Document:

Exhibit 10.34

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

                               WARRANT TO PURCHASE

                             SHARES OF COMMON STOCK

                                       OF

                        Diamond Entertainment Corporation

                            Expires November 15, 2006

No. W-1                                                     Walnut, California
                                                             November 16, 2001

    FOR VALUE RECEIVED, subject to the provisions hereinafter set forth, the
undersigned, Diamond Entertainment Corporation, a New Jersey corporation
(together with its successors and assigns, the "Issuer"), hereby certifies that

                              FILTER INTERNATIONAL

or its registered assigns is entitled to subscribe for and purchase, during the
period specified in this Warrant, up to 2,250,000 shares (subject to adjustment
as hereinafter provided) of the duly authorized, validly issued, fully paid and
non-assessable Common Stock of the Issuer, at an exercise price per share equal
to $0.02, subject, however, to the provisions and upon the terms and conditions
hereinafter set forth. Capitalized terms used in this Warrant and not otherwise
defined herein shall have the respective meanings specified in Section 8 hereof.

         1. Term. The right to subscribe for and purchase shares of Warrant
Stock represented hereby shall commence on November 16, 2001 and shall expire at
5:00 p.m., New York City time, on November 15, 2006 (such period being the
"Term").

         2.  Method of Exercise Payment: Issuance of New Warrant: Transfer and
Exchange.

         (a) Time of Exercise. The purchase rights represented by this Warrant
may be exercised in whole or in part at any time and from time to time during
the Term commencing on November 16, 2001.

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         (b) Method of Exercise. The Holder hereof may exercise this Warrant, in
whole or in part, by the surrender of this Warrant (with the exercise form
attached hereto duly executed) at the principal office of the Issuer, and by the
payment to the Issuer of an amount of consideration therefor equal to the
Warrant Price in effect on the date of such exercise multiplied by the number of
shares of Warrant Stock with respect to which this Warrant is then being
exercised, payable by certified or official bank check.

         (c) Issuance of Stock Certificates. In the event of any exercise of the
rights represented by this Warrant in accordance with and subject to the terms
and conditions hereof, (i) certificates for the shares of Warrant Stock so
purchased shall be dated the date of such exercise and delivered to the Holder
hereof within a reasonable time, not exceeding five (5) Trading Days after such
exercise, and the Holder hereof shall be deemed for all purposes to be the
Holder of the shares of Warrant Stock so purchased as of the date of such
exercise, and (ii) unless this Warrant has expired, a new Warrant representing
the number of shares of Warrant Stock, if any, with respect to which this
Warrant shall not then have been exercised (less any amount thereof which shall
have been cancelled in payment or partial payment of the Warrant Price as
hereinabove provided) shall also be issued to the Holder hereof at the Issuer's
expense within such time.

         (d) Transferability of Warrant. This Warrant may not be transferred by
a Purchaser without the prior written consent of the Company, such consent not
to be unreasonably withheld. If transferred pursuant to this paragraph and
subject to the provisions of subsection (e) of this Section 2, this Warrant may
be transferred on the books of the Issuer by the Holder hereof in person or by
duly authorized attorney, upon surrender of this Warrant at the principal office
of the Issuer, properly endorsed (by the Holder executing an assignment in the
form attached hereto) and upon payment of any necessary transfer tax or other
governmental charge imposed upon such transfer. This Warrant is exchangeable at
the principal office of the Issuer for Warrants for the purchase of the same
aggregate number of shares of Warrant Stock, each new Warrant to represent the
right to purchase such number of shares of Warrant Stock as the Holder hereof
shall designate at the time of such exchange. All Warrants issued on transfers
or exchanges shall be dated the Original Issue Date and shall be identical with
this Warrant except as to the number of shares of Warrant Stock issuable
pursuant hereto.

         (e)      Compliance with Securities Laws.

                  (i) The Holder of this Warrant, by acceptance hereof,
         acknowledges that this Warrant and the shares of Warrant Stock to be
         issued upon exercise hereof are being acquired solely for the Holder's
         own account and not as a nominee for any other party, and for
         investment, and that the Holder will not offer, sell or otherwise
         dispose of this Warrant or any shares of Warrant Stock to be issued

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         upon exercise hereof except pursuant to an effective registration
         statement, or an exemption from registration, under the Securities Act
         and any applicable state securities laws.

                  (ii) Except as provided in paragraph (iii) below, this Warrant
         and all certificates representing shares of Warrant Stock issued upon
         exercise hereof shall be stamped or imprinted with a legend in
         substantially the following form:

                           THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
                  REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN
                  RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
                  SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
                  AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
                  TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
                  ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
                  TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
                  THE SECURITIES ACT.

                  (iii) The restrictions imposed by this subsection (e) upon the
         transfer of this Warrant and the shares of Warrant Stock to be
         purchased upon exercise hereof shall terminate (A) when such securities
         shall have been effectively registered under the Securities Act, (B)
         upon the Issuer's receipt of an opinion of counsel, in form and
         substance reasonably satisfactory to the Issuer, addressed to the
         Issuer to the effect that such restrictions are no longer required to
         ensure compliance with the Securities Act or (C) upon the Issuer's
         receipt of other evidence reasonably satisfactory to the Issuer that
         such registration is not required. Whenever such restrictions shall
         cease and terminate as to any such securities, the Holder thereof shall
         be entitled to receive from the Issuer (or its transfer agent and
         registrar), without expense (other than applicable transfer taxes, if
         any), new Warrants (or, in the case of shares of Warrant Stock, new
         stock certificates) of like tenor not bearing the applicable legends
         required by paragraph (ii) above relating to the Securities Act and
         state securities laws.

         (f) Continuing Rights of Holder. The Issuer will, at the time of or at
any time after each exercise of this Warrant, upon the request of the Holder
hereof or of any shares of Warrant Stock issued upon such exercise, acknowledge
in writing the extent, if any, of its continuing obligation to afford to such
Holder all rights to which such Holder shall continue to be entitled after such
exercise in accordance with the terms of this Warrant, provided that if any such
Holder shall fail to make any such request, the failure shall not affect the
continuing obligation of the Issuer to afford such rights to such Holder.

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         3. Stock Fully Paid: Reservation and Listing of Shares: Covenants.

         (a) Stock Fully Paid. The Issuer represents, warrants, covenants and
agrees that all shares of Warrant Stock which may be issued upon the exercise of
this Warrant or otherwise hereunder will, upon issuance, be duly authorized,
validly issued, fully paid and non-assessable and free from all taxes, liens and
charges created by or through Issuer. The Issuer further covenants and agrees
that during the period within which this Warrant may be exercised, the Issuer
will at all times have authorized and reserved for the purpose of the issue upon
exercise of this Warrant a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.

         (b) Reservation. If any shares of Common Stock required to be reserved
for issuance upon exercise of this Warrant or as otherwise provided hereunder
require registration or qualification with any governmental authority under any
federal or state law before such shares may be so issued, the Issuer will in
good faith use its best efforts as expeditiously as possible at its expense to
cause such shares to be duly registered or qualified. If the Issuer shall list
any shares of Common Stock on any securities exchange or market it will, at its
expense, list thereon, maintain and increase when necessary such listing, of,
all shares of Warrant Stock from time to time issued upon exercise of this
Warrant or as otherwise provided hereunder, and, to the extent permissible under
the applicable securities exchange rules, all unissued shares of Warrant Stock
which are at any time issuable hereunder, so long as any shares of Common Stock
shall be so listed. The Issuer will also so list on each securities exchange or
market, and will maintain such listing of, any other securities which the Holder
of this Warrant shall be entitled to receive upon the exercise of this Warrant
if at the time any securities of the same class shall be listed on such
securities exchange or market by the Issuer.

         (c) Covenants. The Issuer shall not by any action including, without
limitation, amending the Certificate of Incorporation or the by-laws of the
Issuer, or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such actions as may be necessary or appropriate to
protect the rights of the Holder hereof against dilution (to the extent
specifically provided herein) or impairment. Without limiting the generality of
the foregoing, the Issuer will (i) not permit the par value, if any, of its
Common Stock to exceed the then effective Warrant Price, (ii) not amend or
modify any provision of the Certificate of Incorporation or by-laws of the
Issuer in any manner that would adversely affect in any way the powers,
preferences or relative participating, optional or other special rights of the
Common Stock or which would adversely affect the rights of the Holders of the
Warrants, (iii) take all such action as may be reasonably necessary in order
that the Issuer may validly and legally issue fully paid and nonassessable
shares of Common Stock, free and clear of any liens, claims, encumbrances and

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restrictions (other than as provided herein) upon the exercise of this Warrant,
and (iv) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
reasonably necessary to enable the Issuer to perform its obligations under this
Warrant.

         (d) Loss, Theft, Destruction of Warrants. Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Issuer
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same number of shares of Common Stock.

         (e) Rights and Obligations under the Registration Rights Agreement. The
Warrant Stock are entitled to the benefits and subject to the terms of the
Registration Rights Agreement dated as of even date herewith between the Issuer
and the Holders listed on the signature pages thereof (as amended from time to
time, the "Registration Rights Agreement"). The Issuer shall keep or cause to be
kept a copy of the Registration Rights Agreement, and any amendments thereto, at
its chief executive office and shall furnish, without charge, copies thereof to
the Holder upon request.

