Document:

EXHIBIT 4.8

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH
SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED.

                               WARRANT TO PURCHASE

                             SHARES OF COMMON STOCK

                                       OF

                               NUTRITION 21, INC.

                              Expires May 19, 2011

No.: W-06- __                                      Number of Shares: ___________
Date of Issuance: May 19, 2006

      FOR VALUE RECEIVED, subject to the provisions hereinafter set forth, the
undersigned, NUTRITION 21, INC., a New York corporation (together with its
successors and assigns, the "Issuer"), hereby certifies that
_______________________________ or its registered assigns (the "Holder") is
entitled to subscribe for and purchase, during the Term (as hereinafter
defined), up to ____________________________________ (_____________) shares
(subject to adjustment as hereinafter provided) of the duly authorized, validly
issued, fully paid and non-assessable Common Stock of the Issuer, at an exercise
price per share equal to the Warrant Price then in effect on the terms and
conditions hereinafter set forth. Capitalized terms used in this Warrant and not
otherwise defined herein shall have the respective meanings specified in Section
8 hereof.

      1. Term. The term of this Warrant shall commence on May 19, 2006 and shall
expire at 6:00 p.m., eastern time, on May 19, 2011 (such period being the
"Term").

      2. Method of Exercise; Payment; Issuance of New Warrant; Transfer and
Exchange.

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<PAGE>

      (a) Time of Exercise. The purchase rights represented by this Warrant may
be exercised in whole or in part during the Term.

      (b) Method of Exercise. The Holder hereof may exercise this Warrant, in
whole or in part, by the surrender of this Warrant (with the exercise form
attached hereto as Exhibit A duly executed) at the principal office of the
Issuer, and by the payment to the Issuer of an amount of consideration therefor
equal to the Warrant Price in effect on the date of such exercise multiplied by
the number of shares of Warrant Stock with respect to which this Warrant is then
being exercised, payable at such Holder's election (i) by certified or official
bank check or by wire transfer to an account designated by the Issuer, (ii) by
"cashless exercise" in accordance with the provisions of subsection (c) of this
Section 2, but only when a registration statement under the Securities Act
providing for the resale of the Warrant Stock is not then in effect, or (iii) by
a combination of the foregoing methods of payment selected by the Holder of this
Warrant.

      (c) Cashless Exercise. Notwithstanding any provisions herein to the
contrary and commencing one (1) year following the Original Issue Date, if (i)
the Per Share Market Value of one share of Common Stock is greater than the
Warrant Price (at the date of calculation as set forth below) and (ii) a
registration statement under the Securities Act providing for the resale of the
Warrant Stock is not then in effect by the date such registration statement is
required to be effective pursuant to the Registration Rights Agreement (as
defined in the Purchase Agreement) or not effective at any time during the
Effectiveness Period (as defined in the Registration Rights Agreement) in
accordance with the terms of the Registration Rights Agreement, in lieu of
exercising this Warrant by payment of cash, the Holder may exercise this Warrant
by a cashless exercise and shall receive the number of shares of Common Stock
equal to an amount (as determined below) by surrender of this Warrant at the
principal office of the Issuer together with the properly endorsed Notice of
Exercise in which event the Issuer shall issue to the Holder a number of shares
of Common Stock computed using the following formula:

             X = Y - (A)(Y)
                     ------
                        B

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

             Y        = the number of shares of Common Stock purchasable
                      upon exercise of all of the Warrant or, if only a
                      portion of the Warrant is being exercised, the
                      portion of the Warrant being exercised.

             A =      the Warrant Price.

             B = the Per Share Market Value of one share of Common Stock.

      (d) Issuance of Stock Certificates. In the event of any exercise of the
rights represented by this Warrant in accordance with and subject to the terms
and conditions hereof, certificates for the shares of Warrant Stock so purchased
shall be dated the date of such exercise and delivered to the Holder hereof
within a reasonable time, not exceeding three (3) Trading Days after such
exercise (the "Delivery Date") or, at the request of the Holder (provided that a
registration statement under the Securities Act providing for the resale of the
Warrant Stock is then in effect), issued and delivered to the Depository Trust
Company ("DTC") account on the Holder's behalf via the Deposit Withdrawal Agent
Commission System ("DWAC") within a reasonable time, not exceeding three (3)
Trading Days after such exercise, and the Holder hereof shall be deemed for all
purposes to be the holder of the shares of Warrant Stock so purchased as of the
date of such exercise. The Holder shall deliver this original Warrant, or an
indemnification undertaking with respect to such Warrant in the case of its
loss, theft or destruction, at such time that this Warrant is fully exercised.
With respect to partial exercises of this Warrant, the Issuer shall keep written
records for the Holder of the number of shares of Warrant Stock exercised as of
each date of exercise.

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      (e) Compensation for Buy-In on Failure to Timely Deliver Certificates Upon
Exercise. In addition to any other rights available to the Holder, if the Issuer
fails to cause its transfer agent to transmit to the Holder a certificate or
certificates representing the Warrant Stock pursuant to an exercise on or before
the Delivery Date, and if after such date the Holder is required by its broker
to purchase (in an open market transaction or otherwise) shares of Common Stock
to deliver in satisfaction of a sale by the Holder of the Warrant Stock which
the Holder anticipated receiving upon such exercise (a "Buy-In"), then the
Issuer shall (1) pay in cash to the Holder the amount by which (x) the Holder's
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the
number of shares of Warrant Stock that the Issuer was required to deliver to the
Holder in connection with the exercise at issue times (B) the price at which the
sell order giving rise to such purchase obligation was executed, and (2) at the
option of the Holder, either reinstate the portion of the Warrant and equivalent
number of shares of Warrant Stock for which such exercise was not honored or
deliver to the Holder the number of shares of Common Stock that would have been
issued had the Issuer timely complied with its exercise and delivery obligations
hereunder. For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted
exercise of shares of Common Stock with an aggregate sale price giving rise to
such purchase obligation of $10,000, under clause (1) of the immediately
preceding sentence the Issuer shall be required to pay the Holder $1,000. The
Holder shall provide the Issuer written notice indicating the amounts payable to
the Holder in respect of the Buy-In, together with applicable confirmations and
other evidence reasonably requested by the Issuer. Nothing herein shall limit a
Holder's right to pursue any other remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Issuer's failure to timely deliver
certificates representing shares of Common Stock upon exercise of this Warrant
as required pursuant to the terms hereof.

      (f) Transferability of Warrant. Subject to Section 2(h) hereof, this
Warrant, and the rights evidenced hereby, may be transferred by a Holder, in
whole or in part, without the consent of the Issuer, so long as the transferee
is an "accredited investor" as defined in Regulation D under the Securities Act
and agrees to be bound by all of the provisions of this Warrant. If transferred
pursuant to this paragraph, this Warrant may be transferred on the books of the
Issuer by the Holder hereof in person or by duly authorized attorney, upon
surrender of this Warrant at the principal office of the Issuer, properly
endorsed (by the Holder executing an assignment in the form attached hereto) and
upon payment of any necessary transfer tax or other governmental charge imposed
upon such transfer. This Warrant is exchangeable at the principal office of the
Issuer for Warrants to purchase the same aggregate number of shares of Warrant
Stock, each new Warrant to represent the right to purchase such number of shares
of Warrant Stock as the Holder hereof shall designate at the time of such
exchange. All Warrants issued on transfers or exchanges shall be dated the
Original Issue Date and shall be identical with this Warrant except as to the
number of shares of Warrant Stock issuable pursuant thereto.

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<PAGE>

      (g) Continuing Rights of Holder. The Issuer will, at the time of or at any
time after each exercise of this Warrant, upon the request of the Holder hereof,
acknowledge in writing the extent, if any, of its continuing obligation to
afford to such Holder all rights to which such Holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant,
provided that if any such Holder shall fail to make any such request, the
failure shall not affect the continuing obligation of the Issuer to afford such
rights to such Holder.

      (h) Compliance with Securities Laws.

            (i) The Holder of this Warrant, by acceptance hereof, acknowledges
      that this Warrant and the shares of Warrant Stock to be issued upon
      exercise hereof are being acquired solely for the Holder's own account and
      not as a nominee for any other party, and for investment, and that the
      Holder will not offer, sell or otherwise dispose of this Warrant or any
      shares of Warrant Stock to be issued upon exercise hereof except pursuant
      to an effective registration statement, or an exemption from registration,
      under the Securities Act and any applicable state securities laws.

            (ii) Except as provided in paragraph (iii) below, this Warrant and
      all certificates representing shares of Warrant Stock issued upon exercise
      hereof shall be stamped or imprinted with a legend in substantially the
      following form:

                  THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON
                  EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
                  ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
                  SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
                  DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND
                  UNDER APPLICABLE STATE SECURITIES LAWS OR THE ISSUER SHALL
                  HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
                  THE ISSUER THAT REGISTRATION OF SUCH SECURITIES UNDER THE
                  SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE
                  SECURITIES LAWS IS NOT REQUIRED.

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<PAGE>

            (iii) The Issuer agrees, upon a Holder's reasonable request, to
      reissue certificates representing any of the Warrant Stock, without the
      legend set forth above (i) while a registration statement providing for
      the resale of such Warrant Stock is effective under the Securities Act,
      (ii) following any sale of such Warrant Stock pursuant to Rule 144
      (assuming the transferor is not an affiliate of the Issuer), (iii) if such
      Warrant Stock is eligible for sale under Rule 144(k) (to the extent that
      such Holder provides a certification or legal opinion to the Issuer to
      that effect), or (iv) if such legend is not required under applicable
      requirements of the Securities Act (including controlling judicial
      interpretations and pronouncements issued by the Securities and Exchange
      Commission). Following the effective date of the registration statement
      providing for the resale of such Warrant Stock or at such earlier time as
      a legend is no longer required for the Warrant Stock, the Issuer will,
      promptly following the delivery by the Holder to the Issuer or the
      Issuer's transfer agent of a legended certificate representing such
      Warrant Stock, deliver or cause to be delivered to the Holder a
      certificate representing such Warrant Stock that is free from all
      restrictive legends. The restrictions on transfer contained in this
      Section 2(h) shall be in addition to, and not by way of limitation of, any
      other restrictions on transfer contained in any other section of this
      Warrant. Whenever a certificate representing the Warrant Stock is required
      to be issued to a the Holder without a legend, in lieu of delivering
      physical certificates representing the Warrant Stock (provided that a
      registration statement under the Securities Act providing for the resale
      of the Warrant Stock is then in effect), the Issuer shall cause its
      transfer agent to electronically transmit the Warrant Stock to the Holder
      by crediting the account of the Holder's Prime Broker with DTC through its
      DWAC system.

      (i) Accredited Investor. In no event may the Holder exercise this Warrant
in whole or in part unless the Holder is an "accredited investor" as defined in
Regulation D under the Securities Act.

      3. Stock Fully Paid; Reservation and Listing of Shares; Covenants.

      (a) Stock Fully Paid. The Issuer represents, warrants, covenants and
agrees that all shares of Warrant Stock which may be issued upon the exercise of
this Warrant or otherwise hereunder will, when issued in accordance with the
terms of this Warrant, be duly authorized, validly issued, fully paid and
non-assessable and free from all taxes, liens and charges created by or through
the Issuer. The Issuer further covenants and agrees that during the period
within which this Warrant may be exercised, the Issuer will at all times have
authorized and reserved for the purpose of the issuance upon exercise of this
Warrant a number of authorized but unissued shares of Common Stock equal to at
least one hundred percent (100%) of the number of shares of Common Stock
issuable upon exercise of this Warrant without regard to any limitations on
exercise.

      (b) Reservation. If any shares of Common Stock required to be reserved for
issuance upon exercise of this Warrant or as otherwise provided hereunder
require registration or qualification with any Governmental Authority under any
federal or state law before such shares may be so issued, the Issuer will in
good faith use its best efforts as expeditiously as possible at its expense to
cause such shares to be duly registered or qualified. If the Issuer shall list
any shares of Common Stock on any securities exchange or market it will, at its
expense, list thereon, and maintain and increase when necessary such listing,
of, all shares of Warrant Stock from time to time issued upon exercise of this
Warrant or as otherwise provided hereunder (provided that such Warrant Stock has
been registered pursuant to a registration statement under the Securities Act
then in effect), and, to the extent permissible under the applicable securities
exchange rules, all unissued shares of Warrant Stock which are at any time
issuable hereunder, so long as any shares of Common Stock shall be so listed.
The Issuer will also so list on each securities exchange or market, and will
maintain such listing of, any other securities which the Holder of this Warrant
shall be entitled to receive upon the exercise of this Warrant if at the time
any securities of the same class shall be listed on such securities exchange or
market by the Issuer.

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<PAGE>

      (c) Covenants. The Issuer shall not by any action including, without
limitation, amending the Certificate of Incorporation or the by-laws of the
Issuer, or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such actions as may be necessary or appropriate to
protect the rights of the Holder hereof against dilution (to the extent
specifically provided herein) or impairment. Without limiting the generality of
the foregoing, the Issuer will (i) not permit the par value, if any, of its
Common Stock to exceed the then effective Warrant Price, (ii) not amend or
modify any provision of the Certificate of Incorporation or by-laws of the
Issuer in any manner that would adversely affect the rights of the Holders of
the Warrants, (iii) take all such action as may be reasonably necessary in order
that the Issuer may validly and legally issue fully paid and nonassessable
shares of Common Stock, free and clear of any liens, claims, encumbrances and
restrictions (other than as provided herein) upon the exercise of this Warrant,
and (iv) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
reasonably necessary to enable the Issuer to perform its obligations under this
Warrant.

      (d) Loss, Theft, Destruction of Warrants. Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Issuer
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same number of shares of Common Stock.

      (e) Payment of Taxes. The Issuer will pay any documentary stamp taxes
attributable to the initial issuance of the Warrant Stock issuable upon exercise
of this Warrant; provided, however, that the Issuer shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in the
issuance or delivery of any certificates representing Warrant Stock in a name
other than that of the Holder in respect to which such shares are issued.

      4. Adjustment of Warrant Price. The price at which such shares of Warrant
Stock may be purchased upon exercise of this Warrant shall be subject to
adjustment from time to time as set forth in this Section 4. The Issuer shall
give the Holder notice of any event described below which requires an adjustment
pursuant to this Section 4 in accordance with the notice provisions set forth in
Section 5.

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            (a) Recapitalization, Reorganization, Reclassification,
Consolidation, Merger or Sale. In case the Issuer after the Original Issue Date
shall do any of the following (each, a "Triggering Event"): (a) consolidate or
merge with or into any other Person and the Issuer shall not be the continuing
or surviving corporation of such consolidation or merger, or (b) permit any
other Person to consolidate with or merge into the Issuer and the Issuer shall
be the continuing or surviving Person but, in connection with such consolidation
or merger, any Capital Stock of the Issuer shall be changed into or exchanged
for Securities of any other Person or cash or any other property, or (c)
transfer all or substantially all of its properties or assets to any other
Person, or (d) effect a capital reorganization or reclassification of its
Capital Stock, then, and as a condition to each such Triggering Event, proper
and adequate provision shall be made so that, upon the basis and the terms and
in the manner provided in this Warrant, the Holder of this Warrant shall be
entitled upon the exercise hereof at any time after the consummation of such
Triggering Event, to the extent this Warrant is not exercised prior to such
Triggering Event, to receive at the Warrant Price in effect at the time
immediately prior to the consummation of such Triggering Event in lieu of the
Common Stock issuable upon such exercise of this Warrant prior to such
Triggering Event, the Securities, cash and property to which such Holder would
have been entitled upon the consummation of such Triggering Event if such Holder
had exercised the rights represented by this Warrant immediately prior thereto
(including the right of a shareholder to elect the type of consideration it will
receive upon a Triggering Event), subject to adjustments (subsequent to such
corporate action) as nearly equivalent as possible to the adjustments provided
for elsewhere in this Section 4.

            (b) Stock Dividends, Subdivisions and Combinations. If at any time
the Issuer shall:

            (i) make or issue or set a record date for the holders of the Common
      Stock for the purpose of entitling them to receive a dividend payable in,
      or other distribution of, shares of Common Stock,

            (ii) subdivide its outstanding shares of Common Stock into a larger
      number of shares of Common Stock, or

            (iii) combine its outstanding shares of Common Stock into a smaller
      number of shares of Common Stock,

then (1) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (2) the Warrant Price then in
effect shall be adjusted to equal (A) the Warrant Price then in effect
multiplied by the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the adjustment divided by (B) the number of
shares of Common Stock for which this Warrant is exercisable immediately after
such adjustment.

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Notwithstanding the foregoing, if such record date shall have been fixed and
such dividend is not fully paid or if such distribution is not fully made on the
date fixed therefor, the Warrant Price shall be adjusted pursuant to this
paragraph as of the time of actual payment of such dividends or distributions.

      (c) Certain Other Distributions. If at any time the Issuer shall make or
issue or set a record date for the determination of the holders of the Common
Stock for the purpose of entitling them to receive any dividend or other
distribution of:

            (i) cash (other than a cash dividend payable out of earnings or
      earned surplus legally available for the payment of dividends under the
      laws of the jurisdiction of incorporation of the Issuer),

            (ii) any evidences of its indebtedness, any shares of stock of any
      class or any other securities or property of any nature whatsoever (other
      than cash), or

            (iii) any warrants or other rights to subscribe for or purchase any
      evidences of its indebtedness, any shares of stock of any class or any
      other securities or property of any nature whatsoever (other than cash),

then (1) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the product of the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such
adjustment multiplied by a fraction (A) the numerator of which shall be the Per
Share Market Value of Common Stock at the date of taking such record and (B) the
denominator of which shall be such Per Share Market Value minus the amount
allocable to one share of Common Stock of any such cash so distributable and of
the fair value (as determined in good faith by the Board of Directors of the
Issuer) of any and all such evidences of indebtedness, shares of stock, other
securities or property or warrants or other subscription or purchase rights so
distributable, and (2) the Warrant Price then in effect shall be adjusted to
equal (A) the Warrant Price then in effect multiplied by the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to the
adjustment divided by (B) the number of shares of Common Stock for which this
Warrant is exercisable immediately after such adjustment. A reclassification of
the Common Stock (other than a change in par value, or from par value to no par
value or from no par value to par value) into shares of Common Stock and shares
of any other class of stock shall be deemed a distribution by the Issuer to the
holders of its Common Stock of such shares of such other class of stock within
the meaning of this Section 4(c) and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock as a
part of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 4(b).

Notwithstanding the foregoing, if such record date shall have been fixed and
such dividend is not fully paid or if such distribution is not fully made on the
date fixed therefor, the Warrant Price shall be adjusted pursuant to this
Section 4(c) as of the time of actual payment of such dividends or
distributions.

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      (d) Other Provisions Applicable to Adjustments under this Section. The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Warrant Price then in effect provided for in this Section 4:

            (i) Computation of Consideration. In connection with any merger or
consolidation in which the Issuer is the surviving corporation (other than any
consolidation or merger in which the previously outstanding shares of Common
Stock of the Issuer shall be changed to or exchanged for the stock or other
securities of another corporation), the amount of consideration therefor shall
be, deemed to be the fair value, as determined reasonably and in good faith by
the Board, of such portion of the assets and business of the nonsurviving
corporation as the Board may determine to be attributable to such securities. In
the event of any consolidation or merger of the Issuer in which the Issuer is
not the surviving corporation or in which the previously outstanding shares of
Common Stock of the Issuer shall be changed into or exchanged for the stock or
other securities of another corporation, or in the event of any sale of all or
substantially all of the assets of the Issuer for stock or other securities of
any corporation, the Issuer shall be deemed to have issued a number of shares of
its Common Stock for stock or securities or other property of the other
corporation computed on the basis of the actual exchange ratio on which the
transaction was predicated, and for a consideration equal to the fair market
value on the date of such transaction of all such stock or securities or other
property of the other corporation. In the event any consideration received by
the Issuer for any securities consists of property other than cash, the fair
market value thereof at the time of issuance or as otherwise applicable shall be
as determined in good faith by the Board. In the event Common Stock is issued
with other shares or securities or other assets of the Issuer for consideration
which covers both, the consideration computed as provided in this Section
4(d)(i) shall be allocated among such securities and assets as determined in
good faith by the Board.

