NOTE PURCHASE AGREEMENT

Note Purchase Agreement

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DWANGO NORTH AMERICA CORP | ALEXANDRA GLOBAL MASTER FUND LTD.

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Title: NOTE PURCHASE AGREEMENT
Governing Law: New York Date: 3/29/2004
Industry: Software and Programming Sector: Technology

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NOTE PURCHASE AGREEMENT

DATED AS OF MARCH19, 2004

BY AND BETWEEN

DWANGO NORTH AMERICA CORP.

AND

ALEXANDRA GLOBAL MASTER FUND LTD.

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

9 % SENIOR

CONVERTIBLE NOTES DUE 2007

AND

COMMON STOCK PURCHASE WARRANTS

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DWANGO NORTH AMERICA CORP.

NOTE PURCHASE AGREEMENT

9% SENIOR

CONVERTIBLE NOTES DUE 2007

AND

COMMON STOCK PURCHASE WARRANTS

TABLE OF CONTENTS

PAGE

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1. DEFINITIONS...........................................................1

2. PURCHASE AND SALE; PURCHASE PRICE.....................................8

(a) Purchase............................................................8

(b) Form of Payment.....................................................9

3. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE BUYER.............9

(a) Purchase for Investment.............................................9

(b) Accredited Investor.................................................9

(d) Company Reliance...................................................10

(e) Information Provided...............................................10

(f) Absence of Approvals...............................................10

(g) Note Purchase Agreement............................................10

(h) Buyer Status.......................................................11

4. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE COMPANY..........11

(a) Organization and Authority.........................................11

(b) Qualifications.....................................................11

(d) Concerning the Shares and the Common Stock.........................12

(e) Corporate Authorization............................................13

(f) Non-contravention..................................................13

(g) Approvals, Filings, Etc............................................14

(h) Information Provided...............................................14

(i) Conduct of Business................................................14

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(j) SEC Filings........................................................15

(k) Absence of Certain Proceedings.....................................15

(l) Financial Statements; Liabilities..................................15

(m) Material Losses....................................................16

(n) Absence of Certain Changes.........................................16

(o) Intellectual Property..............................................16

(p) Internal Accounting Controls.......................................17

(q) Compliance with Law................................................17

(r) Properties.........................................................17

(s) Labor Relations....................................................18

(t) Insurance..........................................................18

(u) Tax Matters........................................................18

(v) Investment Company.................................................18

(w) Absence of Brokers, Finders, Etc...................................18

(x) No Solicitation....................................................18

(y) ERISA Compliance...................................................19

(z) Absence of Rights Agreement........................................19

5. CERTAIN COVENANTS....................................................19

(a) Transfer Restrictions..............................................19

(b) Restrictive Legends................................................20

(d) Form D.............................................................21

(e) State Securities Laws..............................................21

(f) Limitation on Certain Actions......................................21

(g) Use of Proceeds....................................................22

(h) Best Efforts.......................................................22

(i) Debt Obligation....................................................22

(j) Certain Issuances of Securities....................................22

6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.......................23

7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.....................23

8. REGISTRATION RIGHTS..................................................24

(a) Mandatory Registration.............................................24

(b) Obligations of the Company.........................................25

(d) Rule 144...........................................................31

9. INDEMNIFICATION AND CONTRIBUTION.....................................32

(a) Indemnification....................................................32

(b) Contribution.......................................................33

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10. MISCELLANEOUS........................................................34

(a) Governing Law......................................................34

(b) Headings...........................................................34

(d) Notices............................................................34

(e) Counterparts.......................................................35

(f) Entire Agreement; Benefit..........................................35

(g) Waiver.............................................................35

(h) Amendment..........................................................35

(i) Further Assurances.................................................36

(j) Assignment of Certain Rights and Obligations.......................36

(k) Expenses...........................................................36

(l) Termination........................................................37

(m) Survival...........................................................38

(n) Public Statements, Press Releases, Etc.............................38

(o) Construction.......................................................38

ANNEXES

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ANNEX I Form of 9% Senior Convertible Note due 2007

ANNEX II Form of Common Stock Purchase Warrant

ANNEX III-1 Form of Opinion of Moomjian & Waite, LLP to Be Delivered on the

Closing Date

ANNEX III-2 Form of Opinion of Gunn, Mullins & Farrell L.L.P.

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NOTE PURCHASE AGREEMENT

THIS NOTE PURCHASE AGREEMENT, dated as of March 19, 2004 (this

"Agreement"), by and between DWANGO NORTH AMERICA CORP., a Nevada corporation

(the "Company"), with headquarters located at 200 West Mercer Street, Suite 501,

Seattle, Washington 98119, and ALEXANDRA GLOBAL MASTER FUND LTD., a British

Virgin Islands company (the "Buyer").

