Document:

Exhibit 10.1

                            STOCK PURCHASE AGREEMENT

      STOCK PURCHASE AGREEMENT, dated as of August 24, 2004 (the "Agreement"),
by and among (i) Modern Holdings Incorporated, a Delaware corporation ("Buyer"),
and (ii) DAG Media, Inc., a New York corporation ("Seller").

                               W I T N E S S E T H

      WHEREAS, Seller is the only stockholder of Blackbook Photography, Inc., a
New York corporation (the "Company");

      WHEREAS, Seller wishes to sell its capital stock in the Company (the
"Stock") to Buyer and Buyer wishes to purchase such stock (the "Acquisition") on
the terms and subject to the conditions set forth herein; and

      WHEREAS, the parties desire to make certain representations and warranties
and other agreements in connection with the Acquisition;

      NOW, THEREFORE, Buyer and Seller hereby agree as follows:

                                    Article 1
                                   Definitions

      1.1. Certain Matters of Construction. A reference to an Article, Section,
Exhibit or Schedule shall mean an Article of, a Section in, or Exhibit or
Schedule to, this Agreement unless otherwise expressly stated. The titles and
headings herein are for reference purposes only and shall not in any manner
limit the construction of this Agreement which shall be considered as a whole.
The words "include," "includes" and "including" when used herein shall be deemed
in each case to be followed by the words "without limitation."

      1.2. Cross References. The following terms defined elsewhere in this
Agreement in the Sections set forth below shall have the respective meanings
therein defined:

         Term                                       Definition
         ----                                       ----------

         Agreement                                  Preamble
         Acquisition                                Preamble
         Affiliated Group                           Section 3.10
         Buyer                                      Preamble
         Claim Notice                               Section 8.3
         Closing                                    Section 2.3
         Code                                       Section 3.11
         Company                                    Preamble
         Company Balance Sheet                      Section 3.6
         Company Common Stock                       Section 3.2
         Company Contracts                          Section 3.20
         Company Financial Statements               Section 3.6
         Company Proprietary Rights                 Section 3.17

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         Damages                                    Section 8.2
         Employee List                              Section 3.12
         Encumbrances                               Section 3.15
         ERISA                                      Section 3.11
         Escrow Agent                               Section 2.2
         Escrow Agreement                           Section 8.6
         Governmental Entity                        Section 3.5
         Indemnification Escrow Amount              Section 2.2
         Indemnified Parties                        Section 8.2
         Liabilities                                Section 3.7
         Objection Notice                           Section 8.3
         Permits                                    Section 3.8
         Pre-Closing Tax Period                     Section 6.12
         Purchase Price                             Section 2.2
         Rubin Escrow Amount                        Section 2.2
         Seller                                     Preamble
         Seller Releasing Parties                   Section 6.11
         Stock                                      Preamble
         Tax or Taxes                               Section 3.10
         Tax Return                                 Section 3.10

      1.3. Certain Definitions. As used herein, the following terms shall have
the following meanings:

            (a) Affiliate: with respect to any Person, any Person which,
directly or indirectly, controls, is controlled by, or is under common control
with, such Person.

            (b) Cause: (i) conviction of or guilty plea to a felony, (ii)
commission of a fraudulent, illegal or dishonest act in the performance of
Executive's duties to the Company, as reasonably determined by the board of
directors of the Company, (iii) willful misconduct or gross negligence in the
performance of Executive's duties to the Company which reasonably could be
expected to be materially injurious to the business or operations of the Company
(monetarily or otherwise), or (iv) failure or refusal to attempt to perform his
duties to the Company if Executive does not cure such failure or refusal within
thirty (30) days after his receipt of written notice from the Company of such
failure (unless such act or omission, by its nature, may not be remedied, in
which case such notice shall not be required).

            (c) Company Leases: each lease, sublease, license or other agreement
under which the Company uses, occupies or has the right to occupy any real
property or interest therein that (i) provides for aggregate future minimum
payments of $2,500 or more (ignoring any right of cancellation or termination)
or (ii) the cancellation or termination of which would have a Company Material
Adverse Effect.

            (d) Company Material Adverse Effect: any change in or effect on the
business of the Company that is or could be expected to be materially adverse to
the business, results of operations or prospects of the Company.

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            (e) Company Plans: all pension, profit sharing, retirement, deferred
compensation, welfare, legal services, medical, dental or other employee benefit
or health insurance plans, life insurance or other death benefit plans,
disability, stock option, stock purchase, stock compensation, bonus, vacation
pay, severance pay and other similar plans, programs or agreements, and every
material personnel policy, relating to any persons employed by the Company or in
which any person employed by the Company is eligible to participate and which is
currently maintained or that was maintained at any time in the last five
calendar years by the Company, Seller or any Affiliate of Seller.

            (f) Control: (including with correlative meaning, controlled by and
under common control with): as used with respect to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.

            (g) Environmental Laws: any and all statutes, regulations and
ordinances relating to the protection of public health, safety or the
environment.

            (h) Executive: Ted Rubin, President of the Company.

            (i) GAAP: United States generally accepted accounting principles.

            (j) Permitted Encumbrances: (i) liens for current taxes and other
statutory liens and trusts not yet due and payable, (ii) liens of carriers,
warehousemen, landlords and mechanics and other similar liens that were incurred
in the ordinary course of business and secure obligations not yet due or payable
and (iii) imperfections of title or other minor encumbrances that do not
materially detract from the value or impair the use of the asset subject thereto
or impair the operations of the Company.

            (k) Person: an individual, a corporation, an association, a
partnership, an estate, a trust and any other entity or organization.

            (l) Publications: publications created or distributed by or for the
Company, including the publications entitled Black Book Photography (also known
as The Black Book), Black Book Illustration, AR100 Award Show Book and The
Complete Creative Industry Directory (also known as The Creative Industry
Directory or The Complete Industry Directory).

            (m) Subsidiary: any corporation, association, or other business
entity a majority (by number of votes on the election of directors or persons
holding positions with similar responsibilities) of the shares of capital stock
(or other voting interests) of which is owned by Buyer, the Company or their
respective Subsidiaries, as the case may be.

            (n) to the knowledge of Seller: the actual knowledge of the officers
and directors of Seller and the Company, after making due inquiry with respect
thereto.

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                                   Article 2
                                 The Acquisition

      2.1. Sale and Purchase of Stock. At the Closing, Seller shall deliver and
sell to Buyer the Stock, free and clear of all Encumbrances, against payment of
the Purchase Price by Buyer in accordance with this Article 2.

      2.2. Payment of Purchase Price. The purchase price for the Stock (the
"Purchase Price") shall be as follows:

            (a) Payment. At Closing, Buyer will pay Seller a total of $2,125,000
by check or wire transfer.

            (b) Escrow Amounts.

                  (i) Buyer will deposit the sum of $50,000 (the
"Indemnification Escrow Amount") into escrow at the Closing with Mellon Trust of
New England, N.A. (the "Escrow Agent") as security for the full and timely
payment and performance by the Company of its obligations under Section 8 of
this Agreement. Unless and except to the extent that such funds are to be repaid
to Buyer as provided in Section 8 of this Agreement or are subject to pending
claims under such section, such amounts shall be released from escrow and paid
to Seller upon the expiration of twelve (12) months from the Closing.

                  (ii) Buyer will also deposit the sum of $75,000 (the "Rubin
Escrow Amount") into escrow with the Escrow Agent at the Closing. The Rubin
Escrow Amount shall be immediately payable in full to Buyer in the event that
Executive resigns his employment with the Company for any reason or is dismissed
by the Company for Cause, in each case on or before the date that is twelve (12)
months from the Closing. Unless such amount is to be repaid to Buyer as provided
herein or is subject to a pending dispute under Section 8.4, such amount shall
be released from escrow and paid to Seller promptly after such date. The
parties' agreement herein with respect to the Rubin Escrow Amount constitutes
their reasonable estimate of the loss to Buyer if Executive should so resign or
be dismissed and is not a penalty.

      2.3. Closing. The closing of the Acquisition (the "Closing") shall take
place on August 24, 2004 at 10:00 a.m. or at such other date and time as may be
mutually agreed to by the parties.

                                   Article 3
                    Representations and Warranties of Seller

      Seller represents and warrants to Buyer as follows:

      3.1. Corporate Status of the Company. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the state of
New York, with the requisite corporate power to carry on its business as now
being conducted. The Company is duly qualified and licensed to do business and
is in good standing in all jurisdictions in which the nature of the business
transacted by it makes qualification necessary. All jurisdictions in which the
Company is qualified to do business are set forth on Schedule 3.1.

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      3.2. Capital Stock.

            (a) Authorized Stock of the Company. The authorized capital stock of
the Company consists of 1,000 shares of common stock, par value $0.001 ("Company
Common Stock"), of which 1,000 shares are issued and outstanding. The
outstanding shares of Company Common Stock are owned of record and beneficially
by Seller. All of the outstanding shares of Company Common Stock have been duly
authorized and validly issued, were not issued in violation of any person's
preemptive rights, and are fully paid and nonassessable.

            (b) Options and Convertible Securities of the Company. There are no
outstanding subscriptions, options, warrants, conversion rights or other rights,
securities, agreements or commitments obligating the Company to issue, sell or
otherwise dispose of shares of its capital stock, or any securities or
obligations convertible into, or exercisable or exchangeable for, any shares of
its capital stock. There are no voting trusts or other agreements or
understandings to which the Company or any Seller is a party with respect to the
voting of the shares of Company Common Stock, and the Company is not a party to
or bound by any outstanding restrictions, options or other obligations,
agreements or commitments to sell, repurchase, redeem or acquire any outstanding
shares of Company Common Stock or other equity securities of the Company.

      3.3. Subsidiaries. The Company does not have any Subsidiaries. Other than
as reflected in the Company Balance Sheet, the Company does not own, directly or
indirectly, any shares or other equity interest or securities in any business
organization, entity or enterprise.

      3.4. Certificate of Incorporation, Bylaws, Directors and Officers. The
Company has delivered to Buyer true and correct copies of the certificate of
incorporation and bylaws of the Company, including all amendments thereto, as in
effect on the date hereof. The minute book of the Company contains accurate
records of all meetings and consents in lieu of meetings of the board of
directors of the Company (and any committees thereof, whether permanent or
temporary) and of its shareholders since the date of its incorporation, and such
records accurately reflect all transactions referred to in such minutes and
consents. The stock book of the Company accurately reflects record ownership of
the Company's capital stock. Buyer has been provided with a copy of or access to
such minute book and stock book. Schedule 3.4 hereto sets forth a list of the
directors and officers of the Company.

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      3.5. Noncontravention. Neither the execution and delivery of this
Agreement by the Seller, nor the performance by Seller of its obligations
hereunder, nor the consummation by Seller of the transactions contemplated
hereby will (i) conflict with or result in a violation of any provision of the
certificate of incorporation or bylaws of the Company, (ii) with or without the
giving of notice or the lapse of time, or both, conflict with, or result in any
violation or breach of, or constitute a default under, or result in any right to
accelerate or result in the creation of any Encumbrance pursuant to, or right of
termination under, any provision of any note, mortgage, indenture, lease,
instrument or other agreement, Company Plan, permit, concession, grant,
franchise, license, judgment, order, decree, statute, ordinance, rule or
regulation to which the Company is a party or by which it or any of its assets
or properties is bound or which is applicable to it or any of its assets or
properties.

      3.6. Financial Statements. The Company has previously furnished Buyer with
(a) accurate and complete copies of the audited balance sheet of the Company as
of December 31, 2003 and the statements of operations and cash flows of the
Company for the year then ended and (b) accurate and complete copies of the
unaudited balance sheet of the Company as of June 30, 2004 and the statements of
operations and cash flows of the Company for the six months then ended.
Collectively, the financial statements referred to in the immediately preceding
sentence are sometimes referred to herein as the "Company Financial Statements"
and the unaudited balance sheet of the Company as of June 30, 2004 is sometimes
referred to herein as the "Company Balance Sheet". Each of the balance sheets
included in the Company Financial Statements (including any related notes)
fairly presents in all material respects the financial position of the Company
as of its date, and the other statements included in the Company Financial
Statements (including any related notes) fairly present in all material respects
the results of operations, cash flows and shareholders' equity, as the case may
be, of the Company for the periods therein set forth, in each case in accordance
with GAAP consistently applied (except as otherwise stated therein).

      3.7. Absence of Material Adverse Changes and Undisclosed Liabilities.

            (a) Changes. Since the date of the Company Balance Sheet, the
Company has not suffered any Company Material Adverse Effect, nor has there
occurred or arisen any event, condition or state of facts of any character that
could reasonably be expected to result in a Company Material Adverse Effect.
Without limiting the generality of the foregoing, except as set forth on
Schedule 3.7(a), since the date of the Company Balance Sheet, the Company has
not:

                  (i) sold, leased, transferred or assigned any of its assets,
      tangible or intangible, other than in the ordinary course of business;

                  (ii) accelerated, terminated, modified, or canceled any
      contract, lease, sublease, license, or sublicense (or series of related
      contracts, leases, subleases, licenses, and sublicenses) involving more
      than $2,500 to which the Company is a party;

                  (iii) canceled, compromised, waived, or released any right or
      claim (or series of related rights and claims) either involving more than
      $2,500 or outside the ordinary course of business;

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                  (iv) experienced material damage, destruction, or loss
      (whether or not covered by insurance) to its property (other than ordinary
      wear and tear not caused by neglect);

                  (v) created or suffered to exist any Encumbrance (other than
      Permitted Encumbrances) upon any of its assets, tangible or intangible;

                  (vi) issued, sold, otherwise disposed of or reacquired any of
      its capital stock, or granted or reacquired any options, warrants, or
      other rights to purchase or obtain (including upon conversion or exercise)
      any of its capital stock, or any securities convertible or exchangeable
      into any of its capital stock or otherwise changed its capital structure
      or stock ownership in any way;

                  (vii) declared, set aside, or paid any dividend or
      distribution with respect to its capital stock (whether in cash or in
      kind) or redeemed, purchased, or otherwise acquired any of its capital
      stock;

                  (viii) made or committed to make any capital expenditures or
      entered into any other material transaction outside the ordinary course of
      business or involving an expenditure in excess of $2,500;

                  (ix) amended or modified in any respect any employment
      contract or arrangement or any profit sharing, bonus, incentive
      compensation, severance, employee benefit, multiemployer plan or other
      Company Plan;

                  (x) entered into any employment agreement or collective
      bargaining agreement or increased the compensation of any of its
      directors, officers, employees or consultants; or

                  (xi) committed (orally or in writing) to any of the foregoing.

            (b) Liabilities. To the knowledge of Seller, the Company has no
liabilities or obligations, fixed, accrued, contingent or otherwise of the type
required to be disclosed in the Company's financial statements in accordance
with GAAP (collectively, "Liabilities"), that are not fully reflected or
provided for on, or disclosed in the notes to, the balance sheets included in
the Company Financial Statements, except (i) Liabilities incurred in the
ordinary course of business since the date of the Company Balance Sheet, none of
which individually or in the aggregate has had or could reasonably be expected
to have a Company Material Adverse Effect and (ii) Liabilities expressly
disclosed on the Schedules delivered hereunder. Schedule 3.7(b) hereto sets
forth an accurate and complete list of the Company's Liabilities as of the
Closing, including its accounts payable, and the full dollar amount of each such
Liability so listed, determined in accordance with GAAP.

      3.8. Compliance with Applicable Law, Certificate and Bylaws. The Company
has all requisite licenses, permits and certificates (collectively, "Permits")
from all United States or foreign governmental or public bodies or authorities
(each a "Governmental Entity") necessary to conduct its business as currently
conducted, and to own, lease and operate its properties in the manner currently
held and operated. The Company is in compliance in all material respects with

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all the terms and conditions related to such Permits. There are no proceedings
in progress, pending or, to the knowledge of Seller, threatened, which may
result in revocation, cancellation, suspension, or any material adverse
modification of any of such Permits. To the knowledge of Seller, the business of
the Company is not being conducted in violation of any applicable law, statute,
ordinance, regulation, rule, judgment, decree, order, Permit, concession, grant
or other authorization of any Governmental Entity. The Company is not in default
or violation of any provision of its certificate of incorporation or its bylaws.

      3.9. Litigation and Audits. Except as set forth on Schedule 3.9, there is
(a) no investigation by any Governmental Entity with respect to the Company
pending or, to the knowledge of Seller, threatened, nor has any Governmental
Entity indicated to the Company an intention to conduct the same; (b) no claim,
action, suit, arbitration or proceeding pending or, to the knowledge of Seller,
threatened against or involving the Company, or any of its assets or properties,
at law or in equity, or before any arbitrator or Governmental Entity; and (c) no
judgments, decrees, injunctions or orders of any Governmental Entity or
arbitrator outstanding against the Company.

      3.10. Tax Matters.

            (a) The Company has filed all Tax Returns that it was required to
file under applicable laws and regulations. Each Affiliated Group has filed all
material income Tax Returns that it was required to file for each taxable period
during which the Company was a member of the group. All such Tax Returns were
correct and complete (A) in all respects in so far as they relate to the Company
and (B) in all material respects in so far as they do not relate to the Company,
and have been prepared in substantial compliance with all applicable laws and
regulations. All Taxes due and owing by the Company (whether or not shown on any
Tax Return) have been paid. All material income Taxes owed by any Affiliated
Group (whether or not shown on any Tax Return) have been paid for each taxable
period during which the Company was a member of the group. The Company is not
currently the beneficiary of any extension of time within which to file any Tax
Return. No claim has ever been made by an authority in a jurisdiction where the
Company does not file Tax Returns that it is or may be subject to taxation by
that jurisdiction. There are no liens for Taxes (other than Taxes not yet due
and payable) upon any of the assets of the Company.

