EXHIBIT 10.40


                            THE NEPTUNE SOCIETY, INC.

                    DEBENTURE AND WARRANT AMENDMENT AGREEMENT

     This  Debenture  and Warrant  Amendment  Agreement  (this  "Agreement")  is
effective as of December  31, 2001 (the  "Effective  Date"),  by and between The
Neptune Society,  Inc., a Florida  corporation (the "Company"),  CapEx,  L.P., a
Delaware limited partnership ("CapEx"), and D.H. Blair Investment Banking Corp.,
a New York corporation ("DHB") (together with CapEx, the "Holders"). The Company
and the Holders are collectively  referred to herein as the "Parties" and each a
"Party."

                                    RECITALS

     1.   The Company  and the  Holders  are parties to a Debenture  and Warrant
          Purchase  Agreement  dated  November 24,  1999,  pursuant to which the
          Company  issued  certain  securities  to CapEx and DHB (the  "Purchase
          Agreement");

     2.   The Company issued to CapEx pursuant to the Purchase Agreement:  (i) a
          Convertible Debenture dated December 24, 1999 in the initial principal
          amount of $3,000,000  (the "CapEx  Debenture"),  due February 24, 2005
          and convertible  into shares of the Company's  common stock, par value
          $0.002  ("Common  Stock");  (ii) a Warrant  initially  exercisable  to
          purchase 120,000 shares of Common Stock at $5.21 per share, subject to
          certain  adjustments  (the "CapEx Warrant No. 1"); and (iii) a Warrant
          initially  exercisable  to purchase  120,000 shares of Common Stock at
          $6.25 per share,  subject to certain  adjustments  (the "CapEx Warrant
          No. 2");

     3.   The Company  issued to DHB pursuant to the Purchase  Agreement:  (i) a
          Convertible Debenture dated December 24, 1999 in the initial principal
          amount of  $2,000,000  (the "DHB  Debenture"),  due February 24, 2005,
          convertible into Common Shares; (ii) a Warrant exercisable to purchase
          80,000 shares of Common Stock, at $5.21 per share,  subject to certain
          adjustments (the "DHB Warrant No. 1"); and (iii) a Warrant exercisable
          to purchase 80,000 shares of Common Stock, at $6.25 per share, subject
          to certain adjustments (the "DHB Warrant No. 2");

     4.   The  Company  has  entered  into  certain  transactions,   which  have
          triggered  adjustments  to  effective  conversion  price of the  CapEx
          Debenture and the DHB Debenture  (collectively,  the "Debentures") and
          the exercise  price of the CapEx  Warrant No. 1, CapEx  Warrant No. 2,
          DHB  Warrant  No.  1  and  DHB  Warrant  No.  2   (collectively,   the
          "Warrants");

     5.   The Company and CapEx have entered into a Memorandum of  Understanding
          dated  February  13,  2002 (the  "MOU"),  under  which the parties are
          agreeing, effective as of the Effective Date: (i) to amend Section 3.1
          to adjust the Conversion  Ratio (as defined therein) of the Debentures
          to adjust the effective  conversion  price of the  Debentures to $3.00
          per share, subject to future adjustments under the terms thereof; (ii)
          to delete Section 5.16 of the Debentures



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          to eliminate  the "full  ratchet"  anti-dilution  provision;  (iii) to
          amend Section 3.3 of the  Debentures to provide that, in the event the
          Company's  Common Stock is combined  into a smaller  number of shares,
          the  Conversion  Ratio shall not be adjusted  below a ratio that would
          increase the effective  conversion  price above $3.00 per share (after
          giving effect to the  adjustment)  subject to certain  limitations  on
          conversion;  (iv) to amend  Section 1.1 of the  Debentures  to provide
          that beginning with the regularly  scheduled  interest  payment due in
          June 2003, the Company shall pay the Holders interest on the Principal
          Amount  and all  accrued  and  unpaid  Current  Interest  (as  defined
          therein)  at the rate of 13% per annum,  payable  in cash,  monthly in
          arrears;  (v) to amend Section 1.1 to provide that  beginning with the
          regularly  scheduled  interest  payment due in June 2003,  the Company
          shall begin to pay the Holders,  subject to certain  limitations,  the
          accrued Deferred Interest in monthly  installment  payments of $25,000
          until  paid in full;  (vi) to amend  Section  5.18 to change the Fixed
          Charge  Coverage  Ratio (as defined  therein);  and (vii) to amend the
          Warrants to decrease the Exercise Price to $3.00 per share, subject to
          future adjustments under the terms thereof.

     6.   Under the terms of the MOU, the parties are also agreeing effective as
          of the Closing Date (as defined in Section 3.1,  below):  (i) to issue
          to the  Holders,  on a pro rata  basis,  a total of 675,000  shares of
          Common Stock as a  restructuring  fee, and (ii) to provide the Holders
          with certain  preemptive rights to maintain their pro rata interest in
          the  Company  (based on the  percentage  interest  represented  by the
          shares  issued as the  restructuring  fee) in the  event  the  Company
          offers  to sell  Common  Stock or Equity  Securities  (as  defined  in
          Section 2.2, below).

     In consideration of the mutual promises  hereinafter set forth, the parties
hereto agree as follows:

1.   AGREEMENT  TO  AMEND  AND  RESTATE  CONVERTIBLE  DEBENTURES  AND  WARRANTS;
     LIMITATION ON CONVERSION

     1.1 Amendment of Debentures. Subject to the terms and conditions hereof, at
Closing (as defined in Section  3.1 below),  the Company and the Holders  hereby
agree to amend the  Debentures,  each  amendment to the  Debentures to be in the
forms attached hereto as Exhibit A (each, a "Debenture Amendment") and effective
as of the Effective  Date, to, among other things,  be  convertible  (subject to
adjustment  and in accordance  with the terms thereof) into the number of shares
of the Company's Common Stock set forth opposite the name of each of the Holders
after giving effect to such amendments:

    Holder      Debenture No.       Principal Amount     Shares Convertible Into
    ------      -------------       ----------------     -----------------------

    CapEx            1                 $3,000,000             1,000,000
    DHB              2                 $2,000,000               666,667



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The CapEx Debenture, as amended by the Debenture Amendment is referred to herein
as the  "CapEx  Amended  Debenture,"  and the DHB  Debenture,  as amended by the
Debenture Amendment is referred to herein as the "DHB Amended Debenture."

     1.2 Limitation on Conversion. Until the earlier of: (a) the Company issuing
shares of Common Stock or Equity Securities (as defined in Section 2.2 below) in
satisfaction of $750,000 or more of its present  aggregate debt liabilities owed
to either  (i)  Consulting  Commerce  Distribution  AG/SA/LTD  in the  amount of
$1,500,000  and/or  (ii)  Private  Investment  Company,  Ltd.  in the  amount of
$1,000,000;  (b) the  Company  issuing  new  shares  of  Common  Stock or Equity
Securities for gross cash consideration of at least $1,000,000;  (c) the Company
issuing at least  1,000,000  shares (as  adjusted  to give effect to any capital
reclassification,   stock   dividend,   subdivision,   split  up,   combination,
consolidation or other reorganization of Common Stock) of Common Stock or Equity
Securities  (which  Equity  Securities  would  include  any  preferred  stock or
convertible securities which are at the time of issuance or could at some future
time be convertible  into Common Stock);  (d) 120 days after the Company effects
the Reverse Stock Split (as defined in Section 7.2 below); or (e) 180 days after
the Closing Date (as defined in Section 3.1 below):

          (1) in no event shall CapEx,  its affiliates or a transferee of all or
     a  portion  of  the  CapEx  Amended  Debenture  convert,  in  one  or  more
     transactions,  all or a portion  of the  CapEx  Amended  Debenture,  in any
     transaction  which upon  giving  effect to one or more  conversions,  would
     cause the Company to issue to CapEx,  its affiliates or a transferee of all
     or a portion of such CapEx Amended Debenture, an aggregate number of shares
     of Common Stock (issued as a result of such  conversions) that would exceed
     11.99% of the outstanding shares of the Common Stock immediately  following
     the last such conversion; and

          (2) in no event shall DHB, its  affiliates or a transferee of all or a
     portion of the DHB Amended Debenture convert,  in one or more transactions,
     all or a portion of the DHB Amended  Debenture,  in any  transaction  which
     upon giving effect to one or more  conversions,  would cause the Company to
     issue to DHB, its  affiliates  or a transferee  of all or a portion of such
     DHB  Amended  Debenture,  an  aggregate  number of  shares of Common  Stock
     (issued as a result of such  conversions)  that would  exceed  7.99% of the
     outstanding shares of the Common Stock immediately  following the last such
     conversion.

