Document:

Exhibit 10.19

	

Exhibit 10.19

SECURITIES
PURCHASE AGREEMENT

dated as of

June 18, 2002

by and
between

American
International Petroleum Corporation
as the
Issuer,

and

GCA
Strategic Investment Fund Limited

	

TABLE OF CONTENTS

		
	ARTICLE I. DEFINITIONS	 	1	 
	         Section 1.1 Definitions	 	1	 
	         Section 1.2 Accounting Terms and Determinations	 	8	 
	ARTICLE II. PURCHASE AND SALE OF SECURITIES	 	9	 
	         Section 2.1 Purchase and Sale of Bridge Note	 	9	 
	         Section 2.2 Purchase Price	 	9	 
	         Section 2.3 Closing and Mechanics of Payment	 	9	 
	ARTICLE III. PAYMENT TERMS OF BRIDGE NOTE	 	9	 
	         Section 3.1 Ranking; Payment of Principal and Interest; Payment Mechanics	 	9	 
	         Section 3.2. Payment of Interest	 	10	 
	         Section 3.3 Intentionally Omitted	 	10	 
	         Section 3.4 Mandatory Prepayments	 	10	 
	         Section 3.5 Redemption Procedures	 	10	 
	         Section 3.6 Payment of Additional Amounts	 	11	 
	ARTICLE IV. REPRESENTATIONS AND WARRANTIES	 	12	 
	         Section 4.1 Organization and Qualification	 	12	 
	         Section 4.2 Authorization and Execution	 	13	 
	         Section 4.3 Capitalization	 	13	 
	         Section 4.4 Governmental Authorization	 	14	 
	         Section 4.5 Issuance of Shares	 	14	 
	         Section 4.6 No Conflicts	 	14	 
	         Section 4.7 Financial Information an SEC Reports	 	15	 
	         Section 4.8 Litigation	 	15	 
	         Section 4.9 Compliance with ERISA and other Benefit Plans	 	16	 
	         Section 4.10 Environmental Matters	 	16	 
	         Section 4.11 Taxes	 	16	 
	         Section 4.12 Investments, Joint Ventures	 	17	 
	         Section 4.13 Not an Investment Company	 	17	 
	         Section 4.14 Full Disclosure	 	17	 
	         Section 4.15 No Solicitation; No Integration with Other Offerings	 	17	 
	         Section 4.16 Permits	 	17	 
	         Section 4.17 Leases	 	18	 
	         Section 4.18 Absence of Any Undisclosed Liabilities or Capital Calls	 	18	 
	         Section 4.19 Public Utility Holding Company	 	18	 
	         Section 4.20 Intellectual Property Rights	 	18	 
	         Section 4.21 Insurance	 	18	 
	         Section 4.22 Title to Properties	 	18	 

	

 i

	

		
	         Section 4.23 Reserved	 	18	 
	         Section 4.24 Internal Accounting Controls	 	18	 
	         Section 4.25 Reserved	 	19	 
	         Section 4.26 Foreign Practices	 	19	 
	ARTICLE V. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER	 	19	 
	         Section 5.1 Purchaser	 	19	 
	ARTICLE VI. CONDITIONS PRECEDENT TO PURCHASE OF SECURITIES	 	21	 
	         Section 6.1 Conditions Precedent to the Purchaser's Obligations to Purchase	 	21	 
	         Section 6.2 Conditions to the Company's Obligations	 	23	 
	ARTICLE VII. AFFIRMATIVE COVENANTS	 	23	 
	         Section 7.1 Information	 	23	 
	         Section 7.2 Payment of Obligations	 	24	 
	         Section 7.3 Maintenance of Property; Insurance	 	24	 
	         Section 7.4 Maintenance of Existence	 	24	 
	         Section 7.5 Compliance with Laws	 	24	 
	         Section 7.6 Inspection of Property, Books and Records	 	25	 
	         Section 7.7 Investment Company Act	 	25	 
	         Section 7.8 Use of Proceeds	 	25	 
	         Section 7.9 Compliance with Terms and Conditions of Material Contracts	 	25	 
	         Section 7.10 Reserved Shares and Listings	 	25	 
	         Section 7.11 Irrevocable Instructions	 	26	 
	         Section 7.12 Maintenance of Reporting Status; Supplemental Information	 	26	 
	         Section 7.13 Form D; Blue Sky Laws	 	26	 
	         Section 7.14 Certain Payments	 	27	 
	ARTICLE VIII. NEGATIVE COVENANTS	 	27	 
	         Section 8.1 Reserved	 	27	 
	         Section 8.2 Transactions with Affiliates	 	27	 
	         Section 8.3 Merger or Consolidation	 	27	 
	         Section 8.4 Limitation on Asset Sales	 	27	 
	         Section 8.5 Restrictions on Certain Amendments	 	28	 
	ARTICLE IX. RESTRICTIVE LEGENDS	 	28	 
	         Section 9.1 Restrictions on Transfer	 	28	 
	         Section 9.2 Restrictive Legends	 	28	 
	         Section 9.3 Notice of Proposed Transfers	 	28	 
	ARTICLE X. ADDITIONAL AGREEMENTS AMONG THE PARTIES	 	29	 
	         Section 10.1 Liquidated Damages	 	29	 
	         Section 10.2 Exercise Notice	 	29	 
	         Section 10.3 Reserved	 	30	 
	         Section 10.4 Registration Rights	 	30	 

ii

	

		
	ARTICLE
      XI. ADJUSTMENT OF FIXED PRICE	 	31	 
	         Section
      11.1 Reorganization	 	31	 
	         Section
      11.2 Share Reorganization	 	31	 
	         Section
      11.3 Capital Reorganization	 	32	 
	         Section
      11.4 Adjustment Rules	 	32	 
	         Section
      11.5 Certificate as to Adjustment	 	33	 
	         Section
      11.6 Notice to Noteholders	 	33	 
	ARTICLE
      XII. EVENTS OF DEFAULT	 	33	 
	         Section
      12.1 Events of Default	 	33	 
	         Section
      12.2 Powers and Remedies Cumulative	 	36	 
	ARTICLE
      XIII. MISCELLANEOUS	 	36	 
	         Section
      13.1 Notices	 	36	 
	         Section
      13.2 No Waivers; Amendments	 	36	 
	         Section
      13.3 Indemnification	 	37	 
	         Section
      13.4 Expense Reimbursement Fee	 	39	 
	         Section
      13.5 Payment	 	39	 
	         Section
      13.6 Successors and Assigns	 	39	 
	         Section
      13.7 Broker	 	39	 
	         Section
      13.8 New York Law; Submission to Jurisdiction; Waiver of Jury Trial; Appointment
                                       of Agent	 	39	 

	

 iii

	

LIST OF
SCHEDULES

		
	Schedule
      4.12 	 	Investment,
      Joint Ventures	 
	 	 	 	 
	Schedule
      4.21	 	Insurance	 
	 	 	 	 
	Schedule
      4.27	 	Subsidiaries
      	 
	 	 	 	 
	Schedule
      4.3	 	Capitalization	 
	 	 	 	 
	Schedule
      7.8 	 	Use of
      Proceeds 	 
	 	 	 	 

 

	 
       iv

	

LIST OF
EXHIBITS

		
	Exhibit
      A	 	Secured
      Bridge Notes	 
	 	 	 	 
	Exhibit
      B	 	Warrants	 
	 	 	 	 
	Exhibit
      C	 	Registration
      Rights Agreement	 
	 	 	 	 
	Exhibit
      D	 	Form
      of Solvency Certificate	 
	 	 	 	 
	Exhibit
      E	 	Form
      of Officer's Certificate	 
	 	 	 	 
	Exhibit
      F	 	Security
      Agreement	 

	

 v

	

SECURITIES
PURCHASE AGREEMENT

     AGREEMENT,
dated as of June 18, 2002, between American International Petroleum Corporation
(the “Company”) and GCA Strategic Investment Fund Limited
(“Purchaser”). 

R E C I T A
L S:

     WHEREAS,
the Company desires to sell and issue to the Purchaser, and Purchaser desires to
purchase from the Company, a $1,900,000 principal amount 12% Secured Bridge Note
due March 18, 2002 (“Bridge Note”), with terms and conditions as set
forth in the form of Bridge Note attached hereto as Exhibit A; and 

     WHEREAS,
in order to induce the Purchaser to enter into the transactions described in
this Agreement, the Company desires to issue to the Purchaser an aggregate of
3,600,000 warrants to purchase shares of common stock, $.08 par value per share
(“Common Stock”) upon the Closing (as defined herein) on the terms and
conditions described in the form of the common stock purchase warrant attached
hereto as Exhibit B (the “Warrants”); and 

     WHEREAS,
the Purchaser will have certain registration rights with respect to the shares
of Common Stock issuable upon exercise of the Warrants (the “Warrant
Shares”) as set forth in the Registration Rights Agreement in the form
attached hereto as Exhibit C; and 

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

	ARTICLE 1.     DEFINITIONS

	

ARTICLE 1.1
     Definitions. The following terms, as used herein, have the following
meanings: 

     “Additional
Shares of Common Stock” has the meaning set forth in Section 11.6. 

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

     “Agreement”
means this Securities Purchase Agreement, as amended, supplemented or otherwise
modified from time to time in accordance with its terms. 

     “Asset
Sale” has the meaning set forth in Section 8.4. 

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

	

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

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

     “Bridge
Note” means the Company’s Secured Bridge Note substantially in the
form set forth as Exhibit A hereto. 

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

     “Capital
Reorganization” has the meaning set forth in Section 11.5. 

     “Change
in Control” means (i) after the date of this Agreement, any person or group
of persons (within the meaning of Sections 13 and 14 of the Exchange Act and the
rules and regulations of the Commission relating to such sections) other than
the Purchaser shall have acquired beneficial ownership (within the meaning of
Rules 13d-3 and 13d-5 promulgated by the Commission pursuant to the Exchange
Act) of 331/3% or more of the outstanding shares of Common Stock of the Company;
(ii) individuals constituting the Board of Directors of the Company on the date
hereof (together with any new Directors whose election by such Board of
Directors or whose nomination for election by the stockholders of the Company
was approved by a vote of at least 50.1% of the Directors still in office who
are either Directors as of the date hereof or whose election or nomination for
election was previously so approved), cease for any reason to constitute at
least two-thirds of the Board of Directors of the Company then in office. 

     “Closing
Bid Price” shall mean for any security as of any date, the lowest closing
bid price as reported by Bloomberg, L.P. (“Bloomberg”) on the
principal securities exchange or trading market where such security is listed or
traded or, if the foregoing does not apply, the lowest closing bid price of such
security in the over-the-counter market on the electronic bulletin board for
such security as reported by Bloomberg, or, if no trading price is reported for
such security by Bloomberg, then the average of the bid prices of any market
makers for such securities as reported in the “Pink Sheets” by the
National Quotation Bureau, Inc. If the lowest closing bid price cannot be
calculated for such security on such date on any of the foregoing bases, the
lowest closing bid price of such security on such date shall be the fair market
value as mutually determined by the Purchaser and the Company for which the
calculation of the closing bid price requires, and in the absence of such mutual
determination, as determined by the Board of Directors of the Company in good
faith. 

