Document:

Exhibit 10.1.1
--------------

Sierra Strategic Design Inc.
8-700 South Crest Drive
Kelowna, B.C.

August 26, 2004

Zomex Distribution Inc.
5205 Buchanan Road
Peachland, B.C.

Attention:  Peter Buckley
-------------------------

Dear Peter:

Re:  Sierra - Zomex Contract dated January 5, 2004, - See Schedule A
--------------------------------------------------------------------

The contract noted above expires on August 31, 2004. Further to discussions
between our companies this month, we agree to the following:

     1.   Monies have been advanced to date from Zomex to Sierra ($14,000) for
          preliminary architecture and design work against this contract;

     2.   Business World has additional market research and software feature
          definition pending in the scope of its contract and amendments thereto
          before we can complete our architectural and design work;

     3.   We mutually agree to amend the current contract from $35,000 to
          $14,000;

     4.   This contract is then paid and discharged in full and the work
          performed by Sierra Strategic has been satisfactorily performed and
          discharged. Our signatures below constitute our mutual and complete
          release;

     5.   We will then review outstanding architectural and design work at the
          completion of Business World's tasks (item 2 above) and re-visit the
          remaining work, costs and any required Letter of Engagement and/or
          contracts at that time.

/s/ Michael Mooney                                         Date:  Aug 26, 2004
---------------------------------------------                   ----------------
Michael Mooney, President, Sierra Strategic Design, Inc.

/s/ Peter Buckley
---------------------------------------------
Peter Buckley, President, Zomex Distribution, Inc.Exhibit 10.14
-------------

September 2, 2004

Zomex Distribution, Inc.
5205 Buchanan Road
Peachland, British Columbia
Canada V0H 1X1

Attention:     Board of Directors

               Re:    Continued Funding
                      -----------------

Gentlemen:

In my capacity as President of Zomex  Distribution,  Inc., a Nevada  corporation
(the "Company"),  I hereby undertake to provide to the Company those funds which
are  necessary  to enable  the  Company  to  conduct  its  business  and pay its
obligations during those times as such financing is appropriate.

Of course,  in the event you have  questions or comments  regarding this matter,
please do not hesitate to contact me. Thank you.

Sincerely,

/s/ Peter C. Buckley

Peter C. Buckley,
PresidentExhibit 4.1
                          SECURITIES PURCHASE AGREEMENT

      This  Securities  Purchase  Agreement  (this  "Agreement")  is dated as of
September  13,  2004,  by and  among  RCG  Companies  Incorporated,  a  Delaware
corporation  (the  "Company"),  and the  purchasers  identified on the signature
pages hereto (each,  including its  successors  and assigns,  a "Purchaser"  and
collectively the "Purchasers").

      WHEREAS,  subject to the terms and  conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act (as defined below),  and Rule
506  promulgated  thereunder,  the  Company  desires  to issue  and sell to each
Purchaser,  and each Purchaser,  severally and not jointly,  desires to purchase
from the Company in the aggregate,  up to $6,000,000 million of Preferred Stock,
Warrants and Additional Investment Rights on the Closing Date.

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

                                    ARTICLE I
                                   DEFINITIONS

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

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

      "Actual  Minimum" means, as of any date, the maximum  aggregate  number of
shares  of Common  Stock  then  issued or  potentially  issuable  in the  future
pursuant to the Transaction Documents,  including any Underlying Shares issuable
upon exercise or conversion  in full of all Warrants and  Additional  Investment
Rights and shares of Preferred Stock, ignoring any conversion or exercise limits
set forth  therein,  and  assuming  that any  previously  unconverted  shares of
Preferred Stock are held until the third anniversary of the Closing Date and all
dividends  are paid in shares of Common  Stock  until  such  third  anniversary,
subject  to the  limitation  on the  number of shares of Common  Stock  issuable
hereunder set forth in Section 5(a)(iii) of the Certificate of Designation.

      "Additional  Investment  Right" means the Additional  Investment Rights in
the form of Exhibit E,  delivered to the Purchasers at the Closing in accordance
with Section 2.2(a)(iv).

      "Additional  Investment  Right  Shares"  means the shares of Common  Stock
issuable upon exercise of the Additional Investment Rights.

<PAGE>

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

      "Certificate  of  Designation"  means the Certificate of Designation to be
filed  prior  to the  Closing  by the  Company  with the  Secretary  of State of
Delaware, in the form of Exhibit A attached hereto.

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

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

      "Commission" means the Securities and Exchange Commission.

      "Common Stock" means the common stock of the Company,  par value $0.04 per
share,  and any securities into which such common stock shall  hereinafter  been
reclassified into.

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

      "Company Counsel" means Adorno & Yoss PA.

      "Disclosure  Schedules"  means the  Disclosure  Schedules  of the  Company
delivered concurrently herewith.

      "Effective Date" means the date that the  Registration  Statement is first
declared effective by the Commission.

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

      "Escrow  Agreement" shall mean the Escrow  Agreement in substantially  the
form of Exhibit G hereto  executed  and  delivered  contemporaneously  with this
Agreement.

                                      -2-
<PAGE>

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

      "Exempt Issuance" the issuance of (a) shares of Common Stock or options to
employees,  officers or directors of the Company pursuant to any stock or option
plan duly  adopted by a  majority  of the  non-employee  members of the Board of
Directors  of the  Company  or a  majority  of the  members  of a  committee  of
non-employee  directors  established  for such purpose,  (b) securities upon the
exercise  of or  conversion  of any  securities  issued  hereunder,  convertible
securities,  options  or  warrants  issued and  outstanding  on the date of this
Agreement, provided that such securities have not been amended since the date of
this Agreement to increase the number of such securities;  (c) securities issued
pursuant to acquisitions or strategic  transactions,  provided any such issuance
shall only be to a Person  which is,  itself or  through  its  subsidiaries,  an
operating  company and in which the Company receives benefits in addition to the
investment of funds, but shall not include a transaction in which the Company is
issuing securities  primarily for the purpose of raising capital or to an entity
whose  primary  business  is  investing  in  securities;  and (d) an  additional
issuance of Preferred Stock,  Warrants and Additional  Investment  Rights on the
exact same terms and conditions as the issuance under the Transaction  Documents
and placed through HPC Capital for up to the  difference  between $6 million and
the aggregate Subscription Amount raised hereunder,  which exempt issuance shall
have occurred within 5 Trading Days of the date hereof; provided,  however, such
issuance  shall  not  toll or  extend  the  Closing  Date  for  purposes  of the
Transaction Documents.

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

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

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

      "Losses"  means  any  and  all  losses,  claims,   damages,   liabilities,
settlement costs and expenses, including without limitation costs of preparation
and reasonable attorneys' fees.

      "Market Price" means $0.94.

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

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

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

                                      -3-
<PAGE>

      "Preferred  Stock" means the up to 6,000 shares of the Company's Series __
6% Convertible  Preferred Stock issued hereunder having the rights,  preferences
and privileges set forth in the Certificate of Designation.

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

      "Registration  Rights Agreement" means the Registration  Rights Agreement,
dated the date  hereof,  among the  Company and each  Purchaser,  in the form of
Exhibit B.

      "Registration  Statement"  means  a  registration  statement  meeting  the
requirements  set forth in the  Registration  Rights  Agreement and covering the
resale by the Purchasers of the Underlying Shares.

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

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

      "Shareholder  Approval"  means such  approval  as may be  required  by the
applicable  rules and  regulations  of the  Principal  Market (or any  successor
entity) from the  shareholders  of the Company with respect to the  transactions
contemplated by the Transaction Documents,  including the issuance of all of the
Underlying  Shares in excess of 19.9% of the  Company's  issued and  outstanding
Common Stock on the Closing Date.

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

      "Securities"  means the  Preferred  Stock,  the Warrants,  the  Additional
Investment Rights and the Underlying Shares.

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

      "Set  Price"  shall  have  the  meaning  ascribed  to  such  term  in  the
Certificate of Designations.

      "Stated Value" means $1,000 per share of Preferred Stock.

      "Subscription  Amount" shall mean, as to each Purchaser,  the amount to be
paid for the  Preferred  Stock  purchased  hereunder  as  specified  below  such
Purchaser's  name on the  signature  page of this  Agreement,  in United  States
Dollars.

      "Subsidiary"  means any  subsidiary  of the Company that is required to be
listed in Schedule 3.1(a).

                                      -4-
<PAGE>

      "Trading Day" means any day during which the Trading  Market shall be open
for business.

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

      "Transaction   Documents"   means  this  Agreement,   the  Certificate  of
Designation,  the Warrants,  the Additional  Investment Rights, the Registration
Rights Agreement and the Escrow Agreement.

      "Underlying  Shares"  means  the  shares  of Common  Stock  issuable  upon
conversion of the Preferred Stock,  upon exercise of the Warrants and Additional
Investment  Rights  and  issued  and  issuable  in lieu of the cash  payment  of
dividends on the Preferred Stock.

      "VWAP"  means,  for any  date,  the price  determined  by the first of the
following clauses that applies: (a) if the Common Stock is then listed or quoted
on a Principal  Market,  the daily volume  weighted  average price of the Common
Stock for such date (or the nearest  preceding date) on the Principal  Market on
which  the  Common  Stock is then  listed or quoted  as  reported  by  Bloomberg
Financial L.P. (based on a Trading Day from 9:30 a.m.  Eastern Time to 4:02 p.m.
Eastern  Time);  (b) if the  Common  Stock is not then  listed  or  quoted  on a
Principal  Market and if prices for the Common  Stock are then quoted on the OTC
Bulletin Board,  the volume weighted  average price of the Common Stock for such
date (or the  nearest  preceding  date) on the OTC  Bulletin  Board;  (c) if the
Common  Stock is not then  listed  or quoted  on the OTC  Bulletin  Board and if
prices for the Common Stock are then reported in the "Pink Sheets"  published by
the National Quotation Bureau Incorporated (or a similar  organization or agency
succeeding to its functions of reporting prices),  the most recent bid price per
share of the  Common  Stock so  reported;  or (c) in all other  cases,  the fair
market  value  of a share  of  Common  Stock  as  determined  by an  independent
appraiser selected in good faith by the Purchasers and reasonably  acceptable to
the Company.

      "Warrants"  means  the  Common  Stock  Purchase  Warrants,  in the form of
Exhibit C, delivered to the Purchasers at the Closing in accordance with Section
2.2 hereof.

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

                                   ARTICLE II
                                PURCHASE AND SALE

      2.1 Closing.  On the Closing Date,  each Purchaser shall purchase from the
Company,  severally and not jointly with the other  Purchasers,  and the Company
shall issue and sell to each  Purchaser,  (a) shares of Preferred  Stock with an
aggregate Stated Value equal to such Purchaser's  Subscription  Amount;  (b) the
Warrants as determined  pursuant to Section  2.2(a)(iii)  and (c) the Additional
Investment Rights as determined  pursuant to Section  2.2(a)(iv).  The aggregate
number of shares of Preferred  Stock sold hereunder  shall be up to 6,000.  Upon
satisfaction of the conditions set forth in Section 2.2, the Closing shall occur
at the offices of the Escrow Agent or such other  location as the parties  shall
mutually agree.

                                      -5-
<PAGE>

      2.2 Conditions to Closing.  The Closing is subject to the  satisfaction or
waiver by the party to be benefited thereby of the following conditions:

            (a) The Company  shall have  delivered  or caused to be delivered to
the Escrow Agent the following:

                  (i) this Agreement duly executed by the Company;

                  (ii) a certificate  evidencing a number of shares of Preferred
Stock equal to such Purchaser's Subscription Amount divided by the Stated Value,
registered in the name of such Purchaser;

                  (iii) a Warrant,  registered in the name of such Purchaser, to
purchase  up to a  number  of  shares  of  Common  Stock  equal  to 25% of  such
Purchaser's  Subscription  Amount divided by the Market Price,  with an exercise
price  equal  to  $1.20,  subject  to  adjustment  as  set  forth  therein,  and
exercisable beginning 181 days after the date hereof for a term of 3 years;

                  (iv) an Additional Investment Right, registered in the name of
such  Purchaser,  to purchase up to a number of shares of Common  Stock equal to
75% of such Purchaser's Subscription Amount divided by the Market Price, with an
exercise  price equal to $1.03 and  exercisable  starting 181 days from the date
hereof for a term  ending the earlier of (A) the later of (1) 181 days after the
Effective Date and (2) 181 days after the initial  exercise date thereof and (B)
the 2nd year  anniversary of the date hereof,  both subject to adjustment as set
forth therein;

                  (v) the written voting agreement, substantially in the form of
Exhibit F attached  hereto,  of all of the  executive  officers and directors to
vote all Common Stock owned by each of such  shareholders  as of the record date
for the annual  meeting of  shareholders  of the Company in favor of Shareholder
Approval;

                  (vi) a  legal  opinion  of  Company  Counsel,  in the  form of
Exhibit D attached hereto, addressed to each Purchaser;

                  (vii) the Escrow Agreement duly executed by the Company; and

                  (viii) the Registration  Rights Agreement duly executed by the
Company.

                                      -6-
<PAGE>

            (b) At the Closing, each Purchaser shall have delivered or caused to
be delivered to the Escrow Agent the following:

                  (i) this Agreement duly executed by such Purchaser;

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

                  (iii) the Escrow  Agreement  duly executed by such  Purchaser;
and

                  (iv) the  Registration  Rights Agreement duly executed by such
Purchaser.

            (c) All  representations and warranties of the other party contained
herein  shall  remain true and correct in all material  respects  (except  those
qualified  as to  materiality,  which shall  remain true and  correct) as of the
Closing Date and all  covenants of the other party shall have been  performed if
due prior to such date.

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

                                   ARTICLE III
                         REPRESENTATIONS AND WARRANTIES

      3.1 Representations and Warranties of the Company.  Except as set forth in
the SEC Reports or under the corresponding  section of the Disclosure  Schedules
which  Disclosure  Schedules  shall be deemed a part hereof,  the Company hereby
makes the representations and warranties set forth below to each Purchaser:

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

                                      -7-
<PAGE>

      (b)  Organization  and   Qualification.   Each  of  the  Company  and  the
Subsidiaries  (other  than  Lifestyle  Innovations,  Inc.)  is  an  entity  duly
incorporated or otherwise organized, validly existing and in good standing under
the  laws  of  the  jurisdiction  of  its   incorporation  or  organization  (as
applicable),  with  the  requisite  power  and  authority  to own  and  use  its
properties  and  assets and to carry on its  business  as  currently  conducted.
Neither the Company nor any Subsidiary (other than Lifestyle Innovations,  Inc.)
is in  violation  or  default  of  any  of  the  provisions  of  its  respective
certificate  or articles of  incorporation,  bylaws or other  organizational  or
charter  documents.  Each  of the  Company  and  the  Subsidiaries  (other  than
Lifestyle  Innovations,  Inc.) is duly  qualified to conduct  business and is in
good standing as a foreign  corporation or other entity in each  jurisdiction in
which the nature of the business  conducted  or property  owned by it makes such
qualification necessary,  except where the failure to be so qualified or in good
standing, as the case may be, could not have or reasonably be expected to result
in (i) a material adverse effect on the legality,  validity or enforceability of
any  Transaction  Document,  (ii) a material  adverse  effect on the  results of
operations,  assets,  business  or  financial  condition  of the Company and the
Subsidiaries,  taken as a whole  other  than  any  change,  event or  occurrence
resulting from any change to the extent generally  affecting the national or any
local  economy  or the  industries  in which the  Company  and the  Subsidiaries
operate,  or (iii) a material adverse effect on the Company's ability to perform
in any material respect on a timely basis its obligations  under any Transaction
Document  (any of (i),  (ii) or (iii),  a "Material  Adverse  ------------------
Effect") and to the Company's knowledge no Proceeding has been instituted in any
such jurisdiction  revoking,  limiting or curtailing or seeking to revoke, limit
or curtail such power and authority or qualification.

      (c) Authorization;  Enforcement.  The Company has the requisite  corporate
power  and  authority  to  enter  into  and  to  consummate   the   transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations  hereunder or thereunder.  The execution and delivery of each of the
Transaction  Documents  by  the  Company  and  the  consummation  by it  of  the
transactions  contemplated  hereby or thereby have been duly  authorized  by all
necessary  action on the part of the Company and no further consent or action is
required by the Company other than Required  Approvals.  Each of the Transaction
Documents  has been (or upon delivery will be) duly executed by the Company and,
when delivered in accordance  with the terms hereof,  will  constitute the valid
and  binding  obligation  of the  Company  enforceable  against  the  Company in
accordance  with  its  terms,  subject  to  applicable  bankruptcy,  insolvency,
fraudulent  conveyance,  reorganization,  moratorium  and similar laws affecting
creditors'  rights and  remedies  generally  and general  principles  of equity.
Neither the Company nor any Subsidiary (other than Lifestyle Innovations,  Inc.)
is in  violation  of any of the  provisions  of its  respective  certificate  or
articles of incorporation,  by-laws or other organizational or charter documents
except  where  such  violation  could  not,  individually  or in the  aggregate,
constitute a Material Adverse Effect.

                                      -8-
<PAGE>

      (d)  No  Conflicts.  The  execution,   delivery  and  performance  of  the
Transaction  Documents by the Company,  the issuance and sale of the  Securities
and the  consummation  by the  Company  of the other  transactions  contemplated
thereby do not and will not (i)  conflict  with or violate any  provision of the
Company's  or  any  Subsidiary's  (other  than  Lifestyle   Innovations,   Inc.)
certificate  or articles of  incorporation,  bylaws or other  organizational  or
charter  documents,  or (ii) conflict with, or constitute a default (or an event
that with notice or lapse of time or both would become a default) under,  result
in the creation of any Lien upon any of the  properties or assets of the Company
or any  Subsidiary,  or give to others  any  rights of  termination,  amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of,
any agreement,  credit facility,  debt or other instrument (evidencing a Company
or Subsidiary  (other than  Lifestyle  Innovations,  Inc.) debt or otherwise) or
other understanding to which the Company or any Subsidiary (other than Lifestyle
Innovations,  Inc.) is a party or by which any  property or asset of the Company
or any Subsidiary (other than Lifestyle Innovations, Inc.) is bound or affected,
or (iii)  subject  to the  Required  Approvals,  conflict  with or  result  in a
violation of any law, rule, regulation,  order, judgment,  injunction, decree or
other restriction of any court or governmental authority to which the Company or
a Subsidiary  (other than  Lifestyle  Innovations,  Inc.) is subject  (including
federal and state securities laws and regulations),  or by which any property or
asset of the Company or a Subsidiary is bound or affected, or (iv) conflict with
or violate the terms of any  agreement  by which the  Company or any  Subsidiary
(other than  Lifestyle  Innovations,  Inc.) is bound or to which any property or
asset of the Company or any Subsidiary is bound or affected;  except in the case
of each of clauses (ii), (iii) and (iv), such as could not have or reasonably be
expected to result in a Material Adverse Effect.

      (e)  Filings,  Consents  and  Approvals.   Neither  the  Company  nor  any
Subsidiary is required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration  with, any court or other
federal,  state,  local or other  governmental  authority  or  other  Person  in
connection  with the execution,  delivery and  performance by the Company of the
Transaction  Documents,  other than (i) the filings  required under Section 4.4,
(ii) the filing with the  Commission of the  Registration  Statement,  (iii) the
application(s)  to  each  applicable  Trading  Market  for  the  listing  of the
Underlying  Shares for trading thereon in the time and manner required  thereby,
(iv)  the  filing  with  the  Commission  of a Form  D  pursuant  to  Commission
Regulation  D, (v)  applicable  Blue Sky  filings  and  (vi) the  filing  of the
Certificate   of   Designation   with  the   Secretary   of  State  of  Delaware
(collectively, the "Required Approvals").

