Document:

CONSULTING AGREEMENT

THIS  CONSULTING  AGREEMENT  is  entered  into  as of  December  23,  2004  (the
"EFFECTIVE  DATE"), by and between  BRAINSTORM CELL THERAPEUTICS INC., a company
incorporated  under the laws of the State of Washington  (the "COMPANY") and Mr.
Ernest Muller ("MULLER").

      Whereas,  Muller and the Company (the "PARTIES") entered into a Consulting
Agreement  dated  August 10, 2004 (the "FIRST  AGREEMENT")  pursuant to which in
consideration  for services  rendered  Muller was issued  450,000  shares of the
Common Stock of the Company (the "SHARES");

      Whereas,  due to a discrepancy in the valuation of the Shares, the Parties
have rescinded the First  Agreement,  Muller has  surrendered  the Shares to the
Company for  cancellation,  and the  Parties  have agreed to enter into this new
Consulting Agreement;

NOW, THEREFORE,  in consideration of the mutual promises and covenants set forth
herein,  the  receipt  and  sufficiency  of which are hereby  acknowledged,  the
Parties hereto agree as follows:

1. SERVICES. Muller shall use its best efforts to perform the following services
in a timely manner:  to become  familiar with the business and operations of the
Company so that he (i) may introduce the company to entities or individuals that
would enhance and accelerate the  commercialization  of the Company's technology
and business  objectives and (ii) work with the Company,  if needed,  on capital
structure, management, reorganization and related corporate issues.

2. TERM.  This  Agreement  shall be in effect for twelve  months from August 10,
2004.  Muller shall not be required to be  available  at any  specific  time for
consultation;  shall not be required to appear at the offices of the Company and
may perform such service  telephonically,  by e-mail or in any other  reasonable
manner.

3. CONSIDERATION.  For the valuable advice and services to be provided by Muller
to the Company under this Agreement, the Company shall issue Muller a Warrant to
purchase  up to  450,000  shares of the  Company's  common  stock at a per share
purchase price of $0.00005.  The Warrant shall be fully vested as of the date of
issuance,  exercisable  at any time for a period of 10 years  from such date and
fully issued upon delivery thereof.

4. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants to Muller
that the statements  contained in paragraph 4 are correct and complete as of the
Effective  Date:  (a) The  Company  is a  corporation  duly  organized,  validly
existing  and  active  under  the laws of its  state of  incorporation.  (b) The
Company has full  corporate  power and  authority to (i) conduct its business as
now  conducted and as proposed to be conducted  and to own,  use,  license,  and
lease its  assets and  properties  and (ii)  enter  into this  Agreement  and to
consummate the transactions contemplated herein.

5. INDEMNITY. The Company agrees to indemnify,  defend, and hold harmless Muller
and his affiliates,  counsel, employees, agents, successors, and assigns. (each,
an "Indemnified  Party") from and against any and all losses,  claims,  damages,
costs, expenses, and liabilities (including any investigatory,  legal, and other
expenses  incurred as they are incurred by an  Indemnified  Party in  connection
with preparing for or defending any action, claim, or proceeding, whether or not
resulting in any liability) (collectively,  "Indemnifiable Losses") to which any
Indemnified Party may become subject or liable relating to or arising out of (a)
the services to be  performed  under the  Agreement,  (b) any  inaccuracy  in or
breach in the  representations  and warranties of the Company  contained in this
Agreement,  and (c) any failure of the Company to perform its obligations  under
this Agreement,  provided that the Company shall not be liable to an Indemnified
Party in any such case to the extent that any such  Indemnifiable  Loss is found
in a final,  nonappealable judgment by a court of competent jurisdiction to have
resulted as a direct and  proximate  cause from the willful  misconduct or gross
negligence  of an  Indemnified  Party.  No  Indemnified  Party  shall be liable,
responsible,  or  accountable  in  damages  and  costs and  expenses  (including
attorneys'  fees)  under this  Agreement  except for any  liability  for losses,
claims,  damages, or liabilities finally judicially  determined to have resulted
solely and  exclusively  from  actions  taken or omitted to be taken as a direct
result of such Indemnified  Party's gross negligence or willful  misconduct.  If
for any reason,  except as specifically provided herein, the foregoing indemnity
for Indemnifiable  Losses is unavailable to an Indemnified Party or insufficient
to fully  hold any  Indemnified  Party  harmless,  then the  Company  agrees  to
contribute to the amount paid or payable by such  Indemnified  Party as a result
of such Indemnifiable Losses in such proportion as is appropriate to reflect the
relative benefits received by and fault of the Company, on the one hand, and the
relative benefits received by and fault of Muller, on the other hand.

6. LEGAL MATTERS.  This Agreement shall be interpreted under and governed by the
laws of the State of New York. Any  controversy,  dispute,  or claim between the
parties  relating to this Agreement shall be resolved by binding  arbitration in
accordance with the rules of the American Arbitration Association.