         4. Adjustment of Warrant Price and Warrant Share Number. The number and
kind of Securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the happening of
certain events as follows:

         (a) Recapitalization, Reorganization, Reclassification, Consolidation,
Merger or Sale. (i) In case the Issuer after the Original Issue Date shall do
any of the following (each, a "Triggering Event") (a) consolidate with or merge
into any other Person and the Issuer shall not be the continuing or surviving
corporation of such consolidation or merger, or (b) permit any other Person to
consolidate with or merge into the Issuer and the Issuer shall be the continuing
or surviving Person but, in connection with such consolidation or merger, any
Capital Stock of the Issuer shall be changed into or exchanged for Securities of
any other Person or cash or any other property, or (c) transfer all or
substantially all of its properties or assets to any other Person, or (d) effect
a capital reorganization or reclassification of its Capital Stock, then, and in
the case of each such Triggering Event, proper provision shall be made so that,
upon the basis and the terms and in the manner provided in this Warrant, the
Holder of this Warrant shall be entitled (x) upon the exercise hereof at any
time after the consummation of such Triggering Event, to the extent this Warrant
is not exercised prior to such Triggering Event, or is redeemed in connection
with such Triggering Event, to receive at the Warrant Price in effect at the
time immediately prior to the consummation of such Triggering Event in lieu of

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the Common Stock issuable upon such exercise of this Warrant prior to such
Triggering Event, the Securities, cash and property to which such Holder would
have been entitled upon the consummation of such Triggering Event if such Holder
had exercised the rights represented by this Warrant immediately prior thereto,
subject to adjustments and increases (subsequent to such corporate action) as
nearly equivalent as possible to the adjustments provided for in Section 4
hereof or (y) to sell this Warrant (or, at such Holder's election, a portion
hereof) to the Person continuing after or surviving such Triggering Event, or to
the Issuer (if Issuer is the continuing or surviving Person) at a sales price
equal to the amount of cash, property and/or Securities to which a holder of the
number of shares of Common Stock which would otherwise have been delivered upon
the exercise of this Warrant would have been entitled upon the effective date or
closing of any such Triggering Event (the "Event Consideration"), less the
amount or portion of such Event Consideration having a fair value equal to the
aggregate Warrant Price applicable to this Warrant or the portion hereof so
sold.

         (ii) Notwithstanding anything contained in this Warrant to the
contrary, the Issuer will not effect any Triggering Event unless, prior to the
consummation thereof, each Person (other than the Issuer) which may be required
to deliver any Securities, cash or property upon the exercise of this Warrant as
provided herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the Holder of this Warrant, (A) the obligations of the Issuer
under this Warrant (and if the Issuer shall survive the consummation of such
Triggering Event, such assumption shall be in addition to, and shall not release
the Issuer from, any continuing obligations of the Issuer under this Warrant)
and (B) the obligation to deliver to such Holder such shares of Securities, cash
or property as, in accordance with the foregoing provisions of this subsection
(a), such Holder shall be entitled to receive, and such Person shall have
similarly delivered to such Holder an opinion of counsel for such Person, which
counsel shall be reasonably satisfactory to such Holder, stating that this
Warrant shall thereafter continue in full force and effect and the terms hereof
(including, without limitation, all of the provisions of this subsection (a))
shall be applicable to the Securities, cash or property which such Person may be
required to deliver upon any exercise of this Warrant or the exercise of any
rights pursuant hereto.

         (iii) If with respect to any Triggering Event, the Holder of this
Warrant has exercised its right as provided in clause (y) of subparagraph (i) of
this subsection (a) to sell this Warrant or a portion thereof, the Issuer agrees
that as a condition to the consummation of any such Triggering Event the Issuer
shall secure such right of Holder to sell this Warrant to the Person continuing
after or surviving such Triggering Event and the Issuer shall not effect any
such Triggering Event unless upon or prior to the consummation thereof the
amounts of cash, property and/or Securities required under such clause (y) are
delivered to the Holder of this Warrant. The obligation of the Issuer to secure
such right of the Holder to sell this Warrant shall be subject to such Holder's

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cooperation with the Issuer, including, without limitation, the giving of
customary representations and warranties to the purchaser in connection with any
such sale. Prior notice of any Triggering Event shall be given to the Holder of
this Warrant in accordance with Section 11 hereof.

         (b) Subdivision or Combination of Shares. If the Issuer, at any time
while this Warrant is outstanding, shall subdivide or combine any shares of
Common Stock, (i) in case of subdivision of shares, the Warrant Price shall be
proportionately reduced (as at the effective date of such subdivision or, if the
Issuer shall take a record of Holders of its Common Stock for the purpose of so
subdividing, as at the applicable record date, whichever is earlier) to reflect
the increase in the total number of shares of Common Stock outstanding as a
result of such subdivision, or (ii) in the case of a combination of shares, the
Warrant Price shall be proportionately increased (as at the effective date of
such combination or, if the Issuer shall take a record of Holders of its Common
Stock for the purpose of so combining, as at the applicable record date,
whichever is earlier) to reflect the reduction in the total number of shares of
Common Stock outstanding as a result of such combination.

         (c) Certain Dividends and Distributions. If the Issuer, at any time
while this Warrant is outstanding, shall:

                  (i) Stock Dividends. Pay a dividend in, or make any other
         distribution to its stockholders (without consideration therefor) of,
         shares of Common Stock, the Warrant Price shall be adjusted, as at the
         date the Issuer shall take a record of the Holders of the Issuer's
         Capital Stock for the purpose of receiving such dividend or other
         distribution (or if no such record is taken, as at the date of such
         payment or other distribution), to that price determined by multiplying
         the Warrant Price in effect immediately prior to such record date (or
         if no such record is taken, then immediately prior to such payment or
         other distribution), by a fraction (1) the numerator of which shall be
         the total number of shares of Common Stock outstanding immediately
         prior to such dividend or distribution, and (2) the denominator of
         which shall be the total number of shares of Common Stock outstanding
         immediately after such dividend or distribution (plus in the event that
         the Issuer paid cash for fractional shares, the number of additional
         shares which would have been outstanding had the Issuer issued
         fractional shares in connection with said dividends); or

                  (ii) Other Dividends. Pay a dividend on, or make any
         distribution of its assets upon or with respect to (including, but not
         limited to, a distribution of its property as a dividend in liquidation
         or partial liquidation or by way of return of capital), the Common
         Stock (other than as described in clause (i) of this subsection (c)),
         or in the event that the Company shall offer options or rights to
         subscribe for shares of Common Stock, or issue any Common Stock

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         Equivalents, to all of its holders of Common Stock, then on the record
         date for such payment, distribution or offer or, in the absence of a
         record date, on the date of such payment, distribution or offer, the
         Holder shall receive what the Holder would have received had it
         exercised this Warrant in full immediately prior to the record date of
         such payment, distribution or offer or, in the absence of a record
         date, immediately prior to the date of such payment, distribution or
         offer.

         (d) Other Provisions Applicable to Adjustments Under this Section 4.
The following provisions shall be applicable to the making of adjustments in the
Warrant Price hereinbefore provided in Section 4:

                  (i) Computation of Consideration. The consideration received
         by the Issuer shall be deemed to be the following: to the extent that
         any Additional Shares of Common Stock or any Common Stock Equivalents
         shall be issued for a cash consideration, the consideration received by
         the Issuer therefor, or if such Additional Shares of Common Stock or
         Common Stock Equivalents are offered by the Issuer for subscription,
         the subscription price, or, if such Additional Shares of Common Stock
         or Common Stock Equivalents are sold to underwriters or dealers for
         public offering without a subscription offering, the public offering
         price, in any such case excluding any amounts paid or receivable for
         accrued interest or accrued dividends and without deduction of any
         compensation, discounts, commissions, or expenses paid or incurred by
         the Issuer for or in connection with the underwriting thereof or
         otherwise in connection with the issue thereof; to the extent that such
         issuance shall be for a consideration other than cash, then, except as
         herein otherwise expressly provided, the fair market value of such
         consideration at the time of such issuance as determined in good faith
         by the Board. The consideration for any Additional Shares of Common
         Stock issuable pursuant to any Common Stock Equivalents shall be the
         consideration received by the Issuer for issuing such Common Stock
         Equivalents, plus the additional consideration payable to the Issuer
         upon the exercise, conversion or exchange of such Common Stock
         Equivalents. In case of the issuance at any time of any Additional
         Shares of Common Stock or Common Stock Equivalents in payment or
         satisfaction of any dividend upon any class of Capital Stock of the
         Issuer other than Common Stock, the Issuer shall be deemed to have
         received for such Additional Shares of Common Stock or Common Stock
         Equivalents a consideration equal to the amount of such dividend so
         paid or satisfied. In any case in which the consideration to be
         received or paid shall be other than cash, the Board shall notify the
         Holder of this Warrant of its determination of the fair market value of
         such consideration prior to payment or accepting receipt thereof. If,
         within thirty days after receipt of said notice, the Majority Holders
         shall notify the Board in writing of their objection to such

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         determination, a determination of the fair market value of such
         consideration shall be made by an Independent Appraiser selected by the
         Majority Holders with the approval of the Board (which approval shall
         not be unreasonably withheld), whose fees and expenses shall be paid by
         the Issuer.

