Document:

EXHIBIT 4.1
                                   -----------
                             SUBSCRIPTION AGREEMENT
                             ----------------------

Dear  Subscriber:

     Stonestreet  Limited  Partnership,  a  limited partnership formed under the
laws  of  Ontario, Canada (the "Subscriber") hereby agrees to purchase, and SBE,
Inc.,  a Delaware corporation (the "Company") hereby agrees to issue and to sell
to  the Subscriber, 555,556 shares of the Company's $.001 par value common stock
(the "Company Shares") and common stock purchase warrants representing the right
to  purchase  111,111  shares  of  the  Company's  $.001  par value common stock
("Warrants")  for  the aggregate consideration of $1,000,000.80 in the aggregate
("Purchase  Price").  The  form of Warrant is annexed hereto as EXHIBIT A.  (The
Company Shares included in the Securities (as hereinafter defined) are sometimes
referred  to  herein  as the "Shares", "Common Shares" or "Common Stock").  (The
Company  Shares,  Warrants,  and  the Common Stock issuable upon exercise of the
Warrants  ("Warrant  Shares")  are  collectively  referred  to  herein  as,  the
"Securities").  Subject  to  the terms and conditions hereof and upon acceptance
of  this  agreement  by  the  Subscriber, at the Closing Date, the Company shall
issue,  sell  and  deliver  the  Company Shares and Warrants against payment, by
Subscriber  of  the  Purchase  Price, federal funds wire transfer of immediately
available  funds.

     The  following  terms  and  conditions  shall  apply  to this subscription.

     1.     Subscriber's  Representations and Warranties.  The Subscriber hereby
            --------------------------------------------
represents  and  warrants  to  and  agrees  with  the  Company  that:

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

     (b)     Information  on  Subscriber.  The  Subscriber  is  an  "accredited
             ---------------------------
investor", as such term is defined in Regulation D promulgated by the Commission
under the Securities Act of 1933, as amended (the "1933 Act"), is experienced in
investments  and  business matters, has made investments of a speculative nature
and  has  purchased  securities  of  United  States  publicly-owned companies in
private placements in the past and, with its representatives, has such knowledge
and  experience  in  financial,  tax and other business matters as to enable the
Subscriber  to utilize the information made available by the Company to evaluate
the merits and risks of and to make an informed investment decision with respect

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to  the  proposed  purchase,  which  represents  a  speculative investment.  The
Subscriber  has  all  necessary  power  and  the  authority under all applicable
provisions of law to execute and deliver this Agreement and the Escrow Agreement
referred to in Section 5 of this Agreement and to carry out their provisions and
is  duly and legally qualified to purchase and own the Securities.  Assuming due
execution  and  delivery  by  the  other parties thereto, this Agreement and the
Escrow  Agreement  will  be,  valid  and  binding  obligations  of  Subscriber,
enforceable  in  accordance  with their terms, subject to applicable bankruptcy,
insolvency,  fraudulent  conveyance  reorganization, moratorium and similar laws
affecting  client's  rights  and  remedies generally.  The Subscriber is able to
bear  the  risk  of  such  investment  for  an indefinite period and to afford a
complete  loss  thereof.  The information set forth on the signature page hereto
regarding  the  Subscriber  is  accurate.

     (c)     Purchase  of Company Shares and Warrants.  On the Closing Date, the
             ----------------------------------------
Subscriber will purchase the Company Shares and Warrants for its own account and
not  with  a  view  to  any  distribution  thereof.

     (d)     Compliance  with  Securities  Act.  The  Subscriber understands and
             ---------------------------------
agrees  that  the  Securities  have  not  been registered under the 1933 Act, by
reason  of  their  issuance  in a transaction that does not require registration
under  the  1933  Act  (based in part on the accuracy of the representations and
warranties  of  Subscriber  contained  herein), and that such Securities must be
held  indefinitely  unless a subsequent disposition is registered under the 1933
Act  or  is  exempt  from such registration.  Subscriber acknowledges and agrees
that  the Common Shares, Warrant, and if issued, the Warrant Shares, are subject
to  restrictions  on  transfer  as  set forth in this Agreement and the Warrant.

     (e)     Company Shares Legend. The Company Shares, and the Warrant Shares,
             ----------------------
shall  bear  the  following  legend:

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

     (f)     Warrants  Legend.  The  Warrants  shall  bear the following legend:
             ----------------

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<PAGE>

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

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

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

   2.     Company Representations and Warranties.  The Company  represents  and
          --------------------------------------
warrants  to and agrees with the Subscriber that, except as set forth (i) in the
Company's  disclosure  Schedule  delivered  to Subscriber contemporaneously with
this  Agreement ("Other Written Information") or (ii) the Reports, the statement
confirmed  in  the  following  paragraphs of the Section 2 are true and correct:

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

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

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

     (d)     Additional  Issuances.   There  are  no  outstanding  agreements or
             ---------------------
preemptive  or similar rights affecting the Company's common stock or equity and
no  outstanding  rights,  warrants  or  options  to  acquire,  or  instruments
convertible  into  or  exchangeable  for,  or  agreements or understandings with
respect  to  the sale or issuance of any shares of common stock or equity of the
Company  or  other  equity  interest  in any of the subsidiaries of the Company.

     (e)     Consents.  No  consent,  approval,  authorization  or  order of any
             --------
court,  governmental  agency  or body or arbitrator having jurisdiction over the
Company,  or  any  of  its  affiliates,  the  National Association of Securities
Dealers,  Inc.  ("NASD"),  NASDAQ, or the Company's Stockholders is required for
execution  of  the  Transaction  Documents,  including,  without  limitation the
issuance  and  sale  of  the  Securities,  and  the performance of the Company's
obligations  hereunder  and  thereunder.

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

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

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

     (g)     The  Securities.  The  Securities,  when  issued against payment in
             ---------------
compliance with the provisions of this Agreement or the Warrant, as the case may
be,

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<PAGE>

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

          (ii)  will  be,  duly and validly authorized, duly and validly issued,
     fully  paid  and nonassessable (and if registered pursuant to the 1933 Act,
     and  resold  pursuant  to  an effective registration statement will be free
     trading  and  unrestricted,  provided that the Subscriber complies with the
     Prospectus  delivery  requirements);  and

          (iii) will not have been issued or sold in violation of any preemptive
     or  other  similar  rights of the holders of any securities of the Company;
     and will not subject the holders thereof to personal liability by reason of
     being  such  holders.

     (h)          Litigation.  There  is no pending or, to the best knowledge of
                  ----------
the  Company,  threatened  action,  suit, proceeding or investigation before any
court,  governmental  agency or body, or arbitrator having jurisdiction over the
Company, or any of its affiliates that would affect the execution by the Company
or  the  performance  by  the  Company  of its obligations under the Transaction
Documents.  There  is  no  pending  or,  to  the  best knowledge of the Company,
threatened  action,  suit,  proceeding  or  investigation  before  any  court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or  any  of its affiliates which litigation if adversely determined would have a
Material  Adverse  Effect.

     (i)          Reporting  Company.  The  Company is a publicly-held company
                  ------------------
subject  to  reporting  obligations  pursuant  to  Sections  15(d) and 13 of the
Securities  Exchange  Act  of  1934,  as amended (the "1934 Act") and its common
stock  is  registered  pursuant  to Section 12(g) of the 1934 Act. The Company's
common stock is listed for trading on the Nasdaq National Market System ("NMS").
Pursuant  to  the  provisions  of the 1934 Act, the Company has timely filed all
reports  and  other materials required to be filed by it with the Securities and
Exchange  Commission  during  the  preceding  twelve  months.

     (j)          No  Market  Manipulation.  The Company has not taken, and will
                  ------------------------
not  take,  directly  or  indirectly,  any  action  designed  to,  or that might
reasonably  be  expected to, cause or result in stabilization or manipulation of
the price of its Common Stock to facilitate the sale or resale of the Securities
or  affect  the  price  at  which  the  Securities  may  be  issued  or  resold.

     (k)          Reports.  Since  the date of the financial statements included
                  -------
in  the  Reports,  there  has  been  no material adverse change in the Company's
business,  financial  condition  or  affairs  not disclosed in the Reports.  The
Reports  do  not  contain any untrue statement of a material fact required to be
stated  therein  or  necessary  to  make  the statements therein not misleading.

