Document:

Exhibit 10.31

                         COMMON STOCK PURCHASE AGREEMENT

     This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of July
26, 2001 by and between Data Race, Inc., a corporation organized and existing
under the corporate law of the State of Texas (the "Company") and Grenville
Finance Ltd. (the "Purchaser"), a British Virgin Islands corporation.

     WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to Purchaser from
time to time as provided herein, and Purchaser shall purchase, up to $30,000,000
of Common Stock and the Warrant; and

     WHEREAS, such investments will be made by the Purchaser as statutory
underwriter of a registered indirect primary offering of such Common Stock by
the Company.

     NOW, THEREFORE, in consideration of the foregoing premises, and the
promises and covenants herein contained, the receipt and sufficiency of which
are hereby acknowledged by the parties hereto, the parties, intending to be
legally bound, hereby agree as follows:

                                   ARTICLE 1

                        PURCHASE AND SALE OF COMMON STOCK

     Section 1.1. Purchase and Sale of Stock. Subject to the terms and
conditions of this Agreement, the Company may sell and issue to the Purchaser
and the Purchaser shall be obligated to purchase from the Company, up to an
aggregate of, $30,000,000 of Common Stock (the "Commitment Amount") and the
Warrant, subject to the terms herein.

     Section 1.2. Purchase Price and Initial Closing. The Company agrees to
issue and sell to the Purchaser and, in consideration of and in express reliance
upon the representations, warranties, covenants, terms and conditions of this
Agreement, the Purchaser agrees to purchase that number of the Shares to be
issued in connection with each Draw Down. The delivery of executed documents
under this Agreement and the other agreements referred to herein and the payment
of the fees set forth in Article I of the Escrow Agreement, attached as Exhibit
B hereto, (the "Initial Closing") shall take place at the offices of Epstein
Becker & Green, P.C., 250 Park Avenue, New York, New York 10177 (i) within
fifteen (15) days from the date hereof, or (ii) such other time and place or on
such date as the Purchaser and the Company may agree upon (the "Initial Closing
Date"). Each party shall deliver all documents, instruments and writings
required to be delivered by such party pursuant to this Agreement at or prior to
the Initial Closing.

     Section 1.3. Liquidated Damages. The parties hereto acknowledge and agree
that the sums payable pursuant to this Agreement for late delivery of the Draw
Down Shares and the Registration Rights Agreement for a suspension of the
Registration Statement or the Purchaser's right to resell the Draw Down Shares
thereunder shall constitute liquidated damages and not penalties. The parties
further acknowledge that (a) the amount of loss or damages likely

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to be incurred is incapable or is difficult to precisely estimate, (b) the
amount specified in such provisions bear a reasonable proportion and are not
plainly or grossly disproportionate to the probable loss likely to be incurred
by the Purchaser in connection with the failure of the Company to deliver the
Draw Down Shares in a timely manner or the suspension of the Purchaser's rights
to resell the Draw Down Shares under the Registration Statement, and (c) the
parties are sophisticated businesses and have been represented by sophisticated
and able legal and financial counsel and negotiated this Agreement at arm's
length.

                                   ARTICLE 2

                         REPRESENTATIONS AND WARRANTIES

     Section 2.1. Representation and Warranties of the Company. Except as set
forth in the SEC Documents or on the Disclosure Schedule prepared by the Company
and attached hereto, or as contemplated by this Agreement, the Company hereby
makes the following representations and warranties to the Purchaser:

          (a) Organization, Good Standing and Power. The Company is a
     corporation duly incorporated validly existing and in good standing under
     the laws of the State of Texas and has all requisite corporate authority to
     own, lease and operate its properties and assets and to carry on its
     business as now being conducted. The Company does not have any active
     subsidiaries and does not own more than fifty percent (50%) of or control
     any other business entity except as set forth in the SEC Documents. The
     Company is duly qualified to do business and is in good standing as a
     foreign corporation in every jurisdiction in which the nature of the
     business conducted or property owned by it makes such qualification
     necessary, other than those in which the failure so to qualify would not
     have a Material Adverse Effect.

          (b) Authorization, Enforcement. (i) The Company has the requisite
     corporate power and corporate authority to enter into and perform its
     obligations under the Transaction Documents and to issue the Draw Down
     Shares pursuant to their respective terms, (ii) the execution and delivery
     of the Transaction Documents by the Company and the consummation by it of
     the transactions contemplated hereby and thereby have been duly authorized
     by all necessary corporate action and no further consent or authorization
     of the Company or its Board of Directors or stockholders is required, and
     (iii) the Transaction Documents have been duly executed and delivered by
     the Company and at the Initial Closing shall constitute valid and binding
     obligations of the Company enforceable against the Company in accordance
     with their terms, except as such enforceability may be limited by
     applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
     conservatorship, receivership or similar laws relating to, or affecting
     generally the enforcement of, creditors' rights and remedies or by other
     equitable principles of general application.

          (c) Capitalization. The authorized capital stock of the Company
     consists of 70,000,000 shares of Common Stock of which 29,986,153 shares
     are issued and outstanding, and no shares of preferred stock. All of the
     outstanding shares of the Company's Common Stock have been duly and validly
     authorized and are fully paid and non-assessable except as set forth in the
     SEC Documents. No shares of Common Stock

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     are entitled to preemptive rights or registration rights and there are no
     outstanding options, warrants, scrip, rights to subscribe to, calls or
     commitments of any character whatsoever relating to, or securities or
     rights convertible into, any shares of capital stock of the Company. There
     are no contracts, commitments, understandings, or arrangements by which the
     Company is or may become bound to issue additional shares of the capital
     stock of the Company or options, securities or rights convertible into
     shares of capital stock of the Company. The Company is not a party to any
     agreement granting registration rights to any person with respect to any of
     its equity or debt securities. The Company is not a party to, and it has no
     knowledge of, any agreement restricting the voting or transfer of any
     shares of the capital stock of the Company. The Company has made available
     to the Purchaser true and correct copies of the Company's articles or
     certificate of incorporation as in effect on the date hereof (the
     "Charter"), and the Company's bylaws as in effect on the date hereof (the
     "Bylaws"). The Company has not received any notice from the Principal
     Market questioning or threatening the continued inclusion of the Common
     Stock on such market.

          (d) Issuance of Shares. The Warrant Shares to be issued under this
     Agreement have been duly authorized by all necessary corporate action and,
     when paid for and issued in accordance with the terms hereof and the
     Warrant, the Warrant Shares shall be validly issued and outstanding, fully
     paid and non-assessable, and the Purchaser shall be entitled to all rights
     accorded to a holder of Common Stock.

          (e) No Conflicts. The execution, delivery and performance of this
     Agreement by the Company and the consummation by the Company of the
     transactions contemplated herein do not and will not (i) violate any
     provision of the Company's Charter or Bylaws, (ii) conflict with, or
     constitute a default (or an event which with notice or lapse of time or
     both would become a default) under, or give to others any rights of
     termination, amendment, acceleration or cancellation of, any agreement,
     mortgage, deed of trust, indenture, note, bond, license, lease agreement,
     instrument or obligation to which the Company is a party, (iii) create or
     impose a lien, charge or encumbrance on any property of the Company under
     any agreement or any commitment to which the Company is a party or by which
     the Company is bound or by which any of its respective properties or assets
     are bound, or (iv) result in a violation of any federal, state, local or
     other foreign statute, rule, regulation, order, judgment or decree
     (including any federal or state securities laws and regulations) applicable
     to the Company or any of its subsidiaries or by which any property or asset
     of the Company or any of its subsidiaries are bound or affected, except, in
     all cases, for such conflicts, defaults, termination, amendments,
     accelerations, cancellations and violations as would not, individually or
     in the aggregate, have a Material Adverse Effect. The business of the
     Company and its subsidiaries is not being conducted in violation of any
     laws, ordinances or regulations of any governmental entity, except for
     violations which singularly or in the aggregate do not and will not have a
     Material Adverse Effect. The Company is not required under any federal,
     state or local law, rule or regulation to obtain any consent, authorization
     or order of, or make any filing or registration with, any court or
     governmental agency in order for it to execute, deliver or perform any of
     its obligations under this Agreement, or issue and sell the Shares in
     accordance with the terms hereof (other than any filings which may be
     required to be made by the Company with the SEC or state securities
     administrators and any registration statement which may be filed pursuant
     hereto); provided, however, that for purpose of the

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     representations made in this sentence, the Company is assuming and relying
     upon the accuracy of the relevant representations and agreements of the
     Purchaser herein.

          (f) SEC Documents, Financial Statements. The Common Stock of the
     Company is registered pursuant to Section 12(g) of the Exchange Act, and,
     the Company is current with all reports, schedules, forms, statements and
     other documents required to be filed by it with the SEC pursuant to the
     reporting requirements of the Exchange Act, including material filed
     pursuant to Section 13(a) or 15(d) of the Exchange Act. The Company has
     delivered or made available to the Purchaser, through the EDGAR system or
     otherwise, true and complete copies of the SEC Documents filed with the SEC
     since December 31, 1998. The Company has not provided to the Purchaser any
     information which, according to applicable law, rule or regulation, should
     have been disclosed publicly by the Company but which has not been so
     disclosed, other than with respect to the transactions contemplated by this
     Agreement. As of their respective filing dates, the SEC Documents complied
     in all material respects with the requirements of the Exchange Act or the
     Securities Act, as applicable, and the rules and regulations of the SEC
     promulgated thereunder applicable to such documents, and, as of their
     respective filing dates, none of the SEC Documents contained any untrue
     statement of a material fact or omitted to state a material fact required
     to be stated therein or necessary in order to make the statements therein,
     in light of the circumstances under which they were made, not misleading.
     The financial statements of the Company included in the SEC Documents
     comply as to form in all material respects with applicable accounting
     requirements under GAAP and the published rules and regulations of the SEC
     or other applicable rules and regulations with respect thereto. Such
     financial statements have been prepared in accordance with GAAP applied on
     a consistent basis during the periods involved (except (i) as may be
     otherwise indicated in such financial statements or the notes thereto or
     (ii) in the case of unaudited interim statements, to the extent they may
     not include footnotes or may be condensed or summary statements), and
     fairly present in all material respects the financial position of the
     Company and its subsidiaries as of the dates thereof and the results of
     operations and cash flows for the periods then ended (subject, in the case
     of unaudited statements, to normal year-end audit adjustments).

          (g) Subsidiaries. The SEC Documents or the Disclosure Schedule
     attached hereto sets forth each subsidiary of the Company, showing the
     jurisdiction of its incorporation or organization and showing the
     percentage of the Company's ownership of the outstanding stock or other
     interests of such subsidiary. For the purposes of this Agreement,
     "subsidiary" shall mean any corporation or other entity of which at least a
     majority of the securities or other ownership interests having ordinary
     voting power (absolutely or contingently) for the election of directors or
     other persons performing similar functions are at the time owned directly
     or indirectly by the Company and/or any of its other subsidiaries. All of
     the issued and outstanding shares of capital stock of each subsidiary have
     been duly authorized and validly issued, and are fully paid and
     non-assessable. There are no outstanding preemptive, conversion or other
     rights, options, warrants or agreements granted or issued by or binding
     upon any subsidiary for the purchase or acquisition of any shares of
     capital stock of any subsidiary or any other securities convertible into,
     exchangeable for or evidencing the rights to subscribe for any shares of
     such capital stock. Neither the Company nor any subsidiary is subject to
     any obligation (contingent or otherwise) to repurchase or otherwise acquire
     or retire any

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     shares of the capital stock of any subsidiary or any convertible
     securities, rights, warrants or options of the type described in the
     preceding sentence. Neither the Company nor any subsidiary is a party to,
     nor has any knowledge of, any agreement restricting the voting or transfer
     of any shares of the capital stock of any subsidiary.

          (h) No Material Adverse Effect. Since the date of the financial
     statement contained in the most recently filed Form 10-Q (or 10-QSB) or
     Form 10-K (or 10-KSB), whichever is most current, no Material Adverse
     Effect has occurred or exists with respect to the Company, except as
     disclosed in the SEC Documents or on the Disclosure Schedule attached
     hereto.

