Document:

Exhibit
10.2

 

AMENDMENT
NO. 4 TO

THE CALDERA INTERNATIONAL, INC.

2000 EMPLOYEE STOCK PURCHASE PLAN

 

This Amendment No. 4 to
the Caldera International, Inc., 2000 Employee Stock Purchase Plan (the
“Amendment”) is executed by the undersigned, by and on behalf of Caldera
International, Inc., a Delaware corporation (the “Company”).

 

Background

 

A.           The Company has adopted
the 2000 Employee Stock Purchase Plan (the “2000 Plan”) pursuant to which
employees may purchase shares of Common Stock of the Company through
participation in a payroll deduction-based employee stock purchase plan.  Capitalized terms used in the Amendment but
not defined herein have the meaning set forth in the 2000 Plan.

 

B.             The
Board of Directors of the Company have adopted Amendment No. 1 to the 2000 Plan
increasing the number of authorized shares of Common Stock subject to the 2000
Plan from 500,000 to 2,000,000. 
Amendment No. 1 to the 2000 Plan required stockholder approval, which
was obtained at the annual stockholder meeting on April 27, 2001.

 

C.             The
Board of Directors of the Company have adopted Amendment No. 2 to the 2000 Plan
changing the Purchase Intervals from the first day of May to the last day
of October and the first day of November to the last day of
April to now be the first day of June to the last day of
November and the first day of December to the last day of May.  Amendment No. 2 also increased the share
maximum per participant on any one Purchase Date from 750 shares to 1000
shares.  In addition, the maximum number
of shares in the aggregate by all participants any one Purchase Date was
increased from 125,000 shares to 350,000 shares.  The Semi-Annual Entry Date (Definition S in the amendment of the
plan) was changed to reflect the new Purchase Interval dates.  Stockholder approval was not necessary for
these changes.

 

D.            The
Board of Directors of the Company have adopted Amendment No. 3 to the 2000 Plan
which eliminated the share maximum per participant of 1,000 shares.  Amendment No. 3 also changed the rule that
payroll deductions not applied to a purchase must be refunded.  In addition, participants who withdraw from
the plan may now re-enter at the next Purchase Interval, rather than waiting
until the next Purchase Period, as previously stated.  Finally, the definition of Eligible Employees was expanded to
include part-time employees of the Company. 
Stockholder approval was not necessary for these changes.

 

E.              In
connection with the reverse stock split which was effective March 14,
2002, the maximum purchase shares of 350,000 shares in the aggregate by all
participants on any on Purchase Date was adjusted to 87,500 shares.  In addition, the number of authorized shares
under the Plan was reduced from 2,000,000 to 500,000 as a result of the reverse
stock split.  The Company now desires to
increase the aggregate maximum number of shares available on any Purchase Date
to 350,000 shares and also desires to increase the number of authorized shares
available under the plan from 500,000 to 1,000,000.

 

 

Stockholder approval for
this increase will be sought at the next annual stockholder meeting in
April of 2003.

 

Amendment

 

NOW, THEREFORE, the 2000
Plan is hereby amended as follows:

 

1.               Number
of Purchasable Shares.   As per
Section III.C, the maximum number of shares purchasable on any one
Purchase Date should be adjusted appropriately for any stock split, stock
divided, recapitalization, etc. 
Therefore, as amended in Amendment No. 2, the maximum number of 350,000
shares purchasable on any on Purchase Date was adjusted to 87,500 shares after
the four for one reverse stock split, effective March 14, 2002.  Effective as of the close of the first
Purchase Interval that ends in calendar year 2003, this number shall be
increased to a maximum of 350,000 shares purchasable on any one Purchase Date.

 

2.               Increase
in Number of Shares.  As per
Section III.C, the maximum number of shares issuable in the aggregate
under the Plan should be adjusted appropriately for any stock split, stock
divided, recapitalization, etc. 
Therefore, as amended in Amendment No. 1, the maximum number of
2,000,000 shares, which may be issued in the aggregate under the Plan, was
adjusted to 500,000 shares after the four for one reverse stock split,
effective March 14, 2002. 
Effective as of the close of the first Purchase Interval that ends in
calendar year 2003, this number shall be increased to a maximum of 1,000,000
shares issuable in the aggregate under the Plan.

 

3.               Ratification.  Except as specifically modified by the Amendment, the 2000 Plan
is hereby ratified and reaffirmed by the Company.

 

4.               Effectiveness.  The Amendment shall be effective as of the close of the first
Purchase Interval that ends in calendar year 2003.

 

The undersigned, which is duly
elected Secretary of the Company, hereby certifies that the Board of Directors
of the Company approved the Amendment at a duly convened meeting of the Board
of Directors on December 16, 2002.

 

 

	
   

  	
  The SCO
  Group, a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Michael P. Olson

  	
   

  
	
   

  	
   

  	
  Michael P. Olson, its
  Corporate Secretary

  

 

2SECURITIES PURCHASE

                                    AGREEMENT

                         DATED AS OF SEPTEMBER 12, 2003

                                      AMONG

                           AXIOM PHARMACEUTICALS, INC.

                                       AND

                       THE PURCHASERS LISTED ON EXHIBIT A

<PAGE>

<TABLE>

<CAPTION>

                                TABLE OF CONTENTS

                                                                                             PAGE
                                                                                             ----
<S>                                                                             <C>          <C>

ARTICLE I       Purchase and Sale of Preferred Stock and Warrants...............................1

         Section 1.1       Purchase and Sale of Preferred Stock and Warrants....................1
         Section 1.2       Purchase Price and Closing...........................................1
         Section 1.3       Warrants.............................................................2
         Section 1.4       Conversion Shares and Warrant Shares.................................2

ARTICLE II      Representations and Warranties..................................................2

         Section 2.1       Representations and Warranties of the Company........................2
         Section 2.2       Representations and Warranties of the Purchasers....................12

ARTICLE III     Covenants......................................................................14

         Section 3.1       Disclosure of Transactions and Other Material Information...........14
         Section 3.2       Registration and Listing............................................15
         Section 3.3       Inspection Rights...................................................15
         Section 3.4       Complaince with Laws................................................15
         Section 3.5       Keeping of Records and Books of Account.............................15
         Section 3.6       Other Agreements....................................................16
         Section 3.7       Reservation of Shares...............................................16
         Section 3.8       Non-public Information..............................................16
         Section 3.9       Premptive Rights....................................................16
         Section 3.10 Lock-Up..................................................................18

ARTICLE IV      Conditions.....................................................................18

         Section 4.1       Conditions Precedent to the Obligation of the Company to
                           Close and to Sell the Shares and Warrants...........................18
         Section 4.2       Conditions Precedent to the Obligation of the Purchasers to
                           Close and to Purchase the Shares and Warrants.......................19

ARTICLE V       Certificate of Legend..........................................................21

         Section 5.1       Legend..............................................................21

ARTICLE VI      Termination....................................................................22

         Section 6.1       Termination by Mutual Consent.......................................22
         Section 6.2       Effect of Termination...............................................22

ARTICLE VII     Indemnification................................................................23

         Section 7.1       General Indemnity...................................................23
         Section 7.2       Indemnification Procedure...........................................23

ARTICLE VIII    Miscellaneous..................................................................24

                                      -i-
<PAGE>

                               TABLE OF CONTENTS
                               -----------------
                                   (continued)

         Section 8.1       Fees and Expenses...................................................24
         Section 8.2       Specific Enforcement; Consent to Jurisdiction.......................24
         Section 8.3       Entire Agreement; Amendment.........................................25
         Section 8.4       Notices.............................................................25
         Section 8.5       Waivers.............................................................26
         Section 8.6       Headings............................................................26
         Section 8.7       Successors and Assigns..............................................26
         Section 8.8       No Third Party Beneficiaries........................................26
         Section 8.9       Governing Law.......................................................26
         Section 8.10      Survival............................................................27
         Section 8.11      Counterparts........................................................27
         Section 8.12      Publicity...........................................................27
         Section 8.13      Severability........................................................27
         Section 8.14      Further Assurances..................................................27
         Section 8.15      Independent Nature of Purchasers' Obligations and Rights............27

</TABLE>

                                       ii
<PAGE>

                          SECURITIES PURCHASE AGREEMENT

         This  SECURITIES  PURCHASE  AGREEMENT this  ("Agreement"),  dated as of
September  12,  2003,  by  and  among  Axiom  Pharmaceuticals,  Inc.,  a  Nevada
corporation (the "Company"), and the entities listed on Exhibit A hereto (each a
"Purchaser" and collectively,  the  "Purchasers"),  for the purchase and sale to
the Purchasers of shares of the Company's Series A Convertible  Preferred Stock,
par value  $.001 per share (the  "Preferred  Stock"),  and  warrants to purchase
shares of the  Company's  common  stock,  par value $.001 per share (the "Common
Stock").

         The parties hereto agree as follows:

                                   ARTICLE I

                PURCHASE AND SALE OF PREFERRED STOCK AND WARRANTS

         Section 1.1    Purchase and Sale of Preferred Stock and Warrants.  Upon
the  following  terms and  conditions,  the Company  shall issue and sell to the
Purchasers, and the Purchasers shall purchase from the Company, 1,750,000 shares
of Preferred Stock (the "Shares") at a price per share of $2.00 for an aggregate
purchase price of $3,500,000  (the "Purchase  Price"),  and warrants to purchase
shares of Common Stock, in  substantially  the form attached hereto as Exhibit B
(the  "Warrants").  The Company and the  Purchasers are executing and delivering
this  Agreement  in  accordance  with and in reliance  upon the  exemption  from
securities  registration  afforded by Section 4(2) of the U.S. Securities Act of
1933, as amended,  and the rules and  regulations  promulgated  thereunder  (the
"Securities  Act"),  including  Regulation D ("Regulation  D"), and/or upon such
other exemption from the registration  requirements of the Securities Act as may
be available with respect to any or all of the investments to be made hereunder.
The  Preferred  Stock shall have such powers,  preferences  and rights,  and the
qualifications,  limitations  or  restrictions  thereof,  as  set  forth  in the
Certificate of Designation of Rights and Preferences of Series A Preferred Stock
attached hereto as Exhibit D, subject to the applicable  terms and conditions of
this Agreement and the Registration Rights Agreement (as defined below).

         Section  1.2   Purchase Price and Closing.  The Company agrees to issue
and sell to the Purchasers and, in consideration of and in express reliance upon
the  representations,  warranties,  covenants,  terms  and  conditions  of  this
Agreement,  the  Purchasers,  severally  but not jointly,  agree to purchase the
number of Shares and  Warrants  set forth  opposite  their  respective  names on
Exhibit A. The closing of the purchase and sale of the Shares and Warrants to be
acquired by the  Purchasers  from the Company  under this  Agreement  shall take
place at the offices of the Company located at 4695 Macarthur Court, 11th Floor,
Newport Beach,  California 92660 (the "Closing") at 10:00 a.m., Pacific Time (i)
on or before September 12, 2003, provided,  that all of the conditions set forth
in Article IV hereof and  applicable to the Closing shall have been fulfilled or
waived in accordance  herewith,  or (ii) at such other time and place or on such
date as the Purchasers and the Company may agree upon (the "Closing Date").

                                       1
<PAGE>

         Section 1.3    Warrants.  At the Closing, the  Company  shall  issue to
the Purchasers  Warrants to purchase an aggregate of 1,000,000  shares of Common
Stock.  The Warrants  shall be  exercisable  for five (5) years from the date of
issuance and shall have an exercise price equal to $3.00 per share.

         Section  1.4   Conversion Shares  and Warrant Shares. The  Company  has
authorized and reserved and covenants to continue to reserve, free of preemptive
rights  and  other  similar  contractual  rights  of  stockholders,  out  of its
authorized  but unissued  Common  Stock or its Common Stock held in treasury,  a
number  of shares of Common  Stock  equal to the  aggregate  number of shares of
Common Stock  necessary to effect the  conversion of the Shares and the exercise
of the Warrants.  The Company shall,  from time to time, in accordance  with the
Nevada Corporation Law, increase the authorized amount of its Common Stock if at
any time the authorized amount of its Common Stock remaining  unissued shall not
be  sufficient to permit the  conversion of all Shares at the time  outstanding,
subject,  however,  to  stockholder  approval.  If any  shares of  Common  Stock
required to be reserved for issuance  upon  conversion of the Shares or exercise
of  the  Warrants  hereunder  require  registration  with  or  approval  of  any
governmental  authority  under any federal or state law before the shares may be
issued, the Company will cause the shares to be so registered and approved.  All
shares of Common Stock  delivered  upon  conversion of the Shares or exercise of
the Warrants shall, upon delivery,  be duly authorized and validly issued, fully
paid and  nonassessable,  free from all taxes, liens and charges with respect to
the issue thereof.  Any shares of Common Stock  issuable upon  conversion of the
Shares (and such shares when issued) are herein  referred to as the  "Conversion
Shares".  Any shares of Common Stock issuable upon exercise of the Warrants (and
such shares when  issued) are herein  referred to as the "Warrant  Shares".  The
Shares, the Conversion Shares, the Warrants and the Warrant Shares are sometimes
collectively referred to herein as the "Securities".

