Document:

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                               PURCHASE AGREEMENT

                THIS PURCHASE AGREEMENT ("Agreement") is made as of the 22nd day
of February, 2006 by and among Narrowstep Inc., a Delaware corporation (the
"Company"), and the Investors set forth on the signature pages affixed hereto
(each an "Investor" and collectively the "Investors").

                                    RECITALS

                A.      The Company and the Investors are executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded by the provisions of Regulation D ("Regulation D"), as
promulgated by the U.S. Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended; and

                B.      The Investors wish to purchase from the Company, and the
Company wishes to sell and issue to the Investors, upon the terms and conditions
stated in this Agreement, (i) an aggregate of up to 12,333,333 shares of the
Company's Common Stock, par value $0.000001 per share (together with any
securities into which such shares may be reclassified the "Common Stock"), at
purchase price of $0.60 per share, (ii) warrants to purchase an aggregate of up
to 6,166,666 shares of Common Stock (subject to adjustment) at an exercise price
of $0.60 per share (subject to adjustment) in the form attached hereto as
EXHIBIT A (the "Series A Warrants"), and (iii) warrants to purchase an aggregate
of up to 6,166,666 shares of Common Stock (subject to adjustment) at an exercise
price of $1.20 per share (subject to adjustment) in the form attached hereto as
EXHIBIT B (the "Series B Warrants" and, collectively with the Series A Warrants,
the "Warrants"); and

                C.      Contemporaneous with the sale of the Common Stock and
Warrants, the parties hereto will execute and deliver a Registration Rights
Agreement, in the form attached hereto as EXHIBIT C (the "Registration Rights
Agreement"), pursuant to which the Company will agree to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder, and applicable state securities laws.

                In consideration of the mutual promises made herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:

        1.      DEFINITIONS. In addition to those terms defined above and
elsewhere in this Agreement, for the purposes of this Agreement, the following
terms shall have the meanings set forth below:

                "AFFILIATE" means, with respect to any Person, any other Person
which directly or indirectly through one or more intermediaries Controls, is
controlled by, or is under common control with, such Person.

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                "BUSINESS DAY" means a day, other than a Saturday or Sunday, on
which banks in New York City are open for the general transaction of business.

                "CLOSING DATE" has the meaning set forth in Section 3(b).

                "COMMON STOCK" has the meaning set forth in the Recitals of this
Agreement.

                "COMPANY COUNSEL FEES" has the meaning set forth in Section
3(a).

                "COMPANY COUNSEL" has the meaning set forth in Section 3(a).

                "COMPANY'S KNOWLEDGE" means the actual knowledge of the
executive officers (as defined in Rule 405 under the 1933 Act) of the Company,
after due inquiry.

                "CONFIDENTIAL INFORMATION" means trade secrets, confidential
information and know-how (including but not limited to ideas, formulae,
compositions, processes, procedures and techniques, research and development
information, computer program code, performance specifications, support
documentation, drawings, specifications, designs, business and marketing plans,
and customer and supplier lists and related information).

                "CONTROL" (including the terms "controlling", "controlled by" or
"under common control with") means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.

                "CONVERTIBLE SECURITIES" means any options, warrants, debentures
or other securities which by their terms are convertible into or exchangeable
for, Equity Securities.

                "DISCLOSURE SCHEDULES" has the meaning set forth in Section 4.

                "EFFECTIVE DATE" means the date on which the initial
Registration Statement is declared effective by the SEC.

                "EFFECTIVENESS DEADLINE" means the date on which the initial
Registration Statement is required to be declared effective by the SEC under the
terms of the Registration Rights Agreement.

                "ENVIRONMENTAL LAWS" has the meaning set forth in Section 4.16.

                "EQUITY SECURITIES" shall mean, collectively, (a) all of the
shares of any class of capital stock of the Company including, without
limitation, all common stock and any subsequently issued preferred stock and any
shares which may be issued by reason of stock splits, reverse stock splits,
stock dividends or other recapitalizations of the Company, (b) all shares
issuable under options, warrants and other rights of any kind to purchase any
class of such capital stock, and (c) all shares issuable under securities
convertible into or exchangeable for any of the securities described in clause
(a) or clause (b). Whenever this Agreement refers to a

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number or percentage of Equity Securities, such number or percentage shall be
calculated as if each of the Equity Securities had been exchanged or converted
into shares of Common Stock immediately prior to such calculation.

                "ESCROW AMOUNT" has the meaning set forth in Section 3(a).

                "EVALUATION DATE" has the meaning set forth in Section 4.25.

                "EXEMPT ISSUANCE" means any issuance or sale of Convertible
Securities or Equity Securities (i) as a dividend to holders of Equity
Securities or upon any subdivision or combination of Equity Securities; (ii) to
an employee, director or consultant under a plan or arrangement approved by the
Company's Board of Directors, including a majority of the non-employee
directors; (iii) in connection with the acquisition of another entity by the
Company or any Subsidiary by merger or share exchange (whereby the Company owns
no less than 51% of the voting power of the surviving entity) or purchase of
substantially all of such entity's stock or assets; (iv) in connection with a
strategic partnership, joint venture or other similar agreement approved by the
Company's Board of Directors, including a majority of the non-employee
directors, provided that the purpose of such arrangement is not primarily the
raising of capital; (v) to a vendor, lender, landlord or other creditor in
connection with any transaction approved by the Company's Board of Directors;
(vi) upon the exercise or conversion of securities outstanding on the Closing
Date; (vii) pursuant to this Agreement or upon the exercise or conversion of any
of the Securities; or (viii) in any transaction approved by a unanimous vote of
the members of the Company's Board of Directors voting thereon.

                "GAAP" has the meaning set forth in Section 4.18.

                "INDEMNIFIED PERSON" has the meaning set forth in Section 8.2.

                "INTELLECTUAL PROPERTY" means all of the following: (i) patents,
patent applications, patent disclosures and inventions (whether or not
patentable and whether or not reduced to practice); (ii) trademarks, service
marks, trade dress, trade names, corporate names, logos, slogans and Internet
domain names, together with all goodwill associated with each of the foregoing;
(iii) copyrights and copyrightable works; (iv) registrations, applications and
renewals for any of the foregoing; and (v) proprietary computer software
(including but not limited to data, data bases and documentation).

                "INVESTMENT REPRESENTATIONS" has the meaning set forth in
Section 6.2(a).

                "LICENSE AGREEMENTS" has the meaning set forth in Section
4.15(b).

                "LOSSES" has the meaning set forth in Section 8.2.

                "MATERIAL ADVERSE EFFECT" means a material adverse effect on (i)
the results of operations, cash flow, business prospects, customer, supplier or
employee relations or financial condition of the Company and its Subsidiaries
taken as a whole, or (ii) the ability of the Company to perform its obligations
under the Transaction Documents.

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                "NET ESCROW AMOUNT" has the meaning set forth in Section 3(a).

                "PERSON" means an individual, corporation, partnership, limited
liability company, trust, business trust, association, joint stock company,
joint venture, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein.

                "PROHIBITED TRANSACTIONS" has the meaning set forth in Section
5.11.

                "PURCHASE PRICE" means up to Seven Million Four Hundred Thousand
Dollars ($7,400,000).

                "REGISTRATION STATEMENT" has the meaning set forth in the
Registration Rights Agreement.

                "REQUIRED INVESTORS" means the Investors purchasing a majority
of the Shares at the Closing.

                "SEC FILINGS" has the meaning set forth in Section 4.6.

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

                "SERIES A WARRANTS" has the meaning set forth in the Recitals of
this Agreement.

                "SERIES B WARRANTS" has the meaning set forth in the Recitals of
this Agreement.

                "SHARES" means the shares of Common Stock being purchased by the
Investors hereunder.

                "SUBSIDIARY" of any Person means another Person, an amount of
the voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
Person.

                "TRADING AFFILIATES" has the meaning set forth in Section 5.11.

                "TRANSACTION DOCUMENTS" means this Agreement, the Warrants and
the Registration Rights Agreement.

                "TRANSFER AGENT" has the meaning set forth in Section 7.4.

                "WARRANTS" has the meaning set forth in the Recitals of this
Agreement.

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                "WARRANT SHARES" means the shares of Common Stock issuable upon
the exercise of the Warrants.

                "10-KSB" has the meaning set forth in Section 4.6.

                "1933 ACT" means the Securities Act of 1933, as amended, or any
successor statute, and the rules and regulations promulgated thereunder.

                "1934 ACT" means the Securities Exchange Act of 1934, as
amended, or any successor statute, and the rules and regulations promulgated
thereunder.

        2.      PURCHASE AND SALE OF THE SHARES AND WARRANTS. Subject to the
terms and conditions of this Agreement, on the Closing Date, each of the
Investors shall severally, and not jointly, purchase, and the Company shall sell
and issue to the Investors, the Shares and Warrants in the respective amounts
set forth opposite the Investors' names on the signature pages attached hereto
in exchange for the Purchase Price as specified in Section 3 below.

        3.      CLOSING.

                (a)     Except as provided below, simultaneously with the
execution and delivery of a counterpart to this Agreement by an Investor, such
Investor shall promptly cause a wire transfer of immediately available funds in
an amount representing such Investor's pro rata share of the Purchase Price to
be paid to the non-interest bearing escrow account of Lowenstein Sandler PC
("Company Counsel") set forth on EXHIBIT D attached hereto (the aggregate
amounts being held in escrow are referred to herein as the "Escrow Amount").
Company Counsel shall hold the Escrow Amount in escrow until (i) Company Counsel
receives written instructions from the Company and a representative of the
Required Investors (the "Representative") authorizing the release of the Escrow
Amount in accordance with this Section 3 or (ii) Company Counsel receives
written instructions from the Company and/or the Investors (or a specific
terminating Investor) that the Agreement has been terminated in which case
Company Counsel shall promptly return to each Investor (or, in the case of a
termination of this Agreement by an Investor solely with respect to itself, such
terminating Investor), the portion of the Escrow Amount each such Investor
delivered to the Company Counsel. The Company and each Investor hereby
authorizes the Company Counsel to release the Escrow Amount, at the Closing,
without further action or deed (other than receipt of the written instructions
from the Company and the Representative authorizing the release of the Escrow
Amount), to (i) Company Counsel in an amount equal to Company Counsel's fees and
disbursements relating to the negotiation of the Transaction Documents ("Company
Counsel Fees") and (ii) the Company in an amount equal to the Escrow Amount less
the Company Counsel Fees (the "Net Escrow Amount").

                (b)     Upon satisfaction or waiver of the conditions set forth
in Section 6, (i) the Company shall deliver or cause to be delivered to
Registrar and Transfer Company, the transfer agent for the Shares, irrevocable
instructions that certificates representing the Shares shall be issued to the
Investors in such name or names as the Investors may designate and (ii)
following receipt of such instructions, the Company and the Representative shall
jointly instruct Company Counsel to release (I) the Net Escrow Amount to the
Company, and (II) the Company Counsel

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Fees to Company Counsel. The date on which such transactions occur is
hereinafter referred to as the "Closing Date". The closing of the purchase and
sale of the Shares and Warrants (the "Closing") shall take place at the offices
of Lowenstein Sandler PC, 1251 Avenue of the Americas, 18th Floor, New York, New
York 10020, or at such other location and on such other date as the Company and
the Investors shall mutually agree. Promptly following the Closing Date, the
Company shall deliver to each Investor the Warrants purchased by such Investor
hereunder registered in such name or names as such Investor may designate.

                (c)     If an Investor is unable to effect payment for its
Shares and Warrants on the Closing Date, the Company shall have the right to
conduct additional closings with such Investor(s) at any time on or prior to
March 7, 2006; provided, however, that the proceeds of the sale of Shares and
Warrants to all Investors hereunder shall not exceed $7,400,000 in the
aggregate. Such additional closings shall be on the terms and conditions
specified herein; provided, however, that the Company and such Investor may
utilize such payment, delivery and settlement procedures as they may mutually
agree.

