Document:

Exhibit 10.7

                                LOCK-UP AGREEMENT

American Life Holding Company, Inc.
4823 Old Kingston Pike
Suite 125
Knoxville, Tennessee 37919

         Re:      American Life Holding Company, Inc. (the "Company")

Gentlemen:

         The undersigned is a director of the Company and either is the
beneficial owner of, or otherwise controls, such shares of the Company's common
stock as are set forth below (collectively, the "Company Common Shares"). In
connection with the Company's pending registration statement on Form SB-2, SEC
file number 333-99415, for the 90 day period beginning on such date as the
Company's common stock shall be quoted in the over-the- counter market or listed
on a national securities exchange, the undersigned irrevocably agrees that he
will not,

         1. offer, pledge, sell, contract to sell, sell any option or contract
to purchase, purchase ay option or contract to sell, grant any option, right or
warrant to purchase, lend, or otherwise transfer or dispose of, directly or
indirectly, any Company Common Shares, or

         2. enter into any swap or other arrangement that transfers to another,
in whole or in part, any of the economic consequences of ownership of the
Company Common Shares, whether any such transaction is to be settled by delivery
of Company Common Shares or such other securities, in cash or otherwise.

Dated: October 25, 2002

                                                    /s/ John H. Bell
                                                --------------------------------
                                                John H. Bell,individually and as
Shares Covered by this Lock-Up Agreement        trustee of the trust
                                                set forth herein

Record Holder                                   No. of Shares
-------------                                   -------------
John H. Bell                                     1,500
John H. Bell f/b/o Jane P. Bell                 40,174
                                                ------
                                                41,674Exhibit 10.8

                             MARTIN & COMPANY, L.P.
                               Investment Counsel
                          Two Centre Square, Suite 200
                                 625 Gay Street
                           Knoxville, Tennessee 37902

         This agreement is made by and between Martin & Company, L.P., a
Tennessee Limited partnership ("Martin & Co.") and American Life and Annuity
Company ("Client").

         Martin & Co. and Client agree as follows:

         1. SERVICES. Client wishes to retain the services of Martin & Co. to
render investment advisory in the supervision and management of the assets in
its investment account, and Martin & Co. wishes to render such services to
Client.

         2. CUSTODIAN. Client will place the account in the possession of such
custodian(s) as Client may from time to time designate. Martin & Co. will not
have, at any time, possession of any of Client's investment account assets,
whether they be securities, cash or other assets.

         3. AUTHORITY TO MANAGE AND SUPERVISE INVESTMENT ACCOUNT ASSETS. Client
authorizes Martin & Co., from time to time and in its sole discretion, to direct
the custodian and brokers to sell, purchase, invest, reinvest, exchange, retain,
deposit or otherwise trade in or dispose of Client's investment account assets
and such authority shall specifically extend to Option Contracts. Martin & Co.
is further authorized to direct the manner, method, time, and place of such
trading and disposition. This agreement shall serve as client's consent and
authority for all such action or nonaction taken in the discretion of Martin &
Co. and Client's authorization that Martin & Co. and Client's authorization that
Martin & Co. may deal with Client's account assets without seeking further
consent from Client. Client's investment account assets shall include all income
and proceeds from and additions to such assets.

         4. USE OF BROKER'S SERVICES. Client understands that certain brokerage
firms will furnish securities research and statistical information to Martin &
Co. and that Martin & Co. will place some of its securities brokerage
transactions with such firms. Subject to Martin & Co.'s agreement to obtain
execution of brokerage orders for Client's investment account on the most
favorable terms. Client consents to the placement of orders for brokerage
transactions for Client's investment account with such firms.

         5. OTHER CLIENTS. Client acknowledges and agrees that Martin & Co. may
act for other clients.

         6. NO WAIVER. No provision of this Agreement shall be considered as a
waiver of any rights Client may have in connection with any failure by Martin &
Co. to comply with my applicable law or regulation.

<PAGE>

         7. NO ASSIGNMENT. Martin & Co. shall make no assignment without the
consent of Client, and Client shall make no such assignment without the consent
of Martin & Co. Martin & Co. will notify Client of any change in the membership
of its partnership within a reasonable time after any such change.

         8. FEES. Annual fees for the services rendered by Martin & Co. pursuant
to this Agreement are set forth on the Fee Schedule attached to this Agreement
and made part of it. Martin & Co. will bill client for such fees quarterly, at
the end of each calendar quarter based on the value of the account at the end of
such quarter, and Client agrees that payment shall be made from Client's
investment account by the custodian.

         9. TERM. This Agreement shall become effective on the date set forth
below and shall continue in full force and effect until terminated. This
Agreement may be terminated by either party upon 30 days prior written notice to
the other.

         10. DISCLOSURE. By signing below, Client acknowledges receipt of Part
II of the Form ADV of Martin & Co. on this 11th day of 1997.

CLIENT:

         Name: American Life and Annuity Company
               -----------------------------------------------------------

         Address: P.O. Box 11146, Knoxville, TN  37939
                  --------------------------------------------------------

         Social Security or ID Number: 62-1493545
                                       -----------------------------------

         By:   /s/Lila Pfleger
              ------------------------------------------------------------
                  Lila Pfleger, Treasurer

MARTIN & COMPANY, L.P.

         By: /s/ A. David Martin
             -------------------------------------------------------------
                 A. David Martin, President

Effective Date of this Agreement: July 11, 1997
                                  ----------------------------------------

<PAGE>

                                MARTIN & COMPANY

                   ANNUAL FEE SCHEDULE - FIXED INCOME ACCOUNTS

                            0.30% . . . First Million
                            0.25% . . . All over $5 Million

                           MINIMUM ANNUAL FEE . . .

         Fees are billed at the end of each calendar quarter based on the
current market value of the account.

         Contracts are subject to cancellation by either party on 30 days
written notice with fees prorated to the date of cancellation.SECURITIES PURCHASE AGREEMENT

                                   DATED AS OF

                                OCTOBER 14, 2002

                                  BY AND AMONG

                                   E-REX, INC.
                              A NEVADA CORPORATION

                                 AS THE ISSUER,

                                       AND

               THE PURCHASERS LISTED ON SCHEDULE I ATTACHED HERETO

<PAGE>

                          SECURITIES PURCHASE AGREEMENT

     AGREEMENT,  dated  as  of  October  14,  2002,  among E-Rex, Inc., a Nevada
corporation  (the  "Company"),  and the Purchasers listed on Schedule I attached
hereto  (each  a  "Purchaser"  and  collectively,  the  "Purchasers").

                                R E C I T A L S:

     WHEREAS,  the  Company desires to sell and issue to the Purchasers, and the
Purchasers  desire  to  purchase  from the Company, $500,000 aggregate principal
amount  of  the  Company's 10% Convertible Notes (the "Convertible Notes"), with
terms  and  conditions  as  set  forth  in the form of Convertible Note attached
hereto  as  Exhibit  A;  and
            ----------

     WHEREAS,  the  Convertible  Notes  will  be  convertible into shares of the
Company's  common  stock,  par  value $0.001 per share (the "Common Stock"); and

     WHEREAS,  in  order to induce the Purchasers to enter into the transactions
described  in  this  Agreement,  the  Company desires to issue to the Purchasers
warrants  to  purchase  an  aggregate of 5,000,000 shares of Common Stock on the
terms  and conditions described in the form of the common stock purchase warrant
attached  hereto  as  Exhibit  B  ("Warrants");  and
                      ----------

     WHEREAS,  the Purchasers will have certain registration rights with respect
to  shares  of  Common Stock issuable (i) as interest under, and upon conversion
of, the Convertible Notes (collectively, the "Conversion Shares"), and (ii) upon
exercise  of  the  Warrants  (the  "Warrant  Shares"),  all  as set forth in the
Registration  Rights  Agreement  in  the  form attached hereto as Exhibit C; and
                                                                  ---------

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

                                    ARTICLE I
                                   DEFINITIONS

     SECTION  1.1.  Definitions.

The  following  terms,  as  used  herein,  have  the  following  meanings:

     "Affiliate"  means,  with respect to any Person (the "Subject Person"), (i)
any  other  Person (a "Controlling Person") that directly, or indirectly through
one or more intermediaries, Controls the Subject Person or (ii) any other Person
(other  than  the  Subject  Person)  which  is  Controlled by or is under common
Control  with  a  Controlling  Person.

<PAGE>

     "Agreement" means this Securities Purchase Agreement, as  amended,  supple-
mented  or  otherwise  modified  from time to time in accordance with its terms.

     "Balance  Sheet  Date"  has  the  meaning  set  forth  in  Section  4.7.

     "Benefit Arrangement" means at any time an employee benefit plan within the
meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and
which  is  maintained  or  otherwise  contributed  to  by  the  Company.

     "Benefit  Plans"  has  the  meaning  set  forth  in  Section  4.9(b).

     "Business  Day"  means  any  day  except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized or required by law
to  close.

     "Capital  Reorganization"  has  the  meaning  set  forth  in  Section 7.13.

     "Closing Bid Price" shall mean for any security as of any date, the highest
closing  bid price as reported by Bloomberg, L.P. ("Bloomberg") on the principal
securities  exchange  or  trading market where such security is listed or traded
or,  if  the  foregoing  does  not  apply, the highest closing bid price of such
security in the over-the-counter market on the electronic bulletin board, or, if
no  highest  trading  price  is  reported  for  such  security by the electronic
bulletin board, then 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.

     "Closing  Date"  has  the  meaning  set  forth  in  Section  2.2(c).

     "Code"  means  the  Internal  Revenue  Code  of  1986,  as  amended.

     "Commission"  means  the  Securities  and Exchange Commission or any entity
succeeding  to  all  of  its  material  functions.

     "Common  Stock"  means the common stock, par value $0.001 per share, of the
Company.

     "Company"  means  E-Rex,  Inc.,  a  Nevada corporation, and its successors.

     "Company  Corporate  Documents"  means  the  articles  of incorporation and
by-laws  of  the  Company.

     "Control"  (including,  with correlative meanings, the terms "Controlling,"
"Controlled  by"  and  under "common Control with"), as used with respect to any
Person,  means the possession, directly or indirectly, of the power to direct or
cause  the  direction  of  the  management  and policies of that Person, whether
through  the  ownership  of  voting  securities,  by  contract  or  otherwise.

     "Conversion  Date"  shall mean the date of delivery (including delivery via
telecopy)  of  a Notice of Conversion for all or a portion of a Convertible Note
by  the  holder  thereof  to  the Company as specified in each Convertible Note.

<PAGE>

     "Conversion  Price"  has  the  meaning  set forth in the Convertible Notes.

     "Conversion  Shares"  has  the  meaning  set  forth  in  the  Recitals.

     "Convertible  Notes"  means the Company's 10% Convertible Notes in the form
attached  hereto  as  Exhibit  A  hereto.
                      ----------

     "Debt"  of  any  Person  means  at  any  date, without duplication, (i) all
obligations  of  such  Person  for  borrowed money, (ii) all obligations of such
Person  evidenced  by  bonds,  debentures,  notes,  or other similar instruments
issued  by such Person, (iii) all obligations of such Person as lessee which (x)
are  capitalized in accordance with GAAP or (y) arise pursuant to sale-leaseback
transactions,  (iv)  all  reimbursement obligations of such Person in respect of
letters  of  credit or other similar instruments, (v) all Debt of others secured
by  a Lien on any asset of such Person, whether or not such Debt is otherwise an
obligation of such Person and (vi) all Debt of others Guaranteed by such Person.

     "Default"  means  any  event  or  condition  which  constitutes an Event of
Default  or  which  with  the  giving  of notice or lapse of time or both would,
unless  cured  or  waived,  become  an  Event  of  Default.

     "Default  Conversion  Price"  has  the meaning set forth in the Convertible
Notes.

     "Directors" means the individuals then serving on the Board of Directors or
similar  such  management  council  of  the  Company.

     "Environmental  Laws"  means  any and all federal, state, local and foreign
statutes,  laws,  regulations,  ordinances,  rules,  judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or other  govern-
mental  restrictions  relating to the environment or to emissions, discharges or
releases of pollutants, contaminants, petroleum or petroleum products, chemicals
or  industrial,  toxic  or  hazardous substances or wastes into the environment,
including,  without  limitation,  ambient  air,  surface water, ground water, or
land,  or  otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants, contaminants,
petroleum  or  petroleum  products,  chemicals or industrial, toxic or hazardous
substances  or  wastes  or  the  cleanup  or  other  remediation  thereof.