            (b) The Company has withheld and paid all Taxes required to have
been withheld and paid in connection with any amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party.

            (c) Neither Seller nor any director or officer (or employee
responsible for Tax matters) of the Company expects any authority to assess any
additional material Taxes against any Affiliated Group for any taxable period
during which the Company was a member of the group. No foreign, federal, state,
or local tax audits or administrative or judicial Tax proceedings are pending or
being conducted with respect to the Company. The Company has not received from
any foreign, federal, state, or local taxing

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authority (including jurisdictions where the Company has not filed Tax Returns)
any (i) written notice indicating an intent to open an audit or other review,
(ii) request for information related to Tax matters, or (iii) notice of
deficiency or proposed adjustment for any amount of Tax proposed, asserted, or
assessed by any taxing authority against the Company. There is no dispute or
claim concerning any material Tax liability of any Affiliated Group for any
taxable period during which the Company was a member of the group either (A)
claimed or raised by any authority in writing or (B) as to which Seller and the
directors and officers (and employees responsible for Tax matters) of Seller has
knowledge based upon personal contact with any agent of such authority. Except
as disclosed on Schedule 3.10(c), no Affiliated Group has waived any statute of
limitations in respect of any material Taxes or agreed to any extension of time
with respect to a material Tax assessment or deficiency for any taxable period
during which any of the Company was a member of the group. Schedule 3.10(c)
lists all federal, state, local, and foreign income Tax Returns filed with
respect to the Company for taxable periods ended on or after December 31, 2000,
indicates those Tax Returns that have been audited, and indicates those Tax
Returns that currently are the subject of audit. Seller has delivered to Buyer
correct and complete copies of all federal income Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to by the
Company filed or received since December 31, 2000.

            (d) The Company has not filed a consent under Code ss.341(f)
concerning collapsible corporations. The Company is not a party to any
agreement, contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in the payment of (i) any "excess parachute
payment" within the meaning of Code ss.280G (or any corresponding provision of
state, local or foreign Tax law) and (ii) any amount that will not be fully
deductible as a result of Code 162(m) (or any corresponding provision of state,
local or foreign Tax law). The Company has not been a United States real
property holding corporation within the meaning of Code ss.897(c)(2) during the
applicable period specified in Code ss.897(c)(1)(A)(ii). The Company has not
been a member of an Affiliated Group filing a consolidated federal income Tax
Return other than a group the common parent of which is Seller. Seller has filed
a consolidated federal income Tax Return with the Company for the taxable year
immediately preceding the current taxable year. The Company does not have any
liability for the Taxes of any person other than the Company (A) under Reg.
ss.1.1502-6 (or any similar provision of state, local, or foreign law), (B) as a
transferee or successor, (C) by contract, or (D) otherwise.

            (e) The unpaid Taxes of the Company (i) did not, as of June 30,
2004, exceed the reserve for Tax liability (rather than any reserve for deferred
Taxes established to reflect timing differences between book and Tax income) set
forth on the face of the Company Balance Sheet (rather than in any notes
thereto) and (ii) do not exceed that reserve as adjusted for the passage of time
through the date of the Closing in accordance with the past custom and practice
of the Company in filing its Tax Returns. Since the date of the Company Balance
Sheet, the Company has not incurred any liability for Taxes arising from
extraordinary gains or losses, as that term is used in GAAP, outside the
ordinary course of business consistent with past custom and practice.

            (f) The Company has not distributed stock of another person, or has
had its stock distributed by another person, in a transaction that was purported
or intended to be governed in whole or in part by Code ss.355 or ss.361.

            (g) Certain Definitions.

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                  (1) "Affiliated Group" means any affiliated group within the
      meaning of Code ss.1504(a) or any similar group defined under a similar
      provision of state, local or foreign laws.

                  (2) "Tax" or "Taxes" means any federal, state, local, or
      foreign income, gross receipts, license, payroll, employment, excise,
      severance, stamp, occupation, premium, windfall profits, environmental
      (including taxes under Code ss.59A), customs duties, capital stock,
      franchise, profits, withholding, social security (or similar),
      unemployment, disability, real property, personal property, sales, use,
      transfer, registration, value added, alternative or add-on minimum,
      estimated, or other tax of any kind whatsoever, including any interest,
      penalty, or addition thereto, whether disputed or not and including any
      obligations to indemnify or otherwise assume or succeed to the Tax
      liability of any other person.

                  (3) "Tax Return" means any return, declaration, report, claim
      for refund, or information return or statement relating to Taxes,
      including any schedule or attachment thereto, and including any amendment
      thereof.

      3.11. Company Plans. The Company has no Company Plans other than those
listed on Schedule 3.11 hereto. Each Company Plan has been maintained, funded
and administered in accordance with the terms of such Company Plan and complies
in form and in operation in all material respects with the applicable
requirements of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), the Internal Revenue Code of 1986, as amended (the "Code") and all
other applicable laws. Each Company Plan that is intended to meet the
requirements of a "qualified plan" under Code ss. 401(a) has received a
favorable determination letter from the Internal Revenue Service. There is no
material pending or, to the knowledge of Seller, threatened litigation relating
to the Company Plans. The Company has not maintained, sponsored or contributed
to any Company Plan that is a "defined benefit plan" as defined in ERISA ss.
3(35).

      3.12. Employment-Related Matters.

            (a) Employee Payments. All salaries, wages, back pay, vacation pay,
bonuses, commissions and other compensation payable by the Company to the
employees of and consultants to the Company and any previous employees of or
consultants to the Company through the date of Closing, including any retention
bonus or other compensation payable in connection with the Closing, have been or
will be paid in full or waived in writing as of the date of the Closing.

            (b) Employee List. The Company has heretofore delivered to Buyer a
correct and complete list (the "Employee List") containing the name of each
current employee of the Company, and each such employee's position, length of
service and current annual salary. No third party has asserted any claim, or, to
the knowledge of Seller, has any reasonable basis to assert any valid claim,
against the Company that either the continued employment by, or association
with, the Company or any of the present officers or employees of, or consultants
to, the Company contravenes any agreements or laws applicable to unfair
competition, trade secrets or proprietary information.

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            (c) Labor Disputes and Compliance. The Company has not at any time
had, nor to the knowledge of Seller is there now threatened, any walkout,
strike, union activity, picketing, work slowdown or any other similar
occurrence. The Company has complied in all material respects with all
applicable laws, rules and regulations relating to the employment of labor,
including those relating to wages, hours and collective bargaining. The Company
has withheld all amounts required by law or agreement to be withheld from the
wages or salaries of its employees and it has paid all such amounts to the
appropriate governmental agency, insurer or other person in accordance with such
laws or agreements.

      3.13. Environmental Laws. To the knowledge of Seller, the Company is in
compliance in all material respects with all applicable Environmental Laws. The
Company has not received any communication that alleges that the Company is not
in compliance in all respects with all applicable Environmental Laws in effect
on the date hereof.

      3.14. No Broker's or Finder's Fees. Except as set forth on Schedule 3.14,
neither the Company nor Seller has paid or become obligated to pay any fee or
commission to any broker, finder, financial advisor or intermediary in
connection with the transactions contemplated by this Agreement.

      3.15. Assets Other Than Real Property.

            (a) Title. The Company has good and marketable title to all of the
tangible assets shown on the Company Balance Sheet and listed in Schedule
3.15(a), in each case, free and clear of any mortgage, pledge, lien, claim,
charge, security interest, lease or other encumbrance (collectively,
"Encumbrances"), except for (a) assets disposed of since the date of the Company
Balance Sheet in the ordinary course of business and in a manner consistent with
past practices and not material in amount, (b) liabilities, obligations and
Encumbrances reflected in the Company Balance Sheet or otherwise in the Company
Financial Statements, (c) Permitted Encumbrances, and (d) liabilities,
obligations and Encumbrances set forth on Schedule 3.7(b) hereto.

            (b) Accounts Receivable. Schedule 3.15(b) sets forth an accurate and
complete list of the Company's accounts receivable as of the date hereof. All of
such receivables have arisen in the ordinary course of the Company's business
and to the knowledge of Seller are valid, collectible and payable in full in the
amounts shown on Schedule 3.15(b), net of the allowance for doubtful accounts
set forth on such Schedule, and subject to the Company's performance of any
related fulfillment obligation reflected on such Schedule. To the knowledge of
Seller, no account receivable is subject to any defense, counterclaim, set-off,
discount, dispute or condition of any nature, except as described in this
paragraph.

            (c) Condition. All materials, equipment and personal property owned
by the Company and used in its business are in good operating condition and
repair.

      3.16. Real Property. The Company does not own or have any interest in any
real property.

      3.17. Intellectual Property.

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            (a) Right to Intellectual Property. The Company owns, or has valid
and enforceable rights to use, all patents, trademarks, trade names, service
marks, copyrights, and any applications therefor, domain names, URLs,
technology, know-how, trade secrets, and tangible or intangible proprietary
information or material that are used in the business of the Company as
currently conducted or as currently proposed to be conducted by the Company (the
"Company Proprietary Rights"), free and clear of any and all Encumbrances.
Following the Closing, the Company will continue to own or have valid and
enforceable rights to use all Company Proprietary Rights necessary for the
lawful conduct of its business as currently conducted and as currently proposed
to be conducted, without any infringement or conflict with the rights of others.

            (b) List of Company Proprietary Rights. Set forth on Schedule
3.17(b) hereto is a complete list of all patents, trademarks, trade names,
service marks, registered copyrights, domain names, URLs and any applications
therefor, and tangible proprietary information included in the Company
Proprietary Rights, specifying, where applicable, the jurisdictions in which
each such Company Proprietary Right has been issued or registered or in which an
application for such issuance and registration has been filed, including the
respective registration or application numbers and the names of all registered
owners.

            (c) Royalties. The Company is not obligated to pay any royalties or
other compensation to any third party in respect of its ownership, use or
license of any of the Company Proprietary Rights.

            (d) Licenses. Set forth on Schedule 3.17(d) is a complete list of
all licenses, sublicenses and other agreements as to which the Company is a
party and pursuant to which the Company or any other person is authorized to use
any Company Proprietary Right, and includes (i) the date and term thereof, (ii)
the identity of all parties thereto, and (iii) a description of the nature and
subject matter thereof. True and correct copies of all such licenses,
sublicenses and agreements have been provided to Buyer.

            (e) Protection of Company Proprietary Rights. The Company has at all
times diligently protected its rights in the Company Proprietary Rights and has
maintained the confidentiality of its trade secrets and other confidential
Company Proprietary Rights, and there have been no acts or omissions by the
Company, the result of which would be to compromise the rights of the Company to
apply for or enforce appropriate legal protection of such Company Proprietary
Rights. Without limiting the generality of the foregoing, the Publications
contain copyright notices sufficient to maintain copyright protection on the
copyrighted portions of the Company Proprietary Rights.

            (f) No Conflict. No claims with respect to the Company Proprietary
Rights have been asserted or, to the knowledge of Seller, are threatened by any
person nor are there any valid grounds for any bona fide claims (i) to the
effect that the Publications or any portion thereof, or the Company's conduct of
its business, infringe on any copyright, patent, trademark, service mark, domain
name, URL or trade secret, (ii) against the use by the Company of any
trademarks, service marks, trade names, domain names, URLs, trade secrets,
copyrights, patents, technology or know-how and applications used in the
Company's business as currently conducted or as proposed to be conducted by the
Company, or (iii) challenging the ownership by

                                     - 12 -
<PAGE>

the Company, validity or effectiveness of any of the Company Proprietary Rights.
To the knowledge of the Company and Seller, there is no unauthorized use,
infringement or misappropriation of any of the Company Proprietary Rights by any
third party, including any employee or former employee of the Company. No
Company Proprietary Right or product of the Company is subject to any
outstanding decree, order, judgment, or stipulation restricting in any manner
the use or exploitation thereof by the Company.

            (g) Employee Agreements. To the knowledge of Seller, no employee,
officer or consultant of the Company is in material violation of any term of any
employment or consulting contract, proprietary information agreement,
non-competition agreement, or any other contract or agreement relating to the
relationship of any such employee, officer or consultant with the Company or any
previous employer.

            (h) Certain Software. The software necessary for the layout and
pagination of all Company directories is licensed to the Company and available
on the Company's computer system.

      3.18. Statement of Publication. The Company has heretofore delivered to
Buyer a statement of publication for each issue of the Publications. Each such
statement of publication is complete and correct in all material respects.

      3.19. Mailing Lists. A complete and correct list of all mailing lists used
in connection with the Publications, other than those obtained from third
parties, is available on the Blackbook's computer system. The Company's use of
such mailing lists has not infringed or conflicted with any copyright, trademark
or trade secrecy, privacy or other right of any third party.

      3.20. Agreements, Contracts and Commitments.

            (a) Company Agreements. Except as set forth on Schedule 3.20(a)
hereto, the Company is not a party to:

                  (i) any bonus, deferred compensation, pension, severance,
      profit-sharing, stock option, employee stock purchase or retirement plan,
      contract or arrangement or other Company Plan;

                  (ii) any employment agreement with any present employee,
      officer, director or consultant (or former employees, officers, directors
      and consultants to the extent there remain at the date hereof obligations
      to be performed by the Company);

                  (iii) any agreement for personal services or employment with a
      term of service or employment specified in the agreement or any agreement
      for personal services or employment in which the Company has agreed on the
      termination of such agreement to make any payments greater than those that
      would otherwise be imposed by law;

                  (iv) any agreement of guarantee or indemnification;

                                     - 13 -
<PAGE>

                  (v) any agreement or commitment containing a covenant limiting
      or purporting to limit the freedom of the Company (a) to compete with any
      person in any geographic area, (b) to engage in any line of business, or
      (c) to hire or solicit for employment any individual;

                  (vi) any Company Lease or personal property lease under which
      the Company is lessee;

                  (vii) any joint venture or profit-sharing agreement;

                  (viii) except for trade indebtedness incurred in the ordinary
      course of business and reflected on the Company Balance Sheet, any loan or
      credit agreements providing for the extension of credit to the Company or
      any instrument evidencing or related in any way to indebtedness incurred
      in the acquisition of companies or other entities or indebtedness for
      borrowed money by way of direct loan, sale of debt securities, purchase
      money obligation, conditional sale, lease, guarantee, or otherwise that
      individually is in the amount of $2,500 or more;

                  (ix) any license or royalty agreement other than those
      disclosed on Schedule 3.17(d);

                  (x) any agreement or arrangement with any third party to
      develop any intellectual property or other asset expected to be used or
      currently used or useful in the Company's business;

                  (xi) any agreement or arrangement for the Company to develop
      any intellectual property or other asset for any third party;

                  (xii) any agreement or arrangement providing for the payment
      of any commission based on sales;

                  (xiii) any agreement for the sale or license by or to the
      Company of materials, products, services or supplies that involves future
      payments to the Company of more than $2,500;

                  (xiv) any agreement for the purchase by the Company of any
      materials, equipment, services, or supplies, that either (A) involves a
      binding commitment by the Company to make future payments totaling in
      excess of $2,500 and cannot be terminated by it without penalty upon less
      than one month's notice or (B) was not entered into in the ordinary course
      of business;

                  (xv) any agreement or commitment for the acquisition,
      construction or sale of fixed assets owned or to be owned by the Company
      that involves future payments by it totaling more than $2,500;

                  (xvi) any agreement or commitment to which present or former
      directors or officers (or their Affiliates or members of their immediate
      families) or Affiliates (or directors or officers of an Affiliate) are
      also parties;

                                     - 14 -
<PAGE>

                  (xvii) any agreement not described above (ignoring, solely for
      this purpose, any dollar amount thresholds in those descriptions)
      involving the payment or receipt by the Company of more than $2,500; or

                  (xviii) any agreement not described above that was not made in
      the ordinary course of business and that is material to the financial
      condition, business, operations, assets, results of operations or
      prospects of the Company.

            (b) Validity. Except as set forth on Schedule 3.20(b), all
contracts, leases, instruments, licenses and other agreements or documents
described on Schedule 3.17(d) or Schedule 3.20(a) (the "Company Contracts") are
valid, enforceable and in full force and effect and the Company has not, nor, to
the knowledge of Seller, has any other party thereto, breached any provision of,
or defaulted under the terms of any such contract, lease, instrument, license or
other agreement or document. The execution and delivery of this Agreement by the
Company, and the consummation of the transactions contemplated hereby, will not
cause the Company to be in violation or default under any Company Contract nor
entitle any other party thereto to terminate or modify any Company Contract.
Schedule 3.20(b) identifies each Company Contract that requires the consent of a
third party in connection with the transactions contemplated hereby.

      3.21. Banking Relationships. Schedule 3.21 hereto shows the names and
locations of all banks and trust companies in which the Company has accounts,
lines of credit or safety deposit boxes and, with respect to each account, line
of credit or safety deposit box, the names of all persons authorized to draw
thereon or to have access thereto.