W I T N E S S E T H:

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WHEREAS, the Buyer wishes to purchase from the Company and the

Company wishes to sell to the Buyer, upon the terms and subject to the

conditions of this Agreement, a promissory note of the Company having the

aggregate principal amount set forth on the signature page of this Agreement and

in connection with which the Company shall issue to the Buyer warrants to

purchase shares of Common Stock (such capitalized term and all other capitalized

terms used in this Agreement having the meanings provided in Section 1);

NOW THEREFORE, in consideration of the premises and the mutual

covenants contained herein and other good and valuable consideration, the

receipt and sufficiency of which are hereby acknowledged, the parties agree as

follows:

1. DEFINITIONS

(a) As used in this Agreement, the terms "Agreement",

"Buyer" and "Company" shall have the respective meanings assigned to such terms

in the introductory paragraph of this Agreement.

(b) All the agreements or instruments herein defined shall

mean such agreements or instruments as the same may from time to time be

supplemented or amended or the terms thereof waived or modified to the extent

permitted by, and in accordance with, the terms thereof and of this Agreement.

(such meanings to be equally applicable to both the singular and plural forms of

the terms defined):

"Affiliate" means, with respect to any Person, any other

Person that directly, or indirectly through one or more intermediaries,

controls, is controlled by or is under common control with the subject Person.

For purposes of this definition, "control" (including, with correlative meaning,

the terms "controlled by" and "under common control with"), as used with respect

to any Person, shall mean the possession, directly or indirectly, of the power

to direct or cause the direction of the management and policies of such Person,

whether through the ownership of voting securities or by contract or otherwise.

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"Blackout Period" means the period of up to 20 Trading Days

(whether or not consecutive) during any period of 365 consecutive days after the

date the Company notifies the Investors that they are required, pursuant to

Section 8(c)(4), to suspend offers and sales of Registrable Securities as a

result of an event or circumstance described in Section 8(b)(5)(A), during which

period, by reason of Section 8(b)(5)(B), the Company is not required to amend

the Registration Statement or supplement the related Prospectus.

"Business Day" means any day other than a Saturday, Sunday or

a day on which commercial banks in The City of New York are authorized or

required by law or executive order to remain closed.

"Claims" means any losses, claims, damages, liabilities or

expenses, including, without limitation, reasonable fees and expenses of legal

counsel (joint or several), incurred by a Person.

"Closing Date" means 10:00 a.m., New York City time, on March

19, 2004 or such other mutually agreed to time.

"Code" means the Internal Revenue Code of 1986, as amended,

and the regulations thereunder and published interpretations thereof.

"Common Stock" means the Common Stock, par value $.001 per

share, of the Company.

"Common Stock Equivalent" means any warrant, option,

subscription or purchase right with respect to shares of Common Stock, any

security convertible into, exchangeable for, or otherwise entitling the holder

thereof to acquire, shares of Common Stock or any warrant, option, subscription

or purchase right with respect to any such convertible, exchangeable or other

security.

"Conversion Shares" means the shares of Common Stock issuable

upon conversion of the Note.

"Encumbrances" means all mortgages, deeds of trust, claims,

security interests, liens, pledges, leases, subleases, charges, escrows,

options, proxies, rights of occupancy, rights of first refusal, preemptive

rights, covenants, conditional limitations, hypothecations, prior assignments,

easements, title retention agreements, indentures, security agreements or any

other encumbrances of any kind.

"ERISA" means the Employee Retirement Income Security Act of

1974, as amended, and the regulations thereunder and published interpretations

thereof.

"Event of Default" shall have the meaning to be provided or

provided in the Note.

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"Indebtedness" shall have the meaning to be provided or

provided in the Note.

"Indemnified Party" means the Company, each of its directors,

each of its officers who signs the Registration Statement, each Person, if any,

who controls the Company within the meaning of the 1933 Act or the 1934 Act, any

underwriter and any other stockholder selling securities pursuant to the

Registration Statement or any of its directors or officers or any Person who

controls such stockholder or underwriter within the meaning of the 1933 Act or

the 1934 Act.

"Indemnified Person" means the Buyer and each other Investor

who beneficially owns or holds Registrable Securities and each other Investor

who sells such Registrable Securities in the manner permitted under this

Agreement, the directors, if any, of such Investor, the officers or persons

performing similar functions, if any, of the Buyer and any such Investor, each

Person, if any, who controls the Buyer or any such Investor within the meaning

of the 1933 Act or the 1934 Act, any underwriter (as defined in the 1933 Act)

acting on behalf of an Investor who participates in the offering of Registrable

Securities of such Investor in accordance with the plan of distribution

contained in the Prospectus, the directors, if any, of such underwriter and the

officers, if any, of such underwriter, and each Person, if any, who controls any

such underwriter within the meaning of the 1933 Act or the 1934 Act.

"Initial Warrant Exercise Price" means the "Purchase Price,"

as defined in the Warrants, on the Closing Date.

"Inspector" means any attorney, accountant or other agent

retained by an Investor for the purposes provided in Section 8(b)(9).

"Interest Shares" means the shares of Common Stock issuable in

payment of interest on the Note.

