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                                                                     Exhibit 4.1

                          SECURITIES PURCHASE AGREEMENT

         This Securities Purchase Agreement (this "AGREEMENT") is dated as of
January 15, 2004, among PacificNet Inc., a Delaware corporation (the "Company"),
and the purchasers identified on the signature pages hereto (each a "PURCHASER"
and collectively the "PURCHASERS"); and

         WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act (as defined below),
and Rule 506 promulgated thereunder, the Company desires to issue and sell to
the Purchasers, and each Purchaser, severally and not jointly, desires to
purchase from the Company in the aggregate, up to $3,000,000 of the Company's
Common Stock (as defined below), as more fully described in this Agreement.

         NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agree
as follows:

                                   ARTICLE I.
                                   DEFINITIONS

         1.1 DEFINITIONS. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the
meanings indicated in this Section 1.1:

                  "ACTION" shall have the meaning ascribed to such term in
         Section 3.1(j).

                  "AFFILIATE" means any Person that, directly or indirectly
         through one or more intermediaries, controls or is controlled by or is
         under common control with a Person as such terms are used in and
         construed under Rule 144. With respect to a Purchaser, any investment
         fund or managed account that is managed on a discretionary basis by the
         same investment manager as such Purchaser will be deemed to be an
         Affiliate of such Purchaser.

                  "BUSINESS DAY" means any day except Saturday, Sunday and any
         day which shall be a federal legal holiday or a day on which banking
         institutions in the State of New York are authorized or required by law
         or other governmental action to close.

                  "CLOSING" means the closing of the purchase and sale of the
         Common Stock and the Warrants pursuant to Section 2.1.

                  "CLOSING DATE" means the Trading Day when all of the
         Transaction Documents have been executed and delivered by the
         applicable parties thereto, all conditions precedent to the Purchasers'
         obligations to pay the Subscription Amount have been satisfied or
         waived, and the net aggregate Subscription Amounts have been
         transmitted to and received by the Company.

                  "CLOSING PRICE" means on any particular date (a) the last
         reported closing bid price per share of Common Stock on such date on
         the Trading Market (as reported by Bloomberg L.P. at 4:15 PM (New York
         time), or (b) if there is no such price on such date, then the closing
         bid price on the Trading Market on the date nearest preceding such date

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         (as reported by Bloomberg L.P. at 4:15 PM (New York time) for the
         closing bid price for regular session trading on such day), or (c) if
         the Common Stock is not then listed or quoted on the Trading Market and
         if prices for the Common Stock are then reported in the "pink sheets"
         published by the National Quotation Bureau Incorporated (or a similar
         organization or agency succeeding to its functions of reporting
         prices), the most recent bid price per share of the Common Stock so
         reported, or (d) if the shares of Common Stock are not then publicly
         traded the fair market value of a share of Common Stock as determined
         by an appraiser selected in good faith by the Purchasers of a majority
         in interest of the Shares then outstanding.

                  "COMMISSION" means the Securities and Exchange Commission.

                  "COMMON STOCK" means the common stock of the Company, $0.0001
         par value per share, and any securities into which such common stock
         may hereafter be reclassified.

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

                  "COMPANY COUNSEL" means Loeb & Loeb LLP.

                  "DISCLOSURE SCHEDULES" means the Disclosure Schedules attached
         hereto.

                  "EFFECTIVE DATE" means the date that the Registration
         Statement is first declared effective by the Commission.

                  "ESCROW AGENT" shall have the meaning set forth in the Escrow
         Agreement.

                  "ESCROW AGREEMENT" shall mean the Escrow Agreement in
         substantially the form of EXHIBIT B hereto executed and delivered
         contemporaneously with this Agreement.

                  "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
         amended.

                  "FW" means Feldman Weinstein LLP with offices located at 420
         Lexington Avenue, New York, New York 10170-0002.

                  "INTELLECTUAL PROPERTY RIGHTS" shall have the meaning ascribed
         to such term in Section 3.1(o).

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

                  "MATERIAL ADVERSE EFFECT" shall have the meaning ascribed to
         such term in Section 3.1(b).

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

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                  "PER SHARE PURCHASE PRICE" equals $4.86, subject to adjustment
         for reverse and forward stock splits, stock dividends, stock
         combinations and other similar transactions of the Common Stock that
         occur after the date of this Agreement.

                  "PERSON" means an individual or corporation, partnership,
         trust, incorporated or unincorporated association, joint venture,
         limited liability company, joint stock company, government (or an
         agency or subdivision thereof) or other entity of any kind.

                  "REGISTRATION STATEMENT" means a registration statement
         meeting the requirements set forth in the Registration Rights Agreement
         and covering the resale by the Purchasers of the Shares and the Warrant
         Shares.

                  "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
         Agreement, dated as of the date of this Agreement, among the Company
         and each Purchaser, in the form of EXHIBIT A hereto.

                  "REQUIRED APPROVALS" shall have the meaning ascribed to such
         term in Section 3.1(e).

                  "RULE 144" means Rule 144 promulgated by the Commission
         pursuant to the Securities Act, as such Rule may be amended from time
         to time, or any similar rule or regulation hereafter adopted by the
         Commission having substantially the same effect as such Rule.

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

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

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

                  "SHARES" means the shares of Common Stock issued or issuable
         to each Purchaser pursuant to this Agreement.

                  "SUBSCRIPTION AMOUNT" means, as to each Purchaser, the amounts
         set forth below such Purchaser's signature block on the signature page
         hereto, in United States dollars and in immediately available funds.

                  "SUBSIDIARY" shall mean the subsidiaries of the Company, if
         any, set forth on Schedule 3.1(a).

                  "TRADING DAY" means (i) a day on which the Common Stock is
         traded on a Trading Market, or (ii) if the Common Stock is not listed
         on a Trading Market, a day on which the Common Stock is traded on the
         over-the-counter market, as reported by the OTC Bulletin Board, or
         (iii) if the Common Stock is not quoted on the OTC Bulletin Board, a
         day on which the Common Stock is quoted in the over-the-counter market
         as reported by the National Quotation Bureau Incorporated (or any
         similar organization or agency succeeding its functions of reporting
         prices); provided, that in the event that the Common Stock is not
         listed or quoted as set forth in (i), (ii) and (iii) hereof, then
         Trading Day shall mean a Business Day.

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                  "TRADING MARKET" means the following markets or exchanges on
         which the Common Stock is listed or quoted for trading on the date in
         question: the American Stock Exchange, the New York Stock Exchange, the
         Nasdaq National Market or the Nasdaq SmallCap Market.

                  "TRANSACTION DOCUMENTS" means this Agreement, the Escrow
         Agreement, the Warrants and the Registration Rights Agreement and any
         other documents or agreements executed in connection with the
         transactions contemplated hereunder.

                  "VWAP" means, for any date, the price determined by the first
         of the following clauses that applies: (a) if the Common Stock is then
         listed or quoted on a Trading Market, the daily volume weighted average
         price of the Common Stock for such date (or the nearest preceding date)
         on the primary Trading Market on which the Common Stock is then listed
         or quoted as reported by Bloomberg Financial L.P. (based on a Trading
         Day from 9:30 a.m. ET to 4:02 p.m. Eastern Time) using the VAP
         function; (b) if the Common Stock is not then listed or quoted on an
         Trading Market and if prices for the Common Stock are then quoted on
         the OTC Bulletin Board, the volume weighted average price of the Common
         Stock for such date (or the nearest preceding date) on the OTC Bulletin
         Board; (c) if the Common Stock is not then listed or quoted on the OTC
         Bulletin Board and if prices for the Common Stock are then reported in
         the "Pink Sheets" published by the National Quotation Bureau
         Incorporated (or a similar organization or agency succeeding to its
         functions of reporting prices), the most recent bid price per share of
         the Common Stock so reported; or (d) in all other cases, the fair
         market value of a share of Common Stock as determined by a nationally
         recognized-independent appraiser selected in good faith by Purchasers
         holding a majority of the Shares then outstanding.

                  "WARRANTS" means the Common Stock Purchase Warrants, in the
         form of EXHIBIT C, issuable to the Purchasers at the Closing, which
         warrants shall have an exercise price equal to $7.15 and be exercisable
         for a period of 5 years.

                  "WARRANT SHARES" means the shares of Common Stock issuable
         upon exercise of the Warrants.

                                   ARTICLE II.
                                PURCHASE AND SALE

         2.1 CLOSING. At the Closing, each Purchaser shall purchase from the
Company, severally and not jointly with the other Purchasers, and the Company
shall issue and sell to each Purchaser, (a) a number of Shares equal to such
Purchaser's Subscription Amount divided by the Per Share Purchase Price and (b)
the Warrants as determined pursuant to Section 2.2(a)(iii). The maximum
aggregate Subscription Amounts hereunder shall not exceed $3,000,000. The
Closing shall occur on or before the third Trading Day after the date hereof at
the offices of the Escrow Agent, or at such other location or earlier date as
the parties shall mutually agree.

         2.2 CLOSING CONDITIONS.

                  (a) At the Closing the Company shall deliver or cause to be
         delivered to the Escrow Agent on behalf of each Purchaser the
         following:

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                           (i) this Agreement duly executed by the Company;

                           (ii) a certificate evidencing a number of Shares
                  equal to such Purchaser's Subscription Amount divided by the
                  Per Share Purchase Price, registered in the name of such
                  Purchaser

                           (iii) a Warrant, registered in the name of such
                  Purchaser, pursuant to which such Purchaser shall have the
                  right to acquire up to the number of shares of Common Stock
                  equal to 25% of the Shares to be issued to such Purchaser;

                           (iv) the Registration Rights Agreement duly executed
                  by the Company;

                           (v) the Escrow Agreement duly executed by the
                  Company; and

                           (vi) a legal opinion of Company Counsel, in the form
                  of EXHIBIT D attached hereto.

                  (b) At the Closing each Purchaser shall deliver or cause to be
         delivered to the Escrow Agent the following:

                           (i) this Agreement duly executed by such Purchaser;

                           (ii) such Purchaser's Subscription Amount by wire
                  transfer to the account of the Escrow Agent;

                           (iii) the Escrow Agreement, duly executed by such
                  Purchaser; and

                           (iv) the Registration Rights Agreement duly executed
                  by such Purchaser.

                  (c) All representations and warranties of the other party
         contained herein shall remain true and correct as of the Closing Date.

                  (d) As of the Closing Date, there shall have been no Material
         Adverse Effect with respect to the Company since the date hereof.

                  (e) From the date hereof to the Closing Date, trading in the
         Common Stock shall not have been suspended by the Commission (except
         for any suspension of trading of limited duration agreed to by the
         Company, which suspension shall be terminated prior to the Closing),
         and, at any time prior to the Closing Date, trading in securities
         generally as reported by Bloomberg Financial Markets shall not have
         been suspended or limited, or minimum prices shall not have been
         established on securities whose trades are reported by such service, or
         on any Trading Market, nor shall a banking moratorium have been
         declared either by the United States or New York State authorities, nor
         shall there have occurred any material outbreak or escalation of
         hostilities or other national or international calamity of such
         magnitude in its effect on, or any material adverse change in, any
         financial market which, in each case, in the reasonable judgment of
         each Purchaser, makes it impracticable or inadvisable to purchase the
         Shares at the Closing.

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                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

         3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth
under the corresponding section of the Disclosure Schedules delivered
concurrently herewith, the Company hereby makes the following representations
and warranties as of the date hereof and as of the Closing Date to each
Purchaser:

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

                  (b) ORGANIZATION AND QUALIFICATION. Each of the Company and
         the Subsidiaries is an entity duly incorporated or otherwise organized,
         validly existing and in good standing under the laws of the
         jurisdiction of its incorporation or organization (as applicable), with
         the requisite corporate power and authority to own and use its
         properties and assets and to carry on its business as currently
         conducted. Neither the Company nor any Subsidiary is in violation of
         any of the provisions of its certificate or articles of incorporation,
         bylaws or other organizational or charter documents. Each of the
         Company and the Subsidiaries is duly qualified to conduct business and
         is in good standing as a foreign corporation or other entity in each
         jurisdiction in which the nature of the business conducted or property
         owned by it makes such qualification necessary, except where the
         failure to be so qualified or in good standing, as the case may be,
         could not have or reasonably be expected to result in (i) a material
         adverse effect on the legality, validity or enforceability of any
         Transaction Document, (ii) a material adverse effect on the results of
         operations, assets, business or financial condition of the Company and
         the Subsidiaries, taken as a whole, or (iii) a material adverse effect
         on the Company's ability to perform in any material respect on a timely
         basis its obligations under any Transaction Document (any of (i), (ii)
         or (iii), a "MATERIAL ADVERSE EFFECT").

