REGISTRATION RIGHTS AGREEMENT

         This  REGISTRATION  RIGHTS  AGREEMENT (this  "AGREEMENT"),  dated as of
October ___, 2010, is by and among Imaging3, Inc., a California corporation with
offices  located  at 3200 W.  Valhalla  Drive,  Burbank,  California  91505 (the
"COMPANY"),   and  each  of  the  undersigned   buyers  (each,  a  "BUYER,"  and
collectively, the "BUYERS").

                                    RECITALS

         A. In connection  with the Securities  Purchase  Agreement by and among
the  parties  hereto,  dated as of  October  4, 2010 (the  "SECURITIES  PURCHASE
AGREEMENT"),  the  Company  has  agreed,  upon  the  terms  and  subject  to the
conditions of the Securities Purchase Agreement, to issue and sell to each Buyer
(i) shares (the "COMMON  SHARES") of the Company's  common  stock,  no par value
(the  "COMMON  STOCK")  and (ii) the  Warrants  (as  defined  in the  Securities
Purchase  Agreement)  which will be exercisable  to purchase  Warrant Shares (as
defined in the Securities  Purchase  Agreement) in accordance  with the terms of
the Warrants.

         B. To induce the Buyers to consummate the transactions  contemplated by
the Securities  Purchase  Agreement,  the Company has agreed to provide  certain
registration rights under the Securities Act of 1933, as amended,  and the rules
and regulations thereunder, or any similar successor statute (collectively,  the
"1933 Act"), and applicable state securities laws.

                                    AGREEMENT

         NOW,  THEREFORE,  in  consideration  of the  premises  and  the  mutual
covenants  contained herein and for other good and valuable  consideration,  the
receipt and sufficiency of which are hereby  acknowledged,  the Company and each
of the Buyers hereby agree as follows:

1.       DEFINITIONS.
         -----------

         Capitalized  terms used herein and not otherwise  defined  herein shall
have the respective meanings set forth in the Securities Purchase Agreement.  As
used in this Agreement, the following terms shall have the following meanings:

         (a)  "BUSINESS  DAY" means any day other than  Saturday,  Sunday or any
other day on which  commercial  banks in New York,  New York are  authorized  or
required by law to remain closed.

         (b) "CLOSING  DATE" shall have the meaning set forth in the  Securities
Purchase Agreement.

         (c) "EFFECTIVE  DATE" means the date that the  applicable  Registration
Statement has been declared effective by the SEC.

         (d)  "EFFECTIVENESS  DEADLINE"  means (i) with  respect to the  initial
Registration  Statement  required  to be filed  pursuant  to Section  2(a),  the
earlier  of the (A) 90th  calendar  day  after  the  Closing  Date (or the 120th

<PAGE>

calendar  day  after  the  Closing  Date in the  event  that  such  Registration
Statement  is subject to review by the SEC) and (B) 2nd  Business  Day after the
date the Company is notified (orally or in writing, whichever is earlier) by the
SEC that such Registration Statement will not be reviewed or will not be subject
to  further  review  and  (ii)  with  respect  to  any  additional  Registration
Statements  that may be  required  to be filed by the  Company  pursuant to this
Agreement,  the earlier of the (A) 90th calendar day following the date on which
the Company was required to file such additional  Registration Statement (or the
120th calendar day after such date in the event that such Registration Statement
is  subject  to review by the SEC) and (B) 2nd  Business  Day after the date the
Company is notified (orally or in writing, whichever is earlier) by the SEC that
such  Registration  Statement  will not be  reviewed  or will not be  subject to
further review.

         (e)  "FILING   DEADLINE"   means  (i)  with   respect  to  the  initial
Registration  Statement  required to be filed pursuant to Section 2(a), the 30th
calendar  day after the  Closing  Date and (ii) with  respect to any  additional
Registration Statements that may be required to be filed by the Company pursuant
to this  Agreement,  the date on which the  Company  was  required  to file such
additional Registration Statement pursuant to the terms of this Agreement.

         (f)  "INVESTOR"  means a Buyer or any  transferee  or  assignee  of any
Registrable  Securities or Warrants, as applicable,  to whom a Buyer assigns its
rights under this  Agreement and who agrees to become bound by the provisions of
this  Agreement  in  accordance  with Section 9 and any  transferee  or assignee
thereof to whom a  transferee  or  assignee  of any  Registrable  Securities  or
Warrants, as applicable,  assigns its rights under this Agreement and who agrees
to become bound by the provisions of this  Agreement in accordance  with Section
9.

         (g)  "PERSON"  means an  individual,  a limited  liability  company,  a
partnership,  a  joint  venture,  a  corporation,  a  trust,  an  unincorporated
organization or a government or any department or agency thereof.

         (h)   "REGISTER,"   "REGISTERED,"   and   "REGISTRATION"   refer  to  a
registration   effected  by  preparing  and  filing  one  or  more  Registration
Statements  in  compliance  with the 1933 Act and  pursuant  to Rule 415 and the
declaration of effectiveness of such Registration Statement(s) by the SEC.

         (i)  "REGISTRABLE  SECURITIES"  means (i) the Common  Shares,  (ii) the
Warrant  Shares and (iii) any capital  stock of the  Company  issued or issuable
with  respect  to the  Common  Shares,  the  Warrant  Shares  or  the  Warrants,
including,  without  limitation,  (1) as a  result  of any  stock  split,  stock
dividend,  recapitalization,  exchange  or similar  event or  otherwise  and (2)
shares of capital stock of the Company into which the shares of Common Stock are
converted or  exchanged  and shares of capital  stock of a Successor  Entity (as
defined in the Warrants)  into which the shares of Common Stock are converted or
exchanged,  in each case,  without regard to any  limitations on exercise of the
Warrants.

         (j)  "REGISTRATION   STATEMENT"  means  a  registration   statement  or
registration  statements  of the  Company  filed  under  the 1933  Act  covering
Registrable Securities.

         (k)  "REQUIRED  REGISTRATION  AMOUNT"  means the sum of (i) the  Common
Shares and (ii) 133% of the maximum number of Warrant Shares issued and issuable

                                      -2-
<PAGE>

pursuant to the  Warrants  as of the  Trading  Day (as defined in the  Warrants)
immediately preceding the applicable date of determination  (without taking into
account any limitations on the exercise of the Warrants set forth therein),  all
subject to adjustment as provided in Section 2(d).

         (l) "RULE  144" means  Rule 144  promulgated  by the SEC under the 1933
Act,  as such rule may be  amended  from time to time,  or any other  similar or
successor  rule or  regulation  of the  SEC  that  may at any  time  permit  the
Investors to sell securities of the Company to the public without registration.

         (m) "RULE  415" means  Rule 415  promulgated  by the SEC under the 1933
Act,  as such rule may be  amended  from time to time,  or any other  similar or
successor  rule or regulation of the SEC providing for offering  securities on a
continuous or delayed basis.

         (n) "SEC" means the United States Securities and Exchange Commission or
any successor thereto.

2.       REGISTRATION.
         ------------

         (a) MANDATORY  REGISTRATION.  The Company shall prepare and, as soon as
practicable,  but in no event later than the Filing Deadline,  file with the SEC
an initial Registration  Statement on Form S-3 covering the resale of all of the
Registrable Securities,  provided that such initial Registration Statement shall
register  for resale at least the number of shares of Common  Stock equal to the
Required  Registration  Amount as of the date  such  Registration  Statement  is
initially filed with the SEC,  provided  further that if Form S-3 is unavailable
for such a registration, the Company shall use such other form as is required by
Section 2(c). Such initial Registration  Statement,  and each other Registration
Statement  required to be filed pursuant to the terms of this  Agreement,  shall
contain  (except if otherwise  directed by each of the  Investors)  the "SELLING
STOCKHOLDERS"  and "PLAN OF  DISTRIBUTION"  sections in  substantially  the form
attached  hereto as EXHIBIT B. The  Company  shall use its best  efforts to have
such  initial  Registration  Statement,  and each other  Registration  Statement
required to be filed pursuant to the terms of this Agreement, declared effective
by the SEC as soon as  practicable,  but in no event  later than the  applicable
Effectiveness Deadline for such Registration Statement.

         (b) LEGAL COUNSEL. Subject to Section 5 hereof, Cranshire Capital, L.P.
("CRANSHIRE") shall have the right to select one (1) legal counsel to review and
oversee,  solely on its behalf,  any  registration  pursuant  to this  Section 2
("LEGAL COUNSEL"),  which shall be Greenberg Traurig,  LLP or such other counsel
as thereafter designated by Cranshire.

         (c)  INELIGIBILITY  TO USE FORM S-3.  In the event that Form S-3 is not
available  for  the  registration  of  the  resale  of  Registrable   Securities
hereunder,  the  Company  shall  (i)  register  the  resale  of the  Registrable
Securities  on another  appropriate  form  reasonably  acceptable to each of the
Investors  and  (ii)  undertake  to  register  the  resale  of  the  Registrable
Securities  on Form S-3 as soon as such  form is  available,  provided  that the
Company shall maintain the effectiveness of all Registration  Statements then in
effect  until such time as a  Registration  Statement  on Form S-3  covering the
resale of all the Registrable Securities has been declared effective by the SEC.

         (d) SUFFICIENT NUMBER OF SHARES REGISTERED.  In the event the number of
shares available under any  Registration  Statement is insufficient to cover all
of the  Registrable  Securities  required  to be  covered  by such  Registration

                                      -3-
<PAGE>

Statement  or an  Investor's  allocated  portion of the  Registrable  Securities
pursuant to Section 2(h),  the Company shall amend such  Registration  Statement
(if  permissible),  or file with the SEC a new  Registration  Statement  (on the
short form available therefor, if applicable),  or both, so as to cover at least
the Required Registration Amount as of the Trading Day immediately preceding the
date of the filing of such  amendment  or new  Registration  Statement,  in each
case, as soon as practicable,  but in any event not later than fifteen (15) days
after the necessity  therefor  arises (but taking  account of any Staff position
with  respect to the date on which the Staff will permit such  amendment  to the
Registration  Statement and/or such new Registration  Statement (as the case may
be) to be filed with the SEC).  The Company  shall use its best efforts to cause
such  amendment  to such  Registration  Statement  and/or such new  Registration
Statement  (as the  case  may be) to  become  effective  as soon as  practicable
following  the  filing  thereof  with the SEC,  but in no event  later  than the
applicable  Effectiveness Deadline for such Registration Statement. For purposes
of the foregoing provision,  the number of shares available under a Registration
Statement  shall  be  deemed  "insufficient  to  cover  all of  the  Registrable
Securities"  if at any time the number of shares of Common Stock  available  for
resale  under the  applicable  Registration  Statement  is less than the product
determined by multiplying (i) the Required  Registration  Amount as of such time
by (ii) 0.90. The calculation set forth in the foregoing  sentence shall be made
without  regard  to any  limitations  on  exercise  of the  Warrants  (and  such
calculation shall assume that the Warrants are then fully exercisable for shares
of Common Stock at the then-prevailing applicable Exercise Price).

