Document:

Exhibit 4.3

                          REGISTRATION RIGHTS AGREEMENT

     This Registration  Rights Agreement (this  "Agreement") is made and entered
into as of January 11, 2006,  among  Electronic  Control  Security,  Inc., a New
Jersey  corporation (the "Company"),  and the purchasers  signatory hereto (each
such purchaser is a "Purchaser" and collectively, the "Purchasers").

     This Agreement is made pursuant to the Securities Purchase Agreement, dated
as of the date  hereof  among the  Company  and the  Purchasers  (the  "Purchase
Agreement").

     The Company and the Purchasers hereby agree as follows:

          1.   Definitions

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

               "Advice" shall have the meaning set forth in Section 6(d).

               "Effectiveness   Date"   means,   with  respect  to  the  initial
          Registration  Statement  required  to be filed  hereunder,  the  120th
          calendar  day  following  the date  hereof  and,  with  respect to any
          additional  Registration  Statements which may be required pursuant to
          Section  3(c),  the 90th  calendar day following the date on which the
          Company  first  knows,  or  reasonably  should have  known,  that such
          additional  Registration  Statement is required  hereunder;  provided,
          however,  in the event the Company is notified by the Commission  that
          one of the above Registration Statements will not be reviewed or is no
          longer subject to further review and comments,  the Effectiveness Date
          as to such  Registration  Statement  shall be the  fifth  Trading  Day
          following  the date on which the  Company is so  notified if such date
          precedes the dates required above.

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

               "Event" shall have the meaning set forth in Section 2(b).

               "Event Date" shall have the meaning set forth in Section 2(b).

               "Filing  Date" means,  with  respect to the initial  Registration
          Statement required hereunder, the 45th calendar day following the date
          hereof and,  with respect to any  additional  Registration  Statements
          which may be required pursuant to Section 3(c), the 30th day following
          the date on which the Company first knows,  or reasonably  should have
          known  that  such  additional   Registration   Statement  is  required
          hereunder.

               "Holder" or  "Holders"  means the holder or holders,  as the case
          may be, from time to time of Registrable Securities.

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

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

               "Losses" shall have the meaning set forth in Section 5(a).

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               "Plan of  Distribution"  shall  have  the  meaning  set  forth in
          Section 2(a).

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

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

               "Registrable  Securities"  means (i) all of the  shares of Common
          Stock  issuable upon  conversion in full of the  Debentures,  (ii) all
          shares issuable as interest on the Debentures assuming all permissible
          interest  payments  are  made  in  shares  of  Common  Stock  and  the
          Debentures are held until maturity, (iii) all Warrant Shares, (iv) any
          additional  shares  issuable  in  connection  with  any  anti-dilution
          provisions in the  Debentures  or the Warrants (in each case,  without
          giving  effect  to any  limitations  on  conversion  set  forth in the
          Debenture or limitations on exercise set forth in the Warrant) and (v)
          any  securities  issued or issuable upon any stock split,  dividend or
          other distribution,  recapitalization or similar event with respect to
          the foregoing.

               "Registration   Statement"  means  the  registration   statements
          required  to  be  filed  hereunder  and  any  additional  registration
          statements  contemplated by Section 3(c), including (in each case) the
          Prospectus,  amendments and supplements to such registration statement
          or  Prospectus,  including  pre- and  post-effective  amendments,  all
          exhibits thereto, and all material incorporated by reference or deemed
          to be incorporated by reference in such registration statement.

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

               "Rule 424" means Rule 424 promulgated by the Commission  pursuant
          to the Securities  Act, as such Rule may be amended from time to time,
          or any similar rule or regulation  hereafter adopted by the Commission
          having substantially the same purpose and effect as such Rule.

               "Selling  Shareholder  Questionnaire"  shall have the meaning set
          forth in Section 3(a).

          2.   Shelf Registration

               (a)  On or prior to each Filing Date,  the Company  shall prepare
          and file with the Commission a "Shelf" Registration Statement covering
          the resale of 125% of the  Registrable  Securities on such Filing Date
          for an offering to be made on a continuous basis pursuant to Rule 415.
          The  Registration  Statement  shall  be on Form  SB-2  (or on  another
          appropriate  form in accordance  herewith)  and shall contain  (unless
          otherwise  directed  by  the  Holders)   substantially  the  "Plan  of
          Distribution" attached hereto as Annex A. Subject to the terms of this
          Agreement,  the  Company  shall  use  its  best  efforts  to  cause  a
          Registration  Statement to be declared  effective under the Securities
          Act as promptly as possible after the filing thereof, but in any event
          prior  to  the  applicable  Effectiveness  Date,  and  shall  use  its
          commercially  reasonable  efforts to keep such Registration  Statement
          continuously  effective under the Securities Act until all Registrable
          Securities  covered by such  Registration  Statement have been sold or
          may be sold  without  volume  restrictions  pursuant to Rule 144(k) as
          determined by the counsel to the Company pursuant to a written opinion
          letter to such  effect,  addressed  and  acceptable  to the  Company's
          transfer agent and the affected Holders (the "Effectiveness  Period").
          The  Company  shall   telephonically   request   effectiveness   of  a

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          Registration  Statement  as of 5:00 pm Eastern  Time on a Trading Day.
          The Company shall immediately  notify the Holders via facsimile of the
          effectiveness of a Registration Statement on the same Trading Day that
          the Company telephonically confirms effectiveness with the Commission,
          which shall be the date requested for  effectiveness of a Registration
          Statement.  The Company shall,  by 9:30 am Eastern Time on the Trading
          Day after the Effective  Date (as defined in the Purchase  Agreement),
          file a Form 424(b)(5)  prospectus with the  Commission.  Failure to so
          notify the Holder within 1 Trading Day of such  notification  shall be
          deemed an Event under Section 2(b).

