Document:

EXECUTION COPY

                            TERMS OF PREFERRED STOCK

                  SECTION 1.  DESIGNATION,  AMOUNT AND PAR VALUE.  The series of
preferred  stock  shall be  designated  as its  Secured 6% Series a  Convertible
Preferred Stock (the  "Preferred  Stock") and the number of shares so designated
shall be 350 (which shall not be subject to increase  without the consent of the
holders  of  the  Preferred  Stock  (each,  a  "Holder"  and  collectively,  the
"Holders").  each share of  preferred  stock shall have a par value of $.001 per
share and a stated value equal to the sum of $10,000 plus all unpaid and accrued
dividends to the date of determination to the extent not previously paid in cash
in accordance with the terms hereof (the "Stated Value").

                  SECTION 2.        DIVIDENDS.

                  (a) Holders shall be entitled to receive, out of funds legally
available therefor,  and the Company shall pay, cumulative dividends at the rate
per share (as a  percentage  of the  Stated  Value per  share) of 6% per  annum,
payable on each  Conversion  Date (as defined herein) for such share, in cash or
by accretion of the Stated Value.  Subject to the terms and  conditions  herein,
the decision  whether to accrete  dividends  hereunder to the Stated Value or to
pay for dividends in cash shall be at the discretion of the Company. The Company
shall provide the Holders  written notice of its intention to accrete  dividends
hereunder  to the Stated  Value or pay  dividends in cash not less than ten days
prior to each  Conversion  Date for so long as  shares  of  Preferred  Stock are
outstanding (the Company may indicate in such notice that the election contained
in such notice  shall  continue for later  periods  until  revised).  Failure to
timely provide such written  notice shall be deemed (if permitted  hereunder) an
election  by the Company to accrete  dividends  hereunder  to the Stated  Value.
Dividends on the Preferred  Stock shall be calculated on the basis of a 360- day
year,  shall accrue daily  commencing on the Original  Issue Date (as defined in
Section 8), and shall be deemed to accrue  from such date  whether or not earned
or declared and whether or not there are profits,  surplus or other funds of the
Company  legally  available  for the payment of  dividends.  Except as otherwise
provided  herein,  if at any time the Company pays less than the total amount of
dividends then accrued on account of the Preferred Stock,  such payment shall be
distributed  ratably  among  the  Holders  based  upon the  number  of shares of
Preferred Stock held by each H    Any dividends to be paid in cash hereunder
that are not paid within three  Trading Days (as defined in Section 8) following
a Dividend  Payment  Date shall  continue to accrue and shall entail a late fee,
which  must be paid in cash,  at the rate of 18% per  annum or the  lesser  rate
permitted  by  applicable  law (such  fees to accrue  daily,  from the date such
dividend is due hereunder through and including the date of payment).

                  (b) Notwithstanding anything to the contrary contained herein,
the Company must pay dividends in cash if:

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                           (i)  the number of shares of Common Stock (as defined
in Section 8)  at the time authorized,  unissued and unreserved for all purposes
is insufficient  to  accrete  such  dividends  to  the  Stated  Value  to permit
conversion in full of all outstanding Stated Value;

                            (ii)   after  the  Dividend  Effectiveness  Date (as
defined in Section 8), Underlying  Shares (as defined in Section 8)  (x) are not
registered  for  resale  pursuant to an effective Underlying Shares Registration
Statement  (as defined in Section 8)  and  (y)  may not be  sold  without volume
restrictions  pursuant to Rule 144  promulgated  under  the  Securities  Act (as
defined in Section 8),  as determined  by counsel to the Company  pursuant  to a
written  opinion  letter, addressed to the Company's  transfer agent in the form
and substance acceptable to the applicable Holder and  such  transfer  agent (if
the Company is permitted and elects to pay dividends  in shares of Common  Stock
under this clause (ii) prior to the Dividend Effectiveness  Date and  thereafter
an Underlying  Shares  Registration Statement shall be declared effective by the
Commission (as defined in Section 8), the Company  shall,  within three  Trading
Days  after  the  date of  such  declaration  of  effectiveness,  exchange  such
Underlying Shares for shares of  Common  Stock  that  are  free  of  restrictive
legends of any kind);

                           (iii)     the  Common Stock  is not then eligible for
quotation on the  OTC Bulletin Board  (the "OTC")  or  listed for trading on the
Nasdaq National Market, the New York Stock Exchange, the American Stock Exchange
or the Nasdaq SmallCap Market (each, a "SUBSEQUENT MARKET"); or

                           (iv)    the accretion of such dividends to the Stated
Value and subsequent conversions  of  all  then  outstanding  Stated Value would
result in a  violation  of  any  rules  and regulations governing any Subsequent
Market on which the Common Stock is then listed or quoted for trading.

                  (c) So long as any Preferred  Stock shall remain  outstanding,
neither  the  Company  nor any  subsidiary  thereof  shall  redeem,  purchase or
otherwise  acquire  directly or indirectly any Junior  Securities (as defined in
Section 8), nor shall the  Company  directly  or  indirectly  pay or declare any
dividend  or make  any  distribution  (other  than a  dividend  or  distribution
described  in  Section 5 or  dividends  due and paid in the  ordinary  course on
preferred  stock of the Company at such times when the Company is in  compliance
with  its  payment  and  other  obligations   hereunder)  upon,  nor  shall  any
distribution be made in respect of, any Junior Securities,  nor shall any monies
be set aside for or applied to the  purchase  or  redemption  (through a sinking
fund or  otherwise)  of any  Junior  Securities  or shares  pari  passu with the
Preferred Stock.

                  SECTION 3. VOTING RIGHTS.  Except as otherwise provided herein
and as  otherwise  required  by law,  the  Preferred  Stock shall have no voting
rights.  However, so long as any shares of Preferred Stock are outstanding,  the
Company shall not,  without the affirmative vote of the Holders of a majority of
the shares of the Preferred Stock then outstanding (a) alter or change adversely

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the powers, preferences or rights given to the Preferred Stock or alter or amend
this  Certificate  of  Designation,  (b)  authorize or create any class of stock
ranking as to dividends or distribution of assets upon a Liquidation (as defined
in Section 4) senior to or otherwise  pari passu with the Preferred  Stock,  (c)
amend its certificate or articles of incorporation or other charter documents so
as to affect  adversely any rights of the Holders,  (i) increase the  authorized
number of shares of Preferred Stock, (e) enter into modifications,  replacements
or new  credit  facilities  with  terms more  restrictive  on the  Company as to
payments and fulfillment of
obligations  hereunder or with respect to  subordination,  or (f) enter into any
agreement with respect to the foregoing.

                  SECTION 4. LIQUIDATION.  Upon any liquidation,  dissolution or
winding-up of the Company,  whether voluntary or involuntary (a  "LIQUIDATION"),
the  Holders  shall be  entitled  to receive  out of the assets of the  Company,
whether such assets are capital or surplus, for each share of Preferred Stock an
amount equal to the Stated Value per share  before any  distribution  or payment
shall be made to the holders of any Junior Securities,  and if the assets of the
Company  shall be  insufficient  to pay in full such  amounts,  then the  entire
assets to be distributed  to the Holders shall be distributed  among the Holders
ratably in accordance with the respective  amounts that would be payable on such
shares if all amounts payable  thereon were paid in full. A sale,  conveyance or
disposition of 50% or more of the assets of the Company or the  effectuation  by
the Company of a  transaction  or series of related  transactions  in which more
than 33% of the voting power of the Company is disposed  of, or a  consolidation
or merger of the Company with or into any other company or companies into one or
more  companies  not  wholly-  owned by the  Company  shall not be  treated as a
Liquidation,  but instead  shall be subject to the  provisions of Section 5. The
Company shall mail written notice of any such Liquidation, not less than 45 days
prior to the payment date stated therein, to each record Holder.

                  SECTION 5.        CONVERSION.

                  (A)(I)  CONVERSIONS  AT  OPTION  OF  HOLDER.   Each  share  of
Preferred  Stock shall be convertible  into shares of Common Stock a (subject to
the limitations set forth in Section 5(a)(ii)), the Conversion Ratio (as defined
in Section  8), at the option of the  Holder,  at any time and from time to time
from and  after  the  first to  occur  of (i) the  date  the  Underlying  Shares
Registration  Statement (as defined in Section 8) is first declared effective by
the  Commission  (as defined in Section 8) (the  "EFFECTIVE  DATE") and (ii) the
Effectiveness  Date (as defined in Section 8). Holders shall effect  conversions
by  surrendering  the  certificate or  certificates  representing  the shares of
Preferred  Stock  to be  converted  to the  Company,  together  with the form of
conversion  notice  attached hereto as Exhibit A (a "CONVERSION  NOTICE").  Each
Conversion  Notice shall  specify the number of shares of Preferred  Stock to be
converted and the date on which such  conversion  is to be effected,  which date
may not be prior to the date the  Holder  delivers  such  Conversion  Notice  by
Facsimile  (the  "CONVERSION  DATE").  If no  Conversion  Date is specified in a
Conversion  Notice,  the Conversion  Date shall be the date that such Conversion
Notice is deemed delivered hereunder.  If the Holder is converting less than all
shares  of  Preferred  Stock  represented  by the  certificate  or  certificates

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tendered by the Holder with the Conversion Notice, or if a conversion  hereunder
cannot be effected in full for any reason, the Company shall promptly deliver to
such  Holder (in the  manner  and  within the time set forth in Section  5(b)) a
certificate  representing  the number of shares of  Preferred  Stock as have not
been converted.

                           (II) CERTAIN CONVERSION RESTRICTIONS.

                           (A) A  Holder  may not  convert  shares  of Preferred
Stock or receive shares of Common Stock as payment of dividends hereunder to the
extent such  conversion or receipt of such dividend  payment would result in the
Holder, together with any affiliate thereof,  beneficially owning (as determined
in  accordance  with Section 13(d) of the Exchange Act (as defined in Section 8)
and the rules promulgated thereunder) in excess of 4.999% of the then issued and
outstanding  shares of Common Stock,  including  shares issuable upon conversion
of, and  payment of  dividends  on, the shares of  Preferred  Stock held by such
Holder after application of this Section. Since the Holder will not be obligated
to report to the Company the number of shares of Common Stock it may hold at the
time of a conversion  hereunder,  unless the conversion at issue would result in
the  issuance  of  shares  of  Common  Stock in  excess  of  4.999%  of the then
outstanding  shares of Common Stock without regard to any other shares which may
be beneficially  owned by the Holder or an affiliate  thereof,  the Holder shall
have the authority and obligation to determine whether the restriction contained
in this Section will limit any particular conversion hereunder and to the extent
that  the  Holder  determines  that the  limitation  contained  in this  Section
applies, the determination of which portion of the shares of Preferred Stock are
convertible  shall be the  responsibility  and obligation of the Holder.  If the
Holder has  delivered a Conversion  Notice for shares of  Preferred  Stock that,
without  regard to any  other  shares  that the  Holder  or its  affiliates  may
beneficially own, would result in the issuance in excess of the permitted amount
hereunder,  the Company shall notify the Holder of this fact and shall honor the
conversion for the maximum number of shares of Preferred  Stock  permitted to be
converted on such Conversion  Date in accordance  with the periods  described in
Section 5(b) and, at the option of the Holder, either retain shares of Preferred
Stock  tendered for conversion in excess of the permitted  amount  hereunder for
future  conversions or return such excess shares of Preferred Stock permitted to
the Holder.  The  provisions of this Section may be waived by a Holder (but only
as to itself  and not to any  other  Holder)  upon not less  than 61 days  prior
notice to the Company. Other Holders shall be unaffected by any such waiver.

                           (B)      A Holder may not convert shares of Preferred
Stock or receive shares of Common Stock as payment of dividends hereunder to the
extent such  conversion or receipt of such dividend  payment would result in the
Holder, together with any affiliate thereof,  beneficially owning (as determined
in accordance  with Section 13(d) of the Exchange Act and the rules  promulgated
thereunder)  in excess of 9.999% of the then  issued and  outstanding  shares of
Common  Stock,  including  shares  issuable upon  conversion  of, and payment of
dividends  on,  the  shares  of  Preferred  Stock  held  by  such  Holder  after
application of this Section. Since the Holder will not be obligated to report to
the  Company  the number of shares of Common  Stock it may hold at the time of a
conversion  hereunder,  unless  the  conversion  at issue  would  result  in the

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issuance of shares of Common  Stock in excess of 9.999% of the then  outstanding
shares  of  Common  Stock  without  regard  to any  other  shares  which  may be
beneficially owned by the Holder or an affiliate thereof,  the Holder shall have
the authority and obligation to determine  whether the restriction  contained in
this Section will limit any  particular  conversion  hereunder and to the extent
that  the  Holder  determines  that the  limitation  contained  in this  Section
applies, the determination of which portion of the shares of Preferred Stock are
convertible  shall be the  responsibility  and obligation of the Holder.  If the
Holder has  delivered a Conversion  Notice for shares of  Preferred  Stock that,
without  regard to any  other  shares  that the  Holder  or its  affiliates  may
beneficially own, would result in the issuance in excess of the permitted amount
hereunder,  the Company shall notify the Holder of this fact and shall honor the
conversion for the maximum number of shares of Preferred  Stock  permitted to be
converted on such Conversion  Date in accordance  with the periods  described in
Section 5(b) and, at the option of the Holder, either retain shares of Preferred
Stock  tendered for conversion in excess of the permitted  amount  hereunder for
future  conversions or return such excess shares of Preferred Stock permitted to
the Holder.  The  provisions of this Section may be waived by a Holder (but only
as to itself  and not to any  other  Holder)  upon not less  than 61 days  prior
notice to the Company. Other Holders shall be unaffected by any such waiver.