            (ii) When Adjustments to Be Made. The adjustments required by this
Section 4 shall be made whenever and as often as any specified event requiring
an adjustment shall occur, except that any adjustment of the number of shares of
Common Stock for which this Warrant is exercisable that would otherwise be
required may be postponed (except in the case of a subdivision or combination of
shares of the Common Stock, as provided for in Section 4(b)) up to, but not
beyond the date of exercise if such adjustment either by itself or with other
adjustments not previously made adds or subtracts less than one percent (1%) of
the shares of Common Stock for which this Warrant is exercisable immediately
prior to the making of such adjustment. Any adjustment representing a change of
less than such minimum amount (except as aforesaid) which is postponed shall be
carried forward and made as soon as such adjustment, together with other
adjustments required by this Section 4 and not previously made, would result in
a minimum adjustment or on the date of exercise. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at the close of
business on the date of its occurrence.

            (iii) Fractional Interests. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into account to
the nearest one one-hundredth (1/100th) of a share.

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            (iv) When Adjustment Not Required. If the Issuer shall take a record
of the holders of its Common Stock for the purpose of entitling them to receive
a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.

      (e) Form of Warrant after Adjustments. The form of this Warrant need not
be changed because of any adjustments in the Warrant Price or the number and
kind of Securities purchasable upon the exercise of this Warrant.

      (f) Escrow of Warrant Stock. If after any property becomes distributable
pursuant to this Section 4 by reason of the taking of any record of the holders
of Common Stock, but prior to the occurrence of the event for which such record
is taken, and the Holder exercises this Warrant, any shares of Common Stock
issuable upon exercise by reason of such adjustment shall be deemed the last
shares of Common Stock for which this Warrant is exercised (notwithstanding any
other provision to the contrary herein) and such shares or other property shall
be held in escrow for the Holder by the Issuer to be issued to the Holder upon
and to the extent that the event actually takes place, upon payment of the
current Warrant Price. Notwithstanding any other provision to the contrary
herein, if the event for which such record was taken fails to occur or is
rescinded, then such escrowed shares shall be cancelled by the Issuer and
escrowed property returned.

      5. Notice of Adjustments. Whenever the Warrant Price or Warrant Share
Number shall be adjusted pursuant to Section 4 hereof (for purposes of this
Section 5, each an "adjustment"), the Issuer shall cause its Chief Financial
Officer to prepare and execute a certificate setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated (including a description of the
basis on which the Board made any determination hereunder), and the Warrant
Price and Warrant Share Number after giving effect to such adjustment, and shall
cause copies of such certificate to be delivered to the Holder of this Warrant
promptly after each adjustment. Any dispute between the Issuer and the Holder of
this Warrant with respect to the matters set forth in such certificate may, at
the option of Holders representing at least five percent (5%) of the outstanding
Warrants at such time, be submitted to an Independent Appraiser reasonably
acceptable to the Issuer and the Holder. The Issuer shall use its best efforts
to cause the Independent Appraiser to perform the calculations and notify the
Issuer and the Holder of the results no later than five (5) business days from
the time it receives the disputed calculation. Such Independent Appraiser's
calculation shall be binding upon all parties absent manifest error. The
reasonable expenses of the Independent Appraiser in making such determination
shall be paid by the Issuer, in the event the Holder's calculation was correct,
or by the Holder, in the event the Issuer's calculation was correct, or equally
by the Issuer and the Holder in the event that neither the Issuer's or the
Holder's calculation was correct.

      6. Fractional Shares. No fractional shares of Warrant Stock will be issued
in connection with any exercise hereof, but in lieu of such fractional shares,
the Issuer shall round the number of shares to be issued upon exercise up to the
nearest whole number of shares.

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<PAGE>

      7. Ownership Cap and Certain Exercise Restrictions.

            (a) Notwithstanding anything to the contrary set forth in this
Warrant, at no time may a Holder of this Warrant exercise any portion of this
Warrant if the number of shares of Common Stock to be issued pursuant to such
exercise would exceed, when aggregated with all other shares of Common Stock
beneficially owned by such Holder at such time, the number of shares of Common
Stock which would result in such Holder beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules thereunder) in
excess of 4.99% of the then issued and outstanding shares of Common Stock;
provided, however, that upon a holder of this Warrant providing the Issuer with
sixty-one (61) days notice (pursuant to Section 12 hereof) (the "Waiver Notice")
that such Holder would like to waive this Section 7(a) with regard to any or all
shares of Common Stock issuable upon exercise of this Warrant, this Section 7(a)
will be of no force or effect with regard to all or a portion of the Warrant
referenced in the Waiver Notice; provided, further, that this provision shall be
of no further force or effect during the sixty-one (61) days immediately
preceding the expiration of the term of this Warrant.

            (b) Notwithstanding anything to the contrary set forth in this
Warrant, at no time may a Holder of this Warrant exercise any portion of this
Warrant if the number of shares of Common Stock to be issued pursuant to such
exercise would exceed, when aggregated with all other shares of Common Stock
beneficially owned by such Holder at such time, the number of shares of Common
Stock which would result in such Holder beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules thereunder) in
excess of 9.99% of the then issued and outstanding shares of Common Stock;
provided, however, that upon a holder of this Warrant providing the Issuer with
a Waiver Notice that such holder would like to waive this Section 7(b) with
regard to any or all shares of Common Stock issuable upon exercise of this
Warrant, this Section 7(b) shall be of no force or effect with regard to those
shares of Warrant Stock referenced in the Waiver Notice; provided, further, that
this provision shall be of no further force or effect during the sixty-one (61)
days immediately preceding the expiration of the term of this Warrant.

      8. Definitions. For the purposes of this Warrant, the following terms have
the following meanings:

            "Board" shall mean the Board of Directors of the Issuer.

            "Capital Stock" means and includes (i) any and all shares,
      interests, participations or other equivalents of or interests in (however
      designated) corporate stock, including, without limitation, shares of
      preferred or preference stock, (ii) all partnership interests (whether
      general or limited) in any Person which is a partnership, (iii) all
      membership interests or limited liability company interests in any limited
      liability company, and (iv) all equity or ownership interests in any
      Person of any other type.

                                       11
<PAGE>

            "Certificate of Incorporation" means the Certificate of
      Incorporation of the Issuer as in effect on the Original Issue Date, and
      as hereafter from time to time amended, modified, supplemented or restated
      in accordance with the terms hereof and thereof and pursuant to applicable
      law.

            "Common Stock" means the Common Stock, par value $.005 per share, of
      the Issuer and any other Capital Stock into which such stock may hereafter
      be changed.

            "Governmental Authority" means any governmental, regulatory or
      self-regulatory entity, department, body, official, authority, commission,
      board, agency or instrumentality, whether federal, state or local, and
      whether domestic or foreign.

            "Holders" mean the Persons who shall from time to time own any
      Warrant. The term "Holder" means one of the Holders.

            "Independent Appraiser" means a nationally recognized or major
      regional investment banking firm or firm of independent certified public
      accountants of recognized standing (which may be the firm that regularly
      examines the financial statements of the Issuer) that is regularly engaged
      in the business of appraising the Capital Stock or assets of corporations
      or other entities as going concerns, and which is not affiliated with
      either the Issuer or the Holder of any Warrant.

            "Issuer" means Nutrition 21, Inc., a New York corporation, and its
      successors and assigns.

            "Majority Holders" means at any time the Holders of Warrants
      exercisable for a majority of the shares of Warrant Stock issuable under
      the Warrants at the time outstanding.

            "Nasdaq" means the Nasdaq National Market or the Nasdaq Capital
      Market.

            "Original Issue Date" means May 19, 2006.

            "OTC Bulletin Board" means the over-the-counter electronic bulletin
      board.

            "Other Common" means any other Capital Stock of the Issuer of any
      class which shall be authorized at any time after the date of this Warrant
      (other than Common Stock) and which shall have the right to participate in
      the distribution of earnings and assets of the Issuer without limitation
      as to amount.

            "Outstanding Common Stock" means, at any given time, the aggregate
      amount of outstanding shares of Common Stock, assuming full exercise,
      conversion or exchange (as applicable) of all options, warrants and other
      Securities which are convertible into or exercisable or exchangeable for,
      and any right to subscribe for, shares of Common Stock that are
      outstanding at such time.

                                       12
<PAGE>

            "Person" means an individual, corporation, limited liability
      company, partnership, joint stock company, trust, unincorporated
      organization, joint venture, Governmental Authority or other entity of
      whatever nature.

            "Per Share Market Value" means on any particular date (a) the
      closing bid price per share of the Common Stock on such date on Nasdaq or
      another registered national stock exchange on which the Common Stock is
      then listed, or if there is no such price on such date, then the closing
      bid price on such exchange or quotation system on the date nearest
      preceding such date, or (b) if the Common Stock is not listed then on
      Nasdaq or any registered national stock exchange, the closing bid price
      for a share of Common Stock in the over-the-counter market, as reported by
      the OTC Bulletin Board or in the National Quotation Bureau Incorporated
      (or similar organization or agency succeeding to its functions of
      reporting prices) at the close of business on such date, or (c) if the
      Common Stock is not then reported by the OTC Bulletin Board or the
      National Quotation Bureau Incorporated (or similar organization or agency
      succeeding to its functions of reporting prices), then the average of the
      "Pink Sheet" quotes for the five days preceding such date of
      determination, or (d) if the Common Stock is not then publicly traded the
      fair market value of a share of Common Stock as determined by an
      Independent Appraiser selected in good faith by the Majority Holders;
      provided, however, that the Issuer, after receipt of the determination by
      such Independent Appraiser, shall have the right to select an additional
      Independent Appraiser, in which case, the fair market value shall be equal
      to the average of the determinations by each such Independent Appraiser;
      and provided, further that all determinations of the Per Share Market
      Value shall be appropriately adjusted for any stock dividends, stock
      splits or other similar transactions during such period. The determination
      of fair market value by an Independent Appraiser shall be based upon the
      fair market value of the Issuer determined on a going concern basis as
      between a willing buyer and a willing seller and taking into account all
      relevant factors determinative of value, and shall be final and binding on
      all parties. In determining the fair market value of any shares of Common
      Stock, no consideration shall be given to any restrictions on transfer of
      the Common Stock imposed by agreement or by federal or state securities
      laws, or to the existence or absence of, or any limitations on, voting
      rights.

            "Purchase Agreement" means the Common Stock and Warrant Purchase
      Agreement dated as of May 19, 2006, among the Issuer and the Purchasers.

            "Purchasers" means the purchasers of Common Stock and Warrants
      issued by the Issuer pursuant to the Purchase Agreement.

            "Securities" means any debt or equity securities of the Issuer,
      whether now or hereafter authorized, any instrument convertible into or
      exchangeable for Securities or a Security, and any option, warrant or
      other right to purchase or acquire any Security. "Security" means one of
      the Securities.

            "Securities Act" means the Securities Act of 1933, as amended, or
      any similar federal statute then in effect.

                                       13
<PAGE>

            "Subsidiary" means any corporation at least 50% of whose outstanding
      Voting Stock shall at the time be owned directly or indirectly by the
      Issuer or by one or more of its Subsidiaries, or by the Issuer and one or
      more of its Subsidiaries.

            "Term" has the meaning specified in Section 1 hereof.

            "Trading Day" means (a) a day on which the Common Stock is traded on
      Nasdaq, or (b) if the Common Stock is not listed on Nasdaq, a day on which
      the Common Stock is traded on any other registered national stock
      exchange, or (c) if the Common Stock is not traded on any other registered
      national stock exchange, a day on which the Common Stock is traded on the
      OTC Bulletin Board, or (d) if the Common Stock is not traded on the OTC
      Bulletin Board, a day on which the Common Stock is quoted in the
      over-the-counter market as reported by the National Quotation Bureau
      Incorporated (or any similar organization or agency succeeding its
      functions of reporting prices); provided, however, that in the event that
      the Common Stock is not listed or quoted as set forth in (a), (b) or (c)
      hereof, then Trading Day shall mean any day except Saturday, Sunday and
      any day which shall be a legal holiday or a day on which banking
      institutions in the State of New York are authorized or required by law or
      other government action to close.

            "Voting Stock" means, as applied to the Capital Stock of any
      corporation, Capital Stock of any class or classes (however designated)
      having ordinary voting power for the election of a majority of the members
      of the Board of Directors (or other governing body) of such corporation,
      other than Capital Stock having such power only by reason of the happening
      of a contingency.

            "Warrants" means the Warrants issued and sold pursuant to the
      Purchase Agreement, including, without limitation, this Warrant, and any
      other warrants of like tenor issued in substitution or exchange for any
      thereof pursuant to the provisions of Section 2(c), 2(d) or 2(e) hereof or
      of any of such other Warrants.

            "Warrant Price" initially means U.S. $1.80, as such price may be
      adjusted from time to time as shall result from the adjustments specified
      in this Warrant, including Section 4 hereto.

            "Warrant Share Number" means at any time the aggregate number of
      shares of Warrant Stock which may at such time be purchased upon exercise
      of this Warrant, after giving effect to all prior adjustments and
      increases to such number made or required to be made under the terms
      hereof.

            "Warrant Stock" means Common Stock issuable upon exercise of any
      Warrant or Warrants or otherwise issuable pursuant to any Warrant or
      Warrants.

                                       14
<PAGE>

      9. Other Notices. In case at any time:

                                    (A)     the Issuer shall make any
                                            distributions to the holders of
                                            Common Stock; or

                                    (B)     the Issuer shall authorize the
                                            granting to all holders of its
                                            Common Stock of rights to subscribe
                                            for or purchase any shares of
                                            Capital Stock of any class or other
                                            rights; or

                                    (C)     there shall be any reclassification
                                            of the Capital Stock of the Issuer;
                                            or

                                    (D)     there shall be any capital
                                            reorganization by the Issuer; or

                                    (E)     there shall be any (i) consolidation
                                            or merger involving the Issuer or
                                            (ii) sale, transfer or other
                                            disposition of all or substantially
                                            all of the Issuer's property, assets
                                            or business (except a merger or
                                            other reorganization in which the
                                            Issuer shall be the surviving
                                            corporation and its shares of
                                            Capital Stock shall continue to be
                                            outstanding and unchanged and except
                                            a consolidation, merger, sale,
                                            transfer or other disposition
                                            involving a wholly-owned
                                            Subsidiary); or

                                    (F)     there shall be a voluntary or
                                            involuntary dissolution, liquidation
                                            or winding-up of the Issuer or any
                                            partial liquidation of the Issuer or
                                            distribution to holders of Common
                                            Stock;

then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
(20) days prior to the action in question and not less than ten (10) days prior
to the record date or the date on which the Issuer's transfer books are closed
in respect thereto. This Warrant entitles the Holder to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Common Stock.

      10. Amendment and Waiver. Any term, covenant, agreement or condition in
this Warrant may be amended, or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), by a written instrument or written instruments executed by the
Issuer and the Majority Holders; provided, however, that no such amendment or
waiver shall reduce the Warrant Share Number, increase the Warrant Price,
shorten the period during which this Warrant may be exercised or modify any
provision of this Section 10 without the consent of the Holder of this Warrant.
No consideration shall be offered or paid to any person to amend or consent to a
waiver or modification of any provision of this Warrant unless the same
consideration is also offered to all holders of the Warrants.

                                       15
<PAGE>

      11. Governing Law; Jurisdiction. This Warrant shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to any of the conflicts of law principles which would result in
the application of the substantive law of another jurisdiction. This Warrant
shall not be interpreted or construed with any presumption against the party
causing this Warrant to be drafted. The Issuer and the Holder agree that venue
for any dispute arising under this Warrant will lie exclusively in the state or
federal courts located in New York County, New York, and the parties irrevocably
waive any right to raise forum non conveniens or any other argument that New
York is not the proper venue. The Issuer and the Holder irrevocably consent to
personal jurisdiction in the state and federal courts of the state of New York.
The Issuer and the Holder consent to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address in
effect for notices to it under this Warrant and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing in
this Section 11 shall affect or limit any right to serve process in any other
manner permitted by law. The Issuer and the Holder hereby agree that the
prevailing party in any suit, action or proceeding arising out of or relating to
this Warrant or the Purchase Agreement, shall be entitled to reimbursement for
reasonable legal fees from the non-prevailing party. The parties hereby waive
all rights to a trial by jury.

      12. Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earlier of (i) the date of transmission, if
such notice or communication is delivered via facsimile (evidenced by a
successful transmission) at the facsimile telephone number specified for notice
prior to 5:00 p.m., eastern time, on a Trading Day, (ii) the Trading Day after
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified for notice later than 5:00
p.m., eastern time, on any date and earlier than 11:59 p.m., eastern time, on
such date, (iii) the Trading Day following the date of mailing, if sent by
overnight delivery by a nationally recognized overnight courier service or (iv)
actual receipt by the party to whom such notice is required to be given. The
addresses for such communications shall be with respect to the Holder of this
Warrant or of Warrant Stock issued pursuant hereto, addressed to such Holder at
its last known address or facsimile number appearing on the books of the Issuer
maintained for such purposes, or with respect to the Issuer, addressed to:

                                  Nutrition 21, Inc.
                                  4 Manhattanville Road
                                  Purchase, New York 10577-2197
                                  Attention: Chief Executive Officer and General
                                  Counsel
                                  Tel. No.: (914) 701-4500
                                  Fax No.: (914) 696-0860

with copies (which copies
shall not constitute notice
to the Issuer) to:                Oscar D. Folger, Esq.
                                  521 Fifth Avenue, 24th Floor
                                  New York, New York 10175
                                  Tel. No.: (212) 697-6464
                                  Fax No.: (212) 697-7833

                                       16
<PAGE>

Copies of notices to the Holder shall be sent to Kramer Levin Naftalis & Frankel
LLP, 1177 Avenue of the Americas, New York, New York 10036, Attention: Richard
H. Gilden, Esq., Tel. No.: (212) 715-9100, Fax. No.: (212) 715-8000. Any party
hereto may from time to time change its address for notices by giving at least
ten (10) days written notice of such changed address to the other party hereto.

      13. Warrant Agent. The Issuer may, by written notice to each Holder of
this Warrant, appoint an agent having an office in New York, New York for the
purpose of issuing shares of Warrant Stock on the exercise of this Warrant
pursuant to subsection (b) of Section 2 hereof, exchanging this Warrant pursuant
to subsection (d) of Section 2 hereof or replacing this Warrant pursuant to
subsection (d) of Section 3 hereof, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.

      14. Remedies. The Issuer stipulates that the remedies at law of the Holder
of this Warrant in the event of any default or threatened default by the Issuer
in the performance of or compliance with any of the terms of this Warrant are
not and will not be adequate and that, to the fullest extent permitted by law,
such terms may be specifically enforced by a decree for the specific performance
of any agreement contained herein or by an injunction against a violation of any
of the terms hereof or otherwise.