         (e) EFFECT OF FAILURE TO FILE AND OBTAIN AND MAINTAIN  EFFECTIVENESS OF
ANY REGISTRATION  STATEMENT. If (i) a Registration Statement covering the resale
of  all  of  the   Registrable   Securities   required  to  be  covered  thereby
(disregarding  any reduction  pursuant to Section 2(f)) and required to be filed
by the Company  pursuant to this  Agreement  is (A) not filed with the SEC on or
before the Filing Deadline for such Registration  Statement (a "FILING FAILURE")
(it being understood that if the Company files a Registration  Statement without
affording  each  Investor the  opportunity  to review and comment on the same as
required  by  Section  3(c)  hereof,  the  Company  shall be  deemed to not have
satisfied  this  clause  (i)(A)  and such  event  shall be deemed to be a Filing
Failure) or (B) not declared effective by the SEC on or before the Effectiveness
Deadline for such Registration Statement (an "EFFECTIVENESS  FAILURE") (it being
understood that if on the Business Day immediately  following the Effective Date
for such  Registration  Statement  the  Company  shall not have  filed a "final"
prospectus  for such  Registration  Statement  with the SEC under Rule 424(b) in
accordance  with Section 3(b) (whether or not such a prospectus  is  technically
required by such rule),  the Company shall be deemed to not have  satisfied this
clause  (i)(B) and such event shall be deemed to be an  Effectiveness  Failure),
(ii) other than during an Allowable Grace Period (as defined below),  on any day
after  the  Effective  Date  of a  Registration  Statement  sales  of all of the
Registrable  Securities  required to be included on such Registration  Statement
(disregarding any reduction pursuant to Section 2(f)) cannot be made pursuant to
such Registration Statement (including, without limitation, because of a failure
to keep such  Registration  Statement  effective,  a failure  to  disclose  such
information  as is necessary for sales to be made pursuant to such  Registration
Statement, a suspension or delisting of (or a failure to timely list) the shares

                                      -4-
<PAGE>

of Common Stock on the Principal  Market (as defined in the Securities  Purchase
Agreement),  or a failure to  register a  sufficient  number of shares of Common
Stock or by reason of a stop order) or the prospectus  contained  therein is not
available  for use for any  reason  (a  "MAINTENANCE  FAILURE"),  or  (iii) if a
Registration  Statement  is not  effective  for  any  reason  or the  prospectus
contained therein is not available for use for any reason,  the Company fails to
file with the SEC any required reports under Section 13 or 15(d) of the 1934 Act
such that it is not in compliance  with Rule  144(c)(1) (or Rule  144(i)(2),  if
applicable) (a "CURRENT PUBLIC INFORMATION FAILURE") as a result of which any of
the  Investors are unable to sell  Registrable  Securities  without  restriction
under Rule 144 (including,  without limitation,  volume restrictions),  then, as
partial  relief for the damages to any holder by reason of any such delay in, or
reduction of, its ability to sell the  underlying  shares of Common Stock (which
remedy  shall not be  exclusive  of any other  remedies  available  at law or in
equity), the Company shall pay to each holder of Registrable Securities relating
to such  Registration  Statement an amount in cash equal to two (2%)] percent of
such Investor's Purchase Price (as defined in the Securities Purchase Agreement)
on the date of such Filing Failure,  Effectiveness Failure,  Maintenance Failure
or Current Public Information  Failure,  as applicable,  and (2) on every thirty
(30) day anniversary of (I) a Filing Failure until such Filing Failure is cured;
(II) an Effectiveness Failure until such Effectiveness Failure is cured; (III) a
Maintenance  Failure until such Maintenance Failure is cured; and (IV) a Current
Public Information Failure until the earlier of (i) the date such Current Public
Information  Failure is cured and (ii) such time that such public information is
no longer  required  pursuant  to Rule 144 (in each case,  pro rated for periods
totaling  less  than  thirty  (30)  days).  The  payments  to which a holder  of
Registrable  Securities  shall be  entitled  pursuant to this  Section  2(e) are
referred  to herein as  "REGISTRATION  DELAY  PAYMENTS."  Following  the initial
Registration  Delay Payment for any particular  event or failure (which shall be
paid on the date of such event or failure, as set forth above), without limiting
the  foregoing,  if an event or failure  giving rise to the  Registration  Delay
Payments  is cured  prior to any thirty  (30) day  anniversary  of such event or
failure,  then such Registration  Delay Payment shall be made on the third (3rd)
Business  Day  after  such  cure.  In  the  event  the  Company  fails  to  make
Registration Delay Payments in a timely manner in accordance with the foregoing,
such  Registration  Delay  Payments  shall bear  interest at the rate of one and
one-half  percent (1.5%) per month  (prorated for partial  months) until paid in
full.  Notwithstanding  the foregoing,  no Registration  Delay Payments shall be
owed to an Investor (other than with respect to a Maintenance  Failure resulting
from a  suspension  or  delisting of (or a failure to timely list) the shares of
Common Stock on the  Principal  Market) with respect to any period  during which
all of such  Investor's  Registrable  Securities  may be  sold by such  Investor
without  restriction  under  Rule 144  (including,  without  limitation,  volume
restrictions)  and without the need for current public  information  required by
Rule 144(c)(1) (or Rule 144(i)(2), if applicable).

         (f)  OFFERING.  Notwithstanding  anything to the contrary  contained in
this Agreement,  but subject to the payment of the  Registration  Delay Payments
pursuant to Section 2(e), in the event the staff of the SEC (the "Staff") or the
SEC seeks to  characterize  any offering  pursuant to a  Registration  Statement
filed pursuant to this Agreement as  constituting  an offering of securities by,
or on behalf of, the Company, or in any other manner, such that the Staff or the
SEC do not permit such  Registration  Statement to become effective and used for
resales in a manner that does not  constitute  such an offering and that permits
the continuous resale at the market by the Investors  participating  therein (or
as otherwise may be acceptable to each Investor)  without being named therein as
an  "underwriter,"  then the  Company  shall  reduce  the number of shares to be
included in such Registration  Statement by all Investors until such time as the
Staff  and the SEC  shall  so  permit  such  Registration  Statement  to  become
effective as aforesaid.  In making such reduction,  the Company shall reduce the
number of shares to be included by all Investors on a pro rata basis (based upon

                                      -5-
<PAGE>

the number of Registrable  Securities otherwise required to be included for each
Investor)  unless  the  inclusion  of  shares  by  a  particular  Investor  or a
particular  set of Investors  are  resulting in the Staff or the SEC's "by or on
behalf of the Company" offering position, in which event the shares held by such
Investor or set of Investors  shall be the only shares subject to reduction (and
if by a set of Investors on a pro rata basis by such  Investors or on such other
basis as would result in the exclusion of the least number of shares by all such
Investors).  In  addition,  in the event that the Staff or the SEC  requires any
Investor  seeking  to sell  securities  under  a  Registration  Statement  filed
pursuant to this Agreement to be specifically  identified as an "underwriter" in
order to  permit  such  Registration  Statement  to become  effective,  and such
Investor  does  not  consent  to  being  so  named  as an  underwriter  in  such
Registration  Statement,  then, in each such case,  the Company shall reduce the
total  number  of  Registrable  Securities  to be  registered  on behalf of such
Investor,  until  such  time as the  Staff  or the SEC  does  not  require  such
identification or until such Investor accepts such identification and the manner
thereof.  Any  reduction  pursuant  to this  paragraph  will  first  reduce  all
Registrable  Securities  other  than those  issued  pursuant  to the  Securities
Purchase  Agreement.  In the event of any  reduction in  Registrable  Securities
pursuant  to this  paragraph,  an  affected  Investor  shall  have the  right to
require,  upon  delivery  of a written  request  to the  Company  signed by such
Investor,  the Company to file a registration  statement within thirty (30) days
of such request (subject to any restrictions  imposed by Rule 415 or required by
the Staff or the SEC) for resale by such Investor in a manner acceptable to such
Investor,  and the Company  shall  following  such request  cause to be and keep
effective  such   registration   statement  in  the  same  manner  as  otherwise
contemplated in this Agreement for registration  statements  hereunder,  in each
case until such time as: (i) all  Registrable  Securities  held by such Investor
have been registered and sold pursuant to an effective Registration Statement in
a manner  acceptable to such Investor or (ii) all Registrable  Securities may be
resold by such Investor  without  restriction  (including,  without  limitation,
volume  limitations)  pursuant to Rule 144 (taking account of any Staff position
with  respect to  "affiliate"  status) and  without the need for current  public
information  required by Rule  144(c)(1) (or Rule  144(i)(2),  if applicable) or
(iii)  such  Investor  agrees  to  be  named  as  an  underwriter  in  any  such
Registration  Statement  in a  manner  acceptable  to  such  Investor  as to all
Registrable  Securities held by such Investor and that have not theretofore been
included in a Registration  Statement under this Agreement (it being  understood
that the  special  demand  right  under this  sentence  may be  exercised  by an
Investor  multiple  times and with  respect  to limited  amounts of  Registrable
Securities  in  order  to  permit  the  resale   thereof  by  such  Investor  as
contemplated above).

         (g) PIGGYBACK  REGISTRATIONS.  Without  limiting any  obligation of the
Company hereunder or under the Securities Purchase Agreement, if there is not an
effective  Registration  Statement covering all of the Registrable Securities or
the prospectus  contained therein is not available for use and the Company shall
determine to prepare and file with the SEC a registration  statement relating to
an offering  for its own account or the account of others  under the 1933 Act of
any of its  equity  securities  (other  than on Form  S-4 or Form  S-8  (each as
promulgated  under the 1933 Act) or their then  equivalents  relating  to equity
securities to be issued solely in connection  with any acquisition of any entity
or business or equity securities issuable in connection with the Company's stock
option or other employee benefit plans),  then the Company shall deliver to each
Investor a written notice of such determination and, if within fifteen (15) days
after  the date of the  delivery  of such  notice,  any such  Investor  shall so
request in writing, the Company shall include in such registration statement all
or any  part  of  such  Registrable  Securities  such  Investor  requests  to be

                                      -6-
<PAGE>

registered; provided, however, the Company shall not be required to register any
Registrable  Securities  pursuant to this  Section  2(g) that are  eligible  for
resale pursuant to Rule 144 without restriction (including,  without limitation,
volume  restrictions)  and  without  the need  for  current  public  information
required by Rule  144(c)(1) (or Rule  144(i)(2),  if applicable) or that are the
subject of a then-effective Registration Statement.

         (h)  ALLOCATION  OF  REGISTRABLE  SECURITIES.  The  initial  number  of
Registrable  Securities included in any Registration  Statement and any increase
in the number of Registrable  Securities included therein shall be allocated pro
rata among the Investors  based on the number of Registrable  Securities held by
each  Investor at the time such  Registration  Statement  covering  such initial
number of Registrable  Securities or increase  thereof is declared  effective by
the SEC. In the event that an Investor sells or otherwise  transfers any of such
Investor's Registrable Securities,  each transferee or assignee (as the case may
be) that  becomes  an  Investor  shall be  allocated  a pro rata  portion of the
then-remaining  number of Registrable  Securities  included in such Registration
Statement  for such  transferor  or assignee (as the case may be). Any shares of
Common Stock included in a Registration  Statement and which remain allocated to
any  Person  which  ceases to hold any  Registrable  Securities  covered by such
Registration  Statement shall be allocated to the remaining Investors,  pro rata
based on the number of Registrable  Securities then held by such Investors which
are covered by such Registration Statement.

