Document:

SECURITIES PURCHASE AGREEMENT

         This Securities Purchase Agreement (this "Agreement") is dated as of
February 25, 2004, among Industries International, Incorporated, a Nevada
corporation (the "Company"), and each purchaser identified on the signature
pages hereto (each, including its successors and assigns, a "Purchaser" and
collectively the "Purchasers"); and

         WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act (as defined below),
and Rule 506 promulgated thereunder, the Company desires to issue and sell to
each Purchaser, and each Purchaser, severally and not jointly, desires to
purchase from the Company in the aggregate, up to $5,800,000 of shares of Common
Stock and Warrants on the Closing Date.

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

ARTICLE I.
                                   DEFINITIONS

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

                  "Action" shall have the meaning ascribed to such term in
Section 3.1(j).

                  "Affiliate" means any Person that, directly or indirectly
         through one or more intermediaries, controls or is controlled by or is
         under common control with a Person as such terms are used in and
         construed under Rule 144. With respect to a Purchaser, any investment
         fund or managed account that is managed on a discretionary basis by the
         same investment manager as such Purchaser will be deemed to be an
         Affiliate of such Purchaser.

                  "Closing" means the closing of the purchase and sale of the
         Common Stock and the Warrants pursuant to Section 2.1.

                  "Closing Date" means the Trading Day when all of the
         Transaction Documents have been executed and delivered by the
         applicable parties thereto, and all conditions precedent to (i) the
         Purchasers' obligations to pay the Subscription Amount and (ii) the
         Company's obligations to deliver the Securities have been satisfied or
         waived.

                   "Commission" means the Securities and Exchange Commission.

                                       1
<PAGE>

                  "Common Stock" means the common stock of the Company, $0.01
         par value per share, and any securities into which such common stock
         may hereafter be reclassified.

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

                  "Company Counsel" means Richardson & Patel LLP.

                   "Disclosure Schedules" means the disclosure schedules of the
         Company delivered concurrently herewith.

                  "Effective Date" means the date that the Registration
         Statement is first declared effective by the Commission.

                  "Escrow Agent" shall have the meaning set forth in the Escrow
Agreement.

                  "Escrow Agreement" shall mean the Escrow Agreement in
         substantially the form of Exhibit D hereto executed and delivered
         contemporaneously with this Agreement.

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

                  "FW" means Feldman Weinstein LLP with offices located at 420
         Lexington Avenue, Suite 2620, New York, New York 10170-0002.

                  "Intellectual Property Rights" shall have the meaning ascribed
to such term in Section 3.1(o).

                  "Liens" means a lien, charge, security interest, encumbrance,
         right of first refusal, preemptive right or other restriction.

                  "Material Adverse Effect" shall have the meaning ascribed to
such term in Section 3.1(b).

                  "Material Permits" shall have the meaning ascribed to such
term in Section 3.1(m).

                  "Per Share Purchase Price" equals $2.30, subject to adjustment
         for reverse and forward stock splits, stock dividends, stock
         combinations and other similar transactions of the Common Stock that
         occur after the date of this Agreement.

                                       2
<PAGE>

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

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

                   "Registration Rights Agreement" means the Registration Rights
         Agreement, dated as of the date of this Agreement, among the Company
         and each Purchaser, in the form of Exhibit A hereto.

                  "Registration Statement" means a registration statement
         meeting the requirements set forth in the Registration Rights Agreement
         and covering the resale by the Purchasers of the Shares and the Warrant
         Shares.

                   "Required Approvals" shall have the meaning ascribed to such
term in Section 3.1(e).

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

                  "SEC Reports" shall have the meaning ascribed to such term in
Section 3.1(h).

                  "Securities" means the Shares, the Warrants and the Warrant
Shares.

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

                  "Shares" means the shares of Common Stock issued or issuable
         to each Purchaser pursuant to this Agreement.

                  "Subscription Amount" means, as to each Purchaser, the amounts
         set forth below such Purchaser's signature block on the signature page
         hereto, in United States dollars and in immediately available funds.

                  "Subsidiary" shall mean the subsidiaries of the Company, if
any, set forth on Schedule 3.1(a).

                  "Trading Day" means a day on which the Common Stock is traded
on a Trading Market.

                   "Trading Market" means the following markets or exchanges on
         which the Common Stock is listed or quoted for trading on the date in
         question: OTC Bulletin Board, the American Stock Exchange, the New York
         Stock Exchange, the Nasdaq National Market or the Nasdaq SmallCap
         Market.

                                       3
<PAGE>

                  "Transaction Documents" means this Agreement, the Warrants,
         the Escrow Agreement and the Registration Rights Agreement and any
         other documents or agreements executed in connection with the
         transactions contemplated hereunder.

                  "VWAP" means, for any date, the price determined by the first
         of the following clauses that applies: (a) if the Common Stock is then
         listed or quoted on a Trading Market, the daily volume weighted average
         price of the Common Stock for such date (or the nearest preceding date)
         on the Trading Market on which the Common Stock is then listed or
         quoted as reported by Bloomberg Financial L.P. (based on a trading day
         from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b) if the
         Common Stock is not then listed or quoted on a Trading Market and if
         prices for the Common Stock are then reported in the "Pink Sheets"
         published by the National Quotation Bureau Incorporated (or a similar
         organization or agency succeeding to its functions of reporting
         prices), the most recent bid price per share of the Common Stock so
         reported; or (c) in all other cases, the fair market value of a share
         of Common Stock as determined by an independent appraiser selected in
         good faith by the Purchasers and reasonably acceptable to the Company.

                   "Warrants" means the Common Stock Purchase Warrants, in the
         form of Exhibit B, issuable to the Purchasers at the Closing, which
         warrants shall be exercisable immediately upon issuance for a term of 3
         years and have an exercise price equal to $2.7601 per share.

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

ARTICLE II.
                                PURCHASE AND SALE

2.1 Closing. On the Closing Date, each Purchaser shall purchase from the
Company, severally and not jointly with the other Purchasers, and the Company
shall issue and sell to each Purchaser, (a) a number of Shares equal to such
Purchaser's Subscription Amount divided by the Per Share Purchase Price and (b)
the Warrants as determined pursuant to Section 2.2(a)(iii). The aggregate
Subscription Amounts for Shares sold hereunder shall be up to $5,800,000. Upon
satisfaction of the conditions set forth in Section 2.2, the Closing shall occur
at the offices of the Escrow Agent or such other location as the parties shall
mutually agree.

         2.2 Closing Conditions; Deliveries. The Closing shall be subject to the
following conditions and deliveries being met on the Closing Date:

                  (a) On the Closing Date, the Company shall deliver or cause to
         be delivered to the Escrow Agent with respect to each Purchaser the
         following:

                                       4
<PAGE>

                           (i) this Agreement duly executed by the Company;

                           (ii) a copy of the irrevocable instructions to the
                  Company's transfer agent instructing the transfer agent to
                  deliver, on an expedited basis, a certificate evidencing a
                  number of Shares equal to such Purchaser's Subscription Amount
                  divided by the Per Share Purchase Price, registered in the
                  name of such Purchaser;

                  (iii) with 3 Trading Days of the Closing Date, a Warrant,
         registered in the name of such Purchaser, pursuant to which such
         Purchaser shall have the right to acquire up to the number of shares of
         Common Stock equal to 30% of the Shares to be issued to such Purchaser
         at the Closing;

                           (iv) the Registration Rights Agreement duly executed
                  by the Company;

                           (v) the Escrow Agreement duly executed by the
                  Company; and

                           (vi) a legal opinion of Company Counsel, in the form
                  of Exhibit C attached hereto.

                  (b) On the Closing Date, each Purchaser shall deliver or cause
         to be delivered to the Escrow Agent the following:

                           (i) this Agreement duly executed by such Purchaser;

                           (ii) such Purchaser's Subscription Amount by wire
                  transfer to the account of the Escrow Agent;

                           (iii) the Escrow Agreement duly executed by such
                  Purchaser; and

                           (iv) the Registration Rights Agreement duly executed
                  by such Purchaser.

                  (c) All representations and warranties of the respective
         parties contained herein shall remain true and correct as of the
         Closing Date and all covenants of the other party shall have been
         performed if due prior to such date.

                  (d) From the date hereof to the Closing Date, trading in the
         Common Stock shall not have been suspended by the Commission (except
         for any suspension of trading of limited duration agreed to by the
         Company, which suspension shall be terminated prior to the Closing),
         and, at any time prior to the Closing Date, trading in securities
         generally as reported by Bloomberg Financial Markets shall not have
         been suspended or limited, or minimum prices shall not have been
         established on securities whose trades are reported by such service, or
         on any Trading Market, nor shall a banking moratorium have been
         declared either by the United States or New York State authorities nor
         shall there have occurred any material outbreak or escalation of
         hostilities or other national or international calamity of such
         magnitude in its effect on, or any material adverse change in, any
         financial market which, in each case, in the reasonable judgment of
         each Purchaser, makes it impracticable or inadvisable to purchase the
         Shares at the Closing.

                                       5
<PAGE>

ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

         3.1 Representations and Warranties of the Company. Except as set forth
in the SEC Reports, and/or under the corresponding section of the Disclosure
Schedules which Disclosure Schedules shall be deemed a part hereof, the Company
hereby makes the representations and warranties set forth below to each
Purchaser:

                  (a) Subsidiaries. All of the direct and indirect subsidiaries
         of the Company are set forth on Schedule 3.1(a). The Company owns,
         directly or indirectly, all of the capital stock or other equity
         interests of each Subsidiary free and clear of any Liens, and all the
         issued and outstanding shares of capital stock of each Subsidiary are
         validly issued and are fully paid, non-assessable and free of
         preemptive and similar rights to subscribe for or purchase securities.
         If the Company has no subsidiaries, then references in the Transaction
         Documents to the Subsidiaries will be disregarded.

                  (b) Organization and Qualification. Each of the Company and
         the Subsidiaries is an entity duly incorporated or otherwise organized,
         validly existing and in good standing under the laws of the
         jurisdiction of its incorporation or organization (as applicable), with
         the requisite power and authority to own and use its properties and
         assets and to carry on its business as currently conducted. Neither the
         Company nor any Subsidiary is in violation or default of any of the
         provisions of its respective certificate or articles of incorporation,
         bylaws or other organizational or charter documents. Each of the
         Company and the Subsidiaries is duly qualified to conduct business and
         is in good standing as a foreign corporation or other entity in each
         jurisdiction in which the nature of the business conducted or property
         owned by it makes such qualification necessary, except where the
         failure to be so qualified or in good standing, as the case may be,
         could not have or reasonably be expected to result in (i) a material
         adverse effect on the legality, validity or enforceability of any
         Transaction Document, (ii) a material adverse effect on the results of
         operations, assets, business or financial condition of the Company and
         the Subsidiaries, taken as a whole, or (iii) a material adverse effect
         on the Company's ability to perform in any material respect on a timely
         basis its obligations under any Transaction Document (any of (i), (ii)
         or (iii), a "Material Adverse Effect") and no Proceeding has been
         instituted in any such jurisdiction revoking, limiting or curtailing or
         seeking to revoke, limit or curtail such power and authority or
         qualification.

                                       6
<PAGE>

                  (c) Authorization; Enforcement. The Company has the requisite
         corporate power and authority to enter into and to consummate the
         transactions contemplated by each of the Transaction Documents and
         otherwise to carry out its obligations thereunder. The execution and
         delivery of each of the Transaction Documents by the Company and the
         consummation by it of the transactions contemplated thereby have been
         duly authorized by all necessary action on the part of the Company and
         no further action is required by the Company in connection therewith
         other than in connection with the Required Approvals. Each Transaction
         Document has been (or upon delivery will have been) duly executed by
         the Company and, when delivered in accordance with the terms hereof,
         will constitute the valid and binding obligation of the Company
         enforceable against the Company in accordance with its terms except (i)
         as limited by applicable bankruptcy, insolvency, reorganization,
         moratorium and other laws of general application affecting enforcement
         of creditors' rights generally and (ii) as limited by laws relating to
         the availability of specific performance, injunctive relief or other
         equitable remedies.

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

                  (e) Filings, Consents and Approvals. The Company is not
         required to obtain any consent, waiver, authorization or order of, give
         any notice to, or make any filing or registration with, any court or
         other federal, state, local or other governmental authority or other
         Person in connection with the execution, delivery and performance by
         the Company of the Transaction Documents, other than (i) filings
         required pursuant to Section 4.4 of this Agreement, (ii) the filing
         with the Commission of the Registration Statement, (iii) application(s)
         to each applicable Trading Market for the listing of the Shares and
         Warrant Shares for trading thereon in the time and manner required
         thereby, and (iv) the filing of Form D with the Commission and such
         filings as are required to be made under applicable state securities
         laws (collectively, the "Required Approvals").