      15. Successors and Assigns. This Warrant and the rights evidenced hereby
shall inure to the benefit of and be binding upon the successors and assigns of
the Issuer, the Holder hereof and (to the extent provided herein) the Holders of
Warrant Stock issued pursuant hereto, and shall be enforceable by any such
Holder or Holder of Warrant Stock.

      16. Modification and Severability. If, in any action before any court or
agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.

                                       17
<PAGE>

      17. Registration Rights. The Holder of this Warrant is entitled to the
benefit of certain registration rights with respect to the shares of Warrant
Stock issuable upon the exercise of this Warrant pursuant to that certain
Registration Rights Agreement, of even date herewith, by and among the Company
and Persons listed on Schedule I thereto (the "Registration Rights Agreement")
and the registration rights with respect to the shares of Warrant Stock issuable
upon the exercise of this Warrant by any subsequent Holder may only be assigned
in accordance with the terms and provisions of the Registrations Rights
Agreement.

      18. Headings. The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       18
<PAGE>

      IN WITNESS WHEREOF, the Issuer has executed this Warrant as of the day and
year first above written.

                                                     NUTRITION 21, INC.

                                                     By:
                                                        ------------------------
                                                          Name:
                                                          Title:

                                       19
<PAGE>

                                  EXERCISE FORM

                               NUTRITION 21, INC.

The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of Nutrition 21,
Inc. covered by the within Warrant.

Dated: _________________            Signature ___________________________

                                    Address   ___________________________

Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the date of Exercise: _________________________

The undersigned intends that payment of the Warrant Price shall be made as
(check one):

                  Cash Exercise_______

                  Cashless Exercise_______

If the Holder has elected a Cash Exercise, the Holder shall pay the sum of
$________ to the Issuer in accordance with the terms of the Warrant.

If the Holder has elected a Cashless Exercise, a certificate shall be issued to
the Holder for the number of shares equal to the whole number portion of the
product of the calculation set forth below, which is ___________. The Company
shall pay a cash adjustment in respect of the fractional portion of the product
of the calculation set forth below in an amount equal to the product of the
fractional portion of such product and the Per Share Market Value on the date of
exercise, which product is ____________.

         X = Y - (A)(Y)
                 ------
                    B

Where:

The number of shares of Common Stock to be issued to the Holder
__________________("X").

The number of shares of Common Stock purchasable upon exercise of all of the
Warrant or, if only a portion of the Warrant is being exercised, the portion of
the Warrant being exercised ___________________________ ("Y").

The Warrant Price ______________ ("A").

The Per Share Market Value of one share of Common Stock _______________________
("B").

                                       20
<PAGE>

                                   ASSIGNMENT

FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation.

Dated: _________________            Signature ___________________________

                                    Address   ___________________________

                               PARTIAL ASSIGNMENT

FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.

Dated: _________________            Signature ___________________________

                                    Address   ___________________________

                           FOR USE BY THE ISSUER ONLY:

This Warrant No. W-___ canceled (or transferred or exchanged) this _____ day of
___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock in
the name of _______________.

                                       21Exhibit 10.1

                           AGREEMENTAND PLAN OF MERGER

                  THIS AGREEMENT AND PLAN OF MERGER (this  "Agreement")  is made
and entered into as of May 5, 2006, by and among THE JACKSON RIVERS  COMPANY,  a
Florida corporation (the "Parent"),  JKRI Acquisition Corp., a Texas corporation
("Merger Sub"), and UTSI  International  Corporation,  a Texas  corporation (the
"Company"),  and the  shareholders  of the  Company who are  signatories  hereto
(each, a "Shareholder" and collectively, the "Shareholders").  Capitalized terms
used in this Agreement  without  definition shall have the meanings set forth or
referenced in Article XI.

                              W I T N E S S E T H:

                  WHEREAS,  the Shareholders are collectively the beneficial and
record owners of all of the issued and outstanding capital stock of the Company,
comprised  of  1,529,871  shares  of  common  stock,  $0.01  par value per share
(collectively, the "Company Shares");

                  WHEREAS,  the  respective  Boards of  Directors of the Parent,
Merger Sub and the  Company  have  approved  the merger  (the  "Merger")  of the
Company into the Merger Sub on the terms and subject to the conditions set forth
in this  Agreement,  whereby each issued  Company Share not owned by the Parent,
Merger Sub or the  Company  shall be  converted  into the right to  receive  the
Merger Consideration (as defined in Section 2.1 below); and

                  WHEREAS,  for Federal  income tax purposes it is intended that
the Merger qualify as a "reorganization" within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"); and

                  WHEREAS, the Parent, Merger Sub and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger and also to prescribe various conditions to the Merger;

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

                                    ARTICLE I

                                   THE MERGER

         1.1 The Merger. On the terms and subject to the conditions set forth in
this Agreement,  and in accordance  with the applicable  provisions of the Texas
Business  Corporation  Act (the  "TBCA"),  the Company  shall be merged into the
Merger Sub at the Effective  Time. At the Effective  Time and as a result of the
Merger, the separate  corporate  existence of the Company shall cease and Merger
Sub shall continue as the surviving entity (the "Surviving Entity"). The Merger,
the  issuance by the Parent of shares of preferred  stock,  par value $0.001 per
share,  of the Parent (the  "Parent  Preferred  Stock") in  connection  with the
Merger (the "Share  Issuance") and the other  transactions  contemplated by this
Agreement are referred to in this Agreement as the "Transactions."

                                  Page 1 of 42
<PAGE>

         1.2 Closing. The closing (the "Closing") of the Merger shall take place
at the offices of Weycer,  Kaplan,  Pulaski & Zuber, P.C., 1400 Summit Tower, 11
Greenway  Plaza,  Houston,  Texas at 10:00 a.m.,  Central  Daylight Time, on the
third (3rd) Business Day following the satisfaction (or, to the extent permitted
by Law, waiver by the party or parties entitled to the benefits  thereof) of the
conditions set forth in Sections 4.1 and 4.2 (other than those  conditions  that
by  their  nature  are  to be  satisfied  at the  Closing,  but  subject  to the
fulfillment  or waiver of those  conditions),  or at such other place,  time and
date as shall be agreed in writing by the  Parent and the  Company.  The date on
which the Closing occurs is referred to in this Agreement as the "Closing Date."

         1.3 Effective  Time. The Merger shall become  effective at such time as
the Articles of Merger is duly filed with such Secretary of State on the Closing
Date,  or at such  later  time as the Parent  and the  Company  shall  agree and
specify in the Articles of Merger (the time the Merger becomes  effective  being
the "Effective Time").

         1.4 Effect of the  Merger.  At the  Effective  Time,  the effect of the
Merger shall be as provided herein and in the applicable provisions of the TBCA.

         1.5 Articles of Incorporation and By-laws.

                  (a) The  articles  of  incorporation  of the Merger Sub, as in
effect  immediately  prior  to the  Effective  Time,  shall be the  articles  of
incorporation of the Surviving Entity until thereafter changed or amended.

                  (b) The by-laws of the Merger  Sub,  as in effect  immediately
prior to the Effective Time,  shall be the by-laws of the Surviving Entity until
thereafter changed or amended as provided therein or by applicable Law.

         1.6 Directors. The directors of the Surviving Entity shall be Daniel W.
Nagala and James E. Nelson, until the earlier of their resignation or removal or
until their  respective  successors are duly elected and qualified,  as the case
may be.

         1.7 Officers.  The officers of the Surviving  Entity shall be Daniel W.
Nagala as Chairman of the Board,  Chief Executive  Officer and President,  until
the earlier of their resignation or removal or until their respective successors
are duly elected or appointed and qualified, as the case may be.

                                  Page 2 of 42
<PAGE>

                                   ARTICLE II

          EFFECT ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
                            EXCHANGE OF CERTIFICATES

         2.1 Effect on Capital  Stock.  At the Effective  Time, by virtue of the
Merger and without any action on the part of the holder of any Company Shares or
any shares of capital stock of Merger Sub:

                  (a)  Capital  Stock  of  Surviving  Entity . Each  issued  and
outstanding share of capital stock of Merger Sub shall continue to be issued and
outstanding and shall  constitute the only issued and outstanding  shares of the
Surviving Entity.

                  (b)  Cancellation  of Treasury Stock and  Parent-Owned  Stock.
Each Company  Share that is owned by the  Company,  Merger Sub or Parent (or any
direct or  indirect  wholly-owned  subsidiary  of Parent or Merger Sub) shall no
longer be outstanding and shall  automatically be canceled and retired and shall
cease to exist, and no cash, Parent Common Stock or other consideration shall be
delivered or deliverable in exchange therefor.

                  (c) Conversion of Company Shares.

                           (1) Subject to Sections 2.1(b) and 2.1(d), all issued
and  outstanding  Company  Shares prior to the Effective Time shall be converted
into the right to receive  2,200,000  shares of Series C Preferred Stock in JKRI
(the "Merger  Consideration")  with  substantially  the rights,  privileges  and
preferences set forth on Exhibit A hereto (the "Series C_Preferred Stock"); and

                           (2) As of the Effective Time, all such Company Shares
shall no longer be outstanding and shall  automatically  be canceled and retired
and shall cease to exist, and each holder of a certificate representing any such
Company Shares shall cease to have any rights with respect  thereto,  except the
right to receive  Merger  Consideration  upon  surrender of such  certificate in
accordance with Section 2.2.

                  (d)  Dissenters  Rights.   Notwithstanding  anything  in  this
Agreement  to  the  contrary,  Company  Shares  ("Dissenter  Shares")  that  are
outstanding  immediately  prior to the  Effective  Time and that are held by any
person who is entitled to demand and properly demands payment for such Dissenter
Shares  pursuant to, and who complies in all respects  with,  Articles  5.12 and
5.13, et. seq. of the TBCA (the "Dissenter  Rights") shall not be converted into
Merger Consideration as provided in Section 2.1(c)(1), but rather the holders of
Dissenter  Shares  shall be  entitled to payment  for such  Dissenter  Shares in
accordance with the Dissenter Rights; provided, however, that if any such holder
shall fail to perfect or otherwise  shall  waive,  withdraw or lose the right to
receive payment under the Dissenter Rights,  then the right of such holder to be
paid in  accordance  with the  Dissenter  Rights shall cease and such  Dissenter
Shares shall be deemed to have been converted as of the Effective Time into, and
to  have  become   exchangeable   solely  for  the  right  to  receive,   Merger
Consideration as provided in Section  2.1(c)(1).  The Company shall serve prompt
notice to the Parent of any written notice of intent to demand  payment,  or any
written  demand for  payment,  received by the Company in respect of any Company
Shares,  and the Parent  shall have the right to  participate  in and direct all
negotiations  and  proceedings  with  respect  to  such  demands.  Prior  to the
Effective Time, the Company shall not,  without the prior written consent of the
Parent, make any payment with respect to, or settle or offer to settle, any such
demands, or agree to do any of the foregoing.

                                  Page 3 of 42
<PAGE>

         2.2 Exchange of Certificates.

                  (a) Exchange Agent. Weycer, Kaplan, Pulaski & Zuber, PC, shall
serve  as  Exchange  Agent  (the   "Exchange   Agent")  for  payment  of  Merger
Consideration  upon surrender of certificates  representing  Company Shares. The
Exchange  Agent shall also act as the agent for the Company's  stockholders  for
the purpose of  receiving  and holding  their  Certificates  and shall obtain no
rights or interest in such shares. Promptly following the Effective Time, Parent
shall deposit with the Exchange Agent, for the benefit of the holders of Company
Shares,  for exchange in accordance  with this Article II,  through the Exchange
Agent  certificates  representing  the  number  of  shares  of  Parent  Series C
Preferred Stock issuable  pursuant to this Agreement.  The Exchange Agent shall,
pursuant  to  irrevocable   instructions,   deliver  the  Merger   Consideration
contemplated to be issued pursuant to Section 2.1.

                  (b)  Exchange  Procedures.  As soon as  practicable  after the
Effective Time, the Exchange  Agent, or its designee,  shall mail to each holder
of a certificate or certificates (the  "Certificates") that immediately prior to
the Effective Time represented outstanding shares of Company Shares whose shares
were  converted  into the right to  receive  Merger  Consideration  pursuant  to
Section  2.1(c) (i) a letter of  transmittal  (which shall specify that delivery
shall be  effected  and risk of loss and title to the  Certificates  shall pass,
only upon  delivery of the  Certificates  to the Exchange  Agent and shall be in
such form and have such other provisions as Parent shall reasonably specify) and
(ii)  instructions  for use in effecting  the surrender of the  Certificates  in
exchange  for  Merger  Consideration.   Upon  surrender  of  a  Certificate  for
cancellation  to the  Exchange  Agent or to such other agent or agents as may be
appointed by Parent,  together with such letter of  transmittal,  duly executed,
and such other  documents as may  reasonably be required by the Exchange  Agent,
the  holder  of such  Certificate  shall be  entitled  to  receive  in  exchange
therefore  the number of shares of Parent  Series C Preferred  Stock in to which
the  aggregate  number  of  Company  Shares   previously   represented  by  such
Certificate  shall  have been  converted  pursuant  to Section  2.1(c),  and the
Certificate so surrendered shall forthwith be canceled.

                  (c)  Restricted  Securities.  The  shares of Parent  Preferred
Stock  (and the  shares  issuable  upon  conversion  thereof)  (i)  shall not be
registered  under the Securities Act or any state  securities laws, (ii) will be
offered and sold in reliance upon exemptions  provided in the Securities Act and
state securities laws for  transactions  not involving any public offering,  and
(iii) therefore,  shall constitute "restricted securities" within the meaning of
the  Securities  Act  and  cannot  be  resold  or  transferred  until  they  are
subsequently  registered  under the  Securities  Act and such  applicable  state
securities laws or unless an exemption from such registration is available.

                                  Page 4 of 42
<PAGE>

                  (d)  Investment  Representation  Letters  . On or  before  the
Closing Date, each of the  Shareholders  shall execute and deliver an Investment
Representation  Letter,  in the form attached hereto as Exhibit B (the "Investor
Representation  Letter"),  which contains  certain  representations  designed to
confirm the availability to the Parent of the exemption from registration  under
Section 4(2) of the Securities Act in connection with the issuance of the Parent
Preferred  Stock  pursuant to this  Agreement.  Notwithstanding  anything to the
contrary in this  Agreement,  in the event that any  Shareholder  (a "Defaulting
Shareholder")   is  unable  or  fails  to  execute   and   deliver  an  Investor
Representation  Letter in favor of the  Parent,  or the Parent has a  reasonable
basis to believe that the  representations  of such  Shareholder in the Investor
Representation  Letter are not true and correct in any material  respects,  then
the Parent may in its sole and  absolute  discretion  refuse to issue the Merger
Consideration allocable to the Defaulting Shareholder.

                  (e) No Further Ownership Rights in Company Shares.  The Merger
Consideration paid and/or issued in accordance with the terms of this Article II
upon  conversion of any Company  Shares shall be deemed to have been paid and/or
issued in full  satisfaction  of all rights  pertaining to such Company  Shares,
subject,  however, to the Company's  obligation to pay any dividends or make any
other distributions with a record date prior to the Effective Time that may have
been declared or made by the Company on such Company  Shares in accordance  with
the terms of this  Agreement  or prior to the date of this  Agreement  and which
remain unpaid at the Effective Time, and after the Effective Time there shall be
no further  registration of transfers on the stock transfer books of the Company
of Company Shares that were outstanding immediately prior to the Effective Time.
If, after the Effective Time, any  Certificates  formerly  representing  Company
Shares are presented to the Company or the Exchange  Agent for any reason,  they
shall be canceled and exchanged as provided in this Article II.

                  (f)  No  Liability.  None  of  Parent  or the  Company  or the
Exchange  Agent  shall  be  liable  to any  person  in  respect  of  any  Merger
Consideration (or dividends or distributions  with respect thereto) delivered to
a public  official  pursuant to any applicable  abandoned  property,  escheat or
similar Law. If any  Certificate  has not been  surrendered  prior to five years
after  the  date  on  which  the  final  Merger  Consideration  becomes  due (or
immediately prior to such earlier date on which Merger  Consideration in respect
of such  Certificate  would  otherwise  escheat to or become the property of any
Governmental  Entity),  any such cash,  shares,  dividends or  distributions  in
respect of such  Certificate  shall, to the extent  permitted by applicable Law,
become the  property of the  Surviving  Entity , free and clear of all claims or
interest of any person previously entitled thereto.

                  (h) Income Tax Treatment. It is intended by the parties hereto
that the Merger  qualify  as a  "reorganization"  within the  meaning of Section
368(a) of the Code. The parties hereto hereby adopt this Agreement as a "plan of
reorganization" within the meanings of Sections 1.368-2(g) and 1.368-3(a) of the
U.S. Treasury Regulations promulgated under the Code.

                                  Page 5 of 42
<PAGE>

                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

         3.1 Representations and Warranties  concerning the Company. The Company
hereby represents and warrants to the Parent as follows:

                  (a)  Authority.  The  Company  has  the  corporate  power  and
authority  to enter  into  and  deliver  this  Agreement  and each of the  other
agreements,   certificates,   instruments  and  documents   contemplated  hereby
(collectively,  the "Ancillary  Documents") to which it is a party, to carry out
its obligations hereunder and under any Ancillary Document and to consummate the
transactions  contemplated hereby and by the Ancillary  Documents.  All actions,
authorizations  and consents  required by Law for the execution,  delivery,  and
performance  by the Company of this  Agreement  and each  Ancillary  Document to
which it is a  party,  and the  consummation  of the  transactions  contemplated
hereby and thereby,  have been  properly  taken or obtained,  including  without
limitation,  the approval of this Agreement and the transactions contemplated by
it by the Board of Directors of the Company.

                  (b) Execution and Delivery.  This Agreement has been, and each
Ancillary Document to which the Company is a party will be at the Closing,  duly
authorized, executed and delivered by the Company and constitutes a legal, valid
and  binding  obligation  of the  Company,  enforceable  against  the Company in
accordance with their respective terms and conditions,  except as enforceability
thereof may be limited by applicable bankruptcy,  reorganization,  insolvency or
other similar laws  affecting or relating to creditors'  rights  generally or by
general principles of equity.

                  (c) No Conflicts.  Except as set forth on Schedule 3.1(c), the
execution,  delivery and  performance  by the Company of this Agreement and each
Ancillary  Document  to  which  it is a  party,  and  the  consummation  of  the
transactions  contemplated  hereby  and  thereby,  do not and will not  violate,
conflict  with or result in a breach of any term,  condition or provision of, or
require the consent of any Person  under,  or result in the creation of or right
to create any Lien upon any of the assets of the Company under,  (i) any Laws to
which the Company or any of its assets are subject,  (ii) any permit,  judgment,
order, writ, injunction,  decree or award of any Governmental Authority to which
the  Company  or  any  of  its  assets  are  subject,   (iii)  the  articles  of
incorporation  or  bylaws  of the  Company,  or  (iv)  any  license,  indenture,
promissory note, bond, credit or loan agreement, lease, agreement, commitment or
other  instrument  or  document  to which the Company is a party or by which the
Company  or any of its  assets  are  bound,  except  where,  in the  case of the
immediately preceding clause, such violation,  conflict, breach, etc. would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.

                  (d)  Governmental  Consents.  No consent,  approval,  order or
authorization of, or registration,  declaration or filing with, any Governmental
Authority,  is required to be obtained by the Company in connection with or as a
result of the execution  and delivery of this  Agreement or any of the Ancillary
Documents, or the performance of its obligations hereunder and thereunder.

