Document:

EXHIBIT 10.32

SouthTrust
      Guaranty Agreement

SouthTrust Bank
ST Cap Funds(SERVICEMARK)

GUARANTOR:                          SECURED PARTY:
[Last Name(s) first, if individual]

Harry D. Shields                          SouthTrust Bank
Post Office Box 2554
Birmingham, Alabama 35290
Attn: Asset Based Lending Department
City        County            State Zip

      THIS AGREEMENT made this day of October, 2000 by the above_named Guarantor
(the "Guarantor"); to SOUTHTRUST BANK (the "Bank").

      R E C I T A L S

      Nor'easter  Micro,  Inc., a Florida  corporation,  (the  "Borrower"),  has
requested  that the Bank loan to Borrower  the sum of One Million  Five  Hundred
Thousand  Dollars  ($1,500,000),  (the  "Loan"),  to be evidenced by one or more
Promissory Notes (the "Promissory  Notes") payable by Borrower to Bank according
to their respective  terms, and such other documents and instruments as are more
particularly  described  in the  Promissory  Notes,  and  secured  by  the  Loan
Agreement of even date herewith between Borrower and Bank (the "Loan Agreement")
and by the Loan Documents,  security  agreements and other collateral  documents
referred to in the Promissory Notes and in the Loan Agreement. Capitalized terms
used  herein  and not  otherwise  defined  shall  have the  respective  meanings
ascribed to them in the Loan Agreement.  Said  definitions  shall continue to be
applicable to this  Guaranty  Agreement  notwithstanding  payment of the Loan or
termination of the Loan Agreement for any other reason. As a condition to making
the  Loan,  the Bank has  required  that the  Guarantor  guarantee  the Loan and
certain other  obligations  of Borrower,  on the terms and  conditions set forth
herein. Guarantor is a shareholder or affiliate of Borrower.

      AGREEMENT

      NOW,  THEREFORE,  in  consideration  of  the  foregoing  recitals,  as  an
inducement  to the Bank to make the Loan to  Borrower,  and as security  for the
Obligations (as defined in the Loan  Agreement),  including,  but not limited to
(a) the payment of the  principal,  interest and other  charges  pursuant to the
Promissory  Note(s)  evidencing the Loan (as the same may hereafter be extended,
renewed,  modified,  or amended),  (b) the payment of all expenses,  charges and
other amounts from time to time owing to Bank pursuant to the Promissory  Notes,
the Loan Agreement,  and the other Loan Documents and (c) the performance of all
covenants,  agreements and other  obligations from time to time owing to, or for
the benefit of, Lender  pursuant to the Loan  Documents,  the Guarantor  agrees,
covenants and represents as follows:

      1.  Guarantor  hereby  unconditionally  guarantees  to the  Bank  the due,
regular and punctual payment and performance of the  Obligations,  together with
any other sum or sums of money which any Borrower now owes the Bank or from time
to time  hereafter  shall  owe the  Bank,  whether  evidenced  by notes or other
instruments,  or by open  account or  otherwise,  and whether it  represents  an

<PAGE>

original balance, a balance reduced by part payment,  or a deficiency after sale
of  collateral,  an  extension or renewal of an original  debt,  or otherwise in
connection  with the Loan.  The Guarantor  hereby  further  guarantees  the due,
regular  and  punctual  payment  and  prompt  performance  of any other  debt or
obligation  of any  kind or  character  of any  Borrower  to the  Bank.  Without
limiting  the  foregoing,  the  Guarantor  guarantees  the  obligations  of  any
Borrower,  as provided in the Loan Agreement and the Loan Documents to indemnify
and to save the Bank  harmless from the  occurrences  set forth in Article XI of
said  Agreement.  Notwithstanding  any other  provision of this  Agreement,  the
Guarantor agrees that its guaranty of the obligations described in the preceding
sentence shall survive  indefinitely and shall not be extinguished by payment in
full of the  Obligations or foreclosure by the Bank under the Loan Agreement and
the Loan  Documents  or  exercise  of any other  rights  under  said  documents.
Further,  the Guarantor  guarantees  the payment of all costs,  attorney fees or
expenses  which may be  incurred  by the Bank by  reason of an Event of  Default
under  the  Loan  Agreement  or a  default  of  any  Borrower  under  any  other
Obligations.

      In the  event of an Event  of  Default  under  the Loan  Agreement  or any
default by the Borrower in the payment or performance of any other  Obligations,
the  Guarantor  unconditionally  promises to pay to the Bank such amounts as are
necessary  to cure the  default,  or, at the option of the Bank,  the  Guarantor
agrees to pay the entire  indebtedness owed the Bank by the Borrower at the time
of default.

      This  guaranty is an  unconditional  guaranty.  Guarantor  agrees that the
Bank, in the event of an Event of Default under the Loan  Agreement or a payment
or performance default of the Borrower under any other Obligation,  shall not be
required  to assert any claim or cause of action  against  the  Borrower  or any
other  guarantor  before  asserting  any  claim or cause of action  against  the
Guarantor under this Agreement.  Furthermore, the Guarantor agrees that the Bank
shall not be  required  to pursue or  foreclose  on any  collateral  that it may
receive  from  the  Borrower,  the  Guarantor  or  others  as  security  for any
Obligations  before  making a claim or  asserting a cause of action  against the
Guarantor under this Agreement.

      The failure of the Bank to perfect any portion of its  security  interest,
or to maintain  perfection of its security  interest,  in the  collateral as set
forth in the Loan Agreement,  the Loan Documents, or any other collateral now or
hereafter  securing  all or any part of the  Obligations,  shall not release the
Guarantor from its liabilities and obligations hereunder.

      Notice of  acceptance  of this Guaranty and of any default by the Borrower
is hereby waived by the Guarantor.  Presentment,  protest, demand, and notice of
protest and demand of any and all collateral,  and of the exercise of possessory
remedies or foreclosure on any and all collateral  received by the Bank from the
Borrower or the  Guarantor  are hereby  waived.  All  settlements,  compromises,
compositions,  accounts  stated and agreed  balances  in good faith  between any
primary or second  obligors  on any  accounts  received as  collateral  shall be
binding upon the Guarantor.

      This guaranty shall not be affected,  modified, or impaired by any sale or
other disposition  (whether  voluntary or pursuant to the exercise of a purchase
option or  similar  right) of any  Guarantor's  interest  in the  Borrower,  the
voluntary or involuntary liquidation,  dissolution, sale or other disposition of
all or  substantially  all of the assets,  marshaling of assets and liabilities,
receivership,  insolvency,  bankruptcy, assignment for the benefit of creditors,
reorganization,  arrangements, composition with creditors or readjustment of, or
other similar  proceedings  affecting the Borrower or the Guarantor or any other
guarantor, or any of the assets belonging to one or more of them, nor shall this
guaranty be affected,  modified or impaired by the  invalidity of the Promissory
Notes, the Loan Agreement, the Loan Documents, or any other document executed by
the Borrower or the  Guarantor or any other  guarantor  in  connection  with the
Loan.

      Without notice to the Guarantor, without the consent of the Guarantor, and
without affecting or limiting the Guarantor's liability hereunder, the Bank may:

            (a)  grant  the  Borrower  extensions  of time  for  payment  of the
Obligations or any part thereof;

            (b)   renew any of the Obligations;

<PAGE>

            (c)  grant  the  Borrower  extensions  of time  for  performance  of
agreements or other indulgences;

            (d) at any time  release  any or all of the  collateral  held by the
Bank as security for the Obligations;

            (e) at any time release any one or more of the  guarantors  from any
guaranty existing with respect to the Obligations;

            (f)  compromise,  settle,  release,  or terminate  any or all of the
obligations,  covenants,  or  agreements  of the Borrower  under the  Promissory
Notes, the Loan Agreement or any Loan Document; or

            (g) modify or amend any  obligation,  covenant or  agreement  of the
Borrower  set  forth  in any one or more of the  Promissory  Notes  or the  Loan
Agreement.

      This  guaranty  shall  not  terminate  and  may not be  terminated  by the
Guarantor  until  such  time  as all  Obligations,  including  any  renewals  or
extensions thereof,  have been paid in full and such payments of the Obligations
have become  final and are not  subject to being  refunded  as a  preference  or
fraudulent  transfer or rescinded under the Bankruptcy Code or other  applicable
law. If any  collateral  secures  this  guaranty at any time,  Bank shall not be
required to release such collateral unless and until Bank is satisfied that such
payments  of  the   Obligations   are  not  subject  to  refund  or  rescission.
Furthermore,  to the extent the Loan Documents  contain  Obligations of Borrower
under which the terms of Loan Documents survive payment of the Loan, foreclosure
under the Loan  Documents  or receipt  by Bank of a deed in lieu of  foreclosure
(including  any  environmental   indemnities  with  respect  to  the  collateral
described in the Loan Documents), such Obligations are deemed guaranteed herein,
and the  Guarantor's  guaranty  thereof  shall  likewise  continue  indefinitely
notwithstanding  payment in full of all Obligations  then  outstanding.  If this
instrument is returned to Guarantor or marked "canceled" or marked with words of
similar  import,  or if Bank shall issue any  instrument of  termination  to any
Guarantor in connection herewith, such cancellation or termination by Bank shall
be  deemed  to be  subject  to the  right of Bank to  thereafter  reinstate  the
guarantees  herein and enforce this guaranty  against  Guarantor for Obligations
(including such an  environmental  indemnity) which were either unknown or in an
unliquidated amount at the time of such return or cancellation.

      2. The Guarantor  represents  and warrants to Bank and covenants with Bank
as follows:

            (a)  Guarantor has full power and  unrestricted  right to enter into
this Agreement, to incur the obligations provided for herein, and to execute and
deliver the same to Bank, and that when executed and  delivered,  this Agreement
will  constitute  a valid  and  legally  binding  obligation  of the  Guarantor,
enforceable in accordance with its terms.

            (b) Its financial  statements  that have been  furnished to the Bank
are complete and correct and fairly  present its  financial  condition as of the
date or dates  indicated.  There  has been no  material  adverse  change  in its
financial  condition  since  the date of its  most  recent  financial  statement
furnished to the Bank.

      3. The Guarantor  covenants and agrees that so long as the Obligations are
outstanding,  it will  from  time to time  upon  request,  furnish  to Bank such
information  regarding  the  business,  affairs and  financial  condition of the
Guarantor and its properties in such detail as the Bank may reasonably  request,
including, without limitation, cash flow statements and supporting documentation
showing all income and expense of Guarantor, and copies of income tax returns of
Guarantor  (which  shall be  submitted  to Bank on an  annual  basis as the same
become  available).  Guarantor will furnish to the Bank, within ninety (90) days
after the end of each calendar year, a financial  statement in form satisfactory
to the Bank  prepared as of the end of the calendar  year just ended.  Guarantor
covenants  that  during the term  hereof it will pay or cause to be paid as they
become due and payable all taxes,  assessments  and other  governmental  charges
lawfully  levied or assessed or imposed  upon it or its  properties  or any part
thereof or upon any income therefrom.

