Document:

EXHIBIT 10.1

                          SECURITIES PURCHASE AGREEMENT

     SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of September 30,
2005, by and among InkSure Technologies Inc., a Delaware corporation, with
headquarters located at 1770 N.W. 64th Street, Fort Lauderdale, Florida 33309,
(the "COMPANY"), and the investors listed on the Schedule of Buyers attached
hereto (individually, a "BUYER" and collectively, the "BUYERS").

     WHEREAS:

     A. The Company and each Buyer is executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Section
4(2) of the Securities Act of 1933, as amended (the "1933 ACT"), and Rule 506 of
Regulation D ("REGULATION D") as promulgated by the United States Securities and
Exchange Commission (the "SEC") under the 1933 Act.

     B. The Company has authorized a new series of convertible notes of the
Company, which notes shall be convertible into the Company's common stock, par
value $0.01 per share (the "COMMON STOCK"), in accordance with the terms of the
Notes.

     C. Each Buyer wishes to purchase, and the Company wishes to sell, upon the
terms and conditions stated in this Agreement, that aggregate principal amount
of Notes, in substantially the form attached hereto as EXHIBIT A (the "INITIAL
NOTES"), set forth opposite such Buyer's name in column (3) on the Schedule of
Buyers (which aggregate amount for all Buyers shall be $6,000,000) (as
converted, collectively, the "INITIAL CONVERSION SHARES").

     D. Subject to the terms and conditions set forth in this Agreement, the
Buyers shall have the right to purchase in Additional Closings (as defined in
Section 1(a)(ii) below), that aggregate principal amount of Notes, in
substantially the form attached hereto as EXHIBIT A (collectively, the
"ADDITIONAL NOTES" and, collectively with the Initial Notes, the "NOTES"), set
forth opposite such Buyer's name in column (4) on the Schedule of Buyers (which
aggregate amount for all Buyers shall be up to $1,250,000) (as converted,
collectively, the "ADDITIONAL CONVERSION SHARES" and, collectively with the
Initial Conversion Shares, the "CONVERSION SHARES").

     E. Contemporaneously with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement,
substantially in the form attached hereto as EXHIBIT B (the "REGISTRATION RIGHTS
AGREEMENT"), pursuant to which the Company has agreed to provide certain
registration rights with respect to the Conversion Shares under the 1933 Act and
the rules and regulations promulgated thereunder, and applicable state
securities laws.

     F. The Notes and the Conversion Shares are collectively are referred to
herein as the "SECURITIES".

     NOW, THEREFORE, the Company and each Buyer hereby agree as follows:

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     1. PURCHASE AND SALE OF NOTES.

          (a) PURCHASE OF NOTES.

               (i) INITIAL NOTES. Subject to the satisfaction (or waiver) of the
          conditions set forth in Sections 6(a) and 7(a) below, the Company
          shall issue and sell to each Buyer, and each Buyer severally, but not
          jointly, agrees to purchase from the Company on the Initial Closing
          Date (as defined below), a principal amount of Initial Notes as is set
          forth opposite such Buyer's name in column (3) on the Schedule of
          Buyers (the "INITIAL CLOSING").

               (ii) ADDITIONAL NOTES. Subject to the satisfaction (or waiver) of
          the conditions set forth in Sections 1(c), 6(b) and 7(b) below, the
          Company shall issue and sell to each Buyer electing to participate in
          such Additional Closing pursuant to Section 1(c) below, and each such
          Buyer severally, but not jointly, agrees to purchase from the Company
          on such Additional Closing Date (as defined below), a principal amount
          of Additional Notes as is set forth opposite such Buyer's name in
          column (4) on the Schedule of Buyers (each, an "ADDITIONAL CLOSING").

               (iii) CLOSING. The Initial Closing and the Additional Closings
          are each referred to in this Agreement as a "CLOSING". Each Closing
          shall occur on the applicable Closing Date at the offices of Schulte
          Roth & Zabel LLP, 919 Third Avenue, New York, New York 10022.

               (iv) PURCHASE PRICE. The purchase price for each Buyer of the
          Initial Notes to be purchased by each such Buyer at the Initial
          Closing shall be the amount set forth opposite such Buyer's name in
          column (5) of the Schedule of Buyers (the "INITIAL PURCHASE PRICE").
          Each Buyer shall pay $1.00 for each $1.00 of principal amount of
          Additional Notes to be purchased at each Additional Closing (the
          "ADDITIONAL PURCHASE PRICE", and together with the Initial Purchase
          Price, the "PURCHASE PRICE").

          (b) INITIAL CLOSING DATE. The date and time of the Initial Closing
     (the "INITIAL CLOSING DATE") shall be 10:00 a.m., New York City Time, on
     the date hereof after notification of satisfaction (or waiver) of the
     conditions to the Initial Closing set forth in Sections 6(a) and 7(a) below
     (or such later date as is mutually agreed to by the Company and each
     Buyer).

          (c) ADDITIONAL CLOSING DATE. The date and time of the Additional
     Closings (each, an "ADDITIONAL CLOSING DATE," and together with the Initial
     Closing Date, each or "CLOSING DATE" and collectively, the "CLOSING DATES")
     shall be 10:00 a.m., New York City Time, on the date specified in the
     applicable Additional Closing Notice (as defined below), subject to
     satisfaction (or waiver) of the conditions to each Additional Closing set
     forth in Sections 6(b) and 7(b) and the conditions contained in this
     Section 1(c) (or such later date as is mutually agreed to by the Company
     and the applicable Buyer). Subject to the requirements of Sections 6(b) and
     7(b) and the conditions contained in this Section 1(c), each Buyer may
     purchase, at such Buyer's option, Additional Notes by delivering written
     notice to the Company (an "ADDITIONAL CLOSING NOTICE") at any time prior to
     March 30, 2007. An Additional Closing Notice shall be delivered at least
     five Business Days prior to the applicable Additional Closing Date set
     forth in such Additional Closing Notice. An Additional Closing Notice shall
     set forth (i) the principal amount of Additional Notes to be purchased by
     such Buyer at the applicable Additional Closing, which principal amount,
     when added to the principal amount of any Additional Notes previously
     purchased by such Buyer, shall not exceed the principal amount of
     Additional Notes as is set forth opposite such Buyer's name in column (4)
     on the Schedule of Buyers, (ii) the aggregate Additional Purchase Price for
     the Additional Notes to be purchased and (iii) the proposed Additional
     Closing Date. The Company shall promptly deliver a copy of each Additional
     Closing Notice to each Buyer that did not issue such Additional Closing
     Notice and allow such Buyer to participate in such Additional Closing,
     provided such Buyer gives written notice of its election to participate two
     (2) Business Days prior to the Additional Closing Date. As used herein,
     "BUSINESS DAY" means any day other than Saturday, Sunday or other day on
     which commercial banks in The City of New York are authorized or required
     by law to remain closed.

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          (d) FORM OF PAYMENT. On the Initial Closing Date, each Buyer shall pay
     the Initial Purchase Price to the Company for the Notes to be issued and
     sold to such Buyer at the Initial Closing by wire transfer of immediately
     available funds for such Initial Purchase Price in accordance with the
     Company's written wire instructions. On each Additional Closing Date, each
     Buyer shall pay the Additional Purchase Price to the Company for the
     Additional Notes to be issued and sold to such Buyer at the Additional
     Closing by wire transfer of immediately available funds for such Additional
     Purchase Price in accordance with the Company's written wire instructions.
     At each Closing, the Company shall deliver to each Buyer the Notes (in the
     principal amounts as such Buyer shall request) which such Buyer is then
     purchasing duly executed on behalf of the Company and registered in the
     name of such Buyer or its designee.

     2. BUYER'S REPRESENTATIONS AND WARRANTIES.

          Each Buyer represents and warrants with respect to only itself that:

          (a) NO PUBLIC SALE OR DISTRIBUTION. Such Buyer is (i) acquiring the
     Notes and (ii) upon conversion of the Notes will acquire the Conversion
     Shares, for its own account and not with a view towards, or for resale in
     connection with, the public sale or distribution thereof, except pursuant
     to sales registered or exempted under the 1933 Act; PROVIDED, HOWEVER, that
     by making the representations herein, such Buyer does not agree to hold any
     of the Securities for any minimum or other specific term and reserves the
     right to dispose of the Securities at any time in accordance with or
     pursuant to a registration statement or an exemption under the 1933 Act.
     Such Buyer is acquiring the Securities hereunder in the ordinary course of
     its business. Such Buyer does not presently have any agreement or
     understanding, directly or indirectly, with any Person to distribute any of
     the Securities.

          (b) ACCREDITED INVESTOR STATUS. Such Buyer is an "accredited investor"
     as that term is defined in Rule 501(a) of Regulation D.

          (c) RELIANCE ON EXEMPTIONS. Such Buyer understands that the Securities
     are being offered and sold to it in reliance on specific exemptions from
     the registration requirements of United States federal and state securities
     laws and that the Company is relying in part upon the truth and accuracy
     of, and such Buyer's compliance with, the representations, warranties,
     agreements, acknowledgments and understandings of such Buyer set forth
     herein in order to determine the availability of such exemptions and the
     eligibility of such Buyer to acquire the Securities.

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          (d) INFORMATION. Such Buyer and its advisors, if any, have been
     furnished with all materials relating to the business, finances and
     operations of the Company and materials relating to the offer and sale of
     the Securities which have been requested by such Buyer. Such Buyer and its
     advisors, if any, have been afforded the opportunity to ask questions of
     the Company. Neither such inquiries nor any other due diligence
     investigations conducted by such Buyer or its advisors, if any, or its
     representatives shall modify, amend or affect such Buyer's right to rely on
     the Company's representations and warranties contained herein. Such Buyer
     understands that its investment in the Securities involves a high degree of
     risk. Such Buyer has sought such accounting, legal and tax advice as it has
     considered necessary to make an informed investment decision with respect
     to its acquisition of the Securities.

          (e) NO GOVERNMENTAL REVIEW. Such Buyer understands that no United
     States federal or state agency or any other government or governmental
     agency has passed on or made any recommendation or endorsement of the
     Securities or the fairness or suitability of the investment in the
     Securities nor have such authorities passed upon or endorsed the merits of
     the offering of the Securities.

          (f) TRANSFER OR RESALE. Such Buyer understands that except as provided
     in the Registration Rights Agreement: (i) the Securities have not been and
     are not being registered under the 1933 Act or any state securities laws,
     and may not be offered for sale, sold, assigned or transferred unless (A)
     subsequently registered thereunder, (B) such Buyer shall have delivered to
     the Company an opinion of counsel, in a generally acceptable form, to the
     effect that such Securities to be sold, assigned or transferred may be
     sold, assigned or transferred pursuant to an exemption from such
     registration, or (C) such Buyer provides the Company with reasonable
     assurance that such Securities can be sold, assigned or transferred
     pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act, as
     amended, (or a successor rule thereto) (collectively, "RULE 144"); (ii) any
     sale of the Securities made in reliance on Rule 144 may be made only in
     accordance with the terms of Rule 144 and further, if Rule 144 is not
     applicable, any resale of the Securities under circumstances in which the
     seller (or the Person (as defined in Section 3(s)) through whom the sale is
     made) may be deemed to be an underwriter (as that term is defined in the
     1933 Act) may require compliance with some other exemption under the 1933
     Act or the rules and regulations of the SEC thereunder; and (iii) neither
     the Company nor any other Person is under any obligation to register the
     Securities under the 1933 Act or any state securities laws or to comply
     with the terms and conditions of any exemption thereunder.

          (g) LEGENDS. Such Buyer understands that the certificates or other
     instruments representing the Notes and, until such time as the resale of
     the Conversion Shares have been registered under the 1933 Act as
     contemplated by the Registration Rights Agreement, the stock certificates
     representing the Conversion Shares, except as set forth below, shall bear
     any legend as required by the "blue sky" laws of any state and a
     restrictive legend in substantially the following form (and a stop-transfer
     order may be placed against transfer of such stock certificates):

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          [NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
          CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
          CONVERTIBLE HAVE BEEN] [THE SECURITIES REPRESENTED BY THIS CERTIFICATE
          HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
          AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT
          BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE
          OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
          THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL,
          IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
          UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A
          UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE
          PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
          FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for resale under the 1933 Act, (ii) in connection with
a sale, assignment or other transfer, such holder provides the Company with an
opinion of counsel, in a generally acceptable form, to the effect that such
sale, assignment or transfer of the Securities may be made without registration
under the applicable requirements of the 1933 Act, or (iii) such holder provides
the Company with reasonable assurance that the Securities can be sold, assigned
or transferred pursuant to Rule 144 or Rule 144A.

          (h) VALIDITY; ENFORCEMENT. This Agreement and the Registration Rights
     Agreement to which such Buyer is a party have been duly and validly
     authorized, executed and delivered on behalf of such Buyer and shall
     constitute the legal, valid and binding obligations of such Buyer
     enforceable against such Buyer in accordance with their respective terms,
     except as such enforceability may be limited by general principles of
     equity or to applicable bankruptcy, insolvency, reorganization, moratorium,
     liquidation and other similar laws relating to, or affecting generally, the
     enforcement of applicable creditors' rights and remedies.

          (i) NO CONFLICTS. The execution, delivery and performance by such
     Buyer of this Agreement and the Registration Rights Agreement to which such
     Buyer is a party and the consummation by such Buyer of the transactions
     contemplated hereby and thereby will not (i) result in a violation of the
     organizational documents of such Buyer or (ii) conflict with, or constitute
     a default (or an event which with notice or lapse of time or both would
     become a default) under, or give to others any rights of termination,
     amendment, acceleration or cancellation of, any agreement, indenture or
     instrument to which such Buyer is a party, or (iii) result in a violation
     of any law, rule, regulation, order, judgment or decree (including federal
     and state securities laws) applicable to such Buyer, except in the case of
     clauses (ii) and (iii) above, for such conflicts, defaults, rights or
     violations which would not, individually or in the aggregate, reasonably be
     expected to have a material adverse effect on the ability of such Buyer to
     perform its obligations hereunder.

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          (j) RESIDENCY. Such Buyer is a resident of that jurisdiction specified
     below its address on the Schedule of Buyers.

          (k) CERTAIN TRADING ACTIVITIES. Such Buyer has not directly or
     indirectly engaged in any Short Sales involving the Company's securities
     since the time that such Buyer was first contacted by the Agent with
     respect to the transactions contemplated hereby. "SHORT SALES" include,
     without limitation, all "SHORT SALES" as defined in Rule 200 promulgated
     under Regulation SHO under the 1934 Act and all types of direct and
     indirect stock pledges, forward sale contracts, options, puts, calls, short
     sales, swaps and similar arrangements (including on a total return basis),
     and sales and other transactions through non-US broker dealers or foreign
     regulated brokers.

     3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

          The Company represents and warrants to each of the Buyers that:

          (a) ORGANIZATION AND QUALIFICATION. The Company and its "SUBSIDIARIES"
     (which for purposes of this Agreement means any entity in which the
     Company, directly or indirectly, owns capital stock or holds an equity or
     similar interest) are entities duly organized and validly existing in good
     standing under the laws of the jurisdiction in which they are formed, and
     have the requisite power and authorization to own their properties and to
     carry on their business as now being conducted. Each of the Company and its
     Subsidiaries is duly qualified as a foreign entity to do business and is in
     good standing in every jurisdiction in which its ownership of property or
     the nature of the business conducted by it makes such qualification
     necessary, except to the extent that the failure to be so qualified or be
     in good standing would not have a Material Adverse Effect. As used in this
     Agreement, "MATERIAL ADVERSE EFFECT" means any material adverse effect on
     the business, properties, assets, operations, results of operations,
     condition (financial or otherwise) or prospects of the Company and its
     Subsidiaries, taken as whole, or on the transactions contemplated hereby
     and the other Transaction Documents or by the agreements and instruments to
     be entered into in connection herewith or therewith, or on the authority or
     ability of the Company to perform its obligations under the Transaction
     Documents (as defined below). The Company has no Subsidiaries, except as
     set forth on SCHEDULE 3(A).

          (b) AUTHORIZATION; ENFORCEMENT; VALIDITY. The Company has the
     requisite power and authority to enter into and perform its obligations
     under this Agreement, the Notes, the Registration Rights Agreement, the
     Irrevocable Transfer Agent Instructions (as defined in Section 5(b)), and
     each of the other agreements entered into by the parties hereto in
     connection with the transactions contemplated by this Agreement
     (collectively, the "TRANSACTION DOCUMENTS") and to issue the Securities in
     accordance with the terms hereof and thereof. The execution and delivery of
     the Transaction Documents by the Company and the consummation by the
     Company of the transactions contemplated hereby and thereby, including,
     without limitation, the issuance of the Notes and the reservation for
     issuance and the issuance of the Conversion Shares issuable upon conversion
     of the Notes, have been duly authorized by the Company's Board of Directors
     and (other than the filing with the SEC of (i) a Form D under Regulation D
     of the 1933 Act in accordance with Section 4(b) hereof, (ii) one or more
     Registration Statements in accordance with the requirements of the
     Registration Rights Agreement and (iii) one or more Current Reports on Form
     8-K pursuant to Section 4(i) hereof), no further filing, consent, or
     authorization is required by the Company, its Board of Directors or its
     stockholders. This Agreement and the other Transaction Documents of even
     date herewith have been duly executed and delivered by the Company, and
     constitute the legal, valid and binding obligations of the Company,
     enforceable against the Company in accordance with their respective terms,
     except as such enforceability may be limited by general principles of
     equity or applicable bankruptcy, insolvency, reorganization, moratorium,
     liquidation or similar laws relating to, or affecting generally, the
     enforcement of applicable creditors' rights and remedies. Any of the
     Transaction Documents dated after the date hereof, upon execution and
     delivery, will have been duly executed and delivered by the Company, and
     constitute the legal, valid and binding obligations of the Company,
     enforceable against the Company in accordance with their respective terms,
     except as such enforceability may be limited by general principles of
     equity or applicable bankruptcy, insolvency, reorganization, moratorium,
     liquidation or similar laws relating to, or affecting generally, the
     enforcement of applicable creditors' rights and remedies.

