Document:

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                                                                    Exhibit 10.3

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
WARRANT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO FORTUNE DIVERSIFIED INDUSTRIES, INC. THAT
SUCH REGISTRATION IS NOT REQUIRED.

            Right to Purchase up to 272,727 Shares of Common Stock of
                      FORTUNE DIVERSIFIED INDUSTRIES, INC.
                   (subject to adjustment as provided herein)

                          COMMON STOCK PURCHASE WARRANT

No. _________________                              Issue Date: November 21, 2005

     FORTUNE DIVERSIFIED INDUSTRIES, INC., a corporation organized under the
laws of the State of Indiana (the "Company"), hereby certifies that, for value
received, LAURUS MASTER FUND, LTD., or assigns (the "Holder"), is entitled,
subject to the terms set forth below, to purchase from the Company (as defined
herein) from and after the Issue Date of this Warrant and at any time or from
time to time before 5:00 p.m., New York time, through the close of business
November __, 2010 (the "Expiration Date"), up to 272,727 fully paid and
nonassessable shares of Common Stock (as hereinafter defined), $0.10 par value
per share, at the applicable Exercise Price per share (as defined below). The
number and character of such shares of Common Stock and the applicable Exercise
Price per share are subject to adjustment as provided herein.

     As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:

          (a) The term "Company" shall include Fortune Diversified Industries,
     Inc. and any corporation which shall succeed, or assume the obligations of,
     Fortune Diversified Industries, Inc. hereunder.

          (b) The term "Common Stock" includes (i) the Company's Common Stock,
     par value $0.10 per share; and (ii) any other securities into which or for
     which any of the securities described in the preceding clause (i) may be
     converted or exchanged pursuant to a plan of recapitalization,
     reorganization, merger, sale of assets or otherwise.

          (c) The term "Other Securities" refers to any stock (other than Common
     Stock) and other securities of the Company or any other person (corporate
     or otherwise) which the holder of the Warrant at any time shall be entitled
     to receive, or shall have received, on the exercise of the Warrant, in lieu
     of or in addition to Common Stock, or

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     which at any time shall be issuable or shall have been issued in exchange
     for or in replacement of Common Stock or Other Securities pursuant to
     Section 4 or otherwise.

          (d) The "Exercise Price" applicable under this Warrant, and subject to
     adjustment as set forth herein, shall be a price of $6.60 for the all
     shares acquired hereunder.

     1.   Exercise of Warrant.

          1.1. Number of Shares Issuable upon Exercise. From and after the date
hereof through and including the Expiration Date, the Holder shall be entitled
to receive, upon exercise of this Warrant in whole or in part, by delivery of an
original or fax copy of an exercise notice in the form attached hereto as
Exhibit A (the "Exercise Notice"), shares of Common Stock of the Company,
subject to adjustment pursuant to Section 4.

          1.2. Fair Market Value. For purposes hereof, the "Fair Market Value"
of a share of Common Stock as of a particular date (the "Determination Date")
shall mean:

          (a) If the Company's Common Stock is traded on the American Stock
     Exchange or another national exchange or is quoted on the National or
     SmallCap Market of The Nasdaq Stock Market, Inc.("Nasdaq"), then the
     closing or last sale price, respectively, reported for the last business
     day immediately preceding the Determination Date.

          (b) If the Company's Common Stock is not traded on the American Stock
     Exchange or another national exchange or on the Nasdaq but is traded on the
     NASD Over the Counter Bulletin Board, then the mean of the average of the
     closing bid and asked prices reported for the last business day immediately
     preceding the Determination Date.

          (c) Except as provided in clause (d) below, if the Company's Common
     Stock is not publicly traded, then as the Holder and the Company agree or
     in the absence of agreement by arbitration in accordance with the rules
     then in effect of the American Arbitration Association, before a single
     arbitrator to be chosen from a panel of persons qualified by education and
     training to pass on the matter to be decided.

          (d) If the Determination Date is the date of a liquidation,
     dissolution or winding up, or any event deemed to be a liquidation,
     dissolution or winding up pursuant to the Company's articles, then all
     amounts to be payable per share to holders of the Common Stock pursuant to
     the articles in the event of such liquidation, dissolution or winding up,
     plus all other amounts to be payable per share in respect of the Common
     Stock in liquidation under the articles , assuming for the purposes of this
     clause (d) that all of the shares of Common Stock then issuable upon
     exercise of the Warrant are outstanding at the Determination Date.

          1.3. Company Acknowledgment. The Company will, at the time of the
exercise of this Warrant, upon the request of the Holder hereof acknowledge in
writing its

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continuing obligation to afford to such Holder any rights to which such Holder
shall continue to be entitled after such exercise in accordance with the
provisions of this Warrant. If the Holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to afford
to such Holder any such rights.

          1.4. Trustee for Warrant Holders. In the event that a bank or trust
company shall have been appointed as trustee for the Holders of this Warrant
pursuant to Subsection 3.2, such bank or trust company shall have all the powers
and duties of a warrant agent (as hereinafter described) and shall accept, in
its own name for the account of the Company or such successor person as may be
entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 1.

     2.   Procedure for Exercise.

          2.1. Delivery of Stock Certificates, Etc., on Exercise. The Company
agrees that the shares of Common Stock purchased upon exercise of this Warrant
shall be deemed to be issued to the Holder as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares in accordance herewith. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within three (3) business days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the Holder, or as such Holder (upon
payment by such Holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such Holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share, together with any other stock or other
securities and property (including cash, where applicable) to which such Holder
is entitled upon such exercise pursuant to Section 1 or otherwise.

          2.2. Exercise.

     Payment may be made in cash or by certified check payable to the order of
     the Company equal to the applicable aggregate Exercise Price , for the
     number of Common Shares specified in such Exercise Notice (as such exercise
     number shall be adjusted to reflect any adjustment in the total number of
     shares of Common Stock issuable to the Holder per the terms of this
     Warrant) and the Holder shall thereupon be entitled to receive the number
     of duly authorized, validly issued, fully-paid and non-assessable shares of
     Common Stock (or Other Securities) determined as provided herein.

