Document:

PRIME COMPANIES, INC.

                              INVESTMENT AGREEMENT

         THE  SECURITIES  OFFERED  HEREBY  HAVE  NOT  BEEN  REGISTERED  WITH THE
         SECURITIES  AND EXCHANGE  COMMISSION  OR ANY STATE OR OTHER  SECURITIES
         AUTHORITIES.  THEY MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN
         EFFECTIVE  REGISTRATION STATEMENT OR AN EXEMPTION FROM THE REGISTRATION
         REQUIREMENTS OF THE FEDERAL AND STATE SECURITIES LAWS.

         THIS  INVESTMENT  AGREEMENT  DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
         SOLICITATION OF AN OFFER TO PURCHASE,  ANY OF THE SECURITIES  DESCRIBED
         HEREIN BY OR TO ANY PERSON IN ANY  JURISDICTION  IN WHICH SUCH OFFER OR
         SOLICITATION  WOULD  BE  UNLAWFUL.   THESE  SECURITIES  HAVE  NOT  BEEN
         RECOMMENDED BY ANY FEDERAL OR STATE  SECURITIES  AUTHORITIES,  NOR HAVE
         SUCH  AUTHORITIES  CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF
         THIS  DOCUMENT.  ANY  REPRESENTATION  TO  THE  CONTRARY  IS A  CRIMINAL
         OFFENSE.

         AN INVESTMENT IN THESE  SECURITIES  INVOLVES A HIGH DEGREE OF RISK. THE
         INVESTOR MUST RELY ON ITS OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT
         OF THE RISKS  INVOLVED.  SEE THE RISK FACTORS SET FORTH IN THE ATTACHED
         DISCLOSURE DOCUMENTS AS EXHIBIT J.

         SEE ADDITIONAL LEGENDS AT SECTIONS 4.7.

                  THIS  INVESTMENT  AGREEMENT  (this  "Agreement" or "Investment
Agreement")  is made as of the 3rd day of October,  2000,  by and between  Prime
Companies, Inc., a corporation duly organized and existing under the laws of the
State of Delaware (the "Company"),  and the undersigned  Investor executing this
Agreement ("Investor").

                                    RECITALS:

         WHEREAS,  the parties  desire  that,  upon the terms and subject to the
conditions  contained herein,  the Company shall issue to the Investor,  and the
Investor shall purchase from the Company,  from time to time as provided herein,
shares of the Company's  Common Stock, as part of an offering of Common Stock by
the  Company to  Investor,  for a maximum  aggregate  offering  amount of Thirty
Million Dollars ($30,000,000) (the "Maximum Offering Amount"); and

         WHEREAS, the solicitation of this Investment Agreement and, if accepted
by the  Company,  the offer  and sale of the  Common  Stock  are  being  made in
reliance upon the provisions of Regulation D ("Regulation D") promulgated  under
the Act,  Section  4(2) of the Act,  and/or upon such other  exemption  from the
registration  requirements of the Act as may be available with respect to any or
all of the purchases of Common Stock to be made hereunder.

                                     TERMS:

         NOW, THEREFORE, the parties hereto agree as follows:

     1. Certain  Definitions.  As used in this Agreement (including the recitals
above),  the following terms shall have the following meanings (such meanings to
be  equally  applicable  to both the  singular  and  plural  forms of the  terms
defined):

     "20% Approval" shall have the meaning set forth in Section 5.25.

     "9.9% Limitation" shall have the meaning set forth in Section 2.3.1(f).

     "Accredited Investor" shall have the meaning set forth in Section 3.1.

     "Act" shall mean the Securities Act of 1933, as amended.

     "Additional  Warrant"  shall  have the  meaning  set  forth in the  Warrant
Antidilution Agreement.

     "Advance Put Notice" shall have the meaning set forth in Section  2.3.1(a),
the form of which is attached hereto as Exhibit E.

     "Advance  Put  Notice  Confirmation"  shall have the  meaning  set forth in
Section 2.3.1(a), the form of which is attached hereto as Exhibit F.

     "Advance  Put  Notice  Date"  shall have the  meaning  set forth in Section
2.3.1(a).

     "Affiliate" shall have the meaning as set forth Section 6.4.

     "Aggregate  Issued Shares" equals the aggregate  number of shares of Common
Stock  issued  to  Investor  pursuant  to the  terms  of this  Agreement  or the
Registration  Rights  Agreement  as of a given  date,  including  Put Shares and
Warrant Shares.

     "Agreed Upon Procedures Report" shall have the meaning set forth in Section
2.5.3(b).

     "Agreement" shall mean this Investment Agreement.

     "Automatic Termination" shall have the meaning set forth in Section 2.3.2.

     "Bring  Down Cold  Comfort  Letters"  shall have the  meaning  set forth in
Section 2.3.6(b).

     "Business Day" shall mean any day during which the Principal Market is open
for trading.
<PAGE>

     "Calendar Month" shall mean the period of time beginning on the numeric day
in question in a calendar month and for Calendar Months thereafter, beginning on
the earlier of (i) the same numeric day of the next  calendar  month or (ii) the
last day of the next calendar  month.  Each Calendar  Month shall end on the day
immediately preceding the beginning of the next succeeding Calendar Month.

     "Cap Amount" shall have the meaning set forth in Section 2.3.10.

     "Capital Raising  Limitations"  shall have the meaning set forth in Section
6.5.1.

     "Capitalization  Schedule"  shall  have the  meaning  set forth in  Section
3.2.4, attached hereto as Exhibit K.

     "Change in Control"  shall have the meaning set forth within the definition
of Major Transaction, below.

     "Closing" shall mean one of (i) the Investment  Commitment Closing and (ii)
each closing of a purchase and sale of Common Stock pursuant to Section 2.

         "Closing Bid Price"  means,  for any security as of any date,  the last
inside closing bid price (as reported by Bloomberg L.P) for such security during
Normal Trading on the O.T.C. Bulletin Board, or, if the O.T.C. Bulletin Board is
not the principal  securities exchange or trading market for such security,  the
last closing bid price during  Normal  Trading of such security on the principal
securities exchange or trading market where such security is listed or traded as
reported by such  principal  securities  exchange or trading  market,  or if the
foregoing do not apply, the last closing bid price during Normal Trading of such
security in the  over-the-counter  market on the  electronic  bulletin board for
such security,  or, if no closing bid price is reported for such  security,  the
average of the bid prices of any market  makers for such security as reported in
the "pink  sheets" by the  National  Quotation  Bureau,  Inc. If the Closing Bid
Price  cannot  be  calculated  for  such  security  on  such  date on any of the
foregoing  bases,  the Closing Bid Price of such  security on such date shall be
the fair market value as mutually  determined by the Company and the Investor in
this  Offering.  If the Company and the Investor in this  Offering are unable to
agree upon the fair market value of the Common Stock, then such dispute shall be
resolved by an investment  banking firm  mutually  acceptable to the Company and
the Investor in this offering and any fees and costs associated  therewith shall
be paid by the Company.

     "Commitment  Evaluation Period" shall have the meaning set forth in Section
2.6.

     "Commitment  Warrants"  shall have the meaning set forth in Section  2.4.1,
the form of which is attached hereto as Exhibit U.

     "Commitment  Warrant  Exercise  Price"  shall have the meaning set forth in
Section 2.4.1.

     "Common Shares" shall mean the shares of Common Stock of the Company.

     "Common Stock" shall mean the common stock of the Company.
<PAGE>

     "Company" shall mean Prime  Companies,  Inc., a corporation  duly organized
and existing under the laws of the State of Delaware.

     "Company  Designated  Maximum Put Dollar Amount" shall have the meaning set
forth in Section 2.3.1(a).

     "Company  Designated  Minimum Put Share  Price"  shall have the meaning set
forth in Section 2.3.1(a).

     "Company Termination" shall have the meaning set forth in Section 2.3.12.

     "Conditions to Investor's  Obligations" shall have the meaning as set forth
in Section 2.2.2.

     "Delisting  Event"  shall mean any time during the term of this  Investment
Agreement,  that the  Company's  Common  Stock is not  listed  for and  actively
trading on the O.T.C.  Bulletin Board,  the Nasdaq Small Cap Market,  the Nasdaq
National Market, the American Stock Exchange,  or the New York Stock Exchange or
is  suspended  or delisted  with  respect to the trading of the shares of Common
Stock on such market or exchange.

     "Disclosure  Documents"  shall  have the  meaning  as set forth in  Section
3.2.4.

     "Due Diligence Review" shall have the meaning as set forth in Section 2.5.

     "Effective Date" shall have the meaning set forth in Section 2.3.1.

     "Equity Securities" shall have the meaning set forth in Section 6.5.1.

     "Evaluation Day" shall have the meaning set forth in Section 2.3.1(b).

     "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

     "Excluded Day" shall have the meaning set forth in Section 2.3.1(b).

     "Extended Put Period" shall mean the period of time between the Advance Put
Notice Date until the Pricing Period End Date.

     "Impermissible  Put  Cancellation"  shall  have the  meaning  set  forth in
Section 2.3.1(e).

     "Indemnified Liabilities" shall have the meaning set forth in Section 9.

     "Indemnities" shall have the meaning set forth in Section 9.

     "Indemnitor" shall have the meaning set forth in Section 9.
<PAGE>

     "Individual  Put Limit"  shall have the meaning set forth in Section  2.3.1
(b).

     "Ineffective Period" shall have the meaning given to it in the Registration
Rights Agreement.

     "Ineffective  Registration  Payment"  shall have the meaning given to it in
the Registration Rights Agreement.

     "Intended  Put Share  Amount"  shall have the  meaning set forth in Section
2.3.1(a).

     "Investment Commitment Closing" shall have the meaning set forth in Section
2.2.1.

     "Investment Agreement" shall mean this Investment Agreement.

     "Investment  Commitment  Opinion of  Counsel"  shall  mean an opinion  from
Company's independent counsel,  substantially in the form attached as Exhibit B,
or  such  other  form  as  agreed  upon  by the  parties,  as to the  Investment
Commitment Closing.

     "Investment Date" shall mean the date of the Investment Commitment Closing.

     "Investor" shall have the meaning set forth in the preamble hereto.

     "Key  Employee"  shall have the meaning set forth in Section  5.17,  as set
forth in Exhibit N.

     "Late Payment Amount" shall have the meaning set forth in Section 2.3.8.

     "Legend" shall have the meaning set forth in Section 4.7.

     "Lookback  Volume  Limitation"  shall have the meaning set forth in Section
2.3.1(b).

     "Major Transaction" shall mean and shall be deemed to have occurred at such
time upon any of the following events:

          (i) a consolidation,  merger or other business combination or event or
     transaction  following  which the  holders of Common  Stock of the  Company
     immediately  preceding  such  consolidation,  merger,  combination or event
     either (i) no longer hold a majority  of the shares of Common  Stock of the
     Company or (ii) no longer have the ability to elect the board of  directors
     of the Company (a "Change of Control");

          (ii) the sale or transfer of a portion of the Company's  assets not in
     the ordinary course of business;

          (iii) the purchase of assets by the Company not in the ordinary course
     of business;

or

          (iv) a  purchase,  tender or  exchange  offer  made to the  holders of
     outstanding shares of Common Stock.
<PAGE>

     "Market  Price"  shall  equal the lowest  Closing  Bid Price for the Common
Stock on the Principal Market during the Pricing Period for the applicable Put.

     "Material Facts" shall have the meaning set forth in Section 2.3.6(a).

     "Maximum  Put  Dollar  Amount"  shall  mean the  lesser of (i) the  Company
Designated  Maximum Put Dollar Amount, if any, specified by the Company in a Put
Notice, and (ii) $2 million.

     "Maximum  Offering  Amount"  shall mean have the  meaning  set forth in the
recitals hereto.

     "NASD" shall have the meaning set forth in Section 6.9.

     "Nasdaq 20% Rule" shall have the meaning set forth in Section 2.3.10.

     "Normal  Trading"  shall mean trading that occurs  between 9:30 AM and 4:00
PM, New York City Time, on any Business Day, and shall expressly  exclude "after
hours" trading.

     "Numeric Day" shall mean the  numerical day of the month of the  Investment
Date or the last day of the calendar month in question, whichever is less.

     "NYSE" shall have the meaning set forth in Section 6.9.

     "Offering"  shall mean the Company's  offering of Common Stock and Warrants
issued under this Investment Agreement.

     "Officer's  Certificate" shall mean a certificate,  signed by an officer of
the  Company,  to the effect  that the  representations  and  warranties  of the
Company in this  Agreement  required to be true for the  applicable  Closing are
true  and  correct  in all  material  respects  and  all of the  conditions  and
limitations  set  forth  in  this  Agreement  for  the  applicable  Closing  are
satisfied.

     "Opinion of Counsel" shall mean, as applicable,  the Investment  Commitment
Opinion of Counsel, the Put Opinion of Counsel, and the Registration Opinion.

     "Payment Due Date" shall have the meaning set forth in Section 2.3.8.

     "Pricing Period" shall mean, unless otherwise  shortened under the terms of
this Agreement,  the period beginning on the Business Day immediately  following
the Put Date and  ending on and  including  the date which is 20  Business  Days
after such Put Date.

     "Pricing  Period End Date" shall mean the last  Business Day of any Pricing
Period.

     "Principal  Market" shall mean the O.T.C.  Bulletin Board, the Nasdaq Small
Cap Market,  the Nasdaq National Market,  the American Stock Exchange or the New
York Stock Exchange,  whichever is at the time the principal trading exchange or
market for the Common Stock.

     "Proceeding" shall have the meaning as set forth Section 5.1.
<PAGE>

     "Purchase" shall have the meaning set forth in Section 2.3.7.

     "Purchase  Warrant  Exercise  Price"  shall have the  meaning  set forth in
Section 2.4.2.

     "Purchase  Warrants" shall have the meaning set forth in Section 2.4.2, the
form of which is attached hereto as Exhibit D.

     "Put" shall have the meaning set forth in Section 2.3.1(d).

     "Put Cancellation" shall have the meaning set forth in Section 2.3.11(a).

     "Put  Cancellation  Date"  shall  have the  meaning  set  forth in  Section
2.3.11(a).

     "Put  Cancellation  Notice"  shall  have the  meaning  set forth in Section
2.3.11(a), the form of which is attached hereto as Exhibit Q.

     "Put Cancellation Notice  Confirmation" shall have the meaning set forth in
Section 2.3.11(c), the form of which is attached hereto as Exhibit S.

     "Put Closing" shall have the meaning set forth in Section 2.3.8.

     "Put Closing Date" shall have the meaning set forth in Section 2.3.8.

     "Put Date" shall mean the date that is  specified by the Company in any Put
Notice for which the  Company  intends to  exercise a Put under  Section  2.3.1,
unless the Put Date is postponed pursuant to the terms hereof, in which case the
"Put Date" is such postponed date.

     "Put Dollar Amount" shall be determined by multiplying the Put Share Amount
by the respective  Put Share Prices with respect to such Put Shares,  subject to
the limitations herein.

     "Put Notice" shall have the meaning set forth in Section 2.3.1(d), the form
of which is attached hereto as Exhibit G.

     "Put  Notice  Confirmation"  shall  have the  meaning  set forth in Section
2.3.1(d), the form of which is attached hereto as Exhibit H.

     "Put Opinion of Counsel" shall mean an opinion from  Company's  independent
counsel, in the form attached as Exhibit I, or such other form as agreed upon by
the parties, as to any Put Closing.

     "Put Share Amount" shall have the meaning as set forth Section 2.3.1(b).

     "Put Share Price" shall have the meaning set forth in Section 2.3.1(c).

     "Put Shares"  shall mean shares of Common  Stock that are  purchased by the
Investor pursuant to a Put.
<PAGE>

     "Registrable  Securities"  shall  have  the  meaning  as set  forth  in the
Registration Rights Agreement.

     "Registration  Opinion"  shall  have  the  meaning  set  forth  in  Section
2.3.6(a), the form of which is attached hereto as Exhibit R.

     "Registration Opinion Deadline" shall have the meaning set forth in Section
2.3.6(a).

     "Registration Rights Agreement" shall mean that certain registration rights
agreement entered into by the Company and Investor on even date herewith, in the
form  attached  hereto as Exhibit  A, or such  other form as agreed  upon by the
parties.

     "Registration  Statement"  shall  have  the  meaning  as set  forth  in the
Registration Rights Agreement.

     "Regulation D" shall have the meaning set forth in the recitals hereto.

     "Reporting Issuer" shall have the meaning set forth in Section 6.2.

     "Restrictive Legend" shall have the meaning set forth in Section 4.7.

     "Required Put Documents" shall have the meaning set forth in Section 2.3.5.

     "Right of First Refusal" shall have the meaning set forth in Section 6.5.2.

     "Risk Factors" shall have the meaning set forth in Section 3.2.4,  attached
hereto as Exhibit J.

     "Schedule of Exceptions" shall have the meaning set forth in Section 5, and
is attached hereto as Exhibit C.

     "SEC" shall mean the Securities and Exchange Commission.

     "Securities" shall mean this Investment Agreement, together with the Common
Stock of the Company,  the Warrants and the Warrant Shares issuable  pursuant to
this Investment Agreement.

     "Semi-Annual  Non-Usage  Fee" shall have the  meaning  set forth in Section
2.6.

     "Share Authorization Increase Approval" shall have the meaning set forth in
Section 5.25.

     "Stockholder  20%  Approval"  shall have the  meaning  set forth in Section
6.11.

     "Supplemental  Registration  Statement" shall have the meaning set forth in
the Registration Rights Agreement.
<PAGE>

     "Term"  shall mean the term of this  Agreement,  which shall be a period of
time beginning on the date of this Agreement and ending on the Termination Date.

     "Termination Date" shall mean the earlier of (i) the date that is three (3)
years after the  Effective  Date,  or (ii) the date that is thirty (30) Business
Days  after  the  later  of (a) the Put  Closing  Date on  which  the sum of the
aggregate Put Share Price for all Put Shares equal the Maximum  Offering Amount,
(b) the date  that  the  Company  has  delivered  a  Termination  Notice  to the
Investor, (c) the date of an Automatic Termination, and (d) the date that all of
the Warrants have been exercised.

     "Termination Fee" shall have the meaning as set forth in Section 2.6.

     "Termination Notice" shall have the meaning as set forth in Section 2.3.12.

     "Third Party Report" shall have the meaning set forth in Section 3.2.4.

     "Trading  Volume " shall mean the volume of shares of the Company's  Common
Stock  that  trade  between  9:30 AM and 4:00 PM,  New York  City  Time,  on any
Business  Day, and shall  expressly  exclude any shares  trading  during  "after
hours" trading.

     "Transaction Documents" shall have the meaning set forth in Section 9.

     "Transfer Agent" shall have the meaning set forth in Section 6.10.

     "Transfer Agent Instructions" shall mean the Company's  instructions to its
transfer agent,  substantially  in the form attached as Exhibit T, or such other
form as agreed upon by the parties.

     "Trigger Price" shall have the meaning set forth in Section 2.3.1(b).

     "Truncated  Pricing  Period"  shall have the  meaning  set forth in Section
2.3.11(d).

     "Truncated  Put Share  Amount"  shall have the meaning set forth in Section
2.3.11(b).

     "Unlegended  Share  Certificates"  shall mean a certificate or certificates
(or  electronically  delivered  shares,  as appropriate)  (in  denominations  as
instructed  by  Investor)  representing  the shares of Common Stock to which the
Investor is then entitled to receive,  registered in the name of Investor or its
nominee (as instructed by Investor) and not  containing a restrictive  legend or
stop  transfer  order,  including  but not  limited  to the Put  Shares  for the
applicable Put and Warrant Shares.

     "Use of Proceeds  Schedule"  shall have the meaning as set forth in Section
3.2.4, attached hereto as Exhibit L.

     "Volume Limitations" shall have the meaning set forth in Section 2.3.1(b).
<PAGE>

     "Warrant   Antidilution   Agreement"   shall  mean  that  certain   Warrant
Antidilution  Agreement  entered  into by the Company and  Investor on even date
herewith, in the form attached hereto as Exhibit O, or such other form as agreed
upon by the parties.

