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                                                                    EXHIBIT 4.9

                             SUBSCRIPTION AGREEMENT

Dear Subscriber:

         You ("Subscriber") hereby agree to purchase, and Famous Fixins, Inc., a
New York corporation (the "Company"),  hereby agrees to issue and to sell to the
Subscriber,  a Convertible Note convertible in accordance with the terms thereof
into  shares of the  Company's  $0.001  par value  common  stock  (the  "Company
Shares")  for the  consideration  as set  forth  on the  signature  page  hereof
("Purchase Price").  The form of Convertible Note is annexed hereto as Exhibit A
upon the terms and subject to the  limitations  and conditions set forth in such
Debentures and warrants, in the form attached hereto as Exhibit "B", to purchase
One Million  (1,000,000)  shares of Common Stock (the "Warrants").  (The Company
Shares  included  in the  Securities  (as  hereinafter  defined)  are  sometimes
referred to herein as the "Shares",  "Common  Shares" or "Common  Stock").  (The
Notes,  Warrants and Company Shares are collectively  referred to herein as, the
"Securities").  Upon acceptance of this Agreement by the Subscriber, the Company
shall issue and deliver the Note and Warrants against payment,  by federal funds
wire transfer of the Purchase Price.

                  The  following  terms  and  conditions  shall  apply  to  this
subscription.

                  1. SUBSCRIBER'S REPRESENTATIONS AND WARRANTIES. The Subscriber
hereby represents and warrants to and agrees with the Company that:

                           (a)  INFORMATION ON COMPANY.  The Subscriber has been
furnished  with the Company's  Form 10-K for the year ended December 31, 2001 as
filed with the Securities and Exchange  Commission (the  "Commission")  together
with all  subsequently  filed forms,  10-Q,  8-K, and other  publicly  available
filings made with the Commission  (hereinafter  referred to  collectively as the
"Reports"). In addition, the Subscriber has received from the Company such other
information concerning its operations,  financial condition and other matters as
the  Subscriber  has  requested  in  writing  (such  information  in  writing is
collectively,  the "Other Written Information"),  and considered all factors the
Subscriber  deems material in deciding on the  advisability  of investing in the
Securities.

                           (b) INFORMATION ON SUBSCRIBER.  The Subscriber is and
was not a "U.S.  person",  as  defined in  Regulation  S  promulgated  under the
Securities  Act of 1933 at the  time  the  offer  or sale of the  Note is  made.
Additionally, Subscriber is an "accredited investor", as such term is defined in
Regulation D promulgated by the Commission  under the Securities Act of 1933, as
amended (the "1933 Act"),  is experienced in investments  and business  matters,
has made  investments  of a speculative  nature and has purchased  securities of
United States  publicly-owned  companies in private  placements in the past and,
with its  representatives,  has such knowledge and experience in financial,  tax
and  other  business  matters  as  to  enable  the  Subscriber  to  utilize  the
information  made  available  by the Company to evaluate the merits and risks of
and to make  an  informed  investment  decision  with  respect  to the  proposed
purchase,  which  represents a speculative  investment.  The  Subscriber has the
authority and is duly and legally  qualified to purchase and own the Securities.
The  Subscriber  is able to bear the risk of such  investment  for an indefinite
period and to afford a complete loss thereof.  The  information set forth on the
signature page hereto regarding the Subscriber is accurate.

                           (c)  PURCHASE  OF NOTE AND  WARRANT.  On the  Closing
Date, the Subscriber will purchase the Note and

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Warrant for its own account and not with a view to any distribution  thereof and
that the  purchase  of the Note is  intended  to be made as a  "Transaction"  as
defined in Regulation D.

                           (d) COMPLIANCE  WITH  SECURITIES  ACT. The Subscriber
understands and agrees that the Securities have
not been  registered  under the 1933  Act,  by  reason  of their  issuance  in a
transaction that does not require registration under the 1933 Act (based in part
on the accuracy of the  representations  and warranties of Subscriber  contained
herein),  and that such Securities must be held unless a subsequent  disposition
is registered under the 1933 Act or is exempt from such registration.

                           (e) COMPANY SHARES  LEGEND.  The Company Shares shall
bear the following legend, unless same shall have
been included in an effective registration statement under the 1933 Act:

                  "THE  SHARES  REPRESENTED  BY THIS  CERTIFICATE  HAVE NOT BEEN
                  REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE
                  SHARES  MAY  NOT  BE  SOLD,   OFFERED  FOR  SALE,  PLEDGED  OR
                  HYPOTHECATED  IN  THE  ABSENCE  OF AN  EFFECTIVE  REGISTRATION
                  STATEMENT  UNDER SUCH  SECURITIES ACT OR AN OPINION OF COUNSEL
                  REASONABLY  SATISFACTORY  TO  FAMOUS  FIXINS,  INC.  THAT SUCH
                  REGISTRATION IS NOT REQUIRED."

                           (f) NOTE  LEGEND.  The Note shall bear the  following
legend:

                  "THIS NOTE AND THE COMMON SHARES  ISSUABLE UPON  CONVERSION OF
                  THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
                  1933,  AS AMENDED.  THIS NOTE AND THE COMMON  SHARES  ISSUABLE
                  UPON  CONVERSION  OF THIS  NOTE MAY NOT BE SOLD,  OFFERED  FOR
                  SALE,  PLEDGED OR  HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
                  REGISTRATION  STATEMENT  AS TO THIS NOTE  UNDER SAID ACT OR AN
                  OPINION OF COUNSEL  REASONABLY  SATISFACTORY TO FAMOUS FIXINS,
                  INC. REGISTRATION IS NOT REQUIRED."

                           (g)  COMMUNICATION  OF  OFFER.  The offer to sell the
Securities was directly communicated to the
Subscriber.  At no time was the  Subscriber  presented  with or solicited by any
leaflet,  newspaper or magazine article, radio or television  advertisement,  or
any other  form of  general  advertising  or  solicited  or  invited to attend a
promotional  meeting  otherwise  than in connection and  concurrently  with such
communicated offer.

                           (h)  CORRECTNESS OF  REPRESENTATIONS.  The Subscriber
represents that the foregoing representations and
warranties are true and correct as of the date hereof and, unless the Subscriber
otherwise  notifies  the  Company  prior to the  Closing  Date  (as  hereinafter
defined),  shall be true and  correct  as of the  Closing  Date.  The  foregoing
representations and warranties shall survive the Closing Date.

                  2.  COMPANY   REPRESENTATIONS  AND  WARRANTIES.   The  Company
represents and warrants to and agrees with the Subscriber that:

                           (a) DUE  INCORPORATION.  The  Company and each of its
subsidiaries, if any, is a corporation duly

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organized,  validly  existing  and  in  good  standing  under  the  laws  of the
respective jurisdictions of their incorporation and have the requisite corporate
power to own  their  properties  and to carry on  their  business  as now  being
conducted.  The  Company and each of its  subsidiaries  is duly  qualified  as a
foreign  corporation to do business and is in good standing in each jurisdiction
where the nature of the business  conducted  or property  owned by it makes such
qualification necessary,  other than those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the business,  operations
or financial condition of the Company.

                           (b)  OUTSTANDING  STOCK.  All issued and  outstanding
shares of capital  stock of the  Company and each of its  subsidiaries  has been
duly authorized and validly issued and are fully paid and non-assessable.

                           (c)  AUTHORITY;  ENFORCEABILITY.  This  Agreement and
other  agreements  delivered  together  with  this  Agreement  or in  connection
herewith  have been duly  authorized,  executed and delivered by the Company and
are valid and binding  agreements  enforceable  in accordance  with their terms,
subject  to  bankruptcy,   insolvency,   fraudulent  transfer,   reorganization,
moratorium  and similar laws of general  applicability  relating to or affecting
creditors' rights generally and to general principles of equity; and the Company
has full corporate  power and authority  necessary to enter into this Agreement,
and such other agreements and to perform its obligations hereunder and under all
other agreements entered into by the Company relating hereto.

                           (d)  ADDITIONAL  ISSUANCES.  Except  as set  forth on
Schedule  2(d),  there are no  outstanding  agreements  or preemptive or similar
rights affecting the Company's common stock or equity and no outstanding rights,
warrants or options to acquire, or instruments  convertible into or exchangeable
for, or agreements or understandings with respect to the sale or issuance of any
shares of common stock or equity of the Company or other equity  interest in any
of the  subsidiaries  of the Company except as described in the Reports or Other
Written Information.

                           (e) CONSENTS. No consent, approval,  authorization or
order  of  any  court,   governmental   agency  or  body  or  arbitrator  having
jurisdiction  over  the  Company,  or  any  of  its  affiliates,   the  National
Association  of  Securities  Dealers,  Inc.  ("NASD"),  NASDAQ or the  Company's
Shareholders  is  required  for  execution  of this  Agreement,  and  all  other
agreements  entered into by the Company  relating  thereto,  including,  without
limitation,  the issuance and sale of the Securities, and the performance of the
Company's obligations hereunder and under all such other agreements.

                           (f)  NO   VIOLATION   OR   CONFLICT.   Assuming   the
representations and warranties of the Subscriber in
Paragraph  1  are  true  and  correct  and  the  Subscriber  complies  with  its
obligations  under  this  Agreement,  neither  the  issuance  and  sale  of  the
Securities nor the performance of the Company's obligations under this Agreement
and all other  agreements  entered into by the Company  relating  thereto by the
Company will:

                                    (i)  violate,  conflict  with,  result  in a
breach of, or  constitute a default (or an event which with the giving of notice
or the lapse of time or both would be reasonably likely to constitute a default)
under (A) the  certificate of  incorporation,  charter or bylaws of the Company,
(B) to the Company's knowledge, any decree, judgment,  order, law, treaty, rule,
regulation or determination applicable to the Company of any court, governmental
agency or body, or arbitrator having jurisdiction over the Company or any of its
affiliates  or over  the  properties  or  assets  of the  Company  or any of its
affiliates,  (C) the terms of any bond, debenture, note or any other evidence of
indebtedness,  or any agreement,  stock option or other similar plan, indenture,
lease,  mortgage,  deed of trust or other instrument to which the Company or any
of its  affiliates is a party,  by which the Company or any of its affiliates is
bound, or to which any of the properties of the Company or any of its affiliates
is  subject,  or (D) the terms of any  "lock-up"  or  similar  provision  of any
underwriting or similar agreement to which the Company, or any of its affiliates
is a party except the violation, conflict, breach, or default of which would not
have a material adverse effect on the Company; or

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     (ii)  result  in  the  creation  or  imposition  of  any  lien,  charge  or
encumbrance  upon  the  Securities  or any of the  assets  of the  Company,  its
subsidiaries or any of its affiliates.

                           (g) THE SECURITIES. The Securities upon issuance:

     (i) are,  or will be,  free and  clear of any  security  interests,  liens,
claims or other  encumbrances,  subject to restrictions  upon transfer under the
1933 Act and State laws;

     (ii) have been, or will be, duly and validly  authorized and on the date of
issuance and on the Closing Date, as hereinafter  defined, and the date the Note
is converted,  the Securities  will be duly and validly  issued,  fully paid and
nonassessable  (and if registered  pursuant to the 1933 Act, and resold pursuant
to an effective  registration  statement will be free trading and  unrestricted,
provided   that  the   Subscriber   complies   with  the   Prospectus   delivery
requirements);

     (iii) will not have been issued or sold in violation of any  preemptive  or
other similar rights of the holders of any securities of the Company; and

     (iv) will not subject the holders  thereof to personal  liability by reason
of being such holders.

                           (h)  LITIGATION.  There is no pending or, to the best
knowledge of the Company,  threatened action, suit,  proceeding or investigation
before any court, governmental agency or body, or arbitrator having jurisdiction
over the Company,  or any of its  affiliates  that would affect the execution by
the  Company or the  performance  by the Company of its  obligations  under this
Agreement, and all other agreements entered into by the Company relating hereto.
Except as disclosed  in the Reports or Other  Written  Information,  there is no
pending or, to the best  knowledge  of the  Company,  threatened  action,  suit,
proceeding or investigation  before any court,  governmental  agency or body, or
arbitrator having  jurisdiction over the Company, or any of its affiliates which
litigation if adversely  determined  could have a material adverse effect on the
Company.

                           (i) REPORTING COMPANY. The Company is a publicly-held
company  subject to reporting  obligations  pursuant to Sections 15(d) and 13 of
the Securities Exchange Act of 1934, as amended (the "1934 Act") and has a class
of common  shares  registered  pursuant  to Section  12(g) of the 1934 Act.  The
Company's  common  stock  is  listed  for  trading  on the  OTC  Bulletin  Board
("Bulletin Board").  Pursuant to the provisions of the 1934 Act, the Company has
filed all reports and other materials  required to be filed  thereunder with the
Securities and Exchange Commission during the preceding twelve months.

                           (j) NO  MARKET  MANIPULATION.  The  Company  has  not
taken,  and will not take,  directly or indirectly,  any action  designed to, or
that might  reasonably  be  expected  to,  cause or result in  stabilization  or
manipulation  of the price of the common stock of the Company to facilitate  the
sale or resale of the Securities or affect the price at which the Securities may
be issued or resold.

                           (k)  INFORMATION   CONCERNING  COMPANY.  The  Reports
contain all material  information relating to the Company and its operations and
financial  condition as of their respective dates which  information is required
to be disclosed therein.  Since the date of the financial statements included in
the Reports,  and except as modified in the Other Written  Information or in the
Schedule  hereto,  there has been no material  adverse  change in the  Company's
business,  financial  condition or affairs not  disclosed  in the  Reports.  The

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Reports do not contain any untrue  statement of a material fact or omit to state
a  material  fact  required  to be  stated  therein  or  necessary  to make  the
statements therein not misleading in light of the circumstances when made.

                           (l) DILUTION.  The Company's  executive  officers and
directors have studied and fully  understand the nature of the Securities  being
sold hereby and recognize that they have a potential  dilutive effect. The board
of directors of the Company has concluded,  in its good faith business  judgment
that  such  issuance  is in the  best  interests  of the  Company.  The  Company
specifically   acknowledges  that  its  obligation  to  issue  the  Shares  upon
conversion  of the Note is binding upon the Company and  enforceable,  except as
otherwise  described in this Subscription  Agreement or the Note,  regardless of
the  dilution  such  issuance  may  have on the  ownership  interests  of  other
shareholders of the Company.

                           (m)STOP TRANSFER.  The Securities are restricted
securities as of the date of this  Agreement.  The Company
will not issue any stop transfer order or other order impeding the sale,  resale
or delivery of the Securities,  except as may be required by federal  securities
laws.

                           (n)  DEFAULTS.  Neither  the  Company  nor any of its
subsidiaries  is in violation of its  Certificate  of  Incorporation  or ByLaws.
Neither the Company nor any of its  subsidiaries  is (i) in default  under or in
violation of any other  material  agreement or instrument to which it is a party
or by which it or any of its properties are bound or affected,  which default or
violation would have a material  adverse effect on the Company,  (ii) in default
with  respect  to any order of any court,  arbitrator  or  governmental  body or
subject to or party to any order of any court or governmental  authority arising
out of any action,  suit or proceeding under any statute or other law respecting
antitrust,  monopoly, restraint of trade, unfair competition or similar matters,
or (iii) to its knowledge in violation of any statute, rule or regulation of any
governmental  authority which violation would have a material  adverse effect on
the Company.

                           (o) NO INTEGRATED OFFERING.  Neither the Company, nor
any of its  affiliates,  nor any  person  acting  on its or  their  behalf,  has
directly or indirectly made any offers or sales of any security or solicited any
offers to buy any security under circumstances that would cause the offer of the
Securities  pursuant to this Agreement to be integrated  with prior offerings by
the Company for purposes of the 1933 Act or any applicable  stockholder approval
provisions,  including,  without limitation,  under the rules and regulations of
the Bulletin Board nor will the Company or any of its affiliates or subsidiaries
take any action or steps that would cause the offering of the  Securities  to be
integrated  with other  offerings.  The Company has not  conducted  and will not
conduct any offer other than the transactions  contemplated  hereby that will be
integrated with the offer or issuance of the Securities.

                           (p) NO GENERAL SOLICITATION. Neither the Company, nor
any of its affiliates,  nor to its knowledge,  any person acting on its or their
behalf, has engaged in any form of general  solicitation or general  advertising
(within the meaning of Regulation D under the Act) in connection  with the offer
or sale of the Securities.

                           (q) LISTING. The Company's common stock is quoted on,
and listed for trading on the Bulletin  Board.  The Company has not received any
oral or written  notice that its Common Stock will be delisted from the Bulletin
Board or that the Company's  common stock does not meet all requirements for the
continuation of such listing.

                           (r) NO  UNDISCLOSED  LIABILITIES.  The Company has no
liabilities or obligations which are material, individually or in the aggregate,
which are not disclosed in the Reports and Other Written Information, other than
those incurred in the ordinary course of the Company's businesses since December
31, 2001 and which,  individually  or in the aggregate,  would not reasonably be
expected to have a material adverse effect on the Company's financial condition.

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                           (s) NO  UNDISCLOSED  EVENTS OR  CIRCUMSTANCES.  Since
December 31, 2001, no event or circumstance  has occurred or exists with respect
to the Company or its businesses, properties, operations or financial condition,
that,  under applicable law, rule or regulation,  requires public  disclosure or
announcement  prior to the date  hereof by the Company but which has not been so
publicly announced or disclosed in the Reports.

                           (t) CAPITALIZATION.  The authorized and outstanding
capital  stock of the Company as of the date of this  Agreement  and the Closing
Date are set forth on Schedule  2(t) hereto.  Except as set forth in the Reports
and Other Written Information and Schedule 2(t), there are no options, warrants,
or rights to subscribe to, securities, rights or obligations convertible into or
exchangeable  for or giving  any right to  subscribe  for any  shares of capital
stock of the  Company.  All of the  outstanding  shares of  Common  Stock of the
Company have been duly and validly  authorized and issued and are fully paid and
nonassessable.