     3.   Effect of Reorganization, Etc.; Adjustment of Exercise Price.

          3.1. Reorganization, Consolidation, Merger, Etc. In case at any time
or from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate

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provision shall be made by the Company whereby the Holder, on the exercise
hereof as provided in Section 1 at any time after the consummation of such
reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Common Stock (or
Other Securities) issuable on such exercise prior to such consummation or such
effective date, the stock and other securities and property (including cash) to
which such Holder would have been entitled upon such consummation or in
connection with such dissolution, as the case may be, if such Holder had so
exercised this Warrant, immediately prior thereto, all subject to further
adjustment thereafter as provided in Section 4.

          3.2. Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, concurrently with any distributions made to holders of its Common
Stock, shall at its expense deliver or cause to be delivered to the Holder the
stock and other securities and property (including cash, where applicable)
receivable by the Holder pursuant to Section 3.1, or, if the Holder shall so
instruct the Company, to a bank or trust company specified by the Holder and
having its principal office in New York, NY as trustee for the Holder (the
"Trustee").

          3.3. Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 4. In the
event this Warrant does not continue in full force and effect after the
consummation of the transactions described in this Section 3, then the Company's
securities and property (including cash, where applicable) receivable by the
Holder will be delivered to the Holder or the Trustee as contemplated by Section
3.2.

     4. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock or any preferred stock issued by
the Company (b) subdivide its outstanding shares of Common Stock, or (c) combine
its outstanding shares of the Common Stock into a smaller number of shares of
the Common Stock, then, in each such event, the Exercise Price shall,
simultaneously with the happening of such event, be adjusted by multiplying the
then Exercise Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such event and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after such event, and the product so obtained shall thereafter be
the Exercise Price then in effect. The Exercise Price, as so adjusted, shall be
readjusted in the same manner upon the happening of any successive event or
events described herein in this Section 4. The number of shares of Common Stock
that the Holder shall thereafter, on the exercise hereof as provided in Section
1, be entitled to receive shall be adjusted to a number determined by
multiplying the number of shares of Common Stock that would otherwise (but for
the provisions of this Section 4) be issuable on such exercise by a fraction of
which (a) the numerator is the Exercise Price that would otherwise

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(but for the provisions of this Section 4) be in effect, and (b) the denominator
is the Exercise Price in effect on the date of such exercise (taking into
account the provisions of this Section 4).

     5. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of this Warrant, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Exercise Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the Holder and any Warrant agent of the
Company (appointed pursuant to Section 11 hereof).

     6. Reservation of Stock, Etc., Issuable on Exercise of Warrant. The Company
will at all times reserve and keep available, solely for issuance and delivery
on the exercise of this Warrant, shares of Common Stock (or Other Securities)
from time to time issuable on the exercise of this Warrant.

     7. Assignment; Exchange of Warrant. Subject to compliance with applicable
securities laws, this Warrant, and the rights evidenced hereby, may be
transferred by any registered holder hereof (a "Transferor") in whole or in
part. On the surrender for exchange of this Warrant, with the Transferor's
endorsement in the form of Exhibit B attached hereto (the "Transferor
Endorsement Form") and together with evidence reasonably satisfactory to the
Company demonstrating compliance with applicable securities laws, which shall
include, without limitation, the provision of a legal opinion from the
Transferor's counsel that such transfer is exempt from the registration
requirements of applicable securities laws, the Company at its expense (but with
payment by the Transferor of any applicable transfer taxes) will issue and
deliver to or on the order of the Transferor thereof a new Warrant of like
tenor, in the name of the Transferor and/or the transferee(s) specified in such
Transferor Endorsement Form (each a "Transferee"), calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant so surrendered by the Transferor.

     8. Replacement of Warrant. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any such loss, theft or destruction of this Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.

     9. Registration Rights. The Holder has been granted certain registration
rights by the Company. These registration rights are set forth in a Registration
Rights Agreement entered

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into by the Company and Holder dated as of the date hereof, as the same may be
amended, modified and/or supplemented from time to time.

     10. Maximum Exercise. Notwithstanding anything contained herein to the
contrary, the Holder shall not be entitled to exercise this Warrant in
connection with that number of shares of Common Stock which would exceed the
difference between (i) 4.99% of the issued and outstanding shares of Common
Stock and (ii) the number of shares of Common Stock beneficially owned by the
Holder. For the purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Exchange
Act, as amended, and Regulation 13d-3 thereunder. The conversion limitation
described in this Section 10 shall automatically become null and void following
notice to the Company upon the occurrence and during the continuance of an Event
of Default under and as defined in the Note made by the Company to the Holder
dated the date hereof (as amended, modified or supplemented from time to time,
the "Note"), or upon 75 days prior notice to the Company, except that at no time
shall the number of shares of Common Stock beneficially owned by the Holder
exceed 19.99% of the outstanding shares of Common Stock. Notwithstanding
anything contained herein to the contrary, the number of shares of Common Stock
issuable by the Company and acquirable by the Holder at a price below $4.86 per
share pursuant to the terms of this Warrant, the Note, the Purchase Agreement
(as defined in the Note), any Related Agreement (as defined in the Purchase
Agreement) or otherwise, shall not exceed an aggregate of 2,108,764 shares of
Common Stock (subject to appropriate adjustment for stock splits, stock
dividends, or other similar recapitalizations affecting the Common Stock) (the
"MAXIMUM COMMON STOCK ISSUANCE"), unless the issuance of Common Stock hereunder
in excess of the Maximum Common Stock Issuance shall first be approved by the
Company's shareholders. If at any point in time and from time to time the number
of shares of Common Stock issued pursuant to the terms of this Warrant, the
Note, the Purchase Agreement or any Related Agreement, together with the number
of shares of Common Stock that would then be issuable by the Company to the
Holder in the event of a conversion or exercise pursuant to the terms of this
Warrant, the Note, the Purchase Agreement, any Related Agreement or otherwise,
would exceed the Maximum Common Stock Issuance but for this Section 10, the
Company shall promptly call a shareholders meeting to solicit shareholder
approval for the issuance of the shares of Common Stock hereunder in excess of
the Maximum Common Stock Issuance.

     11. Warrant Agent. The Company may, by written notice to the each Holder of
the Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 1, exchanging
this Warrant pursuant to Section 7, and replacing this Warrant pursuant to
Section 8, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.

     12. Transfer on the Company's Books. Until this Warrant is transferred on
the books of the Company, the Company may treat the registered Holder hereof as
the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.