     "Warrant  Shares"  shall  mean the Common  Stock  issued or  issuable  upon
exercise of the Warrants.

     "Warrants" shall mean the Purchase  Warrants,  the Commitment  Warrants and
the Additional Warrants.

     2. Purchase and Sale of Common Stock.

          2.1 Offer to Subscribe.
              ------------------

          Subject to the terms and conditions herein and the satisfaction of the
     conditions  to closing  set forth in Sections  2.2 and 2.3 below,  Investor
     hereby  agrees to purchase  such amounts of Common  Stock and  accompanying
     Warrants as the Company may, in its sole and absolute discretion, from time
     to time elect to issue and sell to Investor  according  to one or more Puts
     pursuant to Section 2.3 below.

          2.2 Investment Commitment.
              ---------------------

          2.2.1  Investment  Commitment  Closing.  The closing of this Agreement
     (the  "Investment  Commitment  Closing") shall be deemed to occur when this
     Agreement,  the Registration  Rights Agreement,  the Commitment Warrant and
     the Warrant Antidilution  Agreement have been executed by both Investor and
     the Company, the Transfer Agent Instructions have been executed by both the
     Company and the Transfer  Agent,  and the other  Conditions  to  Investor's
     Obligations set forth in Section 2.2.2 below have been met.

          2.2.2 Conditions to Investor's  Obligations.  As a prerequisite to the
     Investment Commitment Closing and the Investor's obligations hereunder, all
     of the following (the  "Conditions to Investor's  Obligations")  shall have
     been satisfied  prior to or concurrently  with the Company's  execution and
     delivery of this Agreement:

               (a)  the  following  documents  shall have been  delivered to the
                    Investor: (i) the Registration Rights Agreement (executed by
                    the Company and Investor),  (ii) the  Investment  Commitment
                    Opinion of Counsel (signed by the Company's counsel),  (iii)
                    the Transfer Agent Instructions (executed by the Company and
                    the Transfer Agent),  and (iv) a Secretary's  Certificate as
                    to (A) the  resolutions of the Company's  board of directors
                    authorizing this transaction,  (B) the Company's Certificate
                    of Incorporation, and (C) the Company's Bylaws;

               (b)  this Investment  Agreement,  accepted by the Company,  shall
                    have been received by the Investor;

               (c)  the  Company's  Common Stock shall be listed for trading and
                    actually  trading on the O.T.C.  Bulletin Board,  the Nasdaq
                    Small Cap Market,  the Nasdaq National Market,  the American
                    Stock Exchange or the New York Stock Exchange;
<PAGE>

               (d)  other than continuing  losses  described in the Risk Factors
                    set  forth  in the  Disclosure  Documents  (provided  for in
                    Section  3.2.4),  as of  the  Closing  there  have  been  no
                    material adverse changes in the Company's business prospects
                    or  financial  condition  since the date of the last balance
                    sheet  included in the Disclosure  Documents,  including but
                    not limited to incurring material liabilities; and

               (e)  the  representations  and  warranties of the Company in this
                    Agreement shall be true and correct in all material respects
                    and the  conditions to Investor's  obligations  set forth in
                    this  Section  2.2.2  shall have been  satisfied  as of such
                    Closing;   and  the  Company   shall  deliver  an  Officer's
                    Certificate,  signed by an officer of the  Company,  to such
                    effect to the Investor.

          2.3 Puts of Common Shares to the Investor.
              --------------------------------------

          2.3.1  Procedure  to  Exercise a Put.  Subject to the  Individual  Put
     Limit, the Maximum Offering Amount and the Cap Amount (if applicable),  and
     the other  conditions and limitations  set forth in this Agreement,  at any
     time beginning on the date on which the Registration  Statement is declared
     effective by the SEC (the "Effective  Date"),  the Company may, in its sole
     and absolute  discretion,  elect to exercise one or more Puts  according to
     the following  procedure,  provided that each subsequent Put Date after the
     first Put Date shall be no sooner than three (3)  Business  Days  following
     the preceding Pricing Period End Date:

               (a)  Delivery of Advance Put  Notice.At  least ten (10)  Business
          Days but not more than twenty (20) Business Days prior to any intended
          Put Date (unless  otherwise  agreed in writing by the  Investor),  the
          Company  shall  deliver  advance  written  notice  (the  "Advance  Put
          Notice,"  the form of which is attached  hereto as Exhibit E, the date
          of such Advance Put Notice  being the  "Advance  Put Notice  Date") to
          Investor stating the Put Date for which the Company shall,  subject to
          the limitations and restrictions contained herein,  exercise a Put and
          stating  the  number  of  shares  of  Common  Stock  (subject  to  the
          Individual  Put Limit and the  Maximum  Put Dollar  Amount)  which the
          Company intends to sell to the Investor for the Put (the "Intended Put
          Share Amount").

               The Company may, at its option, also designate in any Advance Put
          Notice  (i) a maximum  dollar  amount of Common  Stock,  not to exceed
          $2,000,000,  which  it  shall  sell to  Investor  during  the Put (the
          "Company  Designated Maximum Put Dollar Amount") and/or (ii) a minimum
          purchase price per Put Share at which the Investor may purchase shares
          of Common  Stock  pursuant to such Put Notice (a  "Company  Designated
          Minimum Put Share Price").  The Company  Designated  Minimum Put Share
          Price,  if applicable,  shall be no greater than the lesser of (i) 80%
          of the Closing Bid Price of the Company's common stock on the Business
          Day  immediately  preceding  the Advance Put Notice Date,  or (ii) the
          Closing Bid Price of the  Company's  common  stock on the Business Day
          immediately  preceding the Advance Put Notice Date minus  $0.125.  The
          Company may decrease (but not increase) the Company Designated Minimum
          Put Share Price for a Put at any time by giving the  Investor  written
          notice of such decrease not later than 12:00 Noon, New York City time,
          on the Business Day  immediately  preceding the Business Day that such
          decrease  is to take  effect.  A decrease  in the  Company  Designated
          Minimum  Put  Share  Price  shall  have no  retroactive  effect on the
          determination  of Trigger  Prices and Excluded Days for days preceding
          the Business Day that such decrease  takes  effect,  provided that the
          Put Share Price for all shares in a Put shall be calculated  using the
          lowest Company Designated Minimum Put Share Price, as decreased.
<PAGE>

               Notwithstanding  the  above,  if, at the time of  delivery  of an
          Advance  Put  Notice,  more than two (2)  Calendar  Months have passed
          since the date of the previous  Put  Closing,  such Advance Put Notice
          shall  provide  at least  twenty  (20)  Business  Days  notice  of the
          intended Put Date, unless waived in writing by the Investor.  In order
          to effect  delivery of the Advance Put Notice,  the Company  shall (i)
          send the  Advance  Put Notice by  facsimile  on such date so that such
          notice is received by the  Investor by 6:00 p.m.,  New York,  NY time,
          and (ii) surrender such notice on such date to a courier for overnight
          delivery to the  Investor  (or two (2) day  delivery in the case of an
          Investor  residing outside of the U.S.).  Upon receipt by the Investor
          of a facsimile  copy of the Advance Put Notice,  the  Investor  shall,
          within two (2) Business Days,  send, via facsimile,  a confirmation of
          receipt (the "Advance Put Notice  Confirmation,"  the form of which is
          attached hereto as Exhibit F) of the Advance Put Notice to the Company
          specifying that the Advance Put Notice has been received and affirming
          the intended Put Date and the Intended Put Share Amount.

               (b) Put Share  Amount.  The "Put  Share  Amount" is the number of
          shares  of  Common  Stock  that the  Investor  shall be  obligated  to
          purchase  in a given  Put,  and  shall  equal  the  lesser  of (i) the
          Intended Put Share  Amount,  and (ii) the  Individual  Put Limit.  The
          "Individual Put Limit" shall equal the lesser of (A) 1,500,000 shares,
          (B) 15% of the sum of the aggregate daily reported  Trading Volumes in
          the  outstanding  Common  Stock  on the  Company's  Principal  Market,
          excluding  any block trades of 20,000 or more shares of Common  Stock,
          for all Evaluation Days (as defined below) in the Pricing Period,  (C)
          the number of Put Shares which,  when  multiplied by their  respective
          Put Share Prices,  equals the Maximum Put Dollar  Amount,  and (D) the
          9.9% Limitation, but in no event shall the Individual Put Limit exceed
          15% of the sum of the aggregate daily reported  Trading Volumes in the
          outstanding Common Stock on the Company's Principal Market,  excluding
          any block  trades of 20,000 or more  shares of Common  Stock,  for the
          twenty (20) Business Days immediately preceding the Advance Put Notice
          Date (the "Lookback Volume Limitation")(this limitation, together with
          the limitation in (B) immediately  above are collectively  referred to
          herein  as the  "Volume  Limitations").  Company  agrees  not to trade
          Common  Stock or arrange for Common Stock to be traded for the purpose
          of artificially increasing the Volume Limitations. Notwithstanding the
          above,  Block Trades shall not be excluded from the above calculations
          to the extent that the  aggregate  number of shares traded in all such
          Block Trades on a given trading day  constitute  less than ten percent
          (10%) of the total trading volume of all shares traded on that trading
          day.

         For purposes of this Agreement:

     "Trigger  Price" for any Pricing  Period  shall mean the greater of (i) the
Company  Designated  Minimum Put Share Price,  plus $0.075,  or (ii) the Company
Designated Minimum Put Share Price divided by .91.

     An  "Excluded  Day" shall mean each  Business  Day during a Pricing  Period
where the lowest  intra-day  trading  price of the Common Stock is less than the
Trigger Price.
<PAGE>

     An  "Evaluation  Day" shall mean each Business Day during a Pricing  Period
that is not an Excluded Day.

               (c) Put Share Price.  The purchase  price for the Put Shares (the
          "Put Share  Price") shall equal the lesser of (i) the Market Price for
          such Put, minus $0.075,  or (ii) 91% of the Market Price for such Put,
          but shall in no event be less than the Company  Designated Minimum Put
          Share Price for such Put, if applicable.

               (d)  Delivery  of Put  Notice.  After  delivery of an Advance Put
          Notice,  on the Put Date  specified  in the  Advance  Put  Notice  the
          Company  shall deliver  written  notice (the "Put Notice," the form of
          which is attached hereto as Exhibit G) to Investor stating (i) the Put
          Date,  (ii) the  Intended Put Share Amount as specified in the Advance
          Put Notice  (such  exercise  a "Put"),  (iii) the  Company  Designated
          Maximum  Put  Dollar  Amount  (if  applicable),  and (iv) the  Company
          Designated Minimum Put Share Price (if applicable). In order to effect
          delivery of the Put Notice,  the Company shall (i) send the Put Notice
          by  facsimile  on the Put Date so that such  notice is received by the
          Investor by 6:00 p.m.,  New York,  NY time,  and (ii)  surrender  such
          notice  on the Put Date to a courier  for  overnight  delivery  to the
          Investor (or two (2) day delivery in the case of an Investor  residing
          outside of the U.S.). Upon receipt by the Investor of a facsimile copy
          of the Put Notice,  the Investor shall,  within two (2) Business Days,
          send,  via  facsimile,  a  confirmation  of receipt  (the "Put  Notice
          Confirmation,"  the form of which is attached  hereto as Exhibit H) of
          the Put  Notice to  Company  specifying  that the Put  Notice has been
          received and affirming the Put Date and the Intended Put Share Amount.

               (e) Delivery of Required Put Documents. On or before the Put Date
          for such Put, the Company shall deliver the Required Put Documents (as
          defined in Section  2.3.5  below) to the  Investor  (or to an agent of
          Investor,  if Investor so directs).  Unless otherwise specified by the
          Investor,  the  delivery of the Put Shares of Common Stock shall be in
          the form of physical  certificates.  If specifically  requested by the
          Investor, the Put Shares shall be transmitted  electronically pursuant
          to such electronic  delivery system as the Investor shall request.  If
          the Company has not delivered all of the Required Put Documents to the
          Investor  on or before  the Put Date,  the Put shall be  automatically
          cancelled,  unless the Investor  agrees to delay the Put Date by up to
          three (3) Business  Days,  in which case the Pricing  Period begins on
          the Business Day  following  such new Put Date. If the Company has not
          delivered  all of the  Required  Put  Documents  to the Investor on or
          before the Put Date (or new Put Date, if applicable), and the Investor
          has  not  agreed  in  writing  to  delay  the  Put  Date,  the  Put is
          automatically  canceled (an  "Impermissible  Put  Cancellation")  and,
          unless the Put was otherwise  canceled in accordance with the terms of
          Section  2.3.11,  the Company  shall pay the  Investor  $5,000 for its
          reasonable  due diligence  expenses  incurred in  preparation  for the
          canceled Put and the Company may deliver an Advance Put Notice for the
          subsequent  Put no sooner than ten (10)  Business  Days after the date
          that such Put was canceled, unless otherwise agreed by the Investor.

               (f)  Limitation  on  Investor's  Obligation  to Purchase  Shares.
          Notwithstanding  anything  to the  contrary in this  Agreement,  in no
          event shall the Investor be required to purchase,  and an Intended Put
          Share  Amount may not  include,  an amount of Put  Shares,  which when
          added to the number of Put Shares acquired by the Investor pursuant to
          this  Agreement  in any Put or Puts having a Put Closing  Date that is
          forty five (45) or fewer Business Days (not counting any Business days
          during which the Registration  Statement is in an Ineffective  Period)
          preceding the Put Date with respect to which this determination of the
          permitted  Intended Put Share  Amount is being made (the  "Aggregating
          Period"),  would  exceed 9.99% of the number of shares of Common Stock
          outstanding (on a fully diluted basis, to the extent that inclusion of
          unissued shares is mandated by Section 13(d) of the
<PAGE>

          Exchange Act) on the Put Date for such Pricing  Period,  as determined
          in  accordance  with Section  13(d) of the Exchange Act (the  "Section
          13(d)  Outstanding  Share  Amount").  Each Put Notice shall  include a
          representation  of the  Company as to the  Section  13(d)  Outstanding
          Share  Amount on the related  Put Date.  In the event that the Section
          13(d)  Outstanding  Share  Amount is  different  on any date  during a
          Pricing  Period  than on the Put Date  associated  with  such  Pricing
          Period,  then the number of shares of Common Stock outstanding on such
          date  during  such  Pricing   Period  shall  govern  for  purposes  of
          determining  whether the Investor,  when  aggregating all purchases of
          Shares made  pursuant to this  Agreement  in the  Aggregating  Period,
          would have acquired  more than 9.99% of the Section 13(d)  Outstanding
          Share Amount.  The  limitation  set forth in this Section  2.3.1(f) is
          referred to as the "9.9% Limitation."

          2.3.2  Termination of Right to Put. The Company's right to require the
     Investor to purchase any subsequent Put Shares shall terminate  permanently
     (each,  an  "Automatic  Termination")  upon  the  occurrence  of any of the
     following:

               (a) the Company  shall not  exercise a Put or any Put  thereafter
          if, at any time,  either the  Company  or any  director  or  executive
          officer of the Company has engaged in a transaction or conduct related
          to the Company  that has  resulted in (i) a  Securities  and  Exchange
          Commission  enforcement  action,  or (ii) a civil judgment or criminal
          conviction  for fraud or  misrepresentation,  or for any other offense
          that,  if  prosecuted  criminally,  would  constitute  a felony  under
          applicable law;

               (b) the Company  shall not exercise a Put or any Put  thereafter,
          on any date after a cumulative  time period or series of time periods,
          consisting  only of  Ineffective  Periods and Delisting  Events,  that
          lasts for an aggregate of four (4) months;

               (c) the Company shall not exercise a Put or any Put thereafter if
          at any time the  Company  has  filed  for  and/or  is  subject  to any
          bankruptcy,  insolvency,  reorganization or liquidation proceedings or
          other  proceedings  for relief under any bankruptcy law or any law for
          the relief of debtors  instituted  by or  against  the  Company or any
          subsidiary of the Company;

               (d) the Company  shall not exercise a Put after the sooner of (i)
          the date that is three (3) years after the Effective Date, or (ii) the
          Put Closing Date on which the aggregate of the Put Dollar  Amounts for
          all Puts equal the Maximum Offering Amount; and

               (e) the  Company  shall not  exercise a Put after the Company has
          breached any covenant in Section 2.6, Section 6, or Section 9 hereof.

               (f) if no Registration  Statement has been declared  effective by
          the date that is one (1) year  after the date of this  Agreement,  the
          Automatic  Termination  shall  occur on the date  that is one (1) year
          after the date of this Agreement.
<PAGE>

          2.3.3 Put Limitations.  The Company's right to exercise a Put shall be
     limited as follows:

               (a) notwithstanding the amount of any Put, the Investor shall not
          be obligated to purchase any  additional Put Shares once the aggregate
          Put Dollar Amount paid by Investor equals the Maximum Offering Amount;

               (b) the  Investor  shall not be  obligated to acquire and pay for
          the Put  Shares  with  respect  to any Put for which the  Company  has
          announced a subdivision or combination,  including a reverse split, of
          its Common Stock or has subdivided or combined its Common Stock during
          the Extended Put Period;

               (c) the  Investor  shall not be  obligated to acquire and pay for
          the Put Shares with  respect to any Put for which the Company has paid
          a dividend of its Common Stock or has made any other  distribution  of
          its Common Stock during the Extended Put Period;

               (d) the  Investor  shall not be  obligated to acquire and pay for
          the Put Shares with respect to any Put for which the Company has made,
          during the Extended Put Period,  a distribution  of all or any portion
          of its  assets or  evidences  of  indebtedness  to the  holders of its
          Common Stock;

               (e) the  Investor  shall not be  obligated to acquire and pay for
          the Put Shares with  respect to any Put for which a Major  Transaction
          has occurred during the Extended Put Period.

          2.3.3 A Exception for Certain Major Transactions.  Notwithstanding the
     terms of Section  2.3.3(e)  above,  in the event  that,  during an Extended
     Pricing Period, the Company announces a Major Transaction  consisting of an
     acquisition of either (i) assets in the telecommunications  industry having
     a  value   of  less   than   $1,000,000,   or   (ii)  a   Company   in  the
     telecommunications  industry  having gross revenues of less than $1,000,000
     per year, and such  transaction  does not result in an Ineffective  Period,
     the Company may publicly  announce such transaction  during an Extended Put
     Period,  provided  that each  Business Day from and  including  the date of
     public announcement of such transaction through and including the date that
     the Company  delivers to the  Investor an opinion of counsel,  as described
     below (a "Registration  Confirmation Opinion"),  shall be consider to be an
     "Excluded  Day," as that term is used in this  Agreement.  A  "Registration
     Confirmation  Opinion" shall (i) describe the acquisition in question,  and
     (ii) opine that the  Registration  Statement does not need to be amended by
     virtue of the acquisition in question,  and that the Registration Statement
     remains current and effective, and is not in an Ineffective Period.