                  (ii) Readjustment of Warrant Price. Upon the expiration or
         termination of the right to convert, exchange or exercise any Common
         Stock Equivalent the issuance of which effected an adjustment in the
         Warrant Price, if such Common Stock Equivalent shall not have been
         converted, exercised or exchanged in its entirety, the number of shares
         of Common Stock deemed to be issued and outstanding by reason of the
         fact that they were issuable upon conversion, exchange or exercise of
         any such Common Stock Equivalent shall no longer be computed as set
         forth above, and the Warrant Price shall forthwith be readjusted and
         thereafter be the price which it would have been (but reflecting any
         other adjustments in the Warrant Price made pursuant to the provisions
         of this Section 4 after the issuance of such Common Stock Equivalent)
         had the adjustment of the Warrant Price been made in accordance with
         the issuance or sale of the number of Additional Shares of Common Stock
         actually issued upon conversion, exchange or issuance of such Common
         Stock Equivalent and thereupon only the number of Additional Shares of
         Common Stock actually so issued shall be deemed to have been issued and
         only the consideration actually received by the Issuer (computed as in
         clause (i) of this subsection (g)) shall be deemed to have been
         received by the Issuer.

                  (iii) Outstanding Common Stock. The number of shares of Common
         Stock at any time outstanding shall (A) not include any shares thereof
         then directly or indirectly owned or held by or for the account of the
         Issuer or any of its Subsidiaries, and (B) be deemed to include all
         shares of Common Stock then issuable upon conversion, exercise or
         exchange of any then outstanding Common Stock Equivalents or any other
         evidences of Indebtedness, shares of Capital Stock or other Securities
         which are or may be at any time convertible into or exchangeable for
         shares of Common Stock or Other Common Stock.

         (e) Other Action Affecting Common Stock. In case after the Original
Issue Date the Issuer shall take any action affecting its Common Stock, other
than an action described in any of the foregoing subsections (a) through (d) of
this Section 4, inclusive, and the failure to make any adjustment would not
fairly protect the purchase rights represented by this Warrant in accordance
with the essential intent and principle of this Section 4, then the Warrant
Price shall be adjusted in such manner and at such time as the Board may in good
faith determine to be equitable in the circumstances.

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         (f) Adjustment of Warrant Share Number. Upon each adjustment in the
Warrant Price pursuant to any of the foregoing provisions of this Section 4, the
Warrant Share Number shall be adjusted, to the nearest one hundredth of a whole
share, to the product obtained by multiplying the Warrant Share Number
immediately prior to such adjustment in the Warrant Price by a fraction, the
numerator of which shall be the Warrant Price immediately before giving effect
to such adjustment and the denominator of which shall be the Warrant Price
immediately after giving effect to such adjustment. If the Issuer shall be in
default under any provision contained in Section 3 of this Warrant so that
shares issued at the Warrant Price adjusted in accordance with this Section 4
would not be validly issued, the adjustment of the Warrant Share Number provided
for in the foregoing sentence shall nonetheless be made and the Holder of this
Warrant shall be entitled to purchase such greater number of shares at the
lowest price at which such shares may then be validly issued under applicable
law. Such exercise shall not constitute a waiver of any claim arising against
the Issuer by reason of its default under Section 3 of this Warrant.

         (g) Form of Warrant after Adjustments. The form of this Warrant need
not be changed because of any adjustments in the Warrant Price or the number and
kind of Securities purchasable upon the exercise of this Warrant.

         5. Notice of Adjustments. Whenever the Warrant Price or Warrant Share
Number shall be adjusted pursuant to Section 4 hereof (for purposes of this
Section 5, each an "adjustment"), the Issuer shall cause its Chief Financial
Officer to prepare and execute a certificate setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated (including a description of the
basis on which the Board made any determination hereunder), and the Warrant
Price and Warrant Share Number after giving effect to such adjustment, and shall
cause copies of such certificate to be delivered to the Holder of this Warrant
promptly after each adjustment. Any dispute between the Issuer and the Holder of
this Warrant with respect to the matters set forth in such certificate may at
the option of the Holder of this Warrant be submitted to one of the national
accounting firms currently known as the "big five" selected by the Holder,
provided that the Issuer shall have ten days after receipt of notice from such
Holder of its selection of such firm to object thereto, in which case such
Holder shall select another such firm and the Issuer shall have no such right of
objection. The firm selected by the Holder of this Warrant as provided in the
preceding sentence shall be instructed to deliver a written opinion as to such
matters to the Issuer and such Holder within thirty days after submission to it
of such dispute. Such opinion shall be final and binding on the parties hereto.
The fees and expenses of such accounting firm shall be paid by the Issuer.

         6. Fractional Shares. No fractional shares of Warrant Stock will be
issued in connection with and exercise hereof, but in lieu of such fractional
shares, the Issuer shall make a cash payment therefor equal in amount to the
product of the applicable fraction multiplied by the Per Share Market Value then
in effect.

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         7. Warrant Exercise Restriction. Notwithstanding anything to the
contrary set forth in this Warrant, at no time may a holder of this Warrant
exercise this Warrant, or a portion hereof, if the number of shares of Common
Stock to be issued pursuant to such exercise would exceed, when aggregated with
all other shares of Common Stock owned by such holder at such time, would result
in such holder owning more than 4.99% of all of the Common Stock issued and
outstanding at such time; provided, however, that upon a holder of this Warrant
providing the Issuer with 75 days notice (pursuant to Section 11 hereof) (the
"Waiver Notice") that such holder would like to waive Section 7 of this Warrant
with regard to any or all shares of Common Stock issuable upon exercise of the
Warrant, this Section 7 will be of no further force or effect with regard to the
number of shares exercisable pursuant to the Warrant, or the applicable portion
thereof, referenced in the Waiver Notice.

         8. Definitions. For the purposes of this Warrant, the following terms
have the following meanings:

                  "Additional Shares of Common Stock" means all shares of Common
Stock issued by the Issuer after the Original Issue Date, and all shares of
Other Common, if any, issued by the Issuer after the Original Issue Date, except
(i) Warrant Stock, (ii) any shares of Common Stock issuable upon conversion of
the Notes pursuant to the Purchase Agreement, (iii) any shares of Common Stock
issuable upon conversion of the Series B Preferred Shares and exercise of the
warrants issued pursuant to the Preferred Stock Securities Purchase Agreement
dated November 16, 2001, and (iv) options or warrants or rights to purchase
stock issued to officers and/or directors of the Maker and any shares of Common
Stock issuable upon exercise of the Stock Options.

                  "Board" shall mean the Board of Directors of the Issuer.

                  "Capital Stock" means and includes (i) any and all shares,
         interests, participations or other equivalents of or interests in
         (however designated) corporate stock, including, without limitation,
         shares of preferred or preference stock, (ii) all partnership interests
         (whether general or limited) in any Person which is a partnership,
         (iii) all membership interests or limited liability company interests
         in any limited liability company, and (iv) all equity or ownership
         interests in any Person of any other type.

                  "Certificate of Incorporation" means the Certificate of
         Incorporation of the Issuer as in effect on the Original Issue Date,
         and as hereafter from time to time amended, modified, supplemented or
         restated in accordance with the terms hereof and thereof and pursuant
         to applicable law.

                  "Original Issue Date" means November 16, 2001.

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                  "Common Stock" means the Common Stock, no par value, of the
         Issuer and any other Capital Stock into which such stock may hereafter
         be changed.

                  "Common Stock Equivalent" means any Convertible Security or
         warrant, option or other right to subscribe for or purchase any
         Additional Shares of Common Stock or any Convertible Security.

                  "Convertible Securities" means the Notes, evidences of
         Indebtedness, shares of Capital Stock or other Securities which are or
         may be at any time convertible into or exchangeable for Additional
         Shares of Common Stock. The term "Convertible Security" means one of
         the Convertible Securities.

                  "Governmental Authority" means any governmental, regulatory or
         self-regulatory entity, department, body, official, authority,
         commission, board, agency or instrumentality, whether federal, state or
         local, and whether domestic or foreign.

                  "Holders"  mean the  Persons who shall from  time to time own
         any  Warrant.  The term  "Holder" means one of the Holders.

                  "Independent Appraiser" means a nationally recognized or major
         regional investment banking firm or firm of independent certified
         public accountants of recognized standing (which may be the firm that
         regularly examines the financial statements of the Issuer) that is
         regularly engaged in the business of appraising the Capital Stock or
         assets of corporations or other entities as going concerns, and which
         is not affiliated with either the Issuer or the Holder of any Warrant.

                  "Issuer" means Diamond Entertainment Corporation, a New Jersey
         corporation, and its successors.

                  "Majority Holders" means at any time the Holders of Warrants
         exercisable for a majority of the shares of Warrant Stock issuable
         under the Warrants at the time outstanding.

                  "NASDAQ" means the National Association of Securities Dealers
         Automated Quotation System.

                  "Other Common" means any other Capital Stock of the Issuer of
         any class which shall be authorized at any time after the date of this
         Warrant (other than Common Stock) and which shall have the right to
         participate in the distribution of earnings and assets of the Issuer
         without limitation as to amount.

                  "Person" means an individual, corporation, limited liability
         company, partnership, joint stock company, trust, unincorporated
         organization, joint venture, Governmental Authority or other entity of
         whatever nature.

