Document:

Exhibit 4.1
                                                             Document is copied.

                         TIDELANDS OIL & GAS CORPORATION

                              INVESTMENT AGREEMENT

         THE SECURITIES  OFFERED HEREBY HAVE NOT BEEN  REGISTERED  WITH
         THE SECURITIES  AND EXCHANGE  COMMISSION OR ANY STATE OR OTHER
         SECURITIES  AUTHORITIES.  THEY MAY NOT BE SOLD OR  TRANSFERRED
         EXCEPT PURSUANT TO AN EFFECTIVE  REGISTRATION  STATEMENT OR AN
         EXEMPTION FROM THE  REGISTRATION  REQUIREMENTS  OF THE FEDERAL
         AND STATE SECURITIES LAWS.

         THIS  INVESTMENT  AGREEMENT  DOES NOT  CONSTITUTE  AN OFFER TO
         SELL, OR A  SOLICITATION  OF AN OFFER TO PURCHASE,  ANY OF THE
         SECURITIES  DESCRIBED  HEREIN  BY  OR TO  ANY  PERSON  IN  ANY
         JURISDICTION  IN WHICH  SUCH  OFFER OR  SOLICITATION  WOULD BE
         UNLAWFUL.  THESE  SECURITIES HAVE NOT BEEN  RECOMMENDED BY ANY
         FEDERAL  OR  STATE  SECURITIES  AUTHORITIES,   NOR  HAVE  SUCH
         AUTHORITIES  CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY
         OF THIS  DOCUMENT.  ANY  REPRESENTATION  TO THE  CONTRARY IS A
         CRIMINAL OFFENSE.

         AN  INVESTMENT IN THESE  SECURITIES  INVOLVES A HIGH DEGREE OF
         RISK.  THE  INVESTOR  MUST  RELY  ON ITS OWN  ANALYSIS  OF THE
         INVESTMENT AND ASSESSMENT OF THE RISKS INVOLVED.  SEE THE RISK
         FACTORS  SET FORTH IN THE  ATTACHED  DISCLOSURE  DOCUMENTS  AS
         EXHIBIT J.

         SEE ADDITIONAL LEGENDS AT SECTIONS 4.7.

         THIS INVESTMENT AGREEMENT (this "Agreement" or "Investment  Agreement")
is made as of the 17th day of October,  2000, by and between Tidelands Oil & Gas
Corporation,  a corporation  duly  organized and existing  under the laws of the
State of Nevada (the  "Company"),  and the undersigned  Investor  executing this
Agreement ("Investor").

                                    RECITALS:

         WHEREAS,  the parties  desire  that,  upon the terms and subject to the
conditions  contained herein,  the Company shall issue to the Investor,  and the
Investor shall purchase from the Company,  from time to time as provided herein,
shares of the Company's  Common Stock, as part of an offering of Common Stock by
the  Company to  Investor,  for a maximum  aggregate  offering  amount of Twenty
Million Dollars ($20,000,000) (the "Maximum Offering Amount"); and

         WHEREAS, the solicitation of this Investment Agreement and, if accepted
by the  Company,  the offer  and sale of the  Common  Stock  are  being  made in
reliance upon the provisions of Regulation D ("Regulation D") promulgated  under
the Act,  Section  4(2) of the Act,  and/or upon such other  exemption  from the
registration  requirements of the Act as may be available with respect to any or
all of the purchases of Common Stock to be made hereunder.

                                     TERMS:

         NOW, THEREFORE, the parties hereto agree as follows:

         1.  Certain  Definitions.  As  used in this  Agreement  (including  the
recitals  above),  the following  terms shall have the following  meanings (such
meanings to be equally  applicable  to both the singular and plural forms of the
terms defined):

         "20% Approval" shall have the meaning set forth in Section 5.25.

         "9.9% Limitation" shall have the meaning set forth in Section 2.3.1(f).

         "Accredited Investor" shall have the meaning set forth in Section 3.1.

<PAGE>

         "Act" shall mean the Securities Act of 1933, as amended.

         "Additional  Warrant"  shall have the  meaning set forth in the Warrant
Antidilution Agreement.

         "Advance  Put  Notice"  shall  have the  meaning  set forth in  Section
2.3.1(a), the form of which is attached hereto as Exhibit E.

         "Advance Put Notice  Confirmation"  shall have the meaning set forth in
Section 2.3.1(a), the form of which is attached hereto as Exhibit F.

         "Advance  Put Notice  Date" shall have the meaning set forth in Section
2.3.1(a).

         "Affiliate" shall have the meaning as set forth Section 6.4.

         "Aggregate  Issued  Shares"  equals the  aggregate  number of shares of
Common Stock issued to Investor  pursuant to the terms of this  Agreement or the
Registration  Rights  Agreement  as of a given  date,  including  Put Shares and
Warrant Shares.

         "Agreed  Upon  Procedures  Report"  shall have the meaning set forth in
Section 2.5.3(b).

         "Agreement" shall mean this Investment Agreement.

         "Automatic  Termination"  shall have the  meaning  set forth in Section
2.3.2.

         "Bring Down Cold Comfort  Letters"  shall have the meaning set forth in
Section 2.3.6(b).

         "Business Day" shall mean any day during which the Principal  Market is
open for trading.

         "Calendar Month" shall mean the period of time beginning on the numeric
day in  question  in a  calendar  month  and  for  Calendar  Months  thereafter,
beginning on the earlier of (i) the same numeric day of the next calendar  month
or (ii) the last day of the next calendar  month.  Each Calendar Month shall end
on the day immediately  preceding the beginning of the next succeeding  Calendar
Month.

         "Cap Amount" shall have the meaning set forth in Section 2.3.10.

         "Capital  Raising  Limitations"  shall  have the  meaning  set forth in
Section 6.5.1.

         "Capitalization  Schedule"  shall have the meaning set forth in Section
3.2.4, attached hereto as Exhibit K.

         "Change  in  Control"  shall  have the  meaning  set forth  within  the
definition of Major Transaction, below.

         "Closing" shall mean one of (i) the Investment  Commitment  Closing and
(ii) each closing of a purchase and sale of Common Stock pursuant to Section 2.

         "Closing Bid Price"  means,  for any security as of any date,  the last
closing bid price for such security during Normal Trading on the O.T.C. Bulletin
Board, or, if the O.T.C. Bulletin Board is not the principal securities exchange
or trading  market for such  security,  the last closing bid price during Normal
Trading of such security on the principal  securities exchange or trading market
where such security is listed or traded as reported by such principal securities
exchange or trading market,  or if the foregoing do not apply,  the last closing
bid price during Normal Trading of such security in the over-the-counter  market
on the electronic bulletin board for such security,  or, if no closing bid price
is  reported  for such  security,  the  average  of the bid prices of any market
makers for such  security  as  reported  in the "pink  sheets"  by the  National
Quotation  Bureau,  Inc. If the Closing Bid Price cannot be calculated  for such
security on such date on any of the  foregoing  bases,  the Closing Bid Price of
such security on such date shall be the fair market value as mutually determined
by the  Company  and the  Investor  in this  Offering.  If the  Company  and the
Investor in this  Offering are unable to agree upon the fair market value of the
Common Stock, then such dispute shall be resolved by an investment  banking firm
mutually  acceptable  to the Company and the  Investor in this  offering and any
fees and costs associated therewith shall be paid by the Company.

<PAGE>

         "Commitment  Evaluation  Period"  shall have the  meaning  set forth in
Section 2.6.

         "Commitment  Warrants"  shall  have the  meaning  set forth in  Section
2.4.1, the form of which is attached hereto as Exhibit U.

         "Common Shares" shall mean the shares of Common Stock of the Company.

         "Common Stock" shall mean the common stock of the Company.

         "Company"  shall mean  Tidelands Oil & Gas  Corporation,  a corporation
duly organized and existing under the laws of the State of Nevada.

         "Company  Designated  Maximum Put Dollar Amount" shall have the meaning
set forth in Section 2.3.1(a).

         "Company Designated Minimum Put Share Price" shall have the meaning set
forth in Section 2.3.1(a).

         "Company  Termination"  shall  have the  meaning  set forth in  Section
2.3.12.

         "Conditions  to Investor's  Obligations"  shall have the meaning as set
forth in Section 2.2.2.

          "Delisting  Event"  shall  mean  any  time  during  the  term  of this
Investment  Agreement,  that the  Company's  Common  Stock is not listed for and
actively trading on the O.T.C.  Bulletin Board, the Nasdaq Small Cap Market, the
Nasdaq  National  Market,  the American  Stock  Exchange,  or the New York Stock
Exchange or is suspended  or delisted  with respect to the trading of the shares
of Common Stock on such market or exchange.

         "Disclosure  Documents"  shall have the meaning as set forth in Section
3.2.4.

         "Due  Diligence  Review" shall have the meaning as set forth in Section
2.5.

         "Effective Date" shall have the meaning set forth in Section 2.3.1.

         "Equity Securities" shall have the meaning set forth in Section 6.5.1.

<PAGE>

         "Evaluation Day" shall have the meaning set forth in Section 2.3.1(b).

         "Exchange  Act"  shall mean the  Securities  Exchange  Act of 1934,  as
amended.

         "Excluded Day" shall have the meaning set forth in Section 2.3.1(b).

         "Extended Put Period" shall mean the period of time between the Advance
Put Notice Date until the Pricing Period End Date.

         "Impermissible  Put  Cancellation"  shall have the meaning set forth in
Section 2.3.1(e).

         "Indemnified  Liabilities"  shall have the meaning set forth in Section
9.

         "Indemnities" shall have the meaning set forth in Section 9.

         "Indemnitor" shall have the meaning set forth in Section 9.

         "Individual  Put  Limit"  shall have the  meaning  set forth in Section
2.3.1 (b).

          "Ineffective  Period"  shall  have  the  meaning  given  to it in  the
Registration Rights Agreement.

         "Ineffective  Registration  Payment" shall have the meaning given to it
in the Registration Rights Agreement.

         "Intended Put Share Amount" shall have the meaning set forth in Section
2.3.1(a).

         "Investment  Commitment  Closing"  shall have the  meaning set forth in
Section 2.2.1.

         "Investment Agreement" shall mean this Investment Agreement.

         "Investment  Commitment  Opinion of Counsel" shall mean an opinion from
Company's  outside legal counsel,  substantially in the form attached as Exhibit
B, or such  other  form as  agreed  upon by the  parties,  as to the  Investment
Commitment Closing.

         "Investment  Date"  shall  mean the date of the  Investment  Commitment
Closing.

         "Investor" shall have the meaning set forth in the preamble hereto.

         "Key Employee" shall have the meaning set forth in Section 5.17, as set
forth in Exhibit N.

         "Late  Payment  Amount"  shall  have the  meaning  set forth in Section
2.3.9.

         "Legend" shall have the meaning set forth in Section 4.7.

<PAGE>

         "Major  Transaction" shall mean and shall be deemed to have occurred at
such time upon any of the following events:

                  (i) a consolidation,  merger or other business  combination or
event or transaction  following which the holders of Common Stock of the Company
immediately  preceding such consolidation,  merger,  combination or event either
(i) no longer  hold a majority  of the shares of Common  Stock of the Company or
(ii) no longer have the ability to elect the board of  directors  of the Company
(a "Change of Control");

                  (ii) the sale or transfer of a portion of the Company's assets
not in the ordinary course of business;

                  (iii)  the  purchase  of  assets  by  the  Company  not in the
ordinary course of business; or

                  (iv) a purchase,  tender or exchange offer made to the holders
of outstanding shares of Common Stock.

         "Market  Price" shall equal the lowest Closing Bid Price for the Common
Stock on the Principal Market during the Pricing Period for the applicable Put.

         "Material Facts" shall have the meaning set forth in Section 2.3.6(a).

         "Maximum  Put Dollar  Amount"  shall mean the lesser of (i) the Company
Designated  Maximum Put Dollar Amount, if any, specified by the Company in a Put
Notice, and (ii) $2 million.

         "Maximum  Offering Amount" shall mean have the meaning set forth in the
recitals hereto.

         "NASD" shall have the meaning set forth in Section 6.9.

         "Nasdaq 20% Rule" shall have the meaning set forth in Section 2.3.10.

         "Normal  Trading"  shall mean trading  that occurs  between 9:30 AM and
4:00 PM, New York City Time,  on any Business Day, and shall  expressly  exclude
"after hours" trading.

         "Numeric  Day"  shall  mean  the  numerical  day  of the  month  of the
Investment Date or the last day of the calendar month in question,  whichever is
less.

         "NYSE" shall have the meaning set forth in Section 6.9.

         "Offering"  shall  mean the  Company's  offering  of  Common  Stock and
Warrants issued under this Investment Agreement.

         "Officer's Certificate" shall mean a certificate,  signed by an officer
of the Company,  to the effect that the  representations  and  warranties of the
Company in this  Agreement  required to be true for the  applicable  Closing are
true  and  correct  in all  material  respects  and  all of the  conditions  and
limitations  set  forth  in  this  Agreement  for  the  applicable  Closing  are
satisfied.

<PAGE>

         "Opinion  of  Counsel"  shall  mean,  as  applicable,   the  Investment
Commitment Opinion of Counsel,  the Put Opinion of Counsel, and the Registration
Opinion.

         "Payment Due Date" shall have the meaning set forth in Section 2.3.8.

         "Pricing Period" shall mean, unless otherwise shortened under the terms
of  this  Agreement,  the  period  beginning  on the  Business  Day  immediately
following the Put Date and ending on and including the date which is 20 Business
Days after such Put Date.

         "Pricing  Period  End Date"  shall  mean the last  Business  Day of any
Pricing Period.

         "Principal  Market" shall mean the O.T.C.  Bulletin  Board,  the Nasdaq
Small Cap Market, the Nasdaq National Market, the American Stock Exchange or the
New York Stock Exchange, whichever is at the time the principal trading exchange
or market for the Common Stock.

         "Proceeding" shall have the meaning as set forth Section 5.1.

         "Purchase" shall have the meaning set forth in Section 2.3.7.

         "Purchase  Warrant  Exercise Price" shall have the meaning set forth in
Section 2.4.2.

         "Purchase  Warrants" shall have the meaning set forth in Section 2.4.2,
the form of which is attached hereto as Exhibit D.

         "Put" shall have the meaning set forth in Section 2.3.1(d).

         "Put  Cancellation"  shall  have  the  meaning  set  forth  in  Section
2.3.11(a).

         "Put  Cancellation  Date"  shall have the  meaning set forth in Section
2.3.11(a).

         "Put  Cancellation  Notice" shall have the meaning set forth in Section
2.3.11(a), the form of which is attached hereto as Exhibit Q.

         "Put Cancellation Notice Confirmation" shall have the meaning set forth
in Section 2.3.11(c), the form of which is attached hereto as Exhibit S.

         "Put Closing" shall have the meaning set forth in Section 2.3.8.

         "Put Closing Date" shall have the meaning set forth in Section 2.3.8.

         "Put Date" shall mean the date that is  specified by the Company in any
Put Notice for which the Company  intends to exercise a Put under Section 2.3.1,
unless the Put Date is postponed pursuant to the terms hereof, in which case the
"Put Date" is such postponed date.

<PAGE>

         "Put Dollar  Amount" shall be determined by  multiplying  the Put Share
Amount by the  respective  Put Share  Prices  with  respect to such Put  Shares,
subject to the limitations herein.

         "Put Notice" shall have the meaning set forth in Section 2.3.1(d),  the
form of which is attached hereto as Exhibit G.

         "Put Notice  Confirmation"  shall have the meaning set forth in Section
2.3.1(d), the form of which is attached hereto as Exhibit H.

         "Put Opinion of Counsel" shall mean an opinion from  Company's  outside
legal  counsel,  in the form attached as Exhibit I, or such other form as agreed
upon by the parties, as to any Put Closing.

         "Put  Share  Amount"  shall  have  the  meaning  as set  forth  Section
2.3.1(b).

         "Put Share Price" shall have the meaning set forth in Section 2.3.1(c).

         "Put Shares"  shall mean shares of Common  Stock that are  purchased by
the Investor pursuant to a Put.

         "Registrable  Securities"  shall  have the  meaning as set forth in the
Registration Rights Agreement.

         "Registration  Opinion"  shall  have the  meaning  set forth in Section
2.3.6(a), the form of which is attached hereto as Exhibit R.

         "Registration  Opinion  Deadline"  shall have the  meaning set forth in
Section 2.3.6(a).

         "Registration  Rights  Agreement" shall mean that certain  registration
rights agreement entered into by the Company and Investor on even date herewith,
in the form  attached  hereto as Exhibit A, or such other form as agreed upon by
the parties.

         "Registration  Statement"  shall  have the  meaning as set forth in the
Registration Rights Agreement.

         "Regulation D" shall have the meaning set forth in the recitals hereto.

         "Reporting Issuer" shall have the meaning set forth in Section 6.2.

         "Restrictive Legend" shall have the meaning set forth in Section 4.7.

         "Required  Put  Documents"  shall have the meaning set forth in Section
2.3.5.

         "Right of First  Refusal"  shall have the  meaning set forth in Section
6.5.2.

         "Risk  Factors"  shall have the  meaning  set forth in  Section  3.2.4,
attached hereto as Exhibit J.

<PAGE>

         "Schedule of Exceptions" shall have the meaning set forth in Section 5,
and is attached hereto as Exhibit C.

         "SEC" shall mean the Securities and Exchange Commission.

         "Securities"  shall mean this Investment  Agreement,  together with the
Common  Stock of the  Company,  the  Warrants  and the Warrant  Shares  issuable
pursuant to this Investment Agreement.

         "Semi-Annual Non-Usage Fee" shall have the meaning set forth in Section
2.6.

         "Share  Authorization  Increase  Approval"  shall have the  meaning set
forth in Section 5.25.

         "Stockholder  20% Approval" shall have the meaning set forth in Section
6.11.

         "Supplemental  Registration Statement" shall have the meaning set forth
in the Registration Rights Agreement.

         "Term" shall mean the term of this  Agreement,  which shall be a period
of time  beginning on the date of this  Agreement and ending on the  Termination
Date.

         "Termination Date" shall mean the earlier of (i) the date that is three
(3)  years  after the  Effective  Date,  or (ii) the date  that is  thirty  (30)
Business  Days after the later of (a) the Put  Closing  Date on which the sum of
the  aggregate  Put Share Price for all Put Shares  equal the  Maximum  Offering
Amount,  (b) the date that the Company has delivered a Termination Notice to the
Investor, (c) the date of an Automatic Termination, and (d) the date that all of
the Warrants have been exercised.

         "Termination Fee" shall have the meaning as set forth in Section 2.6.

         "Termination  Notice"  shall  have the  meaning as set forth in Section
2.3.12.

         "Third Party Report" shall have the meaning set forth in Section 3.2.4.

         "Trading  Volume " shall  mean the  volume of  shares of the  Company's
Common Stock that trade  between 9:30 AM and 4:00 PM, New York City Time, on any
Business  Day, and shall  expressly  exclude any shares  trading  during  "after
hours" trading.

         "Transaction Documents" shall have the meaning set forth in Section 9.

         "Transfer Agent" shall have the meaning set forth in Section 6.10.

         "Transfer Agent Instructions" shall mean the Company's  instructions to
its transfer  agent,  substantially  in the form  attached as Exhibit T, or such
other form as agreed upon by the parties.

         "Trigger Price" shall have the meaning set forth in Section 2.3.1(b).

<PAGE>

         "Truncated  Pricing Period" shall have the meaning set forth in Section
2.3.11(d).

         "Truncated  Put  Share  Amount"  shall  have the  meaning  set forth in
Section 2.3.11(b).

         "Unlegended   Share   Certificates"   shall  mean  a   certificate   or
certificates  (or   electronically   delivered   shares,   as  appropriate)  (in
denominations as instructed by Investor) representing the shares of Common Stock
to which the  Investor is then  entitled to receive,  registered  in the name of
Investor or its legally  permitted  nominee (as  instructed by Investor) and not
containing  a  restrictive  legend or stop  transfer  order,  including  but not
limited to the Put Shares for the applicable Put and Warrant Shares.