Each of the Holders  agrees that if it decides to transfer all or a portion of a
Debenture  prior to the  occurrence  of any one of the  conditions  set forth in
subsections  (a), (b), (c), (d) and (e) of this Section 1.2, the Holder will not
sell,  assign or otherwise  transfer  such  Debenture,  directly or  indirectly,
unless  the  purchaser,  assignee  or  transferee  agrees  to be  bound  by  the
limitations on conversion set forth in this Section 1.2.

     1.3 Amendment of Warrants.  Subject to the terms and conditions  hereof, at
Closing (as defined in Section  3.1 below),  the Company and the Holders  hereby
agree to amend the Warrants,  each  amendment to the Warrants to be in the forms
attached  hereto as Exhibit B (each, a "Warrant  Amendment") and effective as of
the Effective Date, to be exercisable (subject to



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<PAGE>

adjustment  as therein  provided)  to  purchase  from the  Company the number of
shares of the Company's  Common Stock at the respective  exercise  prices as set
forth opposite the name of such Holder:

    Holder     Warrant No.       Shares Purchasable      Initial Exercise Price
    ------     -----------       ------------------      ----------------------

    CapEx          1                  60,000                     $3.00

    CapEx          2                  60,000                     $3.00

    DHB            3                  40,000                     $3.00

    DHB            4                  40,000                     $3.00


     1.4  Condition  for  Rescission  and   Termination  of  Certain   Debenture
Amendments.  The Company and the Holders  hereby agree that if the Company fails
to effect the Reverse  Stock Split (as defined in Section 7.2) on or before June
30, 2002,  then without  further  action by the Company or the Holders,  (a) the
Warrant  Amendment shall be amended to delete in its entirety  Section 4 related
to the Conversion  Ratio Cap (as defined therein) and such section shall be null
and void ab initio;  (b) the Debenture  Amendment  shall be amended to delete in
its entirety  Section 7 related to the amendment and  restatement of Section 3.3
of the Debenture to provide,  among other things,  the Conversion  Ratio Cap (as
defined therein) and such section shall be null and void ab initio;  and (c) the
Debenture  Amendment  shall be  amended  to delete in its  entirety  Section  10
related to the deletion of Section 5.16 of the Debentures to eliminate the "full
ratchet"  anti-dilution  provision (to apply,  however,  only to the extent such
Debentures  have not been  previously  converted) and such section shall be null
and void ab initio.  Notwithstanding the foregoing,  the Company and the Holders
hereby agree that Section  5.16 of the  Debentures  shall not apply any offer or
sale of Equity  Offerings  (as that term is defined  in  Section  5.16(b) of the
Debentures) specifically set forth on Schedule 4.2 of this Agreement.

Except  as  otherwise  provided  in  this  Section  1.4,  the  remaining  terms,
conditions,  representations,   warranties  and  covenants  set  forth  in  this
Agreement,  the Debenture Amendments (to apply, however, only to the extent such
Debentures have not been previously converted), and the Warrant Amendments shall
be binding on the Company and the Holders.

2.   RESTRUCTURING FEE

     2.1  Restructuring  Fee. At Closing,  the Company  will issue the Holders a
total of 675,000  shares of the Company's  Common Stock as a  restructuring  fee
(the  "Consideration  Shares") in  consideration  of amending the Debentures and
Warrants,  under the terms provided herein,  in the amounts set out opposite the
name of each Holder:

         Holder                    Consideration Shares
         ------                    --------------------
         CapEx                            405,000

         DHB                              270,000


     2.2 Preemptive Rights. Whenever the Board of Directors of the Company shall
authorize the issuance and/or sale of (a) shares of Common Stock,  (b) any other
securities of the



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<PAGE>

Company  entitled to participate  with the Common Stock in a distribution of the
Company's  remaining  assets  (after  distribution  to all holders of securities
entitled to such  distribution  in priority to the holders of Common Stock),  or
(c) any rights,  options or  warrants to  purchase,  or  securities  of any type
whatsoever (except for stock options to employees,  officers or directors of the
Corporation or any of its  subsidiaries  pursuant to employee stock option plans
approved of by Agent not to exceed 10% of the issued and  outstanding  shares of
Common  Stock)  that  are,  or  may  become,   convertible  into,  or  otherwise
exchangeable  for,  securities of the type referred to in Section  2.2(a) or (b)
(the securities described in (a), (b) and (c), hereinafter collectively referred
to as "Equity Securities"), the Equity Securities shall first be ratably offered
to the  Holders  effective  on the  date of the  authorization  by the  Board of
Directors of such issuance  (the  "Preemptive  Rights").  The Holders  (each,  a
"Preemptive  Rightholder")  shall be entitled to exercise  preemptive rights for
that number of such Equity  Securities equal to the percentage the Consideration
Shares  represents  of the total  number of shares of Common  Stock  issued  and
outstanding  on the close of business (5 p.m.  Pacific time) on the Closing Date
(the "Equity  Percentage").  The Equity Percentage for CapEx will be 4.3096% and
the Equity Percentage for DHB will be 2.8731%. Each Preemptive Rightholder shall
be entitled to exercise the Preemptive  Rights  provided  herein with respect to
the whole of such  proportionate  share or with respect to only a part  thereof.
The Preemptive  Rights provided herein are in addition to the preemptive  rights
contained in the Purchase Agreement.

     2.3 Consideration for Equity Securities. The Preemptive Rights provided for
in Section 2.2 shall entitle  Holder to subscribe  for,  purchase,  or otherwise
acquire  any Equity  Securities  to be offered  for sale,  at a price which such
Equity  Securities  are  proposed  to be offered  for sale to others (net of any
expenses  of, or  compensation  for,  underwriting  or  purchase  of such Equity
Securities by underwriters or dealers).  In the event that the Company  proposes
to offer for sale to others any Equity Securities for a consideration other than
cash,  such Preemptive  Rights shall be exercisable by a Preemptive  Rightholder
for  cash,  in an  amount  which  shall  equal  the  Fair  Market  Value  of any
consideration  other than cash.  The term "Fair  Market  Value" with  respect to
assets or property received by the Company or any other person shall be the fair
market value,  regardless of any prior accounting  treatment,  of such assets or
property,  determined in good faith by agreement of Agent (as defined below) and
the Board of Directors of the Company. If Agent and the Board of Directors shall
be unable to agree as to such Fair Market Value,  the Fair Market Value shall be
determined by the independent  certified public accountant at that time retained
by the  Company  to audit its books and  records,  and a  determination  by such
independent  certified public accountant shall be final,  conclusive and binding
or, if there be none,  or if such  accountant  shall refuse or be unable to make
such a  determination  then the Fair Market  Value shall be  determined  in good
faith by the  Board of  Directors  of the  Company,  and the  price  paid by the
Holders to purchase the Equity Securities shall be adjusted after the sole issue
of Fair Market Value is submitted  to and settled by binding  arbitration  under
and  pursuant  to the  Colorado  Uniform  Arbitration  Act  and  the  rules  and
regulations of the American Arbitration  Association,  and the decision or award
of the arbitrator or arbitrators in such arbitration shall be final,  conclusive
and  binding  and a final  judgment  may be  entered  thereon  by any  court  of
competent jurisdiction.

