Document:

SECURITIES PURCHASE AGREEMENT

                            LAURUS MASTER FUND, LTD.

                                       and

                                ADAL GROUP, INC.

                              Dated: June 29, 2005

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                                TABLE OF CONTENTS

                                                                          Pages

1.       Agreement to Sell and Purchase........................................1

2.       Fees, Option and Warrant..............................................2

3.       Closing, Delivery and Payment.........................................2
         3.1      Closing......................................................2
         3.2      Delivery.....................................................2
         3.3      Equity Investment by Management..............................3

4.       Representations and Warranties of the Company.........................3
         4.1      Subsidiaries.................................................4
         4.2      Capitalization; Voting Rights................................4
         4.3      Authorization; Binding Obligations...........................5
         4.4      Liabilities..................................................5
         4.5      Agreements; Action...........................................6
         4.6      Obligations to Related Parties...............................7
         4.7      Changes......................................................8
         4.8      Title to Properties and Assets; Liens, Etc...................9
         4.9      Intellectual Property.......................................10
         4.10     Compliance with Other Instruments...........................10
         4.11     Litigation..................................................11
         4.12     Tax Returns and Payments....................................11
         4.13     Employees...................................................11
         4.14     Registration Rights and Voting Rights.......................12
         4.15     Compliance with Laws; Permits...............................12
         4.16     Environmental and Safety Laws...............................13
         4.17     Valid Offering..............................................13
         4.18     Full Disclosure.............................................13
         4.19     Insurance...................................................13
         4.20     SEC Reports.................................................14
         4.21     Listing.....................................................14
         4.22     No Integrated Offering......................................14
         4.23     Stop Transfer...............................................14
         4.24     Dilution....................................................14
         4.25     Patriot Act.................................................15
         4.26     ERISA.......................................................15

5.       Representations and Warranties of the Purchaser......................16
         5.1      No Shorting.................................................16
         5.2      Requisite Power and Authority...............................16
         5.3      Investment Representations..................................16
         5.4      The Purchaser Bears Economic Risk...........................16

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                                                                          Pages

         5.5      Acquisition for Own Account.................................17
         5.6      The Purchaser Can Protect Its Interest......................17
         5.7      Accredited Investor.........................................17
         5.8      Legends.....................................................17

6.       Covenants of the Company.............................................18
         6.1      Stop-Orders.................................................18
         6.2      Listing.....................................................18
         6.3      Market Regulations..........................................19
         6.4      Reporting Requirements......................................19
         6.5      Use of Funds................................................19
         6.6      Access to Facilities........................................19
         6.7      Taxes.......................................................19
         6.8      Insurance...................................................21
         6.9      Intellectual Property.......................................22
         6.10     Properties..................................................22
         6.11     Confidentiality.............................................22
         6.12     Required Approvals..........................................22
         6.13     Reissuance of Securities....................................24
         6.14     Opinion.....................................................24
         6.15     Margin Stock................................................24
         6.16     No Limitations on Additional Financing......................24
         6.17     Authorization and Reservation of Shares.....................24

7.       Covenants of the Purchaser...........................................25
         7.1      Confidentiality.............................................25
         7.2      Non-Public Information......................................25
         7.3      Limitation on Acquisition of Common Stock of the Company....25
         7.4      No Shorting.................................................25

8.       Covenants of the Company and the Purchaser Regarding Indemnification.25
         8.1      Company Indemnification.....................................25
         8.2      Purchaser's Indemnification.................................26

9.       Conversion of Convertible Note.......................................26
         9.1      Mechanics of Conversion.....................................26

10.      Registration Rights..................................................27
         10.1     Registration Rights Granted.................................27
         10.2     Offering Restrictions.......................................27

11.      Miscellaneous........................................................28
         11.1     Governing Law, Jurisdiction and Waiver of Jury Trial........28
         11.2     Severability................................................29
         11.3     Survival....................................................29

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                                                                          Pages

         11.4     Successors..................................................29
         11.5     Entire Agreement; Maximum Interest..........................29
         11.6     Amendment and Waiver........................................30
         11.7     Delays or Omissions.........................................30
         11.8     Notices.....................................................30
         11.9     Attorneys' Fees.............................................31
         11.10    Titles and Subtitles........................................31
         11.11    Facsimile Signatures; Counterparts..........................31
         11.12    Broker's Fees...............................................31
         11.13    Construction................................................32

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                                LIST OF EXHIBITS

Form of Convertible Term Note..........................................Exhibit A
Form of Warrant........................................................Exhibit B
Form of Opinion........................................................Exhibit C
Form of Escrow Agreement...............................................Exhibit D

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                          SECURITIES PURCHASE AGREEMENT

         THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of June 29, 2005, by and between ADAL GROUP, INC., a Delaware
corporation (the "Company"), and LAURUS MASTER FUND, LTD., a Cayman Islands
company (the "Purchaser").

                                    RECITALS

         WHEREAS, the Company has authorized the sale to the Purchaser of a
Secured Convertible Term Note in the aggregate principal amount of One Million
Five Hundred Thousand Dollars ($1,500,000) in the form of Exhibit A hereto (as
amended, modified and/or supplemented from time to time, the "Note"), which Note
is convertible into shares of the Company's common stock, $0.0001 par value per
share (the "Common Stock") at an initial fixed conversion price of $3,00 per
share of Common Stock ("Fixed Conversion Price");

         WHEREAS, the Company wishes to issue to the Purchaser a warrant in the
form of Exhibit B-1 hereto (as amended, modified and/or supplemented from time
to time, the "Warrant") to purchase up to 375,000 shares of the Company's Common
Stock (subject to adjustment as set forth therein) in connection with the
Purchaser's purchase of the Note;

         WHEREAS, the Company wishes to issue to the Purchaser a warrant in the
form of Exhibit B-2 hereto (as amended, modified and/or supplemented from time
to time, the "Option") to purchase up to 150,702 shares of the Company's Common
Stock (subject to adjustment as set forth therein) in connection with the
Purchaser's purchase of the Note;

         WHEREAS, the Purchaser desires to purchase the Note, the Option and the
Warrant on the terms and conditions set forth herein; and

         WHEREAS, the Company desires to issue and sell the Note, the Option and
the Warrant to the Purchaser on the terms and conditions set forth herein.

                                    AGREEMENT

         NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises, representations, warranties and covenants hereinafter set forth
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:

      1. Agreement to Sell and Purchase. Pursuant to the terms and conditions
set forth in this Agreement, on the Closing Date (as defined in Section 3), the
Company shall sell to the Purchaser, and the Purchaser shall purchase from the
Company, the Note. The sale of the Note on the Closing Date shall be known as
the "Offering." The Note will mature on the Maturity Date (as defined in the
Note). Collectively, the Note, the Option and the Warrant and Common Stock
issuable upon conversion of the Note and upon exercise of the Warrant and the
Option are referred to as the "Securities."

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      2. Fees, Option and Warrant. On the Closing Date:

            (a) The Company will issue and deliver to the Purchaser the Warrant
      to purchase up to 375,000 shares of Common Stock (subject to adjustment as
      set forth therein) in connection with the Offering, pursuant to Section 1
      hereof. All the representations, covenants, warranties, undertakings, and
      indemnification, and other rights made or granted to or for the benefit of
      the Purchaser by the Company are hereby also made and granted for the
      benefit of the holder of the Warrant and shares of the Company's Common
      Stock issuable upon exercise of the Warrant (the "Warrant Shares").

            (b) The Company will issue and deliver to the Purchaser the Option
      to purchase up to 150,702 shares of Common Stock (subject to adjustment as
      set forth therein) in connection with the Offering, pursuant to Section 1
      hereof. All the representations, covenants, warranties, undertakings, and
      indemnification, and other rights made or granted to or for the benefit of
      the Purchaser by the Company are hereby also made and granted for the
      benefit of the holder of the Option and shares of the Company's Common
      Stock issuable upon exercise of the Option (the "Option Shares").

            (c) Subject to the terms of Section 2(e) below, the Company shall
      pay to Laurus Capital Management, LLC, the manager of the Purchaser, a
      closing payment in an amount equal to seven percent (7.00%) of the
      aggregate principal amount of the Note. The foregoing fee is referred to
      herein as the "Closing Payment."

            (d) The Company shall reimburse the Purchaser for its reasonable
      expenses (including legal fees and expenses) incurred in connection with
      the preparation and negotiation of this Agreement and the Related
      Agreements (as hereinafter defined), and expenses incurred in connection
      with the Purchaser's due diligence review of the Company and its
      Subsidiaries (as defined in Section 4.2) and all related matters. Amounts
      required to be paid under this Section 2(d) will be paid on the Closing
      Date and shall be $50,000 (plus the expense associated with retaining
      local counsel for the Purchaser) for such expenses referred to in this
      Section 2(d).

            (e) The Closing Payment and the expenses referred to in the
      preceding clause (d) (net of deposits previously paid by the Company)
      shall be paid at closing out of funds held pursuant to the Escrow
      Agreement (as defined below) and a disbursement letter (the "Disbursement
      Letter").

      3. Closing, Delivery and Payment.

            3.1 Closing. Subject to the terms and conditions herein, the closing
      of the transactions contemplated hereby (the "Closing"), shall take place
      on the date hereof, at such time or place as the Company and the Purchaser
      may mutually agree (such date is hereinafter referred to as the "Closing
      Date").

            3.2 Delivery. Pursuant to the Escrow Agreement, at the Closing on
      the Closing Date, the Company will deliver to the Purchaser, among other

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      things, the Note, the Option and the Warrant and the Purchaser will
      deliver to the Company, among other things, the amounts set forth in the
      Disbursement Letter by certified funds or wire transfer.

            3.3 Equity Investment by Management. Prior to the Closing Date,
      certain managers of the Company shall make a cash common equity investment
      into the Company which shall generate net cash proceeds for the Company
      equal to at least (pound)150,000.

      4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchaser as follows (which representations and
warranties are made as of the date hereof):

            4.1 Organization, Good Standing and Qualification. Each of the
      Company and each of its Subsidiaries is a corporation, partnership or
      limited liability company, as the case may be, duly organized, validly
      existing and in good standing under the laws of its jurisdiction of
      organization. Each of the Company and each of its Subsidiaries has the
      corporate, limited liability company or partnership, as the case may be,
      power and authority to own and operate its properties and assets and,
      insofar as it is or shall be a party thereto, to (1) execute and deliver
      (i) this Agreement, (ii) the Note, the Option and the Warrant to be issued
      in connection with this Agreement, (iii) the Master Security Agreement
      dated as of the date hereof between the Company, certain Subsidiaries of
      the Company and the Purchaser (as amended, modified and/or supplemented
      from time to time, the "Master Security Agreement"), (iv) the Registration
      Rights Agreement relating to the Securities dated as of the date hereof
      between the Company and the Purchaser (as amended, modified and/or
      supplemented from time to time, the "Registration Rights Agreement"),
      (vii) the Funds Escrow Agreement dated as of the date hereof among the
      Company, the Purchaser and the escrow agent referred to therein,
      substantially in the form of Exhibit D hereto (as amended, modified and/or
      supplemented from time to time, the "Escrow Agreement"), (viii) (a) the
      Composite Guarantee and Debenture, dated as of the date hereof, among the
      Company, its Subsidiaries and the Purchaser, (b) certain Deeds of
      Priorities, dated on or after the date hereof, among the Purchaser, Lloyds
      TSB Commercial Finance Limited, Lloyds TSB Bank plc, Keith Malcolm Broome,
      Adal Seco Limited, Adal Estates Limited, Adal Extra Limited, Adal Group
      (UK) Limited and/or Adal Engineering Limited, and (c) certain Deeds of
      Priorities, each dated on or after the date hereof, among the Purchaser,
      State Securities plc, Venture Finance Plc, Keith Malcolm Broome, Guilform
      Holdings Limited and/or Adal Guilform Limited (as each of the documents
      referred to in the preceding clauses (a) through (c), inclusive, of this
      clause (viii) are amended, modified or supplemented from time to time,
      collectively, the "Foreign Documentation") and (ix) all other documents,
      instruments and agreements entered into in connection with the
      transactions contemplated hereby and thereby (the preceding clauses (ii)
      through (viii), collectively, the "Related Agreements"); (2) issue and

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      sell the Note and the shares of Common Stock issuable upon conversion of
      the Note (the "Note Shares"); (3) issue and sell the Warrant and the
      Warrant Shares; (4) issue and sell the Option and the Option Shares and
      (5) carry out the provisions of this Agreement and the Related Agreements
      and to carry on its business as presently conducted. Each of the Company
      and each of its Subsidiaries is duly qualified and is authorized to do
      business and is in good standing as a foreign corporation, partnership or
      limited liability company, as the case may be, in all jurisdictions in
      which the nature or location of its activities and of its properties (both
      owned and leased) makes such qualification necessary, except for those
      jurisdictions in which failure to do so has not, or could not reasonably
      be expected to have, individually or in the aggregate, a material adverse
      effect on the business, assets, liabilities, condition (financial or
      otherwise), properties, operations or prospects of the Company and its
      Subsidiaries, taken individually and as a whole (a "Material Adverse
      Effect").

            4.2 Subsidiaries. Each direct and indirect Subsidiary of the
      Company, the direct owner of such Subsidiary and its percentage ownership
      thereof, is set forth on Schedule 4.2. For the purpose of this Agreement,
      a "Subsidiary" of any person or entity means (i) a corporation or other
      entity whose shares of stock or other ownership interests having ordinary
      voting power (other than stock or other ownership interests having such
      power only by reason of the happening of a contingency) to elect a
      majority of the directors of such corporation, or other persons or
      entities performing similar functions for such person or entity, are
      owned, directly or indirectly, by such person or entity or (ii) a
      corporation or other entity in which such person or entity owns, directly
      or indirectly, more than 50% of the equity interests at such time. On the
      date hereof, AdAl Engineering, a company organized under the laws of
      Czechoslovakia (the "Immaterial Subsidiary"), does not own any assets
      (other than immaterial assets) or have any liabilities (other than
      immaterial liabilities).

            4.3 Capitalization; Voting Rights.

            (a) The authorized capital stock of the Company, as of the date
      hereof consists of 101,000,000 shares, of which 100,000,000 are shares of
      Common Stock, par value $0.0001 per share, 2,860,001 shares of which are
      issued and outstanding, and 1,000,000 are shares of preferred stock, par
      value $0.01 per share of which there are no shares of preferred stock are
      issued and outstanding. The authorized, issued and outstanding capital
      stock of each Subsidiary of the Company is set forth on Schedule 4.3.

            (b) Except as disclosed on Schedule 4.3, other than: (i) the shares
      reserved for issuance under the Company's stock option plans; and (ii)
      shares which may be granted pursuant to this Agreement and the Related
      Agreements, there are no outstanding options, warrants, rights (including
      conversion or preemptive rights and rights of first refusal), proxy or
      stockholder agreements, or arrangements or agreements of any kind for the
      purchase or acquisition from the Company of any of its securities. Except
      as disclosed on Schedule 4.3, neither the offer, issuance or sale of any
      of the Note, the Option or the Warrant, or the issuance of any of the Note
      Shares, the Option Shares or Warrant Shares, nor the consummation of any
      transaction contemplated hereby will result in a change in the price or
      number of any securities of the Company outstanding, under anti-dilution
      or other similar provisions contained in or affecting any such securities.

            (c) All issued and outstanding shares of the Company's Common Stock:
      (i) have been duly authorized and validly issued and are fully paid and
      nonassessable; and (ii) were issued in compliance with all applicable
      state and federal laws concerning the issuance of securities.

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            (d) The rights, preferences, privileges and restrictions of the
      shares of the Common Stock are as stated in the Company's Certificate of
      Incorporation (the "Charter") or as set forth under Delaware corporate
      law. The Note Shares, the Option Shares and Warrant Shares have been duly
      and validly reserved for issuance. When issued in compliance with the
      provisions of this Agreement and the Company's Charter, the Securities
      will be validly issued, fully paid and nonassessable, and will be free of
      any liens or encumbrances; provided, however, that the Securities may be
      subject to restrictions on transfer under state and/or federal securities
      laws as set forth herein or as otherwise required by such laws at the time
      a transfer is proposed.

            4.4 Authorization; Binding Obligations. All corporate, partnership
      or limited liability company, as the case may be, action on the part of
      the Company and each of its Subsidiaries (including their respective
      officers and directors) necessary for the authorization of this Agreement
      and the Related Agreements, the performance of all obligations of the
      Company and its Subsidiaries hereunder and under the other Related
      Agreements at the Closing and, the authorization, sale, issuance and
      delivery of the Note, the Option and Warrant has been taken or will be
      taken prior to the Closing. This Agreement and the Related Agreements,
      when executed and delivered and to the extent it is a party thereto, will
      be valid and binding obligations of each of the Company and each of its
      Subsidiaries, enforceable against each such person or entity in accordance
      with their terms, except:

            (a) as limited by applicable bankruptcy, insolvency, reorganization,
      moratorium or other laws of general application affecting enforcement of
      creditors' rights; and

            (b) general principles of equity that restrict the availability of
      equitable or legal remedies.

The sale of the Note and the subsequent conversion of the Note into Note Shares
are not and will not be subject to any preemptive rights or rights of first
refusal that have not been properly waived or complied with. The issuance of the
Warrant and the subsequent exercise of the Warrant for Warrant Shares are not
and will not be subject to any preemptive rights or rights of first refusal that
have not been properly waived or complied with. The issuance of the Option and
the subsequent exercise of the Option for Option Shares are not and will not be
subject to any preemptive rights or rights of first refusal that have not been
properly waived or complied with.

            4.5 Liabilities. Neither the Company nor any of its Subsidiaries has
      any liabilities, except current liabilities incurred in the ordinary
      course of business and liabilities disclosed in any of the Company's
      filings under the Securities Exchange Act of 1934 ("Exchange Act") made
      prior to the date of this Agreement (collectively, the "Exchange Act
      Filings"), copies of which have been provided to the Purchaser.

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      4.6 Agreements; Action. Except as set forth on Schedule 4.6 or as
disclosed in any Exchange Act Filings:

            (a) there are no agreements, understandings, instruments, contracts,
      proposed transactions, judgments, orders, writs or decrees to which the
      Company or any of its Subsidiaries is a party or by which it is bound
      which may involve: (i) obligations (contingent or otherwise) of, the
      Company or any of its Subsidiaries in excess of $250,000 (other than
      obligations of, the Company or any of its Subsidiaries arising from
      purchase or sale agreements entered into in the ordinary course of
      business); or (ii) the transfer or license of any patent, copyright, trade
      secret or other proprietary right to or from the Company or any of its
      Subsidiaries (other than licenses arising from the purchase of "off the
      shelf" or other standard products); or (iii) provisions restricting the
      development, manufacture or distribution of the Company's or any of its
      Subsidiaries products or services; or (iv) indemnification by the Company
      or any of its Subsidiaries with respect to infringements of proprietary
      rights.

            (b) Since December 31, 2004 (the "Balance Sheet Date"), neither the
      Company nor any of its Subsidiaries has: (i) declared or paid any
      dividends, or authorized or made any distribution upon or with respect to
      any class or series of its capital stock; (ii) incurred any indebtedness
      for money borrowed or any other liabilities (other than ordinary course
      obligations) individually in excess of $100,000 or, in the case of
      indebtedness and/or liabilities individually less than $100,000, in excess
      of $200,000 in the aggregate; (iii) made any loans or advances to any
      person or entity not in excess, individually or in the aggregate, of
      $100,000, other than ordinary course advances for travel expenses; or (iv)
      sold, exchanged or otherwise disposed of any of its assets or rights,
      other than the sale of its inventory in the ordinary course of business
      and the sale of obsolete or worn out equipment.

            (c) For the purposes of subsections (a) and (b) above, all
      indebtedness, liabilities, agreements, understandings, instruments,
      contracts and proposed transactions involving the same person or entity
      (including persons or entities the Company or any Subsidiary of the
      Company has reason to believe are affiliated therewith) shall be
      aggregated for the purpose of meeting the individual minimum dollar
      amounts of such subsections.

            (d) The Company maintains reasonable disclosure controls and
      procedures ("Disclosure Controls") designed to ensure that information
      required to be disclosed by the Company in the reports that it files or
      submits under the Exchange Act is recorded, processed, summarized, and
      reported, within the time periods specified in the rules and forms of the
      Securities and Exchange Commission ("SEC").

            (e) The Company makes and keep books, records, and accounts, that,
      in reasonable detail, accurately and fairly reflect any and all
      transactions in, and dispositions of, the Company's assets. The Company
      maintains reasonable internal control over financial reporting ("Financial
      Reporting Controls") designed by, or under the supervision of, the
      Company's principal executive and principal financial officers, and
      effected by the Company's board of directors, management, and other

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      personnel, to provide reasonable assurance regarding the reliability of
      financial reporting and the preparation of financial statements for
      external purposes in accordance with generally accepted accounting
      principles ("GAAP"), including that:

                  (i) transactions are executed in accordance with management's
            general or specific authorization; (ii) unauthorized acquisition,
            use, or disposition of the Company's assets that could have a
            material effect

                  on the financial statements are prevented or timely detected;
            (iii) transactions are recorded as necessary to permit preparation
            of financial statements in accordance with GAAP, and that the
            Company's receipts and expenditures are being made only in
            accordance with authorizations of the Company's management and board
            of directors;

                  (iv) transactions are recorded as necessary to maintain
            accountability for assets; and

                  (v) the recorded accountability for assets is compared with
            the existing assets at reasonable intervals, and appropriate action
            is taken with respect to any differences.

            (f) There is no weakness in any of the Company's Disclosure Controls
      or Financial Reporting Controls that is required to be disclosed in any of
      the Exchange Act Filings, except as so disclosed.

      4.7 Obligations to Related Parties. Except as set forth on Schedule 4.7,
there are no obligations of the Company or any of its Subsidiaries to officers,
directors, stockholders or employees of the Company or any of its Subsidiaries
other than:

      (a) for payment of salary for services rendered and for bonus payments;

      (b) reimbursement for reasonable expenses incurred on behalf of the
Company and its Subsidiaries;

      (c) for other standard employee benefits made generally available to all
employees (including stock option agreements outstanding under any stock option
plan approved by the Board of Directors of the Company and each Subsidiary of
the Company, as applicable);

      (d) obligations listed in the Company's and each of its Subsidiary's
financial statements or disclosed in any of the Company's Exchange Act Filings;
and

      (e) obligations to any stockholders required under the Charter, as in
effect on the date hereof, and applicable law.

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Except as described above or set forth on Schedule 4.7, none of the officers,
directors or, to the best of the Company's knowledge, key employees or
stockholders of the Company or any of its Subsidiaries or any members of their
immediate families, are indebted to the Company or any of its Subsidiaries,
individually or in the aggregate, in excess of $50,000 or have any direct or
indirect ownership interest in any firm or corporation with which the Company or
any of its Subsidiaries is affiliated or with which the Company or any of its
Subsidiaries has a business relationship, or any firm or corporation which
competes with the Company or any of its Subsidiaries, other than passive
investments in publicly traded companies (representing less than one percent
(1%) of such company) which may compete with the Company or any of its
Subsidiaries. Except as described above, no officer, director or stockholder of
the Company or any of its Subsidiaries, or any member of their immediate
families, is, directly or indirectly, interested in any material contract with
the Company or any of its Subsidiaries and no agreements, understandings or
proposed transactions are contemplated between the Company or any of its
Subsidiaries and any such person. Except as set forth on Schedule 4.7, neither
the Company nor any of its Subsidiaries is a guarantor or indemnitor of any
indebtedness of any other person or entity.

            4.8 Changes. Since the Balance Sheet Date, except as disclosed in
      any Exchange Act Filing or in any Schedule to this Agreement or to any of
      the Related Agreements, there has not been:

            (a) any change in the business, assets, liabilities, condition
      (financial or otherwise), properties, operations or prospects of the
      Company or any of its Subsidiaries, which individually or in the aggregate
      has had, or could reasonably be expected to have, individually or in the
      aggregate, a Material Adverse Effect;

            (b) any resignation or termination of any officer, key employee or
      group of employees of the Company or any of its Subsidiaries;

            (c) any material change, except in the ordinary course of business,
      in the contingent obligations of the Company or any of its Subsidiaries by
      way of guaranty, endorsement, indemnity, warranty or otherwise;

            (d) any damage, destruction or loss, whether or not covered by
      insurance, which has had, or could reasonably be expected to have,
      individually or in the aggregate, a Material Adverse Effect;

            (e) any waiver by the Company or any of its Subsidiaries of a
      material right or of a material debt owed to it;

            (f) any direct or indirect loans made by the Company or any of its
      Subsidiaries to any stockholder, employee, officer or director of the
      Company or any of its Subsidiaries, other than advances made in the
      ordinary course of business;

            (g) any material change in any compensation arrangement or agreement
      with any employee, officer, director or stockholder of the Company or any
      of its Subsidiaries;

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            (h) any declaration or payment of any dividend or other distribution
      of the assets of the Company or any of its Subsidiaries;

            (i) any labor organization activity related to the Company or any of
      its Subsidiaries;

            (j) any debt, obligation or liability incurred, assumed or
      guaranteed by the Company or any of its Subsidiaries, except those for
      immaterial amounts and for current liabilities incurred in the ordinary
      course of business;

            (k) any sale, assignment or transfer of any patents, trademarks,
      copyrights, trade secrets or other intangible assets owned by the Company
      or any of its Subsidiaries;

            (l) any change in any material agreement to which the Company or any
      of its Subsidiaries is a party or by which either the Company or any of
      its Subsidiaries is bound which either individually or in the aggregate
      has had, or could reasonably be expected to have, individually or in the
      aggregate, a Material Adverse Effect;

            (m) any other event or condition of any character that, either
      individually or in the aggregate, has had, or could reasonably be expected
      to have, individually or in the aggregate, a Material Adverse Effect; or

            (n) any arrangement or commitment by the Company or any of its
      Subsidiaries to do any of the acts described in subsection (a) through (m)
      above.

            4.9 Title to Properties and Assets; Liens, Etc. Except as set forth
      on Schedule 4.9, each of the Company and each of its Subsidiaries has good
      and marketable title to its properties and assets, and good title to its
      leasehold interests, in each case subject to no mortgage, pledge, lien,
      lease, encumbrance or charge, other than:

            (a) those resulting from taxes which have not yet become delinquent;

            (b) minor liens and encumbrances which do not materially detract
      from the value of the property subject thereto or materially impair the
      operations of the Company or any of its Subsidiaries, so long as in each
      such case, such liens and encumbrances have no effect on the lien priority
      of the Purchaser in such property;

            (c) those that have otherwise arisen in the ordinary course of
      business, so long as they have no effect on the lien priority of the
      Purchaser therein;

            (d) liens in favor of Purchaser; and

            (e) liens of warehousemen, mechanics, materialmen, workers,
      repairmen, common carriers, or landlords, liens for taxes, assessments or
      other governmental charges, and other similar liens arising by operation
      of law, in each case arising in the ordinary course of business and for
      amounts that are not yet due and payable or which are being contested in
      good faith by appropriate proceedings promptly instituted and diligently

                                       9
<PAGE>

      conducted and for which an adequate reserve or other appropriate provision
      shall have been made to the extent required by generally accepted
      accounting principals.

All facilities, machinery, equipment, fixtures, vehicles and other properties
owned, leased or used by the Company and its Subsidiaries are in reasonably good
operating condition and repair and are reasonably fit and usable for the
purposes for which they are being used. Except as set forth on Schedule 4.9, the
Company and its Subsidiaries are in compliance with all material terms of each
lease to which it is a party or is otherwise bound.

            4.10 Intellectual Property.

            (a) Except as set forth on Schedule 4.10, each of the Company and
      each of its Subsidiaries owns or possesses sufficient legal rights to all
      patents, trademarks, service marks, trade names, copyrights, trade
      secrets, licenses, information and other proprietary rights and processes
      necessary for its business as now conducted and, to the Company's
      knowledge, as presently proposed to be conducted (the "Intellectual
      Property"), without any known infringement of the rights of others. There
      are no outstanding options, licenses or agreements of any kind relating to
      the foregoing proprietary rights, nor is the Company or any of its
      Subsidiaries bound by or a party to any options, licenses or agreements of
      any kind with respect to the Intellectual Property of any other person or
      entity other than such licenses or agreements arising from the purchase of
      "off the shelf" or standard products.

            (b) Neither the Company nor any of its Subsidiaries has received any
      communications alleging that the Company or any of its Subsidiaries has
      violated any of the Intellectual Property of any other person or entity,
      nor is the Company or any of its Subsidiaries aware of any basis therefor.

            (c) The Company does not believe it is or will be necessary to
      utilize any Intellectual Property of any of its employees made prior to
      their employment by the Company or any of its Subsidiaries, except for
      Intellectual Property that has been rightfully assigned to the Company or
      any of its Subsidiaries.

            4.11 Compliance with Other Instruments. Neither the Company nor any
      of its Subsidiaries is in violation or default of (x) any term of its
      Charter or Bylaws, or (y) any provision of any indebtedness, mortgage,
      indenture, contract, agreement or instrument to which it is party or by
      which it is bound or of any judgment, decree, order or writ, which
      violation or default, in the case of this clause (y), has had, or could
      reasonably be expected to have, either individually or in the aggregate, a
      Material Adverse Effect. The execution, delivery and performance of and
      compliance with this Agreement and the Related Agreements to which it is a
      party, and the issuance and sale of the Note by the Company and the other
      Securities by the Company each pursuant hereto and thereto, will not, with
      or without the passage of time or giving of notice, result in any such
      material violation, or be in conflict with or constitute a default under
      any such term or provision, or result in the creation of any mortgage,
      pledge, lien (other than a lien in favor of Purchaser), encumbrance or

                                       10
<PAGE>

      charge upon any of the properties or assets of the Company or any of its
      Subsidiaries or the suspension, revocation, impairment, forfeiture or
      nonrenewal of any permit, license, authorization or approval applicable to
      the Company, its business or operations or any of its assets or
      properties.