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

                                      -9-
<PAGE>

      (g)  Capitalization.  The capitalization of the Company is as described in
the Company's most recent periodic report filed with the Commission. The Company
has not issued any capital  stock since such filing  other than  pursuant to the
exercise of employee stock options under the Company's  stock option plans,  the
issuance  of shares of  Common  Stock to  employees  pursuant  to the  Company's
employee  stock  purchase  plan and  pursuant to the  conversion  or exercise of
outstanding  Common Stock  Equivalents  outstanding.  No Person has any right of
first refusal, preemptive right, right of participation, or any similar right to
participate  in the  transactions  contemplated  by the  Transaction  Documents.
Except  as a result of the  purchase  and sale of the  Securities,  there are no
outstanding  options,   warrants,  script  rights  to  subscribe  to,  calls  or
commitments of any character  whatsoever  relating to, or securities,  rights or
obligations convertible into or exchangeable for, or giving any Person any right
to  subscribe  for or  acquire,  any  shares  of  Common  Stock,  or  contracts,
commitments,  understandings  or  arrangements  by  which  the  Company  or  any
Subsidiary  (other than Lifestyle  Innovations,  Inc.) is or may become bound to
issue additional shares of Common Stock, or securities or rights  convertible or
exchangeable  into shares of Common Stock.  The issue and sale of the Securities
will  not  obligate  the  Company  to  issue  shares  of  Common  Stock or other
securities  to any Person (other than the  Purchasers)  and will not result in a
right of any holder of Company  securities to adjust the  exercise,  conversion,
exchange or reset price under such securities.  All of the outstanding shares of
capital stock of the Company are validly issued,  fully paid and  nonassessable,
have been issued in compliance with all federal and state  securities  laws, and
none of such outstanding shares was issued in violation of any preemptive rights
or similar rights to subscribe for or purchase  securities.  No further approval
or authorization  of any  stockholder,  the Board of Directors of the Company or
others is required for the  issuance  and sale of the shares of Preferred  Stock
other than  Shareholder  Approval  to comply  with rules of the  American  Stock
Exchange.  There are no  stockholders  agreements,  voting  agreements  or other
similar  agreements  with respect to the  Company's  capital  stock to which the
Company is a party or, to the knowledge of the Company,  between or among any of
the Company's stockholders.

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

                                      -10-
<PAGE>

      (i)  Material  Changes.  Since the date of the  latest  audited  financial
statements  included  within  the SEC  Reports,  (i)  there  has been no  event,
occurrence or development  that has had or that would  reasonably be expected to
result in a Material  Adverse  Effect,  (ii) the  Company has not  incurred  any
liabilities  (contingent or otherwise) other than (A) trade payables and accrued
expenses  incurred  in the  ordinary  course of  business  consistent  with past
practice and (B)  liabilities  not  required to be  reflected  in the  Company's
financial  statements  pursuant to GAAP or required to be  disclosed  in filings
made with the  Commission,  (iii) the  Company  has not  altered  its  method of
accounting,  (iv)  the  Company  has  not  declared  or  made  any  dividend  or
distribution  of  cash or  other  property  to its  stockholders  or  purchased,
redeemed or made any  agreements to purchase or redeem any shares of its capital
stock and (v) the Company has not issued any equity  securities to any executive
officer, director or Affiliate, except pursuant to existing Company stock option
plans.  The Company does not have pending  before the Commission any request for
confidential treatment of information.

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

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

                                      -11-
<PAGE>

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

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

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

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

                                      -12-
<PAGE>

      (p)  Insurance.  The Company and the  Subsidiaries  (other than  Lifestyle
Innovations, Inc.) are insured against such losses and risks and in such amounts
as are  prudent and  customary  in the  businesses  in which the Company and the
Subsidiaries (other than Lifestyle Innovations,  Inc.) are engaged.  Neither the
Company nor any  Subsidiary  (other than  Lifestyle  Innovations,  Inc.) has any
reason  to  believe  that it will not be able to renew  its  existing  insurance
coverage as and when such coverage  expires or to obtain  similar  coverage from
similar  insurers  as may be  necessary  to  continue  its  business  without  a
significant increase in cost.

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

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

                                      -13-
<PAGE>

      (s) Certain Fees. No brokerage or finder's fees or commissions are or will
be  payable by the  Company  to any  broker,  financial  advisor or  consultant,
finder, placement agent, investment banker, bank or other Person with respect to
the  transactions  contemplated by this Agreement.  The Purchasers shall have no
obligation  with respect to any fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this Section that may
be due in connection with the transactions contemplated by this Agreement.

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

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

      (v) Registration  Rights.  No Person has any right to cause the Company to
effect  the  registration  under the  Securities  Act of any  securities  of the
Company.

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

                                      -14-
<PAGE>

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

      (y)  Disclosure.  Other than the terms of the Transaction  Documents,  the
Company  confirms that, the Company has not provided any of the Purchasers  with
any  information  that  constitutes  or might  constitute  material,  non-public
information.  The Company understands and confirms that the Purchasers will rely
on the  foregoing  representations  and covenants in effecting  transactions  in
securities of the Company.  All disclosure provided to the Purchasers  regarding
the Company, its business and the transactions  contemplated  hereby,  including
the Schedules to this  Agreement,  furnished by or on behalf of the Company with
respect to the  representations  and warranties made herein are true and correct
in all material respects with respect to such representations and warranties and
do not  contain  any untrue  statement  of a material  fact or omit to state any
material fact necessary in order to make the statements  made therein,  in light
of the  circumstances  under which they were made, not  misleading.  The Company
acknowledges and agrees that no Purchaser makes or has made any  representations
or warranties with respect to the  transactions  contemplated  hereby other than
those specifically set forth in Section 3.2 hereof.

      (z)  No  Integrated  Offering.   Neither  the  Company,  nor  any  of  its
Affiliates,  nor any  Person  acting on its or their  behalf  has,  directly  or
indirectly,  made any offers or sales of any security or solicited any offers to
buy any  security,  under  circumstances  that would cause this  offering of the
Securities to be integrated  with prior offerings by the Company for purposes of
the Securities Act or which could violate any  applicable  shareholder  approval
provisions,  including,  without limitation,  under the rules and regulations of
the Trading Market.

