Document:

Exhibit
      4.1 

    

    

    1999
      STOCK OPTION PLAN

    (as
      amended through September 13, 2006)

    

    1. Purpose.
      The
      purpose of the 1999 Stock Option Plan (the “Plan”)
      of
      Wits Basin Precious Minerals Inc., (the “Company”)
      is to
      increase shareholder value and to advance the interests of the Company by
      attracting, retaining and motivating employees and certain key consultants
      of
      the Company by furnishing opportunities to purchase or receive shares of Common
      Stock, $.01 par value, of the Company (“Common
      Stock”)
      pursuant to the Plan.

    

    2. Administration.
      The
      Plan shall be administered by the Board of Directors or by a stock option
      committee (the “Committee”)
      of the
      Board of Directors of the Company. The Committee shall consist of not less
      than
      two directors of the Company and shall be appointed from time to time by the
      Board of Directors of the Company. If the Company stock becomes the subject
      of a
      public offering, the Committee shall then consist of not less than two directors
      who shall be appointed from time to time by the Board, each of which such
      appointees shall be a “disinterested person” within the meaning of Rule 16b-3 of
      the Securities Exchange Act of 1934, and the regulations promulgated thereunder
      (the “1934
      Act”).
      The
      Board of Directors of the Company may from time to time appoint members of
      the
      Committee in substitution for, or in addition to, members previously appointed,
      and may fill vacancies, however caused, in the Committee. The Committee shall
      select one of its members as its chairman and shall hold its meetings at such
      times and places, as it shall deem advisable. A majority of the Committee’s
      members shall constitute a quorum. All action of the Committee shall be taken
      by
      the majority of its members. Any action may be taken by a written instrument
      signed by majority of the members and actions so taken shall be fully effective
      as if it had been made by a majority vote at a meeting duly called and held.
      The
      Committee may appoint a secretary, shall keep minutes of its meetings and shall
      make such rules and regulations for the conduct of its business as it shall
      deem
      advisable. The Committee shall have complete authority to award Incentives
      under
      the Plan, to interpret the Plan, and to make any other determination which
      it
      believes necessary and advisable for the proper administration of the Plan.
      The
      Committee’s decisions and matters relating to the Plan shall be final and
      conclusive on the Company and its participants.

    

    3. Eligible
      Participants.
      Employees of or consultants to the Company or its subsidiaries or affiliates
      (including officers and directors, but excluding directors who are not also
      employees of or consultants to the Company or its subsidiaries or affiliates),
      shall become eligible to receive Incentives under the Plan when designated
      by
      the Committee. Participants may be designated individually or by groups or
      categories (for example, by pay grade), as the Committee deems appropriate.
      Participation by officers of the Company or its subsidiaries or affiliates
      and
      any performance objectives relating to such officers must be approved by the
      Committee. Participation by others and any performance objectives relating
      to
      others may be approved by groups or categories (for example, by pay grade)
      and
      authority to designate participants who are not officers and to set or modify
      such targets may be delegated.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    4. Types
      of Incentives.
      Incentives under the Plan may be granted in any one or a combination of the
      following forms: (a) incentive stock options and non-statutory stock options
      (Section 6); (b) stock appreciation rights (“SARs”)
      (Section 7); (c) stock awards (Section 8); (d) restricted stock (Section 8);
      and
      (e) performance shares (Section 9).

    

    5. Shares
      Subject to the Plan.

    

    5.1. Number
      of Shares.
      Subject
      to adjustment as provided in Section 10.6, the number of shares of Common Stock
      which may be issued under the Plan shall not exceed Six Million Two Hundred
      Fifty Thousand (6,250,000) shares of Common Stock.

    

    5.2. Cancellation.
      To the
      extent that cash in lieu of shares of Common Stock is delivered upon the
      exercise of a SAR pursuant to Section 7.4, the Company shall be deemed, for
      purposes of applying the limitation on the number of shares, to have issued
      the
      greater of the number of shares of Common Stock which it was entitled to issue
      upon such exercise or on the exercise of any related option. In the event that
      a
      stock option or SAR granted hereunder expires or is terminated or canceled
      unexercised as to any shares of Common Stock, such shares may again be issued
      under the Plan either pursuant to stock options, SARs or otherwise. In the
      event
      that shares of Common Stock are issued as restricted stock or pursuant to a
      stock award and thereafter are forfeited or reacquired by the Company pursuant
      to rights reserved upon issuance thereof, such forfeited and reacquired shares
      may again be issued under the Plan, either as restricted stock, pursuant to
      stock awards or otherwise. The Committee may also determine to cancel, and
      agree
      to the cancellation of, stock options in order to make a participant eligible
      for the grant of a stock option at a lower price than the option to be
      canceled.

    

    5.3. Type
      of Common Stock.
      Common
      Stock issued under the Plan in connection with stock options, SARs, performance
      shares, restricted stock or stock awards, may be authorized and unissued
      shares.

    

    6. Stock
      Options.
      A stock
      option is a right to purchase shares of Common Stock from the Company. Each
      stock option granted by the Committee under this Plan shall be subject to the
      following terms and conditions:

    

    6.1. Price.
      The
      option price per share shall be determined by the Committee.

    

    6.2. Number.
      The
      number of shares of Common Stock subject to the option shall be determined
      by
      the Committee, subject to adjustment as provided in Section 10.6. The number
      of
      shares of Common Stock subject to a stock option shall be reduced in the same
      proportion that the holder thereof exercises a SAR if any SAR is granted in
      conjunction with or related to the stock option.

    

    6.3. Duration
      and Time for Exercise.
      Subject
      to earlier termination as provided in Section 10.4, the term of each stock
      option shall be determined by the Committee but shall not exceed ten years
      and
      one day from the date of grant. Each stock option shall become exercisable
      at
      such time or times during its term as shall be determined by the Committee
      at
      the time of grant. No stock option may be exercised during the first six months
      of its term. Except as provided by the preceding sentence, the Committee may
      accelerate the exercisability of any stock option. Subject to the foregoing
      and
      with the approval of the Committee, all or any part of the shares of Common
      Stock with respect to which the right to purchase has accrued may be purchased
      by the Company at the time of such accrual or at any time or times thereafter
      during the term of the option.

    

    
      
         

      

      
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    6.4. Manner
      of Exercise.
      A stock
      option may be exercised, in whole or in part, by giving written notice to the
      Company, specifying the number of shares of Common Stock to be purchased and
      accompanied by the full purchase price for such shares. The option price shall
      be payable in United States dollars upon exercise of the option and may be
      paid
      by cash; uncertified or certified check; bank draft; by delivery of Mature
      Shares of Common Stock (held at least six months) in payment of all or any
      part
      of the option price, which shares shall be valued for this purpose at the Fair
      Market Value on the date such option is exercised; by instructing the Company
      to
      withhold from the shares of Common Stock issuable upon exercise of the stock
      option shares of Common Stock in payment of all or any part of the option price,
      which shares shall be valued for this purpose at the Fair Market Value or in
      such other manner as may be authorized from time to time by the Committee.
      Prior
      to the issuance of shares of Common Stock upon the exercise of a stock option,
      a
      participant shall have no rights as a shareholder.

    

    6.5. Incentive
      Stock Options.
      Notwithstanding anything in the Plan to the contrary, the following additional
      provisions shall apply to the grant of stock options which are intended to
      qualify as Incentive Stock Options (as such term is defined in Section 422
      of
      the Internal Revenue Code of 1986, as amended):

    

    (a) The
      aggregate Fair Market Value (determined as of the time the option is granted)
      of
      the shares of Common Stock with respect to which Incentive Stock Options are
      exercisable for the first time by any participant during any calendar year
      (under all of the Company’s plans) shall not exceed $100,000.

    

    (b) Any
      Incentive Stock Option certificate authorized under the Plan shall contain
      such
      other provisions as the Committee shall deem advisable, but shall in all events
      be consistent with and contain all provisions required in order to qualify
      the
      options as Incentive Stock Options.

    

    (c) All
      Incentive Stock Options must be granted within ten years from the earlier of
      the
      date on which this Plan was adopted by Board of Directors or the date this
      Plan
      was approved by the shareholders.

    

    (d) Unless
      sooner exercised, all Incentive Stock Options shall expire no later than 10
      years after the date of grant.

    

    (e) The
      option price for Incentive Stock Options shall be not less than the Fair Market
      Value of the Common Stock subject to the option on the date of
      grant.

    

    (f) No
      Incentive Stock Options shall be granted to any participant who, at the time
      such option is granted, would own (within the meaning of Section 422 of the
      Code) stock possessing more than 10% of the total combined voting power of
      all
      classes of stock of the employer corporation or of its parent or subsidiary
      corporation.

    

    
      
         

      

      
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    7. Stock
      Appreciation Rights.
      A SAR
      is a right to receive, without payment to the Company, a number of shares of
      Common Stock, cash or any combination thereof, the amount of which is determined
      pursuant to the formula set forth in Section 7.4. A SAR may be granted (a)
      with
      respect to any stock option granted under this Plan, either concurrently with
      the grant of such stock option or at such later time as determined by the
      Committee (as to all or any portion of the shares of Common Stock subject to
      the
      stock option), or (b) alone, without reference to any related stock option.
      Each
      SAR granted by the Committee under this Plan shall be subject to the following
      terms and conditions:

    

    7.1. Number.
      Each
      SAR granted to any participant shall relate to such number of shares of Common
      Stock as shall be determined by the Committee, subject to adjustment as provided
      in Section 10.6. In the case of a SAR granted with respect to a stock option,
      the number of shares of Common Stock to which the SAR pertains shall be reduced
      in the same proportion that the holder of the option exercises the related
      stock
      option.

    

    7.2. Duration.
      Subject
      to earlier termination as provided in Section 10.4, the term of each SAR shall
      be determined by the Committee but shall not exceed ten years and one day from
      the date of grant. Unless otherwise provided by the Committee, each SAR shall
      become exercisable at such time or times, to such extent and upon such
      conditions as the stock option, if any, to which it relates is exercisable.
      No
      SAR may be exercised during the first twelve months of its term. Except as
      provided in the preceding sentence, the Committee may in its discretion
      accelerate the exercisability of any SAR.

    

    7.3. Exercise.
      A SAR
      may be exercised, in whole or in part, by giving written notice to the Company,
      specifying the number of SARs which the holder wishes to exercise. Upon receipt
      of such written notice, the Company shall, within 90 days thereafter, deliver
      to
      the exercising holder certificates for the shares of Common Stock or cash or
      both, as determined by the Committee, to which the holder is entitled pursuant
      to Section 7.4.

    

    7.4. Payment.
      Subject
      to the right of the Committee to deliver cash in lieu of shares of Common Stock
      (which, as it pertains to officers and directors of the Company, shall comply
      with all requirements of the 1934 Act), the number of shares of Common Stock
      which shall be issuable upon the exercise of a SAR shall be determined by
      dividing:

    

    (a) the
      number of shares of Common Stock as to which the SAR is exercised multiplied
      by
      the amount of the appreciation in such shares (for this purpose, the
“appreciation” shall be the amount by which the Fair Market Value of the shares
      of Common Stock subject to the SAR on the exercise date exceeds (1) in the
      case
      of a SAR related to a stock option, the purchase price of the shares of Common
      Stock under the stock option or (2) in the case of a SAR granted alone, without
      reference to a related stock option, an amount which shall be determined by
      the
      Committee at the time of grant, subject to adjustment under Section 10.6);
      by

    

    (b) the
      Fair
      Market Value of a share of Common Stock on the exercise date.

     

    
      
         

      

      
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    In
      lieu
      of issuing shares of Common Stock upon the exercise of a SAR, the Committee
      may
      elect to pay the holder of the SAR cash equal to the Fair Market Value on the
      exercise date of any or all of the shares which would otherwise be issuable.
      No
      fractional shares of Common Stock shall be issued upon the exercise of a SAR;
      instead, the holder of the SAR shall be entitled to receive a cash adjustment
      equal to the same fraction of the Fair Market Value of a share of Common Stock
      on the exercise date or to purchase the portion necessary to make a whole share
      at its Fair Market Value on the date of exercise.

     

    

    8. Stock
      Awards and Restricted Stock.
      A stock
      award consists of the transfer by the Company to a participant of shares of
      Common Stock, without other payment therefor, as additional compensation for
      services to the Company. A share of restricted stock consists of shares of
      Common Stock which are sold or transferred by the Company to a participant
      at a
      price determined by the Committee (which price shall be at least equal to the
      minimum price required by applicable law for the issuance of a share of Common
      Stock) and subject to restrictions on their sale or other transfer by the
      participant. The transfer of Common Stock pursuant to stock awards and the
      transfer and sale of restricted stock shall be subject to the following terms
      and conditions:

    

    8.1. Number
      of Shares.
      The
      number of shares to be transferred or sold by the Company to a participant
      pursuant to a stock award or as restricted stock shall be determined by the
      Committee.

    

    8.2. Sale
      Price.
      The
      Committee shall determine the price, if any, at which shares of restricted
      stock
      shall be sold to a participant, which may vary from time to time and among
      participants and which may be below the Fair Market Value of such shares of
      Common Stock at the date of sale.

    

    8.3. Restrictions.
      All
      shares of restricted stock transferred or sold hereunder shall be subject to
      such restrictions as the Committee may determine, including, without limitation
      any or all of the following:

    

    (a) a
      prohibition against the sale, transfer, pledge or other encumbrance of the
      shares of restricted stock, such prohibition to lapse at such time or times
      as
      the Committee shall determine (whether in annual or more frequent installments,
      at the time of the death, disability or retirement of the holder of such shares,
      or otherwise);

    

    (b) a
      requirement that the holder of shares of restricted stock forfeit, or (in the
      case of shares sold to a participant) resell back to the Company at his or
      her
      cost, all or a part of such shares in the event of termination of his or her
      employment or consulting engagement during any period in which such shares
      are
      subject to restrictions 

    

    (c) such
      other conditions or restrictions as the Committee may deem
      advisable.

    

    
      
         

      

      
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    8.4. Escrow.
      In
      order to enforce the restrictions imposed by the Committee pursuant to Section
      8.3, the participant receiving restricted stock shall enter into an agreement
      with the Company setting forth the conditions of the grant. Shares of restricted
      stock shall be registered in the name of the participant and deposited, together
      with a stock power endorsed in blank, with the Company. Each such certificate
      shall bear a legend in substantially the following form:

    

    

    The
      shares represented by this certificate have not been registered under the
      Securities Act of 1933 or the securities law of any state. The shares have
      been
      acquired for investment and without a view to their distribution and may not
      be
      sold or otherwise disposed of in the absence of any effective registration
      statement for the shares under the Securities Act of 1933 or unless an exemption
      from registration is available under the securities laws.