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          (c) ISSUANCE OF SECURITIES. The issuance of the Notes are duly
     authorized and are free from all taxes, liens and charges with respect to
     the issue thereof. As of the applicable Closing, the Company shall have
     reserved from its duly authorized capital stock not less than the sum of
     130% of the maximum number of shares of Common Stock issuable upon
     conversion of the Notes issuable at such Closing and issued at any prior
     Closing (assuming for purposes hereof, that the Notes are convertible at
     the initial Conversion Price and without taking into account any
     limitations on the conversion of the Notes set forth in the Notes). Upon
     conversion in accordance with the Notes, the Conversion Shares will be
     validly issued, fully paid and nonassessable and free from all preemptive
     or similar rights, taxes, liens and charges with respect to the issue
     thereof, with the holders being entitled to all rights accorded to a holder
     of Common Stock. The offer and issuance by the Company of the Securities is
     exempt from registration under the 1933 Act.

          (d) NO CONFLICTS. The execution, delivery and performance of the
     Transaction Documents by the Company and the consummation by the Company of
     the transactions contemplated hereby and thereby (including, without
     limitation, the issuance of the Notes and reservation for issuance and
     issuance of the Conversion Shares) will not (i) result in a violation of
     the Certificate of Incorporation (as defined in Section 3(r)) of the
     Company or any of its Subsidiaries, any capital stock of the Company or
     Bylaws (as defined in Section 3(r)) of the Company or any of its
     Subsidiaries or (ii) conflict with, or constitute a default (or an event
     which with notice or lapse of time or both would become a default) under,
     or give to others any rights of termination, amendment, acceleration or
     cancellation of, any agreement, indenture or instrument to which the
     Company or any of its Subsidiaries is a party, except which are the subject
     of written waivers or consents which have been obtained or effected, or
     (iii) result in a violation of any law, rule, regulation, order, judgment
     or decree (including federal and state securities laws and regulations and
     the rules and regulations of the OTC Bulletin Board (the "PRINCIPAL
     MARKET")) applicable to the Company or any of its Subsidiaries or by which
     any property or asset of the Company or any of its Subsidiaries is bound or
     affected, except in the case of clauses (ii) and (iii), for such breaches
     or defaults as could not reasonably be expected to have a Material Adverse
     Effect.

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          (e) CONSENTS. The Company is not required to obtain any consent,
     authorization or order of, or make any filing or registration with, any
     court, governmental agency or any regulatory or self-regulatory agency or
     any other Person in order for it to execute, deliver or perform any of its
     obligations under or contemplated by the Transaction Documents, in each
     case in accordance with the terms hereof or thereof (other than the filing
     with the SEC of (i) a Form D under Regulation D of the 1933 Act in
     accordance with Section 4(b) hereof, (ii) one or more Registration
     Statements in accordance with the requirements of the Registration Rights
     Agreement and (iii) one or more Current Reports on Form 8-K pursuant to
     Section 4(i) hereof). All consents, authorizations, orders, filings and
     registrations which the Company is required to obtain pursuant to the
     preceding sentence have been obtained or effected on or prior to the
     applicable Closing Date, and the Company and its Subsidiaries are unaware
     of any facts or circumstances which might prevent the Company from
     obtaining or effecting any of the registration, application or filings
     pursuant to the preceding sentence. The Company is not in violation of the
     listing requirements of the Principal Market and has no knowledge of any
     facts which would reasonably lead to delisting or suspension of the Common
     Stock in the foreseeable future.

          (f) ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF SECURITIES. The
     Company acknowledges and agrees that each Buyer is acting solely in the
     capacity of arm's length purchaser with respect to the Transaction
     Documents and the transactions contemplated hereby and thereby and that no
     Buyer is (i) an officer or director of the Company, (ii) an "affiliate" of
     the Company (as defined in Rule 144) or (iii) to the knowledge of the
     Company, a "beneficial owner" of more than 10% of the shares of Common
     Stock (as defined for purposes of Rule 13d-3 of the Securities Exchange Act
     of 1934, as amended (the "1934 ACT")). The Company further acknowledges
     that no Buyer is acting as a financial advisor or fiduciary of the Company
     (or in any similar capacity) with respect to the Transaction Documents and
     the transactions contemplated hereby and thereby, and any advice given by a
     Buyer or any of its representatives or agents in connection with the
     Transaction Documents and the transactions contemplated hereby and thereby
     is merely incidental to such Buyer's purchase of the Securities. The
     Company further represents to each Buyer that the Company's decision to
     enter into the Transaction Documents has been based solely on the
     independent evaluation by the Company and its representatives and partially
     in reliance upon the representations and warranties of each Buyer
     hereunder.

          (g) NO GENERAL SOLICITATION; PLACEMENT AGENT'S FEES. Neither the
     Company, nor any of its affiliates, nor any Person acting on its or their
     behalf, has engaged in any form of general solicitation or general
     advertising (within the meaning of Regulation D) in connection with the
     offer or sale of the Securities. The Company shall be responsible for the
     payment of any placement agent's fees, financial advisory fees, or brokers'
     commissions (other than for persons engaged by any Buyer or its investment
     advisor) relating to or arising out of the transactions contemplated
     hereby. The Company shall pay, and hold each Buyer harmless against, any
     liability, loss or expense (including, without limitation, attorney's fees
     and out-of-pocket expenses) arising in connection with any such claim. The
     Company acknowledges that it has engaged Jefferies & Co. as placement agent
     (the "AGENT") in connection with the sale of the Securities. Other than the
     Agent, the Company has not engaged any placement agent or other agent in
     connection with the sale of the Securities.

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          (h) NO INTEGRATED OFFERING. None of the Company, its Subsidiaries, any
     of their affiliates, and any Person acting on their behalf has, directly or
     indirectly, made any offers or sales of any security or solicited any
     offers to buy any security, under circumstances that would require
     registration of any of the Securities under the 1933 Act or cause this
     offering of the Securities to be integrated with prior offerings by the
     Company for purposes of the 1933 Act or any applicable stockholder approval
     provisions, including, without limitation, under the rules and regulations
     of any exchange or automated quotation system on which any of the
     securities of the Company are listed or designated. None of the Company,
     its Subsidiaries, their affiliates and any Person acting on their behalf
     will take any action or steps referred to in the preceding sentence that
     would require registration of any of the Securities under the 1933 Act or
     cause the offering of the Securities to be integrated with other offerings.

          (i) DILUTIVE EFFECT. The Company understands and acknowledges that the
     number of Conversion Shares issuable upon conversion of the Notes will
     increase in certain circumstances. The Company further acknowledges that
     its obligation to issue Conversion Shares upon conversion of the Notes in
     accordance with this Agreement and the Notes is absolute and unconditional
     regardless of the dilutive effect that such issuance may have on the
     ownership interests of other stockholders of the Company.

          (j) APPLICATION OF TAKEOVER PROTECTIONS; RIGHTS AGREEMENT. The Company
     and its board of directors have taken all necessary action, if any, in
     order to render inapplicable any control share acquisition, business
     combination, poison pill (including any distribution under a rights
     agreement) or other similar anti-takeover provision under the Certificate
     of Incorporation or the laws of the jurisdiction of its formation which is
     or could become applicable to any Buyer as a result of the transactions
     contemplated by this Agreement, including, without limitation, the
     Company's issuance of the Securities and any Buyer's ownership of the
     Securities. The Company has not adopted a stockholder rights plan or
     similar arrangement relating to accumulations of beneficial ownership of
     Common Stock or a change in control of the Company.

          (k) SEC DOCUMENTS; FINANCIAL STATEMENTS. Except as disclosed in
     SCHEDULE 3(K), during the two (2) years prior to the date hereof, the
     Company has filed all reports, schedules, forms, statements and other
     documents required to be filed by it with the SEC pursuant to the reporting
     requirements of the 1934 Act (all of the foregoing filed prior to the date
     hereof and all exhibits included therein and financial statements, notes
     and schedules thereto and documents incorporated by reference therein being
     hereinafter referred to as the "SEC DOCUMENTS"). The Company has delivered
     to the Buyers or their respective representatives true, correct and
     complete copies of the SEC Documents not available on the EDGAR system. As
     of their respective dates, the SEC Documents complied in all material
     respects with the requirements of the 1934 Act and the rules and
     regulations of the SEC promulgated thereunder applicable to the SEC
     Documents, and none of the SEC Documents, at the time they were filed with
     the SEC, contained any untrue statement of a material fact or omitted to
     state a material fact required to be stated therein or necessary in order
     to make the statements therein, in the light of the circumstances under
     which they were made, not misleading. As of their respective dates, the
     financial statements of the Company included in the SEC Documents complied
     as to form in all material respects with applicable accounting requirements
     and the published rules and regulations of the SEC with respect thereto.
     Such financial statements have been prepared in accordance with generally
     accepted accounting principles, consistently applied, during the periods
     involved (except (i) as may be otherwise indicated in such financial
     statements or the notes thereto, or (ii) in the case of unaudited interim
     statements, to the extent they may exclude footnotes or may be condensed or
     summary statements) and fairly present in all material respects the
     financial position of the Company as of the dates thereof and the results
     of its operations and cash flows for the periods then ended (subject, in
     the case of unaudited statements, to normal year-end audit adjustments). No
     other information provided by or on behalf of the Company to the Buyers
     which is not included in the SEC Documents, including, without limitation,
     information referred to in Section 2(d) of this Agreement, contains any
     untrue statement of a material fact or omits to state any material fact
     necessary in order to make the statements therein, in the light of the
     circumstance under which they are or were made, not misleading.

                                     - 9 -
<PAGE>

          (l) ABSENCE OF CERTAIN CHANGES. Except as disclosed in SCHEDULE 3(L),
     since December 31, 2004, there has been no material adverse change and no
     material adverse development in the business, properties, operations,
     condition (financial or otherwise), results of operations or prospects of
     the Company. Except as disclosed in SCHEDULE 3(L), since December 31, 2004,
     the Company has not (i) declared or paid any dividends, (ii) sold any
     assets, individually or in the aggregate, in excess of $100,000 outside of
     the ordinary course of business or (iii) had capital expenditures,
     individually or in the aggregate, in excess of $100,000. The Company has
     not taken any steps to seek protection pursuant to any bankruptcy law nor
     does the Company have any knowledge or reason to believe that its creditors
     intend to initiate involuntary bankruptcy proceedings or any actual
     knowledge of any fact which would reasonably lead a creditor to do so. The
     Company is not as of the date hereof, and after giving effect to the
     transactions contemplated hereby to occur at the applicable Closing, will
     not be Insolvent (as defined below). For purposes of this Section 3(l),
     "INSOLVENT" means (i) the present fair saleable value of the Company's
     assets is less than the amount required to pay the Company's total
     Indebtedness (as defined in Section 3(s)), (ii) the Company is unable to
     pay its debts and liabilities, subordinated, contingent or otherwise, as
     such debts and liabilities become absolute and matured, (iii) the Company
     intends to incur or believes that it will incur debts that would be beyond
     its ability to pay as such debts mature or (iv) the Company has
     unreasonably small capital with which to conduct the business in which it
     is engaged as such business is now conducted and is proposed to be
     conducted.

          (m) NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR CIRCUMSTANCES.
     No event, liability, development or circumstance has occurred or exists
     with respect to the Company, its Subsidiaries or their respective business,
     properties, prospects, operations or financial condition, that would be
     required to be disclosed by the Company under applicable securities laws on
     a registration statement on Form S-1 filed with the SEC relating to an
     issuance and sale by the Company of its Common Stock and which has not been
     publicly announced.

          (n) CONDUCT OF BUSINESS; REGULATORY PERMITS. Neither the Company nor
     its Subsidiaries is in violation of any term of or in default under its
     Certificate of Incorporation or Bylaws or their organizational charter or
     certificate of incorporation or bylaws, respectively. Neither the Company
     nor any of its Subsidiaries is in violation of any judgment, decree or
     order or any statute, ordinance, rule or regulation applicable to the
     Company or its Subsidiaries, and neither the Company nor any of its
     Subsidiaries will conduct its business in violation of any of the
     foregoing, except for possible violations which would not, individually or
     in the aggregate, have a Material Adverse Effect. Since December 31, 2003,
     (i) the Common Stock has been designated for quotation on the Principal
     Market, (ii) trading in the Common Stock has not been suspended by the SEC
     or the Principal Market and (iii) the Company has received no
     communication, written or oral, from the SEC or the Principal Market
     regarding the suspension or delisting of the Common Stock from the
     Principal Market. The Company and its Subsidiaries possess all
     certificates, authorizations and permits issued by the appropriate
     regulatory authorities necessary to conduct their respective businesses,
     except where the failure to possess such certificates, authorizations or
     permits would not have, individually or in the aggregate, a Material
     Adverse Effect, and neither the Company nor any such Subsidiary has
     received any notice of proceedings relating to the revocation or
     modification of any such certificate, authorization or permit.

                                     - 10 -
<PAGE>

          (o) FOREIGN CORRUPT PRACTICES. Neither the Company nor any of its
     Subsidiaries nor any director, officer, agent, employee or other Person
     acting on behalf of the Company or any of its Subsidiaries has, in the
     course of its actions for, or on behalf of, the Company (i) used any
     corporate funds for any unlawful contribution, gift, entertainment or other
     unlawful expenses relating to political activity; (ii) made any direct or
     indirect unlawful payment to any foreign or domestic government official or
     employee from corporate funds; (iii) violated or is in violation of any
     provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or
     (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback
     or other unlawful payment to any foreign or domestic government official or
     employee.

          (p) SARBANES-OXLEY ACT. The Company is in compliance with any and all
     applicable requirements of the Sarbanes-Oxley Act of 2002 that are
     effective as of the date hereof, and any and all applicable rules and
     regulations promulgated by the SEC thereunder that are effective as of the
     date hereof, except where such noncompliance would not have, individually
     or in the aggregate, a Material Adverse Effect.

          (q) TRANSACTIONS WITH AFFILIATES. Except as set forth in the SEC
     Documents filed at least ten days prior to the date hereof and other than
     the grant of stock options disclosed on SCHEDULE 3(Q), none of the
     officers, directors or employees of the Company is presently a party to any
     transaction with the Company or any of its Subsidiaries (other than for
     ordinary course services as employees, officers or directors), including
     any contract, agreement or other arrangement providing for the furnishing
     of services to or by, providing for rental of real or personal property to
     or from, or otherwise requiring payments to or from any such officer,
     director or employee or, to the knowledge of the Company, any corporation,
     partnership, trust or other entity in which any such officer, director, or
     employee has a substantial interest or is an officer, director, trustee or
     partner.

                                     - 11 -
<PAGE>

               (r) EQUITY CAPITALIZATION. As of the date hereof, the authorized
          capital stock of the Company consists of (i) 35,000,000 shares of
          Common Stock, of which as of the date hereof, 15,161,325 are issued
          and outstanding, 1,345,184 shares are reserved for issuance pursuant
          to the Company's stock option and purchase plans and 3,676,222 shares
          are reserved for issuance pursuant to securities (other than the
          Notes) exercisable or exchangeable for, or convertible into, shares of
          Common Stock and (ii) 10,000,000 shares of preferred stock, $0.01 par
          value per share, of which as of the date hereof, none is issued and
          outstanding. All of such outstanding shares have been, or upon
          issuance will be, validly issued and are fully paid and nonassessable.
          Except as disclosed in SCHEDULE 3(R): (i) none of the Company's
          capital stock is subject to preemptive rights or any other similar
          rights or any liens or encumbrances suffered or permitted by the
          Company; (ii) there are no outstanding options, warrants, scrip,
          rights to subscribe to, calls or commitments of any character
          whatsoever relating to, or securities or rights convertible into, or
          exercisable or exchangeable for, any capital stock of the Company or
          any of its Subsidiaries, or contracts, commitments, understandings or
          arrangements by which the Company or any of its Subsidiaries is or may
          become bound to issue additional capital stock of the Company or any
          of its Subsidiaries or options, warrants, scrip, rights to subscribe
          to, calls or commitments of any character whatsoever relating to, or
          securities or rights convertible into, or exercisable or exchangeable
          for, any capital stock of the Company or any of its Subsidiaries;
          (iii) there are no outstanding debt securities, notes, credit
          agreements, credit facilities or other agreements, documents or
          instruments evidencing Indebtedness of the Company or any of its
          Subsidiaries or by which the Company or any of its Subsidiaries is or
          may become bound; (iv) there are no financing statements securing
          obligations in any material amounts, either singly or in the
          aggregate, filed in connection with the Company or any of its
          Subsidiaries; (v) there are no agreements or arrangements under which
          the Company or any of its Subsidiaries is obligated to register the
          sale of any of their securities under the 1933 Act (except the
          Registration Rights Agreement); (vi) there are no outstanding
          securities or instruments of the Company or any of its Subsidiaries
          which contain any redemption or similar provisions, and there are no
          contracts, commitments, understandings or arrangements by which the
          Company or any of its Subsidiaries is or may become bound to redeem a
          security of the Company or any of its Subsidiaries, except to the
          extent that a cashless exercise feature in options or warrants may be
          treated as a redemption; (vii) there are no securities or instruments
          containing anti-dilution or similar provisions that will be triggered
          by the issuance of the Securities; (viii) the Company does not have
          any stock appreciation rights or "phantom stock" plans or agreements
          or any similar plan or agreement; and (ix) the Company and its
          Subsidiaries have no liabilities or obligations required to be
          disclosed in the SEC Documents but not so disclosed in the SEC
          Documents, other than those incurred in the ordinary course of the
          Company's or its Subsidiaries' respective businesses and which,
          individually or in the aggregate, do not or would not have a Material
          Adverse Effect. The Company has furnished to the Buyer true, correct
          and complete copies of the Company's Certificate of Incorporation, as
          amended and as in effect on the date hereof (the "CERTIFICATE OF
          INCORPORATION"), and the Company's Bylaws, as amended and as in effect
          on the date hereof (the "BYLAWS"), and the terms of all securities
          convertible into, or exercisable or exchangeable for, shares of Common
          Stock and the material rights of the holders thereof in respect
          thereto.