      3.22. Suppliers, Distributors and Sales Agents. The relationships of the
Company with its suppliers, distributors and sales agents are satisfactory
commercial working relationships. Since the date of the Company Balance Sheet,
no material supplier, distributor or sales agent of the Company has canceled or
otherwise modified its relationship with the Company and, to the knowledge of
Seller, no supplier, distributor or sales agent of the Company has any intention
to do so, and, to the knowledge of Seller, the consummation of the transactions
contemplated hereby will not adversely affect such relationships.

      3.23. Certain Transactions. The Company is not indebted, directly or
indirectly, to any of its officers or directors or to their respective spouses
or children in any amount whatsoever, except for indebtedness to employees for
accrued salaries and bonuses not yet payable or for reasonable business expenses
actually incurred. None of said officers or directors, or any members of their
immediate families, are indebted to the Company or, to the knowledge of Seller,
have any direct or indirect ownership interest in any firm or business entity
which is affiliated with or with which the Company has a business relationship,
or any firm or corporation which competes with the Publications; provided, that
ownership of 1% or less of the outstanding voting securities of a publicly
traded corporation shall not constitute such a direct or indirect interest. To
the knowledge of Seller, no officer or director, or any member of his or her
immediate family, is, directly or indirectly, interested in any material
contract with the Company.

      3.24. Acquired Business. Upon consummation of the Acquisition, the Buyer
will acquire the entire business of the Company as heretofore conducted and as
proposed to be

                                     - 15 -
<PAGE>

conducted, and the Buyer will then own and have the right to use all tangible
and intangible assets and properties heretofore used or necessary for the normal
continued conduct of the Company's business as now conducted by it and as
proposed to be conducted.

      3.25. Full Disclosure. Neither this Agreement nor any written statement,
report or other document furnished or to be furnished by the Company or Seller
pursuant to this Agreement or in connection with the transactions contemplated
hereby contains, or will contain, any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained herein
or therein not false or misleading. There is no fact known to Seller which has
not been disclosed to Buyer in writing that materially adversely affects, or so
far as Seller can now foresee will materially adversely affect, (a) the ability
of Seller to perform this Agreement or (b) the financial condition, business,
operations, assets, properties, results of operations or prospects of the
Company.

      3.26. Financial Projections. The financial projections that Seller has
provided to Buyer were prepared in good faith using assumptions that Seller
believes to be reasonable. Notwithstanding the foregoing, however, Seller makes
no representation or warranty regarding the actual future financial performance
of the Company.

                                   Article 4
               Additional Representations And Warranties of Seller

      Seller further represents and warrants to Buyer as follows:

      4.1. Title to Stock. Seller has good and marketable title to the Stock,
free and clear of all Encumbrances.

      4.2. Corporate Status of Seller. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York,
with the requisite corporate power to own, operate and lease its properties and
to carry on its business as now being conducted.

      4.3. Authority for Agreement; Noncontravention.

            (a) Authority. Seller has the corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
board of directors of Seller and no other corporate proceedings on the part of
Seller are necessary to authorize the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby. This Agreement and
the other agreements contemplated hereby to be signed by Seller have been duly
executed and delivered by Seller and constitute valid and binding obligations of
Seller enforceable against Seller in accordance with their respective terms,
subject to the qualifications that enforcement of the rights and remedies
created hereby and thereby are subject to (i) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and other laws of general
application affecting the rights and remedies of creditors and (ii) general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).

                                     - 16 -
<PAGE>

            (b) No Conflict. Neither the execution and delivery of this
Agreement by Seller, nor the performance by Seller of its obligations hereunder,
nor the consummation by Seller of the transactions contemplated hereby will
conflict with or result in a violation of (a) any provision of the certificate
of incorporation or by-laws of Seller, or (b) any note, mortgage, indenture,
lease, instrument or other agreement, Permit, concession, grant, franchise,
license, judgment, order, decree, statute, ordinance, rule or regulation to
which Seller is a party or by which or any of its assets or properties is bound
or which is applicable to Seller or any of its assets or properties. No
authorization, consent or approval of, or filing with or notice to, any
Governmental Entity is necessary for the execution and delivery of this
Agreement by Seller or the consummation by Seller of the transactions
contemplated hereby.

      4.4. Company Proprietary Rights. Seller does not own or claim to have any
interest in any of the Company's Proprietary Rights.

                                   Article 5
                     Representations and Warranties of Buyer

      Buyer represents and warrants to Seller as follows:

      5.1. Corporate Status of Buyer. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the state of Delaware,
with the requisite corporate power to own, operate and lease its properties and
to carry on its business as now being conducted.

      5.2. Authority for Agreement; Noncontravention.

            (a) Authority. Buyer has the corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
board of directors of Buyer and no other corporate proceedings on the part of
Buyer are necessary to authorize the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby. This Agreement and
the other agreements contemplated hereby to be signed by Buyer have been duly
executed and delivered by Buyer and constitute valid and binding obligations of
Buyer enforceable against Buyer in accordance with their respective terms,
subject to the qualifications that enforcement of the rights and remedies
created hereby and thereby are subject to (i) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and other laws of general
application affecting the rights and remedies of creditors and (ii) general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).

            (b) No Conflict. Neither the execution and delivery of this
Agreement by Buyer, nor the performance by Buyer of its obligations hereunder,
nor the consummation by Buyer of the transactions contemplated hereby will
conflict with or result in a violation of (a) any provision of the certificate
of incorporation or by-laws of Buyer, or (b) any note, mortgage, indenture,
lease, instrument or other agreement, Permit, concession, grant, franchise,
license, judgment, order, decree, statute, ordinance, rule or regulation to
which Buyer is a party or by which or any of its assets or properties is bound
or which is applicable to Buyer or any of its

                                     - 17 -
<PAGE>

assets or properties. No authorization, consent or approval of, or filing with
or notice to, any Governmental Entity is necessary for the execution and
delivery of this Agreement by Buyer or the consummation by Buyer of the
transactions contemplated hereby.

      5.3. No Broker's or Finder's Fees. Buyer has not paid or become obligated
to pay any fee or commission to any broker, finder, financial advisor or
intermediary in connection with the transactions contemplated by this Agreement.

      5.4. Availability of Funds. Buyer currently has access to sufficient funds
in cash or cash equivalents and will at the Closing have sufficient immediately
available funds, in cash, to pay the Purchase Price and to pay any other amounts
payable pursuant to this Agreement.

                                   Article 6
                              Additional Agreements

      6.1. Expenses. Seller shall be responsible for all costs and expenses
(including fees and disbursements of consultants, investment bankers, and other
financial advisors, brokers and finders, counsel and accountants) incurred by it
or the Company in connection with the matters contemplated hereby. Buyer shall
be responsible for all costs and expenses (including fees and disbursements of
consultants, investment bankers, and other financial advisors, brokers and
finders, counsel and accountants) incurred by it in connection with the matters
contemplated hereby.

      6.2. Non-Disclosure. Seller shall hold in strict confidence, and not
disclose to any third party or use except for the benefit of the Company or
Buyer, any and all confidential and proprietary information of the Company and
Buyer.

      6.3. Non-Competition; Non-Solicitation. During the period commencing on
the Closing and ending five years after the Closing, neither Seller nor any of
its Affiliates shall directly or indirectly, whether as principal, agent,
stockholder, co-venturer, owner, manager, operator or partner, (a) enter into or
engage, compete with or interfere with the business of the Company (as conducted
as of the Closing) or publish any publication that competes with the
Publications (as they exist as of the Closing); provided that this Section 6.3
shall not restrict Seller or its Affiliates from holding a passive equity, debt
or revenue interest of 1% or less in any other person or entity that engages in
any of the foregoing activities so long as neither Seller nor its Affiliates has
any active participation in the business of such person; or (b) solicit or
attempt to divert or take away from the Company the business, patronage or
services of any persons or entities who are customers, suppliers or sales agents
of the Company; or (c) solicit, induce, attempt to hire, or hire any employee or
consultant of Buyer or the Company (other than a person whose employment by or
services to Buyer or the Company has been terminated for a period of at least
twelve months), or assist in such hiring by any other person or business entity
or encourage any such employee or consultant to terminate his or her employment
with or retention by Buyer or the Company. Seller agrees and acknowledges that
the potential harm to Buyer of its non-enforcement of this Section 6.3 outweighs
any harm to Buyer of Seller's enforcement hereof by injunction or otherwise.
Seller expressly acknowledges and agrees that each and every restraint imposed
by this Agreement is reasonable with respect to subject matter, time period and
geographical area. If, at the time of enforcement of any provision of this
Section 6.3, a court

                                     - 18 -
<PAGE>

shall hold that the duration, scope or area restrictions stated herein are
unreasonable under the circumstances then existing, Buyer and Seller hereby
agree that the maximum duration, scope or area reasonable under such
circumstances shall be substituted for the stated duration, scope or area and
that the court shall be allowed to revise the restrictions contained herein to
cover the maximum period, scope and area permitted by law. Buyer and Seller also
hereby agree that money damages would not be an adequate remedy for any breach
of this Section 6.3 or Section 6.4. Therefore, in the event of a breach or
threatened breach of this Section 6.3 or Section 6.4, the non-breaching party or
its successors or assigns may, in addition to other rights and remedies existing
in their favor, apply to any court of competent jurisdiction for specific
performance and/or injunctive or other relief in order to enforce or prevent any
violations of the provisions hereof (without posting a bond or other security).

      6.4. Trade Names of the Company. Seller and its Affiliates will not, at
any time after the Closing, individually, jointly or in association with others
use as a trade name, a corporate name or name of another business entity, the
names of the Publications or any name which is substantially similar to any such
name for any purpose whatsoever. Seller and its Affiliates shall not question or
contest the right of the Company to continue to do business under its present
corporate name or to continue to use the names of any of the Publications.

      6.5. Resignations; Bank Accounts. Each member of the board of directors of
the Company and each officer of the Company shall resign as a director and
officer of the Company, effective as of the Closing. Seller, and any other bank
signatories shall take such action as may be necessary at or after the Closing
to revoke their signing authority on all Company bank accounts and to substitute
such individuals as new signatories as may be designated by the Buyer.

      6.6. Right of Access. Seller shall provide to Buyer and its accountants,
counsel, and other representatives full access to all of the properties, books,
contracts, commitments and records prior to and after the Closing so as to
facilitate the acquisition of the Company and the operation of the Company
post-Closing. During the period prior the Closing, Seller and Company shall use
reasonable efforts to furnish promptly to buyer all other information concerning
the Company ands its business properties, and personnel as Buyer may reasonable
request.

      6.7. Public Announcements. Except for announcements or filings required by
law or Nasdaq rule, without the consent of the other party, each party will not
issue or permit any of its subsidiaries, directors, officers, employees or
agents to issue any press release or other information to the press or any third
party with respect to this Agreement or the transactions contemplated hereby.

      6.8. Further Assurances. If at any time after the Closing any further
assignments, conveyances, transfers or assurances in law, or any other actions
or things, may be reasonably necessary to transfer, assign, convey or deliver
to, or to vest, perfect or confirm in (a) the Company, any right, title or
interest of Seller in or to any assets or properties sold to Buyer hereunder, or
(b) Buyer any right, title or interest of Seller, of record or otherwise, in or
to the Stock then, in either such case, Seller, at its sole cost and expense,
shall use its commercially reasonable efforts to promptly execute, deliver and
record, or cause to be executed, delivered and

                                     - 19 -
<PAGE>

recorded, any and all such further instruments of assignment, conveyance and
transfer and take, or cause to be taken, all actions and do, or cause to be
done, all things, as may be reasonably requested by Buyer to transfer, assign,
convey or deliver the same to, or to vest, perfect or confirm the same in, the
Company, or Buyer, as applicable.

      6.9. Interim Performance. Between the date of this Agreement and the
Closing, Seller shall use commercially reasonable efforts to preserve intact the
Company's business organization, employees, operations, goodwill, customers,
sales agents and others with whom it has business relationships, and Seller
shall cause the Company to carry on its business in the ordinary course and in
substantially the same manner as currently being conducted. Without limiting the
foregoing, Seller shall cause the Company to pay all invoices in a manner
consistent with past practices and shall cause the Company not to, without the
prior written consent of Buyer:

            (a) enter into any contract or commitment or take any other action
that is not in the ordinary course of business or that, at the time the Company
enters into such contract or commitment or takes such action, may reasonably be
expected to have an adverse impact on the transactions contemplated by this
Agreement;

            (b) change the capital structure or stock ownership of the Company
in any way, including, without limitation, issuing or reacquiring any of its
capital stock or any options, warrants or other securities exercisable or
exchangeable for, or convertible into, shares of its capital stock or
accelerating the exercise period of any such option, warrant or other security;

            (c) pay any dividend or distribution;

            (d) enter into financial arrangements for the benefit of its
shareholders except in the ordinary course of business consistent with past
practice;

            (e) dispose of any significant part of its assets;

            (f) increase the compensation of or pay any bonus to any officer,
director or employee of the Company;

            (g) fail to pay or delay the payment of any salary, employee
benefit, account payable or other liability other than in the ordinary course of
business;

            (h) make any payment in respect of the loan from Seller to the
Company; or

            (i) agree, whether in writing or otherwise, to take any action
described in paragraphs (a) through (h) above.

      6.10. Satisfaction of Closing Conditions. Seller shall promptly seek all
necessary approvals, consents and authorizations of third parties required for
the consummation of the transactions contemplated hereby. Seller shall not take
any action, or permit the Company to take any action, that would, or is
reasonably likely to, result in any of Seller's representations and warranties
set forth in this Agreement being untrue or in any of the conditions to the
Closing

                                     - 20 -
<PAGE>

set forth herein not being satisfied or that could hinder or delay the
consummation of the transactions contemplated by this Agreement.

      6.11. Release. Effective upon the Closing, Seller and its Affiliates (the
"Seller Releasing Parties") hereby release, acquit and forever discharge the
Company from liability on or for any and all claims, demands, causes of action,
damages, costs, expenses, compensation, and all other liabilities of any kind or
nature whatsoever, direct or indirect, known or unknown, contingent or absolute,
which any Seller Releasing Party has had, now has, or may hereafter have for any
reason whatsoever, for or on account of, in consequence of, or arising out of
acts or omissions on or prior to the Closing by the Company and/or any of its
officers, directors or Affiliates, past or present, other than obligations under
the Agreement. Following the Closing, neither the Company, Buyer nor any
Affiliate of Buyer shall have any obligation to indemnify or hold harmless any
person who served as an officer or director of the Company or Seller prior to
the Closing in respect of any claim or action arising out of or related to such
service.

      6.12. Tax Matters. The following provisions shall govern the allocation of
responsibility as between Buyer and Seller for certain tax matters following the
Closing:

            (a) Tax Indemnification. Seller shall indemnify the Company, Buyer,
and each Buyer Affiliate and hold them harmless from and against, any loss,
claim, liability, expense, or other damage attributable to (i) all Taxes (or the
non-payment thereof) of the Company for all taxable periods ending on or before
the date of the Closing and the portion through the end of the date of the
Closing for any taxable period that includes (but does not end on) such date
(the "Pre-Closing Tax Period"), (ii) all Taxes of any member of an affiliated,
consolidated, combined or unitary group of which the Company (or any predecessor
of any of the foregoing) is or was a member on or prior to the date of the
Closing, including pursuant to Treasury Regulation ss.1.1502-6 or any analogous
or similar state, local, or foreign law or regulation, and (iii) any and all
Taxes of any person (other than the Company) imposed on the Company as a
transferee or successor, by contract or pursuant to any law, rule, or
regulation, which Taxes are imposed in connection with an event or transaction
occurring before the Closing.

            (b) Responsibility for Filing Tax Returns for Periods through
Closing Date. Seller shall include the income of the Company (including any
deferred items triggered into income by Reg. ss.1.1502-13 and any excess loss
account taken into income under Reg. ss.1.1502-19) on Seller's consolidated
federal income Tax Returns for all periods through the date of the Closing and
pay any federal income Taxes attributable to such income. For all taxable
periods ending on or before such date, Seller shall cause the Company to join in
Seller's consolidated federal income tax return and, in jurisdictions requiring
separate reporting from Seller, to file separate company state and local income
tax returns. All such Tax Returns shall be prepared and filed in a manner
consistent with prior practice, except as required by a change in applicable
law. Buyer shall have the right to review and comment on any such Tax Returns
prepared by Seller. Buyer shall cause the Company to furnish information to
Seller as reasonably requested by Seller to allow Seller to satisfy its
obligations under this section in accordance with past custom and practice. The
Company and Buyer shall consult and cooperate with Seller as to any elections to
be made on returns of the Company for periods ending on or before the date of
the Closing. Buyer shall cause the Company to file income Tax Returns, or shall
include the Company in its

                                     - 21 -
<PAGE>

combined or consolidated income tax returns, for all periods other than periods
ending on or before the date of the Closing.

            (c) Cooperation on Tax Matters.

                  (i) Buyer, the Company , and Seller shall cooperate fully, as
      and to the extent reasonably requested by the other party, in connection
      with the filing of Tax Returns pursuant to this Section 6.12 and any
      audit, litigation or other proceeding with respect to Taxes. Such
      cooperation shall include the retention and (upon the other party's
      request) the provision of records and information which are reasonably
      relevant to any such audit, litigation or other proceeding and making
      employees available on a mutually convenient basis to provide additional
      information and explanation of any material provided hereunder. The
      Company and Seller agree (A) to retain all books and records with respect
      to Tax matters pertinent to the Company relating to any taxable period
      beginning before the date of the Closing until the expiration of the
      statute of limitations (and, to the extent notified by Buyer or Seller,
      any extensions thereof) of the respective taxable periods, and to abide by
      all record retention agreements entered into with any taxing authority,
      and (B) to give the other party reasonable written notice prior to
      transferring, destroying or discarding any such books and records and, if
      the other party so requests, the Company or Seller, as the case may be,
      shall allow the other party to take possession of such books and records.