          (i) No Undisclosed Liabilities. Except as disclosed in the SEC
     Documents or on the Disclosure Schedule attached hereto, neither the
     Company nor any of its subsidiaries has any liabilities, obligations,
     claims or losses (whether liquidated or unliquidated, secured or unsecured,
     absolute, accrued, contingent or otherwise) that would be required to be
     disclosed on a balance sheet of the Company or any subsidiary (including
     the notes thereto) in conformity with GAAP which are not disclosed in the
     SEC Documents, other than those incurred in the ordinary course of the
     Company's or its subsidiaries' respective businesses since such date and
     which, individually or in the aggregate, do not or would not have a
     Material Adverse Effect on the Company or its subsidiaries.

          (j) No Undisclosed Events or Circumstances. Since the date of the
     financial statement contained in the most recently filed Form 10- Q (or
     10-QSB) or Form 10-K (or 10-KSB), whichever is most current, no event or
     circumstance has occurred or exists with respect to the Company or its
     businesses, properties, prospects, operations or financial condition, that,
     under applicable law, rule or regulation, requires public disclosure or
     announcement prior to the date hereof by the Company but which has not been
     so publicly announced or disclosed in the SEC Documents.

          (k) Indebtedness. The SEC Documents or the Disclosure Schedule
     attached hereto sets forth as of the date hereof all outstanding secured
     and unsecured Indebtedness of the Company or any subsidiary, or for which
     the Company or any subsidiary has commitments. For the purposes of this
     Agreement, "Indebtedness" shall mean (A) any liabilities for borrowed money
     or amounts owed in excess of $500,000 (other than trade accounts payable
     incurred in the ordinary course of business), (B) all guaranties,
     endorsements and contingent obligations in respect of Indebtedness of
     others, whether or not the same are or should be reflected in the Company's
     balance sheet (or the notes thereto), except guaranties by endorsement of
     negotiable instruments for deposit or collection or similar transactions in
     the ordinary course of business; and (C) the present value of any lease
     payments in excess of $500,000 due under leases required to be capitalized
     in accordance with GAAP. Neither the Company nor any subsidiary is in
     default with respect to any Indebtedness.

          (l) Title to Assets. Each of the Company and the subsidiaries has good
     and marketable title to all of its real and personal property reflected in
     the SEC Documents, free of any mortgages, pledges, charges, liens, security
     interests or other encumbrances, except for those indicated in the SEC
     Documents or such that do not

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     cause a Material Adverse Effect. All said real property leases of the
     Company and each of its subsidiaries are valid and subsisting and in full
     force and effect.

          (m) Actions Pending. There is no action, suit, claim, investigation or
     proceeding pending or, to the knowledge of the Company, threatened against
     the Company or any subsidiary which questions the validity of this
     Agreement or the transactions contemplated hereby or any action taken or to
     be taken pursuant hereto or thereto. There is no action, suit, claim,
     investigation or proceeding pending or, to the knowledge of the Company,
     threatened, against or involving the Company, any subsidiary or any of
     their respective properties or assets, which action, suit, claim,
     investigation or proceeding would have a Material Adverse Effect. There are
     no outstanding orders, judgments, injunctions, awards or decrees of any
     court, arbitrator or governmental or regulatory body against the Company or
     any subsidiary except those orders, judgments, injunctions, awards or
     decrees which would not have a Material Adverse Effect.

          (n) Compliance with Law. The Company and each of its subsidiaries have
     all franchises, permits, licenses, consents and other governmental or
     regulatory authorizations and approvals necessary for the conduct of their
     respective businesses as now being conducted by them unless the failure to
     possess such franchises, permits, licenses, consents and other governmental
     or regulatory authorizations and approvals, individually or in the
     aggregate, could not reasonably be expected to have a Material Adverse
     Effect.

          (o) Taxes. The Company and each subsidiary has filed all Tax Returns
     which it is required to file under applicable laws; all such Tax Returns
     are true and accurate in all material respects, and have been prepared in
     compliance with all applicable laws; except as set forth in the SEC
     Documents the Company has paid all Taxes due and owing by it or any
     subsidiary (whether or not such Taxes are required to be shown on a Tax
     Return) and has withheld and paid over to the appropriate taxing
     authorities all Taxes which it is required to withhold from amounts paid or
     owing to any employee, stockholder, creditor or other third parties; and
     since December 31, 1999, the charges, accruals and reserves for Taxes with
     respect to the Company (including any provisions for deferred income taxes)
     reflected on the books of the Company are to its knowledge adequate to
     cover any Tax liabilities of the Company if its current tax year were
     treated as ending on the date hereof.

          No claim has been made by a taxing authority in a jurisdiction where
     the Company does not file tax returns that the Company or any subsidiary is
     or may be subject to taxation by that jurisdiction. Except as set forth in
     the SEC Documents, there are no foreign, federal, state or local tax audits
     or administrative or judicial proceedings pending or being conducted with
     respect to the Company or any subsidiary; no information related to Tax
     matters has been requested by any foreign, federal, state or local taxing
     authority; and, except as disclosed above, no written notice indicating an
     intent to open an audit or other review has been received by the Company or
     any subsidiary from any foreign, federal, state or local taxing authority.
     Except as set forth in the SEC Documents, there are no material unresolved
     questions or claims concerning the Company's Tax liability. The Company (A)
     has not executed or entered into a closing agreement pursuant to ss. 7121
     of the Internal Revenue Code or any predecessor

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     provision thereof or any similar provision of state, local or foreign law;
     and (B) has not agreed to or is required to make any adjustments pursuant
     to ss. 481 (a) of the Internal Revenue Code or any similar provision of
     state, local or foreign law by reason of a change in accounting method
     initiated by the Company or any of its subsidiaries or has any knowledge
     that the IRS has proposed any such adjustment or change in accounting
     method, or has any application pending with any taxing authority requesting
     permission for any changes in accounting methods that relate to the
     business or operations of the Company. The Company has not been a United
     States real property holding corporation within the meaning of ss.
     897(c)(2) of the Internal Revenue Code during the applicable period
     specified in ss. 897(c)(1)(A)(ii) of the Internal Revenue Code.

          The Company has not made an election under ss.341 (f) of the Internal
     Revenue Code. The Company is not liable for the Taxes of another person
     that is not a subsidiary of the Company under (A) Treas. Reg. ss. 1.1502-6
     (or comparable provisions of state, local or foreign law), (B) as a
     transferee or successor, (C) by contract or indemnity or (D) otherwise. The
     Company is not a party to any tax sharing agreement. The Company has not
     made any payments, is not obligated to make payments nor is it a party to
     an agreement that could obligate it to make any payments that would not be
     deductible under ss. 280G of the Internal Revenue Code.

          For purposes of this Section 2.1(o):

          "IRS" means the United States Internal Revenue Service.

          "Tax" or "Taxes" means federal, state, county, local, foreign, or
          other income, gross receipts, ad valorem, franchise, profits, sales or
          use, transfer, registration, excise, utility, environmental,
          communications, real or personal property, capital stock, license,
          payroll, wage or other withholding, employment, social security,
          severance, stamp, occupation, alternative or add-on minimum, estimated
          and other taxes of any kind whatsoever (including, without limitation,
          deficiencies, penalties, additions to tax, and interest attributable
          thereto) whether disputed or not.

          "Tax Return" means any return, information report or filing with
          respect to Taxes, including any schedules attached thereto and
          including any amendment thereof.

          (p) Certain Fees. Except for the fees paid to Hadrian Investments
     Limited pursuant to the Escrow Agreement, no brokers, finders or financial
     advisory fees or commissions will be payable by the Company or any
     subsidiary with respect to the transactions contemplated by this Agreement.

          (q) Operation of Business. The Company and each of the subsidiaries
     owns or possesses all patents, trademarks, service marks, trade names,
     copyrights, licenses and authorizations as set forth in the SEC Documents
     or the Disclosure Schedule attached hereto, and all rights with respect to
     the foregoing, which to its knowledge would be reasonably necessary for the
     conduct of its business as now conducted without any conflict with the
     rights of others.

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          (r) Books and Records. The records and documents of the Company and
     its subsidiaries accurately reflect in all material respects the
     information relating to the business of the Company and the subsidiaries,
     the location and collection of their assets, and the nature of all
     transactions giving rise to the obligations or accounts receivable of the
     Company or any subsidiary.

          (s) Material Agreements. The Company and each of its subsidiaries has
     in all material respects performed all the obligations required to be
     performed by them to date under the foregoing agreements, have received no
     notice of default and, to the best of the Company's knowledge are not in
     default under any Material Agreement now in effect, the result of which
     would cause a Material Adverse Effect. Except as set forth in the SEC
     Documents, no written or oral contract, instrument, agreement, commitment,
     obligation, plan or arrangement of the Company or of any subsidiary limits
     or shall limit the payment of dividends on the Company's Common Stock.

          (t) Transactions with Affiliates. There are no loans, leases,
     agreements, contracts, royalty agreements, management contracts or
     arrangements or other continuing transactions exceeding $100,000 between
     (A) the Company, any subsidiary or any of their respective customers or
     suppliers on the one hand, and (B) on the other hand, any officer,
     employee, consultant or director of the Company, or any of its
     subsidiaries, or any person owning 5% or more of the capital stock of the
     Company or any subsidiary or any member of the immediate family of such
     officer, employee, consultant, director or stockholder or any corporation
     or other entity controlled by such officer, employee, consultant, director
     or stockholder, or a member of the immediate family of such officer,
     employee, consultant, director or stockholder.

          (u) Securities Laws. The Company has complied and will comply with all
     applicable federal and state securities laws in connection with the offer,
     issuance and sale of the Shares hereunder. Neither the Company nor anyone
     acting on its behalf, directly or indirectly, has or will sell, offer to
     sell or solicit offers to buy the Shares or similar securities to, or
     solicit offers with respect thereto from, or enter into any preliminary
     conversations or negotiations relating thereto with, any person (other than
     the Purchaser), so as to bring the issuance and sale of the Shares under
     the registration provisions of the Securities Act and applicable state
     securities laws. Neither the Company nor any of its affiliates, nor any
     person acting on its or their behalf, has engaged in any form of general
     solicitation or general advertising (within the meaning of Regulation D
     under the Securities Act) in connection with the offer or sale of the
     Shares.

          (v) Employees. Neither the Company nor any subsidiary has any
     collective bargaining arrangements or agreements covering any of its
     employees. Neither the Company nor any subsidiary is in breach of any
     employment contract, agreement regarding proprietary information,
     noncompetition agreement, nonsolicitation agreement, confidentiality
     agreement, or any other similar contract or restrictive covenant, relating
     to the right of any officer, to be employed or engaged by the Company or
     such subsidiary. Since the date of the December 31, 2000 Form 10-K (or
     10-KSB), no officer, consultant or key employee of the Company or any
     subsidiary whose termination, either individually or in the aggregate,
     could have a Material Adverse Effect, has terminated or, to the knowledge
     of the Company, has any present intention of terminating his or her
     employment or engagement with the Company or any subsidiary.