     2.4 Issuance  Notice.  The Company shall, on or before the 5th business day
after the date of authorization of the issuance of any Equity  Securities,  give
notice to Agent (the



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<PAGE>

"Issuance  Notice") of such  authorization,  which Issuance Notice shall specify
the number of shares of Equity  Securities to be issued,  a full  description of
such class of Equity  Securities  and the offering price or Fair Market Value of
the consideration thereof.

     2.5 Acceptance or Decline of Offer. The Preemptive  Rights granted pursuant
to Section 2.2 with respect to any Equity Securities to be issued by the Company
shall be  exercised  by the  Preemptive  Rightholder  by the giving of notice by
Agent of such exercise (the  "Preemptive  Exercise  Notice")  within 10 business
days after receipt by the Agent of the Issuance Notice (the  "Preemptive  Rights
Period"). In the event any Preemptive  Rightholder fails or declines to purchase
his/her  proportionate  share of the Equity  Securities so offered (a "Declining
Rightholder"), the Equity Securities not purchased by the Declining Rightholders
shall be offered for sale to those  Preemptive  Rightholders who shall have duly
exercised  their  preemptive  rights with respect to that issue (the  "Accepting
Rightholders").  Each  Accepting  Rightholder  shall be entitled to purchase the
Equity  Securities not purchased by the Declining  Rightholders  (the "Reoffered
Securities")  in the  proportion  which the Equity  Percentage  of the Accepting
Rightholders  bears to the aggregate of the Equity  Percentages of all Accepting
Rightholders;  provided,  however,  that  each  Accepting  Rightholder  shall be
entitled to exercise his/her preemptive rights to purchase Reoffered  Securities
only with respect to the whole of such proportionate  share thereof and not with
respect to only a part thereof.  On the 1st business day after the expiration of
the Preemptive Rights Period, the Agent shall give notice (the "Reoffer Notice")
to Accepting  Shareholders of the amount of Reoffered  Securities  available for
purchase. The preemptive rights granted with respect to the Reoffered Securities
shall be  exercised  by the giving of notice by Agent on behalf of an  Accepting
Rightholder  of such  exercise  within the 2nd business day after receipt by the
Accepting  Rightholder  of the  Reoffer  Notice;  provided  however,  that  each
Accepting  Shareholder  may  provide  notice of such  shareholder's  election to
acquire all  unpurchased  Reoffered  Securities  in the event that any Accepting
Rightholder fails or declines to purchase his/ her  proportionate  share of such
Reoffered  Securities,  then such unpurchased Reoffered Securities shall be sold
to  those   electing   to   acquire   all   unpurchased   Reoffered   Securities
proportionately  based on the Equity  Percentage of the  Accepting  Rightholders
making  such  election.  The  Agent  shall  provide  the  Company  notice of any
Preemptive  Exercise  Notice and  Reoffer  Notice no later than 5 business  days
after expiration of the Preemptive  Rights Period. No later than 3 business days
prior to the closing date of the Equity Securities  offering,  the Company shall
give notice to Agent of such closing date and the Company shall close the Equity
Securities  offering   concurrently  with  the  sale  of  Equity  Securities  to
Preemptive  Rightholder  exercising Preemptive Rights under the terms of Section
2.2.


3.   CLOSING

     3.1 The closing of the transactions  contemplated under this Agreement (the
"Closing")  shall take place at 10:00 a.m.  on March 15,  2002 at the offices of
Dorsey & Whitney, LLP, 1420 Fifth Avenue, Suite 3400, Seattle, Washington, or at
such other time or place as the Company and the Holders may mutually agree (such
date being hereinafter referred to as the "Closing Date").



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<PAGE>

     3.2  At  the  Closing,  upon  and  in  consideration  of  the  transactions
contemplated under this Agreement, the Parties agree as follows:

          (a) the Company  will  execute and deliver to CapEx (i) the  Debenture
Amendment  to the  CapEx  Debenture,  (ii) the  Warrant  Amendment  to the CapEx
Warrant No. 1, and (iii) the Warrant Amendment to the CapEx Warrant No. 2;

          (b) CapEx will accept and acknowledge  (i) the Debenture  Amendment to
the CapEx Debenture,  (ii) the Warrant Amendment to the CapEx Warrant No. 1, and
(iii) the Warrant Amendment to the CapEx Warrant No. 2;

          (c) the Company  will  execute  and  deliver to DHB (i) the  Debenture
Amendment to the DHB  Debenture,  (ii) the Warrant  Amendment to the DHB Warrant
No.1, and (iii) the Warrant Amendment to the DHB Warrant No. 2; and

          (d) DHB will accept and acknowledge (i) Debenture Amendment to the DHB
Debenture,  (ii) the Warrant  Amendment  to the DHB Warrant No. 1, and (iii) the
Warrant Amendment to the DHB Warrant No. 2.

4.   REPRESENTATIONS, WARRANTIES, AND COVENANTS OF THE COMPANY

     The  Company  hereby  represents,  warrants  and  covenants  to each of the
Holders as of the Closing Date:

     4.1 Organization,  Subsidiaries, Good Standing, Qualification and Power and
Authority. The Company is a corporation duly organized,  validly existing and in
good  standing  under the laws of the State of  Florida.  The  Company  and each
Subsidiary  has all requisite  corporate  power and authority (a) to execute and
deliver this Agreement, the Debenture Amendments, the Warrant Amendments and the
other  agreements,  instruments  and documents  contemplated  to be executed and
delivered  by it pursuant  to this  Agreement  (this  Agreement,  the  Debenture
Amendments,  the Warrant  Amendments and such other  agreements  instruments and
documents being herein  sometimes  collectively  referred to as the "Transaction
Documents"),  (b) to issue the Consideration  Shares, (c) to issue the shares of
the Company's  Common Stock  issuable  upon  conversion  of the  Debentures,  as
amended by the Debenture Amendments (the "Conversion Shares"),  (d) to issue the
shares of the Company's  Common Stock issuable upon  conversion of the Warrants,
as amended by the Warrant  Amendments (the "Warrant  Shares"),  and (e) to carry
out the other provisions of the Transaction Documents.

     4.2  Capitalization.  All issued and outstanding shares of the Common Stock
of the Company have been duly  authorized  and validly issued and are fully paid
and  non-assessable.  The issued and  outstanding  capital  stock of the Company
immediately  prior to the Closing  will be as set forth on Schedule 4.2 attached
hereto and  incorporated  by reference  herein.  Except as set forth on Schedule
4.2,  there  are no  outstanding  (or  deemed  outstanding)  options,  warrants,
convertible debentures,  convertible instruments,  agreements or other rights to
purchase or otherwise  acquire upon  conversion,  exchange or otherwise from the
Company any of its securities.



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<PAGE>

     4.3 Authorization; Binding Obligations. All corporate action on the part of
the  Company,  its  officers,  directors  and  shareholders  necessary  for  the
authorization  of the  Transaction  Documents and the  performance of all of its
obligations thereunder and for the authorization, sale, issuance and delivery of
the Debenture Amendments,  the Warrant Amendments, the Consideration Shares, the
Conversion  Shares and the Warrant  Shares has been taken or will be taken prior
to the Closing.  The Conversion  Shares and the Warrant Shares have been or will
be, prior to the Closing,  duly and validly  reserved  for  issuance  and,  when
issued  upon  conversion  of  the  Debentures,   as  amended  by  the  Debenture
Amendments,  or upon the  exercise  of the  Warrants,  as amended by the Warrant
Amendments,  as the  case  may be,  will  be  validly  issued,  fully  paid  and
non-assessable,  and the Consideration Shares will be validly issued, fully paid
and non-assessable. The Company has taken or will take all such action as may be
necessary  to assure  that an  adequate  number  of  shares  of Common  Stock is
authorized  and reserved for issuance of the  Conversion  Shares and the Warrant
Shares.  This  Agreement has been duly  authorized  and executed by the Company.
This Agreement, the Debenture Amendments,  the Warrant Amendments, and the other
Transaction Documents will, once executed,  constitute, valid, legal and binding
obligations of the Company enforceable in accordance with their terms, except to
such  limitations  as may result  from any  applicable  bankruptcy,  insolvency,
reorganization,  moratorium  or other  similar laws relating to or affecting the
enforcement of creditors' rights generally.

