Document:

NOTE AND WARRANT PURCHASE AGREEMENT

                                 DATED  AS  OF

                              AUGUST  18  ,  2000

                               BY  AND  BETWEEN

     MERLIN  SOFTWARE  TECHNOLOGIES  INTERNATIONAL  INC.,  MAKER  AND  SELLER,
                       MERLIN SOFTWARE TECHNOLOGIES, INC.

                                      AND

              NARRAGANSETT  I,  L.P.,  NARRAGANSETT  OFFSHORE  LTD.,
               PEQUOT SCOUT FUND, L.P. AND SDS MERCHANT FUND, L.P.

                                 WITH RESPECT TO

                  SERIES A 10% SENIOR SECURED CONVERTIBLE NOTES
                 AND SERIES A WARRANTS TO PURCHASE COMMON STOCK

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<TABLE>
<CAPTION>

TABLE  OF  CONTENTS

     TABLE  OF  EXHIBITS  AND  SCHEDULES

<S>             <C>

Exhibit A. . .  Form of Series A Senior Secured Convertible Note

Exhibit B. . .  Form of Series A Warrant

Exhibit C. . .  Form of Registration Rights Agreement

Exhibit D. . .  Form of Security Agreement

Exhibit E. . .  Form of Subsidiary Security Agreement

Exhibit F. . .  Form of Intellectual Property Security Agreement and Assignment of Intellectual Property

Exhibit G. . .  Form of Subsidiary Intellectual Property Security Agreement and Assignment of Intellectual Property

Exhibit H. . .  Form of Pledge Agreement

Exhibit I. . .  Form of Subsidiary Guaranty

Exhibit J. . .  Form of Lock Up and Tag-Along Rights Agreement

Exhibit K. . .  Form of Escrow Agreement

Exhibit L. . .  Annual Budget

Schedule 1 . .  Purchasers

Schedule 3.6 .  Financial Statements

Schedule 3.7 .  Compliance with Law

Schedule 3.8 .  No Defaults

Schedule 3.9 .  Litigation

Schedule 3.10.  Absence of Certain Changes

Schedule 3.11.  No Undisclosed Liabilities

Schedule 3.13.  Taxes

Schedule 3.14.  Interests of Officers, Directors and Other Affiliates

Schedule 3.15.  Intellectual Property

Schedule 3.16.  Restrictions on Business Activities

Schedule 3.18.  Major Customers and Suppliers; Supplies

Schedule 3.20.  Insurance

Schedule 3.21.  Subsidiaries and Investments

<PAGE>

Schedule 3.23.  Rights, Warrants, Options

Schedule 3.24.  Real Property

Schedule 3.25.  Labor Relations

Schedule 3.26A  Employment Agreements

Schedule 3.26B  Employee Benefit Plans

Schedule 3.30.  Licenses; Compliance With Regulatory Requirements

Schedule 3.31.  Title to Securities

Schedule 3.32.  Related Parties

Schedule 3.33.  List of Accounts

Schedule 3.34.  Material Agreements

Schedule 3.35.  Guaranties

Schedule 3.36.  Brokers

Schedule 3.37.  Arm's Length Transactions

Schedule 3.42.  Disclosure

</TABLE>

<PAGE>

                       NOTE AND WARRANT PURCHASE AGREEMENT
                  SERIES A 10% SENIOR SECURED CONVERTIBLE NOTES
                   SERIES A WARRANTS TO PURCHASE COMMON STOCK

     NOTE  AND  WARRANT  PURCHASE AGREEMENT (the "Agreement") dated as of August
18,  2000,  by  and  between MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC., a
Nevada  corporation (the "Seller"), MERLIN SOFTWARE TECHNOLOGIES, INC., a Nevada
corporation  (the  "Subsidiary"),  and  NARRAGANSETT I, L.P., a Delaware limited
partnership,  NARRAGANSETT  OFFSHORE  LTD., a Cayman Islands corporation, Pequot
Scout  Fund, L.P., a Delaware limited partnership and SDS Merchant Fund, L.P., a
Delaware  limited  partnership,  (collectively,  the  "Purchasers").

     WITNESSETH:

     WHEREAS,  the  Purchasers  are willing to purchase from the Seller, and the
Seller  desires  to  sell  to  the  Purchasers, up to an aggregate of $2,100,000
principal amount of Series A 10% Senior Secured Convertible Notes due August 18,
2003  (the  "Notes")  and Series A Common Stock Purchase Warrants (the "Series A
Warrants"  or  the  "Warrants")  entitling  the  holder  thereof  to purchase an
aggregate  of  1,520,000  shares  of the Seller's common stock, $0.001 par value
(the  "Common  Stock"),  at  an  exercise  price  of $1.75 per share (subject to
adjustment  as  more  fully  set  forth  herein  and  in the Series A Warrants).

     NOW,  THEREFORE,  in  consideration  of  the  mutual  promises  and
representations,  warranties,  covenants  and  agreements  set forth herein, the
parties  hereto  hereby  agree  as  follows:

     ARTICLE  I
     PURCHASE  AND  SALE

     1.1          PURCHASE AND SALE.  On the terms and subject to the conditions
set  forth  in  this  Agreement, at the Closing (as defined in Section 2.2), the
Seller  will sell and each of  the Purchasers will purchase (i) the Notes in the
principal amounts set forth on Schedule 1 hereto, and (ii) the numbers of Series
A  Warrants set forth on Schedule 1 hereto.  The shares of Common Stock issuable
upon  conversion of the Notes are referred to herein as the "Conversion Shares,"
and  the  shares of Common Stock issuable upon exercise of the Series A Warrants
are  referred  to  herein  as  the  "Warrant  Shares."

1.2          TERMS  OF THE NOTES AND WARRANTS.   The terms and provisions of the
Notes  are  more  fully  set  forth  in  the  Form  of  Series  A Senior Secured
Convertible  Note,  in  the  form  attached  hereto as Exhibit A.  The terms and
provisions  of  the  Warrants  are  more fully set forth in the Form of Series A
Common  Stock  Purchase  Warrant,  in  the  form  attached  hereto as Exhibit B.

<PAGE>

     1.3          TRANSFERS;  LEGENDS.

     (a)     The  Notes  may  be transferred, in whole or in part, by any of the
Purchasers  at  any  time  by  delivering  written  transfer instructions to the
Seller,  and the Seller shall reflect such transfer on its books and records and
reissue  appropriate  Notes  upon  surrender of Notes evidencing the Notes being
transferred.  Any  such transfer shall be made by a Purchaser in accordance with
applicable  law.

     (b)     The  certificates representing the Common Stock, until such time as
the  Conversion  Shares and the Warrant Shares are sold pursuant to an effective
registration  statement  under  the  Securities  Act  of 1933, as amended, shall
contain  the  following  legend:

"THE  SHARES  REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES  ACT  OF  1933,  AS  AMENDED,  AND  MAY  NOT  BE  SOLD,  ASSIGNED  OR
TRANSFERRED,  IN  THE  ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID
ACT  OR  UNLESS  THE  ISSUER  HAS  RECEIVED  AN  OPINION  OF  COUNSEL REASONABLY
SATISFACTORY  TO  THE  ISSUER THAT REGISTRATION UNDER SAID ACT IS NOT REQUIRED."

     ARTICLE  II
     PURCHASE PRICE AND CLOSING

     2.1          PURCHASE  PRICE.  The  aggregate purchase price (the "Purchase
Price") to be paid by the Purchasers to the Seller to acquire the Notes shall be
$2,100,000,  and the aggregate purchase price for the Series A Warrants shall be
$100.

     2.2          THE  CLOSING.

     (a)     The  closing  of the transactions contemplated under this Agreement
(the  "Closing")  shall  take  place  at the offices of Kane Kessler, P.C., 1350
Avenue  of  the  Americas,  26th  Floor,  New  York,  New  York.

     (b)     The  Closing  shall  take  place  in two stages (the "First Tranche
Closing"  and the "Second Tranche Closing";  reference to the "Closing" shall be
construed to include both Closings unless only one closing is expressly referred
to).  The  First  Tranche  Closing  shall  take  place  on  the  date  hereof.

     (c)     The  Second  Tranche Closing shall take place within 7 trading days
after  a  registration  statement  is filed and declared effective in accordance
with the Registration  Rights  Agreement.

<PAGE>

     (d)     When  used  herein,  "Closing Date" refers to the date of the First
Tranche  Closing  and  the  Second  Tranche  Closing, unless expressly indicated
otherwise.

     2.3          DELIVERIES.

     (A)     DELIVERIES  BY THE SELLER.  At Closing, the Seller shall deliver or
cause  to  be  delivered  to  the  Purchasers  the  following:

1.     (i)     The  Notes  duly  executed  by  the Seller;  at the First Tranche
Closing, the principal amount of the Notes to be delivered shall be an aggregate
of  up to  $1,100,000 (the "First Tranche");  at the Second Tranche Closing, the
principal  amount  of the Notes to be delivered shall be $1,000,000 (the "Second
Tranche");  notwithstanding  any  contrary provision herein or in the Notes, the
due dates of the Notes delivered at the Second Tranche Closing shall be the same
as  the  due  dates  of  the  Notes  delivered at the First Tranche Closing; and

       (ii)     At  the  First  Tranche  Closing,  certificates  evidencing  an
aggregate of 770,000  Series  A  Warrants;  and  at  the Second Tranche Closing,
certificates evidencing an aggregate of an additional 750,000 Series A Warrants.

2.     The Registration Rights Agreement, in the form attached hereto as Exhibit
C,  duly  executed  by  the  Seller,  at  the  First  Tranche  Closing  only.

3.     (i)     At  the  First  Tranche Closing, a legal opinion of Clark, Wilson
("Seller's  Counsel"), counsel to the Seller, in form and substance satisfactory
to  the  Purchasers;  and

       (ii)    At the Second Tranche Closing, a legal opinion  of  the  Seller's
Counsel,  in  form  and  substance  satisfactory  to the Purchasers;  the Seller
understands that  the  opinion to be delivered at the Second Tranche Closing may
be required to address additional or different matters than the opinion accepted
at the First  Tranche  Closing.

4.     At  the  Closing,  the  Secretary's  certificate  and other documents, as
contemplated  by  Section  7.1.

5.     At  the  First  Tranche  Closing,  a  wire  transfer  representing  the
Purchasers'  legal  fees  and  expenses;  such  fee  may, at the election of the
Seller,  be  paid  out of the funds due from the Purchasers at the First Tranche
Closing.

<PAGE>

6.     At the First Tranche Closing, the Security Agreement in the form attached
hereto as Exhibit D, and the related financing statements on Form UCC-1 and Form
PPR,  duly  executed  by  the  Seller.

7.     At  the  First  Tranche Closing, the Subsidiary Security Agreement in the
form  attached hereto as Exhibit E, and the related financing statements on Form
UCC-1  and  Form  PPR,  duly  executed  by  the  Subsidiary.

8.     At  the  First  Tranche  Closing,  the  Intellectual  Property  Security
Agreement  and  Assignment of Intellectual Property, in the form attached hereto
as  Exhibit  F, and the related financing statements on Form UCC-1 and Form PPR,
duly  executed  by  the  Seller.

9.     At  the  First  Tranche  Closing,  the  Subsidiary  Intellectual Property
Security Agreement and Assignment of Intellectual Property, in the form attached
hereto as Exhibit G, and the related financing statements on Form UCC-1 and Form
PPR,  duly  executed  by  the  Subsidiary.

10.     At the First Tranche Closing, the Pledge Agreement, duly executed by the
Seller  in  the  form  attached  hereto  as  Exhibit  H.

11.     At  the  First  Tranche  Closing,  the  Subsidiary Guaranty, in the form
attached  hereto  as  Exhibit  I,  duly  executed  by  the  Subsidiary.

12.     At  the  First  Tranche  Closing,  the  Lock-Up  and  Tag-Along  Rights
Agreement,  in  the  form  attached  hereto  as  Exhibit J, duly executed by the
executive  officers, directors and certain 5% or greater shareholders of Seller.

13.     At the First Tranche Closing, the Escrow Agreement, in the form attached
hereto  as  Exhibit  K,  duly  executed  by  the  Seller  and  the  Subsidiary.

14.     Such  other  documents  as  the  Purchasers  shall  reasonably  request,
including  without  limitation,  at  the  Second  Tranche  Closing, a bring-down
Secretary's  Certificate  with  respect  to  the continuing validity and lack of
default  under  the  documents  and  instruments  delivered at the First Tranche
Closing  and  a  bring-down  financial  statement.

     (B)     DELIVERIES  BY  THE  PURCHASERS.  At  the  Closings, the Purchasers
shall  deliver  or  cause  to  be  delivered  to  the  Seller  the  following:

1.     (i)     At the First Tranche Closing, payment of the First Tranche of the
Purchase  Price,  in cash by either wire transfer of immediately available funds
or  certified  or

<PAGE>

cashier's  check  or  in  accordance  with  the  Seller's  instructions  (which
instructions  shall  be  given  to  the  Purchasers  in  writing no later than 3
business  days  prior  to  the  First  Tranche  Closing);

       (ii)     At  the  Second  Tranche  Closing, payment of the Second Tranche
of the Purchase Price,  in cash by either wire transfer of immediately available
funds  or  certified  or  cashier's  check  or  in  accordance with the Seller's
instructions (which  instructions shall be given to the Purchasers in writing no
later than 3 business  days  prior  to  the  Second  Tranche  Closing);  and

2.     Such  other  documents  as  the  Seller  shall  reasonably  request.

     ARTICLE  III
     REPRESENTATIONS  AND  WARRANTIES  OF  THE  SELLER

     The  Seller  and  its Subsidiary each hereby represents and warrants to the
Purchasers  as  follows (for purposes of this Article III, all references to the
Seller shall be deemed to include the Subsidiary and the predecessor entities of
the  Seller,  including,  but  not limited to Austin Land & Development, Inc., a
Nevada  corporation):

     3.1          CORPORATE  EXISTENCE AND POWER.  The Seller and the Subsidiary
are  corporations duly incorporated, validly existing and in good standing under
the  laws  of  the  state in which they are incorporated, and have all corporate
powers required to carry on their business as now conducted.  The Seller and the
Subsidiary are duly qualified to do business as a foreign corporation and are in
good  standing in each jurisdiction where the character of the property owned or
leased  by  them  or  the  nature  of  their activities makes such qualification
necessary,  except  for those jurisdictions where the failure to be so qualified
would  not  have a Material Adverse Effect on the Seller or the Subsidiary.  For
purposes  of  this  Agreement,  the  term  "Material Adverse Effect" means, with
respect  to  any  Person  or  entity, a material adverse effect on its condition
(financial  or  otherwise), business, properties, assets, liabilities (including
contingent  liabilities),  results  of  operations  or  current prospects of the
Seller  or  any  of  its Subsidiaries.  True and complete copies of the Seller's
Articles of Incorporation, as amended, and Bylaws, as amended (collectively, the
"Articles  and  Bylaws")  have  previously been provided to the Purchasers.  For
purposes  of  this  Agreement,  the term "Subsidiary" means, with respect to any
entity,  any  corporation  or  other  organization  of which securities or other
ownership  interests  having  ordinary  voting  power to elect a majority of the
board of directors or other persons performing similar functions are directly or
indirectly  owned  by  such  entity  or of which such entity is a partner or is,
directly  or  indirectly,  the  beneficial  owner of 50% or more of any class of
equity  securities  or  equivalent  profit  participation  interests.

3.2          CORPORATE  AUTHORIZATION.  The  execution, delivery and performance
by  the  Seller  and  its  Subsidiaries  of this Agreement, the Notes, Warrants,
Registration  Rights  Agreement,  Security

<PAGE>

     Agreement,  Subsidiary  Security  Agreement, Intellectual Property Security
Agreement  and  Assignment,  Subsidiary Intellectual Property Security Agreement
and  Assignment,  Lock-Up  and  Tag  Along  Rights  Agreement, Pledge Agreement,
Subsidiary  Guaranty,  the  Escrow  Agreement  and  each  of the other documents
executed  pursuant  to  and  in  connection  with  this  Agreement (the "Related
Documents"),  and  the  consummation  of  the  transactions  contemplated hereby
(including,  but  not  limited  to,  the  sale and delivery of the Notes and the
Warrants,  and  the subsequent issuance of the Conversion Shares upon conversion
of the Notes, and the subsequent issuance of the Warrant Shares upon exercise of
the  Warrants)  have been duly authorized, and no additional corporate action is
required  for  the  approval  of  this Agreement.  The Conversion shares and the
Warrant  Shares  have  been  duly  authorized  and reserved, for issuance by the
Seller  in  an  amount  sufficient to cover all conversions and exercises of the
Notes  and  Warrants.  This Agreement and the Related Documents have been or, to
the  extent  contemplated  hereby,  will  be  duly  executed  and  delivered and
constitutes  the  legal,  valid  and  binding  agreement  of  the Seller and its
Subsidiaries  enforceable against them in accordance with their terms, except as
may be limited by bankruptcy, reorganization, insolvency, moratorium and similar
laws  of  general application relating to or affecting the enforcement of rights
of  creditors,  and  except  as  enforceability of its obligations hereunder are
subject  to  general  principles  of  equity  (regardless  of  whether  such
enforceability  is  considered  in  a  proceeding  in  equity  or  at  law).

     3.3          CHARTER,  BYLAWS  AND  CORPORATE RECORDS.  The minute books of
the  Seller  and  its  Subsidiaries contain complete and accurate records of all
meetings  and  other  corporate actions of the board of directors, committees of
the  board  of  directors,  incorporators and shareholders of the Seller and the
Subsidiary  from  the  date  of  their  incorporation  to  the date hereof.  All
material  corporate  decisions and actions have been validly made or taken.  All
corporate  books,  including  without  limitation  the  share transfer register,
comply  with  applicable  laws  and regulations and have been regularly updated.
Such  books  fully  and correctly reflect all the decisions of the shareholders.

     3.4          GOVERNMENTAL  AUTHORIZATION.  Except as otherwise specifically
con-tem-plated  in  this Agreement and the Related Documents, and except for the
filing  of  a  Form  D with respect to the Notes and Warrants under Regulation D
under  the  Securities  Act  and  any filings required under state or provincial
securities  laws  that  are  permitted  to  be  made  after the date hereof, the
execution,  delivery  and performance by the Seller and its Subsidiaries of this
Agreement  and  the  Related Documents, and the consummation of the transactions
contemplated hereby (including, but not limited to, the sale and delivery of the
Notes  and  Warrants  and  the  subsequent issuance of the Conversion Shares and
Warrant  Shares  upon  conversion  of  the Notes or exercise of the Warrants, as
applicable)  by the Seller and the Subsidiary require no action by or in respect
of,  or  filing  with,  any  governmental  body,  agency, official or authority.

3.5          NON-CONTRAVENTION.  The  execution, delivery and performance by the
Seller  and  the Subsidiary of this Agreement and the Related Documents, and the
consummation  by  the  Seller of the transactions contemplated hereby (including
the  issuance  of  the Conversion Shares and Warrant Shares) do not and will not
(a)  contravene  or  conflict  with  the  Articles  and Bylaws of the Seller and

<PAGE>

     the  Subsidiary;  (b) contravene or conflict with or constitute a violation
of  any  provision of any law, regulation, judgment, injunction, order or decree
binding  upon  or  applicable  to  the  Seller,  or  the  Subsidiary,  which
contravention, conflict or violation would have a Material Adverse Effect on the
Seller  and  the Subsidiary, taken as a whole, (c) constitute a default under or
give rise to a right of termination, cancellation or acceleration or loss of any
benefit  under any material agreement, contract or other instrument binding upon
the Seller or the Subsidiary or under any material license, franchise, permit or
other  similar authorization held by the Seller or the Subsidiary; or (d) result
in  the  creation  or  imposition of any Lien (as defined below) on any material
asset of the Seller or the Subsidiary.  For purposes of this Agreement, the term
"Lien"  means,  with  respect  to any asset, any mortgage, lien, pledge, charge,
security  interest,  claim  or encumbrance of any kind in respect of such asset.

     3.6          FINANCIAL STATEMENTS.  The audited balance sheet of the Seller
as  at December 31, 1998 and 1999, and the audited statements of income and cash
flows  for  the  years  then  ended, and the unaudited interim balance sheet and
statements  of income and cash flows for the 6 months ending June 30, 2000, (the
"Financial  Statements"),  copies  of which are attached hereto as Schedule 3.6,
were prepared in accordance with generally accepted accounting principals (as in
effect  from  time  to  time)  ("GAAP")  applied on a consistent basis, and such
Financial Statements fairly present in accordance with GAAP consistently applied
with prior periods in all material respects the financial position of the Seller
as at the dates thereof and the results of its operations and its cash flows for
the  periods then ended, subject, in the case of the unaudited interim financial
statements,  to  normal,  recurring  year-end  audit  adjustments.

     3.7          COMPLIANCE  WITH LAW.  Except as set forth in Section 3.7, the
Seller  and  the Subsidiary are in compliance in all respects and have conducted
their  business  so  as  to  comply  in  all  respects  with all laws, rules and
regulations, judgments,  decrees  or orders of any court, administrative agency,
commission,  regulatory  authority  or  other  governmental  authority  or
instrumentality,  domestic or foreign, applicable to its operations except where
such  non-compliance  would  not  have  a  Material  Adverse  Effect.  Except as
disclosed  in  Schedule  3.7,  there  are  no  judgments or orders, injunctions,
decrees,  stipulations  or awards (whether rendered by a court or administrative
agency  or  by  arbitration), including any such actions relating to affirmative
action  claims or claims of discrimination, against the Seller or the Subsidiary
or  against  any  of  their  properties  or  businesses.