               (b)  If: (i) a Registration Statement is not filed on or prior to
          its Filing Date (if the Company files a Registration Statement without
          affording  the  Holders the  opportunity  to review and comment on the
          same as required by Section  3(a),  the Company shall not be deemed to
          have  satisfied  this clause (i)),  or (ii) the Company  fails to file
          with the Commission a request for acceleration in accordance with Rule
          461 promulgated  under the Securities Act, within five Trading Days of
          the date that the Company is notified (orally or in writing, whichever
          is earlier) by the Commission  that a Registration  Statement will not
          be "reviewed," or not subject to further review, or (iii) prior to its
          Effectiveness   Date,  the  Company  fails  to  file  a  pre-effective
          amendment  and  otherwise  respond in writing to comments  made by the
          Commission  in  respect  of  such  Registration  Statement  within  20
          calendar  days after the  receipt of  comments  by or notice  from the
          Commission that such amendment is required in order for a Registration
          Statement to be declared effective,  or (iv) a Registration  Statement
          filed or required to be filed  hereunder is not declared  effective by
          the   Commission  by  its   Effectiveness   Date,  or  (v)  after  the
          Effectiveness Date, a Registration  Statement ceases for any reason to
          remain  continuously  effective as to all  Registrable  Securities for
          which it is required to be effective, or the Holders are not permitted
          to  utilize  the  Prospectus   therein  to  resell  such   Registrable
          Securities  for 10  consecutive  Trading  Days  but no  more  than  an
          aggregate of 20 Trading Days during any  12-month  period  (which need
          not be  consecutive  Trading  Days) (any such  failure or breach being
          referred to as an "Event",  and for purposes of clause (i) or (iv) the
          date on which such Event  occurs,  or for  purposes of clause (ii) the
          date on which  such  five  Trading  Day  period  is  exceeded,  or for
          purposes of clause  (iii) the date which such 20 Trading Day period is
          exceeded,  or for  purposes of clause (v) the date on which such 10 or
          20 Trading Day period, as applicable, is exceeded being referred to as
          "Event  Date"),  then in addition to any other  rights the Holders may
          have hereunder or under  applicable  law, (A) on each such Event Date,
          the  Company  shall pay to each  Holder an amount in cash,  as partial
          liquidated  damages  and  not  as a  penalty,  equal  to  1.0%  of the
          aggregate  purchase price paid by such Holder pursuant to the Purchase
          Agreement for any Registrable  Securities then held by such Holder and
          (B) and on each monthly anniversary of each such Event Date thereafter
          (if the applicable Event shall not have been cured by such date) until
          the applicable Event is cured, the Company shall pay to each Holder an
          amount in cash,  as partial  liquidated  damages and not as a penalty,
          equal to 2.0% of the  aggregate  purchase  price  paid by such  Holder
          pursuant to the Purchase Agreement for any Registrable Securities then
          held  by  such  Holder.  If  the  Company  fails  to pay  any  partial
          liquidated  damages pursuant to this Section in full within seven days
          after the date  payable,  the Company will pay  interest  thereon at a
          rate of 18% per annum (or such lesser maximum amount that is permitted
          to be paid by applicable  law) to the Holder,  accruing daily from the
          date such partial liquidated damages are due until such amounts,  plus
          all such interest  thereon,  are paid in full. The partial  liquidated
          damages  pursuant to the terms hereof shall apply on a daily  pro-rata
          basis for any portion of a month prior to the cure of an Event.

          3.   Registration Procedures.

          In connection with the Company's  registration  obligations hereunder,
the Company shall:

               (a)  Not less than four  Trading Days prior to the filing of each
          Registration Statement or any related Prospectus or any amendment or

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          supplement  thereto (including any document that would be incorporated
          or deemed to be incorporated therein by reference), the Company shall,
          (i) furnish to each Holder copies of all such documents proposed to be
          filed,  which documents (other than those incorporated or deemed to be
          incorporated  by  reference)  will be  subject  to the  review of such
          Holders,  and (ii)  cause its  officers  and  directors,  counsel  and
          independent  certified public accountants to respond to such inquiries
          as shall be necessary, in the reasonable opinion of respective counsel
          to  conduct a  reasonable  investigation  within  the  meaning  of the
          Securities Act. The Company shall not file a Registration Statement or
          any such Prospectus or any amendments or supplements  thereto to which
          the  Holders  of  a  majority  of  the  Registrable  Securities  shall
          reasonably  object  in good  faith,  provided  that,  the  Company  is
          notified  of such  objection  in writing no later than 5 Trading  Days
          after the Holders  have been so  furnished  copies of such  documents.
          Each Holder agrees to furnish to the Company a completed Questionnaire
          in the  form  attached  to  this  Agreement  as  Annex  B (a  "Selling
          Shareholder  Questionnaire") not less than three Trading Days prior to
          the Filing Date or by the end of the fourth  Trading Day following the
          date on which such Holder  receives draft materials in accordance with
          this Section.

               (b)  (i) