Document:

Exhibit 10.18

    
      

    

     

    Exhibit
      10.18

     

    STOCK
      PURCHASE AGREEMENT

    

    THIS
      STOCK PURCHASE AGREEMENT
      (this
“Agreement”)
      is made
      effective as of the 15th day of June, 2005, by and among Sheer Ventures, Inc.,
      a
      Nevada corporation (the “Company” or “Seller”) and Petrofinanz GMBH, a limited
      liability company organized pursuant to the laws of the Marshall Islands
      (“Purchaser”).

    

    

    WHEREAS,
      the Purchaser desires to purchase 400,000 shares of the Company’s common stock
      at a price of $0.50 per share (the “Shares”); and

    

    WHEREAS,
      the Company desires to sell the Shares to Purchaser and the Purchaser desires
      to
      purchase the Shares from the Company on the terms and conditions set forth
      herein.

     

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

    

    ARTICLE
      I

    Purchase
      and Sale of the Shares 

    

    Section
      1.01. Purchase
      and Sale.
      On the
      Closing Date and upon the terms and subject to the conditions set forth herein,
      the Seller shall deliver the Shares to the Purchaser free and clear of all
      liens, in accordance with Section 1.04 below, and Purchaser shall purchase
      the
      Shares from the Seller in accordance with Section 1.02 below. 

    

    Section
      1.02. Purchase
      Price.
      The
      purchase price (the “Purchase
      Price”)
      for the
      Shares is US $200,000 ($0.50 per share), which shall be paid to Seller by
      cashier’s check, certified funds or wire transfer within four (4) days of
      Closing. 

    

    Section
      1.03. Time
      and Place of Closing.
      Subject
      to the satisfaction or waiver of the conditions herein, the closing (the
“Closing”)
      of the
      transactions contemplated by this Agreement shall take place on or before June
      15th,
      2005 or
at
      such
      time, date or place as Seller and Purchaser may agree.

    

    Section
      1.04. Delivery
      of the Shares; Payment of Purchase Price.
      Upon
      Closing, the Company shall deliver to Purchaser a certificate representing
      the
      Shares, duly endorsed to Purchaser or accompanied by stock powers duly endorsed
      to Purchaser. Upon payment of the Purchase Price, the Shares shall be deemed
      to
      be paid in full, with all taxes attributable to the transfer and sale of the
      Shares paid by the Seller. 

    

    ARTICLE
      II

    Representations
      and Warranties of the Company

    
      
         

        
        

      

      
        
        

        
          

        

      

       

    

    

    Subject
      to all of the terms, conditions and provisions of this Agreement, the Company
      hereby represents and warrants to Purchaser, as of the date hereof and as of
      the
      Closing, as follows:

    

    Section
      2.01. Organization
      and Qualification.
      The
      Company (i) is an entity duly organized, validly existing and in good standing
      under the laws of the Nevada, (ii) has all requisite power and authority to
      carry on its business, and (iii) is duly qualified to transact business and
      is
      in good standing in all jurisdictions where its ownership, lease or operation
      of
      property or the conduct of its business requires such qualification, except
      where the failure to do so would not have a material adverse effect to the
      Seller or the Company, respectively. 

    

    At
      Closing, the authorized capital stock of the Company consists of 75,000,000
      shares of common stock, no par value, of which 40,800,000 shares are validly
      issued and outstanding. There are no shares of preferred stock authorized or
      issued and there is no other class of capital stock authorized or issued by
      the
      Company. All of the issued and outstanding shares of common stock of the Company
      are fully paid and non-assessable. None of the shares issued are in violation
      of
      any preemptive rights. The Company has no obligation to repurchase, reacquire,
      or redeem any of its outstanding capital stock. There are no outstanding
      securities convertible into or evidencing the right to purchase or subscribe
      for
      any shares of capital stock of the Company, there are no outstanding or
      authorized options, warrants, calls, subscriptions, rights, commitments or
      any
      other agreements of any character obligating the Company to issue any shares
      of
      its capital stock or any securities convertible into or evidencing the right
      to
      purchase or subscribe for any shares of such stock, and there are no agreements
      or understandings with respect to the voting, sale, transfer or registration
      of
      any shares of capital stock of the Company.

    

    Section
      2.02  Authorization.
      All
      corporate action on the part of Company necessary for the authorization,
      execution, delivery and performance of this Agreement by the Company has been
      taken or will be taken prior to the Closing. The Company has the requisite
      corporate power and authority to execute, deliver and perform this Agreement.
      This Agreement, when been duly executed and delivered in accordance with its
      terms, will constitute a valid and binding obligation of the Company,
      enforceable against the Company in accordance with its terms, except as may
      be
      limited by bankruptcy, insolvency, reorganization, and other similar laws of
      general application relating to or affecting creditors’ rights and to general
      equitable principles.

    

    Section
      2.03 No
      Breaches or Defaults.
      The
      execution, delivery, and performance of this Agreement by the Company does
      not:
      (i) conflict with, violate, or constitute a breach of or a default under, (ii)
      result in the creation or imposition of any lien, claim, or encumbrance of
      any
      kind upon the Shares, or (iii) require any authorization, consent, approval,
      exemption, or other action by or filing with any third party or Governmental
      Authority under any provision of: (a) any applicable Legal Requirement, or
      (b)
      any credit or loan agreement, promissory note, or any other agreement or
      instrument to which the Company is a party or by which the Shares may be bound
      or affected. For purposes of this Agreement, "Governmental Authority" means
      any
      foreign governmental authority, the United States of America, any state of
      the
      United States, and any political subdivision of any of the foregoing, and any
      agency, department, commission, board, bureau, court, or similar entity, having
      jurisdiction over the parties hereto or their respective assets or properties.
      For purposes of this Agreement, "Legal Requirement" means any law,
      statute, injunction, decree, order or judgment (or interpretation of any of
      the
      foregoing) of, and the terms of any license or permit issued by, any
      Governmental Authority. 

    
       

      
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          Purchase Agreement - Page 2

        
          

        

      

      
        
        

      

    

    

    Section
      2.04 Consents.
      No
      permit, consent, approval or authorization of, or designation, declaration
      or
      filing with, any Governmental Authority or any other person or entity is
      required on the part of the Company in connection with the execution and
      delivery by the Seller or the Company of this Agreement or the consummation
      and
      performance of the transactions contemplated hereby.

    

    Section
      2.05 Pending
      Claims.
      There
      is no claim, suit, arbitration, investigation, action or other proceeding,
      whether judicial, administrative or otherwise, now pending or, to the best
      of
      the Company’s knowledge, threatened before any court, arbitration,
      administrative or regulatory body or any governmental agency which may result
      in
      any judgment, order, award, decree, liability or other determination which
      will
      or could reasonably be expected to have any effect upon the Company, or the
      transfer by the Company to Purchaser of the Shares under this Agreement, nor
      is
      there any basis known to the Company for any such action. No litigation is
      pending, or, to the Company’s knowledge, threatened against the Company, or its
      assets or properties, which seeks to restrain or enjoin the execution and
      delivery of this Agreement or any of the documents referred to herein or the
      consummation of any of the transactions contemplated thereby or hereby. The
      Company is not subject to any judicial injunction or mandate or any
      quasi-judicial or administrative order or restriction directed to or against
      them or which would affect the Company or the Shares to be transferred under
      this Agreement. 

    

    Section
      2.06 Taxes.
      The
      Company has timely and accurately filed all federal, state, foreign and local
      tax returns and reports required to be filed prior to such dates and have timely
      paid all taxes shown on such returns as owed for the periods of such returns,
      including all sales taxes and withholding or other payroll related taxes shown
      on such returns. The Company has made adequate provision for the payment of
      all
      taxes accruable for all periods ending on or before the Closing Date to any
      taxing authority and are not delinquent in the payment of any tax or
      governmental charge of any nature. No assessments or notices of deficiency
      or
      other communications have been received by the Company with respect to any
      tax
      return which has not been paid, discharged or fully reserved against and no
      amendments or applications for refund have been filed or are planned with
      respect to any such return. There are no agreements between the Company and
      any
      taxing authority, including, without limitation, the Internal Revenue Service,
      waiving or extending any statute of limitations with respect to any tax return.
      

    

    Section
      2.07. Labor
      Matters.
      The
      Company is not a party or otherwise subject to any collective bargaining
      agreement with any labor union or association. There are no discussions,
      negotiations, demands or proposals that are pending or have been conducted
      or
      made with or by any labor union or association, and there are not pending or
      threatened against the Company any labor disputes, strikes or work stoppages.
      To
      the best of the Company’s knowledge, the Company is in compliance with all
      federal and state laws respecting employment and employment practices, terms
      and
      conditions of employment and wages and hours, and, to its knowledge, is not
      engaged in any unfair labor practices. 

    

    Section
      2.08. Compliance
      with Laws.
      The
      Company is, and at all times prior to the date hereof has been, to the best
      of
      its knowledge, in compliance with all statutes, orders, rules, ordinances and
      regulations applicable to it or to the ownership of their assets or the
      operation of its businesses, except for failures to be in compliance that would
      not have a material adverse effect on the business, properties, condition
      (financial or otherwise) or prospects of the Company. The Company has no basis
      to expect, nor have they received any order or notice of any such violation
      or
      claim of violation of any such statute, order, rule, ordinance or regulation
      by
      the Company. 

    
      
        
        

      

      
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          Purchase Agreement - Page 3

        
          

        

      

      
        
        

      

    

    

    Section
      2.09. Material
      Agreements; Action.
      There
      are no material contracts, agreements, commitments, understandings or proposed
      transactions, whether written or oral, to which the Company is a party or by
      which they are bound that involve or relate to: (i) any of the respective
      officers, directors, stockholders or partners of the Company or any affiliates
      thereof, other than in the ordinary course of business; (ii) the sale of any
      of
      the assets of the Company other than in the ordinary course of business; (iii)
      covenants of the Company not to compete in any line of business or with any
      person in any geographical area or covenants of any other person not to compete
      with the Company in any line of business or in any geographical area; (iv)
      the
      acquisition by the Company of any operating business or the capital stock of
      any
      other Person; (v) the borrowing of money; or (vi) the expenditure of more than
      $5,000 in the aggregate or the performance by the Company extending for a period
      more than one year from the date hereof, other than in the ordinary course
      of
      business. 

    

    Section
      2.10. No
      Default.
      The
      Company is not in default under any term or condition of any instrument
      evidencing, creating or securing any indebtedness of the Company, and there
      has
      been no default in any material obligation to be performed by the Company under
      any other contract, lease, agreement, commitment or undertaking to which it
      is a
      party or by which it or its assets or properties are bound, nor has the Company
      waived any material right under any such contract, lease, agreement, commitment
      or undertaking.

    

    Section
      2.11. Disclosure.
      No
      representation or warranty of the Company contained in this Agreement (including
      the exhibits hereto) contains any untrue statement or omits to state a material
      fact necessary in order to make the statements contained herein or therein,
      in
      light of the circumstances under which they were made, not
      misleading.

    

    ARTICLE
      III

    Representations
      and Warranties of Purchaser

    

    Subject
      to all of the terms, conditions and provisions of this Agreement, the Purchaser
      hereby represents and warrants to the Seller, as of the date hereof and as
      of
      the Closing, as follows:

    

    Section
      3.01. Authorization.
      All
      corporate action on the part of Purchaser necessary for the authorization,
      execution, delivery and performance of this Agreement by Purchaser has been
      taken or will be taken prior to the Closing. Purchaser has the requisite
      corporate power and authority to execute, deliver and perform this Agreement.
      This Agreement, when been duly executed and delivered in accordance with its
      terms, will constitute a valid and binding obligation of the Purchaser,
      enforceable against the Purchaser in accordance with its terms, except as may
      be
      limited by bankruptcy, insolvency, reorganization, and other similar laws of
      general application relating to or affecting creditors’ rights and to general
      equitable principles.

    

    
      
        
        

      

      
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          Purchase Agreement - Page 4

        
          

        

      

      
        
        

      

    

     

    Section
      3.02. Purchase
      for Investment.
      Purchaser is purchasing the Shares for its own account, for investment purposes
      only and not with view to any public resale or other distribution thereof.
      Purchaser acknowledges that it is an Accredited Investor as that term is defined
      in Rule 501(a) of Regulation D of the Securities Act of 1933, as amended.
      Purchaser and its representatives have received, or have had access to, and
      have
      had sufficient opportunity to review, all books, records, financial information
      and other information which Purchaser considers necessary or advisable to enable
      it to make a decision concerning its purchase of the Shares, and that it
      possesses such knowledge and experience in financial and business matters that
      it is capable of evaluating the merits and risks of his investment hereunder.
      

    

    Additionally,
      the Purchaser understands that any sale by the Purchaser of any of the Shares
      purchased under this Agreement will, under current law, require either: (a)
      the
      registration of the Shares under the Act and applicable state securities acts;
      (b) compliance with Rule 144 of the Act; or (c) the availability of an exemption
      from the registration requirements of the Act. The Purchaser understands that
      the Company has not undertaken and does not presently intend to file a
      Registration Statement to register the Shares purchased hereunder. The Purchaser
      hereby agrees to execute, deliver, furnish or otherwise provide to the Company
      an opinion of counsel reasonably acceptable to the Company prior to any
      subsequent transfer of the Shares, that such transfer will not violate the
      registration requirements of the federal or state securities acts. The Purchaser
      further agrees to execute, deliver, furnish or otherwise provide to the Company
      any documents or instruments as may be reasonably necessary or desirable in
      order to evidence and record the Shares acquired hereby.

    

    To
      assist
      in implementing the above provisions, the Purchaser hereby consents to the
      placement of the legend, or a substantially similar legend, set forth below,
      on
      all certificates representing ownership of the Shares acquired hereby until
      the
      Shares have been sold, transferred, or otherwise disposed of, pursuant to the
      requirements hereof. The legend shall read substantially as
      follows:

     

    
      "THESE
        SECURITIES HAVE BEEN ISSUED PURSUANT TO EXEMPTION FROM REGISTRATION CONTAINED
        IN
        REGULATION S OF THE SECURITIES ACT OF 1933 AND HAVE NOT BEEN REGISTERED UNDER
        THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE FOREIGN SECURITIES
        ACTS. THESE SECURITIES MAY ONLY BE RESOLD IN COMPLIANCE WITH REGULATION S
        OF THE
        SECURITIES ACT OF 1933."

       

    

    Section
      3.03  Purchasers
      Information.
      

     

    Purchaser
      hereby confirms and represents that:

    

    
      	 	
              a.

            	
              Purchaser
                understands that the Shares have not been approved or disapproved
                by the
                United States Securities and Exchange Commission or any foreign securities
                agencies and no registration statement has been filed with any regulatory
                agency.

            

    

    
      
         

      

      
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          Purchase Agreement - Page 5

        
          

        

      

      
        
        

      

    

     

    
      	 	
              b.

            	
              Purchaser
                is not an underwriter and would be acquiring the Shares solely for
                investment for his or her own account and not with a view to, or
                for,
                resale in connection with any distribution with in the meaning of
                the
                federal securities act, the state securities acts or any other applicable
                state securities acts;

            

    

    

    
      	 	
              c.

            	
              The
                undersigned Purchaser is not a person in the United States of America
                and
                at the time the buy order was originated, the Purchaser was outside
                the
                United States of America. The undersigned Purchaser is not a citizen
                of
                the United States (a U.S. Person) as that term is defined in Reg.
                S of the
                Securities Act of 1933 and was not formed by a U. S. person principally
                for the purpose of investing in securities not registered under the
                Securities Act of 1933.

            

    

    

    
      	 	
              d.

            	
              The
                undersigned Purchaser understands the speculative nature and risks
                of
                investments associated with the Company, and confirms that the Shares
                would be suitable and consistent with his or her investment program
                and
                that his or her financial position enable him or her to bear the
                risks of
                this investment;

            

    

    

    
      	 	
              e.

            	
              To
                the extent that any federal, and/or state securities laws shall require,
                the Purchaser hereby agrees that any securities acquired pursuant
                to this
                Agreement shall be without preference as to
                assets;

            

    

    

    
      	 	
              f.

            	
              The
                certificate for Shares will contain a legend that transfer is prohibited
                except in accordance with the provisions of Regulation
                S;

            

    

    

    
      	 	
              g.

            	
              The
                Purchaser has had the opportunity to ask questions of the Company
                and has
                received all information from the Company to the extent that the
                Company
                possessed such information, necessary to evaluate the merits and
                risks of
                any investment in the Company; 

            

    

    

    
      	 	
              h.

            	
              The
                Purchaser has satisfied the suitability standards and securities
                laws
                imposed by government of his
                residence;

            

    

    

    
      	 	
              i.

            	
              The
                Purchaser has adequate means of providing for its current needs and
                contingencies and has no need to sell the Shares in the foreseeable
                future
                (that is at the time of the investment, Purchaser can afford to hold
                the
                investment for an indefinite period of time);

            

    

    

    
      	 	
              j.

            	
              The
                Purchaser has sufficient knowledge and experience in financial matters
                to
                evaluate the merits and risks of this investment and further, the
                Purchaser is capable of reading and interpreting financial statements.
                Further, Purchaser is an “accredited investor” as that term is defined in
                applicable court cases and the rules, regulations and decisions of
                the
                United States Securities and Exchange
                Commission.

            

    

    

    
      	 	
              k.
                

            	
              The
                offer and sale of the Shares referred to herein is being made outside
                the
                United States within the meaning of and in full compliance with Regulation
                S.

            

    

    

    
      
        
        

      

      
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              l.

            	
              The
                Purchaser is not a U. S. person within the meaning of Regulation
                S and is
                not acquiring the Shares for the account or benefit of any U. S.
                person;
                and,

            

    

    

    
      	 	
              m.

            	
              The
                Purchaser agrees to resell the Shares only in accordance with the
                provisions of Regulation S, pursuant to registration under the Securities
                Act of 1933, as amended, or pursuant to an available exemption from
                registration.

            

    

    

    Section
      3.04. No
      Conflict.
      The
      execution and delivery by Purchaser of this Agreement and the consummation
      of
      the transactions contemplated hereby and thereby do not and shall not, by the
      lapse of time, the giving of notice or otherwise: (a) constitute a violation
      of
      any law; or (b) constitute a breach of any provision contained in, or a default
      under, any governmental approval, any writ, injunction, order, judgment or
      decree of any governmental authority or any contract to which Purchaser is
      a
      party or by which Purchaser is bound or affected.

    

    Section
      3.05. Consents
      and Approvals.
      No
      governmental approvals and no notifications, filings or registrations to or
      with
      any governmental authority or any other person is or will be necessary for
      the
      valid execution and delivery by Purchaser of this Agreement and the closing
      documents to which it is a party, or the consummation of the transactions
      contemplated hereby or thereby, or the enforceability hereof or thereof, other
      than those which have been obtained or made and are in full force and
      effect.

     

    ARTICLE
      IV

    Conditions

    

    Section
      4.01. Conditions
      to Obligations of each of the Parties. 
      The
      respective obligations of each party to consummate the transactions contemplated
      hereby shall be subject to the fulfillment at or prior to the Closing of the
      following conditions: (a) no preliminary or permanent injunction or other order,
      decree or ruling which prevents the consummation of the transactions
      contemplated by this Agreement shall have been issued and remain in effect;
      (b)
      no claim shall have been asserted, threatened or commenced and no law shall
      have
      been enacted, promulgated or issued which would reasonably be expected to (i)
      prohibit the purchase of, payment for or retention of the Shares by Purchaser
      or
      the consummation of the transactions contemplated by this Agreement or (ii)
      make
      the consummation of any such transactions illegal; and (c) all approvals legally
      required for the consummation of the transactions contemplated by this Agreement
      shall have been obtained and be in full force and effect at the
      Closing.

    

    Section
      4.02. Conditions
      to Obligations of Seller.
       The
      obligations of Seller to consummate the transactions contemplated hereby shall
      be subject to the fulfillment at or prior to the Closing Date of the following
      additional conditions, except as Seller may waive in writing: (a) Purchaser
      shall have complied with and performed in all material respects all of the
      terms, covenants, agreements and conditions contained in this Agreement which
      are required to be complied with and performed on or prior to Closing; and
      (b)
      the representations and warranties of Purchaser in this Agreement shall have
      been true and correct on the date hereof or thereof, as applicable,
      and such representations and warranties shall be true and correct on and at
      the
      Closing (except those, if any, expressly stated to be true and correct at an
      earlier date), with the same force and effect as though such representations
      and
      warranties had been made on and at the Closing.

    
    

    

    
      
        
        

      

      
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      Section 4.03. Conditions
      to Obligations of Purchaser.
      The
      obligations of Purchaser to consummate the transactions contemplated hereby
      shall be subject to the fulfillment at or prior to Closing of the following
      additional conditions, except as Purchaser may waive in writing: (a) the Company
      shall have complied with and performed in all material respects all of the
      terms, covenants, agreements and conditions contained in this Agreement which
      are required to be complied with and performed on or prior to Closing; and
      (b)
      the representations and warranties of the Company in this Agreement shall have
      been true and correct on the date hereof or thereof, as applicable, and such
      representations and warranties shall be true and correct on and at the Closing
      (except those, if any, expressly stated to be true and correct at an earlier
      date), with the same force and effect as though such representations and
      warranties had been made on and at the Closing.

    

    ARTICLE
      V

    Indemnification

    

    Section
      5.01. Indemnification
      of Seller.
      Subject
      to the terms and conditions of this Article VI, Purchaser agrees to indemnify,
      defend and hold harmless Seller, from and against any and all claims,
      liabilities and losses which may be imposed on, incurred by or asserted against,
      arising out of or resulting from, directly or indirectly:

    

    (a) the
      inaccuracy of any representation or breach of any warranty of Purchaser
      contained in or made pursuant to this Agreement which was not disclosed to
      Seller in writing prior to the Closing; provided
      that no
      such notification shall be deemed to waive or abrogate any right of Seller
      with
      respect to conditions to Closing in Section 4.02;

    

    (b) the
      breach of any covenant or agreement of Purchaser contained in this Agreement;
      or

    

    (c) any
      claim
      to fees or costs for alleged services by a broker, agent, finder or other person
      claiming to act in a similar capacity at the request of Purchaser in connection
      with this Agreement;

    

    provided,
      however,
      that
      Purchaser shall not be liable for any portion of any claims, liabilities or
      losses resulting from a material breach by Seller, of any of its obligations
      under this Agreement or from Seller’s gross negligence, fraud or willful
      misconduct.

    

    Section
      5.02. Indemnification
      of Purchaser.
      Subject
      to the terms and conditions of this Article V, from and after the Closing,
      the
      Company agrees to indemnify, defend and hold harmless the Purchaser, its
      respective affiliates, its respective present and former directors, officers,
      shareholders, employees and agents and its respective heirs, executors,
      administrators, successors and assigns (the “Purchaser Indemnified Persons”),
      from and against any and all claims, liabilities and losses which may be imposed
      on, incurred by or asserted against any Purchaser Indemnified Person, arising
      out of or resulting from, directly or indirectly:

    

    
      
        
        

      

      
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          Purchase Agreement - Page 8

        
          

        

      

      
        
        

      

    

     

    (a) the
      inaccuracy of any representation or breach of any warranty of the Company
      contained in or made pursuant to this Agreement which was not disclosed to
      Purchaser in writing prior to the Closing; provided
      that no
      such notification shall be deemed to waive or abrogate any right of Purchaser
      with respect to conditions to Closing in Section 4.03;

    

    (b) the
      breach of any covenant or agreement of the Company contained in this
      Agreement;

    

    (c) the
      conduct of the business of the Company prior to the Closing; or

    

    (d) any
      claim
      to fees or costs for alleged services rendered by a broker, agent, finder or
      other person claiming to act in a similar capacity at the request of the Company
      in connection with this Agreement;

    

    provided,
      however,
      that
      the Company shall not be liable for any portion of any claims, liabilities
      or
      losses resulting from a material breach by Purchaser of its obligations under
      this Agreement or from a Purchaser Indemnified Person’s gross negligence, fraud
      or willful misconduct. 

    

    ARTICLE
      VI

    Miscellaneous

    

    Section
      6.01. Notices.
      Any and
      all notices, requests or other communications hereunder shall be given in
      writing and delivered by: (a) regular, overnight or registered or certified
      mail
      (return receipt requested), with first class postage prepaid; (b) hand delivery;
      (c) facsimile transmission; or (d) overnight courier service, to the parties
      at
      the following addresses or facsimile numbers:

    

    
      	 	
              (i)
                if to Seller/the Company, to:

            	 	
              Sheer
                Ventures Inc. 

            
	 	 	 	
              Attn:
                President

            
	 	 	 	
              100
                Crescent Court, 7th
                Floor

            
	 	 	 	
              Dallas,
                Texas 75201

            
	 	 	 	 
	 	
              With
                copies to:

            	 	
              Robert
                D. Axelrod

            
	 	 	 	
              Axelrod,
                Smith & Kirshbaum, P.C.

            
	 	 	 	
              5300
                Memorial Drive, Suite 700

            
	 	 	 	
              Houston,
                Texas 77007

            
	 	 	 	
              Telephone
                Number: 713-861-1996

            
	 	 	 	
              Facsimile
                Number: 713-552-0202

            
	 	 	 	 
	 	
              (iii)
                if to Purchaser, to:

            	 	
              Petrofinanz
                GMBH

            
	 	 	 	
              Trust
                Company Complex

            
	 	 	 	
              Ajeltake
                Road

            
	 	 	 	
              Ajeltake
                Island

            
	 	 	 	
              Majuro,
                Marshall Islands MH 96960

            

    

     

    
      
        
        

      

      
        Stock
          Purchase Agreement - Page 9

        
          

        

      

      
        
        

      

    

     

    or
      at
      such other address or number as shall be designated by either of the parties
      in
      a notice to the other party given in accordance with this Section 6.01. Except
      as otherwise provided in this Agreement, all such communications shall be deemed
      to have been duly given: (A) in the case of a notice sent by regular or
      registered or certified mail, three business days after it is duly deposited
      in
      the mails; (B) in the case of a notice delivered by hand, when personally
      delivered; (C) in the case of a notice sent by facsimile, upon transmission
      subject to telephone confirmation of receipt; and (D) in the case of a notice
      sent by overnight mail or overnight courier service, the next business day
      after
      such notice is mailed or delivered to such courier, in each case given or
      addressed as aforesaid.

    

    Section
      6.02. Benefit
      and Burden.
      This
      Agreement shall inure to the benefit of, and shall be binding upon, the parties
      hereto and their successors and permitted assigns.

    

    Section
      6.03. No
      Third Party Rights.
      Nothing
      in this Agreement shall be deemed to create any right in any creditor or other
      person not a party hereto (other than the Purchaser Indemnified Persons) and
      this Agreement shall not be construed in any respect to be a contract in whole
      or in part for the benefit of any third party (other than the Purchaser
      Indemnified Persons).

    

    Section
      6.04. Amendments
      and Waiver.
      No
      amendment, modification, restatement or supplement of this Agreement shall
      be
      valid unless the same is in writing and signed by the parties hereto. No waiver
      of any provision of this Agreement shall be valid unless in writing and signed
      by the party against whom that waiver is sought to be enforced.

    

    Section
      6.05. Assignments.
      Purchaser may assign any of their rights, interests and obligations under this
      Agreement and must notify Seller in writing of any such assignment.

    

    Section
      6.06. Counterparts.
      This
      Agreement may be executed in counterparts and by the different parties in
      separate counterparts, each of which when so executed shall be deemed an
      original and all of which taken together shall constitute one and the same
      agreement.

    

    Section
      6.07. Captions
      and Headings.
      The
      captions and headings contained in this Agreement are inserted and included
      solely for convenience and shall not be considered or given any effect in
      construing the provisions hereof if any question of intent should
      arise.

    

    Section
      6.08. Construction.
      The
      parties acknowledge that each of them has had the benefit of legal counsel
      of
      its own choice and has been afforded an opportunity to review this Agreement
      with its legal counsel and that this Agreement shall be construed as if jointly
      drafted by the parties hereto.

    

    Section
      6.09. Severability.
      Should
      any clause, sentence, paragraph, subsection, Section or Article of this
      Agreement be judicially declared to be invalid, unenforceable or void, such
      decision will not have the effect of invalidating or voiding the remainder
      of
      this Agreement, and the parties agree that the part or parts of this Agreement
      so held to be invalid, unenforceable or void will be deemed to have been
      stricken herefrom by the parties, and the remainder will have the same force
      and
      effectiveness as if such stricken part or parts had never been included
      herein.

    

    
      
        
        

      

      
        Stock
          Purchase Agreement - Page 10

        
          

        

      

      
        
        

      

    

     

    Section
      6.10. Applicable
      Law.
      This
      Agreement and the rights and obligations of the parties hereunder shall be
      governed by and construed in accordance with the laws of the State of Nevada,
      without giving effect to the conflict of law principles thereof. 

    

    Section
      6.11. Submission
      to Jurisdiction.
      Each of
      the parties hereby: (a) irrevocably submits to the non-exclusive personal
      jurisdiction of any Nevada court, over any claim arising out of or relating
      to
      this Agreement and irrevocably agrees that all such claims may be heard and
      determined in such Nevada court; and (b) irrevocably waives, to the fullest
      extent permitted by applicable law, any objection it may now or hereafter have
      to the laying of venue in any proceeding brought in a Nevada court.

    

    Section
      6.12. Expenses;
      Prevailing Party Costs.
      The
      Company and Purchaser shall each pay their own expenses incident to this
      Agreement and the transactions contemplated hereby and thereby, including all
      legal and accounting fees and disbursements. Notwithstanding anything contained
      herein or therein to the contrary, if any party commences an action against
      another party to enforce any of the terms, covenants, conditions or provisions
      of this Agreement, or because of a breach by a party of its obligations under
      this Agreement, the prevailing party in any such action shall be entitled to
      recover its losses, including reasonable attorneys’ fees, incurred in connection
      with the prosecution or defense of such action, from the losing
      party.

    

    Section
      6.13. Entire
      Agreement.
      This
      Agreement sets forth all of the promises, agreements, conditions,
      understandings, warranties and representations among the parties with respect
      to
      the transactions contemplated hereby and thereby, and supersedes all prior
      agreements, arrangements and understandings between the parties, whether
      written, oral or otherwise.