                  (ii) Buyer and Seller further agree, upon request, to use
      their best efforts to obtain any certificate or other document from any
      governmental authority or any other person as may be necessary to
      mitigate, reduce or eliminate any Tax that could be imposed (including,
      but not limited to, with respect to the transactions contemplated hereby).

                  (iii) Buyer and Seller further agree, upon request, to provide
      the other party with all information that either party may be required to
      report pursuant to Code ss.6043 and all treasury regulations promulgated
      thereunder.

            (d) Tax Sharing Agreements. All Tax sharing agreements or similar
agreements with respect to or involving the Company shall be terminated as of
the date of the Closing and, after such date, the Company shall not be bound
thereby or have any liability thereunder.

            (e) Certain Taxes and Fees. All transfer, documentary, sales, use,
stamp, registration and other such Taxes, and all conveyance fees, recording
charges and other fees and charges (including any penalties and interest)
incurred in connection with consummation of the transactions contemplated by
this Agreement shall be paid by Seller when due, and Seller will, at its
expense, file all necessary Tax Returns and other documentation with respect to
all such Taxes, fees and charges, and, if required by applicable law, Buyer
will, and will cause its Affiliates to, join in the execution of any such Tax
Returns and other documentation.

                                     - 22 -
<PAGE>

      6.13. Payment of Printing and Distribution Costs. Buyer shall cause the
Company to pay when due the Company's outstanding unpaid Liabilities for
printing and distribution costs for the Illustration Guide and the AR 100 Guide
described in Section 7.2(l).

                                   Article 7
                              Conditions Precedent

      7.1. Conditions Precedent to the Obligations of Each Party. The
obligations of the parties hereto to effect the Acquisition shall be subject to
the fulfillment at or prior to the Closing of the following conditions:

            (a) No Injunction. No injunction or restraining or other order
issued by a court of competent jurisdiction that prohibits or materially
restricts the consummation of the Acquisition or the other transactions
contemplated hereby shall be in effect (each party agreeing to use all
reasonable efforts to have any injunction or other order immediately lifted),
and no action or proceeding shall have been commenced or threatened in writing
seeking any injunction or restraining or other order that seeks to prohibit,
restrain, invalidate or set aside consummation of the Acquisition or any of the
other transactions contemplated hereby.

            (b) Illegality. There shall not have been any action taken, and no
statute, rule or regulation shall have been enacted, by any state or federal
government agency that would prohibit or materially restrict the consummation of
the Acquisition or the other transactions contemplated hereby.

      7.2. Conditions Precedent to Obligation of Buyer to Effect the
Acquisition. The obligation of Buyer to effect the Acquisition shall be subject
to the fulfillment at or prior to the Closing of the following additional
conditions:

            (a) Representations and Warranties. The representations and
warranties of Seller contained in this Agreement shall be true and correct on
and as of the Closing, except for changes contemplated by this Agreement and
except for those representations and warranties which address matters only as of
a particular date (which shall remain true and correct as of such date), with
the same force and effect as if made on and as of the Closing; and Seller shall
have delivered to Buyer a certificate to that effect, dated the date of the
Closing and signed by an executive officer of Seller.

            (b) Agreements and Covenants. Seller shall have performed all of its
agreements and covenants set forth herein that are required to be performed at
or prior to the Closing; and Seller shall have delivered to Buyer a certificate
to that effect, dated the date of the Closing and signed by an executive officer
of Seller.

            (c) Diligence. Buyer shall have received all information concerning
the Company and its subsidiaries and respective business, properties and
personnel as Buyer may have reasonably requested on or before the Closing, and
Buyer shall be fully satisfied with the results of its investigation regarding
the Company.

            (d) Legal Opinion. Buyer shall have received an opinion from Morse,
Zelnick, Rose & Lander, counsel to the Company, in substantially the form of
Exhibit A hereto.

                                     - 23 -
<PAGE>

            (e) Escrow Agreement. Seller and the Escrow Agent shall have
executed the Escrow Agreement (as defined in Section 8.5).

            (f) Transition Services Agreement. Seller and the Company shall have
executed an agreement providing for the delivery by Seller to the Company of
certain transition services, in form and substance acceptable to Buyer.

            (g) Closing Documents. The Company and Seller shall have delivered
to Buyer such closing documents as Buyer shall reasonably request (other than
additional opinions of counsel).

            (h) Resignations. Buyer shall have received the written resignations
of the directors of the Company as contemplated by this Agreement.

            (i) Third Party Consents. Any and all third party consents or
approvals required from third parties relating to contracts, agreements,
licenses, leases, and other instruments to the Company shall have been obtained
by the Company and shall be effective and shall not have been suspended,
revoked, or stayed by action of any such third party.

            (j) Employee Arrangements. Ted Rubin and Magi Lipson shall have each
entered into an employment arrangement with the Company on terms and conditions
satisfactory to Buyer.

            (k) Sales Agency Agreement. Seller shall have provided to Buyer a
fully executed copy of the Sales Agency Agreement among the Company, Andreas
Panagopoulos and Advertising Media Consultants, Inc., and the parties to such
agreement shall have entered into an amendment thereto increasing the notice
required for termination of such agreement from 5 days to 60 days.

            (l) Liabilities of the Company. The Company shall have paid the
printing and distribution costs for the Illustration Guide budgeted for payment
in August, in the amount of approximately $70,000. In addition, the Company's
outstanding unpaid Liabilities for printing and distribution costs for the
Illustration Guide and the AR 100 Guide shall not exceed $140,000 in the
aggregate. Seller shall have contributed to the capital of the Company all
inter-company Liabilities owed by the Company to Seller through the date of the
Closing so that the Company shall have no further obligation with respect
thereto.

      7.3. Conditions to Obligations of Seller to Effect the Acquisition. The
obligation of Seller to effect the Acquisition shall be subject to the
fulfillment at or prior to the Closing of the following additional conditions:

            (a) Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement shall be true and correct on and
as of the Closing, except for changes contemplated by this Agreement and except
for those representations and warranties which address matters only as of a
particular date (which shall remain true and correct as of such date), with the
same force and effect as if made on and as of the Closing; and Buyer shall have
delivered to Seller a certificate to that effect, dated the date of the Closing
and signed by its President or Chief Executive Officer.

                                     - 24 -
<PAGE>

            (b) Agreements and Covenants. Buyer shall have performed all of its
agreements and covenants set forth herein that are required to be performed at
or prior to the Closing; and Buyer shall have delivered to Seller a certificate
to that effect, dated the date of the Closing and signed by its President or
Chief Executive Officer.

            (c) Escrow Agreement. Buyer and Escrow Agent shall have executed the
Escrow Agreement (as defined in Section 8.5).

                                   Article 8
                  Survival of Representations; Indemnification

      8.1. Survival of Representations. The representations, warranties,
covenants and agreements contained herein, will survive the Closing and continue
in full force and effect for a period of one year after the Closing; provided
however that (a) the representations and warranties in Section 3.10 and the
covenants in Section 6.12 shall survive until expiration of the statute of
limitations period, (b) the representations and warranties in Sections 3.2 and
4.1 shall survive indefinitely and (c) the covenants of the parties set forth in
Sections 6.2, 6.3, 6.4, 6.8 and 6.11 shall survive indefinitely. Notwithstanding
the foregoing, any representation, warranty, covenant or agreement that would
otherwise terminate will continue to survive if a claim shall have been timely
given in good faith based on facts reasonably expected to establish a valid
claim under this Article 8 on or prior to such termination date, until the
related claim for indemnification has been satisfied or otherwise resolved as
provided in Article 8.

      8.2. Indemnification. Seller hereby agrees to indemnify, defend and hold
harmless Buyer and its respective Affiliates, officers, directors, employees,
representatives and agents (the "Indemnified Parties") from and against any and
all claims, costs, losses, expenses, liabilities, taxes, fines, penalties or
other damages, including, without limitation, interest, penalties and reasonable
attorneys' fees and disbursements (collectively "Damages") by reason of or
otherwise arising out of:

            (a) any breach of, or inaccuracy in, any representation or warranty
contained in Article 3 or Article 4 or otherwise made by Seller in this
Agreement, including the Schedules hereto or any certificates delivered by the
Company or Seller pursuant to this Agreement, in each case as each such
representation or warranty would read if all qualifications as to materiality
were deleted therefrom;

            (b) any breach or failure in performance by Seller of any covenant,
agreement or obligation of Seller contained in this Agreement; or

            (c) the litigation matters described on Exhibit B, and any other
claim, action or proceeding based upon or related to the facts that are the
subject matter of such litigation matters.

The amounts for which the Indemnified Parties may seek indemnification under
this Section 8.2 shall extend to, and as used herein the term "Damages" shall
include, reasonable attorneys' fees and disbursements, reasonable accountants'
fees, costs of litigation and other expenses incurred by them in the defense of
any claim asserted against them and any amounts paid in settlement or compromise
of any claim asserted against them to the extent that the claim asserted is or
would

                                     - 25 -
<PAGE>

have been subject to the indemnification provisions hereof. Any payment of
indemnification required to be made pursuant to this Section 8.2 will be made
out of any of the Indemnification Escrow Amount then held by the Escrow Agent.
To the extent that the amount of such payment exceeds the Indemnification Escrow
Amount, the balance of such payment shall be made by Seller, provided, however,
that the aggregate liability of Seller for Damages hereunder shall not exceed
the Purchase Price.

      8.3. Indemnification Escrow - Claims. If Buyer reasonably believes that it
is entitled to obtain recovery for Damages from the Indemnification Escrow
Amount, Buyer shall submit a written notice of such claim to Seller and the
Escrow Agent (the "Claim Notice"). The Claim Notice shall describe the material
facts pertaining to the claim and the amount of the Damages or, if such amount
is not ascertainable at the time such Claim Notice is delivered, a reasonable
estimate of the amount of the Damages. If Seller does not submit a good faith
objection to the claim within 30 days after the receipt of the Claim Notice (an
"Objection Notice"), the Escrow Agent shall be authorized to release the amount
so claimed from escrow and deliver those funds to Buyer and, to the extent the
amount so claimed exceeds the Indemnification Escrow Amount, Seller shall pay
such excess within 10 days. If Seller submits an Objection Notice within the
time specified above, the amount subject to the claim shall be held in escrow
until such time as Buyer and Seller agree that the funds may be released from
escrow or there is a judicial determination that such funds shall be released,
in which case the funds shall be released from escrow in accordance with such
agreement or determination. Buyer agrees that it shall submit no claims for
recovery of Damages unless the aggregate amount of such claims exceeds $10,000.

      8.4. Rubin Escrow - Claim. If Executive resigns his employment with the
Company for any reason or is dismissed by the Company for Cause, in each case on
or before the date that is twelve (12) months from the Closing, Buyer shall
submit a written notice of such fact to Seller and the Escrow Agent (the "Rubin
Claim Notice"). The Rubin Claim Notice shall describe the material facts
pertaining to Executive's termination of employment with the Company. If Seller
does not submit a good faith objection to the claim within 30 days after the
receipt of the Claim Notice (a "Rubin Objection Notice"), the Escrow Agent shall
be authorized immediately to release the entire Rubin Escrow Amount from escrow
and deliver those funds to Buyer. If Seller submits a Rubin Objection Notice
within the time specified above, the Rubin Indemnification Amount shall be held
in escrow until such time as Buyer and Seller agree that the funds may be
released from escrow or there is a judicial determination that such funds shall
be released, in which case the funds shall be released from escrow in accordance
with such agreement or determination.

      8.5. Release of Funds from Escrow. Except to the extent that some or all
of the funds in escrow are the subject of a pending dispute and are to be
retained in escrow pursuant to Section 8.3 or Section 8.4, all funds held in
escrow shall be released and delivered to Seller twelve (12) months following
the Closing.

      8.6. Execution of Escrow Agreement - Instructions. Buyer and Seller agree
to execute such form of escrow agreement setting forth the rights and duties of
the Escrow Agent as the Escrow Agent shall reasonably request (the "Escrow
Agreement"), provided that such agreement shall not be inconsistent with the
terms and conditions of this Agreement. Each party agrees to execute such
instructions as are necessary or as the Escrow Agent requests to allow the

                                     - 26 -
<PAGE>

Escrow Agent to perform its duties and to carry out the terms of the Escrow
Agreement and this Agreement. Buyer shall be responsible for paying the fees
charged by the Escrow Agent for the performance of the Escrow Agent's services.

                                   Article 9
                       Termination; Effect of Termination

      9.1. Termination. This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned:

            (a) at any time before the Closing, by mutual written agreement of
Seller and Buyer;

            (b) at any time before the Closing without liability to the
terminating party, by Seller or Buyer, in the event that any order or law
becomes effective restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement upon notification of the non-terminating party by the terminating
party;

            (c) at any time before the Closing, by Buyer in the event of a
material breach of this Agreement by Seller if Seller fails to cure such breach
within fifteen (15) days following notification thereof by Buyer; or

            (d) at any time after September 30, 2004, without liability to the
terminating party, by Seller or Buyer upon notification of the non-terminating
party by the terminating party if the Closing shall not have occurred on or
before such date and such failure to consummate is not caused by a breach of
this Agreement by the terminating party.

      9.2. Effect of Termination. If this Agreement is validly terminated
pursuant to Section 9.1, all further obligations of the parties under this
Agreement will terminate, and there will be no liability or obligation on the
part of Seller or Buyer (or any of their respective officers, directors,
employees, agents or other representatives or Affiliates), except for claims of
breach of this Agreement arising under this Agreement prior to termination and
for the provisions of Articles 9 and 10, which shall survive the termination
hereof. The termination of this Agreement shall not be deemed an exclusive
remedy available to a party for breach of this Agreement.

                                   Article 10
                                  Miscellaneous

      10.1. Fees and Expenses. All costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such costs and expenses, except as specifically provided to
the contrary in this Agreement. Notwithstanding the foregoing, all such costs
and expenses incurred by the Company, including any bonus or other compensation
payable to officers, directors, employees or consultants of the Company in
respect of the transactions contemplated hereby, shall be paid by Seller.

                                     - 27 -
<PAGE>

      10.2. Amendments and Supplements. This Agreement may not be amended,
modified or supplemented by the parties hereto in any manner, except by an
instrument in writing signed by Buyer, the Company and Seller.

      10.3. Waiver. The terms and conditions of this Agreement may be waived
only by a written instrument signed by the party waiving compliance. The failure
of any party hereto to enforce at any time any of the provisions of this
Agreement shall in no way be construed to be a waiver of any such provision, nor
in any way to affect the validity of this Agreement or any part hereof or the
right of such party thereafter to enforce each and every such provision. No
waiver of any breach of or non-compliance with this Agreement shall be held to
be a waiver of any other or subsequent breach or non-compliance. The rights and
remedies herein provided are cumulative and are not exclusive of any rights or
remedies that any party may otherwise have at law or in equity.

      10.4. Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the substantive laws of the State of New York,
without regard to its principles of conflicts of laws.

      10.5. Notice. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered by hand, sent by facsimile
transmission with confirmation of transmission, or sent via a reputable
overnight courier service with confirmation of receipt requested, to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice), and shall be deemed given on the date on which
delivered by hand or otherwise on the date of confirmed receipt or transmission:

      To Buyer:

            Mr. Henry Guy
            Modern Holdings Incorporated
            280 Park Avenue, 23rd Floor, East
            New York, New York 10017
            Facsimile: (212) 702-4685

      With a copy to:

            Alexander H. Pyle, Esq.
            Foley Hoag LLP
            155 Seaport Boulevard
            Boston, Massachusetts 02210
            Facsimile: (617) 832-7000

      To the Company or Seller:

            Mr. Assaf Ran
            DAG Media, Inc.
            125-10 Queens Blvd. Suite 14
            Kew Gardens, New York 11415
            Facsimile: (718) 209-0809

                                     - 28 -
<PAGE>

      With a copy to:

            Stephen A. Zelnick, Esq.
            Morse, Zelnick, Rose & Lander
            405 Park Avenue
            Suite 1401
            New York, NY 10022
            Facsimile: (212) 838-9190

      10.6. Entire Agreement. This Agreement and the documents and instruments
and other agreements among the parties hereto as contemplated by or referred to
herein constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all other prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof. Each party hereto acknowledges that, in entering into
this Agreement and completing the transactions contemplated hereby, such party
is not relying on any representation, warranty, covenant or agreement not
expressly stated in this Agreement or in the agreements, certificates and other
documents among or between the parties contemplated by or referred to herein.

      10.7. Binding Effect; Assignability. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns. This Agreement is not intended to confer upon any person other than
the parties hereto (and such parties' and members' respective successors and
assigns) any rights or remedies hereunder, except as otherwise expressly
provided herein. Neither this Agreement nor any of the rights and obligations of
the parties hereunder shall be assigned or delegated, whether by operation of
law or otherwise, without the written consent of all parties hereto.

      10.8. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.

      10.9. Counterparts. This Agreement may be executed in one or more
counterparts, all of which together shall constitute one and the same agreement.