      (aa) Solvency/Indebtedness.  To the best of the Company's knowledge, based
on the financial condition of the Company as of the Closing Date,  including the
application of the net proceeds raised  hereunder:  (i) the fair saleable market
value of the  Company's  assets  exceeds  the amount that will be required to be
paid on or in  respect of the  Company's  existing  debts and other  liabilities
(including  known  contingent  liabilities)  as they mature;  (ii) the Company's
assets do not  constitute  unreasonably  small  capital to carry on its business
through, if less than $6 million is raised hereunder,  December 31, 2004, and if
$6 million in gross proceeds are raised  hereunder in one or more closings,  the
one year anniversary of the date hereof,  as now conducted and as proposed to be
conducted including its capital needs taking into account the particular capital
requirements  of the business  conducted by the Company,  and projected  capital
requirements and capital  availability  thereof; and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive, were it to
liquidate all of its assets,  after taking into account all anticipated  uses of
the cash,  would be  sufficient  to pay all amounts on or in respect of its debt
when such amounts are required to be paid.  The Company does not intend to incur
debts  beyond its ability to pay such debts as they mature  (taking into account
the timing and amounts of cash to be payable on or in respect of its debt).  The
Company has no knowledge of any facts or circumstances  which lead it to believe
that it will file for  reorganization  or  liquidation  under the  bankruptcy or
reorganization  laws of any jurisdiction  within one year from the Closing Date.
The SEC Reports set forth as of the dates  thereof all  outstanding  secured and
unsecured  Indebtedness  of the  Company  or any  Subsidiary,  or for  which the
Company or any Subsidiary has  commitments.  For the purposes of this Agreement,
"Indebtedness" shall mean (a) any liabilities for ------------ borrowed money or
amounts owed in excess of $50,000 (other than trade accounts payable incurred in
the ordinary  course of business),  (b) all guaranties,  endorsements  and other
contingent  obligations in respect of Indebtedness of others, whether or not the
same are or should be reflected  in the  Company's  balance  sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit
or collection or similar  transactions in the ordinary  course of business;  and
(c) the  present  value of any lease  payments  in excess of  $50,000  due under
leases required to be capitalized in accordance  with GAAP.  Neither the Company
nor any Subsidiary is in default with respect to any Indebtedness.

                                      -15-
<PAGE>

      (bb) S-3  Eligibility.  To its  knowledge,  the  Company  is  eligible  to
register the Underlying Shares for resale by the Purchasers on SEC Form S-3.

      (cc) Tax  Status.  The Company  and each of its  Subsidiaries  (other than
Lifestyle  Innovations,  Inc.) has made or filed all federal,  state and foreign
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  and each of its  Subsidiaries  has set  aside on its  books  provisions
reasonably  adequate for the payment of all unpaid and unreported taxes) and has
paid (or made provision for) 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 has set aside on its books provisions 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.  The  Company  has not  executed a
waiver with respect to the statute of limitations  relating to the assessment or
collection of any foreign,  federal,  statue or local tax. None of the Company's
tax returns is presently being audited by any taxing authority.

      (dd) No General Solicitation or Advertising in Regard to this Transaction.
Neither the Company nor, to the  knowledge of the Company,  any of its directors
or officers (i) has conducted or will conduct any general  solicitation (as that
term is used in Rule 502(c) of Regulation D) or general advertising with respect
to the sale of the  Preferred  Stock,  the  Warrants  or  Additional  Investment
Rights, or (ii) made any offers or sales of any security or solicited any offers
to buy any security under any circumstances  that would require  registration of
the Preferred Stock, the Underlying  Shares or the Warrants under the Securities
Act or made any "directed  selling efforts" as defined in Rule 902 of Regulation
S.

                                      -16-
<PAGE>

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

      (ff)  Acknowledgment  Regarding  Purchasers'  Purchase of Securities.  The
Company  acknowledges  and agrees that the  Purchasers  are acting solely in the
capacity of arm's  length  purchasers  with  respect to this  Agreement  and the
transactions  contemplated  hereby.  The Company  further  acknowledges  that no
Purchaser  is acting as a financial  advisor or  fiduciary of the Company (or in
any  similar  capacity)  with  respect to this  Agreement  and the  transactions
contemplated  hereby and any  statement  made by any  Purchaser  or any of their
respective  representatives  or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation and is merely
incidental to the Purchasers'  purchase of the  Securities.  The Company further
represents  to each  Purchaser  that the  Company's  decision to enter into this
Agreement has been based solely on the independent evaluation of the Company and
its representatives.

      (gg) Seniority.  As of the date of this Agreement,  no other equity of the
Company  is senior to the  Preferred  Stock in right of  payment,  whether  with
respect to interest or upon liquidation or dissolution, or otherwise.

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

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

                                      -17-
<PAGE>

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

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

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

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

      (f)  Certain  Trading  Activities.  Such  Purchaser  has not  directly  or
indirectly,  nor  has  any  Person  acting  on  behalf  of or  pursuant  to  any
understanding with such Purchaser, engaged in any transactions in the securities
of the Company (including,  without  limitations,  any Short Sales involving the
Company's  securities) since the time that such Purchaser was first contacted by
the Company or HPC Capital Management  regarding this investment in the Company.
For purposes of this Section,  "Short Sales" include,  without  limitation,  all
"short  sales" as  defined  in Rule 3b-3  -----------  of the  Exchange  Act and
include all types of direct and indirect stock pledges,  forward sale contracts,
options, puts, calls, short sales, swaps and similar arrangements  (including on
a total return basis),  and sales and other  transactions  through non-US broker
dealers or foreign regulated brokers having the effect of hedging the securities
or investment made under this Agreement.  Such Purchaser  covenants that neither
it nor any Person acting on its behalf or pursuant to any understanding  with it
will engage in any  transactions  in the  securities  of the Company  (including
Short  Sales)  prior to the  time  that the  transactions  contemplated  by this
Agreement are publicly disclosed.

                                      -18-
<PAGE>

      (g) Access to Information.  Such Purchaser acknowledges and agrees that it
has access to the  Company's  SEC Reports and has reviewed  such filings as such
Purchaser  has deemed  necessary or desirable  including  the  Company's  Annual
Report on Form 10-KSB for the fiscal year ended June 30, 2003 and the  Company's
Quarterly  Report on Form  10-QSB  for the  quarter  ended  March 31 2004.  Each
Purchaser and its respective  representatives  have been afforded an opportunity
to ask such  questions  of the  officers,  employees,  agents,  accountants  and
representatives  of the Company concerning the business,  operations,  financial
condition, assets, liabilities, and other relevant matters as such Purchaser and
its  representatives  have deemed  necessary or  desirable,  and each  Purchaser
hereby  confirms that it or its agents have been given all such  information  as
has been requested in order to evaluate the merits and risks of the  prospective
investment  contemplated  hereby  and that it does  not  desire  any  additional
information.   Without  limiting  the  foregoing,  each  Purchaser  specifically
acknowledges  that  it has had the  opportunity  to  review  the  Company's  SEC
Reports.

      (h) Risk Factors.  Such Purchaser  understands  and  acknowledges  that an
investment  in the Shares is highly  speculative  and  includes a high degree of
risk including,  but not limited to, those risks  specifically  set forth in the
Company's  Annual  Report on Form  10-KSB  for the period  ended June 30,  2003,
which, by its signature below, each Purchaser acknowledges it has reviewed.