     "ERISA"  means  the  Employee  Retirement  Income  Security Act of 1974, as
amended,  or  any  successor  statute.

     "ERISA  Group"  means  the Company and all members of a controlled group of
corporations  and  all  trades or businesses (whether or not incorporated) under
common control that, together with the Company, are treated as a single employer
under  the  Code.

     "Escrow  Agent"  means  The  Lebrecht  Group,  APLC.

     "Event  of  Default"  has  the  meaning  set  forth  in  Article XI hereof.

<PAGE>

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

     "GAAP"  has  the  meaning  set  forth  in  Section  1.2.

     "Guarantee" by any Person means any obligation,  contingent  or  otherwise,
of such  Person  directly  or  indirectly  guaranteeing  (whether  by  virtue of
partnership  arrangements, by agreement to keep well, to purchase assets, goods,
securities  or  services,  to  take-or-pay,  or to maintain a minimum net worth,
financial  ratio  or  similar  requirements, or otherwise) any Debt of any other
Person  and,  without  limiting the generality of the foregoing, any obligation,
direct  or  indirect, contingent or otherwise, of such Person (i) to purchase or
pay  (or  advance  or  supply funds for the purchase or payment of) such Debt or
(ii)  entered into for the purpose of assuring in any other manner the holder of
such  Debt  of  the  payment  thereof  or to protect such holder against loss in
respect  thereof  (in  whole or in part); provided that the term Guarantee shall
not  include  endorsements  for  collection or deposit in the ordinary course of
business.  The  term  Guarantee  used  as  a  verb  has a corresponding meaning.

     "Hazardous  Materials"  means  any  hazardous  materials, hazardous wastes,
hazardous  constituents,  hazardous  or  toxic  substances or petroleum products
(including  crude  oil  or  any  derivative  or  fraction  thereof),  defined or
regulated  as  such  in  or  under  any  Environmental  Laws.

     "Holder"  or  "Holders" has the meaning set forth in the Convertible Notes.

     "Intellectual  Property"  has  the  meaning  set  forth  in  Section  4.18.

     "Investment"  means any investment in any Person, whether by means of share
purchase,  partnership  interest,  capital  contribution,  loan, time deposit or
otherwise.

     "Lien"  means,  any  lien,  mechanic's  lien,  materialmen's  lien,  lease,
easement,  charge,  encumbrance,  mortgage,  conditional  sale  agreement, title
retention  agreement,  agreement  to sell or convey, option, claim, title imper-
fection,  encroachment  or  other  survey  defect, pledge, restriction, security
interest  or  other  adverse  claim, whether arising by contract or under law or
otherwise  (including,  without  limitation,  any  financing  lease  having sub-
stantially  the  same economic effect as any of the foregoing, and the filing of
any  financing  statement under the Uniform Commercial Code or comparable law of
any  jurisdiction  in  respect  of  any  of  the  foregoing).

     "Majority  Holders"  means  (i)  as of the Closing Date, the Purchasers and
(ii) at any time thereafter, the holders of more than 50% in aggregate principal
amount  of  the  Convertible  Notes  outstanding  at  such  time.

     "Market  Price"  shall  mean  the  Closing  Bid  Price  of the Common Stock
preceding  the  date  of  determination.

     "Material Plan" means at any time a Plan or Plans having aggregate Unfunded
Liabilities  in  excess  of  $500,000.

<PAGE>
     "Maturity  Date"  shall mean the date of maturity of the Convertible Notes.

     "Notice  of  Conversion"  means  the  form to be delivered by a holder of a
Convertible  Note  upon conversion of all or a portion thereof to the Company in
the  form  of  Exhibit  I  to  the  form  of  Convertible  Note.
               ----------

     "Notice  of  Exercise"  means  the  form  to  be delivered by a holder of a
Warrant  upon exercise of all or a portion thereof to the Company in the form of
Exhibit  I  to  the  form  of  Warrant.
----------

     "Officer's Certificate" shall mean a certificate executed by the President,
chief executive officer or chief financial officer of the Company in the form of
Exhibit  D  attached  hereto.
----------

     "Other  Taxes"  has  the  meaning  set  forth  in  Section  3.6(b).

     "PBGC"  means  the  Pension  Benefit  Guaranty  Corporation  or  any entity
succeeding  to  any  or  all  of  its  functions  under  ERISA.

     "Permits"  means  all  domestic  and  foreign licenses, franchises, grants,
authorizations, permits, easements,  variances,  exemptions,  consents, certifi-
cates,  orders  and approvals necessary to own, lease and operate the properties
of,  and  to  carry  on  the  business  of  the  Company.

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

     "Plan"  means at any time an employee pension benefit plan which is covered
by  Title IV of ERISA or subject to the minimum funding standards under the Code
and  either  (i)  is  maintained,  or contributed to, by any member of the ERISA
group  for  employees  of  any member of the ERISA group or (ii) has at any time
within  the  preceding  five  years  been  maintained, or contributed to, by any
Person  which  was at such time a member of the ERISA Group for employees of any
Person  which  was  at  such  time  a  member  of  the  ERISA  group.

     "Purchase  Price"  means the purchase price for the Securities set forth in
Section  2.2(a)  hereof.

     "Purchasers"  means,  collectively,  those entities listed on the signature
page  hereto  and  their  successors and assigns, including holders from time to
time  of  the  Convertible  Notes.

     "Registrable  Securities"  has  the  meaning  set forth in Section 10.2(a).

     "Registration  Statement"  has  the  meaning  set forth in Section 10.2(b).

"Registration  Rights Agreement" means the agreement between the Company and the
Purchasers  dated  the  date  hereof in the form set forth in Exhibit C attached
                                                              ---------
hereto.

     "SEC  Reports"  shall  have  the  meaning  set  forth  in  Section  4.7.

<PAGE>

     "Securities"  means the Convertible Notes, the Warrants and, as applicable,
the  Conversion  Shares  and  the  Warrant  Shares.

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

     "Subsidiary"  means,  with  respect to any Person, any corporation or other
entity of which (x) a majority of the capital stock or other ownership interests
having  ordinary  voting  power to elect a majority of the Board of Directors or
other  persons  performing  similar  functions  are  at  the  time  directly  or
indirectly owned by such Person or (y) the results of operations, the assets and
the  liabilities  of  which  are  consolidated  with  such  Person  under  GAAP.

     "Taxes"  has  the  meaning  set  forth  in  Section  3.6.

     "Trading  Day" shall mean any Business Day on which the automated quotation
system  or exchange on which the Common Stock is then traded is open for trading
for  at  least  four  (4)  hours.

     "Transaction  Agreements"  means this Agreement, the Convertible Notes, the
Warrants,  and  the  Registration  Rights  Agreement.

     "Transfer" means any disposition of Securities that would constitute a sale
thereof  under  the  Securities  Act.

     "Unfunded  Liabilities"  means,  with  respect to any Plan at any time, the
amount  (if  any) by which (i) the present value of all benefits under such Plan
exceeds (ii) the fair market value of all Plan assets allocable to such benefits
(excluding  any accrued but unpaid contributions), all determined as of the then
most  recent  valuation  date  for  such  Plan, but only to the extent that such
excess  represents  a  potential liability of a member of the ERISA Group to the
PBGC  or  any  other  Person  under  Title  IV  of  ERISA.

     "Warrants"  means  the  Common  Stock  Purchase  Warrants  issued  to  the
Purchasers  for 5,000,000 shares of Common Stock in the aggregate on the Closing
Date  in  the  form  of  Exhibit  B  attached  hereto.
                         ----------

     "Warrant  Shares"  has  the  meaning  set  forth  in  the  Recitals.

     SECTION  1.2.  Accounting  Terms  and  Determinations.

     Unless  otherwise  specified herein, all accounting terms used herein shall
be  interpreted,  all accounting determinations hereunder shall be made, and all
financial  statements  required  to be delivered hereunder shall be prepared, in
accordance  with generally accepted accounting principles as in effect from time
to  time,  applied on a consistent basis (except for changes concurred in by the
Company's independent public accountants) ("GAAP"). All references to "dollars,"
"Dollars"  or  "$"  are  to  United  States  dollars unless otherwise indicated.

<PAGE>

                                   ARTICLE II
                         PURCHASE AND SALE OF SECURITIES

     SECTION  2.1.  Authorization  of  Securities.

     (a)     The Company has duly authorized the issuance of its 10% Convertible
Notes  in the original aggregate principal amount of up to $500,000, in the form
annexed  hereto  as  Exhibit  A.
                     ----------

     (b) The Company has duly authorized the issuance of Warrants to purchase up
to  5,000,000  shares  of  Common Stock in the form annexed hereto as Exhibit B.
                                                                      ---------
The  Warrants  shall  be  exercisable at any time during the two (2) year period
commencing  at  the  Closing.

     SECTION  2.2.  Purchase  and  Sale  of  Convertible  Notes.

     (a)     Subject  to  the terms and conditions set forth herein, the Company
agrees  to issue and sell to each Purchaser, and each Purchaser severally agrees
to  purchase  from  the  Company,  on the Closing Date (as hereinafter defined),
Convertible  Notes  in  the principal amount set opposite its name on Schedule I
                                                                      ----------
for  a  purchase  price  of  100% of the principal amount thereof (the "Purchase
Price").  Each  Purchaser shall deliver a check in payment of the Purchase Price
to  the  Escrow  Agent  according  to  the schedule set forth in each respective
Convertible  Note.

     (b) In connection with the Purchasers agreement to purchase the Convertible
Notes,  the  Company  shall  issue  and  deliver  to  the Purchasers Warrants to
purchase  the  number  of  shares of Common Stock set forth opposite its name on
Schedule  I.  No  part  of  the purchase price of the Convertible Notes shall be
-----------
allocated  to  the  Warrants.

     (c) The closing for the purchase and sale of the Convertible Notes shall be
held  on  such date (the "Closing Date"), not later than October ___, 2002, that
the  Escrow  Agent receives the Convertible Notes and Warrants registered in the
names  of the Purchasers in the principal amounts and numbers, respectively, set
forth  on  Schedule  I,  duly  executed  by  the  Company.
           -----------

     SECTION  2.3.  Deliveries.

     On  the  Closing  Date,  subject  to  the  satisfaction  of  all  terms and
conditions  set  forth herein, the Escrow Agent shall deliver to each Purchaser,
Convertible  Notes duly executed on behalf of the Company registered in the name
of  such  Purchaser  in the principal amount set opposite its name on Schedule I
                                                                      ----------
annexed hereto, together with Warrants duly executed on behalf of the Company to
purchase  the  number  of  shares of Common Stock set forth opposite the name of
such  Purchaser  on  Schedule  I,  registered  in  the  name  of such Purchaser.
                     -----------

<PAGE>

                                   ARTICLE III
                        PAYMENT TERMS OF CONVERTIBLE NOTE

     SECTION  3.1.  Payment  of  Principal  and  Interest.

     The Company will pay all amounts due on each Convertible Note by the method
and  at  the  address  specified for such purpose by the applicable Purchaser in
writing,  without  the  presentation or surrender of any Convertible Note or the
making  of any notation thereon, except that upon written request of the Company
made  concurrently  with  or  reasonably promptly after payment or prepayment in
full  of  the  Convertible Note, the holder shall surrender the Convertible Note
for  cancellation, reasonably promptly after any such request, to the Company at
its  principal  executive  office. Prior to any sale or other disposition of any
Convertible  Note,  the  holder  thereof  will,  at its election, either endorse
thereon the amount of principal paid thereon and the last date to which interest
has  been  paid  thereon  or  surrender  the  Convertible Note to the Company in
exchange  for  a  new  Convertible  Note  or Convertible Notes. The Company will
afford  the benefits of this Section 3.1 to any direct or indirect transferee of
the  Convertible  Note purchased under this Agreement and that has made the same
agreement relating to this Convertible Note as the Purchaser has in this Section
3.1; provided that such transferee is an "accredited investor" under Rule 501 of
the  Securities  Act.

     SECTION  3.2.  Payment  of  Interest.

     Interest  shall  accrue  on  the  outstanding  principal  amount  of   each
Convertible Note and shall be payable in the manner set forth in the Convertible
Note.

     SECTION  3.3.  Voluntary  Prepayment.