7.  REPRESENTATION.  The Company  acknowledges  that it has been given notice by
Muller  that Muller is not a licensed  securities  broker-dealer  and  therefore
Muller is not  required  under this  Agreement  or any side  agreement,  whether
verbally  or in  writing,  to sell  securities  on behalf of the  Company or any
issuer  affiliated with the Company.  Moreover,  the Company  acknowledges  that
Muller does not intend to negotiate  raising of capital  transactions,  does not
intend to directly solicit  purchasers of the Company's  common stock,  will not
hold  any  funds  or  securities  in a  capital  raising  transaction,  and  the
compensation due to Muller is not based on a specified  percentage of any actual
or proposed funds raised.  The Company  acknowledges that Muller has informed it
that  neither  Muller nor any of its  members or  employees  provides  any legal
advice or counsel.

<PAGE>

8. INDEPENDENT CONTRACTOR. Muller is an independent contractor and may engage in
other business activities. Since Muller is an independent contractor, nothing in
this  Agreement  shall be  interpreted  to  constitute  that Muller is an agent,
employee,  or partner of the Company,  nor shall either party have any authority
to bind the other.  In  furtherance  of, but  without  limiting  the  foregoing,
Company  shall  not  be  responsible  for  payment  of  workers'   compensation,
disability benefits, unemployment insurance and for withholding or paying income
taxes and social  security  for Muller but such  responsibility  shall be solely
that of Muller.

9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the
parties  pertaining to the subject  matter hereof and supersedes and cancels any
prior communications,  representations,  understandings,  and agreements between
the parties.  No modifications of or changes to this Agreement shall be binding,
nor can any of its  provisions  be  waived,  unless  agreed to in writing by the
parties. There are no side agreements,  whether verbally or in writing,  between
the Company and Muller.

10.  CONFIDENTIALITY.   The  parties  agree  that  the  terms  and  all  of  the
encompassing  components of this Agreement  shall be kept  confidential,  unless
this  information  is required to be  disclosed  pursuant  to any  inquiries  by
federal, state, or local law enforcement.

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

By: /s/ Ernext Muller
    --------------------
    Ernest Muller

By: /s/ Yaffa Beck
    -------------------
    Name: Dr. Yaffa Beck
    Title: President & CEOEXHIBIT 4.1

                          SECURITIES PURCHASE AGREEMENT

      This  Securities  Purchase  Agreement  (this  "Agreement")  is dated as of
December 15, 2004 among Knobias,  Inc., a Delaware  corporation (the "Company"),
and each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a "Purchaser" and collectively the "Purchasers").

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

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

                                   ARTICLE I.
                                   DEFINITIONS

      1.1  Definitions.  In  addition  to the terms  defined  elsewhere  in this
Agreement:  (a) capitalized terms that are not otherwise defined herein have the
meanings  given to such  terms in the Notes  (as  defined  herein),  and (b) the
following terms have the meanings indicated in this Section 1.1:

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

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

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

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

            "Commission" means the Securities and Exchange Commission.
<PAGE>

            "Common Stock" means the common stock of the Company,  no par value,
      and any  securities  into which such common stock shall  hereinafter  have
      been reclassified into.

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

            "Company Counsel" means Watkins & Eager PLLC.

            "Disclosure  Schedules" shall have the meaning ascribed to such term
      in Section 3.1 hereof.

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

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

            "KW" means  Keith  Wellner,  attorney  for DCOFI  Master  LDC,  with
      offices at 830 Third Avenue, New York, New York 10022.

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

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

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

            "Notes"  means,  the 12%  Senior  Subordinated  Secured  Notes  due,
      subject to the terms therein,  June 15, 2005, issued by the Company to the
      Purchasers hereunder, in the form of Exhibit A.

            "Penalty Shares" means,  shares of registered  Common Stock issuable
      to the Purchasers in the event that the Notes are not repaid in accordance
      with their terms.

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

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

                                       2
<PAGE>

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

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

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

            "Securities" means the Notes and the Penalty Shares.

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

            "Security  Agreement" means the Security  Agreement,  dated the date
      hereof,  among the  Company and the  Purchasers,  in the form of Exhibit B
      attached hereto.

            "Security  Documents"  means the  Security  Agreement  and any other
      documents and filing required  thereunder in order to grant the Purchasers
      a  perfected  security  interest  in  all of the  assets  of the  Company,
      including all UCC-1 filing receipts.

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

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

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

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

            "Transaction  Documents"  means  this  Agreement,   the  Notes,  the
      Security  Agreement  and any other  documents  or  agreements  executed in
      connection with the transactions contemplated hereunder.