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

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                  (d) NO CONFLICTS. The execution, delivery and performance of
         the Transaction Documents by the Company and the consummation by the
         Company of the transactions contemplated thereby do not and will not
         (i) conflict with or violate any provision of the Company's or any
         Subsidiary's certificate or articles of incorporation, bylaws or other
         organizational or charter documents, or (ii) conflict with, or
         constitute a default (or an event that with notice or lapse of time or
         both would become a default) under, or give to others any rights of
         termination, amendment, acceleration or cancellation (with or without
         notice, lapse of time or both) of, any agreement, credit facility, debt
         or other instrument (evidencing a Company or Subsidiary debt or
         otherwise) or other understanding to which the Company or any
         Subsidiary is a party or by which any property or asset of the Company
         or any Subsidiary is bound or affected, or (iii) subject to the
         Required Approvals, result in a violation of any law, rule, regulation,
         order, judgment, injunction, decree or other restriction of any court
         or governmental authority to which the Company or a Subsidiary is
         subject (including federal and state securities laws and regulations),
         or by which any property or asset of the Company or a Subsidiary is
         bound or affected; except in the case of each of clauses (ii) and
         (iii), such as could not have or reasonably be expected to result in a
         Material Adverse Effect.

                  (e) FILINGS, CONSENTS AND APPROVALS. The Company is not
         required to obtain any consent, waiver, authorization or order of, give
         any notice to, or make any filing or registration with, any court or
         other federal, state, local or other governmental authority or other
         Person in connection with the execution, delivery and performance by
         the Company of the Transaction Documents, other than (i) filings
         required pursuant to Section 4.4 of this Agreement, (ii) the filing
         with the Commission of the Registration Statement, (iii) application(s)
         to each applicable Trading Market for the listing of the Shares and
         Warrant Shares for trading thereon in the time and manner required
         thereby, and (iv) the filing of Form D with the Commission and such
         filings as are required to be made under applicable state securities
         laws.

                  (f) ISSUANCE OF THE SECURITIES. The Securities are duly
         authorized and, when issued and paid for in accordance with the
         Transaction Documents, will be duly and validly issued, fully paid and
         nonassessable, and the Company will deliver the Securities free and
         clear of all Liens. The Company has reserved from its duly authorized
         capital stock an amount shares of Common Stock issuable pursuant to
         this Agreement and the exercise of the Warrants.

                  (g) CAPITALIZATION. The capitalization of the Company is as
         described in the Company's most recent periodic report filed with the
         Commission. The Company has not issued any capital stock since such
         filing other than pursuant to the exercise of employee stock options
         under the Company's stock option plans, the issuance of shares of
         Common Stock to employees pursuant to the Company's employee stock
         purchase plan and pursuant to the conversion or exercise of outstanding
         Common Stock Equivalents. No Person has any right of first refusal,
         preemptive right, right of participation, or any similar right to
         participate in the transactions contemplated by the Transaction
         Documents. Except as a result of the purchase and sale of the
         Securities, there are no outstanding options, warrants, script rights
         to subscribe to, calls or commitments of any character whatsoever
         relating to, or securities, rights or obligations convertible into or

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         exchangeable for, or giving any Person any right to subscribe for or
         acquire, any shares of Common Stock, or contracts, commitments,
         understandings or arrangements by which the Company or any Subsidiary
         is or may become bound to issue additional shares of Common Stock, or
         securities or rights convertible or exchangeable into shares of Common
         Stock. The issue and sale of the Securities will not obligate the
         Company to issue shares of Common Stock or other securities to any
         Person (other than the Purchasers) and will not result in a right of
         any holder of Company securities to adjust the exercise, conversion,
         exchange or reset price under such securities.

                  (h) SEC REPORTS; FINANCIAL STATEMENTS. The Company has filed
         all reports required to be filed by it under the Securities Act and the
         Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for
         the two years preceding the date hereof (or such shorter period as the
         Company was required by law to file such material) (the foregoing
         materials, including the exhibits thereto, being collectively referred
         to herein as the "SEC REPORTS") on a timely basis or has received a
         valid extension of such time of filing and has filed any such SEC
         Reports prior to the expiration of any such extension. As of their
         respective dates, the SEC Reports complied in all material respects
         with the requirements of the Securities Act and the Exchange Act and
         the rules and regulations of the Commission promulgated thereunder, and
         none of the SEC Reports, when filed, contained any untrue statement of
         a material fact or omitted to state a material fact required to be
         stated therein or necessary in order to make the statements therein, in
         light of the circumstances under which they were made, not misleading.
         The financial statements of the Company included in the SEC Reports
         comply in all material respects with applicable accounting requirements
         and the rules and regulations of the Commission with respect thereto as
         in effect at the time of filing. Such financial statements have been
         prepared in accordance with generally accepted accounting principles
         applied on a consistent basis during the periods involved ("GAAP"),
         except as may be otherwise specified in such financial statements or
         the notes thereto and except that unaudited financial statements may
         not contain all footnotes required by GAAP, and fairly present in all
         material respects the financial position of the Company and its
         consolidated subsidiaries as of and for the dates thereof and the
         results of operations and cash flows for the periods then ended,
         subject, in the case of unaudited statements, to normal, immaterial,
         year-end audit adjustments.

                  (i) MATERIAL CHANGES. Since the date of the latest audited
         financial statements included within the SEC Reports, except as
         disclosed in the SEC Reports, (i) there has been no event, occurrence
         or development that has had or that could reasonably be expected to
         result in a Material Adverse Effect, (ii) the Company has not incurred
         any liabilities (contingent or otherwise) other than (A) trade payables
         and accrued expenses incurred in the ordinary course of business
         consistent with past practice and (B) liabilities not required to be
         reflected in the Company's financial statements pursuant to GAAP or
         required to be disclosed in filings made with the Commission, (iii) the
         Company has not altered its method of accounting, (iv) the Company has
         not declared or made any dividend or distribution of cash or other
         property to its stockholders or purchased, redeemed or made any
         agreements to purchase or redeem any shares of its capital stock and
         (v) the Company has not issued any equity securities to any officer,
         director or Affiliate, except pursuant to existing Company stock option
         plans. The Company does not have pending before the Commission any
         request for confidential treatment of information.

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                  (j) LITIGATION. Except as disclosed in the SEC Reports, there
         is no action, suit, inquiry, notice of violation, proceeding or
         investigation pending or, to the knowledge of the Company, threatened
         against or affecting the Company, any Subsidiary or any of their
         respective properties before or by any court, arbitrator, governmental
         or administrative agency or regulatory authority (federal, state,
         county, local or foreign) (collectively, an "Action") which (i)
         adversely affects or challenges the legality, validity or
         enforceability of any of the Transaction Documents or the Securities or
         (ii) could, if there were an unfavorable decision, have or reasonably
         be expected to result in a Material Adverse Effect. Neither the Company
         nor any Subsidiary, nor any director or officer thereof, is or has been
         the subject of any Action involving a claim of violation of or
         liability under federal or state securities laws or a claim of breach
         of fiduciary duty. There has not been, and to the knowledge of the
         Company, there is not pending or contemplated, any investigation by the
         Commission involving the Company or any current or former director or
         officer of the Company. The Commission has not issued any stop order or
         other order suspending the effectiveness of any registration statement
         filed by the Company or any Subsidiary under the Exchange Act or the
         Securities Act.

                  (k) LABOR RELATIONS. No material labor dispute exists or, to
         the knowledge of the Company, is imminent with respect to any of the
         employees of the Company which could reasonably be expected to result
         in a Material Adverse Effect.

                  (l) COMPLIANCE. Except as disclosed in the SEC Reports,
         neither the Company nor any Subsidiary (i) is in default under or in
         violation of (and no event has occurred that has not been waived that,
         with notice or lapse of time or both, would result in a default by the
         Company or any Subsidiary under), nor has the Company or any Subsidiary
         received notice of a claim that it is in default under or that it is in
         violation of, any indenture, loan or credit agreement or any other
         agreement or instrument to which it is a party or by which it or any of
         its properties is bound (whether or not such default or violation has
         been waived), (ii) is in violation of any order of any court,
         arbitrator or governmental body, or (iii) is or has been in violation
         of any statute, rule or regulation of any governmental authority,
         including without limitation all foreign, federal, state and local laws
         applicable to its business except in each case as could not have a
         Material Adverse Effect.

                  (m) REGULATORY PERMITS. The Company and the Subsidiaries
         possess all certificates, authorizations and permits issued by the
         appropriate federal, state, local or foreign regulatory authorities
         necessary to conduct their respective businesses as described in the
         SEC Reports, except where the failure to possess such permits could not
         have or reasonably be expected to result in a Material Adverse Effect
         ("MATERIAL PERMITS"), and neither the Company nor any Subsidiary has
         received any notice of proceedings relating to the revocation or
         modification of any Material Permit.

                  (n) TITLE TO ASSETS. The Company and the Subsidiaries have
         good and marketable title in fee simple to all real property owned by
         them that is material to the business of the Company and the
         Subsidiaries and good and marketable title in all personal property
         owned by them that is material to the business of the Company and the
         Subsidiaries, in each case free and clear of all Liens, except for
         Liens as do not materially affect the value of such property and do not
         materially interfere with the use made and proposed to be made of such

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         property by the Company and the Subsidiaries and Liens for the payment
         of federal, state or other taxes, the payment of which is neither
         delinquent nor subject to penalties. Any real property and facilities
         held under lease by the Company and the Subsidiaries are held by them
         under valid, subsisting and enforceable leases of which the Company and
         the Subsidiaries are in compliance.

                  (o) PATENTS AND TRADEMARKS. To the knowledge of the Company
         and each Subsidiary, the Company and the Subsidiaries have, or have
         rights to use, all patents, patent applications, trademarks, trademark
         applications, service marks, trade names, copyrights, licenses and
         other similar rights that are necessary or material for use in
         connection with their respective businesses as described in the SEC
         Reports and which the failure to so have could have or reasonably be
         expected to result in a Material Adverse Effect (collectively, the
         "INTELLECTUAL PROPERTY RIGHTS"). Neither the Company nor any Subsidiary
         has received a written notice that the Intellectual Property Rights
         used by the Company or any Subsidiary violates or infringes upon the
         rights of any Person. To the knowledge of the Company, all such
         Intellectual Property Rights are enforceable.

                  (p) INSURANCE. The Company and the Subsidiaries are insured by
         insurers of recognized financial responsibility against such losses and
         risks and in such amounts as are prudent and customary in the
         businesses in which the Company and the Subsidiaries are engaged.
         Neither the Company nor any Subsidiary has any reason to believe that
         it will not be able to renew its existing insurance coverage as and
         when such coverage expires or to obtain similar coverage from similar
         insurers as may be necessary to continue its business without a
         significant increase in cost.

                  (q) TRANSACTIONS WITH AFFILIATES AND EMPLOYEES. Except as set
         forth in the SEC Reports, none of the officers or directors of the
         Company and, to the knowledge of the Company, none of the employees of
         the Company is presently a party to any transaction with the Company or
         any Subsidiary (other than for services as employees, officers and
         directors), including any contract, agreement or other arrangement
         providing for the furnishing of services to or by, providing for rental
         of real or personal property to or from, or otherwise requiring
         payments to or from any officer, director or such employee or, to the
         knowledge of the Company, any entity in which any officer, director, or
         any such employee has a substantial interest or is an officer,
         director, trustee or partner, in each case in excess of $60,000 other
         than (i) for payment of salary or consulting fees for services
         rendered, (ii) reimbursement for expenses incurred on behalf of the
         Company and (iii) for other employee benefits, including stock option
         agreements under any stock option plan of the Company.