     For  so  long as no Event of Default shall have occurred and is continuing,
the  Company  may,  at  its  option, repay, in whole or in part, the Convertible
Notes  at 130% of the principal amount thereof, plus accrued but unpaid interest
through  the  date of prepayment following at least five (5) Business Days prior
written  notice  to the Purchasers (the expiration of such five (5) Business Day
period  being  referred to as the "prepayment date"); provided, however, that if
such  date is not a Business Day, the prepayment date shall be the next Business
Day thereafter. Partial prepayments shall be in an aggregate principal amount of
at least $50,000 and a principal amount of at least $5,000 or a multiple thereof
for  the  Convertible  Notes  purchased  from  any  Holder,  unless  all  of the
Convertible  Notes  registered  in  the  name  of the Holder are to be redeemed.

     SECTION  3.4.  Mandatory  Prepayments.

     Upon  (i)  a  transfer  of  all  or  substantially all of the assets of the
Company to any Person in a single transaction or series of related transactions,
or  (ii)  a  consolidation,  merger  or amalgamation of the Company with or into
another  Person  in  which the Company is not the surviving entity (other than a
merger  which  is effected solely to change the jurisdiction of incorporation of
the  Company  and  results  in  a  reclassification,  conversion  or exchange of
outstanding  shares of Common Stock solely into shares of Common Stock) (each of
items (i) and (ii) being referred to as a "Sale Event"), then, in each case, the
Company  shall,  upon  request  of  any  Holder,  redeem  the  Convertible Notes
registered  in the name of such Holder in cash for 130% of the principal amount,
plus  accrued  but  unpaid  interest  through  the date of redemption, or at the
election  of  the Holder, such Holder may convert the unpaid principal amount of
such Convertible Notes (together with the amount of accrued but unpaid interest)
into  shares  of  Common  Stock  at  the  Conversion  Price.

<PAGE>

     SECTION  3.5.  Prepayment  Procedures.

     (a)     Any  permitted  prepayment  or  redemption of the Convertible Notes
pursuant  to  Sections  3.3  or  3.4  above  shall be deemed to be effective and
consummated  (for purposes of determining the time at which the Purchasers shall
thereafter not be entitled to deliver a Notice of Conversion for the Convertible
Notes)  as  follows:

          (i)  A  prepayment  pursuant  to  Section  3.3,  the "prepayment date"
     specified  therein;

          (ii) A redemption pursuant to Section 3.4, the date of consummation of
     the  applicable  Sale  Event;

     (b)     On  the  Maturity  Date and on the effective date of a repayment or
redemption  of  the  Convertible Notes as specified in Section 3.5(a) above, the
Company  shall  deliver by wire transfer of funds the repayment/redemption price
to  each  Purchaser  of the Convertible Notes subject to redemption.  Should any
Purchaser  not  receive  payment  of  any  amounts  due  on  redemption  of  its
Convertible  Notes  by  reason  of  the Company's failure to make payment at the
times  prescribed  above for any reason, the Company shall pay to the applicable
holder  on  demand  (x) interest on the sums not paid when due at an annual rate
equal  to  the  lesser  of  (i)  the  maximum lawful rate and (ii) 2% per annum,
compounded  at  the end of each thirty (30) days, until the applicable holder is
paid  in  full  and  (y) all costs of collection, including, but not limited to,
reasonable  attorneys'  fees  and  costs,  whether  or  not suit or other formal
proceedings  are  instituted.

     (c)     The  Company  shall select the Convertible Notes to be redeemed  in
any  redemption  in which not all of the Convertible Notes are to be redeemed so
that  the  ratio of the Convertible Notes of each holder selected for redemption
to  the  total  Convertible  Notes owned by that holder shall be the same as the
ratio  of  all such Convertible Notes selected for redemption bears to the total
of all then outstanding Convertible Notes. Should any Convertible Notes required
to  be  redeemed  under  the  terms  hereof  not be redeemed solely by reason of
limitations  imposed  by law, the applicable Convertible Notes shall be redeemed
on  the  earliest  possible  dates thereafter to the maximum extent permitted by
law.

     (d)     Any Notice of Conversion  delivered  by  any  Purchaser  (including
delivery  via  telecopy)  to  the  Company prior to the (x) Maturity Date or (y)
effective  date  of a voluntary repayment pursuant to Section 3.3 or a mandatory
prepayment  pursuant to Section 3.4 as specified in Section 3.5(a) above), shall
be  honored  by the Company and the conversion of the Convertible Notes shall be
deemed  effected on the Conversion Date. In addition, between the effective date
of  a  voluntary  prepayment  pursuant  to Section 3.3 or a mandatory prepayment
pursuant  to  Section  3.4 as specified in Section 3.5(a) above and the date the
Company  is  required  to  deliver  the  redemption  proceeds  in  full  to  the
Purchasers,  the  Purchasers  may deliver a Notice of Conversion to the Company.
Such  notice  will  be  (x) of no force or effect if the Company timely pays the
redemption  proceeds  to  the Purchasers when due or (y) honored on or as of the
date  the Notice of Conversion if the Company fails to timely pay the redemption
proceeds  to  the  Purchasers  when  due.

<PAGE>

     SECTION  3.6.  Payment  of  Additional  Amounts.

     (a)     Any  and  all  payments  by  the  Company  hereunder  or  under the
Convertible  Notes  to any Purchaser and each "qualified assignee" thereof shall
be  made  free and clear of and without deduction or withholding for any and all
present  or  future taxes, levies, imposts, deductions, charges or withholdings,
and  all  liabilities  with  respect  thereto  (all such taxes, levies, imposts,
deductions,  charges, withholdings and liabilities being hereinafter referred to
as  "Taxes") unless such Taxes are required by law or the administration thereof
to  be  deducted  or  withheld.  If  the Company shall be required by law or the
administration thereof to deduct or withhold any Taxes from or in respect of any
sum  payable  under  the  Convertible Notes (i) the holders of Convertible Notes
subject to such Taxes shall have the right, but not the obligation, for a period
of  thirty  (30)  days  commencing  upon  the day it shall have received written
notice form the Company that it is required to withhold Taxes to transfer all or
any  portion of the Convertible Notes to a qualified assignee to the extent such
transfer  can  be  effected  in  accordance  with  the  other provisions of this
Agreement  and  applicable  law;  (ii) the Company shall make such deductions or
withholdings;  (iii)  the sum payable shall be increased as may be necessary  so
that  after making all required deductions or withholdings (including deductions
or  withholdings  applicable  to additional amounts paid under this Section 3.6)
such  Purchaser receives an amount equal to the sum it would have received if no
such  deduction  or  withholding  had  been  made;  and  (iv)  the Company shall
forthwith  pay  the full amount deducted or withheld to the relevant taxation or
other  authority in accordance with applicable law.  A "qualified assignee" of a
Purchaser  is  a  Person  that is (x) organized under the laws of (i) the United
States  or  (ii)  any jurisdiction other than the United States or any political
subdivision  thereof  and  that  (y) represents and warrants to the Company that
payments of the Company to such assignee under the laws in existence on the date
of  this  Agreement would not be subject to any Taxes and (z) from time to time,
as  and  when requested by the Company, executes and delivers to the Company and
the  Internal  Revenue  Service  forms,  and  provides  the  Company  with  any
information  necessary  to  establish  such  assignee's continued exemption from
Taxes  under  applicable  law.

     (b)     The  Company  shall  forthwith  pay  any  present  or  future stamp
or documentary taxes or any  other  excise or property taxes, charges or similar
levies  (all  such  taxes,  charges and levies hereinafter referred to as "Other
Taxes")  which  arise  from  any  payment  made  under  any  of  the Transaction
Agreements or from the execution, delivery or registration of, or otherwise with
respect  to,  this  Agreement other than Taxes payable solely as a result of the
transfer  from  the  Purchasers  to  a  Person  of  any  Security.

<PAGE>

     (c)     The  Company shall indemnify each Purchaser, or qualified assignee,
for  the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes  or  Other Taxes imposed by any jurisdiction on amounts payable under this
Section  3.6)  paid  by each Purchaser, or qualified assignee, and any liability
(including  penalties,  interest and expenses) arising therefrom or with respect
thereto,  unless such Taxes or Other Taxes are required by law to be deducted or
withheld.  Payment  under  this indemnification shall be made within thirty (30)
days  from  the date such Purchaser or assignee makes written demand therefor. A
certificate  as  to  the  amount  of  such Taxes or Other Taxes submitted to the
Company by such Purchaser or assignee shall be conclusive evidence of the amount
due  from  the  Company  to  such  party.

     (d)     Within  thirty  (30)  days after the date of any payment of  Taxes,
the Company will furnish to each Purchaser the original or a certified copy of a
receipt  evidencing  payment  thereof.

     (e)     Each  Purchaser  shall  provide  to the Company a Form W-8, stating
that it is a non-U.S. person, together with any additional tax forms that may be
required  under  the  Code,  as amended after the date hereof, to allow interest
payments  to  be  made  to  it  without  deduction.

                                   ARTICLE IV
                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     The Company represents and warrants to the Purchasers, and each of them, as
of  the  Closing  Date  the  following:

     SECTION  4.1.  Organization  and  Qualification.

     The  Company  is a corporation duly organized, validly existing and in good
standing  under  the  laws of its jurisdiction of incorporation, with full power
and  authority to own, lease, use and operate its properties and to carry on its
business  as  and  where  now  owned,  leased, used, operated and conducted. The
Company  has  no Subsidiaries. The Company is duly qualified to conduct business
as  a foreign corporation and is in good standing in every jurisdiction in which
the  nature  of the business conducted by it makes such qualification necessary,
except  where such failure would not have a Material Adverse Effect. A "Material
Adverse  Effect" means any material adverse effect on the operations, results of
operations,  properties,  assets  or  condition  (financial or otherwise) of the
Company,  or  on  the  transactions  contemplated hereby or by the agreements or
instruments  to  be  entered  into  in  connection  herewith.

     SECTION  4.2.  Authorization  and  Execution.

     (a)     The  Company  has  all  requisite  corporate power and authority to
enter  into  and  perform  each  Transaction  Agreement  and  to  consummate the
transactions  contemplated  hereby  and  thereby  and to issue the Securities in
accordance  with  the  terms  hereof  and  thereof.

<PAGE>

     (b)     The  execution,  delivery  and  performance  by the Company of each
Transaction  Agreement  and  the  issuance by the Company of the Securities have
been  duly and validly authorized and no further consent or authorization of the
Company,  its  Board  of  Directors  or  its  shareholders  is  required.

     (c)     This Agreement has been duly executed and delivered by the Company.

     (d)     This Agreement constitutes, and upon execution and delivery thereof
by  the  Company,  each  of  the other Transaction Agreements will constitute, a
valid and binding agreement of the Company, in each case enforceable against the
Company  in  accordance  with  its  respective  terms.

     SECTION  4.3.  Capitalization.

     As  of  the  date  hereof,  the  authorized  shares  of  Common  Stock  are
250,000,000 shares, and as of October 11, 2002 the issued and outstanding common
stock  of  the  Company is 117,996,471 shares. All of such outstanding shares of
capital  stock  are,  or upon issuance will be, duly authorized, validly issued,
fully  paid  and  non-assessable.  No shares of capital stock of the Company are
subject  to  preemptive  rights  or  similar  rights  of the stockholders of the
Company  or  any liens or encumbrances imposed through the actions or failure to
act  of  the  Company.  As  of  the  date hereof, and other than as set forth in
Schedule  4.3,  (i) there are no outstanding options, warrants, scrip, rights to
subscribe for, puts, calls, rights of first refusal, agreements, understandings,
claims  or  other commitments or rights of any character whatsoever relating to,
or  securities  or  rights  convertible  into  or exchangeable for any shares of
capital  stock  of  the  Company, or arrangements by which the Company is or may
become  bound  to  issue  additional shares of capital stock of the Company, and
(ii)  there  are  no  agreements  or  arrangements  under  which  the Company is
obligated to register the sale of any of its securities under the Securities Act
(except  pursuant  to  the Registration Rights Agreement) and (iii) there are no
anti-dilution or price adjustment provisions contained in any security issued by
the Company (or in any agreement providing rights to security holders) that will
be  triggered  by  the  issuance  of  the  Convertible Notes, Conversion Shares,
Warrants  or  Warrant  Shares.  The Company has furnished to Purchasers true and
correct  copies  of  the  Company's  Corporate  Documents,  and the terms of all
securities  convertible  into  or  exercisable for Common Stock and the material
rights  of  the  holders  thereof  in  respect  thereto.

     SECTION  4.4.  Governmental  Authorization.