                                     - 12 -
<PAGE>

          (s) INDEBTEDNESS AND OTHER CONTRACTS. Except as disclosed in SCHEDULE
     3(S), neither the Company nor any of its Subsidiaries (i) has any
     outstanding Indebtedness (as defined below), (ii) is a party to any
     contract, agreement or instrument, the violation of which, or default under
     which, by the other party(ies) to such contract, agreement or instrument
     would result in a Material Adverse Effect, (iii) is in violation of any
     term of or in default under any contract, agreement or instrument relating
     to any Indebtedness, except where such violations and defaults would not
     result, individually or in the aggregate, in a Material Adverse Effect, or
     (iv) is a party to any contract, agreement or instrument relating to any
     Indebtedness, the performance of which, in the judgment of the Company's
     officers, has or is expected to have a Material Adverse Effect. SCHEDULE
     3(S) provides a detailed description of the material terms of any such
     outstanding Indebtedness. For purposes of this Agreement: (x)
     "INDEBTEDNESS" of any Person means, without duplication (A) all
     indebtedness for borrowed money, (B) all obligations issued, undertaken or
     assumed as the deferred purchase price of property or services (other than
     trade payables entered into in the ordinary course of business), (C) all
     reimbursement or payment obligations with respect to letters of credit,
     surety bonds and other similar instruments, (D) all obligations evidenced
     by notes, bonds, debentures or similar instruments, including obligations
     so evidenced incurred in connection with the acquisition of property,
     assets or businesses, (E) all indebtedness created or arising under any
     conditional sale or other title retention agreement, or incurred as
     financing, in either case with respect to any property or assets acquired
     with the proceeds of such indebtedness (even though the rights and remedies
     of the seller or bank under such agreement in the event of default are
     limited to repossession or sale of such property), (F) all monetary
     obligations under any leasing or similar arrangement which, in connection
     with generally accepted accounting principles, consistently applied for the
     periods covered thereby, is classified as a capital lease, (G) all
     indebtedness referred to in clauses (A) through (F) above secured by (or
     for which the holder of such Indebtedness has an existing right, contingent
     or otherwise, to be secured by) any mortgage, lien, pledge, charge,
     security interest or other encumbrance upon or in any property or assets
     (including accounts and contract rights) owned by any Person, even though
     the Person which owns such assets or property has not assumed or become
     liable for the payment of such indebtedness, and (H) all Contingent
     Obligations in respect of indebtedness or obligations of others of the
     kinds referred to in clauses (A) through (G) above; (y) "CONTINGENT
     OBLIGATION" means, as to any Person, any direct or indirect liability,
     contingent or otherwise, of that Person with respect to any indebtedness,
     lease, dividend or other obligation of another Person if the primary
     purpose or intent of the Person incurring such liability, or the primary
     effect thereof, is to provide assurance to the obligee of such liability
     that such liability will be paid or discharged, or that any agreements
     relating thereto will be complied with, or that the holders of such
     liability will be protected (in whole or in part) against loss with respect
     thereto; and (z) "PERSON" means an individual, a limited liability company,
     a partnership, a joint venture, a corporation, a trust, an unincorporated
     organization and a government or any department or agency thereof.

          (t) ABSENCE OF LITIGATION. There is no action, suit, proceeding,
     inquiry or investigation before or by the Principal Market, any court,
     public board, government agency, self-regulatory organization or body
     pending or, to the knowledge of the Company, threatened against or
     affecting the Company, the Common Stock or any of the Company's
     Subsidiaries or any of the Company's or its Subsidiaries' officers or
     directors, except as set forth in SCHEDULE 3(T).

          (u) INSURANCE. The Company and each of its Subsidiaries are insured by
     insurers of recognized financial responsibility against such losses and
     risks and in such amounts as management of the Company believes to be
     prudent and customary in the businesses in which the Company and its
     Subsidiaries are engaged. Neither the Company nor any such Subsidiary has
     been refused any insurance coverage sought or applied for and neither the
     Company nor any such Subsidiary has any reason to believe that it will not
     be able to renew its existing insurance coverage as and when such coverage
     expires or to obtain similar coverage from similar insurers as may be
     necessary to continue its business at a cost that would not have a Material
     Adverse Effect.

                                     - 13 -
<PAGE>

          (v) EMPLOYEE RELATIONS. (i) Except as set forth in SCHEDULE 3(V),
     neither Company nor any of its Subsidiaries is a party to any collective
     bargaining agreement or employs any member of a union. The Company and its
     Subsidiaries believe that their relations with their employees are good. No
     executive officer of the Company or any of its Subsidiaries (as defined in
     Rule 501(f) of the 1933 Act) has notified the Company or any such
     Subsidiary that such officer intends to leave the Company or any such
     Subsidiary or otherwise terminate such officer's employment with the
     Company or any such Subsidiary. No executive officer of the Company or any
     of its Subsidiaries, to the knowledge of the Company or any such
     Subsidiary, is, or is now expected to be, in violation of any material term
     of any employment contract, confidentiality, disclosure or proprietary
     information agreement, non-competition agreement, or any other contract or
     agreement or any restrictive covenant, and the continued employment of each
     such executive officer does not subject the Company or any such Subsidiary
     to any liability with respect to any of the foregoing matters.

               (ii) The Company and its Subsidiaries are in compliance with all
          federal, state, local and foreign laws and regulations respecting
          labor, employment and employment practices and benefits, terms and
          conditions of employment and wages and hours, except where failure to
          be in compliance would not, either individually or in the aggregate,
          reasonably be expected to result in a Material Adverse Effect.

          (w) TITLE. The Company and its Subsidiaries have good and marketable
     title in fee simple to all real property and good and marketable title to
     all personal property owned by them which is material to the business of
     the Company and its Subsidiaries, in each case free and clear of all liens,
     encumbrances and defects except such as do not materially affect the value
     of such property and do not interfere with the use made and proposed to be
     made of such property by the Company and any of its Subsidiaries. Any real
     property and facilities held under lease by the Company and any of its
     Subsidiaries are held by them under valid, subsisting and enforceable
     leases with such exceptions as are not material and do not interfere with
     the use made and proposed to be made of such property and buildings by the
     Company and its Subsidiaries.

          (x) INTELLECTUAL PROPERTY RIGHTS. The Company and its Subsidiaries own
     or possess adequate rights or licenses to use all trademarks, trade names,
     service marks, service mark registrations, service names, patents, patent
     rights, copyrights, inventions, licenses, approvals, governmental
     authorizations, trade secrets and other intellectual property rights
     ("INTELLECTUAL PROPERTY RIGHTS") necessary to conduct their respective
     businesses as now conducted. Except as set forth in SCHEDULE 3(X), none of
     the Company's Intellectual Property Rights have expired or terminated, or
     are expected to expire or terminate, within three years from the date of
     this Agreement. The Company does not have any knowledge of any infringement
     by the Company or its Subsidiaries of Intellectual Property Rights of
     others. There is no claim, action or proceeding being made or brought, or
     to the knowledge of the Company, being threatened, against the Company or
     its Subsidiaries regarding its Intellectual Property Rights. The Company is
     unaware of any facts or circumstances which might give rise to any of the
     foregoing infringements or claims, actions or proceedings. The Company and
     its Subsidiaries have taken reasonable security measures to protect the
     secrecy, confidentiality and value of all of their intellectual properties.

                                     - 14 -
<PAGE>

          (y) ENVIRONMENTAL LAWS. To the knowledge of the Company, the Company
     and its Subsidiaries (i) are in compliance with any and all Environmental
     Laws (as hereinafter defined), (ii) have received all permits, licenses or
     other approvals required of them under applicable Environmental Laws to
     conduct their respective businesses and (iii) are in compliance with all
     terms and conditions of any such permit, license or approval where, in each
     of the foregoing clauses (i), (ii) and (iii), the failure to so comply
     could be reasonably expected to have, individually or in the aggregate, a
     Material Adverse Effect. The term "ENVIRONMENTAL LAWS" means all federal,
     state, local or foreign laws relating to pollution or protection of human
     health or the environment (including, without limitation, ambient air,
     surface water, groundwater, land surface or subsurface strata), including,
     without limitation, laws relating to emissions, discharges, releases or
     threatened releases of chemicals, pollutants, contaminants, or toxic or
     hazardous substances or wastes (collectively, "HAZARDOUS MATERIALS") into
     the environment, or otherwise relating to the manufacture, processing,
     distribution, use, treatment, storage, disposal, transport or handling of
     Hazardous Materials, as well as all authorizations, codes, decrees, demands
     or demand letters, injunctions, judgments, licenses, notices or notice
     letters, orders, permits, plans or regulations issued, entered, promulgated
     or approved thereunder.

          (z) SUBSIDIARY RIGHTS. Except as set forth in SCHEDULE 3(Z), the
     Company or one of its Subsidiaries has the unrestricted right to vote, and
     (subject to limitations imposed by applicable law) to receive dividends and
     distributions on, all capital securities of its Subsidiaries as owned by
     the Company or such Subsidiary.

          (aa) TAX STATUS. Except as set forth in Schedule 3(aa), the Company
     and each of its Subsidiaries (i) has made or filed all foreign, federal and
     state income and all other tax returns, reports and declarations required
     by any jurisdiction to which it is subject, (ii) has paid all taxes and
     other governmental assessments and charges that are material in amount,
     shown or determined to be due on such returns, reports and declarations,
     except those being contested in good faith and (iii) has set aside on its
     books provision reasonably adequate for the payment of all taxes for
     periods subsequent to the periods to which such returns, reports or
     declarations apply. There are no unpaid taxes in any material amount
     claimed to be due by the taxing authority of any jurisdiction, and the
     officers of the Company know of no basis for any such claim.

          (bb) INTERNAL ACCOUNTING CONTROLS. The Company and each of its
     Subsidiaries maintain a system of internal accounting controls sufficient
     to provide reasonable assurance that (i) transactions are executed in
     accordance with management's general or specific authorizations, (ii)
     transactions are recorded as necessary to permit preparation of financial
     statements in conformity with generally accepted accounting principles and
     to maintain asset and liability accountability, (iii) access to assets or
     incurrence of liabilities is permitted only in accordance with management's
     general or specific authorization and (iv) the recorded accountability for
     assets and liabilities is compared with the existing assets and liabilities
     at reasonable intervals and appropriate action is taken with respect to any
     difference.

          (cc) RANKING OF NOTES. Except for Permitted Senior Indebtedness (as
     defined in the Notes) and as set forth on SCHEDULE (CC), no Indebtedness of
     the Company is senior to the Notes in right of payment, whether with
     respect of payment of redemptions, interest, damages or upon liquidation or
     dissolution or otherwise.

          (dd) FORM SB-2 ELIGIBILITY. The Company is eligible to register the
     Conversion Shares for resale by the Buyers using Form SB-2, or other
     applicable or successor form, promulgated under the 1933 Act.

                                     - 15 -
<PAGE>

          (ee) MANIPULATION OF PRICE. The Company has not, and to its knowledge
     no one acting on its behalf has, (i) taken, directly or indirectly, any
     action designed to cause or to result in the stabilization or manipulation
     of the price of any security of the Company to facilitate the sale or
     resale of any of the Securities, (ii) other than the Agent, sold, bid for,
     purchased, or paid any compensation for soliciting purchases of, any of the
     Securities, or (iii) other than the Agent, paid or agreed to pay to any
     person any compensation for soliciting another to purchase any other
     securities of the Company.

          (ff) DISCLOSURE. The Company confirms that neither it nor any other
     Person acting on its behalf has provided any of the Buyers or their agents
     or counsel with any information that constitutes or could reasonably be
     expected to constitute material, nonpublic information other than for the
     status and terms of the financing contemplated hereby. The Company
     understands and confirms that each of the Buyers will rely on the foregoing
     representations in effecting transactions in securities of the Company. All
     disclosure provided to the Buyers regarding the Company, its business and
     the transactions contemplated hereby, including the Schedules to this
     Agreement, furnished by or on behalf of the Company is true and correct and
     does not contain any untrue statement of a material fact or omit to state
     any material fact necessary in order to make the statements made therein,
     in the light of the circumstances under which they were made, not
     misleading. Each press release issued by the Company during the twelve (12)
     months preceding the date of this Agreement did not at the time of release
     contain any untrue statement of a material fact or omit to state a material
     fact required to be stated therein or necessary in order to make the
     statements therein, in the light of the circumstances under which they are
     made, not misleading. No event or circumstance has occurred or information
     exists with respect to the Company or any of its Subsidiaries or its or
     their business, properties, prospects, operations or financial conditions,
     which, under applicable law, rule or regulation, requires public disclosure
     or announcement by the Company but which has not been so publicly announced
     or disclosed.

     4. COVENANTS.

          (a) BEST EFFORTS. Each party shall use its best efforts timely to
     satisfy each of the conditions to be satisfied by it as provided in
     Sections 6 and 7 of this Agreement.

          (b) FORM D AND BLUE SKY. The Company agrees to file a Form D with
     respect to the Securities as required under Regulation D and to provide a
     copy thereof to each Buyer promptly after such filing. The Company shall,
     on or before the applicable Closing Date, take such action as the Company
     shall reasonably determine is necessary in order to obtain an exemption for
     or to qualify the Securities for sale to the Buyers at the applicable
     Closing pursuant to this Agreement under applicable securities or "Blue
     Sky" laws of the states of the United States (or to obtain an exemption
     from such qualification), and shall provide evidence of any such action so
     taken to the Buyers on or prior to the applicable Closing Date. The Company
     shall make all filings and reports relating to the offer and sale of the
     Securities required under applicable securities or "Blue Sky" laws of the
     states of the United States following the applicable Closing Date.

                                     - 16 -
<PAGE>

          (c) REPORTING STATUS. Until the latest of the date on which the
     Investors (as defined in the Registration Rights Agreement) shall have sold
     all the Conversion Shares, none of the Notes is outstanding and the date
     that no Additional Notes may be issued pursuant to the terms of this
     Agreement (the "REPORTING PERIOD"), the Company shall file all reports
     required to be filed with the SEC pursuant to the 1934 Act, and the Company
     shall not terminate its status as an issuer required to file reports under
     the 1934 Act even if the 1934 Act or the rules and regulations thereunder
     would otherwise permit such termination.

          (d) USE OF PROCEEDS. The Company will use the proceeds from the sale
     of the Securities for working capital purposes, and not for (A) repayment
     of any outstanding Indebtedness of the Company or any of its Subsidiaries
     or (B) redemption or repurchase of any of its or its Subsidiaries' equity
     securities.

          (e) FINANCIAL INFORMATION. The Company agrees to send the following to
     each Investor (as defined in the Registration Rights Agreement) during the
     Reporting Period (i) unless the following are filed with the SEC through
     EDGAR and are available to the public through the EDGAR system, within one
     (1) Business Day after the filing thereof with the SEC, a copy of its
     Annual Reports on Form 10-K or 10-KSB, any interim reports or any
     consolidated balance sheets, income statements, stockholders' equity
     statements and/or cash flow statements for any period other than annual,
     any Current Reports on Form 8-K and any registration statements (other than
     on Form S-8) or amendments filed pursuant to the 1933 Act, (ii) on the same
     day as the release thereof, facsimile or e-mailed copies of all press
     releases issued by the Company or any of its Subsidiaries, and (iii) copies
     of any notices and other information made available or given to the
     stockholders of the Company generally, contemporaneously with the making
     available or giving thereof to the stockholders.

          (f) LISTING. The Company shall promptly secure the listing of all of
     the Registrable Securities (as defined in the Registration Rights
     Agreement) upon each national securities exchange and automated quotation
     system, if any, upon which the Common Stock is then listed (subject to
     official notice of issuance) and shall maintain such listing of all
     Registrable Securities from time to time issuable under the terms of the
     Transaction Documents. The Company shall maintain the Common Stocks'
     authorization for quotation on the Principal Market unless it shall secure
     listing on The Nasdaq SmallCap Market, the Nasdaq National Market or a
     national securities exchange. Neither the Company nor any of its
     Subsidiaries shall take any action which would be reasonably expected to
     result in the delisting or suspension of the Common Stock on the Principal
     Market unless it shall secure listing on The Nasdaq SmallCap Market, the
     Nasdaq National Market or a national securities exchange and except in
     connection with a Fundamental Transaction, as defined in the Notes pursuant
     to the terms contained in the Notes. The Company shall pay all fees and
     expenses in connection with satisfying its obligations under this Section
     4(f).

          (g) FEES. Subject to Section 8 below, at the Initial Closing, the
     Company shall pay an expense allowance of $75,000 to Smithfield Fiduciary
     LLC (a Buyer) or its designee(s) (in addition to any other expense amounts
     paid to any Buyer prior to the date of this Agreement), which amount shall
     be withheld by such Buyer from its Initial Purchase Price at the Initial
     Closing. The Company shall be responsible for the payment of any placement
     agent's fees, financial advisory fees, or broker's commissions (other than
     for Persons engaged by any Buyer) relating to or arising out of the
     transactions contemplated hereby, including, without limitation, any fees
     or commissions payable to the Agent. The Company shall pay, and hold each
     Buyer harmless against, any liability, loss or expense (including, without
     limitation, reasonable attorney's fees and out-of-pocket expenses) arising
     in connection with any claim relating to any such payment. Except as
     otherwise set forth in the Transaction Documents, each party to this
     Agreement shall bear its own expenses in connection with the sale of the
     Securities to the Buyers.

                                     - 17 -
<PAGE>

          (h) PLEDGE OF SECURITIES. The Company acknowledges and agrees that the
     Securities may be pledged by an Investor (as defined in the Registration
     Rights Agreement) in connection with a bona fide margin agreement or other
     loan or financing arrangement that is secured by the Securities. The pledge
     of Securities shall not be deemed to be a transfer, sale or assignment of
     the Securities hereunder, and no Investor effecting a pledge of Securities
     shall be required to provide the Company with any notice thereof or
     otherwise make any delivery to the Company pursuant to this Agreement or
     any other Transaction Document, including, without limitation, Section 2(f)
     hereof; provided that an Investor and its pledgee shall be required to
     comply with the provisions of Section 2(f) hereof in order to effect a
     sale, transfer or assignment of Securities to such pledgee. The Company
     hereby agrees to execute and deliver such documentation as a pledgee of the
     Securities may reasonably request in connection with a pledge of the
     Securities to such pledgee by an Investor.