     13. No Rights as Shareholder until Exercise. This Warrant does not entitle
the Holder to any voting rights or other rights as a shareholder of the Company
prior to the exercise hereof. Upon the surrender of this Warrant and the payment
of the aggregate Exercise Price, the Warrant

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Shares so purchased shall be and be deemed to be issued to such Holder as the
record owner of such shares as of the close of business on the later of the date
of such surrender or payment.

     14. Notices, Etc. All notices and other communications from the Company to
the Holder shall be mailed by first class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company in writing by
such Holder or, until any such Holder furnishes to the Company an address, then
to, and at the address of, the last Holder who has so furnished an address to
the Company.

     15. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. ANY
ACTION BROUGHT CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS WARRANT SHALL BE
BROUGHT ONLY IN THE STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN
THE STATE OF NEW YORK. The individuals executing this Warrant on behalf of the
Company agree to submit to the jurisdiction of such courts and waive trial by
jury. The prevailing party shall be entitled to recover from the other party its
reasonable attorneys' fees and costs. In the event that any provision of this
Warrant is invalid or unenforceable under any applicable statute or rule of law,
then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
of this Warrant. The headings in this Warrant are for purposes of reference
only, and shall not limit or otherwise affect any of the terms hereof. The
invalidity or unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision hereof. The Company
acknowledges that legal counsel participated in the preparation of this Warrant
and, therefore, stipulates that the rule of construction that ambiguities are to
be resolved against the drafting party shall not be applied in the
interpretation of this Warrant to favor any party against the other party.

                   [BALANCE OF PAGE INTENTIONALLY LEFT BLANK;
                             SIGNATURE PAGE FOLLOWS]

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     IN WITNESS WHEREOF, the Company has executed this Warrant as of the date
first written above.

                                        FORTUNE DIVERSIFIED INDUSTRIES, INC.

WITNESS:                                By:
                                            ------------------------------------
-------------------------------------   Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

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                                    EXHIBIT A

                              FORM OF SUBSCRIPTION
                   (To Be Signed Only On Exercise Of Warrant)

TO: [Newco]

     Attention: Chief Financial Officer

The undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____), hereby irrevocably elects to purchase _______ shares of the Common
Stock covered by such Warrant.

The undersigned herewith makes payment of the full Exercise Price for such
shares at the price per share provided for in such Warrant, which is $6.60. Such
payment takes the form of $__________ in lawful money of the United States.

     The undersigned requests that the certificates for such shares be issued in
the name of, and delivered to ______________________________________________
whose address is ______________________________________________________________.

     The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.

Dated:                                  ----------------------------------------
       -----------------------          (Signature must conform to name of
                                        holder as specified on the face of the
                                        Warrant)

                                        Address:
                                                 -------------------------------

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

                                       A-1

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                                    EXHIBIT B

                         FORM OF TRANSFEROR ENDORSEMENT
                   (To Be Signed Only On Transfer Of Warrant)

     For value received, the undersigned hereby sells, assigns, and transfers
unto the person(s) named below under the heading "Transferees" the right
represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of Fortune Diversified Industries, Inc.into which the
within Warrant relates specified under the headings "Percentage Transferred" and
"Number Transferred," respectively, opposite the name(s) of such person(s) and
appoints each such person Attorney to transfer its respective right on the books
of Fortune Diversified Industries, Inc.with full power of substitution in the
premises.

<TABLE>
<CAPTION>
                                                        Percentage      Number
Transferees                Address                     Transferred   Transferred
-----------                -------                     -----------   -----------
<S>                        <C>                         <C>           <C>
________________________   _________________________   ___________   ___________

________________________   _________________________   ___________   ___________

________________________   _________________________   ___________   ___________

________________________   _________________________   ___________   ___________
</TABLE>

Dated: _______________________          ----------------------------------------
                                        (Signature must conform to name of
                                        holder as specified on the face of the
                                        Warrant)

                                        Address:
                                                 -------------------------------

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

                                        SIGNED IN THE PRESENCE OF:

                                        ----------------------------------------
                                                         (Name)

ACCEPTED AND AGREED:
[TRANSFEREE]

-------------------------------------
                (Name)

                                       B-1<PAGE>
                                                                    Exhibit 10.4

                          REGISTRATION RIGHTS AGREEMENT

     This Registration Rights Agreement (this "Agreement") is made and entered
into as of November 21, 2005, by and between Fortune Diversified Industries,
Inc., an Indiana corporation (the "Company"), and Laurus Master Fund, Ltd. (the
"Purchaser").

     This Agreement is made pursuant to the Securities Purchase Agreement, dated
as of the date hereof, by and between the Purchaser and the Company (as amended,
modified or supplemented from time to time, the "Securities Purchase
Agreement"), and pursuant to the Note and the Warrants referred to therein.

     The Company and the Purchaser hereby agree as follows:

     1. DEFINITIONS. Capitalized terms used and not otherwise defined herein
that are defined in the Securities Purchase Agreement shall have the meanings
given such terms in the Securities Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:

          "Commission" means the Securities and Exchange Commission.

          "Common Stock" means shares of the Company's common stock, par value
$0.10 per share.

          "Effectiveness Date" means (i) with respect to the initial
Registration Statement required to be filed hereunder, a date no later than one
hundred twenty (120) days following the date hereof and (ii) with respect to
each additional Registration Statement required to be filed hereunder, a date no
later than thirty (30) days following the applicable Filing Date.

          "Effectiveness Period" has the meaning set forth in Section 2(a).

          "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any successor statute.

          "Filing Date" means, with respect to (i) the Registration Statement
required to be filed hereunder in respect of the shares of Common Stock issuable
upon conversion of the Note, a date no later than thirty (30) days following the
date hereof, (ii) the shares of Common Stock issuable upon exercise of any
Warrant, the date which is thirty (30) days after the date of the issuance of
such Warrant, and (iii) the shares of Common Stock issuable to the Holder as a
result of adjustments to the Fixed Conversion Price or Exercise Price, as the
case may be, made pursuant to the Note or the Warrant or otherwise, thirty (30)
days after the occurrence such event or the date of the adjustment of the Fixed
Conversion Price or Exercise Price, as the case may be.

          "Holder" or "Holders" means the Purchaser or any of its affiliates or
transferees to the extent any of them hold Registrable Securities, other than
those purchasing Registrable Securities in a market transaction.

          "Indemnified Party" has the meaning set forth in Section 5(c).

