Document:

Exhibit 4.3

                                                                  EXECUTION COPY

NEITHER THIS WARRANT NOR THE  SECURITIES  INTO WHICH THIS WARRANT IS EXERCISABLE
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.

Right to Purchase  1,000,000 shares of Common Stock of CHINA  BIOPHARMACEUTICALS
HOLDINGS, INC. (subject to adjustment as provided herein)

                          COMMON STOCK PURCHASE WARRANT

No. A-1 Issue Date: February 2, 2006

         CHINA BIOPHARMACEUTICALS  HOLDINGS, INC., a corporation organized under
the laws of the State of Delaware (the  "Company"),  hereby  certifies that, for
value received,  GCE Property Holdings,  Inc. or its assigns (the "Holder"),  is
entitled,  subject to the terms set forth below, to purchase from the Company at
any time and from time to time from and after  the Issue  Date and  through  and
including  February 2, 2010 (the "Expiration  Date"), up to a total of 1,000,000
fully paid and  nonassessable  shares of the common  stock of the  Company  (the
"Common  Stock"),  $.001 par value  per share at a per share  purchase  price of
$1.25 in lawful money of the United States.  The  aforedescribed  purchase price
per share,  as  adjusted  from time to time as herein  provided,  is referred to
herein as the  "Exercise  Price."  The number and  character  of such  shares of
Common  Stock and the  Exercise  Price are  subject to  adjustment  as  provided
herein.  Capitalized  terms used and not otherwise defined herein shall have the
meanings  set  forth  in  that  certain   Purchase   Agreement   (the  "Purchase
Agreement"), dated February 2, 2006, entered into by the Company and the Holder.

         As used  herein  the  following  terms,  unless the  context  otherwise
requires, have the following respective meanings:

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<PAGE>

         The term  "Company"  shall include China  Biopharmaceuticals  Holdings,
Inc. and any corporation  which shall succeed or assume the obligations of China
Biopharmaceuticals Holdings, Inc. hereunder.

         The term "Common Stock" includes (a) the Company's Common Stock,  $.001
par value per share,  as authorized on the date of the Purchase  Agreement,  and
(b) any other securities into which or for which any of the securities described
in (a) may be  converted or  exchanged  pursuant to a plan of  recapitalization,
reorganization, merger, sale of assets or otherwise.

         The term "Fundamental  Transaction" means any of the following: (1) the
Company effects any merger or  consolidation of the Company with or into another
Person,  (2) the  Company  effects any sale of all or  substantially  all of its
assets in one or a series  of  related  transactions,  (3) any  tender  offer or
exchange offer (whether by the Company or another Person) is completed  pursuant
to which  holders of Common  Stock are  permitted  to tender or  exchange  their
shares for other  securities,  cash or property,  or (4) the Company effects any
reclassification  of the Common Stock or any compulsory share exchange  pursuant
to which the Common Stock is  effectively  converted into or exchanged for other
securities, cash or property.

         The term "Issue Date" means the Issue Date first set forth on the first
page of this Warrant.

         1. Exercise.

         (a) To effect exercises hereunder,  the Holder shall not be required to
physically   surrender  this  Warrant   unless  the  aggregate   Warrant  Shares
represented  by this Warrant is being  exercised.  Upon  delivery of the form of
subscription  attached  hereto (the  "Subscription  Form") to the Company at its
address for notice set forth in the Purchase  Agreement  and upon payment of the
Exercise  Price  multiplied  by the  number of  Warrant  Shares  that the Holder
intends to purchase hereunder, the Company shall promptly (but in no event later
than three  Trading Days after the Date of Exercise (as defined  herein))  issue
and deliver to the Holder,  a certificate  for the Warrant Shares  issuable upon
such exercise, which, unless otherwise required by the Purchase Agreement, shall
be free of restrictive legends. A "Date of Exercise" means the date on which the
Holder  shall  have  delivered  to  the  Company:  (i)  the  Subscription  Form,
appropriately  completed and duly signed and (ii) payment of the Exercise  Price
for the number of Warrant Shares so indicated by the Holder to be purchased.

         (b) If by the third  Trading Day after a Date of  Exercise  the Company
fails to deliver the required  number of Warrant  Shares in the manner  required
pursuant to Section  1(a),  then the Holder will have the right to rescind  such
exercise.

         (c) If by the third  Trading Day after a Date of  Exercise  the Company
fails to deliver the required  number of Warrant  Shares in the manner  required
pursuant to Section  1(a),  and if after such third Trading Day and prior to the
receipt  of such  Warrant  Shares,  the  Holder  purchases  (in an  open  market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a
sale by the Holder of the Warrant Shares which the Holder anticipated  receiving

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<PAGE>

upon such exercise (a  "Buy-In"),  then the Company shall (1) pay in cash to the
Holder the amount by which (x) the  Holder's  total  purchase  price  (including
brokerage  commissions,  if any) for the  shares  of Common  Stock so  purchased
exceeds (y) the amount  obtained by multiplying (A) the number of Warrant Shares
that the Company was  required to deliver to the Holder in  connection  with the
exercise at issue by (B) the  closing bid price of the Common  Stock on the Date
of Exercise and (2) at the option of the Holder, either reinstate the portion of
the Warrant and equivalent  number of Warrant Shares for which such exercise was
not  honored or deliver to the Holder the number of shares of Common  Stock that
would have been issued had the Company  timely  complied  with its  exercise and
delivery  obligations  hereunder.  The Holder shall provide the Company  written
notice indicating the amounts payable to the Holder in respect of the Buy-In.

         (d) The Company's  obligations  to issue and deliver  Warrant Shares in
accordance with the terms hereof are absolute and unconditional, irrespective of
any action or inaction by the Holder to enforce the same,  any waiver or consent
with respect to any provision  hereof,  the recovery of any judgment against any
Person  or  any  action  to  enforce  the  same,  or any  setoff,  counterclaim,
recoupment,  limitation or  termination,  or any breach or alleged breach by the
Holder or any other Person of any  obligation to the Company or any violation or
alleged violation of law by the Holder or any other Person,  and irrespective of
any other  circumstance  which  might  otherwise  limit such  obligation  of the
Company to the Holder in connection with the issuance of Warrant Shares. Nothing
herein shall limit a Holder's right to pursue any other remedies available to it
hereunder,  at law or in  equity  including,  without  limitation,  a decree  of
specific  performance  and/or  injunctive  relief with respect to the  Company's
failure to timely deliver certificates representing Warrant Shares upon exercise
of the Warrant as required pursuant to the terms hereof.

         2. Certain Adjustments. The Exercise Price and number of Warrant Shares
issuable upon  exercise of this Warrant are subject to  adjustment  from time to
time as set forth in this Section 2.

         (a) Stock Dividends and Splits. If the Company,  at any time while this
Warrant  is  outstanding,  (i)  pays a stock  dividend  on its  Common  Stock or
otherwise  makes a distribution on any class of capital stock that is payable in
shares of Common Stock, (ii) subdivides  outstanding shares of Common Stock into
a larger number of shares, or (iii) combines  outstanding shares of Common Stock
into a smaller number of shares, then in each such case the Exercise Price shall
be multiplied by a fraction of which the numerator shall be the number of shares
of Common  Stock  outstanding  immediately  before  such  event and of which the
denominator   shall  be  the  number  of  shares  of  Common  Stock  outstanding
immediately after such event. Any adjustment made pursuant to clause (i) of this
paragraph  shall  become  effective  immediately  after the record  date for the
determination of stockholders entitled to receive such dividend or distribution,
and any  adjustment  pursuant  to clause (ii) or (iii) of this  paragraph  shall
become  effective  immediately  after the effective date of such  subdivision or
combination.

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<PAGE>

         (b)  Fundamental  Transactions.  If, at any time while this  Warrant is
outstanding there is a Fundamental  Transaction,  then the Holder shall have the
right thereafter to receive,  upon exercise of this Warrant, the same amount and
kind of  securities,  cash or property as it would have been entitled to receive
upon the occurrence of such Fundamental  Transaction if it had been, immediately
prior to such  Fundamental  Transaction,  the  holder of the  number of  Warrant
Shares then  issuable  upon  exercise in full of this  Warrant  (the  "Alternate
Consideration").  For purposes of any such exercise,  the  determination  of the
Exercise  Price  shall be  appropriately  adjusted  to  apply to such  Alternate
Consideration based on the amount of Alternate Consideration issuable in respect
of one share of Common Stock in such  Fundamental  Transaction,  and the Company
shall  apportion  the  Exercise  Price among the  Alternate  Consideration  in a
reasonable manner  reflecting the relative value of any different  components of
the Alternate Consideration.  If holders of Common Stock are given any choice as
to the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it  receives  upon any  exercise  of this  Warrant  following  such  Fundamental
Transaction. At the Holder's option and request, any successor to the Company or
surviving entity in such Fundamental  Transaction shall, either (1) issue to the
Holder a new warrant  substantially  in the form of this Warrant and  consistent
with the foregoing  provisions and evidencing the Holder's right to purchase the
Alternate  Consideration for the aggregate Exercise Price upon exercise thereof,
or (2)  purchase the Warrant  from the Holder for a purchase  price,  payable in
cash within five Trading Days after such request (or, if later, on the effective
date of the  Fundamental  Transaction),  equal to the Black Scholes value of the
remaining  unexercised portion of this Warrant on the date of such request.  The
terms of any agreement  pursuant to which a Fundamental  Transaction is effected
shall include terms  requiring any such successor or surviving  entity to comply
with the  provisions of this paragraph (b) and insuring that the Warrant (or any
such  replacement  security)  will be  similarly  adjusted  upon any  subsequent
transaction analogous to a Fundamental Transaction.