                                    * * * * *

                                     - 29 -
<PAGE>

      IN WITNESS WHEREOF, the parties have caused this Stock Purchase Agreement
to be executed as an agreement under seal as of the date first above written.

                                      MODERN HOLDINGS INCORPORATED

                                      By:
                                             -----------------------------------

                                      Name:
                                             -----------------------------------

                                      Title:
                                             -----------------------------------

                                      DAG MEDIA, INC.

                                      By:
                                             -----------------------------------

                                      Name:
                                             -----------------------------------

                                      Title:
                                             -----------------------------------

                                     - 30 -
<PAGE>

                                                                       Exhibit A

             Matters To Be Addressed in Opinion of Seller's Counsel

      1. Each of Seller and the Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York.

      2. Seller has all requisite corporate power to execute and deliver and to
perform its obligations under the Stock Purchase Agreement (the "Agreement") and
each of the other agreements, documents and instruments delivered by it in
connection with the consummation of the transactions contemplated by the
Agreement (together with the Agreement, the "Purchase Documents"), and to
consummate the transactions contemplated thereby.

      3. Seller has taken all corporate action necessary to authorize the
execution and delivery by it of, and the performance by it of its obligations
under, each of the Purchase Documents.

      4. Seller has duly executed and delivered each of the Purchase Documents
and each such Purchase Document constitutes the legal, valid and binding
obligation of Seller, enforceable against Seller in accordance with its terms.

      5. The authorized capital stock of the Company consists of 1,000 shares of
common stock, par value $0.001 per share, of which, immediately prior to the
Closing, 1,000 shares (the "Shares") are issued and outstanding and owned of
record by Seller. The Shares represent all of the issued and outstanding capital
stock of the Company and have been duly authorized and validly issued and are
fully paid and non-assessable. Upon the purchase of the Shares in accordance
with the terms and conditions of the Agreement and delivery to you of the
certificates therefor duly endorsed for transfer, assuming you do not have
notice of any adverse claim to the Shares, you will acquire the Shares free of
any adverse claim. To our knowledge, no options, warrants, agreements,
conversion rights or other rights to subscribe for, purchase or acquire any of
the capital stock of the Company are authorized or outstanding.

      6. To our knowledge, except as set forth in Schedule 3.9 to the Agreement,
there is no governmental action or proceeding and no litigation pending or
threatened against the Company or any of its properties or assets.

      7. Except as obtained and in effect at the Closing, no consent, approval,
authorization or order of, or the making of any declaration or filing with, any
governmental agency or body is required for the valid execution and delivery by
Seller of, or the performance by Seller of its obligations under, any of the
Purchase Documents.

      8. The execution and delivery by Seller of the Purchase Documents do not,
and the performance by Seller of the terms thereof will not, (i) violate the
terms of its Certificate of Incorporation or by-laws, each as currently in
effect, (ii) violate any federal or state law, statute or governmental
regulation or any judicial or administrative decree, judgment or order known to
us and applicable to Seller or the Company or (iii) result in any material
violation or material breach of, constitute a material default under, give rise
to any right of termination or acceleration (with or without notice or the lapse
of time or both) pursuant to, or otherwise require any notice under, any term or
provision of any Company Contract.

                                     - 31 -
<PAGE>

                                                                       Exhibit B

                               Litigation Matters

Charge of Discrimination of Tracy Russek against Seller and the Company, filed
with the U.S. Equal Employment Opportunity Commission (Case No. 160-2004-01987)

Case filed by Neopost Leasing, Inc. against the Company in the Civil Court of
the City of New York, County of Queens (Index No. 56913/04)

                                     - 32 -Exhibit 10.6

                          SECURITIES PURCHASE AGREEMENT

            THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of
February 27, 2004, is entered into by and between MOBILE REACH INTERNATIONAL,
INC., a Delaware corporation with headquarters located at 8000 Regency Parkway,
Suite 660, Cary, North Carolina 27511 (the "Company"), and each individual or
entity named on a signature page hereto (as used herein, each such signatory is
referred to as the "Lender") (each agreement with a Lender being deemed a
separate and independent agreement between the Company and such Lender, except
that each Lender acknowledges and consents to the rights granted to each other
Lender [each, an "Other Lender"] under such agreement and the Transaction
Agreements, as defined below, referred to therein).

                              W I T N E S S E T H:

            WHEREAS, the Company and the Lender are executing and delivering
this Agreement in accordance with and in reliance upon the exemption from
securities registration for offers and sales to accredited investors afforded,
inter alia, by Rule 506 under Regulation D ("Regulation D") as promulgated by
the United States Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "1933 Act"), and/or Section 4(2) and/or
Section 4(6) of the 1933 Act; and

            WHEREAS, the Lender wishes to lend to the Company, subject to and
upon the terms and conditions of this Agreement and acceptance of this Agreement
by the Company, the Lender's Purchase Price amount set forth on the Lender's
signature page hereto, the repayment of which will be represented by 5%
Convertible Debentures Series 04-01 of the Company (the "Convertible
Debentures"), which Convertible Debentures will be convertible into shares of
Common Stock, $.0001 par value per share, of the Company (the "Common Stock"),
upon the terms and subject to the conditions of such Convertible Debentures,
together with the Warrants (as defined below) exercisable for the purchase of
shares of Common Stock;

            NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:

            1. AGREEMENT TO PURCHASE; PURCHASE PRICE.

            a. Purchase. Subject to the terms and conditions of this Agreement
and the other Transaction Agreements, the undersigned hereby agrees to loan to
the Company the principal amount set forth on the Lender's signature page of
this Agreement (the "Purchase Price"), out of the aggregate amount being loaned
by all Lenders of $525,000 (the "Total Purchase Price"). The obligation to repay
the loan from the Lender shall be evidenced by the Company's issuance of one or
more Convertible Debentures to the Lender in such principal amount (the
Convertible Debentures issued to the Lender, the "Debentures"). Each Debenture
(i) shall provide for a conversion price (the

                                                                         2/19/04

<PAGE>

"Conversion Price"), which shall initially be the Fixed Conversion Price (as
defined below), which price may be adjusted from time to as provided in the
Debenture, and (ii) shall have the terms and conditions of, and be substantially
in the form attached hereto as, Annex I. The loan to be made by the Lender and
the issuance of the Debentures to the Lender are sometimes referred to herein
and in the other Transaction Agreements as the purchase and sale of the
Debentures and the Warrants (collectively, the "Purchased Securities").

            b. Certain Definitions. As used herein, each of the following terms
has the meaning set forth below, unless the context otherwise requires:

            "Affiliate" means, with respect to a specific Person referred to in
the relevant provision, another Person who or which controls or is controlled by
or is under common control with such specified Person.

            "Certificates" means the Debentures and the Warrants, each duly
executed by the Company and issued on the Closing Date in the name of the
Lender.

            "Closing Date" means the date of the closing of the purchase and
sale of the Purchased Securities, as provided herein.

            "Closing Price" shall mean the 4:00 P.M. closing bid price of the
Common Stock on the Principal Trading Market on the relevant Trading Day(s).

            "Company Control Person" means each director, executive officer,
promoter, and such other Persons as may currently be deemed in control of the
Company pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act
(as defined below).

            "Conversion Shares" means the shares of Common Stock issuable upon
conversion of the Debentures (including, if relevant, accrued interest on the
Debentures so converted).

            "Effective Date" means the date the Registration Statement covering
the Registrable Securities is declared effective by the SEC.

            "Escrow Agent" means the escrow agent identified in the Joint Escrow
Instructions attached hereto as Annex II (the "Joint Escrow Instructions").

            "Escrow Funds" means the Purchase Price delivered to the Escrow
Agent as contemplated by Sections 1(c) and (d) hereof.

            "Escrow Property" means the Escrow Funds and the Certificates
delivered to the Escrow Agent as contemplated by Section 1(c) hereof.

            "Exercise Price" means the exercise price per share of the Warrants,
as in effect at the relevant time.

                                       2                               2/19/04

<PAGE>

            "Finder" means vFinance Investments, Inc.

            "Fixed Conversion Price" means $0.16 (as that amount may be adjusted
as provided in the Debenture).

            "Holder" means the Person holding the relevant Securities at the
relevant time.

            "Last Audited Date" means July 31, 2003.

            "Lender Control Person" means each director, executive officer,
promoter, and such other Persons as may be deemed in control of the Lender
pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act.

            "Majority in Interest of the Holders" means one or more Holders
whose respective Purchase Prices aggregate more than fifty percent (50%) of the
Total Purchase Price.

            "Material Adverse Effect" means an event or combination of events,
which individually or in the aggregate, would reasonably be expected to (w)
adversely affect the legality, validity or enforceability of the Securities or
any of the Transaction Agreements, (x) have or result in a material adverse
effect on the results of operations, assets, or condition (financial or
otherwise) of the Company and its subsidiaries, taken as a whole, (y) adversely
impair the Company's ability to perform fully on a timely basis its material
obligations under any of the Transaction Agreements or the transactions
contemplated thereby, or (z) materially and adversely affect the value of the
rights granted to the Lender in the Transaction Agreements.

            "Person" means any living person or any entity, such as, but not
necessarily limited to, a corporation, partnership or trust.

            "Principal Trading Market" means the Over the Counter Bulletin Board
or such other market on which the Common Stock is principally traded at the
relevant time, but shall not include the "pink sheets."

            "Registrable Securities" shall have the meaning ascribed to it in
the Registration Rights Agreement.

            "Registration Rights Agreement" means the Registration Rights
Agreement in the form annexed hereto as Annex IV as executed by the Lender and
the Company simultaneously with the execution of this Agreement.

            "Registration Statement" means an effective registration statement
covering the Registrable Securities.

            "Reporting Service" means Bloomberg LP or if that service is not
then reporting the relevant information regarding the Common Stock, a comparable
reporting service of national

                                       3                               2/19/04

<PAGE>

reputation selected by a Majority in Interest of the Holders and reasonably
acceptable to the Company.

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

            "Shares" means the shares of Common Stock representing any or all of
the Conversion Shares and the Warrant Shares or any of the other Registrable
Securities.

            "State of Incorporation" means Delaware.

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

            "Transaction Agreements" means this Agreement, the Debenture, the
Registration Rights Agreement, the Joint Escrow Instructions, and the Warrants,
and includes all ancillary documents referred to in those agreements.

            "Transfer Agent" means, at any time, the transfer agent for the
Company's Common Stock.

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

            c. Form of Payment; Delivery of Certificates.

            (i) The Lender shall pay the Purchase Price by delivering
immediately available good funds in United States Dollars to the Escrow Agent no
later than the date prior to the Closing Date.

            (ii) No later than the Closing Date, but in any event promptly
following payment by one or more Lenders to the Escrow Agent of the Total
Purchase Price, the Company shall deliver the Certificates to the Escrow Agent.

            (iii) By signing this Agreement, each of the Lender and the Company,
subject to acceptance by the Escrow Agent, agrees to all of the terms and
conditions of, and becomes a party to, the Joint Escrow Instructions, all of the
provisions of which are incorporated herein by this reference as if set forth in
full.

            d. Method of Payment. Payment into escrow of the Purchase Price
shall be made by wire transfer of funds to:

                  Bank of New York
                  350 Fifth Avenue
                  New York, New York 10001

                                       4                               2/19/04

<PAGE>

                  ABA# 021000018
                  For credit to the account of Krieger & Prager LLP
                  Account No.:  [To be provided to the Lender by
                                Krieger & Prager LLP]
                  Re:  Mobile Reach 04 Transaction/[Name of Lender]

            2. LENDER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.

            The Lender represents and warrants to, and covenants and agrees
with, the Company as follows:

            a. Without limiting Lender's right to sell the Securities pursuant
to an effective registration statement or otherwise in compliance with the 1933
Act, the Lender is purchasing the Securities for its own account for investment
only and not with a view towards the public sale or distribution thereof and not
with a view to or for sale in connection with any distribution thereof. The
Lender currently has no arrangement to sell any of the Convertible Debentures,
Warrants, Conversion Shares or Warrant Shares at any time to or through any
Person.

            b. The Lender is (i) an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act by
reason of Rule 501(a)(3), (ii) experienced in making investments of the kind
described in this Agreement and the related documents, (iii) able, by reason of
the business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its Affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and to evaluate the merits and risks of an investment in
the Securities, and (iv) able to afford the entire loss of its investment in the
Securities.

            c. All subsequent offers and sales of the Securities by the Lender
shall be made pursuant to registration of the relevant Securities under the 1933
Act or pursuant to an exemption from registration.

            d. The Lender understands that the Securities are being offered and
sold to it in reliance on specific exemptions from the registration requirements
of the 1933 Act and state securities laws and that the Company is relying upon
the truth and accuracy of, and the Lender's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Lender set forth herein in order to determine the availability of such
exemptions and the eligibility of the Lender to acquire the Securities.

            e. The Lender and its advisors, if any, have been furnished with or
have been given access to all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by the Lender, including those set forth on
in any annex attached hereto. The Lender and its advisors, if any, have been
afforded the opportunity to ask questions of the Company and its management and
have

                                       5                               2/19/04

<PAGE>

received complete and satisfactory answers to any such inquiries. Without
limiting the generality of the foregoing, the Lender has also had the
opportunity to obtain and to review the Company's filings on EDGAR listed on
Annex VII hereto (the documents listed on such Annex VII, to the extent
available on EDGAR or otherwise provided to the Lender as indicated on said
Annex VII, collectively, the "Company's SEC Documents").

            f. The Lender understands that its investment in the Securities
involves a high degree of risk.

            g. The Lender hereby represents that, in connection with its
purchase of the Securities, it has not relied on any statement or representation
by the Company or the Finder or any of their respective officers, directors and
employees or any of their respective attorneys or agents or the Finder, except
as specifically set forth herein. The Finder is a third party beneficiary of
this provision.

            h. The Lender understands that no United States federal or state
agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities.

            i. This Agreement and the other Transaction Agreements to which the
Lender is a party, and the transactions contemplated thereby, have been duly and
validly authorized, executed and delivered on behalf of the Lender and are valid
and binding agreements of the Lender enforceable in accordance with their
respective terms, subject as to enforceability to general principles of equity
and to bankruptcy, insolvency, moratorium and other similar laws affecting the
enforcement of creditors' rights generally.

            j. At no time was the Lender presented with or solicited by or
through any leaflet, public promotional meeting, television advertisement or any
other form of general solicitation or advertising. The Lender is not an officer,
director or affiliate (as defined in Rule 405 of the 1933 Act) of the Company.

            k. The execution and delivery of this Agreement and each of the
other Transaction Agreements to which the Lender is a party, the purchase of the
Securities and the consummation by the Lender of the other transactions
contemplated by this Agreement do not and will not conflict with or result in a
breach by the Lender of any of the terms or provisions of, or constitute a
default under (i) if the Lender is an entity, the certificate of incorporation,
by-laws, operating agreement or other organizational or governance documents of
the Lender, each as currently in effect, or (ii) to its knowledge, any existing
applicable law, rule or regulation or any applicable decree, judgment, or order
of any court, United States federal or state regulatory body, administrative
agency or other governmental body, having jurisdiction over the Lender, except
such conflict, breach or default which would not materially affect Lender's
participation in such transactions.