    

    The
      transferability of this certificate and the shares of Common Stock represented
      by it are subject to the terms and conditions (including conditions of
      forfeiture) contained in the 1999 Stock Option Plan of Wits Basin Precious
      Minerals Inc. (the “Company”), and an agreement entered into between the
      registered owner and the Company. A copy of the Plan and the agreement is on
      file in the office of the secretary of the Company.

    

    8.5. End
      of
      Restrictions.
      Subject
      to Section 10.5, at the end of any time period during which the shares of
      restricted stock are subject to forfeiture and restrictions on transfer, such
      shares will be delivered free of all restrictions to the participant or to
      the
      participant’s legal representative, beneficiary or heir.

    

    8.6. Shareholder.
      Subject
      to the terms and conditions of the Plan, each participant receiving restricted
      stock shall have all the rights of a shareholder with respect to shares of
      stock
      during any period in which such shares are subject to forfeiture and
      restrictions on transfer, including without limitation, the right to vote such
      shares. Dividends paid in cash or property other than Common Stock with respect
      to shares of restricted stock shall be paid to the participant
      currently.

    

    9. Performance
      Shares.
      A
      performance share consists of an award which shall be paid in shares of Common
      Stock, as described below. The grant of performance share shall be subject
      to
      such terms and conditions as the Committee deems appropriate, including the
      following:

    

    9.1. Performance
      Objectives.
      Each
      performance share will be subject to performance objectives for the Company
      or
      one of its operating units to be achieved by the end of a specified period.
      The
      number of performance shares granted shall be determined by the Committee and
      may be subject to such terms and conditions, as the Committee shall determine.
      If the performance objectives are achieved, each participant will be paid in
      shares of Common Stock or cash. If such objectives are not met, each grant
      of
      performance shares may provide for lesser payments in accordance with formulas
      established in the award.

    

    
      
         

      

      
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    9.2. Not
      Shareholder.
      The
      grant of performance shares to a participant shall not create any rights in
      such
      participant as a shareholder of the Company, until the payment of shares of
      Common Stock with respect to an award.

    

    9.3. No
      Adjustments.
      No
      adjustment shall be made in performance shares granted on account of cash
      dividends which may be paid or other rights which may be issued to the holders
      of Common Stock prior to the end of any period for which performance objectives
      were established.

    

    9.4. Expiration
      of Performance Share.
      If any
      participant’s employment or consulting engagement with the Company is terminated
      for any reason other than normal retirement, death or disability prior to the
      achievement of the participant’s stated performance objectives, all the
      participant’s rights on the performance shares shall expire and terminate unless
      otherwise determined by the Committee. In the event of termination of employment
      by reason of death, disability, or normal retirement, the Committee, in its
      own
      discretion may determine what portions, if any, of the performance shares should
      be paid to the participant.

    

    10. General.

    

    10.1. Effective
      Date.
      The
      Plan will become effective on June
      1, 1999.

    

    10.2. Duration.
      The
      Plan shall remain in effect until all Incentives granted under the Plan have
      either been satisfied by the issuance of shares of Common Stock or the payment
      of cash or been terminated under the terms of the Plan and all restrictions
      imposed on shares of Common Stock in connection with their issuance under the
      Plan have lapsed. No Incentives may be granted under the Plan after the tenth
      anniversary of the date the Plan is approved by the shareholders of the
      Company.

    

    10.3. Non-transferability
      of Incentives.
      No
      stock option, SAR, restricted stock or performance award may be transferred,
      pledged or assigned by the holder thereof (except, in the event of the holder’s
      death, by will or the laws of descent and distribution to the limited extent
      provided in the Plan or in the Incentive) or pursuant to a qualified domestic
      relations order as defined by the Code or Title I of the Employee Retirement
      Income Security Act, or the rules thereunder, and the Company shall not be
      required to recognize any attempted assignment of such rights by any
      participant. Notwithstanding the preceding sentence, stock options may be
      transferred by the holder thereof to family members, trusts or charities. During
      a participant’s lifetime, an Incentive may be exercised only by him or her, by
      his or her guardian or legal representative or, in the case of stock options,
      by
      the transferees permitted by the preceding sentence.

    

    10.4. Effect
      of Termination of Employment or Death.
      In the
      event that a participant ceases to be an employee of or consultant to the
      Company for any reason, including death, any Incentives may be exercised or
      shall expire at such times as may be determined by the Committee.

    

    10.5. Additional
      Condition.
      Notwithstanding anything in this Plan to the contrary: (a) the Company may,
      if
      it shall determine it necessary or desirable for any reason, at the time of
      award of any Incentive or the issuance of any shares of Common Stock pursuant
      to
      any Incentive, require the recipient of the Incentive, as a condition to the
      receipt thereof or to the receipt of shares of Common Stock issued pursuant
      thereto, to deliver to the Company a written representation of present intention
      to acquire the Incentive or the shares of Common Stock issued pursuant thereto
      for his own account for investment and not for distribution; and (b) if at
      any
      time the Company further determines, in its sole discretion, that the listing,
      registration or qualification (or any updating of any such document) of any
      Incentive or the shares of Common Stock issuable pursuant thereto is necessary
      on any securities exchange or under any federal or state securities or blue
      sky
      law, or that the consent or approval of any governmental regulatory body is
      necessary or desirable as a condition of, or in connection with the award of
      any
      Incentive, the issuance of shares of Common Stock pursuant thereto, or the
      removal of any restrictions imposed on such shares, such Incentive shall not
      be
      awarded or such shares of Common Stock shall not be issued or such restrictions
      shall not be removed, as the case may be, in whole or in part, unless such
      listing, registration, qualification, consent or approval shall have been
      effected or obtained free of any conditions not acceptable to the
      Company.

    

    
      
         

      

      
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    10.6. Adjustment.
      In the
      event of any merger, consolidation or reorganization of the Company with any
      other corporation or corporations, there shall be substituted for each of the
      shares of Common Stock then subject to the Plan, including shares subject to
      restrictions, options, or achievement of performance share objectives, the
      number and kind of shares of stock or other securities to which the holders
      of
      the shares of Common Stock will be entitled pursuant to the transaction. In
      the
      event of any recapitalization, stock dividend, stock split, combination of
      shares or other change in the Common Stock, the number of shares of Common
      Stock
      then subject to the Plan, including shares subject to restrictions, options
      or
      achievements of performance shares, shall be adjusted in proportion to the
      change in outstanding shares of Common Stock. In the event of any such
      adjustments, the purchase price of any option, the performance objectives of
      any
      Incentive, and the shares of Common Stock issuable pursuant to any Incentive
      shall be adjusted as and to the extent appropriate, in the discretion of the
      Committee, to provide participants with the same relative rights before and
      after such adjustment.

    

    10.7. Incentive
      Plans and Agreements.
      Except
      in the case of stock awards or cash awards, the terms of each Incentive shall
      be
      stated in a plan or agreement approved by the Committee. The Committee may
      also
      determine to enter into agreements with holders of options to reclassify or
      convert certain outstanding options, within the terms of the Plan, as Incentive
      Stock Options or as non-statutory stock options and in order to eliminate SARs
      with respect to all or part of such options and any other previously issued
      options.

    

    10.8. Withholding.

    

    (a) The
      Company shall have the right to withhold from any payments made under the Plan
      or to collect as a condition of payment, any taxes required by law to be
      withheld. At any time when a participant is required to pay to the Company
      an
      amount required to be withheld under applicable income tax laws in connection
      with a distribution of Common Stock or upon exercise of an option or SAR, the
      participant may satisfy this obligation in whole or in part by electing (the
      “Election”)
      to
      have the Company withhold from the distribution shares of Common Stock having
      a
      value up to the amount required to be withheld. The value of the shares to
      be
      withheld shall be based on the Fair Market Value of the Common Stock on the
      date
      that the amount of tax to be withheld shall be determined (“Tax
      Date”).

    

    
      
         

      

      
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    (b) Each
      Election must be made prior to the Tax Date. The Committee may disapprove of
      any
      Election, may suspend or terminate the right to make Elections, or may provide
      with respect to any Incentive that the right to make Elections shall not apply
      to such Incentive. An Election is irrevocable.

    

    (c) If
      a
      participant is an officer or director of the Company within the meaning of
      Section 16 of the 1934 Act, then an Election must comply with all of the
      requirements of the 1934 Act.

    

    10.9. No
      Continued Employment, Engagement or Right to Corporate Assets.
      No
      participant under the Plan shall have any right, because of his or her
      participation, to continue in the employ of, or to continue his or her
      consulting engagement for, the Company for any period of time or to any right
      to
      continue his or her present or any other rate of compensation. Nothing contained
      in the Plan shall be construed as giving an employee, a consultant, such
      person’s beneficiaries or any other person any equity or interests of any kind
      in the assets of the Company or creating a trust of any kind or a fiduciary
      relationship of any kind between the Company and any such person.

    

    10.10. Deferral
      Permitted.
      Payment
      of cash or distribution of any shares of Common Stock to which a participant
      is
      entitled under any Incentive shall be made as provided in the Incentive. Payment
      may be deferred at the option of the participant if provided in the
      Incentive.

    

    10.11. Amendment
      of the Plan.
      The
      Board may amend or discontinue the Plan at any time. However, no such amendment
      or discontinuance shall, subject to adjustment under Section 10.6, (a) change
      or
      impair, without the consent of the recipient, an Incentive previously granted,
      (b) increase the maximum number of shares of Common Stock which may be issued
      to
      all participants under the Plan, (c) change or expand the types of Incentives
      that may be granted under the Plan, (d) change the class of persons eligible
      to
      receive Incentives under the Plan, or (e) materially increase the benefits
      accruing to participants under the Plan.

    

    10.12 Immediate
      Acceleration of Incentives.
      Notwithstanding any provision in this Plan or in any Incentive to the contrary,
      (a) the restriction on all shares of restricted stock award shall lapse
      immediately, (b) all outstanding options and SARs will become exercisable
      immediately, and (c) all performance shares shall be deemed to be met and
      payment made immediately, if any of the following events occur unless otherwise
      determined by the Board of Directors and a majority of the Continuing Directors
      (as defined below):

    

    (1) any
      person or group of persons becomes the beneficial owner of 30% or more of any
      equity security of the Company entitled to vote for the election of directors;
      or

     

    

    (2) a
      majority of the members of the Board of Directors of the Company is replaced
      within the period of less than two years by directors not nominated and approved
      by the Board of Directors; or

    

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    (3) the
      shareholders of the Company approve the sale or other disposition of all or
      substantially all of the Company’s assets (including a plan of liquidation);
      or

    

    (4) the
      shareholders of the Company approve the reorganization, merger or consolidation
      of the Company or a statutory exchange of outstanding voting securities of
      the
      Company, unless, immediately following such reorganization, merger,
      consolidation or exchange, all or substantially all of the persons who were
      the
      beneficial owners, respectively, of voting securities and Common Stock of the
      Company immediately prior to such reorganization, merger, consolidation or
      exchange beneficially own, directly or indirectly, more than 50% of,
      respectively, the combined voting power of the then outstanding voting
      securities entitled to vote generally in the election of directors and the
      then
      outstanding shares of common stock, as the case may be, of the corporation
      resulting from such reorganization, merger, consolidation or exchange in
      substantially the same proportions as their ownership, immediately prior to
      such
      reorganization, merger, consolidation or exchange, of the voting securities
      and
      Common Stock of the Company, as the case may be.

    

    For
      purposes of this Section 10.12, beneficial ownership by a person or group of
      persons shall be determined in accordance with Regulation 13D (or any similar
      successor regulation) promulgated by the Securities and Exchange Commission
      pursuant to the 1934 Act. Beneficial ownership of more than 30% of an equity
      security may be established by any reasonable method, but shall be presumed
      conclusively as to any person who files a Schedule 13D report with the
      Securities and Exchange Commission reporting such ownership. If the restrictions
      and forfeitability periods are eliminated by reason of provision (1), the
      limitations of this Plan shall not become applicable again should the person
      cease to own 30% or more of any equity security of the Company.

    

    For
      purposes of this Section 10.12, “Continuing
      Directors”
are
      directors (a) who were in office prior to the time of any of provisions (1),
      (2)
      or (3) occurred or any person publicly announced an intention to acquire 20%
      or
      more of any equity security of the Company, (b) directors in office for a period
      of more than two years, and (c) directors nominated and approved by the
      Continuing Directors.

    

    10.13. Dilution
      and Other Adjustments.
      In the
      event of any change in the outstanding Common Stock of the Company by reason
      of
      any stock split, stock dividend, split-up, split-off, spin-off,
      recapitalization, merger, consolidation, rights offering, reorganization,
      combination or exchange of shares, a sale by the Company of substantially all
      of
      its assets, any distribution to shareholders other than a normal cash dividend,
      or other extraordinary or unusual event, the number or kind of shares subject
      to
      an Incentive, and the option price per share under all outstanding options
      shall
      be automatically adjusted so that the proportionate interest of the participant
      shall be maintained as before the occurrence of such event; such adjustment
      in
      outstanding Incentives shall be made without change in any option exercise
      price
      applicable to the unexercised portion of such Incentive and with a corresponding
      adjustment in the option exercise price per share, if any, and such adjustment
      shall be conclusive and binding for all purposes of the Plan.

    

    10.14. Definition
      of Fair Market Value.
      For
      purposes of this Plan, the “Fair
      Market Value”
of
      a
      share of Common Stock at a specified date shall, unless otherwise expressly
      provided in this Plan, be the amount which the Committee determines in good
      faith to be 100% of the fair market value of such a share as of the date in
      question; provided, however, that notwithstanding the foregoing, if such shares
      are listed on a U.S. securities exchange or are quoted on the Nasdaq National
      Market System or Nasdaq SmallCap Stock Market (“Nasdaq”),
      then
      Fair Market Value shall be determined by reference to the last sale price of
      a
      share of Common Stock on such U.S. securities exchange or Nasdaq on the
      applicable date. If such U.S. securities exchange or Nasdaq is closed for
      trading on such date, or if the Common Stock does not trade on such date, then
      the last sale price used shall be the one on the date the Common Stock last
      traded on such U.S. securities exchange or Nasdaq.

     

     

    
      
         

      

      
        10SUBSCRIPTION AGREEMENT

      SUBSCRIPTION  AGREEMENT  (this  "Agreement")  made as of the last date set
forth on the signature page hereof between National  Investment Managers Inc., a
Florida corporation (the "Company"), and the undersigned (the "Subscriber").