     “Closing
Date” means the date on which all of the conditions set forth in Sections
6.1 and 6.2 shall have been satisfied and the Bridge Note in the aggregate
principal amount of $1,900,000 and Warrants to acquire 3,600,000 shares of
Common Stock are issued by the Company to the Purchaser. 

	

     “Code”
means the Internal Revenue Code of 1986, as amended. 

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

     “Common
Stock” means the common stock, $.08 par value per share, of the Company. 

     “Company”
means American International Petroleum Corporation, a Nevada corporation, and
its successors. 

     “Company
Corporate Documents” means the certificate of incorporation and bylaws of
the Company. 

     “Consolidated
Net Worth” means at any date the total shareholder’s equity which
would appear on a consolidated balance sheet of the Company prepared as of such
date. 

     “Consolidated
Subsidiary” means at any date with respect to any Person or Subsidiary or
other entity, the accounts of which would be consolidated with those of such
Person in its consolidated financial statements if such statements were prepared
as of such date. 

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

     “Deadline”
has the meaning set forth in Section 10.1. 

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

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

     “Default
Fee” has the meaning set forth in Section 10.4. 

	

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

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

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

     “ERISA
Group” means the Company and each Subsidiary and all members of a
controlled group of corporation and all trades or businesses (whether or not
incorporated) under common control which, together with the Company or any
Subsidiary, are treated as a single employer under the Code. 

     “Event
of Default” has the meaning set forth in Article XII hereof. 

     “Exchange
Act” means the Securities Exchange Act of 1934, as amended. 

     “Expense
Reimbursement Fee” has the meaning set forth in Section 13.4. 

     “Financing”
means a public or private financing consummated (meaning closing and funding)
through the issuance of debt or equity securities (or securities convertible
into or exchangeable for debt or equity securities) of the Company for cash,
except for the issuance of stock options or warrants to purchase the
Company’s Common Stock. 

     “Fixed
Price” has the meaning set forth in Section 11.1. 

     “Formula
Price” shall mean a dollar amount equal to the aggregate principal amount
of the Bridge Note then outstanding, together with all accrued and unpaid
interest thereon. 

     “GAAP”
has the meaning set forth in Section 1.2. 

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

	

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

     “Intellectual
Property” has the meaning set forth in Section 4.2. 

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

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

     “Liquidity
Event” has the meaning set forth in Section 10.4(b). 

     “Majority
Holders” means (i) as of the Closing Date, the Purchaser and (ii) at any
time thereafter, the holders of more than 50% in aggregate principal amount of
the Bridge Note outstanding at such time. 

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

     “Material
Transaction” has the meaning set forth in Section 10.3(b). 

     “Maturity Date”
shall mean the date of maturity of the Bridge Note; specifically, March 18,
2003. 

     “Mortgages”
shall mean the Amendment No. 2 to that certain Mortgage and Security Agreement by and
between St. Mark's Refinery, Inc. and Purchaser dated the date hereof and the Mortgage
Agreement between Purchaser and American International Marine, Inc. dated the date hereof. 

	

     “Nasdaq
Market” means the Nasdaq Stock Market's National Market System. 

     “Net
Cash Proceeds” means, with respect to any transaction, the total amount of
cash proceeds received by the Company or any Subsidiary less (i) reasonable
underwriters’ fees, brokerage commissions, reasonable professional fees and
other customary out-of-pocket expenses payable in connection with such
transaction, and (ii) in the case of dispositions of assets, (A) actual transfer
taxes (but not income taxes) payable with respect to such dispositions, and (B)
the amount of Debt, if any, secured by a Lien on the asset or assets disposed of
and required to be, and actually repaid by the Company or any Subsidiary in
connection therewith, and any trade payables specifically relating to such asset
or assets sold by the Company or any Subsidiary that are not assumed by the
purchaser of such asset or assets. 

     “Non-Recourse
Financing” means Debt of the Company or any Subsidiary which, by its terms,
bars the lender thereof from any action against the Company or any Subsidiary,
as borrower or guarantor, if the security value of the project or asset pledged
in respect thereof falls below the amount required to repay such Debt. 

     “Notice
of Exercise” means the form to be delivered by a holder of a Warrant upon
exercise of all or a portion thereof to the Company substantially in the form of
Exhibit A to the form of Warrant. 

     “Officer’s
Certificate” shall mean a certificate executed by the President, chief
executive officer or chief financial officer of the Company in the form of
Exhibit E attached hereto. 

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

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

     “Permits”
means all domestic and foreign licenses, franchises, grants, authorizations,
permits, easements, variances, exemptions, consents, certificates, orders and
approvals necessary to own, lease and operate the properties of, and to carry on
the business of the Company and the Subsidiaries. 

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

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

	

     “Purchase
Price” means the purchase price for the Securities set forth in Section 2.2
hereof. 

     “Purchaser”
means GCA Strategic Investment Fund Limited and its successors and assigns,
including holders from time to time of the Bridge Note. 

     “Registrable
Securities” has the meaning set forth in Section 10.4(a). 

     “Registration
Default” has the meaning set forth in Section 10.4(e). 

     “Registration Maintenance
Period” has the meaning set forth in Section 10.4(c). 

     “Registration
Statement” has the meaning set forth in Section 10.4(b). 

     “Registration Rights
Agreement” means the agreement between the Company and the Purchaser dated
the date hereof substantially in the form set forth in Exhibit C attached
hereto. 

     “Required
Effectiveness Date” has the meaning set forth in Section 10.4(b). 

     “Reserve
Amount” has the meaning set forth in Section 7.10. 

     “Restricted
Payment” means, with respect to any Person, (i) any dividend or other
distribution on any shares of capital stock of such Person (except dividends
payable solely in shares of capital stock of the same or junior class of such
Person and dividends from a wholly-owned direct or indirect Subsidiary of the
Company to its parent corporation), (ii) any payment on account of the purchase,
redemption, retirement or acquisition of (a) any shares of such Person’s
capital stock or (b) any option, warrant or other right to acquire shares of
such Person’s capital stock or (iii) any loan, or advance or capital
contribution to any Person (a “Stockholder”) owning any capital stock
of such Person other than relocation, travel or like advances to officers and
employees in the ordinary course of business, and other than reasonable
compensation as determined by the Board of Directors. 

     “Rights
Offering” has the meaning set forth in Section 11.3. 

     “Sale
Event” has the meaning set forth in Section 3.4. 

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

     “Securities”
means the Bridge Note, the Warrants and the Warrant Shares. 

     “Securities
Act” means the Securities Act of 1933, as amended. 

	

     “Security
Agreement” means that certain Pledge and Security Agreement of even date
herewith between Purchaser and the Company. 

     “Share
Reorganization” has the meaning set forth in Section 11.2. 

     “Solvency
Certificate” shall mean a certificate executed by the chief financial
officer of the Company as to the solvency of the Company, the adequacy of its
capital and its ability to pay its debts, all after giving effect to the
issuance and sale of the Bridge Note and the completion of the offering
(including without limitation the payment of any fees or expenses in connection
therewith), which such Solvency Certificate shall be in the from of Exhibit D
attached hereto. 

     “Special
Distribution” has the meaning set forth in Section 11.4. 

     “Subsidiary
Corporate Documents” means the certificates of incorporation and bylaws of
each Subsidiary. 

     “Subsidiaries”
has the meaning set forth in Section 4.27. 

     “Taxes”
has the meaning set forth in Section 3.6. 

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

     “Transaction
Agreements” means this Agreement, the Bridge Note, the Security Agreement,
the Warrants, the Mortgages, and the Registration Rights Agreement. 

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

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

     “Warrants”
means the Common Stock Purchase Warrants issued to the Purchaser for up to an
aggregate of 3,600,000 shares of Common Stock in the aggregate on the Closing
Date or in the months thereafter in the form of Exhibit B hereto. 

     “Warrant
Shares” has the meaning set forth in the Recitals. 

	

ARTICLE 1.2       Accounting
Terms and Determinations. Unless otherwise specified herein, all accounting
terms used herein shall be interpreted, all accounting determinations hereunder
shall be made, and all financial statements required to be delivered hereunder
shall be prepared, in accordance with generally accepted accounting principles
as in effect from time to time, applied on a consistent basis (except for
changes concurred in by the Company’s independent public accountants)
(“GAAP”). All references to “dollars,” “Dollars”
or “$” are to United States dollars unless otherwise indicated. 

ARTICLE
2.     PURCHASE AND SALE OF SECURITIES 

ARTICLE
2.1      Purchase and Sale of Bridge Note. 

(a)     Subject
to the terms and conditions set forth herein, the Company agrees to issue and sell to
Purchaser, and Purchaser severally agrees to purchase from the Company, a Bridge Note in
the aggregate principal amount of $1,900,000.  

(b)     Purchaser
shall acquire the Bridge Note on the Closing Date in an aggregate principal amount of One
Million Nine Hundred Thousand Dollars ($1,900,000). 

(c)     In
connection with the Purchaser’s agreement to purchase the Bridge Note specified in
this Article II, the Company shall issue and deliver to the Purchaser on the Closing
Date, Warrants to purchase an aggregate of 3,600,000 (“Warrants”) shares of
Common Stock. 

(d)     The
Bridge Note is secured pursuant to the Security Agreement and the Mortgages. 

ARTICLE 2.2     Purchase Price.
The purchase price for the Bridge Note shall be $1,900,000.00. No part of the purchase
price of the Bridge Note shall be allocated to the Warrants. Therefore, the aggregate
consideration payable by the Purchaser to the Company for the Bridge Note and the
Warrants shall be $1,900,000.00 (the “Purchase Price”). 

ARTICLE
2.3      Closing and Mechanics of Payment. 

(a)     Subject
to satisfaction of the conditions set forth in Sections 6.1 and 6.2 hereof, the Closing
Date shall occur on June 18, 2002. 

(b)     The
Bridge Note issued on the Closing Date shall be dated the date hereof. 

