Document:

CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS

                                       OF

                      SERIES A CONVERTIBLE PREFERRED STOCK

                                       OF

                                UTIX GROUP, INC.

                         (Pursuant to Section 151 of the
                        Delaware General Corporation Law)

              UTIX Group,  Inc., a corporation  organized and existing under the
laws of the State of Delaware (the "Company"),  hereby certifies that,  pursuant
to authority  vested in the Board of Directors of the Company by Article  FOURTH
of the Amended and Restated  Certificate of  Incorporation  of the Company,  the
following  resolution  was  adopted  as of  January  13,  2006 by the  Board  of
Directors  of the  Company  pursuant  to  Section  151 of the  Delaware  General
Corporation Law:

              "RESOLVED  that,  pursuant  to  authority  vested  in the Board of
Directors of the Company by Article FOURTH of the Company's Amended and Restated
Certificate of  Incorporation,  out of the total authorized number of 25,000,000
shares of its preferred stock, par value $0.001 per share  ("Preferred  Stock"),
there shall be designated a series of Two Thousand (2,000) shares which shall be
issued in and  constitute a single  series to be known as "Series A  Convertible
Preferred Stock" (hereinafter called the "Series A Preferred Stock"). The shares
of Series A Preferred  Stock have the voting powers,  designations,  preferences
and other special  rights,  and  qualifications,  limitations  and  restrictions
thereof set forth below:

              1.     CERTAIN DEFINITIONS.

              As used in  this  Certificate  of  Designations,  Preferences  and
Rights  of  Series A  Convertible  Preferred  Stock  of UTIX  Group,  Inc.,  the
following terms shall have the respective meanings set forth below:

              "AFFILIATE",  as applied  to any  Person,  means any other  Person
directly or indirectly controlling, controlled by, or under common control with,
that Person.  For the purposes of this definition,  "control"  (including,  with
correlative meanings, the terms "controlling", "controlled by" and "under common
control  with"),  as applied to any Person,  means the  possession,  directly or
indirectly,  of the power to direct or cause the direction of the management and
policies of that Person,  whether through the ownership of voting  securities or
by contract or otherwise.

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              "COMMON STOCK" means the common stock, $0.001 par value per share,
of the Company,  including the stock into which the Series A Preferred  Stock is
convertible, and any securities into which the Common Stock may be reclassified.

              "CONVERSION  SHARES"  means the shares of Common  Stock into which
the Series A Preferred Stock is convertible.

              "EXCLUDED  STOCK" means (A) capital stock,  Options (as defined in
Section 4D(1)) or Convertible Securities (as defined in Section 4D(1)) issued to
employees,  consultants,  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) shares of
Common Stock issued upon the  conversion  or exercise of Options or  Convertible
Securities  issued prior to the date hereof,  provided that such securities have
not been  amended  since the date  hereof to  increase  the  number of shares of
Common Stock  issuable  thereunder or to lower the exercise or conversion  price
thereof, (C) securities issued pursuant to that certain Purchase Agreement dated
January 13,  2006,  among the  Company  and the  Investors  named  therein  (the
"Purchase  Agreement") and securities  issued upon the exercise or conversion of
those securities, and (D) shares of Common Stock issued or issuable by reason of
a dividend,  stock split or other  distribution  on shares of Common  Stock (but
only to the extent that such a  dividend,  split or  distribution  results in an
adjustment  in the  Conversion  Price  pursuant to the other  provisions of this
Series A Preferred Stock).

              "PERSON"  shall be construed  in the broadest  sense and means and
includes any natural person,  a partnership,  a corporation,  an association,  a
joint stock company, a limited liability  company, a trust, a joint venture,  an
unincorporated    organization    and   other   entity   or    governmental   or
quasi-governmental entity.

              "SERIES A STATED VALUE" means $5,000.

              "SUBSIDIARY" means any corporation,  association or other business
entity (i) at least 50% of the outstanding voting securities of which are at the
time owned or controlled,  directly or indirectly,  by the Company; or (ii) with
respect to which the Company  possesses,  directly or  indirectly,  the power to
direct or cause the direction of the affairs or management of such person;

              2.     DIVIDENDS.  Dividends on the Series A Preferred Stock shall
be declared and paid from time to time as determined  by the Company's  Board of
Directors  out of funds  legally  available  therefor.  The  Company  shall  not
declare,  pay or set aside any  dividends or  distributions  on shares of Common
Stock (other than dividends  payable  solely in shares of Common Stock),  unless
the  holders  of Series A  Preferred  Stock  first  receive,  or  simultaneously
receive,  a  dividend  or  distribution  on each  outstanding  share of Series A
Preferred  Stock  equal  to the  product  of  (i)  the  per  share  dividend  or
distribution to be declared,  paid or set aside for the Common Stock, multiplied
by (ii) the  number of shares of Common  Stock into which such share of Series A
Preferred Stock is then convertible.

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              3.     LIQUIDATION.  Upon any liquidation,  dissolution or winding
up of the Company,  whether voluntary or involuntary,  the holders of the shares
of Series A Preferred Stock shall be entitled, before any distributions shall be
made to the holders of the Common Stock, or any other class or series of capital
stock of the Company  ranking junior to the Series A Preferred  Stock as to such
distributions, to be paid an amount per share equal to the Series A Stated Value
plus any  accrued  and unpaid  Series A Preferred  Dividends  (the  "Liquidation
Preference").  If  upon  such  liquidation,  dissolution  or  winding  up of the
Company,  whether  voluntary or involuntary,  the assets to be distributed among
the holders of the Series A  Preferred  Stock and any class or series of capital
stock  ranking  on a  parity  with  the  Series  A  Preferred  Stock  as to such
distributions  shall be  insufficient  to permit  payment to the  holders of the
Series A Preferred  Stock and any such class or series of capital stock of their
respective  liquidation  amount,  then the  entire  assets of the  Company to be
distributed  shall be distributed  pro rata to the holders of Series A Preferred
Stock and the  holders  of such class or series of  capital  stock  ranking on a
parity with the Series A Preferred Stock as to such  distributions  according to
the preferential amounts due thereon. Unless waived in writing by the holders of
at least a majority of the Series A  Preferred  Stock then  outstanding,  voting
together as one class, a consolidation or merger of the Company into or with any
other entity or entities,  a share exchange,  a sale of Common Stock or the sale
or transfer by the Company of all or  substantially  all of its assets,  in each
case under  circumstances  in which the holders of a majority in voting power of
the  outstanding  capital  stock  of the  Company,  immediately  prior to such a
merger,  consolidation,  share  exchange  or sale,  own less than a majority  in
voting  power  of  the  outstanding  capital  stock  of the  corporation  or the
surviving or resulting  corporation or acquirer, as the case may be, immediately
following  such a merger,  consolidation,  share  exchange  or sale  (each  such
transaction being hereinafter referred to as a "Corporate Transaction") shall be
deemed to be a liquidation within the meaning of this Section 3.

              4.     CONVERSION.

              4A.    RIGHT TO CONVERT.

              (a)    Subject to the terms and  conditions of this  paragraph 4A,
       the holder of any share or shares of Series A Preferred  Stock shall have
       the right,  at its  option at any time,  to  convert  any such  shares of
       Series A Preferred Stock into such number of fully paid and nonassessable
       whole shares of Common Stock as is obtained by multiplying  the number of
       shares of Series A Preferred  Stock so to be converted by the Liquidation
       Preference per share and dividing the result by the  conversion  price of
       $0.02 per share or,  if there has been an  adjustment  of the  conversion
       price, by the conversion price as last adjusted and in effect at the date
       any  share or  shares of Series A  Preferred  Stock are  surrendered  for
       conversion (such price, or such price as last adjusted, being referred to
       herein as the  "Conversion  Price").  Such rights of conversion  shall be
       exercised  by  the  holder  thereof  by  surrender  of a  certificate  or
       certificates  for  the  shares  to be  converted  to the  Company  at its
       principal  office (or such other  office or agency of the  Company as the
       Company  may  designate  by notice in writing to the holder or holders of
       the Series A Preferred Stock) at any time during its usual business hours
       on the date set forth in such notice,  together with a properly completed
       notice of conversion in the form attached to the Series A Preferred Stock
       certificate with a statement of

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<PAGE>

       the name or names (with  address),  subject to compliance with applicable
       laws to the extent such  designation  shall involve a transfer,  in which
       the  certificate  or  certificates  for shares of Common Stock,  shall be
       issued.  Such  conversion  shall be deemed to have been  effected and the
       Conversion  Price shall be  determined as of the close of business on the
       date on which such written notice shall have been received by the Company
       and the  certificate  or  certificates  for such  shares  shall have been
       surrendered as aforesaid.

              (b)    To the extent  permitted by applicable  law and the listing
       requirements of any stock market or exchange on which the Common Stock is
       then listed,  the Company  from time to time may decrease the  Conversion
       Price by any  amount  for any  period  of time if the  period is at least
       twenty (20) days, the decrease is  irrevocable  during the period and the
       Board shall have made a determination  that such decrease would be in the
       best interests of the Company,  which  determination shall be conclusive.
       Whenever  the  Conversion  Price is decreased  pursuant to the  preceding
       sentence, the Company shall provide written notice thereof to the holders
       of the Series A Preferred  Stock at least five (5) days prior to the date
       the decreased  Conversion Price takes effect, and such notice shall state
       the decreased  Conversion Price and the period during which it will be in
       effect.

              4B.    ISSUANCE  OF   CERTIFICATES;   TIME  CONVERSION   EFFECTED.
       Promptly  after  the  conversion  of the  Series A  Preferred  Stock  and
       surrender of the certificate or  certificates  for the share or shares of
       the Series A Preferred Stock being converted, the Company shall issue and
       deliver, or cause to be issued and delivered,  to the holder,  registered
       in such name or names as such  holder may direct,  subject to  compliance
       with  applicable  laws to the extent  such  designation  shall  involve a
       transfer, a certificate or certificates for the number of whole shares of
       Common  Stock  issuable  upon the  conversion  of such share or shares of
       Series A Preferred Stock. Upon the effective date of any such conversion,
       the rights of the holder of the shares of Series A Preferred  Stock being
       converted  shall cease,  and the person or persons in whose name or names
       any  certificate  or  certificates  for shares of Common  Stock  shall be
       issuable upon such  conversion  shall be deemed to have become the holder
       or holders of record of the shares represented thereby.

              4C.    FRACTIONAL SHARES; DIVIDENDS. No fractional shares shall be
       issued upon conversion of the Series A Preferred Stock into Common Stock.
       In lieu of any fractional  share  interest,  the Company shall pay to the
       converting holder an amount equal to such fractional  interest multiplied
       by the  Market  Price  of a  share  of  Common  Stock  on the  date  such
       conversion is deemed to be effective..

              4D.    ADJUSTMENT OF CONVERSION  PRICE. If the Company shall issue
       or sell, or is, in accordance with any of subsections 4D(1) through 4D(7)
       hereof,  deemed to have issued or sold, any  Additional  Shares of Common
       Stock for no consideration or for a consideration per share less than the
       Conversion Price in effect immediately prior to the time of such issue or
       sale, then and in each such case (a "TRIGGER ISSUANCE") the then-existing
       Conversion  Price,  shall be reduced,  as of the close of business on the
       effective date of the Trigger Issuance,  to the lowest price per share at
       which any share of Common Stock was issued or sold or

                                      -4-
<PAGE>

       deemed to be issued or sold;  provided,  however,  that in no event shall
       the  Conversion  Price after giving  effect to such  Trigger  Issuance be
       greater  than the  Conversion  Price  in  effect  prior  to such  Trigger
       Issuance.

              For purposes of this subsection 4D,  "Additional  Shares of Common
Stock"  shall mean all shares of Common Stock issued by the Company or deemed to
be issued pursuant to this subsection 4D, other than Excluded Stock.

              For purposes of this subsection 4D, the following paragraphs 4D(1)
to 4D(7) shall also be applicable:

              4D(1)  ISSUANCE  OF  RIGHTS  OR  OPTIONS.  In case at any time the
       Company  shall in any manner grant  (directly  and not by assumption in a
       merger or otherwise)  any warrants or other rights to subscribe for or to
       purchase,  or any options for the purchase of,  Common Stock or any stock
       or  security  convertible  into or  exchangeable  for Common  Stock (such
       warrants,  rights or options being called  "Options" and such convertible
       or   exchangeable   stock  or   securities   being  called   "Convertible
       Securities")  whether  or not such  Options  or the right to  convert  or
       exchange any such Convertible Securities are immediately exercisable, and
       the price per share for which Common Stock is issuable  upon the exercise
       of such Options or upon the  conversion  or exchange of such  Convertible
       Securities   (determined  by  dividing  (i)  the  sum  (which  sum  shall
       constitute the applicable consideration) of (x) the total amount, if any,
       received or receivable by the Company as  consideration  for the granting
       of  such   Options,   plus  (y)  the   aggregate   amount  of  additional
       consideration  payable  to the  Company  upon  the  exercise  of all such
       Options,  plus  (z),  in  the  case  of  such  Options  which  relate  to
       Convertible Securities, the aggregate amount of additional consideration,
       if any, payable upon the issue or sale of such Convertible Securities and
       upon the conversion or exchange thereof, by (ii) the total maximum number
       of shares of Common Stock  issuable  upon the exercise of such Options or
       upon  the  conversion  or  exchange  of all such  Convertible  Securities
       issuable  upon the  exercise  of such  Options)  shall  be less  than the
       Conversion Price in effect  immediately prior to the time of the granting
       of such Options, then the total number of shares of Common Stock issuable
       upon the exercise of such Options or upon  conversion  or exchange of the
       total amount of such Convertible Securities issuable upon the exercise of
       such Options shall be deemed to have been issued for such price per share
       as of the  date of  granting  of such  Options  or the  issuance  of such
       Convertible  Securities and thereafter  shall be deemed to be outstanding
       for  purposes of  adjusting  the  Conversion  Price.  Except as otherwise
       provided in subsection 4D(3), no adjustment of the Conversion Price shall
       be made upon the actual issue of such Common Stock or of such Convertible
       Securities upon exercise of such Options or upon the actual issue of such
       Common Stock upon conversion or exchange of such Convertible Securities.

              4D(2)  ISSUANCE  OF  CONVERTIBLE  SECURITIES.  In case the Company
       shall in any manner issue  (directly and not by assumption in a merger or
       otherwise) or sell any Convertible Securities,  whether or not the rights
       to exchange or convert any such  Convertible  Securities are  immediately
       exercisable,  and the price per share for which  Common Stock is issuable

                                      -5-
<PAGE>

       upon such  conversion  or exchange  (determined  by dividing  (i) the sum
       (which sum shall  constitute  the  applicable  consideration)  of (x) the
       total amount received or receivable by the Company as  consideration  for
       the issue or sale of such Convertible Securities,  plus (y) the aggregate
       amount of additional  consideration,  if any, payable to the Company upon
       the conversion or exchange thereof, by (ii) the total number of shares of
       Common  Stock  issuable  upon  the  conversion  or  exchange  of all such
       Convertible Securities) shall be less than the Conversion Price in effect
       immediately  prior to the time of such  issue  or  sale,  then the  total
       maximum  number of shares of Common Stock  issuable  upon  conversion  or
       exchange of all such Convertible  Securities shall be deemed to have been
       issued  for such  price  per share as of the date of the issue or sale of
       such  Convertible  Securities  and  thereafter  shall  be  deemed  to  be
       outstanding for purposes of adjusting the Conversion Price, provided that
       (a) except as otherwise  provided in subsection  4D(3),  no adjustment of
       the  Conversion  Price  shall be made upon the  actual  issuance  of such
       Common Stock upon conversion or exchange of such  Convertible  Securities
       and (b) no further  adjustment of the  Conversion  Price shall be made by
       reason of the issue or sale of  Convertible  Securities  upon exercise of
       any  Options  to  purchase  any such  Convertible  Securities  for  which
       adjustments of the Conversion  Price have been made pursuant to the other
       provisions of subsection 4D.