3.8          NO  DEFAULTS.  Except  as set forth in Schedule 3.8, the Seller and
the  Subsidiary  are  not, nor have they received notice that they would be with
the  passage  of  time,  giving  of  notice,  or  both,  (i) in violation of any
provision of their Articles and Bylaws (ii) in default or violation of any term,
condition  or  provision  of  (A)  any  judgment,  decree,  order, injunction or
stipulation  applicable  to  the  Seller or its Subsidiaries or (B) any material
agreement,  note,  mortgage,  indenture,  contract, lease or instrument, permit,
concession,  franchise  or  license  to which the Seller or the Subsidiary are a
party or by which the Seller or the Subsidiary or their properties or assets may
be  bound,  and  no  circumstances  exist  which  would entitle any party to any
material  agreement,  note,  mortgage,

<PAGE>

     indenture,  contract,  lease  or  instrument  to  which  such Seller or the
Subsidiary  are  a  party,  to  terminate such as a result of such Seller or the
Subsidiary,  having failed to meet any material provision thereof including, but
not limited to, meeting any applicable milestone under any material agreement or
contract.

     3.9          LITIGATION.  Except  as disclosed in Schedule 3.9, there is no
action,  suit,  proceeding,  judgment, claim or investigation pending or, to the
best  knowledge  of the Seller, threatened against the Seller and the Subsidiary
taken  as  a whole, which could, individually or in the aggregate, reasonably be
expected  to  have  a Material Adverse Effect on the Seller or the Subsidiary or
which  in any manner challenges or seeks to prevent, enjoin, alter or materially
delay  any  of  the  transactions  contemplated hereby, or which could lead to a
claim,  damages  payment,  settlement,  loss,  liability, cost or expense to the
Seller  in  excess  of  $10,000  in  the aggregate and there is no basis for the
assertion  of  any  of the foregoing. There are no claims or complaints existing
or,  to  the  knowledge  of the Seller or the Subsidiary, threatened for product
liability  in  respect  of  any product of the Seller or the Subsidiary, and the
Seller  and  the  Subsidiary are not aware of any basis for the assertion of any
such  claim.

     3.10          ABSENCE  OF CERTAIN CHANGES.  Since June 30, 2000, the Seller
has  conducted  its  business in the ordinary course and there has not occurred,
except  as  set  forth  on  Schedule  3.10:

     (a)     Any  event  that  could  reasonably  be expected to have a Material
Adverse  Effect  on  the  Seller  and  the  Subsidiary  taken  as  a  whole;

     (b)     Any  amendments  or changes in the Articles or Bylaws of the Seller
and  the  Subsidiary;

     (c)     Any  damage,  destruction  or  loss,  whether  or  not  covered  by
insurance, that would, individually or in the aggregate, have a Material Adverse
Effect  on  the  Seller  and  the  Subsidiary,  taken  as  a  whole;

     (d)     Any (i) incurrence, assumption or guarantee  by  the  Seller or the
Subsidiary  of  any  debt  for  borrowed  money;  (ii)  issuance  or sale of any
securities  convertible into or exchangeable for securities of the Seller; (iii)
issuance  or  sale  of options or other rights to acquire from the Seller or the
Subsidiary,  directly  or indirectly, securities of the Seller or any securities
convertible  into or exchangeable for any such securities; (iv) issuance or sale
of any stock, bond or other corporate security; (v) discharge or satisfaction of
any  Lien,  other  than current liabilities incurred since December 31, 1999, in
the  ordinary  course  of  business;  (vi)  declaration or making any payment or
distribution  to  shareholders or purchased or redeemed any share of its capital
stock  or  other  security;  (vii)  sale,  assignment  or  transfer  any  of its
intangible  assets except in the ordinary course of business, or cancellation of
any  debt  or  claim; (viii) waiver of any right of substantial value whether or
not  in  the  ordinary  course  of  business;  (ix)  material  change in officer
compensation  except  in  the  ordinary

<PAGE>

     course  of  business  and  consistent  with  past  practices;  or (x) other
commitment  (contingent  or  other-wise)  to  do  any  of  the  foregoing.

     (e)     Any  creation  or assumption by the Seller or the Subsidiary of any
Lien  on any asset or any making of any loan, advance or capital contribution to
or  investment  in  any  Person  in  an  aggregate  amount which exceeds $10,000
outstanding  at  any  time;

     (f)     Any  entry  into,  amendment  of,  relinquishment,  termination  or
non-renewal  by  the  Seller  or the Subsidiary of any contract, license, lease,
transaction, commitment or other right or obligation, other than in the ordinary
course  of  business;  or

     (g)     Any  transfer  or  grant of a right with respect to the trademarks,
trade  names,  service  marks,  trade  secrets, copyrights or other intellectual
property  rights  owned  or  licensed  by  the  Seller  or  the  Subsidiary.

     3.11          NO  UNDISCLOSED LIABILITIES.  Except as set forth in Schedule
3.11, and except for liabilities and obligations incurred in the ordinary course
of  business  since December 31, 1999, as of the date hereof, (i) the Seller and
the  Subsidiary  do  not have any liabilities or obligations (absolute, accrued,
contingent  or otherwise) and (ii) there has not been any aspect of the prior or
current  conduct  of the business of the Seller or the Subsidiary which may form
the basis for any claim by any third party which if asserted could result in any
such liabilities or obligations, which are not fully reflected, reserved against
or  disclosed  in  the  balance  sheet  of  the  Seller as at December 31, 1999.

     3.12          RECEIVABLES.  The  Seller's receivables arose in the ordinary
course  of  business  and have been collected or are collectible in the ordinary
course  of business in the book amounts thereof, less an amount not in excess of
any  allowance  for  doubtful  accounts.

3.13          TAXES.  The  Seller  has  previously delivered to Purchasers true,
correct  and  complete copies of each of the federal, state and local income tax
returns  filed  by the Seller and the Subsidiary for the past three fiscal years
through  1999.  Except  as  set  forth on Schedule 3.13, all tax returns and tax
reports required to be filed with respect to the income, operations, business or
assets  of  the Seller and the Subsidiary have been timely filed (or appropriate
extensions have been obtained which extensions are listed on Schedule 3.13) with
                                                             -------------
the appropriate governmental agencies in all jurisdictions in which such returns
and  reports  are  required  to  be filed, and all of the foregoing as filed are
true, correct and complete and, in all material respects, reflect accurately all
liability  for  taxes  of the Seller and the Subsidiary for the periods to which
such  returns  relate,  and  all  amounts shown as owing thereon have been paid.
Except  as  set  forth  on Schedule 3.13, all income, profits, franchise, sales,
use,  value added, occupancy, property, excise, payroll, withholding, FICA, FUTA
and  other  taxes  (including  interest  and  penalties), if any, collectible or
payable  by  the  Seller and the Subsidiary or relating to or chargeable against
any  of  its assets, revenues or income or relating to any employee, independent
contractor,  creditor,  stockholder  or  other  third party through December 31,

<PAGE>

     1999,  and  through the Closing Date, were fully collected and paid by such
date  or  provided  for  by adequate reserves in the December 31, 1999 Financial
Statements  and  all  similar  items due through the Closing Date will have been
fully paid by that date or provided for by adequate reserves, whether or not any
such  taxes were reported or reflected in any tax returns or filings.  Except as
set  forth  on  Schedule  3.13,  no  taxation  authority has sought to audit the
records  of  the  Seller  or  the  Subsidiary  for  the  purpose of verifying or
disputing  any  tax  returns,  reports  or  related  information and disclosures
provided  to  such  taxation  authority, or for the Seller's or the Subsidiary's
alleged  failure to provide any such tax returns, reports or related information
and  disclosure.  Except as provided on Schedule 3.13, no claims or deficiencies
have been asserted against or inquiries raised with the Seller or the Subsidiary
with respect to any taxes or other governmental charges or levies which have not
been  paid  or otherwise satisfied, including claims that, or inquiries whether,
the  Seller  the  Subsidiary  has not filed a tax return that it was required to
file,  and,  to  the  best of the Seller's knowledge, there exists no reasonable
basis for the making of any such claims or inquiries.  Neither the Seller or the
Subsidiary  has  waived any restrictions on assessment or collection of taxes or
consented  to  the extension of any statute of limitations relating to taxation.
Neither  the  Seller nor the Subsidiary has filed a consent under Section 341(f)
of  the  Internal  Revenue  Code  of  1986,  as  amended (the "Code") concerning
collapsible  corporations, is not and has never been a party to a tax allocation
or  sharing  agreement  or  a  member  of a group filing, a consolidated federal
income  tax  return  and  has  not  been  a  United States real property holding
corporation within the meaning of Code Section 897 (c)(2), during the applicable
period  specified  in  Code  Section  897(c)(1)(A)(ii).

     3.14          INTERESTS  OF  OFFICERS,  DIRECTORS  AND  OTHER  AFFILIATES.
Schedule  3.14  sets  forth  a  description  of  any  interest held, directly or
indirectly,  by  any  officer,  director  or  other  affiliate  of Seller in any
property,  real  or  personal,  tangible or intangible, used in or pertaining to
Seller's  business, including any interest in the Seller's Intellectual Property
(as  defined  in  Section  3.15  hereof).

     3.15          INTELLECTUAL  PROPERTY.     (a)  Except as limited in Section
3.15(c),  the  Seller  and  the Subsidiary, directly or indirectly, own and have
the valid right to use all intellectual property, currently used or contemplated
or  necessary  to  be used in connection with the business of the Seller and its
Subsidiaries,  including  without  limitation  all  license agreements and other
agreements  granting  rights  relating  to  any  intellectual property ("License
Agreements")  to  which  the Seller or the Subsidiary is a party or is otherwise
bound  (such  intellectual  property,  together with the License Agreements, the
"Seller's  Intellectual  Property").

(b)     Schedule 3.15 sets forth, for all of the Seller's Intellectual Property,
directly  or  indirectly  owned by the Seller and the Subsidiary, a complete and
accurate  list  of  all  United  States, international and state (i) patents and
patent  applications, (ii) Trademark registrations and applications and material
unregistered  Trademarks,  (iii)  Internet  domain  names,  and  (iv)  Copyright
registrations  and applications  and material unregistered Copyrights, including
Internet  domain  names  and software, that constitute the Seller's Intellectual
Property,  indicating  for  each,  the

<PAGE>

     applicable  jurisdiction, registration number (or application number), date
issued  (or date filed) and descriptions of the pertinent invention or software.

     (c)     Except as  set forth on Schedule 3.15, except as may be revealed by
"prior  art"  searches  conducted  by  the Purchasers with respect to the Patent
Applications  prior  to  the  Closing  Date,  the Seller's Intellectual Property
directly  or indirectly owned or used by the Seller and the Subsidiary is solely
and  exclusively  owned  by  the Seller and the Subsidiary free and clear of all
liens,  and  the  Seller  and  the  Subsidiary  are listed in the records of the
appropriate  United  States, state or foreign agency as the sole owner of record
for each registration and application for any Patent, Trademark, Internet domain
name and  Copyright  that it owns.  Except as set forth on Schedule 3.15, all of
the items set forth on Schedule 3.15 are valid and subsisting, in full force and
effect, and have not been cancelled, expired, or abandoned.  There is no pending
or  threatened  opposition,  interference  or cancellation proceeding before any
court  or registration authority in any jurisdiction against the items set forth
on  Schedule  3.15  or  any  of the  Seller's Intellectual Property, directly or
indirectly,  owned  by  the  Seller  and  the  Subsidiary  or against any of the
Seller's  Intellectual  Property  not  owned  by  the Seller and the Subsidiary.

     (d)     There  are  no  settlements,  forebearances  to  sue,  consents,
judgments,  or  orders  or  similar  obligations  to  which  the  Seller  or the
Subsidiary  is  a party or is otherwise bound, which (i) restrict the Seller and
the  Subsidiary's rights to use any of the Seller's  Intellectual Property, (ii)
restrict  the  Seller  and  the Subsidiaries' business in order to accommodate a
third  party's intellectual property rights or (iii) permit third parties to use
any  intellectual  property  which  would otherwise infringe any of the Seller's
Intellectual  Property.  The  Seller  and  the  Subsidiary  have not licensed or
sublicensed its rights in the Seller's Intellectual Property other than pursuant
to  the  License  Agreements  set  forth  on  Schedule  3.15,  and no royalties,
honoraria or other fees are payable by the Seller and the Subsidiary for the use
of  or  right  to  use any Seller's Intellectual Property in connection with the
Seller  and  the Subsidiary's business as currently conducted or contemplated to
be  conducted,  except  pursuant to the License Agreements set forth on Schedule
3.15.

     (e)     The  license  agreements,  permits and other agreements under which
the  Seller and  the Subsidiary has rights to the Seller's Intellectual Property
are valid and binding obligations of the Seller and the Subsidiary and all other
parties thereto, enforceable in accordance with their terms, and there exists no
event  or condition which will result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default by the Seller or
its  Subsidiaries,  under  any  such  agreement.

(f)     The  Seller  and the Subsidiary takes reasonable measures to protect the
confidentiality of its material Trade Secrets, including requiring employees and
independent  contractors having access thereto to execute written non-disclosure
agreements.  Except  as  set forth in Schedule 3.15, no Trade Secret material to
the  business  of the Seller and the Subsidiary as currently operated or planned
to  be  operated  has  been disclosed or authorized to be disclosed to any third
party,  including  any  employee,  agent, contractor or other entity, other than
pursuant  to  a  non-disclosure  agreement

<PAGE>

     that  adequately  protects  the  Seller  and  the  Subsidiary's proprietary
interests  in  and  to  such  Trade  Secrets.  No  party  to  any non-disclosure
agreement  relating  to  its  Trade  Secrets  is  in  breach  thereof.

     (g)     To  the best knowledge of the Seller, the conduct of the Seller and
the  Subsidiary's  business  as  currently conducted and planned to be conducted
does  not  infringe  upon  any  intellectual property owned or controlled by any
third  party  (either  directly  or  indirectly  such  as  through  contributory
infringement  or  inducement  to  infringe)  and  is  not  libelous, slanderous,
defamatory,  violative  in  any  way of publicity or privacy rights, or obscene.
Except as set forth in Schedule 3.9, there are no claims or suits pending or, to
the  Seller  and  the Subsidiary's knowledge, threatened, and the Seller and the
Subsidiary  have  not  received  any  notice of a third party claim or suit, (i)
alleging  that  the  Seller  or  Subsidiary's  activities  or the conduct of its
businesses  infringes  upon  or  constitutes  the  unauthorized  use  of  the
intellectual  property  rights  of any third party, nor alleging libel, slander,
defamation,  or  other  violation  of  a personal right, or (ii) challenging the
ownership,  use,  validity or enforceability of any of the Seller's Intellectual
Property.

     (h)     To  the  best  knowledge  of  the  Seller,  no  third  party  is
misappropriating,  infringing,  diluting,  or  otherwise  violating  any  of the
Seller's  Intellectual  Property.  Except  as  set forth in Schedule 3.15(g), no
such  claims  are pending against a third party by the Seller or the Subsidiary.

     (i)     The  consummation  of the transactions contemplated hereby will not
result  in  the loss or impairment of the Seller or Subsidiary's right to own or
use  any  of  the  Seller's Intellectual Property nor require the consent of any
Governmental  Authority  or  third  party  in  respect  of  any  such  Seller's
Intellectual  Property.

     (j)     All  computer  software and inventions currently used by the Seller
and  its  Subsidiaries,  planned  to  be  used  by  the Seller and Subsidiary or
necessary  for  the conduct of the current or planned business of the Seller and
Subsidiary were either (i) developed by an employee of the Seller and Subsidiary
within  the  scope  of  employment  of  the  employee  and pursuant to a binding
invention assignment agreement,  (ii) developed by a third-party under a binding
work  for hire and assignment agreement, or (iii) developed by a third party and
transferred  and  assigned  to  the  Seller  or  the  Subsidiary under a binding
transfer  and  assignment  agreement.

(k)     Without  limitation  to  the  representations  and  warranties set forth
elsewhere  in  this Section, the Seller and the Subsidiary represent and warrant
that:  (i)  except  as set forth in Schedule 3.15, all right, title and interest
in  and  to  the  Seller  and the Subsidiary Content is owned exclusively by the
Seller  and  the  Subsidiary;  (ii) the Seller and the Subsidiary has all rights
necessary  for  the  use  of  the  Seller  and  the Subsidiary Content listed in
Schedule  3.15  in  connection  with the Seller and the Subsidiary's business as
currently  conducted  and  contemplated  to be conducted, including the right to
copy,  publish,  display,  perform,  distribute,  transmit and create derivative
works  from  the  Seller  and  its  Subsidiaries  Content in all formats via all
current  Seller  and  the  Subsidiary sales and distribution channels, including
magazines  and  over the Internet; (iii) all Seller and its Subsidiaries Content
owned  by the Seller and the Subsidiary was either developed by (I) employees of
the  Seller

<PAGE>

     and  the  Subsidiary  within  the  scope  of  their  employment,  or  (II)
independent  contractors  who  have  assigned their rights to the Seller and the
Subsidiary  pursuant  to  written  agreements;  (iv)  there  are  no  material
restrictions  on  the  Seller and the Subsidiary Content owned by the Seller and
its  Subsidiaries; and (v) no element or aspect of the Seller and the Subsidiary
Content  contains  or  constitutes  defamatory, disparaging, obscene, materially
erroneous  or misleading material, nor does it violate the privacy, publicity or
other  personal  rights  of  any  third  party.

     (l)     Schedule  3.15  contains  a  list of all material Trademarks of the
Seller and the  Subsidiary used in connection with the Seller and the Subsidiary
business  as  currently  conducted  or  contemplated  to be conducted ("Material
Seller  Marks"), along with their date of first use and any applicable Trademark
registration  or application numbers.  Without limitation to the representations
and  warranties  set  forth  above  in  this  Section  3.15,  the Seller and the
Subsidiary  represent  and warrant that: (i) the Material Seller Marks have been
in  continuous  use  by  the Seller and  the Subsidiary at all times since their
date of first use by the Seller and the Subsidiary; (ii) there has been no prior
use  of  such  Trademarks  by any third party which would confer upon said third
party  superior  rights  in such Trademarks; (iii) the Seller and the Subsidiary
have adequately policed the Trademarks against third party infringement to avoid
a  reasonable  claim  of  invalidation  of  each  such  Trademark;  and (iv) the
registered  Trademarks have been continuously used in the form appearing in, and
in  connection with the goods and services listed in, their respective Trademark
registration  certificates  or  applications.

     3.16          RESTRICTIONS  ON BUSINESS ACTIVITIES.  Except as set forth in
Schedule  3.16,  there  is  no  agreement, judgment, injunction, order or decree
binding  upon  the  Seller or its Sub-sidiaries which has or could reasonably be
expected to have the effect of prohibiting or materially im-pairing any business
practice  of  the  Seller  or the Subsidiary, any acquisition of property by the
Seller  or  the  Subsidiary  or  the  conduct  of  business by the Seller or the
Subsidiary  as  currently  conducted or as currently proposed to be conducted by
the  Seller.

     3.17          TITLE  TO  AND CONDITION OF PERSONAL PROPERTY; NO LIENS.  The
Seller  and  the  Subsidiary  have  good  and valid title to, or, in the case of
leased  properties  and  assets,  valid  leasehold  interests  in,  all of their
tangible  properties  and  assets,  real,  personal  and  mixed,  used  in their
business,  free and clear of any Liens.  All tangible personal property owned by
the  Seller  or  the  Subsidiary and material to the operations of the Seller or
the  Subsidiary on the date hereof (with a replacement value in excess of $5000)
in  the operation of their business is in good operating condition and in a good
state  of maintenance and repair, and is adequate for the business conducted and
proposed to be conducted by the Seller or the Subsidiary.  Except for the Leases
specifically identified in Schedule 3.24, there are no assets owned by any third
party  which  are material to the operation of the business of the Seller or the
Subsidiary,  as  presently  conducted  or  proposed  to  be  conducted.

3.18          MAJOR  CUSTOMERS  AND  SUPPLIERS;  SUPPLIES.   Schedule  3.18 sets
forth  a true and complete list of the ten largest customers (measured by dollar
volume)  of  the  Seller  and  the

<PAGE>

     Subsidiary and all suppliers of significant goods or services to the Seller
or  the  Subsidiary  for  the  last three years.  Schedule 3.18 identifies those
suppliers  of  significant  goods  or services with respect to which alternative
sources  of supply are not readily available on comparable terms and conditions.
Except  as  indicated  on  Schedule  3.18,  all  material  supplies and services
necessary  for  the  conduct of the business of the Seller or the Subsidiary, as
presently  conducted,  may  be  obtained  from  alternate  sources  on terms and
conditions  comparable  to  those  presently  available  to  the  Seller  or the
Subsidiary,  and  no  facts,  circumstances  or  conditions exist which create a
reasonable  basis for believing that the Seller or the Subsidiary will be unable
to  continue  to  procure  the  supplies  and  services necessary to conduct its
business  on  substantially  the  same terms and conditions as such supplies and
services are currently procured.  There has not been, and there will not be, any
material  adverse  change  in the relations of the Seller or the Subsidiary with
their  respective  customers, suppliers, contractors, licensor and lessors, as a
result  of  the announcement or consummation of the transactions contemplated by
this Agreement, nor do any facts, circumstances or conditions exist which create
a  reasonable  basis  for  believing  that  the  Seller's  or  the  Subsidiary's
relationships  with their vendors and/or customers will be unable to continue on
substantially  the  same  terms  and  conditions  as  currently  exist.

     3.19          PREEMPTIVE  RIGHTS.  None  of  the shareholders of the Seller
possess  any  preemptive  rights  in respect of the Conversion Shares or Warrant
Shares  to be  issued to the Purchasers upon conversion of the Notes or exercise
of  the  Warrants,  as  applicable.