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          (w) Absence of Certain Developments. Since the date of the financial
     statement contained in the most recently filed Form 10-Q (or 10-QSB) or
     Form 10-K (or 10KSB), whichever is most current, neither the Company nor
     any subsidiary has:

               (i) issued any stock, bonds or other corporate securities or any
          rights, options or warrants with respect thereto;

               (ii) borrowed any amount or incurred or become subject to any
          liabilities (absolute or contingent) except current liabilities
          incurred in the ordinary course of business which are comparable in
          nature and amount to the current liabilities incurred in the ordinary
          course of business during the comparable portion of its prior fiscal
          year, as adjusted to reflect the current nature and volume of the
          Company's or such subsidiary's business;

               (iii) discharged or satisfied any lien or encumbrance or paid any
          obligation or liability (absolute or contingent), other than current
          liabilities paid in the ordinary course of business;

               (iv) declared or made any payment or distribution of cash or
          other property to stockholders with respect to its stock, or purchased
          or redeemed, or made any agreements so to purchase or redeem, any
          shares of its capital stock;

               (v) sold, assigned or transferred any other tangible assets, or
          canceled any debts or claims, except in the ordinary course of
          business;

               (vi) sold, assigned or transferred any patent rights, trademarks,
          trade names, copyrights, trade secrets or other intangible assets or
          intellectual property rights, or disclosed any proprietary
          confidential information to any person except to customers in the
          ordinary course of business or to the Purchaser or its
          representatives;

               (vii) suffered any material losses (except for anticipated losses
          consistent with prior quarters) or waived any rights of material
          value, whether or not in the ordinary course of business, or suffered
          the loss of any material amount of prospective business;

               (viii) made any changes in employee compensation except in the
          ordinary course of business and consistent with past practices;

               (ix) made capital expenditures or commitments therefor that
          aggregate in excess of $500,000;

               (x) entered into any other material transaction, whether or not
          in the ordinary course of business;

               (xi) suffered any material damage, destruction or casualty loss,
          whether or not covered by insurance;

               (xii) experienced any material problems with labor or management
          in connection with the terms and conditions of their employment; or

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               (xiii) effected any two or more events of the foregoing kind
          which in the aggregate would be material to the Company or its
          subsidiaries.

          (x) Governmental Approvals. Except for the filing of any notice prior
     or subsequent to any Settlement Date that may be required under applicable
     federal or state securities laws (which if required, shall be filed on a
     timely basis), including the filing of a registration statement or
     post-effective amendment pursuant to this Agreement, no authorization,
     consent, approval, license, exemption of, filing or registration with any
     court or governmental department, commission, board, bureau, agency or
     instrumentality, domestic or foreign, is or will be necessary for, or in
     connection with, the delivery of the Shares, or for the performance by the
     Company of its obligations under this Agreement.

          (aa) Acknowledgment Regarding Purchaser's Purchase of Shares. Company
     acknowledges and agrees that Purchaser is acting solely in the capacity of
     arm's length purchaser with respect to this Agreement and the transactions
     contemplated hereunder. The Company further acknowledges that the Purchaser
     is not acting as a financial advisor or fiduciary of the Company (or in any
     similar capacity) with respect to this Agreement and the transactions
     contemplated hereunder. The Company further represents to the Purchaser
     that the Company's decision to enter into this Agreement has been based
     solely on (a) the Purchaser's representations and warranties in Section
     2.2, and (b) the independent evaluation by the Company and its own
     representatives and counsel.

     Section 2.2. Representations and Warranties of the Purchaser. The Purchaser
hereby makes the following representations and warranties to the Company:

          (a) Organization and Standing of the Purchaser. The Purchaser is a
     corporation duly incorporated, validly existing and in good standing under
     the laws of the British Virgin Islands.

          (b) Authorization and Power. The Purchaser has the requisite power and
     authority to enter into and perform the Transaction Documents and to
     purchase the Shares being sold to it hereunder. The execution, delivery and
     performance of the Transaction Documents by Purchaser and the consummation
     by it of the transactions contemplated hereby have been duly authorized by
     all necessary corporate action and at the Initial Closing shall constitute
     valid and binding obligations of the Purchaser enforceable against the
     Purchaser in accordance with their terms, except as such enforceability may
     be limited by applicable bankruptcy, insolvency, reorganization,
     moratorium, liquidation, conservatorship, receivership or similar laws
     relating to, or affecting generally the enforcement of, creditors' rights
     and remedies or by other equitable principles of general application

          (c) No Conflicts. The execution, delivery and performance of this
     Agreement and the consummation by the Purchaser of the transactions
     contemplated hereby or relating hereto do not and will not (i) result in a
     violation of the Purchaser's charter documents or bylaws or (ii) conflict
     with, or constitute a default (or an event which with notice or lapse of
     time or both would become a default) under, or give to others any rights of
     termination, amendment, acceleration or cancellation of any agreement,
     indenture or instrument to which the Purchaser is a party, or result in a

                                       10
<PAGE>

     violation of any law, rule, or regulation, or any order, judgment or decree
     of any court or governmental agency applicable to the Purchaser or its
     properties (except for such conflicts, defaults and violations as would
     not, individually or in the aggregate, have a Material Adverse Effect on
     Purchaser). The Purchaser is not required to obtain any consent,
     authorization or order of, or make any filing or registration with, any
     court or governmental agency in order for it to execute, deliver or perform
     any of its obligations under this Agreement or to purchase the Shares in
     accordance with the terms hereof.

          (d) Financial Risks. The Purchaser acknowledges that it is able to
     bear the financial risks associated with an investment in the Shares and
     that it has been given full access to such records of the Company and the
     subsidiaries and to the officers of the Company and the subsidiaries as it
     has deemed necessary or appropriate to conduct its due diligence
     investigation. The Purchaser is capable of evaluating the risks and merits
     of an investment in the Shares by virtue of its experience as an investor
     and its knowledge, experience, and sophistication in financial and business
     matters and the Purchaser is capable of bearing the entire loss of its
     investment in the Shares.

          (e) Accredited Investor. The Purchaser is an "accredited investor" as
     defined in Regulation D promulgated under the Securities Act.

          (f) General. The Purchaser understands that the Company is relying
     upon the truth and accuracy of the representations, warranties, agreements,
     acknowledgments and understandings of the Purchaser set forth herein in
     order to determine the suitability of the Purchaser to acquire the Shares.

                                   ARTICLE 3

                                    COVENANTS

     The Company covenants with the Purchaser as follows:

     Section 3.1. The Shares. As of the date of each applicable Draw Down, the
Company will have authorized and reserved, free of preemptive rights, a
sufficient number of authorized but unissued shares of its Common Stock to cover
the Draw Down Shares to be issued in connection with such Draw Down requested
under this Agreement. The Draw Down Shares to be issued under this Agreement,
when paid for and issued in accordance with the terms hereof, shall be duly and
validly issued and outstanding, fully paid and non-assessable, and the Purchaser
shall be entitled to all rights accorded to a holder of Common Stock. Anything
in this Agreement to the contrary notwithstanding, (i) at no time will the
Company request a Draw Down which would result in the issuance of an aggregate
number of shares of Common Stock pursuant to this Agreement which exceeds 19.9%
of the number of shares of Common Stock issued and outstanding on the Initial
Closing Date without obtaining stockholder approval of such excess issuance, or
such other amount as would require stockholder approval under rules of the
Principal Market or otherwise without obtaining stockholder approval of such
excess issuance, and (ii) the Company may not make a Draw Down to the extent
that, after such purchase by the Purchaser, the sum of the number of shares of
Common Stock beneficially

                                       11
<PAGE>

owned by the Purchaser and its affiliates would result in beneficial ownership
by the Purchaser and its affiliates of more than 9.9% of the then outstanding
shares of Common Stock. For purposes of the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Exchange Act.

     Section 3.2. Securities Compliance. If applicable, the Company shall notify
the Principal Market, in accordance with its rules and regulations, of the
transactions contemplated by this Agreement, and shall take all other necessary
action and proceedings as may be required and permitted by applicable law, rule
and regulation, for the legal and valid issuance of the Shares and the Warrant
to the Purchaser or subsequent holders.

     Section 3.3. Registration and Listing. The Company will cause its Common
Stock to continue to be registered under Sections 12(b) or 12(g) of the Exchange
Act, will comply in all material respects with its reporting and filing
obligations under the Exchange Act, will comply with all requirements related to
any registration statement filed pursuant to this Agreement, and will not take
any action or file any document (whether or not permitted by the Securities Act
or the Exchange Act or the rules promulgated thereunder) to terminate or suspend
such registration or to terminate or suspend its reporting and filing
obligations under the Exchange Act or Securities Act, except as permitted
herein. The Company will take all action necessary to continue the listing or
trading of its Common Stock on the Principal Market and will comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the Principal Market and shall provide the Purchaser with
copies of any correspondence to or from such Principal Market which questions or
threatens delisting of the Common Stock, within three (3) Trading Days of the
Company's receipt thereof, until the Purchaser has disposed of all of the
Shares.

     Section 3.4. Escrow Arrangement. The Company and the Purchaser shall enter
into an escrow arrangement with Epstein Becker & Green, P.C. (the "Escrow
Agent") in the form of Exhibit B hereto respecting payment against delivery of
the Shares.

     Section 3.5. Registration Rights Agreement. The Company and the Purchaser
shall enter into the Registration Rights Agreement in the Form of Exhibit A
hereto. Before the Purchaser shall be obligated to accept a Draw Down request
from the Company, the Company shall have caused a sufficient number of shares of
Common Stock to be registered to cover the Shares to be issued in connection
with such Draw Down.

     Section 3.6. Accuracy of Registration Statement.On each Settlement Date,
the Registration Statement and the prospectus therein shall 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 therein not
misleading in light of the circumstances under which they were made; and on such
Settlement Date or date of filing the Registration Statement and the prospectus
therein will not include any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; provided,
however, the Company makes no representations or warranties as to the
information contained in or omitted from the Registration Statement and the
prospectus therein in reliance upon and in conformity with the information
furnished in writing to the Company by the Purchaser specifically for inclusion
in the Registration Statement and the prospectus therein.

                                       12
<PAGE>

     Section 3.7. Compliance with Laws. The Company shall comply, and cause each
subsidiary to comply, with all applicable laws, rules, regulations and orders,
noncompliance with which could have a Material Adverse Effect.

     Section 3.8. Keeping of Records and Books of Account. The Company shall
keep and cause each subsidiary to keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied, reflecting all financial transactions of the Company and its
subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.

     Section 3.9. Other Agreements. The Company shall not enter into any
agreement the terms of which would restrict or impair the ability of the Company
to perform its obligations under this Agreement.

     Section 3.10. Notice of Certain Events Affecting Registration; Suspension
of Right to Request a Draw Down. The Company will promptly notify the Purchaser
in writing upon the occurrence of any of the following events in respect of the
Registration Statement or related prospectus in respect of the Shares: (i)
receipt of any request for additional information from the SEC or any other
federal or state governmental authority during the period of effectiveness of
the Registration Statement the response to which would require any amendments or
supplements to the Registration Statement or related prospectus; (ii) the
issuance by the SEC or any other federal or state governmental authority of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; (iii) receipt of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; (iv) the happening
of any event that makes any statement made in the Registration Statement or
related prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires the making
of any changes in the Registration Statement, related prospectus or documents so
that, in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (v) the Company's
reasonable determination that the filing of a post-effective amendment to or the
withdrawal of the Registration Statement would be appropriate. The Company shall
not deliver to the Purchaser any Draw Down Notice during the continuation of any
of the foregoing events. The Company shall promptly make available to the
Purchaser any such supplements or amendments to the related prospectus, at which
time, provided that the registration statement and any supplements and
amendments thereto are then effective, the Company may recommence the delivery
of Draw Down Notices.

     Section 3.11. Consolidation; Merger. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another entity (a "Consolidation Event") unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument or by
operation of law the obligation to deliver to the Purchaser such shares of stock
and/or securities as the Purchaser is entitled to receive pursuant to this
Agreement.

                                       13
<PAGE>

     Section 3.12. Limitation on Future Financing. The Company agrees that,
except as set forth below, it will not enter into any sale of its securities for
cash at a discount to the then current market price (including securities
convertible, exchangeable, adjustable or which may be reset at a discount to the
then current market price) until the earlier of (i) 36 months from the Effective
Date, (ii) sixty (60) days after the entire Commitment Amount has been purchased
by the Purchaser, or (iii) the date this Agreement is terminated pursuant to the
terms herein. The foregoing shall not prevent or limit the Company from engaging
in any sale of securities (i) in a registered public offering by the Company
which is underwritten by one or more established investment banks (not including
an "equity line" type of financing), (ii) pursuant to a private placement where
the investors do not have registration rights, (iii) pursuant to any
compensatory plan for a full-time employee or key consultant, (iv) in connection
with a strategic partnership or other business transaction, the principal
purpose of which is not simply to raise money, or (v) to which Purchaser gives
its prior written consent. Further, the Purchaser shall have a right of first
refusal to undertake and complete such subsequent transaction in the case of
(i), (ii) and (v) above. Such right of first refusal must be exercised in
writing within five (5) Trading Days of the Purchaser's receipt of notice of the
proposed terms of such financing or the right to participate in such financing
shall be waived.