     The  execution  and  delivery  by the Company of the Transaction Agreements
does  not  and  will not, the issuance and sale by the Company of the Securities
does  not  and  will  not, and the consummation of the transactions contemplated
hereby  and  by the other Transaction Agreements will not, require any action by
or  in respect of, or filing with, any governmental body, agency or governmental
official  except  (a)  such actions or filings that have been undertaken or made
prior  to  the  date  hereof and that will be in full force and effect (or as to
which  all applicable waiting periods have expired) on and as of the date hereof
or  which are not required to be filed on or prior to the Closing Date, (b) such
actions or filings that, if not obtained, would not result in a Material Adverse
Effect,  and  (c)  the  filing of a "Form D" as described in Section 7.12 below.

<PAGE>

     SECTION  4.5.  Issuance  of  Shares.

     Upon  conversion  in  accordance with the terms of the Convertible Notes or
upon exercise in accordance with the terms of the Warrants (assuming the payment
of  the  exercise  price  set  forth in the Warrants), the Conversion Shares and
Warrant  Shares shall be duly and validly issued and outstanding, fully paid and
nonassessable,  free  and  clear of any Taxes, Liens and charges with respect to
issuance  except  as  set  forth in Article IX below and shall not be subject to
preemptive  rights  or  similar rights of any other stockholders of the Company.
Assuming  the  representations  and warranties of the Purchasers herein are true
and  correct  in  all  material  respects, each of the Securities will have been
issued  in  material  compliance  with  all  applicable  U.S.  federal and state
securities  laws.  The  Company  understands  and  acknowledges that, in certain
circumstances, the issuance of Conversion Shares and Warrant Shares could dilute
the  ownership  interests  of  other  stockholders  of  the Company. The Company
further  acknowledges  that  its  obligation  to  issue  Conversion  Shares upon
conversion  of  the  Convertible  Notes, and Warrant Shares upon exercise of the
Warrants,  is  absolute and unconditional regardless of the dilutive effect that
such  issuance  may have on the ownership interests of other stockholders of the
Company.

     SECTION  4.6.  No  Conflicts.

     The  execution and delivery by the Company of the Transaction Agreements to
which  it  is a party did not and will not, the issuance and sale by the Company
of  the Securities did not and will not and the consummation of the transactions
contemplated hereby and by the other Transaction Agreements will not, contravene
or  constitute  a  default under or violation of (i) any provision of applicable
law  or  regulation,  (ii) the Company Corporate Documents, (iii) any agreement,
judgment, injunction, order, decree or other instrument binding upon the Company
or  any  its  assets, or result in the creation or imposition of any Lien on any
asset  of  the  Company.  The  Company is in compliance  with  and  conforms  to
all statutes,  laws,  ordinances,  rules,  regulations, orders, restrictions and
all other legal requirements of  any  domestic  or  foreign  government  or  any
instrumentality  thereof  having jurisdiction over the conduct of its businesses
or  the  ownership of its properties, except where such failure would not have a
Material  Adverse  Effect.

     SECTION  4.7.  Financial  Information.

     The Company has delivered to each Purchaser true and complete copies of its
(i)  Annual  report  on  Form  10-KSB  for the previous two fiscal years and its
Quarterly  Report  on  Form 10-QSB covering each quarter during the previous two
fiscal  years,  plus  any  interim  periods  ("SEC Reports"); (ii) all other SEC
filings  made  during  the  previous  two  years, along with any comment letters
issued  by  the SEC or any other regulatory body; and (iii) financial statements
and  schedules  included therein on a quarterly basis for the previous two years
through  and  including  the  most  recently  ended  fiscal  quarter ("Financial
Statements"), and such SEC Reports and Financial Statements and schedules do not

<PAGE>

contain any untrue statement of a material fact or omit to state a material fact
necessary  in  order  to make the statements made, in light of the circumstances
under  which they were made, not misleading. There have been no material adverse
changes  in the Company's business, properties, results of operations, condition
(financial  or  otherwise)  or  prospects  since the date of the SEC Reports and
Financial  Statements that have not been disclosed to the Purchasers in writing.
The  SEC  Reports  and  Financial  Statements,  including the footnotes thereto,
except  as  indicated  therein,  (i)  complied  in  all  material  respects with
applicable  accounting  requirements  and the published rules and regulations of
the  Commission  with  respect thereto and (ii) have been prepared in accordance
with GAAP consistently applied throughout the periods indicated, except that the
unaudited financial statements do not contain notes and may be subject to normal
audit  adjustments and normal annual adjustments. Such SEC Reports and Financial
Statements  fairly  present  the financial condition of the Company at the dates
indicated  and  its  results  of their operations and cash flows for the periods
then  ended and, except as indicated therein, reflect all claims against and all
Debts  and  liabilities of the Company, fixed or contingent. Since June 30, 2002
(the "Balance Sheet Date"), there has been (x) no Material Adverse Change in the
assets  or liabilities, or in the business or condition, financial or otherwise,
or  in  the  results  of  operations  or prospects, of the Company, whether as a
result  of  any  legislative  or regulatory change, revocation of any license or
rights  to  do  business,  fire,  explosion,  accident, casualty, labor trouble,
flood, drought, riot, storm, condemnation, act of God, public force or otherwise
and  (y)  no  Material  Adverse  Change  in the assets or liabilities, or in the
business  or  condition, financial or otherwise, or in the results of operations
or  prospects, of the Company, except in the ordinary course of business; and no
fact or condition exists or is contemplated or threatened which might cause such
a  change  in  the  future.

     SECTION  4.8.  Litigation.

     Other  than  as  set  forth  in  Schedule  4.8, there is no action, suit or
proceeding  pending  or, to the knowledge of the Company, threatened against the
Company,  before  any  court  or  arbitrator or any governmental body, agency or
official in which there is a reasonable possibility of an adverse decision which
could  materially  adversely  affect  the  business,  condition  (financial  or
otherwise),  operations,  performance, properties or prospects of the Company or
which  challenges  the  validity  of  any  Transaction  Agreements.

     SECTION  4.9.  Compliance  with  ERISA  and  other  Benefit  Plans.

     (a)     Each  member of the ERISA Group has fulfilled its obligations under
the  minimum  funding  standards of ERISA and the Code with respect to each Plan
and  is  in  compliance  in  all material respects with the presently applicable
provisions  of  ERISA  and the Code with respect to each Plan.  No member of the
ERISA  Group  has  (i)  sought  a  waiver  of the minimum funding standard under
Section 412 of the Code in respect of any Plan, (ii) failed to make any required
contribution  or  payment to any Plan or Multiemployer Plan or in respect of any
Benefit  Arrangement,  or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could result in the imposition of a Lien or the posting of
a bond or other security under ERISA or the Code or (iii) incurred any liability
under  Title  IV  of ERISA other than a liability to the PBGC for premiums under
Section  4007  of  ERISA.

     (b)     The  benefit  plans not covered under clause (a)  above  (including
profit  sharing,  deferred  compensation, stock option, employee stock purchase,
bonus,  retirement, health or insurance plans, collectively the "Benefit Plans")
relating  to the employees of the Company are duly registered where required by,
and  are  in  good standing in all material respects under, all applicable laws.
All  required employer and employee contributions and premiums under the Benefit
Plans  to  the  date  hereof  have  been  made,  the  respective  fund  or funds
established  under  the  Benefit  Plans are funded in accordance with applicable
laws,  and  no  past  service  funding  liabilities  exist  thereunder.

<PAGE>

     (c)     No  Benefit  Plans  have  any  unfunded  liabilities, either  on  a
"going  concern"  or  "winding  up"  basis and determined in accordance with all
applicable  laws  and  actuarial  practices  and using actuarial assumptions and
methods  that  are reasonable in the circumstances. No event has occurred and no
condition  exists  with  respect to any Benefit Plans that has resulted or could
reasonably  be  expected  to  result in any pension plan having its registration
revoked  or  wound  up  (in whole or in part) or refused for the purposes of any
applicable laws or being placed under the administration of any relevant pension
benefits  regulatory  authority  or being required to pay any taxes or penalties
(in  any  material  amounts)  under  any  applicable  laws.

     SECTION  4.10.  Environmental  Matters.

     The costs and liabilities associated with Environmental Laws (including the
cost  of compliance therewith) are unlikely to have a material adverse effect on
the  business,  condition  (financial  or  otherwise),  operations, performance,
properties  or  prospects of the Company. The Company conducts its businesses in
compliance  in  all  material  respects  with all applicable Environmental Laws.

     SECTION  4.11.  Taxes.

     All  United  States  federal,  state, county, municipality local or foreign
income  tax  returns  and  all other material tax returns (including foreign tax
returns) which are required to be filed by or on behalf of the Company have been
filed  and  all  material  taxes due pursuant to such returns or pursuant to any
assessment  received  by the Company have been paid, except those being disputed
in  good  faith  and  for  which  adequate  reserves  have been established. The
charges,  accruals  and reserves on the books of the Company in respect of taxes
or  other  governmental  charges  have been established in accordance with GAAP.

     SECTION  4.12.  Investments,  Joint  Ventures.

     The  Company  does  not have a direct or indirect Investment in any Person,
and  the Company is not a party to any partnership, management, shareholders' or
joint  venture  or  similar  agreement.

     SECTION  4.13.  Not  an  Investment  Company.

     The  Company  is  not  an  "investment  company"  within the meaning of the
Investment  Company  Act  of  1940,  as  amended.

<PAGE>

     SECTION  4.14.  Full  Disclosure.

     The  information  heretofore furnished by the Company to the Purchasers for
purposes of or in connection with this Agreement or any transaction contemplated
hereby  does not, and all such information hereafter furnished by the Company to
the Purchasers will not (in each case taken together and on the date as of which
such  information is furnished), contain any untrue statement of a material fact
or  omit  to  state  a  material  fact necessary in order to make the statements
contained  therein, in the light of the circumstances under which they are made,
not  misleading.

     SECTION  4.15.  No  Solicitation;  No  Integration  with  Other  Offerings.

     No  form  of  general  solicitation  or general advertising was used by the
Company  or,  to  the  best  of its actual knowledge, any other Person acting on
behalf  of the Company, in connection with the offer and sale of the Securities.
Neither  the  Company, nor, to its knowledge, any Person acting on behalf of the
Company,  has,  either  directly  or indirectly, sold or offered for sale to any
Person  (other  than  the  Purchasers)  any of the Securities or, within the six
months  prior  to  the  date  hereof,  any other similar security of the Company
except  as  contemplated  by  this  Agreement,  and  the Company represents that
neither  itself  nor any Person authorized to act on its behalf (except that the
Company  makes no representation as to the Purchasers and their Affiliates) will
sell  or  offer  for sale any such security to, or solicit any offers to buy any
such  security from, or otherwise approach or negotiate in respect thereof with,
any  Person or Persons so as thereby to cause the issuance or sale of any of the
Securities  to  be  in  violation  of  any of the provisions of Section 5 of the
Securities  Act.

     SECTION  4.16.  Permits.

     (a)     The  Company  has  all  material  Permits;

     (b)     all such  Permits  are  in  full  force and effect, and the Company
has  fulfilled  and  performed  all  material  obligations  with respect to such
Permits;

     (c)     no  event  has  occurred  which allows, or after notice or lapse of
time  would  allow,  revocation  or  termination  by the issuer thereof or which
results in any other material impairment of the rights of the holder of any such
Permit;  and

     (d)     the  Company  has  no reason to  believe that any governmental body
or  agency  is  considering  limiting,  suspending  or revoking any such Permit.

     SECTION  4.17.  Absence  of  Any  Undisclosed Liabilities or Capital Calls.

     There  are  no  liabilities  of the Company of any kind whatsoever, whether
accrued,  contingent, absolute, determined, determinable or otherwise, and there
is  no  existing  condition,  situation  or  set  of  circumstances  which could
reasonably  be  expected  to  result  in  such a liability, other than (i) those
liabilities  provided  for  in  the  financial  statements delivered pursuant to
Section 4.7 hereof and (ii) other undisclosed liabilities which, individually or
in  the  aggregate,  would  not  have  a  Material  Adverse  Effect.

<PAGE>

     SECTION  4.18.  Intellectual  Property  Rights.

     The  Company  owns,  or  is  licensed under, and has the rights to use, all
material  patents, trademarks, trade names, copyrights, technology, know-how and
processes  (collectively, "Intellectual Property") used in, or necessary for the
conduct  of  its business; no claims have been asserted by any Person to the use
of  any such Intellectual Property or challenging or questioning the validity or
effectiveness  of  any  license or agreement related thereto. To the best of the
Company's  knowledge,  there is no valid basis for any such claim and the use of
such  Intellectual  Property by the Company will not infringe upon the rights of
any  Person.

     SECTION  4.19.  Insurance.

     The  Company  maintains,  with  financially  sound  and reputable insurance
companies,  insurance  in at least such amounts and against such risks such that
any  uninsured  loss  would  not  have  a Material Adverse Effect. All insurance
coverages  of the Company are in full force and effect and there are no past due
premiums  in  respect  of  any  such  insurance.

     SECTION  4.20.  Title  to  Properties.

     The  Company  has good and marketable title to all its properties reflected
on  the  financial  statements referred to in Section 4.7, free and clear of all
Liens,  other  than  Liens  set  forth  on  the  Financial  Statements.

     SECTION  4.21.  Internal  Accounting  Controls.

     The  Company maintains a system of internal accounting controls sufficient,
in  the  judgment  of  the  Company's  Board of Directors, to provide reasonable
assurance  that  (i)  transactions  are executed in accordance with management's
general  or specific authorizations, (ii) transactions are recorded as necessary
to  permit  preparation  of  financial statements in conformity with GAAP and to
maintain  asset  accountability,  (iii)  access  to  assets is permitted only in
accordance  with  management's  general  or  specific authorization and (iv) the
recorded  accountability  for  assets  is  compared  with the existing assets at
reasonable  intervals  and  appropriate  action  is  taken  with  respect to any
differences.

     SECTION  4.22.  Foreign  Practices.

     Neither  the Company nor, to the Company's knowledge, any employee or agent
of  the  Company  has  made any payments of funds of the Company, or received or
retained any funds, in each case (x) in violation of any law, rule or regulation
or  (y) of a character required to be disclosed by the Company in any of the SEC
Reports.

<PAGE>

                                    ARTICLE V
                REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS

     SECTION  5.1.  Purchasers.

     Each  Purchaser  severally (and not jointly) hereby represents and warrants
to  the  Company  solely  as  to  such  Purchaser  that:

     (a)     the  Purchaser  is  an  "accredited investor" within the meaning of
Rule  501(a)  under  the  Securities Act and the Securities to be acquired by it
pursuant to this Agreement are being acquired for its own account and, as of the
date  hereof,  not  with  a  view  toward,  or  for sale in connection with, any
distribution  thereof except in compliance with applicable United States federal
and  state  securities  law;  provided  that  the disposition of the Purchaser's
property  shall  at  all  times  be  and  remain  within  its  control;

     (b)     if the Purchaser is a corporation  or  partnership,  the execution,
delivery  and  performance  of this Agreement and the purchase of the Securities
pursuant  hereto  are within the Purchaser's corporate or partnership powers, as
applicable, and have been duly and validly authorized by all requisite corporate
or  partnership  action;

     (c)     this  Agreement  has  been  duly  executed  and  delivered  by  the
Purchaser.

     (d)     the execution and delivery by  the  Purchaser  of  the  Transaction
Agreements  to  which  it  is  a  party  does  not,  and the consummation of the
transactions  contemplated hereby and thereby will not, contravene or constitute
a  default  under  or  violation  of  (i)  any  provision  of  applicable law or
regulation,  or (ii) any agreement, judgment, injunction, order, decree or other
instrument  binding  upon  such  Purchaser;

     (e)     such  Purchaser  understands  that  the  Securities  have  not been
registered under the Securities Act and may not be transferred or sold except as
specified  in  this  Agreement  or  the  remaining  Transition  Agreements;

     (f)     this Agreement constitutes a valid and  binding  agreement  of  the
Purchaser  enforceable  in  accordance with its terms, subject to (i) applicable
bankruptcy, insolvency or similar laws affecting the enforceability of creditors
rights  generally  and  (ii)  equitable  principles  of  general  applicability;

     (g)     the Purchaser has such knowledge and  experience  in  financial and
business  matters  so as to be capable of evaluating the merits and risks of its
investment  in  the  Securities  and  the  Purchaser  is  capable of bearing the
economic  risks  of  such  investment;

     (h)     the Purchaser is knowledgeable, sophisticated  and  experienced  in
business  and  financial  matters;  the  Purchaser  has  previously  invested in
securities  similar  to  the Securities and fully understands the limitations on
transfer described herein; the Purchaser has been afforded access to information
about  the Company and the financial condition, results of operations, property,
management  and prospects of the Company sufficient to enable it to evaluate its
investment in the Securities; the Purchaser has been afforded the opportunity to
ask  such  questions as it has deemed necessary of, and to receive answers from,
representatives  of  the  Company  concerning  the  terms  and conditions of the
offering  of  the  Securities  and  the merits and the risks of investing in the
Securities;  and  the Purchaser has been afforded the opportunity to obtain such
additional  information  which  the  Company  possesses  or  can acquire that is
necessary  to  verify  the accuracy and completeness of the information given to
the Purchaser concerning the Company.  The foregoing does not in any way relieve
the  Company  of its representations and other undertakings hereunder, and shall
not  limit  any  Purchaser's  ability  to  rely  thereon;  and

<PAGE>

     (i)     no part of the source of funds used by the Purchaser to acquire the
Securities  constitutes  assets  allocated to any separate account maintained by
the  Purchaser in which any employee benefit plan (or its related trust) has any
interest.

                                   ARTICLE VI
                 CONDITIONS PRECEDENT TO PURCHASE OF SECURITIES

     SECTION  6.1.  Conditions  Precedent  to  the  Purchasers'  Obligation  to
Purchase.

     The  obligation  of  each  Purchaser  hereunder to purchase the Convertible
Notes  at  the  Closing is subject to the satisfaction, on or before the Closing
Date of each of the following conditions, provided that these conditions are for
such Purchaser's sole benefit and may be waived by such Purchaser at any time in
its  sole  discretion:

     (a)     The  Company  shall  have  executed this Agreement, the Convertible
Note,  Warrant,  Officer's  Certificate,  Escrow Agreement, and the Registration
Rights  Agreement  and  delivered  the  same  to  the  Purchasers;

     (b)     The Company shall have delivered to  the Escrow Agent duly executed
certificates  representing  the Convertible Notes and the Warrants in accordance
with  Section  2.3  hereof;

     (c)     The representations and warranties of the Company contained in each
Transaction  Agreement  shall be true and correct in all material respects as of
the  date  when  made  and  as  of  the Closing Date as though made at such time
(except  for  representations  and warranties that speak as of a specified date)
and the Company shall have performed, satisfied and complied with all covenants,
agreements  and  conditions  required  by  such  Transaction  Agreements  to  be
performed,  satisfied  or  complied  with by it at or prior to the Closing Date.
The  Purchasers'  shall  have  received an Officer's Certificate executed by the
chief  executive  officer  of  the Company, dated as of the Closing Date, to the
foregoing  effect and as to such other matters as may be reasonably requested by
the  Purchasers,  including  but not limited to  certificates  with  respect  to
the Company  Corporate  Documents,  resolutions  relating  to  the  transactions
contemplated  hereby  and  the incumbencies of certain officers and Directors of
the  Company.  The  form  of  such  certificate is attached hereto as Exhibit D;
                                                                      ---------

<PAGE>

     (d)     The Company shall have received governmental, Board  of  Directors,
shareholders  and  third  party consents and approvals necessary or desirable in
connection  with  the  issuance  and  sale  of  the  Securities;

     (e)     All applicable waiting  periods in respect to the issuance and sale
of the Securities shall have expired without any action having been taken by any
competent  authority  that  could  restrain,  prevent  or  impose any materially
adverse  conditions thereon or that could seek or threaten any of the foregoing;

     (f)     No  law  or  regulation shall have been imposed or enacted that, in
the  judgment  of  the  Purchasers,  could adversely affect the transactions set
forth  herein  or  in the other Transaction Agreements, and no law or regulation
shall  have  been  proposed  that in the reasonable judgment of Purchasers could
reasonably  have  any  such  effect;

     (g)     The  Company  Corporate Documents shall be in full force and effect
and  no  term  or condition thereof shall have been amended, waived or otherwise
modified  without  the  prior  written  consent  of  the  Purchasers;

     (h)     There  shall  have  occurred no  material  adverse  change  in  the
business,  condition  (financial or otherwise), operations, performance, proper-
ties  or  prospects  of  the Company since the date of the Financial Statements;

     (i)     There shall exist no action,  suit,  investigation,  litigation  or
proceeding  pending  or  threatened  in  any  court  or before any arbitrator or
governmental  instrumentality  that  challenges  the  validity of or purports to
affect  this  Agreement or any other Transaction Agreement, or other transaction
contemplated  hereby  or  thereby or that could reasonably be expected to have a
Material Adverse Effect, or any material adverse effect on the enforceability of
the Transaction Agreements or the Securities or the rights of the holders of the
Securities  or  the  Purchasers  hereunder;

     (j)     The  Escrow  Agent shall have confirmed receipt of the  Convertible
Notes  and  the  Warrants  to  be  issued,  duly  executed by the Company in the
denominations  and  registered  in  the  names of the Purchasers specified in or
pursuant  to  Schedule  I;
              -----------

     (k)     There  shall  not have occurred any disruption or adverse change in
the  financial  or  capital  markets  generally, or in the market for the Common
Stock  (including  but  not  limited  to any suspension or delisting), which the
Purchasers  reasonably  deem  material  in  connection  with the purchase of the
Securities;

     (l)     Immediately before and  after the Closing Date, no Default or Event
of  Default  shall  have  occurred  and  be  continuing;  and

<PAGE>

     (m)     The Purchasers shall have received all other certificates,  instru-
ments, agreements  or  other  documents  as  they  shall  reasonably  request.

     SECTION  6.2.  Conditions  to  the  Company's  Obligations.

     The  obligations  of  the  Company  to issue and sell the Securities to the
Purchasers  pursuant  to  this  Agreement are subject to the satisfaction, at or
prior  to  any  Closing  Date,  of  the  following  conditions:

     (a)     The  representations  and  warranties  of  the Purchasers contained
herein  shall  be  true and correct in all material respects on the Closing Date
and  the  Purchasers  shall have performed and complied in all material respects
with  all agreements required by this Agreement to be performed or complied with
by  the  Purchasers  at  or  prior  to  the  Closing  Date;

     (b)     The issue and sale of the  Securities  by  the Company shall not be
prohibited  by  any  applicable law, court order or governmental regulation; and

     (c)     Receipt by  the  Company  of  duly  executed  counterparts  of this
Agreement  ,  the Escrow Agreement, and the Registration Rights Agreement signed
by  the  Purchasers.

                                   ARTICLE VII
                              AFFIRMATIVE COVENANTS

     The  Company hereby agrees that, from and after the date hereof for so long
as  any Convertible Notes remain outstanding (except for Sections 7.1, 7.9, 7.10
and  7.11,  which  shall  apply for so long as any Convertible Notes or Warrants
remain  outstanding)  and  for  the  benefit  of  the  Purchasers:

     SECTION  7.1.  Information.

     The  Company  will  deliver  to  each  holder  of  the  Convertible  Notes:

     (a)     promptly  upon  the  filing thereof, copies of (i) all registration
statements  (other  than the exhibits thereto and any registration statements on
Form  S-8  or  its equivalent), and (ii) all reports on Forms 10-K, 10-Q and 8-K
(or  their  equivalents)  which  the  Company has filed with the Commission; and

     (b)     promptly  upon  the  mailing  thereof to the  shareholders  of  the
Company  generally,  copies  of  all  financial  statements,  reports  and proxy
statements  so  mailed  and  any  other  document  generally  distributed  to
shareholders.

<PAGE>

     SECTION  7.2.  Payment  of  Obligations.

     The  Company  will  pay  and  discharge,  at  or  before  maturity, all its
liabilities, except where the same may be contested in good faith by appropriate
proceedings and will maintain, in accordance with GAAP, appropriate reserves for
the  accrual  of  any  of  the  same.

     SECTION  7.3.  Maintenance  of  Property;  Insurance.

     The  Company will keep all property useful and necessary in its business in
good  working order and condition, ordinary wear and tear excepted. In addition,
the  Company  will  maintain insurance in at least such amounts and against such
risks  as  it  has  insured  against  as  of  the  Closing  Date.

     SECTION  7.4.  Maintenance  of  Existence.

     The Company will continue to engage in business of the same general type as
now  conducted by it, and will preserve, renew and keep in full force and effect
its  corporate  existence  and  its  material  rights, privileges and franchises
necessary  or  desirable  in  the  normal  conduct  of  business.

     SECTION  7.5.  Compliance  with  Laws.

