Document:

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                                                                   Exhibit 10.10

THE SHARES SUBSCRIBED FOR BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE OR OTHER SECURITIES
LAWS, AND THE SHARES ARE SUBJECT TO THE TERMS OF THE CONFIDENTIAL PRIVATE
PLACEMENT MEMORANDUM DATED AS OF MAY 1, 2003, THIS AGREEMENT AND APPLICABLE
FEDERAL AND STATE SECURITIES LAWS.

                SHARES OF NORTH AMERICAN TECHNOLOGIES GROUP, INC.
                -------------------------------------------------
                             SUBSCRIPTION AGREEMENT
                             ----------------------

TO: NORTH AMERICAN TECHNOLOGIES GROUP, INC.

GENTLEMEN:

1.   Subscription.

          The undersigned (the "Subscriber") hereby subscribes for and agrees to
purchase the number of shares of Common Stock, $.001 par value per share (the
"Shares"), of North American Technologies Group, Inc., a Delaware corporation
(the "Company"), set forth on the signature page attached hereto.

2.   Payment.

          The undersigned agrees to pay sixty cents ($0.60) per Share for the
Shares by the transfer, sale and conveyance to the Company of 408,000 shares of
common stock of Global Photonic Energy Corporation (the "GPEC Shares"). The GPEC
Shares have a current market value of One Million Twenty Thousand Dollars
($1,020,000) valued by recent arm's-length, private placement transactions.
Subscriber shall execute a power of attorney transferring the GPEC Shares to the
Company in payment in full for the Shares.

3.   Representations and Warranties.

          By executing this Subscription Agreement, the undersigned further:

     (a)  acknowledges that the undersigned has received and carefully read the
          Company's Confidential Private Placement Memorandum dated as of May 1,
          2003, including the Company's Confidential Business Plan and all other
          exhibits and attachments thereto ("Memorandum"), is familiar with and
          understands the Memorandum and the material risk factors contained
          therein, has based its decision to invest solely on the information
          contained in the Memorandum and has not been furnished with or relied
          upon any other offering literature or prospectus, except as provided
          in the Memorandum.

     (b)  represents and warrants that it is an "accredited investor" as that
          term is defined in Rule 501 of Regulation D of the Securities Act of
          1933, as amended (the

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          "Securities Act") and that one or more of the categories set forth in
          Section 5(g) of this Subscription Agreement correctly and in all
          respects describes the undersigned.

     (c)  acknowledges that the undersigned has received and carefully read this
          Subscription Agreement;

     (d)  represents and warrants that it is acquiring the Shares for its own
          account as a principal, for investment purposes only and not with a
          view to, or for, resale or distribution, and no other person has a
          direct or indirect beneficial interest in such Shares. Further, the
          undersigned does not have any contract, understanding, agreement or
          arrangement in existence or contemplated, with any person to sell,
          pledge, assign or otherwise transfer to such person or to any third
          person, with respect to any of the Shares;

     (e)  represents and warrants that it has such knowledge and experience in
          financial and business matters that it is capable of evaluating the
          merits and risks of the prospective investment;

     (f)  represents and warrants that it is able to bear the economic risk of
          losing its entire investment in the Shares and is not relying on the
          Company with respect to advice as to the economic considerations in
          this investment;

     (g)  represents and warrants that its overall commitment to investments
          which are not readily marketable is not disproportionate to its net
          worth, and its investment in the Shares will not cause such overall
          commitment to become excessive;

     (h)  understands that the Company shall have the right, in its sole
          discretion, to accept or reject this subscription, in whole or in
          part, or to allocate to it fewer than the number of Shares for which
          it has subscribed. The Company will notify it whether this
          subscription is accepted or rejected. In the event this subscription
          is rejected, the GPE Shares will be returned to it and all of its
          obligations hereunder shall terminate;

     (i)  agrees and understands that it will not sell or otherwise transfer any
          Shares or any interest therein unless the Shares are registered under
          the Securities Act and any other applicable securities laws or the
          undersigned obtains an opinion of counsel which is satisfactory to the
          Company (both as to the issuer of the opinion and the form and
          substance thereof) that the Shares may be transferred in reliance on
          an applicable exemption from such registration requirements;

     (j)  understands that (i) the offering contemplated hereby has not been
          reviewed by any federal or state governmental body or agency due in
          part to the Company's representations that it will comply with the
          provisions of Regulation D; (ii) if required by the laws or
          regulations of said state(s), the offering contemplated

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          hereby will be submitted to the appropriate authorities of such
          state(s) for registration or exemption therefrom; and (iii) the
          documents used in connection with this Offering have not been reviewed
          or approved by any regulatory agency or government department, nor has
          any such agency or government department made any finding or
          determination as to the fairness of the Shares for investment;

     (k)  understands that the Shares have not been registered under the
          Securities Act and that no market exists for them. The undersigned has
          adequate means of providing for its current needs and personal and
          family contingencies, has no need for liquidity in the investment
          contemplated hereby, and is able to bear the risk of loss of its
          entire investment;

     (1)  understands that its investment in the Company is subject to numerous
          substantial risks, certain of which are set forth in the Memorandum;

     (m)  it has been formed and validly exists and has not been organized for
          the specific purpose of purchasing the Shares and is not prohibited
          from doing so;

     (n)  recognizes that the Company may seek to raise additional operating
          capital through a variety of sources, and that although the Company
          may undertake one or more public or private offerings of its debt or
          equity securities, there can be no assurance that any such offering
          will be made or, if made, that it will be successful. The undersigned
          acknowledges that the Company has no obligation, in the event of any
          such additional offerings, to offer the undersigned the opportunity to
          participate therein;

     (o)  acknowledges that all material documents, records, and books
          pertaining to this investment have on request been made available to
          its and its advisers, if any;

     (p)  acknowledges that if it is purchasing the Shares subscribed for hereby
          in a fiduciary capacity, the above representations and warranties
          shall be deemed to have been made on behalf of the person or persons
          for whom it is so purchasing;

     (q)  acknowledges that the Company has made available to it the opportunity
          to ask questions of, and receive answers from the Company or its
          representatives regarding its proposed business operations and this
          Offering and has been given the opportunity for a reasonable time
          prior to the date hereof to review such additional information
          necessary to verify the accuracy of the information contained in the
          Memorandum or that which was otherwise provided to the undersigned in
          order to evaluate the merits and risks of a purchase of the Shares to
          the extent the Company could acquire it without unreasonable effort or
          expense;

     (r)  ACKNOWLEDGES AND UNDERSTANDS THAT:

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NASAA UNIFORM LEGEND
--------------------

     IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE ISSUER'S SECURITIES AND THE TERMS OF THE OFFERING, INCLUDING
THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY
FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE
FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY
OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

     THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE
AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES
ACT, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO
BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

     THE INVESTOR MUST RELY ON THE INVESTOR'S OWN EXAMINATION OF THE PERSON OR
ENTITY CREATING THE SECURITIES AND THE TERMS OF THE OFFERING, INCLUDING THE
MERITS AND RISKS INVOLVED, IN MAKING AN INVESTMENT DECISION ON THESE SECURITIES;

     (s)  understands that the Shares are being offered and sold in reliance on
          specific exemptions from the registration requirements of Federal and
          state securities law and that the Company is relying upon the truth
          and accuracy of the representations, warranties, agreements,
          acknowledgments, and understandings set forth herein in order to
          determine the applicability of such exemptions;