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

                                   ARTICLE IV
                         OTHER AGREEMENTS OF THE PARTIES

      4.1 Transfer Restrictions.

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

                                      -19-
<PAGE>

      (b) Each  Purchaser  agrees to the  imprinting,  so long as is required by
this Section  4.1(b),  of the  following  legend on any  certificate  evidencing
Securities:

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

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

                                      -20-
<PAGE>

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

      (d) In addition to such Purchaser's other available remedies,  the Company
shall pay to a Purchaser,  in cash, as partial  liquidated  damages and not as a
penalty,  for each $1,000 of  Underlying  Shares  (based on the VWAP on the date
such  Securities are submitted to the Company's  transfer  agent)  delivered for
removal of the restrictive  legend and subject to this Section  4.1(c),  $10 per
Trading Day  (increasing to $20 per Trading Day five (5) Trading Days after such
damages have begun to accrue) for each Trading Day after the Legend Removal Date
until such certificate is delivered. Nothing herein shall limit such Purchaser's
right to pursue actual damages for the Company's failure to deliver certificates
representing any Securities as required by the Transaction  Documents,  and such
Purchaser shall have the right to pursue all remedies  available to it at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief.

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

                                      -21-
<PAGE>

      (f) From the date hereof until the 12 month  anniversary  of the Effective
Date,  the  Company  shall not  undertake  a reverse or forward  stock  split or
reclassification  of the Common Stock without the prior  written  consent of the
Purchasers holding a majority in interest of the shares of Preferred Stock.

      4.2 Furnishing of Information.  As long as any Purchaser owns  Securities,
the Company covenants to use commercially  reasonable efforts to timely file (or
obtain  extensions  in respect  thereof  and file  within the  applicable  grace
period)  all reports  required to be filed by the Company  after the date hereof
pursuant to the Exchange Act.  Upon the written  request of any  Purchaser,  the
Company  shall  deliver  to such  Purchaser  a written  certification  of a duly
authorized officer as to whether it has complied with the preceding sentence. As
long as any Purchaser  owns  Securities,  if the Company is not required to file
reports pursuant to such laws, it will prepare and furnish to each Purchaser and
make publicly  available in accordance  with Rule 144(c) such  information as is
required for each Purchaser to sell the  Securities  under Rule 144. The Company
further  covenants  that it will  take  such  further  action  as any  holder of
Securities may reasonably request,  all to the extent required from time to time
to enable such Person to sell such  Securities  without  registration  under the
Securities Act within the limitation of the exemptions provided by Rule 144. 4.3
Integration. The Company shall not sell, offer for sale or solicit offers to buy
or  otherwise  negotiate  in respect of any security (as defined in Section 2 of
the  Securities  Act)  that  would be  integrated  with the offer or sale of the
Securities in a manner that would require the registration  under the Securities
Act of the sale of the  Securities to the Purchasers or that would be integrated
with  the  offer  or  sale of the  Securities  for  purposes  of the  rules  and
regulations  of any  Trading  Market  such  that it  would  require  shareholder
approval  prior to the  closing of such  other  transaction  unless  shareholder
approval is obtained before the closing of such subsequent transaction.

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

                                      -22-
<PAGE>

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

      4.6 Non-Public Information.  The Company covenants and agrees that it will
not and will not direct any other Person to, provide any Purchaser or its agents
or counsel with any information that the Company believes  constitutes  material
non-public information,  unless prior thereto such Purchaser shall have executed
a written agreement  regarding the  confidentiality and use of such information.
The Company understands and confirms that each Purchaser shall be relying on the
foregoing  representations  in  effecting  transactions  in  securities  of  the
Company.

      4.7 Use of Proceeds.  The Company shall use the net proceeds from the sale
of the  Securities  hereunder for and working  capital  purposes and not for the
satisfaction  of any portion of the Company's  debt (other than payment of trade
payables, capital lease obligations, and accrued expenses in the ordinary course
of the Company's business and prior practices),  to redeem any Company equity or
equity-equivalent  securities or to settle any outstanding litigation.  Prior to
the receipt of  Shareholder  Approval,  the Company shall not declare or pay any
cash dividend on its shares of Common Stock while any shares of Preferred  Stock
remain outstanding.

      4.8 Trading Market Approval.  In the event the Company does not obtain the
approval of the Trading  Market for this  transaction  within 10 Trading Days of
the date  hereof,  the Company  shall  return the  respective  net  Subscription
Amounts  to each  Purchaser  within 2  Trading  Days of the date a  majority  in
interest of the  Purchaser's  notify the Company to return said  amounts and the
Purchasers  and the Company,  upon  receipt of such  payment by the  Purchasers,
shall instruct the Escrow Agent to return the Preferred Stock,  Warrants and the
Additional Investment Rights to the Company.

      4.9  Indemnification  of  Purchasers.  Subject to the  provisions  of this
Section  4.9,  the Company  will  indemnify  and hold the  Purchasers  and their
directors,  officers,  shareholders,  partners,  employees and agents  (each,  a
"Purchaser Party") harmless from any and all losses,  liabilities,  obligations,
claims,  contingencies,  damages,  costs and expenses,  including all judgments,
amounts paid in  settlements,  court costs and  reasonable  attorneys'  fees and
costs of  investigation  that any such Purchaser  Party may suffer or incur as a
result of or relating to (a) any material breach of any of the  representations,
warranties,  covenants or agreements made by the Company in this Agreement or in
the  other  Transaction  Documents  or  (b)  any  action  instituted  against  a
Purchaser, or any of them or their respective Affiliates,  by any stockholder of
the Company who is not an Affiliate of such Purchaser, arising solely out of the
transactions  contemplated by the Transaction  Documents  (unless such action is
based upon a breach of such Purchaser's representation,  warranties or covenants
under  the  Transaction  Documents  or any  agreements  or  understandings  such
Purchaser may have with any such  stockholder or any violations by the Purchaser
of state or  federal  securities  laws or any  conduct by such  Purchaser  which
constitutes fraud, gross negligence,  willful misconduct or malfeasance). If any
action  shall  be  brought  against  any  Purchaser  Party in  respect  of which
indemnity may be sought pursuant to this  Agreement,  such Purchaser Party shall
promptly notify the Company in writing,  and the Company shall have the right to
assume the defense thereof with counsel of its own choosing. Any Purchaser Party
shall  have  the  right to  employ  separate  counsel  in any  such  action  and
participate  in the defense  thereof,  but the fees and expenses of such counsel
shall be at the expense of such  Purchaser  Party  except to the extent that (i)
the  employment  thereof  has been  specifically  authorized  by the  Company in
writing, (ii) the Company has failed after a reasonable period of time to assume
such  defense  and to employ  counsel or (iii) in such  action  there is, in the
reasonable  written opinion of such separate counsel, a material conflict on any
material  issue  between the  position  of the Company and the  position of such
Purchaser  Party.  The Company will not be liable to any  Purchaser  Party under
this Agreement (i) for any settlement by an Purchaser Party effected without the
Company's prior written  consent,  which shall not be  unreasonably  withheld or
delayed;  or (ii) to the  extent,  but only to the  extent  that a loss,  claim,
damage or liability is  attributable  to any Purchaser  Party's breach of any of
the representations,  warranties, covenants or agreements made by the Purchasers
in this Agreement or in the other Transaction Documents.