     The Company will comply,  in  all  material  respects,  with  all  federal,
state, municipal, local or foreign applicable laws, ordinances,  rules,  regula-
tions,  municipal  by-laws,  codes  and requirements of governmental authorities
(including,  without  limitation, Environmental Laws and ERISA and the rules and
regulations  thereunder)  except  (i) where compliance therewith is contested in
good  faith  by  appropriate  proceedings or (ii) where non-compliance therewith
could  not  reasonably be expected, in the aggregate, to have a material adverse
effect   on  the  business,  condition  (financial  or  otherwise),  operations,
properties  or  prospects  of  the  Company.

     SECTION  7.6.  Inspection  of  Property,  Books  and  Records.

     The  Company  will  keep  proper books of record and account in which full,
true  and  correct  entries  shall  be  made of all dealings and transactions in
relation to its business and activities; and will permit, during normal business
hours,  a  representative  of  the  Purchasers  to  visit and inspect any of its
properties, upon reasonable prior notice, to examine and make abstracts from any
of  its books and records and to discuss its affairs, finances and accounts with
its executive officers and independent public accountants (and by this provision
the  Company  authorizes  its  independent  public  accountants  to disclose and
discuss  with the Purchasers the affairs, finances and accounts of the Company),
all  at  such  reasonable  times.

     SECTION  7.7.  Investment  Company  Act.

     The  Company  will  not  be  or  become  an open-end investment trust, unit
investment trust or face-amount certificate company that is or is required to be
registered  under  Section  8 of the Investment Company Act of 1940, as amended.

<PAGE>

     SECTION  7.8.  Use  of  Proceeds.

     The  proceeds  from  the  issuance and sale of the Convertible Notes by the
Company  shall  be  used for working capital purposes. None of the proceeds from
the  issuance  and sale of the Convertible Notes by the Company pursuant to this
Agreement  will  be  used  directly  or  indirectly  for  the  purpose,  whether
immediate,  incidental or ultimate, of purchasing or carrying any "margin stock"
within  the  meaning  of  Regulation  G of the Board of Governors of the Federal
Reserve  System.

     SECTION  7.9.  Reserved  Shares.

     The  Company  shall  at  all  times  have  authorized, and reserved for the
purpose  of  issuance,  a sufficient number of shares of Common Stock to provide
for the full conversion of the outstanding Convertible Notes and issuance of the
Conversion  Shares  and the exercise in full of the Warrants and the issuance of
the  Warrant  Shares.

     SECTION  7.10.  Irrevocable  Instructions.

     Notwithstanding  the  obligation of the Company to deliver shares of common
stock  to  the  Escrow  Agent  pursuant  to  Section  1.01(a)(ii)  of the Escrow
Agreement,  upon  receipt  of  a  Notice of Conversion or Notice of Exercise, as
applicable,  the  Company  shall,  within forth eight (48) business hours, issue
irrevocable instructions to its transfer agent to issue certificates, registered
in the name of the Escrow Agent, for the Conversion Shares or Warrant Shares, as
applicable,  in such amounts as specified from time to time by each Purchaser to
the  Company  upon proper conversion of the Convertible Notes or exercise of the
Warrants.  Upon  conversion  of  any  Convertible Notes in accordance with their
terms  and/or  exercise  of  any  Warrants  in  accordance with their terms, the
Company  will,  and will use its best lawful efforts to cause its transfer agent
to,  issue  one or more certificates representing shares of Common Stock in such
name  or names and in such denominations specified by a Purchaser in a Notice of
Conversion  or  Notice  of  Exercise,  as  the  case  may  be.  As  long  as the
Registration  Statement  contemplated by the Registration Rights Agreement shall
remain  effective,  the  shares  of Common Stock issuable upon conversion of any
Convertible  Notes or exercise of any Warrants shall be issued to any transferee
of  such  shares  from  a  Purchaser without any restrictive legend. The Company
further  warrants  and agrees that no instructions other than these instructions
have  been  or will be given to its transfer agent. Nothing in this Section 7.10
shall  affect  in any way a Purchaser's obligation to comply with all securities
laws  applicable  to  such Purchaser upon resale of such shares of Common Stock,
including  any  prospectus  delivery  requirements.

     SECTION  7.11.  Maintenance  of Reporting Status; Supplemental Information.

     So  long as any of the Securities are outstanding, the Company shall timely
file  all  reports  required  to  be  filed  with the Commission pursuant to the
Exchange  Act.  The Company shall not terminate its status as an issuer required
to  file  reports  under the Exchange Act, even if the Exchange Act or the rules
and  regulations  thereunder  would  permit  such termination. If at anytime the
Company  is  not  subject  to  the  requirements  of  Section 13 or 15(d) of the
Exchange  Act,  the  Company will promptly furnish at its expense, upon request,
for  the benefit of the holders from time to time of Securities, and prospective
purchasers of Securities, information satisfying the information requirements of
Rule  144  under  the  Securities Act. The Company will apply to have its Common
Stock  traded  on the Bulletin Board Exchange ("BBX") within thirty (30) days of
when  the  BBX  first  begins  to accept listing applications, and the Company's
Common  Stock  will  trade  on  either  the BBX or the Over the Counter Bulletin
Board.

<PAGE>

     SECTION  7.12.  Form  D;  Blue  Sky  Laws.

     The  Company  agrees  to  file a "Form D" with respect to the Securities as
required  under Regulation D of the Securities Act and to provide a copy thereof
to  each  Purchaser  promptly after such filing. The Company shall, on or before
the  Closing Date, take such action as the Company shall reasonably determine is
necessary  to  qualify  the Securities for sale to the Purchasers at the Closing
pursuant to this Agreement under applicable securities or "blue sky" laws of the
states of the United States (or to obtain an exemption from such qualification),
and  shall  provide evidence of any such action so taken to each Purchaser on or
prior  to  the  Closing  Date.

     SECTION  7.13.  Capital  Reorganization.

     If  and  whenever  there  shall  occur:

     (a)     a  reclassification  or redesignation of the shares of Common Stock
or  any  change  of  the  shares  of  Common  Stock  into  other  shares,  or,

     (b)     a Sale Event  (any  such  event  being  herein  called  a  "Capital
Reorganization"),  then  in each such case the holder who exercises the right to
convert  Convertible  Notes or exercise the Warrants after the effective date of
such  Capital Reorganization shall be entitled to receive and shall accept, upon
the  exercise  of such right, in lieu of the number of shares of Common Stock to
which  such  holder was theretofore entitled upon the exercise of the conversion
privilege, the aggregate number of shares or other securities or property of the
Company or of the body corporate resulting from such Capital Reorganization that
such  holder  would  have  been  entitled to receive as a result of such Capital
Reorganization  if,  on  the  effective  date thereof, such holders had been the
holder  of  the  number  of  shares  of  Common  Stock  to which such holder was
theretofore  entitled  upon  conversion; provided, however, that no such Capital
Reorganization  shall  be consummated in effect unless all necessary steps shall
have  been  taken  so  that such holders shall thereafter be entitled to receive
such  number  of  shares  or  other  securities  of  the  Company or of the body
corporate  resulting  from  such  Capital  Reorganization, subject to adjustment
thereafter in accordance with provisions the same, as nearly as may be possible,
as  those  contained  above.

     SECTION  7.14.  Notice  to  Noteholders.

     The  Company shall give the registered holders of the Convertible Notes and
Warrants  written  notice  of  any  record, not less than ten (10) Business Days
prior to such record date or, if no record date is fixed, not less than ten (10)
Business  Days prior to the effective date of such event, which notice shall set
forth  the particulars of the proposed event or the extent that such particulars
have  been  determined  at  the  time  of  giving  the  notice.

<PAGE>

                                  ARTICLE VIII
                               NEGATIVE COVENANTS

     The  Company hereby agrees that, from and after the date hereof for so long
as  any  Convertible  Notes, and in the case of Section 8.1, the Warrants remain
outstanding  and  for  the  benefit  of  the  Purchasers:

     SECTION  8.1.  No  Reverse  Stock  Split.

     The  Company  will  not  consolidate the outstanding shares of Common Stock
into  a smaller number of shares unless it is first approved, in writing, by the
Purchasers.

     SECTION  8.2.  Limitation  on  Future  Financing.

     The  Company agrees that it will not, without the consent of the registered
holders  of  the  Convertible  Notes,  enter into any financing at a discount to
Market  Price  until  six  months  after  the effective date of the Registration
Statement;   provided,  however,  anything  to  the  contrary  appearing  herein
notwithstanding,  neither  this  Section nor any other provision hereof shall be
construed  to  restrict or prohibit the Company's right to restructure, amend or
modify  any facility existing on the date hereof that does not materially impair
the  rights  of  the  holders  of  the  Convertible  Notes.

                                   ARTICLE IX
                               RESTRICTIVE LEGENDS

     SECTION  9.1.  Restrictions  on  Transfer.

     From  and  after their respective dates of issuance, none of the Securities
shall  be  transferable except upon the conditions specified in this Article IX,
which  conditions  are  intended to ensure compliance with the provisions of the
Securities  Act  in  respect  of  the  Transfer of any of such Securities or any
interest therein. Each Purchaser will use its best efforts to cause any proposed
transferee  of  any  Securities  held  by  it  to  agree  to  take and hold such
Securities  subject  to the provisions and upon the conditions specified in this
Article  IX.

     SECTION  9.2.  Restrictive  Legends.

     Each  certificate  for  Securities issued to a Purchaser or to a subsequent
transferee shall (except as contemplated by Section 7.10 and Section 9.1 hereof)
include  a  legend  in  substantially  the  following  form:

     THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES  SECURITIES  ACT  OF  1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER
HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE CORPORATION
THAT  SUCH  SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO
THE  CORPORATION,  (B)  PURSUANT  TO  THE  EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES  ACT,  OR  (C)  IF  REGISTERED  UNDER  THE  SECURITIES  ACT.

<PAGE>

     SECTION  9.3.  Notice  of  Proposed  Transfers.

     Prior to any proposed Transfer of the Securities (other than a Transfer (i)
registered  or  exempt  from  registration  under the Securities Act, (ii) to an
affiliate of a Purchaser which is an "accredited investor" within the meaning of
Rule  501(a)  under  the Securities Act, provided that any such transferee shall
agree  to  be  bound  by the terms of this Agreement and the Registration Rights
Agreement,  or  (iii)  to  be  made in reliance on Rule 144 under the Securities
Act),  the  holder  thereof  shall  give  written  notice to the Company of such
holder's  intention  to  effect  such  Transfer,  setting  forth  the manner and
circumstances  of  the  proposed  Transfer, which shall be accompanied by (A) an
opinion  of  counsel  reasonably acceptable to the Company, confirming that such
transfer  does  not  give  rise  to  a  violation  of  the  Securities  Act, (B)
representation  letters  in  form  and  substance reasonably satisfactory to the
Company  to  ensure compliance with the provisions of the Securities Act and (C)
letters  in  form and substance reasonably satisfactory to the Company from each
such  transferee stating such transferee's agreement to be bound by the terms of
this Agreement and the Registration Rights Agreement. Such proposed Transfer may
be  effected  only  if  the Company shall have received such notice of transfer,
opinion  of counsel, representation letters and other letters referred to in the
immediately preceding sentence, whereupon the holder of such Securities shall be
entitled  to Transfer such Securities in accordance with the terms of the notice
delivered  by  the  holder  to  the  Company.

                                    ARTICLE X
                     ADDITIONAL AGREEMENTS AMONG THE PARTIES

     SECTION  10.1.  Conversion  Limit.

     Notwithstanding  the  conversion  rights  under  the  Convertible Notes and
exercise  rights  under  the Warrants, unless the Purchaser delivers a waiver in
accordance  with  the  immediately  following  sentence,  in  no event shall the
Purchaser  be  entitled  to  convert  any  portion  of  the Convertible Notes or
exercise  any  portion  of  the  Warrants,  in  excess  of  that  portion of the
Convertible  Notes  or  Warrants upon conversion and exercise, as applicable, of
which  the sum of (i) the number of shares of Common Stock beneficially owned by
the Purchaser and its Affiliates (other than shares of Common Stock which may be
deemed  beneficially  owned  through the ownership of the unconverted portion of
the  Convertible  Note  and  unexercised  portion  of  the  Warrants,  or  other
Derivative  Securities  convertible  into  or  exchangeable for shares of Common
Stock  which  contain  a  limitation  similar  to that set forth in this Section
10.1),  and  (ii)  the  number  of  shares  of  Common  Stock  issuable upon the
conversion  of the portion of the Convertible Note or issuable upon exercise the
portion  of the Warrants with respect to which this determination is being made,
would result in beneficial ownership by the Purchaser and its Affiliates of more
than  4.99%  of  the  outstanding  shares  of Common Stock. For purposes of this
Section  10.1,  beneficial ownership shall be determined in accordance with Rule
13d-3 of the Exchange Act and Regulations 13 D-G thereunder, except as otherwise
provided  in  this  Section  10.1.  The foregoing limitation shall not apply and
shall  be  of  no further force or effect (i) immediately preceding and upon the
occurrence  of  any  voluntary  or mandatory redemption or repayment transaction
described herein or in the Convertible Notes, (ii) on the Maturity Date or (iii)
following  the  occurrence of any Event of Default which is not cured within the
greater  of  the  applicable  time  period  specified in either (A) such written
notice  of  Purchaser  or  (B)  Section  11.1  hereof.