     3.20          INSURANCE.  The  insurance  policies  providing  insurance
coverage  to  the  Seller  or the Subsidiary including for product liability are
adequate  for  the  business  conducted by the Seller and the Subsidiary and are
sufficient for compliance by the Seller and the Subsidiary with all requirements
of  law  and all material agreements to which the Seller or the Subsidiary are a
party  or  by  which any of their assets are bound.  All of such policies are in
full  force  and  effect  and are valid and enforceable in accordance with their
terms,  and  the Seller and the Subsidiary have complied with all material terms
and  conditions  of  such  policies,  including  premium  payments.  None of the
insurance carriers has indicated to the Seller or the Subsidiary an intention to
cancel  any  such  policy.  Except as set forth on Schedule 3.20, the Seller and
the Subsidiary have no claim pending against any of the insurance carriers under
any  of  such policies and there has been no actual or alleged occurrence of any
kind  which  may  give  rise  to  any  such  claim.

3.21          SUBSIDIARIES  AND  INVESTMENTS.  Except  as  set forth on Schedule
3.21,  the  Seller  has  no  subsidiaries  or Investments.  For purposes of this
Agreement,  the  term  "Investments" shall mean, with respect to any Person, all
   -
advances,  loans  or  extensions of credit to any other Person, all purchases or
commitments  to purchase any stock, bonds, notes, debentures or other securities
of  any  other  Person,  and any other investment in any other Person, including
partnerships or joint ventures (whether by capital contribution or otherwise) or
other  similar  arrangement (whether written or oral) with any Person, including
but  not  limited  to  arrangements  in  which (i) the Person shares profits and
losses,  (ii) any such other Person has the right to obligate or bind the Person
to  any  third  party,  or

<PAGE>

     (iii)  the  Person  may  be  wholly  or  partially  liable for the debts or
obligations  of  such  partnership,  joint  venture  or  other  arrangement.

     3.22          CAPITALIZATION. The authorized capital stock of the Seller as
of  the  date  hereof  consists of 50,000,000 shares of common stock, $0.001 par
value  per  share,  of which 12,270,024 shares were issued and outstanding as at
August 1, 2000.  All shares of the Seller's issued and outstanding capital stock
have  been  duly  authorized,  are validly issued and outstanding, and are fully
paid and nonassessable.  No securities issued by the Seller from the date of its
incorporation  to  the  date hereof were issued in violation of any statutory or
common law preemptive rights.  There are no dividends which have accrued or been
declared  but  are unpaid on the capital stock of the Seller. All taxes required
to  be  paid  in  connection with the issuance and any transfers of the Seller's
capital  stock  have  been  paid.  All  permits or authorizations required to be
obtained  from  or  registrations  required  to  be  effected with any Person in
connection  with any and all issuances of securities of the Seller from the date
of  the Seller's incorporation to the date hereof have been obtained or effected
and  all  securities  of  the Seller have been issued and are held in accordance
with  the provisions of all applicable securities or other laws.  The Securities
constitute  one  hundred  percent  (100%)  of the issued and outstanding capital
stock  of  the  Seller.

     3.23          RIGHTS, WARRANTS, OPTIONS AND REGISTRATION RIGHTS.  Except as
set  forth  on  Schedule 3.23, there are no outstanding (a) securities, notes or
instruments  convertible  into  or  exercisable  for any of the capital stock or
other equity interests of the Seller or its Subsidiaries; (b) options, warrants,
subscriptions or other rights to acquire capital stock or other equity interests
of  the  Seller  or  the  Subsidiary;  or  (c)  com-mitments,  agreements  or
understandings of any kind, including employee benefit arrangements, relating to
the  issuance  or  repur-chase  by  the Seller or  the Subsidiary of any capital
stock  or  other  equity  interests  of  the  Seller or the Subsidiary, any such
securities or instruments convertible or exer-cisable for securities or any such
options,  warrants  or  rights.  Except as set forth on Schedule 3.23, and other
than  the  rights  granted  to  the Purchasers under the Notes and the Warrants,
neither  the  Seller nor the Subsidiary have granted anti-dilution rights to any
person  or  entity  in connection with  any option, warrant, subscription or any
other  instrument convertible or exercisable for the securities of the Seller or
the  Subsidiary.  Other  than  the  rights  granted  to the Purchasers under the
Registration  Rights Agreement, there are no outstanding rights which permit the
holder  thereof  to  cause  the  Seller or the Subsidiary to file a registration
statement  under  the  Securities  Act  or  corresponding Canadian laws or which
permit  the holder thereof to include securities of the Seller or the Subsidiary
in  a  registration statement filed by the Seller or the Subsidiary under any of
such  laws,  and  there are no outstanding agreements or other commitments which
otherwise  relate  to  the  registration  of any securities of the Seller or the
Subsidiary  for  sale  or  distribution  in  any  jurisdiction.

3.24          REAL PROPERTY.     (a)  The Seller does not own any real property.
The  Seller  and the Subsidiary do not hold, nor are they a party to any option,
right  of first refusal or other contractual right to purchase, acquire, sell or
dispose  of  any  interest  in real property.  Schedule 3.24 also sets forth the
street  address  of  each  parcel  of real property leased by the Seller and the

<PAGE>

     Subsidiary  (the  "Leased  Property"  or  the  "Premises").  The Seller has
previously  delivered  to  the  Purchasers a true and complete copy of all lease
agreements,  as  amended to date (the "Leases") relating to the Leased Property.
The  Seller  and the Subsidiary enjoy peaceful and undisturbed possession of the
Leased Property.  All improvements located on the Leased Property are in a state
of  good maintenance and repair and in a condition adequate and suitable for the
effective conduct therein of the business conducted and proposed to be conducted
by  the  Seller  or  the  Subsidiary.

     (b)     The  Leases  are  valid,  binding and in full force and effect, all
rent  and  other  sums  and charges payable thereunder are current, no notice of
default  or  termination  under any of the Leases is outstanding, no termination
event  or  condition  or  uncured  default  on  the  part  of  the Seller or its
Subsidiaries  or,  to  the  best  of  the Seller's knowledge, on the part of the
landlord,  thereunder, exists under the Leases, and no event has occurred and no
condition  exists which, with the giving of notice or the lapse of time or both,
would constitute such a default or termination event or condition.  There are no
subleases,  licenses or other agreements granting to any Person any right to the
possession, use, occupancy or enjoyment of the premises demised by the Leases or
any  portion thereof.  All of the Premises are used and useful in the conduct of
the  Seller's  and  the  Subsidiary's  business.

     (c)     To  the  best  of  the Seller's knowledge, there are no liabilities
associated  with  any of the Leases including, without limitation, any liability
under any Environmental Law (as defined herein) or regulation, which is or which
may  become  payable  by  the  Purchasers.

     (d)     The  Seller  has  not  experienced any material interruption in the
services provided to any of the Premises within the last twelve (12) months.  To
the  best knowledge of the Seller, no landlord under the Leases has any plans to
make any material alterations to any of the Leased Property, the construction of
which  would  interfere  with the use of any portion of the Leased Property.  To
the  best knowledge of the Seller, no landlord under the Leases has any plans to
make  any  material alterations to any of the buildings in which Leased Property
is  located,  the  costs  of  which  alterations would be borne in any part by a
tenant  under  the  applicable  Lease.

     (e)     All  material  permits,  licenses,  franchises,  approvals  and
authorizations  (collectively,  the "Real Property Permits") of all governmental
authorities having jurisdiction over each Leased Property and from all insurance
companies  and  fire  rating  and  other  similar  boards  and  organizations
(collectively, the "Insurance Organizations"), required or appropriate have been
issued  to the Seller to enable each Leased Property to be lawfully occupied and
used for all of the purposes for which they are currently occupied and used have
been  lawfully  issued and are, as of the date hereof, in full force and effect.
The  Seller has not received or been informed by a third party of the receipt by
it  of  any  notice from any governmental authority having jurisdiction over any
Leased  Property  or  from  any Insurance Organization threatening a suspension,
revocation,  modification  or cancellation of any Real Property Permit or of any
insurance  policies and there is no basis for the issuance of any such notice or
the  taking  of  any  such action.  No action is required  in order for all Real
Property  Permits  and  liability and casualty insurance policies required under
any  of the Leases to remain Real Property Permits and insurance policies of the
Purchasers.

<PAGE>

     (f)     Neither the Seller nor its Subsidiaries have received any notice of
any  pending,  threatened  or contemplated condemnation proceeding affecting any
Leased  Property  or  any  part  thereof.

     3.25          LABOR  RELATIONS.  There  is  no  strike,  work  stoppage  or
slowdown  or labor disturbance pending or threatened that involves any employees
of  the Seller or the Subsidiary.  The Seller and the Subsidiary are not a party
to,  otherwise  bound  by  or threatened with any labor or collective bargaining
agreement  and  there have been no attempts to organize a labor union or to seek
recognition  as a collective bargaining unit by or with respect to any employees
of  the  Seller or its Subsidiaries.  Without limiting the generality of Section
3.9,  except  as  identified  on  Schedule  3.25,  (i)  no unfair labor practice
complaints  have  been  filed  against  the  Seller or its Subsidiaries with any
governmental  or  regulatory  agency, (ii) neither the Seller nor the Subsidiary
have  received  any notice or communication reflecting an intention or threat to
file any such complaint, and (iii) no Person has made any claim, and there is no
basis  for  any  claim,  against the Seller or the Subsidiary under any statute,
regulation  or ordinance relating to discrimination with respect to employees or
employment  practices.

     3.26          EMPLOYEES,  EMPLOYMENT AGREEMENTS AND EMPLOYEE BENEFIT PLANS.

     (A)     EMPLOYMENT  AGREEMENTS.  Except  as  set  forth  in Schedule 3.26A,
there  are no employment, consulting, severance or indemnification arrangements,
agreements,  or  understandings  between  the  Seller and any officer, director,
consultant  or  employee  of  the  Seller  or  the  Subsidiary (the "Employ-ment
Agreements").  The  Seller  has  previously delivered to the Purchasers true and
complete  copies  of  all  of the Employment Agreements.  Except as disclosed in
Schedule  3.26A,  no such Employment Agreement provides for the accelera-tion or
change  in  the award, grant, vesting or deter-mination of operations, warrants,
rights,  severance  payments,  or  other  contin-gent  obligations of any nature
whatsoever  of  the  Seller  or  the  Subsidiary in favor of any such parties in
connection with the transactions contemplated by this Agreement.  Except for the
agreements set forth in Schedule 3.26A, the terms of employment or engagement of
all  directors,  officers,  employees,  agents,  consultants  and  professional
advisors  of  the  Seller  and  the Subsidiary are such that their employment or
engagement  may  be  terminated upon not more than two weeks notice given at any
time without liability for payment of compensation or damages and the Seller and
the  Subsidiary  have  not  entered  into  any  agreement or arrangement for the
management  of  their  busi-ness  or  any  part  thereof  other  than with their
directors  or  employees.

(B)     EMPLOYEE  BENEFIT PLANS.  Schedule 3.26B includes a correct and complete
list  of  all pension, retirement, stock purchase, stock bonus, stock ownership,
stock  option, profit sharing, savings, medical, disability, hospitalization, or
insurance  plans,  deferred compensation, bonus, or group insurance contracts or
plans  or  any  other  incentive,  welfare  or  employee  benefit  plan, policy,
agreement  commitment,  arrangement or practice maintained by the Seller and the
Subsidiary  for  any  of  their  directors,  employees  or former employees (the
"Seller  Plans").  The  Seller  has  previously

<PAGE>

     delivered  to  the  Purchasers  accurate  and complete copies of all of the
Seller  Plans  (or,  if  oral,  true  and  complete  written summaries thereof).
Schedule  3.26B  also identifies each Seller Plan which constitutes an "employee
pension  benefit  plan" or an "employee welfare benefit plan", as such terms are
defined  in  the  Employee  Retirement  Income  Security Act of 1974, as amended
("ERISA").  The  Seller  is  not  a  contributing employer to any "multiemployer
plan,"  as  such  term  is  defined  in  ERISA,  nor  does  the  Seller have any
multiemployer  plan liability with respect to any such plans or any Seller Plan.
No  event  has occurred or condition exists with respect to any employee benefit
plan  or  arrangement  (whether or not terminated) subject to ERISA which is (or
was)  maintained,  sponsored or contributed to by an entity under common control
with  the Seller or the Subsidiary, determined under Section 414(b), (c), (m) or
(o) of the Code, which could, on or after the Closing, subject the Seller or the
Subsidiary  or the Purchasers directly or indirectly (through an indemnification
agreement  or  otherwise)  to  any  liability,  including,  without  limitation,
liability  under  Section  412,  4971 or 4980B of the Code or Title IV or ERISA.

     (C)     EMPLOYEES.  To the Seller's best knowledge, no employee, consultant
or  agent of the Seller or the Subsidiary is or will be, based upon the business
and  activities taken or proposed to be taken by the Seller or its Subsidiaries,
in  violation  of  any  term  of  any  employment  contract,  confidentiality or
non-disclosure  agreement  or  any  other  contract,  agreement,  commitment  or
understanding relating to the relationship of such employee, consultant or agent
with  the Seller or any other party.  Except as set forth on Schedule 3.15, each
significant employee or consultant of the Seller or its Subsidiaries with access
to  confidential  or  proprietary  information  of  the  Seller  has executed an
agreement  regarding  ownership  by  the  Seller  of  intellectual  property and
obligating  such  employee, consultant, contractor or agent to hold confidential
the  Seller's proprietary information.  The Seller is not aware that any officer
or  key  employee  intends  to  terminate  employment  with  the  Seller  or the
Subsidiary.

     3.27          ABSENCE  OF  CERTAIN BUSINESS PRACTICES.  Neither the Seller,
nor  any  affiliate of the Seller, nor to the knowledge of the Seller, any agent
or  employee  of  the Seller, any other Person acting on behalf of or associated
with  the  Seller,  or  any  individual related to any of the foregoing Persons,
acting  alone  or  together,  has:  (a)  received,  directly  or indirectly, any
rebates,  payments,  commissions,  promotional  allowances or any other economic
benefits,  regardless  of  their  nature  or  type, from any customer, supplier,
trading  company,  shipping  company, governmental employee or other Person with
whom  the  Seller  has  done business directly or indirectly; or (b) directly or
indirectly, given or agreed to give any gift or similar benefit to any customer,
supplier,  trading  company,  ship-ping  company, governmental employee or other
Person  who  is  or  may  be in a position to help or hinder the business of the
Seller  (or  assist  the  Seller  in  connection  with  any  actual  or proposed
trans-action)  which  (i) may subject the Seller to any damage or penalty in any
civil,  criminal  or governmental litigation or proceeding, (ii) if not given in
the past, may have had an adverse effect on the Seller or (iii) if not continued
in  the  future,  may  adversely  affect  the  assets,  business,  operations or
prospects  of the Seller or subject the Seller to suit or penalty in any private
or  governmental  litigation  or  proceeding.

<PAGE>

     3.28          PRODUCTS  AND  SERVICES.    To  the  knowledge of the Seller,
there exists no set of facts (i) which could furnish a basis for the withdrawal,
suspension  or  cancellation  of  any  registration,  license,  permit  or other
governmental  approval  or consent of any governmental or regulatory agency with
respect  to  any  product  or service developed or provided by the Seller or its
Subsidiaries, (ii) which could furnish a basis for the withdrawal, suspension or
cancellation  by  order  of  any  state,  federal or foreign court of law of any
product or service, or (iii) which could have an adverse effect on the continued
operation  of  any  facility  of  the  Seller  or  the Subsidiary or which could
otherwise  cause  the  Seller or its Subsidiaries to withdraw, suspend or cancel
any  such  product  or  service  from  the  market  or  to  change the marketing
classification of any such product or service.  Each product or service provided
by  Seller  or  the  Subsidiary  has  been  provided  in  accordance  with  the
specifications  under  which  such  product  or service normally is and has been
provided  and  the  provisions  of  all  applicable  laws  or  regulations.

     3.29          ENVIRONMENTAL  MATTERS.  None  of  the  Premises or any other
property used by the Seller or its Subsidiaries in the past has been used by the
Seller  or,  to  the Seller's knowledge, any other Person to manufacture, treat,
store,  or  dispose  of any hazardous substance or any other regulated material,
and such property is free of all such substances and materials.  The Seller, and
any other Person for whose conduct it may be responsible, are in compliance with
all  laws,  regu-lations  and  other  federal,  state  or  local  governmental
require-ments,  and  all  applicable judgments, orders, writs, notices, decrees,
permits,  licenses,  approvals,  consents  or  injunctions  relating  to  the
generation,  management, handling, transportation, treatment, disposal, storage,
delivery,  discharge,  release  or  emission  of  any waste, pollutant or toxic,
hazardous or other regulated substance (including, without limitation, asbestos,
radioactive  material  and  pesticides)  or  to  any other actions, omissions or
conditions  affecting  the environment (the "Environ-mental Laws").  Neither the
Seller nor any other Person for whose conduct it may be responsible has received
any  complaint,  notice, order, or citation of any actual, threatened or alleged
noncompliance  with  any  of the Environmental Laws, and there is no proceeding,
suit  or investigation pending or, to the Seller's knowledge, threatened against
the Seller or any such Person with respect to any violation or alleged violation
of the Environmental Laws, and there is no basis for the institution of any such
proceeding,  suit  or  investigation.

3.30          LICENSES;  COMPLIANCE  WITH REGULATORY REQUIREMENTS. Schedule 3.30
lists all material authorizations, consents, approvals, franchises, licenses and
permits  required  under  applicable  law or regulation for the operation of the
business  of  the  Seller  and  its  Subsidiaries  as  presently  operated  (the
"Governmental  Authorizations").  Except  as otherwise set forth herein, all the
Governmental  Authorizations  have  been duly issued or obtained and are in full
force and effect, and the Seller and its Subsidiaries are in compliance with the
terms  of  all  the  Governmental Authorizations.  Except as otherwise set forth
herein,  the  Seller  and  the  Subsidiary have not engaged in any activity that
would  cause  revocation  or suspension of any such Governmental Authorizations.
Except  as  otherwise set forth herein, the Seller has no knowledge of any facts
which  could  reasonably  be  expected  to  cause  them  to  believe  that  the
Governmental  Authorizations will not be renewed by the appropriate governmental
authorities  in  the  ordinary  course.  Neither  the  execution,

<PAGE>

     delivery  nor  performance  of  this  Agreement  shall adversely affect the
status  of  any  of  the  Governmental  Authorizations.

     3.31          TITLE  TO SECURITIES.  The shareholders set forth on Schedule
3.31  are  the record owners of 5% or more of the issued and outstanding capital
stock, securities and notes of the Seller listed opposite their name, and except
as set forth on Schedule 3.31 hereto, to its knowledge such securities are owned
free  and  clear  of  any  liens,  encumbrances, pledges, security interests and
claims  whatsoever,  including,  without  limitation, claims or rights under any
voting  trust  agreements,  shareholder  agreements  or  other  agreements.

     3.32          RELATED  PARTIES.  Except  as  set forth on Schedule 3.32, no
member  of management of the Seller or the Subsidiary, nor any current or former
(within the past three years) director, officer or employee of the Seller or the
Subsidiary  (individually  a  "Related  Party"  and  collectively  the  "Related
Parties")  or  any  affiliate or Immediate Family Member of any of the Seller or
the  Subsidiary  or  any  Related  Party:  (a) owns, directly or indirectly, any
interest  in any Person which is a competitor of the Seller, or of a supplier or
customer  of  the Seller; (b) owns, directly or indirectly, in whole or in part,
any  property,  asset  or right, real, personal or mixed, tangible or intangible
(including,  but  not  limited  to,  any  of  the  Intangible Property) which is
utilized  in the operation of the business of the Seller; or (c) has an interest
in  or  is, directly or indirectly, a party to any contract, agreement, lease or
arrangement  pertaining  or  relating  to  the  Seller,  except  for employment,
consulting  or other personal service agreements that may be in effect and which
are  listed on Schedule 3.26A hereto and except for ownership of less than 2% of
the  stock  of  a public company listed on a recognized securities exchange. For
purposes of this Agreement, the term "Immediate Family Member" includes parents,
mother-in-law  or  father-in-law,  husband  or  wife,  brother  or  sister,
brother-in-law  or  sister-in-law,  son-in-law  or daughter-in-law and children.
Schedule  3.32  sets  forth  a  description  of  any  interest held, directly or
indirectly,  by  any  officer,  director or other affiliate of the Seller in any
property, real or personal, tangible or intangible, used in or pertaining to the
Seller's  business, including any interest in the Seller's Intellectual Property
(as  defined  in  Section  3.15  hereof).

     3.33          LIST  OF  ACCOUNTS.  Set  forth  on Schedule 3.33 is: (a) the
name and address of each bank or other institution in which the Seller maintains
an  account  (cash,  securities  or other) or safe deposit box; (b) the name and
phone  number of the Seller's contact person at such bank or institution and (c)
the  account  number  of  the  relevant account and a description of the type of
account.