ARTICLE
3.     PAYMENT
TERMS OF BRIDGE NOTE 

ARTICLE 3.1     Ranking;
Payment of Principal and Interest; Payment Mechanics. The Bridge Note shall
be junior in right of payment (but not with respect to the rights in the
Collateral (as defined in the Bridge Note)) to the Company’s 5% Secured
Convertible Debentures due February 18, 2004. The Bridge Note shall rank senior
in respect to any other indebtedness of the Company outstanding as of the
Closing Date or incurred hereafter except other indebtedness owed to Purchaser
and its affiliates, which will rank pari passu with the Bridge Note. The Company
will pay all amounts of principal and interest due on each Bridge Note by the
method and at the address specified for such purpose by the applicable Purchaser
in writing, without the presentation or surrender of any Bridge Note or the
making of any notation thereon, except that upon written request of the Company
made concurrently with or reasonably promptly after payment or prepayment in
full of this Bridge Note, the holder shall surrender the Bridge Note for
cancellation, reasonably promptly after any such request, to the Company at its
principal executive office. Prior to any sale or other disposition of any Bridge
Note, the holder thereof will, at its election, either endorse thereon the
amount of principal paid thereon and the last date to which interest has been
paid thereon or surrender the Bridge Note to the Company in exchange for a new
Bridge Note or Bridge Note. The Company will afford the benefits of this Section
3.1 to any direct or indirect transferee of the Bridge Note purchased under this
Agreement and that has made the same agreement relating to this Bridge Note as
the Purchaser has in this Section 3.1; provided that such transferee is an
“accredited investor” under Rule 501 of the Securities Act. 

	

ARTICLE 3.2     Payment of
Interest. Interest shall accrue on the outstanding principal amount of each
Bridge Note and shall be payable as specified therein.  

ARTICLE 3.3      Intentionally Omitted. 

ARTICLE 3.4      Mandatory Prepayments. 

(a)      Upon (i) the occurrence
of a Change in Control of the Company (a “Sale Event”), or (ii) the
occurrence of a Registration Default which continues uncured for a period of
forty-five (45) days, then, in each case, the Company shall, upon request of the
Majority Holders, redeem this Bridge Note in cash for the Formula Price. 

(b)      Upon the consummation
of (i) one or more Financings (ii) a transfer of all or substantially all of the
assets of the Company to any Person in a single transaction or series of related
transactions, or (iii) a consolidation, merger or amalgamation of the Company
with or into another Person in which the Company is not the surviving entity
(other than a merger which is effected solely to change the jurisdiction of
incorporation of the Company and results in a reclassification, conversion or
exchange of outstanding shares of Common Stock solely into shares of Common
Stock), the Company shall use 25% of the Net Cash Proceeds therefrom (unless, in
the case of subclause (i), such Net Cash Proceeds from each such Financing is
less than $250,000) to redeem the Bridge Note. The redemption price payable upon
any such redemption shall be the Formula Price. 

ARTICLE 3.5      Redemption Procedures. 

(a)      Any redemption of the
Bridge Note pursuant to Sections 3.4 above shall be deemed to be effective and
consummated (for purposes of determining the Formula Price as follows): 

	 	
(i)     A redemption pursuant to Section 3.4(a), the date of consummation of the applicable Sale
Event or the Registration Default; and

	

Form S-1
Exhibit 10.18

	 	
(ii)  A redemption pursuant to Section 3.4(b), three (3) Business Days following the date of
consummation of the applicable Financing (meaning closing and funding). 

	

(b)      On the Maturity Date
and on the effective date of a repayment or redemption of the Bridge Note as
specified in Section 3.5(a) above, the Company shall deliver by wire transfer of
funds the repayment/redemption price to Purchaser of the Bridge Note subject to
redemption. Should Purchaser not receive payment of any amounts due on
redemption of its Bridge Note by reason of the Company’s failure to make
payment at the times prescribed above for any reason, the Company shall pay to
the applicable holder on demand (x) interest on the sums not paid when due at an
annual rate equal to the lesser of (I) the maximum lawful rate and (II) 18% per
annum, compounded at the end of each thirty (30) days, until the applicable
holder is paid in full and (y) all costs of collection, including, but not
limited to, reasonable attorneys’ fees and costs, whether or not suit or
other formal proceedings are instituted. 

ARTICLE 3.6      Payment of Additional
Amounts. 

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

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

(c)      The Company shall
indemnify Purchaser, or qualified assignee, for the full amount of Taxes or
Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by
any jurisdiction on amounts payable under this Section 3.6) paid by each
Purchaser, or qualified assignee, and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto, whether or not
such Taxes or Other Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within 30 days from the date such Purchaser or
assignee makes written demand therefor. A certificate as to the amount of such
Taxes or Other Taxes submitted to the Company by such Purchaser or assignee
shall be conclusive evidence of the amount due from the Company to such party. 

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

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

	ARTICLE 4     REPRESENTATIONS
AND WARRANTIES

	

     The
Company represents and warrants to the Purchaser as of the Closing Date, the
following: 

ARTICLE 4.1
     Organization and Qualification. The Company and each Subsidiary is a
corporation (or other legal entity) duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, with full power
and authority to own, lease, use and operate its properties and to carry on its
business as and where now owned, leased, used, operated and conducted. The
Company and each Subsidiary is qualified to conduct business as a foreign
corporation and is in good standing in every jurisdiction in which the nature of
the business conducted by it makes such qualification necessary, except where
such failure would not have a Material Adverse Effect. A “Material Adverse
Effect” means any material adverse effect on the operations, results of
operations, properties, assets or condition (financial or otherwise) of the
Company or the Company and its Subsidiaries, taken as a whole, or on the
transactions contemplated hereby or by the agreements or instruments to be
entered into in connection herewith. 

	

Form S-1
Exhibit 10.18

ARTICLE 4.2      Authorization and
Execution. 

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

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

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

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

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

ARTICLE 4.4      Governmental
Authorization. The execution and delivery by the Company and each applicable
Subsidiary of the Transaction Agreements does not and will not, the issuance and
sale by the Company of the Securities does not and will not, and the
consummation of the transactions contemplated hereby and by the other
Transaction Agreements will not, require any action by or in respect of, or
filing with, any governmental body, agency or governmental official except (a)
such actions or filings that have been undertaken or made prior to the date
hereof and that will be in full force and effect (or as to which all applicable
waiting periods have expired) on and as of the date hereof or which are not
required to be filed on or prior to the Closing Date, (b) such actions or
filings that, if not obtained, would not result in a Material Adverse Effect and
(c) the filing of a “Form D” as described in Section 7.13 below.  

ARTICLE 4.5      Issuance of
Shares. Upon exercise in accordance with the terms of the Warrants (assuming the
payment of the exercise price set forth in the Warrants), the Warrant Shares
shall be duly and validly issued and outstanding, fully paid and nonassessable,
free and clear of any Taxes, Liens and charges with respect to issuance, other
than those created by Purchaser, and shall not be subject to preemptive rights
or similar rights of any other stockholders of the Company. Assuming the
representations and warranties of the Purchaser herein are true and correct in
all material respects, each of the Securities will have been issued in material
compliance with all applicable U.S. federal and state securities laws. The
Company understands and acknowledges that, in certain circumstances, the
issuance of the Warrant Shares could dilute the ownership interests of other
stockholders of the Company. The Company further acknowledges that its
obligation to issue the Warrant Shares, upon exercise of the Warrants, is
absolute and unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other stockholders of the Company.  

	

ARTICLE 4.6       No Conflicts.
The execution and delivery by the Company and each applicable Subsidiary of the
Transaction Agreements to which it is a party did not and will not, the issuance
and sale by the Company of the Securities did not and will not and the
consummation of the transactions contemplated hereby and by the other
Transaction Agreements will not, contravene or constitute a default under or
violation of (i) any provision of applicable law or regulation, (ii) the Company
or applicable Subsidiary Corporate Documents, (iii) any agreement, judgment,
injunction, order, decree or other instrument binding upon the Company or any
Subsidiary or any of their respective assets, or result in the creation or
imposition of any Lien on any asset of the Company or any Subsidiary, except
those created by the Transaction Documents. The Company and each Subsidiary is
in compliance with and conforms to all statutes, laws, ordinances, rules,
regulations, orders, restrictions and all other legal requirements of any
domestic or foreign government or any instrumentality thereof having
jurisdiction over the conduct of its businesses or the ownership of its
properties, except where such failure would not have a Material Adverse Effect.  

ARTICLE 4.7       Financial
Information an SEC Reports. The Company has timely filed all forms, reports and
documents with the Commission required to be filed by it under the Exchange Act
through the date hereof (all of the foregoing filed prior to the date hereof and
all exhibits included therein and financial statements and schedules thereto and
documents (other than exhibits) incorporated by reference therein, being
referred to herein collectively as the “SEC Reports”). The Company has
delivered or made available to each Purchaser true and complete copies of the
SEC Reports, except for such exhibits and incorporated documents. Such SEC
Reports, at the time filed, complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the Commission
thereunder applicable to such SEC Reports. None of the SEC Reports, including
without limitation, any financial statements or schedules included therein,
contains any untrue statement of a material fact or omits to state a material
fact necessary to in order to make the statements made, in light of the
circumstances under which they were made, not misleading. There have been no
material adverse changes in the Company’s business, properties, results of
operations, condition (financial or otherwise) or prospects since the date of
the Company’s most recent Report on Form 10-K for the year ended December
31, 2001 which have not been disclosed in the Company’s SEC Reports. The
audited and unaudited consolidated balance sheets of the Company and its
Subsidiaries contained in the SEC Reports, and the related consolidated
statements of income, changes in stockholders’ equity and changes in cash
flows for the periods then ended, including the footnotes thereto, except as
indicated therein, (i) complied in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission with respect thereto and (ii) have been prepared in accordance with
GAAP consistently applied throughout the periods indicated, except that the
unaudited financial statements do not contain notes and may be subject to normal
audit adjustments and normal annual adjustments. Such financial statements
fairly present the financial condition of the Company and its Subsidiaries at
the dates indicated and the consolidated results of their operations and cash
flows for the periods then ended and, except as indicated therein, reflect all
claims against and all Debts and liabilities of the Company and its
Subsidiaries, fixed or contingent. Since December 31, 2001 (the “Balance
Sheet Date”), except as disclosed in the SEC Reports, there has been (x) no
material adverse change in the assets or liabilities, or in the business or
condition, financial or otherwise, or in the results of operations or prospects,
of the Company and its Subsidiaries, whether as a result of any legislative or
regulatory change, revocation of any license or rights to do business, fire,
explosion, accident, casualty, labor trouble, flood, drought, riot, storm,
condemnation, act of God, public force or otherwise and (y) no material adverse
change in the assets or liabilities, or in the business or condition, financial
or otherwise, or in the results of operations or prospects, of the Company and
its subsidiaries except in the ordinary course of business; and no fact or
condition exists or is contemplated or threatened which might cause such a
change in the future.  

	

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

ARTICLE 4.9      Compliance with
ERISA and other Benefit Plans.  

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

	

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

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

ARTICLE 4.10       Environmental
Matters. The costs and liabilities associated with Environmental Laws (including
the cost of compliance therewith) are unlikely to have a material adverse effect
on the business, condition (financial or otherwise), operations, performance,
properties or prospects of the Company or any Subsidiary. Each of the Company
and the Subsidiaries conducts its businesses in compliance in all material
respects with all applicable Environmental Laws.  