    

    Section
      6.14. Faxed
      Signatures.
      For
      purposes of this Agreement, a faxed signature shall constitute an original
      signature.

    

    IN
      WITNESS WHEREOF,
      the
      parties have duly executed this Agreement as of the day and year first above
      written.

     

     

    
      	
              SELLER:

            	 	
              SHEER
                VENTURES, INC.

            	 
	 	 	 	 	 
	 	 	 /s/  
              Philipp Buschmann	 
	 	 	
              By:

            	 	 
	 	 	
              Its:

            	Director	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	
              PURCHASER:

            	 	
              PETROFINANZ
                GMBH

            	 
	 	 	 	 	 
	 	 	 /s/  
              T. Crabtree	 
	 	 	
              By:
                

            	 	 
	 	 	
              Its:
                

            	Director	 

    

     

    Stock
      Purchase Agreement - Page 11EXHIBIT 10.1

                          SECURITIES PURCHASE AGREEMENT

      This  Securities  Purchase  Agreement  (this  "Agreement")  is dated as of
October  12,  2005,  among  Spatialight,  Inc.,  a  New  York  corporation  (the
"Company"),  and each purchaser  identified on the signature pages hereto (each,
including  its  successors  and assigns,  a  "Purchaser"  and  collectively  the
"Purchasers").

      WHEREAS,  subject to the terms and  conditions set forth in this Agreement
and  pursuant to Section  4(2) of the  Securities  Act of 1933,  as amended (the
"Securities  Act") and Rule 506 promulgated  thereunder,  the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase  from the Company,  securities  of the Company as more fully
described in this Agreement.

      NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement,  and for  other  good and  valuable  consideration  the  receipt  and
adequacy of which are hereby acknowledged,  the Company and each Purchaser agree
as follows:

                                   ARTICLE I.
                                   DEFINITIONS

      1.1  Definitions.  In  addition  to the terms  defined  elsewhere  in this
Agreement,  for all purposes of this  Agreement,  the  following  terms have the
meanings indicated in this Section 1.1:

            "Action"  shall have the  meaning  ascribed  to such term in Section
      3.1(j).

            "Affiliate"  means any Person that,  directly or indirectly  through
      one or more  intermediaries,  controls  or is  controlled  by or is  under
      common control with a Person as such terms are used in and construed under
      Rule 144 under the  Securities  Act.  With  respect  to a  Purchaser,  any
      investment  fund or managed  account  that is  managed on a  discretionary
      basis by the same  investment  manager as such Purchaser will be deemed to
      be an Affiliate of such Purchaser.

            "Closing"  means  the  closing  of  the  purchase  and  sale  of the
      Securities pursuant to Section 2.1.

            "Closing  Date" means the  Trading  Day when all of the  Transaction
      Documents  have been  executed  and  delivered by the  applicable  parties
      thereto, and all conditions  precedent to (i) the Purchasers'  obligations
      to pay the  Subscription  Amount  and (ii) the  Company's  obligations  to
      deliver the Securities have been satisfied or waived.

            "Closing  Price" means on any particular  date (a) the last reported
      closing  bid price per share of Common  Stock on such date on the  Trading
      Market (as reported by Bloomberg L.P. at 4:15 PM (New York time)),  or (b)
      if there is no such price on such date,  then the closing bid price on the
      Trading  Market on the date  nearest  preceding  such date (as reported by
      Bloomberg L.P. at 4:15 PM (New York time)),  or (c) if the Common Stock is
      not then  listed or quoted on the  Trading  Market  and if prices  for the
      Common  Stock are then  reported  in the "pink  sheets"  published  by the
      National  Quotation  Bureau  Incorporated  (or a similar  organization  or
      agency succeeding to its functions of reporting  prices),  the most recent
      bid price per share of the Common Stock so reported,  or (d) if the shares
      of Common  Stock are not then  publicly  traded the fair market value of a
      share of Common Stock as determined by an appraiser selected in good faith
      by  the   Purchasers  of  a  majority  in  interest  of  the  Shares  then
      outstanding.

                                       1
<PAGE>

            "Commission" means the Securities and Exchange Commission.

            "Common  Stock"  means the common  stock of the  Company,  par value
      $0.01 per  share,  and any  other  class of  securities  into  which  such
      securities may hereafter have been reclassified or changed into.

            "Common Stock  Equivalents"  means any  securities of the Company or
      the Subsidiaries  which would entitle the holder thereof to acquire at any
      time Common Stock,  including,  without  limitation,  any debt,  preferred
      stock, rights,  options,  warrants or other instrument that is at any time
      convertible into or exercisable or exchangeable for, or otherwise entitles
      the holder thereof to receive, Common Stock.

            "Company Counsel" means Bryan Cave LLP.

            "Disclosure Schedules" means the Disclosure Schedules of the Company
      delivered concurrently herewith.

            "Effective  Date"  means  the  date  that the  initial  Registration
      Statement  filed  by  the  Company  pursuant  to the  Registration  Rights
      Agreement is first declared effective by the Commission.

            "Escrow  Agent"  shall  have the  meaning  set  forth in the  Escrow
      Agreement.

            "Escrow  Agreement" shall mean the Escrow Agreement in substantially
      the form of Exhibit B hereto executed and delivered contemporaneously with
      this Agreement.

            "Evaluation  Date" shall have the  meaning  ascribed to such term in
      Section 3.1(r).

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

            "Exempt  Issuance"  means the issuance of (a) shares of Common Stock
      or options to employees,  officers or directors of the Company pursuant to
      any stock or option plan duly  adopted by a majority  of the  non-employee
      members of the Board of  Directors  of the  Company  or a majority  of the
      members of a committee  of  non-employee  directors  established  for such
      purpose,  (b) securities upon the exercise or exchange of or conversion of
      any  Securities   issued  hereunder  and/or   securities   exercisable  or
      exchangeable  for or  convertible  into shares of Common  Stock issued and
      outstanding on the date of this  Agreement,  provided that such securities
      have not been  amended  since the date of this  Agreement  to increase the
      number  of such  securities  or to  decrease  the  exercise,  exchange  or
      conversion  price  of any  such  securities,  and  (c)  securities  issued
      pursuant to  acquisitions  or  strategic  transactions,  provided any such
      issuance  shall  only be to a Person  which  is,  itself  or  through  its
      subsidiaries,  an  operating  company in a business  synergistic  with the
      business  of the Company  and in which the  Company  receives  benefits in
      addition to the  investment of funds,  but shall not include a transaction
      in which the Company is issuing  securities  primarily  for the purpose of
      raising  capital or to an entity  whose  primary  business is investing in
      securities.

                                       2
<PAGE>

            "FW"  means  Feldman  Weinstein  LLP  with  offices  located  at 420
      Lexington Avenue, Suite 2620, New York, New York 10170-0002.

            "GAAP"  shall  have the  meaning  ascribed  to such term in  Section
      3.1(h).

            "Intellectual  Property  Rights" shall have the meaning  ascribed to
      such term in Section 3.1(o).

            "Legend  Removal Date" shall have the meaning  ascribed to such term
      in Section 4.1(c).

            "Liens" means a lien, charge, security interest,  encumbrance, right
      of first refusal, preemptive right or other restriction.

            "Material  Adverse  Effect" shall have the meaning  assigned to such
      term in Section 3.1(b).

            "Material  Permits" shall have the meaning  ascribed to such term in
      Section 3.1(m).

            "Per Share Purchase  Price" equals $3.50,  subject to adjustment for
      reverse and forward stock splits, stock dividends,  stock combinations and
      other similar  transactions  of the Common Stock that occur after the date
      of this Agreement.

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

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

            "Purchaser  Party"  shall have the meaning  ascribed to such term in
      Section 4.9.

            "Registration   Rights  Agreement"  means  the  Registration  Rights
      Agreement, dated the date hereof, among the Company and the Purchasers, in
      the form of Exhibit A attached hereto.

                                       3
<PAGE>

            "Registration  Statement" means a registration statement meeting the
      requirements set forth in the  Registration  Rights Agreement and covering
      the resale by the Purchasers of the Shares and the Warrant Shares.

            "Required Approvals" shall have the meaning ascribed to such term in
      Section 3.1(e).

            "Rule 144" means Rule 144 promulgated by the Commission  pursuant to
      the Securities  Act, as such Rule may be amended from time to time, or any
      similar rule or  regulation  hereafter  adopted by the  Commission  having
      substantially the same effect as such Rule.

            "SEC  Reports"  shall  have the  meaning  ascribed  to such  term in
      Section 3.1(h).

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

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

            "Shareholder Approval" means such approval as may be required by the
      applicable  rules and  regulations of the Nasdaq  SmallCap  Market (or any
      successor entity) from the shareholders of the Company with respect to the
      transactions  contemplated  by the  Transaction  Documents,  including the
      issuance  of all of the Shares and shares of Common  Stock  issuable  upon
      exercise of the Warrants in excess of 19.99% of the issued and outstanding
      Common Stock on the Closing Date.

            "Shares" means the shares of Common Stock issued or issuable to each
      Purchaser pursuant to this Agreement.

            "Short Sales" shall include all "short sales" as defined in Rule 200
      of Regulation SHO under the Exchange Act.

            "Subscription  Amount" means,  as to each  Purchaser,  the aggregate
      amount to be paid for Shares and Warrants purchased hereunder as specified
      below such  Purchaser's  name on the signature  page of this Agreement and
      next to the heading "Subscription Amount", in United States Dollars and in
      immediately available funds.

            "Subsidiary"  means any  subsidiary  of the  Company as set forth on
      Schedule 3.1(a).

            "Trading  Day" means a day on which the Common  Stock is traded on a
      Trading Market.

            "Trading  Market" means the following  markets or exchanges on which
      the Common  Stock is listed or quoted for trading on the date in question:
      the Nasdaq  SmallCap  Market,  the American Stock  Exchange,  the New York
      Stock Exchange, or the Nasdaq National Market.

                                       4
<PAGE>

            "Transaction  Documents"  means this  Agreement,  the Warrants,  the
      Escrow  Agreement  and the  Registration  Rights  Agreement  and any other
      documents  or  agreements  executed in  connection  with the  transactions
      contemplated hereunder.

            "Warrants" means collectively the Common Stock purchase warrants, in
      the form of  Exhibit C  delivered  to the  Purchasers  at the  Closing  in
      accordance with Section 2.2(a) hereof, which Warrants shall be exercisable
      immediately and have a term of exercise equal to 5 years.

            "Warrant  Shares"  means the shares of Common  Stock  issuable  upon
      exercise of the Warrants.

                                  ARTICLE II.
                                PURCHASE AND SALE

      2.1  Closing.  On the  Closing  Date,  upon the terms and  subject  to the
conditions set forth herein,  concurrent with the execution and delivery of this
Agreement by the parties hereto,  the Company agrees to sell, and each Purchaser
agrees to purchase in the aggregate, severally and not jointly, up to $2,500,000
of Shares and  Warrants.  Each  Purchaser  shall deliver to the Company via wire
transfer  or a  certified  check  immediately  available  funds  equal  to their
Subscription  Amount  and the  Company  shall  deliver to each  Purchaser  their
respective Shares and Warrants as determined  pursuant to Section 2.2(a) and the
other items set forth in Section 2.2 issuable at the Closing.  Upon satisfaction
of the  conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at
the  offices of the FW, or such other  location as the  parties  shall  mutually
agree.

      2.2 Deliveries.

            (a) On the Closing  Date,  the Company  shall deliver or cause to be
      delivered  to the  Escrow  Agent for the  benefit  of each  Purchaser  the
      following:

                  (i) this Agreement duly executed by the Company;

                  (ii) a legal opinion of Company Counsel,  in a form reasonably
            satisfactory to the Purchasers;

                  (iii) a copy of the irrevocable  instructions to the Company's
            transfer  agent  instructing  the transfer  agent to deliver,  on an
            expedited  basis, a certificate  evidencing a number of Shares equal
            to such  Purchaser's  Subscription  Amount  divided by the Per Share
            Purchase Price, registered in the name of such Purchaser;

                  (iv) a Warrant  registered  in the name of such  Purchaser  to
            purchase  up to a number of shares of Common  Stock  equal to 40% of
            such  Purchaser's  Subscription  Amount  divided  by $3.50,  with an
            exercise price equal to $5.00, subject to adjustment therein;

                  (v) the Escrow Agreement duly executed by the Company; and

                                       5
<PAGE>

                  (vi) the  Registration  Rights  Agreement duly executed by the
            Company.

            (b) On the Closing Date, each Purchaser shall deliver or cause to be
      delivered  to  the  Escrow  Agent  for  the  benefit  of the  Company  the
      following:

                  (i) this Agreement duly executed by such Purchaser;

                  (ii) such Purchaser's  Subscription Amount by wire transfer to
            the account as specified in writing by the Company;

                  (iii) the Escrow  Agreement  duly executed by such  Purchaser;
            and

                  (iv) the  Registration  Rights Agreement duly executed by such
            Purchaser.

      2.3 Closing Conditions.

            (a) The obligations of the Company  hereunder in connection with the
      Closing are subject to the following conditions being met:

                  (i) the accuracy in all material respects when made and on the
            Closing Date of the representations and warranties of the Purchasers
            contained herein;

                  (ii)  all   obligations,   covenants  and  agreements  of  the
            Purchasers  required to be performed at or prior to the Closing Date
            shall have been performed; and

                  (iii) the delivery by the Purchasers of the items set forth in
            Section 2.2(b) of this Agreement.

            (b)  The  respective  obligations  of the  Purchasers  hereunder  in
      connection with the Closing are subject to the following  conditions being
      met:

                  (i) the accuracy in all material  respects on the Closing Date
            of the  representations  and  warranties  of the  Company  contained
            herein;

                  (ii) all obligations,  covenants and agreements of the Company
            required to be  performed at or prior to the Closing Date shall have
            been performed;

                  (iii) the  delivery  by the  Company of the items set forth in
            Section 2.2(a) of this Agreement;

                  (iv) there  shall have been no  Material  Adverse  Effect with
            respect to the Company since the date hereof; and

                  (v) from the date hereof to the Closing  Date,  trading in the
            Common Stock shall not have been suspended by the Commission (except
            for any suspension of trading of limited  duration  agreed to by the
            Company, which suspension shall be terminated prior to the Closing),
            and, at any time prior to the Closing  Date,  trading in  securities
            generally as reported by Bloomberg  Financial Markets shall not have
            been  suspended  or limited,  or minimum  prices shall not have been
            established on securities whose trades are reported by such service,
            or on any Trading Market,  nor shall a banking  moratorium have been
            declared  either by the United States or New York State  authorities
            nor shall there have occurred any material outbreak or escalation of
            hostilities  or other  national  or  international  calamity of such
            magnitude in its effect on, or any material  adverse  change in, any
            financial market which, in each case, in the reasonable  judgment of
            each Purchaser,  makes it  impracticable  or inadvisable to purchase
            the Shares at the Closing.