         (c) Number of Warrant Shares. Simultaneously with any adjustment to the
Exercise Price pursuant to this Section 2, the number of Warrant Shares that may
be  purchased  upon  exercise of this  Warrant  shall be  increased or decreased
proportionately,  so that after such  adjustment  the aggregate  Exercise  Price
payable hereunder for the adjusted number of Warrant Shares shall be the same as
the aggregate Exercise Price in effect immediately prior to such adjustment.

         (d)  Notice of  Adjustments.  Upon the  occurrence  of each  adjustment
pursuant to this  Section 2, the Company at its expense  will  promptly  compute
such  adjustment  in  accordance  with the terms of this  Warrant  and prepare a
certificate setting forth such adjustment, including a statement of the adjusted
Exercise Price and adjusted number or type of Warrant Shares or other securities
issuable  upon  exercise  of  this  Warrant  (as  applicable),   describing  the
transactions  giving  rise to such  adjustments  and showing in detail the facts
upon which such  adjustment  is based.  Upon written  request,  the Company will
promptly  deliver  a copy of each  such  certificate  to the  Holder  and to the
Company's Transfer Agent.

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<PAGE>

         (e) Notice of Corporate  Events. If the Company (i) declares a dividend
or any other  distribution  of cash,  securities or other property in respect of
its  Common  Stock,  including  without  limitation  any  granting  of rights or
warrants to subscribe  for or purchase  any capital  stock of the Company or any
Subsidiary, (ii) authorizes or approves, enters into any agreement contemplating
or  solicits  stockholder  approval  for any  Fundamental  Transaction  or (iii)
authorizes the voluntary  dissolution,  liquidation or winding up of the affairs
of the Company, then the Company shall deliver to the Holder a notice describing
the material  terms and conditions of such  transaction  (but only to the extent
such disclosure would not result in the  dissemination  of material,  non-public
information  to the  Holder) at least 10 calendar  days prior to the  applicable
record or  effective  date on which a Person  would need to hold Common Stock in
order to  participate  in or vote  with  respect  to such  transaction,  and the
Company  will take all steps  reasonably  necessary  in order to insure that the
Holder is given the practical opportunity to exercise this Warrant prior to such
time so as to participate in or vote with respect to such transaction; provided,
however, that the failure to deliver such notice or any defect therein shall not
affect the  validity of the  corporate  action  required to be described in such
notice.

         3.  Limitations on Exercise.  Notwithstanding  anything to the contrary
contained  herein,  the number of Warrant  Shares  that may be  acquired  by the
Holder upon any exercise of this Warrant (or otherwise in respect  hereof) shall
be limited to the extent  necessary to insure that,  following such exercise (or
other  issuance),  the total number of shares of Common Stock then  beneficially
owned by such Holder and its Affiliates  and any other Persons whose  beneficial
ownership of Common Stock would be aggregated  with the Holder's for purposes of
Section 13(d) of the Exchange Act, does not exceed 9.999% of the total number of
issued and  outstanding  shares of Common Stock  (including for such purpose the
shares  of  Common  Stock  issuable  upon  such  exercise).  For such  purposes,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Exchange  Act  and  the  rules  and  regulations  promulgated  thereunder.  This
provision shall not restrict the number of shares of Common Stock which a Holder
may receive or  beneficially  own in order to determine the amount of securities
or  other  consideration  that  such  Holder  may  receive  in  the  event  of a
Fundamental  Transaction  as  contemplated  in Section 2 of this  Warrant.  This
restriction may not be waived, and  notwithstanding  anything to the contrary in
any Transaction Document, may not be amended by agreement of the parties.

         4. Common Stock  Legend.  The Holder  acknowledges  and agrees that the
shares of Common Stock of the Company,  and, until such time as the Common Stock
has been registered  under the 1933 Act and sold in accordance with an effective
registration statement,  or exemption from registration,  certificates and other
instruments representing any of the Common Stock shall bear a restrictive legend
in  substantially  the following  form and a  stop-transfer  order may be placed
against transfer of any such securities:

         THE SHARES  REPRESENTED BY THIS  CERTIFICATE  HAVE NOT BEEN  REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION NOR 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

                                       5
<PAGE>

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 SHARES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SHARES.

         5. Warrant  Agent.  The Company may, by written notice to the Holder of
the  Warrant,  appoint an agent (a  "Warrant  Agent") for the purpose of issuing
Common Stock issuable on the exercise of this Warrant.

         6. Miscellaneous. The Warrant Shares shall be accorded the registration
rights set forth in the Registration Rights Agreement.

         This Warrant and any term hereof may be changed, waived,  discharged or
terminated  only by an instrument  in writing  signed by the party against which
enforcement of such change,  waiver,  discharge or  termination is sought.  This
Warrant shall be construed  and enforced in accordance  with and governed by the
laws of the State of New York,  without  giving  effect to the conflicts of laws
principles thereof.

         This Warrant and the legal  relations among the parties hereto shall be
governed by and  construed in  accordance  with the laws of the United States of
America  and State of New York,  regardless  of the laws  that  might  otherwise
govern under applicable choice-of-law principles. The parties hereby irrevocably
submit to the non-exclusive jurisdiction of the state and federal courts located
in the  State  and  County of New York for  purposes  of all  legal  proceedings
arising  out of or  relating  to  this  Common  Stock  Purchase  Warrant  or the
transactions  contemplated  hereby. The parties hereby irrevocably waive, to the
fullest  extent  permitted by  applicable  law, the right to trial by jury,  any
objection  which  they may now or  hereafter  have to the laying of venue of any
such  proceeding  brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.

                      [THE NEXT PAGE IS THE SIGNATURE PAGE]

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<PAGE>

         IN WITNESS  WHEREOF,  the Company has  executed  this Warrant as of the
date first written above.

                                     China Biopharmaceuticals Holdings, Inc.

                                     By:

                                     Name: Chris Peng Mao

                                     Title: Chief Executive Officer and Chairman

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<PAGE>

                                    Exhibit A

                              FORM OF SUBSCRIPTION
                   (to be signed only on exercise of Warrant)

TO:  CHINA BIOPHARMACEUTICALS HOLDINGS INC.

The  undersigned,  pursuant to the provisions set forth in the attached  Warrant
(No.A-1), hereby irrevocably elects to purchase:

_____ Shares of the Common Stock covered by such Warrant.

The  undersigned  herewith  makes  payment of the full  purchase  price for such
shares at the price per share provided for in such Warrant, which is $1.25. Such
payment takes the form of:

$_________ in lawful money of the United States.

The undersigned  requests that the certificates for such shares be issued in the
name of, and delivered to whose address is

By its  delivery of this  Subscription  Form,  the  undersigned  represents  and
warrants to the Company that in giving effect to the exercise  evidenced  hereby
the Holder will not beneficially own in excess of the number of shares of Common
Stock  (determined in accordance  with Section 13(d) of the Securities  Exchange
Act of 1934) permitted to be owned under Section 3 of this Warrant to which this
notice relates.

Dated:

                                    (Address)Exhibit 4.1

                                                                  EXECUTION COPY

                          SECURITIES PURCHASE AGREEMENT

         This Securities  Purchase  Agreement (this  "Agreement") is dated as of
February  2, 2006 among  China  Biopharmaceuticals  Holdings,  Inc.,  a Delaware
corporation (the "Company"),  and the purchaser identified on the signature page
hereto (including its successors and assigns, a "Purchaser").

         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 the Purchaser,  and the Purchaser  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 the Purchaser agree
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 Warrants (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 the
         Purchaser,  any investment fund or managed account that is managed on a
         discretionary  basis by the same  investment  manager as the  Purchaser
         will be deemed to be an Affiliate of the 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
         Purchaser's  obligations  to pay the  Investment  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,  par
         value  $.001 per share,  and any other class of  securities  into which
         such securities may hereafter have been reclassified or changed into.

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

                  "Company Counsel" means Baker & McKenzie, LLP.