                                   ARTICLE II

                         REPRESENTATIONS AND WARRANTIES

         Section  2.1   Representations and Warranties of the Company.  In order
to induce the Purchasers to enter into this Agreement and to purchase the Shares
and  Warrants,  the  Company  hereby  makes the  following  representations  and
warranties to the Purchasers:

         (a) Organization, Good Standing and Power. The Company is a corporation
duly  incorporated,  validly existing and in good standing under the laws of the
State of Nevada and has the requisite  corporate power to own, lease and operate
its  properties  and  assets  and to  conduct  its  business  as it is now being
conducted.  The Company  does not have any  Subsidiaries  (as defined in Section
2.1(g)) or own  securities of any kind in any other entity,  except as set forth
on Schedule  2.1(g)  hereto or in that certain  Confidential  Private  Placement
Memorandum of the Company  dated July 8, 2003 (the "PPM").  The Company and each
such Subsidiary is duly qualified as a foreign corporation to do business and is
in good  standing  in every  jurisdiction  in which the  nature of the  business
conducted or property owned by it makes such qualification necessary, except for
any  jurisdiction(s)  (alone or in the  aggregate) in which the failure to be so
qualified  will not have a Material  Adverse  Effect.  For the  purposes of this
Agreement,  "Material  Adverse Effect" means any adverse effect on the business,

                                       2
<PAGE>

operations,  assets,  prospects  or  financial  condition  of the Company or its
Subsidiaries and which is material to such entity or other entities  controlling
or  controlled  by such entity or the  Company or which is likely to  materially
hinder the performance by the Company of its obligations hereunder and under the
other Transaction Documents (as defined in Section 2.1(b) hereof).

         (b) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and perform this Agreement,  the  Registration
Rights  Agreement,   the  Warrants,  and  the  other  agreements  and  documents
contemplated  hereby and  thereby  and  executed  by the Company or to which the
Company is party (collectively,  the "Transaction Documents"),  and to issue and
sell the  Shares and the  Warrants  in  accordance  with the terms  hereof.  The
execution,  delivery and performance of the Transaction Documents by the Company
and the  consummation by it of the transactions  contemplated  thereby have been
duly and validly  authorized by all necessary  corporate action,  and, except as
set forth in Schedule  2.1(b) or  disclosed  in the PPM,  no further  consent or
authorization  of the  Company  or its Board of  Directors  or  stockholders  is
required.  This  Agreement  has been duly executed and delivered by the Company.
The other  Transaction  Documents  will have been duly executed and delivered by
the Company at the Closing.  Each of the Transaction Documents  constitutes,  or
shall constitute when executed and delivered,  a valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy,  reorganization,
moratorium, liquidation, conservatorship,  receivership or similar laws relating
to, or affecting generally the enforcement of, creditor's rights and remedies or
by equitable principles or remedies of general application.

         (c) Capitalization. The authorized capital stock of the Company and the
shares  thereof  issued  and  outstanding  as of August 1, 2003 are set forth on
Schedule 2.1(c) hereto.  All of the outstanding  shares of the Company's  Common
Stock  and any  other  security  of the  Company  have  been  duly  and  validly
authorized.  Except as set forth on Schedule  2.1(c)  hereto or disclosed in the
PPM, no shares of Common Stock or any other security of the Company are entitled
to  preemptive  rights or  registration  rights  and  there  are no  outstanding
options,  warrants,  scrip,  rights to subscribe to, call or  commitments of any
character  whatsoever relating to, or securities or rights convertible into, any
shares of  capital  stock of the  Company.  Furthermore,  except as set forth on
Schedule  2.1(c) hereto or disclosed in the PPM or in any  Commission  Documents
(as defined in Section 2.1(f) below) and except for the  Transaction  Documents,
there are no contracts,  commitments,  understandings,  or arrangements by which
the  Company is or may become  bound to issue  additional  shares of the capital
stock of the Company or options, securities or rights convertible into shares of
capital  stock  of the  Company.  Except  for  customary  transfer  restrictions
contained in agreements  entered into by the Company in order to sell restricted
securities  or as provided on Schedule  2.1(c) hereto and except as disclosed in
the PPM or in any Commission  Documents,  the Company is not a party to or bound
by any agreement or understanding  granting registration or anti-dilution rights
to any person with  respect to any of its equity or debt  securities.  Except as
set  forth on  Schedule  2.1(c)  or  disclosed  in the PPM or in any  Commission
Documents,  the  Company  is not a party to,  and it has no  knowledge  of,  any
agreement or  understanding  restricting the voting or transfer of any shares of
the capital stock of the Company.  Except as set forth on Schedule 2.1(c) hereto
or disclosed in the PPM or in any  Commission  Documents,  the offer and sale of
all capital stock,  convertible securities,  rights, warrants, or options of the
Company  issued prior to the Closing  complied with all  applicable  federal and

                                       3
<PAGE>

state  securities  laws, and to the best knowledge of the Company,  no holder of
such  securities  has a right of  rescission or has made or threatened to make a
claim for rescission or damages with respect thereto which could have a Material
Adverse  Effect.  The Company has furnished or made  available to the Purchasers
true and correct  copies of the Company's  Certificate  of  Incorporation  as in
effect on the date hereof (the  "Certificate"),  and the Company's  Bylaws as in
effect on the date hereof (the "Bylaws").

         (d) Issuance of Securities. The Shares and the Warrants to be issued at
the Closing have been duly  authorized  by all necessary  corporate  action and,
when paid for or issued in accordance with the terms hereof, the Shares shall be
validly issued and outstanding,  fully paid and nonassessable and free and clear
of all  liens,  encumbrances  and  rights of first  refusal  of any kind and the
holders shall be entitled to all rights accorded to a holder of Preferred Stock.
When the  Conversion  Shares  are  issued  in  accordance  with the terms of the
Preferred Stock, such shares will be duly authorized by all necessary  corporate
action and validly issued and outstanding,  fully paid and  nonassessable,  free
and clear of all liens, encumbrances and rights of first refusal of any kind and
the  holders  shall be  entitled  to all rights  accorded  to a holder of Common
Stock.  When the Warrant  Shares are issued and paid for in accordance  with the
terms of this  Agreement and as set forth in the  Warrants,  such shares will be
duly  authorized  by all  necessary  corporate  action  and  validly  issued and
outstanding,  fully  paid  and  nonassessable,  free  and  clear  of all  liens,
encumbrances  and rights of first  refusal of any kind and the holders  shall be
entitled to all rights accorded to a holder of Common Stock.

         (e) No  Conflicts.  The  execution,  delivery  and  performance  of the
Transaction  Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not (i) violate any
provision of the Certificate or Bylaws or any  Subsidiary's  comparable  charter
documents,  (ii) conflict  with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of  termination,  amendment,  acceleration  or  cancellation  of, any
agreement,  mortgage,  deed of trust,  indenture,  note,  bond,  license,  lease
agreement,  instrument  or  obligation  to  which  the  Company  or  any  of its
Subsidiaries  is a party or by which  the  Company  or any of its  Subsidiaries'
respective  properties  or  assets  are  bound,  (iii)  create or impose a lien,
mortgage, security interest, charge or encumbrance of any nature on any property
or asset of the Company or any of its  Subsidiaries  under any  agreement or any
commitment  to which the  Company  or any of its  Subsidiaries  is a party or by
which the Company or any of its  Subsidiaries  is bound or by which any of their
respective  properties or assets are bound, or (iv) result in a violation of any
federal,  state, local or foreign statute, rule, regulation,  order, judgment or
decree (including federal and state securities laws and regulations)  applicable
to the Company or any of its  Subsidiaries  or by which any property or asset of
the Company or any of its  Subsidiaries  is bound or  affected,  except,  in all
cases other than  violations  pursuant  to clauses (i) or (iv) (with  respect to
federal  and  state  securities  laws)  above,  for  such  conflicts,  defaults,
terminations,  amendments,  acceleration,  cancellations and violations as would
not,  individually  or in the aggregate,  have a Material  Adverse  Effect.  The
business of the Company and its Subsidiaries is not being conducted in violation
of any laws,  ordinances or regulations of any governmental  entity,  except for
possible  violations  which  singularly  or in the aggregate do not and will not
have a Material Adverse Effect.  Neither the Company nor any of its Subsidiaries
is required  under federal,  state,  foreign or local law, rule or regulation to
obtain  any  consent,   authorization  or  order  of,  or  make  any  filing  or
registration with, any court or governmental  agency in order for it to execute,

                                       4
<PAGE>

deliver or perform any of its  obligations  under the  Transaction  Documents or
issue and sell the Shares,  the Conversion  Shares,  the Warrants or the Warrant
Shares in  accordance  with the terms hereof or thereof  (other than any filings
which may be required to be made by the Company with the Securities and Exchange
Commission (the "Commission") or state securities  administrators  subsequent to
the Closing, or any registration statement which may be filed pursuant hereto or
thereto).

         (f) Commission Documents; Commission Filings; Financial Statements. The
Common Stock is not currently  registered  pursuant to Section 12(b) or 12(g) of
the  Securities  Exchange Act of 1934,  as amended (the  "Exchange  Act"),  but,
except as  disclosed  on Schedule  2.1(f)  hereto or in the PPM, the Company has
timely filed all  reports,  schedules,  forms,  statements  and other  documents
required  to be  filed  by it with  the  Commission  pursuant  to the  reporting
requirements of the Exchange Act,  including  material filed pursuant to Section
13(a) or 15(d) of the  Exchange  Act,  including,  but not limited  to,  current
reports on Form 8-K (and all of the foregoing, including filings incorporated by
reference therein, being referred to herein as the "Commission Documents").  The
Company has not provided to the Purchasers any material  non-public  information
or other  information  which,  according to applicable  law, rule or regulation,
should  have been  disclosed  publicly  by the Company but which has not been so
disclosed,  other than with  respect to the  transactions  contemplated  by this
Agreement.  At the time of its filing,  the Company's Form 10-QSB for the fiscal
quarter ended June 30, 2003 (the "Form 10-Q") complied in all material  respects
with the  requirements  of the Exchange Act and the rules and regulations of the
Commission promulgated thereunder and other federal, state and local laws, rules
and regulations applicable to such documents,  and the Form 10-Q did not contain
any  untrue  statement  of a material  fact or omitted to state a material  fact
required  to be stated  therein  or  necessary  in order to make the  statements
therein,  in  light  of the  circumstances  under  which  they  were  made,  not
misleading.  At the time of its filing,  the  Company's  Form  10-KSB/A  for the
fiscal  year ended June 30,  2002 (the "Form  10-K")  complied  in all  material
respects with the requirements of the Exchange Act and the rules and regulations
of the Commission  promulgated  thereunder  and other  federal,  state and local
laws, rules and regulations applicable to such documents,  and the Form 10-K did
not  contain  any  untrue  statement  of a  material  fact or omitted to state a
material  fact  required to be stated  therein or necessary in order to make the
statements  therein,  in light of the circumstances  under which they were made,
not misleading.  As of their respective  dates, the financial  statements of the
Company included in the Commission Documents complied as to form in all material
respects with  applicable  accounting  requirements  and the published rules and
regulations of the Commission or other  applicable  rules and  regulations  with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting  principles ("GAAP") applied on a consistent basis
during the periods  involved  (except (i) as may be otherwise  indicated in such
financial  statements  or the Notes  thereto,  or (ii) in the case of  unaudited
interim  statements,  to the extent  they may not  include  footnotes  or may be
condensed or summary  statements),  and fairly present in all material  respects
the  financial  position  of the Company  and its  Subsidiaries  as of 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  year-end  audit
adjustments).