      4. The Guarantor  hereby agrees not to exercise any right of  subrogation,
indemnification, or other right of contribution, recourse, or reimbursement from

<PAGE>

the Borrower or any other right to payment  from the Borrower  arising out of or
on  account  of any sums paid or agreed to be paid by the  Guarantor  under this
Agreement,   whether  any  such  right  is  reduced  to  judgment,   liquidated,
unliquidated,  fixed,  contingent,  matured,  unmatured,  disputed,  undisputed,
secured or unsecured,  until such time as the Obligations are indefeasibly  paid
in full and not subject to being set aside by the order of a bankruptcy court or
other course of competent  jurisdiction.  Guarantor further waives all rights in
any collateral  heretofore,  now, or hereafter given to Guarantor by Borrower to
the extent the same may in any way impair or delay  Bank's  ability to  exercise
its rights pursuant to this Agreement.

      5.  If  Borrower  is or  shall  hereafter  be  indebted  to  Bank  for any
obligations,  liability or  indebtedness  other than the  Obligations,  and Bank
should  collect or receive any payments,  funds or  distributions  which are not
specifically  required,  by law or agreement,  to be applied to the Obligations,
Bank may, in its sole discretion, apply such payments, funds or distributions to
indebtedness of Borrower other than the Obligations.

      6. This Agreement  shall be binding upon, and inure to the benefit of, the
Guarantor,   the  Bank  and  their  respective  heirs,  legal   representatives,
successors and assigns.

      7. The validity, interpretation,  enforcement and effect of this Agreement
shall be  governed  by,  and  construed  according  to the laws of, the State of
Nevada.

      8. In the event  that any  provision  hereof is  deemed to be  invalid  by
reason of the  operation  of any law or by reason of the  interpretation  placed
thereon by any court,  this Agreement  shall be construed as not containing such
provisions  and the  invalidity  of  such  provisions  shall  not  affect  other
provisions  hereof which are otherwise lawful and valid and shall remain in full
force and effect.

      9.  Any  notice  or  payment  required  hereunder  or  by  reason  of  the
application  of any law shall be deemed to have been duly given (a) if delivered
in person,  (b) if mailed by  certified or  registered  mail,  postage  prepaid,
return receipt requested,  or (c) if sent by Federal Express or overnight United
States Mail or other national overnight  carrier,  and in each case addressed to
the parties  hereto at their  respective  addresses  set forth on the first page
hereof,  or to such other address as either party hereto shall  designate to the
other in a written notice, given as herein provided.

      10.  The  failure  at any  time  or  times  hereafter  to  require  strict
performance  by the Guarantor of any of the  provisions,  warranties,  terms and
conditions  contained herein or in any other  agreement,  document or instrument
now or hereafter  executed by the  Guarantor and delivered to the Bank shall not
waive,  affect or  diminish  any right of the Bank  hereafter  to demand  strict
compliance or  performance  therewith and with respect to any other  provisions,
warranties,  terms and conditions  contained in such  agreements,  documents and
instruments,  and any waiver of any default  shall not waive or affect any other
default,  whether  prior or  subsequent  thereto  and  whether  of the same or a
different  type.  None  of the  warranties,  conditions,  provisions  and  terms
contained in this Agreement or in any  agreement,  document or instrument now or
hereafter executed by the Guarantor and delivered to the Bank shall be deemed to
have been waived by any act or  knowledge of the Bank,  its agents,  officers or
employees,  but only by an  instrument  in writing,  signed by an officer of the
Bank, and directed to Guarantor specifying such waiver.

      11. If, at any time or times hereafter, the Bank employs counsel to advise
or provide  other  representation  with  respect to this  Agreement or any other
agreement,  document or instrument heretofore,  now or hereafter executed by the
Guarantor  and  delivered  to the  Bank  with  respect  to the  Borrower  or the
Obligations  or to commence,  defend or intervene,  file a petition,  complaint,
answer, motion or other pleadings or to take any other action in or with respect
to any suit or  proceeding  relating to this  Agreement or any other  agreement,
instrument or document  heretofore,  now or hereafter  executed by the Guarantor
and delivered to the Bank with respect to the Borrower or the Obligations,  then
in any such event, all of the attorneys' fees arising from such services and any
expenses,  costs  and  charges  relating  thereto  shall  constitute  additional
obligations of the Guarantor payable on demand.

      12. This  Agreement  constitutes  the entire  agreement and supersedes all
prior  agreements  and  understandings,  both  oral  and  written,  between  the
Guarantor and the Bank with respect to the subject matter hereof. This Agreement
may be executed in any number of counterparts,  each of which shall be deemed an
original,  but such  counterparts  together  shall  constitute  one and the same
instrument.

<PAGE>

      13. Any  indebtedness  of Borrower now or  hereafter  held by Guarantor is
hereby   subordinated  to  the   indebtedness  of  Borrower  to  Bank  and  such
indebtedness  of Borrower to Guarantor if Bank so requests  shall be  collected,
enforced  and received by Guarantor as trustee for Bank and be paid over to Bank
on account of the indebtedness of Borrower to Bank without reducing or affecting
in any manner the  liability of  Guarantor  under the other  provisions  of this
guaranty.

      14.  Guarantor  and Bank  hereby  waive  any right to trial by jury on any
claim,  counterclaim,  setoff, demand, action or cause of action (a) arising out
of or in any way pertaining or relating to this  Agreement,  the Loan Agreement,
the Loan Documents (as defined in the Loan Agreement),  the Loan, the Promissory
Notes,  and the  Obligations,  or any other  instrument,  document or  agreement
executed or delivered in connection  with said documents or  transactions or (b)
in any way  connected  with or  pertaining  or related to or  incidental  to any
dealings  of the  parties  hereto  with  respect  to this  Agreement,  the  Loan
Agreement, the Loan Documents (as defined in the Loan Agreement),  the Loan, the
Promissory  Notes, and the  Obligations,  or any other  instrument,  document or
agreement executed or delivered in connection herewith or in connection with the
transactions  related thereto or contemplated  thereby or the exercise of either
party's rights and remedies  thereunder,  in all of the foregoing  cases whether
now existing or hereafter  arising,  and whether  sounding in contract,  tort or
otherwise.  Guarantor and Bank agree that either or both of them may file a copy
of this paragraph with any court as written  evidence of the knowing,  voluntary
and bargained  agreement between the parties irrevocably to waive trial by jury,
and that any dispute or  controversy  whatsoever  between them shall  instead be
tried in a court of competent jurisdiction by a judge sitting without a jury.

      IN WITNESS  WHEREOF,  the  Guarantor has executed this Guaranty on the day
and year first above written.

Harry D. Shields

STATE OF                      )
                              )
COUNTY OF                     )

I,  _______________  , a Notary  Public in and for said  County  in said  State,
hereby  certify  that Harry D.  Shields,  whose name is signed to the  foregoing
instrument,  and who is known to me,  acknowledged  before  me on this day that,
being  informed  of the  contents  of such  instrument,  he  executed  the  same
voluntarily on the day the same bears date.

      Given under my hand and seal, this _____ day of ___________, 2000.

                                    NOTARY PUBLIC
(SEAL)

                                    My Commission Expires:EXHIBIT 10.34
                                  -------------

                         EQUITY LINE OF CREDIT AGREEMENT

         AGREEMENT  dated as of the 24 day of  August  2000,  (the  "Agreement")
between Spinneret  Financial  System,  Ltd., (the "Investor") and European Micro
Holdings, Inc., a corporation organized and existing under the laws of the State
of Nevada (the "Company").

         WHEREAS,  the parties  desire  that,  upon the terms and subject to the
conditions  contained herein,  the Company shall issue and sell to the Investor,
from time to time as provided  herein,  and the  Investor  shall  purchase up to
Twenty Million  ($20,000,000)  Dollars of the Company's  common stock, par value
$0.01 per share  (the  "Common  Stock"),  for a total  purchase  price of Twenty
Million ($20,000,000) Dollars; and

         WHEREAS,  such investments will be made in reliance upon the provisions
of Regulation D ("Regulation D") of the Securities Act of 1933, as amended,  and
the regulations promulgated there under (the "Securities Act"), and or upon such
other exemption from the registration  requirements of the Securities Act as may
be available with respect to any or all of the investments to be made hereunder;
and

         NOW, THEREFORE, the parties hereto agree as follows:

                                    ARTICLE I
                               CERTAIN DEFINITIONS

         Section 1.1 "Advance"  shall mean the portion of the Commitment  Amount
requested by the Company in the Advance Notice.

         Section 1.2  "Advance  Notice  Date"  shall  mean each date the Company
delivers to the  Investor an Advance  Notice  requiring  the Investor to advance
funds to the Company,  subject to the terms of this Agreement. No Advance Notice
Date shall be less than  fifteen  Trading  Days after the prior  Advance  Notice
Date.

         Section 1.3  "Advance  Date"  shall  mean  the  date   Butler  Gonzalez
LLP/First  Union Escrow Account is in receipt of the funds from the Investor and
Butler Gonzalez LLP, as the Placement Agent's Counsel,  is in possession of free
trading  shares from the Company and therefore an Advance by the Investor to the
Company can be made and Butler  Gonzalez LLP can release the free trading shares
to the Company. No Advance Date shall be less than twenty-five (25) Trading Days
after an Advance Notice Date.

         Section 1.4  "Advance  Notice"  shall  mean a  written   notice  to the
Investor  setting  forth the Advance  amount that the Company  requests from the
Investor and the Advance Date,

                                      A-1
<PAGE>

         Section 1.5 "Bid Price" shall mean, on any date,  the closing bid price
(as reported by Bloomberg  L.P.) of the Common Stock on the Principal  Market or
if the Common Stock is not traded on a Principal  Market,  the highest  reported
bid price for the Common  Stock,  as furnished by the  National  Association  of
Securities Dealers, Inc.

         Section 1.7 "Closing"  shall mean one of the closings of a purchase and
sale of Common Stock pursuant to Section 2.1.

         Section 1.8 "Commitment  Amount" shall mean the aggregate  amount of up
to $20,000,000  which the Investor has agreed to provide to the Company in order
to purchase the Company's  Common Stock  pursuant to the terms and conditions of
this Agreement.

         Section 1.9 "Commitment Period" shall mean the period commencing on the
earlier to occur of (i) the  Effective  Date,  or (ii) such  earlier date as the
Company and the  Investor  may  mutually  agree in writing,  and expiring on the
earliest to occur of (x) the date on which the Investor  shall have made payment
of Advances  pursuant to this Agreement in the aggregate  amount of $20,000,000,
(y) the date this  Agreement is  terminated  pursuant to Section 2.6, or (z) the
date occurring thirty (30) months from the date hereof.