                           (u)  CORRECTNESS  OF  REPRESENTATIONS.   The  Company
represents  that  the  foregoing  representations  and  warranties  are true and
correct as of the date hereof in all material respects,  and, unless the Company
otherwise  notifies the Subscriber  prior to the Closing Date, shall be true and
correct  in  all  material  respects  as of  the  Closing  Date.  The  foregoing
representations and warranties shall survive the Closing Date.

                  3. REGULATION D OFFERING. This Offering is being made pursuant
to the exemption from the registration provisions of the Securities Act of 1933,
as amended,  afforded by Rule 506 of Regulation D promulgated thereunder. On the
Closing  Date,  the Company will  provide an opinion  reasonably  acceptable  to
Subscriber from the Company's  legal counsel opining on the  availability of the
Regulation  D  exemption  as it  relates  to  the  offer  and  issuance  of  the
Securities.  A form of the legal  opinion  is  annexed  hereto as EXHIBIT C. The
Company will provide, at the Company's expense, such other legal opinions in the
future as are  reasonably  necessary for the conversion of the Note and issuance
of the Company Shares.

                  4.  REISSUANCE OF  SECURITIES.  The Company  agrees to reissue
certificates  representing  the  Securities  without  the  legends  set forth in
Sections 1(e) and 1(f) above at such time as (a) the holder thereof is permitted
to and disposes of such  Securities  pursuant to Rule 144(d)  and/or Rule 144(k)
under the 1933 Act in the  opinion of  counsel  reasonably  satisfactory  to the
Company, or (b) upon resale subject to an effective registration statement after
the  Securities  are  registered  under  the 1933  Act.  The  Company  agrees to
cooperate  with the Subscriber in connection  with all resales  pursuant to Rule
144(d) and Rule  144(k)  and  provide  legal  opinions  necessary  to allow such
resales  provided  the  Company  and its counsel  receive  reasonably  requested
written representations from the Subscriber and selling broker, if any. Provided
the Subscriber provides required  certifications and representation  letters, if
any, if the Company  fails to remove any legend as required by this Section 4 (a
"Legend Removal Failure"),  then beginning on the tenth (10th) day following the
date that the  Subscriber  has requested the removal of the legend and delivered
all items reasonably  required by the Company to be delivered by the Subscriber,
the Company  continues to fail to remove such legend,  the Company  shall pay to
each Subscriber or assignee holding shares, subject to a Legend Removal Failure,
as  liquidated  damages and not a penalty an amount equal to one percent (1%) of
the Purchase  Price of the shares  subject to a Legend  Removal  Failure per day
that such failure continues. If during any twelve (12) month period, the Company

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fails to remove any legend as required  by this  Section 4 for an  aggregate  of
thirty (30) days, each Subscriber or assignee  holding  Securities  subject to a
Legend Removal  Failure may, at its option,  require the Company to purchase all
or any portion of the  Securities  subject to a Legend  Removal  Failure held by
such Subscriber or assignee at a price per share equal to 120% of the applicable
Purchase Price.

                  5. REGULATION S. N/A.

                  6. FEES.

                           The  Company  shall pay to counsel to the  Subscriber
its fees of $15,000 for services rendered to the
Subscriber in connection with this Agreement for aggregate  subscription amounts
of up to $500,000 of principal  amount of Notes (the  "Offering")  and acting as
escrow agent for the Offering.

                  7. COVENANTS OF THE COMPANY.  The Company covenants and agrees
with the Subscriber as follows:

                           (a) The Company will advise the Subscriber,  promptly
after it receives notice of issuance by the
Securities and Exchange Commission, any state securities commission or any other
regulatory  authority of any stop order or of any order preventing or suspending
any offering of any  securities  of the  Company,  or of the  suspension  of the
qualification  of the Common  Stock of the Company  for  offering or sale in any
jurisdiction, or the initiation of any proceeding for any such purpose.

                           (b) The Company shall promptly  secure the listing of
the Company Shares,  and Common Stock issuable upon the exercise of the Warrants
upon each national securities  exchange,  or automated quotation system, if any,
upon which shares of common stock are then listed (subject to official notice of
issuance) and shall maintain such listing so long as any Notes are  outstanding.
The Company will maintain the listing of its Common Stock on the NASDAQ SmallCap
Market,  NASDAQ  National  Market System,  NASD OTC Bulletin  Board, or New York
Exchange  (whichever  of the  foregoing  is at the  time the  principal  trading
exchange  or market for the Common  Stock (the  "Principal  Market")),  and will
comply  in  all  respects  with  the  Company's  reporting,   filing  and  other
obligations under the bylaws or rules of the National  Association of Securities
Dealers ("NASD") and such exchanges, as applicable. The Company will provide the
Subscriber  copies of all  notices  it  receives  notifying  the  Company of the
threatened and actual delisting of the Common Stock from any Principal Market.

                           (c) The Company  shall notify the  Commission,  NASD,
the Principal Market and applicable state authorities,  in accordance with their
requirements,  if any, of the transactions  contemplated by this Agreement,  and
shall take all other  necessary  action and  proceedings  as may be required and
permitted  by  applicable  law,  rule and  regulation,  for the  legal and valid
issuance of the Securities to the Subscriber and promptly provide copies thereof
to Subscriber.

                           (d)     From the Closing Date and until at least two
(2) years after the  effectiveness of the Registration  Statement on Form S-2 or
such other  Registration  Statement  described in Section 10.1(iv)  hereof,  the
Company  will (i) cause its Common  Stock to  continue  to be  registered  under
Sections  12(b) or 12(g) of the Exchange  Act,  (ii) comply in all respects with
its reporting and filing  obligations  under the Exchange Act, (iii) comply with
all  reporting  requirements  that are  applicable  to an issuer with a class of
Shares registered pursuant to Section 12(g) of the Exchange Act, and (iv) comply
with all requirements  related to any  registration  statement filed pursuant to
this Agreement.  The Company will use its best efforts not to take any action or
file any  document  (whether or not  permitted by the Act or the Exchange Act or
the rules  thereunder) to terminate or suspend such registration or to terminate
or suspend its  reporting and filing  obligations  under said Acts until two (2)

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years after the actual effective date of the Registration  Statement on Form S-2
or other Registration  Statement described in Section 10.1(iv) hereof. Until the
resale of the Company  Shares by the  Subscriber,  the Company will continue the
listing  of the  Common  Stock on the  Bulletin  Board  and will  comply  in all
respects with the Company's  reporting,  filing and other  obligations under the
bylaws or rules of Bulletin Board.

                           (e) The Company  undertakes  to reserve,  pro rata on
behalf of each holder of a Note,  from its authorized but unissued common stock,
at all times that Notes remain  outstanding,  a number of common shares equal to
not less than the amount of common shares necessary to allow each such holder to
be able to fully convert all such outstanding Notes.

                           (f) The  Purchase  Price may not and will not be used
for  accrued and unpaid  officer and  director  salaries,  payment of  financing
related  debt,  redemption of  outstanding  notes or equity  instruments  of the
Company, nor non-trade obligations outstanding on the Closing Date.

                  8.       COVENANTS OF THE COMPANY AND SUBSCRIBER REGARDING
INDEMNIFICATION.

                           (a) The Company  agrees to indemnify,  hold harmless,
reimburse and defend Subscriber, Subscriber's
officers,   directors,  agents,  affiliates,   control  persons,  and  principal
shareholders,  against any claim, cost, expense, liability,  obligation, loss or
damage (including  reasonable legal fees) of any nature,  incurred by or imposed
upon Subscriber or any such person which results, arises out of or is based upon
(i) any  material  misrepresentation  by  Company or breach of any  warranty  by
Company in this Agreement or in any Exhibits or Schedules  attached  hereto,  or
other agreement  delivered  pursuant hereto; or (ii) after any applicable notice
and/or cure periods,  any breach or default in performance by the Company of any
covenant or undertaking to be performed by the Company  hereunder,  or any other
agreement entered into by the Company and Subscribers relating hereto.

                           (b)  Subscriber  agrees to indemnify,  hold harmless,
reimburse and defend the Company and each of the
Company's officers,  directors, agents, affiliates,  control persons against any
claim,  cost,  expense,   liability,   obligation,  loss  or  damage  (including
reasonable legal fees) of any nature, incurred by or imposed upon the Company or
any such person which  results,  arises out of or is based upon (i) any material
misrepresentation  by  Subscriber  in  this  Agreement  or in  any  Exhibits  or
Schedules attached hereto, or other agreement delivered pursuant hereto; or (ii)
after any  applicable  notice  and/or  cure  periods,  any  breach or default in
performance  by  Subscriber  of any covenant or  undertaking  to be performed by
Subscriber  hereunder,  or any other  agreement  entered into by the Company and
Subscribers relating hereto.

                           (c)      The procedures set forth in Section 10.6
shall apply to the  indemnifications set forth in Sections8(a) and 8(b) above.

                  9.1. CONVERSION OF NOTE.

                           (a) Upon the  conversion of the Note or part thereof,
the  Company  shall,  at its own cost and  expense,  take all  necessary  action
(including  the issuance of an opinion of counsel) to assure that the  Company's
transfer agent shall issue stock  certificates in the name of Subscriber (or its
nominee)  or  such  other  persons  as  designated  by  Subscriber  and in  such
denominations to be specified at conversion representing the number of shares of
common  stock  issuable  upon such  conversion.  The  Company  warrants  that no
instructions  other  than these  instructions  have been or will be given to the
transfer  agent of the  Company's  Common Stock and that,  unless  waived by the
Subscriber,   the  Shares   will  be   unlegended,   free-trading,   and  freely
transferable,   and  will  not  contain  a  legend  restricting  the  resale  or
transferability  of the  Company  Shares  provided  the  Shares  are being  sold
pursuant  to an  effective  registration  statement  covering  the Shares or are
otherwise exempt from registration.

                           (b)  Subscriber  will give notice of its  decision to
exercise its right to convert the Note or part
thereof by telecopying an executed and completed Notice of Conversion (a form of
which is annexed to EXHIBIT A hereto) to the  Company via  confirmed  telecopier
transmission  or  otherwise  pursuant to Section  11(a) of this  Agreement.  The
Subscriber  will not be required to  surrender  the Note until the Note has been
fully  converted  or  satisfied.  Each date on which a Notice of  Conversion  is
telecopied  to the Company in  accordance  with the  provisions  hereof shall be
deemed a  Conversion  Date.  The Company  will or causes the  transfer  agent to
transmit  the  Company's  Common  Stock  certificates  representing  the  Shares
issuable upon  conversion of the Note to the Subscriber via express  courier for
receipt by such  Subscriber  within three (3) business days after receipt by the
Company of the Notice of  Conversion  (the  "Delivery  Date").  In the event the
Shares are electronically transferable, then delivery of the Shares must be made
by  electronic  transfer  provided  the  Subscriber  has made  request  for such
electronic transfer. The Company will provide a Note representing the balance of
the Note not so converted to the Subscriber, if requested by Subscriber provided

                                       8
<PAGE>

an original  Note is delivered  to the Company.  To the extent that a Subscriber
elects  not  to  surrender  a  Note  for  reissuance  upon  partial  payment  or
conversion,  the Subscriber  hereby  indemnifies the Company against any and all
loss or damage attributable to a third-party claim in an amount in excess of the
actual amount then due under the Note.

                           (c)  The  Company  understands  that a  delay  in the
delivery of the Shares in the form required pursuant
to Section 9 hereof, or the Mandatory Redemption Amount described in Section 9.2
hereof,  beyond the  Delivery  Date or  Mandatory  Redemption  Payment  Date (as
hereinafter  defined)  could  result  in  economic  loss to the  Subscriber.  As
compensation  to the  Subscriber  for such loss,  the Company agrees to pay late
payments to the  Subscriber  for late  issuance  of Shares in the form  required
pursuant to Section 9 hereof upon  Conversion of the Note or late payment of the
Mandatory  Redemption  Amount,  in the amount of $100 per business day after the
Delivery Date or Mandatory Redemption Payment Date, as the case may be, for each
$10,000 of Note principal amount being converted or redeemed.  The Company shall
pay any payments incurred under this Section in immediately available funds upon
demand. Furthermore, in addition to any other remedies which may be available to
the  Subscriber,  in the event that the  Company  fails for any reason to effect
delivery of the Shares by the  Delivery  Date or make  payment by the  Mandatory
Redemption  Payment Date, the Subscriber  will be entitled to revoke all or part
of the  relevant  Notice of  Conversion  or rescind all or part of the notice of
Mandatory  Redemption  by  delivery  of a notice to such  effect to the  Company
whereupon  the  Company  and the  Subscriber  shall  each be  restored  to their
respective  positions  immediately prior to the delivery of such notice,  except
that late  payment  charges  described  above shall be payable  through the date
notice of revocation or rescission is given to the Company.

                           (d)  Nothing  contained  herein  or in  any  document
referred  to herein  or  delivered  in  connection  herewith  shall be deemed to
establish  or require  the  payment of a rate of  interest  or other  charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest or dividends  required to be paid or other charges hereunder exceed the
maximum  permitted by such law, any payments in excess of such maximum  shall be
credited against amounts owed by the Company to the Subscriber and thus refunded
to the Company.

                  9.2.  MANDATORY  REDEMPTION AT SUBSCRIBER'S  ELECTION.  In the
event the Company fails to timely deliver Shares on a Delivery Date, or upon the
occurrence  of any other  Event of Default  (as  defined in the Note) or for any
reason other than pursuant to the  limitations  set forth in Section 9.3 hereof,
then at the  Subscriber's  election,  the Company must pay to the Subscriber ten
(10) business  days after request by the  Subscriber or on the Delivery Date (if
requested by the Subscriber) a sum of money  determined by (i) multiplying up to
the  outstanding  principal  amount of the Note  designated by the Subscriber by
130%,  or (ii)  multiplying  the  number of Shares  otherwise  deliverable  upon
conversion  of an amount of Note  principal  and/or  interest  designated by the
Subscriber  (with  the  date of  giving  of  such  designation  being  a  Deemed

                                       9
<PAGE>

Conversion  Date) at the  Conversion  Price by the highest  closing price of the
Common Stock on the principal  market from the Deemed  Conversion Date until the
day prior to the  receipt of the  Mandatory  Redemption  Payment,  whichever  is
greater ("Mandatory Redemption Payment").  The Mandatory Redemption Payment must
be received by the Subscriber on the same date as the Company  Shares  otherwise
deliverable or within ten (10) business days after request,  whichever is sooner
("Mandatory  Redemption Payment Date"). Upon receipt of the Mandatory Redemption
Payment,  the  corresponding  Note  principal  will be deemed paid and no longer
outstanding.

                  9.3. MAXIMUM CONVERSION.  The Subscriber shall not be entitled
to convert on a Conversion  Date that amount of the Note in connection with that
number of shares of Common  Stock which would be in excess of the sum of (i) the
number of shares of common stock  beneficially  owned by the  Subscriber and its
affiliates on a Conversion  Date,  and (ii) the number of shares of Common Stock
issuable upon the conversion of the Note with respect to which the determination
of this  provision  is being made on a  Conversion  Date,  which would result in
beneficial  ownership by the Subscriber and its affiliates of more than 9.99% of
the outstanding  shares of common stock of the Company on such Conversion  Date.
For  the  purposes  of the  provision  to the  immediately  preceding  sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities  Exchange Act of 1934, as amended,  and Regulation 13d-3  thereunder.
Subject to the  foregoing,  the  Subscriber  shall not be  limited to  aggregate
conversions of only 9.99% and aggregate  conversion by the Subscriber may exceed
9.99%.  The  Subscriber  may void the  conversion  limitation  described in this
Section 9.3 upon 75 days prior written notice to the Company. The Subscriber may
allocate  which of the equity of the Company  deemed  beneficially  owned by the
Subscriber shall be included in the 9.99% amount described above and which shall
be allocated to the excess above 9.99%.

                  9.4.  INJUNCTION - POSTING OF BOND.  In the event a Subscriber
shall  elect to  convert a Note or part  thereof,  the  Company  may not  refuse
conversion  based on any claim that such  Subscriber  or any one  associated  or
affiliated with such Subscriber has been engaged in any violation of law, or for
any other reason, unless, an injunction from a court, on notice, restraining and
or enjoining  conversion  of all or part of said Note shall have been sought and
obtained and the Company posts a surety bond for the benefit of such  Subscriber
in the  amount  of 130% of the  amount  of the  Note,  which is  subject  to the
injunction,   which  bond  shall  remain  in  effect  until  the  completion  of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to such Subscriber to the extent Subscriber obtains judgment.

                  9.5. BUY-IN.  In addition to any other rights available to the
Subscriber,  if the  Company  fails to deliver  to the  Subscriber  such  shares
issuable  upon  conversion  of a Note by the Delivery  Date and if ten (10) days
after the Delivery Date the Subscriber  purchases (in an open market transaction
or  otherwise)  shares of Common Stock to deliver in  satisfaction  of a sale by
such Subscriber of the Common Stock which the Subscriber  anticipated  receiving
upon such  conversion  (a  "Buy-In"),  then the Company shall pay in cash to the
Subscriber  (in  addition  to  any  remedies  available  to or  elected  by  the
Subscriber)  the  amount  by which (i) the  Subscriber's  total  purchase  price
(including  brokerage  commissions,  if any) for the  shares of Common  Stock so
purchased  exceeds (ii) the aggregate  principal  and/or  interest amount of the
Note for which such  conversion was not timely  honored,  together with interest
thereon at a rate of 15% per annum,  accruing  until such amount and any accrued
interest  thereon is paid in full (which amount shall be paid as damages and not
as a penalty).  For example, if the Subscriber  purchases shares of Common Stock
having a total  purchase  price of $11,000 to cover a Buy-In with  respect to an
attempted  conversion of $10,000 of note principal and/or interest,  the Company
shall be required to pay the Subscriber  $1,000,  plus interest.  The Subscriber
shall provide the Company  written notice  indicating the amounts payable to the
Subscriber in respect of the Buy-In.

                  9.6  ADJUSTMENTS.  The  Conversion  Price and amount of Shares
issuable upon  conversion of the Notes shall be adjusted to offset the effect of
stock splits,  stock dividends and pro rata  distributions of property or equity
interests to the Company's shareholders.