                              W I T N E S S E T H:

      WHEREAS,  the Company is conducting a private  offering  (the  "Offering")
consisting of a minimum of 100,000 (the  "Minimum  Offering") up to a maximum of
500,000 (the "Maximum  Offering")  shares (the  "Shares") of Series D Cumulative
Convertible  Preferred Stock ("Series D Preferred  Stock"),  pursuant to Section
4(2) of the Securities Act of 1933, as amended (the  "Securities  Act") and Rule
506 promulgated thereunder; and

      WHEREAS,  the  Subscriber  desires to  purchase  that number of Shares set
forth on the signature page hereof on the terms and conditions  hereinafter  set
forth; and

      WHEREAS,  for each  share of  Series D  Preferred  Stock  purchased,  each
Subscriber  will  receive a warrant to purchase  ten (10) shares of common stock
(the "Common Stock") of the Company (the "Warrants",  and collectively  with the
Series D Preferred Stock, the "Securities").

      NOW,   THEREFORE,   in  consideration  of  the  premises  and  the  mutual
representations  and  covenants  hereinafter  set forth,  the parties  hereto do
hereby agree as follows:

I.    SUBSCRIPTION FOR SHARES AND REPRESENTATIONS BY SUBSCRIBER

      1.1 Subject to the terms and conditions  hereinafter  set forth and in the
Confidential  Offering  Memorandum  dated  September 14, 2006 (such  memorandum,
together with all amendments  thereof and supplements and exhibits thereto,  the
"Memorandum"),  the Subscriber hereby  irrevocably  subscribes for and agrees to
purchase  from the Company,  and the Company  agrees to sell to the  Subscriber,
such number of Shares as is set forth on the  signature  page  hereof,  at a per
share price  equal to $10.00 per Share.  The  purchase  price is payable by wire
transfer of immediately available funds to:

             Account Name:             National Investment Managers Inc.
             Account #                 091084939165
             Swift Code                CHASUS33
             ABA #                     021000021
             Bank                      JP Morgan Chase
             Address:                  270 Park Avenue
                                       New York, NY 10017

      1.2 Offering  Period;  Maximum.  The  Securities  will be offered for sale
until  December  4,  2006,  (the  "Termination  Date").  The  Offering  is being
conducted on a best-efforts basis.

<PAGE>

      1.3 Closings.  The Company may hold an initial closing ("Initial Closing")
at any time after the receipt of accepted subscriptions for the Minimum Offering
prior to the Termination  Date. After the Initial Closing,  subsequent  closings
with respect to  additional  Securities  may take place at any time prior to the
Termination  Date as  determined by the Company,  with respect to  subscriptions
accepted  prior to the  Termination  Date (each such closing,  together with the
Initial Closing, being referred to as a "Closing").

      1.4 The Subscriber recognizes that the purchase of the Securities involves
a high degree of risk  including,  but not limited  to, the  following:  (a) the
Company has limited operating history and requires substantial funds in addition
to the  proceeds of the  Offering;  (b) an  investment  in the Company is highly
speculative,  and  only  investors  who can  afford  the  loss of  their  entire
investment should consider investing in the Company and the Securities;  (c) the
Subscriber may not be able to liquidate its investment;  (d)  transferability of
the  Securities is extremely  limited;  (e) in the event of a  disposition,  the
Subscriber could sustain the loss of its entire investment;  (f) the Company has
not paid any dividends  since its inception and does not  anticipate  paying any
dividends;  and (g) the Company may issue  additional  securities  in the future
which  have  rights  and  preferences  that are  senior to those of the Series D
Preferred  Stock.  Without  limiting the generality of the  representations  set
forth in Section 1.5 below,  the Subscriber  represents  that the Subscriber has
carefully reviewed the section of the Memorandum captioned "Risk Factors."

      1.5 The  Subscriber  represents  that  the  Subscriber  is an  "accredited
investor" as such term is defined in Rule 501 of Regulation D  ("Regulation  D")
promulgated under the Securities Act, as indicated by the Subscriber's responses
to the  questions  contained in Article VII hereof,  and that the  Subscriber is
able to bear the economic risk of an investment in the Securities.

      1.6  The  Subscriber  hereby  acknowledges  and  represents  that  (a) the
Subscriber has knowledge and experience in business and financial matters, prior
investment  experience,  including investment in securities that are non-listed,
unregistered  and/or  not traded on a national  securities  exchange  nor on the
National  Association  of  Securities  Dealers,   Inc.  (the  "NASD")  automated
quotation  system  ("NASDAQ"),  or the Subscriber has employed the services of a
"purchaser  representative"  (as defined in Rule 501 of Regulation D),  attorney
and/or  accountant to read all of the documents  furnished or made  available by
the Company both to the Subscriber and to all other prospective investors in the
Securities  to  evaluate  the  merits  and  risks of such an  investment  on the
Subscriber's behalf; (b) the Subscriber recognizes the highly speculative nature
of this  investment;  and (c) the  Subscriber  is able to bear the economic risk
that the Subscriber hereby assumes.

      1.7 The Subscriber hereby acknowledges  receipt and careful review of this
Agreement,  the  Memorandum  (which  includes the Risk  Factors),  including the
Warrant and the Series D Certificate of  Designation  (as defined below) and all
other  exhibits  thereto,  and any documents  which may have been made available
upon request as reflected  therein  (collectively  referred to as the  "Offering
Materials") and hereby  represents that the Subscriber has been furnished by the
Company  during the course of the Offering  with all  information  regarding the
Company, the terms and conditions of the Offering and any additional information
that the  Subscriber has requested or desired to know, and has been afforded the
opportunity  to ask  questions  of and  receive  answers  from  duly  authorized
officers or other  representatives of the Company concerning the Company and the
terms and conditions of the Offering.

                                       2
<PAGE>

      1.8 (a) In making the decision to invest in the  Securities the Subscriber
has relied solely upon the  information  provided by the Company in the Offering
Materials.  To the extent  necessary,  the Subscriber  has retained,  at its own
expense,   and  relied  upon  appropriate   professional  advice  regarding  the
investment,  tax and legal merits and  consequences  of this  Agreement  and the
purchase of the Securities  hereunder.  The Subscriber disclaims reliance on any
statements made or information provided by any person or entity in the course of
Subscriber's  consideration  of an investment in the  Securities  other than the
Offering Materials.

            (b) The Subscriber  represents that (i) the Subscriber was contacted
regarding the sale of the  Securities by the Company (or an authorized  agent or
representative  thereof)  with  whom  the  Subscriber  had a  prior  substantial
pre-existing  relationship  and (ii) no Securities were offered or sold to it by
means  of any  form of  general  solicitation  or  general  advertising,  and in
connection  therewith,  the  Subscriber  did  not  (A)  receive  or  review  any
advertisement,  article,  notice or other communication published in a newspaper
or magazine or similar  media or broadcast  over  television  or radio,  whether
closed  circuit,  or generally  available;  or (B) attend any seminar meeting or
industry  investor  conference  whose  attendees  were  invited  by any  general
solicitation or general advertising.

      1.9 The Subscriber hereby represents that the Subscriber, either by reason
of  the  Subscriber's  business  or  financial  experience  or the  business  or
financial  experience  of  the  Subscriber's   professional  advisors  (who  are
unaffiliated with and not compensated by the Company or any affiliate or selling
agent of the Company,  directly or indirectly),  has the capacity to protect the
Subscriber's  own  interests in  connection  with the  transaction  contemplated
hereby.

      1.10 The  Subscriber  hereby  acknowledges  that the Offering has not been
reviewed by the United States Securities and Exchange Commission (the "SEC") nor
any state regulatory  authority since the Offering is intended to be exempt from
the  registration  requirements of Section 5 of the Securities Act,  pursuant to
Regulation  D. The  Subscriber  understands  that the  Securities  have not been
registered  under the Securities Act or under any state securities or "blue sky"
laws and agrees not to sell, pledge,  assign or otherwise transfer or dispose of
the Securities unless they are registered under the Securities Act and under any
applicable  state securities or "blue sky" laws or unless an exemption from such
registration is available.

      1.11  The  Subscriber  understands  that  the  Securities  have  not  been
registered  under the Securities Act by reason of a claimed  exemption under the
provisions of the Securities Act that depends,  in part,  upon the  Subscriber's
investment intention. In this connection,  the Subscriber hereby represents that
the Subscriber is purchasing the Securities for the Subscriber's own account for
investment and not with a view toward the resale or distribution to others.  The
Subscriber,  if an  entity,  further  represents  that it was not formed for the
purpose of purchasing the Securities.

                                       3
<PAGE>

      1.12 The  Subscriber  understands  that the  Common  Stock  issuable  upon
conversion of the Series D Preferred  Stock (the  "Conversion  Shares") and upon
exercise  of the  Warrants  (the  "Warrant  Shares"  and  collectively  with the
Conversion  Shares, the "Common Shares") is quoted on the OTC Bulletin Board and
that there is a limited market for the Common Stock. The Subscriber  understands
that even if a public  market  develops for the Common  Shares,  Rule 144 ("Rule
144")  promulgated under the Securities Act requires for  non-affiliates,  among
other  conditions,  a one-year  holding  period  prior to the resale (in limited
amounts) of  securities  acquired in a  non-public  offering  without  having to
satisfy the registration  requirements  under the Securities Act. The Subscriber
understands and hereby  acknowledges  that the Company is under no obligation to
register any of the  Securities or the Common Shares under the Securities Act or
any state securities or "blue sky" laws other than as set forth in Article V.

      1.13  The  Subscriber  consents  to  the  placement  of a  legend  on  any
certificate  or other  document  evidencing the Securities and the Common Shares
that such securities  have not been  registered  under the Securities Act or any
state  securities  or "blue  sky" laws and  setting  forth or  referring  to the
restrictions on  transferability  and sale thereof  contained in this Agreement.
The Subscriber is aware that the Company will make a notation in its appropriate
records  with  respect  to the  restrictions  on  the  transferability  of  such
Securities.  The  legend  to be  placed  on each  certificate  shall  be in form
substantially similar to the following:

      "THE  SECURITIES  REPRESENTED  HEREBY HAVE NOT BEEN  REGISTERED  UNDER THE
      UNITED STATES  SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY STATE
      SECURITIES OR "BLUE SKY LAWS," AND MAY NOT BE OFFERED, SOLD,  TRANSFERRED,
      ASSIGNED, PLEDGED OR HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF
      UNDER SUCH ACT OR COMPLIANCE WITH RULE 144 PROMULGATED  UNDER SUCH ACT, OR
      UNLESS  THE  COMPANY  HAS  RECEIVED  AN  OPINION  OF  COUNSEL,  REASONABLY
      SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
      REQUIRED."

      1.14 It is agreed that the Company,  at its sole discretion,  reserves the
unrestricted  right,  without further  documentation or agreement on the part of
the Subscriber, to reject or limit any subscription, to accept subscriptions for
fractional  Shares and to close the Offering to the  Subscriber  at any time and
that the Company will issue stop  transfer  instructions  to its transfer  agent
with respect to such Securities.

      1.15 The Subscriber  hereby  represents that the address of the Subscriber
furnished  by  Subscriber  on the  signature  page  hereof  is the  Subscriber's
principal  residence if Subscriber  is an  individual or its principal  business
address if it is a corporation or other entity.

      1.16 The  Subscriber  represents  that the  Subscriber  has full power and
authority  (corporate,  statutory  and  otherwise)  to execute and deliver  this
Agreement and to purchase the Securities.  This Agreement constitutes the legal,
valid  and  binding  obligation  of  the  Subscriber,  enforceable  against  the
Subscriber in accordance with its terms.

                                       4
<PAGE>

      1.17 If the Subscriber is a corporation,  partnership,  limited  liability
company,  trust,  employee benefit plan,  individual  retirement account,  Keogh
Plan, or other  tax-exempt  entity,  it is authorized and qualified to invest in
the Company and the person  signing this  Agreement on behalf of such entity has
been duly authorized by such entity to do so.

      1.18  The  Subscriber  acknowledges  that  if he or  she  is a  Registered
Representative  of an NASD member firm, he or she must give such firm the notice
required  by the  NASD's  Rules  of Fair  Practice,  receipt  of  which  must be
acknowledged by such firm in Section 7.4 below.

      1.19 The  Subscriber  acknowledges  that at such  time,  if  ever,  as the
Securities  or the  Common  Shares  are  registered  (as such term is defined in
Article V hereof), sales of the Securities and the Common Shares will be subject
to state securities laws.

      1.20 (a) The  Subscriber  agrees  not to issue any public  statement  with
respect to the Subscriber's  investment or proposed investment in the Company or
the terms of any agreement or covenant  between them and the Company without the
Company's  prior written  consent,  except such  disclosures  as may be required
under applicable law or under any applicable order, rule or regulation.

      (b) The Company  agrees not to disclose the names,  addresses or any other
information about the Subscribers, except as required by law; provided, that the
Company may use the name of the Subscriber in any  registration  statement filed
pursuant to Article V in which the Subscriber's Securities are included.

      1.21  The  Subscriber  agrees  to hold  the  Company  and  its  directors,
officers,  employees,  affiliates,  controlling  persons  and  agents  and their
respective  heirs,  representatives,  successors  and  assigns  harmless  and to
indemnify them against all liabilities, costs and expenses incurred by them as a
result of (a) any sale or  distribution  of the  Securities by the Subscriber in
violation of the Securities Act or any applicable state securities or "blue sky"
laws;  or (b) any false  representation  or warranty or any breach or failure by
the  Subscriber  to comply  with any  covenant  made by the  Subscriber  in this
Agreement  (including  the  Confidential  Investor  Questionnaire  contained  in
Article VII herein) or any other document  furnished by the Subscriber to any of
the foregoing in connection with this Agreement.

II.   REPRESENTATIONS BY AND COVENANTS OF THE COMPANY

      The Company hereby represents and warrants to the Subscriber that:

      2.1  Organization,  Good  Standing  and  Qualification.  The  Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida and has full  corporate  power and  authority to own and
use its  properties  and its  assets  and  conduct  its  business  as  currently
conducted.  Each of the Company's subsidiaries (the "Subsidiaries") is an entity
duly  organized,  validly  existing and in good  standing  under the laws of the
jurisdiction  of its  incorporation  with  the  requisite  corporate  power  and
authority to own and use its  properties  and assets and to conduct its business
as currently  conducted.  Neither the Company, nor any of its Subsidiaries is in
violation  of  any  of  the   provisions   of  their   respective   articles  of
incorporation,  by-laws or other organizational or charter documents, including,
but not limited to the Charter Documents (as defined below). Each of the Company
and its  Subsidiaries  is duly  qualified  to  conduct  business  and is in good
standing as a foreign  corporation in each  jurisdiction  in which the nature of
the  business  conducted  or  property  owned  by it  makes  such  qualification
necessary,  except where the failure to be so qualified or in good standing,  as
the case may be,  would not  result in a direct  and/or  indirect  (i)  material
adverse  effect  on  the  legality,  validity  or  enforceability  of any of the
Securities and/or this Agreement, (ii) material adverse effect on the results of
operations,  assets,  business  or  financial  condition  of the  Company or its
Subsidiaries,  or (iii)  material  adverse  effect on the  Company's  ability to
perform in any  material  respect on a timely basis its  obligations  under this
Agreement,  the Warrants,  the  Certificate of  Designation of the  Preferences,
Rights and  Limitations of Series D Convertible  Preferred  Stock (the "Series D
Certificate of Designation") and the Memorandum.