                  "Per Share Market Value" means on any particular date (a) the
         closing bid price per share of the Common Stock on such date on The

                                       12
<PAGE>

         Nasdaq Small-Cap Market, the Nasdaq National Market or other registered
         national stock exchange on which the Common Stock is then listed or if
         there is no such price on such date, then the closing bid price on such
         exchange or quotation system on the date nearest preceding such date,
         or (b) if the Common Stock is not listed then on The Nasdaq Small-Cap
         Market, the Nasdaq National Market or any registered national stock
         exchange, the closing bid price for a share of Common Stock in the
         over-the-counter market, as reported by NASDAQ or in the National
         Quotation Bureau Incorporated or similar organization or agency
         succeeding to its functions of reporting prices) at the close of
         business on such date, or (c) if the Common Stock is not then reported
         by the National Quotation Bureau Incorporated (or similar organization
         or agency succeeding to its functions of reporting prices), then the
         average of the "Pink Sheet" quotes for the relevant conversion period,
         as determined in good faith by the holder, or (d) if the Common Stock
         is not then publicly traded the fair market value of a share of Common
         Stock as determined by an Independent Appraiser selected in good faith
         by the Majority Holders; provided, however, that the Issuer, after
         receipt of the determination by such Independent Appraiser, shall have
         the right to select an additional Independent Appraiser, in which case,
         the fair market value shall be equal to the average of the
         determinations by each such Independent Appraiser; and provided,
         further that all determinations of the Per Share Market Value shall be
         appropriately adjusted for any stock dividends, stock splits or other
         similar transactions during such period. The determination of fair
         market value by an Independent Appraiser shall be based upon the fair
         market value of the Issuer determined on a going concern basis as
         between a willing buyer and a willing seller and taking into account
         all relevant factors determinative of value, and shall be final and
         binding on all parties. In determining the fair market value of any
         shares of Common Stock, no consideration shall be given to any
         restrictions on transfer of the Common Stock imposed by agreement or by
         federal or state securities laws, or to the existence or absence of, or
         any limitations on, voting rights.

                  "Purchase Agreement" means the Securities Purchase Agreement
         dated as of November 16, 2001 among the Issuer and the purchaser named
         therein.

                  "Registration Rights Agreement" has the meaning specified in
         Section 3(e) hereof.

                  "Securities" means any debt or equity securities of the
         Issuer, whether now or hereafter authorized, any instrument convertible
         into or exchangeable for Securities or a Security, and any option,
         warrant or other right to purchase or acquire any Security. "Security"
         means one of the Securities.

                                       13
<PAGE>

                  "Securities Act" means the Securities Act of 1933, as amended,
         or any similar federal statute then in effect.

                  "Stock Options" means options to purchase shares of Common
         Stock issued by the Issuer on the Original Issue Date to certain
         members of the Issuer's senior management, as the same may from time to
         time be amended, modified or supplemented in accordance with their
         terms.

                  "Subsidiary" means any corporation at least 50% of whose
         outstanding Voting Stock shall at the time be owned directly or
         indirectly by the Issuer or by one or more of its Subsidiaries, or by
         the Issuer and one or more of its Subsidiaries.

                  "Trading Day" means (a) a day on which the Common Stock is
         traded on The Nasdaq Small-Cap Market, the Nasdaq National Market or
         other registered national stock exchange on which the Common Stock has
         been listed, or (b) if the Common Stock is not listed on The Nasdaq
         Small-Cap Market, the Nasdaq National Market or any registered national
         stock exchange, a day or which the Common Stock is traded in the
         over-the-counter market, as reported by the OTC Bulletin Board, or (c)
         if the Common Stock is not quoted on the OTC Bulletin Board, a day on
         which the Common Stock is quoted in the over-the-counter market as
         reported by the National Quotation Bureau Incorporated (or any similar
         organization or agency succeeding its functions of reporting prices);
         provided, however, that in the event that the Common Stock is not
         listed or quoted as set forth in (a), (b) and (c) hereof, then Trading
         Day shall mean any day except Saturday, Sunday and any day which shall
         be a legal holiday or a day on which banking institutions in the State
         of New York are authorized or required by law or other government
         action to close.

                  "Term" has the meaning specified in Section 1 hereof.

                  "Voting Stock", as applied to the Capital Stock of any
         corporation, means Capital Stock of any class or classes (however
         designated) having ordinary voting power for the election of a majority
         of the members of the Board of Directors (or other governing body) of
         such corporation, other than Capital Stock having such power only by
         reason of the happening of a contingency.

                  "Warrants" means the Warrants issued and sold pursuant to the
         Purchase Agreement, including, without limitation, this Warrant, and
         any other warrants of like tenor issued in substitution or exchange for
         any thereof pursuant to the provisions of Section 2(c), 2(d) or 2(e)
         hereof or of any of such other Warrants.

                                       14
<PAGE>

                  "Warrant Price" means initially $.02, as such price may be
         adjusted from time to time as shall result from the adjustments
         specified in Section 4 hereof.

                  "Warrant Share Number" means at any time the aggregate number
         of shares of Warrant Stock which may at such time be purchased upon
         exercise of this Warrant, after giving effect to all prior adjustments
         and increases to such number made or required to be made under the
         terms hereof.

                  "Warrant Stock" means Common Stock issuable upon exercise of
         any Warrant or Warrants or otherwise issuable pursuant to any Warrant
         or Warrants.

         8.       Other Notices.  In case at any time:

                                    (A)     the  Issuer  shall  make any
                                            distributions  to the  holders  of
                                            Common Stock; or

                                    (B)     the Issuer shall authorize the
                                            granting to all holders of its
                                            Common Stock of rights to subscribe
                                            for or purchase any shares of
                                            Capital Stock of any class or of any
                                            Common Stock Equivalents or
                                            Convertible Securities or other
                                            rights; or

                                    (C)     there  shall be any reclassification
                                            of the Capital Stock of the Issuer;
                                            or

                                    (D)     there shall be any capital
                                            reorganization by the Issuer; or

                                    (E)     there shall be any (i) consolidation
                                            or merger involving the Issuer or
                                            (ii) sale, transfer or other
                                            disposition of all or substantially
                                            all of the Issuer's property, assets
                                            or business (except a merger or
                                            other reorganization in which the
                                            Issuer shall be the surviving
                                            corporation and its shares of
                                            Capital Stock shall continue to be
                                            outstanding and unchanged and except
                                            a consolidation, merger, sale,
                                            transfer or other disposition
                                            involving a wholly-owned
                                            Subsidiary); or

                                       15
<PAGE>

                                    (F)     there shall be a voluntary or
                                            involuntary dissolution, liquidation
                                            or winding-up of the Issuer or any
                                            partial liquidation of the Issuer or
                                            distribution to holders of Common
                                            Stock;

then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
days prior to the action in question and not less than twenty days prior to the
record date or the date on which the Issuer's transfer books are closed in
respect thereto. The Issuer shall give to the Holder notice of all meetings and
actions by written consent of its stockholders, at the same time in the same
manner as notice of any meetings of stockholders is required to be given to
stockholders who do not waive such notice (or, if such requires no notice, then
two Trading Days written notice thereof describing the matters upon which action
is to be taken). The Holder shall have the right to send two representatives
selected by it to each meeting, who shall be permitted to attend, but not vote
at, such meeting and any adjournments thereof. This Warrant entitles the Holder
to receive copies of all financial and other information distributed or required
to be distributed to the holders of the Common Stock.

         9. Amendment and Waiver. Any term, covenant, agreement or condition in
this Warrant may be amended, or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), by a written instrument or written instruments executed by the
Issuer and the Majority Holders; provided, however, that no such amendment or
waiver shall reduce the Warrant Share number, increase the Warrant Price,
shorten the period during which this Warrant may be exercised or modify any
provision of this Section 9 without the consent of the Holder of this Warrant.

         10. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.

         11. Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earlier of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice prior to 5:00 p.m., Los Angeles City time,
on a Business Day, (ii) the Business Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified for notice later than 5:00 p.m., Los Angeles City time, on any
date and earlier than 11:59 p.m., Los Angeles time, on such date, (iii) the

                                       16
<PAGE>

Business Day following the date of mailing, if sent by nationally recognized
overnight courier service or (iv) actual receipt by the party to whom such
notice is required to be given. The addresses for such communications shall be
with respect to the Holder of this Warrant or of Warrant Stock issued pursuant
hereto, addressed to such Holder at its last known address or facsimile number
appearing on the books of the Issuer maintained for such purposes, or with
respect to the Issuer, addressed to:

                  Diamond Entertainment Corporation
                  800 Tucker Lane
                  Walnut, California 91789
                  Attention:  President
                  Facsimile No. (909) 869-1990

or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Naccarato & Associates, 19600 Fairchild, Suite 260, Irvine CA
92612 Attention: Owen Naccarato, Facsimile No.: (949) 851-9262.

         12. Warrant Agent. The Issuer may, by written notice to each Holder of
this Warrant, appoint an agent having an office in New York, NY 10004 for the
purpose of issuing shares of Warrant Stock on the exercise of this Warrant
pursuant to subsection (b) of Section 2 hereof, exchanging this Warrant pursuant
to subsection (d) of Section 2 hereof or replacing this Warrant pursuant to
subsection (d) of Section 3 hereof, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.

         13. Remedies. The Issuer stipulates that the remedies at law of the
Holder of this Warrant in the event of any default or threatened default by the
Issuer in the performance of or compliance with any of the terms of this Warrant
are not and will not be adequate and that, to the fullest extent permitted by
law, such terms may be specifically enforced by a decree for the specific
performance of any agreement contained herein or by an injunction against a
violation of any of the terms hereof or otherwise.