     (t)  represents, warrants and agrees that it will not sell, pledge, or
          otherwise transfer the Shares without registration under the
          Securities Act or an exemption therefrom and fully understands and
          agrees that it must bear the economic risk of its purchase because,
          among other reasons, the Shares have not been registered under the
          Securities Act or under the securities laws of any state and,
          therefore, cannot be resold, pledged, assigned or otherwise disposed
          of unless they are subsequently registered under the Securities Act
          and under the applicable securities laws of such states or an
          exemption from such registration is available. In particular, the
          undersigned is aware that the Shares are "restricted securities", as
          such term is defined in Rule 144 promulgated under the Securities Act
          ("Rule 144"), may not be sold unless all of the conditions of Rule 144
          are met. Subscriber further understands that sales or transfers of the
          Shares are further restricted by state securities laws and the
          provisions of this Subscription Agreement;

     (u)  no representations or warranties have been made to the undersigned by
          the Company, or any officer, employee, agent, affiliate or subsidiary
          of the Company,

                                        4

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          other than the representations of the Company contained in the
          Memorandum, and in subscribing for the Shares the undersigned is not
          relying upon any representations other than those contained in the
          Memorandum;

     (v)  any information which the undersigned furnishes to the Company with
          respect to its financial position and business experience is correct
          and complete as of the date of this Subscription Agreement, and if
          there should be any material change in such information it will
          immediately furnish such revised or corrected information to the
          Company;

     (w)  understands and agrees that each stock certificate evidencing the
          Shares provided by the Company to the undersigned shall bear the
          following legend:

          "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
          ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE
          OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED OR TRANSFERRED
          EXCEPT (i) PURSUANT TO A REGISTRATION STATEMENT UNDER THE
          SECURITIES ACT WHICH HAS BECOME EFFECTIVE AND IS CURRENT WITH
          RESPECT TO THESE SECURITIES, OR (ii) PURSUANT TO A SPECIFIC
          EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT BUT ONLY
          UPON A HOLDER HEREOF FIRST HAVING OBTAINED THE WRITTEN OPINION OF
          COUNSEL TO THE ISSUER, OR OTHER COUNSEL REASONABLY ACCEPTABLE TO
          THE ISSUER, THAT THE PROPOSED DISPOSITION IS CONSISTENT WITH ALL
          APPLICABLE PROVISIONS OF THE SECURITIES ACT AS WELL AS ANY
          APPLICABLE STATE SECURITIES LAW."

     (x)  the address set forth below is the undersigned's correct principal
          office, and the undersigned has no present intention of changing such
          address;

     (y)  the undersigned understands that the purchase of the Shares is a
          speculative investment which involves a high degree of risk of loss of
          the entire investment in the Company;

     (z)  the undersigned hereby authorizes the Company or its respective
          designees to call the undersigned's bank or place of employment or
          otherwise inquire regarding the undersigned's financial standing;

     (aa) the foregoing representations, warranties and agreements shall survive
          the date of acceptance of this Subscription Agreement by the Company
          and that the information set forth herein regarding the undersigned is
          true and correct; and

                                        5

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     (bb) it understands the meaning of the representations made by it in this
          Subscription Agreement. The undersigned also understands that the
          Company will be requesting certain background and financial
          information from it in order to verify that it is eligible to
          subscribe for Shares, and that such information must be true and
          correct inasmuch as the Company is relying upon the accuracy of such
          information.

4.   General Information About the Subscriber.

     (a)  Name of Subscriber: Avalanche Resources, Ltd.

          Address and telephone number: 8 Saddlewood Estates, Houston, TX 77024

     (b)  Social Security or Tax ID Number of Subscriber:_______________________

     (c)  Can Subscriber afford to hold Subscriber's investment in the Company
          for an indefinite period of time? (Answer yes or no) Yes [X]   No [_]

     (d)  Can Subscriber afford a loss of its prospective investment in the
          Company? (Answer yes or no) Yes [X]   No [_]

     (e)  If Subscriber is not an individual:

               (1)  Is Subscriber's principal place of business located, or does
                    Subscriber have substantial amounts of assets, in any other
                    state(s)? No If yes, which state(s)?________________________

               (2)  In which state(s), if any, does Subscriber file state or
                    local franchise, business or other tax returns? Texas

               (3)  In which state(s) is Subscriber authorized to do business?
                    Texas

               (4)  Subscriber is (check appropriate type and give the requested
                    information):

                    [_]  Corporation (jurisdiction and date of incorporation):
                         _______________________________________________________

                    [X]  Partnership (jurisdiction and date where original
                         Certificate filed or date of Partnership Agreement
                         if filing not required): Texas

                    [_]  Trust (jurisdiction and date of Trust Agreement):
                         _______________________________________________________

                                        6

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                    [_]  Limited Liability Company (jurisdiction and date of
                         formation):____________________________________________

                    [_]  Other (Describe):______________________________________

               (5)  Was Subscriber organized for the specific purpose of
                    acquiring the Shares?
                    (Answer yes or no) Yes [_]   No [X]

     (f)  Subscriber is an "accredited investor" because it falls within the
          applicable category(ies) checked below:

[_]       (1)  Any employee benefit plan within the meaning of ERISA, if a
self-directed plan, with investment decisions made solely by persons that are
"accredited investors"; or if the investment decision is made by a plan
fiduciary, as defined in section 3(21) of such Act, which is either a bank,
savings and loan association, insurance company, or registered investment
adviser, or if the employee benefit plan has total assets in excess of $5
million;

[_]       (2)  Any bank as defined in section 3(a)(2) of the Securities Act, or
any savings or loan association or other institution as defined in section
3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary
capacity; any broker or dealer registered pursuant to section 15 of the
Securities Exchange Act of 1934; any insurance company as defined in section
2(13) of the Act; any investment company registered under the Investment Company
Act of 1940 or a business development company as defined in section 2(a)(48) of
that Act; any Small Business Investment Company licensed by the U.S. Small
Business Administration under section 301(c) or (d) of the Small Business
Investment Act of 1958, any plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees if such plan has total
assets in excess of $5 million;

[_]       (3)  Any private business development company as defined in section
202(a)(22) of the Investment Advisers Act of 1940:

[_]       (4)  Any organization described in section 501(c)(3) of the Internal
Revenue Code of 1986, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the Shares, with
total assets in excess of $5,000,000;

[_]       (5)  Any natural person whose individual net worth, or joint net worth
with that persons' spouse, at the time of his purchase exceeds $1,000,000;

[_]       (6)  Any natural person who had an income in excess of $200,000 in
each of the two most recent years or joint income with that person's spouse in
excess of $300,000 in each of those years and has a reasonable expectation of
reaching the same income level in the current year;

                                        7

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[_]       (7)  Any trust with total assets in excess of $5,000,000, not formed
for the specific purpose of purchasing the Shares, whose purchase is directed by
a "sophisticated" person;

[X]       (8)  Any entity in which all of the equity owners are "accredited
               investors;" or

[_]       (9)  Any director or executive officer of the Company.

6.   Registration Rights. If a minimum of $3 million is subscribed for in the
Offering, the Company agrees to make all reasonable efforts to file a
registration statement with the SEC to register the sale of the Shares by the
Subscriber upon written request made within 270 days after the closing of the
Offering; provided, however, that if the Subscriber is able to sell all of the
Shares owned by him or her in the public market by means of Rule 144 within 60
days of the filing of the registration statement, this obligation of the Company
shall terminate.

7.   Miscellaneous.

     (a)  Indemnify. The undersigned agrees to indemnify and hold harmless the
          Company, its officers and directors, employees, agents and affiliates
          against any loss, liability, claim damage and expense whatsoever
          (including, but not limited to, any and all expenses whatsoever
          reasonably incurred in investigating, preparing or defending against
          any litigation commenced or threatened or any claim whatsoever)
          arising out of or based upon any false representation or warranty or
          breach or failure by the undersigned to comply with any covenant or
          agreement made by the undersigned herein or in any other document
          furnished by or on behalf of the undersigned to any of the foregoing
          in connection with this transaction.