     Section 3.13. Use of Proceeds. The proceeds from the sale of the Shares
will be used by the Company and its subsidiaries for general corporate purposes,
including the retirement of outstanding convertible debentures.

     The Purchaser covenants with the Company as follows:

     Section 3.14. Compliance with Law.

     The Purchaser agrees that its trading activities with respect to shares of
the Company's Common Stock will be in compliance with all applicable state and
federal securities laws, rules and regulations and rules and regulations of the
Principal Market on which the Company's Common Stock is listed. Without limiting
the generality of the foregoing, the Purchaser agrees that it will, whenever
required by federal securities laws, deliver the prospectus included in the
Registration Statement to any purchaser of Shares from the Purchaser.

                                   ARTICLE 4

                  CONDITIONS TO INITIAL CLOSING AND DRAW DOWNS

     Section 4.1. Conditions Precedent to the Obligation of the Company to Sell
the Shares. The obligation hereunder of the Company to proceed to close this
Agreement and to issue and sell the Shares to the Purchaser is subject to the
satisfaction or waiver, at or before the Initial Closing, and as of each
Settlement Date of each of the conditions set forth below. These conditions are
for the Company's sole benefit and may be waived by the Company at any time in
its sole discretion.

          (a) Accuracy of the Purchaser's Representations and Warranties. The
     representations and warranties of the Purchaser shall be true and correct
     in all material respects as of the date when made and as of the Initial
     Closing and as of each Settlement

                                       14
<PAGE>

     Date as though made at that time, except for representations and warranties
     that speak as of a particular date.

          (b) Performance by the Purchaser. The Purchaser shall have performed,
     satisfied and complied in all material respects with all material
     covenants, agreements and conditions required by this Agreement to be
     performed, satisfied or complied with by the Purchaser at or prior to the
     Initial Closing and as of each Settlement Date.

          (c) No Injunction. No statute, rule, regulation, executive order,
     decree, ruling or injunction shall have been enacted, entered, promulgated
     or endorsed by any court or governmental authority of competent
     jurisdiction which prohibits the consummation of any of the transactions
     contemplated by this Agreement.

     Section 4.2. Conditions Precedent to the Obligation of the Purchaser to
Close. The obligation hereunder of the Purchaser to perform its obligations
under this Agreement and to purchase the Shares is subject to the satisfaction
or waiver, at or before the Initial Closing, of each of the conditions set forth
below. These conditions are for the Purchaser's sole benefit and may be waived
by the Purchaser at any time in its sole discretion.

          (a) Accuracy of the Company's Representations and Warranties. Each of
     the representations and warranties of the Company shall be true and correct
     in all material respects as of the date when made and as of the Initial
     Closing as though made at that time (except for representations and
     warranties that speak as of a particular date).

          (b) Performance by the Company. The Company shall have performed,
     satisfied and complied in all respects with all covenants, agreements and
     conditions required by this Agreement to be performed, satisfied or
     complied with by the Company at or prior to the Initial Closing.

          (c) No Injunction. No statute, rule, regulation, executive order,
     decree, ruling or injunction shall have been enacted, entered, promulgated
     or endorsed by any court or governmental authority of competent
     jurisdiction which prohibits the consummation of any of the transactions
     contemplated by this Agreement.

          (d) No Proceedings or Litigation. No action, suit or proceeding before
     any arbitrator or any governmental authority shall have been commenced, and
     no investigation by any governmental authority shall have been threatened,
     against the Purchaser or the Company or any subsidiary, or any of the
     officers, directors or affiliates of the Company or any subsidiary seeking
     to restrain, prevent or change the transactions contemplated by this
     Agreement, or seeking damages in connection with such transactions.

          (e) Opinion of Counsel, Etc. At the Initial Closing, the Purchaser
     shall have received an opinion of counsel to the Company, dated as of the
     Initial Closing Date, in the form of Exhibit C hereto.

          (f) Warrant. On the Initial Closing Date, the Company shall issue to
     the Purchaser a warrant to purchase up to a number of shares of Common
     Stock equal to

                                       15
<PAGE>

     $1,000,000 divided by the average of the VWAPs during the 15 Trading Days
     immediately prior to the Initial Closing (the "Warrant Base Price"). The
     Warrant shall have a term from its initial date of exercise of 3 years. The
     exercise price of the Warrant shall be 110% of the Warrant Base Price. The
     Common Stock underlying the Warrant will be registered in the Registration
     Statement referred to in Section 4.3 hereof. The Warrant shall be in the
     form of Exhibit E hereto.

     Section 4.3. Conditions Precedent to the Obligation of the Purchaser to
Accept a Draw Down and Purchase the Shares. The obligation hereunder of the
Purchaser to accept a Draw Down request and to acquire and pay for the Shares is
subject to the satisfaction at or before each Settlement Date, of each of the
conditions set forth below.

          (a) Satisfaction of Conditions to Initial Closing. The Company shall
     have satisfied, or the Purchaser shall have waived at the Initial Closing,
     the conditions set forth in Section 4.2 hereof

          (b) Effective Registration Statement. The Registration Statement
     registering the Shares, subject to the Draw Down request, shall have been
     declared effective by the SEC and shall remain effective on each Settlement
     Date.

          (c) No Suspension. Trading in the Company's Common Stock shall not
     have been suspended by the SEC or the Principal Market (except for any
     suspension of trading of limited duration agreed to by the Company, which
     suspension shall be terminated prior to the delivery of each Draw Down
     Notice), and, at any time prior to such Draw Down Notice, trading in
     securities generally as reported on the Principal Market shall not have
     been suspended or limited, or minimum prices shall not have been
     established on securities whose trades are reported on the Principal Market
     unless the general suspension or limitation shall have been terminated
     prior to the delivery of such Draw Down Notice.

          (d) Material Adverse Effect. No Material Adverse Effect and no
     Consolidation Event where the successor entity has not agreed to perform
     the Company's obligations shall have occurred, such occurrences to be
     determined in accordance with Section 8.9 herein.

          (e) Opinion of Counsel. The Purchaser shall have received a
     "down-to-date" letter from the Company's counsel, confirming that there is
     no change from the counsel's previously delivered opinion, or else
     specifying with particularity the reason for any change and an opinion as
     to the additional items specified in Exhibit C hereto.

                                   ARTICLE 5

                                 DRAW DOWN TERMS

     Section 5.1. Draw Down Terms. Subject to the satisfaction of the conditions
set forth in this Agreement, the parties agree as follows:

                                       16
<PAGE>

          (a) The Company may, in its sole discretion, issue and exercise draw
     downs (each a "Draw Down") during the Commitment Period, which Draw Downs
     the Purchaser shall be obligated to accept, subject to the terms and
     conditions herein.

          (b) Only one Draw Down shall be allowed in each Draw Down Pricing
     Period. There shall be a minimum of five (5) Trading Days between Draw Down
     Pricing Periods. The number of shares of Common Stock purchased by the
     Purchaser with respect to each Draw Down shall be determined as set forth
     in Section 5.1(e) herein and settled on:

               (i) as to the 1st through the 11th Trading Day during the Draw
          Down Pricing Period, on or before the 13th Trading Day after such Draw
          Down Pricing Period commences; and

               (ii) as to the 12th through the 22nd Trading Day during the Draw
          Down Pricing Period commences, on or before the 24th Trading Day after
          such Draw Down Pricing Period (such settlement periods and such
          settlement dates in subsection (i) and this subsection (ii) each
          referred to as a "Settlement Period" and a "Settlement Date",
          respectively).

          (c) In connection with each Draw Down Pricing Period, the Company may
     set the Threshold Price in the Draw Down Notice.

          (d) The minimum Investment Amount for any Draw Down shall be $100,000
     and the maximum Investment Amount as to each Draw Down shall be the lesser
     of (i) $1,000,000, and (ii) 15% of the EQY weighted average price field (as
     reported on Bloomberg Financial L.P. using the BLPH function) for the
     Common Stock for the 30 calendar days immediately prior to the applicable
     Commencement Date (defined below) multiplied by the total trading volume in
     respect of the Common Stock for such period; Notwithstanding anything
     herein to the contrary, in the event the minimum Investment Amount is
     greater than the maximum Investment Amount, as to such Draw Down only, the
     minimum Investment Amount shall equal the maximum Investment Amount, but in
     no event shall the minimum Investment Amount be less than $50,000, such
     that if the maximum Investment Amount is less than $50,000, then the
     Company shall be precluded from exercising a Draw Down at such time.

          (e) The number of Shares of Common Stock to be issued on each
     Settlement Date shall be a number of shares equal to the sum of the
     quotients (for each trading day within the Settlement Period) of (x) 1/22nd
     of the Investment Amount, and (y) the Purchase Price on each Trading Day
     within the Settlement Period, subject to the following adjustments:

               (i) if the VWAP on a given Trading Day is less than the Threshold
          Price, then that portion of the Investment Amount to be paid on the
          immediately pending Settlement Date shall be reduced by 1/22nd of the
          Investment Amount and such Trading Day shall be withdrawn from the
          Settlement Period;

                                       17
<PAGE>

               (ii) if during any Trading Day during the Settlement Period
          trading of the Common Stock on the Principal Market is suspended for
          more than three (3) hours, in the aggregate, or if any Trading Day
          during the Settlement Period is shortened because of a public holiday,
          then that portion of the Investment Amount to be paid on the
          immediately pending Settlement Date shall be reduced by 1/22nd of the
          Investment Amount and such Trading Day shall be withdrawn from the
          Settlement Period; and

               (iii) if during any Trading Day during the Settlement Period
          sales of Draw Down Shares pursuant to the Registration Statement are
          suspended by the Company in accordance with Sections 3(j) or 5(e) of
          the Registration Rights Agreement for more than three (3) hours, in
          the aggregate, during the Settlement Period, then that portion of the
          Investment Amount to be paid on the immediately pending Settlement
          Date shall be reduced by 1/22nd of the Investment Amount and such
          Trading Day shall be withdrawn from the Settlement Period.

          (f) The Company must inform the Purchaser by delivering a draw down
     notice, in the form of Exhibit D hereto (the "Draw Down Notice"), via
     facsimile transmission in accordance with Section 8.4 as to the amount of
     the Draw Down (the "Investment Amount") the Company wishes to exercise,
     before the first day of the Draw Down Pricing Period (the "Commencement
     Date"). If the Commencement Date is to be the date of the Draw Down Notice,
     the Draw Down Notice must be delivered to and receipt confirmed by the
     Purchaser at least one (1) hour before trading commences on such date. At
     no time shall the Purchaser be required to purchase more than the maximum
     Investment Amount for a given Draw Down Pricing Period so that if the
     Company chooses not to exercise the maximum Investment Amount in a given
     Draw Down Pricing Period the Purchaser is not obligated to and shall not
     purchase more than the scheduled maximum Investment Amount in a subsequent
     Draw Down Pricing Period.