         14. Successors and Assigns. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors and
assigns of the Issuer, the Holder hereof and (to the extent provided herein) the
Holders of Warrant Stock issued pursuant hereto, and shall be enforceable by any
such Holder or Holder of Warrant Stock

         15. Modification and Severability. If, in any action before any court
or agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.

         16. Headings. The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.

                                       17
<PAGE>

         IN WITNESS WHEREOF, the Issuer has executed this Warrant as of the day
and year first above written.

                                      Diamond Entertainment Corporation

                                      By: /s/ James K.T. Lu
                                         -------------------------
                                            James K.T. Lu
                                            President & Chief Executive Officer

                                       18
<PAGE>

                                  EXERCISE FORM

Diamond Entertainment Corporation

The undersigned             , pursuant to the provisions of the within
                ------------
Warrant, hereby elects to purchase             shares of Common Stock of Diamond
                                  -------------
Entertainment Corporation covered by the within Warrant.

Dated:                    Signature
      ----------------                -------------------------

                          Address     -------------------------

                                   ASSIGNMENT

FOR VALUE RECEIVED,                hereby sells, assigns and transfers unto
                    --------------
                    the within Warrant and all rights evidenced thereby and does
------------------
irrevocably constitute and appoint              , attorney, to transfer the said
                                   -------------
Warrant on the books of the within named corporation.

Dated:                    Signature
      ----------------                -------------------------

                          Address     -------------------------

                               PARTIAL ASSIGNMENT

FOR VALUE RECEIVED,                    hereby sells, assigns and transfers unto
                   the right to purchase           shares of Warrant Stock
------------------                       ----------
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint                 , attorney, to transfer
                                   ----------------
that part of the said Warrant on the books of the within named corporation.

Dated:                    Signature
      ----------------                -------------------------

                          Address     -------------------------

                           FOR USE BY THE ISSUER ONLY:

This Warrant No. W-       cancelled (or transferred or exchanged) this       day
                   ------                                              -----
of           ,       , shares of Common Stock issued therefor in the name of
   ---------  -------
               , Warrant No. W-    issued for        shares of Common Stock in
--------------                 ---            ------
the name of                    .
            ------------------

                                                                   Exhibit 10.35

                                       19Exhibit 10.35

                          REGISTRATION RIGHTS AGREEMENT

         REGISTRATION RIGHTS AGREEMENT dated this 16th day of November, 2001
(this "Agreement"), between Diamond Entertainment Corporation, a New Jersey
corporation with principal executive offices located at 800 Tucker Lane, Walnut,
California 91789 (the "Company"), and the other signatories hereto (the "Initial
Investors").

W I T N E S S E T H

         WHEREAS, upon the terms and subject to the conditions of the Securities
Purchase Agreement dated as of a date even herewith, between the Initial
Investors and the Company (the "Securities Purchase Agreement"), the Company has
agreed to issue and sell to the Initial Investors (i) 15 shares of Series B
Convertible Preferred Stock, no par value ("Preferred Stock") which, upon the
terms and subject to the conditions set forth in the Articles of Amendment of
the Articles of Incorporation of the Company designating the rights, preferences
and limitations of the Series B Convertible Preferred Stock (the "Certificate of
Designations") are convertible into shares of common stock, no par value, of the
Company ("Common Stock") and (ii) warrants ("Warrants") to purchase 2,250,000
shares of Common Stock.

         WHEREAS, to induce the Initial Investors to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide with respect to
the Common Stock issued or issuable upon conversion of the Preferred Stock and
exercise of the Warrants certain registration rights under the Securities Act
(as hereinafter defined);

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:

         1.       Definitions.

         (a) As used in this Agreement, the following terms shall have the
meanings:

                  (i) "Affiliate" of any specified Person means any other Person
         who directly, or indirectly through one or more intermediaries, is in
         control of, is controlled by, or is under common control with, such
         specified Person. For purposes of this definition, control of a Person
         means the power, directly or indirectly, to direct or cause the
         direction of the management and policies of such Person whether by
         contract, securities, ownership or otherwise; and the terms
         "controlling" and "controlled" have the respective meanings correlative
         to the foregoing.

                  (ii) "Commission" means the Securities and Exchange
Commission.

                                       1
<PAGE>

                  (iii) "Exchange Act" means the Securities Exchange Act of
         1934, as amended, and the rules and regulations of the Commission
         thereunder, or any similar successor statute.

                  (iv) "Investors" means the Initial Investors and any
         transferee or assignee of Registrable Securities who agrees to become
         bound by all of the terms and provisions of this Agreement in
         accordance with Section 8 hereof.

                  (v) "Market Price" on any date of determination means the
         closing bid price of a share of Common Stock on such day as reported on
         the over the counter Bulletin Board ("OTC"BB") or, if such security is
         not listed or admitted to trading on the OTC:BB, on any national
         security exchange or quotation system on which such security is quoted
         or listed or admitted to trading, or, if not quoted or listed or
         admitted to trading on any securities exchange or quotation system, the
         closing bid price of such security on the pink-sheets market on the day
         in question as reported by the National Quotation Bureau Incorporated,
         or a similar generally accepted reporting service, or if not so
         available, in such manner as furnished by any NASDAQ member firm of the
         National Association of Securities Dealers, Inc. selected from time to
         time by the Board of Directors of the Company for that purpose, or a
         price determined in good faith by the Board of Directors of the Company
         as being equal to the fair market value thereof, as the case may be.

                  (vi) "Person" means any individual, partnership, corporation,
         limited liability company, joint stock company, association, trust,
         unincorporated organization, or a government or agency or political
         subdivision thereof.

                  (vii) "Prospectus" means the prospectus (including" without
         limitation, any preliminary prospectus and any final prospectus filed
         pursuant to Rule 424(b) under the Securities Act, including any
         prospectus that discloses information previously omitted from a
         prospectus filed as part of an effective registration statement in
         reliance on Rule 430A under the Securities Act) included in the
         Registration Statement, as amended or supplemented by any prospectus
         supplement with respect to the terms of the offering of any portion of
         the Registrable Securities covered by the Registration Statement and by
         all other amendments and supplements to such prospectus, including all
         material incorporated by reference in such prospectus and all documents
         filed after the date of such prospectus by the Company under the
         Exchange Act and incorporated by reference therein.

                  (viii) "Registrable Securities" means the Common Stock issued
         or issuable (i) upon conversion of the Preferred Stock or (iii) upon
         exercise of the Warrants; provided, however, a share of Common Stock
         shall cease to be a Registrable Security for purposes of this Agreement
         when it no longer is a Restricted Security.

                  (ix) "Registration Statement" means a registration statement
         of the Company filed on an appropriate form under the Securities Act
         providing for the registration of, and the sale on a continuous or

                                       2
<PAGE>

         delayed basis by the holders of, all of the Registrable Securities
         pursuant to Rule 415 under the Securities Act, including the Prospectus
         contained therein and forming a part thereof, any amendments to such
         registration statement and supplements to such Prospectus, and all
         exhibits and other material incorporated by reference in such
         registration statement and Prospectus.

                  (x) "Restricted Security" means any share of Common Stock
         issued or issuable upon conversion of the Preferred Stock or exercise
         of the Warrants, except any such share that (i) has been registered
         pursuant to an effective registration statement under the Securities
         Act and sold in a manner contemplated by the Prospectus included in the
         Registration Statement, (ii) has been transferred in compliance with
         the resale provisions of Rule 144 under the Securities Act (or any
         successor provision thereto) or is transferable pursuant to paragraph
         (k) of Rule 144 under the Securities Act (or any successor provision
         thereto), or (iii) otherwise has been transferred and a new share of
         Common Stock not subject to transfer restrictions under the Securities
         Act has been delivered by or on behalf of the Company.

                  (xi) "Securities Act" means the Securities Act of 1933, as
         amended, and the rules and, regulations of the Commission thereunder,
         or any similar successor statute.

         (b) All capitalized terms used and not defined herein have the
respective meaning assigned to them in the Securities Purchase Agreement.

         2.       Registration.

         (a) Filing and Effectiveness of Registration Statement. The Company
shall prepare and file with the Commission by not later than 90 days after the
Closing Date (as defined in the Securities Purchase Agreement), a Registration
Statement relating to the offer and sale of the Registrable Securities and shall
use its best efforts to cause the Commission to declare such Registration
Statement effective under the Securities Act as promptly as practicable but not
later than 180 days after the Closing Date, assuming for purposes hereof a
Conversion Price as defined in the Certificate of Designations. The Company
shall notify the Initial Investors by written notice that such Registration
Statement has been declared effective by the Commission within one business day
of such declaration by the Commission.