     (b)  Modification. Neither this Subscription Agreement nor any provisions
          hereof shall be modified, discharged or terminated except by an
          instrument in writing signed by the party against whom any waiver,
          change, discharge or termination is sought.

     (c)  Notices. Any notice, demand, or other communication which any party
          hereto may be required, or may elect, to give to anyone interested
          hereunder shall be sufficiently given if (i) deposited, postage
          prepaid, in a United States mail letter box, registered or certified
          mail, return receipt requested, addressed to such address as may be
          given herein, or (ii) delivered personally at such address.

     (d)  Counterparts. This Subscription Agreement may be executed and
          delivered via facsimile through the use of separate signature pages or
          in any number of counterparts, and each of such counterparts shall,
          for all purposes, constitute one agreement binding on all parties,
          notwithstanding that all parties are not signatories to the same
          counterpart.

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     (e)  Binding Effect. Except as otherwise set forth herein, this
          Subscription Agreement shall be binding upon and inure to the benefit
          of the parties and their heirs, executors, administrators, successors,
          legal representatives and assigns. If the undersigned is more than one
          person, the obligations of the undersigned shall be joint and several
          and the agreements, representations, warranties and acknowledgments
          herein contained shall be deemed to be made by and be binding upon
          each such person and his heirs, executors, administrators and
          successors.

     (f)  Entire Agreement. This instrument contains the entire agreement of the
          parties, and there are no representations, covenants or other
          agreements except as stated or referred to herein.

     (g)  Assignability. This Subscription Agreement is not transferable or
          assignable by the Subscriber.

     (h)  Law Governing. This Subscription Agreement shall be enforced, governed
          and construed in all respects in accordance with the laws of the State
          of Delaware, without giving effect to its conflicts of law principles.

Number of Shares Subscribed for: 1,700,000 ($0.60 per Share)

Consideration Paid: 408,000 shares of Global Photonic Energy Corporation ($2.50
per share)

PLEASE TYPE OR PRINT THE FOLLOWING INFORMATION EXACTLY AS YOU WISH IT TO APPEAR
ON THE COMPANY RECORDS.

     Avalanche Resources, Ltd.
--------------------------------------------------------------------------------
Name of Subscriber                                    (Taxpayer ID Number)

     8 Saddlewood Estates, Houston, Texas 77024
--------------------------------------------------------------------------------
Address-Street, City, State, Zip Code                 (Telephone No.)

SIGNATURE

     The undersigned corporate officer, general partner, trustee, member or
manager certifies and warrants that he has full power and authority from and on
behalf of the entity named below and its shareholders, partners, members or
beneficiaries and is permitted by applicable law to complete, execute, and
deliver this Subscription Agreement Signature Page on its behalf and to make the
statements, representations, warranties, and agreements made herein on its
behalf, and that investment in the Company has been affirmatively authorized by
the governing board or body of the entity and is not prohibited by law or the
governing documents of the entity.

     IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement on the date set forth below.

                                        9

<PAGE>

                                        AVALANCHE RESOURCES, LTD.

Dated: July 15, 2003                    By: /s/ Kevin C. Maddox
                                            ------------------------------------
                                            Kevin C. Maddox, President

                 AGREED AND ACCEPTED this 15th day of July, 2003

                                        NORTH AMERICAN TECHNOLOGIES GROUP, INC.

                                        By: /s/ Henry W. Sullivan
                                            ------------------------------------
                                            Henry W. Sullivan, President

                                       10<PAGE>

                                  EXHIBIT 10.11

                          SECURITIES PURCHASE AGREEMENT

     This Securities Purchase Agreement (this "Agreement") is dated as of
December 31, 2003, among North American Technologies Group, Inc., a Delaware
corporation (the "Company"), and the purchasers identified on the signature
pages hereto (each a "Purchaser" and collectively the "Purchasers"); and

     WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act (as defined below), and Rule
506 promulgated thereunder, the Company desires to issue and sell to the
Purchasers, and the Purchasers, severally and not jointly, desires to purchase
from the Company in the aggregate, up to $5,000,000 of Common Stock and Warrants
on the Closing Date.

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

                                   ARTICLE I.
                                   DEFINITIONS

     1.1  Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the
meanings indicated in this Section 1.1:

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

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

          "Closing" means the closing of the purchase and sale of the Common
     Stock and the Warrants pursuant to Section 2.1.

          "Closing Date" means the date of the Closing, which shall be the date
     hereof.

          "Closing Price" means on any particular date (a) the last reported
     closing bid price per share of Common Stock on such date on the Trading
     Market (as reported by Bloomberg L.P. at 4:15 PM (New York time), or (b) if
     there is no such price on such date, then the closing bid price on the
     Trading Market on the date nearest preceding such date (as reported by
     Bloomberg L.P. at 4:15 PM (New York time) for the closing bid price for
     regular session trading on such day), or (c) if the Common Stock is not
     then listed or quoted on the Trading Market and if prices for the Common
     Stock are then reported in the "pink sheets" published by the National
     Quotation Bureau Incorporated (or a similar organization or agency
     succeeding to its functions of reporting prices), the

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     most recent bid price per share of the Common Stock so reported, or (d) if
     the shares of Common Stock are not then publicly traded the fair market
     value of a share of Common Stock as determined by an appraiser selected in
     good faith by the Purchasers of a majority in interest of the Shares then
     outstanding.

          "Commission" means the Securities and Exchange Commission.

          "Common Stock" means the common stock of the Company, $0.001 par value
     per share, and any securities into which such common stock may hereafter be
     reclassified.

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

          "Company Counsel" means Boyer & Ketchand, a professional corporation,
     Houston, Texas.

          "Disclosure Schedules" means the Disclosure Schedules attached hereto.

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

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

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

          "Intellectual Property Rights" shall have the meaning ascribed to such
     term in Section 3.1(o).

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

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

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

          "Per Share Purchase Price" equals $0.60 subject to adjustment for
     reverse and forward stock splits, stock dividends, stock combinations and
     other similar transactions of the Common Stock that occur after the date of
     this Agreement.

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

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<PAGE>

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

          "Registration Rights Agreement" means the Registration Rights
     Agreement, dated as of the date of this Agreement, among the Company and
     each Purchaser, in the form of Exhibit A hereto.

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

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

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

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

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

          "Shareholder Approval" means such approval as may be required by the
     applicable rules and regulations of the Trading Market (or any successor
     entity) from the shareholders of the Company with respect to the
     transactions contemplated by the Transaction Documents, including the
     issuance of all of the Underlying Shares and shares of Common Stock
     issuable upon exercise of the Warrants in excess of 19.999% of the
     Company's issued and outstanding Common Stock on the Closing Date.

          "Shares" means the shares of Common Stock issued or issuable to each
     Purchaser pursuant to this Agreement.

          "Subscription Amount" means, as to each Purchaser, the amounts set
     forth below such Purchaser's signature block on the signature page hereto,
     in United States dollars and in immediately available funds.

          "Subsidiary" shall mean the subsidiaries of the Company, if any, set
     forth on Schedule 3.1(a).

          "Trading Day" means (i) a day on which the Common Stock is traded on a
     Trading Market, or (ii) if the Common Stock is not quoted on a Trading
     Market, a day on which the Common Stock is quoted in the over-the-counter
     market as reported by the National Quotation Bureau Incorporated (or any
     similar organization or agency succeeding its functions of reporting
     prices).