"Intellectual Property" means all franchises, patents,

trademarks, service marks, tradenames (whether registered or unregistered),

copyrights, corporate names, licenses, trade secrets, proprietary software or

hardware, proprietary technology, technical information, discoveries, designs

and other proprietary rights, whether or not patentable, and confidential

information (including, without limitation, know-how, processes and technology)

used in the conduct of the business of the Company or any Subsidiary, or in

which the Company or any Subsidiary has an interest.

"Investor" means the Buyer and any transferee or assignee who

agrees to become bound by the provisions of Sections 5(a), 5(b), 8, 9, and 10 of

this Agreement.

"Letter Agreement" means the letter agreement, dated as of the

date of this Agreement, between the Company and the Buyer.

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"Margin Stock" shall have the meaning provided in Regulation U

of the Board of Governors of the Federal Reserve System (12 C.F.R. Part 221).

"Nasdaq" means the Nasdaq National Market.

"Nasdaq SmallCap" means the Nasdaq SmallCap Market.

"NASD" means the National Association of Securities Dealers,

Inc.

"1934 Act" means the Securities Exchange Act of 1934, as

amended.

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

"Note" means the 9% Senior Convertible Note due 2007 of the

Company in the form attached as

ANNEX I.

"Other Note Purchase Agreement" means the Note Purchase

Agreement, dated January 8, 2004, by and between the Company and the Buyer.

"Other Notes" shall have the meaning to be provided or

provided in the Note.

"Permitted Indebtedness" shall have the meaning to be provided

or provided in the Note.

"Person" means any natural person, corporation, partnership,

limited liability company, trust, incorporated organization, unincorporated

association or similar entity or any government, governmental agency or

political subdivision.

"Placement Agent" means HCFP Brenner Securities and RG

Securities LLC.

"Products" shall have the meaning to be provided or provided

in the Note.

"Prospectus" means the prospectus forming part of the

Registration Statement at the time the Registration Statement is declared

effective and any amendment or supplement thereto (including any information or

documents incorporated therein by reference).

"Purchase Price" means the purchase price for the Note set

forth on the signature page of this Agreement.

"Questionnaire" means the Investor Questionnaire completed by

the Buyer and previously delivered to the Company.

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"Record" means all pertinent financial and other records,

pertinent corporate documents and properties of the Company subject to

inspection for the purposes provided in Section 8(b)(9).

"register," "registered," and "registration" refer to a

registration effected by preparing and filing a Registration Statement or

Statements in compliance with the 1933 Act and pursuant to Rule 415, and the

declaration or ordering of effectiveness of such Registration Statement by the

SEC.

"Registrable Securities" means (1) the Shares, (2) if the

Common Stock is changed, converted or exchanged by the Company or its successor,

as the case may be, into any other stock or other securities on or after the

date hereof, such other stock or other securities which are issued or issuable

in respect of or in lieu of the Shares and (3) if any other securities are

issued to holders of the Common Stock (or such other shares or other securities

into which or for which the Common Stock is so changed, converted or exchanged

as described in the immediately preceding clause (2)) upon any reclassification,

share combination, share subdivision, share dividend, merger, consolidation or

similar transaction or event, such other securities which are issued or issuable

in respect of or in lieu of the Common Shares.

"Registration Default Date" means the date which is 150 days

following the Closing Date.

"Registration Default Period" means the period following the

Registration Default Date during which any Registration Event occurs and is

continuing.

"Registration Event" means the occurrence of any of the

following events:

(i) the Company fails to file with the SEC the Registration

Statement on or before the date by which the Company is required to

file the Registration Statement pursuant to Section 8(a)(1),

(ii) the Registration Statement covering Registrable

Securities is not declared effective by the SEC within 150 days

following the Closing Date,

(iii) after the SEC Effective Date, sales cannot be made

pursuant to the Registration Statement for any reason (including

without limitation by reason of a stop order of any untrue statement of

a material fact or omission of a material fact in the Registration

Statement, or the Company's failure to update the Registration

Statement) but except as excused pursuant to Section 8(b)(5),

(iv) after the date on which securities of the Company are

listed or included for quotation on a Trading Market, the Common Stock

generally or the Registrable Securities specifically are not listed or

included for quotation on a Trading Market,

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or trading of the Common Stock is suspended or halted for a period

exceeding 5 days on the Trading Market which at the time constitutes

the principal market for the Common Stock, or

(v) the Company fails, refuses or is otherwise unable timely

to issue Shares upon conversion of the Notes or Warrant Shares upon

exercise of the Warrant in accordance with the terms of the Notes and

the Warrant, or certificates therefor as required under the Transaction

Documents or the Company fails, refuses or is otherwise unable timely

to transfer any Shares as and when required by the Transaction

Documents.

"Registration Period" means the period from the SEC Effective

Date to the earlier of (A) the date which is three years after the Closing Date

(or if (x) the Note shall have been fully converted into shares of Common Stock

or (y) the Note shall no longer remain outstanding, such date after which each

Investor may sell all of its Registrable Securities without registration under

the 1933 Act pursuant to Rule 144, free of any limitation on the volume of such

securities which may be sold in any period) and (B) the date on which the

Investors no longer own any Registrable Securities.