              4D(3)  CHANGE  IN  OPTION  PRICE  OR  CONVERSION  RATE.  Upon  the
       happening of any of the following  events,  namely, if the purchase price
       provided for in any Option  referred to in subsection  4D(l) hereof,  the
       additional consideration, if any, payable upon the conversion or exchange
       of any Convertible  Securities referred to in subsections 4D(l) or 4D(2),
       or the rate at which  Convertible  Securities  referred to in subsections
       4D(l) or 4D(2) are  convertible  into or  exchangeable  for Common  Stock
       shall change at any time (including, but not limited to, changes under or
       by reason of  provisions  designed  to  protect  against  dilution),  the
       Conversion  Price in effect at the time of such event shall  forthwith be
       readjusted  to the  Conversion  Price  which would have been in effect at
       such time had such Options or Convertible  Securities  still  outstanding
       provided for such changed  purchase price,  additional  consideration  or
       conversion  rate,  as the case may be,  at the  time  initially  granted,
       issued or sold. On the termination of any Option for which any adjustment
       was made  pursuant  to this  subsection  4(D) or any right to  convert or
       exchange  Convertible  Securities  for  which  any  adjustment  was  made
       pursuant to this subsection 4(D) (including  without  limitation upon the
       redemption or purchase for  consideration of such Convertible  Securities
       by the Company),  the  Conversion  Price then in effect  hereunder  shall
       forthwith  be changed to the  Conversion  Price  which would have been in
       effect at the time of such  termination  had such  Option or  Convertible
       Securities,   to  the  extent  outstanding   immediately  prior  to  such
       termination, never been issued.

              4D(4)  STOCK   DIVIDENDS.   Subject  to  the  provisions  of  this
       subsection  4D, in case the  Company  shall  declare or pay a dividend or
       make any other distribution upon any stock of the Company (other than the
       Common Stock) payable in Common Stock, Options or Convertible Securities,
       then any Common Stock, Options or Convertible Securities, as the case may
       be, issuable in payment of such dividend or distribution  shall be deemed
       to have been issued or sold without consideration.

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              4D(5)  CONSIDERATION  FOR  STOCK.  In case any  shares  of  Common
       Stock,  Options  or  Convertible  Securities  shall be issued or sold for
       cash, the  consideration  received therefor shall be deemed to be the net
       amount received by the Company therefor, after deduction therefrom of any
       expenses incurred or any underwriting  commissions or concessions paid or
       allowed by the  Company in  connection  therewith.  In case any shares of
       Common Stock,  Options or Convertible  Securities shall be issued or sold
       for a  consideration  other  than cash,  the amount of the  consideration
       other than cash  received by the  Company  shall be deemed to be the fair
       value of such  consideration  as determined in good faith by the Board of
       Directors of the Company, after deduction of any expenses incurred or any
       underwriting commissions or concessions paid or allowed by the Company in
       connection  therewith.  In case any Options shall be issued in connection
       with the  issue and sale of other  securities  of the  Company,  together
       comprising one integral transaction in which no specific consideration is
       allocated to such Options by the parties  thereto,  such Options shall be
       deemed to have been issued for such  consideration  as determined in good
       faith by the Board of Directors of the Company. If Common Stock,  Options
       or Convertible  Securities shall be issued or sold by the Company and, in
       connection  therewith,  other  Options  or  Convertible  Securities  (the
       "Additional  Rights")  are  issued,  then the  consideration  received or
       deemed to be received by the Company  shall be reduced by the fair market
       value of the  Additional  Rights (as determined  using the  Black-Scholes
       option pricing model or another method  mutually agreed to by the Company
       and the  holder).  The Board of Directors  of the Company  shall  respond
       promptly,  in writing,  to an inquiry by the holder as to the fair market
       value of the Additional  Rights. In the event that the Board of Directors
       of the  Company  and the holder are unable to agree upon the fair  market
       value of the Additional  Rights, the Company and the holder shall jointly
       select an appraiser,  who is experienced in such matters. The decision of
       such  appraiser  shall  be  final  and  conclusive,  and the cost of such
       appraiser shall be borne evenly by the Company and the holder.

              4D(6)  RECORD DATE. In case the Company shall take a record of the
       holders of its Common  Stock for the  purpose  of  entitling  them (i) to
       receive a dividend or other distribution payable in Common Stock, Options
       or  Convertible  Securities or (ii) to subscribe  for or purchase  Common
       Stock, Options or Convertible Securities,  then such record date shall be
       deemed to be the date of the issue or sale of the shares of Common  Stock
       deemed to have been issued or sold upon the  declaration of such dividend
       or the making of such other  distribution  or the date of the granting of
       such right of subscription or purchase, as the case may be.

              4D(7)  TREASURY  SHARES.  The  number of  shares  of Common  Stock
       outstanding  at any given time shall not include  shares owned or held by
       or  for  the  account  of  the   Company  or  any  of  its   wholly-owned
       subsidiaries,  and the  disposition  of any such  shares  (other than the
       cancellation or retirement  thereof) shall be considered an issue or sale
       of Common Stock for the purpose of this Section 4D.

              4E     STOCK SPLITS AND DIVIDENDS.  If the Company  shall,  at any
       time or  from  time to  time  while  the  Series  A  Preferred  Stock  is
       outstanding, pay a dividend or make a distribution

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       on its Common Stock in shares of Common Stock,  subdivide its outstanding
       shares of Common  Stock into a greater  number of shares or  combine  its
       outstanding  shares of Common  Stock  into a smaller  number of shares or
       issue by  reclassification  of its outstanding shares of Common Stock any
       shares of its  capital  stock  (including  any such  reclassification  in
       connection  with a  consolidation  or merger in which the  Company is the
       continuing corporation),  then the Conversion Price in effect immediately
       prior to the date upon which such change shall become  effective shall be
       adjusted  by  multiplying  such  Conversion  Price  by  a  fraction,  the
       numerator  of  which  shall be the  number  of  shares  of  Common  Stock
       outstanding immediately prior to such change and the denominator of which
       shall be the  number of shares of Common  Stock  outstanding  immediately
       after giving  effect to such change and.  Such  adjustment  shall be made
       successively whenever any event listed above shall occur.

              4F.    REORGANIZATION   OR   RECLASSIFICATION.   If  any   capital
       reorganization or  reclassification  of the capital stock of the Company,
       consolidation or merger of the Company with another  corporation in which
       the Company is not the survivor,  or sale,  transfer or other disposition
       of  all  or  substantially   all  of  the  Company's  assets  to  another
       corporation   shall  be   effected,   then,   as  a  condition   of  such
       reorganization or reclassification, consolidation, merger, sale, transfer
       or other disposition, lawful and adequate provision shall be made whereby
       each  holder  of a share or  shares of  Series A  Preferred  Stock  shall
       thereafter  have the right to receive,  upon the basis and upon the terms
       and  conditions  specified  herein and in lieu of the  Conversion  Shares
       immediately  theretofore  receivable upon the conversion of such share or
       shares of the Series A Preferred Stock, such shares of stock,  securities
       or assets as would have been  issuable or payable  with  respect to or in
       exchange  for a  number  of  Conversion  Shares  equal to the  number  of
       Conversion Shares immediately theretofore issuable upon conversion of the
       Series A  Preferred  Stock,  had such  reorganization,  reclassification,
       consolidation,  merger,  sale,  transfer or other  disposition  not taken
       place,  and in any such  case  appropriate  provision  shall be made with
       respect to the rights and  interests  of such  holder to the end that the
       provisions hereof (including without limitation provisions for adjustment
       of the  Conversion  Price)  shall  thereafter  be  applicable,  as nearly
       equivalent  as may be  practicable  in  relation  to any shares of stock,
       securities  or assets  thereafter  deliverable  upon the exercise of such
       conversion rights.  The Company shall not effect any such  consolidation,
       merger,   sale,   transfer  or  other  disposition  unless  prior  to  or
       simultaneously  with the consummation  thereof the successor  corporation
       (if other than the Company)  resulting from such consolidation or merger,
       or the corporation purchasing or otherwise acquiring such assets or other
       appropriate  corporation or entity shall assume the obligation to deliver
       to the holders of the Series A Preferred  Stock, at the last addresses of
       such holders appearing on the books of the Company, such shares of stock,
       securities  or assets as, in accordance  with the  foregoing  provisions,
       such  holders  may be  entitled  to  receive,  and the other  obligations
       hereunder.  The provisions of this subsection 4F shall similarly apply to
       successive reorganizations,  reclassifications,  consolidations, mergers,
       sales, transfers or other dispositions.

              4G.    DISTRIBUTIONS. In case the Company shall fix a payment date
       for  the  making  of

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<PAGE>

       a  distribution  to all  holders  of  Common  Stock  (including  any such
       distribution  made in connection with a consolidation  or merger in which
       the Company is the continuing  corporation)  of evidences of indebtedness
       or assets (other than cash dividends or cash distributions payable out of
       consolidated  earnings or earned  surplus or dividends  or  distributions
       referred  to in Section  4E), or  subscription  rights or  warrants,  the
       Conversion  Price  to be in  effect  after  such  payment  date  shall be
       determined by  multiplying  the  Conversion  Price in effect  immediately
       prior to such payment date by a fraction, the numerator of which shall be
       the total number of shares of Common Stock outstanding  multiplied by the
       Market  Price (as defined  below) per share of Common  Stock  immediately
       prior to such payment date,  less the fair market value (as determined by
       the  Company's  Board of  Directors  in good  faith)  of said  assets  or
       evidences of indebtedness so distributed,  or of such subscription rights
       or warrants,  and the  denominator  of which shall be the total number of
       shares of Common Stock  outstanding  multiplied  by such Market Price per
       share of Common Stock  immediately  prior to such payment  date.  "Market
       Price" as of a  particular  date (the  "Valuation  Date")  shall mean the
       following:  (a) if the Common  Stock is then  listed on a national  stock
       exchange,  the  closing  sale price of one share of Common  Stock on such
       exchange on the last trading day prior to the Valuation  Date; (b) if the
       Common Stock is then quoted on The Nasdaq Stock Market, Inc.  ("Nasdaq"),
       the National  Association of Securities Dealers,  Inc. OTC Bulletin Board
       (the "Bulletin  Board") or such similar  quotation system or association,
       the  closing  sale  price of one share of  Common  Stock on  Nasdaq,  the
       Bulletin Board or such other quotation  system or association on the last
       trading day prior to the Valuation Date or, if no such closing sale price
       is available,  the average of the high bid and the low asked price quoted
       thereon on the last trading day prior to the  Valuation  Date;  or (c) if
       the Common  Stock is not then  listed on a  national  stock  exchange  or
       quoted on Nasdaq,  the Bulletin Board or such other  quotation  system or
       association, the fair market value of one share of Common Stock as of the
       Valuation  Date, as determined in good faith by the Board of Directors of
       the Company  and the  holders of at least a majority  of the  outstanding
       Series A  Preferred  Stock.  If the Common  Stock is not then listed on a
       national  securities  exchange,  Nasdaq, the Bulletin Board or such other
       quotation  system or  association,  the Board of Directors of the Company
       shall respond promptly, in writing, to an inquiry by a holder of Series A
       Preferred  Stock  prior to the  conversion  of Series A  Preferred  Stock
       hereunder  as to the fair  market  value of a share  of  Common  Stock as
       determined  by the Board of Directors  of the Company.  In the event that
       the Board of  Directors  of the  Company  and the  holders  of at least a
       majority of the outstanding  Series A Preferred Stock are unable to agree
       upon the fair market value in respect of subpart (c) hereof,  the Company
       and the  holders  of at  least a  majority  of the  outstanding  Series A
       Preferred Stock shall jointly select an appraiser,  who is experienced in
       such  matters.  The  decision  of  such  appraiser  shall  be  final  and
       conclusive,  and the cost of such appraiser shall be borne equally by the
       Company and such  holders.  Such  adjustment  shall be made  successively
       whenever such a payment date is fixed.

              4H.    EFFECTIVE  DATE  OF   ADJUSTMENT.   An  adjustment  to  the
       Conversion  Price shall become  effective  immediately  after the payment
       date in the case of each dividend or distribution  and immediately  after
       the effective date of each other event which requires an adjustment.

                                      -9-
<PAGE>

              4I.    SUBSEQUENT  ADJUSTMENTS.  In the event that, as a result of
       an  adjustment  made  pursuant  to this  Section  4,  holders of Series A
       Preferred  Stock shall  become  entitled to receive any shares of capital
       stock of the  Company  other than shares of Common  Stock,  the number of
       such  other  shares so  receivable  upon the  conversion  of the Series A
       Preferred  Stock shall be subject  thereafter to adjustment  from time to
       time in a manner and on terms as nearly  equivalent as practicable to the
       provisions with respect to the Conversion Shares contained herein.

              4J.    NOTICE OF ADJUSTMENT. Upon any adjustment of the Conversion
       Price,  then, and in each such case the Company shall give written notice
       thereof by first class mail, postage prepaid, addressed to each holder of
       shares of Series A Preferred Stock at the address of such holder as shown
       on the books of the  Company,  which  notice  shall state the  Conversion
       Price resulting from such adjustment,  setting forth in reasonable detail
       the method of  calculation  and the facts upon which such  calculation is
       based.

              4K.    OTHER NOTICES. In case at any time:

                     (1)    the  Company  shall  declare any  dividend  upon its
       Common Stock payable in cash or stock or make any other  distribution  to
       the holders of its Common Stock;

                     (2)    the Company shall offer for subscription PRO RATA to
       the holders of its Common  Stock any  additional  shares of such stock of
       any class or other rights;

                     (3)    there  shall  be  any  capital   reorganization   or
       reclassification  of the capital stock of the Company, or a consolidation
       or merger of the Company with, or a sale of all or substantially  all its
       assets to, another corporation; or

                     (4)    there   shall   be  a   voluntary   or   involuntary
       dissolution, liquidation or winding up of the Company;

       then, in any one or more of said cases,  the Company shall give, by first
       class mail,  postage  prepaid,  addressed to each holder of any shares of
       Series A  Preferred  Stock at the  address of such holder as shown on the
       books of the Company,  (a) at least 15 days prior  written  notice of the
       date on which the books of the Company  shall close or a record  shall be
       taken  for such  dividend,  distribution  or  subscription  rights or for
       determining  rights  to  vote  in  respect  of any  such  reorganization,
       reclassification,  consolidation,  merger, sale, dissolution, liquidation
       or  winding  up,  and  (b)  in  the  case  of  any  such  reorganization,
       reclassification,  consolidation,  merger, sale, dissolution, liquidation
       or winding up, at least 15 days prior written notice of the date when the
       same shall take  place.  Such  notice in  accordance  with the  foregoing
       clause  (a)  shall  also  specify,  in the  case  of any  such  dividend,
       distribution  or  subscription  rights,  the date on which the holders of
       Common  Stock shall be entitled  thereto,  and such notice in  accordance
       with the  foregoing  clause (b) shall also  specify the date on which the
       holders of Common Stock shall be entitled to exchange  their Common Stock
       for securities or other

                                      -10-
<PAGE>

       property   deliverable   upon  such   reorganization,   reclassification,
       consolidation,  merger, sale, dissolution,  liquidation or winding up, as
       the case may be.