     3.34          MATERIAL  AGREEMENTS.

(a)     Schedule 3.34 sets forth a brief description of all material written and
oral  contracts  or agreements relating to the Seller and the Subsidiary (except
with  respect  to  the  Leases,  which are set forth on Schedule 3.24, which are
hereby  incorporated  by  reference into Schedule 3.34 and made a part thereof),
including  without  limitation  any:  (i)  contract resulting in a commitment or
potential  commitment  for  expenditure  or  other  obligation  or  potential
obligation,  or  which  provides  for  the

<PAGE>

     receipt  or  potential receipt, involving in excess of Ten Thousand Dollars
($10,000.00)  in  any  instance,  or  series  of  related  contracts that in the
aggregate  give  rise  to  rights  or  obligations  exceeding  such amount; (ii)
indenture,  mortgage,  promissory  note,  loan  agreement,  guarantee  or  other
agreement  or commitment for the borrowing or lending of money or encumbrance of
assets  involving  more than Ten Thousand Dollars ($10,000.00) in each instance;
(iii)  agreement  which  restricts the Seller or the Subsidiary from engaging in
any  line  of  business or from competing with any other Person; (iv) warranties
made with respect to products manufactured, packaged, distributed or sold by the
Seller  or  the  Subsidiary;  or  (v) any other contract, agreement, instrument,
arrangement  or  commitment  that  is  material  to  the condition (financial or
otherwise),  results  of operation, assets, properties, liabilities, business or
prospects  of the Seller and the Subsidiary, taken as a whole (collectively, and
together  with the Leases, Employment Agreements, the Seller Plans and all other
agreements  required  to  be  disclosed  on  any Schedule to this Agreement, the
"Material  Agreements").  The  Seller has previously furnished to the Purchasers
true,  complete  and  correct  copies  of  all  written  agreements, as amended,
required  to  be  listed  on  Schedule  3.34.

     (b)     Except  as  set  forth  on  Schedule  3.34,  none  of  the Material
Agreements  was  entered  into  outside  the  ordinary course of business of the
Seller or the Subsidiary, contains any unusual, onerous or burdensome provisions
that  will  impair or adversely effect in any material way the operations of the
Seller  or  the  Subsidiary  or make them reasonably likely to be performed at a
material  loss.

     (c)     The  Material  Agreements are each in full force and effect and are
the  valid  and legally binding obligations of the Seller or the Subsidiary and,
to the best of the Sellers' knowledge, the other parties thereto, enforceable in
accordance  with  their respective terms, subject only to bankruptcy, insolvency
or  similar  laws  affecting  the  rights  of creditors generally and to general
equitable  principles.  The  Seller  has  not  received notice of default by the
Seller  or  the Subsidiary under any of the Material Agreements and no event has
occurred  which, with the passage of time or the giving of notice or both, would
constitute  a  default  by the Seller or the Subsidiary thereunder.  None of the
other  parties  to  any of the Material Agreements is in default thereunder, nor
has an event occurred which, with the passage of time or the giving of notice or
both  would constitute a default by such other party thereunder.  The Seller has
not  received  notice  of  the pending or threatened cancellation, revocation or
termination  of any of the Material Agreements, nor are any of them aware of any
facts  or  circumstances  which could reasonably be expected to lead to any such
cancellation,  revocation  or  termination.

     (d)     Except  as  otherwise indicated on Schedule 3.34, the continuation,
validity  and  effectiveness  of the Material Agreements under the current terms
thereof  will  in  no  way  be  affected by the consummation of the transactions
contemplated  by  this  Agreement.

3.35          GUARANTIES.  Except  as set forth on Schedule 3.35, the Seller and
                                                   -------------
the  Subsidiary are not a party to any Guaranty (as hereinafter defined), and no
Person  is  a  party  to  any  Guaranty  for  the  benefit  of the Seller or the
Subsidiary.  For  purposes  of  this  Agreement,  the  term  "Guaranty"  shall

<PAGE>

     mean, as to any Person, all liabilities or obligations of such Person, with
respect to any indebtedness or other obligations of any other Person, which have
been  guaranteed,  directly or indirectly, in any manner by such Person, through
an  agreement,  contingent  or  otherwise,  to  purchase  such  indebtedness  or
obligation,  or  to  purchase  or  sell  property or services, primarily for the
purpose  of  enabling  the  debtor  to  make  payment  of  such  indebtedness or
obligation  or  to  assure  the owner of such indebtedness or obligation against
loss, or to supply funds to or in any manner invest in the debtor, or otherwise.

     3.36          BROKERS.  Except  as  set  forth on Schedule 3.36, no broker,
finder  or investment banker is entitled to any brokerage, finder's or other fee
or  commission  in  connection  with  the  transactions  contemplated  by  this
Agreement,  based  upon  any  arrangement  made  by  or on behalf of the Seller.

     3.37          ARM'S  LENGTH  TRANSACTIONS.  Except as set forth on Schedule
3.37,  each  of the agreements entered into by the Seller or the Subsidiary have
been  entered  into  in  good  faith and represent transactions that are no more
favorable  to  the  parties  thereto  than would be available in an arm's length
transaction  between  such  parties.

     3.38          SECURITIES  LAWS.  Neither  the Seller nor the Subsidiary nor
any  agent  acting  on  behalf of the Seller or the Subsidiary has taken or will
taken  any  action  which might cause this Agreement or the Notes to violate the
Securities  Act  of  1933,  as amended, (the "Securities Act") or the Securities
Exchange  Act  of  1934,  as  amended,  (the  "Exchange  Act")  or  any rules or
regulations  promulgated  thereunder,  as  in  effect  on the Closing Date.  All
offers  and  sales  of  capital  stock,  securities and notes of the Seller were
conducted  and completed in compliance with the Securities Act and all shares of
capital stock and other securities issued by the Seller and the Subsidiary prior
to the date hereof have been issued in transactions exempt from the registration
requirements  under  the  Securities  Act and all applicable state securities or
"blue  sky"  laws  and  in  compliance  with all applicable corporate laws.  Any
breach  of  the provisions of the immediately preceding sentence of this Section
3.8 shall not constitute an Event of Default unless such breach would reasonably
be  expected  to  result  in  a  Material  Adverse  Effect.

     3.39          PRINCIPAL  OFFICE.  The  Seller's principal place of business
is  at  its  address  herein  set  forth.

     3.40          NO  ASSUMED  NAMES  OR  TRADE NAMES.  The Seller has not been
known  under,  or transacted business using, any name except for the name as set
forth  in  this  Agreement.

     3.41          SOLVENCY.  The  Seller  and  the Subsidiary are solvent after
giving effect to the transactions contemplated by this Agreement, the Notes, the
Warrants  and  the  Related  Documents.

3.42          DISCLOSURE.  No  representation  or warranty made by the Seller in
this  Agreement,  nor in any document, written information, financial statement,
certificate,  schedule  or  exhibit  prepared

<PAGE>

     and  furnished  or  to  be  prepared  and  furnished  by  the Seller or the
representatives  of  the  Seller  pursuant  hereto  or  in  connection  with the
transactions  contemplated hereby, contains or will contain any untrue statement
of  a material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained herein or therein not misleading in light
of  the  circumstances  under which they were furnished.  Except as disclosed in
Schedule 3.42, there is no event, fact or condition (other than general business
or economic conditions which affect businesses generally) that adversely affects
the  business  of the Seller and the Subsidiary, or, to the best of the Seller's
knowledge,  that  reasonably  could  be expected to do so, that has not been set
forth in this Agreement or in the Schedules attached hereto.  Schedule 3.42 sets
forth  all  documents  filed  with  the  Securities and Exchange Commission (the
"Commission")  by  the  Seller during the last two (2) years, (collectively, the
"Public  Documents").  The  Public Documents constitute all the documents (other
than  preliminary proxy materials) that the Seller was required to file with the
Commission  prior  to  the date of this Agreement.  None of the Public Documents
contained  any  untrue  statement  of  a  material  fact or omitted to state any
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  (in  each  case as of the respective dates that they were filed
with  the  Commission).

     ARTICLE  IV
     REPRESENTATIONS  AND  WARRANTIES  OF  THE  PURCHASERS

     Each Purchaser, for itself, hereby severally represents and warrants to the
Seller  as  follows:

     4.1          EXISTENCE AND POWER.  The Purchaser is duly organized, validly
existing  and  in  good  standing  under  the  laws  of the jurisdiction of such
Purchaser's organization. The Purchaser has all powers required to carry on such
Purchaser's  business  as  now  conducted.

     4.2          AUTHORIZATION.  The execution, delivery and performance by the
Purchaser  of this Agreement, the Related Documents to which such Purchaser is a
party,  and  the  consummation by the Purchaser of the transactions contemplated
hereby  have  been duly authorized, and no additional action is required for the
approval  of  this Agreement.  This Agreement and the Related Documents to which
the  Purchaser is a party, have been or, to the extent contemplated hereby, will
be,  duly  executed and delivered and constitute valid and binding agreements of
the  Purchaser,  enforceable  against  such  Purchaser  in accordance with their
terms,  except  as  may  be  limited  by bankruptcy, reorganization, insolvency,
moratorium  and similar laws of general application relating to or affecting the
enforcement  of  rights  of  creditors  and  except that enforceability of their
obligations  thereunder  are subject to general principles of equity (regardless
of  whether  such  enforceability  is considered in a proceeding in equity or at
law).

4.3          INVESTMENT.  The  Purchaser is acquiring the Notes and Warrants for
its own account for investment and not with a view to, or for sale in connection
with,  any  distribution  thereof,  nor  with  the  intention of distribution or
selling  the  same; provided, however, that the Purchaser may transfer the Notes
and  Warrants  among  one  or  more  of  its affiliates.  The Purchaser is aware
neither

<PAGE>

     the Notes nor the Warrants have been registered under the Securities Act or
under  applicable  state  securities  or  blue  sky  laws.  The  Purchaser is an
"Accredited  Investor"  as  such term is defined in Rule 501 of Regulation D, as
promulgated  under  the  Securities  Act.

     4.4          SECURITIES ACT (BRITISH COLUMBIA).  The Purchaser has not been
created,  established, formed or incorporated solely, and is not used primarily,
to  acquire  securities  or  to  permit  the  purchase of the Notes and Warrants
without  a  prospectus  in  reliance  on  an  exemption  from  the  prospectus
requirements  of  the Securities Act (British Columbia) (the "BC Act").  Each of
the  Purchasers  represents  and warrants that it is purchasing as a principal a
number  of  Notes and Warrants with an aggregate acquisition cost (as defined in
the  BC  Act)  of  not  less  than  CDN$97,000.

     4.5          RELIANCE  ON  EXEMPTIONS.   The Purchaser understands that the
Notes, Warrants, Conversion Shares and Warrant Shares are being offered and sold
to  such  Purchaser  in  reliance upon specific exemptions from the registration
requirements  of  United States federal and state securities laws and exemptions
from  the  prospectus  requirements of the BC Act and that the Seller is relying
upon  the  truth  and  accuracy  of,  and  such Purchaser's compliance with, the
representations,  warranties,  agreements, acknowledgments and understandings of
such  Purchaser  set forth herein in order to determine the availability of such
exemptions and the eligibility of such Purchaser to acquire the Notes, Warrants,
Conversion  Shares  and  Warrant  Shares.

     ARTICLE  V
     COVENANTS  OF  THE  SELLER

     5.1          ACTIONS  REQUIRING  THE  PURCHASERS'  CONSENT.

     The  Seller and the Subsidiary covenant and agree that, so long as at least
10%  of  the aggregate principal amount of the Notes remain outstanding, none of
the  actions set forth below will take place prior or subsequent to the Closing,
without  the  prior  written consent of persons owning a majority in interest of
the aggregate principal amount of the Notes.  The actions to which the foregoing
apply  are  as  follows:

     (a)     Any amendment, alteration or repeal of any of the provisions of the
Articles  of  Incorporation,  or  the  By-laws  of the Seller or the Subsidiary;

     (b)     The  authorization  or creation by the Seller or the Subsidiary of,
or  the  increase in the number of authorized shares of, any stock of any class,
or  any  security  convertible  into stock of any class, or the authorization or
creation  of  any new class of preferred stock (or any action which would result
in  another  series  of  preferred  stock);

     (c)     The  liquidation,  dissolution  or  winding-up of the Seller or the
Subsidiary  or  any merger or consolidation of the Seller or the Subsidiary with
or  into  another  entity  or  the  sale,

<PAGE>

     conveyance  or  other disposition of all, or substantially all, the assets,
property  or  business  of  the  Seller  or  the  Subsidiary;

     (d)     The  reorganization,  recapitalization,  sale, conveyance, or other
disposition  of  or  encumbrance  of all or substantially all of the property or
business  of  the  Seller  or the Subsidiary or the merger into or consolidation
with any other corporation (other than a wholly owned subsidiary corporation) or
effect  any transaction or series of related transactions in which, in any case,
more  than  25%  of  the  voting  power  of  the  corporation  is  disposed  of;

     (e)     The  taking of any action, directly or indirectly or permitting any
action  to be taken, solely or primarily for the purpose of increasing the value
of  any  class  of  stock  of the Seller or the Subsidiary if the effect of such
action is reasonably likely to reduce the value, security, rights or preferences
of  the  Notes;

     (f)     The  redemption,  purchase  or  other  acquisition,  directly  or
indirectly,  of  any shares of capital stock of the Seller or the Subsidiary or
any option, warrant or other right to purchase or acquire any such shares or the
repayment  or  prepayment  of any indebtedness other than trade debt incurred in
the  ordinary  course  of  business;

     (g)     The  declaration  or  payment of any dividend or other distribution
(whether  in cash, stock or other property) with respect to the capital stock of
the  Seller  or  its  Subsidiary;

     (h)     The  approval  of  any transaction with a Related Party relating to
the  Seller  or  the  Subsidiary;

     (i)     The  filing  of  any  petition as a debtor or application for other
relief  as  a  debtor under any federal or state bankruptcy, insolvency or other
similar law, or the sufferance, acquiescence in, consent to or refusal to answer
any  petition  or  other application filed by another person against the Seller,
the  Subsidiary,  or  any  of  their  respective  assets.

     (j)     The  entering  into  by the Seller or the Subsidiary of any bank or
other  non-trade  indebtedness  for  borrowed money in excess of $500,000 in the
aggregate;

     (k)     The  granting  or  making  by  the  Seller or the Subsidiary of any
mortgage  or  pledge,  or  the  assumption  or  suffering  to  exist  on, or the
imposition  on,  any  of  its  material  properties or assets, any lien, charge,
defect  in  title,  or  encumbrance  of  any  kind,  except  liens for taxes not
currently  due;

(l)     The  loan  or  advance  of  money, credit (other than by the creation of
accounts  receivable  in  the  ordinary  course  of business) or property by the
Seller  or  the  Subsidiary  to  any individual, corporation, association, joint
stock  company,  business  trust,  partnership,  joint  venture,  unincorporated
organization,  or  government  or  any  agency  or political subdivision thereof

<PAGE>

     (hereinafter  collectively  defined  as "Person"), or the investment in (by
capital  contribution or otherwise), or the purchase or repurchase by the Seller
or  the Subsidiary of the stock or indebtedness, of all or a substantial part of
the  assets  or  properties,  of  any  Person,  or guarantee, assume, endorse or
otherwise  become  responsible  for (directly or indirectly or by any instrument
having the effect of assuring any Person's payment or performance or capability)
the indebtedness, performance, obligations, stock or dividends of any Person, or
the agreement by the Seller or the Subsidiary to do any of the foregoing, except
endorsement  of negotiable instruments for deposit or collection in the ordinary
course  of  business,  and  investments  in  readily  marketable  securities;

     (m)     The  making  by  the  Seller or the Subsidiary of any prepayment of
indebtedness  or  the  agreement  to  do  the  same;

     (n)     The  termination, without cause by the Seller or the Subsidiary, of
the  employment  of  the Chief Executive Officer, Chief Financial Officer, Chief
Operating  Officer  or  equivalent position of the Seller or the Subsidiary, and
hire  any  new  person  to  assume  such  responsibilities;

     (o)     The  making  of  or  commitment  to  make,  by  the  Seller  or the
Subsidiary,  any  capital  expenditures  in  excess  of  $100,000;

     (p)     The  approval  of any material legal settlement in excess of $5,000
relating  to  the  Seller  or  the  Subsidiary;

     (q)     The  grant  or  issuance  of any stock options or other convertible
securities  of  the  Seller  or the Subsidiary at below fair market value on the
date  of grant, other than the issuance of  of up to 750,000 options to incoming
management  and  current and future employees at a maximum discount of 20% below
the  fair  market  value on the date of the grant pursuant to any employee stock
option  plan  existing  on  the  date  hereof, true copies of which are attached
hereto  as  Schedule  3.26B;

     (r)     The voluntary sale, transfer, surrender, abandonment or disposition
of  any  of the assets or property rights (tangible or intangible) of the Seller
or  the  Subsidiary,  other  than  in  the  ordi-nary  course  of  business;

     (s)     The  granting  of any material increase in the compensation payable
or  the  compensation  to become payable to directors and officers of the Seller
or  the Subsidiary (including, without limitation, any such increase pursuant to
any  bonus,  pension,  profit-sharing,  incentive  option  or  other  plan  or
commitment);

     (t)     The  alteration of the manner of keeping books, accounts or records
of  the  Seller  or  the  Subsidiary, or the change in any manner the accounting
practices  therein  reflected;

     (u)     The  increase  in the size of the Board of Directors of the Seller.

<PAGE>

     5.2          INSURANCE.

          (a)     The  Seller  and  the  Subsidiary  shall  (i)  keep all of its
properties  adequately  insured at all times with responsible insurance carriers
against  loss  or  damage  by fire and other hazards, and (ii) maintain adequate
insurance  at all times with responsible insurance carriers against liability on
account  of  damage  or  injury  to  persons and property including from product
liability  and  under  all  applicable  workmen's compensation laws.   Insurance
shall  be  deemed  adequate  if  the  same is not less extensive in coverage and
amount  than is customarily maintained by other persons engaged in the same or a
similar  business  similarly situated.  All insurance covering tangible personal
property  subject  to  a  lien  or  security interest in favor of the Purchasers
granted  pursuant to this Agreement or under any instrument or document given as
security  pursuant hereto shall provide that, in the case of a catastrophic loss
during  the  period  in  which  the  Notes  are  outstanding, the full amount of
in-surance  proceeds  with  respect  thereto  subject to creditors senior to the
Purchasers  shall be payable to the Purchasers as loss payee, mortgagee, secured
party, or otherwise as its interest may appear, and shall further provide for at
least  ten  days'  prior  notice  to  the  Purchasers  of  the  cancellation  or
modification  thereof.

     (b)     The Seller and the Subsidiary shall, from time to time upon request
of  the  Purchasers,  promptly  furnish  or  cause to be furnished to the Seller
evidence,  in  form  and substance reasonably satisfactory to the Purchasers, of
the  maintenance of all insurance required by this Section 5.2 to be maintained.
From  time  to  time during the term hereof, the Purchasers shall have the right
upon  notice to the Seller, to require the Seller and the Subsidiary to maintain
additional insurance coverage or insurance coverage in additional amounts if for
any  reason  the  Purchasers  reasonably  determine  that the existing insurance
maintained  by  the  Seller  or  the  Subsidiary  is  insufficient.

     5.3          REPORTING  OBLIGATIONS.

So long as any interest or principal of the Notes is outstanding, and so long as
any  Warrant has not been exercised and has not expired by its terms, the Seller
shall  furnish to the Purchasers, or any other persons who hold any of the Notes
or Warrants (provided that such holders give notice to the Seller that they hold
Notes  or  Warrants  and  furnish  their addresses) promptly upon their becoming
available one copy of each report, notice or proxy statement sent by the Company
to  its stockholders generally, and of each regular or periodic report (pursuant
to  the  Exchange  Act)  and  any  registration statement, prospectus or written
communication (other than transmittal letters) (pursuant to the Securities Act),
filed  by  the Seller with (i) the Commission or (ii) any securities exchange on
which  shares  of Common Stock are listed.  The Purchasers are hereby authorized
to  deliver  a copy of any financial statement or any other information relating
to  the business, operations or financial condition of the Seller which may have
been  furnished to the Purchasers hereunder or otherwise, to any regulatory body
or  agency having jurisdiction over the Purchasers or to any Person which shall,
or  shall  have  right  or  obligation  to  succeed  to  all  or any part of the
Purchasers'  interest  in  the  Seller  or  this  Agreement.

<PAGE>

     The Seller agrees to maintain its registration pursuant to Section 12(g) of
the  Exchange Act and its listing on the OTC Bulletin Board.  To the extent that
the Seller is no longer required to provide information pursuant to the Exchange
Act,  the Seller shall provide the Purchasers with (i) (within 15 days after the
close  of  each  fiscal  quarter in each fiscal year of the Seller) an unaudited
consolidated  balance sheet of the Seller, a consolidated statement of income of
the  Seller, and a consolidated statement of cash flows of the Seller, as at the
end  of and for the period commencing at the end of the previous fiscal year and
ending  with  such  month, prepared in accordance with GAAP; and (ii) (within 90
days  after  the  close  of  each  fiscal  year  then  ended  of  the  Seller) a
consolidated  balance sheet of the Seller, a consolidated statement of income of
the  Seller, and a consolidated statement of cash flows of the Seller, as at the
end  of  and  for  the  fiscal  year then ended, setting forth the corresponding
figures  of the previous fiscal year in comparative form, and certified (without
any  qualification  or  exception  deemed  material  by  the  Purchasers) by the
independent  certified  public  accountants  of  the  Seller.

     Upon  the occurrence of an Event of Default under the Notes or in the event
of  the failure of the Seller to comply with the first sentence of the preceding
paragraph,  the  Seller  and  its Subsidiary shall afford to the Purchasers full
access  to  the  properties,  books, records and contracts of the Seller and the
Subsidiary  for  the  purpose of verifying compliance with the provisions of the
Notes  and  this  Agreement.

     5.4          INVESTIGATION.  The representations, warranties, covenants and
agreements  set  forth  in this Agreement shall not be affected or diminished in
any  way  by  any investigation (or failure to investigate) at any time by or on
behalf  of  the  party  for  whose  benefit  such  representations,  warranties,
covenants  and  agreements  were  made.  Without  limiting the generality of the
foregoing,  the  inability  or failure of the Purchasers to discover any breach,
default  or  misrepresentation by the Seller under this Agreement or the Related
Documents  (including  under  any  certificate  furnished  pursuant  to  this
Agreement),  notwithstanding  the exercise by the Purchasers or other holders of
the  Notes  of their rights under Section 5.4, shall not in any way diminish any
liability  hereunder.