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

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          "Transaction Documents" means this Agreement, the Warrants and the
     Registration Rights Agreement and any other documents or agreements
     executed in connection with the transactions contemplated hereunder.

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

          "Warrants" means collectively the Common Stock purchase warrants
     delivered to the Purchasers at the Closing in accordance with Section
     2.2(a)(iii)-(iv) hereof.

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

                                   ARTICLE II.
                                PURCHASE AND SALE

     2.1  Closing. On the Closing, each Purchaser shall purchase from the
Company, severally and not jointly with the other Purchasers, and the Company
shall issue and sell to each Purchaser, (a) a number of Shares equal to such
Purchaser's Subscription Amount divided by the Per Share Purchase Price and (b)
the Warrants as determined pursuant to Section 2.2(a)(iii)-(iv). The aggregate
Subscription Amounts for Shares sold hereunder shall be up to $5,000,000. Upon
satisfaction of the conditions set forth in Section 2.2, the Closing shall occur
at the offices of FW, or such other location as the parties shall mutually
agree.

     2.2  Closing Conditions.

          (a)  On the Closing Date, the Company shall deliver or cause to be
     delivered to each Purchaser the following:

               (i)   this Agreement duly executed by the Company;

               (ii)  within 3 Trading Days of the Closing Date, a certificate
          evidencing a number of Shares equal to such Purchaser's Subscription
          Amount divided by the Per Share Purchase Price, registered in the name
          of such Purchaser;

               (iii) within 3 Trading Days of the Closing Date, a Warrant
          registered in the name of Crestview Capital Master LLC (the "Lead
          Investor") to purchase up 4,166,667 shares of Common Stock, with a
          term of 180 days and an exercise price equal to $0.60, subject to
          adjustment therein (the "Series A Warrant"), in the form of Exhibit B
          attached hereto;

               (iv)  within 3 Trading Days of the Closing Date, a Warrant
          registered in the name of such Purchaser to purchase up to a number of
          shares of Common Stock equal to 100% of such Purchaser's Subscription
          Amount, with a term of 5 years and an exercise price equal to $0.60,
          subject to adjustment therein (the "Series B Warrant"), in the form of
          Exhibit C attached hereto;

                                        4

<PAGE>

               (v)   the Registration Rights Agreement duly executed by the
          Company;

               (vi)  the written voting agreement from Avalanche Resources,
          Ltd., who holds more than 68.11% of the issued and outstanding shares
          of Common Stock as of December 31, 2002, to vote all Common Stock
          owned by it as of the record date at a meeting of shareholders of the
          Company to be held no later than May 31, 2004 in favor of Shareholder
          Approval; and

               (vii) a legal opinion of Company Counsel, in the form of Exhibit
          D attached hereto.

          (b)  On the Closing Date, each Purchaser shall deliver or cause to be
     delivered to the Company the following:

               (i)   this Agreement duly executed by such Purchaser;

               (ii)  such Purchaser's Subscription Amount by wire transfer to
          the account of the Company; and

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

          (c)  All representations and warranties of the other party contained
     herein shall remain true and correct as of the Closing Date.

          (d)  All obligations, covenants and agreements of the parties required
     to be performed at or prior to the Closing Date shall have been performed.

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

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

     3.1  Representations and Warranties of the Company. Except as set forth
under the corresponding section of the Disclosure Schedules delivered
concurrently herewith, the Company hereby makes the following representations
and warranties as of the date hereof to each Purchaser:

                                        5

<PAGE>

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

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

          (c)  Authorization; Enforcement. The Company has the requisite
     corporate power and authority to enter into and to consummate the
     transactions contemplated by each of the Transaction Documents and
     otherwise to carry out its obligations thereunder. The execution and
     delivery of each of the Transaction Documents by the Company and the
     consummation by it of the transactions contemplated thereby have been duly
     authorized by all necessary action on the part of the Company and no
     further action is required by the Company in connection therewith other
     than in connection with the Required Approvals. Each Transaction Document
     has been (or upon delivery will have been) duly executed by the Company
     and, when delivered in accordance with the terms hereof, will constitute
     the valid and binding obligation of the Company enforceable against the
     Company in accordance with its terms except (i) as limited by applicable
     bankruptcy, insolvency, reorganization, moratorium and other laws of
     general application affecting enforcement of creditors' rights generally
     and (ii) as limited by laws relating to the availability of specific
     performance, injunctive relief or other equitable remedies.

          (d)  No Conflicts. The execution, delivery and performance of the
     Transaction Documents by the Company, the issuance and sale of the Shares
     and the consummation by the Company of the other transactions contemplated
     thereby do not and will not (i) conflict with or violate any provision of
     the Company's or any Subsidiary's certificate or articles of incorporation,
     bylaws or other organizational or charter documents, or (ii) conflict with,
     or constitute a default (or an event that with notice or lapse of time or
     both

                                        6

<PAGE>

     would become a default) under, result in the creation of any Lien upon any
     of the properties or assets of the Company or any Subsidiary, or give to
     others any rights of termination, amendment, acceleration or cancellation
     (with or without notice, lapse of time or both) of, any agreement, credit
     facility, debt or other instrument (evidencing a Company or Subsidiary debt
     or otherwise) or other understanding to which the Company or any Subsidiary
     is a party or by which any property or asset of the Company or any
     Subsidiary is bound or affected, or (iii) subject to the Required
     Approvals, conflict with or result in a violation of any law, rule,
     regulation, order, judgment, injunction, decree or other restriction of any
     court or governmental authority to which the Company or a Subsidiary is
     subject (including federal and state securities laws and regulations), or
     by which any property or asset of the Company or a Subsidiary is bound or
     affected, or (iv) conflict with or violate the terms of any agreement by
     which the Company or any Subsidiary is bound or to which any property or
     asset of the Company or any Subsidiary is bound or affected; except in the
     case of each of clauses (ii) and (iii), such as could not have or
     reasonably be expected to result in a Material Adverse Effect.

          (e)  Filings, Consents and Approvals. The Company is not required to
     obtain any consent, waiver, authorization or order of, give any notice to,
     or make any filing or registration with, any court or other federal, state,
     local or other governmental authority or other Person in connection with
     the execution, delivery and performance by the Company of the Transaction
     Documents, other than (i) filings required pursuant to Section 4.4 of this
     Agreement, (ii) the filing with the Commission of the Registration
     Statement, (iii) application(s) to each applicable Trading Market for the
     listing of the Shares and Warrant Shares for trading thereon in the time
     and manner required thereby, and (iv) the filing of Form D with the
     Commission and such filings as are required to be made under applicable
     state securities laws (collectively, the "Required Approvals").

          (f)  Issuance of the Securities. The Securities are duly authorized
     and, when issued and paid for in accordance with the Transaction Documents,
     will be duly and validly issued, fully paid and nonassessable, free and
     clear of all Liens. The issuance of the Shares is not subject to any
     preemptive or similar rights to subscribe for or purchase securities. The
     Company has reserved from its duly authorized capital stock the maximum
     number of shares of Common Stock issuable pursuant to this Agreement and
     the Warrants.