                  (r) SARBANES-OXLEY; INTERNAL ACCOUNTING CONTROLS. The Company
         is in material compliance with all provisions of the Sarbanes-Oxley Act
         of 2002 which are applicable to it as of the Closing Dates. The Company
         and each of its subsidiaries maintains a system of internal accounting
         controls sufficient to provide reasonable assurance that (i)
         transactions are executed in accordance with management's general or
         specific authorizations, (ii) transactions are recorded as necessary to
         permit preparation of financial statements in conformity with GAAP and

                                       10
<PAGE>

         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. The Company has established disclosure
         controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
         15d-15(e)) for the Company and designed such disclosure controls and
         procedures to ensure that material information relating to the Company,
         including its subsidiaries, is made known to the certifying officers by
         others within those entities, particularly during the period in which
         the Company's Form 10-K or 10-QSB, as the case may be, is being
         prepared. The Company's certifying officers have evaluated the
         effectiveness of the Company's controls and procedures as of end of the
         filing period prior to the filing date of the Form 10-QSB for the
         quarter ended September 30, 2003 (such date, the "Evaluation Date").
         The Company presented in its most recently filed Form 10-KSB or Form
         10-QSB the conclusions of the certifying officers about the
         effectiveness of the disclosure controls and procedures based on their
         evaluations as of the Evaluation Date. Since the Evaluation Date, there
         have been no significant changes in the Company's internal controls (as
         such term is defined in Item 307(b) of Regulation S-K under the
         Exchange Act) or, to the Company's knowledge, in other factors that
         could significantly affect the Company's internal controls.

                  (s) CERTAIN FEES. No brokerage or finder's fees or commissions
         are or will be payable by the Company to any broker, financial advisor
         or consultant, finder, placement agent, investment banker, bank or
         other Person with respect to the transactions contemplated by this
         Agreement. The Purchasers shall have no obligation with respect to any
         fees or with respect to any claims made by or on behalf of other
         Persons for fees of a type contemplated in this Section that may be due
         in connection with the transactions contemplated by this Agreement.

                  (t) PRIVATE PLACEMENT. Assuming the accuracy of the Purchasers
         representations and warranties set forth in Section 3.2, no
         registration under the Securities Act is required for the offer and
         sale of the Securities by the Company to the Purchasers as contemplated
         hereby. The issuance and sale of the Securities hereunder does not
         contravene the rules and regulations of the Trading Market.

                  (u) INVESTMENT COMPANY. The Company is not, and is not an
         Affiliate of, an "investment company" within the meaning of the
         Investment Company Act of 1940, as amended.

                  (v) REGISTRATION RIGHTS. Except as set forth on the disclosure
         schedule to the Registration Rights Agreement, no Person has any right
         to cause the Company to effect the registration under the Securities
         Act of any securities of the Company.

                  (w) LISTING AND MAINTENANCE REQUIREMENTS. The Company has not,
         in the 12 months preceding the date hereof, received notice from any
         Trading Market on which the Common Stock is or has been listed or
         quoted to the effect that the Company is not in compliance with the
         listing or maintenance requirements of such Trading Market. The Company
         is, and has no reason to believe that it will not in the foreseeable
         future continue to be, in compliance with all such listing and
         maintenance requirements.

                                       11
<PAGE>

                  (x) APPLICATION OF TAKEOVER PROTECTIONS. The Company and its
         Board of Directors have taken all necessary action, if any, in order to
         render inapplicable any control share acquisition, business
         combination, poison pill (including any distribution under a rights
         agreement) or other similar anti-takeover provision under the Company's
         Certificate of Incorporation (or similar charter documents) or the laws
         of its state of incorporation that is or could become applicable to the
         Purchasers as a result of the Purchasers and the Company fulfilling
         their obligations or exercising their rights under the Transaction
         Documents, including without limitation the Company's issuance of the
         Securities and the Purchasers' ownership of the Securities.

                  (y) DISCLOSURE. The Company confirms that, neither the Company
         nor any other Person acting on its behalf has provided any of the
         Purchasers or their agents or counsel with any information that
         constitutes or might constitute material, non-public information. The
         Company understands and confirms that the Purchasers will rely on the
         foregoing representations and covenants in effecting transactions in
         securities of the Company. All disclosure provided to the Purchasers
         regarding the Company, its business and the transactions contemplated
         hereby, including the Disclosure Schedules to this Agreement, furnished
         by or on behalf of the Company are true and correct and do not contain
         any untrue statement of a material fact or omit to state any material
         fact necessary in order to make the statements made therein, in light
         of the circumstances under which they were made, not misleading.

                  (z) NO INTEGRATED OFFERING. Neither the Company, nor any of
         its affiliates, nor any Person acting on its or their behalf has,
         directly or indirectly, made any offers or sales of any security or
         solicited any offers to buy any security, under circumstances that
         would cause this offering of the Securities to be integrated with prior
         offerings by the Company for purposes of the Securities Act or any
         applicable shareholder approval provisions, including, without
         limitation, under the rules and regulations of any exchange or
         automated quotation system on which any of the securities of the
         Company are listed or designated.

                  (aa) SOLVENCY. Based on the financial condition of the Company
         as of the Closing Date after giving effect to the receipt by the
         Company of the proceeds from the sale of the Securities hereunder, (i)
         the Company's fair saleable value of its assets exceeds the amount that
         will be required to be paid on or in respect of the Company's existing
         debts and other liabilities (including known contingent liabilities) as
         they mature; (ii) the Company's assets do not constitute unreasonably
         small capital to carry on its business for the current fiscal year as
         now conducted and as proposed to be conducted including its capital
         needs taking into account the particular capital requirements of the
         business conducted by the Company, and projected capital requirements
         and capital availability thereof; and (iii) the current cash flow of
         the Company, together with the proceeds the Company would receive, were
         it to liquidate all of its assets, after taking into account all
         anticipated uses of the cash, would be sufficient to pay all amounts on
         or in respect of its debt when such amounts are required to be paid.
         The Company does not intend to incur debts beyond its ability to pay
         such debts as they mature (taking into account the timing and amounts
         of cash to be payable on or in respect of its debt).

                                       12
<PAGE>

                  (bb) FORM S-3 ELIGIBILITY. The Company is eligible to register
         the resale of its Common Stock by the Purchasers under Form S-3
         promulgated under the Securities Act.

         3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:

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

                  (b) INVESTMENT INTENT. Such Purchaser understands that the
         Securities are "restricted securities" and have not been registered
         under the Securities Act or any applicable state securities law and is
         acquiring the Securities as principal for its own account for
         investment purposes only and not with a view to or for distributing or
         reselling such Securities or any part thereof, has no present intention
         of distributing any of such Securities and has no arrangement or
         understanding with any other persons regarding the distribution of such
         Securities (this representation and warranty not limiting such
         Purchaser's right to sell the Securities pursuant to the Registration
         Statement or otherwise in compliance with applicable federal and state
         securities laws). Such Purchaser is acquiring the Securities hereunder
         in the ordinary course of its business. Such Purchaser does not have
         any agreement or understanding, directly or indirectly, with any Person
         to distribute any of the Securities.

                  (c) PURCHASER STATUS. At the time such Purchaser was offered
         the Securities, it was, and at the date hereof it is an "accredited
         investor" as defined in Rule 501(a) under the Securities Act. Such
         Purchaser is not required to be registered as a broker-dealer under
         Section 15 of the Exchange Act.

                  (d) EXPERIENCE OF SUCH PURCHASER. Such Purchaser, either alone
         or together with its representatives, has such knowledge,
         sophistication and experience in business and financial matters so as
         to be capable of evaluating the merits and risks of the prospective
         investment in the Securities, and has so evaluated the merits and risks
         of such investment. Such Purchaser is able to bear the economic risk of
         an investment in the Securities and, at the present time, is able to
         afford a complete loss of such investment.

                                       13
<PAGE>

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

         The Company acknowledges and agrees that each Purchaser does not make
or has not made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in this
Section 3.2.

                                   ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

         4.1 TRANSFER RESTRICTIONS.

                  (a) The Securities may only be disposed of in compliance with
         state and federal securities laws. In connection with any transfer of
         Securities other than pursuant to an effective registration statement,
         to the Company, to an Affiliate of a Purchaser or in connection with a
         pledge as contemplated in Section 4.1(b), the Company may require the
         transferor thereof to provide to the Company an opinion of counsel
         selected by the transferor, the form and substance of which opinion
         shall be reasonably satisfactory to the Company, to the effect that
         such transfer does not require registration of such transferred
         Securities under the Securities Act. As a condition of transfer, any
         such transferee shall agree in writing to be bound by the terms of this
         Agreement and shall have the rights of a Purchaser under this Agreement
         and the Registration Rights Agreement.

                  (b) The Purchasers agree to the imprinting, so long as is
         required by this Section 4.1(b), of a legend on any of the Securities
         in the following form:

                  THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES
                  AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
                  STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
                  THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
                  AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
                  TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
                  ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
                  TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
                  THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
                  SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
                  THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE
                  REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE
                  PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
                  REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL
                  INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN
                  RULE 501(a) UNDER THE SECURITIES ACT.

                  The Company acknowledges and agrees that a Purchaser may from
         time to time pledge pursuant to a bona fide margin agreement with a
         registered broker-dealer or grant a security interest in some or all of
         the Securities to a financial institution that is an "accredited

                                       14
<PAGE>

         investor" as defined in Rule 501(a) under the Securities Act and, if
         required under the terms of such arrangement, such Purchaser may
         transfer pledged or secured Securities to the pledgees or secured
         parties. Such a pledge or transfer would not be subject to approval of
         the Company and no legal opinion of legal counsel of the pledgee,
         secured party or pledgor shall be required in connection therewith.
         Further, no notice shall be required of such pledge. At the appropriate
         Purchaser's expense, the Company will execute and deliver such
         reasonable documentation as a pledgee or secured party of Securities
         may reasonably request in connection with a pledge or transfer of the
         Securities, including, if the Securities are subject to registration
         pursuant to the Registration Rights Agreement, the preparation and
         filing of any required prospectus supplement under Rule 424(b)(3) under
         the Securities Act or other applicable provision of the Securities Act
         to appropriately amend the list of Selling Stockholders thereunder.

                  (c) Certificates evidencing the Shares and Warrant Shares
         shall not contain any legend (including the legend set forth in Section
         4.1(b)), (i) while a registration statement (including the Registration
         Statement) covering the resale of such security is effective under the
         Securities Act, or (ii) following any sale of such Shares or Warrant
         Shares pursuant to Rule 144, or (iii) if such Shares or Warrant Shares
         are eligible for sale under Rule 144(k), or (iv) if such legend is not
         required under applicable requirements of the Securities Act (including
         judicial interpretations and pronouncements issued by the Staff of the
         Commission). The Company shall cause its counsel to issue a legal
         opinion to the Company's transfer agent promptly after the Effective
         Date if required by the Company's transfer agent to effect the removal
         of the legend hereunder. If all or any portion of a Warrant is
         exercised at a time when there is an effective registration statement
         to cover the resale of the Warrant Shares, such Warrant Shares shall be
         issued free of all legends. The Company agrees that following the
         Effective Date or at such time as such legend is no longer required
         under this Section 4.1(c), it will, no later than three Trading Days
         following the delivery by a Purchaser to the Company or the Company's
         transfer agent of a certificate representing Shares or Warrant Shares,
         as the case may be, issued with a restrictive legend (such date, the
         "LEGEND REMOVAL DATE"), deliver or cause to be delivered to such
         Purchaser a certificate representing such Securities that is free from
         all restrictive and other legends. The Company may not make any
         notation on its records or give instructions to any transfer agent of
         the Company that enlarge the restrictions on transfer set forth in this
         Section.

                  (d) In addition to such Purchaser's other available remedies,
         the Company shall pay to a Purchaser, in cash, as partial liquidated
         damages and not as a penalty, for each $1,000 of Shares or Warrant
         Shares (based on the VWAP of the Common Stock on the date such
         Securities are submitted to the Company's transfer agent) subject to
         Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading Day
         five (5) Trading Days after such damages have begun to accrue) for each
         Trading Day after such third Trading Day after the Legend Removal Date
         until such certificate is delivered. Nothing herein shall limit such
         Purchaser's right to pursue actual damages for the Company's failure to
         deliver certificates representing any Securities as required by the
         Transaction Documents, and such Purchaser shall have the right to
         pursue all remedies available to it at law or in equity including,
         without limitation, a decree of specific performance and/or injunctive
         relief.