     5.5          PUBLIC  ANNOUNCEMENTS.  Neither  the Purchasers nor the Seller
shall  (and  each  such  party  shall  use  its  reasonable efforts to cause its
subsidiaries,  affiliates,  directors,  officers,  employees  and  authorized
representatives  not  to), issue any press release, make any public announcement
or  furnish  any  written  statement  to its employees or stockholders generally
concerning  the  transactions contemplated by this Agreement without the consent
of the other party (which consent shall not be unreasonably withheld), except to
the  extent  required  by  applicable  law  or  the  applicable  requirements of
applicable  stock exchange rules (including NASDAQ) or as otherwise contemplated
herein  (and in either such case such party shall, to the extent consistent with
timely  compliance  with such requirement, consult with the other party prior to
making  the  required  release,  announcement  or  statement).

5.6          RIGHT  OF FIRST REFUSAL.   Effective as of the Closing Date and for
one year from the Effective Date, the Seller hereby grants to the Purchasers the
first  option  to  provide  and/or

<PAGE>

     participate  in  any debt or equity financing transaction other than (i) an
underwritten  public  offering  of  the  Seller's  Common Stock resulting in net
proceeds  to  the  Company  of  at  least  $20,000,000  or  (ii)  an issuance of
securities  in  consideration  for  the  strategic acquisition by the Company of
another  business  (the  "Future  Financing"), that the Seller may require.  If,
while  any  of  the  Notes  are  outstanding, the Seller desires to initiate any
Future  Financing,  then  the Seller shall give written notice to the Purchasers
setting  forth  the  price  and  terms of such Future Financing.  The Purchasers
shall  thereupon  have  the option for a period of twenty (20) days (the "Option
Period")  from receipt of such notice, to participate in the Future Financing at
the  same  price  and  terms  identified  in the notice to Purchasers, with such
option to be exercised by giving written notice to the Seller.  In the event the
Purchasers  do  not  exercise  such  option within the Option Period, the Seller
shall be free to proceed with the Future Financing with any third parties at the
price  and  terms  contained  in the notice to Purchasers for a period of ninety
(90)  days  from  the  expiration of the Option Period.  The Purchasers shall be
entitled to customary and appropriate advisory fees, agreed to in writing by the
parties  hereto, in the event that the Purchasers provide acquisition, financing
or  other  advisory  services  to  the  Seller.

     5.7          USE  OF  PROCEEDS.  The  Seller  covenants and agrees that the
proceeds  of  the Purchase Price shall be used by the Seller for working capital
and  general  corporate  purposes,  all  in  the  manner,  amounts  and  as more
particularly  set  forth  in  the  Annual  Budget.

     5.8          CORPORATE  EXISTENCE.  The  Seller shall preserve and maintain
and  cause  the  Subsidiary to preserve and maintain its corporate existence and
good  standing  in  the  jurisdiction  of  their  incorporation  and the rights,
privileges  and  franchises  of the Seller and the Subsidiary in each case where
failure  to  so preserve or maintain could have a material adverse effect on the
financial  condition,  business  or  operations of the Seller and the Subsidiary
taken  as  a  whole.

     5.9     LICENSES.  The  Seller  shall,  and  shall cause the Subsidiary to,
maintain  at  all  times all licenses or permits necessary to the conduct of its
business  or  as  may  be required by any governmental agency or instrumentality
thereof.

     5.10     TAXES  AND  CLAIMS.  The  Seller and the Subsidiary shall duly pay
and  discharge  (a)  all  taxes,  assessments  and  governmental charges upon or
against  the Seller or properties or assets prior to the date on which penalties
attach  thereto,  unless  and to the extent that such taxes are being diligently
contested in good faith and by appropriate proceedings, and appropriate reserves
therefor  have  been  established, and (b) all lawful claims, whether for labor,
materials,  supplies, services or anything else which might or could, if unpaid,
become  a  lien  or  charge  upon  the properties or assets of the Seller or the
Subsidiary  unless  and  to  the  extent only that the same are being diligently
contested  in good faith and by appropriate proceedings and appropriate reserves
therefor  have  been  established.

<PAGE>

     5.11          BOOKS  AND  RESERVES.  The  Seller  shall:

     (a)     maintain,  and  cause  its  Subsidiaries to maintain, at all times,
true  and complete books, records and accounts in which true and correct entries
shall  be  made of its transactions in accordance with GAAP consistently applied
and  consistent  with  those  applied  in  the  preparation  of  the  Financial
Statements,  and

     (b)     by  means  of  appropriate monthly entries, reflect in its accounts
and  in  all  financial  statements  the proper liabilities and reserves for all
taxes  and  proper  reserves  for  depreciation,  renewals  and  replacements,
obsolescence and amortization of its properties and bad debts, all in accordance
with  GAAP  consistently  applied,  as  above  described.

     5.12     CONDITION  OF  PROPERTY.  The Seller and the Subsidiary shall keep
their  properties  in good repair, working order and condition and, from time to
time, make all needful and proper repairs, renewals, replacements, additions and
improvements  thereto,  so  that  the  business  carried  on may be properly and
advantageously  conducted  at  all  times  in  accordance  with prudent business
management.  The  Seller  and  the  Subsidiary  shall  at  all  times keep their
properties  free  and clear of all liens, encumbrances and security interests of
every  kind,  other than liens, encumbrances and security interests permitted to
exist  pursuant  to  this  Agreement.

     5.13     PERFORM  COVENANTS.  The  Seller  shall  (a)  make full and timely
payment  of any and all payments on the Notes, and all other indebtedness of the
Seller  to  the  Purchasers,  whether now existing or hereafter arising, and (b)
duly comply with all the terms and covenants contained herein and in each of the
instruments and documents given to the Purchasers in connection with or pursuant
to  this  Agreement,  all  at  the  times and places and in the manner set forth
herein  or  therein,  and  (c)  at  all  times  maintain  the liens and security
interests  provided  for  under  or  pursuant  to this Agreement and the Related
Documents  as  valid  and perfected liens and security interests on the property
covered  thereby.

5.14     ADDITIONAL  COVENANTS.

     (a)     Except for transactions approved by a majority of the disinterested
directors of the Board of Directors, neither the Seller nor the Subsidiary shall
enter  into  any  transaction  with any director, officer, employee or holder of
more  than 5% of the outstanding capital stock of any class or series of capital
stock  of the Seller or the Subsidiary, member of the family of any such person,
or any corporation, partnership, trust or other entity in which any such person,
or  member  of  the  family of any such person, is a director, officer, trustee,
partner or holder of more than 5% of the outstanding capital stock thereof, with
the  exception of transactions which are consummated upon terms that are no less
favorable  than  would  be  available  if  such transaction had been effected at
arms-length,  in  the  reasonable  judgment  of the Board of Directors ("Related
Person  Transactions").

<PAGE>

     (b)     The  Seller  shall  comply and cause each subsidiary to comply with
all  applicable  laws,  rules,  regulations  and  orders.

     (c)     The  Seller  shall, and shall cause the Subsidiary to, at all times
observe  and  comply  with  all  rules  of  governmental  and quasi-governmental
authorities  which  may  be  applicable  to  any  activity  of the Seller or the
Subsidiary.

     (d)     So long as any Notes are outstanding, the Seller shall not make any
cash payment in redemption of any of its capital stock without the prior written
consent  of the holders of a majority of the outstanding principal amount of the
Notes.

     (e)     Neither  the Seller nor the Subsidiary shall provide the Purchasers
with  any  material  non-public  information  except as required pursuant to the
terms  of  this  Agreement  or  the  Related  Documents.

     5.15     FURTHER  ASSURANCES.  The  Seller  shall, at its cost and expense,
upon written request of the Purchasers, duly execute and deliver, or cause to be
duly  executed  and delivered, to the Purchasers such further instruments and do
and cause to be done such further acts as may be necessary, advisable or proper,
in  the absolute discretion of the Purchasers, to carry out more effectually the
provisions  and  purposes  of  this  Agreement.

     ARTICLE VI
     COVENANTS OF THE PURCHASERS

     6.1     SHORTING.  Until  the  earlier to occur of the maturity date of the
Note,  any  exercise  by  the  Seller  of  its Mandatory Conversion Right, which
results  in  the  conversion  of  90%  or more of the then outstanding Notes, as
defined  in  the  Note or conversion by a Purchaser of 90% or more of its Notes,
such  Purchasers shall not hold a short position in the Common Stock for so long
as  the  closing  price  of  the  Common  Stock  is  less  than  $5.00.

     ARTICLE  VII
     CONDITIONS  TO  THE  CLOSING

     7.1     CONDITIONS  TO  OBLIGATIONS  OF THE PURCHASERS.  The obligations of
the  Purchasers are subject to the fulfillment or satisfaction, on and as of the
date  of  each of the First Tranche Closing and the Second Tranche (individually
and/or collectively, the "Closing Date") except as otherwise expressly indicated
below  or in Section 1.3 hereof, of each of the following conditions (any one or
more of which may be waived by the Purchasers in their sole discretion, but only
in  a  writing  signed  by  the  Purchasers):

<PAGE>

     (A)     OPINION.  The  Purchasers  shall  have  received  the  opinion  of
Seller's  Counsel,  in  form  and  substance  satisfactory  to  the  Purchasers.

     (B)     SECRETARY'S  CERTIFICATE.  The  Purchasers  shall  have  received a
certificate  of the Secretary of the Seller and the Subsidiary (the "Secretary's
Certificate"),  in form and substance satisfactory to the Purchasers, certifying
as  follows:

(i)     that attached thereto are true and complete copies of the resolutions of
the  Board  of  Directors  of  the  Seller  and  the  Subsidiary authorizing the
execution, delivery and performance of this Agreement and the Related Documents,
instruments  and  certificates  required  to  be  executed  by  it in connection
herewith  and  approving  the  consummation  of  the  transactions in the manner
contemplated  hereby  including,  but  not  limited  to,  the  authorization and
issuance  of  the  Notes,

(ii)     the  names  and  true  signatures of the officers of the Seller and the
Subsidiary  signing  this  Agreement  and all other documents to be delivered in
connection  with  this  Agreement,

(iii)     the  incumbency  of the members of the Seller's and Subsidiary's Board
of  Directors,

(iv)     such  other  matters  as  required  by  this  Agreement,

(v)     such  other  matters as the Purchasers may reasonably request, including
without  limitation  an update of any representation set forth in this Agreement
as  of  the  time  of  the  Closing.

At  the  Second  Tranche  Closing,  the Secretary's Certificate shall include an
update  of all information contained in the Secretary's Certificate delivered at
the  First  Tranche Closing, a certification that the documents delivered at the
First  Tranche Closing remain in full force and effect, and a certification that
no  Events  of Default have occurred under any of the documents delivered at the
First  Tranche  Closing  and  such other matters reasonably requested, including
certification  of  material  compliance  with  the  Annual  Budget.

     (C)     NOTES,  WARRANTS.  The Seller shall have executed and delivered the
Notes  in the form of Exhibit A attached hereto, and certificates evidencing the
Warrants  in  the  form  of Exhibit B attached hereto, to the Purchasers, in the
amounts  as provided in Section 2.3 with respect to the First and Second Tranche
Closings.

     (D)     REGISTRATION  RIGHTS  AGREEMENT.  At the First Tranche Closing, the
Seller  shall  have executed and delivered the Registration Rights Agreement, in
the  form  attached  hereto  as  Exhibit  C.

<PAGE>

     (E)     SECURITY AGREEMENT.  At the First Tranche Closing, the Seller shall
have  executed and delivered the Security Agreement, in the form attached hereto
as  Exhibit  D.

     (F)     SUBSIDIARY  SECURITY  AGREEMENT.  At the First Tranche Closing, the
Subsidiary  shall have executed and delivered the Subsidiary Security Agreement,
in  the  form  attached  hereto  as  Exhibit  E.

     (G)     INTELLECTUAL  PROPERTY  SECURITY  AGREEMENT AND ASSIGNMENT.  At the
First  Tranche,  the  Seller  shall have executed and delivered the Intellectual
Property  Security  Agreement  and  Assignment,  in  the form attached hereto as
Exhibit  F.

     (H)     SUBSIDIARY INTELLECTUAL PROPERTY SECURITY AGREEMENT AND ASSIGNMENT.
At  the  First  Tranche,  the  Subsidiary  shall have executed and delivered the
Subsidiary  Intellectual Property Agreement and Assignment, in the form attached
hereto  as  Exhibit  G.

     (I)     PLEDGE  AGREEMENT.   At the First Tranche Closing, the Seller shall
have executed and delivered the Pledge Agreement, in the form attached hereto as
Exhibit  H.

     (J)     SUBSIDIARY  GUARANTY.  At the First Tranche Closing, the Subsidiary
shall  have executed and delivered the Subsidiary Guaranty, in the form attached
hereto  as  Exhibit  I.

     (K)     LOCK-UP  AND  TAG  ALONG  RIGHTS  AGREEMENT.  At  the First Tranche
Closing,  the  executive  officers,  directors and 5% or greater shareholders of
Seller and its Subsidiary shall each have executed and delivered the Lock-Up and
Tag  Along  Rights  Agreement,  in  the  form  attached  hereto  as  Exhibit  J.

     (L)     ESCROW AGREEMENT.  At the First Tranche Closing, the Seller and the
Subsidiary  shall  each have executed and delivered the Escrow Agreement, in the
form  attached  hereto  as  Exhibit  K.

     (M)     PERFORMANCE;  REPRESENTATION AND WARRANTIES.  The Seller shall have
performed  and  complied  in  all  respects  with  all agreements and conditions
contained  in this Agreement which are required to be performed or complied with
by  the  Seller prior to or at the Closing, the representation and warranties of
the  Seller  contained herein shall be true and correct on and as of the Closing
Date  as  though  made  on such date, and the Seller shall have delivered to the
Purchasers  a  certificate  of  a  duly authorized officer of the Seller to such
effect.

     (N)    APPROVALS, ETC. Approval and consent of all appropriate governmental
regulatory  agencies  and  the receipt of approval and/or consent from all other
appropriate  parties,  and  all  consents which may be required under any of the
Seller's  agreements  (or  otherwise),  including,  but

<PAGE>

     not  limited  to,  all  landlord  consents and waivers, with respect to the
transactions  contemplated  hereby  shall  have  been  obtained.

     (O)     NO  MATERIAL  ADVERSE  EFFECT.  There  shall have occurred no event
which,  in  the  Purchasers' sole discretion, could result in a Material Adverse
Effect on the Seller and the Subsidiary taken as a whole between the date hereof
and  the  date  of  the  Closing  and  the  Seller and the Subsidiary shall have
operated  their  business in the ordinary course, consistent with past practices
during  such  period.

     (P)     NO  EVENT  OF  DEFAULT.  At the Second Tranche Closing, no Event of
Default  shall  have  occurred  and  be  continuing.

     (Q)     COMPLIANCE  WITH BUDGET.  At the Second Tranche Closing, the Seller
shall  be  in  material  compliance with the annual budget approved at the first
board  of  directors  meeting  of  the  Seller within 90 days of which the First
Tranche  Closing  and  forwarded  to  each Purchaser within ten days thereafter,
which reflects a financial plan that provides the Seller with a positive working
capital balance as of December 31, 2000; provided however that if no such annual
budget  is adopted, the annual budget shall be the annual budget attached hereto
as  Exhibit  L.  For  purposes  of this paragraph (p), Material Compliance shall
mean that (i) the operating expenses of the Seller shall be no greater than 110%
of budgeted amounts and (ii) the revenues of the Seller shall be at least 75% of
budgeted  amounts.

     (R)     REGISTRATION  STATEMENT  EFFECTIVENESS.  The Registration Statement
shall  have  been  declared  effective  by  the  Commission.

     (S)     NO  LITIGATION.  No  litigation,  arbitration  or  other  legal  or
administrative  proceeding  against the Seller or the Subsidiary shall have been
commenced  or  be  pending  by  or  before  any  court,  arbitration  panel  or
govern-mental  authority  or official, and no statute, rule or regulation of any
foreign  or  domestic, national or local government or agency thereof shall have
been enacted after the date of this Agreement, and no judicial or administrative
decision shall have been rendered which enjoins or prohibits, or seeks to enjoin
or  prohibit, the consummation of all or any of the transactions contemplated by
this  Agreement.

     (T)     NO  TERMINATIONS  OF  FIRST  TRANCHE  CLOSING DOCUMENTS.     At the
Second  Tranche  Closing,  a  certification  by  the  Seller  that  all  Related
Documents,  certificates,  estoppel  letters  and other documents or instruments
delivered at the First Tranche Closing (collectively, the "First Tranche Closing
Documents")are  in  full  force and effect, and no party thereto has alleged any
breach  or  default  thereunder or otherwise alleged or indicated that any party
thereto  is  no longer bound by any one or more First Tranche Closing Documents.

<PAGE>

     (U)     WORKING  CAPITAL.  At the Second Tranche Closing a certification by
the  Seller  that  its  working  capital  balance  exceeds  $100,000.

     7.2     CONDITIONS  TO  OBLIGATIONS  OF THE SELLER.  The obligations of the
Seller  hereunder  are  subject to the fulfillment or satisfaction, on and as of
the Closing Date, of the following condition (which may be waived by the Seller,
in  its  sole  discretion,  but  only  in  a  writing  signed  by  the  Seller):

     (A)     PERFORMANCE;  REPRESENTATION  AND WARRANTIES.  The Purchasers shall
have  performed  and complied in all respects with all agreements and conditions
contained  in this Agreement which are required to be performed or complied with
by  the Purchasers prior to or at the Closing, the representation and warranties
of  the  Purchasers  contained herein shall be true and correct on and as of the
Closing  Date  as  though  made  on  such  date,  and  the Purchasers shall have
delivered  to  the  Seller  a  certificate  of  a duly authorized officer of the
Purchasers  to  such  effect.

     (B)     NO  LITIGATION.  No  litigation,  arbitration  or  other  legal  or
administrative proceeding against the Purchasers shall have been commenced or be
pending  by or before any court, arbitration panel or govern-mental authority or
official,  and  no  statute,  rule  or  regulation  of  any foreign or domestic,
national or local government or agency thereof shall have been enacted after the
date  of  this  Agreement, and no judicial or administrative decision shall have
been  rendered  which  enjoins or prohibits, or seeks to enjoin or prohibit, the
consummation  of  all or any of the transactions contemplated by this Agreement.

     ARTICLE  VIII
     INDEMNIFICATION  AND  TERMINATION

8.1     SURVIVAL  OF  REPRESENTATIONS;  INDEMNITY;  PURCHASERS'  LIABILITY.

     (A)     SURVIVAL  OF REPRESENTATIONS.  Except as otherwise provided herein,
the  representations, warranties, covenants and agreements of the Seller and the
Purchasers  contained  in  or  made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing Date and shall continue
in full force and effect and shall in no way be affected by any investigation of
the subject matter thereof made by or on behalf of the Seller or the Purchasers.

(B)     INDEMNIFICATION.  (i)  The  Seller agrees to indemnify and hold harmless
the  Purchasers,  their affiliates, each of their officers, directors, employees
and  agents  and  their  respective successors and assigns, from and against any
losses,  damages, or expenses which are caused by or arise out of (A) any breach
or  default  in the performance by the Seller or  the Subsidiary of any covenant
or agreement made by the Seller or the Subsidiary in this Agreement or in any of
the  agreements  or  the  Related  Documents;  (B)  any  breach  of  warranty or
representation  made by the Seller or the Subsidiary in this Agreement or in any
of  the  agreements or documents referred to in this Agreement arising out of or
(C)  any  losses  or  liabilities  attributable  to  the  matters  described  in

<PAGE>

     Schedules  3.9,  3.10,  3.14  or  3.15  and (D) any and all actions, suits,
proceedings,  claims,  demands,  judgments,  costs  and  expenses  (including
reasonable  legal  fees  and  expenses)  incident  to  any  of  the  foregoing.

     (ii)  The  Purchasers,  severally  and  not jointly, agree to indemnify and
hold  harmless  the  Seller,  its  affiliates, and its respective successors and
assigns,  from  and against any losses, damages, or expenses which are caused by
or  arise  out of (A) any breach or default in the performance by the Purchasers
of  any  covenant or agreement made by the Purchasers in this Agreement; (B) any
breach  of  warranty or representation made by the Purchasers in this Agreement;
and  (C)  any  and  all actions, suits, proceedings, claims, demands, judgments,
costs  and  expenses  (including reasonable legal fees and expenses) incident to
any  of  the  foregoing.

     (C)     INDEMNITY  PROCEDURE.  A  party  or  parties  hereto agreeing to be
responsible for or to indemnify against any matter pursuant to this Agreement is
referred  to  herein  as the "Indemnifying Party" and the other party or parties
claiming  indemnity  is  referred  to  as  the  "Indemnified  Party".

     An  Indemnified  Party  under  this Agreement shall, with respect to claims
asserted  against  such  party  by  any  third party, give written notice to the
Indemnifying  party  of  any  liability  which  might  give  rise to a claim for
indemnity under this Agreement within sixty (60) business days of the receipt of
any written claim from any such third party, but not later than twenty (20) days
prior  to the date any answer or responsive pleading is due, and with respect to
other  matters  for  which  the Indemnified Party may seek indemnification, give
prompt  written  notice  to  the Indemnifying party of any liability which might
give  rise to a claim for indemnity; provided, however, that any failure to give
such  notice  will  not  waive any rights of the Indemnified Party except to the
extent  the  rights  of  the  Indemnifying  Party  are  materially  prejudiced.