                                       10
<PAGE>

                  9.7.  REDEMPTION.  The Company may not redeem or call the Note
without the consent of the holder of the Note.

                  10.1.  REGISTRATION  RIGHTS.  The  Company  hereby  grants the
following registration rights to holders of the Securities.

                           (i)      On one occasion,  for a period  commencing
91 days after the Closing Date, but not later than three years after the Closing
Date ("Request  Date"),  the Company,  upon a written request therefore from any
record  holder or holders  of more than 50% of the  aggregate  of the  Company's
Shares issued and issuable upon conversion of the Notes (the Common Stock issued
or issuable  upon  conversion of the Notes or issuable by virtue of ownership of
the Notes are collectively the "Registrable Securities"), shall prepare and file
with  the  Commission  a  registration  statement  under  the Act  covering  the
Registrable  Securities  which are the  subject  of such  request,  unless  such
Registrable Securities are the subject of an effective registration statement or
included for registration in a pending registration statement. In addition, upon
the receipt of such request,  the Company shall  promptly give written notice to
all other record holders of the Registrable  Securities  that such  registration
statement  is to be filed  and  shall  include  in such  registration  statement
Registrable Securities for which it has received written requests within 10 days
after the  Company  gives such  written  notice.  Such other  requesting  record
holders shall be deemed to have exercised their demand  registration right under
this Section 10.1(i).  As a condition  precedent to the inclusion of Registrable
Securities,  the holder thereof shall provide the Company with such  information
as the Company  reasonably  requests.  The  obligation of the Company under this
Section 10.1(i) shall be limited to one registration statement.

                           (ii)             If the Company at any time  proposes
to  register  any of its  securities  under the 1933 Act for sale to the public,
whether  for its own  account or for the  account of other  security  holders or
both,  except  with  respect to  registration  statements  on Forms S-4,  S-8 or
another form not available for registering  the Registrable  Securities for sale
to the public,  provided the Registrable Securities are not otherwise registered
for resale by the  Subscriber  or Holder  pursuant to an effective  registration
statement, each such time it will give at least 25 days' prior written notice to
the record holder of the Registrable  Securities of its intention so to do. Upon
the written request of the holder,  received by the Company within 15 days after
the giving of any such notice by the Company, to register any of the Registrable
Securities,  the  Company  will cause such  Registrable  Securities  as to which
registration  shall have been so requested to be included with the securities to
be covered by the  registration  statement  proposed to be filed by the Company,
all to the  extent  required  to  permit  the sale or other  disposition  of the
Registrable   Securities  so  registered  by  the  holder  of  such  Registrable
Securities (the "Seller").  In the event that any registration  pursuant to this
Section 10.1(ii) shall be, in whole or in part, an underwritten  public offering
of common stock of the Company,  the number of shares of Registrable  Securities
to be  included  in  such  an  underwriting  may  be  reduced  by  the  managing
underwriter  if and to the extent  that the Company  and the  underwriter  shall
reasonably  be of the opinion that such  inclusion  would  adversely  affect the
marketing  of the  securities  to be  sold  by the  Company  therein;  provided,
however,  that the  Company  shall  notify  the  Seller in  writing  of any such
reduction. Notwithstanding the foregoing provisions, or Section 10.4 hereof, the
Company may  withdraw or delay or suffer a delay of any  registration  statement
referred to in this Section 10.1(ii) without thereby  incurring any liability to
the Seller.

                           (iii)  If,  at  the  time  any  written  request  for
registration is received by the Company pursuant to

                                       11
<PAGE>

Section  10.1(i),  the  Company  has  determined  to  proceed  with  the  actual
preparation  and  filing  of a  registration  statement  under  the  1933 Act in
connection  with the proposed  offer and sale for cash of any of its  securities
for the  Company's  own account and the  Company  actually  does file such other
registration statement,  such written request shall be deemed to have been given
pursuant to Section 10.1(ii) rather than Section 10.1(i),  and the rights of the
holders of  Registrable  Securities  covered by such  written  request  shall be
governed by Section 10.1(ii).

                           (iv)     The Company  shall file with the  Commission
not later than sixty (60) days after the Closing Date (the "Filing  Date"),  and
use its reasonable  commercial  efforts to cause to be declared effective within
one hundred  twenty (120) days after the Closing  Date, a Form S-2  registration
statement  (or such other form that it is  eligible to use) in order to register
the Registrable Securities for issuance to the Subscriber and distribution under
the Act. The Commission  must declare the  registration  statement  described in
this  paragraph  effective no later than one hundred twenty (120) days after the
Closing Date ("Effective Date"). The Company will register a number of shares of
Common Stock in the afore described  registration statement that is equal to the
number of  Company  Shares  issuable  at the  Conversion  Price in effect at the
Closing  Date,  or  actual  filing  date of the  registration  statement  or any
amendment thereto assuming conversion of 200% of the Notes (whichever results in
the  greatest  number of  Company  shares).  Such  registration  statement  will
immediately be amended or additional registration statements will be immediately
filed by the Company as necessary in order to register additional Company Shares
to allow the unlegended  reissuance of all Common Stock included and issuable by
virtue  of the  Registrable  Securities.  The  Registrable  Securities  shall be
reserved  and set  aside  exclusively  for the  benefit  of each  Subscriber  in
proportion to each Subscriber's interest in the Registrable Securities,  and not
issued, employed or reserved for anyone other than the Subscriber. No securities
of the Company  other than the  Registrable  Securities  will be included in the
registration statement described in this Section 10.1(iv) except as described on
SCHEDULE 10.1.

                  10.2. REGISTRATION PROCEDURES.  If and whenever the Company is
required by the provisions  hereof to effect the  registration  of any shares of
Registrable  Securities  under the Act, the Company  will, as  expeditiously  as
possible:

                           (a)   prepare   and  file  with  the   Commission   a
registration statement with respect to such securities and
use its best efforts to cause such  registration  statement to become and remain
effective for the period of the distribution contemplated thereby (determined as
herein provided),  and promptly provide to the holders of Registrable Securities
("Sellers") copies of all filings and Commission letters of comment;

                           (b)  prepare  and  file  with  the  Commission   such
amendments  and  supplements to such  registration  statement and the prospectus
used in  connection  therewith  as may be  necessary  to keep such  registration
statement  effective  until the latest of:  (i) twelve  months  after the latest
Maturity Date of a Note;  (ii) until six months after all the Company Shares are
eligible for resale pursuant to Rule 144(k) of the 1933 Act; or (iii) until such
registration  statement  has been  effective  for a period  of not less than 365
days, and comply with the provisions of the Act with respect to the  disposition
of all of the Registrable  Securities covered by such registration  statement in
accordance  with the Seller's  intended  method of disposition set forth in such
registration statement for such period;

                           (c) furnish to the  Seller,  such number of copies of
the registration  statement and the prospectus  included therein (including each
preliminary  prospectus)  as such  Seller  reasonably  may  request  in order to
facilitate the public sale or their  disposition  of the  securities  covered by
such registration statement;

                           (d) use its best  efforts to  register or qualify the
Seller's Registrable Securities covered by such registration  statement  under
the  securities  or "blue sky" laws of such  jurisdictions  as the Seller  shall
reasonably designate, provided, however, that the Company shall not for any such
purpose be  required  to qualify  generally  to  transact  business as a foreign
corporation  in any  jurisdiction  where it is not so qualified or to consent to
general service of process in any such jurisdiction;

                                       12
<PAGE>

                           (e) list the Registrable  Securities  covered by such
registration statement with any securities
exchange on which the Common Stock of the Company is then listed;

                           (f)  immediately  notify the Seller when a prospectus
relating  thereto is required to be delivered under the Act, of the happening of
any event of which the Company has knowledge as a result of which the prospectus
contained in such registration  statement, as then in effect, includes an untrue
statement of a material  fact or omits to state a material  fact  required to be
stated  therein or necessary to make the  statements  therein not  misleading in
light of the circumstances then existing;

                           (g) make available for inspection by the Seller,  and
any attorney,  accountant or other agent retained by the Seller or  underwriter,
all publicly available,  non-confidential financial and other records, pertinent
corporate  documents  and  properties  of the Company,  and cause the  Company's
officers,   directors   and   employees  to  supply  all   publicly   available,
non-confidential  information  reasonably  requested  by the  seller,  attorney,
accountant or agent in connection with such registration statement;

                           (h) will notify the  Subscriber of the  effectiveness
of the registration statement within one business
day of such event.

                  10.3.   PROVISION  OF  DOCUMENTS.   In  connection  with  each
registration  hereunder,  the Seller will furnish to the Company in writing such
information and  representation  letters with respect to itself and the proposed
distribution  by  it as  reasonably  shall  be  necessary  in  order  to  assure
compliance with federal and applicable state securities laws. In connection with
each   registration   pursuant  to  Section  10.1(i)  or  10.1(ii)  covering  an
underwritten  public offering,  the Company and the Seller agree to enter into a
written agreement with the managing underwriter in such form and containing such
provisions as are customary in the  securities  business for such an arrangement
between such  underwriter  and  companies of the Company's  size and  investment
stature.

                  10.4.  NON-REGISTRATION EVENTS. The Company and the Subscriber
agree that the Seller will suffer damages if any registration statement required
under  Section  10.1(i)  or  10.1(ii)  above is not filed  within 60 days  after
written  request by the  Holder and not  declared  effective  by the  Commission
within 120 days after such  request  [or the  Filing  Date and  Effective  Date,
respectively,  in  reference to the  Registration  Statement on Form S-2 or such
other form  described in Section  10.1(iv)],  and  maintained  in the manner and
within the time periods  contemplated by Section 10 hereof,  and it would not be
feasible to ascertain the extent of such damages with precision. Accordingly, if
(i) the Registration  Statement described in Sections 10.1(i) or 10.1(ii) is not
filed within 60 days of such written  request,  or is not declared  effective by
the  Commission on or prior to the date that is 120 days after such request,  or
(ii) the  registration  statement  on Form S-2 or such other form  described  in
Section  10.1(iv)  is not filed on or before  the  Filing  Date or not  declared
effective on or before the sooner of the Effective  Date, or within ten business
days of receipt  by the  Company  of a written  or oral  communication  from the
Commission that the  registration  statement  described in Section 10.1(iv) will
not be  reviewed,  or (iii) any  registration  statement  described  in Sections
10.1(i),  10.1(ii)  or  10.1(iv)  is filed  and  declared  effective  but  shall
thereafter  cease to be effective  (without  being  succeeded  immediately by an
additional  registration statement filed and declared effective) for a period of
time  which  shall  exceed  30 days in the  aggregate  per year or more  than 20
consecutive  calendar  days  (defined as a period of 365 days  commencing on the
date the Registration Statement is declared effective) (each such event referred
to in clauses (i),  (ii) and (iii) of this Section 10.4 is referred to herein as
a "Non-Registration  Event"),  then, for so long as such Non-Registration  Event
shall continue,  the Company shall pay, at the Subscriber's  option,  in cash or
stock at the applicable  Conversion Price, as Liquidated  Damages to each holder
of any Registrable  Securities an amount equal to two percent (2%) per month for
each month or part thereof during the pendency of such  Non-Registration  Event,
of the principal of the Notes issued in the Offering,  whether or not converted,
owned of record by such holder or issuable as of or subsequent to the occurrence
of such  Non-Registration  Event.  Payments to be made  pursuant to this Section

                                       13
<PAGE>

10.4 shall be due and  payable  within ten (10)  business  days after  demand in
immediately  available  funds.  In the event a Mandatory  Redemption  Payment is
demanded  from  the  Company  by the  Holder  pursuant  to  Section  9.2 of this
Subscription  Agreement,  then the Liquidated  Damages described in this Section
10.4 shall no longer accrue on the portion of the Purchase Price  underlying the
Mandatory  Redemption  Payment,  from and after the date the Holder receives the
Mandatory Redemption Payment. It shall be deemed a Non-Registration  Event if at
any time the Company has registered for  unrestricted  resale fewer than 125% of
the amount of Common Shares  issuable upon full conversion of all sums due under
the Note.

                  10.5.  EXPENSES.  All  expenses  incurred  by the  Company  in
complying with Section 10, including,  without limitation,  all registration and
filing  fees,   printing  expenses,   fees  and  disbursements  of  counsel  and
independent  public  accountants for the Company,  fees and expenses  (including
reasonable  counsel  fees)  incurred in  connection  with  complying  with state
securities or "blue sky" laws,  fees of the National  Association  of Securities
Dealers, Inc., transfer taxes, fees of transfer agents and registrars, and costs
of insurance are called "Registration  Expenses". All underwriting discounts and
selling commissions applicable to the sale of Registrable Securities,  including
any fees and  disbursements  of any special  counsel to the  Seller,  are called
"Selling Expenses". The Seller shall pay the fees of its own additional counsel,
if any. The Company will pay all  Registration  Expenses in connection  with the
registration statement under Section 10. All Selling Expenses in connection with
each  registration  statement  under Section 10 shall be borne by the Seller and
may be apportioned  among the Sellers in proportion to the number of shares sold
by the  Seller  relative  to the number of shares  sold under such  registration
statement or as all Sellers thereunder may agree.

                  10.6. INDEMNIFICATION AND CONTRIBUTION.

                           (a) In the event of a registration of any Registrable
Securities  under the Act pursuant to Section 10, the Company will indemnify and
hold  harmless  the Seller,  each  officer of the Seller,  each  director of the
Seller,  each  underwriter of such  Registrable  Securities  thereunder and each
other person, if any, who controls such Seller or underwriter within the meaning
of the 1933 Act, against any losses,  claims,  damages or liabilities,  joint or
several,  to which the Seller,  or such  underwriter or  controlling  person may
become  subject  under the Act or  otherwise,  insofar as such  losses,  claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue  statement or alleged  untrue  statement  of any  material  fact
contained in any registration  statement under which such Registrable Securities
was registered under the Act pursuant to Section 10, any preliminary  prospectus
or final prospectus  contained therein,  or any amendment or supplement thereof,
or arise out of or are based  upon the  omission  or alleged  omission  to state
therein a material fact  required to be stated  therein or necessary to make the
statements  therein not misleading in light of the circumstances  when made, and
will  reimburse  the Seller,  each such  underwriter  and each such  controlling
person for any legal or other expenses reasonably incurred by them in connection
with  investigating  or defending  any such loss,  claim,  damage,  liability or
action; provided, however, that the Company shall not be liable to the Seller to
the  extent  that any such  damages  arise  out of or are  based  upon an untrue
statement  or  omission  made in any  preliminary  prospectus  if (i) the Seller
failed  to send or  deliver  a copy of the  final  prospectus  delivered  by the
Company to the Seller with or prior to the delivery of written  confirmation  of
the sale by the Seller to the person asserting the claim from which such damages
arise,  (ii) the final  prospectus would have corrected such untrue statement or
alleged untrue statement or such omission or alleged  omission,  or (iii) to the
extent that any such loss, claim,  damage or liability arises out of or is based
upon an untrue  statement  or alleged  untrue  statement  or omission or alleged
omission so made in conformity with information furnished by any such Seller, or
any such controlling person in writing specifically for use in such registration
statement or prospectus.

                                       14
<PAGE>

                           (b)  In the  event  of a  registration  of any of the
Registrable  Securities  under the Act  pursuant  to Section 10, the Seller will
indemnify and hold harmless the Company,  and each person,  if any, who controls
the Company within the meaning of the Act, each officer of the Company who signs
the registration  statement,  each director of the Company, each underwriter and
each person who controls any underwriter  within the meaning of the Act, against
all losses,  claims,  damages or  liabilities,  joint or  several,  to which the
Company or such officer, director,  underwriter or controlling person may become
subject under the Act or otherwise,  insofar as such losses,  claims, damages or
liabilities  (or actions in respect  thereof) arise out of or are based upon any
untrue  statement or alleged untrue  statement of any material fact contained in
the  registration   statement  under  which  such  Registrable  Securities  were
registered  under the Act pursuant to Section 10, any preliminary  prospectus or
final prospectus  contained therein,  or any amendment or supplement thereof, or
arise out of or are based upon the omission or alleged omission to state therein
a  material  fact  required  to be  stated  therein  or  necessary  to make  the
statements therein not misleading,  and will reimburse the Company and each such
officer,  director,  underwriter and  controlling  person for any legal or other
expenses  reasonably  incurred  by  them in  connection  with  investigating  or
defending any such loss, claim, damage, liability or action, provided,  however,
that the  Seller  will be liable  hereunder  in any such case if and only to the
extent that any such loss, claim,  damage or liability arises out of or is based
upon an untrue  statement  or alleged  untrue  statement  or omission or alleged
omission made in reliance upon and in conformity with information  pertaining to
such  Seller,  as such,  furnished  in  writing to the  Company  by such  Seller
specifically for use in such registration statement or prospectus, and provided,
further, however, that the liability of the Seller hereunder shall be limited to
the  gross  proceeds  received  by the  Seller  from  the  sale  of  Registrable
Securities covered by such registration statement.

                           (c) Promptly  after receipt by an  indemnified  party
hereunder of notice of the commencement of any action,  such  indemnified  party
shall,  if a claim in respect  thereof is to be made  against  the  indemnifying
party  hereunder,  notify the  indemnifying  party in writing  thereof,  but the
omission  so to notify  the  indemnifying  party  shall not  relieve it from any
liability  which it may have to such  indemnified  party  other  than under this
Section  10.6(c) and shall only relieve it from any liability  which it may have
to such indemnified party under this Section 10.6(c),  except and only if and to
the extent the  indemnifying  party is prejudiced by such omission.  In case any
such action shall be brought against any  indemnified  party and it shall notify
the indemnifying party of the commencement thereof, the indemnifying party shall
be entitled to  participate  in and, to the extent it shall wish,  to assume and
undertake  the defense  thereof with counsel  satisfactory  to such  indemnified
party,  and, after notice from the indemnifying  party to such indemnified party
of its election so to assume and undertake the defense thereof, the indemnifying
party shall not be liable to such  indemnified  party under this Section 10.6(c)
for any  legal  expenses  subsequently  incurred  by such  indemnified  party in
connection with the defense thereof other than reasonable costs of investigation
and of liaison  with  counsel  so  selected,  provided,  however,  that,  if the
defendants  in any such  action  include  both  the  indemnified  party  and the
indemnifying  party and the indemnified  party shall have  reasonably  concluded
that there may be reasonable  defenses  available to it which are different from
or additional to those available to the  indemnifying  party or if the interests
of the indemnified party reasonably may be deemed to conflict with the interests
of the  indemnifying  party,  the  indemnified  parties  shall have the right to
select one separate  counsel and to assume such legal  defenses and otherwise to
participate in the defense of such action, with the reasonable expenses and fees
of such separate counsel and other expenses related to such  participation to be
reimbursed by the indemnifying party as incurred.