         "Use of  Proceeds  Schedule"  shall  have the  meaning  as set forth in
Section 3.2.4, attached hereto as Exhibit L.

         "Volume  Limitations"  shall  have the  meaning  set  forth in  Section
2.3.1(b).

         "Warrant  Antidilution  Agreement"  shall  mean  that  certain  Warrant
Antidilution  Agreement  entered  into by the Company and  Investor on even date
herewith, in the form attached hereto as Exhibit O, or such other form as agreed
upon by the parties.

         "Warrant  Shares"  shall mean the Common Stock issued or issuable  upon
exercise of the Warrants.

         "Warrants"  shall  mean  Purchase  Warrants,  Commitment  Warrants  and
Additional Warrants.

         2.       Purchase and Sale of Common Stock.

                  2.1  Offer to Subscribe.
                       ------------------

                  Subject   to  the  terms  and   conditions   herein   and  the
satisfaction  of the  conditions  to closing set forth in  Sections  2.2 and 2.3
below,  Investor  hereby  agrees to purchase  such  amounts of Common  Stock and
accompanying  Warrants as the Company may, in its sole and absolute  discretion,
from time to time elect to issue and sell to Investor  according  to one or more
Puts pursuant to Section 2.3 below.

                  2.2  Investment Commitment.
                       ---------------------

                       2.2.1  Investment Commitment Closing. The closing of this
Agreement (the  "Investment  Commitment  Closing") shall be deemed to occur when
this Agreement,  the Registration  Rights Agreement,  the Commitment Warrant and
the Warrant  Antidilution  Agreement have been executed by both Investor and the
Company,  the Transfer Agent Instructions have been executed by both the Company
and the Transfer Agent, and the other  Conditions to Investor's  Obligations set
forth in Section 2.2.2 below have been met.

<PAGE>

                       2.2.2  Conditions  to  Investor's   Obligations.   As   a
prerequisite to the Investment Commitment Closing and the Investor's obligations
hereunder,  all of the following (the  "Conditions  to Investor's  Obligations")
shall have been satisfied prior to or concurrently with the Company's  execution
and delivery of this Agreement:

                  (a)  the following documents shall have been delivered to  the
                       Investor:   (i)  the   Registration   Rights    Agreement
                       (executed  by   the  Company  and  Investor),   (ii)  the
                       Commitment  Warrant,  (iii)   the  Investment  Commitment
                       Opinion of Counsel  (signed by  the  Company's  counsel),
                       (iv) the Warrant Antidilution  Agreement (executed by the
                       Company   and   Investor),   (v)   the   Transfer   Agent
                       Instructions  (executed  by the Company and  the Transfer
                       Agent), and (vi) a Secretary's Certificate  as to (A) the
                       resolutions   of  the   Company's   board   of  directors
                       authorizing   this   transaction,   (B)   the   Company's
                       Certificate  of  Incorporation,  and (C)   the  Company's
                       Bylaws;

                  (b)  this  Investment  Agreement,   accepted   by   (b)   this
                       investment Agreement, accepted by the Company, shall have
                       been received by the Investor;

                  (c)  the  Company's  Common  Stock shall be listed for trading
                       and  actually trading  on  the O.T.C. Bulletin Board, the
                       Nasdaq Small Cap Market,  the Nasdaq National Market, the
                       American Stock Exchange or the New York Stock Exchange;

                  (d)  other  than  continuing  losses  described  in  the  Risk
                       Factors set forth in the Disclosure  Documents  (provided
                       for  in Section 3.2.4), as of the Closing there have been
                       no  material  adverse  changes in the Company's  business
                       prospects or  financial  condition  since the date of the
                       last balance  sheet included in the Disclosure Documents,
                       including   but   not  limited  to   incurring   material
                       liabilities; and

                  (e)  the representations and warranties of the Company in this
                       Agreement shall be  true  and  correct  in  all  material
                       respects and  the conditions  to  Investor's  obligations
                       set forth in this Section 2.2.2 shall have been satisfied
                       as of such Closing;  and  the  Company  shall deliver  an
                       Officer's  Certificate,  signed  by  an  officer  of  the
                       Company, to such effect to the Investor.

                  2.3  Puts of Common Shares to the Investor.
                       --------------------------------------

                       2.3.1  Procedure  to  Exercise  a  Put.  Subject  to  the
Individual  Put  Limit,  the  Maximum  Offering  Amount  and the Cap  Amount (if
applicable),  and  the  other  conditions  and  limitations  set  forth  in this
Agreement, at any time beginning on the date on which the Registration Statement
is declared effective by the SEC (the "Effective Date"), the Company may, in its
sole and absolute  discretion,  elect to exercise one or more Puts  according to
the following procedure,  provided that each subsequent Put Date after the first
Put Date shall be no sooner than five (5) Business Days  following the preceding
Pricing Period End Date:

                              (a)  Delivery of Advance Put Notice.  At least ten
(10)  Business  Days but not more than  twenty (20)  Business  Days prior to any
intended  Put Date (unless  otherwise  agreed in writing by the  Investor),  the
Company shall deliver advance written notice (the "Advance Put Notice," the form
of which is  attached  hereto as Exhibit E, the date of such  Advance Put Notice
being the "Advance Put Notice Date") to Investor  stating the Put Date for which
the Company shall, subject to the limitations and restrictions contained herein,
exercise a Put and stating the number of shares of Common Stock  (subject to the
Individual  Put Limit and the  Maximum  Put  Dollar  Amount)  which the  Company
intends to sell to the Investor for the Put (the "Intended Put Share Amount").

<PAGE>

         The  Company  may,  at its option,  also  designate  in any Advance Put
Notice (i) a maximum  dollar amount of Common Stock,  not to exceed  $2,000,000,
which it shall sell to Investor during the Put (the "Company  Designated Maximum
Put Dollar Amount") and/or (ii) a minimum  purchase price per Put Share at which
the Investor may purchase  shares of Common Stock pursuant to such Put Notice (a
"Company  Designated  Minimum Put Share Price").  The Company Designated Minimum
Put Share Price,  if applicable,  shall be no greater than the lesser of (i) 80%
of the Closing  Bid Price of the  Company's  common  stock on the  Business  Day
immediately preceding the Advance Put Notice Date, or (ii) the Closing Bid Price
of the  Company's  common stock on the Business Day  immediately  preceding  the
Advance  Put  Notice  Date minus  $0.125.  The  Company  may  decrease  (but not
increase) the Company  Designated  Minimum Put Share Price for a Put at any time
by giving the  Investor  written  notice of such  decrease  not later than 12:00
Noon, New York City time, on the Business Day immediately preceding the Business
Day that such decrease is to take effect.  A decrease in the Company  Designated
Minimum Put Share Price shall have no retroactive effect on the determination of
Trigger  Prices and Excluded Days for days  preceding the Business Day that such
decrease takes effect, provided that the Put Share Price for all shares in a Put
shall be calculated using the lowest Company Designated Minimum Put Share Price,
as decreased.

         Notwithstanding  the above,  if, at the time of  delivery of an Advance
Put Notice,  more than two (2) Calendar Months have passed since the date of the
previous Put Closing, such Advance Put Notice shall provide at least twenty (20)
Business  Days notice of the intended Put Date,  unless waived in writing by the
Investor.  In order to effect  delivery of the  Advance Put Notice,  the Company
shall (i) send the  Advance  Put Notice by  facsimile  on such date so that such
notice is received by the  Investor by 6:00 p.m.,  New York,  NY time,  and (ii)
surrender  such notice on such date to a courier for  overnight  delivery to the
Investor (or two (2) day delivery in the case of an Investor residing outside of
the U.S.).  Upon receipt by the Investor of a facsimile  copy of the Advance Put
Notice, the Investor shall, within two (2) Business Days, send, via facsimile, a
confirmation  of receipt  (the  "Advance Put Notice  Confirmation,"  the form of
which is attached  hereto as Exhibit F) of the Advance Put Notice to the Company
specifying  that the  Advance Put Notice has been  received  and  affirming  the
intended Put Date and the Intended Put Share Amount.

                              (b) Put Share Amount. The  "Put  Share  Amount" is
the number of shares of Common  Stock that the  Investor  shall be  obligated to
purchase  in a given Put,  and shall  equal the lesser of (i) the  Intended  Put
Share Amount,  and (ii) the Individual  Put Limit.  The  "Individual  Put Limit"
shall  equal  the  lesser  of (a)  1,500,000  shares,  (b) 15% of the sum of the
aggregate daily reported Trading Volumes in the outstanding  Common Stock on the
Company's Principal Market,  excluding any block trades of 20,000 or more shares
of Common  Stock,  for all  Evaluation  Days (as  defined  below) in the Pricing
Period,  (c) the number of Put Shares which, when multiplied by their respective
Put Share  Prices,  equals  the  Maximum  Put  Dollar  Amount,  and (d) the 9.9%
Limitation, but in no event shall the Individual Put Limit exceed 15% of the sum
of the aggregate daily reported Trading Volumes in the outstanding  Common Stock
on the Company's Principal Market,  excluding any block trades of 20,000 or more
shares of Common Stock, for the twenty (20) Business Days immediately  preceding
the Advance Put Notice Date (this  limitation,  together with the  limitation in
(b)  immediately  above are  collectively  referred  to  herein  as the  "Volume
Limitations").  Company  agrees not to trade  Common Stock or arrange for Common
Stock to be  traded  for the  purpose  of  artificially  increasing  the  Volume
Limitations.

<PAGE>

         For purposes of this Agreement:

                  "Trigger  Price" for any Pricing Period shall mean the greater
of (i) the Company  Designated Minimum Put Share Price, plus $0.075, or (ii) the
Company Designated Minimum Put Share Price divided by .91.

                  An  "Excluded  Day"  shall  mean each  Business  Day  during a
Pricing Period where the lowest  intra-day  trading price of the Common Stock is
less than the Trigger Price.

                  An  "Evaluation  Day"  shall mean each  Business  Day during a
Pricing Period that is not an Excluded Day.

                              (c) Put Share Price.  The purchase price  for  the
Put Shares (the Put Share Price") shall equal the lesser of (i) the Market Price
for such Put,  minus  $0.075,  or (ii) 91% of the Market Price for such Put, but
shall in no event be less than the  Company  Designated  Minimum Put Share Price
for such Put, if applicable.

                              (d) Delivery of Put Notice.  After  delivery of an
Advance  Put  Notice,  on the Put Date  specified  in the Advance Put Notice the
Company  shall  deliver  written  notice (the "Put Notice," the form of which is
attached  hereto as Exhibit G) to Investor  stating  (i) the Put Date,  (ii) the
Intended Put Share Amount as specified in the Advance Put Notice (such  exercise
a  "Put"),   (iii)  the  Company   Designated  Maximum  Put  Dollar  Amount  (if
applicable),  and (iv) the  Company  Designated  Minimum  Put  Share  Price  (if
applicable).  In order to effect  delivery of the Put Notice,  the Company shall
(i) send the Put  Notice by  facsimile  on the Put Date so that  such  notice is
received by the Investor by 6:00 p.m.,  New York,  NY time,  and (ii)  surrender
such notice on the Put Date to a courier for overnight  delivery to the Investor
(or two (2) day  delivery  in the case of an  Investor  residing  outside of the
U.S.).  Upon receipt by the Investor of a facsimile copy of the Put Notice,  the
Investor  shall,   within  two  (2)  Business  Days,  send,  via  facsimile,   a
confirmation  of receipt  (the "Put Notice  Confirmation,"  the form of which is
attached  hereto as Exhibit H) of the Put Notice to Company  specifying that the
Put Notice has been  received  and  affirming  the Put Date and the Intended Put
Share Amount.

                              (e) Delivery  of  Required  Put  Documents. On  or
before the Put Date for such Put,  the Company  shall  deliver the  Required Put
Documents (as defined in Section 2.3.5 below) to the Investor (or to an agent of
Investor,  if Investor so directs).  Unless otherwise specified by the Investor,
the  delivery of the Put Shares of Common Stock shall be in the form of physical
Unlegended  Share  Certificates.  The Put  Shares  shall  be  capable  of  being
transmitted  electronically  pursuant to the  Depository  Trust Company  ("DTC")
electronic delivery system. If the Company has not delivered all of the Required
Put  Documents  to the  Investor  on or before  the Put  Date,  the Put shall be
automatically cancelled,  unless the Investor agrees to delay the Put Date by up
to three (3)  Business  Days,  in which case the  Pricing  Period  begins on the
Business Day  following  such new Put Date. If the Company has not delivered all
of the Required Put  Documents to the Investor on or before the Put Date (or new
Put Date,  if  applicable),  and the Investor has not agreed in writing to delay
the  Put  Date,  the  Put  is  automatically  canceled  (an  "Impermissible  Put
Cancellation") and, unless the Put was otherwise canceled in accordance with the
terms of Section  2.3.11,  the  Company  shall pay the  Investor  $5,000 for its
reasonable due diligence  expenses  incurred in preparation for the canceled Put
and the  Company may  deliver an Advance  Put Notice for the  subsequent  Put no
sooner than ten (10)  Business  Days after the date that such Put was  canceled,
unless otherwise agreed by the Investor.

<PAGE>

                              (f) Limitation   on   Investor's   Obligation   to
Purchase Shares.  Notwithstanding anything to the contrary in this Agreement, in
no event shall the Investor be required to  purchase,  and an Intended Put Share
Amount may not include, an amount of Put Shares,  which when added to the number
of Put Shares acquired by the Investor  pursuant to this Agreement during the 61
days  preceding  the Put Date with  respect to which this  determination  of the
permitted  Intended  Put Share  Amount is being made,  would  exceed 9.9% of the
number of shares of Common Stock  outstanding  (on a fully diluted basis, to the
extent that  inclusion  of unissued  shares is mandated by Section  13(d) of the
Exchange  Act) on the Put  Date  for  such  Pricing  Period,  as  determined  in
accordance   with  Section  13(d)  of  the  Exchange  Act  (the  "Section  13(d)
Outstanding  Share Amount").  Each Put Notice shall include a representation  of
the Company as to the Section 13(d)  Outstanding Share Amount on the related Put
Date. In the event that the Section 13(d)  Outstanding Share Amount is different
on any date during a Pricing  Period than on the Put Date  associated  with such
Pricing  Period,  then the number of shares of Common Stock  outstanding on such
date during such Pricing Period shall govern for purposes of determining whether
the  Investor,  when  aggregating  all purchases of Shares made pursuant to this
Agreement in the 61 calendar days preceding such date,  would have acquired more
than 9.9% of the Section 13(d)  Outstanding  Share Amount.  The  limitation  set
forth in this Section 2.3.1(f) is referred to as the "9.9% Limitation".

                       2.3.2  Termination of Right to Put.   The Company's right
to require the Investor to purchase any  subsequent  Put Shares shall  terminate
permanently (each, an "Automatic Termination") upon the occurrence of any of the
following:

                              (a) the  Company  shall  not exercise a Put or any
Put thereafter if, at any time,  either the Company or any director or executive
officer of the Company has engaged in a  transaction  or conduct  related to the
Company  that  has  resulted  in  (i)  a  Securities  and  Exchange   Commission
enforcement action, or (ii) a civil judgment or criminal conviction for fraud or
misrepresentation,  or for any other offense  that,  if  prosecuted  criminally,
would constitute a felony under applicable law;

                              (b) the  Company  shall  not exercise a Put or any
Put  thereafter,  on any date after a  cumulative  time period or series of time
periods, consisting only of Ineffective Periods and Delisting Events, that lasts
for an aggregate of four (4) months;

                              (c) the  Company  shall  not exercise a Put or any
Put thereafter if at any time the Company has filed for and/or is subject to any
bankruptcy,  insolvency,  reorganization  or  liquidation  proceedings  or other
proceedings  for relief  under any  bankruptcy  law or any law for the relief of
debtors instituted by or against the Company or any subsidiary of the Company;

<PAGE>

                              (d) the Company shall not exercise a Put after the
sooner of (i) the date that is three (3) years after the Effective Date, or (ii)
the Put Closing Date on which the  aggregate  of the Put Dollar  Amounts for all
Puts equal the Maximum Offering Amount; and

                              (e) the Company shall not exercise a Put after the
Company  has  breached  any  covenant  in Section  2.6,  Section 6, or Section 9
hereof.

                              (f) if no Registration Statement has been declared
effective by the date that is one (1) year after the date of this Agreement, the
Automatic  Termination  shall  occur on the date that is one (1) year  after the
date of this Agreement.

                       2.3.3  Put Limitations.  The  Company's right to exercise
a Put shall be limited as follows:

                              (a) notwithstanding  the  amount  of  any Put, the
Investor  shall not be obligated to purchase any  additional Put Shares once the
aggregate Put Dollar Amount paid by Investor equals the Maximum Offering Amount;

                              (b) the Investor shall not be obligated to acquire
and pay for the Put Shares  with  respect to any Put for which the  Company  has
announced a subdivision or combination, including a reverse split, of its Common
Stock or has  subdivided  or combined  its Common  Stock during the Extended Put
Period;

                              (c) the Investor shall not be obligated to acquire
and pay for the Put Shares  with  respect to any Put for which the  Company  has
paid a dividend of its Common  Stock or has made any other  distribution  of its
Common Stock during the Extended Put Period;

                              (d) the Investor shall not be obligated to acquire
and pay for the Put Shares  with  respect to any Put for which the  Company  has
made,  during the Extended Put Period,  a distribution  of all or any portion of
its assets or evidences of indebtedness to the holders of its Common Stock;

                              (e) the Investor shall not be obligated to acquire
and pay for the Put Shares with respect to any Put for which a Major Transaction
has occurred during the Extended Put Period.

                       2.3.4   Conditions Precedent to  the Right of the Company
to  Deliver an Advance  Put  Notice or a Put  Notice and the  Obligation  of the
Investor to Purchase Put Shares.  The right of the Company to deliver an Advance
Put Notice or a Put Notice  and the  obligation  of the  Investor  hereunder  to
acquire  and pay for the Put  Shares  incident  to a Closing  is  subject to the
satisfaction,  on (i) the date of  delivery  of such  Advance  Put Notice or Put
Notice  and (ii) the  applicable  Put  Closing  Date,  of each of the  following
conditions:

                  (a)  the  Company's  Common  Stock  shall  be  listed  for and
                       actively trading on the O.T.C. Bulletin Board, the Nasdaq
                       Small Cap Market, the Nasdaq  National  Market or the New
                       York  Stock  Exchange  and  the  Put  Shares  shall be so
                       listed, and to the Company's knowledge there is no notice
                       of  any  suspension  or  delisting  with  respect  to the
                       trading of  the  shares of Common Stock on such market or
                       exchange;

                  (b)  the Company shall have  satisfied any and all obligations
                       pursuant to the Registration Rights Agreement, including,
                       but  not limited  to,  the  filing  of  the  Registration
                       Statement with the SEC with  respect to the resale of all
                       Registrable  Securities  and  the  requirement  that  the
                       Registration Statement shall have been declared effective
                       by the SEC for the resale of all  Registrable  Securities
                       and the  Company shall  have  satisfied  and  shall be in
                       compliance with any and all obligations  pursuant to this
                       Agreement and the Warrants;

                  (c)  the  representations  and  warranties  of the Company are
                       true and correct in all  material  respects as if made on
                       such  date  and  the conditions to Investor's obligations
                       set forth in this Section 2.3.4 are  satisfied as of such
                       Closing,  and the  Company shall  deliver a  certificate,
                       signed by an officer of the Company, to  such  effect  to
                       the Investor;

                  (d)  the Company shall have reserved for issuance a sufficient
                       number of Common  Shares for the purpose of  enabling the
                       Company to satisfy any obligation  to issue Common Shares
                       pursuant to  any  Put  and  to  effect  exercise  of  the
                       Warrants;

                  (e)  the  Registration   Statement   is  not   subject  to  an
                       Ineffective Period as defined in the Registration  Rights
                       Agreement, the prospectus included therein is current and
                       deliverable, and to the Company's  knowledge  there is no
                       notice  of  any  investigation  or inquiry concerning any
                       stop  order  with  respect to the Registration Statement;
                       and

                  (f)  if the Aggregate  Issued  Shares after the Closing of the
                       Put would exceed the Cap Amount,  the Company  shall have
                       obtained  the Stockholder  20%  Approval as  specified in
                       Section 6.11, if the Company's  Common Stock is listed on
                       the NASDAQ Small Cap Market or the NASDAQ National Market
                       System (the "NMS"), and such  approval is required by the
                       rules of the NASDAQ.