ARTICLE 4.11       Taxes. All
United States federal, state, county, municipality, local or foreign income tax
returns and all other material tax returns (including foreign tax returns) which
are required to be filed by or on behalf of the Company and each Subsidiary have
been filed or extensions for the filing of such returns have been filed and all
material taxes due pursuant to such returns or pursuant to any assessment
received by the Company and each Subsidiary have been paid except those being
disputed in good faith and for which adequate reserves have been established.
The charges, accruals and reserves on the books of the Company and each
Subsidiary in respect of taxes and other governmental charges have been
established in accordance with GAAP.  

ARTICLE 4.12      Investments,
Joint Ventures. Other than as set forth in Schedule 4.12, the Company has no
direct or indirect Investment in any Person, and the Company is not a party to
any partnership, management, shareholders’ or joint venture or similar
agreement.  

ARTICLE 4.13      Not an
Investment Company. The Company has no direct or indirect Investment in any
Person, and the Company is not a party to any partnership, management,
shareholders’ or joint venture or similar agreement  

	

ARTICLE 4.14.       Not an
Investment Company. Neither the Company nor any Subsidiary is an
“Investment Company” within the meaning of Investment Company Act of
1940, as amended.  

ARTICLE 4.15      Full
Disclosure. The information heretofore furnished by the Company to the Purchaser
for purposes of or in connection with this Agreement or any transaction
contemplated hereby does not, and all such information hereafter furnished by
the Company or any Subsidiary to the Purchaser will not (in each case taken
together and on the date as of which such information is furnished), contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained therein, in the light of the
circumstances under which they are made, not misleading.  

ARTICLE 4.16      No
Solicitation; No Integration with Other Offerings. No form of general
solicitation or general advertising was used by the Company or, to the best of
its actual knowledge, any other Person acting on behalf of the Company, in
connection with the offer and sale of the Securities. Neither the Company, nor,
to its knowledge, any Person acting on behalf of the Company, has, either
directly or indirectly, sold or offered for sale to any Person (other than the
Purchaser) any of the Securities or, within the six months prior to the date
hereof, any other similar security of the Company except as contemplated by this
Agreement, and the Company represents that neither itself nor any Person
authorized to act on its behalf (except that the Company makes no representation
as to the Purchaser and their Affiliates) will sell or offer for sale any such
security to, or solicit any offers to buy any such security from, or otherwise
approach or negotiate in respect thereof with, any Person or Persons so as
thereby to cause the issuance or sale of any of the Securities to be in
violation of any of the provisions of Section 5 of the Securities Act. The
issuance of the Securities to the Purchaser will not be integrated with any
other issuance of the Company’s securities (past, current or future) which
requires stockholder approval.  

ARTICLE 4.17      Permits. (a)
Each of the Company and its Subsidiaries has all material Permits; (b) all such
Permits are in full force and effect, and each of the Company and its
Subsidiaries has fulfilled and performed all material obligations with respect
to such Permits; (c) no event has occurred which allows, or after notice of
lapse of time would allow, revocation or termination by the issuer thereof or
which results in any other material impairment of the rights of the holder of
any such Permit; and (d) the Company has no reason to believe that any
governmental body or agency is considering limiting, suspending or revoking any
such Permit.  

ARTICLE 4.18      Leases. Other
than as disclosed in the SEC Reports, neither the Company nor any Subsidiary is
a party to any capital lease obligation with a value greater than $100,000 or to
any operating lease with an aggregate annual rental greater than $500,000 during
the life of such lease.  

	

ARTICLE 4.19      Absence of Any
Undisclosed Liabilities or Capital Calls. There are no liabilities of the
Company or any Subsidiary of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, and there is no existing
condition, situation or set of circumstances which would reasonably be expected
to result in such a liability, other than (i) those liabilities provided for in
the financial statements delivered pursuant to Section 4.7 hereof and (ii) other
undisclosed liabilities which, individually or in the aggregate, would not have
a Material Adverse Effect.  

ARTICLE 4.20      Public Utility
Holding Company. Neither the Company nor any Subsidiary is, or will be upon
issuance and sale of the Securities and the use of the proceeds described
herein, subject to regulation under the Public Utility Holding Company Act of
1935, as amended, the Federal Power Act, the Interstate Commerce Act or to any
federal or state statute or regulation limiting its ability to issue and perform
its obligations under any Transaction Agreement.  

ARTICLE 4.21      Intellectual
Property Rights. Each of the Company and its Subsidiaries owns, or is licensed
under, and has the rights to use, all material patents, trademarks, trade names,
copyrights, technology, know-how and processes (collectively, “Intellectual
Property”) used in, or necessary for the conduct of its business; no claims
have been asserted by any Person to the use of any such Intellectual Property or
challenging or questioning the validity or effectiveness of any license or
agreement related thereto. To the best of Company’s and its
Subsidiaries’ knowledge, there is no valid basis for any such claim and the
use of such Intellectual Property by the Company and its Subsidiaries will not
infringe upon the rights of any Person.  

ARTICLE 4.22      Insurance. The
Company and its Subsidiaries maintain, with financially sound and reputable
insurance companies, insurance in at least such amounts and against such risks
such that any uninsured loss would not have a Material Adverse Effect. Except as
set forth in Schedule 4.21, all insurance coverages of the Company and its
Subsidiaries are in full force and effect and there are no past due premiums in
respect of any such insurance.  

ARTICLE 4.23      Title to
Properties. The Company and its Subsidiaries have good and marketable title to
all their respective properties, real and personal, free and clear of all Liens.  

ARTICLE 4.24      Reserved. 

ARTICLE 4.25      Internal
Accounting Controls. The Company and each of its Subsidiaries maintain a system
of internal accounting controls sufficient, in the judgment of the
Company’s Board of Directors, to provide reasonable assurance that (i)
transactions are executed in accordance with managements’ 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.  

	

ARTICLE 4.26      Reserved.  

ARTICLE 4.27      Foreign
Practices. Neither the Company nor any of its Subsidiaries nor, to the
Company’s knowledge, any employee or agent of the Company or any Subsidiary
has made any payments of funds of the Company or Subsidiary, or received or
retained any funds, in each case (x) in violation of any law, rule or regulation
or (y) of a character required to be disclosed by the Company in any of the SEC
Reports.  

     Section
4.27 Subsidiaries. Except for the directly and indirectly owned subsidiaries of
the Company as set forth on Schedule 4.27 (the “Subsidiaries”), the
Company does not own or hold any shares of stock or any other security or
interest in any other equity, or any rights to acquire any such security or
interest. Except for the Subsidiaries disclosed on Schedule 4.27, the Company
has never had any subsidiary corporation of which the securities having a
majority of voting power in electing the board of directors or representing a
majority of the economic interests were, at the time as of which any
determination was made, owned by the Company either directly or indirectly. The
number of authorized, issued and outstanding shares of capital stock of the
Subsidiaries is as set forth on Schedule 4.27. All outstanding shares of the
Subsidiaries capital stock are validly issued, fully paid and nonassessable, are
free from, and were not issued in violation of any preemptive rights, and are
owned of record and beneficially by the Company.  

ARTICLE 5.     REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

ARTICLE 5.1      Purchaser.  Purchaser
hereby represents and warrants to the Company that: 

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

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

	

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

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

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

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

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

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

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

(j)      the Purchaser is a corporation
organized under the laws of Bermuda. 

	

ARTICLE 6.     CONDITIONS PRECEDENT TO PURCHASE OF SECURITIES

ARTICLE 6.1       Conditions
Precedent to the Purchaser’s Obligations to Purchase. The obligation of
Purchaser hereunder to purchase the Bridge Note at the Closing is subject to the
satisfaction, on or before the Closing Date of each of the following conditions,
provided that these conditions are for Purchaser’s sole benefit and may be
waived by Purchaser at any time in its sole discretion; 

(a)      The Company shall have executed
this Agreement and the Registration Rights Agreement and delivered the same to the
Purchaser; 

(b)      The Company and each
applicable Subsidiary shall have delivered to the Purchaser a duly executed
certificate representing the Bridge Note in accordance with Article 2 hereof,
the Warrant, the Security Agreement, the Mortgages and all other Transaction
Documents. 

(c)      The Company shall have delivered
the Solvency Certificate; 

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

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

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

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

(h)     Purchaser
shall have received an opinion, dated the Closing Date, of counsel to the Company; 

	

(i)      All fees and expenses due and
payable by the Company on or prior to the Closing Date shall have been paid; 

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

(k)      There shall have
occurred no material adverse change in the business, condition (financial or
otherwise), operations, performance, properties or prospects of the Company or
any Subsidiary since December 31, 2001; 

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

(m)       The Purchaser shall
have confirmed receipt of the Bridge Note to be issued, duly executed by the
Company in the denominations and registered in the name of the Purchaser
specified in Section 2.1; 

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

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

(p)       The Purchaser shall have
received all pledged collateral pursuant to the Security Agreement along with blank stock
transfer powers; 

(q)       The Purchaser shall
have received evidence of valid insurance in compliance with Section 4.21 of
this Agreement on all real and personal property of the Company and its
subsidiaries being used as collateral for the Security Agreement and the
Mortgages; and 

	

(r)       The Purchaser shall
have received a pay-off letter and lien release from AcTrade Capital with
respect to any amounts owed by the Company to AcTrade Capital which are secured
by any collateral named in the Mortgages. 

ARTICLE 6.2      Conditions
to the Company’s Obligations. The obligations of the Company to issue
and sell the Securities to the Purchaser pursuant to this Agreement are subject
to the satisfaction, at or prior to any Closing Date, of the following
conditions: 

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

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

(c)      Receipt by the Company of duly
executed counterparts of this Agreement and the Registration Rights Agreement signed by
the Purchaser; and 

(d)      The Company shall have received
payment of the Purchase Price, less the Expense Reimbursement Fee. 