<PAGE>

          "Indemnifying Party" has the meaning set forth in Section 5(c).

          "Note" has the meaning set forth in the Securities Purchase Agreement.

          "Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.

          "Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.

          "Registrable Securities" means the shares of Common Stock issued upon
the conversion of the Note and issuable upon exercise of the Warrants.

          "Registration Statement" means each registration statement required to
be filed hereunder, including the Prospectus therein, amendments and supplements
to such registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference in such registration statement.

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

          "Rule 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.

          "Securities Act" means the Securities Act of 1933, as amended, and any
successor statute.

          "Securities Purchase Agreement" has the meaning given to such term in
the Preamble hereto.

          "Trading Market" means any of the NASD Over The Counter Bulletin
Board, NASDAQ SmallCap Market, the NASDAQ National Markets System, the American
Stock Exchange or the New York Stock Exchange.

          "Warrants" means the Common Stock purchase warrants issued in
connection with the Securities Purchase Agreement, whether on the date hereof or
thereafter.

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<PAGE>

     2. REGISTRATION.

          (a) On or prior to the Filing Date the Company shall prepare and file
     with the Commission a Registration Statement covering the Registrable
     Securities for a selling stockholder resale offering to be made on a
     continuous basis pursuant to Rule 415. The Registration Statement shall be
     on Form S-3 (except if the Company is not then eligible to register for
     resale the Registrable Securities on Form S-3, in which case such
     registration shall be on another appropriate form in accordance herewith).
     The Company shall cause each Registration Statement to become effective and
     remain effective as provided herein. The Company shall use its reasonable
     commercial efforts to cause each Registration Statement to be declared
     effective under the Securities Act as promptly as possible after the filing
     thereof, but in any event no later than the Effectiveness Date. The Company
     shall use its reasonable commercial efforts to keep each Registration
     Statement continuously effective under the Securities Act until the date
     which is the earlier date of when (i) all Registrable Securities have been
     sold or (ii) all Registrable Securities covered by such Registration
     Statement may be sold immediately without registration under the Securities
     Act and without volume restrictions pursuant to Rule 144(k), as determined
     by the counsel to the Company pursuant to a written opinion letter to such
     effect, addressed and acceptable to the Company's transfer agent and the
     affected Holders (the "Effectiveness Period").

          (b) If: (i) any Registration Statement is not filed on or prior to the
     applicable Filing Date; (ii) a Registration Statement filed hereunder is
     not declared effective by the Commission by the applicable Effectiveness
     Date; (iii) after a Registration Statement is filed with and declared
     effective by the Commission, a Discontinuation Event (as hereafter defined)
     shall occur and be continuing, or such Registration Statement ceases to be
     effective (by suspension or otherwise) as to all Registrable Securities to
     which it is required to relate at any time prior to the expiration of the
     Effectiveness Period (without being succeeded immediately by an additional
     registration statement filed and declared effective), for a period of time
     which shall exceed forty-five (45) days in the aggregate per year or more
     than thirty (30) consecutive calendar days (defined as a period of three
     hundred sixty-five (365) days commencing on the date the Registration
     Statement is declared effective); or (iv) the Common Stock is not listed or
     quoted, or is suspended from trading on any Trading Market for a period of
     five (5) consecutive Trading Days (provided the Company shall not have been
     able to cure such trading suspension within thirty (30) days of the notice
     thereof or list the Common Stock on another Trading Market within such
     thirty (30) days); (any such failure or breach being referred to as an
     "Event," and for purposes of clause (i) or (ii) the date on which such
     Event occurs, or for purposes of clause (iii) the date which such
     forty-five (45) or thirty (30) consecutive day period (as the case may be)
     is exceeded, or for purposes of clause (iv) the date on which such five (5)
     Trading Day period is exceeded, being referred to as "Event Date"), then as
     partial relief for the damages to the Purchaser by reason of the occurrence
     of any such Event (which remedy shall not be exclusive of any other
     remedies available at law or in equity), the Company shall pay to the
     Purchaser for each day that an Event has occurred and is continuing, an
     amount in cash as liquidated damages and not as a penalty, equal to
     one-thirtieth (1/30th) of the product of: (A) the then outstanding
     principal amount of the Note multiplied by (B) 0.02.

                                        3

<PAGE>

          (c) Within three business days after the Effectiveness Date, the
     Company shall cause its counsel to issue a blanket opinion in the form
     attached hereto as Exhibit A, to the transfer agent stating that the shares
     are subject to an effective registration statement and can be reissued free
     of restrictive legend upon notice of a sale by the Purchaser and
     confirmation by the Purchaser that it has complied with the prospectus
     delivery requirements, provided that the Company has not advised the
     transfer agent orally or in writing that the opinion has been withdrawn.
     Copies of the blanket opinion required by this Section 2(c) shall be
     delivered to the Purchaser within the time frame set forth above.

     3. REGISTRATION PROCEDURES. If and whenever the Company is required by the
provisions hereof to effect the registration of any Registrable Securities under
the Securities Act, the Company will, as expeditiously as possible:

          (a) prepare and file with the Commission a Registration Statement with
     respect to such Registrable Securities, respond as promptly as possible to
     any comments received from the Commission, and use its best efforts to
     cause the Registration Statement to become and remain effective for the
     Effectiveness Period with respect thereto, and promptly provide to the
     Purchaser copies of all filings and Commission letters of comment relating
     thereto;

          (b) prepare and file with the Commission such amendments and
     supplements to the Registration Statement and the Prospectus used in
     connection therewith as may be necessary to comply with the provisions of
     the Securities Act with respect to the disposition of all Registrable
     Securities covered by such Registration Statement and to keep such
     Registration Statement effective until the expiration of the Effectiveness
     Period applicable to such Registration Statement;

          (c) furnish to the Purchaser such number of copies of the Registration
     Statement and the Prospectus included therein (including each preliminary
     Prospectus) as the Purchaser reasonably may request to facilitate the
     public sale or disposition of the Registrable Securities covered by the
     Registration Statement;

          (d) use its commercially reasonable efforts to register or qualify the
     Purchaser's Registrable Securities covered by such Registration Statement
     under the securities or "blue sky" laws of such jurisdictions within the
     United States as the Purchaser may reasonably request, provided, however,
     that the Company shall not for any such purpose be required to qualify
     generally to transact business as a foreign corporation in any jurisdiction
     where it is not so qualified or to consent to general service of process in
     any such jurisdiction;