          2.3.4  Conditions  Precedent to the Right of the Company to Deliver an
     Advance Put Notice or a Put Notice and the  Obligation  of the  Investor to
     Purchase  Put  Shares.  The right of the  Company to deliver an Advance Put
     Notice or a Put Notice and the  obligation  of the  Investor  hereunder  to
     acquire and pay for the Put Shares  incident to a Closing is subject to the
     satisfaction, on (i) the date of delivery of such Advance Put Notice or Put
     Notice and (ii) the  applicable  Put Closing Date, of each of the following
     conditions:
<PAGE>

                  (a)      the  Company's  Common  Stock shall be listed for and
                           actively  trading on the O.T.C.  Bulletin Board,  the
                           Nasdaq Small Cap Market,  the Nasdaq  National Market
                           or the New York  Stock  Exchange  and the Put  Shares
                           shall be so listed,  and to the  Company's  knowledge
                           there is no notice  of any  suspension  or  delisting
                           with  respect to the  trading of the shares of Common
                           Stock on such market or exchange;

                  (b)      the  Company   shall  have   satisfied  any  and  all
                           obligations   pursuant  to  the  Registration  Rights
                           Agreement,  including, but not limited to, the filing
                           of the  Registration  Statement  with  the  SEC  with
                           respect to the resale of all  Registrable  Securities
                           and the requirement that the  Registration  Statement
                           shall have been declared effective by the SEC for the
                           resale of all Registrable  Securities and the Company
                           shall have satisfied and shall be in compliance  with
                           any and all  obligations  pursuant to this  Agreement
                           and the Warrants;

                  (c)      the representations and warranties of the Company are
                           true and correct in all material  respects as if made
                           on  such  date  and  the   conditions  to  Investor's
                           obligations  set  forth  in this  Section  2.3.4  are
                           satisfied as of such  Closing,  and the Company shall
                           deliver a  certificate,  signed by an  officer of the
                           Company, to such effect to the Investor;

                  (d)      the  Company  shall  have  reserved  for  issuance  a
                           sufficient number of Common Shares for the purpose of
                           enabling  the  Company to satisfy any  obligation  to
                           issue Common Shares pursuant to any Put and to effect
                           exercise of the Warrants;

                  (e)      the  Registration  Statement  is  not  subject  to an
                           Ineffective  Period as  defined  in the  Registration
                           Rights Agreement,  the prospectus included therein is
                           current  and   deliverable,   and  to  the  Company's
                           knowledge there is no notice of any  investigation or
                           inquiry concerning any stop order with respect to the
                           Registration Statement;

                  (f)      if the  Aggregate  Issued Shares after the Closing of
                           the Put would  exceed  the Cap  Amount,  the  Company
                           shall have obtained the  Stockholder  20% Approval as
                           specified in Section 6.11,  if the  Company's  Common
                           Stock is listed on the NASDAQ Small Cap Market or the
                           NASDAQ National  Market System (the "NMS"),  and such
                           approval is required by the rules of the NASDAQ;

                  (g)      the Company shall have no knowledge of any event more
                           likely  than not to have the  effect of  causing  any
                           Registration  Statement  to be suspended or otherwise
                           ineffective  (which  event is more likely than not to
                           occur within the thirty  Business Days  following the
                           date on which such  Advance Put Notice and Put Notice
                           is deemed delivered);
<PAGE>

                  (h)      there  is  not  then  in  effect  any  law,  rule  or
                           regulation    prohibiting    or    restricting    the
                           transactions  contemplated  hereby,  or requiring any
                           consent  or  approval   which  shall  not  have  been
                           obtained,  nor is there  any  pending  or  threatened
                           proceeding or investigation which may have the effect
                           of  prohibiting  or  adversely  affecting  any of the
                           transactions contemplated by this Agreement;

                    (i)  no statute, rule, regulation,  executive order, decree,
                         ruling or injunction shall have been enacted,  entered,
                         promulgated  or  adopted  by any court or  governmental
                         authority of competent  jurisdiction that prohibits the
                         transactions  contemplated  by this  Agreement,  and no
                         actions,  suits or  proceedings  shall be in  progress,
                         pending or  threatened  by any person  (other  than the
                         Investor or any affiliate of the  Investor),  that seek
                         to enjoin or prohibit the transactions  contemplated by
                         this Agreement.  For purposes of this paragraph (i), no
                         proceeding shall be deemed pending or threatened unless
                         one  of  the  parties  has  received  written  or  oral
                         notification  thereof prior to the  applicable  Closing
                         Date.

     2.3.5  Documents  Required to be Delivered on the Put Date as Conditions to
Closing of any Put. The Closing of any Put and Investor's  obligations hereunder
shall  additionally be conditioned  upon the delivery to the Investor of each of
the following  (the  "Required Put  Documents")  on or before the applicable Put
Date:

          (a) a number of Unlegended  Share  Certificates  equal to the Intended
     Put Share  Amount,  in  denominations  of not more than  50,000  shares per
     certificate;

          (b)  the  following  documents:  Put  Opinion  of  Counsel,  Officer's
     Certificate, Put Notice, Registration Opinion, and any report or disclosure
     required under Section 2.3.6 or Section 2.5;

          (c) all  documents,  instruments  and other  writings  required  to be
     delivered  on or before  the Put Date  pursuant  to any  provision  of this
     Agreement in order to implement  and effect the  transactions  contemplated
     herein.

           2.3.6  Accountant's Letter and Registration Opinion.

          (a) The Company shall have caused to be delivered to the Investor, (i)
     whenever  required by Section 2.3.6(b) or by Section 2.5.3, and (ii) on the
     date  that is  three  (3)  Business  Days  prior  to  each  Put  Date  (the
     "Registration  Opinion Deadline"),  an opinion of the Company's independent
     counsel,  in  substantially  the  form  of  Exhibit  R  (the  "Registration
     Opinion"),  addressed to the Investor  stating,  inter alia,  that no facts
     ("Material  Facts") have come to such counsel's  attention that have caused
     it to believe that the Registration  Statement is subject to an Ineffective
     Period or to believe  that the  Registration  Statement,  any  Supplemental
     Registration  Statement (as each may be amended,  if  applicable),  and any
     related prospectuses, contain an untrue statement of material fact or omits
     a material fact required to make the statements contained therein, in light
     of the  circumstances  under  which they were made,  not  misleading.  If a
     Registration  Opinion  cannot be  delivered  by the  Company's  independent
     counsel to the  Investor on the  Registration  Opinion  Deadline due to the
     existence of Material  Facts or an  Ineffective  Period,  the Company shall
     promptly  notify the Investor and as promptly as possible amend each of the
<PAGE>

     Registration  Statement and any Supplemental  Registration  Statements,  as
     applicable,  and any related prospectus or cause such Ineffective Period to
     terminate,  as the case may be, and deliver such  Registration  Opinion and
     updated prospectus as soon as possible  thereafter.  If at any time after a
     Put Notice  shall have been  delivered  to Investor  but before the related
     Pricing  Period End Date, the Company  acquires  knowledge of such Material
     Facts or any Ineffective  Period occurs,  the Company shall promptly notify
     the Investor and shall  deliver a Put  Cancellation  Notice to the Investor
     pursuant to Section 2.3.11 by facsimile and overnight courier by the end of
     that Business Day.

          (b) (i) the Company shall engage its  independent  auditors to perform
     the  procedures in accordance  with the provisions of Statement on Auditing
     Standards  No. 71, as  amended,  as agreed to by the  parties  hereto,  and
     reports thereon (the "Bring Down Cold Comfort  Letters") as shall have been
     reasonably  requested  by the Investor  with  respect to certain  financial
     information  contained  in  the  Registration   Statement  and  shall  have
     delivered to the Investor such a report  addressed to the Investor,  on the
     date that is three (3) Business Days prior to each Put Date.

          (ii) in the event that the Investor shall have  requested  delivery of
     an Agreed Upon  Procedures  Report  pursuant to Section 2.5.3,  the Company
     shall  engage its  independent  auditors  to perform  certain  agreed  upon
     procedures  and report thereon as shall have been  reasonably  requested by
     the Investor with respect to certain  financial  information of the Company
     and the  Company  shall  deliver  to the  Investor  a copy  of such  report
     addressed to the  Investor.  In the event that the report  required by this
     Section 2.3.6(b) cannot be delivered by the Company's independent auditors,
     the Company shall, if necessary, promptly revise the Registration Statement
     and the  Company  shall  not  deliver a Put  Notice  until  such  report is
     delivered.

          2.3.7 Investor's  Obligation and Right to Purchase Shares.  Subject to
     the  conditions  set  forth in this  Agreement,  following  the  Investor's
     receipt of a validly  delivered Put Notice,  the Investor shall be required
     to  purchase  (each a  "Purchase")  from the Company a number of Put Shares
     equal to the Put Share Amount, in the manner described below.

          2.3.8  Mechanics of Put Closing.  Each of the Company and the Investor
     shall  deliver  all  documents,  instruments  and  writings  required to be
     delivered by either of them pursuant to this  Agreement at or prior to each
     Closing.  Subject to such delivery and the  satisfaction  of the conditions
     set forth in Sections  2.3.4 and 2.3.5,  the closing of the purchase by the
     Investor of Shares shall occur by 5:00 PM, New York City Time,  on the date
     which is five (5) Business Days following the applicable Pricing Period End
     Date (the "Payment Due Date") at the offices of Investor. On each or before
     each Payment Due Date,  the Investor  shall deliver to the Company,  in the
     manner  specified in Section 8 below,  the Put Dollar Amount to be paid for
     such  Put  Shares,  determined  as  aforesaid.  The  closing  (each  a "Put
     Closing")  for each Put shall  occur on the date that both (i) the  Company
     has  delivered to the Investor  all  Required Put  Documents,  and (ii) the
     Investor has  delivered to the Company such Put Dollar  Amount and any Late
     Payment Amount, if applicable (each a "Put Closing Date").
<PAGE>

          If the Investor  does not deliver to the Company the Put Dollar Amount
     for such Put Closing on or before the Payment Due Date,  then the  Investor
     shall pay to the Company,  in addition to the Put Dollar Amount,  an amount
     (the "Late  Payment  Amount")  at a rate of X% per month,  accruing  daily,
     multiplied by such Put Dollar Amount, where "X" equals one percent (1%) for
     the  first  month  following  the date in  question,  and  increases  by an
     additional  one percent  (1%) for each month that passes  after the date in
     question,  up to a  maximum  of five  percent  (5%)  per  month;  provided,
     however,  that in no event shall the amount of interest  that shall  become
     due and payable  hereunder  exceed the  maximum  amount  permissible  under
     applicable law.

          2.3.9 Limitation on Short Sales. The Investor and its affiliates shall
     not engage in short sales of the Company's Common Stock; provided, however,
     that the Investor may enter into any short exempt sale or any short sale or
     other hedging or similar  arrangement it deems  appropriate with respect to
     Put Shares  after it receives a Put Notice with  respect to such Put Shares
     so long as such sales or  arrangements  do not involve more than the number
     of such Put Shares specified in the Put Notice.

          2.3.10 Cap Amount.  If the Company  becomes listed on the Nasdaq Small
     Cap Market or the Nasdaq  National  Market,  then,  unless the  Company has
     obtained  Stockholder  20%  Approval as set forth in Section 6.11 or unless
     otherwise  permitted  by Nasdaq,  in no event  shall the  Aggregate  Issued
     Shares  exceed  the  maximum  number of shares  of Common  Stock  (the "Cap
     Amount")  that the Company  can,  without  stockholder  approval,  so issue
     pursuant to Nasdaq Rule  4460(i)(1)(d)(ii)  (or any other applicable Nasdaq
     Rules or any successor rule) (the "Nasdaq 20% Rule").

          2.3.11 Put Cancellation.

               (a)  Mechanics  of Put  Cancellation.  If at any  time  during  a
          Pricing  Period the Company  discovers the existence of Material Facts
          or any Ineffective Period or Delisting Event occurs, the Company shall
          cancel the Put (a "Put Cancellation"), by delivering written notice to
          the Investor (the "Put Cancellation  Notice"),  attached as Exhibit Q,
          by facsimile and overnight courier.  The "Put Cancellation Date" shall
          be the date that the Put Cancellation  Notice is first received by the
          Investor, if such notice is received by the Investor by 6:00 p.m., New
          York,  NY time,  and shall be the  following  date,  if such notice is
          received by the Investor after 6:00 p.m., New York, NY time.

               (b) Effect of Put Cancellation. Anytime a Put Cancellation Notice
          is delivered  to Investor  after the Put Date,  the Put,  shall remain
          effective  with respect to a number of Put Shares (the  "Truncated Put
          Share  Amount")  equal to the  Individual  Put Limit for the Truncated
          Pricing Period.

               (c) Put  Cancellation  Notice  Confirmation.  Upon receipt by the
          Investor  of a  facsimile  copy of the Put  Cancellation  Notice,  the
          Investor shall promptly send, via facsimile, a confirmation of receipt
          (the  "Put  Cancellation  Notice  Confirmation,"  a form of  which  is
          attached as Exhibit S) of the Put  Cancellation  Notice to the Company
          specifying  that the Put  Cancellation  Notice has been  received  and
          affirming the Put Cancellation Date.

               (d) Truncated  Pricing Period.  If a Put Cancellation  Notice has
          been  delivered to the Investor after the Put Date, the Pricing Period
          for such Put  shall end at on the  close of  trading  on the last full
          trading day on the  Principal  Market that ends prior to the moment of
          initial  delivery of the Put  Cancellation  Notice to the  Investor (a
          "Truncated Pricing Period").
<PAGE>

          2.3.12 Investment Agreement Cancellation. The Company may terminate (a
     "Company  Termination")  its right to  initiate  future  Puts by  providing
     written  notice  ("Termination  Notice") to the Investor,  by facsimile and
     overnight  courier,  at any time other than during an Extended  Put Period,
     provided that such  termination  shall have no effect on the parties' other
     rights  and  obligations  under this  Agreement,  the  Registration  Rights
     Agreement or the  Warrants.  Notwithstanding  the above,  any  cancellation
     occurring during an Extended Put Period is governed by Section 2.3.11.

          2.3.13 Return of Excess Common Shares. In the event that the number of
     Shares purchased by the Investor  pursuant to its obligations  hereunder is
     less than the Intended Put Share Amount, the Investor shall promptly return
     to the Company any shares of Common Stock in the Investor's possession that
     are not being purchased by the Investor.

     2.4 Warrants.

          2.4.1 Commitment Warrants. In partial consideration hereof,  following
     the  execution  of the Letter of Agreement  dated on or about  September 8,
     2000 between the Company and the Investor, the Company issued and delivered
     to  Investor  or  its  designated  assignees,   warrants  (the  "Commitment
     Warrants") in the form attached  hereto as Exhibit U, or such other form as
     agreed upon by the parties,  to purchase  1,521,000 shares of Common Stock.
     Each Commitment Warrant shall be immediately exercisable in accordance with
     its terms,  and shall have a term  beginning  on the date of  issuance  and
     ending on date that is five (5) years thereafter.  The Warrant Shares shall
     be registered for resale pursuant to the Registration Rights Agreement. The
     Investment  Commitment  Opinion of Counsel  shall cover the issuance of the
     Commitment  Warrant and the issuance of the common  stock upon  exercise of
     the Commitment Warrant.

          Notwithstanding  any  Termination  or  Automatic  Termination  of this
     Agreement, regardless of whether or not the Registration Statement is or is
     not filed, and regardless of whether or not the  Registration  Statement is
     approved or denied by the SEC, the Investor  shall retain full ownership of
     the  Commitment  Warrant  as  partial   consideration  for  its  commitment
     hereunder.

          2.4.2 Purchase  Warrants.  Within five (5) Business Days of the end of
     each Pricing Period,  the Company shall issue and deliver to the Investor a
     warrant ("Purchase Warrant"),  in the form attached hereto as Exhibit D, or
     such  other form as agreed  upon by the  parties,  to  purchase a number of
     shares of Common  Stock equal to 10% of the Put Share  Amount for that Put.
     Each  Purchase  Warrant  shall be  exerciseable  at a price (the  "Purchase
     Warrant  Exercise  Price") which shall initially equal the Market Price for
     the  applicable  Put, and shall have  semi-annual  reset  provisions.  Each
     Purchase  Warrant shall be immediately  exercisable at the Purchase Warrant
     Exercise Price, and shall have a term beginning on the date of issuance and
     ending on the date that is five (5) years  thereafter.  The Warrant  Shares
     shall  be  registered  for  resale  pursuant  to  the  Registration  Rights
     Agreement.
<PAGE>

     2.5 Due Diligence  Review.  The Company shall make available for inspection
and  review  by the  Investor  (the "Due  Diligence  Review"),  advisors  to and
representatives  of the  Investor  (who  may or may not be  affiliated  with the
Investor and who are  reasonably  acceptable  to the Company),  any  underwriter
participating  in any  disposition  of Common  Stock on  behalf of the  Investor
pursuant to the Registration Statement, any Supplemental Registration Statement,
or amendments or supplements  thereto or any blue sky, NASD or other filing, all
financial and other records,  all 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 to supply all such information reasonably requested by the Investor 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 Investor 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 the Registration Statement.

          2.5.1  Treatment  of  Nonpublic  Information.  The  Company  shall not
     disclose  nonpublic  information  to the  Investor  or to its  advisors  or
     representatives  unless prior to disclosure of such information the Company
     identifies such information as being nonpublic information and provides the
     Investor and such  advisors and  representatives  with the  opportunity  to
     accept or refuse to accept  such  nonpublic  information  for  review.  The
     Company  may,  as a  condition  to  disclosing  any  nonpublic  information
     hereunder,  require the Investor and its  advisors and  representatives  to
     enter into a  confidentiality  agreement  (including an agreement with such
     advisors and representatives  prohibiting them from trading in Common Stock
     during  such  period  of  time  as  they  are in  possession  of  nonpublic
     information)  in  form  reasonably  satisfactory  to the  Company  and  the
     Investor.

          Nothing  herein  shall  require  the  Company  to  disclose  nonpublic
     information  to the  Investor or its advisors or  representatives,  and the
     Company  represents that it does not disseminate  nonpublic  information to
     any investors who purchase  stock in the Company in a public  offering,  to
     money  managers  or  to  securities  analysts,   provided,   however,  that
     notwithstanding  anything  herein to the  contrary,  the Company  will,  as
     hereinabove  provided,  immediately notify the advisors and representatives
     of the Investor and, if any, underwriters, of any event or the existence of
     any circumstance  (without any obligation to disclose the specific event or
     circumstance) of which it becomes aware, constituting nonpublic information
     (whether or not requested of the Company  specifically or generally  during
     the course of due diligence by and such persons or entities), which, if not
     disclosed in the Prospectus included in the Registration  Statement,  would
     cause  such  Prospectus  to include a  material  misstatement  or to omit a
     material fact required to be stated therein in order to make the statements
     therein,  in light  of the  circumstances  in which  they  were  made,  not
     misleading.  Nothing  contained  in this  Section 2.5 shall be construed to
     mean that such  persons or entities  other than the  Investor  (without the
     written  consent of the Investor  prior to disclosure of such  information)
     may not  obtain  nonpublic  information  in the  course of  conducting  due
     diligence  in  accordance  with  the  terms  of this  Agreement;  provided,
     however,  that in no event shall the Investor's advisors or representatives
     disclose to the Investor the nature of the specific event or  circumstances
     constituting  any  nonpublic  information  discovered  by such  advisors or
     representatives  in the course of their due  diligence  without the written
     consent of the Investor prior to disclosure of such information.
<PAGE>

          2.5.2  Disclosure  of  Misstatements  and  Omissions.  The  Investor's
     advisors  or  representatives   shall  make  complete   disclosure  to  the
     Investor's  counsel of all events or circumstances  constituting  nonpublic
     information discovered by such advisors or representatives in the course of
     their due diligence  upon which such advisors or  representatives  form the
     opinion that the Registration  Statement  contains an untrue statement of a
     material  fact or  omits a  material  fact  required  to be  stated  in the
     Registration  Statement  or  necessary  to make  the  statements  contained
     therein,  in the light of the  circumstances  in which they were made,  not
     misleading.  Upon receipt of such disclosure,  the Investor's counsel shall
     consult  with the  Company's  independent  counsel in order to address  the
     concern raised as to the existence of a material  misstatement  or omission
     and to discuss  appropriate  disclosure  with  respect  thereto;  provided,
     however,  that such  consultation  shall not  constitute  the advice of the
     Company's  independent  counsel to the  Investor as to the  accuracy of the
     Registration Statement and related Prospectus.

          2.5.3 Procedure if Material Facts are Reasonably Believed to be Untrue
     or are Omitted.  In the event after such  consultation  the Investor or the
     Investor's  counsel  reasonably  believes that the  Registration  Statement
     contains an untrue  statement of a material  fact or omits a material  fact
     required to be stated in the  Registration  Statement  or necessary to make
     the statements  contained  therein,  in light of the circumstances in which
     they were made, not misleading,

               (a) the  Company  shall  file  with the SEC an  amendment  to the
          Registration  Statement responsive to such alleged untrue statement or
          omission and provide the Investor,  as promptly as  practicable,  with
          copies of the  Registration  Statement and related  Prospectus,  as so
          amended, or

               (b) if the Company  disputes the  existence of any such  material
          misstatement or omission,  (i) the Company's independent counsel shall
          provide the Investor's counsel with a Registration Opinion and (ii) in
          the event the dispute relates to the adequacy of financial  disclosure
          and the Investor shall reasonably request,  the Company's  independent
          auditors  shall  provide  to  the  Company  a  letter   ("Agreed  Upon
          Procedures  Report")  outlining the  performance  of such "agreed upon
          procedures"  as shall be reasonably  requested by the Investor and the
          Company shall provide the Investor with a copy of such letter.