         Section 1.10 "Common Stock" shall mean the Company's  common stock, par
value $0.01 per share.

         Section 1.11 "Condition  Satisfaction  Date" shall have the meaning set
forth in Section 7.2.

         Section 1.12 "Damages" shall mean any loss, claim,  damage,  liability,
costs and expenses (including,  without limitation,  reasonable  attorney's fees
and disbursements and costs and expenses of expert witnesses and investigation).

         Section 1.13  "Effective  Date"  shall  mean  the date on which the SEC
first declares effective a Registration  Statement registering the resale of the
Registrable Securities as set forth in Section 7.2(a).

         Section 1.14 "Escrow Agreement" shall mean the escrow agreement between
the Company and the Investor dated the date hereof.

         Section 1.15 "Exchange  Act" shall mean the Securities  Exchange Act of
1934, as amended, and the rules and regulations promulgated there under.

         Section 1.16  "Material  Adverse  Effect"  shall  mean  any  condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with the ability of the Company to enter into and perform any of its obligations
under this  Agreement  or the  Registration  Rights  Agreement  in any  material
respect.

         Section 1.17  "Market  Price"  shall mean the  average of the three (3)
lowest  closing  Bid Prices of the Common  Stock over the ten (10)  Trading  Day

                                      A-2
<PAGE>

period beginning on the relevant Advance Notice Date.

         Section 1.18 "Maximum  Advance Amount" on any Advance Notice Date shall
be equal to the  difference  between  (i) the amount  indicated  in the  Maximum
Advance  Amount  column  opposite  the range of the 25 Day Average  Daily Volume
Traded on such Advance Notice Date, as set forth in the table below and (ii) the
sum of the  Advances  made  pursuant to this  Agreement,  in the 15 Trading Days
immediately preceding the Advance Notice Date:

25-DAY AVERAGE VOLUME TRADED(1)                 MAXIMUM ADVANCE AMOUNT
-------------------------------                 ----------------------

$25,000 - $50,000                                     $100,000
$50,001 - $100,000                                    $200,000
$100,001 - $200,000                                   $350,000
$200,001- $300,000                                    $500,000
$300,001 - $400,000                                   $650,000
$400,001 - $500,000                                   $900,000
$500,001 - $600,000                                 $1,200,000
$600,001 - $800,000                                 $1,500,000
$800,001 - $1,000,000                               $1,750,000
$1,000,000 plus                                     $2,000,000

(1) The 25-Day Average Volume Traded shall be equal to the Bid Price  multiplied
by the volume for each of the 25 Trading Days preceding the Advance Notice Date.

         Section 1.19 "NASD" shall mean the National  Association  of Securities
Dealers, Inc.

         Section 1.20  "Person"  shall mean an  individual,  a  corporation,  a
partnership, an association, a trust or other entity or organization,  including
a government or political subdivision or an agency or instrumentality thereof.

         Section 1.21      "Placement Agent" shall mean May Davis Group, Inc.

         Section 1.22 "Pre Advance  Notice  Market Price" shall mean the average
of the three (3) lowest closing Bid Prices of the Common Stock over the ten (10)
Trading Day period beginning on the relevant Advance Notice Date.

         Section 1.23 "Principal  Market" shall mean the Nasdaq National Market,
the Nasdaq  SmallCap  Market,  the American Stock Exchange or the New York Stock
Exchange,  whichever is at the time the principal trading exchange or market for
the Common Stock.

         Section 1.24  "Purchase Price" shall be set at 88% of the Market Price.

                                      A-3
<PAGE>

         Section 1.25  "Registrable  Securities" shall mean the shares of Common
Stock (i) in respect of which the  Registration  Statement has not been declared
effective by the SEC, (ii) which have not been sold under circumstances  meeting
all of the applicable  conditions of Rule 144 (or any similar  provision then in
force)  under the  Securities  Act  ("Rule  144") or (iii)  which  have not been
otherwise  transferred to a holder who may trade such shares without restriction
under the  Securities  Act, and the Company has delivered a new  certificate  or
other  evidence of  ownership  for such  securities  not  bearing a  restrictive
legend.

         Section 1.26   "Registration   Rights   Agreement"    shall  mean   the
Registration Rights Agreement dated the date hereof, regarding the filing of the
Registration  Statement for the resale of the  Registrable  Securities,  entered
into between the Company and the Investor.

         Section 1.27  "Registration   Statement"  shall   mean  a  registration
statement on Form S-1 or Form S-3 (if use of such form is then  available to the
Company  pursuant  to the  rules  of the SEC and,  if not,  on such  other  form
promulgated  by the SEC for which the Company then  qualifies  and which counsel
for the Company  shall deem  appropriate,  and which form shall be available for
the  resale  of the  Registrable  Securities  to be  registered  there  under in
accordance  with the  provisions of this Agreement and the  Registration  Rights
Agreement,  and in accordance  with the intended  method of distribution of such
securities),  for  the  registration  of  the  resale  by  the  Investor  of the
Registrable Securities under the Securities Act.

         Section 1.28   "Regulation  D" shall have the  meaning set forth in the
recitals of this Agreement.

         Section 1.29 "SEC" shall mean the Securities and Exchange Commission.

         Section 1.30  "Securities  Act" shall have the meaning set forth in the
recitals of this Agreement.

         Section 1.31 "SEC  Documents"  shall mean Annual  Reports on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and Proxy Statements
of the Company as  supplemented  to the date hereof,  filed by the Company for a
period of at least twelve (12) months  immediately  preceding the date hereof or
the Advance  Date,  as the case may be, until such time as the Company no longer
has an obligation to maintain the  effectiveness of a Registration  Statement as
set forth in the Registration Rights Agreement.

         Section 1.32 "Trading Day" shall mean any day during which the New York
Stock Exchange shall be open for business.

                                      A-4
<PAGE>

                                   ARTICLE II
                                    ADVANCES

         Section 2.1       INVESTMENTS.
                           -----------

                  (a) ADVANCES.  Upon the terms and  conditions set forth herein
(including  without  limitation,  the provisions of Article VII hereof),  on any
Advance  Notice Date the  Company may request an Advance by the  Investor by the
delivery  of an Advance  Notice.  The number of shares of Common  Stock that the
Investor  shall  receive for each Advance  shall be  determined  by dividing the
amount of the Advance by the  Purchase  Price on the  Advance  Notice  Date.  No
fractional  shares  shall be issued.  Fractional  shares shall be rounded to the
next higher whole number of shares. The aggregate maximum amount of all Advances
that the  Investor  shall be obligated  to make under this  Agreement  shall not
exceed the Commitment Amount.

         Section 2.2       MECHANICS.
                           ---------

                  (a) ADVANCE NOTICE. At any time during the Commitment  Period,
the  Company  may  deliver an  Advance  Notice to the  Investor,  subject to the
conditions  set forth in Section 2.7 and Section  7.2;  provided,  however,  the
amount for each Advance as designated by the Company in the  applicable  Advance
Notice shall not be (i) less than $30,000, or (ii) more than the Maximum Advance
Amount.  The aggregate  amount of the Advances  pursuant to this Agreement shall
not exceed the Commitment Amount, unless otherwise agreed by the Investor in the
Investor's sole and absolute discretion. There will be a minimum of fifteen (15)
Trading Days between each Advance Notice.

                  (b) DATE OF  DELIVERY  OF ADVANCE  NOTICE.  An Advance  Notice
shall be deemed  delivered on (i) the Trading Day it is received by facsimile or
otherwise by the Investor if such notice is received prior to 12:00 noon Eastern
Time,  or (ii) the  immediately  succeeding  Trading  Day if it is  received  by
facsimile or otherwise  after 12:00 noon Eastern Time on a Trading Day or at any
time on a day  which is not a  Trading  Day.  No  Advance  Notice  may be deemed
delivered, on a day that is not a Trading Day.

                  (c) WITHDRAWAL  OF  ADVANCE  NOTICE.  The  Company  shall have
the right to withdrawal an Advance Notice if prior to a Closing the Market Price
shall change more than:
                      (i) ten percent (10%) from the Pre Advance  Notice  Market
Price if the closing price of the Common Stock is less than Ten (10) dollars; or

                      (ii) five percent (5%) from the Pre Advance  Notice Market
Price if the closing price of the Common Stock is greater than Ten (10) dollars.

         Section 2.3 CLOSINGS.  On each Advance Date, which shall be twenty-five
(25) Trading Days after an Advance Notice Date, (i) the Company shall deliver to
the Escrow Agent,  as defined  pursuant to the Escrow  Agreement,  shares of the
Company's  Common Stock,  representing the amount of the Advance by the Investor
pursuant to Section 2.1 herein,  registered  in the name of the  Investor  which
shall be delivered to the Investor,  or otherwise in accordance  with the Escrow
Agreement and (ii) the Investor  shall deliver to the Escrow Agent the amount of
the Advance  specified  in the Advance  Notice by wire  transfer of  immediately
available  funds  which shall be  delivered  to the  Company,  or  otherwise  in
accordance with the Escrow  Agreement.  In addition,  on or prior to the Advance

                                      A-5
<PAGE>

Date,  each of the Company and the Investor  shall  deliver to the other through
the  Escrow  Agent  all  documents,  instruments  and  writings  required  to be
delivered or reasonably  requested by either of them pursuant to this  Agreement
in order to implement and effect the transactions  contemplated herein.  Payment
of funds to the  Company  and  delivery  of the  Company's  Common  Stock to the
Investor shall occur in accordance with the conditions set forth above and those
contained in the Escrow  Agreement;  PROVIDED,  HOWEVER,  that to the extent the
Company has not paid the fees,  expenses,  and  disbursements  of the Investor's
counsel and the Placement  Agent in accordance  with Section 12.4, the amount of
such fees,  expenses,  and  disbursements  may be deducted by the Investor  (and
shall be paid to the  relevant  party)  from the amount of the  Advance  with no
reduction in the amount of shares of the Company's  Common Stock to be delivered
on such Advance Date.

          Section 2.4 SUSPENSION OF REGISTRATION STATEMENT. If subsequent to any
Closing, the Registration Statement is suspended,  other than due to the acts of
the Investor or the Placement  Agent,  for any period  exceeding  twenty trading
days (20)  days,  the  Company  shall  pay an  amount  equal to one and one half
percent  (1  1/2 %) of the  Purchase  Price  of all  Common  Stock  held  by the
Investor,  purchased pursuant to this Agreement for each twenty trading day (20)
day period or portion thereof; PROVIDED,  HOWEVER, that the Company shall not be
required  to pay such  amount to the  Investor  in  connection  with any  period
commencing upon the filing of a  post-effective  amendment to such  Registration
Statement  and ending upon the date on which such  post-effective  amendment  is
declared effective by the SEC.