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

     (m)          Defaults. The Company is not in violation of its Certificate
                  --------
of Incorporation or ByLaws.  The Company  is  (i)  not  in  default  under or in
violation  of  any other material agreement or instrument to which it is a party
or  by which it or any of its properties are bound or affected, which default or
violation  would  have  a  material  adverse  effect on the Company, (ii) not in
default  with respect to any order of any court, arbitrator or governmental body
or  subject  to  or  party  to  any order of any court or governmental authority
arising  out  of  any  action, suit or proceeding under any statute or other law
respecting  antitrust,  monopoly,  restraint  of  trade,  unfair  competition or
similar  matters, or (iii) to its knowledge in violation of any statute, rule or
regulation  of  any governmental authority which violation would have a Material
Adverse  Effect.
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<PAGE>
    (n)          No  Integrated  Offering.   Neither the Company, nor any of its
                 -------------------------
affiliates,  nor  any  person  acting  on  its  or their behalf, has directly or
indirectly  made  any offers or sales of any security or solicited any offers to
buy  any  security  under  circumstances  that  would  cause  the  offer  of the
Securities  pursuant  to this Agreement to be integrated with prior offerings by
the  Company for purposes of the 1933 Act or any applicable stockholder approval
provisions,  including,  without  limitation, under the rules and regulations of
the  NMS, nor will the Company or any of its affiliates or subsidiaries take any
action  or  steps  that would cause the offer of the Securities to be integrated
with  other  offerings.  The  Company has not conducted and will not conduct any
offering other than the transactions contemplated hereby that will be integrated
with  the  offer  or  issuance  of  the  Securities.

    (o)          No General Solicitation.  Neither the Company,  nor  any of its
                 -------------------------
affiliates,  nor to its knowledge, any person acting on its or their behalf, has
engaged  in  any form of general solicitation or general advertising (within the
meaning of Regulation D under the 1933 Act) in connection with the offer or sale
of  the  Securities.

     (p)          Listing.   The Company's common stock is quoted on, and listed
                  -------
for trading on the NMS.  The Company has not received any oral or written notice
that  its  Common  Stock will be delisted from the NMS nor that its common stock
does  not  meet  all  requirements  for  the continuation of such listing.  Upon
Closing and receipt of the proceeds of the Purchase Price, the Company will meet
the  continued  listing  requirements  of  the  Nasdaq  SmallCap  Market.

     (q)          No Undisclosed Liabilities.  The Company has no liabilities or
                  --------------------------
obligations  which are material, individually or in the aggregate, which are not
disclosed  in  the  Reports, other than those incurred in the ordinary course of
the  Company's  businesses  since October 31, 2001 and which, individually or in
the  aggregate,  would  not  reasonably  be  expected to have a Material Adverse
Effect.

     (r)          No  Undisclosed  Events  or  Circumstances.  Since October 31,
                  ------------------------------------------
2001,  no  event  or  circumstance  has  occurred  or exists with respect to the
Company  or its businesses, properties, operations or financial condition, that,
under  applicable  law,  rule  or  regulation,  requires  public  disclosure  or
announcement  prior  to the date hereof by the Company but which has not been so
publicly  announced  or  disclosed  in  the  Reports.

     (s)          Capitalization.  The  authorized  and  outstanding capital
                  --------------
stock  of  the  Company  immediately  prior  to the Closing Date consists of (i)
10,000,000  shares  of  Common  Stock,  3,546,141 shares of which are issued and
outstanding,  and  (ii)  2,000,000  shares of Preferred Stock, none of which are
issued  and  outstanding.  Except  as set forth in the Reports and Other Written
Information,  there  are  no  options,  warrants,  or  rights  to  subscribe to,
securities, rights or obligations convertible into or exchangeable for or giving
any  right  to  subscribe for any shares of capital stock of the Company. All of
the outstanding shares of common stock of the Company have been duly and validly
authorized  and  issued  and  are  fully  paid  and  nonassessable.

     (t)          S-3  Eligibility.  The  Company currently meets, and will
                  ----------------
use its best efforts to take all necessary action to continue to meet, the
"registrant  requirements"  set forth in the general instruction 1A to Form S-3.

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<PAGE>
               (u)          Correctness  of  Representations.  The  Company
                            --------------------------------
represents  that  the  foregoing  representations  and  warranties  are true and
correct as of the date hereof in all material respects, will be true and correct
as  of  the  Closing  Date  in  all  material  respects, and, unless the Company
otherwise  notifies  the Subscriber prior to the Closing Date, shall be true and
correct  in  all  material  respects  as  of  the  Closing  Date.  The foregoing
representations  and  warranties  shall survive the Closing Date for a period of
three  years.

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

     4.     Reissuance  of  Securities.  The  Company agrees to promptly reissue
            --------------------------
certificates  representing  the  Securities  without  the  legends  set forth in
Sections 1(e) and 1(f) above at such time as (a) the holder thereof is permitted
to  and  disposes  of such Securities pursuant to Rule 144(d) and/or Rule 144(k)
under  the  1933  Act  in  the opinion of counsel reasonably satisfactory to the
Company, or (b) upon resale subject to an effective registration statement after
the  Securities are registered under the 1933 Act and compliance with applicable
prospectus  delivery  requirements.  The  Company  agrees  to cooperate with the
Subscriber  in  connection  with  all  resales  pursuant to Rule 144(d) and Rule
144(k)  and  provide legal opinions necessary to allow such resales provided the
Company  and  its  counsel  receive reasonably requested written representations
from  the  Subscriber  and selling broker, if reasonably appropriate.   Provided
the  Subscriber  provides required certifications and representation letters, if
any,  if the Company fails to remove any legend as required by this Section 4 (a
"Legend  Removal Failure"), then beginning on the tenth (10th) day following the
date  that  the Subscriber has requested the removal of the legend and delivered
all  items reasonably required by the Company to be delivered by the Subscriber,
the  Company  continues  to  fail  to  remove  such legend, and deliver reissued
unlegended common stock certificates, except due to causes beyond the control of
the Company and its agents, the Company shall pay to each Subscriber or assignee
holding  shares  subject  to  a  Legend  Removal  Failure an amount equal to one
percent  (1%)  of  the  Purchase Price of the shares subject to a Legend Removal
Failure  per  day  that such failure continues.  If during any twelve (12) month
period,  the  Company fails to remove any legend except due to causes beyond the
control  of the Company and its agents as required by this Section 4 or fails to
deliver reissued unlegended common stock certificates for an aggregate of thirty
(30)  days,  each  Subscriber or assignee holding Securities subject to a Legend
Removal  Failure  may, at its option, require the Company to purchase all or any
portion  of  the  Securities  subject  to  a Legend Removal Failure held by such
Subscriber  or  assignee  at  a  price per share equal to 110% of the applicable
Purchase  Price.

     5.     Finder's  Fee/Legal  Fee.
            -------------------------

     (a)          Finder.   The Company agrees that it will pay the finder's fee
                  ------
due  to  Vintage  Partners, LLC ("Finder") ("Finder's Fee").  The Company on the
one  hand,  and  the  Subscriber on the other hand, agree to indemnify the other
against  and  hold  the other harmless from any and all liabilities to any other
persons claiming brokerage commissions or finder's fees other than the Finder on
account  of  services  purported  to  have  been  rendered  on  behalf  of  the
indemnifying  party  in  connection  with  this  Agreement  or  the transactions
contemplated  hereby  and  arising  out  of  such  party's actions.  The Company
represents  that  there  are  no  other  parties  entitled  to  receive  fees,
commissions,  or  similar  payments in connection with the offering described in
the  Subscription  Agreement.

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<PAGE>
     (b)          Legal  Fee.  The Company shall pay to Grushko & Mittman, P.C.,
                  ----------
counsel  to  the Subscriber a fee of $25,000 ("Legal Fees") as reimbursement for
services  rendered  to  Subscriber  in  connection  with  this Agreement and the
purchase  and sale of the Securities (the "Offering") and acting as escrow agent
for  the Offering.  The Legal Fees will be payable out of funds held pursuant to
a funds escrow agreement ("Escrow Agreement") to be entered into by the Company,
Subscriber  and  Escrow  Agent  in  connection  with  the  Offering.

6.     Covenants  of  the  Company.  The  Company  covenants and agrees with the
       ---------------------------
Subscriber  as  follows:

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

     (b)          The  Company  shall promptly secure the listing of the Company
Shares,  and Warrant Shares upon each national securities exchange, or automated
quotation  system,  if  any,  upon  which shares of common stock are then listed
(subject  to  official  notice  of  issuance)  and shall use its reasonable best
efforts  to  maintain such listing so long as any such Company Shares or Warrant
Shares  have  not  been  transferred  or  sold by the Subscriber without further
restrictions  on transfer.  The Company will take all actions within its control
to  comply  in  all  material  respects with the Company's reporting, filing and
other  obligations  under  the  bylaws  or  rules of the National Association of
Securities  Dealers  ("NASD")  in order to maintain its listing on the NMS or if
unable  to  comply  with  the  requirements for the NMS to obtain and maintain a
listing  of  the  Company  Shares  on  the  Nasdaq SmallCap Market ("SmallCap").
Subject  to  the  execution  of  a  confidentiality  agreement, the Company will
provide  the  Subscriber copies of all notices it receives notifying the Company
of  the  threatened  and  actual  delisting  of the common stock from the NMS or
SmallCap.