     2.6 Commitment Payments.  On the last Business Day of each six (6) Calendar
Month  period  following  the  Effective  Date (each such  period a  "Commitment
Evaluation Period"), if the Company has not Put at least $1,000,000 in aggregate
Put Dollar Amount during that  Commitment  Evaluation  Period,  the Company,  in
consideration of Investor's commitment costs, including, but not limited to, due
diligence  expenses,  shall  pay to the  Investor  an amount  (the  "Semi-Annual
Non-Usage  Fee") equal to the difference of (i) $100,000,  minus (ii) 10% of the
aggregate  Put  Dollar  Amount of the Put  Shares put to  Investor  during  that
Commitment  Evaluation  Period.  In  the  event  that  the  Company  delivers  a
Termination  Notice to the  Investor or an  Automatic  Termination  occurs,  the
Company shall pay to the Investor (the "Termination Fee") the greater of (i) the
Semi-Annual  Non-Usage Fee for the applicable  Commitment  Evaluation Period, or
(ii) the  difference of (x) $200,000,  minus (y) 10% of the aggregate Put Dollar
Amount  of the Put  Shares  put to  Investor  during  all Puts to date,  and the
Company shall not be required to pay the  Semi-Annual  Non-Usage Fee thereafter.
Notwithstanding  the above, the Company shall not be required to pay a Non Usage
Fee for any Commitment  Evaluation Period during which the Company has delivered
at least  five Put  Notices to the  Investor  and each such Put Notice is for an
Intended Put Share  Amount  equal to at least the amount of the Lookback  Volume
Limitation.
<PAGE>

     Each Semi Annual  Non-Usage  Fee or  Termination  Fee is payable,  in cash,
within five (5) business  days of the date it accrued.  The Company shall not be
required  to deliver  any  payments  to  Investor  under this  subsection  until
Investor has paid all Put Dollar Amounts that are then due.

     3. Representations,  Warranties and Covenants of Investor.  Investor hereby
represents and warrants to and agrees with the Company as follows:

          3.1   Accredited   Investor.   Investor  is  an  accredited   investor
     ("Accredited  Investor"),  as defined in Rule 501 of  Regulation D, and has
     checked the applicable box set forth in Section 10 of this Agreement.

          3.2  Investment   Experience;   Access  to  Information;   Independent
     Investigation.
     ------------------------------------------------------------------------

               3.2.1 Access to Information.  Investor or Investor's professional
          advisor  has been  granted the  opportunity  to ask  questions  of and
          receive  answers from  representatives  of the Company,  its officers,
          directors, employees and agents concerning the terms and conditions of
          this  Offering,  the Company and its  business and  prospects,  and to
          obtain  any  additional   information  which  Investor  or  Investor's
          professional  advisor  deems  necessary  to verify  the  accuracy  and
          completeness of the information received.

               3.2.2 Reliance on Own Advisors. Investor has relied completely on
          the advice of, or has  consulted  with,  Investor's  own personal tax,
          investment,  legal or other advisors and has not relied on the Company
          or any of its affiliates,  officers, directors, attorneys, accountants
          or any  affiliates of any thereof and each other  person,  if any, who
          controls any of the foregoing, within the meaning of Section 15 of the
          Act for any tax or legal advice (other than reliance on information in
          the Disclosure  Documents as defined in Section 3.2.4 below and on the
          Opinion of Counsel). The foregoing,  however, does not limit or modify
          Investor's   right  to  rely  upon  covenants,   representations   and
          warranties of the Company in this Agreement.

               3.2.3  Capability  to Evaluate.  Investor has such  knowledge and
          experience  in  financial  and  business  matters so as to enable such
          Investor to utilize the information made available to it in connection
          with the  Offering  in order to  evaluate  the merits and risks of the
          prospective  investment,  which  are  substantial,  including  without
          limitation those set forth in the Disclosure  Documents (as defined in
          Section 3.2.4 below).

               3.2.4  Disclosure  Documents.   Investor,  in  making  Investor's
          investment   decision  to  subscribe  for  the  Investment   Agreement
          hereunder,  represents  that  (a)  Investor  has  received  and had an
          opportunity  to review (i) the Company's  Annual Report on Form 10-KSB
          for the year ended  December 31, 1999,  (ii) the  Company's  quarterly
          report on Form 10-QSB for the quarters  ended March 31, 2000, and June
          30, 2000,  (iii) the Risk  Factors,  attached as Exhibit J, (the "Risk
          Factors")  (iv) the  Capitalization  Schedule,  attached as Exhibit K,
          (the "Capitalization  Schedule") and (v) the Use of Proceeds Schedule,
          attached as Exhibit L, (the "Use of Proceeds Schedule");  (b) Investor
          has read,  reviewed,  and relied solely on the documents  described in
          (a) above,  the Company's  representations  and  warranties  and other
          information  in this  Agreement,  including  the  exhibits,  documents
          prepared  by the  Company  which have been  specifically  provided  to
          Investor in connection with this Offering (the documents  described in
          this  Section  3.2.4 (a) and (b) are  collectively  referred to as the
          "Disclosure  Documents"),  and an  independent  investigation  made by
          Investor and  Investor's  representatives,  if any; (c) Investor  has,
          prior to the
<PAGE>

          date of this  Agreement,  been given an opportunity to review material
          contracts  and  documents  of the  Company  which  have been  filed as
          exhibits to the  Company's  filings under the Act and the Exchange Act
          and has had an  opportunity  to ask  questions of and receive  answers
          from the Company's  officers and directors;  and (d) is not relying on
          any oral  representation  of the Company or any other person,  nor any
          written  representation or assurance from the Company other than those
          contained  in the  Disclosure  Documents  or  incorporated  herein  or
          therein. The foregoing,  however,  does not limit or modify Investor's
          right to rely upon  covenants,  representations  and warranties of the
          Company in Sections 5 and 6 of this Agreement.  Investor  acknowledges
          and  agrees  that the  Company  has no  responsibility  for,  does not
          ratify,  and is under no responsibility  whatsoever to comment upon or
          correct any reports, analyses or other comments made about the Company
          by any  third  parties,  including,  but  not  limited  to,  analysts'
          research  reports or comments  (collectively,  "Third Party Reports"),
          and Investor has not relied upon any Third Party Reports in making the
          decision to invest.

               3.2.5  Investment   Experience;   Fend  for  Self.  Investor  has
          substantial  experience  in  investing in  securities  and it has made
          investments  in securities  other than those of the Company.  Investor
          acknowledges  that Investor is able to fend for Investor's self in the
          transaction  contemplated  by this  Agreement,  that  Investor has the
          ability to bear the economic risk of Investor's investment pursuant to
          this Agreement and that Investor is an "Accredited Investor" by virtue
          of the fact that Investor meets the investor  qualification  standards
          set forth in Section 3.1 above.  Investor has not been  organized  for
          the purpose of investing in securities  of the Company,  although such
          investment is consistent with Investor's purposes.

          3.3 Exempt Offering Under Regulation D.
              ----------------------------------

               3.3.1 No General  Solicitation.  The Investment Agreement was not
          offered to Investor through, and Investor is not aware of, any form of
          general  solicitation  or  general  advertising,   including,  without
          limitation,   (i)  any   advertisement,   article,   notice  or  other
          communication published in any newspaper, magazine or similar media or
          broadcast  over  television or radio,  and (ii) any seminar or meeting
          whose  attendees  have been  invited by any  general  solicitation  or
          general advertising.

               3.3.2  Restricted  Securities.   Investor  understands  that  the
          Investment  Agreement is, the Common Stock and Warrants issued at each
          Put Closing will be, and the Warrant Shares will be,  characterized as
          "restricted  securities" under the federal securities laws inasmuch as
          they are being acquired from the Company in a transaction  exempt from
          the registration  requirements of the federal securities laws and that
          under such laws and applicable  regulations such securities may not be
          transferred or resold without  registration  under the Act or pursuant
          to an exemption  therefrom.  In this connection,  Investor  represents
          that Investor is familiar with Rule 144 under the Act, as presently in
          effect, and understands the resale limitations  imposed thereby and by
          the Act.
<PAGE>

               3.3.3   Disposition.    Without   in   any   way   limiting   the
          representations  set  forth  above,  Investor  agrees  that  until the
          Securities are sold pursuant to an effective Registration Statement or
          an  exemption  from  registration,  they  will  remain  in the name of
          Investor  and will not be  transferred  to or  assigned to any broker,
          dealer or depositary.  Investor further agrees not to sell,  transfer,
          assign,  or pledge the  Securities  (except  for any bona fide  pledge
          arrangement   to  the  extent   that  such  pledge  does  not  require
          registration   under  the  Act  or  unless  an  exemption   from  such
          registration is available and provided  further that if such pledge is
          realized  upon,  any  transfer  to the pledgee  shall  comply with the
          requirements set forth herein),  or to otherwise dispose of all or any
          portion of the Securities unless and until:

                    (a) There is then in effect a registration  statement  under
               the Act and any applicable  state  securities  laws covering such
               proposed  disposition and such  disposition is made in accordance
               with  such   registration   statement  and  in  compliance   with
               applicable prospectus delivery requirements; or

                    (b) (i)  Investor  shall have  notified  the  Company of the
               proposed  disposition and shall have furnished the Company with a
               statement   of  the   circumstances   surrounding   the  proposed
               disposition  to the  extent  relevant  for  determination  of the
               availability  of an  exemption  from  registration,  and  (ii) if
               reasonably   requested  by  the  Company,   Investor  shall  have
               furnished  the  Company  with an opinion of  counsel,  reasonably
               satisfactory  to the  Company,  that  such  disposition  will not
               require  registration  of the  Securities  under the Act or state
               securities  laws.  It is agreed that the Company will not require
               the Investor to provide opinions of counsel for transactions made
               pursuant  to Rule  144  provided  that  Investor  and  Investor's
               broker,  if  necessary,  provide the Company  with the  necessary
               representations  for  counsel to the  Company to issue an opinion
               with respect to such transaction.

          The Investor is entering  into this  Agreement for its own account and
     the Investor has no present arrangement (whether or not legally binding) at
     any time to sell the  Common  Stock to or  through  any  person or  entity;
     provided,  however, that by making the representations herein, the Investor
     does not agree to hold the Common  Stock for any minimum or other  specific
     term and  reserves  the right to dispose of the Common Stock at any time in
     accordance  with  federal  and state  securities  laws  applicable  to such
     disposition.

     3.4 Due Authorization.
         -----------------

               3.4.1 Authority.  The person executing this Investment Agreement,
          if executing this Agreement in a representative or fiduciary capacity,
          has full power and authority to execute and deliver this Agreement and
          each other document  included herein for which a signature is required
          in  such  capacity  and  on  behalf  of  the  subscribing  individual,
          partnership,  trust,  estate,  corporation or other entity for whom or
          which Investor is executing this  Agreement.  Investor has reached the
          age of majority (if an individual)  according to the laws of the state
          in which he or she resides.

               3.4.2 Due Authorization.  Investor is duly and validly organized,
          validly existing and in good standing as a limited  liability  company
          under the laws of Georgia  with full power and  authority  to purchase
          the  Securities to be purchased by Investor and to execute and deliver
          this Agreement.
<PAGE>

               3.4.3   Partnerships.   If   Investor  is  a   partnership,   the
          representations,  warranties,  agreements and understandings set forth
          above are true with  respect to all  partners of Investor  (and if any
          such partner is itself a partnership,  all persons holding an interest
          in such partnership,  directly or indirectly, including through one or
          more  partnerships),  and the person executing this Agreement has made
          due inquiry to determine the truthfulness of the  representations  and
          warranties made hereby.

               3.4.4   Representatives.   If   Investor  is   purchasing   in  a
          representative  or  fiduciary   capacity,   the   representations  and
          warranties  shall be deemed to have been made on behalf of the  person
          or persons for whom Investor is so purchasing.

     4. Acknowledgments Investor is aware that:

          4.1 Risks of Investment. Investor recognizes that an investment in the
     Company  involves  substantial  risks,  including  the  potential  loss  of
     Investor's  entire  investment   herein.   Investor   recognizes  that  the
     Disclosure Documents, this Agreement and the exhibits hereto do not purport
     to contain all the information,  which would be contained in a registration
     statement under the Act;

          4.2 No Government Approval. No federal or state agency has passed upon
     the Securities,  recommended or endorsed the Offering,  or made any finding
     or determination as to the fairness of this transaction;

          4.3 No Registration,  Restrictions on Transfer. As of the date of this
     Agreement,   the  Securities  and  any  component  thereof  have  not  been
     registered  under the Act or any applicable state securities laws by reason
     of exemptions from the registration  requirements of the Act and such laws,
     and may not be sold,  pledged  (except for any limited pledge in connection
     with a margin  account of  Investor to the extent that such pledge does not
     require  registration  under  the Act or  unless  an  exemption  from  such
     registration  is  available  and  provided  further  that if such pledge is
     realized   upon,  any  transfer  to  the  pledgee  shall  comply  with  the
     requirements  set forth herein),  assigned or otherwise  disposed of in the
     absence of an effective  registration  of the  Securities and any component
     thereof  under the Act or unless an  exemption  from such  registration  is
     available;

          4.4  Restrictions  on  Transfer.  Investor  may not  attempt  to sell,
     transfer,  assign, pledge or otherwise dispose of all or any portion of the
     Securities or any  component  thereof in the absence of either an effective
     registration  statement or an exemption from the registration  requirements
     of the Act and applicable state securities laws;

          4.5 No Assurances of Registration.  There can be no assurance that any
     registration  statement  will become  effective at the  scheduled  time, or
     ever, or remain effective when required,  and Investor acknowledges that it
     may be required to bear the economic risk of Investor's  investment  for an
     indefinite period of time;

          4.6 Exempt Transaction.  Investor  understands that the Securities are
     being  offered  and  sold in  reliance  on  specific  exemptions  from  the
     registration   requirements   of  federal   and  state  law  and  that  the
     representations, warranties, agreements, acknowledgments and understandings
     set forth  herein are being relied upon by the Company in  determining  the
     applicability of such exemptions and the suitability of Investor to acquire
     such Securities.
<PAGE>

          4.7 Legends.  The  certificates  representing the Put Shares shall not
     bear a  legend  restricting  the  sale or  transfer  thereof  ("Restrictive
     Legend"). The certificates representing the Warrant Shares shall not bear a
     Restrictive  Legend unless they are issued at a time when the  Registration
     Statement  is  not  effective  for  resale.   It  is  understood  that  the
     certificates  evidencing  any  Warrant  Shares  issued  at a time  when the
     Registration  Statement  is not  effective  for  resale,  subject to legend
     removal  under the terms of  Section  6.8 below,  shall bear the  following
     legend (the "Legend"):

         "The securities  represented  hereby have not been registered under the
         Securities  Act of 1933,  as amended,  or applicable  state  securities
         laws, nor the securities laws of any other  jurisdiction.  They may not
         be sold or  transferred  in the  absence of an  effective  registration
         statement  under those  securities  laws or  pursuant  to an  exemption
         therefrom."

         5.  Representations  and Warranties of the Company.  The Company hereby
makes the following  representations  and warranties to Investor (which shall be
true  at the  signing  of  this  Agreement,  and as of any  such  later  date as
contemplated  hereunder) and agrees with Investor  that,  except as set forth in
the "Schedule of Exceptions" attached hereto as Exhibit C:

          5.1 Organization,  Good Standing, and Qualification.  The Company is a
     corporation duly organized, validly existing and in good standing under the
     laws of the State of Delaware,  USA and has all requisite  corporate  power
     and  authority to carry on its business as now conducted and as proposed to
     be conducted.  The Company is duly qualified to transact business and is in
     good standing in each jurisdiction in which the failure to so qualify would
     have a material adverse effect on the business or properties of the Company
     and its  subsidiaries  taken as a whole.  The Company is not the subject of
     any pending, threatened or, to its knowledge, contemplated investigation or
     administrative or legal proceeding (a "Proceeding") by the Internal Revenue
     Service, the taxing authorities of any state or local jurisdiction,  or the
     Securities and Exchange Commission,  the National Association of Securities
     Dealers,  Inc.,  the Nasdaq  Stock  Market,  Inc.  or any state  securities
     commission, or any other governmental entity, which have not been disclosed
     in the Disclosure  Documents.  None of the disclosed  Proceedings,  if any,
     will have a material  adverse effect upon the Company or the market for the
     Common Stock. The Company has the subsidiaries set forth on Schedule 5.1.

          5.2 Corporate  Condition.  The Company's condition is, in all material
     respects, as described in the Disclosure Documents (as further set forth in
     any subsequently  filed Disclosure  Documents,  if applicable),  except for
     changes in the ordinary course of business and normal year-end  adjustments
     that are not, in the aggregate,  materially adverse to the Company.  Except
     for continuing  losses,  there have been no material adverse changes to the
     Company's business,  financial  condition,  or prospects since the dates of
     such  Disclosure  Documents.  The financial  statements as contained in the
     10-KSB and 10-QSB have been prepared in accordance with generally  accepted
     accounting principles,  consistently applied (except as otherwise permitted
     by  Regulation  S-X of the Exchange Act, or Generally  Accepted  Accounting
     Principles,  as  applicable),  subject,  in the case of  unaudited  interim
     financial statements,  to customary year end adjustments and the absence of
     certain  footnotes,  and fairly  present  the  financial  condition  of the
     Company as of the dates of the  balance  sheets  included  therein  and the
     consolidated  results of its operations and cash flows for the periods then
     ended. Without limiting the foregoing,  there are no material  liabilities,
     contingent or actual,  that are not disclosed in the  Disclosure  Documents
     (other than  liabilities  incurred by the Company in the ordinary course of
     its business,  consistent with its past practice,  after the period covered
     by the Disclosure Documents).  The Company has paid all material taxes that
     are due, except for taxes that it reasonably disputes. There is no
<PAGE>

     material claim, litigation, or administrative proceeding pending or, to the
     best of the Company's knowledge,  threatened against the Company, except as
     disclosed in the  Disclosure  Documents.  This Agreement and the Disclosure
     Documents do not contain any untrue statement of a material fact and do not
     omit to state any  material  fact  required to be stated  therein or herein
     necessary to make the statements contained therein or herein not misleading
     in the light of the  circumstances  under which they were made. No event or
     circumstance  exists relating to the Company which,  under  applicable law,
     requires public disclosure but which has not been so publicly  announced or
     disclosed.

          5.3 Authorization.  All corporate action on the part of the Company by
     its officers,  directors and stockholders  necessary for the authorization,
     execution  and  delivery  of  this   Agreement,   the  performance  of  all
     obligations of the Company  hereunder and the  authorization,  issuance and
     delivery of the Common Stock being sold hereunder and the issuance  (and/or
     the  reservation  for issuance) of the Warrants and the Warrant Shares have
     been  taken,  and this  Agreement  and the  Registration  Rights  Agreement
     constitute   valid  and  legally   binding   obligations  of  the  Company,
     enforceable  in  accordance  with  their  terms,   except  insofar  as  the
     enforceability  may  be  limited  by  applicable  bankruptcy,   insolvency,
     reorganization, or other similar laws affecting creditors' rights generally
     or by principles  governing the  availability  of equitable  remedies.  The
     Company has obtained all consents and approvals required for it to execute,
     deliver and perform each agreement referenced in the previous sentence.