                                       15
<PAGE>

                  (e) Each Purchaser, severally and not jointly with the other
         Purchasers, agrees that the removal of the restrictive legend from
         certificates representing Securities as set forth in this Section 4.1
         is predicated upon the Company's reliance that the Purchaser will sell
         any Securities pursuant to either the registration requirements of the
         Securities Act, including any applicable prospectus delivery
         requirements, or an exemption therefrom.

                  (f) Until the date that each Purchaser holds less than 20% of
         the Shares initially purchased hereunder by such Purchaser, the Company
         shall not undertake a reverse or forward stock split or
         reclassification of the Common Stock without the prior written consent
         of the Purchasers holding a majority in interest of the Shares.

         4.2 FURNISHING OF INFORMATION. As long as any Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. As long as any Purchaser owns Securities, if the Company is not
required to file reports pursuant to such laws, it will prepare and furnish to
the Purchasers and make publicly available in accordance with Rule 144(c) such
information as is required for the Purchasers to sell the Securities under Rule
144. The Company further covenants that it will take such further action as any
holder of Securities may reasonably request, all to the extent required from
time to time to enable such Person to sell such Securities without registration
under the Securities Act within the limitation of the exemptions provided by
Rule 144.

         4.3 INTEGRATION. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent transaction.

         4.4 SECURITIES LAWS DISCLOSURE; PUBLICITY. The Company shall, within 1
Trading Day of the Closing Date, issue a press release or file a Current Report
on Form 8-K, in each case reasonably acceptable to each Purchaser disclosing the
transactions contemplated hereby and make such other filings and notices in the
manner and time required by the Commission. The Company and each Purchaser shall
consult with each other in issuing any press releases with respect to the
transactions contemplated hereby, and neither the Company nor any Purchaser
shall issue any such press release or otherwise make any such public statement
without the prior consent of the Company, with respect to any press release of
any Purchaser, or without the prior consent of each Purchaser, with respect to
any press release of the Company, which consent shall not unreasonably be
withheld, except if such disclosure is required by law, in which case the
disclosing party shall promptly provide the other party with prior notice of
such public statement or communication. Notwithstanding the foregoing, the
Company shall not publicly disclose the name of any Purchaser, or include the
name of any Purchaser in any filing with the Commission or any regulatory agency
or Trading Market, without the prior written consent of such Purchaser, except
(i) as required by federal securities law in connection with the registration
statement contemplated by the Registration Rights Agreement and (ii) to the
extent such disclosure is required by law or Trading Market regulations, in
which case the Company shall provide the Purchasers with prior notice of such
disclosure permitted under subclause (i) or (ii).

                                       16
<PAGE>

         4.5 SHAREHOLDERS RIGHTS PLAN. No claim will be made or enforced by the
Company or, to the knowledge of the Company, any other Person that any Purchaser
is an "Acquiring Person" under any shareholders rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the provisions of any such plan or arrangement, by
virtue of receiving Securities under the Transaction Documents or under any
other agreement between the Company and the Purchasers.

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

         4.7 USE OF PROCEEDS. Except as set forth on Schedule 4.7 attached
hereto, the Company shall use the net proceeds from the sale of the Securities
hereunder for working capital purposes and not for the satisfaction of any
portion of the Company's debt (other than payment of trade payables in the
ordinary course of the Company's business and prior practices), to redeem any
Company equity or equity-equivalent securities or to settle any outstanding
litigation.

         4.8 REIMBURSEMENT. If any Purchaser becomes involved in any capacity in
any Proceeding by or against any Person who is a stockholder of the Company
(except as a result of sales, pledges, margin sales and similar transactions by
such Purchaser to or with any current stockholder), solely as a result of such
Purchaser's acquisition of the Securities under this Agreement, the Company will
reimburse such Purchaser for its reasonable legal and other expenses (including
the cost of any investigation preparation and travel in connection therewith)
incurred in connection therewith, as such expenses are incurred. The
reimbursement obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any Affiliates of the Purchasers who are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees and controlling persons (if any), as the case may
be, of the Purchasers and any such Affiliate, and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company solely as a result of acquiring the Securities under
this Agreement.

         4.9 INDEMNIFICATION OF PURCHASERS. The Company will indemnify and hold
the Purchasers and their directors, officers, shareholders, partners, employees
and agents (each, a "PURCHASER PARTY") harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys' fees and costs of investigation that any such Purchaser Party may
suffer or incur as a result of or relating to: (a) any misrepresentation, breach
or inaccuracy, or any allegation by a third party that, if true, would
constitute a breach or inaccuracy, of any of the representations, warranties,

                                       17
<PAGE>

covenants or agreements made by the Company in this Agreement or in the other
Transaction Documents; or (b) any cause of action, suit or claim brought or made
against such Purchaser Party and arising solely out of or solely resulting from
the execution, delivery, performance or enforcement of this Agreement or any of
the other Transaction Documents and without causation by any other activity,
obligation, condition or liability pertaining to such Purchaser. The Company
will reimburse such Purchaser for its reasonable legal and other expenses
(including the cost of any investigation, preparation and travel in connection
therewith) incurred in connection therewith, as such expenses are incurred.

         4.10 RESERVATION OF COMMON STOCK. As of the date hereof, the Company
has reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Shares pursuant to this
Agreement and Warrant Shares pursuant to any exercise of the Warrants.

         4.11 LISTING OF COMMON STOCK. The Company hereby agrees to use
commercially reasonably efforts to maintain the listing of the Common Stock on
the Trading Market, and as soon as reasonably practicable following the Closing
(but not later than the earlier of the Effective Date and the first anniversary
of the Closing Date) to list all of the Shares and Warrant Shares on the Trading
Market. The Company further agrees, if the Company applies to have the Common
Stock traded on any other Trading Market, it will include in such application
all of the Shares and Warrant Shares, and will take such other action as is
necessary to cause the Shares and Warrant Shares to be listed on such other
Trading Market as promptly as possible. The Company will take all action
reasonably necessary to continue the listing and trading of its Common Stock on
a Trading Market and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Trading Market.

         4.12 PARTICIPATION IN FUTURE FINANCING. From the date hereof until 6
months after the Effective Date, the Company shall not effect a financing of its
Common Stock or Common Stock Equivalents (a "SUBSEQUENT FINANCING") unless (i)
the Company delivers to each of such Purchasers a written notice at least 5
Trading Days prior to the closing of such Subsequent Financing (the "SUBSEQUENT
FINANCING NOTICE") of its intention to effect such Subsequent Financing, which
Subsequent Financing Notice shall describe in reasonable detail the proposed
terms of such Subsequent Financing, the amount of proceeds intended to be raised
thereunder, the Person with whom such Subsequent Financing is proposed to be
effected, and attached to which shall be a term sheet or similar document
relating thereto and (ii) such Purchaser shall not have notified the Company by
6:30 p.m. (New York City time) on the fifth (5th) Trading Day after its receipt
of the Subsequent Financing Notice of its willingness to provide (or to cause
its designee to provide), subject to completion of mutually acceptable
documentation, all or part of such financing to the Company on the same terms
set forth in the Subsequent Financing Notice. If one or more Purchasers shall
fail to so notify the Company of their willingness to participate in the
Subsequent Financing, the Company may effect the remaining portion of such
Subsequent Financing on the terms and to the Persons set forth in the Subsequent
Financing Notice; provided that the Company must provide the Purchasers with a
second Subsequent Financing Notice, and the Purchasers will again have the right
of first refusal set forth above in this Section 4.12, if the Subsequent
Financing subject to the initial Subsequent Financing Notice is not consummated

                                       18
<PAGE>

for any reason on the terms set forth in such Subsequent Financing Notice within
60 Trading Days after the date of the initial Subsequent Financing Notice with
the Person identified in the Subsequent Financing Notice. In the event the
Company receives responses to Subsequent Financing Notices from Purchasers
seeking to purchase more than the financing sought by the Company in the
Subsequent Financing such Purchasers shall have the right to purchase their Pro
Rata Portion (as defined below) of the Common Stock or Common Stock Equivalents
to be issued in such Subsequent Financing. "Pro Rata Portion" is the ratio of
(x) such Purchaser's Subscription Amount and (y) the aggregate sum of all of the
Subscription Amounts. Notwithstanding anything to the contrary herein, this
Section 4.12 shall not apply to the following (a) the granting of options to
employees, officers and directors of the Company pursuant to any stock option
plan duly adopted by a majority of the non-employee members of the Board of
Directors of the Company or a majority of the members of a committee of
non-employee directors established for such purpose, or (b) the exercise of any
security issued by the Company in connection with the offer and sale of this
Company's securities pursuant to this Agreement, or (c) the exercise of or
conversion of any convertible securities, options or warrants issued and
outstanding on the date hereof, provided such securities have not been amended
since the date hereof, or (d) acquisitions or strategic investments, the primary
purpose of which is not to raise capital (including, but not limited to any
issuance of securities in connection with the formation of a joint venture
expected to be named "PacificNet Communications Limited - Macao Commercial
Offshore").

         4.13 SUBSEQUENT EQUITY SALES. From the date hereof until 90 days after
the Effective Date, neither the Company nor any Subsidiary shall issue shares of
Common Stock or Common Stock Equivalents; PROVIDED, HOWEVER, the 90 day period
set forth in this Section 4.13 shall be extended for the number of Trading Days
during such period in which (y) trading in the Common Stock is suspended by any
Trading Market, or (z) following the Effective Date, the Registration Statement
is not effective or the prospectus included in the Registration Statement may
not be used by the Purchasers for the resale of the Shares and Warrant Shares.
Notwithstanding anything to the contrary herein, this Section 4.13 shall not
apply to the following (a) the granting of options to employees, officers and
directors of the Company pursuant to any stock option plan duly adopted by a
majority of the non-employee members of the Board of Directors of the Company or
a majority of the members of a committee of non-employee directors established
for such purpose, or (b) the exercise of any security issued by the Company in
connection with the offer and sale of the Company's securities pursuant to this
Agreement, or (c) the exercise of or conversion of any convertible securities,
options or warrants issued and outstanding on the date hereof, provided such
securities have not been amended since the date hereof, or (d) acquisitions or
strategic investments, the primary purpose of which is not to raise capital
(including, but not limited to any issuance of securities in connection with the
formation of a joint venture expected to be named "PacificNet Communications
Limited - Macao Commercial Offshore").

         4.14 EQUAL TREATMENT OF PURCHASERS. No consideration shall be offered
or paid to any person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents. For
clarification purposes, this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated separately by each Purchaser, and
is intended to treat for the Company the Purchasers as a class and shall not in
any way be construed as the Purchasers acting in concert or as a group with
respect to the purchase, disposition or voting of Securities or otherwise.

