Document:

Exhibit 10.1.2

                                   LMIC, INC.
                            6435 Virginia Manor Road
                              Beltsville, MD 20705

                                                                   March 8, 2004

Omicron Master Trust, Ltd.
c/o Omicron Capital L.P.
810 Seventh Avenue, 38th Floor
New York, New York 10019

            Re:  Consent to New Financing

Ladies & Gentlemen:

            LMIC, Inc. (the "Company") intends to engage in a series of
financing transactions (the "New Financing") in which it will issue up to 3.34
million shares of common stock for a purchase price of not less than $1.50 per
share and warrants for up to 3.34 million share of common stock at an exercise
price of not less than $1.50 per share subject to customary anti-dilution
protection, with a price per warrant of not less than $0.02. In connection with
the New Financing, the Company is requesting certain consents, waivers and
amendments from Omicron Master Trust, Ltd. ("Omicron") under the following
documents (the "Omicron Documents") as more fully set forth in this letter:

      o     Securities Purchase Agreement, dated March 8, 2004, between the
            Company and Omicron (the "Securities Purchase Agreement");

      o     Convertible Debenture of the Company, dated March 8, 2004, in favor
            of Omicron (the "Debenture");

      o     Common Stock Purchase Warrant of the Company, dated March 8, 2004,
            in favor of Omicron (the "Warrant"); and

      o     Registration Rights Agreement, dated March 8, 2004, between the
            Company and Omicron (the "Registration Rights Agreement");

            In consideration of the improvement in the Company's credit that
will result from the New Financing and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Laurus and the Company agree as follows:

            1.    Consent. Omicron hereby consents to the New Financing.

            2.    Anti-Dilution. Notwithstanding anything to the contrary
                  contained in the Omicron Documents (including Section 4(c)(ii)
                  of the Debenture and Section 11(c)(i) of the Warrant), the New
                  Financing shall not be deemed

<PAGE>

Omicron Master Fund, Ltd.                                          March 8, 2004
Page 2

                  to be a "Dilutive Issuance" (as defined in the Debenture and
                  the Warrant), and no adjustment shall be made to the Set Price
                  (as defined in the Debenture) or in the Exercise Price (as
                  defined in the Warrant) as a result of the New Financing.

            3.    Registration Rights. Omicron hereby consents to the inclusion
                  in the Registration Statement (as defined in the Registration
                  Rights Agreement) of the shares to be issued in connection
                  with the New Financing (including the shares issuable upon
                  exercise of the warrants).

            4.    Preemptive and Subscription Rights. Omicron hereby waives any
                  and all preemptive rights, subscription rights, rights of
                  first offer or first refusal in connection with a sale of
                  securities, and similar rights (collectively, "Preemptive
                  Rights") in connection with the New Financing.

            5.    Amendment. Section 4.13(a) of the Securities Purchase
                  Agreement is hereby amended and restated in its entirety to
                  read as follow: "the greater of (i) the portion of the
                  Subsequent Financing not subscribed for by the purchasers in
                  the Vertical Ventures Financing (as defined below) or the New
                  Financing pursuant to the preemptive rights granted to them in
                  connection with the Vertical Ventures Financing or the New
                  Financing and (ii) a percentage of the Subsequent Financing
                  equal to (A) the aggregate principal amount of all Debentures
                  converted prior to the date of the Subsequent Financing
                  ("Converted Principal Amount"), divided by (B) the sum of (I)
                  the Converted Principal Amount and (II) the aggregate purchase
                  price paid for all of the units in the Vertical Ventures
                  Financing and the New Financing and".

            Omicron represents and warrants that it has not transferred or
assigned any of its rights under the Omicron Documents.

                  [Remainder of page intentionally left blank.]

<PAGE>

Omicron Master Fund, Ltd.                                          March 8, 2004
Page 3

            If this letter meets with your approval please sign where indicated
below and return a copy of the signed document to me.

                                                          Sincerely,

                                                          LMIC, INC.

                                                          By: __________________
                                                          Name: Luis P. Negrete
                                                          Title: President & CEO

Accepted and Agreed
this __ day of March, 2004

OMICRON MASTER FUND, LTD.

By:  __________________________
     Name:
     Title:Exhibit 10.1.3

                                   LMIC, INC.
                            6435 Virginia Manor Road
                              Beltsville, MD 20705

                                          March 5, 2004

To Purchasers Listed on
the Signature Pages to the Securities Purchase
Agreement dated January 21, 2004.

            Re:   Consent and Waiver

Ladies & Gentlemen:

            LMIC, Inc. (the "Company") intends to complete a financing
transaction (the "Financing") in which it will sell up to $5,000,000 in common
stock and warrants with an exercise price of not less than $1.50 per. Each unit,
comprised of one share of common stock and one warrant shall be sold for a price
of not less than $1.50; provided, however, that the common stock and warrants
may be sold separately, so long as in the aggregate the purchase price is not
less than the minimum amount set forth in this paragraph. In connection with the
Financing, the Company is requesting certain consents and waivers from the
purchasers under the Securities Purchase Agreement, dated as of January 21, 2004
(the "Purchase Agreement"), by and among the Company and the purchasers set
forth on the signature pages thereto (the "Purchasers"). Capitalized terms used
but not defined herein shall have the meanings assigned to such terms in the
Purchase Agreement.

            In consideration of the improvement in the Company's credit that
will result from the Financing and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the undersigned
and the Company agree as follows:

            1.    CONSENT. The undersigned hereby consents to the Financing,
                  including, without limitation, pursuant to Section 4.5(a) of
                  the Purchase Agreement, and agrees that the securities sold in
                  the Financing shall be deemed to be Excluded Stock for
                  purposes of Section 4.5(a) of the Purchase Agreement.

            2.    REGISTRATION RIGHTS. The undersigned hereby consents to the
                  inclusion in the Registration Statement of the shares to be
                  issued in connection with the Financing (including the shares
                  issuable upon exercise of the warrants).

                        [Remainder of Page Intentionally Left Blank.]

<PAGE>

Purchasers Listed on                                             March 5, 2004
the Signature Pages to the Securities Purchase
Agreement dated January 21, 2004.
Page 2

            If this letter meets with your approval  please sign where indicated
below and return a copy of the signed document to me.

                                          Sincerely,

                                          LMIC, INC.

