Document:

EXHIBIT B

                          REGISTRATION RIGHTS AGREEMENT

      This Registration Rights Agreement (this "Agreement") is made and entered
into as of April 6, 2005, among TNX Television Holdings, Inc., a Delaware
corporation (the "Company"), and the purchasers signatory hereto (each such
purchaser is a "Purchaser" and collectively, the "Purchasers").

            This Agreement is made pursuant to the Securities Purchase
Agreement, dated as of the date hereof among the Company and the Purchasers (the
"Purchase Agreement").

            The Company and the Purchasers hereby agree as follows:

      1. Definitions

            Capitalized terms used and not otherwise defined herein that are
defined in the Purchase Agreement shall have the meanings given such terms in
the Purchase Agreement. As used in this Agreement, the following terms shall
have the following meanings:

            "Advice" shall have the meaning set forth in Section 6(d).

            "Effectiveness Date" means, with respect to the initial Registration
      Statement required to be filed hereunder, the 120th calendar day following
      the Filing Date and, with respect to any additional Registration
      Statements which may be required pursuant to Section 3(c), the 90th
      calendar day following the date on which the Company first knows, or
      reasonably should have known, that such additional Registration Statement
      is required hereunder; provided, however, in the event the Company is
      notified by the Commission that one of the above Registration Statements
      will not be reviewed or is no longer subject to further review and
      comments, the Effectiveness Date as to such Registration Statement shall
      be the fifth Trading Day following the date on which the Company is so
      notified if such date precedes the dates required above.

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            "Effectiveness Period" shall have the meaning set forth in Section
      2(a).

            "Event" shall have the meaning set forth in Section 2(b).

            "Event Date" shall have the meaning set forth in Section 2(b).

            "Filing Date" means, with respect to the initial Registration
      Statement required hereunder, the earlier of (i) 30th calendar day
      following the filing date of the Company's Annual Report on Form 10-KSB
      for the year ended December 31, 2004 and (ii) June 15 2005, and, with
      respect to any additional Registration Statements which may be required
      pursuant to Section 3(c), the 30th day following the date on which the
      Company first knows, or reasonably should have known that such additional
      Registration Statement is required hereunder.

            "Holder" or "Holders" means the holder or holders, as the case may
      be, from time to time of Registrable Securities.

            "Indemnified Party" shall have the meaning set forth in Section
      5(c).

            "Indemnifying Party" shall have the meaning set forth in Section
      5(c).

            "Losses" shall have the meaning set forth in Section 5(a).

            "Plan of Distribution" shall have the meaning set forth in Section
      2(a).

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

            "Prospectus" means the prospectus included in a Registration
      Statement (including, without limitation, a prospectus that includes any
      information previously omitted from a prospectus filed as part of an
      effective registration statement in reliance upon Rule 430A promulgated
      under the Securities Act), as amended or supplemented by any prospectus
      supplement, with respect to the terms of the offering of any portion of
      the Registrable Securities covered by a Registration Statement, and all
      other amendments and supplements to the Prospectus, including
      post-effective amendments, and all material incorporated by reference or
      deemed to be incorporated by reference in such Prospectus.

            "Registrable Securities" means (i) all of the shares of Common Stock
      issuable upon conversion in full of the Debentures, (ii) all of the shares
      of Common Stock issuable upon conversion in full of the shares of Series
      A-1 Preferred Stock, (iii) all shares issuable as dividends on the Series
      A-1 Preferred Stock assuming all dividend payments are made in shares of
      Common Stock and the Series A-1 Preferred Stock is held for at least 3
      years, (iv) all Warrant Shares, (v) any securities issued or issuable upon
      any stock split, dividend or other distribution, recapitalization or
      similar event with respect to the foregoing, (vi) any additional shares
      issuable in connection with any anti-dilution provisions in the
      Debentures, Series A-1 Preferred Stock or the Warrants (in each case,
      without giving effect to any limitations on conversion set forth in the
      Debenture and certificate of designation for the Series A-1 Preferred
      Stock or limitations on exercise set forth in the Warrant) and (vii) all
      shares issuable in lieu of cash payments of liquidated damages pursuant to
      Section 2(b).

            "Registration Statement" means the registration statements required
      to be filed hereunder and any additional registration statements
      contemplated by Section 3(c), including (in each case) the Prospectus,
      amendments and supplements to such registration statement or Prospectus,
      including pre- and post-effective amendments, all exhibits thereto, and
      all material incorporated by reference or deemed to be incorporated by
      reference in such registration statement.

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            "Rule 415" means Rule 415 promulgated by the Commission pursuant to
      the Securities Act, as such Rule may be amended from time to time, or any
      similar rule or regulation hereafter adopted by the Commission having
      substantially the same purpose and effect as such Rule.

            "Rule 424" means Rule 424 promulgated by the Commission pursuant to
      the Securities Act, as such Rule may be amended from time to time, or any
      similar rule or regulation hereafter adopted by the Commission having
      substantially the same purpose and effect as such Rule.

            "Selling Shareholder Questionnaire" shall have the meaning set forth
      in Section 3(a).

      2. Shelf Registration

            (a) On or prior to each Filing Date, the Company shall prepare and
file with the Commission a "Shelf" Registration Statement covering the resale of
135% of the Registrable Securities on such Filing Date for an offering to be
made on a continuous basis pursuant to Rule 415. The Registration Statement
shall be on Form SB-2 and shall contain (unless otherwise directed by the
Holders) substantially the "Plan of Distribution" attached hereto as Annex A.
Subject to the terms of this Agreement, the Company shall use its best efforts
to cause the Registration Statement to be declared effective under the
Securities Act as promptly as possible after the filing thereof, but in any
event prior to the applicable Effectiveness Date, and shall use its best efforts
to keep such Registration Statement continuously effective under the Securities
Act until all Registrable Securities covered by such Registration Statement have
been sold or may be sold without volume restrictions pursuant to Rule 144(k) as
determined by the counsel to the Company pursuant to a written opinion letter to
such effect, addressed and acceptable to the Company's transfer agent and the
affected Holders (the "Effectiveness Period"). The Company shall immediately
notify the Holders via email or facsimile of the effectiveness of the
Registration Statement on the same day that the Company receives notification of
the effectiveness from the Commission. Failure to so notify the Holder within 1
Trading Day of such notification shall be deemed an Event under Section 2(b).
The Company shall, within 1 Trading Day of the day that the Company receives
notification of the effectiveness from the Commission, file a Form 424(b)(5)
with the Commission.

            (b) If: (i) a Registration Statement is not filed on or prior to its
Filing Date (if the Company files a Registration Statement without affording the
Holders the opportunity to review and comment on the same as required by Section
3(a), the Company shall not be deemed to have satisfied this clause (i)), or
(ii) the Company fails to file with the Commission a request for acceleration in
accordance with Rule 461 promulgated under the Securities Act, within five
Trading Days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that a Registration Statement will not
be "reviewed," or not subject to further review, or (iii) prior to its
Effectiveness Date, the Company fails to file a pre-effective amendment and
otherwise respond in writing to comments made by the Commission in respect of
such Registration Statement within 15 calendar days after the receipt of
comments by or notice from the Commission that such amendment is required in
order for a Registration Statement to be declared effective, or (iv) a

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Registration Statement filed or required to be filed hereunder is not declared
effective by the Commission by its Effectiveness Date, or (v) after the
Effectiveness Date, a Registration Statement ceases for any reason to remain
continuously effective as to all Registrable Securities for which it is required
to be effective, or the Holders are not permitted to utilize the Prospectus
therein to resell such Registrable Securities for 15 consecutive calendar days
but no more than an aggregate of 20 calendar days during any 12-month period
(which need not be consecutive Trading Days) (any such failure or breach being
referred to as an "Event", and for purposes of clause (i) or (iv) the date on
which such Event occurs, or for purposes of clause (ii) the date on which such
five Trading Day period is exceeded, or for purposes of clause (iii) the date
which such 15 calendar day period is exceeded, or for purposes of clause (v) the
date on which such 15 or 20 calendar day period, as applicable, is exceeded
being referred to as "Event Date"), then in addition to any other rights the
Holders may have hereunder or under applicable law, (A) on each such Event Date
and, on each monthly anniversary of each such Event Date (if the applicable
Event shall not have been cured by such date) until the applicable Event is
cured, for the Events set forth in clauses (i), (ii), (iv) and (v) herein, the
Company shall pay to each Holder an amount in cash, or shares of Common Stock,
as applicable, as partial liquidated damages and not as a penalty, equal to 2.0%
of the aggregate purchase price paid by such Holder pursuant to the Purchase
Agreement for any Registrable Securities then held by such Holder, and (B) on
each such Event Date for the Event set forth in clause (iii) herein, the Company
shall pay to each Holder an amount in cash or shares of Common Stock, as
applicable, as partial liquidated damages and not as a penalty, equal to 1.0% of
the aggregate purchase price paid by such Holder pursuant to the Purchase
Agreement for any Registrable Securities then held by such Holder and, on each
60 day anniversary of each such Event Date for the Event set forth in clause
(iii) herein (if the applicable Event shall not have been cured by such date)
until the applicable Event is cured, the Company shall pay to each Holder an
amount in cash or shares of Common Stock, as applicable, as partial liquidated
damages and not as a penalty, equal to 2.0% of the aggregate purchase price paid
by such Holder pursuant to the Purchase Agreement for any Registrable Securities
then held by such Holder. Subject to the terms and conditions herein, the
decision whether to pay partial liquidated damages hereunder in cash or shares
of Common Stock shall be at the discretion of the Company. Not less than 20
Trading Days prior to each payment of liquidated damages, the Company shall
provide the Holder with written notice of its election to pay the partial
liquidated damages hereunder either in cash or shares of Common Stock (the
Company may indicate in such notice that the election contained in such notice
shall continue for later payments of partial liquidated damages until revised).
Within 20 Trading Days prior to a payment of Partial Liquidated Damages, the
Company's election (whether specific to a single payment of partial liquidated
damages or continuous) shall be irrevocable as to such payment of partial
liquidated damages. Subject to the aforementioned conditions, failure to timely
provide such written notice shall be deemed an election by the Company to pay
the partial liquidated damages on such applicable payment date in cash. If the
Company fails to pay any partial liquidated damages pursuant to this Section in
full within seven days after the date payable, the Company will pay interest
thereon at a rate of 15% per annum (or such lesser maximum amount that is
permitted to be paid by applicable law) to the Holder, accruing daily from the
date such partial liquidated damages are due until such amounts, plus all such
interest thereon, are paid in full. The partial liquidated damages pursuant to
the terms hereof shall apply on a daily pro-rata basis for any portion of a
month prior to the cure of an Event.