          (g) On each Settlement Date, the Shares purchased by the Purchaser
     shall be delivered to The Depository Trust Company ("DTC") on the
     Purchaser's behalf. Upon the Company electronically delivering whole shares
     of Common Stock to the Purchaser or its designees via DTC through its
     Deposit Withdrawal Agent Commission ("DWAC") system by 1:00 p.m. EST, the
     Purchaser shall wire transfer immediately available funds to the Company's
     designated account on such day, less any fees as set forth in the Escrow
     Agreement, which fees shall be wired as directed in the Escrow Agreement.
     Upon the Company electronically delivering whole shares of Common Stock to
     the Purchaser or its designees DTC account via DWAC after 1:00 p.m. EST,
     the Purchaser shall wire transfer next day available funds to the Company's
     designated account on such day, less any fees as set forth in the Escrow
     Agreement, which fees shall be wired as directed in the Escrow Agreement.
     In the event that either party elects to use the Escrow Agent, the Shares
     shall be credited by the Company to the DTC account designated by the
     Purchaser via DWAC upon receipt by the Escrow Agent of payment for the Draw
     Down Shares into the Escrow Agent's master escrow account, as further set
     forth in the Escrow Agreement. The Escrow Agent shall be directed to pay
     the purchase price to the Company, net of $1,000 per Settlement as escrow
     expenses to the Escrow Agent and any additional fees as set forth in the
     Escrow Agreement. The Company

                                       18
<PAGE>

     understands that a delay in the delivery of the Draw Down Shares into the
     Purchaser's DTC account beyond 3 Trading Days after the dates set forth
     herein or in the Escrow Agreement, as the case may be, could result in
     economic loss to the Purchaser. Notwithstanding anything herein to the
     contrary, as compensation to the Purchaser for such loss, the Company
     agrees to pay late payments to the Purchaser for late delivery after 3
     Trading Days from such dates in accordance with the following schedule
     (where "No. Trading Days Late" is defined as the number of Trading Days
     beyond three 3 Trading Days from the dates set forth herein or in the
     Escrow Agreement, as the case may be, on which such Draw Down Shares are to
     be delivered into the Purchaser's DTC account via the DWAC system):

--------------------------------------------------------------------------------
         No. Trading Days Late             Late Payment for Each
                                           $5,000 of Draw Down Shares
                                           Being Purchased
--------------------------------------------------------------------------------
         1                                 $100
--------------------------------------------------------------------------------
         2                                 $200
--------------------------------------------------------------------------------
         3                                 $300
--------------------------------------------------------------------------------
         4                                 $400
--------------------------------------------------------------------------------
         5                                 $500
--------------------------------------------------------------------------------
         6                                 $600
--------------------------------------------------------------------------------
         7                                 $700
--------------------------------------------------------------------------------
         8                                 $800
--------------------------------------------------------------------------------
         9                                 $900
--------------------------------------------------------------------------------
         10                                $1,000
--------------------------------------------------------------------------------
         More than 10                      $1,000 +$200 for each Trading Day
                                           Late beyond 10 Trading Days
--------------------------------------------------------------------------------

          The Company shall pay any payments incurred under this Section 5.1(g)
     in immediately available funds upon demand. Nothing herein shall limit the
     Purchaser's right to pursue injunctive relief and/or actual damages for the
     Company's failure to issue and deliver the Draw Down Shares to the Company,
     including, without limitation, the Purchaser's actual losses occasioned by
     any "buy-in" of Common Stock necessitated by such late delivery.

                                    ARTICLE 6

                                   TERMINATION

     Section 6.1. Term. The term of this Agreement shall begin on the date
hereof and shall end on the earlier of 36 months from the Effective Date or as
otherwise set forth in Section 6.2.

     Section 6.2. Other Termination.

                                       19
<PAGE>

          (a) This Agreement shall terminate upon one (1) Trading Day's notice
     if (i) an event resulting in a Material Adverse Effect has occurred and has
     not been cured for a period of thirty (30) days after giving written notice
     thereof, (ii) the Common Stock is de-listed from the Principal Market
     unless such de-listing is in connection with the Company's subsequent
     listing of the Common Stock on the Nasdaq National Market, Nasdaq SmallCap
     Market, the American Stock Exchange, the OTC Bulletin Board or the New York
     Stock Exchange, or (iii) the Company files for protection from creditors
     under any applicable law.

          (b) The Company may terminate this Agreement upon one (1) Trading
     Day's notice if the Purchaser shall fail to fund more than one properly
     noticed Draw Down within five (5) Trading Days of the end of the applicable
     Settlement Period.

     Section 6.3. Effect of Termination.

     In the event of termination of this Agreement pursuant to Section 6.2
herein, written notice thereof shall forthwith be given to the other party and
the transactions contemplated by this Agreement shall be terminated without
further action by either party. If this Agreement is terminated as provided in
Section 6.1 or 6.2 herein, this Agreement shall become void and of no further
force and effect, except for Sections 8.1, 8.2 and 8.9, and Article 7 herein.
Nothing in this Section 6.3 shall be deemed to release the Company or the
Purchaser from any liability for any breach under this Agreement, or to impair
the rights of the Company or the Purchaser to compel specific performance by the
other party of its obligations under this Agreement.

                                    ARTICLE 7

                                 INDEMNIFICATION

     Section 7.1. General Indemnity.

          (a) The Company agrees to indemnify and hold harmless the Purchaser
     (and its directors, officers, affiliates, agents, successors and assigns)
     from and against any and all losses, liabilities, deficiencies, costs,
     damages and expenses (including, without limitation, reasonable attorneys'
     fees, charges and disbursements) incurred by the Purchaser as a result of
     any material inaccuracy in or breach of the representations, warranties or
     covenants made by the Company herein.

          (b) The Purchaser agrees to indemnify and hold harmless the Company
     and its directors, officers, affiliates, agents, successors and assigns
     from and against any and all losses, liabilities, deficiencies, costs,
     damages and expenses (including, without limitation, reasonable attorneys'
     fees, charges and disbursements) incurred by the Company as result of any
     material inaccuracy in or breach of the representations, warranties or
     covenants made by the Purchaser herein. Notwithstanding anything to the
     contrary herein, the Purchaser shall be liable under this Section 7.1(b)
     for only that amount as does not exceed the net proceeds to the Purchaser
     as a result of the sale of the Shares.

                                       20
<PAGE>

     Section 7.2. Indemnification Procedure. Any party entitled to
indemnification under this Article 7 (an "Indemnified Party") will give written
notice to the indemnifying party of any matters giving rise to a claim for
indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article 7 except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought against an
Indemnified Party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of counsel to the Indemnified Party a conflict of interest
between it and the indemnifying party may exist with respect of such action,
proceeding or claim, to assume the defense thereof with counsel reasonably
satisfactory to the Indemnified Party. In the event that the indemnifying party
advises an Indemnified Party that it will contest such a claim for
indemnification hereunder, or fails, within thirty (30) days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise, at its sole cost and expense, any action,
proceeding or claim (or discontinues its defense at any time after it commences
such defense), then the Indemnified Party may, at its option, defend, settle or
otherwise compromise or pay such action or claim. In any event, unless and until
the indemnifying party elects in writing to assume and does so assume the
defense of any such claim, proceeding or action, the Indemnified Party's costs
(including reasonable attorneys' fees, charges and disbursements) and expenses
arising out of the defense, settlement or compromise of any such action, claim
or proceeding shall be losses subject to indemnification hereunder. The
Indemnified Party shall cooperate fully with the indemnifying party in
connection with any settlement negotiations or defense of any such action or
claim by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the Indemnified Party, which relates to such
action or claim. The indemnifying party shall keep the Indemnified Party fully
apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the Indemnified Party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. The indemnifying party shall not be liable for any settlement of any
action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article 7 to the contrary, the indemnifying
party shall not, without the Indemnified Party's prior written consent (which
consent shall not be unreasonably withheld), settle or compromise any claim or
consent to entry of any judgment in respect thereof which imposes any future
obligation on the Indemnified Party or which does not include, as an
unconditional term thereof, the giving by the claimant or the plaintiff to the
Indemnified Party of a release from all liability in respect of such claim. The
indemnification required by this Article 7 shall be made by periodic payments of
the amount thereof during the course of investigation or defense, as and when
bills are received or expense, loss, damage or liability is incurred, within ten
(10) Trading Days of written notice thereof to the indemnifying party so long as
the Indemnified Party irrevocably agrees to refund such moneys, with interest,
if it is ultimately determined by a court of competent jurisdiction that such
party was not entitled to indemnification. The indemnity agreements contained
herein shall be in addition to (a) any cause of action or similar rights of the
Indemnified Party against the indemnifying party or others, and (b) any
liabilities to which the indemnifying party may be subject.

                                       21
<PAGE>

                                    ARTICLE 8

                                  MISCELLANEOUS

     Section 8.1. Fees and Expenses. Except as set forth in the Escrow
Agreement, each of the parties to this Agreement shall pay its own fees and
expenses related to the transactions contemplated by this Agreement. In
addition, the Company shall pay all reasonable fees and expenses incurred by the
Purchaser in connection with any subsequent amendments, modifications or waivers
of this Agreement, the Escrow Agreement or the Registration Rights Agreement or
incurred in connection with the enforcement of this Agreement, the Escrow
Agreement and the Registration Rights Agreement, including, without limitation,
all reasonable attorneys' fees and expenses if such subsequent amendment,
modification or waiver is at the request of the Company. The Company shall pay
all stamp or other similar taxes and duties levied in connection with issuance
of the Shares pursuant hereto.

     Section 8.2. Specific Enforcement. The Company and the Purchaser
acknowledge and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof or thereof, this being in addition to any other
remedy to which any of them may be entitled by law or equity.

     Section 8.3. Entire Agreement; Amendment. The Transaction Documents contain
the entire understanding of the parties with respect to the matters covered in
the Transaction Documents. No provision of this Agreement may be waived or
amended other than by a written instrument signed by the party against whom
enforcement of any such amendment or waiver is sought and no condition to
closing any Draw Down in favor of the Purchaser may be waived by the Purchaser.

     Section 8.4. Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery or facsimile at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be:

If to the Company:                  6509 Windcrest Drive, Suite 120
                                    Plano, Texas 75029
                                    Attn:  Michael McDonnell, President & CEO
                                    Tel:  (972) 265-4000
                                    Fax:  (972) [_______]

                                       22
<PAGE>

With copies to:                     Jackson Walker L.L.P.
(which shall not constitute         901 Main Street, Suite 6000
notice)                             Dallas, Texas 75202
                                    Attn: James S. Ryan, III
                                    Tel:  (214) 953-5801
                                    Fax:  (214) 953-5822

If to Purchaser:                    c/o Trident Chambers
                                    P.O. Box 146
                                    Road Town, Tortola
                                    British Virgin Islands
                                    Attn: Francois Morax
                                    Fax:  011-411-201-4800

with copies to:                     Epstein Becker & Green P.C.
(which shall not constitute         250 Park Avenue
notice)                             New York, NY  10177-1211
                                    Tel:  (212) 351-3771
                                    Fax:  (212) 661-0989
                                    Attn:  Robert F. Charron

     Any party hereto may from time to time change its address for notices by
giving written notice of such changed address to the other party hereto in
accordance herewith.

     Section 8.5. Waivers. No waiver by either party of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any other provisions,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such right
accruing to it thereafter.

     Section 8.6. Headings. The article, section and subsection headings in this
Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.

     Section 8.7. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns. The
parties hereto may not amend this Agreement or any rights or obligations
hereunder without the prior written consent of the Company and each Purchaser to
be affected by the amendment.

     Section 8.8. No Third Party Beneficiaries.This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

     Section 8.9. Governing Law/Arbitration. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of New York,
without giving effect to the choice of law provisions thereof. The Company and
the Purchaser agree to submit themselves to the in personam jurisdiction of the
state and federal courts situated within the Southern District of the State of
New York with regard to any controversy arising out of or relating to this
Agreement. Any dispute under this Agreement or any Exhibit attached hereto shall

                                       23
<PAGE>

be submitted to arbitration under the American Arbitration Association (the
"AAA") in New York City, New York, and shall be finally and conclusively
determined by the decision of a board of arbitration consisting of three (3)
members (hereinafter referred to as the "Board of Arbitration") selected as
according to the rules governing the AAA. The Board of Arbitration shall meet on
consecutive business days in New York City, New York, and shall reach and render
a decision in writing (concurred in by a majority of the members of the Board of
Arbitration) with respect to the amount, if any, which the losing party is
required to pay to the other party in respect of a claim filed. In connection
with rendering its decisions, the Board of Arbitration shall adopt and follow
the laws of the State of New York. To the extent practical, decisions of the
Board of Arbitration shall be rendered no more than thirty (30) calendar days
following commencement of proceedings with respect thereto. The Board of
Arbitration shall cause its written decision to be delivered to all parties
involved in the dispute. The Board of Arbitration shall be authorized and is
directed to enter a default judgment against any party refusing to participate
in the arbitration proceeding within thirty days of any deadline for such
participation. Any decision made by the Board of Arbitration (either prior to or
after the expiration of such thirty (30) calendar day period) shall be final,
binding and conclusive on the parties to the dispute, and entitled to be
enforced to the fullest extent permitted by law and entered in any court of
competent jurisdiction. The prevailing party shall be awarded its costs,
including attorneys' fees, from the non-prevailing party as part of the
arbitration award. Any party shall have the right to seek injunctive relief from
any court of competent jurisdiction in any case where such relief is available.
The prevailing party in such injunctive action shall be awarded its costs,
including reasonable attorneys' fees, from the non-prevailing party.

     Section 8.10. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart. Execution may be made by delivery by
facsimile.

     Section 8.11. Publicity. Neither the Company nor the Purchaser shall issue
any press release or otherwise make any public statement or announcement with
respect to this Agreement or the transactions contemplated hereby or the
existence of this Agreement, without the prior written consent of the other
party. After the Initial Closing, the Company may issue a press release or
otherwise make a public statement or announcement with respect to this Agreement
or the transactions contemplated hereby or the existence of this Agreement;
provided, however, that prior to issuing any such press release, making any such
public statement or announcement, the Company obtains the prior consent of the
Purchaser, which consent shall not be unreasonably withheld or delayed.

     Section 8.12. Severability. The provisions of this Agreement are severable
and, in the event that The Board of Arbitration or any court or officials of any
regulatory agency of competent jurisdiction shall determine that any one or more
of the provisions or part of the provisions contained in this Agreement shall,
for any reason, be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provision or part of a provision of this Agreement and this Agreement shall be
reformed and construed as if such invalid or illegal or unenforceable provision,
or part of such provision, had never been contained herein, so that such
provisions would be valid, legal and enforceable to

                                       24
<PAGE>

the maximum extent possible, so long as such construction does not materially
adversely affect the economic rights of either party hereto.

     Section 8.13. Further Assurances. From and after the date of this
Agreement, upon the request of the Purchaser or the Company, each of the Company
and the Purchaser shall execute and deliver such instruments, documents and
other writings as may be reasonably necessary or desirable to confirm and carry
out and to effectuate fully the intent and purposes of this Agreement.

     Section 8.14. Effectiveness of Agreement. This Agreement shall become
effective only upon satisfaction of the conditions precedent to the Initial
Closing set forth in Article I of the Escrow Agreement.

                                   ARTICLE 9

                                   DEFINITIONS

     Section 9.1. Certain Definitions.

          (a) "Commencement Date" shall have the meaning assigned to such term
     in Section 5.1(f) hereof.

          (b) "Commitment Amount" shall have the meaning assigned to such term
     in Section 1.1 hereof.

          (c) "Commitment Period" shall mean the period commencing on the
     Effective Date and expiring on the earliest to occur of (i) the date on
     which the Purchaser shall have exercised an aggregate amount of Draw Downs
     equal to the Commitment Amount, (ii) the date this Agreement is terminated
     in accordance with the terms hereof, or (iii) the date occurring thirty-six
     (36) months from the Effective Date.

          (d) "Common Stock" shall mean the Company's common stock, no par value
     per share.

          (e) "Disclosure Schedule" shall mean the schedules prepared by the
     Company and attached hereto.

          (f) "Draw Down" shall have the meaning assigned to such term in
     Section 5.1(a) hereof.

          (g) "Draw Down Notice" shall have the meaning assigned to such term in
     Section 5.1(f) hereof.

          (h) "Draw Down Pricing Period" shall mean a period of twenty-two (22)
     consecutive Trading Days beginning on the date specified in the Draw Down
     Notice (as defined in Section 5.1(f) herein); provided, however, the Draw
     Down Pricing Period shall not begin before the day on which receipt of such
     notice is confirmed by the Purchaser.

                                       25
<PAGE>

          (i) "DTC" shall have the meaning assigned to such term in Section
     5.1(g).

          (j) "DWAC" shall have the meaning assigned to such term in Section
     5.1(g).

          (k) "Effective Date" shall mean the date the Registration Statement of
     the Company covering the Shares being subscribed for hereby is declared
     effective by the SEC.

          (l) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
     amended, and the rules and regulations promulgated thereunder.

          (m) "GAAP" shall mean the United States Generally Accepted Accounting
     Principles as those conventions, rules and procedures are determined by the
     Financial Accounting Standards Board and its predecessor agencies.

          (n) "Initial Closing" shall have the meaning assigned to such term in
     Section 1.2 hereof.

          (o) "Initial Closing Date" shall have the meaning assigned to such
     term in Section 1.2 hereof.

          (p) "Investment Amount" shall have the meaning assigned to such term
     in Section 5.1(f) hereof.

          (q) "Material Adverse Effect" shall mean any adverse effect on the
     business, operations, properties, or financial condition of the Company
     that is material and adverse to the Company and its subsidiaries and
     affiliates, taken as a whole and/or any condition, circumstance, or
     situation that would prohibit or otherwise materially interfere with the
     ability of the Company to perform any of its material obligations under
     this Agreement or the Registration Rights Agreement or to perform its
     obligations under any other Material Agreement.

          (r) "Material Agreement" shall mean any written or oral contract,
     instrument, agreement, commitment, obligation, plan or arrangement, a copy
     of which is required to be filed with the SEC as an exhibit to any of the
     SEC Documents.

          (s) "Principal Market" shall mean initially the Nasdaq National Market
     and shall include the American Stock Exchange, Nasdaq Small-Cap Market, the
     OTC Bulletin Board and the New York Stock Exchange if the Company becomes
     listed and trades on such market or exchange after the date hereof.

          (t) "Purchase Price" shall mean, with respect to Shares purchased
     during each applicable Settlement Period, 82.5% of the VWAP on the date in
     question.

          (u) "Registration Statement" shall mean the registration statements
     under the Securities Act, to be filed with the Securities and Exchange
     Commission for the

                                       26
<PAGE>

     registration of the Shares pursuant to the Registration Rights Agreement
     attached hereto as Exhibit A (the "Registration Rights Agreement).

          (v) "SEC" shall mean the Securities and Exchange Commission.

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

          (x) "Securities Act" shall mean the Securities Act of 1933, as
     amended, and the rules and regulations promulgated thereunder.

          (y) "Settlement" shall mean the delivery of the Draw Down Shares into
     the Purchaser's DTC account via DTC's DWAC System in exchange for payment
     therefor.

          (z) "Settlement Date" shall have the meaning assigned to such term in
     Section 5.1(b).

          (aa) "Settlement Period" shall have the meaning assigned to such term
     in Section 5.1(b).

          (bb) "Shares" shall mean, collectively, the shares of Common Stock of
     the Company being subscribed for hereunder (the "Draw Down Shares") and the
     shares of Common Stock issuable upon exercise of the Warrant (the "Warrant
     Shares").

          (cc) "Threshold Price" shall mean the price per Share designated by
     the Company as the lowest VWAP during any Draw Down Pricing Period at which
     the Company shall sell its Common Stock in accordance with this Agreement.

          (dd) "Trading Day" shall mean any day on which the Principal Market is
     open for business.

          (ee) "Transaction Documents" shall mean this Agreement, the
     Registration Rights Agreement and the Escrow Agreement.

          (ff) "VWAP" shall mean the daily volume weighted average price of the
     Company's Common Stock on the Principal Market as reported by Bloomberg
     Financial L.P. (based on a trading day from 9:30 a.m. Eastern Time to 4:02
     p.m. Eastern Time) using the VAP function on the date in question.

          (gg) "Warrant" shall mean the warrant issued to the Purchaser pursuant
     to Section 4.2(f) hereof.

                            [SIGNATURE PAGE FOLLOWS]

                                       27
<PAGE>

               [SIGNATURE PAGE TO EQUITY LINE PURCHASE AGREEMENT]

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officer as of this 26th day of
July, 2001.

                                    DATA RACE, INC.

                                    By:  /s/ James G. Scogin
                                         James G. Scogin, President & CFO

                                    Grenville Finance Ltd.

                                    By:  /s/ Francois Morax
                                         Francois Morax, Authorized Signatory

                                       28Exhibit 10.32

                                                                       EXHIBIT A

                          REGISTRATION RIGHTS AGREEMENT

     THIS REGISTRATION RIGHTS AGREEMENT, dated as of July 26, 2001 between
Grenville Finance Ltd. ("Purchaser") and Data Race, Inc. (the "Company").

     WHEREAS, simultaneously with the execution and delivery of this Agreement,
the parties shall enter into the Common Stock Purchase Agreement, dated as of
the date hereof, (the "Purchase Agreement") pursuant to which the Purchaser has
committed to purchase up to $30,000,000 of the Company's Common Stock (terms not
defined herein shall have the meanings ascribed to them in the Purchase
Agreement) and the Warrant; and

     WHEREAS, the execution and delivery of this Agreement and granting to the
Purchaser of the registration rights set forth herein with respect to the Shares
is a component part of the transaction contemplated under the Purchase
Agreement.

     NOW, THEREFORE, the parties hereto mutually agree as follows:

     Section 1. Registrable Securities. As used herein the term "Registrable
Security" means all Shares that (i) have not been sold under the Registration
Statement, (ii) have not been sold under circumstances under which all of the
applicable conditions of Rule 144 (or any similar provision then in force) under
the Securities Act ("Rule 144") are met, (iii) have not been otherwise
transferred to persons who may trade such Shares without restriction under the
Securities Act, and the Company has delivered a new certificate or other
evidence of ownership for such Shares not bearing a restrictive legend, or (iv)
may not be sold without any time, volume or manner limitations pursuant to Rule
144(k) (or any similar provision then in effect) under the Securities Act. In
the event of any merger, reorganization, consolidation, recapitalization or
other change in corporate structure affecting the Common Stock, such adjustment
shall be deemed to be made in the definition of "Registrable Security" as is
appropriate in order to prevent any dilution or enlargement of the rights
granted pursuant to this Agreement.

     Section 2. Restrictions on Transfer. The Purchaser acknowledges and
understands that in the absence of an effective Registration Statement
authorizing the resale of the Shares as provided herein, the Shares are
"restricted securities" as defined in Rule 144. The Purchaser understands that
no disposition or transfer of the Shares may be made by Purchaser in the absence
of (i) an opinion of counsel to the Purchaser, in form and substance reasonably
satisfactory to the Company, that such transfer may be made without registration
under the Securities Act or (ii) such registration.

     With a view to making available to the Purchaser the benefits of Rule 144,
the Company agrees to:

          (a) comply with the provisions of paragraph (c)(1) of Rule 144; and

          (b) to file with the Commission in a timely manner all reports and
     other documents required to be filed by the Company pursuant to Section 13
     or 15(d) under the Exchange Act; and, if at any time it is not required to
     file such reports but in the past had been required to or did file such
     reports, it will, upon the request of the Purchaser, make

<PAGE>

     available other information as required by, and so long as necessary to
     permit sales of, its Registrable Securities pursuant to Rule 144.

     Section 3. Registration Rights With Respect to the Shares.

          (a) The Company agrees that it will prepare and file with the
     Securities and Exchange Commission ("Commission"), within forty-five (45)
     days after the date hereof, a registration statement (on Form S-3 and/or
     SB-2, or other appropriate form of registration statement) under the
     Securities Act (the "Registration Statement"), at the sole expense of the
     Company (except as provided in Section 3(c) hereof), so as to permit a
     public offering and resale of the Shares under the Securities Act by
     Purchaser.

          (b) The Company shall use its best efforts to cause the Registration
     Statement to become effective within the earlier of (i) one hundred and
     twenty (120) days of the date of filing the Registration Statement, or (ii)
     five (5) days after receiving written notice of SEC clearance and will
     within said five (5) days request acceleration of effectiveness. The
     Company will notify Purchaser of the effectiveness of the Registration
     Statement within one Trading Day of such event.

          (c) The Company will maintain the Registration Statement or
     post-effective amendment filed under this Section 3 hereof effective under
     the Securities Act until the earliest of (i) the date that all the
     Registrable Securities have been disposed of pursuant to the Registration
     Statement, (ii) the date that all of the Registrable Securities have been
     sold pursuant to the Registration Statement, (iii) the date that all of the
     Registrable Securities have been otherwise transferred to persons who may
     trade such shares without restriction under the Securities Act, and the
     Company has delivered a new certificate or other evidence of ownership for
     such Shares not bearing a restrictive legend, (iv) the date that all of the
     Registrable Securities may be sold without any time, volume or manner
     limitations pursuant to Rule 144(k) or any similar provision then in effect
     under the Securities Act in the opinion of counsel to the Company, which
     counsel shall be reasonably acceptable to the Purchaser (the "Effectiveness
     Period").

          (d) All fees, disbursements and out-of-pocket expenses and costs
     incurred by the Company in connection with the preparation and filing of
     the Registration Statement under subparagraph 3(a) and in complying with
     applicable securities and Blue Sky laws (including, without limitation, all
     attorneys' fees of the Company) shall be borne by the Company. The
     Purchaser shall bear the cost of underwriting and/or brokerage discounts,
     fees and commissions, if any, applicable to the Shares being registered and
     the fees and expenses of its counsel.

          (e) The Purchaser and its counsel shall have a reasonable period, not
     to exceed ten (10) Trading Days, to review the proposed Registration
     Statement or any amendment thereto, prior to filing with the Commission,
     and the Company shall provide the Purchaser with copies of any comment
     letters received from the Commission with respect thereto within two (2)
     Trading Days of receipt thereof.

          (f) The Company shall make reasonably available for inspection by
     Purchaser, any underwriter participating in any disposition pursuant to the
     Registration Statement, and any attorney, accountant or other agent
     retained by the Purchaser or any

                                       2
<PAGE>

     such underwriter all relevant financial and other records, pertinent
     corporate documents and properties of the Company and its subsidiaries, and
     cause the Company's officers, directors and employees to supply all
     information reasonably requested by the Purchaser or any such underwriter,
     attorney, accountant or agent in connection with the Registration
     Statement, in each case, as is customary for similar due diligence
     examinations; provided, however, that all records, information and
     documents that are designated in writing by the Company, in good faith, as
     confidential, proprietary or containing any material non-public information
     shall be kept confidential by the Purchaser and any such underwriter,
     attorney, accountant or agent, unless such disclosure is made pursuant to
     judicial process in a court proceeding (after first giving the Company an
     opportunity promptly to seek a protective order or otherwise limit the
     scope of the information sought to be disclosed) or is required by law, or
     such records, information or documents become available to the public
     generally or through a third party not in violation of an accompanying
     obligation of confidentiality. If the foregoing inspection and information
     gathering would otherwise disrupt the Company's conduct of its business,
     such inspection and information gathering shall, to the maximum extent
     possible, be coordinated on behalf of the Purchaser and the other parties
     entitled thereto by one firm of counsel designed by and on behalf of the
     majority in interest of Purchaser and other parties.

          (g) The Company shall qualify any of the Shares for sale in such
     states as the Purchaser reasonably designates and shall furnish
     indemnification in the manner provided in Section 6 hereof. However, the
     Company shall not be required to qualify in any state which will require an
     escrow or other restriction relating to the Company and/or the sellers, or
     which will require the Company to qualify to do business in such state or
     require the Company to file therein any general consent to service of
     process.

          (h) The Company at its expense will supply the Purchaser with copies
     of the Registration Statement and the final prospectus included therein
     (the "Prospectus") and other related documents in such quantities as may be
     reasonably requested by the Purchaser.

          (i) The Company shall not be required by this Section 3 to include the
     Purchaser's Shares in any Registration Statement which is to be filed if,
     in the opinion of counsel for both the Purchaser and the Company (or,
     should they not agree, in the opinion of another counsel experienced in
     securities law matters acceptable to counsel for the Purchaser and the
     Company) the proposed offering or other transfer as to which such
     registration is requested is exempt from applicable federal and state
     securities laws and would result in all purchasers or transferees obtaining
     securities which are not "restricted securities", as defined in Rule 144
     under the Securities Act.

          (j) If at any time or from time to time after the effective date of
     the Registration Statement, the Company notifies the Purchaser in writing
     of the existence of a Potential Material Event (as defined in Section 3(k)
     below), the Purchaser shall not offer or sell any Shares or engage in any
     other transaction involving or relating to Shares, from the time of the
     giving of notice with respect to a Potential Material Event until the
     Purchaser receives written notice from the Company that such Potential
     Material Event either has been disclosed to the public or no longer
     constitutes a Potential Material Event (the "Suspension Period").
     Notwithstanding anything herein to the contrary, if a Suspension Period
     occurs at any time during any period commencing on a Trading Day a

                                       3
<PAGE>

     Draw Down Notice is deemed delivered and ending ten (10) Trading Days
     following the end of the corresponding Draw Down Pricing Period, then the
     Company must compensate the Purchaser for any net decline in the market
     value of any Shares purchased, or committed to be purchased, by the
     Purchaser pursuant to such recent Draw Down Pricing Period through the end
     of such Suspension Period. Net decline shall be calculated as the
     difference between the highest VWAP during the applicable Suspension Period
     and the VWAP on the Trading Day immediately following a properly delivered
     notice to the Purchaser that such Suspension Period has ended. If a
     Potential Material Event shall occur prior to the date the Registration
     Statement is filed, then the Company's obligation to file the Registration
     Statement shall be delayed without penalty for not more than thirty (30)
     calendar days. The Company must give Purchaser notice in writing of the
     existence of a Potential Material Event promptly upon knowledge that such
     an event exists and, where possible, at least two (2) days prior to the
     first day of a Suspension Period, if lawful to do so.

          (k) "Potential Material Event" means any of the following: (i) the
     possession by the Company of material information that is not ripe for
     disclosure in a registration statement, as determined in good faith by the
     Chief Executive Officer or the Board of Directors of the Company or that
     disclosure of such information in the Registration Statement would be
     detrimental to the business and affairs of the Company; (ii) any material
     engagement or activity by the Company which would, in the good faith
     determination of the Chief Executive Officer or the Board of Directors of
     the Company, be adversely affected by disclosure in a registration
     statement at such time, which determination shall be accompanied by a good
     faith determination by the Chief Executive Officer or the Board of
     Directors of the Company that the Registration Statement would be
     materially misleading absent the inclusion of such information, or (iii)
     pursuant to applicable law, the Company is required to file a
     post-effective amendment to the Registration Statement because the Company
     experiences a fundamental change, must change the plan of distribution to
     the Prospectus, or must update the information included in the Prospectus
     pursuant to Section 10(a)(3) of the Securities Act.

     Section 4. Cooperation with Company. The Purchaser will cooperate with the
Company in all respects in connection with this Agreement, including timely
supplying all information reasonably requested by the Company (which shall
include all information regarding the Purchaser and proposed manner of sale of
the Registrable Securities required to be disclosed in the Registration
Statement) and executing and returning all documents reasonably requested in
connection with the registration and sale of the Registrable Securities and
entering into and performing its obligations under any underwriting agreement,
if the offering is an underwritten offering, in usual and customary form, with
the managing underwriter or underwriters of such underwritten offering. The
Purchaser shall consent to be named as an underwriter in the Registration
Statement. The Purchaser acknowledges that in accordance with current Commission
policy, the Purchaser will be named as the underwriter of the Shares in the
Registration Statement.

     Section 5. Registration Procedures. If and whenever the Company is required
by any of the provisions of this Agreement to effect the registration of any of
the Registrable Securities under the Securities Act, the Company shall (except
as otherwise provided in this

                                       4
<PAGE>

Agreement), as expeditiously as possible, subject to the Purchaser's assistance
and cooperation as reasonably required:

          (a) (i) prepare and file with the Commission such amendments and
     supplements to the Registration Statement and the Prospectus as may be
     necessary to keep such registration statement effective and to comply with
     the provisions of the Securities Act with respect to the sale or other
     disposition of all securities covered by such registration statement
     whenever the Purchaser of such Registrable Securities shall desire to sell
     or otherwise dispose of the same (including prospectus supplements with
     respect to the sales of securities from time to time in connection with a
     registration statement pursuant to Rule 415 promulgated under the
     Securities Act) and (ii) take all lawful action such that each of (A) the
     Registration Statement and any amendment thereto does not, when it becomes
     effective, contain an untrue statement of a material fact or omit to state
     a material fact required to be stated therein or necessary to make the
     statements therein not misleading and (B) the Prospectus, and any amendment
     or supplement thereto, does not at any time during the Effectiveness Period
     include an untrue statement of a material fact or omit to state a material
     fact required to be stated therein or necessary to make the statements
     therein, in light of the circumstances under which they were made, not
     misleading;

          (b) (i) prior to the filing with the Commission of any Registration
     Statement (including any amendments thereto) and the distribution or
     delivery of the Prospectus (including any supplements thereto), provide
     draft copies thereof to the Purchaser and reflect in such documents all
     such comments as the Purchaser (and its counsel) reasonably may propose and
     (ii) furnish to the Purchaser such numbers of copies of the Prospectus
     including a preliminary prospectus or any amendment or supplement to the
     Prospectus, as applicable, in conformity with the requirements of the
     Securities Act, and such other documents, as the Purchaser may reasonably
     request in order to facilitate the public sale or other disposition of the
     Registrable Securities;

          (c) comply with the New York blue sky laws with respect to the
     Registrable Securities (subject to the limitations set forth in Section
     3(g) above), and do any and all other acts and things which may be
     reasonably necessary or advisable to enable the Purchaser to consummate the
     public sale or other disposition in such jurisdiction of the Registrable
     Securities, except that the Company shall not for any such purpose be
     required to qualify to do business as a foreign corporation in any
     jurisdiction wherein it is not so qualified or to file therein any general
     consent to service of process;

          (d) list such Registrable Securities on the Principal Market, and any
     other exchange on which the Common Stock of the Company is then listed, if
     the listing of such Registrable Securities is then permitted under the
     rules of such exchange or the Principal Market;

          (e) notify the Purchaser at any time when the Prospectus is required
     to be delivered under the Securities Act, of the happening of any event of
     which it has knowledge as a result of which the Prospectus, as then in
     effect, includes an untrue statement of a material fact or omits to state a
     material fact required to be stated therein or necessary to make the
     statements therein not misleading in the light of the circumstances then
     existing, and the Company shall prepare and file a curative amendment or
     curative

                                       5
<PAGE>

     supplement under Section 5(a) as quickly as commercially possible and the
     period beginning on the date of notice until the curative amendment is
     effective or a curative supplement is filed shall be deemed a Suspension
     Period and the Company shall compensate the Purchaser as set forth in
     Section 3(j) herein;

          (f) as promptly as practicable after becoming aware of such event,
     notify the Purchaser (or, in the event of an underwritten offering, the
     managing underwriters) of the issuance by the Commission or any state
     authority of any stop order or other suspension of the effectiveness of the
     Registration Statement at the earliest possible time and take all lawful
     action to effect the withdrawal, rescission or removal of such stop order
     or other suspension;

          (g) take all such other lawful actions reasonably necessary to
     expedite and facilitate the disposition by the Purchaser of its Registrable
     Securities in accordance with the intended methods therefor provided in the
     Prospectus which are customary for issuers to perform under the
     circumstances;

          (h) in the event of an underwritten offering, promptly include or
     incorporate in a prospectus supplement or post-effective amendment to the
     Registration Statement such information as the managing underwriters
     reasonably agree should be included therein and to which the Company does
     not reasonably object and make all required filings of such prospectus
     supplement or post-effective amendment as soon as practicable after it is
     notified of the matters to be included or incorporated in such prospectus
     supplement or post-effective amendment; and

          (i) maintain a transfer agent for its Common Stock.