                                          By:  __________________
                                                Name:
                                                Title:

Accepted and Agreed
this     th day of March, 2004

____________________________

By:  __________________
      Name:
      Title:

<PAGE>EXHIBIT 10.2.1

                          SECURITIES PURCHASE AGREEMENT

         This Securities  Purchase  Agreement (this  "Agreement") is dated as of
March 11, 2004,  among LMIC, Inc., a Delaware  corporation (the "Company"),  and
the  purchasers  identified on the signature  pages hereto (each,  including its
successors and assigns, a "Purchaser" and collectively the "Purchasers").

         WHEREAS,  subject  to the  terms  and  conditions  set  forth  in  this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act") 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, securities of the Company as more
fully described in this Agreement.

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

                                    ARTICLE I
                                   DEFINITIONS

         1.1  Definitions.  In addition to the terms  defined  elsewhere in this
Agreement:  (a) capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Debentures (as defined herein),  and (b) 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 under the Securities Act.

                  "Capital  Shares" means the Common Stock and any shares of any
         other class of common stock whether now or hereafter authorized, having
         the right to participate in the  distribution of earnings and assets of
         the Company.

                  "Capital Shares  Equivalents" means any securities,  rights or
         obligations  that are convertible  into or exchangeable for or give any
         right to subscribe for or purchase,  directly or indirectly, any Common
         Stock or any  warrants,  options or other  rights to  subscribe  for or
         purchase, directly or indirectly,  Common Stock or any such convertible
         or exchangeable securities.

                  "Closing"  means the closing of the  purchase  and sale of the
         Securities pursuant to Section 2.1.

<PAGE>

                  "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  the
         Purchasers'  obligations  to pay  the  Subscription  Amount  have  been
         satisfied or waived.

                  "Commission" means the Securities and Exchange Commission.

                  "Common  Stock"  means the common  stock of the  Company,  par
         value $0.001 per share, and any securities into which such common stock
         shall hereinafter have been reclassified into.

                  "Company Counsel" means Willkie Farr & Gallagher LLP.

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

                  "Custodial   Agreement"   means  the  Custodial  and  Security
         Agreement in  substantially  the form of Exhibit E hereto  executed and
         delivered contemporaneously with this Agreement.

                  "Debentures"  means, the 4.0% Secured  Convertible  Debentures
         due 30 months from their date of issuance, issued by the Company to the
         Purchasers hereunder, in the form of Exhibit A.

                  "Disclosure Schedules" shall have the meaning ascribed to such
         term in Section 3.1 hereof.

                  "Effective Date" means the date that the initial  Registration
         Statement  filed by the  Company  pursuant to the  Registration  Rights
         Agreement is first declared effective by the Commission.

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

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

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

                  "Knowledge" means the following: a Person other than a natural
         person will be deemed to have  Knowledge of a particular  fact or other
         matter if any natural  person who is serving as a director or executive
         officer of such Person either (a) has actual  knowledge of a particular
         fact or matter,  or (b) at the time in  question  would,  based on such
         director's  or executive  officer's  position and title,  reasonably be
         expected  to have had,  actual  knowledge  of such  particular  fact or
         matter.

                  "Liens"  shall  have  the  meaning  ascribed  to such  term in
         Section 3.1(a) hereof.

                                      -2-
<PAGE>

                  "Losses"   means  any  and  all   losses,   claims,   damages,
         liabilities,   settlement  costs  and  expenses,   including  costs  of
         preparation and reasonable attorneys' fees.

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

                  "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 an investigation or partial proceeding, such as a
         deposition), whether commenced or threatened.

                   "Registration Rights Agreement" means the Registration Rights
         Agreement,   dated  the  Closing  Date,   among  the  Company  and  the
         Purchasers, in the form of Exhibit B.

                  "Registration   Statement"  means  a  registration   statement
         meeting the requirements set forth in the Registration Rights Agreement
         and covering,  among other things,  the resale of the Underlying Shares
         by each Purchaser as provided for in the Registration Rights Agreement.

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

                  "Required   Minimum"  means,  as  of  any  date,  the  maximum
         aggregate  number of shares of Common Stock then issued or  potentially
         issuable in the future pursuant to the Transaction Documents, including
         any Underlying  Shares  issuable upon exercise or conversion in full of
         all Warrants and Debentures, ignoring any conversion or exercise limits
         set forth  therein,  and  assuming  that  interest is paid in shares of
         Common Stock based on a conversion price equal to the Set Price.

                  "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) hereof.

                  "Securities"  means  the  Debentures,  the  Warrants  and  the
         Underlying Shares.

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

                  "Set Price"  shall have the  meaning  ascribed to such term in
         the Debentures.

                                      -3-
<PAGE>

                  "Subscription  Amount"  means,  as  to  each  Purchaser,   the
         aggregate  amount to be paid by such  Purchaser for the  Debentures and
         Warrants  purchased  hereunder at the Closing as  specified  below such
         Purchaser's  name on the signature  page of this  Agreement and next to
         the heading  "Subscription  Amount",  in United  States  Dollars and in
         immediately   available  funds,  but  excluding  the  exercise  of  the
         Warrants.

                  "Subsidiary" means each direct and indirect  subsidiary of the
         Company as set forth on Schedule 3.1(a) attached hereto.

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

                  "Trading  Market" means initially the OTC Bulletin Board,  and
         shall also include the NASDAQ  Small-Cap  Market,  the  American  Stock
         Exchange,  the New York Stock Exchange,  or the NASDAQ National Market,
         whichever is at the time the principal  trading  exchange or market for
         the Common Stock, based upon share volume.

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

                  "Underlying  Shares" means the shares of Common Stock issuable
         upon conversion of the Debentures and upon exercise of the Warrants and
         issued and  issuable  in lieu of the cash  payment of  interest  on the
         Debentures.

                  "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 4:00 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 prior to the day in question;  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   collectively  the  Common  Stock  purchase
         warrants,  in the form of Exhibit C delivered to the  Purchasers at the
         Closing in accordance with Section 2.2 hereof.

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

                                      -4-
<PAGE>

         1.2 Interpretation.  Unless the context otherwise  requires,  the terms
defined  in this  Article 1 shall have the  meanings  herein  specified  for all
purposes of this Agreement and in the other Transaction Documents, applicable to
both the singular and plural forms of any of the terms  defined  herein.  When a
reference is made in this Agreement to a Section,  such reference  shall be to a
Section  of this  Agreement  unless  otherwise  indicated.  Whenever  the  words
"include," "includes" or "including" are used in the Transaction Documents, they
shall be deemed to be followed by the words "without limitation." The use of any
gender in the  Transaction  Documents  shall be deemed to  include  the  neuter,
masculine and feminine genders wherever necessary or appropriate.