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      3. Registration Procedures

            In connection with the Company's registration obligations hereunder,
the Company shall:

            (a) Not less than five Trading Days prior to the filing of each
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall, (i) furnish to each
Holder copies of all such documents proposed to be filed, which documents (other
than those incorporated or deemed to be incorporated by reference) will be
subject to the review of such Holders, and (ii) cause its officers and
directors, counsel and independent certified public accountants to respond to
such inquiries as shall be necessary, in the reasonable opinion of respective
counsel to conduct a reasonable investigation within the meaning of the
Securities Act. The Company shall not file the Registration Statement or any
such Prospectus or any amendments or supplements thereto to which the Holders of
a majority of the Registrable Securities shall reasonably object in good faith,
provided that, the Company is notified of such objection in writing no later
than 5 Trading Days after the Holders have been so furnished copies of such
documents. Each Holder agrees to furnish to the Company a completed
Questionnaire in the form attached to this Agreement as Annex B (a "Selling
Shareholder Questionnaire") not less than two Trading Days prior to the Filing
Date or by the end of the fourth Trading Day following the date on which such
Holder receives draft materials in accordance with this Section.

            (b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to a Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep a
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the Commission
such additional Registration Statements in order to register for resale under
the Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement
(subject to the terms of this Agreement), and as so supplemented or amended to
be filed pursuant to Rule 424; (iii) respond as promptly as reasonably possible
to any comments received from the Commission with respect to a Registration
Statement or any amendment thereto and as promptly as reasonably possible
provide the Holders true and complete copies of all correspondence from and to
the Commission relating to a Registration Statement; and (iv) comply in all
material respects with the provisions of the Securities Act and the Exchange Act
with respect to the disposition of all Registrable Securities covered by a
Registration Statement during the applicable period in accordance (subject to
the terms of this Agreement) with the intended methods of disposition by the
Holders thereof set forth in such Registration Statement as so amended or in
such Prospectus as so supplemented.

            (c) If during the Effectiveness Period, the number of Registrable
Securities at any time exceeds 90% of the number of shares of Common Stock then
registered in a Registration Statement, then the Company shall file as soon as
reasonably practicable but in any case prior to the applicable Filing Date, an
additional Registration Statement covering the resale by the Holders of not less
than 135% of the number of such Registrable Securities.

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            (d) Notify the Holders of Registrable Securities to be sold (which
notice shall, pursuant to clauses (ii) through (vi) hereof, be accompanied by an
instruction to suspend the use of the Prospectus until the requisite changes
have been made) as promptly as reasonably possible (and, in the case of (i)(A)
below, not less than five Trading Days prior to such filing) and (if requested
by any such Person) confirm such notice in writing no later than one Trading Day
following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to a Registration Statement is proposed to be filed;
(B) when the Commission notifies the Company whether there will be a "review" of
such Registration Statement and whenever the Commission comments in writing on
such Registration Statement (the Company shall provide true and complete copies
thereof and all written responses thereto to each of the Holders); and (C) with
respect to a Registration Statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to a
Registration Statement or Prospectus or for additional information; (iii) of the
issuance by the Commission or any other federal or state governmental authority
of any stop order suspending the effectiveness of a Registration Statement
covering any or all of the Registrable Securities or the initiation of any
Proceedings for that purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; (v) of the occurrence of any event or passage of time that makes the
financial statements included in a Registration Statement ineligible for
inclusion therein or any statement made in a Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to a
Registration Statement, Prospectus or other documents so that, in the case of a
Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading; and
(vi) the occurrence or existence of any pending corporate development with
respect to the Company that the Company believes may be material and that, in
the determination of the Company, makes it not in the best interest of the
Company to allow continued availability of the Registration Statement or
Prospectus; provided that any and all of such information shall remain
confidential to each Holder until such information otherwise becomes public,
unless disclosure by a Holder is required by law; provided, further,
notwithstanding each Holder's agreement to keep such information confidential,
the Holders make no acknowledgement that any such information is material,
non-public information.

            (e) Use its commercially reasonable efforts to avoid the issuance
of, or, if issued, obtain the withdrawal of (i) any order suspending the
effectiveness of a Registration Statement, or (ii) any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable moment.

            (f) Furnish to each Holder, without charge, at least one conformed
copy of each such Registration Statement and each amendment thereto, including
financial statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference to the extent requested by such Person, and
all exhibits to the extent requested by such Person (including those previously
furnished or incorporated by reference) promptly after the filing of such
documents with the Commission.

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            (g) Promptly deliver to each Holder, without charge, as many copies
of the Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably request in
connection with resales by the Holder of Registrable Securities. Subject to the
terms of this Agreement, the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto, except after
the giving on any notice pursuant to Section 3(d).

            (h) If NASDR Rule 2710 requires any broker-dealer to make a filing
prior to executing a sale by a Holder, make an Issuer Filing with the NASDR,
Inc. Corporate Financing Department pursuant to NASDR Rule 2710(b)(10)(A)(i) and
respond within five Trading Days to any comments received from NASDR in
connection therewith, and pay the filing fee required in connection therewith.

            (i) Prior to any resale of Registrable Securities by a Holder, use
its commercially reasonable efforts to register or qualify or cooperate with the
selling Holders in connection with the registration or qualification (or
exemption from the Registration or qualification) of such Registrable Securities
for the resale by the Holder under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder reasonably requests in
writing, to keep each registration or qualification (or exemption therefrom)
effective during the Effectiveness Period and to do any and all other acts or
things reasonably necessary to enable the disposition in such jurisdictions of
the Registrable Securities covered by each Registration Statement; provided,
that the Company shall not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified, subject the Company to any
material tax in any such jurisdiction where it is not then so subject or file a
general consent to service of process in any such jurisdiction.

            (j) If requested by the Holders, cooperate with the Holders to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be delivered to a transferee pursuant to a
Registration Statement, which certificates shall be free, to the extent
permitted by the Purchase Agreement, of all restrictive legends, and to enable
such Registrable Securities to be in such denominations and registered in such
names as any such Holders may request.

            (k) Upon the occurrence of any event contemplated by this Section 3,
as promptly as reasonably possible under the circumstances taking into account
the Company's good faith assessment of any adverse consequences to the Company
and its stockholders of the premature disclosure of such event, prepare a
supplement or amendment, including a post-effective amendment, to a Registration
Statement or a supplement to the related Prospectus or any document incorporated
or deemed to be incorporated therein by reference, and file any other required
document so that, as thereafter delivered, neither a Registration Statement nor
such Prospectus will contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the

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statements therein, in light of the circumstances under which they were made,
not misleading. If the Company notifies the Holders in accordance with clauses
(ii) through (vi) of Section 3(d) above to suspend the use of any Prospectus
until the requisite changes to such Prospectus have been made, then the Holders
shall suspend use of such Prospectus. The Company will use its best efforts to
ensure that the use of the Prospectus may be resumed as promptly as is
practicable. The Company shall be entitled to exercise its right under this
Section 3(j) to suspend the availability of a Registration Statement and
Prospectus, subject to the payment of partial liquidated damages pursuant to
Section 2(b), for a period not to exceed 60 days (which need not be consecutive
days) in any 12 month period.

            (l) Comply with all applicable rules and regulations of the
Commission.

            (m) The Company may require each selling Holder to furnish to the
Company a certified statement as to the number of shares of Common Stock
beneficially owned by such Holder and, if required by the Commission, the person
thereof that has voting and dispositive control over the Shares. During any
periods that the Company is unable to meet its obligations hereunder with
respect to the registration of the Registrable Securities solely because any
Holder fails to furnish such information within three Trading Days of the
Company's request, any liquidated damages that are accruing at such time as to
such Holder only shall be tolled and any Event that may otherwise occur solely
because of such delay shall be suspended as to such Holder only, until such
information is delivered to the Company.

      4. Registration Expenses. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not any Registrable Securities are sold pursuant to
the Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the Trading Market on which the Common Stock is then
listed for trading, (B) in compliance with applicable state securities or Blue
Sky laws reasonably agreed to by the Company in writing (including, without
limitation, fees and disbursements of counsel for the Company in connection with
Blue Sky qualifications or exemptions of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as requested by the Holders) and (C) if not
previously paid by the Company in connection with an Issuer Filing, with respect
to any filing that may be required to be made by any broker through which a
Holder intends to make sales of Registrable Securities with NASD Regulation,
Inc. pursuant to the NASD Rule 2710, so long as the broker is receiving no more
than a customary brokerage commission in connection with such sale, (ii)
printing expenses (including, without limitation, expenses of printing
certificates for Registrable Securities and of printing prospectuses if the
printing of prospectuses is reasonably requested by the holders of a majority of
the Registrable Securities included in a Registration Statement), (iii)
messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, (v) Securities Act liability insurance, if the Company
so desires such insurance, and (vi) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (including, without limitation,

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all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder. In no event shall the Company be
responsible for any broker or similar commissions or, except to the extent
provided for in the Transaction Documents, any legal fees or other costs of the
Holders.

      5. Indemnification

            (a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment advisors
and employees of each of them, each Person who controls any such Holder (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) and the officers, directors, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all losses, claims, damages, liabilities, costs (including, without
limitation, reasonable attorneys' fees) and expenses (collectively, "Losses"),
as incurred, arising out of or relating to any untrue or alleged untrue
statement of a material fact contained in a Registration Statement, any
Prospectus or any form of prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in light of the circumstances under which
they were made) not misleading, except to the extent, but only to the extent,
that (i) such untrue statements or omissions are based solely upon information
regarding such Holder furnished in writing to the Company by such Holder
expressly for use therein, or to the extent that such information relates to
such Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in a Registration Statement, such Prospectus or such form of
Prospectus or in any amendment or supplement thereto (it being understood that
the Holder has approved Annex A hereto for this purpose) or (ii) in the case of
an occurrence of an event of the type specified in Section 3(d)(ii)-(vi), the
use by such Holder of an outdated or defective Prospectus after the Company has
notified such Holder in writing that the Prospectus is outdated or defective and
prior to the receipt by such Holder of the Advice contemplated in Section 6(d).
The Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding arising from or in connection with the transactions
contemplated by this Agreement of which the Company is aware.

            (b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses, as
incurred, to the extent arising out of or based solely upon: (x) such Holder's
failure to comply with the prospectus delivery requirements of the Securities
Act or (y) any untrue or alleged untrue statement of a material fact contained
in any Registration Statement, any Prospectus, or any form of prospectus, or in
any amendment or supplement thereto or in any preliminary prospectus, or arising

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out of or relating to any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading (i) to the extent, but only to the extent, that such untrue statement
or omission is contained in any information so furnished in writing by such
Holder to the Company specifically for inclusion in such Registration Statement
or such Prospectus or (ii) to the extent that (1) such untrue statements or
omissions are based solely upon information regarding such Holder furnished in
writing to the Company by such Holder expressly for use therein, or to the
extent that such information relates to such Holder or such Holder's proposed
method of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in the Registration
Statement (it being understood that the Holder has approved Annex A hereto for
this purpose), such Prospectus or such form of Prospectus or in any amendment or
supplement thereto or (2) in the case of an occurrence of an event of the type
specified in Section 3(d)(ii)-(vi), the use by such Holder of an outdated or
defective Prospectus after the Company has notified such Holder in writing that
the Prospectus is outdated or defective and prior to the receipt by such Holder
of the Advice contemplated in Section 6(d). In no event shall the liability of
any selling Holder hereunder be greater in amount than the dollar amount of the
net proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.