                (d)     The Company and the Investors acknowledge and agree for
the benefit of Company Counsel (which shall be deemed to be a third party
beneficiary of this Section 3) as follows:

                        (i)     Company Counsel (A) is not responsible for the
performance by the Company or the Investors of this Agreement or any of the
Transaction Documents or for determining or compelling compliance therewith; (B)
is only responsible for (I) holding the Escrow Amount in escrow pending receipt
of written instructions from the Placement Agent and the Company directing the
release of the Escrow Amount in accordance with this Section 3 or (II)
disbursing the Escrow Amount in accordance with the written instructions from
the Company and/or the Investors in accordance with this Section 3, each of the
responsibilities of Company Counsel in clause (I) and (II) is ministerial in
nature, and no implied duties or obligations of any kind shall be read into this
Agreement against or on the part of Company Counsel (collectively, the "Company
Counsel Duties"); (C) shall not be obligated to take any legal or other action
hereunder which might in its judgment involve or cause it to incur any expense
or liability unless it shall have been furnished with indemnification acceptable
to it, in its sole discretion; (D) may rely on and shall be protected in acting
or refraining from acting upon any written notice, instruction (including,
without limitation, wire transfer instructions, whether incorporated herein or
provided in a separate written instruction), instrument, statement, certificate,
request or other document furnished to it hereunder and believed by it to be
genuine and to have been signed or presented by the proper Person, and shall
have no responsibility for making inquiry as to, or for determining, the
genuineness, accuracy or validity thereof, or of the authority of the Person
signing or presenting the same; (E) may consult counsel satisfactory to it
(which may be affiliated with Company Counsel), and the written opinion or
advice of such counsel in any instance shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with the opinion or advice of such
counsel; and (F) shall be authorized to distribute, at the Closing, to itself
the Company Counsel Fees. Documents and written materials referred to in this
Section 3 including, without limitation, e-mail and other electronic
transmissions capable of being printed, whether or not they are in fact printed;
and any such e-mail or other electronic transmission may be deemed

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and treated by Company Counsel as having been signed or presented by a Person if
it bears, as sender, the Person's e-mail address.

                        (ii)    Company Counsel shall not be liable to anyone
for any action taken or omitted to be taken by it hereunder in connection with
its Company Counsel Duties, except in the case of Company Counsel's gross
negligence, willful misconduct or bad faith (as finally determined by a court of
competent jurisdiction) breach of the Company Counsel Duties. IN NO EVENT SHALL
COMPANY COUNSEL BE LIABLE FOR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL
DAMAGE OR LOSS (INCLUDING BUT NOT LIMITED TO LOST PROFITS) WHATSOEVER, EVEN IF
COMPANY COUNSEL HAS BEEN INFORMED OF THE LIKELIHOOD OF SUCH LOSS OR DAMAGE AND
REGARDLESS OF THE FORM OF ACTION.

                        (iii)   The Company hereby indemnifies and holds
harmless Company Counsel from and against, any and all loss, liability, cost,
damage and expense, including, without limitation, reasonable counsel fees and
expenses, which Company Counsel may suffer or incur by reason of any action,
claim or proceeding brought against Company Counsel arising out of or relating
to the performance of the Company Counsel Duties, unless such action, claim or
proceeding is the result of the gross negligence, willful misconduct or bad
faith (as finally determined by a court of competent jurisdiction) of Company
Counsel.

                        (iv)    Company Counsel has acted as legal counsel to
the Company in connection with this Agreement and the other Transaction
Documents, is merely acting as an escrow agent under this Agreement and is,
therefore, hereby authorized to continue acting as legal counsel to the Company,
including, without limitation, with regard to any dispute arising out of this
Agreement, the other Transaction Documents, the Escrow Amount or any other
matter. Each of the Company and the Investors hereby expressly consents to
permit Company Counsel to represent the Company in connection with all matters
relating to or arising from this Agreement, including, without limitation, with
regard to any dispute arising out of this Agreement, the other Transaction
Documents, the Escrow Amount or any other matter, and hereby waives any conflict
of interest or appearance of conflict or impropriety with respect to such
representation. The Investors have consulted with their own counsel specifically
about this Section 3 to the extent they deemed necessary.

        4.      REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to the Investors that, except as set forth in the
schedules delivered herewith (collectively, the "Disclosure Schedules"):

                4.1     ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each of
the Company and its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to carry on
its business as now conducted and to own its properties. Each of the Company and
its Subsidiaries is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction in which the conduct of its business or
its ownership or leasing of property makes such qualification or leasing
necessary unless the failure to so qualify has not

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had and could not reasonably be expected to have a Material Adverse Effect. The
Company's Subsidiaries are listed on SCHEDULE 4.1 hereto.

                4.2     AUTHORIZATION. The Company has the corporate power and
has taken all requisite action on the part of the Company, its officers,
directors and stockholders necessary for (i) the authorization, execution and
delivery of the Transaction Documents, (ii) the authorization of the performance
of all obligations of the Company hereunder or thereunder, and (iii) the
authorization, issuance (or reservation for issuance) and delivery of the
Securities. The Transaction Documents constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability, relating
to or affecting creditors' rights generally.

                4.3     CAPITALIZATION. SCHEDULE 4.3 sets forth (a) the
authorized capital stock of the Company on the date hereof; (b) the number of
shares of capital stock issued and outstanding; (c) the number of shares of
capital stock issuable pursuant to the Company's stock plans; and (d) the number
of shares of capital stock issuable and reserved for issuance pursuant to
securities (other than the Shares and the Warrants) exercisable for, or
convertible into or exchangeable for any shares of capital stock of the Company.
All of the issued and outstanding shares of the Company's capital stock have
been duly authorized and validly issued and are fully paid, nonassessable and
free of pre-emptive rights and were issued in compliance in all material
respects with applicable state and federal securities law and any rights of
third parties. Except as described on SCHEDULE 4.3, all of the issued and
outstanding shares of capital stock of each Subsidiary have been duly authorized
and validly issued and are fully paid, nonassessable and free of pre-emptive
rights, were issued in compliance in all material respects with applicable state
and federal securities law and any rights of third parties and are owned by the
Company, beneficially and of record, subject to no lien, encumbrance or other
adverse claim. Except as described on SCHEDULE 4.3, no Person is entitled to
pre-emptive or similar statutory or contractual rights with respect to any
securities of the Company. Except as described on SCHEDULE 4.3, there are no
outstanding warrants, options, convertible securities or other rights,
agreements or arrangements of any character under which the Company or any of
its Subsidiaries is or may be obligated to issue any equity securities of any
kind and except as contemplated by this Agreement, neither the Company nor any
of its Subsidiaries is currently in negotiations for the issuance of any equity
securities of any kind. Except as described on SCHEDULE 4.3 and except for the
Registration Rights Agreement, there are no voting agreements, buy-sell
agreements, option or right of first purchase agreements or other agreements of
any kind among the Company and any of the securityholders of the Company
relating to the securities of the Company held by them. Except as described on
SCHEDULE 4.3 and except as provided in the Registration Rights Agreement, no
Person has the right to require the Company to register any securities of the
Company under the 1933 Act, whether on a demand basis or in connection with the
registration of securities of the Company for its own account or for the account
of any other Person. The Company has taken all action necessary to eliminate the
obligation to issue options to its current chief executive officer pursuant to
the arrangements described on SCHEDULE 4.3.

                Except as described on SCHEDULE 4.3, the issuance and sale of
the Securities hereunder will not obligate the Company to issue shares of Common
Stock or other securities to

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any other Person (other than the Investors) and will not result in the
adjustment of the exercise, conversion, exchange or reset price of any
outstanding security.

                Except as described on SCHEDULE 4.3, the Company does not have
outstanding stockholder purchase rights or "poison pill" or any similar
arrangement in effect giving any Person the right to purchase any equity
interest in the Company upon the occurrence of certain events.

                4.4     VALID ISSUANCE. The Shares have been duly and validly
authorized and, when issued and paid for pursuant to this Agreement, will be
validly issued, fully paid and nonassessable, and shall be free and clear of all
encumbrances and restrictions (other than those created by the Investors),
except for restrictions on transfer set forth in the Transaction Documents or
imposed by applicable securities laws. The Warrants have been duly and validly
authorized. Upon the due exercise of the Warrants, the Warrant Shares will be
validly issued, fully paid and non-assessable free and clear of all encumbrances
and restrictions, except for restrictions on transfer set forth in the
Transaction Documents or imposed by applicable securities laws and except for
those created by the Investors. The Company has reserved a sufficient number of
shares of Common Stock for issuance upon the exercise of the Warrants, free and
clear of all encumbrances and restrictions, except for restrictions on transfer
set forth in the Transaction Documents or imposed by applicable securities laws
and except for those created by the Investors.

                4.5     CONSENTS. The execution, delivery and performance by the
Company of the Transaction Documents and the offer, issuance and sale of the
Securities require no consent of, action by or in respect of, or filing with,
any Person, governmental body, agency, or official other than filings that have
been made pursuant to applicable state securities laws and post-sale filings
pursuant to applicable state and federal securities laws which the Company
undertakes to file within the applicable time periods. Subject to the accuracy
of the representations and warranties of each Investor set forth in Section 5
hereof, the Company has taken all action necessary to exempt (i) the issuance
and sale of the Securities, (ii) the issuance of the Warrant Shares upon due
exercise of the Warrants, and (iii) the other transactions contemplated by the
Transaction Documents from the provisions of any stockholder rights plan or
other "poison pill" arrangement, any anti-takeover, business combination or
control share law or statute binding on the Company or to which the Company or
any of its assets and properties may be subject and any provision of the
Company's Certificate of Incorporation or Bylaws that is or could reasonably be
expected to become applicable to the Investors as a result of the transactions
contemplated hereby, including without limitation, the issuance of the
Securities and the ownership, disposition or voting of the Securities by the
Investors or the exercise of any right granted to the Investors pursuant to this
Agreement or the other Transaction Documents.

                4.6     DELIVERY OF SEC FILINGS; BUSINESS. The Company has made
available to the Investors through the EDGAR system, true and complete copies of
the Company's Special Financial Report on Form 10-KSB for the fiscal year ended
February 28, 2005 (the "10-KSB"), and all other reports filed by the Company
pursuant to the 1934 Act since the filing of the 10-KSB and prior to the date
hereof (collectively, the "SEC Filings"). The SEC Filings are the only filings
required of the Company pursuant to the 1934 Act for such period.

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                4.7     USE OF PROCEEDS. The net proceeds of the sale of the
Shares and the Warrants hereunder shall be used by the Company for working
capital and general corporate purposes.

                4.8     NO MATERIAL ADVERSE CHANGE. Since February 28, 2005,
except as identified and described in the SEC Filings or as described on
SCHEDULE 4.8, there has not been:

                        (i)     any material adverse change in the consolidated
assets, liabilities, financial condition or operating results of the Company
from that reflected in the financial statements included in the Company's
Quarterly Report on Form 10-QSB for the quarter ended August 31, 2005;

                        (ii)    any declaration or payment of any dividend, or
any authorization or payment of any distribution, on any of the capital stock of
the Company, or any redemption or repurchase of any securities of the Company;

                        (iii)   any material damage, destruction or loss,
whether or not covered by insurance to any assets or properties of the Company
or its Subsidiaries;

                        (iv)    any material labor difficulties or labor union
organizing activities with respect to employees of the Company or any
Subsidiary;

                        (v)     any material transaction entered into by the
Company or a Subsidiary other than in the ordinary course of business;

                        (vi)    any other event or condition of any character
that has had or could reasonably be expected to have a Material Adverse Effect;
or

                        (vii)   any occurrence or development that has caused of
could reasonably be expected to cause the representations and warranties in this
Section 4 as of their date to contain any untrue statement of material fact or
omit to state any material fact necessary in order to make the statements made
therein not misleading.

                4.9     SEC FILINGS. At the time of filing thereof as amended on
or prior to the date hereof, the SEC Filings complied as to form in all material
respects with the requirements of the 1934 Act and did not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.

                4.10    NO CONFLICT, BREACH, VIOLATION OR DEFAULT. The
execution, delivery and performance of the Transaction Documents by the Company
and the issuance and sale of the Securities will not conflict with or result in
a breach or violation of any of the terms and provisions of, or constitute a
default under (i) the Company's Certificate of Incorporation or the Company's
Bylaws, both as in effect on the date hereof (true and complete copies of which
have been made available to the Investors through the EDGAR system), or (ii)(a)
any statute, rule,

<PAGE>

regulation or order of any governmental agency or body or any court, domestic or
foreign, having jurisdiction over the Company, any Subsidiary or any of their
respective assets or properties, or (b) any agreement or instrument to which the
Company or any Subsidiary is a party or by which the Company or a Subsidiary is
bound or to which any of their respective assets or properties is subject,
except, in the case of clause (ii), for such breaches, violations or defaults as
would not reasonably be expected to result in a Material Adverse Effect.