                                  ARTICLE II.
                                PURCHASE AND SALE

                                       3
<PAGE>

      2.1  Closing.  On the  Closing  Date,  upon the terms and  subject  to the
conditions set forth herein,  concurrent with the execution and delivery of this
Agreement by the parties hereto,  the Company agrees to sell, and each Purchaser
agrees to purchase,  $275,000  principal  amount of the Notes. On the subsequent
closing  date  (the  "Subsequent  Closing  Date"),  if any,  upon the  terms and
conditions herein (including,  specifically  Section 2.4), the Company agrees to
sell and each Purchaser agrees to purchase $225,000  aggregate  principal amount
of the Notes (the  "Balance").  Each Purchaser  shall deliver to the Company via
wire transfer or a certified  check  immediately  available funds equal to their
Subscription  Amount  and the  Company  shall  deliver to each  Purchaser  their
respective Note as determined pursuant to Section 2.2(a) and the other items set
forth  in  Section  2.2  issuable  at  the  Closing.  Upon  satisfaction  of the
conditions  set forth in Section 2.2, the Closing  shall occur at the offices of
the Company, or such other location as the parties shall mutually agree.

      2.2 Deliveries.

            a)    On the Closing Date,  the Company shall deliver to the counsel
                  for  such  Purchasers  with  respect  to  each  Purchaser  the
                  following:

                  (i)   this Agreement duly executed by the Company;

                  (ii)  a Note with a principal amount equal to such Purchaser's
                        Subscription  Amount,  registered  in the  name  of such
                        Purchaser;

                  (iii) the Security  Agreement,  duly  executed by the Company,
                        along with all the Security Documents; and

                  (iv)  a legal opinion of Company Counsel.

            b)    On the Closing Date,  each Purchaser shall deliver or cause to
                  be delivered to Company Counsel the following:

                  (i)   this Agreement duly executed by such Purchaser;

                  (ii)  such Purchaser's Subscription Amount by wire transfer to
                        the account of the Company; and

                  (iii) the Security Agreement, duly executed by such Purchaser.

      2.3 Closing Conditions.

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

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

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

                                       4
<PAGE>

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

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

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

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

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

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

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

      2.4 Conditions for Delivering the Balance.

            c)    The  obligations  of the  Purchasers to deliver the Balance to
                  the Company are subject to the following conditions being met:

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

                  (ii)  the continuing performance of all obligations, covenants
                        and  agreements of the Company  required to be performed
                        pursuant to the Transaction Documents;

                                       5
<PAGE>

                  (iii) the  delivery  by the Company of a Note with a principal
                        amount  equal to the Balance  registered  in the name of
                        such Purchaser;

                  (iv)  certification  from the  President  of the Company  that
                        representations  and  warranties of the Company are true
                        and correct as of such date;

                  (v)   ninety  (90) days shall have  elapsed  since the Closing
                        Date; and

                  (vi)  the Company's  operations and financial  condition shall
                        be   acceptable   to  the   Purchasers   in  their  sole
                        discretion.

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

      3.1 Representations and Warranties of the Company.  Except as set forth in
the  Company's  Form 8-K filed with the  Securities  and Exchange  Commission on
November  19, 2004 and  delivered  to the  Purchasers  concurrently  herewith as
Schedule 3.1 (the  "Disclosure  Schedule")  which  Disclosure  Schedule shall be
deemed a part hereof, on the date hereof and on the Subsequent Closing Date, the
Company hereby makes the  representations and warranties set forth below to each
Purchaser.

            (a) Subsidiaries. All of the direct and indirect subsidiaries of the
      Company are set forth in Item 2.01 of the Disclosure Schedule. The Company
      owns,  directly or  indirectly,  all of the capital  stock or other equity
      interests  of each  Subsidiary  free and clear of any  Liens,  and all the
      issued and  outstanding  shares of capital  stock of each  Subsidiary  are
      validly issued and are fully paid,  non-assessable  and free of preemptive
      and similar rights to subscribe for or purchase securities. If the Company
      has no subsidiaries,  then references in the Transaction  Documents to the
      Subsidiaries will be disregarded.