            (c) Conduct of Indemnification Proceedings. If any Proceeding shall
be brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall have the right to assume the defense thereof, including
the employment of counsel reasonably satisfactory to the Indemnified Party and
the payment of all fees and expenses incurred in connection with defense
thereof; provided, that the failure of any Indemnified Party to give such notice
shall not relieve the Indemnifying Party of its obligations or liabilities
pursuant to this Agreement, except (and only) to the extent that it shall be
finally determined by a court of competent jurisdiction (which determination is
not subject to appeal or further review) that such failure shall have prejudiced
the Indemnifying Party.

            An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall reasonably believe that a material conflict of interest is likely to exist
if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and the reasonable fees and expenses of one
separate counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written consent of the

                                       10
<PAGE>

Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.

            Subject to the terms of this Agreement, all reasonable fees and
expenses of the Indemnified Party (including reasonable fees and expenses to the
extent incurred in connection with investigating or preparing to defend such
Proceeding in a manner not inconsistent with this Section) shall be paid to the
Indemnified Party, as incurred, within ten Trading Days of written notice
thereof to the Indemnifying Party; provided, that the Indemnified Party shall
promptly reimburse the Indemnifying Party for that portion of such fees and
expenses applicable to such actions for which such Indemnified Party is not
entitled to indemnification hereunder, determined based upon the relative faults
of the parties.

            (d) Contribution. If the indemnification under Section 5(a) or 5(b)
is unavailable to an Indemnified Party or insufficient to hold an Indemnified
Party harmless for any Losses, then each Indemnifying Party shall contribute to
the amount paid or payable by such Indemnified Party, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in this Agreement, any reasonable attorneys' or
other reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.

            The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), no Holder shall be required
to contribute, in the aggregate, any amount in excess of the amount by which the
proceeds actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission, except in the case of fraud by
such Holder.

            The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.

      6. Miscellaneous

                                       11
<PAGE>

            (a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.

            (b) No Piggyback on Registrations. Except as set forth on Schedule
3.1(v) to the Purchase Agreement, neither the Company nor any of its security
holders (other than the Holders in such capacity pursuant hereto) may include
securities of the Company in the Registration Statement other than the
Registrable Securities. The Company shall not file any other registration
statements until the initial Registration Statement required hereunder is
declared effective by the Commission, provided that this Section 6(b) shall not
prohibit the Company from filing amendments to registration statements already
filed.

            (c) Compliance. Each Holder covenants and agrees that it will comply
with the prospectus delivery requirements of the Securities Act as applicable to
it in connection with sales of Registrable Securities pursuant to the
Registration Statement.

            (d) Discontinued Disposition. Each Holder agrees by its acquisition
of such Registrable Securities that, upon receipt of a notice from the Company
of the occurrence of any event of the kind described in Section 3(d), such
Holder will forthwith discontinue disposition of such Registrable Securities
under a Registration Statement until such Holder's receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement, or until it is
advised in writing (the "Advice") by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement. The
Company will use its best efforts to ensure that the use of the Prospectus may
be resumed as promptly as it practicable. The Company agrees and acknowledges
that any periods during which the Holder is required to discontinue the
disposition of the Registrable Securities hereunder shall be subject to the
provisions of Section 2(b).

            (e) Piggy-Back Registrations. If at any time during the
Effectiveness Period there is not an effective Registration Statement covering
all of the Registrable Securities and the Company shall determine to prepare and
file with the Commission a registration statement relating to an offering for
its own account or the account of others under the Securities Act of any of its
equity securities, other than on Form S-4 or Form S-8 (each as promulgated under
the Securities Act) or their then equivalents relating to equity securities to
be issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with the stock option or other employee
benefit plans, then the Company shall send to each Holder a written notice of
such determination and, if within fifteen days after the date of such notice,
any such Holder shall so request in writing, the Company shall include in such

                                       12
<PAGE>

registration statement all or any part of such Registrable Securities such
holder requests to be registered; provided, that, the Company shall not be
required to register any Registrable Securities pursuant to this Section 6(e)
that are eligible for resale pursuant to Rule 144(k) promulgated under the
Securities Act or that are the subject of a then effective Registration
Statement.

      t 12 (f) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and each Holder of the then outstanding Registrable Securities. Notwithstanding
the foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of Holders and that
does not directly or indirectly affect the rights of other Holders may be given
by Holders of all of the Registrable Securities to which such waiver or consent
relates; provided, however, that the provisions of this sentence may not be
amended, modified, or supplemented except in accordance with the provisions of
the immediately preceding sentence.

            (g) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be delivered as
set forth in the Purchase Agreement.

            (h) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
all of the Holders of the then-outstanding Registrable Securities. Each Holder
may assign their respective rights hereunder in the manner and to the Persons as
permitted under the Purchase Agreement.

            (i) No Inconsistent Agreements. Neither the Company nor any of its
subsidiaries has entered, as of the date hereof, nor shall the Company or any of
its subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities, that would have the effect of
impairing the rights granted to the Holders in this Agreement or otherwise
conflicts with the provisions hereof. Except as set forth on Schedule 6(i),
neither the Company nor any of its subsidiaries has previously entered into any
agreement granting any registration rights with respect to any of its securities
to any Person that have not been satisfied in full.

            (j) Execution and Counterparts. This Agreement may be executed in
any number of counterparts, each of which when so executed shall be deemed to be
an original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.

            (k) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be determined
with the provisions of the Purchase Agreement.

                                       13
<PAGE>

            (l) Cumulative Remedies. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.

            (m) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.

            (n) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

            (o) Independent Nature of Holders' Obligations and Rights. The
obligations of each Holder hereunder are several and not joint with the
obligations of any other Holder hereunder, and no Holder shall be responsible in
any way for the performance of the obligations of any other Holder hereunder.
Nothing contained herein or in any other agreement or document delivered at any
closing, and no action taken by any Holder pursuant hereto or thereto, shall be
deemed to constitute the Holders as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Holders
are in any way acting in concert with respect to such obligations or the
transactions contemplated by this Agreement. Each Holder shall be entitled to
protect and enforce its rights, including without limitation the rights arising
out of this Agreement, and it shall not be necessary for any other Holder to be
joined as an additional party in any proceeding for such purpose.

                             ********************

                                       14
<PAGE>

      IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.

                              TNX TELEVISION HOLDINGS, INC.

                              By:
                                 --------------------------------------
                                 Name:
                                 Title:

                       [SIGNATURE PAGE OF HOLDERS FOLLOWS]

                                       15
<PAGE>

                   [SIGNATURE PAGE OF HOLDERS TO TNXT RRA]

Name of Holder: __________________________

Signature of Authorized Signatory of Holder: __________________________

Name of Authorized Signatory: _________________________

Title of Authorized Signatory: __________________________

                             [SIGNATURE PAGES CONTINUE]

                                       16
<PAGE>

                              Plan of Distribution

      Each Selling Stockholder (the "Selling Stockholders") of the common stock
("Common Stock") of TNX Television Holdings, Inc., a Delaware corporation (the
"Company") and any of their pledgees, assignees and successors-in-interest may,
from time to time, sell any or all of their shares of Common Stock on the
Trading Market or any other stock exchange, market or trading facility on which
the shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. A Selling Stockholder may use any one or more of the
following methods when selling shares:

            o     ordinary brokerage transactions and transactions in which the
                  broker-dealer solicits purchasers;

            o     block trades in which the broker-dealer will attempt to sell
                  the shares as agent but may position and resell a portion of
                  the block as principal to facilitate the transaction;

            o     purchases by a broker-dealer as principal and resale by the
                  broker-dealer for its account;

            o     an exchange distribution in accordance with the rules of the
                  applicable exchange;

            o     privately negotiated transactions;

            o     settlement of short sales entered into after the date of this
                  prospectus;

            o     broker-dealers may agree with the Selling Stockholders to sell
                  a specified number of such shares at a stipulated price per
                  share;

            o     a combination of any such methods of sale;

            o     through the writing or settlement of options or other hedging
                  transactions, whether through an options exchange or
                  otherwise; or

            o     any other method permitted pursuant to applicable law.

      The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), if available, rather
than under this prospectus.

      Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated, but, except as set forth in a supplement to this Prospectus, in the
case of an agency transaction not in excess of a customary brokerage commission
in compliance with NASDR Rule 2440; and in the case of a principal transaction a
markup or markdown in compliance with NASDR IM-2440.

                                       17
<PAGE>

      In connection with the sale of the Common Stock or interests therein, the
Selling Stockholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the
Common Stock in the course of hedging the positions they assume. The Selling
Stockholders may also sell shares of the Common Stock short and deliver these
securities to close out their short positions, or loan or pledge the Common
Stock to broker-dealers that in turn may sell these securities. The Selling
Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).

      The Selling Stockholders and any broker~dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker~dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. Each Selling Stockholder has
informed the Company that it does not have any written or oral agreement or
understanding, directly or indirectly, with any person to distribute the Common
Stock. In no event shall any broker-dealer receive fees, commissions and markups
which, in the aggregate, would exceed eight percent (8%).

      The Company is required to pay certain fees and expenses incurred by the
Company incident to the registration of the shares. The Company has agreed to
indemnify the Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.

      Because Selling Stockholders may be deemed to be "underwriters" within the
meaning of the Securities Act, they will be subject to the prospectus delivery
requirements of the Securities Act. In addition, any securities covered by this
prospectus which qualify for sale pursuant to Rule 144 under the Securities Act
may be sold under Rule 144 rather than under this prospectus. Each Selling
Stockholder has advised us that they have not entered into any written or oral
agreements, understandings or arrangements with any underwriter or broker-dealer
regarding the sale of the resale shares. There is no underwriter or coordinating
broker acting in connection with the proposed sale of the resale shares by the
Selling Stockholders.

      We agreed to keep this prospectus effective until the earlier of (i) the
date on which the shares may be resold by the Selling Stockholders without
registration and without regard to any volume limitations by reason of Rule
144(e) under the Securities Act or any other rule of similar effect or (ii) all
of the shares have been sold pursuant to the prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale shares will be
sold only through registered or licensed brokers or dealers if required under
applicable state securities laws. In addition, in certain states, the resale
shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.

                                       18
<PAGE>

      Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the resale shares may not simultaneously engage
in market making activities with respect to the Common Stock for a period of two
business days prior to the commencement of the distribution. In addition, the
Selling Stockholders will be subject to applicable provisions of the Exchange
Act and the rules and regulations thereunder, including Regulation M, which may
limit the timing of purchases and sales of shares of the Common Stock by the
Selling Stockholders or any other person. We will make copies of this prospectus
available to the Selling Stockholders and have informed them of the need to
deliver a copy of this prospectus to each purchaser at or prior to the time of
the sale.