         (b) Registration Default. If the Registration Statement covering the
Registrable Securities or the Additional Registrable Securities (as defined in
Section 2 (d) hereof) required to be filed by the Company pursuant to Section
2(a) or 2(d) hereof, as the case may be, is not (i) filed with the Commission
within 90 days after the Closing Date or (ii) declared effective by the
Commission within 180 days after the Closing Date, or if the Commission notifies

                                       3
<PAGE>

the Company that it will not review the Registration Statement and the
Registration Statement is not declared effective not later than five business
days thereafter (any of which, without duplication, an "Initial Date"), then the
Company shall make the payments to the Initial Investors as provided in the next
sentence as liquidated damages and not as a penalty. The amount to be paid by
the Company to the Initial Investors (pro rated on a daily basis) shall be
determined as of each Computation Date, and such amount shall be equal to one
percent (1%) (the "Liquidated Damage Rate") of the Purchase Price per share of
Preferred Stock (as defined in the Securities Purchase Agreement) from the
Initial Date (the date the registration becomes effective or the date that the
Commission notifies the Company that it will not review the Registration
Statement) to the first Computation Date in the event of late filing, and one
percent (1%) of the purchase price per share of Preferred Stock for every thirty
(30) day period thereafter until the Registration Statement has been filed and
in the event of late effectiveness, one percent (1%) of the purchase price per
share of Preferred Stock for every thirty (30) day period thereafter until the
Registration Statement has been declared effective. The full amount of
liquidated damages shall be paid by the Company to the Initial Investors by wire
transfer of immediately available funds within three days after each Computation
Date. The Company may pay the liquidation damages in additional shares of Common
Stock based upon the Market Price (so defined in the Certificate of
Designations), as determined on the date of payment.

         As used in this Section 2 (b), "Computation Date" means the date which
is 30 days after the Initial Date and, if the Registration Statement required to
be filed by the Company pursuant to Section 2(a) has not theretofore been
declared effective by the Commission, each date which is 30 days after the
previous Computation Date until such Registration Statement is so declared
effective.

         If the Company does not remit the damages to the Holder as set forth
above, the Company will pay the Holder reasonable costs of collection, including
attorneys fees, in addition to the liquidated damages. The registration of the
Securities pursuant to this provision shall not affect or limit Holder's other
rights or remedies as set forth in this Agreement.

         (c) Eligibility for Use of Form SB2. The Company agrees that at such
time as it meets all the requirements for the use of Securities Act Registration
Statement on Form SB2 it shall file all reports and information required to be
filed by it with the Commission in a timely manner and take all such other
action so as to maintain such eligibility for the use of such form.

         (d) Additional Registration Statement. File additional Registration
Statements if the number of Registrable Securities at any time exceeds 85% of
the number of shares of Common Stock then registered in all their existing
Registration Statements hereunder which additional Registration Statement shall
cover 120% or more of the number of unregistered Registrable Securities.

                                       4
<PAGE>

         (e) Piggy-back Registrations. (i) If the Company proposes to register
any of its warrants, Common Stock or any other shares of common stock of the
Company under the Securities Act (other than a registration (A) on Form S-8 or
S-4 or any successor or similar forms, (B) relating to Common Stock or any other
shares of common stock of the Company issuable upon exercise of employee share
options or in connection with any employee benefit or similar plan of the
Company or (C) in connection with a direct or indirect acquisition by the
Company of another Person or any transaction with respect to which Rule 145 (or
any successor provision) under the Securities Act applies), whether or not for
sale for its own account, it will each such time, give prompt written notice at
least 20 days prior to the anticipated filing date of the registration statement
relating to such registration to the Initial Investors, which notice shall set
forth such Initial Investors' rights under this Section 2(e) and shall offer the
Initial Investors the opportunity to include in such registration statement such
number of Registrable Securities as the Initial Investors may request. Upon the
written request of an Initial Investors made within ten (10) days after the
receipt of notice from the Company (which request shall specify the number of
Registrable Securities intended to be disposed of by such Initial Investors),
the Company will use its best efforts to effect the registration under the
Securities Laws of all Registrable Securities that the Company has been so
requested to register by the Initial Investors, to the extent requisite to
permit the disposition of the Registrable Securities so to be registered;
provided, however, that (A) if such registration involves a public offering, the
Initial Investors must sell their Registrable Securities to the underwriters
selected as provided in Section 2(f) hereof on the same terms and conditions as
apply to the Company and (B) if, at any time after giving written notice of its
intention to register any Registrable Securities pursuant to this Section 2 and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason not to
register such Registrable Securities, the Company shall give written notice to
the Initial Investors and, thereupon, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration. The
Company's obligations under this Section 2(e) shall terminate on the date that
the registration statement to be filed in accordance with Section 2(a) is
declared effective by the Commission.

         (ii) If a registration pursuant to this Section 2(e) involves a public
offering and the managing underwriter thereof advises the Company that, in its
view, the number of shares of Common Stock, warrants or other shares of Common
Stock that the Company and the Initial Investors intend to include in such
registration exceeds the largest number of shares of Common Stock or warrants
(including any other shares of Common Stock or warrants of the Company) that can
be sold without having an adverse effect on such public offering (the "Maximum
Offering Size"), the Company will include in such registration, only that number
of shares of Common Stock or warrants, as applicable, such that the number of
Registrable Securities registered does not exceed the Maximum Offering Size,
with the difference between the number of shares in the Maximum Offering Size
and the number of shares to be issued by the Company to be allocated (after

                                       5
<PAGE>

including all shares to be issued and sold by the Company) among the Company and
the Initial Investors pro rata on the basis of the relative number of
Registrable Securities offered for sale under such registration by each of the
Company and the Initial Investors.

         If as a result of the proration provisions of this Section 2 (e)(ii),
any Initial Investors is not entitled to include all such Registrable Securities
in such registration, such Initial Investors may elect to withdraw its request
to include any Registrable Securities in such registration. With respect to
registrations pursuant to this Section 2(e), the number of securities required
to satisfy any underwriters' over-allotment option shall be allocated pro rata
among the Company and the Initial Investors on the basis of the relative number
of securities otherwise to be included by each of them in the registration with
respect to which such over-allotment option relates.

         3. Obligations of the Company. In connection with the registration of
the Registrable Securities, the Company shall:

         (a) Promptly (i) prepare and file with the Commission such amendments
(including post-effective amendments) to the Registration Statement and
supplements to the Prospectus as may be necessary to keep the Registration
Statement continuously effective and in compliance with the provisions of the
Securities Act applicable thereto so as to permit the Prospectus forming part
thereof to be current and useable by Investors for resales of the Registrable
Securities for a period of one year (such period to be extended by a period
equal to any change in the Mandatory Conversion Date (as defined in the
Certificate of Designations) from the date on which the Registration Statement
is first declared effective by the Commission (the "Effective Time") or such
shorter period that will terminate when all the Registrable Securities covered
by the Registration Statement have been sold pursuant thereto in accordance with
the plan of distribution provided in the Prospectus, capable of being
transferred pursuant to Rule 144 under the Securities Act or otherwise
transferred in a manner that results in the delivery of new securities not
subject to transfer restrictions under the Securities Act (the "Registration
Period") and (ii) take all lawful action such that each of (A) the Registration
Statement and any amendment thereto does not, when it becomes effective, contain
an untrue statement of a material fact or omit 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 and (B) the
Prospectus forming part of the Registration Statement, and any amendment or
supplement thereto, does not at any time during the Registration Period include
an untrue statement of a material fact or omit 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. Notwithstanding
the foregoing provisions of this Section 3(a), the Company may, during the
Registration Period, suspend the use of the Prospectus for a period not to

                                       6
<PAGE>

exceed 20 days (whether or not consecutive) in any 12-month period if the Board
of Directors of the Company determines in good faith that because of pending
mergers or other business combination transactions, the planned acquisition or
divestiture of assets, pending material corporate developments and similar
events, it is in the best interests of the Company to suspend such use, and
prior to or contemporaneously with suspending such use, the Company provides the
Investors with written notice of such suspension, which notice need not specify
the nature of the event giving rise to such suspension. At the end of any such
suspension period, the Company shall provide the Investors with written notice
of the termination of such suspension;

         (b) During the Registration Period, comply with the provisions of the
Securities Act with respect to the Registrable Securities of the Company covered
by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the Investors as set forth in the Prospectus forming part of the
Registration Statement or are no longer Registrable Securities;

         (c)(i) Prior to the filing with the Commission of any Registration
Statement (including any amendments thereto) and the distribution or delivery of
any Prospectus (including any supplements thereto), provide draft copies thereof
to the Investors and reflect in such documents all such comments as the
Investors (and their counsel) reasonably may propose with regard to Holder
ownership and the Plan of Distribution included therein and (ii) furnish to each
Investor whose Registrable Securities are included in the Registration Statement
and its legal counsel identified to the Company, (A) promptly after the same is
prepared and publicly distributed, filed with the Commission, or received by the
Company, one copy of the Registration Statement, each Prospectus, and each
amendment or supplement thereto, and (B) such number of copies of the Prospectus
and all amendments and supplements thereto and such other documents, as such
Investor may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Investor;

         (d)(i) Register or qualify the Registrable Securities covered by the
Registration Statement under such securities or "blue sky" laws of such
jurisdictions as the Investors who hold a majority-in-interest of the
Registrable Securities being offered reasonably request, (ii) prepare and file
in such jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof at all times during the Registration Period,
(iii) take all such other lawful actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period, and (iv) take all such other lawful actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d),(B) subject itself to general taxation in any such jurisdiction or
(C) file a general consent to service of process in any such jurisdiction;

                                       7
<PAGE>

         (e) As promptly as practicable after becoming aware of such event,
notify each Investor of the occurrence of any event, as a result of which the
Prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits 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, and
promptly prepare an amendment to the Registration Statement and supplement to
the Prospectus to correct such untrue statement or omission, and deliver a
number of copies of such supplement and amendment to each Investor as such
Investor may reasonably request;