<PAGE>

     SECTION  10.2.  Registration  Rights.

     (a)     The Company shall grant the Purchasers registration rights covering
the  Conversion  Shares and Warrant Shares (the "Registrable Securities") on the
terms  set  forth  in  the  Registration  Rights  Agreement  and  herein.

     (b)     The  Company  shall  prepare and  file  within  fourteen  (14) days
following the Closing Date a registration  statement  (the  "Registration State-
ment")  on  Form  S-3 (or such other form as is then available for registration)
covering  the  sale  of  the  Registrable  Securities  (a  minimum of 67,500,000
shares).  The  Company  shall  use  its  best  efforts to cause the Registration
Statement  to be declared effective by the Commission. The Company shall pay all
expenses of registration, other than underwriting fees and discounts, if any, in
respect  of  Registrable  Securities  offered  and  sold under such Registration
Statement  by  the  Purchasers.

     SECTION  10.3.  Conditions  Precedent  to  Funding.

     The  Purchaser's  obligation  to  deliver  the  principal  amount under the
Convertible  Notes  is subject to conditions precedent as set forth therein.  In
the  event  those  conditions precedent are not satisfied during any consecutive
six  (6)  month period beginning on the Closing Date, then Purchaser may, at its
sole  discretion,  terminate  this  Securities  Purchase Agreement and the other
Transaction  Agreements  (except  the Warrants, which shall remain in effect for
their  term)  and  Purchaser  will  have  no  further  obligations  hereunder or
thereunder.

     SECTION  10.4.  Rights  of  First  Refusal.

     For  any  private  capital  raising transactions 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  Agreement,  the  Company agrees to deliver to Purchaser, 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 Purchaser 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.

<PAGE>

                                   ARTICLE XI
                                EVENTS OF DEFAULT

     SECTION  11.1.  Events  of  Default.

     If  one  or more of the following events (each an "Event of Default") shall
have  occurred  and  be  continuing:

     (a)     failure  by  the Company to pay or prepay when due, all or any part
of  the  principal  on  any  of  the Convertible Notes (whether by virtue of the
agreements  specified  in  this  Agreement  or  the  Convertible  Notes);

     (b)     failure on the part of the Company to observe  or  perform  in  any
material  respect  any  covenant contained in Sections 7.9, 7.10, 7.11 or 8.1 of
this  Agreement;

     (c)     trading  in the Common Stock  shall  have  been  suspended  by  the
Commission  or  by the OTC Bulletin Board or the Bulletin Board Exchange (except
for any suspension of trading of limited duration solely to permit dissemination
of  material  information regarding the Company and except if, at the time there
is  any suspension on the OTC Bulletin Board or the Bulletin Board Exchange, the
Common  Stock is then listed and approved for trading on either the Nasdaq Stock
Market's SmallCap Market or the Nasdaq Stock Market's National Market or a stock
exchange  within  ten  (10)  Trading  Days  thereof);

     (d)     the  Company  shall have its Common Stock  delisted  from  the  OTC
Bulletin  Board  or  Bulletin  Board  Exchange for at least ten (10) consecutive
Trading  Days  and  is  unable  to  obtain  a listing on either the Nasdaq Stock
Market's SmallCap Market or the Nasdaq Stock Market's National Market or a stock
exchange  within  such  ten  (10)  Trading  Days  thereof;

     (e)     the  Company  has commenced a voluntary case  or  other  proceeding
seeking  liquidation, winding-up, reorganization or other relief with respect to
itself  or  its  debts  under  any  bankruptcy,  insolvency, moratorium or other
similar  law now or hereafter in effect or seeking the appointment of a trustee,
receiver,  liquidator,  custodian  or  other  similar  official  of  it  or  any
substantial  part of its property, or has consented to any such relief or to the
appointment  of or taking possession by any such official in an involuntary case
or  other  proceeding commenced against it, or has made a general assignment for
the  benefit  of  creditors,  or  has  failed generally to pay its debts as they
become due, or has taken any corporate action to authorize any of the foregoing;

     (f)     an involuntary  case or other proceeding has been commenced against
the Company seeking liquidation, winding-up, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency, moratorium or other
similar  law now or hereafter in effect or seeking the appointment of a trustee,
receiver,  liquidator,  custodian  or  other  similar  official  of  it  or  any
substantial  part of its property, and such involuntary case or other proceeding
shall  remain undismissed and unstayed for a period of fourteen (14) days, or an
order  for  relief  has  been  entered  against  the  Company  under the federal
bankruptcy  laws  as  now  or  hereafter  in  effect;

     (g)     default  in any provision  (including  payment)  of  any  agreement
governing  the terms of any Debt of the Company in excess of $100,000, which has
not  been  cured  within  any  applicable  period of grace associated therewith;

     (h)     judgments or orders for the payment of money which in the aggregate
at  any  one  time  exceed  $200,000  and are not covered by insurance have been
rendered  against  the  Company  by  a  court of competent jurisdiction and such
judgments  or  orders  shall  continue  unsatisfied and unstayed for a period of
fourteen  (14)  days.

     (i)     failure  of the Company to have the Registration Statement referred
to  in  Section  10.2(b)  of  this  Agreement  filed  with the Commission within
fourteen (14) days from the date of this Agreement and declared effective by the
SEC  within  120  days  of  the  date  of  this  Agreement.

then,  and in every such occurrence, any Purchaser may, with respect to an Event
of  Default  specified  in  paragraph  (a),  and  the Majority Holders may, with
respect  to  any  other  Event of Default, by notice to the Company, declare the
Convertible  Notes  to  be,  and  the  Convertible  Notes  shall  thereon become
immediately  due and payable, and Purchasers shall have no further obligation to
fund monies under the Convertible Notes; provided that in the case of any of the
                                         --------
Events  of  Default  specified  in  paragraph  (e) or (f) above with respect the
Company, then, without any notice to the Company or any other act by any Holder,
the  entire  amount  of  the  Convertible Notes shall become immediately due and
payable,  provided  further,  if  any  Event  of  Default  has  occurred  and is
          --------  -------
continuing,  and  irrespective of whether any Convertible Note has been declared
immediately  due  and  payable  hereunder,  any  Holder of Convertible Notes may
proceed  to  protect  and enforce the rights of such Holder by an action at law,
suit  in  equity  or  other  appropriate  proceeding,  whether  for the specific
performance of any agreement contained herein or in any Convertible Note, or for
an  injunction  against a violation of any of the terms hereof or thereof, or in
aid  of  the  exercise  of  any  power  granted  hereby  or thereby or by law or
otherwise,  and provided further, in the case of any Event of Default other than
                ----------------
those  specified  in paragraphs (e) and (f), the amount declared due and payable
on  the  Convertible  Notes  shall  be  130%  of  the  principal amount thereof,
including  accrued  but unpaid interest through the date of payment, except that
any  Holder  may  convert  the  unpaid  principal amount of any Convertible Note
(including  the  amount  of  accrued  but unpaid interest) into shares of Common
Stock  at  the  Conversion  Price.

     SECTION  11.2.  Powers  and  Remedies  Cumulative.

     No  right  or remedy herein conferred upon or reserved to the Purchasers is
intended  to  be  exclusive  of  any  other right or remedy, and every right and
remedy  shall,  to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or  in  equity  or otherwise. The assertion or employment of any right or remedy
hereunder,  or  otherwise,  shall  not  prevent  the  concurrent  assertion   or
employment  of  any  other  appropriate  right or remedy. Every power and remedy
given by the Convertible Notes or by law may be exercised from time to time, and
as  often  as  shall  be  deemed  expedient,  by  the  Purchasers.

<PAGE>

                                   ARTICLE XII
                                  MISCELLANEOUS

     SECTION  12.1.  Notices.

     All  notices, demands and other communications to any party hereunder shall
be  in  writing  (including telecopier or similar writing) and shall be given to
such party at its address set forth on the signature pages hereof, or such other
address  as  such  party  may  hereafter  specify  for  the purpose to the other
parties.  Each such notice, demand or other communication shall be effective (i)
if  given  by telecopy, when such telecopy is transmitted to the telecopy number
specified  on  the  signature  page hereof, (ii) if given by mail, four (4) days
after  such  communication  is  deposited  in  the mail with first class postage
prepaid,  addressed  as  aforesaid  or  (iii)  if given by any other means, when
delivered  at  the  address  specified  in  or  pursuant  to  this  Section.

     SECTION  12.2.  No  Waivers;  Amendments.

     (a)     No  failure  or  delay  on  the part of any party in exercising any
right,  power  or  remedy hereunder shall operate as a waiver thereof, nor shall
any  single  or partial exercise of any such right, power or remedy preclude any
other  or  further exercise thereof or the exercise of any other right, power or
remedy.

     (b)     Any  provision  of  this  Agreement may be amended, supplemented or
waived if,  but  only  if,  such  amendment,  supplement or waiver is in writing
and is signed  by  the  Company and the Majority Holders; provided, that without
                                                          --------
the consent of each holder of any Convertible Note affected thereby an amendment
or waiver may not (a) reduce the aggregate principal amount of Convertible Notes
whose  holders  must  consent  to an amendment or waiver, (b) reduce the rate or
extend  the time for payment of interest on any Convertible Note, (c) reduce the
principal amount of or extend the stated maturity of any Convertible Note or (d)
make  any  Convertible Note payable in money or property other than as stated in
such  Convertible  Note.  In  determining  whether  the holders of the requisite
principal  amount of Convertible Notes have concurred in any direction, consent,
or  waiver as provided in any Transaction Agreement, Convertible Notes which are
owned  by  the  Company  or any other obligor on or guarantor of the Convertible
Notes, or by any Person Controlling, Controlled by, or under common Control with
any  of the foregoing, shall be disregarded and deemed not to be outstanding for
the  purpose  of  any  such  determination;  and  provided  further that no such
                                                  -----------------
amendment,  supplement  or waiver which affects the rights of the Purchasers and
their  affiliates  otherwise  than  solely  in  their  capacities  as holders of
Convertible  Notes  shall  be effective with respect to them without their prior
written  consent.

<PAGE>

     SECTION  12.3.  Indemnification.

     (a)     The  Company  agrees to indemnify and hold harmless each Purchaser,
its  Affiliates, and each Person, if any, who controls such Purchaser, or any of
its  Affiliates,  within  the  meaning of the Securities  Act  or  the  Exchange
Act  (each,  a  "Controlling  Person"),  and  the  respective  partners, agents,
employees,  officers  and  Directors of each Purchaser, their Affiliates and any
such  Controlling  Person  (each  an  "Indemnified  Party" and collectively, the
"Indemnified  Parties"),  from  and against any and all losses, claims, damages,
liabilities  and  expenses  (including,  without  limitation  and  as  incurred,
reasonable  costs  of  investigating,  preparing  or defending any such claim or
action,  whether or not such Indemnified Party is a party thereto, provided that
the  Company  shall  not  be  obligated to advance such costs to any Indemnified
Party  other  than  the  Purchasers unless it has received from such Indemnified
Party  an undertaking to repay to the Company the costs so advanced if it should
be  determined  by final judgment of a court of competent jurisdiction that such
Indemnified  Party was not entitled to indemnification hereunder with respect to
such  costs)  which may be incurred by such Indemnified Party in connection with
any  investigative,  administrative or judicial proceeding brought or threatened
that  relates  to  or  arises  out  of,  or is in connection with any activities
contemplated  by  any  Transaction  Agreement  or any other services rendered in
connection  herewith;  provided that the Company will not be responsible for any
                       --------
claims,  liabilities  losses,  damages  or expenses that are determined by final
judgment  of  a  court of competent jurisdiction to result from such Indemnified
Party's  gross  negligence,  willful  misconduct  or  bad  faith.