                                       6
<PAGE>

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

      3.1  Representations  and  Warranties of the Company.  Except as set forth
under the corresponding  section of the Disclosure  Schedules,  which Disclosure
Schedules  shall  be  deemed  a  part  hereof,  the  Company  hereby  makes  the
representations  and  warranties  set forth below to each  Purchaser,  provided,
however,  that the  Disclosure  Schedules  shall  not be  required  to  disclose
information previously disclosed in SEC Reports (as hereinafter defined):

            (a) Subsidiaries. All of the direct and indirect subsidiaries of the
      Company are set forth on Schedule  3.1(a).  The Company owns,  directly or
      indirectly,  all of the capital  stock or other  equity  interests of each
      Subsidiary free and clear of any Liens, and all the issued and outstanding
      shares of capital  stock of each  Subsidiary  are  validly  issued and are
      fully paid,  non-assessable  and free of preemptive  and similar rights to
      subscribe for or purchase securities.  If the Company has no subsidiaries,
      then references in the Transaction  Documents to the Subsidiaries  will be
      disregarded.

            (b)  Organization  and  Qualification.  The  Company and each of the
      Subsidiaries  is an  entity  duly  incorporated  or  otherwise  organized,
      validly  existing and in good standing under the laws of the  jurisdiction
      of its  incorporation or organization (as applicable),  with the requisite
      power and authority to own and use its  properties and assets and to carry
      on its  business  as  currently  conducted.  Neither  the  Company nor any
      Subsidiary  is in  violation  or default of any of the  provisions  of its
      respective  certificate  or  articles  of  incorporation,  bylaws or other
      organizational  or  charter  documents.   Each  of  the  Company  and  the
      Subsidiaries is duly qualified to conduct business and is in good standing
      as a foreign corporation or other entity in each jurisdiction in which the
      nature  of the  business  conducted  or  property  owned by it makes  such
      qualification necessary, except where the failure to be so qualified or in
      good  standing,  as the  case may be,  could  not  have or  reasonably  be
      expected  to  result in (i) a  material  adverse  effect on the  legality,
      validity or  enforceability of any Transaction  Document,  (ii) a material
      adverse effect on the results of operations,  assets, business,  prospects
      or condition (financial or otherwise) of the Company and the Subsidiaries,
      taken as a whole,  or (iii) a  material  adverse  effect on the  Company's
      ability  to  perform  in  any  material  respect  on a  timely  basis  its
      obligations  under any Transaction  Document (any of (i), (ii) or (iii), a
      "Material  Adverse  Effect") and no Proceeding has been  instituted in any
      such jurisdiction  revoking,  limiting or curtailing or seeking to revoke,
      limit or curtail such power and authority or qualification.

                                       7
<PAGE>

            (c)  Authorization;  Enforcement.  The  Company  has  the  requisite
      corporate  power  and  authority  to  enter  into  and to  consummate  the
      transactions  contemplated  by  each  of  the  Transaction  Documents  and
      otherwise  to carry out its  obligations  hereunder  and  thereunder.  The
      execution and delivery of each of the Transaction Documents by the Company
      and the consummation by it of the transactions  contemplated  thereby have
      been duly  authorized by all  necessary  action on the part of the Company
      and no further  action is required by the Company,  its board of directors
      or its stockholders in connection  therewith other than in connection with
      the  Required  Approvals.  Each  Transaction  Document  has  been (or upon
      delivery will have been) duly executed by the Company and, when  delivered
      in accordance with the terms hereof and thereof, will constitute the valid
      and binding obligation of the Company  enforceable  against the Company in
      accordance with its terms except (i) as limited by applicable  bankruptcy,
      insolvency,   reorganization,   moratorium   and  other  laws  of  general
      application  affecting enforcement of creditors' rights generally and (ii)
      as limited by laws relating to the  availability of specific  performance,
      injunctive relief or other equitable remedies.

            (d) No Conflicts.  The  execution,  delivery and  performance of the
      Transaction  Documents by the Company, the issuance and sale of the Shares
      and the consummation by the Company of the other transactions contemplated
      hereby and  thereby do not and will not (i)  conflict  with or violate any
      provision of the Company's or any Subsidiary's  certificate or articles of
      incorporation,  bylaws or other  organizational or charter  documents,  or
      (ii) conflict  with, or constitute a default (or an event that with notice
      or lapse of time or both  would  become a  default)  under,  result in the
      creation of any Lien upon any of the  properties  or assets of the Company
      or any Subsidiary, or give to others any rights of termination, amendment,
      acceleration  or cancellation  (with or without  notice,  lapse of time or
      both)  of,  any  agreement,  credit  facility,  debt or  other  instrument
      (evidencing  a  Company  or   Subsidiary   debt  or  otherwise)  or  other
      understanding  to which the  Company  or any  Subsidiary  is a party or by
      which any property or asset of the Company or any  Subsidiary  is bound or
      affected,  or (iii)  subject to the Required  Approvals,  conflict with or
      result in a  violation  of any law,  rule,  regulation,  order,  judgment,
      injunction,  decree  or other  restriction  of any  court or  governmental
      authority  to which the  Company or a  Subsidiary  is  subject  (including
      federal  and  state  securities  laws and  regulations),  or by which  any
      property or asset of the  Company or a  Subsidiary  is bound or  affected;
      except in the case of each of clauses  (ii) and  (iii),  such as could not
      have or reasonably be expected to result in a Material Adverse Effect.

            (e) Filings,  Consents and Approvals. The Company is not required to
      obtain any consent, waiver, authorization or order of, give any notice to,
      or make any  filing or  registration  with,  any  court or other  federal,
      state, local or other governmental authority or other Person in connection
      with  the  execution,  delivery  and  performance  by the  Company  of the
      Transaction Documents, other than (i) filings required pursuant to Section
      4.4 of  this  Agreement,  (ii)  the  filing  with  the  Commission  of the
      Registration  Statement,  (iii)  application(s) to each applicable Trading
      Market  for the  listing  of the Shares  and  Warrant  Shares for  trading
      thereon in the time and manner required thereby, (iv) the filing of Form D
      with the  Commission  and such  filings as are  required  to be made under
      applicable   state   securities   laws   and  (v)   Shareholder   Approval
      (collectively, the "Required Approvals").

                                       8
<PAGE>

            (f) Issuance of the  Securities.  The Securities are duly authorized
      and,  when  issued  and  paid  for  in  accordance   with  the  applicable
      Transaction  Documents,  will be duly and validly  issued,  fully paid and
      nonassessable,  free and clear of all Liens  imposed by the Company  other
      than restrictions on transfer  provided for in the Transaction  Documents.
      The  Warrant  Shares,  when  issued  in  accordance  with the terms of the
      Transaction   Documents,   will  be   validly   issued,   fully  paid  and
      nonassessable,  free and clear of all Liens  imposed by the  Company.  The
      Company has reserved  from its duly  authorized  capital stock the maximum
      number of shares of Common Stock  issuable  pursuant to this Agreement and
      the Warrants.

            (g)  Capitalization.  The  capitalization  of the  Company is as set
      forth on Schedule  3.1(g).  The  Company has not issued any capital  stock
      since its most  recently  filed  periodic  report under the Exchange  Act,
      other than  pursuant to the exercise of employee  stock  options under the
      Company's  stock option  plans,  the issuance of shares of Common Stock to
      employees  pursuant to the  Company's  employee  stock  purchase  plan and
      pursuant  to the  conversion  or  exercise  of  outstanding  Common  Stock
      Equivalents.  No Person has any right of first refusal,  preemptive right,
      right  of  participation,  or any  similar  right  to  participate  in the
      transactions contemplated by the Transaction Documents. Except as a result
      of the  purchase  and sale of the  Securities,  there  are no  outstanding
      options,  warrants, script rights to subscribe to, calls or commitments of
      any character whatsoever relating to, or securities, rights or obligations
      convertible into or exercisable or exchangeable  for, or giving any Person
      any right to  subscribe  for or acquire,  any shares of Common  Stock,  or
      contracts,  commitments,  understandings  or  arrangements  by  which  the
      Company  or any  Subsidiary  is or may  become  bound to issue  additional
      shares of Common Stock or Common Stock Equivalents.  The issuance and sale
      of the Securities  will not obligate the Company to issue shares of Common
      Stock or other  securities to any Person (other than the  Purchasers)  and
      will not result in a right of any holder of Company  securities  to adjust
      the exercise,  conversion,  exchange or reset price under such securities.
      All of the outstanding  shares of capital stock of the Company are validly
      issued, fully paid and nonassessable,  have been issued in compliance with
      all federal and state securities laws, and none of such outstanding shares
      was issued in  violation  of any  preemptive  rights or similar  rights to
      subscribe for or purchase securities. No further approval or authorization
      of any  stockholder,  the Board of  Directors  of the Company or others is
      required  for the  issuance  and  sale  of the  Securities.  There  are no
      stockholders  agreements,  voting  agreements or other similar  agreements
      with  respect to the  Company's  capital  stock to which the  Company is a
      party or, to the  knowledge  of the  Company,  between or among any of the
      Company's stockholders.

                                       9
<PAGE>

            (h) SEC  Reports;  Financial  Statements.  The Company has filed all
      reports,  schedules,  forms, statements and other documents required to be
      filed by it under  the  Securities  Act and the  Exchange  Act,  including
      pursuant to Section 13(a) or 15(d)  thereof,  for the two years  preceding
      the date hereof (or such shorter period as the Company was required by law
      to file such material) (the  foregoing  materials,  including the exhibits
      thereto  and   documents   incorporated   by  reference   therein,   being
      collectively referred to herein as the "SEC Reports") on a timely basis or
      has  received a valid  extension  of such time of filing and has filed any
      such SEC Reports  prior to the  expiration  of any such  extension.  As of
      their respective  dates, the SEC Reports complied in all material respects
      with the  requirements  of the Securities Act and the Exchange Act and the
      rules and regulations of the Commission promulgated  thereunder,  and none
      of the SEC  Reports,  when  filed,  contained  any untrue  statement  of a
      material  fact or omitted 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.  The
      financial  statements of the Company included in the SEC Reports comply in
      all material  respects with  applicable  accounting  requirements  and the
      rules and  regulations of the Commission with respect thereto as in effect
      at the time of filing.  Such  financial  statements  have been prepared in
      accordance with United States  generally  accepted  accounting  principles
      applied on a consistent basis during the periods involved ("GAAP"), except
      as may be otherwise  specified in such  financial  statements or the notes
      thereto and except that unaudited financial statements may not contain all
      footnotes  required by GAAP, and fairly  present in all material  respects
      the financial position of the Company and its consolidated subsidiaries as
      of and for the dates thereof and the results of operations  and cash flows
      for the periods then ended,  subject, in the case of unaudited statements,
      to normal, immaterial, year-end audit adjustments.

            (i) Material Changes. Since the date of the latest audited financial
      statements  included  within  the  SEC  Reports,  except  as  specifically
      disclosed in the SEC Reports,  (i) there has been no event,  occurrence or
      development that has had or that could reasonably be expected to result in
      a  Material  Adverse  Effect,  (ii)  the  Company  has  not  incurred  any
      liabilities  (contingent  or otherwise)  other than (A) trade payables and
      accrued  expenses  incurred in the ordinary course of business  consistent
      with past practice and (B) liabilities not required to be reflected in the
      Company's  financial  statements  pursuant  to  GAAP  or  required  to  be
      disclosed in filings made with the  Commission,  (iii) the Company has not
      altered its method of  accounting,  (iv) the  Company has not  declared or
      made  any  dividend  or  distribution  of cash or  other  property  to its
      stockholders or purchased,  redeemed or made any agreements to purchase or
      redeem any shares of its capital  stock and (v) the Company has not issued
      any equity  securities  to any  officer,  director  or  Affiliate,  except
      pursuant to existing Company stock option plans. The Company does not have
      pending before the Commission  any request for  confidential  treatment of
      information.

            (j)  Litigation.  There  is no  action,  suit,  inquiry,  notice  of
      violation, proceeding or investigation pending or, to the knowledge of the
      Company,  threatened  against or affecting the Company,  any Subsidiary or
      any of their  respective  properties  before or by any court,  arbitrator,
      governmental or administrative  agency or regulatory  authority  (federal,
      state,  county,  local or foreign)  (collectively,  an "Action") which (i)
      adversely  affects or challenges the legality,  validity or enforceability
      of any of the  Transaction  Documents or the Securities or (ii) could,  if
      there were an  unfavorable  decision,  have or  reasonably  be expected to
      result  in  a  Material  Adverse  Effect.  Neither  the  Company  nor  any
      Subsidiary,  nor any  director  or  officer  thereof,  is or has  been the
      subject of any Action involving a claim of violation of or liability under
      federal or state  securities  laws or a claim of breach of fiduciary duty.
      There has not been,  and to the  knowledge  of the  Company,  there is not
      pending or contemplated, any investigation by the Commission involving the
      Company or any current or former  director or officer of the Company.  The
      Commission  has not issued any stop order or other  order  suspending  the
      effectiveness  of any  registration  statement filed by the Company or any
      Subsidiary under the Exchange Act or the Securities Act.

                                       10
<PAGE>

            (k) Labor  Relations.  No material  labor dispute  exists or, to the
      knowledge of the Company, is imminent with respect to any of the employees
      of the Company which could  reasonably be expected to result in a Material
      Adverse Effect.

            (l)  Compliance.  Neither the Company nor any  Subsidiary  (i) is in
      default  under or in violation of (and no event has occurred  that has not
      been waived that, with notice or lapse of time or both,  would result in a
      default by the Company or any  Subsidiary  under),  nor has the Company or
      any Subsidiary  received  notice of a claim that it is in default under or
      that it is in violation of, any indenture, loan or credit agreement or any
      other agreement or instrument to which it is a party or by which it or any
      of its  properties is bound  (whether or not such default or violation has
      been waived),  (ii) is in violation of any order of any court,  arbitrator
      or governmental body, or (iii) is or has been in violation of any statute,
      rule  or  regulation  of any  governmental  authority,  including  without
      limitation all foreign,  federal,  state and local laws  applicable to its
      business except in each case as could not have a Material Adverse Effect.

            (m) Regulatory Permits. The Company and the Subsidiaries possess all
      certificates,   authorizations  and  permits  issued  by  the  appropriate
      federal,  state,  local or foreign  regulatory  authorities  necessary  to
      conduct  their  respective  businesses  as  described  in the SEC Reports,
      except  where  the  failure  to  possess  such  permits  could not have or
      reasonably be expected to result in a Material  Adverse Effect  ("Material
      Permits"),  and neither the Company nor any  Subsidiary  has  received any
      notice of proceedings  relating to the revocation or  modification  of any
      Material Permit.

            (n) Title to Assets.  The Company and the Subsidiaries have good and
      marketable  title in fee simple to all real property owned by them that is
      material to the business of the Company and the  Subsidiaries and good and
      marketable  title in all personal  property owned by them that is material
      to the business of the Company and the Subsidiaries, in each case free and
      clear of all Liens, except for Liens as do not materially affect the value
      of such  property and do not  materially  interfere  with the use made and
      proposed to be made of such  property by the Company and the  Subsidiaries
      and Liens for the payment of federal, state or other taxes, the payment of
      which is neither  delinquent  nor subject to penalties.  Any real property
      and facilities  held under lease by the Company and the  Subsidiaries  are
      held by them under valid,  subsisting and enforceable  leases of which the
      Company and the Subsidiaries are in compliance.