                                   ARTICLE II
                                PURCHASE AND SALE

         2.1 Closing. On the Closing Date, and upon the terms and subject to the
conditions  set forth  herein,  the Company  hereby  sells,  and each  Purchaser
severally  and not  jointly  with  the  other  Purchasers,  hereby  purchases  a
principal amount of the Debentures equal to the Subscription Amount set forth on
such Purchaser's  signature page and Warrants for a number of Warrant Shares set
forth on such  Purchaser's  signature  page for a  purchase  price  equal to the
Subscription  Amount set forth on such  Purchaser's  signature page. The Closing
shall occur at the offices of the Custodial Agent, or such other location as the
parties shall mutually agree.

         2.2      Conditions to Closing.

                  (a) At or prior to the Closing Date the Company  shall deliver
         or cause to be delivered to the Custodial Agent for the benefit of each
         Purchaser the following:

                           (i) a Debenture in the principal amount equal to such
                  Purchaser's  Subscription  Amount,  registered  in the name of
                  such Purchaser;

                           (ii) a  Warrant  in the form of  Exhibit  C  attached
                  hereto;

                           (iii) the legal  opinion  of  Company  Counsel in the
                  form  of  Exhibit  D  attached   hereto,   addressed   to  the
                  Purchasers;

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

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

                           (vi) this Agreement, duly executed by the Company.

                  (b) At or prior to the Closing,  each Purchaser  shall deliver
         or cause to be delivered to the Custodial Agent the following:

                           (i)  such  Purchaser's  Subscription  Amount  by wire
                  transfer of immediately available funds;

                           (ii) this Agreement, duly executed by such Purchaser;

                                      -5-
<PAGE>

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

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

                  (c) All  representations  and  warranties of the other 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 the  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 the
         Purchasers,  makes it  impracticable  or  inadvisable  to purchase  the
         Debentures at the Closing.

                                   ARTICLE III
                         REPRESENTATIONS AND WARRANTIES

         3.1 Representations and Warranties of the Company.  Except as set forth
under the  corresponding  section of the disclosure  schedules  delivered to the
Purchasers  concurrently herewith (the "Disclosure  Schedules") which Disclosure
Schedules  shall be  deemed a part  hereof  or  except  as set  forth in the SEC
Reports,  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  lien,  charge,
         security  interest,  encumbrance,  right  of  first  refusal  or  other
         restriction on ownership  (collectively,  "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. If the Company has no Subsidiaries,  then references in
         the Transaction Documents to the Subsidiaries shall 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

                                      -6-
<PAGE>

         assets and to carry on its business as currently conducted. Neither the
         Company nor any  Subsidiary is in violation of any of the provisions of
         its  respective  certificate  or articles of  incorporation,  bylaws or
         other organizational or charter documents.  Each of the Company and the
         Subsidiaries  is duly  qualified to do 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, would not, individually or in the
         aggregate:   (i)   adversely   affect   the   legality,   validity   or
         enforceability of any Transaction  Document,  (ii) have or result in or
         be reasonably  likely to have or result in 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) adversely
         impair the  Company's  ability to perform  fully on a timely  basis its
         obligations under any of the Transaction Documents (any of (i), (ii) or
         (iii), a "Material Adverse Effect").

                  (c) Authorization;  Enforcement. The Company has the requisite
         corporate  power and  authority  to enter  into and to  consummate  the
         transactions  contemplated  by each of the  Transaction  Documents  and
         otherwise  to  carry  out  its  obligations  in all  material  respects
         hereunder  or  thereunder.  The  execution  and delivery of each of the
         Transaction  Documents by the Company and the consummation by it of the
         transactions  contemplated  hereby or thereby have been duly authorized
         by all  necessary  action  on the part of the  Company  and no  further
         consent or action is required by the  Company  other than the  Required
         Approvals. Each of the Transaction Documents has been (or upon delivery
         will be) 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,  subject  to  applicable  bankruptcy,   insolvency,   fraudulent
         conveyance,  reorganization,  moratorium  and  similar  laws  affecting
         creditors'  rights and remedies  generally  and general  principles  of
         equity.  Neither the Company nor any  Subsidiary is in violation of any
         of  the  provisions  of  its  respective  certificate  or  articles  of
         incorporation, by-laws or other organizational or charter documents.

                  (d) No Conflicts.  The execution,  delivery and performance of
         the  Transaction  Documents by the Company and the  consummation by the
         Company of the transactions  contemplated  thereby do not and will not:
         (i)  conflict  with or violate any  provision  of the  Company's or any
         Subsidiary's certificate or articles of incorporation,  bylaws or other
         organizational or charter  documents,  or (ii) subject to obtaining the
         Required Approvals, conflict with, or constitute a default (or an event
         that  with  notice  or lapse of time or both  would  become a  default)
         under,  or  give  to  others  any  rights  of  termination,  amendment,
         acceleration or cancellation (with or without notice,  lapse of time or
         both) of, any  agreement,  credit  facility,  debt or other  instrument
         (evidencing  a  Company  or  Subsidiary  debt or  otherwise)  or  other
         understanding  to which the Company or any  Subsidiary is a party or by
         which any property or asset of the Company or any  Subsidiary  is bound
         or affected, or (iii) assuming that the representations made by each of
         the  Purchasers  in  Section  3.2 are true  and  correct,  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

                                      -7-
<PAGE>

         and regulations), or by which any property or asset of the Company or a
         Subsidiary is bound or affected;  except in the case of each of clauses
         (ii) and (iii),  such as would not,  individually  or in the aggregate,
         have or result in a Material Adverse Effect.

                  (e) Filings,  Consents and Approvals.  Neither the Company nor
         any Subsidiary is required to obtain any consent, waiver, authorization
         or order of,  give any notice to, or make any  filings or  registration
         with, any court or other federal,  state,  local or other  governmental
         authority or other Person in connection  with the  execution,  delivery
         and performance by the Company of the Transaction Documents, other than
         (i) the press release or filings  required  under Section 4.7, (ii) the
         filing with the  Commission of the  Registration  Statement,  (iii) the
         notice and/or  application(s) to each applicable Trading Market for the
         issuance and sale of the Debentures and Warrants and the listing of the
         Underlying  Shares for trading  thereon in the time and manner required
         thereby  and  (iv)  the  filing  of  Form D  with  the  Commission  and
         applicable Blue Sky filings (collectively, the "Required Approvals").