          5.4 Valid Issuance of Common Stock. The Common Stock and the Warrants,
     when issued,  sold and delivered in accordance  with the terms hereof,  for
     the consideration  expressed herein, will be validly issued, fully paid and
     nonassessable  and, based in part upon the  representations  of Investor in
     this  Agreement,  will be issued in  compliance  with all  applicable  U.S.
     federal  and state  securities  laws.  The Warrant  Shares,  when issued in
     accordance with the terms of the Warrants, shall be duly and validly issued
     and  outstanding,  fully paid and  nonassessable,  and based in part on the
     representations  and  warranties of Investor,  will be issued in compliance
     with all applicable U.S. federal and state securities laws. The Put Shares,
     the Warrants and the Warrant  Shares will be issued free of any  preemptive
     rights.  5.5  Compliance  with  Other  Instruments.  The  Company is not in
     violation or default of any provisions of its Certificate of  Incorporation
     or  Bylaws,  each as  amended  and in  effect  on and as of the date of the
     Agreement,  or of any  material  provision of any  material  instrument  or
     material  contract to which it is a party or by which it is bound or of any
     provision of any federal or state judgment,  writ, decree,  order, statute,
     rule or governmental regulation applicable to the Company, which would have
     a material adverse effect on the Company's business or prospects, or on the
     performance of its  obligations  under this  Agreement or the  Registration
     Rights Agreement. The execution, delivery and performance of this Agreement
     and the other agreements  entered into in conjunction with the Offering and
     the consummation of the transactions  contemplated  hereby and thereby will
     not (a) result in any such  violation or be in conflict with or constitute,
     with or without the passage of time and giving of notice,  either a default
     under any such provision,  instrument or contract or an event which results
     in the creation of any lien,  charge or encumbrance  upon any assets of the
     Company,  which  would  have a  material  adverse  effect on the  Company's
     business or prospects,  or on the performance of its obligations under this
     Agreement,  the Registration Rights Agreement, or (b) violate the Company's
     Certificate of Incorporation or By-Laws or (c) violate any statute, rule or
     governmental  regulation  applicable to the Company which  violation  would
     have a material adverse effect on the Company's business or prospects.
<PAGE>

          5.6  Reporting  Company.  The  Company  is  subject  to the  reporting
     requirements  of the  Exchange  Act, has a class of  securities  registered
     under Section 12 of the Exchange Act, and has filed all reports required by
     the  Exchange Act since the date the Company  first became  subject to such
     reporting  obligations.  The Company  undertakes  to furnish  Investor with
     copies of such reports as may be reasonably  requested by Investor prior to
     consummation  of  this  Offering  and  thereafter,  to  make  such  reports
     available,  for the full term of this  Agreement,  including any extensions
     thereof, and for as long as Investor holds the Securities. The Common Stock
     is duly listed or approved for quotation on the O.T.C.  Bulletin Board. The
     Company  is not in  violation  of the  listing  requirements  of the O.T.C.
     Bulletin  Board and does not  reasonably  anticipate  that the Common Stock
     will be delisted by the O.T.C.  Bulletin Board for the foreseeable  future.
     The Company has filed all reports  required  under the  Exchange  Act.  The
     Company  has  not   furnished  to  the  Investor  any  material   nonpublic
     information concerning the Company.

          5.7  Capitalization.  The capitalization of the Company as of the date
     hereof is, and the capitalization as of the Closing, subject to exercise of
     any outstanding  warrants and/or exercise of any outstanding stock options,
     after taking into account the offering of the  Securities  contemplated  by
     this  Agreement  and all  other  share  issuances  occurring  prior to this
     Offering, will be, as set forth in the Capitalization Schedule as set forth
     in  Exhibit  K.  There  are  no   securities  or   instruments   containing
     anti-dilution or similar  provisions that will be triggered by the issuance
     of the Securities.  Except as disclosed in the Capitalization  Schedule, as
     of the  date of this  Agreement,  (i)  there  are no  outstanding  options,
     warrants,  scrip,  rights to subscribe  for,  calls or  commitments  of any
     character  whatsoever relating to, or securities or rights convertible into
     or  exercisable  or  exchangeable  for, any shares of capital  stock of the
     Company or any of its subsidiaries, or arrangements by which the Company or
     any of its subsidiaries is or may become bound to issue  additional  shares
     of capital stock of the Company or any of its subsidiaries,  and (ii) there
     are no  agreements  or  arrangements  under which the Company or any of its
     subsidiaries  is  obligated  to  register  the  sale of any of its or their
     securities under the Act (except the Registration Rights Agreement), except
     that the Company is obligated to register  6,569,444 shares of common stock
     by January 1, 2000 pursuant to a private  placement that closed in March of
     2000.

          5.8  Intellectual  Property.  The Company has valid,  unrestricted and
     exclusive ownership of or rights to use the patents, trademarks,  trademark
     registrations,  trade names,  copyrights,  know-how,  technology  and other
     intellectual  property necessary to the conduct of its business.  Exhibit M
     lists all patents,  trademarks,  trademark  registrations,  trade names and
     copyrights  of the Company.  The Company has granted  such  licenses or has
     assigned  or  otherwise  transferred  a portion of (or all of) such  valid,
     unrestricted and exclusive patents,  trademarks,  trademark  registrations,
     trade  names,  copyrights,  know-how,  technology  and  other  intellectual
     property  necessary  to the conduct of its business as set forth in Exhibit
     M. The Company has been granted licenses, know-how, technology and/or other
     intellectual property necessary to the conduct of its business as set forth
     in Exhibit M. To the best of the Company's knowledge after due inquiry, the
     Company is not infringing on the intellectual  property rights of any third
     party,  nor is any third party  infringing  on the  Company's  intellectual
     property  rights.  There are no restrictions  in any agreements,  licenses,
     franchises, or other instruments that preclude the Company from engaging in
     its business as presently conducted.
<PAGE>

          5.9 Use of Proceeds. As of the date hereof, the Company expects to use
     the proceeds from this  Offering  (less fees and expenses) for the purposes
     and in the  approximate  amounts set forth on the Use of Proceeds  Schedule
     set forth as Exhibit L hereto. These purposes and amounts are estimates and
     are subject to change without notice to any Investor.

          5.10 No Rights of Participation.  No person or entity,  including, but
     not  limited  to,   current  or  former   stockholders   of  the   Company,
     underwriters,  brokers,  agents or other  third  parties,  has any right of
     first refusal,  preemptive right,  right of  participation,  or any similar
     right to participate in the financing  contemplated by this Agreement which
     has not been waived.

          5.11 Company  Acknowledgment.  The Company  hereby  acknowledges  that
     Investor may elect to hold the Securities  for various  periods of time, as
     permitted  by  the  terms  of  this  Agreement,  the  Warrants,  and  other
     agreements  contemplated  hereby, and the Company further acknowledges that
     Investor has made no representations or warranties, either written or oral,
     as to how  long  the  Securities  will  be held by  Investor  or  regarding
     Investor's trading history or investment strategies.

          5.12 No Advance  Regulatory  Approval.  The Company  acknowledges that
     this  Investment  Agreement,  the transaction  contemplated  hereby and the
     Registration  Statement  contemplated  hereby have not been approved by the
     SEC,  or any  other  regulatory  body and there is no  guarantee  that this
     Investment   Agreement,   the  transaction   contemplated  hereby  and  the
     Registration Statement contemplated hereby will ever be approved by the SEC
     or any other  regulatory  body.  The Company is relying on its own analysis
     and is not  relying on any  representation  by  Investor  that  either this
     Investment   Agreement,   the  transaction   contemplated   hereby  or  the
     Registration  Statement contemplated hereby has been or will be approved by
     the SEC or other appropriate regulatory body.

          5.13  Underwriter's  Fees and Rights of First Refusal.  The Company is
     not  obligated  to pay any  compensation  or other  fees,  costs or related
     expenditures  in cash or securities to any  underwriter,  broker,  agent or
     other representative in connection with this Offering.

          5.14  Availability of Suitable Form for  Registration.  The Company is
     currently  eligible and agrees to maintain its  eligibility to register the
     resale of its Common Stock on a  registration  statement on a suitable form
     under the Act.

          5.15 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 of the Company's  securities or
     solicited  any offers to buy any security  under  circumstances  that would
     prevent the parties hereto from consummating the transactions  contemplated
     hereby pursuant to an exemption from registration under Regulation D of the
     Act or would require the issuance of any other  securities to be integrated
     with this Offering  under the Rules of the SEC. The Company has not engaged
     in any form of general  solicitation  or advertising in connection with the
     offering of the Common Stock or the Warrants.
<PAGE>

          5.16 Foreign Corrupt  Practices.  Neither the Company,  nor any of its
     subsidiaries,  nor any director,  officer,  agent, employee or other person
     acting on behalf of the Company or any subsidiary has, in the course of its
     actions for, or on behalf of, the Company, used any corporate funds for any
     unlawful  contribution,  gift,  entertainment  or other  unlawful  expenses
     relating  to  political  activity;  made any  direct or  indirect  unlawful
     payment to any foreign or  domestic  government  official or employee  from
     corporate  funds;  violated or is in violation of any provision of the U.S.
     Foreign  Corrupt  Practices  Act of 1977,  as  amended;  or made any bribe,
     rebate,  payoff,  influence payment,  kickback or other unlawful payment to
     any foreign or domestic government official or employee.

          5.17 Key  Employees.  Each "Key Employee" (as defined in Exhibit N) is
     currently  serving the Company in the  capacity  disclosed in Exhibit N. No
     Key Employee,  to the best  knowledge of the Company and its  subsidiaries,
     is, or is now  expected to be, in  violation  of any  material  term of any
     employment contract, confidentiality, disclosure or proprietary information
     agreement, non-competition agreement, or any other contract or agreement or
     any restrictive covenant, and the continued employment of each Key Employee
     does not subject the Company or any of its  subsidiaries  to any  liability
     with respect to any of the foregoing  matters.  No Key Employee has, to the
     best  knowledge  of the  Company and its  subsidiaries,  any  intention  to
     terminate  his  employment  with, or services to, the Company or any of its
     subsidiaries.

          5.18   Representations   Correct.   The   foregoing   representations,
     warranties and  agreements  are true,  correct and complete in all material
     respects,  and shall survive any Put Closing and the issuance of the shares
     of Common Stock thereby.

          5.19 Tax  Status.  The Company has made or filed all federal and state
     income and all other tax returns,  reports and declarations required by any
     jurisdiction to which it is subject (unless and only to the extent that the
     Company has set aside on its books provisions  reasonably  adequate for the
     payment  of all  unpaid  and  unreported  taxes) and has paid all taxes and
     other  governmental  assessments  and charges  that are material in amount,
     shown or determined to be due on such  returns,  reports and  declarations,
     except  those being  contested in good faith and has set aside on its books
     provision  reasonably  adequate  for the  payment of all taxes for  periods
     subsequent  to the periods to which such returns,  reports or  declarations
     apply.  There are no unpaid taxes in any material  amount claimed to be due
     by the  taxing  authority  of any  jurisdiction,  and the  officers  of the
     Company know of no basis for any such claim.

          5.20  Transactions  With  Affiliates.  Except  as  set  forth  in  the
     Disclosure Documents, none of the officers,  directors, or employees of the
     Company is  presently a party to any  transaction  with the Company  (other
     than for services as  employees,  officers and  directors),  including  any
     contract,  agreement or other  arrangement  providing for the furnishing of
     services to or by, providing for rental of real or personal  property to or
     from, or otherwise  requiring payments to or from any officer,  director or
     such  employee  or,  to the  knowledge  of the  Company,  any  corporation,
     partnership,  trust or other entity in which any officer,  director, or any
     such  employee  has a  substantial  interest  or is an  officer,  director,
     trustee or partner.

          5.21 Application of Takeover Protections. The Company and its board of
     directors  have  taken all  necessary  action,  if any,  in order to render
     inapplicable any control share acquisition,  business  combination or other
     similar anti-takeover provision under Delaware law which is or could become
     applicable to the Investor as a result of the transactions  contemplated by
     this Agreement,  including,  without limitation, the issuance of the Common
     Stock,  any exercise of the Warrants and ownership of the Common Shares and
     Warrant Shares.  The Company has not adopted and will not adopt any "poison
     pill"  provision  that  will be  applicable  to  Investor  as a  result  of
     transactions contemplated by this Agreement,  where "poison pill" provision
     means a  provision  which  effectively  prevents a change in control of the
     Company without the approval of the continuing board of directors.
<PAGE>

          5.22 Other  Agreements.  The Company has not,  directly or indirectly,
     made any agreements  with the Investor under a subscription  in the form of
     this  Agreement for the purchase of Common Stock,  relating to the terms or
     conditions of the  transactions  contemplated  hereby or thereby  except as
     expressly set forth herein, respectively, or in exhibits hereto or thereto.

          5.23  Major  Transactions.  There  are  no  other  Major  Transactions
     currently pending or contemplated by the Company.

          5.24 Financings.  There are no other financings  currently  pending or
     contemplated by the Company, except that the Company is contemplating up to
     $3.5 million in equipment lease financing or straight equipment financing.

          5.25 Shareholder Authorization.  The Company shall, at its next annual
     shareholder  meeting  following  its listing on either the Nasdaq Small Cap
     Market or the Nasdaq National Market, or at a special meeting to be held as
     soon as practicable thereafter,  use its best efforts to obtain approval of
     its shareholders to (i) authorize the issuance of the full number of shares
     of Common Stock which would be issuable  under this Agreement and eliminate
     any  prohibitions  under  applicable law or the rules or regulations of any
     stock  exchange,  interdealer  quotation  system  or other  self-regulatory
     organization  with  jurisdiction  over the Company or any of its securities
     with  respect to the  Company's  ability to issue shares of Common Stock in
     excess of the Cap Amount (such approvals being the "20% Approval") and (ii)
     increase  the number of  authorized  shares of Common  Stock of the Company
     (the "Share Authorization Increase Approval") such that at least 15,000,000
     shares  can  be  reserved  for  this  Offering.  In  connection  with  such
     shareholder  vote,  the  Company  shall use its best  efforts  to cause all
     officers and  directors of the Company to promptly  enter into  irrevocable
     agreements  to vote  all of their  shares  in  favor  of  eliminating  such
     prohibitions.  As soon as practicable  after the 20% Approval and the Share
     Authorization Increase Approval, the Company agrees to use its best efforts
     to  reserve  15,000,000  shares of Common  Stock for  issuance  under  this
     Agreement.

          5.26  Acknowledgment  of  Limitations  on  Put  Amounts.  The  Company
     understands  and  acknowledges   that  the  amounts  available  under  this
     Investment  Agreement  are  limited,  among  other  things,  based upon the
     liquidity of the Company's Common Stock traded on its Principal Market.

     6. Covenants of the Company.

          6.1  Independent  Auditors.  The  Company  shall,  until at least  the
     Termination Date,  maintain as its independent  auditors an accounting firm
     authorized to practice before the SEC.
<PAGE>

          6.2 Corporate  Existence and Taxes;  Change in Corporate  Entity.  The
     Company shall, until at least the Termination Date,  maintain its corporate
     existence  in good  standing  and,  once it  becomes a  "Reporting  Issuer"
     (defined as a Company which files periodic reports under the Exchange Act),
     remain a  Reporting  Issuer and shall pay all its taxes when due except for
     taxes which the Company disputes.  The Company shall not, at any time after
     the  date  hereof,  enter  into  any  merger,  consolidation  or  corporate
     reorganization   of  the  Company   with  or  into,   or  transfer  all  or
     substantially  all of the assets of the Company to,  another  entity unless
     the resulting successor or acquiring entity in such transaction, if not the
     Company (the "Surviving  Entity"),  (i) has Common Stock listed for trading
     on Nasdaq or on another national stock exchange and is a Reporting  Issuer,
     (ii) assumes by written  instrument the Company's  obligations with respect
     to this  Investment  Agreement,  the  Registration  Rights  Agreement,  the
     Transfer  Agent  Instructions,  the  Warrant  Antidilution  Agreement,  the
     Warrants,  and the other agreements  referred to herein,  including but not
     limited to the  obligations  to deliver  to the  Investor  shares of Common
     Stock and/or  securities  that Investor is entitled to receive  pursuant to
     this  Investment  Agreement and upon exercise of the Warrants and agrees by
     written  instrument to reissue,  in the name of the Surviving  Entity,  any
     Commitment Warrants, Purchase Warrants and Additional Warrants (each in the
     same terms, including but not limited to the same reset provisions,  as the
     Commitment   Warrants,   Purchase  Warrants  and/or   Additional   Warrants
     originally  issued  or  required  to be  issued  by the  Company)  that are
     outstanding  immediately  prior  to such  transaction,  making  appropriate
     proportional  adjustments  to the  number  of  shares  represented  by such
     Warrants and the exercise prices of such Warrants to accurately reflect the
     exchange represented by the transaction.

          6.3  Registration  Rights.  The Company will enter into a registration
     rights  agreement  covering the resale of the Common Shares and the Warrant
     Shares  substantially  in the  form of the  Registration  Rights  Agreement
     attached as Exhibit A.

          6.4 Asset Transfers.  The Company shall not (i) transfer, sell, convey
     or otherwise dispose of any of its material assets to any subsidiary except
     for a cash or cash  equivalent  consideration  and  for a  proper  business
     purpose or (ii) transfer,  sell,  convey or otherwise dispose of any of its
     material assets to any Affiliate, as defined below, during the Term of this
     Agreement.  For purposes hereof,  "Affiliate" shall mean any officer of the
     Company,  director of the Company or owner of twenty  percent (20%) or more
     of the Common Stock or other securities of the Company.

          6.5 Rights of First Refusal.
             -----------------------

               6.5.1  Capital  Raising  Limitations.  During the period from the
          date of this  Agreement  until the date that is sixty  (60) days after
          the Termination Date, the Company shall not issue or sell, or agree to
          issue  or sell  Equity  Securities  (as  defined  below),  for cash in
          private  capital  raising  transactions  without  obtaining  the prior
          written  approval of the  Investor of the  Offering  (the  limitations
          referred to in this subsection 6.5.1 are  collectively  referred to as
          the "Capital Raising Limitations"). For purposes hereof, the following
          shall be collectively  referred to herein as, the "Equity Securities":
          (i)  Common  Stock or any other  equity  securities,  (ii) any debt or
          equity   securities  which  are  convertible   into,   exercisable  or
          exchangeable  for, or carry the right to receive  additional shares of
          Common Stock or other equity  securities,  or (iii) any  securities of
          the Company  pursuant to an equity line structure or format similar in
          nature to this Offering.  Notwithstanding  the above,  the Company may
          issue  or  sell  Equity  Securities  without  the  Investor's  written
          approval   (subject   to  the   Right  of  First   Refusal   described
          below)("Unauthorized  Equity  Securities"),  provided that the Company
          may not  deliver an Advance Put Notice or a Put Notice if, on the date
          of such proposed  Advance Put Notice or Put Notice,  the dollar amount
          of Unauthorized  Equity Securities  outstanding  exceeds the following
          amount:
<PAGE>

               (A) the average per day trading  volume of the  Company's  Common
          Stock for the twenty trading days  immediately  preceding the proposed
          date of such notice, multiplied by

               (B) the  closing  price  of the  Company's  Common  Stock  on the
          trading day  immediately  preceding  the proposed date of such notice,
          multiplied by

               (C) seven.

               6.5.2 Investor's Right of First Refusal.  For any private capital
          raising  transactions of Equity  Securities which close after the date
          hereof  and on or prior to the date that is sixty  (60) days after the
          Termination Date of this Agreement,  not including any warrants issued
          in conjunction with this Investment  Agreement,  the Company agrees to
          deliver to  Investor,  at least ten (10) days prior to the  closing of
          such transaction,  written notice describing the proposed transaction,
          including the terms and conditions thereof, and providing the Investor
          and its affiliates an option (the "Right of First Refusal") during the
          ten (10) day period following  delivery of such notice to purchase the
          securities  being  offered  in such  transaction  on the same terms as
          contemplated by such transaction.

               6.5.3  Exceptions to Capital  Raising  Limitations  and Rights of
          First Refusal.  Notwithstanding the above, neither the Capital Raising
          Limitations  nor the  Rights  of  First  Refusal  shall  apply  to any
          transaction  involving  issuances of securities  in connection  with a
          merger, consolidation, acquisition or sale of assets, or in connection
          with any strategic  partnership or joint venture (the primary  purpose
          of which is not to raise equity  capital),  or in connection  with the
          disposition or  acquisition  of a business,  product or license by the
          Company or  exercise  of  options by  employees,  or  directors,  or a
          primary underwritten  offering of the Company's Common Stock, but each
          shall apply to the issuance of securities or options to consultants of
          the  Company.  The  Capital  Raising  Limitations  and Rights of First
          Refusal  also shall not apply to (a) the issuance of  securities  upon
          exercise or  conversion of the  Company's  options,  warrants or other
          convertible  securities  outstanding  as of the date  hereof,  (b) the
          grant of additional options or warrants, or the issuance of additional
          securities,  under any Company stock option or  restricted  stock plan
          for the benefit of the Company's employees,  directors or consultants,
          or (c) the  issuance  of debt  securities,  with  no  equity  feature,
          incurred solely for working capital purposes.