                                  Page 6 of 42
<PAGE>

                  (e) Organization, Standing and Qualification. The Company is a
corporation duly incorporated,  validly existing, and in good standing under the
Laws of the State of Texas.  The Company has  corporate  power and  authority to
own,  lease and operate its properties and to carry on its business as now being
conducted,  to use its name and is duly qualified,  licensed or authorized to do
business  and in good  standing,  in each  jurisdiction  where the nature of the
activities  conducted by it or the character of the properties owned,  leased or
operated by it require such qualification, licensing or authorization. Each such
jurisdiction is identified on Schedule  3.1(e).  The Company's  corporate minute
books reflect all resolutions  approved and other material  actions taken by its
shareholders or Board of Directors and any committees  thereof since the date of
its incorporation.  The Shareholders or the Company have previously delivered to
the Parent true,  correct and complete  copies of the Articles of  Incorporation
and  Bylaws of the  Company,  each as  currently  in effect  (collectively,  the
"Organization Documents").

                  (f)  Capitalization.  The  authorized  capital  stock  of  the
Company  consists  solely  of  100,000,000  shares  of  common  stock,  of which
1,529,871 shares are issued and outstanding, and 0 shares of preferred stock, of
which  0  shares  are  issued  and  outstanding.  As of the  date  hereof,  each
Shareholder owns of record such number of shares of Common Stock as is set forth
opposite  such  Shareholder's  name  on  Schedule  3.1(f).  The  Company  Shares
constitute all of the issued and outstanding  capital stock of the Company.  All
of the issued and  outstanding  shares of capital  stock of the Company are duly
authorized,  validly issued, fully paid and non-assessable.  No shares of Common
Stock are held in treasury. Except as disclosed in Schedule 3.1(f), there are no
outstanding  subscriptions,   options,  warrants,  calls,  contracts,   demands,
commitments,   convertible  or  exchangeable   securities,   profits  interests,
conversion rights,  preemptive rights,  rights of first refusal or other rights,
agreements, arrangements or commitments of any nature whatsoever under which the
Company is or may become  obligated  to issue,  redeem,  assign or transfer  any
shares of capital  stock or purchase or make payment in respect of any shares of
capital  stock of the Company now or  previously  outstanding,  and there are no
outstanding or authorized  stock  appreciation,  phantom stock or similar rights
with respect to or any shares of its capital stock.

                  (g) No  Subsidiaries  or Other Equity  Interests.  The Company
does not,  nor has it ever at any time since its  organization,  had a direct or
indirect Subsidiary or owned, directly or indirectly,  any equity, investment or
other equity  interest,  or any right  (contingent  or otherwise) to acquire the
same, in any other Person.

                  (h) Financial Statements. The Company has previously delivered
to  the  Parent  true,  complete  and  correct  copies  of  unaudited  financial
statements  of the  Company  for the  fiscal  year  ended  June  30,  2005  (the
"Financial  Statements").  The  Financial  Statements  comply  as to form in all
material respects with the applicable accounting  requirements and the published
rules and  regulations  with respect  thereto,  were prepared in accordance with
GAAP  applied on a  consistent  basis  during the  periods  involved  and fairly
present in all material respects the financial position of the Company as of the
respective  dates thereof and the results of its  operations  and cash flows for
the respective periods then ended.

                                  Page 7 of 42
<PAGE>

                  (i) Absence of Undisclosed  Liabilities.  Except to the extent
adequately  reflected on or reserved  against in the  Financial  Statements  and
except for  recurring  Liabilities  incurred in the ordinary  course of business
consistent  with recent past  practice,  as of December  31, 2005 (the  "Balance
Sheet Date"),  the Company had no direct or indirect  Liabilities for any period
prior to such date or arising  out of  transactions  entered  into or any set of
facts existing prior thereto.  Since the Balance Sheet Date, the Company has not
incurred any Liabilities  except in the ordinary  course of business  consistent
with recent past practice,  none of which are, individually or in the aggregate,
material.

                  (j) Ordinary Course.  Since the Balance Sheet Date,  except as
otherwise disclosed on Schedule 3.1(j), the Company has operated its business in
the ordinary course consistent with past practice and there has not occurred:

                           (i)  any  change  in  the  condition   (financial  or
otherwise),  properties, assets, liabilities, business, prospects, operations or
results of  operations  that has had or could  reasonably  be expected to have a
Material Adverse Effect on the Company;

                           (ii)  any   amendments  or  changes  in  any  of  its
Organization Documents;

                           (iii)  any  issuance  or  sale  of any  shares  of or
interests in, or rights of any kind to acquire any shares of or interests in, or
receipt  of any  payment  based  on the  value  of,  its  capital  stock  or any
securities  convertible  or  exchangeable  into  shares  of  its  capital  stock
(including,  without  limitation,  any  stock  options,  phantom  stock or stock
appreciation rights) or any adjustment,  split,  combination or reclassification
of its  capital  stock,  or any  declaration  or payment of any  dividend or any
distribution  on,  or any  redemption,  purchase,  retirement  or other  Merger,
directly or indirectly,  of any shares of its capital stock or any securities or
obligations  convertible  into or  exchangeable  for any  shares of its  capital
stock;

                           (iv) any  investment  of a capital  nature on its own
account in excess of $50,000 individually or $100,000 in the aggregate;

                           (v) any entering into, amendment of, modification in,
relinquishment,  termination,  or  non-renewal  by the Company of any  contract,
lease, transaction, commitment or other right or obligation, except for purchase
and sale commitments  entered into in the ordinary course of business consistent
with recent past practice;

                           (vi) any waiver, forfeiture, or failure to assert any
rights of a material value or made, whether directly or indirectly,  any payment
of any material Liability before the same came due in accordance with its terms;

                           (vii) any material damage, destruction or loss of the
Company's assets or properties, whether covered by insurance or not;

                           (viii)  any  payment  of (or  any  making  of oral or
written  commitments or representations  to pay) any bonus,  increased salary or
special  remuneration  to any director,  officer,  employee or consultant or any
entry  into  or  alterations  of the  terms  of any  employment,  consulting  or
severance  agreement  with any such  person;  any  payment of any  severance  or
termination  pay (other than payments made in accordance  with existing plans or
agreements);  any grant of stock option or issuance of any restricted stock; any
entry into or modification of any agreement or Employee  Benefit Plan (except as
required by law) or any similar agreement;

                                  Page 8 of 42
<PAGE>

                           (ix) any modification of any term of benefits payable
under any Employee Benefit
Plan;

                           (x) (A) any creation, incurrence or assumption of any
Liability for borrowed money except those  Liabilities  incurred in the ordinary
course of business consistent with recent past practice, (B) issuance or sale of
any  securities  convertible  into or  exchangeable  for debt  securities of the
Company;  or (C) issuance or sale of options or other rights to acquire from the
Company,  directly  or  indirectly,  debt  securities  of  the  Company  or  any
securities convertible into or exchangeable for any such debt securities;

                           (xi) any  material  change in the amounts or scope of
coverage of insurance policies;

                           (xii)  any  merger  or  consolidation  with any other
Person,  acquisition  of any  capital  stock or other  securities  of any  other
Person,  or  acquisition  of all or a  significant  portion of the assets of any
other Person, or acquisition of any assets or properties from any Shareholder or
its affiliate or family member;

                           (xiii) any  assumption  or guarantee of any Liability
or responsibility  (whether primarily,  secondarily,  contingently or otherwise)
for the obligations of any other Person;

                           (xiv)   any   loan,   advance   (including,   without
limitation,  any  loan or  advance  to any  stockholder,  officer,  director  or
employee of such  Company) or capital  contribution  to, or  investment  in, any
Person,  except travel advances or advances of no more than $50,000 to employees
in the ordinary course of business consistent with recent past practice;

                           (xv) any sale,  transfer  or lease to others  of, any
grant, creation or assumption of Liens against, or otherwise disposed of, any of
its material assets, whether tangible or intangible;

                           (xvi)  any  lapse,  failure  to take any  actions  to
protect, or any adverse change in respect of any of its Proprietary Rights;

                           (xvii) any consummation of any other transaction that
is not in the Company's ordinary course of business  consistent with recent past
practice;

                           (xviii)  any  collection  of the  Company's  accounts
receivable,  or any payment of the Company's accounts payable, in each case that
is not in the Company's ordinary course of business  consistent with recent past
practice; or

                                  Page 9 of 42
<PAGE>

                           (xix) any  agreement  or  commitment,  in  writing or
otherwise,  to take any of the actions described in the foregoing subclauses (i)
through (xviii).

                  (k) Title to Assets.  Except as disclosed on Schedule  3.1(k),
the Company has good and marketable  title to all of the tangible and intangible
assets  owned by it,  free and clear of any Liens,  and none of such  assets are
owned by any Person other than the Company.  The Company owns, leases,  licenses
or  otherwise  has the  contractual  right to use all of the  assets  used in or
necessary  for the conduct of its business as currently  conducted.  The Company
has  delivered to the Parent a schedule of the fixed assets of the Company dated
within thirty (30) days prior to the date hereof. All personal property owned or
leased by the Company,  taken as a whole,  is in good repair and is  operational
and usable in the operation of the Company, subject to ordinary wear and tear.

                  (l) Receivables and Payables.  Except as disclosed on Schedule
3.1(l),  (i) the  accounts  and  notes  receivable  reflected  on the  Financial
Statements  or  arising  since  the  Balance  Sheet  Date   (collectively,   the
"Receivables"),  are bona fide,  represent valid obligations to the Company, and
have arisen or were acquired in the ordinary  course of business and in a manner
consistent  with recent past  practice  and with the  Company's  regular  credit
practices;  (ii) the Company's  provision for doubtful accounts reflected on its
Financial  Statements  or reserved on its books since the Balance Sheet Date has
been determined in accordance with the generally accepted accounting  principles
consistently  applied;   (iii)  the  Receivables  have  been  collected  or  are
collectible  in full,  net of any allowance for  uncollectibles  recorded on the
Financial  Statements or properly  reserved on its books since the Balance Sheet
Date,  in a manner  consistent  with past  practice  in the  ordinary  course of
business and without resort to litigation; (iv) to the Knowledge of the Company,
none of the  Receivables  is or  will at the  Closing  Date  be  subject  to any
defense,  counterclaim or setoff;  (v) since the Balance Sheet Date, the Company
has not canceled, reduced, discounted,  credited or rebated or agreed to cancel,
reduce,  discount,  credit or rebate, in whole or in part, any Receivables;  and
(vi) there has been no material  adverse  change since the Balance Sheet Date in
the amounts of Receivables or the allowances with respect  thereto,  or accounts
payable of the Company, from those reflected in the balance sheet of the Company
as of such date.  The  Company  has  provided  to the Parent a schedule  of aged
Receivables  and payables for the Company as of a date which is within three (3)
business days of the date hereof.

                  (m) Real Property.

                           (i) The  Company  does  not now  own,  and has  never
owned, any real property.

                           (ii)  Schedule  3.1(m) sets forth a true and complete
list of all real property  leased or otherwise used by the Company,  identifying
the lessor or other owner thereof (the "Real Property").

                                 Page 10 of 42
<PAGE>

                           (iii)  There is not  existing or proposed as a matter
of public  record or, to the Knowledge of the Company,  presently  contemplated,
any condemnation or similar action, or zoning action or proceeding, with respect
to any  portion  of the  Real  Property.  None  of the  existing  buildings  and
improvements which in part comprise the Real Property fails to comply fully with
all size,  height,  set back, use and other zoning  restrictions and regulations
applicable   thereto,   including,   without   limitation,   the  parking  space
requirements of all applicable zoning ordinances and regulations. The Company or
its landlord has obtained all licenses,  permits, approvals,  certificates,  and
other  authorizations  required by applicable  Laws for the use and occupancy of
the Real Property as it is currently being  utilized.  None of the Real Property
is  subject  to  any  encumbrance,  easement,  right-of-way,   building  or  use
restriction,  exception, variance, reservation,  limitation or other Liens which
might in any material respect interfere with or impair the continued use thereof
as currently utilized or proposed to be utilized by the Company.

                  (n) Proprietary Rights.

                           (i) To the Knowledge of the Company, the Company owns
or possesses licenses or other rights to use all trademarks,  trade and business
names, internet domain names, service marks, service names, copyrights, customer
lists, trade secrets and inventions  (whether or not patentable)  (collectively,
"Proprietary  Rights")  that  are  necessary  to the  conduct  of the  Company's
business as currently conducted or anticipated.

                           (ii)  Schedule  3.1(n)(ii)  sets  forth  a  true  and
complete list of all  trademarks,  trade names,  service  marks,  service names,
internet domain names, copyrights and patents included in the Proprietary Rights
of the Company  (identifying which are owned and which are licensed),  including
all  United  States,  state  and  foreign   registrations  or  applications  for
registration   thereof  and  all  agreements   relating  thereto.   All  filing,
registration,  maintenance  or  similar  fees  payable in  connection  with each
registration  (or  application  therefor)  of  Proprietary  Rights  set forth on
Schedule  3.1(n)(ii)  have been paid and each such  registration is valid and in
full force and effect.

                           (iii) Except as  disclosed  in Schedule  3.1(n)(iii),
the  Company  is not  required  to  pay  any  royalty,  license  fee or  similar
compensation  in  connection  with the  conduct  of its  business  as  currently
conducted.

                           (iv) To the Knowledge of the Company, the Company has
not interfered  with,  infringed  upon,  misappropriated  or otherwise come into
conflict with the  Proprietary  Rights of any other Person or committed any acts
of unfair  competition,  and no claims have been asserted by any Person alleging
such  interference,  infringement,  misappropriation,  conflict or act of unfair
competition.

                           (v) To the  Knowledge  of the  Company,  no Person is
infringing upon its Proprietary
Rights.

                           (vi) There are no Proprietary Rights developed by any
shareholder,  director,  officer, consultant or employee of the Company that are
used in the Company's business and that have not been transferred to, or are not
owned free and clear of any Liens by, the Company.

                                 Page 11 of 42
<PAGE>

                  (o) Material Agreements.  Schedule 3.1(o)(1) sets forth a true
and complete  list, and the Company has provided to the Parent  complete  copies
(including all amendments and extensions thereof and all waivers thereunder) or,
if oral, an accurate and complete description, of each of the following, whether
written or oral, to which the Company is a party or is otherwise  bound (each, a
"Material Agreement"):

                           (i)  all  loan  agreements,   indentures,  mortgages,
notes,   installment   obligations,   capital  leases  or  other  agreements  or
instruments relating to the borrowing of money (or guarantees thereof);

                           (ii) all continuing  contracts or commitments for the
future purchase, sale or manufacture of products, materials, supplies, equipment
or services  requiring  payment to or from the Company in an amount in excess of
$50,000 per annum which are not  terminable  on 30 days' or less notice  without
cost or other  liability at or any time after the Closing  Date, or in which the
Company  has granted or  received  manufacturing  rights,  most  favored  nation
pricing provisions or exclusive rights relating to any product or service;

                           (iii) all contracts with any Governmental Authority;

                           (iv) all leases, subleases or any other agreements or
arrangements  under  which  the  Company  has the  right or  license  to use any
personal property, whether tangible or intangible,  owned or licensed by another
Person;

                           (v) all  agreements or  arrangements  under which any
other  Person  has the right or  license to use any real  property  or  personal
property,  whether  tangible  or  intangible,  owned,  leased or licensed by the
Company;

                           (vi) all contracts or  understandings  which by their
terms  restrict  the  ability  of the  Company  to conduct  its  business  or to
otherwise compete, including as to manner or place;

                           (vii) all joint  venture  or  similar  agreements  or
understandings;

                           (viii) lease and other  agreements  pertaining to the
Real Property;

                           (ix)   all   collective    bargaining,    employment,
severance,   consulting,   nondisclosure  or  confidentiality   agreements,  and
agreements  requiring a charge of control or  parachute  payments,  or any other
type of contract or  understanding  with any  officer,  employee or  consultant,
other  than  pursuant  to  Employee  Benefit  Plans,  which  is not  immediately
terminable by the Company without cost or other liability to the Company;

                           (x)   all    agreements    with   sales   agents   or
representatives, wholesalers, distributors
and dealers;

                           (xi)  all   agreements   concerning   any   Hazardous
Materials; and

                                 Page 12 of 42
<PAGE>

                           (xii) all other contracts, without regard to monetary
amount,  which  were  not  entered  into  in the  ordinary  course  of  business
consistent  with past  practice  or which are  material  to the  conduct  of the
Company's business and not listed above.

                           Except  as  disclosed  on  Schedule  3.1(o)(2),   the
Company is not, and to the Knowledge of the Company,  any other party thereto is
not, in default  under any  Material  Agreement  and no event has occurred or is
reasonably expected to occur which (after notice or lapse of time or both) would
become a breach  or  default  under,  or would  otherwise  permit  modification,
cancellation,  acceleration or termination  of, any Material  Agreement or would
result  in the  creation  of or right to obtain  any Lien  upon,  or any  Person
obtaining any right to acquire, any assets,  rights or interests of the Company.
Except as disclosed on Schedule  3.1(o)(3):  (i) each  Material  Agreement is in
full force and effect and is a valid and binding obligation of the Company, and,
to the Knowledge of the Company,  the other parties  thereto;  (ii) there are no
unresolved  disputes  with  respect  to any  Material  Agreement;  and (iii) the
Company  has no  reasonable  basis  to  believe  that any  party  to a  Material
Agreement intends either to modify, cancel or terminate such Material Agreement.

                  (p) Litigation.  Except as disclosed on Schedule 3.1(p), there
is no claim, legal action, suit, arbitration,  investigation or other proceeding
pending,  or to the Knowledge of the Company,  threatened against or relating to
the Company or its assets. Neither the Company nor any of its assets are subject
to  any  outstanding  judgment,   order,  writ,  injunction  or  decree  of  any
Governmental  Authority.  There is currently no  investigation  or review by any
Governmental  Authority with respect to the Company pending or, to the Knowledge
of the Company,  threatened,  nor has any  Governmental  Authority  notified the
Company of its intention to conduct the same.

                  (q) Compliance with Laws. To the Knowledge of the Company, the
Company has all licenses,  permits and other  authorizations from all applicable
Governmental  Authorities necessary or desirable for the conduct of its business
as currently  conducted or as currently  expected to be conducted  following the
Closing Date.  Schedule 3.1(q) hereto sets forth a true and complete list of all
such licenses, permits and other authorizations obtained by the Company, each of
which is in full  force  and  effect  and no  violations  thereunder  have  been
recorded. To the Knowledge of the Company, the Company is in compliance, and has
complied,  in all material  respects with all Laws  applicable to it and has not
received any notice of any violation thereof.

                  (r)  Environmental  Matters.  To the Knowledge of the Company,
except as disclosed in Schedule 3.1(r):

                           (i)  During the period  that the  Company  has owned,
leased or operated any properties or facilities, neither it nor any other Person
has  disposed,  released,  or  participated  in or  authorized  the  release  or
threatened  release of Hazardous  Materials on, from or under such properties or
facilities.  There is not now nor has there  ever been any  presence,  disposal,
release or  threatened  release of Hazardous  Materials on, from or under any of
such  properties or  facilities,  which may have  occurred  prior to the Company
having  taken  possession  of any of  such  properties  or  facilities.  For the
purposes of this  Agreement,  the terms  "disposal,"  "release," and "threatened
release"  shall  have the  definitions  assigned  thereto  by the  Comprehensive
Environmental  Response  Compensation  and Liability Act of 1980, 42 U. S.C. ss.
9601 et seq., as amended ("CERCLA").