            (o) Patents and Trademarks.  The Company and the Subsidiaries  have,
      or have  rights to use,  all  patents,  patent  applications,  trademarks,
      trademark applications,  service marks, trade names, copyrights,  licenses
      and other similar rights  necessary or material for use in connection with
      their respective  businesses as described in the SEC Reports and which the
      failure to so have could have a Material Adverse Effect (collectively, the
      "Intellectual  Property  Rights").  Neither the Company nor any Subsidiary
      has received a written notice that the  Intellectual  Property Rights used
      by the Company or any Subsidiary  violates or infringes upon the rights of
      any  Person.  To the  knowledge  of the  Company,  all  such  Intellectual
      Property Rights are  enforceable and there is no existing  infringement by
      another Person of any of the Intellectual Property Rights of others.

                                       11
<PAGE>

            (p)  Insurance.  The  Company  and the  Subsidiaries  are insured by
      insurers of recognized  financial  responsibility  against such losses and
      risks and in such  amounts  as  management  of the  Company  believes  are
      prudent  and  customary  in the  businesses  in which the  Company and the
      Subsidiaries  are engaged,  including,  but not limited to,  directors and
      officers insurance  coverage at least equal to the aggregate  Subscription
      Amount. To the best knowledge of the Company, such insurance contracts and
      policies are accurate and complete. Neither the Company nor any Subsidiary
      has any reason to believe  that it will not be able to renew its  existing
      insurance  coverage as and when such coverage expires or to obtain similar
      coverage  from  similar  insurers  as may be  necessary  to  continue  its
      business without a significant increase in cost.

            (q) Transactions With Affiliates and Employees.  Except as set forth
      in the SEC Reports,  none of the officers or directors of the Company and,
      to the  knowledge of the Company,  none of the employees of the Company is
      presently a party to any  transaction  with the Company or any  Subsidiary
      (other than for services as employees, officers and directors),  including
      any contract,  agreement or other arrangement providing for the furnishing
      of services to or by, providing for rental of real or personal property to
      or from, or otherwise requiring payments to or from any officer,  director
      or such employee or, to the knowledge of the Company,  any entity in which
      any officer,  director, or any such employee has a substantial interest or
      is an officer,  director,  trustee or  partner,  in each case in excess of
      $60,000  other  than (i) for  payment  of  salary or  consulting  fees for
      services  rendered,  (ii) reimbursement for expenses incurred on behalf of
      the Company and (iii) for other employee benefits,  including stock option
      agreements under any stock option plan of the Company.

            (r) Sarbanes-Oxley;  Internal Accounting Controls. The Company is in
      material  compliance with all provisions of the Sarbanes-Oxley Act of 2002
      which are  applicable  to it as of the Closing  Date.  The Company and the
      Subsidiaries  maintain a system of internal accounting controls sufficient
      to provide  reasonable  assurance  that (i)  transactions  are executed in
      accordance  with  management's  general or specific  authorizations,  (ii)
      transactions are recorded as necessary to permit  preparation of financial
      statements in conformity  with GAAP and to maintain asset  accountability,
      (iii) access to assets is permitted only in accordance  with  management's
      general or specific  authorization,  and (iv) the recorded  accountability
      for assets is compared with the existing  assets at  reasonable  intervals
      and  appropriate  action is taken  with  respect to any  differences.  The
      Company has established  disclosure controls and procedures (as defined in
      Exchange Act Rules  13a-15(e) and  15d-15(e)) for the Company and designed
      such   disclosure   controls  and   procedures  to  ensure  that  material
      information relating to the Company,  including its Subsidiaries,  is made
      known  to  the  certifying  officers  by  others  within  those  entities,
      particularly  during the period in which the Company's most recently filed
      periodic  report  under  the  Exchange  Act,  as the case may be, is being
      prepared.   The  Company's   certifying   officers   have   evaluated  the
      effectiveness  of the  Company's  controls and  procedures  as of the date
      prior to the filing date of the most recently filed periodic  report under
      the Exchange Act (such date, the "Evaluation Date"). The Company presented
      in its most  recently  filed  periodic  report  under the Exchange Act the
      conclusions of the  certifying  officers  about the  effectiveness  of the
      disclosure  controls and procedures  based on their  evaluations as of the
      Evaluation Date. Since the Evaluation Date, there have been no significant
      changes in the  Company's  internal  controls  (as such term is defined in
      Item 307(b) of Regulation S-K under the Exchange Act) or, to the knowledge
      of the  Company,  in other  factors  that could  significantly  affect the
      Company's internal controls.

                                       12
<PAGE>

            (s) Certain Fees. No brokerage or finder's fees or  commissions  are
      or will be payable  by the  Company to any  broker,  financial  advisor or
      consultant,  finder,  placement agent,  investment  banker,  bank or other
      Person with respect to the  transactions  contemplated  by the Transaction
      Documents.  The  Purchasers  shall have no obligation  with respect to any
      fees or with  respect to any claims made by or on behalf of other  Persons
      for  fees  of a type  contemplated  in  this  Section  that  may be due in
      connection   with  the   transactions   contemplated  by  the  Transaction
      Documents.

            (t) Private  Placement.  Assuming  the  accuracy  of the  Purchasers
      representations  and warranties set forth in Section 3.2, no  registration
      under  the  Securities  Act is  required  for the  offer  and  sale of the
      Securities by the Company to the Purchasers as  contemplated  hereby.  The
      issuance and sale of the  Securities  hereunder  does not  contravene  the
      rules and regulations of the Trading Market.

            (u) Investment Company.  The Company is not, and is not an Affiliate
      of, and immediately after receipt of payment for the Securities,  will not
      be or be an Affiliate of, an  "investment  company"  within the meaning of
      the Investment Company Act of 1940, as amended.  The Company shall conduct
      its  business  in a  manner  so that it will  not  become  subject  to the
      Investment Company Act.

            (v)  Registration  Rights.  Other  than each of the  Purchasers,  no
      Person has any right to cause the Company to effect the registration under
      the Securities Act of any securities of the Company.

            (w) Listing and Maintenance Requirements. The Company's Common Stock
      is  registered  pursuant to Section  12(g) of the  Exchange  Act,  and the
      Company  has taken no action  designed  to, or which to its  knowledge  is
      likely to have the effect of,  terminating the  registration of the Common
      Stock under the Exchange Act nor has the Company received any notification
      that the Commission is contemplating  terminating such  registration.  The
      Company  has not, in the 12 months  preceding  the date  hereof,  received
      notice  from any Trading  Market on which the Common  Stock is or has been
      listed or quoted to the effect that the Company is not in compliance  with
      the  listing or  maintenance  requirements  of such  Trading  Market.  The
      Company  is,  and  has no  reason  to  believe  that  it  will  not in the
      foreseeable future continue to be, in compliance with all such listing and
      maintenance requirements.

                                       13
<PAGE>

            (x) Application of Takeover  Protections.  The Company and its Board
      of Directors have taken all necessary  action,  if any, in order to render
      inapplicable any control share acquisition,  business combination,  poison
      pill  (including  any  distribution  under a  rights  agreement)  or other
      similar  anti-takeover   provision  under  the  Company's  Certificate  of
      Incorporation  (or similar charter  documents) or the laws of its state of
      incorporation  that is or could become  applicable to the  Purchasers as a
      result of the Purchasers and the Company  fulfilling their  obligations or
      exercising their rights under the Transaction Documents, including without
      limitation as a result of the Company's issuance of the Securities and the
      Purchasers' ownership of the Securities.

            (y) Disclosure.  The Company confirms that, neither it nor any other
      Person  acting on its behalf has provided any of the  Purchasers  or their
      agents  or  counsel  with  any  information   that  constitutes  or  might
      constitute material,  non-public information.  The Company understands and
      confirms that the  Purchasers  will rely on the foregoing  representations
      and covenants in effecting  transactions in securities of the Company. All
      disclosure provided to the Purchasers  regarding the Company, its business
      and  the  transactions   contemplated  hereby,  including  the  Disclosure
      Schedules to this Agreement, furnished by or on behalf of the Company with
      respect to the  representations  and  warranties  made herein are true and
      correct with respect to such  representations  and  warranties  and do not
      contain  any  untrue  statement  of a  material  fact or omit to state any
      material fact necessary in order to make the statements  made therein,  in
      light of the circumstances under which they were made, not misleading. The
      Company  acknowledges  and agrees that no Purchaser  makes or has made any
      representations   or   warranties   with   respect  to  the   transactions
      contemplated hereby other than those specifically set forth in Section 3.2
      hereof.

            (z) No Integrated Offering. Assuming the accuracy of the Purchasers'
      representations  and  warranties  set forth in Section  3.2,  neither  the
      Company, nor any of its affiliates,  nor any Person acting on its or their
      behalf  has,  directly  or  indirectly,  made any  offers  or sales of any
      security or solicited any offers to buy any security,  under circumstances
      that would cause this offering of the  Securities  to be  integrated  with
      prior  offerings by the Company for purposes of the  Securities Act or any
      applicable shareholder approval provisions, including, without limitation,
      under the rules and  regulations of any Trading Market on which any of the
      securities of the Company are listed or designated.

                                       14
<PAGE>

            (aa) Solvency. Based on the financial condition of the Company as of
      the Closing Date after giving  effect to the receipt by the Company of the
      proceeds from the sale of the Securities hereunder, (i) the Company's fair
      saleable  value of its assets  exceeds the amount that will be required to
      be paid  on or in  respect  of the  Company's  existing  debts  and  other
      liabilities (including known contingent  liabilities) as they mature; (ii)
      the Company's assets do not constitute unreasonably small capital to carry
      on its  business  for the  current  fiscal  year as now  conducted  and as
      proposed to be conducted  including  its capital needs taking into account
      the  particular  capital  requirements  of the  business  conducted by the
      Company,  and  projected  capital  requirements  and capital  availability
      thereof; and (iii) the current cash flow of the Company, together with the
      proceeds  the  Company  would  receive,  were it to  liquidate  all of its
      assets,  after taking into account all anticipated uses of the cash, would
      be  sufficient  to pay all  amounts on or in respect of its debt when such
      amounts  are  required to be paid.  The  Company  does not intend to incur
      debts  beyond its  ability to pay such debts as they mature  (taking  into
      account  the timing and  amounts of cash to be payable on or in respect of
      its debt).  The Company  has no  knowledge  of any facts or  circumstances
      which  lead  it to  believe  that  it  will  file  for  reorganization  or
      liquidation   under  the   bankruptcy  or   reorganization   laws  of  any
      jurisdiction  within one year from the Closing  Date.  The SEC Reports set
      forth as of the  dates  thereof  all  outstanding  secured  and  unsecured
      Indebtedness of the Company or any Subsidiary, or for which the Company or
      any  Subsidiary  has  commitments.  For the  purposes  of this  Agreement,
      "Indebtedness"  shall  mean  (a) any  liabilities  for  borrowed  money or
      amounts  owed in excess of  $50,000  (other  than trade  accounts  payable
      incurred  in  the  ordinary  course  of  business),  (b)  all  guaranties,
      endorsements and other  contingent  obligations in respect of Indebtedness
      of  others,  whether  or not the same are or  should be  reflected  in the
      Company's  balance  sheet (or the notes  thereto),  except  guaranties  by
      endorsement of negotiable instruments for deposit or collection or similar
      transactions in the ordinary course of business; and (c) the present value
      of any lease payments in excess of $50,000 due under leases required to be
      capitalized  in  accordance  with  GAAP.   Neither  the  Company  nor  any
      Subsidiary is in default with respect to any Indebtedness.

            (bb) Tax Status.  Except for matters that would not, individually or
      in the  aggregate,  have or reasonably be expected to result in a Material
      Adverse  Effect,  the Company and each  Subsidiary has filed all necessary
      federal,  state and foreign  income and franchise tax returns and has paid
      or  accrued  all  taxes  shown  as due  thereon,  and the  Company  has no
      knowledge  of a tax  deficiency  which  has been  asserted  or  threatened
      against the Company or any Subsidiary.

            (cc) No General  Solicitation.  Neither  the  Company nor any person
      acting on behalf of the Company has offered or sold any of the  Securities
      by any form of general  solicitation or general  advertising.  The Company
      has offered the  Securities  for sale only to the  Purchasers  and certain
      other  "accredited  investors"  within  the  meaning of Rule 501 under the
      Securities Act.

            (dd) Foreign  Corrupt  Practices.  Neither the  Company,  nor to the
      knowledge  of the Company,  any agent or other person  acting on behalf of
      the Company,  has (i) directly or indirectly,  used any funds for unlawful
      contributions,  gifts, entertainment or other unlawful expenses related to
      foreign or domestic political activity,  (ii) made any unlawful payment to
      foreign or domestic government officials or employees or to any foreign or
      domestic political parties or campaigns from corporate funds, (iii) failed
      to  disclose  fully any  contribution  made by the Company (or made by any
      person  acting on its behalf of which the  Company  is aware)  which is in
      violation of law, or (iv)  violated in any material  respect any provision
      of the Foreign Corrupt Practices Act of 1977, as amended.

                                       15
<PAGE>

            (ee)  Accountants.  The  Company's  accountants  are  set  forth  on
      Schedule  3.1(ff) of the  Disclosure  Schedule.  To the  knowledge  of the
      Company,  such  accountants,  who the Company  expects will express  their
      opinion with  respect to the  financial  statements  to be included in the
      Company's  Annual  Report on Form 10-K for the year  ending  December  31,
      2005,  are  a  registered  public  accounting  firm  as  required  by  the
      Securities Act.

            (ff) Acknowledgment  Regarding  Purchasers'  Purchase of Securities.
      The Company  acknowledges and agrees that each of the Purchasers is acting
      solely in the  capacity of an arm's length  purchaser  with respect to the
      Transaction  Documents  and  the  transactions  contemplated  hereby.  The
      Company  further  acknowledges  that no Purchaser is acting as a financial
      advisor or  fiduciary  of the Company (or in any  similar  capacity)  with
      respect to this Agreement and the transactions contemplated hereby and any
      advice given by any Purchaser or any of their  respective  representatives
      or  agents  in  connection  with  this  Agreement  and  the   transactions
      contemplated  hereby is merely  incidental to the Purchasers'  purchase of
      the Securities.  The Company further represents to each Purchaser that the
      Company's  decision to enter into this  Agreement has been based solely on
      the independent evaluation of the transactions  contemplated hereby by the
      Company and its representatives.

            (gg)   Acknowledgement   Regarding   Purchasers'  Trading  Activity.
      Anything  in  this   Agreement  or   elsewhere   herein  to  the  contrary
      notwithstanding  (except for Section 4.15 hereof),  it is  understood  and
      agreed by the Company (i) that none of the  Purchasers  have been asked to
      agree, nor has any Purchaser agreed, to desist from purchasing or selling,
      long and/or short,  securities of the Company, or "derivative"  securities
      based on securities  issued by the Company or to hold the  Securities  for
      any  specified  term;  (ii)  that  past or  future  open  market  or other
      transactions  by any Purchaser,  including Short Sales,  and  specifically
      including,  without limitation,  Short Sales or "derivative" transactions,
      before  or  after  the  closing  of  this  or  future  private   placement
      transactions,  may  negatively  impact the market  price of the  Company's
      publicly-traded securities;  (iii) that any Purchaser, and counter parties
      in  "derivative"  transactions  to which  any such  Purchaser  is a party,
      directly  or  indirectly,  presently  may have a "short"  position  in the
      Common Stock, and (iv) that each Purchaser shall not be deemed to have any
      affiliation  with or control  over any arm's length  counter-party  in any
      "derivative" transaction. The Company further understands and acknowledges
      that (a) one or more  Purchasers  may  engage  in  hedging  activities  at
      various  times  during the period  that the  Securities  are  outstanding,
      including,  without  limitation,  during the periods that the value of the
      Warrant Shares deliverable with respect to Securities are being determined
      and (b) such  hedging  activities  (if any) could  reduce the value of the
      existing  stockholders'  equity  interests in the Company at and after the
      time  that  the  hedging  activities  are  being  conducted.  The  Company
      acknowledges that such aforementioned hedging activities do not constitute
      a breach of any of the Transaction Documents.