                                       19
<PAGE>

                                                                         Annex B

                          TNX Television Holdings, Inc.

               Selling Securityholder Notice and Questionnaire

      The undersigned beneficial owner of common stock, par value $0.001 per
share (the "Common Stock"), of TNX Television Holdings, Inc., a Delaware
corporation (the "Company"), (the "Registrable Securities") understands that the
Company has filed or intends to file with the Securities and Exchange Commission
(the "Commission") a registration statement on Form SB-2 (the "Registration
Statement") for the registration and resale under Rule 415 of the Securities Act
of 1933, as amended (the "Securities Act"), of the Registrable Securities, in
accordance with the terms of the Registration Rights Agreement, dated as of
April 6, 2005 (the "Registration Rights Agreement"), among the Company and the
Purchasers named therein. A copy of the Registration Rights Agreement is
available from the Company upon request at the address set forth below. All
capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in the Registration Rights Agreement.

      Certain legal consequences arise from being named as a selling
securityholder in the Registration Statement and the related prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are advised
to consult their own securities law counsel regarding the consequences of being
named or not being named as a selling securityholder in the Registration
Statement and the related prospectus.

                                     NOTICE

      The undersigned beneficial owner (the "Selling Securityholder") of
Registrable Securities hereby elects to include the Registrable Securities owned
by it and listed below in Item 3 (unless otherwise specified under such Item 3)
in the Registration Statement.

                                       20
<PAGE>

The undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate:

                                  QUESTIONNAIRE

1.    Name.

      (a)   Full Legal Name of Selling Securityholder

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

      (b)   Full Legal Name of Registered Holder (if not the same as (a) above)
            through which Registrable Securities Listed in Item 3 below are
            held:

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

      (c)   Full Legal Name of Natural Control Person (which means a natural
            person who directly or indirectly alone or with others has power to
            vote or dispose of the securities covered by the questionnaire):

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

2. Address for Notices to Selling Securityholder:

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

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

--------------------------------------------------------------------------------
Telephone:
          ----------------------------------------------------------------------

Fax:
    ----------------------------------------------------------------------------

Contact Person:
               -----------------------------------------------------------------

3. Beneficial Ownership of Registrable Securities:

      (a)   Type and Principal Amount of Registrable Securities beneficially
            owned:

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

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

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

                                       21
<PAGE>

4.    Broker-Dealer Status:

      (a)   Are you a broker-dealer?

                              Yes |_|    No |_|

      Note: If yes, the  Commission's  staff has indicated  that you should be
            identified as an underwriter in the Registration Statement.

      (b)   Are you an affiliate of a broker-dealer?

                              Yes |_|    No |_|

      (c)   If you are an affiliate of a broker-dealer, do you certify that you
            bought the Registrable Securities in the ordinary course of
            business, and at the time of the purchase of the Registrable
            Securities to be resold, you had no agreements or understandings,
            directly or indirectly, with any person to distribute the
            Registrable Securities?

                              Yes |_|    No |_|

      Note: If no, the  Commission's  staff has  indicated  that you should be
            identified as an underwriter in the Registration Statement.

5.    Beneficial Ownership of Other Securities of the Company Owned by the
      Selling Securityholder.

      Except as set forth below in this Item 5, the undersigned is not the
      beneficial or registered owner of any securities of the Company other than
      the Registrable Securities listed above in Item 3.

      (a)   Type and Amount of Other Securities beneficially owned by the
            Selling Securityholder:

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

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

                                       22
<PAGE>

6.    Relationships with the Company:

      Except as set forth below, neither the undersigned nor any of its
      affiliates, officers, directors or principal equity holders (owners of 5%
      of more of the equity securities of the undersigned) has held any position
      or office or has had any other material relationship with the Company (or
      its predecessors or affiliates) during the past three years.

      State any exceptions here:

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

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

      The undersigned agrees to promptly notify the Company of any inaccuracies
or changes in the information provided herein that may occur subsequent to the
date hereof at any time while the Registration Statement remains effective.

      By signing below, the undersigned consents to the disclosure of the
information contained herein in its answers to Items 1 through 6 and the
inclusion of such information in the Registration Statement and the related
prospectus and any amendments or supplements thereto. The undersigned
understands that such information will be relied upon by the Company in
connection with the preparation or amendment of the Registration Statement and
the related prospectus.

      IN WITNESS WHEREOF the undersigned, by authority duly given, has caused
this Notice and Questionnaire to be executed and delivered either in person or
by its duly authorized agent.

Dated:                              Beneficial Owner:
      ------------------                             ---------------------------

                                    By:
                                       -----------------------------------------
                                       Name:
                                       Title:

PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND
RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:

                                       23SECURITIES PURCHASE AGREEMENT

      This Securities Purchase Agreement (this "Agreement") is dated as of April
6, 2005, among TNX Television Holdings, Inc., a Delaware corporation (the
"Company"), and each purchaser identified on the signature pages hereto (each,
including its successors and assigns, a "Purchaser" and collectively the
"Purchasers").

      WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act") and Rule 506 promulgated thereunder, the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase from the Company, securities of the Company as more fully
described in this Agreement.

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

ARTICLE I.
                                   DEFINITIONS

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

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

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

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

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

             "Commission" means the Securities and Exchange Commission.

<PAGE>

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

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

            "Company  Counsel"  means  Mintz  Levin Cohn  Ferris  Glovsky  and
      Popeo, PC.

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

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

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

            "Debentures" means the Secured Convertible Debentures due, subject
      to the terms therein, two years from their date of issuance, issued by the
      Company to the Purchasers hereunder, in the form of Exhibit A.

            "Deed" means the Mortgage of Shares in substantially the form of
      Exhibit G hereto executed and delivered contemporaneously with this
      Agreement

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

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

            "Evaluation Date" shall have the meaning ascribed to such term in
      Section 3.1(r).

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

            "Exempt Issuance" means the issuance of (a) shares of Common Stock
      or options to employees, officers or directors of the Company pursuant to
      any stock or option plan duly adopted by a majority of the non-employee
      members of the Board of Directors of the Company or a majority of the
      members of a committee of non-employee directors established for such
      purpose, (b) securities upon the exercise of or conversion of any
      Securities issued hereunder, convertible securities, options or warrants
      issued and outstanding on the date of this Agreement, provided that such
      securities have not been amended since the date of this Agreement to
      increase the number of such securities or to decrease the exercise or
      conversion price of any such securities, (c) securities issued pursuant to

                                       2
<PAGE>

      acquisitions or strategic transactions (including, without limitation,
      equipment leases or the purchase of equipment in the ordinary course of
      business), provided any such issuance shall only be to a Person which is,
      itself or through its subsidiaries, an operating company in a business
      synergistic with the business of the Company and in which the Company
      receives benefits in addition to the investment of funds, but shall not
      include a transaction in which the Company is issuing securities primarily
      for the purpose of raising capital or to an entity whose primary business
      is investing in securities, (d) securities issued to service providers in
      exchange for services rendered or to be rendered, and (e) unregistered
      securities issued to creditors of the Subsidiary pursuant to a company
      voluntary arrangement (CVA) under the UK Insolvency Act of 1986; provided,
      however, securities issued pursuant to subsections (d) and (e) herein
      shall not exceed 28,000,000 in the aggregate among all creditors.

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

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

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

            "Legend Removal Date" shall have the meaning ascribed to such term
      in Section 4.1(c).

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

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

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

            "Maximum Rate" shall have the meaning ascribed to such term in
      Section 5.17.

            "Participation Maximum" shall have the meaning ascribed to such term
      in Section 4.13.

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

            "Pre-Notice" shall have the meaning ascribed to such term in Section
      4.13.

            "Principal Amount" shall mean, as to each Purchaser, the amounts set
      forth below such Purchaser's signature block on the signature pages hereto
      and next to the heading "Principal Amount", in United States Dollars,
      which shall equal such Purchaser's Subscription Amount multiplied by
      1.190476.

                                       3
<PAGE>

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

            "Purchaser Party" shall have the meaning ascribed to such term in
      Section 4.11.

            "Registration Rights Agreement" means the Registration Rights
      Agreement, dated the date hereof, among the Company and the Purchasers, in
      the form of Exhibit B attached hereto.

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

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

            "Required Minimum" means, as of any date, the maximum aggregate
      number of shares of Common Stock then issued or potentially issuable in
      the future pursuant to the Transaction Documents, including any Underlying
      Shares issuable upon exercise or conversion in full of all Warrants and
      Debentures, ignoring any conversion or exercise limits set forth therein,
      and assuming that the Conversion Price is at all times on and after the
      date of determination 75% of the then Conversion Price on the Trading Day
      immediately prior to the date of determination.

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

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

            "Series A Threshold Investment Amount" shall be equal to 50% of the
      stated value of such Series A Preferred Stock currently held by such
      Series A Purchaser.

            "Series A Preferred Stock" shall mean the Series A Preferred Stock
      of the Company, par value $.001 per share and any securities into which
      such preferred stock shall have been reclassified into, issued pursuant to
      the Certificate of Designations, Rights and Preferences of the 5% Series A
      Convertible Preferred Stock of the Company.

             "Series A Purchaser" shall mean a purchaser of the Series A
      Preferred Stock.

                                       4
<PAGE>

            "Series A Transaction" shall mean the purchase of the Series A
      Preferred Stock and Series A Warrants by the Series A Purchaser.

            "Series A Warrant" shall mean the Series A Common Stock Purchase
      Warrant issued to the Series A Purchasers, with an initial exercise price
      equal to $1.75 per share, subject to adjustment therein and a term of five
      years.

            "Series A-1_Preferred Stock" shall mean the Series A-1 Preferred
      Stock issue to the Series A Purchasers, with a conversion price equal to
      $0.11 per share, subject to adjustment therein.

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

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

            "Security Agreement" means the Security Agreement, dated the date
      hereof, among the Company and the Purchasers, in the form of Exhibit F
      attached hereto.

            "Security Documents" shall mean the Security Agreement and any other
      documents and filing required thereunder in order to grant the Purchasers
      a security interest in all of the assets of the Company, including all
      UCC-1 filing receipts.

             "Shareholder Approval" means the approval from the shareholders of
      an amendment to the Company's certificate of incorporation to increase the
      number of authorized shares of Common Stock to 500,000,000.

             "Shareholder Approval Date" shall have the meaning set forth in
      Section 4.12(d).

            "Short Sales" shall include, without limitation, all "short sales"
      as defined in Rule 3b-3 of the Exchange Act.

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

            "Subsequent Financing" shall have the meaning ascribed to such term
      in Section 4.13.

            "Subsequent Financing Notice" shall have the meaning ascribed to
      such term in Section 4.13.

            "Subsidiary" means any subsidiary of the Company as set forth on
      Schedule 3.1(a).