                           (d) In  order  to  provide  for  just  and  equitable
contribution  in the event of joint liability under the Act in any case in which
either (i) the Seller,  or any controlling  person of the Seller,  makes a claim
for  indemnification  pursuant  to  this  Section  10.6  but  it  is  judicially

                                       15
<PAGE>

determined  (by the entry of a final  judgment or decree by a court of competent
jurisdiction  and the  expiration  of time to appeal  or the  denial of the last
right of appeal)  that such  indemnification  may not be  enforced  in such case
notwithstanding  the fact that this Section 10.6 provides for indemnification in
such case, or (ii) contribution under the Act may be required on the part of the
Seller  or  controlling   person  of  the  Seller  in  circumstances  for  which
indemnification  is provided  under this Section  10.6;  then,  and in each such
case,  the Company  and the Seller  will  contribute  to the  aggregate  losses,
claims,  damages or liabilities to which they may be subject (after contribution
from others) in such  proportion so that the Seller is responsible  only for the
portion  represented  by the  percentage  that the public  offering price of its
securities  offered by the  registration  statement bears to the public offering
price  of all  securities  offered  by such  registration  statement,  provided,
however,  that,  in any  such  case,  (y) the  Seller  will not be  required  to
contribute  any  amount  in  excess  of the  public  offering  price of all such
securities  offered by it pursuant to such  registration  statement;  and (z) no
person or entity guilty of fraudulent  misrepresentation  (within the meaning of
Section  10(f) of the Act) will be entitled to  contribution  from any person or
entity who was not guilty of such fraudulent misrepresentation.

                  11.      MISCELLANEOUS.

                           (a)   NOTICES.   All  notices,   demands,   requests,
consents,  approvals,  and other communications  required or permitted hereunder
shall  be in  writing  and,  unless  otherwise  specified  herein,  shall be (i)
personally served, (ii) deposited in the mail,  registered or certified,  return
receipt  requested,  postage  prepaid,  (iii) delivered by reputable air courier
service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or
facsimile,  addressed as set forth below or to such other  address as such party
shall  have  specified  most  recently  by written  notice.  Any notice or other
communication  required  or  permitted  to be given  hereunder  shall be  deemed
effective  (a) upon hand  delivery  or  delivery  by  facsimile,  with  accurate
confirmation  generated by the transmitting facsimile machine, at the address or
number  designated  below (if delivered on a business day during normal business
hours where such notice is to be received),  or the first business day following
such delivery (if delivered  other than on a business day during normal business
hours where such notice is to be  received)  or (b) on the second  business  day
following  the date of  mailing  by  express  courier  service,  fully  prepaid,
addressed to such address,  or upon actual  receipt of such  mailing,  whichever
shall first occur. The addresses for such communications shall be: (i) if to the
Company to Famous  fixins  Inc.,  1325 Howard  Avenue,  Suite #422,  Burlingame,
California  94010,  telecopier  number:  (650)  340-8015  and  (ii)  if  to  the
Subscriber,  to the name, address and telecopy number set forth on the signature
page  hereto,  with a copy  by  telecopier  to  Naccarato  &  Associates,  19600
Fairchild,  Suite  260,  Irvine,  CA  92612,  Attn:  Owen  M.  Naccarato,  Esq.,
telecopier number: (949) 851-9262.

                           (b) CLOSING.  The  consummation  of the  transactions
contemplated  herein shall take place at the offices of Feldman Weinstein,  LLP,
420  Lexington  Avenue,   Suite  2620,  New  York,  New  York  10170,  upon  the
satisfaction  of all  conditions  to Closing  set forth in this  Agreement.  The
closing date shall be the date that subscriber funds representing the net amount
due the Company from the Purchase  Price of the Offering is  transmitted by wire
transfer or otherwise to the Company (the "Closing Date").

                           (c)  ENTIRE  AGREEMENT;  ASSIGNMENT.  This  Agreement
represents the entire  agreement  between the parties hereto with respect to the
subject  matter  hereof and may be amended  only by a writing  executed  by both
parties.  That party shall assign no right or obligation of either party without
prior notice to and the written consent of the other party.

                           (d)  EXECUTION.  This  Agreement  may be  executed by
facsimile transmission, and in counterparts, each of which will be deemed an
original.

                                       16
<PAGE>

                           (e) LAW  GOVERNING  THIS  AGREEMENT.  This  Agreement
shall be governed by and construed in  accordance  with the laws of the State of
California without regard to principles of conflicts of laws. Any action brought
by either party against the other  concerning the  transactions  contemplated by
this Agreement shall be brought only in the state courts of California or in the
federal  courts  located  in the  state  of  California.  Both  parties  and the
individuals  executing  this  Agreement  and other  agreements  on behalf of the
Company  agree to submit to the  jurisdiction  of such courts and waive trial by
jury. The prevailing party shall be entitled to recover from the other party its
reasonable  attorney's  fees and costs.  In the event that any provision of this
Agreement or any other agreement  delivered in connection herewith is invalid or
unenforceable  under any applicable  statute or rule of law, then such provision
shall be deemed  inoperative  to the extent that it may conflict  therewith  and
shall be deemed  modified to conform  with such statute or rule of law. Any such
provision,  which may prove invalid or  unenforceable  under any law,  shall not
affect the validity or enforceability of any other provision of any agreement.

                           (f) SPECIFIC  ENFORCEMENT,  CONSENT TO  JURISDICTION.
The Company and Subscriber  acknowledge and agree that irreparable  damage would
occur  in the  event  that  any of the  provisions  of this  Agreement  were not
performed in accordance with their specific terms or were otherwise breached. It
is  accordingly  agreed that the parties  shall be entitled to an  injunction or
injunctions  to prevent or cure breaches of the provisions of this Agreement and
to enforce  specifically the terms and provisions hereof or thereof,  this being
in addition  to any other  remedy to which any of them may be entitled by law or
equity.  Subject to Section  11(e)  hereof,  each of the Company and  Subscriber
hereby waives,  and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally  subject to the  jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient  forum or that
the venue of the suit, action or proceeding is improper. Nothing in this Section
shall affect or limit any right to serve  process in any other manner  permitted
by law.

                           (g) CONFIDENTIALITY.  The Company agrees that it will
not  disclose  publicly  or  privately  the  identity of the  Subscriber  unless
expressly  agreed to in writing by the Subscriber or only to the extent required
by law.

                           (h)  AUTOMATIC  TERMINATION.   This  Agreement  shall
automatically terminate without any further action of either party hereto if the
Closing shall not have  occurred by the tenth (10th)  business day following the
date this Agreement is accepted by the Subscriber.

                                       17
<PAGE>

         Please  acknowledge  your  acceptance  of  the  foregoing  Subscription
Agreement by signing and returning a copy to the undersigned  whereupon it shall
become a binding agreement between us.

                            FAMOUS FIXINS, INC.
                            A New York Corporation

                            B: /S/ S. MICHAEL RUDOLPH
                            -------------------------------
                            Name: S. Michael Rudolph
                            Title:  Chief Executive officer

                            Dated: December 27, 2002

                                       18
<PAGE>
SUBSCRIBERS
-------------------------------------------- ----------------------------------
                                            Purchase Price of Note:    $500,000
                                             Number of Warrants:      1,000,000
                                             Aggregate purchase Price: $500,000
/s/ David Firestone
--------------------------------------
(Signature)

Mercator Momentum Fund, LP
Address: 555 South Flower Street, Suite 4500
         Los Angeles, CA 9071
Attn:    David Firestone
Telecopier: 213-599-8285

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

                                       19
<PAGE>

                         LIST OF SCHEDULES AND EXHIBITS
                        --------------------------------

         Exhibit A                  Form of Note

         Exhibit B                  Form of Warrrant

         Exhibit C                  Form of Legal Opinion

         Schedule 2(d)              Additional Issuances

         Schedule 2(t)              Capitalization

         Schedule 10.1              Other Securities to be Registered

                                       20

<PAGE><PAGE>

                                                           Exhibit 4.10

                            STOCK PURCHASE AGREEMENT

                                 BY AND BETWEEN

                          MERCATOR MOMENTUM FUND, L.P.

                                       AND

                               FAMOUS FIXINS, INC.

                          DATED AS OF December 27, 2002

                                       21

<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                                                               PAGE
<S>     <C>                                                                                                    <C>

ARTICLE I: CERTAIN DEFINITIONS...................................................................................26
    Section 1.1      "Adjustment Price"..........................................................................26
    Section 1.2      "Adjustment Shares".........................................................................26
    Section 1.3      "Bid Price".................................................................................26
    Section 1.4      "Capital Shares"............................................................................26
    Section 1.5      "Closing"...................................................................................26
    Section 1.6      "Closing Date"..............................................................................27
    Section 1.7      "Commitment Period".........................................................................27
    Section 1.8      "Commitment Shares".........................................................................27
    Section 1.9      "Common Stock"..............................................................................27
    Section 1.10     "Condition Satisfaction Date"...............................................................27
    Section 1.11     "Daily Trading Value".......................................................................27
    Section 1.12     "Damages"...................................................................................27
    Section 1.13     "Effective Date"............................................................................27
    Section 1.14     "Exchange Act"..............................................................................27
    Section 1.15     "Investment Amount".........................................................................27
    Section 1.16     "Legend"....................................................................................27
    Section 1.17     "Lowest Price"..............................................................................27
    Section 1.18     "Material Adverse Effect"...................................................................27
    Section 1.19     "Material Adverse Market Event".............................................................28
    Section 1.20     "Maximum Commitment Amount".................................................................28
    Section 1.21     "Maximum Put Amount"........................................................................28
    Section 1.22     "Minimum Bid Price".........................................................................28
    Section 1.23     "Minimum Put Amount"........................................................................28
    Section 1.24     "Minimum Time Interval".....................................................................28
    Section 1.25     "NASD"......................................................................................28
    Section 1.26     "Outstanding"...............................................................................28
    Section 1.27     "Person"....................................................................................28
    Section 1.28     "Principal Market"..........................................................................28
    Section 1.29     "Purchase Price"............................................................................28
    Section 1.30     "Put".......................................................................................29
    Section 1.31     "Put Date"..................................................................................29
    Section 1.32     "Put Notice"................................................................................29
    Section 1.33     "Put Notice Period".........................................................................29
    Section 1.34     "Put Shares"................................................................................29
    Section 1.35     "Registrable Securities"....................................................................29
    Section 1.36     "Registration Rights Agreement".............................................................29
    Section 1.37     "Registration Statement"....................................................................30
    Section 1.38     "Regulation D"..............................................................................30
    Section 1.39     "SEC".......................................................................................30
    Section 1.40     "SEC Documents".............................................................................30
    Section 1.41     "Section 4(2)"..............................................................................30
    Section 1.42     "Securities Act"............................................................................30

                                       22
<PAGE>

    Section 1.43     "Subscription Date".........................................................................30
    Section 1.44     "Subsidiary"................................................................................30
    Section 1.45     "Trading Day"...............................................................................30
    Section 1.46     "Underwriter"...............................................................................30
    Section 1.47     "Valuation Period"..........................................................................30

ARTICLE II: PURCHASE AND SALE OF COMMON STOCK; TERMINATION OF OBLIGATIONS........................................30
    Section 2.1      Investments.................................................................................30
    Section 2.2      Mechanics...................................................................................31
    Section 2.3      Closings....................................................................................31
    Section 2.4      Termination of Agreement and Investment Obligation..........................................31
    Section 2.5      The Commitment Fee..........................................................................32
    Section 2.6      Adjustment Shares...........................................................................32

ARTICLE III: REPRESENTATIONS AND WARRANTIES OF INVESTOR..........................................................32
    Section 3.1      Intent......................................................................................32
    Section 3.2      Sophisticated Investor......................................................................32
    Section 3.3      Authority...................................................................................33
    Section 3.4      Not an Affiliate............................................................................33
    Section 3.5      Organization and Standing...................................................................33
    Section 3.6      Absence of Conflicts........................................................................33
    Section 3.7      Disclosure; Access to Information...........................................................33
    Section 3.8      Manner of Sale..............................................................................33

ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................................33
    Section 4.1      Organization of the Company.................................................................33
    Section 4.2      Authority...................................................................................34
    Section 4.3      Corporate Documents.........................................................................34
    Section 4.4      Books and Records...........................................................................34
    Section 4.5      Capitalization..............................................................................34
    Section 4.6      Registration and Listing of Common Stock....................................................35
    Section 4.7      Financial Statements........................................................................35
    Section 4.8      SEC Documents...............................................................................35
    Section 4.9      Exemption from Registration; Valid Issuances; New Issuances.................................36
    Section 4.10     No General Solicitation or Advertising in Regard to this Transaction........................36
    Section 4.11     No Conflicts................................................................................36
    Section 4.12     No Material Adverse Change..................................................................37
    Section 4.13     No Undisclosed Liabilities..................................................................37
    Section 4.14     No Undisclosed Events or Circumstances......................................................37
    Section 4.15     No Integrated Offering......................................................................37
    Section 4.16     Litigation and Other Proceedings............................................................38
    Section 4.17     No Misleading or Untrue Communication.......................................................38
    Section 4.18     Material Non-Public Information.............................................................38

                                       23
<PAGE>

ARTICLE V: COVENANTS OF THE INVESTOR.............................................................................38
    Section 5.1      No Short Sales..............................................................................38

ARTICLE VI: COVENANTS OF THE COMPANY.............................................................................38
    Section 6.1      Registration Rights.........................................................................38
    Section 6.2      Reservation of Common Stock.................................................................38
    Section 6.3      Listing of Common Stock.....................................................................39
    Section 6.4      Exchange Act Registration...................................................................39
    Section 6.5      Legends.....................................................................................39
    Section 6.6      Corporate Existence.........................................................................39
    Section 6.7      Additional SEC Documents....................................................................39
    Section 6.8      Notice of Certain Events Affecting Registration; Suspension of Right to Make a Put..........39
    Section 6.9      Consolidation; Merger.......................................................................40
    Section 6.10     Legal Opinion on Subscription Date..........................................................40
    Section 6.11     No Similar Arrangement; Right of First Refusal..............................................40

ARTICLE VII: CONDITIONS TO DELIVERY OF PUT NOTICES AND CONDITIONS TO CLOSING.....................................41
    Section 7.1      Conditions Precedent to the Obligation of the Company to Issue and Sell Common Stock........41
    Section 7.2      Conditions Precedent to the Right of the Company to Deliver a Put Notice and the Obligation of the Investor to
                     Purchase Put Shares.........................................................................41
    Section 7.3      Due Diligence Review; Non-Disclosure of Non-Public Information..............................44

ARTICLE VIII: LEGENDS............................................................................................45
    Section 8.1      Legends.....................................................................................45
    Section 8.2      No Other Legend or Stock Transfer Restrictions..............................................46
    Section 8.3      Investor's Compliance.......................................................................46

ARTICLE IX: INDEMNIFICATION; ARBITRATION.........................................................................46
    Section 9.1      Indemnification.............................................................................46
    Section 9.2      Method of Asserting Indemnification Claims..................................................47
    Section 9.3      Arbitration.................................................................................49

ARTICLE X: MISCELLANEOUS.........................................................................................50
    Section 10.1     Transaction Costs...........................................................................50
    Section 10.2     Reporting Entity for the Common Stock.......................................................50
    Section 10.3     Brokerage...................................................................................50
    Section 10.4     Notices.....................................................................................50

                                       24
<PAGE>

    Section 10.5     Assignment..................................................................................51
    Section 10.6     Amendment; No Waiver........................................................................51
    Section 10.7     Annexes and Exhibits; Entire Agreement......................................................51
    Section 10.8     Survival....................................................................................52
    Section 10.9     Severability................................................................................52
    Section 10.10    Title and Subtitles.........................................................................52
    Section 10.11    Counterparts................................................................................52
    Section 10.12    Choice of Law...............................................................................52
    Section 10.13    Other Expenses..............................................................................52

</TABLE>

                                       25
<PAGE>

                            STOCK PURCHASE AGREEMENT

                                 BY AND BETWEEN

                          MERCATOR MOMENTUM FUND, L.P.

                                       AND

                               FAMOUS FIXINS, INC.

This STOCK  PURCHASE  AGREEMENT  is entered into as of the __th day of December,
2002 (this "Agreement"),  by and between MERCATOR MOMENTUM FUND, L.P., a limited
partnership  organized and existing  under the laws of California and affiliates
it may  designate  as  co-investors  (collectively  the  "Investor")  and FAMOUS
FIXINS,  INC., a corporation  organized and existing under the laws of the State
of New York (the "Company").

WHEREAS,  the  parties  desire  that,  subject  to the terms and  subject to the
conditions  contained herein,  the Company shall issue and sell to the Investor,
from time to time as provided  herein,  and the Investor shall  purchase,  up to
$2,000,000 of shares of the Company's Common Stock (as defined below); and

WHEREAS,  such  investments  will be made in reliance upon the private  offering
exemption under Section 4(2) ("Section  4(2)") and Regulation D ("Regulation D")
of the  Securities  Act of  1933,  as  amended  and the  rules  and  regulations
promulgated  thereunder (the "Securities Act"), and/or upon such other exemption
from the  registration  requirements  of the  Securities Act as may be available
with  respect  to any or all of the  investments  in  Common  Stock  to be  made
hereunder.