              4L.    STOCK TO BE RESERVED.

                     (1)    From and after the  effectiveness  of the  Amendment
       and the Reverse  Split (each as defined in the Purchase  Agreement),  the
       Company  will  at  all  times  reserve  and  keep  available  out  of its
       authorized  but unissued  Common Stock solely for the purpose of issuance
       upon the conversion of the Series A Preferred  Stock as herein  provided,
       such number of shares of Common Stock as shall then be issuable  upon the
       conversion of all  outstanding  shares of Series A Preferred  Stock.  All
       shares of Common Stock which shall be so issued shall be duly and validly
       issued and fully paid and nonassessable  and free from all liens,  duties
       and charges arising out of or by reason of the issue thereof  (including,
       without  limitation,  in  respect of taxes)  and,  without  limiting  the
       generality of the foregoing, the Company covenants that it will from time
       to time take all such action as may be  requisite  to assure that the par
       value per share of the Common Stock is at all times equal to or less than
       the  effective  Conversion  Price.  The Company will take all such action
       within its  control as may be  necessary  on its part to assure  that all
       such shares of Common  Stock may be so issued  without  violation  of any
       applicable  law or  regulation,  or of any  requirements  of any national
       securities  exchange  upon which the Common  Stock of the  Company may be
       listed.  The  Company  will not  take any  action  which  results  in any
       adjustment of the Conversion  Price if after such action the total number
       of shares of Common Stock issued and outstanding and thereafter  issuable
       upon exercise of all options and  conversion of  Convertible  Securities,
       including upon conversion of the Series A Preferred  Stock,  would exceed
       the total number of shares of such class of Common Stock then  authorized
       by the Company's Amended and Restated Certificate of Incorporation.

                     (2)    The  Company  will at all  times  reserve  and  keep
       available out of its authorized  Series A Preferred  Stock such number of
       shares of Series A Preferred Stock as is equal to the number of shares of
       Series A  Preferred  Stock  then  outstanding.  All  shares  of  Series A
       Preferred Stock which shall be so issued shall be duly and validly issued
       and fully  paid and  nonassessable  and free from all  liens,  duties and
       charges  arising  out of or by reason of the  issue  thereof  (including,
       without limitation, in respect of taxes).

              4M.    NO REISSUANCE OF SERIES A PREFERRED STOCK. Shares of Series
       A  Preferred  Stock that are  converted  into  shares of Common  Stock as
       provided  herein  shall be retired  and may not be  reissued  as Series A
       Preferred  Stock but may be reissued as all or part of another  series of
       Preferred Stock.

              4N.    ISSUE  TAX.  The  issuance  of  certificates  for shares of
       Common  Stock upon  conversion  of the Series A Preferred  Stock shall be
       made without  charge to the holders  thereof for any issuance tax,  stamp
       tax,  transfer tax, duty or charge in respect thereof,  provided that the
       Company shall not be required to pay any tax, duty or charge which may be

                                      -11-
<PAGE>

       payable in respect of any transfer  involved in the issuance and delivery
       of any  certificate in a name other than that of the holder of the Series
       A Preferred Stock which is being converted.

              4O.    CLOSING  OF BOOKS.  The  Company  will at no time close its
       transfer books against the transfer of any Series A Preferred Stock or of
       any shares of Common Stock issued or issuable upon the  conversion of any
       shares of Series A Preferred  Stock in any manner which  interferes  with
       the  timely  conversion  of such  Series  A  Preferred  Stock;  PROVIDED,
       HOWEVER,  nothing  herein  shall be construed to prevent the Company from
       setting record dates for the holders of its securities.

              5.     VOTING - SERIES A PREFERRED STOCK. In addition to any class
voting rights provided by law and this  Certificate of Designation,  the holders
of Series A  Preferred  Stock  shall  have the right to vote  together  with the
holders of Common  Stock as a single class on any matter on which the holders of
Common Stock are entitled to vote  (including the election of  directors).  With
respect to the voting  rights of the  holders  of the Series A  Preferred  Stock
pursuant to the  preceding  sentence,  each  holder of Series A Preferred  Stock
shall be  entitled  to one vote for each  share of Common  Stock  that  would be
issuable  to such  holder  upon the  conversion  of all the  shares  of Series A
Preferred Stock held by such holder on the record date for the  determination of
shareholders entitled to vote.

              6.     CERTAIN RESTRICTIONS.  In addition to any other vote of the
holders  of Series A  Preferred  Stock  required  by law or by the  Amended  and
Restated Certificate of Incorporation,  without the prior consent of the holders
of at least a majority of the  outstanding  Series A Preferred  Stock,  given in
person or by proxy,  either in writing or at a special  meeting  called for that
purpose,  at which  meeting the holders of the shares of such Series A Preferred
Stock shall vote together as a class, the Company will not:

                     (a)    authorize,  create,  designate,  establish  or issue
       (whether by merger or  otherwise)  (i) an  increased  number of shares of
       Series A Preferred  Stock (other than pursuant to the exercise of the SSF
       Option (as such term is defined in the Purchase Agreement)),  or (ii) any
       other  class or series of capital  stock  ranking  senior to or on parity
       with the Series A Preferred Stock as to dividends or upon  liquidation or
       reclassify  any shares of Common Stock into shares having any  preference
       or priority as to dividends or upon liquidation  superior to or on parity
       with any such preference or priority of Series A Preferred Stock;

                     (b)    authorize,  create,  designate,  establish  or issue
       (whether  by merger or  otherwise)  any  shares of  capital  stock or any
       Options or  Convertible  Securities or amend or waive any of the terms or
       provisions  of any  outstanding  capital  stock,  Options or  Convertible
       Securities,   except  for   issuances   made  in   accordance   with  the
       Recapitalization (as defined in the Purchase Agreement);

                     (c)    enter into or consummate any Corporate Transaction;

                     (d)    incur,  assume or  suffer to exist any  indebtedness
       for borrowed money in excess of $500,000 in the aggregate;

                                      -12-
<PAGE>

                     (e)    amend,   alter  or   repeal,   whether   by  merger,
       consolidation  or  otherwise,  the Amended and  Restated  Certificate  of
       Incorporation  or By-laws of the Company or the Resolutions  contained in
       this  Certificate of Designations of the Series A Preferred Stock and the
       powers, preferences,  privileges, relative,  participating,  optional and
       other special rights and  qualifications,  limitations  and  restrictions
       thereof, which would adversely affect any right, preference, privilege or
       voting power of the Series A Preferred  Stock, or which would increase or
       decrease the amount of authorized  shares of the Series A Preferred Stock
       or of any other series of preferred  stock ranking senior to the Series A
       Preferred Stock, with respect to the payment of dividends (whether or not
       such series of  preferred  stock is  cumulative  or  noncumulative  as to
       payment of dividends) or upon liquidation;

                     (f)    directly or indirectly,  declare or pay any dividend
       (other  than  dividends  permitted  pursuant  to Section 2 and  dividends
       payable in shares of Common  Stock but only to the extent that such stock
       dividend  results in an adjustment of the  Conversion  Price  pursuant to
       Section 4(D)(4)) or directly or indirectly purchase,  redeem,  repurchase
       or  otherwise  acquire or permit  any  Subsidiary  to  redeem,  purchase,
       repurchase  or  otherwise  acquire (or make any payment to a sinking fund
       for such redemption, purchase, repurchase or other acquisition) any share
       of Common  Stock or any other  class or series of the  Company's  capital
       stock  (except for shares of Common  Stock  repurchased  from  current of
       former employees,  consultants,  or directors upon termination of service
       in accordance  with plans  approved by the Company's  Board of Directors)
       whether in cash,  securities or property or in obligations of the Company
       or any Subsidiary; or

                     (g)    agree to do any of the foregoing.

              7.     NO WAIVER.  Except as  otherwise  modified or provided  for
herein,  the holders of Series A Preferred  Stock shall also be entitled to, and
shall not be deemed to have waived,  any other applicable rights granted to such
holders under the Delaware General Corporation Law.

              8.     NO   IMPAIRMENT.   The  Company   will  not,   through  any
reorganization,  transfer  of  assets,  merger,  dissolution,  issue  or sale of
securities or any other voluntary action,  avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed  hereunder by the
Company but will at all time in good faith assist in the carrying out of all the
provisions of this Article FOURTH and in the taking of all such action as may be
necessary  or  appropriate  in  order  to  protect  the  conversion  rights  and
liquidation  preferences  granted  hereunder  of the  holders  of the  Series  A
Preferred Stock against impairment."

              9.     AMENDMENT; WAIVER. Any term of the Series A Preferred Stock
may be  amended or waived  (including  the  adjustment  provisions  included  in
Section 4(D) hereof) upon the written  consent of the Company and the holders of
at least a majority of the Series A  Preferred  Stock then  outstanding,  voting
together as a single  class;  PROVIDED,  HOWEVER  that the number of  Conversion
Shares issuable  hereunder and the Conversion Price may not be amended,  and the
right to  convert  the

                                      -13-
<PAGE>

Series A  Preferred  Stock may not be  altered or waived,  without  the  written
consent of the holders of all of the Series A Preferred Stock then outstanding.

              10.    ACTION BY  HOLDERS.  Any  action or  consent to be taken or
given by the  holders of the Series A Preferred  Stock may be given  either at a
meeting of the holders of the Series A Preferred  Stock called and held for such
purpose or by written consent.

                            [Execution Page Follows]

                                      -14-
<PAGE>

              IN WITNESS  WHEREOF,  the undersigned has executed  Certificate of
Designations, Preferences and Rights this 13th day of January, 2006.

                                        UTIX GROUP, INC.

                                        By: /s/Anthony G. Roth
                                            ------------------------------------
                                            Name:  Anthony G. Roth
                                            Title: President and CEO

                                      -15-PURCHASE AGREEMENT

              THIS PURCHASE  AGREEMENT  ("Agreement") is made as of the 13th day
of January,  2006 by and among UTIX Group,  Inc.,  a Delaware  corporation  (the
"Company"),  and the Investors set forth on the signature  pages affixed  hereto
(each an "Investor" and collectively the "Investors").

                                    RECITALS

              A.     The Company and the Investors are executing and  delivering
this  Agreement in reliance  upon the  exemption  from  securities  registration
afforded by the provisions of Regulation D  ("Regulation  D"), as promulgated by
the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended; and

              B.     The Investors  wish to purchase  from the Company,  and the
Company wishes to sell and issue to the Investors, upon the terms and conditions
stated in this  Agreement,  (i) an aggregate  of 1,093  shares of the  Company's
Series A Convertible Preferred Stock, par value $0.001 per share (the "Preferred
Stock"), such shares of Preferred Stock to have the relative rights, preferences
and  designations  set forth in the  Certificate  of  Designations  set forth in
EXHIBIT A hereto (the  "Certificate  of  Designations"),  at a purchase price of
$5,000 per share (the "Per Share Purchase Price"), and (ii) warrants to purchase
an aggregate of 68,312,500  shares of Common Stock (subject to adjustment) at an
exercise  price of $0.04 per share  (subject to adjustment) in the form attached
hereto as EXHIBIT B; and

              C.     Contemporaneous  with  the  sale  of  the  Shares  and  the
Warrants,  the parties  hereto will  execute and deliver a  Registration  Rights
Agreement,  in the form attached hereto as EXHIBIT C (the  "Registration  Rights
Agreement"),  pursuant  to which  the  Company  will  agree to  provide  certain
registration rights under the Securities Act of 1933, as amended,  and the rules
and regulations promulgated thereunder, and applicable state securities laws.

              In  consideration of the mutual promises made herein and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

       1.     DEFINITIONS.   In  addition  to  those  terms  defined  above  and
elsewhere in this Agreement,  for the purposes of this Agreement,  the following
terms shall have the meanings set forth below:

              "AFFILIATE"  means,  with respect to any Person,  any other Person
which directly or indirectly  through one or more  intermediaries  Controls,  is
controlled by, or is under common control with, such Person.

              "AMENDMENT"  means  an  amendment  to the  Company's  Amended  and
Restated Certificate of Incorporation  increasing the number of shares of Common
Stock the Company is authorized to issue to 375,000,000.
<PAGE>

              "BUSINESS  DAY" means a day,  other than a Saturday or Sunday,  on
which banks in New York City are open for the general transaction of business.

              "COMMON STOCK" means the Company's  common stock, par value $0.001
per share, and any securities into which the common stock may be reclassified.

              "COMPANY'S  KNOWLEDGE" means the actual knowledge of the executive
officers (as defined in Rule 405 under the 1933 Act) of the  Company,  after due
inquiry.

              "CONFIDENTIAL  INFORMATION"  means  trade  secrets,   confidential
information  and  know-how  (including  but  not  limited  to  ideas,  formulae,
compositions,  processes,  procedures and  techniques,  research and development
information,   computer  program  code,  performance   specifications,   support
documentation, drawings, specifications,  designs, business and marketing plans,
and customer and supplier lists and related information).

              "CONTROL" (including the terms  "controlling",  "controlled by" or
"under common control with") means the  possession,  direct or indirect,  of the
power to direct or cause the  direction  of the  management  and  policies  of a
Person,  whether  through the  ownership  of voting  securities,  by contract or
otherwise.

              "CONVERSION SHARES" means the shares of Common Stock issuable upon
the conversion of the Shares.

              "EFFECTIVE DATE" means the date on which the initial  Registration
Statement is declared effective by the SEC.

              "EFFECTIVENESS  DEADLINE"  means  the  date on which  the  initial
Registration Statement is required to be declared effective by the SEC under the
terms of the Registration Rights Agreement.

              "INTELLECTUAL  PROPERTY" means all of the following:  (i) patents,
patent   applications,   patent  disclosures  and  inventions  (whether  or  not
patentable  and whether or not reduced to practice);  (ii)  trademarks,  service
marks, trade dress, trade names,  corporate names,  logos,  slogans and Internet
domain names,  together with all goodwill associated with each of the foregoing;
(iii) copyrights and copyrightable  works; (iv) registrations,  applications and
renewals  for  any of the  foregoing;  and  (v)  proprietary  computer  software
(including but not limited to data, data bases and documentation).

              "MATERIAL  ADVERSE EFFECT" means a material  adverse effect on (i)
the  assets,  liabilities,   results  of  operations,  condition  (financial  or
otherwise),  business, or prospects of the Company and its Subsidiaries taken as
a whole, or (ii) the ability of the Company to perform its obligations under the
Transaction Documents.

              "PERSON" means an individual,  corporation,  partnership,  limited
liability  company,  trust,  business trust,  association,  joint stock company,
joint venture, sole proprietorship,

                                      -2-
<PAGE>

unincorporated organization,  governmental authority or any other form of entity
not specifically listed herein.

              "PROPOSALS" has the meaning set forth in Section 7.9.

              "PURCHASE  PRICE"  means  Five  Million  Four  Hundred  Sixty-Five
Thousand Dollars ($5,465,000).

              "RECAPITALIZATION" shall mean all of the following actions:

                     (i)    the   conversion   or  exchange  of  the   Company's
$5,000,000 in aggregate  principal amount of indebtedness  ("Company Debt") into
(A) an  aggregate  of  145,000,000  shares  of Common  Stock  and (B)  five-year
warrants to acquire an  aggregate  of  31,250,000  shares of Common  Stock at an
exercise price of $0.04 per share and containing  terms no more favorable to the
holder than the Warrants:

                     (ii)   the conversion or exchange of warrants issued to the
holders of the Company  Debt and  exercisable  for an  aggregate  of  30,300,000
shares of Common Stock (the "Debt Warrants") into five-year  warrants to acquire
an aggregate of 15,150,000  shares of Common Stock at an exercise price of $0.04
per  share  and  containing  terms  no more  favorable  to the  holder  than the
Warrants; and

                     (iii)  the creation (subject to stockholder approval) of an
option plan (the "Plan") for the benefit of the management of the Company which,
together  with any  options  that may be granted  under the  Company's  existing
option plans, shall cover an aggregate of 75,000,000 shares of Common Stock.

              "REGISTRATION   STATEMENT"  has  the  meaning  set  forth  in  the
Registration Rights Agreement.

              "REVERSE  SPLIT" means a  one-for-100  reverse split of the Common
Stock  that does not alter the number of shares of Common  Stock the  Company is
authorized to issue.

              "SEC FILINGS" has the meaning set forth in Section 4.6.

              "SECURITIES" means the Shares, the Conversion Shares, the Warrants
and the Warrant Shares.

              "SHARES"  means the  shares  of  Preferred  Stock to be  purchased
hereunder,  including  any Option  Shares  purchased  pursuant  to Section  2(b)
hereof.

              "SUBSIDIARY" of any Person means another Person,  an amount of the
voting  securities,  other voting ownership or voting  partnership  interests of
which is  sufficient  to elect at least a majority of its Board of  Directors or
other governing body (or, if there are no such voting interests,  50% or more of
the equity  interests of which) is owned  directly or  indirectly  by such first
Person.

                                      -3-
<PAGE>

              "TRANSACTION  DOCUMENTS" means this Agreement,  the Certificate of
Designations,  the Warrants,  the  Registration  Rights Agreement and the Voting
Agreement.

              "VOTING AGREEMENTS" means the voting agreements among the Company,
the Investors and the stockholders listed in SCHEDULE 6.1(f) attached hereto, in
the form attached hereto as EXHIBIT D.

              "WARRANTS" means the warrants to be purchased hereunder, including
any Option Warrants purchased pursuant to Section 3(b) hereof.

              "WARRANT  SHARES"  means the shares of Common Stock  issuable upon
the exercise of the Warrants.

              "1933 ACT" means the  Securities  Act of 1933, as amended,  or any
successor statute, and the rules and regulations promulgated thereunder.

              "1934 ACT" means the Securities  Exchange Act of 1934, as amended,
or any successor statute, and the rules and regulations promulgated thereunder.

       2.     PURCHASE AND SALE OF THE SHARES AND WARRANTS.

              (a)    Subject to the terms and conditions of this  Agreement,  on
the Closing  Date,  each of the  Investors  shall  severally,  and not  jointly,
purchase, and the Company shall sell and issue to the Investors,  the Shares and
the Warrants in the respective  amounts set forth opposite the Investors'  names
on the signature  pages attached hereto in exchange for each Investor's pro rata
share of the Purchase Price as specified in Section 3(a) below.

              (b)    Subject  to the terms  and  conditions  of this  Agreement,
Special  Situations Fund III, L.P.  ("SSF") and the other  Investors  affiliated
with SSF (the "SSF  Investors")  shall have the right,  allocable  among the SSF
Investors as they may  determine in their sole  discretion  (the "SSF  Option"),
exercisable at any time, and from time to time, in whole or in part, on or prior
to 5:00 p.m.,  New York time, on the first  anniversary of the Closing Date (the
"Expiration  Time") to acquire for the Per Share Purchase Price up to $2,000,000
in additional  shares of Preferred Stock (the "Option Shares") and Warrants (the
"Option  Warrants")  having  the same  terms and  conditions  as the  Shares and
Warrants issued on the Closing Date, subject to adjustment to give effect to the
Reverse Split in the event that the Reverse Split has occurred prior thereto. In
the event that SSF Investors wish to exercise the SSF Option,  SSF, on behalf of
all  participating  SSF  Investors,  shall give  written  notice (the  "Exercise
Notice") of such  exercise to the  Company at or prior to the  Expiration  Time.
Such Exercise  Notice shall  specify the  aggregate  number of Option Shares and
Option Warrants being purchased by each participating SSF Investor and the total
amount being invested (the "Option Purchase Price").

                                      -4-
<PAGE>

       3.     CLOSING.

              (a)    Upon  confirmation  that the other  conditions  to  closing
specified  herein  have been  satisfied  or duly  waived by the  Investors,  the
Company shall file the Certificate of  Designations  with the Secretary of State
of  Delaware.  Unless and Investor has made  alternative  arrangements  with the
Company,  upon  confirmation that the Certificate of Designations has been filed
and has become effective, the Company shall deliver to Lowenstein Sandler PC, in
trust,  a certificate or  certificates,  registered in such name or names as the
Investors  may  designate,  representing  the  Shares  and  the  Warrants,  with
instructions  that such certificates are to be held for release to the Investors
only  upon  payment  in full of the  Purchase  Price to the  Company  by all the
Investors. Upon such receipt by Lowenstein Sandler PC of the certificates,  each
Investor shall promptly,  but no more than one Business Day thereafter,  cause a
wire  transfer  in same day funds to be sent to the  account  of the  Company as
instructed in writing by the Company,  in an amount representing such Investor's
pro rata portion of the Purchase  Price as set forth on the  signature  pages to
this  Agreement.  On the date (the  "Closing  Date") the  Company  receives  the
Purchase Price, the certificates evidencing the Shares and the Warrants shall be
released to the Investors (the  "Closing").  The Closing shall take place at the
offices of Lowenstein  Sandler PC, 1251 Avenue of the Americas,  18th Floor, New
York,  New York 10020,  or at such other  location and on such other date as the
Company and the Investors shall mutually agree.

              (b)    Upon any  exercise  of the SSF Option,  the  Company  shall
deliver to  Lowenstein  Sandler PC, in trust,  a  certificate  or  certificates,
registered  in  such  name or  names  as the  participating  SSF  Investors  may
designate,  representing  the  Option  Shares  and  the  Option  Warrants,  with
instructions  that  such  certificates  are  to  be  held  for  release  to  the
participating  SSF  Investors  only upon payment in full of the Option  Purchase
Price to the Company by all the participating  SSF Investors.  Upon such receipt
by Lowenstein  Sandler PC of the certificates,  each  participating SSF Investor
shall  promptly,  but no more than one  Business  Day  thereafter,  cause a wire
transfer  in same  day  funds  to be  sent  to the  account  of the  Company  as
instructed in writing by the Company,  in an amount representing such Investor's
pro rata  portion  of the  Option  Purchase  Price as set forth in the  Exercise
Notice.  On the date (the "Option Closing Date") the Company receives the Option
Purchase  Price,  the  certificates  evidencing the Option Shares and the Option
Warrants being  purchased shall be released to the  participating  SSF Investors
(each, an "Option Closing"). Each Option Closing shall take place at the offices
of Lowenstein Sandler PC, 1251 Avenue of the Americas, 18th Floor, New York, New
York 10020,  or at such other location and on such other date as the Company and
the participating SSF Investors shall mutually agree.

       4.     REPRESENTATIONS AND WARRANTIES OF THE COMPANY.  The Company hereby
represents  and  warrants  to the  Investors  that,  except  as set forth in the
schedules delivered herewith (collectively, the "Disclosure Schedules"):

              4.1    ORGANIZATION, GOOD STANDING AND QUALIFICATION.  Each of the
Company and its Subsidiaries is a corporation  duly organized,  validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has all requisite  corporate power and authority to carry on its business as now
conducted and to own its properties. Each of the Company and its Subsidiaries is
duly qualified to do business as a foreign  corporation  and is in good standing
in each  jurisdiction  in which the conduct of its business or its  ownership or
leasing of property makes such  qualification  or leasing  necessary  unless the
failure to so qualify has not

                                      -5-
<PAGE>

had and could not reasonably be expected to have a Material Adverse Effect.  The
Company's Subsidiaries are listed on SCHEDULE 4.1 hereto.

              4.2    AUTHORIZATION.  The  Company  has full power and  authority
and, except as described in SCHEDULE 4.2, has taken all requisite  action on the
part of the Company, its officers,  directors and stockholders necessary for (i)
the authorization, execution and delivery of the Transaction Documents, (ii) the
authorization of the performance of all obligations of the Company  hereunder or
thereunder, (iii) the authorization,  issuance (or reservation for issuance) and
delivery of the Securities,  and (iv) the effectuation of the  Recapitalization,
the Amendment and the Reverse Split.  The Transaction  Documents  constitute the
legal,  valid and binding  obligations of the Company,  enforceable  against the
Company in  accordance  with their  terms,  subject to  bankruptcy,  insolvency,
fraudulent  transfer,  reorganization,  moratorium  and similar  laws of general
applicability, relating to or affecting creditors' rights generally.

              4.3    CAPITALIZATION.  SCHEDULE 4.3 sets forth (a) the authorized
capital  stock of the  Company on the date  hereof;  (b) the number of shares of
capital stock issued and outstanding;  (c) the number of shares of capital stock
issuable  pursuant to the Company's stock plans; and (d) the number of shares of
capital stock issuable and reserved for issuance  pursuant to securities  (other
than the Securities)  exercisable  for, or convertible  into or exchangeable for
any shares of capital stock of the Company,  in each case without  giving effect
to the Amendment,  the Reverse Split or the Recapitalization.  All of the issued
and outstanding  shares of the Company's capital stock have been duly authorized
and validly  issued and are fully paid,  nonassessable  and free of  pre-emptive
rights and were  issued in full  compliance  with  applicable  state and federal
securities law and any rights of third parties.  Except as described on SCHEDULE
4.3,  all of the  issued  and  outstanding  shares  of  capital  stock  of  each
Subsidiary  have been duly  authorized  and  validly  issued and are fully paid,
nonassessable  and free of pre-emptive  rights,  were issued in full  compliance
with applicable state and federal securities law and any rights of third parties
and are owned by the Company,  beneficially  and of record,  subject to no lien,
encumbrance  or other  adverse  claim.  Except as described on SCHEDULE  4.3, no
Person is entitled to  pre-emptive or similar  statutory or  contractual  rights
with respect to any  securities of the Company.  Except as described on SCHEDULE
4.3, there are no outstanding warrants, options, convertible securities or other
rights,  agreements or  arrangements of any character under which the Company or
any of its Subsidiaries is or may be obligated to issue any equity securities of
any kind and except as contemplated  by this Agreement,  neither the Company nor
any of its  Subsidiaries  is currently in  negotiations  for the issuance of any
equity  securities  of any kind.  Except as described on SCHEDULE 4.3 and except
for the Voting Agreements and the Registration  Rights  Agreement,  there are no
voting  agreements,  buy-sell  agreements,  option  or right  of first  purchase
agreements  or other  agreements  of any kind among the  Company  and any of the
securityholders of the Company relating to the securities of the Company held by
them.  Except  as  described  on  SCHEDULE  4.3 and  except as  provided  in the
Registration Rights Agreement, no Person has the right to require the Company to
register any  securities of the Company under the 1933 Act,  whether on a demand
basis or in connection  with the  registration  of securities of the Company for
its own account or for the account of any other Person.

              Except as described on SCHEDULE  4.3, the issuance and sale of the
Securities  hereunder  will not  obligate  the Company to issue shares of Common
Stock or other  securities  to

                                      -6-
<PAGE>

any  other  Person  (other  than  the  Investors)  and will  not  result  in the
adjustment  of  the  exercise,  conversion,  exchange  or  reset  price  of  any
outstanding security.

              Except as  described  on SCHEDULE  4.3,  the Company does not have
outstanding  stockholder  purchase  rights  or  "poison  pill"  or  any  similar
arrangement  in effect  giving  any  Person  the right to  purchase  any  equity
interest in the Company upon the occurrence of certain events.

              4.4    VALID  ISSUANCE.  The  Shares  have been  duly and  validly
authorized  and,  when issued and paid for pursuant to this  Agreement,  will be
validly issued, fully paid and nonassessable, and shall be free and clear of all
encumbrances  and  restrictions  (other  than those  created by the  Investors),
except for  restrictions on transfer set forth in the  Transaction  Documents or
imposed by applicable  securities laws and will have the relative rights, powers
and preferences set forth in the Certificate of Designations.  The Warrants have
been duly and  validly  authorized.  Upon the due  conversion  of the  Shares in
accordance with the Certificate of Designations,  the Conversion  Shares will be
validly issued, fully paid and nonassessable, and shall be free and clear of all
encumbrances  and  restrictions  (other  than those  created by the  Investors),
except for  restrictions on transfer set forth in the  Transaction  Documents or
imposed by applicable  securities  laws.  Upon the due exercise of the Warrants,
the Warrant Shares will be validly issued,  fully paid and  non-assessable  free
and clear of all  encumbrances  and  restrictions,  except for  restrictions  on
transfer  set  forth in the  Transaction  Documents  or  imposed  by  applicable
securities  laws and except for those created by the Investors.  The Company has
reserved a sufficient  number of shares of Common  Stock for  issuance  upon the
conversion of the Shares and the exercise of the Warrants, free and clear of all
encumbrances and restrictions,  except for restrictions on transfer set forth in
the  Transaction  Documents or imposed by applicable  securities laws and except
for those created by the Investors.