"Registration Statement" means a registration statement on

Form S-1, Form SB-2, Form S-3 or such other form as may be available to the

Company to be filed with the SEC under the 1933 Act relating to the Registrable

Securities and which names the Investors as selling stockholders.

"Regulation D" means Regulation D under the 1933 Act.

"Repurchase Event" shall have the meaning to be provided or

provided in the Note.

"Required Information" means, with respect to each Investor,

all information regarding such Investor, the Registrable Securities held by such

Investor or which such Investor has the right to acquire and the intended method

of disposition of the Registrable Securities held by such Investor or which such

Investor has the right to acquire as shall be required by the 1933 Act to effect

the registration of the resale by such Investor of such Registrable Securities.

"Rule 144" means Rule 144 promulgated under the 1933 Act or

any other similar rule or regulation of the SEC that may at any time provide a

"safe harbor" exemption from registration under the 1933 Act so as to permit a

holder to sell securities of the Company to the public without registration

under the 1933 Act.

"Rule 144A" means Rule 144A under the 1933 Act or any

successor rule thereto.

"SEC" means the Securities and Exchange Commission.

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"SEC Effective Date" means the date the Registration Statement

is declared effective by the SEC.

"SEC Filing Date" means the date the Registration Statement is

first filed with the SEC pursuant to Section 8.

"SEC Reports" means the Company's (1) Quarterly Report on Form

10-QSB for the quarter ended September 30, 2003, (2) the Current Reports on Form

8-K filed on October 7, 2003, October 29, 2003, November 7, 2003, December 8,

2003, January 16, 2004, January 30, 2004, February 19, 2004 and March 10, 2004,

and (3) all other periodic and other reports filed by the Company with the SEC

pursuant to the 1934 Act subsequent to September 30, 2003, and prior to the date

hereof, in each case as filed with the SEC and including the information and

documents (other than exhibits) incorporated therein by reference.

"Securities" means, collectively, the Note, the Shares and the

Warrants.

"Shares" means the Conversion Shares, the Interest Shares and

the Warrant Shares.

"Subsidiary" means any corporation or other entity of which a

majority of the capital stock or other ownership interests having ordinary

voting power to elect a majority of the board of directors or other persons

performing similar functions are at the time directly or indirectly owned by the

Company.

"Trading Day" means at any time a day on which any of a

national securities exchange, Nasdaq, Nasdaq SmallCap or such other securities

market as at such time constitutes the principal securities market for the

Common Stock is open for general trading of securities.

"Trading Market" means the Over-The-Counter Bulletin Board,

the American Stock Exchange, Inc., the Nasdaq, the Nasdaq SmallCap or the New

York Stock Exchange, Inc.

"Transaction Documents" means, collectively, this Agreement,

the Securities, the Letter Agreement and the other agreements, instruments and

documents contemplated hereby and thereby.

"Transfer Agent" means Interwest Transfer Company, Inc.,

as transfer agent and registrar for the Common Stock, or its successor.

"Violation" means

(i) any untrue statement or alleged untrue statement of a

material fact contained in the Registration Statement or any post-effective

amendment thereof or the omission

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or alleged omission to state therein a material fact required to be stated

therein or necessary to make the statements therein not misleading,

(ii) any untrue statement or alleged untrue statement of a

material fact contained in any Prospectus (as amended or supplemented, if the

Company files any amendment thereof or supplement thereto with the SEC) or the

omission or alleged omission to state therein any material fact necessary to

make the statements made therein, in light of the circumstances under which the

statements therein were made, not misleading,

(iii) any violation or alleged violation by the Company of the

1933 Act, the 1934 Act, any state securities law or any rule or regulation under

the 1933 Act, the 1934 Act or any state securities law, or

(iv) any breach or alleged breach by any Person other than

the Buyer of any representation, warranty, covenant, agreement or other term of

any of the Transaction Documents.

"Warrants" means the Common Stock Purchase Warrants in the

form attached hereto as ANNEX II.

"Warrant Shares" means the shares of Common Stock issuable

upon exercise of the Warrants.

2. PURCHASE AND SALE; PURCHASE PRICE.

(A) PURCHASE. Upon the terms and subject to the conditions

of this Agreement, the Buyer hereby agrees to purchase from the Company, and

the Company hereby agrees to sell to the Buyer, on the Closing Date, the Note

in the principal amount set forth on the signature page of this Agreement and

having the terms and conditions as set forth in the form of the Note attached

hereto as ANNEX I for the Purchase Price. In connection with the purchase of

the Note by the Buyer, the Company shall issue to the Buyer at the closing on

the Closing Date Warrants initially entitling the holder to purchase a number

of shares of Common Stock equal to the quotient obtained by dividing $500 by

the Initial Warrant Exercise Price for each $1,000 principal amount of the

Note.

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(B) FORM OF PAYMENT. Payment by the Buyer of the Purchase

Price to the Company on the Closing Date shall be made by wire transfer of

immediately available funds to:

Regions Bank

2401 S. Kirkwood

Houston, Texas 77077

ABA No. 06200 5690

For credit to account No. 8520039853

For credit to the account of Dwango North America

issuance of the Warrants shall occur on the Closing Date at the Law Offices of

Brian W Pusch, Penthouse Suite, 29 West 57th Street, New York, New York. At the

closing, upon the terms and subject to the conditions of this Agreement, (1) the

Company shall issue and deliver to the Buyer the Note and the Warrants against

payment by the Buyer to the Company of an amount equal to the Purchase Price,

and (2) the Buyer shall pay to the Company an amount equal to the Purchase Price

against delivery by the Company to the Buyer of the Note and the Warrants.

3. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE

BUYER.

The Buyer represents and warrants to, and covenants and agrees

with, the Company as follows:

(A) PURCHASE FOR INVESTMENT. The Buyer is purchasing the

Note and acquiring the Warrants for its own account for investment and not with

a view towards the public sale or distribution thereof within the meaning of

the 1933 Act; and the Buyer will acquire any Shares issued to the Buyer prior

to the SEC Effective Date of a Registration Statement covering the resale of

such Shares by the Buyer for its own account for investment and not with a view

towards the public sale or distribution thereof within the meaning of the 1933

Act prior to the SEC Effective Date; and the Buyer has no intention of making

any distribution, within the meaning of the 1933 Act, of the Shares except in

compliance with the registration requirements of the 1933 Act or pursuant to an

exemption therefrom;

(B) ACCREDITED INVESTOR. The Buyer is an "accredited

investor" as that term is defined in Rule 501 of Regulation D under the 1933

Act by reason of Rule 501(a)(3) thereof;

indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit

any offers to buy, purchase or otherwise acquire or take a pledge of) any of the

Securities unless registered under the 1933 Act, pursuant to an exemption from

registration under the 1933 Act or in a transaction not requiring registration

under the 1933 Act;

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(D) COMPANY RELIANCE. The Buyer understands that (1) the

Note is being offered and sold and the Warrants are being issued to the Buyer,

(2) the Shares are being offered to the Buyer, (3) the Interest Shares, if any,

will be issued to the Buyer and (4) upon exercise of the Warrants, the Warrant

Shares will be sold to the Buyer, in each such case in reliance on one or more

exemptions from the registration requirements of the 1933 Act, including,

without limitation, Regulation D, and exemptions from state securities laws and

that the Company is relying upon the truth and accuracy of, and the Buyer's

compliance with, the representations, warranties, agreements, acknowledgments

and understandings of the Buyer set forth herein and in the Questionnaire, a

true and accurate copy of which has been delivered by the Buyer to the Company,

in order to determine the availability of such exemptions and the eligibility

of the Buyer to acquire or receive an offer to acquire the Securities; and the

information with respect to the Buyer set forth in the Questionnaire is

accurate and complete in all material respects;

(E) INFORMATION PROVIDED. The Buyer and its advisors, if

any, have requested, received and considered all information relating to the

business, properties, operations, condition (financial or other), results of

operations or prospects of the Company and information relating to the offer

and sale of the Note and the offer of the Interest Shares and the Warrant

Shares deemed relevant by them (assuming the accuracy and completeness of the

SEC Reports and of the Company's responses to the Buyer's requests); the Buyer

and its advisors, if any, have been afforded the opportunity to ask questions

of the Company concerning the terms of the offering of the Securities and the

business, properties, operations, condition (financial or other), results of

operations and prospects of the Company and its Subsidiaries and have received

satisfactory answers to any such inquiries; without limiting the generality of

the foregoing, the Buyer has had the opportunity to obtain and to review the

SEC Reports; in connection with its decision to purchase the Note and to

acquire the Warrants, the Buyer has relied solely upon the SEC Reports, the

representations, warranties, covenants and agreements of the Company set forth

in this Agreement and to be contained in the other Transaction Documents, as

well as any investigation of the Company completed by the Buyer or its

advisors; the Buyer understands that its investment in the Securities involves

a high degree of risk; and the Buyer understands that the offering of the Note

is being made to the Buyer as part of an offering without any minimum or

maximum amount of the offering (subject, however, to the right of the Company

at any time prior to execution and delivery of this Agreement by the Company,

in its sole discretion, to accept or reject an offer by the Buyer to purchase

the Note and to acquire the Warrants);

(F) ABSENCE OF APPROVALS. The Buyer understands that no

United States federal or state agency or any other government or governmental

agency has passed on or made any recommendation or endorsement of the

Securities;

(G) NOTE PURCHASE AGREEMENT. The Buyer has all requisite

power and authority, corporate or otherwise, to execute, deliver and perform

its obligations under this Agreement and the other agreements executed by the

Buyer in connection herewith and to consummate the transactions contemplated

hereby and thereby; and this Agreement has been

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duly and validly authorized, duly executed and delivered by the Buyer and,

assuming due execution and delivery by the Company, is a valid and binding

agreement of the Buyer enforceable in accordance with its terms, except as the

enforceability hereof may be limited by bankruptcy, insolvency, reorganization,

moratorium, fraudulent conveyance or other similar laws now or hereafter in

effect relating to or affecting creditors' rights generally and general

principles of equity, regardless of whether enforcement is considered in a

proceeding in equity or at law; and

(H) BUYER STATUS. The Buyer is not a "broker" or "dealer" as

those terms are defined in the 1934 Act which is required to be registered with

the SEC pursuant to Section 15 of the 1934 Act.

4. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE

COMPANY.

The Company represents and warrants to, and covenants and

agrees with, the Buyer as follows:

(A) ORGANIZATION AND AUTHORITY. The Company and each of the

Subsidiaries is a corporation duly organized, validly existing and in good

standing under the laws of the jurisdiction of its incorporation, and (i) each

of the Company and the Subsidiaries has all requisite corporate power and

authority to own, lease and operate its properties and to carry on its business

as described in the SEC Reports and as currently conducted, and (ii) the Company

has all requisite corporate power and authority to execute, deliver and perform

its obligations under this Agreement and the other Transaction Documents to be

executed and delivered by the Company in connection herewith, and to consummate

the transactions contemplated hereby and thereby; and the Company does not have

any equity investment in any other Person other than (x) the Subsidiaries listed

in Schedule 4(a) hereto and (y) Subsidiaries which do not, individually or in

the aggregate, have any material revenue, assets or liabilities.

(B) QUALIFICATIONS. The Company and each of the Subsidiaries

are duly qualified to do business as foreign corporations and are in good

standing in all jurisdictions where such qualification is necessary and where

failure so to qualify could have a material adverse effect on the business,

properties, operations, condition (financial or other), results of operations or

prospects of the Company and the Subsidiaries, taken as a whole.

Company consists of (A) 50,000,000 shares of Common Stock, of which 6,925,090

shares were outstanding at the close of business on March 18, 2004 and (B)

10,000,000 shares of Preferred Stock, $.001 par value, none of which is

outstanding; from March 18, 2004 to the Closing Date there will be (x) no

increase in the number of shares of Common Stock outstanding (except for shares

issued upon exercise of options and warrants outstanding on the date hereof or

options or similar rights granted to employees, directors or consultants

subsequent to the date of this Agreement pursuant

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to the Company's stock option plans in effect on the date of this Agreement)

and (y) no issuance of securities convertible into, exchangeable for, or

otherwise entitling the holder to acquire, shares of Common Stock (except for

securities issued pursuant to the Other Note Purchase Agreement). The current

report on Form 8-K filed with the SEC on October 7, 2003 discloses as of

October 7, 2003 all outstanding options or warrants for the purchase of, or

rights to purchase or subscribe for, or securities convertible into,

exchangeable for, or otherwise entitling the holder to acquire, Common Stock or

other capital stock of the Company, or any contracts or commitments to issue or

sell Common Stock or other capital stock of the Company or any such options,

warrants, rights or other securities; and, except as set forth on SCHEDULE 4(C)

attached hereto, from such date to the date hereof there has been, and to the

Closing Date there will be, no material change in the amount or terms of any of

the foregoing except for the grant or exercise of options to purchase shares of

Common Stock pursuant to the Company's stock option plans in effect on the date

of this Agreement.

(2) The Company has duly reserved from its authorized and

unissued shares of Common Stock the full number of shares required for (A) all

options, warrants, convertible securities, exchangeable securities, and other

rights to acquire shares of Common Stock which are outstanding and (B) all

shares of Common Stock and options and other rights to acquire shares of Common

Stock which may be issued or granted under the stock option and similar plans

which have been adopted by the Company or any Subsidiary; and, immediately

following the Closing Date, after giving effect to any antidilution or similar

adjustment arising by reason of issuance of the Note, the Other Notes, the

Warrants and the warrants issuable to the purchasers of the Other Notes, the

total number of shares of Common Stock reserved and required to be reserved from

the authorized and unissued shares of Common Stock for purposes of all such

options, warrants, convertible securities, other rights, and stock option and

similar plans (excluding the Note, the Other Notes, the Warrants and the

warrants issuable to the purchasers of the Other Notes) will be 11,603,068. Each

outstanding class or series of securities of the Company for which any such

antidilution adjustment will occur is identified on SCHEDULE 4(C) attached

hereto, together with the amount of such antidilution adjustment for each such

class or series. The outstanding shares of Common Stock of the Company and

outstanding options, warrants, rights, and other securities entitling the

holders to purchase or otherwise acquire Common Stock have been duly and validly

authorized and issued. None of the outstanding shares of Common Stock or

options, warrants, rights, or other such securities has been issued in violation

of the preemptive rights of any securityholder of the Company. The offers and

sales of the outstanding shares of Common Stock of the Company and options,

warrants, rights, and other securities were at all relevant times either

registered under the 1933 Act and applicable state securities laws or exempt

from such requirements. Except for as set forth on SCHEDULE 4(C) attached

hereto, no holder of any of the Company's securities has any rights, "demand,"

"piggy-back" or otherwise, to have such securities registered by reason of the

intention to file, filing or effectiveness of the Registration Statement.