                   (g) the Company  shall  have no  knowledge  of any event more
                       likely than  not  to  have  the  effect  of  causing  any
                       Registration  Statement  to  be  suspended  or  otherwise
                       ineffective (which event is more likely than not to occur
                       within the thirty  Business  Days  following  the date on
                       which such  Advance  Put  Notice and Put Notice is deemed
                       delivered).

                  (h)  there is not then in effect  any law, rule or  regulation
                       prohibiting or restricting the  transactions contemplated
                       hereby,  or requiring any consent or approval which shall
                       not have  been  obtained,  nor is  there  any pending  or
                       threatened proceeding or investigation which may have the
                       effect of prohibiting  or adversely  affecting any of the
                       transactions contemplated by this Agreement.

<PAGE>

                  (i)  no statute, rule,  regulation,  executiv  order,  decree,
                       ruling or  injunction  shall have been  enacted, entered,
                       promulgated  or  adopted  any   court   or   governmental
                       authority of competent jurisdiction  that  prohibits  the
                       transactions   contemplated  by  this Agreement,  and  no
                       actions,  suits  or  proceedings shall  be  in  progress,
                       pending  or  threatened  by any person  (other  than  the
                       Investor or any affiliate of the Investor),  that seek to
                       enjoin or prohibit the  transactions contemplated by this
                       Agreement.   For  purposes  of  this  paragraph  (i),  no
                       proceeding shall be deemed  pending or threatened  unless
                       one  of  the  parties  has   received   written  or  oral
                       notification  thereof  prior  to  the  applicable Closing
                       Date.

                  (j)  the Put Shares delivered to the Investor are DTC eligible
                       and  can  be immediately converted into electronic  form;
                       and

                  (k)  the  Company   shall  have   obtained   all  permits  and
                       qualifications (if any) required by any state  securities
                       laws  or  Blue  Sky  laws  for  the offer and sale of the
                       Common Stock to the Investor and by the Investor or shall
                       have the availability of exemptions therefrom.

                       2.3.5  Documents Required to be Delivered on the Put Date
as  Conditions  to Closing  of any Put.  The  Closing of any Put and  Investor's
obligations hereunder shall additionally be conditioned upon the delivery to the
Investor of each of the following  (the  "Required Put  Documents") on or before
the applicable Put Date:

                              (a) a  number  of  Unlegended  Share  Certificates
equal to the Intended Put Share Amount, in denominations of not more than 50,000
shares per certificate,  and such Unlegended Share Certificates shall be capable
of being  transmitted  electronically  pursuant to the Depository  Trust Company
("DTC") electronic delivery system;

                              (b) the  following  documents:  Put   Opinion   of
Counsel, Officer's Certificate, Put Notice, Registration Opinion, and any report
or disclosure required under Section 2.3.6 or Section 2.5;

                              (c) all documents, instruments and other  writings
required to be delivered on or before the Put Date  pursuant to any provision of
this  Agreement in order to implement and effect the  transactions  contemplated
herein.

<PAGE>

                       2.3.6 Accountant's Letter and Registration Opinion.

                              (a)  The Company shall have caused to be delivered
to the Investor,  (i) whenever required by Section 2.3.6(b) or by Section 2.5.3,
and (ii) on the date that is three (3) Business Days prior to each Put Date (the
"Registration  Opinion  Deadline"),  an opinion of the  Company's  outside legal
counsel,  in substantially the form of Exhibit R (the  "Registration  Opinion"),
addressed to the Investor stating,  inter alia, that no facts ("Material Facts")
have come to such  counsel's  attention  that have caused it to believe that the
Registration  Statement is subject to an  Ineffective  Period or to believe that
the Registration Statement, any Supplemental Registration Statement (as each may
be amended,  if  applicable),  and any related  prospectuses,  contain an untrue
statement  of  material  fact or  omits a  material  fact  required  to make the
statements  contained  therein,  in light of the circumstances  under which they
were made, not misleading.  If a Registration Opinion cannot be delivered by the
Company's  outside  legal  counsel to the Investor on the  Registration  Opinion
Deadline due to the existence of Material  Facts or an Ineffective  Period,  the
Company  shall  promptly  notify the Investor and as promptly as possible  amend
each of the Registration Statement and any Supplemental Registration Statements,
as applicable,  and any related  prospectus or cause such Ineffective  Period to
terminate, as the case may be, and deliver such Registration Opinion and updated
prospectus  as soon as  possible  thereafter.  If at any time after a Put Notice
shall have been delivered to Investor but before the related  Pricing Period End
Date, the Company  acquires  knowledge of such Material Facts or any Ineffective
Period occurs,  the Company shall promptly notify the Investor and shall deliver
a Put  Cancellation  Notice  to the  Investor  pursuant  to  Section  2.3.11  by
facsimile and overnight courier by the end of that Business Day.

                              (b)   (i)   the    Company    shall   engage   its
independent auditors to perform the procedures in accordance with the provisions
of  Statement  on Auditing  Standards  No. 71, as  amended,  as agreed to by the
parties hereto,  and reports thereon (the "Bring Down Cold Comfort  Letters") as
shall have been  reasonably  requested by the  Investor  with respect to certain
financial  information  contained in the  Registration  Statement and shall have
delivered to the Investor such a report  addressed to the Investor,  on the date
that is three (3) Business Days prior to each Put Date.

                                    (ii) in the event  that the  Investor  shall
have requested  delivery of an Agreed Upon Procedures Report pursuant to Section
2.5.3,  the Company  shall engage its  independent  auditors to perform  certain
agreed  upon  procedures  and  report  thereon  as shall  have  been  reasonably
requested by the Investor with respect to certain  financial  information of the
Company  and the  Company  shall  deliver to the  Investor a copy of such report
addressed to the Investor. In the event that the report required by this Section
2.3.6(b) cannot be delivered by the Company's independent auditors,  the Company
shall, if necessary,  promptly revise the Registration Statement and the Company
shall not deliver a Put Notice until such report is delivered.

                       2.3.7 Investor's Obligation and Right to Purchase Shares.
Subject to the conditions set forth in this Agreement,  following the Investor's
receipt of a validly  delivered  Put Notice,  the Investor  shall be required to
purchase  (each a  "Purchase")  from the Company a number of Put Shares equal to
the Put Share Amount, in the manner described below.

                       2.3.8  Mechanics of Put Closing.  Each of the Company and
the Investor shall deliver all documents,  instruments and writings  required to
be  delivered by either of them  pursuant to this  Agreement at or prior to each
Closing.  Subject to such delivery and the  satisfaction  of the  conditions set
forth in Sections  2.3.4 and 2.3.5,  the closing of the purchase by the Investor
of Shares shall occur by 5:00 PM, New York City Time,  on the date which is five
(5) Business Days following the applicable Pricing Period End Date (the "Payment
Due Date") at the offices of Investor.  On each or before each Payment Due Date,
the Investor shall deliver to the Company,  in the manner specified in Section 8
below,  the Put  Dollar  Amount to be paid for such Put  Shares,  determined  as
aforesaid.  The closing  (each a "Put  Closing") for each Put shall occur on the
date that both (i) the Company has  delivered  to the  Investor all Required Put
Documents,  and (ii) the Investor  has  delivered to the Company such Put Dollar
Amount and any Late Payment Amount, if applicable (each a "Put Closing Date").

<PAGE>

         If the Investor  does not deliver to the Company the Put Dollar  Amount
for such Put Closing on or before the Payment Due Date,  then the Investor shall
pay to the Company,  in addition to the Put Dollar Amount,  an amount (the "Late
Payment Amount") at a rate of X% per month,  accruing daily,  multiplied by such
Put  Dollar  Amount,  where "X"  equals  one  percent  (1%) for the first  month
following the date in question,  and increases by an additional one percent (1%)
for each month that passes after the date in  question,  up to a maximum of five
percent (5%) per month; provided,  however, that in no event shall the amount of
interest that shall become due and payable  hereunder  exceed the maximum amount
permissible under applicable law.

                       2.3.9    Limitation on Short Sales.  The Investor and its
affiliates  shall  not  engage in short  sales of the  Company's  Common  Stock;
provided, however, that the Investor may enter into any short exempt sale or any
short sale or other hedging or similar  arrangement  it deems  appropriate  with
respect to Put Shares  after it receives a Put Notice  with  respect to such Put
Shares so long as such sales or arrangements do not involve more than the number
of such Put Shares specified in the Put Notice.

                       2.3.10   Cap Amount.   If  the  Company becomes listed on
the Nasdaq  Small Cap Market or the Nasdaq  National  Market,  then,  unless the
Company has  obtained  Stockholder  20% Approval as set forth in Section 6.11 or
unless  otherwise  permitted by Nasdaq,  in no event shall the Aggregate  Issued
Shares  exceed the maximum  number of shares of Common Stock (the "Cap  Amount")
that the Company can, without stockholder  approval, so issue pursuant to Nasdaq
Rule  4460(i)(1)(d)(ii)  (or any other applicable  Nasdaq Rules or any successor
rule) (the "Nasdaq 20% Rule").

                       2.3.11   Put Cancellation.

                              (a) Mechanics of Put Cancellation.  If at any time
during a Pricing Period the Company discovers the existence of Material Facts or
any Ineffective  Period or Delisting Event occurs,  the Company shall cancel the
Put (a "Put  Cancellation"),  by delivering  written notice to the Investor (the
"Put  Cancellation  Notice"),  attached as Exhibit Q, by facsimile and overnight
courier. The "Put Cancellation Date" shall be the date that the Put Cancellation
Notice is first  received  by the  Investor,  if such  notice is received by the
Investor by 6:00 p.m.,  New York, NY time,  and shall be the following  date, if
such notice is received by the Investor after 6:00 p.m., New York, NY time.

                              (b)  Effect  of Put  Cancellation.  Anytime  a Put
Cancellation  Notice is delivered to Investor after the Put Date, the Put, shall
remain  effective  with  respect to a number of Put Shares (the  "Truncated  Put
Share  Amount")  equal to the  Individual  Put Limit for the  Truncated  Pricing
Period.

<PAGE>

                              (c) Put  Cancellation  Notice  Confirmation.  Upon
receipt by the Investor of a facsimile copy of the Put Cancellation  Notice, the
Investor shall promptly send, via facsimile, a confirmation of receipt (the "Put
Cancellation Notice  Confirmation," a form of which is attached as Exhibit S) of
the Put Cancellation  Notice to the Company specifying that the Put Cancellation
Notice has been received and affirming the Put Cancellation Date.

                              (d)   Truncated   Pricing   Period.   If   a   Put
Cancellation  Notice has been  delivered to the Investor after the Put Date, the
Pricing  Period  for such Put shall end at on the close of  trading  on the last
full  trading  day on the  Principal  Market  that ends  prior to the  moment of
initial  delivery of the Put  Cancellation  Notice to the Investor (a "Truncated
Pricing Period").

                       2.3.12   Investment Agreement Cancellation.   The Company
may  terminate (a "Company  Termination")  its right to initiate  future Puts by
providing written notice  ("Termination  Notice") to the Investor,  by facsimile
and  overnight  courier,  at any time other than during an Extended  Put Period,
provided that such termination shall have no effect on the parties' other rights
and obligations under this Agreement,  the Registration  Rights Agreement or the
Warrants.  Notwithstanding  the  above,  any  cancellation  occurring  during an
Extended Put Period is governed by Section 2.3.11.

                       2.3.13   Return of Excess  Common Shares.  In  the  event
that the number of Shares purchased by the Investor  pursuant to its obligations
hereunder  is less  than the  Intended  Put Share  Amount,  the  Investor  shall
promptly  return to the  Company  any shares of Common  Stock in the  Investor's
possession that are not being purchased by the Investor.

                  2.4  Warrants.

                       2.4.1    Commitment Warrants.  In  partial  consideration
hereof,  following  the  execution of the Letter of Agreement  dated on or about
September 7, 2000 between the Company and the Investor,  the Company  issued and
delivered to Investor or its  designated  assignees,  warrants (the  "Commitment
Warrants")  in the form  attached  hereto as  Exhibit  U, or such  other form as
agreed upon by the parties,  to purchase  1,500,000 shares of Common Stock. Each
Commitment  Warrant shall be  immediately  exercisable  in  accordance  with its
terms,  and shall have a term  beginning  on the date of issuance  and ending on
date that is ten (10) years  thereafter.  The Warrant Shares shall be registered
for  resale  pursuant  to the  Registration  Rights  Agreement.  The  Investment
Commitment Opinion of Counsel shall cover the issuance of the Commitment Warrant
and the issuance of the common stock upon exercise of the Commitment Warrant.

         Notwithstanding  any  Termination  or  Automatic  Termination  of  this
Agreement,  regardless of whether or not the Registration Statement is or is not
filed, and regardless of whether or not the  Registration  Statement is approved
or denied by the SEC, the Investor shall retain full ownership of the Commitment
Warrant as partial consideration for its commitment hereunder.

                       2.4.2   Purchase Warrants.  Within five (5) Business Days
of the end of each Pricing  Period,  the Company  shall issue and deliver to the
Investor a warrant ("Purchase Warrant"),  in the form attached hereto as Exhibit
D, or such other form as agreed  upon by the  parties,  to  purchase a number of
shares of Common Stock equal to 10% of the Put Share  Amount for that Put.  Each
Purchase  Warrant  shall  be  exerciseable  at a price  (the  "Purchase  Warrant
Exercise Price") which shall initially equal the Market Price for the applicable
Put, and shall have semi-annual reset provisions. Each Purchase Warrant shall be
immediately exercisable at the Purchase Warrant Exercise Price, and shall have a
term  beginning  on the date of issuance and ending on the date that is ten (10)
years thereafter.  The Warrant Shares shall be registered for resale pursuant to
the Registration Rights Agreement.

<PAGE>

                  2.5 Due Diligence Review. The Company shall make available for
inspection and review by the Investor (the "Due Diligence Review"),  advisors to
and  representatives  of the Investor (who may or may not be affiliated with the
Investor and who are  reasonably  acceptable  to the Company),  any  underwriter
participating  in any  disposition  of Common  Stock on  behalf of the  Investor
pursuant to the Registration Statement, any Supplemental Registration Statement,
or amendments or supplements  thereto or any blue sky, NASD or other filing, all
financial and other records,  all filings with the SEC, and all other  corporate
documents and  properties of the Company as may be reasonably  necessary for the
purpose  of such  review,  and  cause  the  Company's  officers,  directors  and
employees to supply all such information reasonably requested by the Investor or
any  such  representative,  advisor  or  underwriter  in  connection  with  such
Registration  Statement  (including,  without  limitation,  in  response  to all
questions  and other  inquiries  reasonably  made or  submitted by any of them),
prior to and  from  time to time  after  the  filing  and  effectiveness  of the
Registration  Statement  for the sole  purpose of enabling the Investor and such
representatives,  advisors and underwriters and their respective accountants and
attorneys  to conduct  initial  and ongoing due  diligence  with  respect to the
Company and the accuracy of the Registration Statement.

                       2.5.1    Treatment of Nonpublic Information.  The Company
shall not disclose  nonpublic  information to the Investor or to its advisors or
representatives  unless  prior to  disclosure  of such  information  the Company
identifies  such  information as being  nonpublic  information  and provides the
Investor and such advisors and representatives with the opportunity to accept or
refuse to accept such nonpublic  information  for review.  The Company may, as a
condition  to  disclosing  any  nonpublic  information  hereunder,  require  the
Investor and its advisors and  representatives  to enter into a  confidentiality
agreement  (including  an  agreement  with  such  advisors  and  representatives
prohibiting them from trading in Common Stock during such period of time as they
are in possession of nonpublic  information) in form reasonably  satisfactory to
the Company and the Investor.

        Nothing   herein  shall  require  the  Company  to  disclose   nonpublic
information to the Investor or its advisors or representatives,  and the Company
represents that it does not disseminate  nonpublic  information to any investors
who purchase stock in the Company in a public offering,  to money managers or to
securities analysts,  provided, however, that notwithstanding anything herein to
the contrary, the Company will, as hereinabove provided,  immediately notify the
advisors and representatives of the Investor and, if any,  underwriters,  of any
event or the existence of any  circumstance  (without any obligation to disclose
the specific  event or  circumstance)  of which it becomes  aware,  constituting
nonpublic  information  (whether or not requested of the Company specifically or
generally  during the course of due  diligence by and such persons or entities),
which,  if  not  disclosed  in  the  Prospectus  included  in  the  Registration
Statement,  would cause such Prospectus to include a material misstatement or to
omit a  material  fact  required  to be  stated  therein  in  order  to make the
statements  therein,  in light of the circumstances in which they were made, not
misleading.  Nothing  contained  in this  Section 2.5 shall be construed to mean
that such  persons or  entities  other than the  Investor  (without  the written
consent of the Investor prior to disclosure of such  information) may not obtain
nonpublic  information  in the course of conducting  due diligence in accordance
with the terms of this Agreement;  provided, however, that in no event shall the
Investor's  advisors or  representatives  disclose to the Investor the nature of
the specific  event or  circumstances  constituting  any  nonpublic  information
discovered  by such  advisors  or  representatives  in the  course  of their due
diligence  without the written  consent of the Investor  prior to  disclosure of
such information.

<PAGE>

                       2.5.2   Disclosure  of  Misstatements and Omissions.  The
Investor's  advisors or  representatives  shall make complete  disclosure to the
Investor's  counsel  of  all  events  or  circumstances  constituting  nonpublic
information  discovered  by such  advisors or  representatives  in the course of
their due diligence upon which such advisors or representatives form the opinion
that the Registration  Statement contains an untrue statement of a material fact
or omits a material fact required to be stated in the Registration  Statement or
necessary  to  make  the  statements  contained  therein,  in the  light  of the
circumstances  in which they were made,  not  misleading.  Upon  receipt of such
disclosure,  the  Investor's  counsel shall  consult with the Company's  outside
legal  counsel in order to address the concern  raised as to the  existence of a
material  misstatement  or omission and to discuss  appropriate  disclosure with
respect thereto; provided,  however, that such consultation shall not constitute
the advice of the  Company's  outside  legal  counsel to the  Investor as to the
accuracy of the Registration Statement and related Prospectus.

                       2.5.3   Procedure  if  Material  Facts   are   Reasonably
Believed to be Untrue or are Omitted.  In the event after such  consultation the
Investor or the Investor's  counsel  reasonably  believes that the  Registration
Statement  contains an untrue  statement of a material  fact or omits a material
fact  required to be stated in the  Registration  Statement or necessary to make
the statements  contained  therein,  in light of the circumstances in which they
were made, not misleading,

                              (a)  the  Company  shall  file  with  the  SEC  an
amendment  to the  Registration  Statement  responsive  to such  alleged  untrue
statement or omission and provide the Investor, as promptly as practicable, with
copies of the Registration Statement and related Prospectus, as so amended, or

                              (b) if the Company  disputes the  existence of any
such material misstatement or omission,  (i) the Company's outside legal counsel
shall provide the Investor's counsel with a Registration Opinion and (ii) in the
event the  dispute  relates to the  adequacy  of  financial  disclosure  and the
Investor shall  reasonably  request,  the Company's  independent  auditors shall
provide to the Company a letter ("Agreed Upon Procedures  Report") outlining the
performance of such "agreed upon procedures" as shall be reasonably requested by
the Investor  and the Company  shall  provide the  Investor  with a copy of such
letter.