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

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

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

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

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

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

                  "Knowledge"  means,  with respect to any statement made to the
         knowledge of a party, that the statement is based upon actual knowledge
         of the officers of such party having  responsibility  for the matter or
         matters that are the subject of the statement, after due inquiry.

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<PAGE>

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

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

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

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

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

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

                  "Participation  Maximum"  shall have the  meaning  ascribed to
         such term in Section 4.12.

                  "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.

                  "Pre-Notice"  shall have the meaning  ascribed to such term in
         Section 4.12.

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

                  "Purchaser Party" shall have the meaning ascribed to such term
         in Section 4.11.

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

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

                                       3
<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).

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

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

                  "Shares"  means the shares of Common  Stock issued or issuable
         to the Purchaser pursuant to this Agreement, par value $.001 per share.

                  "Short  Sales" shall  include all "short  sales" as defined in
         Rule 200 of  Regulation  SHO under the  Exchange  Act (but shall not be
         deemed to include the location and/or  reservation of borrowable shares
         of Common Stock).

                  "Subsequent Financing" shall have the meaning ascribed to such
         term in Section 4.12.

                  "Subsequent  Financing Notice" shall have the meaning ascribed
         to such term in Section 4.12.

                  "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 Capital 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 Warrants,
         the Registration Rights Agreement and any other documents or agreements
         executed in connection with the transactions contemplated hereunder.

                  "VWAP" means,  for any date, the price determined by the first
         of the following clauses that applies:  (a) if the Common Stock is then
         listed or quoted on a Trading Market, the daily volume weighted average
         price of the Common Stock for such date (or the nearest preceding date)
         on the  Trading  Market on which  the  Common  Stock is then  listed or
         quoted as reported by Bloomberg  Financial L.P. (based on a Trading Day

                                       4
<PAGE>

         from 9:30 a.m.  Eastern  Time to 4:02 p.m.  Eastern  Time);  (b) if the
         Common  Stock is not then  listed or quoted on a Trading  Market and if
         prices  for the Common  Stock are then  reported  in the "Pink  Sheets"
         published by the Pink Sheets, LLC (or a similar  organization or agency
         succeeding to its functions of reporting  prices),  the most recent bid
         price per share of the Common  Stock so  reported;  or (c) in all other
         cases,  the fair market value of a share of Common Stock as  determined
         by an independent appraiser selected in good faith by the Purchaser and
         reasonably acceptable to the Company.

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

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

                                   ARTICLE II.
                                PURCHASE AND SALE

         2.1  Closing.  On the Closing  Date,  upon the terms and subject to the
conditions set forth herein,  concurrent with the execution and delivery of this
Agreement by the parties  hereto,  the Company agrees to sell, and the Purchaser
agrees to purchase up to $1,000,000  of Shares at $1.00 per Share  together with
Warrants exercisable into 1,000,000 Shares having an exercise price of $1.25 per
Share with a term of four (4) years.  The Purchaser shall deliver to the Company
via wire transfer or a certified check immediately  available funds equal to its
Investment  Amount and the Company shall deliver to the Purchaser its respective
Shares and Warrants as determined pursuant to Section 2.2(a) and the other items
set forth in Section  2.2  issuable at the  Closing.  Upon  satisfaction  of the
conditions  set forth in Sections  2.2 and 2.3,  the Closing  shall occur at the
offices of Bryan Cave LLP, 1290 Avenue of the Americas,  New York, NY 10104,  or
such other location as the parties shall mutually agree.

         2.2 Deliveries.

                  (a) On the Closing Date, the Company shall deliver or cause to
         be delivered to the Purchaser the following:

                           (i) this Agreement duly executed by the Company;

                           (ii) a  certificate  evidencing  a number  of  Shares
                  equal to the Purchaser's  Investment  Amount registered in the
                  name of the Purchaser;

                           (iii)  a  Warrant  registered  in  the  name  of  the
                  Purchaser  exercisable into a number of shares of Common Stock
                  equal to 100% of the Purchaser's  Investment  Amount,  with an
                  exercise price equal to $1.25 per Share, subject to adjustment
                  therein;

                                       5
<PAGE>

                           (iv) the legal opinion of Company Counsel,  in agreed
                  form, addressed to the Purchaser; and

                           (v) the Registration Rights Agreement,  duly executed
                  by the Company.

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

                           (i) this Agreement duly executed by the Purchaser;

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

                           (iii)  the  Registration   Rights   Agreement,   duly
                  executed by the 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 Purchaser contained herein;

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

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

                  (b) The respective  obligations of the Purchaser  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) since the date of execution  of this  Agreement,
                  no  event  or  series  of  events  shall  have  occurred  that
                  reasonably  could have or result in (i) an  adverse  effect on
                  the legality,  validity or  enforceability  of any Transaction
                  Document, or (ii) a Material Adverse Effect;

                                       6
<PAGE>

                           (v) no statute,  rule,  regulation,  executive order,
                  decree, ruling or injunction shall have been enacted, entered,
                  promulgated or endorsed by any court or governmental authority
                  of competent  jurisdiction  that prohibits the consummation of
                  any  of  the  transactions  contemplated  by  the  Transaction
                  Documents; and

                           (vi)  from  the  date  hereof  to the  Closing  Date,
                  trading in the Common  Stock shall not have been  suspended by
                  the  Commission  or the  Company's  principal  Trading  Market
                  (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 the Purchaser,  makes it impracticable
                  or inadvisable to purchase the Shares at the Closing.

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

         3.1 Representations and Warranties of the Company.  Except as set forth
under the  corresponding  section of the disclosure  schedules  delivered to the
Purchaser  concurrently  herewith (the "Disclosure  Schedules") which Disclosure
Schedules  shall  be  deemed  a  part  hereof,  the  Company  hereby  makes  the
representations and warranties set forth below to the Purchaser.

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

                  (b)  Organization and  Qualification.  The Company and each of
         the Subsidiaries is an entity duly incorporated or otherwise organized,
         validly   existing  and  in  good  standing   under  the  laws  of  the
         jurisdiction of its incorporation or organization (as applicable), with
         the  requisite  power and authority to own and use its  properties  and
         assets and to carry on its business as currently conducted. Neither the
         Company nor any  Subsidiary  is in  violation  or default of any of the
         provisions of its respective  certificate or articles of incorporation,
         bylaws  or  other  organizational  or  charter  documents.  Each of the

                                       7
<PAGE>

         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,  individually,  or in the  aggregate,  have or reasonably be
         expected to result in (i) a material  adverse  effect on the  legality,
         validity or enforceability of any Transaction Document, (ii) a material
         adverse  effect  on  the  results  of  operations,   assets,  business,
         prospects or condition  (financial or otherwise) of the Company and the
         Subsidiaries,  taken as a whole, or (iii) a material  adverse effect on
         the  Company's  ability to perform in any material  respect on a timely
         basis its obligations under any Transaction  Document (any of (i), (ii)
         or (iii),  a "Material  Adverse  Effect")  and no  Proceeding  has been
         instituted in any such jurisdiction revoking, limiting or curtailing or
         seeking  to  revoke,  limit or  curtail  such  power and  authority  or
         qualification.

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

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

                                       8
<PAGE>

         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, individually,  or in the aggregate, have or reasonably be expected
         to result in a Material Adverse Effect.

                  (e)  Filings,  Consents  and  Approvals.  The  Company  is not
         required to obtain any consent, waiver, authorization or order of, give
         any notice to, or make any filing or  registration  with,  any court or
         other federal,  state, local or other  governmental  authority or other
         Person in connection  with the execution,  delivery and  performance by
         the  Company  of the  Transaction  Documents,  other  than (i)  filings
         required  pursuant to Section 4.6, (ii) the filing with the  Commission
         of  one  or  more  Registration   Statements  in  accordance  with  the
         requirements  of  the  Registration  Rights  Agreement,  (iii)  filings
         required by state  securities laws in accordance with the  requirements
         of the Registration  Rights  Agreement,  which when permitted,  will be
         made  prior to the  Effectiveness  Date (as such term is defined in the
         Registration Rights Agreement),  (iv) the notice and/or  application(s)
         to each  applicable  Trading  Market for the  issuance  and sale of the
         Shares,  Warrants and the listing of the Shares and Warrant  Shares for
         trading  thereon in the time and manner  required  thereby  and (v) 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  other than
         restrictions on transfer provided for in the Transaction Documents. The
         Warrant  Shares,  when  issued  in  accordance  with  the  terms of the
         Transaction   Documents,   will  be  validly  issued,  fully  paid  and
         nonassessable,  free and clear of all Liens.  The Company has  reserved
         from its duly  authorized  capital  stock the  shares  of Common  Stock
         issuable  pursuant to this Agreement and the Warrants in order to issue
         the Shares and the Warrant  Shares.  The  Securities are not subject to
         any   preemptive  or  similar  rights  to  subscribe  for  or  purchase
         securities.