         (f) As promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the Commission of any stop order or other suspension of the effectiveness of the
Registration Statement at the earliest possible time and take all lawful action
to effect the withdrawal, recession or removal of such stop order or other
suspension;

         (g) Cause all the Registrable Securities covered by the Registration
Statement to be listed on the principal national securities exchange, and
included in an inter-dealer quotation system of a registered national securities
association, on or in which securities of the same class or series issued by the
Company are then listed or included;

         (h) Maintain a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement;

         (i) Cooperate with the Investors who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates for
the Registrable Securities to be offered pursuant to the Registration Statement
and enable such certificates for the Registrable Securities to be in such
denominations or amounts, as the case may be, as the Investors reasonably may
request and registered in such names as the Investor may request; and, within
three business days after a Registration Statement which includes Registrable
Securities is declared effective by the Commission, deliver and cause legal
counsel selected by the Company to deliver to the transfer agent for the
Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) an appropriate
instruction and, to the extent necessary, an opinion of such counsel;

         (j) Take all such other lawful actions reasonably necessary to expedite
and facilitate the disposition by the Investors of their Registrable Securities
in accordance with the intended methods therefor provided in the Prospectus
which are customary under the circumstances;

                                       8
<PAGE>

         (k) If required, make generally available to its security holders as
soon as practicable (including, without limitation, by means of a filing with
the Commission), but in any event not later than 18 months after (i) the
effective date (as defined in Rule 158(c) under the Securities Act) of the
Registration Statement, and (ii) the effective date of each post-effective
amendment to the Registration Statement, as the case may be, an earnings
statement of the Company and its subsidiaries complying with Section 11(a) of
the Securities Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);

         (1) In the event of an underwritten offering, promptly include or
incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the managers reasonably agree should
be included therein and to which the Company does not reasonably object and make
all required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after it is notified of the matters to be included or
incorporated in such Prospectus supplement or post-effective amendment;

         (m) Enter into such customary agreements (including an underwriting
agreement in customary form in the event of an underwritten offering) and take
such other lawful and reasonable action to expedite and facilitate the
registration and disposition of the Registrable Securities, and in connection
therewith, if an underwriting agreement is entered into, use its best efforts to
cause the same to contain indemnification provisions and procedures
substantially identical to those set forth in this Agreement;

         (n) (i) Make reasonably available for inspection by Investors, any
underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by such
Investors or any such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and (ii) cause the Company's officers, directors and employees to
supply all information reasonably requested by such Investors or any such
underwriter, attorney, accountant or agent in connection with the Registration
Statement, in each case, as is customary for similar due diligence examinations;
provided, however, that all records, information and documents that are
designated in writing by the Company, in good faith, as confidential,
proprietary or containing any material nonpublic information shall be kept
confidential by such Investors and any such underwriter, attorney, accountant or
agent (pursuant to an appropriate confidentiality agreement in the case of any
such holder or agent), unless such disclosure is made pursuant to judicial
process in a court proceeding (after first giving the Company an opportunity
promptly to seek a protective order or otherwise limit the scope of the
information sought to be disclosed) or is required by law, or such records,
information or documents become available to the public generally or through a
third party not in violation of an accompanying obligation of confidentiality;

                                       9
<PAGE>

and provided further that, if the foregoing inspection and information gathering
would otherwise disrupt the Company's conduct of its business, such inspection
and information gathering shall, to the maximum extent possible, be coordinated
on behalf of the Investors and the other parties entitled thereto by one firm of
counsel designed by and on behalf of the majority in interest of Investors and
other parties;

         (o) In connection with any underwritten offering, make such
representations and warranties to the Investors participating in such
underwritten offering and to the managers, in form, substance and scope as are
customarily made by the Company to underwriters in secondary underwritten
offerings;

         (p) In connection with any underwritten offering, obtain opinions of
counsel to the Company (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managers) addressed to the
underwriters, covering such matters as are customarily covered in opinions
requested in secondary underwritten offerings;

         (q) In connection with any underwritten offering, obtain "cold comfort"
letters and updates thereof from the independent public accountants of the
Company (and, if necessary, from the independent public accountants of any
subsidiary of the Company or of any business acquired by the Company, in each
case for which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to each underwriter
participating in such underwritten offering (if such underwriter has provided
such letter, representations or documentation, if any, required for such cold
comfort letter to be so addressed), in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
secondary underwritten offerings;

         (r) In connection with any underwritten offering, deliver such
documents and certificates as may be reasonably required by the managers, if
any; and

         (s) In the event that any broker-dealer registered under the Exchange
Act shall be an "Affiliate" (as defined in Rule 2729(b)(1) of the rules and
regulations of the National Association of Securities Dealers, Inc. (the "NASD
Rules") (or any successor provision thereto)) of the Company or has a "conflict
of interest" (as defined in Rule 2720(b)(7) of the NASD Rules (or any successor
provision thereto)) and such broker-dealer shall underwrite, participate as a
member of an underwriting syndicate or selling group or assist in the
distribution of any Registrable Securities covered by the Registration
Statement, whether as a holder of such Registrable Securities or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, the Company shall assist such broker-dealer in complying
with the requirements of the NASD Rules, including, without limitation, by (A)

                                       10
<PAGE>

engaging a "qualified independent underwriter" (as defined in Rule 2720(b)(15)
of the NASD Rules (or any successor provision thereto)) to participate in the
preparation of the Registration Statement relating to such Registrable
Securities, to exercise usual standards of due diligence in respect thereof and
to recommend the public offering price of such Registrable Securities, (B)
indemnifying such qualified independent underwriter to the extent of the
indemnification of underwriters provided in Section 5 hereof, and (C) providing
such information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the NASD Rules.

         4. Obligations of the Investors. In connection with the registration of
the Registrable Securities, the Investors shall have the following obligations:

         (a) It shall be a condition precedent to the obligations of the Company
to complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall
promptly furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of the
Registrable Securities held by it as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request. As
least seven days prior to the first anticipated filing date of the Registration
Statement, the Company shall promptly notify each Investor of the information
the Company requires from each such Investor (the "Requested Information") if
such Investor elects to have any of its Registrable Securities included in the
Registration Statement. If at least two business days prior to the anticipated
filing date the Company has not received the Requested Information from an
Investor (a "Non-Responsive Investor"), then the Company may file the
Registration Statement without including Registrable Securities of such
Non-Responsive Investor and have no further obligations to the Non-Responsive
Investor;

         (b) Each Investor by its acceptance of the Registrable Securities
agrees to cooperate with the Company in connection with the preparation and
filing of the Registration Statement hereunder, unless such Investor has
notified the Company in writing of its election to exclude all of its
Registrable Securities from the Registration Statement;

         (c) Each Investor agrees that, upon receipt of any notice from the
Company of the occurrence of any event of the kind described in Section 3(e) or
3(f), it shall immediately discontinue its disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 3(e) and, if so directed by the Company, such
Investor shall deliver to the Company (at the expense of the Company) or destroy
(and deliver to the Company a certificate of destruction) all copies in such
Investor's possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice; and

                                       11
<PAGE>

         (d) Enter into such customary agreements (including an underwriting
agreement in customary form in the event of an underwritten offering) and take
such other lawful and reasonable action to expedite and facilitate the
registration and disposition of the Registrable Securities, and in connection
therewith, if an underwriting agreement is entered into, use its best efforts to
cause the same to contain indemnification provisions and procedures
substantially identical to those set forth in Section 6(b) of this Agreement.

         5. Expenses of Registration. All expenses, other than underwriting
discounts and commissions, incurred in connection with registrations, filings or
qualifications pursuant to Section 3, but including, without limitation, all
registration, listing, and qualification fees, printing and engraving fees,
accounting fees, and the fees and disbursements of counsel for the Company and
the reasonable fees and disbursements of one firm of counsel to the holders of a
majority in interest of the Registrable Securities (which fees and disbursements
shall not exceed $30,000) shall be borne by the Company.

         6.  Indemnification and Contribution.

         (a) Indemnification by the Company. The Company shall indemnify and
hold harmless each Investor and each underwriter, if any, which facilitates the
disposition of Registrable Securities, and each of their respective officers and
directors and each person who controls such Investor or underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
(each such person being sometimes hereinafter referred to as an "Indemnified
Person") from and against any losses, claims, damages or liabilities, joint or
several, to which such Indemnified Person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement or an omission or alleged omission to state therein 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, or arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Prospectus or an omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and the Company hereby
agrees to reimburse such Indemnified Person for all reasonable legal and other
expenses incurred by them in connection with investigating or defending any such
action or claim as and when such expenses are incurred; provided, however, that
the Company shall not be liable to any such Indemnified Person in any such case
to the extent that any such loss, claim, damage or liability arises out of or is
based upon (i) an untrue statement or alleged untrue statement made in, or an
omission or alleged omission from, such Registration Statement or Prospectus in
reliance upon and in conformity with written information furnished to the

                                       12
<PAGE>

Company by such Indemnified Person expressly for use therein or (ii) in the case
of the occurrence of an event of the type specified in Section 3(e), the use by
the Indemnified Person of an outdated or defective Prospectus after the Company
has provided to such Indemnified Person an updated Prospectus correcting the
untrue statement or alleged untrue statement or omission or alleged omission
giving rise to such loss, claim, damage or liability.