          (e) list the Registrable Securities covered by such Registration
     Statement with any securities exchange on which the Common Stock of the
     Company is then listed;

          (f) immediately notify the Purchaser at any time when a Prospectus
     relating thereto is required to be delivered under the Securities Act, of
     the happening of any event of which the Company has knowledge as a result
     of which the Prospectus contained in

                                        4

<PAGE>

     such Registration Statement, as then in effect, includes an untrue
     statement of a material fact or omits to state a material fact required to
     be stated therein or necessary to make the statements therein not
     misleading in light of the circumstances then existing; and

          (g) upon prior notice and during regular business hours, make
     available for inspection by the Purchaser and any attorney, accountant or
     other agent retained by the Purchaser, all publicly available,
     non-confidential financial and other records, pertinent corporate documents
     and properties of the Company, and cause the Company's officers, directors
     and employees to supply all publicly available, non-confidential
     information reasonably requested by the attorney, accountant or agent of
     the Purchaser.

     4. REGISTRATION EXPENSES. All expenses relating to the Company's compliance
with Sections 2 and 3 hereof, including, without limitation, all registration
and filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, fees and expenses (including
reasonable counsel fees) incurred in connection with complying with state
securities or "blue sky" laws, fees of the NASD, transfer taxes, fees of
transfer agents and registrars and are called "Registration Expenses". All
selling commissions applicable to the sale of Registrable Securities, including
any fees and disbursements of any special counsel to the Holders beyond those
included in Registration Expenses, are called "Selling Expenses." The Company
shall only be responsible for all Registration Expenses and shall not be
responsible for payment of any Selling Expenses.

     5. INDEMNIFICATION.

          (a) In the event of a registration of any Registrable Securities under
     the Securities Act pursuant to this Agreement, the Company will indemnify
     and hold harmless the Purchaser, and its officers, directors and each other
     person, if any, who controls the Purchaser within the meaning of the
     Securities Act, against any losses, claims, damages or liabilities, joint
     or several, to which the Purchaser, or such persons may become subject
     under the Securities Act or otherwise, insofar as such losses, claims,
     damages or liabilities (or actions in respect thereof) arise out of or are
     based upon any untrue statement of any material fact contained in any
     Registration Statement under which such Registrable Securities were
     registered under the Securities Act pursuant to this Agreement, any
     preliminary Prospectus or final Prospectus contained therein, or any
     amendment or supplement thereof, or arise out of or are based upon the
     omission to state therein a material fact required to be stated therein or
     necessary to make the statements therein not misleading, and will reimburse
     the Purchaser, and each such person for any reasonable legal or other
     expenses incurred by them in connection with investigating or defending any
     such loss, claim, damage, liability or action; provided, however, that the
     Company will not be liable in any such case if and to the extent that any
     such loss, claim, damage or liability arises out of or is based upon an
     untrue statement or omission so made in conformity with information
     furnished by or on behalf of the Purchaser or any such person in writing
     specifically for use in any such document.

          (b) In the event of a registration of the Registrable Securities under
     the Securities Act pursuant to this Agreement, the Purchaser will indemnify
     and hold harmless the Company, and its officers, directors and each other
     person, if any, who

                                        5

<PAGE>

     controls the Company within the meaning of the Securities Act, against all
     losses, claims, damages or liabilities, joint or several, to which the
     Company or such persons may become subject under the Securities Act or
     otherwise, insofar as such losses, claims, damages or liabilities (or
     actions in respect thereof) arise out of or are based upon any untrue
     statement of any material fact which was furnished by the Purchaser to the
     Company expressly for use in the preparation of the Registration Statement
     under which such Registrable Securities were registered under the
     Securities Act pursuant to this Agreement, any preliminary Prospectus or
     final Prospectus contained therein, or any amendment or supplement thereof,
     or arise out of or are based upon the omission to state therein a material
     fact required to be stated therein or necessary to make the statements
     therein not misleading, and will reimburse the Company and each such person
     for any reasonable legal or other expenses incurred by them in connection
     with investigating or defending any such loss, claim, damage, liability or
     action, provided, however, that the Purchaser will be liable in any such
     case if and only to the extent that any such loss, claim, damage or
     liability arises out of or is based upon an untrue statement or omission so
     made in conformity with information furnished to the Company by or on
     behalf of the Purchaser specifically for use in any such document.
     Notwithstanding the provisions of this paragraph, the Purchaser shall not
     be required to indemnify any person or entity in excess of the amount of
     the aggregate net proceeds received by the Purchaser in respect of
     Registrable Securities in connection with any such registration under the
     Securities Act.

          (c) Promptly after receipt by a party entitled to claim
     indemnification hereunder (an "Indemnified Party") of notice of the
     commencement of any action, such Indemnified Party shall, if a claim for
     indemnification in respect thereof is to be made against a party hereto
     obligated to indemnify such Indemnified Party (an "Indemnifying Party"),
     notify the Indemnifying Party in writing thereof, but the omission so to
     notify the Indemnifying Party shall not relieve it from any liability which
     it may have to such Indemnified Party other than under this Section 5(c)
     and shall only relieve it from any liability which it may have to such
     Indemnified Party under this Section 5(c) if and to the extent the
     Indemnifying Party is prejudiced by such omission. In case any such action
     shall be brought against any Indemnified Party and it shall notify the
     Indemnifying Party of the commencement thereof, the Indemnifying Party
     shall be entitled to participate in and, to the extent it shall wish, to
     assume and undertake the defense thereof with counsel satisfactory to such
     Indemnified Party, and, after notice from the Indemnifying Party to such
     Indemnified Party of its election so to assume and undertake the defense
     thereof, the Indemnifying Party shall not be liable to such Indemnified
     Party under this Section 5(c) for any legal expenses subsequently incurred
     by such Indemnified Party in connection with the defense thereof; if the
     Indemnified Party retains its own counsel, then the Indemnified Party shall
     pay all fees, costs and expenses of such counsel, provided, however, that,
     if the defendants in any such action include both the Indemnified Party and
     the Indemnifying Party and the Indemnified Party shall have reasonably
     concluded that there may be reasonable defenses available to it which are
     different from or additional to those available to the Indemnifying Party
     or if the interests of the Indemnified Party reasonably may be deemed to
     conflict with the interests of the Indemnifying Party, the Indemnified
     Party shall have the right to select one separate counsel and to assume
     such legal defenses and otherwise to participate in the defense of such
     action, with the

                                        6

<PAGE>

     reasonable expenses and fees of such separate counsel and other expenses
     related to such participation to be reimbursed by the Indemnifying Party as
     incurred.