         Section 2.5  TERMINATION OF INVESTMENT.  The obligation of the Investor
to make an Advance to the Company  pursuant to this  Agreement  shall  terminate
permanently  (including  with  respect  to an  Advance  Date  that  has  not yet
occurred)  in the event that (i) there shall occur any stop order or  suspension
of the  effectiveness  of the  Registration  Statement for an aggregate of fifty
(50) Trading  Days,  other than due to the acts of the Investor or the Placement
Agent,  during the Commitment Period, or (ii) the Company shall at any time fail
materially to comply with the requirements of Section 6.3, 6.4 or 6.7; PROVIDED,
HOWEVER,  that  this  termination  provision  shall  not  apply  to  any  period
commencing upon the filing of a  post-effective  amendment to such  Registration
Statement  and ending upon the date on which such post  effective  amendment  is
declared effective by the SEC.

         Section 2.6       AGREEMENT TO ADVANCE FUNDS.

                 (a) The Investor agrees to  advance the amount specified in the
Advance  Notice to the Company  after the  completion  of each of the  following
conditions and the other conditions set forth in this Agreement:

                      (i)   the  execution and delivery by  the Company, and the
         Investor, of this Agreement, and the Exhibits hereto;

                      (ii)  the  Escrow Agent shall have received  the shares of
         Common Stock applicable to the Advance;

                                      A-6
<PAGE>

                      (iii) the Company's Registration Statement with respect to
         the resale of the  Registrable  Securities in accordance with the terms
         of the Registration Rights Agreement shall have been declared effective
         by the SEC;

                      (iv)  the  Company shall have  obtained  all  permits  and
         qualifications  required by any applicable state for the offer and sale
         of the  Registrable  Securities,  or  shall  have the  availability  of
         exemptions  there  from.  The  sale  and  issuance  of the  Registrable
         Securities  shall be legally  permitted by all laws and  regulations to
         which the Company is subject;

                      (v)   the Company shall have filed with the Commission in
         a timely manner all reports,  notices and other documents required of a
         "reporting  company" under the Exchange Act and  applicable  Commission
         regulations;

                      (vi)  the  fees as set  forth in Section  12.4 below shall
         have been paid or can be withheld as provided in Section 2.3; and

                      (vii) the conditions set forth in Section 7.2 shall have
         been satisfied.

         Section 2.7 LOCK UP PERIOD. (a) During the terms of this Agreement, the
Company shall not, without the prior consent of the Investor,  issue or sell (i)
any Common Stock without  consideration  or for a  consideration  per share less
than the Bid Price on the date of  issuance  or (ii) issue or sell any  warrant,
option,  right,  contract,  call, or other  security or instrument  granting the
holder thereof the right to acquire Common Stock without  consideration or for a
consideration per share less than the Bid Price on the date of issuance.

         (b) On the date hereof,  the Company  shall  obtain from each  officer,
director and Affiliate, as defined below, a lock-up agreement, as defined below,
in the  form  annexed  hereto  as  Schedule  2.7(a)  agreeing  to  only  sell in
compliance  with the volume  limitation  of Rule 144.  "Affiliate"  for purposes
hereof  means,  with respect to any person or entity,  another  person or entity
that,  directly  or  indirectly,  (i) has a 5% or more  equity  interest in that
person or  entity,  (ii) has 5% or more  common  ownership  with that  person or
entity, (iii) controls that person or entity, or (iv) shares common control with
that person or entity.  "Control" or "controls" for purposes hereof means that a
person or entity has the  power,  direct or  indirect,  to conduct or govern the
policies of another person or entity.

         Section 2.8 SHAREHOLDER APPROVAL.  The Company's obligations under this
Agreement are subject to approval of the shareholders of the Company pursuant to
Nevada Corporate Law.

                                  ARTICLE III
                   REPRESENTATIONS AND WARRANTIES OF INVESTOR

         Investor  hereby  represents  and  warrants  to, and agrees  with,  the
Company  that the  following  are true and as of the date  hereof and as of each
Advance Date:

                                      A-7
<PAGE>

         Section  3.1   ORGANIZATION   AND   AUTHORIZATION.   Investor  is  duly
incorporated  or  organized  and  validly  existing in the  jurisdiction  of its
incorporation  or  organization  and has all  requisite  power and  authority to
purchase and hold the securities issuable hereunder.  The decision to invest and
the execution and delivery of this Agreement by such Investor,  the  performance
by such  Investor of its  obligations  hereunder  and the  consummation  by such
Investor of the transactions  contemplated  hereby have been duly authorized and
requires no other  proceedings on the part of the Investor.  The undersigned has
the right,  power and  authority to execute and deliver this  Agreement  and all
other  instruments ( including,  without  limitations,  the Registration  Rights
Agreement), on behalf of the Investor. This Agreement has been duly executed and
delivered by the Investor and,  assuming the  execution and delivery  hereof and
acceptance thereof by the Company,  will constitute the legal, valid and binding
obligations of the Investor, enforceable against the Investor in accordance with
its terms.

         Section 3.2  EVALUATION OF RISKS.  The Investor has such  knowledge and
experience in financial tax and business  matters as to be capable of evaluating
the  merits  and risks of,  and  bearing  the  economic  risks  entailed  by, an
investment  in the Company and of protecting  its  interests in connection  with
this  transaction.  It recognizes that its investment in the Company  involves a
high degree of risk.

         Section  3.3.  NO  LEGAL   ADVICE  FROM  THE   COMPANY.   The  Investor
acknowledges  that it had the  opportunity  to  review  this  Agreement  and the
transactions  contemplated  by this  Agreement with his or its own legal counsel
and investment and tax advisors.  The Investor is relying solely on such counsel
and advisors and not on any statements or  representations of the Company or any
of its  representatives  or agents  for legal,  tax or  investment  advice  with
respect to this investment,  the transactions  contemplated by this Agreement or
the securities laws of any jurisdiction.

         Section 3.4 INVESTMENT  PURPOSE.  The securities are being purchased by
the  Investor for its own account,  for  investment  and without any view to the
distribution, assignment or resale to others or fractionalization in whole or in
part.  The Investor  agrees not to assign or in any way transfer the  Investor's
rights to the  securities  or any  interest  therein and  acknowledges  that the
Company  will not  recognize  any  purported  assignment  or transfer  except in
accordance with applicable  Federal and state  securities  laws. No other person
has or will have a direct or indirect beneficial interest in the securities. The
Investor  agrees not to sell,  hypothecate or otherwise  transfer the Investor's
securities  unless the securities  are  registered  under Federal and applicable
state securities laws or unless,  in the opinion of counsel  satisfactory to the
Company, an exemption from such laws is available.

         Section 3.5  ACCREDITED INVESTOR.  Investor is an "accredited investor"
as that term is defined in Rule 501(a)(3) of Regulation D of the Securities Act.

         Section 3.6 INFORMATION. Such Investor and its advisors (and his or its
counsel),  if any,  have  been  furnished  with all  materials  relating  to the
business,  finances  and  operations  of the Company and  information  it deemed
material  to making an  informed  investment  decision.  Such  Investor  and its
advisors,  if any,  have been afforded the  opportunity  to ask questions of the
Company and its  management.  Neither such inquiries nor any other due diligence

                                      A-8
<PAGE>

investigations  conducted  by such  Investor  or its  advisors,  if any,  or its
representatives  shall modify,  amend or affect the Investor's  right to rely on
the Company's  representations and warranties contained in this Agreement.  Such
Investor  understands  that its investment  involves a high degree of risk. Such
Investor is in a position  regarding the Company,  which, based upon employment,
family  relationship  or economic  bargaining  power,  enabled and enables  each
Investor to obtain  information from the Company in order to evaluate the merits
and risks of this investment.  Such Investor has sought such  accounting,  legal
and tax advice,  as it has considered  necessary to make an informed  investment
decision with respect to this transaction.

         Section 3.7 RECEIPT OF DOCUMENTS.  Such Investor and his or its counsel
has received and read in their  entirety:  (i) this  Agreement  and the Exhibits
annexed hereto; (ii) all due diligence and other information necessary to verify
the accuracy and completeness of such representations, warranties and covenants;
(iii) the  Company's  Form 10-K for the year ended year ended June 30,  1999 and
Form 10-Q for the periods ended September  1999,  December 1999, and March 2000;
and (v) answers to all questions the Investor submitted to the Company regarding
an  investment  in the Company;  and the Investor has relied on the  information
contained  therein and has not been furnished any other  documents,  literature,
memorandum or prospectus.

         Section 3.8  REGISTRATION  RIGHTS AGREEMENT AND ESCROW  AGREEMENT.  The
parties have  entered  into the  Registration  Rights  Agreement  and the Escrow
Agreement, each dated the date hereof.

         Section 3.9 NO GENERAL  SOLICITATION.  Neither the Company,  nor any of
its affiliates, nor any person acting on its or their behalf, has engaged in any
form of general  solicitation  or general  advertising  (within  the  meaning of
Regulation D under the Securities  Act) in connection  with the offer or sale of
the shares of Common Stock offered hereby.

         Section 3.10 NOT AN AFFILIATE. The Investor is not an officer, director
or a person that  directly,  or indirectly  through one or more  intermediaries,
controls or is  controlled  by, or is under common  control with the Company "an
Affiliate,"  as that term is defined in Rule 405 of the  Securities  Act) of the
Company).  The  Investor  agrees  that it will not,  and that it will  cause its
affiliates  not to,  engage in any short sales of or hedging  transactions  with
respect to the Common Stock

                                   ARTICLE IV
                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

         Except as stated below or on the disclosure  schedules attached hereto,
the Company hereby  represents and warrants to, and covenants with, the Investor
that the  following  are true and  correct as of the date  hereof and as of each
Advance Date:

         Section  4.1  ORGANIZATION  AND  QUALIFICATION.  The  Company  is  duly
incorporated  or  organized  and  validly  existing in the  jurisdiction  of its
incorporation  or  organization  and  has  all  requisite  power  and  authority
corporate  power to own their  properties  and to carry on their business as now
being conducted. Each of the Company and its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the  business  conducted  by it makes such  qualification

                                      A-9
<PAGE>

necessary,  except to the extent  that the failure to be so  qualified  or be in
good standing  would not have a Material  Adverse  Effect on the Company and its
subsidiaries taken as a whole.

         Section  4.2.   AUTHORIZATION,   ENFORCEMENT,   COMPLIANCE  WITH  OTHER
INSTRUMENTS.  (i) The Company has the requisite corporate power and authority to
enter into and perform this Agreement, the Registration Rights Agreement and any
related  agreements,  in accordance with the terms hereof and thereof,  (ii) the
execution and delivery of this Agreement, the Registration Rights Agreement, the
Escrow Agreement and any related  agreements by the Company and the consummation
by it of the  transactions  contemplated  hereby  and  thereby,  have  been duly
authorized  by the  Company's  Board of  Directors  and no  further  consent  or
authorization  is  required  by the  Company,  its  Board  of  Directors  or its
stockholders,  (iii)  except  as  disclosed  in  Section  4.3,  this  Agreement,
Registration  Rights Agreement,  the Escrow Agreement and any related agreements
have been duly executed and delivered by the Company,  (iv) this Agreement,  the
Registration  Rights  Agreement,  Escrow  Agreement  the  execution and delivery
thereof and acceptance by the Investor and any related agreements constitute the
valid and binding  obligations of the Company enforceable against the Company in
accordance  with their terms,  except as such  enforceability  may be limited by
general   principles   of   equity   or   applicable   bankruptcy,   insolvency,
reorganization,   moratorium,  liquidation  or  similar  laws  relating  to,  or
affecting generally, the enforcement of creditors' rights and remedies.

         Section  4.3  CAPITALIZATION.  As of the date  hereof,  the  authorized
capital stock of the Company consists of 20,000,000  shares of Common Stock, par
value $0.01 per share, of which  4,933,900shares were issued and outstanding and
1,000,000  shares of preferred stck of which nine are  outstanding.  All of such
outstanding   shares   have  been   validly   issued  and  are  fully  paid  and
nonassessable.  Except as disclosed  on Schedule  4.3, no shares of Common Stock
are subject to  preemptive  rights or any other  similar  rights or any liens or
encumbrances  suffered or  permitted  by the  Company.  Except as  disclosed  on
Schedule  4.3,  as of the date  hereof,  (i) there are no  outstanding  options,
warrants,  scrip,  rights to subscribe to, calls or commitments of any character
whatsoever  relating to, or securities or rights convertible into, any shares of
capital  stock  of  the  Company  or  any of  its  subsidiaries,  or  contracts,
commitments,  understandings  or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional  shares of capital stock
of the Company or any of its subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character  whatsoever  relating to, or
securities  or rights  convertible  into,  any  shares of  capital  stock of the
Company  or  any  of its  subsidiaries,  (ii)  there  are  no  outstanding  debt
securities  and (iii) there are no  agreements or  arrangements  under which the
Company or any of its  subsidiaries  is obligated to register the sale of any of
their  securities  under the Securities Act (except pursuant to the Registration
Rights   Agreement).   There  are  no  securities  or   instruments   containing
anti-dilution or similar  provisions that will be triggered in this Agreement or
any related  agreement or the consummation of the transactions  described herein
or therein..  The Company has furnished to the Investor true and correct  copies
of the Company's  Certificate of  Incorporation,  as amended and as in effect on
the date hereof (the "Certificate of Incorporation"), and the Company's By-laws,
as in effect on the date hereof (the "By-laws"), and the terms of all securities
convertible  into or exercisable for Common Stock and the material rights of the

                                      A-10
<PAGE>

holders thereof in respect thereto.

         Section  4.4 NO  CONFLICT.  Subject  to  Section  2.8,  the  execution,
delivery and  performance of this Agreement by the Company and the  consummation
by the Company of the transactions  contemplated hereby will not (i) result in a
violation of the Certificate of  Incorporation,  any certificate of designations
of any  outstanding  series of preferred stock of the Company or By-laws or (ii)
conflict with or constitute a default (or an event which with notice or lapse of
time or both  would  become a  default)  under,  or give to others any rights of
termination,   amendment,   acceleration  or  cancellation  of,  any  agreement,
indenture or  instrument  to which the Company or any of its  subsidiaries  is a
party, or result in a violation of any law, rule, regulation, order, judgment or
decree  (including  federal and state  securities  laws and  regulations and the
rules and  regulations of Nasdaqon which the Common Stock is quoted)  applicable
to the Company or any of its  subsidiaries  or by which any property or asset of
the Company or any of its subsidiaries is bound or affected. Except as disclosed
on Schedule 4.4, neither the Company nor its subsidiaries is in violation of any
term of or in default under its Certificate of Incorporation or By-laws or their
organizational  charter or  by-laws,  respectively,  or any  material  contract,
agreement, mortgage,  indebtedness,  indenture,  instrument, judgment, decree or
order or any  statute,  rule or  regulation  applicable  to the  Company  or its
subsidiaries.  The  business of the Company  and its  subsidiaries  is not being
conducted,  and  shall  not be  conducted  in  violation  of any  material  law,
ordinance,  regulation  of  any  governmental  entity.  Except  as  specifically
contemplated  by this Agreement and as required under the Securities Act and any
applicable  state  securities  laws,  the Company is not  required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute,  deliver or perform any
of its obligations  under or contemplated by this Agreement or the  Registration
Rights  Agreement in accordance with the terms hereof or thereof.  All consents,
authorizations,  orders, filings and registrations which the Company is required
to obtain  pursuant to the preceding  sentence have been obtained or effected on
or prior to the date hereof. The Company and its subsidiaries are unaware of any
facts or circumstance which might give rise to any of the foregoing.

         Section 4.5 SEC DOCUMENTS;  FINANCIAL  STATEMENTS.  Since June 6, 1998,
the  Company  has filed all  reports,  schedules,  forms,  statements  and other
documents required to be filed by it with the SEC under of the Exchange Act (all
of the  foregoing  filed  prior to the date  hereof  and all  exhibits  included
therein  and  financial   statements   and   schedules   thereto  and  documents
incorporated by reference  therein,  being  hereinafter  referred to as the "SEC
Documents").  The Company has delivered to the Investor or its  representatives,
or made  available  through the SEC's  website at  http://www.sec.gov,  true and
complete  copies  of the  SEC  Documents.  As of  their  respective  dates,  the
financial  statements  of the  Company  disclosed  in  the  SEC  Documents  (the
"Financial  Statements")  complied  as to form  in all  material  respects  with
applicable  accounting  requirements  and the published rules and regulations of
the SEC with respect  thereto.  Such financial  statements have been prepared in
accordance with generally accepted accounting principles,  consistently applied,
during the periods  involved  (except (i) as may be otherwise  indicated in such
financial  statements  or the notes  thereto,  or (ii) in the case of  unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements) and fairly present in all material respects the financial
position  of  the  Company  as of the  dates  thereof  and  the  results  of its

                                      A-11
<PAGE>

operations  and cash flows for the periods then ended  (subject,  in the case of
unaudited   statements,   to  normal  year-end  audit  adjustments).   No  other
information provided by or on behalf of the Company to the Investor which is not
included in the SEC Documents  contains any untrue  statement of a material fact
or omits to state any material  fact  necessary in order to make the  statements
therein,  in the light of the  circumstances  under  which they were  made,  not
misleading.

         Section 4.6.   10B-5.  The SEC  Documents  do not  include  any  untrue
statements  of  material  fact,  nor do they  omit to state  any  material  fact
required to be stated therein necessary to make the statements made, in light of
the circumstances under which they were made, not misleading.

         Section 4.7 NO DEFAULT.  Except as disclosed Section 4.4 the Company is
not in default in the  performance  or  observance  of any material  obligation,
agreement,  covenant or condition contained in any indenture,  mortgage, deed of
trust or other  material  instrument  or  agreement to which it is a party or by
which it is or its property is bound and neither the execution, nor the delivery
by the Company, nor the performance by the Company of its obligations under this
Agreement or any of the exhibits or  attachments  hereto will  conflict  with or
result in the  breach or  violation  of any of the  terms or  provisions  of, or
constitute  a default or result in the  creation  or  imposition  of any lien or
charge on any assets or  properties  of the  Company  under its  Certificate  of
Incorporation, By-Laws, any material indenture, mortgage, deed of trust or other
material agreement  applicable to the Company or instrument to which the Company
is a party or by which it is bound,  or any  statute,  or any decree,  judgment,
order,  rules or regulation of any court or  governmental  agency or body having
jurisdiction  over the Company or its  properties,  in each case which  default,
lien or charge is likely to cause a  Material  Adverse  Effect on the  Company's
business or financial condition.

         Section 4.8 ABSENCE OF EVENTS OF DEFAULT.  Except for matters described
in the SEC Documents and/or this Agreement,  no Event of Default,  as defined in
the  respective  agreement to which the Company is a party,  and no event which,
with the giving of notice or the passage of time or both,  would become an Event
of Default (as so defined),  has occurred and is continuing,  which would have a
Material  Adverse  Effect  on the  Company's  business,  properties,  prospects,
financial condition or results of operations.

         Section 4.9   INTELLECTUAL   PROPERTY  RIGHTS.   The  Company  and  its
subsidiaries  own or possess  adequate rights or licenses to use all trademarks,
trade names, service marks, service mark registrations,  service names, patents,
patent  rights,  copyrights,   inventions,  licenses,  approvals,   governmental
authorizations,  trade secrets and rights  necessary to conduct their respective
businesses as now conducted.  The Company and its  subsidiaries  do not have any
knowledge of any  infringement by the Company or its  subsidiaries of trademark,
trade name rights, patents,  patent rights,  copyrights,  inventions,  licenses,
service names, service marks, service mark registrations,  trade secret or other
similar  rights of others,  and, to the  knowledge of the  Company,  there is no
claim,  action or proceeding being made or brought against,  or to the Company's
knowledge,  being threatened against, the Company or its subsidiaries  regarding
trademark,  trade name, patents, patent rights, invention,  copyright,  license,
service names, service marks, service mark registrations,  trade secret or other
infringement;  and the Company and its  subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.

                                      A-12
<PAGE>

         Section 4.10  EMPLOYEE  RELATIONS.  Neither the  Company nor any of its
subsidiaries  is involved in any labor  dispute  nor,  to the  knowledge  of the
Company or any of its subsidiaries,  is any such dispute threatened. None of the
Company's or its subsidiaries'  employees is a member of a union and the Company
and its subsidiaries believe that their relations with their employees are good.

         Section 4.11  ENVIRONMENTAL  LAWS. The Company and its subsidiaries are
(i) in compliance with any and all applicable foreign,  federal, state and local
laws and regulations  relating to the protection of human health and safety, the
environment  or  hazardous  or  toxic   substances  or  wastes,   pollutants  or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable  Environmental Laws to conduct
their  respective  businesses  and  (iii) are in  compliance  with all terms and
conditions of any such permit, license or approval.