     Section 6. Indemnification.

          (a) The Company agrees to indemnify and hold harmless the Purchaser
     and each person, if any, who controls the Purchaser within the meaning of
     the Securities Act ("Distributing Purchaser") against any losses, claims,
     damages or liabilities, joint or several (which shall, for all purposes of
     this Agreement, include, but not be limited to, all reasonable costs of
     defense and investigation and all reasonable attorneys' fees), to which the
     Distributing Purchaser may become subject, under the Securities Act or
     otherwise, insofar as such losses, claims, damages or liabilities (or
     actions in respect thereof) arise out of or are based upon any untrue
     statement or alleged untrue statement of any material fact contained in the
     Registration Statement, or any related preliminary prospectus, the
     Prospectus or amendment or supplement thereto, or arise out of or are based
     upon the omission or alleged omission to state therein a material fact
     required to be stated therein or necessary to make the statements therein
     in light of the circumstances when made not misleading; provided, however,
     that the Company will not be liable in any such case to the extent that any
     such loss, claim, damage or liability arises out of or is based upon an
     untrue statement or alleged untrue statement or omission or alleged
     omission made in the Registration Statement, preliminary prospectus, the
     Prospectus or amendment or supplement thereto in reliance upon, and in
     conformity with, written information furnished to the Company by the
     Distributing Purchaser specifically for use in the preparation thereof.
     This Section 6(a) shall not inure to the benefit of any Distributing
     Purchaser with respect to any person asserting such loss, claim, damage or
     liability who

                                       6
<PAGE>

     purchased the Registrable Securities which are the subject thereof if the
     Distributing Purchaser failed to send or give a copy of the Prospectus to
     such person at or prior to the written confirmation to such person of the
     sale of such Registrable Securities, where the Distributing Purchaser was
     obligated to do so under the Securities Act or the rules and regulations
     promulgated thereunder. This indemnity agreement will be in addition to any
     liability which the Company may otherwise have.

          (b) Each Distributing Purchaser agrees that it will indemnify and hold
     harmless the Company, and each officer, director of the Company or person,
     if any, who controls the Company within the meaning of the Securities Act,
     against any losses, claims, damages or liabilities (which shall, for all
     purposes of this Agreement, include, but not be limited to, all reasonable
     costs of defense and investigation and all reasonable attorneys' fees) to
     which the Company or any such officer, director or controlling person may
     become subject under the Securities Act or otherwise, insofar as such
     losses, claims, damages or liabilities (or actions in respect thereof)
     arise out of or are based upon any untrue statement or alleged untrue
     statement of any material fact contained in the Registration Statement, or
     any related preliminary prospectus, the Prospectus or amendment or
     supplement thereto, or arise out of or are based upon the omission or the
     alleged omission to state therein a material fact required to be stated
     therein or necessary to make the statements therein not misleading, but in
     each case only to the extent that such untrue statement or alleged untrue
     statement or omission or alleged omission was made in the Registration
     Statement, preliminary prospectus, the Prospectus or amendment or
     supplement thereto in reliance upon, and in conformity with, written
     information furnished to the Company by such Distributing Purchaser
     specifically for use in the preparation thereof. This indemnity agreement
     will be in addition to any liability which the Distributing Purchaser may
     otherwise have. Notwithstanding anything to the contrary herein, the
     Distributing Purchaser shall not be liable under this Section 6(b) for any
     amount in excess of the net proceeds to such Distributing Purchaser as a
     result of the sale of Registrable Securities pursuant to the Registration
     Statement.

          (c) Promptly after receipt by an indemnified party under this Section
     6 of notice of the commencement of any action, such indemnified party will,
     if a claim in respect thereof is to be made against the indemnifying party
     under this Section 6, notify the indemnifying party of the commencement
     thereof; but the omission so to notify the indemnifying party will not
     relieve the indemnifying party from any liability which it may have to any
     indemnified party except to the extent of actual prejudice demonstrated by
     the indemnifying party. In case any such action is brought against any
     indemnified party, and it notifies the indemnifying party of the
     commencement thereof, the indemnifying party will be entitled to
     participate in, and, to the extent that it may wish, jointly with any other
     indemnifying party similarly notified, assume the defense thereof, subject
     to the provisions herein stated and after notice from the indemnifying
     party to such indemnified party of its election so to assume the defense
     thereof, the indemnifying party will not be liable to such indemnified
     party under this Section 6 for any legal or other expenses subsequently
     incurred by such indemnified party in connection with the defense thereof
     other than reasonable costs of investigation, unless the indemnifying party
     shall not pursue the action to its final conclusion. The indemnified party
     shall have the right to employ separate counsel in any such action and to
     participate in the defense thereof, but the fees and expenses of such
     counsel shall not be at the expense of the

                                       7
<PAGE>

     indemnifying party if the indemnifying party has assumed the defense of the
     action with counsel reasonably satisfactory to the indemnified party;
     provided that if the indemnified party is the Distributing Purchaser, the
     fees and expenses of such counsel shall be at the expense of the
     indemnifying party if (i) the employment of such counsel has been
     specifically authorized in writing by the indemnifying party, or (ii) the
     named parties to any such action (including any impleaded parties) include
     both the Distributing Purchaser and the indemnifying party and the
     Distributing Purchaser shall have been advised by such counsel in writing
     that there may be one or more legal defenses available to the indemnifying
     party different from or in conflict with any legal defenses which may be
     available to the Distributing Purchaser (in which case the indemnifying
     party shall not have the right to assume the defense of such action on
     behalf of the Distributing Purchaser, it being understood, however, that
     the indemnifying party shall, in connection with any one such action or
     separate but substantially similar or related actions in the same
     jurisdiction arising out of the same general allegations or circumstances,
     be liable only for the reasonable fees and expenses of one separate firm of
     attorneys for the Distributing Purchaser, which firm shall be designated in
     writing by the Distributing Purchaser and be approved by the indemnifying
     party). No settlement of any action against an indemnified party shall be
     made without the prior written consent of the indemnified party, which
     consent shall not be unreasonably withheld.

     All fees and expenses of the indemnified party (including reasonable costs
of defense and investigation in a manner not inconsistent with this Section and
all reasonable attorneys' fees and expenses) shall be promptly paid to the
indemnified party, as incurred; within ten (10) Trading Days of written notice
thereof to the indemnified party; provided, that the indemnifying party may
require such indemnified party to undertake to reimburse all such fees and
expenses to the extent it is finally judicially determined that such indemnified
party is not entitled to indemnification hereunder.

     Section 7. Contribution. In order to provide for just and equitable
contribution under the Securities Act in any case in which (i) the indemnified
party makes a claim for indemnification pursuant to Section 6 hereof but is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of Section 6 hereof provide
for indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any indemnified party, then the Company and the
applicable Distributing Purchaser shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (which shall, for
all purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys' fees), in
either such case (after contribution from others) on the basis of relative fault
as well as any other relevant equitable considerations. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or the applicable Distributing Purchaser on the other hand, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Distributing Purchaser
agree that it would not be just and equitable if contribution pursuant to this
Section 7 were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations

                                       8
<PAGE>

referred to in this Section 7. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in this Section 7 shall be deemed to include
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.

     Notwithstanding any other provision of this Section 7, in no event shall
any (i) Purchaser be required to undertake liability to any person under this
Section 7 for any amounts in excess of the dollar amount of the net proceeds to
be received by the Purchaser from the sale of the Purchaser's Registrable
Securities (after deducting any fees, discounts and commissions applicable
thereto) pursuant to any Registration Statement under which such Registrable
Securities are or were to be registered under the Securities Act and (ii)
underwriter be required to undertake liability to any person hereunder for any
amounts in excess of the aggregate discount, commission or other compensation
payable to such underwriter with respect to the Registrable Securities
underwritten by it and distributed pursuant to the Registration Statement.

     Section 8. Notices. All notices, demands, requests, consents, approvals,
and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be delivered as set forth in the
Purchase Agreement.

     Section 9. Assignment. Neither this Agreement nor any rights of the
Purchaser or the Company hereunder may be assigned by either party to any other
person. Notwithstanding the foregoing, upon the prior written consent of the
Company, which consent shall not be unreasonably withheld or delayed in the case
of an assignment to an affiliate of the Purchaser, the Purchaser's interest in
this Agreement may be assigned at any time, in whole or in part, to any other
person or entity (including any affiliate of the Purchaser) who agrees to be
bound hereby.

     Section 10. Counterparts/Facsimile. This Agreement may be executed in two
or more counterparts, each of which shall constitute an original, but all of
which, when together shall constitute but one and the same instrument, and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered to the other party. In lieu of the original, a facsimile
transmission or copy of the original shall be as effective and enforceable as
the original.

     Section 11. Remedies and Severability. The remedies provided in this
Agreement are cumulative and not exclusive of any remedies provided by law. If
any term, provision, covenant or restriction of this Agreement is held by a
board of arbitration or a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of those
that may be hereafter declared invalid, illegal, void or unenforceable.

                                       9
<PAGE>

     Section 12. Conflicting Agreements. The Company shall not enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the purchasers of Registrable Securities in this Agreement or
otherwise prevents the Company from complying with all of its obligations
hereunder.

     Section 13. Headings. The headings in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.

     Section 14. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made in New York by persons domiciled in New York City and without
regard to its principles of conflicts of laws. Any action may be brought as set
forth in the Purchase Agreement. The Company and the Purchaser agree to submit
themselves to the in personam jurisdiction of the state and federal courts
situated within the Southern District of the State of New York with regard to
any controversy arising out of or relating to this Agreement. Any party shall
have the right to seek injunctive relief from any court of competent
jurisdiction in any case where such relief is available. Any dispute under this
Agreement shall be submitted to arbitration under the American Arbitration
Association (the "AAA") in New York City, New York, and shall be finally and
conclusively determined by the decision of a board of arbitration consisting of
three (3) members (hereinafter referred to as the "Board of Arbitration")
selected as according to the rules governing the AAA. The Board of Arbitration
shall meet on consecutive business days in New York City, New York, and shall
reach and render a decision in writing (concurred in by a majority of the
members of the Board of Arbitration) with respect to the amount, if any, which
the losing party is required to pay to the other party in respect of a claim
filed. In connection with rendering its decisions, the Board of Arbitration
shall adopt and follow the laws of the State of New York. To the extent
practical, decisions of the Board of Arbitration shall be rendered no more than
thirty (30) calendar days following commencement of proceedings with respect
thereto. The Board of Arbitration shall cause its written decision to be
delivered to all parties involved in the dispute. The Board of Arbitration shall
be authorized and is directed to enter a default judgment against any party
refusing to participate in the arbitration proceeding within thirty days of any
deadline for such participation. Any decision made by the Board of Arbitration
(either prior to or after the expiration of such thirty (30) calendar day
period) shall be final, binding and conclusive on the parties to the dispute,
and entitled to be enforced to the fullest extent permitted by law and entered
in any court of competent jurisdiction. The prevailing party shall be awarded
its costs, including attorneys' fees, from the non-prevailing party as part of
the arbitration award. Any party shall have the right to seek injunctive relief
from any court of competent jurisdiction in any case where such relief is
available. The prevailing party in such injunctive action shall be awarded its
costs, including attorney's fees, from the non-prevailing party.

                            [SIGNATURE PAGE FOLLOWS]

                                       10
<PAGE>

      [SIGNATURE PAGE TO REGISTRATION RIGHTS REGISTRATION RIGHTS AGREEMENT]

     IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed, on this 26th day of July, 2001

                                    DATA RACE, INC.

                                    By:  /s/ James G. Scogin
                                         James G. Scogin, President & CFO

                                    GRENVILLE FINANCE LTD.

                                    By:  /s/ Francois Morax
                                         Francois Morax, Authorized Signatory

                                       11

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