                  (b)(i) Not later than three Trading Days after each Conversion
Date, the Company will deliver to the Holder (A) a certificate  or  certificates
which shall be free of restrictive legends and trading  restrictions (other than
those required by Section  3.1(b) of the Purchase  Agreement)  representing  the
number of shares of Common Stock being acquired upon the conversion of shares of
Preferred Stock, (B) one or more certificates  representing the number of shares
of Preferred  Stock not  converted and (C) a bank check in the amount of accrued
and unpaid  dividends  (if the Company has elected or is required to pay accrued
dividends in cash).  Notwithstanding  the  foregoing or anything to the contrary
contained  herein,  the Company  shall not be  obligated  to issue  certificates
evidencing the shares of Common Stock issuable upon  conversion of any shares of
Preferred Stock until one Trading Day after certificates  evidencing such shares
of Preferred Stock are delivered for conversion to the Company, or the Holder of
such Preferred Stock notifies the Company that such certificates have been lost,
stolen or destroyed and provides a bond (or other adequate security)  reasonably
satisfactory  to the Company to indemnify  the Company from any loss incurred by
it in connection  therewith.  The Company shall,  upon request of the Holder, if
available,  use its best  efforts to deliver  any  certificate  or  certificates
required  to be  delivered  by the  Company  under this  Section  electronically
through  the  Depository  Trust  Corporation  or  another  established  clearing
corporation  performing  similar  functions.  If in the  case of any  Conversion
Notice such  certificate or certificates  are not delivered to or as directed by
the applicable  Holder by the third Trading Day after the  Conversion  Date, the
Holder  shall be entitled to elect by written  notice to the Company at any time
on or before its receipt of such  certificate  or  certificates  thereafter,  to
rescind such conversion, in which event the Company shall immediately return the
certificates representing the shares of Preferred Stock tendered for conversion.

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                  (ii) If the  Company  fails  to  deliver  to the  Holder  such
certificate or certificates  pursuant to Section  5(b)(i),  by the third Trading
Day after the Conversion Date, the Company shall pay to such Holder, in cash, as
liquidated damages and not as a penalty,  $5,000 for each Trading Day after such
third Trading Day until such  certificates  are delivered.  Nothing herein shall
limit a Holder's  right to pursue actual  damages for the  Company's  failure to
deliver certificates  representing shares of Common Stock upon conversion within
the period  specified  herein and such Holder shall have the right to pursue all
remedies  available  to it  hereunder,  at law or in equity  including,  without
limitation, a decree of specific performance and/or injunctive relief.

                  (iii) In addition to any other rights available to the Holder,
if the Company fails to deliver to the Holder such  certificate or  certificates
pursuant to Section 5(b)(i), by the third (3rd) Trading Day after the Conversion
Date, and if after such third (3rd) Trading Day the Holder purchases (in an open
market  transaction or otherwise)  Common Stock to deliver in  satisfaction of a
sale by such Holder of the  Underlying  Shares  which the Holder was entitled to
receive upon such  conversion  (A  "BUY-IN"),  then the Company shall (A) pay in
cash to the Holder the amount by which (x) the  Holder's  total  purchase  price
(including  brokerage  commissions,  if any) for the Common  Stock so  purchased
exceeds (y) the product of (1) the  aggregate  number of shares of Common  Stock
that such Holder was entitled to receive from the conversion at issue multiplied
by (2) the market  price of the Common Stock at the time of the sale giving rise
to such purchase  obligation and (B) at the option of the Holder,  either return
the shares of  Preferred  Stock for which  such  conversion  was not  honored or
deliver to such Holder the number of shares of Common Stock that would have been
issued  had the  Company  timely  complied  with  its  conversion  and  delivery
obligations under Section 5(b)(i).  For example,  if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted  conversion of shares of Preferred  Stock with respect to which the
market price of the Underlying Shares on the date of conversion totaled $10,000,
under clause (A) of the  immediately  preceding  sentence  the Company  shall be
required to pay the Holder $1,000.  The Holder shall provide the Company written
notice  indicating  the amounts  payable to the Holder in respect of the Buy-In.
Nothing  herein  shall  limit a  Holder's  right to pursue  any  other  remedies
available to it hereunder, at law or in equity including,  without limitation, a
decree of specific  performance  and/or  injunctive  relief with  respect to the
Company's failure to timely deliver  certificates  representing shares of Common
Stock upon conversion of the shares of Preferred  Stock as required  pursuant to
the terms hereof.

                  (c)(i) The conversion  price for each share of Preferred Stock
in effect on any Conversion Date (the "CONVERSION PRICE") shall be the lesser of
(i) the Per Share  Market  Value on the Trading Day  immediately  preceding  the
Original Issue Date (the "INITIAL CONVERSION PRICE") and (ii) 80% of the average
of the Per Share Market Values for the five Trading Days  immediately  preceding
the applicable conversion date, provided,  that (1) such five Trading Day period
shall be extended for the number of Trading Days during such period in which (A)
trading in the Common Stock is  suspended  by a  Subsequent  Market on which the

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Common Stock is then  listed,  or (B) after the date  declared  effective by the
Commission,   the  Underlying  Shares  Registration   Statement  is  either  not
effective,  or (C) after the date  declared  effective  by the  Commission,  the
Prospectus included in the Underlying Shares  Registration  Statement may not be
used by the Holder for the resale of Underlying Shares and (2) any or all of the
Trading  Days  comprising  such five  Trading  Day period  may be  Trading  Days
preceding the date that  Conversion  Notices may first be delivered  pursuant to
Section 5(a)(i).

                           (ii)     If the Company, at any time while any shares
of Preferred Stock are outstanding,  shall (a) pay a stock dividend or otherwise
make a distribution or distributions on shares of its Junior  Securities or pari
passu securities  payable in shares of Common Stock,  (b) subdivide  outstanding
shares of Common Stock into a larger number of shares,  (c) combine  outstanding
shares  of  Common  Stock  into a  smaller  number  of  shares,  or (d) issue by
reclassification and exchange of the Common Stock any shares of capital stock of
the Company, then the Initial Conversion Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common Stock outstanding
before such event and of which the denominator  shall be the number of shares of
Common Stock  outstanding after such event. Any adjustment made pursuant to this
Section  5(c)(ii) shall become effective  immediately  after the record date for
the  determination  of  stockholders   entitled  to  receive  such  dividend  or
distribution and shall become effective  immediately after the effective date in
the case of a subdivision, combination or re-classification.

                           (iii)    If the Company, at any time while any shares
of Preferred Stock are outstanding,  shall issue rights,  warrants or options to
all holders of Common Stock  entitling them to subscribe for or purchase  shares
of Common Stock at a price per share less than the Per Share Market Value at the
record date mentioned below,  then the Conversion Price shall be multiplied by a
fraction,  the  numerator of which shall be the number of shares of Common Stock
outstanding  immediately  prior to the  issuance  of such  rights,  warrants  or
options,  plus the number of shares of Common Stock which the aggregate offering
price of the total number of shares so offered would  purchase at such Per Share
Market  Value,  and the  denominator  of which shall be the sum of the number of
shares of Common Stock  outstanding  immediately prior to such issuance plus the
number of shares of Common Stock  offered for  subscription  or  purchase.  Such
adjustment shall be made whenever such rights or warrants are issued,  and shall
become  effective  immediately  after the record date for the  determination  of
stockholders  entitled to receive  such rights or  warrants.  However,  upon the
expiration  of any right,  warrant or option to purchase  shares of Common Stock
the issuance of which resulted in an adjustment in the Conversion Price pursuant
to this Section 5(c)(iii), if any such right, warrant or option shall expire and
shall not have been exercised,  the Conversion Price shall immediately upon such
expiration  shall be recomputed and effective  immediately  upon such expiration
shall be  increased  to the price which it would have been (but  reflecting  any
other  adjustments  in the  Conversion  Price made pursuant to the provisions of
this Section 5 upon the issuance of other rights or warrants) had the adjustment
of the  Conversion  Price made upon the  issuance of such rights,  warrants,  or
options been made on the basis of offering  for  subscription  or purchase  only
that number of shares of Common Stock  actually  purchased  upon the exercise of
such rights, warrants or options actually exercised.

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                           (iv)     If the Company or any subsidiary thereof, as
applicable with respect to Common Stock  Equivalents (as defined below),  at any
time while any shares of Preferred Stock are outstanding,  shall issue shares of
Common Stock or rights,  warrants,  options or other  securities or debt that is
convertible  into or  exchangeable  for shares of Common  Stock  ("COMMON  STOCK
EQUIVALENTS"), entitling any Person to acquire shares of Common Stock at a price
per share less than the  Conversion  Price (if the holder of the Common Stock or
Common Stock  Equivalent  so issued  shall at any time,  whether by operation of
purchase price adjustments, reset provisions,  floating conversion,  exercise or
exchange  prices or otherwise,  or due to warrants,  options or rights issued in
connection with such issuance,  be entitled to receive shares of Common Stock at
a price less than the  Conversion  Price,  such issuance shall be deemed to have
occurred for less than the Conversion Price), then the Conversion Price shall be
multiplied  by a fraction,  the numerator of which shall be the number of shares
of Common  Stock  outstanding  immediately  prior to the issuance of such Common
Stock or such Common Stock Equivalents plus the number of shares of Common Stock
which the  offering  price  for such  shares  of  Common  Stock or Common  Stock
Equivalents would purchase at the Conversion Price, and the denominator of which
shall be the sum of the number of shares of Common Stock outstanding immediately
prior to such  issuance  plus the number of shares of Common  Stock so issued or
issuable,  provided,  that for purposes hereof,  all shares of Common Stock that
are issuable upon conversion,  exercise or exchange of Common Stock  Equivalents
shall be deemed outstanding  immediately after the issuance of such Common Stock
Equivalents.  Such adjustment shall be made whenever such Common Stock or Common
Stock Equivalents are issued.  However,  upon the expiration of any Common Stock
Equivalents  the issuance of which  resulted in an adjustment in the  Conversion
Price  pursuant to this  Section,  if any such Common  Stock  Equivalents  shall
expire and shall not have been exercised, the Conversion Price shall immediately
upon  such  expiration  be  recomputed  and  effective   immediately  upon  such
expiration  be increased  to the price which it would have been (but  reflecting
any other adjustments in the Conversion Price made pursuant to the provisions of
this  Section  after the  issuance of such  Common  Stock  Equivalents)  had the
adjustment of the  Conversion  Price made upon the issuance of such Common Stock
Equivalents been made on the basis of offering for subscription or purchase only
that number of shares of the Common Stock  actually  purchased upon the exercise
of  such  Common  Stock  Equivalents  actually  exercised.  Notwithstanding  the
foregoing, the following shall not be deemed to be Common Stock Equivalents: (i)
issuances  pursuant  to a grant  or  exercise  of  stock or  options  which  may
hereafter be granted or exercised under any employee benefit plan of the Company
now  existing or to be  implemented  in the future,  (ii) shares of Common Stock
issued in connection  with a Strategic  Transaction  (as defined  below),  (iii)
issuances of shares of Common Stock for an  acquisition of assets or stock of an
unaffiliated  Person,  and (iv) shares of Common  Stock issued as payment of the
purchase price in connection with a Strategic Transaction.  For purposes of this
section,  a "STRATEGIC  TRANSACTION" shall mean a transaction or relationship in
which the Company issues shares of Common Stock to an entity which is, itself or
through its  subsidiaries,  an  operating  company in a business  related to the
business of the Company and in which the Company receives  material  benefits in
addition to the  investment  of funds,  but shall not include a  transaction  in
which the  Company is issuing  securities  primarily  for the purpose of raising
capital.

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                           (v)       If the Company, at any time while shares of
Preferred Stock are outstanding, shall distribute to all holders of Common Stock
(and not to  Holders)  evidences  of its  indebtedness  or  assets  or rights or
warrants to subscribe for or purchase any security  (excluding those referred to
in Sections 5(c)(ii)-(iv) above), then in each such case the Conversion Price at
which each share of Preferred  Stock shall  thereafter be  convertible  shall be
determined by multiplying the Conversion  Price in effect  immediately  prior to
the record date fixed for determination of stockholders entitled to receive such
distribution  by a  fraction  of which  the  denominator  shall be the Per Share
Market Value  determined as of the record date mentioned above, and of which the
numerator shall be such Per Share Market Value on such record date less the then
fair market  value at such record date of the portion of such assets or evidence
of  indebtedness so distributed  applicable to one  outstanding  share of Common
Stock as determined by the Board of Directors in good faith.  In either case the
adjustments  shall be  described  in a statement  provided to the Holders of the
portion  of  assets  or  evidences  of   indebtedness  so  distributed  or  such
subscription  rights  applicable to one share of Common Stock.  Such  adjustment
shall be made whenever any such  distribution is made and shall become effective
immediately after the record date mentioned above.

                           (vi)   All calculations under this Section 5 shall be
made to the nearest cent or the nearest  1/100th of a share, as the case may be.
The  number of shares of Common  Stock  outstanding  at any given time shall not
include  shares  owned or held by or for the  account  of the  Company,  and the
disposition  of any such shares shall be  considered  an issue or sale of Common
Stock.

                           (vii)    Whenever the Initial Conversion Price or the
Conversion Price is adjusted pursuant to Section 5(c)(ii),(iii),(iv), or (v) the
Company shall  promptly mail to each Holder,  a notice setting forth the Initial
Conversion Price or the Conversion  Price (as applicable)  after such adjustment
and setting forth a brief statement of the facts requiring such adjustment.