	ARTICLE 7.     AFFIRMATIVE COVENANTS

	

     The
Company hereby agrees that, from and after the date hereof for so long as any
Bridge Note remain outstanding (except for Sections 7.1(a) and (d), 7.10, 7.11,
7.12 and 7.13, which shall apply for so long as any Bridge Note or Warrants
remain outstanding) and for the benefit of the Purchaser: 

ARTICLE 7.1     Information. The Company will deliver to each holder of the Bridge Note: 

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

(b)      simultaneously with the
delivery of each item referred to in clause (a) above, a certificate from the
chief financial officer of the Company stating that no Default or Event of
Default has occurred and is continuing, or, if as of the date of such delivery a
Default shall have occurred and be continuing, a certificate from the Company
setting forth the details of such Default or Event of Default and the action
which the Company is taking or proposes to take with respect thereto; 

	

(c)      within two (2) days
after any officer of the Company obtains knowledge of a Default or Event of
Default, or that any Person has given any notice or taken any action with
respect to a claimed Default hereunder, a certificate of the chief financial
officer of the Company setting forth the details thereof and the action which
the Company is taking or proposed to take with respect thereto; 

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

(e)      at least two (2)
Business Days prior to the consummation of any Financing or other event
requiring a repayment of the Bridge Note under Section 3.4, notice thereof
together with a summary of all material terms thereof and copies of all
documents and instruments associated therewith; 

(f)      notice promptly upon
the occurrence of any event by which the Reserved Amount becomes less than the
maximum number of Warrant Shares issuable pursuant to the Transaction
Agreements; and 

(g)      promptly following the
commencement thereof, notice and a description in reasonable detail of any
litigation or proceeding to which the Company or any Subsidiary is a party in
which the amount involved is $250,000 or more and not covered by insurance or in
which injunctive or similar relief is sought or which the Company is required to
disclose in its SEC Reports. 

ARTICLE 7.2      Payment of
Obligations. The Company will, and will cause each Subsidiary to, pay and
discharge, at or before maturity, all their respective material obligations,
including, without limitation, tax liabilities, except where the same may be
contested in good faith by appropriate proceedings and will maintain, in
accordance with GAAP, appropriate reserves for the accrual of any of the same.  

ARTICLE 7.3      Maintenance
of Property; Insurance. The Company will, and will cause each Subsidiary to,
keep all property useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted. In addition, the Company and each
Subsidiary will maintain insurance in at least such amounts and against such
risks as it has insured against as of the Closing Date.  

	

ARTICLE 7.4     Maintenance
of Existence. The Company will, and will cause each Subsidiary to, continue
to engage in business of the same general type as now conducted by the Company
and such Subsidiaries, and will preserve, renew and keep in full force and
effect its respective corporate existence and their respective material rights,
privileges and franchises necessary or desirable in the normal conduct of
business.  

ARTICLE 7.5       Compliance
with Laws. The Company will, and will cause each Subsidiary to, comply, in
all material respects, with all federal, state, municipal, local or foreign
applicable laws, ordinances, rules, regulations, municipal by-laws, codes and
requirements of governmental authorities (including, without limitation,
Environmental Laws and ERISA and the rules and regulations thereunder) except
(i) where compliance therewith is contested in good faith by appropriate
proceedings or (ii) where non-compliance therewith could not reasonably be
expected, in the aggregate, to have a material adverse effect on the business,
condition (financial or otherwise), operations, performance, properties or
prospects of the Company or such Subsidiary. 

ARTICLE 7.6       Inspection
of Property, Books and Records. The Company will, and will cause each
Subsidiary to, keep proper books of record and account in which full, true and
correct entries shall be made of all dealings and transactions in relation to
their respective businesses and activities; and will permit, during normal
business hours, the Purchaser’s Representative or an affiliate thereof, as
representatives of the Purchaser, to visit and inspect any of their respective
properties, upon reasonable prior notice, to examine and make abstracts from any
of their respective books and records and to discuss their respective affairs,
finances and accounts with their respective executive officers and independent
public accountants (and by this provision the Company authorizes its independent
public accountants to disclose and discuss with the Purchaser the affairs,
finances and accounts of the Company and its Subsidiaries), all at such
reasonable times. 

ARTICLE 7.7       Investment
Company Act. The Company will not be or become an open-end investment trust,
unit investment trust or face-amount certificate company that is or is required
to be registered under Section 8 of the Investment Company Act of 1940, as
amended. 

ARTICLE 7.8       Use of
Proceeds. The proceeds from the issuance and sale of the Bridge Note by the
Company shall be used as set forth on Schedule 7.8. None of the proceeds
from the issuance and sale of the Bridge Note by the Company pursuant to this
Agreement will be used directly or indirectly for the purpose, whether
immediate, incidental or ultimate, of purchasing or carrying any “margin
stock” within the meaning of Regulation G of the Board of Governors of the
Federal Reserve System. 

ARTICLE 7.9       Compliance
with Terms and Conditions of Material Contracts. The Company will, and will
cause each Subsidiary to, comply, in all respects, with all terms and conditions
of all material contracts to which it is subject. 

	

ARTICLE 7.10      Reserved Shares and
Listings. 

(a)      The Company shall at
all times have authorized, and reserved for the purpose of issuance, a
sufficient number of shares of Common Stock to provide for the exercise in full
of the Warrants and the issuance of the Warrant Shares (based on the exercise
price of the Warrants) (collectively, the “Reserved Amount”). The
Company shall not reduce the Reserved Amount without the prior written consent
of Purchaser. If at any time the number of shares of Common Stock authorized and
reserved for issuance is below the number of Warrant Shares issued or issuable
upon exercise of the Warrants, the Company will promptly take all corporate
action necessary to authorize and reserve a sufficient number of shares,
including, without limitation, either (x) calling a special meeting of
shareholders to authorize additional shares, in the case of an insufficient
number of authorized shares or (y) in lieu thereof, consummating the immediate
repurchase of the Warrants contemplated in Sections 3.4(c) and 10.3 hereof. 

(b)      The Company will obtain and
maintain the listing and trading of its Common Stock on the Nasdaq Stock Market, the
Nasdaq SmallCap Market, the New York Stock Exchange, Inc., the American Stock Exchange
Inc., or the Nasdaq Bulletin Board and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the National
Association of Securities Dealers, Inc. (the "NASD") and such exchanges, as applicable. 

ARTICLE 7.11
     Irrevocable Instructions. Upon receipt of a Notice of Exercise, as
applicable, the Company shall immediately issue irrevocable instructions to its
transfer agent to issue certificates, registered in the name of each Purchaser
or its nominee, for the Warrant Shares in such amounts as specified from time to
time by each Purchaser to the Company upon proper exercise of the Warrants. Upon
exercise of any Warrants in accordance with their terms, the Company will, and
will use its best lawful efforts to cause its transfer agent to, issue one or
more certificates representing shares of Common Stock in such name or names and
in such denominations specified by a Purchaser in a Notice of Exercise. As long
as the Registration Statement contemplated by the Registration Rights Agreement
shall remain effective, the shares of Common Stock issuable upon exercise of any
Warrants shall be issued to any transferee of such shares from Purchaser,
including transferee’s of such shares pursuant to an effective registration
statement, without any restrictive legend. The Company further warrants and
agrees that no instructions other than these instructions have been or will be
given to its transfer agent. Nothing in this Section 7.11 shall affect in any
way a Purchaser’s obligation to comply with all securities laws applicable
to such Purchaser upon resale of such shares of Common Stock, including any
prospectus delivery requirements. 

ARTICLE 7.12
     Maintenance of Reporting Status; Supplemental Information. So long as any of
the Securities are outstanding, the Company shall timely file all reports
required to be filed with the Commission pursuant to the Exchange Act. The
Company shall not terminate its status as an issuer required to file reports
under the Exchange Act, even if the Exchange Act or the rules and regulations
thereunder would permit such termination. If at anytime the Company is not
subject to the requirements of Section 13 or 15(d) of the Exchange Act, the
Company will promptly furnish at its expense, upon request, for the benefit of
the holders from time to time of Securities, and prospective Purchaser of
Securities, information satisfying the information requirements of Rule 144
under the Securities Act. 

	

ARTICLE 7.13       Form D;
Blue Sky Laws. The Company agrees to file a “Form D” with respect
to the Securities as required under Regulation D of the Securities Act and to
provide a copy thereof to each Purchaser promptly after such filing. The Company
shall, on or before the Closing Date, take such action as the Company shall
reasonably determine is necessary to qualify the Securities for sale to the
Purchaser at the Closing pursuant to this Agreement under applicable securities
or “blue sky” laws of the states of the United States (or to obtain an
exemption from such qualification), and shall provide evidence of any such
action so taken to each Purchaser on or prior to the Closing Date. 

ARTICLE 7.14       Certain
Payments. The Company agrees to pay all title insurance, filing, recordation
or other fees, including any taxes, relating to the execution and perfection of
the security interest evidenced by the Security Agreement and the Mortgages, and
to cooperate with Purchaser in connection with filing the appropriate documents
for the perfection of such security interest. 

ARTICLE 8.1      Reserved. 

ARTICLE 8.2      Transactions
with Affiliates. The Company and each Subsidiary will not, directly or
indirectly, pay any funds to or for the account of, make any investment (whether
by acquisition or stock or indebtedness, by loan, advance, transfer of property,
guarantee or other agreement to pay, purchase or service, directly or
indirectly, and Debt, or otherwise) in, lease, sell, transfer or otherwise
dispose of any assets, tangible or intangible, to, or participate in, or effect
any transaction in connection with any joint enterprise or other joint
arrangement with, any Affiliate, except, (1) pursuant to those agreements
specifically identified on Schedule 8.2 attached hereto (with a copy of such
agreements annexed to such Schedule 8.3) or (2) on terms to the Company or such
Subsidiary no less favorable than terms that could be obtained by the Company or
such Subsidiary from a Person that is not an Affiliate of the Company upon
negotiation at arms’ length, as determined in good faith by the Board of
Directors of the Company; provided that no determination of the Board of
Directors shall be required with respect to any such transactions entered into
in the ordinary course of business.  

ARTICLE 8.3      Merger or
Consolidation. Subject to the provisions of Section 3.4(b), the Company will
not, in a single transaction or a series of related transactions without ten
days prior written notice to Purchaser, (i) consolidate with or merge with or
into any other Person, or (ii) permit any other Person to consolidate with or
merge into it, unless the Company shall be the survivor of such merger or
consolidation and (x) immediately before and immediately after given effect to
such transaction (including any indebtedness incurred or anticipated to be
incurred in connection with the transaction), no Default or Event of Default
shall have occurred and be continuing; and (y) the Company has delivered to the
Purchaser an Officer’s Certificate stating that such consolidation, merger
or transfer complies with this Agreement, and that all conditions precedent in
this Agreement relating to such transaction have been satisfied.  

	

ARTICLE 8.4      Limitation on
Asset Sales. Subject to the provisions of Section 3.4(b), neither the Company
nor any Subsidiary will consummate an Asset Sale of material assets of the
Company or any Subsidiary without ten days prior written notice to Purchaser. As
used herein, “Asset Sale” means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) or
sales of capital stock of a Subsidiary (other than directors’ qualifying
shares), property or other assets (each referred to for the purpose of this
definition as a “disposition”), including any disposition by means of
a merger, consolidation or similar transaction other than a disposition of
property or assets at fair market value in the ordinary course of business;
provided, however, Asset Sale shall not include the sale of a portion of the
Company’s ownership interest in License 1551 relating to the development of
certain oil and gas fields in Kazakstan and the sale of any gas resulting from
the development of such property under License 1551 or products derived from
processing of crude oil or asphalt in the normal course of the Company’s
business.  