                                       19
<PAGE>

         4.15 PER SHARE PURCHASE PRICE PROTECTION. From the date hereof until
120 days following the Effective Date, if the Company or any subsidiary thereof
shall issue any Common Stock or Common Stock Equivalents entitling any person or
entity to acquire shares of Common Stock at an effective price per share less
than the then Per Share Purchase Price (subject to reverse and forward stock
splits and the like) (the "Discounted Purchase Price", as further defined
below), the Company shall issue to such Purchaser that number of additional
shares of Common Stock equal to (a) the actual Subscription Amount paid by such
Purchaser at the Closing divided by the Discounted Purchase Price, less (b) the
Shares issued to such Purchaser at the Closing pursuant to this Agreement. The
term "Discounted Purchase Price" shall mean the amount actually paid by third
parties for a share of Common Stock. The sale of Common Stock Equivalents shall
be deemed to have occurred at the time of the issuance of the Common Stock
Equivalents and the Discounted Purchase Price covered thereby shall also include
the actual exercise or conversion price thereof at the time of the conversion or
exercise (in addition to the consideration per share of Common Stock underlying
the Common Stock Equivalents received by the Company upon such sale or issuance
of the Common Stock Equivalents). In the case of any Subsequent Financing
involving a "Variable Rate Transaction" or an "MFN Transaction" (each as defined
below), the Discounted Purchase Price shall be deemed to be the lowest actual
conversion or exercise price at which such securities are converted or exercised
in the case of a Variable Rate Transaction, or the lowest adjustment price in
the case of an MFN Transaction. If shares are issued for a consideration other
than cash, the per share selling price shall be the fair value of such
consideration as determined in good faith by the Board of Directors of the
Company. The term "Variable Rate Transaction" shall mean a transaction in which
the Company issues or sells any debt or equity securities that are convertible
into, exchangeable or exercisable for, or include the right to receive
additional shares of Common Stock either (x) at a conversion, exercise or
exchange rate or other price that is based upon and/or varies with the trading
prices of or quotations for the shares of Common Stock at any time after the
initial issuance of such debt or equity securities, or (y) with a conversion,
exercise or exchange price that is subject to being reset at some future date
after the initial issuance of such debt or equity security or upon the
occurrence of specified or contingent events directly or indirectly related to
the business of the Company or the market for the Common Stock. The term "MFN
Transaction" shall mean a transaction in which the Company issues or sells any
securities in a capital raising transaction or series of related transactions
which grants to an investor the right to receive additional shares based upon
future transactions of the Company on terms more favorable than those granted to
the such investor in such offering. The Company may not refuse to issue a
Purchaser additional Shares hereunder based on any claim that such Purchaser or
any one associated or affiliated with such Purchaser has been engaged in any
violation of law, agreement or for any other reason, unless, an injunction from
a court, on notice, restraining and or enjoining an issuance hereunder shall
have been sought and obtained and the Company posts a surety bond for the
benefit of such Purchaser in the amount of 150% of the market value of such
Shares (based on the Closing Price of the Common Stock on the date of the event
giving rise to the Company's obligation hereunder), which is subject to the
injunction, which bond shall remain in effect until the completion of litigation
of the dispute and the proceeds of which shall be payable to the Purchaser to
the extent it obtains judgment. Nothing herein shall limit a Purchaser's right
to pursue actual damages for the Company's failure to deliver Shares hereunder
and such Purchaser shall have the right to pursue all remedies available to it
at law or in equity including, without limitation, a decree of specific

                                       20
<PAGE>

performance and/or injunctive relief. Notwithstanding anything to the contrary
herein, this Section 4.15 shall not apply to the following: (a) the granting of
options to employees, officers and directors of the Company pursuant to any
stock option plan duly adopted by a majority of the non-employee members of the
Board of Directors of the Company or a majority of the members of a committee of
non-employee directors established for such purpose, or (b) the exercise of any
security issued by the Company in connection with the offer and sale of the
Company's securities pursuant to this Agreement, or (c) the exercise of or
conversion of any convertible securities, options or warrants issued and
outstanding on the date hereof, provided such securities have not been amended
since the date hereof, or (d) acquisitions or strategic investments, the primary
purpose of which is not to raise capital (including, but not limited to any
issuance of securities in connection with the formation of a joint venture
expected to be named "PacificNet Communications Limited - Macao Commercial
Offshore"). Notwithstanding anything herein to the contrary, (i) the Company or
any Subsidiary may not issue any Common Stock or Common Stock Equivalents if
such issuance would result in the issuance of additional shares of Common Stock
to the Purchasers that would be in excess of, in the aggregate, 19.9% of the
number of shares of Common Stock outstanding on the Trading Day immediately
preceding the date hereof and (ii) in the event that the sum of (A) the number
of Shares issued and issuable at the Closing, (B) the Warrant Shares issuable
upon exercise of the Warrants in full and (C) the additional shares Common Stock
issuable pursuant to this Section 4.15 issuable on or prior to the 15th Trading
Day after the Effective Date exceeds 4.9% of the then issued and outstanding
shares of Common Stock of the Company ("Issuance Cap"), then such Purchaser
shall notify the Company that such issuance of additional shares of Common Stock
pursuant to this Section will cause its beneficial ownership to exceed the
Issuance Cap and the Company shall not issue any additional shares of Common
Stock to such Purchaser hereunder to the extent such additional shares of Common
Stock cause such Purchaser to exceed the Issuance Cap until the later of (y) a
date 75 days from the Closing Date and (z) a date 75 Trading Days after the
Effective Date (or such date that the Purchaser may dispose of all of the
already issued Shares and Warrant Shares pursuant to Rule 144).

                                   ARTICLE V.
                                  MISCELLANEOUS

         5.1 FEES AND EXPENSES. Except as otherwise set forth in this Agreement,
each party shall pay the fees and expenses of its advisers, counsel, accountants
and other experts, if any, and all other expenses incurred by such party
incident to the negotiation, preparation, execution, delivery and performance of
this Agreement. The Company shall pay all stamp and other taxes and duties
levied in connection with the sale of the Securities.

         5.2 ENTIRE AGREEMENT. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.

                                       21
<PAGE>

         5.3 NOTICES. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto prior to 6:30 p.m. (New York
City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading
Day, (c) the second Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached
hereto.

         5.3 AMENDMENTS; WAIVERS. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and each Purchaser or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.

         5.4 CONSTRUCTION. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.

         5.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser. Any Purchaser may assign
any or all of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Securities, provided such transferee agrees
in writing to be bound, with respect to the transferred Securities, by the
provisions hereof that apply to the "Purchasers".

         5.6 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.9.

         5.7 GOVERNING LAW. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
New York for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein (including with

                                       22
<PAGE>

respect to the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is improper. Each party hereto
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by delivering a copy thereof
via overnight delivery (with evidence of delivery) to such party at the address
in effect for notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. Each party hereto (including its
affiliates, agents, officers, directors and employees) hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and all right to
trial by jury in any legal proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby. If either party shall
commence an action or proceeding to enforce any provisions of a Transaction
Document, then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its attorneys fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such
action or proceeding.

         5.8 SURVIVAL. The representations and warranties herein shall survive
the Closing and delivery of the Shares and Warrant Shares.

         5.9 EXECUTION. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.

         5.10 SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

         5.11 REPLACEMENT OF SECURITIES. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.

         5.12 REMEDIES. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.

                                       23
<PAGE>

         5.13 PAYMENT SET ASIDE. To the extent that the Company makes a payment
or payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

         5.14 INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. For reasons of
administrative convenience only, Purchasers and their respective counsel have
chosen to communicate with the Company through FW. FW does not represent all of
the Purchasers but only Stonestreet L.P. The Company has elected to provide all
Purchasers with the same terms and Transaction Documents for the convenience of
the Company and not because it was required or requested to do so by the
Purchasers.

                            (SIGNATURE PAGE FOLLOWS)

                                       24
<PAGE>

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

PACIFICNET INC.                                      ADDRESS FOR NOTICE:
                                                     ------------------
                                                     Unit 2710
                                                     Hong Kong Plaza
                                                     188 Connaught Road West
                                                     Hong Kong
By:/S/ TONY TONG                                     Attn: Tony Tong
   ----------------------------------
     Name: Tony Tong                                 Tel: 011-852-2876-2900
     Title: Chairman and CEO                         Fax:

With copy to (which shall not constitute notice):    Loeb & Loeb LLP
                                                     345 Park Avenue
                                                     New York, NY 10154-0037
                                                     Attn: Mitchell S. Nussbaum
                                                     Tel: (212) 407-4800
                                                     Fax: (212) 407-4990

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                     SIGNATURE PAGES FOR PURCHASERS FOLLOW]

                                       25
<PAGE>

          IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

Name of Investing Entity: ALPHA CAPITAL AG
                          ------------------------------------------------------
SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: /S/ K. ACKERMAN
                                                       -------------------------
Name of Authorized Signatory: KONRAD ACKERMAN
                              --------------------------------------------------
Title of Authorized Signatory: DIRECTOR
                               -------------------------------------------------

Address for Notice of Investing Entity:

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

Subscription Amount: $500,000
Shares: 102,881
Warrant Shares: 25,720
EIN Number:  [you may provide this under separate cover]

                           [SIGNATURE PAGE CONTINUED]

                                       26
<PAGE>

         IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

Name of Investing Entity: BLUE GRASS GROWTH FUND LP
                          ------------------------------------------------------
SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: /S/ BRIAN SHATZ
                                                       -------------------------
Name of Authorized Signatory: BRIAN SHATZ
                              --------------------------------------------------
Title of Authorized Signatory: MANAGING MEMBER, BLUEGRASS GROWTH FUND PARTNERS
                               -----------------------------------------------
                               LLC
                               ---

Address for Notice of Investing Entity:
         115 E. 57th Street
         Suite 111
         New York, NY 10022

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

Subscription Amount: $500,000
Shares: 102,881
Warrant Shares: 25,720
EIN Number:  [you may provide this under separate cover]

                           [SIGNATURE PAGE CONTINUED]

                                       27

<PAGE>

         IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

Name of Investing Entity: EXCALIBUR LIMITED PARTNERSHIP
                          ------------------------------------------------------
SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: /S/ WILLIAM HECHTER
                                                      --------------------------
Name of Authorized Signatory: WILLIAM HECHTER
                              -----------------------------------------
Title of Authorized Signatory:
                               ----------------------------------------

Address for Notice of Investing Entity:

         33 Prince Arthur Avenue
         Toronto, Ontario
         Canada M52 1B2

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

Subscription Amount:$300,000
Shares: 61,728
Warrant Shares: 15,432
EIN Number:  [you may provide this under separate cover]

                           [SIGNATURE PAGE CONTINUED]

                                       28
<PAGE>

         IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

Name of Investing Entity: GREENWICH GROWTH FUND LIMITED
                          ------------------------------------------------------
SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: /S/ EVAN SCHEMENAUER
                                                       -------------------------
Name of Authorized Signatory: EVAN SCHEMENAUER
                              --------------------------------------------------
Title of Authorized Signatory: DIRECTOR
                               -------------------------------------------------

Address for Notice of Investing Entity:

         P.O. Box HM 2257
         Hamilton HMJX
         Bermuda

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

         Cannaccord Capital Corporation
         Suite 1300, 320 Bay Street
         Toronto, Ontario M5H 4A6
         Canada
         Attention:  Tricia Webb

Subscription Amount: $100,000
Shares: 20,576
Warrant Shares: 5,144
EIN Number:  [you may provide this under separate cover]

                           [SIGNATURE PAGE CONTINUED]

                                       29
<PAGE>

         IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

Name of Investing Entity: OMICRON MASTER TRUST
                          ------------------------------------------------------
SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: /S/ BRUCE BERNSTEIN
                                                       -------------------------
Name of Authorized Signatory: BRUCE BERNSTEIN
                              --------------------------------------------------
Title of Authorized Signatory: MANAGING PARTNER
                               -------------------------------------------------

Address for Notice of Investing Entity:

         810 Seventh Avenue, 39th Floor
         New York, NY 10019
         Tel:  212-803-5263
         Fax:  212-803-5269

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

Subscription Amount: $499,966.80
Shares: 102,880
Warrant Shares: 25,720
EIN Number:  [you may provide this under separate cover]

                           [SIGNATURE PAGE CONTINUED]

                                       30
<PAGE>

         IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

Name of Investing Entity: STONESTREET LP
                          ------------------------------------------------------
SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: /S/ ELIZABETH LEONARD
                                                       -------------------------
Name of Authorized Signatory: ELIZABETH LEONARD
                              --------------------------------------------------
Title of Authorized Signatory: CHIEF OPERATING OFFICER
                               -------------------------------------------------

Address for Notice of Investing Entity:

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

Subscription Amount:
Shares:
Warrant Shares:
EIN Number:  [you may provide this under separate cover]

                           [SIGNATURE PAGE CONTINUED]

                                       31
<PAGE>

         IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

Name of Investing Entity: VERTICAL VENTURES, LLC
                          ------------------------------------------------------
SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: /S/ JOSHUA SILVERMAN
                                                       -------------------------
Name of Authorized Signatory: JOSHUA SILVERMAN
                              --------------------------------------------------
Title of Authorized Signatory: PARTNER
                               -------------------------------------------------

Address for Notice of Investing Entity:

         641 Lexington Avenue, 26th Floor
         New York, NY 10022

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

Subscription Amount: $500,000
Shares: 102,880
Warrant Shares: 25,720
EIN Number:  [you may provide this under separate cover]

                           [SIGNATURE PAGE CONTINUED]

                                       32
<PAGE>

         IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

Name of Investing Entity: WHALEHAVEN FUND LIMITED
                          ------------------------------------------------------
SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: /S/ EVAN SCHEMENAUER
                                                       -------------------------
Name of Authorized Signatory: EVAN SCHEMENAUER
                              --------------------------------------------------
Title of Authorized Signatory: DIRECTOR
                               -------------------------------------------------

Address for Notice of Investing Entity:

         P.O. Box HM 2257
         Hamilton HMJX
         Bermuda

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

         Desjardins Securities
         Suite 2750, 145 King Street West
         Toronto, Ontario M5H 1J8
         Canada
         Attention:  Edena Soper

Subscription Amount: $100,000
Shares: 20,576
Warrant Shares: 5,144
EIN Number:  [you may provide this under separate cover]

                           [SIGNATURE PAGE CONTINUED]

                                       33<PAGE>

                                                                     Exhibit 4.2

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
REASONABLY ACCEPTABLE TO THE COMPANY TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR
OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS
DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT.