                           (viii)  In case of any reclassification of the Common
Stock,  or any compulsory  share exchange  pursuant to which the Common Stock is
converted into other  securities,  cash or property (other than compulsory share
exchanges which constitute Change of Control  Transactions),  the Holders of the
Preferred Stock then outstanding shall have the right thereafter to convert such
shares  only into the shares of stock and other  securities,  cash and  property
receivable  upon or deemed to be held by holders of Common Stock  following such
reclassification or share exchange, and the Holders of the Preferred Stock shall
be  entitled  upon such  event to receive  such  amount of  securities,  cash or
property as a holder of the number of shares of Common Stock of the Company into
which such shares of Preferred Stock could have been converted immediately prior
to such  reclassification  or share  exchange  would  have been  entitled.  This
provision  shall  similarly  apply  to  successive  reclassifications  or  share
exchanges.

                                       -9-

<PAGE>

                           (ix)    In case of any (1) merger or consolidation of
the Company with or into another Person, or (2) sale by the Company of more than
one-half of the assets of the Company (on an as valued basis) in one or a series
of related transactions, a Holder shall have the right thereafter to (A) convert
its shares of  Preferred  Stock  into the shares of stock and other  securities,
cash and  property  receivable  upon or deemed to be held by  holders  of Common
Stock  following  such merger,  consolidation  or sale, and such Holder shall be
entitled  upon such event or series of related  events to receive such amount of
securities,  cash and  property  as the  shares of Common  Stock into which such
shares of Preferred  Stock could have been converted  immediately  prior to such
merger, consolidation or sales would have been entitled, or (B) in the case of a
merger or  consolidation,  (x) require the  surviving  entity to issue shares of
convertible preferred stock or convertible debentures with such aggregate stated
value or in such face  amount,  as the case may be, equal to the Stated Value of
the shares of  Preferred  Stock then held by such  Holder,  plus all accrued and
unpaid  dividends and other amounts owing thereon,  which newly issued shares of
preferred stock or debentures shall have terms identical (including with respect
to  conversion)  to the terms of the  Preferred  Stock  (except,  in the case of
debentures,  as may be  required  to reflect the  differences  between  debt and
equity) and shall be entitled to all of the rights and privileges of a Holder of
Preferred  Stock set  forth  herein  and the  agreements  pursuant  to which the
Preferred Stock was issued (including, without limitation, as such rights relate
to the acquisition, transferability,  registration and listing of such shares of
stock other securities issuable upon conversion thereof), and (y) simultaneously
with the issuance of such convertible preferred stock or convertible debentures,
shall have the right to convert  such  instrument  only into shares of stock and
other  securities,  cash and  property  receivable  upon or deemed to be held by
holders of Common Stock following such merger or  consolidation.  In the case of
clause (B), the  conversion  price  applicable  for the newly  issued  shares of
convertible  preferred stock or convertible  debentures  shall be based upon the
amount of  securities,  cash and property  that each share of Common Stock would
receive in such  transaction,  the  Conversion  Ratio  immediately  prior to the
effectiveness  or closing date for such  transaction  and the  Conversion  Price
stated herein. The terms of any such merger, sale or consolidation shall include
such terms so as continue to give the  Holders of  Preferred  Stock the right to
receive the  securities,  cash and  property  set forth in this Section upon any
conversion or redemption  following such event.  This provision  shall similarly
apply to successive such events.  The rights set forth in this Section  5(c)(ix)
shall not alter the rights of a Holder set forth in Section 7, provided, that, a
Holder may only  exercise the rights set forth in this  Section  5(c)(ix) or the
rights set forth in Section 7 with respect to a single event giving rise to such
rights.

                           (x)       If (a) the Company shall declare a dividend
(or any other distribution) on the Common Stock, (b) the Company shall declare a
special  nonrecurring  cash dividend on or a redemption of the Common Stock, (c)

                                      -10-

<PAGE>
the Company  shall  authorize the granting to all holders of Common Stock rights
or warrants to  subscribe  for or  purchase  any shares of capital  stock of any
class or of any  rights,  (d) the  approval of any  stockholders  of the Company
shall be required in connection with any  reclassification  of the Common Stock,
any  consolidation  or  merger  to which  the  Company  is a party,  any sale or
transfer  of all or  substantially  all of the  assets  of the  Company,  or any
compulsory  share of exchange  whereby the Common Stock is converted  into other
securities,  cash or property,  or (e) the Company shall authorize the voluntary
or  involuntary  dissolution,  liquidation  or winding up of the  affairs of the
Company;  then the Company  shall notify the Holders at their last  addresses as
they shall appear upon the stock books of the Company, at least 20 calendar days
prior to the applicable record or effective date hereinafter specified, a notice
stating  (x) the date on which a record is to be taken for the  purpose  of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken,  the date as of which  the  holders  of  Common  Stock of record to be
entitled to such dividend, distributions,  redemption, rights or warrants are to
be  determined  or (y) the date on which such  reclassification,  consolidation,
merger,  sale,  transfer or share  exchange is expected to become  effective  or
close,  and the date as of which it is expected  that holders of Common Stock of
record shall be entitled to exchange their Common Stock for securities,  cash or
other property deliverable upon such  reclassification,  consolidation,  merger,
sale,  transfer or share  exchange.  Holders are  entitled to convert  shares of
Preferred  Stock during the 20-day period  commencing the date of such notice to
the effective date of the event triggering such notice.

                  (d) The Company  covenants  that it will at all times  reserve
and keep  available out of its  authorized  and unissued  shares of Common Stock
solely for the  purpose of  issuance  upon  conversion  of  Preferred  Stock and
payment of dividends  on Preferred  Stock,  each as herein  provided,  free from
preemptive  rights or any other  actual  contingent  purchase  rights of persons
other than the  Holders,  not less than such number of shares of Common Stock as
shall be issuable  (taking  into  account  the  provisions  of Section  5(a) and
Section 5(c)) upon the conversion of all outstanding  shares of Preferred Stock.
The Company  covenants that all shares of Common Stock that shall be so issuable
shall,  upon  issue,  be duly and  validly  authorized,  issued and fully  paid,
nonassessable.

                  (e) Upon a  conversion  hereunder  the  Company  shall  not be
required to issue stock certificates  representing fractions of shares of Common
Stock,  but may if  otherwise  permitted,  make a cash payment in respect of any
final  fraction of a share based on the Per Share Market Value at such time.  If
any fraction of an  Underlying  Share would,  except for the  provisions of this
Section,  be issuable  upon a  conversion  hereunder,  the Company  shall pay an
amount in cash equal to the Conversion Ratio multiplied by such fraction.

                  (f)  The  issuance  of   certificates   for  Common  Stock  on
conversion  of  Preferred  Stock  shall be made  without  charge to the  Holders
thereof  for any  documentary  stamp or  similar  taxes  that may be  payable in
respect of the issue or delivery of such certificate,  provided that the Company
shall not be  required  to pay any tax that may be  payable  in  respect  of any
transfer  involved in the  issuance and  delivery of any such  certificate  upon
conversion  in a name other than that of the Holder of such shares of  Preferred
Stock so converted.

                                      -11-

<PAGE>
                  (g) Shares of Preferred  Stock  converted into Common Stock or
redeemed in  accordance  with the terms  hereof shall be canceled and may not be
reissued.

                  (h) Any and all notices or other  communications or deliveries
to be provided  by the  Holders of the  Preferred  Stock  hereunder,  including,
without  limitation,  any Conversion  Notice,  shall be in writing and delivered
personally,  by facsimile or sent by a nationally  recognized  overnight courier
service,  addressed  to the  attention  of the Chief  Financial  Officer  of the
Company  addressed  to 7251 West  Palmetto  Park Road,  Suite 208,  Boca  Raton,
Florida  33433,  Facsimile  No.:  (561)  395-1975,  or to such other  address or
facsimile  number as shall be  specified  in  writing  by the  Company  for such
purpose.  Any and all  notices  or  other  communications  or  deliveries  to be
provided by the Company hereunder shall be in writing and delivered  personally,
by facsimile  or sent by a  nationally  recognized  overnight  courier  service,
addressed to each Holder at the  facsimile  telephone  number or address of such
Holder appearing on the books of the Company,  or if no such facsimile telephone
number or address appears, at the principal place of business of the Holder. Any
notice or other communication or deliveries  hereunder shall be deemed given and
effective  on the  earliest of (i) the date of  transmission,  if such notice or
communication  is delivered  via  facsimile at the  facsimile  telephone  number
specified in this Section prior to 6:30 p.m. (New York City time), (ii) the date
after the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section later than
6:30 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York
City time) on such date, (iii) upon receipt, if sent by a nationally  recognized
overnight courier service, or (iv) upon actual receipt by the party to whom such
notice is required to be given.

                  SECTION 6.        OPTIONAL REDEMPTION.

                  (a)      Subject to the provisions of this Section 6, from and
after the Original Issue Date, the Company shall have the right, upon 30 trading
days' notice (an "OPTIONAL  REDEMPTION NOTICE") to the Holders, to redeem all or
any  portion of the shares of  Preferred  Stock which have not  previously  been
redeemed or for which  Conversion  Notices shall not have been  delivered,  at a
price equal to the Optional Redemption Price (as defined below). The Company may
only  deliver  an  Optional  Redemption  Notice  if: (i) the number of shares of
Common Stock at the time authorized, unissued and unreserved for all purposes is
sufficient  to satisfy the  Company's  conversion  obligations  of all shares of
Preferred Stock then  outstanding,  (ii) the Underlying  Shares then outstanding
are  registered  for  resale   pursuant  to  an  effective   Underlying   Shares
Registration  Statement  pursuant  to which the Holders  are  permitted  to sell
Underlying  Shares  or the  Underlying  Shares  may  be  resold  without  volume
restrictions  pursuant to Rule 144(k)  promulgated under the Securities Act, and
(iii) the  Common  Stock is listed  for  trading  on the OTC or on a  Subsequent
Market.  Each of clauses (i) - (iii) of the immediately  preceding sentence must

                                      -12-

<PAGE>

be true  during the entire 30 Trading  Days  between  the date of delivery of an
Optional  Redemption  Notice and the date of payment of the Optional  Redemption
Price. The entire Optional Redemption Price shall be paid in cash. A Holder may,
subject to Section  5(a)(i)  hereof,  convert (and the Company  shall honor such
conversions  in  accordance  with the terms  hereof) any or all of the shares of
Preferred  Stock  subject to an Optional  Redemption  Notice,  provided that the
Conversion  Notice for such shares is  delivered  prior to the 28th  Trading Day
following the receipt by such Holder of such an Optional Redemption Notice.

                  (b) Failure by the Company to pay any portion of the  Optional
Redemption  Price by the 30th  Trading  Day  following  the date of an  Optional
Redemption  Notice  shall  result IN THE  INVALIDATION  AB INITIO of the  unpaid
portion of such optional redemption, and, notwithstanding anything herein to the
contrary,  the Company  shall  thereafter  have no further  rights to optionally
redeem any shares of Preferred  Stock. In such event,  the Company shall, at the
option of the Holder, either, (i) not later than three Trading Days from receipt
of  Holder's  request  therefor,  return  to the  Holder  all of the  shares  of
Preferred  Stock for which such Optional  REDEMPTION  PRICE HAS NOT BEEN PAID IN
FULL (THE "UNPAID REDEMPTION  SHARES") or (ii) convert all or any portion of the
Unpaid  Redemption  Shares in which  event the Per Share  Market  Value for such
shares shall be the lower of the Per Share Market Value  calculated  on the date
the Optional  Redemption Price was originally due and the Per Share Market Value
as of the Holder's  written demand for  conversion.  If the Holder elects option
(ii) above,  the Company  shall within three Trading Days of its receipt of such
election  deliver  to the  Holder  the  shares of  Common  Stock  issuable  upon
conversion of the Unpaid  Redemption  Shares  subject to such Holder  conversion
demand and otherwise perform its obligations hereunder with respect thereto.

                  (C) THE  "OPTIONAL  REDEMPTION  PRICE" shall be the sum of (i)
125% of the principal  amount of shares of Preferred  Stock to be redeemed,  and
(ii) all accrued and unpaid  dividends  thereon  and all other  amounts,  costs,
expenses  and  liquidated  damages  due in respect of such  shares of  Preferred
Stock.

         SECTION 7.        REDEMPTION UPON TRIGGERING EVENTS.
                           ---------------------------------

                  (a) Upon the  occurrence  of a Triggering  Event,  each Holder
shall (in addition to all other rights it may have hereunder or under applicable
law), have the right,  exercisable at the sole option of such Holder, to require
the Company to redeem all or a portion of the Preferred  Stock then held by such
Holder for a redemption  price,  in cash,  equal to the sum of (i) the Mandatory
Redemption  Amount (as  defined  in Section 8) plus (ii) the  product of (A) the
number of Underlying Shares issued in respect of conversions  hereunder and then
held by the  Holder  and (B)  the  Per  Share  Market  Value  on the  date  such
redemption  is demanded or the date the  redemption  price  hereunder is paid in
full,  whichever is greater (such sum, the "REDEMPTION  PRICE").  The Redemption
Price shall be due and payable within five (5) Trading Days of the date on which
the notice for the payment  therefor  is  provided  by a Holder.  If the Company

                                      -13-

<PAGE>

fails to pay the Redemption  Price hereunder in full pursuant to this Section on
the date such amount is due in accordance  with this  Section,  the Company will
pay interest  thereon at a rate of 18% per annum (or the lesser amount permitted
by applicable  law),  accruing daily from such date until the Redemption  Price,
plus all such interest thereon, is paid in full. For purposes of this Section, a
share of Preferred Stock is outstanding until such date as the Holder shall have
received  Underlying Shares upon a conversion (or attempted  conversion) thereof
that meets the requirements hereof.