                  (f)  Issuance  of the  Securities.  The  Securities  are  duly
         authorized  and  when  issued  and  paid  for in  accordance  with  the
         applicable  Transaction  Documents,  will be duly and  validly  issued,
         fully paid and non-assessable, free and clear of all Liens. The Company
         has reserved from its duly authorized  capital stock a number of shares
         of Common Stock for issuance of the Underlying Shares at least equal to
         the Required  Minimum on the date  hereof.  The Company has not, and to
         the  Knowledge  of the  Company,  no Affiliate of the Company has sold,
         offered for sale or solicited offers to buy or otherwise  negotiated 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.

                  (g)  Capitalization.  The  number  of  shares  and type of all
         authorized,  issued and outstanding capital stock of the Company is set
         forth in the Disclosure Schedules attached hereto. No securities of the
         Company are entitled to preemptive or similar rights, and no Person has
         any right of first refusal,  preemptive right,  right of participation,
         or any similar right to participate in the transactions contemplated by
         the Transaction Documents.  Except as 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  issuance  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

                                      -8-
<PAGE>

         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  Securities.  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.

                  (h) SEC Reports;  Financial Statements.  The Company has filed
         all  reports  required  to be  filed  by it  under  the  Exchange  Act,
         including  pursuant to Section 13(a) or 15(d)  thereof,  since July 17,
         2003 (or such shorter period as the Company was required by law to file
         such material) (the foregoing materials 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.  The  Company  has
         identified  and  made  available  to the  Purchasers  a copy of all SEC
         Reports filed within the 10 days preceding the date hereof. 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, as
         at their respective dates and for the periods shown therein,  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 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 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, 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  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 accounting  principles or the identity of its auditors,
         (iv) the Company has not declared or made any dividend or  distribution
         of cash or other property to its stockholders or purchased, redeemed or
         made any agreements to purchase or redeem any shares of its

                                      -9-
<PAGE>

         capital stock, and (v) the Company has not issued any equity securities
         to any  officer,  director or  Affiliate,  except  pursuant to existing
         Company stock option or similar plans.

                  (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) adversely  affects or  challenges  the legality,
         validity or enforceability  of any of the Transaction  Documents or the
         Securities  or (ii)  would,  if  there  were an  unfavorable  decision,
         individually  or in the  aggregate,  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. The Company does not have pending before the Commission
         any request for  confidential  treatment of information.  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) Compliance. Neither the Company nor any Subsidiary: (i) is
         in material default under or in material 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,  except in each case
         as would not,  individually or in the aggregate,  have or reasonably be
         expected to result in a Material Adverse Effect.

                  (l) 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.

                  (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  would
         not,  individually or in the aggregate,  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.

                                      -10-
<PAGE>

                  (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
         Liens as do not materially affect the value of such property and do not
         materially  interfere with the use made and proposed to be made of such
         property by the Company and the  Subsidiaries.  Any real  property  and
         facilities  held under lease by the Company  and the  Subsidiaries  are
         held  under  valid,  subsisting  and  enforceable  leases  of which the
         Company and the Subsidiaries are in material 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.

                  (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  Company's  Knowledge,  such  insurance  contracts and policies are
         accurate and complete.  Neither the Company nor any  Subsidiary has any
         reason to believe 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.

                  (r)  Internal  Accounting   Controls.   The  Company  and  the
         Subsidiaries   maintain  a  system  of  internal   accounting  controls
         sufficient to provide  reasonable  assurance that (i)  transactions are
         executed  in   accordance   with   management's   general  or  specific
         authorizations,  (ii)  transactions are recorded as necessary to permit
         preparation of

                                      -11-
<PAGE>

         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-14 and 15d-14) for the
         Company and  designed  such  disclosures  controls and  procedures  (or
         caused such disclosure controls and procedures to be designed under its
         supervision)  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 Form 10-K or 10-Q, as the case may be, is
         being prepared.  The Company's  certifying  officers have evaluated the
         effectiveness of the Company's disclosure controls and procedures as of
         the end of the period  covered by the Form 10-Q for the  quarter  ended
         September  30, 2003 (such date,  the  "Evaluation  Date").  The Company
         presented in the Form 10-Q for the quarter ended September 30, 2003 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 would  reasonably be
         expected to significantly affect the Company's internal controls.

                  (s) Solvency/Indebtedness. Based on the financial condition of
         the Company as of the Closing Date and assuming  that the  transactions
         contemplated by the Transaction  Documents occur: (i) the fair saleable
         value of the Company's  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).  The SEC  Reports set
         forth as of the dates  thereof all  outstanding  secured and  unsecured
         Indebtedness  (as defined below) of the Company or any  Subsidiary,  or
         for  which the  Company  or any  Subsidiary  has  commitments.  For the
         purposes  of  this  Agreement,   "Indebtedness"   shall  mean  (a)  any
         liabilities  for  borrowed  money or amounts  owed in excess of $50,000
         (other than trade accounts  payable  incurred in the ordinary course of
         business),  (b)  all  guaranties,  endorsements  and  other  contingent
         obligations,  whether or not the same are or should be reflected in the
         Company's  balance  sheet or the notes  thereto,  except  guaranties by
         endorsement of negotiable  instruments for deposit or collection in the
         ordinary  course of  business,  and (c) the present  value of any lease
         payments in excess of $50,000 due under

                                      -12-
<PAGE>

         leases required to be capitalized in accordance with GAAP.  Neither the
         Company  nor  any   Subsidiary  is  in  default  with  respect  to  any
         Indebtedness.

                  (t) Certain Fees.  Except as set forth in Schedule 3.1(t),  no
         brokerage or finder's fees or commissions are or will be payable by the
         Company  to  any  broker,  financial  adviser  or  consultant,  finder,
         placement agent,  investment banker,  bank or other Person with respect
         to the transactions contemplated by this Agreement, and the Company has
         not taken any action  that would cause any  Purchaser  to be liable for
         any such fees or  commissions.  The Company  agrees that the Purchasers
         shall have no  obligation  with  respect to any fees or with respect to
         any  claims  made by or on  behalf of any  Person  for fees of the type
         contemplated by this Section with the transactions contemplated by this
         Agreement.

                  (u)  Private   Placement.   Assuming   the   accuracy  of  the
         representations  and warranties of the Purchasers set forth in Sections
         3.2(b)-(e),  the  offer,  issuance  and sale of the  Securities  to the
         Purchasers  as  contemplated  hereby are exempt  from the  registration
         requirements  of the  Securities  Act.  The  issuance  and  sale of the
         Securities  hereunder does not contravene the rules and  regulations of
         the Trading Market.

                  (v) 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.

                  (w)  Registration  Rights.  Other  than  as set  forth  in the
         Registration Rights Agreement and the Disclosure Schedules, the Company
         has not granted or agreed to grant to any Person any rights  (including
         "piggy-back" registration rights) to have any securities of the Company
         registered with the Commission or any other governmental authority that
         have not been satisfied.