          (d) In order to provide for just and equitable contribution in the
     event of joint liability under the Securities Act in any case in which
     either (i) the Purchaser, or any officer, director or controlling person of
     the Purchaser, makes a claim for indemnification pursuant to this Section 5
     but it is judicially determined (by the entry of a final judgment or decree
     by a court of competent jurisdiction and the expiration of time to appeal
     or the denial of the last right of appeal) that such indemnification may
     not be enforced in such case notwithstanding the fact that this Section 5
     provides for indemnification in such case, or (ii) contribution under the
     Securities Act may be required on the part of the Purchaser or such
     officer, director or controlling person of the Purchaser in circumstances
     for which indemnification is provided under this Section 5; then, and in
     each such case, the Company and the Purchaser will contribute to the
     aggregate losses, claims, damages or liabilities to which they may be
     subject (after contribution from others) in such proportion so that the
     Purchaser is responsible only for the portion represented by the percentage
     that the public offering price of its securities offered by the
     Registration Statement bears to the public offering price of all securities
     offered by such Registration Statement, provided, however, that, in any
     such case, (A) the Purchaser will not be required to contribute any amount
     in excess of the public offering price of all such securities offered by it
     pursuant to such Registration Statement; and (B) no person or entity guilty
     of fraudulent misrepresentation (within the meaning of Section 10(f) of the
     Act) will be entitled to contribution from any person or entity who was not
     guilty of such fraudulent misrepresentation.

     6. REPRESENTATIONS AND WARRANTIES.

          (a) The Common Stock is registered pursuant to Section 12(b) or 12(g)
     of the Exchange Act and, except with respect to certain matters which the
     Company has disclosed to the Purchaser on Schedule 4.21 to the Securities
     Purchase Agreement, the Company has timely filed all proxy statements,
     reports, schedules, forms, statements and other documents required to be
     filed by it under the Exchange Act. The Company has filed (i) its Annual
     Report on Form 10-KSB for its fiscal year ended August 31, 2004 (including
     all amendments thereto) and (ii) its Quarterly Report on Form 10-QSB for
     the fiscal quarters ended November 30, 2004, February 28, 2005and May 31,
     2005 (collectively, the "SEC Reports"). Except as disclosed to Purchaser on
     Schedule 4.21 to the Securities Purchase Agreement, each SEC Report was, at
     the time of its filing, in substantial compliance with the requirements of
     its respective form and none of the SEC Reports, nor the financial
     statements (and the notes thereto) included in the SEC Reports, as of their
     respective filing dates, contained any untrue statement of a material fact
     or omitted to state a material fact required to be stated therein or
     necessary to make the statements therein, in light of the circumstances
     under which they were made, not misleading. The financial statements of the
     Company included in the SEC Reports comply as to form in all material
     respects with applicable accounting requirements and the published rules
     and regulations of the Commission or other applicable rules and regulations
     with respect thereto. Such financial statements have been prepared in
     accordance with generally accepted accounting principles ("GAAP") applied
     on a

                                        7

<PAGE>

     consistent basis 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
     not include footnotes, may be condensed or may be subject to year end
     adjustments) and fairly present in all material respects the financial
     condition, the results of operations and the cash flows of the Company and
     its subsidiaries, on a consolidated basis, as of, and for, the periods
     presented in each such SEC Report.

          (b) The Common Stock is listed for trading on the American Stock
     Exchange and satisfies all requirements for the continuation of such
     listing, and the Company shall do all things necessary for the continuation
     of such listing. The Company has not received any notice that its Common
     Stock will be delisted from the American Stock Exchange (except for prior
     notices which have been fully remedied) or that the Common Stock does not
     meet all requirements for the continuation of such listing.

          (c) Neither the Company, nor any of its affiliates, nor any person
     acting on its or their behalf, has directly or indirectly made any offers
     or sales of any security or solicited any offers to buy any security under
     circumstances that would cause the offering of the Securities pursuant to
     the Securities Purchase Agreement to be integrated with prior offerings by
     the Company for purposes of the Securities Act which would prevent the
     Company from selling the Common Stock pursuant to Rule 506 under the
     Securities Act, or any applicable exchange-related stockholder approval
     provisions, nor will the Company or any of its affiliates or subsidiaries
     take any action or steps that would cause the offering of the Securities to
     be integrated with other offerings.

          (d) The Warrants, the Note and the shares of Common Stock which the
     Purchaser may acquire pursuant to the Warrants and the Note are all
     restricted securities under the Securities Act as of the date of this
     Agreement. The Company will not issue any stop transfer order or other
     order impeding the sale and delivery of any of the Registrable Securities
     at such time as such Registrable Securities are registered for public sale
     or an exemption from registration is available, except as required by
     federal or state securities laws.

          (e) The Company understands the nature of the Registrable Securities
     issuable upon the conversion of the Note and the exercise of the Warrant
     and recognizes that the issuance of such Registrable Securities may have a
     potential dilutive effect. The Company specifically acknowledges that its
     obligation to issue the Registrable Securities is binding upon the Company
     and enforceable regardless of the dilution such issuance may have on the
     ownership interests of other shareholders of the Company.

          (f) Except for agreements made in the ordinary course of business or
     as stated on Schedule 4.11 to the Securities Purchase Agreement, there is
     no agreement that has not been filed with the Commission as an exhibit to a
     registration statement or to a form required to be filed by the Company
     under the Exchange Act, the breach of which could reasonably be expected to
     have a material and adverse effect on the Company and its subsidiaries, or
     would prohibit or otherwise interfere with the ability of the Company to

                                        8

<PAGE>

     enter into and perform any of its obligations under this Agreement in any
     material respect.

          (g) The Company will at all times have authorized and reserved a
     sufficient number of shares of Common Stock for the full conversion of the
     Note and exercise of the Warrants.