                                       5
<PAGE>

      2.2  Capitalization   and  Voting  Rights.  The  authorized,   issued  and
outstanding  capital stock of the Company is as set forth in Schedule 2.2 hereto
and all  issued  and  outstanding  shares of capital  stock of the  Company  are
validly issued,  fully paid and  nonassessable.  Except as set forth in Schedule
2.2 hereto, (i) there are no outstanding securities of the Company or any of its
Subsidiaries which contain any preemptive, redemption or similar provisions, nor
is any  holder of  securities  of the  Company  or any  Subsidiary  entitled  to
preemptive or similar rights arising out of any agreement or understanding  with
the Company or any Subsidiary by virtue of any of the Transaction Documents, 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;  (ii) the Company  does not have any
stock appreciation  rights or "phantom stock" plans or agreements or any similar
plan or  agreement;  and  (iii)  there  are no  outstanding  options,  warrants,
agreements,  convertible  securities,  preemptive  rights  or  other  rights  to
subscribe  for or to  purchase or  acquire,  any shares of capital  stock of the
Company or contracts, commitments,  understandings, or arrangements by which the
Company or any  Subsidiary is or may become bound to issue any shares of capital
stock of the Company,  or securities or rights  convertible or exchangeable into
shares of capital stock of the Company.  Except as set forth in Schedule 2.2 and
as  otherwise  required  by law,  there are no  restrictions  upon the voting or
transfer of any of the shares of capital  stock of the  Company  pursuant to the
Company's  Charter  Documents,  Bylaws  or  other  governing  documents  or  any
agreement or other  instruments  to which the Company is a party or by which the
Company is bound.

      2.3  Authorization;  Enforceability.  The Company has all corporate right,
power and authority to enter into,  execute and deliver this  Agreement and each
other  agreement,  document,  instrument  and  certificate to be executed by the
Company in connection  with the  consummation of the  transactions  contemplated
hereby,  including, but not limited to the Warrants and the Series D Certificate
of Designation (collectively,  the "Transaction Documents") and to perform fully
its obligations  hereunder and thereunder.  All corporate  action on the part of
the Company, its directors and stockholders  necessary for the (a) authorization
execution,  delivery  and  performance  of this  Agreement  and the  Transaction
Documents by the Company; and (b) authorization,  sale, issuance and delivery of
the Securities and the Common Shares  contemplated hereby and the performance of
the Company's obligations under this Agreement and the Transaction Documents has
been taken. This Agreement and the Transaction Documents have been duly executed
and  delivered by the Company and each  constitutes  a legal,  valid and binding
obligation of the Company,  enforceable  against the Company in accordance  with
its  respective  terms,  subject  to laws of  general  application  relating  to
bankruptcy,  insolvency  and the  relief of debtors  and rules of law  governing
specific  performance,  injunctive  relief or other equitable  remedies,  and to
limitations of public policy. The Securities and Common Shares,  when issued and
fully paid for in accordance with the terms of this  Agreement,  will be validly
issued,  fully paid and  nonassessable.  The issuance and sale of the Securities
and  Common  Shares  contemplated  hereby  will not give rise to any  preemptive
rights or rights of first refusal on behalf of any person.

                                       6
<PAGE>

      2.4 No Conflict; Governmental Consents.

            (a) The execution and delivery by the Company of this  Agreement and
the Transaction Documents and the consummation of the transactions  contemplated
hereby will not (i) result in the violation of any material law, statute,  rule,
regulation,  order,  writ,  injunction,  judgment  or  decree  of any  court  or
governmental  authority to or by which the Company is bound,  (ii) conflict with
or violate  any  provision  of the  Company's  Articles  of  Incorporation  (the
"Articles"),  as amended,  the Bylaws,  or the  Certificate  of  Designation  of
Preferences, Rights and Limitations of Series B Cumulative Convertible Preferred
Stock (the "Series B COD") or the  Certificate of  Designation  of  Preferences,
Rights and Limitations of Series C Cumulative  Convertible  Preferred Stock (the
"Series C COD" and collectively,  with the Articles, the Bylaws and the Series B
COD, the "Charter  Documents") of the Company, and (iii) will not conflict with,
or result in a material  breach or violation  of, any of the terms or provisions
of,  or  constitute  (with or  without  due  notice  or lapse of time or both) a
default or give to others any rights of termination,  amendment, acceleration or
cancellation  (with or  without  due  notice,  lapse of time or both)  under any
agreement, credit facility, lease, loan agreement, mortgage, security agreement,
trust indenture or other agreement or instrument to which the Company is a party
or by which it is bound or to which any of its  properties or assets is subject,
nor result in the creation or imposition of any lien upon any of the  properties
or assets of the Company.

            (b) No  approval  by the holders of Common  Stock,  or other  equity
securities  of  the  Company  is  required  to be  obtained  by the  Company  in
connection with the  authorization,  execution and delivery of this Agreement or
the  Transaction  Documents or in connection with the  authorization,  issue and
sale of the Securities,

            (c) No  consent,  approval,  authorization  or  other  order  of any
governmental  authority is required to be obtained by the Company in  connection
with  the  authorization,  execution  and  delivery  of  this  Agreement  or the
Transaction Documents or in connection with the authorization, issue and sale of
the Securities,  except such filings as may be required to be made with the SEC,
NASD,  NASDAQ and with any state or foreign  blue sky or  securities  regulatory
authority.

      2.5 Consents of Third Parties.  No vote, approval or consent of any holder
of capital  stock of the  Company or any other  third  parties  is  required  or
necessary to be obtained by the Company in  connection  with the  authorization,
execution  and deliver of this  Agreement  or the  Transaction  Documents  or in
connection  with  the  consummation  of the  transactions  contemplated  by this
Agreement and/or the Transaction Documents.

                                       7
<PAGE>

      2.6 Licenses. Except as otherwise set forth in the SEC Reports (as defined
below),  the Company has  sufficient  licenses,  permits and other  governmental
authorizations  currently  required for the conduct of its business or ownership
of properties and is in all material respects in compliance therewith.

      2.7 Litigation.  Except as set forth in the SEC Reports, the Company knows
of no  pending or  threatened  legal or  governmental  proceedings  against  the
Company  which  could  materially  adversely  affect  the  business,   property,
financial  condition  or  operations  of the  Company  or which  materially  and
adversely  questions the validity of this Agreement or any agreements related to
the transactions  contemplated  hereby or the right of the Company to enter into
any of such agreements, or to consummate the transactions contemplated hereby or
thereby.  The Company is not a party or subject to the  provisions of any order,
writ,  injunction,  judgment  or  decree of any  court or  government  agency or
instrumentality which could materially adversely affect the business,  property,
financial  condition or  operations  of the Company.  There is no action,  suit,
proceeding or  investigation  by the Company  currently  pending in any court or
before any arbitrator or that the Company intends to initiate.

      2.8 Disclosure.  The information set forth in the Offering Materials as of
the date hereof  contains no untrue  statement  of a material  fact nor omits to
state a  material  fact  necessary  in order to make  the  statements  contained
therein,  in  light  of the  circumstances  under  which  they  were  made,  not
misleading.

      2.9 Investment Company.  The Company is not an "investment company" within
the meaning of such term under the  Investment  Company Act of 1940, as amended,
and the rules and regulations of the SEC thereunder.

      2.10 Brokers.  Except as set forth on Schedule  2.10,  neither the Company
nor any of the Company's  officers,  directors,  employees or  stockholders  has
employed or engaged  any broker or finder in  connection  with the  transactions
contemplated  by this Agreement and no fee or other  compensation  is or will be
due and owing to any broker,  finder,  underwriter,  placement  agent or similar
person in connection with the transactions  contemplated by this Agreement.  The
Company is not party to any agreement,  arrangement or understanding whereby any
person has an  exclusive  right to raise funds and/or place or purchase any debt
or equity securities for or on behalf of the Company.

      2.11 Intellectual Property; Employees.

            (a) To the best of its  knowledge,  the  Company  owns or  possesses
sufficient legal rights to all patents, trademarks,  service marks, trade names,
copyrights,  trade secrets,  licenses,  information and other proprietary rights
and  processes  necessary  for its  business as now  conducted  and as presently
proposed  to be  conducted,  without  any known  infringement  of the  rights of
others. Except as disclosed in the Memorandum, there are no material outstanding
options,   licenses  or  agreements  of  any  kind  relating  to  the  foregoing
proprietary  rights,  nor is the  Company  bound by or a party  to any  material
options,  licenses  or  agreements  of any kind  with  respect  to the  patents,
trademarks,  service marks, trade names,  copyrights,  trade secrets,  licenses,
information  and other  proprietary  rights and processes of any other person or
entity other than such licenses or agreements  arising from the purchase of "off
the shelf" or  standard  products.  The  Company  has not  received  any written
communications  alleging  that the Company has  violated or, by  conducting  its
business  as  presently  proposed  to be  conducted,  would  violate  any of the
patents, trademarks,  service marks, trade names, copyrights or trade secrets or
other proprietary rights of any other person or entity.

                                       8
<PAGE>

            (b) Except as disclosed in the SEC Reports, the Company is not aware
that any of its employees is obligated under any contract  (including  licenses,
covenants or  commitments of any nature) or other  agreement,  or subject to any
judgment,  decree or order of any court or  administrative  agency,  that  would
interfere  with their  duties to the  Company or that  would  conflict  with the
Company's business as presently conducted.

            (c) Neither the  execution nor delivery of this  Agreement,  nor the
carrying on of the Company's  business by the employees of the Company,  nor the
conduct of the Company's business as presently conducted, will, to the Company's
knowledge,  conflict  with or  result in a breach of the  terms,  conditions  or
provisions  of, or  constitute  a  default  under,  any  contract,  covenant  or
instrument under which any employee is now obligated.

            (d) To the Company's knowledge,  no employee of the Company, nor any
consultant with whom the Company has contracted,  is in violation of any term of
any  employment  contract,   proprietary  information  agreement  or  any  other
agreement  relating to the right of any such individual to be employed by, or to
contract  with, the Company  because of the nature of the business  conducted by
the Company;  and to the Company's  knowledge  the  continued  employment by the
Company of its present employees, and the performance of the Company's contracts
with its independent  contractors,  will not result in any such  violation.  The
Company has not received any written notice alleging that any such violation has
occurred.  Except as described in the Memorandum, no employee of the Company has
been  granted  the  right  to  continued  employment  by the  Company  or to any
compensation following termination of employment with the Company except for any
of the same which would not have a material  adverse  effect on the  business of
the Company. The Company is not aware that any officer, key employee or group of
employees  intends to terminate his, her or their  employment  with the Company,
nor does the Company have a present intention to terminate the employment of any
officer, key employee or group of employees.

      2.12 Title to Properties and Assets;  Liens,  Etc.  Except as described in
the SEC Reports, the Company has good and marketable title to its properties and
assets, including the properties and assets reflected in the most recent balance
sheet  included in the  Company's  financial  statements,  and good title to its
leasehold  estates,  in each case subject to no mortgage,  pledge,  lien, lease,
encumbrance or charge,  other than (a) those resulting from taxes which have not
yet  become  delinquent;  (b) liens  and  encumbrances  which do not  materially
detract from the value of the property subject thereto or materially  impair the
operations  of the  Company;  and (c) those  that have  otherwise  arisen in the
ordinary  course of  business.  The Company is in  compliance  with all material
terms of each lease to which it is a party or is otherwise bound.

                                       9
<PAGE>

      2.13  Obligations to Related  Parties.  Except (i) as described in the SEC
Reports,  and (ii) the lease for our office  premises  as set forth on  Schedule
2.12  and the M&A  agreement  entered  with  Duncan  Capital,  which is owned by
Michael  Crow, a shareholder  of the Company,  there are no  obligations  of the
Company to officers, directors,  stockholders, or employees of the Company other
than (a) for payment of salary or other compensation for services rendered,  (b)
reimbursement for reasonable  expenses incurred on behalf of the Company and (c)
for other standard employee  benefits made generally  available to all employees
(including  stock  option  agreements  outstanding  under any stock  option plan
approved by the Board of Directors of the  Company).  Except as may be disclosed
in  the  Memorandum,  the  Company  is  not a  guarantor  or  indemnitor  of any
indebtedness of any other person, firm or corporation.

      2.14  Subsidiaries.  The Company  has no direct or  indirect  Subsidiaries
other than as  specified  in the SEC  Reports.  The  Company  owns,  directly or
indirectly,  all of the capital stock of each  Subsidiary  free and clear of any
and all liens,  and all the issued and  outstanding  shares of capital  stock of
each Subsidiary are validly issued and are fully paid,  non-assessable  and free
of preemptive and similar rights.

      2.15 SEC Reports;  Financial Statements. The Company has filed all reports
required to be filed by it under the Securities Act and Securities  Exchange Act
of 1934 (the  "Exchange  Act"),  including  pursuant  to Section  13(a) or 15(d)
thereof, for the twelve months preceding the date hereof (or such shorter period
as the  Company  was  required  by law to  file  such  reports)  (the  foregoing
materials  being  collectively  referred  to  herein as the "SEC  Reports"  and,
together  with  the  Schedules  to this  Agreement  (if  any),  the  "Disclosure
Materials") on a timely basis or has timely filed a valid extension of such time
of filing and has filed any such SEC Reports prior to the expiration of any such
extension.  As of  their  respective  dates,  the SEC  Reports  complied  in all
material  respects with the  requirements of the Securities Act and the Exchange
Act and the rules and regulations of the SEC promulgated thereunder, and none of
the SEC Reports,  when filed,  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 light of the  circumstances  under
which they were made, not  misleading.  The financial  statements of the Company
included in the SEC Reports  comply in all  material  respects  with  applicable
accounting  requirements  and the rules and  regulations of the SEC with respect
thereto as in effect at the time of filing. Such financial  statements have been
prepared in accordance with generally accepted accounting  principles applied on
a  consistent  basis  during the periods  involved,  except as may be  otherwise
specified in such financial  statements or the notes thereto, and fairly present
in all  material  respects  the  financial  position  of  the  Company  and  its
consolidated  Subsidiaries  as of and for the dates  thereof  and the results of
operations  and cash flows for the periods then ended,  subject,  in the case of
unaudited statements, to normal, immaterial, year-end audit adjustments.

      2.16 Press Releases. The press releases disseminated by the Company during
the twelve months  preceding the date of this Agreement  taken as a whole do not
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 light of the circumstances under which they were made and when made,
not misleading.