                  A  "Triggering  Event" means any one or more of the  following
events  (whatever the reason and whether it shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order,  rule or regulation of any  administrative  or governmental
body):

                           (i)  the failure of an Underlying Shares Registration
Statement to be declared  effective by the  Commission  on or prior to the 180th
day after the Original Issue Date;

                           (ii)      if,  during  the  Effectiveness Period, the
effectiveness  of the Underlying  Shares  Registration  Statement lapses for any
reason  for  more  than an  aggregate  of 25  Trading  Days  (which  need not be
consecutive  Trading  Days),  or the  Holder  shall not be  permitted  to resell
Registrable  Securities under the Underlying Shares  Registration  Statement for
more than an aggregate of 25 Trading Days (which need not be consecutive Trading
Days);

                           (iii)    the  Common Stock  is not  then eligible for
quotation on the OTC Bulletin Board or listed for trading on Subsequent Market;

                           (iv)     the  Company  shall  fail  for any reason to
deliver certificates  representing  Underlying Shares issuable upon a conversion
hereunder  that comply with the  provisions  hereof prior to the tenth day after
the Conversion Date or the Company shall provide notice to any Holder, including
by way of public announcement,  at any time, of its intention not to comply with
requests for conversion of any shares of Preferred  Stock in accordance with the
terms hereof;

                           (v)     the Company shall be a party to any Change of
Control  Transaction,  shall  agree  to sell  (in  one or a  series  of  related
transactions) more than 33% of its assets or shall redeem more than a de minimis
number of Common Stock or other Junior  Securities  (other than  redemptions  of
Underlying Shares);

                           (vi)  an Event (as defined in the Registration Rights
Agreement) shall not have been cured to the satisfaction of the Holders prior to
the  expiration  of 60 days from the Event Date (as defined in the  Registration
Rights  Agreement)  relating  thereto  (other than an Event  resulting  from the
failure of an Underlying Shares Registration Statement to be declared  effective

                                      -14-

<PAGE>

by  the  Commission on or prior to the  180th day after the Original Issue Date,
which shall be covered by Section 7(a)(i));

                           (vii)    the Company shall fail for any reason to pay
in full the amount of cash due pursuant to a Buy-In  within seven  Business Days
after notice  therefor is delivered  hereunder  or shall fail to pay all amounts
owed on account of an Event within seven Business Days of the date due);

                           (viii)   the  Company  shall fail to have available a
sufficient number of  authorized and unreserved shares of  Common Stock to issue
to such Holder upon a conversion hereunder; or

                           (ix)     the Company shall fail to observe or perform
any other material  covenant,  agreement or warranty  contained in, or otherwise
commit any breach of the  Transaction  Documents  (as defined in Section 8), and
such failure or breach shall not, if subject to the possibility of a cure by the
Company,  have been  remedied  within ten Business  Days after the date on which
written notice of such failure or breach shall have been given.

                           (x)      an  Event of Default shall have occurred and
be continuing under the Security Agreement or IP Security Agreement.

                  SECTION 8. DEFINITIONS. For the purposes hereof, the following
terms shall have the following meanings:

                  "CHANGE OF CONTROL TRANSACTION" means the occurrence of any of
(i) an  acquisition  after the date hereof by an  individual  or legal entity or
"group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective  control  (whether  through legal or  beneficial  ownership of capital
stock of the  Company,  by  contract  or  otherwise)  of in excess of 33% of the
voting securities of the Company, (ii) a replacement at one time or over time of
more than one- half of the members of the Company's  board of directors which is
not approved by a majority of those  individuals who are members of the board of
directors on the date hereof (or by those individuals who are serving as members
of the board of directors on any date whose nomination to the board of directors
was  approved  by a majority of the  members of the board of  directors  who are
members  on the date  hereof),  (iii)  the  merger of the  Company  with or into
another entity that is not wholly-owned by the Company, consolidation or sale of
50% or  more  of the  assets  of the  Company  in  one or a  series  of  related
transactions,  or (iv) the execution by the Company of an agreement to which the
Company is a party or by which it is bound,  providing for any of the events set
forth above in (i), (ii) or (iii).

                  "COMMISSION" means the Securities and Exchange Commission.
                   ----------
                                      -15-

<PAGE>
                  "COMMON  STOCK" means the Company's  common  stock,  $.001 par
value per  share,  and stock of any other  class  into  which  such  shares  may
hereafter have been reclassified or changed.

                  "CONVERSION  RATIO"  means,  at  any  time,  a  fraction,  the
numerator  of  which  is  Stated  Value  and the  denominator  of  which  is the
Conversion Price at such time.

                  "DIVIDEND  EFFECTIVENESS  DATE"  means the earlier to occur of
(x) the Effectiveness Date (as defined in the Registration Rights Agreement) and
(y) the date  that an  Underlying  Shares  Registration  Statement  is  declared
effective by the Commission.

                  "EFFECTIVENESS  DATE"  shall have the meaning set forth in the
Registration Rights Agreement.

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

                  "IP  SECURITY  AGREEMENT"  shall have the meaning set forth in
the Purchase Agreement.

                  "JUNIOR  SECURITIES"  means  the  Common  Stock  and all other
equity   securities  of  the  Company  other  than  those  securities  that  are
outstanding on the Original Issue Date and which are explicitly senior in rights
or liquidation preference to the Preferred Stock.

                  "MANDATORY  REDEMPTION  AMOUNT"  for each  share of  Preferred
Stock means the sum of (i) the  greater of (A) 125% of the Stated  Value and (B)
the product of (a) the Per Share  Market  Value on the  Trading Day  immediately
preceding (x) the date of the Triggering  Event or the  Conversion  Date, as the
case may be, or (y) the date of payment in full by the Company of the applicable
redemption price,  whichever is greater, and (b) the Conversion Ratio calculated
on the date of the Triggering Event, or the Conversion Date, as the case may be,
and (ii) all other  amounts,  costs,  expenses  and  liquidated  damages  due in
respect of such share of Preferred Stock.

                  "ORIGINAL  ISSUE  DATE"  shall  mean  the  date  of the  first
issuance  of any  shares of the  Preferred  Stock  regardless  of the  number of
transfers of any  particular  shares of Preferred  Stock and  regardless  of the
number of certificates which may be issued to evidence such Preferred Stock.

                  "PER SHARE MARKET means on any particular date (a) the closing
bid price per share of  Common  Stock on such date on the  Subsequent  Market on
which the Common Stock is then listed or quoted, or if there is no such price on
such  date,  then the  closing  bid price on the  Subsequent  Market on the date
nearest  preceding  such date,  or (b) if the Common Stock is not then listed or
quoted on a  Subsequent  Market,  the  closing  bid price for a shares of Common
Stock in the OTC, as reported by the National  Quotation Bureau  Incorporated or

                                      -16-

<PAGE>

similar  organization or agency succeeding to its functions of reporting prices)
at the close of  business on such date,  or (c) if the Common  Stock is not then
reported by the National Quotation Bureau Incorporated (or similar  organization
or agency succeeding to its functions of reporting prices),  then the average of
the "Pink Sheet"  quotes for the relevant  conversion  period,  as determined in
good faith by the Holder, or (d) if the Common Stock is not then publicly traded
the fair market value of a share of Common Stock as  determined  by an Appraiser
selected in good faith by the  Holders of a majority of the shares of  Preferred
Stock.

                  "PERSON" means a corporation,  an association,  a partnership,
an  organization,   a  business,  an  individual,   a  government  or  political
subdivision thereof or a governmental agency.

                  "PURCHASE  AGREEMENT" means the Secured Convertible  Preferred
Stock  Purchase  Agreement,  dated as of the Original  Issue Date,  to which the
Company  and  the  original  Holder  are  parties,   as  amended,   modified  or
supplemented from time to time in accordance with its terms.

                  "REGISTRATION  RIGHTS AGREEMENT" means the Registration Rights
Agreement,  dated as of the  Original  Issue Date,  to which the Company and the
original Holder are parties,  as amended,  modified or supplemented from time to
time in accordance with its terms.

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

                  "SECURITY  AGREEMENT"  shall have the meaning set forth in the
Purchase Agreement.

                  "STOCK PLEDGE  AGREEMENTS" shall have the meaning set forth in
the Purchase Agreement.

                  "TRADING  DAY"  means (a) a day on which the  Common  Stock is
traded  on a  Subsequent  Market  on which the  Common  Stock is then  listed or
quoted,  as the case may be,  or (b) if the  Common  Stock  is not  listed  on a
Subsequent   Market,  a  day  on  which  the  Common  Stock  is  traded  in  the
over-the-counter  market,  as reported by the OTC, or (c) if the Common Stock is
not  quoted  on the OTC,  a day on which  the  Common  Stock  is  quoted  in the
over-the-counter   market  as  reported  by  the   National   Quotation   Bureau
Incorporated (or any SIMILAR  ORGANIZATION OR AGENCY SUCCEEDING ITS FUNCTIONS OF
REPORTING PRICES); PROVIDED, HOWEVER, that in the event that the Common Stock is
not listed or quoted as set forth in (a),  (b) and (c) hereof,  then Trading Day
shall mean any day except  Saturday,  Sunday and any day which  shall be a legal
holiday  or a day on which  banking  institutions  in the  State of New York are
authorized or required by law or other government action to close.

                  "TRANSACTION  DOCUMENTS"  shall have the  meaning set forth in
the Purchase Agreement.

                                      -17-

<PAGE>

                  "UNDERLYING SHARES" means, collectively,  the shares of Common
Stock into which the shares of Preferred  Stock are  convertible  in  accordance
with the terms hereof.

                  "UNDERLYING   SHARES    REGISTRATION    STATEMENT"   means   a
registration  statement that meets the requirements of the  Registration  Rights
Agreement and registers the resale of all Underlying  Shares by the Holder,  who
shall be named as a "selling stockholder" thereunder.

                  SECTION 9.        SECURED OBLIGATION.   The payment obligation

under the terms of the  shares of  Preferred  Stock and the  obligations  of the
Company to the Holder arising upon the conversion of all or any of the shares of
Preferred Stock in accordance with the provisions hereof are secured pursuant to
the  Security  Agreement,  the  IP  Security  Agreement  and  the  Stock  Pledge
Agreements.

                                       18
<PAGE>

                                    EXHIBIT A

                              NOTICE OF CONVERSION

(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)

The  undersigned  hereby  elects to convert  the number of shares of 6% Series A
Convertible  Preferred Stock indicated below, into shares of Common Stock, $.001
par  value per share  (the  "COMMON  STOCK"),  OF CELEXX  CORPORATION,  A NEVADA
CORPORATION (THE "COMPANY"),  according to the conditions hereof, as of the date
written  below.  If shares  are to be issued in the name of a person  other than
undersigned,  the  undersigned  will pay all transfer taxes payable with respect
thereto and is delivering  herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith.  No fee will be charged to the
Holder for any conversion, except for such transfer taxes, if any.

Conversion calculations:
                       Date to Effect Conversion

                       Number of shares of Preferred Stock to be Converted

                       Stated Value of shares of Preferred Stock to be Converted

                       Number of shares of Common Stock to be Issued

                       Applicable Conversion Price

                       Signature

                       Name

                       AddressSECURED  CONVERTIBLE  PREFERRED  STOCK  PURCHASE  AGREEMENT       (this
"AGREEMENT"),  dated as of April 7, 2000,  among  CeleXx  Corporation,  a Nevada
corporation  (the  "COMPANY"),  and the  investors  signatory  hereto (each such
investor  is a  "Purchaser"  and  all  such  investors  are,  collectively,  the
"PURCHASERS").

         WHEREAS,  subject  to the  terms  and  conditions  set  forth  in  this
Agreement,  the  Company  desires  to issue and sell to the  Purchasers  and the
Purchasers,  severally  and not  jointly,  desire to purchase  from the Company,
shares of the Company's 6% Series A Convertible Preferred Stock, $.001 par value
per share (the  "Preferred  Stock"),  which are  convertible  into shares of the
Company's common stock, $.001 par value per share (THE "COMMON STOCK").

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

                                    ARTICLE I
                                PURCHASE AND SALE

         1.1      THE CLOSING.
                  -----------

                  (A) THE CLOSING.  (i) Subject to the terms and  conditions set
forth in this Agreement,  the Company shall issue and sell to the Purchasers and
the Purchasers  shall,  severally and not jointly,  purchase an aggregate of 350
shares of Preferred  Stock (the  "SHARES")  for an aggregate  purchase  price of
$3,500,000.  The closing of the purchase and sale of the Shares (the  "CLOSING")
shall take place at the offices of Robinson  Silverman  Pearce Aronsohn & Berman
LLP  ("ROBINSON  SILVERMAN"),  1290 Avenue of the Americas,  New York,  New York
10104,  immediately  following  the  execution  hereof or such later date as the
parties shall agree.  The date of the Closing IS hereinafter  referred to as the
"CLOSING DATE."