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

     (d)          From  the  Closing Date and until at least two (2) years after
the  effectiveness  of  the  Registration  Statement  on  Form S-3 or such other
Registration  Statement  described  in Section 10.1(iv) hereof, the Company will
(i)  cause  its common stock to continue to be registered under Section 12(g) of
the  Exchange  Act, (ii) comply in all material respects with its  reporting and
filing obligations under the Exchange Act, (iii) comply in all material respects
with all reporting requirements that are applicable to an issuer with a class of
common  stock registered pursuant to Section 12(g) of the Exchange Act, and (iv)
comply  in  all  material respects with all material requirements related to any
registration  statement  filed pursuant to this Agreement.  The Company will use
its  best  efforts  not  to take any action or file any document (whether or not
permitted  by  the  1933  Act  or  the  Exchange Act or the rules thereunder) to
terminate  or suspend such registration or to terminate or suspend its reporting
and  filing  obligations  under said Acts until the later of two (2) years after
the  actual  effective  date  of  the Registration Statement on Form S-3 or such
other  Registration  Statement  described in Section 10.1(iv) hereof.  Until the
earlier  of  the  resale of the Company Shares by the Subscriber or at least two
(2)  years after the Warrants have been exercised, the Company will use its best

                                        8
<PAGE>
efforts  to  continue  the  listing of the common stock on the NMS or obtain and
maintain  a  listing of the common stock on the NMS or SmallCap, and will comply
in all material respects with the Company's material reporting, filing and other
obligations  under  the  bylaws or rules of the NMS or SmallCap, as the case may
be.

     (e)          The Company undertakes to use the proceeds of the Subscriber's
funds for working capital.   The Purchase Price may not and will not be used for
accrued  and  unpaid officer and director salaries, payment of financing related
debt,  redemption  of  outstanding redeemable notes or equity instruments of the
Company  nor  non-trade  obligations  outstanding  on  the  Closing  Date.

     (f)          The Company undertakes to reserve, on behalf of each holder of
Company Shares and Warrant, at all times a sufficient number of shares of Common
Stock  to  be  issued  upon  exercise  of  the  Warrant.

  7.     Covenants  of  the Company and Subscriber Regarding Indemnification
         --------------------------------------------------------------------

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

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

    (c)           The  procedures  set  forth in Section 8.6 shall apply to the
indemnifications  set  forth  in  Sections  7(a)  and  7(b)  above.

          8.1.     Registration Rights.  The Company hereby grants the following
                   -------------------
registration  rights  to  holders  of  the  Securities.

               (i)          On  one  occasion,  for  a period commencing 60 days
after  the  Closing  Date, but not later than three years after the Closing Date
("Request  Date"),  the Company, upon a written request therefor from any record
holder  or  holders  of more than 50% of the Company Shares (the Company Shares,
and  one share of common stock for each share of common stock issued or issuable
upon exercise of the Warrants, collectively the "Registrable Securities"), shall
prepare and file with the Commission a registration statement under the 1933 Act

                                        9
<PAGE>
covering  the  Registrable  Securities  which  are  the subject of such request,
unless  such Registrable Securities are the subject of an effective registration
statement  or included for registration in a pending registration statement.  In
addition,  upon  the  receipt  of  such request, the Company shall promptly give
written  notice  to  all other record holders of the Registrable Securities that
such  registration  statement  is  to  be  filed  and  shall  include  in  such
registration  statement Registrable Securities for which it has received written
requests within 10 days after the Company gives such written notice.  Such other
requesting  record  holders  shall  be  deemed  to  have  exercised their demand
registration  right  under this Section 8.1(i).  As a condition precedent to the
inclusion  of  Registrable  Securities,  the  holder  thereof  shall provide the
Company  with  such  information  as  the  Company  reasonably  requests.  The
obligation  of  the  Company  under  this Section 8.1(i) shall be limited to one
registration  statement.

               (ii)          If the Company at any time proposes to register any
of its securities under the 1933 Act for sale to the public, whether for its own
account  or  for  the  account  of  other  security holders or both, except with
respect  to  registration  statements  on  Forms  S-4,  S-8  or another form not
available  for  registering  the  Registrable Securities for sale to the public,
provided  the  Registrable Securities are not otherwise registered for resale by
the  Subscriber  or Holder pursuant to an effective registration statement, each
such  time  it  will  give  at least 25 days' prior written notice to the record
holder of the Registrable Securities of its intention so to do. Upon the written
request  of  the holder, received by the Company within 15 days after the giving
of  any  such  notice  by  the  Company,  to  register  any  of  the Registrable
Securities,  the  Company  will  cause  such  Registrable Securities as to which
registration  shall have been so requested to be included with the securities to
be  covered  by  the registration statement proposed to be filed by the Company,
all  to  the  extent  required  to  permit  the sale or other disposition of the
Registrable  Securities  so  registered  by  the  holder  of  such  Registrable
Securities  (the  "Seller"). In the event that any registration pursuant to this
Section  8.1(ii)  shall be, in whole or in part, an underwritten public offering
of  common  stock of the Company, the number of shares of Registrable Securities
to  be  included  in  such  an  underwriting  may  be  reduced  by  the managing
underwriter  if  and  to  the  extent that the Company and the underwriter shall
reasonably  be  of  the  opinion  that such inclusion would adversely affect the
marketing  of  the  securities  to  be  sold  by  the Company therein; provided,
however,  that  the  Company  shall  notify  the  Seller  in writing of any such
reduction.  Notwithstanding the foregoing provisions, or Section 8.4 hereof, the
Company  may  withdraw  or delay or suffer a delay of any registration statement
referred  to  in this Section 8.1(ii) without thereby incurring any liability to
the  Seller.

               (iii)     Reserved.

               (iv)      The  Company  shall file with the Commission not later
than  thirty-five  (35) days after the Closing Date (the "Filing Date"), and use
its reasonable commercial efforts to cause to be declared effective within sixty
(60)  days after the Closing Date assuming that the Company has been notified by
the  SEC that the Registration Statement will not be reviewed (or 120 days after
the  Closing  Date in the event the SEC reviews the registration Statement) (the
"Effective  Date"),  a  Form  S-3  registration  statement  (the  "Registration
Statement") (or such other form that it is eligible to use) in order to register
the  Registrable  Securities for resale and distribution under the 1933 Act. The
Company  will  register  not less than a number of shares of common stock in the
aforedescribed  registration  statement  that  is equal to the number of Company
Shares and one share of common stock for each of the common shares issuable upon
exercise  of  the Warrants. The Registrable Securities shall be reserved and set
aside exclusively for the benefit of the Subscriber, and not issued, employed or
reserved  for anyone other than the Subscriber. Such registration statement will
immediately be amended or additional registration statements will be immediately
filed by the Company as necessary to register additional Company Shares to allow
the  public resale of all Common Stock included in and issuable by virtue of the
Registrable  Securities. No securities of the Company other than the Registrable
Securities  will  be  included  in  the registration statement described in this

                                       10
<PAGE>

Section  8.1(iv) or in any other registration prior to the actual effective date
of  the  registration  statement  described  in  this  Section 8.1(iv) except as
disclosed  in  the Other Written Information, without the written consent of the
Subscriber,  which  consent  will  not  be  unreasonably  withheld.

     8.2.     Registration  Procedures.  If and whenever the Company is required
              ------------------------
by the provisions hereof to effect the registration of any shares of Registrable
Securities  under  the 1933 Act, the Company will, as expeditiously as possible:

     (a)         prepare  and file with the Commission a registration statement
required  by  Section  8.1,  with  respect  to  such securities and use its best
efforts  to cause such registration statement to become and remain effective for
the  period  of  the  distribution  contemplated  thereby  (determined as herein
provided),  and  promptly  provide  to  the  holders  of  Registrable Securities
("Sellers")  copies  of  all  filings  and  Commission  letters  of  comment;

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

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

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

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

     (f)          immediately  notify  the  Seller  when  a  prospectus relating
thereto  is required to be delivered under the 1933 Act, of the happening of any
event  of  which  the  Company has knowledge as a result of which the prospectus
contained  in such registration statement, as then in effect, includes an untrue
statement  of  a  material fact or omits to state a material fact required to be
stated  therein  or  necessary  to make the statements therein not misleading in
light  of  the  circumstances  then  existing;

     (g)          provided  same  would  not be in violation of the provision of
Regulation  FD  under the 1934 Act, make available for inspection by the Seller,
and  any  attorney,  accountant  or  other  agent  retained  by  the  Seller  or
underwriter,  all  publicly  available,  non-confidential  financial  and  other
records,  pertinent corporate documents and properties of the Company, and cause
the  Company's  officers,  directors  and  employees  to  supply  all  publicly
available,  non-confidential  information  reasonably  requested  by the seller,
attorney,  accountant  or  agent in connection with such registration statement.

                                       11
<PAGE>
     8.3.     Provision  of  Documents.  In  connection  with  each registration
              ------------------------
described  in  this Section 8, the Seller will furnish to the Company in writing
such  information  and  representation  letters  with  respect to itself and the
proposed  distribution by it as reasonably shall be necessary in order to assure
compliance  with  federal  and  applicable state securities laws.  In connection
with  each  registration  pursuant  to  Section  8.1(i)  or  8.1(ii) covering an
underwritten  public  offering, the Company and the Seller agree to enter into a
written agreement with the managing underwriter in such form and containing such
provisions  as  are customary in the securities business for such an arrangement
between  such  underwriter  and  companies  of the Company's size and investment
stature.