(D) CONCERNING THE SHARES AND THE COMMON STOCK. The Shares

have been duly authorized and the Conversion Shares when issued upon conversion

of the Note, the Interest

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Shares, when issued in payment of interest on the Note, and the Warrant Shares,

when issued upon exercise of the Warrants, will be duly and validly issued,

fully paid and non-assessable and will not subject the holder thereof to

personal liability by reason of being such holder. Other than the rights of

Buyer, there are no preemptive or similar rights of any stockholder of the

Company or any other Person to acquire any of the Shares or the Warrants. The

Company has duly reserved 2,875,000 shares of Common Stock for issuance upon

conversion of the Note and upon exercise of the Warrants, and such shares shall

remain so reserved, and the Company shall from time to time reserve such

additional shares of Common Stock as shall be required to be reserved pursuant

to the Notes and the Warrants, so long as the Notes or the Warrants are

outstanding. The Common Stock is traded on the Over-The-Counter Bulletin Board.

The Company knows of no reason that the Shares will be ineligible for quotation

on the Over-The-Counter Bulletin Board.

(E) CORPORATE AUTHORIZATION. This Agreement and the other

Transaction Documents to which the Company is or will be a party have been duly

and validly authorized by the Company; this Agreement has been duly executed and

delivered by the Company and, assuming due execution and delivery by the Buyer,

this Agreement is, and the Note, and the Warrants will be, when executed and

delivered by the Company, valid and binding obligations of the Company

enforceable in accordance with their respective terms, except as the

enforceability hereof or thereof may be limited by bankruptcy, insolvency,

reorganization, moratorium or other similar laws now or hereafter in effect

relating to or affecting creditors' rights generally and general principles of

equity, regardless of whether enforcement is considered in a proceeding in

equity or at law.

(F) NON-CONTRAVENTION. The execution and delivery of the

Transaction Documents by the Company and the consummation by the Company of the

issuance of the Securities as contemplated by this Agreement and consummation by

the Company of the other transactions contemplated by the Transaction Documents

do not and will not, with or without the giving of notice or the lapse of time,

or both, (i) result in any violation of any term or provision of the certificate

of incorporation or bylaws of the Company or any Subsidiary, (ii) conflict with

or result in a breach by the Company or any Subsidiary of any of the terms or

provisions of, or constitute a default under, or result in the modification of,

or result in the creation or imposition of any lien, security interest, charge

or encumbrance upon any of the properties or assets of the Company or any

Subsidiary pursuant to, any indenture, mortgage, deed of trust or other

agreement or instrument to which the Company or any Subsidiary is a party or by

which the Company or any Subsidiary or any of their respective properties or

assets are bound or affected, in any such case which would be reasonably likely

to have a material adverse effect on the business, properties, operations,

condition (financial or other), results of operations or prospects of the

Company and the Subsidiaries, taken as a whole, or the validity or

enforceability of, or the ability of the Company to perform its obligations

under, the Transaction Documents, (iii) violate or contravene any applicable

law, rule or regulation or any applicable decree, judgment or order of any

court, United States federal or state regulatory body, administrative agency or

other governmental body having jurisdiction over the Company or any Subsidiary

or any of their

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<PAGE>

respective properties or assets, in any such case which would be reasonably

likely to have a material adverse effect on the business, properties,

operations, condition (financial or other), results of operations or prospects

of the Company and the Subsidiaries, taken as a whole, or the validity or

enforceability of, or the ability of the Company to perform its obligations

under, the Transaction Documents, or (iv) have any material adverse effect on

any permit, certification, registration, approval, consent, license or

franchise necessary for the Company or any Subsidiary to own or lease and

operate any of its properties and to conduct any of its business or the ability

of the Company or any Subsidiary to make use thereof.

(G) APPROVALS, FILINGS, ETC. No authorization, approval or

consent of, or filing with, any United States or foreign court, governmental

body, regulatory agency, self-regulatory organization, or stock exchange or

market or the stockholders of the Company is required to be obtained or made by

the Company or any Subsidiary for (x) the execution, delivery and performance by

the Company of the Transaction Documents, (y) the issuance and sale of the

Securities as contemplated by this Agreement and the terms of the Note and the

Warrants and (z) the performance by the Company of its obligations under the

Transaction Documents, other than (1) registration of the resale of the Shares

under the 1933 Act as contemplated by Section 8, (2) as may be required under

applicable state securities or "blue sky" laws, and (3) filing of one or more

Forms D with respect to the Securities as required under Regulation D.

(H) INFORMATION PROVIDED. The SEC Reports, the Transaction

Documents and the instruments delivered by the Company to the Buyer in

connection with the closing on the Closing Date do not and will not on the date

of execution and delivery of this Agreement, the date of delivery thereof to the

Buyer and on the Closing Date contain any untrue statement of a material fact or

omit to state any material fact necessary in order to make the statements

therein, in the light of the circumstances under which they are made, not

misleading, it being understood that for purposes of this Section 4(h), any

statement contained in such information shall be deemed to be modified or

superseded for purposes of this Section 4(h) to the extent that a statement in

any document included in such information which was prepared and furnished to

the Buyer on a later date or filed with the SEC on a later date modifies or

replaces such statement, whether or not such later prepared or filed statement

so states.