                  (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 would 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  as a result  of the  Company's  issuance  of the
         Securities and the Purchasers' ownership of the Securities.

                                      -13-
<PAGE>

                  (y) Seniority.  As of the Closing Date, no indebtedness of the
         Company is senior to the Debentures in right of payment.

                  (z) Disclosure.  The Company  confirms that neither it nor any
         other Person acting on its behalf has provided any of the Purchasers or
         their  agents or  counsel  with any  information  that,  as of the date
         hereof,  constitutes  material,   nonpublic  information.  The  Company
         understands and confirms that the Purchasers will rely on the foregoing
         representations in effecting transactions in securities of the Company.
         The Disclosure  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.

                  (aa) Tax Status.  The Company and each of its Subsidiaries has
         made or filed all federal,  state and foreign  income and all other tax
         returns, reports and declarations required by any jurisdiction to which
         it is subject  (unless and only to the extent that the Company and each
         of its  Subsidiaries has in accordance with GAAP set aside on its books
         provisions  reasonably  adequate  for the  payment  of all  unpaid  and
         unreported  taxes)  and has paid or  accounted  for all taxes and other
         governmental assessments and charges that are material in amount, shown
         or  determined  to be due on such  returns,  reports and  declarations,
         except those being  contested in good faith and has in accordance  with
         GAAP set  aside on its books  provisions  reasonably  adequate  for the
         payment of all taxes for  periods  subsequent  to the  periods to which
         such returns,  reports or declarations apply. There are no unpaid taxes
         in any material amount claimed to be due by the taxing authority of any
         jurisdiction,  and the officers of the Company know of no basis for any
         such claim.  The Company has not  executed a waiver with respect to the
         statute of limitations  relating to the assessment or collection of any
         foreign,  federal,  statue  or local  tax.  None of the  Company's  tax
         returns is presently being audited by any taxing authority.

                  (bb)   Acknowledgment   Regarding   Purchasers'   Purchase  of
         Securities. The Company acknowledges and agrees that the Purchasers are
         acting solely in the capacity of arm's length  purchasers  with respect
         to this Agreement and the transactions contemplated hereby. The Company
         further acknowledges that no Purchaser is acting as a financial adviser
         or fiduciary of the Company (or in any similar  capacity)  with respect
         to this  Agreement  and the  transactions  contemplated  hereby and any
         statement  made  to the  Company  by  any  Purchaser  or  any of  their
         respective  representatives or agents in connection with this Agreement
         and  the   transactions   contemplated   hereby  is  not  advice  or  a
         recommendation and is merely incidental to the Purchasers'  purchase of
         the Securities.  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  Company  and  its
         representatives.

                                      -14-
<PAGE>

                  (cc) No General  Solicitation or Advertising in Regard to this
         Transaction.  Neither the Company nor, to the Knowledge of the Company,
         any of its directors or officers: (i) has conducted or will conduct any
         general solicitation (as that term is used in Rule 502(c) of Regulation
         D) or general advertising with respect to the sale of the Debentures or
         the  Warrants,  or (ii)  made any  offers or sales of any  security  or
         solicited any offers to buy any security under any  circumstances  that
         would require registration of the Debentures,  the Underlying Shares or
         the Warrants  under the  Securities  Act or made any "directed  selling
         efforts" as defined in Rule 902 of Regulation S.

                  (dd)  No  Disagreements   with   Accountants.   There  are  no
         disagreements  of any kind presently  existing  between the accountants
         formerly  or  presently  employed  by the  Company,  and the Company is
         current with respect to any fees owed to its accountants.

                  (ee)  Form  SB-2  Eligibility.  The  Company  is  eligible  to
         register the  Underlying  Shares for resale by the  Purchasers  on Form
         SB-2 promulgated under the Securities Act.

                  (ff) 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
         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.

                  (gg) Accountants.  To the Company's  Knowledge,  DDK & Company
         LLP, the Company's  accountants,  who the Company  expects will express
         their opinion with respect to the  financial  statements to be included
         in the  Company's  next  Annual  Report on Form 10-K,  are  independent
         accountants  as  required  by the  Securities  Act  and the  rules  and
         regulations promulgated thereunder.

         3.2  Representations  and Warranties of the Purchasers.  Each Purchaser
hereby,  for itself and for no other  Purchaser,  represents and warrants 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  the  requisite  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 purchase by such Purchaser of
         the  Securities  hereunder  has been duly  authorized  by all necessary
         action  on the  part of such  Purchaser.  Each of this  Agreement,  the
         Custodial Agreement and the Registration Rights Agreement 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

                                      -15-
<PAGE>

         of such Purchaser,  enforceable against it 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.

                  (b)  Investment   Intent.   Such  Purchaser   understands  and
         acknowledges that none of the Securities have been registered under the
         Securities Act. Such Purchaser is acquiring the Securities as principal
         for  its own  account  and not  with a view to or for  distributing  or
         reselling  such  Securities  or any part  thereof,  without  prejudice,
         however,  to such Purchaser's right,  subject to the provisions of this
         Agreement, at all times to sell or otherwise dispose of all or any part
         of such  Securities  pursuant to an  effective  registration  statement
         under the Securities  Act or under an exemption from such  registration
         and in compliance with applicable  federal and state  securities  laws.
         Nothing  contained herein shall be deemed a representation  or warranty
         by such  Purchaser  to hold  Securities  for any  period of time.  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  (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.)

                  (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 or converts  any  Debentures,  or
         receives payments of principal or interest in shares of Common Stock on
         such Debenture, it will be, an "accredited investor" as defined in Rule
         501(a)  under  the  Securities  Act (an  "Accredited  Investor").  Such
         Purchaser  has not been formed  solely for the purpose of acquiring the
         Securities.  Such  Purchaser  is not a registered  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.  Such  Purchaser  has been
         furnished  access to such information and documents as it has requested
         and has been  afforded an  opportunity  to ask questions of and receive
         answers from  representatives  of the Company  concerning the terms and
         conditions  of  this  Agreement  and  the  purchase  of the  Securities
         contemplated hereby.

                  (e) General Solicitation; Investigation. 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.

                                      -16-
<PAGE>

                  (f) Certain Fees. No brokerage or finder's fees or commissions
         are or will be  payable  by such  Purchaser  to any  broker,  financial
         adviser or consultant, finder, placement agent, investment banker, bank
         or other Person with respect to the  transactions  contemplated by this
         Agreement, and such Purchaser has not taken any action that would cause
         the  Company  to be  liable  for any  such  fees or  commissions.  Such
         Purchaser agrees that the Company shall have no obligation with respect
         to any fees or with  respect to any claims  made by or on behalf of any
         Person  for  fees of the type  contemplated  by this  Section  with the
         transactions contemplated by this Agreement.