                                       7
<PAGE>

                  (f) Issuance of the Securities. The Shares and Warrants are
         duly authorized and, when issued and paid for in accordance with the
         Transaction Documents, will be duly and validly issued, fully paid and
         nonassessable, free and clear of all Liens imposed by the Company other
         than restrictions on transfer provided for in the Transaction
         Documents. The Warrant Shares, when issued in accordance with the terms
         of the Transaction Documents, will be validly issued, fully paid and
         nonassessable, free and clear of all Liens imposed by the Company. The
         Company has reserved from its duly authorized capital stock the maximum
         number of shares of Common Stock issuable pursuant to this Agreement
         and the Warrants.

                  (g) Capitalization. The capitalization of the Company is as
         described in the Company's most recent periodic report filed with the
         Commission. The Company has not issued any capital stock since such
         filing other than pursuant to the exercise of stock options under the
         Company's equity incentive plan, the issuance of shares of Common Stock
         pursuant to the Company's equity incentive plan and pursuant to the
         conversion or exercise of outstanding Common Stock Equivalents
         outstanding. No Person has any right of first refusal, preemptive
         right, right of participation, or any similar right to participate in
         the transactions contemplated by the Transaction Documents. Except as a
         result of the purchase and sale of the Securities, there are no
         outstanding options, warrants, script rights to subscribe to, calls or
         commitments of any character whatsoever relating to, or securities,
         rights or obligations convertible into or exchangeable for, or giving
         any Person any right to subscribe for or acquire, any shares of Common
         Stock, or contracts, commitments, understandings or arrangements by
         which the Company or any Subsidiary is or may become bound to issue
         additional shares of Common Stock, or securities or rights convertible
         or exchangeable into shares of Common Stock. The issue and sale of the
         Securities will not obligate the Company to issue shares of Common
         Stock or other securities to any Person (other than the Purchasers) and
         will not result in a right of any holder of Company securities to
         adjust the exercise, conversion, exchange or reset price under such
         securities. All of the outstanding shares of capital stock of the
         Company are validly issued, fully paid and nonassessable, have been
         issued in compliance with all federal and state securities laws, and
         none of such outstanding shares was issued in violation of any
         preemptive rights or similar rights to subscribe for or purchase
         securities. No further approval or authorization of any stockholder,
         the Board of Directors of the Company or others is required for the
         issuance and sale of the Shares. Except as disclosed in the SEC
         Reports, there are no stockholders agreements, voting agreements or
         other similar agreements with respect to the Company's capital stock to
         which the Company is a party or, to the knowledge of the Company,
         between or among any of the Company's stockholders.

                                       8
<PAGE>

                  (h) SEC Reports; Financial Statements. The Company has filed
         all reports required to be filed by it under the Securities Act and the
         Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for
         the two years preceding the date hereof (or such shorter period as the
         Company was required by law to file such material) (the foregoing
         materials, including the exhibits thereto, being collectively referred
         to herein as the "SEC Reports") on a timely basis or has received a
         valid extension of such time of filing and has filed any such SEC
         Reports prior to the expiration of any such extension. As of their
         respective dates, the SEC Reports complied in all material respects
         with the requirements of the Securities Act and the Exchange Act and
         the rules and regulations of the Commission promulgated thereunder, and
         none of the SEC Reports, when filed, contained any untrue statement of
         a material fact or omitted to state a material fact required to be
         stated therein or necessary in order to make the statements therein, in
         light of the circumstances under which they were made, not misleading.
         The financial statements of the Company included in the SEC Reports
         comply in all material respects with applicable accounting requirements
         and the rules and regulations of the Commission with respect thereto as
         in effect at the time of filing. Such financial statements have been
         prepared in accordance with United States generally accepted accounting
         principles applied on a consistent basis during the periods involved
         ("GAAP"), except as may be otherwise specified in such financial
         statements or the notes ---- thereto and except that unaudited
         financial statements may not contain all footnotes required by GAAP,
         and fairly present in all material respects the financial position of
         the Company and its consolidated subsidiaries as of and for the dates
         thereof and the results of operations and cash flows for the periods
         then ended, subject, in the case of unaudited statements, to normal,
         immaterial, year-end audit adjustments.

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

                  (j) Litigation. There is no action, suit, inquiry, notice of
         violation, proceeding or investigation pending or, to the knowledge of
         the Company, threatened against or affecting the Company, any
         Subsidiary or any of their respective properties before or by any
         court, arbitrator, governmental or administrative agency or regulatory
         authority (federal, state, county, local or foreign) (collectively, an
         "Action") which (i)

                                       10
<PAGE>

         adversely affects or challenges the legality, validity or
         enforceability of any of the Transaction Documents or the Securities or
         (ii) could, if there were an unfavorable decision, have or reasonably
         be expected to result in a Material Adverse Effect. Neither the Company
         nor any Subsidiary, nor any director or officer thereof, is or has been
         the subject of any Action involving a claim of violation of or
         liability under federal or state securities laws or a claim of breach
         of fiduciary duty. There has not been, and to the knowledge of the
         Company, there is not pending or contemplated, any investigation by the
         Commission involving the Company or any current or former director or
         officer of the Company. The Commission has not issued any stop order or
         other order suspending the effectiveness of any registration statement
         filed by the Company or any Subsidiary under the Exchange Act or the
         Securities Act.

                  (k) Labor Relations. No material labor dispute exists or, to
         the knowledge of the Company, is imminent with respect to any of the
         employees of the Company which could reasonably be expected to result
         in a Material Adverse Effect.

                  (l) Compliance. Neither the Company nor any Subsidiary (i) is
         in default under or in violation of (and no event has occurred that has
         not been waived that, with notice or lapse of time or both, would
         result in a default by the Company or any Subsidiary under), nor has
         the Company or any Subsidiary received notice of a claim that it is in
         default under or that it is in violation of, any indenture, loan or
         credit agreement or any other agreement or instrument to which it is a
         party or by which it or any of its properties is bound (whether or not
         such default or violation has been waived), (ii) is in violation of any
         order of any court, arbitrator or governmental body, or (iii) is or has
         been in violation of any statute, rule or regulation of any
         governmental authority, including without limitation all foreign,
         federal, state and local laws applicable to its business except in each
         case as could not have a Material Adverse Effect.

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

                  (n) Title to Assets. The Company and the Subsidiaries have
         good and marketable title in fee simple to all real property owned by
         them that is material to the business of the Company and the
         Subsidiaries and good and marketable title in all personal property
         owned by them that is material to the business of the Company and the
         Subsidiaries, in each case free and clear of all Liens, except for

                                       11
<PAGE>

         Liens as do not materially affect the value of such property and do not
         materially interfere with the use made and proposed to be made of such
         property by the Company and the Subsidiaries and Liens for the payment
         of federal, state or other taxes, the payment of which is neither
         delinquent nor subject to penalties. Any real property and facilities
         held under lease by the Company and the Subsidiaries are held by them
         under valid, subsisting and enforceable leases of which the Company and
         the Subsidiaries are in compliance.

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

                  (p) Insurance. The Company and the Subsidiaries are insured by
         insurers of recognized financial responsibility against such losses and
         risks and in such amounts as are prudent and customary in the
         businesses in which the Company and the Subsidiaries are engaged. To
         the best of Company's knowledge, such insurance contracts and policies
         are accurate and complete. Neither the Company nor any Subsidiary has
         any reason to believe that it will not be able to renew its existing
         insurance coverage as and when such coverage expires or to obtain
         similar coverage from similar insurers as may be necessary to continue
         its business without a significant increase in cost.

                  (q) Transactions With Affiliates and Employees. Except as set
         forth in the SEC Reports, none of the officers or directors of the
         Company and, to the knowledge of the Company, none of the employees of
         the Company is presently a party to any transaction with the Company or
         any Subsidiary (other than for services as employees, officers and
         directors), including any contract, agreement or other arrangement
         providing for the furnishing of services to or by, providing for rental
         of real or personal property to or from, or otherwise requiring
         payments to or from any officer, director or such employee or, to the
         knowledge of the Company, any entity in which any officer, director, or
         any such employee has a substantial interest or is an officer,
         director, trustee or partner, in each case in excess of $60,000 other
         than (i) for payment of salary or consulting fees for services
         rendered, (ii) reimbursement for expenses incurred on behalf of the
         Company and (iii) for other employee benefits, including stock option
         agreements under any stock option plan of the Company.

                                       12
<PAGE>

                  (r) Sarbanes-Oxley; Internal Accounting Controls. The Company
         is in material compliance with all provisions of the Sarbanes-Oxley Act
         of 2002 which are applicable to it as of the Closing Date. The Company
         and the Subsidiaries maintain a system of internal accounting controls
         sufficient to provide reasonable assurance that (i) transactions are
         executed in accordance with management's general or specific
         authorizations, (ii) transactions are recorded as necessary to permit
         preparation of financial statements in conformity with GAAP and to
         maintain asset accountability, (iii) access to assets is permitted only
         in accordance with management's general or specific authorization, and
         (iv) the recorded accountability for assets is compared with the
         existing assets at reasonable intervals and appropriate action is taken
         with respect to any differences. The Company has established disclosure
         controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
         15d-15(e)) for the Company and designed such disclosure controls and
         procedures to ensure that material information relating to the Company,
         including its subsidiaries, is made known to the certifying officers by
         others within those entities, particularly during the period in which
         the Company's most recently filed periodic report under the Exchange
         Act, as the case may be, is being prepared. The Company's certifying
         officers have evaluated the effectiveness of the Company's controls and
         procedures as of the date prior to the filing date of the most recently
         filed periodic report under the Exchange Act (such date, the
         "Evaluation Date"). The Company presented in its most recently filed
         periodic report under the Exchange Act the conclusions of the
         certifying officers about the effectiveness of the disclosure controls
         and procedures based on their evaluations as of the Evaluation Date.
         Since the Evaluation Date, there have been no significant changes in
         the Company's internal controls (as such term is defined in Item 307(b)
         of Regulation S-K under the Exchange Act) or, to the Company's
         knowledge, in other factors that could significantly affect the
         Company's internal controls.

                  (s) Certain Fees. No brokerage or finder's fees or commissions
         are or will be payable by the Company to any broker, financial advisor
         or consultant, finder, placement agent, investment banker, bank or
         other Person with respect to the transactions contemplated by this
         Agreement. The Purchasers shall have no obligation with respect to any
         fees or with respect to any claims made by or on behalf of other
         Persons for fees of a type contemplated in this Section that may be due
         in connection with the transactions contemplated by this Agreement.

                  (t) Private Placement. Assuming the accuracy of the Purchasers
         representations and warranties set forth in Section 3.2, no
         registration under the Securities Act is required for the offer and
         sale of the Securities by the Company to the Purchasers as contemplated
         hereby. The issuance and sale of the Securities hereunder does not
         contravene the rules and regulations of the Trading Market.

                                       13
<PAGE>

                  (u) Investment Company. The Company is not, and is not an
         Affiliate of, and immediately after receipt of payment for the Shares,
         will not be or be an Affiliate of, an "investment company" within the
         meaning of the Investment Company Act of 1940, as amended. The Company
         shall conduct its business in a manner so that it will not become
         subject to the Investment Company Act.

                  (v) Registration Rights. No Person has any right to cause the
         Company to effect the registration under the Securities Act of any
         securities of the Company.

                  (w) Listing and Maintenance Requirements. The Company's Common
         Stock is registered pursuant to Section 12(g) of the Exchange Act, and
         the Company has taken no action designed to, or which to its knowledge
         is likely to have the effect of, terminating the registration of the
         Common Stock under the Exchange Act nor has the Company received any
         notification that the Commission is contemplating terminating such
         registration. The Company has not, in the 12 months preceding the date
         hereof, received notice from any Trading Market on which the Common
         Stock is or has been listed or quoted to the effect that the Company is
         not in compliance with the listing or maintenance requirements of such
         Trading Market. The Company is, and has no reason to believe that it
         will not in the foreseeable future continue to be, in compliance with
         all such listing and maintenance requirements.

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

                  (y) Disclosure. The Company confirms that, neither the Company
         nor any other Person acting on its behalf has provided any of the
         Purchasers or their agents or counsel with any information that
         constitutes or might constitute material, non-public information. The
         Company understands and confirms that the Purchasers will rely on the
         foregoing representations and covenants in effecting transactions in
         securities of the Company. All disclosure provided to the Purchasers
         regarding the Company, its business and the transactions contemplated
         hereby, including the Schedules to this Agreement, furnished by or on
         behalf of the Company with respect to the representations and
         warranties made herein are true and correct with respect to such
         representations and warranties and do not contain any untrue statement
         of a material fact or omit to state any material fact necessary in
         order to make the statements made therein, in light of the
         circumstances under which they were made, not misleading. The Company
         acknowledges and agrees that no Purchaser makes or has made any
         representations or warranties with respect to the transactions
         contemplated hereby other than those specifically set forth in Section
         3.2 hereof.