            4.12 Litigation. Except as set forth on Schedule 4.12 hereto, there
      is no action, suit, proceeding or investigation pending or, to the
      Company's knowledge, currently threatened against the Company or any of
      its Subsidiaries that prevents the Company or any of its Subsidiaries from
      entering into this Agreement or the other Related Agreements, or from
      consummating the transactions contemplated hereby or thereby, or which has
      had, or could reasonably be expected to have, either individually or in
      the aggregate, a Material Adverse Effect or any change in the current
      equity ownership of the Company or any of its Subsidiaries, nor is the
      Company aware that there is any basis to assert any of the foregoing.
      Neither the Company nor any of its Subsidiaries is a party to or subject
      to the provisions of any order, writ, injunction, judgment or decree of
      any court or government agency or instrumentality. There is no action,
      suit, proceeding or investigation by the Company or any of its
      Subsidiaries currently pending or which the Company or any of its
      Subsidiaries intends to initiate.

            4.13 Tax Returns and Payments. Each of the Company and each of its
      Subsidiaries has timely filed all tax returns (federal, state and local)
      required to be filed by it under applicable law or has filed all necessary
      extensions under applicable law. All taxes shown to be due and payable on
      such returns, any assessments imposed, and all other taxes due and payable
      by the Company or any of its Subsidiaries on or before the Closing, have
      been paid or will be paid prior to the time they become delinquent. Except
      as set forth on Schedule 4.13, neither the Company nor any of its
      Subsidiaries has been advised:

            (a) that any of its returns, federal, state or other, have been or
      are being audited as of the date hereof; or

            (b) of any adjustment, deficiency, assessment or court decision in
      respect of its federal, state or other taxes.

The Company has no knowledge of any liability for any tax imposed upon its
properties or assets as of the date of this Agreement that is not adequately
provided for.

            4.14 Employees. Except as set forth on Schedule 4.14, neither the
      Company nor any of its Subsidiaries has any collective bargaining
      agreements with any of its employees. There is no labor union organizing
      activity pending or, to the Company's knowledge, threatened with respect
      to the Company or any of its Subsidiaries. Except as disclosed in the
      Exchange Act Filings or on Schedule 4.14, neither the Company nor any of
      its Subsidiaries is a party to or bound by any currently effective
      employment contract, deferred compensation arrangement, bonus plan,
      incentive plan, profit sharing plan, retirement agreement or other
      employee compensation plan or agreement. To the Company's knowledge, no
      employee of the Company or any of its Subsidiaries, nor any consultant
      with whom the Company or any of its Subsidiaries has contracted, is in
      violation of any material term of any employment contract, proprietary
      information agreement or any other agreement relating to the right of any

                                       11
<PAGE>

      such individual to be employed by, or to contract with, the Company or any
      of its Subsidiaries because of the nature of the business to be conducted
      by the Company or any of its Subsidiaries; and to the Company's knowledge
      the continued employment by the Company and its Subsidiaries of their
      present employees, and the performance of the Company's and its
      Subsidiaries' contracts with its independent contractors, will not result
      in any such violation. Neither the Company nor any of its Subsidiaries is
      aware that any of its employees is obligated under any contract (including
      licenses, covenants or commitments of any nature) or other agreement, or
      subject to any judgment, decree or order of any court or administrative
      agency that would interfere with the operations of the Company or any of
      its Subsidiaries. Neither the Company nor any of its Subsidiaries has
      received any notice alleging that any such violation has occurred. Except
      for employees who have a current effective employment agreement with the
      Company or any of its Subsidiaries, no employee of the Company or any of
      its Subsidiaries has been granted the right to continued employment by the
      Company or any of its Subsidiaries or to any material compensation
      following termination of employment with the Company or any of its
      Subsidiaries. Except as set forth on Schedule 4.14, the Company is not
      aware that any officer, key employee or group of employees intends to
      terminate his, her or their employment with the Company or any of its
      Subsidiaries, nor does the Company or any of its Subsidiaries have a
      present intention to terminate the employment of any officer, key employee
      or group of employees.

            4.15 Registration Rights and Voting Rights. Except as set forth on
      Schedule 4.15 and except as disclosed in Exchange Act Filings, neither the
      Company nor any of its Subsidiaries is presently under any obligation, and
      neither the Company nor any of its Subsidiaries has granted any rights, to
      register any of the Company's or its Subsidiaries' presently outstanding
      securities or any of its securities that may hereafter be issued. Except
      as set forth on Schedule 4.15 and except as disclosed in Exchange Act
      Filings, to the Company's knowledge, no stockholder of the Company or any
      of its Subsidiaries has entered into any agreement with respect to the
      voting of equity securities of the Company or any of its Subsidiaries.

            4.16 Compliance with Laws; Permits. Neither the Company nor any of
      its Subsidiaries is in violation of any provision of the Sarbanes-Oxley
      Act of 2002 or any SEC related regulation or rule or any rule of the
      Principal Market (as hereafter defined) promulgated thereunder or any
      other applicable statute, rule, regulation, order or restriction of any
      domestic or foreign government or any instrumentality or agency thereof in
      respect of the conduct of its business or the ownership of its properties
      which has had, or could reasonably be expected to have, either
      individually or in the aggregate, a Material Adverse Effect. No
      governmental orders, permissions, consents, approvals or authorizations
      are required to be obtained and no registrations or declarations are
      required to be filed in connection with the execution and delivery of this
      Agreement or any other Related Agreement and the issuance of any of the
      Securities, except such as have been duly and validly obtained or filed,
      or with respect to any filings that must be made after the Closing, as
      will be filed in a timely manner. Each of the Company and its Subsidiaries
      has all material franchises, permits, licenses and any similar authority
      necessary for the conduct of its business as now being conducted by it,
      the lack of which could, either individually or in the aggregate,
      reasonably be expected to have a Material Adverse Effect.

                                       12
<PAGE>

            4.17 Environmental and Safety Laws. Neither the Company nor any of
      its Subsidiaries is in violation of any applicable statute, law or
      regulation relating to the environment or occupational health and safety,
      except where the failure to be in compliance could not reasonably be
      expected to have a Material Adverse Effect, and to its knowledge, no
      material expenditures are or will be required in order to comply with any
      such existing statute, law or regulation. Except as set forth on Schedule
      4.17, no Hazardous Materials (as defined below) are used or have been
      used, stored, or disposed of by the Company or any of its Subsidiaries in
      violation of any applicable environmental law or, to the Company's
      knowledge, by any other person or entity on any property owned, leased or
      used by the Company or any of its Subsidiaries. For the purposes of the
      preceding sentence, "Hazardous Materials" shall mean:

            (a) materials which are listed or otherwise defined as "hazardous"
      or "toxic" under any applicable local, state, federal and/or foreign laws
      and regulations that govern the existence and/or remedy of contamination
      on property, the protection of the environment from contamination, the
      control of hazardous wastes, or other activities involving hazardous
      substances, including building materials; or

            (b) any petroleum products or nuclear materials.

            4.18 Valid Offering. Assuming the accuracy of the representations
      and warranties of the Purchaser contained in this Agreement, the offer,
      sale and issuance of the Securities will be exempt from the registration
      requirements of the Securities Act of 1933, as amended (the "Securities
      Act"), and will have been registered or qualified (or are exempt from
      registration and qualification) under the registration, permit or
      qualification requirements of all applicable state securities laws.

            4.19 Full Disclosure. Each of the Company and each of its
      Subsidiaries has provided the Purchaser with all information requested by
      the Purchaser in connection with its decision to purchase the Note, the
      Option and Warrant. Neither this Agreement, the Related Agreements, the
      exhibits and schedules hereto and thereto nor any other document delivered
      by the Company or any of its Subsidiaries to Purchaser or its attorneys or
      agents in connection herewith or therewith or with the transactions
      contemplated hereby or thereby, contain any untrue statement of a material
      fact nor omit to state a material fact necessary in order to make the
      statements contained herein or therein, in light of the circumstances in
      which they are made, not misleading. Any financial projections and other
      estimates provided to the Purchaser by the Company or any of its
      Subsidiaries were based on the Company's and its Subsidiaries' experience
      in the industry and on assumptions of fact and opinion as to future events
      which the Company or any of its Subsidiaries, at the date of the issuance
      of such projections or estimates, believed to be reasonable.

            4.20 Insurance. Each of the Company and each of its Subsidiaries has
      general commercial, product liability, fire and casualty insurance
      policies with coverages which the Company believes are customary for
      companies similarly situated to the Company and its Subsidiaries in the
      same or similar business.

                                       13
<PAGE>

            4.21 SEC Reports. Except as set forth on Schedule 4.21, the Company
      has filed all proxy statements, reports and other documents required to be
      filed by it under the Securities Exchange Act 1934, as amended (the
      "Exchange Act"). The Company has furnished the Purchaser copies of: (i)
      its Annual Reports on Form 10-KSB for its fiscal years ended December 31,
      2004; and (ii) its Quarterly Reports on Form 10-QSB for its fiscal quarter
      ended March 31, 2005, and the Form 8-K filings which it has made during
      the fiscal year 2005 to date (collectively, the "SEC Reports"). Except as
      set forth on Schedule 4.21, each SEC Report was, at the time of its
      filing, in substantial compliance with the requirements of its respective
      form and none of the SEC Reports, nor the financial statements (and the
      notes thereto) included in the SEC Reports, as of their respective filing
      dates, contained any untrue statement of a material fact or omitted to
      state a material fact required to be stated therein or necessary to make
      the statements therein, in light of the circumstances under which they
      were made, not misleading.

            4.22 Listing. The Company's Common Stock is listed or quoted, as
      applicable, on a Principal Market (as hereafter defined) and satisfies and
      at all times hereafter will satisfy, all requirements for the continuation
      of such listing or quotation, as applicable. The Company has not received
      any notice that its Common Stock will be delisted from, or no longer
      quoted on, as applicable, the Principal Market or that its Common Stock
      does not meet all requirements for such listing or quotation, as
      applicable. For purposes hereof, the term "Principal Market" means the
      NASD Over The Counter Bulletin Board, NASDAQ SmallCap Market, NASDAQ
      National Markets System, American Stock Exchange or New York Stock
      Exchange (whichever of the foregoing is at the time the principal trading
      exchange or market for the Common Stock).

            4.23 No Integrated Offering. Neither the Company, nor any of its
      Subsidiaries or affiliates, nor any person acting on its or their behalf,
      has directly or indirectly made any offers or sales of any security or
      solicited any offers to buy any security under circumstances that would
      cause the offering of the Securities pursuant to this Agreement or any of
      the Related Agreements to be integrated with prior offerings by the
      Company for purposes of the Securities Act which would prevent the Company
      from selling the Securities pursuant to Rule 506 under the Securities Act,
      or any applicable exchange-related stockholder approval provisions, nor
      will the Company or any of its affiliates or Subsidiaries take any action
      or steps that would cause the offering of the Securities to be integrated
      with other offerings.

            4.24 Stop Transfer. The Securities are restricted securities as of
      the date of this Agreement. Neither the Company nor any of its
      Subsidiaries will issue any stop transfer order or other order impeding
      the sale and delivery of any of the Securities at such time as the
      Securities are registered for public sale or an exemption from
      registration is available, except as required by state and federal
      securities laws.

            4.25 Dilution. The Company specifically acknowledges that its
      obligation to issue the shares of Common Stock upon conversion of the Note
      and exercise of the Warrant and the Option is binding upon the Company and
      enforceable regardless of the dilution such issuance may have on the
      ownership interests of other shareholders of the Company.

                                       14
<PAGE>

            4.26 Patriot Act. The Company certifies that, to the best of
      Company's knowledge, neither the Company nor any of its Subsidiaries has
      been designated, nor is or shall be owned or controlled, by a "suspected
      terrorist" as defined in Executive Order 13224. The Company hereby
      acknowledges that the Purchaser seeks to comply with all applicable laws
      concerning money laundering and related activities. In furtherance of
      those efforts, the Company hereby represents, warrants and covenants that:
      (i) none of the cash or property that the Company or any of its
      Subsidiaries will pay or will contribute to the Purchaser has been or
      shall be derived from, or related to, any activity that is deemed criminal
      under United States law; and (ii) no contribution or payment by the
      Company or any of its Subsidiaries to the Purchaser, to the extent that
      they are within the Company's and/or its Subsidiaries' control shall cause
      the Purchaser to be in violation of the United States Bank Secrecy Act,
      the United States International Money Laundering Control Act of 1986 or
      the United States International Money Laundering Abatement and
      Anti-Terrorist Financing Act of 2001. The Company shall promptly notify
      the Purchaser if any of these representations, warranties or covenants
      ceases to be true and accurate regarding the Company or any of its
      Subsidiaries. The Company shall provide the Purchaser all additional
      information regarding the Company or any of its Subsidiaries that the
      Purchaser deems necessary or convenient to ensure compliance with all
      applicable laws concerning money laundering and similar activities. The
      Company understands and agrees that if at any time it is discovered that
      any of the foregoing representations, warranties or covenants are
      incorrect, or if otherwise required by applicable law or regulation
      related to money laundering or similar activities, the Purchaser may
      undertake appropriate actions to ensure compliance with applicable law or
      regulation, including but not limited to segregation and/or redemption of
      the Purchaser's investment in the Company. The Company further understands
      that the Purchaser may release confidential information about the Company
      and its Subsidiaries and, if applicable, any underlying beneficial owners,
      to proper authorities if the Purchaser, in its sole discretion, determines
      that it is in the best interests of the Purchaser in light of relevant
      rules and regulations under the laws set forth in subsection (ii) above.

            4.27 ERISA. Based upon the Employee Retirement Income Security Act
      of 1974 ("ERISA"), and the regulations and published interpretations
      thereunder: (i) neither the Company nor any of its Subsidiaries has
      engaged in any Prohibited Transactions (as defined in Section 406 of ERISA
      and Section 4975 of the Internal Revenue Code of 1986, as amended (the
      "Code")); (ii) each of the Company and each of its Subsidiaries has met
      all applicable minimum funding requirements under Section 302 of ERISA in
      respect of its plans; (iii) neither the Company nor any of its
      Subsidiaries has any knowledge of any event or occurrence which would
      cause the Pension Benefit Guaranty Corporation to institute proceedings
      under Title IV of ERISA to terminate any employee benefit plan(s); (iv)
      neither the Company nor any of its Subsidiaries has any fiduciary
      responsibility for investments with respect to any plan existing for the
      benefit of persons other than the Company's or such Subsidiary's
      employees; and (v) neither the Company nor any of its Subsidiaries has
      withdrawn, completely or partially, from any multi-employer pension plan
      so as to incur liability under the Multiemployer Pension Plan Amendments
      Act of 1980.