                                   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 and, unless such transfer is pursuant
         to an effective  registration  statement  under the  Securities  Act or
         pursuant  to  Rule  144,  may  only  be  transferred  to an  Accredited
         Investor.  In connection with any transfer of Securities other (i) than
         pursuant to an effective  registration statement or Rule 144 (provided,
         as to any  transfers  pursuant to Rule 144,  reasonable  and  customary
         documentation  is provided to the  Company by the holder  thereof),  or
         (ii) to the Company,  the Company may require the transferor thereof to
         provide to the Company an opinion of counsel selected by the transferor
         and  reasonably  acceptable  to the Company,  the form and substance of
         which opinion shall be reasonably  satisfactory to the Company,  to the
         effect  that  such  transfer  does  not  require  registration  of such
         transferred  Securities  under the  Securities  Act. As a condition  of
         transfer,  any such  transferee  (other than a transferee in a transfer
         pursuant  to  clause  (i) of the  preceding  sentence)  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) Each  Purchaser  agrees to the  imprinting,  so long as is
         required  by  this  Section  4.1(b),  of the  following  legend  on any
         certificate evidencing Securities:

         [NEITHER]  THESE  SECURITIES  [NOR  THE  SECURITIES  INTO  WHICH  THESE
         SECURITIES ARE [EXERCISABLE]  [CONVERTIBLE]]  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

                                      -17-
<PAGE>

         WHICH SHALL BE REASONABLY  ACCEPTABLE TO THE COMPANY.  [THE TRANSFER OF
         THIS  SECURITY  [AND THE  SECURITIES  ISSUABLE  UPON  EXERCISE  OF THIS
         SECURITY]  ARE  SUBJECT  TO THE  RESTRICTIONS  ON  TRANSFER  SET  FORTH
         HEREIN.] THESE SECURITIES AND THE SECURITIES  ISSUABLE UPON EXERCISE OF
         THESE  SECURITIES MAY BE PLEDGED IN CONNECTION  WITH A BONA FIDE MARGIN
         ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

                  The Company  acknowledges and agrees that a Purchaser may from
         time to time pledge pursuant to a bona fide margin agreement 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,  if  required  under the terms of such
         arrangement,  such Purchaser may transfer pledged or secured Securities
         to the pledgees or secured  parties.  Such 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;  provided,  however,  that such pledgee,  secured
         party, or other  transferee  shall be required to comply with the terms
         of the last  sentence of Section  4.1(a).  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 the
         preparation and filing of any required prospectus supplement under Rule
         424(b)(3) of the  Securities Act or other  applicable  provision of the
         Securities Act to appropriately amend the list of selling  stockholders
         thereunder. Any such pledgee shall otherwise be bound by the provisions
         of this Agreement.

                  (c)  Certificates  evidencing the Underlying  Shares shall not
         contain any legend  (including  the legend set forth in Section  4.1(b)
         hereof): (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  Underlying  Shares
         pursuant to Rule 144, or (iii) if such  Underlying  Shares are eligible
         for sale under Rule 144(k);  provided,  however, in connection with the
         issuance of the Underlying  Shares,  each Purchaser,  severally and not
         jointly with the other Purchasers, hereby agrees to adhere to and abide
         by all prospectus  delivery  requirements  under the Securities Act and
         rules and  regulations of the  Commission.  The Company shall cause its
         counsel to issue  direction 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
         Debenture or Warrant is converted or  exercised  (as  applicable)  at a
         time when there is an  effective  registration  statement  to cover the
         resale of the Underlying  Shares,  or if such Underlying  Shares may be
         sold under Rule 144(k) then such Underlying 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 five Trading Days following the delivery
         by a Purchaser  to the  Company or the  Company's  transfer  agent of a
         certificate  representing  Underlying  Shares issued with a restrictive
         legend (such fifth Trading Day, the "Legend Removal Date"),  deliver or
         cause to be delivered to such Purchaser a certificate

                                      -18-
<PAGE>

         representing  such shares 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  $5,000 of  Underlying  Shares
         (based on the VWAP of the Common Stock on the date such  Securities are
         submitted to the Company's transfer agent) delivered for removal of the
         restrictive  legend and subject to this Section 4.1(c), $25 per Trading
         Day  (increasing  to $50 per  Trading  Day 3 Trading  Days  after  such
         damages  have begun to accrue)  for each  Trading  Day after the second
         Trading  Date  after the  applicable  Legend  Removal  Date  until such
         certificate is delivered  without a legend.  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.  Notwithstanding  anything  herein to the contrary,  liquidated
         damages  hereunder  that accrue as to any  delivered  Shares or Warrant
         Shares  shall not be payable  to a  Purchaser  to the  extent  that the
         Purchaser has previously  demanded,  as to such Securities,  liquidated
         damages  pursuant  to Section  4(b)(ii)  of the  Debenture  or "buy-in"
         compensation pursuant to Section 4(b)(iii) of the Debenture or "buy-in"
         compensation  pursuant to Section 3(a) of the Warrant, each as the case
         may be.

         4.2  Acknowledgment  of  Dilution.  The Company  acknowledges  that the
issuance of the Securities may result in dilution of the  outstanding  shares of
Common Stock, which dilution may be substantial under certain market conditions.
The Company  further  acknowledges  that its  obligations  under the Transaction
Documents,  including its obligation to issue the Underlying  Shares pursuant to
the Transaction Documents, are unconditional and absolute and not subject to any
right of set off, counterclaim,  delay or reduction, regardless of the effect of
any such  dilution or any claim the Company may have against any  Purchaser  and
regardless  of the dilutive  effect that such issuance may have on the ownership
of the other stockholders of the Company.

         4.3  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; provided,  however,  that such obligation shall cease at such time
as Purchaser is eligible to sell such  Securities  pursuant to Rule 144(k).  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.

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

                                      -19-
<PAGE>

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.

         4.5      Reservation and Listing of Securities.

                  (a) The  Company  shall  maintain  a  reserve  from  its  duly
         authorized  shares  of  Common  Stock  for  issuance  pursuant  to  the
         Transaction  Documents in such amount as may be required to fulfill its
         obligations in full under the Transaction Documents.