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

                                       6
<PAGE>

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

            (d) No Conflicts.  The  execution,  delivery and  performance of the
      Transaction  Documents by the Company and the  consummation by the Company
      of the other  transactions  contemplated  thereby do not and will not: (i)
      conflict   with  or  violate  any   provision  of  the  Company's  or  any
      Subsidiary's  certificate  or articles of  incorporation,  bylaws or other
      organizational or charter documents,  or (ii) conflict with, or constitute
      a default  (or an event  that with  notice or lapse of time or both  would
      become a default)  under,  result in the  creation of any Lien upon any of
      the  properties  or assets of the  Company or any  Subsidiary,  or give to
      others any rights of termination,  amendment, acceleration or cancellation
      (with or without notice, lapse of time or both) of, any agreement,  credit
      facility,  debt or other  instrument  (evidencing  a Company or Subsidiary
      debt or  otherwise)  or other  understanding  to which the  Company or any
      Subsidiary  is a party or by which any property or asset of the Company or
      any  Subsidiary  is  bound  or  affected  (with  the  exception  of the 8%
      Convertible Notes), or (iii) subject to the Required  Approvals,  conflict
      with or  result  in a  violation  of any  law,  rule,  regulation,  order,
      judgment,  injunction,  decree  or  other  restriction  of  any  court  or
      governmental  authority  to which the Company or a  Subsidiary  is subject
      (including federal and state securities laws and regulations), or by which
      any property or asset of the Company or a Subsidiary is bound or affected;
      except in the case of each of clauses  (ii) and  (iii),  such as could not
      have or reasonably be expected to result in a Material Adverse Effect.

                                       7
<PAGE>

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

            (f) Issuance of the  Securities.  The Securities are duly authorized
      and,  when  issued  and  paid  for  in  accordance   with  the  applicable
      Transaction  Documents,  will be duly and validly  issued,  fully paid and
      nonassessable,  free and clear of all Liens  imposed by the Company  other
      than restrictions on transfer  provided for in the Transaction  Documents.
      The  Penalty  Shares,  when  issued  in  accordance  with the terms of the
      Transaction  Documents,  will  be  registered,  freely  tradable,  validly
      issued, fully paid and nonassessable,  free and clear of all Liens imposed
      by the Company.  The Company has reserved from its duly authorized capital
      stock a number  of shares of Common  Stock  for  issuance  of the  Penalty
      Shares.  The Company has not,  and to the  knowledge  of the  Company,  no
      Affiliate of the Company has sold, offered for sale or solicited offers to
      buy or  otherwise  negotiated  in respect of any  security  (as defined in
      Section 2 of the Securities  Act) that would be integrated  with the offer
      or sale of the Securities in a manner that would require the  registration
      under the Securities Act of the sale of the Securities to the  Purchasers,
      or that would be integrated  with the offer or sale of the  Securities for
      purposes of the rules and regulations of any Trading Market.

            (g)  Capitalization.  The  capitalization  of the  Company is as set
      forth  in  Item  2.01,  the  Description  of  Securities  section  of  the
      Disclosure  Schedule.  The Company has not issued any capital  stock since
      November 15, 2004 other than  pursuant to the  exercise of employee  stock
      options under the Company's stock option plans,  the issuance of shares of
      Common  Stock  to  employees  pursuant  to the  Company's  employee  stock
      purchase plan and pursuant to the  conversion  or exercise of  outstanding
      Common  Stock  Equivalents.  No  Person  has any  right of first  refusal,
      preemptive  right,  right  of  participation,  or  any  similar  right  to
      participate in the transactions contemplated by the Transaction Documents.
      Except as set forth in Item 2.01 and the Description of Securities section
      of the  Disclosure  Schedule,  as a result of the purchase and sale of the
      Securities,  there are no outstanding options,  warrants, script rights to
      subscribe to, calls or  commitments of any character  whatsoever  relating
      to, or securities,  rights or obligations convertible into or exchangeable
      for,  or giving any  Person any right to  subscribe  for or  acquire,  any
      shares of Common  Stock,  or  contracts,  commitments,  understandings  or
      arrangements by which the Company or any Subsidiary is or may become bound
      to issue  additional  shares  of Common  Stock,  or  securities  or rights
      convertible or exchangeable  into shares of Common Stock. The issuance and
      sale of the  Securities  will not  obligate the Company to issue shares of
      Common Stock or other securities to any Person (other than the Purchasers)
      and will not  result in a right of any  holder of  Company  securities  to
      adjust  the  exercise,  conversion,  exchange  or reset  price  under such
      securities.  All of the outstanding shares of capital stock of the Company
      are  validly  issued,  fully paid and  nonassessable,  have been issued in
      compliance  with all federal and state  securities  laws, and none of such
      outstanding  shares was issued in  violation of any  preemptive  rights or
      similar  rights  to  subscribe  for or  purchase  securities.  No  further
      approval or authorization  of any  stockholder,  the Board of Directors of
      the  Company  or  others  is  required  for the  issuance  and sale of the
      Securities.  There are no stockholders  agreements,  voting  agreements or
      other similar  agreements  with respect to the Company's  capital stock to
      which the Company is a party or, to the knowledge of the Company,  between
      or among any of the Company's stockholders.