                                       15
<PAGE>

      5. Representations and Warranties of the Purchaser. The Purchaser hereby
represents and warrants to the Company as follows (such representations and
warranties do not lessen or obviate the representations and warranties of the
Company set forth in this Agreement):

            5.1 No Shorting. The Purchaser or any of its affiliates and
      investment partners has not, will not and will not cause any person or
      entity, to directly engage in "short sales" of the Company's Common Stock
      as long as the Note shall be outstanding.

            5.2 Requisite Power and Authority. The Purchaser has all necessary
      power and authority under all applicable provisions of law to execute and
      deliver this Agreement and the Related Agreements and to carry out their
      provisions. All corporate action on the Purchaser's part required for the
      lawful execution and delivery of this Agreement and the Related Agreements
      have been or will be effectively taken prior to the Closing. Upon their
      execution and delivery, this Agreement and the Related Agreements will be
      valid and binding obligations of the Purchaser, enforceable in accordance
      with their terms, except:

            (a) as limited by applicable bankruptcy, insolvency, reorganization,
      moratorium or other laws of general application affecting enforcement of
      creditors' rights; and

            (b) as limited by general principles of equity that restrict the
      availability of equitable and legal remedies.

            5.3 Investment Representations. The Purchaser understands that the
      Securities are being offered and sold pursuant to an exemption from
      registration contained in the Securities Act based in part upon the
      Purchaser's representations contained in this Agreement, including,
      without limitation, that the Purchaser is an "accredited investor" within
      the meaning of Regulation D under the Securities Act of 1933, as amended
      (the "Securities Act"). The Purchaser confirms that it has received or has
      had full access to all the information it considers necessary or
      appropriate to make an informed investment decision with respect to the
      Note, the Option and the Warrant to be purchased by it under this
      Agreement and the Note Shares, the Option Shares and the Warrant Shares
      acquired by it upon the conversion of the Note, the Option and the
      exercise of the Warrant, respectively. The Purchaser further confirms that
      it has had an opportunity to ask questions and receive answers from the
      Company regarding the Company's and its Subsidiaries' business, management
      and financial affairs and the terms and conditions of the Offering, the
      Note, the Warrant, the Option and the Securities and to obtain additional
      information (to the extent the Company possessed such information or could
      acquire it without unreasonable effort or expense) necessary to verify any
      information furnished to the Purchaser or to which the Purchaser had
      access.

            5.4 The Purchaser Bears Economic Risk. The Purchaser has substantial
      experience in evaluating and investing in private placement transactions
      of securities in companies similar to the Company so that it is capable of
      evaluating the merits and risks of its investment in the Company and has
      the capacity to protect its own interests. The Purchaser must bear the

                                       16
<PAGE>

      economic risk of this investment until the Securities are sold pursuant
      to: (i) an effective registration statement under the Securities Act; or
      (ii) an exemption from registration is available with respect to such
      sale.

            5.5 Acquisition for Own Account. The Purchaser is acquiring the
      Note, the Option and Warrant and the Note Shares, the Option Shares and
      the Warrant Shares for the Purchaser's own account for investment only,
      and not as a nominee or agent and not with a view towards or for resale in
      connection with their distribution.

            5.6 The Purchaser Can Protect Its Interest. The Purchaser represents
      that by reason of its, or of its management's, business and financial
      experience, the Purchaser has the capacity to evaluate the merits and
      risks of its investment in the Note, the Warrant, the Option and the
      Securities and to protect its own interests in connection with the
      transactions contemplated in this Agreement and the Related Agreements.
      Further, the Purchaser is aware of no publication of any advertisement in
      connection with the transactions contemplated in the Agreement or the
      Related Agreements.

            5.7 Accredited Investor. The Purchaser represents that it is an
      accredited investor within the meaning of Regulation D under the
      Securities Act.

            5.8 Legends.

      (a) The Note shall bear substantially the following legend:

      "THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE
      NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
      APPLICABLE STATE SECURITIES LAWS. THIS NOTE AND THE COMMON STOCK ISSUABLE
      UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
      HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO
      THIS NOTE OR SUCH SHARES UNDER SAID ACT AND APPLICABLE STATE SECURITIES
      LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO ADAL GROUP, INC.
      THAT SUCH REGISTRATION IS NOT REQUIRED."

      (b) The Note Shares, the Option Shares and the Warrant Shares, if not
issued by DWAC system (as hereinafter defined), shall bear a legend which shall
be in substantially the following form until such shares are covered by an
effective registration statement filed with the SEC:

      "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
      THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
      LAWS. THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
      HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
      SUCH SECURITIES ACT AND APPLICABLE STATE LAWS OR AN OPINION OF COUNSEL
      REASONABLY SATISFACTORY TO ADAL GROUP, INC. THAT SUCH REGISTRATION IS NOT
      REQUIRED."

                                       17
<PAGE>

            (c) The Warrant shall bear substantially the following legend:

            "THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS
            WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
            AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THIS WARRANT
            AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT
            BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
            AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT OR THE
            UNDERLYING SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE
            STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
            SATISFACTORY TO ADAL GROUP, INC. THAT SUCH REGISTRATION IS NOT
            REQUIRED."

            (d) The Option shall bear substantially the following legend:

            "THIS OPTION AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS
            OPTION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
            AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THIS OPTION AND
            THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS OPTION MAY NOT BE
            SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
            EFFECTIVE REGISTRATION STATEMENT AS TO THIS OPTION OR THE UNDERLYING
            SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE STATE
            SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
            ADAL GROUP, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."

      6. Covenants of the Company. The Company covenants and agrees with the
Purchaser as follows:

            6.1 Stop-Orders. The Company will advise the Purchaser, promptly
      after it receives notice of issuance by the SEC, any state securities
      commission or any other regulatory authority of any stop order or of any
      order preventing or suspending any offering of any securities of the
      Company, or of the suspension of the qualification of the Common Stock of
      the Company for offering or sale in any jurisdiction, or the initiation of
      any proceeding for any such purpose.

            6.2 Listing. The Company shall promptly secure the listing or
      quotation, as applicable, of the shares of Common Stock issuable upon
      conversion of the Note and upon the exercise of the Warrant and the Option
      on the Principal Market upon which shares of Common Stock are listed or
      quoted for trading, as applicable (subject to official notice of issuance)
      and shall maintain such listing or quotation, as applicable, so long as
      any other shares of Common Stock shall be so listed or quoted, as
      applicable. The Company will maintain the listing or quotation, as
      applicable, of its Common Stock on the Principal Market, and will comply

                                       18
<PAGE>

      in all material respects with the Company's reporting, filing and other
      obligations under the bylaws or rules of the National Association of
      Securities Dealers ("NASD") and such exchanges, as applicable.

            6.3 Market Regulations. The Company shall notify the SEC, NASD and
      applicable state authorities, in accordance with their requirements, of
      the transactions contemplated by this Agreement, and shall take all other
      necessary action and proceedings as may be required and permitted by
      applicable law, rule and regulation, for the legal and valid issuance of
      the Securities to the Purchaser and promptly provide copies thereof to the
      Purchaser.

            6.4 Reporting Requirements. The Company shall timely file with the
      SEC all reports required to be filed pursuant to the Exchange Act and
      refrain from terminating its status as an issuer required by the Exchange
      Act to file reports thereunder even if the Exchange Act or the rules or
      regulations thereunder would permit such termination.

            6.5 Use of Funds. The Company shall use the proceeds of the sale of
      the Note, the Option and the Warrant for asset acquisitions reasonably
      acceptable to the Purchaser and general working capital purposes.

            6.6 Access to Facilities. Each of the Company and each of its
      Subsidiaries will permit any representatives designated by the Purchaser
      (or any successor of the Purchaser), upon reasonable notice and during
      normal business hours, at such person's expense and accompanied by a
      representative of the Company or any Subsidiary (provided that no such
      prior notice shall be required to be given and no such representative of
      the Company or any Subsidiary shall be required to accompany the Purchaser
      in the event the Purchaser believes such access is necessary to preserve
      or protect the Collateral (as defined in the Master Security Agreement) or
      following the occurrence and during the continuance of an Event of Default
      (as defined in the Note)), to:

            (a) visit and inspect any of the properties of the Company or any of
      its Subsidiaries;

            (b) examine the corporate and financial records of the Company or
      any of its Subsidiaries (unless such examination is not permitted by
      federal, state or local law or by contract) and make copies thereof or
      extracts therefrom; and

            (c) discuss the affairs, finances and accounts of the Company or any
      of its Subsidiaries with the directors, officers and independent
      accountants of the Company or any of its Subsidiaries.

Notwithstanding the foregoing, neither the Company nor any of its Subsidiaries
will provide any material, non-public information to the Purchaser unless the
Purchaser signs a confidentiality agreement and otherwise complies with
Regulation FD, under the federal securities laws.

            6.7 Taxes. (i) Each of the Company and each of its Subsidiaries will
      promptly pay and discharge, or cause to be paid and discharged, when due
      and payable, all taxes, assessments and governmental charges or levies
      imposed upon the income, profits, property or business of the Company and

                                       19
<PAGE>

      its Subsidiaries; provided, however, that any such tax, assessment, charge
      or levy need not be paid currently if (i) the validity thereof shall
      currently and diligently be contested in good faith by appropriate
      proceedings, (ii) such tax, assessment, charge or levy shall have no
      effect on the lien priority of the Purchaser in any property of the
      Company or any of its Subsidiaries and (iii) if the Company and/or such
      Subsidiary shall have set aside on its books adequate reserves with
      respect thereto in accordance with GAAP; and provided, further, that the
      Company and its Subsidiaries will pay all such taxes, assessments, charges
      or levies forthwith upon the commencement of proceedings to foreclose any
      lien which may have attached as security therefor.

            (ii) If Company or any of its Subsidiaries shall be required by law
to deduct or withhold in respect of any and all present or future taxes, levies,
imposts, deductions and other governmental charges or withholdings, and all
interest, penalties and other liabilities with respect thereto, imposed by any
jurisdiction (or any political subdivision thereof) ("Taxes") other than, with
respect to the Purchaser, any Taxes (including income, branch profits or
franchise taxes) imposed on or measured by its net income ("Indemnified Taxes")
from or in respect of any sum payable hereunder to the Purchaser, then:

            (a) the sum payable shall be increased by such additional amount
(the "Additional Amount") as necessary so that after making all required
deductions and withholdings (including deductions and withholdings applicable to
such Additional Amount) the Purchaser receives an amount equal to the sum it
would have received had no such deductions or withholdings been made;

            (b) the Company or such Subsidiary shall make the appropriate
deductions or withholdings and shall pay the full amount deducted or withheld to
the relevant taxing authority or other authority in accordance with applicable
law;

            (c) within thirty (30) days after the date of such payment, upon the
Purchaser's request, the Company or such Subsidiary shall furnish to the
Purchaser the original or a certified copy of a receipt evidencing payment
thereof, or other evidence of payment reasonably satisfactory to the Purchaser;

            (d) if the Company or such Subsidiary fails to pay amounts in
accordance with paragraph (b) above, the Company or such Subsidiary shall
indemnify the Purchaser for any incremental Indemnified Taxes that is paid by
the Purchaser as a result of the failure;

            (e) the Company will indemnify the Purchaser for the full amount of
any Taxes imposed by any jurisdiction and paid by the Purchaser with respect to
any Additional Amount payable pursuant to paragraph (a) above and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes are correctly asserted; and

            (f) the indemnification contemplated in paragraphs (d) and (e) above
shall be made within 30 days from the date the Purchaser makes written demand
therefor (which demand shall identify the nature and amount of Taxes for which

                                       20
<PAGE>

indemnification is being sought and shall include a copy of the relevant portion
of any written assessment from the governmental authority demanding payment of
such Taxes).

            6.8 Insurance. Each of the Company and its Subsidiaries will keep
      its assets which are of an insurable character insured by financially
      sound and reputable insurers against loss or damage by fire, explosion and
      other risks customarily insured against by companies in similar business
      similarly situated as the Company and its Subsidiaries; and the Company
      and its Subsidiaries will maintain, with financially sound and reputable
      insurers, insurance against other hazards and risks and liability to
      persons and property to the extent and in the manner which the Company
      reasonably believes is customary for companies in similar business
      similarly situated as the Company and its Subsidiaries and to the extent
      available on commercially reasonable terms. The Company, and each of its
      Subsidiaries, will jointly and severally bear the full risk of loss from
      any loss of any nature whatsoever with respect to the assets pledged to
      the Purchaser as security for their respective obligations hereunder and
      under the Related Agreements. At the Company's and each of its
      Subsidiaries' joint and several cost and expense in amounts and with
      carriers reasonably acceptable to the Purchaser, each of the Company and
      each of its Subsidiaries shall (i) keep all its insurable properties and
      properties in which it has an interest insured against the hazards of
      fire, flood, sprinkler leakage, those hazards covered by extended coverage
      insurance and such other hazards, and for such amounts, as is customary in
      the case of companies engaged in businesses similar to the Company's or
      the respective Subsidiary's including business interruption insurance;
      (ii) maintain a bond in such amounts as is customary in the case of
      companies engaged in businesses similar to the Company's or the respective
      Subsidiary's insuring against larceny, embezzlement or other criminal
      misappropriation of insured's officers and employees who may either singly
      or jointly with others at any time have access to the assets or funds of
      the Company or any of its Subsidiaries either directly or through
      governmental authority to draw upon such funds or to direct generally the
      disposition of such assets; (iii) maintain public and product liability
      insurance against claims for personal injury, death or property damage
      suffered by others; (iv) maintain all such worker's compensation or
      similar insurance as may be required under the laws of any state or
      jurisdiction in which the Company or the respective Subsidiary is engaged
      in business; and (v) furnish the Purchaser with (x) copies of all policies
      and evidence of the maintenance of such policies at least thirty (30) days
      before any expiration date, (y) excepting the Company's workers'
      compensation policy, endorsements to such policies naming the Purchaser as
      "co-insured" or "additional insured" and appropriate loss payable
      endorsements in form and substance satisfactory to the Purchaser, naming
      the Purchaser as loss payee, and (z) evidence that as to the Purchaser the
      insurance coverage shall not be impaired or invalidated by any act or
      neglect of the Company or any Subsidiary and the insurer will provide the
      Purchaser with at least thirty (30) days notice prior to cancellation. The
      Company and each Subsidiary shall instruct the insurance carriers that in
      the event of any loss thereunder, the carriers shall make payment for such
      loss to the Company and/or the Subsidiary and the Purchaser jointly. In
      the event that as of the date of receipt of each loss recovery upon any
      such insurance, the Purchaser has not declared an event of default with
      respect to this Agreement or any of the Related Agreements, then the

                                       21
<PAGE>

      Company and/or such Subsidiary shall be permitted to direct the
      application of such loss recovery proceeds toward investment in property,
      plant and equipment that would comprise "Collateral" secured by the
      Purchaser's security interest pursuant to the Master Security Agreement or
      such other security agreement as shall be required by the Purchaser, with
      any surplus funds to be applied toward payment of the obligations of the
      Company to the Purchaser. In the event that the Purchaser has properly
      declared an event of default with respect to this Agreement or any of the
      Related Agreements, then all loss recoveries received by the Purchaser
      upon any such insurance thereafter may be applied to the obligations of
      the Company hereunder and under the Related Agreements, in such order as
      the Purchaser may determine. Any surplus (following satisfaction of all
      Company obligations to the Purchaser) shall be paid by the Purchaser to
      the Company or applied as may be otherwise required by law. Any deficiency
      thereon shall be paid by the Company or the Subsidiary, as applicable, to
      the Purchaser, on demand.