                  (b) If, on any date,  the number of  authorized  but  unissued
         (and  otherwise  unreserved)  shares of  Common  Stock is less than the
         Required  Minimum  on such  date,  then the Board of  Directors  of the
         Company  shall  use  commercially   reasonable  efforts  to  amend  the
         Company's  certificate  or articles of  incorporation  to increase  the
         number of  authorized  but unissued  shares of Common Stock to at least
         the Required Minimum at such time, as soon as possible and in any event
         not later than the 75th day after such date.

                  (c) The  Company  shall,  if  applicable:  (i) in the time and
         manner  required  by the  Trading  Market,  prepare  and file with such
         Trading  Market an additional  shares  listing  application  covering a
         number of shares of Common Stock at least equal to the Required Minimum
         on the  date  of such  application,  (ii)  take  all  steps  reasonably
         necessary  to cause  such  shares of Common  Stock to be  approved  for
         listing on the  Trading  Market as soon as possible  thereafter,  (iii)
         provide to the Purchasers  evidence of such listing,  and (iv) maintain
         the  listing  of such  Common  Stock on any date at least  equal to the
         Required Minimum on such date on such Trading Market or another Trading
         Market.

         4.6 Conversion and Exercise Procedures.  The form of Notice of Exercise
included in the  Warrants and the form of Notice of  Conversion  included in the
Debentures set forth the totality of the  procedures  required of the Purchasers
in order to exercise the Warrants or convert the Debentures (provided, as to any
transfers  pursuant to Rule 144,  the Company may request of the holder  thereof
reasonable and customary  documentation usually required for such transactions).
No  additional  legal  opinion or other  information  or  instructions  shall be
required  of  the  Purchasers  to  exercise  their  Warrants  or  convert  their
Debentures (provided,  as to any transfers pursuant to Rule 144, the Company may
request of the holder  thereof  reasonable and customary  documentation  usually
required  for such  transactions).  The  Company  shall honor  exercises  of the
Warrants and conversions of the Debentures and shall deliver  Underlying  Shares
in  accordance  with the terms,  conditions  and time  periods  set forth in the
Transaction Documents.

         4.7 Securities Laws Disclosure;  Publicity.  The Company shall, by 8:30
a.m. Eastern time on the Trading Day following the date of this Agreement, issue
a press release or file a Current  Report on Form 8-K  reasonably  acceptable to
each Purchaser  disclosing all material terms of the  transactions  contemplated
hereby.  The Company and the Purchasers shall consult with each other in issuing
any 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

                                      -20-
<PAGE>

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 or delayed,  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,  except as required by law, other than in any registration  statement
filed pursuant to the Registration Rights Agreement and filings related thereto,
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 to the extent  such  disclosure  is  required  by law or  Trading  Market
regulations,  in which case the Company shall provide each  Purchaser with prior
notice of such disclosure.

         4.8 Non-Public  Information.  Other than a Subsequent  Financing Notice
pursuant to Section 4.13,  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.

         4.9      [RESERVED]

         4.10  Reimbursement.  If any Purchaser becomes involved in its capacity
as such in any Proceeding by a stockholder of the Company, solely as a result of
such Purchaser's  acquisition of the Securities under this Agreement and without
causation by any other activity, obligation,  condition or liability on the part
of, or  pertaining  to such  Purchaser  and not to the  purchase  of  Securities
pursuant to 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 (and
limitations thereon) 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
except to the extent any provision of the Transaction Documents is breached.

         4.11 Shareholders  Rights Plan. In the event that a shareholders rights
plan is adopted by the Company, no claim will be made or enforced by the Company
or any other Person that any Purchaser is an  "Acquiring  Person" under the plan
or in any way could be deemed to trigger the  provisions  of such plan by virtue
of receiving Securities under the Transaction Documents.

                                      -21-
<PAGE>

         4.12     [RESERVED].

         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 such  Subsequent  Financing for
all or part of the  Subsequent  Financing up to the lesser of (a) the greater of
(i) the portion of the Subsequent Financing not subscribed for by the purchasers
in the Vertical Ventures Financing (as defined below) pursuant to the preemptive
rights granted to them in connection  with the Vertical  Ventures  Financing and
(ii) a  percentage  of the  Subsequent  Financing  equal  to (A)  the  aggregate
principal amount of all Debentures converted prior to the date of the Subsequent
Financing  ("Converted  Principal  Amount"),  divided  by (B) the sum of (I) the
Converted  Principal  Amount and (II) the aggregate  purchase price paid for the
all of the  units  in the  Vertical  Ventures  Financing  and  (b)  50% of  such
Subsequent Financing (such lesser amount, 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 additionally 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. Each Purchaser
shall have until 6:30 p.m.  (New York City time) on the first  Trading Day after
all of the  Purchasers  have  received the  Pre-Notice  to notify the Company in
writing of their  willingness to  participate  in the Subsequent  Financing (the
"Notice  Deadline").  From and after the  Notice  Deadline,  if the  Purchasers'
aggregate commitment to participate in the Subsequent Financing is less than the
Participation  Maximum,  the Company may effect the  uncommitted  portion of the
Participation  Maximum on terms no less  favorable to the Company than those set
forth in the Subsequent Financing Notice. If the Company receives no notice from
a Purchaser as of such 3rd Trading Day, or if a Purchaser  fails to respond to a
Pre-Notice  within  one  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 Participation  Maximum, 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 principal  amount of Debentures  purchased
by a participating Purchaser to (y) the sum of the aggregate principal amount of
Debentures  issued  hereunder  to  participating   Purchasers.   Notwithstanding
anything  to the  contrary  herein,  this  Section  4.13  shall not apply to the
following  (a) the granting of options to  employees,  officers and directors of
the Company  pursuant to any stock option plan duly adopted by a majority of the
non-employee members of the Board of Directors of the Company

                                      -22-
<PAGE>

or  a  majority  of  the  members  of  a  committee  of  non-employee  directors
established  for such  purpose,  or (b) the exercise of a Debenture or any other
security  issued by the  Company in  connection  with the offer and sale of this
Company's  securities  pursuant  to this  Agreement,  or (c) the  exercise of or
conversion  of any Capital  Shares  Equivalents  issued and  outstanding  on the
Closing  Date,  provided  such  securities  have not been amended since the date
hereof,  or (d) the issuance of Capital  Shares or Capital Share  Equivalents in
exchange for stock or assets of any other Person or (e) the private placement of
up to 5 million units,  each unit  consisting of one share of Common Stock and a
warrant to purchase one share of Common  Stock at an exercise  price of not less
than $1.50 per share,  subject to  customary  anti-dilution  protection,  with a
price  per unit of not  less  than  $1.50  per  share  (the  "Vertical  Ventures
Financing").