          (g)  Capitalization. The capitalization of the Company is as described
     in the Company's most recent periodic report filed with the Commission. The
     Company has not issued any capital stock since such filing other than
     pursuant to the exercise of employee stock options under the Company's
     stock option plans, the issuance of shares of Common Stock to employees
     pursuant to the Company's employee stock purchase plan and pursuant to the
     conversion or exercise of outstanding Common Stock Equivalents outstanding.
     No Person has any right of first refusal, preemptive right, right of
     participation, or any similar right to participate in the transactions
     contemplated by the Transaction Documents. Except as a result of the
     purchase and sale of the Securities, there are no outstanding options,
     warrants, script rights to subscribe to, calls or commitments of any
     character whatsoever relating to, or securities, rights or obligations
     convertible into or exchangeable for, or giving any Person any right to
     subscribe for or acquire, any shares of Common Stock, or contracts,
     commitments, understandings or

                                        7

<PAGE>

     arrangements by which the Company or any Subsidiary is or may become bound
     to issue additional shares of Common Stock, or securities or rights
     convertible or exchangeable into shares of Common Stock. The issue and sale
     of the Securities will not obligate the Company to issue shares of Common
     Stock or other securities to any Person (other than the Purchasers) and
     will not result in a right of any holder of Company securities to adjust
     the exercise, conversion, exchange or reset price under such securities.
     All of the outstanding shares of capital stock of the Company are validly
     issued, fully paid and nonassessable, have been issued in compliance with
     all federal and state securities laws, and none of such outstanding shares
     was issued in violation of any preemptive rights or similar rights to
     subscribe for or purchase securities. No further approval or authorization
     of any stockholder, the Board of Directors of the Company or others is
     required for the issuance and sale of the Shares. Except as disclosed in
     the SEC Reports, there are no stockholders agreements, voting agreements or
     other similar agreements with respect to the Company's capital stock to
     which the Company is a party or, to the knowledge of the Company, between
     or among any of the Company's stockholders.

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

          (i)  Material Changes. Since September 30, 2003 except as disclosed in
     the SEC Reports, (i) there has been no event, occurrence or development
     that has had or that could reasonably be expected to result in a Material
     Adverse Effect, (ii) the Company has not incurred any liabilities
     (contingent or otherwise) other than (A) trade payables and accrued
     expenses incurred in the ordinary course of business consistent with past
     practice and (B) liabilities not required to be reflected in the Company's
     financial statements pursuant to GAAP or required to be disclosed in
     filings made with the Commission, (iii)

                                        8

<PAGE>

     the Company has not altered its method of accounting, (iv) the Company has
     not declared or made any dividend or distribution of cash or other property
     to its stockholders or purchased, redeemed or made any agreements to
     purchase or redeem any shares of its capital stock and (v) the Company has
     not issued any equity securities to any officer, director or Affiliate,
     except pursuant to existing Company stock option plans. The Company does
     not have pending before the Commission any request for confidential
     treatment of information.

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

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

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

          (m)  Regulatory Permits. The Company and the Subsidiaries possess all
     certificates, authorizations and permits issued by the appropriate federal,
     state, local or foreign regulatory authorities necessary to conduct their
     respective businesses as described in the SEC Reports, except where the
     failure to possess such permits would not have or reasonably be expected to
     result in a Material Adverse Effect ("Material

                                        9

<PAGE>

     Permits"), and neither the Company nor any Subsidiary has received any
     notice of proceedings relating to the revocation or modification of any
     Material Permit.

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

          (o)  Patents and Trademarks. To the knowledge of the Company and each
     Subsidiary, the Company and the Subsidiaries have, or have rights to use,
     all patents, patent applications, trademarks, trademark applications,
     service marks, trade names, copyrights, licenses and other similar rights
     that are necessary or material for use in connection with their respective
     businesses as described in the SEC Reports and which the failure to so have
     could have or reasonably be expected to result in a Material Adverse Effect
     (collectively, the "Intellectual Property Rights"). Neither the Company nor
     any Subsidiary has received a written notice that the Intellectual Property
     Rights used by the Company or any Subsidiary violates or infringes upon the
     rights of any Person. To the knowledge of the Company, all such
     Intellectual Property Rights are enforceable and do not violate or infringe
     the Intellectual Property Rights of others.

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

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

                                       10

<PAGE>

          (r)  Sarbanes-Oxley; Internal Accounting Controls. The Company is in
     material compliance with all provisions of the Sarbanes-Oxley Act of 2002
     which are applicable to it as of the Closing Date. The Company and each of
     its subsidiaries maintains a system of internal accounting controls
     sufficient to provide reasonable assurance that (i) transactions are
     executed in accordance with management's general or specific
     authorizations, (ii) transactions are recorded as necessary to permit
     preparation of financial statements in conformity with GAAP and to maintain
     asset accountability, (iii) access to assets is permitted only in
     accordance with management's general or specific authorization, and (iv)
     the recorded accountability for assets is compared with the existing assets
     at reasonable intervals and appropriate action is taken with respect to any
     differences. The Company has established disclosure controls and procedures
     (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company
     and designed such disclosure controls and procedures to ensure that
     material information relating to the Company, including its subsidiaries,
     is made known to the certifying officers by others within those entities,
     particularly during the period in which the Company's Form 10-K or 10-QSB,
     as the case may be, is being prepared. The Company's certifying officers
     have evaluated the effectiveness of the Company's controls and procedures
     as of end of the filing period prior to the filing date of the Form 10-QSB
     for the quarter ended September 30, 2003 (such date, the "Evaluation
     Date"). The Company presented in its most recently filed Form 10-KSB or
     Form 10-QSB the conclusions of the certifying officers about the
     effectiveness of the disclosure controls and procedures based on their
     evaluations as of the Evaluation Date. Since the Evaluation Date, there
     have been no significant changes in the Company's internal controls (as
     such term is defined in Item 307(b) of Regulation S-K under the Exchange
     Act) or, to the Company's knowledge, in other factors that could
     significantly affect the Company's internal controls.

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

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

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

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

                                       11

<PAGE>

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

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

          (y)  Disclosure. Other than the terms of the transaction contemplated
     by this Agreement or, as to any Purchaser, information disclosed subject to
     the terms of a confidentiality agreement entered into between the Company
     and such Purchaser, the Company confirms that, neither the Company nor any
     other Person acting on its behalf has provided any of the Purchasers or
     their agents or counsel with any information that constitutes or might
     constitute material, non-public information. The Company understands and
     confirms that the Purchasers will rely on the foregoing representations and
     covenants in effecting transactions in securities of the Company. All
     disclosure provided to the Purchasers regarding the Company, its business
     and the transactions contemplated hereby, including the Disclosure
     Schedules to this Agreement, furnished by or on behalf of the Company are
     true and correct and do not contain any untrue statement of a material fact
     or omit to state any material fact necessary in order to make the
     statements made therein, in light of the circumstances under which they
     were made, not misleading.

          (z)  No Integrated Offering. Assuming the accuracy of the Purchasers'
     representations and warranties set forth in Section 3.2, neither the
     Company, nor any of its affiliates, nor any Person acting on its or their
     behalf has, directly or indirectly, made any offers or sales of any
     security or solicited any offers to buy any security, under circumstances
     that would cause this offering of the Securities to be integrated with
     prior offerings by the Company for purposes of the Securities Act or any
     applicable shareholder approval provisions, including, without limitation,
     under the rules and regulations of any exchange or automated quotation
     system on which any of the securities of the Company are listed or
     designated.

                                       12

<PAGE>

          (aa) Solvency. Based on the financial condition of the Company as of
     the Closing Date after giving effect to the receipt by the Company of the
     proceeds from the sale of the Securities hereunder, (i) the Company's fair
     saleable value of its assets exceeds the amount that will be required to be
     paid on or in respect of the Company's existing debts and other liabilities
     (including known contingent liabilities) as they mature; (ii) the Company's
     assets do not constitute unreasonably small capital to carry on its
     business for the current fiscal year as now conducted and as proposed to be
     conducted including its capital needs taking into account the particular
     capital requirements of the business conducted by the Company, and
     projected capital requirements and capital availability thereof; and (iii)
     the current cash flow of the Company, together with the proceeds the
     Company would receive, were it to liquidate all of its assets, after taking
     into account all anticipated uses of the cash, would be sufficient to pay
     all amounts on or in respect of its debt when such amounts are required to
     be paid. The Company does not intend to incur debts beyond its ability to
     pay such debts as they mature (taking into account the timing and amounts
     of cash to be payable on or in respect of its debt).