                4.11    TAX MATTERS. Except as described in SCHEDULE 4.11, the
Company and each Subsidiary have timely prepared and filed all tax returns
required to have been filed by the Company or such Subsidiary with all
appropriate governmental agencies and timely paid all taxes shown thereon or
otherwise owed by them, except where such taxes are being contested in good
faith by appropriate proceedings. The charges, accruals and reserves on the
books of the Company in respect of taxes for all fiscal periods are adequate in
all material respects, and there are no material unpaid assessments against the
Company or any Subsidiary except for any assessment which is not material to the
Company and its Subsidiaries, taken as a whole. All taxes and other assessments
and levies that the Company or any Subsidiary is required to withhold or to
collect for payment have been duly withheld and collected and paid to the proper
governmental entity or third party when due. There are no tax liens or claims
pending or, to the Company's Knowledge, threatened against the Company or any
Subsidiary or any of their respective assets or property. Except as described on
SCHEDULE 4.11, there are no outstanding tax sharing agreements or other such
arrangements between the Company and any Subsidiary or other corporation or
entity.

                4.12    TITLE TO PROPERTIES. Except as disclosed in the SEC
Filings, the Company and each Subsidiary have good and marketable title to all
real properties and all other properties and assets owned by them, in each case
free from liens, encumbrances and defects that would materially affect the value
thereof or materially interfere with the use made or currently planned to be
made thereof by them; and except as disclosed in the SEC Filings, the Company
and each Subsidiary hold any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere with the
use made or currently planned to be made thereof by them.

                4.13    CERTIFICATES, AUTHORITIES AND PERMITS. The Company and
each Subsidiary possess adequate certificates, authorities or permits issued by
appropriate governmental agencies or bodies necessary to conduct the business
now operated by them, except where the failure to possess such certificates,
authorities or permits has not had and would not reasonably be expected to have
a Material Adverse Effect and neither the Company nor any Subsidiary has
received any written notice of proceedings relating to the revocation or
modification of any such certificate, authority or permit that, if determined
adversely to the Company or such Subsidiary, would reasonably be expected to
have a Material Adverse Effect, individually or in the aggregate.

                4.14    LABOR MATTERS.

                (a)     Except as set forth on SCHEDULE 4.14, the Company is not
a party to or bound by any collective bargaining agreements or other agreements
with labor organizations.

<PAGE>

The Company has not violated in any material respect any laws, regulations,
orders or contract terms, affecting the collective bargaining rights of
employees, labor organizations or any laws, regulations or orders affecting
employment discrimination, equal opportunity employment, or employees' health,
safety, welfare, wages and hours.

                (b)     (i) There are no labor disputes existing, or to the
Company's Knowledge, threatened, involving strikes, slow-downs, work stoppages,
job actions, disputes, lockouts or any other disruptions of or by the Company's
employees, (ii) there are no unfair labor practices or petitions for election
pending or, to the Company's Knowledge, threatened before the National Labor
Relations Board or any other federal, state or local labor commission relating
to the Company's employees, (iii) no demand for recognition or certification
heretofore made by any labor organization or group of employees is pending with
respect to the Company and (iv) to the Company's Knowledge, the Company enjoys
good labor and employee relations with its employees and labor organizations.

                (c)     Except as disclosed in the SEC Filings or as described
on SCHEDULE 4.14, the Company is not a party to, or bound by, any employment or
other contract or agreement that contains any severance, termination pay or
change of control liability or obligation, including, without limitation, any
"excess parachute payment," as defined in Section 2806(b) of the Internal
Revenue Code.

                4.15    INTELLECTUAL PROPERTY.

                        (a)     To the Company's Knowledge, all Intellectual
Property used by the Company and its Subsidiaries in their respective businesses
is valid and enforceable. No patent of the Company or its Subsidiaries is
involved in any interference, reissue, re-examination or opposition proceeding.

                        (b)     To the Company's Knowledge, all of the licenses
and sublicenses and consent, royalty or other agreements concerning Intellectual
Property which are necessary for the conduct of the Company's and each of its
Subsidiaries' respective businesses as currently conducted to which the Company
or any Subsidiary is a party or by which any of their assets are bound (other
than generally commercially available, non-custom, off-the-shelf software
application programs having a retail acquisition price of less than $10,000 per
license) (collectively, "License Agreements") are enforceable in accordance with
their terms, except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors' rights generally, and
there exists no event or condition which will result in a material violation or
breach of or constitute (with or without due notice or lapse of time or both) a
default by the Company or any of its Subsidiaries under any such License
Agreement.

                        (c)     The Company and its Subsidiaries own or have the
valid right to use all of the Intellectual Property that is necessary for the
conduct of the Company's and each of its Subsidiaries' respective businesses as
currently conducted.

<PAGE>

                        (d)     To the Company's Knowledge, the conduct of the
Company's and its Subsidiaries' businesses as currently conducted does not
infringe or otherwise impair or conflict with any Intellectual Property rights
of any third party or any confidentiality obligation owed to a third party.
There is no litigation or order pending or outstanding or, to the Company's
Knowledge, threatened, that seeks to limit or challenge or that concerns the
ownership, use, validity or enforceability of any Intellectual Property or
Confidential Information of the Company and its Subsidiaries.

                4.16    ENVIRONMENTAL MATTERS. To the Company's Knowledge,
neither the Company nor any Subsidiary (i) is in violation of any statute, rule,
regulation, decision or order of any governmental agency or body or any court,
domestic or foreign, relating to the use, disposal or release of hazardous or
toxic substances or relating to the protection or restoration of the environment
or human exposure to hazardous or toxic substances (collectively, "Environmental
Laws"), except for violations which have not had and would not be reasonably
expected to have a Material Adverse Effect, (ii) is liable for any off-site
disposal or contamination pursuant to any Environmental Laws, or (iii) is
subject to any claim relating to any Environmental Laws, which violation,
contamination, liability or claim has had or could reasonably be expected to
have a Material Adverse Effect, individually or in the aggregate.

                4.17    LITIGATION. Except as described on SCHEDULE 4.17, there
are no pending or, to the Company's Knowledge, threatened actions, suits or
proceedings against or affecting the Company, its Subsidiaries or any of its or
their properties which would reasonably be expected to have a Material Adverse
Effect.

                4.18    FINANCIAL STATEMENTS. The financial statements included
in each SEC Filing present fairly, in all material respects, the consolidated
financial position of the Company as of the dates shown and its consolidated
results of operations and cash flows for the periods shown, and such financial
statements have been prepared in conformity with United States generally
accepted accounting principles applied on a consistent basis ("GAAP") (except as
may be disclosed therein or in the notes thereto, and, in the case of quarterly
financial statements, as permitted by Form 10-QSB under the 1934 Act). Except as
set forth in the financial statements of the Company included in the SEC Filings
filed prior to the date hereof or as described on SCHEDULE 4.18, neither the
Company nor any of its Subsidiaries has incurred any liabilities, contingent or
otherwise, except those incurred in the ordinary course of business, consistent
(as to amount and nature) with past practices since the date of such financial
statements, none of which, individually or in the aggregate, have had or could
reasonably be expected to have a Material Adverse Effect.

                4.19    BROKERS AND FINDERS. No Person will have, as a result of
the transactions contemplated by the Transaction Documents, any valid right,
interest or claim against or upon the Company, any Subsidiary or an Investor for
any commission, fee or other compensation pursuant to any agreement, arrangement
or understanding entered into by or on behalf of the Company, other than as
described in SCHEDULE 4.19.

                4.20    NO DIRECTED SELLING EFFORTS OR GENERAL SOLICITATION.
Neither the Company nor any Person acting on its behalf has conducted any
general solicitation or general advertising

<PAGE>

(as those terms are used in Regulation D) in connection with the offer or sale
of any of the Securities.

                4.21    NO INTEGRATED OFFERING. Neither the Company nor any of
its Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any Company security or solicited any
offers to buy any security, under circumstances that would adversely affect
reliance by the Company on Section 4(2) for the exemption from registration for
the transactions contemplated hereby or would require registration of the
Securities under the 1933 Act.

                4.22    PRIVATE PLACEMENT. Assuming the accuracy of the
representations and warranties of the Investors contained in Section 5 hereof
and compliance by the Investors with the terms of the Transaction Documents, the
offer and sale of the Securities to the Investors as contemplated hereby is
exempt from the registration requirements of the 1933 Act.

                4.23    QUESTIONABLE PAYMENTS. Neither the Company nor any of
its Subsidiaries nor, to the Company's Knowledge, any of their respective
current or former stockholders, directors, officers or employees, has on behalf
of the Company or any Subsidiary or in connection with their respective
businesses: (a) used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity; (b)
made any direct or indirect unlawful payments to any governmental officials or
employees from corporate funds; (c) established or maintained any unlawful or
unrecorded fund of corporate monies or other assets; (d) made any false or
fictitious entries on the books and records of the Company or any Subsidiary; or
(e) made any unlawful bribe, rebate, payoff, influence payment, kickback or
other unlawful payment of any nature.

                4.24    TRANSACTIONS WITH AFFILIATES. Except as disclosed in the
SEC Filings or as disclosed on SCHEDULE 4.24, none of the officers or directors
of the Company and, to the Company's Knowledge, none of the employees of the
Company is presently a party to any transaction with the Company or any
Subsidiary (other than as holders of stock options and/or warrants, and for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
Company's Knowledge, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.

                4.25    INTERNAL CONTROLS. The Company is in material compliance
with the provisions of the Sarbanes-Oxley Act of 2002 currently applicable to
the Company. Except as disclosed in the SEC Filings, the Company and the
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with

<PAGE>

respect to any differences. Except as disclosed in the SEC Filings, the Company
has established disclosure controls and procedures (as defined in 1934 Act Rules
13a-14 and 15d-14) for the Company and designed such disclosure controls and
procedures to ensure that material information relating to the Company,
including the Subsidiaries, is made known to the certifying officers by others
within those entities, particularly during the period in which the Company's
most recently filed period report under the 1934 Act, as the case may be, is
being prepared. The Company's certifying officers have evaluated the
effectiveness of the Company's controls and procedures as of the end of the
period covered by the most recently filed periodic report under the 1934 Act
(such date, the "Evaluation Date"). The Company presented in its most recently
filed periodic report under the 1934 Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date. Since the Evaluation Date, there
have been no significant changes in the Company's internal controls (as such
term is defined in Item 308 of Regulation S-B) or, to the Company's Knowledge,
in other factors that could significantly affect the Company's internal
controls. The Company maintains and will continue to maintain a standard system
of accounting established and administered in accordance with GAAP and the
applicable requirements of the 1934 Act.

                4.26    DISCLOSURES. Neither the Company nor any Person acting
on its behalf has provided the Investors or their agents or counsel with any
information that constitutes or might constitute material, non-public
information, other than the fact that the Company intends to enter into the
transactions contemplated hereby and the terms hereof. The Company understands
that the Investors will be relying on this representation in effecting
transactions in the Company's securities.

        5.      REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each of the
Investors hereby severally, and not jointly, represents and warrants to the
Company that:

                5.1     ORGANIZATION AND EXISTENCE. Such Investor is a validly
existing corporation, limited partnership or limited liability company and has
all requisite corporate, partnership or limited liability company power and
authority to invest in the Securities pursuant to this Agreement.

                5.2     AUTHORIZATION. The execution, delivery and performance
by such Investor of the Transaction Documents to which such Investor is a party
have been duly authorized and will each constitute the valid and legally binding
obligation of such Investor, enforceable against such Investor in accordance
with their respective terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability,
relating to or affecting creditors' rights generally.

                5.3     PURCHASE ENTIRELY FOR OWN ACCOUNT. The Securities to be
received by such Investor hereunder will be acquired for such Investor's own
account, not as nominee or agent, and not with a view to the resale or
distribution of any part thereof in violation of the 1933 Act, and such Investor
has no present intention of selling, granting any participation in, or otherwise
distributing the same in violation of the 1933 Act without prejudice, however,
to such Investor's right at all times to sell or otherwise dispose of all or any
part of such Securities in

<PAGE>

compliance with applicable federal and state securities laws. Nothing contained
herein shall be deemed a representation or warranty by such Investor to hold the
Securities for any period of time. Such Investor is not a broker-dealer
registered with the SEC under the 1934 Act or an entity engaged in a business
that would require it to be so registered.

                5.4     INVESTMENT EXPERIENCE. Such Investor acknowledges that
it can bear the economic risk and complete loss of its investment in the
Securities and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the investment
contemplated hereby.

                5.5     DISCLOSURE OF INFORMATION. Such Investor has had an
opportunity to receive all information related to the Company requested by it
and to ask questions of and receive answers from the Company regarding the
Company, its business and the terms and conditions of the offering of the
Securities. Such Investor acknowledges receipt of copies of the SEC Filings.
Neither such inquiries nor any other due diligence investigation conducted by
such Investor shall modify, amend or affect such Investor's right to rely on the
Company's representations and warranties contained in this Agreement.