                                       14
<PAGE>

                  (z) No Integrated Offering. Assuming the accuracy of the
         Purchasers' representations and warranties set forth in Section 3.2,
         neither the Company, nor any of its affiliates, nor any Person acting
         on its or their behalf has, directly or indirectly, made any offers or
         sales of any security or solicited any offers to buy any security,
         under circumstances that would cause this offering of the Securities to
         be integrated with prior offerings by the Company for purposes of the
         Securities Act or any applicable shareholder approval provisions,
         including, without limitation, under the rules and regulations of any
         exchange or automated quotation system on which any of the securities
         of the Company are listed or designated. -

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

                  (bb) Intentionally Omitted.

                  (cc) Taxes. Except for matters that would not, individually or
         in the aggregate, have or reasonably be expected to result in a
         Material Adverse Effect, the Company and each Subsidiary has filed all
         necessary federal, state and foreign income and franchise tax returns
         and has paid or accrued all taxes shown as due thereon, and the Company
         has no knowledge of a tax deficiency which has been asserted or
         threatened against the Company or any Subsidiary.

                  (dd) General Solicitation. Neither the Company nor any person
         acting on behalf of the Company has offered or sold any of the Shares
         by any form of general solicitation or general advertising. The Company
         has offered the Shares for sale only to the Purchasers and certain
         other "accredited investors" within the meaning of Rule 501 under the
         Securities Act.

                  (ee) Foreign Corrupt Practices. Neither the Company, nor to
         the knowledge of the Company, any agent or other person acting on
         behalf of the Company, has (i) directly or indirectly, used any corrupt
         funds for unlawful contributions, gifts, entertainment or other

                                       15
<PAGE>

         unlawful expenses related to foreign or domestic political activity,
         (ii) made any unlawful payment to foreign or domestic government
         officials or employees or to any foreign or domestic political parties
         or campaigns from corporate funds, (iii) failed to disclose fully any
         contribution made by the Company (or made by any person acting on its
         behalf of which the Company is aware) which is in violation of law, or
         (iv) violated in any material respect any provision of the Foreign
         Corrupt Practices Act of 1977, as amended.

                  (ff) Accountants. The Company's accountants are set forth on
         Schedule 3.1(ff) of the Disclosure Schedule. To the Company's
         knowledge, such accountants, who the Company expects will express their
         opinion with respect to the financial statements to be included in the
         Company's Annual Report on Form 10-K for the year ended December 31,
         2003, are independent accountants as required by the Securities Act.

                  (gg) Acknowledgment Regarding Purchasers' Purchase of Shares.
         The Company acknowledges and agrees that each of the Purchasers is
         acting solely in the capacity of an arm's length purchaser with respect
         to the Transaction Documents and the transactions contemplated hereby.
         The Company further acknowledges that no Purchaser is acting as a
         financial advisor or fiduciary of the Company (or in any similar
         capacity) with respect to this Agreement and the transactions
         contemplated hereby and any advice given by any Purchaser or any of
         their respective representatives or agents in connection with this
         Agreement and the transactions contemplated hereby is merely incidental
         to the Purchasers' purchase of the Shares. The Company further
         represents to each Purchaser that the Company's decision to enter into
         this Agreement has been based solely on the independent evaluation of
         the transactions contemplated hereby by the Company and its
         representatives.

         3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:

                  (a) Organization; Authority. Such Purchaser is an entity duly
         organized, validly existing and in good standing under the laws of the
         jurisdiction of its organization with full right, corporate or
         partnership power and authority to enter into and to consummate the
         transactions contemplated by the Transaction Documents and otherwise to
         carry out its obligations thereunder. The execution, delivery and
         performance by such Purchaser of the transactions contemplated by this
         Agreement have been duly authorized by all necessary corporate or
         similar action on the part of such Purchaser. Each Transaction Document
         to which it is party a has been duly executed by such Purchaser, and
         when delivered by such Purchaser in accordance with the terms hereof,
         will constitute the valid and legally binding obligation of such
         Purchaser, enforceable against it in accordance with its terms, except
         (i) as limited by general equitable principles and applicable
         bankruptcy, insolvency, reorganization, moratorium and other laws of
         general application affecting enforcement of creditors' rights
         generally, (ii) as limited by laws relating to the availability of
         specific performance, injunctive relief or other equitable remedies and
         (iii) insofar as indemnification and contribution provisions may be
         limited by applicable law.

                                       16
<PAGE>

                  (b) Investment Intent. Such Purchaser understands that the
         Securities are "restricted securities" and have not been registered
         under the Securities Act or any applicable state securities law and is
         acquiring the Securities as principal for its own account for
         investment purposes only and not with a view to or for distributing or
         reselling such Securities or any part thereof, has no present intention
         of distributing any of such Securities and has no arrangement or
         understanding with any other persons regarding the distribution of such
         Securities (this representation and warranty not limiting such
         Purchaser's right to sell the Securities pursuant to the Registration
         Statement or otherwise in compliance with applicable federal and state
         securities laws). Such Purchaser is acquiring the Securities hereunder
         in the ordinary course of its business. Such Purchaser does not have
         any agreement or understanding, directly or indirectly, with any Person
         to distribute any of the Securities.

                  (c) Purchaser Status. At the time such Purchaser was offered
         the Securities, it was, and at the date hereof it is, and on each date
         on which it exercises any Warrants, it will be either: (i) an
         "accredited investor" as defined in Rule 501(a)(1), (a)(2), (a)(3),
         (a)(7) or (a)(8) under the Securities Act or (ii) a "qualified
         institutional buyer" as defined in Rule 144A(a) under the Securities
         Act. Such Purchaser is not required to be registered as a broker-dealer
         under Section 15 of the Exchange Act.

                  (d) Experience of Such Purchaser. Such Purchaser, either alone
         or together with its representatives, has such knowledge,
         sophistication and experience in business and financial matters so as
         to be capable of evaluating the merits and risks of the prospective
         investment in the Securities, and has so evaluated the merits and risks
         of such investment. Such Purchaser is able to bear the economic risk of
         an investment in the Securities and, at the present time, is able to
         afford a complete loss of such investment.

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

                  (f) Registration Required. Such Purchaser hereby covenants
         with the Company not to make any sale of the Shares and Warrant Shares
         without complying with the provisions hereof and of the Registration
         Rights Agreement, and without effectively causing the prospectus
         delivery requirement under the Securities Act to be satisfied (unless
         such Purchaser is selling such Shares and Warrant Shares in a
         transaction not subject to the prospectus delivery requirement), and
         such Purchaser acknowledges that the certificates evidencing the Shares
         and Warrant Shares will be imprinted with a legend that prohibits their
         transfer except in accordance therewith.

                                       17
<PAGE>

                  (g) No Tax or Legal Advice. Such Purchaser understands that
         nothing in this Agreement, any other Transaction Document or any other
         materials presented to such Purchaser in connection with the purchase
         and sale of the Securities constitutes legal, tax or investment advice.
         Such Purchaser has consulted such legal, tax and investment advisors as
         it, in its sole discretion, has deemed necessary or appropriate in
         connection with its purchase of Securities.

                  (h) Disclosure of Information. Such Purchaser believes it has
         received all the information it considers necessary or appropriate for
         deciding whether to purchase the Shares and Warrants. Such Purchaser
         further represents that it has had an opportunity to ask questions and
         receive answers from the Company regarding the terms and conditions of
         the offering of the Shares and Warrants and the business, properties,
         prospects and financial condition of the Company. Such Purchaser has
         reviewed the Company's Annual Report on Form 10K-SB for the fiscal year
         ended December 31, 2002 (the "10K-SB"), including, without limitation,
         all of the Factors Affecting Business, Operating Results and Financial
         Condition set forth therein (the "Risk Factors"). Each such Purchaser
         understands and accepts all of the Risk Factors in connection with such
         Purchaser's investment in the Securities. In addition, each Purchaser
         has reviewed and is aware of the information set forth in all SEC
         Reports filed with the SEC since the filing of the 10K-SB.

                  (i) Open Short Position. As of the date hereof, each
         Purchaser, for itself only, represents and warrants that neither it,
         nor any person or entity acting at the direction of such Purchaser,
         holds an open short position in the Company's Common Stock.

         The Company acknowledges and agrees that each Purchaser does not make
or has not made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in this
Section 3.2.

                                  ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

         4.1 Transfer Restrictions.

                  (a) The Securities may only be disposed of in compliance with
         state and federal securities laws. In connection with any transfer of
         Securities other than pursuant to an effective registration statement
         or Rule 144, to the Company or to an Affiliate of a Purchaser or in
         connection with a pledge as contemplated in Section 4.1(b), the Company
         may require the transferor thereof to provide to the Company an opinion
         of counsel selected by the transferor and reasonably acceptable to the
         Company, the form and substance of which opinion and shall be
         reasonably satisfactory to the Company, to the effect that such
         transfer does not require registration of such transferred Securities
         under the Securities Act. As a condition of transfer, any such
         transferee shall agree in writing to be bound by the terms of this
         Agreement and shall have the rights of a Purchaser under this Agreement
         and the Registration Rights Agreement.

                  (b) The Purchasers agree to the imprinting, so long as is
         required by this Section 4.1(b), of a legend on any of the Securities
         in the following form:

         THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
         EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
         RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
         OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
         BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
         STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
         EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
         REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
         STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE
         TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
         ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED IN
         CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED
         BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN
         "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a) UNDER THE SECURITIES
         ACT.

                  The Company acknowledges and agrees that a Purchaser may from
         time to time pledge pursuant to a bona fide margin agreement with a
         registered broker-dealer or grant a security interest in some or all of
         the Securities to a financial institution that is an "accredited
         investor" as defined in Rule 501(a) under the Securities Act and who
         agrees to be bound by the provisions of this Agreement and the
         Registration Rights Agreement and, if required under the terms of such
         arrangement, such Purchaser may transfer pledged or secured Securities
         to the pledgees or secured parties. Such a pledge or transfer would not
         be subject to approval of the Company and no legal opinion of legal
         counsel of the pledgee, secured party or pledgor shall be required in
         connection therewith. Further, no notice shall be required of such
         pledge. At the appropriate Purchaser's expense, the Company will
         execute and deliver such reasonable documentation as a pledgee or
         secured party of Securities may reasonably request in connection with a
         pledge or transfer of the Securities, including, if the Securities are
         subject to registration pursuant to the Registration Rights Agreement,
         the preparation and filing of any required prospectus supplement under
         Rule 424(b)(3) under the Securities Act or other applicable provision
         of the Securities Act to appropriately amend the list of Selling
         Stockholders thereunder.

                                       18
<PAGE>

                  (c) Certificates evidencing the Shares and Warrant Shares
         shall not contain any legend (including the legend set forth in Section
         4.1(b)), (i) while a registration statement (including the Registration
         Statement) covering the resale of such security is effective under the
         Securities Act, or (ii) following any sale of such Shares or Warrant
         Shares pursuant to Rule 144, or (iii) if such Shares or Warrant Shares
         are eligible for sale under Rule 144(k), or (iv) if such legend is not
         required under applicable requirements of the Securities Act (including
         judicial interpretations and pronouncements issued by the Staff of the
         Commission). The Company shall cause its counsel to issue a legal
         opinion to the Company's transfer agent promptly after the Effective
         Date if required by the Company's transfer agent to effect the removal
         of the legend hereunder. If all or any portion of a Warrant is
         exercised at a time when there is an effective registration statement
         to cover the resale of the Warrant Shares, such Warrant Shares shall be
         issued free of all legends. The Company agrees that following the
         Effective Date or at such time as such legend is no longer required
         under this Section 4.1(c), it will, no later than three Trading Days
         following the delivery by a Purchaser to the Company or the Company's
         transfer agent of a certificate representing Shares or Warrant Shares,
         as the case may be, issued with a restrictive legend (such date, the
         "Legend Removal Date"), deliver or cause to be delivered to such
         Purchaser a certificate representing such Securities that is free from
         all restrictive and other legends. The Company may not make any
         notation on its records or give instructions to any transfer agent of
         the Company that enlarge the restrictions on transfer set forth in this
         Section.