<PAGE>

                  2.6 Commitment Payments.
                      -------------------

         On the  last  Business  Day of  each  six  (6)  Calendar  Month  period
following  the  Effective  Date  (each  such  period  a  "Commitment  Evaluation
Period"), if the Company has not Put at least $1,000,000 in aggregate Put Dollar
Amount during that Commitment  Evaluation Period, the Company,  in consideration
of Investor's  commitment  costs,  including,  but not limited to, due diligence
expenses,  shall pay to the Investor an amount (the "Semi-Annual Non-Usage Fee")
equal to the  difference  of (i)  $100,000,  minus (ii) 10% of the aggregate Put
Dollar  Amount  of  the  Put  Shares  put to  Investor  during  that  Commitment
Evaluation  Period. In the event that the Company delivers a Termination  Notice
to the Investor or an Automatic Termination occurs, the Company shall pay to the
Investor (the  "Termination  Fee") the greater of (i) the Semi-Annual  Non-Usage
Fee for the applicable  Commitment  Evaluation Period, or (ii) the difference of
(x) $200,000, minus (y) 10% of the aggregate Put Dollar Amount of the Put Shares
put to Investor  during all Puts to date,  and the Company shall not be required
to pay the Semi-Annual Non- Usage Fee thereafter.

         Each Semi Annual Non-Usage Fee or Termination Fee is payable,  in cash,
within five (5) business  days of the date it accrued.  The Company shall not be
required  to deliver  any  payments  to  Investor  under this  subsection  until
Investor has paid all Put Dollar Amounts that are then due.

         3.  Representations,  Warranties  and  Covenants of Investor.  Investor
hereby represents and warrants to and agrees with the Company as follows:

                  3.1 Accredited  Investor.  Investor is an accredited  investor
("Accredited Investor"), as defined in Rule 501 of Regulation D, and has checked
the applicable box set forth in Section 10 of this Agreement.

                  3.2 Investment Experience; Access to Information;  Independent
Investigation.

                       3.2.1   Access  to  Information.  Investor  or Investor's
professional  advisor has been granted the  opportunity  to ask questions of and
receive answers from  representatives of the Company,  its officers,  directors,
employees and agents  concerning the terms and conditions of this Offering,  the
Company and its business and prospects, and to obtain any additional information
which Investor or Investor's  professional advisor deems necessary to verify the
accuracy and completeness of the information received.

                       3.2.2   Reliance  on  Own Advisors.  Investor  has relied
completely on the advice of, or has consulted with, Investor's own personal tax,
investment,  legal or other advisors and has not relied on the Company or any of
its affiliates, officers, directors, attorneys, accountants or any affiliates of
any thereof and each other  person,  if any, who controls any of the  foregoing,
within the meaning of Section 15 of the Act for any tax or legal  advice  (other
than reliance on information  in the Disclosure  Documents as defined in Section
3.2.4 below and on the Opinion of Counsel).  The  foregoing,  however,  does not
limit or modify  Investor's  right to rely upon covenants,  representations  and
warranties of the Company in this Agreement.

                       3.2.3   Capability  to  Evaluate.   Investor   has   such
knowledge and experience in financial and business  matters so as to enable such
Investor to utilize the information  made available to it in connection with the
Offering  in  order  to  evaluate  the  merits  and  risks  of  the  prospective
investment, which are substantial,  including without limitation those set forth
in the Disclosure Documents (as defined in Section 3.2.4 below).

<PAGE>

                       3.2.4   Disclosure   Documents.   Investor,   in   making
Investor's  investment  decision  to  subscribe  for  the  Investment  Agreement
hereunder,  represents  that (a) Investor has received and had an opportunity to
review (i) the Company's  quarterly  report on Form 10-QSB for the quarter ended
June 30,  2000,  (ii) the Risk  Factors,  attached  as  Exhibit  J,  (the  "Risk
Factors")  (iii)  the  Capitalization  Schedule,  attached  as  Exhibit  K, (the
"Capitalization  Schedule") and (iv) the Use of Proceeds  Schedule,  attached as
Exhibit L, (the "Use of Proceeds  Schedule");  (b) Investor has read,  reviewed,
and  relied  solely on the  documents  described  in (a)  above,  the  Company's
representations   and  warranties  and  other  information  in  this  Agreement,
including  the  exhibits,  documents  prepared  by the  Company  which have been
specifically  provided  to  Investor  in  connection  with  this  Offering  (the
documents described in this Section 3.2.4 (a) and (b) are collectively  referred
to as the  "Disclosure  Documents"),  and an independent  investigation  made by
Investor and Investor's representatives,  if any; (c) Investor has, prior to the
date of this  Agreement,  been given an  opportunity to review the contracts set
forth in Schedule  2.3.5 and the material  contracts and other  documents of the
Company which have been filed as exhibits to the Company's filings under the Act
and the Exchange Act and has had an  opportunity to ask questions of and receive
answers from the Company's officers and directors; and (d) is not relying on any
oral  representation  of the  Company  or any  other  person,  nor  any  written
representation  or assurance from the Company other than those  contained in the
Disclosure Documents or incorporated herein or therein. The foregoing,  however,
does  not  limit  or   modify   Investor's   right  to  rely   upon   covenants,
representations  and  warranties  of the  Company  in  Sections  5 and 6 of this
Agreement.   Investor   acknowledges   and  agrees   that  the  Company  has  no
responsibility  for, does not ratify, and is under no responsibility  whatsoever
to comment upon or correct any reports,  analyses or other  comments  made about
the Company by any third  parties,  including,  but not  limited  to,  analysts'
research reports or comments (collectively, "Third Party Reports"), and Investor
has not relied upon any Third Party Reports in making the decision to invest.

                       3.2.5  Investment Experience; Fend for Self. Investor has
substantial experience in investing in securities and it has made investments in
securities other than those of the Company.  Investor acknowledges that Investor
is able to fend for  Investor's  self in the  transaction  contemplated  by this
Agreement, that Investor has the ability to bear the economic risk of Investor's
investment  pursuant  to this  Agreement  and that  Investor  is an  "Accredited
Investor" by virtue of the fact that Investor  meets the investor  qualification
standards  set forth in Section 3.1 above.  Investor has not been  organized for
the purpose of investing in securities of the Company,  although such investment
is consistent with Investor's purposes.

                  3.3  Exempt Offering Under Regulation D.

                       3.3.1  No General Solicitation.  The Investment Agreement
was not offered to Investor  through,  and Investor is not aware of, any form of
general solicitation or general advertising,  including, without limitation, (i)
any  advertisement,  article,  notice or other  communication  published  in any
newspaper,  magazine or similar media or broadcast over television or radio, and
(ii) any seminar or meeting  whose  attendees  have been  invited by any general
solicitation or general advertising.

<PAGE>

                       3.3.2  Restricted Securities.   Investor understands that
the  Investment  Agreement is, the Common Stock and Warrants  issued at each Put
Closing will be, and the Warrant  Shares will be,  characterized  as "restricted
securities"  under  the  federal  securities  laws  inasmuch  as they are  being
acquired  from  the  Company  in a  transaction  exempt  from  the  registration
requirements  of the  federal  securities  laws and  that  under  such  laws and
applicable  regulations such securities may not be transferred or resold without
registration  under  the Act or  pursuant  to an  exemption  therefrom.  In this
connection,  Investor  represents  that Investor is familiar with Rule 144 under
the Act, as presently in effect, and understands the resale limitations  imposed
thereby and by the Act.

                       3.3.3  Disposition.  Without  in  any  way  limiting  the
representations  set forth above,  Investor agrees that until the Securities are
sold  pursuant to an  effective  Registration  Statement  or an  exemption  from
registration,  they  will  remain  in the  name  of  Investor  and  will  not be
transferred to or assigned to any broker, dealer or depositary. Investor further
agrees not to sell,  transfer,  assign, or pledge the Securities (except for any
bona fide  pledge  arrangement  to the extent  that such pledge does not require
registration  under the Act or unless an  exemption  from such  registration  is
available  and  provided  further  that if such  pledge is  realized  upon,  any
transfer to the pledgee shall comply with the requirements set forth herein), or
to otherwise dispose of all or any portion of the Securities unless and until:

                              (a)  There  is  then  in  effect  a   registration
statement under the Act and any applicable  state  securities laws covering such
proposed  disposition  and such  disposition  is made in  accordance  with  such
registration  statement and in compliance  with applicable  prospectus  delivery
requirements; or

                              (b) (i) Investor  shall have  notified the Company
of the  proposed  disposition  and  shall  have  furnished  the  Company  with a
statement  of the  circumstances  surrounding  the proposed  disposition  to the
extent  relevant for  determination  of the  availability  of an exemption  from
registration,  and (ii) if reasonably  requested by the Company,  Investor shall
have furnished the Company with an opinion of counsel,  reasonably  satisfactory
to the  Company,  that such  disposition  will not require  registration  of the
Securities under the Act or state securities laws. It is agreed that the Company
will not require the  Investor to provide  opinions of counsel for  transactions
made  pursuant to Rule 144 provided  that  Investor and  Investor's  broker,  if
necessary,  provide  the  Company  with the  necessary  representations  for the
Company and/or the Company's  counsel to authorize the Company's  stock transfer
agent to remove the restrictive legends in accordance with Rule 144.

                  The  Investor  is  entering  into this  Agreement  for its own
account  and the  Investor  has no present  arrangement  (whether or not legally
binding)  at any time to sell the  Common  Stock to or  through  any  person  or
entity;  provided,  however,  that by making  the  representations  herein,  the
Investor  does not  agree to hold the  Common  Stock  for any  minimum  or other
specific  term and reserves the right to dispose of the Common Stock at any time
in  accordance  with  federal  and  state  securities  laws  applicable  to such
disposition.

                  3.4  Due Authorization.
                       -----------------

                       3.4.1  Authority.  The person  executing  this Investment
Agreement,  if  executing  this  Agreement  in  a  representative  or  fiduciary
capacity, has full power and authority to execute and deliver this Agreement and
each other  document  included  herein for which a signature is required in such
capacity  and on  behalf  of the  subscribing  individual,  partnership,  trust,
estate, corporation or other entity for whom or which Investor is executing this
Agreement. Investor has reached the age of majority (if an individual) according
to the laws of the state in which he or she resides.

<PAGE>

                       3.4.2  Due Authorization.  Investor is duly  and  validly
organized,  validly existing and in good standing as a limited liability company
under  the laws of  Georgia  with full  power  and  authority  to  purchase  the
Securities  to be  purchased  by  Investor  and  to  execute  and  deliver  this
Agreement.

                       3.4.3  Partnerships.  If Investor is a  partnership,  the
representations,  warranties,  agreements and understandings set forth above are
true with respect to all partners of Investor (and if any such partner is itself
a partnership, all persons holding an interest in such partnership,  directly or
indirectly,  including  through  one  or  more  partnerships),  and  the  person
executing this Agreement has made due inquiry to determine the  truthfulness  of
the representations and warranties made hereby.

                       3.4.4  Representatives.  If Investor is purchasing  in  a
representative or fiduciary  capacity,  the representations and warranties shall
be deemed to have been made on behalf of the person or persons for whom Investor
is so purchasing.

         4.       Acknowledgments           Investor is aware that:

                  4.1  Risks  of  Investment.   Investor   recognizes   that  an
investment in the Company involves  substantial  risks,  including the potential
loss of  Investor's  entire  investment  herein.  Investor  recognizes  that the
Disclosure  Documents,  this Agreement and the exhibits hereto do not purport to
contain  all  the  information,  which  would  be  contained  in a  registration
statement under the Act;

                  4.2 No  Government  Approval.  No federal or state  agency has
passed upon the  Securities,  recommended or endorsed the Offering,  or made any
finding or determination as to the fairness of this transaction;

                  4.3 No Registration,  Restrictions on Transfer. As of the date
of this  Agreement,  the  Securities  and any  component  thereof  have not been
registered  under the Act or any applicable  state  securities laws by reason of
exemptions from the registration  requirements of the Act and such laws, and may
not be sold,  pledged (except for any limited pledge in connection with a margin
account of Investor to the extent that such pledge does not require registration
under the Act or unless an exemption  from such  registration  is available  and
provided  further  that if such pledge is  realized  upon,  any  transfer to the
pledgee  shall  comply  with the  requirements  set forth  herein),  assigned or
otherwise  disposed  of in  the  absence  of an  effective  registration  of the
Securities  and any component  thereof under the Act or unless an exemption from
such registration is available;

                  4.4  Restrictions  on  Transfer.  Investor  may not attempt to
sell, transfer, assign, pledge or otherwise dispose of all or any portion of the
Securities  or any  component  thereof  in the  absence  of either an  effective
registration statement or an exemption from the registration requirements of the
Act and applicable state securities laws;

<PAGE>

                  4.5 No Assurances of  Registration.  There can be no assurance
that any registration  statement will become effective at the scheduled time, or
ever, or remain effective when required,  and Investor  acknowledges that it may
be required to bear the economic risk of Investor's investment for an indefinite
period of time;

                  4.6  Exempt   Transaction.   Investor   understands  that  the
Securities  are being offered and sold in reliance on specific  exemptions  from
the   registration   requirements   of  federal  and  state  law  and  that  the
representations,  warranties, agreements, acknowledgments and understandings set
forth  herein  are  being  relied  upon  by  the  Company  in  determining   the
applicability of such exemptions and the suitability of Investor to acquire such
Securities.

                  4.7  Legends.  The  certificates  representing  the Put Shares
shall not bear a legend  restricting the sale or transfer thereof  ("Restrictive
Legend").  The  certificates  representing  the Warrant  Shares shall not bear a
Restrictive  Legend  unless  they are  issued  at a time  when the  Registration
Statement is not effective for resale.  It is understood  that the  certificates
evidencing any Warrant Shares issued at a time when the  Registration  Statement
is not  effective  for  resale,  subject  to legend  removal  under the terms of
Section 6.8 below, shall bear the following legend (the "Legend"):

         "The securities  represented  hereby have not been registered under the
         Securities  Act of 1933,  as amended,  or applicable  state  securities
         laws, nor the securities laws of any other  jurisdiction.  They may not
         be sold or  transferred  in the  absence of an  effective  registration
         statement  under those  securities  laws or  pursuant  to an  exemption
         therefrom."

         5.  Representations  and Warranties of the Company.  The Company hereby
makes the following  representations  and warranties to Investor (which shall be
true  at the  signing  of  this  Agreement,  and as of any  such  later  date as
contemplated  hereunder) and agrees with Investor  that,  except as set forth in
the "Schedule of Exceptions" attached hereto as Exhibit C:

                  5.1  Organization,  Good  Standing,  and  Qualification.   The
Company is a corporation  duly organized,  validly existing and in good standing
under the laws of the State of Nevada, USA and has all requisite corporate power
and  authority to carry on its business as now  conducted  and as proposed to be
conducted.  The Company is duly  qualified  to transact  business and is in good
standing in each  jurisdiction  in which the failure to so qualify  would have a
material  adverse  effect on the business or  properties  of the Company and its
subsidiaries  taken as a whole.  The Company is not the subject of any  pending,
threatened or, to its knowledge, contemplated investigation or administrative or
legal proceeding (a  "Proceeding")  by the Internal Revenue Service,  the taxing
authorities of any state or local  jurisdiction,  or the Securities and Exchange
Commission,  the National  Association of Securities  Dealers,  Inc., the Nasdaq
Stock Market, Inc. or any state securities commission, or any other governmental
entity, which have not been disclosed in the Disclosure  Documents.  None of the
disclosed  Proceedings,  if any,  will have a material  adverse  effect upon the
Company or the  market  for the Common  Stock.  The  Company  has the  following
subsidiaries:

<PAGE>

                  5.2 Corporate  Condition.  The Company's  condition is, in all
material  respects,  as described in the  Disclosure  Documents  (as further set
forth in any subsequently filed Disclosure Documents, if applicable), except for
changes in the ordinary course of business and normal year-end  adjustments that
are not,  in the  aggregate,  materially  adverse  to the  Company.  Except  for
continuing losses,  there have been no material adverse changes to the Company's
business,  financial condition,  or prospects since the dates of such Disclosure
Documents.  The  financial  statements  as  contained  in the  10-QSB  have been
prepared  in  accordance   with  generally   accepted   accounting   principles,
consistently  applied  (except as otherwise  permitted by Regulation  S-X of the
Exchange  Act, or Generally  Accepted  Accounting  Principles,  as  applicable),
subject,  in the case of unaudited  interim financial  statements,  to customary
year end  adjustments and the absence of certain  footnotes,  and fairly present
the  financial  condition  of the Company as of the dates of the balance  sheets
included therein and the  consolidated  results of its operations and cash flows
for the periods  then ended.  Without  limiting the  foregoing,  the best of the
Company's knowledge,  there are no material  liabilities,  contingent or actual,
that are not  disclosed  in the  Disclosure  Documents  (other than  liabilities
incurred by the Company in the ordinary course of its business,  consistent with
its past practice,  after the period covered by the Disclosure  Documents).  The
Company  has paid all  material  taxes  that are due,  except  for taxes that it
reasonably disputes. There is no material claim,  litigation,  or administrative
proceeding  pending  or,  to the  best of the  Company's  knowledge,  threatened
against the Company,  except as disclosed in the  Disclosure  Documents.  To the
best of the Company's knowledge,  this Agreement and the Disclosure Documents do
not contain any untrue statement of a material fact and do not omit to state any
material  fact  required to be stated  therein or herein  necessary  to make the
statements  contained  therein  or  herein  not  misleading  in the light of the
circumstances  under  which  they were  made.  No event or  circumstance  exists
relating to the Company which,  under applicable law, requires public disclosure
but which has not been so publicly announced or disclosed.

                  5.3  Authorization.  All  corporate  action on the part of the
Company  by  its  officers,   directors  and  stockholders   necessary  for  the
authorization,  execution and delivery of this Agreement, the performance of all
obligations  of the  Company  hereunder  and  the  authorization,  issuance  and
delivery of the Common Stock being sold  hereunder and the issuance  (and/or the
reservation  for  issuance)  of the  Warrants  and the Warrant  Shares have been
taken, and this Agreement and the Registration Rights Agreement constitute valid
and legally binding  obligations of the Company,  enforceable in accordance with
their terms,  except insofar as the  enforceability may be limited by applicable
bankruptcy,   insolvency,   reorganization,  or  other  similar  laws  affecting
creditors'  rights  generally or by  principles  governing the  availability  of
equitable remedies. The Company has obtained all consents and approvals required
for it to execute, deliver and perform each agreement referenced in the previous
sentence.

                  5.4 Valid  Issuance of Common Stock.  The Common Stock and the
Warrants,  when issued,  sold and delivered in accordance with the terms hereof,
for the consideration  expressed herein, will be validly issued,  fully paid and
nonassessable  and, based in part upon the  representations  of Investor in this
Agreement,  will be issued in compliance  with all applicable  U.S.  federal and
state  securities  laws. The Warrant Shares,  when issued in accordance with the
terms of the Warrants,  shall be duly and validly issued and outstanding,  fully
paid and nonassessable,  and based in part on the representations and warranties
of Investor,  will be issued in compliance with all applicable U.S.  federal and
state securities laws. The Put Shares,  the Warrants and the Warrant Shares will
be issued free of any preemptive rights.