                      FORM OF COMMON STOCK PURCHASE WARRANT

                To Purchase __________ Shares of Common Stock of

                                 PACIFICNET INC.

         THIS COMMON STOCK PURCHASE WARRANT (the "WARRANT") CERTIFIES that, for
value received, _____________ (the "HOLDER"), is entitled, upon the terms and
subject to the limitations on exercise and the conditions hereinafter set forth,
at any time on or after January 15, 2004 (the "INITIAL EXERCISE DATE") and on or
prior to the fifth anniversary of the Initial Exercise Date (the "TERMINATION
DATE") but not thereafter, to subscribe for and purchase from PacificNet Inc., a
corporation incorporated in the State of Delaware (the "COMPANY"), up to
____________ shares (the "WARRANT SHARES") of Common Stock, par value $0.0001
per share, of the Company (the "COMMON STOCK"). The purchase price of one share
of Common Stock (the "EXERCISE PRICE") under this Warrant shall be $7.15,
subject to adjustment hereunder. The Exercise Price and the number of Warrant
Shares for which the Warrant is exercisable shall be subject to adjustment as
provided herein. CAPITALIZED TERMS USED AND NOT OTHERWISE DEFINED HEREIN SHALL
HAVE THE MEANINGS SET FORTH IN THAT CERTAIN SECURITIES PURCHASE AGREEMENT (THE
"PURCHASE AGREEMENT"), DATED JANUARY 15, 2004, AMONG THE COMPANY AND THE
PURCHASERS SIGNATORY THERETO.

                                       1
<PAGE>

         1. TITLE TO WARRANT. Prior to the Termination Date and subject to
compliance with applicable laws and Section 7 of this Warrant, this Warrant and
all rights hereunder are transferable, in whole or in part, at the office or
agency of the Company by the Holder in person or by duly authorized attorney,
upon surrender of this Warrant together with the Assignment Form annexed hereto
properly endorsed. The transferee shall sign an investment letter in form and
substance reasonably satisfactory to the Company.

         2. AUTHORIZATION OF SHARES. The Company covenants that all Warrant
Shares which may be issued upon the exercise of the purchase rights represented
by this Warrant will, upon exercise of the purchase rights represented by this
Warrant, be duly authorized, validly issued, fully paid and nonassessable and
free from all taxes, liens and charges in respect of the issue thereof (other
than taxes in respect of any transfer occurring contemporaneously with such
issue).

         3. EXERCISE OF WARRANT.

                  (a) Exercise of the purchase rights represented by this
         Warrant may be made at any time or times on or after the Initial
         Exercise Date and on or before the Termination Date by delivery to the
         Company of a duly executed facsimile copy of the Notice of Exercise
         Form annexed hereto (or such other office or agency of the Company as
         it may designate by notice in writing to the registered Holder at the
         address of such Holder appearing on the books of the Company);
         PROVIDED, HOWEVER, within 5 Trading Days of the date said Notice of
         Exercise is delivered to the Company, the Holder shall have surrendered
         this Warrant to the Company and the Company shall have received payment
         of the aggregate Exercise Price of the shares thereby purchased by wire
         transfer or cashier's check drawn on a United States bank. Certificates
         for shares purchased hereunder shall be delivered to the Holder within
         the earlier of (i) 5 Trading Days after the date on which the Notice of
         Exercise shall have been delivered by facsimile copy or (ii) 3 Trading
         Days from the delivery to the Company of the Notice of Exercise Form by
         facsimile copy, surrender of this Warrant and payment of the aggregate
         Exercise Price as set forth above ("WARRANT SHARE DELIVERY DATE");
         PROVIDED, HOWEVER, in the event the Warrant is not surrendered or the
         aggregate Exercise Price is not received by the Company within 5
         Trading Days after the date on which the Notice of Exercise shall be
         delivered by facsimile copy, the Warrant Share Delivery Date shall be
         extended to the extent such 5 Trading Day period is exceeded. This
         Warrant shall be deemed to have been exercised on the later of the date
         the Notice of Exercise is delivered to the Company by facsimile copy
         and the date the Exercise Price is received by the Company. The Warrant
         Shares shall be deemed to have been issued, and Holder or any other
         person so designated to be named therein shall be deemed to have become
         a holder of record of such shares for all purposes, as of the date the
         Warrant has been exercised by payment to the Company of the Exercise
         Price and all taxes required to be paid by the Holder, if any, pursuant
         to Section 5 prior to the issuance of such shares, have been paid. If
         the Company fails to deliver to the Holder a certificate or
         certificates representing the Warrant Shares pursuant to this Section
         3(a) by the third Trading Day following the Warrant Share Delivery
         Date, then the Holder will have the right to rescind such exercise. In
         addition to any other rights available to the Holder, if the Company
         fails to deliver to the Holder a certificate or certificates
         representing the Warrant Shares pursuant to an exercise by the third
         Trading Day after the Warrant Share Delivery Date, and if after such

                                       2
<PAGE>

         day the Holder is required by its broker to purchase (in an open market
         transaction or otherwise) shares of Common Stock to deliver in
         satisfaction of a sale by the Holder of the Warrant Shares which the
         Holder anticipated receiving upon such exercise (a "Buy-In"), then the
         Company shall (1) pay in cash to the Holder the amount by which (x) the
         Holder's total purchase price (including brokerage commissions, if any)
         for the shares of Common Stock so purchased exceeds (y) the amount
         obtained by multiplying (A) the number of Warrant Shares that the
         Company was required to deliver to the Holder in connection with the
         exercise at issue times (B) the price at which the sell order giving
         rise to such purchase obligation was executed, and (2) at the option of
         the Holder, either reinstate the portion of the Warrant and equivalent
         number of Warrant Shares for which such exercise was not honored or
         deliver to the Holder the number of shares of Common Stock that would
         have been issued had the Company timely complied with its exercise and
         delivery obligations hereunder. For example, if the Holder purchases
         Common Stock having a total purchase price of $11,000 to cover a Buy-In
         with respect to an attempted exercise of shares of Common Stock with an
         aggregate sale price giving rise to such purchase obligation of
         $10,000, under clause (1) of the immediately preceding sentence the
         Company shall be required to pay the Holder $1,000. The Holder shall
         provide the Company written notice indicating the amounts payable to
         the Holder in respect of the Buy-In, together with applicable
         confirmations and other evidence reasonably requested by the Company.
         Nothing herein shall limit a Holder's right to pursue any other
         remedies available to it hereunder, at law or in equity including,
         without limitation, a decree of specific performance and/or injunctive
         relief with respect to the Company's failure to timely deliver
         certificates representing shares of Common Stock upon exercise of the
         Warrant as required pursuant to the terms hereof.

                  (b) If this Warrant shall have been exercised in part, the
         Company shall, at the time of delivery of the certificate or
         certificates representing Warrant Shares, deliver to Holder a new
         Warrant evidencing the rights of Holder to purchase the unpurchased
         Warrant Shares called for by this Warrant, which new Warrant shall in
         all other respects be identical with this Warrant.

                  (c) The Company shall not effect any exercise of this Warrant,
         and the Holder shall not have the right to exercise any portion of this
         Warrant, pursuant to Section 3(a) or otherwise, to the extent that
         after giving effect to such issuance after exercise, the Holder
         (together with the Holder's affiliates), as set forth on the applicable
         Notice of Exercise, would beneficially own in excess of 4.99% of the
         number of shares of the Common Stock outstanding immediately after
         giving effect to such issuance. For purposes of the foregoing sentence,
         the number of shares of Common Stock beneficially owned by the Holder
         and its affiliates shall include the number of shares of Common Stock
         issuable upon exercise of this Warrant with respect to which the
         determination of such sentence is being made, but shall exclude the
         number of shares of Common Stock which would be issuable upon (A)
         exercise of the remaining, nonexercised portion of this Warrant
         beneficially owned by the Holder or any of its affiliates and (B)

                                       3
<PAGE>

         exercise or conversion of the unexercised or nonconverted portion of
         any other securities of the Company (including, without limitation, any
         other Warrants) subject to a limitation on conversion or exercise
         analogous to the limitation contained herein beneficially owned by the
         Holder or any of its affiliates. Except as set forth in the preceding
         sentence, for purposes of this Section 3(c), beneficial ownership shall
         be calculated in accordance with Section 13(d) of the Exchange Act. To
         the extent that the limitation contained in this Section 3(c) applies,
         the determination of whether this Warrant is exercisable (in relation
         to other securities owned by the Holder) and of which a portion of this
         Warrant is exercisable shall be in the sole discretion of such Holder,
         and the submission of a Notice of Exercise shall be deemed to be such
         Holder's determination of whether this Warrant is exercisable (in
         relation to other securities owned by such Holder) and of which portion
         of this Warrant is exercisable, in each case subject to such aggregate
         percentage limitation, and the Company shall have no obligation to
         verify or confirm the accuracy of such determination. For purposes of
         this Section 3(c), in determining the number of outstanding shares of
         Common Stock, the Holder may rely on the number of outstanding shares
         of Common Stock as reflected in (x) the Company's most recent Form
         10-QSB or Form 10-KSB, as the case may be, (y) a more recent public
         announcement by the Company or (z) any other notice by the Company or
         the Company's Transfer Agent setting forth the number of shares of
         Common Stock outstanding. Upon the written or oral request of the
         Holder, the Company shall within two Trading Days confirm orally and in
         writing to the Holder the number of shares of Common Stock then
         outstanding. In any case, the number of outstanding shares of Common
         Stock shall be determined after giving effect to the conversion or
         exercise of securities of the Company, including this Warrant, by the
         Holder or its affiliates since the date as of which such number of
         outstanding shares of Common Stock was reported. The provisions of this
         Section 3(c) may be waived by the Holder upon, at the election of the
         Holder, not less than 61 days' prior notice to the Company, and the
         provisions of this Section 3(c) shall continue to apply until such 61st
         day (or such later date, as determined by the Holder, as may be
         specified in such notice of waiver).

                  (d) If at any time after one year from the date of issuance of
         this Warrant there is no effective Registration Statement registering
         the resale of the Warrant Shares by the Holder, this Warrant may also
         be exercised at such time by means of a "cashless exercise" in which
         the Holder shall be entitled to receive a certificate for the number of
         Warrant Shares equal to the quotient obtained by dividing [(A-B)*(X)]
         by (A), where:

                  (A) = the VWAP on the Trading Day immediately preceding
                        the date of such election;

                  (B) = the Exercise Price of this Warrant, as adjusted; and

                  (X) = the number of Warrant Shares issuable upon exercise
                        of this Warrant in accordance with the terms of this
                        Warrant by means of a cash exercise rather than a
                        cashless exercise.

         4. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to such fraction multiplied by
the Exercise Price.

                                       4
<PAGE>

         5. CHARGES, TAXES AND EXPENSES. Issuance of certificates for Warrant
Shares shall be made without charge to the Holder for any issue or transfer tax
or other incidental expense in respect of the issuance of such certificate, all
of which taxes and expenses shall be paid by the Company, and such certificates
shall be issued in the name of the Holder or in such name or names as may be
directed by the Holder; PROVIDED, HOWEVER, that in the event certificates for
Warrant Shares are to be issued in a name other than the name of the Holder,
this Warrant when surrendered for exercise shall be accompanied by the
Assignment Form attached hereto duly executed by the Holder; and the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.