                           (ii)     At the Closing, the parties shall deliver or
shall cause to be delivered the following: (A) the Company shall deliver to each
Purchaser  (1) stock  certificates,  registered  in the name of such  Purchaser,
representing  a number of Shares equal to the quotient  obtained by dividing the
purchase price  indicated below such  Purchaser's  name on the signature page to
this agreement by 10,000,  (2) a Common STock purchase  warrant,  in the form of
Exhibit D,  registered  in the name of such  Purchaser,  pursuant  to which such
Purchaser  shall have the right to acquire the number of shares of Common  Stock
indicated  below such  Purchaser's  name on the signature page to this agreement
(collectively,  the  "WARRANTS")  (3) the legal opinion of Atlas  Perlman,  P.A.
outside  counsel  to the  Company  in the form of  Exhibit  C,  (4) an  executed
Registration Rights Agreement,  dated the date hereof, among the Company and the
purchasers, in the form of Exhibit B (the "REGISTRATION RIGHTS AGREEMENT");  (5)
an executed Security Agreement, dated the date hereof, among the Company and the
purchasers, in the form of Exhibit F (the "SECURITY AGREEMENT"), (6) an executed
Intellectual  Property  Security  Agreement,  dated the date  hereof,  among the
Company  and  the  purchasers,  in the  form  of  Exhibit  G (the  "IP  SECURITY
AGREEMENT");   (7) an executed  Stock Pledge Agreement,  dated the  date hereof,

                                       -1-

<PAGE>

 among the Company and the Purchasers,  in the
form of Exhibit H (the "COMPANY  STOCK PLEDGE  AGREEMENT");  (8) a form of Stock
Pledge Agreement, dated the date hereof, between the Company, the Purchasers and
the pledgor  signatory  thereto (the  "SHAREHOLDER  STOCK PLEDGE AGREEMENT" and,
together   with  the  Company   Stock  Pledge   Agreement,   the  "STOCK  PLEDGE
AGREEMENTS"),  (9) a letter of  consent  from  Finova  Bank,  consenting  to the
transaction contemplated in the Transaction Documents (as defined below) in form
mutually  acceptable to the parties;  (10) executed Transfer Agent Instructions,
in the  form of  exhibit  E,  delivered  to and  acknowledged  by the  Company's
Transfer  Agent (the  "TRANSFER  AGENT  INSTRUCTIONS"),  and (11)  letters  from
certain agreed  shareholders of the Company,  in form mutually acceptable to the
parties,  by  which  such  shareholders  agree to lock up all  dispositions  and
transfers  of Common  Stock owned by them  through the 180th day  following  the
Effective  Date (as defined in Section  3.1(b));  and (B) each  Purchaser  shall
deliver (1) the purchase  price  indicated  below such  Purchaser's  name on the
signature  page to this  Agreement  in  United  States  dollars  in  immediately
available  funds by wire  transfer  to an account  designated  in writing by the
Company for such purpose,  and (2) executed  copies of the  Registration  Rights
Agreement,   Security   Agreement,   IP  Security  Agreement  and  Stock  Pledge
Agreements.

         1.2 TERMS OF PREFERRED STOCK. The Preferred Stock shall have the rights
preferences  and  privileges  set forth in Exhibit A, and shall be  incorporated
into a Certificate of Designation (the "CERTIFICATE OF DESIGNATION") to be filed
prior to the Closing by the Company with the  Secretary  of State of Nevada,  in
form and substance mutually agreed to by the parties.

         1.3 CERTAIN DEFINED TERMS.  For purposes of this  Agreement,  "ORIGINAL
ISSUE DATE" and  "TRADING  DAY" shall have the  meanings set forth in Exhibit A;
"BUSINESS  DAY"  shall mean any day  except  Saturday,  Sunday and any day which
shall be a federal legal holiday or a day on which banking  institutions  in the
State of New York or the State of Florida are  authorized  or required by law or
other governmental action to close; "PERSON" means an individual or corporation,
partnership,  trust, incorporated or unincorporated association,  joint venture,
limited  liability  company,  joint stock  company,  government (or an agency or
subdivision thereof) or other entity of any kind.

                                   ARTICLE II
                         REPRESENTATIONS AND WARRANTIES

         2.1      REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company  hereby  makes the  following  representations  and  warranties  to  the
Purchasers:

                  (A)   ORGANIZATION  AND   QUALIFICATION.   The  Company  is  a
corporation duly  incorporated,  validly existing and in good standing under the
laws of the State of Nevada, with the requisite corporate power and authority to
own and use its  properties and assets and to carry on its business as currently
conducted.  The Company has no subsidiaries  other than as set forth in Schedule
2.1(A) (collectively the "SUBSIDIARIES"). Each of the Subsidiaries is an entity,
duly incorporated or otherwise organized,  validly existing and in good standing
under the laws of the  jurisdiction of its  incorporation  or  organization  (as
applicable),  with  the  requisite  power  and  authority  to own  and  use  its
properties and assets and to carry on its business as currently conducted.

                                       -2-

<PAGE>

Each of the Company and the Subsidiaries is duly qualified to do business and is
in good  standing as a foreign  corporation  in each  jurisdiction  in which the
nature  of  the  business   conducted  or  property   owned  by  it  makes  such
qualification necessary,  except where the failure to be so qualified or in good
standing, as the case may be, could not,  individually or in the aggregate,  (x)
adversely affect the legality,  validity or enforceability of the Securities (as
defined below) or any of this Agreement,  the Registration Rights Agreement, the
Warrants, the Security Agreement,  the IP Security Agreement,  the Company Stock
Pledge  Agreement  or  the  Transfer  Agent  Instructions   (collectively,   the
"TRANSACTION DOCUMENTS"), (y) have or result in a material adverse effect on the
results of operations,  assets, prospects, or condition (financial or otherwise)
of the Company and the  Subsidiaries,  taken as a whole, or (z) adversely impair
the Company's  ability to perform fully on a timely basis its obligations  under
any of the  Transaction  Documents (any of (x), (y) or (z), a "MATERIAL  ADVERSE
EFFECT").

                  (B) AUTHORIZATION;  ENFORCEMENT. The Company has the requisite
corporate  power and authority to enter into and to consummate the  transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations  thereunder.  The execution and delivery of each of the  Transaction
Documents  by  the  Company  and  the  consummation  by it of  the  transactions
contemplated  thereby have been duly  authorized by all necessary  action on the
part of the Company and no further  action is required by the  Company.  Each of
the  Transaction  Documents  has been duly  executed  by the Company  and,  when
delivered (or filed,  as the case may be) in  accordance  with the terms hereof,
will  constitute  the valid and binding  obligation  of the Company  enforceable
against the Company in  accordance  with its terms.  Neither the Company nor any
Subsidiary  is  in  violation  of  any  of  the  provisions  of  its  respective
certificate or articles of  incorporation,  by-laws or other  organizational  or
charter documents.

                  (C)  CAPITALIZATION.  The  number of  authorized,  issued  and
outstanding capital stock of the Company is set forth in Schedule 2.1(c). except
as disclosed in Schedule  2.1(C),  the Company owns all of the capital  stock of
each Subsidiary. No shares of Common Stock are entitled to preemptive or similar
rights,  nor is any holder of the Common Stock entitled to preemptive or similar
rights arising out of any agreement or understanding  with the Company by virtue
of any of the Transaction Documents. Except as a result of the purchase and sale
of the Shares and the warrants and except as disclosed in Schedule 2.1(C), there
are no outstanding  options,  warrants,  script rights to subscribe to, calls or
commitments of any character  whatsoever  relating to, or securities,  rights or
obligations convertible into or exchangeable for, or giving any Person any right
to  subscribe  for or  acquire,  any  shares  of  Common  Stock,  or  contracts,
commitments,  understandings,  or  arrangements  by  which  the  Company  or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.

                  (D)  ISSUANCE OF THE SHARES AND THE  WARRANTS.  The Shares and
the Warrants are duly  authorized  and,  when issued and paid for in  accordance
with  the  terms  hereof,  will be duly  and  validly  issued,  fully  paid  and
nonassessable,  free and clear of all  liens,  encumbrances  and rights of first
refusal of any kind (collectively,  "LIENS"). The Company has on the date hereof
and will,  at all times  while the  Shares  and the  Warrants  are  outstanding,
maintain  an  adequate  reserve  of  duly  authorized   shares  of Common Stock,

                                       -3-

<PAGE>

reserved for issuance to the holders of the Shares and the  Warrants,  to enable
it to  perform  its  conversion,  exercise  and  other  obligations  under  this
Agreement,  the  Certificate  of  Designation  and the Warrants.  Such number of
reserved  and  available  shares of Common Stock is not less than the sum of (i)
200% of the  number of  shares of Common  Stock  which  would be  issuable  upon
conversion in full of the Shares on the Closing  Date,  assuming that the Shares
remain  outstanding  for five years and that all accrued  dividends are added to
the Stated Value (as defined in the  Certificate  of  Designation)  and (ii) the
number of shares of Common Stock  issuable upon  exercise of the Warrants  (such
number of shares  of Common  Stock as  contemplated  IN  CLAUSES  (I)-(II),  the
"INITIAL  MINIMUM").  All such  authorized  shares of Common Stock shall be duly
reserved for issuance to the holders of the Shares and the Warrants.  The shares
of Common Stock issuable upon  conversion of the Shares and upon exercise of the
Warrants are  collectively  referred to herein as the  "UNDERLYING  SHARES." The
Shares,  the Warrants and the  Underlying  Shares are  collectively  referred to
herein as, the  "SECURITIES."  When issued in accordance with the Certificate of
Designation  and the Warrants,  the Underlying  Shares will be duly  authorized,
validly issued, fully paid and nonassessable, free and clear of all Liens.

                  (E) NO CONFLICTS.  The execution,  delivery and performance of
the Transaction  Documents by the Company and the consummation by the Company of
the transactions  contemplated  thereby do not and will not (i) conflict with or
violate any  provision  of the  Company's  or any  Subsidiary's  certificate  or
articles of  incorporation,  bylaws or other charter  documents (each as amended
through the date hereof),  or (ii) subject to obtaining  the Required  Approvals
(as defined  below),  conflict  with, or constitute a default (or an event which
with notice or lapse of time or both would become a default)  under,  or give to
others any rights of termination,  amendment, acceleration or cancellation (with
or without notice,  lapse of time or both) of, any agreement,  credit  facility,
debt or other instrument  (evidencing a Company or Subsidiary debt or otherwise)
or other  understanding  to which the Company or any Subsidiary is a party or by
which  any  property  or  asset of the  Company  or any  Subsidiary  is bound or
affected,  or (iii) result in a violation of any law, rule,  regulation,  order,
judgment,  injunction,  decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations), or by which any property or asset of the
Company  or a  Subsidiary  is bound or  affected;  except in the case of each of
clauses (ii) and (iii), as could not, individually or in the aggregate,  have or
result in a Material  Adverse  Effect.  The business of the Company is not being
conducted in violation of any law,  ordinance or regulation of any  governmental
authority,  except for violations which, individually or in the aggregate, could
not have or result in a Material Adverse Effect.

                  (F) FILINGS,  CONSENTS AND APPROVALS.  Neither the Company nor
any Subsidiary is required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or  registration  with,  any court or
other federal,  state, local or other governmental  authority or other Person in
connection  with the execution,  delivery and  performance by the Company of the
Transaction  Documents,  other  than  (i)  the  filing  of  the  Certificate  of
Designation  with the  Secretary of State of Nevada,  (ii) the filings  required
pursuant to Section  3.10,  (iii) the filing with the  Securities  and  Exchange
Commission  (the   "COMMISSION")  of  a  registration   statement   meeting  the
requirements  set forth in the  Registration  Rights  Agreement and covering the
resale  of the  underlying  shares by the  Purchasers  (the  "UNDERLYING  SHARES
REGISTRATION STATEMENT"), and (iv)in all other cases where the failure to obtain

                                       -4-

<PAGE>

such consent,  waiver,  authorization  or order,  or to give such notice or make
such filing or registration could not have or result in,  individually or in the
aggregate, a material adverse effect (collectively, the "REQUIRED APPROVALS").

                  (G)  LITIGATION;   PROCEEDINGS.  There  is  no  action,  suit,
inquiry,  notice of violation,  proceeding or  investigation  pending or, to the
knowledge of the Company,  threatened against or affecting the Company or any of
its Subsidiaries or any of their respective  properties  before or by any court,
arbitrator,  governmental  or  administrative  agency  or  regulatory  authority
(federal, state, county, local or foreign) (collectively, an "ACTION") which (i)
adversely affects or challenges the legality,  validity or enforceability of any
of the Transaction Documents or the Securities or (ii) could, individually or in
the aggregate, have or result in a Material Adverse Effect.

                  (H) NO DEFAULT  OR  VIOLATION.  Neither  the  Company  nor any
Subsidiary (i) is in default under or in violation of (and no event has occurred
which has not been waived  which,  with  notice or lapse of time or both,  would
result in a default by the Company or any Subsidiary under), nor has the Company
or any Subsidiary received notice of a claim that it is in default under or that
it is in  violation  of, any  indenture,  loan or credit  agreement or any other
agreement  or  instrument  to  which  it is a party or by which it or any of its
properties is bound, (ii) is in violation of any order of any court,  arbitrator
or  governmental  body,  or  (iii)  is in  violation  of any  statute,  rule  or
regulation of any governmental  authority,  in each case of clauses (i), (ii) or
(iii)  above,  except as could not  individually  or in the  aggregate,  have or
result in a Material Adverse Effect.

                  (I)   PRIVATE   OFFERING.   Assuming   the   accuracy  of  the
representations   and  warranties  of  the  Purchasers  set  forth  in  Sections
2.2(b)-(g),  the offer, issuance and sale of the Securities to the Purchasers as
contemplated  hereby  are  exempt  from  the  registration  requirements  of the
Securities ACT OF 1933, AS AMENDED (THE "SECURITIES  ACT").  Neither the Company
nor any Person  acting on its behalf  has taken or is, to the  knowledge  of the
Company,  contemplating  taking any action  which could  subject  the  offering,
issuance  or sale of the  Securities  to the  registration  requirements  of the
Securities  Act including  soliciting any offer to buy or sell the Securities by
means of any form of general solicitation or advertising.