                                       5
<PAGE>

         (g) Subsidiaries.  Schedule 2.1(g) hereto sets forth each Subsidiary of
the Company,  showing the jurisdiction of its  incorporation or organization and
showing the percentage of each person's  ownership of the  outstanding  stock or
other  interests  of such  Subsidiary.  For  the  purposes  of  this  Agreement,
"Subsidiary"  shall  mean any  corporation  or other  entity of which at least a
majority of the securities or other  ownership  interest  having ordinary voting
power  (absolutely  or  contingently)  for the  election of  directors  or other
persons  performing  similar  functions  are  at  the  time  owned  directly  or
indirectly  by the  Company  and/or  any of its other  Subsidiaries.  All of the
outstanding shares of capital stock of each Subsidiary have been duly authorized
and  validly  issued,  and  are  fully  paid  and  nonassessable.  There  are no
outstanding  preemptive,  conversion  or  other  rights,  options,  warrants  or
agreements  granted or issued by or binding upon any Subsidiary for the purchase
or  acquisition  of any shares of capital  stock of any  Subsidiary or any other
securities  convertible  into,  exchangeable  for or  evidencing  the  rights to
subscribe  for any shares of such  capital  stock.  Neither  the Company nor any
Subsidiary is subject to any obligation  (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of the capital stock of any Subsidiary
or any convertible securities, rights, warrants or options of the type described
in the  preceding  sentence  except as set forth on  Schedule  2.1(g)  hereto or
disclosed  in the  PPM or the  Commission  Documents.  Except  as set  forth  on
Schedule  2.1(g)  hereto or  disclosed  in the PPM,  neither the Company nor any
Subsidiary is party to, nor has any knowledge of, any agreement  restricting the
voting or transfer of any shares of the capital stock of any Subsidiary.

         (h) No Material  Adverse  Change.  Since June 30, 2003, the Company has
not experienced or suffered any Material Adverse Effect,  except as disclosed on
Schedule 2.1(h) hereto or in the PPM.

         (i) No Undisclosed Liabilities.  Except as disclosed on Schedule 2.1(i)
hereto or in the PPM or in the Commission Documents, neither the Company nor any
of its Subsidiaries has any liabilities,  obligations, claims or losses (whether
liquidated or unliquidated,  secured or unsecured, absolute, accrued, contingent
or otherwise)  other than those set forth on the balance  sheet  included in the
Form  10-Q  or  incurred  in  the  ordinary  course  of  the  Company's  or  its
Subsidiaries respective businesses since June 30, 2003, and which,  individually
or in the aggregate,  do not or would not have a Material  Adverse Effect on the
Company or its Subsidiaries.

         (j) No Undisclosed Events or Circumstances. Since June 30, 2003, except
as  disclosed  on  Schedule  2.1(j)  hereto  or in the PPM or in the  Commission
Documents,  no event or circumstance  has occurred or exists with respect to the
Company  or  its  Subsidiaries  or  their  respective  businesses,   properties,
prospects,  operations or financial condition, which, under applicable law, rule
or regulation,  requires  public  disclosure or  announcement by the Company but
which has not been so publicly announced or disclosed.

         (k)  Indebtedness.  Schedule  2.1(k)  hereto  sets forth as of the date
hereof all outstanding secured and unsecured  Indebtedness of the Company or any
Subsidiary,  or for which the Company or any Subsidiary has  commitments,  which
Indebtedness is not disclosed in any Commission  Documents.  For the purposes of
this Agreement, "Indebtedness" shall mean (i) any liabilities for borrowed money
in excess of  $100,000  (other  than  trade  accounts  payable  incurred  in the

                                       6
<PAGE>

ordinary  course  of  business),  (ii) all  guaranties,  endorsements  and other
contingent  obligations  in  respect  of  Indebtedness  of  others  in excess of
$100,000,  whether or not the same are or should be reflected  in the  Company's
balance  sheet (or the Notes  thereto),  except  guaranties  by  endorsement  of
negotiable  instruments for deposit or collection or similar transactions in the
ordinary  course of business,  and (iii) the present value of any lease payments
in excess of $100,000 due under leases  required to be capitalized in accordance
with  GAAP.  Except  as  disclosed  on  Schedule  2.1(k) or in the PPM or in any
Commission Documents,  neither the Company nor any Subsidiary is in default with
respect to any Indebtedness.

         (l) Title to Assets.  Each of the Company and the Subsidiaries has good
and marketable title to all of its real and personal property, free and clear of
any mortgages, pledges, charges, liens, security interests or other encumbrances
of any nature  whatsoever,  except for those indicated on Schedule 2.1(l) hereto
or  disclosed  in  the  PPM  or  in  any  Commission  Documents  or  such  that,
individually or in the aggregate,  do not have a Material  Adverse  Effect.  All
material  leases  of the  Company  and each of its  Subsidiaries  are  valid and
subsisting and in full force and effect.

         (m) Actions Pending. Except as set forth in the Commission Documents or
Schedule 2.1(m) hereto or disclosed in the PPM, there is no action, suit, claim,
investigation,  arbitration,  alternate dispute  resolution  proceeding or other
proceeding  pending or, to the knowledge of the Company,  threatened against the
Company or any Subsidiary  which questions the validity of this Agreement or any
of the  other  Transaction  Documents  or any of the  transactions  contemplated
hereby or thereby or any action taken or to be taken pursuant hereto or thereto.
Except as set forth in any Commission  Document or on Schedule  2.1(m) hereto or
disclosed  in the PPM:  (i)  there is no  action,  suit,  claim,  investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the  knowledge  of the  Company,  threatened  against  or  involving  the
Company,  any Subsidiary or any of their respective  properties or assets, which
individually or in the aggregate, would have a Material Adverse Effect, and (ii)
there are no outstanding orders,  judgments,  injunctions,  awards or decrees of
any court,  arbitrator or governmental or regulatory body against the Company or
any  Subsidiary or any officers or directors of the Company or any Subsidiary in
their capacities as such, which individually,  or in the aggregate, would have a
Material Adverse Effect.

         (n)  Compliance   with  Law.  The  business  of  the  Company  and  the
Subsidiaries  has been and is presently  being  conducted in accordance with all
applicable  federal,  state and local governmental laws, rules,  regulations and
ordinances,  except  as set forth in the  Commission  Documents  or on  Schedule
2.1(n)  hereto or  disclosed  in the PPM or such  that,  individually  or in the
aggregate, the noncompliance therewith would not have a Material Adverse Effect.
The Company and each of its Subsidiaries have all franchises, permits, licenses,
consents and other  governmental  or  regulatory  authorizations  and  approvals
necessary  for the conduct of its  business as now being  conducted by it unless
the failure to possess such franchises,  permits,  licenses,  consents and other
governmental or regulatory authorizations and approvals,  individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.

                                       7
<PAGE>

         (o) Taxes.  Except as set forth on Schedule  2.1(o) hereto or disclosed
in the  PPM  or in  the  Commission  Documents,  the  Company  and  each  of the
Subsidiaries has accurately prepared and filed all federal,  state and other tax
returns  required by law to be filed by it, has paid or made  provisions for the
payment  of all  taxes  shown  to be due and  all  additional  assessments,  and
adequate  provisions have been and are reflected in the financial  statements of
the Company and the  Subsidiaries  for all  current  taxes and other  charges to
which the Company or any  Subsidiary  is subject and which are not currently due
and payable.  Except as disclosed on Schedule  2.1(o) hereto or in the PPM, none
of the federal  income tax returns of the  Company or any  Subsidiary  have been
audited by the Internal Revenue  Service.  Except as disclosed in the Commission
Documents,   the  Company  has  no  knowledge  of  any  additional  assessments,
adjustments or contingent tax liability (whether federal or state) of any nature
whatsoever,  whether pending or threatened against the Company or any Subsidiary
for  any  period,  nor of any  basis  for any  such  assessment,  adjustment  or
contingency.

         (p)  Certain  Fees.  Except as set forth on Schedule  2.1(p)  hereto or
disclosed  in the PPM,  the  Company  has not  employed  any broker or finder or
incurred  any  liability   for  any   brokerage  or  investment   banking  fees,
commissions, finders' structuring fees, financial advisory fees or other similar
fees in connection with the Transaction Documents.

         (q) Disclosure.  To the best of the Company's  knowledge,  neither this
Agreement nor any other documents,  certificates or instruments furnished to the
Purchasers by or on behalf of the Company or any  Subsidiary in connection  with
the transactions contemplated by this Agreement contains any untrue statement of
a material fact or omits to state a material fact necessary in order to make the
statements made herein or therein, in the light of the circumstances under which
they were made herein or therein, not misleading.

         (r)  Intellectual  Property.  Schedule  2.1(r)  contains a complete and
correct  list  of  all  patents,  trademarks,   domain  names  (whether  or  not
registered) and any patentable  improvements or  copyrightable  derivative works
thereof,  websites and intellectual  property rights relating  thereto,  service
marks, trade names, copyrights, licenses and authorizations, and all rights with
respect  to the  foregoing  held  by  the  Company  or  any of its  Subsidiaries
(collectively,   the  "Proprietary   Rights").  The  Company  and  each  of  the
Subsidiaries  owns or possesses all the  Proprietary  Rights which are necessary
for the conduct of its business as now  conducted  without any conflict with the
rights of others.  Except as disclosed in the Commission Documents or in the PPM
or Schedule  2.1(r) hereto,  (i) as of the date of this  Agreement,  neither the
Company nor any of its  Subsidiaries  has received  any written  notice that any
Proprietary Rights have been declared  unenforceable or otherwise invalid by any
court or governmental  agency, and (ii) as of the date of this Agreement,  there
is, to the knowledge of the Company, no material existing  infringement,  misuse
or  misappropriation  of any  Proprietary  Rights by others  that  could  have a
Material  Adverse  Effect.  From June 30, 2003,  to the date of this  Agreement,
neither the Company nor any of its  Subsidiaries has received any written notice
alleging  that  the  operation  of the  business  of the  Company  or any of its
Subsidiaries  infringes in any material respect upon the  intellectual  property
rights of others.

         (s)  Environmental  Compliance.  Except as disclosed on Schedule 2.1(s)
hereto or the  Commission  Documents  or in the PPM, the Company and each of its

                                       8
<PAGE>

Subsidiaries have obtained all material approvals, authorization,  certificates,
consents,  licenses,  orders and permits or other similar  authorizations of all
governmental authorities,  or from any other person, that are required under any
Environmental  Laws.  Schedule  2.1(s)  hereto sets forth all material  permits,
licenses and other  authorizations  issued under any  Environmental  Laws to the
Company or its Subsidiaries. "Environmental Laws" shall mean all U.S. Federal or
state laws applicable to the Company or any of its Subsidiaries  relating to the
protection of the environment  including,  without limitation,  all requirements
pertaining to reporting, licensing,  permitting,  controlling,  investigating or
remediating emissions,  discharges, releases or threatened releases of hazardous
substances, chemical substances,  pollutants,  contaminants or toxic substances,
materials or wastes,  whether solid,  liquid or gaseous in nature, into the air,
surface water, groundwater or land, or relating to the manufacture,  processing,
distribution,  use,  treatment,  storage,  disposal,  transport  or  handling of
hazardous  substances,  chemical substances,  pollutants,  contaminants or toxic
substances,  material  or wastes,  whether  solid,  liquid or gaseous in nature.
Except as set forth on  Schedule  2.1(s)  hereto or  disclosed  in the PPM,  the
Company  has  all   necessary   governmental   approvals   required   under  all
Environmental  Laws and used in its  business  or in the  business of any of its
Subsidiaries,  except for such  instances  as would not  individually  or in the
aggregate  have  a  Material  Adverse  Effect.  The  Company  and  each  of  its
Subsidiaries  are also in compliance with all other  limitations,  restrictions,
conditions,  standards,  requirements,  schedules  and  timetables  required  or
imposed under all Environmental Laws where  non-compliance could have a Material
Adverse  Effect.  Except for such instances as would not  individually or in the
aggregate  have a Material  Adverse  Effect or as  disclosed  in the  Commission
Documents,  there  are no past or  present  events,  conditions,  circumstances,
incidents,  actions or omissions relating to or in any way affecting the Company
or its Subsidiaries  that violate or may violate any Environmental Law after the
Closing or that may give rise to any  Environmental  Liabilities,  or  otherwise
form the basis of any claim, action, demand, suit, proceeding, hearing, study or
investigation  (i) under any  Environmental  Law, or (ii) based on or related to
the manufacture,  processing,  distribution, use, treatment, storage (including,
without limitation, underground storage tanks), disposal, transport or handling,
or the  emission,  discharge,  release or  threatened  release of any  hazardous
substance.  "Environmental  Liabilities"  means  all  liabilities  of  a  person
(whether such  liabilities are owed by such person to governmental  authorities,
third  parties or  otherwise)  currently in existence or arising  hereafter  and
which arise under or relate to any Environmental Law.