                  (g)  Capitalization.  Other than  disclosed in the SEC Reports
         and as set forth on  Schedule  3.1(g),  the  Company has not issued any
         capital  stock 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  all as set  forth on  Schedule  3.1(g).  No
         securities of the Company are entitled to preemptive or similar  rights
         and 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. As of the date
         of this  Agreement,  except as  disclosed in the SEC Reports and as set
         forth in Schedule  3.1(g) and as a result of the  purchase  and sale of
         the Warrants, there are no outstanding options, warrants, script rights
         to  subscribe  to, calls or  commitments  of any  character  whatsoever
         relating to, or securities,  rights or obligations  convertible into or
         exercisable  or  exchangeable  for,  or giving  any Person any right to
         subscribe  for or  acquire,  any  shares  of the  capital  stock of the
         Company, or contracts,  commitments,  understandings or arrangements by
         which the  Company or any  Subsidiary  is or may become  bound to issue
         additional  shares  of its  capital  stock,  or  securities  or  rights

                                       9
<PAGE>

         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  Purchaser) 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.

                  (h) SEC Reports;  Financial Statements.  The Company has filed
         all reports,  schedules, forms, statements and other documents required
         to be  filed by it  under  the  Securities  Act and the  Exchange  Act,
         including pursuant to Section 13(a) or 15(d) thereof, for the two years
         preceding  the date hereof (or such  shorter  period as the Company was
         required  by law to  file  such  material)  (the  foregoing  materials,
         including the exhibits thereto and documents  incorporated by reference
         therein, being collectively referred to herein as the "SEC Reports") on
         a timely basis or has received a valid extension of such time of filing
         and has filed any such SEC Reports prior to the  expiration of any such
         extension.  As of their  respective  dates, the SEC Reports complied in
         all material  respects with the  requirements of the Securities Act and
         the  Exchange  Act and the  rules  and  regulations  of the  Commission
         promulgated  thereunder,  and  none of the  SEC  Reports,  when  filed,
         contained any untrue statement of a material fact or omitted to state a
         material  fact  required to be stated  therein or necessary in order to
         make the statements  therein,  in the light of the circumstances  under
         which they were made, not misleading.  The financial  statements of the
         Company  included in the SEC Reports  comply in all  material  respects
         with applicable  accounting  requirements and the rules and regulations
         of the  Commission  with  respect  thereto  as in effect at the time of
         filing. Such financial statements have been prepared in accordance with
         United States generally  accepted  accounting  principles  applied on a
         consistent basis during the periods involved ("GAAP"), except as may be
         otherwise specified in such financial  statements or the notes thereto,
         and 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. The Company maintains and will
         continue to maintain a standard  system of accounting  established  and
         administered in accordance with GAAP and the applicable requirements of
         the Exchange Act.

                  (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, individually, or in the
         aggregate, could reasonably be expected to result in a Material Adverse

                                       10
<PAGE>

         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, (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,  and (C) other liabilities that would
         not, individually or in the aggregate,  have a Material Adverse Effect,
         (iii) the  Company  has not  altered  its method of  accounting  or the
         identity of its auditors, (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.  Except for the  issuance of the  Securities
         contemplated by this Agreement or as set forth on Schedule  3.1(i),  no
         event,  liability or development has occurred or exists with respect to
         the  Company  or  its  Subsidiaries  or  their   respective   business,
         properties,  operations or financial condition,  that would be required
         to be disclosed by the Company under applicable  securities laws at the
         time this representation is made that has not been publicly disclosed 1
         Trading Day prior to the date that this representation is made.

                  (j) Litigation.  There is no action, suit, inquiry,  notice of
         violation,  proceeding or investigation pending or, to the Knowledge of
         the  Company,   threatened  against  or  affecting  the  Company,   any
         Subsidiary  or any of  their  respective  properties  before  or by any
         court, arbitrator,  governmental or administrative agency or regulatory
         authority (federal, state, county, local or foreign) (collectively,  an
         "Action")  which (i)  adversely  affects or  challenges  the  legality,
         validity or enforceability  of any of the Transaction  Documents or the
         Securities  or  (ii)  could  if  there  were an  unfavorable  decision,
         individually,  or in the  aggregate,  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. None of the Company's or its Subsidiaries' employees is
         a member of a union that relates to such employee's  relationship  with
         the Company,  and neither the Company or any of its  Subsidiaries  is a
         party to a  collective  bargaining  agreement,  and the Company and its
         Subsidiaries  believe that their relationships with their employees are
         good. No executive officer, to the Knowledge of the Company,  is, or is
         now expected to be, in violation of any material term of any employment
         contract,   confidentiality,   disclosure  or  proprietary  information
         agreement  or  non-competition  agreement,  or any  other  contract  or
         agreement or any restrictive covenant,  and the continued employment of
         each such executive  officer does not subject the Company or any of its
         Subsidiaries  to any  liability  with  respect to any of the  foregoing
         matters.  The Company and its  Subsidiaries  are in compliance with all

                                       11
<PAGE>

         U.S. federal, state, local and foreign laws and regulations relating to
         employment and employment practices, terms and conditions of employment
         and wages and hours, except where the failure to be in compliance could
         not, individually or in the aggregate, reasonably be expected to have a
         Material Adverse Effect.

                  (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 and all such
         laws that  affect  the  environment,  except in each case as could not,
         individually,  or in the aggregate, have a Material Adverse Effect. The
         Company  is in  compliance  with  all  effective  requirements  of  the
         Sarbanes-Oxley  Act of 2002, as amended,  and the rules and regulations
         thereunder, that are applicable to it, except where such noncompliance,
         individually  or in the  aggregate,  could  not have or  reasonably  be
         expected to result in 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, individually,  or in the aggregate, have or reasonably be expected
         to  result in a  Material  Adverse  Effect  ("Material  Permits"),  and
         neither the  Company  nor any  Subsidiary  has  received  any notice of
         proceedings  relating to the revocation or modification of any Material
         Permit.

                  (n) Title to Assets.  The  Company and the  Subsidiaries  have
         good and  marketable  title in fee simple to all real property owned by
         them  that  is  material  to  the  business  of  the  Company  and  the
         Subsidiaries  and good and  marketable  title in all personal  property
         owned by them that is material  to the  business of the Company and the
         Subsidiaries,  in each  case free and clear of all  Liens,  except  for
         Liens  described  in  Schedule  3.1(n)  and 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. 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.

                                       12
<PAGE>

                  (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, trade
         secrets,  inventions,   copyrights,  licenses  and  other  intellectual
         property  rights or 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, individually, or in the
         aggregate,  have or reasonably  be expected to have a Material  Adverse
         Effect (collectively,  the "Intellectual Property Rights"). Neither the
         Company nor any Subsidiary has received a notice (written or otherwise)
         that  the  Intellectual  Property  Rights  used by the  Company  or any
         Subsidiary  violates or  infringes  upon the rights of any Person.  All
         such Intellectual Property Rights are enforceable and do not violate or
         infringe the Intellectual Property Rights of others in any respect that
         would,  individually  or in the  aggregate,  reasonably  be expected to
         result in a  Material  Adverse  Effect  and,  to the  Knowledge  of the
         Company,  there is no existing infringement by another Person of any of
         the Company's or the Subsidiary's  Intellectual  Property  Rights.  The
         Company and its Subsidiaries have taken reasonable security measures to
         protect  the  secrecy,  confidentiality  and  value  of  all  of  their
         intellectual  properties,  except  where  failure  to do so could  not,
         individually  or in the  aggregate,  reasonably  be  expect  to  have a
         Material Adverse Effect.

                  (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 Investment Amount. To the best
         Knowledge of the Company,  such  insurance  contracts  and policies are
         accurate and complete.  Neither the Company nor any  Subsidiary has any
         reason  to  believe  that it will  not be able to  renew  its  existing
         insurance  coverage  as and when  such  coverage  expires  or to obtain
         similar  coverage from similar insurers as may be necessary to continue
         its business without a significant increase in cost.

                  (q) Transactions With Affiliates and Employees.  Except as set
         forth in the SEC  Reports,  none of the  officers or  directors  of the
         Company and, to the Knowledge of the Company,  none of the employees of
         the Company is presently a party to any transaction with the Company or
         any  Subsidiary  (other than for  services as  employees,  officers and
         directors),  including  any  contract,  agreement or other  arrangement
         providing for the furnishing of services to or by, providing for rental
         of real  or  personal  property  to or  from,  or  otherwise  requiring
         payments to or from any officer,  director or such  employee or, to the
         Knowledge of the Company, any entity in which any officer, director, or
         any  such  employee  has a  substantial  interest  or  is  an  officer,
         director, trustee or partner.