              4.5    CONSENTS.  Except as  described  in SCHEDULE  4.5,  (i) the
execution, delivery and performance by the Company of the Transaction Documents,
(ii) the offer,  issuance and sale of the Securities and (iii) the  effectuation
of the Recapitalization,  the Amendment and the Reverse Split require no consent
of, action by or in respect of, or filing with, any Person,  governmental  body,
agency,  or  official  other  than  filings  that  have been  made  pursuant  to
applicable  state  securities laws and post-sale  filings pursuant to applicable
state and federal securities laws or any other notices required thereby,  all of
which the Company undertakes to file within the applicable time periods. Subject
to the accuracy of the representations and warranties of each Investor set forth
in Section 5 hereof,  the Company has taken all action  necessary  to exempt (i)
the issuance  and sale of the  Securities,  (ii) the issuance of the  Conversion
Shares upon the due conversion of the Shares,  (iii) the issuance of the Warrant
Shares  upon due  exercise  of the  Warrants,  and (iv) the  other  transactions
contemplated by the Transaction Documents from the provisions of any stockholder
rights plan or other  "poison pill"  arrangement,  any  anti-takeover,  business
combination  or control share law or statute  binding on the Company or to which
the Company or any of its assets and properties may be subject and any provision
of the Company's  Amended and Restated  Certificate of  Incorporation  or Bylaws
that is or could reasonably be expected to become applicable to the Investors as
a result of the transactions  contemplated hereby, including without limitation,
the issuance of the Securities  and the

                                      -7-
<PAGE>

ownership,  disposition  or voting of the  Securities  by the  Investors  or the
exercise of any right granted to the Investors pursuant to this Agreement or the
other Transaction Documents.

              4.6    DELIVERY  OF SEC  FILINGS;  BUSINESS.  The Company has made
available to the Investors through the EDGAR system, true and complete copies of
the Company's most recent Annual Report on Form 10-KSB for the fiscal year ended
September  30, 2004 (the  "10-KSB"),  and all other reports filed by the Company
pursuant  to the 1934 Act since the  filing of the  10-KSB and prior to the date
hereof  (collectively,  the  "SEC  Filings").  Except  as  indicated  in the SEC
Filings,  the SEC Filings are the only filings  required of the Company pursuant
to the 1934 Act for such period. The Company and its Subsidiaries are engaged in
all material respects only in the business  described in the SEC Filings and the
SEC Filings contain a complete and accurate description in all material respects
of the business of the Company and its Subsidiaries, taken as a whole.

              4.7    USE OF PROCEEDS. The net proceeds of the sale of the Shares
and the Warrants  hereunder shall be used by the Company for working capital and
general corporate purposes.

              4.8    NO MATERIAL  ADVERSE  CHANGE.  Since  September  30,  2004,
except for the Recapitalization,  the Amendment and the Reverse Split and except
as identified  and described in the SEC Filings or as described on SCHEDULE 4.8,
there has not been:

                     (i)    any change in the consolidated assets,  liabilities,
financial  condition or operating  results of the Company from that reflected in
the  financial  statements  included in the Company's  Quarterly  Report on Form
10-QSB for the quarter  ended June 30, 2005,  except for changes in the ordinary
course of business  which have not had and could not  reasonably  be expected to
have a Material Adverse Effect, individually or in the aggregate;

                     (ii)   any  declaration or payment of any dividend,  or any
authorization or payment of any distribution, on any of the capital stock of the
Company, or any redemption or repurchase of any securities of the Company;

                     (iii)  any material damage, destruction or loss, whether or
not  covered by  insurance  to any assets or  properties  of the  Company or its
Subsidiaries;

                     (iv)   any waiver,  not in the ordinary course of business,
by the Company or any  Subsidiary of a material right or of a material debt owed
to it;

                     (v)    any  satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company or a Subsidiary,  except
in the  ordinary  course of  business  and which is not  material to the assets,
properties,  financial  condition,  operating results or business of the Company
and its Subsidiaries  taken as a whole (as such business is presently  conducted
and as it is proposed to be conducted);

                     (vi)   any change or amendment to the Company's Amended and
Restated  Certificate  of  Incorporation  or Bylaws,  or material  change to any
material contract or

                                      -8-
<PAGE>

arrangement  by which the Company or any  Subsidiary is bound or to which any of
their respective assets or properties is subject;

                     (vii)  any  material  labor  difficulties  or  labor  union
organizing   activities  with  respect  to  employees  of  the  Company  or  any
Subsidiary;

                     (viii) any material transaction entered into by the Company
or a Subsidiary other than in the ordinary course of business;

                     (ix)   the loss of the  services  of any key  employee,  or
material  change in the  composition  or duties of the senior  management of the
Company or any Subsidiary;

                     (x)    the loss or  threatened  loss of any customer  which
has had or could reasonably be expected to have a Material Adverse Effect; or

                     (xi)   any other event or condition of any  character  that
has had or could reasonably be expected to have a Material Adverse Effect.

              4.9    SEC FILINGS.

                     (a)    At the  time of  filing  thereof,  the  SEC  Filings
complied as to form in all material  respects with the  requirements of the 1934
Act and did 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 the
light of the circumstances under which they were made, not misleading.

                     (b)    Each   registration   statement  and  any  amendment
thereto  filed by the Company since January 1, 2002 pursuant to the 1933 Act and
the rules and regulations thereunder, as of the date such statement or amendment
became effective, complied as to form in all material respects with the 1933 Act
and did not contain any untrue statement of a material fact or omit to state any
material  fact  required to be stated  therein or necessary in order to make the
statements  made therein not misleading;  and each prospectus  filed pursuant to
Rule  424(b)  under the 1933 Act,  as of its issue date and as of the closing of
any sale of securities  pursuant thereto did not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements  made therein,  in the light of the
circumstances under which they were made, not misleading.

              4.10   NO CONFLICT,  BREACH,  VIOLATION OR DEFAULT. Subject to the
preparation  and delivery of the Information  Statement  contemplated by Section
7.9, the execution, delivery and performance of the Transaction Documents by the
Company and the issuance and sale of the  Securities  will not conflict  with or
result  in a breach or  violation  of any of the  terms  and  provisions  of, or
constitute a default under (i) the Company's Amended and Restated Certificate of
Incorporation  or the  Company's  Bylaws,  both as in effect on the date  hereof
(true and complete  copies of which have been made  available  to the  Investors
through the EDGAR system), or (ii)(a) any statute,  rule, regulation or order of
any  governmental  agency or body or any  court,  domestic  or  foreign,  having
jurisdiction over the Company,  any Subsidiary or any of

                                      -9-
<PAGE>

their  respective  assets or  properties,  or (b) any agreement or instrument to
which the  Company  or any  Subsidiary  is a party or by which the  Company or a
Subsidiary is bound or to which any of their respective  assets or properties is
subject.

              4.11   TAX  MATTERS.  The Company and each  Subsidiary  has timely
prepared and filed all tax returns required to have been filed by the Company or
such Subsidiary with all appropriate  governmental  agencies and timely paid all
taxes shown thereon or otherwise owed by it. The charges,  accruals and reserves
on the books of the  Company  in respect  of taxes for all  fiscal  periods  are
adequate in all material respects,  and there are no material unpaid assessments
against the Company or any Subsidiary nor, to the Company's Knowledge, any basis
for the assessment of any additional taxes, penalties or interest for any fiscal
period or audits by any federal,  state or local taxing authority except for any
assessment which is not material to the Company and its Subsidiaries, taken as a
whole.  All taxes and other  assessments  and  levies  that the  Company  or any
Subsidiary  is required  to  withhold  or to collect for payment  have been duly
withheld and collected and paid to the proper governmental entity or third party
when  due.  There  are no tax  liens or  claims  pending  or,  to the  Company's
Knowledge,  threatened  against  the Company or any  Subsidiary  or any of their
respective  assets or property.  Except as described on SCHEDULE 4.11, there are
no outstanding  tax sharing  agreements or other such  arrangements  between the
Company and any Subsidiary or other corporation or entity.

              4.12   TITLE  TO  PROPERTIES.  Except  as  disclosed  in  the  SEC
Filings,  the Company and each  Subsidiary has good and marketable  title to all
real  properties  and all other  properties and assets owned by it, in each case
free from liens, encumbrances and defects that would materially affect the value
thereof or  materially  interfere  with the use made or currently  planned to be
made thereof by them;  and except as  disclosed in the SEC Filings,  the Company
and each Subsidiary  holds any leased real or personal  property under valid and
enforceable  leases with no exceptions that would materially  interfere with the
use made or currently planned to be made thereof by them.

              4.13   CERTIFICATES, AUTHORITIES AND PERMITS. The Company and each
Subsidiary  possess  adequate  certificates,  authorities  or permits  issued by
appropriate  governmental  agencies or bodies  necessary to conduct the business
now operated by it, and neither the Company nor any  Subsidiary has received any
notice of  proceedings  relating to the revocation or  modification  of any such
certificate, authority or permit that, if determined adversely to the Company or
such Subsidiary, could reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate.

              4.14   LABOR MATTERS.

              (a)    Except as set forth on SCHEDULE  4.14, the Company is not a
party to or bound by any collective  bargaining  agreements or other  agreements
with labor  organizations.  The Company has not violated in any material respect
any laws,  regulations,  orders or  contract  terms,  affecting  the  collective
bargaining rights of employees,  labor organizations or any laws, regulations or
orders affecting employment  discrimination,  equal opportunity  employment,  or
employees' health, safety, welfare, wages and hours.

                                      -10-
<PAGE>

              (b)    (i)  There  are  no  labor  disputes  existing,  or to  the
Company's Knowledge,  threatened, involving strikes, slow-downs, work stoppages,
job actions, disputes,  lockouts or any other disruptions of or by the Company's
employees,  (ii) there are no unfair labor  practices or petitions  for election
pending or, to the Company's  Knowledge,  threatened  before the National  Labor
Relations Board or any other federal,  state or local labor commission  relating
to the Company's  employees,  (iii) no demand for  recognition or  certification
heretofore made by any labor  organization or group of employees is pending with
respect to the Company and (iv) to the Company's  Knowledge,  the Company enjoys
good labor and employee relations with its employees and labor organizations.

              (c)    The Company is, and at all times has been, in compliance in
all material respects with all applicable laws respecting  employment (including
laws relating to  classification  of employees and independent  contractors) and
employment practices,  terms and conditions of employment,  wages and hours, and
immigration and naturalization.  There are no claims pending against the Company
before the Equal Employment  Opportunity  Commission or any other administrative
body or in any court  asserting  any  violation of Title VII of the Civil Rights
Act of 1964, the Age Discrimination  Act of 1967, 42 U.S.C.  ss.ss. 1981 or 1983
or any  other  federal,  state  or  local  Law,  statute  or  ordinance  barring
discrimination in employment.

              (d)    Except as  disclosed  in the SEC Filings or as described on
SCHEDULE  4.14,  the Company is not a party to, or bound by, any  employment  or
other  contract or agreement  that contains any  severance,  termination  pay or
change of control liability or obligation,  including,  without limitation,  any
"excess  parachute  payment,"  as  defined in  Section  2806(b) of the  Internal
Revenue Code.

              (e)    Except as  specified  in SCHEDULE  4.14,  to the  Company's
Knowledge,  each of the  Company's  employees is a Person who is either a United
States citizen or a permanent resident entitled to work in the United States. To
the  Company's  Knowledge,  the  Company  has  no  liability  for  the  improper
classification  by the Company of such employees as  independent  contractors or
leased employees prior to the Closing.

              4.15   INTELLECTUAL PROPERTY.

                     (a)    All  Intellectual  Property  of the  Company and its
Subsidiaries is currently in compliance with all legal  requirements  (including
timely filings,  proofs and payments of fees) and is valid and  enforceable.  No
Intellectual  Property of the Company or its Subsidiaries which is necessary for
the conduct of Company's and each of its Subsidiaries'  respective businesses as
currently  conducted or as currently proposed to be conducted has been or is now
involved in any  cancellation,  dispute or  litigation,  and,  to the  Company's
Knowledge,  no such  action  is  threatened.  No patent  of the  Company  or its
Subsidiaries  has  been  or  is  now  involved  in  any  interference,  reissue,
re-examination or opposition proceeding.

                     (b)    All of the  licenses  and  sublicenses  and consent,
royalty or other agreements concerning Intellectual Property which are necessary
for the  conduct  of the  Company's  and  each of its  Subsidiaries'  respective
businesses  as currently  conducted or as currently  proposed to be conducted to
which the Company or any  Subsidiary  is a party or by

                                      -11-
<PAGE>

which  any  of  their  assets  are  bound  (other  than  generally  commercially
available,  non-custom,  off-the-shelf  software  application  programs having a
retail  acquisition  price of less  than  $10,000  per  license)  (collectively,
"License  Agreements")  are valid and binding  obligations of the Company or its
Subsidiaries that are parties thereto and, to the Company's Knowledge, the other
parties  thereto,  enforceable  in  accordance  with their terms,  except to the
extent  that  enforcement  thereof  may be  limited by  bankruptcy,  insolvency,
reorganization,   moratorium,   fraudulent  conveyance  or  other  similar  laws
affecting the enforcement of creditors'  rights  generally,  and there exists no
event or  condition  which will result in a material  violation  or breach of or
constitute  (with or  without  due notice or lapse of time or both) a default by
the Company or any of its Subsidiaries under any such License Agreement.

                     (c)    The  Company  and its  Subsidiaries  own or have the
valid right to use all of the  Intellectual  Property  that is necessary for the
conduct of the Company's and each of its Subsidiaries'  respective businesses as
currently  conducted  or as  currently  proposed  to be  conducted  and  for the
ownership,  maintenance  and operation of the  Company's  and its  Subsidiaries'
properties and assets, free and clear of all liens, encumbrances, adverse claims
or obligations to license all such owned Intellectual  Property and Confidential
Information,  other than  licenses  entered into in the  ordinary  course of the
Company's and its  Subsidiaries'  businesses.  The Company and its  Subsidiaries
have a valid and enforceable right to use all third party Intellectual  Property
and Confidential  Information used or held for use in the respective  businesses
of the Company and its Subsidiaries.

                     (d)    To  the  Company's  Knowledge,  the  conduct  of the
Company's  and its  Subsidiaries'  businesses  as currently  conducted  does not
infringe or otherwise  impair or conflict with  (collectively,  "Infringe")  any
Intellectual   Property  rights  of  any  third  party  or  any  confidentiality
obligation  owed  to a  third  party,  and,  to  the  Company's  Knowledge,  the
Intellectual  Property  and  Confidential  Information  of the  Company  and its
Subsidiaries  which are  necessary  for the conduct of Company's and each of its
Subsidiaries'  respective  businesses  as  currently  conducted  or as currently
proposed to be conducted are not being Infringed by any third party. There is no
litigation  or order  pending or  outstanding  or, to the  Company's  Knowledge,
threatened  or imminent,  that seeks to limit or challenge or that  concerns the
ownership,  use,  validity or  enforceability  of any  Intellectual  Property or
Confidential  Information of the Company and its  Subsidiaries and the Company's
and  its  Subsidiaries'  use  of  any  Intellectual   Property  or  Confidential
Information owned by a third party, and, to the Company's Knowledge, there is no
valid basis for the same.

                     (e)    The  consummation of the  transactions  contemplated
hereby and by the other Transaction Documents will not result in the alteration,
loss,  impairment of or restriction on the Company's or any of its Subsidiaries'
ownership  or  right to use any of the  Intellectual  Property  or  Confidential
Information  which is  necessary  for the conduct of  Company's  and each of its
Subsidiaries'  respective  businesses  as  currently  conducted  or as currently
proposed to be conducted.