     4.4 Consents and  Approvals.  Except as required by the  Securities  Act of
1933,  as amended (the  "Securities  Act"),  or any state  securities  laws,  no
filings with,  notices to, or approvals of any  governmental  or regulatory body
are  required  to be  obtained  or made by the  Company in  connection  with the
consummation of the transactions contemplated hereby.

     4.5 No  Violations.  The  execution  and  delivery of this  Agreement,  the
Debenture Amendments,  the Warrant Amendments or the other Transaction Documents
and the performance by the Company of its  obligations  hereunder and thereunder
(a) do not and will not conflict  with or violate any provision of the Company's
Articles of  Incorporation  or bylaws,  and (b) do not and will not (i) conflict
with or result in a breach of the  terms,  conditions  or  provisions  of,  (ii)
constitute a default under,  (iii) result in a violation of, or (iv) require any
authorization,  consent, approval, exemption or other action by or notice to any
court or  administrative  or governmental body or other third party pursuant to,
any law,  statute,  rule or  regulation  or any  agreement or  instrument or any
order, judgment or decree to which the Company is subject or by which any of its
assets  are bound  except for such  consents  which  have been  obtained  by the
Company.

     4.6 Rule 144. The Company has  maintained and will continue to maintain all
reports and documents and has taken all actions as may be necessary or useful in
order to allow a holder of  Registrable  Securities  (as  defined  in  Section 6
below) to sell any such securities without  registration in accordance with Rule
144 under the Securities Act.



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<PAGE>

5.   REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE HOLDERS

     The Holders each, severally and not jointly, hereby represent,  warrant and
covenant to the Company as of the Closing Date:

     5.1 Requisite Power and Authority.  Such Holder has all necessary power and
authority to execute and deliver this Agreement,  the Debenture Amendments,  and
the Warrant  Amendments and to carry out their  provisions.  All actions on such
Holder's part required for the lawful  execution and delivery of this Agreement,
the  Debenture  Amendments,  and the  Warrant  Amendments  have  been or will be
effectively taken prior to the Closing.

     5.2 Investment  Representations.  Such Holder  understands that none of the
Debentures, as amended by the Debenture Amendments,  the Warrants, as amended by
the Warrant Amendments,  the Consideration Shares, the Conversion Shares and the
Warrant Shares to be acquired by such Holder has yet been  registered  under the
Securities Act. Such Holder also understands that such Debentures, as amended by
the Debenture  Amendments,  the Warrants,  as amended by the Warrant Amendments,
and  Consideration  Shares are being  offered and sold  pursuant to an exemption
from  registration  contained in  regulations  under the Securities Act based in
part upon such Holder's representations contained in this Agreement.

          (a)  Acquisition  for  Own  Account.  Such  Holder  is  acquiring  the
Consideration  Shares for its own account for  investment  only,  and not with a
view towards distribution in violation of applicable securities laws.

          (b)  Accredited  Investor.  Such  Holder  represents  that  it  is  an
accredited  investor  within  the  meaning  of Rule  501(a) of  Regulation  D as
promulgated under the Securities Act.

          (c)  Non-Foreign  Status.  Such  Holder  certifies  that  it is  not a
nonresident  alien for  purposes of income  taxation (as such term is defined in
the Internal Revenue Code of 1986, as amended, and Income Tax Regulations).

          (d)  Financial   Experience.   Such  Holder  has  such  knowledge  and
experience in financial and business  matters as to be capable of evaluating the
merits  and risks of an  investment  in the  Debenture  Amendment,  the  Warrant
Amendments,  the  Consideration  Shares,  the Conversion  Shares and the Warrant
Shares (collectively, the "Securities") and it is able to bear the economic risk
of loss of its entire investment.

          (e)  Information.   The  Company  has  provided  to  such  Holder  the
opportunity  to ask  questions  and  receive  answers  concerning  the terms and
conditions of the  transactions  contemplated  in this  Agreement and it has had
access to such information concerning the Company as it has considered necessary
or  appropriate  in  connection  with its  investment  decision  to acquire  the
Securities.



                                       9
<PAGE>

          (f) Transfer  Restrictions.  Such Holder  agrees that if it decides to
offer, sell or otherwise transfer any of the Securities, it will not offer, sell
or otherwise transfer any of such Securities directly or indirectly, unless:

               (i)  the  sale  is  made  pursuant  to  registration   under  the
                    Securities Act;

               (ii) the  sale  is  made  pursuant  to  the  exemption  from  the
                    registration  requirements under the Securities Act provided
                    by Rule 144 thereunder and in accordance with any applicable
                    state securities or "Blue Sky" laws; or

               (iii)the  Securities  are  sold in a  transaction  that  does not
                    require   registration  under  the  Securities  Act  or  any
                    applicable  state laws and  regulations  governing the offer
                    and  sale of  securities,  and it has  prior  to  such  sale
                    furnished  to the  Company an opinion of counsel  reasonably
                    satisfactory to the Company.

          (g) Legends.  Such Holder understands and agrees that the certificates
representing the Securities will bear a legend stating that such shares have not
been registered  under the Securities Act or the securities laws of any state of
the  United  States and may not be offered  for sale or sold  unless  registered
under the Securities Act and the securities laws of all applicable states of the
United States or an exemption from such registration requirements is available.

          (h) Warrant Restrictions.  Such Holder understands and agrees that the
Warrants,  as amended,  may not be sold or transferred unless the Warrant Shares
are registered under the Securities Act and any applicable state securities laws
or unless an exemption from such registration requirements is available and that
certificates representing the Warrants will bear a legend to such effect.

          (i) Notations.  Such Holder  consents to the Company making a notation
on its records or giving  instructions  to any transfer  agent of the Company in
order to implement the restrictions on transfer set forth and described herein.

     5.3 Knowledge of Breach or Event of Default.  As of the Closing Date,  each
Holder  acknowledges  and confirms  that it has no knowledge and is not aware of
any fact or circumstance  that would cause or constitute a breach of or an event
of default under the Purchase Agreement,  the Debentures or the Warrants,  other
than as are cured by entering into this  Agreement,  and each Holder agrees that
it is the  intent  of the  Parties,  without  admitting  any  breach or event of
default, to enter into this Agreement for the purposes of curing any breaches or
events of default which may have arisen as a result of any Holder's knowledge of
facts and circumstances as of the Date of Closing.

6.   REGISTRATION RIGHTS RELATING TO CONSIDERATION SHARES

     6.1 Definitions.  As used in this Section 6, the following terms shall have
the following respective meanings:



                                       10
<PAGE>

          (a) "Exchange Act" shall mean the Securities  Exchange Act of 1934, as
amended,   (or  any  similar  successor  federal  statute)  and  the  rules  and
regulations thereunder, all as the same shall be in effect from time to time.

          (b) "Public  Sale"  means any sale of  Registrable  Securities  to the
public  pursuant to an offering  registered  under the  Securities Act or to the
public  through a broker,  dealer or market maker  pursuant to the provisions of
Rule 144.

          (c) "registers,"  "registered,"  and  "registration"  shall refer to a
registration  effected  by  preparing  and filing a  registration  statement  in
compliance  with the  Securities  Act and the  declaration  or  ordering  of the
effectiveness of such registration statement by the SEC.