         (t) Books and Records; Internal Accounting Controls. The books, records
and  documents  of the Company and its  Subsidiaries  accurately  reflect in all
material  respects the  information  relating to the business of the Company and
the Subsidiaries, the location and collection of their assets, and the nature of
all  transactions  giving rise to the obligations or accounts  receivable of the
Company or any Subsidiary.  The Company and each of its Subsidiaries  maintain a
system of  internal  accounting  controls  sufficient,  in the  judgment  of the
Company's  board  of  directors,   to  provide  reasonable  assurance  that  (i)
transactions  are executed in accordance with  management's  general or specific
authorizations,   (ii)   transactions   are  recorded  as  necessary  to  permit
preparation  of financial  statements  in  conformity  with GAAP and to maintain
asset  accountability,  (iii) access to assets is permitted  only in  accordance
with  management's  general or  specific  authorization,  and (iv) the  recorded
accountability  for assets is compared  with the existing  assets at  reasonable
intervals and appropriate actions are taken with respect to any differences.

                                       9
<PAGE>

         (u) Material Agreements. Except for the Transaction Documents or as set
forth on  Schedule  2.1(u)  hereto  or  disclosed  in the PPM or the  Commission
Documents,  or those that are included as exhibits to the Commission  Documents,
neither  the  Company  nor any  Subsidiary  is a party  to any  written  or oral
contract, instrument, agreement, commitment,  obligation, plan or arrangement, a
copy of which would be required to be filed with the  Commission  if the Company
or  any  Subsidiary  were  registering   securities  under  the  Securities  Act
(collectively,  "Material  Agreements").  Except as set forth in the  Commission
Documents or on Schedule  2.1(u) hereto or disclosed in the PPM, the Company and
each  Subsidiary  has in all material  respects  performed  all the  obligations
required to be performed by them to date under the  foregoing  agreements,  have
received no notice of default and, to the best of the Company's  knowledge,  are
not in default under any Material  Agreement now in effect,  the result of which
could cause a Material Adverse Effect. No written or oral contract,  instrument,
agreement  (other  than the  Certificate  of  Designation  with  respect  to the
Preferred  Stock,  this  Agreement  or  any  other   Transaction   Document(s)),
commitment, obligation (other than any obligation imposed by state law), plan or
arrangement  of the  Company  or of any  Subsidiary  limits  or shall  limit the
payment of dividends on its Common Stock.

         (v)  Transactions  with  Affiliates.  Except as set  forth on  Schedule
2.1(v)  hereto or  disclosed in any of the  Commission  Documents or in the PPM,
there  are  no  loans,  leases,  agreements,   contracts,   royalty  agreements,
management  contracts or arrangements or other continuing  transactions  between
(i) the Company,  any  Subsidiary  or any of their  respective  its customers or
suppliers,  on the one hand, and (ii) on the other hand, any officer,  employee,
consultant or director of the Company, or any of its Subsidiaries, or any person
owning any capital  stock of the Company or any  Subsidiary or any member of the
immediate family of such officer, employee, consultant,  director or stockholder
or any  corporation  or  other  entity  controlled  by such  officer,  employee,
consultant, director or stockholder.

         (w) Securities Act of 1933.  Assuming the accuracy and  completeness of
the  representations,  warranties  and  covenants  of the  Purchasers  contained
herein, the Company has complied and will comply with all applicable federal and
state  securities  laws in connection  with the offer,  issuance and sale of the
Shares,  the Conversion  Shares,  the Warrants and the Warrant Shares hereunder.
Neither the Company nor anyone acting on its behalf, directly or indirectly, has
or will sell,  offer to sell or solicit offers to buy any of the Securities,  or
similar  securities  to, or solicit  offers with respect  thereto from, or enter
into any preliminary  conversations  or negotiations  relating thereto with, any
person,  or has taken or will take any action so as to require  registration  of
the issuance and sale of any of the Securities under the registration provisions
of the Securities Act and applicable state securities laws.  Neither the Company
nor any of its  affiliates,  nor any person acting on its or their  behalf,  has
engaged in any form of general  solicitation or general  advertising (within the
meaning of Regulation D under the Securities  Act) in connection  with the offer
or sale of any of the Securities.

         (x)  Governmental  Approvals.  Except as set forth on  Schedule  2.1(x)
hereto or disclosed in the PPM, and except for the filing of any notice prior or
subsequent  to the Closing that may be required  under  applicable  state and/or
federal  securities laws (which if required,  shall be filed on a timely basis),
no  authorization,   consent,   approval,   license,  exemption  of,  filing  or

                                       10
<PAGE>

registration  with any  court or  governmental  department,  commission,  board,
bureau, agency or instrumentality,  domestic or foreign, is or will be necessary
for, or in  connection  with,  the  execution  or delivery of the Shares and the
Warrants,  or,  except as set forth in this  Agreement or any other  Transaction
Document,  for the  performance  by the  Company  of its  obligations  under the
Transaction Documents.

         (y)  Employees.   Neither  the  Company  nor  any  Subsidiary  has  any
collective bargaining  arrangements or agreements covering any of its employees.
Except as set forth in the Commission  Documents or on Schedule 2.1(y) hereto or
disclosed in the PPM or in the Commission Documents, neither the Company nor any
Subsidiary  has  any  employment  contract,   agreement  regarding   proprietary
information,     non-competition    agreement,    non-solicitation    agreement,
confidentiality   agreement,  or  any  other  similar  contract  or  restrictive
covenant,  relating to the right of any officer,  employee or  consultant  to be
employed or engaged by the Company or such  Subsidiary.  Since June 30, 2003, no
officer,  consultant  or key  employee  of the Company or any  Subsidiary  whose
termination,  either  individually  or in the  aggregate,  could have a Material
Adverse  Effect,  has  terminated  or, to the knowledge of the Company,  has any
present  intention of terminating  his or her employment or engagement  with the
Company or any Subsidiary.

         (z)  Absence  of  Certain  Developments.  Except  as set  forth  in the
Commission Documents or on Schedule 2.1(z) hereto or disclosed in the PPM, since
June 30, 2003, neither the Company nor any Subsidiary has:

            (i) issued any stock,  bonds or other  corporate  securities  or any
rights, options or warrants with respect thereto;

            (ii)  borrowed  any  amount or  incurred  or become  subject  to any
liabilities  (absolute or contingent) except current liabilities incurred in the
ordinary  course of business  which are  comparable  in nature and amount to the
current  liabilities  incurred in the  ordinary  course of  business  during the
comparable  portion of its prior fiscal year, as adjusted to reflect the current
nature and volume of the Company's or such Subsidiary's business;

            (iii)  discharged or satisfied any material lien or  encumbrance  or
paid a material amount of any obligation or liability  (absolute or contingent),
other than current liabilities paid in the ordinary course of business;

            (iv) declared or made any payment or  distribution  of cash or other
property to stockholders with respect to its stock, or purchased or redeemed, or
made any agreements so to purchase or redeem, any shares of its capital stock;

            (v)  sold, assigned or  transferred  any other tangible  assets,  or
canceled any debts or claims, except in the ordinary course of business;

            (vi) sold, assigned or transferred  any patent  rights,  trademarks,
trade  names,   copyrights,   trade  secrets  or  other  intangible   assets  or
intellectual  property  rights,  which sale,  assignment  or transfer  has had a
Material Adverse Effect, or disclosed any proprietary  confidential  information

                                       11
<PAGE>

to any person except in the ordinary  course of business or to the Purchasers or
their representatives;

            (vii)  suffered  any  substantial  losses  or waived  any  rights of
material value,  whether or not in the ordinary course of business,  or suffered
the loss of any material amount of prospective business;

            (viii)  made any  changes  in  employee  compensation  except in the
ordinary course of business and consistent with past practices;

            (ix)  made  capital   expenditures  or  commitments   therefor  that
aggregate in excess of $25,000;

            (x) entered  into any other  transaction  other than in the ordinary
course of business, or entered into any other material  transaction,  whether or
not in the ordinary course of business;

            (xi) made charitable contributions or pledges in excess of $25,000;

            (xii)  suffered any material  damage,  destruction or casualty loss,
whether or not covered by insurance;

            (xiii) experienced any material problems with labor or management in
connection with the terms and conditions of their employment; or

            (xiv) entered into an agreement,  written or otherwise,  to take any
of the foregoing actions.

         (aa) Use of  Proceeds.  Except  as set  forth on  Schedule  2.1(aa)  or
disclosed in the PPM, the proceeds  from the sale of the Shares and the Warrants
will be used by the Company  for working  capital  purposes  and,  except as set
forth on Schedule  2.1(aa) or disclosed  in the PPM,  shall not be used to repay
any outstanding Indebtedness or any loans to any officer, director, affiliate or
insider of the Company.

         (bb) Public  Utility  Holding  Company Act and  Investment  Company Act
Status.  The Company is not a "holding company" or a "public utility company" as
such terms are defined in the Public  Utility  Holding  Company Act of 1935,  as
amended.  The Company is not,  and as a result of and  immediately  upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended.

         (cc) ERISA.  No liability to the Pension Benefit  Guaranty  Corporation
has  been  incurred  with  respect  to any  Plan  by the  Company  or any of its
Subsidiaries  which is or would cause a Material  Adverse Effect.  The execution
and  delivery  of this  Agreement  and the issue and sale of the  Shares and the
Warrants will not involve any transaction  which is subject to the  prohibitions
of  Section  406 of ERISA or in  connection  with  which a tax could be  imposed

                                       12
<PAGE>

pursuant to Section 4975 of the Internal  Revenue Code of 1986,  as amended (the
"Code");  provided that, if any  Purchaser,  or any person or entity that owns a
beneficial  interest in any  Purchaser,  is an "employee  pension  benefit plan"
(within the meaning of Section  3(2) of ERISA) with respect to which the Company
is a "party in  interest"  (within the meaning of Section  3(14) of ERISA),  the
requirements of Sections 407(d)(5) and 408(e) of ERISA, if applicable,  are met.
As used in this Section 2.1(cc), the term "Plan" shall mean an "employee pension
benefit  plan"  (as  defined  in  Section  3 of  ERISA)  which  is or  has  been
established or maintained,  or to which  contributions are or have been made, by
the  Company  or any  Subsidiary  or by any trade or  business,  whether  or not
incorporated,  which,  together  with the  Company or any  Subsidiary,  is under
common control, as described in Section 414(b) or (c) of the Code.

         Section   2.2  Representations and Warranties of the  Purchasers.  Each
of the Purchasers hereby makes the following  representations  and warranties to
the  Company  with  respect  solely to itself and not with  respect to any other
Purchaser:

         (a) Organization and Standing of the Purchasers. If the Purchaser is an
entity,   such  Purchaser  is  a  corporation,   limited  liability  company  or
partnership  duly  incorporated  or  organized,  validly  existing  and in  good
standing  under  the  laws  of  the   jurisdiction  of  its   incorporation   or
organization.

         (b) Authorization and Power. Each Purchaser has the requisite power and
authority  to enter into and perform this  Agreement,  the  Registration  Rights
Agreement,  the Warrants,  and the other  agreements and documents  contemplated
hereby and thereby and executed by the  Purchaser  or to which the  Purchaser is
party (collectively,  the "Purchaser Transaction Documents") and to purchase the
Shares and Warrants  being sold to it  hereunder.  The  execution,  delivery and
performance  of the Purchaser  Transaction  Documents by each  Purchaser and the
consummation  by it of the  transactions  contemplated  hereby  have  been  duly
authorized  by all necessary  corporate or  partnership  action,  and no further
consent  or   authorization  of  such  Purchaser  or  its  Board  of  Directors,
stockholders,  or partners, as the case may be, is required.  This Agreement has
been duly  authorized,  executed and  delivered by each  Purchaser.  Each of the
Purchaser Transaction Documents  constitutes,  or shall constitute when executed
and  delivered,  valid and binding  obligations  of each  Purchaser  enforceable
against  such   Purchaser  in  accordance   with  its  terms,   except  as  such
enforceability   may  be   limited   by   applicable   bankruptcy,   insolvency,
reorganization,   moratorium,  liquidation,  conservatorship,   receivership  or
similar laws relating to, or affecting  generally the enforcement of, creditor's
rights  and  remedies  or  by  equitable   principles  or  remedies  of  general
application.