     (b)     If any action shall be brought against an  Indemnified  Party  with
respect  to  which  indemnity  may  be  sought  against  the  Company under this
Agreement,  such  Indemnified Party shall promptly notify the Company in writing
and  the  Company, at its option, may, assume the defense thereof, including the
employment  of  counsel  reasonably  satisfactory  to such Indemnified Party and
payment  of  all  reasonable  fees  and  expenses.  The failure to so notify the
Company  shall  not  affect  any  obligations  the  Company  may  have  to  such
Indemnified  Party  under  this  Agreement  or  otherwise  unless the Company is
materially adversely affected by such failure. Such Indemnified Party shall have
the  right  to  employ  separate  counsel  in such action and participate in the
defense  thereof,  but  the  fees  and  expenses of such counsel shall be at the
expense  of such Indemnified Party, unless: (i) the Company has failed to assume
the  defense  and  employ  counsel  or (ii) the named parties to any such action
(including  any  impleaded  parties)  include  such  Indemnified  Party  and the
Company,  and  such  Indemnified  Party  shall have been advised by counsel that
there may be one or more legal defenses available to it which are different from
or  additional  to  those  available  to  the  Company,  in  which case, if such
Indemnified  Party  notifies  the  Company  in  writing that it elects to employ
separate  counsel  at the expense of the Company, the Company shall not have the
right  to  assume  the  defense  of  such action or proceeding on behalf of such
Indemnified  Party, provided, however, that the Company shall not, in connection
with  any one such action or proceeding or separate but substantially similar or
related  actions or proceedings in the  same  jurisdiction  arising out  of  the
same general  allegations  or  circumstances,  be  responsible hereunder for the
reasonable  fees and expenses of more than one such firm of separate counsel, in
addition  to  any  local  counsel,  which  counsel  shall  be  designated by the
Purchasers.  The  Company  shall  not  be  liable for any settlement of any such
action  effected  without the written consent of the Company (which shall not be
unreasonably  withheld)  and  the  Company agrees to indemnify and hold harmless
each  Indemnified  Party  from  and  against  any loss or liability by reason of
settlement  of any action effected with the consent of the Company. In addition,
the  Company  will  not,  without  the  prior written consent of the Purchasers,
settle  or  compromise  or  consent to the entry of any judgment in or otherwise
seek to terminate any pending or threatened action, claim, suit or proceeding in
respect  to  which  indemnification  or  contribution  may  be  sought hereunder
(whether  or  not  any  Indemnified  Party  is  a  party  thereto)  unless  such
settlement, compromise, consent or termination includes an express unconditional
release  of  the  Purchasers  and the other Indemnified Parties, satisfactory in
form  and  substance  to  the Purchasers, from all liability arising out of such
action,  claim,  suit  or  proceeding.

<PAGE>

     (c)     If for any reason the foregoing indemnity is unavailable (otherwise
than pursuant to the express terms of such indemnity) to an Indemnified Party or
insufficient to hold an Indemnified Party harmless, then in lieu of indemnifying
such  Indemnified  Party,  the  Company  shall  contribute to the amount paid or
payable  by  such  Indemnified  Party  as  a result of such claims, liabilities,
losses, damages, or expenses (i) in such proportion as is appropriate to reflect
the  relative  benefits  received  by  the  Company  on  the one hand and by the
Purchasers  on the other from the transactions contemplated by this Agreement or
(ii)  if the allocation provided by clause (i) is not permitted under applicable
law,  in  such  proportion  as  is  appropriate to reflect not only the relative
benefits  received  by  the  Company  on  the one hand and the Purchasers on the
other,  but also the relative fault of the Company and the Purchasers as well as
any  other  relevant equitable considerations. Notwithstanding the provisions of
this  Section  12.3, the aggregate contribution of all Indemnified Parties shall
not  exceed  the amount of interest and fees actually received by the Purchasers
pursuant  to  this  Agreement.  It  is  hereby  further agreed that the relative
benefits  to  the  Company  on the one hand and the Purchasers on the other with
respect to the transactions contemplated hereby shall be determined by reference
to,  among  other  things,  whether  any  untrue  or alleged untrue statement of
material  fact  or  the  omission  or  alleged omission to state a material fact
related  to  information  supplied  by  the Company or by the Purchasers and the
parties'  relative  intent,  knowledge, access to information and opportunity to
correct  or  prevent  such statement or omission. No Person guilty of fraudulent
misrepresentation  (within  the  meaning of Section 11(f) of the Securities Act)
shall  be  entitled  to  contribution from any Person who was not guilty of such
fraudulent  misrepresentation

     (d)     The indemnification, contribution and expense reimbursement obliga-
tions  set  forth in this Section 12.3 shall (i) be in addition to any liability
the  Company  may have to any Indemnified Party at common law or otherwise, (ii)
survive  the  termination of this Agreement and the other Transaction Agreements
and  the payment in full of the Convertible Notes and (iii) remain operative and
in full force and effect regardless of any investigation made by or on behalf of
the  Purchasers  or  any  other  Indemnified  Party.

<PAGE>

     SECTION  12.4.  Expenses.

     The Company agrees to pay legal fees and expenses as follows: (a) $2,500 to
legal  counsel for the preparation of the Transaction Agreements, (b) $12,500 to
legal  counsel  for  preparation  of  an  S-3  registration  statement,  (c)  an
additional  $15,000  to legal counsel upon effectiveness of the S-3 registration
statement,  and  (d)  $5,000  to legal counsel for acting as escrow agent. Other
than  as  set forth herein, the Company and each of the Purchasers agrees to pay
their  own  expenses  in  connection with the negotiation and preparation of the
Transaction  Agreements.

     SECTION  12.5.  Successors  and  Assigns.

     This  Agreement  shall  be binding upon the Company and upon the Purchasers
and their respective successors and assigns; provided that the Company shall not
assign  or  otherwise transfer its rights or obligations under this Agreement to
any  other Person without the prior written consent  of  the  Majority  Holders.
All provisions  hereunder  purporting  to  give  rights  to Purchasers and their
affiliates  or  to  holders  of  Securities  are for the express benefit of such
Persons  and  their  successors  and  assigns.

     SECTION  12.6.  Brokers.

     The  Company  agrees  to  pay  any  brokerage,  finder's  or  other  fee or
commission  payable  in  connection  with  the  sale  of  the  Securities.

     SECTION  12.7.  Florida  Law;  Submission  to  Jurisdiction; Waiver of Jury
Trial.

     THIS  AGREEMENT  SHALL  BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS  OF THE STATE OF FLORIDA. EACH PARTY HERETO HEREBY SUBMITS TO THE EXCLUSIVE
JURISDICTION  OF  ANY  FLORIDA STATE COURT FOR PURPOSES OF ALL LEGAL PROCEEDINGS
ARISING  OUT  OF  OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY. EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE
OF  ANY  SUCH  PROCEEDING  BROUGHT  IN  SUCH A COURT AND ANY CLAIM THAT ANY SUCH
PROCEEDING  BROUGHT  IN  SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
EACH  PARTY  HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY
IN  ANY  LEGAL  PROCEEDING  ARISING  OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS  CONTEMPLATED  HEREBY.  NOTWITHSTANDING ANYTHING TO THE CONTRARY IN
THE  FOREGOING,  AT THE ELECTION OF A HOLDER, ANY DISPUTE BETWEEN THE HOLDER AND
THE  COMPANY  MAY BE ARBITRATED, RATHER THAN LITIGATED IN THE COURTS, BEFORE AND
IN ACCORDANCE WITH THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION IN FLORIDA.
THE  COMPANY  AGREES  TO  SUBMIT  TO  AND  PARTICIPATE  IN ANY SUCH ARBITRATION.

     SECTION  12.8.  Severability.

     If  any  term, provision, covenant or restriction of this Agreement is held
by  a  court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall  remain in full force and effect and shall in no way be affected, impaired
or  invalidated  unless  a  failure  of  consideration  would  result  thereby.

<PAGE>

     SECTION  12.9.  Survival.

     All  provisions  contained  in this Agreement (unless specifically noted to
the  contrary)  shall  survive  the payment in full of the Convertible Notes and
shall  remain  operative  and  in  full  force  and  effect.

     SECTION  12.10.  Counterparts.

     This  Agreement  may be executed by telecopy signature and in any number of
counterparts  each  of which shall be an original with the same effect as if the
signatures  there  to  and  hereto  were  upon  the  same  instrument.

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

E-REX,  INC.
a  Nevada  corporation

     By:     /s/  Carl  Dilley
             -----------------
     Name:   Carl  Dilley
             ------------
     Title:  President
             ---------
     Address:  11645  Biscayne  Blvd.
               Suite  210
               Miami,  FL  33181
     Fax:      305-895-1400
     Attn:

PURCHASER:

Auxiliarius  Fortunare,  LLC

/s/  Kyle  G.  Kennedy
----------------------
President

<PAGE>

                                    EXHIBITS
                                    --------

Exhibit  A     -     Form  of  Convertible  Note
Exhibit  B     -     Form  of  Warrant
Exhibit  C     -     Form  of  Registration  Rights  Agreement
Exhibit  D     -     Form  of  Officer's  Certificate

<PAGE>
                                   SCHEDULE I
                                   ----------

                      AGGREGATE  PRINCIPAL                     NUMBER  OF
NAME  AND  ADDRESS    AMOUNT  OF  NOTES      PURCHASE  PRICE   WARRANT SHARES
------------------    -----------------      ---------------   --------------

<PAGE>
                                  SCHEDULE 4.3

                       OUTSTANDING OPTIONS, WARRANTS, ETC.

<PAGE>
                                  SCHEDULE 4.8

                                   LITIGATION

     1.     Carol  Gamble  Trust  86,  et  al  v.  E-Rex,  Inc.,  et  al
            ------------------------------------------------------------

     In  February 2002, the Company was served with a lawsuit brought by a group
of ten (10) plaintiffs, namely Carol Gamble Trust 86, June L. Blackwell, June L.
Blackwell and Christopher Ford, as joint  tenants,  Terry  Shores,  Steve  Rigg,
Karl Weinacker, Ressoyia Anderson, Mel  Goodman,  Slawomir  Kownacki,  and  John
Bussjeager,  in  the  United  States  District  Court,  District of Nevada.  The
defendants  in  the  action  were  the Company, its Board of Directors, a former
Director,  the  Company's  legal  counsel,  and  two  corporate  entities.

     At a hearing on July 29, 2002, the Court in the above-referenced case found
that  the  plaintiff's  had  not  met  their pleading standard under the Private
Securities Litigation Reform Act (PSLRA) and dismissed the case, with prejudice,
as  to all defendants. The order of dismissal was entered on August 5, 2002. The
Plaintiff's  have  appealed the Court's decision, and a hearing has been set for
October  21,  2002.

     2.     Chris  Ford,  Successor  Trustee  to the Carol J. Gamble 86 Trust v.
            --------------------------------------------------------------------
International  Investment  Banking,  Inc.,  et  al
--------------------------------------------------

     In April 2002, the Company was served with a lawsuit brought by Chris Ford,
Successor  Trustee  to the Carol J. Gamble Trust 86,  in  the  Circuit Court  of
the 11th  Judicial  Circuit  in  and  for  Miami-Dade  County,  Florida, General
Jurisdictional Division, case number 02-10265CA1S.  The defendants in the action
are  International  Investment Banking, Inc. ("IIBI"), the Company, its Board of
Directors,  and  a  former  Director.

     The  Complaint  alleges,  among  other things, that the plaintiff agreed to
lend  money  to  IIBI  for  the  purpose  of  development  of  E-Rex's Dragonfly
electronic  device.  The  Complaint  further  alleges  theft,  diversion  of the
corporate  assets, and breach of fiduciary duties by the defendants in diverting
the  loan  proceeds  for  the  directors  own  benefit.

     The  Complaint  requests treble damages in the amount of $750,000 under the
note,  plus penalties, interest, and attorneys' fees, and an accounting from all
defendants.

     The  Company  is  vigorously  defending  this  lawsuit although the Company
believes  that  the  action lacks merit.  The plaintiff in this case is the same
plaintiff  as  in  the  case  described  below.  The case is at a stage where no
discovery has been taken and no prediction can be made as to the outcome of this
case.

<PAGE>
                                    EXHIBIT A
                                    ---------

                            FORM OF CONVERTIBLE NOTE

<PAGE>
                                    EXHIBIT B
                                    ---------

                                 FORM OF WARRANT

<PAGE>
                                    EXHIBIT C
                                    ---------

                      FORM OF REGISTRATION RIGHTS AGREEMENT

<PAGE>
                                    EXHIBIT D
                                    ---------

                          FORM OF OFFICER'S CERTIFICATE

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