         6. CLOSING OF BOOKS. The Company will not close its stockholder books
or records in any manner which prevents the timely exercise of this Warrant,
pursuant to the terms hereof.

         7. TRANSFER, DIVISION AND COMBINATION.

                  (a) Subject to compliance with any applicable securities laws
         and the conditions set forth in Sections 1 and 7(e) hereof and to the
         provisions of Section 4.1 of the Purchase Agreement, this Warrant and
         all rights hereunder are transferable, in whole or in part, upon
         surrender of this Warrant at the principal office of the Company,
         together with a written assignment of this Warrant substantially in the
         form attached hereto duly executed by the Holder or its agent or
         attorney and funds sufficient to pay any transfer taxes payable upon
         the making of such transfer. Upon such surrender and, if required, such
         payment, the Company shall execute and deliver a new Warrant or
         Warrants in the name of the assignee or assignees and in the
         denomination or denominations specified in such instrument of
         assignment, and shall issue to the assignor a new Warrant evidencing
         the portion of this Warrant not so assigned, and this Warrant shall
         promptly be cancelled. A Warrant, if properly assigned, may be
         exercised by a new holder for the purchase of Warrant Shares without
         having a new Warrant issued.

                  (b) This Warrant may be divided or combined with other
         Warrants upon presentation hereof at the aforesaid office of the
         Company, together with a written notice specifying the names and
         denominations in which new Warrants are to be issued, signed by the
         Holder or its agent or attorney. Subject to compliance with Section
         7(a), as to any transfer which may be involved in such division or
         combination, the Company shall execute and deliver a new Warrant or
         Warrants in exchange for the Warrant or Warrants to be divided or
         combined in accordance with such notice.

                  (c) The Company shall prepare, issue and deliver at its own
         expense (other than transfer taxes) the new Warrant or Warrants under
         this Section 7.

                  (d) The Company agrees to maintain, at its aforesaid office,
         books for the registration and the registration of transfer of the
         Warrants.

                                       5
<PAGE>

                  (e) If, at the time of the surrender of this Warrant in
         connection with any transfer of this Warrant, the transfer of this
         Warrant shall not be registered pursuant to an effective registration
         statement under the Securities Act and under applicable state
         securities or blue sky laws, the Company may require, as a condition of
         allowing such transfer (i) that the Holder or transferee of this
         Warrant, as the case may be, furnish to the Company a written opinion
         of counsel (which opinion shall be in form, substance and scope
         customary for opinions of counsel in comparable transactions and
         reasonably acceptable to the Company) to the effect that such transfer
         may be made without registration under the Securities Act and under
         applicable state securities or blue sky laws, (ii) that the holder or
         transferee execute and deliver to the Company an investment letter in
         form and substance acceptable to the Company and (iii) that the
         transferee be an "accredited investor" as defined in Rule 501(a)
         promulgated under the Securities Act.

         8. NO RIGHTS AS SHAREHOLDER UNTIL EXERCISE. This Warrant does not
entitle the Holder to any voting rights or other rights as a shareholder of the
Company prior to the exercise hereof. Upon the surrender of this Warrant and the
payment of the aggregate Exercise Price (or by means of a cashless exercise),
the Warrant Shares so purchased shall be and be deemed to be issued to such
Holder as the record owner of such shares as of the close of business on the
later of the date of such surrender or payment.

         9. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. The Company
covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which, in
the case of the Warrant, shall not include the posting of any bond), and upon
surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like
tenor and dated as of such cancellation, in lieu of such Warrant or stock
certificate.

         10. SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action may be
taken or such right may be exercised on the next succeeding day not a Saturday,
Sunday or legal holiday.

         11. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.

                  (a) STOCK SPLITS, ETC. The number and kind of securities
         purchasable upon the exercise of this Warrant and the Exercise Price
         shall be subject to adjustment from time to time upon the happening of
         any of the following. In case the Company shall (i) pay a dividend in
         shares of Common Stock or make a distribution in shares of Common Stock
         to holders of its outstanding Common Stock, (ii) subdivide its
         outstanding shares of Common Stock into a greater number of shares,
         (iii) combine its outstanding shares of Common Stock into a smaller
         number of shares of Common Stock, or (iv) issue any shares of its
         capital stock in a reclassification of the Common Stock, then the
         number of Warrant Shares purchasable upon exercise of this Warrant
         immediately prior thereto shall be adjusted so that the Holder shall be
         entitled to receive the kind and number of Warrant Shares or other

                                       6
<PAGE>

         securities of the Company which it would have owned or have been
         entitled to receive had such Warrant been exercised in advance thereof.
         Upon each such adjustment of the kind and number of Warrant Shares or
         other securities of the Company which are purchasable hereunder, the
         Holder shall thereafter be entitled to purchase the number of Warrant
         Shares or other securities resulting from such adjustment at an
         Exercise Price per Warrant Share or other security obtained by
         multiplying the Exercise Price in effect immediately prior to such
         adjustment by the number of Warrant Shares purchasable pursuant hereto
         immediately prior to such adjustment and dividing by the number of
         Warrant Shares or other securities of the Company that are purchasable
         pursuant hereto immediately thereafter. An adjustment made pursuant to
         this paragraph shall become effective immediately after the effective
         date of such event retroactive to the record date, if any, for such
         event.

                  (b) ANTI-DILUTION PROVISIONS. During the Exercise Period, the
         Exercise Price shall be subject to adjustment from time to time as
         provided in this Section 11(b). In the event that any adjustment of the
         Exercise Price as required herein results in a fraction of a cent, such
         Exercise Price shall be rounded up or down to the nearest cent.

                           (i) ADJUSTMENT OF EXERCISE PRICE. If and whenever the
                  Company issues or sells, or in accordance with Section 11(b)
                  hereof is deemed to have issued or sold, any shares of Common
                  Stock for an effective consideration per share of less than
                  the then Exercise Price or for no consideration (such lower
                  price, the "BASE SHARE PRICE" and such issuances collectively,
                  a "DILUTIVE ISSUANCE"), then, the Exercise Price shall be
                  multiplied by a fraction of which the numerator shall be the
                  number of shares of Common Stock Outstanding immediately prior
                  to the Dilutive Issuance plus the number of shares of Common
                  Stock which the aggregate offering price for such Dilutive
                  Issuance (assuming receipt by the Company in full of all
                  consideration payable upon exercise of such rights, options or
                  warrants) would purchase at the Exercise Price, and the
                  denominator of which shall be the sum of the number of shares
                  of Common Stock Outstanding immediately prior to the Dilutive
                  Issuance plus the number of shares of Common Stock so issued
                  or issuable in connection with the Dilutive Issuance;
                  provided, that for purposes hereof, all shares of Common Stock
                  that are issuable upon conversion, exercise or exchange of
                  Capital Share Equivalents shall be deemed outstanding
                  immediately after the issuance of such Common Stock. Such
                  adjustment shall be made whenever such shares of Common Stock
                  or Capital Share Equivalents are issued. For purposes of this
                  Section 11(b), "Common Stock Outstanding" as of a given date
                  shall be the number of shares of Common Stock (excluding
                  treasury shares, if any) issued and outstanding.

                           (ii) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For
                  purposes of determining the adjusted Exercise Price under
                  Section 11(b) hereof, the following will be applicable:

                                             (A) ISSUANCE OF RIGHTS OR OPTIONS.
                           If the Company in any manner issues or grants any
                           warrants, rights or options, whether or not
                           immediately exercisable, to subscribe for or to
                           purchase Common Stock or Common Stock Equivalents

                                       7
<PAGE>

                           (such warrants, rights and options to purchase Common
                           Stock or Common Stock Equivalents are hereinafter
                           referred to as "OPTIONS") and the effective price per
                           share for which Common Stock is issuable upon the
                           exercise of such Options is less than the Exercise
                           Price ("BELOW BASE PRICE OPTIONS"), then the maximum
                           total number of shares of Common Stock issuable upon
                           the exercise of all such Below Base Price Options
                           (assuming full exercise, conversion or exchange of
                           Common Stock Equivalents, if applicable) will, as of
                           the date of the issuance or grant of such Below Base
                           Price Options, be deemed to be outstanding and to
                           have been issued and sold by the Company for such
                           price per share and the maximum consideration payable
                           to the Company upon such exercise (assuming full
                           exercise, conversion or exchange of Common Stock
                           Equivalents, if applicable) will be deemed to have
                           been received by the Company. For purposes of the
                           preceding sentence, the "effective price per share
                           for which Common Stock is issuable upon the exercise
                           of such Below Base Price Options" is determined by
                           dividing (i) the total amount, if any, received or
                           receivable by the Company as consideration for the
                           issuance or granting of all such Below Base Price
                           Options, plus the minimum aggregate amount of
                           additional consideration, if any, payable to the
                           Company upon the exercise of all such Below Base
                           Price Options, plus, in the case of Common Stock
                           Equivalents issuable upon the exercise of such Below
                           Base Price Options, the minimum aggregate amount of
                           additional consideration payable upon the exercise,
                           conversion or exchange thereof at the time such
                           Common Stock Equivalents first become exercisable,
                           convertible or exchangeable, by (ii) the maximum
                           total number of shares of Common Stock issuable upon
                           the exercise of all such Below Base Price Options
                           (assuming full conversion of Common Stock
                           Equivalents, if applicable). No further adjustment to
                           the Exercise Price will be made upon the actual
                           issuance of such Common Stock upon the exercise of
                           such Below Base Price Options or upon the exercise,
                           conversion or exchange of Common Stock Equivalents
                           issuable upon exercise of such Below Base Price
                           Options.

                                            (B) ISSUANCE OF COMMON STOCK
                           EQUIVALENTS. If the Company in any manner issues or
                           sells any Common Stock Equivalents, whether or not
                           immediately convertible (other than where the same
                           are issuable upon the exercise of Options) and the
                           effective price per share for which Common Stock is
                           issuable upon such exercise, conversion or exchange
                           is less than the Exercise Price, then the maximum
                           total number of shares of Common Stock issuable upon
                           the exercise, conversion or exchange of all such
                           Common Stock Equivalents will, as of the date of the
                           issuance of such Common Stock Equivalents, be deemed
                           to be outstanding and to have been issued and sold by
                           the Company for such price per share and the maximum
                           consideration payable to the Company upon such
                           exercise (assuming full exercise, conversion or
                           exchange of Common Stock Equivalents, if applicable)
                           will be deemed to have been received by the Company.
                           For the purposes of the preceding sentence, the
                           "effective price per share for which Common Stock is

                                       8
<PAGE>

                           issuable upon such exercise, conversion or exchange"
                           is determined by dividing (i) the total amount, if
                           any, received or receivable by the Company as
                           consideration for the issuance or sale of all such
                           Common Stock Equivalents, plus the minimum aggregate
                           amount of additional consideration, if any, payable
                           to the Company upon the exercise, conversion or
                           exchange thereof at the time such Common Stock
                           Equivalents first become exercisable, convertible or
                           exchangeable, by (ii) the maximum total number of
                           shares of Common Stock issuable upon the exercise,
                           conversion or exchange of all such Common Stock
                           Equivalents. No further adjustment to the Exercise
                           Price will be made upon the actual issuance of such
                           Common Stock upon exercise, conversion or exchange of
                           such Common Stock Equivalents.

                                            (C) CHANGE IN OPTION PRICE OR
                           CONVERSION RATE. If there is a change at any time in
                           (i) the amount of additional consideration payable to
                           the Company upon the exercise of any Options; (ii)
                           the amount of additional consideration, if any,
                           payable to the Company upon the exercise, conversion
                           or exchange of any Common Stock Equivalents; or (iii)
                           the rate at which any Common Stock Equivalents are
                           convertible into or exchangeable for Common Stock (in
                           each such case, other than under or by reason of
                           provisions designed to protect against dilution), the
                           Exercise Price in effect at the time of such change
                           will be readjusted to the Exercise Price which would
                           have been in effect at such time had such Options or
                           Common Stock Equivalents still outstanding provided
                           for such changed additional consideration or changed
                           conversion rate, as the case may be, at the time
                           initially granted, issued or sold.