     7. MISCELLANEOUS.

          (a) REMEDIES. In the event of a breach by the Company or by a Holder,
     of any of their respective obligations under this Agreement, each Holder or
     the Company, as the case may be, in addition to being entitled to exercise
     all rights granted by law and under this Agreement, including recovery of
     damages, will be entitled to specific performance of its rights under this
     Agreement as allowed under applicable laws.

          (b) NO PIGGYBACK ON REGISTRATIONS. Except as and to the extent
     specified in Schedule 7(b) hereto, neither the Company nor any of its
     security holders (other than the Holders in such capacity pursuant hereto)
     may include securities of the Company in any Registration Statement other
     than the Registrable Securities, and the Company shall not after the date
     hereof enter into any agreement providing any such right for inclusion of
     shares in the Registration Statement to any of its security holders. Except
     as and to the extent specified in Schedule 7(b) hereto, the Company has not
     previously entered into any agreement granting any registration rights with
     respect to any of its securities to any person or entity that have not been
     fully satisfied.

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

          (d) DISCONTINUED DISPOSITION. Each Holder agrees by its acquisition of
     such Registrable Securities that, upon receipt of a notice from the Company
     of the occurrence of a Discontinuation Event (as defined below), such
     Holder will forthwith discontinue disposition of such Registrable
     Securities under the applicable Registration Statement until such Holder's
     receipt of the copies of the supplemented Prospectus and/or amended
     Registration Statement or until it is advised in writing (the "Advice") by
     the Company that the use of the applicable Prospectus may be resumed, and,
     in either case, has received copies of any additional or supplemental
     filings that are incorporated or deemed to be incorporated by reference in
     such Prospectus or Registration Statement. The Company may provide
     appropriate stop orders to enforce the provisions of this paragraph. For
     purposes of this Agreement, a "Discontinuation Event" shall mean (i) when
     the Commission notifies the Company whether there will be a "review" of
     such Registration Statement and whenever the Commission comments in writing
     on such Registration Statement (the Company shall provide true and complete
     copies thereof and all written responses thereto to each of the Holders);
     (ii) any request by the Commission or any other Federal or state
     governmental authority for amendments or supplements to such Registration
     Statement or Prospectus or for additional information; (iii) the issuance
     by the Commission of any stop order suspending the effectiveness of such
     Registration

                                        9

<PAGE>

     Statement covering any or all of the Registrable Securities or the
     initiation of any Proceedings for that purpose; (iv) the receipt by the
     Company of any notification with respect to the suspension of the
     qualification or exemption from qualification of any of the Registrable
     Securities for sale in any jurisdiction, or the initiation or threatening
     of any Proceeding for such purpose; and/or (v) the occurrence of any event
     or passage of time that makes the financial statements included in such
     Registration Statement ineligible for inclusion therein or any statement
     made in such Registration Statement or Prospectus or any document
     incorporated or deemed to be incorporated therein by reference untrue in
     any material respect or that requires any revisions to such Registration
     Statement, Prospectus or other documents so that, in the case of such
     Registration Statement or Prospectus, as the case may be, it will not
     contain any untrue statement of a material fact or omit to state any
     material fact required to be stated therein or necessary to make the
     statements therein, in light of the circumstances under which they were
     made, not misleading.

          (e) PIGGY-BACK REGISTRATIONS. If at any time during the Effectiveness
     Period there is not an effective Registration Statement covering all of the
     Registrable Securities and the Company shall determine to prepare and file
     with the Commission a registration statement relating to an offering for
     its own account or the account of others under the Securities Act of any of
     its equity securities, other than on Form S-4 or Form S-8 (each as
     promulgated under the Securities Act) or their then equivalents relating to
     equity securities to be issued solely in connection with any acquisition of
     any entity or business or equity securities issuable in connection with
     stock option or other employee benefit plans, then the Company shall send
     to each Holder written notice of such determination and, if within fifteen
     (15) days after receipt of such notice, any such Holder shall so request in
     writing, the Company shall include in such registration statement all or
     any part of such Registrable Securities such Holder requests to be
     registered to the extent the Company may do so without violating
     registration rights of others which exist as of the date of this Agreement,
     subject to customary underwriter cutbacks applicable to all holders of
     registration rights and subject to obtaining any required consent of any
     selling stockholder(s) to such inclusion under such registration statement.

          (f) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
     including the provisions of this sentence, may not be amended, modified or
     supplemented, and waivers or consents to departures from the provisions
     hereof may not be given, unless the same shall be in writing and signed by
     the Company and the Holders of the then outstanding Registrable Securities.
     Notwithstanding the foregoing, a waiver or consent to depart from the
     provisions hereof with respect to a matter that relates exclusively to the
     rights of certain Holders and that does not directly or indirectly affect
     the rights of other Holders may be given by Holders of at least a majority
     of the Registrable Securities to which such waiver or consent relates;
     provided, however, that the provisions of this sentence may not be amended,
     modified, or supplemented except in accordance with the provisions of the
     immediately preceding sentence.

          (g) NOTICES. Any notice or request hereunder may be given to the
     Company or the Purchaser at the respective addresses set forth below or as
     may hereafter be specified in a notice designated as a change of address
     under this Section 7(g). Any

                                       10

<PAGE>

     notice or request hereunder shall be given by registered or certified mail,
     return receipt requested, hand delivery, overnight mail, Federal Express or
     other national overnight next day carrier (collectively, "Courier") or
     telecopy (confirmed by mail). Notices and requests shall be, in the case of
     those by hand delivery, deemed to have been given when delivered to any
     party to whom it is addressed, in the case of those by mail or overnight
     mail, deemed to have been given three (3) business days after the date when
     deposited in the mail or with the overnight mail carrier, in the case of a
     Courier, the next business day following timely delivery of the package
     with the Courier, and, in the case of a telecopy, when confirmed. The
     address for such notices and communications shall be as follows:

          If to the Company:              Fortune Diversified Industries, Inc.
                                          Attention: Chief Financial Officer
                                          Facsimile: 317-532-1376

                                          with a copy to:

                                          Drewry Simmons Vornehm, LLP
                                          8888 Keystone Crossing, Suite 1200
                                          Indianapolis, IN 46240

                                          Attention: Robert J. Milford
                                          Facsimile: 317-580-4855

          If to a Purchaser:              To the address set forth under such
                                          Purchaser name on the signature pages
                                          hereto.