                5.6     RESTRICTED SECURITIES. Such Investor understands that
the Securities are characterized as "restricted securities" under the U.S.
federal securities laws inasmuch as they are being acquired from the Company in
a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the 1933 Act only in certain limited circumstances.

                5.7     LEGENDS. It is understood that, except as provided
below, certificates evidencing the Securities may bear the following or any
similar legend:

                        (a)     "The securities represented hereby may not be
transferred unless (i) such securities have been registered for sale pursuant to
the Securities Act of 1933, as amended, (ii) such securities may be sold
pursuant to Rule 144(k), or (iii) the Company has received an opinion of counsel
reasonably satisfactory to it that such transfer may lawfully be made without
registration under the Securities Act of 1933, as amended, or qualification
under applicable state securities laws."

                        (b)     If required by the authorities of any state in
connection with the issuance of sale of the Securities, the legend required by
such state authority.

                5.8     ACCREDITED INVESTOR. Such Investor is an accredited
investor as defined in Rule 501(a) of Regulation D, as amended, under the 1933
Act.

                5.9     NO GENERAL SOLICITATION. Such Investor did not learn of
the investment in the Securities as a result of any public advertising or
general solicitation.

                5.10    BROKERS AND FINDERS. Except as disclosed to the Company
in writing, no Person will have, as a result of the transactions contemplated by
the Transaction Documents, any valid right, interest or claim against or upon
the Company, any Subsidiary or an Investor for any

<PAGE>

commission, fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of such Investor.

                5.11    PROHIBITED TRANSACTIONS. During the last thirty (30)
days prior to the date hereof, neither such Investor nor any Affiliate of such
Investor which (x) had knowledge of the transactions contemplated hereby, (y)
has or shares discretion relating to such Investor's investments or trading or
information concerning such Investor's investments, including in respect of the
Securities, or (z) is subject to such Investor's review or input concerning such
Affiliate's investments or trading (collectively, "Trading Affiliates") has,
directly or indirectly, effected or agreed to effect any short sale, whether or
not against the box, established any "put equivalent position" (as defined in
Rule 16a-1(h) under the 1934 Act) with respect to the Common Stock, granted any
other right (including, without limitation, any put or call option) with respect
to the Common Stock or with respect to any security that includes, relates to or
derived any significant part of its value from the Common Stock or otherwise
sought to hedge its position in the Securities (each, a "Prohibited
Transaction"). Prior to the earliest to occur of (i) the termination of this
Agreement, (ii) the Effective Date or (iii) the Effectiveness Deadline, such
Investor shall not, and shall cause its Trading Affiliates not to, engage,
directly or indirectly, in a Prohibited Transaction. Such Investor acknowledges
that the representations, warranties and covenants contained in this Section
5.11 are being made for the benefit of the Investors as well as the Company and
that each of the other Investors shall have an independent right to assert any
claims against such Investor arising out of any breach or violation of the
provisions of this Section 5.11.

                5.12    INVESTOR QUESTIONNAIRE. Such Investor has provided to
the Company an executed of an Investor Questionnaire in the form attached hereto
as EXHIBIT E. The information regarding such Investor contained therein is true
and correct.

        6.      CONDITIONS TO CLOSING.

                6.1     CONDITIONS TO THE INVESTORS' OBLIGATIONS. The obligation
of each Investor to purchase the Shares and the Warrants at the Closing is
subject to the fulfillment to such Investor's satisfaction, on or prior to the
Closing Date, of the following conditions, any of which may be waived by such
Investor (as to itself only):

                        (a)     The representations and warranties made by the
Company in Section 4 hereof qualified as to materiality shall be true and
correct at all times prior to and on the Closing Date, except to the extent any
such representation or warranty expressly speaks as of an earlier date, in which
case such representation or warranty shall be true and correct as of such
earlier date, and, the representations and warranties made by the Company in
Section 4 hereof not qualified as to materiality shall be true and correct in
all material respects at all times prior to and on the Closing Date, except to
the extent any such representation or warranty expressly speaks as of an earlier
date, in which case such representation or warranty shall be true and correct in
all material respects as of such earlier date. The Company shall have performed
in all material respects all obligations and covenants herein required to be
performed by it on or prior to the Closing Date.

<PAGE>

                        (b)     The Company shall have obtained any and all
consents, permits, approvals, registrations and waivers necessary or appropriate
for consummation of the purchase and sale of the Securities and the consummation
of the other transactions contemplated by the Transaction Documents, all of
which shall be in full force and effect.

                        (c)     The Company shall have executed and delivered
the Registration Rights Agreement.

                        (d)     No judgment, writ, order, injunction, award or
decree of or by any court, or judge, justice or magistrate, including any
bankruptcy court or judge, or any order of or by any governmental authority,
shall have been issued, and no action or proceeding shall have been instituted
by any governmental authority, enjoining or preventing the consummation of the
transactions contemplated hereby or in the other Transaction Documents.

                        (e)     The Company shall have delivered a Certificate,
executed on behalf of the Company by its Chief Executive Officer or its Chief
Financial Officer, dated as of the Closing Date, certifying to the fulfillment
of the conditions specified in subsections (a), (b) and (d) of this Section 6.1.

                        (f)     The Company shall have delivered a Certificate,
executed on behalf of the Company by its Secretary, dated as of the Closing
Date, certifying the resolutions adopted by the Board of Directors of the
Company approving the transactions contemplated by this Agreement and the other
Transaction Documents and the issuance of the Securities, certifying the current
versions of the Certificate of Incorporation and Bylaws of the Company and
certifying as to the signatures and authority of persons signing the Transaction
Documents and related documents on behalf of the Company.

                        (g)     The Investors shall have received an opinion
from Company Counsel, dated as of the Closing Date, in form and substance
reasonably acceptable to the Investors and addressing such legal matters as the
Investors may reasonably request.

                        (h)     No stop order or suspension of trading shall
have been imposed by the SEC or any other governmental or regulatory body with
respect to public trading in the Common Stock.

                        (i)     Company Counsel shall have received the Escrow
Amount from the Investors pursuant to Section 3 hereof.

                6.2     CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's
obligation to sell and issue the Shares and the Warrants at the Closing is
subject to the fulfillment to the satisfaction of the Company on or prior to the
Closing Date of the following conditions, any of which may be waived by the
Company:

                        (a)     The representations and warranties made by the
Investors in Section 5 hereof, other than the representations and warranties
contained in Sections 5.3, 5.4, 5.5, 5.6, 5.7, 5.8 and 5.9 (the "Investment
Representations"), shall be true and correct in all material respects when made,
and shall be true and correct in all

<PAGE>

material respects on the Closing Date with the same force and effect as if they
had been made on and as of said date. The Investment Representations shall be
true and correct in all respects when made, and shall be true and correct in all
respects on the Closing Date with the same force and effect as if they had been
made on and as of said date. The Investors shall have performed in all material
respects all obligations and covenants herein required to be performed by them
on or prior to the Closing Date.

                        (b)     The Investors shall have executed and delivered
the Registration Rights Agreement.

                        (c)     Company Counsel shall have received the Escrow
Amount from the Investors pursuant to Section 3 hereof.

                6.3     TERMINATION OF OBLIGATIONS TO EFFECT CLOSING; EFFECTS.

                        (a)     The obligations of the Company, on the one hand,
and the Investors, on the other hand, to effect the Closing shall terminate as
follows:

                                (i)     Upon the mutual written consent of the
Company and the Investors;

                                (ii)    By the Company if any of the conditions
set forth in Section 6.2 shall have become incapable of fulfillment, and shall
not have been waived by the Company;

                                (iii)   By an Investor (with respect to itself
only) if any of the conditions set forth in Section 6.1 shall have become
incapable of fulfillment, and shall not have been waived by the Investor; or

                                (iv)    By either the Company or any Investor
(with respect to itself only) if the Closing has not occurred on or prior to
March 7, 2006;

provided, however, that, except in the case of clause (i) above, the party
seeking to terminate its obligation to effect the Closing shall not then be in
breach of any of its representations, warranties, covenants or agreements
contained in this Agreement or the other Transaction Documents if such breach
has resulted in the circumstances giving rise to such party's seeking to
terminate its obligation to effect the Closing.

                (b)     In the event of termination by the Company or any
Investor of its obligations to effect the Closing pursuant to this Section 6.3,
written notice thereof shall forthwith be given to the other Investors and the
other Investors shall have the right to terminate their obligations to effect
the Closing upon written notice to the Company and the other Investors. Nothing
in this Section 6.3 shall be deemed to release any party from any liability for
any breach by such party of the terms and provisions of this Agreement or the
other Transaction

<PAGE>

Documents or to impair the right of any party to compel specific performance by
any other party of its obligations under this Agreement or the other Transaction
Documents.

        7.      COVENANTS AND AGREEMENTS OF THE COMPANY.

                7.1     RESERVATION OF COMMON STOCK. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of providing for the exercise of the
Warrants, such number of shares of Common Stock as shall from time to time equal
the number of shares sufficient to permit the exercise of the Warrants issued
pursuant to this Agreement in accordance with their respective terms.

                7.2     NO CONFLICTING AGREEMENTS. The Company will not take any
action, enter into any agreement or make any commitment that would conflict or
interfere in any material respect with the Company's obligations to the
Investors under the Transaction Documents.

                7.3     COMPLIANCE WITH LAWS. The Company will comply in all
material respects with all applicable laws, rules, regulations, orders and
decrees of all governmental authorities.

                7.4     REMOVAL OF LEGENDS. Upon the earlier of (i) the resale
of the Shares or Warrant Shares pursuant to a registration statement in
accordance with the plan of distribution contained therein, delivery to
Registrar and Transfer Company (or any successor thereto, the "Transfer Agent")
(with a copy to the Company) of the certificate representing the shares of
Common Stock sold and receipt by the Company and the Transfer Agent of a
certificate of subsequent sale in the form of EXHIBIT G attached hereto or (ii)
Rule 144(k) becoming available, delivery to the Transfer Agent (with a copy to
the Company) of the certificate representing the shares of Common Stock and the
delivery to the Company and the Transfer Agent of a representation letter from
the Investor in customary form that Rule 144(k) applies to the shares of Common
Stock represented thereby, the Company shall promptly cause the Transfer Agent
to issue a certificate representing the shares of Common Stock which does not
bear such restrictive legends.

                7.5     BOARD DESIGNEE, ETC.

                (a)     So long as the Investors are the beneficial owners
(determined pursuant to Rule 13d-3 under the 1934 Act) of at least shall own
5,000,000 shares of Common Stock (the "Ownership Condition"), the Investors
shall have the right to submit one designee, who shall be David McCourt or
another individual acceptable to the Company's Board of Directors (the "Investor
Designee") to be (a) elected to the Company's Board of Directors to serve until
the Company's next shareholders' meeting called for the purpose of electing
members of the Board of Directors, if a vacancy exists at any time after the
Closing and before such stockholders' meeting, (b) nominated and recommended by
the Board of Directors for election in the case of board seats to be filled at a
shareholders' meeting, and (c) included for election in the Company's future
proxy statements. Upon the request of the Company's Board of Directors, the
Investors shall cause the Investor Designee to resign from the Board of
Directors if the Investors no longer satisfy the Ownership Condition. At any
time when there is no Investor Designee, so

<PAGE>

long as the Ownership Condition is met, the Company shall give the Investors
written notice of each meeting of the Company's Board of Directors and each
committee thereof at least at the same time and in the same manner as notice is
given to the directors, and the Company shall permit a David McCourt, or another
individual acceptable to the Company's Board of Directors (the "Observer") to
attend as an observer all meetings of the Company's Board of Directors and all
committees thereof; provided, that, the Company shall have the right to exclude
the Observer from any meeting if the Company is advised by counsel that the
inclusion of such Observer in such meeting would result in the waiver of any
applicable privilege and; provided, further, that in the case of telephonic
meetings conducted in accordance with the Company's bylaws and applicable law,
the Observer shall be given the opportunity to listen to such telephonic
meetings. The Observer shall be entitled to receive all written materials and
other information (including without limitation copies of meeting minutes) given
to directors in connection with such meetings at the same time such materials
and information are given to the directors; provided, that, the Company shall
have the right to withhold any materials or information from the Observer if the
Company is advised by counsel that providing such materials or information to
the Observer would result in the waiver of any applicable privilege. If the
Company proposes to take any action by written consent in lieu of a meeting of
the Board of Directors or of any committee thereof, the Company shall give
written notice thereof to the Observer and each of the Company's directors prior
to the effective date of such consent describing in reasonable detail the nature
and substance of such action. The Company shall cause each of its Subsidiaries
to provide to the Investors the same rights with respect to such Subsidiary
(including without limitation relating to notice of and attendance at meeting of
the board of directors of such Subsidiary) as provided by the Company to the
Holder hereunder.