<PAGE>

                  5.5 Compliance with Other  Instruments.  The Company is not in
violation or default of any provisions of its  Certificate of  Incorporation  or
Bylaws, each as amended and in effect on and as of the date of the Agreement, or
of any material  provision of any material  instrument  or material  contract to
which it is a party or by which it is bound or of any  provision  of any federal
or state judgment, writ, decree, order, statute, rule or governmental regulation
applicable  to the Company,  which would have a material  adverse  effect on the
Company's business or prospects,  or on the performance of its obligations under
this Agreement or the Registration Rights Agreement. The execution, delivery and
performance  of  this  Agreement  and  the  other  agreements  entered  into  in
conjunction   with  the  Offering  and  the  consummation  of  the  transactions
contemplated  hereby and thereby will not (a) result in any such violation or be
in conflict with or  constitute,  with or without the passage of time and giving
of notice, either a default under any such provision,  instrument or contract or
an event which results in the creation of any lien,  charge or encumbrance  upon
any assets of the  Company,  which would have a material  adverse  effect on the
Company's business or prospects,  or on the performance of its obligations under
this Agreement,  the Registration Rights Agreement, or (b) violate the Company's
Certificate  of  Incorporation  or By-Laws or (c) violate any  statute,  rule or
governmental  regulation  applicable to the Company which violation would have a
material adverse effect on the Company's business or prospects.

                  5.6 Reporting Company. The Company is subject to the reporting
requirements  of the Exchange  Act, has a class of securities  registered  under
Section  12 of the  Exchange  Act,  and has filed all  reports  required  by the
Exchange Act since the date the Company first became  subject to such  reporting
obligations.  The Company  undertakes  to furnish  Investor  with copies of such
reports as may be reasonably requested by Investor prior to consummation of this
Offering and thereafter,  to make such reports  available,  for the full term of
this Agreement,  including any extensions  thereof,  and for as long as Investor
holds the Securities.  The Common Stock is duly listed or approved for quotation
on the O.T.C.  Bulletin  Board.  The Company is not in  violation of the listing
requirements  of the O.T.C.  Bulletin Board and does not  reasonably  anticipate
that the Common  Stock will be  delisted  by the O.T.C.  Bulletin  Board for the
foreseeable  future.  The  Company  has filed  all  reports  required  under the
Exchange  Act.  The Company  has not  furnished  to the  Investor  any  material
nonpublic information concerning the Company.

                  5.7  Capitalization.  The  capitalization of the Company as of
the date  hereof  is,  and the  capitalization  as of the  Closing,  subject  to
exercise of any outstanding  warrants  and/or exercise of any outstanding  stock
options,  after taking into account the offering of the Securities  contemplated
by  this  Agreement  and all  other  share  issuances  occurring  prior  to this
Offering,  will be, as set forth in the Capitalization  Schedule as set forth in
Exhibit K. There are no securities or instruments  containing  anti-dilution  or
similar  provisions  that will be triggered  by the issuance of the  Securities.
Except  as  disclosed  in the  Capitalization  Schedule,  as of the date of this
Agreement,  (i) there are no outstanding  options,  warrants,  scrip,  rights to
subscribe for, calls or commitments of any character  whatsoever relating to, or
securities or rights  convertible  into or exercisable or exchangeable  for, any
shares  of  capital  stock  of  the  Company  or any  of  its  subsidiaries,  or
arrangements  by which the Company or any of its  subsidiaries  is or may become
bound to issue  additional  shares of capital stock of the Company or any of its
subsidiaries,  and (ii) there are no agreements or arrangements  under which the
Company or any of its  subsidiaries  is obligated to register the sale of any of
its  or  their  securities  under  the  Act  (except  the  Registration   Rights
Agreement).

<PAGE>

                  5.8 Intellectual Property. The Company has valid, unrestricted
and exclusive ownership of or rights to use the patents,  trademarks,  trademark
registrations,   trade  names,  copyrights,   know-how,   technology  and  other
intellectual property necessary to the conduct of its business.  Exhibit M lists
all patents, trademarks, trademark registrations,  trade names and copyrights of
the Company.  The Company has granted such licenses or has assigned or otherwise
transferred  a portion of (or all of) such  valid,  unrestricted  and  exclusive
patents, trademarks, trademark registrations, trade names, copyrights, know-how,
technology  and other  intellectual  property  necessary  to the  conduct of its
business  as set forth in  Exhibit M. The  Company  has been  granted  licenses,
know-how, technology and/or other intellectual property necessary to the conduct
of its  business  as set  forth  in  Exhibit  M. To the  best  of the  Company's
knowledge after due inquiry,  the Company is not infringing on the  intellectual
property  rights of any third party,  nor is any third party  infringing  on the
Company's  intellectual  property  rights.  There  are  no  restrictions  in any
agreements, licenses, franchises, or other instruments that preclude the Company
from engaging in its business as presently conducted.

                  5.9  Use of  Proceeds.  As of the  date  hereof,  the  Company
expects to use the proceeds from this Offering  (less fees and expenses) for the
purposes  and in the  approximate  amounts  set  forth  on the  Use of  Proceeds
Schedule set forth as Exhibit L hereto. These purposes and amounts are estimates
and are subject to change without notice to any Investor.

                  5.10  No  Rights  of  Participation.   No  person  or  entity,
including,  but not limited to, current or former  stockholders  of the Company,
underwriters,  brokers,  agents or other third  parties,  has any right of first
refusal,  preemptive  right,  right of  participation,  or any similar  right to
participate in the financing  contemplated  by this Agreement which has not been
waived.

                  5.11 Company  Acknowledgment.  The Company hereby acknowledges
that Investor may elect to hold the Securities  for various  periods of time, as
permitted by the terms of this  Agreement,  the Warrants,  and other  agreements
contemplated hereby, and the Company further acknowledges that Investor has made
no  representations  or  warranties,  either written or oral, as to how long the
Securities will be held by Investor or regarding  Investor's  trading history or
investment strategies.

                  5.12 No Advance Regulatory Approval.  The Company acknowledges
that this  Investment  Agreement,  the transaction  contemplated  hereby and the
Registration Statement contemplated hereby have not been approved by the SEC, or
any  other  regulatory  body and  there is no  guarantee  that  this  Investment
Agreement,  the transaction  contemplated hereby and the Registration  Statement
contemplated  hereby will ever be  approved  by the SEC or any other  regulatory
body.  The  Company  is relying on its own  analysis  and is not  relying on any
representation   by  Investor  that  either  this  Investment   Agreement,   the
transaction  contemplated  hereby  or the  Registration  Statement  contemplated
hereby has been or will be approved by the SEC or other  appropriate  regulatory
body.

                  5.13  Underwriter's  Fees and  Rights  of First  Refusal.  The
Company is not obligated to pay any compensation or other fees, costs or related
expenditures in cash or securities to any  underwriter,  broker,  agent or other
representative in connection with this Offering.

<PAGE>

                  5.14  Availability  of  Suitable  Form for  Registration.  The
Company is currently eligible and agrees to maintain its eligibility to register
the resale of its Common Stock on a  registration  statement on a suitable  form
under the Act.

                  5.15 No Integrated  Offering.  Neither the Company, nor any of
its  affiliates,  nor any person acting on its or their behalf,  has directly or
indirectly  made  any  offers  or sales of any of the  Company's  securities  or
solicited any offers to buy any security under  circumstances that would prevent
the parties  hereto  from  consummating  the  transactions  contemplated  hereby
pursuant to an  exemption  from  registration  under  Regulation D of the Act or
would require the issuance of any other  securities  to be integrated  with this
Offering  under the Rules of the SEC. The Company has not engaged in any form of
general  solicitation  or  advertising  in  connection  with the offering of the
Common Stock or the Warrants.

                  5.16 Foreign Corrupt Practices.  Neither the Company,  nor any
of its subsidiaries,  nor any director, officer, agent, employee or other person
acting on behalf of the  Company  or any  subsidiary  has,  in the course of its
actions  for, or on behalf of, the  Company,  used any  corporate  funds for any
unlawful contribution,  gift,  entertainment or other unlawful expenses relating
to  political  activity;  made any direct or  indirect  unlawful  payment to any
foreign or  domestic  government  official  or employee  from  corporate  funds;
violated  or is in  violation  of any  provision  of the  U.S.  Foreign  Corrupt
Practices Act of 1977, as amended; or made any bribe, rebate, payoff,  influence
payment,  kickback  or  other  unlawful  payment  to  any  foreign  or  domestic
government official or employee.

                  5.17 Key Employees. Each "Key Employee" (as defined in Exhibit
N) is currently  serving the Company in the capacity  disclosed in Exhibit N. No
Key Employee, to the best knowledge of the Company and its subsidiaries,  is, or
is now  expected to be, in  violation  of any  material  term of any  employment
contract,  confidentiality,  disclosure or  proprietary  information  agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each Key Employee does not subject the
Company or any of its  subsidiaries  to any liability with respect to any of the
foregoing matters. No Key Employee has, to the best knowledge of the Company and
its  subsidiaries,  any intention to terminate his employment  with, or services
to, the Company or any of its subsidiaries.

                  5.18 Representations  Correct. The foregoing  representations,
warranties  and  agreements  are true,  correct  and  complete  in all  material
respects,  and shall  survive any Put Closing and the  issuance of the shares of
Common Stock thereby.

                  5.19 Tax Status. The Company has made or filed all federal and
state income and all other tax returns, reports and declarations required by any
jurisdiction  to which it is subject  (unless  and only to the  extent  that the
Company  has set  aside on its  books  provisions  reasonably  adequate  for the
payment  of all unpaid  and  unreported  taxes) and has paid all taxes and other
governmental  assessments  and charges  that are  material  in amount,  shown or
determined to be due on such  returns,  reports and  declarations,  except those
being contested in good faith and as set aside on its books provision reasonably
adequate for the payment of all taxes for periods  subsequent  to the periods to
which such returns,  reports or declarations apply. There are no unpaid taxes in
any  material  amount  claimed  to  be  due  by  the  taxing  authority  of  any
jurisdiction,  and the  officers  of the  Company  know of no basis for any such
claim.

<PAGE>

                  5.20 Transactions With Affiliates.  Except as set forth in the
Disclosure  Documents,  none of the  officers,  directors,  or  employees of the
Company is presently a party to any transaction with the Company (other than for
services  as  employees,  officers  and  directors),   including  any  contract,
agreement or other  arrangement  providing for the  furnishing of services to or
by,  providing for rental of real or personal  property to or from, or otherwise
requiring payments to or from any officer,  director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any officer,  director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.

                  5.21 Application of Takeover Protections.  The Company and its
board of directors have taken, or agrees to use reasonable commercial efforts to
take, all necessary action, if any, in order to render  inapplicable any control
share acquisition, business combination or other similar anti-takeover provision
under Nevada law which is or could become applicable to the Investor as a result
of  the  transactions  contemplated  by  this  Agreement,   including,   without
limitation,  the issuance of the Common Stock,  any exercise of the Warrants and
ownership of the Common Shares and Warrant  Shares.  The Company has not adopted
and will not adopt any  "poison  pill"  provision  that  will be  applicable  to
Investor as a result of transactions contemplated by this Agreement.

                  5.22  Other  Agreements.  The  Company  has not,  directly  or
indirectly,  made any agreements  with the Investor under a subscription  in the
form of this  Agreement for the purchase of Common Stock,  relating to the terms
or  conditions  of the  transactions  contemplated  hereby or thereby  except as
expressly set forth herein, respectively, or in exhibits hereto or thereto.

                  5.23 Major Transactions. There are no other Major Transactions
currently pending or contemplated by the Company.

                  5.24  Financings.  There  are no  other  financings  currently
pending or  contemplated  by the Company  other than have been  disclosed to the
Investor in writing.

                  5.25 Shareholder Authorization. The Company shall, at its next
annual shareholder  meeting following its listing on either the Nasdaq Small Cap
Market or the Nasdaq National Market, or at a special meeting to be held as soon
as  practicable  thereafter,  use its best  efforts  to obtain  approval  of its
shareholders  to (i)  authorize  the  issuance  of the full  number of shares of
Common Stock which would be issuable  under this  Agreement  and  eliminate  any
prohibitions  under  applicable  law or the  rules or  regulations  of any stock
exchange,  interdealer  quotation system or other  self-regulatory  organization
with  jurisdiction over the Company or any of its securities with respect to the
Company's  ability to issue  shares of Common  Stock in excess of the Cap Amount
(such approvals being the "20% Approval") and (ii) the increase in the number of
authorized  shares of Common  Stock of the  Company  (the  "Share  Authorization
Increase  Approval")  such that at least  25,000,000  shares can be reserved for
this Offering.  In connection with such shareholder  vote, the Company shall use
its best efforts to cause all officers and  directors of the Company to promptly
enter  into  irrevocable  agreements  to vote  all of their  shares  in favor of
eliminating such prohibitions. As soon as practicable after the 20% Approval and
the Share  Authorization  Increase Approval,  the Company agrees to use its best
efforts to reserve  25,000,000  shares of Common Stock for  issuance  under this
Agreement.

<PAGE>

                  5.26 Acknowledgment of Limitations on Put Amounts. The Company
understands and  acknowledges  that the amounts  available under this Investment
Agreement  are  limited,  among other  things,  based upon the  liquidity of the
Company's Common Stock traded on its Principal Market.

         6.       Covenants of the Company.

                  6.1 Independent  Auditors.  The Company shall,  until at least
the Termination  Date,  maintain as its independent  auditors an accounting firm
authorized to practice before the SEC.

                  6.2 Corporate Existence and Taxes; Change in Corporate Entity.
The Company shall,  until at least the Termination Date,  maintain its corporate
existence in good standing and, once it becomes a "Reporting Issuer" (defined as
a Company  which  files  periodic  reports  under the  Exchange  Act),  remain a
Reporting Issuer and shall pay all its taxes when due except for taxes which the
Company  disputes.  The Company  shall not,  at any time after the date  hereof,
enter into any merger,  consolidation or corporate reorganization of the Company
with or into, or transfer all or substantially  all of the assets of the Company
to,  another entity unless the resulting  successor or acquiring  entity in such
transaction,  if not the Company (the "Surviving Entity"),  (i) has Common Stock
listed for  trading on Nasdaq or on another  national  stock  exchange  and is a
Reporting Issuer,  (ii) assumes by written instrument the Company's  obligations
with respect to this Investment  Agreement,  the Registration  Rights Agreement,
the  Transfer  Agent  Instructions,  the  Warrant  Antidilution  Agreement,  the
Warrants, and the other agreements referred to herein, including but not limited
to the  obligations  to deliver to the  Investor  shares of Common  Stock and/or
securities  that  Investor is entitled  to receive  pursuant to this  Investment
Agreement and upon exercise of the Warrants and agrees by written  instrument to
reissue,  in the name of the Surviving  Entity,  any Warrants  (each in the same
terms, including but not limited to the same reset provisions, as the Commitment
Warrants,   Additional   Warrants  and/or  Purchase  Warrants,   as  applicable,
originally  issued or required to be issued by the Company) that are outstanding
immediately  prior  to  such  transaction,   making   appropriate   proportional
adjustments  to the  number  of  shares  represented  by such  Warrants  and the
exercise prices of such Warrants to accurately reflect the exchange  represented
by the transaction.

                  6.3  Registration  Rights.  The  Company  will  enter  into  a
registration  rights agreement  covering the resale of the Common Shares and the
Warrant Shares  substantially in the form of the  Registration  Rights Agreement
attached as Exhibit A.

                  6.4 Asset Transfers. The Company shall not (i) transfer, sell,
convey or  otherwise  dispose of any of its  material  assets to any  subsidiary
except for a cash or cash  equivalent  consideration  and for a proper  business
purpose  or (ii)  transfer,  sell,  convey or  otherwise  dispose  of any of its
material  assets to any  Affiliate,  as defined  below,  during the Term of this
Agreement.  For  purposes  hereof,  "Affiliate"  shall  mean any  officer of the
Company, director of the Company or owner of twenty percent (20%) or more of the
Common Stock or other securities of the Company.

                  6.5  Capital Raising Limitations and Rights of First Refusal.
                                                       -----------------------

<PAGE>

                       6.5.1    Capital Raising Limitations.   During the period
from the date of this Agreement until the date that is sixty (60) days after the
Termination Date, the Company shall not issue or sell, or agree to issue or sell
Equity  Securities  (as  defined  below),  for cash in private  capital  raising
transactions without obtaining the prior written approval of the Investor of the
Offering (the limitations  referred to in this subsection 6.5.1 are collectively
referred to as the "Capital  Raising  Limitations").  For purposes  hereof,  the
following shall be collectively  referred to herein as, the "Equity Securities":
(i)  Common  Stock or any  other  equity  securities,  (ii)  any debt or  equity
securities which are convertible into, exercisable or exchangeable for, or carry
the  right to  receive  additional  shares  of  Common  Stock  or  other  equity
securities,  or (iii) any  securities of the Company  pursuant to an equity line
structure or format similar in nature to this Offering.

                       6.5.2    Investor's  Right  of  First  Refusal.  For  any
private capital raising  transactions of Equity Securities which close after the
date  hereof  and on or prior to the date  that is sixty  (60)  days  after  the
Termination  Date of this  Agreement,  not  including  any  warrants  issued  in
conjunction  with this  Investment  Agreement,  the Company agrees to deliver to
Investor,  at least  ten (10) days  prior to the  closing  of such  transaction,
written  notice  describing  the proposed  transaction,  including the terms and
conditions thereof, and providing the Investor and its affiliates an option (the
"Right of First Refusal") during the ten (10) day period  following  delivery of
such notice to purchase the securities  being offered in such transaction on the
same terms as contemplated by such transaction.

                       6.5.3   Exceptions  to  Capital  Raising  Limitations and
Rights of First Refusal.  Notwithstanding the above, neither the Capital Raising
Limitations  nor the  Rights of First  Refusal  shall  apply to any  transaction
involving  issuances of securities in connection  with a merger,  consolidation,
acquisition or sale of assets,  or in connection with any strategic  partnership
or joint venture (the primary purpose of which is not to raise equity  capital),
or in connection with the  disposition or acquisition of a business,  product or
license by the Company or exercise of options by employees,  or directors,  or a
primary  underwritten  offering of the Company's  Common  Stock,  but each shall
apply to the issuance of  securities or options to  consultants  of the Company.
The Capital Raising Limitations and Rights of First Refusal also shall not apply
to (a) the issuance of  securities  upon exercise or conversion of the Company's
options,  warrants or other  convertible  securities  outstanding as of the date
hereof,  (b) the grant of  additional  options or  warrants,  or the issuance of
additional  securities,  under any Company stock option or restricted stock plan
for the benefit of the Company's  employees  directors or legal counsel,  or (c)
the issuance of debt  securities,  with no equity  feature,  incurred solely for
working capital purposes.

                  6.6 Financial 10-KSB  Statements,  Etc. and Current Reports on
Form 8-K. The Company shall deliver to the Investor copies of its annual reports
on Form 10-KSB,  and  quarterly  reports on Form 10-QSB and shall deliver to the
Investor  current reports on Form 8-K within two (2) days of filing for the Term
of this Agreement.

                  6.7 Opinion of Counsel.  Investor  shall,  concurrent with the
Investment  Commitment  Closing,  receive an opinion  letter from the  Company's
legal counsel, in the form attached as Exhibit B, or in such form as agreed upon
by the parties,  and shall,  concurrent  with each Put Date,  receive an opinion
letter from the Company's legal counsel, in the form attached as Exhibit I or in
such form as agreed upon by the parties.

<PAGE>

                  6.8 Removal of Legend.  If the  certificates  representing any
Securities are issued with a restrictive  Legend in accordance with the terms of
this  Agreement,  the Legend  shall be removed  and the  Company  shall  issue a
certificate  without such Legend to the holder of any Security  upon which it is
stamped, and a certificate for a security shall be originally issued without the
Legend,  if (a) the sale of such  Security is  registered  under the Act, or (b)
such holder provides the Company with an opinion of counsel, in form,  substance
and scope  customary  for opinions of counsel in  comparable  transactions  (the
reasonable  cost of which shall be borne by the Investor),  to the effect that a
public sale or transfer of such Security may be made without  registration under
the Act, or (c) such holder provides the Company with reasonable assurances that
such Security can be sold pursuant to Rule 144. Each Investor agrees to sell all
Securities,  including  those  represented  by a  certificate(s)  from which the
Legend has been removed,  or which were  originally  issued  without the Legend,
pursuant to an effective  registration  statement and to deliver a prospectus in
connection  with  such  sale  or  in  compliance  with  an  exemption  from  the
registration requirements of the Act.