                  (J) SEC Documents; Financial Statements. The Company has filed
all reports  required  to be filed by it under the  Securities  Exchange  Act of
1934, as amended (the "EXCHANGE  ACT"),  including  pursuant to Section 13(a) or
15(d)  thereof,  for the two years  preceding  the date hereof (or such  shorter
period as the Company was required by law to file such  material) (the foregoing
materials  being  collectively  referred to herein as the "SEC  DOCUMENTS"  and,
together with the schedules to this agreement,  the "DISCLOSURE MATERIALS") on a
timely  basis or has  received a valid  extension of such time of filing and has
filed any such SEC Documents prior to the expiration of any such  extension.  As
of their respective  dates, the SEC Documents  complied in all material respects
with the  requirements  of the Securities Act and the Exchange Act and the rules
and regulations of the Commission  promulgated  thereunder,  and none of the SEC
Documents,  when filed,  contained  any untrue  statement of a material  fact or
omitted to state a material fact  required to be stated  therein or necessary in
order to make the statements  therein, in light of the circumstances under which
they were made, not misleading.  All material agreements to which the Company is
a party or to which the  property or assets of the Company are subject have been
filed as exhibits to the SEC Documents as  required.  The  financial  statements

                                       -5-

<PAGE>

of the Company  included in the SEC  Documents  comply in all material  respects
with  applicable  accounting  requirements  and the rules and regulations of the
Commission  with  respect  thereto  as in  effect  at the time of  filing.  Such
financial  statements have been prepared in accordance  with generally  accepted
accounting  principles applied on a consistent BASIS DURING THE PERIODS INVOLVED
("GAAP"),  except as may be otherwise specified in such financial  statements or
the notes  thereto,  and fairly  present in all material  respects the financial
position  of the  Company and its  consolidated  subsidiaries  as of and for the
dates thereof and the results of operations  and cash flows for the periods then
ended,  subject,  in the case of unaudited  statements,  to normal,  immaterial,
year-end  audit  adjustments.  Since December 31, 1999,  except as  specifically
disclosed  in the SEC  Documents,  (a) there has been no  event,  occurrence  or
development that has resulted or that could result in a Material Adverse Effect,
(b) the Company has not incurred any liabilities (contingent or otherwise) other
than (x) liabilities incurred in the ordinary course of business consistent with
past practice and (y)  liabilities not required to be reflected in the Company's
financial  statements  pursuant to GAAP or otherwise required to be disclosed in
filings made with the Commission,  (c) the Company has not altered its method of
accounting  or the identity of its auditors and (d) the Company has not declared
or  made  any  payment  or  distribution  of  cash  or  other  property  to  its
stockholders  or officers or directors  (other than in compliance  with existing
Company  stock option  plans) with respect to its capital  stock,  or purchased,
redeemed  (or made any  agreements  to  purchase  or  redeem)  any shares of its
capital stock.

                  (K)     INVESTMENT COMPANY.  The Company is not, and is not an
Affiliate (as defined in Rule 405 under the Securities Act)  of,  an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.

                  (L)  CERTAIN   FEES.   Except  for  certain  fees  payable  to
Wellington Capital  Corporation,  by the Company, no fees or commissions will be
payable by the Company to any broker,  financial advisor or consultant,  finder,
placement  agent,  investment  banker,  bank or other Person with respect to the
transactions  contemplated  by this  Agreement.  The  Purchasers  shall  have no
obligation  with respect to any fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this Section that may
be due in connection with the transactions  contemplated by this Agreement.  The
Company  shall  indemnify  and hold harmless the  Purchasers,  their  employees,
officers, directors, agents, and partners, and their respective Affiliates, from
and  against  all  claims,  losses,  damages,  costs  (including  the  costs  of
preparation  and attorney's  fees) and expenses  suffered in respect of any such
claimed or existing fees, as such fees and expenses are incurred.

                  (M)      SOLICITATION MATERIALS.   Neither the Company nor any
Person acting on the Company's behalf has solicited any offer to buy or sell the
Securities by means of any form of general solicitation or advertising.

                  (N)    SENIORITY. No class of equity securities of the Company
is senior  to  the  Shares  in  right  of  payment,  whether upon liquidation or
dissolution, or otherwise.

                  (O)    LISTING AND MAINTENANCE REQUIREMENTS COMPLIANCE. Except
as set  forth  in  the  SEC  Documents,  the  Company  has not, in the two years
preceding the date hereof (or such shorter  period  from which the Common  Stock

                                       -6-

<PAGE>

has been listed or quoted for trading),  received  notice (written or oral) from
any stock exchange,  market or trading  facility on which the Common Stock is or
has been listed (or on which it has been  quoted) to the effect that the Company
is not in  compliance  with the  listing  or  maintenance  requirements  of such
exchange or market.  The  Company is, and has no reason to believe  that it will
not in the  foreseeable  future  continue  to be,  in  compliance  with all such
listing and maintenance requirements.

                  (P) PATENTS AND TRADEMARKS.  The Company and its  Subsidiaries
have,  or have rights to use,  all  patents,  patent  applications,  trademarks,
trademark  applications,  service marks, trade names,  copyrights,  licenses and
rights  which  are  necessary  or  material  for use in  connection  with  their
respective  business as described in the SEC Reports and which the failure to so
have would have a  material  adverse  effect  (collectively,  the  "INTELLECTUAL
PROPERTY RIGHTS"). Neither the Company nor any Subsidiary has received a written
notice  that  the  Intellectual  Property  Rights  used  by the  Company  or its
Subsidiaries  violates or infringes  upon the rights of any Person,  to the best
knowledge of the Company. All such Intellectual  Property Rights are enforceable
and  there  is no  existing  infringement  by  another  Person  of  any  of  the
Intellectual Property Rights.

                  (Q) REGISTRATION  RIGHTS;  RIGHTS OF PARTICIPATION.  Except as
disclosed under Section 6(c) of the Registration  Rights Agreement,  the Company
has not  granted  or  agreed  to  grant  to any  Person  any  rights  (including
"piggy-back"  registration  rights)  to  have  any  securities  of  the  Company
registered  with the Commission or any other  governmental  authority which have
not been satisfied. No Person, has any right of first refusal, preemptive right,
right of participation,  or any similar right to participate in the transactions
contemplated by the Transaction Documents.

                  (R)  REGULATORY  PERMITS.  The  Company  and its  Subsidiaries
possess all certificates,  authorizations  and permits issued by the appropriate
Federal,  state or foreign  regulatory  authorities  necessary to conduct  their
respective  businesses  as  described  in the SEC  Documents,  except  where the
failure to possess such permits  could not,  individually  or in the  aggregate,
have or result in a material adverse effect  ("MATERIAL  PERMITS"),  and neither
the Company  nor any such  Subsidiary  has  received  any notice of  proceedings
relating to the revocation or modification of any Material Permit.

                  (S) TITLE.  The  Company  and the  Subsidiaries  have good and
marketable  title in fee  simple  to all real  property  owned by them  which is
material  to the  business  of the  Company  and its  Subsidiaries  and good and
marketable title in all personal property owned by them which is material to the
business of the Company and its Subsidiaries, in each case free and clear of all
Liens,  except for Liens as do not materially  affect the value of such property
and do not interfere  with the use made and proposed to be made of such property
by the Company and its Subsidiaries. Any real property and facilities held under
lease  by the  Company  and its  Subsidiaries  are  held by  them  under  valid,
subsisting and enforceable  leases of which the Company and its Subsidiaries are
in compliance  and do not interfere with the use made and proposed to be made of
such property and buildings by the Company and its Subsidiaries.

                                       -7-

<PAGE>

                  (T) ABSENCE OF CERTAIN PROCEEDINGS. Except as described in the
SEC  Reports,  (i) neither the Company nor any  Subsidiary,  nor any director or
officer thereof,  is or has been the subject of any Action involving (A) a claim
of violation of or liability  under  federal or state  securities  laws or (B) a
claim of breach of fiduciary duty; (ii) the Company does not have pending before
the Commission  any request for  confidential  treatment of information  and the
Company has no knowledge  of any expected  such request that would be made prior
to the Effectiveness Date (as defined in the Registration Rights Agreement); and
(iii) there has not been,  and to the best of the Company's  knowledge  there is
not pending or contemplated,  any investigation by the Commission  involving the
Company or any current or former director or officer of the Company.

                  (U)  LABOR RELATIONS.  No material labor problem exists or, to
the knowledge of the Company,  is imminent with respect to any of the  employees
of the Company.

                  (V) DISCLOSURE.  The Company  confirms that neither it nor any
other  Person  acting on its behalf has provided  any of the  Purchasers  or its
agents or counsel with any  information  that  constitutes  or might  constitute
material non-public  information.  The Company understands and confirms that the
Purchasers  shall be  relying  on the  foregoing  representations  in  effecting
transactions  in  securities  of the  Company.  All  disclosure  provided to the
Purchasers regarding the Company, its business and the transactions contemplated
hereby, including the Schedules to this Agreement,  furnished by or on behalf of
the Company are true and  correct and do not contain any untrue  statement  of a
material fact or omit to state any material fact  necessary in order to make the
statements  made therein,  in light of the  circumstances  under which they were
made, not misleading.

         2.2    REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser
hereby for itself  and  for  no  other  Purchaser represents and warrants to the
Company as follows:

                  (A) ORGANIZATION;  AUTHORITY. Such Purchaser is an entity duly
organized,  validly  existing  and  in  good  standing  under  the  laws  of the
jurisdiction  of its  organization  with the requisite  corporate or partnership
power  and  authority  to  enter  into  and  to  consummate   the   transactions
contemplated  by the  Transaction  Documents  and  otherwise  to  carry  out its
obligations  thereunder.  The  purchase  by  such  Purchaser  of the  Securities
hereunder has been duly  authorized by all necessary  action on the part of such
Purchaser.  Each of this  Agreement,  the  Registration  Rights  Agreement,  the
Security Agreement, the IP Security Agreement and the Stock Pledge Agreement has
been duly executed by such  Purchaser,  and when  delivered by such Purchaser in
accordance with the terms hereof,  will constitute the valid and legally binding
obligation of such  Purchaser,  enforceable  against it in  accordance  with its
terms.

                  (B)  INVESTMENT  INTENT.   Such  Purchaser  is  acquiring  the
Securities as principal for its own account for investment purposes only and not
with a view to or for  distributing  or reselling  such  Securities  or any part
thereof,  without prejudice,  however, to such Purchaser's right, subject to the
provisions of this Agreement, the Registration Rights Agreement and the Warrant,
at all times to sell or otherwise  dispose of all or any part of such Securities
pursuant to an effective  registration  statement  under the  Securities  Act or
under an exemption  from such  registration  and in compliance  with  applicable
federal and state securities laws.   Such Purchaser is acquiring  the Securities

                                       -8-

<PAGE>

hereunder in the ordinary  course of its business.  Such Purchaser does not have
any  agreement  or  understanding,  directly or  indirectly,  with any person to
distribute the Securities.

                  (C) PURCHASER  STATUS.  At the time such Purchaser was offered
the Securities,  it was, and at the date hereof it is, and at each exercise date
under its respective Warrants,  it will be, an "accredited  investor" as defined
in Rule 501(a) under the Securities Act.

                  (D) EXPERIENCE OF SUCH PURCHASER. Such Purchaser, either alone
or together with its  representatives,  has such knowledge,  sophistication  and
experience in business and  financial  matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment.

                  (E) ABILITY OF SUCH PURCHASER TO BEAR RISK OF INVESTMENT. Such
Purchaser is able to bear the economic risk of an  investment in the  Securities
and, at the present time, is able to afford a complete loss of such investment.

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

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

                  (H) RELIANCE. Such Purchaser understands and acknowledges that
(i) the Securities are being offered and sold to it without  registration  under
the Securities Act in a private  placement that is exempt from the  registration
provisions of the Securities Act and (ii) the  availability  of such  exemption,
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing  representations  and such Purchaser  hereby  consents to such
reliance.

          The Company  acknowledges  and agrees that no  Purchaser  makes or has
made  any  representations  or  warranties  with  respect  to  the  transactions
contemplated hereby other than those specifically set forth in this Section 2.2.

                                       -9-

<PAGE>

                                   ARTICLE III
                         OTHER AGREEMENTS OF THE PARTIES

         3.1  TRANSFER  RESTRICTIONS.  (a)  Securities  may only be  disposed of
pursuant to an effective registration statement under the Securities Act, to the
Company or pursuant  to an  available  exemption  from or in a  transaction  not
subject  to  the  registration  requirements  of  the  Securities  Act,  and  in
compliance with any applicable  federal and state securities laws. In connection
with any transfer of Securities other than pursuant to an effective registration
statement or to the Company,  except as otherwise set forth herein,  the Company
may  require  the  transferor  thereof to  provide to the  Company an opinion of
counsel  selected by the  transferor,  the form and  substance of which  opinion
shall be  reasonably  satisfactory  to the  Company,  to the  effect  that  such
transfer does not require registration of such transferred  securities under the
Securities Act.  Notwithstanding the foregoing, the Company, without requiring a
legal  opinion  as  described  in the  immediately  preceding  sentence,  hereby
consents  to and agrees to  register  on the books of the  Company  and with any
transfer agent for the securities of the Company any transfer of Securities by a
Purchaser to an  Affiliate of such  Purchaser or to one or more funds or managed
accounts under common management with such Purchaser, and any transfer among any
such  Affiliates  or one or more funds or managed  accounts,  provided  that the
transferee  certifies  to the Company  that it is an  "accredited  investor"  as
defined in Rule 501(a) under the  Securities  Act and that it is  acquiring  the
Securities  solely  for  investment  purposes  (subject  to  the  qualifications
hereof).  Any such transferee shall agree in writing to be bound by the terms of
this Agreement and shall have the rights of a Purchaser under this Agreement and
the Registration Rights Agreement.