          8.4.     Non-Registration  Events.  The  Company  and  the  Subscriber
                   ------------------------
agree that the Seller will suffer damages if any registration statement required
under  Section 8.1(i) or 8.1(ii) above is not filed within 60 days after written
request  by  the  Holder and not declared effective by the Commission within 120
days after such request [or the Filing Date and Effective Date, respectively, in
reference to the Registration Statement on Form S-3 or such other form described
in  Section  8.1(iv)],  and maintained in the manner and within the time periods
contemplated  by Section 8 hereof, and it would not be feasible to ascertain the
extent  of  such  damages  with precision.  Accordingly, if (i) the Registration
Statement described in Sections 8.1(i) or 8.1(ii) is not filed within 60 days of
such written request, or is not declared effective by the Commission on or prior
to  the  date  that  is  120  days  after such request, or (ii) the registration
statement  on  Form  S-3  or such other form described in Section 8.1(iv) is not
filed  on  or  before the Filing Date or not declared effective on or before the
sooner of the Effective Date, or within ten (10) business days of receipt by the
Company  of  a  written  or  oral  communication  from  the  Commission that the
registration  statement  described  in  Section 8.1(iv) will not be reviewed, or
(iii)  any  registration  statement  described  in  Sections  8.1(i), 8.1(ii) or
8.1(iv)  is  filed  and  declared  effective  but  shall  thereafter cease to be
effective  (without  being  succeeded  immediately by an additional registration
statement  filed and declared effective) for a period of time which shall exceed
30  days  in  the  aggregate  per year or more than 20 consecutive calendar days
(defined  as  a  period  of  365  days  commencing  on the date the Registration
Statement  is  declared  effective) (each such event referred to in clauses (i),
(ii)  and (iii) of this Section 8.4 is referred to herein as a "Non-Registration
Event"),  then,  for  so long as such Non-Registration Event shall continue, the
Company  shall  pay  in  cash  as  Liquidated  Damages  to  each  holder  of any
Registrable  Securities an amount equal to one (1%) percent for the first thirty
(30)  days or part thereof and two (2%) percent per month for each month or part
thereof  thereafter,  up  to  a maximum of twenty percent (20%) per year, in the
aggregate,  during  the pendency of such Non-Registration Event, of the Purchase
Price  for  the  Registrable  Securities owned of record by such holder as of or
subsequent  to  the  occurrence  of such Non-Registration Event.  Payments to be
made  pursuant  to  this  Section  8.4  shall be due and payable within ten (10)
business  days  after  demand  in  immediately  available  funds.

          8.5.     Expenses.  All  expenses  incurred  by  the  Company  in
                   --------
complying  with  Section  8, including, without limitation, all registration and
filing  fees,  printing  expenses,  fees  and  disbursements  of  counsel  and
independent  public  accountants  for  the Company, fees and expenses (including
reasonable  counsel  fees)  incurred  in  connection  with  complying with state
securities  or  "blue  sky" laws, fees of the National Association of Securities
Dealers, Inc., transfer taxes, fees of transfer agents and registrars, and costs
of  insurance are called "Registration Expenses". All underwriting discounts and
selling  commissions applicable to the sale of Registrable Securities, including
any  fees  and  disbursements  of  any special counsel to the Seller, are called
"Selling Expenses". The Seller shall pay the fees of its own additional counsel,
if  any.  The  Company will pay all Registration Expenses in connection with the

                                       12
<PAGE>
registration statement under Section 8.  All Selling Expenses in connection with
each registration statement under Section 8 shall be borne by the Seller and may
be  apportioned  among the Sellers in proportion to the number of shares sold by
the  Seller  relative  to  the  number  of  shares  sold under such registration
statement  or  as  all  Sellers  thereunder  may  agree.

     8.6.     Indemnification  and  Contribution.
              ----------------------------------

               (a)     In  the  event  of  a  registration  of  any  Registrable
Securities  under  the  1933 Act pursuant to Section 8, the Company will, to the
extent permitted by law, indemnify and hold harmless the Seller, each officer of
the  Seller,  each  director of the Seller, each underwriter of such Registrable
Securities thereunder and each other person, if any, who controls such Seller or
underwriter  within  the  meaning  of  the 1933 Act, against any losses, claims,
damages  or  liabilities,  joint  or  several,  to  which  the  Seller,  or such
underwriter  or  controlling  person  may  become  subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect  thereof) arise out of or are based upon any untrue statement or alleged
untrue  statement  of  any material fact contained in any registration statement
under  which  such  Registrable  Securities  was  registered  under the 1933 Act
pursuant  to Section 8, any preliminary prospectus or final prospectus contained
therein,  or  any  amendment or supplement thereof, or arise out of or are based
upon  the omission or alleged omission to state therein a material fact required
to  be stated therein or necessary to make the statements therein not misleading
in  light  of the circumstances when made, and will subject to the provisions of
Section  8.1(c)  reimburse  the  Seller,  each  such  underwriter  and each such
controlling  person  for any legal or other expenses reasonably incurred by them
in  connection  with  investigating  or  defending any such loss, claim, damage,
liability  or action; provided, however, that the Company shall not be liable to
the Seller to the extent that any such damages arise out of or are based upon an
untrue  statement  or  omission  made  in  any preliminary prospectus if (i) the
Seller failed to send or deliver a copy of the final prospectus delivered by the
Company  to  the Seller with or prior to the delivery of written confirmation of
the sale by the Seller to the person asserting the claim from which such damages
arise,  (ii)  the final prospectus would have corrected such untrue statement or
alleged  untrue  statement or such omission or alleged omission, or (iii) to the
extent  that any such loss, claim, damage or liability arises out of or is based
upon  an  untrue  statement  or  alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by any such Seller, or
any such controlling person in writing specifically for use in such registration
statement  or  prospectus.

               (b)     In  the event of a registration of any of the Registrable
Securities  under  the  1933  Act pursuant to Section 8, the Seller will, to the
extent  permitted  by  law,  indemnify  and  hold harmless the Company, and each
person,  if  any,  who  controls the Company within the meaning of the 1933 Act,
each  officer of the Company who signs the registration statement, each director
of  the  Company,  each underwriter and each person who controls any underwriter
within  the  meaning  of  the  1933  Act, against all losses, claims, damages or
liabilities,  joint  or several, to which the Company or such officer, director,
underwriter  or  controlling  person  may  become  subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect  thereof) arise out of or are based upon any untrue statement or alleged
untrue  statement  of  any material fact contained in the registration statement
under  which  such  Registrable  Securities  were  registered under the 1933 Act
pursuant  to Section 8, any preliminary prospectus or final prospectus contained
therein,  or  any  amendment or supplement thereof, or arise out of or are based
upon  the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and  will reimburse the Company and each such officer, director, underwriter and
controlling  person  for any legal or other expenses reasonably incurred by them
in  connection  with  investigating  or  defending any such loss, claim, damage,
liability or action, provided, however, that the Seller will be liable hereunder
in  any such case if and only to the extent that any such loss, claim, damage or
liability  arises  out of or is based upon an untrue statement or alleged untrue
statement  or  omission  or  alleged  omission  made  in  reliance  upon  and in
conformity  with  information  pertaining  to such Seller, as such, furnished in
writing  to the Company by such Seller specifically for use in such registration
statement  or  prospectus, and provided, further, however, that the liability of
the  Seller  hereunder  shall  be  limited to the gross proceeds received by the
Seller  from  the  sale  of  Registrable Securities covered by such registration
statement.                             13
<PAGE>

               (c)     Promptly  after receipt by an indemnified party hereunder
of  notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify  the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to  such  indemnified  party other than under this Section 8.6(c) and shall only
relieve  it from any liability which it may have to such indemnified party under
this Section 8.6(c), except and only if and to the extent the indemnifying party
is prejudiced by such omission. In case any such action shall be brought against
any  indemnified  party  and  it  shall  notify  the  indemnifying  party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and,  to  the  extent it shall wish, to assume and undertake the defense thereof
with  counsel satisfactory to such indemnified party, and, after notice from the
indemnifying  party  to  such indemnified party of its election so to assume and
undertake  the  defense  thereof,  the indemnifying party shall not be liable to
such  indemnified  party  under  this  Section  8.6(c)  for  any  legal expenses
subsequently  incurred  by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with counsel
so  selected,  provided,  however,  that,  if  the defendants in any such action
include  both  the  indemnified  party  and  the  indemnifying  party  and  the
indemnified  party  shall have reasonably concluded that there may be reasonable
defenses  available  to  it  which  are  different  from  or additional to those
available to the indemnifying party or if the interests of the indemnified party
reasonably  may  be  deemed  to  conflict with the interests of the indemnifying
party,  the  indemnified  parties  shall  have  the right to select one separate
counsel  and  to  assume such legal defenses and otherwise to participate in the
defense  of  such action, with the reasonable expenses and fees of such separate
counsel and other expenses related to such participation to be reimbursed by the
indemnifying  party  as  incurred.