          6.6 Financial 10-KSB Statements, Etc. and Current Reports on Form 8-K.
     The Company shall deliver to the Investor  copies of its annual  reports on
     Form 10-KSB,  and quarterly reports on Form 10-QSB and shall deliver to the
     Investor  current reports on Form 8-K within two (2) days of filing for the
     Term of this Agreement.
<PAGE>

          6.7 Opinion of Counsel. Investor shall, concurrent with the Investment
     Commitment  Closing,  receive an opinion  letter from the  Company's  legal
     counsel,  in the form attached as Exhibit B, or in such form as agreed upon
     by the  parties,  and  shall,  concurrent  with each Put Date,  receive  an
     opinion letter from the Company's  legal  counsel,  in the form attached as
     Exhibit I or in such form as agreed upon by the parties.

          6.8 Removal of Legend. If the certificates representing any Securities
     are issued with a restrictive  Legend in accordance  with the terms of this
     Agreement,  the  Legend  shall be removed  and the  Company  shall  issue a
     certificate without such Legend to the holder of any Security upon which it
     is stamped,  and a certificate  for a security  shall be originally  issued
     without the Legend,  if (a) the sale of such Security is  registered  under
     the Act,  or (b) such  holder  provides  the  Company  with an  opinion  of
     counsel, in form,  substance and scope customary for opinions of counsel in
     comparable transactions (the reasonable cost of which shall be borne by the
     Investor),  to the effect that a public  sale or transfer of such  Security
     may be made without registration under the Act, or (c) such holder provides
     the Company  with  reasonable  assurances  that such  Security  can be sold
     pursuant  to  Rule  144.  Each  Investor  agrees  to sell  all  Securities,
     including those  represented by a certificate(s)  from which the Legend has
     been removed, or which were originally issued without the Legend,  pursuant
     to an  effective  registration  statement  and to deliver a  prospectus  in
     connection  with  such sale or in  compliance  with an  exemption  from the
     registration requirements of the Act.

          6.9 Listing. Subject to the remainder of this Section 6.9, the Company
     shall ensure that its shares of Common Stock  (including all Warrant Shares
     and Put Shares) are listed and available for trading on the O.T.C. Bulletin
     Board.  Thereafter,  the Company shall (i) use its best efforts to continue
     the listing and trading of its Common Stock on the O.T.C. Bulletin Board or
     to become  eligible for and listed and  available for trading on the Nasdaq
     Small Cap Market,  the NMS, or the New York Stock  Exchange  ("NYSE");  and
     (ii) comply in all material respects with the Company's  reporting,  filing
     and  other   obligations  under  the  By-Laws  or  rules  of  the  National
     Association  of  Securities   Dealers  ("NASD")  and  such  exchanges,   as
     applicable.

          6.10 The Company's  Instructions to Transfer  Agent.  The Company will
     instruct the Transfer Agent of the Common Stock (the "Transfer Agent"),  by
     delivering  instructions  in  the  form  of  Exhibit  T  hereto,  to  issue
     certificates,  registered in the name of each Investor or its nominee,  for
     the Put Shares and Warrant Shares in such amounts as specified from time to
     time by the  Company  upon any  exercise  by the  Company  of a Put  and/or
     exercise of the Warrants by the holder thereof. Such certificates shall not
     bear a Legend  unless  issuance  with a Legend is permitted by the terms of
     this  Agreement  and Legend  removal is not permitted by Section 6.8 hereof
     and the Company shall cause the Transfer  Agent to issue such  certificates
     without  a  Legend.  Nothing  in  this  Section  shall  affect  in any  way
     Investor's  obligations  and agreement set forth in Sections 3.3.2 or 3.3.3
     hereof to resell  the  Securities  pursuant  to an  effective  registration
     statement and to deliver a prospectus  in  connection  with such sale or in
     compliance with an exemption from the registration requirements of
<PAGE>

     applicable securities laws. If (a) an Investor provides the Company with an
     opinion of counsel,  which opinion of counsel  shall be in form,  substance
     and scope customary for opinions of counsel in comparable transactions,  to
     the effect that the  Securities  to be sold or  transferred  may be sold or
     transferred  pursuant to an exemption from  registration or (b) an Investor
     transfers  Securities,  pursuant to Rule 144, to a  transferee  which is an
     accredited  investor,  the Company shall permit the  transfer,  and, in the
     case of Put Shares and Warrant Shares, promptly instruct its transfer agent
     to issue one or more  certificates in such name and in such denomination as
     specified by such Investor. The Company acknowledges that a breach by it of
     its  obligations  hereunder will cause  irreparable  harm to an Investor by
     vitiating the intent and purpose of the  transaction  contemplated  hereby.
     Accordingly,  the Company  acknowledges that the remedy at law for a breach
     of its  obligations  under this Section 6.10 will be inadequate and agrees,
     in the  event  of a breach  or  threatened  breach  by the  Company  of the
     provisions of this Section  6.10,  that an Investor  shall be entitled,  in
     addition to all other available remedies, to an injunction  restraining any
     breach and requiring immediate issuance and transfer, without the necessity
     of showing  economic  loss and  without  any bond or other  security  being
     required.

          6.11  Stockholder  20% Approval.  Prior to the closing of any Put that
     would  cause the  Aggregate  Issued  Shares to exceed  the Cap  Amount,  if
     required  by the rules of NASDAQ  because  the  Company's  Common  Stock is
     listed on NASDAQ,  the Company shall obtain approval of its stockholders to
     authorize  (i) the  issuance of the full  number of shares of Common  Stock
     which would be issuable  pursuant to this  Agreement but for the Cap Amount
     and  eliminate  any  prohibitions  under  applicable  law or the  rules  or
     regulations of any stock exchange,  interdealer  quotation  system or other
     self-regulatory  organization  with jurisdiction over the Company or any of
     its  securities  with respect to the  Company's  ability to issue shares of
     Common  Stock  in  excess  of the Cap  Amount  (such  approvals  being  the
     "Stockholder 20% Approval").

          6.12 Press Release. Any public announcement relating to this financing
     (a "Press  Release") shall be submitted to the Investor for review at least
     two (2)  business  days prior to the planned  release.  The  Company  shall
     obtain  the  Investor's  written  approval  of the Press  Release  prior to
     issuance by the Company.

          6.13  Change in Law or  Policy.  In the  event of a change in law,  or
     policy of the SEC,  as  evidenced  by a No-Action  letter or other  written
     statements of the SEC or the NASD which causes the Investor to be unable to
     perform its obligations  hereunder,  this Agreement shall be  automatically
     terminated   and  no   Termination   Fee  shall  be  due,   provided   that
     notwithstanding any termination under this section 6.13, the Investor shall
     retain full  ownership of the Commitment  Warrant as partial  consideration
     for its commitment hereunder.

          6.14. Notice of Certain Events Affecting  Registration;  Suspension of
     Right to Make a Put. The Company shall immediately notify the Investor, but
     in no event later than two (2) business  days by facsimile and by overnight
     courier, upon the occurrence of any of the following events in respect of a
     Registration  Statement or related  prospectus in respect of an offering of
     Registrable   Securities:   (i)  receipt  of  any  request  for  additional
     information by the SEC or any other federal or state governmental authority
     during  the  period of  effectiveness  of the  Registration  Statement  for
     amendments  or  supplements  to  the  Registration   Statement  or  related
     prospectus;  (ii) the  issuance  by the SEC or any other  deferral or state
     governmental  authority of any stop order suspending the effectiveness of a
     Registration  Statement  or the  initiation  of any  proceedings  for  that
     purpose;  (iii) receipt of any notification  with respect to the suspension
     of  the  qualification  or  exemption  from  qualification  of  any  of the
     Registrable  Securities for sale in any  jurisdiction  or the initiation or
     threatening of any  proceeding for such purpose;  (iv) the happening of any
     event that  makes any  statement  made in such  Registration  Statement  or
     related
<PAGE>

     prospectus  or any  document  incorporated  or  deemed  to be  incorporated
     therein by reference  untrue in any material  respect or that  requires the
     making of any changes in the Registration Statement,  related prospectus or
     documents so that,  in the case of a  Registration  Statement,  it will not
     contain  any  untrue  statement  of a  material  fact or omit to state  any
     material  fact  required  to be stated  therein  or  necessary  to make the
     statements  therein  not  misleading,  and that in the case of the  related
     prospectus,  it will not contain any untrue statement of a material fact or
     omit to state any material fact required to be stated  therein or necessary
     to make the statements  therein,  in the light of the  circumstances  under
     which they were made, not misleading; (v) the declaration by the SEC of the
     effectiveness  of  a  Registration   Statement;   and  (vi)  the  Company's
     reasonable   determination   that  a   post-effective   amendment   to  the
     Registration Statement would be appropriate, and the Company shall promptly
     make  available  to the Investor  any such  supplement  or amendment to the
     related  prospectus.  The Company shall not deliver to the Investor any Put
     Notice during the continuation of any of the foregoing events.

          6.15 Acknowledgment  Regarding  Investor's Purchase of the Securities.
     The Company  acknowledges  and agrees that the Investor is acting solely in
     the capacity of arm's  length  purchaser  with  respect to the  Transaction
     Documents and the transactions contemplated hereby and thereby. The Company
     further acknowledges that the Investor is not acting as a financial advisor
     or  fiduciary of the Company (or in any similar  capacity)  with respect to
     the  Transaction  Documents and the  transactions  contemplated  hereby and
     thereby and any advice given by the Investor or any of its  representatives
     or agents in connection with the Transaction Documents and the transactions
     contemplated  hereby and  thereby is merely  incidental  to the  Investor's
     purchase of the Securities.  The Company further represents to the Investor
     that the  Company's  decision to enter into the  Transaction  Documents has
     been based  solely on the  independent  evaluation  by the  Company and its
     representatives and advisors.

          6.16.  Liquidated  Damages.  The parties hereto  acknowledge and agree
     that the sums payable as Non-Usage Fees,  Termination  Fees and Ineffective
     Registration  Payments  shall each give rise to liquidated  damages and not
     penalties.  The parties further  acknowledge that (a) the amount of loss or
     damages  likely to be incurred by the Investor is incapable or is difficult
     to  precisely  estimate,  (b)  the  amounts  specified  bear  a  reasonable
     proportion and are not plainly or grossly  disproportionate to the probable
     loss  likely  to be  incurred  by the  Investor,  and (c) the  parties  are
     sophisticated  business  parties and have been represented by sophisticated
     and able legal and financial counsel and negotiated this Agreement at arm's
     length.

          6.17.  Copies of Financial  Statements,  Reports and Proxy Statements.
     Promptly  upon the  mailing  thereof  to the  shareholders  of the  Company
     generally,  the  Company  shall  deliver  to  the  Investor  copies  of all
     financial statements,  reports and proxy statements so mailed and any other
     document generally distributed to shareholders.

          6.18.   Notice  of  Certain   Litigation.   Promptly   following   the
     commencement thereof, the Company shall provide the Investor written notice
     and a description  in reasonable  detail of any litigation or proceeding to
     which the Company or any subsidiary of the Company is a party, in which the
     amount  involved is $250,000 or more and which is not covered by  insurance
     or in which injunctive or similar relief is sought.
<PAGE>

     7. Miscellaneous.

          7.1 Representations and Warranties Survive the Closing;  Severability.
     Investor's and the Company's  representations  and warranties shall survive
     the  Investment  Date and any Put Closing  contemplated  by this  Agreement
     notwithstanding any due diligence investigation made by or on behalf of the
     party  seeking to rely  thereon.  In the event that any  provision  of this
     Agreement becomes or is declared by a court of competent jurisdiction to be
     illegal,  unenforceable  or void,  or is altered by a term  required by the
     Securities   Exchange   Commission  to  be  included  in  the  Registration
     Statement,  this Agreement  shall continue in full force and effect without
     said provision;  provided that if the removal of such provision  materially
     changes  the  economic  benefit of this  Agreement  to the  Investor,  this
     Agreement shall terminate.

          7.2  Successors and Assigns.  This  Agreement  shall not be assignable
     without  the  Company's  written  consent.  If  assigned,   the  terms  and
     conditions of this  Agreement  shall inure to the benefit of and be binding
     upon the respective 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.  Investor may
     assign Investor's rights hereunder,  in connection with any private sale of
     the Common Stock of such Investor,  so long as, as a condition precedent to
     such transfer,  the transferee  executes an  acknowledgment  agreeing to be
     bound by the applicable  provisions of this Agreement in a form  acceptable
     to the Company and provides an original copy of such  acknowledgment to the
     Company.

          7.3  Execution  in  Counterparts  Permitted.  This  Agreement  may  be
     executed in any number of counterparts,  each of which shall be enforceable
     against the parties actually executing such counterparts,  and all of which
     together shall constitute one (1) instrument.

          7.4 Titles and  Subtitles;  Gender.  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.  The use in this Agreement of
     a  masculine,  feminine  or neuter  pronoun  shall be  deemed to  include a
     reference to the others.

          7.5 Written  Notices,  Etc. Any notice,  demand or request required or
     permitted  to be given by the Company or Investor  pursuant to the terms of
     this Agreement shall be in writing and shall be deemed given when delivered
     personally,  or by facsimile or upon receipt if by overnight or two (2) day
     courier,  addressed  to the  parties  at  the  addresses  and/or  facsimile
     telephone  number of the parties set forth at the end of this  Agreement or
     such  other  address  as a party  may  request  by  notifying  the other in
     writing; provided, however, that in order for any notice to be effective as
     to the  Investor  such notice  shall be  delivered  and sent,  as specified
     herein,  to all  the  addresses  and  facsimile  telephone  numbers  of the
     Investor  set  forth at the end of this  Agreement  or such  other  address
     and/or facsimile  telephone  number as Investor may request in writing.  In
     addition,  the Investor  shall deliver copies of all notices to the Company
     to the following addresses:  Attention Irving Pfeffer,  Pfeffer & Williams,
     155 Montgomery  Street,  6th Floor,  San Francisco,  CA 94194,  and Norbert
     Lima, Prime Companies, Inc., 409 Center Street, Yuba City, CA 95991.

          7.6  Expenses.   Except  as  set  forth  in  the  Registration  Rights
     Agreement,  each of the  Company  and  Investor  shall  pay all  costs  and
     expenses  that it  respectively  incurs,  with respect to the  negotiation,
     execution, delivery and performance of this Agreement.
<PAGE>

          7.7 Entire Agreement;  Written  Amendments  Required.  This Agreement,
     including the Exhibits attached hereto, the Common Stock certificates,  the
     Warrants,  the  Registration  Rights  Agreement,  and the  other  documents
     delivered pursuant hereto constitute the full and entire  understanding and
     agreement  between  the  parties  with  regard to the  subjects  hereof and
     thereof,  and no party  shall be liable or bound to any other  party in any
     manner by any  warranties,  representations  or  covenants,  whether  oral,
     written,  or otherwise  except as specifically set forth herein or therein.
     Except as expressly  provided  herein,  neither this Agreement nor any term
     hereof may be amended,  waived,  discharged or  terminated  other than by a
     written instrument signed by the party against whom enforcement of any such
     amendment, waiver, discharge or termination is sought.

          7.8  Actions at Law or Equity;  Jurisdiction  and Venue.  The  parties
     acknowledge  that any and all  actions,  whether at law or at  equity,  and
     whether or not said  actions  are based  upon this  Agreement  between  the
     parties  hereto,  shall be filed in any state or federal  court  sitting in
     Atlanta,  Georgia.  Georgia law shall govern both the proceeding as well as
     the  interpretation  and construction of the Transaction  Documents and the
     transaction as a whole. In any litigation  between the parties hereto,  the
     prevailing  party, as found by the court,  shall be entitled to an award of
     all attorney's  fees and costs of court.  Should the court refuse to find a
     prevailing party, each party shall bear its own legal fees and costs.

          7.9 Reporting Entity for the Common Stock. The reporting entity relied
     upon for the  determination  of the trading price or trading  volume of the
     Common  Stock on the  Principal  Market  on any given  Trading  Day for the
     purposes of this  Agreement  shall be the Bloomberg L.P. The written mutual
     consent of the  Investor  and the  Company  shall be required to employ any
     other reporting entity.

     8. Subscription and Wiring Instructions; Irrevocability.

               (a)  Wire transfer of Subscription Funds.  Investor shall deliver
                    Put Dollar Amounts (as payment  towards any Put Share Price)
                    by  wire  transfer,  to  the  Company  pursuant  to  a  wire
                    instruction letter to be provided by the Company, and signed
                    by the Company.

               (b)  Irrevocable  Subscription.  Investor hereby acknowledges and
                    agrees,  subject to the  provisions of any  applicable  laws
                    providing for the refund of subscription  amounts  submitted
                    by Investor,  that this  Agreement is  irrevocable  and that
                    Investor is not entitled to cancel, terminate or revoke this
                    Agreement or any other agreements  executed by such Investor
                    and delivered  pursuant hereto,  and that this Agreement and
                    such other  agreements shall survive the death or disability
                    of such  Investor and shall be binding upon and inure to the
                    benefit  of  the   parties  and  their   heirs,   executors,
                    administrators,   successors,   legal   representatives  and
                    assigns. If the Securities subscribed for are to be owned by
                    more than one  person,  the  obligations  of all such owners
                    under this  Agreement  shall be joint and  several,  and the
                    agreements, representations,  warranties and acknowledgments
                    herein  contained  shall  be  deemed  to be  made  by and be
                    binding  upon each such  person  and his  heirs,  executors,
                    administrators,   successors,   legal   representatives  and
                    assigns.
<PAGE>

     9. Indemnification and Reimbursement.

          (a) Indemnification.  In consideration of the Investor's execution and
     delivery of the Investment Agreement, the Registration Rights Agreement and
     the Warrants (the  "Transaction  Documents")  and acquiring the  Securities
     thereunder and in addition to all of the Company's other  obligations under
     the Transaction Documents, the Company shall defend, protect, indemnify and
     hold harmless  Investor and all of its stockholders,  officers,  directors,
     employees  and  direct  or  indirect  investors  and  any of the  foregoing
     person's agents,  members,  partners or other  representatives  (including,
     without  limitation,  those  retained in connection  with the  transactions
     contemplated by this Agreement) (collectively,  the "Indemnitees") from and
     against  any and all  actions,  causes of action,  suits,  claims,  losses,
     costs, penalties, fees, liabilities and damages, and expenses in connection
     therewith  (irrespective  of whether any such  Indemnitee is a party to the
     action  for which  indemnification  hereunder  is  sought),  and  including
     reasonable    attorney's   fees   and   disbursements   (the   "Indemnified
     Liabilities"),  incurred by any  Indemnitee  as a result of, or arising out
     of,  or   relating   to  (a)  any   misrepresentation   or  breach  of  any
     representation or warranty made by the Company in the Transaction Documents
     or any other certificate,  instrument or documents  contemplated  hereby or
     thereby,  (b) any breach of any  covenant,  agreement or  obligation of the
     Company  contained in the Transaction  Documents or any other  certificate,
     instrument  or document  contemplated  hereby or thereby,  (c) any cause of
     action, suit or claim,  derivative or otherwise,  by any stockholder of the
     Company  based on a breach or alleged  breach by the  Company or any of its
     officers  or  directors  of their  fiduciary  or other  obligations  to the
     stockholders  of the Company,  or (d) claims made by third parties  against
     any of the Indemnitees  based on a violation of Section 5 of the Securities
     Act caused by the  integration  of the private  sale of common stock to the
     Investor and the public offering pursuant to the Registration Statement.