                                       5
<PAGE>

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

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

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

            "Underlying Shares" means the shares of Common Stock issuable upon
      conversion of the Debentures and upon exercise of the Warrants.

            "VWAP" means, for any date, the price determined by the first of the
      following clauses that applies: (a) if the Common Stock is then listed or
      quoted on a Trading Market, the daily volume weighted average price of the
      Common Stock for such date (or the nearest preceding date) on the primary
      Trading Market on which the Common Stock is then listed or quoted as
      reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30
      a.m. EST to 4:02 p.m. Eastern Time) using the VAP function; (b) if the
      Common Stock is not then listed or quoted on the Trading Market and if
      prices for the Common Stock are then reported in the "Pink Sheets"
      published by the Pink Sheets, LLC (or a similar organization or agency
      succeeding to its functions of reporting prices), the most recent bid
      price per share of the Common Stock so reported; or (c) in all other
      cases, the fair market value of a share of Common Stock as determined by a
      nationally recognized-independent appraiser selected in good faith by
      Purchasers holding a majority of the Principal Amount of Debentures then
      outstanding.

             "Warrants" means collectively the Common Stock purchase warrants,
      in the form of Exhibit C delivered to the Purchasers at the Closing in
      accordance with Section 2.2(a) hereof, which Warrants shall be exercisable
      immediately and have a term of exercise equal to three years.

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

                                  ARTICLE II.
                                PURCHASE AND SALE

      2.1 Closing. On the Closing Date, upon the terms and subject to the
conditions set forth herein, concurrent with the execution and delivery of this
Agreement by the parties hereto, the Company agrees to sell, and each Purchaser
agrees to purchase in the aggregate, severally and not jointly, up to $5,000,000
Principal Amount of the Debentures. Each Purchaser shall deliver to the Company

                                       6
<PAGE>

via wire transfer or a certified check immediately available funds equal to
their Subscription Amount and the Company shall deliver to each Purchaser their
respective Debenture and Warrants as determined pursuant to Section 2.2(a) and
the other items set forth in Section 2.2 issuable at the Closing. Upon
satisfaction of the conditions set forth in Sections 2.2 and 2.3, the Closing
shall occur at the offices of the Custodial Agent, or such other location as the
parties shall mutually agree.

      2.2 Deliveries.

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

            (i)   this Agreement duly executed by the Company;

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

            (iii) a Warrant registered in the name of such Purchaser to purchase
                  up to a number of shares of Common Stock equal to 100% of such
                  Purchaser's Subscription Amount divided by the Conversion
                  Price, with an exercise price equal to $0.30, subject to
                  adjustment therein;

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

            (v)   a legal opinion of Company Counsel, in the form of Exhibit D
                  attached hereto;

            (vi)  the Custodial Agreement duly executed by the Company and all
                  receipts of UCC-1 financing statements and other documentation
                  required to demonstrate a grant to the Purchasers of a
                  perfected, first priority security interest in all of the
                  accounts receivables of the Company;

            (vii) the Security Agreement, duly executed by the Company, along
                  with all the Security Documents;

            (viii) as to the Series A Purchasers only, (A) a certificate
                  evidencing a number of shares of Series A-1 Preferred Stock
                  equal to the number of shares of Series A Preferred Stock then
                  held by such Purchaser, registered in the name of such
                  Purchaser and (B) a copy of the filed certificate of
                  designation for the Series A-1 Preferred Stock, as filed with
                  the Delaware Secretary of State;

            (ix)  the Secretary's Certificate, if any, required to be issued
                  pursuant to Section 4.17(a);

                                       7
<PAGE>

            (x)   the written voting agreement, in the form of Exhibit H
                  attached hereto, of all of the officers, directors and
                  shareholders holding more than 10% of the issued and
                  outstanding shares of Common Stock on the date hereof agreeing
                  to amend the Company's certificate of incorporation to
                  increase the number of authorized shares of Common Stock
                  pursuant to Section 4.12(d); and

            (xi)  the Deed duly executed by the Company and the Custodial Agent.

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

            (i)   this Agreement duly executed by such Purchaser;

            (ii)  such Purchaser's Subscription Amount by wire transfer to the
                  account of the Custodial Agent as specified in writing by the
                  Company;

            (iii) the Registration Rights Agreement duly executed by such
                  Purchaser;

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

            (v)   the Security Agreement, duly executed by such Purchaser.

      2.3 Closing Conditions.

      a)    The obligations of the Company hereunder in connection with the
            Closing are subject to the following conditions being met:

            (i)   the accuracy in all material respects when made and on the
                  Closing Date of the representations and warranties of the
                  Purchasers contained herein;

            (ii)  all obligations, covenants and agreements of the Purchasers
                  required to be performed at or prior to the Closing Date shall
                  have been performed; and

            (iii) the delivery by the Purchasers of the items set forth in
                  Section 2.2(b) of this Agreement.

      b)    The respective obligations of the Purchasers hereunder in connection
            with the Closing are subject to the following conditions being met:

            (i)   the accuracy in all material respects on the Closing Date of
                  the representations and warranties of the Company contained
                  herein;

            (ii)  all obligations, covenants and agreements of the Company
                  required to be performed at or prior to the Closing Date shall
                  have been performed;

                                       8
<PAGE>

            (iii) the delivery by the Company of the items set forth in Section
                  2.2(a) of this Agreement;

            (iv)  there shall have been no Material Adverse Effect with respect
                  to the Company since the date hereof; and

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

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

      3.1 Representations and Warranties of the Company. Except as set forth
under the corresponding section of the disclosure schedules delivered to the
Purchasers concurrently herewith (the "Disclosure Schedules") which Disclosure
Schedules shall be deemed a part hereof, the Company hereby makes the
representations and warranties set forth below to each Purchaser.

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

            (b) Organization and Qualification. The Company and each of the
      Subsidiaries is an entity duly incorporated or otherwise organized,
      validly existing and in good standing under the laws of the jurisdiction
      of its incorporation or organization (as applicable), with the requisite

                                       9
<PAGE>

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

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

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

                                       10
<PAGE>

      regulation, order, judgment, injunction, decree or other restriction of
      any court or governmental authority to which the Company or a Subsidiary
      is subject (including federal and state securities laws and regulations),
      or by which any property or asset of the Company or a Subsidiary is bound
      or affected; except in the case of each of clauses (ii) and (iii), such as
      could not have or reasonably be expected to result in a Material Adverse
      Effect.

            (e) Filings, Consents and Approvals. The Company is not required to
      obtain any consent, waiver, authorization or order of, give any notice to,
      or make any filing or registration with, any court or other federal,
      state, local or other governmental authority or other Person in connection
      with the execution, delivery and performance by the Company of the
      Transaction Documents, other than (i) filings required pursuant to Section
      4.6, (ii) the filing with the Commission of the Registration Statement,
      (iii) the notice and/or application(s) to each applicable Trading Market
      for the issuance and sale of the Debentures and Warrants and the listing
      of the Underlying Shares for trading thereon in the time and manner
      required thereby, (iv) the filing of any UCC-1 financing statements or
      similar documents to perfect the security interests of the Purchasers
      which shall be filed prior to the Closing, and (v) the filing of Form D
      with the Commission and such filings as are required to be made under
      applicable state securities laws (collectively, the "Required Approvals").

            (f) Issuance of the Securities. The Securities are duly authorized
      and, when issued and paid for in accordance with the applicable
      Transaction Documents, will be duly and validly issued, fully paid and
      nonassessable, free and clear of all Liens imposed by the Company other
      than restrictions on transfer provided for in the Transaction Documents.
      The Underlying Shares, when issued in accordance with the terms of the
      Transaction Documents, will be validly issued, fully paid and
      nonassessable, free and clear of all Liens imposed by the Company. The
      Company has reserved from its duly authorized capital stock a number of
      shares of Common Stock for issuance of the Underlying Shares at least
      equal to the Required Minimum on the date hereof.

            (g) Capitalization. The capitalization of the Company is as set
      forth on Schedule 3.1(g). The Company has not issued any capital stock
      since its most recently filed periodic report under the Exchange Act,
      other than pursuant to the exercise of employee stock options under the
      Company's stock option plans, the issuance of shares of Common Stock to
      employees pursuant to the Company's employee stock purchase plan and
      pursuant to the conversion or exercise of outstanding Common Stock
      Equivalents. No Person has any right of first refusal, preemptive right,
      right of participation, or any similar right to participate in the
      transactions contemplated by the Transaction Documents. Except as a result
      of the purchase and sale of the Securities, there are no outstanding
      options, warrants, script rights to subscribe to, calls or commitments of
      any character whatsoever relating to, or securities, rights or obligations
      convertible into or exchangeable for, or giving any Person any right to
      subscribe for or acquire, any shares of Common Stock, or contracts,
      commitments, understandings or arrangements by which the Company or any
      Subsidiary is or may become bound to issue additional shares of Common
      Stock or Common Stock Equivalents. The issuance and sale of the Securities
      will not obligate the Company to issue shares of Common Stock or other

                                       11
<PAGE>

      securities to any Person (other than the Purchasers) and will not result
      in a right of any holder of Company securities to adjust the exercise,
      conversion, exchange or reset price under such securities. All of the
      outstanding shares of capital stock of the Company are validly issued,
      fully paid and nonassessable, have been issued in compliance with all
      federal and state securities laws, and none of such outstanding shares was
      issued in violation of any preemptive rights or similar rights to
      subscribe for or purchase securities. No further approval or authorization
      of any stockholder, the Board of Directors of the Company or others is
      required for the issuance and sale of the Securities. There are no
      stockholders agreements, voting agreements or other similar agreements
      with respect to the Company's capital stock to which the Company is a
      party or, to the knowledge of the Company, between or among any of the
      Company's stockholders.

            (h) SEC Reports; Financial Statements. The Company has filed all
      reports, schedules, forms, statements and other documents required to be
      filed by it under the Securities Act and the Exchange Act, including
      pursuant to Section 13(a) or 15(d) thereof, since November 13, 2003 (the
      foregoing materials, including the exhibits thereto and documents
      incorporated by reference therein, being collectively referred to herein
      as the "SEC Reports") on a timely basis or has received a valid extension
      of such time of filing and has filed any such SEC Reports prior to the
      expiration of any such extension. As of their respective dates, the SEC
      Reports complied in all material respects with the requirements of the
      Securities Act and the Exchange Act and the rules and regulations of the
      Commission promulgated thereunder, and none of the SEC Reports, when
      filed, contained any untrue statement of a material fact or omitted to
      state a material fact required to be stated therein or necessary in order
      to make the statements therein, in light of the circumstances under which
      they were made, not misleading. The financial statements of the Company
      included in the SEC Reports comply in all material respects with
      applicable accounting requirements and the rules and regulations of the
      Commission with respect thereto as in effect at the time of filing. Such
      financial statements have been prepared in accordance with United States
      generally accepted accounting principles applied on a consistent basis
      during the periods involved ("GAAP"), except as may be otherwise specified
      in such financial statements or the notes thereto and except that
      unaudited financial statements may not contain all footnotes required by
      GAAP, and fairly present in all material respects the financial position
      of the Company and its consolidated subsidiaries as of and for the dates
      thereof and the results of operations and cash flows for the periods then
      ended, subject, in the case of unaudited statements, to normal,
      immaterial, year-end audit adjustments.