               (d)     In  order  to provide for just and equitable contribution
in  the  event of joint liability under the 1933 Act in any case in which either
(i)  the  Seller,  or  any  controlling  person of the Seller, makes a claim for
indemnification pursuant to this Section 8.6 but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such  indemnification  may not be enforced in such case notwithstanding the fact
that  this  Section  8.6  provides  for  indemnification  in  such case, or (ii)
contribution  under  the  1933  Act may be required on the part of the Seller or
controlling  person  of the Seller in circumstances for which indemnification is
provided  under  this  Section 8.6; then, and in each such case, the Company and
the  Seller  will  contribute  to  the  aggregate  losses,  claims,  damages  or
liabilities  to  which  they  may be subject (after contribution from others) in
such  proportion  so  that  the  Seller  is  responsible  only  for  the portion
represented  by  the percentage that the public offering price of its securities
offered  by the registration statement bears to the public offering price of all
securities  offered  by such registration statement, provided, however, that, in
any  such  case, (y) the Seller will not be required to contribute any amount in
excess  of  the  public  offering  price  of  all  such securities offered by it
pursuant  to  such registration statement; and (z) no person or entity guilty of
fraudulent  misrepresentation  (within  the meaning of Section 10(f) of the 1933
Act)  will  be  entitled  to  contribution from any person or entity who was not
guilty  of  such  fraudulent  misrepresentation.

          8.7.     Delivery  of  Unlegended  Shares.
                   --------------------------------

                                       14
<PAGE>
               (a)     Within  three (3) business days (such third business day,
the  "Delivery Date") after the business day on which the Company has received a
notice  that  Company  Shares have been sold including a representation that the
prospectus  delivery  requirements,  if  applicable,  have  been  satisfied  (by
facsimile  or  other  delivery)  and the original Company Share certificate, the
Company  at  its  expense,  (i)  shall  deliver,  and  shall cause legal counsel
selected  by  the  Company  to  deliver,  to  its transfer agent (with copies to
Subscriber)  an  appropriate  instruction  and  opinion of such counsel, for the
delivery  of  unlegended  Company  Shares issuable pursuant to any effective and
current  registration  statement  described  in Section 8 of this Agreement (the
"Unlegended  Shares");  and  (ii)  transmit  the  certificates  representing the
Unlegended  Shares,  with  a  certificate representing the balance of the unsold
Company Shares to the Subscriber at the address specified in the notice of sale,
via  express  courier,  by  electronic  transfer  or  otherwise on or before the
Delivery  Date.

               (b)     In  lieu of delivering physical certificates representing
the  Unlegended  Shares, if the Company's transfer agent is participating in the
Depository  Trust  Company  ("DTC")  Fast Automated Securities Transfer program,
upon  request of the Subscriber and its compliance with the provisions contained
in  this  paragraph,  so long as the certificates therefore do not bear a legend
and the Subscriber is not obligated to return such certificate for the placement
of  a  legend  thereon,  the  Company  shall  use  its best efforts to cause its
transfer agent to electronically transmit the Unlegended Shares by crediting the
account  of  Subscriber's  prime  Broker with DTC through its Deposit Withdrawal
Agent  Commission  system.

               (c)     The Company  understands  that a delay in the delivery of
the  Unlegended  Shares  pursuant  to  Section 8 hereof beyond the Delivery Date
could  result  in  economic  loss  to  the  Subscriber.  As  compensation to the
Subscriber  for  such  loss,  the  Company  agrees  to  pay late payments to the
Subscriber  for  late  delivery  of  Unlegended Shares in the amount of $100 per
business  day  after the Delivery Date for each $10,000 of Purchase Price of the
Company Shares delivered to the Company for reissuance as Unlegended Shares. The
Company  shall  pay  any  payments  incurred  under  this Section in immediately
available  funds  upon  demand.

               (d)      In  addition  to  any  other rights available to the
Subscriber,  if the Company fails to deliver to the Subscriber Unlegended Shares
within  ten  (10)  calendar  days  after  the  Delivery  Date and the Subscriber
purchases (in an open market transaction or otherwise) shares of common stock to
deliver in satisfaction of a sale by such Subscriber of the Company Shares which
the  Subscriber  anticipated  receiving  from the Company (a "Buy-In"), then the
Company  shall  pay  in  cash  to  the  Subscriber  (in addition to any remedies
available  to  or  elected  by  the  Subscriber)  the  amount  by  which (A) the
Subscriber's  total purchase price (including brokerage commissions, if any) for
the shares of common stock so purchased exceeds (B) the aggregate Purchase Price
of  the  Company  Shares  delivered  to the Company for reissuance as Unlegended
Shares,  together  with  interest  thereon  at a rate of 15% per annum, accruing
until such amount and any accrued interest thereon is paid in full (which amount
shall  be paid as liquidated damages and not as a penalty).  For example, if the
Subscriber  purchases  shares  of  Common Stock having a total purchase price of
$11,000  to  cover a Buy-In with respect to $10,000 of Purchase Price of Company
Shares delivered to the Company for reissuance as Unlegended Shares, the Company
shall  be  required to pay the Subscriber $1,000, plus interest.  The Subscriber
shall  provide  the Company written notice indicating the amounts payable to the
Subscriber  in  respect  of  the  Buy-In.

          9.     Miscellaneous.
                 -------------

               (a)     Notices.   All  notices,  demands,  requests,  consents,
                       -------
approvals,  and other communications required or permitted hereunder shall be in
writing  and, unless otherwise specified herein, shall be (i) personally served,

                                       15
<PAGE>

(ii)  deposited  in the mail, registered or certified, return receipt requested,
postage  prepaid,  (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as  set  forth below or to such other address as such party shall have specified
most  recently by written notice.  Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or  delivery  by  facsimile,  with  accurate  confirmation  generated  by  the
transmitting  facsimile  machine,  at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be  received),  or  the first business day following such delivery (if delivered
other  than  on a business day during normal business hours where such notice is
to  be received) or (b) on the second business day following the date of mailing
by  express  courier  service, fully prepaid, addressed to such address, or upon
actual  receipt of such mailing, whichever shall first occur.  The addresses for
such  communications  shall be: (i) if to the Company, to SBE, Inc., 2305 Camino
Ramon, Suite 200, San Ramon, CA 94583, telecopier number: (925) 355-2041, with a
copy  by telecopier only to: Cooley Godward LLP, One Maritime Plaza, 20th Floor,
San  Francisco,  CA  94111, Attn: Chris Westover, Esq., telecopier number: (415)
951-3699,  and  (ii)  if  to  the  Subscriber, to the name, address and telecopy
number set forth on the signature page hereto, with a copy by telecopier only to
Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176,
telecopier  number:  (212)  697-3575.

     (b)     Closing.  The  consummation of the transactions contemplated herein
             -------
shall  take  place  at the offices of Grushko & Mittman, P.C., 551 Fifth Avenue,
Suite 1601, New York, New York 10176, upon the satisfaction of all conditions to
Closing  set  forth  in this Agreement.  The closing date shall be the date that
subscriber  funds  representing the net amount due the Company from the Purchase
Price  of  the  Offering  is  transmitted  by  wire transfer or otherwise to the
Company  (the  "Closing  Date").

     (c)     Entire Agreement; Assignment.  This Agreement and other Transaction
            -----------------------------
Documents represent the entire agreement between the parties hereto with respect
to  the  subject  matter hereof and may be amended only by a writing executed by
both  parties.  No right or obligation of either party shall be assigned by that
party  without  prior  notice  to  and  the  written consent of the other party.

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

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

                                       16
<PAGE>
     (f)     Specific  Enforcement,  Consent  to  Jurisdiction.  The Company and
             -------------------------------------------------
Subscriber  acknowledge  and  agree  that  irreparable damage would occur in the
event  that  any  of  the  provisions  of  this  Agreement were not performed in
accordance  with  their  specific  terms  or  were  otherwise  breached.  It  is
accordingly  agreed  that  the  parties  shall  be  entitled to an injunction or
injunctions  to prevent or cure breaches of the provisions of this Agreement and
to  enforce  specifically the terms and provisions hereof or thereof, this being
in  addition  to any other remedy to which any of them may be entitled by law or
equity.  Subject  to  Section  9(e)  hereof,  each of the Company and Subscriber
hereby  waives, and agrees not to assert in any such suit, action or proceeding,
any  claim  that it is not personally subject to the jurisdiction of such court,
that  the suit, action or proceeding is brought in an inconvenient forum or that
the  venue  of  the  suit,  action  or  proceeding is improper.  Nothing in this
Section  shall  affect  or  limit any right to serve process in any other manner
permitted  by  law.

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

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

                      [THIS SPACE INTENTIONALLY LEFT BLANK]

                                       17
<PAGE>

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

                                      SBE,  INC.