         To the extent  that the  foregoing  undertaking  by the  Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and  satisfaction  of each of the Indemnified  Liabilities  which it
would be required to make if such foregoing undertaking was enforceable which is
permissible under applicable law.

         Promptly  after  receipt  by an  Indemnified  Party  of  notice  of the
commencement of any action pursuant to which indemnification may be sought, such
Indemnified  Party will, if a claim in respect thereof is to be made against the
other party  (hereinafter  "Indemnitor")  under this  Section 9,  deliver to the
Indemnitor a written notice of the commencement thereof and the Indemnitor shall
have the right to participate in and to assume the defense  thereof with counsel
reasonably selected by the Indemnitor,  provided,  however,  that an Indemnified
Party  shall  have the  right to retain  its own  counsel,  with the  reasonably
incurred  fees and  expenses of such  counsel to be paid by the  Indemnitor,  if
representation  of  such  Indemnified  Party  by  the  counsel  retained  by the
Indemnitor  would be  inappropriate  due to actual  or  potential  conflicts  of
interest between such Indemnified  Party and any other party represented by such
counsel  in such  proceeding.  The  failure  to  deliver  written  notice to the
Indemnitor  within a reasonable time of the commencement of any such action,  if
prejudicial to the Indemnitor's ability to defend such action, shall relieve the
Indemnitor of any liability to the  Indemnified  Party under this Section 9, but
the omission to so deliver  written notice to the Indemnitor will not relieve it
of any liability that it may have to any Indemnified Party other than under this
Section 9 to the extent it is prejudicial.
<PAGE>

     (b) Reimbursement.  If (i) the Investor,  other than by reason of its gross
negligence  or willful  misconduct,  becomes  involved  in any  capacity  in any
action,  proceeding or investigation  brought by any stockholder of the Company,
in  connection  with or as a  result  of the  consummation  of the  transactions
contemplated  by the Transaction  Documents,  or if the Investor is impleaded in
any such action,  proceeding or investigation  by any person or entity,  or (ii)
the  Investor,  other  than  by  reason  of  its  gross  negligence  or  willful
misconduct,  becomes  involved  in any  capacity in any  action,  proceeding  or
investigation  brought  by the  SEC  against  or  involving  the  Company  or in
connection  with  or  as a  result  of  the  consummation  of  the  transactions
contemplated  by the Transaction  Documents,  or if the Investor is impleaded in
any such action,  proceeding or investigation  by any person or entity,  then in
any such case, the Company will reimburse the Investor for its reasonable  legal
and other expenses  (including the cost of any  investigation  and preparation )
incurred in connection  therewith,  as such expenses are incurred.  In addition,
other than with  respect to any matter in which the  Investor is a named  party,
the Company will pay the Investor the charges,  as reasonably  determined by the
Investor,  for the time of any officers or employees of the Investor  devoted to
appearing  and preparing to appear as witnesses,  assisting in  preparation  for
hearing,  trials or pretrial  matters,  or otherwise  with respect to inquiries,
hearing,  trials,  and other proceedings  relating to the subject matter of this
Agreement.  The  reimbursement  obligations  of the Company under this paragraph
shall be in addition to any  liability  which the  Company may  otherwise  have,
shall  extend  upon the same  terms  and  conditions  to any  Affiliates  of the
Investor who are actually named in such action, proceeding or investigation, and
partners,  directors, agents, employees and controlling persons (if any), as the
case may be, of the Investor and any such  Affiliate,  and shall be binding upon
and  inure  to the  benefit  of any  successors,  assigns,  heirs  and  personal
representatives of the Company, the Investor and any such Affiliate and any such
person or entity. The Company also agrees that neither the Investor nor any such
Affiliate,  partners,  directors, agents, employees or controlling persons shall
have any liability to the Company or any person asserting claims on behalf of or
in right of the Company in connection with or as a result of the consummation of
the Transaction Documents except to the extent that any losses, claims, damages,
liabilities or expenses incurred by the Company result from the gross negligence
or willful misconduct of the Investor or any inaccuracy in any representation or
warranty of the Investor  contained  herein or any breach by the Investor of any
of the provisions hereof.

<PAGE>
                           [INTENTIONALLY LEFT BLANK]

<PAGE>

     10.  Accredited  Investor.  Investor is an  "accredited  investor"  because
(check all applicable boxes):

         (a)               [ ]  it  is  an  organization  described  in  Section
                           501(c)(3)  of  the  Internal   Revenue   Code,  or  a
                           corporation,   limited  duration   company,   limited
                           liability company, business trust, or partnership not
                           formed  for the  specific  purpose of  acquiring  the
                           securities  offered,  with total  assets in excess of
                           $5,000,000.

         (b)               [ ]  any  trust,  with  total  assets  in  excess  of
                           $5,000,000,  not formed for the  specific  purpose of
                           acquiring the securities  offered,  whose purchase is
                           directed  by a  sophisticated  person  who  has  such
                           knowledge  and  experience  in financial and business
                           matters that he is capable of  evaluating  the merits
                           and risks of the prospective investment.

         (c)      [  ]     a natural person, who

                  [  ]     is a director, executive officer or general partner
                           of the issuer of the securities being offered or sold
                           or a director,  executive  officer or general partner
                           of a general partner of that issuer.

                  [  ]     has an individual net worth, or joint net worth with
                           that person's  spouse,  at the time of  his purchase
                           exceeding $1,000,000.

                  [  ]     had an  individual  income in excess of $200,000 in
                           each of the two most  recent  years  or joint  income
                           with that  person's  spouse in excess of  $300,000 in
                           each of those years and has a reasonable  expectation
                           of  reaching  the same  income  level in the  current
                           year.

         (d)               [ ] an entity each equity owner of which is an entity
                           described  in a - b  above  or is an  individual  who
                           could check one (1) of the last three (3) boxes under
                           subparagraph (c) above.

         (e)      [  ]     other [specify] _____________________________________

<PAGE>

         The  undersigned  hereby  subscribes  the Maximum  Offering  Amount and
acknowledges that this Agreement and the subscription  represented  hereby shall
not be effective unless accepted by the Company as indicated below.

         IN WITNESS WHEREOF, the undersigned Investor does represent and certify
under penalty of perjury that the foregoing  statements are true and correct and
that Investor by the following signature(s) executed this Agreement.

Dated this 3rd day of October, 2000.

SWARTZ PRIVATE EQUITY, LLC

By: ____________________________________
        Eric S. Swartz, Manager

SECURITY DELIVERY INSTRUCTIONS:
Swartz Private Equity, LLC
C/o Eric S. Swartz
200 Roswell Summit, Suite 285
1080 Holcomb Bridge Road
Roswell, GA 30076
Telephone: (770) 640-8130

THIS AGREEMENT IS ACCEPTED BY THE COMPANY IN THE AMOUNT OF THE MAXIMUM  OFFERING
AMOUNT ON THE 3RD DAY OF OCTOBER, 2000.

                                           PRIME COMPANIES, INC.

                                   By:
                                      --------------------------------
                                            Norbert J. Lima, CEO

                                  Address: Attn: Stephen Goodman, CFO
                                                 2975 Treat Boulevard, Ste. C8
                                                 Concord, CA  94518
                                                 Telephone (925) 687-9669
                                                 Facsimile  (925) 687-9670

<PAGE>

                                   EXHIBIT E

                               ADVANCE PUT NOTICE

PRIME COMPANIES,  INC. (the "Company") hereby intends, subject to the Individual
Put Limit (as defined in the Investment  Agreement),  to elect to exercise a Put
to sell the number of shares of Common Stock of the Company  specified below, to
_____________________________, the Investor, as of the Intended Put Date written
below,  all  pursuant to that  certain  Investment  Agreement  (the  "Investment
Agreement") by and between the Company and Swartz Private  Equity,  LLC dated on
or about October 3, 2000.

                 Date of Advance Put Notice: ___________________

                 Intended Put Date: ___________________________

                 Intended Put Share Amount: __________________

                 Company Designation Maximum Put Dollar Amount (Optional):
                 ----------------------------------------.

                 Company Designation Minimum Put Share Price (Optional):
                 ----------------------------------------.

                                   PRIME COMPANIES, INC.

                                   By:
                                       -----------------------------------------
                                           Norbert J. Lima, CEO

                          Address: Attn: Stephen Goodman, CFO
                                         2975 Treat Boulevard, Ste. C8
                                         Concord, CA  94518
                                         Telephone (925) 687-9669
                                         Facsimile  (925) 687-9670

<PAGE>

                                    EXHIBIT F
                       CONFIRMATION of ADVANCE PUT NOTICE

_________________________________,  the  Investor,  hereby  confirms  receipt of
PRIME  COMPANIES,  INC.'s (the "Company")  Advance Put Notice on the Advance Put
Date written below,  and its intention to elect to exercise a Put to sell shares
of common stock ("Intended Put Share Amount") of the Company to the Investor, as
of the intended Put Date written below, all pursuant to that certain  Investment
Agreement  (the  "Investment  Agreement")  by and between the Company and Swartz
Private Equity, LLC dated on or about October 3, 2000.

                   Date of Confirmation: ____________________

                   Date of Advance Put Notice: _______________

                   Intended Put Date: ________________________

                   Intended Put Share Amount: ________________

                   Company Designation Maximum Put Dollar Amount (Optional):
                   ----------------------------------------.

                   Company Designation Minimum Put Share Price (Optional):
                   ----------------------------------------.

                    INVESTOR(S)

                    -----------------------------------
                     Investor's Name

                    By: ________________________________
                                 (Signature)

                  Address:____________________________________

                          ------------------------------------

                          ------------------------------------

               Telephone No.: ___________________________________

               Facsimile No.: ___________________________________

<PAGE>

                                    EXHIBIT G
                                   PUT NOTICE

PRIME  COMPANIES,  INC. (the "Company")  hereby elects to exercise a Put to sell
shares   of   common    stock    ("Common    Stock")    of   the    Company   to
_____________________________,  the  Investor,  as of the Put  Date,  at the Put
Share Price and for the number of Put Shares written below, all pursuant to that
certain  Investment  Agreement (the  "Investment  Agreement") by and between the
Company and Swartz Private Equity, LLC dated on or about October 3, 2000.

          Put Date: _________________

          Intended  Put Share Amount (from  Advance Put  Notice):
          _________________  Common    Shares

          Company Designation Maximum Put Dollar Amount (Optional):
          ----------------------------------------.

          Company Designation Minimum Put Share Price (Optional):
          ----------------------------------------.

          Note:  Capitalized  terms shall have the meanings  ascribed to them in
          this Investment Agreement.

                           PRIME COMPANIES, INC.

                           By:
                               -------------------------------------------------
                                             Norbert J. Lima, CEO

                  Address: Attn: Stephen Goodman, CFO
                                 2975 Treat Boulevard, Ste. C8
                                 Concord, CA  94518
                                 Telephone (925) 687-9669
                                 Facsimile  (925) 687-9670

<PAGE>

f
                                    EXHIBIT H
                           CONFIRMATION of PUT NOTICE

_________________________________,  the  Investor,  hereby  confirms  receipt of
Prime Companies,  Inc. (the "Company") Put Notice and election to exercise a Put
to sell  ___________________________  shares of common stock ("Common Stock") of
the  Company to  Investor,  as of the Put Date,  all  pursuant  to that  certain
Investment Agreement (the "Investment Agreement") by and between the Company and
Swartz Private Equity, LLC dated on or about October 3, 2000.

           Date of Confirmation: ____________________

                            Date of Put Notice: _______________

                            Put Date: ________________________

           Intended Put Share Amount: ________________

           Company Designation Maximum Put Dollar Amount (Optional):

           ----------------------------------------.

           Company Designation Minimum Put Share Price (Optional):

           ----------------------------------------.

                           INVESTOR(S)

                           -----------------------------------
                           Investor's Name

                      By: _________________________________
                           (Signature)
          Address:____________________________________

                  ------------------------------------

                  ------------------------------------

           Telephone No.: ___________________________________

           Facsimile No.: ____________________________________

<PAGE>

                                    EXHIBIT Q
                             PUT CANCELLATION NOTICE

PRIME  COMPANIES,  INC. (the "Company")  hereby cancels the Put specified below,
pursuant to that certain  Investment  Agreement (the "Investment  Agreement") by
and between the Company and Swartz Private Equity, LLC dated on or about October
3,  2000,  as of  the  close  of  trading  on  the  date  specified  below  (the
"Cancellation Date," which date must be on or after the date that this notice is
delivered to the Investor),  provided that such cancellation  shall not apply to
the number of shares of Common Stock equal to the Truncated Put Share Amount (as
defined in the Investment Agreement).

                          Cancellation Date: _____________________

                          Put Date of Put Being Canceled: __________

                          Number of Shares Put on Put Date: _________

                          Reason   for   Cancellation
(check one):

                         [   ] Material Facts, Ineffective Registration Period.

                        [    ] Delisting Event

The Company  understands  that, by canceling  this Put, it must give twenty (20)
Business Days advance written notice to the Investor  before  effecting the next
Put.

                             PRIME COMPANIES, INC.

                             By:
                                 --------------------------------------------
                                               Norbert J. Lima, CEO

                    Address: Attn: Stephen Goodman, CFO
                                      2975 Treat Boulevard, Ste. C8
                                      Concord, CA  94518
                                      Telephone (925) 687-9669
                                      Facsimile  (925) 687-9670

<PAGE>

                                    EXHIBIT S
                      PUT CANCELLATION NOTICE CONFIRMATION

The undersigned  Investor to that certain Investment  Agreement (the "Investment
Agreement")  by and  between the Prime  Companies,  Inc.'s,  and Swartz  Private
Equity,  LLC dated on or about October 3, 2000, hereby confirms receipt of Prime
Companies,  Inc.'s (the  "Company") Put  Cancellation  Notice,  and confirms the
following:

                                       Date of this Confirmation: ______________

                                       Put Cancellation Date: __________________

                     INVESTOR(S)

                     -----------------------------------
                     Investor's Name

                     By: _________________________________
                                     (Signature)

                     Address:____________________________________

                             ------------------------------------

                             ------------------------------------

                     Telephone No.: ___________________________________

                     Facsimile No.: ____________________________________THIS WARRANT AND THE  SECURITIES  ISSUABLE  UPON  EXERCISE  HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES  ACT"),
OR ANY  STATE  SECURITIES  LAW,  AND  MAY  NOT BE  SOLD,  TRANSFERRED,  PLEDGED,
HYPOTHECATED  OR OTHERWISE  DISPOSED OF OR EXERCISED  UNLESS (i) A  REGISTRATION
STATEMENT  UNDER THE SECURITIES ACT AND APPLICABLE  STATE  SECURITIES LAWS SHALL
HAVE  BECOME   EFFECTIVE  WITH  REGARD  THERETO,   OR  (ii)  AN  EXEMPTION  FROM
REGISTRATION  UNDER THE SECURITIES ACT AND APPLICABLE  STATE  SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.

AN INVESTMENT IN THESE SECURITIES  INVOLVES A HIGH DEGREE OF RISK.  HOLDERS MUST
RELY ON THEIR  OWN  ANALYSIS  OF THE  INVESTMENT  AND  ASSESSMENT  OF THE  RISKS
INVOLVED. SEE THE RISK FACTORS SET FORTH UNDER THAT CERTAIN INVESTMENT AGREEMENT
BY AND BETWEEN THE COMPANY AND HOLDER REFERENCED THEREIN AS EXHIBIT J.

Warrant to Purchase
      "N" shares                                            Warrant Number ____
     ----

                        Warrant to Purchase Common Stock
                                       of
                              Prime Companies, Inc.

         THIS CERTIFIES that Swartz Private Equity, LLC or any subsequent holder
hereof  ("Holder"),  has the right to purchase  from Prime  Companies,  Inc.,  a
Delaware  corporation  (the "Company"),  up to "N" fully paid and  nonassessable
shares, wherein "N" is defined below, of the Company's common stock, $0.0001 par
value per share ("Common Stock"), subject to adjustment as provided herein, at a
price  equal to the  Exercise  Price as defined in Section 3 below,  at any time
beginning on the Date of Issuance  (defined  below) and ending at 5:00 p.m., New
York,  New York time the date that is five (5) years  after the Date of Issuance
(the "Exercise  Period");  provided,  that,  with respect to each "Put," as that
term  is  defined  in  that  certain   Investment   Agreement  (the  "Investment
Agreement")  by and between the initial  Holder and  Company,  dated on or about
October 3, 2000,  "N" shall equal ten  percent  (10%) of the number of shares of
Common Stock purchased by the Holder in that Put.

         Holder  agrees with the Company  that this  Warrant to Purchase  Common
Stock of the Company (this  "Warrant") is issued and all rights  hereunder shall
be held subject to all of the  conditions,  limitations and provisions set forth
herein.

         1.       Date of Issuance and Term.
                  --------------------------

         This  Warrant  shall be deemed to be  issued on  _____________,  ______
("Date of  Issuance").  The term of this Warrant is five (5) years from the Date
of Issuance.
<PAGE>

         Notwithstanding anything to the contrary herein, the applicable portion
of this Warrant shall not be  exercisable  during any time that, and only to the
extent  that,  the number of shares of Common  Stock to be issued to Holder upon
such exercise,  when added to the number of shares of Common Stock, if any, that
the Holder otherwise beneficially owns at the time of such exercise, would equal
or exceed  4.99% of the number of shares of Common  Stock then  outstanding,  as
determined  in  accordance  with  Section  13(d) of the Exchange Act (the "4.99%
Limitation").  The  4.99%  Limitation  shall be  conclusively  satisfied  if the
applicable  Exercise Notice includes a signed  representation by the Holder that
the  issuance of the shares in such  Exercise  Notice will not violate the 4.99%
Limitation,  and  the  Company  shall  not be  entitled  to  require  additional
documentation of such satisfaction.

         2.       Exercise.
                  --------

         (a) Manner of Exercise. During the Exercise Period, this Warrant may be
exercised as to all or any lesser  number of full shares of Common Stock covered
hereby (the "Warrant Shares") upon surrender of this Warrant,  with the Exercise
Form  attached  hereto as Exhibit A (the  "Exercise  Form") duly  completed  and
executed,  together  with the full  Exercise  Price (as defined  below) for each
share of Common  Stock as to which this Warrant is  exercised,  at the office of
the Company, Attention:  Norbert J. Lima, CEO, Prime Companies, Inc., 2975 Treat
Boulevard,  Suite C8, Concord, CA 94518; Telephone:  (925) 687-9669,  Facsimile:
(925)  687-9670,  or at such other office or agency as the Company may designate
in writing, by overnight mail, with an advance copy of the Exercise Form sent to
the Company and its Transfer Agent by facsimile  (such  surrender and payment of
the Exercise Price hereinafter called the "Exercise of this Warrant").

         (b) Date of Exercise.  The "Date of  Exercise" of the Warrant  shall be
defined as the date that the advance copy of the completed and executed Exercise
Form is sent by facsimile to the Company, provided that the original Warrant and
Exercise  Form are  received by the Company as soon as  practicable  thereafter.
Alternatively,  the Date of Exercise  shall be defined as the date the  original
Exercise Form is received by the Company,  if Holder has not sent advance notice
by facsimile.  The Company shall not be required to deliver the shares of Common
Stock to the Holder until the requirements of Section 2(a) above are satisfied.