         (i) NO  INCLUSION  OF OTHER  SECURITIES.  In no event shall the Company
include any securities  other than  Registrable  Securities on any  Registration
Statement without the prior written consent of each of the Investors.  Until the
Applicable Date (as defined in the Securities Purchase  Agreement),  the Company
shall not enter into any agreement  providing any registration  rights to any of
its security holders.

3.       RELATED OBLIGATIONS.
         -------------------

         The Company  shall use its best efforts to effect the  registration  of
the Registrable Securities in accordance with the intended method of disposition
thereof,   and,  pursuant   thereto,   the  Company  shall  have  the  following
obligations:

         (a)  The  Company  shall  promptly  prepare  and  file  with  the SEC a
Registration Statement with respect to all the Registrable Securities (but in no
event later than the  applicable  Filing  Deadline)  and use its best efforts to
cause such  Registration  Statement to become  effective as soon as  practicable
after  such  filing  (but in no event  later than the  Effectiveness  Deadline).
Subject to Allowable  Grace  Periods,  the Company shall keep each  Registration
Statement  effective (and the prospectus  contained  therein  available for use)
pursuant to Rule 415 for  resales by the  Investors  on a delayed or  continuous
basis at then-prevailing market prices (and not fixed prices) at all times until
the earlier of (i) the date as of which all of the Investors may sell all of the
Registrable  Securities  required to be covered by such  Registration  Statement
(disregarding  any  reduction  pursuant  to Section  2(f))  without  restriction
pursuant to Rule 144 (including,  without limitation,  volume  restrictions) and
without the need for current public  information  required by Rule 144(c)(1) (or
Rule  144(i)(2),  if applicable)  or (ii) the date on which the Investors  shall
have  sold  all of the  Registrable  Securities  covered  by  such  Registration
Statement (the "REGISTRATION PERIOD").  Notwithstanding anything to the contrary

                                      -7-
<PAGE>

contained in this  Agreement,  the Company shall ensure that,  when filed and at
all times while  effective,  each  Registration  Statement  (including,  without
limitation,   all  amendments  and  supplements   thereto)  and  the  prospectus
(including,  without limitation, all amendments and supplements thereto) used in
connection  with such  Registration  Statement  (1) shall not contain any untrue
statement  of a material  fact or omit to state a material  fact  required to be
stated  therein,  or  necessary to make the  statements  therein (in the case of
prospectuses,  in the light of the  circumstances  in which  they were made) not
misleading and (2) will disclose (whether  directly or through  incorporation by
reference to other SEC filings to the extent permitted) all material information
regarding the Company and its  securities.  The Company shall submit to the SEC,
within  one (1)  Business  Day after the later of the date that (i) the  Company
learns that no review of a particular Registration Statement will be made by the
Staff or that the Staff has no further  comments  on a  particular  Registration
Statement (as the case may be) and (ii) the consent of Legal Counsel is obtained
pursuant to Section 3(c) (which consent shall be immediately  sought), a request
for acceleration of effectiveness of such  Registration  Statement to a time and
date not later than forty-eight (48) hours after the submission of such request.

         (b)  Subject to  Section  3(r) of this  Agreement,  the  Company  shall
prepare and file with the SEC such amendments  (including,  without  limitation,
post-effective  amendments) and supplements to each  Registration  Statement and
the prospectus used in connection with each such Registration  Statement,  which
prospectus is to be filed pursuant to Rule 424  promulgated  under the 1933 Act,
as may be necessary to keep each such  Registration  Statement  effective at all
times  during the  Registration  Period for such  Registration  Statement,  and,
during such period,  comply with the  provisions of the 1933 Act with respect to
the  disposition  of all  Registrable  Securities of the Company  required to be
covered  by  such  Registration  Statement  until  such  time  as  all  of  such
Registrable  Securities  shall  have been  disposed  of in  accordance  with the
intended methods of disposition by the seller or sellers thereof as set forth in
such Registration Statement;  provided, however, by 8:30 a.m. (New York time) on
the Business Day  immediately  following each Effective  Date, the Company shall
file with the SEC in  accordance  with Rule 424(b)  under the 1933 Act the final
prospectus  to be used in  connection  with  sales  pursuant  to the  applicable
Registration Statement (whether or not such a prospectus is technically required
by such rule).  In the case of amendments and  supplements  to any  Registration
Statement which are required to be filed pursuant to this Agreement  (including,
without  limitation,  pursuant  to this  Section  3(b)) by reason of the Company
filing a report  on Form  10-Q or Form 10-K or any  analogous  report  under the
Securities  Exchange Act of 1934, as amended (the "1934 ACT"), the Company shall
have incorporated such report by reference into such Registration  Statement, if
applicable,  or shall file such  amendments or  supplements  with the SEC on the
same day on which the 1934 Act report is filed which created the requirement for
the Company to amend or supplement such Registration Statement.

         (c) The Company  shall (A) permit Legal  Counsel and legal  counsel for
each other Investor to review and comment upon (i) each  Registration  Statement
at least five (5)  Business  Days prior to its filing  with the SEC and (ii) all
amendments and supplements to each Registration  Statement  (including,  without
limitation, the prospectus contained therein) (except for Annual Reports on Form
10-K,  Quarterly  Reports on Form  10-Q,  Current  Reports on Form 8-K,  and any
similar or successor  reports) within a reasonable number of days prior to their
filing with the SEC, and (B) not file any Registration Statement or amendment or
supplement thereto in a form to which Legal Counsel or any legal counsel for any
other Investor  reasonably  objects.  The Company shall not submit a request for
acceleration of the  effectiveness of a Registration  Statement or any amendment
or supplement  thereto or to any prospectus  contained therein without the prior
consent of Legal Counsel,  which consent shall not be unreasonably withheld. The

                                      -8-
<PAGE>

Company shall promptly furnish to Legal Counsel and legal counsel for each other
Investor,  without charge, (i) copies of any correspondence  from the SEC or the
Staff  to the  Company  or its  representatives  relating  to each  Registration
Statement,  provided  that such  correspondence  shall not contain any material,
non-public  information  regarding  the Company or any of its  Subsidiaries  (as
defined in the Securities Purchase  Agreement),  (ii) after the same is prepared
and filed  with the SEC,  one (1) copy of each  Registration  Statement  and any
amendment(s) and supplement(s) thereto, including, without limitation, financial
statements and schedules,  all documents  incorporated therein by reference,  if
requested by an Investor,  and all exhibits and (iii) upon the  effectiveness of
each  Registration  Statement,  one (1) copy of the prospectus  included in such
Registration  Statement and all amendments and supplements  thereto. The Company
shall  reasonably  cooperate with Legal Counsel and legal counsel for each other
Investor in performing the Company's obligations pursuant to this Section 3.

         (d)  The  Company  shall  promptly   furnish  to  each  Investor  whose
Registrable  Securities  are  included in any  Registration  Statement,  without
charge,  (i) after the same is prepared and filed with the SEC, at least one (1)
copy of each  Registration  Statement  and any  amendment(s)  and  supplement(s)
thereto, including, without limitation,  financial statements and schedules, all
documents  incorporated therein by reference,  if requested by an Investor,  all
exhibits and each preliminary  prospectus,  (ii) upon the  effectiveness of each
Registration  Statement,  ten (10)  copies of the  prospectus  included  in such
Registration Statement and all amendments and supplements thereto (or such other
number of copies as such Investor may reasonably  request from time to time) and
(iii)  such  other  documents,  including,  without  limitation,  copies  of any
preliminary or final  prospectus,  as such Investor may reasonably  request from
time  to  time  in  order  to  facilitate  the  disposition  of the  Registrable
Securities owned by such Investor.

         (e) The Company shall use its best efforts to (i) register and qualify,
unless an exemption from registration and qualification  applies,  the resale by
Investors of the  Registrable  Securities  covered by a  Registration  Statement
under such other  securities or "blue sky" laws of all applicable  jurisdictions
in the  United  States,  (ii)  prepare  and  file in those  jurisdictions,  such
amendments  (including,  without  limitation,   post-effective  amendments)  and
supplements  to such  registrations  and  qualifications  as may be necessary to
maintain the effectiveness  thereof during the Registration  Period,  (iii) take
such other  actions as may be  necessary  to  maintain  such  registrations  and
qualifications in effect at all times during the Registration  Period,  and (iv)
take all  other  actions  reasonably  necessary  or  advisable  to  qualify  the
Registrable  Securities for sale in such jurisdictions;  provided,  however, the
Company shall not be required in connection  therewith or as a condition thereto
to (x) qualify to do business in any  jurisdiction  where it would not otherwise
be required to qualify but for this Section 3(e),  (y) subject itself to general
taxation in any such  jurisdiction,  or (z) file a general consent to service of
process in any such  jurisdiction.  The  Company  shall  promptly  notify  Legal
Counsel,  legal  counsel for each other  Investor  and each  Investor  who holds
Registrable  Securities of the receipt by the Company of any  notification  with
respect to the suspension of the  registration  or  qualification  of any of the
Registrable  Securities  for sale under the securities or "blue sky" laws of any
jurisdiction  in the  United  States  or its  receipt  of  actual  notice of the
initiation or threatening of any proceeding for such purpose.

                                      -9-
<PAGE>

         (f) The Company  shall notify  Legal  Counsel,  legal  counsel for each
other  Investor and each Investor in writing of the  happening of any event,  as
promptly as practicable after becoming aware of such event, as a result of which
the prospectus included in a Registration Statement, as then in effect, includes
an untrue  statement  of a material  fact or omission  to state a material  fact
required to be stated  therein or necessary to make the statements  therein,  in
the light of the  circumstances  under  which  they were  made,  not  misleading
(provided  that in no event shall such notice  contain any material,  non-public
information  regarding the Company or any of its Subsidiaries),  and, subject to
Section 3(r),  promptly  prepare a supplement or amendment to such  Registration
Statement and such prospectus contained therein to correct such untrue statement
or omission and deliver ten (10) copies of such supplement or amendment to Legal
Counsel,  legal counsel for each other Investor and each Investor (or such other
number of copies as Legal Counsel, legal counsel for each other Investor or such
Investor may reasonably  request).  The Company shall also promptly notify Legal
Counsel,  legal counsel for each other Investor and each Investor in writing (i)
when a prospectus or any prospectus  supplement or post-effective  amendment has
been filed, when a Registration  Statement or any  post-effective  amendment has
become effective (notification of such effectiveness shall be delivered to Legal
Counsel, legal counsel for each other Investor and each Investor by facsimile or
e-mail on the same day of such  effectiveness  and by overnight  mail), and when
the Company receives  written notice from the SEC that a Registration  Statement
or any post-effective amendment will be reviewed by the SEC, (ii) of any request
by the SEC for amendments or supplements to a Registration  Statement or related
prospectus  or  related   information,   (iii)  of  the   Company's   reasonable
determination that a post-effective  amendment to a Registration Statement would
be  appropriate;  and (iv) of the receipt of any request by the SEC or any other
federal or state governmental  authority for any additional information relating
to the  Registration  Statement or any  amendment or  supplement  thereto or any
related prospectus.  The Company shall respond as promptly as practicable to any
comments  received from the SEC with respect to each  Registration  Statement or
any  amendment  thereto  (it being  understood  and  agreed  that the  Company's
response to any such  comments  shall be delivered to the SEC no later than five
(5) days after the receipt thereof).