ARTICLE 8.5      Restrictions on
Certain Amendments. Neither the Company nor any Subsidiary will waive any
provision of, amend, or suffer to be amended, any provision of such
entity’s existing Debt except for the Company’s 5% Secured Convertible
Debentures due February 18, 2004, any material contract or agreement previously
or hereafter filed by the Company with the Commission as part of its SEC
Reports, any Company Corporate Document or Subsidiary Corporate Document if such
amendment, in the Company’s reasonable judgment, would materially adversely
affect the Purchaser or the holders of the Securities without the prior written
consent of the Purchaser.  

ARTICLE 9.      RESTRICTIVE LEGENDS 

ARTICLE 9.1      Restrictions on
Transfer. From and after their respective dates of issuance, none of the
Securities shall be transferable except upon the conditions specified in this
Article IX, which conditions are intended to ensure compliance with the
provisions of the Securities Act in respect of the Transfer of any of such
Securities or any interest therein. Purchaser will use its best efforts to cause
any proposed transferee of any Securities held by it to agree to take and hold
such Securities subject to the provisions and upon the conditions specified in
this Article IX.  

	

ARTICLE 9.2      Restrictive Legends.  

(a)      Each certificate for
Securities issued to Purchaser or to a subsequent transferee shall (except as
contemplated by Section 7.11 and Section 9.1 hereof) include a legend in
substantially the following form: 

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

ARTICLE 9.3      Notice of
Proposed Transfers. Prior to any proposed Transfer of the Securities (other than
a Transfer (i) registered or exempt from registration under the Securities Act,
(ii) to an affiliate of a Purchaser which is an “accredited investor”
within the meaning of Rule 501(a) under the Securities Act, provided that any
such transferee shall agree to be bound by the terms of this Agreement and the
Registration Rights Agreement, or (iii) to be made in reliance on Rule 144 under
the Securities Act), the holder thereof shall give written notice to the Company
of such holder’s intention to effect such Transfer, setting forth the
manner and circumstances of the proposed Transfer, which shall be accompanied by
(a) an opinion of counsel reasonably acceptable to the Company, confirming that
such transfer does not give rise to a violation of the Securities Act, (B)
representation letters in form and substance reasonably satisfactory to the
Company to ensure compliance with the provisions of the Securities Act and (C)
letters in form and substance reasonably satisfactory to the Company from each
such transferee stating such transferee’s agreement to be bound by the
terms of this Agreement and the Registration Rights Agreement. Such proposed
Transfer may be effected only if the Company shall have received such notice of
transfer, opinion of counsel, representation letters and other letters referred
to in the immediately preceding sentence, whereupon the holder of such
Securities shall be entitled to Transfer such Securities in accordance with the
terms of the notice delivered by the holder to the Company.  

	

ARTICLE 10.      ADDITIONAL AGREEMENTS
AMONG THE PARTIES 

ARTICLE 10.1      Liquidated Damages.  

(a)      The Company shall, and
shall use its best efforts to cause its transfer agent to, issue and deliver
shares of Common Stock consistent with Section 7.11 hereof within three (3) New
York Stock Exchange Trading Days of delivery of a Notice of Exercise, as
applicable (the “Deadline”) to the Purchaser (or any party receiving
Securities by transfer from such Purchaser) at the address of the Purchaser set
forth in the Notice of Exercise, as the case may be. The Company understands
that a delay in the issuance of such certificates after the Deadline could
result in economic loss to the Purchaser. 

(b)      Without in any way
limiting the Purchaser’s right to pursue other remedies, including actual
damages and/or equitable relief, the Company agrees that if delivery of the
Warrant Shares is more than one (1) Business Day after the Deadline the Company
shall pay to each Purchaser, as liquidated damages and not as a penalty, $500
for each $100,000 of Bridge Note then outstanding per day in cash, for each of
the first ten (10) days beyond the Deadline, and $1,000 for each $100,000 of
Bridge Note then outstanding per day in cash for each day thereafter that the
Company fails to deliver such Common Stock. Such cash amount shall be paid to
each Purchaser upon demand. 

ARTICLE 10.2      Exercise
Notice. The Company agrees that, in addition to any other remedies which may be
available to the Purchaser, including, but not limited to, the remedies
available under Section 10.1, in the event the Company fails for any reason
(other than as a result of actions taken by a Purchaser in breach of this
Agreement) to effect delivery to a Purchaser of certificates with or without
restrictive legends as contemplated by Article IX representing the shares of
Common Stock on or prior to the Deadline after exercise of any Warrant, such
Purchaser will be entitled, if prior to the delivery of such certificates, to
revoke the Notice of Exercise, as applicable, by delivering a notice to such
effect to the Company whereupon the Company and the Purchaser shall each be
restored to their respective positions immediately prior to delivery of such
Notice of Exercise.  

ARTICLE 10.3      Reserved.  

ARTICLE 10.4      Registration Rights.  

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

(b)      The Company shall
prepare and file, within 30 days following the closing (the “Filing
Date”), a registration statement (the “Registration Statement”)
on Form S-3 (or such other form as is then available for registration) covering
the sale of the Registrable Securities. The Company shall use its best efforts
to cause the Registration Statement to be declared effective by the Commission
no later than (x) 90 days following the Closing Date or (y) five days after the
receipt of a “no review” or similar letter from the Commission (the
“Required Effectiveness Date”). The Company shall pay all expenses of
registration (other than underwriting fees and discounts, if any, in respect of
Registrable Securities offered and sold under such Registration Statement by the
Purchaser). 

	

(c)      If the Registration
Statement is not filed by the Filing Date, the Company will pay to the Fund, one
percent of the original principal amount of the Bridge Note prorated, for each
30 day period the Registration Statement has not been filed. Furthermore, if the
Registration Statement is not declared effective by the Commission by the
Required Effectiveness Date, the Company shall pay to the Purchaser, as
liquidated damages and not as a penalty, an aggregate amount of two percent of
the original principal amount of the Bridge Note (each a “Default
Fee”), for each 30-day period the Registration Statement is not declared
effective by the Commission by the Required Effectiveness Date, which fee will
increase to three percent of the original principal amount of the Bridge Note if
the Registration Statement is not declared effective within 90 days following
the Filing Date. If the effectiveness is not maintained for a period of three
years after the Closing Date (including but not limited to the occurrence of any
event that results in any prospectus or supplemental prospectus containing an
untrue statement of a material fact or omitting a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances in which they were made, not misleading) (subject to the right
of the Company to suspend the effectiveness thereof for not more than 10
consecutive days or an aggregate of 30 days during such three year period) (the
“Registration Maintenance Period”), the Company shall pay to the
Purchaser, if such default in the effectiveness of the registration statement
has not been cured within 10 business days following such default, as liquidated
damages and not as a penalty, $1,000.00 for each day the effectiveness is not
maintained during the Required Maintenance Period (a “Default Fee”). 

(d)      Any such Default Fee
shall be paid in cash by the Company to the Purchaser by wire transfer in
immediately available funds on the last day of each calendar week following the
event requiring its payment. 

(e)      If, for any reason
(including but not limited to the issuance of all shares of Common Stock covered
by the prospectus included in the Registration Statement), the Default Fee is
incurred for a period of forty-five (45) days (a “Registration
Default”), the holders of a majority of the Bridge Note then outstanding
may elect to cause the Company to repay the Bridge Note in full at the Formula
Price. 

ARTICLE 11.      ADJUSTMENT OF FIXED PRICE 

ARTICLE 11.1
     Reorganization. The exercise price of the Warrants (the “Fixed Price”)
shall be adjusted, as applicable, as hereafter provided.  

ARTICLE 11.2      Share Reorganization.
If and whenever the Company shall: 

	

	 	
(i)
     subdivide the outstanding shares of Common Stock into a greater number of shares; 

	 	
(ii)     consolidate the outstanding shares of Common Stock into a smaller number of shares; 

	 	
(iii)     issue
Common Stock or securities convertible into or exchangeable for shares of Common Stock as
a stock dividend to all or substantially all the holders of Common Stock; or 

	 	
(iv)     make
a distribution on the outstanding Common Stock to all or substantially all the holders of
Common Stock payable in Common Stock or securities convertible into or exchangeable for
Common Stock; 

	 	
any
of such events being herein called a “Share Reorganization,”then in each such
case the Fixed Price shall be adjusted, effective immediately after the record date at
which the holders of Common Stock are determined for the purposes of the Share
Reorganization or, if no record date is fixed, the effective date of the Share
Reorganization, by multiplying the Fixed Price in effect on such record or effective
date, as the case may be, by a fraction of which: 

	 	     (i)
the numerator shall be the number of shares of Common Stock outstanding on such record or
effective date (without giving effect to the transaction); and

	 	     (ii)
the denominator shall be the number of shares of Common Stock outstanding after giving
effect to such Share Reorganization, including, in the case of a distribution of
securities convertible into or exchangeable for shares of Common Stock, the number of
shares of Common Stock that would have been outstanding if such securities had been
converted into or exchanged for Common Stock on such record or effective date. 

ARTICLE 11.3      Capital Reorganization.
If and whenever there shall occur: 

	 	
(i)
     a reclassification or redesignation of the shares of Common Stock or any change of the
shares of Common Stock into other shares, other than in a Share Reorganization;

	 	
(ii)
     a consolidation, merger or amalgamation of the Company with, or into another body
corporate; or

	 	
(iii)
     the transfer of all or substantially all of the assets of the Company to another body
corporate;

	

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

ARTICLE 11.4      Adjustment
Rules. The following rules and procedures shall be applicable to adjustments
made in this Article XI:  

(a)      no adjustment in the
Fixed Price shall be required unless such adjustment would result in a change of
at least 1% in the Fixed Price then in effect, provided, however, that any
adjustments which, but for the provisions of this clause would otherwise have
been required to be made, shall be carried forward and taken into account in any
subsequent adjustment; 

(b)      if any event occurs of
the type contemplated by the adjustment provisions of this Article XI but not
expressly provided for by such provisions, the Company will give notice of such
event as provided herein, and the Company’s board of directors will make an
appropriate adjustment in the Fixed Price so that the rights of the holders of
the applicable Security shall not be diminished by such event; and 

(c)      if a dispute shall at
any time arise with respect to any adjustment of the Fixed Price, such dispute
shall be conclusively determined by the auditors of the Company or, if they are
unable or unwilling to act, by a firm of independent chartered accountants
selected by the Directors and any such determination shall be binding upon the
Company and Purchaser. 

ARTICLE 11.5      Certificate as
to Adjustment. The Company shall from time to time promptly after the occurrence
of any event which requires an adjustment in the Fixed Price deliver to the
Purchaser a certificate specifying the nature of the event requiring the
adjustment, the amount of the adjustment necessitated thereby, the Fixed Price
after giving effect to such adjustment and setting forth, in reasonable detail,
the method of calculation and the facts upon which such calculation is based.  