          (i) DISCLOSURE OF TRANSACTIONS AND OTHER MATERIAL INFORMATION. On or
     before 8:30 a.m., New York Time, on the second Business Day following the
     date of this Agreement, the Company shall file a Current Report on Form 8-K
     describing the terms of the transactions contemplated by the Transaction
     Documents and the Acquisitions in the form required by the 1934 Act and
     attaching the material Transaction Documents (including, without
     limitation, this Agreement (and all schedules to this Agreement), the form
     of Notes and the Registration Rights Agreement) and the material
     transaction documents relating to the Acquisitions as exhibits to such
     filing (including all attachments, the "INITIAL 8-K FILING"). On or before
     8:30 a.m., New York City Time, on the second Trading Day following each
     Additional Closing Date, the Company shall file a Current Report on Form
     8-K with the SEC describing the transaction consummated on such date (the
     "ADDITIONAL 8-K FILING," and together with the Initial 8-K Filing, the "8-K
     FILINGS"). From and after the filing of the Initial 8-K Filing with the
     SEC, no Buyer shall be in possession of any material, nonpublic information
     received from the Company or any of its Subsidiaries, or any of their
     respective officers, directors, employees or agents, that is not disclosed
     in the Initial 8-K Filing. The Company shall not, and shall cause each of
     its Subsidiaries and its and each of their respective officers, directors,
     employees and agents, not to, provide any Buyer with any material,
     nonpublic information regarding the Company or any of its Subsidiaries from
     and after the filing of the Initial 8-K Filing with the SEC without the
     express written consent of such Buyer. To the extent that the Company gives
     notice to the Buyer that a portion of a Registration Statement (as defined
     in the Registration Rights Agreement) or any information contemplated by
     Section 3(i) of the Registration Rights Agreement contains material,
     nonpublic information and, if Buyer thereafter elects not to receive such
     information, notwithstanding anything to the contrary contained in Section
     3(c) or 3(i) of the Registration Rights Agreement, the Company shall not be
     deemed to be in violation of Section 3(c) of the Registration Rights
     Agreement by its failure to deliver those portions of the Registration
     Statement to the Buyer for their review and comment or, to be in violation
     of Section 3(i) of the Registration Rights Agreement by not providing
     access to such material non-public information. In the event of a breach of
     the foregoing covenant by the Company, or any of its Subsidiaries, or any
     of its or their respective officers, directors, employees and agents, in
     addition to any other remedy provided herein or in the Transaction
     Documents, a Buyer shall have the right to make a public disclosure, in the
     form of a press release, public advertisement or otherwise, of such
     material, nonpublic information without the prior approval by the Company,
     its Subsidiaries, or any of its or their respective officers, directors,
     employees or agents. No Buyer shall have any liability to the Company, its
     Subsidiaries, or any of its or their respective officers, directors,
     employees, stockholders or agents, for any such disclosure. Subject to the
     foregoing, neither the Company, its Subsidiaries nor any Buyer shall issue
     any press releases or any other public statements with respect to the
     transactions contemplated hereby; PROVIDED, HOWEVER, that the Company shall
     be entitled, without the prior approval of any Buyer, to make any press
     release or other public disclosure with respect to such transactions (i) in
     substantial conformity with the 8-K Filings and contemporaneously therewith
     and (ii) as is required by applicable law and regulations (provided that in
     the case of clause (i) each Buyer shall be consulted by the Company in
     connection with any such press release or other public disclosure prior to
     its release).

                                     - 18 -
<PAGE>

          (j) RESTRICTION ON REDEMPTION AND CASH DIVIDENDS. So long as any Notes
     are outstanding, the Company shall not, directly or indirectly, redeem, or
     declare or pay any cash dividend or distribution on, the Common Stock
     without the prior express written consent of the holders of Notes
     representing not less than a majority of the aggregate principal amount of
     the then outstanding Notes.

          (k) ADDITIONAL NOTES; VARIABLE SECURITIES; DILUTIVE ISSUANCES. So long
     as any Buyer beneficially owns any Notes, or any Additional Notes may be
     issued pursuant to the terms of this Agreement, the Company will not issue
     any Notes (other than to the Buyers as contemplated hereby) and the Company
     shall not issue any other securities that would cause a breach or default
     under the Notes. For long as any Notes remain outstanding or any Additional
     Notes may be issued pursuant to the terms of this Agreement, the Company
     shall not, in any manner, issue or sell any rights, warrants or options to
     subscribe for or purchase Common Stock or directly or indirectly
     convertible into or exchangeable or exercisable for Common Stock at a price
     which varies or may vary with the market price of the Common Stock,
     including by way of one or more reset(s) to any fixed price unless the
     conversion, exchange or exercise price of any such security cannot be less
     than the then applicable Conversion Price (as defined in the Notes) with
     respect to the Common Stock into which any Note is convertible. For long as
     any Notes remain outstanding, the Company shall not, in any manner, enter
     into or affect any Dilutive Issuance (as defined in the Notes) if the
     effect of such Dilutive Issuance is to cause the Company to be required to
     issue upon conversion of any Note, any shares of Common Stock in excess of
     that number of shares of Common Stock which the Company may issue upon
     conversion of the Notes, without breaching the Company's obligations under
     the rules or regulations of the Eligible Market (as defined in the Notes).

          (l) CORPORATE EXISTENCE. So long as any Buyer beneficially owns any
     Securities or any Additional Notes may be issued pursuant to the terms of
     this Agreement, the Company shall not be party to any Fundamental
     Transaction (as defined in the Notes) unless the Company is in compliance
     with the applicable provisions governing Fundamental Transactions set forth
     in the Notes.

                                     - 19 -
<PAGE>

          (m) RESERVATION OF SHARES. So long as any Buyer owns any Notes or any
     Additional Notes may be issued pursuant to the terms of this Agreement, the
     Company shall take all action necessary to at all times have authorized,
     and reserved for the purpose of issuance, no less than 130% of the number
     of shares of Common Stock issuable upon conversion of the Notes then
     outstanding (without taking into account any limitations on the conversion
     of the Notes set forth in the Notes).

          (n) CONDUCT OF BUSINESS. The business of the Company and its
     Subsidiaries shall not be conducted in violation of any law, ordinance or
     regulation of any governmental entity, except where such violations would
     not result, either individually or in the aggregate, in a Material Adverse
     Effect.

          (o) ADDITIONAL ISSUANCES OF SECURITIES.

               (i) For purposes of this Section 4(o), the following definitions
          shall apply.

                    (1) "CONVERTIBLE SECURITIES" means any stock or securities
               (other than Options) convertible into or exercisable or
               exchangeable for shares of Common Stock.

                    (2) "OPTIONS" means any rights, warrants or options to
               subscribe for or purchase shares of Common Stock or Convertible
               Securities.

                    (3) "COMMON STOCK EQUIVALENTS" means, collectively, Options
               and Convertible Securities.

               (ii) From the date hereof until the date that is 90 Trading Days
          (as defined in the Notes) following the Effective Date of the Initial
          Registration Statement (as such terms are defined in the Registration
          Rights Agreement) (the "TRIGGER DATE"), the Company will not, directly
          or indirectly, offer, sell, grant any option to purchase, or otherwise
          dispose of (or announce any offer, sale, grant or any option to
          purchase or other disposition of) any of its or its Subsidiaries'
          equity or equity equivalent securities, including, without limitation,
          any debt, preferred stock or other instrument or security that is, at
          any time during its life and under any circumstances, convertible into
          or exchangeable or exercisable for shares of Common Stock or Common
          Stock Equivalents (any such offer, sale, grant, disposition or
          announcement being referred to as a "SUBSEQUENT PLACEMENT").

               (iii) From the Trigger Date until the date that is eighteen
          months after the Effective Date of the Initial Registration Statement,
          the Company will not, directly or indirectly, effect any Subsequent
          Placement unless the Company shall have first complied with this
          Section 4(o)(iii).

                                     - 20 -
<PAGE>

                    (1) The Company shall deliver to each Buyer a written notice
               (the "OFFER NOTICE") of any proposed or intended issuance or sale
               or exchange (the "OFFER") of the securities being offered (the
               "OFFERED SECURITIES") in a Subsequent Placement, which Offer
               Notice shall (w) identify and describe the Offered Securities,
               (x) describe the price and other terms upon which they are to be
               issued, sold or exchanged, and the number or amount of the
               Offered Securities to be issued, sold or exchanged, (y) identify
               the persons or entities (if known) to which or with which the
               Offered Securities are to be offered, issued, sold or exchanged
               and (z) offer to issue and sell to or exchange with such Buyers
               at least one-third of the Offered Securities, allocated among
               such Buyers (a) based on such Buyer's pro rata portion of the
               aggregate principal amount of Notes purchased hereunder (the
               "BASIC AMOUNT"), and (b) with respect to each Buyer that elects
               to purchase its Basic Amount, any additional portion of the
               Offered Securities attributable to the Basic Amounts of other
               Buyers as such Buyer shall indicate it will purchase or acquire
               should the other Buyers subscribe for less than their Basic
               Amounts (the "UNDERSUBSCRIPTION AMOUNT").

                    (2) To accept an Offer, in whole or in part, such Buyer must
               deliver a written notice to the Company prior to the end of the
               fifth (5th) Business Day after such Buyer's receipt of the Offer
               Notice (the "OFFER PERIOD"), setting forth the portion of such
               Buyer's Basic Amount that such Buyer elects to purchase and, if
               such Buyer shall elect to purchase all of its Basic Amount, the
               Undersubscription Amount, if any, that such Buyer elects to
               purchase (in either case, the "NOTICE OF ACCEPTANCE"). If the
               Basic Amounts subscribed for by all Buyers are less than the
               total of all of the Basic Amounts, then each Buyer who has set
               forth an Undersubscription Amount in its Notice of Acceptance
               shall be entitled to purchase, in addition to the Basic Amounts
               subscribed for, the Undersubscription Amount it has subscribed
               for; PROVIDED, HOWEVER, that if the Undersubscription Amounts
               subscribed for exceed the difference between the total of all the
               Basic Amounts and the Basic Amounts subscribed for (the
               "AVAILABLE UNDERSUBSCRIPTION AMOUNT"), each Buyer who has
               subscribed for any Undersubscription Amount shall be entitled to
               purchase only that portion of the Available Undersubscription
               Amount as the Basic Amount of such Buyer bears to the total Basic
               Amounts of all Buyers that have subscribed for Undersubscription
               Amounts, subject to rounding by the Company to the extent its
               deems reasonably necessary.

                    (3) The Company shall have twenty (20) Business Days from
               the expiration of the Offer Period above to offer, issue, sell or
               exchange all or any part of such Offered Securities as to which a
               Notice of Acceptance has not been given by the Buyers (the
               "REFUSED SECURITIES"), but only to the offerees described in the
               Offer Notice (if so described therein) and only upon terms and
               conditions (including, without limitation, unit prices and
               interest rates) that are not more favorable to the acquiring
               person or persons or less favorable to the Company than those set
               forth in the Offer Notice.

                    (4) In the event the Company shall propose to sell less than
               all the Refused Securities (any such sale to be in the manner and
               on the terms specified in Section 4(o)(iii)(3) above), then each
               Buyer may, at its sole option and in its sole discretion, reduce
               the number or amount of the Offered Securities specified in its
               Notice of Acceptance to an amount that shall be not less than the
               number or amount of the Offered Securities that such Buyer
               elected to purchase pursuant to Section 4(o)(iii)(2) above
               multiplied by a fraction, (i) the numerator of which shall be the
               number or amount of Offered Securities the Company actually
               proposes to issue, sell or exchange (including Offered Securities
               to be issued or sold to Buyers pursuant to Section 4(o)(iii)(3)
               above prior to such reduction) and (ii) the denominator of which
               shall be the original amount of the Offered Securities. In the
               event that any Buyer so elects to reduce the number or amount of
               Offered Securities specified in its Notice of Acceptance, the
               Company may not issue, sell or exchange more than the reduced
               number or amount of the Offered Securities unless and until such
               securities have again been offered to the Buyers in accordance
               with Section 4(o)(iii)(1) above.

                                     - 21 -
<PAGE>

                    (5) Upon the closing of the issuance, sale or exchange of
               all or less than all of the Refused Securities, the Buyers shall
               acquire from the Company, and the Company shall issue to the
               Buyers, the number or amount of Offered Securities specified in
               the Notices of Acceptance, as reduced pursuant to Section
               4(o)(iii)(3) above if the Buyers have so elected, upon the terms
               and conditions specified in the Offer. The purchase by the Buyers
               of any Offered Securities is subject in all cases to the
               preparation, execution and delivery by the Company and the Buyers
               of the same form of purchase agreement and related documentation
               as is signed by the other investors in the offering and Buyers
               electing to participate shall be bound to execute such agreements
               and related documentation.

                    (6) Any Offered Securities not acquired by the Buyers or
               other persons in accordance with Section 4(o)(iii)(3) above may
               not be issued, sold or exchanged until they are again offered to
               the Buyers under the procedures specified in this Agreement.

               (iv) The restrictions contained in subsections (ii) and (iii) of
          this Section 4(o) shall not apply (i) in connection with the issuance
          of any Excluded Securities (as defined in the Notes) or (ii) at any
          time after the Company is acquired by a Public Successor Entity (as
          defined in the Notes) having an equity market capitalization exceeding
          $150 million (as of the day immediately prior to the day the Change of
          Control (as defined in the Notes) is announced) held by Persons who
          are not (or are not deemed to be) "affiliates" of the Company under
          the 1933 Act.

          (p) QUALIFICATION TO TRANSACT BUSINESS. On or prior to October 10,
     2005, the Company shall cause Inksure Inc. to be qualified to transact
     business in good standing in the State of Illinois, and shall deliver to
     each Buyer written evidence thereof.

     5. REGISTER; TRANSFER AGENT INSTRUCTIONS.

          (a) REGISTER. The Company shall maintain at its principal executive
     offices (or such other office or agency of the Company as it may designate
     by notice to each holder of Securities), a register for the Notes in which
     the Company shall record the name and address of the Person in whose name
     the Notes have been issued (including the name and address of each
     transferee), the principal amount of Notes held by such Person and the
     number of Conversion Shares issuable upon conversion of the Notes held by
     such Person. The Company shall keep the register open and available at all
     times during business hours for inspection of any Buyer or its legal
     representatives.

                                     - 22 -
<PAGE>

          (b) TRANSFER AGENT INSTRUCTIONS. The Company shall issue irrevocable
     instructions to its transfer agent, and any subsequent transfer agent, to
     issue certificates or credit shares to the applicable balance accounts at
     The Depository Trust Company ("DTC"), registered in the name of each Buyer
     or its respective nominee(s), for the Conversion Shares issued at the
     applicable Closing or upon conversion of the Notes in such amounts as
     specified from time to time by each Buyer to the Company upon conversion of
     the Notes in the form of EXHIBIT C attached hereto (the "IRREVOCABLE
     TRANSFER AGENT INSTRUCTIONS"). The Company warrants that no instruction
     other than the Irrevocable Transfer Agent Instructions referred to in this
     Section 5(b), and stop transfer instructions to give effect to Section 2(g)
     hereof, will be given by the Company to its transfer agent, and that the
     Securities shall otherwise be freely transferable on the books and records
     of the Company as and to the extent provided in this Agreement and the
     other Transaction Documents. If a Buyer effects a sale, assignment or
     transfer of the Securities in accordance with Section 2(f), the Company
     shall permit the transfer and shall promptly instruct its transfer agent to
     issue one or more certificates or credit shares to the applicable balance
     accounts at DTC in such name and in such denominations as specified by such
     Buyer to effect such sale, transfer or assignment. In the event that such
     sale, assignment or transfer involves Conversion Shares sold, assigned or
     transferred pursuant to an effective registration statement or pursuant to
     Rule 144, the transfer agent shall issue such Securities to the Buyer,
     assignee or transferee, as the case may be, without any restrictive legend.
     The Company acknowledges that a breach by it of its obligations hereunder
     will cause irreparable harm to a Buyer. Accordingly, the Company
     acknowledges that the remedy at law for a breach of its obligations under
     this Section 5(b) will be inadequate and agrees, in the event of a breach
     or threatened breach by the Company of the provisions of this Section 5(b),
     that a Buyer shall be entitled, in addition to all other available
     remedies, to an order and/or injunction restraining any breach and
     requiring immediate issuance and transfer, without the necessity of showing
     economic loss and without any bond or other security being required.

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

          (a) INITIAL CLOSING DATE. The obligation of the Company hereunder to
     issue and sell the Initial Notes to each Buyer at the Initial Closing is
     subject to the satisfaction, at or before the Initial Closing Date, of each
     of the following conditions, provided that these conditions are for the
     Company's sole benefit and may be waived by the Company at any time in its
     sole discretion by providing each Buyer with prior written notice thereof:

               (i) Such Buyer shall have executed each of the Transaction
          Documents to which it is a party and delivered the same to the
          Company.

               (ii) Such Buyer and each other Buyer shall have delivered to the
          Company the Initial Purchase Price (less, in the case of Smithfield
          Fiduciary LLC, the amounts withheld pursuant to Section 4(g)) for the
          Initial Notes being purchased by such Buyer at the Initial Closing by
          wire transfer of immediately available funds pursuant to the wire
          instructions provided by the Company.

                                     - 23 -
<PAGE>

               (iii) The representations and warranties of such Buyer shall be
          true and correct in all material respects as of the date when made and
          as of the Initial Closing Date as though made at that time (except for
          representations and warranties that speak as of a specific date), and
          such Buyer shall have performed, satisfied and complied in all
          material respects with the covenants, agreements and conditions
          required by this Agreement to be performed, satisfied or complied with
          by such Buyer at or prior to the Initial Closing Date.

          (b) ADDITIONAL CLOSING DATE. The obligation of the Company hereunder
     to issue and sell the Additional Notes to each Buyer at the Additional
     Closing is subject to the satisfaction, at or before the Additional Closing
     Date, of each of the following conditions, provided that these conditions
     are for the Company's sole benefit and may be waived by the Company at any
     time in its sole discretion by providing each Buyer with prior written
     notice thereof:

               (i) Such Buyer and each other Buyer shall have delivered to the
          Company the Additional Purchase Price for the Additional Notes being
          purchased by such Buyer at the Additional Closing by wire transfer of
          immediately available funds pursuant to the wire instructions provided
          by the Company.