                  (r) Sarbanes-Oxley;  Internal Accounting Controls. The Company
         is in 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

                                       13
<PAGE>

         maintain asset accountability, (iii) access to assets is permitted only
         in accordance with management's general or specific authorization,  and
         (iv) the  recorded  accountability  for  assets  is  compared  with the
         existing assets at reasonable intervals and appropriate action is taken
         with respect to any differences. The Company has established disclosure
         controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
         15d-15(e))  for the Company and designed such  disclosure  controls and
         procedures to ensure that material information relating to the Company,
         including its Subsidiaries, is made known to the certifying officers by
         others within those entities,  particularly  during the period in which
         the Company's most recently  filed  periodic  report under the Exchange
         Act, as the case may be, is being  prepared.  The Company's  certifying
         officers have evaluated the effectiveness of the Company's controls and
         procedures as of the date prior to the filing date of the most recently
         filed   periodic   report  under  the  Exchange  Act  (such  date,  the
         "Evaluation  Date").  The Company  presented in its most recently filed
         periodic   report  under  the  Exchange  Act  the  conclusions  of  the
         certifying  officers about the effectiveness of the disclosure controls
         and procedures  based on their  evaluations as of the Evaluation  Date.
         Since the Evaluation  Date,  there have been no significant  changes in
         the Company's internal controls (as such term is defined in Item 307(b)
         of  Regulation  S-K under the Exchange Act) or, to the Knowledge of the
         Company, in other factors that could significantly affect the Company's
         internal controls.

                  (s)  Private   Placement.   Assuming   the   accuracy  of  the
         Purchaser's 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 Purchaser as  contemplated
         hereby.  The issuance  and sale of the  Securities  hereunder  does not
         contravene the rules and regulations of the Trading  Market.  Except as
         described in Schedule 3.1(s),  the Company has not granted or agreed to
         grant to any  Person any rights  (including  "piggy-back"  registration
         rights)  to have any  securities  of the  Company  registered  with the
         Commission  or any  other  governmental  authority  that  have not been
         satisfied.

                  (t)  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.

                  (u) Registration  Rights. The Purchaser has the right to cause
         the Company to effect the registration  under the Securities Act of any
         securities of the Company.

                  (v) 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 24 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

                                       14
<PAGE>

         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. The issuance and sale of
         the Securities under the Transaction  Documents does not contravene the
         rules and  regulations  of the Trading Market on which the Common Stock
         is currently  listed or quoted,  and no approval of the stockholders of
         the Company thereunder is required for the Company to issue and deliver
         to  the  Purchaser  the  Securities  contemplated  by  the  Transaction
         Documents.  As of the date hereof, the Company's Common Stock is listed
         on the OTC Bulletin Board.

                  (w) Disclosure.  The Company  confirms that neither it nor any
         other Person  acting on its behalf has  provided  the  Purchaser or its
         agents  or  counsel  with any  information  that  constitutes  or might
         constitute material, nonpublic information. The Company understands and
         confirms that the Purchaser will rely on the foregoing  representations
         and covenants in effecting  transactions  in securities of the Company.
         All  disclosure  provided to the Purchaser  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 the
         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.

                  (x) No Integrated  Offering.  Neither the Company,  nor any of
         its  Affiliates,  nor any  Person  acting on its or their  behalf  has,
         directly  or  indirectly,  made any offers or sales of any  security or
         solicited  any offers to buy any  security,  under  circumstances  that
         would cause this offering of the Securities to be integrated with prior
         offerings  by the Company for  purposes  of the  Securities  Act or any
         applicable   shareholder   approval  provisions,   including,   without
         limitation,  under the rules and  regulations  of any Trading Market on
         which any of the securities of the Company are listed or designated.

                  (y) 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  cash and fair saleable value of its assets in an orderly
         liquidation  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

                                       15
<PAGE>

         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.

                  (z)  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.

                  (aa) 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 Purchaser.

                  (bb) 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.

                  (cc)   Acknowledgment   Regarding   Purchaser's   Purchase  of
         Securities.  The Company  acknowledges and agrees that the Purchaser 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 the Purchaser is not 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 the Purchaser or any of its
         respective  representatives or agents in connection with this Agreement
         and the transactions  contemplated  hereby is merely  incidental to the
         Purchaser's purchase of the Securities.  The Company further represents
         to the  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.

                  (dd) Acknowledgement  Regarding  Purchaser's Trading Activity.
         Anything  in  this  Agreement  or  elsewhere  herein  to  the  contrary
         notwithstanding,  it is  understood  and agreed by the Company (i) that
         the  Purchaser  has not been  asked  to  agree,  nor has the  Purchaser
         agreed,  to desist  from  purchasing  or selling,  long  and/or  short,
         securities  of  the  Company,  or  "derivative"   securities  based  on
         securities  issued by the  Company  or to hold the  Securities  for any
         specified  term;  (ii)  that  past  or  future  open  market  or  other
         transactions by the Purchaser,  including Short Sales, and specifically
         including,    without   limitation,   Short   Sales   or   "derivative"

                                       16
<PAGE>

         transactions,  before or after the  closing  of this or future  private
         placement  transactions,  may negatively impact the market price of the
         Company's  publicly-traded  securities;  (iii) that the Purchaser,  and
         counter parties in "derivative"  transactions to which the Purchaser is
         a party, directly or indirectly,  presently may have a "short" position
         in the Common Stock, and (iv) that the Purchaser shall not be deemed to
         have  any   affiliation   with  or  control   over  any  arm's   length
         counter-party  in any  "derivative"  transaction.  The Company  further
         understands  and  acknowledges  that (a) the  Purchaser  may  engage in
         hedging  activities  at  various  times  during  the  period  that  the
         Securities are outstanding,  including, without limitation,  during the
         periods that the value of the Warrant Shares  deliverable  with respect
         to Securities are being determined and (b) such hedging  activities (if
         any)  could  reduce  the  value of the  existing  stockholders'  equity
         interests  in the  Company  at and  after  the time  that  the  hedging
         activities  are being  conducted.  The Company  acknowledges  that such
         aforementioned  hedging activities do not constitute a breach of any of
         the Transaction Documents.

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

                  (ff) Press  Releases.  The press releases  disseminated by the
         Company  during the two (2) years  preceding the date of this Agreement
         taken as a whole do not contain any untrue statement of a material fact
         or omit to state a  material  fact  required  to be stated  therein  or
         necessary  in  order to make the  statements  therein,  in light of the
         circumstances under which they were made not misleading.

                  (gg)  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 Purchaser shall have no obligation
         with respect to any fees or with respect to any claims (other than such
         fees  or  commissions  owed  by  the  Purchaser   pursuant  to  written
         agreements executed by the Purchaser which fees or commissions shall be
         the sole responsibility of the Purchaser) 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.

                  (hh)  Application  of  Takeover  Protections.  The Company has
         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

                                       17
<PAGE>

         of incorporation that is or could become applicable to the Purchaser as
         a result of the Purchaser and the Company  fulfilling their obligations
         or exercising their rights under the Transaction  Documents,  including
         without  limitation  the Company's  issuance of the  Securities and the
         Purchaser's ownership of the Securities.

                  (ii) No Additional  Agreements.  The Company does not have any
         agreement  or  understanding  with the  Purchaser  with  respect to the
         transactions  contemplated by the  Transaction  Documents other than as
         specified in the Transaction Documents.

         3.2  Representations  and  Warranties of the  Purchaser.  The Purchaser
hereby  represents and warrants as of the date hereof and as of the Closing Date
to the Company as follows:

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

                  (b) Own Account. The Purchaser understands that the Securities
         are  "restricted  securities"  and have not been  registered  under the
         Securities Act or any applicable  state securities law and is acquiring
         the  Securities as principal for its own account and not with a view to
         or for distributing or reselling such Securities or any part thereof in
         violation of the Securities Act or any applicable state securities law,
         has no present  intention of  distributing  any of such  Securities  in
         violation of the Securities Act or any applicable  state securities law
         and  has  no  arrangement  or  understanding  with  any  other  persons
         regarding the distribution of such Securities (this  representation and
         warranty  not  limiting the  Purchaser's  right to sell the  Securities
         pursuant to the Registration  Statement or otherwise in compliance with
         applicable  federal  and state  securities  laws) in  violation  of the
         Securities Act or any applicable  state  securities law. Subject to the
         immediately  preceding  sentence,  nothing  contained  herein  shall be
         deemed  a  representation  or  warranty  by the  Purchaser  to hold the
         Securities  for any period of time.  The  Purchaser  is  acquiring  the
         Securities  hereunder  in the  ordinary  course  of its  business.  The
         Purchaser  does not have any  agreement or  understanding,  directly or
         indirectly, with any Person to distribute any of the Securities.

                                       18
<PAGE>

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

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

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

                  The Company  acknowledges  and agrees that the 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.

                                       19
<PAGE>

                  (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 the  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.