NOW, THEREFORE, the parties hereto agree as follows:

                         ARTICLE I: CERTAIN DEFINITIONS

Section  1.1......."Adjustment Price" shall mean ninety-two percent (92%) of the
lowest  closing Bid Price of the  Company's  Common  Stock during the 15 Trading
Days following each Closing Date.

Section  1.2......."Adjustment  Shares" shall mean all shares issued pursuant to
Section 2.6 below.

Section 1.3......."Bid Price" shall mean the closing bid price as reported under
Section 10.2 of this Agreement.

Section 1.4......."Capital Shares" shall mean 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 dividends (as and when declared) and
assets (upon liquidation of the Company).

Section  1.5......."Closing"  shall mean one of the  closings of a purchase  and
sale of the Common Stock pursuant to Section 2.1.

Section  1.6......."Closing  Date" shall mean,  with  respect to a Closing,  the
Trading Day specified in the Put Notice  related to such  Closing,  provided all
conditions to such Closing have been satisfied on or before such Trading Day.

                                       26
<PAGE>

Section  1.7......."Commitment  Period" shall mean the period  commencing on the
effectiveness of the Registration Statement and expiring on the earlier to occur
of (i) the date on which the Investor shall have  purchased Put Shares  pursuant
to this  Agreement  for an aggregate  Purchase  Price of the Maximum  Commitment
Amount,  (ii) the date this Agreement is terminated  pursuant to Section 2.4, or
(iii) the date occurring three years from the Subscription Date.

Section 1.8......."Commitment Shares" shall mean any shares of Common Stock that
may be issued pursuant to Section 2.5 below.

Section  1.9......."Common  Stock" shall mean the Company's common stock, no par
value per share.

Section 1.10......"Condition Satisfaction Date" shall have the meaning set forth
in Section 7.2 of this Agreement.

Section  1.11......"Daily Trading Value" shall mean, on any Trading Day, the Bid
Price multiplied by the trading volume of the Common Stock.

Section  1.12......"Damages"  shall mean any and all  losses,  claims,  damages,
liabilities,  costs and expenses  (including,  without  limitation,  any and all
investigative,  legal and other expenses reasonably incurred in connection with,
and any and all amounts paid in defense or  settlement  of, any action,  suit or
proceeding  between any indemnified party and any indemnifying  party or between
any indemnified party and any third party, or otherwise, or any claim asserted).

Section  1.13......"Effective  Date" shall mean the earlier to occur of: (i) the
date  on  which  the  SEC  has  declared  effective  a  Registration   Statement
registering resale of Registrable Securities as set forth in Section 7.2(a); and
(ii) the date on which such  Registrable  Securities  first become  eligible for
resale pursuant to Rule 144 of the Securities Act.

Section  1.14......"Exchange  Act"  shall  mean  the  United  States  Securities
Exchange  Act of 1934,  as  amended  and the rules and  regulations  promulgated
thereunder.

Section  1.15......"Investment  Amount"  shall  mean  the  dollar  amount  to be
invested by the  Investor to purchase Put Shares with respect to any Put Date as
notified by the Company to the Investor in accordance with Section 2.2 hereof.

Section 1.16......"Legend" shall have the meaning specified in Section 8.1.

Section 1.17......"Lowest Price" shall mean the lowest closing Bid Prices during
the applicable Valuation Period.

Section  1.18......"Material  Adverse  Effect"  shall  mean  any  effect  on the
business,  operations,  properties,  prospects,  or  financial  condition of the
Company  that is material  and adverse to the Company or to the Company and such
other  entities  controlling  or  controlled  by the Company,  taken as a whole,
and/or  any  condition,  circumstance,  or  situation  that  would  prohibit  or
otherwise  interfere  with the  ability of the Company to enter into and perform
its obligations under any of (i) this Agreement or (ii) the Registration  Rights
Agreement.  Material  Adverse Effect shall  include,  but not be limited to, any
qualification  of  the  Company's  financial  statements  by  its  auditor,  any
restatement of prior financial  results,  resignation by any Director or failure
to timely file any SEC documents.

                                       27
<PAGE>

Section  1.19......"Material  Adverse  Market  Event"  shall  mean a fall in the
NASDAQ  Composite  Index or Standard and Poors 500 index in excess of 10% in any
Trading Day or in excess of 20% over any 5 consecutive Trading Days.

Section 1.20......"Maximum Commitment Amount" shall mean $2,000,000.

Section  1.21......"Maximum  Put  Amount"  shall be limited to the lesser of (a)
$150,000;  (b) the remaining  amounts  available  under the line;  (c) an amount
equal to 10% of the total dollar  trading  volume in Company common stock (based
on the  closing bid prices)  during the month in  questions;  or (d) the maximum
amount which the Investor could  purchase  without being required to file a Form
13D under the Securities Exchange Act of 1934.

Section  1.22......"Minimum  Bid  Price"  shall  have the  meaning  set forth in
Section 7.2(j) of this Agreement.

Section 1.23......"Minimum Put Amount" shall mean $50,000.

Section  1.24......"Minimum  Time Interval" shall mean the mandatory  twenty-two
(22) Trading Days between any two Put Dates.

Section 1.25......"NASD" shall mean the National Association of Securities
Dealers, Inc.

Section  1.26......"Outstanding"  when used with  reference to Common  Shares or
Capital Shares (collectively the "Shares"),  shall mean, at any date as of which
the  number of such  Shares is to be  determined,  all  issued  and  outstanding
Shares,  and shall  include all such Shares  issuable in respect of  outstanding
scrip or any  certificates  representing  fractional  interests  in such Shares;
provided,  however,  that "Outstanding"  shall not refer to any such Shares then
directly or indirectly owned or held by or for the account of the Company.

Section   1.27......"Person"  shall  mean  an  individual,   a  corporation,   a
partnership, an association, a trust or other entity or organization,  including
a government or political subdivision or an agency or instrumentality thereof.

Section  1.28......"Principal Market" shall mean the NASDAQ National Market, the
NASDAQ Small Cap Market, the American Stock Exchange,  the OTC Bulletin Board or
the New York Stock  Exchange,  whichever  is at the time the  principal  trading
exchange or market for the Common Stock.

Section 1.29......"Purchase Price" shall mean, with respect to a Put, ninety-two
percent (92%) of the Lowest Price.

Section  1.30......"Put" shall mean each occasion the Company elects to exercise
its  right  to  tender  a Put  Notice  requiring  the  Investor  to  purchase  a
discretionary  amount of the Company's  Common  Stock,  subject to the terms and
conditions of this Agreement.

Section  1.31......"Put  Date" shall mean the Trading Day during the  Commitment
Period  that a Put  Notice  to sell  Common  Stock  to the  Investor  is  deemed
delivered pursuant to Section 2.2(b) hereof.

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<PAGE>

Section  1.32......"Put  Notice"  shall  mean a written  notice to the  Investor
setting forth the: (i) intended Closing Date, which shall not be less than seven
(7) nor more  than ten  (10)  Trading  Days  from  the  date the Put  Notice  is
delivered to the Investor;  and (ii) Investment  Amount that the Company intends
to require the Investor to purchase pursuant to the terms of this Agreement.

Section  1.33......"Put  Notice  Period" shall mean a period  beginning on a Put
Date and ending on a Closing Date;  provided that in no event shall a Put Notice
Period be less than seven (7) nor more than ten (10) Trading Days.

Section  1.34......"Put  Shares" shall mean all shares of Common Stock issued or
issuable  pursuant  to a Put that  has been  exercised  or may be  exercised  in
accordance  with the terms and  conditions of this  Agreement and, in respect of
representations  and  warranties  of the Company  and any  ongoing  registration
obligations, shall also include any Commitment Shares and any Adjustment Shares,
whether or not those are specified or not below.

Section  1.35......"Registrable  Securities" shall mean (i) the Put Shares, (ii)
any Commitment Shares; (ii) any Adjustment Shares and (iv) any securities issued
or issuable  with  respect to any of the  foregoing  by way of  exchange,  stock
dividend  or  stock  split  or in  connection  with  a  combination  of  shares,
recapitalization, merger, consolidation or other reorganization or otherwise. As
to any particular  Registrable  Securities,  once issued such  securities  shall
cease  to  be  Registrable  Securities  when  (w)  the  applicable  Registration
Statement  has  been  declared  effective  by the SEC and all  such  Registrable
Securities  have  been  disposed  of  pursuant  to the  applicable  Registration
Statement,   (x)  all  such   Registrable   Securities   have  been  sold  under
circumstances  under which all of the applicable  conditions of Rule 144 (or any
similar  provision then in force) under the Securities  Act("Rule 144") are met,
(y) such time as all such Registrable Securities have been otherwise transferred
to holders who may trade such shares  without  restriction  under the Securities
Act,  and the  Company  has  delivered a new  certificate  or other  evidence of
ownership for such  securities  not bearing a  restrictive  legend or (z) in the
opinion of counsel to the Company,  which counsel shall be reasonably acceptable
to  the  Investor,   all  such  Registrable   Securities  may  be  sold  without
registration or the need for an exemption from any registration requirements and
without any time, volume or manner  limitations  pursuant to Rule 144(k) (or any
similar provision then in effect) under the Securities Act.

Section  1.36......"Registration  Rights  Agreement" shall mean the registration
rights agreement in the form of Exhibit A hereto.

Section  1.37......"Registration  Statement" shall mean a registration statement
on Form S-3 (if use of such form is then  available  to the Company  pursuant to
the rules of the SEC and, if not, on such other form  promulgated by the SEC for
which the Company then  qualifies  and which  counsel for the Company shall deem
appropriate  and which form shall be available for the resale of the Registrable
Securities to be registered thereunder in accordance with the provisions of this
Agreement, the Registration Rights Agreement and in accordance with the intended
method of distribution of such  securities),  for the registration of the resale
by the Investor of the Registrable Securities under the Securities Act.

Section  1.38......"Regulation  D"  shall  have  the  meaning  set  forth in the
recitals of this Agreement.

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<PAGE>

Section 1.39......"SEC" shall mean the Securities and Exchange Commission.

Section  1.40......"SEC  Documents" shall mean the Company's latest Form 10-K as
of the time in question, all Forms 10-Q and 8-K filed thereafter,  and the Proxy
Statement for its latest fiscal year as of the time in question  until such time
the Company no longer has an  obligation  to  maintain  the  effectiveness  of a
Registration Statement as set forth in the Registration Rights Agreement.

Section  1.41......"Section  4(2)"  shall  have  the  meaning  set  forth in the
recitals of this Agreement.

Section  1.42......"Securities  Act"  shall  have the  meaning  set forth in the
recitals of this Agreement.

Section  1.43......"Subscription  Date"  shall  mean  the  date  on  which  this
Agreement is executed and delivered by the parties hereto.

Section  1.44......"Subsidiary"  shall  mean any  Person in which  the  Company,
directly or indirectly through Subsidiaries or otherwise, beneficially owns more
than  fifty  percent  (50%) of either  the  equity  interests  in, or the voting
control of, such Person.

Section  1.45......"Trading  Day" shall mean any day during which the  Principal
Market shall be open for business.

Section  1.46......"Underwriter" shall mean any underwriter participating in any
disposition of the Registrable  Securities on behalf of the Investor pursuant to
a Registration Statement.

Section  1.47......"Valuation  Period"  shall  mean:  (i)  with  respect  to  an
Effective Date, the five Trading Day period immediately preceding such Effective
Date;  and (ii) with  respect to a Closing  Date,  the five  Trading  Day period
immediately  preceding the applicable Put Date,  during which the Purchase Price
of the Common Stock is determined.

                 ARTICLE II: PURCHASE AND SALE OF COMMON STOCK;
                           TERMINATION OF OBLIGATIONS

Section 2.1 INVESTMENTS.

(a) PUTS.  Upon the terms and  conditions set forth herein  (including,  without
limitation,  the provisions of Article VII hereof),  on any Put Date the Company
may  exercise a Put by the  delivery of a Put  Notice.  The number of Put Shares
that the Investor  shall  receive  pursuant to such Put shall be  determined  by
dividing the Investment Amount specified in the Put Notice by the Purchase Price
with respect to such Put Date.

(b) MAXIMUM AMOUNT OF PUTS. Unless the Company obtains the requisite approval of
its  shareholders  in  accordance  with  the  corporate  laws  of any  State  or
regulatory or self regulatory  authority  which may be applicable,  no more than
19.9% of the Outstanding  shares of Common Stock may be issued and sold pursuant
to Puts without  shareholder  approval.  The  Investor's  obligation to purchase
shares of the  Company's  Common  Stock under this  Agreement  during any 30-day
period  shall  be the  lesser  of:  (i)  $150,000;  (ii) the  remaining  amounts
available  under the  line;  (iii) an  amount  equal to 10% of the total  dollar
trading  volume in the Company's  Common Stock (based on the closing bid prices)
during the 30-days in questions;  or (iv) the maximum  amount which the Investor
could  purchase  without being  required to file a Form 13D under the Securities
Exchange Act of 1934.

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<PAGE>

Section 2.2 MECHANICS.

     (a) PUT NOTICE. At any time during the Commitment  Period,  the Company may
deliver a Put Notice to the  Investor,  subject to the  conditions  set forth in
Section 7.2; provided, however, the Investment Amount for each Put as designated
by the  Company  in the  applicable  Put Notice  shall be neither  less than the
Minimum Put Amount nor more than the Maximum Put Amount.

     (b) DATE OF DELIVERY OF PUT NOTICE.  A Put Notice shall be deemed delivered
on (i) the Trading Day it is received by  facsimile or otherwise by the Investor
if such  notice  is  received  prior to 12:00  noon New York  time,  or (ii) the
immediately  succeeding  Trading Day if it is received by facsimile or otherwise
after  9:00 a.m.  Pacific  Coast  time on a Trading  Day or at any time on a day
which is not a Trading Day. No Put Notice may be deemed delivered, on a day that
is not a Trading Day.

Section  2.3 CLOSINGS.  The Closing  Date shall not be less than seven (7)
nor more than ten (10) Trading Days from the date the Put Notice is delivered to
the  Investor.  On each Closing Date for a Put,  (i) the Company  shall  deliver
irrevocable  instructions to the transfer agent to promptly  prepare and deliver
to the  Investor  a share  certificate  in the name of the  Investor  and in the
amount of the  applicable  Put Shares and (ii) the Investor shall deliver to the
Company the  Investment  Amount  specified in the Put Notice by wire transfer of
immediately  available  funds to the account  designated  in the Put Notice.  In
addition, on or prior to such Closing Date, each of the Company and the Investor
shall  deliver  to the  other  party all  documents,  instruments  and  writings
required to be delivered or  reasonably  requested by either of them pursuant to
this  Agreement in order to implement and effect the  transactions  contemplated
herein.

Section  2.4  TERMINATION  OF  AGREEMENT  AND  INVESTMENT  OBLIGATION.  The
Company shall have the right to terminate this Agreement at any time upon thirty
(30) days' written notice to the Investor.  The Investor shall have the right to
immediately  terminate this Agreement (including with respect to any Put, notice
of which has been given but the applicable Closing Date has not yet occurred) in
the event that: (i) the  Registration  Statement with respect to the Registrable
Securities is not effective  within one hundred and eighty (180) days  following
the  Subscription  Date (The Company shall use all  available  resources to have
Registration   Statement  declared  effective  within  180  days  following  the
Subscription  Date);  (ii) a Registration  Statement with respect to Registrable
Securities is no longer  effective or current at any point during the Commitment
Period;   (iii)  there  shall  occur  any  stop  order  or   suspension  of  the
effectiveness  of the  Registration  Statement  for an  aggregate of thirty (30)
Trading Days during the  Commitment  Period;  (iv) the Company shall at any time
fail to comply with the  requirements of Section 6.2, 6.3, 6.4, 6.5, 6.6, 6.8 or
6.9;  (v) a  Material  Adverse  Market  Event has  occurred;  (vi) a  regulatory
authority of the self regulatory organization governing broker-dealers takes the
position that the intended purchase of the Common Stock contemplated  herein and
its resale by the Investor may cause the Investor to be a statutory  underwriter
subject  alone  or with  its  agents  to the  restrictions  of  Regulation  M as
promulgated  by the SEC or  otherwise  restrict  or  prohibit  the resale of the
Common  Stock;  or (vii) the Company  shall  otherwise  breach the terms of this
Agreement, including payment of the commitment fee provided for in Section 2.5.

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<PAGE>

Section  2.5  THE  COMMITMENT  FEE. A Commitment Fee of $100,000 is due and
payable  by the  Company  to the  Investor  at the time the  parties  sign  this
Agreement.

Section  2.6  ADJUSTMENT  SHARES.  If the Adjustment  Price shall fall more
than two and a half percent (2.5%) below the Purchase Price in respect of shares
of Common Stock purchased by the Investor on any Closing Date, then the Investor
shall be issued Adjustment Shares equal to the difference  between the number of
shares  purchased  on the last  Closing Date and the amount that would have been
purchased if the Purchase  Price had been the Adjustment  Price.  The Adjustment
Shares  shall be  promptly  issued to  Investor  within 12  Trading  Days of the
determination more shares are due the Investor.

            ARTICLE III: REPRESENTATIONS AND WARRANTIES OF INVESTOR

                  The Investor represents and warrants to the Company that:

Section  3.1.......INTENT.  The Investor is entering into this Agreement for its
own account and has no present  arrangement  (whether or not legally binding) at
any time to sell the Registrable  Securities to or through any person or entity;
provided,  however, that by making the representations herein, the Investor does
not agree to hold the  Registrable  Securities for any minimum or other specific
term and reserves the right to dispose of the Registrable Securities at any time
pursuant to the Registration  Statement and in accordance with federal and state
securities laws applicable to such disposition.

Section 3.2.......SOPHISTICATED INVESTOR. The Investor is an accredited investor
(as defined in Rule 501 of  Regulation  D), and has such  experience in business
and financial  matters that it is capable of evaluating  the merits and risks of
an investment in the Common Stock. The Investor  acknowledges that an investment
in the Common Stock is speculative and involves a high degree of risk.