                                 Page 13 of 42
<PAGE>

                           (ii) The  operations  of the Company  and  properties
that the Company  owns,  leases or operates,  are in  compliance in all material
respects  with  Environmental  Law.  During the time that the Company has owned,
leased or operated its  properties and  facilities,  neither the Company nor any
other Person has used, generated, manufactured or stored on, under or about such
properties or facilities or transported or arranged for disposal to or from such
properties  or  facilities,  any Hazardous  Materials  which may be considered a
violation of applicable Environmental Law.

                           (iii)  During  the time that the  Company  has owned,
leased or operated its properties and  facilities,  there has been no litigation
or proceeding  brought or, to the Knowledge the Company,  threatened against the
Company by, or any settlement reached the Company with, any Persons alleging the
presence, disposal, release or threatened release of any Hazardous Materials, on
from or under any of such properties or facilities.

                           (iv) There are no facts,  circumstances or conditions
relating  to the  properties  and  facilities  owned,  leased or operated by the
Company which could give rise to a claim under any  Environmental  Law or to any
material Environmental Costs and Liabilities.

                  (s)  Related  Party  Transactions.   Except  as  disclosed  on
Schedule 3.1(s), no Related Party has been directly or indirectly a party to any
contract  or  other  arrangement  (whether  written  or oral)  with the  Company
providing  for services  (other than as an employee of the  Company),  products,
goods or supplies,  rental of real or personal property, or other wise requiring
payments from or to the Company.  For purposes hereof,  the term "Related Party"
shall mean any Shareholder or a director or officer of the Company or any member
of his or her family or any corporation, partnership, limited liability company,
other  business  entity or trust in which he or she or any  member of his or her
family has greater than a ten percent (10%)  interest,  or of which he or she or
any member of his or her family is an officer, director, general partner, member
or trustee.

                  (t)  Insurance.  Schedule  3.1(t)(l)  sets forth a list of the
Company's insurance policies (including property,  casualty, liability (general,
professional and directors and officers) and workers' compensation), listing for
each policy the identity of the insurance carrier, the policy period, the limits
and  retentions  and any  special  exclusions.  Except as set forth on  Schedule
3.1(t)(2),  such insurance  coverage and coverage amounts are, in the opinion of
the Company, customary for the business engaged in by the Company. Such policies
are currently in full force and effect, all premiums have been paid in full with
respect  thereto and the Company has not received any notice of  termination  or
modification from the insurance  carriers.  Schedule 3.1(t)(l) also sets forth a
true and complete description of any self-insurance  arrangement by or affecting
the Company, including any reserves established thereunder, if any.

                                 Page 14 of 42
<PAGE>

                  (u) Taxes.

                           (i) The Company has timely filed with the appropriate
taxing  authorities  all  returns  and  reports in respect of Taxes  ("Returns")
required to be filed by it (taking  into  account any  extension of time to file
granted to or on the account of the Company). The information on such Returns is
complete and accurate in all material respects. The Company has paid on a timely
basis all Taxes (whether or not shown on any Return) due and payable.  There are
no Liens for Taxes (other than for current  Taxes not yet due and payable)  upon
the assets of the Company.  As used in this Section  3.1(u),  the Company  shall
mean,  individually and  collectively,  (i) the Company and (ii) any individual,
trust,  corporation,  partnership or other entity as to which the Company may be
liable  for Taxes  incurred  by such  individual  or entity as a  transferee  or
pursuant to any provision of federal, state, local or foreign law or regulation.

                           (ii) No unpaid  (or  unreserved  in  accordance  with
generally  accepted  accounting   principles  applied  on  a  consistent  basis)
deficiencies  for Taxes have been  claimed,  proposed  or assessed by any taxing
authority or other  Governmental  Authority  with respect to the Company for any
Pre-Closing Period and, to the best knowledge of the Company or the Shareholder,
there are no pending  audits,  investigations  or claims for or  relating to any
liability in respect of Taxes of the Company,  nor has the Company been notified
of any request for such an audit,  investigation  or claim.  The Company has not
requested  any  extension  of time within  which to file any  currently  unfiled
returns  in respect of any Taxes and no  extension  of a statute of  limitations
relating to any Taxes is in effect with respect to the Company.

                           (iii) (1) The Company has made or will make provision
for all Taxes payable by it with respect to any Pre-Closing Period which are not
payable prior to the Closing Date;  (2) the provisions for Taxes with respect to
the  Company  for the  Pre-Closing  Period are  adequate to cover all Taxes with
respect to such period; (3) the Company has withheld and paid all Taxes required
to have been withheld and paid in  connection  with amounts paid or owing to any
employee,  independent contractor,  creditor,  shareholder or other third party;
(4) all material elections with respect to Taxes made by or, to the Knowledge of
the  Company,  affecting  the  Company  as of the date  hereof  are set forth in
Schedule 3.1(u)(iii)(4); (5) the Company is not a "consenting corporation" under
Section 341(f) of the Code, or any  corresponding  provision of state,  local or
foreign  law;  (6) there are no  private  letter  rulings  in respect of any Tax
pending between the Company and any taxing authority;  (7) the Company has never
been a member of an  affiliated  group within the meaning of Section 1504 of the
Code, or filed or been included in a combined, consolidated or unitary return of
any Person  other than the  Company;  (8) the Company is not liable for Taxes of
any other Person, or is currently under any contractual  obligation to indemnify
any Person with respect to Taxes, or is a party to any tax sharing  agreement or
any other agreement providing for payments by the Company with respect to Taxes;
(9) the Company is not, and has not been, a real  property  holding  corporation
(as  defined in Section  897(c)(2)  of the Code)  during the  applicable  period
specified  in Section  897(c)(1)(A)(ii)  of the Code;  (10) the Company is not a
person other than a United States  person  within the meaning of the Code;  (11)
the  Company  is not a  party  to  any  joint  venture,  partnership,  or  other
arrangement  or  contract  which could be treated as a  partnership  for federal
income tax purposes; (12) the Company has not entered into any sale leaseback or
any  leveraged  lease  transaction  that fails to satisfy  the  requirements  of
Revenue Procedure 75-21 (or similar provisions of foreign law); (13) the Company
has not  agreed  and is not  required,  as a result  of a change  in  method  of
accounting or otherwise, to include any adjustment under Section 481 of the Code
(or any  corresponding  provision  of state,  local or  foreign  law) in taxable
income; (14) the Company is not a party to any agreement,  contract, arrangement
or plan that would result (taking into account the transactions  contemplated by
this Agreement),  separately or in the aggregate,  in the payment of any "excess
parachute  payments"  within the meaning of Section  280G of the Code;  (15) the
Company  has never  been a  Subchapter  S  corporation  (as  defined  in Section
1361(a)(1) of the Code);  (16) Schedule  3.1(u)(iii)(16)  contains a list of all
jurisdictions  to which any Tax is  properly  payable by the  Company;  (17) the
Company is not a personal  holding  company within the meaning of Section 542 of
the Code; (18) the Company has not made an election and is not required to treat
any of its assets as owned by another  Person for federal income tax purposes or
as tax-exempt  bond  financed  property or  tax-exempt  use property  within the
meaning of Section  168 of the Code (or any  corresponding  provision  of state,
local or foreign law).

                                 Page 15 of 42
<PAGE>

                  (v) Employee Benefit Plans.

                           (i) Schedule  3.1(v)(i)  lists all  Employee  Benefit
Plans which have been  maintained or  contributed  to by the Company or to which
the Company has been  obligated to  contribute.  Except as set forth on Schedule
3.1(v)(ii),  neither  the Company  nor any of its ERISA  Affiliates  (as defined
below),  maintains  or has  maintained,  contributed  to or  been  obligated  to
contribute  to a Pension Plan subject to Title IV of ERISA or Section 412 of the
Code.  To the  Knowledge  of  the  Company,  except  as set  forth  on  Schedule
3.1(v)(iii),  each Pension Plan and Welfare Plan disclosed on Schedule 3.1(v)(i)
has been  maintained  in  compliance  with its  material  terms and all material
provisions  of ERISA  and the  Code,  applicable  thereto  (including  rules and
regulations thereunder).

                           (ii) The Company has  delivered or made  available to
Parent  prior  to the  date  hereof  complete  and  correct  copies  of (a)  any
employment agreements and any procedures and policies relating to the employment
of employees of the Company and the use of temporary  employees and  independent
contractors by the Company  (including  summaries of any procedures and policies
that are  unwritten),  (b)  plan  instruments  and  amendments  thereto  for all
Employee  Benefit  Plans  and  related  trust  agreements,  insurance  and other
contracts,  summary plan descriptions,  summaries of material  modifications and
material communications distributed to the participants of each Employee Benefit
Plan  (and  written   summaries  of  any  unwritten   Employee   Benefit  Plans,
modifications to Employee Benefit Plans and employee communications), (c) to the
extent  annual  reports on Form 5500 are  required  with respect to any Employee
Benefit Plan,  the three most recent annual  reports and attached  schedules for
each Employee  Benefit Plan as to which such report is required to be filed, (d)
where  applicable,  the most recent (A) opinion,  notification and determination
letters,  (B)  actuarial  valuation  reports,  and (C)  nondiscrimination  tests
performed under the Code  (including  401(k) and 401(m) tests) for each Employee
Benefit  Plan,  (e) all  material  communications  received  from or sent to the
Internal  Revenue  Service  or the  Department  of Labor  (including  a  written
description  of any oral  communication),  and (f) any Forms 5330 required to be
filed by the Company or any Affiliate,  whether  related to an Employee  Benefit
Plan or otherwise.

                                 Page 16 of 42
<PAGE>

                           (iii) Except as disclosed on Schedule 3.1(v)(vi), all
contributions  required to be paid under the terms of each Employee Benefit Plan
identified in Schedule  3.1(v)(i) hereto have been made. As of and including the
Closing Date, the Company shall have made all contributions  required to be made
by it up to and including the Closing Date with respect to each Employee Benefit
Plan,  or adequate  accruals  therefor  will have been  provided for and will be
reflected on an unaudited balance sheet of the Company provided to Parent by the
Company.

                           (iv)  Neither  the  Company  nor  any  of  its  ERISA
Affiliates  has  maintained  or  contributed  to, been  obligated or required to
contribute  to, or  withdrawn  in a  partial  or  complete  withdrawal  from,  a
"Multiemployer Plan," as such term is defined in Section 4001(a)(3) of ERISA.

                           (v) Except as disclosed on Schedule 3.1(v), except as
required by law or by the terms of an Employee Benefit Plan, the Company has not
proposed or agreed to any changes to any Employee  Benefit Plan that would cause
an increase in benefits under any such Employee Benefit Plan (or the creation of
new benefits or plans) nor to change any employee  coverage which would cause an
increase in the expense of maintaining any such Employee Benefit Plan.

                           (vi)  Except as  disclosed  on Schedule  3.1(vi),  no
Employee Benefit Plan provides  benefits or payments based on or measured by the
value  of an  equity  security  of or  interest  in the  Company  or  any  ERISA
Affiliate.

                           (vii) Except as disclosed on Schedule 3.1(v)(vii), no
Employee  Benefit  Plan  is a  plan,  agreement  or  arrangement  providing  for
benefits,  in the nature of  severance  benefits,  and the Company does not have
outstanding any  liabilities  with respect to any severance  benefits  available
under any Employee Benefit Plan.

                  (w) Employee Matters.

                           (i) The Company has  provided to the Parent lists all
current  employees of the Company and their hourly rates of compensation or base
salaries (as  applicable),  the date of last  increase in such  compensation  or
salaries, and all other compensation paid to such employees. To the Knowledge of
the  Company,  no  employee  of the  Company  has  notified  the Company of such
employee's plans to terminate  employment with the Company.  To the Knowledge of
the Company,  the Company has complied in all  material  respects  with all Laws
relating  to the hiring of  employees  and the  employment  of labor,  including
provisions  thereof  relating to wages,  hours,  equal  opportunity,  collective
bargaining and the withholding and payment of social security and other Taxes.

                           (ii) Except as set forth on Schedule 3.1(w):  (A) the
Company is not  delinquent  in payments to any of its  employees  for any wages,
salaries,  commissions,  bonuses or other direct  compensation  for any services
performed by them to date or amounts required to be reimbursed to such employees
and,  upon  termination  of the  employment of any such  employees,  neither the
Parent  nor the  Company  will by  reason  of any  event,  fact or  circumstance
occurring  or existing  prior to the Closing be liable to any of such  employees
for severance pay or any other  payments;  (B) there is no unfair labor practice
complaint  against the Company pending before the National Labor Relations Board
or any other  Governmental  Authority;  (C) there is no labor  strike,  material
dispute,  slowdown or stoppage  actually  pending  or, to the  Knowledge  of the
Company, threatened against the Company; (D) the Company has not experienced any
significant  deterioration  in its relationship  with its employees;  and (E) no
labor union  currently  represents  the  employees  of the  Company  and, to the
Knowledge  of the  Company,  no labor union has taken any action with respect to
organizing the employees of the Company.

                                 Page 17 of 42
<PAGE>

                           (iii) Except for payment of the Merger  Consideration
to the  Shareholders  and except as  disclosed on Schedule  3.1(w),  neither the
execution  and  delivery  of  this  Agreement  nor  the   consummation   of  the
transactions  contemplated  hereby will:  (A) result in any payment  (including,
without  limitation,  severance,  unemployment  compensation,  golden parachute,
bonus or  otherwise)  becoming  due to any  director or employee of the Company,
under any Employee  Benefit Plan or otherwise;  (B) increase any compensation or
benefits payable under any Employee Benefit Plan or otherwise;  or (C) result in
the  acceleration  of the time of payment  or  vesting of any such  compensation
benefits.  No Employee Benefit Plan or other  arrangement  provides  benefits or
payments  contingent upon,  triggered by or increased as a result of a change in
the ownership or effective control of the Company.

                  (x) Brokerage Fees.  Company has not engaged or authorized any
broker,  investment  banker or other  Person to act on its  behalf,  directly or
indirectly,  as a broker or finder who might be entitled to a fee, commission or
other  remuneration  in connection  with the  transactions  contemplated by this
Agreement.

                  (y)  Books and  Records.  All  accounts,  books,  ledgers  and
official and other records  prepared and kept by the Company are true,  complete
and accurate in all  material  respects  and have been kept in  accordance  with
sound business practices.

                  (z)  Disclosure.  No  representation  or warranty  made by the
Company  in this  Agreement,  nor any  information  contained  in any  Ancillary
Document to be delivered by the Company or the Shareholder  pursuant hereto,  or
any information relating to the Company provided or made available to the Parent
in connection with the  transactions  contemplated  hereby,  contains any untrue
statement  of a material  fact,  or omits or will omit to state a material  fact
necessary  to make the  statements  or facts  contained  herein or  therein  not
misleading  in any material  respect in light of the  circumstances  under which
they were made.

         3.2  Representations   and   Warranties   of   the   Shareholders.  The
Shareholders,  severally  but  not  jointly, hereby represent and warrant to the
Parent as follows:

                   (a) Authority.  Each Shareholder has all corporate or limited
liability  company  power or legal  capacity  and  authority  to enter  into and
deliver  this  Agreement  and each of the  Ancillary  Documents  to  which  such
Shareholder is a party, to carry out such  Shareholder's  obligations  hereunder
and  under  such  Ancillary   Document  and  to  consummate   the   transactions
contemplated hereby and by such Ancillary Documents. All actions, authorizations
and consents required by Law for the execution, delivery and performance by each
Shareholder  of this  Agreement  and  each  Ancillary  Document  to  which  such
Shareholder is a party, and the  consummation of the  transactions  contemplated
hereby and thereby, have been properly taken or obtained.

                                 Page 18 of 42
<PAGE>

                  (b) Execution and Delivery.  This Agreement has been, and each
Ancillary  Document  to  which  it is a  party  will  be at  the  Closing,  duly
authorized,  executed and delivered by such  Shareholder and constitutes or will
constitute  at the  Closing  a  legal,  valid  and  binding  obligation  of such
Shareholder,  enforceable  against such  Shareholder  in  accordance  with their
respective terms and conditions, except as enforceability thereof may be limited
by  applicable  bankruptcy,  reorganization,  insolvency  or other  similar laws
affecting or relating to creditors' rights generally or by general principles of
equity.

                  (c) No Conflicts.  The execution,  delivery and performance by
each Shareholder of this Agreement and each Ancillary  Document to which it is a
party, and the consummation of the transactions contemplated hereby and thereby,
do not and will not  violate,  conflict  with or result in a breach of any term,
condition or provision of, or require the consent of any Person under, or result
in the  creation  of or right to create  any Lien upon any of the assets of such
Shareholder  under,  (i) any Laws to which such Shareholder or any of its or his
assets are subject, (ii) any permit, judgment,  order, writ, injunction,  decree
or award of any  Governmental  Authority to which such Shareholder or any of its
or his  assets are  subject,  (iii) with  respect  to a  Shareholder  that is an
entity, the certificate of formation or incorporation or the operating agreement
or  bylaws  of such  Shareholder  (or their  equivalent),  or (iv) any  license,
indenture,  promissory note, bond, credit or loan agreement,  lease,  agreement,
commitment or other  instrument or document to which such Shareholder is a party
or by which such Shareholder or any of its or his assets are bound.

                  (d)  Governmental  Consents.  No consent,  approval,  order or
authorization of, or registration,  declaration or filing with, any Governmental
Authority,  is required to be obtained by each Shareholder in connection with or
as a result  of the  execution  and  delivery  of this  Agreement  or any of the
Ancillary  Documents,  or the  performance  of  such  Shareholder's  obligations
hereunder or thereunder.

                  (e) Organization, Standing and Qualification. Each Shareholder
that  is  an  entity  is  a  corporation  or  limited   liability  company  duly
incorporated,  validly  existing  and in good  standing  under  the  Laws of the
jurisdiction  of its  organization.  Each such  Shareholder has all corporate or
limited  liability  company  power and  authority to own,  lease and operate its
properties and to carry on its business as now being conducted.

                  (f) Ownership.  Each  Shareholder  owns,  beneficially  and of
record, free and clear of any Liens, such number of shares of Common Stock as is
set forth  opposite his or its name on Schedule  3.1(f).  At the  Closing,  upon
delivery of and payment  for such Shares as provided in this  Agreement,  all of
the Shares owned by each Shareholder shall be transferred to the Parent, and the
Parent  shall have good and valid  title to such  Shares,  free and clear of any
Liens.  Except  as  disclosed  in  Schedule  3.1(f),  there  are no  outstanding
subscriptions,   options,  warrants,  calls,  contracts,  demands,  commitments,
convertible or exchangeable  securities,  profits interests,  conversion rights,
preemptive  rights,  rights  of  first  refusal  or  other  rights,  agreements,
arrangements or commitments of any nature  whatsoever  under which a Shareholder
is or may become  obligated  to sell,  assign or transfer  any shares of capital
stock of the Company owned by such Shareholder.

                                 Page 19 of 42
<PAGE>

                  (g) Brokerage Fees. None of the  Shareholders  have engaged or
authorized any broker,  investment  banker or other Person to act on its behalf,
directly  or  indirectly,  as a broker or finder who might be entitled to a fee,
commission  or  other   remuneration   in  connection   with  the   transactions
contemplated by this Agreement.

         3.3 Representations  and  Warranties  of  the Parent. The Parent hereby
represents and warrants to the Shareholders as follows:

                  (a)  Authority.   The  Parent  has  all  necessary  power  and
authority to enter into and deliver  this  Agreement  and each of the  Ancillary
Documents to which it is a party,  to carry out its  obligations  hereunder  and
thereunder and to consummate  the  transactions  contemplated  hereby and by the
Ancillary  Documents.  All actions,  authorizations and consents required by Law
for the execution, delivery and performance by Parent of this Agreement and each
Ancillary  Document  to  which  it is a  party,  and  the  consummation  of  the
transactions  contemplated hereby and thereby, have been or prior to the Closing
will have been properly taken or obtained,  including  without  limitation,  the
approval of this Agreement and the transactions  contemplated by it by the Board
of Directors of the Parent.

                  (b) Execution and Delivery.  This Agreement has been, and each
Ancillary  Document to which the Parent is a party will be at the Closing,  duly
authorized,  executed and delivered by the Parent and constitutes a legal, valid
and  binding  obligation  of the  Parent,  enforceable  against  the  Parent  in
accordance with its terms and conditions,  except as enforceability  thereof may
be limited by applicable bankruptcy, reorganization, insolvency or other similar
laws  affecting  or  relating  to  creditors'  rights  generally  or by  general
principles of equity.

                  (c) No Conflicts.  The execution,  delivery and performance by
the Parent of this Agreement and each Ancillary Document to which it is a party,
and the consummation of the transactions contemplated hereby and thereby, do not
and will not violate, conflict with or result in a breach of any term, condition
or provision  of, or require the consent of any Person  under,  or result in the
creation  of or right to create  any Lien upon any of the  assets of the  Parent
under,  (i) any Laws to which the Parent or any of its assets are subject,  (ii)
any  judgment,  order,  writ,  injunction,  decree or award of any  Governmental
Authority  to which  the  Parent or any of its  assets  are  subject,  (iii) the
Certificate  of  Incorporation  or Bylaws of the  Parent,  or (iv) any  license,
indenture,  promissory note, bond, credit or loan agreement,  lease,  agreement,
commitment or other  instrument or document to which the Parent is a party or by
which any of its assets are bound,  except  where,  in the case of clause  (iv),
such  violation,  conflict,  breach,  etc.  would  not,  individually  or in the
aggregate, have a Material Adverse Effect on the Parent.

                  (d)  Governmental  Consents.  No consent,  approval,  order or
authorization of, or registration,  declaration or filing with, any Governmental
Authority,  is required to be obtained by the Parent in connection  with or as a
result of the execution  and delivery of this  Agreement or any of the Ancillary
Documents, or the performance of its obligations thereunder.

                                 Page 20 of 42
<PAGE>

                  (e) Organization,  Standing and Qualification. The Parent is a
corporation duly  incorporated,  validly existing and in good standing under the
Laws  of the  State  of  Florida  (or  such  other  applicable  jurisdiction  of
incorporation or formation). The Parent has all requisite power and authority to
own, lease and operate its  properties  and to carry on their  businesses as now
being  conducted,  to use  their  names  and are  duly  qualified,  licensed  or
authorized to do business and in good standing,  in each jurisdiction  where the
nature of the  activities  conducted by them or the character of the  properties
owned,  leased or operated by them  require  such  qualification,  licensing  or
authorization.

                  (f) Parent Stock.  The authorized  capital stock of the Parent
consists solely of  5,000,000,000  shares of common stock, par value $.00001 per
share  ("Parent  Common  Stock"),  of which  138,777,624  shares  are issued and
outstanding and  1,000,000,000  shares of Parent  Preferred  Stock, of which (i)
1,000,000  shares  have been  designated  as Series A  Preferred  Stock of which
960,000 are issued and  outstanding  and (ii) 8,413,607 have been  designated as
Series B Preferred Stock of which 1,000,000  shares are issued and  outstanding.
All of the issued and  outstanding  shares of capital  stock of the Parent  have
been,  and all of the  shares of the  Parent  Preferred  Stock  issuable  to the
Shareholders  pursuant to this Agreement will be when issued,  duly  authorized,
validly issued,  fully paid and non-assessable.  Except as disclosed in Schedule
3.3(f) or in any SEC Document, there are no outstanding subscriptions,  options,
warrants, calls, contracts,  demands,  commitments,  convertible or exchangeable
securities,  profits interests,  conversion rights, preemptive rights, rights of
first refusal or other rights,  agreements,  arrangements  or commitments of any
nature  whatsoever  under which the Parent is or may become  obligated to issue,
redeem,  assign or  transfer  any shares of capital  stock or  purchase  or make
payment  in  respect  of any  shares  of  capital  stock  of the  Parent  now or
previously  outstanding,  and  there  are no  outstanding  or  authorized  stock
appreciation,  phantom stock or similar  rights with respect to or any shares of
its capital stock.  Except as set forth on Schedule 3.3(f), none of the Parent's
stock  purchase  agreements or stock option  documents  contains a provision for
acceleration of vesting (or lapse of a repurchase  right) upon the occurrence of
any event or combination of events.  Except as set forth on Schedule 3.3(f), the
Parent has never  adjusted or amended the  exercise  price of any stock  options
previously awarded, whether through amendment, cancellation,  replacement grant,
repricing, or any other means.

                                 Page 21 of 42
<PAGE>

                  (g) SEC Documents;  Financial Statements.  Except as otherwise
set forth on Schedule 3.3(g), the Parent has filed, on a timely basis (except as
permitted  by Rule  12b-25  under the  Exchange  Act),  all forms,  reports  and
documents  required  to be filed with the SEC since  August  31,  2005 (the "SEC
Documents").  The  SEC  Documents  (i)  complied  in all  material  respects  in
accordance  with the  requirements of the Securities Act or the Exchange Act, as
the case may be, and the rules and regulations promulgated thereunder,  and (ii)
did not at the time they were  filed (or if amended  or  superseded  by a filing
prior to the date of this  Agreement,  then on the date of such filing)  contain
any  untrue  statement  of a  material  fact or omit to  state a  material  fact
required  to be stated  therein  or  necessary  in order to make the  statements
therein,  in the light of the  circumstances  under  which they were  made,  not
misleading.  All material  agreements to which the Parent is a party or to which
the  property  or assets of the Parent are  subject  are  included as part of or
specifically identified in the SEC Documents to the extent required by the rules
and  regulations  of the SEC as in effect at the time of filing.  The Parent has
prepared  and  filed  with  the SEC all  filings  and  reports  required  by the
Securities  Act and the Exchange  Act to make the  Parent's  filings and reports
current  in all  respects.  Since  August 31,  2005,  the  financial  statements
included  in  SEC  Documents   filed  by  the  Parent  (the  "Parent   Financial
Statements")  fairly present in all material respects,  and the Parent Financial
Statements included in SEC Documents filed after the date of this Agreement will
fairly present in all material respects,  the consolidated financial position of
the Parent as of the dates  indicated and the  consolidated  income,  changes in
shareholders' equity and cash flows of the Parent for the periods then ended and
each such financial  statement has been or will be, as the case may be, prepared
in conformity with GAAP applied on a consistent basis, except that the unaudited
interim  financial  statements  were or are  subject  to  normal  and  recurring
year-end adjustments (which individually and in the aggregate are not material),
and may not contain  certain related notes as may be permitted by the applicable
rules  promulgated by the SEC. The Parent Financial  Statements  included in the
SEC  Documents  comply  in all  material  respects  with  applicable  accounting
requirements  and the rules and  regulations of the SEC with respect  thereto in
effect at the time of filing. All "off-balance  sheet  arrangements" (as defined
in Item 303(a)(4) of Regulation S-K  promulgated by the SEC) which the Parent is
required to disclose  under Item 303(a) of  Regulation  S-K in its SEC Documents
are set forth in the SEC  Documents.  The Parent  maintains a system of internal
accounting  controls  sufficient  to  provide  reasonable  assurances  that  (i)
transactions  are executed in accordance with  management's  general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation
of financial  statements in conformity with GAAP and to maintain  accountability
for  assets;  (iii)  access to  assets  is  permitted  only in  accordance  with
management's general or specific authorization; (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,  and (v) the Parent
is otherwise in  compliance  with the  Securities  Act, the Exchange Act and all
other rules and regulations promulgated by the SEC and applicable to the Parent,
including  such rules and  regulations  to implement the  Sarbanes-Oxley  Act of
2002, as amended. Neither the Parent, nor any of its directors, officers, or 10%
shareholders:  Are currently the subject of an  investigation  by the Securities
Exchange  Commission  ("SEC")  or any  governmental  body or  agency;  has  been
convicted  in a criminal  proceeding  or are  currently  the named  subject of a
pending  criminal  proceeding,  other that  traffic  violations  or other  minor
offenses;   has  been  the  subject  of  any  order,  judgment  or  decree,  not
subsequently  reversed,  suspended  or  vacated,  of any  court  permanently  or
temporarily  enjoining such from engaging in any activity in connection with the
purchase  or sale  of any  security  or  commodity  or in  connection  with  any
violation of federal or state  securities laws or federal  commodities  laws; or
has been found by a court of competent  jurisdiction in a civil action or by the
SEC to have violated any federal or state  securities law (other than a judgment
in such  civil  action  or a  finding  by the SEC  that  has  been  subsequently
reversed, suspended or vacated).

                                 Page 22 of 42
<PAGE>

                  (h) Brokerage  Fees.  The Parent has not engaged or authorized
any broker,  investment banker or other Person to act on its behalf, directly or
indirectly,  as a broker or finder who might be entitled to a fee, commission or
other  remuneration  in connection  with the  transactions  contemplated by this
Agreement.

                  (i)  Disclosure.  No  representation  or warranty  made by the
Parent  in  this  Agreement,  nor any  information  contained  in any  Ancillary
Document to be  delivered  by the Parent  pursuant  hereto,  or any  information
relating to the Parent  provided or made  available to the Parent in  connection
with the transactions contemplated hereby, including any SEC Document,  contains
any  untrue  statement  of a  material  fact,  or omits or will  omit to state a
material  fact  necessary to make the  statements or facts  contained  herein or
therein not  misleading  in any material  respect in light of the  circumstances
under which they were made.

                                   ARTICLE IV

                                CERTAIN COVENANTS

         4.1  Conduct of  Business  Pending  the  Closing.  The  Company  hereby
covenants and agrees that, prior to the Closing,  except as contemplated by this
Agreement  or as  set  forth  in  Schedule  4.1,  it  shall  (and  each  of  the
Shareholders hereby covenants and agrees to cause the Company to comply with the
provisions of this Section 4.1):

                  (a) conduct its  business in the usual,  regular and  ordinary
course consistent with recent past practice and use its commercially  reasonable
efforts to take,  or refrain from  taking,  as the case may be, any action which
would cause the  representations  and  warranties  made in Section 4.1 to become
untrue or inaccurate; and

                  (b) use its  commercially  reasonable  efforts to maintain and
preserve  its  business  organization  and  relationships  with  its  customers,
vendors,  suppliers and others having  business  dealings with it and retain the
services of its officers and employees.

         4.2 Conduct of the Business Post Closing. Following the Closing,

                  (a) the Parent  covenants and agrees (and the Surviving Entity
shall  cooperate in): that it will complete an audit of the Company's  financial
statements  (including an audit of the Company's  financial  statements prior to
Closing) as required by Form 8-K promulgated  under the Securities  Exchange Act
of 1934, with a PCAOB approved  auditor (the "Post Closing  Audit").  The Parent
and the Surviving  Entity shall attempt to complete the Post Closing Audit for a
cost of no more than $50,000;

                  (b) the Company  covenants and agrees that the gross  revenues
of the Surviving Entity for the 12 month period following the Closing will equal
or exceed  twenty  percent  (20%) of the  revenues of the Company  during the 12
month period prior to the Closing.

         4.3 Post-Closing Financing for the Parent; Market Capitalization.

                  (a) As used herein,  the term "Post Closing  Financing"  shall
mean the receipt by the Company of a firm  commitment  from a funding  source to
provide at least One Million  Dollars  ($1,000,000.00)  of equity funding over a
period of two (2) years  from and after  the date of the  Closing  (such  equity
funding to be solely in the form of equity  funding and not debt  funding)  (the
date  that is two (2)  years  from  and  after  the  Closing  Date is  sometimes
hereinafter referred to as the "Post Closing Financing Deadline").

                                 Page 23 of 42
<PAGE>

                  (b) The Parent  shall  attain a market  capitalization  of its
common stock of at least Three Million Dollars  ($3,000,000.00)  by February 28,
2008. (For purposes of this Agreement,  "market capitalization" being determined
by multiplying  the number of outstanding  shares by the "Market Price." "Market
Price" means that price which shall be computed as the arithmetic average of the
Closing  Sale Prices for the Parent's  Common  Stock  during the 20  consecutive
trading days immediately  preceding such date of  determination.  "Closing Sales
Price"  shall mean the last closing  trade price for such  security at 4:00 p.m.
Eastern  Standard Time on the Nasdaq  National  Market as reported by Bloomberg,
or, if the Nasdaq  National Market is not the principal  securities  exchange or
trading market for such security,  the last closing trade price of such security
at 4:00 p.m.  Eastern  Standard  Time on the  principal  securities  exchange or
trading market where such security is listed or traded as reported by Bloomberg,
or if the foregoing do not apply,  the last closing trade price of such security
at 4:00  p.m.  Eastern  Standard  Time  in the  over-the-counter  market  on the
electronic bulletin board for such security as reported by Bloomberg,  or, if no
last closing trade price is reported for such security by Bloomberg, the average
of the bid and ask prices of such security as reported by  Bloomberg,  or, if no
bid or ask prices are reported for such  security by  Bloomberg,  the average of
the bid and ask prices of any market makers for such security as reported in the
"pink sheets" by the National Quotation Bureau, Inc.). In the event of a default
under this Section 4.3(b) and the Company and the  Shareholders  (acting through
the  Shareholder  Representative)  has the right to and  elects  to  unwind  and
rescind the Merger in accordance with Section 8.2 of this Agreement,  the Parent
shall  retain an amount of Common  Stock of the  Surviving  Entity  equal to one
percent (1%) for every $100,000 that the Parent provided to the Surviving Entity
after the Closing Date in the form of cash, debt retirement,  or other agreement
upon financing, and the Surviving Entity, the Parent, and the Shareholders shall
each sign mutually agreed upon covenants not to compete.

         4.4  No   Solicitation.   The  Company  shall  not,  and  none  of  the
Shareholders shall, directly or indirectly (through their respective Affiliates,
employees,   agents  or   representatives),   initiate  contact  with,  solicit,
encourage,  respond to or participate in any way in discussions or  negotiations
with,  or provide any  information  or  assistance  to, or take any other action
intended or designed to facilitate the efforts of (including without limitation,
the execution of any letter of intent, term sheet or definitive agreement),  any
Person other than the Parent  concerning any  acquisition of equity  interest in
the Company or any significant  portion of the assets of the Company  (including
by merger or other similar  transaction).  The Company or the Shareholders shall
promptly notify the Parent if they are contacted or approached in respect of any
such transaction,  as well as the material terms of the proposed transaction and
the identity of the contacting party.

         4.5 Reasonable Efforts;  Assurances.  Upon the terms and subject to the
conditions  of  this  Agreement,  each  of the  parties  hereto  shall  use  all
reasonable  efforts to take or cause to be taken all action,  and to do or cause
to be done,  and to assist and cooperate  with the other  parties in doing,  all
things  necessary,  proper or  advisable  to  consummate  and make  effective as
promptly  as  practicable  the  transactions  contemplated  by  this  Agreement,
including using  commercially  reasonable  efforts to (a) obtain all consents or
approvals required or desirable in connection with the transactions contemplated
hereby,  (b) effect  promptly all  necessary  or  appropriate  registrations  or
filings  with  any  Governmental  Authorities,  and (c)  fulfill  or  cause  the
fulfillment  of the conditions to Closing set forth in Article V. In case at any
time after the  Closing  Date any  further  action is  reasonably  necessary  or
desirable  to carry out the  purposes  of this  Agreement,  each of the  parties
hereto shall take such further action without additional consideration.

                                 Page 24 of 42
<PAGE>

         4.6 Notification  of  Certain  Matters.  The  Company  and Parent shall
promptly notify each other in writing:

                  (a) if,  subsequent to the date of this Agreement and prior to
the Closing Date, either of them becomes aware of the occurrence of any event or
the  existence  of any fact that  would  render any of the  representations  and
warranties made by it (and, in case of the Company,  made by any Shareholder) in
Sections  3.1,  3.2 or 3.3,  as the case may be, if made on or as of the date of
such event or the Closing Date, inaccurate or untrue (other than with respect to
representations and warranties made as of a specified date);

                  (b) of any  breach by  either  of them of any of its (and,  in
case of the Company,  any of the Shareholders')  covenant or agreement contained
in this Agreement;

                  (c) of any notice or other  communication from any third party
alleging  that  the  consent  of  such  third  party  is or may be  required  in
connection with the transactions contemplated by this Agreement;

                  (d) of any notice or other communication from any Governmental
Authority  in  connection  with or  relating  to the  transactions  contemplated
hereby; or

                  (e) if the  Company  or any  Shareholder  become  aware of any
material  deterioration  in the  relationship  with any  customer,  supplier  or
employee of the Company.

         4.7  Public  Announcements.  No party  will  issue or make or cause the
publication of, any press release or other public  announcement  with respect to
this Agreement or the transactions contemplated hereby without the prior written
consent of the other parties hereto; provided, however, that nothing herein will
prohibit any party from issuing,  making or causing the  publication of any such
press release or public announcement to the extent that such party is advised by
its legal  counsel  that such action is required by Law, in which case the party
making such determination will use reasonable efforts to allow the other parties
reasonable  time to review  and  comment  on such  release  or  announcement  in
advance. For the purposes of this Section, the Company shall be entitled to give
such prior written consent on behalf of the Shareholders.

         4.8  Transfer  Taxes.   All  stock  transfer,   real  estate  transfer,
documentary,  stamp,  recording  and other similar  Taxes  (including  interest,
penalties  and  additions  to any such  Taxes)  ("Transfer  Taxes")  incurred in
connection with the Transactions shall be paid by the Company (provided any such
payments shall not be funded,  directly or indirectly,  by the Company), and the
Company shall  cooperate with Parent in preparing,  executing and filing any Tax
Returns with respect to such Transfer Taxes.

                                 Page 25 of 42
<PAGE>

                                    ARTICLE V

                              CONDITIONS TO CLOSING

         5.1  Conditions  to Obligation  of the Company.  The  obligation of the
Company to consummate the transactions  contemplated  hereby shall be subject to
the satisfaction on or prior to the Closing of the following  conditions (any of
which may be waived in writing by the Company):

                  (a) the Parent  shall have  performed  and  complied  with all
obligations  and  agreements  required to be performed  and complied  with by it
hereunder  on or prior to the  Closing  (including,  without  limitation,  those
specified in Section 6.3);

                  (b) the representations and warranties of the Parent contained
in this Agreement shall be true and correct as of the Closing Date as if made as
of such date (other  than those  representations  and  warranties  that  address
matters only as of a particular  date or only with respect to a specific  period
of time,  which need only be true and correct as of such date or with respect to
such period);

                  (c)  there  shall  be  no  order,  decree  or  ruling  by  any
Governmental  Authority nor any action,  suit,  claim or proceeding by or before
any Governmental Authority shall be pending, which seeks to restrain, prevent or
materially delay or restructure the transactions  contemplated  hereby or by any
Ancillary Document, or which otherwise questions the validity or legality of any
such transactions;

                  (d) there  shall be no  statute,  rules,  regulation  or order
enacted,   entered  or  enforced  or  deemed   applicable  to  the  transactions
contemplated  hereby which would  prohibit or, render  illegal the  transactions
contemplated by this Agreement or the Ancillary Documents;

                  (e)  each  of the  documents  to be  delivered  by the  Parent
pursuant  to  Section  6.3 shall  have been so  delivered  by the  Parent at the
Closing.