          If to any other Person who is
          then the registered Holder:     To the address of such Holder as it
                                          appears in the stock transfer books of
                                          the Company

     or such other address as may be designated in writing hereafter in
     accordance with this Section 7(g) by such Person.

          (h) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
     of and be binding upon the successors and permitted assigns of each of the
     parties and shall inure to the benefit of each Holder. The Company may not
     assign its rights or obligations hereunder without the prior written
     consent of each Holder. Each Holder may assign their respective rights
     hereunder in the manner and to the persons and entities as permitted under
     the Note and the Securities Purchase Agreement.

          (i) EXECUTION AND COUNTERPARTS. This Agreement may be executed in any
     number of counterparts, each of which when so executed shall be deemed to
     be an original and, all of which taken together shall constitute one and
     the same agreement. In the event that any signature is delivered by
     facsimile transmission, such signature shall create a valid binding
     obligation of the party executing (or on whose behalf such

                                       11

<PAGE>

     signature is executed) the same with the same force and effect as if such
     facsimile signature were the original thereof.

          (j) GOVERNING LAW, JURISDICTION AND WAIVER OF JURY TRIAL. THIS
     AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
     WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
     PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
     The Company and the Purchaser hereby consent and agree that the state or
     federal courts located in the County of New York, State of New York shall
     have exclusion jurisdiction to hear and determine any Proceeding between
     the Company, on the one hand, and the Purchaser, on the other hand,
     pertaining to this Agreement or to any matter arising out of or related to
     this Agreement; provided, that the Purchaser and the Company acknowledge
     that any appeals from those courts may have to be heard by a court located
     outside of the County of New York, State of New York, and further provided,
     that nothing in this Agreement shall be deemed or operate to preclude a
     party from bringing a Proceeding in any other jurisdiction to collect the
     obligations, to realize on the Collateral or any other security for the
     obligations, or to enforce a judgment or other court order in favor of such
     party. The Company and the Purchaser expressly submit and consent in
     advance to such jurisdiction in any Proceeding commenced in any such court,
     and the Company and the Purchaser hereby waive any objection which it may
     have based upon lack of personal jurisdiction, improper venue or forum non
     conveniens. The Company and the Purchaser hereby waive personal service of
     the summons, complaint and other process issued in any such Proceeding and
     agrees that service of such summons, complaint and other process may be
     made by registered or certified mail addressed to the Company or the
     Purchaser at the address set forth in Section 7(g) and that service so made
     shall be deemed completed upon the earlier of the party's actual receipt
     thereof or three (3) days after deposit in the U.S. mails, proper postage
     prepaid. The parties hereto desire that their disputes be resolved by a
     judge applying such applicable laws. Therefore, to achieve the best
     combination of the benefits of the judicial system and of arbitration, the
     parties hereto waive all rights to trial by jury in any Proceeding brought
     to resolve any dispute, whether arising in contract, tort, or otherwise
     between the Purchaser and/or the Company arising out of, connected with,
     related or incidental to the relationship established between then in
     connection with this Agreement. If either party hereto shall commence a
     Proceeding to enforce any provisions of this Agreement, the Securities
     Purchase Agreement or any other Related Agreement, then the prevailing
     party in such Proceeding shall be reimbursed by the other party for its
     reasonable attorneys' fees and other costs and expenses incurred with the
     investigation, preparation and prosecution of such Proceeding.

          (k) CUMULATIVE REMEDIES. The remedies provided herein are cumulative
     and not exclusive of any remedies provided by law.

          (l) SEVERABILITY. If any term, provision, covenant or restriction of
     this Agreement is held by a court of competent jurisdiction to be invalid,
     illegal, void or unenforceable, the remainder of the terms, provisions,
     covenants and restrictions set forth herein shall remain in full force and
     effect and shall in no way be affected, impaired or invalidated, and the
     parties hereto shall use their reasonable efforts to find and employ an

                                       12

<PAGE>

     alternative means to achieve the same or substantially the same result as
     that contemplated by such term, provision, covenant or restriction. It is
     hereby stipulated and declared to be the intention of the parties that they
     would have executed the remaining terms, provisions, covenants and
     restrictions without including any of such that may be hereafter declared
     invalid, illegal, void or unenforceable.

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

                   [BALANCE OF PAGE INTENTIONALLY LEFT BLANK;
                             SIGNATURE PAGE FOLLOWS]

                                       13

<PAGE>

     IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.

FORTUNE DIVERSIFIED INDUSTRIES, INC.    LAURUS MASTER FUND, LTD.

By:                                     By:
    ---------------------------------       ------------------------------------
Name:                                   Name:
      -------------------------------         ----------------------------------
Title:                                  Title:
       ------------------------------          ---------------------------------

                                        Address for Notices:

                                        825 Third Avenue, 14th Floor
                                        New York, NY 10022
                                        Attention: David Grin
                                        Facsimile: 212-541-4434

                                       14

<PAGE>

                                    EXHIBIT A

                             [__________ __, 200__]

[Continental Stock Transfer & Trust Company
Two Broadway
New York, NY 10004
Attn: William Seegraber]

          Re: Fortune Diversified Industries, Inc. Registration Statement on
          Form [S-3]

Ladies and Gentlemen:

     As counsel to Fortune Diversified Industries, Inc., a _____________________
corporation (the "Company"), we have been requested to render our opinion to you
in connection with the resale by the individuals or entitles listed on Schedule
A attached hereto (the "Selling Stockholders"), of an aggregate of __________
shares (the "Shares") of the Company's Common Stock.

     A Registration Statement on Form [S-3] under the Securities Act of 1933, as
amended (the "Act"), with respect to the resale of the Shares was declared
effective by the Securities and Exchange Commission on [date]. Enclosed is the
Prospectus dated [date]. We understand that the Shares are to be offered and
sold in the manner described in the Prospectus.

     Based upon the foregoing, upon request by the Selling Stockholders at any
time while the registration statement remains effective, it is our opinion that
the Shares have been registered for resale under the Act and new certificates
evidencing the Shares upon their transfer or re-registration by the Selling
Stockholders may be issued without restrictive legend. We will advise you if the
registration statement is not available or effective at any point in the future.

                                        Very truly yours,

                                        [Company counsel]

<PAGE>

                             SCHEDULE A TO EXHIBIT A

<TABLE>
<CAPTION>
                          Shares
Selling Stockholder   Being Offered
-------------------   -------------
<S>                   <C>

</TABLE>

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