                  6.9 Listing. Subject to the remainder of this Section 6.9, the
Company  shall  ensure that its shares of Common  Stock  (including  all Warrant
Shares  and Put  Shares)  are  listed and  available  for  trading on the O.T.C.
Bulletin  Board.  Thereafter,  the  Company  shall (i) use its best  efforts  to
continue  the  listing and  trading of its Common  Stock on the O.T.C.  Bulletin
Board or to become  eligible  for and listed and  available  for  trading on the
Nasdaq Small Cap Market, the NMS, or the New York Stock Exchange  ("NYSE");  and
(ii) comply in all material  respects with the Company's  reporting,  filing and
other  obligations  under the By-Laws or rules of the  National  Association  of
Securities Dealers ("NASD") and such exchanges, as applicable.

                  6.10 The Company's Instructions to Transfer Agent. The Company
will instruct the Transfer Agent of the Common Stock (the "Transfer Agent"),  by
delivering  instructions in the form of Exhibit T hereto, to issue certificates,
registered in the name of each Investor or its legally  permitted  nominee,  for
the Put Shares and Warrant Shares in such amounts as specified from time to time
by the Company upon any exercise by the Company of a Put and/or  exercise of the
Warrants by the holder thereof. Such certificates shall not bear a Legend unless
issuance  with a Legend is permitted by the terms of this  Agreement  and Legend
removal is not  permitted by Section 6.8 hereof and the Company  shall cause the
Transfer  Agent to issue  such  certificates  without a Legend.  Nothing in this
Section shall affect in any way Investor's  obligations  and agreement set forth
in  Sections  3.3.2 or 3.3.3  hereof to resell  the  Securities  pursuant  to an
effective  registration statement and to deliver a prospectus in connection with
such sale or in compliance with an exemption from the registration  requirements
of applicable  securities laws. If (a) an Investor  provides the Company with an
opinion of counsel,  which  opinion of counsel  shall be in form,  substance and
scope  customary  for  opinions of counsel in  comparable  transactions,  to the
effect that the Securities to be sold or transferred  may be sold or transferred
pursuant  to an  exemption  from  registration  or  (b)  an  Investor  transfers
Securities,  pursuant  to Rule  144,  to a  transferee  which  is an  accredited
investor, the Company shall permit the transfer,  and, in the case of Put Shares
and Warrant  Shares,  promptly  instruct its transfer agent to issue one or more
certificates  in  such  name  and in  such  denomination  as  specified  by such
Investor.  The  Company  acknowledges  that a  breach  by it of its  obligations
hereunder will cause irreparable harm to an Investor by vitiating the intent and
purpose  of  the  transaction  contemplated  hereby.  Accordingly,  the  Company
acknowledges  that the remedy at law for a breach of its obligations  under this
Section  6.10  will be  inadequate  and  agrees,  in the  event of a  breach  or
threatened breach by the Company of the provisions of this Section 6.10, that an
Investor shall be entitled,  in addition to all other available remedies,  to an
injunction restraining any breach and requiring immediate issuance and transfer,
without the  necessity  of showing  economic  loss and without any bond or other
security being required.

<PAGE>

                  6.11 Stockholder 20% Approval. Prior to the closing of any Put
that  would  cause the  Aggregate  Issued  Shares to exceed the Cap  Amount,  if
required by the rules of NASDAQ because the Company's  Common Stock is listed on
NASDAQ,  the Company shall obtain approval of its  stockholders to authorize (i)
the  issuance  of the full  number  of shares of  Common  Stock  which  would be
issuable  pursuant to this  Agreement  but for the Cap Amount and  eliminate any
prohibitions  under  applicable  law or the  rules or  regulations  of any stock
exchange,  interdealer  quotation system or other  self-regulatory  organization
with  jurisdiction over the Company or any of its securities with respect to the
Company's  ability to issue  shares of Common  Stock in excess of the Cap Amount
(such approvals being the "Stockholder 20% Approval").

                  6.12 Press Release.  Any public announcement  relating to this
financing (a "Press  Release")  shall be submitted to the Investor for review at
least two (2) business days prior to the planned release.  The Company shall not
disclose the Investor's  name in any press release or other public  announcement
without the  Investor's  prior  written  approval.  The Company shall obtain the
Investor's  written  approval  of the Press  Release  prior to  issuance  by the
Company.

                  6.13 Change in Law or Policy. In the event of a change in law,
or  policy of the SEC,  as  evidenced  by a  No-Action  letter or other  written
statements  of the SEC or the NASD  which  causes the  Investor  to be unable to
perform  its  obligations  hereunder,  this  Agreement  shall  be  automatically
terminated and no Termination  Fee shall be due,  provided that  notwithstanding
any  termination  under this  section  6.13,  the  Investor  shall  retain  full
ownership of the Commitment Warrant as partial  consideration for its commitment
hereunder.

                  6.14.   Notice  of  Certain  Events  Affecting   Registration;
Suspension  of Right to Make a Put.  The Company  shall  immediately  notify the
Investor,  but in no event later than two (2) business  days by facsimile and by
overnight courier, upon the occurrence of any of the following events in respect
of a Registration  Statement or related  prospectus in respect of an offering of
Registrable Securities: (i) receipt of any request for additional information by
the SEC or any other federal or state  governmental  authority during the period
of effectiveness of the Registration  Statement for 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 a 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  Registrable  Securities 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 such  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 a  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; (v) the declaration by
the SEC of the effectiveness of a Registration Statement; and (vi) the Company's
reasonable  determination  that a  post-effective  amendment to the Registration
Statement would be appropriate, and the Company shall promptly make available to
the Investor any such  supplement  or amendment to the related  prospectus.  The
Company shall not deliver to the Investor any Put Notice during the continuation
of any of the foregoing events.

<PAGE>

                  6.15  Acknowledgment  Regarding  Investor's  Purchase  of  the
Securities.  The Company  acknowledges  and agrees  that the  Investor is acting
solely in the capacity of arm's length purchaser with respect to the Transaction
Documents  and the  transactions  contemplated  hereby and thereby.  The Company
further  acknowledges  that the Investor is not acting as a financial advisor or
fiduciary  of the  Company  (or in any  similar  capacity)  with  respect to the
Transaction  Documents and the transactions  contemplated hereby and thereby and
any advice  given by the  Investor  or any of its  representatives  or agents in
connection  with the  Transaction  Documents and the  transactions  contemplated
hereby and  thereby  is merely  incidental  to the  Investor's  purchase  of the
Securities.  The Company  further  represents to the Investor that the Company's
decision to enter into the  Transaction  Documents  has been based solely on the
independent evaluation by the Company and its representatives and advisors.

                  6.16.  Liquidated Damages.  The parties hereto acknowledge and
agree that the sums payable as Non-Usage Fees,  Termination Fees and Ineffective
Registration  Payments  shall  each  give  rise to  liquidated  damages  and not
penalties.  The  parties  further  acknowledge  that (a) the  amount  of loss or
damages  likely to be incurred by the  Investor is  incapable or is difficult to
precisely estimate,  (b) the amounts specified bear a reasonable  proportion and
are not plainly or grossly  disproportionate  to the probable  loss likely to be
incurred by the Investor, and (c) the parties are sophisticated business parties
and have been represented by sophisticated  and able legal and financial counsel
and negotiated this Agreement at arm's length.

                  6.17.  Copies  of  Financial  Statements,  Reports  and  Proxy
Statements. Promptly upon the mailing thereof to the shareholders of the Company
generally,  the Company  shall  deliver to the Investor  copies of all financial
statements,  reports  and  proxy  statements  so mailed  and any other  document
generally distributed to shareholders.

                  6.18.  Notice of Certain  Litigation.  Promptly  following the
commencement  thereof, the Company shall provide the Investor written notice and
a description in reasonable  detail of any litigation or proceeding to which the
Company  or any  subsidiary  of the  Company  is a party,  in which  the  amount
involved is $250,000 or more and which is not covered by  insurance  or in which
injunctive or similar relief is sought.

         7.       Miscellaneous.

<PAGE>

                  7.1   Representations  and  Warranties  Survive  the  Closing;
Severability.  Investor's and the Company's representations and warranties shall
survive the Investment  Date and any Put Closing  contemplated by this Agreement
notwithstanding  any due  diligence  investigation  made by or on  behalf of the
party seeking to rely thereon. In the event that any provision of this Agreement
becomes or is  declared  by a court of  competent  jurisdiction  to be  illegal,
unenforceable  or void,  or is  altered  by a term  required  by the  Securities
Exchange Commission to be included in the Registration Statement, this Agreement
shall continue in full force and effect without said provision; provided that if
the removal of such provision  materially  changes the economic  benefit of this
Agreement to the Investor or the Company, this Agreement shall terminate.

                  7.2  Successors  and  Assigns.  This  Agreement  shall  not be
assignable  without the Company's  written consent.  If assigned,  the terms and
conditions of this  Agreement  shall inure to the benefit of and be binding upon
the respective successors and assigns of the parties. Nothing in this Agreement,
express or implied,  is intended to confer upon any party other than the parties
hereto  or  their  respective  successors  and  assigns  any  rights,  remedies,
obligations,  or  liabilities  under or by reason of this  Agreement,  except as
expressly  provided in this  Agreement.  Investor may assign  Investor's  rights
hereunder,  in connection  with any private sale of the  membership  interest of
such  Investor,  so long as, as a  condition  precedent  to such  transfer,  the
transferee  executes an  acknowledgment  agreeing to be bound by the  applicable
provisions of this Agreement in a form acceptable to the Company and provides an
original copy of such acknowledgment to the Company.

                  7.3 Execution in Counterparts Permitted. This Agreement may be
executed  in any  number of  counterparts,  each of which  shall be  enforceable
against the  parties  actually  executing  such  counterparts,  and all of which
together shall constitute one (1) instrument.

                  7.4 Titles and  Subtitles;  Gender.  The titles and  subtitles
used  in  this  Agreement  are  used  for  convenience  only  and  are not to be
considered  in  construing  or  interpreting  this  Agreement.  The  use in this
Agreement of a masculine,  feminine or neuter pronoun shall be deemed to include
a reference to the others.

                  7.5  Written  Notices,  Etc.  Any  notice,  demand or  request
required or  permitted  to be given by the  Company or Investor  pursuant to the
terms of this  Agreement  shall be in  writing  and shall be deemed  given  when
delivered personally, or by facsimile or upon receipt if by overnight or two (2)
day  courier,  addressed  to the  parties  at  the  addresses  and/or  facsimile
telephone  number of the parties set forth at the end of this  Agreement or such
other  address  as a party  may  request  by  notifying  the  other in  writing;
provided,  however,  that in order  for any  notice  to be  effective  as to the
Investor such notice shall be delivered and sent,  as specified  herein,  to all
the addresses and facsimile  telephone  numbers of the Investor set forth at the
end of this Agreement or such other address and/or facsimile telephone number as
Investor may request in writing.

                  7.6 Expenses.  Except as set forth in the Registration  Rights
Agreement,  each of the Company and  Investor  shall pay all costs and  expenses
that  it  respectively  incurs,  with  respect  to the  negotiation,  execution,
delivery and performance of this Agreement.

<PAGE>

                  7.7  Entire  Agreement;   Written  Amendments  Required.  This
Agreement,   including   the  Exhibits   attached   hereto,   the  Common  Stock
certificates,  the Warrants,  the Registration  Rights Agreement,  and the other
documents delivered pursuant hereto constitute the full and entire understanding
and  agreement  between  the  parties  with  regard to the  subjects  hereof and
thereof,  and no party shall be liable or bound to any other party in any manner
by any  warranties,  representations  or covenants,  whether oral,  written,  or
otherwise  except  as  specifically  set  forth  herein  or  therein.  Except as
expressly  provided  herein,  neither this  Agreement nor any term hereof may be
amended,  waived,  discharged or terminated  other than by a written  instrument
signed by the party  against whom  enforcement  of any such  amendment,  waiver,
discharge or termination is sought.

                  7.8  Actions at Law or  Equity;  Jurisdiction  and Venue.  The
parties  acknowledge that any and all actions,  whether at law or at equity, and
whether or not said  actions are based upon this  Agreement  between the parties
hereto,  shall be filed  in any  state or  federal  court  sitting  in  Atlanta,
Georgia.   Georgia  law  shall  govern  both  the  proceeding  as  well  as  the
interpretation and construction of the Transaction Documents and the transaction
as a whole. In any litigation  between the parties hereto, the prevailing party,
as found by the court,  shall be entitled to an award of all attorney's fees and
costs of court.  Should the court refuse to find a prevailing  party, each party
shall bear its own legal fees and costs.

                  7.9  Reporting  Entity for the  Common  Stock.  The  reporting
entity relied upon for the  determination of the trading price or trading volume
of the Common  Stock on the  Principal  Market on any given  Trading Day for the
purposes of this  Agreement  shall be the  Bloomberg  L.P.  The  written  mutual
consent of the  Investor  and the Company  shall be required to employ any other
reporting entity.

         8.       Subscription and Wiring Instructions; Irrevocability.

                  (a)  Wire  transfer  of  Subscription  Funds.  Investor  shall
                       deliver  Put Dollar  Amounts (as payment  towards any Put
                       Share Price)  by wire transfer,  to the Company  pursuant
                       to a  wire  instruction  letter   to be  provided  by the
                       Company, and signed by the Company.

                  (b)  Irrevocable Subscription.  Investor  hereby  acknowledges
                       and agrees,  subject  to the provisions of any applicable
                       laws  providing for the  refund of  subscription  amounts
                       submitted   by   Investor,   that   this   Agreement   is
                       irrevocable and  that Investor is not entitled to cancel,
                       terminate   or   revoke  this   Agreement  or  any  other
                       agreements  executed   by  such  Investor  and  delivered
                       pursuant hereto,  and  that this Agreement and such other
                       agreements shall  survive the death or disability of such
                       Investor  and  shall  be  binding  upon and  inure to the
                       benefit  of  the  parties  and  their  heirs,  executors,
                       administrators,  successors,  legal  representatives  and
                       assigns.  If the  Securities  subscribed  for  are to  be
                       owned by more than one person,  the  obligations  of  all
                       such  owners  under  this  Agreement  shall be joint  and
                       several, and the agreements, representations,  warranties
                       and acknowledgments  herein contained shall be  deemed to
                       be made  by and be binding  upon each such person and his
                       heirs,   executors,  administrators,   successors,  legal
                       representatives and assigns.

<PAGE>

         9.       Indemnification and Reimbursement.

                              (a)  Indemnification.   In  consideration  of  the
Investor's execution and delivery of the Investment Agreement,  the Registration
Rights  Agreement and the Warrants (the  "Transaction  Documents") and acquiring
the  Securities  thereunder  and in  addition  to all  of  the  Company's  other
obligations under the Transaction Documents,  the Company shall defend, protect,
indemnify  and hold  harmless  Investor and all of its  stockholders,  officers,
directors,  employees and direct or indirect  investors and any of the foregoing
person's agents, members, partners or other representatives (including,  without
limitation,  those retained in connection with the transactions  contemplated by
this Agreement)  (collectively,  the "Indemnitees") from and against any and all
actions,  causes of action,  suits,  claims,  losses,  costs,  penalties,  fees,
liabilities and damages, and expenses in connection  therewith  (irrespective of
whether any such  Indemnitee is a party to the action for which  indemnification
hereunder is sought), and including reasonable attorney's fees and disbursements
(the "Indemnified  Liabilities"),  incurred by any Indemnitee as a result of, or
arising  out of,  or  relating  to (a) any  misrepresentation  or  breach of any
representation  or warranty made by the Company in the Transaction  Documents or
any other certificate,  instrument or documents  contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the Company contained
in the Transaction  Documents or any other  certificate,  instrument or document
contemplated  hereby  or  thereby,  (c) any  cause  of  action,  suit or  claim,
derivative or otherwise,  by any stockholder of the Company based on a breach or
alleged  breach by the  Company or any of its  officers  or  directors  of their
fiduciary or other obligations to the stockholders of the Company, or (d) claims
made by third  parties  against any of the  Indemnitees  based on a violation of
Section 5 of the Securities Act caused by the integration of the private sale of
common  stock  to  the  Investor  and  the  public  offering   pursuant  to  the
Registration Statement.

         To the extent  that the  foregoing  undertaking  by the  Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and  satisfaction  of each of the Indemnified  Liabilities  which it
would be required to make if such foregoing undertaking was enforceable which is
permissible under applicable law.

         Promptly  after  receipt  by an  Indemnified  Party  of  notice  of the
commencement of any action pursuant to which indemnification may be sought, such
Indemnified  Party will, if a claim in respect thereof is to be made against the
other party  (hereinafter  "Indemnitor")  under this  Section 9,  deliver to the
Indemnitor a written notice of the commencement thereof and the Indemnitor shall
have the right to participate in and to assume the defense  thereof with counsel
reasonably selected by the Indemnitor,  provided,  however,  that an Indemnified
Party  shall  have the  right to retain  its own  counsel,  with the  reasonably
incurred  fees and  expenses of such  counsel to be paid by the  Indemnitor,  if
representation  of  such  Indemnified  Party  by  the  counsel  retained  by the
Indemnitor  would be  inappropriate  due to actual  or  potential  conflicts  of
interest between such Indemnified  Party and any other party represented by such
counsel  in such  proceeding.  The  failure  to  deliver  written  notice to the
Indemnitor  within a reasonable time of the commencement of any such action,  if
prejudicial to the Indemnitor's ability to defend such action, shall relieve the
Indemnitor of any liability to the  Indemnified  Party under this Section 9, but
the omission to so deliver  written notice to the Indemnitor will not relieve it
of any liability that it may have to any Indemnified Party other than under this
Section 9 to the extent it is prejudicial.

<PAGE>

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

<PAGE>

                           [INTENTIONALLY LEFT BLANK]

<PAGE>

         10.      Accredited Investor.   Investor  is  an  "accredited investor"
because (check all applicable boxes):

         (a)      [ ]      it is an organization  described in Section 501(c)(3)
                           of  the  Internal  Revenue  Code,  or a  corporation,
                           limited duration company,  limited liability company,
                           business  trust,  or  partnership  not formed for the
                           specific purpose of acquiring the securities offered,
                           with total assets in excess of $5,000,000.

         (b)      [ ]      any trust, with total assets in excess of $5,000,000,
                           not formed for the specific  purpose of acquiring the
                           securities  offered,  whose purchase is directed by a
                           sophisticated  person  who  has  such  knowledge  and
                           experience in financial and business  matters that he
                           is capable of evaluating  the merits and risks of the
                           prospective investment.

         (c)      [ ]      a natural person, who

                  [ ]      is a director,  executive  officer or general partner
                           of the issuer of the securities being offered or sold
                           or a director,  executive  officer or general partner
                           of a general partner of that issuer.

                  [ ]      has an individual net worth,  or joint net worth with
                           that  person's  spouse,  at the time of his  purchase
                           exceeding $1,000,000.

                  [ ]      had an  individual  income in excess of  $200,000  in
                           each of the two most  recent  years  or joint  income
                           with that  person's  spouse in excess of  $300,000 in
                           each of those years and has a reasonable  expectation
                           of  reaching  the same  income  level in the  current
                           year.

         (d)      [ ]      an  entity  each  equity  owner of which is an entity
                           described  in a - b  above  or is an  individual  who
                           could check one (1) of the last three (3) boxes under
                           subparagraph (c) above.

         (e)      [ ]      other [specify]_____________________________________.

<PAGE>

         The  undersigned  hereby  subscribes  the Maximum  Offering  Amount and
acknowledges that this Agreement and the subscription  represented  hereby shall
not be effective unless accepted by the Company as indicated below.