            (hh)  Manipulation  of  Price.  The  Company  has  not,  and  to its
      knowledge  no one  acting  on its  behalf  has,  (i)  taken,  directly  or
      indirectly, any action designed to cause or to result in the stabilization
      or  manipulation of the price of any security of the Company to facilitate
      the  sale  or  resale  of any of  the  Securities,  (ii)  sold,  bid  for,
      purchased,  or, paid any compensation for soliciting  purchases of, any of
      the  Securities  (other than for the  placement  agent's  placement of the
      Securities), or (iii) paid or agreed to pay to any person any compensation
      for soliciting another to purchase any other securities of the Company.

                                       16
<PAGE>

      3.2  Representations  and  Warranties of the  Purchasers.  Each  Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:

            (a)  Organization;  Authority.  Such  Purchaser  is an  entity  duly
      organized,  validly  existing and in good  standing  under the laws of the
      jurisdiction of its organization with full right, corporate or partnership
      power and  authority  to enter  into and to  consummate  the  transactions
      contemplated by the  Transaction  Documents and otherwise to carry out its
      obligations  hereunder  and  thereunder.   The  execution,   delivery  and
      performance by such  Purchaser of the  transactions  contemplated  by this
      Agreement have been duly authorized by all necessary  corporate or similar
      action on the part of such Purchaser.  Each Transaction  Document to which
      it is a party has been duly executed by such Purchaser, and when delivered
      by such Purchaser in accordance with the terms hereof, will constitute the
      valid  and  legally  binding  obligation  of such  Purchaser,  enforceable
      against it in accordance with its terms,  except (i) as limited by general
      equitable    principles    and    applicable    bankruptcy,    insolvency,
      reorganization, moratorium and other laws of general application affecting
      enforcement  of  creditors'  rights  generally,  (ii) as  limited  by laws
      relating to the availability of specific performance, injunctive relief or
      other  equitable  remedies  and  (iii)  insofar  as  indemnification   and
      contribution provisions may be limited by applicable law.

            (b) Own Account.  Such Purchaser understands that the Securities are
      "restricted  securities" and have not been registered under the Securities
      Act or any applicable state securities law and is acquiring the Securities
      as  principal  for  its  own  account  and  not  with  a  view  to or  for
      distributing or reselling such Securities or any part thereof in violation
      of the  Securities  Act or any  applicable  state  securities  law, has no
      present  intention of distributing  any of such Securities in violation of
      the  Securities  Act or any  applicable  state  securities  law and has no
      arrangement  or  understanding   with  any  other  persons  regarding  the
      distribution  of such  Securities  (this  representation  and warranty not
      limiting such  Purchaser's  right to sell the  Securities  pursuant to the
      Registration  Statement or otherwise in compliance with applicable federal
      and state  securities  laws) in  violation  of the  Securities  Act or any
      applicable   state   securities  law.  Such  Purchaser  is  acquiring  the
      Securities  hereunder  in  the  ordinary  course  of  its  business.  Such
      Purchaser  does not have  any  agreement  or  understanding,  directly  or
      indirectly, with any Person to distribute any of the Securities.

            (c)  Purchaser  Status.  At the time such  Purchaser was offered the
      Securities,  it was,  and at the date  hereof  it is,  and on each date on
      which it exercises any  Warrants,  it will be either:  (i) an  "accredited
      investor" as defined in Rule 501(a)(1),  (a)(2),  (a)(3), (a)(7) or (a)(8)
      under the  Securities  Act or (ii) a  "qualified  institutional  buyer" as
      defined in Rule 144A(a) under the  Securities  Act. Such  Purchaser is not
      required  to be  registered  as a  broker-dealer  under  Section 15 of the
      Exchange Act.

                                       17
<PAGE>

            (d) Experience of Such Purchaser.  Such  Purchaser,  either alone or
      together with its representatives,  has such knowledge, sophistication and
      experience  in  business  and  financial  matters  so as to be  capable of
      evaluating  the  merits  and risks of the  prospective  investment  in the
      Securities,  and has so evaluated the merits and risks of such investment.
      Such  Purchaser is able to bear the economic  risk of an investment in the
      Securities  and, at the present time, is able to afford a complete loss of
      such investment.

            (e) General  Solicitation.  Such  Purchaser  is not  purchasing  the
      Securities  as a result  of any  advertisement,  article,  notice or other
      communication   regarding  the  Securities  published  in  any  newspaper,
      magazine  or  similar  media  or  broadcast  over  television  or radio or
      presented  at any  seminar or any other  general  solicitation  or general
      advertisement.

            (f) Short Sales and Confidentiality  Prior To The Date Hereof. Other
      than  the  transaction  contemplated  hereunder,  such  Purchaser  has not
      directly or indirectly, nor has any Person acting on behalf of or pursuant
      to any  understanding  with  such  Purchaser,  executed  any  disposition,
      including Short Sales (but not including the location  and/or  reservation
      of borrowable  shares of Common  Stock),  in the securities of the Company
      during  the  period  commencing  from the time that such  Purchaser  first
      received a term sheet from the Company or any other Person  setting  forth
      the material terms of the  transactions  contemplated  hereunder until the
      date hereof ("Discussion  Time").  Notwithstanding  the foregoing,  in the
      case of a Purchaser that is a  multi-managed  investment  vehicle  whereby
      separate  portfolio  managers manage separate portions of such Purchaser's
      assets  and  the  portfolio  managers  have  no  direct  knowledge  of the
      investment  decisions  made  by  the  portfolio  managers  managing  other
      portions of such Purchaser's  assets,  the  representation set forth above
      shall  only apply with  respect  to the  portion of assets  managed by the
      portfolio  manager  that made the  investment  decision  to  purchase  the
      Securities covered by this Agreement. Other than to other Persons party to
      this Agreement,  such Purchaser has maintained the  confidentiality of all
      disclosures made to it in connection with this transaction  (including the
      existence and terms of this transaction).

      The Company  acknowledges  and agrees that each Purchaser does not make or
has not made any  representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 3.2.

                                  ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

      4.1 Transfer Restrictions.

            (a) The Securities may only be disposed of in compliance  with state
      and federal securities laws. In connection with any transfer of Securities
      other than pursuant to an effective registration statement or Rule 144, to
      the Company or to an  affiliate  of a Purchaser  or in  connection  with a
      pledge as  contemplated  in Section  4.1(b),  the  Company may require the
      transferor  thereof  to  provide  to the  Company  an  opinion  of counsel
      selected by the transferor and reasonably  acceptable to the Company,  the
      form and substance of which opinion  shall be reasonably  satisfactory  to
      the  Company,   to  the  effect  that  such   transfer  does  not  require
      registration of such transferred Securities under the Securities Act. As a
      condition of transfer,  any such  transferee  shall agree in writing to be
      bound by the  terms of this  Agreement  and  shall  have the  rights  of a
      Purchaser under this Agreement and the Registration Rights Agreement.

                                       18
<PAGE>

            (b) The Purchasers  agree to the imprinting,  so long as is required
      by this  Section  4.1(b),  of a  legend  on any of the  Securities  in the
      following form:

            THESE  SECURITIES  HAVE NOT BEEN  REGISTERED WITH THE SECURITIES AND
            EXCHANGE  COMMISSION  OR THE  SECURITIES  COMMISSION OF ANY STATE IN
            RELIANCE UPON AN EXEMPTION  FROM  REGISTRATION  UNDER THE SECURITIES
            ACT OF 1933, AS AMENDED (THE "SECURITIES  ACT"),  AND,  ACCORDINGLY,
            MAY  NOT  BE  OFFERED  OR  SOLD  EXCEPT  PURSUANT  TO  AN  EFFECTIVE
            REGISTRATION  STATEMENT  UNDER THE  SECURITIES ACT OR PURSUANT TO AN
            AVAILABLE  EXEMPTION  FROM, OR IN A TRANSACTION  NOT SUBJECT TO, THE
            REGISTRATION  REQUIREMENTS  OF THE  SECURITIES ACT AND IN ACCORDANCE
            WITH  APPLICABLE  STATE  SECURITIES  LAWS  AS  EVIDENCED  BY A LEGAL
            OPINION OF COUNSEL TO THE  TRANSFEROR TO SUCH EFFECT,  THE SUBSTANCE
            OF WHICH  SHALL  BE  REASONABLY  ACCEPTABLE  TO THE  COMPANY.  THESE
            SECURITIES  MAY BE PLEDGED  IN  CONNECTION  WITH A BONA FIDE  MARGIN
            ACCOUNT  WITH  A  REGISTERED  BROKER-DEALER  OR  OTHER  LOAN  WITH A
            FINANCIAL INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN
            RULE 501(a) UNDER THE  SECURITIES  ACT OR OTHER LOAN SECURED BY SUCH
            SECURITIES.

            The Company  acknowledges  and agrees that a Purchaser may from time
      to time pledge pursuant to a bona fide margin  agreement with a registered
      broker-dealer  or  grant  a  security  interest  in  some  or  all  of the
      Securities to a financial  institution that is an "accredited investor" as
      defined in Rule 501(a) under the Securities Act and who agrees to be bound
      by the provisions of this Agreement and the Registration  Rights Agreement
      and, if required under the terms of such  arrangement,  such Purchaser may
      transfer pledged or secured Securities to the pledgees or secured parties.
      Such a pledge or transfer  would not be subject to approval of the Company
      and no legal  opinion of legal  counsel of the pledgee,  secured  party or
      pledgor  shall be required in  connection  therewith.  Further,  no notice
      shall be required of such pledge. At the appropriate  Purchaser's expense,
      the Company will execute and deliver such  reasonable  documentation  as a
      pledgee  or  secured  party  of  Securities  may  reasonably   request  in
      connection with a pledge or transfer of the Securities,  including, if the
      Securities are subject to registration pursuant to the Registration Rights
      Agreement,   the  preparation  and  filing  of  any  required   prospectus
      supplement  under  Rule  424(b)(3)  under  the  Securities  Act  or  other
      applicable provision of the Securities Act to appropriately amend the list
      of Selling Stockholders thereunder.

                                       19
<PAGE>

            (c) Certificates  evidencing the Shares and Warrant Shares shall not
      contain any legend (including the legend set forth in Section 4.1(b)), (i)
      while a  registration  statement  (including the  Registration  Statement)
      covering  the resale of such  security is effective  under the  Securities
      Act, or (ii) following any sale of such Shares or Warrant Shares  pursuant
      to Rule 144, or (iii) if such Shares or Warrant  Shares are  eligible  for
      sale under  Rule  144(k),  or (iv) if such  legend is not  required  under
      applicable   requirements  of  the  Securities  Act  (including   judicial
      interpretations and pronouncements issued by the staff of the Commission).
      The  Company  shall  cause its  counsel  to issue a legal  opinion  to the
      Company's  transfer agent promptly after the Effective Date if required by
      the  Company's  transfer  agent  to  effect  the  removal  of  the  legend
      hereunder.  If all or any portion of a Warrant is exercised at a time when
      there is an  effective  registration  statement to cover the resale of the
      Warrant  Shares,  such Warrant Shares shall be issued free of all legends.
      The Company  agrees that  following the Effective  Date or at such time as
      such legend is no longer required under this Section  4.1(c),  it will, no
      later than three Trading Days following the delivery by a Purchaser to the
      Company or the  Company's  transfer  agent of a  certificate  representing
      Shares or Warrant  Shares,  as the case may be,  issued with a restrictive
      legend (such third  Trading Day, the "Legend  Removal  Date"),  deliver or
      cause to be delivered to such  Purchaser a certificate  representing  such
      shares that is free from all  restrictive  and other legends.  The Company
      may not make any  notation  on its  records  or give  instructions  to any
      transfer  agent of the Company that enlarge the  restrictions  on transfer
      set forth in this Section.  Certificates for Securities  subject to legend
      removal  hereunder  shall  be  transmitted  by the  transfer  agent of the
      Company to the  Purchasers  by  crediting  the account of the  Purchaser's
      prime broker with the Depository Trust Company System.

            (d) In addition to such Purchaser's  other available  remedies,  the
      Company shall pay to a Purchaser,  in cash, as partial  liquidated damages
      and not as a penalty,  for each $1,000 of Shares or Warrant  Shares (based
      on the Closing Price of the Common Stock on the date such  Securities  are
      submitted to the Company's  transfer  agent)  delivered for removal of the
      restrictive  legend and  subject to Section  4.1(c),  $10 per  Trading Day
      (increasing  to $20 per  Trading  Day five (5)  Trading  Days  after  such
      damages  have  begun to  accrue)  for each  Trading  Day after the  Legend
      Removal Date until such certificate is delivered without a legend. Nothing
      herein shall limit such Purchaser's right to pursue actual damages for the
      Company's failure to deliver  certificates  representing any Securities as
      required by the Transaction  Documents,  and such Purchaser shall have the
      right  to  pursue  all  remedies  available  to it  at  law  or in  equity
      including,  without  limitation,  a decree of specific  performance and/or
      injunctive relief.

            (e)  Each  Purchaser,  severally  and not  jointly  with  the  other
      Purchasers,  agrees  that  the  removal  of the  restrictive  legend  from
      certificates  representing  Securities as set forth in this Section 4.1 is
      predicated  upon the Company's  reliance that the Purchaser  will sell any
      Securities  pursuant  to  either  the  registration  requirements  of  the
      Securities Act, including any applicable prospectus delivery requirements,
      or an exemption therefrom.

            (f)  Until  the one year  anniversary  of the  Effective  Date,  the
      Company   shall  not  undertake  a  reverse  or  forward  stock  split  or
      reclassification  of the Common Stock without the prior written consent of
      the Purchasers holding a majority in interest of the Shares.

                                       20
<PAGE>

      4.2 Furnishing of Information.  As long as any Purchaser owns  Securities,
the Company  covenants to timely file (or obtain  extensions in respect  thereof
and file within the applicable grace period) all reports required to be filed by
the Company  after the date hereof  pursuant to the Exchange Act. As long as any
Purchaser  owns  Securities,  if the  Company is not  required  to file  reports
pursuant to the Exchange Act, it will prepare and furnish to the  Purchasers and
make publicly  available in accordance  with Rule 144(c) such  information as is
required for the Purchasers to sell the  Securities  under Rule 144. The Company
further  covenants  that it will  take  such  further  action  as any  holder of
Securities may reasonably request,  all to the extent required from time to time
to enable such Person to sell such  Securities  without  registration  under the
Securities Act within the limitation of the exemptions provided by Rule 144.