         5.2  Conditions  to  Obligation  of the Parent.  The  obligation of the
Parent to consummate the  transactions  contemplated  hereby shall be subject to
the satisfaction on or prior to the Closing of the following  conditions (any of
which may be waived in writing by the Parent):

                  (a) the  Shareholders  and the Company shall have performed or
complied  with all  obligations  and  agreements  required  to be  performed  or
complied  with by any of them  hereunder on or prior to the Closing  (including,
without limitation, those specified in Section 6.2);

                                 Page 26 of 42
<PAGE>

                  (b) the representations and warranties of the Shareholders and
the  Company  contained  in this  Agreement  shall be true and correct as of the
Closing  Date as if made as of such date (other than those  representations  and
warranties  that  address  matters  only as of a  particular  date or only  with
respect to a specific period of time,  which need only be true and correct as of
such date or with respect to such period);

                  (c)  there  shall  be  no  order,  decree  or  ruling  by  any
Governmental  Authority nor any action,  suit,  claim or proceeding by or before
any Governmental Authority shall be pending, which seeks to restrain, prevent or
materially  delay or restructure  the  transactions  contemplated  hereby or any
Ancillary Document, or which otherwise questions the validity or legality of any
such transactions;

                  (d) there  shall be no  statute,  rules,  regulation  or order
enacted,   entered  or  enforced  or  deemed   applicable  to  the  transactions
contemplated  hereby  which would  prohibit or render  illegal the  transactions
contemplated by this Agreement or the Ancillary Documents;

                  (e) the Company  shall have  obtained on terms and  conditions
satisfactory  to  the  Parent  all  consents  and  approvals  of  third  parties
(including Governmental  Authorities) that are required (i) for the consummation
of the transactions  contemplated hereby or any Ancillary  Document,  or (ii) in
order to prevent a breach of, a default under or a termination,  material change
in the terms or conditions or material  modification of, any Material  Agreement
as a result of the consummation of the transactions contemplated hereby;

                  (f) each of the documents to be delivered by  Shareholders  or
the Company pursuant to Section 6.2 shall have been so delivered by Shareholders
or the Company at the Closing; and

                  (g) no Shareholder shall have exercised Dissenter's Rights.

                                   ARTICLE VI

                        CLOSING AND POST-CLOSING MATTERS

         6.1 Closing.  The closing of the transactions  contemplated hereby (the
"Closing") shall take place at the offices of Weycer,  Kaplan,  Pulaski & Zuber,
P.C.,  1400  Summit  Tower,  11  Greenway  Plaza,  Houston,  Texas,  as  soon as
practicable  but in no event later than 10:00 a.m.,  Pacific  time, on the third
(3rd)  Business Day after the date on which each of the  conditions set forth in
Sections  5.1 and 5.2 have been  satisfied  or  waived  by the party or  parties
entitled  to the benefit of such  conditions,  or at such other  place,  at such
other time or on such other date as the parties may mutually agree.  The date on
which the closing actually occurs is referred to herein as the "Closing Date".

         6.2  Deliveries  by the  Shareholders  and the Company.  Subject to the
terms and conditions  hereof, the Shareholders and the Company shall deliver the
following to the Parent at or before the Closing:

                                 Page 27 of 42
<PAGE>

                  (a) the Certificates  that immediately  prior to the Effective
Time represented outstanding Company Shares whose shares were converted into the
right to receive Merger Consideration pursuant to Section 2.1(c) together with a
duly executed letter of transmittal;

                  (b) the corporate  minute book,  seal, and stock ledger of the
Company;

                  (c)  evidence  that the  Company  has  obtained  on terms  and
conditions  reasonably  satisfactory to the Parent all consents and approvals of
third parties (including Governmental Authorities) that are required (i) for the
consummation of the transactions contemplated hereby or (ii) in order to prevent
a material  breach of, a default under or a termination,  material change in the
terms or conditions  or material  modification  of, any Material  Agreement as a
result of the  consummation of the transaction  contemplated  hereby,  provided,
however, it is understood and agreed that any required approvals relating to the
Spanish division of the Company shall be obtained after the Closing;

                  (d) original counterparts to a non-competition  agreement,  by
and  between  the  Parent,  Company,  Daniel W.  Nagala  and David L.  Rossmann,
substantially  in a form  attached  hereto as Exhibit C (the "Nagala  Employment
Agreement"  and the  "Rossmann  Employment  Agreement"),  duly  executed by such
Persons;

                  (e) resolutions of the Board of Directors appointing Daniel W.
Nagala as Director Officer of the Parent;

                  (f)  original  counterparts  to  the  Investor  Representation
Letters duly executed by each Shareholder;

                  (g)   certificates   of  the  Company   and  the   Shareholder
Representative,  in form and substance  reasonably  satisfactory  to the Parent,
dated the Closing Date,  certifying  compliance with the conditions set forth in
Sections 5.2(a), 5.2(b) and 5.2(g); and

         6.3 Actions  or  Deliveries  by  the  Parent.  Subject to the terms and
conditions hereof, the Parent shall deliver the following to the Shareholders at
or before the Closing:

                  (a) the Merger Consideration in accordance with Section 2.2;

                  (b) a  certificate  of  the  Parent,  in  form  and  substance
reasonably  satisfactory  to the Shareholder  Representative,  dated the Closing
Date and signed by the President and the Chief  Financial  Officer of the Parent
evidencing  compliance  with the  conditions  set forth in  Sections  5.1(a) and
5.1(b);

                  (c)   original   counterparts   to  the  Nagala  and  Rossmann
Employment Agreements, duly executed by the Company; and

         6.4 Other  Documents.  The  parties  agree to execute and deliver on or
before  the  Closing  all  other  documents  that are  reasonably  necessary  or
desirable in order to consummate  the  transactions  contemplated  hereby and to
carry out the intent of this Agreement.

                                 Page 28 of 42
<PAGE>

         6.5 Expenses.  Except as otherwise  specifically  provided herein,  the
Shareholders,  the Company,  and the Parent,  shall each pay their own expenses,
including, but not limited to, attorneys', accountants', financial advisors' and
brokers'  or  finders'  fees,  incurred  in  connection  with  the  transactions
contemplated hereby  ("Expenses"),  except that as having been incurred from the
professionals  utilized in this  transaction  and the ordinary course of Company
business they will become the obligation of the Surviving  Entity and paid by it
as was the manner and the custom of the Company.  It is the express intention of
the parties that the Company shall remain  responsible for all Expenses incurred
by the Company, its Affiliates or their respective agents in connection with the
transactions   contemplated   hereby.   Notwithstanding   the   foregoing,   any
administrative or other expenses incurred after Closing to obtain approvals with
respect to the Spanish  division of the Company  shall be the  obligation of the
Surviving Entity.

         6.6 Post-Closing Matters:

                  (a) Upon the later of (i) ninety (90) days after the  Closing,
or (ii) fifteen (15) days after the  completion  of the Post Closing  Audit (and
provided that the Post Closing Audit is completed), the Parent and the Surviving
Entity  shall take all  appropriate  action to  accomplish  the  following  with
respect to that  certain  line of credit  that the  Company has with Wells Fargo
Bank (the "Bank") which has an approximate  outstanding balance of $275,000: (1)
remove  Daniel W. Nagala as a guarantor of such line of credit;  (2) replace the
personal  collateral  Mr.  Nagala has pledged to secure such line of credit with
collateral  satisfactory  to the Bank;  and (3) if the Bank does not  permit the
actions  described  in items (1) and (2) above,  pay in full such line of credit
and indemnify Mr. Nagala from any and all  obligations  relating to such line of
credit.

                  (b) Immediately upon the Closing, the Parent and the Surviving
Entity shall assume (1) those  certain loans payable by the Company to Daniel W.
Nagala  in the  aggregate  original  principal  amount  of  $38,571.13,  with an
outstanding  balance of $38,571.13,  and shall issue a replacement note from the
Parent and the Surviving Entity containing the same payment terms and provisions
of such  loans;  and (2) that  certain  loan  payable by the Company to David L.
Rossmann in the original  principal  amount of  $13,026.32,  with an outstanding
balance of  $13,026.32,  and shall issue a replacement  note from the Parent and
the Surviving  Entity  containing  the same payment terms and provisions as such
loan.

                                   ARTICLE VII

                                   TERMINATION

         7.1 Termination.  This Agreement may be terminated at any time prior to
the Closing:

                  (a) by mutual consent of the Parent and the Company;

                  (b) by either the Parent or the Company if the  Closing  shall
not have  been  consummated  on or  before  June  30,  2006  (provided  that the
terminating  party is not otherwise in material breach of its obligations  under
this Agreement),  which date may be extended by written  agreement of the Parent
and the Company; or

                                 Page 29 of 42
<PAGE>

                  (c) by  either  the  Parent  or the  Company,  if a  permanent
injunction or other order by any Federal or state court which would make illegal
or  otherwise   restrain  or  prohibit  the  consummation  of  the  transactions
contemplated  hereby  shall have been  issued and shall  have  become  final and
non-appealable.

         7.2  Effect of  Termination.  In the event of the  termination  of this
Agreement in accordance with this Article VII, this Agreement  shall  thereafter
become void and there shall be no  liability  on the part of any party hereto or
their respective  directors,  officers,  stockholders or agents, except that any
such  termination  shall be without  prejudice to the rights of any party hereto
arising  out of any  breach  by any  other  party of this  Agreement.  Surviving
clauses of  confidentiality  agreements  of Parent and Company  shall  remain in
effect until such time as their respective expiration.

                                  ARTICLE VIII

                         EVENTS OF DEFAULT AND REMEDIES

         8.1 Events  of  Default.  Any one or more of the following events shall
constitute an Event of Default:

                  (a) By the Company:  the Company  breaches the  covenants  set
forth under Section 4.2 (b).

                  (b) By the Parent:  Parent  breaches the  covenants  set forth
under Section 4.3.

         8.2 Remedies Upon Event of Default.  Without  limiting any other rights
or  remedies  of the  Shareholders  or the  Company or the Parent  provided  for
elsewhere in this Agreement,  or by applicable Law, or in equity,  or otherwise,
upon the occurrence,  and during the  continuance,  of any Event of Default that
occurs at any time prior to two (2) years from and after the Closing Date,  then
in such event:

         The  non-defaulting  party may exercise the rights set forth under this
Section 8.2 and  require  that all  parties to this  Agreement  take all actions
required  to unwind and  effectively  rescind the Merger  consummated  hereunder
including, without, limitation:

(i) the Shareholders shall return to Parent all Merger Consideration received by
them against  delivery of the items to be  delivered by Parent under  subsection
(ii) below;

(ii) Parent shall transfer certificate(s) representing all shares of the Company
and the Company held by it to the Shareholder  Representative,  duly endorsed or
delivered  with blank stock powers  appropriately  executed,  in the name of the
Shareholder Representative or in such other form as requested by the Shareholder
representative against delivery of the items to be delivered by the Shareholders
and the Shareholder  Representative  as set forth under subsections (i) and (ii)
above;

                                 Page 30 of 42
<PAGE>

(iii) the Parent shall retain an amount of Common Stock of the Surviving  Entity
equal to one percent  (1%) for every  $100,000  that the Parent  provided to the
Surviving Entity after the Closing Date in the form of cash, debt retirement, or
other agreement upon financing, and the Surviving Entity, and

(iv) the  Parent,  and the  Shareholders  shall each sign  mutually  agreed upon
covenants not to compete;

provided,  however,  that if the default  giving rise to the  remedies set forth
under this  Section 8.2 are due to the actions of the  Parent,  or for  whatever
reason the Post-Closing  Financing does not occur by the Post-Closing  Financing
Deadline,  it is  understood  and agreed that the  Company and the  Shareholders
shall have no obligation to reimburse or pay the Parent for any Interim  Funding
received  from Parent,  and all costs and  expenses  related to the audit of the
Company shall be borne by the Parent.

         It is understood and agreed that the rights and remedies of the parties
under this  Section 8.2 to unwind and rescind the Merger  shall only apply until
two (2) years from and after the Closing Date.

                                   ARTICLE IX

           INDEMNIFICATION; SURVIVAL OR REPRESENTATIONS AND WARRANTIES

         9.1 Survival; Indemnity. The representations, warranties, covenants and
agreements  of the Company  contained in Section 3.1 of this  Agreement  and the
Parent   contained  in  Section   3.3,   shall   terminate   upon  the  Closing.
Notwithstanding  the  foregoing,  the  representations  and  warranties  of  the
Shareholders under Section 3.2 shall only so survive until the first anniversary
of the Closing Date (the period from the Closing Date to such applicable date is
hereinafter  referred to as the  "Survival  Period").  Nothing  contained in the
foregoing   sentence  shall  prevent  recovery  under  this  Article  after  the
expiration of the Survival Period so long as the party making a claim or seeking
recovery  complies  with the  provisions  of clause (x) and (y) of the following
sentence. No party shall have any claim or right of recovery for any breach of a
representation,  warranty,  covenant or agreement  unless (x) written  notice is
given in good  faith by that  party to the  other  party of the  representation,
warranty,  covenant or agreement pursuant to which the claim is made or right of
recovery  is  sought  setting  forth in  reasonable  detail  the  basis  for the
purported breach of the  representation,  warranty,  covenant or agreement,  the
amount or nature of the claim being made, if then ascertainable, and the general
basis  therefore  and (y) such  notice is given prior to the  expiration  of the
Survival Period.

         9.2 General  Indemnification  by the Shareholders and the Company.  The
Shareholders,  severally but not jointly,  agree to indemnify the Parent and its
officers, directors, shareholders, employees, Affiliates, attorneys, accountants
and agents (the "Parent  Parties"),  and hold them harmless from and against any
and all damages,  losses,  liabilities,  costs and expenses (including,  without
limitation,  reasonable expenses of investigation and reasonable attorneys' fees
and expenses in connection with any action,  suit or proceeding)  (collectively,
"Parent Damages")  incurred or suffered by the Parent Parties as a result of any
breach or inaccuracy of any  representation  or warranty of such  Shareholder in
Section  3.2, or for any breach by a  Shareholder  of any of such  Shareholder's
covenants  or  agreements  contained in this  Agreement,  or for any breach of a
representation  or warranty in any  certificate  delivered  by the  Shareholders
pursuant  to  this  Agreement   (including  without  limitation,   any  Investor
Representation  Letter),.  Notwithstanding  the  foregoing,  from and  after the
Closing, the Shareholders shall have no liability under this Section 9.2 arising
out of or as a result of a breach of any  representation  or warranty unless and
until such claim is made on or before the expiration of the Survival Period, and
such  Shareholders  shall  not be  liable  for more  than the  amount  of Merger
Consideration actually received by such Shareholder under this Agreement.

                                 Page 31 of 42
<PAGE>

         9.3 Indemnification Procedures

                  (a) Notification of Claims.  Upon any party (the  "Indemnified
Party")  becoming aware of a fact,  condition or event that  constitutes a basis
for a claim for Parent Damages,  in respect thereof against the other party (the
"Indemnifying  Party")  under  Section  9.2, if such a claim is to be made,  the
Indemnified  Party will with reasonable  promptness and  specificity  notify the
Indemnifying  Party or Parties in writing of such fact,  condition or event. The
failure to notify the Indemnifying Party or Parties under this Section 9.3 shall
not  relieve any  Indemnifying  Party of any  liability  that it may have to the
Indemnified  Party  except to the extent that such  failure to notify shall have
resulted  in a  waiver  of any  lawful  and  valid  affirmative  defense  to any
third-party claim or otherwise  materially  prejudices the Indemnifying Party or
Parties in connection  with the  administration  or defense of such  third-party
claim.

                  (b) Third-Party Claims.

                           (i) Upon receipt by the Indemnifying Party or Parties
of any notice of claim for indemnification  hereunder arising from a third-party
claim, the  Indemnifying  Party or Parties shall assume the  administration  and
defense of such third-party  claim with counsel that is reasonably  satisfactory
to the Indemnified Party and shall proceed with the  administration  and defense
of such third-party claim diligently and in good faith; provided,  however, that
any  Indemnifying  Party  shall be  entitled  to assume the  administration  and
defense  of such  third-party  claim  only if it  agrees  in  writing  with  the
Indemnified  Party that it is  obligated  to  indemnify  the  Indemnified  Party
pursuant to this Article with respect to such  third-party  claim; and provided,
further   that  no   Indemnifying   Party   shall  be  entitled  to  assume  the
administration and defense of any third-party claim that (A) seeks an injunction
or other  equitable  relief  that  might  materially  and  adversely  affect any
Indemnified  Party,  or (B) involves any criminal action or any claim that could
reasonably be expected to result in a criminal  action  against any  Indemnified
Party. Each parties' counsel in connection with this transaction shall be deemed
to be  reasonably  satisfactory  to the other party for purposes of this Section
9.3(b)(i).  The Indemnified  Party shall be fully consulted by the  Indemnifying
Party or Parties and shall have the right to participate, at its own expense, in
the  investigation,  administration  and defense of such third-party  claim. Any
party hereto receiving notice of any proposed settlement of any such third-party
claim shall promptly  provide a copy of such notice to the other parties hereto.
The  Indemnifying  Party  or  Parties  shall  not have the  right to  settle  or
compromise  any  third-party  claim for which  indemnification  is being  sought
hereunder  without the consent of the  Indemnified  Party  unless as a result of
such  settlement or compromise  the  Indemnified  Party is fully  discharged and
released from any and all liability with respect to such third-party  claim. The
Indemnified Party shall make available to the Indemnifying  Party or Parties and
its counsel all books, records,  documents and other information relating to any
third-party claim for which indemnification is sought hereunder, and the parties
to this  Agreement  shall  render to each  other  reasonable  assistance  in the
defense of any such third-party claim.

                                 Page 32 of 42
<PAGE>

                           (ii)  Notwithstanding  any  other  provision  of this
Agreement,  if the  Indemnified  Party is not  entitled to defend a  third-party
claim under Section  9.3(b)(i),  the  Indemnified  Party shall have the absolute
right, at its election (to be exercised in its sole discretion by written notice
to the Indemnifying  Party or Parties) to assume from the Indemnifying  Party or
Parties the administration and defense of any such third-party claim against the
Indemnified   Party  with  counsel  that  is  reasonably   satisfactory  to  the
Indemnifying  Party. In such event, the Indemnified Party shall proceed with the
administration and defense of such third-party  claim(s)  diligently and in good
faith,  and the  Indemnifying  Party shall be fully consulted by the Indemnified
Party or Parties and shall have the right to participate, at its own expense, in
the  investigation,  administration  and defense of such third-party  claim. The
Indemnifying Party or Parties shall be responsible for the costs and expenses of
the   administration  and  defense  of  such  claim(s)  incurred  prior  to  the
Indemnified Party or Parties'  assumption of the  administration  and defense of
such claim(s) and shall not be responsible for costs and expenses incurred after
such assumption,  and the Indemnifying Party shall have the right to participate
in, but not control,  the defense of such  claim(s) at the sole cost and expense
of the Indemnifying Party.