               (ii) The representations and warranties of such Buyer shall be
          true and correct in all material respects as of the date when made and
          as of the Additional Closing Date as though made at that time (except
          for representations and warranties that speak as of a specific date),
          and such Buyer shall have performed, satisfied and complied in all
          material respects with the covenants, agreements and conditions
          required by this Agreement to be performed, satisfied or complied with
          by such Buyer at or prior to the Additional Closing Date.

     7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.

          (a) INITIAL CLOSING DATE. The obligation of each Buyer hereunder to
     purchase the Initial Notes at the Initial Closing is subject to the
     satisfaction, at or before the Initial Closing Date, of each of the
     following conditions, provided that these conditions are for each Buyer's
     sole benefit and may be waived by such Buyer at any time in its sole
     discretion by providing the Company with prior written notice thereof:

               (i) The Company shall have executed and delivered to such Buyer
          each of the Transaction Documents and the Initial Notes (in such
          principal amounts as such Buyer shall request) which are being
          purchased by such Buyer at the Initial Closing pursuant to this
          Agreement.

               (ii) Such Buyer shall have received the opinions of Mintz, Levin,
          Cohn, Ferris, Glovsky and Popeo, P.C., the Company's outside counsel,
          dated as of the Initial Closing Date, in substantially the form of
          EXHIBIT D attached hereto.

               (iii) The Company shall have delivered to such Buyer a copy of
          the Irrevocable Transfer Agent Instructions, in the form of EXHIBIT C
          attached hereto, which instructions shall have been delivered to and
          acknowledged in writing by the Company's transfer agent.

                                     - 24 -
<PAGE>

               (iv) The Company shall have delivered to such Buyer a certificate
          evidencing the formation and good standing of the Company and each of
          its Subsidiaries (other than Inksure Ltd.) in such entity's
          jurisdiction of formation issued by the Secretary of State (or
          comparable office) of such jurisdiction, as of a date within 10 days
          of the Initial Closing Date.

               (v) The Company shall have delivered to such Buyer a certificate
          evidencing the Company's qualification as a foreign corporation and
          good standing issued by the Secretary of State (or comparable office)
          of each jurisdiction in which the Company conducts business, as of a
          date within 10 days of the Initial Closing Date.

               (vi) The Company shall have delivered to such Buyer a certified
          copy of the Certificate of Incorporation as certified by the Secretary
          of State of the State of Delaware within ten (10) days of the Initial
          Closing Date.

               (vii) The Company shall have delivered to such Buyer a
          certificate, executed by the Secretary of the Company and dated as of
          the Initial Closing Date, as to (i) the resolutions consistent with
          Section 3(b) as adopted by the Company's Board of Directors in a form
          reasonably acceptable to such Buyer, (ii) the Certificate of
          Incorporation and (iii) the Bylaws, each as in effect at the Initial
          Closing, in the form attached hereto as EXHIBIT E.

               (viii) The representations and warranties of the Company shall be
          true and correct as of the date when made and as of the Initial
          Closing Date as though made at that time (except for representations
          and warranties that speak as of a specific date) and the Company shall
          have performed, satisfied and complied in all respects with the
          covenants, agreements and conditions required by the Transaction
          Documents to be performed, satisfied or complied with by the Company
          at or prior to the Initial Closing Date. Such Buyer shall have
          received a certificate, executed by the Chief Executive Officer of the
          Company, dated as of the Initial Closing Date, to the foregoing effect
          and as to such other matters as may be reasonably requested by such
          Buyer in the form attached hereto as EXHIBIT F. The representations
          and warranties contained herein shall be deemed to have been modified,
          as specified in the Representation Certificate (as defined below) and
          shall, as modified, be true and correct as of the Additional Closing
          Date.

               (ix) The Company shall have delivered to such Buyer a letter from
          the Company's transfer agent certifying the number of shares of Common
          Stock outstanding as of a date within five days of the Initial Closing
          Date.

               (x) The Common Stock (I) shall be designated for quotation or
          listed on the Principal Market and (II) shall not have been suspended,
          as of the Initial Closing Date, by the SEC or the Principal Market
          from trading on the Principal Market nor shall suspension by the SEC
          or the Principal Market have been threatened, as of the Initial
          Closing Date, in writing by the SEC or the Principal Market.

               (xi) The Company shall have obtained all governmental, regulatory
          or third party consents and approvals, if any, necessary for the sale
          of the Securities.

               (xii) The Company shall have delivered to such Buyer such other
          documents relating to the transactions contemplated by this Agreement
          as such Buyer or its counsel may reasonably request.

                                     - 25 -
<PAGE>

          (b) ADDITIONAL CLOSING DATE. The obligation of each Buyer hereunder to
     purchase the Additional Notes at an Additional Closing is subject to the
     satisfaction, at or before the Additional Closing Date, of each of the
     following conditions, provided that these conditions are for each Buyer's
     sole benefit and may be waived by such Buyer at any time in its sole
     discretion by providing the Company with prior written notice thereof:

               (i) The Company shall have executed and delivered to such Buyer
          the Additional Notes (in such principal amounts as such Buyer shall
          request) which are being purchased by such Buyer at the Additional
          Closing pursuant to this Agreement.

               (ii) Such Buyer shall have received the opinions of Mintz, Levin,
          Cohn, Ferris, Glovsky and Popeo, P.C., the Company's outside counsel,
          dated as of the Additional Closing Date, in substantially the form of
          EXHIBIT D attached hereto.

               (iii) The Irrevocable Transfer Agent Instructions shall remain in
          effect as of the Additional Closing Date and the Company shall cause
          its transfer agent to deliver a letter to such Buyer to that effect.

               (iv) The Company shall have delivered to such Buyer a certificate
          evidencing the formation and good standing of the Company and each of
          its Subsidiaries (other than Inksure Ltd.) in such entity's
          jurisdiction of formation issued by the Secretary of State of the
          State (or comparable office) of such jurisdiction, as of a date within
          10 days of the Additional Closing Date.

               (v) The Company shall have delivered to such Buyer a certificate
          evidencing the Company's qualification as a foreign corporation and
          good standing issued by the Secretary of State (or comparable office)
          of each jurisdiction in which the Company conducts business, as of a
          date within 10 days of the Additional Closing Date.

               (vi) The Company shall have delivered to such Buyer a certified
          copy of the Certificate of Incorporation as certified by the Secretary
          of State of the State of Delaware within 10 days of the Additional
          Closing Date.

               (vii) The Company shall have delivered to such Buyer a
          certificate, executed by the Secretary of the Company dated as of the
          Additional Closing Date, as to (i) the Resolutions, (ii) the
          Certificate of Incorporation and (iii) the Bylaws, each as in effect
          at the Additional Closing, in the form attached hereto as EXHIBIT E.

               (viii) The representations and warranties of the Company shall be
          true and correct in all material respects (except for those
          representations and warranties that are qualified by materiality or
          Material Adverse Effect, which shall be true and correct in all
          respects) as of the date when made and as of the Additional Closing
          Date as though made at that time (except for representations and
          warranties that speak as of a specific date) and the Company shall
          have performed, satisfied and complied in all material respects with
          the covenants, agreements and conditions required by the Transaction
          Documents to be performed, satisfied or complied with by the Company
          at or prior to the Additional Closing Date. Such Buyer shall have
          received a certificate, executed by the Chief Executive Officer of the
          Company, dated as of the Additional Closing Date, to the foregoing
          effect and as to such other matters as may be reasonably requested by
          such Buyer in the form attached hereto as EXHIBIT F; provided, that
          Buyer shall be entitled to not consummate an Additional Closing if the
          Representation Certificate is not acceptable to such Buyer, in its
          sole discretion. Nothing herein shall be deemed a representation,
          warranty, covenant or agreement that the representations and
          warranties contained herein that are described in the Representation
          Certificate (as defined below) shall be true and correct as of the
          Additional Closing Date.

                                     - 26 -
<PAGE>

               (ix) The Company shall have delivered to such Buyer a letter from
          the Company's transfer agent certifying the number of shares of Common
          Stock outstanding as of a date within five days of the Additional
          Closing Date.

               (x) The Common Stock (I) shall be designated for quotation or
          listed on the Principal Market, (II) shall not have been suspended, as
          of the Additional Closing Date, by the SEC or the Principal Market
          from trading on the Principal Market nor shall suspension by the SEC
          or the Principal Market have been threatened, as of the Additional
          Closing Date, in writing by the SEC or the Principal Market and (III)
          during any day during the ninety (90) Trading Days prior to the
          Additional Closing Date, shall not have fallen below the minimum
          listing maintenance requirements of the Principal Market.

               (xi) The Company shall have obtained all governmental, regulatory
          or third party consents and approvals, if any, necessary for the sale
          of the applicable Additional Notes.

               (xii) No Event of Default (as defined in the Notes) shall have
          occurred and be continuing.

               (xiii) The Company shall have delivered to such Buyer such other
          documents relating to the transactions contemplated by this Agreement
          as such Buyer or its counsel may reasonably request.

          8. TERMINATION. In the event that the Initial Closing shall not have
     occurred with respect to a Buyer on or before five (5) Business Days from
     the date hereof due to the Company's or such Buyer's failure to satisfy the
     conditions set forth in Sections 6 and 7 above (and the nonbreaching
     party's failure to waive such unsatisfied condition(s)), the nonbreaching
     party shall have the option to terminate this Agreement with respect to
     such breaching party at the close of business on such date without
     liability of any party to any other party; PROVIDED, HOWEVER, this if this
     Agreement is terminated pursuant to this Section 8, the Company shall
     remain obligated to reimburse the non-breaching Buyers for the expenses
     described in Section 4(g) above.

          9. MISCELLANEOUS.

                                     - 27 -
<PAGE>

          (a) GOVERNING LAW; JURISDICTION; JURY TRIAL. All questions concerning
     the construction, validity, enforcement and interpretation of this
     Agreement shall be governed by the internal laws of the State of New York,
     without giving effect to any choice of law or conflict of law provision or
     rule (whether of the State of New York or any other jurisdictions) that
     would cause the application of the laws of any jurisdictions other than the
     State of New York. Each party hereby irrevocably submits to the exclusive
     jurisdiction of the state and federal courts sitting in The City of New
     York, Borough of Manhattan, 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. EACH PARTY
     HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST,
     A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
     WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
     HEREBY.

          (b) COUNTERPARTS. This Agreement may be executed in two or more
     identical counterparts, all of which shall be considered one and the same
     agreement and shall become effective when counterparts have been signed by
     each party and delivered to the other party; provided that a facsimile
     signature shall be considered due execution and shall be binding upon the
     signatory thereto with the same force and effect as if the signature were
     an original, not a facsimile signature.

          (c) HEADINGS. The headings of this Agreement are for convenience of
     reference and shall not form part of, or affect the interpretation of, this
     Agreement.

          (d) SEVERABILITY. 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.

          (e) ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the other
     Transaction Documents supersede all other prior oral or written agreements
     between the Buyers, the Company, their Affiliates and Persons acting on
     their behalf with respect to the matters discussed herein, and this
     Agreement, the other Transaction Documents and the instruments referenced
     herein and therein contain the entire understanding of the parties with
     respect to the matters covered herein and therein and, except as
     specifically set forth herein or therein, neither the Company nor any Buyer
     makes any representation, warranty, covenant or undertaking with respect to
     such matters. No provision of this Agreement may be amended other than by
     an instrument in writing signed by the Company and the holders of at least
     a majority of the aggregate number of Registrable Securities issued and
     issuable hereunder, and any amendment to this Agreement made in conformity
     with the provisions of this Section 9(e) shall be binding on all Buyers and
     holders of Securities, as applicable. No provision hereof may be waived
     other than by an instrument in writing signed by the party against whom
     enforcement is sought. No such amendment shall be effective to the extent
     that it applies to less than all of the holders of the applicable
     Securities then outstanding. No consideration shall be offered or paid to
     any Person to amend or consent to a waiver or modification of any provision
     of any of the Transaction Documents unless the same consideration also is
     offered to all of the parties to the Transaction Documents and the holders
     of Notes. The Company has not, directly or indirectly, made any agreements
     with any Buyers relating to the terms or conditions of the transactions
     contemplated by the Transaction Documents except as set forth in the
     Transaction Documents. Without limiting the foregoing, the Company confirms
     that, except as set forth in this Agreement, no Buyer has made any
     commitment or promise or has any other obligation to provide any financing
     to the Company or otherwise.

                                     - 28 -
<PAGE>

          (f) NOTICES. Any notices, consents, waivers or other communications
     required or permitted to be given under the terms of this Agreement must be
     in writing and will be deemed to have been delivered: (i) upon receipt,
     when delivered personally; (ii) upon receipt, when sent by facsimile
     (provided confirmation of transmission is mechanically or electronically
     generated and kept on file by the sending party); or (iii) one Business Day
     after deposit with an overnight courier service, in each case properly
     addressed to the party to receive the same. The addresses and facsimile
     numbers for such communications shall be:

               If to the Company:

                        InkSure Technologies Inc.
                        1770 N.W. 64th Street, Suite 350
                        Fort Lauderdale, Florida  33309
                        Telephone:       (954) 772-8507
                        Facsimile:       (954) 772-8509
                        Attention:       Elie Housman

               With a copy (for informational purposes only) to:

                        Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
                        Chrysler Center
                        666 Third Avenue
                        New York, New York 10017
                        Telephone:       (212) 935-3000
                        e-mail:          kkoch@mintz.com
                        Facsimile:       (212) 983-3115
                        Attention:       Kenneth R. Koch, Esq.

               If to the Transfer Agent:

                        Pacific Stock Transfer Co.
                        500 E. Warm Springs Rd., Ste. 240
                        Las Vegas, Nevada 89119
                        Telephone:       702-361-3033
                        Facsimile:       702-433-1979
                        Attention:       Linda C. Payne, Manager, Transfer Dept.

If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers, with copies to such Buyer's representatives as set forth on the Schedule
of Buyers,

                                     - 29 -
<PAGE>

               with a copy (for informational purposes only) to:

                        Schulte Roth & Zabel LLP
                        919 Third Avenue
                        New York, New York  10022
                        Telephone:       (212) 756-2000
                        Facsimile:       (212) 593-5955
                        Attention:       Eleazer N. Klein, Esq.

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.
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 containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C)
provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above, respectively.

          (g) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
     inure to the benefit of the parties and their respective successors and
     assigns, including any purchasers of the Notes. The Company shall not
     assign this Agreement or any rights or obligations hereunder without the
     prior written consent of the holders of at least a majority of the
     aggregate number of Registrable Securities issued and issuable hereunder,
     including by way of a Fundamental Transaction (unless the Company is in
     compliance with the applicable provisions governing Fundamental
     Transactions set forth in the Notes). A Buyer may assign some or all of its
     rights hereunder without the consent of the Company, in which event such
     assignee shall be deemed to be a Buyer hereunder with respect to such
     assigned rights.

          (h) NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the
     benefit of the parties hereto and their respective permitted successors and
     assigns, and is not for the benefit of, nor may any provision hereof be
     enforced by, any other Person.

          (i) SURVIVAL. Unless this Agreement is terminated under Section 8, the
     representations and warranties of the Company and the Buyers contained in
     Sections 2 and 3 and the agreements and covenants set forth in Sections 4,
     5 and 9 shall survive each Closing. Each Buyer shall be responsible only
     for its own representations, warranties, agreements and covenants
     hereunder.

          (j) FURTHER ASSURANCES. 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.

                                     - 30 -
<PAGE>

          (k) INDEMNIFICATION. In consideration of each Buyer's execution and
     delivery of the Transaction Documents and acquiring the Securities
     thereunder and in addition to all of the Company's other obligations under
     the Transaction Documents, the Company shall defend, protect, indemnify and
     hold harmless each Buyer and each other holder of the Securities and all of
     their stockholders, partners, members, officers, directors, employees and
     direct or indirect investors and any of the foregoing Persons' agents or
     other representatives (including, without limitation, those retained in
     connection with the transactions contemplated by this Agreement)
     (collectively, the "INDEMNITEES") from and against any and all actions,
     causes of action, suits, claims, losses, costs, penalties, fees,
     liabilities and damages, and expenses in connection therewith (irrespective
     of whether any such Indemnitee is a party to the action for which
     indemnification hereunder is sought), and including reasonable attorneys'
     fees and disbursements (the "INDEMNIFIED LIABILITIES"), incurred by any
     Indemnitee as a result of, or arising out of, or relating to (a) any
     misrepresentation or breach of any representation or warranty made by the
     Company in the Transaction Documents or any other certificate, instrument
     or document contemplated hereby or thereby, provided that the
     representations and warranties deemed to have been made at an Additional
     Closing shall be the representations and warranties contained herein as
     modified by the exceptions, if any, described in the officer's certificate
     (the "REPRESENTATION CERTIFICATE") in the form of EXHIBIT G to be delivered
     at such Additional Closing, (b) any breach of any covenant, agreement or
     obligation of the Company contained in the Transaction Documents or any
     other certificate, instrument or document contemplated hereby or thereby or
     (c) any cause of action, suit or claim brought or made against such
     Indemnitee by a third party (including for these purposes a derivative
     action brought on behalf of the Company) and arising out of or resulting
     from (i) the execution, delivery, performance or enforcement of the
     Transaction Documents or any other certificate, instrument or document
     contemplated hereby or thereby, (ii) any transaction financed or to be
     financed in whole or in part, directly or indirectly, with the proceeds of
     the issuance of the Securities, (iii) any disclosure made by such Buyer
     pursuant to Section 4(i), or (iv) the status of such Buyer or holder of the
     Securities as an investor in the Company pursuant to the transactions
     contemplated by the Transaction Documents. To the extent that the foregoing
     undertaking by the Company may be unenforceable for any reason, the Company
     shall make the maximum contribution to the payment and satisfaction of each
     of the Indemnified Liabilities which is permissible under applicable law.
     Except as otherwise set forth herein, the mechanics and procedures with
     respect to the rights and obligations under this Section 9(k) shall be the
     same as those set forth in Section 6 of the Registration Rights Agreement.