         Section 4.12 TITLE.  Except as set forth in Schedule  4.12, the Company
has good and marketable title to its properties and material assets owned by it,
free and clear of any pledge,  lien,  security interest,  encumbrance,  claim or
equitable  interest  other than such as are not  material to the business of the
Company.  Any real property and  facilities  held under lease by the Company and
its subsidiaries are held by them under valid, subsisting and enforceable leases
with such  exceptions as are not material and do not interfere with the use made
and proposed to be made of such  property  and  buildings by the Company and its
subsidiaries.

         Section 4.13 INSURANCE.  The Company and each of its  subsidiaries  are
insured by insurers of recognized financial  responsibility  against such losses
and risks and in such  amounts  as  management  of the  Company  believes  to be
prudent  and  customary  in  the   businesses  in  which  the  Company  and  its
subsidiaries  are engaged.  Neither the Company nor any such subsidiary has been
refused any insurance coverage sought or applied for and neither the Company nor
any such  subsidiary has any reason to believe that it will not be able to renew
its existing  insurance  coverage as and when such coverage expires or to obtain
similar  coverage  from  similar  insurers as may be  necessary  to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise,  or the earnings,  business or operations of the Company
and its subsidiaries, taken as a whole.

         Section 4.14   REGULATORY  PERMITS.  The Company  and its  subsidiaries
possess all certificates,  authorizations  and permits issued by the appropriate
federal,  state or foreign  regulatory  authorities  necessary to conduct  their
respective  businesses,  and neither the  Company  nor any such  subsidiary  has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.

         Section 4.15 INTERNAL ACCOUNTING CONTROLS.  The Company and each of its
subsidiaries  maintain a system of internal  accounting  controls  sufficient to
provide  reasonable  assurance that (i)  transactions are executed in accordance
with  management's  general or specific  authorizations,  (ii)  transactions are
recorded  as  necessary  to  permit  preparation  of  financial   statements  in

                                      A-13
<PAGE>

conformity with generally accepted  accounting  principles and to maintain asset
accountability,  (iii) access to assets is  permitted  only in  accordance  with
management's   general  or  specific   authorization   and  (iv)  the   recorded
accountability  for assets is compared  with the existing  assets at  reasonable
intervals and appropriate action is taken with respect to any differences.

         Section 4.16 NO MATERIAL ADVERSE BREACHES,  ETC. Except as set forth in
the SEC Documents, neither the Company nor any of its subsidiaries is subject to
any charter,  corporate or other legal  restriction,  or any  judgment,  decree,
order, rule or regulation which in the judgment of the Company's officers has or
is expected  in the future to have a Material  Adverse  Effect on the  business,
properties,  operations, financial condition, results of operations or prospects
of  the  Company  or  its  subsidiaries.  Neither  the  Company  nor  any of its
subsidiaries  is in breach of any contract or  agreement  which  breach,  in the
judgment  of the  Company's  officers,  has or is  expected  to have a  Material
Adverse Effect on the business,  properties,  operations,  financial  condition,
results of operations or prospects of the Company or its subsidiaries.

         Section 4.17   ABSENCE  OF  LITIGATION.  Except as set forth in the SEC
Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board, government agency,  self-regulatory  organization
or body pending against or affecting the Company, the Common Stock or any of the
Company's subsidiaries, wherein an unfavorable decision, ruling or finding would
(i) have a Material Adverse Effect on the transactions  contemplated hereby (ii)
adversely affect the validity or enforceability  of, or the authority or ability
of the Company to perform its  obligations  under,  this Agreement or any of the
documents contemplated herein, or (iii) except as expressly disclosed in the SEC
Documents,  have  a  Material  Adverse  Effect  on  the  business,   operations,
properties,  financial  condition or results of operation of the Company and its
subsidiaries taken as a whole.

         Section 4.18  SUBSIDIARIES.  Except as disclosed in the SEC  Documents,
the Company  does not  presently  own or control,  directly or  indirectly,  any
interest in any other  corporation,  partnership,  association or other business
entity.

         Section 4.19  (INTENTIONALLY NOT USED)

         Section 4.20 OTHER OUTSTANDING SECURITIES/FINANCING RESTRICTIONS. As of
the date hereof,  other than  warrants  and options to acquire  shares of Common
Stock as  disclosed  in Schedule  4.3,  there are no other  warrants and options
registered  with the SEC,  which are available for sale as  unrestricted  ("free
trading") stock.

         Section 4.21 TAX STATUS.  The Company and each of its  subsidiaries has
made or filed all federal and state  income and all other tax  returns,  reports
and declarations required by any jurisdiction to which it is subject and (unless
and only to the extent  that the Company  and each of its  subsidiaries  has set
aside on its books provisions  reasonably adequate for the payment of all unpaid
and unreported taxes) has paid all taxes and other governmental  assessments and
charges  that are  material  in amount,  shown or  determined  to be due on such
returns,  reports and  declarations,  except those being contested in good faith
and has set aside on its books provision  reasonably adequate for the payment of

                                      A-14
<PAGE>

all taxes for periods  subsequent to the periods to which such returns,  reports
or declarations  apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any  jurisdiction,  and the officers of the
Company know of no basis for any such claim.

         Section 4.22  CERTAIN   TRANSACTIONS.  Except  as set  forth in the SEC
Documents,  none of the  officers,  directors,  or  employees  of the Company is
presently a party to any  transaction  with the Company (other than for services
as employees,  officers and  directors),  including  any contract,  agreement or
other  arrangement  providing for the furnishing of services to or by, providing
for rental of real or  personal  property  to or from,  or  otherwise  requiring
payments to or from any officer,  director or such employee or, to the knowledge
of the Company, any corporation, partnership, trust or other entity in which any
officer,  director,  or any such  employee has a  substantial  interest or is an
officer, director, trustee or partner.

         Section 4.23 FEES AND RIGHTS OF FIRST  REFUSAL.  Except as set forth in
the SEC Documents,  the Company is not obligated to offer the securities offered
hereunder on a right of first  refusal  basis or otherwise to any third  parties
including,  but not limited to, current or former  shareholders  of the Company,
underwriters, brokers, agents or other third parties.

         Section 4.24 USE OF  PROCEEDS.  The   Company  represents  that the net
proceeds from this offering will be used as provided on Schedule 4.24.  However,
in no event shall the net proceeds from this offering be used by the Company for
the payment (or loaned to any such person for the payment) of any  judgment,  or
other  liability,  incurred by any  executive  officer,  officer,  director,  or
employee of the Company.

         Section 4.25 FURTHER  REPRESENTATION AND WARRANTIES OF THE COMPANY. For
so  long as any  securities  issuable  hereunder  held  by the  Investor  remain
outstanding, the Company acknowledges,  represents,  warrants and agrees that it
will use commercially  reasonable  efforts to maintain the listing of its Common
Stock on NASD Bulletin Board and/or the NASDAQ Small Cap Stock Market and/or the
American Stock Exchange.

         Section 4.26  OPINION OF COUNSEL.  Investor  shall  receive  an opinion
letter from counsel to the Company (updated where applicable) on the date hereof
and on each Advance Date substantially in the form of Exhibit "C".

         Section 4.27  OPINION OF  COUNSEL.  The  Company  will   obtain for the
Investor, at the Company's expense, any and all opinions of counsel which may be
reasonably  required in order to sell the securities  issuable hereunder without
restriction.

         Section 4.28  DILUTION.  The  Company  is aware and  acknowledges  that
issuance  of shares of the  Company's  Common  Stock  could  cause  dilution  to
existing shareholders and could significantly increase the outstanding number of
shares of Common Stock.

                                      A-15
<PAGE>

                                    ARTICLE V
                                 INDEMNIFICATION

         The Investor and the Company  represent to the other the following with
respect to itself:

         Section 5.1  INDEMNIFICATION.  (a) In  consideration  of the Investor's
execution  and  delivery  of  this  Agreement,  and  in  addition  to all of the
Company's  other  obligations  under this  Agreement,  the Company shall defend,
protect, indemnify and hold harmless the Investor(s), and all of their officers,
directors,  employees and agents (including,  without limitation, those retained
in  connection   with  the   transactions   contemplated   by  this   Agreement)
(collectively, the "Investor Indemnitees") from and against any and all actions,
causes of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith  (irrespective of whether any such
Investor Indemnitee is a party to the action for which indemnification hereunder
is sought),  and including  reasonable  attorneys' fees and  disbursements  (the
"Indemnified Liabilities"),  incurred by the Investor Indemnitees or any of them
as a result of, or arising out of, or relating to (a) any  misrepresentation  or
breach of any  representation  or warranty made by the Company in this Agreement
or the  Registration  Rights Agreement or any other  certificate,  instrument or
document  contemplated  hereby  or  thereby,  (b) any  breach  of any  covenant,
agreement  or  obligation  of the Company  contained  in this  Agreement  or the
Registration  Rights Agreement or any other certificate,  instrument or document
contemplated  hereby  or  thereby,  or (c) any  cause of  action,  suit or claim
brought or made against such Investor  Indemnitee  not arising out of any action
or inaction of an Investor Indemnitee,  and arising out of or resulting from the
execution,  delivery,  performance or enforcement of this Agreement or any other
instrument,  document  or  agreement  executed  pursuant  hereto  by  any of the
Indemnitees.  To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and  satisfaction of each of the Indemnified  Liabilities,  which is
permissible under applicable law.

         (b) In  consideration  of the Company's  execution and delivery of this
Agreement, and in addition to all of the Investor's other obligations under this
Agreement,  the Investor shall defend, protect,  indemnify and hold harmless the
Company and all of its officers,  directors,  employees  and agents  (including,
without   limitation,   those  retained  in  connection  with  the  transactions
contemplated by this Agreement)  (collectively,  the "Company Indemnitees") from
and against any and all Indemnified  Liabilities  incurred by the Indemnitees or
any of  them  as a  result  of,  or  arising  out  of,  or  relating  to (a) any
misrepresentation  or  breach  of any  representation  or  warranty  made by the
Investor(s) in this Agreement or any instrument or document  contemplated hereby
or thereby executed by the Investor,  (b) any breach of any covenant,  agreement
or obligation of the Investor(s)  contained in this Agreement,  the Registration
Rights Agreement or any other certificate,  instrument or document  contemplated
hereby or thereby executed by the Investor,  or (c) any cause of action, suit or
claim  brought  or made  against  such  Company  Indemnitee  based  on  material
misrepresentations  or due to a material  breach by the Investor and arising out
of or resulting from the execution, delivery, performance or enforcement of this
Agreement  or any other  instrument,  document or  agreement  executed  pursuant
hereto by any of the  Company  Indemnitees.  To the  extent  that the  foregoing
undertaking  by the Company  may be  unenforceable  for any reason,  the Company
shall make the maximum  contribution to the payment and  satisfaction of each of

                                      A-16
<PAGE>

the Indemnified Liabilities, which is permissible under applicable law.