         (c) Acquisition for Investment. Each Purchaser is purchasing the Shares
and  acquiring  the  Warrants  solely  for its own  account  for the  purpose of
investment  and  not  with  a  view  to or  for  sale  in  connection  with  any
distribution  thereof.  Each Purchaser does not have a present intention to sell
any of  the  Securities,  nor a  present  arrangement  (whether  or not  legally
binding) or intention to effect any  distribution of any of the Securities to or
through  any  person  or  entity;   provided,   however,   that  by  making  the
representations  herein and subject to Section 2.2(e) below, each Purchaser does
not agree to hold any of the  Securities  for any minimum or other specific term
and  reserves  the  right to  dispose  of any of the  Securities  at any time in
accordance with federal and state securities laws applicable to such disposition

                                       13
<PAGE>

provided that the Company  receives an opinion of its counsel to the effect that
such disposition  complies with such laws. Each Purchaser  acknowledges  that it
(i) has such  knowledge and  experience  in financial and business  matters such
that such  Purchaser  is  capable  of  evaluating  the  merits  and risks of its
investment in the Company,  (ii) is able to bear the financial risks  associated
with an  investment in the  Securities,  and (iii) has been given full access to
such  records of the Company  and the  Subsidiaries  and to the  officers of the
Company  and the  Subsidiaries  as it has deemed  necessary  or  appropriate  to
conduct its due diligence investigation.

         (d) Rule 144. Each Purchaser  understands  that the Securities  must be
held indefinitely unless such Securities are registered under the Securities Act
or an exemption from registration is available. Each Purchaser acknowledges that
it is familiar with Rule 144 of the rules and regulations of the Commission,  as
amended,  promulgated pursuant to the Securities Act ("Rule 144"), and that such
Purchaser  has been  advised that Rule 144 permits  resales  only under  certain
circumstances.  Each Purchaser  understands  that to the extent that Rule 144 is
not available,  such  Purchaser  will be unable to sell any  Securities  without
either  registration  under  the  Securities  Act or the  existence  of  another
exemption from such registration requirement, provided that the Company receives
an opinion  of its  counsel  to the  effect  that such sale is exempt  from such
registration requirement.

         (e) General.  Each Purchaser  understands that the Securities are being
offered and sold in reliance on a transactional  exemption from the registration
requirements  of federal  and state  securities  laws and the Company is relying
upon the truth,  accuracy and completeness of the  representations,  warranties,
agreements,  acknowledgments  and  understandings  of such  Purchaser  set forth
herein and in the other  Purchaser  Transaction  Documents in order to determine
the  applicability  of such  exemptions and the suitability of such Purchaser to
acquire the Securities. Each Purchaser understands that no United States federal
or state agency or any government or governmental agency has passed upon or made
any recommendation or endorsement with respect to any of the Securities.

         (f)   Opportunities   for   Additional   Information.   Each  Purchaser
acknowledges that such Purchaser has had the opportunity to ask questions of and
receive  answers  from, or obtain  additional  information  from,  the executive
officers  of the  Company  concerning  the  financial  and other  affairs of the
Company,  and to the extent deemed  necessary by such Purchaser in light of such
Purchaser's  personal  knowledge of the Company's  affairs,  such  Purchaser has
asked such  questions  and  received  answers to the full  satisfaction  of such
Purchaser, and such Purchaser desires to invest in the Company.

         (g) No  General  Solicitation.  Each  Purchaser  acknowledges  that the
Securities were not offered to such Purchaser by means of any form of general or
public   solicitation   or  general   advertising,   or  publicly   disseminated
advertisements or sales literature,  including (i) any  advertisement,  article,
notice or other communication  published in any newspaper,  magazine, or similar
media,  or broadcast over television or radio, or (ii) any seminar or meeting to
which  such   Purchaser   was  invited  by  any  of  the   foregoing   means  of
communications.

         (h) Accredited  Investor.  Each Purchaser is an accredited investor (as
defined in Rule 501 of Regulation D), and such Purchaser has such  experience in
business and financial  matters that it is capable of evaluating  the merits and

                                       14
<PAGE>

risks of an investment in the Securities.  Each Purchaser  acknowledges  that an
investment in the Securities is speculative  and involves a high degree of risk.

                                  ARTICLE III

                                    COVENANTS

         The parties  covenant with one another as follows,  which covenants are
for the  benefit of each  respective  covenantee  and its  respective  permitted
assignees.

         Section 3.1  Disclosure of Transactions and Other Material Information.
On or before 8:30 a.m.,  New York City time,  on the  business  day  immediately
following the Closing Date,  the Company shall file a Current Report on Form 8-K
with the Commission describing the terms of the transactions contemplated by the
Transaction  Documents and including as exhibits to such Current  Report on Form
8-K this Agreement,  the Warrants and the Registration Rights Agreement, and the
schedules hereto and thereto in the form required by the Exchange Act (including
all attachments,  the "8-K Filing"). The Company shall not, and shall cause each
of its Subsidiaries and its and each of their  respective  officers,  directors,
employees and agents not to, provide the Purchaser with any material,  nonpublic
information  regarding the Company or any of its Subsidiaries from and after the
filing of the 8-K Filing with the Commission without the express written consent
of the  Purchaser.  Neither the Company nor the Purchaser  shall issue any press
releases  or any  other  public  statements  with  respect  to the  transactions
contemplated  hereby;  provided,  however,  that the Company  shall be entitled,
without the prior approval of the Purchaser,  to make any press release or other
public   disclosure  with  respect  to  such  transactions  (i)  in  substantial
conformity with the 8-K Filing and contemporaneously  therewith,  and (ii) as is
required by applicable law and regulations  (provided that in the case of clause
(i) above, the Purchaser shall be consulted by the Company (although the consent
of the  Purchaser  shall not be  required)  in  connection  with any such  press
release or other public disclosure prior to its release).

         Section  3.2   Registration  and  Listing.  The Company  will  use  its
commercially reasonable efforts to cause its Common Stock to be registered under
Section 12(b) or 12(g) of the Exchange Act, will comply in all respects with its
reporting  and filing  obligations  under the Exchange Act, will comply with all
requirements  related  to any  registration  statement  filed  pursuant  to this
Agreement,  and will not take any action or file any  document  (whether  or not
permitted  by the  Securities  Act  or  the  rules  promulgated  thereunder)  to
terminate or suspend such  registration or to terminate or suspend its reporting
and filing  obligations  under the Exchange  Act or  Securities  Act,  except as
permitted herein. The Company will promptly file the "Listing  Application" for,
or in connection  with, the issuance and delivery of the  Conversion  Shares and
the Warrant Shares.

         Section 3.3 Inspection Rights. In the event the Registration  Statement
(as defined in the  Registration  Rights  Agreement) is not effective,  has been
suspended or is otherwise no longer effective,  the Company shall permit, during
normal  business  hours and upon  reasonable  request and reasonable  notice,  a
Purchaser or any employees,  agents or representatives  thereof that are parties
to an effective confidentiality agreement with the Company of appropriate scope,
so long as a Purchaser  shall be  obligated  hereunder to purchase the Shares or

                                       15
<PAGE>

shall  beneficially  own the Shares or Conversion  Shares,  or shall own Warrant
Shares or the Warrants which, in the aggregate,  represent more than two percent
(2%)  of  the  total  combined  voting  power  of  all  voting  securities  then
outstanding,  to examine and make  reasonable  copies of and  extracts  from the
records and books of account of, and visit and  inspect,  during the term of the
Warrants, the properties, assets, operations and business of the Company and any
Subsidiary, and to discuss the affairs, finances and accounts of the Company and
any  Subsidiary  with  any of its  officers,  consultants,  directors,  and  key
employees.

         Section 3.4    Compliance with Laws.  The  Company  shall  comply,  and
cause each Subsidiary to comply,  with all applicable laws,  rules,  regulations
and orders, the noncompliance with which could have a Material Adverse Effect.

         Section 3.5    Keeping of  Records and  Books of  Account.  The Company
shall keep and cause  each  Subsidiary  to keep  adequate  records  and books of
account,  in  which  complete  entries  will  be made in  accordance  with  GAAP
consistently applied.

         Section  3.6   Other Agreements.  The Company  shall not enter into any
agreement  containing  any provision that would violate the terms of, or cause a
default under, any material term of any Transaction Document.

         Section 3.7    Reservation of Shares. So long as the Shares or Warrants
remain outstanding,  the Company shall take all action necessary to at all times
have authorized, and reserved for the purpose of issuance, the maximum number of
shares of Common Stock to effect the  conversion  of the Shares and the exercise
of the Warrants.

         Section 3.8    Non-public Information.  Neither the Company nor any  of
its officers or agents shall disclose any material non-public  information about
the  Company to the  Purchasers,  and neither  the  Purchasers  nor any of their
affiliates,  officers or agents will solicit any material non-public information
from the Company.

         Section 3.9    Preemptive Rights.

         (a) Until the first  anniversary of the Closing Date and for so long as
any  Purchaser  or its  assigns  shall own any Shares (any  Purchaser,  for such
purpose,  an "Eligible  Purchaser"),  the Company hereby grants to each Eligible
Purchaser a right (the  "Preemptive  Right") to purchase all or any part of such
Eligible  Purchaser's  pro rata  share of any "New  Securities"  (as  defined in
Section  3.9(b))  that the Company may,  from time to time,  propose to sell and
issue.  The pro rata share for each  Eligible  Purchaser,  for  purposes  of the
Preemptive  Right, is the ratio of (x) the number of shares of Common Stock then
held by such  Eligible  Purchaser  immediately  prior to the issuance of the New
Securities  (assuming the full conversion of the Shares and the full exercise of
the Warrants),  to (y) the total number of shares of Common Stock of the Company
outstanding  immediately  prior to the  issuance  of the New  Securities  (after
giving effect to the full  conversion of the Shares and the full exercise of the
Warrants).

         (b) For purposes of this Section 3.9, "New  Securities"  shall mean any
Common Stock or Preferred Stock of the Company, whether or not authorized on the

                                       16
<PAGE>

date  hereof,  and  rights,  options or warrants  to  purchase  Common  Stock or
Preferred  Stock and securities of any type  whatsoever that are, or may become,
convertible into Common Stock or Preferred Stock;  provided,  however, that "New
Securities"  does not include the following:

            (i) shares of capital stock of the Company  issuable upon conversion
or exercise of any currently outstanding  securities or any Shares,  Warrants or
New Securities  issued in accordance with this Agreement  (including the Warrant
Shares);

            (ii)  shares or options or  warrants  for  Common  Stock  granted to
officers,  directors and employees of, and consultants to, the Company  pursuant
to stock option or purchase plans or other compensatory  agreements  approved by
the Compensation Committee of the Board of Directors;

            (iii) shares of Common Stock or Preferred Stock issued in connection
with any pro rata  stock  split or stock  dividend  in  respect of any series or
class of capital stock of the Company or recapitalization by the Company;

            (iv)  shares of capital  stock,  or options or  warrants to purchase
capital  stock,  issued to a strategic  investor in connection  with a strategic
commercial agreement as determined by the Board of Directors;

            (v) shares of capital  stock,  or options or  warrants  to  purchase
capital stock, issued pursuant to commercial borrowing, secured lending or lease
financing transaction approved by the Board of Directors;

            (vi)  shares of capital  stock,  or options or  warrants to purchase
capital stock,  issued  pursuant to the  acquisition  of another  corporation or
entity by the Company by consolidation, merger, purchase of all or substantially
all of the assets, or other  reorganization in which the Company acquires,  in a
single transaction or series of related  transactions,  all or substantially all
of the assets of such other corporation or entity or fifty percent (50%) or more
of the voting power of such other  corporation  or entity or fifty percent (50%)
or more of the equity ownership of such other corporation or entity;

 (vii)
shares of capital stock issued in an  underwritten  public  securities  offering
pursuant to a  registration  statement  filed under the Securities  Act;

            (viii) shares of capital  stock,  or options or warrants to purchase
capital stock,  issued to current or  prospective  customers or suppliers of the
Company  approved by the Board of Directors as compensation or  accommodation in
lieu of  other  payment,  compensation  or  accommodation  to such  customer  or
supplier;

            (ix) shares of capital stock, or warrants to purchase capital stock,
issued  to any  person  or entity  that  provides  services  to the  Company  as
compensation  therefor  pursuant  to an  agreement  approved  by  the  Board  of
Directors;

            (x) shares of capital  stock,  or options or  warrants  to  purchase
capital stock, offered in a transaction where purchase of such securities by any
Purchaser would cause such transaction to fail to comply with applicable federal
or  state  securities  laws  or  would  cause  an  applicable   registration  or

                                       17
<PAGE>

qualification  exemption  to  fail to be  available  to the  Company;  provided,
however,  that this clause (x) shall apply only to the  Purchaser or  Purchasers
who would cause any such failure,  and not to any of the other Purchasers;  (xi)
securities  issuable upon  conversion or exercise of the securities set forth in
paragraphs (i) - (x) above.