                  (d) In addition to such Purchaser's other available remedies,
         the Company shall pay to a Purchaser, in cash, as partial liquidated
         damages and not as a penalty, for each $1,000 of Shares or Warrant
         Shares (based on the VWAP of the Common Stock on the date such
         Securities are submitted to the Company's transfer agent) subject to
         Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading Day
         five (5) Trading Days after such damages have begun to accrue) for each
         Trading Day after the Legend Removal Date until such certificate is
         delivered. Nothing herein shall limit such Purchaser's right to pursue
         actual damages for the Company's failure to deliver certificates
         representing any Securities as required by the Transaction Documents,
         and such Purchaser shall have the right to pursue all remedies
         available to it at law or in equity including, without limitation, a
         decree of specific performance and/or injunctive relief.

                  (e) Each Purchaser, severally and not jointly with the other
         Purchasers, agrees that the removal of the restrictive legend from
         certificates representing Securities as set forth in this Section 4.1
         is predicated upon the Company's reliance that the Purchaser will sell
         any Securities pursuant to either the registration requirements of the
         Securities Act, including any applicable prospectus delivery
         requirements, or an exemption therefrom.

                  (f) Until the date that each Purchaser holds less than 20% of
         the Shares initially purchased hereunder by such Purchaser, the Company
         shall not undertake a reverse or forward stock split or
         reclassification of the Common Stock without the prior written consent
         of the Purchasers holding a majority in interest of the Shares.

                                       19
<PAGE>

         4.2 Furnishing of Information. As long as any Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. As long as any Purchaser owns Securities, if the Company is not
required to file reports pursuant to the Exchange Act, it will prepare and
furnish to the Purchasers and make publicly available in accordance with Rule
144(c) such information as is required for the Purchasers to sell the Securities
under Rule 144. The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, all to the extent
required from time to time to enable such Person to sell such Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144.

         4.3 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent transaction.

         4.4 Securities Laws Disclosure; Publicity. The Company shall, by 8:30
a.m. Eastern time on the Trading Day following the date hereof, issue a press
release or file a Current Report on Form 8-K, in each case reasonably acceptable
to each Purchaser disclosing the material terms of the transactions contemplated
hereby. The Company and each Purchaser shall consult with each other in issuing
any other press releases with respect to the transactions contemplated hereby,
and neither the Company nor any Purchaser shall issue any such press release or
otherwise make any such public statement without the prior consent of the
Company, with respect to any press release of any Purchaser, or without the
prior consent of each Purchaser, with respect to any press release of the
Company, which consent shall not unreasonably be withheld, except if such
disclosure is required by law, in which case the disclosing party shall promptly
provide the other party with prior notice of such public statement or
communication. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Purchaser, or include the name of any Purchaser in any
filing with the Commission or any regulatory agency or Trading Market, without
the prior written consent of such Purchaser, except (i) as required by federal
securities law in connection with the registration statement contemplated by the
Registration Rights Agreement and (ii) to the extent such disclosure is required
by law or Trading Market regulations, in which case the Company shall provide
the Purchasers with prior notice of such disclosure permitted under subclause
(i) or (ii).

                                       20
<PAGE>

         4.5 Shareholders Rights Plan. No claim will be made or enforced by the
Company or, to the knowledge of the Company, any other Person that any Purchaser
is an "Acquiring Person" under any shareholders rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the provisions of any such plan or arrangement, by
virtue of receiving Securities under the Transaction Documents or under any
other agreement between the Company and the Purchasers. The Company shall
conduct its business in a manner so that it will not become subject to the
Investment Company Act.

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

         4.7 Use of Proceeds. Except as set forth on Schedule 4.7 attached
hereto, the Company shall use the net proceeds from the sale of the Securities
hereunder for working capital purposes and not for the satisfaction of any
portion of the Company's debt (other than payment of trade payables in the
ordinary course of the Company's business and prior practices), to redeem any
Company equity or equity-equivalent securities or to settle any outstanding
litigation.

         4.8 Reimbursement. If any Purchaser becomes involved in any capacity in
any Proceeding by or against any Person who is a stockholder of the Company
(except as a result of sales, pledges, margin sales and similar transactions by
such Purchaser to or with any current stockholder, or a breach of such
Purchaser's representation, warranties or covenants under the Transaction
Documents, or any agreements or understandings such Purchaser may have with any
such stockholder, or any violations by the Purchaser of state or federal
securities laws, or any conduct by such Purchaser which constitutes fraud, gross
negligence, willful misconduct or malfeasance), solely as a result of such
Purchaser's acquisition of the Securities under this Agreement, the Company will
reimburse such Purchaser for its reasonable legal and other expenses (including
the cost of any investigation preparation and travel in connection therewith)
incurred in connection therewith, as such expenses are incurred. The
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 Purchasers who are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees and controlling persons (if any), as the case may
be, of the Purchasers 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 Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company solely as a result of acquiring the Securities under
this Agreement.

                                       21
<PAGE>

         4.9 Indemnification of Purchasers. Subject to the provisions of this
Section 4.9, the Company will indemnify and hold the Purchasers and their
directors, officers, shareholders, partners, employees and agents (each, a
"Purchaser Party") harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys' fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a
Purchaser, or any of them or their respective Affiliates, by any stockholder of
the Company who is not an Affiliate of such Purchaser, with respect to any of
the transactions contemplated by the Transaction Documents (unless such action
is based upon a breach of such Purchaser's representation, warranties or
covenants under the Transaction Documents or any agreements or understandings
such Purchaser may have with any such stockholder or any violations by the
Purchaser of state or federal securities laws or any conduct by such Purchaser
which constitutes fraud, gross negligence, willful misconduct or malfeasance).
If any action shall be brought against any Purchaser Party in respect of which
indemnity may be sought pursuant to this Agreement, such Purchaser Party shall
promptly notify the Company in writing, and the Company shall have the right to
assume the defense thereof with counsel of its own choosing. Any Purchaser Party
shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Purchaser Party except to the extent that (i)
the employment thereof has been specifically authorized by the Company in
writing, (ii) the Company has failed after a reasonable period of time to assume
such defense and to employ counsel or (iii) in such action there is, in the
reasonable opinion of such separate counsel, a material conflict on any material
issue between the position of the Company and the position of such Purchaser
Party. The Company will not be liable to any Purchaser Party under this
Agreement (i) for any settlement by an Purchaser Party effected without the
Company's prior written consent, which shall not be unreasonably withheld or
delayed; or (ii) to the extent, but only to the extent that a loss, claim,
damage or liability is attributable to any Purchaser Party's breach of any of
the representations, warranties, covenants or agreements made by the Purchasers
in this Agreement or in the other Transaction Documents.

         4.10 Reservation of Common Stock. As of the date hereof, the Company
has reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Shares pursuant to this
Agreement and Warrant Shares pursuant to any exercise of the Warrants.

         4.11 Listing of Common Stock. The Company hereby agrees to use best
efforts to maintain the listing of the Common Stock on a Trading Market, and as
soon as reasonably practicable following the Closing (but not later than the
earlier of the Effective Date and the first anniversary of the Closing Date) to
list all of the Shares and Warrant Shares on such Trading Market. The Company
further agrees, if the Company applies to have the Common Stock traded on any
other Trading Market, it will include in such application all of the Shares and
Warrant Shares, and will take such other action as is necessary to cause all of
the Shares and Warrant Shares to be listed on such other Trading Market as
promptly as possible. The Company will take all action reasonably necessary to
continue the listing and trading of its Common Stock on a Trading Market and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Trading Market.

                                       22
<PAGE>

         4.12 Equal Treatment of Purchasers. 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 Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents. For
clarification purposes, this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated separately by each Purchaser, and
is intended to treat for the Company the Purchasers as a class and shall not in
any way be construed as the Purchasers acting in concert or as a group with
respect to the purchase, disposition or voting of Securities or otherwise.

         4.13 Participation in Future Financing. From the date hereof until 12
months after the Effective Date, upon any financing by the Company of its
Capital Shares or Capital Shares Equivalents (a "Subsequent Financing"), each
Purchaser shall have the right to participate in up to 100% of such Subsequent
Financing (the "Participation Maximum"). At least 5 Trading Days prior to the
closing of the Subsequent Financing, the Company shall deliver to each Purchaser
a written notice of its intention to effect a Subsequent Financing
("Pre-Notice"), which Pre-Notice shall ask such Purchaser if it wants to review
the details of such financing (such additional notice, a "Subsequent Financing
Notice"). Upon the request of a Purchaser, and only upon a request by such
Purchaser, for a Subsequent Financing Notice, the Company shall promptly, but no
later than 1 Trading Day after such request, deliver a Subsequent Financing
Notice to such Purchaser. The Subsequent Financing Notice shall describe in
reasonable detail the proposed terms of such Subsequent Financing, the amount of
proceeds intended to be raised thereunder, the Person with whom such Subsequent
Financing is proposed to be effected, and attached to which shall be a term
sheet or similar document relating thereto. If by 6:30 p.m. (New York City time)
on the fifth Trading Day after all of the Purchasers have received the
Pre-Notice, notifications by the Purchasers of their willingness to participate
in the Subsequent Financing (or to cause their designees to participate) is, in
the aggregate, less than the total amount of the Subsequent Financing, then the
Company may effect the remaining portion of such Subsequent Financing on the
terms and to the Persons set forth in the Subsequent Financing Notice. If the
Company receives no notice from a Purchaser as of such 5th Trading Day, such
Purchaser shall be deemed to have notified the Company that it does not elect to
participate. The Company must provide the Purchasers with a second Subsequent
Financing Notice, and the Purchasers will again have the right of participation
set forth above in this Section 4.13, if the Subsequent Financing subject to the
initial Subsequent Financing Notice is not consummated for any reason on the
terms set forth in such Subsequent Financing Notice within 60 Trading Days after
the date of the initial Subsequent Financing Notice. In the event the Company
receives responses to Subsequent Financing Notices from Purchasers seeking to
purchase more than the aggregate amount of the Subsequent Financing, each such
Purchaser shall have the right to purchase their Pro Rata Portion (as defined
below) of the Participation Maximum. "Pro Rata Portion" is the ratio of (x) the
Subscription Amount of Securities purchased by a participating Purchaser and (y)
the sum of the aggregate Subscription Amount of all participating Purchasers.
Notwithstanding the foregoing, this Section 4.13 shall not apply in respect of
the issuance of (a) shares of Common Stock or options to employees, officers or
directors of the Company pursuant to any stock or option plan duly adopted by a
majority of the non-employee members of the Board of Directors of the Company or
a majority of the members of a committee of non-employee directors established
for such purpose or (b) securities upon the exercise of or conversion of any
convertible securities, options or warrants issued and outstanding on the date
of this Agreement, provided that such securities have not been amended since the
date of this Agreement.

                                       23
<PAGE>

4.14 Subsequent Equity Sales. Except as contemplated in Section 4.17, from the
date hereof until 90 days after the Effective Date, neither the Company nor any
Subsidiary shall issue shares of Common Stock or Common Stock Equivalents;
provided, however, the 90 day period set forth in this Section 4.14 shall be
extended for the number of Trading Days during such period in which (y) trading
in the Common Stock is suspended by any Trading Market, or (z) following the
Effective Date, the Registration Statement is not effective or the prospectus
included in the Registration Statement may not be used by the Purchasers for the
resale of the Shares and Warrant Shares. Notwithstanding the foregoing, this
Section 4.14 shall not apply in respect of the issuance of (a) shares of Common
Stock or options to key consultants, employees, officers or directors of the
Company pursuant to any stock or option plan duly adopted the Board of Directors
of the Company or a majority of the members of a committee of directors
established for such purpose or (b) securities upon the exercise of or
conversion of any convertible securities, options or warrants (including
securities issuable pursuant to this Agreement) issued and outstanding on the
date of this Agreement, provided that such securities have not been amended
since the date of this Agreement.

         4.15 Deliver of Securities After Closing. The Company shall deliver, or
cause to be delivered, the respective Shares and Warrants purchased by each
Purchaser to such Purchaser within 3 Trading Days of the Closing Date.

         4.16 Intentionally Omitted.

         4.17 Additional Investment. From the date hereof until 12 months after
the Closing Date, each Purchaser may, in its sole determination and severally
and not jointly with the other Purchasers, elect to purchase, in the ratio of
such Purchaser's Subscription Amount on the Closing Date to the aggregate
Subscription Amounts of all Purchasers on the Closing Date, additional shares of
Common Stock and Warrants for an aggregate purchase price among all Purchasers
of up to $3,000,000. Any additional investment will be on terms and prices
identical those set forth in the Transaction Documents, mutatis mutandis. In
order to effectuate a purchase and sale of the additional shares of Common Stock
and Warrants, the Company and the Purchasers shall enter into the following
agreements: (x) a securities purchase agreement identical to this Agreement,
mutatis mutandis and shall include updated disclosure schedules and (y) a
registration rights agreement identical to the Registration Rights Agreement,
mutatis mutandis and shall include updated disclosure schedules. Any such
additional Investment shall, subject to the closing conditions set forth in the
securities purchase agreement, close within 10 Trading Days of notice to the
Company by a Purchaser that such Purchaser elects to exercise its rights
hereunder. The parties hereby agree and acknowledge that the rights granted
hereunder to a Purchaser are independent and separate of the rights granted to
any other Purchaser and a Purchasers election to exercise its right to an
additional investment hereunder does not obligate any other Purchaser to also
elect at such time nor does it waive any Purchaser's right to elect to exercise
at a later date.