          (l) NO STRICT CONSTRUCTION. 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.

          (m) REMEDIES. Each Buyer and each holder of the Securities shall have
     all rights and remedies set forth in the Transaction Documents and all
     rights and remedies which such holders have been granted at any time under
     any other agreement or contract and all of the rights which such holders
     have under any law. Any Person having any rights under any provision of
     this Agreement shall be entitled to enforce such rights specifically
     (without posting a bond or other security), to recover damages by reason of
     any breach of any provision of this Agreement and to exercise all other
     rights granted by law. Furthermore, the Company recognizes that in the
     event that it fails to perform, observe, or discharge any or all of its
     obligations under the Transaction Documents, any remedy at law may prove to
     be inadequate relief to the Buyers. The Company therefore agrees that the
     Buyers shall be entitled to seek temporary and permanent injunctive relief
     in any such case without the necessity of proving actual damages and
     without posting a bond or other security.

                                     - 31 -
<PAGE>

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

          (o) INDEPENDENT NATURE OF BUYERS' OBLIGATIONS AND RIGHTS. The
     obligations of each Buyer under any Transaction Document are several and
     not joint with the obligations of any other Buyer, and no Buyer shall be
     responsible in any way for the performance of the obligations of any other
     Buyer under any Transaction Document. Nothing contained herein or in any
     other Transaction Document, and no action taken by any Buyer pursuant
     hereto or thereto, shall be deemed to constitute the Buyers as a
     partnership, an association, a joint venture or any other kind of entity,
     or create a presumption that the Buyers are in any way acting in concert or
     as a group with respect to such obligations or the transactions
     contemplated by the Transaction Documents. Each Buyer confirms that it has
     independently participated in the negotiation of the transaction
     contemplated hereby with the advice of its own counsel and advisors. Each
     Buyer 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 Buyer to be joined as an additional party in any proceeding for
     such purpose.

                            [SIGNATURE PAGE FOLLOWS]

                                     - 32 -
<PAGE>

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

                                                    COMPANY:

                                                    INKSURE TECHNOLOGIES INC.

                                                    By:______________________
                                                    Name:
                                                    Title:

<PAGE>

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

                                                    BUYERS:

                                                    SMITHFIELD FIDUCIARY LLC

                                                    By:______________________
                                                    Name:   Adam J. Chill
                                                    Title:  Authorized Signatory

<PAGE>

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

                                            THE IRREVOCABLE TRUST OF
                                            JAMES E. LINEBERGER U/A 12/17/98

                                            By:_____________________________
                                            Name:
                                            Title:

<PAGE>

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

                                                    IROQUOIS MASTER FUND LTD.

                                                    By:______________________
                                                    Name:
                                                    Title:

<PAGE>

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

                                                    OMICRON MASTER TRUST

                                                    By:_________________
                                                    Name:
                                                    Title:

<PAGE>

<TABLE>
<CAPTION>
                                                SCHEDULE OF BUYERS

       (1)                      (2)                  (3)            (4)              (5)                      (6)
                                                                 AGGREGATE
                                                  AGGREGATE      PRINCIPAL
                                                  PRINCIPAL      AMOUNT OF
                            ADDRESS AND           AMOUNT OF     ADDITIONAL    PURCHASE PRICE OF      LEGAL REPRESENTATIVE'S
      BUYER              FACSIMILE NUMBER       INITIAL NOTES      NOTES        INITIAL NOTES     ADDRESS AND FACSIMILE NUMBER

<S>                    <C>                        <C>             <C>          <C>                   <C>
Smithfield Fiduciary   c/o Highbridge Capital     $4,700,000      $979,166.67  $4,700,000            Schulte Roth & Zabel LLP
LLC                    Management, LLC                                                               919 Third Avenue
                       9 West 57th Street, 27th                                                      New York, New York  10022
                       Floor                                                                         Attention:  Eleazer Klein, Esq.
                       New York, New York  10019                                                     Facsimile: (212) 593-5955
                       Attention:  Ari J. Storch                                                     Telephone:  (212) 756-2376
                                   Adam J. Chill
                       Facsimile:  (212) 751-0755
                       Telephone:  (212) 287-4720
                       Residence:  Cayman Islands

The Irrevocable Trust  c/o Lineberger & Co., LLC    $300,000       $62,500.00    $300,000            Troutman Sanders LLP
of James E.            1120 Boston Post Rd.                                                          The Chrysler Building
Lineberger u/a         Darien, CT  06820                                                             405 Lexington Avenue
12/17/98               Attention: Jamie Lineberger                                                   New York, New York 10174
                       Facsimile: (203) 655-7397                                                     Attention: Edward Mandell
                       Telephone: (203) 655-7578                                                     Facsimile: (212) 704-6288
                                                                                                     Telephone: (212) 704-6000
Iroquois Master Fund   Iroquois Master Fund Ltd.    $250,000       $52,083.33    $250,000
Ltd.                   641 Lexington Avenue
                       26th Floor
                       New York, NY 10022
                       Attention: Joshua Silverman
                       Facsimile: (646) 274-1728
                       Telephone: (212) 974-3070

Omicron Master Trust   c/o Omicron Capital          $750,000      $156,250.00    $750,000
                       650 Fifth Avenue, 24th Fl.
                       New York, NY 10019
                       Attention: Brian Daly
                       Facsimile: (212) 258-2300
                       Telephone: (212) 258-2315

                       Residence: Bermuda

</TABLE>

<PAGE>

                                    EXHIBITS

Exhibit A         Form of Notes
Exhibit B         Registration Rights Agreement
Exhibit C         Irrevocable Transfer Agent Instructions
Exhibit D         Form of Outside Company Counsel Opinion
Exhibit E         Form of Secretary's Certificate
Exhibit F         Form of Officer's Certificate
Exhibit G         Form of Officer's Certificate re:  Representations

                                    SCHEDULES

Schedule 3(a)     Subsidiaries
Schedule 3(k)     SEC Documents; Financial Statements
Schedule 3(l)     Absence of Certain Changes
Schedule 3(q)     Transactions with Affiliates
Schedule 3(r)     Capitalization
Schedule 3(s)     Indebtedness and Other Contracts
Schedule 3(t)     Litigation
Schedule 3(v)     Employee Relations
Schedule 3(x)     Intellectual Property
Schedule 3(z)     Subsidiary Rights
Schedule 3(cc)    Ranking of Notes

<PAGE>

                              COMPANY'S DISCLOSURE SCHEDULES

The following constitute the Company's disclosure schedules (the "Disclosure
Schedules") to that certain Securities Purchase Agreement, dated as of September
30, 2005 (the "Agreement"), by and among InkSure Technologies Inc., a Delaware
corporation (the "Company"), and the investors listed on the Schedule of Buyers
attached thereto. Any terms defined in the Agreement shall have the same meaning
when used in the Disclosure Schedules as when used in the Agreement, unless the
context requires otherwise. In the interest of full disclosure, the Disclosure
Schedules may include items that are beyond the scope of the representations and
warranties called for by the Agreement. Such inclusion, however, should not be
construed to in any way broaden the scope of the representations and warranties
made in the Agreement. Headings and captions in the Disclosure Schedules are for
convenience of reference only and shall in no way modify or effect, or be
considered in construing or interpreting, any information provided herein. No
inclusion of a matter in the Disclosure Schedules shall constitute an admission
that a matter is "material" or would have a material adverse effect on the
Company. Nothing in the Disclosure Schedules constitutes an admission of any
liability or obligation of the Company to any third party, or an admission
against its interests.

<PAGE>

                          SCHEDULE 3(A) - SUBSIDIARIES

1.   InkSure Inc.*

2.   InkSure Ltd.

3.   IST Operating Inc.

4.   InkSure RF Inc.

* INKSURE INC. IS NOT QUALIFIED TO TRANSACT BUSINESS IN GOOD STANDING IN THE
STATE OF ILLINOIS.

<PAGE>

               SCHEDULE 3(K) - SEC DOCUMENTS, FINANCIAL STATEMENTS

None.

<PAGE>

                   SCHEDULE 3(L) - ABSENCE OF CERTAIN CHANGES

As of December 31, 2004, the Company had 1.65 million dollars in cash and as of
June 30, 2005, the Company had 0.88 million dollars in cash.

<PAGE>

                   SCHEDULE 3(Q) - TRANSACTION WITH AFFILIATES

Option to purchase 10,000 shares of Common Stock to Gerry Lauer, the Company's
National Accounts Manager, granted by the Company on May 5, 2005, at an exercise
price of $1.30 per share, with an expiration date of May 5, 2010.

<PAGE>

                      SCHEDULE 3(R) - EQUITY CAPITALIZATION

(ii)

     1.   The Company is disputing the valid issuance of an option to purchase
          300,480 shares of Common Stock that was granted prior to the reverse
          acquisition merger to Elie Rozen at an exercise price of $0.50 per
          share.

     2.   Attached as EXHIBIT 3(R) to this Schedule 3(r) is a listing of the
          outstanding options granted by the Company and their corresponding
          terms.

     3.   Five-year warrants to purchase an aggregate of 550,933 shares of
          Common Stock to Commonwealth Associates, L.P., in connection with
          Commonwealth's role as placement agent, issued on July 5, 2002, July
          31, 2002 and September 6, 2002, at an exercise price of $1.61 per
          share. Such warrants were exercised in part though cashless exercises,
          with warrants to purchase an aggregate of 287,023 shares of Common
          Stock remaining.

     4.   Five-year warrants to purchase an aggregate of 1,456,526 shares of
          Common Stock to various investors, issued on July 5, 2002, July 31,
          2002 and September 6, 2002, at an exercise price of $2.17 per share.
          Such warrants were exercised in part though cashless exercises, with
          warrants to purchase an aggregate of 1,434,787 shares of Common Stock
          remaining.

     5.   Five-year warrants to purchase an aggregate of 1,904,411 shares of
          Common Stock to various investors, issued on April 8, 2004, at an
          exercise price of $1.00 per share.

     6.   Ten-year warrants to purchase 50,000 shares of Common Stock to Jerry
          Flakner, in connection with services rendered to the Company, issued
          on March 15, 2005, at an exercise price of $1.40 per share.

(iii)

          The Company obtained bank guarantees in the amount of $9,000 to secure
          its lease commitments.

<PAGE>

     EXHIBIT 3(R)

<TABLE>
<CAPTION>
     NAME                    DATE GRANT           QUANTITY        EXERCISE PRICE   EXPIRATION DATE
     ----                    ----------           --------        --------------   ---------------
<S>                          <C>                <C>                   <C>             <C>
EMPLOYEES:
Shlomo Dukler                12/31/2001            65,000               0.8           12/31/06
Shlomo Dukler                  1/1/2002             3,197               0.8             1/1/07
Daniel Perry                 12/31/2001            15,150               0.8           12/31/06
Daniel Perry                   1/6/2004             4,850              1.05             1/6/09
Dana kaplan                  12/31/2001             9,500               0.8           12/31/06
Dana kaplan                    1/1/2002             5,500               0.8             1/1/07
Nava Stollero                12/31/2001             3,800               1.2           12/31/06
Sigal Ohaion                 12/31/2001             3,800               1.2           12/31/06
Russ Kobela                    5/1/2002             9,500               1.2             5/1/07
Eyal Bigon                     1/1/2002            55,000               0.8             1/1/07
Eyal Bigon                    3/24/2003            25,000              1.45            3/24/08
Eyal Bigon                    2/24/2004           100,000               0.8            2/24/09
Eyal Bigon                    12/9/2004            10,000              1.25            12/9/09
Chris Brown                   3/24/2003            30,000              1.45            3/24/08
Chris Brown                   12/9/2004            30,000              1.25            12/9/09
Jamie Assaf                    9/4/2002           100,000              1.61             9/4/07
Viktor Goldovsky               1/6/2004             8,550              1.05             1/6/09
Eli Shasha                     1/6/2004             5,000              1.05             1/6/09
Yaron Siton                    1/6/2004             5,000              1.05             1/6/09
Yohanan Davidovich             1/6/2004             2,500              1.05             1/6/09
Jerry lauer                   5/18/2005            10,000               1.3            5/18/10

BOARD MEMBERS:
Elie Housman                   2/6/2002           478,469             0.966             2/6/09
Elie Housman                  2/24/2004           200,000               0.8            2/24/09
Elie Housman                  12/9/2004            50,000              1.25            12/9/09
Elie Housman                  5/19/2005           250,000              1.30            5/19/09
Yaron Meerfeld                 1/1/2002            57,000               0.8             1/1/07
Yaron Meerfeld                2/24/2004           200,000               0.8            2/24/09
Yaron Meerfeld                12/9/2004            50,000              1.25            12/9/09
David Sass                    3/24/2003            22,000              1.45            3/24/08
David Sass                    2/24/2004            24,000               0.8            2/24/09
David Sass                     2/1/2005            24,000              1.35             2/1/10
Ezra Harel                    3/24/2003            22,000              1.45            3/24/08
Jim Lineberger                3/24/2003            22,000              1.45            3/24/08
Jim Lineberger                2/24/2004            34,000              0.80            2/24/09
Jim Lineberger                 2/1/2005            29,000              1.35             2/1/10
Albert Attias                 3/24/2003            22,000              1.45            3/24/08
Albert Attias                 2/24/2004            24,000              0.80            2/24/09
Albert Attias                  2/1/2005            24,000              1.35             2/1/10
Philip Getter                 2/24/2004            31,000              0.80            2/24/09
Philip Getter                  2/1/2005            36,000              1.35           2/1/2010
Micahel Acks                  2/24/2004            27,000              0.80            2/24/09
Micahel Acks                   2/1/2005            27,000              1.35             2/1/10

                                                2,154,816
</TABLE>

<PAGE>

                SCHEDULE 3(S) - INDEBTEDNESS AND OTHER CONTRACTS

None.

<PAGE>

                      SCHEDULE 3(T) - ABSENCE OF LITIGATION

On December 12, 1999, Secu-Systems filed a lawsuit with the District Court in
Tel Aviv-Jaffa against Supercom Ltd. (IST Operating Inc.'s former parent
company) and InkSure Ltd. seeking a permanent injunction and damages. The
plaintiff asserted in its suit that the printing method applied to certain
products that have been developed by InkSure Ltd. constitutes inter alia: (a)
breach of a confidentiality agreement between the plaintiff and Supercom; (b)
unjust enrichment of Supercom and InkSure Ltd.; (c) breach of fiduciary duties
owed to the plaintiff by Supercom and InkSure Ltd.; and (d) a tort of
misappropriation of trade secret and damage to plaintiff's property.
Secu-Systems seeks, among other things, an injunction and a 50% share of profits
from the printing method at issue. At the beginning of 2004 the Company
submitted closing arguments to the Court, and Secu-Systems replied to such
closing arguments. It is expected that the Court render its decision at the
beginning of 2006.

<PAGE>

                       SCHEDULE 3(V) - EMPLOYEE RELATIONS

The employees of InkSure Ltd. are entitled to "Dmey Havra'a" as provided in a
Collective Bargaining Agreement to which the General Labor Union of the Workers
in Israel is a party. Dmey Havra'a is an employee benefit program whereby
employees receive payments from their employer for vacation. In addition,
InkSure Ltd. pays a monthly amount equal to 14.53% of the salary of each
employee to an insurance policy, pension fund or combination of both, according
to the request of each such employee. Each employee pays a monthly amount to
such insurance policy equal to 5% of such employee's salary.

<PAGE>

                  Schedule 3(x) - Intellectual Property Rights

None.

<PAGE>

                       SCHEDULE 3(Z) - SUBSIDIARY RIGHTS

None.

<PAGE>

                           SCHEDULE 3(AA) - TAX STATUS

The Company, InkSure Inc., IST Operating Inc. and InkSure RF Inc. have not filed
their 2002, 2003 and 2004 tax returns. InkSure Ltd. has not filed its 2004 tax
return. The Company is awaiting the completion of a transfer price study,
approved by the Company's audit committee and performed by the Company's
auditor, Brightman Almagor & Co. (a member firm of Deloitte Touche Tohmatsu)
prior to filing such tax returns. The Company estimates that such study will be
completed by November 30, 2005, and at that time the Company plans to file the
tax returns set forth above. All of the tax reports relating to the Company's
operating subsidiaries are showing tax losses. Accordingly, there will be no
taxes due upon filing such tax returns.

<PAGE>

                        SCHEDULE 3(CC) - RANKING OF NOTES

None.EXHIBIT 10.2

                          REGISTRATION RIGHTS AGREEMENT

     REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of September 30,
2005, by and among InkSure Technologies Inc., a Delaware corporation, with
headquarters located at 1770 N.W. 67th Street, Fort Lauderdale, Florida 33309
(the "COMPANY"), and the undersigned buyers (each, a "BUYER", and collectively,
the "BUYERS").

     WHEREAS:

     A. In connection with the Securities Purchase Agreement by and among the
parties hereto of even date herewith (the "SECURITIES PURCHASE AGREEMENT"), the
Company has agreed, upon the terms and subject to the conditions set forth in
the Securities Purchase Agreement, to issue and sell to each Buyer convertible
notes of the Company (the "INITIAL NOTES") which will, among other things, be
convertible into shares of the Company's common stock, par value $0.01 per share
(the "COMMON STOCK") (as converted, the "INITIAL CONVERSION SHARES") in
accordance with the terms of the Notes.

     B. In connection with the Securities Purchase Agreement, the Company has
agreed, upon the terms and subject to the conditions set forth in the Securities
Purchase Agreement, to issue and sell to each Buyer at the Additional Closings
additional convertible notes of the Company (the "ADDITIONAL NOTES", and
collectively with the Initial Notes, the "NOTES"), which will be convertible
into shares of Common Stock (as converted, the "ADDITIONAL CONVERSION SHARES",
and collectively with the Initial Conversion Shares, the "CONVERSION SHARES") in
accordance with the terms of the Additional Notes.