                                       10
<PAGE>

      2.17  Material  Changes.  Since the date of the latest  audited  financial
statements included within the SEC Reports,  except as specifically disclosed in
the SEC Reports, (i) there has been no event, occurrence or development that has
had or that could reasonably be expected to result in a material adverse effect,
(ii) the Company has not  incurred any  liabilities  (contingent  or  otherwise)
other than (A) trade payables,  accrued expenses and other liabilities  incurred
in the  ordinary  course  of  business  consistent  with past  practice  and (B)
liabilities not required to be reflected in the Company's  financial  statements
pursuant to generally accepted accounting principles or required to be disclosed
in filings  made with the SEC,  (iii) the  Company has not altered its method of
accounting or the identity of its auditors, (iv) the Company has not declared or
made any dividend or distribution of cash or other property to its  stockholders
or purchased,  redeemed or made any  agreements to purchase or redeem any shares
of its capital stock,  and (v) the Company has not issued any equity  securities
to any officer, director or affiliate, except pursuant to existing Company stock
option plans.  The Company does not have pending  before the SEC any request for
confidential treatment of information.

      2.18  Labor  Relations.  No  material  labor  dispute  exists  or,  to the
knowledge of the Company,  is imminent  with respect to any of the  employees of
the Company.

      2.19  Compliance.   The  Company  is  in  compliance  with  all  effective
requirements of the  Sarbanes-Oxley  Act of 2002, as amended,  and the rules and
regulations   thereunder,   that  are   applicable  to  it,  except  where  such
noncompliance  could not have or  reasonably be expected to result in a material
adverse effect.

      2.20 Insurance.  The Company and the  Subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the  businesses in which the Company and
the Subsidiaries are engaged.  The Company has no reason to believe that it will
not be able to renew its and the Subsidiaries'  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 on terms  consistent  with
market for the Company's and such Subsidiaries' respective lines of business.

      2.21  Internal  Accounting  Controls.  The  Company  and the  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  accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific  authorization,  and (iv) the recorded  accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company has established disclosure
controls  and  procedures  (as  defined  in  Exchange  Act Rules  13a-15(e)  and
15d-15(e)) for the Company and designed such disclosure  controls and procedures
to ensure that  material  information  relating to the  Company,  including  its
Subsidiaries,  is made known to the  certifying  officers by others within those
entities,  particularly  during the period in which the Company's Form 10-KSB or
10-QSB, as the case may be, is being prepared. The Company's certifying officers
have  evaluated the  effectiveness  of the Company's  controls and procedures in
accordance  with  Item 307 of  Regulation  S-B under  the  Exchange  Act for the
Company's most recently ended fiscal quarter or fiscal  year-end (such date, the
"Evaluation Date"). The Company presented in its most recently filed Form 10-KSB
or  Form  10-QSB  the   conclusions  of  the   certifying   officers  about  the
effectiveness  of  the  disclosure   controls  and  procedures  based  on  their
evaluations as of the Evaluation  Date.  Since the Evaluation  Date,  there have
been no significant  changes in the Company's internal controls (as such term is
defined in Item  308(c) of  Regulation  S-B under the  Exchange  Act) or, to the
Company's  knowledge,  in other  factors  that  could  significantly  affect the
Company's internal controls.

                                       11
<PAGE>

      2.22 Solvency.  Based on the financial  condition of the Company as of the
Initial Closing (and assuming that the Initial Closing shall have occurred), (i)
the Company's  fair saleable value of its assets exceeds the amount that will be
required to be paid on or in respect of the Company's  existing  debts and other
liabilities  (including known contingent  liabilities) as they mature,  (ii) the
Company's  assets do not constitute  unreasonably  small capital to carry on its
business  for the  current  fiscal year as now  conducted  and as proposed to be
conducted including its capital needs taking into account the particular capital
requirements  of the business  conducted by the Company,  and projected  capital
requirements and capital  availability  thereof, and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive, were it to
liquidate all of its assets,  after taking into account all anticipated  uses of
the cash,  would be  sufficient  to pay all amounts on or in respect of its debt
when such amounts are required to be paid.  The Company does not intend to incur
debts  beyond its ability to pay such debts as they mature  (taking into account
the timing and amounts of cash to be payable on or in respect of its debt).

      2.23  Certain   Registration   Matters.   Assuming  the  accuracy  of  the
Subscribers'   representations   and  warranties,   no  registration  under  the
Securities Act is required for the offer and sale of the  Securities  and/or the
issuance  of the  Common  Shares by the  Company  to the  Subscribers  under the
Agreement.  The Company is eligible to register the resale of its Common  Shares
under Form SB-2 promulgated under the Securities Act.

      2.24 Listing and Maintenance Requirements.  Except as specified in the SEC
Reports,  the  Company  has not,  in the two years  preceding  the date  hereof,
received notice from any trading market to the effect that the Company is not in
compliance with the listing or maintenance requirements thereof. The Company is,
and has no reason to believe that it will not in the foreseeable future continue
to be, in compliance with the listing and maintenance requirements for continued
listing of the Common  Stock on the trading  market on which the Common Stock is
currently listed or quoted.  The issuance and sale of the Securities  and/or the
issuance of the Common Shares under the Agreement  does not contravene the rules
and  regulations  of the trading  market on which the Common  Stock is currently
listed or quoted,  and no approval of the shareholders of the Company thereunder
is  required  for the  Company  to issue  and  deliver  to the  Subscribers  the
Securities contemplated by this Agreement.

      2.25 No General Solicitation.  None of the Company, its Subsidiaries,  any
of their affiliates,  and any person acting on their behalf,  has engaged in any
form of general  solicitation  or general  advertising  (within  the  meaning of
Regulation D under the Securities  Act) in connection  with the offer or sale of
the Securities.

                                       12
<PAGE>

      2.26 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 Securities Act or cause this offering of the Securities
to be  integrated  with prior  offerings  by the  Company  for  purposes  of the
Securities  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  Securities  Act  or  cause  the  offering  of the  Securities  to be
integrated with other offerings.

      2.27  Application  of  Takeover  Protections.  The  Company  has 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 Company's
Charter  Documents  or the laws of its state of  incorporation  that is or could
become  applicable to the  Subscribers  as a result of the  Subscribers  and the
Company  fulfilling  their  obligations  or  exercising  their rights under this
Agreement,   including,  without  limitation,  the  Company's  issuance  of  the
Securities and the Subscribers' ownership of the Securities.

      2.28 No Additional Agreements.  The Company does not have any agreement or
understanding with any Subscribers with respect to the transactions contemplated
by this Agreement other than as specified in this Agreement.

III.  TERMS OF SUBSCRIPTION

      3.1 All  funds  shall  be  submitted  directly  to the  Company's  account
identified in Section 1.1 hereof.

      3.2  Certificates  representing  the Series D Preferred Stock purchased by
the  Subscriber  pursuant to this Agreement will be prepared for delivery to the
Subscriber  within 10 business days following the Closing at which such purchase
takes place. The Subscriber hereby authorizes and directs the Company to deliver
the  certificates  representing  the Series D Preferred  Stock  purchased by the
Subscriber  pursuant to this Agreement directly to the Subscriber's  residential
or business address indicated on the signature page hereto.

IV.   CONDITIONS TO OBLIGATIONS OF THE SUBSCRIBERS

      4.1 The Subscriber's  obligation to purchase the Securities at the Closing
at which such purchase is to be consummated is subject to the  fulfillment on or
prior to such  Closing of the  following  conditions,  which  conditions  may be
waived at the option of each Subscriber to the extent permitted by law:

            (a) Covenants. All covenants, agreements and conditions contained in
this  Agreement  to be  performed by the Company on or prior to the date of such
Closing shall have been performed or complied with in all material respects.

                                       13
<PAGE>

            (b) No Legal  Order  Pending.  There shall not then be in effect any
legal or other order enjoining or restraining the  transactions  contemplated by
this Agreement.

            (c) No Law Prohibiting or Restricting  Such Sale. There shall not be
in effect any law, rule or regulation  prohibiting or  restricting  such sale or
requiring  any  consent or  approval  of any  person,  which shall not have been
obtained,  to  issue  the  Securities  (except  as  otherwise  provided  in this
Agreement).

            (d) Adverse Changes.  Since the date of execution of this Agreement,
no event or series of events shall have occurred that  reasonably  could have or
result in a material adverse effect.

            (e) No Suspensions of Trading in Common Stock;  Listing.  Trading in
the Common Stock shall not have been  suspended by the SEC or any trading market
(except for any  suspensions  of trading of not more than one trading day solely
to permit  dissemination of material  information  regarding the Company) at any
time since the date of execution of this  Agreement,  and the Common Stock shall
have been at all times since such date listed for trading on a trading market.

            (f) Series D  Designation.  The  Certificate  of  Designation of the
Preferences,  Rights and  Limitations for the Series D Preferred shall have been
accepted for filing by the  Secretary  of State of Florida and a certified  copy
thereof shall have been delivered to the Subscribers.

            (g) Blue Sky. The Company  shall have  completed  qualification  for
registration  of the Securities and the Common Shares under  applicable Blue Sky
laws.

            (j)  Legal  Opinion.  Counsel  to the  Company  shall  issue a legal
opinion to the Subscribers in a form acceptable to the Subscribers.

V.    REGISTRATION RIGHTS

      5.1 Definitions. As used in this Agreement, the following terms shall have
the following meanings.

            (a) The term  "Holder"  shall mean any  person  owning or having the
right to acquire Registrable Securities or any permitted transferee of a Holder.

            (b) The terms "register," "registered" and "registration" refer to a
registration  effected  by  preparing  and filing a  registration  statement  or
similar  document in compliance  with the Securities Act, and the declaration or
order of effectiveness of such registration statement or document.

                                       14
<PAGE>

            (c) The term  "Registrable  Securities"  shall  mean the  Conversion
Shares issuable upon conversion of the Preferred  Stock, the Common Stock issued
or issuable in payment of quarterly  dividends on the Series D Preferred  Stock,
the Warrant  Shares  issuable upon exercise of the Warrants,  and any securities
issued  or  issuable  upon any  stock  split,  dividend  or other  distribution,
recapitalization  or similar event,  or any  conversion  price  adjustment  with
respect to the Series D Preferred  Stock,  or  exercise  price  adjustment  with
respect  to the  Warrants;  provided,  however,  that  securities  shall only be
treated as  Registrable  Securities if and only for so long as they (A) have not
been disposed of pursuant to a registration  statement declared effective by the
SEC; (B) have not been sold in a transaction  exempt from the  registration  and
prospectus  delivery  requirements  of the  Securities  Act so that all transfer
restrictions  and restrictive  legends with respect thereto are removed upon the
consummation of such sale; (C) are held by a Holder or a permitted transferee of
a Holder  pursuant to Section 5.11 hereof;  and (D) may not be disposed of under
Rule 144(k) under the Securities Act without restriction.

      5.2 Mandatory Registration.

      The Company  shall  prepare,  and,  within sixty (60) days  following  the
Initial Closing of this Offering (the "Filing  Date"),  will file with the SEC a
registration  statement on Form S-3 (or, if Form S-3 is not then  available,  on
such  form  of  registration   statement  as  is  then  available  to  effect  a
registration  of  the  Registrable   Securities)  covering  the  resale  of  the
Registrable  Securities.  The  Company  will use its best  efforts  to have such
registration statement declared effective within 180 days (the "Effective Date")
of the Initial Closing of this Offering.

      5.3 Piggyback Registration.

            (a) The Company  agrees that if, at any time, and from time to time,
after the Closing,  the Board of Directors  of the Company (the  "Board")  shall
authorize the filing of a registration statement under the Securities Act (other
than a registration  statement on Form S-8, Form S-4 or any other form that does
not include  substantially  the same  information as would be required in a form
for the general  registration  of  securities)  in connection  with the proposed
offer of any of its  securities  by it or any of its  stockholders,  the Company
shall: (A) promptly notify each Holder that such registration  statement will be
filed  and that the  Registrable  Securities  then held by such  Holder  will be
included in such registration  statement;  (B) cause such registration statement
to cover all of such Registrable  Securities issued to such Holder; (C) use best
efforts to cause such  registration  statement  to become  effective  as soon as
practicable;  and (D) take all  other  reasonable  action  necessary  under  any
federal or state law or regulation of any  governmental  authority to permit all
such  Registrable  Securities that have been issued to such Holder to be sold or
otherwise  disposed of, and will maintain such compliance with each such federal
and  state law and  regulation  of any  governmental  authority  for the  period
necessary  for  such  Holder  to  promptly  effect  the  proposed  sale or other
disposition.

            (b)  Notwithstanding  any other  provision  of this Section 5.3, the
Company  may at any time,  abandon or delay any  registration  commenced  by the
Company.  In the event of such an abandonment by the Company,  the Company shall
not be required to continue  registration of shares  requested by the Holder for
inclusion,  the Holder shall retain the right to request  inclusion of shares as
set  forth  above  and the  withdrawn  registration  shall not be deemed to be a
registration request for the purposes of Section 5.3(c) below.

            (c) Each Holder shall have the right to request  inclusion of any of
its  Registrable  Securities  in a  registration  statement as described in this
Section 5.3, up to three times.

                                       15
<PAGE>

      5.4  Registration  Procedures.  Whenever  required under this Article V to
include Registrable Securities in a Company registration statement,  the Company
shall, as expeditiously as reasonably possible:

            (a) Use best  efforts to (i) cause such  registration  statement  to
become effective, and (ii) cause such registration statement to remain effective
until the  earliest  to occur of (A) such  date as the  sellers  of  Registrable
Securities (the "Selling Holders") have completed the distribution  described in
the  registration  statement  and (B) such  time  that  all of such  Registrable
Securities  are no longer,  by reason of Rule 144(k) under the  Securities  Act,
required to be  registered  for the sale  thereof by such Selling  Holders.  The
Company  will  also use its  best  efforts  to,  during  the  period  that  such
registration  statement  is  required  to be  maintained  hereunder,  file  such
post-effective  amendments  and  supplements  thereto as may be  required by the
Securities Act and the rules and  regulations  thereunder or otherwise to ensure
that the  registration  statement  does not  contain  any  untrue  statement  of
material fact or omit to state a fact required to be stated therein or necessary
to make the statements  contained therein,  in light of the circumstances  under
which they are made, not misleading; provided, however, that if applicable rules
under the  Securities  Act  governing the  obligation  to file a  post-effective
amendment  permits,  in lieu of  filing  a  post-effective  amendment  that  (i)
includes any  prospectus  required by Section  10(a)(3) of the Securities Act or
(ii) reflects facts or events  representing a material or fundamental  change in
the  information  set  forth in the  registration  statement,  the  Company  may
incorporate  by  reference  information  required to be included in (i) and (ii)
above to the extent such  information  is  contained in periodic  reports  filed
pursuant  to  Section  13 or  15(d)  of the  Exchange  Act  in the  registration
statement.