          (d) "Registrable  Securities" shall mean (i) Consideration  Shares and
(ii) any Common Stock or Common Stock Equivalents  issued as a dividend or other
distribution  with respect to or in exchange for or in replacement of the shares
referenced  in  Sections  6.1(d)(i)  and  6.1(d)(ii),  provided,  however,  that
Registrable  Securities  shall not include any such shares or Equity  Securities
that have  previously  been  registered  under the  Securities  Act or that have
otherwise been sold to the public in an open-market transaction under Rule 144.

          (e)  "Registration  Expenses"  shall  mean all  expenses  incurred  in
connection with effecting any registration pursuant to this Agreement, including
without  limitation all registration,  qualification  and filing fees,  printing
expenses,  escrow fees, fees and disbursements of counsel for the Company,  blue
sky fees and expenses,  expenses of any regular or special audits incident to or
required by any such registration,  and the fees and expenses of one counsel for
the selling holders of Registrable Securities, but excluding Selling Expenses.

          (f) "Rule 144" shall mean Rule 144 as promulgated by the SEC under the
Securities  Act, as such Rule may be amended  from time to time,  or any similar
successor rule that may be promulgated by the SEC.

          (g)  "SEC"  shall  mean the  United  States  Securities  and  Exchange
Commission or any other federal agency at the time  administering the Securities
Act.

          (h)  "Securities  Act"  shall  mean the  Securities  Act of  1933,  as
amended,   (or  any  similar  successor  federal  statute)  and  the  rules  and
regulations thereunder, all as the same shall be in effect from time to time.

          (i)  "Selling   Expenses"   shall  mean  all  stock  transfer   taxes,
underwriting  discounts,  expenses for special counsel of a selling  stockholder
(in  addition to the  counsel  referred to in the  definition  of  "Registration
Expenses")  and  selling  commissions  applicable  to the  sale  of  Registrable
Securities.

     6.2 Demand Registration.

          (a) Request for  Registration.  Subject to Sections 6.2(b) and 6.2(e),
at any time from the issue of the  Consideration  Shares,  when any  Registrable
Securities  are  outstanding,  any Holder may, by notice (the  "Demand  Notice")
given by Agent, demand that the



                                       11
<PAGE>

Company effect one (1)  registration  under the Securities Act utilizing  either
(i) a  registration  on Form S-1,  Form SB-2,  if  available,  or any similar or
successor  form, or (ii) a registration  on Form S-3 or any similar or successor
form, if available (a "Demand  Registration").  These Demand Registration rights
are in addition to the rights granted in the Purchase Agreement.

          (b) Deferral of Demand  Registration.  The Company  shall use its best
efforts to file a registration  statement with respect to a Demand  Registration
demanded  pursuant  to Section  6.2(a) as soon as  practicable  and in any event
within 60 days after receipt of the Demand Notice;  provided,  however,  that if
the Company  selects an  underwriter to distribute  the  Registrable  Securities
covered by the Demand Registration as part of an offering of other securities of
the Company,  and such  underwriter  determines in good faith that, and provides
Agent  with a  certificate  (an  "Underwriter  Notice")  of an  officer  of such
underwriter  certifying  that in its  view  such  Demand  Registration  would be
materially  detrimental  to the  Company  or would  negatively  impact any other
material corporate transaction and concludes,  as a result, that it is advisable
to defer the  filing  of such  registration  statement  at such  time,  then the
Company  shall have the right to defer such filing for the period  during  which
such registration would be detrimental;  provided, however, that the Company may
not defer the filing for a period of more than 90 days following  receipt of the
Demand Notice. In addition,  and  notwithstanding the Demand Notice, the Company
shall not be  required to effect a  registration  statement  if,  within 10 days
after  receiving any Demand  Notice,  the Company  delivers a notice (a "Company
Registration  Notice") to Agent of its intent to file a  registration  statement
within the following 60 days and does so file such registration within such time
period.  In addition,  the Company may, not more than once in each calendar year
and provided  that in such  calendar  year neither an  Underwriter  Notice nor a
Company  Registration  Notice shall have been  previously  given,  and no Demand
Notice shall have been given at any time prior  thereto,  be entitled to provide
to Agent a written notice (a "Company Deferral Notice") stating that the Company
has determined  that it would be materially  detrimental to the Company or would
negatively impact on other material  corporate  transactions for Agent to give a
Demand Notice within the period of 60 days following the date of receipt of such
Company  Deferral Notice,  in which case,  Agent shall not be permitted,  during
such 60 day period, to give a Demand Notice.

          (c) Underwriting. The right of any Holder of Registrable Securities to
participate in an underwritten  Demand  Registration  shall be conditioned  upon
such Holder's  participation  in such  underwriting in accordance with the terms
and conditions thereof, and Holder shall enter into an underwriting agreement in
customary form with the underwriter and the Company.

          (d)  Priorities.  The  Holders  of  Registrable  Securities  will have
absolute  priority  over any  other  securities  proposed  to be  included  in a
registered  offering  pursuant to Section 6.2(a) hereof. If other securities are
included in any Demand  Registration that is not an underwritten  offering,  all
Registrable Securities included in such offering shall be sold prior to the sale
of any of such other securities.  If the Registrable  Securities are included in
any  underwritten  offering,  and the  managing  underwriter  for such  offering
advises the Company that in its opinion the amount of the Registrable Securities
to be included,  when given absolute priority over any other securities proposed
to be  included  in such  underwritten  offering  as  provided  for in the first
sentence of this Section 6.2(d), exceeds the amount of securities which



                                       12
<PAGE>

can be sold in such  offering  without  adversely  affecting  the  marketability
thereof  (including  the price at which such  securities  are to be sold),  such
number of Registrable Securities included in such registration shall be reduced,
pro rata among the holders  thereof based on the  percentage of the  outstanding
Common Stock held by each such  holder,  by no more than 50% of the total number
of Registrable Securities held by the Holder (an "Underwriter's  Cut-Back").  In
no  event  shall  the  Registrable  Securities  be  subject  to  more  than  one
Underwriter's Cut-Back unless expressly agreed to in writing by the Holders.

          (e) One  Registration.  Where the  Company  has  effected  the  Demand
Registration,  it  shall  have  no  obligation  to  effect  any  further  Demand
Registrations;  provided,  however,  that (i) where at any time  within  two (2)
years after such Demand  Registration  was made pursuant to Section 6.2 the time
period within which any issue or trade of Registrable  Securities is required to
be made under such  registration has passed or will in 30 days pass, the Holders
shall have the right to demand (by notice  given by Agent on their  behalf) that
the Company effect a further registration (including,  but not limited to, a new
Demand  Registration)  as may be required for  registration  of the  Registrable
Securities or (ii) if such Demand  Registration  is subject to an  Underwriter's
Cut-Back,  the Holders  shall have  (effective  30 days after  completion of the
offering in which the  Underwriter's  Cut-Back  related) the right to demand (by
notice  given by  Agent on their  behalf)  that  the  Company  effect a  further
registration  (including,  but not limited to, a new Demand Registration) as may
be required for  registration  of the remaining  Registrable  Securities held by
such Holders.

     6.3 Expenses of  Registration.  Except as provided in this Section 6.3, the
Company shall bear all  Registration  Expenses  incurred in connection  with the
Demand  Registration  and  any  Piggyback  Registration.  All  Selling  Expenses
incurred  by the  Company  relating to  Registrable  Securities  included in any
Demand Registration and Piggyback Registration shall be reimbursed by Agent.