                  (b) The  Purchaser  agrees  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]  [CONVERSION] OF THESE  SECURITIES
         MAY BE PLEDGED IN CONNECTION  WITH A BONA FIDE MARGIN  ACCOUNT OR OTHER
         LOAN SECURED BY SUCH SECURITIES.

                  The Company  acknowledges  and agrees that the  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, if
         required  under  the  terms  of such  arrangement,  the  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 expense of
         the  Purchaser,  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.

                                       20
<PAGE>

                  (c)  Certificates  evidencing  the Shares and  Warrant  Shares
         shall not contain any legend (including the legend set forth in Section
         4.1(b)  hereof):  (i)  whenever  the  Shares  and  Warrant  Shares  are
         registered for resale under the  Securities  Act, or (ii) following any
         sale or transfer of such Shares or Warrant Shares pursuant to Rule 144,
         or (iii)  while such  Shares or Warrant  Shares are  eligible  for sale
         under  Rule  144(k),  or (iv)  if such  legend  is not  required  under
         applicable  requirements  of the  Securities  Act  (including  judicial
         interpretations   and  pronouncements   issued  by  the  staff  of  the
         Commission).  The  Company  shall cause its counsel to issue a standing
         legal  opinion  to the  Company's  transfer  agent  promptly  after the
         Effective  Date if required by the Company's  transfer  agent to effect
         the removal of the legend hereunder. Following such time as restrictive
         legends are not required to be placed on certificates  representing the
         Shares or Warrant Shares, the Company will, no later than three Trading
         Days  following  the  delivery by the  Purchaser  to the Company or the
         Company's transfer agent of (i) a certificate  representing such Shares
         or Warrant  Shares  containing a restrictive  legend  (endorsed or with
         stock power  attached,  signatures  guaranteed,  and  otherwise in form
         necessary to affect  reissuance and/ or transfer),  or (ii) an Exercise
         Notice in the manner  stated in the  Warrants to affect the exercise of
         such Warrant in accordance  with its terms (such third Trading Day, the
         "Legend  Removal  Date"),  deliver  or  cause  to be  delivered  to the
         Purchaser a certificate representing such Shares or Warrant Shares that
         is free from all  restrictive  and other  legends.  The Company may not
         make any notation on its records or give  instructions  to any transfer
         agent of the Company  that  enlarge the  restrictions  on transfer  set
         forth in this Section.  Certificates  for Securities  subject to legend
         removal  hereunder  shall be  transmitted  by the transfer agent of the
         Company to the  Purchaser by crediting  the account of the  Purchaser's
         prime broker with the Depository Trust Company System.

                  (d) In addition to the Purchaser's  other available  remedies,
         the Company shall pay to the Purchaser,  in cash, as partial liquidated
         damages  and not as a penalty,  for each  $1,000 of Shares and  Warrant
         Shares, respectively (based on the VWAP of the Common Stock on the date
         such  Securities  are  submitted  to  the  Company's   transfer  agent)
         delivered for removal of the restrictive  legend and subject to Section
         4.1(c),  $10 per  Trading  Day  (increasing  to $20 per  Trading  Day 5
         Trading Days after the Legend  Removal Date) for each Trading Day after
         the Legend Removal Date until such  certificate is delivered  without a
         legend.  Payment  shall be made to the  Purchaser no later than on each
         monthly  anniversary  of  each  such  Legend  Removal  Date  until  the
         applicable  certificate  free from all restrictive and other legends is
         delivered.  Nothing herein shall limit the Purchaser's  right to pursue
         actual  damages  for the  Company's  failure  to  deliver  certificates
         representing  any Securities as required by the Transaction  Documents,
         and the Purchaser shall have the right to pursue all remedies available
         to it at law or in equity including,  without  limitation,  a decree of
         specific performance and/or injunctive relief.

         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 Shares and

                                       21
<PAGE>

Warrant 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 the  Purchaser and  regardless  of the dilutive  effect
that such  issuance may have on the ownership of the other  stockholders  of the
Company.

         4.3  Furnishing  of   Information.   As  long  as  the  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 the Purchaser  owns  Securities,  if the Company is not
required to file  reports  pursuant  to the  Exchange  Act, it will  prepare and
furnish to the  Purchaser and make  publicly  available in accordance  with Rule
144(c) such  information as is required for the Purchaser 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, and shall use its best efforts
to ensure  that no  Affiliate  of the  Company  shall,  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 Purchaser 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 Conversion and Exercise Procedures.  The form of Notice of Exercise
included in the Warrants set forth the  totality of the  procedures  required of
the Purchaser in order to exercise the Warrants.  No additional legal opinion or
other information or instructions shall be required of the Purchaser to exercise
its  Warrants.  The Company  shall honor  exercises  of the  Warrants  and shall
deliver Warrant Shares in accordance with the terms, conditions and time periods
set forth in the Transaction Documents.

         4.6 Securities Laws Disclosure; Publicity. By 9:00 a.m. (New York time)
on the Trading Day following the execution of this  Agreement,  and by 9:00 a.m.
(New York time) on the Trading Day following the Closing Date, the Company shall
issue press releases  disclosing the  transactions  contemplated  hereby and the
Closing.  On the Trading Day  following  the  execution  of this  Agreement  the
Company will file a Current  Report on Form 8-K disclosing the material terms of
the  Transaction  Documents  (and  attach as exhibits  thereto  the  Transaction
Documents),  and on the Trading Day  following the Closing Date the Company will
file an  additional  Current  Report on Form 8-K to  disclose  the  Closing.  In
addition, the Company will make such other filings and notices in the manner and
time required by the Commission and the Trading Market on which the Common Stock
is  listed.  Notwithstanding  the  foregoing,  the  Company  shall not  publicly
disclose the name of the Purchaser,  or include the name of the Purchaser in any
filing  with the  Commission  (other  than the  Registration  Statement  and any
exhibits  to filings  made in respect of this  transaction  in  accordance  with
periodic filing requirements under the Exchange Act) or any regulatory agency or
Trading Market,  without the prior written  consent of the Purchaser,  except to
the extent such disclosure is required by law or Trading Market regulations.

                                       22
<PAGE>

         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 the 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 the 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 Purchaser. The Company shall conduct
its  business in a manner so that it will not become  subject to the  Investment
Company Act.

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

         4.9 Use of  Proceeds.  Except as set  forth on  Schedule  4.9  attached
hereto,  the Company shall use the net proceeds from the sale of the  Securities
hereunder for (A) working capital purposes and (B) for the purchase price of the
Company's acquisition of potential subsidiaries, and not for the satisfaction of
any portion of the Company's  debt (other than payment of trade  payables in the
ordinary course of the Company's  business and prior  practices),  to redeem any
Common  Stock  or  Common  Stock   Equivalents  or  to  settle  any  outstanding
litigation.

         4.10  Reimbursement.  If the 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
the  Purchaser  to or with any current  stockholder),  solely as a result of the
Purchaser's acquisition of the Securities under this Agreement, the Company will
reimburse the 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 Purchaser 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 Purchaser 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  Purchaser  and any such  Affiliate  and any such Person.  The
Company  also  agrees  that  neither  the  Purchaser  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 Purchaser.  Subject to the provisions of this
Section  4.11 and in addition  to the  indemnity  provided  in the  Registration
Rights  Agreement,  the Company will  indemnify  and hold the  Purchaser and its
directors, officers, shareholders,  members, partners, employees and agents (and

                                       23
<PAGE>

any other Persons with a functionally  equivalent  role of a Person holding such
titles notwithstanding a lack of such title or any other title), each Person who
controls the Purchaser  (within the meaning of Section 15 of the  Securities Act
and  Section 20 of the  Exchange  Act),  and the  directors,  officers,  agents,
members,  partners  or  employees  (and any other  Persons  with a  functionally
equivalent role of a Person holding such titles  notwithstanding  a lack of such
title or any other title) of such controlling person (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,  misrepresentation  or  inaccuracy  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 the Purchaser,  or any of its respective Affiliates,  by any stockholder
of the Company who is not an Affiliate of the Purchaser,  with respect to any of
the transactions  contemplated by the Transaction  Documents (unless such action
is based upon a material breach of the Purchaser's  representations,  warranties
or covenants under the Transaction Documents or any agreements or understandings
that the Purchaser may have with any such  stockholder  or any violations by the
Purchaser of state or federal  securities  laws or any conduct by the  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 material breach of
any of the  representations,  warranties,  covenants or  agreements  made by the
Purchaser in this Agreement or in the other Transaction Documents.

                                       24
<PAGE>

         4.12 Participation in Future Financing.

                  (a) From the date  hereof  until the date that is the 12 month
         anniversary  of the  Effective  Date,  upon any  offer  or sale to,  or
         exchange with (or other type of distribution to) any third party by the
         Company  or any of its  Subsidiaries  of Common  Stock or Common  Stock
         Equivalents (a "Subsequent  Financing"),  the Purchaser  shall have the
         right to  participate  in up to an amount of the  Subsequent  Financing
         equal  to  100%  of  the  Subsequent   Financing  (the   "Participation
         Maximum").