            (b) Prepare and file with the SEC such amendments and supplements to
such  registration  statement,  and the prospectus  used in connection with such
registration statement, as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.

            (c) Make available for inspection upon reasonable  notice during the
Company's  regular  business  hours  by each  Selling  Holder,  any  underwriter
participating in any distribution pursuant to such registration  statement,  and
any  attorney,  accountant  or other agent  retained by such  Selling  Holder or
underwriter,  all financial and other records, pertinent corporate documents and
properties  of the Company,  and cause the  Company's  officers,  directors  and
employees  to supply all  information  reasonably  requested by any such Selling
Holder,  underwriter,  attorney,  accountant  or agent in  connection  with such
registration statement.

            (d) Furnish to the Selling Holders such numbers of copies of a final
prospectus,  in conformity with the requirements of the Securities Act, and such
other  documents  as they may  reasonably  request  in order to  facilitate  the
disposition of Registrable Securities owned by them.

            (e) Use best efforts to register and qualify the securities  covered
by such registration statement under such other federal or state securities laws
of such  jurisdictions as shall be reasonably  requested by the Selling Holders;
provided,  however,  that  the  Company  shall  not be  required  in  connection
therewith  or as a  condition  thereto to qualify  to do  business  or to file a
general  consent to service  of  process  in any such  states or  jurisdictions,
unless the Company is already subject to service in such jurisdiction and except
as may be required by the Securities Act.

                                       16
<PAGE>

            (f) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting  agreement, in usual and customary
form,  with the managing  underwriter  of such  offering.  Each  Selling  Holder
participating  in such  underwriting  shall  also  enter  into and  perform  its
obligations under such an agreement.

            (g) Notify each Selling Holder of Registrable  Securities covered by
such registration  statement,  at any time when a prospectus relating thereto is
required to be delivered under the Securities Act within one (1) business day of
receipt, (i) when the registration statement or any post-effective amendment and
supplement thereto has become effective;  (ii) of the issuance by the SEC of any
stop order or the initiation of proceedings for that purpose (in which event the
Company shall make every effort to obtain the withdrawal of any order suspending
effectiveness  of the  registration  statement at the earliest  possible time or
prevent  the  entry  thereof);  (iii)  of  the  receipt  by the  Company  of any
notification  with  respect  to  the  suspension  of  the  qualification  of the
Registrable  Securities  for sale in any  jurisdiction  or the initiation of any
proceeding for such purpose;  and (iv) of the happening of any event as a result
of which the  prospectus  included in such  registration  statement,  as then in
effect,  includes  an untrue  statement  of a material  fact or omits to state a
material fact required to be stated  therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.

            (h) Cause all such Registrable Securities registered hereunder to be
listed  on each  securities  exchange  or  quotation  service  on which  similar
securities  issued by the  Company  are then  listed  or  quoted  or, if no such
similar  securities  are listed or quoted on a securities  exchange or quotation
service,   apply  for  qualification  and  use  best  efforts  to  qualify  such
Registrable  Securities for inclusion on the New York Stock  Exchange,  American
Stock Exchange or listing on a quotation  system of the National  Association of
Securities Dealers, Inc.

            (i)   Cooperate   with  the  Selling   Holders   and  the   managing
underwriters,  if any, to  facilitate  the timely  preparation  and  delivery of
certificates   representing  the  Registrable   Securities  to  be  sold,  which
certificates will not bear any restrictive  legends; and enable such Registrable
Securities  to be in such  denominations  and  registered  in such  names as the
managing  underwriters,  if any, shall request at least five business days prior
to any sale of the Registrable Securities to the underwriters.

            (j) In connection with an underwritten offering,  cause the officers
of the Company to provide reasonable assistance in the preparation of, any "road
show"  presentation  to  potential  investors as the  managing  underwriter  may
determine.

            (k) Comply with all applicable  rules and regulations of the SEC and
make generally  available to its security holders earning statements  satisfying
the  provisions of Section 11(a) of the  Securities  Act and Rule 158 thereunder
(or any similar  rule  promulgated  under the  Securities  Act) no later than 50
calendar  days after the end of any 3-month  period (or 105 calendar  days after
the end of any 12-month  period if such period is a fiscal year) (i)  commencing
at the end of any fiscal  quarter in which  Registrable  Securities  are sold to
underwriters in a firm  commitment or best efforts  underwritten  offering,  and
(ii) if not sold to  underwriters  in such an offering,  commencing on the first
day of the first fiscal  quarter of the Company,  after the effective  date of a
registration statement, which statements shall cover said period.

                                       17
<PAGE>

            (l) If the  offering  is  underwritten  and  at the  request  of any
Selling  Holder,  use its best  efforts to furnish on the date that  Registrable
Securities  are  delivered  to  the  underwriters  for  sale  pursuant  to  such
registration:  (i) opinions dated such date of counsel  representing the Company
for the purposes of such  registration,  addressed to the  underwriters  and the
transfer agent for the Registrable Securities so delivered, respectively, to the
effect  that  such  registration   statement  has  become  effective  under  the
Securities Act and such Registrable Securities are freely tradable, and covering
such other matters as are  customarily  covered in opinions of issuer's  counsel
delivered to underwriters  and transfer agents in underwritten  public offerings
and (ii) a letter dated such date from the  independent  public  accountants who
have  certified  the  financial  statements  of  the  Company  included  in  the
registration  statement  or  the  prospectus,   covering  such  matters  as  are
customarily  covered  in  accountants'  letters  delivered  to  underwriters  in
underwritten public offerings.

      5.5  Furnish  Information.  It  shall  be a  condition  precedent  to  the
obligation  of the Company to take any action  pursuant  to this  Article V with
respect to the  Registrable  Securities of any Selling  Holder that such Selling
Holder  shall  furnish to the Company  such  information  regarding  the Selling
Holder, the Registrable  Securities held by the Selling Holder, and the intended
method of disposition of such securities as shall be reasonably  required by the
Company  to  effect  the  registration  of  such  Selling  Holder's  Registrable
Securities.

      5.6 Registration Expenses. The Company shall bear and pay all Registration
Expenses incurred in connection with any  registration,  filing or qualification
of Registrable  Securities with respect to  registrations  pursuant to Section V
for each Selling Holder,  but excluding  underwriting  discounts and commissions
relating to Registrable  Securities and excluding any professional fees or costs
of accounting, financial or legal advisors to any of the Selling Holders.

      5.7 Underwriting  Requirements.  In connection with any offering involving
an underwriting of shares of the Company's  capital stock, the Company shall not
be  required  under  Section  5.3 to  include  any of the  Holders'  Registrable
Securities in such underwriting unless they accept the terms of the underwriting
as agreed upon  between the Company and the  underwriters  selected by it (or by
other persons entitled to select the  underwriters),  provided,  however,that if
the total amount of securities,  including Registrable Securities,  requested by
stockholders  to be included in such  offering  exceeds the amount of securities
that the underwriters  determine in their sole discretion is compatible with the
success of the  offering,  then the Company  shall be required to include in the
offering only that number of such securities,  including Registrable Securities,
which the  underwriters  determine in their sole  discretion will not jeopardize
the  success of the  offering,  provided,  however,  that any  reduction  in the
securities  to be  included  in  such  registration  statement  pursuant  to the
foregoing  shall be  apportioned  among  all of the  securities  proposed  to be
included  in  such  registration  statement,  including,  but  not  limited  to,
securities sold by the Company and Registrable Securities (based upon the number
of Registrable  Securities  requested to be registered by each such Holder) on a
pro  rata  basis.  For  purposes  of  the  preceding  parenthetical   concerning
apportionment,  for any  selling  stockholder  who is a  holder  of  Registrable
Securities and is a partnership or corporation,  the partners,  retired partners
and  stockholders of such holder,  or the estates and family members of any such
partners  and  retired  partners  and any trusts  for the  benefit of any of the
foregoing persons shall be deemed to be a single "selling  stockholder," and any
pro-rata  reduction  with respect to such "selling  stockholder"  shall be based
upon the aggregate  amount of shares carrying  registration  rights owned by all
entities and individuals  included in such "selling  stockholder," as defined in
this sentence.

                                       18
<PAGE>

      5.8 Delay of  Registration.  No Holder  shall  have any right to obtain or
seek an injunction  restraining or otherwise  delaying any such  registration as
the  result  of  any   controversy   that  might  arise  with   respect  to  the
interpretation or implementation of this Article.

      5.9  Indemnification.  In the event that any  Registrable  Securities  are
included in a registration statement under this Article V:

            (a) To the extent  permitted by law, the Company will  indemnify and
hold harmless each Holder,  any  underwriter  (as defined in the Securities Act)
for such Holder and each person, if any, who controls such Holder or underwriter
within the  meaning of the  Securities  Act or the  Exchange  Act,  against  any
losses,  claims,  damages,  or liabilities  (joint or several) to which they may
become  subject under the Securities  Act, or the Exchange Act,  insofar as such
losses,  claims,  damages,  or liabilities (or actions in respect thereof) arise
out  of or  are  based  upon  any  of the  following  statements,  omissions  or
violations (collectively a "Violation"):  (i) any untrue statement of a material
fact  contained  in  such  registration  statement,  including  any  preliminary
prospectus  or  final  prospectus   contained   therein  or  any  amendments  or
supplements thereto, (ii) the omission to state therein a material fact required
to  be  stated  therein,  or  necessary  to  make  the  statements  therein  not
misleading,  or (iii) any  violation by the Company of the  Securities  Act, the
Exchange Act, or any rule or regulation promulgated under the Securities Act, or
the Exchange Act, and the Company will pay to each such Holder,  underwriter  or
controlling person, as incurred, any legal or other expenses reasonably incurred
by them in connection  with  investigating  or defending  any such loss,  claim,
damage,  liability, or action;  provided,  however, that the indemnity agreement
contained in this Section  5.9(a) shall not apply to amounts paid in  settlement
of any such loss,  claim,  damage,  liability,  or action if such  settlement is
effected  without  the  consent  of the  Company  (which  consent  shall  not be
unreasonably withheld), nor shall the Company be liable in any such case for any
such loss, claim, damage,  liability, or action to the extent that it arises out
of or is based upon a Violation  which occurs in reliance upon and in conformity
with written  information  furnished  expressly for use in connection  with such
registration by any such Holder, underwriter or controlling person.

            (b) To the  extent  permitted  by  law,  each  Selling  Holder  will
indemnify  and hold  harmless the Company,  each of its  directors,  each of its
officers,  each person,  if any, who controls the Company  within the meaning of
the Securities Act, any underwriter, any other Holder selling securities in such
registration  statement and any  controlling  person of any such  underwriter or
other Holder,  against any losses,  claims,  damages,  or liabilities  (joint or
several) to which any of the  foregoing  persons may become  subject,  under the
Securities Act, or the Exchange Act, insofar as such losses, claims, damages, or
liabilities  (or actions in respect  thereto) 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 by such  Selling  Holder  expressly  for use in  connection  with such
registration;  and each such Selling Holder will pay, as incurred,  any legal or
other  expenses  reasonably  incurred by any person  intended to be  indemnified
pursuant to this Section 5.9(b),  in connection with  investigating or defending
any such loss, claim, damage, liability, or action; provided,  however, that any
Holder's  liability  pursuant to this Section 5.9 shall be limited to the amount
of the net  proceeds  received by such  Holder from the sale of the  Registrable
Securities  sold by it,  and  further  provided  that  the  indemnity  agreement
contained in this Section  5.9(b) shall not apply to amounts paid in  settlement
of any such loss,  claim,  damage,  liability  or action if such  settlement  is
effected  without  the  consent  of  the  Holder,  which  consent  shall  not be
unreasonably withheld.

                                       19
<PAGE>

            (c)  Promptly  after  receipt  by an  indemnified  party  under this
Section  5.9  of  notice  of  the  commencement  of any  action  (including  any
governmental  action),  such  indemnified  party  shall,  if a claim in  respect
thereof is to be made  against any  indemnifying  party under this  Section 5.9,
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 notified, to assume the defense thereof with counsel selected by
the  indemnifying  party and approved by the  indemnified  party (whose approval
shall not be  unreasonably  withheld);  provided,  however,  that an indemnified
party  (together  with all other  indemnified  parties which may be  represented
without  conflict by one  counsel)  shall have the right to retain one  separate
counsel,  with the fees and expenses to be paid by the  indemnifying  party,  if
representation  of  such  indemnified  party  by  the  counsel  retained  by the
indemnifying  party would be inappropriate due to actual or potential  differing
interests between such indemnified party and any other party represented by such
counsel  in such  proceeding.  The  failure  to  deliver  written  notice to the
indemnifying  party within a  reasonable  time of the  commencement  of any such
action, if prejudicial to its ability to defend such action,  shall relieve such
indemnifying  party of any liability to the indemnified party under this Section
5.9, but the omission so to deliver  written  notice to the  indemnifying  party
will not relieve it of any liability that it may have to any  indemnified  party
otherwise than under this Section 5.9.

            (d) If the indemnification  provided for in this Section 5.9 is held
by a court of competent  jurisdiction to be unavailable to an indemnified  party
with  respect to any loss,  liability,  claim,  damage,  or expense  referred to
therein,  then the indemnifying  party, in lieu of indemnifying such indemnified
party  hereunder,  shall  contribute  to the  amount  paid  or  payable  by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such  proportion  as is  appropriate  to reflect  the  relative  fault of the
indemnifying  party on the one hand and of the indemnified party on the other in
connection  with  the  statements  or  omissions  that  resulted  in such  loss,
liability,  claim,  damage,  or expense as well as any other relevant  equitable
considerations.  The  relative  fault  of  the  indemnifying  party  and  of the
indemnified  party shall be  determined  by reference  to,  among other  things,
whether the untrue or alleged untrue statement of a material fact or the alleged
omission  to state a  material  fact  relates  to  information  supplied  by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge,  access to  information,  and  opportunity to correct or prevent such
statement or omission.

                                       20
<PAGE>

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

            (f) The  obligations  of the Company and Holders  under this Section
5.9 shall survive the completion of the Offering.

      5.10 Reports Under Securities  Exchange Act of 1934. With a view to making
available  to the  Holders  the  benefits  of Rule  144 and  any  other  rule or
regulation of the SEC that may at any time permit a Holder to sell securities of
the Company to the public without  registration or pursuant to a registration on
Form S-3 (or other applicable form), the Company agrees to:

            (a) file with the SEC all  reports and other  documents  required of
the Company under the Securities Act and the Exchange Act; and

            (b)  furnish  to  any  Holder,  so  long  as  the  Holder  owns  any
Registrable  Securities,  forthwith  upon  request (i) a copy of the most recent
annual or quarterly  report of the Company and such other  reports and documents
so filed by the Company,  and (ii) such other  information  as may be reasonably
requested  in  availing  any Holder of any rule or  regulation  of the SEC which
permits the selling of any such securities  without  registration or pursuant to
such form.