     6.4 Registration  Procedures.  In the case of each registration effected by
the Company  pursuant to this Section 6, the Company will keep Agent  advised in
writing  as to the  initiation  of such  registration  and as to the  completion
thereof. The Company will use its reasonable efforts to:

          (a) cause such  registration to be declared  effective by the SEC and,
in the case of a Demand  Registration,  keep such  registration  effective for a
period of two years or until the  holders  of  Registrable  Securities  included
therein have completed the distribution  described in the registration statement
relating thereto, whichever first occurs;

          (b) prepare and file with the SEC such  amendments and  supplements to
such  registration  statement and the  prospectus  used in connection  with such
registration statement (including post-effective amendments) as may be necessary
to comply with the  provisions of the  Securities  Act and the Exchange Act with
respect  to the  disposition  of all  securities  covered  by such  registration
statement;

          (c) obtain  appropriate  qualifications  of the securities  covered by
such   registration   under  state   securities  or  "blue  sky"  laws  in  such
jurisdictions as may be requested by Agent;



                                       13
<PAGE>

          (d) furnish such number of prospectuses  and other documents  incident
thereto,  including any amendment of or supplement to the  prospectus,  as Agent
from time to time may reasonably request;

          (e) notify  Agent at any time when a  prospectus  relating  thereto is
required to be delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such registration  statement, as
then in effect,  includes  an untrue  statement  of a material  fact or omits to
state a material  fact  required to be stated  therein or  necessary to make the
statements   therein  not   misleading   or  incomplete  in  the  light  of  the
circumstances then existing, and at the request of Agent, prepare and furnish to
Agent a reasonable  number of copies of a supplement  to or an amendment of such
prospectus as may be necessary so that,  as thereafter  delivered to the Holders
of such  shares,  such  prospectus  shall not include an untrue  statement  of a
material fact or omit to state a material fact required to be stated  therein or
necessary to make the  statements  therein not  misleading  or incomplete in the
light of the  circumstances  then  existing;  cause all  Registrable  Securities
covered  by such  registration  to be  listed  on each  securities  exchange  or
inter-dealer  quotation system on which similar securities issued by the Company
are then listed;

          (f)  provide  a  transfer  agent  and  registrar  for all  Registrable
Securities  covered by such registration  and, if necessary,  a CUSIP number for
all such Registrable Securities,  in each case not later than the effective date
of such registration;

          (g) otherwise  comply with all applicable rules and regulations of the
SEC,  and  make  available  to its  security  holders,  as  soon  as  reasonably
practicable,  an earnings  statement  covering the period of at least 12 months,
but not more than 18 months,  beginning with the first month after the effective
date of the registration  statement,  which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act; and

          (h) in connection with any underwritten registration, the Company will
enter into an underwriting agreement reasonably satisfactory to Agent containing
customary underwriting  provisions,  including  indemnification and contribution
provisions.

     6.5 Indemnification.

          (a) The Company will indemnify  Holder,  each of Holder's officers and
directors, and each person controlling such Holder within the meaning of Section
15 of the Securities Act, with respect to each  registration,  qualification  or
compliance  effected  pursuant  to this  Section  6 or  otherwise,  against  all
expenses,  claims, losses,  damages and liabilities (or actions,  proceedings or
settlements in respect  thereof) arising out of or based on any untrue statement
(or alleged untrue  statement) of a material fact  contained in any  prospectus,
offering  circular  or  other  document  (including  any  related   registration
statement,  notification  or  the  like)  incident  to  any  such  registration,
qualification or compliance,  or based on any omission (or alleged  omission) to
state therein a material fact required to be stated therein or necessary to make
the statements  therein not  misleading,  or any violation by the Company of the
Securities  Act  applicable  to the Company  and  relating to action or inaction
required of the Company in connection with any such registration,  qualification
or compliance, and will reimburse each such indemnified person for any legal and
any other expenses reasonably incurred in connection with



                                       14
<PAGE>

investigating and defending or settling any such claim, loss, damage,  liability
or action;  provided,  however,  that the Company will not be liable in any such
case to the extent that any such  claims,  loss,  damage,  liability  or expense
arises out of or is based on any untrue statement or omission based upon written
information furnished to the Company by Holder and stated to be specifically for
use therein. It is agreed that the indemnity agreement contained in this Section
6.5(a) shall not apply to amounts paid in  settlement  of any such loss,  claim,
damage,  liability or action if such settlement is effected  without the consent
of the Company (which consent has not been unreasonably withheld).

          (b) Each of the Holders,  to the extent it is a holder of  Registrable
Securities  included in any  registration  effected  pursuant to this Section 6,
shall indemnify the Company, each of its directors,  officers, agents, employees
and representatives, and each person who controls the Company within the meaning
of Section 15 of the Securities  Act,  against all claims,  losses,  damages and
liabilities  (or  actions in  respect  thereof)  arising  out of or based on any
untrue  statement (or alleged untrue  statement) of a material fact contained in
any  such  registration  statement,   prospectus,  offering  circular  or  other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated  therein or necessary to make the  statements  therein not
misleading,  and will  reimburse such  indemnified  persons for any legal or any
other expenses reasonably incurred in connection with investigating or defending
any such claim, loss,  damage,  liability or action, in each case to the extent,
but only to the extent, that such untrue statement (or alleged untrue statement)
or  omission  (or  alleged  omission)  is made in such  registration  statement,
prospectus,  offering  circular or other document in reliance upon and in strict
conformity with written information  furnished to the Company by Agent on behalf
of such  Holder;  provided,  however,  that (x) such Holder  shall not be liable
hereunder for any amounts in excess of the net proceeds  received by such Holder
pursuant to such registration,  and (y) the obligations of such Holder hereunder
shall  not apply to  amounts  paid in  settlement  of any such  claims,  losses,
damages or  liabilities  (or actions in respect  thereof) if such  settlement is
effected  without  the  consent  of such  Holder  (which  consent  has not  been
unreasonably withheld).

          (c) Each party entitled to indemnification under this Section 6.5 (the
"Indemnified  Party")  shall  give  notice  to the  party  required  to  provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the  Indemnifying  Party to assume  the  defense of any such claim or any
litigation   resulting   therefrom,   provided  that  counsel  selected  by  the
Indemnifying  Party,  who  shall  conduct  the  defense  of  such  claim  or any
litigation  resulting  therefrom,  shall be  approved by the  Indemnified  Party
(whose approval shall not unreasonably be withheld),  and the Indemnified  Party
may participate in such defense at such party's  expense,  and provided  further
that the failure of any  Indemnified  Party to give  notice as  provided  herein
shall not relieve the Indemnifying  Party of its obligations  under this Section
6.5 to the extent such failure is not prejudicial.  No Indemnifying Party in the
defense of any such claim or litigation  shall,  except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include an unconditional  release of such Indemnified  Party from
all liability in respect to such claim or  litigation.  Each  Indemnified  Party
shall furnish such  information  regarding itself or the claim in question as an
Indemnifying  Party may reasonably request in writing and as shall be reasonably
required  in  connection  with  defense of such claim and  litigation  resulting
therefrom.



                                       15
<PAGE>

          (d) If the indemnification provided for in this Section 6.5 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss,  liability,  claim,  damage or expense referred to therein,
then the  Indemnifying  Party, in lieu of indemnifying  such  Indemnified  Party
hereunder,  shall  contribute to the amount paid or payable by such  Indemnified
Party as a result of such  loss,  liability,  claim,  damage or  expense in such
proportion as is appropriate  to reflect the relative fault of the  Indemnifying
Party on the one hand and of the  Indemnified  Party on the other in  connection
with the statements or omissions which resulted in such loss, liability,  claim,
damage or expense as well as any other relevant  equitable  considerations.  The
relative fault of the Indemnifying  Party and of the Indemnified  Party shall be
determined by reference  to, among other  things,  whether the untrue or alleged
untrue  statement of a material  fact or the  omission to state a material  fact
relates to information  supplied by the Indemnifying Party or by the Indemnified
Party and the parties'  relative  intent,  knowledge,  access to information and
opportunity to correct or prevent such statement or omission.