                                       24
<PAGE>

                                   ARTICLE V.
                                  MISCELLANEOUS

         5.1 Fees and Expenses. Except as otherwise set forth in this Agreement,
each party shall pay the fees and expenses of its advisers, counsel, accountants
and other experts, if any, and all other expenses incurred by such party
incident to the negotiation, preparation, execution, delivery and performance of
this Agreement. The Company shall pay all stamp and other taxes and duties
levied in connection with the sale of the Securities.

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

         5.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto prior to 6:30 p.m. (New York
City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading
Day, (c) the second Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached
hereto.

         5.4 Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and each Purchaser or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.

                                       25
<PAGE>

         5.5 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.

         5.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser. Any Purchaser may assign
any or all of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Securities, provided such transferee agrees
in writing to be bound, with respect to the transferred Securities, by the
provisions hereof that apply to the "Purchasers".

         5.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.9.

         5.8 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. The parties hereby waive all rights to a trial by jury. If
either party shall commence an action or proceeding to enforce any provisions of
the Transaction Documents, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its attorneys' fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.

         5.9 Survival. The representations and warranties herein shall survive
the Closing and delivery of the Shares and Warrant Shares.

                                       26
<PAGE>

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

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

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

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

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

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

                                       27
<PAGE>

         5.16 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser 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 Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. For reasons of
administrative convenience only, Purchasers and their respective counsel have
chosen to communicate with the Company through FW. FW does not represent all of
the Purchasers but only HPC Capital Management, who has acted as placement agent
to the transaction. The Company has elected to provide all Purchasers with the
same terms and Transaction Documents for the convenience of the Company and not
because it was required or requested to do so by the Purchasers.

         5.17 Liquidated Damages. The Company's obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.

                            (Signature Page Follows)

                                       28
<PAGE>

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

INDUSTRIES INTERNATIONAL, INCORPORATED                    Address for Notice:
                                                          -------------------

By:
     ----------------------------------------------
     Name:  Tsui Kit
     Title: Chief Executive Officer

With a copy to (which shall not constitute notice):

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

                                       29
<PAGE>

        [PURCHASER SIGNATURE PAGES TO IDUL SECURITIES PURCHASE AGREEMENT]

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

Name of Investing Entity: ______________________________________________________

Signature of Authorized Signatory of Investing Entity: _________________________

Name of Authorized Signatory: __________________________________________________

Title of Authorized Signatory: _________________________________________________

Email Address of Authorized Entity:_____________________________________________

Address for Notice of Investing Entity:

Address for Delivery of Securities for Investing Entity (if not same as above):

Subscription Amount:
Shares:
Warrant Shares:
EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]

                                       30<PAGE>

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE  BEEN  REGISTERED  WITH  THE  SECURITIES  AND  EXCHANGE  COMMISSION  OR THE
SECURITIES   COMMISSION  OF  ANY  STATE  IN  RELIANCE  UPON  AN  EXEMPTION  FROM
REGISTRATION  UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED  (THE  "SECURITIES
ACT"),  AND,  ACCORDINGLY,  MAY NOT BE OFFERED  OR SOLD  EXCEPT  PURSUANT  TO AN
EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE  SECURITIES  ACT OR PURSUANT TO AN
AVAILABLE  EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE  REGISTRATION
REQUIREMENTS  OF THE  SECURITIES  ACT AND IN ACCORDANCE  WITH  APPLICABLE  STATE
SECURITIES  LAWS AS  EVIDENCED BY A LEGAL  OPINION OF COUNSEL TO THE  TRANSFEROR
REASONABLY  ACCEPTABLE  TO THE COMPANY TO SUCH  EFFECT,  THE  SUBSTANCE OF WHICH
SHALL BE REASONABLY  ACCEPTABLE TO THE COMPANY.  THIS SECURITY MAY BE PLEDGED IN
CONNECTION  WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED  BROKER-DEALER  OR
OTHER LOAN WITH A FINANCIAL  INSTITUTION  THAT IS AN  "ACCREDITED  INVESTOR"  AS
DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT.

                          COMMON STOCK PURCHASE WARRANT

                To Purchase __________ Shares of Common Stock of

                     Industries International, Incorporated

                    THIS COMMON STOCK PURCHASE WARRANT (the "Warrant") CERTIFIES
that, for value received, _____________ (the "Holder"), is entitled, upon the
terms and subject to the limitations on exercise and the conditions hereinafter
set forth, at any time on or after the date of issuance of this Warrant (the
"Initial Exercise Date") and on or prior to the third anniversary of the Initial
Exercise Date (the "Termination Date") but not thereafter, to subscribe for and
purchase from Industries International, Incorporated, a Nevada corporation (the
"Company"), up to ____________ shares (the "Warrant Shares") of Common Stock,
par value $0.01 per share, of the Company (the "Common Stock"). The purchase
price of one share of Common Stock (the "Exercise Price") under this Warrant
shall be $2.7601 subject to adjustment hereunder. The Exercise Price and the
number of Warrant Shares for which the Warrant is exercisable shall be subject
to adjustment as provided herein. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in that certain Securities
Purchase Agreement (the "Purchase Agreement"), dated February 25, 2004, among
the Company and the purchasers signatory thereto.

                                       1
<PAGE>

         1.  Title to  Warrant.  Prior to the  Termination  Date and  subject to
compliance with applicable laws and Section 7 of this Warrant,  this Warrant and
all rights  hereunder  are  transferable,  in whole or in part, at the office or
agency of the  Company by the Holder in person or by duly  authorized  attorney,
upon surrender of this Warrant  together with the Assignment Form annexed hereto
properly  endorsed.  The transferee shall sign an investment  letter in form and
substance reasonably satisfactory to the Company.

         2.  Authorization  of Shares.  The Company  covenants  that all Warrant
Shares which may be issued upon the exercise of the purchase rights  represented
by this Warrant will, upon exercise of the purchase  rights  represented by this
Warrant,  be duly authorized,  validly issued,  fully paid and nonassessable and
free from all taxes,  liens and charges in respect of the issue  thereof  (other
than taxes in  respect of any  transfer  occurring  contemporaneously  with such
issue).

         3. Exercise of Warrant.

                  (a)  Exercise  of the  purchase  rights  represented  by  this
         Warrant  may be made at any  time or  times  on or  after  the  Initial
         Exercise Date and on or before the Termination  Date by delivery to the
         Company of a duly  executed  facsimile  copy of the Notice of  Exercise
         Form  annexed  hereto (or such other office or agency of the Company as
         it may designate by notice in writing to the  registered  Holder at the
         address  of  such  Holder  appearing  on the  books  of  the  Company);
         provided,  however,  within 5 Trading  Days of the date said  Notice of
         Exercise is delivered to the Company, the Holder shall have surrendered
         this Warrant to the Company and the Company shall have received payment
         of the aggregate Exercise Price of the shares thereby purchased by wire
         transfer or cashier's check drawn on a United States bank. Certificates
         for shares purchased  hereunder shall be delivered to the Holder within
         the earlier of (i) 5 Trading Days after the date on which the Notice of
         Exercise  shall have been delivered by facsimile copy or (ii) 3 Trading
         Days from the delivery to the Company of the Notice of Exercise Form by
         facsimile copy,  surrender of this Warrant and payment of the aggregate
         Exercise  Price as set forth above  ("Warrant  Share  Delivery  Date");
         provided,  however,  in the event the Warrant is not surrendered or the
         aggregate  Exercise  Price  is not  received  by the  Company  within 5
         Trading  Days after the date on which the Notice of  Exercise  shall be
         delivered by facsimile  copy,  the Warrant Share Delivery Date shall be
         extended  to the extent  such 5 Trading  Day period is  exceeded.  This
         Warrant shall be deemed to have been exercised on the later of the date
         the Notice of Exercise is delivered  to the Company by  facsimile  copy
         and the date the Exercise Price is received by the Company. The Warrant
         Shares  shall be deemed to have been  issued,  and  Holder or any other
         person so designated to be named therein shall be deemed to have become
         a holder of record of such shares for all purposes,  as of the date the
         Warrant has been  exercised  by payment to the Company of the  Exercise
         Price and all taxes required to be paid by the Holder, if any, pursuant
         to Section 5 prior to the issuance of such shares,  have been paid.  If

                                       2
<PAGE>

         the  Company  fails  to  deliver  to  the  Holder  a   certificate   or
         certificates  representing  the Warrant Shares pursuant to this Section
         3(a) by the third  Trading Day  following  the Warrant  Share  Delivery
         Date, then the Holder will have the right to rescind such exercise.  In
         addition to any other rights  available  to the Holder,  if the Company
         fails  to  deliver  to  the  Holder  a  certificate   or   certificates
         representing  the Warrant  Shares  pursuant to an exercise by the third
         Trading Day after the Warrant Share  Delivery  Date,  and if after such
         day the Holder is required by its broker to purchase (in an open market
         transaction  or  otherwise)  shares  of  Common  Stock  to  deliver  in
         satisfaction  of a sale by the Holder of the Warrant  Shares  which the
         Holder anticipated receiving upon such exercise (a "Buy-In"),  then the
         Company shall (1) pay in cash to the Holder the amount by which (x) the
         Holder's total purchase price (including brokerage commissions, if any)
         for the  shares of Common  Stock so  purchased  exceeds  (y) the amount
         obtained  by  multiplying  (A) the  number of Warrant  Shares  that the
         Company was  required to deliver to the Holder in  connection  with the
         exercise  at issue  times (B) the price at which the sell order  giving
         rise to such purchase obligation was executed, and (2) at the option of
         the Holder,  either reinstate the portion of the Warrant and equivalent
         number of Warrant  Shares for which such  exercise  was not  honored or
         deliver to the  Holder the number of shares of Common  Stock that would
         have been issued had the Company timely  complied with its exercise and
         delivery  obligations  hereunder.  For example, if the Holder purchases
         Common Stock having a total purchase price of $11,000 to cover a Buy-In
         with respect to an attempted exercise of shares of Common Stock with an
         aggregate  sale  price  giving  rise to  such  purchase  obligation  of
         $10,000,  under clause (1) of the  immediately  preceding  sentence the
         Company  shall be required to pay the Holder  $1,000.  The Holder shall
         provide the Company  written notice  indicating the amounts  payable to
         the  Holder  in  respect  of  the  Buy-In,   together  with  applicable
         confirmations and other evidence  reasonably  requested by the Company.
         Nothing  herein  shall  limit a  Holder's  right to  pursue  any  other
         remedies  available  to it  hereunder,  at law or in equity  including,
         without limitation,  a decree of specific performance and/or injunctive
         relief  with  respect  to  the  Company's  failure  to  timely  deliver
         certificates  representing  shares of Common Stock upon exercise of the
         Warrant as required pursuant to the terms hereof.

                  (b) If this Warrant  shall have been  exercised  in part,  the
         Company  shall,   at  the  time  of  delivery  of  the  certificate  or
         certificates  representing  Warrant  Shares,  deliver  to  Holder a new
         Warrant  evidencing  the rights of Holder to purchase  the  unpurchased
         Warrant  Shares called for by this Warrant,  which new Warrant shall in
         all other respects be identical with this Warrant.