      4.3  Integration.  The Company  shall not sell,  offer for sale or solicit
offers to buy or  otherwise  negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the  Securities  in a manner that would  require the  registration  under the
Securities  Act of the sale of the Securities to the Purchasers or that would be
integrated  with the offer or sale of the  Securities  for purposes of the rules
and  regulations  of any Trading  Market such that it would require  shareholder
approval  prior to the  closing of such  other  transaction  unless  shareholder
approval is obtained before the closing of such subsequent transaction.

      4.4 Securities Laws Disclosure; Publicity. The Company shall, by 8:30 a.m.
Eastern  time on the  Trading Day  following  the date  hereof,  issue a Current
Report on Form 8-K,  reasonably  acceptable  to each  Purchaser  disclosing  the
material terms of the  transactions  contemplated  hereby,  and shall attach the
Transaction Documents thereto. The Company and each Purchaser shall consult with
each other in issuing any other press releases with respect to the  transactions
contemplated  hereby,  and neither the Company nor any Purchaser shall issue any
such press release or otherwise make any such public statement without the prior
consent of the Company,  with respect to any press release of any Purchaser,  or
without the prior consent of each  Purchaser,  with respect to any press release
of the Company, which consent shall not unreasonably be withheld, except if such
disclosure is required by law, in which case the disclosing party shall promptly
provide  the  other  party  with  prior  notice  of  such  public  statement  or
communication.  Notwithstanding  the  foregoing,  the Company shall not publicly
disclose the name of any Purchaser,  or include the name of any Purchaser in any
filing with the Commission or any regulatory  agency or Trading Market,  without
the prior written consent of such  Purchaser,  except (i) as required by federal
securities law in connection with the registration statement contemplated by the
Registration Rights Agreement and (ii) to the extent such disclosure is required
by law or Trading  Market  regulations,  in which case the Company shall provide
the Purchasers  with prior notice of such  disclosure  permitted under subclause
(i) or (ii).

      4.5  Shareholder  Rights  Plan.  No claim will be made or  enforced by the
Company or, to the knowledge of the Company, any other Person that any Purchaser
is an "Acquiring  Person" under any  shareholder  rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the  provisions of any such plan or  arrangement,  by
virtue of  receiving  Securities  under the  Transaction  Documents or under any
other  agreement  between  the  Company and the  Purchasers.  The Company  shall
conduct  its  business  in a manner so that it will not  become  subject  to the
Investment Company Act.

                                       21
<PAGE>

      4.6 Non-Public Information.  The Company covenants and agrees that neither
it nor any other Person  acting on its behalf will provide any  Purchaser or its
agents or counsel with any  information  that the Company  believes  constitutes
material non-public information,  unless prior thereto such Purchaser shall have
executed  a written  agreement  regarding  the  confidentiality  and use of such
information.  The Company  understands and confirms that each Purchaser shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.

      4.7 Use of Proceeds.  Except as set forth on Schedule 4.7 attached hereto,
the Company shall use the net proceeds from the sale of the Securities hereunder
for working capital  purposes and not for the satisfaction of any portion of the
Company's debt (other than payment of trade  payables in the ordinary  course of
the  Company's  business and prior  practices or  regularly  scheduled  interest
payments on existing  Indebtedness),  to redeem any Common Stock or Common Stock
Equivalents or to settle any outstanding litigation.

      4.8  Reimbursement.  If any Purchaser  becomes involved in any capacity in
any  Proceeding  by or against  any Person who is a  stockholder  of the Company
(except as a result of sales, pledges,  margin sales and similar transactions by
such Purchaser to or with any current  stockholder),  solely as a result of such
Purchaser's acquisition of the Securities under this Agreement, the Company will
reimburse such Purchaser for its reasonable legal and other expenses  (including
the cost of any  investigation  preparation and travel in connection  therewith)
incurred  in  connection   therewith,   as  such  expenses  are  incurred.   The
reimbursement  obligations  of the  Company  under  this  paragraph  shall be in
addition to any  liability  which the Company may otherwise  have,  shall extend
upon the same terms and  conditions to any  Affiliates of the Purchasers who are
actually  named in such  action,  proceeding  or  investigation,  and  partners,
directors,  agents,  employees and controlling persons (if any), as the case may
be, of the  Purchasers  and any such  Affiliate,  and shall be binding  upon and
inure  to  the  benefit  of  any   successors,   assigns,   heirs  and  personal
representatives  of the Company,  the  Purchasers and any such Affiliate and any
such Person.  The Company also agrees that neither the  Purchasers  nor any such
Affiliates,  partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company  solely as a result of acquiring  the  Securities  under
this Agreement.

      4.9  Indemnification  of  Purchasers.  Subject to the  provisions  of this
Section  4.9,  the Company  will  indemnify  and hold the  Purchasers  and their
directors,  officers,  shareholders,  members,  partners,  employees  and agents
(each,  a  "Purchaser  Party")  harmless  from any and all losses,  liabilities,
obligations,  claims, contingencies,  damages, costs and expenses, including all
judgments,  amounts paid in settlements,  court costs and reasonable  attorneys'
fees and costs of  investigation  that any such  Purchaser  Party may  suffer or
incur  as  a  result  of  or   relating   to  (a)  any  breach  of  any  of  the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other  Transaction  Documents  or (b) any action  instituted
against  a  Purchaser,  or any of them or their  respective  Affiliates,  by any
stockholder  of the  Company who is not an  Affiliate  of such  Purchaser,  with
respect to any of the  transactions  contemplated by the  Transaction  Documents
(unless such action is based upon a breach of such Purchaser's  representations,
warranties or covenants  under the  Transaction  Documents or any  agreements or
understandings  such  Purchaser  may  have  with  any  such  stockholder  or any
violations by the Purchaser of state or federal  securities  laws or any conduct
by such Purchaser which constitutes fraud, gross negligence,  willful misconduct
or  malfeasance).  If any action shall be brought against any Purchaser Party in
respect  of which  indemnity  may be sought  pursuant  to this  Agreement,  such
Purchaser  Party shall promptly  notify the Company in writing,  and the Company
shall  have the right to assume  the  defense  thereof  with  counsel of its own
choosing. Any Purchaser Party shall have the right to employ separate counsel in
any  such  action  and  participate  in the  defense  thereof,  but the fees and
expenses of such counsel shall be at the expense of such Purchaser  Party except
to the extent that (i) the employment  thereof has been specifically  authorized
by the Company in writing, (ii) the Company has failed after a reasonable period
of time to assume  such  defense  and to employ  counsel or (iii) in such action
there is,  in the  reasonable  opinion  of such  separate  counsel,  a  material
conflict  on any  material  issue  between  the  position of the Company and the
position  of such  Purchaser  Party.  The  Company  will  not be  liable  to any
Purchaser Party under this Agreement (i) for any settlement by a Purchaser Party
effected  without  the  Company's  prior  written  consent,  which  shall not be
unreasonably  withheld or delayed; or (ii) to the extent, but only to the extent
that a loss, claim, damage or liability is attributable to any Purchaser Party's
breach of any of the representations,  warranties,  covenants or agreements made
by the Purchasers in this Agreement or in the other Transaction Documents.

                                       22
<PAGE>

      4.10  Reservation of Common Stock. As of the date hereof,  the Company has
reserved  and the Company  shall  continue to reserve and keep  available at all
times, free of preemptive  rights, a sufficient number of shares of Common Stock
for the  purpose of  enabling  the  Company  to issue  Shares  pursuant  to this
Agreement  and Warrant  Shares  pursuant to any  exercise  of the  Warrants.  In
addition,  the Company shall hold a special meeting of  shareholders  (which may
also be at the annual meeting of  shareholders)  at the earliest  practical date
after the date the number of shares of Common  Stock  issuable  pursuant to this
Agreement on a fully  converted or exercised  basis  (ignoring for such purposes
any conversion or exercise  limitations  therein)  exceeds 15% of the issued and
outstanding  shares of  Common  Stock on the  Closing  Date for the  purpose  of
obtaining Shareholder  Approval,  with the recommendation of the Company's Board
of Directors  that such  proposal be  approved,  and the Company  shall  solicit
proxies from its shareholders in connection  therewith in the same manner as all
other management proposals in such proxy statement and all  management-appointed
proxyholders shall vote their proxies in favor of such proposal.  If the Company
does not obtain  Shareholder  Approval at the first  meeting,  the Company shall
call a meeting every four months  thereafter to seek Shareholder  Approval until
the earlier of the date  Shareholder  Approval is obtained or the  Purchasers no
longer own any Securities.

      4.11  Listing  of Common  Stock.  The  Company  hereby  agrees to use best
efforts to maintain the listing of the Common Stock on a Trading Market,  and as
soon as  reasonably  practicable  following  the Closing (but not later than the
earlier of the Effective Date and the first  anniversary of the Closing Date) to
list all of the Shares and Warrant  Shares on such Trading  Market.  The Company
further  agrees,  if the Company  applies to have the Common Stock traded on any
other Trading Market,  it will include in such application all of the Shares and
Warrant Shares,  and will take such other action as is necessary to cause all of
the  Shares and  Warrant  Shares to be listed on such  other  Trading  Market as
promptly as possible.  The Company will take all action reasonably  necessary to
continue  the listing and  trading of its Common  Stock on a Trading  Market and
will  comply in all  respects  with the  Company's  reporting,  filing and other
obligations under the bylaws or rules of the Trading Market.

                                       23
<PAGE>

      4.12 Equal Treatment of Purchasers.  No consideration  shall be offered or
paid to any  person  to amend or  consent  to a waiver  or  modification  of any
provision of any of the Transaction  Documents unless the same  consideration is
also  offered  to  all  of  the  parties  to  the  Transaction  Documents.   For
clarification  purposes,  this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated  separately by each Purchaser,  and
is intended to treat for the Company the  Purchasers as a class and shall not in
any way be  construed  as the  Purchasers  acting in  concert or as a group with
respect to the purchase, disposition or voting of Securities or otherwise.

      4.13 [RESERVED]

      4.14 [RESERVED]

      4.15 Short Sales and Confidentiality After The Date Hereof. Each Purchaser
severally and not jointly with the other  Purchasers  covenants  that neither it
nor any affiliates acting on its behalf or pursuant to any understanding with it
will  execute any Short Sales during the period  after the  Discussion  Time and
ending at the time that the  transactions  contemplated  by this  Agreement  are
first publicly announced as described in Section 4.4. Each Purchaser,  severally
and not jointly with the other Purchasers, covenants that until such time as the
transactions  contemplated  by this  Agreement  are  publicly  disclosed  by the
Company  as  described  in  Section  4.4,  such  Purchaser  will  maintain,  the
confidentiality   of  all  disclosures  made  to  it  in  connection  with  this
transaction  (including  the  existence  and  terms of this  transaction).  Each
Purchaser understands and acknowledges, severally and not jointly with any other
Purchaser,  that the  Commission  currently  takes the position that coverage of
short  sales of  shares  of the  Common  Stock  "against  the box"  prior to the
Effective Date of the Registration  Statement with the Securities is a violation
of Section 5 of the  Securities  Act,  as set forth in Item 65,  Section 5 under
Section A, of the Manual of Publicly Available Telephone Interpretations,  dated
July 1997,  compiled by the Office of Chief  Counsel,  Division  of  Corporation
Finance.  Notwithstanding the foregoing,  no Purchaser makes any representation,
warranty  or  covenant  hereby  that it will not  engage  in Short  Sales in the
securities of the Company after the time that the  transactions  contemplated by
this  Agreement  are first  publicly  announced  as  described  in Section  4.4.
Notwithstanding   the  foregoing,   in  the  case  of  a  Purchaser  that  is  a
multi-managed  investment  vehicle whereby  separate  portfolio  managers manage
separate portions of such Purchaser's  assets and the portfolio managers have no
direct  knowledge of the  investment  decisions  made by the portfolio  managers
managing other portions of such Purchaser's assets, the covenant set forth above
shall only apply with respect to the portion of assets  managed by the portfolio
manager that made the investment  decision to purchase the Securities covered by
this Agreement.

      4.16 Delivery of Securities After Closing.  The Company shall deliver,  or
cause to be delivered,  the respective Securities purchased by each Purchaser to
such Purchaser within 3 Trading Days of the Closing Date.

                                       24
<PAGE>

                                   ARTICLE V.
                                  MISCELLANEOUS

      5.1 Termination.  This Agreement may be terminated by any Purchaser, as to
such Purchaser's obligations hereunder only and without any effect whatsoever on
the obligations between the Company and the other Purchasers,  by written notice
to the other  parties,  if the  Closing  has not been  consummated  on or before
October 19, 2005;  provided,  however,  that no such termination will affect the
right of any party to sue for any breach by the other party (or parties).

      5.2 Fees and Expenses.  At the Closing, the Company will pay The BlueGrass
Fund ("BlueGrass") $15,000 for its legal fees and expenses. Accordingly, in lieu
of the foregoing  payments,  the Company,  on the Closing Date, will direct that
the aggregate amount that BlueGrass is to pay for the Shares and Warrants at the
Closing, be reduced by $15,000. The Company shall deliver, prior to the Closing,
a completed and executed copy of the Closing Statement, attached hereto as Annex
A. Except as expressly set forth in the  Transaction  Documents to the contrary,
each party shall pay the fees and expenses of its advisers, counsel, accountants
and  other  experts,  if any,  and all other  expenses  incurred  by such  party
incident to the negotiation, preparation, execution, delivery and performance of
this Agreement.  The Company shall pay all transfer agent fees,  stamp taxes and
other taxes and duties levied in connection with the delivery of any Securities.

      5.3  Entire  Agreement.  The  Transaction  Documents,  together  with  the
exhibits and schedules thereto,  contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.

      5.4 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 earliest of (a) the date of  transmission,  if
such notice or  communication is delivered via facsimile at the facsimile number
set forth on the signature  pages  attached  hereto prior to 5:30 p.m. (New York
City  time)  on a  Trading  Day,  (b) the next  Trading  Day  after  the date of
transmission,  if such notice or communication is delivered via facsimile at the
facsimile  number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day,  (c) the 2nd Trading  Day  following  the date of mailing,  if sent by U.S.
nationally  recognized  overnight courier service, or (d) upon actual receipt by
the party to whom such  notice is  required  to be given.  The  address for such
notices and communications shall be as set forth on the signature pages attached
hereto.

      5.5 Amendments;  Waivers.  No provision of this Agreement may be waived or
amended except in a written instrument  signed, in the case of an amendment,  by
the Company and each Purchaser or, in the case of a waiver, by the party against
whom  enforcement  of any such waiver is sought.  No waiver of any default  with
respect to any provision,  condition or  requirement of this Agreement  shall be
deemed to be a  continuing  waiver in the  future or a waiver of any  subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise  any right  hereunder in
any manner impair the exercise of any such right.

                                       25
<PAGE>

      5.6  Headings.  The  headings  herein  are for  convenience  only,  do not
constitute a part of this  Agreement  and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent,  and no
rules of strict construction will be applied against any party.

      5.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their  successors and permitted  assigns.  The
Company may not assign this  Agreement  or any rights or  obligations  hereunder
without the prior written  consent of each  Purchaser.  Any Purchaser may assign
any or all of its  rights  under  this  Agreement  to any  Person  to whom  such
Purchaser  assigns or transfers any Securities,  provided such transferee agrees
in  writing to be bound,  with  respect to the  transferred  Securities,  by the
provisions hereof that apply to the "Purchasers".