                (b)     So long as the Ownership Condition is met, the Company
shall consult with the Investors prior to appointing to the Board of Directors
or nominating for election to the Board of Directors any independent director.

                7.6     RIGHT TO PARTICIPATE IN FUTURE FINANCINGS. From the date
hereof until the second anniversary of the Effective Date, upon any private
placement of Equity Securities by the Company (other than an Exempt Issuance) (a
"Subsequent Financing"), each Investor shall have the right to participate in
such Subsequent Financing as provided herein. At least five (5) Business Days
prior to the closing of the Subsequent Financing, the Company shall deliver to
each Investor a written notice of its intention to effect a Subsequent Financing
("Pre-Notice"), which Pre-Notice shall ask such Investor if it wants to review
the details of such financing (such additional notice, a "Subsequent Financing
Notice"). Upon the request of an Investor, and only upon a request by such
Investor, for a Subsequent Financing Notice, the Company shall promptly, but no
later than one Business Day after such request, deliver a Subsequent Financing
Notice to such Investor. The Subsequent Financing Notice shall describe in
reasonable detail the proposed terms of such Subsequent Financing, the amount of
proceeds intended to be raised thereunder, and a summary of the material terms
of such Subsequent Financing. Each Investor shall notify the Company by 6:30
p.m. (New York City time) on the fifth (5th) Business Day after their receipt of
the Subsequent Financing Notice of its willingness to participate in the
Subsequent Financing on the terms described in the Subsequent Financing Notice,
subject to completion of mutually acceptable documentation and the dollar amount
that such Investor is willing to invest in the Subsequent Financing. Each
Investor shall have the right to invest in the

<PAGE>

Subsequent Financing an amount up to its Base Amount. As used herein, the "Base
Amount" of an Investor shall be the total dollar amount the Company anticipates
receiving in the Subsequent Financing times a fraction, the numerator of which
is the total number of shares of Common Stock beneficially owned by such
Investor (determined pursuant to Rule 13d-3 under the 1934 Act; provided, that
only one Investor shall be deemed to be the beneficial owner of a particular
share or shares of Common Stock) and the denominator of which is the number of
shares of Common Stock then outstanding, calculated on a fully diluted basis
assuming the exercise or conversion of all outstanding Convertible Securities.
If one or more Investors fail to timely notify the Company of their willingness
to participate in the Subsequent Financing, the Company may effect the remaining
portion of such Subsequent Financing on substantially the terms set forth in the
Subsequent Financing Notice; provided that the Company must provide the
Investors with a second Subsequent Financing Notice, and the Investors will
again have the participation right set forth above in this Section 7.6, if the
Subsequent Financing subject to the initial Subsequent Financing Notice is not
consummated for any reason on substantially the terms set forth in such
Subsequent Financing Notice within 60 Business Days after the date of the
initial Subsequent Financing Notice.

        8.      SURVIVAL AND INDEMNIFICATION.

                8.1     SURVIVAL. The representations, warranties, covenants and
agreements contained in this Agreement shall survive the Closing of the
transactions contemplated by this Agreement; provided, however, that any claim
for Losses arising out of a breach of representation or warranty must be made,
if at all, within two (2) years of the Closing Date.

                        8.2     INDEMNIFICATION. The Company agrees to indemnify
and hold harmless each Investor and its Affiliates and their respective
directors, officers, employees and agents from and against any and all losses,
claims, damages, liabilities and expenses (including without limitation
reasonable attorney fees and disbursements and other expenses incurred in
connection with investigating, preparing or defending any action, claim or
proceeding, pending or threatened and the costs of enforcement thereof)
(collectively, "Losses") to which such Person may become subject as a result of
any breach of representation, warranty, covenant or agreement made by or to be
performed on the part of the Company under the Transaction Documents, and will
reimburse any such Person for all such amounts as they are incurred by such
Person.

                        8.3     CONDUCT OF INDEMNIFICATION PROCEEDINGS. Promptly
after receipt by any Person (the "Indemnified Person") of notice of any demand,
claim or circumstances which would or might give rise to a claim or the
commencement of any action, proceeding or investigation in respect of which
indemnity may be sought pursuant to Section 8.2, such Indemnified Person shall
promptly notify the Company in writing and the Company shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to such
Indemnified Person, and shall assume the payment of all fees and expenses;
PROVIDED, HOWEVER, that the failure of any Indemnified Person so to notify the
Company shall not relieve the Company of its obligations hereunder except to the
extent that the Company is materially prejudiced by such failure to notify. In
any such proceeding, any Indemnified Person shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the

<PAGE>

expense of such Indemnified Person unless: (i) the Company and the Indemnified
Person shall have mutually agreed to the retention of such counsel; or (ii) in
the reasonable judgment of counsel to such Indemnified Person representation of
both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. The Company shall not be liable for
any settlement of any proceeding effected without its written consent, which
consent shall not be unreasonably withheld, but if settled with such consent, or
if there be a final judgment for the plaintiff, the Company shall indemnify and
hold harmless such Indemnified Person from and against any loss or liability (to
the extent stated above) by reason of such settlement or judgment. Without the
prior written consent of the Indemnified Person, which consent shall not be
unreasonably withheld, the Company shall not effect any settlement of any
pending or threatened proceeding in respect of which any Indemnified Person is
or could have been a party and indemnity could have been sought hereunder by
such Indemnified Person, unless such settlement includes an unconditional
release of such Indemnified Person from all liability arising out of such
proceeding.

        9.      MISCELLANEOUS.

                9.1     SUCCESSORS AND ASSIGNS. This Agreement may not be
assigned by a party hereto without the prior written consent of the Company or
the Investors, as applicable, provided, however, that an Investor may assign its
rights and delegate its duties hereunder in whole or in part to an Affiliate or
to a third party acquiring some or all of its Securities in a private
transaction without the prior written consent of the Company or the other
Investors, after notice duly given by such Investor to the Company provided,
that no such assignment or obligation shall affect the obligations of such
Investor hereunder. The provisions of this Agreement shall inure to the benefit
of and be binding upon the respective permitted successors and assigns of the
parties. Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.

                9.2     COUNTERPARTS; FAXES. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Agreement may
also be executed via facsimile, which shall be deemed an original.

                9.3     TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

                9.4     NOTICES. Unless otherwise provided, any notice required
or permitted under this Agreement shall be given in writing and shall be deemed
effectively given as hereinafter described (i) if given by personal delivery,
then such notice shall be deemed given upon such delivery, (ii) if given by
telex or telecopier, then such notice shall be deemed given upon receipt of
confirmation of complete transmittal, (iii) if given by mail, then such notice
shall be deemed given upon the earlier of (A) receipt of such notice by the
recipient or (B) five days after such notice is deposited in first class mail,
postage prepaid, and (iv) if given by an

<PAGE>

internationally recognized overnight air courier, then such notice shall be
deemed given one Business Day after delivery to such carrier. All notices shall
be addressed to the party to be notified at the address as follows, or at such
other address as such party may designate by ten days' advance written notice to
the other party:

                        If to the Company:

                            Narrowstep Inc.
                            60 Parsons Green Lane
                            London SW6 4HU
                            United Kingdom

                                    and

                            116 Village Blvd, Suite 200
                            Princeton, NJ 08540
                            Attention:  Steve Crowther, Chief Financial Officer
                            Fax: (609) 951 2252

                        With a copy to:

                            Lowenstein Sandler PC
                            65 Livingston Avenue
                            Roseland, NJ 07068
                            Attention:  John D. Hogoboom
                            Fax: (973) 597-2383

                        If to the Investors:

to the addresses set forth on the signature pages hereto.

                9.5     EXPENSES. The parties hereto shall pay their own costs
and expenses in connection herewith, except that if the Closing occurs, the
Company shall reimburse the Investors for the reasonable legal fees and
disbursements of their counsel incurred in connection with the negotiation of
the Transaction Documents up to $35,000 in the aggregate upon presentation of
appropriate invoices.

                9.6     AMENDMENTS AND WAIVERS. Any term 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 with the written consent of the Company and the Investors
agreeing to purchase a majority of the Shares. Any amendment or waiver effected
in accordance with this Section 9.6 shall be binding upon each holder of any
Securities purchased under this Agreement at the time outstanding, each future
holder of all such Securities, and the Company.

<PAGE>

                9.7     PUBLICITY. Except as set forth below, no public release
or announcement concerning the transactions contemplated hereby shall be issued
by the Company or the Investors without the prior consent of the Company (in the
case of a release or announcement by the Investors) or the Investors (in the
case of a release or announcement by the Company) (which consents shall not be
unreasonably withheld), except as such release or announcement may be required
by law or the applicable rules or regulations of any securities exchange or
securities market, in which case the Company or the Investors, as the case may
be, shall allow the Investors or the Company, as applicable, to the extent
reasonably practicable in the circumstances, reasonable time to comment on such
release or announcement in advance of such issuance. By 8:30 a.m. (New York City
time) on the trading day immediately following the Closing Date, the Company
shall issue a press release disclosing the consummation of the transactions
contemplated by this Agreement. No later than the third trading day following
the Closing Date, the Company will file a Current Report on Form 8-K attaching
the press release described in the foregoing sentence as well as copies of the
Transaction Documents. In addition, the Company will make such other filings and
notices in the manner and time required by the SEC.

                9.8     SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof but shall be interpreted as if it
were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties hereby
waive any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.

                9.9     ENTIRE AGREEMENT. This Agreement, including the Exhibits
and the Disclosure Schedules, and the other Transaction Documents constitute the
entire agreement among the parties hereof with respect to the subject matter
hereof and thereof and supersede all prior agreements and understandings, both
oral and written, between the parties with respect to the subject matter hereof
and thereof.

                9.10    FURTHER ASSURANCES. The parties shall execute and
deliver all such further instruments and documents and take all such other
actions as may reasonably be required to carry out the transactions contemplated
hereby and to evidence the fulfillment of the agreements herein contained.

                9.11    GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL. This Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of New York without regard to the choice of law
principles thereof. Each of the parties hereto irrevocably submits to the
exclusive jurisdiction of the courts of the State of New York located in New
York County and the United States District Court for the Southern District of
New York for the purpose of any suit, action, proceeding or judgment relating to
or arising out of this Agreement and the transactions contemplated hereby.
Service of process in connection with any such suit, action or proceeding may be
served on each party hereto anywhere in the world by the same methods as are
specified for the giving of notices under this Agreement. Each of the parties
hereto irrevocably consents to the jurisdiction of any such court in any such
suit, action or proceeding and to the laying of venue in such court. Each party
hereto irrevocably waives any objection to the laying of venue of any such suit,
action or proceeding brought in such courts and irrevocably waives any claim
that any such suit, action or

<PAGE>

proceeding brought in any such court has been brought in an inconvenient forum.
EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN
CONSULTED SPECIFICALLY AS TO THIS WAIVER.

                9.12    INDEPENDENT NATURE OF INVESTORS' OBLIGATIONS AND RIGHTS.
The obligations of each Investor under any Transaction Document are several and
not joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. The decision of each Investor to
purchase Securities pursuant to the Transaction Documents has been made by such
Investor independently of any other Investor. Nothing contained herein or in any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. Each
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no Investor
will be acting as agent of such Investor in connection with monitoring its
investment in the Securities or enforcing its rights under the Transaction
Documents. Each Investor shall be entitled to independently protect and enforce
its rights, including, without limitation, the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the Investors
has been provided with the same Transaction Documents for the purpose of closing
a transaction with multiple Investors and not because it was required or
requested to do so by any Investor.

                            [signature page follows]

<PAGE>

        IN WITNESS WHEREOF, the parties have executed this Agreement or caused
their duly authorized officers to execute this Agreement as of the date first
above written.

The Company:                          NARROWSTEP INC.