In the  event  that  the  Company  proposes  to  undertake  an  issuance  of New
Securities,  it shall give each Eligible Purchaser written notice (the "Notice")
of its intention,  describing  the type of New  Securities,  the price,  and the
general terms upon which the Company  proposes to issue the same.  Each Eligible
Purchaser  shall have twenty (20)  Business Days after receipt of such notice to
agree  to  purchase  all or any  portion  of its pro  rata  share  of  such  New
Securities  at the price and upon the terms  specified  in the  notice by giving
written notice to the Company and stating therein the quantity of New Securities
to be purchased.  In the event that any New Securities subject to the Preemptive
Right are not  purchased  by the  Eligible  Purchaser  within  the  twenty  (20)
Business Day period  specified  above,  the Company  shall have ninety (90) days
thereafter to sell (or enter into an agreement pursuant to which the sale of New
Securities that had been subject to the Preemptive Right shall be closed,  if at
all,  within sixty (60) days from the date of said agreement) the New Securities
with respect to which the rights of the Purchaser  were not exercised at a price
and upon terms, including manner of payment, no more favorable to the purchasers
thereof than specified in the Notice.  In the event the Company has not sold all
offered  New  Securities  within such ninety (90) day period (or sold and issued
New Securities in accordance with the foregoing  within sixty (60) days from the
date of such agreement),  the Company shall not thereafter issue or sell any New
Securities,  without first complying again with the procedures set forth in this
Section 3.9.

         Section 3.10   Lock-Up. Each Purchaser agrees to sell, in each calendar
month during the one-year  period  beginning on the Closing Date,  not more than
1/12 of the aggregate number of Conversion Shares and Warrant Shares issuable to
such Purchaser pursuant to the Transaction  Documents;  provided,  however, that
the number of such  Conversion  Shares and Warrant Shares that can be sold shall
be  cumulative  and shall begin to  accumulate  on the day following the Closing
Date;  and,  provided  further  that the  number of such  Conversion  Shares and
Warrant  Shares that may be sold in any calendar  month shall increase to 1/6 of
such aggregate  number of Conversion  Shares and Warrant Shares  issuable to the
undersigned  in the event that the average  daily  trading  volume in the Common
Stock is equal to or greater  than  200,000  shares per day in the  previous  20
trading days. The Company shall use its commercially reasonable efforts to cause
each of its  officers,  directors  and  affiliates  to enter  into an  agreement
containing  covenants  substantially  similar to those set forth in this Section
3.10.

                                  ARTICLE IV

                                   CONDITIONS

         Section 4.1    Conditions Precedent to the Obligation of the Company to
Close and to Sell the Shares  and  Warrants.  The  obligation  hereunder  of the
Company  to close  and  issue  and  sell  the  Shares  and the  Warrants  to the
Purchasers on the Closing Date is subject to the  satisfaction or waiver,  at or

                                       18
<PAGE>

before the Closing,  of the conditions set forth below. These conditions are for
the  Company's  sole benefit and may be waived by the Company at any time in its
sole discretion.

        (a)   Accuracy   of  the   Purchasers'   Representations   and
Warranties.  The  representations  and warranties of each Purchaser  Transaction
Documents shall be true and correct in all material respects as of the date when
made  and as of the  Closing  Date  as  though  made at that  time,  except  for
representations  and warranties that are expressly made as of a particular date,
which shall be true and correct in all material respects as of such date.

         (b) Performance by the Purchasers. Each Purchaser shall have performed,
satisfied and complied in all material  respects with all covenants,  agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Purchasers at or prior to the Closing Date.

         (c) No  Injunction.  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 which
prohibits  the  consummation  of any of the  transactions  contemplated  by this
Agreement.

         (d) Delivery of Purchase  Price.  The Purchase Price for the Shares and
Warrants shall have been delivered to the Company at the Closing.

         (e)  Delivery  of  Purchaser  Transaction   Documents.   The  Purchaser
Transaction  Documents  shall  have  been duly  executed  and  delivered  by the
Purchasers to the Company.

         Section 4.2    Conditions Precedent to the Obligation of the Purchasers
to Close and to Purchase the Shares and Warrants.  The  obligation  hereunder of
the   Purchasers  to  purchase  the  Shares  and  Warrants  and  consummate  the
transactions  contemplated  by this Agreement is subject to the  satisfaction or
waiver,  at or before the Closing,  of each of the  conditions  set forth below.
These  conditions are for the Purchasers'  sole benefit and may be waived by the
Purchasers at any time in their sole discretion.

         (a) Accuracy of the Company's  Representations and Warranties.  Each of
the  representations and warranties of the Company in this Agreement and in each
of the Transaction  Documents shall be true and correct in all material respects
as of the Closing  Date,  except for  representations  and  warranties  that are
expressly made as of a particular  date,  which shall be true and correct in all
material respects as of such date.

         (b)  Performance  by the  Company.  The Company  shall have  performed,
satisfied  and  complied in all  respects  with all  covenants,  agreements  and
conditions  required by this  Agreement to be  performed,  satisfied or complied
with by the Company at or prior to the Closing Date.

         (c) No Suspension, Etc. Trading in the Company's Common Stock shall not
have been suspended by the  Commission  (except for any suspension of trading of

                                       19
<PAGE>

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  ("Bloomberg")
shall not have been suspended or limited,  or minimum prices shall not have been
established  on securities  whose trades are reported by Bloomberg,  nor shall a
banking  moratorium  have been  declared  either by the United  States or Nevada
State  authorities,  nor shall there have occurred any national or international
calamity  or crisis of such  magnitude  in its  effect on any  financial  market
which,  in each case, in the  reasonable  judgment of the  Purchasers,  makes it
impracticable or inadvisable to purchase the Shares.

         (d)  No Injunction.  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 which
prohibits  the  consummation  of any of the  transactions  contemplated  by this
Agreement.

         (e) No Proceedings or Litigation.  No action, suit or proceeding before
any arbitrator or any governmental  authority shall have been commenced,  and no
investigation by any governmental authority shall have been threatened,  against
the Company or any Subsidiary,  or any of the officers,  directors or affiliates
of the Company or any  Subsidiary,  seeking to  restrain,  prevent or change the
transactions  contemplated by this  Agreement,  or seeking damages in connection
with such transactions.

         (f) Opinion of Counsel,  Etc.  The  Purchasers  shall have  received an
opinion of counsel to the Company, dated the Closing Date,  substantially in the
form of  Exhibit C hereto,  and such other  certificates  and  documents  as the
Purchasers or their counsel shall reasonably require incident to the Closing.

         (g)  Warrants  and Shares.  The  Company  shall have  delivered  to the
Purchasers  the  originally  executed  Warrants (in such  denominations  as each
Purchaser  may  request but in no event in  denominations  of less than 100) and
shall have delivered certificates representing the Shares (in such denominations
as each Purchaser may request) being acquired by the Purchasers at the Closing.

         (h)  Resolutions.  The Board of  Directors  of the  Company  shall have
adopted  resolutions  consistent with Section 2.1(b) hereof in a form reasonably
acceptable to the Purchasers (the "Resolutions").

         (i)  Certificate of  Designations.  As of the Closing Date, the Company
shall have filed with the Nevada Secretary of State a Certificate of Designation
authorizing the Preferred Stock in substantially  the Form of Exhibit D attached
hereto.

         (j)  Reservation  of Shares.  As of the Closing Date, the Company shall
have reserved out of its authorized and unissued Preferred Stock, solely for the
purpose of effecting the issuance of the Shares, a number of shares of Preferred
Stock equal to the aggregate  number of the Shares.  As of the Closing Date, the
Company shall have  reserved out of its  authorized  and unissued  Common Stock,
solely  for the  purpose  of  effecting  the  conversion  of the  Shares and the

                                       20
<PAGE>

exercise of the Warrants, a number of shares of Common Stock equal to the number
of Conversion  Shares and the number of Warrant Shares  issuable upon conversion
of the Preferred Stock and the exercise of the Warrants, respectively,  assuming
the  Warrants  are  exercised  and the Shares are  converted on the Closing Date
(assuming the Warrants are fully exercisable and the Shares fully convertible on
such date  regardless of any limitation on the timing or amount of such exercise
or conversion).

         (k)  Secretary's  Certificate.  The Company shall have delivered to the
Purchasers a  secretary's  certificate,  dated as of the Closing Date, as to (i)
the Resolutions,  (ii) the Certificate,  (iii) the Bylaws,  each as in effect at
the  Closing,  and (iv) the  authority  and  incumbency  of the  officers of the
Company executing the Transaction  Documents and any other documents required to
be executed or delivered in connection therewith.

         (l) Officer's Certificate.  On the Closing Date, the Company shall have
delivered  to the  Purchasers  a  certificate  of an  executive  officer  of the
Company,  dated as of the Closing Date, confirming the accuracy of the Company's
representations,  warranties and covenants  contained  herein and in each of the
other Transaction Documents as of the Closing Date and confirming the compliance
by the Company with the conditions precedent set forth in this Section 4.2 as of
the Closing Date.

         (m) Fees and Expenses.  As of the Closing  Date,  all fees and expenses
required  to be  paid  by  the  Company  in  connection  with  the  transactions
contemplated by this Agreement shall have been, or authorized to be, paid by the
Company.

         (n) Registration Rights Agreement.  As of the Closing Date, the parties
shall have entered into the Registration Rights Agreement in the Form of Exhibit
E attached hereto.

         (o) Material  Adverse  Effect.  No Material  Adverse  Effect shall have
occurred.

                                   ARTICLE V

                               CERTIFICATE LEGEND

         Section 5.1    Legend.  Each  certificate representing the Shares,  the
Conversion  Shares,  the  Warrants  and the Warrant  Shares  shall be stamped or
otherwise  imprinted  with a  legend  substantially  in the  following  form (in
addition to any legend  required by  applicable  state  securities or "blue sky"
laws):

         THE SECURITIES  REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE
         NOT BEEN  REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
         "SECURITIES  ACT") OR ANY  STATE  SECURITIES  LAWS AND MAY NOT BE SOLD,
         TRANSFERRED  OR  OTHERWISE  DISPOSED  OF  UNLESS  REGISTERED  UNDER THE
         SECURITIES  ACT AND UNDER  APPLICABLE  STATE  SECURITIES  LAWS OR AXIOM
         PHARMACEUTICALS,  INC.  SHALL HAVE  RECEIVED  AN OPINION OF ITS COUNSEL

                                       21

<PAGE>

         THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER
         THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

         Each  certificate  representing  any  Shares  shall  also be stamped or
otherwise imprinted with a legend substantially in the following form:

         AXIOM PHARMACEUTICALS, INC. WILL FURNISH TO EACH HOLDER OF ITS SERIES A
         CONVERTIBLE  PREFERRED  STOCK WHO SO REQUESTS  WITHOUT CHARGE A COPY OF
         THE CERTIFICATE OF DESIGNATION SETTING FORTH THE POWERS,  DESIGNATIONS,
         PREFERENCES  AND  RELATIVE,  PARTICIPATING,  OPTIONAL OR OTHER  SPECIAL
         RIGHTS  OF SUCH  STOCK AND ANY OTHER  CLASS OR SERIES  THEREOF  AND THE
         QUALIFICATIONS,  LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR
         RIGHTS.