      5.8 No  Third-Party  Beneficiaries.  This  Agreement  is intended  for the
benefit of the parties  hereto and their  respective  successors  and  permitted
assigns and is not for the benefit of, nor may any provision  hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.9.

      5.9 Governing Law. All questions  concerning the  construction,  validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance  with the internal laws of the State of
New York,  without  regard to the  principles of conflicts of law thereof.  Each
party  agrees  that  all  legal  proceedings   concerning  the  interpretations,
enforcement and defense of the  transactions  contemplated by this Agreement and
any other Transaction  Documents  (whether brought against a party hereto or its
respective affiliates,  directors, officers, shareholders,  employees or agents)
shall be commenced  exclusively  in the state and federal  courts sitting in the
City of New  York.  Each  party  hereby  irrevocably  submits  to the  exclusive
jurisdiction  of the state and federal  courts  sitting in the City of New York,
borough  of  Manhattan  for the  adjudication  of any  dispute  hereunder  or in
connection  herewith or with any  transaction  contemplated  hereby or discussed
herein  (including  with respect to the  enforcement  of any of the  Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action  or  proceeding,  any  claim  that it is not  personally  subject  to the
jurisdiction of any such court, that such suit, action or proceeding is improper
or inconvenient venue for such proceeding.  Each party hereby irrevocably waives
personal  service of process and  consents to process  being  served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or  overnight  delivery  (with  evidence of  delivery) to such party at the
address in effect for  notices to it under this  Agreement  and agrees that such
service  shall  constitute  good and  sufficient  service of process  and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to serve  process in any manner  permitted by law. The parties  hereby waive all
rights  to a trial  by jury.  If  either  party  shall  commence  an  action  or
proceeding to enforce any  provisions  of the  Transaction  Documents,  then the
prevailing  party in such action or proceeding  shall be reimbursed by the other
party for its  attorneys'  fees and other costs and expenses  incurred  with the
investigation, preparation and prosecution of such action or proceeding.

                                       26
<PAGE>

      5.10 Survival.  The representations and warranties  contained herein shall
survive the Closing and the delivery of the Shares and Warrant Shares.

      5.11   Execution.   This   Agreement  may  be  executed  in  two  or  more
counterparts,  all of which when taken  together shall be considered one and the
same agreement and shall become effective when  counterparts have been signed by
each party and  delivered  to the other  party,  it being  understood  that both
parties need not sign the same  counterpart.  In the event that any signature is
delivered by facsimile  transmission,  such  signature  shall create a valid and
binding  obligation of the party executing (or on whose behalf such signature is
executed)  with the same force and effect as if such  facsimile  signature  page
were an original thereof.

      5.12  Severability.  If any  provision  of  this  Agreement  is held to be
invalid or unenforceable in any respect,  the validity and enforceability of the
remaining  terms  and  provisions  of  this  Agreement  shall  not in any way be
affected or impaired  thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor,  and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

      5.13  Rescission and  Withdrawal  Right.  Notwithstanding  anything to the
contrary  contained in (and  without  limiting  any similar  provisions  of) the
Transaction  Documents,  whenever  any  Purchaser  exercises a right,  election,
demand or option  under a  Transaction  Document and the Company does not timely
perform its related  obligations within the periods therein provided,  then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice,  demand or election in whole
or in part without prejudice to its future actions and rights.

      5.14   Replacement  of  Securities.   If  any  certificate  or  instrument
evidencing any Securities is mutilated,  lost, stolen or destroyed,  the Company
shall  issue or cause to be issued in  exchange  and  substitution  for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument,  but only upon receipt of evidence reasonably satisfactory to the
Company  of such  loss,  theft  or  destruction  and  customary  and  reasonable
indemnity,  if requested.  The  applicants  for a new  certificate or instrument
under  such  circumstances  shall  also  pay any  reasonable  third-party  costs
associated with the issuance of such replacement Securities.

      5.15  Remedies.  In  addition to being  entitled  to  exercise  all rights
provided herein or granted by law,  including  recovery of damages,  each of the
Purchasers  and the Company will be entitled to specific  performance  under the
Transaction  Documents.  The  parties  agree that  monetary  damages  may not be
adequate  compensation  for  any  loss  incurred  by  reason  of any  breach  of
obligations  described in the  foregoing  sentence and hereby agrees to waive in
any action for specific  performance  of any such  obligation the defense that a
remedy at law would be adequate.

      5.16 Payment Set Aside.  To the extent that the Company makes a payment or
payments to any Purchaser  pursuant to any  Transaction  Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such  enforcement  or exercise or any part thereof are  subsequently
invalidated,  declared to be fraudulent or  preferential,  set aside,  recovered
from, disgorged by or are required to be refunded,  repaid or otherwise restored
to the  Company,  a  trustee,  receiver  or  any  other  person  under  any  law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable  cause of action),  then to the extent of any such  restoration
the  obligation  or part thereof  originally  intended to be satisfied  shall be
revived and  continued  in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

                                       27
<PAGE>

      5.17  Independent  Nature  of  Purchasers'  Obligations  and  Rights.  The
obligations of each Purchaser under any Transaction Document are several and not
joint with the  obligations of any other  Purchaser,  and no Purchaser  shall be
responsible  in any way for the  performance  of the  obligations  of any  other
Purchaser under any Transaction  Document.  Nothing  contained  herein or in any
Transaction  Document,  and no action taken by any Purchaser  pursuant  thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint  venture  or any other kind of entity,  or create a  presumption  that the
Purchasers  are in any way acting in concert or as a group with  respect to such
obligations or the transactions  contemplated by the Transaction Documents. Each
Purchaser  shall be  entitled to  independently  protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out of
the other  Transaction  Documents,  and it shall not be necessary  for any other
Purchaser  to be  joined  as an  additional  party  in any  proceeding  for such
purpose.  Each Purchaser has been  represented by its own separate legal counsel
in their review and  negotiation of the  Transaction  Documents.  For reasons of
administrative  convenience only,  Purchasers and their respective  counsel have
chosen to communicate  with the Company through FW. FW does not represent all of
the  Purchasers  but only  BlueGrass.  The  Company  has  elected to provide all
Purchasers with the same terms and Transaction  Documents for the convenience of
the  Company  and not  because  it was  required  or  requested  to do so by the
Purchasers.

      5.18  Liquidated  Damages.  The Company's  obligations  to pay any partial
liquidated  damages or other amounts owing under the Transaction  Documents is a
continuing  obligation of the Company and shall not  terminate  until all unpaid
partial liquidated damages and other amounts have been paid  notwithstanding the
fact that the instrument or security  pursuant to which such partial  liquidated
damages or other amounts are due and payable shall have been canceled.

      5.19  Construction.  The  parties  agree  that each of them  and/or  their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved  against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.

                            (Signature Pages Follow)

                                       28
<PAGE>

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

SPATIALIGHT, INC.                                 Address for Notice:

By: /s/ Robert A. Olins                           5 Hamilton Landing, Suite 100
   --------------------------------------         Novato, CA 94949
   Name: Robert A. Olins
   Title: Chief Executive Officer

With a copy to (which shall not constitute notice):
Melvin Katz
Bryan Cave, LLP
1290 Avenue of the Americas
New York, NY 10104
Telephone: 212-541-1155
Fax: 212-341-8540

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                      SIGNATURE PAGE FOR PURCHASER FOLLOWS]

                                       29
<PAGE>

        [PURCHASER SIGNATURE PAGES TO HDTV SECURITIES PURCHASE AGREEMENT]

      IN WITNESS WHEREOF,  the undersigned have caused this Securities  Purchase
Agreement to be duly executed by their respective  authorized  signatories as of
the date first indicated above.

Name of Holder: Smithfield Fiduciary LLC
               ------------------------------------------------------
Signature of Authorized Signatory of Holder: /s/Adam J. Chill
                                            -------------------------
Name of Authorized Signatory: Adam J. Chill
                             ----------------------------------------
Title of Authorized Signatory: Authorized Signatory
                              ---------------------------------------
Email Address of Purchaser: ari.storch@hcmny.com/adam.chill@hcmny.com
                            -----------------------------------------

Address for Notice of Purchaser:

c/o Highbridge Capital Management, LLC
9 West 57th Street, 27th Floor
New York, New York 10019
Fax: (212) 751-0755
Tel: (212) 287-4720

Address for Delivery of Securities for Purchaser (if not same as above):

Same as above

Subscription Amount: $499,999.50
Shares: 142,857
Warrant Shares: 57,143
EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]

                                       30
<PAGE>

        [PURCHASER SIGNATURE PAGES TO HDTV SECURITIES PURCHASE AGREEMENT]

      IN WITNESS WHEREOF,  the undersigned have caused this Securities  Purchase
Agreement to be duly executed by their respective  authorized  signatories as of
the date first indicated above.

Name of Holder: Portside Growth and Opportunity Fund
               ----------------------------------------------------
Signature of Authorized Signatory of Holder: /s/Jeffrey Solomon
                                            -----------------------
Name of Authorized Signatory: Jeffrey Solomon
                             --------------------------------------
Title of Authorized Signatory: Managing Member
                              -------------------------------------
Email Address of Purchaser: jsmith@ramius.com
                            ---------------------------------------

Address for Notice of Purchaser:

c/o Ramius Capital Group LLC
666 Third Avenue, 26th Floor
New York, New York 10017

Address for Delivery of Securities for Purchaser (if not same as above):

John S. Phillips
Prime Brokerage
Global Equity Finance
CITIGROUP GLOBAL MARKETS INC.
390 Greenwich Street, 5th Floor
New York, New York 10013
Tel: (212) 723-5286
Fax: (212) 723-8736

Subscription Amount: $499,999.50
Shares: 142,857
Warrant Shares: 57,143
EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]

                                       31
<PAGE>

        [PURCHASER SIGNATURE PAGES TO HDTV SECURITIES PURCHASE AGREEMENT]

      IN WITNESS WHEREOF,  the undersigned have caused this Securities  Purchase
Agreement to be duly executed by their respective  authorized  signatories as of
the date first indicated above.

Name of Holder: Bluegrass Growth Fund LP
               ----------------------------------------------------
Signature of Authorized Signatory of Holder: /s/Brian Shatz
                                            -----------------------
Name of Authorized Signatory: Brian Shatz
                             --------------------------------------
Title of Authorized Signatory: Managing Member,
                               Bluegrass Growth Fund Partners, LLC
                              -------------------------------------
Email Address of Purchaser: brian@bluegrassfund.com
                            ---------------------------------------

Address for Notice of Purchaser:

122 E 42nd Street, Suite 2606
New York, New York 10168

Address for Delivery of Securities for Purchaser (if not same as above):

Same as above

Subscription Amount: $500,000.00
Shares: 142,858
Warrant Shares: 57,144
EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]

                                       32
<PAGE>

        [PURCHASER SIGNATURE PAGES TO HDTV SECURITIES PURCHASE AGREEMENT]

      IN WITNESS WHEREOF,  the undersigned have caused this Securities  Purchase
Agreement to be duly executed by their respective  authorized  signatories as of
the date first indicated above.

Name of Holder: Greenpark Limited
               ----------------------------------------------------
Signature of Authorized Signatory of Holder: /s/Shaun F. Cairns
                                            -----------------------
Name of Authorized Signatory: Shaun F. Cairns
                             --------------------------------------
Title of Authorized Signatory: Director
                              -------------------------------------
Address for Notice of Purchaser: Greenpark Limited
                                -----------------------------------

      Suite One, Henville Bldg.,
      Main Street
      Charlestown, Nevis West Indies

Address for Delivery of Securities for Purchaser (if not same as above):

      1 Castle Street, Castletown,
      Isle of Man, 1M9 1LF
      British Isles

Subscription Amount: $300,000.00
Shares: 85,715
Warrant Shares: 34,286
EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

                                       33
<PAGE>

                           [SIGNATURE PAGES CONTINUE]
        [PURCHASER SIGNATURE PAGES TO HDTV SECURITIES PURCHASE AGREEMENT]

      IN WITNESS WHEREOF,  the undersigned have caused this Securities  Purchase
Agreement to be duly executed by their respective  authorized  signatories as of
the date first indicated above.

Name of Holder: Steven F. Tripp
               ----------------------------------------------------
Signature of Authorized Signatory of Holder: /s/Steven F. Tripp
                                            -----------------------
Name of Authorized Signatory: Steven F. Tripp
                             --------------------------------------
Title of Authorized Signatory:
                              -------------------------------------
Email Address of Purchaser: stripp@kno-ware.com
                            ---------------------------------------

Address for Notice of Purchaser:

1801 County Road 440
Chelsea, AL 35043
Tel: (205) 541-5426
Fax: (205) 678-0680

Address for Delivery of Securities for Purchaser (if not same as above):

Same as above

Subscription Amount: $100,000.00
Shares: 28,572
Warrant Shares: 11,429
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]

                                       34
<PAGE>

        [PURCHASER SIGNATURE PAGES TO HDTV SECURITIES PURCHASE AGREEMENT]

      IN WITNESS WHEREOF,  the undersigned have caused this Securities  Purchase
Agreement to be duly executed by their respective  authorized  signatories as of
the date first indicated above.

Name of Holder: Robert Woods
               ----------------------------------------------------
Signature of Authorized Signatory of Holder: /s/Robert Woods
                                            -----------------------
Name of Authorized Signatory: Robert Woods
                             --------------------------------------
Title of Authorized Signatory:
                              -------------------------------------
Email Address of Purchaser: rwoods@kno-ware.com
                            ---------------------------------------

Address for Notice of Purchaser:

35 Indian Forest Road
Indian Springs, AL 35124

Address for Delivery of Securities for Purchaser (if not same as above):

Same as above

Subscription Amount: $100,000.00
Shares: 28,572
Warrant Shares: 11,429
EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

                                       35
<PAGE>

                                     Annex A

                                CLOSING STATEMENT

Pursuant to the attached  Securities  Purchase  Agreement,  dated as of the date
hereto,  the  purchasers  shall  purchase up to  $2,500,000  of Common Stock and
Warrants from Spatialight,  Inc. (the "Company"). All funds will be wired into a
trust account maintained by ____________, counsel to the Company. All funds will
be disbursed in accordance with this Closing Statement.

Disbursement Date: October [__], 2005

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

I.    PURCHASE PRICE

                 Gross Proceeds to be Received in Trust   $

II.   DISBURSEMENTS

                                                          $
                                                          $
                                                          $
                                                          $
                                                          $

Total Amount Disbursed:                                   $

WIRE INSTRUCTIONS:

To: _____________________________________

To: _____________________________________

                                       36
<PAGE>

                                Schedule 3.1 (a)

SpatiaLight Technologies, Inc.

SpatiaLight Korea, Inc.

                                       37
<PAGE>

                                Schedule 3.1 (g)

Company's Capitalization as of the end of the Trading Day of September 30, 2005:

36,708,513 common shares outstanding

$4.39 Closing Price

$11,188,000 of outstanding long-term convertible debt

                                       38
<PAGE>

                                Schedule 3.1 (ff)

Odenberg, Ullakko, Muranishi & Co. LLP

                                       39

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