                                      -23-
<PAGE>

      4.10 Reservation and Listing of Securities.

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

      (b) If, on any date,  the number of authorized but unissued (and otherwise
unreserved)  shares of Common Stock is less than 130% of (i) the Actual  Minimum
on such date, minus (ii) the number of shares of Common Stock previously  issued
pursuant  to the  Transaction  Documents,  then the  Board of  Directors  of the
Company  shall  use  commercially  reasonable  efforts  to amend  the  Company's
certificate  or articles of  incorporation  to increase the number of authorized
but unissued  shares of Common Stock to at least the Actual Minimum at such time
(minus the number of shares of Common Stock  previously  issued  pursuant to the
Transaction Documents),  as soon as possible and in any event not later than the
75th day after such date;  provided that the Company will not be required at any
time to  authorize a number of shares of Common  Stock  greater than the maximum
remaining  number of shares of Common Stock that could  possibly be issued after
such time pursuant to the Transaction Documents.

      (c) The Company shall:  (i) in the time and manner required by the Trading
Market,  prepare and file with such Trading Market an additional  shares listing
application  covering a number of shares of Common  Stock at least  equal to the
Actual Minimum on the date of such application, (ii) take all steps necessary to
cause such  shares of Common  Stock to be  approved  for  listing on the Trading
Market as soon as possible thereafter, (iii) upon a Purchaser's written request,
provide to each  Purchaser  evidence of such  listing,  and (iv) use  reasonable
efforts to maintain the listing of such Common  Stock on such Trading  Market or
another Trading Market. In addition, the Company shall hold a special meeting of
shareholders  (which may also be at the annual meeting of  shareholders)  at the
earliest  practical  date, but in no event later than November 30, 2004, for the
purpose  of  obtaining  Shareholder  Approval,  with the  recommendation  of the
Company's  Board of Directors  that such  proposal be approved,  and the Company
shall solicit proxies from its shareholders in connection  therewith in the same
manner  as all  other  management  proposals  in such  proxy  statement  and all
management-appointed  proxyholders  shall  vote  their  proxies in favor of such
proposal.

                                      -24-
<PAGE>

      (d) If, on any date, the Company is listed on a different  Trading Market,
then the Company shall take the necessary  actions to list all of the Underlying
Shares on such Trading Market as soon as reasonably possible.

      4.11 Conversion and Exercise Procedures.  The form of Election to Purchase
included in the Warrants and the Additional  Investment  Rights and the forms of
Conversion  Notice  included in the  Certificate  of  Designation  set forth the
totality  of the  procedures  required  in order to exercise  the  Warrants  and
Additional Investment Rights or convert the Preferred Stock. No additional legal
opinion or other  information or instructions  shall be necessary to enable each
Purchaser to exercise their Warrants and Additional Investment Rights or convert
their  Preferred  Stock.  The Company shall honor  exercises of the Warrants and
Additional  Investment  Rights and  conversions of the Preferred Stock and shall
deliver  Underlying  Shares in accordance  with the terms,  conditions  and time
periods set forth in the Transaction  Documents.  The Company  acknowledges that
the issuance of the Securities may result in dilution of the outstanding  shares
of  Common  Stock,  which  dilution  may be  substantial  under  certain  market
conditions.  The Company further  acknowledges  that its  obligations  under the
Transaction  Documents,  including its obligation to issue the Underlying Shares
pursuant to the Transaction  Documents,  are  unconditional and absolute and not
subject to any right of set off, counterclaim, delay or reduction, regardless of
the effect of any such  dilution or any claim the  Company may have  against any
Purchaser and  regardless of the dilutive  effect that such issuance may have on
the ownership of the other stockholders of the Company.

      4.12 Equal Treatment of Purchasers.  No consideration  shall be offered or
paid to any  person  to amend or  consent  to a waiver  or  modification  of any
provision of any of the Transaction  Documents unless the same  consideration is
also  offered  to  all  of  the  parties  to  the  Transaction  Documents.   For
clarification  purposes,  this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated  separately by each Purchaser,  and
is intended to treat for the Company the  Purchasers as a class and shall not in
any way be  construed  as the  Purchasers  acting in  concert or as a group with
respect to the purchase, disposition or voting of Securities or otherwise.

                                      -25-
<PAGE>

      4.13  Participation in Future Financing.  Until the 6 month anniversary of
the  Effective  Date,  upon any  financing by the Company of its Common Stock or
Common Stock Equivalents (a "Subsequent  Financing"),  each Purchaser shall have
the right to participate in up to 100% of such Subsequent Financing.  At least 3
Trading Days prior to the closing of the Subsequent Financing, the Company shall
deliver  to each  Purchaser  a  written  notice  of its  intention  to  effect a
Subsequent Financing  ("Pre-Notice"),  which Pre-Notice shall ask such Purchaser
if it wants to review the details of such financing (such  additional  notice, a
"Subsequent  Financing  Notice").  Upon the written request of a Purchaser,  and
only upon a request by such Purchaser,  for a Subsequent  Financing Notice,  the
Company  shall  promptly,  but no later than 1 Trading  Day after such  request,
deliver  a  Subsequent  Financing  Notice  to  such  Purchaser.  The  Subsequent
Financing Notice shall describe in reasonable  detail the proposed terms of such
Subsequent  Financing,  the amount of proceeds intended to be raised thereunder,
the Person with whom such Subsequent  Financing is proposed to be effected,  and
attached to which shall be a term sheet or similar document relating thereto. If
by 6:30  p.m.  (New  York  City  time) on the 3rd  Trading  Day after all of the
Purchasers  have received the  Pre-Notice,  notifications  of the  Purchasers of
their willingness to participate in the Subsequent  Financing (or to cause their
designees  to provide) is, in the  aggregate,  less than the total amount of the
Subsequent Financing,  then the Company may effect the remaining portion of such
Subsequent Financing on the terms and to the Persons set forth in the Subsequent
Financing  Notice. If the Company receives no notice from a Purchaser as of such
3rd Trading Day,  such  Purchaser  shall be deemed to have  notified the Company
that it does not elect to  participate.  The Company must provide the Purchasers
with a second Subsequent  Financing  Notice,  and the Purchasers will again have
the  right of  participation  set  forth  above  in this  Section  4.13,  if the
Subsequent  Financing subject to the initial Subsequent  Financing Notice is not
consummated for any reason on the terms set forth in such  Subsequent  Financing
Notice within 60 Trading Days after the date of the initial Subsequent Financing
Notice.  In the event the Company  receives  responses to  Subsequent  Financing
Notices from  Purchasers  seeking to purchase more than the aggregate  amount of
the Subsequent  Financing,  each such Purchaser shall have the right to purchase
their Pro Rata Portion (as defined below) of the Subsequent Financing. "Pro Rata
Portion"  is the  ratio  of  (x)  the  Subscription  Amount  of a  participating
Purchaser  and  (y)  the  sum  of  the  aggregate  Subscription  Amount  of  all
participating Purchasers. Notwithstanding the foregoing, this Section 4.13 shall
not apply in respect of an Exempt  Issuance  and the  reasonable  and  customary
issuance of Common Stock or Common Stock Equivalents to service providers of the
Company, the primary purpose of which is not to raise capital.