         (g) The Company  shall (i) use its best efforts to prevent the issuance
of any stop order or other  suspension  of  effectiveness  of each  Registration
Statement or the use of any prospectus  contained therein,  or the suspension of
the qualification, or the loss of an exemption from qualification, of any of the
Registrable  Securities  for sale in any  jurisdiction  and, if such an order or
suspension  is issued,  to obtain the  withdrawal of such order or suspension at
the earliest  possible  moment and (ii) notify Legal Counsel,  legal counsel for
each other  Investor and each Investor who holds  Registrable  Securities of the
issuance  of such  order and the  resolution  thereof  or its  receipt of actual
notice of the initiation or threat of any proceeding for such purpose.

         (h) If any Investor may be required under applicable  securities law to
be described in any  Registration  Statement as an underwriter and such Investor
consents to so being named an underwriter,  at the request of any Investor,  the
Company shall furnish to such Investor, on the date of the effectiveness of such
Registration  Statement  and  thereafter  from time to time on such  dates as an
Investor  may  reasonably  request  (i) a  letter,  dated  such  date,  from the
Company's  independent  certified public accountants in form and substance as is
customarily given by independent certified public accountants to underwriters in
an  underwritten  public  offering,  addressed  to the  Investors,  and  (ii) an

                                      -10-
<PAGE>

opinion, dated as of such date, of counsel representing the Company for purposes
of such Registration  Statement,  in form, scope and substance as is customarily
given in an underwritten public offering, addressed to the Investors.

         (i) If any Investor may be required under applicable  securities law to
be described in any  Registration  Statement as an underwriter and such Investor
consents to so being  named an  underwriter,  upon the  written  request of such
Investor,  the Company shall make available for inspection by (i) such Investor,
(ii) legal  counsel for such Investor and (iii) one (1) firm of  accountants  or
other agents retained by such Investor  (collectively,  the  "INSPECTORS"),  all
pertinent  financial and other records,  and pertinent  corporate  documents and
properties of the Company (collectively,  the "RECORDS"), as shall be reasonably
deemed necessary by each Inspector, and cause the Company's officers,  directors
and  employees to supply all  information  which any  Inspector  may  reasonably
request;  provided,  however,  each Inspector  shall agree in writing to hold in
strict  confidence and not to make any  disclosure  (except to such Investor) or
use of any Record or other  information  which the Company's  board of directors
determines  in good faith to be  confidential,  and of which  determination  the
Inspectors  are so  notified,  unless  (1) the  disclosure  of such  Records  is
necessary  to avoid or correct a  misstatement  or omission in any  Registration
Statement or is otherwise  required  under the 1933 Act, (2) the release of such
Records is ordered pursuant to a final,  non-appealable subpoena or order from a
court or government  body of competent  jurisdiction,  or (3) the information in
such  Records  has been made  generally  available  to the public  other than by
disclosure in violation of this Agreement or any other Transaction  Document (as
defined in the  Securities  Purchase  Agreement).  Such Investor  agrees that it
shall,  upon learning that disclosure of such Records is sought in or by a court
or  governmental  body of competent  jurisdiction  or through other means,  give
prompt notice to the Company and allow the Company, at its expense, to undertake
appropriate  action to prevent  disclosure  of, or to obtain a protective  order
for,  the  Records  deemed  confidential.   Nothing  herein  (or  in  any  other
confidentiality  agreement between the Company and such Investor,  if any) shall
be deemed to limit any Investor's  ability to sell  Registrable  Securities in a
manner which is otherwise consistent with applicable laws and regulations.

         (j) The Company shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Company unless (i) disclosure
of such  information  is necessary  to comply with  federal or state  securities
laws, (ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration  Statement or is otherwise required
to be disclosed in such Registration  Statement  pursuant to the 1933 Act, (iii)
the  release of such  information  is ordered  pursuant  to a subpoena  or other
final,  non-appealable  order  from a court or  governmental  body of  competent
jurisdiction,  or (iv) such information has been made generally available to the
public other than by  disclosure  in  violation  of this  Agreement or any other
Transaction  Document.  The Company  agrees that it shall,  upon  learning  that
disclosure of such information concerning an Investor is sought in or by a court
or  governmental  body of competent  jurisdiction  or through other means,  give
prompt  written  notice  to such  Investor  and  allow  such  Investor,  at such
Investor's expense, to undertake appropriate action to prevent disclosure of, or
to obtain a protective order for, such information.

         (k) Without limiting any obligation of the Company under the Securities
Purchase  Agreement,  the Company shall use its best efforts either to (i) cause
all of the Registrable  Securities covered by each Registration  Statement to be
listed on each  securities  exchange  on which  securities  of the same class or
series  issued by the  Company are then  listed,  if any, if the listing of such

                                      -11-
<PAGE>

Registrable Securities is then permitted under the rules of such exchange,  (ii)
secure designation and quotation of all of the Registrable Securities covered by
each Registration  Statement on the OTC Bulletin Board, or (iii) if, despite the
Company's best efforts to satisfy the preceding  clauses (i) or (ii) the Company
is  unsuccessful  in  satisfying  the  preceding  clauses  (i) or (ii),  without
limiting the generality of the foregoing, to use its best efforts to arrange for
at least two market makers to register with the  Financial  Industry  Regulatory
Authority  ("FINRA") as such with  respect to such  Registrable  Securities.  In
addition,  the Company  shall  cooperate  with each  Investor  and any broker or
dealer  through  which  any  such  Investor  proposes  to sell  its  Registrable
Securities  in  effecting  a filing  with FINRA  pursuant  to FINRA Rule 5110 as
requested  by such  Investor.  The  Company  shall pay all fees and  expenses in
connection with satisfying its obligations under this Section 3(k).

         (l) The Company shall cooperate with the Investors who hold Registrable
Securities  being offered and, to the extent  applicable,  facilitate the timely
preparation  and delivery of certificates  (not bearing any restrictive  legend)
representing the Registrable Securities to be offered pursuant to a Registration
Statement and enable such  certificates to be in such  denominations  or amounts
(as the case may be) as the Investors may  reasonably  request from time to time
and registered in such names as the Investors may request.

         (m)  If  requested  by an  Investor,  the  Company  shall  as  soon  as
practicable  after  receipt of notice from such  Investor and subject to Section
3(r) hereof,  (i)  incorporate  in a  prospectus  supplement  or  post-effective
amendment  such  information as an Investor  reasonably  requests to be included
therein  relating  to the  sale  and  distribution  of  Registrable  Securities,
including,  without  limitation,  information  with  respect  to the  number  of
Registrable  Securities  being  offered or sold,  the purchase  price being paid
therefor and any other terms of the offering of the Registrable Securities to be
sold in such  offering;  (ii)  make  all  required  filings  of such  prospectus
supplement or post-effective amendment after being notified of the matters to be
incorporated  in such prospectus  supplement or  post-effective  amendment;  and
(iii) supplement or make amendments to any Registration  Statement or prospectus
contained therein if reasonably requested by an Investor holding any Registrable
Securities.

         (n) The  Company  shall use its best  efforts to cause the  Registrable
Securities covered by a Registration Statement to be registered with or approved
by such other  governmental  agencies  or  authorities  as may be  necessary  to
consummate the disposition of such Registrable Securities.

         (o) The Company shall make generally  available to its security holders
as soon as practical, but not later than ninety (90) days after the close of the
period covered  thereby,  an earnings  statement (in form complying with, and in
the manner  provided by, the provisions of Rule 158 under the 1933 Act) covering
a  twelve-month  period  beginning not later than the first day of the Company's
fiscal quarter next following the applicable Effective Date of each Registration
Statement.

         (p) The Company shall otherwise use its best efforts to comply with all
applicable  rules and regulations of the SEC in connection with any registration
hereunder.

         (q) Within one (1) Business Day after a  Registration  Statement  which
covers  Registrable  Securities  is declared  effective  by the SEC, the Company

                                      -12-
<PAGE>

shall deliver,  and shall cause legal counsel for the Company to deliver, to the
transfer  agent for such  Registrable  Securities  (with copies to the Investors
whose  Registrable  Securities  are  included  in such  Registration  Statement)
confirmation that such Registration Statement has been declared effective by the
SEC in the form attached hereto as EXHIBIT A.

         (r) Notwithstanding anything to the contrary herein (but subject to the
last sentence of this Section  3(r)),  at any time after the Effective Date of a
particular  Registration  Statement,  the  Company may delay the  disclosure  of
material,   non-public   information  concerning  the  Company  or  any  of  its
Subsidiaries  the  disclosure  of which at the  time is not,  in the good  faith
opinion of the board of directors of the  Company,  in the best  interest of the
Company  and, in the opinion of counsel to the  Company,  otherwise  required (a
"GRACE  PERIOD"),  provided that the Company shall promptly notify the Investors
in writing of the (i) existence of material,  non-public information giving rise
to a Grace  Period  (provided  that in each such  notice the  Company  shall not
disclose  the content of such  material,  non-public  information  to any of the
Investors)  and the date on which such Grace  Period will begin and (ii) date on
which such Grace  Period ends,  provided  further that (I) no Grace Period shall
exceed ten (10)  consecutive  days and during any three hundred sixty five (365)
day period all such Grace  Periods  shall not exceed an aggregate of thirty (30)
days,  (II) the first day of any Grace  Period must be at least five (5) Trading
Days after the last day of any prior Grace  Period and (III) no Grace Period may
exist  during  the sixty  (60)  Trading  Day period  immediately  following  the
Effective  Date of such  Registration  Statement  (provided that such sixty (60)
Trading Day period  shall be extended by the number of Trading  Days during such
period and any extension thereof  contemplated by this proviso during which such
Registration  Statement is not effective or the prospectus  contained therein is
not available  for use) (each,  an "ALLOWABLE  GRACE  PERIOD").  For purposes of
determining the length of a Grace Period above, such Grace Period shall begin on
and include the date the Investors  receive the notice referred to in clause (i)
above and shall end on and include the later of the date the  Investors  receive
the notice  referred  to in clause  (ii) above and the date  referred to in such
notice. The provisions of Section 3(g) hereof shall not be applicable during the
period of any Allowable Grace Period.  Upon expiration of each Grace Period, the
Company shall again be bound by the first  sentence of Section 3(f) with respect
to  the  information  giving  rise  thereto  unless  such  material,  non-public
information is no longer  applicable.  Notwithstanding  anything to the contrary
contained in this Section 3(r),  the Company  shall cause its transfer  agent to
deliver  unlegended  shares of Common  Stock to a  transferee  of an Investor in
accordance  with the terms of the  Securities  Purchase  Agreement in connection
with any sale of Registrable  Securities with respect to which such Investor has
entered  into a  contract  for  sale,  and  delivered  a copy of the  prospectus
included  as  part  of the  particular  Registration  Statement  to  the  extent
applicable, prior to such Investor's receipt of the notice of a Grace Period and
for which the Investor has not yet settled.