                                       8
<PAGE>

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

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

                                       9
<PAGE>

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

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

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

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

                                       10
<PAGE>

            (n) Title to Assets.  Other than the  assets  pledged in  connection
      with the Company's 8% Secured  Convertible Notes due November 1, 2006 (the
      "8% Convertible  Notes"),  the Company and the Subsidiaries  have good and
      marketable  title in fee simple to all real property owned by them that is
      material to the business of the Company and the  Subsidiaries and good and
      marketable  title in all personal  property owned by them that is material
      to the business of the Company and the Subsidiaries, in each case free and
      clear of all Liens, except for Liens as do not materially affect the value
      of such  property and do not  materially  interfere  with the use made and
      proposed to be made of such  property by the Company and the  Subsidiaries
      and Liens for the payment of federal, state or other taxes, the payment of
      which is neither  delinquent  nor subject to penalties.  Any real property
      and facilities  held under lease by the Company and the  Subsidiaries  are
      held by them under valid,  subsisting and enforceable  leases of which the
      Company and the Subsidiaries are in compliance.

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

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

            (q) Transactions With Affiliates and Employees.  Except as set forth
      in the SEC Reports,  none of the officers or directors of the Company and,
      to the  knowledge of the Company,  none of the employees of the Company is
      presently a party to any  transaction  with the Company or any  Subsidiary
      (other than for services as employees, officers and directors),  including
      any contract,  agreement or other arrangement providing for the furnishing
      of services to or by, providing for rental of real or personal property to
      or from, or otherwise requiring payments to or from any officer,  director
      or such employee or, to the knowledge of the Company,  any entity in which
      any officer,  director, or any such employee has a substantial interest or
      is an officer,  director,  trustee or  partner,  in each case in excess of
      $50,000  other  than (i) for  payment  of  salary or  consulting  fees for
      services  rendered,  (ii) reimbursement for expenses incurred on behalf of
      the Company and (iii) for other employee benefits,  including stock option
      agreements under any stock option plan of the Company.

                                       11
<PAGE>

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

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

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

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

                                       12
<PAGE>

            (v)  Registration  Rights.  With the exception of the holders of the
      Company's 8% Convertible Notes,  Series A Preferred Stock and the investor
      under the Standby Equity Agreement between Cornell Capital  Partners,  LP,
      and the  Company,  no Person has any right to cause the  Company to effect
      the  registration  under  the  Securities  Act  of any  securities  of the
      Company.

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

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

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

                                       13
<PAGE>

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

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

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

                                       14
<PAGE>

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

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

            (ee) Accountants.  The Company's accountants are Horne CPA Group. To
      the Company's  knowledge,  such accountants,  who the Company expects will
      express  their  opinion with  respect to the  financial  statements  to be
      included in the Company's Annual Report on Form 10-KSB for the year ending
      December 31, 2004, are a registered  public accounting firm as required by
      the Securities Act.

            (ff)  Seniority.   As  of  the  Closing  Date,  other  than  the  8%
      Convertible  Notes of the Company,  no indebtedness or other equity of the
      Company is senior to or pari passu  with,  the Notes in right of  payment,
      whether with respect to interest or upon  liquidation or  dissolution,  or
      otherwise,  other than  indebtedness  secured by purchase  money  security
      interests  (which is senior only as to underlying  assets covered thereby)
      and capital  lease  obligations  (which is senior only as to the  property
      covered thereby).

            (gg) No  Disagreements  with  Accountants and Lawyers.  There are no
      disagreements of any kind presently existing, or reasonably anticipated by
      the Company to arise,  between  the  accountants  and lawyers  formerly or
      presently  employed by the Company and the Company is current with respect
      to  any  fees  owed  to  its  accountants  and  lawyers.  By  making  this
      representation   the  Company   does  not,   in  any  manner,   waive  the
      attorney/client  privilege or the  confidentiality  of the  communications
      between the Company and its lawyers.

            (hh) Acknowledgment  Regarding  Purchasers'  Purchase of Securities.
      The Company  acknowledges and agrees that each of the Purchasers is acting
      solely in the  capacity of an arm's length  purchaser  with respect to the
      Transaction  Documents  and  the  transactions  contemplated  hereby.  The
      Company  further  acknowledges  that no Purchaser is acting as a financial
      advisor or  fiduciary  of the Company (or in any  similar  capacity)  with
      respect to this Agreement and the transactions contemplated hereby and any
      advice given by any Purchaser or any of their  respective  representatives
      or  agents  in  connection  with  this  Agreement  and  the   transactions
      contemplated  hereby is merely  incidental to the Purchasers'  purchase of
      the Securities.  The Company further represents to each Purchaser that the
      Company's  decision to enter into this  Agreement has been based solely on
      the independent evaluation of the transactions  contemplated hereby by the
      Company and its representatives.  The Company further acknowledges that in
      addition to purchasing Securities,  the Purchasers or their affiliates may
      directly or indirectly  own debt  (including  the Company's 8% Convertible
      Notes),  Common  Stock and  Preferred  Stock in the  Company and that such
      parties,  exercising  their rights  hereunder may  adversely  impact their
      other holdings as well as the other equity holders in the Company.