The  Indemnifying  Party shall have the right, at its election, to take over the
defense  or settlement of such claim by giving written notice to the Indemnified
Party  at  least  fifteen  (15)  days  prior to the time when an answer or other
responsive  pleading  or  notice  with  respect  thereto  is  required.  If  the
Indemnifying Party makes such election, it may conduct the defense of such claim
through  counsel of its choosing (subject to the Indemnified Party's approval of
such  counsel,  which  approval  shall  not  be unreasonably withheld), shall be
solely  responsible  for  the expenses of such defense and shall be bound by the
results of its defense or settlement of the claim.  The Indemnifying Party shall
not  settle  any  such  claim  without prior notice to and consultation with the
Indemnified  Party,  and  no  such  settlement involving any equitable relief or
which  might  have  an  adverse effect on the Indemnified Party may be agreed to
without the written consent of the Indemnified Party (which consent shall not be
unreasonably  withheld).  So  long  as  the  Indemnifying  Party  is  diligently
contesting any such claim in good faith, the Indemnified Party may pay or settle
such  claim  only  at  its  own  expense  and the Indemnifying Party will not be
responsible  for  the  fees  of separate legal counsel to the Indemnified Party,
unless  the  named  parties  to  any  proceeding  include  both  parties  and
representation  of  both parties by the same counsel would be inappropriate.  If
the  Indemnifying

<PAGE>

     Party  does  not make such election, or having made such election does not,
in  the reasonable opinion of the Indemnified Party proceed diligently to defend
such  claim,  then  the  Indemnified  Party  may  (after  written  notice to the
Indemnifying  Party),  at  the  expense of the Indemnifying Party, elect to take
over  the  defense of and proceed to handle such claim in its discretion and the
Indemnifying  Party  shall  be  bound  by  any  defense  or  settlement that the
Indemnified  Party  may  make  in  good  faith  with  respect to such claim.  In
connection  therewith,  the  Indemnifying  Party  will  fully cooperate with the
Indemnified Party should the Indemnified Party elect to take over the defense of
any  such  claim.

     The parties agree to cooperate in defending such third party claims and the
Indemnified  Party  shall provide such cooperation and such access to its books,
records  and  properties as the Indemnifying Party shall reasonably request with
respect  to  any  matter  for which indemnification is sought hereunder; and the
parties  hereto agree to cooperate with each other in order to ensure the proper
and  adequate  defense  thereof.

     With regard to claims of third parties for which indemnification is payable
hereunder, such indemnification shall be paid by the Indemnifying Party upon the
earlier  to occur of:  (i) the entry of a judgment against the Indemnified Party
and the expiration of any applicable appeal period, or if earlier, five (5) days
prior  to  the  date  that  the  judgment  creditor has the right to execute the
judgment; (ii) the entry of an unappealable judgment or final appellate decision
against  the  Indemnified  Party;  or  (iii)  a  settlement  of  the  claim.
Notwithstanding  the  foregoing,  the  reasonable  expenses  of  counsel  to the
Indemnified  Party  shall  be  reimbursed on a current basis by the Indemnifying
Party  if  such expenses are a liability of the Indemnifying Party.  With regard
to  other  claims  for  which  indemnification  is  payable  hereunder,  such
indemnification  shall be paid promptly by the Indemnifying Party upon demand by
the  Indemnified  Party.

     (D)     LIABILITY  OF  PURCHASERS.  Except  for  all  willful  misconduct,
Purchasers  shall  be  under no liability for, and the Seller and the Subsidiary
hereby  release  the Purchasers from all claims for loss or damage caused by (a)
Purchasers'  failure  to  perform,  enforce or collect any of the Collateral, as
defined  in  the  Security  Agreement,  the  Subsidiary  Security Agreement, the
Intellectual  Property  Security  Agreement  and  Assignment  and the Subsidiary
Intellectual  Property  Security  Agreement and Assignment, or any part thereof,
(b)  Purchasers' failure to preserve or protect any rights of the Seller against
account  debtors or prior parties to the Collateral or any part thereof, (c) the
operation,  maintenance,  repairing,  selling,  removal,  taking  possession  or
disposing  of the Collateral or any part thereof by Purchasers and (d) any other
act  or  omission  on  the  part  of  the  Purchasers.

<PAGE>

     ARTICLE  IX
     MISCELLANEOUS

     9.1          FURTHER ASSURANCES.  Each party agrees to cooperate fully with
the  other  parties  and  to  execute  such  further  instruments, documents and
agreements  and  to  give  such  further written assurances as may be reasonably
requested  by  any  other  party to better evidence and reflect the transactions
described  herein  and  contemplated hereby and to carry into effect the intents
and  purposes  of  this  Agreement.

     9.2          FEES  AND  EXPENSES.  The  Seller shall be responsible for the
payment  of  $35,000 of the Purchasers' reasonable and documented legal fees and
expenses  relating  to  the  transactions  contemplated  by  this  Agreement.

     9.3          NOTICES.  Whenever  any party hereto desires or is required to
give  any  notice,  demand, or request with respect to this Agreement, each such
communication shall be in writing and shall be effective only if it is delivered
by  personal  service  or  mailed,  United  States registered or certified mail,
postage  prepaid,  return  receipt  requested  (and shall be deemed to have been
received  three(3)  days  after deposit into the United States mail), or sent by
prepaid  overnight  courier,  facsimile  or  confirmed  telecopier, addressed as
follows:

<TABLE>
<CAPTION>

<S>                                                          <C>

                                                             If to the Seller:
If to the Purchasers, to the Purchaser's Representative at:  Merlin Software Technologies
Narragansett Asset Management, LLC. . . . . . . . . . . . .  International, Inc.
375 Park Avenue . . . . . . . . . . . . . . . . . . . . . .  Suite 420 - 6450 Roberts Street
New York, New York 10152. . . . . . . . . . . . . . . . . .  Burnaby, British Columbia, Canada V5G 4E1
Attention: Managing Director. . . . . . . . . . . . . . . .  Attention: Robert Helber
Fax No.: (212) 521-5029 . . . . . . . . . . . . . . . . . .  Fax No.:
-----------------------------------------------------------  -------------------------------------------

With a copy in each case to:. . . . . . . . . . . . . . . .  With a copy in each case to:
Kane Kessler, P.C.. . . . . . . . . . . . . . . . . . . . .  Clark, Wilson
1350 Avenue of the Americas - 26th Floor. . . . . . . . . .  HSBC Building 800-885 West Georgia Street
New York, New York 10019. . . . . . . . . . . . . . . . . .  Vancouver, British Columbia, Canada V6C 3H1
Attention:  Robert L. Lawrence, Esq.. . . . . . . . . . . .  Attention: Virgil Z. Hlus, Esq.
Fax No.: (212) 245-3009 . . . . . . . . . . . . . . . . . .  Fax No.: (604) 687-6314
-----------------------------------------------------------  -------------------------------------------
</TABLE>

Unless  otherwise stated above, such communications shall be effective when they
are  received  by  the  addressee  thereof in conformity with this Section.  Any
party may change its address for such communications by giving notice thereof to
the  other  parties  in  conformity  with  this  Section.

9.4          GOVERNING  LAW.  This  Agreement has been entered into and shall be
construed  and  enforced  in  accordance  with  the  laws of the State of Nevada
without  reference  to  the  choice  of  law  principles  thereof.

<PAGE>

     9.5          JURISDICTION  AND  VENUE.  This  Agreement shall be subject to
the  exclusive jurisdiction of the Federal District Court, Southern District  of
New  York  and if such court does not have proper jurisdiction, the State Courts
of  New  York  County,  New  York.  The parties to this Agreement agree that any
breach of any term or condition of this Agreement shall be deemed to be a breach
occurring  in  the  State  of  New York by virtue of a failure to perform an act
required  to be performed in the State of New York and irrevocably and expressly
agree  to  submit  to  the  jurisdiction of the Federal District Court, Southern
District  of  New  York and if such court does not have proper jurisdiction, the
State  Courts  of  New  York  County,  New York for the purpose of resolving any
disputes  among  the  parties  relating  to  this  Agreement or the transactions
contemplated  hereby.  The  parties  irrevocably  waive,  to  the fullest extent
permitted  by  law,  any  objection  which they may now or hereafter have to the
laying  of venue of any suit, action or proceeding arising out of or relating to
this  Agreement,  or any judgment entered by any court in respect hereof brought
in  New  York County, New York, and further irrevocably waive any claim that any
suit,  action or proceeding brought in Federal District Court, Southern District
of  New  York  and  if  such  court does not have proper jurisdiction, the State
Courts  of  New York County, New York has been brought in an inconvenient forum.

     9.6          SUCCESSORS  AND  ASSIGNS.   This Agreement is personal to each
of  the parties and may not be assigned without the written consent of the other
parties;  provided,  however,  that  any of the Purchasers shall be permitted to
assign  their  rights  under  this Agreement to any affiliate of such Purchaser.

     9.7          SEVERABILITY.  If  any  provision  of  this  Agreement, or the
application  thereof,  shall  for  any  reason  or  to  any extent be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances shall continue in full force and effect and in
no  way  be  affected,  impaired  or  invalidated.

     9.8          ENTIRE AGREEMENT.  This Agreement and the other agreements and
instruments  referenced herein constitute the entire understanding and agreement
of  the  parties  with  respect  to the subject matter hereof and supersedes all
prior  agreements  and  understandings.

     9.9          OTHER  REMEDIES.  Except as otherwise provided herein, any and
all  remedies herein expressly conferred upon a party shall be deemed cumulative
with  and  not  exclusive  of any other remedy conferred hereby or by law, or in
equity  on such party, and the exercise of any one remedy shall not preclude the
exercise  of  any  other.

9.10          AMENDMENT  AND  WAIVERS.  Any  term or provision of this Agreement
may  be  amended, and the observance of any term of this Agreement may be waived
(either  generally  or  in  a  particular  instance  and either retroactively or
prospectively)  only by a writing signed by the Seller and the holders of 66% of
the  outstanding  principal  amount  of the Notes.  The waiver by a party of any
breach  hereof  or  default  in  the  performance  hereof shall not be deemed to
constitute  a  waiver  of any other default or any succeeding breach or default.
This  Agreement  may  not  be  amended  or

<PAGE>

     supplemented  by  any  party  hereto except pursuant to a written amendment
executed  by  the  Seller  and  the  holders of 66% of the outstanding principal
amount  of  the  Notes.

     9.11          NO  WAIVER.  The  failure  of any party to enforce any of the
provisions  hereof  shall  not  be construed to be a waiver of the right of such
party  thereafter  to  enforce  such  provisions.

     9.12          CONSTRUCTION OF AGREEMENT; KNOWLEDGE.    For purposes of this
Agreement,  the  term "knowledge," when used in reference to a corporation means
the  knowledge  of the officers of such corporation assuming such officers shall
have  made  inquiry that is customary and appropriate under the circumstances to
which  reference  is made, and when used in reference to an individual means the
knowledge  of  such  individual  assuming the individual shall have made inquiry
that  is customary and appropriate under the circumstances to which reference is
made.

     9.13          COUNTERPARTS.  This  Agreement  may be executed in any number
of  counterparts,  each of which shall be an original as against any party whose
signature appears thereon and all of which together shall constitute one and the
same  instrument.  This  Agreement  shall  become  binding  when  one  or  more
counterparts  hereof,  individually or taken together, shall bear the signatures
of  all  of  the  parties  reflected  hereon  as  signatories.

     9.14          NO  THIRD PARTY BENEFICIARY.  Nothing expressed or implied in
this  Agreement  is  intended, or shall be construed, to confer upon or give any
person  other  than  the  parties  hereto  and  their respective heirs, personal
representatives,  legal  representatives,  successors and permitted assigns, any
rights  or  remedies  under  or  by  reason  of  this  Agreement.

IN  WITNESS  WHEREOF,  the parties hereto have executed this Agreement as of the
date  first  above  written.

<PAGE>

<TABLE>
<CAPTION>

<S>                                                      <C>

  SELLER AND MAKER:

  MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.

  By:/s/ Robert Heller
  Name:  Robert Heller
  Title: President

  SUBSIDIARY:

  MERLIN SOFTWARE TECHNOLOGIES INC.

  By:/s/ Robert Heller
  Name:  Robert Heller
  Title: President

  PURCHASERS:

Narragansett I, L.P. a Delaware limited partnership

By:/s/ Joseph L. Dowling
Name: Joseph L. Dowling
Title:   Managing Member

Narragansett Offshore Ltd., a Cayman Island corporation
By its Investment Manager, Leo Holdings, L.L.C.

By:  /s/ Joseph L. Dowling
Name: Joseph L. Dowling
Title: Managing Member

Pequot Scout Fund, L.P., a Delaware
limited partnership

By its Investment Advisor,
Pequot Capital Management, Inc.

By: /s/ David J. Malat
Name:  David J. Malat
Title:  Chief Accounting Officer

SDS Merchant Fund, L.P.
By its Managing Member,
SDS Capital Partners, L.L.C.

By: /s/ Steven Derby
Name: Steven Derby
Title:   Managing Member
</TABLE>REGISTRATION RIGHTS AGREEMENT
                          -----------------------------

     This  Registration  Rights Agreement (this "Agreement") is made and entered
into  as  of  August  18, 2000 among Merlin Software Technologies International,
Inc.,  a  Nevada  corporation  (the  "Company"),  and  each  of  the  purchasers
executing this Agreement and listed on Schedule 1 attached hereto (collectively,
the  "Purchasers")

     This  Agreement  is  being  entered  into  pursuant to the Note and Warrant
Purchase  Agreement,  dated  as of the date hereof, by and among the Company and
the  Purchasers  (the  "Purchase  Agreement").

     The  Company  and  the  Purchasers  hereby  agree  as  follows:

     1.     Definitions.

     Capitalized  terms  used  and  not  otherwise defined herein shall have the
meanings given such terms in the Purchase Agreement.  As used in this Agreement,
the  following  terms  shall  have  the  following  meanings:

     "Advice"  shall  have  the  meaning  set  forth  in  Section  3(m).

     "Affiliate"  means,  with  respect  to  any  Person,  any other Person that
directly or indirectly controls or is controlled by or under common control with
such  Person.  For  the  purposes  of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct  or  cause  the  direction of the management and policies of such Person,
whether  through  the  ownership of voting securities, by contract or otherwise;
and  the  terms  of  "affiliated,"  "controlling" and "controlled" have meanings
correlative  to  the  foregoing.

     "Blackout  Period"  shall  have  the  meaning  set  forth  in Section 3(n).

     "Board"  shall  have  the  meaning  set  forth  in  Section  3(n).

     "Business Day"  means  any  day  except  Saturday, Sunday and any day which
shall  be a legal holiday or a day on which banking institutions in the state of
California  generally  are  authorized  or  required  by law or other government
actions  to  close.

     "Commission"  means  the  Securities  and  Exchange  Commission.

     "Common  Stock"  means  the  Company's  Common  Stock, par value $0.001 per
share.

<PAGE>

     "Effectiveness  Date"  means with respect to the Registration Statement the
150th  day  following  the  date  of  the  First Tranche closing pursuant to the
Purchase  Agreement  (the  "First  Tranche  Closing  Date").

     "Effectiveness  Period"  shall  have the meaning set forth in Section 2(a).

     "Event"  shall  have  the  meaning  set  forth  in  Section  7(e).

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

     "Filing Date" means the 75th day  following the First Tranche Closing Date.

     "Holder" or "Holders" means the holder or holders, as the case may be, from
time  to  time  of  Registrable  Securities,  including  without  limitation the
Purchasers  and  their  assignees.

     "Indemnified  Party"  shall  have  the  meaning  set forth in Section 5(c).

     "Indemnifying  Party"  shall  have  the  meaning set forth in Section 5(c).

     "Losses"  shall  have  the  meaning  set  forth  in  Section  5(a).

     "NASDAQ"  shall  mean  the  National  Association  of  Securities  Dealers
Automatic  Quotation  System.

     "Notes"  shall  mean  the  Notes  issued  to the Purchasers pursuant to the
Purchase  Agreement.

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

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

      "Prospectus" means the prospectus included n  the  Registration  Statement
(including,  without  limitation,  a  prospectus  that  includes any information
previously  omitted from a prospectus filed as part of an effective registration
statement  in  reliance upon Rule 430A promulgated under the Securities Act), as
amended  or supplemented by any prospectus supplement, with respect to the terms
of  the  offering  of  any  portion of the Registrable Securities covered by the
Registration  Statement,  and  all  other  amendments  and  supplements  to  the
Prospectus,  including  post-effective amendments, and all material incorporated
by  reference  in  such  Prospectus.

<PAGE>

     "Registrable Securities" means (i) the shares of Common Stock issuable upon
conversion  of  the Notes (the "Conversion Shares") and exercise of the Warrants
(the  "Warrant  Shares"),  and  upon  any  stock  split,  stock  dividend,
recapitalization  or  similar  event  with  respect to such Conversion Shares or
Warrant  Shares  and  (ii) any other dividend or other distribution with respect
to,  conversion  or  exchange  of, or in replacement of, Registrable Securities;
provided, however, that Registrable Securities shall include (but not be limited
to)  (a)  a  number  of  shares  of Common Stock equal to no less than 4,095,000
shares  of Common Stock which would be issuable upon conversion of the Notes and
upon exercise of the Warrants and (b) 500,000 previously issued shares of Common
Stock  previously  issued  by  Merlin Software Technologies, Inc. (the Company's
wholly  owned  subsidiary)  and  exchanged  for  500,000 shares of the Company's
Common  Stock  on  April 26, 2000.  Notwithstanding anything herein contained to
the  contrary,  such  registered shares of Common Stock shall be allocated among
the  Holders pro rata based on the total number of Registrable Securities issued
or  issuable as of each date that a Registration Statement, as amended, relating
to  the  resale  of  the  Registrable  Securities  is  declared effective by the
Commission.

     "Registration  Statement"  means  the  registration  statements  and  any
additional registration statements contemplated by Section 2, including (in each
case)  the Prospectus, amendments and supplements to such registration statement
or  Prospectus,  including  pre-  and  post-effective  amendments,  all exhibits
thereto,  and  all  material  incorporated  by  reference  in  such registration
statement.

     "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.

     "Rule  158"  means  Rule  158 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.

     "Rule  415"  means  Rule  415 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.

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

     "Special  Counsel"  means any special counsel to the Holders, for which the
Holders  will  be  reimbursed  by  the  Company  pursuant  to  Section  4.

     2.     Registration.

(a)     Required  Registration.  On  or  prior  to  the Filing Date, the Company
shall  prepare  and  file  with  the Commission a "shelf" Registration Statement
covering  all  Registrable

<PAGE>

     Securities  for  an  offering  to be made on a continuous basis pursuant to
Rule  415.  The  Registration Statement shall be on Form S-1 (or on another form
appropriate  for  such  registration in accordance herewith).  The Company shall
(i)  not  permit  any  securities  other  than  the Registrable Securities to be
included  in  the  Registration Statement and (ii) use its best efforts to cause
the  Registration  Statement  to  be declared effective under the Securities Act
(including  filing  with  the  Commission  a  request  for  acceleration  of
effectiveness  in accordance with Rule 12dl-2 promulgated under the Exchange Act
within  five  (5) Business Days of the date that the Company is notified (orally
or  in  writing,  whichever  is  earlier)  by the Commission that a Registration
Statement  will  not  be "reviewed," or not be subject to further review) within
one  hundred  fifty  (150)  days from the First Tranche Closing Date, but in any
event  prior  to the Effectiveness Date, and to keep such Registration Statement
continuously  effective  under  the  Securities  Act  until  such date as is the
earlier  of  (x)  the  date  when  all  Registrable  Securities  covered by such
Registration  Statement  have been sold or (y) the date on which the Registrable
Securities  may  be  sold  without  any  restriction  pursuant to Rule 144(k) as
determined  by  the counsel to the Company pursuant to a written opinion letter,
addressed  to  the  Company's  transfer agent to such effect (the "Effectiveness
Period").

     (b)     Shelf  Registration.  As  soon as possible but no later than thirty
(30)  days  after  becoming  eligible  to  file  a  registration statement for a
secondary  or  resale  offering  of  the Registrable Securities on Form S-3, the
Company shall prepare and file with the Commission a post-effective amendment to
Form  S-1  (or  such other applicable form filed in accordance with Section 2(a)
above)  on  Form  S-3 to continue the registration of all Registrable Securities
pursuant  to  a  "shelf"  Registration  Statement  on  Form  S-3  covering  all
Registrable Securities for an offering to be made on a continuous basis pursuant
to  Rule  415.  Notwithstanding anything to the contrary contained herein, at no
time  during  the  Effectiveness  Period shall any of the Registrable Securities
cease  being  registered.

     3.     Registration  Procedures.

     In  connection  with  the Company's registration obligations hereunder, the
Company  shall:

(a)     Prepare  and  file with the Commission on or prior to the Filing Date, a
Registration  Statement  on  Form  S-1  (or on another form appropriate for such
registration in accordance herewith) in accordance with the method or methods of
distribution  thereof  as specified by the Holders (except if otherwise directed
by  the  Holders),  and cause the Registration Statement to become effective and
remain  effective as provided herein; provided, however, that not less than five
(5)  Business  Days  prior  to  the  filing of the Registration Statement or any
related  Prospectus  or  any  amendment  or  supplement  thereto  (including any
document that would be incorporated therein by reference), the Company shall (i)
furnish  to  the  Holders  and any Special Counsel, copies of all such documents
proposed  to  be  filed,  which  documents  (other  than  those  incorporated by
reference)  will  be  subject  to  the  review  of such Holders and such Special
Counsel, and (ii) at the request of any Holder cause its officers and directors,
counsel  and  independent  certified  public  accountants  to

<PAGE>

     respond  to such inquiries as shall be necessary, in the reasonable opinion
of  counsel  to  such  Holders, to conduct a reasonable investigation within the
meaning  of  the  Securities  Act.  The  Company shall not file the Registration
Statement  or  any  such  Prospectus or any amendments or supplements thereto to
which  the  Holders  of  a majority of the Registrable Securities or any Special
Counsel  shall  reasonably  object  in writing within three (3) Business Days of
their  receipt  thereof.