                                      A  Delaware  Corporation

                                      By:/s/  William  B.  Heye
                                        ------------------------
                                        Name:  William  B.  Heye
                                        Title: President  and  CEO

                                      Dated:  April  30,  2002

ACCEPTED:  Dated  as  of  April 30,  2002

STONESTREET  LIMITED  PARTNERSHIP  -  Subscriber
C/o  Canaccord  Capital  Corporation
320  Bay  Street,  Suite  1300
Toronto,  ON  M5H  4A6,  Canada
Fax:  416-956-8989

By: /s/  E.A.  Leonard
    ------------------
    Director

                                      18
<PAGE>
                                LIST OF EXHIBITS
                                ----------------

Exhibit A        Form of Warrant

Exhibit B        Form of Legal Opinion

                                      19EXHIBIT  4.2

THIS  WARRANT  AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT  BEEN  REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT").
THIS  WARRANT  AND  THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY
NOT  BE  SOLD,  OFFERED  FOR  SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE  REGISTRATION STATEMENT AS TO THIS WARRANT UNDER THE ACT OR AN OPINION
OF  COUNSEL  REASONABLY  SATISFACTORY TO SBE, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.

                              Right  to  Purchase 111,111 shares of Common Stock
                              of  SBE,  Inc.  (subject to adjustment as provided
                              herein)

                          COMMON STOCK PURCHASE WARRANT

No.  2002-1                                       Issue  Date:  April  30,  2002

     SBE,  INC.,  a  corporation  organized  under  the  laws  of  Delaware (the
"Company"),  hereby  certifies  that,  for  value  received, STONESTREET LIMITED
PARTNERSHIP  (the  "Holder"),  or assigns, is entitled, subject to the terms set
forth  below, to purchase from the Company from and after the Issue Date of this
Warrant  and  at  any time or from time to time before 5:00 p.m., New York time,
through  three  (3) years after such date (the "Expiration Date"), up to 111,111
fully  paid  and  nonassessable shares of Common Stock (as hereinafter defined),
$.001  par  value  per  share,  of  the Company at a per share purchase price of
$2.00.   The  aforedescribed  purchase price per share, as adjusted from time to
time  as  herein  provided, are referred to herein as the "Purchase Price".  The
number  and  character of such shares of Common Stock and the Purchase Price are
subject  to  adjustment  as  provided  herein.

     As  used herein the following terms, unless the context otherwise requires,
have  the  following  respective  meanings:

     (a)  The  term  "Company" shall include SBE, Inc. and any corporation which
shall  succeed  or  assume  the  obligations  of  SBE,  Inc.  hereunder.

     (b)  The term "Common Stock" includes (a) the Company's Common Stock, $.001
par  value  per  share,  as authorized on the date of the Subscription Agreement
referred  to  in  Section  9 hereof, (b) any other capital stock of any class or
classes  (however  designated) of the Company, authorized on or after such date,
the  holders  of  which  shall  have the right, without limitation as to amount,
either  to all or to a share of the balance of current dividends and liquidating
dividends  after  the  payment  of  dividends  and  distributions  on any shares
entitled  to  preference,  and  the  holders  of  which shall ordinarily, in the
absence  of contingencies, be entitled to vote for the election of a majority of
directors of the Company (even if the right so to vote has been suspended by the
happening  of such a contingency) and (c) any other securities into which or for
which  any  of  the  securities  described  in  (a)  or  (b) may be converted or
exchanged  pursuant  to a plan of recapitalization, reorganization, merger, sale
of  assets  or  otherwise.

     (c)  The  term  "Other  Securities"  refers to any stock (other than Common
Stock)  and  other  securities  of the Company or any other person (corporate or
otherwise)  which  the  holder  of  the Warrant at any time shall be entitled to
receive,  or  shall have received, on the exercise of the Warrant, in lieu of or
in  addition  to  Common  Stock, or which at any time shall be issuable or shall
have  been  issued  in  exchange  for or in replacement of Common Stock or Other
Securities  pursuant  to  Section  4  or  otherwise.

                                        1
<PAGE>
1.     Exercise  of  Warrant.
       ---------------------
     1.1.     Number  of Shares Issuable upon Exercise.  From and after the date
              ----------------------------------------
hereof  through  and  including  the Expiration Date, the holder hereof shall be
entitled  to  receive, upon exercise of this Warrant in whole in accordance with
the  terms  of  subsection  1.2  or  upon  exercise  of  this Warrant in part in
accordance  with  subsection 1.3, shares of Common Stock of the Company, subject
to  adjustment  pursuant  to  Section  4.

     1.2.     Full  Exercise.  This  Warrant  may  be  exercised  in full by the
              --------------
holder  hereof  by  delivery  of  an  original  or facsimile copy of the form of
subscription  attached  as  Exhibit  A  hereto  (the  "Subscription  Form") duly
executed  by  such  holder and surrender of the original Warrant within five (5)
days of exercise, to the Company at its principal office or at the office of its
Warrant  Agent  (as provided hereinafter), accompanied by payment, in cash, wire
transfer  or  by  certified  or  official bank check payable to the order of the
Company,  in  the  amount obtained by multiplying the number of shares of Common
Stock  for  which this Warrant is then exercisable by the Purchase Price then in
effect.

     1.3.     Partial  Exercise.  This Warrant may be exercised in part (but not
              -----------------
for  a  fractional  share) by surrender of this Warrant in the manner and at the
place provided in subsection 1.2 except that the amount payable by the holder on
such partial exercise shall be the amount obtained by multiplying (a) the number
of  shares  of Common Stock designated by the holder in the Subscription Form by
(b)  the  Purchase  Price  then  in  effect.  On  any such partial exercise, the
Company,  at  its expense, will forthwith issue and deliver to or upon the order
of  the  holder  hereof  a  new Warrant of like tenor, in the name of the holder
hereof or as such holder (upon payment by such holder of any applicable transfer
taxes)  may request, the number of shares of Common Stock for which such Warrant
may  still  be  exercised.

     1.4.     Fair Market Value. Fair Market Value of a share of Common Stock as
              -----------------
of a particular date (the "Determination Date") shall mean the Fair Market Value
of a share of the Company's Common Stock. Fair Market Value of a share of Common
Stock  as  of  a  Determination  Date  shall  mean:

     (a)     If the Company's Common Stock is traded on an exchange or is quoted
on  the  National  Association  of  Securities Dealers, Inc. Automated Quotation
("NASDAQ")  National  Market  System, the NASDAQ SmallCap Market or the American
Stock  Exchange,  Inc.,  then  the  closing  or  last  sale price, respectively,
reported for the last business day immediately preceding the Determination Date.

     (b)     If  the  Company's  Common Stock is not traded on an exchange or on
the  NASDAQ  National  Market System, the NASDAQ SmallCap Market or the American
Stock  Exchange,  Inc.,  but  is  traded on the Toronto Stock Exchange or in the
over-the-counter  market,  then  the  mean  of  the closing bid and asked prices
reported for the last business day immediately preceding the Determination Date.

     (c)  Except  as provided in clause (d) below, if the Company's Common Stock
is  not  publicly  traded,  then  as  the Holder and the Company agree or in the
absence  of  agreement by arbitration in accordance with the rules then standing
of the American Arbitration Association, before a single arbitrator to be chosen
from  a  panel  of  persons  qualified  by education and training to pass on the
matter  to  be  decided.

     (d)  If the Determination Date is the date of a liquidation, dissolution or
winding  up,  or any event deemed to be a liquidation, dissolution or winding up
pursuant  to  the Company's charter, then all amounts to be payable per share to
holders  of  the  Common  Stock  pursuant  to  the  charter in the event of such
liquidation, dissolution or winding up, plus all other amounts to be payable per
share  in respect of the Common Stock in liquidation under the charter, assuming
for  the purposes of this clause (d) that all of the shares of Common Stock then
issuable  upon  exercise  of  all  of  the  Warrants  are  outstanding  at  the
Determination  Date.

                                        2
<PAGE>
     1.5.     Company  Acknowledgment.  The  Company  will,  at  the time of the
              -----------------------
exercise  of  the  Warrant, upon the request of the holder hereof acknowledge in
writing  its  continuing obligation to afford to such holder any rights to which
such holder shall continue to be entitled after such exercise in accordance with
the  provisions  of  this  Warrant.  If  the  holder shall fail to make any such
request,  such failure shall not affect the continuing obligation of the Company
to  afford  to  such  holder  any  such  rights.

     1.6.     Trustee  for  Warrant  Holders.  In the event that a bank or trust
              ------------------------------
company  shall  have  been  appointed as trustee for the holders of the Warrants
pursuant to Subsection 3.2, such bank or trust company shall have all the powers
and  duties  of  a warrant agent (as hereinafter described) and shall accept, in
its  own  name for the account of the Company or such successor person as may be
entitled  thereto,  all  amounts  otherwise  payable  to  the  Company  or  such
successor,  as  the  case  may  be, on exercise of this Warrant pursuant to this
Section  1.