                                       6                               2/19/04

<PAGE>

            3. COMPANY REPRESENTATIONS, ETC. The Company represents and warrants
to the Lender as of the Closing Date that, except as otherwise provided in Annex
VI hereto or in the Company's SEC Documents:

            a. Rights of Others Affecting the Transactions. There are no
preemptive rights of any shareholder of the Company, as such, to acquire the
Securities. No party other has a currently exercisable right of first refusal
which would be applicable to any or all of the transactions contemplated by the
Transaction Agreements.

            b. Status. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Incorporation and
has the requisite corporate power to own its properties and to carry on its
business as now being conducted. The Company is duly qualified as a foreign
corporation to do business and is in good standing in each jurisdiction where
the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have or result in a Material Adverse Effect. The Company
has registered its stock and is obligated to file reports pursuant to Section 12
or Section 15(d) of the Securities and Exchange Act of 1934, as amended (the
"1934 Act"). The Common Stock is quoted on the Principal Trading Market. The
Company has received no notice, either oral or written, with respect to the
continued eligibility of the Common Stock for such quotation on the Principal
Trading Market, and the Company has maintained all requirements on its part for
the continuation of such quotation.

            c. Authorized Shares. The authorized capital stock of the Company
consists of (i) 50,000,000 shares of Common Stock, $.0001 par value per share,
of which approximately 25,369,554 shares are outstanding as of the date hereof,
and (ii) 10,000,000 shares of Preferred Stock, $.0001 par value, of which none
are outstanding as of the date hereof. All issued and outstanding shares of
Common Stock have been duly authorized and validly issued and are fully paid and
non-assessable. The Company has sufficient authorized and unissued shares of
Common Stock as may be necessary to effect the issuance of the Shares. As of the
Closing Date, the Shares shall have been duly authorized by all necessary
corporate action on the part of the Company, and, when issued on the conversion
of, or as interest on, the Debentures in accordance with their terms or upon
exercise of the Warrants in accordance with their terms, will be duly and
validly issued, fully paid and non-assessable and will not subject the Holder
thereof to personal liability by reason of being such Holder. As of the date
hereof and as of Closing Date, the Company has not issued any warrants or other
rights to acquire shares of the Common Stock other than those referred to in the
Company's SEC Documents

            d. Transaction Agreements and Stock. This Agreement and each of the
other Transaction Agreements, and the transactions contemplated thereby, have
been duly and validly authorized by the Company, this Agreement has been duly
executed and delivered by the Company and this Agreement is, and the Debentures,
the Warrants and each of the other Transaction Agreements, when executed and
delivered by the Company, will be, valid and binding agreements of the Company
enforceable in accordance with their respective terms, subject as to
enforceability

                                       7                               2/19/04

<PAGE>

to general principles of equity and to bankruptcy, insolvency, moratorium, and
other similar laws affecting the enforcement of creditors' rights generally.

            e. Non-contravention. The execution and delivery of this Agreement
and each of the other Transaction Agreements by the Company, the issuance of the
Securities, and the consummation by the Company of the other transactions
contemplated by this Agreement, the Debentures, the Warrants and the other
Transaction Agreements do not and will not conflict with or result in a breach
by the Company of any of the terms or provisions of, or constitute a default
under (i) the certificate of incorporation or by-laws of the Company, each as
currently in effect, (ii) any indenture, mortgage, deed of trust, or other
material agreement or instrument to which the Company is a party or by which it
or any of its properties or assets are bound, including any listing agreement
for the Common Stock except as herein set forth, or (iii) to its knowledge, any
existing applicable law, rule, or regulation or any applicable decree, judgment,
or order of any court, United States federal or state regulatory body,
administrative agency, or other governmental body having jurisdiction over the
Company or any of its properties or assets, except such conflict, breach or
default which would not have or result in a Material Adverse Effect.

            f. Approvals. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the shareholders of the Company is required to be obtained
by the Company for the issuance and sale of the Securities to the Lender as
contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.

            g. Filings. None of the Company's SEC Documents contained, at the
time they were filed, any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the
statements made therein in light of the circumstances under which they were
made, not misleading. Since July 1, 2003, the Company has timely filed all
requisite forms, reports and exhibits thereto required to be filed by the
Company with the SEC.

            h. Absence of Certain Changes. Since the Last Audited Date, there
has been no Material Adverse Effect, except as disclosed in the Company's SEC
Documents. Since the Last Audited Date, except as provided in the Company's SEC
Documents, the Company has not (i) incurred or become subject to any material
liabilities (absolute or contingent) except liabilities incurred in the ordinary
course of business consistent with past practices; (ii) discharged or satisfied
any material lien or encumbrance or paid any material obligation or liability
(absolute or contingent), in excess of $100,000, other than current liabilities
paid in the ordinary course of business consistent with past practices; (iii)
declared or made any payment or distribution of cash or other property to
shareholders with respect to its capital stock, or purchased or redeemed, or
made any agreements to purchase or redeem, any shares of its capital stock; (iv)
sold, assigned or transferred any other tangible assets, or canceled any debts
owed to the Company by any third party or claims of the Company against any
third party, in excess of $100,000, except in the ordinary course of business
consistent with past practices; (v) waived any rights of material value, whether
or not in the ordinary course of business, or suffered the loss of any material
amount of existing business; (vi) made any increases in employee compensation,
except in the ordinary course of

                                       8                               2/19/04

<PAGE>

business consistent with past practices; or (vii) experienced any material
problems with labor or management in connection with the terms and conditions of
their employment.

            i. Full Disclosure. To the best of the Company's knowledge, there is
no fact known to the Company (other than general economic conditions known to
the public generally or as disclosed in the Company's SEC Documents) that has
not been disclosed in writing to the Lender that would reasonably be expected to
have or result in a Material Adverse Effect.

            j. Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board or body pending
or, to the knowledge of the Company, threatened against or affecting the Company
before or by any governmental authority or nongovernmental department,
commission, board, bureau, agency or instrumentality or any other person,
wherein an unfavorable decision, ruling or finding would have a Material Adverse
Effect or which would adversely affect the validity or enforceability of, or the
authority or ability of the Company to perform its obligations under, any of the
Transaction Agreements. There are no outstanding or unsatisfied judgments,
orders, decrees, writs, injunctions or stipulations to which the Company is a
party or by which it or any of its properties is bound, that involve the
transaction contemplated herein or that, alone or in the aggregate, could
reasonably be expect to have a Material Adverse Effect.

            k. Absence of Events of Default. Except as set forth in Section 3(e)
hereof, no Event of Default (or its equivalent term), as defined in the
respective agreement to which the Company or its subsidiary is a party, and no
event which, with the giving of notice or the passage of time or both, would
become an Event of Default (or its equivalent term) (as so defined in such
agreement), has occurred and is continuing, which would have a Material Adverse
Effect.

            l. Absence of Certain Company Control Person Actions or Events. To
the Company's knowledge, but without independent investigation or inquiry by the
Company, none of the following has occurred during the past five (5) years with
respect to a Company Control Person:

      (1) A petition under the federal bankruptcy laws or any state insolvency
      law was filed by or against, or a receiver, fiscal agent or similar
      officer was appointed by a court for the business or property of such
      Company Control Person, or any partnership in which he was a general
      partner at or within two years before the time of such filing, or any
      corporation or business association of which he was an executive officer
      at or within two years before the time of such filing;

      (2) Such Company Control Person was convicted in a criminal proceeding or
      is a named subject of a pending criminal proceeding (excluding traffic
      violations and other minor offenses);

      (3) Such Company Control Person was the subject of any order, judgment or
      decree, not subsequently reversed, suspended or vacated, of any court of
      competent jurisdiction,

                                          9                            2/19/04

<PAGE>

      permanently or temporarily enjoining him from, or otherwise limiting, the
      following activities:

            (i) acting, as an investment advisor, underwriter, broker or dealer
            in securities, or as an affiliated person, director or employee of
            any investment company, bank, savings and loan association or
            insurance company, as a futures commission merchant, introducing
            broker, commodity trading advisor, commodity pool operator, floor
            broker, any other Person regulated by the Commodity Futures Trading
            Commission ("CFTC") or engaging in or continuing any conduct or
            practice in connection with such activity;

            (ii) engaging in any type of business practice; or

            (iii) engaging in any activity in connection with the purchase or
            sale of any security or commodity or in connection with any
            violation of federal or state securities laws or federal commodities
            laws;

      (4) Such Company Control Person was the subject of any order, judgment or
      decree, not subsequently reversed, suspended or vacated, of any federal or
      state authority barring, suspending or otherwise limiting for more than 60
      days the right of such Company Control Person to engage in any activity
      described in paragraph (3) of this item, or to be associated with Persons
      engaged in any such activity; or

      (5) Such Company Control Person was found by a court of competent
      jurisdiction in a civil action or by the CFTC or SEC to have violated any
      federal or state securities law, and the judgment in such civil action or
      finding by the CFTC or SEC has not been subsequently reversed, suspended,
      or vacated.

            m. No Undisclosed Liabilities or Events. To the best of the
Company's knowledge, the Company has no liabilities or obligations other than
those disclosed in the Transaction Agreements or the Company's SEC Documents or
those incurred in the ordinary course of the Company's business since the Last
Audited Date, or which individually or in the aggregate, do not or would not
have a Material Adverse Effect. No event or circumstances has occurred or exists
with respect to the Company or its properties, business, operations, condition
(financial or otherwise), or results of operations, which, under applicable law,
rule or regulation, requires public disclosure or announcement prior to the date
hereof by the Company but which has not been so publicly announced or disclosed.
There are no proposals currently under consideration or currently anticipated to
be under consideration by the Board of Directors or the executive officers of
the Company which proposal would (x) change the articles or certificate of
incorporation or other charter document or by-laws of the Company, each as
currently in effect, with or without shareholder approval, which change would
reduce or otherwise adversely affect the rights and powers of the shareholders
of the Common Stock or (y) materially or substantially change the business,
assets or capital of the Company, including its interests in subsidiaries.

                                      10                               2/19/04

<PAGE>

            n. No Integrated Offering. Neither the Company nor any of its
Affiliates nor any Person acting on its or their behalf has, directly or
indirectly, at any time since July 1, 2003, made any offer or sales of any
security or solicited any offers to buy any security under circumstances that
would eliminate the availability of the exemption from registration under
Regulation D in connection with the offer and sale of the Securities as
contemplated hereby.

            o. Dilution. The number of shares issuable on conversion of the
Debentures and upon exercise of the Warrants may have a dilutive effect on the
ownership interests of the other shareholders (and Persons having the right to
become shareholders) of the Company. The Company's executive officers and
directors have studied and fully understand the nature of the Securities being
sold hereby and recognize that they have such a potential dilutive effect. The
board of directors of the Company has concluded, in its good faith business
judgment, that such issuance is in the best interests of the Company. The
Company specifically acknowledges that its obligation to issue the Conversion
Shares upon conversion of the Debentures and the Warrant Shares upon exercise of
the Warrants is binding upon the Company and enforceable regardless of the
dilution such issuance may have on the ownership interests of other shareholders
of the Company, and the Company will honor such obligations, including honoring
every Notice of Conversion executed and delivered as contemplated by the
Debentures and every Notice of Exercise executed and delivered as contemplated
by the Warrants, unless the Company is subject to an injunction (which
injunction was not sought by the Company) prohibiting the Company from doing so.

            p. Fees to Brokers, Finders and Others. Except for payment of the
fees to the Finder's Compensation (as defined below) to the Finder, payment of
which is the sole responsibility of the Company, the Company has taken no action
which would give rise to any claim by any Person for brokerage commission,
finder's fees or similar payments by Lender relating to this Agreement or the
transactions contemplated hereby. Lender shall have no obligation with respect
to such fees or with respect to any claims made by or on behalf of other Persons
for fees of a type contemplated in this paragraph that may be due in connection
with the transactions contemplated hereby. The Company shall indemnify and hold
harmless each of Lender, its employees, officers, directors, agents, and
partners, and their respective Affiliates, from and against all claims, losses,
damages, costs (including the costs of preparation and attorney's fees) and
expenses suffered in respect of any such claimed or existing fees, as and when
incurred. The term "Finder's Compensation" means, in connection with the
consummation of the transactions contemplated by this Agreement, the
consideration payable to the Finder contemplated by the Joint Escrow
Instructions.

            q. Confirmation. The Company confirms that all statements of the
Company contained herein shall survive acceptance of this Agreement by the
Lender. The Company agrees that, if any events occur or circumstances exist
prior to the Closing Date or the release of the Purchase Price to the Company
which would make any of the Company's representations, warranties, agreements or
other information set forth herein materially untrue or materially inaccurate as
of such date, the Company shall immediately notify the Lender (directly or
through its counsel, if any) and the Escrow Agent in writing prior to such date
of such fact, specifying which representation, warranty or covenant is affected
and the reasons therefor.

                                      11                               2/19/04

<PAGE>

            4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.

            a. Transfer Restrictions. The Lender acknowledges that (i) the
Securities have not been and are not being registered under the provisions of
the 1933 Act and, except as provided in the Registration Rights Agreement or
otherwise included in an effective registration statement, the Shares have not
been and are not being registered under the 1933 Act, and may not be transferred
unless (A) subsequently registered thereunder or (B) the Lender shall have
delivered to the Company an opinion of counsel, reasonably satisfactory in form,
scope and substance to the Company, to the effect that the Securities to be sold
or transferred may be sold or transferred pursuant to an exemption from such
registration; (ii) any sale of the Securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any resale of such
Securities under circumstances in which the seller, or the Person through whom
the sale is made, may be deemed to be an underwriter, as that term is used in
the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other Person is under any obligation to register the Securities
(other than pursuant to the Registration Rights Agreement) under the 1933 Act or
to comply with the terms and conditions of any exemption thereunder. The
Lender's trading activities with respect to any shares of the Company's Common
Stock will be in compliance with all applicable state and federal securities
laws, rules and regulations and the all applicable rules and regulations of the
Principal Trading Market; provided, however, that unless and until the Company
has affirmatively demonstrated by the use of specific evidence that the Lender
has breached the foregoing provisions of this sentence, the Buyer shall be
assumed to be in compliance with such provisions and the Company shall remain
obligated to fulfill all of its obligations under the Transaction Agreements;
and provided, further, that the Company shall under no circumstances be entitled
to request or demand that the Lender affirmatively demonstrate that it is in
compliance with such provisions as a condition to the Company's fulfillment of
its obligations under any of the Transaction Agreements and shall not assert the
Lender's failure to demonstrate such compliance or the absence of a breach of
such compliance as a defense to any breach of the Company's obligations under
any of the Transaction Agreements.

            b. Restrictive Legend. The Lender acknowledges and agrees that,
until such time as the relevant Shares have been registered under the 1933 Act,
as contemplated by the Registration Rights Agreement, and sold in accordance
with an effective Registration Statement or otherwise in accordance with another
effective registration statement, the Certificates and other instruments
representing any of the Securities shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of any such Securities):

      THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
      1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD
      OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
      FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE
      TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

                                      12                               2/19/04

<PAGE>

            c. Filings. The Company undertakes and agrees to make all necessary
filings in connection with the sale of the Securities to the Lender under any
United States laws and regulations applicable to the Company, or by any domestic
securities exchange or trading market, and to provide a copy thereof to the
Lender promptly after such filing.

            d. Reporting Status. So long as the Lender beneficially owns any of
the Securities, the Company shall file all reports required to be filed with the
SEC pursuant to Section 13 or 15(d) of the 1934 Act, shall take all reasonable
action under its control to ensure that adequate current public information with
respect to the Company, as required in accordance with Rule 144(c)(2) of the
1933 Act, is publicly available, and shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would permit such termination. The Company will take
all reasonable action under its control to maintain the continued listing and
quotation and trading of its Common Stock (including, without limitation, all
Registrable Securities) on the Principal Trading Market or a listing on the
NASDAQ/Small Cap or National Markets and, to the extent applicable to it, will
comply in all material respects with the Company's reporting, filing and other
obligations under the by-laws or rules of the Principal Trading Market and/or
the National Association of Securities Dealers, Inc., as the case may be,
applicable to it at least through the date which is sixty (60) days after the
later of the date on which (x) all of the Debentures have been converted or been
paid in full or (y) all of the Warrants have been exercised or have expired.

            e. Use of Proceeds. The Company will use the proceeds received
hereunder (excluding amounts paid by the Company for Finder's Compensation in
connection with the sale of the Securities or legal and escrow fees contemplated
by the Joint Escrow Instructions) for general corporate and working capital
purposes and to satisfy or reduce the amounts of current liabilities of the
Company.

            f. Warrants. The Company agrees to issue to the Lender on the
Closing Date transferable warrants (the "Warrants") for the purchase of 29,750
shares of Common Stock for each 100,000 Issue Date Conversion Shares (as defined
below). The exercise price of the Warrants will be equal to $0.32, subject to
adjustment as provided in the Warrant. The Warrants will expire on the last day
of the calendar month in which the second anniversary of the Closing Date
occurs. Each of the Warrants shall be in the form annexed hereto as Annex V. The
Warrant Shares shall be subject to the provisions of the Registration Rights
Agreement. The term "Issue Date Conversion Shares" means the number of shares of
Common Stock equal to (x) the Purchase Price paid by the Lender on the Closing
Date, divided by (y) $0.16.

            g. Certain Agreements.

            (i) If during the period (the "New Transaction Period") from the
Closing Date and continuing through and including the Final Lock-up Date (as
defined below), without the prior written consent of a Majority in Interest of
the Holders in each instance, the Company enters into any subsequent or further
offer or sale of Common Stock or securities convertible into and/or other rights
exercisable for the issuance of Common Stock (collectively, "New Common Stock")
to or

                                      13                               2/19/04

<PAGE>

with any third party (any such offer or sale of New Common Stock, a "New
Transaction"), the following provisions of this Section 4(g) shall apply. The
term "Final Lock-up Date" means the date which is ninety (90) days after the
Effective Date, but not counting for such purposes the days, if any, during
which sale of Registrable Securities was suspended after the Effective Date.(1)

            (ii) In the event there is a New Transaction where the New
Transaction Price is less than the Threshold Price (as those terms are defined
below) or if the New Transaction Exercise Price (as defined below) is less than
the then applicable Exercise Price of the Warrants, then

      (A) the Conversion Price on any Unconverted Debenture (as defined in the
      Debenture) shall be adjusted to an amount (the "Adjusted Conversion
      Price") equal to the lower of (1) the Adjustment Percentage (as defined
      below) of the then existing Conversion Price, or (2) eighty percent (80%)
      of the New Transaction Price;

      (B) the number of shares which may be purchased by the unexercised
      Warrants shall be adjusted to equal (i) the fraction, of which the
      numerator is the number of unexercised Warrant Shares and the denominator
      is the number of Warrant Shares originally contemplated by this Agreement,
      multiplied by (ii) the highest of

            (1) the number of Warrant Shares originally contemplated by this
            Agreement,

            (2) the number of shares equal to twenty-nine and 75/100 percent
            (29.75%) of (I) the Purchase Price divided by (II) the lower of (a)
            the Closing Price for the Trading Day immediately preceding the
            initial closing date of the New Transaction or (b) the Adjusted
            Conversion Price, or

            (3) the number of shares equal to the Alternative Warrant Percentage
            (as defined below) of (I) the Purchase Price divided by (II) the
            lower of (a) the Closing Price for the Trading Day immediately
            preceding the initial closing date of the New Transaction or (b) the
            Adjusted Conversion Price; and

      (C) the Exercise Price on the Warrants shall be adjusted to equal the
      lowest of (1) the then existing Exercise Price, or (2) two hundred percent
      (200%) of the Adjusted Conversion Price.