                  (b) At least 10 Trading Days prior to the anticipated  closing
         of a Subsequent Financing, the Company shall deliver to the Purchaser a
         written  notice  of its  intention  to  effect a  Subsequent  Financing
         ("Pre-Notice"), which Pre-Notice shall ask the Purchaser if it wants to
         review  the  details  of such  financing  (such  additional  notice,  a
         "Subsequent Financing Notice"). Upon the request of the Purchaser,  and
         only upon a request by the Purchaser, which request must occur within 3
         Trading Days of receipt of the Pre-Notice,  for a Subsequent  Financing
         Notice,  the Company shall promptly,  but no later than one Trading Day
         after  such  request,  deliver  a  Subsequent  Financing  Notice to the
         Purchaser. The Subsequent Financing Notice shall describe in reasonable
         detail the proposed terms of such Subsequent  Financing,  the amount of
         proceeds  intended to be raised  thereunder,  the Person with whom such
         Subsequent Financing is proposed to be effected,  and attached to which
         shall  be a term  sheet  or  similar  document  relating  thereto.  The
         Purchaser shall have the right to purchase the securities being offered
         in the Subsequent  Financing on the same, absolute terms and conditions
         as  contemplated  by  such  Subsequent   Financing.   Delivery  of  any
         Subsequent  Financing Notice  constitutes a representation and warranty
         by the Company that there are no other material  terms and  conditions,
         arrangements, agreements or otherwise except for those disclosed in the
         Subsequent Financing Notice.

                  (c) If the Purchaser desires to participate in such Subsequent
         Financing  it must provide  written  notice to the Company by not later
         than 5:30 p.m.  (New York City time) on the 5th  Trading  Day after the
         Purchaser  has  received  the  Subsequent  Financing  Notice  that  the
         Purchaser is willing to participate in the  Subsequent  Financing,  the
         amount of the  Purchaser's  participation,  and that the  Purchaser has
         such funds ready,  willing,  and available for  investment on the terms
         set forth in the Subsequent  Financing  Notice. If the Company receives
         no notice from the  Purchaser as of such 5th Trading Day, the Purchaser
         shall be deemed to have  notified the Company that it does not elect to
         participate.

                  (d) If by 5:30 p.m.  (New York City  time) on the 5th  Trading
         Day after the Purchaser has received the Subsequent  Financing  Notice,
         notification  by the Purchaser of its willingness to participate in the
         Subsequent  Financing (or to cause its designees to participate) is, in
         the aggregate,  less than the total amount of the Subsequent Financing,
         then the Company may effect the  remaining  portion of such  Subsequent
         Financing  on the terms and to the Persons set forth in the  Subsequent
         Financing Notice.

                                       25
<PAGE>

                  (e) The Company  shall have 10 Trading  Days from  delivery of
         the Pre-Notice to publicly announce the Subsequent Financing. If by the
         end of such 10 Trading  Day  period,  the Company has not made a public
         announcement with respect to the Subsequent Financing,  such Subsequent
         Financing shall be deemed  terminated and knowledge of such transaction
         shall no longer be deemed material, non-public information.

                  (f) Notwithstanding the foregoing, this Section 4.12 shall not
         apply in respect of an Exempt Issuance.

         4.13 Equal Treatment.  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.

         4.14 Form D. The Company agrees to timely file a Form D with respect to
the  Securities  as required  under  Regulation D and to provide a copy thereof,
promptly upon request of the Purchaser.

         4.15 Subsequent Registrations.  Other than pursuant to the Registration
Statement,   prior  to  the  Effective  Date,  the  Company  may  not  file  any
registration statement (other than on Form S-8) with the Commission with respect
to any securities of the Company.

         4.16  Limitation  on Issaunce of Future Priced  Securities.  During the
twelve (12) months  following the Closing Date,  the Company shall not issue any
security that would be a "Future Priced Securities" as such term is described by
NASD IM-4350-1, that would have a conversion price lower than $1.00 per share or
exercise price lower than $1.25 per share.

         4.17 Listing of Common  Stock.  The Company  hereby  agrees to use best
efforts to  maintain  the  listing  and  trading of its Common  Stock on the OTC
Bulletin Board (or another nationally  recognized  Trading Market).  The Company
further  agrees,  if the Company  applies to have the Common Stock traded on any
other Trading Market, it will include in such application the Shares and Warrant
Shares,  and will take such other  action as is  necessary  or  desirable in the
opinion of the  Purchaser  to cause all of the Shares and  Warrant  Shares to be
listed on such other  Trading  Market as promptly as possible.  The Company will
use best  efforts  and take all action  reasonably  necessary  to  continue  the
listing  and  trading of its  Common  Stock on the  Trading  Market on which the
Common Stock is currently  listed or quoted and will comply in all respects with
the Company's reporting,  filing and other obligations under the bylaws or rules
of such Trading Market.

         4.18 Form SB-2 and Form S-1  Eligibility.  The  Company is  eligible to
register the resale of the Shares and the Warrant Shares by the Purchaser  under
Form SB-2 or Form S-1  promulgated  under  the  Securities  Act and the  Company
hereby  covenants and agrees to use its best efforts to maintain its eligibility
to use Form SB-2 until the  Registration  Statement  covering  the resale of the
Shares and Warrant Shares shall have been filed with, and declared effective by,
the  Commission.  If for any reason the Company is not  eligible to register the
resale of the Shares and the Warrant  Shares by the  Purchaser  under Form SB-2,
the  Company  covenants  and  agrees to  register  the  resale of the Shares and
Warrant Shares on Form S-1 promulgated under the Securities Act.

                                       26
<PAGE>

         4.19 Advisory Board  Representation.  The Company  covenants and agrees
that as soon as is reasonably  practicable following the date of this Agreement,
but in no event  later  than  thirty  calendar  days,  as long as the  Purchaser
beneficially  owns at least 700,000  shares of Common  Stock,  the Company shall
nominate  and elect one (1)  advisor  to the  Advisory  Board of the  Company as
designated in writing by the  Purchaser.  As long as the Purchaser  beneficially
owns at least 700,000 shares of Common Stock, the Purchaser shall be entitled to
have one advisor  designated  by it on the Advisory  Board of the Company at all
times.

         4.20 Price Protection.  While the Warrants are outstanding, the Company
covenants  and agrees not to issue (i) any shares of Common Stock at a price per
share  equal to or less than $1.00 per share,  or (ii) any  promissory  notes or
other securities  convertible or exchangeable  into shares of Common Stock which
have a conversion  price equal to or less than $1.00 per share.  Notwithstanding
the foregoing, while the Warrants are outstanding, solely with respect to common
stock purchase  warrants  exercisable  into shares of Common Stock,  the Company
covenants and agrees not to issue any such common stock purchase  warrants which
have an exercise price less than the then applicable  Exercise Price (as defined
in the Warrants).

                                   ARTICLE V.
                                  MISCELLANEOUS

         5.1 Fees and Expenses.  At the Closing,  the Company shall pay to Bryan
Cave LLP $15,000 as partial reimbursement to the Purchaser for its legal fees in
connection with the Transaction  Documents (the Purchaser may deduct such amount
from the  Investment  Amount  deliverable  to the Company at Closing),  it being
understood  that Bryan Cave LLP has only rendered legal advice to the Purchaser,
and not to the Company in connection with the transactions  contemplated hereby,
and that the  Company  has  relied  for such  matters  on the  advice of its own
respective counsel.  Except as specified in the immediately  preceding sentence,
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
the Transaction  Documents.  The Company shall pay all stamp and other taxes and
duties levied in connection with the sale of the Shares.

         5.2 Termination. This Agreement may be terminated prior to Closing:

                  (a) by written agreement of the Purchaser and the Company; and

                  (b) by the Company or the Purchaser upon written notice to the
         other,  if the Closing shall not have taken place by 6:30 p.m.  Eastern
         time on February 21, 2006;  provided,  that the right to terminate this
         Agreement under this Section shall not be available to any Person whose
         failure to comply with its  obligations  under this  Agreement has been
         the cause of or  resulted  in the failure of the Closing to occur on or
         before such time.

                                       27
<PAGE>

         Upon a termination in accordance with this Section, the Company and the
Purchaser  shall not have any further  obligation  or  liability  (including  as
arising from such termination) to the other except pursuant to Section 4.11.

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

         5.5 Amendments;  Waivers. No provision of this Agreement may be waived,
modified,  supplemented or amended except in a written instrument signed, in the
case of an  amendment,  by the  Company and the  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.