     B. To induce the Buyers to execute and deliver 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.

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the 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. "ADDITIONAL EFFECTIVENESS DEADLINE" means the date which is 90 days
     after the applicable Additional Closing Date that triggers the obligation
     to file an Additional Registration Statement hereunder, or if there is a
     full review of the Registration Statement by the SEC, 120 days after such
     Additional Closing Date.

          b. "ADDITIONAL FILING DEADLINE" means 45 days after the earlier of (x)
     each Additional Closing Date at which an aggregate of at least $500,000 in
     principal amount of Additional Notes are purchased by one or more Buyers or
     their successors or assigns or after which there is an aggregate of at
     least $500,000 in principal amount of Additional Notes that have been
     purchased by one or more Buyers or their successors or assigns that have
     not had their related Additional Registrable Securities previously
     registered hereunder or (y) such time after any Additional Notes are
     purchased that no additional Additional Notes are available or are
     permitted to be purchased pursuant to the Securities Purchase Agreement.

<PAGE>

          c. "ADDITIONAL REGISTRABLE SECURITIES" means the Additional Conversion
     Shares issued or issuable upon conversion or redemption of all of the
     Additional Notes actually purchased and any share capital of the Company
     issued or issuable with respect to the Additional Notes or the Additional
     Conversion Shares as a result of any stock split, stock dividend,
     recapitalization, exchange or similar event or otherwise, without regard to
     any limitations on conversions of Additional Notes.

          d. "ADDITIONAL REGISTRATION STATEMENT" means a registration statement
     or registration statements of the Company filed under the 1933 Act covering
     any Additional Registrable Securities.

          e. "ADDITIONAL REQUIRED REGISTRATION AMOUNT" means 130% of the number
     of Additional Conversion Shares issued and issuable pursuant to the
     Additional Notes as of the trading day immediately preceding the applicable
     date of determination, subject to adjustment as provided in Section 2(e),
     without regard to any limitations on conversions of the Additional Notes.

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

          g. "CLOSING DATE" shall have the meaning set forth in the Securities
     Purchase Agreement.

          h. "EFFECTIVE DATE" means, with respect to the Initial Registration
     Statement or the Additional Registration Statement, the date such
     Registration Statement has been declared effective by the SEC.

          i. "EFFECTIVENESS DEADLINE" means the Initial Effectiveness Deadline
     (as defined below) and the Additional Effectiveness Deadline (as defined
     below), as applicable.

          j. "FILING DEADLINE" means the Initial Filing Deadline (as defined
     below) and the Additional Filing Deadline (as defined below), as
     applicable.

          k. "INITIAL EFFECTIVENESS DEADLINE" means the date which is 90 days
     after the Initial Closing Date, or if there is a full review of the
     Registration Statement by the SEC, 120 days after the Initial Closing Date.

          l. "INITIAL FILING DEADLINE" means 45 days after the Initial Closing
     Date.

                                       2
<PAGE>

          m. "INITIAL REGISTRABLE SECURITIES" means the Initial Conversion
     Shares issued or issuable upon conversion or redemption of the Initial
     Notes, and any share capital of the Company issued or issuable with respect
     to the Initial Conversion Shares or the Initial Notes as a result of any
     stock split, stock dividend, recapitalization, exchange or similar event or
     otherwise, without regard to any limitations on conversions of the Initial
     Notes.

          n. "INITIAL REQUIRED REGISTRATION AMOUNT" means 130% of the number of
     Initial Conversion Shares issued and issuable pursuant to the Initial Notes
     as of the trading day immediately preceding the applicable date of
     determination, subject to adjustment as provided in Section 2(e), without
     regard to any limitations on conversions of the Initial Notes.

          o. "INITIAL REGISTRATION STATEMENT" means a registration statement or
     registration statements of the Company filed under the 1933 Act covering
     the Initial Registrable Securities.

          p. "INVESTOR" means a Buyer or any transferee or assignee thereof 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
     assigns its rights under this Agreement and who agrees to become bound by
     the provisions of this Agreement in accordance with Section 9.

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

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

          s. "REGISTRABLE SECURITIES" means the Initial Registrable Securities
     and the Additional Registrable Securities.

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

          u. "REQUIRED HOLDERS" means the holders of at least a majority of the
     Registrable Securities.

          v. "RULE 415" means Rule 415 under the 1933 Act or any successor rule
     providing for offering securities on a continuous or delayed basis.

          w. "SEC" means the United States Securities and Exchange Commission.

                                       3
<PAGE>

     2. REGISTRATION.

          a. INITIAL MANDATORY REGISTRATION. The Company shall prepare, and, as
     soon as practicable, but in no event later than the Initial Filing
     Deadline, file with the SEC the Initial Registration Statement on Form SB-2
     or Form S-3 covering the resale of all of the Initial Registrable
     Securities. In the event that Form SB-2 or Form S-3 is unavailable for such
     a registration, the Company shall use such other form as is available for
     such a registration on another appropriate form reasonably acceptable to
     the Required Holders, subject to the provisions of Section 2(e). The
     Initial Registration Statement prepared pursuant hereto shall register for
     resale at least the number of shares of Common Stock equal to the Initial
     Required Registration Amount as of the date the Registration Statement is
     initially filed with the SEC. The Initial Registration Statement shall
     contain (except if otherwise directed by the Required Holders) the "SELLING
     SHAREHOLDERS" and "PLAN OF DISTRIBUTION" sections in substantially the form
     attached hereto as EXHIBIT B. The Company shall use its best efforts to
     have the Initial Registration Statement declared effective by the SEC as
     soon as practicable, but in no event later than the Initial Effectiveness
     Deadline.

          b. ADDITIONAL MANDATORY REGISTRATIONS. The Company shall prepare, and,
     as soon as practicable but in no event later than the applicable Additional
     Filing Deadline, file with the SEC an Additional Registration Statement on
     Form SB-2 or Form S-3 covering the resale of all of the Additional
     Registrable Securities not previously registered on an Additional
     Registration Statement hereunder. In the event that Form SB-2 or Form S-3
     is unavailable for such a registration, the Company shall use such other
     form as is available for such a registration on another appropriate form
     reasonably acceptable to the Required Holders, subject to the provisions of
     Section 2(e). Each Additional Registration Statement prepared pursuant
     hereto shall register for resale at least that number of shares of Common
     Stock equal to the Additional Required Registration Amount as to the
     Additional Registrable Securities not previously registered hereunder as of
     the date such Registration Statement is initially filed with the SEC. Each
     Additional Registration Statement shall contain (except if otherwise
     directed by the Required Holders) the "SELLING SHAREHOLDERS" and "PLAN OF
     DISTRIBUTION" sections in substantially the form attached hereto as EXHIBIT
     B. The Company shall use its best efforts to have each Additional
     Registration Statement declared effective by the SEC as soon as
     practicable, but in no event later than the applicable Additional
     Effectiveness Deadline.

          c. 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 the 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 shall be allocated a pro rata portion of the then remaining
     number of Registrable Securities included in such Registration Statement
     for such transferor. 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. Other than as set forth on Schedule 2(c), the
     Company shall not include any securities other than Registrable Securities
     on any Registration Statement without the prior written consent of the
     Required Holders.

                                       4
<PAGE>

          d. LEGAL COUNSEL. Subject to Section 5 hereof, the Required Holders
     shall have the right to select one legal counsel to review and oversee any
     registration pursuant to this Section 2 ("LEGAL COUNSEL"), which shall be
     Schulte Roth & Zabel LLP or such other counsel as thereafter designated by
     the Required Holders. The Company and Legal Counsel shall reasonably
     cooperate with each other in performing the Company's obligations under
     this Agreement.

          e. INELIGIBILITY FOR FORM SB-2 OR FORM S-3. In the event that Form
     SB-2 or 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 the Required Holders and (ii) undertake to register the
     Registrable Securities on Form SB-2 or Form S-3 as soon as either such form
     is available, provided that the Company shall maintain the effectiveness of
     the Registration Statement then in effect until such time as a Registration
     Statement on Form SB-2 or Form S-3 covering the Registrable Securities has
     been declared effective by the SEC or the Company is no longer obligated to
     maintain a registration statement for the Registrable Securities pursuant
     to the terms hereof.

          f. SUFFICIENT NUMBER OF SHARES REGISTERED. In the event the number of
     shares available under a Registration Statement filed pursuant to Section
     2(a) is insufficient to cover all of the Registrable Securities required to
     be covered by such Registration Statement or an Investor's allocated
     portion of the Registrable Securities pursuant to Section 2(b), the Company
     shall amend the applicable Registration Statement, or file 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 thirty (30) days after the
     necessity therefor arises. The Company shall use its best efforts to cause
     such amendment and/or new Registration Statement to become effective as
     soon as practicable following the filing thereof. 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 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 the conversion of the
     Notes and such calculation shall assume that the Notes are then convertible
     into Shares of Common Stock at the then prevailing Conversion Rate (as
     defined in the Notes).

                                       5
<PAGE>

          g. EFFECT OF FAILURE TO FILE AND OBTAIN AND MAINTAIN EFFECTIVENESS OF
     REGISTRATION STATEMENT. If (i) a Registration Statement covering all of the
     Registrable Securities required to be covered thereby and required to be
     filed by the Company pursuant to this Agreement is (A) not filed with the
     SEC on or before the respective Filing Deadline (a "FILING FAILURE") or (B)
     not declared effective by the SEC on or before the respective Effectiveness
     Deadline (an "EFFECTIVENESS FAILURE") or (ii) on any day after the
     Effective Date sales of all of the Registrable Securities required to be
     included on such Registration Statement cannot be made (other than during
     an Allowable Grace Period (as defined in Section 3(r)) pursuant to such
     Registration Statement (including, without limitation, because of a failure
     to keep such Registration Statement effective, to disclose such information
     as is necessary for sales to be made pursuant to such Registration
     Statement or to register a sufficient number of Shares of Common Stock) (a
     "MAINTENANCE FAILURE") 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 one percent (1.0%) of the aggregate
     Purchase Price (as such term is defined in the Securities Purchase
     Agreement) of such Investor's Registrable Securities included in such
     Registration Statement on each of the following dates: (i) the day of a
     Filing Failure and on every thirtieth day (pro rated for periods totaling
     less than thirty days) after a Filing Failure until such Filing Failure is
     cured; (ii) the day of an Effectiveness Failure and on every thirtieth day
     (pro rated for periods totaling less than thirty days) after an
     Effectiveness Failure until such Effectiveness Failure is cured; and (iii)
     the initial day of a Maintenance Failure and on every thirtieth day (pro
     rated for periods totaling less than thirty days) after a Maintenance
     Failure until such Maintenance Failure is cured. The payments to which a
     holder shall be entitled pursuant to this Section 2(g) are referred to
     herein as "REGISTRATION DELAY PAYMENTS." Notwithstanding the foregoing, to
     the extent that there simultaneously exists more than one of the following:
     (i) a Filing Failure, (ii) an Effectiveness Failure or (iii) a Maintenance
     Failure, no more than one Registration Delay Payment shall accrue
     simultaneously. Registration Delay Payments shall be paid on the day of the
     Filing Failure, Effectiveness Failure and the initial day of a Maintenance
     Failure, as applicable, and thereafter on the earlier of (I) the thirtieth
     day after the event or failure giving rise to the Registration Delay
     Payments has occurred and (II) the third Business Day after the event or
     failure giving rise to the Registration Delay Payments is cured. In the
     event the Company fails to make Registration Delay Payments in a timely
     manner, such Registration Delay Payments shall bear interest at the rate of
     one percent (1.0%) per month (prorated for partial months) until paid in
     full.

     3. RELATED OBLIGATIONS.

     At such time as the Company is obligated to file a Registration Statement
with the SEC pursuant to Section 2(a), 2(b) or 2(e), the Company will 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 submit to the SEC, within two (2) Business Days
     after the Company learns that no review of a particular Registration
     Statement will be made by the staff of the SEC or that the staff has no
     further comments on a particular Registration Statement, as the case may
     be, a request for acceleration of effectiveness of such Registration
     Statement to a time and date not later than 48 hours after the submission
     of such request. The Company shall use its best efforts to keep each
     Registration Statement effective pursuant to Rule 415 at all times until
     the earlier of (i) the date as of which the Investors may sell all of the
     Registrable Securities covered by such Registration Statement without
     restriction pursuant to Rule 144(k) (or any successor thereto) promulgated
     under the 1933 Act or (ii) the date on which the Investors shall have sold
     all of the Registrable Securities covered by such Registration Statement
     (the "REGISTRATION PERIOD"). The Company shall ensure that each
     Registration Statement (including any amendments or supplements thereto and
     prospectuses contained therein) 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.

                                       6
<PAGE>

          b. The Company shall prepare and file with the SEC such amendments
     (including post-effective amendments) and supplements to a Registration
     Statement and the prospectus used in connection with such Registration
     Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
     under the 1933 Act, as may be necessary to keep such Registration Statement
     effective at all times during the Registration Period, and, during such
     period, comply with the provisions of the 1933 Act with respect to the
     disposition of all Registrable Securities of the Company 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. In the case of amendments and supplements to a
     Registration Statement which are required to be filed pursuant to this
     Agreement (including pursuant to this Section 3(b)) by reason of the
     Company filing a report on Form 10-QSB, Form 10-KSB 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 to review and comment
     upon (i) a Registration Statement at least five (5) Business Days prior to
     its filing with the SEC and (ii) all amendments and supplements to all
     Registration Statements (except for Annual Reports on Form 10-KSB, and
     Reports on Form 10-QSB 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 reasonably objects. The Company shall not
     submit a request for acceleration of the effectiveness of a Registration
     Statement or any amendment or supplement thereto without the prior approval
     of Legal Counsel, which consent shall not be unreasonably withheld. The
     Company shall furnish to Legal Counsel, without charge, (i) copies of any
     correspondence from the SEC or the staff of the SEC to the Company or its
     representatives relating to any Registration Statement, (ii) promptly after
     the same is prepared and filed with the SEC, one copy of any Registration
     Statement and any amendment(s) thereto, including financial statements and
     schedules, all documents incorporated therein by reference, if requested by
     an Investor, and all exhibits and (iii) upon the effectiveness of any
     Registration Statement, one copy of the prospectus included in such
     Registration Statement and all amendments and supplements thereto. The
     Company shall reasonably cooperate with Legal Counsel in performing the
     Company's obligations pursuant to this Section 3.

          d. The Company shall furnish to each Investor whose Registrable
     Securities are included in any Registration Statement, without charge, (i)
     promptly after the same is prepared and filed with the SEC, at least one
     copy of such Registration Statement and any amendment(s) thereto, including
     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 any 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) and (iii) such other documents,
     including 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.

                                       7
<PAGE>

          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 the securities or "blue sky" laws of the jurisdictions in
     the United States in which the Company's Common Stock is currently trading
     and in such other jurisdictions in the United States reasonably requested
     by an Investor, (ii) prepare and file in those jurisdictions, such
     amendments (including 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, that 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 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.

          f. The Company shall notify Legal Counsel 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, nonpublic information),
     and, subject to Section 3(r), promptly prepare a supplement or amendment to
     such Registration Statement to correct such untrue statement or omission,
     and deliver ten (10) copies of such supplement or amendment to Legal
     Counsel and each Investor (or such other number of copies as Legal Counsel
     or such Investor may reasonably request). The Company shall also promptly
     notify Legal Counsel and each Investor in writing (i) when a prospectus or
     any prospectus supplement or post-effective amendment has been filed, and
     when a Registration Statement or any post-effective amendment has become
     effective (notification of such effectiveness shall be delivered to Legal
     Counsel and each Investor by facsimile or e-mail on the same day of such
     effectiveness and by overnight mail), (ii) of any request by the SEC for
     amendments or supplements to a Registration Statement or related prospectus
     or related information, and (iii) of the Company's reasonable determination
     that a post-effective amendment to a Registration Statement would be
     appropriate.

                                       8
<PAGE>

          g. The Company shall use its best efforts to prevent the issuance of
     any stop order or other suspension of effectiveness of a Registration
     Statement, or the suspension of the 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 to notify Legal Counsel and each Investor who
     holds Registrable Securities being sold 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 is required under applicable securities law to be
     described in the Registration Statement as an underwriter, at the
     reasonable request and expenses of such Investor, the Company shall furnish
     to such Investor, on the date of the effectiveness of the Registration
     Statement and thereafter from time to time on such dates as such 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 such
     Investor, and (ii) an 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 such Investor.

          i. The Company shall make available for inspection by (i) any
     Investor, (ii) Legal Counsel and (iii) one firm of accountants or other
     agents retained by the Investors (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, that each Inspector
     shall agree to hold in strict confidence and shall not make any disclosure
     (except to an Investor) or use of any Record or other information which the
     Company determines in good faith to be confidential, and of which
     determination the Inspectors are so notified, unless (a) 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, (b)
     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 (c) the information in such Records has been made
     generally available to the public other than by disclosure in violation of
     this or any other agreement of which the Inspector has knowledge. Each
     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 any Investor) shall be deemed to limit
     the Investors' 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 or applicable rules and regulations of Nasdaq or any other
     relevant market or exchange, (ii) the disclosure of such information is
     necessary to avoid or correct a misstatement or omission in any
     Registration Statement, (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 agreement to which the Company is
     a party or of which the Company has knowledge. 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 the Investor's expense, to undertake
     appropriate action to prevent disclosure of, or to obtain a protective
     order for, such information.

                                       9
<PAGE>

          k. The Company shall use its best efforts either to (i) cause all of
     the Registrable Securities covered by a 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
     Registrable Securities is then permitted under the rules of such exchange,
     or (ii) secure designation and quotation of all of the Registrable
     Securities covered by a Registration Statement on the American Stock
     Exchange 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), to secure the inclusion for quotation on The
     Nasdaq SmallCap Market for such Registrable Securities and, without
     limiting the generality of the foregoing, to use its best efforts to
     arrange for at least two market makers to register with the National
     Association of Securities Dealers, Inc. ("NASD") as such with respect to
     such Registrable Securities. The Company shall pay all fees and expenses in
     connection with satisfying its obligation 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 and registered in such names as the Investors may
     request.

          m. If requested by an Investor, the Company shall (i) as soon as
     practicable 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) as soon as practicable 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) as soon as
     practicable, supplement or make amendments to any Registration Statement 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.