     2.1     Delivery  of  Stock  Certificates,  etc.  on  Exercise. The Company
             ------------------------------------------------------
agrees  that  the shares of Common Stock purchased upon exercise of this Warrant
shall  be  deemed  to be issued to the holder hereof as the record owner of such
shares  as  of  the close of business on the date on which this original Warrant
shall  have  been  surrendered and payment made for such shares as aforesaid. As
soon  as  practicable after the exercise of this Warrant in full or in part, and
in  any  event  within  seven  (7)  days  thereafter, the Company at its expense
(including  the  payment  by  it of any applicable issue taxes) will cause to be
issued  in  the  name  of  and delivered to the holder hereof, or as such holder
(upon  payment  by  such  holder of any applicable transfer taxes) may direct in
compliance  with  applicable  securities laws, a certificate or certificates for
the  number  of  duly and validly issued, fully paid and nonassessable shares of
Common  Stock  (or  Other  Securities) to which such holder shall be entitled on
such  exercise, plus, in lieu of any fractional share to which such holder would
otherwise  be  entitled, cash equal to such fraction multiplied by the then Fair
Market  Value  of  one  full  share,  together  with  any  other  stock or other
securities  and property (including cash, where applicable) to which such holder
is  entitled  upon  such  exercise  pursuant  to  Section  1  or  otherwise.

     2.2.     Cashless  Exercise.
              ------------------
     (a)     Payment  may be made either in (i) cash or by certified or official
bank  check  payable  to  the  order of the Company or wire transfer of same day
funds  equal  to  the  applicable  aggregate Purchase Price, (ii) by delivery of
Common  Stock  issuable upon exercise of the Warrants in accordance with Section
(b)  below  or  (iii)  by a combination of any of the foregoing methods, for the
number of Common Shares specified in such form (as such exercise number shall be
adjusted to reflect any adjustment in the total number of shares of Common Stock
issuable  to  the  holder  per  the  terms of this Warrant) and the holder shall
thereupon  be entitled to receive the number of duly authorized, validly issued,
fully-paid  and  non-assessable  shares  of  Common  Stock (or Other Securities)
determined  as  provided  herein.

     (b)     Notwithstanding  any provisions herein to the contrary, if the Fair
Market Value of one share of Common Stock is greater than the Purchase Price (at
the  date of calculation as set forth below), in lieu of exercising this Warrant
for  cash,  upon  consent of the Company, the holder may elect to receive shares
equal to the value (as determined below) of this Warrant (or the portion thereof
being  cancelled)  by  surrender  of this Warrant at the principal office of the
Company together with the properly endorsed Subscription Form in which event the
Company  shall  issue  to the holder a number of shares of Common Stock computed
using  the  following  formula:

                                       3
<PAGE>
               X = Y  (A-B)
                   --------
                       A

    Where     X=    the  number of shares of Common Stock to be issued to
                    the  holder

              Y=    the number of shares of Common Stock purchasable under the
                    Warrant  or,  if  only  a  portion  of  the Warrant is being
                    exercised,  the  portion  of the Warrant being exercised (at
                    the  date  of  such  calculation)

              A=    the  Fair Market Value of one share of the Company's Common
                    Stock (at the date  of  such  calculation)

              B=    Purchase  Price  (as  adjusted  to  the  date  of  such
                    calculation)

     (c)     The  Holder  may not employ the cashless exercise feature described
above  at any time that the Warrant Stock to be issued upon exercise is included
for  unrestricted resale in an effective registration statement or may be resold
pursuant  to  Rule 144 under the Act without restriction on the amount of shares
of  Warrant  Stock  that  may  be  resold  at  one  time.

     3.     Adjustment  for  Reorganization,  Consolidation,  Merger,  etc.
            ---------------------------------------------------------------
     3.1.     Reorganization,  Consolidation,  Merger, etc.  In case at any time
              --------------------------------------------
or  from  time  to  time,  the  Company  shall  (a) effect a reorganization, (b)
consolidate  with  or  merge  into  any  other  person  or  (c)  transfer all or
substantially all of its properties or assets to any other person under any plan
or  arrangement contemplating the dissolution of the Company, then, in each such
case,  as  a  condition  to  the  consummation of such a transaction, proper and
adequate  provision  shall  be  made  by  the Company whereby the holder of this
Warrant,  on the exercise hereof as provided in Section 1, at any time after the
consummation  of  such  reorganization, consolidation or merger or the effective
date  of  such  dissolution,  as  the case may be, shall receive, in lieu of the
Common  Stock  (or  Other  Securities)  issuable  on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including  cash)  to  which  such  holder  would  have  been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
holder  had so exercised this Warrant, immediately prior thereto, all subject to
further  adjustment  thereafter  as  provided  in  Section  4.

     3.2.     Dissolution.  In  the  event  of  any  dissolution  of the Company
              -----------
following  the transfer of all or substantially all of its properties or assets,
the Company, prior to such dissolution, shall at its expense deliver or cause to
be  delivered the stock and other securities and property (including cash, where
applicable)  receivable  by the holders of the Warrants after the effective date
of such dissolution pursuant to this Section 3 to a bank or trust company having
its  principal  office  in New York, NY, as trustee for the holder or holders of
the  Warrants.

     3.3.    Continuation  of Terms.  Upon any reorganization, consolidation,
             ----------------------
merger  or  transfer (and any dissolution following any transfer) referred to in
this  Section  3,  this  Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities and
property  receivable  on  the exercise of this Warrant after the consummation of
such  reorganization,  consolidation  or  merger  or  the  effective  date  of
dissolution  following  any  such  transfer,  as  the  case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case  of any such transfer, the person acquiring all or substantially all of the
properties  or  assets  of  the  Company,  whether or not such person shall have
expressly  assumed  the  terms  of this Warrant as provided in Section 4. In the
event  this  Warrant  does  not  continue  in  full  force  and effect after the
consummation  of  the transaction described in this Section 3, then only in such
event  will  the  Company's  securities  and  property  (including  cash,  where
applicable)  receivable  by  the  holders  of  the  Warrants be delivered to the
Trustee  as  contemplated  by  Section  3.2.
                                        4
<PAGE>

     4.     Extraordinary  Events Regarding Common Stock.  In the event that the
            --------------------------------------------
Company  shall  (a) issue additional shares of the Common Stock as a dividend or
other  distribution  on  outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock or (c) combine its outstanding shares of the Common Stock
into  a  smaller number of shares of the Common Stock, then, in each such event,
the  Purchase  Price  shall, simultaneously with the happening of such event, be
adjusted  by multiplying the then Purchase Price by a fraction, the numerator of
which  shall  be  the  number  of shares of Common Stock outstanding immediately
prior  to  such event and the denominator of which shall be the number of shares
of  Common  Stock  outstanding  immediately after such event, and the product so
obtained  shall  thereafter  be  the Purchase Price then in effect. The Purchase
Price, as so adjusted, shall be readjusted in the same manner upon the happening
of any successive event or events described herein in this Section 4. The number
of  shares  of Common Stock that the holder of this Warrant shall thereafter, on
the  exercise  hereof  as provided in Section 1, be entitled to receive shall be
increased  to  a number determined by multiplying the number of shares of Common
Stock  that  would  otherwise  (but  for  the  provisions  of this Section 4) be
issuable  on  such  exercise  by  a  fraction  of which (a) the numerator is the
Purchase  Price  that would otherwise (but for the provisions of this Section 4)
be  in  effect,  and  (b) the denominator is the Purchase Price in effect on the
date  of  such  exercise.

     5.     Certificate  as  to  Adjustments.  In each case of any adjustment or
            --------------------------------
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise  of  the  Warrants,  the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or  readjustment  in  accordance  with  the  terms  of the Warrant and prepare a
certificate  setting forth such adjustment or readjustment and showing in detail
the  facts  upon  which  such  adjustment  or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to  have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities)  outstanding  or deemed to be outstanding and (c) the Purchase Price
and  the  number  of shares of Common Stock to be received upon exercise of this
Warrant,  in  effect immediately prior to such adjustment or readjustment and as
adjusted  or  readjusted as provided in this Warrant. The Company will forthwith
mail  a  copy  of  each  such  certificate  to the holder of the Warrant and any
Warrant  Agent  of  the  Company  (appointed  pursuant  to  Section  11 hereof).

6.     Reservation  of  Stock,  etc.  Issuable on Exercise of Warrant; Financial
       -------------------------------------------------------------------------
Statements.   From and after the Issue Date of this Warrant, the Company will at
-----------
all  times  reserve  and keep available, solely for issuance and delivery on the
exercise  of the Warrants, all shares of Common Stock (or Other Securities) from
time to time issuable on the exercise of the Warrant.  This Warrant entitles the
holder  hereof  to  receive  copies  of  all  financial  and  other  information
distributed or required to be distributed to the holders of the Company's Common
Stock.

     7.     Assignment;  Exchange  of  Warrant.  Subject  to  compliance  with
            ----------------------------------
applicable  securities  laws, this Warrant, and the rights evidenced hereby, may
be  transferred by any registered holder hereof (a "Transferor") with respect to
any  or  all  of the Shares. On the surrender for exchange of this Warrant, with
the  Transferor's  endorsement  in  the  form  of Exhibit B attached hereto (the
"Transferor  Endorsement  Form")  and  together  with  evidence  reasonably
satisfactory  to the Company demonstrating compliance with applicable securities
laws,  the  Company  at  its  expense, but with payment by the Transferor of any
applicable  transfer  taxes)  will  issue  and deliver to or on the order of the
Transferor  thereof  a new Warrant or Warrants of like tenor, in the name of the
Transferor  and/or  the  transferee(s)  specified in such Transferor Endorsement
Form  (each  a  "Transferee"),  calling  in  the  aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of  the  Warrant  so  surrendered  by  the  Transferor.