         (s) The Company shall use its best efforts to maintain  eligibility for
use of Form S-3 (or any  successor  form  thereto) for the  registration  of the
resale of all the Registrable Securities.

         (t) The Company shall take all other  reasonable  actions  necessary to
expedite  and  facilitate  disposition  by  each  Investors  of its  Registrable
Securities pursuant to each Registration Statement.

                                      -13-
<PAGE>

4.       OBLIGATIONS OF THE INVESTORS.
         ----------------------------

         (a) At least  five (5)  Business  Days  prior to the first  anticipated
filing  date of each  Registration  Statement,  the  Company  shall  notify each
Investor  in writing of the  information  the  Company  requires  from each such
Investor with respect to such  Registration  Statement.  It shall be a condition
precedent  to the  obligations  of the  Company  to  complete  the  registration
pursuant to this  Agreement  with  respect to the  Registrable  Securities  of a
particular  Investor  that such  Investor  shall  furnish  to the  Company  such
information  regarding  itself,  the  Registrable  Securities held by it and the
intended  method of disposition  of the  Registrable  Securities  held by it, as
shall be  reasonably  required to effect and maintain the  effectiveness  of the
registration of such Registrable  Securities and shall execute such documents in
connection with such registration as the Company may reasonably request.

         (b) Each Investor,  by such  Investor's  acceptance of the  Registrable
Securities,  agrees to cooperate with the Company as reasonably requested by the
Company in  connection  with the  preparation  and  filing of each  Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such  Investor's  election  to  exclude  all  of  such  Investor's   Registrable
Securities from such Registration Statement.

         (c) Each  Investor  agrees  that,  upon  receipt of any notice from the
Company of the  happening of any event of the kind  described in Section 3(g) or
the  first  sentence  of  3(f),  such  Investor  will  immediately   discontinue
disposition of Registrable Securities pursuant to any Registration  Statement(s)
covering such Registrable Securities until such Investor's receipt of the copies
of the  supplemented or amended  prospectus  contemplated by Section 3(g) or the
first  sentence  of  Section  3(f) or receipt of notice  that no  supplement  or
amendment is required.  Notwithstanding anything to the contrary in this Section
4(c), the Company shall cause its transfer agent to deliver unlegended shares of
Common Stock to a transferee of an Investor in accordance  with the terms of the
Securities  Purchase  Agreement  in  connection  with  any  sale of  Registrable
Securities  with respect to which such  Investor has entered into a contract for
sale  prior to the  Investor's  receipt  of a notice  from  the  Company  of the
happening  of any  event of the kind  described  in  Section  3(g) or the  first
sentence of Section 3(f) and for which such Investor has not yet settled.

         (d) Each  Investor  covenants  and agrees  that it will comply with the
prospectus  delivery  requirements  of  the  1933  Act  as  applicable  to it in
connection  with sales of  Registrable  Securities  pursuant  to a  Registration
Statement.

5.       EXPENSES OF REGISTRATION.
         ------------------------

         All  reasonable  expenses,   other  than  underwriting   discounts  and
commissions,   incurred   in   connection   with   registrations,   filings   or
qualifications pursuant to Sections 2 and 3, including,  without limitation, all
registration,  listing and  qualifications  fees,  printers and accounting fees,
FINRA filing fees (if any) and fees and disbursements of counsel for the Company
shall be paid by the Company. The Company shall also reimburse Cranshire for the
fees and disbursements of Legal Counsel in connection with registration,  filing
or  qualification  pursuant to Sections 2 and 3 of this  Agreement  which amount
shall be limited to $10,000.

                                      -14-
<PAGE>

6.       INDEMNIFICATION.
         ---------------

         (a) To the fullest  extent  permitted  by law,  the Company  will,  and
hereby does,  indemnify,  hold harmless and defend each Investor and each of its
directors,  officers,   shareholders,   members,  partners,  employees,  agents,
advisors,  representatives (and any other Persons with a functionally equivalent
role of a Person holding such titles  notwithstanding  the lack of such title or
any other title) and each Person,  if any, who controls such Investor within the
meaning  of the 1933 Act or the  1934 Act and each of the  directors,  officers,
shareholders,  members, partners,  employees, agents, advisors,  representatives
(and any other Persons with a functionally  equivalent  role of a Person holding
such titles  notwithstanding  the lack of such title or any other title) of such
controlling  Persons  (each,  an  "INDEMNIFIED  PERSON"),  against  any  losses,
obligations,  claims, damages,  liabilities,  contingencies,  judgments,  fines,
penalties,   charges,  costs  (including,   without  limitation,   court  costs,
reasonable attorneys' fees and costs of defense and investigation), amounts paid
in settlement or expenses, joint or several,  (collectively,  "CLAIMS") incurred
in  investigating,  preparing or defending  any action,  claim,  suit,  inquiry,
proceeding,  investigation  or appeal taken from the  foregoing by or before any
court or governmental,  administrative or other regulatory  agency,  body or the
SEC,  whether pending or threatened,  whether or not an indemnified  party is or
may be a party thereto ("INDEMNIFIED  DAMAGES"), to which any of them may become
subject insofar as such Claims (or actions or proceedings,  whether commenced or
threatened,  in respect  thereof) arise out of or are based upon: (i) any untrue
statement  or alleged  untrue  statement  of a material  fact in a  Registration
Statement  or any  post-effective  amendment  thereto or in any  filing  made in
connection with the  qualification of the offering under the securities or other
"blue sky" laws of any jurisdiction in which Registrable  Securities are offered
("BLUE SKY  FILING"),  or the  omission or alleged  omission to state 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  preliminary  prospectus  if used prior to the
effective  date  of such  Registration  Statement,  or  contained  in the  final
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 or (iii) any violation or alleged  violation by the Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable  Securities pursuant to a Registration Statement (the
matters  in  the  foregoing  clauses  (i)  through  (iii)  being,  collectively,
"VIOLATIONS").  Subject  to  Section  6(c),  the  Company  shall  reimburse  the
Indemnified  Persons,  promptly as such  expenses  are  incurred and are due and
payable,  for any legal fees or other  reasonable  expenses  incurred by them in
connection  with  investigating  or  defending  any such Claim.  Notwithstanding
anything  to  the  contrary  contained  herein,  the  indemnification  agreement
contained in this Section 6(a): (i) shall not apply to a Claim by an Indemnified
Person  arising out of or based upon a Violation  which occurs in reliance  upon
and in conformity with  information  furnished in writing to the Company by such
Indemnified  Person for such Indemnified  Person expressly for use in connection
with the  preparation  of such  Registration  Statement  or any  such  amendment
thereof or  supplement  thereto and (ii) shall not be  available to a particular
Investor  to the extent  such Claim is based on a failure  of such  Investor  to
deliver or to cause to be delivered the prospectus made available by the Company
(to  the  extent  applicable),   including,   without  limitation,  a  corrected
prospectus, if such prospectus or corrected prospectus was timely made available

                                      -15-
<PAGE>

by the  Company  pursuant  to  Section  3(d) and then only if, and to the extent
that,  following  the receipt of the  corrected  prospectus  no grounds for such
Claim  would  have  existed;  and  (iii)  shall  not  apply to  amounts  paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company,  which  consent  shall not be  unreasonably  withheld or
delayed.  Such indemnity shall remain in full force and effect regardless of any
investigation  made by or on behalf of the Indemnified  Person and shall survive
the  transfer  of any  of the  Registrable  Securities  by any of the  Investors
pursuant to Section 9.

         (b) In connection with any Registration  Statement in which an Investor
is participating,  such Investor agrees to severally and not jointly  indemnify,
hold  harmless  and defend,  to the same extent and in the same manner as is set
forth in Section 6(a), the Company, each of its directors,  each of its officers
who signs the Registration  Statement and each Person,  if any, who controls the
Company  within  the  meaning  of the  1933  Act  or  the  1934  Act  (each,  an
"INDEMNIFIED  PARTY"),  against any Claim or Indemnified Damages to which any of
them may become subject, under the 1933 Act, the 1934 Act or otherwise,  insofar
as such  Claim  or  Indemnified  Damages  arise  out of or are  based  upon  any
Violation,  in each  case,  to the  extent,  and only to the  extent,  that such
Violation  occurs in reliance  upon and in conformity  with written  information
furnished to the Company by such Investor  expressly for use in connection  with
such Registration Statement; and, subject to Section 6(c) and the below provisos
in this Section  6(b),  such Investor will  reimburse an  Indemnified  Party any
legal  or  other  expenses  reasonably  incurred  by such  Indemnified  Party in
connection with  investigating or defending any such Claim;  provided,  however,
the indemnity  agreement  contained in this Section 6(b) and the agreement  with
respect to  contribution  contained in Section 7 shall not apply to amounts paid
in  settlement  of any Claim if such  settlement  is effected  without the prior
written  consent  of such  Investor,  which  consent  shall not be  unreasonably
withheld or delayed,  provided  further that such Investor shall be liable under
this Section 6(b) for only that amount of a Claim or Indemnified Damages as does
not exceed the net proceeds to such Investor as a result of the applicable  sale
of  Registrable  Securities  pursuant  to  such  Registration  Statement.   Such
indemnity shall remain in full force and effect  regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer of
any of the Registrable Securities by any of the Investors pursuant to Section 9.