            (i) Material Changes. Since the date of the latest audited financial
      statements included within the SEC Reports, except as specifically
      disclosed in the SEC Reports, (i) there has been no event, occurrence or
      development that has had or that could reasonably be expected to result in
      a Material Adverse Effect, (ii) the Company has not incurred any
      liabilities (contingent or otherwise) other than (A) trade payables and
      accrued expenses incurred in the ordinary course of business consistent
      with past practice and (B) liabilities not required to be reflected in the
      Company's financial statements pursuant to GAAP or required to be
      disclosed in filings made with the Commission, (iii) the Company has not
      altered its method of accounting, (iv) the Company has not declared or

                                       12
<PAGE>

      made any dividend or distribution of cash or other property to its
      stockholders or purchased, redeemed or made any agreements to purchase or
      redeem any shares of its capital stock and (v) the Company has not issued
      any equity securities to any officer, director or Affiliate, except
      pursuant to existing Company stock option plans. The Company does not have
      pending before the Commission any request for confidential treatment of
      information.

            (j) Litigation. There is no action, suit, inquiry, notice of
      violation, proceeding or investigation pending or, to the knowledge of the
      Company, threatened against or affecting the Company, any Subsidiary or
      any of their respective properties before or by any court, arbitrator,
      governmental or administrative agency or regulatory authority (federal,
      state, county, local or foreign) (collectively, an "Action") which (i)
      adversely affects or challenges the legality, validity or enforceability
      of any of the Transaction Documents or the Securities or (ii) could, if
      there were an unfavorable decision, have or reasonably be expected to
      result in a Material Adverse Effect. Neither the Company nor any
      Subsidiary, nor any director or officer thereof, is or has been the
      subject of any Action involving a claim of violation of or liability under
      federal or state securities laws or a claim of breach of fiduciary duty.
      There has not been, and to the knowledge of the Company, there is not
      pending or contemplated, any investigation by the Commission involving the
      Company or any current or former director or officer of the Company. The
      Commission has not issued any stop order or other order suspending the
      effectiveness of any registration statement filed by the Company or any
      Subsidiary under the Exchange Act or the Securities Act.

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

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

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

                                       13
<PAGE>

            (n) Title to Assets. The Company and the Subsidiaries have good and
      marketable title in fee simple to all real property owned by them that is
      material to the business of the Company and the Subsidiaries and good and
      marketable title in all personal property owned by them that is material
      to the business of the Company and the Subsidiaries, in each case free and
      clear of all Liens, except for Liens as do not materially affect the value
      of such property and do not materially interfere with the use made and
      proposed to be made of such property by the Company and the Subsidiaries
      and Liens for the payment of federal, state or other taxes, the payment of
      which is neither delinquent nor subject to penalties. Any real property
      and facilities held under lease by the Company and the Subsidiaries are
      held by them under valid, subsisting and enforceable leases of which the
      Company and the Subsidiaries are in compliance.

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

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

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

                                       14
<PAGE>

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

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

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

                                       15
<PAGE>

            (v) Registration Rights. Other than each of the Purchasers, no
      Person has any right to cause the Company to effect the registration under
      the Securities Act of any securities of the Company.

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

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

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

                                       16
<PAGE>

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

            (aa) Solvency. Based on the financial condition of the Company as of
      the Closing Date after giving effect to the receipt by the Company of the
      proceeds from the sale of the Securities hereunder, (i) the Company's fair
      saleable value of its assets exceeds the amount that will be required to
      be paid on or in respect of the Company's existing debts and other
      liabilities (including known contingent liabilities) as they mature; (ii)
      the Company's assets do not constitute unreasonably small capital to carry
      on its business for the current fiscal year as now conducted and as
      proposed to be conducted including its capital needs taking into account
      the particular capital requirements of the business conducted by the
      Company, and projected capital requirements and capital availability
      thereof; and (iii) the current cash flow of the Company, together with the
      proceeds the Company would receive, were it to liquidate all of its
      assets, after taking into account all anticipated uses of the cash, would
      be sufficient to pay all amounts on or in respect of its debt when such
      amounts are required to be paid. The Company does not intend to incur
      debts beyond its ability to pay such debts as they mature (taking into
      account the timing and amounts of cash to be payable on or in respect of
      its debt). The Company has no knowledge of any facts or circumstances
      which lead it to believe that it will file for reorganization or
      liquidation under the bankruptcy or reorganization laws of any
      jurisdiction within one year from the Closing Date. The SEC Reports set
      forth as of the dates thereof all outstanding secured and unsecured
      Indebtedness of the Company or any Subsidiary, or for which the Company or
      any Subsidiary has commitments. For the purposes of this Agreement,
      "Indebtedness" shall mean (a) any liabilities for borrowed money or
      amounts owed in excess of $50,000 (other than trade accounts payable
      incurred in the ordinary course of business), (b) all guaranties,
      endorsements and other contingent obligations in respect of Indebtedness
      of others, whether or not the same are or should be reflected in the
      Company's balance sheet (or the notes thereto), except guaranties by
      endorsement of negotiable instruments for deposit or collection or similar
      transactions in the ordinary course of business; and (c) the present value
      of any lease payments in excess of $50,000 due under leases required to be
      capitalized in accordance with GAAP. Neither the Company nor any
      Subsidiary is in default with respect to any Indebtedness.

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

                                       17
<PAGE>

            (cc) No General Solicitation. Neither the Company nor any person
      acting on behalf of the Company has offered or sold any of the Securities
      by any form of general solicitation or general advertising. The Company
      has offered the Securities for sale only to the Purchasers and certain
      other "accredited investors" within the meaning of Rule 501 under the
      Securities Act.

            (dd) Foreign Corrupt Practices. Neither the Company, nor to the
      knowledge of the Company, any agent or other person acting on behalf of
      the Company, has (i) directly or indirectly, used any funds for unlawful
      contributions, gifts, entertainment or other unlawful expenses related to
      foreign or domestic political activity, (ii) made any unlawful payment to
      foreign or domestic government officials or employees or to any foreign or
      domestic political parties or campaigns from corporate funds, (iii) failed
      to disclose fully any contribution made by the Company (or made by any
      person acting on its behalf of which the Company is aware) which is in
      violation of law, or (iv) violated in any material respect any provision
      of the Foreign Corrupt Practices Act of 1977, as amended

            (ee) Accountants. The Company's accountants are set forth on
      Schedule 3.1(ee) of the Disclosure Schedule. To the Company's knowledge,
      such accountants, who the Company expects will express their opinion with
      respect to the financial statements to be included in the Company's Annual
      Report on Form 10-K for the year ending December 31, 2004 are a registered
      public accounting firm as required by the Securities Act.

            (ff) Seniority. As of the Closing Date, no indebtedness or other
      equity of the Company is senior to the Debentures in right of payment,
      whether upon liquidation or dissolution, or otherwise, other than
      indebtedness secured by purchase money security interests (which is senior
      only as to underlying assets covered thereby) and capital lease
      obligations (which is senior only as to the property covered thereby).

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

            (hh) Acknowledgment Regarding Purchasers' Purchase of Securities.
      The Company acknowledges and agrees that each of the Purchasers is acting
      solely in the capacity of an arm's length purchaser with respect to the
      Transaction Documents and the transactions contemplated hereby. The
      Company further acknowledges that no Purchaser is acting as a financial
      advisor or fiduciary of the Company (or in any similar capacity) with
      respect to this Agreement and the transactions contemplated hereby and any
      advice given by any Purchaser or any of their respective representatives

                                       18
<PAGE>

      or agents in connection with this Agreement and the transactions
      contemplated hereby is merely incidental to the Purchasers' purchase of
      the Securities. The Company further represents to each Purchaser that the
      Company's decision to enter into this Agreement has been based solely on
      the independent evaluation of the transactions contemplated hereby by the
      Company and its representatives.

            (ii) Acknowledgement Regarding Purchasers' Trading Activity.
      Anything in this Agreement or elsewhere herein to the contrary
      notwithstanding (except for Section 4.16 hereof), it is understood and
      agreed by the Company (i) that none of the Purchasers have been asked to
      agree, nor has any Purchaser agreed, to desist from purchasing or selling,
      long and/or short, securities of the Company, or "derivative" securities
      based on securities issued by the Company or to hold the Securities for
      any specified term; (ii) that past or future open market or other
      transactions by any Purchaser, including Short Sales, and specifically
      including, without limitation, Short Sales or "derivative" transactions,
      before or after the closing of this or future private placement
      transactions, may negatively impact the market price of the Company's
      publicly-traded securities; (iii) that any Purchaser, and counter parties
      in "derivative" transactions to which any such Purchaser is a party,
      directly or indirectly, presently may have a "short" position in the
      Common Stock, and (iv) that each Purchaser shall not be deemed to have any
      affiliation with or control over any arm's length counter-party in any
      "derivative" transaction.

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

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

                                       19
<PAGE>

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

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

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

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

            (f) Short Sales. Other than the transaction contemplated hereunder,
      such Purchaser has not directly or indirectly, nor has any Person acting
      on behalf of or pursuant to any understanding with such Purchaser,
      executed any disposition, including Short Sales (but not including the
      location and/or reservation of borrowable shares of Common Stock), in the
      securities of the Company (including, without limitations, any Short Sales
      involving the Company's securities) since the time that such Purchaser
      first received a term sheet from the Company or any other Person setting
      forth the material terms of the transactions contemplated hereunder prior
      to the date hereof ("Discussion Time").

            (g) Access to Information. Such Purchaser acknowledges and agrees
      that it has access to the SEC Reports and has reviewed such filings as
      such Purchaser has deemed necessary or desirable including the Company's
      Annual Report on Form 10-KSB for the fiscal year ended December 31, 2003,
      as amended, and the Company's Quarterly Reports on Form 10-Q for each of
      the quarters ended March 31, 2004, June 30, 2004 and September 30, 2004
      and the Company's Current Reports on Form 8-K filed on November 18, 2004,

                                       20
<PAGE>

      December 23, 2004, January 12, 2005, January 20, 2005, January 27, 2005,
      February 15, 2005, February 24, 2005 and March 4, 2005. Each Purchaser and
      its respective representatives have been afforded an opportunity to ask
      such questions of the officers, employees, agents, accountants and
      representatives of the Company concerning the business, operations,
      financial condition, assets, liabilities, and other relevant matters as
      such Purchaser and its representatives have deemed necessary or desirable,
      and each Purchaser hereby confirms that it or its agents have been given
      all such information as has been requested in order to evaluate the merits
      and risks of the prospective investment contemplated hereby and that it
      does not desire any additional information. Without limiting the
      foregoing, each Purchaser specifically acknowledges that it has had the
      opportunity to review the SEC Reports.