         IN WITNESS WHEREOF, the undersigned Investor does represent and certify
under penalty of perjury that the foregoing  statements are true and correct and
that Investor by the following signature(s) executed this Agreement.

Dated this 17th day of October, 2000.

SWARTZ PRIVATE EQUITY, LLC

By: ____________________________________
           Eric S. Swartz, Manager

SECURITY DELIVERY INSTRUCTIONS:
-------------------------------
Swartz Private Equity, LLC
C/o Eric S. Swartz
300 Colonial Center Parkway
Suite 300
Roswell, GA 30076
Telephone: (770) 640-8130

THIS AGREEMENT IS ACCEPTED BY THE COMPANY IN THE AMOUNT OF THE MAXIMUM  OFFERING
AMOUNT ON THE 17TH DAY OF OCTOBER, 2000.

                                    TIDELANDS OIL & GAS CORPORATION

                           By:
                                    Michael R. Ward, President & CEO

                           Address:
                                    Attn: Michael R. Ward, President & CEO
                                    13330 Leopard Street
                                    Suite 26
                                    Corpus Christi, TX 78410
                                    Telephone (361) 241-2244
                                    Facsimile (361) 241-5292

<PAGE>

                               ADVANCE PUT NOTICE

TIDELANDS OIL & GAS CORPORATION (the "Company")  hereby intends,  subject to the
Individual  Put Limit (as  defined  in the  Investment  Agreement),  to elect to
exercise  a Put to sell the  number of shares  of  Common  Stock of the  Company
specified  below,  to  _____________________________,  the  Investor,  as of the
Intended  Put Date  written  below,  all  pursuant  to that  certain  Investment
Agreement  (the  "Investment  Agreement")  by and between the Company and Swartz
Private Equity, LLC dated on or about October 17, 2000.

                      Date of Advance Put Notice: _________________

                      Intended Put Date: __________________________

                      Intended Put Share Amount: __________________

                      Company Designation Maximum Put Dollar Amount (Optional):
                      _____________________________________________.

                      Company Designation Minimum Put Share Price (Optional):
                      _____________________________________________.

                                    TIDELANDS OIL & GAS CORPORATION

                           By:
                                    Michael R. Ward, President & CEO

                           Address:
                                    Attn: Michael R. Ward, President & CEO
                                    13330 Leopard Street
                                    Suite 26
                                    Corpus Christi, TX 78410
                                    Telephone (361) 241-2244
                                    Facsimile (361) 241-5292

<PAGE>

                       CONFIRMATION of ADVANCE PUT NOTICE

_________________________________,  the  Investor,  hereby  confirms  receipt of
TIDELANDS  OIL & GAS  CORPORATION's  (the  "Company")  Advance Put Notice on the
Advance Put Date written below,  and its intention to elect to exercise a Put to
sell shares of common stock  ("Intended Put Share Amount") of the Company to the
Investor,  as of the  intended  Put Date  written  below,  all  pursuant to that
certain  Investment  Agreement (the  "Investment  Agreement") by and between the
Company and Swartz Private Equity, LLC dated on or about October 17, 2000.

                     Date of Confirmation: _______________________

                     Date of Advance Put Notice: _________________

                     Intended Put Date: __________________________

                     Intended Put Share Amount: __________________

                     Company Designation Maximum Put Dollar Amount (Optional):
                     _____________________________________________.

                     Company Designation Minimum Put Share Price (Optional):
                     _____________________________________________.

                                      INVESTOR(S)

                                      ____________________________________
                                      Investor's Name

                                      By: ________________________________
                                               (Signature)
                     Address:         ____________________________________

                                      ____________________________________

                                      ____________________________________

                     Telephone No.:   ____________________________________

                     Facsimile No.:   ____________________________________

<PAGE>

                                    EXHIBIT F

                                   PUT NOTICE

TIDELANDS OIL & GAS CORPORATION (the "Company")  hereby elects to exercise a Put
to  sell   shares  of  common   stock   ("Common   Stock")  of  the  Company  to
_____________________________,  the  Investor,  as of the Put  Date,  at the Put
Share Price and for the number of Put Shares written below, all pursuant to that
certain  Investment  Agreement (the  "Investment  Agreement") by and between the
Company and Swartz Private Equity, LLC dated on or about October 17, 2000.

                       Put Date: _________________

                       Intended Put Share Amount (from Advance Put Notice):
                       _________________ Common Shares

                       Company Designation Maximum Put Dollar Amount (Optional):
                       _____________________________________________.

                       Company Designation Minimum Put Share Price (Optional):
                       _____________________________________________.

Note:  Capitalized  terms  shall  have  the  meanings  ascribed  to them in this
Investment Agreement.

                                    TIDELANDS OIL & GAS CORPORATION

                           By:
                                    Michael R. Ward, President & CEO

                           Address:
                                    Attn: Michael R. Ward, President & CEO
                                    13330 Leopard Street
                                    Suite 26
                                    Corpus Christi, TX 78410
                                    Telephone (361) 241-2244
                                    Facsimile (361) 241-5292

<PAGE>

                           CONFIRMATION of PUT NOTICE

_________________________________,  the  Investor,  hereby  confirms  receipt of
Tidelands  Oil & Gas  Corporation  (the  "Company")  Put Notice and  election to
exercise  a Put to  sell  ___________________________  shares  of  common  stock
("Common Stock") of the Company to Investor, as of the Put Date, all pursuant to
that certain  Investment  Agreement (the "Investment  Agreement") by and between
the Company and Swartz Private Equity, LLC dated on or about October 17, 2000.

                     Date of Confirmation: ____________________

                     Date of Put Notice: _______________

                     Put Date: ________________________

                     Intended Put Share Amount: ________________

                     Company Designation Maximum Put Dollar Amount (Optional):
                     _____________________________________________.

                     Company Designation Minimum Put Share Price (Optional):
                     _____________________________________________.

                                      INVESTOR(S)

                                      _____________________________________
                                      Investor's Name

                                      By: _________________________________
                                               (Signature)
                     Address:         _____________________________________

                                      _____________________________________

                                      _____________________________________

                     Telephone No.: _______________________________________

                     Facsimile No.: _______________________________________

<PAGE>

                                    EXHIBIT H

                             PUT CANCELLATION NOTICE

TIDELANDS OIL & GAS CORPORATION (the "Company") hereby cancels the Put specified
below,   pursuant  to  that  certain   Investment   Agreement  (the  "Investment
Agreement") by and between the Company and Swartz Private  Equity,  LLC dated on
or about  October  17,  2000,  as of the close of trading on the date  specified
below  (the  "Cancellation  Date,"  which date must be on or after the date that
this notice is delivered to the Investor), provided that such cancellation shall
not apply to the number of shares of Common  Stock  equal to the  Truncated  Put
Share Amount (as defined in the Investment Agreement).

                            Cancellation Date: _____________________

                            Put Date of Put Being Canceled: __________

                            Number of Shares Put on Put Date: _________

                            Reason for Cancellation (check one):

                                  [ ] Material Facts, Ineffective Registration
                                  Period.

                                  [ ] Delisting Event

The Company  understands  that, by canceling  this Put, it must give twenty (20)
Business Days advance written notice to the Investor  before  effecting the next
Put.

                                    TIDELANDS OIL & GAS CORPORATION

                           By:
                                    Michael R. Ward, President & CEO

                           Address:
                                    Attn: Michael R. Ward, President & CEO
                                    13330 Leopard Street
                                    Suite 26
                                    Corpus Christi, TX 78410
                                    Telephone (361) 241-2244
                                    Facsimile (361) 241-5292

<PAGE>

                      PUT CANCELLATION NOTICE CONFIRMATION

The undersigned  Investor to that certain Investment  Agreement (the "Investment
Agreement")  by and between the  Tidelands Oil & Gas  Corporation's,  and Swartz
Private Equity,  LLC dated on or about October 17, 2000, hereby confirms receipt
of Tidelands Oil & Gas  Corporation's  (the "Company") Put Cancellation  Notice,
and confirms the following:

                                     Date of this Confirmation: ________________

                                     Put Cancellation Date: ____________________

                                     INVESTOR(S)

                                     _____________________________________
                                     Investor's Name

                                     By: _________________________________
                                     (Signature)
                    Address:         _____________________________________

                                     _____________________________________

                                     _____________________________________

                    Telephone No.:   _____________________________________

                    Facsimile No.:   _____________________________________Exhibit 4.2
Commitment Warrant (Swartz)

                               Document is Copied.

THIS WARRANT AND THE  SECURITIES  ISSUABLE  UPON  EXERCISE  HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES  ACT"),
OR ANY  STATE  SECURITIES  LAW,  AND  MAY  NOT BE  SOLD,  TRANSFERRED,  PLEDGED,
HYPOTHECATED  OR OTHERWISE  DISPOSED OF OR EXERCISED  UNLESS (i) A  REGISTRATION
STATEMENT  UNDER THE SECURITIES ACT AND APPLICABLE  STATE  SECURITIES LAWS SHALL
HAVE  BECOME   EFFECTIVE  WITH  REGARD  THERETO,   OR  (ii)  AN  EXEMPTION  FROM
REGISTRATION  UNDER THE SECURITIES ACT AND APPLICABLE  STATE  SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.

AN INVESTMENT IN THESE SECURITIES  INVOLVES A HIGH DEGREE OF RISK.  HOLDERS MUST
RELY ON THEIR  OWN  ANALYSIS  OF THE  INVESTMENT  AND  ASSESSMENT  OF THE  RISKS
INVOLVED.

Warrant to Purchase

1,500,000 shares
---------
                        Warrant to Purchase Common Stock
                                       of
                         TIDELANDS OIL & GAS CORPORATION

         THIS CERTIFIES that Swartz Private Equity, LLC or any subsequent holder
hereof pursuant to Section 8 hereof  ("Holder"),  has the right to purchase from
TIDELANDS OIL & GAS CORPORATION,  a Nevada  corporation  (the "Company"),  up to
1,500,000  fully paid and  nonassessable  shares of the Company's  common stock,
$0.001 par value per share ("Common  Stock"),  subject to adjustment as provided
herein, at a price equal to the Exercise Price as defined in Section 3 below, at
any time  beginning on the Date of Issuance  (defined  below) and ending at 5:00
p.m.,  New York, New York time the date that is ten (10) years after the Date of
Issuance (the "Exercise Period").

         Holder  agrees with the Company  that this  Warrant to Purchase  Common
Stock of the Company (this  "Warrant") is issued and all rights  hereunder shall
be held subject to all of the  conditions,  limitations and provisions set forth
herein.

         1.       Date of Issuance and Term.
                  --------------------------

         This  Warrant  shall be deemed to be issued on September 7, 2000 ("Date
of  Issuance").  The term of this  Warrant  is ten (10)  years  from the Date of
Issuance.

         Of  this  Warrant  to  purchase  one  million  five  hundred   thousand
(1,500,000) shares of Common Stock of the Company, the Warrant is exercisable as
to five hundred  thousand  (500,000) shares of Common Stock of the Company after
the fifteen  (15)  business  day document  review  period (the "Review  Period")
referenced in the Equity Line Letter of Agreement dated on or about September 7,
2000, between Holder and Company (the "Letter of Agreement") has ended, shall be
further  exercisable as to an additional five hundred thousand  (500,000) shares
of Common  Stock of the  Company  upon the  execution  by the Company and Swartz
Private  Equity,  LLC of an  Investment  Agreement,  pursuant  to the  Letter of
Agreement  ("Investment  Agreement") and shall be further  exercisable as to the
remaining five hundred thousand  (500,000) shares of Common Stock of the Company
upon the  earlier of (i) the date of  effectiveness  of  Company's  registration
statement (the "Registration  Statement") to be filed pursuant to the Investment
Agreement and related documents, or (ii) March 7, 2001.

<PAGE>

         Anything  in  this  Warrant  to the  contrary  notwithstanding,  if the
Company  delivers  written notice to Swartz Private Equity,  LLC, at 200 Roswell
Summit, Suite 285, 1080 Holcomb Bridge Road, Roswell, GA 30076; Telephone: (770)
640-8130,  Facsimile:  (770)  640-7150  (or such  other  address  and  number as
requested by the Holder),  prior to the expiration of the Review Period that the
legal documents for the transaction are  unacceptable  and the Company wishes to
terminate the transaction (a "Company Termination Notice"),  Holder shall return
this Warrant to the Company and all of Holder's  rights under this Warrant shall
be null  and  void and of no  effect,  provided  that,  if the  Company  has not
delivered a Company  Termination Notice to Swartz Private Equity,  LLC, prior to
the expiration of the Review Period, ownership of this Warrant shall irrevocably
vest to the  Holder,  regardless  of  whether  a Company  Termination  Notice is
delivered anytime thereafter.

         Notwithstanding anything to the contrary herein, the applicable portion
of this Warrant shall not be  exercisable  during any time that, and only to the
extent  that,  the number of shares of Common  Stock to be issued to Holder upon
such exercise,  when added to the number of shares of Common Stock, if any, that
the Holder otherwise beneficially owns at the time of such exercise, would equal
or exceed  4.99% of the number of shares of Common  Stock then  outstanding,  as
determined  in  accordance  with  Section  13(d) of the Exchange Act (the "4.99%
Limitation").  The  4.99%  Limitation  shall be  conclusively  satisfied  if the
applicable  Exercise Notice includes a signed  representation by the Holder that
the  issuance of the shares in such  Exercise  Notice will not violate the 4.99%
Limitation,  and  the  Company  shall  not be  entitled  to  require  additional
documentation of such satisfaction.

         2.       Exercise.
                  --------

         (a) Manner of Exercise. During the Exercise Period, this Warrant may be
exercised as to all or any lesser  number of full shares of Common Stock covered
hereby (the "Warrant Shares") upon surrender of this Warrant,  with the Exercise
Form  attached  hereto as Exhibit A (the  "Exercise  Form") duly  completed  and
executed,  together  with the full  Exercise  Price (as defined  below) for each
share of Common  Stock as to which this Warrant is  exercised,  at the office of
the Company,  Attention:  Michael R. Ward,  President & CEO, Tidelands Oil & Gas
Corporation,  13330  Leopard  Street,  Suite 26,  Corpus  Christi,  Texas  78410
Telephone: (361) 241-2244, Facsimile: (361) 241-5292, or at such other office or
agency as the Company may  designate  in writing,  by  overnight  mail,  with an
advance copy of the Exercise Form sent to the Company and its Transfer  Agent by
facsimile (such surrender and payment of the Exercise Price  hereinafter  called
the "Exercise of this Warrant").

         (b) Date of Exercise.  The "Date of  Exercise" of the Warrant  shall be
defined as the date that the advance copy of the completed and executed Exercise
Form is sent by facsimile to the Company, provided that the original Warrant and
Exercise  Form are  received by the Company as soon as  practicable  thereafter.
Alternatively,  the Date of Exercise  shall be defined as the date the  original
Exercise Form is received by the Company,  if Holder has not sent advance notice
by facsimile.

         (c) Delivery of Shares of Common Stock Upon Exercise. Upon any exercise
of this Warrant,  the Company shall use its reasonable  best efforts to deliver,
or  shall  cause  its  transfer  agent  to  deliver,   a  stock  certificate  or
certificates  representing  the number of shares of Common Stock into which this
Warrant was exercised, within three (3) trading days of the date that all of the
following  have been  received by the Company:  (i) the original  completed  and
executed  Exercise Form, (ii) the original  Warrant and (iii) the Exercise Price
(if applicable)(collectively, the "Receipt Date"). Such stock certificates shall
not contain a legend restricting  transfer if a registration  statement covering
the  resale  of such  shares  of  Common  Stock is in effect at the time of such
exercise  or if such  shares  of  Common  Stock  may be  resold  pursuant  to an
exemption  from  registration,  including  but not limited to Rule 144 under the
Securities Act of 1933. Shares of Common Stock which may be qualified for public
resale under Rule 144 will have their restrictive  legends removed in accordance
with Rule 144(k). Any request for removal of legend before the expiration of the
two year holding period must be handled  through an NASD licensed broker dealer.
The Company will cooperate fully in connection with any  broker/dealer  Rule 144
sale.

<PAGE>

         (d) Economic Loss Due to Late Delivery of Shares.  If the Company fails
for any  reason to  deliver  the  requisite  number  of  shares of Common  Stock
(unlegended,  if so required by the terms of this Warrant)(the "Warrant Shares")
to a Holder upon an exercise of this Warrant  within  fifteen (15) business days
of the Receipt Date (the "Late Delivery  Deadline"),  the Company shall pay such
Holder (in addition to any other  remedies  available to Holder) an amount equal
to  ("Non-Delivery  Payment") the number of Warrant Shares for which delivery is
late, multiplied by the difference of:

(x) the highest closing price for the Company's Common Stock for any trading day
                  during  the  period  beginning  on and  including  the Date of
                  Exercise  and  ending on the  earlier of (i) the date that the
                  Investor receives from the Company  certificates  (unlegended,
                  if so required by the terms of this Warrant)  representing the
                  Warrant Shares of Common Stock  issuable in  conjunction  with
                  such Exercise, or (ii) the date that the Investor receives the
                  full amount of the Non-Delivery Payment, whichever is earlier,

minus

(y) the Exercise Price per share (which, in the case  of  a  Cashless  Exercise,
                  shall be  deemed  to equal  zero),  or,  if the  Investor  has
                  received the Warrant Shares (unlegended, if so required by the
                  terms of this  Warrant)  from the Company prior to the payment
                  of the Non-Delivery  Payment,  the lowest closing price of the
                  Company's   Common   Stock  for  the  five  (5)  trading  days
                  immediately  preceding  the date that such Warrant  Shares are
                  delivered to the Holder.

                  Non-Delivery  Payments  shall  be  payable,  in  cash  or cash
                  equivalent, within five (5) business days of the Late Delivery
                  Deadline.

          (e) Liquidated Damages.  The parties hereto acknowledge and agree that
the sums payable as Non-Delivery  Payments shall give rise to liquidated damages
and not penalties.  The parties further  acknowledge that (i) the amount of loss
or damages  likely to be incurred by the Holder is  incapable or is difficult to
precisely estimate,  (ii) the amounts specified bear a reasonable proportion and
are not plainly or grossly  disproportionate  to the probable  loss likely to be
incurred  by the  Investor,  and (iii) the parties  are  sophisticated  business
parties and have been represented by sophisticated  and able legal and financial
counsel and negotiated this Agreement at arm's length.

         (f)  Cancellation  of Warrant.  This Warrant shall be canceled upon the
Exercise of this Warrant,  and, as soon as practical after the Date of Exercise,
Holder  shall be  entitled  to  receive  Common  Stock for the  number of shares
purchased  upon  such  Exercise  of this  Warrant,  and if this  Warrant  is not
exercised in full, Holder shall be entitled to receive a new Warrant (containing
terms identical to this Warrant)  representing  any unexercised  portion of this
Warrant in addition to such Common Stock.

<PAGE>

         (g) Holder of Record.  Each person in whose name any Warrant for shares
of Common Stock is issued shall, for all purposes, be deemed to be the Holder of
record of such shares on the Date of Exercise of this Warrant,  irrespective  of
the date of delivery of the Common  Stock  purchased  upon the  Exercise of this
Warrant.  Nothing in this Warrant shall be construed as  conferring  upon Holder
any rights as a stockholder of the Company.