----------
(1) By way of illustration: If the sale of Registrable Securities was suspended
for ten (10) days in the interim, the applicable Final Lock-up Date will be one
hundred (100) days after the Effective Date. If on the 98th day after the
Effective Date, the sale of Registrable Securities was suspended again for five
(5) days, the Final Lock-up Date will be one hundred ninety-five (105) days
after the Effective Date.

                                      14                               2/19/04

<PAGE>

            (iii) With respect to any New Transaction, whether or not the New
Transaction Price is not less than the Threshold Price,

      (A) if the provisions of the preferred stock, debenture or similar
      instrument (howsoever denominated), if any, of the New Transaction are
      more beneficial to the holder of such instrument than the corresponding
      terms of the Debenture,(2) or if the terms which are beneficial to the
      Company in the Debentures (as provided in the Debenture or in any of the
      other Transaction Agreements) are not included in the corresponding
      instrument in the New Transaction (howsoever denominated), then, unless
      waived by the Holder, the terms applicable to the Debentures shall be
      modified to reflect similar terms (based on the original issue date of the
      Debenture); and

      (B) if the provisions of the warrant, option or similar instrument
      (howsoever denominated), if any, of the New Transaction are more
      beneficial to the holder of such instrument than the corresponding terms
      of the Warrant,(3) or if the terms which are beneficial to the Company as
      provided in the Warrant are not included in the corresponding instrument
      in the New Transaction, then, unless waived by the Holder, the Warrant
      terms shall be modified to reflect similar terms (based on the original
      issue date of the Warrants).

            (iv) For purposes of this Agreement, the following terms shall have
meanings indicated:

      (A) "New Transaction Price" means, as may be applicable, on a per share
      basis, the lower of (1) the lowest fixed purchase price of any shares of
      the New Common Stock contemplated in the New Transaction or (2) the lowest
      conversion price which would be applicable under the terms of the New
      Transaction.

      (B) "New Transaction Exercise Price" means the lowest exercise price per
      share applicable to warrants or other rights issued in the New
      Transaction.

      (C) "Alternative Warrant Percentage" means (1) the number of shares which
      are eligible to be purchased under the warrant, option or other right
      (howsoever denominated) issued in the New Transaction ("New Transaction
      Warrants"), divided by (2) the aggregate of the shares of New Common Stock
      issued or issuable in such transaction (excluding the shares issuable on
      exercise of the New Transaction Warrants).

----------
(2) Without limiting the foregoing, by way of example: the dividend rate or the
interest rate, as the case may be, of the instrument in the New Transaction is
more than the interest rate of the Debentures as in effect at the time (after
taking into account any prior adjustments thereto).

(3) Without limiting the foregoing, by way of example: the expiration date of
the instrument in the New Transaction is more than two years from its original
issue date.

                                      15                               2/19/04

<PAGE>

      (D) "Threshold Price" means, per share, $0.15, subject to equitable
      adjustment for stock splits, stock dividends, reclassifications,
      recapitalizations and the like effected after the date of this Agreement.

      (E) "Adjustment Percentage" means, with respect to each New Transaction
      which is subject to the provisions of Section 4(g)(ii), (1) ninety percent
      (90%) for the first such New Transaction; (2) eighty percent (80%) for the
      second such New Transaction; and (3) seventy percent (70%) for each
      subsequent such New Transaction.

            (v) Anything herein to the contrary notwithstanding, the Company
shall not be required to make any adjustment of any Conversion Price or the
Exercise Price under any Warrant or make any other adjustments whatsoever under
this Section 4(g) in the case of (A) the issuance or sale of shares of Common
Stock upon exercise of stock options or warrants outstanding on the date hereof,
(B) the sale of shares of Common Stock, or the issuance of options to purchase
shares of the Company's Common Stock, or any combination thereof, to employees,
officers, directors and/or consultants of the Corporation pursuant to a Stock
Option Plan which was duly approved prior to the date of this Agreement, (C) the
issuance of Common Stock upon conversion of the Debentures or exercise of the
Warrants, (D) the issuance of shares or other securities underlying any
warrants, options or other securities convertible into or exercisable for shares
of the Company's Common Stock if the original issuance of such warrants, options
or other securities was made in compliance with this Section 4(g), (E) the
issuance of securities issued pursuant to any stock dividend, stock split,
combination or other reclassification by the Company of any of its capital
stock, or (F) the issuance of securities issued pursuant to the acquisition of
another corporation by the Company by merger, purchase of substantially all the
assets or other reorganization, provided, however, that the shares so issued can
not, by the terms of the relevant agreements, be included in a registration
statement filed prior to the Final Lock-up Date. Anything in the preceding
provisions of this Section 4(g) to the contrary notwithstanding, if, but only
if, an issuance or sale complies fully with the relevant provision or provisions
of the preceding clauses (A) through (F) of this subparagraph (v), such issuance
or sale (x) shall not be deemed in any respect to be a New Transaction, and, (y)
accordingly, the provisions of Section 4(g)(ii) and (iii) shall not be applied
with respect to such issuance or sale

            (vi) Nothing in the foregoing provisions reflects either an
obligation on the part of any Lender to participate in any New Transaction or a
limitation on any Lender from participating in any New Transaction.

            (vii) Notwithstanding any consent obtained from any Holder and any
of the foregoing provisions of this Section 4(g) or any other provision of this
Agreement or any of the other Transaction Agreements to the contrary
notwithstanding, the Company shall not engage in any offers, sales or other
transactions of its securities which would adversely affect the exemption from
registration available for the transactions contemplated by the Transaction
Agreements.

            h. Available Shares. The Company shall have at all times authorized
and reserved for issuance, free from preemptive rights, a number of shares (the
"Minimum Available

                                      16                               2/19/04

<PAGE>

Shares") at least equal to (x) one hundred twenty-five percent (125%) of the
number of shares of Common Stock issuable as may be required to satisfy the
conversion rights of the Holders of principal on all outstanding Debentures plus
(y) one hundred ten percent (110%) of the number of shares issuable upon
exercise of all outstanding Warrants held by all Holders (in each case, whether
such Debentures or Warrants were originally issued to the Holder, the Lender or
to any other party). For the purposes of such calculations, the Company should
assume that all Convertible Debentures for the Total Purchase Price were then
issued and convertible and all related Warrants were then issued and
exercisable, in each case without regard to any restrictions (including
restrictions as to date or amount) which might limit any Holder's right to
convert any of the Convertible Debentures or to exercise any of the Warrants
held by any Holder.

            i. Publicity, Filings, Releases, Etc. Except for disclosures
required by law, rule or regulation, each of the parties agrees that it will not
disseminate any information relating to the Transaction Agreements or the
transactions contemplated thereby, including issuing any press releases, holding
any press conferences or other forums, or filing any reports (collectively,
"Publicity"), without giving the other party reasonable advance notice and an
opportunity to comment on the contents thereof. Except for disclosures required
by law, rule or regulation, neither party will include in any such Publicity any
statement or statements or other material to which the other party reasonably
objects. Notwithstanding the foregoing, each of the parties hereby consents to
the inclusion of the text of the Transaction Agreements in filings made with the
SEC (but any descriptive text accompanying or part of such filing shall be
subject to the other provisions of this paragraph).

            5. TRANSFER AGENT INSTRUCTIONS.

            a. The Company warrants that, with respect to the Securities, other
than the stop transfer instructions to give effect to Section 4(a) hereof, it
will give the Transfer Agent no instructions inconsistent with instructions to
issue Common Stock from time to time upon conversion of the Debentures in such
amounts as specified from time to time by the Company to the Transfer Agent,
bearing the restrictive legend specified in Section 4(b) of this Agreement prior
to registration of the Shares under the 1933 Act, registered in the name of the
Lender or its nominee and in such denominations to be specified by the Holder in
connection with each conversion of the Debentures. Except as so provided, the
Shares shall otherwise be freely transferable on the books and records of the
Company as and to the extent provided in this Agreement and the other
Transaction Agreements. Nothing in this Section shall affect in any way the
Lender's obligations and agreement to comply with all applicable securities laws
upon resale of the Securities. If the Lender provides the Company with an
opinion of counsel reasonably satisfactory to the Company that registration of a
resale by the Lender of any of the Securities in accordance with clause (1)(B)
of Section 4(a) of this Agreement is not required under the 1933 Act, the
Company shall (except as provided in clause (2) of Section 4(a) of this
Agreement) permit the transfer of the Securities and, in the case of the
Conversion Shares or of the Warrant Shares, promptly instruct the Transfer Agent
to issue one or more certificates for Common Stock without legend in such name
and in such denominations as specified by the Lender.

                                      17                               2/19/04

<PAGE>

            b. Subject to the provisions of this Agreement, the Company will
permit the Lender to exercise its right to convert the Debenture in the manner
contemplated by the Debenture and to exercise the Warrants in the manner
contemplated by the Warrants.

            c. (i) The Company understands that a delay in the issuance of the
Shares of Common Stock beyond the Delivery Date (as defined in the Debenture)
could result in economic loss to the Lender. As compensation to the Lender for
such loss, the Company agrees to pay late payments to the Lender for late
issuance of Shares upon conversion in accordance with the following schedule
(where "No. Business Days Late" refers to the number of business days which is
beyond two (2) business days after the Delivery Date):(4)

                                             Late Payment For Each $10,000
                                             of Principal or Interest
             No. Business Days Late          Being Converted
             ----------------------          -----------------------------

             1                               $100
             2                               $200
             3                               $300
             4                               $400
             5                               $500
             6                               $600
             7                               $700
             8                               $800
             9                               $900
             10                              $1,000
             >10                             $1,000 + $200 for each
                                             Business Day Late beyond 10 days

The Company shall pay any payments incurred under this Section in immediately
available funds upon demand as the Lender's exclusive remedy (other than the
following provisions of this Section 5(c) and the provisions of the immediately
following Section 5(d) of this Agreement) for such delay. Furthermore, in
addition to any other remedies which may be available to the Lender, in the
event that the Company fails for any reason to effect delivery of such shares of
Common Stock by close of business on the Delivery Date, the Lender will be
entitled to revoke the relevant Notice of Conversion by delivering a notice to
such effect to the Company, whereupon the Company and the Lender shall each be
restored to their respective positions immediately prior to delivery of such
Notice of Conversion; provided, however, that an amount equal to any payments
contemplated by this Section 5(c) which have accrued through the date of such
revocation notice shall remain due and

----------
(4) Example: Notice of Conversion is delivered on Monday, March 1, 2004. The
Delivery Date would be Thursday, March 4 (the third business day after such
delivery). If the certificate is delivered by Monday, March 8 (2 business days
after the Delivery Date), no payment under this provision is due. If the
certificates are delivered on March 9, that is 1 "Business Day Late" in the
table below; if delivered on December 16, that is 6 "Business Days Late" in the
table.

                                      18                               2/19/04

<PAGE>

owing to the Converting Holder notwithstanding such revocation. The provisions
of this Section 5(c)(i) shall not apply if the Holder elects to have the remedy
provided in Section 5(c)(ii), if applicable, apply.

                  (ii) If, by the relevant Delivery Date, the Company fails for
any reason to deliver the Shares to be issued upon conversion of a Debenture and
after such Delivery Date, the Holder of the Debentures being converted (a
"Converting Holder") purchases, in an arm's-length open market transaction or
otherwise, shares of Common Stock (the "Covering Shares") in order to make
delivery in satisfaction of a sale of Common Stock by the Converting Holder (the
"Sold Shares"), which delivery such Converting Holder anticipated to make using
the Shares to be issued upon such conversion (a "Buy-In"), the Converting Holder
shall have the right, to require the Company to pay to the Converting Holder, in
lieu of, but no in addition, of the amounts due under Section 5(c)(i) hereof
(but in addition to all other amounts contemplated in other provisions of the
Transaction Agreements, and not in lieu of any such other amounts), the Buy-In
Adjustment Amount (as defined below). The "Buy-In Adjustment Amount" is the
amount equal to the number of Sold Shares multiplied by the excess, if any, of
(x) the Converting Holder's total purchase price per share (including brokerage
commissions, if any) for the Covering Shares over (y) the net proceeds per share
(after brokerage commissions, if any) received by the Converting Holder from the
sale of the Sold Shares. The Company shall pay the Buy-In Adjustment Amount to
the Converting Holder in immediately available funds immediately upon demand by
the Converting Holder. By way of illustration and not in limitation of the
foregoing, if the Converting Holder purchases shares of Common Stock having a
total purchase price (including brokerage commissions) of $11,000 to cover a
Buy-In with respect to shares of Common Stock it sold for net proceeds of
$10,000, the Buy-In Adjustment Amount which Company will be required to pay to
the Converting Holder will be $1,000.

            (iii) The Company specifically acknowledges and agrees that the
determination of which provision under Section 5(c)(i) or Section 5(c)(ii) shall
apply is in the sole and absolute discretion of the Holder.

            d. In lieu of delivering physical certificates representing the
Common Stock issuable upon conversion, provided the Transfer Agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer program, upon request of the Holder and its compliance with the
provisions contained in this paragraph, so long as the certificates therefor do
not bear a legend and the Holder thereof is not obligated to return such
certificate for the placement of a legend thereon, the Company shall use its
best efforts to cause the Transfer Agent to electronically transmit the Common
Stock issuable upon conversion to the Holder by crediting the account of
Holder's Prime Broker with DTC through its Deposit Withdrawal Agent Commission
system. If the request for the issuance of the Conversion Shares in this manner
(the "DTC Request") is given subsequent to the issuance of the Notice of
Conversion, the Delivery Date referred to in Section 4(c) and (d) above shall be
determined as if the date of the DTC Request were the Conversion Date.

                                      19                               2/19/04
<PAGE>

            e. The holder of any Debenture shall be entitled to exercise its
conversion privilege with respect to the Debenture notwithstanding the
commencement of any case under 11 U.S.C. ss.101 et seq. (the "Bankruptcy Code").
In the event the Company is a debtor under the Bankruptcy Code, the Company
hereby waives, to the fullest extent permitted, any rights to relief it may have
under 11 U.S.C. ss.362 in respect of such holder's conversion privilege. The
Company hereby waives, to the fullest extent permitted, any rights to relief it
may have under 11 U.S.C. ss.362 in respect of the conversion of the Debenture.
The Company agrees, without cost or expense to such holder, to take or to
consent to any and all action necessary to effectuate relief under 11 U.S.C.
ss.362.

            f. The Company will authorize the Transfer Agent to give information
relating to the Company directly to the Lender or the Lender's representatives
upon the request of the Lender or any such representative, to the extent such
information relates to (i) the status of shares of Common Stock issued or
claimed to be issued to the Lender in connection with a Notice of Conversion or
a Notice of Exercise, or (ii) the number of outstanding shares of Common Stock
of all shareholders as of a current or other specified date. At the request of
the Lender, the Company will provide the Lender with a copy of the authorization
so given to the Transfer Agent.

            6. CLOSING DATES.

            a. The Closing Date shall occur on the date which is the first
Trading Day after each of the conditions contemplated by Sections 7 and 8 hereof
shall have either been satisfied or been waived by the party in whose favor such
conditions run.

            b. The closing of the purchase and issuance of Purchased Securities
shall occur on the Closing Date at the offices of the Escrow Agent and shall
take place on such day or such other time as is mutually agreed upon by the
Company and the Finder.

            c. Notwithstanding anything to the contrary contained herein, the
Escrow Agent will be authorized and directed to release the Escrow Funds to the
Company and to others and to release the other Escrow Property on the Closing
Date upon satisfaction of the conditions set forth in Sections 7 and 8 hereof
and as provided in the Joint Escrow Instructions.

            7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.

            The Lender understands that the Company's obligation to sell the
Purchased Securities to the Lender pursuant to this Agreement on the Closing
Date is conditioned upon:

            a. The execution and delivery by the Lender of this Agreement and
the other Transaction Agreements to which the Lender is a signatory on or before
the Closing Date;

            b. Delivery by the Lender to the Escrow Agent by the Closing Date of
good funds as payment in full of an amount equal to the Purchase Price and the
delivery by the Other Lenders, if any, by the Closing Date of good funds in
payment in full of an amount equal to the balance of the Total Purchase Price,
all in accordance with this Agreement;

                                      20                               2/19/04

<PAGE>

            c. The accuracy on such Closing Date of the representations and
warranties of the Lender contained in this Agreement, each as if made on such
date, and the performance by the Lender on or before such date of all covenants
and agreements of the Lender required to be performed on or before such date;

            d. On such Closing Date, each of the Transaction Agreements executed
by the Lender on or before such date shall be in full force and effect, and the
Lender shall not in default thereunder; and

            e. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.