            6.9 Intellectual Property. Each of the Company and each of its
      Subsidiaries shall maintain in full force and effect its existence, rights
      and franchises and all licenses and other rights to use Intellectual
      Property owned or possessed by it and reasonably deemed to be necessary to
      the conduct of its business.

            6.10 Properties. Each of the Company and each of its Subsidiaries
      will keep its properties in reasonably good repair, working order and
      condition, reasonable wear and tear excepted, and from time to time make
      all needful and proper repairs, renewals, replacements, additions and
      improvements thereto to the extent such properties are necessary to the
      continued operations of the business; and each of the Company and each of
      its Subsidiaries will at all times comply with each provision of all
      leases to which it is a party or under which it occupies property if the
      breach of such provision could, either individually or in the aggregate,
      reasonably be expected to have a Material Adverse Effect.

            6.11 Confidentiality. The Company will not, and will not permit any
      of its Subsidiaries to, disclose, and will not include in any public
      announcement, the name of the Purchaser, unless expressly agreed to by the
      Purchaser or unless and until such disclosure is required by law or
      applicable regulation, and then only to the extent of such requirement.
      Notwithstanding the foregoing, the Company may disclose the Purchaser's
      identity and the terms of this Agreement to its current and prospective
      debt and equity financing sources.

            6.12 Required Approvals. (I) For so long as twenty-five percent
      (25%) of the principal amount of the Note is outstanding, the Company,
      without the prior written consent of the Purchaser, shall not, and shall
      not permit any of its Subsidiaries to:

            (a) (i) directly or indirectly declare or pay any dividends, other
      than dividends paid to the Company or any of its wholly-owned
      Subsidiaries, (ii) issue any preferred stock that is manditorily
      redeemable prior to the one year anniversary of Maturity Date (as defined
      in the Note or (iii) redeem any of its preferred stock or other equity
      interests;

                                       22
<PAGE>

            (b) liquidate, dissolve or effect a material reorganization (it
      being understood that in no event shall the Company or any of its
      Subsidiaries dissolve, liquidate or merge with any other person or entity
      (unless, in the case of such a merger, the Company or, in the case of
      merger not involving the Company, such Subsidiary, as applicable, is the
      surviving entity);

            (c) become subject to (including, without limitation, by way of
      amendment to or modification of) any agreement or instrument which by its
      terms would (under any circumstances) restrict the Company's or any of its
      Subsidiaries, right to perform the provisions of this Agreement, any
      Related Agreement or any of the agreements contemplated hereby or thereby;

            (d) materially alter or change the scope of the business of the
      Company and its Subsidiaries taken as a whole; or

(i) create, incur, assume or suffer to exist any indebtedness whether secured or
unsecured other than (w) unsecured subordinated indebtedness of the Company or
any Subsidiary thereof in an aggregate principal amount not to exceed
US$3,000,000 at any time outstanding, which indebtedness referred to in this
clause (w) shall be subordinated to the indebtedness incurred by the Company and
its Subsidiaries under this Agreement and the Related Agreements, and solely
with respect to such subordination, on terms and subject to documentation
reasonably satisfactory to the Purchaser; (x) the Company's obligations owed to
the Purchaser, (y) indebtedness set forth on Schedule 6.12(e) attached hereto
and made a part hereof and any refinancings or replacements thereof on terms no
less favorable to the Purchaser than the indebtedness being refinanced or
replaced, and (z) any indebtedness incurred in connection with the purchase of
assets (other than equipment) in the ordinary course of business, or any
refinancings or replacements thereof on terms no less favorable to the Purchaser
than the indebtedness being refinanced or replaced, so long as any lien relating
thereto shall only encumber the fixed assets so purchased and no other assets of
the Company or any of its Subsidiaries; (ii) cancel any indebtedness owing to it
in excess of $50,000 in the aggregate during any 12 month period; (iii) assume,
guarantee, endorse or otherwise become directly or contingently liable in
connection with any obligations of any other person or entity, except the
endorsement of negotiable instruments by the Company or any Subsidiary thereof
for deposit or collection or similar transactions in the ordinary course of
business or guarantees of indebtedness otherwise permitted to be outstanding
pursuant to this clause (e); and

      (II) The Company, without the prior written consent of the Purchaser,
      shall not, and shall not permit any of its Subsidiaries to:

            (a) create or acquire any Subsidiary after the date hereof unless
      (i) such Subsidiary is a wholly-owned Subsidiary of the Company and (ii)
      such Subsidiary becomes a party to the Master Security Agreement, and the
      Subsidiary Guaranty, or in the case of each of the foregoing, the foreign
      equivalent thereof in form and substance satisfactory to the Purchaser and
      its legal counsel (either by executing a counterpart thereof or an
      assumption or joinder agreement in respect thereof) and, to the extent
      required by the Purchaser, satisfies each condition of this Agreement and
      the Related Agreements as if such Subsidiary were a Subsidiary on the
      Closing Date; or

                                       23
<PAGE>

            (b) make investments in, make any loans or advances to, or transfer
      assets to, the Immaterial Subsidiary or (ii) permit any Subsidiary to make
      investments in, make any loans or advances to, or transfer assets to, the
      Immaterial Subsidiary.

            6.13 Reissuance of Securities. The Company agrees to reissue
      certificates representing the Securities without the legends set forth in
      Section 5.8 above at such time as:

            (a) the holder thereof is permitted to dispose of such Securities
      pursuant to Rule 144(k) under the Securities Act; or (b) upon resale
      subject to an effective registration statement after such Securities are
      registered under the Securities Act.

The Company agrees to cooperate with the Purchaser in connection with all
resales pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions
necessary to allow such resales provided the Company and its counsel receive
reasonably requested representations from the Purchaser and broker, if any.

            6.14 Opinion. On the Closing Date, the Company will deliver to the
      Purchaser an opinion acceptable to the Purchaser from the Company's
      external legal counsel. The Company will provide, at the Company's
      expense, such other legal opinions in the future as are deemed reasonably
      necessary by the Purchaser (and acceptable to the Purchaser) in connection
      with the conversion of the Note and exercise of the Warrant and the
      Option.

            6.15 Margin Stock. The Company will not permit any of the proceeds
      of the Note, the Option or the Warrant to be used directly or indirectly
      to "purchase" or "carry" "margin stock" or to repay indebtedness incurred
      to "purchase" or "carry" "margin stock" within the respective meanings of
      each of the quoted terms under Regulation U of the Board of Governors of
      the Federal Reserve System as now and from time to time hereafter in
      effect.

            6.16 No Limitations on Additional Financing. The Company will not,
      and will not permit its Subsidiaries to, agree, directly or indirectly, to
      any restriction with any person or entity which limits the ability of the
      Purchaser to consummate an Additional Financing with the Company or any of
      its Subsidiaries. "Additional Financing" shall mean the incurrence of any
      additional indebtedness by the Company, and/or the sale of any equity
      interests of the Company or any of its Subsidiaries to the Purchaser.

            6.17 Authorization and Reservation of Shares. The Company shall at
      all times have authorized and reserved a sufficient number of shares of
      Common Stock to provide for the conversion of the Note and exercise of the
      Warrants and the Option.

                                       24
<PAGE>

      7. Covenants of the Purchaser. The Purchaser covenants and agrees with the
Company as follows:

            7.1 Confidentiality. The Purchaser will not disclose, and will not
      include in any public announcement, the name of the Company, unless
      expressly agreed to by the Company or unless and until such disclosure is
      required by law or applicable regulation, and then only to the extent of
      such requirement.

            7.2 Non-Public Information. The Purchaser will not effect any sales
      in the shares of the Company's Common Stock while in possession of
      material, non-public information regarding the Company if such sales would
      violate applicable securities law.

            7.3 Limitation on Acquisition of Common Stock of the Company.
      Notwithstanding anything to the contrary contained in this Agreement, any
      Related Agreement or any document, instrument or agreement entered into in
      connection with any other transactions between the Purchaser and the
      Company, the Purchaser may not acquire stock in the Company (including,
      without limitation, pursuant to a contract to purchase, by exercising an
      option or warrant, by converting any other security or instrument, by
      acquiring or exercising any other right to acquire, shares of stock or
      other security convertible into shares of stock in the Company, or
      otherwise, and such contracts, options, warrants, conversion or other
      rights shall not be enforceable or exercisable) to the extent such stock
      acquisition would cause any interest (including any original issue
      discount) payable by the Company to Laurus not to qualify as "portfolio
      interest" within the meaning of Section 881(c)(2) of the Code, by reason
      of Section 881(c)(3) of the Code, taking into account the constructive
      ownership rules under Section 871(h)(3)(C) of the Code (the "Stock
      Acquisition Limitation"). The Stock Acquisition Limitation shall
      automatically become null and void without any notice to the Company upon
      the earlier to occur of either (a) the Company's delivery to the Purchaser
      of a Notice of Redemption (as defined in the Note) or (b) the existence of
      an Event of Default (as defined in the Note) at a time when the average
      closing price of the Company's common stock as reported by Bloomberg, L.P.
      on the Principal Market for the immediately preceding five trading days is
      greater than or equal to 150% of the Fixed Conversion Price (as defined in
      the Note).

            7.4 No Shorting. Neither the Purchaser, nor any of its affiliates
      and investment partners will, nor will cause any person or entity, to
      directly engage in "short sales" of the Company's Common Stock as long as
      the Note shall be outstanding.

8. Covenants of the Company and the Purchaser Regarding Indemnification.

            8.1 Company Indemnification. The Company agrees to indemnify, hold
      harmless, reimburse and defend the Purchaser, each of the Purchaser's
      officers, directors, agents, affiliates, control persons, and principal
      shareholders, against all claims, costs, expenses, liabilities,
      obligations, losses or damages (including reasonable legal fees) of any
      nature, incurred by or imposed upon the Purchaser which do not result from
      the Purchaser's gross negligence or willful misconduct and which result,
      arise out of or are based upon: (i) any misrepresentation by the Company

                                       25
<PAGE>

      or any of its Subsidiaries or breach of any warranty by the Company or any
      of its Subsidiaries in this Agreement, any other Related Agreement or in
      any exhibits or schedules attached hereto or thereto; or (ii) any breach
      or default in performance by Company or any of its Subsidiaries of any
      covenant or undertaking to be performed by Company or any of its
      Subsidiaries hereunder, under any other Related Agreement or any other
      agreement entered into by the Company and/or any of its Subsidiaries and
      the Purchaser relating hereto or thereto.

            8.2 Purchaser's Indemnification. The Purchaser agrees to indemnify,
      hold harmless, reimburse and defend the Company and each of the Company's
      officers, directors, agents, affiliates, control persons and principal
      shareholders, at all times against any claims, costs, expenses,
      liabilities, obligations, losses or damages (including reasonable legal
      fees) of any nature, incurred by or imposed upon the Company which do not
      result from the Company's gross negligence or willful misconduct and,
      which result, arise out of or are based upon: (i) any misrepresentation by
      the Purchaser or breach of any warranty by the Purchaser in this Agreement
      or in any exhibits or schedules attached hereto or any Related Agreement;
      or (ii) any breach or default in performance by the Purchaser of any
      covenant or undertaking to be performed by the Purchaser hereunder, or any
      other agreement entered into by the Company and the Purchaser relating
      hereto.

9. Conversion of Convertible Note.

      9.1 Mechanics of Conversion.

            (a) Provided the Purchaser has notified the Company of the
      Purchaser's intention to sell the Note Shares and the Note Shares are
      included in an effective registration statement or are otherwise exempt
      from registration when sold: (i) upon the conversion of the Note or part
      thereof, the Company shall, at its own cost and expense, take all
      necessary action (including the issuance of an opinion of counsel
      reasonably acceptable to the Purchaser following a request by the
      Purchaser) to assure that the Company's transfer agent shall issue shares
      of the Company's Common Stock in the name of the Purchaser (or its
      nominee) or such other persons as designated by the Purchaser in
      accordance with Section 9.1(b) hereof and in such denominations to be
      specified representing the number of Note Shares issuable upon such
      conversion; and (ii) the Company warrants that no instructions other than
      these instructions have been or will be given to the transfer agent of the
      Company's Common Stock and that after the Effectiveness Date (as defined
      in the Registration Rights Agreement) the Note Shares issued will be
      freely transferable subject to the prospectus delivery requirements of the
      Securities Act and the provisions of this Agreement, and will not contain
      a legend restricting the resale or transferability of the Note Shares.

            (b) The Purchaser will give notice of its decision to exercise its
      right to convert the Note or part thereof by telecopying or otherwise
      delivering an executed and completed notice of the number of shares to be
      converted to the Company (the "Notice of Conversion"). The Purchaser will
      not be required to surrender the Note until the Purchaser receives a
      credit to the account of the Purchaser's prime broker through the DWAC
      system (as defined below), representing the Note Shares or until the Note

                                       26
<PAGE>

      has been fully satisfied. Each date on which a Notice of Conversion is
      telecopied or delivered to the Company in accordance with the provisions
      hereof shall be deemed a "Conversion Date." Pursuant to the terms of the
      Notice of Conversion, the Company will issue instructions to the transfer
      agent accompanied by an opinion of counsel within one (1) business day of
      the date of the delivery to the Company of the Notice of Conversion and
      shall cause the transfer agent to transmit the certificates representing
      the Conversion Shares to the Holder by crediting the account of the
      Purchaser's prime broker with the Depository Trust Company ("DTC") through
      its Deposit Withdrawal Agent Commission ("DWAC") system within three (3)
      business days after receipt by the Company of the Notice of Conversion
      (the "Delivery Date").