          (bb) Form S-3 Eligibility. The Company is eligible to register the
     resale of its Common Stock by the Purchasers under Form S-3 promulgated
     under the Securities Act and the Company hereby covenants and agrees to use
     its best efforts to maintain its eligibility to use Form S-3 until the
     Registration Statement covering the resale of the Shares shall have been
     filed with, and declared effective by, the Commission.

          (cc) Taxes. Except for matters that would not, individually or in the
     aggregate, have or reasonably be expected to result in a Material Adverse
     Effect, the Company and each Subsidiary has filed all necessary federal,
     state and foreign income and franchise tax returns and has paid or accrued
     all taxes shown as due thereon, and the Company has no knowledge of a tax
     deficiency which has been asserted or threatened against the Company or any
     Subsidiary.

          (dd) General Solicitation. Neither the Company nor any person acting
     on behalf of the Company has offered or sold any of the Shares by any form
     of general solicitation or general advertising. The Company has offered the
     Shares for sale only to the Purchasers and certain other "accredited
     investors" within the meaning of Rule 501 under the Securities Act.

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

          (ff) Accountants. The Company's accountants are set forth on Schedule
     3.1(ff) of the Disclosure Schedule. To the Company's knowledge, such
     accountants, who

                                       13

<PAGE>

     the Company expects will express their opinion with respect to the
     financial statements to be included in the Company's Annual Report on Form
     10-K for the year ended March 31, 2004, are independent accountants as
     required by the Securities Act.

          (gg) Acknowledgment Regarding Purchasers' Purchase of Shares. The
     Company acknowledges and agrees that each of the Purchasers is acting
     solely in the capacity of an arm's length purchaser with respect to the
     Transaction Documents and the transactions contemplated hereby. The Company
     further acknowledges that no Purchaser is acting as a financial advisor or
     fiduciary of the Company (or in any similar capacity) with respect to this
     Agreement and the transactions contemplated hereby and any advice given by
     any Purchaser or any of their respective representatives or agents in
     connection with this Agreement and the transactions contemplated hereby is
     merely incidental to the Purchasers' purchase of the Shares. The Company
     further represents to each Purchaser that the Company's decision to enter
     into this Agreement has been based solely on the independent evaluation of
     the transactions contemplated hereby by the Company and its
     representatives.

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

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

          (b)  Investment Intent. Such Purchaser understands that the Securities
     are "restricted securities" and have not been registered under the
     Securities Act or any applicable state securities law and is acquiring the
     Securities as principal for its own account for investment purposes only
     and not with a view to or for distributing or reselling such Securities or
     any part thereof, has no present intention of distributing any of such
     Securities and has no arrangement or understanding with any other persons
     regarding the distribution of such Securities (this representation and
     warranty not limiting such Purchaser's right to sell the Securities
     pursuant to the Registration Statement or

                                       14

<PAGE>

     otherwise in compliance with applicable federal and state securities laws).
     Such Purchaser is acquiring the Securities hereunder in the ordinary course
     of its business. Such Purchaser does not have any agreement or
     understanding, directly or indirectly, with any Person to distribute any of
     the Securities (this representation and warranty not limiting such
     Purchaser's right to sell the Securities pursuant to the Registration
     Statement or otherwise in compliance with applicable federal and state
     securities laws).

          (c)  Purchaser Status. At the time such Purchaser was offered the
     Securities, it was, and at the date hereof it is an "accredited investor"
     as defined in Rule 501(a) under the Securities Act. Such Purchaser is not
     required to be registered as a broker-dealer under Section 15 of the
     Exchange Act.

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

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

          (f)  Certain Trading Activities. No open Short Sale (defined below)
     involving the Company's securities exists on the date hereof in the name or
     on behalf of, or in conjunction with, such Purchaser or its Affiliates and
     such Purchaser agrees not to effect any such Short Sale on or prior to the
     second Trading Day after the Closing Date. For purposes of this Section,
     "Short Sale" means all types of direct and indirect stock pledges, forward
     sale contracts, options, puts, calls, short sales, swaps and similar
     arrangements (including on a total return basis), and sales and other
     transactions through non-U.S. broker dealers or foreign regulated brokers,
     but only if executed at a time when the Buyer has no equivalent offsetting
     long position in the Common Stock. For purposes of determining whether the
     Buyer has an equivalent offsetting long position in the Common Stock of the
     Company, any shares of Common Stock (other than the Shares) held by such
     Buyer, and any shares issuable upon exercise of any warrants (other than
     the Warrant Shares) held by such Purchaser, shall be both deemed to be held
     as "long" by such Purchaser.

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

                                   ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

     4.1  Transfer Restrictions.

                                       15

<PAGE>

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

          (b)  The Purchasers agree to the imprinting, so long as is required by
     this Section 4.1(b), of a legend on any of the Securities in the following
     form:

          THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
          EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
          RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
          OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
          BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
          STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
          EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
          REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
          STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
          THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE
          REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED
          IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED
          BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN
          "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a) UNDER THE SECURITIES
          ACT.

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

                                       16

<PAGE>

     filing of any required prospectus supplement under Rule 424(b)(3) under the
     Securities Act or other applicable provision of the Securities Act to
     appropriately amend the list of Selling Stockholders thereunder.

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

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

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

          (f)  Until the date that each Purchaser holds less than 20% of the
     Shares initially purchased hereunder by such Purchaser, the Company shall
     not undertake a reverse or forward stock split or reclassification of the
     Common Stock without the prior

                                       17

<PAGE>

     written consent of the Purchasers holding a majority in interest of the
     Shares, except for reverse or forward stock splits done in connection with,
     and as a condition to, a significant acquisition by the Company of another
     company.

     4.2  Furnishing of Information. As long as any Purchaser owns Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act. As long as any
Purchaser owns Securities, if the Company is not required to file reports
pursuant to such laws, it will prepare and furnish to the Purchasers and make
publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Securities under Rule 144. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to time
to enable such Person to sell such Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144.

     4.3  Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent transaction.

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

     4.5  Shareholders Rights Plan. No claim will be made or enforced by the
Company or, to the knowledge of the Company, any other Person that any Purchaser
is an "Acquiring Person" under any shareholders rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the provisions of any such plan or arrangement, by
virtue of receiving Securities under the Transaction Documents or under

                                       18

<PAGE>

any other agreement between the Company and the Purchasers. The Company shall
conduct its business in a manner so that it will not become subject to the
Investment Company Act.

     4.6  Non-Public Information. The Company covenants and agrees that neither
it nor any other Person acting on its behalf will provide any Purchaser or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Purchaser shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Purchaser shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.

     4.7  Use of Proceeds. Except as set forth on Schedule 4.7 attached hereto,
the Company shall use the net proceeds from the sale of the Securities hereunder
for working capital purposes and not for the satisfaction of any portion of the
Company's debt (other than payment of trade payables in the ordinary course of
the Company's business and prior practices), to redeem any Company equity or
equity-equivalent securities or to settle any outstanding litigation.