                  (b)      The Purchasers agree to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the Securities:

                  NEITHER THESE  SECURITIES NOR THE SECURITIES  INTO WHICH THESE
         SECURITIES ARE  [CONVERTIBLE]  [EXERCISABLE]  HAVE BEEN REGISTERED WITH
         THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES  COMMISSION OF
         ANY STATE IN RELIANCE  UPON AN EXEMPTION  FROM  REGISTRATION  UNDER THE
         SECURITIES  ACT OF  1933,  AS  AMENDED  (THE  "SECURITIES  ACT"),  AND,
         ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
         REGISTRATION  STATEMENT  UNDER THE  SECURITIES  ACT OR  PURSUANT  TO AN
         AVAILABLE  EXEMPTION  FROM,  OR IN A  TRANSACTION  NOT  SUBJECT TO, THE
         REGISTRATION  REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
         APPLICABLE STATE SECURITIES LAWS.

                  Underlying Shares shall not contain the legend set forth above
nor any other legend if the conversion of Shares and exercise of the Warrants or
other  issuances  of  Underlying  Shares  as  contemplated   hereby  or  by  the
Certificate  of  Designation  or the  Warrants  occurs  at  any  time  while  an
Underlying Shares  Registration  Statement is effective under the Securities Act
or if the holder is relying on Rule 144  promulgated  under the  Securities  Act
("RULE 144") in connection with the resale of such Underlying  Shares or, in the
event there is not an effective Underlying Shares Registration Statement at such

                                      -10-

<PAGE>

time and Rule 144 is not then  available,  if, in the  opinion of counsel to the
Company,  such  legend is not  required  under  applicable  requirements  of the
Securities Act (including judicial  interpretations and pronouncements issued by
the staff of the  Commission).  The Company shall cause its counsel to issue the
legal  opinion  included in the Transfer  Agent  Instructions  to the  Company's
transfer agent on the day that the Underlying Shares  Registration  Statement is
declared  effective by the Commission (the "EFFECTIVE DATE"). The Company agrees
that, in the event any Underlying  Shares are issued with a legend in accordance
with this Section 3.1(b),  it will,  within three (3) Trading Days after request
therefor  by  a  Purchaser,   provide  such  Purchaser  with  a  certificate  or
certificates  representing such Underlying Shares, free from such legend at such
time as such legend would not have been required  under this Section  3.1(b) had
such issuance occurred on the date of such request. The Company may not make any
notation  on its  records  or give  instructions  to any  transfer  agent of the
Company which enlarge the restrictions of transfer set forth in this Section.

         3.2  ACKNOWLEDGMENT  OF  DILUTION.  The Company  acknowledges  that the
issuance  of  the  Underlying  Shares  upon  (i)  conversion  of the  Shares  in
accordance with the terms of the  Certificate of Designation,  and (ii) exercise
of the Warrants in accordance  with their terms,  will result in dilution of the
outstanding  shares of Common Stock,  which  dilution may be  substantial  under
certain market conditions.  The Company further acknowledges that its obligation
to issue Underlying  Shares upon (x) conversion of the Shares in accordance with
the terms of the Certificate of Designation, and (y) exercise of the Warrants in
accordance  with their terms,  is  unconditional  and  absolute,  subject to the
limitations  set  forth  herein,  in the  Certificate  of  Designation  and  the
Warrants, regardless of the effect of any such dilution.

         3.3  FURNISHING  OF   INFORMATION.   As  long  as  the  Purchasers  own
Securities,  the  Company  covenants  to timely  file (or obtain  extensions  in
respect  thereof  and file  within the  applicable  grace  period)  all  reports
required  to be filed by the Company  after the date hereof  pursuant to Section
13(a) or 15(d) of the Exchange Act. As long as the Purchasers own Securities, if
the Company is not required to file reports  pursuant to such sections,  it will
prepare and furnish to the Purchasers and make publicly  available in accordance
with Rule 144(c)  promulgated  under the Securities  Act such  information as is
required for the  Purchasers to sell the Securities  under Rule 144  promulgated
under the Securities Act. The Company  further  covenants that it will take such
further action as any holder of Securities may  reasonably  request,  all to the
extent  required  from time to time to  enable  such  Person to sell  Underlying
Shares  without  registration  under the Securities Act within the limitation of
the  exemptions  provided  by Rule 144  promulgated  under the  Securities  Act,
including causing its attorneys to render and deliver any legal opinion required
in  order  to  permit a  Purchaser  to  receive  Underlying  Shares  free of all
restrictive  legends and to subsequently  sell Underlying  Shares under Rule 144
upon receipt of a notice of an intention to sell or other form of notice  having
a similar effect. Upon the request of any such Person, the Company shall deliver
to such  Person a  written  certification  of a duly  authorized  officer  as to
whether it has complied with such requirements.

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

                                      -11-

<PAGE>

the  offer  or sale  of the  Securities  in a  manner  that  would  require  the
registration  under  the  Securities  Act of the sale of the  Securities  to the
Purchasers.

         3.5 INCREASE IN AUTHORIZED SHARES. If on any date the Company would be,
if a notice of  conversion or exercise (as the case may be) were to be delivered
on such date,  precluded  from (a) issuing (a) 200% of the number of  Underlying
Shares as would then be issuable  upon a conversion  in full of the Shares,  and
(b) the number of Underlying Shares as would then be issuable upon a Exercise in
full of the warrants (the "CURRENT  REQUIRED  MINIMUM"),  in either case, due to
the unavailability of a sufficient number of authorized but unissued or reserved
shares of  Common  Stock,  then the  Board of  Directors  of the  Company  shall
promptly  (and in any case,  within 30 Business Days from such date) prepare and
mail to the stockholders of the Company proxy materials requesting authorization
to amend the Company's  certificate or articles of incorporation to increase the
number of shares of Common Stock which the Company is  authorized to issue to at
least such number of shares as reasonably  requested by the  Purchasers in order
to provide for such number of authorized and unissued  shares of Common Stock to
enable  the  Company  to comply  with its  issuance,  conversion,  exercise  and
reservation  of  shares  obligations  as  set  forth  in  this  Agreement,   the
Certificate of Designation and the Warrants (the sum of (x) the number of shares
of Common Stock then  outstanding  plus all shares of Common Stock issuable upon
exercise of all outstanding options,  warrants and convertible instruments,  and
(y) the  Current  Required  Minimum,  is  deemed  for  purposes  hereof  to be a
reasonable  number). In connection  therewith,  the Board of Directors shall (a)
adopt  proper  resolutions  authorizing  such  increase,  (b)  recommend  to and
otherwise use its best efforts to promptly and duly obtain stockholder  approval
to carry out such resolutions (and hold a special meeting of the stockholders no
later  than the  earlier  to occur of the 60th day after  delivery  of the Proxy
materials relating to such meeting and the 90th day after request by a holder of
Securities to issue the number of Underlying Shares in accordance with the terms
hereof)  and (c)  within  five  Business  Days  of  obtaining  such  stockholder
authorization,  file an  appropriate  amendment to the Company's  certificate or
articles of incorporation  to evidence such increase.  Management of the Company
shall also use its best efforts,  including voting of all shares of Common Stock
held by Management in favor of all resolutions to increase the authorized  stock
of the Company hereunder.

         3.6 RESERVATION AND LISTING OF UNDERLYING SHARES. (a) The Company shall
(i) in the time and manner required by any exchange,  market or quotation system
on which the  Common  Stock is  traded,  prepare  and file with such  securities
exchange or market or trading or quotation facility on which the Common Stock is
listed an additional shares listing  application  covering a number of shares of
Common  Stock  which is not less than the Initial  Minimum,  (ii) take all steps
necessary to cause such shares of Common Stock to be approved for listing on any
such securities  exchange or market or trading or quotation  facility as soon as
possible  thereafter,  and (iii)  provide  to the  Purchasers  evidence  of such
listing, and the Company shall maintain the listing of its Common Stock thereon.
If the number of Underlying  Shares issuable upon conversion in full of the then
outstanding Shares and upon exercise in full of the then unexercised  portion of
the Warrants exceeds 85% of the number of Underlying Shares previously listed on
account  thereof,   then  the  Company  shall  take  the  necessary  actions  to
immediately  list a number of Underlying  Shares as equals no less than the then
Current Required Minimum.

                                      -12-

<PAGE>

                  (b) The Company  shall  maintain a reserve of shares of Common
Stock for  issuance  upon the  conversion  in full of the Shares and exercise in
full of the Warrants in  accordance  with this  Agreement,  the  Certificate  of
Designation and the Warrants, respectively, in such amount as may be required to
fulfill its obligations in full under the Transaction  Documents,  which reserve
shall equal no less than the then Current Required Minimum.

         3.7   CONVERSION   AND  EXERCISE   PROCEDURES.   The   Transfer   Agent
Instructions,  Conversion  Notice (as defined in the Certificate of Designation)
and  Notice of  Exercise  under the  Warrants  set  forth  the  totality  of the
procedures  with  respect to the  conversion  of the Shares and  exercise of the
Warrants,  including  the form of legal  opinion,  if  necessary,  that shall be
rendered  to the  Company's  transfer  agent  and  such  other  information  and
instructions as may be reasonably  necessary to enable the Purchasers to convert
their Shares and exercise their Warrants as  contemplated  in the Certificate of
Designation and the Warrants (as applicable).

         3.8  CONVERSION AND EXERCISE  OBLIGATIONS  OF THE COMPANY.  The Company
shall honor  conversion  of the Shares and  exercise of the  Warrants  and shall
deliver  Underlying Shares in accordance with the respective  terms,  conditions
and time periods set forth in the Certificate of Designation and Warrants.

         3.9 RIGHT OF FIRST REFUSAL;  SUBSEQUENT REGISTRATIONS.  (a) The Company
shall not,  directly or  indirectly,  without the prior  written  consent of the
Purchasers,  offer, sell, grant any option to purchase,  or otherwise dispose of
(or  announce  any  offer,  sale,  grant  or any  option  to  purchase  or other
disposition)  any  of  its  or  its  Affiliates'  equity  or   equity-equivalent
securities  including  the issuance of any debt or other  instrument at any time
over life thereof  convertible  into or  exchangeable  for Common Stock,  or any
other transaction intended to be exempt or not subject to registration under the
Securities  Act (a  "SUBSEQUENT  PLACEMENT")  for a period of 180 days after the
Effective  Date,  provided,  that such 180 day period  shall be extended for the
number of Trading  Days during  such  period (A) in which  trading in the Common
Stock is suspended by any securities  exchange or market or quotation  system on
which the Common Stock is then listed, or (B) during which the Underlying Shares
Registration  Statement is not  effective,  or (C) during  which the  prospectus
included in the Underlying Shares Registration  Statement may not be used by the
holders thereof for the resale of Underlying Shares,  except (i) the granting of
options or warrants to employees,  officers and  directors,  and the issuance of
shares upon exercise of options granted,  under any stock option plan heretofore
or hereinafter duly adopted by the Company, (ii) shares of Common Stock issuable
upon exercise of any currently  outstanding  warrants and upon conversion of any
currently  outstanding  convertible  securities  of the  Company,  in each  case
disclosed  in  Schedule  2.1(C),  (iii)  shares of Common  Stock  issuable  upon
conversion of Shares in accordance  with the Certificate of Designation and upon
exercise of the Warrants in accordance  with their terms,  (iv) shares of Common
Stock issued in connection with a Strategic  Transaction (as defined below), and
(v) issuances of shares of Common Stock as payment of the purchase  price for an
acquisition of assets or stock of an unaffiliated Person, unless (A) the Company
delivers to each of the Purchasers a written notice (the  "SUBSEQUENT  PLACEMENT
NOTICE") of its intention to effect such Subsequent Placement,  which Subsequent
Placement Notice shall describe in reasonable  detail the proposed terms of such
Subsequent  Placement,  the amount of proceeds intended to be raised thereunder,
the Person with whom such Subsequent  Placement shall be effected,  and attached
to which shall be a

                                      -13-

<PAGE>

term sheet or similar document relating thereto and (B) such Purchaser shall not
have notified the Company by 6:30 p.m. (New York City time) on the tenth Trading
Day after its receipt of the Subsequent  Placement  Notice of its willingness to
provide (or to cause its sole  designee to provide),  subject to  completion  of
mutually  acceptable  documentation,  financing to the Company on the same terms
set forth in the Subsequent  Placement  Notice.  If the Purchasers shall fail to
notify the Company of their  intention  to enter into such  negotiations  within
such time period, the Company may effect the Subsequent Placement  substantially
upon the terms and to the Persons (or  Affiliates  Of such persons) set forth in
the Subsequent  Placement Notice;  provided,  that the Company shall provide the
Purchasers with a second Subsequent  Placement Notice,  and the Purchasers shall
again have the right of first refusal set forth above in this  paragraph (a), if
the Subsequent  Placement  subject to the initial  Subsequent  Placement  Notice
shall not have been  consummated  for any  reason on the terms set forth in such
Subsequent  Placement  Notice within  thirty  Trading Days after the date of the
initial  Subsequent  Placement  Notice with the Person (or an  Affiliate of such
Person)  identified in the Subsequent  Placement Notice. If the Purchasers shall
indicate a willingness to provide financing in excess of the amount set forth in
the  Subsequent  Placement  Notice,  then each  Purchaser  shall be  entitled to
provide financing  pursuant to such Subsequent  Placement Notice up to an amount
equal to such  Purchaser's  pro-rata  portion of the aggregate  number of Shares
purchased by such Purchaser under this  Agreement,  but the Company shall not be
required to accept  financing  from the Purchasers in an amount in excess of the
amount set forth in the Subsequent  Placement Notice. A "STRATEGIC  TRANSACTION"
shall mean a  transaction  or  relationship  in which the Company  issues Common
Stock to an entity which is,  itself or through its  subsidiaries,  an operating
company in a business  related to the  business  of the Company and in which the
Company receives  material  benefits in addition to the investment of funds, but
shall not  include a  transaction  in which the  Company is  issuing  securities
primarily for the purpose of raising capital.