                                    ARTICLE X

                           SHAREHOLDER REPRESENTATIVE

         10.1 Appointment and Powers of Shareholder Representative. By virtue of
their execution and delivery of this Agreement, the Shareholders shall be deemed
to have irrevocably constituted and appointed,  effective as of the date of this
Agreement,  Daniel W. Nagala (or if Daniel W. Nagala dies or becomes permanently
disabled,  then such person as shall be appointed as his successor by a majority
in interest of the holders of Parent Series C Preferred Stock (the  "Shareholder
Representative"),  as their true and lawful agent and  attorney-in-fact to enter
into any  agreement in connection  with the  transactions  contemplated  by this
Agreement,  to  exercise  all or any of the  powers,  authority  and  discretion
conferred on it hereunder,  to waive any terms and conditions of this Agreement,
to give and receive  notices and  communications,  to authorize  delivery to the
Parent  of  any  portion  of  the  Merger   Consideration   in  satisfaction  of
indemnification claims by the Parent, to object to such deliveries, to agree to,
negotiate, enter into settlements and compromises of, and demand arbitration and
comply  with  orders of courts and awards of  arbitrators  with  respect to such
claims,  and to take all actions necessary or appropriate in the judgment of the
Shareholder Representative for the accomplishment of the foregoing.

                                 Page 33 of 42
<PAGE>

         10.2 Notice of Third Party Claims;  Binding Effect,  Etc. Any notice of
any third  party  claim for which the Parent is an  Indemnified  Party  shall be
deemed to have been  delivered  by the Parent to the  Shareholders  pursuant  to
Section  8.4(b) if validly  delivered  to the  Shareholder  Representative.  The
Shareholders  shall be bound by all actions  taken by and all  omissions  of the
Shareholder   Representative   in  its   capacity   thereof.   The   Shareholder
Representative   shall  at  all  times  act  in  its  capacity  as   Shareholder
Representative in a manner that the Shareholder  Representative believes in good
faith to be in the best interest of the Shareholders as a group.

         10.3 Limitation on Liability.  Neither the  Shareholder  Representative
nor its  respective  shareholders,  officers,  directors,  affiliates,  members,
agents or  representatives  shall be liable to any  Shareholder or any of its or
his shareholders,  officers,  directors,  affiliates, heirs, estate, successors,
assigns and agents for any error of judgment,  or any action taken,  suffered or
omitted to be taken, under this Agreement,  except in the case of its fraud. The
Shareholder  Representative  may consult with legal counsel,  independent public
accountants  and other  experts  selected  by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in  accordance  with the
advice of such counsel,  accountants or experts. The Shareholder  Representative
shall not have any duty to  ascertain  or to  inquire as to the  performance  or
observance of any of the terms, covenants or conditions of this Agreement. As to
any  matters not  expressly  provided  for in this  Agreement,  the  Shareholder
Representative  shall not be  required to exercise  any  discretion  or take any
action.  Each Shareholder  severally shall indemnify and hold harmless and shall
reimburse the  Shareholder  Representative  from and against such  Shareholder's
ratable share of any and all  liabilities,  losses,  damages,  claims,  costs or
expenses suffered or incurred by the Shareholder  Representative  arising out of
or  resulting  from any action  taken or omitted to be taken by the  Shareholder
Representative  under  this  Agreement,  other  than such  liabilities,  losses,
damages,  claims,  costs  or  expenses  arising  out of or  resulting  from  the
Shareholder  Representative's fraud (the "Shareholder Representative Expenses").
The  Shareholder   Representative  shall  make  available  to  each  Shareholder
reasonable   documentation   of   the   Shareholder   Representative   Expenses.
Notwithstanding anything to the contrary, in all matters relating to Article IX,
the  Shareholder  Representative  shall be the only party entitled to assert the
rights of the Shareholders, and the Shareholder Representative shall perform all
of the  obligations of the  Shareholders  hereunder.  The Parent and the Company
shall be entitled to rely on all  statements,  representations  and decisions of
the  Shareholder  Representative  as  those  of the  Shareholders,  without  any
independent investigation or verification.

                                   ARTICLE XI

                                   DEFINITIONS

         For purposes of this  Agreement,  the following terms and phrases shall
have the following meanings:

         "Affiliate"  shall  have  the  meaning  ascribed  to  it  in  Rule  405
promulgated under the Securities Act.

                                 Page 34 of 42
<PAGE>

         "Business Day" shall mean any Monday, Tuesday,  Wednesday,  Thursday or
Friday that is not a day on which  banking  institutions  in the States of Texas
and New York are authorized by law, regulation or executive order to close.

         "Company Stock Option" shall mean any option to purchase Company Shares
granted  under the UTSI  International  Corporation,  Nonqualified  Stock Option
Plan, dated January 8, 1999 or otherwise.

         "Company Stock Plan" shall mean the Company's Nonqualified Stock Option
Plan,  dated January 8, 1999,  and the  corresponding  Stock  Prospectus,  dated
December 11, 1998.

         "Code" shall mean the Internal Revenue Code of 1986, as amended.

         "Employee  Benefit  Plan"  shall mean any  "employee  benefit  plan" as
defined in Section 3(3) of ERISA and any other plan, policy, program,  practice,
agreement, understanding or arrangement (whether written or unwritten) providing
compensation  or other  benefits  to any  current or former  director,  officer,
employee or consultant  (or to any  dependent or  beneficiary  thereof),  of the
Company  or any ERISA  Affiliate,  which are now,  or were  within  the past six
years,  maintained  by the  Company or any ERISA  Affiliate,  or under which the
Company or any ERISA  Affiliate  has or could have any  obligation or liability,
whether actual or contingent (and including,  without limitation,  any liability
arising  out  of  an  indemnification,   guarantee,  hold  harmless  or  similar
agreement),  including,  without  limitation,  all  incentive,  bonus,  deferred
compensation, vacation, holiday, cafeteria, medical, disability, stock purchase,
stock option,  stock  appreciation,  phantom  stock,  restricted  stock or other
stock-based compensation plans, policies, programs, practices or arrangements.

         "Environmental Law" shall mean any federal, state, local or foreign law
(including any common law), statute, code, ordinance,  rule, regulation or other
requirement relating to the environment, natural resources or public or employee
health and safety,  and  includes,  but not limited to,  CERCLA,  the  Hazardous
Materials  Transportation  Act,  49 U.S.C.  ss. 1801 et seq.,  as  amended,  the
Resource  Conservation and Recovery Act, 42 U.S.C. ss. 6901 et seq., as amended,
the Clean Water Act, 33 U.S.C. ss. 2601 et seq., as amended,  the Clean Air Act,
42 U.S.C.  ss. 7401 et seq., as amended,  the Toxic  Substances  Control Act, 15
U.S.C. ss. 6901 et seq., as amended,  the Federal  Insecticide,  Fungicide,  and
Rodenticide Act, 7 U.S.C. ss. 136 et seq., as amended,  the Oil Pollution Act of
1990, 33 U.S.C.  ss. 2701 et seq., as amended,  the New York  Navigation Law, as
amended, and the Occupational Safety and Health Act, 29 U.S.C. ss. 6901 et seq.,
as amended.

         "Environmental  Costs and  Liabilities"  shall mean any and all losses,
liabilities, obligations, damages, fines, penalties, judgments, actions, claims,
costs and expenses  (including,  without  limitation,  fees,  disbursements  and
expenses of legal counsel,  experts,  engineers and consultants and the costs of
investigation and feasibility  studies and remedial  activities) arising from or
under any Environmental Law or order or contract with any Governmental Authority
or any other Person.

         "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.

                                 Page 35 of 42
<PAGE>

         "ERISA  Affiliate"  shall  mean  any  entity  that,  together  with the
Company, is or was treated as a single employer under Section 414(b), (c) or (m)
of the Code.

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

         "GAAP" shall mean generally accepted accounting principles as in effect
in the United States.

         "Governmental Authority" shall mean any court, administrative agency or
commission  or other  governmental  authority  or  instrumentality,  domestic or
foreign.

         "Hazardous  Materials" shall mean any petroleum or petroleum  products,
radioactive materials,  asbestos-containing  materials,  radon gas, PCBs and any
other hazardous or toxic substance,  material or waste which is or becomes prior
to  the  Closing  regulated  under,  or  defined  as  a  "hazardous  substance,"
"pollutant,"  "contaminant,"  "hazardous  waste," "toxic  chemical,"  "hazardous
materials,"  "toxic  substance" or "hazardous  chemical" under any Environmental
Law.

         "Knowledge of the Company" shall mean the actual knowledge of Daniel W.
Nagala and David L. Rossmann, upon due inquiry.

         "Laws"  shall  mean  all  applicable  statutes,   rules,   regulations,
ordinances,   orders,  writs,   injunctions,   judgments,   decrees,  awards  or
restrictions of any governmental entity.

         "Liabilities" shall mean any liability or obligation, including without
limitation, any direct or indirect indebtedness,  guaranty,  endorsement, claim,
loss, damage, deficiency,  cost, expense, obligation or responsibility,  whether
known  or  unknown,  fixed  or  unfixed,  choate  or  inchoate,   liquidated  or
unliquidated, secured or unsecured.

         "Liens"  shall mean any  security  interest,  mortgage,  lien,  charge,
claims, option and encumbrance.

         "Material  Adverse  Effect" used in connection  with a party shall mean
any event, change or effect that is or is reasonably likely to become materially
adverse  to  the  condition  (financial  or  otherwise),   properties,   assets,
liabilities,  businesses, operations, results of operations or prospects of such
party and its subsidiaries, if any, on a consolidated basis.

         "Pension  Plan"  shall mean any  qualified  or  non-qualified  Employee
Pension  Benefit  Plan  (including,  any  Multiemployer  Plan),  as such term is
defined in Section 3(2) of ERISA.

         "Person" shall mean any  individual,  firm,  corporation,  partnership,
trust,  incorporated or unincorporated  association,  joint venture, joint stock
company, governmental entity of any kind.

                                 Page 36 of 42
<PAGE>

         "Pre-Closing Period" shall mean all taxable periods ending on or before
the  Closing  Date and the portion  ending on or before the Closing  Date of any
taxable period that includes (but does not end on) the Closing Date.

         "SEC" shall mean the United States Securities and Exchange Commission.

         "SEC  Documents"  shall mean all  reports and  registration  statements
filed, or required to be filed, by the Parent pursuant to the Securities Laws.

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

         "Securities  Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended;  the Trust  Indenture  Act of 1939,  as  amended;  and the rules and
regulations of the SEC promulgated thereunder.

         "Subsidiary"   shall  mean,   as  to  any  Person,   any   corporation,
partnership, limited liability company or other entity which securities or other
ownership  interests  having  ordinary  voting  power to elect a majority of the
board of directors,  the general  managers or other persons  performing  similar
functions,  are at the time directly or indirectly owned by such Person;  unless
otherwise specified, "Subsidiary" means a Subsidiary of the Company.

         "Taxes" shall mean taxes, fees, levies, duties,  tariffs,  imposts, and
governmental impositions or charges of any kind in the nature of (or similar to)
taxes,  payable  to any  federal,  state,  local or  foreign  taxing  authority,
including (without limitation) (i) income,  franchise,  profits, gross receipts,
ad valorem,  net worth,  value  added,  sales,  use,  service,  real or personal
property,  special assessments,  capital stock, license,  payroll,  withholding,
employment,  social security, workers' compensation,  unemployment compensation,
utility, severance,  production,  excise, stamp, occupation,  premiums, windfall
profits,  transfer and gains taxes,  and (ii)  interest,  penalties,  additional
taxes and additions to tax imposed with respect thereto.

         "Welfare  Plan" shall mean any Employee  Welfare  Benefit Plan, as such
term is defined in Section 3(1) of ERISA.

                                   ARTICLE XII

                                  MISCELLANEOUS

         12.1 Notices. All notices and other  communications  hereunder shall be
in writing and shall be deemed to have been duly given if  delivered  personally
(including  delivery by courier  service),  transmitted by telecopy or mailed by
registered or certified mail, postage prepaid, return receipt requested, or sent
by a nationally recognized overnight courier service, as follows:

                                 Page 37 of 42
<PAGE>

         (a) If to the Parent, to:

             The Jackson Rivers Company
             402 Broadway, 4th Floor
             San Diego, California 92101
             Attention: President
             Telephone:  619.615.4242
             Telecopy:

             with a copy to:

             Weycer, Kaplan, Pulaski & Zuber, P.C.
             1400 Summit Tower, 11 Greenway Plaza
             Houston, Texas 77046
             Attention:  Robert Beasley
             Telephone:  713-961-9045
             Telecopy:  713-961-5341

         (b) If to the Company,  the Surviving  Entity , the Shareholders or the
Shareholder Representative, to:

             UTSI International Corporation
             Attention: President
             1560 West Bay Area Boulevard, Suite 300
             Friendswood, Texas 77546
             Telephone:  281 480 8786
             Telecopy: 281 480 8008

             with a copy to:

             Michael J. Skadden
             10001 Westpark, No. 30
             Houston, Texas  77042
             Telephone: 713 785 8948
             Telecopy: 713 975 6303

or to such other  address  as the Person to whom  notice is to be given may have
previously  furnished to the other  parties in writing in  accordance  herewith.
Notice shall be deemed  given on the date  received  (or, if receipt  thereof is
refused, on the date of such refusal).

         12.2  Amendments  and  Waivers.  This  Agreement  may  not be  amended,
modified or supplemented  except by written  agreement of the parties hereto. No
waiver by any party of any non-compliance,  default, misrepresentation or breach
of warranty or covenant  hereunder,  whether intentional or not, shall be deemed
to extend to any prior or subsequent non-compliance,  default, misrepresentation
or breach of  warranty  or  covenant  hereunder  or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.

                                 Page 38 of 42
<PAGE>

         12.3  Interpretation.  The headings  preceding the text of Articles and
Sections  included in this  Agreement and the headings to Exhibits and Schedules
attached to this Agreement are for convenience only and shall not be deemed part
of this Agreement or be given any effect in interpreting this Agreement. The use
of the masculine, feminine or neuter gender herein shall not limit any provision
of this  Agreement.  The use of the terms  "including" or "include" shall in all
cases  herein  mean  "including,   without  limitation"  or  "include,   without
limitation," respectively.  References to any "Article", "Section", "Exhibit" or
"Schedule"  shall  refer to an Article or Section  of, or an Exhibit or Schedule
to, this Agreement. In any case where the concept of materiality is applied more
than  once  to  qualify   any   provision   of  this   Agreement   (whether   by
cross-referencing  or  incorporation  or  otherwise),  such  provision  shall be
interpreted  as  if  only  one,  but  the  broadest  one,  of  such  materiality
qualification   applied  to  it.  Any  due  diligence  review,  audit  or  other
investigation  or inquiry  undertaken  or  performed  by or on behalf of a party
shall not limit,  qualify,  modify or amend the  representations,  warranties or
covenants of, or indemnities made by any other party pursuant to this Agreement,
irrespective  of the  knowledge and  information  received (or which should have
been received)  therefrom by the  investigating  party and  consummation  of the
transactions  contemplated  herein by a party  shall not be deemed a waiver of a
breach of or  inaccuracy in any  representation,  warranty or covenant or of any
other party's rights and remedies with regard thereto.

         12.4  Assignment;  Binding Upon  Successors  and  Assigns.  None of the
parties hereto may assign or delegate any of its rights or obligations hereunder
without the prior written  consent of the other parties  hereto.  This Agreement
will be binding  upon and inure to the benefit of the  parties  hereto and their
respective successors, heirs, legatees, distributees and assigns.

         12.5  Parties in  Interest.  This  Agreement  shall be binding upon and
inure  solely  to the  benefit  of  the  parties  hereto  and  their  respective
successors,  permitted  assigns and legal  representatives,  and nothing in this
Agreement,  express or implied,  is intended to confer upon any other Person any
rights or remedies of any nature.

         12.6 Counterparts; Facsimiles. This Agreement may be executed in one or
more  counterparts,  each of which shall be deemed to constitute an original and
shall become  effective when one or more  counterparts  have been signed by each
party hereto and delivered to the other  parties.  Counterparts  may be executed
either in  original,  faxed  form,  or  ".pdf"  form and the  parties  adopt any
signatures  received  by a  receiving  fax  machine  or an  e-mail  as  original
signatures  of the parties;  provided,  however,  that any party  providing  its
signature in such manner shall  promptly  forward to the other party an original
of the signed copy of this Agreement which was so faxed or e-mailed.

         12.7 Governing Law; Venue; Jurisdiction. The laws of the State of Texas
(irrespective  of its choice of law principles) will govern the validity of this
Agreement,  the construction of its terms and the interpretation and enforcement
of the  rights  and  duties  of the  parties  hereto.  This  Agreement  shall be
enforceable in any court of competent jurisdiction. In furtherance of and not in
limitation of the foregoing, the parties hereto agree that service of process in
any such action or  proceeding  will be  sufficient  if sent by certified  mail,
return receipt  requested,  to applicable address set forth above, and that such
service shall constitute "personal service,".

                                 Page 39 of 42
<PAGE>

         12.8 Severability. If any term or provision of this Agreement shall, to
any  extent,  be held by a court of  competent  jurisdiction  to be  invalid  or
unenforceable,  the remainder of this Agreement or the  application of such term
or  provision  to Persons or  circumstances  other than those as to which it has
been held  invalid or  unenforceable,  shall not be  affected  thereby  and this
Agreement shall be deemed severable and shall be enforced  otherwise to the full
extent permitted by law.

         12.9 Entire  Agreement.  This  Agreement  (including  the Schedules and
Exhibits  referred  to herein and which form a part  hereof)  and the  Ancillary
Documents   constitute  the  entire  agreement  among  the  parties  hereto  and
supersedes all prior agreements and understandings,  oral and written, among the
parties  hereto  with  respect  to  the  subject  matter  hereof  except  for  a
confidentiality agreement by and among the parties hereto, if any.

         12.10  Schedules  and Exhibits.  The  Schedules  and Exhibits  attached
hereto are incorporated herein and made a part hereof for all purposes.

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                 Page 40 of 42
<PAGE>

                  IN WITNESS WHEREOF, this Agreement and Plan of Merger has been
duly  executed  and  delivered  by the  parties  hereto on the date first  above
written.

                                            PARENT:

                                            THE JACKSON RIVERS COMPANY

                                            By: /s/ Jeffrey Flannery
                                                --------------------------------
                                                Name: Jeffrey Flannery
                                                Title: Chief Executive Officer

                                            By: /s/ James Nelson
                                                --------------------------------
                                                Name: James Nelson
                                                Title: President

                                            COMPANY:

                                            UTSI International Corporation

                                            By: /s/ Daniel W. Nagala
                                                --------------------------------
                                                Name: Daniel W. Nagala
                                                Title: President

                                 Page 41 of 42
<PAGE>

                                            SHAREHOLDERS:

                                            /s/ Daniel W. Nagala
                                                --------------------------------
                                                Daniel W. Nagala

                                            /s/ David L. Rossman
                                                --------------------------------
                                                David L. Rossmann

                                            /s/ Craig S. Alexander
                                                --------------------------------
                                                Craig S. Alexander

                                            /s/ Randall C. Allen
                                                --------------------------------
                                                Randall C. Allen

                                            /s/ Gale P. Brom
                                                --------------------------------
                                                Gale P. Brom

                                            /s/ Duane P. Clemenston
                                                --------------------------------
                                                Duane P. Clemenston

                                            /s/ Robert L. Debbrecth
                                                --------------------------------
                                                Robert L. Debbrecht

                                            /s/ Catalina Frey Pereiras
                                                --------------------------------
                                                Catalina Frey Pereiras

                                            /s/ John W. Keener
                                                --------------------------------
                                                John W. Keener

                                            /s/ Kevin G. Laughbaum
                                                --------------------------------
                                                Kevin G. Laughbaum

                                            /s/ Kurt E. Schottleutner
                                                --------------------------------
                                                Kurt E. Schottleutner

                                            /s/ Matthew P. B. Steakley
                                                --------------------------------
                                                Matthew P.B. Steakley

                                 Page 42 of 42

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