            8. CONDITIONS TO THE LENDER'S OBLIGATION TO PURCHASE.

            The Company understands that the Lender's obligation to purchase the
Purchased Securities on the Closing Date is conditioned upon:

            a. The execution and delivery of this Agreement and the other
Transaction Agreements by the Company on or before the Closing Date;

            b. Delivery by the Company to the Escrow Agent of the relevant
Certificates in accordance with this Agreement;

            c. On such Closing Date, each of the Transaction Agreements executed
by the Company on or before such date shall be in full force and effect and the
Company shall not be in default thereunder;

            d. The accuracy in all material respects on such Closing Date of the
representations and warranties of the Company contained in this Agreement, each
as if made on such date, and the performance by the Company on or before such
date of all covenants and agreements of the Company required to be performed on
or before such date;

            e. On such Closing Date, the Lender shall have received an opinion
of counsel for the Company, dated such Closing Date, in form, scope and
substance reasonably satisfactory to the Lender, substantially to the effect set
forth in Annex III attached hereto;

            f. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained; and

            g. From and after the date hereof to and including the Closing Date,
each of the following conditions will remain in effect: (i) the trading of the
Common Stock shall not have been suspended by the SEC or on the Principal
Trading Market; (ii) trading in securities generally on the

                                      21                               2/19/04

<PAGE>

Principal Trading Market shall not have been suspended or limited; (iii), no
minimum prices shall been established for securities traded on the Principal
Trading Market; and (iv) there shall not have been any material adverse change
in any financial market that, in the reasonable judgment of the Lender, makes it
impracticable or inadvisable to purchase the Securities.

            9. INDEMNIFICATION.

            a. (i) The Company agrees to indemnify and hold harmless the Lender
and its officers, directors, employees, and agents, and each Lender Control
Person from and against any losses, claims, damages, liabilities or expenses
incurred (collectively, "Damages"), joint or several, and any action in respect
thereof to which the Lender, its partners, Affiliates, officers, directors,
employees, and duly authorized agents, and any such Lender Control Person
becomes subject to, resulting from, arising out of or relating to any
misrepresentation, breach of warranty or nonfulfillment of or failure to perform
any covenant or agreement on the part of Company contained in this Agreement, as
such Damages are incurred, except to the extent such Damages result primarily
from Lender's failure to perform any covenant or agreement contained in this
Agreement or the Lender's or its officer's, director's, employee's, agent's or
Lender Control Person's gross negligence, recklessness or bad faith in
performing its obligations under this Agreement.

                  (ii) The Company hereby agrees that, if the Lender (other than
by reason of its gross negligence or willful misconduct or by reason of its
trading of the Common Stock in a manner that is illegal under the federal
securities laws, in each case, as determined by a non-appealable judgment to
such effect), (x) becomes involved in any capacity in any action, proceeding or
investigation brought by any shareholder of the Company, in connection with or
as a result of the consummation of the transactions contemplated by this
Agreement or the other Transaction Agreements, or if the Lender is impleaded in
any such action, proceeding or investigation by any Person, or (y) becomes
involved in any capacity in any action, proceeding or investigation brought by
the SEC, any self-regulatory organization or other body having jurisdiction,
against or involving the Company or in connection with or as a result of the
consummation of the transactions contemplated by this Agreement or the other
Transaction Agreements, or (z) is impleaded in any such action, proceeding or
investigation by any Person, then in any such case, the Company shall indemnify,
defend and hold harmless the Lender from and against and in respect of all
losses, claims, liabilities, damages or expenses resulting from, imposed upon or
incurred by the Lender, directly or indirectly, and reimburse such Lender for
its reasonable legal and other expenses (including the cost of any investigation
and preparation) incurred in connection therewith, as such expenses are
incurred. In addition, the Company will reimburse the Lender for reasonable
internal and overhead costs for the time of any officers or employees of the
Lender devoted to appearing and preparing to appear as witnesses, assisting in
preparation for hearings, trials or pretrial matters, or otherwise with respect
to inquiries, hearing, trials, and other proceedings relating to the subject
matter of this Agreement or the other Transaction Agreements. The
indemnification and reimbursement obligations of the Company under this
paragraph shall be in addition to any liability which the Company may otherwise
have, shall extend upon the same terms and conditions to any Affiliates of the
Lender who are actually named in such action, proceeding or investigation, and
partners, directors, agents, employees and Lender Control Persons (if any), as
the case may be, of

                                      22                               2/19/04

<PAGE>

the Lender and any such Affiliate, and shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal representatives of the
Company, the Lender, any such Affiliate and any such Person. The Company also
agrees that neither the Lender nor any such Affiliate, partner, director, agent,
employee or Lender Control Person shall have any liability to the Company or any
Person asserting claims on behalf of or in right of the Company in connection
with or as a result of the consummation of this Agreement or the other
Transaction Agreements, except as may be expressly and specifically provided in
or contemplated by this Agreement.

            b. All claims for indemnification by any Indemnified Party (as
defined below) under this Section shall be asserted and resolved as follows:

                  (i) In the event any claim or demand in respect of which any
Person claiming indemnification under any provision of this Section (an
"Indemnified Party") might seek indemnity under paragraph (a) of this Section is
asserted against or sought to be collected from such Indemnified Party by a
Person other than a party hereto or an Affiliate thereof (a "Third Party
Claim"), the Indemnified Party shall deliver a written notification, enclosing a
copy of all papers served, if any, and specifying the nature of and basis for
such Third Party Claim and for the Indemnified Party's claim for indemnification
that is being asserted under any provision of this Section against any Person
(the "Indemnifying Party"), together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith, of such Third
Party Claim (a "Claim Notice") with reasonable promptness to the Indemnifying
Party. If the Indemnified Party fails to provide the Claim Notice with
reasonable promptness after the Indemnified Party receives notice of such Third
Party Claim, the Indemnifying Party shall not be obligated to indemnify the
Indemnified Party with respect to such Third Party Claim to the extent that the
Indemnifying Party's ability to defend has been prejudiced by such failure of
the Indemnified Party. The Indemnifying Party shall notify the Indemnified Party
as soon as practicable within the period ending thirty (30) calendar days
following receipt by the Indemnifying Party of either a Claim Notice or an
Indemnity Notice (as defined below) (the "Dispute Period") whether the
Indemnifying Party disputes its liability or the amount of its liability to the
Indemnified Party under this Section and whether the Indemnifying Party desires,
at its sole cost and expense, to defend the Indemnified Party against such Third
Party Claim. The following provisions shall also apply.

      (x) If the Indemnifying Party notifies the Indemnified Party within the
      Dispute Period that the Indemnifying Party desires to defend the
      Indemnified Party with respect to the Third Party Claim pursuant to this
      paragraph (b) of this Section, then the Indemnifying Party shall have the
      right to defend, with counsel reasonably satisfactory to the Indemnified
      Party, at the sole cost and expense of the Indemnifying Party, such Third
      Party Claim by all appropriate proceedings, which proceedings shall be
      vigorously and diligently prosecuted by the Indemnifying Party to a final
      conclusion or will be settled at the discretion of the Indemnifying Party
      (but only with the consent of the Indemnified Party in the case of any
      settlement that provides for any relief other than the payment of monetary
      damages or that provides for the payment of monetary damages as to which
      the Indemnified Party shall not be indemnified in full pursuant to
      paragraph (a) of this Section). The Indemnifying

                                      23                               2/19/04

<PAGE>

Party shall have full control of such defense and proceedings, including any
compromise or settlement thereof; provided, however, that the Indemnified Party
may, at the sole cost and expense of the Indemnified Party, at any time prior to
the Indemnifying Party's delivery of the notice referred to in the first
sentence of this subparagraph (x), file any motion, answer or other pleadings or
take any other action that the Indemnified Party reasonably believes to be
necessary or appropriate protect its interests; and provided further, that if
requested by the Indemnifying Party, the Indemnified Party will, at the sole
cost and expense of the Indemnifying Party, provide reasonable cooperation to
the Indemnifying Party in contesting any Third Party Claim that the Indemnifying
Party elects to contest. The Indemnified Party may participate in, but not
control, any defense or settlement of any Third Party Claim controlled by the
Indemnifying Party pursuant to this subparagraph (x), and except as provided in
the preceding sentence, the Indemnified Party shall bear its own costs and
expenses with respect to such participation. Notwithstanding the foregoing, the
Indemnified Party may take over the control of the defense or settlement of a
Third Party Claim at any time if it irrevocably waives its right to indemnity
under paragraph (a) of this Section with respect to such Third Party Claim.

(y) If the Indemnifying Party fails to notify the Indemnified Party within the
Dispute Period that the Indemnifying Party desires to defend the Third Party
Claim pursuant to paragraph (b) of this Section, or if the Indemnifying Party
gives such notice but fails to prosecute vigorously and diligently or settle the
Third Party Claim, or if the Indemnifying Party fails to give any notice
whatsoever within the Dispute Period, then the Indemnified Party shall have the
right to defend, at the sole cost and expense of the Indemnifying Party, the
Third Party Claim by all appropriate proceedings, which proceedings shall be
prosecuted by the Indemnified Party in a reasonable manner and in good faith or
will be settled at the discretion of the Indemnified Party (with the consent of
the Indemnifying Party, which consent will not be unreasonably withheld). The
Indemnified Party will have full control of such defense and proceedings,
including any compromise or settlement thereof, subject to the provisions of the
previous sentence; provided, however, that if requested by the Indemnified
Party, the Indemnifying Party will, at the sole cost and expense of the
Indemnifying Party, provide reasonable cooperation to the Indemnified Party and
its counsel in contesting any Third Party Claim which the Indemnified Party is
contesting. Notwithstanding the foregoing provisions of this subparagraph (y),
if the Indemnifying Party has notified the Indemnified Party within the Dispute
Period that the Indemnifying Party disputes its liability or the amount of its
liability hereunder to the Indemnified Party with respect to such Third Party
Claim and if such dispute is resolved in favor of the Indemnifying Party in the
manner provided in subparagraph(z) below, the Indemnifying Party will not be
required to bear the costs and expenses of the Indemnified Party's defense
pursuant to this subparagraph (y) or of the Indemnifying Party's participation
therein at the Indemnified Party's request, and the Indemnified Party shall
reimburse the Indemnifying Party in full for all reasonable costs and expenses
incurred by the Indemnifying Party in connection with

                                      24                               2/19/04

<PAGE>

such litigation. The Indemnifying Party may participate in, but not control, any
defense or settlement controlled by the Indemnified Party pursuant to this
subparagraph (y), and the Indemnifying Party shall bear its own costs and
expenses with respect to such participation.

      (z) If the Indemnifying Party notifies the Indemnified Party that it does
      not dispute its liability or the amount of its liability to the
      Indemnified Party with respect to the Third Party Claim under paragraph
      (a) of this Section or fails to notify the Indemnified Party within the
      Dispute Period whether the Indemnifying Party disputes its liability or
      the amount of its liability to the Indemnified Party with respect to such
      Third Party Claim, the amount of Damages specified in the Claim Notice
      shall be conclusively deemed a liability of the Indemnifying Party under
      paragraph (a) of this Section and the Indemnifying Party shall pay the
      amount of such Damages to the Indemnified Party on demand. If the
      Indemnifying Party has timely disputed its liability or the amount of its
      liability with respect to such claim, the Indemnifying Party and the
      Indemnified Party shall proceed in good faith to negotiate a resolution of
      such dispute; provided, however, that it the dispute is not resolved
      within thirty (30) days after the Claim Notice, the Indemnifying Party
      shall be enlisted to institute such legal action as it deems appropriate.

                  (ii) In the event any Indemnified Party should have a claim
under paragraph (a) of this Section against the Indemnifying Party that does not
involve a Third Party Claim, the Indemnified Party shall deliver a written
notification of a claim for indemnity under paragraph (a) of this Section
specifying the nature of and basis for such claim, together with the amount or,
if not then reasonably ascertainable, the estimated amount, determined in good
faith, of such claim (an "Indemnity Notice") with reasonable promptness to the
Indemnifying Party. The failure by any Indemnified Party to give the Indemnity
Notice shall not impair such party's rights hereunder except to the extent that
the Indemnifying Party demonstrates that it has been irreparably prejudiced
thereby. If the Indemnifying Party notifies the Indemnified Party that it does
not dispute the claim or the amount of the claim described in such Indemnity
Notice or fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes the claim or the amount of the claim
described in such Indemnity Notice, the amount of Damages specified in the
Indemnity Notice will be conclusively deemed a liability of the Indemnifying
Party under paragraph (a) of this Section and the Indemnifying Party shall pay
the amount of such Damages to the Indemnified Party on demand. If the
Indemnifying Party has timely disputed its liability or the amount of its
liability with respect to such claim, the Indemnifying Party and the Indemnified
Party shall proceed in good faith to negotiate a resolution of such dispute;
provided, however, that it the dispute is not resolved within thirty (30) days
after the Claim Notice, the Indemnifying Party shall be enlisted to institute
such legal action as it deems appropriate.

            c. The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar rights of the indemnified party against the
indemnifying party or others, and (ii) any liabilities the indemnifying party
may be subject to.

                                      25                               2/19/04

<PAGE>

            10. JURY TRIAL WAIVER. The Company and the Lender hereby waive a
trial by jury in any action, proceeding or counterclaim brought by either of the
Parties hereto against the other in respect of any matter arising out or in
connection with the Transaction Agreements.

            11. GOVERNING LAW: MISCELLANEOUS.

            a. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York for contracts to be wholly performed in
such state and without giving effect to the principles thereof regarding the
conflict of laws. Each of the parties consents to the exclusive jurisdiction of
the federal courts whose districts encompass any part of the County of New York
or the state courts of the State of New York sitting in the County of New York
in connection with any dispute arising under this Agreement or any of the other
Transaction Agreements and hereby waives, to the maximum extent permitted by
law, any objection, including any objection based on forum non conveniens, to
the bringing of any such proceeding in such jurisdictions. To the extent
determined by such court, the Company shall reimburse the Lender for any
reasonable legal fees and disbursements incurred by the Lender in enforcement of
or protection of any of its rights under any of the Transaction Agreements.

            b. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.

            c. This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of each of the parties hereto. Notwithstanding the
foregoing, no party hereto may assign this Agreement or any of its rights or
delegate any of its obligations hereunder without the prior written consent of
the other party.

            d. All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.

            e. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto.

            f. This Agreement may be signed in one or more counterparts, each of
which shall be deemed an original.

            g. The headings of this Agreement are for convenience of reference
and shall not form part of, or affect the interpretation of, this Agreement.

            h. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.

                                      26                               2/19/04

<PAGE>

            i. This Agreement may be amended only by an instrument in writing
signed by the party to be charged with enforcement thereof.

            j. This Agreement supersedes all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof.

            12. NOTICES. Any notice required or permitted hereunder shall be
given in writing (unless otherwise specified herein) and shall be deemed
effectively given on the earliest of

            (a) the date delivered, if delivered by personal delivery as against
            written receipt therefor or by confirmed facsimile transmission,

            (b) the fifth business day after deposit, postage prepaid, in the
            United States Postal Service by registered or certified mail,
            properly addressed to the recipient thereof, or

            (c) the third business day after mailing by domestic or
            international express courier, with delivery costs and fees prepaid,
            properly addressed to the recipient thereof,

in each case, properly addressed to each of the other parties thereunto entitled
at the following addresses (or at such other addresses as such party may
designate by ten (10) days' advance written notice similarly given to each of
the other parties hereto):

COMPANY:          At the address set forth at the head of this Agreement.
                  Attn: Michael Hewitt, CEO
                  Telephone No.: (919) 469-6999
                  Telecopier No.: (919) 465-9102

                  with a copy to:

                  Anthony L.  Williams, Esq.
                  Wyrick Robbins Yates & Ponton LLP
                  4101 Lake Boone Trail
                  Suite 300
                  Raleigh, NC 27607
                  Telephone No.: (919) 781-4000
                  Telecopier No.: (919) 781-4865

LENDER:           At the address set forth on the signature page of this
                  Agreement.

                                      27                               2/19/04

<PAGE>

                  with a copy to:

                  Krieger & Prager LLP, Esqs.
                  39 Broadway
                  Suite 1440
                  New York, NY 10006
                  Attn: Ronald J. Nussbaum, Esq.
                  Telephone No.: (212) 363-2900
                  Telecopier No. (212) 363-2999

ESCROW AGENT:     Krieger & Prager LLP, Esqs.
                  39 Broadway
                  Suite 1440
                  New York, NY 10006
                  Attn: Samuel Krieger, Esq.
                  Telephone No.: (212) 363-2900
                  Telecopier No. (212) 363-2999

            13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's and
the Lender's representations and warranties herein shall survive the execution
and delivery of this Agreement and the delivery of the Certificates and the
payment of the Purchase Price, and shall inure to the benefit of the Lender and
the Company and their respective successors and assigns.

               [BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]

                                      28                               2/19/04
<PAGE>

            IN WITNESS WHEREOF, this Agreement has been duly executed by the
Lender (if an entity, by one of its officers thereunto duly authorized) as of
the date set forth below.

PURCHASE PRICE:                                       $________________________

                             SIGNATURES FOR LENDERS

            IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Agreement to be duly
executed on its behalf this ______________ day of _______________________, 2004.

________________________________    _____________________________________
Address                             Printed Name of Lender

________________________________

                                    By: _________________________________
Telecopier No._________________     (Signature of Authorized Person)

                                    _____________________________________
______________________________       Printed Name and Title
Jurisdiction of Incorporation
or Organization

The undersigned hereby accepts this Agreement and represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf as of the date first above written.

MOBILE REACH INTERNATIONAL, INC.

By:         __________________________

Title:      __________________________

<PAGE>

ANNEX I           FORM OF DEBENTURE

ANNEX II          JOINT ESCROW INSTRUCTIONS

ANNEX III         OPINION OF COUNSEL

ANNEX IV          REGISTRATION RIGHTS AGREEMENT

ANNEX V           FORM OF WARRANT

ANNEX VI          COMPANY DISCLOSURE MATERIAL

ANNEX VII         COMPANY'S SEC DOCUMENTS AVAILABLE ON EDGAR

                                                                       2/19/04

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