         The  Company  agrees to reissue  certificates  representing  any of the
Securities, without the legend set forth above, if at such time, prior to making
any  transfer of any such  Securities,  such holder  thereof  shall give written
notice to the  Company  describing  the  manner and terms of such  transfer  and
removal as the Company may reasonably  request.  Such proposed transfer will not
be effected  until:  (a) the Company has notified such holder that either (i) in
the opinion of Company counsel,  the registration of the Shares,  the Conversion
Shares,  Warrants or Warrant  Shares under the Securities Act is not required in
connection with such proposed transfer,  or (ii) a registration  statement under
the  Securities  Act covering  such proposed  disposition  has been filed by the
Company with the Commission and has become  effective  under the Securities Act;
and (b) the Company has  notified  such holder that either (i) in the opinion of
Company counsel, the registration or qualification under the securities or "blue
sky"  laws of any  state  is not  required  in  connection  with  such  proposed
disposition,  or (ii) compliance with applicable  state securities or "blue sky"
laws has been effected.  The Company will use its best efforts to respond to any
such notice  from a holder  within  five (5) days.  In the case of any  proposed
transfer  under this Section 5.1,  the Company  will use  reasonable  efforts to
comply with any such applicable  state  securities or "blue sky" laws, but shall
in no event be required, in connection  therewith,  to qualify to do business in
any  state  where it is not then  qualified  or to take any  action  that  would
subject it to tax or to the general  service of process in any state where it is
not then subject.  The  restrictions  on transfer  contained in this Section 5.1
shall be in addition to, and not by way of limitation of, any other restrictions
on transfer contained in any other section of this Agreement.

                                   ARTICLE VI

                                   TERMINATION

         Section  6.1   Termination  by Mutual Consent.  This  Agreement  may be
terminated at any time prior to the Closing Date by the mutual  written  consent
of the Company and the Purchasers.

                                       22

<PAGE>

         Section 6.2   Effect of Termination. In the event of termination by the
Company or the  Purchasers,  written notice thereof shall  forthwith be given to
the other party and the  transactions  contemplated  by this Agreement  shall be
terminated  without further action by any party. If this Agreement is terminated
as provided in Section 6.1 herein,  this  Agreement  shall become void and of no
further  force and  effect,  except for  Sections  8.1 and 8.2,  and Article VII
herein.  Nothing in this  Section  6.2 shall be deemed to release the Company or
any  Purchaser  from any liability  for any breach under this  Agreement,  or to
impair  the  rights  of  the  Company  or  such  Purchaser  to  compel  specific
performance by the other party of its obligations under this Agreement.

                                  ARTICLE VII

                                 INDEMNIFICATION

         Section 7.1    General Indemnity.  The Company agrees to  indemnify and
hold harmless each Purchaser (and its respective directors, officers, employees,
affiliates, agents, successors and assigns) from and against any and all losses,
liabilities,  deficiencies,  costs,  damages and  expenses  (including,  without
limitation,  reasonable attorneys' fees, charges and disbursements)  incurred by
each  Purchaser or any such person as a result of any inaccuracy in or breach of
the  representations,  warranties or covenants made by the Company  herein.  The
Purchasers  severally  but not jointly  agree to indemnify and hold harmless the
Company and its directors,  officers, employees,  affiliates, agents, successors
and assigns  from and against  any and all  losses,  liabilities,  deficiencies,
costs,   damages  and  expenses  (including,   without  limitation,   reasonable
attorneys' fees, charges and disbursements) incurred by the Company as result of
any inaccuracy in or breach of the representations, warranties or covenants made
by the Purchasers herein.

         Section  7.2   Indemnification   Procedure.   Any  party   entitled  to
indemnification  under  this  Article  VII (an  "indemnified  party")  will give
written notice to the  indemnifying  party of any matters giving rise to a claim
for  indemnification;  provided,  that the  failure  of any  party  entitled  to
indemnification  hereunder  to give notice as provided  herein shall not relieve
the indemnifying  party of its obligations  under this Article VII except to the
extent that the  indemnifying  party is actually  prejudiced  by such failure to
give  notice.  In case any  action,  proceeding  or claim is brought  against an
indemnified party in respect of which  indemnification is sought hereunder,  the
indemnifying  party  shall be  entitled  to  participate  in and,  unless in the
reasonable  judgment of the indemnified  party a conflict of interest between it
and the indemnifying party may exist with respect to such action,  proceeding or
claim, to assume the defense thereof with counsel reasonably satisfactory to the
indemnified  party.  In  the  event  that  the  indemnifying  party  advises  an
indemnified  party  that  it  will  contest  such a  claim  for  indemnification
hereunder,  or fails,  within thirty (30) days of receipt of any indemnification
notice to notify such person in writing of the indemnifying  party's election to
defend,  settle  or  compromise,  at its sole  cost  and  expense,  any  action,
proceeding or claim (or  discontinues its defense at any time after it commences
such defense),  then the indemnified party may, at its option, defend, settle or
otherwise compromise or pay such action or claim. In any event, unless and until
the  indemnifying  party  elects in  writing  to assume  and does so assume  the
defense of any such claim,  proceeding or action, the indemnified  party's costs

                                       23
<PAGE>

and expenses  arising out of the defense,  settlement  or compromise of any such
action,   claim  or  proceeding  shall  be  losses  subject  to  indemnification
hereunder.  The indemnified  party shall  cooperate fully with the  indemnifying
party in connection  with any negotiation or defense of any such action or claim
by the  indemnifying  party  and shall  furnish  to the  indemnifying  party all
information  reasonably available to the indemnified party which relates to such
action or claim. The indemnifying  party shall keep the indemnified  party fully
apprised  at  all  times  as to the  status  of the  defense  or any  settlement
negotiations  with respect thereto.  If the indemnifying  party elects to defend
any such  action or claim,  then the  indemnified  party  shall be  entitled  to
participate  in such  defense  with  counsel  of its choice at its sole cost and
expense.  The  indemnifying  party shall not be liable for any settlement of any
action,  claim  or  proceeding  effected  without  its  prior  written  consent.
Notwithstanding  anything in this Article VII to the contrary,  the indemnifying
party shall not, without the indemnified  party's prior written  consent,  which
consent may not be  unreasonably  withheld,  settle or  compromise  any claim or
consent to entry of any  judgment in respect  thereof  which  imposes any future
obligation  on  the  indemnified  party  or  which  does  not  include,   as  an
unconditional  term thereof,  the giving by the claimant or the plaintiff to the
indemnified  party of a release from all liability in respect of such claim.  If
the  indemnifying  party fails or refuses to promptly  assume the defense of any
such claim,  proceeding  or action,  then the  indemnification  required by this
Article VII shall be made by periodic  payments of the amount thereof during the
course of investigation  or defense,  as and when bills are received or expense,
loss,  damage  or  liability  is  incurred,  so  long as the  indemnified  party
irrevocably  agrees to refund such moneys if it is  ultimately  determined  by a
court  of   competent   jurisdiction   that  such  party  was  not  entitled  to
indemnification.  The indemnity agreements contained herein shall be in addition
to (a) any cause of action or similar  rights of the  indemnified  party against
the indemnifying party or others, and (b) any liabilities the indemnifying party
may be subject to pursuant to applicable law.

                                  ARTICLE VIII

                                  MISCELLANEOUS

         Section  8.1   Fees and Expenses.  Each  party  shall  pay the fees and
expenses of its advisors,  counsel,  accountants and other experts,  if any, and
all  other  expenses,  incurred  by  such  party  incident  to the  negotiation,
preparation, execution, delivery and performance of this Agreement. In addition,
the  Company  shall  pay all  reasonable  fees  and  expenses  incurred  by each
Purchaser in connection  with any amendments,  modifications  or waivers of this
Agreement or any of the other  Transaction  Documents or incurred in  connection
with  the  enforcement  of  this  Agreement  and  any of the  other  Transaction
Documents,  including,  without  limitation,  all  reasonable  attorneys'  fees,
disbursements and expenses.

         Section 8.2    Specific Enforcement; Consent to Jurisdiction.

         (a)  The  Company  and  the  Purchasers   acknowledge  and  agree  that
irreparable  damage would occur in the event that any of the  provisions of this
Agreement or the other  Transaction  Documents  were not performed in accordance
with their specific terms or were otherwise  breached.  It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent or
cure  breaches of the  provisions  of this  Agreement  or the other  Transaction

                                       24

<PAGE>

Documents  and to  enforce  specifically  the  terms  and  provisions  hereof or
thereof,  this being in addition to any other remedy to which any of them may be
entitled by law or equity.

         (b) The Company and each Purchaser (i) hereby irrevocably submit to the
exclusive  jurisdiction  of the  United  States  District  Court  sitting in the
Northern  District  of Texas and the  courts of the  State of Texas  located  in
Dallas  County or, in addition,  in the case of any suit,  action or  proceeding
brought on behalf of any  Purchaser,  the United  State  District  Court for the
Southern District of New York and the courts of the State of New York located in
New York County,  for the purposes of any suit, action or proceeding arising out
of or relating to this  Agreement or any of the other  Transaction  Documents or
the  transactions  contemplated  hereby or thereby,  and (ii) hereby waive,  and
agree not to assert in any such suit, action or proceeding, any claim that it is
not personally  subject to the  jurisdiction of each such court,  that the suit,
action or  proceeding is brought in an  inconvenient  forum or that the venue of
the suit,  action or  proceeding  is  improper.  The Company and each  Purchaser
consent  to  process  being  served in any such suit,  action or  proceeding  by
mailing a copy  thereof to such party at the address in effect for notices to it
under this  Agreement  and agrees that such service  shall  constitute  good and
sufficient  service of process and notice  thereof.  Nothing in this Section 8.2
shall affect or limit any right to serve  process in any other manner  permitted
by law. The Company and the Purchasers hereby agree that the prevailing party in
any suit,  action or proceeding  arising out of or relating to the Shares,  this
Agreement,  the Registration Rights Agreement or the Warrants, shall be entitled
to reimbursement for reasonable legal fees from the non-prevailing party.

         Section  8.3   Entire   Agreement;   Amendment.   This  Agreement,  the
Transaction Documents and the Purchaser Transaction Documents contain the entire
understanding  and agreement of the parties with respect to the matters  covered
hereby and, except as specifically set forth herein or in any of the Transaction
Documents  or  Purchaser  Transaction  Documents,  neither  the  Company nor any
Purchaser  make any  representation,  warranty,  covenant  or  undertaking  with
respect to such  matters.  This  Agreement,  the  Transaction  Documents and the
Purchaser   Transaction   Documents  supersede  all  prior   understandings  and
agreements with respect to said subject matter,  all of which are merged herein.
No provision of this  Agreement may be waived or amended other than by a written
instrument  signed by the Company and the Purchasers and their permitted assigns
owning of record at least a majority in interest of the then-outstanding Shares,
and no provision hereof may be waived other than by a written  instrument signed
by the party against whom enforcement of any such waiver is sought. No amendment
to this Agreement  shall be effective to the extent that it applies to less than
all of the holders of the Shares then  outstanding  or violates any provision of
the Nevada  Corporation  Law. 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  or holders of Shares,  as the
case may be.

         Section 8.4    Notices.  Any notice, demand,  request,  waiver or other
communication  required or permitted to be given  hereunder  shall be in writing
and shall be deemed  given and  received  (a) upon hand  delivery or delivery by
telecopy or facsimile at the address or number designated below (if delivered on
a  business  day  during  normal  business  hours  where  such  notice  is to be
received), or the first business day following such delivery (if delivered other

                                       25
<PAGE>

than on a business day during normal  business  hours where such notice is to be
received),  or (b) on the second  business day  following the date of mailing by
express  courier  service,  fully  prepaid,  addressed to such address,  or upon
actual receipt of such mailing,  whichever shall first occur.  The addresses for
such communications shall be:

If to the Company:                  Axiom Pharmaceuticals, Inc.
                                    4695 Macarthur Court, 11th Floor
                                    Newport Beach, California 92660
                                    Attention:  Lan Hao, CFO
                                    Telecopier:  (310) 301-7748
                                    Telephone:  (310) 301-7728

with copies (which copies
shall not constitute notice
to the Company) to:                 Law Offices of Louis E. Taubman, P.C.
                                    225 Broadway, Suite 1200
                                    New York, New York  10007
                                    Attention:  Louis E. Taubman, Esq.
                                    Telecopier:  (212) 202-6380
                                    Telephone:  (212) 732-7184

If to any Purchaser:                At the address of such Purchaser set forth
                                    on Exhibit A to this Agreement.