          (e) Notwithstanding  the foregoing,  to the extent that the provisions
on  indemnification  and  contribution  contained in an  underwriting  agreement
entered into in connection with an underwritten  public offering are in conflict
with the foregoing  provisions,  the  provisions in the  underwriting  agreement
shall control.

     6.6 Lock-up Agreement. The Holders agree and acknowledge that the offer and
sale of Registrable  Securities under a Demand Registration may adversely affect
the marketability of the Company's Common Stock. Each of the Holders agrees that
during any three month period, no Holder shall sell, or cause or permit the sale
of, more than one-third of the  Registrable  Securities  held by such Holder and
registered under a Demand Registration.

     6.7 Other  Obligations.  With a view to making  available  the  benefits of
certain rules and  regulations of the SEC which may effectuate the  registration
of Registrable  Securities or permit the sale of  Registrable  Securities to the
public without registration, the Company agrees to:

          (a) after its initial  registration under the Securities Act, exercise
best  efforts to cause the Company to be  eligible  to utilize  Form S-3 (or any
similar form) for the registration of Registrable Securities;

          (b) at such  time  as any  Registrable  Securities  are  eligible  for
transfer under Rule 144(k), upon the request of Agent on behalf of the holder of
such  Registrable  Securities,  promptly remove any restrictive  legend from the
certificates  evidencing  such  securities,  at no cost to Agent or such  holder
where such holder is a Holder  hereunder,  and at the cost of Agent in any other
case;

          (c) make and keep available public  information as defined in Rule 144
under the  Securities  Act at all times from and after its initial  registration
under the Securities Act;

          (d)  file  with the SEC in a  timely  manner  all  reports  and  other
documents  required of the Company under the Securities Act and the Exchange Act
at any time after it has become subject to such reporting requirements; and



                                       16
<PAGE>

          (e) furnish  Agent upon request a written  statement by the Company as
to its  compliance  with  the  reporting  requirements  of Rule 144 (at any time
following the effective date of the first  registration  statement  filed by the
Company  under the  Securities  Act for an  offering  of its  securities  to the
general  public),  and of the  Securities  Act and the Exchange Act (at any time
after it has become subject to such reporting requirements),  a copy of the most
recent  annual or quarterly  report of the Company,  and such other  reports and
documents  as a holder of  Registrable  Securities  may  reasonably  request  in
availing  itself of any rule or regulation  of the  Commission  (including  Rule
144A)  allowing a holder of Registrable  Securities to sell any such  securities
without registration.

     6.8  Termination  of  Registration  Rights.  The right of Agent to  request
inclusion of Registrable Securities in any registration pursuant to this Section
6 shall  terminate  at the date that is the  earlier  of: (a) that date that all
Registrable  Securities  have been  registered  under the  Securities Act has or
otherwise been sold to the public in an open-market  transaction under Rule 144;
and (b) the fifth anniversary of the Closing Date; provided, however, that where
a Company  Deferral  Notice has been  given  within 70 days prior to the date on
which  termination  would otherwise occur, it shall not occur for 60 days beyond
the end of the 60 day  period  during  which a  Demand  Notice  cannot  be given
pursuant to Section 6.2(b).

     6.9 Piggyback Registrations.

          (a)  Request  for  Inclusion.  At any time after the  completion  of a
Public Offering (as defined in the Purchase  Agreement),  after the date hereof,
if the Company  shall  determine to register any of its  securities  for its own
account or for the  account  of other  security  holders  of the  Company on any
registration form (other than a registration relating to either Form S-4 or S-8)
which   permits  the   inclusion  of   Registrable   Securities   (a  "Piggyback
Registration"), the Company will promptly give Agent written notice thereof and,
subject  to  Section  6.9(c),  shall  include  in such  registration  all of the
Registrable  Securities requested to be included therein pursuant to the written
request  of Agent  received  within  twenty  (20)  days  after  delivery  of the
Company's notice.

          (b)  Underwriting.   If  the  Piggyback  Registration  relates  to  an
underwritten public offering, the Company shall so advise Agent as a part of the
written notice given pursuant to Section 6.9(a). In such event, the right of any
holder of Registrable  Securities to participate in such  registration  shall be
conditioned upon such holder's  participation in such underwriting in accordance
with the terms and conditions  thereof.  Each Holder of  Registrable  Securities
proposing to distribute their securities  through such underwriting  shall enter
into an  underwriting  agreement  in  customary  form  with the  underwriter  or
underwriters selected by the Company.

          (c)  Priorities.   If  such  proposed  Piggyback  Registration  is  an
underwritten offering and the managing underwriter for such offering advises the
Company that the amount of securities  requested to be included  therein exceeds
the amount of securities  that can be sold in such  offering,  or if the Company
and the managing  underwriter shall in good faith determine to reduce the number
of shares to be offered by the Company  pursuant to a reasonable  assessment  of
market  conditions,  (i) the number of  Registrable  Securities  requested to be
included  in  such  Piggyback  Registration,   (ii)  the  number  of  securities
determined by the directors of the Company



                                       17
<PAGE>

in good faith to be sold by the Company, and (iii) the number of securities,  if
any, to be sold by any other security holders of the Company  exercising  Demand
Registration  rights  in such  offering,  shall be  reduced  pro rata  among the
Holders on the basis of the percentage of the  outstanding  Common Stock held by
such Holders.

7.   COMPANY COVENANTS

     The Company covenants and agrees with the Holders that:

     7.1  Reservation  of  Common  Stock.  The  Company  will  reserve  and keep
available that maximum number of its authorized but unissued Common Stock as may
be required for the issuance of Conversion Shares and the Warrant Shares.

     7.2 Reverse  Stock  Split.  The Company  agrees to use its best  efforts to
effect a consolidation of its issued and outstanding shares of Common Stock on a
four  (old)  share for one (new)  share  basis,  no later than 90 days after the
Closing Date (the "Reverse  Stock  Split").  The Company shall provide the Agent
with Articles of Amendment to the Company's Articles of Incorporation  effecting
the reverse  split,  certified by the Secretary of State of Florida,  as soon as
practicable  following the Reverse Stock Split.  In the event such Reverse Stock
Split is not effected before June 30, 2002,  certain amendments to the Debenture
Amendments and the Warrant Amendments shall be terminated, rescinded, cancelled,
null and void under the terms of Section 1.4 of this Agreement.

     7.3 Issuance of Additional  Common Stock.  The Company  agrees that it will
not  for so long  as:  (a)  CapEx  or its  affiliates  holds  Debentures  in the
aggregate  principal  amount of  $300,000  or more,  without  the prior  written
consent  of CapEx,  and/or (b) DHB or its  affiliates  holds  Debentures  in the
aggregate  principal  amount of  $200,000  or more,  without  the prior  written
consent of DHB:

          (a) issue Equity  Securities to cause the Fully Diluted Capital of the
Company to exceed 6,250,000  shares of Common Stock,  after giving effect to the
Reverse Stock Split,  unless such Equity Securities are issued for consideration
in cash or with a Fair Market Value in excess of $2.00 per share of Common Stock
(as calculated on a post Reverse Stock Split basis); or

          (b) issue Equity  Securities to cause the Fully Diluted Capital of the
Company to exceed 7,500,000  shares of Common Stock,  after giving effect to the
Reverse Stock Split.

For the purposes of this Section 7.3,  "Fully Diluted  Capital" means the issued
and  outstanding  shares of Common Stock on a fully  diluted basis (after giving
effect to  conversion,  exchange,  exercise or  otherwise  of  preferred  stock,
convertible  debentures,  convertible  instruments,  options  warrants  or other
rights to acquire Common Stock); provided however:

          (i)  that such  calculation  of the Fully  Diluted  Capital  shall not
               include the shares of Common Stock  issuable  upon  conversion of
               the Debentures; and

          (ii) the  references to 6,250,000  shares and $2.00 in subsection  (a)
               above and the  calculation  of Fully Diluted shall be adjusted to
               give effect to any



                                       18
<PAGE>

               capital reclassification,  stock dividend, subdivision, split up,
               combination,  consolidation  or other  reorganization  of  Common
               Stock.