         (b) Indemnification by the Investors and Underwriters. Each Investor
agrees, as a consequence of the inclusion of any of its Registrable Securities
in a Registration Statement, and each underwriter, if any, which facilitates the
disposition of Registrable Securities shall agree, as a consequence of
facilitating such disposition of Registrable Securities, severally and not
jointly, to (i) indemnify and hold harmless the Company, its directors
(including any person who, with his or her consent, is named in the Registration
Statement as a director nominee of the Company), its officers who sign any
Registration Statement and each person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any losses, claims, damages or liabilities to which the
Company or such other persons may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (x) an untrue statement or
alleged untrue statement of a material fact contained in such Registration
Statement or Prospectus or arise out of or are based upon the omission or
alleged omission to state therein 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, in the case of the Prospectus), not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by such
holder or underwriter expressly for use therein, or (y) the use by the Investor
or the underwriter of an outdated or defective Prospectus after the Company has
provided to such Investor or underwriter an updated Prospectus correcting the
untrue statement or alleged untrue statement or omission or alleged omission
giving rise to such loss, claim, damage or liability, and (ii) reimburse the
Company for any legal or other expenses incurred by the Company in connection
with investigating or defending any such action or claim as such expenses are
incurred.

         (c) Notice of Claims, etc. Promptly after receipt by a party seeking
indemnification pursuant to this Section 6 (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Section 6 is being sought (the "Indemnifying Party") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party,
except to the extent that the Indemnifying Party is materially prejudiced and

                                       13
<PAGE>

forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim, the Indemnifying Party shall be entitled to assume
the defense thereof. Notwithstanding the assumption of the defense of any Claim
by the Indemnifying Party, the Indemnified Party shall have the right to employ
separate legal counsel and to participate in the defense of such Claim, and the
Indemnifying Party shall bear the reasonable fees, out-of-pocket costs and
expenses of such separate legal counsel to the Indemnified Party if (and only
if): (x) the Indemnifying Party shall have agreed to pay such fees, costs and
expenses, (y) the Indemnified Party and the Indemnifying Party shall reasonably
have concluded that representation of the Indemnified Party by the Indemnifying
Party by the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party, (i) potentially
differing interests between such parties in the conduct of the defense of such
Claim, or (ii) if there may be legal defenses available to the Indemnified Party
that are in addition to or disparate from those available to the Indemnifying
Party and which can not be presented by counsel to the Indemnifying Party, or
(z) the Indemnifying Party shall have failed to employ legal counsel reasonably
satisfactory to the Indemnified Party within a reasonable period of time after
notice of the commencement of such Claim. If the Indemnified Party employs
separate legal counsel in circumstances other than as described in clauses (x),
(y) or (z) above, the fees, costs and expenses of such legal counsel shall be
borne exclusively by the Indemnified Party. Except as provided above, the
Indemnifying Party shall not, in connection with any Claim in the same
jurisdiction, be liable for the fees and expenses of more than one firm of
counsel for the Indemnified Party (together with appropriate local counsel). The
Indemnifying Party shall not, without the prior written consent of the
Indemnified Party (which consent shall not unreasonably be withheld), settle or
compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnified Party from all liabilities
with respect to such Claim or judgment or which subjects the Indemnified Party
to any continuing obligations.

         (d) Contribution. If the indemnification provided for in this Section 6
is unavailable to or insufficient to hold harmless an Indemnified Person under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and the Indemnified Party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such Indemnified Party or by such Indemnified Party, and the parties' relative

                                       14
<PAGE>

intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 6 (d) were determined by
pro rata allocation (even if the Investors or any underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section 6(d).
The amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations of the Investors and any underwriters in this
Section 6(d) to contribute shall be several in proportion to the percentage of
Registrable Securities registered or underwritten, as the case may be, by them
and not joint.

         (e) Notwithstanding any other provision of Section 6(d), in no event
shall any (i) Investor be required to undertake liability to any person under
Section 6(d) for any amounts in excess of the dollar amount of the proceeds to
be received by such Investor from the sale of such Investor's Registrable
Securities (after deducting any fees, discounts and commissions applicable
thereto) pursuant to any Registration Statement under which such Registrable
Securities are to be registered under the Securities Act and (ii) underwriter be
required to undertake liability to any Person hereunder for any amounts in
excess of the aggregate discount, commission or other compensation payable to
such underwriter with respect to the Registrable Securities underwritten by it
and distributed pursuant to the Registration Statement; provided, however, in
the event of fraud by the Investor (in the case of (i) above) or underwriter (in
the case of (ii) above), there shall be no such dollar amount limitation.

         (f) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under this
Section 6 shall be in addition to any liability which such Indemnified Person
may otherwise have to the Company. The remedies provided in this Section 6 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to an indemnified party at law or in equity.

         7. Rule 144. With a view to making available to the Investors the
benefits of Rule 144 under the Securities Act or any other similar rule or
regulation of the Commission that may at any time permit the Investors to sell
securities of the Company to the public without registration ("Rule 144"), until
such time as the Registrable Securities may be sold pursuant to the provisions
of Rule 144(k) or its equivalent, the Company agrees to use its best efforts to:

                                       15
<PAGE>

         (a) comply with the provisions of paragraph (c) (1) of Rule 144; and

         (b) file with the Commission in a timely manner all reports and other
documents required to be filed by the Company pursuant to Section 13 or 15(d)
under the Exchange Act; and, if at any time it is not required to file such
reports but in the past had been required to or did file such reports, it will,
upon the request of any Holder, make available other information as required by,
and so long as necessary to permit sales of, its Registrable Securities pursuant
to Rule 144.

         8. Assignment. The rights to have the Company register Registrable
Securities pursuant to this Agreement shall be automatically assigned by the
Investors to any permitted transferee of all or any portion of such securities
(or all or any portion of any Preferred Stock or Warrant of the Company which is
convertible into such securities) of Registrable Securities only if: (a) the
Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (b) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (i) the
name, address, and, if applicable, social security or taxpayer identification
number of such transferee or assignee and (ii) the securities with respect to
which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment, the securities so transferred
or assigned to the transferee or assignee constitute Restricted Securities, (d)
at or before the time the Company received the written notice contemplated by
clause (b) of this sentence the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions contained herein and (e) the
Company has received an opinion in form and substance reasonably satisfactory to
the Company of counsel to the Holder reasonably acceptable to the Company to the
effect that the proposed transfer of the Registrable Securities may be effected
pursuant to available exemptions from the registration requirements of the
Securities Act and applicable state securities laws.

         9. Amendment and Waiver. Any provision of this Agreement may be amended
and the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively) , only with the written
consent of the Company and Investors who hold a majority-interest of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 9 shall be binding upon each Investor and the Company.

         10.  Miscellaneous.

         (a) A person or entity shall be deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.

                                       16
<PAGE>

         (b) Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally recognized overnight courier service, and shall be deemed given
when so delivered personally or by overnight courier service, or, if mailed,
three (3) days after the date of deposit in the United States mails, as follows:

         (1)      if to the Company, to:

                  Diamond Entertainment Corporation
                  800 Tucker Lane
                  Walnut, California 91789
                  Attention: President

         (2)      if to the Initial Investors, as set forth in the signature
                  pages of the Securities Purchase Agreement.

         (3)      if to any other Investor, at such address as such Investor
                  shall have provided in writing to the Company.

The Company, the Initial Investors or any Investor may change the foregoing
address by notice given pursuant to this Section 10(c).

         (c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.

         (d) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of California. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of Los Angeles or the state courts of the State of California sitting in
the City of Los Angeles in connection with any dispute arising under this
Agreement and hereby waives, to the maximum extent permitted by law, any
objection including any objection based on forum non conveniens, to the bringing
of any such proceeding in such jurisdictions.

         (e) The remedies provided in this Agreement are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provision,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.

         (f) The Company shall not enter into any agreement with respect to its
securities that constitutes a breach of any of the provisions hereof. Except as
previously disclosed to the Investors, the Company is not currently a party to
any agreement granting any registration rights with respect to any of its

                                       17
<PAGE>

securities to any person which conflicts with the Company's obligations
hereunder or gives any other party the right to include any securities in any
Registration Statement filed pursuant hereto. The Company shall not file any
registration statement after the date hereof for the resale of any of its
securities at any time prior to the 30th day of the filing of the Registration
Statement, nor shall the Company cause any registration statement for the resale
of its securities to become effective prior to the 30th day after the date the
Registration Statement is declared effective.

         (g) This Agreement, the Securities Purchase Agreement, the Certificate
of Designations and the Warrants constitute the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement, the Securities Purchase Agreement, the
Certificate of Designations and the Warrants supersede all prior agreements and
undertakings among the parties hereto with respect to the subject matter hereof.

         (h) Subject to the requirements of Section 8 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.

         (i) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.

         (j) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.

         (k) The Company acknowledges that any failure by the Company to perform
its obligations under Section 3, or any delay in such performance could result
in direct damages to the Investors and the Company agrees that, in addition to
any other liability the Company may have by reason of any such failure or delay,
the Company shall be liable for all direct (but not any special, indirect or
consequential) damages caused by such failure or delay.

         (l) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto.

                                       18
<PAGE>

         IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.

                                    Diamond Entertainment Corporation

                                    By: /s/ James K.T. Lu
                                       ---------------------
                                          James K.T. Lu
                                          President & Chief Executive Officer

                                    Filter International

                                    By: /s/ Al Davis
                                       ---------------------
                                          Name:  Al Davis
                                          Title:

                                       19

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