                  (c) The  Holder  shall  not have the  right  to  exercise  any
         portion of this Warrant,  pursuant to Section 3(a) or otherwise, to the
         extent that after giving effect to such issuance  after  exercise,  the
         Holder  (together  with the Holder's  affiliates),  as set forth on the
         applicable  Notice of  Exercise,  would  beneficially  own in excess of
         4.99%  of  the  number  of  shares  of  the  Common  Stock  outstanding
         immediately  after giving effect to such issuance.  For purposes of the
         foregoing  sentence,  the number of shares of Common Stock beneficially
         owned by the  Holder and its  affiliates  shall  include  the number of
         shares of Common  Stock  issuable  upon  exercise of this  Warrant with
         respect to which the  determination of such sentence is being made, but
         shall  exclude  the  number of shares of Common  Stock  which  would be
         issuable upon (A) exercise of the  remaining,  nonexercised  portion of
         this Warrant  beneficially owned by the Holder or any of its affiliates
         and (B)  exercise or  conversion  of the  unexercised  or  nonconverted
         portion of any other  securities  of the  Company  (including,  without
         limitation,  any other Warrants)  subject to a limitation on conversion
         or exercise analogous to the limitation  contained herein  beneficially

                                       3
<PAGE>

         owned by the  Holder or any of its  affiliates.  Except as set forth in
         the preceding sentence,  for purposes of this Section 3(c),  beneficial
         ownership  shall be calculated in accordance  with Section 13(d) of the
         Exchange Act, it being  acknowledged  by Holder that the Company is not
         representing  to Holder that such  calculation  is in  compliance  with
         Section 13(d) of the Exchange Act and Holder is solely  responsible for
         any  schedules  required to be filed in  accordance  therewith.  To the
         extent that the limitation  contained in this Section 3(c) applies, the
         determination  of whether this Warrant is  exercisable  (in relation to
         other  securities  owned by the  Holder) and of which a portion of this
         Warrant is exercisable  shall be in the sole discretion of such Holder,
         and the  submission of a Notice of Exercise  shall be deemed to be such
         Holder's  determination  of whether  this  Warrant is  exercisable  (in
         relation to other securities owned by such Holder) and of which portion
         of this Warrant is exercisable,  in each case subject to such aggregate
         percentage  limitation,  and the Company  shall have no  obligation  to
         verify or confirm the accuracy of such  determination.  For purposes of
         this Section 3(c), in determining  the number of outstanding  shares of
         Common Stock,  the Holder may rely on the number of outstanding  shares
         of Common Stock as reflected in (x) the Company's most recent Form 10-Q
         or Form 10-K, as the case may be, (y) a more recent public announcement
         by the Company or (z) any other notice by the Company or the  Company's
         Transfer  Agent  setting  forth the  number  of shares of Common  Stock
         outstanding.  Upon the  written  or oral  request  of the  Holder,  the
         Company shall within two Trading Days confirm  orally and in writing to
         the Holder the number of shares of Common  Stock then  outstanding.  In
         any case,  the number of  outstanding  shares of Common  Stock shall be
         determined  after  giving  effect  to the  conversion  or  exercise  of
         securities of the Company, including this Warrant, by the Holder or its
         affiliates since the date as of which such number of outstanding shares
         of Common Stock was reported.

                  (d) If at any time after one year from the date of issuance of
         this Warrant there is no effective  Registration  Statement registering
         the resale of the Warrant  Shares by the Holder,  this Warrant may also
         be  exercised  at such time by means of a "cashless  exercise" in which
         the Holder shall be entitled to receive a certificate for the number of
         Warrant Shares equal to the quotient  obtained by dividing  [(A-B) (X)]
         by (A), where:

                  (A) =    the VWAP on the Trading Day  immediately  preceding
                           the date of such election;

                  (B) =    the Exercise  Price of this  Warrant,  as adjusted;
                           and

                  (X) =    the number of Warrant Shares issuable upon exercise
                           of this Warrant in accordance  with the terms of this
                           Warrant  by means of a cash  exercise  rather  than a
                           cashless exercise.

                  (e) Subject to the  provisions of this Section 3, if after the
         Effective Date the VWAP for each of ten  consecutive  Trading Days (the
         "Measurement  Price", which period shall not have commenced until after
         the  Effective  Date)  exceeds  the then  Exercise  Price  (subject  to
         adjustment as set forth herein) (the  "Threshold  Price") by 200%, then
         the Company  may,  within two  Trading  Days of such  period,  call for
         cancellation  of all or any portion of this  Warrant for which a Notice
         of Exercise  has not yet been  delivered  (such  right,  a "Call").  To
         exercise  this  right,  the  Company  must  deliver  to the  Holder  an

                                       4
<PAGE>

         irrevocable  written notice (a "Call Notice"),  indicating  therein the
         portion of  unexercised  portion of this  Warrant to which such  notice
         applies.  If the conditions set forth below for such Call are satisfied
         from the period from the date of the Call Notice  through and including
         the Call Date (as  defined  below),  then any  portion of this  Warrant
         subject to such Call  Notice for which a Notice of  Exercise  shall not
         have been  received  from and after the date of the Call Notice will be
         cancelled  at 6:30 p.m.  (New York City time) on the tenth  Trading Day
         after the date the Call Notice is  received  by the Holder  (such date,
         the "Call Date"). Any unexercised  portion of this Warrant to which the
         Call Notice does not pertain will be unaffected by such Call Notice. In
         furtherance  thereof,  the  Company  covenants  and agrees that it will
         honor all Notices of Exercise with respect to Warrant Shares subject to
         a Call Notice that are  tendered  from the time of delivery of the Call
         Notice  through  6:30 p.m.  (New York City time) on the Call Date.  The
         parties  agree that any Notice of Exercise  delivered  following a Call
         Notice shall first reduce to zero the number of Warrant  Shares subject
         to such Call Notice  prior to reducing  the  remaining  Warrant  Shares
         available  for purchase  under this Warrant.  For example,  if (x) this
         Warrant  then permits the Holder to acquire 100 Warrant  Shares,  (y) a
         Call Notice pertains to 75 Warrant  Shares,  and (z) prior to 6:30 p.m.
         (New York City  time) on the Call Date the  Holder  tenders a Notice of
         Exercise in respect of 50 Warrant Shares, then (1) on the Call Date the
         right  under  this  Warrant  to  acquire  25  Warrant  Shares  will  be
         automatically  cancelled,  (2) the  Company,  in the  time  and  manner
         required  under this  Warrant,  will have issued and  delivered  to the
         Holder 50 Warrant Shares in respect of the exercises  following receipt
         of the Call Notice, and (3) the Holder may, until the Termination Date,
         exercise this Warrant for 25 Warrant  Shares  (subject to adjustment as
         herein provided and subject to subsequent Call Notices).  Subject again
         to the  provisions  of this  Section  3(e),  the  Company  may  deliver
         subsequent  Call  Notices for any portion of this Warrant for which the
         Holder shall not have  delivered a Notice of Exercise.  Notwithstanding
         anything to the contrary set forth in this Warrant, the Company may not
         deliver a Call Notice or require the  cancellation of this Warrant (and
         any Call Notice will be void),  unless,  from the beginning of the 10th
         consecutive Trading Days used to determine whether the Common Stock has
         achieved the  Threshold  Price  through the Call Date,  (i) the Company
         shall have  honored in  accordance  with the terms of this  Warrant all
         Notices of Exercise  delivered by 6:30 p.m. (New York City time) on the
         Call Date, (ii) the Registration Statement shall be effective as to all
         Warrant Shares and the prospectus  thereunder  available for use by the
         Holder for the resale of all such  Warrant  Shares and (iii) the Common
         Stock shall be listed or quoted for trading on the Trading Market.  The
         Company's  right to Call the Warrant  shall be exercised  ratably among
         the Purchasers  based on each  Purchaser's  initial  purchase of Common
         Stock pursuant to the Purchase Agreement.

         4. No  Fractional  Shares  or  Scrip.  No  fractional  shares  or scrip
representing  fractional  shares  shall  be  issued  upon the  exercise  of this
Warrant.  As to any fraction of a share which Holder would otherwise be entitled
to purchase  upon such  exercise,  the Company  shall pay a cash  adjustment  in
respect of such final fraction in an amount equal to such fraction multiplied by
the Exercise Price.

                                       5
<PAGE>

         5. Charges,  Taxes and Expenses.  Issuance of certificates  for Warrant
Shares shall be made without  charge to the Holder for any issue or transfer tax
or other incidental expense in respect of the issuance of such certificate,  all
of which taxes and expenses shall be paid by the Company,  and such certificates
shall be  issued  in the name of the  Holder  or in such name or names as may be
directed by the Holder;  provided,  however,  that in the event certificates for
Warrant  Shares are to be issued in a name  other  than the name of the  Holder,
this  Warrant  when  surrendered  for  exercise  shall  be  accompanied  by  the
Assignment Form attached hereto duly executed by the Holder; and the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.

         6. Closing of Books.  The Company will not close its stockholder  books
or records in any manner  which  prevents the timely  exercise of this  Warrant,
pursuant to the terms hereof.

         7. Transfer, Division and Combination.

                  (a) Subject to compliance with any applicable  securities laws
         and the  conditions  set forth in Sections 1 and 7(e) hereof and to the
         provisions of Section 4.1 of the Purchase  Agreement,  this Warrant and
         all  rights  hereunder  are  transferable,  in whole  or in part,  upon
         surrender  of this  Warrant  at the  principal  office of the  Company,
         together with a written assignment of this Warrant substantially in the
         form  attached  hereto  duly  executed  by the  Holder  or its agent or
         attorney and funds  sufficient  to pay any transfer  taxes payable upon
         the making of such transfer. Upon such surrender and, if required, such
         payment,  the  Company  shall  execute  and  deliver a new  Warrant  or
         Warrants  in  the  name  of  the  assignee  or  assignees  and  in  the
         denomination   or   denominations   specified  in  such  instrument  of
         assignment,  and shall issue to the  assignor a new Warrant  evidencing
         the portion of this  Warrant not so assigned,  and this  Warrant  shall
         promptly  be  cancelled.  A  Warrant,  if  properly  assigned,  may  be
         exercised  by a new holder for the purchase of Warrant  Shares  without
         having a new Warrant issued.

                  (b)  This  Warrant  may be  divided  or  combined  with  other
         Warrants  upon  presentation  hereof  at the  aforesaid  office  of the
         Company,  together  with a  written  notice  specifying  the  names and
         denominations  in which new  Warrants  are to be issued,  signed by the
         Holder or its agent or  attorney.  Subject to  compliance  with Section
         7(a),  as to any  transfer  which may be involved  in such  division or
         combination,  the  Company  shall  execute and deliver a new Warrant or
         Warrants  in  exchange  for the  Warrant or  Warrants  to be divided or
         combined in accordance with such notice.

                  (c) The Company  shall  prepare,  issue and deliver at its own
         expense  (other than transfer  taxes) the new Warrant or Warrants under
         this Section 7.

                  (d) The Company agrees to maintain,  at its aforesaid  office,
         books for the  registration  and the  registration  of  transfer of the
         Warrants.

                                       6
<PAGE>

                  (e) If,  at the  time of the  surrender  of  this  Warrant  in
         connection  with any  transfer of this  Warrant,  the  transfer of this
         Warrant shall not be registered  pursuant to an effective  registration
         statement  under  the  Securities  Act  and  under   applicable   state
         securities or blue sky laws, the Company may require, as a condition of
         allowing  such  transfer  (i) that the  Holder  or  transferee  of this
         Warrant,  as the case may be, furnish to the Company a written  opinion
         of  counsel  (which  opinion  shall be in  form,  substance  and  scope
         customary  for opinions of counsel in comparable  transactions)  to the
         effect that such  transfer may be made without  registration  under the
         Securities Act and under  applicable state securities or blue sky laws,
         (ii) that the holder or  transferee  execute and deliver to the Company
         an investment  letter in form and  substance  acceptable to the Company
         and (iii) that the transferee be an "accredited investor" as defined in
         Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8) promulgated under the
         Securities  Act or a qualified  institutional  buyer as defined in Rule
         144A(a) under the Securities Act.

         8. No Rights as  Shareholder  until  Exercise.  This  Warrant  does not
entitle the Holder to any voting rights or other rights as a shareholder  of the
Company prior to the exercise hereof. Upon the surrender of this Warrant and the
payment of the aggregate  Exercise  Price (or by means of a cashless  exercise),
the  Warrant  Shares  so  purchased  shall be and be deemed to be issued to such
Holder as the record  owner of such  shares as of the close of  business  on the
later of the date of such surrender or payment.

         9. Loss,  Theft,  Destruction  or  Mutilation  of Warrant.  The Company
covenants that upon receipt by the Company of evidence  reasonably  satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant or any stock
certificate  relating  to the  Warrant  Shares,  and in case of  loss,  theft or
destruction,  of indemnity or security reasonably  satisfactory to it (which, in
the case of the  Warrant,  shall not include the posting of any bond),  and upon
surrender and cancellation of such Warrant or stock  certificate,  if mutilated,
the Company  will make and deliver a new  Warrant or stock  certificate  of like
tenor  and  dated  as of such  cancellation,  in lieu of such  Warrant  or stock
certificate.

         10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the  taking of any action or the  expiration  of any right  required  or granted
herein shall be a Saturday,  Sunday or a legal holiday,  then such action may be
taken or such right may be exercised on the next  succeeding day not a Saturday,
Sunday or legal holiday.