     7.4 Board  Meeting  Attendance.  Until  such time as either  (a) 75% of the
principal  amount of the Debentures has been converted into the Company's Common
Stock,  or (b) the  Debentures  shall have been  repaid in full,  Agent shall be
entitled to receive notice of and to have a  representative  attend all meetings
(including telephonic meetings) and all adjournments of meetings of the Board of
Directors  and any committee  thereof  (including  committees  comprised of both
directors and non-directors). Failure to provide notice (on the same basis as is
required  for all board  members  and in any event not less than three  business
days')  of or to  permit  such  representative  to  attend  such  meeting  shall
constitute  a  material  breach  of  the  provisions  of  this  Agreement.  Such
representative  shall sign a  confidentiality  agreement  as may  reasonably  be
required by the Company to comply with applicable law, including but not limited
to Regulation FD as promulgated by the SEC, and such  representative  shall have
no voting rights at any such meeting, but shall be entitled to participate fully
in all discussions that take place thereat.

8.   CAPEX AS AGENT FOR THE HOLDER

     8.1  Ratification  of CapEx as  Agent.  Each  Holder  hereby  ratifies  the
appointment of CapEx, L.P. as its agent (in such capacity,  "Agent"),  under the
terms set forth in Section 8 of the Purchase Agreement.

9.   EXPENSE REIMBURSEMENT

     The Company  hereby agrees to reimburse  Agent on behalf of the Holders for
all of its  out-of-pocket  expenses incurred in connection with the transactions
contemplated hereby, including all out-of-pocket expenses (including filing fees
and other third party charges)  incurred in connection  with its third party due
diligence  costs,  the  preparation  and  negotiation  of  this  Agreement,  the
Debenture Amendments, the Warrant Amendments, and all other documents evidencing
the transactions contemplated herein (including reasonable attorneys' fees).

10.  MISCELLANEOUS

     10.1 Currency.  Except as may be otherwise expressly  provided,  all dollar
amounts herein are references to United States dollars.

     10.2 Governing  Law. This Agreement  shall be governed by the internal law,
and not the law of conflicts, of the State of Colorado.

     10.3 Survival.  The representations,  warranties,  covenants and agreements
made herein shall survive any investigation  made by or on behalf of the Holders
and the closing of the transactions  contemplated  hereby.  All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company  pursuant  hereto in connection  with the  transactions
contemplated  hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.



                                       19
<PAGE>

     10.4  Successors  and  Assigns.  Except as provided in Section  8.11 of the
Purchase Agreement,  neither Holder shall be entitled to assign its rights under
this Agreement or any of the other Transaction Documents, without the consent of
the  Company,  which  consent  shall not be  unreasonably  withheld  or delayed;
provided  always,  however,  that no such  consent  shall be required for either
Holder to assign  such rights to any person or group of persons  controlling  or
owning the majority of all beneficial interests in such Holder, any other entity
controlled  by such person or persons,  or an entity  controlled by such Holder,
provided that such entity shall  continue to be so controlled by such persons or
such Holder as applicable.  The provisions hereof shall inure to the benefit of,
and be binding upon, the successors,  permitted  assigns,  heirs,  executors and
administrators of the parties hereto.

     10.5 Entire Agreement;  Amendment and Waiver. The Purchase Agreement,  this
Agreement,  the Schedules and Exhibits hereto and the other documents  expressly
delivered  pursuant  hereto or thereto  supersede any other  agreement,  whether
written or oral,  that may have been made or entered into by the parties  hereto
relating to the matters  contemplated hereby, and constitute the full and entire
understanding  and  agreement  between the parties  with regard to the  subjects
hereof and  thereof,  and no party  shall be liable or bound to any other in any
manner by any  representations,  warranties,  covenants and agreements except as
specifically set forth or incorporated by reference herein and therein.  Neither
this  Agreement  nor any term  hereof  may be  amended,  waived,  discharged  or
terminated except by a written instrument signed by the Company and the Holders.

     10.6  Severability.  In case  any  provision  of this  Agreement  shall  be
invalid, illegal or unenforceable,  the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

     10.7  Notices.  All notices  required or  permitted  hereunder  shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be  notified;  (ii) when sent by  confirmed  telex or facsimile if sent
during  normal  business  hours of the  recipient,  and if not, then on the next
business  day;  (iii)  five (5) days after  having  been sent by  registered  or
certified mail, return receipt requested,  postage prepaid;  or (iv) one (1) day
after deposit with a nationally  recognized overnight courier,  special next day
delivery, with verification of receipt. All communications shall be sent:

to the Company at:

            The Neptune Society, Inc.
            3500 Olive Street, Suite 1430
            Burbank, California
            Attention:  Marco Markin, Chief Financial Officer



                                       20
<PAGE>

to the Holders at:

            c/o CapEx, L.P.
            518 17th St., Suite 1700
            Denver, CO  80202
            Telecopier No. (303) 869-4644
            Telephone No. (303) 869-4700
            Attention:  Evan Zucker, Managing Partner

with a copy to:

            D.H. Blair Investment Banking Corp.
            44 Wall Street, 2nd Floor
            New York, NY 10005
            Telecopier No. (212) 514-7837
            Telephone No. (212) 495-4595
            Attention: Martin Bell

or at such  other  address  as the  Company  or Agent on behalf of  Holders  may
designate by ten (10) days advance written notice to the other parties hereto.

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

     10.9  Broker's  Fees.  Each party hereto  represents  and warrants  that no
agent,  broker,  investment banker,  person or firm acting on behalf of or under
the  authority  of such party  hereto is or will be entitled to any  broker's or
finder's fee or any other  commission  directly or indirectly in connection with
the transactions contemplated herein.

         [This space intentionally left blank - signature page follows]







                                       21
<PAGE>

     IN WITNESS WHEREOF,  the parties hereto have executed this Agreement on the
___ day of March, 2002.

COMPANY:

THE NEPTUNE SOCIETY, INC.


By: /s/ Marco Markin
    -------------------------------------------------
Name: Marco Markin
      -----------------------------------------------
Title: CEO
       ----------------------------------------------



HOLDERS:

CAPEX, L.P.                               D.H. BLAIR INVESTMENT BANKING CORP.

By Its General Partner, RBP, LLC


By: /s/ Evan Zucker                       By:  /s/ J. Morton Davis
    -------------------------------            -------------------------------
    Name:  Evan Zucker                         Name:  J. Morton Davis
    Title:  Managing Member                    Title:  Chairman





                                       22
<PAGE>


Acknowledgement

The  undersigned  guarantors  hereby  acknowledge  and consent to the  foregoing
Agreement and the amendments to the Convertible Debentures contemplated thereby.

NEPTUNE SOCIETY OF AMERICA, INC.


By: /s/ Marco Markin
    -------------------------------------------------
Name: Marco Markin
      -----------------------------------------------
Title: Director
       ----------------------------------------------



NEPTUNE MANAGEMENT CORP.


By: /s/ Marco Markin
    -------------------------------------------------
Name: Marco Markin
      -----------------------------------------------
Title: CEO
       ----------------------------------------------



HERITAGE ALTERNATIVES, INC.


By:  /s/ Rodney Bagley
      -----------------------------------------------
Name: Rodney Bagley
      -----------------------------------------------
Title: Director, Treasurer
      -----------------------------------------------







                                       23
<PAGE>

                                    Exhibit A

                       FORMS OF DEBENTURE AMENDMENT NO. 1









                                       24
<PAGE>

                                    Exhibit B

                        FORMS OF WARRANT AMENDMENT NO. 1










                                       25