         (c) Promptly  after  receipt by an  Indemnified  Person or  Indemnified
Party (as the case may be) under this Section 6 of notice of the commencement of
any action or proceeding (including, without limitation, any governmental action
or proceeding)  involving a Claim, such Indemnified  Person or Indemnified Party
(as the case may be) shall,  if a Claim in respect thereof is to be made against
any indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement  thereof,  and the  indemnifying  party shall
have the right to participate in, and, to the extent the  indemnifying  party so
desires,  jointly with any other indemnifying party similarly noticed, to assume
control  of the  defense  thereof  with  counsel  mutually  satisfactory  to the
indemnifying  party and the Indemnified  Person or the Indemnified Party (as the
case may be); provided,  however, an Indemnified Person or Indemnified Party (as
the case may be) shall  have the right to retain its own  counsel  with the fees
and  expenses of such counsel to be paid by the  indemnifying  party if: (i) the
indemnifying party has agreed in writing to pay such fees and expenses; (ii) the

                                      -16-
<PAGE>

indemnifying  party  shall have  failed  promptly  to assume the defense of such
Claim and to employ counsel  reasonably  satisfactory to such Indemnified Person
or Indemnified  Party (as the case may be) in any such Claim; or (iii) the named
parties to any such Claim (including, without limitation, any impleaded parties)
include both such Indemnified  Person or Indemnified  Party (as the case may be)
and the  indemnifying  party,  and such  Indemnified  Person or such Indemnified
Party (as the case may be) shall have been advised by counsel that a conflict of
interest  is  likely  to  exist  if the  same  counsel  were to  represent  such
Indemnified  Person or such  Indemnified  Party and the  indemnifying  party (in
which case, if such Indemnified  Person or such  Indemnified  Party (as the case
may be)  notifies  the  indemnifying  party in writing  that it elects to employ
separate counsel at the expense of the indemnifying party, then the indemnifying
party  shall not have the right to assume the defense  thereof and such  counsel
shall be at the expense of the Indemnifying Party,  provided further that in the
case of clause (iii) above the  indemnifying  party shall not be responsible for
the reasonable fees and expenses of more than one (1) separate legal counsel for
such  Indemnified  Person  or  Indemnified  Party  (as the  case  may  be).  The
Indemnified  Party or Indemnified  Person (as the case may be) shall  reasonably
cooperate  with the  indemnifying  party in connection  with any  negotiation or
defense of any such action or Claim by the indemnifying  party and shall furnish
to  the  indemnifying  party  all  information   reasonably   available  to  the
Indemnified  Party or  Indemnified  Person (as the case may be) which relates to
such action or Claim. The indemnifying party shall keep the Indemnified Party or
Indemnified  Person (as the case may be) reasonably  apprised at all times as to
the status of the defense or any settlement  negotiations  with respect thereto.
No indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without its prior written consent;  provided,  however,  the
indemnifying  party shall not  unreasonably  withhold,  delay or  condition  its
consent.  No indemnifying party shall,  without the prior written consent of the
Indemnified  Party or Indemnified  Person (as the case may be), consent to entry
of any judgment or enter into any settlement or other  compromise which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such  Indemnified  Party  or  Indemnified  Person  (as the  case may be) of a
release  from all  liability  in respect to such Claim or  litigation,  and such
settlement  shall  not  include  any  admission  as to  fault on the part of the
Indemnified  Party.  Following  indemnification  as provided for hereunder,  the
indemnifying party shall be subrogated to all rights of the Indemnified Party or
Indemnified Person (as the case may be) with respect to all third parties, firms
or corporations  relating to the matter for which indemnification has been made.
The  failure  to  deliver  written  notice to the  indemnifying  party  within a
reasonable  time of the  commencement  of any such action shall not relieve such
indemnifying  party of any liability to the  Indemnified  Person or  Indemnified
Party (as the case may be) under this  Section 6,  except to the extent that the
indemnifying  party is  materially  and  adversely  prejudiced in its ability to
defend such action.

         (d) No Person  involved in the sale of  Registrable  Securities  who is
guilty of fraudulent  misrepresentation  (within the meaning of Section 11(f) of
the 1933 Act) in connection with such sale shall be entitled to  indemnification
from any  Person  involved  in such sale of  Registrable  Securities  who is not
guilty of fraudulent misrepresentation.

         (e) The  indemnification  required  by this  Section 6 shall be made by
periodic  payments of the amount thereof during the course of the  investigation
or defense, as and when bills are received or Indemnified Damages are incurred.

         (f) The indemnity and contribution agreements contained herein shall be
in addition to (i) any cause of action or similar right of the Indemnified Party
or Indemnified  Person against the  indemnifying  party or others,  and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.

                                      -17-
<PAGE>

7.       CONTRIBUTION.
         ------------

         To  the  extent  any   indemnification  by  an  indemnifying  party  is
prohibited or limited by law, the indemnifying  party agrees to make the maximum
contribution  with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided,  however:  (i)
no contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section 6
of this Agreement, (ii) no Person involved in the sale of Registrable Securities
which Person is guilty of  fraudulent  misrepresentation  (within the meaning of
Section 11(f) of the 1933 Act) in connection with such sale shall be entitled to
contribution from any Person involved in such sale of Registrable Securities who
was not guilty of fraudulent  misrepresentation;  and (iii)  contribution by any
seller of Registrable Securities shall be limited in amount to the amount of net
proceeds  received by such seller from the applicable  sale of such  Registrable
Securities  pursuant  to  such  Registration   Statement.   Notwithstanding  the
provisions of this Section 7, no Investor  shall be required to  contribute,  in
the  aggregate,  any  amount in excess of the  amount by which the net  proceeds
actually  received by such Investor from the applicable  sale of the Registrable
Securities  subject to the Claim  exceeds  the amount of any  damages  that such
Investor has otherwise  been required to pay, or would  otherwise be required to
pay under Section 6(b), by reason of such untrue or alleged untrue  statement or
omission or alleged omission.

8.       REPORTS UNDER THE 1934 ACT.
         --------------------------

         With a view to making  available to the  Investors the benefits of Rule
144, the Company agrees to:

         (a) make and keep  public  information  available,  as those  terms are
understood and defined in Rule 144;

         (b)  file  with  the SEC in a  timely  manner  all  reports  and  other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood and agreed
that  nothing  herein  shall  limit any  obligations  of the  Company  under the
Securities  Purchase  Agreement)  and the  filing  of  such  reports  and  other
documents is required for the applicable provisions of Rule 144; and

         (c) furnish to each Investor so long as such Investor owns  Registrable
Securities,  promptly upon request,  (i) a written statement by the Company,  if
true,  that  it  has  complied  with  the  reporting,   submission  and  posting
requirements of Rule 144 and the 1934 Act, (ii) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents so filed
by the Company  with the SEC if such  reports  are not  publicly  available  via
EDGAR, and (iii) such other information as may be reasonably requested to permit
the Investors to sell such securities pursuant to Rule 144 without registration.

9.       ASSIGNMENT OF REGISTRATION RIGHTS.
         ---------------------------------

         All  or any  portion  of the  rights  under  this  Agreement  shall  be
automatically  assignable by each Investor to any transferee or assignee (as the

                                      -18-
<PAGE>

case may be) of all or any portion of such Investor's  Registrable Securities or
Warrants  if:  (i) such  Investor  agrees in  writing  with such  transferee  or
assignee (as the case may be) to assign all or any portion of such rights, and a
copy of such  agreement  is furnished  to the Company  within a reasonable  time
after such  transfer or  assignment  (as the case may be);  (ii) the Company is,
within a reasonable time after such transfer or assignment (as the case may be),
furnished with written notice of (a) the name and address of such  transferee or
assignee (as the case may be), and (b) the securities with respect to which such
registration  rights are being  transferred  or  assigned  (as the case may be);
(iii) immediately following such transfer or assignment (as the case may be) the
further  disposition of such  securities by such  transferee or assignee (as the
case may be) is  restricted  under the 1933 Act or applicable  state  securities
laws if so required; (iv) at or before the time the Company receives the written
notice  contemplated by clause (ii) of this sentence such transferee or assignee
(as the case may be)  agrees in writing  with the  Company to be bound by all of
the provisions  contained  herein;  (v) such transfer or assignment (as the case
may be) shall have been made in accordance  with the applicable  requirements of
the  Securities  Purchase  Agreement  and the Warrants (as the case may be); and
(vi) such transfer or assignment  (as the case may be) shall have been conducted
in accordance with all applicable federal and state securities laws.

10.      AMENDMENT OF REGISTRATION RIGHTS.
         --------------------------------

         Provisions  of this  Agreement  may be  amended  only with the  written
consent of the Company and each of the  Investors.  No waiver shall be effective
unless it is in  writing  and  signed  by an  authorized  representative  of the
waiving party. No consideration  shall be offered or paid to any Person to amend
or consent to a waiver or modification of any provision of this Agreement unless
the same consideration also is offered to all of the parties to this Agreement.

11.      MISCELLANEOUS.
         -------------

         (a) Solely for purposes of this  Agreement,  a Person is deemed to be a
holder of Registrable Securities whenever such Person owns, or is deemed to own,
of record  such  Registrable  Securities.  If the Company  receives  conflicting
instructions,  notices or elections from two or more Persons with respect to the
same  Registrable   Securities,   the  Company  shall  act  upon  the  basis  of
instructions,  notice  or  election  received  from  such  record  owner of such
Registrable Securities.

         (b) Any notices,  consents, waivers or other communications required or
permitted to be given under the terms of this  Agreement  must be in writing and
will be  deemed  to have  been  delivered:  (i)  upon  receipt,  when  delivered
personally;  (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); (iii) with respect to Section 3(c), by electronic mail (provided
confirmation of transmission is electronically generated and kept on file by the
sending  party);  or (iv) one (1) Business  Day after  deposit with a nationally
recognized overnight delivery service with next day delivery specified,  in each
case,  properly  addressed to the party to receive the same.  The  addresses and
facsimile numbers for such communications shall be:

                                      -19-
<PAGE>

                           If to the Company:

                                    3200 W. Valhalla Drive
                                    Burbank, California 91505
                                    Telephone: (800) 900-9729
                                    Facsimile: (818) 260-0445
                                    Attention: Chief Executive Officer

                           With a copy (for informational purposes only) to:

                                    Richardson & Associates
                                    1453 3rd Street Promenade #315
                                    Santa Monica,  CA 90401-3419
                                    Telephone:  (310) 393-9992
                                    Facsimile:  (310) 393-2004
                                    Attention: Mark Richardson, Esq.

                           If to the Transfer Agent:

                                    Mountain Share Transfer Company
                                    1625 Abilene Dr.
                                    Broomfield, Colorado 80020
                                    Telephone: (303) 460-1149
                                    Facsimile: (303) 438-9243
                                    Attention: Beth Powell

                          If to Legal Counsel:

                                    Greenberg Traurig, LLP
                                    77 W. Wacker Drive, Suite 3100
                                    Chicago, Illinois 60601
                                    Telephone:  (312) 456-8400
                                    Facsimile:  (312) 456-8435
                                    Attention:  Peter H. Lieberman, Esq.
                                                Todd A. Mazur, Esq.

If to a Buyer, to its address and facsimile  number set forth on the Schedule of
Buyers  attached  to the  Securities  Purchase  Agreement,  with  copies to such
Buyer's representatives as set forth on the Schedule of Buyers, or to such other
address and/or  facsimile number and/or to the attention of such other Person as
the recipient  party has  specified by written  notice given to each other party
five (5) days prior to the effectiveness of such change, provided that Greenberg
Traurig,  LLP  shall  only  be  provided  notices  sent  to  Cranshire.  Written
confirmation  of receipt (A) given by the  recipient  of such  notice,  consent,
waiver or other communication,  (B) mechanically or electronically  generated by
the sender's  facsimile machine or electronic mail  transmission  containing the
time, date,  recipient  facsimile number or electronic mail address and an image
of the first page of such transmission or (C) provided by a courier or overnight
courier  service shall be rebuttable  evidence of personal  service,  receipt by
facsimile or receipt from a nationally  recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.

                                      -20-
<PAGE>

         (c)  Failure of any party to  exercise  any right or remedy  under this
Agreement or otherwise,  or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof. The Company and each Investor acknowledge
and agree  that  irreparable  damage  would  occur in the event  that any of the
provisions  of this  Agreement  were not  performed  in  accordance  with  their
specific terms or were otherwise  breached.  It is accordingly  agreed that each
party hereto shall be entitled to an  injunction  or  injunctions  to prevent or
cure breaches of the  provisions of this Agreement by any other party hereto and
to enforce  specifically the terms and provisions  hereof (without the necessity
of showing economic loss and without any bond or other security being required),
this being in addition to any other remedy to which any party may be entitled by
law or equity.