                                      By: /s/ Steve Crowther
                                         ---------------------------------------
                                      Name: Steve Crowther
                                      Title: Senior Vice President and Chief
                                             Financial Officer

<PAGE>

                                      Richard Molinsky
                                      ------------------------------------------
                                             (Name of Investor)

                                      By: /s/
                                         ---------------------------------------
                                      Name: Richard Molinsky
                                      Title:

Aggregate Purchase Price: $30,000
Number of Shares: 50,000
Number of Series A Warrants: 25,000
Number of Series B Warrants: 25,000

Address for Notice: 51 Lords Highway East
                    Weston, CT  06883

<PAGE>

                             WBBS SA
                             ---------------------------------------------------
                                    (Name of Investor)

                             By: /s/
                                ------------------------------------------------
                             Name:  Sylvain Perret        Dominique Curchod
                             Title: Managing Partners, President, Vice President

Aggregate Purchase Price: $100,000
Number of Shares: 166,666
Number of Series A Warrants: 83,333
Number of Series B Warrants: 83,333

Address for Notice: 108 rue de Lyon
                    1203 Geneva
                    SWITZERLAND

<PAGE>

                                      Sano Ventures XII LLC
                                      ------------------------------------------
                                            (Name of Investor)

                                      By: /s/
                                         ---------------------------------------
                                      Name: Stanley Mauss
                                      Title:  CFO

Aggregate Purchase Price: $1,000,000
Number of Shares: 1,666,666
Number of Series A Warrants:
Number of Series B Warrants:

Address for Notice: c/o Stanley Mauss
                    1700 Broadway, 17th Floor
                    New York, NY  10019

<PAGE>

                                      MicroCapital Fund LP
                                      ------------------------------------------
                                             (Name of Investor)

                                      By: /s/
                                         ---------------------------------------
                                      Name: Chris A. Jarrous
                                      Title:  Senior Vice President

Aggregate Purchase Price: $675,000
Number of Shares: 1,125,000
Number of Series A Warrants: 562,500
Number of Series B Warrants: 562,500

Address for Notice: MicroCapital LLC
                    201 Post Street, Suite 1001
                    San Francisco, CA  94108

<PAGE>

                                      Microcapital Fund Ltd
                                      ------------------------------------------
                                             (Name of Investor)

                                      By: /s/
                                         ---------------------------------------
                                      Name: Chris A. Jarrous
                                      Title:  Senior Vice President

Aggregate Purchase Price: $325,000
Number of Shares: 541,666
Number of Series A Warrants: 270,833
Number of Series B Warrants: 270,833

Address for Notice: MicroCapital LLC
                    201 Post Street, Suite 1001
                    San Francisco, CA  94108

<PAGE>

                                      Roger L. Werner, Jr.
                                      ------------------------------------------
                                             (Name of Investor)

                                      By: /s/
                                         ---------------------------------------
                                      Name: Roger L. Werner, Jr.
                                      Title:

Aggregate Purchase Price: $300,000
Number of Shares: 500,000
Number of Series A Warrants: 250,000
Number of Series B Warrants: 250,000

Address for Notice: Roger L. Werner, Jr.
                    10 Barnstable Lane
                    Greenwich, CT  06830

<PAGE>

                                      SIBEX Capital Fund Inc.
                                      ------------------------------------------
                                             (Name of Investor)

                                      By: /s/
                                         ---------------------------------------
                                      Name: Oleg S. Krasnoshchek
                                      Title:  Vice President

Aggregate Purchase Price: $400,000
Number of Shares: 666,666
Number of Series A Warrants: 333,333
Number of Series B Warrants: 333,333

Address for Notice: 12/24, Sadovaya-
                    Samotechnaya, off.5
                    Moscow
                    RUSSIA  127051

<PAGE>

                                      Carolyn R. Wall
                                      ------------------------------------------
                                             (Name of Investor)

                                      By: /s/
                                         ---------------------------------------
                                      Name: Carolyn R. Wall
                                      Title:  Investor

Aggregate Purchase Price: $10,000
Number of Shares: 16,666
Number of Series A Warrants: 8,333
Number of Series B Warrants: 8,333

Address for Notice: 38 Westmere Avenue
                    Rowayton, CT  06853

<PAGE>

                                      Granahan McCourt Capital, LLC
                                      ------------------------------------------
                                             (Name of Investor)

                                      By: /s/
                                         ---------------------------------------
                                      Name: David C. McCourt
                                      Title: Chief Executive Officer

Aggregate Purchase Price: $3,000,000
Number of Shares: 5,000,000
Number of Series A Warrants: 2,500,000
Number of Series B Warrants: 2,500,000

Address for Notice: Granahan McCourt Capital, LLC
                    P.O. Box AQ
                    Princeton, NJ  08542

<PAGE>

                                      Andreas F. Schneider
                                      ------------------------------------------
                                             (Name of Investor)

                                      By: /s/
                                         ---------------------------------------
                                      Name: Andreas F. Schneider
                                      Title:  Senior Vice President

Aggregate Purchase Price: $60,000
Number of Shares: 100,000
Number of Series A Warrants: 50,000
Number of Series B Warrants: 50,000

Address for Notice: Andreas F. Schneider
                    Juergensallee 20
                    22609 Hamburg
                    GERMANY

<PAGE>

                                      Mr. R. Ledeboer
                                      ------------------------------------------
                                             (Name of Investor)

                                      By: /s/
                                         ---------------------------------------
                                      Name: Mr. R. Ledeboer
                                      Title:

Aggregate Purchase Price: $1,500,000
Number of Shares: 2,500,000
Number of Series A Warrants: 1,250,000
Number of Series B Warrants: 1,250,000

Address for Notice: Mr. R. Ledeboer
                    Zwolsestraat 13K
                    2587 TX The Hague
                    THE NETHERLANDS<PAGE>

                          REGISTRATION RIGHTS AGREEMENT

        This Registration Rights Agreement (the "Agreement") is made and entered
into as of this 22nd day of February, 2006 by and among Narrowstep Inc., a
Delaware corporation (the "Company"), and the "Investors" named in that certain
Purchase Agreement by and among the Company and the Investors (the "Purchase
Agreement").

        The parties hereby agree as follows:

        1.      CERTAIN DEFINITIONS.

        As used in this Agreement, the following terms shall have the following
meanings:

        "AFFILIATE" means, with respect to any person, any other person which
directly or indirectly controls, is controlled by, or is under common control
with, such person.

        "BUSINESS DAY" means a day, other than a Saturday or Sunday, on which
banks in New York City are open for the general transaction of business.

        "COMMON STOCK" shall mean the Company's common stock, par value
$0.000001 per share, and any securities into which such shares may hereinafter
be reclassified.

        "INVESTORS" shall mean the Investors identified in the Purchase
Agreement and any Affiliate or permitted transferee of any Investor who is a
subsequent holder of any Warrants or Registrable Securities.

        "PROSPECTUS" shall mean (i) the prospectus included in any Registration
Statement, 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 such Registration Statement and by all other amendments and
supplements to the prospectus, including post-effective amendments and all
material incorporated by reference in such prospectus, and (ii) any "free
writing prospectus" as defined in Rule 163 under the 1933 Act.

        "REGISTER," "REGISTERED" and "REGISTRATION" refer to a registration made
by preparing and filing a Registration Statement or similar document in
compliance with the 1933 Act (as defined below), and the declaration or ordering
of effectiveness of such Registration Statement or document.

        "REGISTRABLE SECURITIES" shall mean (i) the Shares, (ii) the Warrant
Shares and (iii) any other securities issued or issuable with respect to or in
exchange for Registrable Securities; provided, that, a security shall cease to
be a Registrable Security upon (A) sale pursuant to a Registration Statement or
Rule 144 under the 1933 Act, or (B) such security becoming eligible for sale by
the Investors pursuant to Rule 144(k).

        "REGISTRATION STATEMENT" shall mean any registration statement of the
Company filed under the 1933 Act that covers the resale of any of the
Registrable Securities pursuant to the provisions of this Agreement, amendments
and supplements to such Registration Statement, including post-effective
amendments, all exhibits and all material incorporated by reference in such
Registration Statement.

        "REQUIRED INVESTORS" means the Investors holding a majority of the
Registrable Securities.

<PAGE>

        "SEC" means the U.S. Securities and Exchange Commission.

        "SHARES" means the shares of Common Stock issued pursuant to the
Purchase Agreement.

        "1933 ACT" means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.

        "1934 ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.

        "WARRANTS" means, collectively (i) the Series A warrants to purchase
shares of Common Stock issued to the Investors pursuant to the Purchase
Agreement, the form of which is attached to the Purchase Agreement as Exhibit A,
and (ii) the Series B warrants to purchase shares of Common Stock issued to the
Investors pursuant to the Purchase Agreement, the form of which is attached to
the Purchase Agreement as Exhibit B.

        "WARRANT SHARES" means the shares of Common Stock issuable upon the
exercise of the Warrants.

        2.      REGISTRATION.

                        (a)     REGISTRATION STATEMENTS.

                        (i)     Promptly following the closing of the purchase
and sale of the securities contemplated by the Purchase Agreement (the "Closing
Date") but no later than sixty (60) days after the Closing Date, the Company
shall prepare and file with the SEC one Registration Statement on Form S-1 or
Form SB-2 (or, if both of such forms are not then available to the Company, on
such form of registration statement as is then available to effect a
registration for resale of the Registrable Securities), covering the resale of
the Registrable Securities in an amount at least equal to the Shares and the
Warrant Shares. Subject to any SEC comments, such Registration Statement shall
include the plan of distribution attached hereto as EXHIBIT A. Such Registration
Statement also shall cover, to the extent allowable under the 1933 Act and the
rules promulgated thereunder (including Rule 416), such indeterminate number of
additional shares of Common Stock resulting from stock splits, stock dividends
or similar transactions with respect to the Registrable Securities. The
Registration Statement (and each amendment or supplement thereto, and each
request for acceleration of effectiveness thereof) shall be provided in
accordance with Section 3(c) to the Investors and their counsel prior to its
filing or other submission.

                        (ii)    ADDITIONAL REGISTRABLE SECURITIES. Upon the
written demand of any Investor following any change in the Warrant Price (as
defined in the Warrant) such that additional shares of Common Stock become
issuable upon the exercise of the Warrants, the Company shall prepare and file
with the SEC one or more Registration Statements on Form S-1 or Form SB-2 (or,
if both of such forms are not then available to the Company, on such form of
registration statement as is then available to effect a registration for resale
of such additional shares of Common Stock (the "Additional Shares")) or amend
the Registration Statement filed pursuant to clause (i) above, if such
Registration Statement has not previously been declared effective, covering the
resale of the Additional Shares, but only to the extent the Additional Shares
are not at the time covered by an effective Registration Statement. Such
Registration Statement also shall cover, to the extent allowable under the 1933
Act and the rules promulgated

                                      -2-
<PAGE>

thereunder (including Rule 416), such indeterminate number of additional shares
of Common Stock resulting from stock splits, stock dividends or similar
transactions with respect to the Additional Shares. The Registration Statement
(and each amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided in accordance with Section 3(c) to the
Investors and their counsel prior to its filing or other submission.

                        (b)     EXPENSES. The Company will pay all expenses
associated with each registration, including filing and printing fees, the
Company's counsel and accounting fees and expenses, costs associated with
clearing the Registrable Securities for sale under applicable state securities
laws, listing fees, but excluding discounts, commissions, fees of underwriters,
selling brokers, dealer managers or similar securities industry professionals
fees and other expenses (including fees and disbursements of counsel to the
Investors) incurred by the Investors in connection with the registration with
respect to the Registrable Securities being sold.

                        (c)     EFFECTIVENESS.

                        (i)     The Company shall use its best efforts to have
the Registration Statement declared effective as soon as practicable. The
Company shall notify the Investors by facsimile or e-mail as promptly as
practicable, and in any event, within twenty-four (24) hours, after any
Registration Statement is declared effective and shall simultaneously provide
the Investors with copies of any related Prospectus to be used in connection
with the sale or other disposition of the securities covered thereby. If a
Registration Statement covering the Registrable Securities is not declared
effective by the SEC prior to July 31, 2006, then the Company will make pro rata
payments to each Investor, as liquidated damages and not as a penalty, in an
amount equal to 1.0% of the portion of Purchase Price (as defined in the
Purchase Agreement) paid by each Investor pursuant to the Purchase Agreement,
for each 30-day period or pro rata for any portion thereof following the date by
which such Registration Statement should have been effective (the "Blackout
Period"); provided, however, that in no event shall the Company be liable for
liquidated damages in excess of 10% of the Purchase Price. Such payments shall
constitute the Investors' exclusive monetary remedy for such events, but shall
not affect the right of the Investors to seek injunctive relief. The amounts
payable as liquidated damages pursuant to this paragraph shall be paid monthly
within three (3) Business Days of the last day of each month following the
commencement of the Blackout Period until the termination of the Blackout
Period. Such payments shall be made to each Investor in cash.