                     (f)    The   Company  and  its   Subsidiaries   have  taken
reasonable steps to protect the Company's and its Subsidiaries'  rights in their
Intellectual Property and Confidential  Information.  Each employee,  consultant
and contractor who has had access to Confidential

                                      -12-
<PAGE>

Information  which is  necessary  for the conduct of  Company's  and each of its
Subsidiaries'  respective  businesses  as  currently  conducted  or as currently
proposed  to  be   conducted   has   executed  an   agreement  to  maintain  the
confidentiality  of such Confidential  Information and has executed  appropriate
agreements that are substantially  consistent with the Company's  standard forms
thereof,  except where the failure to do so has not had and could not reasonably
be expected to have a Material Adverse Effect, individually or in the aggregate.
Except under confidentiality obligations,  there has been no material disclosure
of any of the Company's or its  Subsidiaries'  Confidential  Information  to any
third party.

              4.16   ENVIRONMENTAL MATTERS. To the Company's Knowledge,  neither
the  Company  nor any  Subsidiary  (i) is in  violation  of any  statute,  rule,
regulation,  decision or order of any governmental  agency or body or any court,
domestic or foreign,  relating to the use,  disposal or release of  hazardous or
toxic substances or relating to the protection or restoration of the environment
or human exposure to hazardous or toxic substances (collectively, "Environmental
Laws"), (ii) owns or operates any real property  contaminated with any substance
that is  subject to any  Environmental  Laws,  (iii) is liable for any  off-site
disposal or contamination pursuant to any Environmental Laws, or (iv) is subject
to any claim relating to any Environmental Laws, which violation, contamination,
liability  or claim has had or could  reasonably  be expected to have a Material
Adverse Effect, individually or in the aggregate; and there is no pending or, to
the  Company's  Knowledge,  threatened  investigation  that might lead to such a
claim.

              4.17   LITIGATION. Except as described on SCHEDULE 4.17, there are
no pending actions,  suits or proceedings against or affecting the Company,  its
Subsidiaries or any of its or their properties;  and to the Company's Knowledge,
no such actions, suits or proceedings are threatened or contemplated.

              4.18   FINANCIAL STATEMENTS.  The financial statements included in
each SEC Filing  present  fairly,  in all material  respects,  the  consolidated
financial  position of the  Company as of the dates  shown and its  consolidated
results of operations and cash flows for the periods  shown,  and such financial
statements  have been  prepared  in  conformity  with  United  States  generally
accepted accounting principles applied on a consistent basis ("GAAP") (except as
may be disclosed therein or in the notes thereto,  and, in the case of quarterly
financial statements, as permitted by Form 10-QSB under the 1934 Act). Except as
set forth in the financial statements of the Company included in the SEC Filings
filed prior to the date hereof or as  described  on SCHEDULE  4.18,  neither the
Company nor any of its Subsidiaries has incurred any liabilities,  contingent or
otherwise, except those incurred in the ordinary course of business,  consistent
(as to amount and nature) with past  practices  since the date of such financial
statements,  none of which,  individually or in the aggregate, have had or could
reasonably be expected to have a Material Adverse Effect.

              4.19   INSURANCE   COVERAGE.   The  Company  and  each  Subsidiary
maintains in full force and effect  insurance  coverage  that is  customary  for
comparably  situated  companies for the business being  conducted and properties
owned or leased by the Company and each Subsidiary,  and the Company  reasonably
believes such insurance coverage to be adequate against all

                                      -13-
<PAGE>

liabilities,  claims and risks  against  which it is  customary  for  comparably
situated companies to insure.

              4.20   BROKERS AND  FINDERS.  No Person will have,  as a result of
the  transactions  contemplated by the Transaction  Documents,  any valid right,
interest or claim against or upon the Company, any Subsidiary or an Investor for
any commission, fee or other compensation pursuant to any agreement, arrangement
or  understanding  entered  into by or on behalf of the  Company,  other than as
described in SCHEDULE 4.20.

              4.21   NO  DIRECTED  SELLING  EFFORTS  OR  GENERAL   SOLICITATION.
Neither  the  Company  nor any Person  acting on its behalf  has  conducted  any
general  solicitation  or  general  advertising  (as  those  terms  are  used in
Regulation D) in connection with the offer or sale of any of the Securities.

              4.22   NO INTEGRATED OFFERING.  Neither the Company nor any of its
Affiliates,  nor any  Person  acting on its or their  behalf  has,  directly  or
indirectly,  made any offers or sales of any Company  security or solicited  any
offers to buy any security,  under  circumstances  that would  adversely  affect
reliance by the Company on Section 4(2) for the exemption from  registration for
the  transactions  contemplated  hereby  or would  require  registration  of the
Securities under the 1933 Act.

              4.23   PRIVATE PLACEMENT.  The offer and sale of the Securities to
the  Investors  as   contemplated   hereby  is  exempt  from  the   registration
requirements of the 1933 Act.

              4.24   QUESTIONABLE  PAYMENTS.  Neither the Company nor any of its
Subsidiaries nor, to the Company's Knowledge, any of their respective current or
former stockholders,  directors,  officers,  employees,  agents or other Persons
acting on behalf of the Company or any Subsidiary,  has on behalf of the Company
or any Subsidiary or in connection with their  respective  businesses:  (a) used
any corporate funds for unlawful  contributions,  gifts,  entertainment or other
unlawful  expenses  relating  to  political  activity;  (b) made any  direct  or
indirect  unlawful  payments to any  governmental  officials or  employees  from
corporate  funds;  (c) established or maintained any unlawful or unrecorded fund
of corporate monies or other assets; (d) made any false or fictitious entries on
the books and records of the Company or any Subsidiary; or (e) made any unlawful
bribe, rebate, payoff, influence payment,  kickback or other unlawful payment of
any nature.

              4.25   TRANSACTIONS  WITH  AFFILIATES.  Except as disclosed in the
SEC Filings or as disclosed on SCHEDULE 4.25,  none of the officers or directors
of the Company and, to the  Company's  Knowledge,  none of the  employees of the
Company  is  presently  a party  to any  transaction  with  the  Company  or any
Subsidiary  (other than as holders of stock  options  and/or  warrants,  and 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
Company's  Knowledge,  any entity in which any  officer,  director,  or any such
employee  has a  substantial  interest  or is an officer,  director,  trustee or
partner.

                                      -14-
<PAGE>

               4.26  INTERNAL  CONTROLS.  The Company is in material  compliance
with the provisions of the  Sarbanes-Oxley  Act of 2002 currently  applicable to
the  Company.  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 1934
Act Rules  13a-14 and  15d-14)  for the Company  and  designed  such  disclosure
controls and  procedures  to ensure that  material  information  relating to the
Company, including the 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 period report under the 1934 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 end of the
period  covered by the most recently  filed  periodic  report under the 1934 Act
(such date, the "Evaluation  Date").  The Company presented in its most recently
filed  periodic  report  under the 1934 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 308 of Regulation  S-B) or, to the Company's  Knowledge,
in  other  factors  that  could  significantly  affect  the  Company's  internal
controls.  The Company maintains and will continue to maintain a standard system
of accounting  established  and  administered  in  accordance  with GAAP and the
applicable requirements of the 1934 Act.

              4.27   DISCLOSURES.  Neither the Company nor any Person  acting on
its  behalf has  provided  the  Investors  or their  agents or counsel  with any
information   that  constitutes  or  might   constitute   material,   non-public
information. The written materials delivered to the Investors in connection with
the  transactions  contemplated by the Transaction  Documents do not contain any
untrue  statement of a material fact or omit to state a material fact  necessary
in order to make the statements contained therein, in light of the circumstances
under which they were made, not misleading.

       5.     REPRESENTATIONS  AND  WARRANTIES  OF THE  INVESTORS.  Each  of the
Investors  hereby  severally,  and not jointly,  represents  and warrants to the
Company that:

              5.1    ORGANIZATION  AND  EXISTENCE.  Such  Investor  is a validly
existing  corporation,  limited partnership or limited liability company and has
all requisite  corporate,  partnership  or limited  liability  company power and
authority to invest in the Securities pursuant to this Agreement.

              5.2    AUTHORIZATION.  The execution,  delivery and performance by
such  Investor of the  Transaction  Documents to which such  Investor is a party
have been duly authorized and will each constitute the valid and legally binding
obligation  of such  Investor,  enforceable  against

                                      -15-
<PAGE>

such Investor in accordance with their respective terms,  subject to bankruptcy,
insolvency, fraudulent transfer, reorganization,  moratorium and similar laws of
general applicability, relating to or affecting creditors' rights generally.

              5.3    PURCHASE  ENTIRELY FOR OWN ACCOUNT.  The  Securities  to be
received by such Investor  hereunder  will be acquired for such  Investor's  own
account,  not as  nominee  or  agent,  and  not  with a view  to the  resale  or
distribution of any part thereof in violation of the 1933 Act, and such Investor
has no present intention of selling, granting any participation in, or otherwise
distributing the same in violation of the 1933 Act without  prejudice,  however,
to such Investor's right at all times to sell or otherwise dispose of all or any
part  of such  Securities  in  compliance  with  applicable  federal  and  state
securities laws.  Nothing  contained herein shall be deemed a representation  or
warranty by such Investor to hold the  Securities  for any period of time.  Such
Investor is not a broker-dealer registered with the SEC under the 1934 Act or an
entity engaged in a business that would require it to be so registered.

              5.4    INVESTMENT  EXPERIENCE.  Such Investor acknowledges that it
can bear the economic risk and complete loss of its investment in the Securities
and has such knowledge and  experience in financial or business  matters that it
is capable of  evaluating  the merits and risks of the  investment  contemplated
hereby.

              5.5    DISCLOSURE  OF  INFORMATION.   Such  Investor  has  had  an
opportunity to receive all  information  related to the Company  requested by it
and to ask  questions  of and receive  answers  from the Company  regarding  the
Company,  its  business  and the terms and  conditions  of the  offering  of the
Securities.  Such  Investor  acknowledges  receipt of copies of the SEC Filings.
Neither such  inquiries nor any other due diligence  investigation  conducted by
such Investor shall modify, amend or affect such Investor's right to rely on the
Company's representations and warranties contained in this Agreement.

              5.6    RESTRICTED  SECURITIES.  Such Investor understands that the
Securities are  characterized as "restricted  securities" under the U.S. federal
securities  laws  inasmuch  as they are being  acquired  from the  Company  in a
transaction  not  involving  a public  offering  and that  under  such  laws and
applicable  regulations such securities may be resold without registration under
the 1933 Act only in certain limited circumstances.

              5.7    LEGENDS.  It is understood that,  except as provided below,
certificates  evidencing  the  Securities  may bear the following or any similar
legend:

                     (a)    "The  securities   represented  hereby  may  not  be
transferred unless (i) such securities have been registered for sale pursuant to
the  Securities  Act of 1933,  as  amended,  (ii)  such  securities  may be sold
pursuant to Rule 144(k), or (iii) the Company has received an opinion of counsel
reasonably  satisfactory  to it that such  transfer may lawfully be made without
registration under the Securities Act of 1933 or qualification  under applicable
state securities laws."

                     (b)    If  required  by the  authorities  of any  state  in
connection with the issuance of sale of the  Securities,  the legend required by
such state authority.

                                      -16-
<PAGE>

              5.8    ACCREDITED   INVESTOR.   Such  Investor  is  an  accredited
investor as defined in Rule 501(a) of Regulation  D, as amended,  under the 1933
Act.

              5.9    NO GENERAL SOLICITATION. Such Investor did not learn of the
investment in the  Securities as a result of any public  advertising  or general
solicitation.

              5.10   BROKERS AND  FINDERS.  No Person will have,  as a result of
the  transactions  contemplated by the Transaction  Documents,  any valid right,
interest or claim against or upon the Company, any Subsidiary or an Investor for
any commission, fee or other compensation pursuant to any agreement, arrangement
or understanding entered into by or on behalf of such Investor.

              5.11   PROHIBITED  TRANSACTIONS.  During the last thirty (30) days
prior to the date  hereof,  neither  such  Investor  nor any  Affiliate  of such
Investor which (x) had knowledge of the transactions  contemplated  hereby,  (y)
has or shares discretion  relating to such Investor's  investments or trading or
information concerning such Investor's investments,  including in respect of the
Securities, or (z) is subject to such Investor's review or input concerning such
Affiliate's  investments or trading  (collectively,  "Trading  Affiliates") has,
directly or indirectly,  effected or agreed to effect any short sale, whether or
not against the box,  established any "put  equivalent  position" (as defined in
Rule 16a-1(h) under the 1934 Act) with respect to the Common Stock,  granted any
other right (including, without limitation, any put or call option) with respect
to the Common Stock or with respect to any security that includes, relates to or
derived any  significant  part of its value from the Common  Stock or  otherwise
sought  to  hedge  its  position  in  the   Securities   (each,   a  "Prohibited
Transaction").  Prior to the  earliest to occur of (i) the  termination  of this
Agreement,  (ii) the Effective Date or (iii) the  Effectiveness  Deadline,  such
Investor  shall not,  and shall cause its  Trading  Affiliates  not to,  engage,
directly or indirectly, in a Prohibited Transaction.  Such Investor acknowledges
that the  representations,  warranties  and covenants  contained in this Section
5.11 are being made for the benefit of the  Investors as well as the Company and
that each of the other Investors  shall have an independent  right to assert any
claims  against  such  Investor  arising out of any breach or  violation  of the
provisions of this Section 5.11.

               5.12 RELIANCE ON EXEMPTIONS.  Such Investor  understands that the
Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying  upon the truth and  accuracy  of, and such
Investor's  compliance  with,  the  representations,   warranties,   agreements,
acknowledgments and understandings of such Investor set forth herein in order to
determine  the  availability  of such  exemptions  and the  eligibility  of such
Investor to acquire the Securities.

       6.     CONDITIONS TO CLOSING.

              6.1    CONDITIONS TO THE INVESTORS' OBLIGATIONS. The obligation of
each  Investor to purchase the Shares and the Warrants at the Closing is subject
to the fulfillment to such

                                      -17-
<PAGE>

Investor's  satisfaction,  on or prior to the  Closing  Date,  of the  following
conditions, any of which may be waived by such Investor (as to itself only):

              (a)    The  representations  and warranties made by the Company in
Section 4 hereof  qualified as to  materiality  shall be true and correct at all
times  prior  to and  on the  Closing  Date,  except  to  the  extent  any  such
representation or warranty expressly speaks as of a specific date, in which case
such  representation or warranty shall be true and correct as of such date, and,
the  representations  and warranties made by the Company in Section 4 hereof not
qualified as to materiality  shall be true and correct in all material  respects
at all times  prior to and on the  Closing  Date,  except to the extent any such
representation or warranty expressly speaks as of a specific date, in which case
such  representation  or  warranty  shall be true and  correct  in all  material
respects as of such  specific  date.  The Company  shall have  performed  in all
material  respects all obligations and covenants herein required to be performed
by it on or prior to the Closing Date.

              (b)    The  Company  shall  have  obtained  any and all  consents,
permits,  approvals,  registrations and waivers, other than stockholder approval
of the Proposals,  necessary or appropriate for consummation of the purchase and
sale  of the  Shares  and  the  Warrants  and  the  consummation  of  the  other
transactions  contemplated by the Transaction  Documents to be consummated on or
prior to the Closing Date, all of which shall be in full force and effect.