         11. Adjustments of Exercise Price and Number of Warrant Shares.

                  (a) Stock  Splits,  etc.  The  number  and kind of  securities
         purchasable  upon the exercise of this  Warrant and the Exercise  Price
         shall be subject to adjustment  from time to time upon the happening of
         any of the  following.  In case the Company shall (i) pay a dividend in
         shares of Common Stock or make a distribution in shares of Common Stock
         to  holders  of  its  outstanding  Common  Stock,  (ii)  subdivide  its
         outstanding  shares of Common  Stock  into a greater  number of shares,
         (iii)  combine its  outstanding  shares of Common  Stock into a smaller
         number  of  shares of Common  Stock,  or (iv)  issue any  shares of its
         capital  stock in a  reclassification  of the  Common  Stock,  then the

                                       7
<PAGE>

         number of Warrant  Shares  purchasable  upon  exercise of this  Warrant
         immediately prior thereto shall be adjusted so that the Holder shall be
         entitled  to receive  the kind and  number of  Warrant  Shares or other
         securities  of the  Company  which it  would  have  owned or have  been
         entitled to receive had such Warrant been exercised in advance thereof.
         Upon each such  adjustment of the kind and number of Warrant  Shares or
         other  securities of the Company which are purchasable  hereunder,  the
         Holder shall  thereafter  be entitled to purchase the number of Warrant
         Shares  or  other  securities  resulting  from  such  adjustment  at an
         Exercise  Price  per  Warrant  Share  or  other  security  obtained  by
         multiplying  the  Exercise  Price in effect  immediately  prior to such
         adjustment by the number of Warrant Shares purchasable  pursuant hereto
         immediately  prior to such  adjustment  and  dividing  by the number of
         Warrant Shares or other  securities of the Company that are purchasable
         pursuant hereto  immediately after such adjustment.  An adjustment made
         pursuant to this paragraph shall become effective immediately after the
         effective  date of such event  retroactive  to the record date, if any,
         for such event.

                  (b) Anti-Dilution Provisions.  During the Exercise Period, the
         Exercise  Price  shall be  subject to  adjustment  from time to time as
         provided in this Section 11(b). In the event that any adjustment of the
         Exercise Price as required herein results in a fraction of a cent, such
         Exercise Price shall be rounded up or down to the nearest cent.

                           (i) Adjustment of Exercise Price. If and whenever the
                  Company  issues  or  sells,  or  in  accordance  with  Section
                  11(b)(ii)  hereof is deemed to have issued or sold, any shares
                  of Common  Stock for an effective  consideration  per share of
                  less  than the  then  Exercise  Price or for no  consideration
                  (such lower price,  the "Base Share Price" and such  issuances
                  collectively, a "Dilutive Issuance"), then, the Exercise Price
                  shall be multiplied by a fraction of which the numerator shall
                  be  the   number  of  shares  of  Common   Stock   Outstanding
                  immediately  prior to the Dilutive Issuance plus the number of
                  shares of Common Stock which the aggregate  offering price for
                  such Dilutive Issuance (assuming receipt by the Corporation in
                  full  of all  consideration  payable  upon  exercise  of  such
                  rights,  options or warrants)  would  purchase at the Exercise
                  Price,  and the  denominator  of which shall be the sum of the
                  number of shares of Common Stock Outstanding immediately prior
                  to the Dilutive  Issuance  plus the number of shares of Common
                  Stock so issued or issuable in  connection  with the  Dilutive
                  Issuance.  Such adjustment  shall be made whenever such shares
                  of Common Stock or Capital Share  Equivalents are issued.  For
                  purposes of this Section 11(b),  "Common Stock Outstanding" as
                  of a given date shall be the number of shares of Common  Stock
                  (excluding treasury shares, if any) issued and outstanding.

                           (ii) Effect on Exercise Price of Certain Events.  For
                  purposes of  determining  the  adjusted  Exercise  Price under
                  Section 11(b) hereof, the following will be applicable:

                                    (A)  Issuance of Rights or  Options.  If the
                           Company in any manner  issues or grants any warrants,
                           rights  or  options,   whether  or  not   immediately
                           exercisable,  to subscribe for or to purchase  Common
                           Stock or Common  Stock  Equivalents  (such  warrants,
                           rights and options to purchase Common Stock or Common
                           Stock  Equivalents  are  hereinafter  referred  to as
                           "Options")  and the  effective  price  per  share for

                                       8
<PAGE>

                           which Common  Stock is issuable  upon the exercise of
                           such Options is less than the Exercise  Price ("Below
                           Base Price  Options"),  then the maximum total number
                           of shares of Common Stock  issuable upon the exercise
                           of all such Below Base Price Options  (assuming  full
                           exercise,  conversion  or  exchange  of Common  Stock
                           Equivalents,  if applicable)  will, as of the date of
                           the  issuance  or  grant  of such  Below  Base  Price
                           Options, be deemed to be outstanding and to have been
                           issued  and sold by the  Company  for such  price per
                           share and the  maximum  consideration  payable to the
                           Company upon such exercise  (assuming  full exercise,
                           conversion  or exchange of Common Stock  Equivalents,
                           if  applicable)  will be deemed to have been received
                           by  the  Company.   For  purposes  of  the  preceding
                           sentence,  the  "effective  price per share for which
                           Common  Stock is issuable  upon the  exercise of such
                           Below Base Price  Options" is  determined by dividing
                           (i) the total amount,  if any, received or receivable
                           by the Company as  consideration  for the issuance or
                           granting of all such Below Base Price  Options,  plus
                           the   minimum    aggregate   amount   of   additional
                           consideration,  if any,  payable to the Company  upon
                           the  exercise  of all such Below Base Price  Options,
                           plus,  in  the  case  of  Common  Stock   Equivalents
                           issuable  upon the  exercise of such Below Base Price
                           Options,  the minimum  aggregate amount of additional
                           consideration  payable upon the exercise,  conversion
                           or  exchange  thereof at the time such  Common  Stock
                           Equivalents first become exercisable,  convertible or
                           exchangeable,  by (ii) the  maximum  total  number of
                           shares of Common Stock  issuable upon the exercise of
                           all such  Below  Base Price  Options  (assuming  full
                           conversion   of   Common   Stock   Equivalents,    if
                           applicable).  No further  adjustment  to the Exercise
                           Price will be made upon the actual  issuance  of such
                           Common  Stock  upon the  exercise  of such Below Base
                           Price  Options or upon the  exercise,  conversion  or
                           exchange of Common Stock  Equivalents  issuable  upon
                           exercise of such Below Base Price Options.

                                    (B) Issuance of Common Stock Equivalents. If
                           the Company in any manner  issues or sells any Common
                           Stock   Equivalents,   whether  or  not   immediately
                           convertible  (other than where the same are  issuable
                           upon the exercise of Options) and the effective price
                           per share for which  Common  Stock is  issuable  upon
                           such  exercise,  conversion  or exchange is less than
                           the Exercise Price,  then the maximum total number of
                           shares of Common Stock  issuable  upon the  exercise,
                           conversion  or  exchange  of all  such  Common  Stock
                           Equivalents  will,  as of the date of the issuance of
                           such  Common  Stock  Equivalents,  be  deemed  to  be
                           outstanding  and to have been  issued and sold by the
                           Company  for such  price per  share  and the  maximum
                           consideration   payable  to  the  Company  upon  such
                           exercise  (assuming  full  exercise,   conversion  or
                           exchange of Common Stock Equivalents,  if applicable)
                           will be deemed to have been  received by the Company.
                           For  the  purposes  of the  preceding  sentence,  the
                           "effective  price per share for which Common Stock is
                           issuable upon such exercise,  conversion or exchange"
                           is determined  by dividing (i) the total  amount,  if

                                       9
<PAGE>

                           any,   received  or  receivable  by  the  Company  as
                           consideration  for the  issuance  or sale of all such
                           Common Stock Equivalents,  plus the minimum aggregate
                           amount of additional  consideration,  if any, payable
                           to the  Company  upon  the  exercise,  conversion  or
                           exchange  thereof  at  the  time  such  Common  Stock
                           Equivalents first become exercisable,  convertible or
                           exchangeable,  by (ii) the  maximum  total  number of
                           shares of Common Stock  issuable  upon the  exercise,
                           conversion  or  exchange  of all  such  Common  Stock
                           Equivalents.  No further  adjustment  to the Exercise
                           Price will be made upon the actual  issuance  of such
                           Common Stock upon exercise, conversion or exchange of
                           such Common Stock Equivalents.

                                    (C)  Change  in Option  Price or  Conversion
                           Rate.  If there  is a  change  at any time in (i) the
                           amount of  additional  consideration  payable  to the
                           Company upon the  exercise of any  Options;  (ii) the
                           amount of additional  consideration,  if any, payable
                           to the  Company  upon  the  exercise,  conversion  or
                           exchange of any Common  Stock  Equivalents;  or (iii)
                           the rate at which any Common  Stock  Equivalents  are
                           convertible into or exchangeable for Common Stock (in
                           each  such  case,  other  than  under or by reason of
                           provisions designed to protect against dilution), the
                           Exercise  Price in effect at the time of such  change
                           will be readjusted to the Exercise  Price which would
                           have been in effect at such time had such  Options or
                           Common Stock Equivalents  still outstanding  provided
                           for such changed additional  consideration or changed
                           conversion  rate,  as the  case  may be,  at the time
                           initially granted, issued or sold.

                                    (D) Calculation of  Consideration  Received.
                           If  any  Common   Stock,   Options  or  Common  Stock
                           Equivalents are issued, granted or sold for cash, the
                           consideration  received therefor for purposes of this
                           Warrant  will be the amount  received  by the Company
                           therefor, before deduction of reasonable commissions,
                           underwriting   discounts  or   allowances   or  other
                           reasonable  expenses  paid or incurred by the Company
                           in connection  with such issuance,  grant or sale. In
                           case  any  Common  Stock,  Options  or  Common  Stock
                           Equivalents  are  issued or sold for a  consideration
                           part or all of which  shall be other than  cash,  the
                           amount of the consideration  other than cash received
                           by the Company  will be the fair market value of such
                           consideration,   except   where  such   consideration
                           consists of  securities,  in which case the amount of
                           consideration  received  by the  Company  will be the
                           fair market value  (closing  bid price,  if traded on
                           any  market)  thereof as of the date of  receipt.  In
                           case  any  Common  Stock,  Options  or  Common  Stock
                           Equivalents  are issued in connection with any merger
                           or   consolidation   in  which  the  Company  is  the
                           surviving  corporation,  the amount of  consideration
                           therefor  will be deemed to be the fair market  value

                                       10
<PAGE>

                           of such portion of the net assets and business of the
                           non-surviving  corporation as is attributable to such
                           Common Stock, Options or Common Stock Equivalents, as
                           the  case  may  be.  The  fair  market  value  of any
                           consideration  other than cash or securities  will be
                           determined in good faith by an  investment  banker or
                           other  appropriate  expert  of  national   reputation
                           selected by the Company and reasonably  acceptable to
                           the holder  hereof,  with the costs of such appraisal
                           to be borne by the Company.

                                    (E)  Exceptions  to  Adjustment  of Exercise
                           Price.  Notwithstanding the foregoing,  no adjustment
                           will be made under this  Section  11(b) in respect of
                           (1) the  granting  of stock or options to  employees,
                           officers,  directors or key  consultants  pursuant to
                           any equity  incentive  plan duly adopted by the Board
                           of  Directors  of the  Company or a  majority  of the
                           members of a committee of directors  established  for
                           such   purpose  or  (2)  upon  the   exercise  of  or
                           conversion of any Common Stock Equivalents or Options
                           issued and  outstanding  on the Original  Issue Date,
                           provided  that the  securities  have not been amended
                           since the date of the Purchase  Agreement except as a
                           result of the Purchase Agreement.

                           (iii)  Minimum   Adjustment  of  Exercise  Price.  No
                  adjustment of the Exercise Price shall be made in an amount of
                  less than 1% of the Exercise  Price in effect at the time such
                  adjustment  is  otherwise  required  to be made,  but any such
                  lesser  adjustment  shall be carried forward and shall be made
                  at the time and together with the next  subsequent  adjustment
                  which, together with any adjustments so carried forward, shall
                  amount to not less than 1% of such Exercise Price.