         5.6  Headings.  The headings  herein are for  convenience  only, do not
constitute a part of this  Agreement  and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent,  and no
rules of strict  construction  will be applied against any party. This Agreement
shall be construed as if drafted  jointly by the parties,  and no presumption or
burden of proof shall arise favoring or  disfavoring  any party by virtue of the
authorship  of any  provisions  of  this  Agreement  or  any of the  Transaction
Documents.

         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 the Purchaser. The Purchaser may assign any
or all of its rights under this  Agreement  to any Person to whom the  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 Purchaser.

                                       28
<PAGE>

         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 (as to each
Purchaser Party).

         5.9 Governing Law. All questions concerning the construction, validity,
enforcement  and  interpretation  of this  Agreement  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. Each party hereto hereby  irrevocably  waives,  to the fullest
extent  permitted by  applicable  law, any and all right to trial by jury in any
legal  proceeding   arising  out  of  or  relating  to  this  Agreement  or  the
transactions  contemplated  hereby.  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 reasonable  attorneys' fees and other costs and expenses  incurred
with  the   investigation,   preparation  and  prosecution  of  such  action  or
proceeding.

         5.10 Survival.  The  representations,  warranties,  covenants and other
agreements 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

                                       29
<PAGE>

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  the  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 the
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 exercise of a Warrant,  the  Purchaser
shall be  required  to return  any  shares of Common  Stock  subject to any such
rescinded 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
Purchaser  and the Company  will be entitled to specific  performance  under the
Transaction  Documents.  The  parties  agree that  monetary  damages  may not be
adequate  compensation  for  any  loss  incurred  by  reason  of any  breach  of
obligations  described in the  foregoing  sentence and hereby agrees to waive in
any action for specific  performance  of any such  obligation the defense that a
remedy at law would be adequate.

         5.16 Payment Set Aside.  To the extent that the Company makes a payment
or  payments  to the  Purchaser  pursuant  to any  Transaction  Document  or the
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.

                                       30
<PAGE>

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

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

         5.19  Limitation of Liability.  Notwithstanding  anything herein to the
contrary,  the  Company  acknowledges  and  agrees  that  the  liability  of the
Purchaser arising directly or indirectly,  under any Transaction Document of any
and every nature  whatsoever  shall be satisfied solely out of the assets of the
Purchaser,  and that no trustee,  officer, other investment vehicle or any other
Affiliate of the Purchaser or any investor,  shareholder  or holder of shares of
beneficial  interest  of the  Purchaser  shall  be  personally  liable  for  any
liabilities of the Purchaser.

                            (Signature Pages Follow)

                                       31
<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.

CHINA BIOPHARMACEUTICALS HOLDINGS, INC.                   Address for Notice:
                                                          -------------------
                                                          Suite 1601, Building A
                                                          Jinshan Tower, No. 8
                                                          Shan Xi Road
                                                          Nanjing, Jiangsu
                                                          China
                                                          Fax: 86-25-8320-5759

By: /s/ Chris Peng Mao
   -----------------------
   Name:  Chris Peng Mao
   Title: Chief Executive Officer and Chairman

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

                                       32
<PAGE>

      [PURCHASER SIGNATURE PAGES TO CHBP.OB 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 Purchaser: GCE Property Holdings, Inc.
Signature of Authorized Signatory of Purchaser:/s/ Kenneth L. Handerson
Name of Authorized Signatory: Kenneth L. Handerson
Title of Authorized Signatory:President
Email Address of Purchaser:_____________________________________________________
Address for Notice of Purchaser:

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

Investment Amount:
Warrant Shares:
EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

                                       33
<PAGE>

                                                                         Annex A

                                CLOSING STATEMENT

Pursuant to the attached  Securities  Purchase  Agreement,  dated as of the date
hereto,  the  Purchaser  shall  purchase up to $1,000,000 of Shares and Warrants
from China Biopharmaceuticals  Holdings, Inc. (the "Company"). All funds will be
wired into a trust account  maintained by ____________,  counsel to the Company.
All funds will be disbursed in accordance with this Closing Statement.

Disbursement Date:    February ___, 2006

________________________________________________________________________________

I.   PURCHASE PRICE

                    Gross Proceeds to be Received in Trust   $

II.  DISBURSEMENTS

                                                             $
                                                             $
                                                             $
                                                             $
                                                             $

Total Amount Disbursed:                                      $

WIRE INSTRUCTIONS:

To: _____________________________________

To: _____________________________________

                                       34
<PAGE>

Schedule 3.1(a)
---------------
China Biopharmaceuticals Holdings Inc.

List of Subsidiaries of China Biopharmaceuticals Holdings, Inc.
---------------------------------------------------------------

China  Biopharmaceuticals  Corp.,  a British  Virgin  Island  Corporation  (100%
controlled by China Biopharmaceuticals Holdings, Inc.)

NanJing  Keyuan  Pharmaceutical  R&D  Co.,  Ltd.,  a  Chinese  Corporation  (90%
controlled by China Biopharmaceuticals Corp.)

Suzhou Hengyi  Pharmaceuticals  of Feedstock  Co.,  Ltd., a Chinese  Corporation
(75.76% controlled by China Biopharmaceuticals Corp.)

Suzhou  Erye   Pharmaceutical   Limited  Company,  a  Chinese  Corporation  (51%
controlled by China Biopharmaceuticals Corp.)

Chengdu Tianyin  Pharmaceutical  Limited  Company,  a Chinese  Corporation  (51%
controlled by China Biopharmaceuticals Corp.)

                                       35
<PAGE>

Schedule 3.1(g)
---------------
China Biopharmaceuticals Holdings Inc.

----------------------------- --------------------------- ----------------------
Security                             Common Stock               Warrants
----------------------------- --------------------------- ----------------------
Existing Common Stock Share            775,883                   775,883
----------------------------- --------------------------- ----------------------
Convertible Preferred (1)             1,234,625                 1,419,819
----------------------------- --------------------------- ----------------------
Common Stock to be Issued
(2)                                   1,100,000                 1,100,000
----------------------------- --------------------------- ----------------------
Total                                 3,110,508                 3,295,702
----------------------------- --------------------------- ----------------------

Remarks:
(1) Three private placements in Preferred Convertible closed in 2005.
(2) Additional amounts to be raised in a subsequent financing.

                                       36
<PAGE>

Schedule 3.1(i)
---------------
China Biopharmaceuticals Holdings Inc.

None.

                                       37
<PAGE>

Schedule 3.1(n)
---------------
China Biopharmaceuticals Holdings Inc.

------------------- ------------------- -------------------- -------------------
Name of Company(1)   Nature of Company   Total value of       Total Liens(6) on
                                         Owned Properties(5)  Owned Properties
------------------- ------------------- -------------------- -------------------
CBH(1)               Holding                             $0                   $0
------------------- ------------------- -------------------- -------------------
CBC(2)               100% owned by CBH                   $0                   $0
------------------- ------------------- -------------------- -------------------
Keyuan(3)            90% owned by CBC                    $0                   $0
------------------- ------------------- -------------------- -------------------
Hengyi(4)            76% owned by CBH              $377,034             $154,962
------------------- ------------------- -------------------- -------------------
Erye(4)              51% owned by CBH            $1,209,790             $442,055
------------------- ------------------- -------------------- -------------------
Tianyin(4)           51% owned by CBC            $1,133,384             $422,293
------------------- ------------------- -------------------- -------------------
Total                                            $2,720,209           $1,019,310
------------------- ------------------- -------------------- -------------------

Remarks:
(1) China Biopharmaceuticals Holdings Inc. ("CBH") is a corporation incorporated
in Delaware, US.
(2) China  Biopharmaceuticals  Corp.  ("CBC") is a corporation  incorporated  in
British Virgin Islands.
(3) Keyuan is a R & D company incorporated in Nanjing, China.
(4) Companies are incorporated in China.
(5)  Properties  include land,  office  buildings,  manufacturing  buildings and
production licenses & facilities.
(6) Mortgages and bank loans against the properties.

                                       38
<PAGE>

Schedule 3.1(s)
China Biopharmaceuticals Holdings Inc.

-------- ---------------------- --------------- ------------ -------------------
             Common Shares
           with Registration      Convertible      Equity     Shares Underlying
                Rights             Preferred     Investment       Warrants
-------- ---------------------- --------------- ------------ -------------------
Number         775,883             1,234,625     1,100,000*       3,295,702
-------- ---------------------- --------------- ------------ -------------------
                                   7,000,000                      7,000,000
-------- ---------------------- --------------- ------------ -------------------
Total          775,883             8,234,625     1,100,000        10,295,702
-------- ---------------------- --------------- ------------ -------------------

*Same as in Schedule 3.1(g)

                                       39
<PAGE>

Schedule 4.9
------------
China Biopharmaceuticals Holdings Inc.

Capital  contributions  to one or  more  of the  Company's  existing  or  future
subsidiaries.

                                       40

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