         3.       Payment of Warrant Exercise Price.
                  ---------------------------------

         The Exercise Price per share  ("Exercise  Price") shall initially equal
(the "Initial Exercise Price") the lowest Closing Price for the five (5) trading
days immediately  preceding  September 7, 2000,  which is $0.375.  If the lowest
Closing  Price of the  Company's  Common  Stock  for the five (5)  trading  days
immediately preceding the date, if any, that Swartz Private Equity, LLC executes
an Investment Agreement pursuant to the Letter of Agreement (the "Closing Market
Price") is less than the Initial  Exercise  Price,  the Exercise  Price shall be
reset to equal the  Closing  Market  Price,  or, if the Date of Exercise is more
than six (6) months  after the Date of  Issuance,  the  Exercise  Price shall be
reset to equal the lesser of (i) the Exercise Price then in effect,  or (ii) the
"Lowest Reset Price," as that term is defined below. The Company shall calculate
a "Reset Price" on each six-month anniversary date of the Date of Issuance which
shall equal the lowest Closing Price of the Company's  Common Stock for the five
(5)  trading  days  ending on such six-  month  anniversary  date of the Date of
Issuance. The "Lowest Reset Price" shall equal the lowest Reset Price determined
on any six-month  anniversary date of the Date of Issuance preceding the Date of
Exercise, taking into account, as appropriate,  any adjustments made pursuant to
Section 5 hereof.

         For purposes  hereof,  the term "Closing  Price" shall mean the closing
price on the Nasdaq Small Cap Market,  the National Market System  ("NMS"),  the
New York Stock Exchange, or the O.T.C. Bulletin Board, or if no longer traded on
the Nasdaq Small Cap Market,  the National Market System  ("NMS"),  the New York
Stock Exchange,  or the O.T.C.  Bulletin Board,  the "Closing Price" shall equal
the  closing  price  on  the  principal  national  securities  exchange  or  the
over-the-counter  system on which the  Common  Stock is so  traded  and,  if not
available,  the  mean of the  high  and low  prices  on the  principal  national
securities exchange on which the Common Stock is so traded.

         Payment of the Exercise  Price may be made by either of the  following,
or a combination thereof, at the election of Holder:

         (i) Cash Exercise: cash, bank or cashiers check or wire transfer; or

         (ii) Cashless  Exercise:  The Holder, at its option,  may exercise this
Warrant in a cashless  exercise  transaction  under this  subsection (ii) if and
only  if,  on the Date of  Exercise,  there  is not  then in  effect  a  current
registration  statement  that covers the resale of the shares of Common Stock to
be  issued  upon  exercise  of this  Warrant  . In  order to  effect a  Cashless
Exercise, the Holder shall surrender this Warrant at the principal office of the
Company  together with notice of cashless  election,  in which event the Company
shall  issue  Holder a number  of  shares of  Common  Stock  computed  using the
following formula:

                                  X = Y (A-B)/A

where:   X = the number of shares of Common Stock to be issued to Holder.

         Y = the  number of shares of Common  Stock for which  this  Warrant  is
being exercised.

<PAGE>

                  A = the  Market  Price of one (1) share of Common  Stock  (for
                  purposes of this Section  3(ii),  the "Market  Price" shall be
                  defined as the average  Closing  Price of the Common Stock for
                  the five (5)  trading  days prior to the Date of  Exercise  of
                  this Warrant (the "Average Closing Price"), as reported by the
                  O.T.C.  Bulletin  Board,  National  Association  of Securities
                  Dealers  Automated   Quotation  System  ("Nasdaq")  Small  Cap
                  Market,  or if the  Common  Stock is not  traded on the Nasdaq
                  Small  Cap  Market,  the  Average  Closing  Price in any other
                  over-the-counter market; provided, however, that if the Common
                  Stock is listed on a stock exchange, the Market Price shall be
                  the Average  Closing  Price on such  exchange for the five (5)
                  trading days prior to the date of exercise of the Warrants. If
                  the Common Stock is/was not traded during the five (5) trading
                  days prior to the Date of Exercise, then the closing price for
                  the last publicly traded day shall be deemed to be the closing
                  price for any and all (if  applicable)  days  during such five
                  (5) trading day period.

                  B = the Exercise Price.

         For  purposes of Rule 144 and  sub-section  (d)(3)(ii)  thereof,  it is
intended,  understood  and  acknowledged  that the Common  Stock  issuable  upon
exercise of this Warrant in a cashless  exercise  transaction shall be deemed to
have  been  acquired  at the time  this  Warrant  was  issued.  Moreover,  it is
intended,  understood  and  acknowledged  that the holding period for the Common
Stock issuable upon exercise of this Warrant in a cashless exercise  transaction
shall be deemed to have commenced on the date this Warrant was issued.

         4.       Transfer and Registration.
                  -------------------------

         (a) Transfer  Rights.  Subject to the  provisions  of Section 8 of this
Warrant,  this Warrant may be transferred on the books of the Company,  in whole
or in part, in person or by attorney,  upon  surrender of this Warrant  properly
completed  and  endorsed  unless  such  transfer  is  prohibited  by  applicable
securities laws. This Warrant shall be canceled upon such surrender and, as soon
as  practicable  thereafter,  the person to whom such  transfer is made shall be
entitled to receive a new Warrant or Warrants as to the portion of this  Warrant
transferred,  and Holder  shall be  entitled  to receive a new Warrant as to the
portion hereof retained.

         (b)  Registrable  Securities.  In  addition  to any other  registration
rights of the Holder, if the Common Stock issuable upon exercise of this Warrant
is not  registered  for  resale at the time the  Company  proposes  to  register
(including  for  this  purpose  a  registration  effected  by  the  Company  for
stockholders  other  than the  Holders)  any of its Common  Stock  under the Act
(other  than a  registration  relating  solely  for the  sale of  securities  to
participants  in a Company stock plan or a  registration  on Form S4 promulgated
under the Act or any successor or similar form registering stock issuable upon a
reclassification,   upon  a  business  combination   involving  an  exchange  of
securities  or upon an exchange  offer for  securities  of the issuer or another
entity)(a  "Piggyback  Registration  Statement"),  the Company shall cause to be
included in such Piggyback Registration Statement ("Piggyback Registration") all
of the Common Stock  issuable  upon the  exercise of this Warrant  ("Registrable
Securities")  to the extent such  inclusion  does not  violate the  registration
rights of any other  securityholder  of the  Company  granted  prior to the date
hereof.  Nothing herein shall prevent the Company from withdrawing or abandoning
the Piggyback Registration Statement prior to its effectiveness.

         (c)   Limitation  on   Obligations   to  Register   under  a  Piggyback
Registration.   In  the  case  of  a  Piggyback   Registration  pursuant  to  an
underwritten  public  offering  by  the  Company,  if the  managing  underwriter
determines  and  advises  in  writing  that the  inclusion  in the  registration
statement of all Registrable  Securities proposed to be included would interfere
with the successful marketing of the securities proposed to be registered by the
Company,  then the number of such  Registrable  Securities to be included in the
Piggyback Registration  Statement, to the extent such Registrable Securities may
be included in such Piggyback Registration  Statement,  shall be allocated among
all  Holders  who had  requested  Piggyback  Registration  pursuant to the terms
hereof,  in the proportion that the number of Registrable  Securities which each
such  Holder  seeks  to  register  bears  to the  total  number  of  Registrable
Securities  sought to be included by all  Holders.  If required by the  managing
underwriter of such an  underwritten  public  offering,  the Holders shall enter
into a reasonable agreement limiting the number of Registrable  Securities to be
included  in  such  Piggyback  Registration  Statement  and the  terms,  if any,
regarding the future sale of such Registrable Securities.

         5.       Anti-Dilution Adjustments.
                  -------------------------

         (a) Stock Dividend. If the Company shall at any time declare a dividend
payable in shares of Common  Stock,  then Holder,  upon Exercise of this Warrant
after the record date for the  determination of holders of Common Stock entitled
to receive such  dividend,  shall be entitled to receive  upon  Exercise of this
Warrant,  in addition  to the number of shares of Common  Stock as to which this
Warrant is  exercised,  such  additional  shares of Common  Stock as such Holder
would have received had this Warrant been  exercised  immediately  prior to such
record date and the Exercise Price will be proportionately adjusted.

<PAGE>

         (b)      Recapitalization or Reclassification.

                  (i) Stock  Split.  If the  Company  shall at any time effect a
recapitalization,   reclassification   or  other  similar  transaction  of  such
character  that the  shares  of Common  Stock  shall be  changed  into or become
exchangeable  for a larger  number of shares  (a "Stock  Split"),  then upon the
effective date thereof,  the number of shares of Common Stock which Holder shall
be entitled to purchase  upon  Exercise of this  Warrant  shall be  increased in
direct  proportion  to the  increase in the number of shares of Common  Stock by
reason of such  recapitalization,  reclassification or similar transaction,  and
the Exercise Price shall be proportionally decreased.

                  (ii)  Reverse  Stock Split.  If the Company  shall at any time
effect a recapitalization, reclassification or other similar transaction of such
character  that the  shares  of Common  Stock  shall be  changed  into or become
exchangeable for a smaller number of shares (a "Reverse Stock Split"), then upon
the effective  date  thereof,  the number of shares of Common Stock which Holder
shall  be  entitled  to  purchase   upon  Exercise  of  this  Warrant  shall  be
proportionately  decreased  and  the  Exercise  Price  shall  be  proportionally
increased.  The Company shall give Holder the same notice it provides to holders
of Common Stock of any transaction described in this Section 5(b).

         (c)  Distributions.  If the Company shall at any time distribute for no
consideration  to holders of Common  Stock cash,  evidences of  indebtedness  or
other securities or assets (other than cash dividends or  distributions  payable
out of earned  surplus or net profits for the current or preceding  years) then,
in any such case,  Holder  shall be entitled to receive,  upon  Exercise of this
Warrant, with respect to each share of Common Stock issuable upon such exercise,
the amount of cash or evidences of  indebtedness  or other  securities or assets
which Holder would have been entitled to receive with respect to each such share
of Common Stock as a result of the happening of such event had this Warrant been
exercised immediately prior to the record date or other date fixing shareholders
to be affected by such event (the "Determination  Date") or, in lieu thereof, if
the Board of  Directors  of the Company  should so determine at the time of such
distribution,  a reduced  Exercise Price  determined by multiplying the Exercise
Price on the  Determination  Date by a fraction,  the  numerator of which is the
result  of such  Exercise  Price  reduced  by the  value  of  such  distribution
applicable  to one share of Common  Stock  (such value to be  determined  by the
Board of  Directors of the Company in its  discretion)  and the  denominator  of
which is such Exercise Price.

         (d) Notice of Consolidation or Merger and Warrant Exchange. The Company
shall,  prior  to  effecting  a  merger,  consolidation,   exchange  of  shares,
recapitalization,  reorganization,  or other similar event, as a result of which
shares of Common Stock shall be changed  into the same or a different  number of
shares of the same or another  class or classes of stock or  securities or other
assets  of  the  Company  or  another  entity  or  there  is a  sale  of  all or
substantially all the Company's assets (a "Corporate Change"),  obtain a written
agreement  from the  resulting  successor  or acquiring  entity (the  "Resulting
Entity") assuming the Company's  obligations  under this Warrant,  including but
not limited to the Exercise Price reset provisions as provided herein during the
term of the resultant warrants,  and agrees in such written instrument that this
Warrant  shall be  exerciseable  into such class and type of securities or other
assets  of the  Resulting  Entity as  Holder  would  have  received  had  Holder
exercised  this Warrant  immediately  prior to such  Corporate  Change,  and the
Exercise  Price of this  Warrant  shall be  proportionately  increased  (if this
Warrant shall be changed into or become exchangeable for a warrant to purchase a
smaller  number of shares of Common Stock of the  Resulting  Entity) or shall be
proportionately   decreased   (if  this  Warrant  shall  be  changed  or  become
exchangeable for a warrant to purchase a larger number of shares of Common Stock
of the Resulting  Entity);  provided,  however,  that Company may not affect any
Corporate  Change  unless it first  shall have given  thirty (30) days notice to
Holder hereof of any Corporate Change.

         (e)  Exercise  Price  Adjusted.  As  used  in this  Warrant,  the  term
"Exercise  Price" shall mean the purchase price per share specified in Section 3
of this Warrant, until the occurrence of an event stated in subsection (a), (b),
(c) or (d) of this Section 5, and  thereafter  shall mean said price as adjusted
from time to time in accordance  with the  provisions  of this Warrant.  No such
adjustment  under this  Section 5 shall be made  unless  such  adjustment  would
change the Exercise Price at the time by $0.01 or more; provided,  however, that
all  adjustments  not so made  shall be  deferred  and made  when the  aggregate
thereof would change the Exercise Price at the time by $0.01 or more.

<PAGE>

         (f) Adjustments:  Additional Shares, Securities or Assets. In the event
that at any time, as a result of an adjustment  made pursuant to this Section 5,
Holder shall,  upon Exercise of this Warrant,  become entitled to receive shares
and/or other  securities  or assets  (other than Common  Stock)  then,  wherever
appropriate,  all references herein to shares of Common Stock shall be deemed to
refer to and  include  such  shares  and/or  other  securities  or  assets;  and
thereafter the number of such shares and/or other  securities or assets shall be
subject  to  adjustment  from time to time in a manner  and upon terms as nearly
equivalent as practicable to the provisions of this Section 5.

         6.       Fractional Interests.
                  --------------------

                  No fractional shares or scrip  representing  fractional shares
shall be issuable  upon the  Exercise of this  Warrant,  but on Exercise of this
Warrant,  Holder may purchase only a whole number of shares of Common Stock. If,
on Exercise of this Warrant,  Holder would be entitled to a fractional  share of
Common  Stock or a right to acquire a  fractional  share of Common  Stock,  such
fractional  share shall be disregarded  and the number of shares of Common Stock
issuable upon exercise shall be the next higher number of shares.

         7.       Reservation of Shares.
                  ---------------------

                  The  Company  shall at all times  reserve  for  issuance  such
number of authorized  and unissued  shares of Common Stock (or other  securities
substituted  therefor as herein above  provided) as shall be sufficient  for the
Exercise  of this  Warrant  and  payment  of the  Exercise  Price.  The  Company
covenants  and agrees  that upon the  Exercise  of this  Warrant,  all shares of
Common Stock issuable upon such exercise shall be duly and validly issued, fully
paid,  nonassessable  and not  subject  to  preemptive  rights,  rights of first
refusal or similar rights of any person or entity.

         8.       Restrictions on Transfer.
                  ------------------------

                  (a) Registration or Exemption Required.  This Warrant has been
issued in a transaction exempt from the registration  requirements of the Act by
virtue  of  Section  4(2) of the  Act or  Regulation  D and  exempt  from  state
registration  under  applicable  state laws.  The  Warrant and the Common  Stock
issuable upon the Exercise of this Warrant may not be pledged, transferred, sold
or assigned except pursuant to an effective registration statement or unless the
Company has  received an opinion from the  Company's  counsel to the effect that
such registration is not required, or the Holder has furnished to the Company an
opinion of the Holder's counsel, which counsel shall be reasonably  satisfactory
to the  Company,  to the effect  that such  registration  is not  required;  the
transfer  complies  with  any  applicable  state  securities  laws;  and,  if no
registration  covering the resale of the Warrant Shares is effective at the time
the Warrant Shares are issued,  the Holder  consents to a legend being placed on
certificates  for the Warrant Shares  stating that the securities  have not been
registered  under the  Securities  Act and  referring  to such  restrictions  on
transferability and sale.

                  (b)  Assignment.  If  Holder  can  provide  the  Company  with
reasonably  satisfactory  evidence that the  conditions  of (a) above  regarding
registration  or  exemption  have been  satisfied,  Holder  may sell,  transfer,
assign, pledge or otherwise dispose of this Warrant, in whole or in part. Holder
shall  deliver a written  notice to  Company,  substantially  in the form of the
Assignment  attached  hereto as Exhibit B,  indicating  the person or persons to
whom the Warrant shall be assigned and the  respective  number of warrants to be
assigned to each assignee.  The Company shall effect the  assignment  within ten
(10) days, and shall deliver to the  assignee(s)  designated by Holder a Warrant
or Warrants of like tenor and terms for the appropriate number of shares.

         9.       Benefits of this Warrant.
                  ------------------------

                  Nothing in this Warrant  shall be construed to confer upon any
person other than the Company and Holder any legal or equitable right, remedy or
claim under this  Warrant and this Warrant  shall be for the sole and  exclusive
benefit of the Company and Holder.

<PAGE>

         10.      Applicable Law.
                  --------------

                  This  Warrant is issued  under and shall for all  purposes  be
governed by and construed in  accordance  with the laws of the state of Georgia,
without giving effect to conflict of law provisions thereof.

         11.      Loss of Warrant.
                  ---------------

                  Upon  receipt by the Company of  evidence of the loss,  theft,
destruction  or mutilation of this Warrant,  and (in the case of loss,  theft or
destruction)  of indemnity or security  reasonably  satisfactory to the Company,
and upon surrender and cancellation of this Warrant,  if mutilated,  the Company
shall execute and deliver a new Warrant of like tenor and date.

         12.      Notice or Demands.
                  -----------------

Notices or demands  pursuant to this Warrant to be given or made by Holder to or
on the  Company  shall be  sufficiently  given or made if sent by  certified  or
registered mail, return receipt requested, postage prepaid, and addressed, until
another  address is  designated  in writing by the  Company,  to the address set
forth in Section 2(a) above.  Notices or demands  pursuant to this Warrant to be
given or made by the Company to or on Holder shall be sufficiently given or made
if sent by certified or  registered  mail,  return  receipt  requested,  postage
prepaid,  and  addressed,  to the  address of Holder set forth in the  Company's
records, until another address is designated in writing by Holder.

         IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the
____ day of September, 2000.

                                            TIDELANDS OIL & GAS CORPORATION

                                            By: ________________________________
                                                Michael R. Ward, President & CEO

<PAGE>

                                    EXHIBIT A

                            EXERCISE FORM FOR WARRANT

                       TO: TIDELANDS OIL & GAS CORPORATION

         The  undersigned  hereby  irrevocably  exercises  the right to purchase
____________ of the shares of Common Stock (the "Common Stock") of TIDELANDS OIL
& GAS  CORPORATION  a  Nevada  corporation  (the  "Company"),  evidenced  by the
attached  warrant (the  "Warrant"),  and herewith  makes payment of the exercise
price with respect to such shares in full, all in accordance with the conditions
and provisions of said Warrant.

1. The undersigned agrees not to offer,  sell,  transfer or otherwise dispose of
any  of the  Common  Stock  obtained  on  exercise  of the  Warrant,  except  in
accordance with the provisions of Section 8(a) of the Warrant.

2. The undersigned  requests that stock  certificates  for such shares be issued
free of any restrictive legend, if appropriate,  and a warrant  representing any
unexercised portion hereof be issued, pursuant to the Warrant in the name of the
undersigned and delivered to the undersigned at the address set forth below:

Dated: _________

_____________________________________________________________________________
                                    Signature

_____________________________________________________________________________
                                   Print Name

_____________________________________________________________________________
                                     Address

_____________________________________________________________________________

NOTICE

The  signature to the  foregoing  Exercise  Form must  correspond to the name as
written  upon the face of the  attached  Warrant  in every  particular,  without
alteration or enlargement or any change whatsoever.

_____________________________________________________________________________

<PAGE>

                                    EXHIBIT B

                                   ASSIGNMENT

                    (To be executed by the registered holder
                        desiring to transfer the Warrant)

FOR  VALUE  RECEIVED,  the  undersigned  holder  of the  attached  warrant  (the
"Warrant") hereby sells,  assigns and transfers unto the person or persons below
named the right to purchase  _______ shares of the Common Stock of TIDELANDS OIL
& GAS CORPORATION, evidenced by the attached Warrant and does hereby irrevocably
constitute  and appoint  _______________________  attorney to transfer  the said
Warrant  on the books of the  Company,  with full power of  substitution  in the
premises.

Dated:                                           ______________________________
                                                           Signature

Fill in for new registration of Warrant:

_________________________________________
                  Name

_________________________________________
                  Address

_________________________________________
Please print name and address of assignee
(including zip code number)

_______________________________________________________________________________

NOTICE

The signature to the foregoing Assignment must correspond to the name as written
upon the face of the attached Warrant in every particular, without alteration or
enlargement or any change whatsoever.

_______________________________________________________________________________

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