      5.11  Permitted  Transferees.  The rights to cause the Company to register
Registrable  Securities granted to the Holders by the Company under this Article
V may be  assigned  in full by a Holder in  connection  with a transfer  by such
Holder of its  Registrable  Securities  if: (a) such Holder gives prior  written
notice to the Company;  (b) such transferee  agrees to comply with the terms and
provisions of this Agreement;  (c) such transfer is otherwise in compliance with
this Agreement;  and (d) such transfer is otherwise  effected in accordance with
applicable securities laws.

      5.12  Termination of Registration  Rights The obligation of the Company to
include a  Holder's  Registrable  Securities  in any  registration  pursuant  to
Section V shall  terminate if all shares of Registrable  Securities held by such
Holder can immediately be sold under Rule 144(k).

VI.   COVENANTS OF THE COMPANY

      6.1 Integration. The Company shall not, and shall ensure that no affiliate
of the Company shall, sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the  Securities
Act) that  would be  integrated  with the offer or sale of the  Securities  in a
manner that would require the registration  under the Securities Act of the sale
of the Securities to the Subscribers, or that would be integrated with the offer
or sale of the  Securities  for  purposes  of the rules and  regulations  of any
trading market in a manner that would require  stockholder  approval of the sale
of the securities to the Subscribers.

                                       21
<PAGE>

      6.2 Listing of Securities.  The Company agrees, (i) if the Company applies
to have the Common Stock traded on any other trading market,  it will include in
such application the Registrable Securities,  and will take such other action as
is necessary or desirable to cause the  Registrable  Securities  to be listed on
such other  trading  market as promptly as  possible,  and (ii) it will take all
action  reasonably  necessary  to continue the listing and trading of its Common
Stock on a trading  market and will  comply in all  material  respects  with the
Company's  reporting,  filing and other obligations under the bylaws or rules of
the trading market.

      6.3  Reservation of Shares.  The Company shall maintain a reserve from its
duly  authorized  shares  of  Common  Stock to comply  with its  conversion  and
exercise obligations under the Securities.  If on any date the Company would be,
if notice of conversion or exercise were to be delivered on such date, precluded
from issuing the number of shares of Common Stock,  as the case may be, issuable
upon  conversion  in full of the Series D  Preferred  Stock or  exercise  of the
Warrants (in each case,  without  regard to any  conversion  or exercise caps or
other limitation  thereunder),  due to the unavailability of a sufficient number
of authorized but unissued or reserved shares of Common Stock, then the Board of
Directors of the Company shall promptly  prepare and mail to the stockholders of
the  Company  proxy   materials  or  other   applicable   materials   requesting
authorization to amend the Company's Articles or other  organizational  document
to increase the number of shares of Common Stock which the Company is authorized
to issue so as to provide  enough  shares for  issuance  of the shares of Common
Stock  issuable  upon  conversion or exercise of the  Securities.  In connection
therewith, the Board of Directors shall (a) adopt proper resolutions authorizing
such  increase,  (b) recommend to and otherwise use its best efforts to promptly
and duly  obtain  stockholder  approval  (including  the hiring of a  nationally
recognized  proxy  solicitor  firm) to carry  out such  resolutions  (and hold a
special meeting of the stockholders as soon as practicable, but in any event not
later  than  the 60th  day  after  delivery  of the  proxy  or other  applicable
materials  relating  to such  meeting)  and (c)  within  five  business  days of
obtaining such stockholder  authorization,  file an appropriate amendment to the
Company's Articles or other organizational document to evidence such increase.

      6.4 Conversion  Procedures.  The form of Notice of Conversion  included in
the  Certificate of Designation of  Preferences,  Rights and  Limitations of the
Shares  (the  "Certificate  of  Designation")  sets  forth the  totality  of the
procedures  required by the  Subscribers  in order to convert  the  Shares.  The
Company  shall honor  conversions  of Shares and shall  deliver  Common Stock in
accordance  with the  terms,  conditions  and  time  periods  set  forth in this
Agreement and the Certificate of Designation.

      6.5  Rescission  and  Withdrawal  Right.  Notwithstanding  anything to the
contrary  contained in (and without  limiting  any similar  provisions  of) this
Agreement, whenever any Subscriber exercises a right, election, demand or option
under this  Agreement  and the  Company  does not  timely  perform  its  related
obligations  within the  periods  therein  provided,  then such  Subscriber  may
rescind  or  withdraw,  in its sole  discretion  from time to time upon  written
notice to the Company,  any relevant  notice,  demand or election in whole or in
part without prejudice to its future actions and rights.

      6.6 Replacement of Securities. If any certificate or instrument evidencing
any Securities is mutilated,  lost, stolen or destroyed, the Company shall issue
or cause to be issued in exchange  and  substitution  for and upon  cancellation
thereof,  or  in  lieu  of  and  substitution  therefor,  a new  certificate  or
instrument,  but only upon receipt of evidence  reasonably  satisfactory  to the
Company  of such  loss,  theft  or  destruction  and  customary  and  reasonable
indemnity,  if requested.  The  applicants  for a new  certificate or instrument
under  such  circumstances  shall  also  pay any  reasonable  third-party  costs
associated with the issuance of such  replacement  Securities.  If a replacement
certificate  or  instrument  evidencing  any  Securities  is requested  due to a
mutilation  thereof,   the  Company  may  require  delivery  of  such  mutilated
certificate  or  instrument  as a  condition  precedent  to  any  issuance  of a
replacement.

                                       22
<PAGE>

      6.7 Right of First Refusal.  Until the shares of Series D Preferred  Stock
are no longer outstanding,  except in connection with the issuance of securities
associated with (i) the issuance to employees  under the Company's  option plan;
(ii)  issued  for   consideration   other  than  cash   pursuant  to  a  merger,
consolidation,  acquisition,  or similar  business  combination  approved by the
Company's  Board of Directors;  (iii) issued  pursuant to any equipment  loan or
leasing arrangement,  real property leasing arrangement or debt financing from a
bank or similar  financial  institution  approved by the Board of Directors;  or
(iv) warrants  issued in  connection  with a secured  finance  loan.  ("Excepted
Issuances"),  the Holders of the Series D Preferred  Stock shall have a pro-rata
right to participate in subsequent  issuances by the Company of debt,  equity or
other securities (the "Right of First Refusal").  The Company shall give Holders
of Series D Preferred  Stock not less than ten (10)  business days prior written
notice  of any  proposed  sale by the  Company  of its  Common  Stock  or  other
securities or debt obligations.  The Holders of the Series D Preferred Stock who
exercise  their rights  pursuant to this Right of First  Refusal  shall have the
right  during  the ten (10)  business  days  following  receipt of the notice to
purchase such offered  equity,  debt or other  securities in accordance with the
terms and conditions  set forth in the notice of sale in the same  proportion to
each other as their  percentage of the Series D Preferred  Stock  outstanding at
that time. In the event such terms and conditions are modified during the notice
period,  the Company shall give Holders prompt notice of such  modification  and
shall have the right during the ten (10) business  days  following the notice of
modification  to exercise such right.  If a Holder elects to not  participate in
such financing,  then the remaining  holders shall have the right to participate
in that  holders  position on a pro rata  basis.  An election by a Holder not to
exercise its Right of First  Refusal with respect to a security  issuance  shall
not  effect  the  Holder's  Right of First  Refusal  with  respect  to any other
security issuance.

      6.8 Limited  Transactions.  The Company will not,  without the approval of
the Holders of the Series D Preferred Stock representing  two-thirds of the then
outstanding  Series D  Preferred  Stock:  (i) fail to maintain a majority of the
Board of Directors  as  independent  directors,  which such failure has not been
cured for a period of 30 days; (ii) obtain more than  $20,000,000 of Senior Debt
(defined below) unless the Company has achieved during any quarter subsequent to
the final  Closing,  EBITDA  (excluding  stock  compensation)  of  $1,500,000 as
reported in its SEC Reports;  (iii) default on debt in excess of $100,000  which
such default in not cured in 30 days of notice of such  default;  (iv) alter the
terms of the Series D Preferred  Stock;  (v) issue securities that are senior to
or pari passu with the rights and  preferences of the Series D Preferred  Stock;
(vi) pay dividends on the shares of Common Stock; (vii) repurchase its shares of
Common Stock; (viii) change the Company's business; (ix) incur or permit any new
liens on assets;  (x) merge or sell the  Company or its  assets;  (xi) amend the
Company's  Articles  or  Bylaws;  or  fail  to  obtain  the  effectiveness  of a
registration  statement  registering the Registrable  Securities within 240 days
from the final Closing.  In the event that any of the  aforementioned  occurred,
then  the  holders  of the then  outstanding  Series  D  Cumulative  Convertible
Preferred Stock shall  automatically  have the right to appoint directors to the
Board of  Directors  representing  a  majority  of the Board of  Directors.  For
purposes of this Section 6.8,  Senior Debt shall mean all secured lender debt of
the Company  other than payment in kind  interest  added to the  Company's  debt
outstanding  at the Closing and debt  issued to parties in  connection  with the
acquisition  of such  parties'  assets by the Company or merger of such  parties
business into the Company or a subsidiary of the Company.

                                       23
<PAGE>

      6.9  Issuance of  Additional  Convertible  Securities.  Until such time as
there are no shares of the Series D Preferred Stock outstanding,  and subject to
Section  6.8  above,  the  Company  shall not issue  any  additional  securities
convertible into Common Stock (including,  but not limited to, debt or shares of
preferred stock) in addition to the convertible  securities that are outstanding
as of the date hereof  without the written  consent of the  investors  holding a
majority of the then outstanding shares of Series D Preferred Stock.

      6.10  Other  Debt.  Until such time as there are no shares of the Series D
Preferred Stock outstanding, and subject to Section 6.8 above, the Company shall
not incur any additional debt other than debt outstanding as of the date hereof,
without  the prior  written  consent of the Holders of a majority in interest of
the Series D Preferred Stock then  outstanding  except debt issued to parties in
connection with the acquisition of such parties' assets by the Company or merger
of such parties business into the Company or a subsidiary of the Company.

      6.11 Most Favored Nations. During the period commencing on the date of the
Initial  Closing  date  through  the six (6) month  anniversary  of the  Initial
Closing date, except in connection with an Excepted Issuance,  in the event that
the Company  issues Common Stock or securities  convertible  into or exercisable
for  shares of Common  Stock to any party on terms  more  favorable  than  those
granted to the  Holders  of the Series D  Preferred  Stock,  including,  but not
limited to the granting of dividend  rights,  liquidation  preference  rights or
registration  rights,  the Company  will grant such rights to the Holders of the
Series D  Preferred  Stock and will enter  into any  amendments  to confer  such
rights.

      6.12 Access.  The Holders of the Series D Preferred  Stock will be granted
access to the Company  facilities and personnel  during normal working hours and
with reasonable  advance  written  notice.  Upon filing its quarterly and annual
reports with the Securities and Exchange  Commission,  the Company shall deliver
such reports to the holders of the Series D Preferred Stock.

      6.13 Key Man Life Insurance.  The Company shall obtain and maintain at all
times that any shares of Series D Preferred  Stock remain  outstanding,  key man
life insurance policies on the senior executives and key employees identified by
the Holders in such amounts as requested by the Holders.

      6.14  Dividends.  Until  such  time as there  are no  shares  of  Series D
Preferred Stock outstanding, the Company shall pay all dividends on the Series D
Preferred  Stock,  in cash or in Common Stock as  determined  by the Company and
shall pay any and all other dividends due and payable on any series of preferred
stock issued prior to the Series D Preferred  Stock having  preference  over the
Series D  Preferred  Stock so that any  payment  of  dividends  on the  Series D
Preferred  Stock  shall  not  violate  the  provisions  of any  other  series of
preferred stock outstanding as of the Closing.

                                       24
<PAGE>

      6.15 Indemnification.

            (a)  The  Company   agrees  to  indemnify   and  hold  harmless  the
Subscriber, its affiliates and their respective officers, directors,  employees,
agents and controlling persons  (collectively,  the "Indemnified  Parties") from
and  against , any and all loss,  liability,  damage or  deficiency  suffered or
incurred by any Indemnified Party by reason of any  misrepresentation  or breach
of warranty by the Company or  nonfulfillment of any covenant or agreement to be
performed or complied with by the Company under this Agreement,  the Transaction
Documents;  and will promptly reimburse the Indemnified Parties for all expenses
(including  reasonable  fees and  expenses  of legal  counsel)  as  incurred  in
connection with the investigation of,  preparation for or defense of any pending
or  threatened  claim  related  to or  arising  in any  manner out of any of the
foregoing,  or  any  action  or  proceeding  arising  therefrom   (collectively,
"Proceedings"),  whether or not such Indemnified  Party is a formal party to any
such Proceeding.

            (b) If for any reason  (other than a final  non-appealable  judgment
finding any Indemnified Party liable for losses, claims, damages, liabilities or
expenses for its gross negligence or willful misconduct) the foregoing indemnity
is unavailable to an Indemnified  Party or  insufficient  to hold an Indemnified
Party harmless,  then the Company shall contribute to the amount paid or payable
by an Indemnified  Party as a result of such loss, claim,  damage,  liability or
expense in such  proportion as is  appropriate  to reflect not only the relative
benefits  received  by the Company on the one hand and the Advisor on the other,
but also the relative fault by the Company and the Indemnified Party, as well as
any relevant equitable considerations.

VII.  MISCELLANEOUS

      7.1 Any  notice or other  communication  given  hereunder  shall be deemed
sufficient  if in writing  and sent by  registered  or  certified  mail,  return
receipt  requested,  or  delivered  by hand against  written  receipt  therefor,
addressed as follows:

      if to the Company, to it at:
      National Investment Managers Inc.
      420 Lexington Ave, Suite 2420
      New York, New York 10170
      Attn:  Leonard A. Neuhaus, CFO

      With a copy to (which shall not constitute notice):

      Sichenzia Ross Friedman Ference LLP
      1065 Avenue of the Americas
      New York, NY 10018
      Attn:  Gregory Sichenzia, Esq.

      if to the Subscriber, to the Subscriber's address indicated on the
      signature page of this Agreement.

                                       25
<PAGE>

Notices shall be deemed to have been given or delivered on the date of receipt.

      7.2 Except as  otherwise  provided  herein,  this  Agreement  shall not be
changed,  modified  or amended  except by a writing  signed by the parties to be
charged,  and this  Agreement may not be  discharged  except by  performance  in
accordance with its terms or by a writing signed by the party to be charged.