Section 3.3.......AUTHORITY.  Each of this Agreement and the Registration Rights
Agreement  has been duly  authorized  by all  necessary  action  and no  further
consent or authorization of the Investor, or its partners, is required.  Each of
this Agreement and the  Registration  Rights  Agreement was validly executed and
delivered  by the  Investor  and each is a valid and  binding  agreement  of the
Investor  enforceable  against  it in  accordance  with its  terms,  subject  to
applicable  bankruptcy,  insolvency,  or similar laws  relating to, or affecting
generally  the  enforcement  of,  creditors'  rights  and  remedies  or by other
equitable principles of general application.

Section 3.4.......NOT AN AFFILIATE. The Investor is not an officer,  director or
"affiliate"  (as that term is defined in Rule 405 of the Securities  Act) of the
Company.

Section 3.5.......ORGANIZATION AND STANDING. Investor is duly organized, validly
existing, and in good standing under the laws of California.

Section  3.6.......ABSENCE  OF  CONFLICTS.  The  execution  and delivery of this
Agreement and any other  document or  instrument  contemplated  hereby,  and the
consummation of the transactions  contemplated  thereby, and compliance with the
requirements  thereof,  will not (a) violate any law, rule,  regulation,  order,
writ,  judgment,  injunction,  decree or award  binding on Investor,  or, to the
Investor's knowledge, (b) violate any provision of any indenture,  instrument or
agreement to which  Investor is a party or is subject,  or by which  Investor or

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<PAGE>

any of its assets is bound,  (c) conflict with or constitute a material  default
thereunder, (d) result in the creation or imposition of any lien pursuant to the
terms of any such indenture,  instrument or agreement, or constitute a breach of
any  fiduciary  duty owed by  Investor  to any third  party,  or (e) require the
approval  of any  third-party  (that  has not  been  obtained)  pursuant  to any
material  contract  to which  Investor is subject or to which any of its assets,
operations or management may be subject.

Section 3.7.......DISCLOSURE;  ACCESS TO INFORMATION.  Investor has received all
documents,  records,  books  and  other  information  pertaining  to  Investor's
investment in the Company that has been requested by Investor.  The Investor has
received and reviewed copies of the SEC Documents.

Section  3.8.......MANNER  OF SALE.  At no time was Investor  presented  with or
solicited  by or through any leaflet,  public  promotional  meeting,  television
advertisement or any other form of general solicitation or advertising.

           ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF THE COMPANY

                  The Company represents and warrants to the Investor that:

Section 4.1.......ORGANIZATION OF THE COMPANY. The Company is a corporation duly
organized,  validly existing and in good standing under the laws of the State of
New York and has all requisite power and authority to own, lease and operate its
properties  and to carry on its business as now being  conducted.  Except as set
forth in the SEC  Documents,  the Company  does not own more than fifty  percent
(50%) of the outstanding  capital stock of or control any other business entity.
The Company is duly qualified as a foreign  corporation to do business and is in
good  standing  in  every  jurisdiction  in which  the  nature  of the  business
conducted or property owned by it makes such qualification necessary, other than
those in which the  failure  so to  qualify  would not have a  Material  Adverse
Effect.

Section  4.2.......AUTHORITY.  (i) The Company has the requisite corporate power
and authority to enter into and perform its obligations under this Agreement and
the Registration  Rights  Agreement and to issue the Put Shares,  the Commitment
Shares and the  Additional  Shares;  (ii) the  execution  and  delivery  of this
Agreement  and  the  Registration  Rights  Agreement  by  the  Company  and  the
consummation by it of the transactions contemplated hereby and thereby have been
duly  authorized by all  necessary  corporate  action and no further  consent or
authorization  of the  Company  or its Board of  Directors  or  stockholders  is
required; and (iii) each of this Agreement and the Registration Rights Agreement
has been duly  executed and  delivered by the Company and  constitute  valid and
binding obligations of the Company enforceable against the Company in accordance
with their respective  terms,  except as such  enforceability  may be limited by
applicable  bankruptcy,  insolvency,  or similar laws  relating to, or affecting
generally  the  enforcement  of,  creditors'  rights  and  remedies  or by other
equitable principles of general application.

Section  4.3.......CORPORATE  DOCUMENTS.  The  Company  has  furnished  or  made
available to the Investor true and correct  copies of the Company's  Articles of
Incorporation,  as amended and in effect on the date hereof (the "Certificate"),
and the  Company's  By-Laws,  as amended  and in effect on the date  hereof (the
"By-Laws").

                                       33
<PAGE>

Section  4.4.......BOOKS AND RECORDS. The minute books and other similar records
of the Company and its  subsidiaries  as made available to Investor prior to the
execution of this Agreement  contain a true and complete record, in all material
respects,  of all action taken at all  meetings  and by all written  consents in
lieu of meetings of the stockholders,  the boards of directors and committees of
the boards of directors of the Company and the subsidiaries.  The stock transfer
ledgers and other similar  records of the Company and the  subsidiaries  as made
available  to  Investor  prior to the  execution  of this  Agreement  accurately
reflect all record  transfers  prior to the  execution of this  Agreement in the
capital stock of the Company and the  subsidiaries.  Neither the Company nor any
subsidiary  has any of its  Books  and  Records  recorded,  stored,  maintained,
operated  or  otherwise  wholly  or partly  dependent  upon or held by any means
(including  any  electronic,   mechanical  or  photographic   process,   whether
computerized  or not) which  (including  all means of access  thereto  and there
from) are not under the exclusive ownership and direct control of the Company or
a subsidiary.

Section  4.5.......CAPITALIZATION.  The authorized  capital stock of the Company
consists of 200,000,000  shares of Common Stock, of which 23,360,179  shares are
issued  and  outstanding,  and 0 shares  of  preferred  stock of a  wholly-owned
subsidiary,  none of which are issued  and  outstanding.  Except for  options to
purchase not more than  _________  shares of Common Stock with  purchase  prices
between $. ___ and $___ per share, there are no options,  warrants, or rights to
subscribe to, securities, rights or obligations convertible into or exchangeable
for or giving any right to  subscribe  for any  shares of  capital  stock of the
Company.  All of the outstanding shares of Common Stock of the Company have been
duly and validly authorized and issued and are fully paid and nonassessable.

Section  4.6.......REGISTRATION  AND  LISTING OF COMMON  STOCK.  The Company has
registered  its Common Stock  pursuant to Section 12(b) or 12(g) of the Exchange
Act and is in full  compliance  with all reporting  requirements of the Exchange
Act, and the Company has maintained all requirements  for the continued  listing
or quotation of its Common Stock,  and such Common Stock is currently  listed or
quoted on the Principal Market.  As of the date hereof,  the Principal Market is
the OTC Bulletin Board.

Section  4.7.......FINANCIAL   STATEMENTS.   Prior  to  the  execution  of  this
Agreement, the Company has delivered to the Investor true and complete copies of
the following financial statements:

     (a)  the  audited  balance  sheets  of the  Company  and  its  consolidated
subsidiaries  as of December  31,  2001,  and the related  audited  consolidated
statements of  operations,  stockholders'  equity and cash flows for each of the
fiscal years then ended,  together with a true and correct copy of the report of
such  audited  information  by Freeman & Davis,  LLP and all  letters  from such
accountants with respect to the results of such audits; and

     (b) the  unaudited  balance  sheets  of the  Company  and its  consolidated
subsidiaries  as of September  30, 2002,  found in the  Company's  10-Q filed on
November  14, 2002 for the  quarterly  period ended  September  30, 2002 and the
related unaudited consolidated statements of operations and stockholders' equity
for the portion of the fiscal year then ended.  The financial  statements of the
Company  delivered  to the  Investor  have  been  prepared  in  accordance  with
generally  accepted  accounting  principles applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such financial

                                       34
<PAGE>

statements  or the  notes  thereto,  or (ii) in the  case of  unaudited  interim
statements,  to the extent they may not include footnotes or may be condensed or
summary  statements)  and fairly present in all material  respects the financial
position  of the Company as of the dates  thereof and the results of  operations
and cash flows for the  periods  then  ended(subject,  in the case of  unaudited
statements, to normal year-end audit adjustments).

Section 4.8.......SEC  DOCUMENTS. The Company has delivered or made available to
the Investor true and complete copies of the SEC Documents  (including,  without
limitation,  proxy information and solicitation materials).  The Company has not
provided to the Investor any information that, according to applicable law, rule
or regulation,  should have been disclosed  publicly prior to the date hereof by
the Company, but which has not been so disclosed.  As of their respective dates,
the SEC Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and other federal, state
and local laws, rules and regulations applicable to such SEC Documents, and none
of the SEC  Documents  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 Documents  comply as to form and  substance in all material  respects
with applicable accounting  requirements and the published rules and regulations
of the SEC or other applicable rules and regulations with respect thereto.  Such
financial  statements have been prepared in accordance  with generally  accepted
accounting  principles applied on a consistent basis during the periods involved
(except (i) as may be otherwise  indicated in such  financial  statements or the
notes  thereto,  or (ii) in the case of  unaudited  interim  statements,  to the
extent  they  may  include  summary  notes  and  may  be  condensed  or  summary
statements) and fairly present in all material  respects the financial  position
of the Company as of the dates  thereof and the results of  operations  and cash
flows for the periods then ended (subject,  in the case of unaudited statements,
to normal year-end audit adjustments).

Section  4.9.......EXEMPTION FROM REGISTRATION;  VALID ISSUANCES; NEW ISSUANCES.
The  sale  and  issuance  of the  Put  Shares,  the  Commitment  Shares  and the
Additional  Shares  in  accordance  with  the  terms  and  on the  bases  of the
representations  and  warranties set forth in this  Agreement,  may and shall be
properly issued pursuant to Rule 4(2),  Regulation D and/or any applicable state
law. When issued and paid for as herein provided, the Put Shares, the Commitment
Shares and the Additional  Shares shall be duly and validly issued,  fully paid,
and nonassessable.  Neither the sales of the Put Shares or the Additional Shares
pursuant  to, nor the  Company's  performance  of its  obligations  under,  this
Agreement or the Registration  Rights Agreement shall (i) result in the creation
or imposition of any liens,  charges,  claims or other encumbrances upon the Put
Shares or the  Additional  Shares or any of the assets of the  Company,  or (ii)
entitle the holders of Outstanding  Capital Shares to preemptive or other rights
to  subscribe  to or  acquire  the  Capital  Shares or other  securities  of the
Company.  The Put Shares,  the Commitment Shares and the Additional Shares shall
not  subject  the  Investor to  personal  liability  by reason of the  ownership
thereof.  The Put Shares,  the Commitment  Shares and the Additional Shares have
been duly  authorized by the Company,  but have not been issued  (whether or not

                                       35
<PAGE>

subsequently  repurchased by the Company) to any Person,  and when issued to the
Investor  in  accordance  with  this  Agreement  and will not have  been  issued
(whether or not  subsequently  repurchased  by the  Company) to any Person other
than the Investor.

Section  4.10 NO  GENERAL  SOLICITATION  OR  ADVERTISING  IN REGARD TO THIS

TRANSACTION.  Neither the Company nor any of its affiliates nor any  distributor
or any person  acting on its or their  behalf (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 any of the Put Shares,  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 Common Stock
under the Securities Act.

Section 4.11......NO CONFLICTS. The execution,  delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated  hereby,  including  without  limitation  the  issuance  of the Put
Shares,  the Commitment Shares and the Additional Shares do not and will not (i)
result in a violation of the  Certificate or By-Laws,  or (ii) conflict with, or
constitute a material  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 of, any material agreement,  indenture,
instrument or any "lock-up" or similar  provision of any underwriting or similar
agreement to which the Company is a party, or (iii) result in a violation of any
federal,  state,  local or foreign law,  rule,  regulation,  order,  judgment or
decree (including federal and state securities laws and regulations)  applicable
to the  Company  or by which any  property  or asset of the  Company is bound or
affected  (except  for  such  conflicts,  defaults,  terminations,   amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate,  have a Material  Adverse  Effect)  nor is the Company  otherwise  in
violation of, conflict with or in default under any of the foregoing;  provided,
however, that for purposes of the Company's representations and warranties as to
violations of foreign law, rule or regulation  referenced in clause (iii),  such
representations  and  warranties  are  made  only to the  best of the  Company's
knowledge  insofar as the execution,  delivery and performance of this Agreement
by the  Company  and  the  consummation  by  the  Company  of  the  transactions
contemplated  hereby are or may be affected by the status of the Investor  under
or pursuant to any such foreign  law,  rule or  regulation.  The business of the
Company is not being conducted in violation of any law,  ordinance or regulation
of any governmental entity, except for possible violations that either singly or
in the  aggregate  does not and will not have a  Material  Adverse  Effect.  The
Company is not required under federal, state or local law, rule or regulation to
obtain  any  consent,   authorization  or  order  of,  or  make  any  filing  or
registration with, any court or governmental  agency in order for it to execute,
deliver or perform any of its obligations under this Agreement or issue and sell
the Common Stock in  accordance  with the terms hereof (other than any SEC, NASD
or state  securities  filings  that may be  required  to be made by the  Company
subsequent to any Closing, any registration statement that may be filed pursuant
hereto,  and any  shareholder  approval  required  by the  rules  applicable  to
companies whose common stock trades on the Principal Market); provided that, for
purposes of the  representation  made in this sentence,  the Company is assuming
and relying upon the accuracy of the relevant  representations and agreements of
the Investor herein.

Section 4.12......NO MATERIAL ADVERSE CHANGE. Since September 30, 2002, no event
has occurred that would have a Material Adverse Effect on the Company.

                                       36
<PAGE>

Section 4.13......NO UNDISCLOSED LIABILITIES.  The Company has no liabilities or
obligations  that are material,  individually  or in the  aggregate,  other than
those  incurred  in the  ordinary  course  of  the  Company's  businesses  since
September 30, 2002, and which, individually or in the aggregate, do not or would
not have a Material Adverse Effect on the Company.

Section  4.14......NO  UNDISCLOSED EVENTS OR CIRCUMSTANCES.  Since September 30,
2002,  no event or  circumstance  has  occurred  or exists  with  respect to the
Company  or its  businesses,  properties,  prospects,  operations  or  financial
condition,  that,  under  applicable  law, rule or regulation,  requires  public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced.

Section 4.15......NO  INTEGRATED  OFFERING.  Neither the Company, nor any of its
affiliates,  nor any  person  acting on its or their  behalf  has,  directly  or
indirectly,  made any offers or sales of any security or solicited any offers to
buy any  security,  other than pursuant to this  Agreement and the  registration
statement  required  by  the  10%  Secured  Convertible  Debenture  and  Related
Registration Rights Agreement dated December ___, 2002, under circumstances that
would require registration of the Common Stock under the Securities Act.

Section  4.16......LITIGATION AND OTHER PROCEEDINGS.  Except as may be set forth
in the SEC  Documents,  there are no lawsuits or  proceedings  pending or to the
best  knowledge  of the Company  threatened,  against the  Company,  nor has the
Company received any written or oral notice of any such action, suit, proceeding
or  investigation,  which might have a Material  Adverse  Effect.  Except as set
forth in the SEC Documents,  no judgment,  order, writ,  injunction or decree or
award has been issued by or, so far as is known by the Company, requested of any
court,  arbitrator  or  governmental  agency  which  might  result in a Material
Adverse Effect.

Section 4.17......NO MISLEADING OR UNTRUE COMMUNICATION. The Company, any Person
representing the Company, and, to the knowledge of the Company, any other Person
selling  or  offering  to sell the Put  Shares,  the  Commitment  Shares and the
Additional  Shares in  connection  with the  transactions  contemplated  by this
Agreement, have not made, at any time, any oral communication in connection with
the offer or sale of the same which contained any untrue statement of a material
fact or  omitted  to state  any  material  fact  necessary  in order to make the
statements,  in the light of the  circumstances  under which they were made, not
misleading.

Section  4.18......MATERIAL  NON-PUBLIC  INFORMATION.  The  Company  is  not  in
possession of, nor has the Company or its agents disclosed to the Investor,  any
material  non-public  information  that  (i)  if  disclosed,   would,  or  could
reasonably be expected to have,  an effect on the price of the Common Stock,  or
(ii) according to applicable law, rule or regulation, should have been disclosed
publicly  by the  Company  prior to the date  hereof  but  which has not been so
disclosed.

                      ARTICLE V: COVENANTS OF THE INVESTOR

Section  5.1.......NO  SHORT  SALES.  During the  thirty  (30) days prior to the
Subscription  Date,  neither the Investor nor any affiliate of the Investor has,
and during the  Commitment  Period neither the Investor nor any affiliate of the
Investor  will (i) engage in any short sale of the Common  Stock of the  Company
unless  Investor has given prior written notice to the Company.  Nothing in this
Section 5.1 shall  prohibit the Investor or any  affiliate  from making  regular
sales of the Common Stock acquired  pursuant to this Agreement or to require any
approvals from the Company.

                                       37
<PAGE>

                      ARTICLE VI: COVENANTS OF THE COMPANY

Section  6.1.......REGISTRATION RIGHTS. The Company shall cause the Registration
Rights Agreement to remain in full force and effect and the Company shall comply
in all respects with the terms thereof.

Section  6.2.......RESERVATION  OF  COMMON  STOCK.  As of the date  hereof,  the
Company has available  and the Company  shall reserve and keep  available at all
times,  free of  preemptive  rights,  shares of Common  Stock for the purpose of
enabling  the Company to satisfy  any  obligation  to issue the Put Shares,  the
Commitment  Shares and the  Additional  Shares;  such amount of shares of Common
Stock to be reserved shall be calculated  based upon the minimum  Purchase Price
for the Put Shares under the terms and conditions of this Agreement.  The number
of shares so reserved from time to time, as theretofore  increased or reduced as
hereinafter provided, may be reduced by the number of shares actually delivered.