                  (b) Except for (x) Underlying  Shares,  (y) other "Registrable
Securities" (as such term is defined in the Registration Rights Agreement) to be
registered,  and securities of the Company permitted pursuant to Section 6(c) of
the Registration's  Rights Agreement to be registered,  in the Underlying Shares
Registration Statement in accordance with the Registration Rights Agreement, and
(z) Common Stock  permitted to be issued  pursuant to paragraph  (a)(i) - (v) of
Section 3.9 (a), the Company shall not, for a period of not less than 90 Trading
Days  after the  Effective  Date,  without  the  prior  written  consent  of the
Purchasers  (i)  issue or sell any of its or any of its  Affiliates'  equity  or
equity-equivalent  securities  pursuant to  Regulation S  promulgated  under the
Securities  Act, or (ii) register any securities of the Company.  Any days after
the Effective  Date that a Purchaser is unable to sell  Underlying  Shares under
the Underlying Shares  Registration  Statement shall be added to such 90 Trading
Day period.

         3.10 CERTAIN SECURITIES LAWS DISCLOSURES; PUBLICITY. The Company shall:
(i) on the  Closing  Date issue a press  release  acceptable  to the  Purchasers
disclosing the transactions contemplated hereby, (ii) file with the Commission a
Report on Form 8-K disclosing the  transactions  contemplated  hereby within ten
Business Days after the Closing Date,  and (iii) timely file with the Commission
a Form D promulgated  under the Securities  Act as required  under  Regulation D
promulgated  under  the  Securities  Act  and  provide  a  copy  thereof  to the
Purchasers  promptly after the filing  thereof.  The Company shall, no less than
two Business Days prior to the filing of any disclosure required by clauses (ii)

                                      -14-

<PAGE>

and (iii)  above,  provide a copy thereof to the  Purchasers.  No such filing or
disclosure  may be made that  mentions the  Purchasers by name without the prior
consent of the  Purchasers.  The Company and the  Purchasers  shall consult with
each other in issuing any press releases or otherwise  making public  statements
or filings and other communications with the Commission or any regulatory agency
or  stock  market  or  trading   facility  with  respect  to  the   transactions
contemplated  hereby and neither  party  shall  issue any such press  release or
otherwise  make any  such  public  statement,  filings  or other  communications
without  the prior  written  consent of the other,  which  consent  shall not be
unreasonably withheld or delayed, except that no prior consent shall be required
if such  disclosure is required by law, in which such case the disclosing  party
shall provide the other party with prior notice of such public statement, filing
or other  communication.  Notwithstanding  the foregoing,  the Company shall not
publicly  disclose  the names of the  Purchasers,  or  include  the names of the
Purchasers in any filing with the Commission,  or any regulatory agency, trading
facility or stock market  without the prior written  consent of the  Purchasers,
except  to  the  extent  such  disclosure  (but  not  any  disclosure  as to the
controlling Persons thereof) is required by law, in which case the Company shall
provide the Purchasers with prior notice of such disclosure.

         3.11 USE OF PROCEEDS.  The Company  shall use the net proceeds from the
sale of the Securities  hereunder for working capital  purposes and acquisitions
and not for the  satisfaction  of any portion of the Company's  debt (other than
payment of trade payables in the ordinary  course of the Company's  business and
prior practices),  to redeem any Company equity or equity-equivalent  securities
or to settle any outstanding litigation.

         3.12 REIMBURSEMENT. If any Purchaser, other than by reason of its gross
negligence  or willful  misconduct,  becomes  involved  in any  capacity  in any
action,  proceeding or investigation brought by or against any Person, including
stockholders  of  the  Company,  in  connection  with  or  as a  result  of  the
consummation of the transactions  contemplated by the Transaction Documents, the
Company  will  reimburse  such  Purchaser  for its  reasonable  legal  and other
expenses  (including the cost of any investigation and preparation)  incurred in
connection  therewith,  as such expenses are incurred.  In addition,  other than
with respect to any matter in which a Purchaser  is a named  party,  the Company
will pay such Purchaser the charges, as reasonably determined by such Purchaser,
for the time of any officers or employees of such Purchaser devoted to appearing
and preparing to appear as  witnesses,  assisting in  preparation  for hearings,
trials or pretrial  matters,  or otherwise with respect to inquiries,  hearings,
trials, and other proceedings  relating to the subject matter of this Agreement.
The  reimbursement  obligations of the Company under this paragraph  shall be in
addition to any  liability  which the Company may otherwise  have,  shall extend
upon the same terms and  conditions to any  Affiliates of the Purchasers who are
actually  named in such  action,  proceeding  or  investigation,  and  partners,
directors,  agents,  employees and controlling persons (if any), as the case may
be, of the  Purchasers  and any such  Affiliate,  and shall be binding  upon and
inure  to  the  benefit  of  any   successors,   assigns,   heirs  and  personal
representatives  of the Company,  the  Purchasers and any such Affiliate and any
such Person.  The Company also agrees that neither the  Purchasers  nor any such
Affiliates,  partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company in connection with or as a result of the consummation of
the Transaction Documents except to the extent that any losses, claims, damages,
liabilities   or  expenses  incurred  by  the  Company  result  from  the  gross

                                      -15-

<PAGE>

negligence  or  willful  misconduct  of the  applicable  Purchaser  or entity in
connection with the transactions contemplated by this Agreement.

         3.13 CERTAIN CREDIT FACILITIES.  The Company covenants that it will not
replace or amend any provisions of its proposed credit facility with Finova Bank
in a manner that results in terms less favorable with regard to subordination or
payments under the  Transaction  Documents then as exist in such facility on the
date hereof.

         3.14  SHAREHOLDERS   STOCK  PLEDGE  AGREEMENT.   The  Company  and  the
shareholder/pledgor under the Shareholders Stock Pledge Agreement will use their
best efforts to cause the Shareholders Stock Pledge Agreement to be executed and
delivered and the shares subject thereto be delivered in accordance therewith to
the Purchasers as promptly as possible following the Closing.

                                   ARTICLE IV

                                  MISCELLANEOUS

         4.1 FEES AND EXPENSES.  At the Closing, the Company shall reimburse the
Purchasers  for their legal fees and expenses  incurred in  connection  with the
preparation and  negotiation of the Transaction  Documents by paying to Robinson
Silverman  $25,000  for  the  preparation  and  negotiation  of the  Transaction
Documents.  The amount contemplated by the immediately  preceding sentence shall
be retained by the  Purchasers  and shall not be delivered to the Company at the
Closing.  Other than the amount contemplated herein, and except as otherwise set
forth in the Registration  Rights  Agreement,  Security  Agreement,  IP Security
Agreement  and  Stock  Pledge  Agreements,  each  party  shall  pay the fees and
expenses of its advisers,  counsel,  accountants and other experts,  if any, and
all  other  expenses  incurred  by  such  party  incident  to  the  negotiation,
preparation,  execution, delivery and performance of this Agreement. The Company
shall pay all stamp and other  taxes and duties  levied in  connection  with the
issuance of the Securities.

         4.2 ENTIRE AGREEMENT;  AMENDMENTS. The Transaction Documents,  together
with the Exhibits and  Schedules  thereto and the  Transfer  Agent  Instructions
contain  the entire  understanding  of the parties  with  respect to the subject
matter hereof and supersede all prior  agreements  and  understandings,  oral or
written,  with respect to such matters,  which the parties acknowledge have been
merged into such documents, exhibits and schedules.

         4.3 NOTICES.  Any and all notices or other communications or deliveries
required or permitted to be provided  hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of  transmission,  if
such  notice or  communication  is  delivered  via  facsimile  at the  facsimile
telephone  number  specified in this Section  prior to 6:30 p.m.  (New York City
time) on a Business Day (with  confirmation of transmission),  (ii) the Business
Day after the date of transmission, if such notice or communication is delivered
via  facsimile at the facsimile  telephone  number  specified in this  Agreement
later  than 6:30 p.m.  (New York City time) on any date and  earlier  than 11:59
p.m.  (New York City time) on such date  (with  confirmation  of  transmission),
(iii) the  Business Day  following  the date of mailing,  if sent by  nationally
recognized overnight courier service, or (iv) upon actual receipt by  the  party

                                      -16-

<PAGE>

to whom such notice is required  to be given.  The address for such  notices and
communications shall be as follows:

                         CeleXx Corporation

                         7251 West Palmetto Park Road, Suite 208,
                         Boca Raton, Florida 33433
                         Facsimile No.: (561) 395-1975
                         Attn:  Chief Financial Officer

     With copies to:     Atlas Perlman, P.A.
                         350 Las Olas Boulevard, Suite 1700
                         Fort Lauderdale, Florida 33301
                         Facsimile No.: (954) 766-7800
                         Attn: James M. Schneider, Esq.

    If to a Purchaser:   To the address set forth under such Purchaser's name on
                         the signature pages hereto;

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

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

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

         4.6  SUCCESSORS AND ASSIGNS.  This Agreement  shall be binding upon and
inure to the benefit of the parties and their successors and permitted  assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without  the prior  written  consent of the  Purchasers.  Except as set forth in
Section  3.1(a),  the  Purchasers  may not assign this  Agreement  or any of the
rights or  obligations  hereunder  without  the  consent  of the  Company.  This
provision  shall not limit  any  Purchaser's  right to  transfer  securities  or
transfer or assign rights under the Registration Rights Agreement.

         4.7 NO  THIRD-PARTY  BENEFICIARIES.  This Agreement is intended for the
benefit of the parties  hereto and their  respective  successors  and  permitted
assigns and is not for the benefit of, nor may any provision  hereof be enforced
by, any other Person.

         4.8      GOVERNING LAW. The corporate laws of the State of Nevada shall
govern  all  issues  concerning  the  relative  rights  of  the  Company and its
stockholders.   All other  questions  concerning  the  construction,   validity,

                                      -17-

<PAGE>

enforcement  and  interpretation  of this  Agreement  shall be  governed  by and
construed and enforced in accordance  with the internal laws of the State of New
York,  without regard to the principles of conflicts of law thereof.  Each party
hereby  irrevocably  submits  to the  exclusive  jurisdiction  of the  state and
federal  courts sitting in the City of New York,  borough of Manhattan,  for the
adjudication  of any dispute  hereunder  or in  connection  herewith or with any
transaction  contemplated  hereby or discussed herein (including with respect to
the enforcement of any of the  Transaction  Documents),  and hereby  irrevocably
waives,  and agrees not to assert in any suit,  action or proceeding,  any claim
that it is not personally  subject to the  jurisdiction of any such court,  that
such suit,  action or  proceeding  is improper.  Each party  hereby  irrevocably
waives  personal  service of process and consents to process being served in any
such suit,  action or  proceeding  by mailing a copy thereof via  registered  or
certified  mail or overnight  delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this  Agreement and agrees that
such service shall constitute good and sufficient  service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.

         4.9 SURVIVAL. The representations, warranties, agreements and covenants
contained  herein shall  survive the Closing and the delivery and  conversion or
exercise (as the case may be) of the Shares and the Warrants.

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

         4.11  SEVERABILITY.  In case any one or more of the  provisions of this
Agreement  shall be invalid or  unenforceable  in any respect,  the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be  affecting  or impaired  thereby and the parties  will  attempt to
agree  upon a valid  and  enforceable  provision  which  shall  be a  reasonable
substitute  therefor,  and upon so agreeing,  shall  incorporate such substitute
provision in this Agreement.

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

         4.13     INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS.  The
obligations of each Purchaser  under any Transaction Document is several and not

                                      -18-

<PAGE>

joint with the  obligations  of any other  Purchaser  and no Purchaser  shall be
responsible  in any way for the  performance  of the  obligations  of any  other
Purchaser under any Transaction  Document.  Nothing  contained  herein or in any
Transaction  Document,  and no action taken by any Purchaser  pursuant  thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint  venture  or any other kind of entity,  or create a  presumption  that the
Purchasers are in any way acting in concert with respect to such  obligations or
the transactions  contemplated by the Transaction Document. Each Purchaser shall
be entitled to independently  protect and enforce its rights,  including without
limitation  the  rights  arising  out of  this  Agreement  or  out of the  other
Transaction Documents,  and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.

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                            SIGNATURE PAGES FOLLOWS]

                                      -19-

<PAGE>

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

                                    CELEXX CORPORATION

                                    By:_____________________________________
                                        Name:
                                        Title:

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                                         SIGNATURE PAGE FOR PURCHASER FOLLOWS]

<PAGE>

                                BIRCH CIRCLE LLC

                                        By:_____________________________________
                                        Name:
                                        Title:

                                        Purchase Price for Shares to be

                                        acquired at Closing:          $3,500,000

                                        Number of Shares underlying Warrant:

         Address for Notice:            Birch Circle LLC
                                        c/o Citco Trustees (Cayman) Limited
                                        Commercial Centre
                                        P.O. Box 31106 SMB
                                        Grand Cayman, Cayman Islands
                                        British West Indies
                                        Facsimile No.: (345) 945-7566

         With copies to:                  Robinson Silverman Pearce Aronsohn &
                                          Berman LLP
                                          1290 Avenue of the Americas
                                          New York, NY  10104
                                          Facsimile No.:     (212) 541-4630  and
                                                             (212) 541-1432
                                          Attn:  Eric L. Cohen, Esq.

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

<PAGE>

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

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

                 CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT

                                      Among

                               CELEXX CORPORATION

                                       and

                         THE INVESTORS SIGNATORY HERETO

                            Dated as of April 7, 2000

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

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

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