         (d) The parties  hereby agree that  pursuant to 735  Illinois  Compiled
Statutes   105/5-5  they  have  chosen  that  all   questions   concerning   the
construction,  validity,  enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of Illinois, without giving effect
to any choice of law or conflict of law  provision or rule (whether of the State
of Illinois or any other  jurisdictions) that would cause the application of the
laws of any  jurisdictions  other than the State of Illinois.  Each party hereby
irrevocably  submits  to the  exclusive  jurisdiction  of the state and  federal
courts  sitting  in  Chicago,  Illinois,  for the  adjudication  of any  dispute
hereunder or in connection herewith or with any transaction  contemplated hereby
or discussed herein, and hereby irrevocably  waives, and agrees not to assert in
any suit, action or proceeding,  any claim that it is not personally  subject to
the  jurisdiction  of any such court,  that such suit,  action or  proceeding is
brought  in an  inconvenient  forum or that the  venue of such  suit,  action or
proceeding is improper. Each party hereby irrevocably waives personal service of
process  and  consents  to  process  being  served in any such  suit,  action or
proceeding  by  mailing a copy  thereof to such  party at the  address  for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient  service of process and notice  thereof.  Nothing  contained
herein  shall be deemed to limit in any way any  right to serve  process  in any
manner  permitted by law. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction  or the  validity  or  enforceability  of  any  provision  of  this
Agreement in any other  jurisdiction.  EACH PARTY HEREBY  IRREVOCABLY WAIVES ANY
RIGHT  IT MAY  HAVE  TO,  AND  AGREES  NOT TO  REQUEST,  A JURY  TRIAL  FOR  THE
ADJUDICATION OF ANY DISPUTE  HEREUNDER OR IN CONNECTION  HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

         (e) This Agreement,  the other Transaction Documents, the schedules and
exhibits  attached hereto and thereto and the instruments  referenced herein and
therein  constitute  the entire  agreement  among the parties hereto and thereto
solely  with  respect to the subject  matter  hereof and  thereof.  There are no
restrictions,  promises, warranties or undertakings,  other than those set forth
or  referred  to herein  and  therein.  This  Agreement,  the other  Transaction
Documents,  the  schedules  and  exhibits  attached  hereto and  thereto and the
instruments  referenced  herein and therein  supersede all prior  agreements and
understandings  among the  parties  hereto  solely  with  respect to the subject

                                      -21-
<PAGE>

matter  hereof  and  thereof;  provided,  however,  nothing  contained  in  this
Agreement or any other  Transaction  Document  shall (or shall be deemed to) (i)
have any effect on any agreements any Investor has entered into with the Company
or any of its  Subsidiaries  prior to the date hereof with  respect to any prior
investment made by such Investor in the Company,  (ii) waive,  alter,  modify or
amend in any respect any  obligations of the Company or any of its  Subsidiaries
or any  rights  of or  benefits  to any  Investor  or any  other  Person  in any
agreement  entered  into prior to the date  hereof  between or among the Company
and/or any of its  Subsidiaries  and any Investor and all such agreements  shall
continue in full force and effect or (iii) limit any  obligations of the Company
under any of the other Transaction Documents.

         (f)  Subject  to  compliance  with  Section  9  (if  applicable),  this
Agreement  shall  inure to the  benefit  of and be  binding  upon the  permitted
successors and assigns of each of the parties hereto.  This Agreement is not for
the benefit of, nor may any provision  hereof be enforced by, any Person,  other
than the parties hereto,  their respective  permitted successors and assigns and
the Persons referred to in Sections 6 and 7 hereof.

         (g) The headings in this  Agreement  are for  convenience  of reference
only and shall not limit or  otherwise  affect the  meaning  hereof.  Unless the
context  clearly  indicates  otherwise,  each pronoun  herein shall be deemed to
include the masculine,  feminine, neuter, singular and plural forms thereof. The
terms  "including,"  "includes,"  "include"  and words of like  import  shall be
construed  broadly as if followed by the words "without  limitation."  The terms
"herein,"  "hereunder,"  "hereof"  and words of like import refer to this entire
Agreement instead of just the provision in which they are found.

         (h)  This   Agreement  may  be  executed  in  two  or  more   identical
counterparts,  all of which shall be considered  one and the same  agreement and
shall  become  effective  when  counterparts  have been signed by each party and
delivered  to the other party.  In the event that any  signature is delivered by
facsimile transmission or by an e-mail which contains a portable document format
(.pdf) file of an executed  signature  page,  such signature page shall create a
valid and binding  obligation  of the party  executing  (or on whose behalf such
signature is executed)  with the same force and effect as if such signature page
were an original thereof.

         (i) Each party shall do and perform, or cause to be done and performed,
all such further acts and things,  and shall  execute and deliver all such other
agreements,  certificates,  instruments  and  documents  as any other  party may
reasonably  request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.

         (j) The  language  used  in this  Agreement  will be  deemed  to be the
language  chosen by the parties to express  their mutual  intent and no rules of
strict construction will be applied against any party.  Notwithstanding anything
to the  contrary  set forth in  Section  10,  terms used in this  Agreement  but
defined in the other  Transaction  Documents shall have the meanings ascribed to
such  terms on the  Closing  Date in such  other  Transaction  Documents  unless
otherwise  consented  to  in  writing  by  each  Investor.

         (k) The obligations of each Investor under this Agreement and the other
Transaction  Documents  are  several and not joint with the  obligations  of any
other  Investor,  and no  Investor  shall  be  responsible  in any  way  for the
performance of the obligations of any other Investor under this Agreement or any

                                      -22-
<PAGE>

other Transaction Document. Nothing contained herein or in any other Transaction
Document,  and no action taken by any Investor pursuant hereto or thereto, shall
be deemed to constitute the Investors as, and the Company  acknowledges that the
Investors do not so constitute, a partnership,  an association,  a joint venture
or any other kind of group or entity, or create a presumption that the Investors
are in any way acting in concert  or as a group or entity  with  respect to such
obligations or the transactions contemplated by the Transaction Documents or any
matters,  and the  Company  acknowledges  that the  Investors  are not acting in
concert or as a group,  and the Company  shall not assert any such  claim,  with
respect to such obligations or the  transactions  contemplated by this Agreement
or any of the other the Transaction  Documents.  Each Investor shall be entitled
to independently protect and enforce its rights, including,  without limitation,
the  rights  arising  out of  this  Agreement  or out of any  other  Transaction
Documents,  and it shall not be necessary for any other Investor to be joined as
an additional  party in any  proceeding  for such  purpose.  The use of a single
agreement with respect to the  obligations of the Company  contained  herein was
solely  in the  control  of the  Company,  not the  action  or  decision  of any
Investor, and was done solely for the convenience of the Company and not because
it  was  required  or  requested  to do  so by  any  Investor.  It is  expressly
understood  and agreed that each  provision  contained in this  Agreement and in
each other Transaction Document is between the Company and an Investor,  solely,
and not between the Company and the Investors  collectively  and not between and
among Investors.

                            [SIGNATURE PAGES FOLLOW]


























                                      -23-
<PAGE>




         IN WITNESS WHEREOF,  Buyer and the Company have caused their respective
signature page to this  Registration  Rights Agreement to be duly executed as of
the date first written above.


                                 COMPANY:

                                 IMAGING3, INC.



                                 By:______________________________________
                                 Name:
                                 Title:




































                                      -24-
<PAGE>



         IN WITNESS WHEREOF,  Buyer and the Company have caused their respective
signature page to this  Registration  Rights Agreement to be duly executed as of
the date first written above.


                                 BUYER:

                                 CRANSHIRE CAPITAL, L.P.


                                 By:      Downsview Capital, Inc.
                                 Its:     General Partner


                                 _____________________________
                                 By:      ____________________
                                 Its:     ____________________



































                                      -25-
<PAGE>
         IN WITNESS WHEREOF,  Buyer and the Company have caused their respective
signature page to this  Registration  Rights Agreement to be duly executed as of
the date first written above.


                                              BUYER:

                                              FREESTONE ADVANTAGE PARTNERS, L.P.


                                              _____________________________
                                              By:      ____________________
                                              Its:     ____________________




































                                      -26-


<PAGE>
                                                                       EXHIBIT A

                         FORM OF NOTICE OF EFFECTIVENESS
                            OF REGISTRATION STATEMENT

_________________________
_________________________
_________________________
Attention:  _____________

                  RE:      IMAGING3, INC.

Ladies and Gentlemen:


                  [We  are][I  am]  counsel  to  Imaging3,  Inc.,  a  California
corporation (the "COMPANY"), and have represented the Company in connection with
that certain Securities Purchase Agreement (the "SECURITIES PURCHASE AGREEMENT")
entered   into  by  and  among  the  Company  and  the  buyers   named   therein
(collectively,  the  "HOLDERS")  pursuant  to which  the  Company  issued to the
Holders  shares of the  Company's  common  stock,  no par  value per share  (the
"COMMON  STOCK"),  and  warrants  exercisable  for  shares of Common  Stock (the
"WARRANTS"). Pursuant to the Securities Purchase Agreement, the Company also has
entered into a Registration Rights Agreement with the Holders (the "REGISTRATION
RIGHTS AGREEMENT")  pursuant to which the Company agreed, among other things, to
register  the  Registrable  Securities  (as defined in the  Registration  Rights
Agreement),  including the shares of Common Stock  issuable upon exercise of the
Warrants,  under the  Securities  Act of 1933,  as amended (the "1933 ACT").  In
connection  with  the  Company's   obligations  under  the  Registration  Rights
Agreement, on ____________ ___, 20__, the Company filed a Registration Statement
on Form [S-1][S-3] (File No.  333-_____________) (the "REGISTRATION  STATEMENT")
with  the  Securities  and  Exchange  Commission  (the  "SEC")  relating  to the
Registrable  Securities which names each of the Holders as a selling stockholder
thereunder.

                  In connection  with the  foregoing,  [we][I] advise you that a
member of the SEC's staff has advised  [us][me]  by  telephone  that the SEC has
entered an order declaring the Registration  Statement  effective under the 1933
Act at [ENTER  TIME OF  EFFECTIVENESS]  on  [ENTER  DATE OF  EFFECTIVENESS]  and
[we][I] have no  knowledge,  after  telephonic  inquiry of a member of the SEC's
staff,  that any stop order suspending its effectiveness has been issued or that
any proceedings  for that purpose are pending before,  or threatened by, the SEC
and the  Registrable  Securities  are  available  for resale  under the 1933 Act
pursuant to the Registration Statement.

                  This letter  shall serve as our  standing  opinion to you that
the  shares of Common  Stock and the  shares  of  Common  Stock  underlying  the
Warrants are freely  transferable  by the Holders  pursuant to the  Registration
Statement.  You need not require  further  letters  from us to effect any future
legend-free issuance or reissuance of such shares of Common Stock to the Holders
as contemplated by the Company's  Irrevocable  Transfer Agent Instructions dated
_________ __, 20__.