                        (ii)    For not more than twenty (20) consecutive days
or for a total of not more than forty-five (45) days in any twelve (12) month
period, the Company may delay the disclosure of material non-public information
concerning the Company, by suspending the use of any Prospectus included in any
registration contemplated by this Section containing such information, the
disclosure of which at the time is not, in the good faith opinion of the
Company, in the best interests of the Company (an "Allowed Delay"); provided,
however, that the Company may suspend the use of any Prospectus included in any
registration contemplated by this Section, and such suspension shall not be
included in the number of days constituting an Allowed Delay, for a period
commencing on the date that the Company publicly announces its quarterly or
annual earnings and ending on the date that the SEC declares effective a
post-effective amendment to the related Registration Statement including updated
financial statements reflecting such earnings (an "Update Delay). Upon the
occurrence of an Allowed Delay or an

                                      -3-
<PAGE>

Update Delay that the Company shall promptly (a) notify the Investors in writing
of the existence of an Allowed Delay or an Update Delay (but in no event,
without the prior written consent of an Investor, shall the Company disclose to
such Investor any of the facts or circumstances regarding) material non-public
information giving rise to an Allowed Delay, (b) advise the Investors in writing
to cease all sales under the Registration Statement until the end of the Allowed
Delay or Update Delay and (c) use commercially reasonable efforts to terminate
an Allowed Delay or Update Delay as promptly as practicable.

        3.      COMPANY OBLIGATIONS. The Company will use commercially
reasonable efforts to effect the registration of the Registrable Securities in
accordance with the terms hereof, and pursuant thereto the Company will, as
expeditiously as possible:

                        (a)     use commercially reasonable efforts to cause
such Registration Statement to become effective and to remain continuously
effective for a period that will terminate upon the earlier of (i) the date on
which all Registrable Securities covered by such Registration Statement as
amended from time to time, have been sold, and (ii) the date on which all
Registrable Securities covered by such Registration Statement may be sold
pursuant to Rule 144(k) (assuming that all of the Warrants are exercisable on a
cashless basis) (the "Effectiveness Period") and advise the Investors in writing
when the Effectiveness Period has expired;

                        (b)     prepare and file with the SEC such amendments
and post-effective amendments to the Registration Statement and the Prospectus
as may be necessary to keep the Registration Statement effective for the
Effectiveness Period and to comply with the provisions of the 1933 Act and the
1934 Act with respect to the distribution of all of the Registrable Securities
covered thereby;

                        (c)     provide copies to and permit counsel designated
by the Investors to review each Registration Statement and all amendments and
supplements thereto no fewer than three (3) Business Days prior to their filing
with the SEC and not file any document to which such counsel reasonably objects;

                        (d)     furnish to the Investors and their legal counsel
(i) promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company (but not later than two (2) Business Days after
the filing date, receipt date or sending date, as the case may be) one (1) copy
of any Registration Statement and any amendment thereto, each preliminary
prospectus and Prospectus and each amendment or supplement thereto, and (ii)
such number of copies of a Prospectus, including a preliminary prospectus, and
all amendments and supplements thereto and such other documents as each Investor
may reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Investor that are covered by the related Registration
Statement;

                        (e)     use commercially reasonable efforts to (i)
prevent the issuance of any stop order or other suspension of effectiveness and,
(ii) if such order is issued, obtain the withdrawal of any such order at the
earliest possible moment;

                        (f)     prior to any public offering of Registrable
Securities, use commercially reasonable efforts to register or qualify or
cooperate with the Investors and their

                                      -4-
<PAGE>

counsel in connection with the registration or qualification of such Registrable
Securities for offer and sale under the securities or blue sky laws of such
jurisdictions requested by the Investors and do any and all other commercially
reasonable acts or things necessary or advisable to enable the distribution in
such jurisdictions of the Registrable Securities covered by the Registration
Statement; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to (i) qualify to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(f), (ii) subject itself to general taxation in any jurisdiction
where it would not otherwise be so subject but for this Section 3(f), or (iii)
file a general consent to service of process in any such jurisdiction;

                        (g)     use commercially reasonable efforts to cause all
Registrable Securities covered by a Registration Statement to be listed on each
securities exchange, interdealer quotation system or other market on which
similar securities issued by the Company are then listed;

                        (h)     immediately notify the Investors, at any time
prior to the end of the Effectiveness Period, upon discovery that, or upon the
happening of any event as a result of which, the Prospectus includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing, and promptly prepare, file with the
SEC and furnish to such holder a supplement to or an amendment of such
Prospectus as may be necessary so that such Prospectus shall not include 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 not misleading in
light of the circumstances then existing; and

                        (i)     otherwise use commercially reasonable efforts to
comply with all applicable rules and regulations of the SEC under the 1933 Act
and the 1934 Act, including, without limitation, Rule 172 under the 1933 Act,
file any final Prospectus, including any supplement or amendment thereof, with
the SEC pursuant to Rule 424 under the 1933 Act, promptly inform the Investors
in writing if, at any time during the Effectiveness Period, the Company does not
satisfy the conditions specified in Rule 172 and, as a result thereof, the
Investors are required to deliver a Prospectus in connection with any
disposition of Registrable Securities and take such other actions as may be
reasonably necessary to facilitate the registration of the Registrable
Securities hereunder; and make available to its security holders, as soon as
reasonably practicable, but not later than the Availability Date (as defined
below), an earnings statement covering a period of at least twelve (12) months,
beginning after the effective date of each Registration Statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the 1933
Act, including Rule 158 promulgated thereunder (for the purpose of this
subsection 3(i), "Availability Date" means the 45th day following the end of the
fourth fiscal quarter that includes the effective date of such Registration
Statement, except that, if such fourth fiscal quarter is the last quarter of the
Company's fiscal year, "Availability Date" means the 90th day after the end of
such fourth fiscal quarter).

                        (j)     With a view to making available to the Investors
the benefits of Rule 144 (or its successor rule) and any other rule or
regulation of the SEC that may at any time permit the Investors to sell shares
of Common Stock to the public without registration, the Company covenants and
agrees to: (i) make and keep public information available, as those

                                      -5-
<PAGE>

terms are understood and defined in Rule 144, until the earlier of (A) six
months after such date as all of the Registrable Securities may be resold
pursuant to Rule 144(k) or any other rule of similar effect or (B) such date as
all of the Registrable Securities shall have been resold; (ii) file with the SEC
in a timely manner all reports and other documents required of the Company under
the 1934 Act; and (iii) furnish to each Investor upon request, as long as such
Investor owns any Registrable Securities, (A) a written statement by the Company
that it has complied with the reporting requirements of the 1934 Act, (B) a copy
of the Company's most recent Annual Report on Form 10-KSB or Quarterly Report on
Form 10-QSB, and (C) such other information as may be reasonably requested in
order to avail such Investor of any rule or regulation of the SEC that permits
the selling of any such Registrable Securities without registration.

        4.      DUE DILIGENCE REVIEW; INFORMATION. The Company shall make
available, during normal business hours, for inspection and review by the
Investors, advisors to and representatives of the Investors (who may or may not
be affiliated with the Investors and who are reasonably acceptable to the
Company), all financial and other records, all SEC Filings (as defined in the
Purchase Agreement) and other filings with the SEC, and all other corporate
documents and properties of the Company as may be reasonably necessary for the
purpose of such review, and cause the Company's officers, directors and
employees, promptly, to supply all such information reasonably requested by the
Investors or any such representative, advisor or underwriter in connection with
such Registration Statement (including, without limitation, in response to all
questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of the
Registration Statement for the sole purpose of enabling the Investors and such
representatives, advisors and underwriters and their respective accountants and
attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of such Registration Statement.

                The Company shall not disclose material nonpublic information to
the Investors, or to advisors to or representatives of the Investors, unless
prior to disclosure of such information the Company identifies such information
as being material nonpublic information and provides the Investors, such
advisors and representatives with the opportunity to accept or refuse to accept
such material nonpublic information for review and any Investor wishing to
obtain such information enters into an appropriate confidentiality agreement
with the Company with respect thereto.

        5.      OBLIGATIONS OF THE INVESTORS.
                        (a)     Each Investor shall furnish in writing to the

Company such information regarding itself, the Registrable Securities held by it
and the intended method of disposition of the Registrable Securities held by it,
including, without limitation, a completed Selling Stockholder Questionnaire in
the form attached hereto as EXHIBIT B, as shall be reasonably required to effect
the registration of such Registrable Securities and shall execute such documents
in connection with such registration as the Company may reasonably request. At
least five (5) Business Days prior to the first anticipated filing date of any
Registration Statement, the Company shall notify each Investor of the
information the Company requires from such Investor if such Investor elects to
have any of the Registrable Securities included in the Registration Statement.
An Investor shall provide such information to the Company at least three (3)
Business Days prior to the first anticipated filing date of such Registration
Statement if

                                      -6-
<PAGE>

such Investor elects to have any of the Registrable Securities included in the
Registration Statement. The Company shall not have any obligation hereunder with
respect to Registrable Securities held by an Investor that does not comply with
the terms and conditions of this Agreement.

                        (b)     Each Investor, by its acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of a
Registration Statement hereunder, unless such Investor has notified the Company
in writing of its election to exclude all of its Registrable Securities from
such Registration Statement.

                        (c)     Each Investor agrees that, upon receipt of any
notice from the Company of either (i) the commencement of an Allowed Delay or an
Update Delay pursuant to Section 2(c)(ii) or (ii) the happening of an event
pursuant to Section 3(h) hereof, such Investor will immediately discontinue
disposition of Registrable Securities pursuant to the Registration Statement
covering such Registrable Securities, until the Investor is advised by the
Company that such dispositions may again be made.

        6.      INDEMNIFICATION.

                        (a)     INDEMNIFICATION BY THE COMPANY. The Company will
indemnify and hold harmless each Investor and its officers, directors, members,
employees and agents, successors and assigns, and each other person, if any, who
controls such Investor within the meaning of the 1933 Act, against any losses,
claims, damages or liabilities, joint or several, to which they may become
subject under the 1933 Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of any material fact
contained in any Registration Statement, any preliminary Prospectus or final
Prospectus, or any amendment or supplement thereof; (ii) any blue sky
application or other document executed by the Company specifically for that
purpose or based upon written information furnished by the Company filed in any
state or other jurisdiction in order to qualify any or all of the Registrable
Securities under the securities laws thereof (any such application, document or
information herein called a "Blue Sky Application"); (iii) the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading; (iv) any violation
by the Company or its agents of any rule or regulation promulgated under the
1933 Act applicable to the Company or its agents and relating to action or
inaction required of the Company in connection with such registration; or (v)
any failure to register or qualify the Registrable Securities included in any
such Registration in any state where the Company or its agents has affirmatively
undertaken or agreed in writing that the Company will undertake such
registration or qualification on an Investor's behalf and will reimburse such
Investor, and each such officer, director or member and each such controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; PROVIDED, HOWEVER, that the Company will not be liable in any such case
if and to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission so made in conformity with information furnished by such
Investor or any such controlling person in writing specifically for use in such
Registration Statement or Prospectus.

                                      -7-
<PAGE>

                        (b)     INDEMNIFICATION BY THE INVESTORS. Each Investor
agrees, severally but not jointly, to indemnify and hold harmless, to the
fullest extent permitted by law, the Company, its directors, officers,
employees, stockholders and each person who controls the Company (within the
meaning of the 1933 Act) against any losses, claims, damages, liabilities and
expense (including reasonable attorney fees) resulting from (i) any breach of
the terms hereof by such Investor, (ii) any violation by such Investor or its
agents of any rule or regulation promulgated under the 1933 Act applicable to
the Investor or its agents and relating to the sale or other disposition of such
Investor's Registrable Securities, or (iii) any untrue statement of a material
fact or any omission of a material fact required to be stated in the
Registration Statement or Prospectus or preliminary Prospectus or amendment or
supplement thereto or necessary to make the statements therein not misleading,
to the extent, but only to the extent that such untrue statement or omission is
contained in any information furnished in writing by such Investor to the
Company specifically for inclusion in such Registration Statement or Prospectus
or amendment or supplement thereto. In no event shall the liability of an
Investor be greater in amount than the dollar amount of the proceeds (net of all
expense paid by such Investor in connection with any claim relating to this
Section 6 and the amount of any damages such Investor has otherwise been
required to pay by reason of such untrue statement or omission) received by such
Investor upon the sale of the Registrable Securities included in the
Registration Statement giving rise to such indemnification obligation.