                                        5
<PAGE>
     8.     Replacement  of  Warrant.  On  receipt  of  evidence  reasonably
            ------------------------
satisfactory  to  the  Company  of the loss, theft, destruction or mutilation of
this  Warrant  and,  in  the case of any such loss, theft or destruction of this
Warrant,  on  delivery  of  an  indemnity  agreement  or  security  reasonably
satisfactory  in  form  and  amount  to  the Company or, in the case of any such
mutilation,  on  surrender  and cancellation of this Warrant, the Company at its
expense  will execute and deliver, in lieu thereof, a new Warrant of like tenor.

     9.     Registration Rights.  The Holder of this Warrant has been granted
            -------------------
certain  registration  rights by the Company which are not assignable by Holder.
These registration rights are set forth in a Subscription Agreement entered into
by the Company and a Subscriber of the Company's Common Stock at or prior to the
issue  date  of  this  Warrant.  The  terms  of  the  Subscription Agreement are
incorporated herein by this reference. Upon the occurrence of a Non-Registration
Event,  as  defined  in  the Subscription Agreement, in the event the Company is
unable  to  issue  Common  Stock  upon  exercise  of  this Warrant that has been
registered  in  a  Registration  Statement  described  in  Section  8.1  of  the
Subscription  Agreement,  within  the time periods described in the Subscription
Agreement,  which  Registration  Statement must be effective for the periods set
forth in the Subscription Agreement, then the Purchase Price shall be reduced by
ten  cents  ($.10) for each thirty (30) days or part thereof for so long as such
Non-Registration  Event  shall  continue.  The  foregoing  notwithstanding,  the
Purchase  Price  shall  not  be reduced by more than 50% of the initial Purchase
Price  as  adjusted  from  time  to  time  as  herein  provided.

     10.     Maximum  Exercise.  The  Holder  shall  not be entitled to exercise
             -----------------
this  Warrant  on  an exercise date, in connection with that number of shares of
Common  Stock which would be in excess of the sum of (i) the number of shares of
Common  Stock beneficially owned by the Holder and its affiliates on an exercise
date,  and  (ii) the number of shares of Common Stock issuable upon the exercise
of  this  Warrant  with respect to which the determination of this limitation is
being  made  on  an exercise date, which would result in beneficial ownership by
the  Holder  and  its affiliates of more than 4.99% of the outstanding shares of
Common  Stock  of the Company on such date.  For the purposes of the immediately
preceding  sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation
13d-3  thereunder.  Subject to the foregoing, the Holder shall not be limited to
aggregate  exercises  which would result in the issuance of more than 4.99%.  It
is  solely  the  responsibility  of the Holder to determine beneficial ownership
amounts.   The  restriction  described  in  this  paragraph  may be revoked upon
seventy-five  (75) days prior notice from the Holder to the Company.  The Holder
may allocate which of the equity of the Company deemed beneficially owned by the
Subscriber shall be included in the 4.99% amount described above and which shall
be  allocated  to  the  excess  above  4.99%.

     11.     Warrant  Agent.  The  Company  may,  by  written notice to the each
             --------------
holder  of the Warrant, appoint an agent for the purpose of issuing Common Stock
(or  Other  Securities)  on  the exercise of this Warrant pursuant to Section 1,
exchanging  this  Warrant  pursuant  to  Section  7,  and replacing this Warrant
pursuant  to  Section  8,  or  any  of  the  foregoing,  and thereafter any such
issuance,  exchange  or  replacement,  as the case may be, shall be made at such
office  by  such  agent.

     12.     Transfer on the Company's Books.  Until this Warrant is transferred
             -------------------------------
on  the books of the Company, the Company may treat the registered holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.

     13.     Notices.  All notices, demands, requests, consents, approvals, and
             -------
other  communications  required or permitted hereunder to the Holder shall be in
writing  at such address as may have been furnished to the Company in writing by
such

                                        6
<PAGE>
holder  or,  until any such holder furnishes to the Company an address, then to,
and  at  the address of, the last holder of this Warrant who has so furnished an
address  to  the  Company  and,  unless otherwise specified herein, shall be (i)
personally  served,  (ii) deposited in the mail, registered or certified, return
receipt  requested,  postage  prepaid,  (iii) delivered by reputable air courier
service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or
facsimile,  addressed  as set forth below or to such other address as such party
shall  have  specified  most  recently  by  written notice.  Any notice or other
communication  required  or  permitted  to  be  given  hereunder shall be deemed
effective  (a)  upon  hand  delivery  or  delivery  by  facsimile, with accurate
confirmation  generated by the transmitting facsimile machine, at the address or
number  designated  below (if delivered on a business day during normal business
hours  where such notice is to be received), or the first business day following
such  delivery (if delivered other than on a business day during normal business
hours  where  such  notice  is to be received) or (b) on the second business day
following  the  date  of  mailing  by  express  courier  service, fully prepaid,
addressed  to  such  address,  or upon actual receipt of such mailing, whichever
shall  first  occur.

   14.     Miscellaneous. This Warrant and any term hereof may be changed,
           -------------
waived,  discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is  sought.  This Warrant shall be construed and enforced in accordance with and
governed  by the laws of New York. Any dispute relating to this Warrant shall be
adjudicated  in  New  York County in the State of New York. The headings in this
Warrant  are  for  purposes  of reference only, and shall not limit or otherwise
affect  any  of  the  terms  hereof.  The  invalidity or unenforceability of any
provision  hereof  shall  in no way affect the validity or enforceability of any
other  provision.

IN  WITNESS  WHEREOF, the Company has executed this Warrant as of the date first
written  above.

          SBE,  INC.

          By:  /s/  William  B.  Heye
          ----------------------------
          President  &  CEO

Witness:

/s/ David  W.  Brunton
-----------------------
    Secretary

                                        7

<PAGE>
                                    EXHIBIT A

                              FORM OF SUBSCRIPTION
                   (to be signed only on exercise of Warrant)

TO:  SBE,  INC.

The  undersigned,  pursuant  to the provisions set forth in the attached Warrant
(No.____),  hereby  irrevocably  elects  to  purchase  (check  applicable  box):

___     ________  shares  of  the  Common  Stock  covered  by  such  Warrant; or

___     the  maximum  number  of  shares of Common Stock covered by such Warrant
        pursuant to the cashless  exercise  procedure set forth  in  Section  2.

The  undersigned  herewith  makes  payment  of  the full purchase price for such
shares  at  the  price  per  share  provided  for  in  such  Warrant,  which  is
$___________.  Such  payment  takes the form of (check applicable box or boxes):

___     $__________  in  lawful  money  of  the  United  States;  and/or

___     the  cancellation  of  such  portion  of  the  attached  Warrant  as  is
exercisable  for  a total of _______ shares of Common Stock (using a Fair Market
Value  of  $_______  per  share  for  purposes  of  this  calculation);  and/or

___     the  cancellation  of  such  number  of  shares  of  Common  Stock as is
necessary,  in  accordance  with the formula set forth in Section 2, to exercise
this  Warrant  with  respect  to  the  maximum  number of shares of Common Stock
purchasable  pursuant to the cashless exercise procedure set forth in Section 2.

The  undersigned requests that the certificates for such shares be issued in the
name  of, and delivered to _____________________________________________________
whose  address  is  ____________________________________________________________
______________________________________________________________________________.

The  undersigned  represents  and  warrants  that  all  offers  and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933,  as  amended  (the  "Securities  Act"),  or  pursuant to an exemption from
registration  under  the  Securities  Act.

                                 ______________________________________________
                                 (Signature  must  conform to name of holder as
                                 specified on the face of the Warrant)

Dated:___________________

                                 ______________________________________________
                                 ______________________________________________
                                 (Address)

                                        8
<PAGE>

                                    EXHIBIT B

                         FORM OF TRANSFEROR ENDORSEMENT
                   (To be signed only on transfer of Warrant)

     For  value  received,  the undersigned hereby sells, assigns, and transfers
unto  the  person(s)  named  below  under  the  heading  "Transferees" the right
represented  by  the  within  Warrant  to  purchase the percentage and number of
shares  of  Common  Stock  of  SBE,  INC.  to  which  the within Warrant relates
specified  under the headings "Percentage Transferred" and "Number Transferred,"
respectively,  opposite  the  name(s)  of  such person(s) and appoints each such
person  Attorney to transfer its respective right on the books of SBE, INC. with
full  power  of  substitution  in  the  premises.

          Transferees     Percentage Transferred     Number Transferred
          -----------     ----------------------     ------------------

                                            ___________________________________
Dated:  ______________,  ________           (Signature  must  conform to name
                                            of holder as specified on the face
                                            of the warrant)

Signed  in  the  presence  of:

____________________________________        ___________________________________
 (Name)                                     ___________________________________
                                            (address)

ACCEPTED  AND  AGREED:                      ___________________________________
[TRANSFEREE]                                ___________________________________
                                            (address)

____________________________________
 (Name)

                                        9
<PAGE>

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