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

                                  ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

      4.1 Transfer Restrictions.

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

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

      [NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES
      ARE [EXERCISABLE] [CONVERTIBLE]] HAVE BEEN REGISTERED WITH THE SECURITIES
      AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
      RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
      1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
      OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
      UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN
      A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
      SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
      EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT,
      THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
      THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
      SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
      OTHER LOAN SECURED BY SUCH SECURITIES.

                                       21
<PAGE>

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

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

                                       22
<PAGE>

      delivered to such Purchaser a certificate representing such shares that is
      free from all restrictive and other legends. The Company may not make any
      notation on its records or give instructions to any transfer agent of the
      Company that enlarge the restrictions on transfer set forth in this
      Section. Certificates for Securities subject to legend removal hereunder
      shall be transmitted by the transfer agent of the Company to the
      Purchasers by crediting the account of the Purchaser's prime broker with
      the Depository Trust Company System.

            (d) In addition to such Purchaser's other available remedies, the
      Company shall pay to a Purchaser, in cash, as partial liquidated damages
      and not as a penalty, for each $1,000 of Underlying Shares (based on the
      VWAP of the Common Stock on the date such Securities are submitted to the
      Company's transfer agent) delivered for removal of the restrictive legend
      and subject to this Section 4.1(c), $7.50 per Trading Day (increasing to
      $15 per Trading Day 5 Trading Days after such damages have begun to
      accrue) for each Trading Day after the second Trading Day after the Legend
      Removal Date until such certificate is delivered without a legend. Nothing
      herein shall limit such Purchaser's right to pursue actual damages for the
      Company's failure to deliver certificates representing any Securities as
      required by the Transaction Documents, and such Purchaser shall have the
      right to pursue all remedies available to it at law or in equity
      including, without limitation, a decree of specific performance and/or
      injunctive relief.

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

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

      4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance
of the Securities may result in dilution of the outstanding shares of Common
Stock, which dilution may be substantial under certain market conditions. The
Company further acknowledges that its obligations under the Transaction
Documents, including without limitation its obligation to issue the Underlying
Shares pursuant to the Transaction Documents, are unconditional and absolute and
not subject to any right of set off, counterclaim, delay or reduction,
regardless of the effect of any such dilution or any claim the Company may have
against any Purchaser and regardless of the dilutive effect that such issuance
may have on the ownership of the other stockholders of the Company.

                                       23
<PAGE>

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

      4.4 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market.

      4.5 Conversion and Exercise Procedures. The form of Notice of Exercise
included in the Warrants and the form of Notice of Conversion included in the
Debentures set forth the totality of the procedures required of the Purchasers
in order to exercise the Warrants or convert the Debentures. No additional legal
opinion or other information or instructions shall be required of the Purchasers
to exercise their Warrants or convert their Debentures. The Company shall honor
exercises of the Warrants and conversions of the Debentures and shall deliver
Underlying Shares in accordance with the terms, conditions and time periods set
forth in the Transaction Documents.

      4.6 Securities Laws Disclosure; Publicity. The Company shall, by 5:30 p.m.
Eastern time on the Trading Day following the date hereof, issue a Current
Report on Form 8-K, reasonably acceptable to each Purchaser disclosing the
material terms of the transactions contemplated hereby, and shall attach the
Transaction Documents thereto. The Company and each Purchaser shall consult with
each other in issuing any other press releases with respect to the transactions
contemplated hereby, and neither the Company nor any Purchaser shall issue any
such press release or otherwise make any such public statement without the prior
consent of the Company, with respect to any press release of any Purchaser, or
without the prior consent of each Purchaser, with respect to any press release
of the Company, which consent shall not unreasonably be withheld, except if such
disclosure is required by law, in which case the disclosing party shall promptly
provide the other party with prior notice of such public statement or
communication. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Purchaser, or include the name of any Purchaser in any
filing with the Commission or any regulatory agency or Trading Market, without
the prior written consent of such Purchaser, except (i) as required by federal
securities law in connection with the registration statement contemplated by the
Registration Rights Agreement and (ii) to the extent such disclosure is required
by law or Trading Market regulations, in which case the Company shall provide
the Purchasers with prior notice of such disclosure permitted under subclause
(i) or (ii).

                                       24
<PAGE>

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

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

      4.9 Use of Proceeds. The Company shall use the net proceeds from the sale
of the Securities hereunder for working capital purposes and not for the
satisfaction of any portion of the Company's debt (other than payment of trade
payables in the ordinary course of the Company's business and prior practices),
to redeem any Common Stock or Common Stock Equivalents or to settle any
outstanding litigation and specifically for the items set forth on Schedule 4.9
attached hereto.

      4.10 Reimbursement. If any Purchaser becomes involved in any capacity in
any Proceeding by or against any Person who is a stockholder of the Company
(except as a result of sales, pledges, margin sales and similar transactions by
such Purchaser to or with any current stockholder), solely as a result of such
Purchaser's acquisition of the Securities under this Agreement, the Company will
reimburse such Purchaser for its reasonable legal and other expenses (including
the cost of any investigation preparation and travel in connection therewith)
incurred in connection therewith, as such expenses are incurred. The
reimbursement obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any Affiliates of the Purchasers who are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees and controlling persons (if any), as the case may
be, of the Purchasers and any such Affiliate, and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company solely as a result of acquiring the Securities under
this Agreement.

      4.11 Indemnification of Purchasers. Subject to the provisions of this
Section 4.11, the Company will indemnify and hold the Purchasers and their
directors, officers, shareholders, partners, employees and agents (each, a
"Purchaser Party") harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys' fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,

                                       25
<PAGE>

warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a
Purchaser, or any of them or their respective Affiliates, by any stockholder of
the Company who is not an Affiliate of such Purchaser, with respect to any of
the transactions contemplated by the Transaction Documents (unless such action
is based upon a breach of such Purchaser's representation, warranties or
covenants under the Transaction Documents or any agreements or understandings
such Purchaser may have with any such stockholder or any violations by the
Purchaser of state or federal securities laws or any conduct by such Purchaser
which constitutes fraud, gross negligence, willful misconduct or malfeasance).
If any action shall be brought against any Purchaser Party in respect of which
indemnity may be sought pursuant to this Agreement, such Purchaser Party shall
promptly notify the Company in writing, and the Company shall have the right to
assume the defense thereof with counsel of its own choosing. Any Purchaser Party
shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Purchaser Party except to the extent that (i)
the employment thereof has been specifically authorized by the Company in
writing, (ii) the Company has failed after a reasonable period of time to assume
such defense and to employ counsel or (iii) in such action there is, in the
reasonable opinion of such separate counsel, a material conflict on any material
issue between the position of the Company and the position of such Purchaser
Party. The Company will not be liable to any Purchaser Party under this
Agreement (i) for any settlement by a Purchaser Party effected without the
Company's prior written consent, which shall not be unreasonably withheld or
delayed; or (ii) to the extent, but only to the extent that a loss, claim,
damage or liability is attributable to any Purchaser Party's breach of any of
the representations, warranties, covenants or agreements made by the Purchasers
in this Agreement or in the other Transaction Documents.

      4.12 Reservation and Listing of Securities.

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

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

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

                                       26
<PAGE>

            (d) The Company shall file a proxy on or before the 30th calendar
      day after the date hereof notifying the shareholders of a special meeting
      of shareholders (which may also be at the annual meeting of shareholders)
      for the purpose of obtaining Shareholder Approval. The Company shall hold
      such shareholder meeting on or before the 60th calendar day after the date
      hereof (the "Shareholder Meeting" and the date of such approval the
      "Shareholder Approval Date"). Such amendment to the Company's certificate
      of incorporation shall provide for an increased number of authorized
      shares to issue all Conversion Shares (as defined in the Debenture) and
      all Warrant Shares. If the Company does not obtain approval of the
      shareholders at the first meeting, the Company shall call a meeting every
      fiscal quarter thereafter to seek approval of the shareholders until the
      earlier of the date such approval is obtained or the Debentures are no
      longer outstanding.

      4.13 Participation in Future Financing.

            (a) From the date hereof until the one year anniversary of the
      Effective Date, upon any financing by the Company or any of its
      Subsidiaries of Common Stock or Common Stock Equivalents (a "Subsequent
      Financing"), each Purchaser shall have the right to participate in up to
      100% of the Subsequent Financing (the "Participation Maximum").

            (b) At least 5 Trading Days prior to the closing of the Subsequent
      Financing, the Company shall deliver to each Purchaser a written notice of
      its intention to effect a Subsequent Financing ("Pre-Notice"), which
      Pre-Notice shall ask such Purchaser if it wants to review the details of
      such financing (such additional notice, a "Subsequent Financing Notice").
      Upon the request of a Purchaser, and only upon a request by such
      Purchaser, for a Subsequent Financing Notice, the Company shall promptly,
      but no later than 1 Trading Day after such request, deliver a Subsequent
      Financing Notice to such Purchaser. The Subsequent Financing Notice shall
      describe in reasonable detail the proposed terms of such Subsequent
      Financing, the amount of proceeds intended to be raised thereunder, the
      Person with whom such Subsequent Financing is proposed to be effected, and
      attached to which shall be a term sheet or similar document relating
      thereto.

            (c) Any Purchaser desiring to participate in such Subsequent
      Financing must provide written notice to the Company by not later than
      5:30 p.m. (New York City time) on the 5th Trading Day after all of the
      Purchasers have received the Pre-Notice that the Purchaser is willing to
      participate in the Subsequent Financing, the amount of the Purchaser's
      participation, and that the Purchaser has such funds ready, willing, and
      available for investment on the terms set forth in the Subsequent
      Financing Notice. If the Company receives no notice from a Purchaser as of
      such 5th Trading Day, such Purchaser shall be deemed to have notified the
      Company that it does not elect to participate.

                                       27
<PAGE>

            (d) If by 5:30 p.m. (New York City time) on the fifth Trading Day
      after all of the Purchasers have received the Pre-Notice, notifications by
      the Purchasers of their willingness to participate in the Subsequent
      Financing (or to cause their designees to participate) is, in the
      aggregate, less than the total amount of the Subsequent Financing, then
      the Company may effect the remaining portion of such Subsequent Financing
      on the terms and to the Persons set forth in the Subsequent Financing
      Notice.

            (e) If by 5:30 p.m. (New York City time) on the fifth Trading Day
      after all of the Purchasers have received the Pre-Notice, the Company
      receives responses to a Subsequent Financing Notice from Purchasers
      seeking to purchase more than the aggregate amount of the Participation
      Maximum, each such Purchaser shall have the right to purchase the greater
      of (a) their Pro Rata Portion (as defined below) of the Participation
      Maximum and (b) the difference between the Participation Maximum and the
      aggregate amount of participation by all other Purchasers. "Pro Rata
      Portion" is the ratio of (x) the Subscription Amount of Securities
      purchased by a participating Purchaser and (y) the sum of the aggregate
      Subscription Amount of all participating Purchasers.