                        (c)     CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any
person entitled to indemnification hereunder shall (i) give prompt notice to the
indemnifying party of any claim with respect to which it seeks indemnification
and (ii) permit such indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified party; PROVIDED that any
person entitled to indemnification hereunder shall have the right to employ
separate counsel and to participate in the defense of such claim, but the fees
and expenses of such counsel shall be at the expense of such person unless (a)
the indemnifying party has agreed to pay such fees or expenses, or (b) the
indemnifying party shall have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such person or (c) in the reasonable
judgment of any such person, based upon written advice of its counsel, a
conflict of interest exists between such person and the indemnifying party with
respect to such claims (in which case, if the person notifies the indemnifying
party in writing that such person elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such claim on behalf of such person); and
PROVIDED, FURTHER, that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its obligations
hereunder, except to the extent that such failure to give notice shall
materially adversely affect the indemnifying party in the defense of any such
claim or litigation. It is understood that the indemnifying party shall not, in
connection with any proceeding in the same jurisdiction, be liable for fees or
expenses of more than one separate firm of attorneys at any time for all such
indemnified parties. No indemnifying party will, except with the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect of such claim or litigation.

                        (d)     CONTRIBUTION. If for any reason the
indemnification provided for in the preceding paragraphs (a) and (b) is
unavailable to an indemnified party or insufficient to hold

                                      -8-
<PAGE>

it harmless, other than as expressly specified therein, then the indemnifying
party shall contribute to the amount paid or payable by the indemnified party as
a result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect the relative fault of the indemnified party and the
indemnifying party, as well as any other relevant equitable considerations. No
person guilty of fraudulent misrepresentation within the meaning of Section
11(f) of the 1933 Act shall be entitled to contribution from any person not
guilty of such fraudulent misrepresentation. In no event shall the contribution
obligation of a holder of Registrable Securities be greater in amount than the
dollar amount of the proceeds (net of all expenses paid by such holder in
connection with any claim relating to this Section 6 and the amount of any
damages such holder has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission) received by it upon
the sale of the Registrable Securities giving rise to such contribution
obligation.

        7.      MISCELLANEOUS.

                        (a)     AMENDMENTS AND WAIVERS. This Agreement may be
amended only by a writing signed by the Company and the Required Investors. The
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the Required
Investors.

                        (b)     NOTICES. All notices and other communications
provided for or permitted hereunder shall be made as set forth in Section 9.4 of
the Purchase Agreement.

                        (c)     ASSIGNMENTS AND TRANSFERS BY INVESTORS. The
provisions of this Agreement shall be binding upon and inure to the benefit of
the Investors and their respective successors and assigns. An Investor may
transfer or assign, in whole or from time to time in part, to one or more
persons its rights hereunder in connection with the transfer of Registrable
Securities by such Investor to such person, provided that such Investor complies
with all laws applicable thereto and provides written notice of assignment to
the Company promptly after such assignment is effected.

                        (d)     ASSIGNMENTS AND TRANSFERS BY THE COMPANY. This
Agreement may not be assigned by the Company (whether by operation of law or
otherwise) without the prior written consent of the Required Investors,
provided, however, that the Company may assign its rights and delegate its
duties hereunder to any surviving or successor corporation in connection with a
merger or consolidation of the Company with another corporation, or a sale,
transfer or other disposition of all or substantially all of the Company's
assets to another corporation, without the prior written consent of the Required
Investors, after notice duly given by the Company to each Investor.

                        (e)     BENEFITS OF THE AGREEMENT. The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective permitted successors and assigns of the parties. Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.

                                      -9-
<PAGE>

                        (f)     COUNTERPARTS; FAXES. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument. This
Agreement may also be executed via facsimile, which shall be deemed an original.

                        (g)     TITLES AND SUBTITLES. The titles and subtitles
used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.

                        (h)     SEVERABILITY. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof but shall
be interpreted as if it were written so as to be enforceable to the maximum
extent permitted by applicable law, and any such prohibition or unenforceability
in any jurisdiction shall not invalidate or render unenforceable such provision
in any other jurisdiction. To the extent permitted by applicable law, the
parties hereby waive any provision of law which renders any provisions hereof
prohibited or unenforceable in any respect.

                        (i)     FURTHER ASSURANCES. The parties shall execute
and deliver all such further instruments and documents and take all such other
actions as may reasonably be required to carry out the transactions contemplated
hereby and to evidence the fulfillment of the agreements herein contained.

                        (j)     ENTIRE AGREEMENT. This Agreement is intended by
the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.

                        (k)     GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER
OF JURY TRIAL. This Agreement shall be governed by, and construed in accordance
with, the internal laws of the State of New York without regard to the choice of
law principles thereof. Each of the parties hereto irrevocably submits to the
exclusive jurisdiction of the courts of the State of New York located in New
York County and the United States District Court for the Southern District of
New York for the purpose of any suit, action, proceeding or judgment relating to
or arising out of this Agreement and the transactions contemplated hereby.
Service of process in connection with any such suit, action or proceeding may be
served on each party hereto anywhere in the world by the same methods as are
specified for the giving of notices under this Agreement. Each of the parties
hereto irrevocably consents to the jurisdiction of any such court in any such
suit, action or proceeding and to the laying of venue in such court. Each party
hereto irrevocably waives any objection to the laying of venue of any such suit,
action or proceeding brought in such courts and irrevocably waives any claim
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO
REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND
REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

                                      -10-
<PAGE>

        IN WITNESS WHEREOF, the parties have executed this Agreement or caused
their duly authorized officers to execute this Agreement as of the date first
above written.

The Company:                          NARROWSTEP INC.

                                      By: /s/ Steve Crowther
                                         ---------------------------------------
                                      Name: Steve Crowther
                                      Title: Senior Vice President and Chief
                                             Financial Officer

                                      -11-
<PAGE>

                                      Richard Molinsky
                                      ------------------------------------------
                                            (Name of Investor)

                                      By: /s/
                                         ---------------------------------------
                                      Name: Richard Molinsky
                                      Title:

                                      -12-
<PAGE>

                             WBBS SA
                             ---------------------------------------------------
                                   (Name of Investor)

                             By: /s/
                                ------------------------------------------------
                             Name:    Sylvain Perret       Dominique Curchod
                             Title: Managing Partners, President, Vice President

                                      -13-
<PAGE>

                                      Sano Ventures XII LLC
                                      ------------------------------------------
                                            (Name of Investor)

                                      By: /s/
                                         ---------------------------------------
                                      Name: Stanley Mauss
                                      Title:    CFO

                                      -14-

<PAGE>

                                      Microcapital Fund LP
                                      ------------------------------------------
                                            (Name of Investor)

                                      By: /s/
                                         ---------------------------------------
                                      Name: Chris A. Jarrous
                                      Title:  Senior Vice President

                                      -15-

<PAGE>

                                      MicroCapital Fund Ltd
                                      ------------------------------------------
                                            (Name of Investor)

                                      By: /s/
                                         ---------------------------------------
                                      Name: Chris A. Jarrous
                                      Title: Senior Vice President

                                      -16-

<PAGE>

                                      Roger L. Werner, Jr.
                                      ------------------------------------------
                                            (Name of Investor)

                                      By: /s/
                                         ---------------------------------------
                                      Name: Roger L. Werner, Jr.
                                      Title:

                                      -17-

<PAGE>

                                      SIBEX Capital Fund Inc.
                                      ------------------------------------------
                                            (Name of Investor)

                                      By: /s/
                                         ---------------------------------------
                                      Name: Viacheslav Chebotarevich
                                      Title: President

                                      -18-

<PAGE>

                                      Carolyn R. Wall
                                      ------------------------------------------
                                            (Name of Investor)

                                      By: /s/
                                         ---------------------------------------
                                      Name: Carolyn R. Wall
                                      Title: Investor

                                      -19-

<PAGE>

                                      Granahan McCourt Capital, LLC
                                      ------------------------------------------
                                            (Name of Investor)

                                      By: /s/
                                         ---------------------------------------
                                      Name: David C. McCourt
                                      Title: Chief Executive Officer

                                      -20-

<PAGE>

                                      Andreas F. Schneider
                                      ------------------------------------------
                                            (Name of Investor)

                                      By: /s/
                                         ---------------------------------------
                                      Name: Andreas F. Schneider
                                      Title: Senior Vice President

                                      -21-

<PAGE>

                                      Mr. R. Ledeboer
                                      ------------------------------------------
                                            (Name of Investor)

                                      By: /s/
                                         ---------------------------------------
                                      Name: Mr. R. Ledeboer
                                      Title:

                                      -22-

<PAGE>

                                                                       EXHIBIT A

                              PLAN OF DISTRIBUTION

        The selling stockholders, which as used herein includes donees,
pledgees, transferees or other successors-in-interest selling shares of common
stock or interests in shares of common stock received after the date of this
prospectus from a selling stockholder as a gift, pledge, partnership
distribution or other transfer, may, from time to time, sell, transfer or
otherwise dispose of any or all of their shares of common stock or interests in
shares of common stock on any stock exchange, market or trading facility on
which the shares are traded or in private transactions. These dispositions may
be at fixed prices, at prevailing market prices at the time of sale, at prices
related to the prevailing market price, at varying prices determined at the time
of sale, or at negotiated prices.

        The selling stockholders may use any one or more of the following
methods when disposing of shares or interests therein:

        - ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;

        - block trades in which the broker-dealer will attempt to sell the
shares as agent, but may position and resell a portion of the block as principal
to facilitate the transaction;

        - purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;

        - an exchange distribution in accordance with the rules of the
applicable exchange;

        - privately negotiated transactions;

        - short sales effected after the date the registration statement of
which this Prospectus is a part is declared effective by the SEC;

        - through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;

        - broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share; and

        - a combination of any such methods of sale.

        The selling stockholders may, from time to time, pledge or grant a
security interest in some or all of the shares of common stock owned by them
and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell the shares of common stock, from
time to time, under this prospectus, or under an amendment to this prospectus
under Rule 424(b)(3) or other applicable provision of the Securities Act
amending the list of selling stockholders to include the pledgee, transferee or
other successors in interest as

                                      -23-
<PAGE>

selling stockholders under this prospectus. The selling stockholders also may
transfer the shares of common stock in other circumstances, in which case the
transferees, pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus.

        In connection with the sale of our common stock or interests therein,
the selling stockholders may enter into hedging transactions with broker-dealers
or other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume. The selling
stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The selling
stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).

        The aggregate proceeds to the selling stockholders from the sale of the
common stock offered by them will be the purchase price of the common stock less
discounts or commissions, if any. Each of the selling stockholders reserves the
right to accept and, together with their agents from time to time, to reject, in
whole or in part, any proposed purchase of common stock to be made directly or
through agents. We will not receive any of the proceeds from this offering. Upon
any exercise of the warrants by payment of cash, however, we will receive the
exercise price of the warrants.

        The selling stockholders also may resell all or a portion of the shares
in open market transactions in reliance upon Rule 144 under the Securities Act
of 1933, provided that they meet the criteria and conform to the requirements of
that rule.

        The selling stockholders and any underwriters, broker-dealers or agents
that participate in the sale of the common stock or interests therein may be
"underwriters" within the meaning of Section 2(11) of the Securities Act. Any
discounts, commissions, concessions or profit they earn on any resale of the
shares may be underwriting discounts and commissions under the Securities Act.
Selling stockholders who are "underwriters" within the meaning of Section 2(11)
of the Securities Act will be subject to the prospectus delivery requirements of
the Securities Act.

        To the extent required, the shares of our common stock to be sold, the
names of the selling stockholders, the respective purchase prices and public
offering prices, the names of any agents, dealer or underwriter, any applicable
commissions or discounts with respect to a particular offer will be set forth in
an accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this prospectus.

        In order to comply with the securities laws of some states, if
applicable, the common stock may be sold in these jurisdictions only through
registered or licensed brokers or dealers. In addition, in some states the
common stock may not be sold unless it has been registered or qualified for sale
or an exemption from registration or qualification requirements is available and
is complied with.

                                      -24-
<PAGE>

        We have advised the selling stockholders that the anti-manipulation
rules of Regulation M under the Exchange Act may apply to sales of shares in the
market and to the activities of the selling stockholders and their affiliates.
In addition, to the extent applicable we will make copies of this prospectus (as
it may be supplemented or amended from time to time) available to the selling
stockholders for the purpose of satisfying the prospectus delivery requirements
of the Securities Act. The selling stockholders may indemnify any broker-dealer
that participates in transactions involving the sale of the shares against
certain liabilities, including liabilities arising under the Securities Act.

        We have agreed to indemnify the selling stockholders against
liabilities, including liabilities under the Securities Act and state securities
laws, relating to the registration of the shares offered by this prospectus.

        We have agreed with the selling stockholders to keep the registration
statement of which this prospectus constitutes a part effective until the
earlier of (1) such time as all of the shares covered by this prospectus have
been disposed of pursuant to and in accordance with the registration statement
or (2) the date on which the shares may be sold pursuant to Rule 144(k) of the
Securities Act.

                                      -25-

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