         4.14 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 same  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 Debenture  holders 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.

                                    ARTICLE V
                                  MISCELLANEOUS

         5.1 Fees and  Expenses.  At the  Closing,  the  Company  has  agreed to
reimburse  Omicron  Master  Trust  ("Omicron")  $35,000  for its legal  fees and
expenses incurred in connection with the Transaction documents ($15,000 of which
has been received). Accordingly, in lieu of the foregoing payments, the Company,
on the Closing Date,  will direct that the  aggregate  amount that Omicron is to
pay for the  Debentures  and  Warrants  at the  Closing,  be reduced by $20,000.
Except as expressly set forth in the Transaction Documents to the contrary, 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 transfer agent fees, stamp taxes and other
taxes and duties levied in connection with the issuance of any 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

                                      -23-
<PAGE>

facsimile at the  facsimile  number  specified on the  signature  page  attached
hereto  prior  to 5:30  p.m.  (New  York  City  time)  on a  Trading  Day and an
electronic  confirmation  of delivery  is  received by the sender,  (b) the next
Trading Day after the date of  transmission,  if such notice or communication is
delivered via facsimile at the facsimile  number  specified in this Section on a
day that is not a Trading  Day or later  than 5:30 p.m.  (New York City time) on
any Trading Day, (c) three Trading Days  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 addresses
for such notices and  communications  are those set forth on the signature pages
hereof, or such other address as may be designated in writing hereafter,  in the
same manner, by such Person.

         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 of the  Purchasers  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.

         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 the  Purchasers.  Any Purchaser may assign
its rights under this  Agreement and the  Registration  Rights  Agreement to any
Person to whom such Purchaser assigns or transfers any Securities.

         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 4.11.

         5.8  Governing  Law;  Venue;   Waiver  of  Jury  Trial.  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 agrees that all legal
proceedings  concerning  the  interpretations,  enforcement  and  defense of the
transactions  contemplated by this Agreement and any other Transaction Documents
(whether brought against a party hereto or its respective affiliates, directors,
officers,  shareholders,  employees or agents) shall be commenced exclusively in
the  state and  federal  courts  sitting  in the City of New  York,  borough  of
Manhattan (the "New York Courts").  Each party hereby irrevocably submits to the
exclusive  jurisdiction  of the New  York  Courts  for the  adjudication  of any
dispute hereunder or in

                                      -24-
<PAGE>

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,  or that the New York Courts are an 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  hereto  hereby
irrevocably  waive,  to the fullest extent  permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
the Transaction  Documents or the transactions  contemplated  thereby. If either
party shall  commence an action or proceeding to enforce any  provisions of this
Agreement,  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 contained herein shall
survive  the  Closing  and  the  delivery,  exercise  and/or  conversion  of the
Securities, as applicable for the applicable statue of limitations.

         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;  provided,
however,  in the case of a rescission of a conversion of a Debenture or exercise
of a Warrant,  the  Purchaser  shall be  required to return any shares of Common
Stock subject to any such rescinded conversion or exercise notice.

                                      -25-
<PAGE>

         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.

         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.

         5.16 Usury.  To the extent it may  lawfully  do so, the Company  hereby
agrees not to insist upon or plead or in any manner  whatsoever  claim, and will
resist any and all efforts to be compelled to take the benefit or advantage  of,
usury  laws  wherever  enacted,  now or at  any  time  hereafter  in  force,  in
connection  with any  claim,  action or  proceeding  that may be  brought by any
Purchaser  in  order to  enforce  any  right or  remedy  under  any  Transaction
Document.  Notwithstanding  any  provision  to  the  contrary  contained  in any
Transaction  Document,  it is  expressly  agreed  and  provided  that the  total
liability of the Company  under the  Transaction  Documents  for payments in the
nature of interest  shall not exceed the maximum  lawful rate  authorized  under
applicable law (the "Maximum Rate"), and, without limiting the foregoing,  in no
event  shall any rate of  interest or default  interest,  or both of them,  when
aggregated with any other sums in the nature of interest that the Company may be
obligated to pay under the Transaction Documents exceed such Maximum Rate. It is
agreed  that  if the  maximum  contract  rate  of  interest  allowed  by law and
applicable to the Transaction  Documents is increased or decreased by statute or
any official  governmental action subsequent to the date hereof, the new maximum
contract rate of interest  allowed by law will be the Maximum Rate applicable to
the  Transaction  Documents  from  the  effective  date  forward,   unless  such
application  is  precluded  by  applicable  law.  If  under  any   circumstances
whatsoever, interest in excess of the Maximum Rate is paid by the Company to any
Purchaser with respect to indebtedness  evidenced by the Transaction  Documents,
such excess shall be applied by such Purchaser to the unpaid principal

                                      -26-
<PAGE>

balance of any such  indebtedness  or be refunded to the Company,  the manner of
handling such excess to be at such Purchaser's election.

         5.17  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  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 Omicron.  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.

                            (Signature Pages Follow)

                                      -27-
<PAGE>

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

                                            LMIC, INC.

                                            By: /s/
                                                --------------------------------
                                            Name:  Luis P. Negrete
                                            Title: President & CEO

                                            Address for Notice:

                                            Attn:  Mary-Faith Boyer
                                            Tel:   240.264.8300
                                            Fax:   240.264.8200

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

                                            Willkie Farr & Gallagher LLP
                                            787 Seventh Avenue
                                            New York, NY 10019
                                            Attn:  Maurice M. Lefkort
                                            Tel:   (212) 728-8239
                                            Fax:   (212) 728-9239

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                      SIGNATURE PAGE FOR PURCHASER FOLLOWS]

                                      -28-
<PAGE>

                       [PURCHASER'S SIGNATURE PAGE - LMII]

         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.

OMICRON MASTER TRUST                                Address for Notice:
                                                    ------------------
By: Omicron Capital L.P., as advisor                c/o Omicron Capital L.P.
By: Omicron Capital Inc., its general partner       810 Seventh Avenue, 39th Fl.
                                                    New York, NY 10019
                                                    Fax: (212) 803-5269
By: /s/                                             Attn:  Brian Daly
    -----------------------------
    Name:  Bruce Bernstein
    Title:

Subscription Amount:  $
Warrant Shares:
Tax Identification No.:

With a copy to:
--------------
(which shall not constitute notice)         Feldman Weinstein LLP
                                            420 Lexington Avenue
                                            New York, New York 10170
                                            Attn:  Robert F. Charron
                                            Tel:  (212) 869-7000
                                            Fax:  (212) 401-4741

                                      -29-

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