ARTICLE 11.6      Notice to Noteholders.
If the Company shall fix a record date for: 

	

(a)      any Share
Reorganization (other than the subdivision of outstanding Common Stock into a
greater number of shares or the consolidation of outstanding Common Stock into a
smaller number of shares), 

(b)      any Rights Offering, 

(c)      any Special Distribution, 

(d)      any Capital Reorganization
(other than a reclassification or redesignation of the Common Stock into other shares), 

(e)      Sale Event; or 

(f)      any cash dividend, 

the Company shall, not less
than 10 days prior to such record date or, if no record date is fixed, prior to
the effective date of such event, give to the Purchaser notice of the
particulars of the proposed event or the extent that such particulars have been
determined at the time of giving the notice. 

	ARTICLE 12.     EVENTS OF DEFAULT

	

ARTICLE 12.1      Events of
Default. If one or more of the following events (each an “Event of
Default”) shall have occurred and be continuing:  

(a)      failure by the Company
to pay or repay when due, all or any part of the principal and interest on the
Bridge Note (whether by virtue of the agreements specified in this Agreement or
the Bridge Note); 

(b)      failure by the Company
to pay (i) within five (5) Business Days of the due date thereof any interest on
the Bridge Note or (ii) within five (5) Business Days following the delivery of
notice to the Company of any fees or any other amount payable (not otherwise
referred to in (a) above or this clause (b)) by the Company under this Agreement
or any other Transaction Agreement; 

(c)      failure by the Company
to timely comply with the requirements of Section 7.10, 7.11 or 10.1 hereof,
which failure is not cured within five (5) Business Days of such failure; 

(d)      failure on the part of
the Company to observe or perform any covenant contained in Sections 7.10, 7.11,
or Article VIII of this Agreement, which failure is not cured within five
business days of such failure; 

	

(e)      failure on the part of
the Company to observe or perform any covenant or agreement contained in any
Transaction Agreement (other than those covered by clauses (a), (b), (c) or (d)
above) for 30 days from the date of such occurrence; 

(f)      the trading in the
Common Stock shall have been suspended by the Commission or by the NASD (except
for any suspension of trading of limited duration solely to permit dissemination
of material information regarding the Company and except if, at the time there
is any suspension on the Bulleting Board, the Common Stock is then listed and
approved for trading on either the New York Stock Exchange, the American Stock
Exchange, the Nasdaq Stock Market or the Bulletin Board within ten (10) Trading
Days thereof); 

(g)      the Company shall have
its Common Stock delisted from the Bulletin Board for at least ten (10)
consecutive Trading Days and is unable to obtain a listing on either the New
York Stock Exchange, the American Stock Exchange or the Nasdaq Stock Market
within such ten (10) Trading Days; 

(h)      the Registration
Statement shall not have been declared effective by the Commission by the
Required Effectiveness Date, or such effectiveness shall not be maintained for
the Registration Maintenance Period, in each case which results in the Company
incurring the Default Fee for a period in excess of 45 days; 

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

(j)      an involuntary case or
other proceeding has been commenced against the Company or any Subsidiary
seeking liquidation, winding-up, reorganization or other relief with respect to
it or its debts under any bankruptcy, insolvency, moratorium or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days, or an order for
relief has been entered against the Company or any Subsidiary under the federal
bankruptcy laws as now or hereafter in effect; 

(k)      default in any
provision (including payment) or any agreement governing the terms of any Debt
of the Company or any Subsidiary (a) owed to Purchaser or its Affiliates, (b)
owed to the Halifax Fund, L.P. or (c) which is in excess of $1,000,000, which
has not been cured within any applicable period of grace associated therewith; 

	

(l)      judgments or orders for
the payment of money which in the aggregate at any one time exceed $1,000,000
and are not covered by insurance have been rendered against the Company or any
Subsidiary by a court of competent jurisdiction and such judgments or orders
shall continue unsatisfied and unstayed for a period of 60 days; or 

(m)      any representation,
warranty, certification or statement made by the Company in any Transaction
Agreement or which is contained in any certificate, document or financial or
other statement furnished at any time under or in connection with any
Transaction Agreement shall prove to have been untrue in any material respect
when made; 

then, and in every such
occurrence, any Purchaser may, with respect to an Event of Default specified in
paragraphs (a) or (b), and the Majority Holders may, with respect to any other
Event of Default, by notice to the Company, declare the Bridge Note to be, and
the Bridge Note shall thereon become immediately due and payable; provided that
in the case of any of the Events of Default specified in paragraph (i) or (j)
above with respect to the Company or any Subsidiary, then, without any notice to
the Company or any other act by any Purchaser, the entire amount of the Bridge
Note shall become immediately due and payable, provided, further, if any Event
of Default has occurred and is continuing, and irrespective of whether any
Bridge Note has been declared immediately due and payable hereunder, any
Purchaser of Bridge Note may proceed to protect and enforce the rights of such
Purchaser by an action at law, suit in equity or other appropriate proceeding,
whether for the specific performance of any agreement contained herein or in any
Bridge Note, or for an injunction against a violation of any of the terms hereof
or thereof, or in aid of the exercise of any power granted hereby or thereby or
by law or otherwise, and provided further, in the case of any Event of Default,
the amount declared due and payable on the Bridge Note shall be the Formula
Price thereof. 

ARTICLE 12.2      Powers and
Remedies Cumulative. No right or remedy herein conferred upon or reserved to the
Purchaser is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy. Every power
and remedy given by the Bridge Note or by law may be exercised from time to
time, and as often as shall be deemed expedient, by the Purchaser.  

	

ARTICLE
13.     MISCELLANEOUS 

ARTICLE 13.1      Notices. All
notices, demands and other communications to any party hereunder shall be in
writing (including telecopier or similar writing) and shall be given to such
party at its address set forth on the signature pages hereof, or such other
address as such party may hereafter specify for the purpose to the other
parties. Each such notice, demand or other communication shall be effective (i)
if given by telecopy, when such telecopy is transmitted to the telecopy number
specified on the signature page hereof, (ii) if given by mail, four days after
such communication is deposited in the mail with first class postage prepaid,
addressed as aforesaid or (iii) if given by any other means, when delivered at
the address specified in or pursuant to this Section.  

ARTICLE 13.2      No Waivers; Amendments. 

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

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

ARTICLE 13.3      Indemnification. 

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

	

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

	

(c)      If for any reason the
foregoing indemnity is unavailable (otherwise than pursuant to the express terms
of such indemnity) to an Indemnified Party or insufficient to hold an
Indemnified Party harmless, then in lieu of indemnifying such Indemnified Party,
the Company shall contribute to the amount paid or payable by such Indemnified
Party as a result of such claims, liabilities, losses, damages, or expenses (i)
in such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and by the Purchaser on the other from the
transactions contemplated by this Agreement or (ii) if the allocation provided
by clause (i) is not permitted under applicable law, in such proportion as is
appropriate to reflect not only the relative benefits received by the Company on
the one hand and the Purchaser on the other, but also the relative fault of the
Company and the Purchaser as well as any other relevant equitable
considerations. Notwithstanding the provisions of this Section 13.3, the
aggregate contribution of all Indemnified Parties shall not exceed the amount of
interest and fees actually received by the Purchaser pursuant to this Agreement.
It is hereby further agreed that the relative benefits to the Company on the one
hand and the Purchaser on the other with respect to the transactions
contemplated hereby shall be determined by reference to, among other things,
whether any untrue or alleged untrue statement of material fact or the omission
or alleged omission to state a material fact related to information supplied by
the Company or by the Purchaser and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. 

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

ARTICLE 13.4      Expense
Reimbursement Fee. The Company shall pay to Global Capital Advisors, LLC
document preparation, due diligence and legal fees in the amount of $40,000.00.  

	

ARTICLE 13.5      Payment. The
Company agrees that, so long as a Purchaser shall own any Bridge Note purchased
by it from the Company hereunder, the Company will make payments to such
Purchaser of all amounts due thereon by wire transfer by 4:00 P.M. (New York
City time).  

ARTICLE 13.6      Successors and
Assigns. This Agreement shall be binding upon the Company and upon the Purchaser
and their respective successors and assigns; provided that the Company shall not
assign or otherwise transfer its rights or obligations under this Agreement to
any other Person without the prior written consent of the Majority Holders. All
provisions hereunder purporting to give rights to Purchaser and their affiliates
or to holders of Securities are for the express benefit of such Persons and
their successors and assigns.  

ARTICLE 13.7      Broker. Except
for (i) a cash fee of $85,000; and (ii) a warrant to purchase 1,050,000 shares
of Company Common Stock, payable to Colony Park Financial, LLC, the Company
represents and warrants that it has not employed any broker, finder, financial
advisor or investment banker who would be entitled to any brokerage,
finder’s or other fee or commission payable by the Company or the Purchaser
in connection with the sale of the Securities.  

	

ARTICLE 13.8     New
York Law; Submission to Jurisdiction; Waiver of Jury Trial; Appointment of Agent.  
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK. EACH PARTY HERETO HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK
COURT SITTING IN NEW YORK FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A
COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. 

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

     Section
13.10 Survival. All provisions contained in this Agreement ( unless specifically
noted to the contrary) shall survive the payment in full of the Bridge Note and
shall remain operative and in full force.  

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

[SIGNATURES ON
FOLLOWING PAGES] 

	

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

			AMERICAN INTERNATIONAL PETROLEUM 
CORPORATION

By: ________________________________

    Name:______________________________

    Title :______________________________

Address:   2950 North Loop West

                    Suite 1000

                   Houston, TX 77092

                   Fax:(713) 682-7278

                   Attn: Denis Fitzpatrick

			GCA STRATEGIC INVESTMENT FUND 
LIMITED

By: ________________________________

    Name:______________________________

    Title :______________________________

Address:   Mechanics Building

                    12 Church Street

                   Hamilton HM II

                   Bermuda

                   Fax:(678) 947-6499

                   Attn: Mr. Lewis N. LesterEXHIBIT 4.1

                      THIRD AMENDED MODIFICATION AGREEMENT

      This THIRD AMENDED MODIFICATION AGREEMENT (the "Agreement") is made as of
May 21, 2002, by and between SALES ONLINE DIRECT, INC., a Delaware corporation
(the "Company"), and AUGUSTINE FUND, L.P. (the "Buyer").

                                   WITNESSETH

      R. 1. On March 23, 2000 (the "Transaction Date"), the Company and the
Buyer entered into a Securities Purchase Agreement (the "Purchase Agreement")
with respect to the purchase of the common stock of the Company, par value $.001
per share (the "Common Stock"), pursuant to which the Buyer purchased from the
Company a Series A Eight Percent Convertible Note (the "Note"), convertible into
shares of Common Stock, with the first payment of interest to be made on
September 30, 2000 (the "Interest Due Date").