                                            (D) CALCULATION OF CONSIDERATION
                           RECEIVED. If any Common Stock, Options or Common
                           Stock Equivalents are issued, granted or sold for
                           cash, the consideration received therefor for
                           purposes of this Warrant will be the amount received
                           by the Company therefor, before deduction of
                           reasonable commissions, underwriting discounts or
                           allowances or other reasonable expenses paid or
                           incurred by the Company in connection with such
                           issuance, grant or sale. In case any Common Stock,
                           Options or Common Stock Equivalents are issued or
                           sold for a consideration part or all of which shall
                           be other than cash, the amount of the consideration
                           other than cash received by the Company will be the
                           fair market value of such consideration, except where
                           such consideration consists of securities, in which
                           case the amount of consideration received by the
                           Company will be the fair market value (closing bid
                           price, if traded on any market) thereof as of the
                           date of receipt. In case any Common Stock, Options or

                                       9
<PAGE>

                           Common Stock Equivalents are issued in connection
                           with any merger or consolidation in which the Company
                           is the surviving corporation, the amount of
                           consideration therefor will be deemed to be the fair
                           market value of such portion of the net assets and
                           business of the non-surviving corporation as is
                           attributable to such Common Stock, Options or Common
                           Stock Equivalents, as the case may be. The fair
                           market value of any consideration other than cash or
                           securities will be determined in good faith by an
                           investment banker or other appropriate expert of
                           national reputation selected by the Company and
                           reasonably acceptable to the holder hereof, with the
                           costs of such appraisal to be borne by the Company.

                                            (E) EXCEPTIONS TO ADJUSTMENT OF
                           EXERCISE PRICE. Notwithstanding the foregoing, no
                           adjustment will be made under this Section 11(b) in
                           respect of (1) the granting of options to employees,
                           officers, directors or key consultants of the Company
                           pursuant to any stock option plan duly adopted by a
                           majority of the non-employee members of the Board of
                           Directors of the Company or a majority of the members
                           of a committee of non-employee directors established
                           for such purpose, (2) upon the exercise of or
                           conversion of any Common Stock Equivalents or Options
                           issued and outstanding on the Original Issue Date,
                           provided that the securities have not been amended as
                           to price or amount of Common Stock issuable upon
                           exercise since the date of the Purchase Agreement
                           except as a result of the Purchase Agreement, or (3)
                           acquisitions or strategic investments, the primary
                           purpose of which is not to raise capital (including,
                           but not limited to any issuance of securities in
                           connection with the formation of a joint venture
                           expected to be named "PacificNet Communications
                           Limited - Macao Commercial Offshore")

                                            (F) EXPIRATION OF CONVERTIBLE
                           SECURITIES AND OPTIONS. If, in any case, the total
                           number of shares of Common Stock issuable upon
                           exercise of any Option or upon exercise, conversion
                           or exchange of any Convertible Security is not, in
                           fact, issued and the rights to exercise such Option
                           or to exercise, convert or exchange such Convertible
                           Security shall have expired or terminated, the
                           Exercise Price then in effect will be readjusted to
                           the Exercise Price which would have been in effect at
                           the time of such expiration or termination had such
                           Option or Convertible Securities, to the extent
                           outstanding immediately prior to such expiration or
                           termination (other than in respect of the actual
                           number of shares of Common Stock issued upon exercise
                           or conversion thereof), never been issued; PROVIDED,
                           HOWEVER, prior to such adjustment, the Company shall
                           have notified the Holder at least 10 Trading Days
                           prior to the date such adjustment occurs.

                           (iii) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No
                  adjustment of the Exercise Price shall be made in an amount of
                  less than 1% of the Exercise Price in effect at the time such
                  adjustment is otherwise required to be made, but any such
                  lesser adjustment shall be carried forward and shall be made
                  at the time and together with the next subsequent adjustment
                  which, together with any adjustments so carried forward, shall
                  amount to not less than 1% of such Exercise Price.

                                       10
<PAGE>

         12. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of any of its property, assets or
business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("OTHER
PROPERTY"), are to be received by or distributed to the holders of Common Stock
of the Company, then the Holder shall have the right thereafter to receive, at
the option of the Holder, (a) upon exercise of this Warrant, the number of
shares of Common Stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and Other Property receivable upon
or as a result of such reorganization, reclassification, merger, consolidation
or disposition of assets by a Holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such event or (b) cash
equal to the value of this Warrant as determined in accordance with the Black
Scholes option pricing formula. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for adjustments of Warrant Shares
for which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 12. For purposes of
this Section 12, "common stock of the successor or acquiring corporation" shall
include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this Section 12 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.

         13. VOLUNTARY ADJUSTMENT BY THE COMPANY. The Company may at any time
during the term of this Warrant reduce the then current Exercise Price to any
amount and for any period of time deemed appropriate by the Board of Directors
of the Company.

         14. NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares or
number or kind of securities or other property purchasable upon the exercise of
this Warrant or the Exercise Price is adjusted, as herein provided, the Company
shall give notice thereof to the Holder, which notice shall state the number of
Warrant Shares (and other securities or property) purchasable upon the exercise
of this Warrant and the Exercise Price of such Warrant Shares (and other
securities or property) after such adjustment, setting forth a brief statement
of the facts requiring such adjustment and setting forth the computation by
which such adjustment was made.

                                       11
<PAGE>

         15. NOTICE OF CORPORATE ACTION. If at any time:

                  (a) the Company shall take a record of the holders of its
         Common Stock for the purpose of entitling them to receive a dividend or
         other distribution, or any right to subscribe for or purchase any
         evidences of its indebtedness, any shares of stock of any class or any
         other securities or property, or to receive any other right, or

                  (b) there shall be any capital reorganization of the Company,
         any reclassification or recapitalization of the capital stock of the
         Company or any consolidation or merger of the Company with, or any
         sale, transfer or other disposition of all or substantially all the
         property, assets or business of the Company to, another corporation or,

                  (c) there shall be a voluntary or involuntary dissolution,
         liquidation or winding up of the Company;

then, in any one or more of such cases, the Company shall give to Holder (i) at
least 20 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, liquidation or winding up, and (ii)
in the case of any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, dissolution, liquidation or winding up, at least 20
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause also shall specify (i) the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and
character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their Warrant Shares for securities or other property
deliverable upon such disposition, dissolution, liquidation or winding up. Each
such written notice shall be sufficiently given if addressed to Holder at the
last address of Holder appearing on the books of the Company and delivered in
accordance with Section 17(d).

         16. AUTHORIZED SHARES. The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of the Warrant
Shares upon the exercise of any purchase rights under this Warrant. The Company
further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the Trading Market upon
which the Common Stock may be listed.

                                       12
<PAGE>

         Except and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation, amending its
certificate of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder as set forth in this
Warrant against impairment. Without limiting the generality of the foregoing,
the Company will (a) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (b) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant, and (c) use commercially
reasonable efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be necessary
to enable the Company to perform its obligations under this Warrant.

         Before taking any action which would result in an adjustment in the
number of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.

         17. MISCELLANEOUS.

                  (a) JURISDICTION. All questions concerning the construction,
         validity, enforcement and interpretation of this Warrant shall be
         determined in accordance with the provisions of the Purchase Agreement.

                  (b) RESTRICTIONS. The Holder acknowledges that the Warrant
         Shares acquired upon the exercise of this Warrant, if not registered,
         will have restrictions upon resale imposed by state and federal
         securities laws.

                  (c) NONWAIVER AND EXPENSES. No course of dealing or any delay
         or failure to exercise any right hereunder on the part of Holder shall
         operate as a waiver of such right or otherwise prejudice Holder's
         rights, powers or remedies, notwithstanding all rights hereunder
         terminate on the Termination Date. If the Company willfully and
         knowingly fails to comply with any provision of this Warrant, which
         results in any material damages to the Holder, the Company shall pay to
         Holder such amounts as shall be sufficient to cover any costs and
         expenses including, but not limited to, reasonable attorneys' fees,
         including those of appellate proceedings, incurred by Holder in
         collecting any amounts due pursuant hereto or in otherwise enforcing
         any of its rights, powers or remedies hereunder.

                  (d) NOTICES. Any notice, request or other document required or
         permitted to be given or delivered to the Holder by the Company shall
         be delivered in accordance with the notice provisions of the Purchase
         Agreement.

                                       13
<PAGE>

                  (e) LIMITATION OF LIABILITY. No provision hereof, in the
         absence of any affirmative action by Holder to exercise this Warrant or
         purchase Warrant Shares, and no enumeration herein of the rights or
         privileges of Holder, shall give rise to any liability of Holder for
         the purchase price of any Common Stock or as a stockholder of the
         Company, whether such liability is asserted by the Company or by
         creditors of the Company.

                  (f) REMEDIES. Holder, in addition to being entitled to
         exercise all rights granted by law, including recovery of damages, will
         be entitled to specific performance of its rights under this Warrant.
         The Company agrees that monetary damages would not be adequate
         compensation for any loss incurred by reason of a breach by it of the
         provisions of this Warrant and hereby agrees to waive the defense in
         any action for specific performance that a remedy at law would be
         adequate.

                  (g) SUCCESSORS AND ASSIGNS. Subject to applicable securities
         laws, this Warrant and the rights and obligations evidenced hereby
         shall inure to the benefit of and be binding upon the successors of the
         Company and the successors and permitted assigns of Holder. The
         provisions of this Warrant are intended to be for the benefit of all
         Holders from time to time of this Warrant and shall be enforceable by
         any such Holder or holder of Warrant Shares.

                  (h) AMENDMENT. This Warrant may be modified or amended or the
         provisions hereof waived with the written consent of the Company and
         the Holder.

                  (i) SEVERABILITY. Wherever possible, each provision of this
         Warrant shall be interpreted in such manner as to be effective and
         valid under applicable law, but if any provision of this Warrant shall
         be prohibited by or invalid under applicable law, such provision shall
         be ineffective to the extent of such prohibition or invalidity, without
         invalidating the remainder of such provisions or the remaining
         provisions of this Warrant.

                  (j) HEADINGS. The headings used in this Warrant are for the
         convenience of reference only and shall not, for any purpose, be deemed
         a part of this Warrant.

                              ********************

                                       14
<PAGE>

                  IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer thereunto duly authorized.

Dated:  January __, 2004
                                            PACIFICNET INC.

                                            By:  _______________________________
                                                    Name:
                                                    Title:

                                       15
<PAGE>

                               NOTICE OF EXERCISE

To:      PacificNet Inc.

         (1) The undersigned hereby elects to purchase ________ Warrant Shares
of PacificNet Inc. pursuant to the terms of the attached Warrant (only if
exercised in full), and tenders herewith payment of the exercise price in full,
together with all applicable transfer taxes, if any.

         (2) Payment shall take the form of (check applicable box):

                           [ ] in lawful money of the United States; or

                           [ ] the cancellation of such number of Warrant Shares
                           as is necessary, in accordance with the formula set
                           forth in subsection 3(d), to exercise this Warrant
                           with respect to the maximum number of Warrant Shares
                           purchasable pursuant to the cashless exercise
                           procedure set forth in subsection 3(d).

         (3) Please issue a certificate or certificates representing said
Warrant Shares in the name of the undersigned or in such other name as is
specified below:

         -------------------------------

The Warrant Shares shall be delivered to the following:

         -------------------------------

         -------------------------------

         -------------------------------

         (4) ACCREDITED INVESTOR. The undersigned is an "accredited investor" as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended.

                                   [PURCHASER]

                                   By: ______________________________
                                   Name:
                                   Title:

                                   Dated:  ________________________

<PAGE>

                                 ASSIGNMENT FORM

                    (To assign the foregoing warrant, execute
                   this form and supply required information.
                 Do not use this form to exercise the warrant.)

         FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to

_______________________________________________ whose address is

___________________________________________________________________.

___________________________________________________________________

                                                Dated:  ______________, _______

                 Holder's Signature: _____________________________

                 Holder's Address:   _____________________________

                                     _____________________________

Signature Guaranteed:  ___________________________________________

NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.

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