         (c) Delivery of Shares of Common Stock Upon Exercise. Upon any exercise
of this Warrant,  the Company shall use its reasonable  best efforts to deliver,
or  shall  cause  its  transfer  agent  to  deliver,   a  stock  certificate  or
certificates  representing  the number of shares of Common Stock into which this
Warrant was exercised, within three (3) trading days of the date that all of the
following  have been  received by the Company:  (i) the original  completed  and
executed  Exercise Form, (ii) the original  Warrant and (iii) the Exercise Price
(if applicable)(collectively, the "Receipt Date"). Such stock certificates shall
not contain a legend restricting  transfer if a registration  statement covering
the  resale  of such  shares  of  Common  Stock is in effect at the time of such
exercise  or if such  shares  of  Common  Stock  may be  resold  pursuant  to an
exemption  from  registration,  including  but not limited to Rule 144 under the
Securities Act of 1933.
<PAGE>

         (d) Economic Loss Due to Late Delivery of Shares.  If the Company fails
for any  reason to  deliver  the  requisite  number  of  shares of Common  Stock
(unlegended,  if so required by the terms of this Warrant)(the "Warrant Shares")
to a Holder upon an exercise of this Warrant  within  fifteen (15) business days
of the Receipt Date (the "Late Delivery  Deadline"),  the Company shall pay such
Holder (in addition to any other  remedies  available to Holder) an amount equal
to  ("Non-Delivery  Payment") the number of Warrant Shares for which delivery is
late, multiplied by the difference of:

                  (x) the highest  closing price for the Company's  Common Stock
                  for  any  trading  day  during  the  period  beginning  on and
                  including  the Date of  Exercise  and ending on the earlier of
                  (i) the  date  that the  Investor  receives  from the  Company
                  certificates (unlegended,  if so required by the terms of this
                  Warrant)  representing  the  Warrant  Shares of  Common  Stock
                  issuable in conjunction  with such Exercise,  or (ii) the date
                  that the Investor receives the full amount of the Non-Delivery
                  Payment, whichever is earlier,

                  minus

                  (y) the  Exercise  Price  per share  (which,  in the case of a
                  Cashless Exercise,  shall be deemed to equal zero), or, if the
                  Investor has received the Warrant  Shares  (unlegended,  if so
                  required by the terms of this  Warrant) from the Company prior
                  to the payment of the Non-Delivery Payment, the lowest closing
                  price of the  Company's  Common Stock for the five (5) trading
                  days  immediately  preceding the date that such Warrant Shares
                  are delivered to the Holder.

                  Non-Delivery  Payments  shall  be  payable,  in  cash  or cash
                  equivalent, within five (5) business days of the Late Delivery
                  Deadline.

         (e) Liquidated  Damages.  The parties hereto acknowledge and agree that
the sums payable as Non-Delivery  Payments shall give rise to liquidated damages
and not penalties.  The parties further  acknowledge that (i) the amount of loss
or damages  likely to be incurred by the Holder is  incapable or is difficult to
precisely estimate,  (ii) the amounts specified bear a reasonable proportion and
are not plainly or grossly  disproportionate  to the probable  loss likely to be
incurred  by the  Investor,  and (iii) the parties  are  sophisticated  business
parties and have been represented by sophisticated  and able legal and financial
counsel and negotiated this Agreement at arm's length.

         (f)  Cancellation  of Warrant.  This Warrant shall be canceled upon the
Exercise of this Warrant,  and, as soon as practical after the Date of Exercise,
Holder  shall be  entitled  to  receive  Common  Stock for the  number of shares
purchased  upon  such  Exercise  of this  Warrant,  and if this  Warrant  is not
exercised in full, Holder shall be entitled to receive a new Warrant (containing
terms identical to this Warrant)  representing  any unexercised  portion of this
Warrant in addition to such Common Stock.

         (g) Holder of Record.  Each person in whose name any Warrant for shares
of Common Stock is issued shall, for all purposes, be deemed to be the Holder of
record of such shares on the Date of Exercise of this Warrant,  irrespective  of
the date of delivery of the Common  Stock  purchased  upon the  Exercise of this
Warrant.  Nothing in this Warrant shall be construed as  conferring  upon Holder
any rights as a stockholder of the Company.
<PAGE>

         3.       Payment of Warrant Exercise Price.
                  ---------------------------------

         The Exercise Price  ("Exercise  Price"),  shall  initially equal $Y per
share ("Initial Exercise Price"), where "Y" shall equal the Market Price for the
applicable Put (as both are defined in the Investment Agreement) or, if the Date
of Exercise is more than six (6) months after the Date of  Issuance,  the lesser
of (i) the Initial Exercise Price or (ii) the "Lowest Reset Price," as that term
is defined below.  The Company shall calculate a "Reset Price" on each six-month
anniversary  date of the Date of Issuance which shall equal the average  Closing
Bid Price of the  Common  Stock  for the five (5)  trading  days  ending on such
six-month  anniversary  date of the Date of Issuance.  The "Lowest  Reset Price"
shall equal the lowest Reset Price determined on any six-month  anniversary date
of the Date of Issuance preceding the Date of Exercise,  taking into account, as
appropriate, any adjustments made pursuant to Section 5 hereof.

         For  purposes  hereof,  the term  "Closing  Bid  Price"  shall mean the
highest  closing bid price on the O.T.C.  Bulletin  Board,  the National  Market
System ("NMS"), the New York Stock Exchange,  the Nasdaq Small Cap Market, or if
no longer  traded on the  O.T.C.  Bulletin  Board,  the NMS,  the New York Stock
Exchange,  the Nasdaq Small Cap Market,  the "Closing Bid Price" shall equal the
closing   price  on  the   principal   national   securities   exchange  or  the
over-the-counter  system on which the  Common  Stock is so  traded  and,  if not
available,  the  mean of the  high  and low  prices  on the  principal  national
securities exchange on which the Common Stock is so traded.

         Payment of the Exercise  Price may be made by either of the  following,
or a combination thereof, at the election of Holder:

          (i) Cash Exercise: cash, bank or cashiers check or wire transfer; or

          (ii)  Cashless  Exercise:  surrender of this Warrant at the  principal
     office of the Company together with notice of cashless  election,  in which
     event the  Company  shall issue  Holder a number of shares of Common  Stock
     computed using the following formula:

                                  X = Y (A-B)/A

where:

     X = the number of shares of Common Stock to be issued to Holder.

     Y = the number of shares of Common  Stock for which  this  Warrant is being
     exercised.

     A = the Market Price of one (1) share of Common Stock (for purposes of this
     Section 3(ii),  the "Market Price" shall be defined as the average  closing
     price of the Common  Stock for the five (5) trading  days prior to the Date
     of Exercise of this Warrant (the "Average Closing  Price"),  as reported by
     the O.T.C.  Bulletin  Board,  National  Association  of Securities  Dealers
     Automated  Quotation System  ("Nasdaq") Small Cap Market,  or if the Common
     Stock is not traded on the Nasdaq  Small Cap Market,  the  Average  Closing
     Price in any other over-the-counter market; provided,  however, that if the
     Common Stock is listed on a stock  exchange,  the Market Price shall be the
     Average  Closing Price on such exchange for the five (5) trading days prior
     to the date of exercise of the  Warrants.  If the Common  Stock  is/was not
     traded during the five (5) trading days prior to the Date of Exercise, then
     the closing  price for the last  publicly  traded day shall be deemed to be
     the closing price for any and all (if applicable) days during such five (5)
     trading day period.
<PAGE>

                  B = the Exercise Price.

                  For purposes of Rule 144 and sub-section  (d)(3)(ii)  thereof,
it is intended,  understood and acknowledged that the Common Stock issuable upon
exercise of this Warrant in a cashless  exercise  transaction shall be deemed to
have  been  acquired  at the time  this  Warrant  was  issued.  Moreover,  it is
intended,  understood  and  acknowledged  that the holding period for the Common
Stock issuable upon exercise of this Warrant in a cashless exercise  transaction
shall be deemed to have commenced on the date this Warrant was issued.

         4.       Transfer and Registration.
                  -------------------------

         (a) Transfer  Rights.  Subject to the  provisions  of Section 8 of this
Warrant,  this Warrant may be transferred on the books of the Company,  in whole
or in part, in person or by attorney,  upon  surrender of this Warrant  properly
completed and endorsed.  This Warrant shall be canceled upon such surrender and,
as soon as  practicable  thereafter,  the person to whom such  transfer  is made
shall be entitled to receive a new Warrant or Warrants as to the portion of this
Warrant transferred, and Holder shall be entitled to receive a new Warrant as to
the portion hereof retained.

         (b) Registrable Securities. The Common Stock issuable upon the exercise
of  this  Warrant  constitutes   "Registrable  Securities"  under  that  certain
Registration  Rights  Agreement  dated on or about  October 3, 2000  between the
Company  and  certain  investors  and,  accordingly,  has  the  benefit  of  the
registration rights pursuant to that agreement.

         5.       Anti-Dilution Adjustments.
                  -------------------------

         (a) Stock Dividend. If the Company shall at any time declare a dividend
payable in shares of Common  Stock,  then Holder,  upon Exercise of this Warrant
after the record date for the  determination of holders of Common Stock entitled
to receive such  dividend,  shall be entitled to receive  upon  Exercise of this
Warrant,  in addition  to the number of shares of Common  Stock as to which this
Warrant is  exercised,  such  additional  shares of Common  Stock as such Holder
would have received had this Warrant been  exercised  immediately  prior to such
record date and the Exercise Price will be proportionately adjusted.
<PAGE>

         (b) Recapitalization or  Reclassification.  If the Company shall at any
time effect a recapitalization, reclassification or other similar transaction of
such  character  that the shares of Common Stock shall be changed into or become
exchangeable  for a larger or smaller number of shares,  then upon the effective
date  thereof,  the  number  of shares of Common  Stock  which  Holder  shall be
entitled to  purchase  upon  Exercise  of this  Warrant  shall be  increased  or
decreased,  as the case may be, in direct proportion to the increase or decrease
in the  number of shares  of  Common  Stock by reason of such  recapitalization,
reclassification or similar transaction, and the Exercise Price shall be, in the
case of an increase in the number of shares,  proportionally  decreased  and, in
the case of  decrease  in the number of shares,  proportionally  increased.  The
Company shall give Holder the same notice it provides to holders of Common Stock
of any transaction described in this Section 5(b).

         (c)  Distributions.  If the Company shall at any time distribute for no
consideration  to holders of Common  Stock cash,  evidences of  indebtedness  or
other securities or assets (other than cash dividends or  distributions  payable
out of earned  surplus or net profits for the current or preceding  years) then,
in any such case,  Holder  shall be entitled to receive,  upon  Exercise of this
Warrant, with respect to each share of Common Stock issuable upon such exercise,
the amount of cash or evidences of  indebtedness  or other  securities or assets
which Holder would have been entitled to receive with respect to each such share
of Common Stock as a result of the happening of such event had this Warrant been
exercised immediately prior to the record date or other date fixing shareholders
to be affected by such event (the "Determination  Date") or, in lieu thereof, if
the Board of  Directors  of the Company  should so determine at the time of such
distribution,  a reduced  Exercise Price  determined by multiplying the Exercise
Price on the  Determination  Date by a fraction,  the  numerator of which is the
result  of such  Exercise  Price  reduced  by the  value  of  such  distribution
applicable  to one share of Common  Stock  (such value to be  determined  by the
Board of  Directors of the Company in its  discretion)  and the  denominator  of
which is such Exercise Price.

         (d) Notice of  Consolidation  or Merger.  The Company shall not, at any
time after the date hereof, effect a merger, consolidation,  exchange of shares,
recapitalization,  reorganization,  or other similar event, as a result of which
shares of Common Stock shall be changed  into the same or a different  number of
shares of the same or another  class or classes of stock or  securities or other
assets  of  the  Company  or  another  entity  or  there  is a  sale  of  all or
substantially  all the  Company's  assets (a  "Corporate  Change"),  unless  the
resulting  successor or acquiring  entity (the  "Resulting  Entity")  assumes by
written instrument the Company's  obligations under this Warrant,  including but
not limited to the Exercise Price reset provisions as provided herein during the
term of the resultant warrants,  and agrees in such written instrument that this
Warrant  shall be  exerciseable  into such class and type of securities or other
assets  of the  Resulting  Entity as  Holder  would  have  received  had  Holder
exercised  this Warrant  immediately  prior to such  Corporate  Change,  and the
Exercise  Price of this  Warrant  shall be  proportionately  increased  (if this
Warrant shall be changed into or become exchangeable for a warrant to purchase a
smaller  number of shares of Common Stock of the  Resulting  Entity) or shall be
proportionately   decreased   (if  this  Warrant  shall  be  changed  or  become
exchangeable for a warrant to purchase a larger number of shares of Common Stock
of the Resulting  Entity);  provided,  however,  that Company may not affect any
Corporate  Change  unless it first  shall have given  thirty (30) days notice to
Holder hereof of any Corporate Change.
<PAGE>

         (e)  Exercise  Price  Adjusted.  As  used  in this  Warrant,  the  term
"Exercise  Price" shall mean the purchase price per share specified in Section 3
of this Warrant, until the occurrence of an event stated in subsection (a), (b),
(c) or (d) of this Section 5, and  thereafter  shall mean said price as adjusted
from time to time in accordance  with the  provisions  of this Warrant.  No such
adjustment  under this  Section 5 shall be made  unless  such  adjustment  would
change the Exercise Price at the time by $0.01 or more; provided,  however, that
all  adjustments  not so made  shall be  deferred  and made  when the  aggregate
thereof  would  change  the  Exercise  Price at the  time by  $0.01 or more.  No
adjustment  made  pursuant to any provision of this Section 5 shall have the net
effect of increasing  the Exercise  Price in relation to the split  adjusted and
distribution  adjusted price of the Common Stock. The number of shares of Common
Stock subject  hereto shall increase  proportionately  with each decrease in the
Exercise Price.

         (f) Adjustments:  Additional Shares, Securities or Assets. In the event
that at any time, as a result of an adjustment  made pursuant to this Section 5,
Holder shall,  upon Exercise of this Warrant,  become entitled to receive shares
and/or other  securities  or assets  (other than Common  Stock)  then,  wherever
appropriate,  all references herein to shares of Common Stock shall be deemed to
refer to and  include  such  shares  and/or  other  securities  or  assets;  and
thereafter the number of such shares and/or other  securities or assets shall be
subject  to  adjustment  from time to time in a manner  and upon terms as nearly
equivalent as practicable to the provisions of this Section 5.

         6.       Fractional Interests.
                  --------------------

                  No fractional shares or scrip  representing  fractional shares
shall be issuable  upon the  Exercise of this  Warrant,  but on Exercise of this
Warrant,  Holder may purchase only a whole number of shares of Common Stock. If,
on Exercise of this Warrant,  Holder would be entitled to a fractional  share of
Common  Stock or a right to acquire a  fractional  share of Common  Stock,  such
fractional  share shall be disregarded  and the number of shares of Common Stock
issuable upon exercise shall be the next higher number of shares.

         7.       Reservation of Shares.
                  ---------------------

                  The  Company  shall at all times  reserve  for  issuance  such
number of authorized  and unissued  shares of Common Stock (or other  securities
substituted  therefor as herein above  provided) as shall be sufficient  for the
Exercise  of this  Warrant  and  payment  of the  Exercise  Price.  The  Company
covenants  and agrees  that upon the  Exercise  of this  Warrant,  all shares of
Common Stock issuable upon such exercise shall be duly and validly issued, fully
paid,  nonassessable  and not  subject  to  preemptive  rights,  rights of first
refusal or similar rights of any person or entity.

<PAGE>

         8.       Restrictions on Transfer.
                  ------------------------

                  (a) Registration or Exemption Required.  This Warrant has been
issued in a transaction exempt from the registration  requirements of the Act by
virtue of Regulation D and exempt from state registration under applicable state
laws.  The  Warrant  and the Common  Stock  issuable  upon the  Exercise of this
Warrant may not be pledged,  transferred, sold or assigned except pursuant to an
effective   registration   statement  or  an   exemption  to  the   registration
requirements of the Act and applicable state laws.

                  (b)  Assignment.  If  Holder  can  provide  the  Company  with
reasonably  satisfactory  evidence that the  conditions  of (a) above  regarding
registration  or  exemption  have been  satisfied,  Holder  may sell,  transfer,
assign, pledge or otherwise dispose of this Warrant, in whole or in part. Holder
shall  deliver a written  notice to  Company,  substantially  in the form of the
Assignment  attached  hereto as Exhibit B,  indicating  the person or persons to
whom the Warrant shall be assigned and the  respective  number of warrants to be
assigned to each assignee.  The Company shall effect the  assignment  within ten
(10) days, and shall deliver to the  assignee(s)  designated by Holder a Warrant
or Warrants of like tenor and terms for the appropriate number of shares.

         9.       Benefits of this Warrant.
                  ------------------------

                  Nothing in this Warrant  shall be construed to confer upon any
person other than the Company and Holder any legal or equitable right, remedy or
claim under this  Warrant and this Warrant  shall be for the sole and  exclusive
benefit of the Company and Holder.

         10.      Applicable Law.
                  --------------

                  This  Warrant is issued  under and shall for all  purposes  be
governed by and construed in  accordance  with the laws of the state of Georgia,
without giving effect to conflict of law provisions thereof.

         11.      Loss of Warrant.
                  ---------------

                  Upon  receipt by the Company of  evidence of the loss,  theft,
destruction  or mutilation of this Warrant,  and (in the case of loss,  theft or
destruction)  of indemnity or security  reasonably  satisfactory to the Company,
and upon surrender and cancellation of this Warrant,  if mutilated,  the Company
shall execute and deliver a new Warrant of like tenor and date.

         12.      Notice or Demands.
                  -----------------

Notices or demands  pursuant to this Warrant to be given or made by Holder to or
on the  Company  shall be  sufficiently  given or made if sent by  certified  or
registered mail, return receipt requested, postage prepaid, and addressed, until
another  address is  designated  in writing by the  Company,  to the address set
forth in Section 2(a) above.  Notices or demands  pursuant to this Warrant to be
given or made by the Company to or on Holder shall be sufficiently given or made
if sent by certified or  registered  mail,  return  receipt  requested,  postage
prepaid,  and  addressed,  to the  address of Holder set forth in the  Company's
records, until another address is designated in writing by Holder.

<PAGE>

         IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the
______ day of ____________, 200_.

                                        PRIME  COMPANIES, INC.

                                    By:  ________________________________
                                        Norbert J. Lima, CEO

<PAGE>

                                    EXHIBIT A

                            EXERCISE FORM FOR WARRANT

                            TO: PRIME COMPANIES, INC.

         The  undersigned  hereby  irrevocably  exercises  the right to purchase
____________  of the  shares of  Common  Stock  (the  "Common  Stock")  of Prime
Companies,  Inc.,  a Delaware  corporation  (the  "Company"),  evidenced  by the
attached  warrant (the  "Warrant"),  and herewith  makes payment of the exercise
price with respect to such shares in full, all in accordance with the conditions
and provisions of said Warrant.

1. The undersigned agrees not to offer,  sell,  transfer or otherwise dispose of
any  of the  Common  Stock  obtained  on  exercise  of the  Warrant,  except  in
accordance with the provisions of Section 8(a) of the Warrant.

2. The undersigned  requests that stock  certificates  for such shares be issued
free of any restrictive legend, if appropriate,  and a warrant  representing any
unexercised portion hereof be issued, pursuant to the Warrant in the name of the
undersigned and delivered to the undersigned at the address set forth below:

Dated:

    ------------------------------------------------------------------------
                                    Signature

    -----------------------------------------------------------------------
                                   Print Name

    ------------------------------------------------------------------------
                                     Address

    -----------------------------------------------------------------------

NOTICE

The  signature to the  foregoing  Exercise  Form must  correspond to the name as
written  upon the face of the  attached  Warrant  in every  particular,  without
alteration or enlargement or any change whatsoever.
--------------------------------------------------------------------------------

<PAGE>

                                    EXHIBIT B

                                   ASSIGNMENT

                    (To be executed by the registered holder
                        desiring to transfer the Warrant)

FOR  VALUE  RECEIVED,  the  undersigned  holder  of the  attached  warrant  (the
"Warrant") hereby sells,  assigns and transfers unto the person or persons below
named  the  right  to  purchase  _______  shares  of the  Common  Stock of Prime
Companies,  Inc.,  evidenced by the attached Warrant and does hereby irrevocably
constitute  and appoint  _______________________  attorney to transfer  the said
Warrant  on the books of the  Company,  with full power of  substitution  in the
premises.

Dated:   _________                                ______________________________
                                                   Signature

Fill in for new registration of Warrant:

 -----------------------------------
                  Name

-----------------------------------
                  Address

-----------------------------------
Please print name and address of assignee
(including zip code number)

-------------------------------------------------------------------------------

NOTICE

The signature to the foregoing Assignment must correspond to the name as written
upon the face of the attached Warrant in every particular, without alteration or
enlargement or any change whatsoever.
--------------------------------------------------------------------------------

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