              (c)    The  Company   shall  have   executed  and   delivered  the
Registration Rights Agreement.

              (d)    The Certificate of Designations  shall have been filed with
the Secretary of State of Delaware and shall be effective.

              (e)    The  Company  shall  have  (x)  entered  into  one or  more
agreements  with  the  holders  of  the  Company  Debt  and  the  Debt  Warrants
(collectively,  the "Prior  Holders")  pursuant to which (i) the Company and the
Prior Holders irrevocably agree to effect the Recapitalization,  subject only to
the  receipt  of the  consideration  to be  paid  to the  Prior  Holders  in the
Recapitalization,  (ii) the Prior Holders shall have  delivered  into escrow any
instruments representing the Company Debt and the Debt Warrants with irrevocable
instructions  that such  instruments  are to be released to the Company upon the
receipt  of  the   consideration  to  be  paid  to  the  Prior  Holders  in  the
Recapitalization  and (iii) the Prior Holders shall have irrevocably  waived any
event of default or event which,  with the giving of notice,  the lapse of time,
or both,  would  constitute  an event of default  under the Company Debt and (y)
adopted the Plan, subject to stockholder approval.

              (f)    The Company shall have delivered to the Investors  executed
counterparts of Voting  Agreements with each of the Investors listed in SCHEDULE
6.1(f).

              (g)    No judgment, writ, order, injunction, award or decree of or
by any court, or judge, justice or magistrate, including any bankruptcy court or
judge, or any order of or by any governmental authority, shall have been issued,
and no action or  proceeding  shall  have been

                                      -18-
<PAGE>

instituted  by  any   governmental   authority,   enjoining  or  preventing  the
consummation of the transactions contemplated hereby or in the other Transaction
Documents.

              (h)    The Company shall have delivered a Certificate, executed on
behalf of the  Company by its Chief  Executive  Officer  or its Chief  Financial
Officer,  dated as of the Closing  Date,  certifying to the  fulfillment  of the
conditions  specified in  subsections  (a),  (b),  (d), (e), (g) and (k) of this
Section 6.1.

              (i)    The Company shall have delivered a Certificate, executed on
behalf of the Company by its Secretary, dated as of the Closing Date, certifying
the resolutions  adopted by the Board of Directors of the Company  approving the
transactions contemplated by this Agreement and the other Transaction Documents,
the  Information  Statement  (as  defined  below),  the  Recapitalization,   the
Amendment, the Reverse Split and the issuance of the Securities,  certifying the
current versions of the Amended and Restated  Certificate of  Incorporation  and
Bylaws of the Company and  certifying  as to the  signatures  and  authority  of
persons signing the Transaction Documents and related documents on behalf of the
Company.

              (j)    The  Investors  shall have received an opinion from Hodgson
Russ LLP,  the  Company's  counsel,  dated as of the Closing  Date,  in form and
substance  reasonably  acceptable  to the Investors  and  addressing  such legal
matters as the Investors may reasonably request.

              (k)    No stop  order or  suspension  of  trading  shall have been
imposed by the SEC or any other  governmental or regulatory body with respect to
public trading in the Common Stock.

              6.2    CONDITIONS  TO  OBLIGATIONS  OF THE COMPANY.  The Company's
obligation  to sell and issue the  Shares  and the  Warrants  at the  Closing is
subject to the fulfillment to the satisfaction of the Company on or prior to the
Closing  Date of the  following  conditions,  any of which  may be waived by the
Company:

              (a)    The representations and warranties made by the Investors in
Section 5 hereof,  other than the  representations  and warranties  contained in
Sections   5.3,   5.4,   5.5,   5.6,   5.7,   5.8  and  5.9   (the   "Investment
Representations"), shall be true and correct in all material respects when made,
and shall be true and correct in all material  respects on the Closing Date with
the same force and  effect as if they had been made on and as of said date.  The
Investment  Representations shall be true and correct in all respects when made,
and shall be true and correct in all  respects on the Closing Date with the same
force and effect as if they had been made on and as of said date.  The Investors
shall have  performed in all material  respects all  obligations  and  covenants
herein required to be performed by them on or prior to the Closing Date.

              (b)    The  Investors   shall  have  executed  and  delivered  the
Registration Rights Agreement and the Voting Agreements.

              (c)    No judgment, writ, order, injunction, award or decree of or
by any court, or judge, justice or magistrate, including any bankruptcy court or
judge, or any order of or by any governmental authority, shall have been issued,
and no action or  proceeding  shall  have been

                                      -19-
<PAGE>

instituted  by  any   governmental   authority,   enjoining  or  preventing  the
consummation of the transactions contemplated hereby or in the other Transaction
Documents.

              (d)    The Investors  shall have  delivered the Purchase  Price to
the Company.

              6.3    TERMINATION OF OBLIGATIONS TO EFFECT CLOSING; EFFECTS.

              (a)    The  outstanding  obligations  of the  Company,  on the one
hand,  and the  Investors,  on the other  hand,  to  effect  the  Closing  shall
terminate as follows:

                     (i)    Upon the mutual  written  consent of the Company and
the Investors;

                     (ii)   By the Company if any of the conditions set forth in
Section 6.2 shall have become incapable of fulfillment,  and shall not have been
waived by the Company;

                     (iii)  By an Investor  (with respect to itself only) if any
of the  conditions  set forth in Section  6.1 shall  have  become  incapable  of
fulfillment, and shall not have been waived by the Investor; or

                     (iv)   By either the Company or any Investor  (with respect
to itself only) if the Closing has not occurred on or prior to January 20, 2006;

provided,  however,  that,  except in the case of clause  (i)  above,  the party
seeking to terminate  its  obligation to effect the Closing shall not then be in
breach  of any of  its  representations,  warranties,  covenants  or  agreements
contained in this  Agreement or the other  Transaction  Documents if such breach
has  resulted  in the  circumstances  giving  rise to such  party's  seeking  to
terminate its obligation to effect the Closing.

              (b)    In  the  event  of  termination  by  any  Investor  of  its
obligations to effect the Closing  pursuant to this Section 6.3,  written notice
thereof shall  forthwith be given to the other Investors and the other Investors
shall have the right to terminate their  obligations to effect such Closing upon
written notice to the Company and the other  Investors.  Nothing in this Section
6.3 shall be deemed to release  any party from any  liability  for any breach by
such  party  of the  terms  and  provisions  of  this  Agreement  or  the  other
Transaction  Documents  or to impair  the right of any party to compel  specific
performance  by any other party of its  obligations  under this Agreement or the
other Transaction Documents.

       7.     COVENANTS AND AGREEMENTS OF THE COMPANY.

              7.1    RESERVATION   OF   COMMON   STOCK.   From  and   after  the
effectiveness  of the Amendment and the Reverse Split,  the Company shall at all
times reserve and keep available out of its  authorized  but unissued  shares of
Common  Stock,  solely for the purpose of providing  for the  conversion  of the
Shares and the exercise of the  Warrants,  such number of shares of Common Stock
as shall from time to time equal the  Conversion  Shares and the Warrant  Shares
issuable from time to time.

                                      -20-
<PAGE>

              7.2    REPORTS.  The Company will furnish to the Investors  and/or
their assignees such information relating to the Company and its Subsidiaries as
from time to time may  reasonably  be  requested by the  Investors  and/or their
assignees;  provided,  however,  that the Company  shall not  disclose  material
nonpublic information to the Investors,  or to advisors to or representatives of
the  Investors,  unless  prior to  disclosure  of such  information  the Company
identifies such information as being material nonpublic information and provides
the Investors,  such advisors and representatives with the opportunity to accept
or refuse to accept  such  material  nonpublic  information  for  review and any
Investor  wishing  to  obtain  such  information   enters  into  an  appropriate
confidentiality agreement with the Company with respect thereto.

              7.3    NO  CONFLICTING  AGREEMENTS.  The Company will not take any
action,  enter into any agreement or make any commitment  that would conflict or
interfere  in  any  material  respect  with  the  Company's  obligations  to the
Investors under the Transaction Documents.

              7.4    INSURANCE.  The  Company  shall not  materially  reduce the
insurance coverages described in Section 4.19.

              7.5    COMPLIANCE  WITH  LAWS.  The  Company  will  comply  in all
material  respects with all  applicable  laws,  rules,  regulations,  orders and
decrees of all governmental authorities.

              7.6    LISTING OF UNDERLYING  SHARES AND RELATED  MATTERS.  If the
Company applies to have its Common Stock or other securities traded on any stock
exchange or market,  it shall include in such application the Conversion  Shares
and the Warrant  Shares and will take such other action as is necessary to cause
such Common Stock to be so listed. Thereafter, the Company will use commercially
reasonable  efforts to continue  the listing and trading of its Common  Stock on
such exchange or market and, in  accordance,  therewith,  will use  commercially
reasonable  efforts  to comply in all  respects  with the  Company's  reporting,
filing  and other  obligations  under the  bylaws or rules of such  exchange  or
market, as applicable.

              7.7    TERMINATION  OF COVENANTS.  The  provisions of Sections 7.2
through 7.5 shall terminate and be of no further force and effect on the date on
which the  Company's  obligations  under the  Registration  Rights  Agreement to
register  or  maintain  the  effectiveness  of  any  registration  covering  the
Registrable  Securities  (as such term is  defined  in the  Registration  Rights
Agreement) shall terminate.

              7.8    REMOVAL OF LEGENDS.  Upon the  earlier of (i)  registration
for resale  pursuant to the  Registration  Rights  Agreement or (ii) Rule 144(k)
becoming  available the Company shall (A) deliver to the transfer  agent for the
Common Stock (the "Transfer Agent")  irrevocable  instructions that the Transfer
Agent shall  reissue a certificate  representing  shares of Common Stock without
legends upon receipt by such  Transfer  Agent of the legended  certificates  for
such shares, together with either (1) a customary representation by the Investor
that Rule 144(k)  applies to the shares of Common Stock  represented  thereby or
(2) a statement by the Investor that such Investor has sold the shares of Common
Stock represented thereby in accordance with the Plan of Distribution  contained
in the  Registration  Statement,  and (B) cause

                                      -21-
<PAGE>

its counsel to deliver to the Transfer Agent one or more blanket opinions to the
effect that the removal of such  legends in such  circumstances  may be effected
under the 1933 Act. From and after the earlier of such dates, upon an Investor's
written request,  the Company shall promptly cause  certificates  evidencing the
Investor's  Securities to be replaced with  certificates  which do not bear such
restrictive   legends,  and  Conversion  Shares  subsequently  issued  upon  due
conversion  of the  Shares  and  Warrant  Shares  subsequently  issued  upon due
exercise of the Warrants shall not bear such  restrictive  legends  provided the
provisions  of either  clause  (i) or clause  (ii)  above,  as  applicable,  are
satisfied  with  respect  to  such  Conversion  Shares  or  Warrant  Shares,  as
applicable.  When the Company is required to cause  unlegended  certificates  to
replace previously issued legended certificates,  if unlegended certificates are
not  delivered to an Investor  within three (3) Business  Days of  submission by
that Investor of legended certificate(s) to the Transfer Agent as provided above
(or to the Company, in the case of the Warrants), the Company shall be liable to
the Investor for liquidated  damages in an amount equal to 1.5% of the aggregate
purchase  price of the  Securities  evidenced  by such  certificate(s)  for each
thirty (30) day period (or portion  thereof)  beyond such three (3) Business Day
that the unlegended certificates have not been so delivered.

              7.9    STOCKHOLDER APPROVAL. (a) The Company shall take all action
necessary to  effectuate  the  Recapitalization,  the  Amendment and the Reverse
Split as promptly as  practicable.  In  connection  therewith,  the Company will
promptly  take all  action  necessary  to obtain  stockholder  approval  for (i)
Amendment and (ii) the Reverse Split (the  "Proposals").  If necessary to obtain
such approval,  the Company shall take all action necessary to call a meeting of
its stockholders (the "Stockholders Meeting"),  which shall occur not later than
March 20, 2006 (the "Stockholders Meeting Deadline"), for the purpose of seeking
approval of the  Proposals.  Alternatively,  the Company may obtain  stockholder
approval by the consent of the holders of a majority of the  outstanding  Common
Stock.

              (b)    If the Company calls a Stockholder Meeting to seek approval
of the Proposals,  the Company will promptly prepare and file with the SEC proxy
materials  (including  a  proxy  statement  and  form of  proxy)  for use at the
Stockholders  Meeting  and,  after  receiving  and  promptly  responding  to any
comments of the SEC thereon,  shall  promptly  mail such proxy  materials to the
stockholders of the Company.  Each Investor shall promptly furnish in writing to
the Company such information relating to such Investor and its investment in the
Company  as the  Company  may  reasonably  request  for  inclusion  in the Proxy
Statement.  The Company will comply with  Section  14(a) of the 1934 Act and the
rules  promulgated  thereunder in relation to any proxy statement (as amended or
supplemented,  the  "Proxy  Statement")  and any form of proxy to be sent to the
stockholders of the Company in connection with the Stockholders Meeting, and the
Proxy  Statement  shall  not,  on the date  that  the  Proxy  Statement  (or any
amendment  thereof or supplement  thereto) is first mailed to stockholders or at
the time of the Stockholders Meeting, contain any untrue statement of a material
fact  or omit to  state  any  material  fact  necessary  in  order  to make  the
statements  made therein not false or misleading,  or omit to state any material
fact  necessary  to correct  any  statement  in any earlier  communication  with
respect to the  solicitation  of proxies or the  Stockholders  Meeting which has
become false or misleading.  If the Company should discover at any time prior to
the  Stockholders  Meeting,  any event  relating  to the  Company  or any of its
Subsidiaries or any of their respective  affiliates,  officers or directors that
is required to be set forth in a supplement or amendment to the Proxy

                                      -22-
<PAGE>

Statement,  in addition to the  Company's  obligations  under the 1934 Act,  the
Company will promptly inform the Investors thereof.

              (c)    Subject to their fiduciary obligations under applicable law
(as  determined  in  good  faith  by the  Company's  Board  of  Directors  after
consultation  with  the  Company's  outside  counsel),  the  Company's  Board of
Directors shall recommend to the Company's  stockholders  that the  stockholders
vote in favor of the Proposals (the "Company Board Recommendation") and take all
commercially reasonable action (including,  without limitation,  the hiring of a
proxy  solicitation  firm of  nationally  recognized  standing)  to solicit  the
approval of the  stockholders  for the  Proposals  unless the Board of Directors
shall have  modified,  amended or  withdrawn  the Company  Board  Recommendation
pursuant to the provisions of the immediately  succeeding sentence.  The Company
covenants that the Board of Directors of the Company shall not modify,  amend or
withdraw the Company Board  Recommendation  unless the Board of Directors (after
consultation  with the Company's  outside  counsel) shall  determine in the good
faith  exercise of its business  judgment  that  maintaining  the Company  Board
Recommendation  would violate its fiduciary duty to the Company's  stockholders.
Whether or not the Company's  Board of Directors  modifies,  amends or withdraws
the Company Board Recommendation pursuant to the immediately preceding sentence,
the  Company  shall in  accordance  with  Section  146 of the  Delaware  General
Corporation  Law and the  provisions of its Amended and Restated  Certificate of
Incorporation  and  Bylaws,  (i)  take  all  action  necessary  to  convene  the
Stockholders  Meeting  as  promptly  as  practicable,  but  no  later  than  the
Stockholders  Meeting  Deadline,  to consider  and vote upon the approval of the
Proposals  and (ii)  submit the  Proposals  at the  Stockholders  Meeting to the
stockholders of the Company for their approval.