                                                 Very truly yours,

                                                 [ISSUER'S COUNSEL]


                                                 By:_____________________


CC:      [LIST NAMES OF HOLDERS]



<PAGE>
                                                                       EXHIBIT B

                              SELLING STOCKHOLDERS

         The shares of common  stock being  offered by the selling  stockholders
are those that have been issued to the selling  stockholders  and those that are
issuable  to  the  selling  stockholders  upon  exercise  of the  warrants.  For
additional  information  regarding  the  issuance  of the  common  stock and the
warrants,  see "Private  Placement of Common Stock and Warrants"  above.  We are
registering  the  shares  of  common  stock  in  order  to  permit  the  selling
stockholders  to offer the shares for resale  from time to time.  Except for the
ownership of the common stock and the warrants issued pursuant to the Securities
Purchase  Agreement,   the  selling  stockholders  have  not  had  any  material
relationship with us within the past three years.

         The table below lists the selling  stockholders  and other  information
regarding the  beneficial  ownership (as  determined  under Section 13(d) of the
Securities  Exchange  Act of 1934,  as  amended,  and the rules and  regulations
thereunder)  of the  shares  of  common  stock  held  by  each  of  the  selling
stockholders.  The  second  column  lists the  number of shares of common  stock
beneficially  owned by the  selling  stockholders,  based  on  their  respective
ownership of shares of common stock and warrants, as of ________, 2010, assuming
exercise of the warrants held by each such selling  stockholder on that date but
taking account of any limitations on exercise set forth therein.

         The third column lists the shares of common stock being offered by this
prospectus  by the  selling  stockholders  and does not take  into  account  any
limitations on exercise of the warrants set forth therein.

         In accordance  with the terms of a registration  rights  agreement with
the  holders of the shares of common  stock and the  warrants,  this  prospectus
generally  covers  the  resale of the sum of (i) the  number of shares of common
stock issued to the selling  stockholders and (ii) 133% of the maximum number of
shares of common stock  issuable upon exercise of the warrants  determined as if
the  outstanding  warrants  were  exercised  in  full  (without  regard  to  any
limitations  on exercise  contained  therein) as of the trading day  immediately
preceding the date this registration statement was initially filed with the SEC.
Because the exercise price of the warrants may be adjusted, the number of shares
that will actually be issued may be more or less than the number of shares being
offered by this  prospectus.  The fourth  column  assumes the sale of all of the
shares offered by the selling stockholders pursuant to this prospectus.

         Under the terms of the warrants, a selling stockholder may not exercise
the warrants to the extent (but only to the extent) such selling  stockholder or
any of its affiliates  would  beneficially  own a number of shares of our common
stock  which  would  exceed  4.9%.  The  number of shares in the  second  column
reflects these limitations.  The selling stockholders may sell all, some or none
of their shares in this offering. See "Plan of Distribution."



<PAGE>
<TABLE>
<CAPTION>


                                  NUMBER OF SHARES OF        MAXIMUM NUMBER OF        NUMBER OF SHARES OF
                                  COMMON STOCK OWNED       SHARES OF COMMON STOCK     COMMON STOCK OWNED
NAME OF SELLING STOCKHOLDER        PRIOR TO OFFERING       TO BE SOLD PURSUANT TO        AFTER OFFERING
                                                               THIS PROSPECTUS
---------------------------        -----------------       -----------------------       --------------
<S>                               <C>                      <C>                        <C>

CRANSHIRE CAPITAL, L.P.
</TABLE>




(1) Downsview  Capital,  Inc.  ("Downsview") is the general partner of Cranshire
Capital,  L.P.  ("Cranshire") and consequently has voting control and investment
discretion over securities held by Cranshire.  Mitchell P. Kopin ("Mr.  Kopin"),
President of Downsview,  has voting control over Downsview. As a result, each of
Mr. Kopin,  Downsview and Cranshire may be deemed to have  beneficial  ownership
(as determined  under Section 13(d) of the  Securities  Exchange Act of 1934, as
amended) of the shares owned by Cranshire which are being registered hereunder.

<PAGE>

                              PLAN OF DISTRIBUTION

         We are  registering  the shares of common  stock  issued to the selling
stockholders  and issuable upon exercise of the warrants to permit the resale of
these shares of common stock by the selling stockholders from time to time after
the date of this  prospectus.  We will not receive any of the proceeds  from the
sale by the selling stockholders of the shares of common stock. We will bear all
fees and expenses  incident to our  obligation  to register the shares of common
stock.

         The  selling  stockholders  may sell all or a portion  of the shares of
common  stock held by them and  offered  hereby  from time to time  directly  or
through one or more  underwriters,  broker-dealers  or agents.  If the shares of
common  stock are sold  through  underwriters  or  broker-dealers,  the  selling
stockholders  will be responsible for  underwriting  discounts or commissions or
agent's  commissions.  The  shares  of  common  stock may be sold in one or more
transactions  at fixed prices,  at  prevailing  market prices at the time of the
sale, at varying prices determined at the time of sale or at negotiated  prices.
These sales may be effected in transactions,  which may involve crosses or block
transactions, pursuant to one or more of the following methods:

         o        on any national  securities  exchange or quotation  service on
                  which  the  securities  may be listed or quoted at the time of
                  sale;

         o        in the over-the-counter market;

         o        in  transactions  otherwise than on these exchanges or systems
                  or in the over-the-counter market;

         o        through the writing or  settlement  of options,  whether  such
                  options are listed on an options exchange or otherwise;

         o        ordinary brokerage  transactions and transactions in which the
                  broker-dealer solicits purchasers;

         o        block trades in which the  broker-dealer  will attempt to sell
                  the shares as agent but may  position  and resell a portion of
                  the block as principal to facilitate the transaction;

         o        purchases by a  broker-dealer  as principal  and resale by the
                  broker-dealer for its account;

         o        an exchange  distribution  in accordance with the rules of the
                  applicable exchange;

         o        privately negotiated transactions;

         o        short sales made after the date the Registration  Statement is
                  declared effective by the SEC;

         o        broker-dealers may agree with a selling securityholder to sell
                  a specified  number of such shares at a  stipulated  price per
                  share;

         o        a combination of any such methods of sale; and
<PAGE>

         o        any other method permitted pursuant to applicable law.

         The selling  stockholders  may also sell  shares of common  stock under
Rule 144 promulgated under the Securities Act of 1933, as amended, if available,
rather than under this  prospectus.  In addition,  the selling  stockholders may
transfer  the  shares  of common  stock by other  means  not  described  in this
prospectus.  If the selling  stockholders  effect such  transactions  by selling
shares of common  stock to or through  underwriters,  broker-dealers  or agents,
such underwriters,  broker-dealers or agents may receive commissions in the form
of  discounts,  concessions  or  commissions  from the selling  stockholders  or
commissions  from purchasers of the shares of common stock for whom they may act
as agent or to whom they may sell as principal (which discounts,  concessions or
commissions as to particular  underwriters,  broker-dealers  or agents may be in
excess of those customary in the types of transactions  involved). In connection
with sales of the shares of common stock or otherwise,  the selling stockholders
may enter  into  hedging  transactions  with  broker-dealers,  which may in turn
engage in short sales of the shares of common  stock in the course of hedging in
positions they assume.  The selling  stockholders may also sell shares of common
stock short and deliver  shares of common stock  covered by this  prospectus  to
close out short  positions and to return borrowed shares in connection with such
short sales.  The selling  stockholders may also loan or pledge shares of common
stock to broker-dealers that in turn may sell such shares.

         The  selling  stockholders  may pledge or grant a security  interest in
some or all of the warrants or shares of common stock owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured
parties may offer and sell the shares of common stock from time to time pursuant
to this prospectus or any amendment to this  prospectus  under Rule 424(b)(3) or
other  applicable  provision of the Securities Act amending,  if necessary,  the
list of  selling  stockholders  to  include  the  pledgee,  transferee  or other
successors  in  interest  as selling  stockholders  under this  prospectus.  The
selling  stockholders also may transfer and donate the shares of common stock in
other  circumstances  in which case the transferees,  donees,  pledgees or other
successors  in interest  will be the selling  beneficial  owners for purposes of
this prospectus.

         To the  extent  required  by the  Securities  Act  and  the  rules  and
regulations   thereunder,   the  selling   stockholders  and  any  broker-dealer
participating in the distribution of the shares of common stock may be deemed to
be  "underwriters"  within the meaning of the Securities Act, and any commission
paid, or any discounts or concessions  allowed to, any such broker-dealer may be
deemed to be underwriting  commissions or discounts under the Securities Act. At
the time a  particular  offering  of the  shares  of  common  stock  is made,  a
prospectus supplement,  if required,  will be distributed,  which will set forth
the  aggregate  amount of shares of common stock being  offered and the terms of
the offering,  including the name or names of any  broker-dealers or agents, any
discounts,  commissions  and  other  terms  constituting  compensation  from the
selling  stockholders and any discounts,  commissions or concessions  allowed or
re-allowed or paid to broker-dealers.

         Under the  securities  laws of some states,  the shares of common stock
may be sold in such  states  only  through  registered  or  licensed  brokers or
dealers. In addition,  in some states the shares of common stock may not be sold
unless such shares have been  registered  or qualified for sale in such state or
an exemption from  registration  or  qualification  is available and is complied
with.
<PAGE>

         There can be no assurance that any selling stockholder will sell any or
all of the  shares of  common  stock  registered  pursuant  to the  registration
statement, of which this prospectus forms a part.

         The selling  stockholders  and any other person  participating  in such
distribution will be subject to applicable provisions of the Securities Exchange
Act of 1934, as amended,  and the rules and regulations  thereunder,  including,
without limitation, to the extent applicable,  Regulation M of the Exchange Act,
which may limit the timing of purchases and sales of any of the shares of common
stock by the selling  stockholders and any other  participating  person.  To the
extent  applicable,  Regulation  M may also  restrict  the ability of any person
engaged  in the  distribution  of the  shares  of  common  stock  to  engage  in
market-making  activities with respect to the shares of common stock. All of the
foregoing  may affect the  marketability  of the shares of common  stock and the
ability  of any  person or entity to  engage in  market-making  activities  with
respect to the shares of common stock.

         We will pay all  expenses of the  registration  of the shares of common
stock pursuant to the  registration  rights  agreement,  estimated to be $[ ] in
total, including, without limitation,  Securities and Exchange Commission filing
fees and  expenses  of  compliance  with  state  securities  or "blue sky" laws;
provided, however, a selling stockholder will pay all underwriting discounts and
selling commissions,  if any. We will indemnify the selling stockholders against
liabilities,  including some liabilities  under the Securities Act in accordance
with the  registration  rights  agreements or the selling  stockholders  will be
entitled to  contribution.  We may be  indemnified  by the selling  stockholders
against civil liabilities,  including  liabilities under the Securities Act that
may  arise  from  any  written  information  furnished  to  us  by  the  selling
stockholder  specifically  for use in this  prospectus,  in accordance  with the
related registration rights agreements or we may be entitled to contribution.

         Once sold under the  registration  statement,  of which this prospectus
forms a part, the shares of common stock will be freely tradable in the hands of
persons other than our affiliates.