     4.8  Reimbursement. If any Purchaser becomes involved in any capacity in
any Proceeding by or against any Person who is a stockholder of the Company
(except as a result of sales, pledges, margin sales and similar transactions by
such Purchaser to or with any current stockholder), solely as a result of such
Purchaser's acquisition of the Securities under this Agreement, the Company will
reimburse such Purchaser for its reasonable legal and other expenses (including
the cost of any investigation preparation and travel in connection therewith)
incurred in connection therewith, as such expenses are incurred. The
reimbursement obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any Affiliates of the Purchasers who are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees and controlling persons (if any), as the case may
be, of the Purchasers 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 Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company solely as a result of acquiring the Securities under
this Agreement.

     4.9  Indemnification of Purchasers. The Company will indemnify and hold the
Purchasers and their directors, officers, shareholders, partners, employees and
agents (each, a "Purchaser Party") harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys' fees and costs of investigation that any such Purchaser Party may
suffer or incur as a result of or relating to: (a) any misrepresentation, breach
or inaccuracy, or any allegation by a third party that, if true, would
constitute a breach or inaccuracy, of any of the representations, warranties,
covenants or agreements made by the Company in this Agreement or in the other
Transaction Documents; or (b) any cause of action, suit or claim brought or made
against such Purchaser Party and arising solely out of or solely resulting from
the execution, delivery, performance or enforcement of this Agreement or any of
the other Transaction Documents, other than directly resulting from the gross
negligence or willful misconduct of the Purchasers. The Company will reimburse
such Purchaser for its

                                       19

<PAGE>

reasonable legal and other expenses (including the cost of any investigation,
preparation and travel in connection therewith) incurred in connection
therewith, as such expenses are incurred.

     4.10 Reservation of Common Stock. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Shares pursuant to this
Agreement and Warrant Shares pursuant to any exercise of the Warrants.

     4.11 Listing of Common Stock. The Company hereby agrees to use commercially
reasonable efforts to maintain the listing of the Common Stock on a Trading
Market, and as soon as reasonably practicable following the Closing (but not
later than the earlier of the Effective Date and the first anniversary of the
Closing Date) to list all of the Shares and Warrant Shares on such Trading
Market. The Company further agrees, if the Company applies to have the Common
Stock traded on any other Trading Market, it will include in such application
all of the Shares and Warrant Shares, and will take such other action as is
necessary to cause all of the Shares and Warrant Shares to be listed on such
other Trading Market as promptly as possible. The Company will take all action
reasonably necessary to continue the listing and trading of its Common Stock on
a Trading Market and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Trading Market.

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

     4.13 Participation in Future Financing. From the date hereof until 18
months after the Closing Date, the Company shall not effect a financing of its
Common Stock or Common Stock Equivalents or of any debt obligation other than a
loan from a commercial lender not constituting a "security" under the Securities
Act (a "Subsequent Financing") unless (i) the Company delivers to each of such
Purchasers a written notice at least 5 Trading Days prior to the closing of such
Subsequent Financing (the "Subsequent Financing Notice") of its intention to
effect such Subsequent Financing, which Subsequent Financing Notice shall
describe in reasonable detail the proposed terms of such Subsequent Financing,
the amount of proceeds intended to be raised thereunder, the Person with whom
such Subsequent Financing is proposed to be effected, and attached to which
shall be a term sheet or similar document relating thereto and (ii) such
Purchaser shall not have notified the Company by 6:30 p.m. (New York City time)
on the fifth (5/th/) Trading Day after its receipt of the Subsequent Financing
Notice of its willingness to provide (or to cause its designee to provide),
subject to completion of mutually acceptable documentation, all or part of such
financing to the Company on the same terms set forth in the Subsequent Financing
Notice. If one or more Purchasers shall fail to so notify the Company of their
willingness to participate in the Subsequent Financing, the Company may effect
the remaining portion of such Subsequent Financing on the terms and to the
Persons set forth in the Subsequent Financing Notice; provided that the Company
must provide the Purchasers with a

                                       20

<PAGE>

second Subsequent Financing Notice, and the Purchasers will again have the right
of first refusal set forth above in this Section 4.13, if the Subsequent
Financing subject to the initial Subsequent Financing Notice is not consummated
for any reason on the terms set forth in such Subsequent Financing Notice within
60 Trading Days after the date of the initial Subsequent Financing Notice with
the Person identified in the Subsequent Financing Notice. In the event the
Company receives responses to Subsequent Financing Notices from Purchasers
seeking to purchase more than the financing sought by the Company in the
Subsequent Financing such Purchasers shall have the right to purchase their Pro
Rata Portion (as defined below) of the Common Stock or Common Stock Equivalents
to be issued in such Subsequent Financing up to the aggregate of $3,000,000.
"Pro Rata Portion" is the ratio of (x) such Purchaser's Subscription Amount and
(y) the aggregate sum of all of the Subscription Amounts. Notwithstanding
anything to the contrary herein, this Section 4.13 shall not apply to the
following (a) the granting of options to employees, officers, directors or key
consultants of the Company pursuant to any stock option plan duly adopted by a
majority of the non-employee members of the Board of Directors of the Company or
a majority of the members of a committee of non-employee directors established
for such purpose, or (b) the exercise of any security issued by the Company in
connection with the offer and sale of this Company's securities pursuant to this
Agreement, or (c) the exercise of or conversion of any convertible securities,
options or warrants issued and outstanding on the date hereof, provided such
securities have not been amended since the date hereof, or (d) acquisitions or
strategic investments, the primary purpose of which is not to raise capital.

     4.14 Subsequent Equity Sales. From the date hereof until 45 days after the
Closing Date (the "Restricted Period"), neither the Company nor any Subsidiary
shall issue shares of Common Stock or Common Stock Equivalents; provided,
however, the 45 day period set forth in this Section 4.14 shall be extended for
the number of Trading Days during such period in which (y) trading in the Common
Stock is suspended by any Trading Market, or (z) following the Effective Date,
the Registration Statement is not effective or the prospectus included in the
Registration Statement may not be used by the Purchasers for the resale of the
Shares and Warrant Shares. Notwithstanding anything to the contrary herein, this
Section 4.14 shall not apply to the following (a) the granting of options to
employees, officers, directors or key consultants of the Company pursuant to any
stock option plan duly adopted by a majority of the non-employee members of the
Board of Directors of the Company or a majority of the members of a committee of
non-employee directors established for such purpose, or (b) the exercise of any
security issued by the Company in connection with the offer and sale of the
Company's securities pursuant to this Agreement, or (c) the exercise of or
conversion of any convertible securities, options or warrants issued and
outstanding on the date hereof, provided such securities have not been amended
since the date hereof, or (d) acquisitions or strategic investments, the primary
purpose of which is not to raise capital, or (e) the sale of up to 49.9% of the
common stock or other equity interests of a subsidiary of the Company pursuant
to a certain agreement with Sponsor Investments, LLC, dated December 19, 203 but
effective January 1, 2004.