              (d)    If  the  Company  obtains   stockholder   approval  of  the
Proposals  through the  consent of the holders of a majority of the  outstanding
Common Stock, the Company prepare and file with the SEC an information statement
and, after receiving and promptly responding to any comments of the SEC thereon,
shall  promptly  mail such  information  statement  to the  stockholders  of the
Company,  but in no event  later  than  February  20,  2006 (as so  mailed,  the
"Information Statement"). Each Investor shall promptly furnish in writing to the
Company such  information  relating to such  Investor and its  investment in the
Company as the Company may reasonably  request for inclusion in the  Information
Statement.  The Company will comply with  Section  14(c) of the 1934 Act and the
rules promulgated thereunder in relation to the Information  Statement,  and the
Information  Statement shall not, on the date that the Information Statement (or
any amendment thereof or supplement thereto) is first mailed to stockholders, or
at the time that the Reverse Split is effectuated,  contain any statement which,
at the time and in light of the circumstances  under which it was made, is false
or  misleading  with respect to any material  fact,  or which omits to state any
material  fact  necessary in order to make the  statements  therein not false or
misleading  or necessary to correct any  statement in any earlier  communication
with respect to same subject matter which has become false or misleading. If the
Company  should  discover at any time prior to the  effectuation  of the Reverse
Split,  any event relating to the Company or any of its  Subsidiaries  or any of
their  respective  affiliates,  officers or directors that is required to be set
forth in a supplement or amendment to the Information Statement,  in addition to
the Company's  obligations  under the 1934 Act, the Company will promptly inform
the Investors thereof.

                                      -23-
<PAGE>

       8.     SURVIVAL AND INDEMNIFICATION.

              8.1    SURVIVAL.  The representations,  warranties,  covenants and
agreements  contained  in  this  Agreement  shall  survive  the  Closing  of the
transactions contemplated by this Agreement.

              8.2    INDEMNIFICATION.  The Company  agrees to indemnify and hold
harmless  each  Investor  and its  Affiliates  and their  respective  directors,
officers,  employees  and agents from and  against  any and all losses,  claims,
damages,  liabilities  and expenses  (including  without  limitation  reasonable
attorney fees and  disbursements  and other expenses incurred in connection with
investigating,  preparing or defending any action, claim or proceeding,  pending
or threatened and the costs of enforcement thereof) (collectively,  "Losses") to
which  such   Person   may  become   subject  as  a  result  of  any  breach  of
representation,  warranty,  covenant or agreement  made by or to be performed on
the part of the Company under the Transaction Documents,  and will reimburse any
such Person for all such amounts as they are incurred by such Person.

              8.3    CONDUCT  OF  INDEMNIFICATION  PROCEEDINGS.  Promptly  after
receipt by any Person (the "Indemnified  Person") of notice of any demand, claim
or  circumstances  which would or might give rise to a claim or the commencement
of any action,  proceeding or investigation in respect of which indemnity may be
sought  pursuant to Section 8.2, such  Indemnified  Person shall promptly notify
the  Company in writing  and the  Company  shall  assume  the  defense  thereof,
including the employment of counsel reasonably  satisfactory to such Indemnified
Person,  and  shall  assume  the  payment  of all fees and  expenses;  PROVIDED,
HOWEVER,  that the  failure of any  Indemnified  Person so to notify the Company
shall not relieve the Company of its obligations  hereunder except to the extent
that the Company is materially prejudiced by such failure to notify. In any such
proceeding,  any  Indemnified  Person  shall  have the right to  retain  its own
counsel,  but the fees and expenses of such  counsel  shall be at the expense of
such Indemnified Person unless: (i) the Company and the Indemnified Person shall
have mutually agreed to the retention of such counsel; or (ii) in the reasonable
judgment of counsel to such Indemnified Person representation of both parties by
the same counsel  would be  inappropriate  due to actual or potential  differing
interests  between them.  The Company shall not be liable for any  settlement of
any proceeding effected without its written consent,  which consent shall not be
unreasonably  withheld, but if settled with such consent, or if there be a final
judgment for the plaintiff,  the Company shall  indemnify and hold harmless such
Indemnified  Person from and against any loss or liability (to the extent stated
above) by reason of such  settlement  or  judgment.  Without  the prior  written
consent of the  Indemnified  Person,  which  consent  shall not be  unreasonably
withheld,  the  Company  shall not  effect  any  settlement  of any  pending  or
threatened  proceeding  in respect of which any  Indemnified  Person is or could
have  been a party  and  indemnity  could  have been  sought  hereunder  by such
Indemnified Party, unless such settlement  includes an unconditional  release of
such Indemnified Person from all liability arising out of such proceeding.

       9.     MISCELLANEOUS.

              9.1    SUCCESSORS AND ASSIGNS.  This Agreement may not be assigned
by a party  hereto  without  the prior  written  consent  of the  Company or the
Investors, as applicable,

                                      -24-
<PAGE>

provided,  however,  that an  Investor  may assign its rights and  delegate  its
duties  hereunder  in  whole  or in part  to an  Affiliate  or to a third  party
acquiring  some or all of its  Securities in a private  transaction  without the
prior written consent of the Company or the other  Investors,  after notice duly
given by such  Investor  to the Company  provided,  that no such  assignment  or
obligation  shall  affect  the  obligations  of  such  Investor  hereunder.  The
provisions of this  Agreement  shall inure to the benefit of and be binding upon
the respective permitted successors and assigns of the parties.  Nothing in this
Agreement,  express or implied,  is intended to confer upon any party other than
the  parties  hereto or their  respective  successors  and  assigns  any rights,
remedies,  obligations,  or  liabilities  under or by reason of this  Agreement,
except as expressly provided in this Agreement.

              9.2    COUNTERPARTS;  FAXES. This Agreement may be executed in two
or more  counterparts,  each of which  shall be deemed an  original,  but all of
which together shall constitute one and the same instrument.  This Agreement may
also be executed via facsimile, which shall be deemed an original.

              9.3    TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement  are  used  for  convenience  only  and  are not to be  considered  in
construing or interpreting this Agreement.

              9.4    NOTICES.  Unless otherwise provided, any notice required or
permitted  under this  Agreement  shall be given in writing  and shall be deemed
effectively  given as hereinafter  described (i) if given by personal  delivery,
then such  notice  shall be deemed  given upon such  delivery,  (ii) if given by
telex or  telecopier,  then such notice  shall be deemed  given upon  receipt of
confirmation of complete  transmittal,  (iii) if given by mail, then such notice
shall be deemed  given  upon the  earlier of (A)  receipt of such  notice by the
recipient  or (B) three days after such notice is deposited in first class mail,
postage prepaid,  and (iv) if given by an internationally  recognized  overnight
air  courier,  then such notice  shall be deemed  given one  Business  Day after
delivery to such  carrier.  All notices  shall be  addressed  to the party to be
notified at the address as follows,  or at such other  address as such party may
designate by ten days' advance written notice to the other party:

                      If to the Company:

                             UTIX Group, Inc.
                             7 New England Executive Park
                             Suite 610
                             Burlington, Massachusetts 01803-2933
                             Attention:
                             Fax:

                      With a copy to:

                             Hodgson Russ LLP
                             60 E. 42nd Street, 37th Floor
                             New York, NY 10165
                             Attn: Jeffrey A. Rinde, Esq.
                             Fax: (212) 972-1677

                                      -25-
<PAGE>

                      If to the Investors:

to the addresses set forth on the signature pages hereto.

              9.5    EXPENSES.  The parties hereto shall pay their own costs and
expenses  in  connection  herewith,  except  that  the  Company  shall  pay  the
reasonable  fees and expenses of Lowenstein  Sandler PC in  connection  with the
negotiation  and execution of the Transaction  Documents in an aggregate  amount
not to exceed  $40,000.  Such expenses shall be paid not later than the Closing.
The  Company  shall  reimburse  the  Investors  upon  demand for all  reasonable
out-of-pocket  expenses incurred by the Investors,  including without limitation
reimbursement  of attorneys'  fees and  disbursements,  in  connection  with any
amendment,  modification  or waiver of this  Agreement or the other  Transaction
Documents.  In the event that legal  proceedings  are  commenced by any party to
this Agreement  against  another party to this Agreement in connection with this
Agreement or the other Transaction Documents,  the party or parties which do not
prevail in such proceedings shall severally, but not jointly, pay their pro rata
share of the reasonable attorneys' fees and other reasonable out-of-pocket costs
and expenses incurred by the prevailing party in such proceedings.

              9.6    AMENDMENTS  AND WAIVERS.  Any term of this Agreement may be
amended and the  observance of any term of this  Agreement may be waived (either
generally   or  in  a   particular   instance   and  either   retroactively   or
prospectively),  only with the written consent of the Company and the Investors.
Any amendment or waiver  effected in  accordance  with this  paragraph  shall be
binding upon each holder of any Securities purchased under this Agreement at the
time outstanding, each future holder of all such Securities, and the Company.

              9.7    PUBLICITY.  Except as set forth below, no public release or
announcement concerning the transactions  contemplated hereby shall be issued by
the Company or the  Investors  without the prior  consent of the Company (in the
case of a release or  announcement  by the  Investors)  or the Investors (in the
case of a release or  announcement  by the Company) (which consents shall not be
unreasonably  withheld),  except as such release or announcement may be required
by law or the applicable  rules or  regulations  of any  securities  exchange or
securities  market, in which case the Company or the Investors,  as the case may
be,  shall allow the  Investors  or the Company,  as  applicable,  to the extent
reasonably practicable in the circumstances,  reasonable time to comment on such
release or announcement in advance of such issuance. By 8:30 a.m. (New York City
time) on the trading day  immediately  following the Closing  Date,  the Company
shall issue a press release  disclosing  the  consummation  of the  transactions
contemplated by this Agreement.  No later than the fourth Business Day following
the Closing Date,  the Company will file a Current  Report on Form 8-K attaching
the press release  described in the foregoing  sentence as well as copies of the
Transaction  Documents,  to the  extent  not  already  filed  with the  SEC.  In
addition, the Company will make such other filings and notices in the manner and
time required by the SEC.  Notwithstanding the foregoing,  the Company shall not
publicly disclose the name of any Investor,  or include the name of any Investor
in any  filing  with the SEC  (other  than the  Registration  Statement  and any
exhibits  to filings  made in respect

                                      -26-
<PAGE>

of this  transaction in accordance with periodic filing  requirements  under the
1934 Act) or any regulatory  agency,  without the prior written  consent of such
Investor,  except to the extent  such  disclosure  is required by law or trading
market  regulations,  in which case the Company shall provide the Investors with
prior notice of such disclosure.

              9.8    SEVERABILITY.  Any  provision  of  this  Agreement  that is
prohibited or unenforceable in any jurisdiction  shall, as to such jurisdiction,
be ineffective to the extent of such  prohibition  or  unenforceability  without
invalidating the remaining  provisions  hereof but shall be interpreted as if it
were  written  so as to be  enforceable  to  the  maximum  extent  permitted  by
applicable law, and any such prohibition or unenforceability in any jurisdiction
shall  not  invalidate  or  render  unenforceable  such  provision  in any other
jurisdiction.  To the extent  permitted by  applicable  law, the parties  hereby
waive any  provision of law which  renders any  provision  hereof  prohibited or
unenforceable in any respect.

              9.9    ENTIRE  AGREEMENT.  This Agreement,  including the Exhibits
and the Disclosure Schedules, and the other Transaction Documents constitute the
entire  agreement  among the parties  hereof with respect to the subject  matter
hereof and thereof and supersede all prior agreements and  understandings,  both
oral and written,  between the parties with respect to the subject matter hereof
and thereof.

              9.10   FURTHER  ASSURANCES.  The parties shall execute and deliver
all such further  instruments  and  documents and take all such other actions as
may reasonably be required to carry out the transactions contemplated hereby and
to evidence the fulfillment of the agreements herein contained.

              9.11   GOVERNING  LAW;  CONSENT  TO  JURISDICTION;  WAIVER OF JURY
TRIAL.  This Agreement  shall be governed by, and construed in accordance  with,
the internal  laws of the State of New York without  regard to the choice of law
principles  thereof.  Each of the  parties  hereto  irrevocably  submits  to the
exclusive  jurisdiction  of the  courts of the State of New York  located in New
York County and the United States  District  Court for the Southern  District of
New York for the purpose of any suit, action, proceeding or judgment relating to
or arising  out of this  Agreement  and the  transactions  contemplated  hereby.
Service of process in connection with any such suit, action or proceeding may be
served on each party  hereto  anywhere  in the world by the same  methods as are
specified  for the giving of notices under this  Agreement.  Each of the parties
hereto  irrevocably  consents to the  jurisdiction of any such court in any such
suit,  action or proceeding and to the laying of venue in such court. Each party
hereto irrevocably waives any objection to the laying of venue of any such suit,
action or  proceeding  brought in such courts and  irrevocably  waives any claim
that any such  suit,  action or  proceeding  brought  in any such court has been
brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO
REQUEST A TRIAL BY JURY IN ANY  LITIGATION  WITH RESPECT TO THIS  AGREEMENT  AND
REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

              9.12   INDEPENDENT  NATURE OF INVESTORS'  OBLIGATIONS  AND RIGHTS.
The obligations of each Investor under any Transaction  Document are several and
not joint with the obligations of any other  Investor,  and no Investor shall be
responsible in any way for the performance of the

                                      -27-
<PAGE>

obligations of any other Investor under any Transaction  Document.  The decision
of each Investor to purchase  Securities  pursuant to the Transaction  Documents
has been made by such  Investor  independently  of any other  Investor.  Nothing
contained  herein or in any  Transaction  Document,  and no action  taken by any
Investor  pursuant  thereto,  shall be deemed to  constitute  the Investors as a
partnership,  an  association,  a joint venture or any other kind of entity,  or
create a presumption that the Investors 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 Investor  acknowledges  that no other Investor has
acted as agent for such  Investor  in  connection  with  making  its  investment
hereunder  and that no  Investor  will be  acting as agent of such  Investor  in
connection  with  monitoring  its  investment in the Securities or enforcing its
rights  under the  Transaction  Documents.  Each  Investor  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  Investor  to be  joined  as an
additional  party in any proceeding for such purpose.  The Company  acknowledges
that each of the Investors has been provided with the same Transaction Documents
for the purpose of closing a transaction with multiple Investors and not because
it was required or requested to do so by any Investor.

                            [signature page follows]

                                      -28-
<PAGE>

              IN WITNESS  WHEREOF,  the parties have executed this  Agreement or
caused their duly  authorized  officers to execute this Agreement as of the date
first above written.

The Company:                        UTIX GROUP, INC.

                                    By:_________________________
                                    Name:
                                    Title:

                                      -29-

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