(I) CONDUCT OF BUSINESS. Except as set forth in the SEC

Reports, since December 31, 2002, neither the Company nor any Subsidiary has (i)

incurred any material obligation or liability (absolute or contingent) other

than in the ordinary course of business; (ii) canceled, without payment in full,

any material notes, loans or other obligations receivable or other debts or

claims held by it other than in the ordinary course of business; (iii) sold,

assigned, transferred, abandoned, mortgaged, pledged or subjected to lien any of

its material properties, tangible or intangible, or rights under any material

contract, permit, license, franchise or other agreement; (iv) conducted its

business in a manner materially different from its business as conducted on such

date; (v) declared, made or paid or set aside for payment any cash or non-cash

distribution on any shares of its capital stock; or (vi) consummated, or entered

into any

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<PAGE>

agreement with respect to, any transaction or event which would constitute a

Repurchase Event. Except as disclosed in the SEC Reports, the Company and each

Subsidiary owns, possesses or has obtained all governmental, administrative and

third party licenses, permits, certificates, registrations, approvals, consents

and other authorizations necessary to own or lease (as the case may be) and

operate its properties, whether tangible or intangible, and to conduct its

business or operations as currently conducted, except such licenses, permits,

certificates, registrations, approvals, consents and authorizations the failure

of which to obtain would not have a material adverse effect on the business,

properties, operations, condition (financial or other), results of operations

or prospects of the Company and the Subsidiaries, taken as a whole.

(J) SEC FILINGS. The Company has timely filed all reports

required to be filed under the 1934 Act and any other material reports or

documents required to be filed with the SEC since January 1, 2002. All of such

reports and documents complied, when filed, in all material respects, with all

applicable requirements of the 1933 Act and the 1934 Act. The Company has not

filed any reports with the SEC under the 1934 Act since September 30, 2003 other

than the SEC Reports.

(K) ABSENCE OF CERTAIN PROCEEDINGS. Except as disclosed in

the SEC Reports, there is no action, suit, proceeding, inquiry or investigation

before or by any court, public board or body or governmental agency pending or,

to the knowledge of the Company or any Subsidiary, threatened against or

affecting the Company or any Subsidiary, in any such case wherein an

unfavorable decision, ruling or finding would have a material adverse effect on

the business, properties, operations, condition (financial or other), results

of operations or prospects of the Company and the Subsidiaries, taken as a

whole, or the transactions contemplated by the Transaction Documents or which

could adversely affect the validity or enforceability of, or the authority or

ability of the Company to perform its obligations under, the Transaction

Documents; the Company does not have pending before the SEC any request for

confidential treatment of information and, to the best of the Company's

knowledge, except as set forth on SCHEDULE 4(K), no such request will be made

by the Company prior to the SEC Effective Date; and to the best of the

Company's knowledge there is not pending or contemplated any, and there has

been no, investigation by the SEC involving the Company or any current or

former director or officer of the Company.

(L) FINANCIAL STATEMENTS; LIABILITIES. The financial

statements included in the SEC Reports present fairly the financial position,

results of operations and cash flows of the Company and the Subsidiaries, at the

dates and for the periods covered thereby, have been prepared in conformity with

generally accepted accounting principles applied on a consistent basis

throughout the periods covered thereby, and include all adjustments (consisting

only of normal recurring adjustments) necessary to present fairly the financial

position, results of operations and cash flows of the Company and the

Subsidiaries at the dates and for the periods covered thereby. Except as and to

the extent disclosed, reflected or reserved against in the financial statements

of the Company and the notes thereto included in the SEC Reports, or as

otherwise disclosed on SCHEDULE 4(L) neither the Company nor any Subsidiary has

any liability,

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<PAGE>

debt or obligation, whether accrued, absolute, contingent or otherwise, and

whether due or to become due which, individually or in the aggregate, are

material to the Company and the Subsidiaries, taken as a whole. Subsequent to

September 30, 2003, neither the Company nor any Subsidiary has incurred any

liability, debt or obligation of any nature whatsoever which, individually or

in the aggregate are material to the Company and the Subsidiaries, taken as a

whole, other than those incurred in the ordinary course of their respective

businesses or as disclosed on SCHEDULE 4(L). A description and the amount of

the Indebtedness of the Company and Subsidiaries that will be outstanding on

the Closing Date and that will constitute Permitted Indebtedness for purposes

of clause (1) of the definition of the term Permitted Indebtedness appear on

SCHEDULE 4(L) attached hereto.

(M) MATERIAL LOSSES. Since December 31, 2002, neither the

Company nor any Subsidiary has sustained any loss or interference with its

business or properties from fire, flood, hurricane, accident or other calamity,

whether or not covered by insurance, or from any labor dispute or court or

governmental action, order or decree, which loss or interference could be

material to the business, properties, operations, condition (financial or

other), results of operations or prospe

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