     4.15 Anti-dilution Protection. From the date hereof until 18 months after
the Effective Date, if in connection with a Subsequent Financing, the Company or
any subsidiary thereof shall issue any Common Stock or Common Stock Equivalents
entitling any person or entity to acquire shares of Common Stock at a price per
share less than the Per Share Purchase Price (subject to reverse and forward
stock splits and the like) (the "Discounted Purchase Price", as further defined
below), the Company shall issue to such Purchaser that number of additional
shares of Common Stock equal to (a) the Subscription Amount paid by such
Purchaser at the Closing

                                       21

<PAGE>

divided by the Discounted Purchase Price, less (b) the Shares issued to such
Purchaser at the Closing pursuant to this Agreement and pursuant to this Section
4.15. The term "Discounted Purchase Price" shall mean the amount actually paid
by third parties for a share of Common Stock. The sale of Common Stock
Equivalents shall be deemed to have occurred at the time of the issuance of the
Common Stock Equivalents and the Discounted Purchase Price covered thereby shall
also include the actual exercise or conversion price thereof at the time of the
conversion or exercise (in addition to the consideration per share of Common
Stock underlying the Common Stock Equivalents received by the Company upon such
sale or issuance of the Common Stock Equivalents). In the case of any Subsequent
Financing involving a "Variable Rate Transaction" or an "MFN Transaction" (each
as defined below), the Discounted Purchase Price shall be deemed to be the
lowest actual conversion or exercise price at which such securities are
converted or exercised in the case of a Variable Rate Transaction, or the lowest
adjustment price in the case of an MFN Transaction. If shares are issued for a
consideration other than cash, the per share selling price shall be the fair
value of such consideration as determined in good faith by the Board of
Directors of the Company. The term "Variable Rate Transaction" shall mean a
transaction in which the Company issues or sells any debt or equity securities
that are convertible into, exchangeable or exercisable for, or include the right
to receive additional shares of Common Stock either (x) at a conversion,
exercise or exchange rate or other price that is based upon and/or varies with
the trading prices of or quotations for the shares of Common Stock at any time
after the initial issuance of such debt or equity securities, or (y) with a
conversion, exercise or exchange price that is subject to being reset at some
future date after the initial issuance of such debt or equity security or upon
the occurrence of specified or contingent events directly or indirectly related
to the business of the Company or the market for the Common Stock. The term "MFN
Transaction" shall mean a transaction in which the Company issues or sells any
securities in a capital raising transaction or series of related transactions
which grants to an investor the right to receive additional shares based upon
future transactions of the Company on terms more favorable than those granted to
the such investor in such offering. The Company may not refuse to issue a
Purchaser additional Shares hereunder based on any claim that such Purchaser or
any one associated or affiliated with such Purchaser has been engaged in any
violation of law, agreement or for any other reason, unless, an injunction from
a court, on notice, restraining and or enjoining an issuance hereunder shall
have been sought and obtained and the Company posts a surety bond for the
benefit of such Purchaser in the amount of 150% of the market value of such
Shares (based on the Closing Price of the Common Stock on the date of the event
giving rise to the Company's obligation hereunder), which is subject to the
injunction, which bond shall remain in effect until the completion of litigation
of the dispute and the proceeds of which shall be payable to the Purchaser to
the extent it obtains judgment. Nothing herein shall limit a Purchaser's right
to pursue actual damages for the Company's failure to deliver Shares hereunder
and such Purchaser shall have the right to pursue all remedies available to it
at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief. Notwithstanding anything to the contrary
herein, this Section 4.4 shall not apply to the following (a) the granting of
options to employees, officers, directors or key consultants of the Company
pursuant to any stock option plan duly adopted by a majority of the non-employee
members of the Board of Directors of the Company or a majority of the members of
a committee of non-employee directors established for such purpose, or (b) the
exercise of any security issued by the Company in connection with the offer and
sale of the Company's securities pursuant to this Agreement, or (c) the exercise
of or conversion of any convertible securities, options or warrants issued and
outstanding on the date hereof, provided such securities have not been amended
since the date hereof, or (d) acquisitions

                                       22

<PAGE>

or strategic investments, the primary purpose of which is not to raise capital.
Additionally, prior to any issuance hereunder, a Purchaser shall have the right
to continuously defer such issuances for up to periods of 75 days.

     4.16 Due Diligence Requests. The Company will comply with any reasonable
request for due diligence subject to the execution of any nondisclosure
agreement reasonably required in order to comply with Regulation FD.

                                   ARTICLE V.
                                  MISCELLANEOUS

     5.1  Fees and Expenses. At the Closing, the Company has agreed to reimburse
Crestview Capital Master LLC ("Crestview") $30,000 for its legal fees and
expenses and such funds shall be wired per the instructions of Crestview. Except
as otherwise set forth in the Transaction Documents, each party shall pay the
fees and expenses of its advisers, counsel, accountants and other experts, if
any, and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all stamp and other taxes and duties levied in connection with the
sale of the Securities.

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

     5.3  Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto prior to 6:30 p.m. (New York
City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading
Day, (c) the second Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached
hereto.

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

     5.4  Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.

                                       23

<PAGE>

The language used in this Agreement will be deemed to be the language chosen by
the parties to express their mutual intent, and no rules of strict construction
will be applied against any party.

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

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

     5.7  Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
New York for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein (including with
respect to the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is improper. Each party hereto
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by delivering a copy thereof
via overnight delivery (with evidence of delivery) to such party at the address
in effect for notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. Each party hereto (including its
affiliates, agents, officers, directors and employees) hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and all right to
trial by jury in any legal proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby. If either party shall
commence an action or proceeding to enforce any provisions of a Transaction
Document, then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its attorneys fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such
action or proceeding.

     5.8  Survival. The representations and warranties herein shall survive the
Closing and delivery of the Shares and Warrant Shares.

                                       24

<PAGE>

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

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

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

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

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

     5.14 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other

                                       25

<PAGE>

kind of entity, or create a presumption that the Purchasers are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Document. Each Purchaser shall be
entitled to independently protect and enforce its rights, including without
limitation, the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose. Each
Purchaser has been represented by its own separate legal counsel in their review
and negotiation of the Transaction Documents. For reasons of administrative
convenience only, Purchasers and their respective counsel have chosen to
communicate with the Company through FW. FW does not represent all of the
Purchasers but only Crestview. The Company has elected to provide all Purchasers
with the same terms and Transaction Documents for the convenience of the Company
and not because it was required or requested to do so by the Purchasers.

                            (Signature Page Follows)

                                       26

<PAGE>

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

NORTH AMERICAN TECHNOLOGIES GROUP, INC.            Address for Notice:
                                                   -------------------

By:  /s/ Henry W. Sullivan                         14315 West Hardy Road
   Name:  Henry W. Sullivan                        Houston, Texas 77060
   Title: President and Chief Executive Officer    FAX: 281-847-1791

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

John R. Boyer, Jr.
Boyer & Ketchand
Nine Greenway Plaza, Suite 3100
Houston, Texas 77046
FAX: 713-871-2024

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                     SIGNATURE PAGES FOR PURCHASERS FOLLOW]

                                       27

<PAGE>

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

Name of Investing Entity: _________________________________
Signature of Authorized Signatory of Investing entity: ______________________
Name of Authorized Signatory: _______________________________
Title of Authorized Signatory: ______________________________

Address for Notice of Investing Entity:

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

Subscription Amount:
Warrant Shares:
EIN Number: [you may provide this under separate cover]

                           [SIGNATURE PAGE CONTINUED]

                                       28

<PAGE>

                PURCHASER'S SIGNATURE PAGE TO NATK SPA (CONT...)

Name of Investing Entity: _________________________________
Signature of Authorized Signatory of Investing entity: ______________________
Name of Authorized Signatory: _______________________________
Title of Authorized Signatory: ______________________________

Address for Notice of Investing Entity:

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

Subscription Amount:
Warrant Shares:
EIN Number: [you may provide this under separate cover]

                           [SIGNATURE PAGE CONTINUED]

                                       29

<PAGE>

                PURCHASER'S SIGNATURE PAGE TO NATK SPA (CONT...)

Name of Investing Entity:_________________________________
Signature of Authorized Signatory of Investing entity:______________________
Name of Authorized Signatory:________________________________
Title of Authorized Signatory:_______________________________

Address for Notice of Investing Entity:

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

Subscription Amount:
Warrant Shares:
EIN Number: [you may provide this under separate cover]

                                       30

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