                                      10
<PAGE>

          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 effective date of a
     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 two (2) Business Days after a Registration Statement which
     covers Registrable Securities is declared effective by the SEC, the Company
     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, at any time after
     the Registration Statement has been declared effective by the SEC, the
     Company may delay the disclosure of material, non-public information
     concerning the Company the disclosure of which at the time is not, in the
     good faith opinion of the Board of Directors of the Company and its
     counsel, 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 (i) notify the Investors in writing of the existence
     of material, non-public information giving rise to a Grace Period (provided
     that in each notice the Company will not disclose the content of such
     material, non-public information to the Investors) and the date on which
     the Grace Period will begin, and (ii) notify the Investors in writing of
     the date on which the Grace Period ends; and, provided further, that no
     Grace Period shall exceed thirty (30) consecutive days and during any three
     hundred sixty five (365) day period such Grace Periods shall not exceed an
     aggregate of sixty (60) days (or in the case such material, non-public
     information relates to an acquisition or business combination and the
     Company is advised by counsel that the use of the Registration Statement is
     required by law to be suspended, no Grace Period shall exceed forty-five
     (45) consecutive days and, during any three hundred sixty five day (365)
     period, such Grace Periods shall not exceed an aggregate of ninety (90)
     days) the first day of any Grace Period must be at least two (2) trading
     days after the last day of any prior Grace Period (each, an "ALLOWABLE
     GRACE PERIOD"). For purposes of determining the length of a Grace Period
     above, the Grace Period shall begin on and include the date the Investors
     receive the notice referred to in clause (i) and shall end on and include
     the later of the date the Investors receive the notice referred to in
     clause (ii) 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 the 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, 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 an Investor has entered
     into a contract for sale, and delivered a copy of the prospectus included
     as part of the applicable Registration Statement, prior to the Investor's
     receipt of the notice of a Grace Period and for which the Investor has not
     yet settled.

                                      11
<PAGE>

     4. OBLIGATIONS OF THE INVESTORS.

          a. At least five (5) Business Days prior to the first anticipated
     filing date of a Registration Statement, the Company shall notify each
     Investor in writing of the information the Company requires from each such
     Investor if such Investor elects to have any of such Investor's Registrable
     Securities included in 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, in a manner
     consistent with the last sentence of this Section 4(a), 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 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. All such information provided to the Company by an
     Investor pursuant to the prior sentence shall be in writing, and such
     writing shall expressly acknowledge that the information is being provided
     for use in connection with the preparation of the Registration Statement or
     any such amendment thereof or supplement thereto.

          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 any
     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 3(f) or receipt of
     notice that no supplement or amendment is required. Notwithstanding
     anything to the contrary, 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 an
     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 3(f) and for which
     the 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 the
     Registration Statement.

     5. EXPENSES OF REGISTRATION.

     All reasonable expenses, other than underwriting discounts and commissions
(which shall be borne by the Investors), incurred in connection with the
performance of the Company's obligations hereunder and under the transactions
contemplated hereby, including, without limitation, registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, and
fees and disbursements of counsel for the Company shall be paid by the Company.
The fees and disbursements for Legal Counsel shall be borne by the Investors.

                                      12
<PAGE>

     6. INDEMNIFICATION.

     In the event any Registrable Securities are included in a Registration
Statement under this Agreement:

          a. To the fullest extent permitted by law, the Company will, and
     hereby does, indemnify, hold harmless and defend each Investor, the
     directors, officers, members, partners, employees, agents, representatives
     of, and each Person, if any, who controls any Investor within the meaning
     of the 1933 Act or the 1934 Act (each, an "INDEMNIFIED PERSON"), against
     any losses, claims, damages, liabilities, judgments, fines, penalties,
     charges, costs, reasonable attorneys' fees, 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 the light of the circumstances under which the statements
     therein were made, not misleading, (iii) any violation or alleged violation
     by the Company of the 1933 Act, the 1934 Act, any 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 or (iv) any violation of this
     Agreement (the matters in the foregoing clauses (i) through (iv) 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
     the Registration Statement or any such amendment thereof or supplement
     thereto, if such prospectus was timely made available by the Company
     pursuant to Section 3(d); (ii) with respect to any preliminary prospectus,
     shall not inure to the benefit of any such Person from whom the Person
     asserting any such Claim purchased the Registrable Securities that are the
     subject thereof (or to the benefit of any Person controlling such Person)
     if the untrue statement or omission of material fact contained in the
     preliminary prospectus was corrected in the prospectus, as then amended or
     supplemented, if such prospectus was timely made available by the Company
     pursuant to Section 3(d), and the Indemnified Person was promptly advised
     in writing not to use the incorrect prospectus prior to the use giving rise
     to a violation and such Indemnified Person, notwithstanding such advice,
     used it or failed to deliver the correct prospectus as required by the 1933
     Act and such correct prospectus was timely made available pursuant to
     Section 3(d); (iii) shall not be available to the extent such Claim is
     based on a failure of the Investor to deliver or to cause to be delivered
     the prospectus made available by the Company, including a corrected
     prospectus, if such prospectus or corrected prospectus was timely made
     available by the Company pursuant to Section 3(d); and (iv) 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 the Registrable
     Securities by the Investors pursuant to Section 9.

                                      13
<PAGE>

          b. In connection with any Registration Statement in which an Investor
     is participating, each 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
     or any post-effective amendment thereof or any prospectus contained
     therein; and, subject to Section 6(c), such Investor will reimburse any
     legal or other expenses reasonably incurred by an Indemnified Party in
     connection with investigating or defending any such Claim as promptly as
     such expenses are incurred and are due and payable; provided, however, that
     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, however, that the
     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 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 the Registrable
     Securities by the Investors pursuant to Section 9. Notwithstanding anything
     to the contrary contained herein, the indemnification agreement contained
     in this Section 6(b) with respect to any preliminary prospectus shall not
     inure to the benefit of any Indemnified Party if the untrue statement or
     omission of material fact contained in the preliminary prospectus was
     corrected on a timely basis in the prospectus, as then amended or
     supplemented.

                                      14
<PAGE>

          c. Promptly after receipt by an Indemnified Person or Indemnified
     Party under this Section 6 of notice of the commencement of any action or
     proceeding (including any governmental action or proceeding) involving a
     Claim, such Indemnified Person or Indemnified Party 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, that an Indemnified Person or
     Indemnified Party shall have the right to retain its own counsel with the
     fees and expenses of not more than one counsel for such Indemnified Person
     or Indemnified Party to be paid by the indemnifying party, if, in the
     reasonable opinion of counsel retained by the indemnifying party, the
     representation by such counsel of the Indemnified Person or Indemnified
     Party and the indemnifying party would be inappropriate due to actual or
     potential differing interests between such Indemnified Person or
     Indemnified Party and any other party represented by such counsel in such
     proceeding. In the case of an Indemnified Person, legal counsel referred to
     in the immediately preceding sentence shall be selected by the Investors
     holding at least a majority in interest of the Registrable Securities
     included in the Registration Statement to which the Claim relates. The
     Indemnified Party or Indemnified Person shall cooperate fully 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 which relates to such action or Claim. The
     indemnifying party shall keep the Indemnified Party or Indemnified Person
     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, that 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, 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 of a release from all
     liability in respect to such Claim or litigation. Following indemnification
     as provided for hereunder, the indemnifying party shall be subrogated to
     all rights of the Indemnified Party or Indemnified Person 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 under this Section 6, except to the
     extent that the indemnifying party is prejudiced in its ability to defend
     such action.

          d. 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.

          e. The indemnity 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.

                                      15
<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, that: (i) 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 (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities pursuant to such
Registration Statement.

     8. REPORTS UNDER THE 1934 ACT.

     With a view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any other similar 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 ("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 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 requirements of Rule 144,
     the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual report
     of the Company and such other reports and documents so filed by the
     Company, 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.

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

                                      16
<PAGE>

     10. AMENDMENT OF REGISTRATION RIGHTS.

     Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with the written consent of the Company and the Required
Holders. Any amendment or waiver effected in accordance with this Section 10
shall be binding upon each Investor and the Company. No such amendment shall be
effective to the extent that it applies to less than all of the holders of the
Registrable Securities. No consideration shall be offered or paid to any Person
to amend or consent to a waiver or modification of any provision of any of this
Agreement unless the same consideration also is offered to all of the parties to
this Agreement.

     11. MISCELLANEOUS.

          a. 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 the 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); or (iii) one Business Day after
     deposit with a nationally recognized overnight delivery service, in each
     case properly addressed to the party to receive the same. The addresses and
     facsimile numbers for such communications shall be:

         If to the Company:

                  InkSure Technologies Inc.
                  1770 N.W. 64th Street, Suite 350
                  Fort Lauderdale, Florida  33309
                  Telephone:        (954) 772-8507
                  Facsimile:        (954) 772-8509
                  Attention:        Elie Housman

                                      17
<PAGE>

                  With a copy to:

                  Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
                  Chrysler Center
                  666 Third Avenue
                  New York, New York 10017
                  Telephone:  (212) 935-3000
                  e-mail:     kkoch@mintz.com
                  Facsimile:  (212) 983-3115
                  Attention:  Kenneth R. Koch, Esq.

         If to Legal Counsel:

                  Schulte Roth & Zabel LLP
                  919 Third Avenue
                  New York, New York  10022
                  Telephone:  (212) 756-2000
                  Facsimile:  (212) 593-5955
                  Attention:  Eleazer N. Klein, Esq.

If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers attached hereto, 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. 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
containing the time, date, recipient facsimile number 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.

          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.

          d. All questions concerning the construction, validity, enforcement
     and interpretation of this Agreement shall be governed by the internal laws
     of the State of New York, without giving effect to any choice of law or
     conflict of law provision or rule (whether of the State of New York or any
     other jurisdictions) that would cause the application of the laws of any
     jurisdictions other than the State of New York. Each party hereby
     irrevocably submits to the exclusive jurisdiction of the state and federal
     courts sitting in The City of New York, Borough of Manhattan, 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,
     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.

                                      18
<PAGE>

          e. This Agreement, the other Transaction Documents (as defined in the
     Securities Purchase Agreement) and the instruments referenced herein and
     therein constitute the entire agreement among the parties hereto 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 and the instruments referenced herein and therein
     supersede all prior agreements and understandings among the parties hereto
     with respect to the subject matter hereof and thereof.

          f. Subject to the requirements of Section 9, this Agreement shall
     inure to the benefit of and be binding upon the permitted successors and
     assigns of each of the parties hereto.

          g. The headings in this Agreement are for convenience of reference
     only and shall not limit or otherwise affect the meaning hereof.

          h. This Agreement may be executed in identical counterparts, each of
     which shall be deemed an original but all of which shall constitute one and
     the same agreement. This Agreement, once executed by a party, may be
     delivered to the other party hereto by facsimile transmission of a copy of
     this Agreement bearing the signature of the party so delivering this
     Agreement.

          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. All consents and other determinations required to be made by the
     Investors pursuant to this Agreement shall be made, unless otherwise
     specified in this Agreement, by the Required Holders.

          k. 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.

                                      19
<PAGE>

          l. This Agreement is intended for the benefit of the parties hereto
     and their respective permitted successors and assigns, and is not for the
     benefit of, nor may any provision hereof be enforced by, any other Person.

          m. The obligations of each Buyer hereunder are several and not joint
     with the obligations of any other Buyer, and no provision of this Agreement
     is intended to confer any obligations on any Buyer vis-a-vis any other
     Buyer. Nothing contained herein, and no action taken by any Buyer pursuant
     hereto, shall be deemed to constitute the Buyers as a partnership, an
     association, a joint venture or any other kind of entity, or create a
     presumption that the Buyers are in any way acting in concert or as a group
     with respect to such obligations or the transactions contemplated herein.

                                      20
<PAGE>

     IN WITNESS WHEREOF, each 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:

                                           INKSURE TECHNOLOGIES INC.

                                           By: _____________________
                                           Name:
                                           Title:

<PAGE>

     IN WITNESS WHEREOF, each 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.

                                           BUYERS:

                                           SMITHFIELD FIDUCIARY LLC

                                           By: ____________________
                                           Name:  Adam J. Chill
                                           Title: Authorized Signatory

<PAGE>

     IN WITNESS WHEREOF, each 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.

                                           THE IRREVOCABLE TRUST OF JAMES
                                           E. LINEBERGER U/A 12/17/98

                                           By:  ____________________________
                                           Name:
                                           Title:

<PAGE>

     IN WITNESS WHEREOF, each 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.

                                           IROQUOIS MASTER FUND LTD.

                                           By:  ____________________
                                           Name:
                                           Title:

<PAGE>

     IN WITNESS WHEREOF, each 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.

                                           OMICRON MASTER TRUST

                                           By: ________________
                                           Name:
                                           Title:

<PAGE>

<TABLE>
<CAPTION>
                               SCHEDULE OF BUYERS

                                               BUYER'S ADDRESS                 BUYER'S REPRESENTATIVE'S ADDRESS
                                            AND FACSIMILE NUMBER                      AND FACSIMILE NUMBER
                                            --------------------                      --------------------
<S>                                  <C>                                          <C>
Smithfield Fiduciary LLC             c/o Highbridge Capital Management, LLC       Schulte Roth & Zabel LLP
                                     9 West 57th Street, 27th Floor               919 Third Avenue
                                     New York, New York 10019                     New York, New York 10022
                                     Attention:  Ari J. Storch                    Attn:  Eleazer Klein, Esq.
                                                 Adam J. Chill                    Facsimile:  (212) 593-5955
                                     Facsimile: (212) 751-0755                    Telephone:  (212) 756-2000
                                     Telephone: (212) 287-4720

The Irrevocable Trust of James E.    c/o Lineberger & Co., LLC                    Troutman Sanders LLP
Lineberger u/a 12/17/98              1120 Boston Post Rd.                         The Chrysler Building
                                     Darien, CT  06820                            405 Lexington Avenue
                                     Attention: Jamie Lineberger                  New York, New York 10174
                                     Facsimile: (203) 655-7397                    Attention: Edward Mandell
                                     Telephone: (203) 655-7578                    Facsimile: (212) 704-6288
                                                                                  Telephone: (212) 704-6000
Iroquois Master Fund Ltd.            Iroquois Master Fund Ltd.
                                     641 Lexington Avenue
                                     26th Floor
                                     New York, New York 10022
                                     Attention: Joshua Silverman
                                     Facsimile: (646) 274-1728
                                     Telephone: (212) 974-3070

Omicron Master Trust                 c/o Omicron Capital
                                     650 Fifth Avenue
                                     24th Floor
                                     New York, New York 10019
                                     Attention: Brian Daly
                                     Facsimile: (212) 258-2300
                                     Telephone: (212) 258-2315
</TABLE>

<PAGE>

                                                                       EXHIBIT A

                         FORM OF NOTICE OF EFFECTIVENESS
                            OF REGISTRATION STATEMENT

Pacific Stock Transfer Company
500 E. Warm Springs Road, Ste. 240
Las Vegas, NV 89119
Attention:  Linda C. Payne

          Re:  InkSure Technologies Inc.

Ladies and Gentlemen:

     Reference is made to that certain Securities Purchase Agreement (the
"SECURITIES PURCHASE AGREEMENT") by and among InkSure Technologies Inc., a
Delaware corporation, (the "Company") and the buyers named therein
(collectively, the "HOLDERS"), pursuant to which the Company issued to the
Holders senior secured convertible notes (the "NOTES") convertible into the
Company's common stock, $0.01 par value per share (the "COMMON STOCK"), and that
certain Registration Rights Agreement by and among the Company and 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 conversion of the Notes and the shares of Common Stock, under the
Securities Act of 1933, as amended (the "1933 ACT"). In connection with the
Company's obligations under the Registration Rights Agreement, on ____________
___, 200_, the Company filed a Registration Statement on Form SB-2 (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 shareholder thereunder.

     In connection with the foregoing, we advise you that a member of the SEC's
staff has advised our counsel 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 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 notice to you that the shares of Common
Stock 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 shares of Common Stock to the Holders as
contemplated by the Company's Irrevocable Transfer Agent Instructions dated
___________ _, 2005.

                                       1
<PAGE>

     This letter shall serve as our standing notice with regard to this matter.

                                                  Very truly yours,

                                                  INKSURE TECHNOLOGIES INC.

                                                  By:______________________
                                                  Name:
                                                  Title:

CC:  [LIST NAMES OF HOLDERS]

                                       1
<PAGE>

The following is Schedule 2(c) (the "Schedule") to that certain Registration
Rights Agreement (the "Agreement"), dated as of September 30, 2005, by and among
InkSure Technologies Inc., a Delaware corporation (the "Company"), and the
investors listed on the Schedule of Buyers attached thereto. Capitalized terms
used but not defined in the Schedule shall have the meaning given to such terms
in the Agreement.

              SCHEDULE 2(C) - ALLOCATION OF REGISTRABLE SECURITIES

The following table sets forth the securities (including shares of Common Stock
that are issued and outstanding and shares of Common Stock issuable upon the
exercise of outstanding warrants), other than the Registrable Securities, that
may be included by the Company on any Registration Statement, without the prior
written consent of the Required Holders:

               SELLING STOCKHOLDER                        COMMON STOCK
               -------------------                        ------------
1  Robert H. Lessin Venture Capital LLC                        294,118
2  Douglas L. Getter                                            58,824
3  Arthur C. Liebler                                           147,059
4  Daniel Cohen                                                 73,529
5  Zamir Ben-Zion                                              147,059
6  Spencer Corporation                                         294,118
7  Ruth Reinich                                                147,059
8  Ralph Reis                                                  100,000
9  Hebrides Offshore Fund Ltd.                                 200,000
10 Hebrides LP                                                 550,000
11 Peter R. McMullin                                           100,000
12 Gary N. Moss                                                 25,000
13 M.T. Dawson Family Trust                                     50,000
14 Lori and Clement Winke                                       75,000
15 RGA Irrevocable Trust                                       205,882
16 Ronald Assaf                                                205,882
17 Yoav Gottesman                                              176,471
                                                             ---------
                                                     TOTAL:  2,850,001

                                       2

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