                                       15
<PAGE>

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

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

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

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

                                       16
<PAGE>

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

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

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

                                  ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

      4.1 Transfer Restrictions.

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

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

      [NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES
      ARE [EXERCISABLE]  [CONVERTIBLE]] HAVE BEEN REGISTERED WITH THE SECURITIES
      AND  EXCHANGE  COMMISSION  OR THE  SECURITIES  COMMISSION  OF ANY STATE IN
      RELIANCE UPON AN EXEMPTION FROM  REGISTRATION  UNDER THE SECURITIES ACT OF
      1933, AS AMENDED (THE  "SECURITIES  ACT"),  AND,  ACCORDINGLY,  MAY NOT BE
      OFFERED OR SOLD EXCEPT  PURSUANT TO AN  EFFECTIVE  REGISTRATION  STATEMENT
      UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN
      A  TRANSACTION  NOT  SUBJECT  TO,  THE  REGISTRATION  REQUIREMENTS  OF THE
      SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE  STATE SECURITIES LAWS AS
      EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE  TRANSFEROR TO SUCH EFFECT,
      THE  SUBSTANCE  OF WHICH SHALL BE  REASONABLY  ACCEPTABLE  TO THE COMPANY.
      THESE  SECURITIES  AND THE  SECURITIES  ISSUABLE  UPON  EXERCISE  OF THESE
      SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
      OTHER LOAN SECURED BY SUCH SECURITIES.

                                       17
<PAGE>

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

            (c) Certificates evidencing the Penalty Shares shall not contain any
      legend (including the legend set forth in Section 4.1(b) hereof).

      4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance
of the  Securities  may result in dilution of the  outstanding  shares of Common
Stock,  which dilution may be substantial under certain market  conditions.  The
Company  further   acknowledges  that  its  obligations  under  the  Transaction
Documents,  including  without  limitation  its  obligation to issue the Penalty
Shares pursuant to the Transaction Documents, are unconditional and absolute and
not  subject  to any  right  of  set  off,  counterclaim,  delay  or  reduction,
regardless  of the effect of any such dilution or any claim the Company may have
against any Purchaser and  regardless of the dilutive  effect that such issuance
may have on the ownership of the other stockholders of the Company.

                                       18
<PAGE>

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

      4.4  Integration.  The Company  shall not sell,  offer for sale or solicit
offers to buy or  otherwise  negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the  Securities  in a manner that would  require the  registration  under the
Securities  Act of the sale of the Securities to the Purchasers or that would be
integrated  with the offer or sale of the  Securities  for purposes of the rules
and regulations of any Trading Market.

      4.5 Intentionally Omitted.

      4.6 Securities Laws Disclosure;  Publicity. The Company and each Purchaser
shall  consult with each other in issuing any other press  releases with respect
to the  transactions  contemplated  hereby,  and  neither  the  Company  nor any
Purchaser  shall issue any such press release or otherwise  make any such public
statement  without the prior  consent of the Company,  with respect to any press
release of any Purchaser,  or without the prior consent of each Purchaser,  with
respect  to  any  press  release  of  the  Company,   which  consent  shall  not
unreasonably be withheld, except if such disclosure is required by law, in which
case the  disclosing  party  shall  promptly  provide the other party with prior
notice of such public statement or communication. Notwithstanding the foregoing,
the Company shall not publicly  disclose the name of any  Purchaser,  or include
the name of any Purchaser in any filing with the  Commission  or any  regulatory
agency or Trading  Market,  without the prior written consent of such Purchaser,
except  (i)  as  required  by  federal  securities  law  in  connection  with  a
registration statement and (ii) to the extent such disclosure is required by law
or Trading  Market  regulations,  in which case the  Company  shall  provide the
Purchasers with prior notice of such disclosure permitted under subclause (i) or
(ii).

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

                                       19
<PAGE>

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

      4.9 Use of Proceeds.  The Company shall use the net proceeds from the sale
of the Securities hereunder for working capital and general corporate purposes.