      7.3 Subject to the  provisions of Section 5.11,  this  Agreement  shall be
binding  upon and  inure  to the  benefit  of the  parties  hereto  and to their
respective heirs, legal representatives,  successors and assigns. This Agreement
sets forth the entire agreement and understanding  between the parties as to the
subject  matter  hereof  and  merges  and  supersedes  all  prior   discussions,
agreements and understandings of any and every nature among them.

      7.4 Upon the execution and delivery of this  Agreement by the  Subscriber,
this Agreement shall become a binding  obligation of the Subscriber with respect
to the purchase of Securities as herein provided, subject, however, to the right
hereby  reserved  by the  Company to enter into the same  agreements  with other
subscribers and to add and/or delete other persons as subscribers.

      7.5  NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY
OF THE  PARTIES  HERETO,  THE  PARTIES  EXPRESSLY  AGREE  THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK WITHOUT REGARD TO SUCH STATE'S  PRINCIPLES OF CONFLICTS
OF LAW. IN THE EVENT THAT A JUDICIAL PROCEEDING IS NECESSARY, THE SOLE FORUM FOR
RESOLVING  DISPUTES  ARISING OUT OF OR RELATING TO THIS  AGREEMENT IS THE COURTS
STATE OF NEW YORK IN AND FOR THE  COUNTY OF NEW YORK OR THE  FEDERAL  COURTS FOR
SUCH STATE AND COUNTY,  AND ALL RELATED  APPELLATE  COURTS,  THE PARTIES  HEREBY
IRREVOCABLY CONSENT TO THE JURISDICTION OF SUCH COURTS AND AGREE TO SAID VENUE.

      7.6 In order to discourage  frivolous claims the parties agree that unless
a  claimant  in  any  proceeding  arising  out of  this  Agreement  succeeds  in
establishing   his  claim  and  recovering  a  judgment  against  another  party
(regardless of whether such claimant  succeeds  against one of the other parties
to the  action),  then the other party  shall be  entitled to recover  from such
claimant all of its/their  reasonable legal costs and expenses  relating to such
proceeding and/or incurred in preparation therefor.

      7.7 The  holding  of any  provision  of this  Agreement  to be  invalid or
unenforceable  by a court of competent  jurisdiction  shall not affect any other
provision of this Agreement, which shall remain in full force and effect. If any
provision  of  this  Agreement  shall  be  declared  by  a  court  of  competent
jurisdiction  to be invalid,  illegal or incapable of being enforced in whole or
in part, such provision shall be interpreted so as to remain  enforceable to the
maximum  extent  permissible  consistent  with  applicable law and the remaining
conditions and provisions or portions thereof shall nevertheless  remain in full
force and  effect  and  enforceable  to the  extent  they are  valid,  legal and
enforceable, and no provisions shall be deemed dependent upon any other covenant
or provision unless so expressed herein.

                                       26
<PAGE>

      7.8 It is  agreed  that a  waiver  by  either  party  of a  breach  of any
provision of this Agreement shall not operate,  or be construed,  as a waiver of
any subsequent breach by that same party.

      7.9 The Company agrees to execute and deliver all such further  documents,
agreements  and  instruments  and take such other and  further  action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.

      7.10 This  Agreement may be executed in two or more  counterparts  each of
which shall be deemed an original,  but all of which shall  together  constitute
one and the same instrument.

      7.11  Nothing in this  Agreement  shall  create or be deemed to create any
rights in any  person or entity  not a party to this  Agreement,  except for the
holders of Registrable Securities.

      7.12  Remedies.  In  addition to being  entitled  to  exercise  all rights
provided herein or granted by law,  including  recovery of damages,  each of the
Subscribers and the Company will be entitled to specific  performance under this
Agreement.  The  parties  agree  that  monetary  damages  may  not  be  adequate
compensation  for any loss  incurred  by  reason of any  breach  of  obligations
described in the foregoing sentence and hereby agrees to waive in any action for
specific  performance  of any such  obligation  the defense that a remedy at law
would be adequate.

      7.13  Independent  Nature of  Subscribers'  Obligations  and  Rights.  The
obligations  of each  Subscriber  under this Agreement are several and not joint
with  the  obligations  of any  other  Subscriber,  and no  Subscriber  shall be
responsible  in any way for the  performance  of the  obligations  of any  other
Subscriber  under this  Agreement.  The decision of each  Subscriber to purchase
Securities  pursuant  to  this  Agreement  has  been  made  by  such  Subscriber
independently of any other Subscriber.  Nothing contained herein,  and no action
taken by any  Subscriber  pursuant  thereto,  shall be deemed to constitute  the
Subscribers as a partnership,  an association, a joint venture or any other kind
of entity, or create a presumption that the Subscribers are in any way acting in
concert  or as a group  with  respect to such  obligations  or the  transactions
contemplated  herein. Each Subscriber  acknowledges that no other Subscriber has
acted as agent for such  Subscriber  in  connection  with making its  investment
hereunder and that no Subscriber  will be acting as agent of such  Subscriber in
connection  with  monitoring  its  investment in the Securities or enforcing its
rights under this Agreement.  Each Subscriber shall be entitled to independently
protect and enforce its rights,  including without limitation the rights arising
out of this Agreement, and it shall not be necessary for any other Subscriber to
be joined as an additional party in any proceeding for such purpose. The Company
acknowledges  that  each of the  Subscribers  has been  provided  with this same
Agreement for the purpose of closing a transaction with multiple Subscribers and
not because it was required or requested to do so by any Subscriber.

                                       27
<PAGE>

      7.14  Subsequent  Registrations.  Other than pursuant to the  registration
statement  filed  in  connection  with  the  transactions  contemplated  by this
Agreement,  prior to the date  that  such  registration  statement  is  declared
effective by the SEC, the Company may not file any registration statement (other
than on Form S-8) with the SEC with respect to any securities of the Company.

VIII. CONFIDENTIAL INVESTOR QUESTIONNAIRE

      8.1 The Subscriber represents and warrants that he, she or it comes within
one category marked below, and that for any category  marked,  he, she or it has
truthfully  set  forth,  where  applicable,  the  factual  basis or  reason  the
Subscriber  comes  within that  category.  ALL  INFORMATION  IN RESPONSE TO THIS
SECTION WILL BE KEPT STRICTLY  CONFIDENTIAL.  The undersigned  agrees to furnish
any additional  information which the Company deems necessary in order to verify
the answers set forth below.

Category A___     The   undersigned   is  an  individual   (not  a  partnership,
                  corporation,  etc.) whose  individual net worth,  or joint net
                  worth with his or her spouse, presently exceeds $1,000,000.

                  Explanation.  In calculating  net worth you may include equity
                  in personal property and real estate, including your principal
                  residence, cash, short-term investments, stock and securities.
                  Equity in personal property and real estate should be based on
                  the fair market  value of such  property  less debt secured by
                  such property.

Category B___     The   undersigned   is  an  individual   (not  a  partnership,
                  corporation,  etc.) who had an income in excess of $200,000 in
                  each of the two most recent years, or joint income with his or
                  her spouse in excess of  $300,000  in each of those  years (in
                  each case including foreign income, tax exempt income and full
                  amount of capital gains and losses but excluding any income of
                  other family members and any unrealized capital  appreciation)
                  and has a reasonable  expectation  of reaching the same income
                  level in the current year.

Category C___     The  undersigned  is a director  or  executive  officer of the
                  Company which is issuing and selling the Securities.

Category D___     The  undersigned  is a bank;  a savings and loan  association;
                  insurance company;  registered investment company;  registered
                  business   development   company;   licensed   small  business
                  investment  company ("SBIC");  or employee benefit plan within
                  the  meaning  of  Title 1 of  ERISA  and  (a)  the  investment
                  decision is made by a plan  fiduciary  which is either a bank,
                  savings and loan association,  insurance company or registered
                  investment advisor, or (b) the plan has total assets in excess
                  of $5,000,000  or (c) is a self directed plan with  investment
                  decisions   made  solely  by  persons   that  are   accredited
                  investors. (describe entity)

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

                                       28
<PAGE>

Category E___     The undersigned is a private business  development  company as
                  defined in section  202(a)(22) of the Investment  Advisors Act
                  of 1940. (describe entity)

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

Category F___     The   undersigned  is  either  a   corporation,   partnership,
                  Massachusetts  business  trust,  or  non-profit   organization
                  within  the  meaning  of  Section  501(c)(3)  of the  Internal
                  Revenue Code, in each case not formed for the specific purpose
                  of acquiring the Securities and with total assets in excess of
                  $5,000,000. (describe entity)

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

Category G___     The  undersigned  is a trust  with  total  assets in excess of
                  $5,000,000,  not formed for the specific  purpose of acquiring
                  the   Securities,   where  the   purchase  is  directed  by  a
                  "sophisticated    investor"    as   defined   in    Regulation
                  506(b)(2)(ii) under the Act.

Category H___     The undersigned is an entity (other than a trust) in which all
                  of the equity owners are "accredited  investors" within one or
                  more of the above  categories.  If relying upon this  Category
                  alone, each equity owner must complete a separate copy of this
                  Agreement. (describe entity)

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

Category I___     The undersigned is not within any of the categories  above and
                  is therefore not an accredited investor.

                  The undersigned  agrees that the  undersigned  will notify the
                  Company  at any time on or prior to the  Closing  in the event
                  that the  representations  and  warranties  in this  Agreement
                  shall cease to be true, accurate and complete.

      8.2 SUITABILITY (please answer each question)

      (a) For an individual Subscriber, please describe your current employment,
including the company by which you are employed and its principal business:

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

                                       29
<PAGE>

      (b) For an individual Subscriber,  please describe any college or graduate
degrees held by you:

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

      (c) For all Subscribers, please list types of prior investments:

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

      (d) For all  Subscribers,  please state whether you have  participated  in
other private placements before:

                   YES_______                         NO_______

         (e) If your answer to  question  (d) above was "YES",  please  indicate
frequency of such prior participation in private placements of:

                                                     Public or Private Companies
               Public            Private             with no, or insignificant,
               Companies         Companies           assets and operations

Frequently
               ---------------   ------------------  ---------------------------
Occasionally
               ---------------   ------------------  ---------------------------
Never
               ---------------   ------------------  ---------------------------

      (f) For individual Subscribers, do you expect your current level of income
to significantly decrease in the foreseeable future:

                   YES_______                         NO_______

      (g) For trust, corporate, partnership and other institutional Subscribers,
do you expect your total  assets to  significantly  decrease in the  foreseeable
future:

                   YES_______                         NO_______

      (h) For all Subscribers,  do you have any other  investments or contingent
liabilities which you reasonably  anticipate could cause you to need sudden cash
requirements in excess of cash readily available to you:

                   YES_______                         NO_______

      (i) For all  Subscribers,  are you familiar  with the risk aspects and the
non-liquidity  of  investments  such as the  securities  for  which  you seek to
subscribe?

                   YES_______                         NO_______

                                       30
<PAGE>

      (j) For all  Subscribers,  do you understand that there is no guarantee of
financial  return on this  investment  and that you run the risk of losing  your
entire investment?

                   YES_______                         NO_______

8.3      MANNER IN WHICH TITLE IS TO BE HELD.  (circle one)
         -----------------------------------

                   (a)      Individual Ownership
                   (b)      CommSharey Property
                   (c)      Joint Tenant with Right of
                            Survivorship (both parties
                            must sign)
                   (d)      Partnership*
                   (e)      Tenants in Common
                   (f)      Company*
                   (g)      Trust*
                   (h)      Other*

            *If Securities are being  subscribed for by an entity,  the attached
Certificate of Signatory must also be completed.

      8.4 NASD AFFILIATION.

Are you affiliated or associated with an NASD member firm (please check one):

Yes _________              No __________

If Yes, please describe:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

*If Subscriber is a Registered Representative with an NASD member firm, have the
following acknowledgment signed by the appropriate party:

The undersigned NASD member firm acknowledges  receipt of the notice required by
Article 3, Sections 28(a) and (b) of the Rules of Fair Practice.

----------------------------------
Name of NASD Member Firm

By: ------------------------------
         Authorized Officer

Date:-----------------------------

      8.5 The undersigned is informed of the  significance to the Company of the
foregoing  representations  and answers  contained in the Confidential  Investor
Questionnaire  contained in this Article VII and such answers have been provided
under the assumption that the Company will rely on them.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       31
<PAGE>

NUMBER OF SHARES _________ X $10.00  = $_________ (the "Purchase Price")

---------------------------------            -----------------------------------
Signature                                    Signature (if purchasing jointly)

---------------------------------            -----------------------------------
Name Typed or Printed                        Name Typed or Printed

---------------------------------            -----------------------------------
Title (if Subscriber is an Entity)           Title (if Subscriber is an Entity)

---------------------------------            -----------------------------------
Entity Name (if applicable)                  Entity Name (if applicable

---------------------------------            -----------------------------------
Address                                      Address

---------------------------------            -----------------------------------
City, State and Zip Code                     City, State and Zip Code

---------------------------------            -----------------------------------
Telephone-Business                           Telephone-Business

---------------------------------            -----------------------------------
Telephone-Residence                          Telephone-Residence

---------------------------------            -----------------------------------
Facsimile-Business                           Facsimile-Business

---------------------------------            -----------------------------------
Facsimile-Residence                          Facsimile-Residence

Tax ID # or  Social  Security  # Tax ID # or  Social  Security  # Name in  which
securities should be issued:

Dated: ___________________, 2006

      This Subscription Agreement is agreed to and accepted as of _______, 2006.

                                   NATIONAL INVESTMENT MANAGERS INC.

                                   By:____________________________________
                                   Name:  Steven Ross
                                   Title:   Chief Executive Officer

                                       32
<PAGE>

                            CERTIFICATE OF SIGNATORY

                       (To be completed if Securities are
                       being subscribed for by an entity)

I,   ____________________________,   am  the   ____________________________   of
__________________________________________ (the "Entity").

I certify that I am empowered  and duly  authorized by the Entity to execute and
carry out the terms of the  Subscription  Agreement and to purchase and hold the
shares of Series D Preferred  Stock,  and certify further that the  Subscription
Agreement  has been  duly and  validly  executed  on behalf  of the  Entity  and
constitutes a legal and binding obligation of the Entity.

IN WITNESS WHEREOF, I have set my hand this ________ day of _____________, 200_

                                            ------------------------------------
                                            (Signature)

                                       33
<PAGE>

Schedule 2.2 - Capitalization

Outstanding                                                          20,711,837
Reserved for issuance under the Series A Preferred Shares             3,620,000
Reserved for issuance under the Series B Preferred Shares             7,630,000
Reserved for issuance under the Series C Preferred Shares            10,600,008
Reserved for issuance pursuant to options/warrants                    7,946,348

Schedule 2.10 - Brokers

Westminster Securities Corporation

Schedule 2.12 - Leased Premises

We lease our office  premises  from Cohen Tauber  Spievack & Wagner LLP in which
Arthur Emil, a partner, is a director of the Company

                                       34

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