Section  6.3.......LISTING  OF COMMON  STOCK.  The Company  shall  exercise best
efforts to maintain the listing of the Common Stock on a Principal  Market,  and
as soon as practicable  (but in any event prior to the Closing Date for any Put)
will cause the Put Shares,  the Commitment Shares and the Additional Shares with
respect to such Put to be listed on the Principal  Market.  The Company  further
shall,  if the  Company  applies  to have the Common  Stock  traded on any other
Principal  Market,  include in such  application the Put Shares,  the Commitment
Shares  and the  Additional  Shares,  and  shall  take such  other  action as is
necessary  or desirable in the opinion of the Investor to cause the Common Stock
to be listed on such other Principal Market as promptly as possible. The Company
shall use commercially reasonable efforts to continue the listing and trading of
its  Common  Stock  on the  Principal  Market  (including,  without  limitation,
maintaining sufficient net tangible assets) and will comply in all respects with
the Company's reporting,  filing and other obligations under the bylaws or rules
of the NASD and the Principal Market.

Section  6.4.......EXCHANGE ACT REGISTRATION.  After each Registration Statement
becomes  effective,  the Company  shall cause the Common  Stock  covered by such
Registration Statement to continue to be registered under Section 12(g) or 12(b)
of the Exchange  Act,  will comply in all respects with its reporting and filing
obligations  under the  Exchange  Act,  and will not take any action or file any
document  (whether  or not  permitted  by the  Exchange  Act  or the  rules)  to
terminate or suspend such  registration or to terminate or suspend its reporting
and filing obligations under the Exchange Act.

Section  6.5.......LEGENDS.  The  certificates  evidencing  the Put Shares,  the
Commitment Shares and the Additional Shares shall be free of legends,  except as
provided for in Article VIII.

Section  6.6.......CORPORATE   EXISTENCE.  The  Company  shall  take  all  steps
necessary to preserve and continue the corporate existence of the Company.

Section  6.7.......ADDITIONAL  SEC DOCUMENTS.  During the Commitment Period, the
Company  shall  promptly  deliver  to the  Investor,  as and when the  originals
thereof are  submitted  to the SEC for filing,  copies of all SEC  Documents  so
furnished or submitted to the SEC.

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<PAGE>

Section 6.8.......NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF
RIGHT TO MAKE A PUT. The Company shall immediately  notify the Investor,  but in
no event later than two (2) business days by facsimile and by overnight courier,
upon the occurrence of any of the following  events in respect of a Registration
Statement  or  related  prospectus  in  respect of an  offering  of  Registrable
Securities:  (i) receipt of any request for additional information by the SEC or
any  other  federal  or  state  governmental  authority  during  the  period  of
effectiveness of the Registration Statement for amendments or supplements to the
Registration  Statement or related  prospectus;  (ii) the issuance by the SEC or
any other federal or state  governmental  authority of any stop order suspending
the  effectiveness  of  a  Registration  Statement  or  the  initiation  of  any
proceedings for that purpose;  (iii) receipt of any notification with respect to
the suspension of the  qualification  or exemption from  qualification of any of
the  Registrable  Securities for sale in any  jurisdiction  or the initiation or
threatening of any proceeding for such purpose;  (iv) the happening of any event
that  makes  any  statement  made  in such  Registration  Statement  or  related
prospectus or any document  incorporated or deemed to be incorporated therein by
reference  untrue in any  material  respect or that  requires  the making of any
changes in the Registration Statement,  related prospectus or documents so that,
in the  case  of a  Registration  Statement,  it will  not  contain  any  untrue
statement of a material  fact or omit to state any material  fact required to be
stated therein or necessary to make the statements  therein not misleading,  and
that in the case of the  related  prospectus,  it will not  contain  any  untrue
statement of a material  fact or omit to state any material  fact required to be
stated therein or necessary to make the statements  therein, in the light of the
circumstances under which they were made, not misleading; (v) the declaration by
the SEC of the effectiveness of a Registration Statement; and (vi) the Company's
reasonable  determination  that a  post-effective  amendment to the Registration
Statement would be appropriate, and the Company shall promptly make available to
the Investor any such  supplement  or amendment to the related  prospectus.  The
Company shall not deliver to the Investor any Put Notice during the continuation
of any of the  foregoing  events.  While in  possession  of material  non-public
information  received  from the Company,  the Investor  shall not dispose of any
Registrable  Securities  until such  information  is  disclosed to the public (a
"Restricted  Period");  provided  that, if such  Restricted  Period  exceeds one
hundred twenty (120) days, the liquidated damages described in Section 1.1(c) of
the  Registration  Rights  Agreement  shall be increased to three percent (3.0%)
until such Restricted Period shall have elapsed.

Section  6.9.......CONSOLIDATION;  MERGER.  The  Company  shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another  entity unless the resulting  successor or acquiring  entity (if not the
Company) assumes by written instrument the obligation to deliver to the Investor
such shares of stock  and/or  securities  as the Investor is entitled to receive
pursuant to this Agreement.

Section  6.10......LEGAL OPINION ON SUBSCRIPTION DATE. The Company's independent
counsel shall deliver to the Investor on the Subscription Date an opinion in the
form of Exhibit B, except for paragraph 7 thereof.

Section 6.11......NO  SIMILAR  ARRANGEMENT;  RIGHT OF FIRST REFUSAL. The Company
shall  refrain  from  entering  into  any  other  agreements,   arrangements  or
understandings  granting  to  the  Company  the  right  to  sell  shares  of its
securities to one or more investors in similar (Equity Line)  placements  exempt
from registration under the Securities Act until thirty (30) calendar days after
this  Agreement is terminated  pursuant to Section 2.4 hereof (the  "Exclusivity
Period").  The  Exclusivity  Period shall not apply to an issuance of securities
exempt from  registration  under the Securities Act by the Company in connection
with any  strategic  investment,  corporate  partnering  arrangements,  or other
situations  in which the  investment  in the Company is not strictly a financial
one. If the Company,  for the purpose of  obtaining  any  additional  financing,
wishes to sell shares of its securities in placements  exempt from  registration
under the  Securities  Act during the  Exclusivity  Period (a "Sale") to a party
other than the Investor (the "Third Party"),  the Company shall first offer (the
"Offer") to the  Investor,  in writing,  the right to purchase  such shares (the
"Offered  Shares") at the bona fide price offered by the Third Party (the "Offer

                                       39
<PAGE>

Price").  The Offer  shall  grant the  Investor  the right  during  the five (5)
Trading Days  immediately  following  the date of the Offer to elect to purchase
any or all of the Offered Shares.  The Company,  in connection with such a Sale,
shall refrain from  circumventing  or attempting  to circumvent  the  Investor's
right of first  refusal  by way of making  such a Sale to any of its  affiliates
without first making an Offer to the Investor.  If the Investor so exercises its
right to purchase any or all of the Offered Shares, the purchase will be treated
as a Put except  that the  purchase  price for the Offered  Shares  shall be the
Offer  Price.  The  closing and method of payment  shall be as  provided  for in
Section  2.2 hereof and the Closing  Date shall be seven (7) Trading  Days after
the Investor  exercises such right.  If the Investor fails to exercise its right
to  purchase  any or all of the  Offered  Shares,  then  during the thirty  (30)
calendar days  immediately  following the expiration of such right,  the Company
shall be free to sell any or all of the  Offered  Shares  to a  purchaser  for a
purchase  price not lower than the Offer Price  payable on terms and  conditions
that are not more favorable to such purchaser than those contained in the Offer.
In the event that the Company effects a Sale to a Third Party,  the Investor may
immediately terminate this Agreement.

               ARTICLE VII: CONDITIONS TO DELIVERY OF PUT NOTICES
                            AND CONDITIONS TO CLOSING

Section 7.1.......CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO ISSUE
AND SELL COMMON STOCK. The obligation hereunder of the Company to issue and sell
the Put Shares,  the Commitment Shares and the Additional Shares to the Investor
incident to each Closing is subject to the satisfaction,  at or before each such
Closing, of each of the conditions set forth below.

     (a)  ACCURACY  OF  THE  INVESTOR'S   REPRESENTATION  AND  WARRANTIES.   The
representations  and warranties of the Investor herein shall be true and correct
in all material  respects as of the date of this Agreement and as of the date of
each such Closing as though made at each such time.

     (b)  PERFORMANCE  BY THE  INVESTOR.  The  Investor  shall  have  performed,
satisfied  and  complied in all  respects  with all  covenants,  agreements  and
conditions  required by this  Agreement to be  performed,  satisfied or complied
with by the Investor at or prior to such Closing.

Section 7.2.......CONDITIONS  PRECEDENT TO THE RIGHT OF THE COMPANY TO DELIVER A
PUT NOTICE AND THE OBLIGATION OF THE INVESTOR TO PURCHASE PUT SHARES.  Following
completion  of the Early Put,  the right of the  Company to deliver a Put Notice
and the  obligation  of the  Investor  hereunder  to acquire and pay for the Put
Shares  incident  to a  Closing  is  subject  to the  satisfaction,  on (i)  the
applicable  Put Date and (ii) the  applicable  Closing  Date (each a  "Condition
Satisfaction Date"), of each of the following conditions:

                                       40
<PAGE>

(a) TERMINATION  EVENTS.  None of the Events that are listed in Section 2.4 that
would allow the Investor to terminate this Agreement has occurred.

(b) EFFECTIVE  REGISTRATION  STATEMENT.  As set forth in the Registration Rights
Agreement, the Registration  Statement(s) shall have previously become effective
and shall remain effective on each Condition  Satisfaction  Date and (i) neither
the Company nor the Investor shall have received  notice that the SEC has issued
or intends to issue a stop order with  respect to a  Registration  Statement  or
that the SEC  otherwise  has  suspended  or  withdrawn  the  effectiveness  of a
Registration  Statement,  either  temporarily or permanently,  or intends or has
threatened  to do so (unless  the SEC's  concerns  have been  addressed  and the
Investor  is  reasonably  satisfied  that the SEC no  longer is  considering  or
intends to take such action),  (ii) no other suspension of the use or withdrawal
of the effectiveness of such Registration  Statement or related prospectus shall
exist,  and  (iii)  at  least 30 days  shall  have  elapsed  since  the  Initial
Registration  Statement (as defined in the  Registration  Rights  Agreement) has
been declared effective by the SEC.

(c)   ACCURACY   OF  THE   COMPANY'S   REPRESENTATIONS   AND   WARRANTIES.   The
representations  and  warranties  of the Company shall be true and correct as of
each  Condition  Satisfaction  Date as though made at each such time (except for
representations and warranties specifically made as of a particular date).

(d) PERFORMANCE BY THE COMPANY. The Company shall have performed,  satisfied and
complied in all respects with all covenants,  agreements and conditions required
by this  Agreement  and  the  Registration  Rights  Agreement  to be  performed,
satisfied  or  complied  with by the  Company  at or  prior  to  each  Condition
Satisfaction Date.

(e) NO INJUNCTION. No statute, rule, regulation, executive order, decree, ruling
or injunction  shall have been enacted,  entered,  promulgated or adopted by any
court or  governmental  authority of competent  jurisdiction  that prohibits the
transactions  contemplated by this Agreement or otherwise has a Material Adverse
Effect,  and no actions,  suits or proceedings shall be in progress,  pending or
threatened  by any  Person,  that seek to enjoin or  prohibit  the  transactions
contemplated by this Agreement or otherwise could reasonably be expected to have
a Material  Adverse  Effect.  For purposes of this  paragraph (e), no proceeding
shall be deemed  pending or  threatened  unless one of the parties has  received
written or oral notification thereof prior to the applicable Closing Date.

(f) NO SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK. The trading of the
Common Stock shall not have been  suspended by the SEC, the Principal  Market or
the NASD and the Common Stock shall have been  approved for listing or quotation
on and shall not have been delisted from the Principal  Market.  The issuance of
shares of Common Stock with respect to the applicable Closing, if any, shall not
violate the shareholder approval requirements of the Principal Market.
(g)  LEGAL  OPINION.  The  Company  shall  have  caused to be  delivered  to the
Investor,  within five (5) Trading Days of the effective  date of a Registration
Statement,  an  opinion  of the  Company's  independent  counsel  in the form of
Exhibit D hereto, addressed to the Investor.

                                       41
<PAGE>

(h) DUE  DILIGENCE.  Pursuant  to Section  7.3,  the  Investor  shall not have a
material dispute with the Company as to the adequacy of the disclosure contained
in the Registration Statement.

(i) FIVE PERCENT LIMITATION. On each Closing Date, the number of Put Shares, the
Commitment Shares and the Additional Shares then to be purchased by the Investor
shall not exceed the number of such shares that,  when aggregated with all other
shares of Common  Stock and  Registrable  Securities  then owned by the Investor
beneficially or deemed  beneficially owned by the Investor,  would result in the
Investor  owning  no more  than  4.9% of all of such  Common  Stock  as would be
outstanding on such Closing Date, as determined in accordance with Section 13(d)
of the Exchange Act and the regulations promulgated thereunder.  For purposes of
this  Section,  in the event  that the  amount of Common  Stock  outstanding  as
determined  in  accordance  with  Section  13(d)  of the  Exchange  Act  and the
regulations promulgated thereunder is greater on a Closing Date than on the date
upon which the Put Notice associated with such Closing Date is given, the amount
of Common  Stock  outstanding  on such Closing Date shall govern for purposes of
determining whether the Investor, when aggregating all purchases of Common Stock
made pursuant to this Agreement and would own more than 4.9% of the Common Stock
following such Closing Date.

(j) MINIMUM BID PRICE. The Bid Price equals or exceeds $.05 on each of the seven
(7) Trading Days immediately preceding the Subscription Date and on each Trading
Day during any Put Notice Period.

(k) MINIMUM AVERAGE DAILY TRADING VALUE.  The average of the Daily Trading Value
during the twenty-two (22) Trading Days immediately preceding the applicable Put
Notice Period equals or exceeds $50,000.

(l) NO  KNOWLEDGE.  The Company shall have no knowledge of any event more likely
than  not to have  the  effect  of  causing  any  Registration  Statement  to be
suspended or otherwise ineffective (which event is more likely than not to occur
within the 15 Trading  Days  following  the  Trading Day on which such notice is
deemed delivered).

(m) MINIMUM TIME  INTERVAL.  The Minimum Time Interval  shall have elapsed since
the immediately preceding Put Date.

(n) SHAREHOLDER VOTE. The issuance of shares of Common Stock with respect to the
applicable  Closing,  if  any,  shall  not  violate  the  shareholder   approval
requirements of the Principal Market.

(o) OTHER. On each Condition Satisfaction Date, the Investor shall have received
and been  reasonably  satisfied  with such other  certificates  and documents as
shall have been  reasonably  requested by the Investor in order for the Investor
to  confirm  the  Company's  satisfaction  of the  conditions  set forth in this
Section 7.2, including,  without limitation,  a certificate in substantially the
form and substance of Exhibit C hereto,  executed in either case by an executive
officer of the Company and to the effect that all the conditions to such Closing
shall have been satisfied as at the date of each such certificate.

                                       42
<PAGE>

Section   7.3      DUE   DILIGENCE   REVIEW;   NON-DISCLOSURE   OF   NON-PUBLIC
                   INFORMATION.

(a) The Company shall make  available for inspection and review by the Investor,
advisors  to  and  representatives  of the  Investor  (who  may  or  may  not be
affiliated with the Investor and who are reasonably  acceptable to the Company),
and any  Underwriter,  any  Registration  Statement or  amendment or  supplement
thereto or any blue sky, NASD or other filing,  all financial and other records,
all SEC  Documents  and other  filings  with the SEC,  and all  other  corporate
documents and  properties of the Company as may be reasonably  necessary for the
purpose  of such  review,  and  cause  the  Company's  officers,  directors  and
employees to supply all such information reasonably requested by the Investor or
any  such  representative,  advisor  or  Underwriter  in  connection  with  such
Registration  Statement  (including,  without  limitation,  in  response  to all
questions  and other  inquiries  reasonably  made or  submitted by any of them),
prior to and from  time to time  after  the  filing  and  effectiveness  of such
Registration  Statement  for the sole  purpose of enabling the Investor and such
representatives,  advisors and Underwriters and their respective accountants and
attorneys  to conduct  initial  and ongoing due  diligence  with  respect to the
Company and the accuracy of such Registration Statement.

(b) Each of the Company, its officers, directors,  employees and agents shall in
no  event  disclose  non-public  information  to the  Investor,  advisors  to or
representatives  of the Investor unless prior to disclosure of such  information
the Company  identifies  such  information as being  non-public  information and
provides the Investor, such advisors and representatives with the opportunity to
accept or refuse to accept such non-public  information for review.  The Company
may, as a condition to disclosing any non-public information hereunder,  require
the  Investor's  advisors and  representatives  to enter into a  confidentiality
agreement in form reasonably satisfactory to the Company and the Investor.

(c) Nothing herein shall require the Company to disclose non-public  information
to the Investor or its advisors or  representatives,  and the Company represents
that it  does  not  disseminate  non-public  information  to any  investors  who
purchase  stock in the  Company in a public  offering,  to money  managers or to
securities analysts;  provided, however, that notwithstanding anything herein to
the contrary,  the Company shall, as herein above provided,  immediately  notify
the advisors and  representatives  of the Investor and any  Underwriters  of any
event or the existence of any  circumstance  (without any obligation to disclose
the specific  event or  circumstance)  of which it becomes  aware,  constituting
non-public  information (whether or not requested of the Company specifically or
generally  during  the course of due  diligence  by such  persons or  entities),
which,   if  not  disclosed  in  the  prospectus   included  in  the  applicable
Registration  Statement  would  cause  such  prospectus  to  include a  material
misstatement  or to omit a material fact required to be stated  therein in order
to make the statements,  therein,  in light of the  circumstances  in which they
were made,  not  misleading.  Nothing  contained  in this  Section  7.3 shall be
construed to mean that such persons or entities other than the Investor (without
the written consent of the Investor prior to disclosure of such information) may
not obtain  non-public  information in the course of conducting due diligence in
accordance  with the terms and  conditions of this  Agreement and nothing herein
shall prevent any such persons or entities  from  notifying the Company of their

                                       43
<PAGE>

opinion that based on such due diligence by such persons or entities,  that such
Registration  Statement contains an untrue statement of a material fact or omits
a  material  fact  required  to be  stated  in such  Registration  Statement  or
necessary  to  make  the  statements   contained   therein,   in  light  of  the
circumstances in which they were made, not misleading.

                             ARTICLE VIII: LEGENDS

Section  8.1.......LEGENDS.  Unless otherwise  provided below,  each certificate
representing   Registrable  Securities  will  bear  the  following  legend  (the
"Legend"):

                  THE  SECURITIES  EVIDENCED BY THIS  CERTIFICATE  HAVE NOT BEEN
                  REGISTERED  UNDER THE U.S.  SECURITIES ACT OF 1933, AS AMENDED
                  (THE  "SECURITIES  ACT"), OR ANY OTHER  APPLICABLE  SECURITIES
                  LAWS AND HAVE BEEN ISSUED IN RELIANCE  UPON AN EXEMPTION  FROM
                  THE  REGISTRATION  REQUIREMENTS OF THE SECURITIES ACT AND SUCH
                  OTHER SECURITIES LAWS.  NEITHER THIS SECURITY NOR ANY INTEREST
                  OR  PARTICIPATION  HEREIN MAY BE  REOFFERED,  SOLD,  ASSIGNED,
                  TRANSFERRED,  PLEDGED,  ENCUMBERED,  HYPOTHECATED OR OTHERWISE
                  DISPOSED  OF,  EXCEPT  PURSUANT TO AN  EFFECTIVE  REGISTRATION
                  STATEMENT   UNDER  THE   SECURITIES   ACT  OR  PURSUANT  TO  A
                  TRANSACTION  THAT IS EXEMPT  FROM,  OR NOT  SUBJECT  TO,  SUCH
                  REGISTRATION.   THE   HOLDER  OF  THIS   CERTIFICATE   IS  THE
                  BENEFICIARY OF CERTAIN OBLIGATIONS OF THE COMPANY SET FORTH IN
                  A STOCK PURCHASE  AGREEMENT,  DATED AS OF DECEMBER __, 2002. A
                  COPY OF THE PORTION OF THE AFORESAID AGREEMENT EVIDENCING SUCH
                  OBLIGATIONS  MAY  BE  OBTAINED  FROM  THE  ISSUER'S  EXECUTIVE
                  OFFICES.

As soon as practicable after the execution and delivery hereof, but in any event
within five (5) Trading Days hereafter,  the Company shall issue to the transfer
agent for its Common Stock (and to any substitute or replacement  transfer agent
for its Common Stock upon the Company's  appointment  of any such  substitute or
replacement  transfer agent)  instructions,  with a copy to the Investor.  Other
than as  required  as a result  of  change in law,  such  instructions  shall be
irrevocable  by the Company from and after the date hereof or from and after the
issuance  thereof to any such  substitute or replacement  transfer agent, as the
case may be, except as otherwise  expressly provided in the Registration  Rights
Agreement.  It is the  intent  and  purpose of such  instructions,  as  provided
therein,  to require the  transfer  agent for the Common Stock from time to time
upon transfer of  Registrable  Securities by the Investor to issue  certificates

                                       44
<PAGE>

evidencing such  Registrable  Securities free of the Legend during the following
periods and under the following  circumstances  and without  consultation by the
transfer  agent with the  Company or its  counsel  and  without the need for any
further advice or instruction or  documentation to the transfer agent by or from
the Company or its counsel or the Investor:

(a) At any time after the applicable  Effective  Date,  upon surrender of one or
more  certificates  evidencing  Common Stock that bear the Legend, to the extent
accompanied by a notice  requesting the issuance of new certificates free of the
Legend  to  replace  those   surrendered;   provided  that  (i)  the  applicable
Registration  Statement shall then be effective and (ii) if reasonably requested
by the  transfer  agent the  Investor  confirms to the  transfer  agent that the
Investor  has   transferred  the   Registrable   Securities   pursuant  to  such
Registration   Statement   and  has  complied  with  the   prospectus   delivery
requirement.

(b) At any  time  upon  any  surrender  of one or more  certificates  evidencing
Registrable  Securities  that bear the Legend,  to the extent  accompanied  by a
notice requesting the issuance of new certificates free of the Legend to replace
those surrendered and containing  representations that the Investor is permitted
to dispose of such  Registrable  Securities  without  limitation as to amount or
manner of sale pursuant to Rule 144(k) under the Securities Act.

Section  8.2.......NO  OTHER LEGEND OR STOCK  TRANSFER  RESTRICTIONS.  No legend
other than the one  specified  in Section 8.1 has been or shall be placed on the
share  certificates  representing  the Common Stock and no instructions or "stop
transfers   orders,"  so  called,   "stock  transfer   restrictions,"  or  other
restrictions  have been or shall be given to the Company's  transfer  agent with
respect thereto other than as expressly set forth in this Article VIII.

Section  8.3.......INVESTOR'S  COMPLIANCE.  Nothing in this  Article  VIII shall
affect in any way the Investor's  obligations under any agreement to comply with
all applicable securities laws upon resale of the Common Stock.

                    ARTICLE IX: INDEMNIFICATION; ARBITRATION

Section 9.1   INDEMNIFICATION.

(a) The  Company  agrees  to  indemnify  and hold  harmless  the  Investor,  its
partners,  affiliates,  officers,  directors,  employees,  and  duly  authorized
agents,  and each Person or entity, if any, who controls the Investor within the
meaning of Section 15 of the  Securities  Act or Section 20 of the Exchange Act,
together  with its  controlling  persons from and against any Damages,  joint or
several, and any action in respect thereof to which the Investor,  its partners,
affiliates,  officers, directors, employees, and duly authorized agents, and any
such controlling  person becomes subject to,  resulting from,  arising out of or
relating to any  misrepresentation,  breach of warranty or  nonfulfillment of or
failure to perform any covenant or agreement on the part of Company contained in
this  Agreement,  as such  Damages  are  incurred,  unless such  Damages  result
primarily from the Investor's  gross  negligence,  recklessness  or bad faith in
performing its obligations  under this Agreement;  provided,  however,  that the
maximum  aggregate  liability  of the  Company  shall be  limited  to the amount
actually invested by the Investor under this Agreement,  and provided,  further,
that in no event  shall  this  provision  be  deemed  to  limit  any  rights  to
indemnification arising under the Registration Rights Agreement.

                                       45
<PAGE>

     (b) The Investor  agrees to indemnify  and hold  harmless the Company,  its
partners,  affiliates,  officers,  directors,  employees,  and  duly  authorized
agents,  and each Person or entity,  if any, who controls the Company within the
meaning of Section 15 of the  Securities  Act or Section 20 of the Exchange Act,
together  with its  controlling  persons from and against any Damages,  joint or
several,  and any action in respect thereof to which the Company,  its partners,
affiliates,  officers, directors, employees, and duly authorized agents, and any
such controlling  person becomes subject to,  resulting from,  arising out of or
relating to any  misrepresentation,  breach of warranty or  nonfulfillment of or
failure  to  perform  any  covenant  or  agreement  on the part of the  Investor
contained in this Agreement,  as such Damages are incurred,  unless such Damages
result primarily from the Company's gross negligence,  recklessness or bad faith
in performing its obligations under this Agreement;  provided, however, that the
maximum  aggregate  liability  of the  Investor  shall be  limited to the amount
actually invested by the Investor under this Agreement,  and provided,  further,
that in no event  shall  this  provision  be  deemed  to  limit  any  rights  to
indemnification arising under the Registration Rights Agreement.

Section  9.2.......METHOD  OF ASSERTING  INDEMNIFICATION  CLAIMS. All claims for
indemnification  by any  Indemnified  Party (as defined below) under Section 9.1
shall be asserted and resolved as follows:

     (a) In the  event  any claim or  demand  in  respect  of which  any  person
claiming  indemnification  under any  provision of Section 9.1 (an  "Indemnified
Party") might seek indemnity under Section 9.1 is asserted  against or sought to
be collected from such Indemnified Party by a person other than the Company, the
Investor  or  any  affiliate  of  the  Company  (a  "Third  Party  Claim"),  the
Indemnified Party shall deliver a written notification,  enclosing a copy of all
papers  served,  if any, and  specifying  the nature of and basis for such Third
Party Claim and for the Indemnified  Party's claim for  indemnification  that is
being  asserted  under any  provision  of Section  9.1  against  any person (the
"Indemnifying  Party"),  together  with the  amount  or, if not then  reasonably
ascertainable,  the estimated  amount,  determined in good faith,  of such Third
Party Claim (a "Claim  Notice") with reasonable  promptness to the  Indemnifying
Party.  If the  Indemnified  Party  fails  to  provide  the  Claim  Notice  with
reasonable  promptness after the Indemnified Party receives notice of such Third
Party Claim,  the  Indemnifying  Party shall not be  obligated to indemnify  the
Indemnified  Party with respect to such Third Party Claim to the extent that the
Indemnifying  Party's ability to defend has been irreparably  prejudiced by such
failure of the  Indemnified  Party.  The  Indemnifying  Party  shall  notify the
Indemnified  Party as soon as  practicable  within the period ending thirty (30)
calendar  days  following  receipt by the  Indemnifying  Party of either a Claim
Notice or an Indemnity Notice (as defined below) (the "Dispute  Period") whether
the Indemnifying  Party disputes its liability or the amount of its liability to
the  Indemnified  Party under  Section 9.1 and  whether the  Indemnifying  Party
desires,  at its sole cost and expense,  to defend the Indemnified Party against
such Third Party Claim.

     (i) If the  Indemnifying  Party notifies the  Indemnified  Party within the
Dispute  Period that the  Indemnifying  Party desires to defend the  Indemnified
Party with  respect to the Third Party Claim  pursuant to this  Section  9.2(a),
then the  Indemnifying  Party  shall  have the  right to  defend,  with  counsel
reasonably  satisfactory to the Indemnified  Party, at the sole cost and expense
of  the  Indemnifying   Party,   such  Third  Party  Claim  by  all  appropriate
proceedings,  which proceedings shall be vigorously and diligently prosecuted by
the  Indemnifying  Party  to a  final  conclusion  or  will  be  settled  at the
discretion  of  the  Indemnifying  Party  (but  only  with  the  consent  of the
Indemnified  Party in the case of any  settlement  that  provides for any relief

                                       46
<PAGE>

other than the payment of monetary  damages or that  provides for the payment of
monetary  damages as to which the Indemnified  Party shall not be indemnified in
full pursuant to Section 9.1). The Indemnifying Party shall have full control of
such defense and  proceedings,  including any compromise or settlement  thereof;
provided,  however, that the Indemnified Party may, at the sole cost and expense
of the Indemnified Party, at any time prior to the Indemnifying Party's delivery
of the notice  referred to in the first  sentence  of this clause (i),  file any
motion,  answer or other pleadings or take any other action that the Indemnified
Party  reasonably  believes  to be  necessary  or  appropriate  to  protect  its
interests;  and provided further,  that if requested by the Indemnifying  Party,
the  Indemnified  Party will,  at the sole cost and expense of the  Indemnifying
Party,  provide  reasonable  cooperation to the Indemnifying Party in contesting
any Third  Party  Claim  that the  Indemnifying  Party  elects to  contest.  The
Indemnified Party may participate in, but not control, any defense or settlement
of any Third Party Claim controlled by the  Indemnifying  Party pursuant to this
clause (i), and except as provided in the preceding  sentence,  the  Indemnified
Party shall bear its own costs and expenses with respect to such  participation.
Notwithstanding  the foregoing,  the Indemnified Party may take over the control
of  the  defense  or  settlement  of a  Third  Party  Claim  at any  time  if it
irrevocably waives its right to indemnity under Section 9.1 with respect to such
Third Party Claim.

     (ii) If the Indemnifying Party fails to notify the Indemnified Party within
the Dispute Period that the Indemnifying Party desires to defend the Third Party
Claim pursuant to Section 9.2(a), or if the Indemnifying Party gives such notice
but fails to  prosecute  vigorously  and  diligently  or settle the Third  Party
Claim, or if the Indemnifying  Party fails to give any notice  whatsoever within
the Dispute Period,  then the Indemnified  Party shall have the right to defend,
at the sole cost and expense of the Indemnifying Party, the Third Party Claim by
all  appropriate  proceedings,  which  proceedings  shall be  prosecuted  by the
Indemnified Party in a reasonable manner and in good faith or will be settled at
the discretion of the  Indemnified  Party (with the consent of the  Indemnifying
Party, which consent will not be unreasonably  withheld).  The Indemnified Party
will have full control of such defense and proceedings, including any compromise
or settlement thereof;  provided,  however, that if requested by the Indemnified
Party,  the  Indemnifying  Party  will,  at the  sole  cost and  expense  of the
Indemnifying Party, provide reasonable  cooperation to the Indemnified Party and
its counsel in contesting any Third Party Claim which the  Indemnified  Party is
contesting. Notwithstanding the foregoing provisions of this clause (ii), if the
Indemnifying  Party has notified the Indemnified Party within the Dispute Period
that  the  Indemnifying  Party  disputes  its  liability  or the  amount  of its
liability  hereunder to the  Indemnified  Party with respect to such Third Party
Claim and if such dispute is resolved in favor of the Indemnifying  Party in the
manner  provided  in clause  (iii)  below,  the  Indemnifying  Party will not be
required  to bear the costs and  expenses  of the  Indemnified  Party's  defense
pursuant  to this  clause  (ii)  or of the  Indemnifying  Party's  participation
therein at the Indemnified  Party's  request,  and the  Indemnified  Party shall
reimburse the  Indemnifying  Party in full for all reasonable costs and expenses
incurred by the  Indemnifying  Party in  connection  with such  litigation.  The
Indemnifying  Party  may  participate  in,  but  not  control,  any  defense  or
settlement controlled by the Indemnified Party pursuant to this clause (ii), and
the  Indemnifying  Party shall bear its own costs and  expenses  with respect to
such participation.

                                       47
<PAGE>

                         1325 Howard  Avenue,  Suite  #422
                         Burlingame, California 94010
                         Telephone: 650-340-9585
                         Facsimile: 650-340-8015

                 If to the Investor:

                          Mercator Advisory Group
                          555 South Flower Street, Suite 4500
                          Los Angeles, CA 90071
                          Attention:  David Firestone
                          Telephone:  213-533-8288
                          Facsimile:   213-533-8285

Either party hereto may from time to time change its address or facsimile number
for notices  under this Section by giving at least ten (10) days' prior  written
notice of such changed address or facsimile number to the other party hereto.

Section  10.5......ASSIGNMENT.  Neither  this  Agreement  nor any  rights of the
Investor or the Company  hereunder  may be assigned by either party to any other
person. Notwithstanding the foregoing, the Investor's interest in this Agreement
may be  assigned  at any  time,  in whole or in part,  to any  affiliate  of the
Investor or co-investor, provided, however, that any such assignment or transfer
shall  relieve  the  Investor  of its  duties  under  this  Agreement  only upon
performance thereof by any such assignee or transferee.

Section 10.6......AMENDMENT; NO WAIVER. No party shall be liable or bound to any
other party in any manner by any warranties, representations or covenants except
as  specifically  set forth in this  Agreement  or therein.  Except as expressly
provided in this  Agreement,  neither this  Agreement nor any term hereof may be
amended,  waived,  discharged or terminated  other than by a written  instrument
signed by both  parties  hereto.  The  failure of the either  party to insist on
strict compliance with this Agreement,  or to exercise any right or remedy under
this Agreement,  shall not constitute a waiver of any rights provided under this
Agreement,  nor estop the parties from  thereafter  demanding  full and complete
compliance nor prevent the parties from exercising such a right or remedy in the
future.

Section  10.7......ANNEXES  AND  EXHIBITS;  ENTIRE  AGREEMENT.  All  annexes and
exhibits  to this  Agreement  are  incorporated  herein by  reference  and shall
constitute part of this Agreement.  This Agreement and the  Registration  Rights
Agreement  set forth the  entire  agreement  and  understanding  of the  parties
relating to the subject  matter  hereof and thereof and  supersede all prior and
contemporaneous agreements, negotiations and understandings between the parties,
both oral and written, relating to the subject matter hereof.

                                       50
<PAGE>

Section  10.8......SURVIVAL.  The provisions of Articles VI, VIII, IX and X, and
of Section 7.3, shall survive the termination of this Agreement.

Section  10.9......SEVERABILITY.  In  the  event  that  any  provision  of  this
Agreement  becomes or is declared  by a court of  competent  jurisdiction  to be
illegal,  unenforceable or void, this Agreement shall continue in full force and
effect  without  said  provision;  provided  that  such  severability  shall  be
ineffective if it materially  changes the economic  benefit of this Agreement to
any party.

Section  10.10.....TITLE  AND  SUBTITLES.  The titles and subtitles used in this
Agreement are used for the convenience of reference and are not to be considered
in construing or interpreting this Agreement.

Section  10.11.....COUNTERPARTS.  This  Agreement  may be  executed  in multiple
counterparts,  each of which may be executed by less than all of the parties and
shall be deemed to be an original  instrument which shall be enforceable against
the parties actually executing such counterparts and all of which together shall
constitute one and the same instrument.

Section  10.12.....CHOICE  OF LAW. This Agreement  shall be construed  under the
laws of the State of California.

Section  10.13.....OTHER  EXPENSES.  In the  event  that a dispute  between  the
parties is not determined by a Board of Arbitration, the non-prevailing party in
any action,  suit or proceeding  shall bear all  investigative,  legal and other
expenses reasonably incurred in connection with, and any and all amounts paid in
defense or settlement of such action, suit or proceeding, including of the other
party to this Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by the undersigned,  there unto duly authorized,  as of the date first set forth
above.

                                       51
<PAGE>

                                  FAMOUS FIXINS, INC.

                                     /s/ S. Michael Rudolph
                                  By:
                                     ---------------------------------------
                                     Name: S. Michael Rudolph
                                     Title:  Chief Executive Officer

                                  MERCATOR MOMENTUM FUND, L.P.

                                   By It's General Partner- Mercator
                                      Advisory Group

                                            /s/ David Firestone
                                   By:
                                            -------------------
                                   David Firestone
                                   Managing Partner

                                       51

<PAGE>

<PAGE>

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