                                   ARTICLE VI
                            COVENANTS OF THE COMPANY

         Section 6.1    REGISTRATION   RIGHTS.   The  Company  shall  cause  the
Registration Rights Agreement to remain in full force and effect and the Company
shall comply in all material respects with the terms thereof.

         Section 6.2    LISTING OF COMMON STOCK.  The Company shall maintain the
Common Stock's authorization for quotation on the Nasdaq.

         Section 6.3  EXCHANGE  ACT  REGISTRATION.  The  Company  will cause its
Common Stock to continue to be  registered  under  Section 12(g) of the Exchange
Act, will file in a timely manner all reports and other documents required of it
as a reporting  company  under the  Exchange Act and will not take any action or
file any document  (whether or not  permitted by Exchange Act or the rules there
under to terminate or suspend such  registration  or to terminate or suspend its
reporting and filing obligations under said Exchange Act.

         Section 6.4  TRANSFER  AGENT  INSTRUCTIONS.  Upon each  Closing and the
effectiveness   of  the   Registration   Statement   the  Company  will  deliver
instructions  to its  transfer  agent to issue to Investor and deliver to Escrow
Agent shares of Common Stock free of legends.

         Section 6.5  CORPORATE  EXISTENCE.  The  Company  will  take all  steps
necessary  to preserve  and  continue  the  corporate  existence of the Company.

         Section 6.6 NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION
OF RIGHT TO MAKE AN ADVANCE.  The Company will  immediately  notify the Investor
upon its becoming  aware of the  occurrence  of any of the  following  events in
respect  of a  registration  statement  or  related  prospectus  relating  to an
offering of  Registrable  Securities:  (i) receipt of any request for additional
information  by the SEC or any other  Federal  or state  governmental  authority
during the period of effectiveness of the Registration  Statement for amendments
or supplements to the  registration  statement or related  prospectus;  (ii) the
issuance by the SEC or any other Federal or state governmental  authority of any
stop order suspending the  effectiveness  of the  Registration  Statement or the
initiation  of  any  proceedings   for  that  purpose;   (iii)  receipt  of  any
notification  with respect to the suspension of the  qualification  or exemption
from  qualification  of  any of  the  Registrable  Securities  for  sale  in any
jurisdiction  or the  initiation  or  threatening  of any  proceeding  for  such
purpose;  (iv) the happening of any event that makes any  statement  made in the
Registration  Statement or related  prospectus of any document  incorporated  or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in the Registration  Statement,  related
prospectus or documents so that, in the case of the Registration  Statement,  it
will not contain any untrue  statement  of a material  fact or omit to state any
material fact required to be stated  therein or necessary to make the statements
therein not misleading,  and that in the case of the related prospectus, it will
not  contain  any  untrue  statement  of a  material  fact or omit to state  any

                                      A-17
<PAGE>

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 (v) the Company's reasonable determination that a post-effective
amendment to the  Registration  Statement would be appropriate;  and the Company
will promptly make available to the Investor any such supplement or amendment to
the related  prospectus.  The  Company  shall not  deliver to the  Investor  any
Advance Notice during the continuation of any of the foregoing events.

         Section 6.7 EXPECTATIONS  REGARDING  ADVANCE  NOTICES.  Within ten (10)
days after the commencement of each calendar quarter occurring subsequent to the
commencement of the Commitment Period, the Company must notify the Investor,  in
writing, as to its reasonable expectations as to the dollar amount it intends to
raise  during such  calendar  quarter,  if any,  through the issuance of Advance
Notices.  Such  notification  shall  constitute  only the  Company's  good faith
estimate and shall in no way  obligate the Company to raise such amount,  or any
amount,  or otherwise limit its ability to deliver Advance Notices.  The failure
by the  Company  to comply  with this  provision  can be cured by the  Company's
notifying  the  Investor,   in  writing,  at  any  time  as  to  its  reasonable
expectations with respect to the current calendar quarter.

         Section 6.8  CONSOLIDATION;  MERGER. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into,  or a transfer  of all or  substantially  all the assets of the Company to
another  entity (a  "Consolidation  Event")  unless the  resulting  successor or
acquiring  entity  (if  not the  Company)  assumes  by  written  instrument  the
obligation to deliver to the Investor such shares of stock and/or  securities as
the Investor is entitled to receive pursuant to this Agreement.

         Section 6.9 ISSUANCE OF THE  COMPANY'S  COMMON  STOCK.  The sale of the
shares of Common  Stock  shall be made in  accordance  with the  provisions  and
requirements of Regulation D and any applicable state securities law.

                                   ARTICLE VII
                CONDITIONS FOR ADVANCE AND CONDITIONS TO CLOSING

         Section 7.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY. The
obligation hereunder of the Company to issue and sell the shares of Common Stock
to the  Investor  incident to each  Closing is subject to the  satisfaction,  or
waiver by the Company, at or before each such Closing, of each of the conditions
set forth below.

                  (a) ACCURACY OF THE INVESTOR'S  REPRESENTATION AND WARRANTIES.
The  representations and warranties of the Investor shall be true and correct in
all  material  respects as of the date of this  Agreement  and as of the date of
each such Closing as though made at each such time.

                  (b)  PERFORMANCE  BY THE  INVESTOR.  The  Investor  shall have
performed, satisfied and complied in all respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Investor at or prior to such Closing.

                                      A-18
<PAGE>

         Section 7.2 CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY TO DELIVER
AN ADVANCE  NOTICE AND THE  OBLIGATION  OF THE  INVESTOR TO  PURCHASE  SHARES OF
COMMON  STOCK.  The right of the  Company to  deliver an Advance  Notice and the
obligation  of the  Investor  hereunder  to  acquire  and pay for  shares of the
Company's  Common Stock incident to a Closing is subject to the  satisfaction or
waiver by the Investor,  on (i) the date of delivery of such Advance  Notice and
(ii) the applicable Advance Date (each a "Condition Satisfaction Date"), of each
of the following conditions:

                  (a) REGISTRATION OF THE COMMON STOCK WITH THE SEC. The Company
shall have  filed  with the SEC a  Registration  Statement  with  respect to the
resale  of the  Registrable  Securities  in  accordance  with  the  terms of the
Registration  Rights  Agreement.   As  set  forth  in  the  Registration  Rights
Agreement, the Registration Statement shall have previously become effective and
shall remain effective on each Condition  Satisfaction  Date and (i) neither the
Company nor the Investor  shall have received  notice that the SEC has issued or
intends to issue a stop order with respect to the Registration Statement or that
the  SEC  otherwise  has  suspended  or  withdrawn  the   effectiveness  of  the
Registration  Statement,  either  temporarily or permanently,  or intends or has
threatened  to do so (unless  the SEC's  concerns  have been  addressed  and the
Investor  is  reasonably  satisfied  that the SEC no  longer is  considering  or
intends  to take  such  action),  and  (ii) no  other  suspension  of the use or
withdrawal  of  the  effectiveness  of the  Registration  Statement  or  related
prospectus  shall exist.  The  Registration  Statement  must have been  declared
effective by the SEC prior to the first Advance Notice Date.

                  (b) AUTHORITY. The Company shall have obtained all permits and
qualifications   required  by  any  applicable  state  in  accordance  with  the
Registration  Rights  Agreement  for the offer and sale of the  shares of Common
Stock,  or shall have the  availability  of exemptions  there from. The sale and
issuance of the shares of Common  Stock shall be legally  permitted  by all laws
and regulations to which the Company is subject.

                  (c) ACCURACY OF THE COMPANY'S  REPRESENTATIONS AND WARRANTIES.
The  representations  and warranties of the Company shall be true and correct in
all material  respects as of each Condition  Satisfaction Date as though made at
each such time (except for representations  and warranties  specifically made as
of a  particular  date) with  respect to all  periods,  and as to all events and
circumstances occurring or existing to and including each Condition Satisfaction
Date.

                  (d)  PERFORMANCE  BY  THE  COMPANY.  The  Company  shall  have
performed,  satisfied and complied in all material  respects with all covenants,
agreements and conditions required by this Agreement and the Registration Rights
Agreement to be performed, satisfied or complied with by the Company at or prior
to each Condition Satisfaction Date.

                  (e) NO INJUNCTION.  No statute,  rule,  regulation,  executive
order,  decree,   ruling  or  injunction  shall  have  been  enacted,   entered,
promulgated  or endorsed by any court or  governmental  authority  of  competent
jurisdiction  that  prohibits  or  directly  and  adversely  affects  any of the
transactions  contemplated by this Agreement,  and no proceeding shall have been
commenced that may have the effect of prohibiting or adversely  affecting any of
the transactions contemplated by this Agreement.

                                      A-19
<PAGE>

                  (f) ADVERSE CHANGES. Since the date of filing of the Company's
most recent SEC Document,  no event that had or is  reasonably  likely to have a
Material Adverse Effect has occurred.

                  (g) NO  SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK.
The trading of the Common  Stock is not  suspended  by the SEC or the  Principal
Market (if the Common  Stock is traded on a Principal  Market).  The issuance of
shares of Common Stock with respect to the applicable Closing, if any, shall not
violate the shareholder  approval  requirements of the Principal  Market (if the
Common  Stock is traded  on a  Principal  market).  The  Company  shall not have
received any notice threatening the continued listing of the Common Stock on the
Principal Market (if the Common Stock is traded on a Principal Market).

                  (h) MAXIMUM ADVANCE AMOUNT.  The amount of the advance
requested by the Company does not exceed the Maximum Advance Amount.

                  (i) NO  KNOWLEDGE.  The Company has no knowledge  of any event
more likely than not to have the effect of causing such  Registration  Statement
to be suspended or otherwise ineffective.

                  (j) PURCHASE PRICE. The Bid Price on the Advance  Notice  Date
shall not be less than the Purchase Price.

                  (k) OTHER. On each Condition  Satisfaction  Date, the Investor
shall have received and been reasonably  satisfied with such other  certificates
and documents as shall have been  reasonably  requested by the Investor in order
for the Investor to confirm the Company's  satisfaction  of the  conditions  set
forth in this Section 7.2, including, without limitation, a certificate executed
by an executive officer of the Company and to the effect that all the conditions
to  such  Closing  shall  have  been  satisfied  as at the  date  of  each  such
certificate substantially in the form annexed hereto on Schedule B.

                                  ARTICLE VIII
         DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION

         Section 8.1  DUE  DILIGENCE  REVIEW.   Prior  to  the  filing   of  the
Registration  Statement the Company  shall make  available  for  inspection  and
review by the Investor,  advisors to and  representatives  of the Investor,  any
underwriter  participating  in any disposition of the Registrable  Securities on
behalf  of  the  Investor  pursuant  to the  Registration  Statement,  any  such
registration  statement or amendment or supplement thereto or any blue sky, NASD
or other filing,  all financial and other  records,  all SEC Documents and other
filings with the SEC, and all other  corporate  documents and  properties of the
Company as may be reasonably necessary for the purpose of such review, and cause
the Company's  officers,  directors and employees to supply all such information
reasonably  requested  by the  Investor or any such  representative,  advisor or

                                      A-20
<PAGE>

underwriter in connection with such Registration  Statement (including,  without
limitation,  in response to all questions and other inquiries reasonably made or
submitted  by any of them),  prior to and from time to time after the filing and
effectiveness of the Registration Statement for the sole purpose of enabling the
Investor  and  such   representatives,   advisors  and  underwriters  and  their
respective  accountants  and  attorneys  to  conduct  initial  and  ongoing  due
diligence  with  respect to the  Company and the  accuracy  of the  Registration
Statement.

         Section 8.2   NON-DISCLOSURE OF NON-PUBLIC INFORMATION.

                  (a) The Company shall not disclose  non-public  information to
the Investor,  advisors to or  representatives  of the Investor  unless prior to
disclosure of such information the Company  identifies such information as being
non-public   information   and  provides  the   Investor,   such   advisors  and
representatives  with the  opportunity  to  accept  or  refuse  to  accept  such
non-public information for review. The Company may, as a condition to disclosing
any  non-public  information  hereunder,  require the  Investor's  advisors  and
representatives  to enter into a  confidentiality  agreement in form  reasonably
satisfactory to the Company and the Investor.

                  (b) Nothing  herein  shall  require  the  Company to  disclose
non-public  information to the Investor or its advisors or representatives,  and
the Company  represents that it does not disseminate  non-public  information to
any investors who purchase stock in the Company in a public  offering,  to money
managers or to securities  analysts,  provided,  however,  that  notwithstanding
anything  herein to the contrary,  the Company will,  as  hereinabove  provided,
immediately notify the advisors and representatives of the Investor and, if any,
underwriters,  of any event or the  existence of any  circumstance  (without any
obligation to disclose the specific event or  circumstance)  of which it becomes
aware,  constituting  non-public  information  (whether or not  requested of the
Company  specifically  or generally  during the course of due  diligence by such
persons or entities),  which, if not disclosed in the prospectus included in the
Registration  Statement  would  cause  such  prospectus  to  include a  material
misstatement  or to omit a material fact required to be stated  therein in order
to make the statements,  therein,  in light of the  circumstances  in which they
were made,  not  misleading.  Nothing  contained  in this  Section  8.2 shall be
construed to mean that such persons or entities other than the Investor (without
the written consent of the Investor prior to disclosure of such information) may
not obtain  non-public  information in the course of conducting due diligence in
accordance with the terms of this Agreement and nothing herein shall prevent any
such persons or entities from  notifying the Company of their opinion that based
on such due  diligence  by such  persons  or  entities,  that  the  Registration
Statement contains an untrue statement of material fact or omits a material fact
required to be stated in the  Registration  Statement  or  necessary to make the
statements  contained therein,  in light of the circumstances in which they were
made, not misleading.

                                   ARTICLE IX
                           CHOICE OF LAW/JURISDICTION

         Section 9.1  GOVERNING  LAW.  This  Agreement  shall be governed by and
interpreted in accordance  with the laws of the State of New York without regard

                                      A-21
<PAGE>

to the principles of conflict of laws. The parties further agree that any action
between them shall be heard in New York City, New York, and expressly consent to
the  jurisdiction  and  venue of the  Supreme  Court of New York and the  United
States District Court for the Southern District of New York for the adjudication
of any civil action asserted pursuant to this paragraph.

                                    ARTICLE X
                             ASSIGNMENT; TERMINATION

         Section 10.1  ASSIGNMENT.  Neither this Agreement nor any rights of the
Company  hereunder may be assigned to any other Person.  The  provisions of this
Agreement  shall inure to the benefit of, and be enforceable  by, any transferee
of the Investor.  The  Investor's  interest in this Agreement may be assigned at
any time,  in whole or in part,  to any other  person or entity  (including  any
affiliate of the Investor) who agrees to make the representations and warranties
contained in Article III and who agrees to be bound by the  covenants of Article
V.

         Section 10.2   TERMINATION.  The  obligations  of the  Investor to make
Advances  under  Article  II hereof  shall  terminate  30 months  after the date
hereof.

                                   ARTICLE XI
                                     NOTICES

         Section 11.1  NOTICES.  Any   notices,  consents,   waivers,  or  other
communications  required  or  permitted  to be  given  under  the  terms of this
Agreement  must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered  personally;  (ii) upon receipt, when sent by facsimile,
provided a copy is mailed by U.S.  certified  mail,  return  receipt  requested;
(iii) three (3) days after being sent by U.S.  certified  mail,  return  receipt
requested,  or (iv)  one (1) day  after  deposit  with a  nationally  recognized
overnight  delivery  service,  in each case  properly  addressed to the party to
receive the same.  The addresses and facsimile  numbers for such  communications
shall be:

                                                If to the Company, to:

                                                EUROPEAN MICRO HOLDINGS, INC.
                                                6073 N.W. 167th Street
                                                Unit C-25
                                                Miami, Fl  33015
                                                Attention:  John B. Gallagher

                                                Telephone:  (305) 825-2458
                                                Facsimile:  (305) 362-4854

                    with a copy to:             Kirkpatrick  & Lockhart
                                                201 Biscayne Blvd.

                                      A-22
<PAGE>

                                                Suite 2000
                                                Miami, Fl  33131
                                                Attention: Clayton Parker, Esq.

                                                Telephone:  (305) 539-3306
                                                Facsimile:  (305) 358-7095

If to the  Investor(s),  to its address and facsimile  number on Exhibit A, with
copies to the  Investor's  counsel as set forth on  Exhibit A. Each party  shall
provide five (5) days' prior written  notice to the other party of any change in
address or facsimile number.

                                   ARTICLE XII
                                  MISCELLANEOUS

         Section 12.1  COUNTERPARTS.  This  Agreement  may be executed in two or
more identical  counterparts,  all of which shall be considered one and the same
agreement and shall become effective when  counterparts have been signed by each
party and  delivered  to the other  party.  In the event any  signature  page is
delivered  by  facsimile  transmission,  the party  using such means of delivery
shall  cause  four  (4)  additional  original  executed  signature  pages  to be
physically  delivered to the other party  within five (5) days of the  execution
and delivery hereof

         Section 12.2 ENTIRE AGREEMENT;  AMENDMENTS.  This Agreement  supersedes
all other prior oral or written agreements between the Investor(s), the Company,
their  affiliates and persons acting on their behalf with respect to the matters
discussed  herein,  and this  Agreement and the  instruments  referenced  herein
contain  the entire  understanding  of the parties  with  respect to the matters
covered  herein and therein  and,  except as  specifically  set forth  herein or
therein,  neither  the  Company  nor  any  Investor  makes  any  representation,
warranty,  covenant or undertaking with respect to such matters. No provision of
this  Agreement  may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.

         Section  12.3  REPORTING  ENTITY FOR THE COMMON  STOCK.  The  reporting
entity relied upon for the  determination of the trading price or trading volume
of the Common Stock on any given Trading Day for the purposes of this  Agreement
shall be Bloomberg, L.P. or any successor thereto. The written mutual consent of
the  Investor  and the Company  shall be required to employ any other  reporting
entity.

         Section 12.4 FEES AND  EXPENSES.  As set forth in the  Placement  Agent
Agreement  entered into by the Company in connection  herewith,  the Company has
agreed to pay the following fees:

                  (a) LEGAL FEES. Each of the parties shall pay its own fees and
expenses (including the fees of any attorneys, accountants, appraisers or others
engaged by such party) in connection  with this  Agreement and the  transactions
contemplated  hereby,  except that the  Company  will pay the sum of Twenty Five

                                      A-23
<PAGE>

Thousand ($25,000) Dollars, to Butler Gonzalez LLP for legal fees.  Subsequently
on each Advance  Date,  the Company will pay Butler  Gonzalez LLP the sum of Two
Hundred and Fifty Dollars ($250) Dollars for escrow fees.

                  (b)  PLACEMENT  AGENT FEES.  On each  Advance Date the Company
shall pay the May Davis Group, Inc. an amount equal to seven (7%) percent of the
amount of the Advance.  The Company  hereby agrees that if such  payment,  as is
described  above,  is not made by the Company on the Advance Date,  such payment
will be made at the  direction  of the  Investor  as  outlined  and  mandated by
Section 2.3 of this  Agreement.  In the event that Mark Angelo,  Joseph Donahue,
Hunter Singer,  and Robert Farrell terminate their employment with the May Davis
Group,  Inc., May Davis Group,  Inc.,  recognizes and directs the Company to pay
the May Davis Group,  Inc., an amount equal to 1.4% of the amount of the Advance
and an amount  equal to 5.6% of the  amount of the  advance  to a broker  dealer
designated by Mark Angelo,  Joseph  Donahue,  Hunter Singer,  and Robert Farrell
jointly.

         Section 12.5 BROKERAGE.  Each of the parties hereto  represents that it
has had no  dealings  in  connection  with this  transaction  with any finder or
broker who will demand  payment of any fee or  commission  from the other party,
other than the Placement  Agent.  The Company on the one hand, and the Investor,
on the other  hand,  agree to  indemnify  the other  against  and hold the other
harmless  from  any  and  all  liabilities  to  any  person  claiming  brokerage
commissions  or  finder's  fees on account of  services  purported  to have been
rendered on behalf of the  indemnifying  party in connection with this Agreement
or the transactions contemplated hereby.

         Section  12.6  CONFIDENTIALITY.  If for  any  reason  the  transactions
contemplated by this Agreement are not  consummated,  each of the parties hereto
shall keep  confidential  any information  obtained from any other party (except
information  publicly  available  or in such  party's  domain  prior to the date
hereof,  and except as required by court order) and shall promptly return to the
other  parties  all  schedules,  documents,  instruments,  work  papers or other
written information without retaining copies thereof, previously furnished by it
as a result of this Agreement or in connection herein.

                                            [SIGNATURE PAGE FOLLOWS]

                                      A-24
<PAGE>

         IN WITNESS WHEREOF,  the parties hereto have caused this Line of Credit
Agreement to be executed by the undersigned,  thereunto duly  authorized,  as of
the date first set forth above.

                                            COMPANY:
                                            EUROPEAN MICRO HOLDINGS, INC.

                                            By: ________________________________
                                            Name: John B. Gallagher
                                            Title: Co-President

                                            INVESTOR:
                                            SPINNERET FINANCIAL SYSTEM, LTD.

                                            By: ________________________________
                                            Name: Alfred Hahnfeldt
                                            Title:

                                      A-25

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