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

      4.11  Indemnification  of  Purchasers.  Subject to the  provisions of this
Section  4.11,  the Company will  indemnify  and hold the  Purchasers  and their
directors,  officers,  shareholders,  partners,  employees and agents  (each,  a
"Purchaser Party") harmless from any and all losses,  liabilities,  obligations,
claims,  contingencies,  damages,  costs and expenses,  including all judgments,
amounts paid in  settlements,  court costs and  reasonable  attorneys'  fees and
costs of  investigation  that any such Purchaser  Party may suffer or incur as a
result  of or  relating  to (a)  any  breach  of  any  of  the  representations,
warranties,  covenants or agreements made by the Company in this Agreement or in
the  other  Transaction  Documents  or  (b)  any  action  instituted  against  a
Purchaser, or any of them or their respective Affiliates,  by any stockholder of
the Company who is not an  Affiliate of such  Purchaser,  with respect to any of
the transactions  contemplated by the Transaction  Documents (unless such action
is  based  upon a  breach  of such  Purchaser's  representation,  warranties  or
covenants  under the Transaction  Documents or any agreements or  understandings
such  Purchaser  may have with any such  stockholder  or any  violations  by the
Purchaser of state or federal  securities  laws or any conduct by such Purchaser
which constitutes fraud,  gross negligence,  willful misconduct or malfeasance).
If any action shall be brought  against any Purchaser  Party in respect of which
indemnity may be sought pursuant to this  Agreement,  such Purchaser Party shall
promptly notify the Company in writing,  and the Company shall have the right to
assume the defense thereof with counsel of its own choosing. Any Purchaser Party
shall  have  the  right to  employ  separate  counsel  in any  such  action  and
participate  in the defense  thereof,  but the fees and expenses of such counsel
shall be at the expense of such  Purchaser  Party  except to the extent that (i)
the  employment  thereof  has been  specifically  authorized  by the  Company in
writing, (ii) the Company has failed after a reasonable period of time to assume
such  defense  and to employ  counsel or (iii) in such  action  there is, in the
reasonable opinion of such separate counsel, a material conflict on any material
issue  between the  position of the Company and the  position of such  Purchaser
Party.  The  Company  will not be  liable  to any  Purchaser  Party  under  this
Agreement  (i) for any  settlement  by a Purchaser  Party  effected  without the
Company's prior written  consent,  which shall not be  unreasonably  withheld or
delayed;  or (ii) to the  extent,  but only to the  extent  that a loss,  claim,
damage or liability is  attributable  to any Purchaser  Party's breach of any of
the representations,  warranties, covenants or agreements made by the Purchasers
in this Agreement or in the other Transaction Documents.

                                       20
<PAGE>

      4.12 Reservation and Listing of Securities.

            (a) The Company  shall  maintain a reserve from its duly  authorized
      shares of Common Stock for issuance pursuant to the Transaction  Documents
      in such amount as may be required to fulfill its obligations in full under
      the Transaction Documents.

            (b) If, on any date,  the number of  authorized  but  unissued  (and
      otherwise  unreserved)  shares  of Common  Stock is less than the  Penalty
      Shares to be issued,  then the Board of Directors of the Company shall use
      commercially  reasonable  efforts to amend the  Company's  certificate  or
      articles  of  incorporation  to  increase  the  number of  authorized  but
      unissued  shares of  Common  Stock to at least  the  Penalty  Shares to be
      issued at such time,  as soon as possible  and in any event not later than
      the 75th day after such date.

            (c) The Company  shall,  if  applicable:  (i) in the time and manner
      required by the Trading Market,  prepare and file with such Trading Market
      an additional  shares listing  application  covering a number of shares of
      Common  Stock at least equal to the  Required  Minimum on the date of such
      application,  (ii) take all steps necessary to cause such shares of Common
      Stock to be approved for listing on the Trading Market as soon as possible
      thereafter,  (iii) provide to the Purchasers evidence of such listing, and
      (iv)  maintain the listing of such Common Stock on any date at least equal
      to the  Required  Minimum on such date on such  Trading  Market or another
      Trading Market.

      4.13 Equal Treatment of Purchasers.  No consideration  shall be offered or
paid to any  person  to amend or  consent  to a waiver  or  modification  of any
provision of any of the Transaction  Documents unless the same  consideration is
also offered to all of the parties to the Transaction  Documents.  Further,  the
Company  shall not make any  payment of  principal  or  interest on the Notes in
amounts  which  are   disproportionate  to  the  respective   principal  amounts
outstanding on the Notes at any applicable  time.  For  clarification  purposes,
this  provision  constitutes a separate  right granted to each  Purchaser by the
Company and negotiated  separately by each  Purchaser,  and is intended to treat
for the  Company  the  Note  holders  as a  class  and  shall  not in any way be
construed as the Purchasers  acting in concert or as a group with respect to the
purchase, disposition or voting of Securities or otherwise.

                                       21
<PAGE>

      4.14  Most  Favored  Nation  Provision.  Any time the  Company  effects  a
Subsequent  Financing,  each  Purchaser may elect,  in its sole  discretion,  to
exchange all or some of its Notes then held by it for the securities issued in a
Subsequent Financing based on the then outstanding  principal amount of the Note
plus accrued but unpaid  interest and any other fees then owed by the Company to
the Purchaser, and the effective price at which such securities are sold in such
Subsequent Financing.