         Any party  hereto may from time to time  change its address for notices
by giving at least ten (10) days written  notice of such changed  address to the
other party or parties hereto in accordance  with the provisions of this Section
8.4.

         Section 8.5    Waivers.  No waiver  by any  party  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  other
provision,  condition or requirement  hereof, nor shall any delay or omission of
any party to exercise any right  hereunder in any manner  impair the exercise of
any such right accruing to it thereafter.

         Section 8.6    Headings.  The article,  section and subsection headings
in this  Agreement are for  convenience  only and shall not constitute a part of
this  Agreement for any other purpose and shall not be deemed to limit or affect
any of the provisions hereof.

         Section 8.7    Successors and Assigns.  This Agreement shall be binding
upon and inure to the benefit of the parties and their  successors and permitted
assigns.  After the Closing,  the assignment by a party to this Agreement of any
rights  hereunder  shall not affect  the  obligations  of such party  under this
Agreement.

         Section 8.8    No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective  permitted successors
and  assigns  and is not for the  benefit  of, nor may any  provision  hereof be
enforced by, any other person (other than indemnified  parties,  as contemplated
by Article VII).

                                       26
<PAGE>

         Section 8.9    Governing  Law.  This Agreement shall be governed by and
construed in accordance  with the internal laws of the State of Nevada,  without
giving  effect to the  choice of law  provisions.  This  Agreement  shall not be
interpreted  or construed  with any  presumption  against the party causing this
Agreement to be drafted.

         Section  8.10  Survival.  The  representations  and  warranties  of the
Company  contained  in  Sections  2.1(o)  and  2.1(s)  shall  survive  until the
expiration of the applicable  statutes of  limitations,  and those  contained in
Article II, with the exception of Sections 2.1(o) and 2.1(s),  shall survive the
execution and delivery  hereof and the Closing until the date two (2) years from
the Closing Date, and the agreements and covenants set forth in Articles I, III,
V, VII and VIII of this  Agreement  shall  survive the  execution  and  delivery
hereof and the Closing hereunder.

         Section 8.11   Counterparts.  This Agreement  may  be executed  in  any
number of counterparts, all of which taken together shall constitute one and the
same instrument and shall become effective when counterparts have been signed by
each party and delivered to the other parties hereto,  it being  understood that
all parties need not sign the same counterpart.

          Section  8.12 Publicity. The Company agrees that it will not disclose,
and will not  include in any public  announcement,  the names of the  Purchasers
without the consent of the  Purchasers  in  accordance  with Section 8.3,  which
consent shall not be unreasonably  withheld or delayed, or unless and until such
disclosure is required by law, rule or applicable  regulation,  and then only to
the extent of such requirement.

         Section  8.13  Severability.  The  provisions  of  this  Agreement  are
severable  and,  in the event  that any court of  competent  jurisdiction  shall
determine  that  any  one or more of the  provisions  or part of the  provisions
contained  in this  Agreement  shall,  for any  reason,  be held to be  invalid,
illegal  or  unenforceable  in  any  respect,  such  invalidity,  illegality  or
unenforceability  shall not affect any other provision or part of a provision of
this  Agreement  and this  Agreement  shall be reformed and construed as if such
invalid or illegal or unenforceable  provision,  or part of such provision,  had
never been contained herein,  so that such provisions would be valid,  legal and
enforceable to the maximum extent possible.

         Section  8.14  Further  Assurances.  From  and  after  the date of this
Agreement,  upon the request of the  Purchasers or the Company,  the Company and
each Purchaser shall execute and deliver such  instruments,  documents and other
writings as may be  reasonably  necessary  or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement,  the Warrants
and the Registration Rights Agreement.

         Section 8.15 "Independent Nature of Purchasers' Obligations and Rights.
The obligations of each Purchaser under this Agreement are several and not joint
with  the  obligations  of any  other  Purchaser,  and  no  Purchaser  shall  be
responsible  in any way for the  performance  of the  obligations  of any  other
Purchaser  under this  Agreement.  The  decision of each  Purchaser  to purchase
Securities   pursuant  to  this  Agreement  has  been  made  by  such  Purchaser
independently  of any other  Purchaser  and  independently  of any  information,
materials,  statements  or opinions  as to the  business,  affairs,  operations,
assets, properties,  liabilities, results of operations, condition (financial or

                                       27
<PAGE>

otherwise)  or prospects of the Company which may have been made or given by any
other  Purchaser  or by any agent or  employee of any other  Purchaser.  Nothing
contained herein, and no action taken by any Purchaser  pursuant thereto,  shall
be deemed to constitute the Purchasers as a partnership, an association, a joint
venture or any other kind of entity,  or create a presumption that the Investors
are in any way acting in concert or as a group with respect to such  obligations
or the transactions  contemplated by this Agreement. Each Purchaser acknowledges
that no other Purchaser has acted as agent for such Purchaser in connection with
making its  investment  hereunder and that no other  Purchaser will be acting as
agent of such Purchaser in connection with monitoring its investment  hereunder.
Each  Purchaser  shall be  entitled  to  independently  protect  and enforce its
rights,  including without  limitation the rights arising out of this Agreement,
and it  shall  not be  necessary  for any  other  Investor  to be  joined  as an
additional party in any proceeding for such purpose.  The Company has elected to
provide all  Purchasers  with the same terms and form of this  Agreement for the
convenience of the Company."

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

                             AXIOM PHARMACEUTICALS, INC.

                             By:_____________________________________
                                   Name: Lan Hao
                                   Title:   Chief Financial Officer

                             SF CAPITAL PARTNERS LTD.

                                By: _____________________________
                                      Michael A. Roth,
                                      Authorized Signatory

                                GRYPHON MASTER FUND, L.P.

                                By:  Gryphon Partners, L.P., its General Partner

                                    By:  Gryphon Management Partners, L.P.,
                                               its General Partner

                                       By:  Gryphon Advisors, LLC,
                                              its General Partner

                                         By: _____________________________
                                                 , Authorized Agent

                                       28
<PAGE>

<TABLE>

<CAPTION>

                                    EXHIBIT A
                                    ---------
                               LIST OF PURCHASERS

NAMES AND ADDRESSES               NUMBER OF SHARES    NUMBER OF WARRANTS    DOLLAR AMOUNT
OF PURCHASERS                     PURCHASED           PURCHASED             OF INVESTMENT
-------------------               ----------------    ------------------    --------------
<S>                               <C>                 <C>                   <C>

SF Capital Partners Ltd.             1,250,000            1,250,000           $2,500,000
c/o Staro Asset Management, LLC
3600 South Lake Drive
St. Francis, Wisconsin  53235

Gryphon Master Fund, L.P.              500,000              500,000           $1,000,000
500 Crescent Court
Suite 270
Dallas, Texas  75201
Attn:  Ryan R. Wolters
Telecopier: (214) 871-6909
Telephone: (214) 871-6783

with copies to:

Warren W. Garden, P.C.
500 Crescent Court
Suite 270
Dallas, Texas  75201
Attn:  Warren W. Garden, Esq.
Telecopier: (214) 871-6711
Telephone: (214) 871-6710

</TABLE>

                                      A-1
<PAGE>

                                    EXHIBIT B
                                    ----------
                                 FORM OF WARRANT

                                       B-1

<PAGE>

                                    EXHIBIT C
                                    ---------
                                 FORM OF OPINION

         1. The Company is a corporation duly incorporated, validly existing and
in good  standing  under the laws of the State of Nevada  and has the  requisite
corporate  power to own,  lease and operate its  properties  and assets,  and to
carry on its business as presently conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the failure to so qualify would have a Material Adverse Effect.

         2. The Company has the requisite corporate power and authority to enter
into and perform its obligations  under the  Transaction  Documents and to issue
the Shares,  the Conversion  Shares,  the Warrants and the Warrant  Shares.  The
execution,  delivery and performance of each of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated thereby have
been duly and  validly  authorized  by all  necessary  corporate  action  and no
further  consent or  authorization  of the Company or its Board of  Directors is
required.  Each  of the  Transaction  Documents  have  been  duly  executed  and
delivered,  and the Shares and the Warrants have been duly executed,  issued and
delivered by the Company and each of the  Transaction  Documents  constitutes  a
legal,  valid and  binding  obligation  of the Company  enforceable  against the
Company in accordance  with its  respective  terms.  The Shares,  the Conversion
Shares and the Warrant Shares are not subject to any preemptive rights under the
Certificate or the Bylaws.

         3. The Shares have been duly  authorized  and, when  delivered  against
payment in full as provided in the Purchase  Agreement,  will be validly issued,
fully paid and nonassessable.  The Conversion Shares,  have been duly authorized
and reserved for issuance,  and, when delivered  upon  conversion of the Shares,
will be validly issued,  fully paid and nonassessable.  The Warrant Shares, have
been duly  authorized  and reserved  for  issuance,  and,  when  delivered  upon
exercise or against payment in full as provided in the Warrants, will be validly
issued, fully paid and nonassessable.

         4. The execution,  delivery and  performance of and compliance with the
terms  of  the  Transaction  Documents  and  the  issuance  of the  Shares,  the
Conversion  Shares,  the Warrants and the Warrant  Shares do not (a) violate any
provision of the  Certificate  or Bylaws,  (b) conflict  with,  or  constitute a
default (or an event  which with notice or lapse of time or both would  become a
default)  under,  or  give to  others  any  rights  of  termination,  amendment,
acceleration  or  cancellation  of, any material  agreement,  mortgage,  deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which the Company is a party and which is known to us, (c) create or impose a
lien,  charge or  encumbrance on any property of the Company under any agreement
or any  commitment  known to us to which the  Company is a party or by which the
Company  is bound or by which any of its  respective  properties  or assets  are
bound,  or (d) result in a violation  of any  Federal,  state,  local or foreign
statute,  rule,  regulation,  order,  judgment,  injunction or decree (including
Federal and state securities laws and regulations)  applicable to the Company or
by which any property or asset of the Company is bound or affected,  except,  in
all cases other than violations  pursuant to clauses (a) and (d) above, for such
conflicts, default, terminations,  amendments,  acceleration,  cancellations and
violations  as would  not,  individually  or in the  aggregate,  have a Material
Adverse Effect.

                                      C-1

<PAGE>

         5. No consent, approval or authorization of or designation, declaration
or filing with any governmental authority on the part of the Company is required
under  Federal,  state or local law, rule or  regulation in connection  with the
valid execution,  delivery and performance of the Transaction Documents,  or the
offer, sale or issuance of the Shares,  the Conversion  Shares,  the Warrants or
the Warrant  Shares other than filings as may be required by applicable  Federal
and state securities laws and regulations.

         6. To our knowledge,  there is no action, suit, claim, investigation or
proceeding  pending or  threatened  against  the  Company  which  questions  the
validity of the Agreement or the transactions contemplated thereby or any action
taken  or to be  taken  pursuant  thereto.  There  is no  action,  suit,  claim,
investigation or proceeding pending, or to our knowledge, threatened, against or
involving the Company or any of its properties or assets and which, if adversely
determined,  is reasonably likely to result in a Material Adverse Effect.  There
are no  outstanding  orders,  judgments,  injunctions,  awards or decrees of any
court,  arbitrator or governmental or regulatory body against the Company or any
officers or directors of the Company in their capacities as such.

         7. The offer,  issuance and sale of the Shares and the Warrants and the
offer,  issuance  and  sale of the  Conversion  Shares  and the  Warrant  Shares
pursuant to the Agreement and the Warrants,  as applicable,  are exempt from the
registration requirements of the Securities Act of 1933, as amended.

         8. The Company is not, and as a result of and immediately  upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.

         9. We have  participated in the preparation of the Offering  Memorandum
and we have no reason to believe that, as of the date of the Offering Memorandum
and, except as disclosed in the Commission Documents, as of the date hereof, the
Offering  Memorandum  contained or contains  any untrue  statement of a material
fact or omitted or omits to state a material fact required to be stated  therein
or  necessary  to make the  statements  therein not  misleading  (except that no
opinion is expressed as to financial  statements,  schedules and other financial
data contained in the Offering Memorandum).

                                      C-2
<PAGE>

                                    EXHIBIT D
                                    ---------
                       FORM OF CERTIFICATE OF DESIGNATIONS

                                       D-1
<PAGE>

                                    EXHIBIT E
                                    ---------
                      FORM OF REGISTRATION RIGHTS AGREEMENT

                                      E-1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00056-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00056-of-00352.parquet"}]]