4.14 Future  Financings.  From the date hereof until 90 days after the Effective
Date, other than as contemplated by this Agreement,  neither the Company nor any
Subsidiary  (with respect to Common Stock  Equivalents)  shall issue or sell any
Common Stock or Common Stock Equivalents  entitling any Person to acquire shares
of Common Stock.  Notwithstanding  anything  herein to the contrary,  the 90 day
period  set forth in this  Section  4.14  shall be  extended  for the  number of
Trading  Days during  such  period in which (i)  trading in the Common  Stock is
suspended by any Trading  Market,  or (ii)  following  the Effective  Date,  the
Registration  Statement  is not  effective  or the  prospectus  included  in the
Registration  Statement may not be used by each  Purchaser for the resale of the
Underlying Shares. Notwithstanding anything to the contrary herein, this Section
4.14 shall not apply in respect of an Exempt  Issuance  and the  reasonable  and
customary  issuance  of Common  Stock or Common  Stock  Equivalents  to  service
providers of the Company,  the primary purpose of which is not to raise capital.
In addition to the limitations set forth herein, from the date hereof until such
time  as no  Purchaser  holds  any of  the  Securities,  the  Company  shall  be
prohibited  from  effecting or enter into an agreement to effect any  Subsequent
Financing  involving any security  which is not a Junior  Security as defined in
the  Certificate of Designation or pari passu with the Preferred  Stock,  or any
"Variable  Rate  Transaction"  (as  defined  below).  The  term  "Variable  Rate
Transaction"  shall mean a transaction  in which the Company issues or sells (i)
any  debt or  equity  securities  that are  convertible  into,  exchangeable  or
exercisable  for,  or include the right to receive  additional  shares of Common
Stock either (A) at a conversion,  exercise or exchange rate or other price that
is based upon and/or  varies with the trading  prices of or  quotations  for the
shares of Common  Stock at any time after the  initial  issuance of such debt or
equity securities, or (B) with a conversion,  exercise or exchange price that is
subject to being reset at some  future  date after the initial  issuance of such
debt or equity security or upon the occurrence of specified or contingent events
directly or indirectly  related to the business of the Company or the market for
the Common  Stock;  provided  that the  existence  of  anti-dilution  provisions
attached to any such  securities  shall not alone make a  transaction a Variable
Rate Transaction. In addition, unless Shareholder Approval has been obtained and
deemed effective in accordance with Section 4.10(c),  the Company shall not make
any issuance  whatsoever of Common Stock or Common Stock Equivalents which would
cause any  adjustment  of the Set Price to the extent the  holders of  Preferred
Stock would not be permitted,  pursuant to Section  5(a)(iii) of the Certificate
of  Designations,  to convert their respective  outstanding  Preferred Stock and
Warrants in full.

                                      -26-
<PAGE>

                                    ARTICLE V
                                  MISCELLANEOUS

      5.1 Fees and Expenses.  Except as otherwise  set forth in this  Agreement,
each party shall pay the fees and expenses of its advisers, counsel, accountants
and  other  experts,  if any,  and all other  expenses  incurred  by such  party
incident to the negotiation, preparation, execution, delivery and performance of
this  Agreement.  The  Company  shall pay all stamp and other  taxes and  duties
levied in connection with the sale of the Securities.

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

      5.3 Notices.  Any and all notices or other  communications  or  deliveries
required or permitted to be provided  hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of  transmission,  if
such notice or  communication is delivered via facsimile at the facsimile number
specified  on the  signature  page prior to 4:00 p.m.  (New York City time) on a
Trading  Day and an  electronic  confirmation  of  delivery  is  received by the
sender, (b) the next Trading Day after the date of transmission,  if such notice
or communication is delivered via facsimile at the facsimile number specified in
this  Section on a day that is not a Trading  Day or later  than 4:00 p.m.  (New
York City time) on any Trading Day, (c) three Trading Days following the date of
mailing, if sent by U.S. nationally recognized overnight courier service, or (d)
upon  actual  receipt by the party to whom such  notice is required to be given.
The  addresses  for such notices and  communications  are those set forth on the
signature  pages  hereof,  or such other address as may be designated in writing
hereafter, in the same manner, by such Person.

                                      -27-
<PAGE>

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

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

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

      5.7 No  Third-Party  Beneficiaries.  This  Agreement  is intended  for the
benefit of the parties  hereto and their  respective  successors  and  permitted
assigns and is not for the benefit of, nor may any provision  hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.9.

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

                                      -28-
<PAGE>

      5.9 Survival.  The representations  and warranties  contained herein shall
survive  the  Closing  and  the  delivery,  exercise  and/or  conversion  of the
Securities, as applicable, until the 3 year anniversary of the date hereof.

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

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

      5.12  Rescission and  Withdrawal  Right.  Notwithstanding  anything to the
contrary  contained in (and  without  limiting  any similar  provisions  of) the
Transaction  Documents,  whenever  any  Purchaser  exercises a right,  election,
demand or option  under a  Transaction  Document and the Company does not timely
perform its related  obligations within the periods therein provided,  then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice,  demand or election in whole
or in part without prejudice to its future actions and rights.

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

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

                                      -29-
<PAGE>

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

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

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

                            [SIGNATURE PAGE FOLLOWS]

                                      -30-
<PAGE>

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

RCG Companies Incorporated                      Address for Notice:
                                                -------------------

By:__________________________________________   6836 Morrison Blvd.
     Name:                                      Suite 200
     Title:                                     Charlotte, North Carolina 28211
                                                Attn:  William Hodge
                                                Fax: (704) 366 5056
                                                Tel: (704) 366 5054 x28

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

Joel Mayersohn, Esq.
Adorno & Yoss, P.A.
350 East Las Olas Boulevard
Suite 1700
Fort Lauderdale, Florida 33301
954.763.1200 (phone)
954.766.7800 (fax)

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

                                      -31-
<PAGE>

        [PURCHASER SIGNATURE PAGES TO RCG SECURITIES PURCHASE AGREEMENT]

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

Name of Investing Entity: __________________________
Signature of Authorized Signatory of Investing Entity: _______________
Name of Authorized Signatory: _________________________
Title of Authorized Signatory: __________________________
Email Address of Authorized Signatory:________________________________

Address for Notice of Investing Entity:

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

Subscription Amount:
Shares of Preferred Stock:
Warrant Shares:
Additional Investment Right Shares:

                           [SIGNATURE PAGES CONTINUE]

                                      -32-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00071-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00071-of-00352.parquet"}], [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00071-of-00352.parquet"}]]