            (c) The Company understands that a delay in the delivery of the Note
      Shares in the form required pursuant to Section 9 hereof beyond the
      Delivery Date could result in economic loss to the Purchaser. In the event
      that the Company fails to direct its transfer agent to deliver the Note
      Shares to the Purchaser via the DWAC system within the time frame set
      forth in Section 9.1(b) above and the Note Shares are not delivered to the
      Purchaser by the Delivery Date, as compensation to the Purchaser for such
      loss, the Company agrees to pay late payments to the Purchaser for late
      issuance of the Note Shares in the form required pursuant to Section 9
      hereof upon conversion of the Note in the amount equal to the greater of:
      (i) $500 per business day after the Delivery Date; or (ii) the Purchaser's
      actual damages from such delayed delivery. The Company shall pay any
      payments incurred under this Section in immediately available funds upon
      demand and, in the case of actual damages, accompanied by reasonable
      documentation of the amount of such damages. Such documentation shall show
      the number of shares of Common Stock the Purchaser is forced to purchase
      (in an open market transaction) which the Purchaser anticipated receiving
      upon such conversion, and shall be calculated as the amount by which (A)
      the Purchaser's total purchase price (including customary brokerage
      commissions, if any) for the shares of Common Stock so purchased exceeds
      (B) the aggregate principal and/or interest amount of the Note, for which
      such Conversion Notice was not timely honored.

10. Registration Rights.

            10.1 Registration Rights Granted. The Company hereby grants
      registration rights to the Purchaser pursuant to the Registration Rights
      Agreement.

            10.2 Offering Restrictions. Except as previously disclosed in the
      SEC Reports or in the Exchange Act Filings, or stock or stock options
      granted to employees or directors of the Company (these exceptions
      hereinafter referred to as the "Excepted Issuances"), neither the Company
      nor any of its Subsidiaries will, prior to the full repayment or
      conversion of the Note (together with all accrued and unpaid interest and
      fees related thereto), (x) enter into any equity line of credit agreement
      or similar agreement or (y) issue, or enter into any agreement to issued,
      any securities with a variable/floating conversion and/or pricing feature
      which are or could be (by conversion or registration) free trading
      securities (i.e. common stock subject to a registration statement).

                                       27
<PAGE>

      11. Miscellaneous.

            11.1 Governing Law, Jurisdiction and Waiver of Jury Trial.

            (a) THIS AGREEMENT AND THE OTHER RELATED AGREEMENTS SHALL BE
      GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
      STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH
      STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.

            (b) THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL
      COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE
      EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES
      BETWEEN THE COMPANY, ON THE ONE HAND, AND THE PURCHASER, ON THE OTHER
      HAND, PERTAINING TO THIS AGREEMENT OR ANY OF THE RELATED AGREEMENTS OR TO
      ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE OTHER
      RELATED AGREEMENTS; PROVIDED, THAT THE PURCHASER AND THE COMPANY
      ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A
      COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW YORK. ; AND
      FURTHER PROVIDED, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR
      OPERATE TO PRECLUDE THE PURCHASER FROM BRINGING SUIT OR TAKING OTHER LEGAL
      ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON
      THE COLLATERAL (AS DEFINED IN THE MASTER SECURITY AGREEMENT) OR ANY OTHER
      SECURITY FOR THE OBLIGATIONS (AS DEFINED IN THE MASTER SECURITY
      AGREEMENT), OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE
      PURCHASER. THE COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
      JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND THE
      COMPANY HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF
      PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. THE COMPANY
      HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS
      ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS,
      COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
      ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH IN SECTION 11.9 AND THAT
      SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF THE
      COMPANY'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE
      U.S. MAILS, PROPER POSTAGE PREPAID.

            (c) THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE
      APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION
      OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES
      HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR

                                       28
<PAGE>

      PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT,
      TORT, OR OTHERWISE BETWEEN THE PURCHASER AND/OR THE COMPANY ARISING OUT
      OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
      BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, ANY OTHER RELATED
      AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO.

            11.2 Severability. Wherever possible each provision of this
      Agreement and the Related Agreements shall be interpreted in such manner
      as to be effective and valid under applicable law, but if any provision of
      this Agreement or any Related Agreement shall be prohibited by or invalid
      or illegal under applicable law such provision shall be ineffective to the
      extent of such prohibition or invalidity or illegality, without
      invalidating the remainder of such provision or the remaining provisions
      thereof which shall not in any way be affected or impaired thereby.

            11.3 Survival. The representations, warranties, covenants and
      agreements made herein shall survive any investigation made by the
      Purchaser and the closing of the transactions contemplated hereby to the
      extent provided therein. All statements as to factual matters contained in
      any certificate or other instrument delivered by or on behalf of the
      Company pursuant hereto in connection with the transactions contemplated
      hereby shall be deemed to be representations and warranties by the Company
      hereunder solely as of the date of such certificate or instrument. All
      indemnities set forth herein shall survive the execution, delivery and
      termination of this Agreement and the Note and the making and repayment of
      the obligations arising hereunder, under the Note and under the other
      Related Agreements.

            11.4 Successors. Except as otherwise expressly provided herein, the
      provisions hereof shall inure to the benefit of, and be binding upon, the
      successors, heirs, executors and administrators of the parties hereto and
      shall inure to the benefit of and be enforceable by each person or entity
      which shall be a holder of the Securities from time to time, other than
      the holders of Common Stock which has been sold by the Purchaser pursuant
      to Rule 144 or an effective registration statement. The Purchaser may not
      assign its rights hereunder to a competitor of the Company, unless an
      Event of Default, as defined in the Note, has occurred and is continuing.

            11.5 Entire Agreement; Maximum Interest. This Agreement, the Related
      Agreements, the exhibits and schedules hereto and thereto and the other
      documents delivered pursuant hereto constitute the full and entire
      understanding and agreement between the parties with regard to the
      subjects hereof and no party shall be liable or bound to any other in any
      manner by any representations, warranties, covenants and agreements except
      as specifically set forth herein and therein. Nothing contained in this
      Agreement, any Related Agreement or in any document referred to herein or
      delivered in connection herewith shall be deemed to establish or require
      the payment of a rate of interest or other charges in excess of the
      maximum rate permitted by applicable law. In the event that the rate of
      interest or dividends required to be paid or other charges hereunder

                                       29
<PAGE>

      exceed the maximum rate permitted by such law, any payments in excess of
      such maximum shall be credited against amounts owed by the Company to the
      Purchaser and thus refunded to the Company.

            11.6 Amendment and Waiver.

            (a) This Agreement may be amended or modified only upon the written
      consent of the Company and the Purchaser. (b) The obligations of the
      Company and the rights of the Purchaser under this Agreement may be waived
      only

            with the written consent of the Purchaser. (c) The obligations of
      the Purchaser and the rights of the Company under this Agreement may be
      waived only with the written consent of the Company.

            11.7 Delays or Omissions. It is agreed that no delay or omission to
      exercise any right, power or remedy accruing to any party, upon any
      breach, default or noncompliance by another party under this Agreement or
      the Related Agreements, shall impair any such right, power or remedy, nor
      shall it be construed to be a waiver of any such breach, default or
      noncompliance, or any acquiescence therein, or of or in any similar
      breach, default or noncompliance thereafter occurring. All remedies,
      either under this Agreement or the Related Agreements, by law or otherwise
      afforded to any party, shall be cumulative and not alternative.

            11.8 Notices. All notices required or permitted hereunder shall be
      in writing and shall be deemed effectively given: (a) upon personal
      delivery to the party to be notified;

            (b) when sent by confirmed facsimile if sent during normal business
      hours of the recipient, if not, then on the next business day;

            (c) three (3) business days after having been sent by registered or
      certified mail, return receipt requested, postage prepaid; or

            (d) one (1) day after deposit with a nationally recognized overnight
      courier, specifying next day delivery, with written verification of
      receipt.

All communications shall be sent as follows:

         If to the Company, to:             Adal Group, Inc.
                                            Billhurst Studio
                                            P.O. Box 177
                                            Lingfield Common Rd.
                                            Lingfield, Surrey, United Kingdom
                                            RH7 6B7
                                            Attention: Chief Financial Officer
                                            Facsimile: 44-1342-833875

                                       30
<PAGE>

                                       with a copy to:

                                       Loeb & Loeb LLP
                                       345 Park Avenue
                                       New York, New York 10154
                                       Attention:  Mitchell S. Nussbaum, Esq.
                                       Facsimile:  212-407-4990

         If to the Purchaser, to:      Laurus Master Fund, Ltd.
                                       c/o M&C Corporate Services Limited
                                       P.O.  Box 309 GT
                                       Ugland House
                                       George Town
                                       South Church Street
                                       Grand Cayman, Cayman Islands
                                       Facsimile:        345-949-8080

                                       with a copy to:

                                       John E.  Tucker, Esq.
                                       825 Third Avenue 14th Floor
                                       New York, NY 10022
                                       Facsimile: 212-541-4434

or at such other address as the Company or the Purchaser may designate by
written notice to the other parties hereto given in accordance herewith.

            11.9 Attorneys' Fees. In the event that any suit or action is
      instituted to enforce any provision in this Agreement or any Related
      Agreement, the prevailing party in such dispute shall be entitled to
      recover from the losing party all fees, costs and expenses of enforcing
      any right of such prevailing party under or with respect to this Agreement
      and/or such Related Agreement, including, without limitation, such
      reasonable fees and expenses of attorneys and accountants, which shall
      include, without limitation, all fees, costs and expenses of appeals.

            11.10 Titles and Subtitles. The titles of the sections and
      subsections of this Agreement are for convenience of reference only and
      are not to be considered in construing this Agreement.

            11.11 Facsimile Signatures; Counterparts. This Agreement may be
      executed by facsimile signatures and in any number of counterparts, each
      of which shall be an original, but all of which together shall constitute
      one agreement.

            11.12 Broker's Fees. Except as set forth on Schedule 11.12 hereof,
      each party hereto represents and warrants that no agent, broker,
      investment banker, person or firm acting on behalf of or under the
      authority of such party hereto is or will be entitled to any broker's or

                                       31
<PAGE>

      finder's fee or any other commission directly or indirectly in connection
      with the transactions contemplated herein. Each party hereto further
      agrees to indemnify each other party for any claims, losses or expenses
      incurred by such other party as a result of the representation in this
      Section 11.13 being untrue.

            11.13 Construction. Each party acknowledges that its legal counsel
      participated in the preparation of this Agreement and the Related
      Agreements and, therefore, stipulates that the rule of construction that
      ambiguities are to be resolved against the drafting party shall not be
      applied in the interpretation of this Agreement or any Related Agreement
      to favor any party against the other.

             [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK

                                       32
<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed the SECURITIES PURCHASE
AGREEMENT as of the date set forth in the first paragraph hereof.

COMPANY:                                       PURCHASER:

ADAL GROUP, INC.                               LAURUS MASTER FUND, LTD.

By:  /s/ Nicholas Shrager                      By:  /s/ Eugene Grin
     --------------------                           ---------------
Name:  Nicholas Shrager                        Name:  Eugene Grin
Title:  Chief Executive Officer                Title:  Director

                                       33
<PAGE>

                                    EXHIBIT A

                            FORM OF CONVERTIBLE NOTE

                                      A-1
<PAGE>

                                   EXHIBIT B-1

                                 FORM OF WARRANT

                                      B-1
<PAGE>

                                   EXHIBIT B-2

                                 FORM OF OPTION

                                       2
<PAGE>

                                    EXHIBIT C

                                 FORM OF OPINION

      1. The Company is a corporation incorporated, validly existing and in good
standing under the laws of the jurisdiction of its formation and has all
requisite corporate power and authority to own, operate and lease its properties
and to carry on its business as it is now being conducted.

      2. The Company has the requisite corporate power and authority to execute,
deliver and perform its obligations under the Agreement and the Related
Agreements. All corporate action on the part of the Company and its officers,
directors and stockholders necessary has been taken for: (i) the authorization
of the Agreement and the Related Agreements and the performance of all
obligations of the Company thereunder; and (ii) the authorization, sale,
issuance and delivery of the Securities pursuant to the Agreement and the
Related Agreements. The Note Shares, the Option Shares and the Warrant Shares,
when issued pursuant to and in accordance with the terms of the Agreement and
the Related Agreements and upon delivery shall be validly issued and
outstanding, fully paid and non assessable.

      3. The execution, delivery and performance by the Company of the Agreement
and the Related Agreements and the consummation of the transactions on its part
contemplated by any thereof, will not, with or without the giving of notice or
the passage of time or both:

            (a) Violate the provisions of its Charter or bylaws; or

            (b) Violate any judgment, decree, order or award of any court
      binding upon the Company; or

            (c) Violate any state law of the States of New York and Delaware, or
      U.S. federal law. 4. The Agreement and the Related Agreements will
      constitute, valid and legally binding obligations of the Company, and are
      enforceable against the Company in accordance with their respective terms,
      except:

            (a) as limited by applicable bankruptcy, insolvency, reorganization,
      moratorium or other laws of general application affecting enforcement of
      creditors' rights; and

            (b) general principles of equity that restrict the availability of
      equitable or legal remedies.

      5. To our knowledge, the sale of the Note and the subsequent conversion of
the Note into Note Shares are not subject to any preemptive rights or rights of
first refusal that have not been properly waived or complied with. To our
knowledge, the sale of the Warrant and the subsequent exercise of the Warrant
for Warrant Shares are not subject to any preemptive rights or, to our
knowledge, rights of first refusal that have not been properly waived or
complied with. To our knowledge, the sale of the Option and the subsequent
exercise of the Option for Option Shares are not subject to any preemptive
rights or, to our knowledge, rights of first refusal that have not been properly
waived or complied with.

                                       C-1
<PAGE>

      6. Assuming the accuracy of the representations and warranties of the
Purchaser contained in the Agreement, the offer, sale and issuance of the
Securities on the Closing Date will be exempt from the registration requirements
of the Securities Act. To our knowledge, neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offering of the
Securities pursuant to the Agreement or any Related Agreement to be integrated
with prior offerings by the Company for purposes of the Securities Act which
would prevent the Company from selling the Securities pursuant to Rule 506 under
the Securities Act, or any applicable exchange-related stockholder approval
provisions.

      7. There is no action, suit, proceeding or investigation pending or, to
our knowledge, currently threatened against the Company that prevents the right
of the Company to enter into this Agreement, or to consummate the transactions
contemplated thereby. To our knowledge, the Company is not a party or subject to
the provisions of any order, writ, injunction, judgment or decree of any court
or government agency or instrumentality; nor is there any action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.

      8. The terms and provisions of the Master Security Agreement create a
valid security interest in favor of the Purchaser, in the respective rights,
title and interests of the Company in and to the Collateral (as defined in the
Master Security Agreement). Each UCC-1 Financing Statement naming the Company
thereof as debtor and the Purchaser as secured party are in proper form for
filing and assuming that such UCC-1 Financing Statements have been filed with
the Secretary of State of Delaware, the security interest created under the
Master Security Agreement will constitute a perfected security interest under
the Uniform Commercial Code in favor of the Purchaser in respect of the
Collateral that can be perfected by filing a financing statement.