     (b)     (i) Prepare and file with the Commission such amendments, including
post-effective  amendments, to the Registration Statement as may be necessary to
keep  the  Registration  Statement  continuously  effective as to the applicable
Registrable  Securities  for  the Effectiveness Period and prepare and file with
the  Commission such additional Registration Statements in order to register for
resale  under  the  Securities Act all of the Registrable Securities; (ii) cause
the  related Prospectus to be amended or supplemented by any required Prospectus
supplement,  and  as so supplemented or amended to be filed pursuant to Rule 424
(or  any similar provisions then in force) promulgated under the Securities Act;
(iii)  respond  as  promptly  as  possible  to  any  comments  received from the
Commission  with  respect to the Registration Statement or any amendment thereto
and  as promptly as possible provide the Holders true and complete copies of all
correspondence  from  and  to  the  Commission  relating  to  the  Registration
Statement;  and  (iv) comply in all material respects with the provisions of the
Securities  Act  and  the  Exchange  Act  with respect to the disposition of all
Registrable  Securities  covered  by  the  Registration  Statement  during  the
applicable  period in accordance with the intended methods of disposition by the
Holders thereof set forth in the Registration Statement as so amended or in such
Prospectus  as  so  supplemented.

     (c)     Notify  the  Holders  of  Registrable Securities to be sold and any
Special  Counsel  as  promptly  as  possible  but in no event less than five (5)
Business  Days prior to such filing, and confirm such notice in writing no later
than  one (1) Business Day following the day when a Prospectus or any Prospectus
supplement  or post-effective  amendment  to  the Registration Statement: (A) is
proposed  to be filed;  (B)  when  the  Commission  notifies the Company whether
there  will  be  a  "review"  of  such  Registration  Statement and whenever the
Commission  comments  in  writing  on  such Registration Statement; and (C) with
respect to the Registration Statement or  any post-effective amendment, when the
same  has  become  effective; (i)  of any request by the Commission or any other
Federal or state governmental authority  for  amendments  or  supplements to the
Registration  Statement or Prospectus or for additional information; (ii) of the
issuance by the Commission of  any  stop  order  suspending the effectiveness of
the Registration Statement covering  any  or  all  of the Registrable Securities
or the initiation of any Proceedings for that  purpose; (iii) if at any time any
of the representations and  warranties of the Company contained in any agreement
contemplated hereby ceases to be true and correct in all material respects; (iv)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of  the  Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
Proceeding  for  such purpose; and (v) of the occurrence of any event that makes
any  statement  made in the Registration Statement or Prospectus or any document
incorporated  or  deemed  to  be incorporated therein by reference untrue in any
material  respect  or that requires any revisions to the Registration Statement,
Prospectus or other documents so that, in the case of the Registration Statement
or  the Prospectus, as the case may be, it will not contain any untrue statement
of  a  material

<PAGE>

     fact  or  omit  to state any material fact required to be stated therein or
necessary  to  make  the  statements  therein, in the light of the circumstances
under  which  they  were  made,  not  misleading.

     (d)    Use its best efforts to avoid the issuance of, or, if issued, obtain
the withdrawal of (i) any order suspending the effectiveness of the Registration
Statement  or  (ii)  any  suspension  of  the  qualification  (or exemption from
qualification)  of  any  of  the  Registrable  Securities  for  sale  in  any
jurisdiction,  at  the  earliest  practicable  moment.

     (e)     If  requested  by  the  Holders  of  a  majority in interest of the
Registrable  Securities,  (i) promptly incorporate in a Prospectus supplement or
post-effective  amendment  to the Registration Statement such information as the
Company  reasonably agrees should be included therein and (ii) make all required
filings  of  such Prospectus supplement or such post-effective amendment as soon
as  practicable after the Company has received notification of the matters to be
incorporated  in  such  Prospectus  supplement  or  post-effective  amendment.

     (f)     Furnish  to each Holder and any Special Counsel, without charge, at
least  one  conformed  copy  of  each  Registration Statement and each amendment
thereto,  including  financial  statements  and  schedules,  all  documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to  the extent requested by such Person (including those previously furnished or
incorporated  by reference) promptly after the filing of such documents with the
Commission.

     (g)     Promptly  deliver  to  each Holder and any Special Counsel, without
charge, as many copies of the Prospectus or Prospectuses (including each form of
prospectus)  and  each  amendment  or  supplement  thereto  as  such Persons may
reasonably  request;  and  the  Company  hereby  consents  to  the  use  of such
Prospectus  and  each  amendment  or  supplement  thereto by each of the selling
Holders  in  connection with the offering and sale of the Registrable Securities
covered  by  such  Prospectus  and  any  amendment  or  supplement  thereto.

     (h)     Prior  to  any  public  offering of Registrable Securities, use its
best  efforts  to  register or qualify or cooperate with the selling Holders and
any  Special  Counsel  in  connection with the registration or qualification (or
exemption  from  such  registration  or  qualification)  of  such  Registrable
Securities  for  offer  and  sale  under the securities or Blue Sky laws of such
jurisdictions  within  the  United  States as any Holder requests in writing, to
keep  each such registration or qualification (or exemption therefrom) effective
during  the  Effectiveness  Period  and  to  do any and all other acts or things
necessary  or  advisable  to enable the disposition in such jurisdictions of the
Registrable  Securities  covered by a Registration Statement; provided, however,
                                                              --------  -------
that  the  Company  shall not be required to qualify generally to do business in
any  jurisdiction  where  it is not then so qualified or to take any action that
would subject it to general service of process in any such jurisdiction where it
is  not  then  so subject or subject the Company to any material tax in any such
jurisdiction  where  it  is  not  then  so  subject.

(i)     Cooperate  with  the  Holders  to  facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold pursuant
to  a  Registration  Statement,

<PAGE>

     which  certificates shall be free of all restrictive legends, and to enable
such  Registrable  Securities to be in such denominations and registered in such
names as any Holder may request at least two (2) Business Days prior to any sale
of  Registrable  Securities.

     (j)     Upon  the occurrence of any event contemplated by Section 3(c)(vi),
as  promptly  as  possible,  prepare  a  supplement  or  amendment,  including a
post-effective  amendment,  to the Registration Statement or a supplement to the
related  Prospectus  or  any  document incorporated or deemed to be incorporated
therein  by  reference,  and  file  any  other  required  document  so  that, as
thereafter  delivered,  neither  the  Registration Statement nor such Prospectus
will  contain an untrue statement of a material fact or omit to state a material
fact  required to be stated therein or necessary to make the statements therein,
in  the  light  of the circumstances under which they were made, not misleading.

     (k)     Use  its  best efforts to cause all Registrable Securities relating
to  such  Registration Statement to be listed on NASDAQ and any other securities
exchange,  quotation  system, market or over-the-counter bulletin board, if any,
on  which  similar  securities issued by the Company are then listed as and when
required  pursuant  to  the  Purchase  Agreement.

     (l)     Comply  in  all  material  respects  with  all applicable rules and
regulations  of  the  Commission  and  make  generally available to its security
holders  earning  statements  satisfying  the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than 45 days after the end of any 12-month
period  (or  90  days  after  the end of any 12-month period if such period is a
fiscal  year)  commencing  on  the  first day of the first fiscal quarter of the
Company  after the effective date of the Registration Statement, which statement
shall  conform  to  the  requirements  of  Rule  158.

     (m)     Require  each  selling Holder to furnish to the Company information
regarding  such Holder and the distribution of such Registrable Securities as is
required  by  law to be disclosed in the Registration Statement, and the Company
may exclude from such registration the Registrable Securities of any such Holder
who  fails  to  furnish  such  information within a reasonable time prior to the
filing  of  each  Registration Statement, supplemented Prospectus and/or amended
Registration  Statement.

     If  the Registration Statement refers to any Holder by name or otherwise as
the  holder  of  any  securities of the Company, then such Holder shall have the
right  to  require (if such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force) the
deletion  of  the reference to such Holder in any amendment or supplement to the
Registration  Statement  filed  or  prepared  subsequent  to  the time that such
reference  ceases  to  be  required.

     Each Holder covenants and agrees that  (i) it will not sell any Registrable
Securities  under the Registration Statement until it has received copies of the
Prospectus  as  then amended or supplemented as contemplated in Section 3(g) and
notice  from the Company that such Registration Statement and any post-effective
amendments  thereto  have  become  effective  as  contemplated  by

<PAGE>

     Section 3(c) and (ii) it and its officers, directors or Affiliates, if any,
will  comply  with the prospectus delivery requirements of the Securities Act as
applicable  to  them in connection with sales of Registrable Securities pursuant
to  the  Registration  Statement.

     Each  Holder agrees by its acquisition of such Registrable Securities that,
upon  receipt of a notice from the Company of the occurrence of any event of the
kind  described  in  Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(c)(vi),
such  Holder  will  forthwith  discontinue  disposition  of  such  Registrable
Securities  under  the Registration Statement until such Holder's receipt of the
copies  of  the  supplemented  Prospectus  and/or amended Registration Statement
contemplated  by  Section 3(j), or until it is advised in writing (the "Advice")
by the Company that the use of the applicable Prospectus may be resumed, and, in
either  case, has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus or
Registration  Statement.

     (n)     If  (i)  there  is  material  non-public  information regarding the
Company  which  the  Company's  Board  of  Directors  (the  "Board")  reasonably
determines  not  to  be in the Company's best interest to disclose and which the
Company  is  not  otherwise required to disclose, or (ii) there is a significant
business  opportunity  (including,  but  not  limited  to,  the  acquisition  or
disposition  of  assets  (other  than in the ordinary course of business) or any
merger,  consolidation,  tender offer or other similar transaction) available to
the  Company  which  the  Board reasonably determines not to be in the Company's
best  interest  to  disclose and which the Company would be required to disclose
under  the  Registration  Statement,  then  the  Company may postpone or suspend
filing  or  effectiveness of a registration statement for a period not to exceed
20  consecutive  days, provided that the Company may not postpone or suspend its
obligation under this Section 3(n) for more than 45 days in the aggregate during
any 12 month period (each, a "Blackout Period"); provided, however, that no such
postponement  or  suspension  shall be permitted for consecutive 20 day periods,
arising  out  of  the  same  set  of  facts,  circumstances  or  transactions.

     4.     Registration  Expenses

All  fees  and  expenses  incident to the performance of or compliance with this
Agreement  by  the  Company  shall  be  borne  by the Company whether or not the
Registration  Statement  is  filed  or  becomes effective and whether or not any
Registrable  Securities  are  sold  pursuant to the Registration Statement.  The
fees  and  expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees  and  expenses  (A) with respect to filings required to be made with NASDAQ
and each other securities exchange, quotation system, market or over-the-counter
bulletin  board  on  which  Registrable  Securities are required hereunder to be
listed, (B) with respect to filings required to be made with the Commission, (C)
with  respect  to  filings  required  to  be  made  under  NASDAQ  and any other
securities exchange, quotation system, market or over-the-counter bulletin board
and (C) in compliance with state securities or Blue Sky laws (including, without
limitation, fees and disbursements of counsel for the Holders in connection with
Blue  Sky  qualifications  of  the

<PAGE>

     Registrable  Securities  and  determination  of  the  eligibility  of  the
Registrable  Securities  for  investment under the laws of such jurisdictions as
the  Holders  of  a  majority  of  Registrable  Securities may designate)), (ii)
printing  expenses  (including,  without  limitation,  expenses  of  printing
certificates  for  Registrable  Securities  and  of printing prospectuses if the
printing  of  prospectuses  is  requested  by  the  holders of a majority of the
Registrable Securities included in the Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) Securities Act liability insurance, if the
Company  so  desires  such  insurance,  and  (v)  fees and expenses of all other
Persons  retained  by  the  Company  in  connection with the consummation of the
transactions  contemplated by this Agreement, including, without limitation, the
Company's  independent public accountants (including the expenses of any comfort
letters  or costs associated with the delivery by independent public accountants
of  a  comfort  letter  or comfort letters) and legal counsel.  In addition, the
Company  shall  be  responsible  for  all  of  its internal expenses incurred in
connection  with  the  consummation  of  the  transactions  contemplated by this
Agreement  (including,  without  limitation,  all  salaries  and expenses of its
officers  and  employees  performing legal or accounting duties), the expense of
any  annual audit, the fees and expenses incurred in connection with the listing
of  the Registrable Securities on any securities exchange as required hereunder.

     5.     Indemnification

(a)     Indemnification  by the Company.  The Company shall, notwithstanding any
termination  of  this  Agreement,  indemnify  and hold harmless each Holder, the
officers,  directors,  agents,  brokers  (including  brokers  who offer and sell
Registrable  Securities  as  principal as a result of a pledge or any failure to
perform  under a margin call of Common Stock), investment advisors and employees
of each of them, each Person who controls any such Holder (within the meaning of
Section  15  of  the  Securities  Act or Section 20 of the Exchange Act) and the
officers,  directors,  agents  and employees of each such controlling Person, to
the  fullest  extent  permitted  by applicable law, from and against any and all
losses,  claims,  damages,  liabilities,  costs  (including, without limitation,
costs of preparation and attorneys' fees) and expenses (collectively, "Losses"),
as  incurred,  arising  out  of  or  relating  to  any  untrue or alleged untrue
statement  of  a  material  fact  contained  in  the Registration Statement, any
Prospectus  or  any form of prospectus or in any amendment or supplement thereto
or  in any preliminary prospectus, or arising out of or relating to any omission
or  alleged  omission  of  a  material  fact  required  to  be stated therein or
necessary  to make the statements therein (in the case of any Prospectus or form
of  prospectus  or  supplement  thereto, in the light of the circumstances under
which  they  were  made)  not  misleading, except to the extent, but only to the
extent,  that  such  untrue  statements  or  omissions  are  based  solely  upon
information  regarding  such  Holder furnished in writing to the Company by such
Holder  expressly for use therein, which information was reasonably relied on by
the  Company  for  use therein or to the extent that such information relates to
such  Holder  or  such  Holder's  proposed method of distribution of Registrable
Securities  and  was  reviewed  and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form of
Prospectus  or in any amendment or supplement thereto.  The Company shall notify
the  Holders  promptly of the institution, threat or assertion of any Proceeding
of  which  the  Company  is  aware  in  connection  with  the  transactions

<PAGE>

     contemplated  by this Agreement.  Such indemnity shall remain in full force
and  effect  regardless  of  any  investigation  made  by  or  on  behalf  of an
Indemnified  Party  (as  defined  in  Section  5(c) to this Agreement) and shall
survive  the  transfer  of  the  Registrable  Securities  by  the  Holders.

     (b)     Indemnification  by  Holders.  Each Holder shall, severally and not
jointly,  indemnify  and  hold  harmless  the  Company, the directors, officers,
agents  and  employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors,  officers,  agents  or  employees of such controlling Persons, to the
fullest  extent  permitted  by  applicable  law, from and against all Losses, as
incurred,  arising  solely out of or based solely upon any untrue statement of a
material  fact  contained  in the Registration Statement, any Prospectus, or any
form  of  prospectus, or arising solely out of or based solely upon any omission
of  a  material  fact  required  to  be  stated therein or necessary to make the
statements  therein  (in  the  case  of  any Prospectus or form of prospectus or
supplement  thereto,  in  the  light  of the circumstances under which they were
made)  not  misleading,  to the extent, but only to the extent, that such untrue
statement  or  omission  is  contained  in  or  omitted  from any information so
furnished in writing by such Holder to the Company specifically for inclusion in
the  Registration  Statement  or  such  Prospectus and that such information was
reasonably  relied  upon  by  the Company for use in the Registration Statement,
such  Prospectus  or  such  form  of  prospectus  or  to  the  extent  that such
information  relates  to  such  Holder  or  such  Holder's  proposed  method  of
distribution  of  Registrable Securities and was reviewed and expressly approved
in  writing by such Holder expressly for use in the Registration Statement, such
Prospectus  or  such form of Prospectus Supplement.  Notwithstanding anything to
the  contrary  contained  herein,  the Holder shall be liable under this Section
5(b)  for only that amount as does not exceed the net proceeds to such Holder as
a  result  of  the  sale of Registrable Securities pursuant to such Registration
Statement.

     (c)     Conduct of Indemnification Proceedings.  If any Proceeding shall be
brought  or  asserted  against  any  Person  entitled to indemnity hereunder (an
"Indemnified  Party"),  such  Indemnified Party promptly shall notify the Person
from  whom  indemnity  is  sought  (the "Indemnifying Party) in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel  reasonably satisfactory to the Indemnified Party and the payment of all
fees  and  expenses  incurred in connection with defense thereof; provided, that
the  failure  of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except  (and  only) to the extent that it shall be finally determined by a court
of  competent  jurisdiction  (which  determination  is  not subject to appeal or
further  review)  that  such  failure  shall  have  proximately  and  materially
adversely  prejudiced  the  Indemnifying  Party.

     An Indemnified Party shall have the right to employ separate counsel in any
such  Proceeding  and  to  participate  in the defense thereof, but the fees and
expenses of such  counsel  shall  be at the expense of such Indemnified Party or
Parties  unless:  (1)  the  Indemnifying Party has agreed in writing to pay such
fees  and  expenses; or (2) the Indemnifying Party shall have failed promptly to
assume  the  defense  of  such  Proceeding  and  to  employ  counsel  reasonably
satisfactory to such Indemnified Party  in any such Proceeding; or (3) the named
parties to any such Proceeding

<PAGE>

     (including  any  impleaded parties) include both such Indemnified Party and
the  Indemnifying  Party,  and such Indemnified Party shall have been advised by
counsel  that a conflict of interest is likely to exist if the same counsel were
to  represent  such Indemnified Party and the Indemnifying Party (in which case,
if  such  Indemnified  Party  notifies the Indemnifying Party in writing that it
elects  to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying  Party  shall  not have the right to assume the defense thereof and
such  counsel  shall  be  at  the  expense  of  the  Indemnifying  Party).  The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected  without  its  written consent, which consent shall not be unreasonably
withheld.  No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which  any  Indemnified  Party  is  a  party, unless such settlement includes an
unconditional  release  of  such  Indemnified Party from all liability on claims
that  are the subject matter of such Proceeding and does not impose any monetary
or  other  obligation  or  restriction  on  the  Indemnified  Party.

     All  fees  and expenses of the Indemnified Party (including reasonable fees
and  expenses  to  the  extent  incurred  in  connection  with  investigating or
preparing  to  defend  such  Proceeding  in  a manner not inconsistent with this
Section)  shall  be  paid to the Indemnified Party, as incurred, within ten (10)
Business Days of written notice thereof to the Indemnifying Party (regardless of
whether it is ultimately determined that an Indemnified Party is not entitled to
indemnification  hereunder;  provided,  that  the Indemnifying Party may require
such  Indemnified  Party to undertake to reimburse all such fees and expenses to
the  extent  it  is finally judicially determined that such Indemnified Party is
not  entitled  to  indemnification  hereunder).

(d)     Contribution.  If a claim for indemnification under Section 5(a) or 5(b)
is  unavailable  to  an  Indemnified  Party because of a failure or refusal of a
governmental  authority  to  enforce such indemnification in accordance with its
terms  (by  reason of public policy or otherwise), then each Indemnifying Party,
in  lieu  of indemnifying such Indemnified Party, shall contribute to the amount
paid  or  payable  by such Indemnified Party as a result of such Losses, in such
proportion  as  is appropriate to reflect the relative fault of the Indemnifying
Party  and  Indemnified  Party  in  connection  with  the actions, statements or
omissions  that  resulted in such Losses as well as any other relevant equitable
considerations.  The  relative  fault of such Indemnifying Party and Indemnified
Party  shall  be  determined  by  reference  to, among other things, whether any
action  in  question,  including  any  untrue  or  alleged untrue statement of a
material fact or omission or alleged omission of a material fact, has been taken
or  made  by, or relates to information supplied by, such Indemnifying, Party or
Indemnified  Party,  and  the  parties'  relative  intent,  knowledge, access to
information  and  opportunity  to  correct  or prevent such action, statement or
omission.  The amount paid or payable by a party as a result of any Losses shall
be  deemed to include, subject to the limitations set forth in Section 5(c), any
reasonable  attorneys'  or  other  reasonable  fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been
indemnified  for  such  fees  or expenses if the indemnification provided for in
this  Section  was  available  to  such  party  in  accordance  with  its terms.
Notwithstanding  anything  to the contrary contained herein, the Holder shall be
liable or required to contribute under this Section 5(c) for only that amount as
does  not  exceed  the  net  proceeds  to such Holder as a result of the sale of
Registrable

<PAGE>

     Securities  pursuant  to  such  Registration  Statement.

     The  parties  hereto  agree  that  it  would  not  be just and equitable if
contribution  pursuant  to  this  Section  5(d)  were  determined  by  pro  rata
allocation  or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No  Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f)  of  the Securities Act) shall be entitled to contribution from any Person
who  was  not  guilty  of  such  fraudulent  misrepresentation.