            (f) The Company must provide the Purchasers with a second Subsequent
      Financing Notice, and the Purchasers will again have the right of
      participation set forth above in this Section 4.13, if the Subsequent
      Financing subject to the initial Subsequent Financing Notice is not
      consummated for any reason on the terms set forth in such Subsequent
      Financing Notice within 60 Trading Days after the date of the initial
      Subsequent Financing Notice.

            (g) Notwithstanding the foregoing, this Section 4.13 shall not apply
      in respect of an Exempt Issuance.

      4.14 Subsequent Equity Sales.

            (a) From the date hereof until the Effective Date, neither the
      Company nor any Subsidiary shall issue shares of Common Stock or Common
      Stock Equivalents unless (i) the Company shall deliver to Bristol
      Investment Fund, Ltd. ("Bristol") a written notice of its intention to
      effect a Subsequent Financing (the "Bristol Notice") at least 3 Trading
      Days (but no more than 5 Trading Days) prior to the date the Company
      intends to deliver Pre-Notice to the Purchasers as required pursuant to
      Section 4.13(b) herein and (ii) Bristol shall promptly, but no later than
      1 Trading Day after the date of such receipt of the Bristol Notice,
      deliver a written notice to the Company of whether the Company may proceed
      with such Subsequent Financing; provided, however, the period set forth in
      this Section 4.14 shall be extended for the number of Trading Days during
      such period in which (i) trading in the Common Stock is suspended by any
      Trading Market, or (ii) following the Effective Date, the Registration
      Statement is not effective or the prospectus included in the Registration
      Statement may not be used by the Purchasers for the resale of the
      Underlying Shares; provided, further, in responding to the Bristol Notice,
      Bristol is acting in its sole and absolute discretion and has no duty or
      obligations whatsoever to protect the interest of the other Purchasers in
      making such determination or duty or obligation to consult or discuss the
      consent with the other Purchasers.

                                       28
<PAGE>

            (b) From the date hereof until such time as no Purchaser holds any
      of the Securities, the Company shall be prohibited from effecting or
      entering into an agreement to effect any Subsequent Financing involving a
      "Variable Rate Transaction" or an "MFN Transaction" (each as defined
      below). The term "Variable Rate Transaction" shall mean a transaction in
      which the Company issues or sells (i) any debt or equity securities that
      are convertible into, exchangeable or exercisable for, or include the
      right to receive additional shares of Common Stock either (A) at a
      conversion, exercise or exchange rate or other price that is based upon
      and/or varies with the trading prices of or quotations for the shares of
      Common Stock at any time after the initial issuance of such debt or equity
      securities, or (B) with a conversion, exercise or exchange price that is
      subject to being reset at some future date after the initial issuance of
      such debt or equity security or upon the occurrence of specified or
      contingent events directly or indirectly related to the business of the
      Company or the market for the Common Stock except for standard weighted
      average type adjustments and adjustments for stock splits, stock dividends
      and similar events or (ii) enters into any agreement, including, but not
      limited to, an equity line of credit, whereby the Company may sell
      securities at a future determined price. The term "MFN Transaction" shall
      mean a transaction in which the Company issues or sells any securities in
      a capital raising transaction or series of related transactions which
      grants to an investor the right to receive additional shares based upon
      future transactions of the Company on terms more favorable than those
      granted to such investor in such offering.

            (c) Notwithstanding the foregoing, this Section 4.14 shall not apply
      in respect of an Exempt Issuance, except that no Variable Rate Transaction
      or MFN Transaction shall be an Exempt Issuance.

      4.15 Equal Treatment of Purchasers. No consideration shall be offered or
paid to any person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents. Further, the
Company shall not make any payment of principal on the Debentures in amounts
which are disproportionate to the respective principal amounts outstanding on
the Debentures at any applicable time. For clarification purposes, this
provision constitutes a separate right granted to each Purchaser by the Company
and negotiated separately by each Purchaser, and is intended to treat for the
Company the Debenture holders as a class and shall not in any way be construed
as the Purchasers acting in concert or as a group with respect to the purchase,
disposition or voting of Securities or otherwise.

      4.16 Short Sales. Each Purchaser covenants that neither it nor any
affiliates acting on its behalf or pursuant to any understanding with it will
execute any Short Sales during the period after the Discussion Time until prior
to the time that the transactions contemplated by this Agreement are first
publicly announced as described in Section 4.6. Notwithstanding the foregoing,
no Purchaser makes any representation, warranty or covenant hereby that it will
not engage in Short Sales in the securities of the Company after the time that
the transactions contemplated by this Agreement are first publicly announced as
described in Section 4.6.

      4.17 Exchange of Series A Preferred Stock and Reduction in the Exercise
Price of the Series A Warrants.

                                       29
<PAGE>

            (a) In the event a Purchaser is a Series A Purchaser and purchases
      Debentures hereunder for a Subscription Amount equal to or greater than
      its Series A Threshold Investment Amount, such Purchaser may elect, in
      addition to its purchase of Debentures hereunder, to exchange up to all
      shares of Series A Preferred Stock then held by such Purchaser for shares
      of Series A-1 Preferred Stock, which Series A-1 Preferred Stock shall be
      on the same terms and conditions and the obligations of the Company,
      including registration obligations, as the Series A Preferred Stock except
      the conversion price of such Series A-1 Preferred Stock shall be equal to
      $0.11 per share, subject to further adjustment thereunder. Additionally,
      if such Purchaser meets the condition set forth in the first sentence
      under this Section 4.17(a), the exercise price of any Series A Warrants
      held by such Purchaser shall be reduced to equal $0.30 per share, subject
      to adjustment thereunder. Such Series A Purchaser shall receive at the
      Closing, from the Company, (i) a Secretary's Certificate evidencing the
      reduction in the exercise price of the Series A Warrant, (ii) a
      certificate evidencing the number of shares of the Series A-1 Preferred
      Stock issuable to such Purchaser and as such certificate is required
      pursuant to Section 2.2(a)(viii) and (iii) a copy of the certificate of
      designation as filed with the Delaware Secretary of State for the Series
      A-1 Preferred Stock. Furthermore, the Company shall, if necessary, take
      any other actions as such Series A Purchaser may require, in order to
      effect the adjustments hereunder, including but not limited to, if
      requested by the Series A Purchaser, the issuance of a new Series A
      Warrant. All adjustments hereunder shall be effective immediately upon
      execution of this Agreement and require no further action by the Purchaser
      in order to immediately correct or exercise such securities at such
      adjusted rate.

            (b) Any Series A Purchaser that purchases Debentures hereunder and
      holds shares of Series A Preferred Stock exchanged for shares of Series
      A-1 Preferred Stock shall waive its rights pursuant to Section 4.6(c) of
      the Securities Purchase Agreement, dated April 28, 2004, with respect to
      all Securities issued pursuant to the Transaction Documents.

                                   ARTICLE V.
                                  MISCELLANEOUS

      5.1 Termination. This Agreement may be terminated by any Purchaser, as to
such Purchaser's obligations hereunder only and without any effect whatsoever on
the obligations between the Company and the other Purchasers, by written notice
to the other parties, if the Closing has not been consummated on or before April
7, 2005; provided, however, that no such termination will affect the right of
any party to sue for any breach by the other party (or parties).

      5.2 Fees and Expenses. At the Closing, the Company has agreed to reimburse
Bristol Investment Fund, Ltd. up to $30,000, for its actual, reasonable,
out-of-pocket legal fees and expenses, $20,000 of which has been paid by the
Company prior to the Closing. Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all transfer
agent fees, stamp taxes and other taxes and duties levied in connection with the
delivery of any Securities.

                                       30
<PAGE>

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

      5.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto prior to 5:30 p.m. (New York
City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day, (c) the second Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached
hereto.

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

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

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

      5.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.11.

                                       31
<PAGE>

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

      5.10 Survival. The representations and warranties contained herein shall
survive the Closing and the delivery, exercise and/or conversion of the
Securities, as applicable for the applicable statue of limitations.

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

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

                                       32
<PAGE>

      5.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Documents and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights; provided,
however, in the case of a rescission of a conversion of a Debenture or exercise
of a Warrant, the Purchaser shall be required to return any shares of Common
Stock subject to any such rescinded conversion or exercise notice.

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

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

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

      5.17 Usury. To the extent it may lawfully do so, the Company hereby agrees
not to insist upon or plead or in any manner whatsoever claim, and will resist
any and all efforts to be compelled to take the benefit or advantage of, usury
laws wherever enacted, now or at any time hereafter in force, in connection with
any claim, action or proceeding that may be brought by any Purchaser in order to
enforce any right or remedy under any Transaction Document. Notwithstanding any
provision to the contrary contained in any Transaction Document, it is expressly
agreed and provided that the total liability of the Company under the

                                       33
<PAGE>

Transaction Documents for payments in the nature of interest shall not exceed
the maximum lawful rate authorized under applicable law (the "Maximum Rate"),
and, without limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other sums in the
nature of interest that the Company may be obligated to pay under the
Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum
contract rate of interest allowed by law and applicable to the Transaction
Documents is increased or decreased by statute or any official governmental
action subsequent to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Rate applicable to the Transaction Documents
from the effective date forward, unless such application is precluded by
applicable law. If under any circumstances whatsoever, interest in excess of the
Maximum Rate is paid by the Company to any Purchaser with respect to
indebtedness evidenced by the Transaction Documents, such excess shall be
applied by such Purchaser to the unpaid principal balance of any such
indebtedness or be refunded to the Company, the manner of handling such excess
to be at such Purchaser's election.

      5.18 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. For reasons of
administrative convenience only, Purchasers and their respective counsel have
chosen to communicate with the Company through FW. FW does not represent all of
the Purchasers but only Bristol. The Company has elected to provide all
Purchasers with the same terms and Transaction Documents for the convenience of
the Company and not because it was required or requested to do so by the
Purchasers.

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

      5.20 Construction. The parties agree that each of them and/or their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.

                                       34
<PAGE>

                            (Signature Pages Follow)

                                       35
<PAGE>

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

TNX TELEVISION HOLDINGS, INC.                     Address for Notice:

By:__________________________________________     Presidential Place
     Name:                                        800 S. Ocean Blvd, L1
     Title:                                       Boca Raton Fla. 33432

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

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

                                       36
<PAGE>

         [PURCHASER SIGNATURE PAGES TO TNXT SECURITIES PURCHASE AGREEMENT]

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

Name of Purchaser: _____________________________________________________________

Signature of Authorized Signatory of Purchaser: ________________________________

Name of Authorized Signatory: __________________________________________________

Title of Authorized Signatory: _________________________________________________

Email Address of Purchaser:_____________________________________________________

Address for Notice of Purchaser:

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

Subscription Amount:
Principal Amount (1.190476 times the Subscription Amount):
Warrant Shares:
EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]

                                       37

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