                                      C-2
<PAGE>

                                    EXHIBIT D

                            FORM OF ESCROW AGREEMENT

                                      D-1THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF
THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT
AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO ADAL GROUP, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

                          SECURED CONVERTIBLE TERM NOTE

         FOR VALUE RECEIVED, ADAL GROUP, INC., a Delaware corporation (the
"Company"), hereby promises to pay to LAURUS MASTER FUND, LTD., c/o M&C
Corporate Services Limited, P.O. Box 309 GT, Ugland House, South Church Street,
George Town, Grand Cayman, Cayman Islands, Fax: 345-949-8080 (the "Holder") or
its registered assigns or successors in interest, on order, the sum of One
Million Five Hundred Dollars ($1,500,000), together with any accrued and unpaid
interest hereon, on June 29, 2008 (the "Maturity Date") if not sooner paid. The
original principal amount of this Note, subject to amortizing payments pursuant
to Section 1.2 hereof is hereinafter referred to as the "Principal Amount".

         Capitalized terms used herein without definition shall have the
meanings ascribed to such terms in that certain Securities Purchase Agreement
dated as of the date hereof between the Company and the Holder (the "Purchase
Agreement").

         The following terms shall apply to this Secured Convertible Term Note
(this "Note"):

                                    ARTICLE I

                             INTEREST & AMORTIZATION

         1.1 (a) Contract Rate. Subject to Sections 1.1(b), 4.2 and 5.10 hereof,
interest payable on the Principal Amount of this Note shall accrue at a rate per
annum equal to the "prime rate" published in The Wall Street Journal from time
to time (the "Prime Rate"), plus three percent (3%) (the "Contract Rate"). The
Prime Rate shall be increased or decreased as the case may be for each increase
or decrease in the Prime Rate in an amount equal to such increase or decrease in
the Prime Pate; each change to be effective as of the day of the change in the
Prime Rate. Subject to Section 1.1(b) hereof, the Contract Rate shall not be
less than eight percent (8%). Interest shall be calculated on the basis of a 360
day year. Interest shall accrue but not be payable during the period commencing
on the date hereof and ending on June 30, 2005. Interest on the Principal Amount
shall be payable monthly, in arrears, commencing on July 1, 2005 and on the
first business day of each consecutive calendar month thereafter (each, a
"Repayment Date") and on the Maturity Date, whether by acceleration or
otherwise.

         1.1 (b) Contract Rate Adjustment. The Contract Rate shall be subject to
adjustment on the last business day of each month hereafter until the Maturity
Date (each a "Determination Date"). If on any Determination Date (i) the Company

                                    1 of 16
<PAGE>

shall have registered under the Securities Act of 1933, as amended (the
"Securities Act"), the shares of Common Stock underlying each of the conversion
of this Note and the exercise of each Warrant and Option issued on a
registration statement declared effective by the Securities and Exchange
Commission (the "SEC"), and (ii) the market price (the "Market Price") of the
Common Stock as reported by Bloomberg, L.P. on the Principal Market (as defined
below) for the five (5) consecutive trading days immediately preceding such
Determination Date exceeds the then applicable Fixed Conversion Price by at
least twenty five percent (25%), the Contract Rate for the succeeding calendar
month shall automatically be reduced by 100 basis points (100 b.p.) (1.0%) for
each incremental twenty five percent (25%) increase in the Market Price of the
Common Stock above the then applicable Fixed Conversion Price. Notwithstanding
the foregoing (and anything to the contrary contained in herein), in no event
shall the Contract Rate be less than zero percent (0%).

         1.2 Minimum Monthly Principal Payments. Amortizing payments of the
outstanding principal amount of this Note shall begin on January 1, 2005 and
shall recur on each succeeding Repayment Date thereafter until the Principal
Amount has been repaid in full, whether by the payment of cash or by the
conversion of such principal into Common Stock pursuant to the terms hereof.
Subject to Section 2.1 and Article 3 below, on each Repayment Date, the Company
shall make payments to the Holder in the amount of $50,000.00 (the "Monthly
Principal Amount"), together with any accrued and unpaid interest then due on
such portion of the Principal Amount plus any and all other amounts which are
then owing under this Note that have not been paid (the Monthly Principal
Amount, together with such accrued and unpaid interest and such other amounts,
collectively, the "Monthly Amount"). Any outstanding Principal Amount together
with any accrued and unpaid interest and any other unpaid amounts which are then
owing by the Company to the Holder under this Note, the Purchase Agreement
and/or any other Related Agreement shall be due and payable on the Maturity
Date.

                                    2 of 16
<PAGE>

                                   ARTICLE II

                              CONVERSION REPAYMENT

         2.1 (a) Payment of Monthly Amount in Cash or Common Stock. If the
Monthly Amount (or a portion thereof of such Monthly Amount if such portion of
the Monthly Amount would have been converted into shares of Common Stock but for
Section 3.2) is required to be paid in cash pursuant to Section 2.1(b), then the
Company shall pay the Holder an amount equal to 102% of the Monthly Amount due
and owing to the Holder on the Repayment Date in cash. If the Monthly Amount (or
a portion of such Monthly Amount if not all of the Monthly Amount may be
converted into shares of Common Stock pursuant to Section 3.2) is required to be
paid in shares of Common Stock pursuant to Section 2.1(b), the number of such
shares to be issued by the Company to the Holder on such Repayment Date (in
respect of such portion of the Monthly Amount converted into in shares of Common
Stock pursuant to Section 2.1(b)), shall be the number determined by dividing
(x) the portion of the Monthly Amount converted into shares of Common Stock, by
(y) the then applicable Fixed Conversion Price. For purposes hereof, the "Fixed
Conversion Price" shall, subject to adjustments as set forth herein, mean (i)
with respect to the first $1,000,000 of the Principal Amount of this Note
converted pursuant to the terms hereof (and all interest and fees related
thereto), $3.00. and (ii) with respect to the remaining Principal Amount of this
Note converted pursuant to the terms hereof (and all interest and fees related
thereto), $3.50.

                  (b) Monthly Amount Conversion Guidelines. Subject to Sections
2.1(a), 2.2 and 3.2 hereof, the Holder shall convert into shares of Common Stock
all or a portion of the Monthly Amount due on each Repayment Date according to
the following guidelines (collectively, the "Conversion Criteria"): (i) the
average closing price of the Common Stock as reported by Bloomberg, L.P. on the
Principal Market for the five (5) consecutive trading days immediately preceding
such Repayment Date shall be greater than or equal to 110% of the Fixed
Conversion Price and (ii) the amount of such conversion does not exceed twenty
five percent (25%) of the average dollar trading volume of the Common Stock for
the twenty two (22) day trading period immediately preceding the applicable
Repayment Date. If the Conversion Criteria are not met, the Holder shall convert
only such part of the Monthly Amount that meets the Conversion Criteria. Any
part of the Monthly Amount due on a Repayment Date that the Holder has not been
able to convert into shares of Common Stock due to failure to meet the
Conversion Criteria, shall be paid by the Company in cash at the rate of 102% of
the Monthly Amount otherwise due on such Repayment Date, within three (3)
business days of the applicable Repayment Date.

                   (c) Application of Conversion Amounts. Any amounts converted
by the Holder pursuant to Section 2.1(b) shall be deemed to constitute payments
of, or applied against, (i) first, outstanding fees, (ii) second, accrued
interest on the Principal Amount, and (iii) third, the Principal Amount.

         2.2 No Effective Registration. Notwithstanding anything to the contrary
herein, no amount payable hereunder may be converted into Common Stock unless
(a) either (i) an effective current Registration Statement (as defined in the
Registration Rights Agreement) covering the shares of Common Stock to be issued
in satisfaction of such obligations exists, or (ii) an exemption from
registration of the Common Stock is available pursuant to Rule 144 of the
Securities Act, and (b) no Event of Default hereunder exists and is continuing,

                                    3 of 16
<PAGE>

unless such Event of Default is cured within any applicable cure period or is
otherwise waived in writing by the Holder in whole or in part at the Holder's
option.

         2.3 Optional Redemption of Principal Amount. The Company will have the
option of prepaying the outstanding Principal Amount by paying to the Holder a
sum of money equal to one hundred fifteen percent (115%) of the Principal Amount
to be redeemed, together with accrued but unpaid interest thereon and any and
all other sums due, accrued or payable to the Holder arising under this Note,
the Purchase Agreement or any Related Agreement (the "Redemption Amount") on the
Redemption Payment Date (as defined below). The Company shall deliver to the
Holder a notice of redemption (the "Notice of Redemption") specifying the date
for such Optional Redemption (the "Redemption Payment Date"), which date shall
be not less than seven (7) business days after the date of the Notice of
Redemption (the "Redemption Period"). A Notice of Redemption shall not be
effective with respect to any portion of the Principal Amount for which the
Holder has a pending election to convert pursuant to Section 3.1, or for
conversions initiated or made by the Holder pursuant to Section 3.1 during the
Redemption Period. The Redemption Amount shall be determined as if such Holder's
conversion elections had been completed immediately prior to the date of the
Notice of Redemption. On the Redemption Payment Date, the Redemption Amount
shall be paid in good funds to the Holder. In the event the Company fails to pay
the Redemption Amount on the Redemption Payment Date as set forth herein, then
such Notice of Redemption will be null and void.

                                   ARTICLE III
                                CONVERSION RIGHTS

         3.1. Holder's Conversion Rights. Subject to Section 2.2, the Holder
shall have the right, but not the obligation, to convert all or any portion of
the then aggregate outstanding Principal Amount of this Note, together with
interest and fees due hereon, into shares of Common Stock, subject to the terms
and conditions set forth in this Article III. The Holder may exercise such right
by delivery to the Company of a written Notice of Conversion pursuant to Section
3.3. The shares of Common Stock to be issued upon such conversion are herein
referred to as the "Conversion Shares."

         3.2 Conversion Limitation. Notwithstanding anything contained herein to
the contrary, the Holder shall not be entitled to convert pursuant to the terms
of this Note an amount that would be convertible into that number of Conversion
Shares which would exceed the difference between 4.99% of the issued and
outstanding shares of Common Stock and the number of shares of Common Stock
beneficially owned by such Holder or issuable upon exercise of Warrants or the
Option held by such Holder. For the purposes of the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Exchange Act and Regulation 13d-3 thereunder. The Conversion Shares
limitation described in this Section 3.2 shall automatically become null and
void following notice to the Company upon the occurrence and during the
continuance of an Event of Default, or upon 75 days prior notice to the Company.
Notwithstanding anything contained herein to the contrary, the provisions of
this Section 3.2 are irrevocable and may not be waived by the Holder or the
Company.

                                    4 of 16
<PAGE>

         3.3 Mechanics of Holder's Conversion. (a) In the event that the Holder
elects to convert any amounts outstanding under this Note into Common Stock, the
Holder shall give notice of such election by delivering an executed and
completed notice of conversion (a "Notice of Conversion") to the Company, which
Notice of Conversion shall provide a breakdown in reasonable detail of the
Principal Amount, accrued interest and fees being converted. On each Conversion
Date (as hereinafter defined) and in accordance with its Notice of Conversion,
the Holder shall make the appropriate reduction to the Principal Amount, accrued
interest and fees as entered in its records and shall provide written notice
thereof to the Company within two (2) business days after the Conversion Date.
Each date on which a Notice of Conversion is delivered or telecopied to the
Company in accordance with the provisions hereof shall be deemed a "Conversion
Date". A form of Notice of Conversion to be employed by the Holder is annexed
hereto as Exhibit A.

                  (b) Pursuant to the terms of a Notice of Conversion, the
Company will issue instructions to the transfer agent accompanied by an opinion
of counsel, if so required by the Company's transfer agent, within one (1)
business day of the date of the delivery to Company of the Notice of Conversion
and shall cause the transfer agent to transmit the certificates representing the
Conversion Shares to the Holder by crediting the account of the Holder's
designated broker with the Depository Trust Corporation ("DTC") through its
Deposit Withdrawal Agent Commission ("DWAC") system within three (3) business
days after receipt by the Company of the Notice of Conversion (the "Delivery
Date"). In the case of the exercise of the conversion rights set forth herein
the conversion privilege shall be deemed to have been exercised and the
Conversion Shares issuable upon such conversion shall be deemed to have been
issued upon the date of receipt by the Company of the Notice of Conversion. The
Holder shall be treated for all purposes as the record holder of such shares of
Common Stock, unless the Holder provides the Company written instructions to the
contrary.

         3.4      Conversion Mechanics.

                  (a) The number of shares of Common Stock to be issued upon
each conversion of this Note pursuant to this Article III shall be determined by
dividing that portion of the Principal Amount and interest and fees to be
converted, if any, by the then applicable Fixed Conversion Price. In the event
of any conversions of outstanding obligations under this Note in part pursuant
to this Article III, such conversions shall be deemed to constitute conversions
(i) first, of the Monthly Amount for the current calendar month, (ii) then of
the accrued interest on the Principal Amount, and (iii) then of outstanding
Principal Amount, by applying the conversion amount to Monthly Principal Amounts
for the remaining Repayment Dates in chronological order.

                  (b) The Fixed Conversion Price and number and kind of shares
or other securities to be issued upon conversion is subject to adjustment from
time to time upon the occurrence of certain events, as follows:

                           A. Stock Splits, Combinations and Dividends. If the
         shares of Common Stock are subdivided or combined into a greater or
         smaller number of shares of Common Stock, or if a dividend is paid on
         the Common Stock or any preferred stock issued by the Company in shares
         of Common Stock, the Fixed Conversion Price or the Conversion Price, as

                                    5 of 16
<PAGE>

         the case may be, shall be proportionately reduced in the case of
         subdivision of shares or stock dividend or proportionately increased in
         the case of combination of shares, in each such case by the ratio which
         the total number of shares of Common Stock outstanding immediately
         after such event bears to the total number of shares of Common Stock
         outstanding immediately prior to such event.

                           B. During the period the conversion right exists, the
         Company will reserve from its authorized and unissued Common Stock a
         sufficient number of shares to provide for the issuance of Common Stock
         upon the full conversion of this Note. The Company represents that upon
         issuance, such shares will be duly and validly issued, fully paid and
         non-assessable. The Company agrees that its issuance of this Note shall
         constitute full authority to its officers, agents, and transfer agents
         who are charged with the duty of executing and issuing stock
         certificates to execute and issue the necessary certificates for shares
         of Common Stock upon the conversion of this Note.