     The  indemnity and contribution agreements contained in this Section are in
addition  to  any  liability  that  the  Indemnifying  Parties  may  have to the
Indemnified  Parties

     6.     Rule  144.

     As  long  as  any Holder owns Notes, Conversion Shares, Warrants or Warrant
Shares,  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 Section 13(a) or 15(d) of
the  Exchange  Act  and  to  promptly furnish the Holders with true and complete
copies  of  all  such  filings.  As  long  as  any Holder owns Notes, Conversion
Shares,  Warrants  or  Warrant  Shares,  if  the Company is not required to file
reports  pursuant to Section 13(a) or 15(d) of the Exchange Act, it will prepare
and  furnish  to the Holders and make publicly available in accordance with Rule
144(c)  promulgated  under  the  Securities  Act  annual and quarterly financial
statements, together with a discussion and analysis of such financial statements
in  form  and  substance  substantially similar to those that would otherwise be
required  to  be  included  in reports required by Section 13(a) or 15(d) of the
Exchange  Act,  as  well  as any other information required thereby, in the time
period  that  such  filings would have been required to have been made under the
Exchange  Act.  The  Company  further  covenants  that it will take such further
action  as  any  Holder  may reasonably request, all to the extent required from
time  to time to enable such Person to sell Conversion Shares and Warrant Shares
without  registration  under  the  Securities  Act  within the limitation of the
exemptions  provided by Rule 144 promulgated under the Securities Act, including
compliance  with  the  provisions  of  the  Purchase  Agreement  relating to the
transfer  of  the Conversion Shares and Warrant Shares.  Upon the request of any
Holder,  the  Company  shall deliver to such Holder a written certification of a
duly  authorized  officer  as to whether it has complied with such requirements.

     7.     Miscellaneous.

     (a)    Remedies. In the event of a breach by the Company or by a Holder, of
any  of  their  obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all rights granted by
law and under this Agreement, including recovery of damages, will be entitled to
specific  performance  of  its  rights  under  this  Agreement.  The

<PAGE>

     Company  and  each  Holder  agree  that  monetary damages would not provide
adequate compensation for any losses incurred by reason of a breach by it of any
of the provisions of this Agreement and hereby further agrees that, in the event
of any action for specific performance in respect of such breach, it shall waive
the  defense  that  a  remedy  at  law  would  be  adequate.

     (b)     No  Inconsistent  Agreements.   Neither  the Company nor any of its
subsidiaries  has,  as  of the date hereof entered into and currently in effect,
nor  shall  the Company or any of its subsidiaries, on or after the date of this
Agreement,  enter  into  any  agreement  with  respect to its securities that is
inconsistent  with  the  rights  granted  to  the  Holders  in this Agreement or
otherwise  conflicts with the provisions hereof.  Neither the Company nor any of
its  subsidiaries  has previously entered into any agreement currently in effect
granting  any  registration  rights with respect to any of its securities to any
Person.  Without  limiting  the generality of the foregoing, without the written
consent  of  the  Holders  of  a  majority  of  the then outstanding Registrable
Securities,  the  Company shall not grant to any Person the right to request the
Company  to  register  any  securities  of  the Company under the Securities Act
unless  the rights so granted are subject in all respects to the prior rights in
full of the Holders set forth herein, and are not otherwise in conflict with the
provisions  of  this  Agreement.

     (c)     No  Piggyback on Registrations.  Neither the Company nor any of its
security  holders  (other than the Holders in such capacity pursuant hereto) may
include securities of the Company in the Registration Statement, and the Company
shall not after the date hereof enter into any agreement providing such right to
any  of  its  security  holders,  unless  the right so granted is subject in all
respects to the prior rights in full of the Holders set forth herein, and is not
otherwise  in  conflict  with  the  provisions  of  this  Agreement.

(d)     Piggy-Back Registrations.  If at any time when there is not an effective
Registration  Statement  covering  (i) Conversion Shares or (ii) Warrant Shares,
the  Company  shall  determine  to  prepare  and  file  with  the  Commission  a
registration  statement  relating  to  an  offering  for  its own account or the
account  of  others  under  the  Securities Act of any of its equity securities,
other  than  on  Form  S-4 or Form S-8 (each as promulgated under the Securities
Act)  or  its then equivalents relating to equity securities to be issued solely
in  connection  with  any  acquisition  of  any  entity  or  business  or equity
securities  issuable  in  connection with stock option or other employee benefit
plans,  the  Company shall send to each holder of Registrable Securities written
notice  of  such  determination and, if within thirty (30) days after receipt of
such  notice,  any  such holder shall so request in writing (which request shall
specify  the  Registrable Securities intended to be disposed of by the Holders),
the  Company  will  cause  the  registration  under  the  Securities  Act of all
Registrable  Securities  which  the Company has been so requested to register by
the Holder, to the extent requisite to permit the disposition of the Registrable
Securities  so  to  be  registered,  provided  that  if at any time after giving
written  notice  of  its  intention  to register any securities and prior to the
effective  date  of  the  registration  statement  filed in connection with such
registration,  the  Company shall determine for any reason not to register or to
delay  registration  of  such securities, the Company may, at its election, give
written  notice  of such determination to such Holder and, thereupon, (i) in the
case  of a determination not to register, shall be relieved of its obligation to
register  any  Registrable

<PAGE>

     Securities  in  connection  with  such  registration  (but  not  from  its
obligation to pay expenses in accordance with Section 4 hereof), and (ii) in the
case  of  a  determination  to  delay  registering,  shall be permitted to delay
registering any Registrable Securities being registered pursuant to this Section
7(d)  for the same period as the delay in registering such other securities. The
Company  shall  include  in  such registration statement all or any part of such
Registrable Securities such Holder requests to be registered; provided, however,
that  the  Company  shall not be required to register any Registrable Securities
pursuant to this Section 7(d) that are eligible for sale pursuant to Rule 144(k)
of  the  Securities Act.  In the case of an underwritten public offering, if the
managing  underwriter(s)  or  underwriter(s)  should  reasonably  object  to the
inclusion  of the Registrable Securities in such registration statement, then if
the  Company  after consultation with the managing underwriter should reasonably
determine  that  the  inclusion of such Registrable Securities, would materially
adversely  affect  the offering contemplated in such registration statement, and
based  on such determination recommends inclusion in such registration statement
of  fewer  or  none  of  the Registrable Securities of the Holders, then (x) the
number  of  Registrable  Securities of the Holders included in such registration
statement shall be reduced pro-rata among such Holders (based upon the number of
Registrable  Securities  requested  to  be included in the registration), if the
Company  after  consultation with the underwriter(s) recommends the inclusion of
fewer  Registrable  Securities, or (y) none of the Registrable Securities of the
Holders  shall  be included in such registration statement, if the Company after
consultation  with  the  underwriter(s) recommends the inclusion of none of such
Registrable  Securities; provided, however, that if securities are being offered
for  the  account  of  other  persons  or  entities as well as the Company, such
reduction  shall  not  represent a greater fraction of the number of Registrable
Securities  intended  to  be offered by the Holders than the fraction of similar
reductions  imposed  on such other persons or entities (other than the Company).

(e)     Failure  to  File  Registration Statement and Other Events.  The Company
and  the  Holders agree that the Holders will suffer damages if the Registration
Statement is not filed on or prior to the Filing Date and not declared effective
by  the  Commission  on or prior to the Effectiveness Date and maintained in the
manner contemplated herein during the Effectiveness Period.  The Company and the
Holders  further  agree that it would not be feasible to ascertain the extent of
such  damages with precision.  Accordingly, if (i) the Registration Statement is
not  filed  on  or prior to the Filing Date, or is not declared effective by the
Commission  on or prior to the Effectiveness Date (or in the event an additional
Registration  Statement  is  filed because the actual number of shares of Common
Stock  into  which  the  Note  is  convertible  and the Warrants are exercisable
exceeds  the  number of shares of Common Stock initially registered is not filed
and  declared  effective  within the time periods set forth in Section 2(a)), or
(ii) the Company fails to file with the Commission a request for acceleration in
accordance  with  Rule 12dl-2 promulgated under the Exchange Act within five (5)
Business  Days  of  the date that the Company is notified (orally or in writing,
whichever  is  earlier) by the Commission that a Registration Statement will not
be  "reviewed,"  or  not  subject  to  further review, or (iii) the Registration
Statement  is filed with and declared effective by the Commission but thereafter
ceases to be effective as to all Registrable Securities at any time prior to the
expiration of the Effectiveness Period, without being succeeded immediately by a
subsequent  Registration  Statement  filed  with  and  declared effective by the
Commission,  or  (iv)  trading  in the Common Stock shall be suspended or if the
Common  Stock  is

<PAGE>

     delisted  from  NASDAQ  or any other securities exchange, quotation system,
market  or  over-the-counter  bulletin board on which Registrable Securities are
required  hereunder to be listed for any reason for more than three (3) Business
Days in the aggregate, or (v) the conversion rights of the Holders are suspended
for  any reason, or (vi) the Company has breached Section 3(n) of this Agreement
(any  such failure or breach being referred to as an "Event"), the Company shall
pay  in cash as liquidated damages for such failure and not as a penalty to each
Holder  an  amount  equal to two percent (2%) of such Holder's pro rata share of
the  purchase  price  paid  by  all  Holders  then  outstanding  pursuant to the
Purchase  Agreement  for the initial thirty (30) day period until the applicable
Event has been cured, which shall be pro rated for such periods less than thirty
(30)  days  and two percent (2%) of such Holder's pro rata share of the purchase
price  paid  by all Holders for Notes purchased and then outstanding pursuant to
the  Purchase  Agreement  for  each  subsequent thirty (30) day period until the
applicable  Event  has been cured which shall be pro rated for such periods less
than  thirty days (the "Periodic Amount").  Payments to be made pursuant to this
Section  7(e)  shall  be  due and payable immediately upon demand in immediately
available  cash  funds.  The parties agree that the Periodic Amount represents a
reasonable  estimate  on  the  part  of  the  parties,  as  of  the date of this
Agreement,  of  the amount of damages that may be incurred by the Holders if the
Registration  Statement  is  not filed on or prior to the Filing Date or has not
been  declared effective by the Commission on or prior to the Effectiveness Date
and maintained in the manner contemplated herein during the Effectiveness Period
or  if  any  other  Event  as  described  herein  has  occurred.

     (f)     Specific  Enforcement,  Consent  to  Jurisdiction.

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

     (ii)     Each of the Company and the Holders (i) hereby irrevocably submits
to  the  exclusive  jurisdiction  of the state and federal courts located in New
York  City,  New York for the purposes of any suit, action or proceeding arising
out  of  or relating to this Agreement or the Purchase Agreement and (ii) hereby
waives,  and  agrees  not  to assert in any such suit, action or proceeding, any
claim  that it is not personally subject to the jurisdiction of such court, that
the  suit,  action or proceeding is brought in an inconvenient forum or that the
venue  of  the  suit, action or proceeding is improper.  Each of the Company and
the  Holders  consents  to  process  being  served  in  any such suit, action or
proceeding  by mailing a copy thereof 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 in this
Section  7(f)  shall  affect  or  limit  any right to serve process in any other
manner  permitted  by  law.

     (g)     Amendments and Waivers. The provisions of this Agreement, including
the

<PAGE>

     provisions  of this sentence, may not be amended, modified or supplemented,
and  waivers  or  consents  to  departures from the provisions hereof may not be
given, unless the same shall be in writing and signed by the Company and each of
the  Holders.  Notwithstanding the foregoing, a waiver or consent to depart from
the  provisions  hereof with respect to a matter that relates exclusively to the
rights  of Holders and that does not directly or indirectly affect the rights of
other  Holders may be given by Holders of at least a majority of the Registrable
Securities  to which such waiver or consent relates; provided, however, that the
provisions of this sentence may not be amended, modified, or supplemented except
in  accordance  with  the  provisions  of  the  immediately  preceding sentence.

     (h)     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 earlier of (i) the date of transmission, if
such  notice  or  communication  is  delivered  via  facsimile  at the facsimile
telephone  number  specified  for  notice prior to 5:00 p.m., pacific time, on a
Business  Day,  (ii)  the  Business  Day after the date of transmission, if such
notice  or  communication  is delivered via facsimile at the facsimile telephone
number  specified for notice later than 5:00 p.m., pacific time, on any date and
earlier  than  11:59  p.m.,  pacific  time, on such date, (iii) the Business Day
following  the  date  of  mailing,  if  sent  by nationally recognized overnight
courier  service  or  (iv)  actual  receipt  by the party to whom such notice is
required  to  be  given.  The  addresses  for  such communications shall be with
respect  to  each  Holder  at its address set forth under its name on Schedule 1
attached  hereto,  or  with  respect  to  the  Company,  addressed  to:

Robert  Heller
Merlin  Software  Technologies  International,  Inc.
Suite  420-6450  Roberts  Street
Burnaby,  British  Columbia,  Canada  V5G  4E1
Facsimile  No.:  (604)  320-7277

or to such other address or addresses or facsimile number or numbers as any such
party  may  most recently have designated in writing to the other parties hereto
by  such  notice.  Copies  of  notices  to  the Company  shall be sent to Clark,
Wilson,  HSBC  Building,  800-885 West Georgia St., Vancouver, British Columbia,
Canada  V6C  3H1,  Attention:  Virgil  Z.  Hlus,  facsimile no.: (604) 687-6314.
Copies  of  notices  to  any  Holder  shall  be  sent to the addresses listed on
Schedule  1  attached  hereto,  if  applicable.  Copies of notices to the Holder
shall  be sent to Kane Kessler, P.C., 1350 Avenue fo the Americas, New York, New
York  10019, Attention: Robert L. Lawrence, Esq., Facsimile No.: (212) 245-3009.

     (i)     Successors  and  Assigns.  This Agreement shall be binding upon and
inure  to  the benefit of the parties and their successors and permitted assigns
and  shall  inure  to the benefit of each Holder and its successors and assigns.
The  Company  may  not assign this Agreement or any of its rights or obligations
hereunder  without  the  prior  written consent of each Holder.  Each Holder may
assign  its rights hereunder in the manner and to the Persons as permitted under
the  Purchase  Agreement.

<PAGE>

     (j)     Assignment  of  Registration  Rights.  The  rights  of  each Holder
hereunder,  including  the  right  to  have  the  Company  register  for  resale
Registrable  Securities in accordance with the terms of this Agreement, shall be
automatically  assignable by each Holder to any transferee of such Holder of all
or  a  portion  of  the  Note  or the Registrable Securities if:  (i) the Holder
agrees  in  writing with the transferee or assignee to assign such rights, and a
copy  of  such  agreement  is  furnished to the Company within a reasonable time
after  such assignment, (ii) the Company is, within a reasonable time after such
transfer  or  assignment,  furnished  with  written  notice  of (a) the name and
address  of  such transferee or assignee, and (b) the securities with respect to
which  such  registration  rights  are  being  transferred  or  assigned,  (iii)
following such transfer or assignment the further disposition of such securities
by  the  transferee  or  assignees  is  restricted  under the Securities Act and
applicable  state  securities  laws,  (iv)  at  or  before  the time the Company
receives  the  written  notice contemplated by clause (ii) of this Section 7(j),
the transferee or assignee agrees in writing with the Company to be bound by all
of  the provisions of this Agreement, and (v) such transfer shall have been made
in  accordance  with  the applicable requirements of the Purchase Agreement.  In
addition, each Holder shall have the right to assign its rights hereunder to any
other  Person with the prior written consent of the Company, which consent shall
not  be  unreasonably  withheld.  The  rights  to  assignment shall apply to the
Holders  (and  to  subsequent)  successors  and  assigns.

     (k)     Counterparts.  This  Agreement  may  be  executed  in any number of
counterparts,  each  of which when so executed shall be deemed to be an original
and,  all  of  which taken together shall constitute one and the same Agreement.
In  the  event  that  any signature is delivered by facsimile transmission, such
signature  shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as  if  such  facsimile  signature  were  the  original  thereof.

     (l)     Governing  Law.  This  Agreement shall be governed by and construed
in accordance with the laws of the State of Nevada, without regard to principles
of  conflicts  of  law  thereof.  The Company hereby irrevocably consents to the
exclusive jurisdiction of the State and Federal Courts located in New York City,
New  York in connection with any action or proceeding arising out of or relating
to  this  Agreement.

     (m)     Cumulative  Remedies.  The  remedies provided herein are cumulative
and  not  exclusive  of  any  remedies  provided  by  law.

     (n)     Severability.  If  any  term, provision, covenant or restriction of
this  Agreement  is  held  to  be invalid, illegal, void or unenforceable in any
respect,  the remainder of the terms, provisions, covenants and restrictions set
forth  herein  shall  remain  in  full  force  and effect and shall in no way be
affected,  impaired  or  invalidated,  and  the  parties  hereto shall use their
reasonable  efforts  to find and employ an alternative means to achieve the same
or  substantially  the same result as that contemplated by such term, provision,
covenant  or  restriction.  It  is  hereby  stipulated  and  declared  to be the
intention  of  the  parties  that  they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter  declared  invalid,  illegal,  void  or  unenforceable.

<PAGE>

     (o)     Headings.  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.

     (p)     Shares Held by the Company and its Affiliates. Whenever the consent
or  approval  of  Holders of a specified percentage of Registrable Securities is
required hereunder, Registrable Securities held by the Company or its Affiliates
(other  than  any Holder or transferees or successors or assigns thereof if such
Holder  is  deemed  to  be an Affiliate solely by reason of its holdings of such
Registrable Securities) shall not be counted in determining whether such consent
or  approval  was  given  by  the  Holders  of  such  required  percentage.

     (q)     Notice  of  Effectiveness.  Within  two (2) business days after the
Registration  Statement  which  includes  the  Registrable Securities is ordered
effective  by  the  Commission, the Company shall deliver, and shall cause legal
counsel  for  the Company to deliver, to the transfer agent for such Registrable
Securities (with copies to the Holders whose Registrable Securities are included
in such Registration Statement) confirmation that the Registration Statement has
been declared effective by the Commission in the form attached hereto as Exhibit
A.

                            [Signature Page Follows]

<PAGE>

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

PURCHASERS:                               COMPANY:

NARRAGANSETT  I,  L.P.                    MERLIN  SOFTWARE  TECHNOLOGIES
                                          INTERNATIONAL,  INC.

By:_/s/  Joseph  L.  Dowling              By:         /s/Robert  Heller
    ------------------------                       --------------------------
Name:  Joseph  L.  Dowling                Name:   Robert  Heller
Title:   Managing  Member                 Title:   President

NARRAGANSETT  OFFSHORE  LTD.
by  its  Investment  Manager,
Leo  Holding,  L.L.C.

By:  /s/  Joseph  L.  Dowling
   --------------------------
Name:  Joseph  L.  Dowling
Title:   Managing  Member

PEQUOT  SCOUT  FUND,  L.P.
by  its  Investment  Advisor,
Pequot  Capital  Management,  Inc.

By:_/s/  David  J.  Malat
    ---------------------
Name:  David  J.  Malat
Title:  Chief  Accounting  Officer

SDS  MERCHANT  FUND,  L.P.
by  its  Managing  Member,
SDS  Capital  Partners,  L.L.C.

By: /s/  Steven  Derby
    ------------------
Name:  Steven  Derby
Title:   Managing  Member

<PAGE>

                                   SCHEDULE 1

     PURCHASERS

Narragansett  I,  L.P.

Narragansett  Off  Shore  Ltd.

Pequot  Scout  Fund,  L.P.

SDS  Merchant  Fund,  L.P.

<PAGE>

                                    EXHIBIT A
                         FORM OF NOTICE OF EFFECTIVENESS
                            OF REGISTRATION STATEMENT

[Name  and  Address  of  Transfer  Agent]

     RE:     MERLIN  SOFTWARE  TECHNOLOGIES  INTERNATIONAL,  INC.
             ----------------------------------------------------

Dear  [______]:

     We  are  counsel  to  Merlin  Software  Technologies International, Inc., a
Nevada  corporation  (the  "COMPANY"),  and  have  represented  the  Company  in
connection  with that certain Note and Warrant Purchase Agreement (the "PURCHASE
AGREEMENT")  dated as of August __, 2000 by and among the Company and the buyers
named therein (collectively, the "HOLDERS") pursuant to which the Company issued
to  the  Holders  its  Series  A Senior Secured Convertible Notes, (the "Notes")
convertible  into  shares  of  the Company's common stock, par value $.0.001 per
share  (the "COMMON STOCK"), and warrants to purchase shares of the Common Stock
(the  "WARRANTS").  Pursuant  to  the  Purchase  Agreement, the Company has also
entered into a Registration Rights Agreement with the Holders (the "REGISTRATION
RIGHTS  AGREEMENT") pursuant to which the Company agreed, among other things, to
register  the  Registrable  Securities  (as  defined  in the Registration Rights
Agreement), including the shares of Common Stock issuable upon conversion of the
Notes and exercise of the Warrants, under the Securities Act of 1933, as amended
(the  "1933  ACT").  In  connection  with  the  Company's  obligations under the
Registration  Rights  Agreement,  on ____________ ___, 2000, the Company filed a
Registration  Statement  on  Form  S-1  (File  No.  333-_____________)  (the
"REGISTRATION  STATEMENT")  with  the  Securities  and  Exchange Commission (the
"SEC") relating to the Registrable Securities which names each of the Holders as
a  selling  stockholder  thereunder.

     In  connection with the foregoing, we advise you that a member of the SEC's
staff  has  advised  us by telephone that the SEC has entered an order declaring
the  Registration  Statement  effective  under  the  1933  Act at [ENTER TIME OF
EFFECTIVENESS]  on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after
telephonic  inquiry  of  a  member  of  the  SEC's  staff,  that  any stop order
suspending  its  effectiveness  has been issued or that any proceedings for that
purpose  are  pending  before,  or  threatened  by,  the SEC and the Registrable
Securities  are  available  for  resale  under  the  1933  Act  pursuant  to the
Registration  Statement.

     Very  truly  yours,

By:
cc:     [LIST  NAMES  OF  HOLDERS]

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00016-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00016-of-00352.parquet"}]]