         12.   Reorganization,   Reclassification,   Merger,   Consolidation  or
Disposition  of  Assets.  In case the  Company  shall  reorganize  its  capital,
reclassify  its  capital  stock,  consolidate  or  merge  with or  into  another
corporation  (where the Company is not the surviving  corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell,  transfer or otherwise  dispose of its property,  assets or business to
another  corporation  and,  pursuant  to  the  terms  of  such   reorganization,
reclassification,  merger,  consolidation  or disposition  of assets,  shares of
common stock of the successor or acquiring  corporation,  or any cash, shares of
stock or other  securities  or  property  of any  nature  whatsoever  (including
warrants or other  subscription or purchase rights) in addition to or in lieu of
common stock of the successor or acquiring  corporation ("Other Property"),  are
to be received by or  distributed to the holders of Common Stock of the Company,
then the Holder shall have the right thereafter to receive, at the option of the
Holder, (a) upon exercise of this Warrant,  the number of shares of Common Stock
of the  successor  or  acquiring  corporation  or of the  Company,  if it is the
surviving corporation, and Other Property receivable upon or as a result of such
reorganization, reclassification, merger, consolidation or disposition of assets
by a Holder of the number of shares of Common  Stock for which  this  Warrant is
exercisable  immediately  prior to such  event or (b) cash equal to the value of
this Warrant as determined in accordance  with the Black Scholes  option pricing
formula.  In  case  of  any  such  reorganization,   reclassification,   merger,
consolidation or disposition of assets,  the successor or acquiring  corporation
(if  other  than  the  Company)  shall  expressly  assume  the due and  punctual
observance  and  performance  of each and every  covenant and  condition of this
Warrant to be performed and observed by the Company and all the  obligations and
liabilities   hereunder,   subject  to  such  modifications  as  may  be  deemed

                                       1
<PAGE>

appropriate (as determined in good faith by resolution of the Board of Directors
of the Company) in order to provide for  adjustments of Warrant Shares for which
this Warrant is exercisable  which shall be as nearly  equivalent as practicable
to the adjustments provided for in this Section 12. For purposes of this Section
12, "common stock of the successor or acquiring corporation" shall include stock
of such  corporation  of any class which is not  preferred  as to  dividends  or
assets  over any  other  class of stock  of such  corporation  and  which is not
subject to  redemption  and shall also include any  evidences  of  indebtedness,
shares of stock or other  securities  which are convertible into or exchangeable
for any such stock,  either  immediately or upon the arrival of a specified date
or the  happening  of a  specified  event and any  warrants  or other  rights to
subscribe  for or purchase  any such stock.  The  foregoing  provisions  of this
Section   12   shall    similarly    apply   to   successive    reorganizations,
reclassifications, mergers, consolidations or disposition of assets.

         13.  Voluntary  Adjustment by the Company.  The Company may at any time
during the term of this Warrant  reduce the then current  Exercise  Price to any
amount and for any period of time deemed  appropriate  by the Board of Directors
of the Company.

         14.  Notice of  Adjustment.  Whenever  the number of Warrant  Shares or
number or kind of securities or other property  purchasable upon the exercise of
this Warrant or the Exercise Price is adjusted, as herein provided,  the Company
shall give notice thereof to the Holder,  which notice shall state the number of
Warrant Shares (and other securities or property)  purchasable upon the exercise
of this  Warrant  and the  Exercise  Price of such  Warrant  Shares  (and  other
securities or property) after such  adjustment,  setting forth a brief statement
of the facts  requiring  such  adjustment  and setting forth the  computation by
which such adjustment was made.

         15. Notice of Corporate Action. If at any time:

                  (a) the  Company  shall  take a record of the  holders  of its
         Common Stock for the purpose of entitling them to receive a dividend or
         other  distribution,  or any right to  subscribe  for or  purchase  any
         evidences of its indebtedness,  any shares of stock of any class or any
         other securities or property, or to receive any other right, or

                  (b) there shall be any capital  reorganization of the Company,
         any  reclassification  or  recapitalization of the capital stock of the
         Company or any  consolidation  or merger of the  Company  with,  or any
         sale,  transfer or other  disposition of all or  substantially  all the
         property, assets or business of the Company to, another corporation or,

                  (c) there shall be a  voluntary  or  involuntary  dissolution,
         liquidation or winding up of the Company;

then, in any one or more of such cases,  the Company shall give to Holder (i) at
least 10 days' prior written  notice of the date on which a record date shall be
selected for such dividend,  distribution or right or for determining  rights to
vote  in  respect  of  any  such   reorganization,   reclassification,   merger,
consolidation, sale, transfer, disposition,  liquidation or winding up, and (ii)
in the case of any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, dissolution, liquidation or winding up, at least 10

                                       12
<PAGE>

days'  prior  written  notice of the date when the same shall take  place.  Such
notice in accordance  with the foregoing  clause also shall specify (i) the date
on which  any such  record  is to be taken  for the  purpose  of such  dividend,
distribution  or right,  the date on which the holders of Common  Stock shall be
entitled  to any such  dividend,  distribution  or  right,  and the  amount  and
character  thereof,  and  (ii)  the  date  on  which  any  such  reorganization,
reclassification,    merger,   consolidation,   sale,   transfer,   disposition,
dissolution,  liquidation  or winding  up is to take place and the time,  if any
such  time is to be fixed,  as of which the  holders  of Common  Stock  shall be
entitled to exchange  their  Warrant  Shares for  securities  or other  property
deliverable upon such disposition,  dissolution, liquidation or winding up. Each
such written  notice shall be  sufficiently  given if addressed to Holder at the
last address of Holder  appearing  on the books of the Company and  delivered in
accordance with Section 17(d).

         16. Authorized Shares. The Company covenants that during the period the
Warrant is outstanding,  it will reserve from its authorized and unissued Common
Stock a  sufficient  number of shares to provide for the issuance of the Warrant
Shares upon the exercise of any purchase rights under this Warrant.  The Company
further  covenants  that its  issuance of this  Warrant  shall  constitute  full
authority  to its  officers  who are charged  with the duty of  executing  stock
certificates  to execute and issue the  necessary  certificates  for the Warrant
Shares upon the exercise of the purchase rights under this Warrant.  The Company
will take all such  reasonable  action as may be  necessary  to assure that such
Warrant  Shares  may be issued  as  provided  herein  without  violation  of any
applicable law or regulation,  or of any requirements of the Trading Market upon
which the Common Stock may be listed.

         Except and to the extent as waived or consented  to by the Holder,  the
Company shall not by any action,  including,  without  limitation,  amending its
certificate of incorporation or through any reorganization,  transfer of assets,
consolidation,  merger,  dissolution,  issue or sale of  securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this  Warrant,  but will at all times in good  faith  assist in the
carrying  out of all such terms and in the taking of all such  actions as may be
necessary  or  appropriate  to protect the rights of Holder as set forth in this
Warrant against  impairment.  Without  limiting the generality of the foregoing,
the Company will (a) not increase the par value of any Warrant  Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value,  (b) take all such action as may be necessary or appropriate in order
that the Company may  validly  and  legally  issue fully paid and  nonassessable
Warrant  Shares upon the  exercise  of this  Warrant,  and (c) use  commercially
reasonable  efforts to obtain all such  authorizations,  exemptions  or consents
from any public regulatory body having jurisdiction  thereof as may be necessary
to enable the Company to perform its obligations under this Warrant.

         Before  taking any action  which would result in an  adjustment  in the
number of  Warrant  Shares  for which  this  Warrant  is  exercisable  or in the
Exercise Price, the Company shall obtain all such  authorizations  or exemptions
thereof,  or consents  thereto,  as may be necessary from any public  regulatory
body or bodies having jurisdiction thereof.

                                       13
<PAGE>

         17. Miscellaneous.

                  (a) Jurisdiction.  All questions  concerning the construction,
validity,  enforcement and interpretation of this Warrant shall be determined in
accordance with the provisions of the Purchase Agreement.

                  (b)  Restrictions.  The Holder  acknowledges  that the Warrant
Shares acquired upon the exercise of this Warrant, if not registered,  will have
restrictions upon resale imposed by state and federal securities laws.

                  (c) Nonwaiver and Expenses.  No course of dealing or any delay
or failure to exercise any right  hereunder on the part of Holder shall  operate
as a waiver of such right or  otherwise  prejudice  Holder's  rights,  powers or
remedies,  notwithstanding  all rights  hereunder  terminate on the  Termination
Date. If the Company  willfully and knowingly fails to comply with any provision
of this  Warrant,  which  results in any  material  damages to the  Holder,  the
Company  shall pay to Holder such  amounts as shall be  sufficient  to cover any
costs and expenses  including,  but not limited to, reasonable  attorneys' fees,
including those of appellate  proceedings,  incurred by Holder in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its rights,  powers
or remedies hereunder.

                  (d) Notices. Any notice, request or other document required or
permitted  to be  given or  delivered  to the  Holder  by the  Company  shall be
delivered in accordance with the notice provisions of the Purchase Agreement.

                  (e)  Limitation  of  Liability.  No provision  hereof,  in the
absence of any affirmative action by Holder to exercise this Warrant or purchase
Warrant Shares, and no enumeration herein of the rights or privileges of Holder,
shall give rise to any liability of Holder for the purchase  price of any Common
Stock or as a stockholder of the Company,  whether such liability is asserted by
the Company or by creditors of the Company.

                  (f)  Remedies.  Holder,  in  addition  to  being  entitled  to
exercise  all rights  granted by law,  including  recovery of  damages,  will be
entitled to specific  performance of its rights under this Warrant.  The Company
agrees that  monetary  damages would not be adequate  compensation  for any loss
incurred  by reason  of a breach by it of the  provisions  of this  Warrant  and
hereby agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate.

                  (g) Successors and Assigns.  Subject to applicable  securities
laws, this Warrant and the rights and obligations  evidenced  hereby shall inure
to the  benefit of and be binding  upon the  successors  of the  Company and the
successors and permitted  assigns of Holder.  The provisions of this Warrant are
intended to be for the benefit of all Holders  from time to time of this Warrant
and shall be enforceable by any such Holder or holder of Warrant Shares.

                  (h) Amendment.  This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the Holder.

                                       14
<PAGE>

                  (i) Severability.  Wherever  possible,  each provision of this
Warrant shall be  interpreted  in such manner as to be effective and valid under
applicable  law, but if any  provision of this Warrant shall be prohibited by or
invalid under  applicable law, such provision shall be ineffective to the extent
of such  prohibition or invalidity,  without  invalidating the remainder of such
provisions or the remaining provisions of this Warrant.

                  (j)  Headings.  The headings  used in this Warrant are for the
convenience of reference  only and shall not, for any purpose,  be deemed a part
of this Warrant.

                              ********************
                                       15

<PAGE>

                             IN WITNESS  WHEREOF,  the  Company  has caused this
Warrant to be executed by its officer thereunto duly authorized.

Dated:  February____, 2004
                                         INDUSTRIES INTERNATIONAL, INCORPORATED

                                         By:  ________________________________
                                              Name: Tsui Kit

                                       16
<PAGE>

                         Title: Chief Executive Officer
                               NOTICE OF EXERCISE

To:      Industries International, Incorporated

         (1)____________The  undersigned  hereby  elects  to  purchase  ________
Warrant  Shares of the  Company  pursuant to the terms of the  attached  Warrant
(only if exercised in full),  and tenders herewith payment of the exercise price
in full, together with all applicable transfer taxes, if any.

         (2)____________Payment shall take the form of (check applicable box):

                [ ]        in lawful money of the United States; or

                [ ]        the  cancellation of such number of Warrant Shares as
                           is  necessary,  in  accordance  with the  formula set
                           forth in  subsection  3(d),  to exercise this Warrant
                           with respect to the maximum  number of Warrant Shares
                           purchasable   pursuant  to  the   cashless   exercise
                           procedure set forth in subsection 3(d).

         (3)____________Please  issue a certificate or certificates representing
said Warrant  Shares in the name of the  undersigned or in such other name as is
specified below:

            ___________________________________________

The Warrant Shares shall be delivered to the following:
            ___________________________________________
            ___________________________________________
            ___________________________________________

         (4) Accredited Investor. The undersigned is an "accredited investor" as
defined in Regulation D under the Securities Act of 1933, as amended.

                                            [PURCHASER]

                                            By: ______________________________
                                            Name:
                                            Title:
                                            Dated:  ________________________

<PAGE>

                                 ASSIGNMENT FORM

                    (To assign the foregoing warrant, execute
                   this form and supply required information.
                 Do not use this form to exercise the warrant.)

         FOR VALUE  RECEIVED,  the  foregoing  Warrant and all rights  evidenced
thereby are hereby assigned to

_______________________________________________ whose address is

_______________________________________________________________.

_______________________________________________________________

                                  Dated:  ______________, _______

                                  Holder's Signature:_______________

                                  Holder's Address: ________________

Signature Guaranteed:  ___________________________________________

NOTE: The signature to this  Assignment Form must correspond with the name as it
appears on the face of the Warrant,  without  alteration or  enlargement  or any
change whatsoever,  and must be guaranteed by a bank or trust company.  Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00064-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00064-of-00352.parquet"}]]