                                   ARTICLE V.
                                  MISCELLANEOUS

      5.1  Termination.  This Agreement may be terminated by any  Purchaser,  by
written notice to the other parties,  if the Closing has not been consummated on
or before December 30, 2004;  provided that no such  termination will affect the
right of any party to sue for any breach by the other party (or parties).

      5.2 Fees. At the Closing, the Company has agreed to (i) reimburse DC Asset
Management  LLC ("DCAM")  $10,000,  for its legal fees and expenses and (ii) pay
DCAM  $25,000  as a  structuring  fee.  Except  as  expressly  set  forth in the
Transaction  Documents  to the  contrary,  each  party  shall  pay the  fees and
expenses of its advisers,  counsel,  accountants and other experts,  if any, and
all  other  expenses  incurred  by  such  party  incident  to  the  negotiation,
preparation,  execution, delivery and performance of this Agreement. The Company
shall pay all transfer agent fees, stamp taxes and other taxes and duties levied
in connection with the issuance of any Securities.

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

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

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

                                       22
<PAGE>

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

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

      5.8 No  Third-Party  Beneficiaries.  This  Agreement  is intended  for the
benefit of the parties  hereto and their  respective  successors  and  permitted
assigns and is not for the benefit of, nor may any provision  hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.11.

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

                                       23
<PAGE>

      5.10 Survival.  The representations and warranties  contained herein shall
survive  the  Closing  and  the  delivery,  exercise  and/or  conversion  of the
Securities, as applicable for the applicable statue of limitations.

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

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

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

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

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

                                       24
<PAGE>

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

      5.17 Usury. To the extent it may lawfully do so, the Company hereby agrees
not to insist upon or plead or in any manner  whatsoever  claim, and will resist
any and all efforts to be compelled  to take the benefit or advantage  of, usury
laws wherever enacted, now or at any time hereafter in force, in connection with
any claim, action or proceeding that may be brought by any Purchaser in order to
enforce any right or remedy under any Transaction Document.  Notwithstanding any
provision to the contrary contained in any Transaction Document, it is expressly
agreed  and  provided  that  the  total  liability  of  the  Company  under  the
Transaction  Documents  for payments in the nature of interest  shall not exceed
the maximum lawful rate authorized  under  applicable law (the "Maximum  Rate"),
and, without  limiting the foregoing,  in no event shall any rate of interest or
default  interest,  or both of them,  when aggregated with any other sums in the
nature  of  interest  that  the  Company  may  be  obligated  to pay  under  the
Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum
contract  rate of  interest  allowed by law and  applicable  to the  Transaction
Documents is  increased  or  decreased  by statute or any official  governmental
action subsequent to the date hereof,  the new maximum contract rate of interest
allowed by law will be the Maximum Rate applicable to the Transaction  Documents
from the  effective  date  forward,  unless such  application  is  precluded  by
applicable law. If under any circumstances whatsoever, interest in excess of the
Maximum  Rate  is  paid  by  the  Company  to  any  Purchaser  with  respect  to
indebtedness  evidenced  by the  Transaction  Documents,  such  excess  shall be
applied  by  such  Purchaser  to  the  unpaid  principal  balance  of  any  such
indebtedness  or be refunded to the Company,  the manner of handling such excess
to be at such Purchaser's election.

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

                                       25
<PAGE>

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

                            (Signature Pages Follow)

                                       26
<PAGE>

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

KNOBIAS, INC.                              Address for Notice:
                                           -------------------

                                           Building 2, Suite 500
/s/ E. KEY RAMSEY                          875 Northpark Drive
-----------------
E. Key Ramsey                              Ridgeland, Mississippi  39157
President
                                           Telephone:       (601) 978-3399
                                           Facsimile:       (601) 978-3675

With a copy to (which shall not            WATKINS & EAGER PLLC
constitute notice):                        400 East Capitol Street, Suite 300
                                           Jackson, Mississippi  39201
                                           Telephone:       (601) 948-6470
                                           Facsimile:       (601) 354-3623

                                           Attention:       James A. Lowe, III

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

                                       27
<PAGE>

      [PURCHASER SIGNATURE PAGES TO KNOBIAS SECURITIES PURCHASE AGREEMENT]

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

Name of Investing Entity: DCOFI Master LDC
                          ------------------------------------------------------
Signature of Authorized Signatory of Investing Entity: /s/ JEFFREY M. HAAS
                                                       -------------------------
Name of Authorized Signatory: Jeffrey M. Haas
                              --------------------------------------------------
Title of Authorized Signatory: Senior Vice-President
                               -------------------------------------------------
Email Address of Authorized Entity:
                                   ---------------------------------------------

Address for Notice of Investing Entity:

DCOFI Master LDC
Attn:  Jeffrey Haas
830 Third Avenue, 14th Floor
New York, New York 10022

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

Same

Subscription Amount: $275,000
EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]

                                       28

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