                           C. Share Issuances. Subject to the provisions of this
         Section 3.4, if the Company shall at any time prior to the conversion
         or repayment in full of the Principal Amount issue any shares of Common
         Stock or securities convertible into Common Stock to a person other
         than the Holder (except (i) pursuant to Subsections A or B above; (ii)
         pursuant to options, warrants or other obligations to issue shares
         outstanding on the date hereof as disclosed to Holder in writing; or
         (iii) pursuant to options that may be issued under any employee
         incentive stock option and/or any qualified stock option plan adopted
         by the Company) for a consideration per share (the "Offer Price") less
         than the Fixed Conversion Price in effect at the time of such issuance,
         then the Fixed Conversion Price applicable to a portion of the
         outstanding principal amount of this Note (and all interest, fees,
         costs and expenses related thereto) equal to the fair market value of
         the aggregate consideration paid for, or attributable to, such shares
         of Common Stock or securities convertible into Common Stock (the
         "Aggregate Consideration") shall be immediately reset to such lower
         Offer Price at the time of issuance of such securities (provided that,
         in the event that the outstanding principal amount of this Note is
         greater than the respective Aggregate Consideration, the Holder shall
         determine in its sole discretion which portion of the outstanding
         principal amount of the Note shall have a "reset" Fixed Conversion
         Price as a result of such issuance). For example, in the event that (i)
         the Offer Price is less than the Fixed Conversion Price at the time of
         such issuance and (ii) the Aggregate Consideration equals $1,000,000,
         the Fixed Conversion Price applicable a principal amount of this Note
         equal to $1,000,000 (plus all interest, fees, costs and expenses
         related thereto) shall be reset to the Offer Price. . For purposes
         hereof, the issuance of any security of the Company convertible into or
         exercisable or exchangeable for Common Stock shall result in an
         adjustment to the Fixed Conversion Price at the time of issuance of
         such securities.

                           D. Reclassification, etc. If the Company at any time
         shall, by reclassification or otherwise, change the Common Stock into
         the same or a different number of securities of any class or classes,
         this Note, as to the unpaid Principal Amount and accrued interest
         thereon, shall thereafter be deemed to evidence the right to purchase
         an adjusted number of such securities and kind of securities as would
         have been issuable as the result of such change with respect to the
         Common Stock immediately prior to such reclassification or other
         change.

                                    6 of 16
<PAGE>

      3.5 Issuance of Replacement Note. Upon any partial conversion of this
Note, a replacement Note containing the same date and provisions of this Note
shall, at the written request of the Holder, be issued by the Company to the
Holder for the outstanding Principal Amount of this Note and accrued interest
which shall not have been converted or paid. Subject to the provisions of
Article IV, the Company will pay no costs, fees or any other consideration to
the Holder for the production and issuance of a replacement Note.

                                   ARTICLE IV

                                EVENTS OF DEFAULT

            4.1 Events of Default. The occurrence of any of the following events
set forth in this Section 4.1 shall constitute an event of default ("Event of
Default") hereunder:

                  (a) Failure to Pay. The Company fails to pay when due any
installment of principal, interest or other fees hereon in accordance herewith,
or the Company fails to pay any of the other Obligations (under and as defined
in the Master Security Agreement) when due, and, in any such case, such failure
shall continue for a period of three (3) days following the date upon which any
such payment was due.

                  (b) Breach of Covenant. The Company or any of its Subsidiaries
breaches any covenant or any other term or condition of this Note in any
material respect and such breach, if subject to cure, continues for a period of
fifteen (15) days after the occurrence thereof.

                  (c) Breach of Representations and Warranties. Any
representation, warranty or statement made or furnished by the Company or any of
its Subsidiaries in this Note, the Purchase Agreement or any other Related
Agreement shall at any time be false or misleading in any material respect on
the date as of which made or deemed made.

                  (d) Default Under Other Agreements. The occurrence of any
default (or similar term) in the observance or performance of any other
agreement or condition relating to any indebtedness or contingent obligation of
the Company or any of its Subsidiaries beyond the period of grace (if any), the
effect of which default is to cause, or permit the holder or holders of such
indebtedness or beneficiary or beneficiaries of such contingent obligation to
cause, such indebtedness to become due prior to its stated maturity or such
contingent obligation to become payable;

                  (e) Material Adverse Effect. Any change or the occurrence of
any event which could reasonably be expected to have a Material Adverse Effect;

                  (f) Bankruptcy. The Company or any of its Subsidiaries shall
(i) apply for, consent to or suffer to exist the appointment of, or the taking
of possession by, a receiver, custodian, trustee or liquidator of itself or of
all or a substantial part of its property, (ii) make a general assignment for
the benefit of creditors, (iii) commence a voluntary case under the federal
bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt
or insolvent, (v) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (vi) acquiesce to, without challenge within

                                    7 of 16
<PAGE>

ten (10) days of the filing thereof, or failure to have dismissed, within thirty
(30) days, any petition filed against it in any involuntary case under such
bankruptcy laws, or (vii) take any action for the purpose of effecting any of
the foregoing;

            (g) Judgments. Attachments or levies in excess of $200,000 in the
aggregate are made upon the Company or any of its Subsidiary's assets or a
judgment is rendered against the Company's property involving a liability of
more than $200,000 which shall not have been vacated, discharged, stayed or
bonded within thirty (30) days from the entry thereof;

            (h) Insolvency. The Company or any of its Subsidiaries shall admit
in writing its inability, or be generally unable, to pay its debts as they
become due or cease operations of its present business;

                  (i) Change in Control. A Change of Control (as defined below)
shall occur with respect to the Company, unless Holder shall have expressly
consented to such Change of Control in writing. A "Change of Control" shall mean
any event or circumstance as a result of which (i) any "Person" or "group" (as
such terms are defined in Sections 13(d) and 14(d) of the Exchange Act, as in
effect on the date hereof), other than the Holder, is or becomes the "beneficial
owner" (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act),
directly or indirectly, of 35% or more on a fully diluted basis of the then
outstanding voting equity interest of the Company, (ii) the Board of Directors
of the Company shall cease to consist of a majority of the Board of Directors of
the Company on the date hereof (or directors appointed by a majority of the
Board of Directors of the Company in effect immediately prior to such
appointment) or (iii) the Company or any of its subsidiaries merges or
consolidates with, or sells all or substantially all of its assets to, any other
person or entity.;

                  (j) Indictment; Proceedings. The indictment of the Company or
any of its Subsidiaries or any executive officer of the Company or any of its
Subsidiaries under any criminal statute, or commencement of criminal or civil
proceeding against the Company or any of its Subsidiaries or any executive
officer of the Company or any of its Subsidiaries pursuant to which statute or
proceeding penalties or remedies sought or available include forfeiture of any
of the property of the Company or any of its Subsidiaries;

                  (k) The Purchase Agreement and Related Agreements. (i) An
Event of Default shall occur under and as defined in the Purchase Agreement or
any other Related Agreement, (ii) the Company or any of its Subsidiaries shall
breach any term or provision of the Purchase Agreement or any other Related
Agreement in any material respect and such breach, if capable of cure, continues
unremedied for a period of fifteen (15) days after the occurrence thereof, (iii)
the Company or any of its Subsidiaries attempts to terminate, challenges the
validity of, or its liability under, the Purchase Agreement or any Related
Agreement, (iv) any proceeding shall be brought to challenge the validity,
binding effect of the Purchase Agreement or any Related Agreement or (v) the
Purchase Agreement or any Related Agreement ceases to be a valid, binding and
enforceable obligation of the Company or any of its Subsidiaries (to the extent
such persons or entities are a party thereto);

                  (l) Stop Trade. An SEC stop trade order or Principal Market
trading suspension of the Common Stock shall be in effect for five (5)

                                    8 of 16
<PAGE>

consecutive days or five (5) days during a period of ten (10) consecutive days,
excluding in all cases a suspension of all trading on a Principal Market,
provided that the Company shall not have been able to cure such trading
suspension within thirty (30) days of the notice thereof or list the Common
Stock on another Principal Market within sixty (60) days of such notice; or

                  (m) Failure to Deliver Common Stock or Replacement Note. The
Company's failure to deliver Common Stock to the Holder pursuant to and in the
form required by this Note and the Purchase Agreement and, if such failure to
deliver Common Stock shall not be cured within two (2) business days or the
Company is required to issue a replacement Note to the Holder and the Company
shall fail to deliver such replacement Note within seven (7) business days.

            4.2 Default Interest. Following the occurrence and during the
continuance of an Event of Default, the Company shall pay additional interest on
this Note in an amount equal to one and one half percent (1.5%) per annum, and
all outstanding obligations under this Note, the Purchase Agreement and each
other Related Agreement, including unpaid interest, shall continue to accrue
interest at such additional interest rate from the date of such Event of Default
until the date such Event of Default is cured or waived.

            4.3 Default Payment. Following the occurrence and during the
continuance of an Event of Default, the Holder, at its option, may demand
repayment in full of all obligations and liabilities owing by Company to the
Holder under this Note, the Purchase Agreement and/or any other Related
Agreement and/or may elect, in addition to all rights and remedies of the Holder
under the Purchase Agreement and the other Related Agreements and all
obligations and liabilities of the Company under the Purchase Agreement and the
other Related Agreements, to require the Company to make a Default Payment
("Default Payment"). The Default Payment shall be 130% of the outstanding
principal amount of the Note, plus accrued but unpaid interest, all other fees
then remaining unpaid, and all other amounts payable hereunder. The Default
Payment shall be applied first to any fees due and payable to the Holder
pursuant to this Note, the Purchase Agreement, and/or the other Related
Agreements, then to accrued and unpaid interest due on this Note and then to the
outstanding principal balance of this Note. The Default Payment shall be due and
payable immediately on the date that the Holder has exercised its rights
pursuant to this Section 4.3.

                                    ARTICLE V
                                  MISCELLANEOUS

            5.1 Conversion Privileges. The conversion privileges set forth in
Article III shall remain in full force and effect immediately from the date
hereof until the date this Note is indefeasibly paid in full and irrevocably
terminated.

            5.2 Cumulative Remedies. The remedies under this Note shall be
cumulative.

            5.3 Failure or Indulgence Not Waiver. No failure or delay on the
part of the Holder hereof in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further

                                    9 of 16
<PAGE>

exercise thereof or of any other right, power or privilege. All rights and
remedies existing hereunder are cumulative to, and not exclusive of, any rights
or remedies otherwise available.

      5.4 Notices. Any notice herein required or permitted to be given shall be
in writing and shall be deemed effectively given: (a) upon personal delivery to
the party notified, (b) when sent by confirmed telex or facsimile if sent during
normal business hours of the recipient, if not, then on the next business day,
(c) five days after having been sent by registered or certified mail, return
receipt requested, postage prepaid, or (d) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the Company
at the address provided in the Purchase Agreement executed in connection
herewith, and to the Holder at the address provided in the Purchase Agreement
for such Holder, with a copy to John E. Tucker, Esq., 825 Third Avenue, 14th
Floor, New York, New York 10022, facsimile number (212) 541-4434, or at such
other address as the Company or the Holder may designate by ten days advance
written notice to the other parties hereto. A Notice of Conversion shall be
deemed given when made to the Company pursuant to the Purchase Agreement.

      5.5 Amendment Provision. The term "Note" and all reference thereto, as
used throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented, and any successor instrument issued pursuant to Section 3.5
hereof, as it may be amended or supplemented.

      5.6 Assignability. This Note shall be binding upon the Company and its
successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns, and may be assigned by the Holder in accordance with the
requirements of the Purchase Agreement. This Note shall not be assigned by the
Company without the consent of the Holder.

      5.7 Cost of Collection. In case of any Event of Default under this Note,
the Company shall pay the Holder reasonable costs of collection, including
reasonable attorneys' fees.

      5.8 (a) Governing Law, Jurisdiction and Waiver of Jury Trial. THIS NOTE
SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

                  (b) THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR
FEDERAL COURTS LOCATED IN t 12 THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL
HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN
THE COMPANY, ON THE ONE HAND, AND THE HOLDER, ON THE OTHER HAND, PERTAINING TO
THIS NOTE OR ANY OF THE OTHER RELATED AGREEMENTS OR TO ANY MATTER ARISING OUT OF
OR RELATED TO THIS NOTE OR ANY OF THE RELATED AGREEMENTS; PROVIDED, THAT THE
COMPANY ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY
A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND
FURTHER PROVIDED, THAT NOTHING IN THIS NOTE SHALL BE DEEMED OR OPERATE TO
PRECLUDE THE HOLDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER

                                    10 of 16
<PAGE>

JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY
OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF THE HOLDER. THE COMPANY EXPRESSLY SUBMITS AND CONSENTS IN
ADVANCE TO SUCH THE COMPANY HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED
UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. THE
COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH IN THE PURCHASE AGREEMENT AND
THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY'S
ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER
POSTAGE PREPAID.

            (c) THE COMPANY DESIRES THAT ITS DISPUTES BE RESOLVED BY A JUDGE
APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE COMPANY HERETO WAIVES
ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO
RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE
HOLDER AND THE COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO
THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE, ANY
OTHER RELATED AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO.

            5.9 Severability. In the event that any provision of this Note is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision of this
Note.

            5.10 Maximum Payments. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Company to the Holder and thus refunded to the
Company.

            5.11 Security Interest and Guarantee. The Holder has been granted a
security interest (i) in certain assets of the Company and its Subsidiaries as
more fully described in the Master Security Agreement dated as of the date
hereof and (ii) pursuant to certain Foreign Documentation. The obligations of
the Company under this Note are guaranteed by certain Subsidiaries of the
Company pursuant to certain Foreign Documentation.

                                    11 of 16
<PAGE>

            5.12 Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Note and, therefore, stipulates that the
rule of construction that ambiguities are to be resolved against the drafting
party shall not be applied in the interpretation of this Note to favor any party
against the other.

            5.13 Cost of Collection. If default is made in the payment of this
Note, the Company shall pay to Holder reasonable costs of collection, including
reasonable attorney's fees.

                                    12 of 16
<PAGE>

      IN WITNESS WHEREOF, the Company has caused this Note to be signed in its
name effective as of this 29th day of June, 2005.

                                             ADAL GROUP, INC.

                                             By: /s/ Nicholas Shrager
                                                 Name:  N. Shrager
                                                 Title: CEO

WITNESS:

/s/ Rosalind Hallifax
Rosalind Hallifax, Kidd Rapinet
14/15 Craven Street
London WC2N 5AD

                                    13 of 16
<PAGE>

                                                                       EXHIBIT A

                              NOTICE OF CONVERSION

(To be executed by the Holder in order to convert all or part of the Note into
Common Stock

[Name and Address of Holder]

The Undersigned hereby converts $_________ of the principal due on [specify
applicable Repayment Date] under the Convertible Term Note issued by ADAL GROUP,
INC. dated June __, 2005 by delivery of Shares of Common Stock of ADAL GROUP,
INC. on and subject to the conditions set forth in Article III of such Note.

1.  Date of Conversion      _______________________

2.  Shares To Be Delivered: _______________________

                                         By:_______________________________
                                         Name:_____________________________
                                         Title:______________________________

                                    14 of 16

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