      R.2. In connection with the issuance of the Note, the Buyer was also
granted a five year warrant to purchase 300,000 shares of the Company's Common
Stock and the placement agent, Delano Group Securities, LLC, was granted a
warrant to purchase 100,000 shares (collectively, the "Warrants").

      R.3. In connection with the issuance of the Note and the Warrants, the
Company and the Buyer executed a Registration Rights Agreement pursuant to which
the Company agreed to file with the Securities and Exchange Commission (the
"Commission") within 180 days after the closing date (the "Filing Date") a
registration statement (the "Registration Statement") for the resale of the
shares of Common Stock issuable upon the conversion of the Note and the exercise
of the Warrants (the Purchase Agreement, the Note, the Warrants and the
Registration Rights Agreement are collectively referred to herein as the
"Transaction Documents"), which was to have been effective by September 30, 2000
(the "Effectiveness Date").

      R.4. On September 19, 2000, the Company and the Buyer entered into a
Modification Agreement to extend (i) the Interest Due Date from September 30,
2000 to October 31, 2000, (ii) the Filing Date from the 180th day following the
closing date to October 25, 2000, and (iii) the Effectiveness Date from
September 30, 2000 to December 15, 2000.

      R.5. On January 1, 2001, the Company and Buyer entered into another
Modification Agreement to amend the Note by establishing the Applicable
Percentage (as defined in the Note) at 73%, subject to certain conditions, and
to waive all liquidated damages except $30,000 and required an Effectiveness
Date of July 15, 2001. Pursuant to such Modification Agreement, the Company also
granted a security interest in all of its assets as security of the Company's
obligations under the Purchase Agreement.

      R.6 On July 15, 2001, the Company and Buyer entered into an Amended
Modification Agreement, under which all references in the Modification Agreement
to July 15, 2001, were revised to August 31, 2001.

      R.7. On August 30, 2001, the Company and Buyer entered into a Second
Amended Modification Agreement, under which all references in the Amended
Modification Agreement and the Second Amended Modification Agreement to July 15,
2001 and August 31, 2001 were revised to September 30, 2001.

      R.8. On September 7, 2001, a Registration Statement became effective with
the Commission.

      R.9. On March 24, 2002, the Company and Buyer agreed to amend the Purchase
Agreement, the Note, and the Registration Rights Agreement in the manner and
subject to the terms and conditions set forth herein. The Company made its final
interest and liquidated damages payment under the Transaction Documents in the
form of common stock of the Company in the amount of 428,083 shares of common
stock of the Company, there being no further interest, penalties, liquidated
damages, fees, or charges that may be payable or that may accrue under the
Transactions Documents.

<PAGE>

      NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Buyer hereby agree
as follows:

      1. Recitals; Definitions. The recitals set forth above are true and
correct in every respect and are incorporated herein by reference. Any
capitalized terms contained herein not defined herein shall have the meaning
assigned to such term in the Purchase Agreement, or if not defined in the
Purchase Agreement, in the Note, or if not defined in the Purchase Agreement or
Note, in the Registration Rights Agreement.

      2. Amendments to Purchase Agreement. (a) Section 4(k) of the Purchase
Agreement is hereby deleted in its entirety, and replaced with the following:

      "The Buyer covenants that upon full or partial conversion of the Note,
      unless the Company agrees otherwise in advance, the Buyer will not sell
      more shares of common stock of the Company in any one trading day than the
      greater of (x) ten percent (10%) of the current trading day's total share
      volume or (y) ten percent (10%) of the previous trading day's total share
      volume. In addition, unless the Company agrees otherwise in advance, the
      Buyer may only sell shares of common stock of the Company between the
      hours of 10:00 a.m. and 3:30 p.m. eastern standard time. The Buyer shall
      trade through a brokerage firm mutually acceptable to the Buyer and the
      Company. In the event that the Buyer desires to replace its broker, the
      new broker shall be selected from a list pre-approved by Buyer and the
      Company, and Buyer shall give the Company at least forty-eight (48) hours
      notice of such change, which notice shall include the reasons for the
      change. In the event of any change of the initial broker mutually selected
      by the Company and the Buyer, the Buyer shall cause the replacement broker
      to mail duplicate confirmations of sales to the Company."

      3. Amendments to Note. The Note is hereby amended so that:

      (a)   The Fixed Price used in determining the Conversion Price shall be
            deleted and replaced with "$0.375."

      (b)   All references to a Maturity Date of March 31, 2002 shall be changed
            from March 31, 2002 to June 30, 2002; and

      (c)   The first sentence in the fourth paragraph shall be stricken, and in
            lieu thereof shall state as follows:

      "This Note is subject to the following additional provisions, provided,
      however, that notwithstanding any statement to the contrary in this Note,

      (i)   no interest, liquidated damages, or penalties shall be paid, be
            payable, or accrue on this Note, and no liquidated damages or
            penalty shall be assessed against the Company, after March 31, 2002,
            with principal payable in such coin or currency of the United States
            of America at any time on or before the Maturity Date;

      (ii)  the Maturity Date, with respect to all or part of the remaining
            principal, shall be extended to September 30, 2002 and to each
            calendar quarter-end thereafter through March 31, 2005 unless both
            parties agree in writing not to extend the Maturity Date, with such
            written notice given no later than 3 business days prior to June 30,
            2002 or such other quarter-end as the case may be;

      (iii) the Conversion Price on any Maturity Date with respect to all or
            part of the remaining principal shall be based on the average of the
            closing bid prices of the Common Stock for the 90 days immediately
            preceding the Conversion Date, except with respect to a Maturity
            Date on March 31, 2005, if the Maturity Date is so extended as
            provided herein, the Conversion Price with respect to all remaining
            principal shall be based on the average of the closing bid prices of
            the Common Stock for the 30 days immediately preceding the
            Conversion Date;

<PAGE>

      (iv)  the Holder may submit only one Notice of Conversion per trading day,
            and, on any date that is not a Maturity Date, to the extent the
            number of shares being converted pursuant to such notice of
            conversion are converted at a 5-day average closing bid price of
            $.3424 or less, the Holder may convert principal into Common Stock
            only equal to or less than the higher of 10% of the trading volume
            of the Company from the trading day prior to or on such Conversion
            Date, unless the Company permits otherwise in writing; and

      (v)   effective March 31, 2002, the Company shall not be required to
            register any shares issuable under this Note, or to keep any
            existing registration statement effective with respect to shares
            issuable under this Note, whether such shares were issued or are
            issuable prior to, on, or after March 31, 2002:"

      4. Termination of Registration Rights Agreement. The Registration Rights
Agreement is hereby terminated. Buyer, and the holder of any Warrants delivered
in connection with the Transaction Documents have no rights of registration
under the Note, Purchase Agreement or under any of the other Transaction
Documents, notwithstanding any language to the contrary in any of the
Transaction Documents, and have no piggyback registration rights, or any other
registration rights, with respect to shares issuable under the Transaction
Documents.

      5. Termination of Security Interest. Buyer and the Company agree that the
Note represents a general unsecured obligation of the Company, and that the
Company's grant of a security interest pursuant to Paragraph 4 of the
Modification Agreement dated January 1, 2001, is hereby rescinded and revoked,
and Buyer hereby authorizes the Company, without any further action of Buyer, to
terminate such security interest on the records of any state or local
jurisdiction, by filing a UCC Financing Statement Amendment on Form UCC-3 or
other appropriate form. Buyer shall cooperate fully with the Company in the
termination of any financing statement related to the Note or the Transaction
Documents

      6. Not a Novation. The Company and the Buyer each ratifies and confirms
all of its liabilities and obligations under the Transaction Documents and
agrees that, except as expressly modified by this Agreement, the Transaction
Documents continue in full force and effect. The Company and the Buyer agree
that except as set forth in this Agreement, this Agreement shall not be
construed as an agreement to extinguish the Company's or Buyer's original
obligations or covenants under the Note and other Transaction Documents and
shall not constitute a novation as to the obligations of the Company or Buyer
under the Note or other Transaction Documents.

      7. Registration Rights Agreement and Note. The term "Purchase Agreement"
shall hereinafter meant the Purchase Agreement dated the Transaction Date, as
amended and modified by this Agreement. The term "Registration Rights Agreement"
shall hereinafter mean the Registration Rights Agreement dated the Transaction
Date, as amended and modified by this Agreement. The term "Note" shall
hereinafter mean the Series A Eight Percent Convertible Note dated the
Transaction Date, as amended and modified by this Agreement.

      8. No Shorting. As a material inducement for the Company to enter into
this Agreement, the Buyer represents that is has not as of the date hereof, and
covenants on behalf of itself and its affiliates that neither Buyer nor any
affiliate of Buyer will at any time in which the Buyer or any affiliates of the
Buyer beneficially owns any shares of Common Stock of the Company, engage in any
short sales of, or hedging or arbitrage transactions with respect to, the Common
Stock, or buy "put" options or similar instruments with respect tot he Common
Stock. The Company acknowledges that a sale of shares on the same date as a
Conversion Notice is delivered to the Company with respect to such shares is not
a "short sale" for purposes of this Paragraph 8.

      9. Amendment. The Transaction Documents may not be further amended,
altered or extended without, in each instance, the prior written consent of the
parties.

      10. Counterparts. This Agreement may be executed in any number of
counterparts, all of which when taken together shall constitute one Agreement.

      11. Successors and Assigns. Whenever used herein, the words "Company" and
"Buyer" shall be deemed to include their respective successors and assigns. All
words used herein shall be deemed to refer to the singular, plural, masculine,
feminine or neuter as the identity of the person or entity or the context may
require.

<PAGE>

      12. Other Agreements. This document shall be executed simultaneously with
(a) the Modification Agreement related to a Loan Agreement, Convertible
Promissory Note and Registration Rights Agreement, each dated November 7, 2001,
by and between Buyer and the Company and (b) the Loan Agreement, dated as of May
21, 2002 by and between Buyer and the Company. Each of the documents referenced
in (a) and (b) above shall become effective solely upon execution of all of such
referenced documents.

      13. Termination. This Agreement shall not terminate unless and until Buyer
represents in writing that it has no further rights to obtain Common Stock of
the Company under any agreement, or to convert any outstanding indebtedness into
shares of Common Stock of the Company, and until Buyer does not beneficially own
any shares of Common Stock of the Company.

      IN WITNESS WHEREOF the Company and the Buyer have caused this Agreement to
be executed under seal as of the date first above written.

                                     SALES ONLINE DIRECT, INC.

                                     By:   /s/ Gregory Rotman
                                           Gregory P. Rotman, Chief Executive
                                                Officer

                                     AUGUSTINE FUND, L.P.

                                     By:  Augustine Capital Management, LLC,
                                              Its General Partner

                                     By: /s/ Thomas F. Duszynski

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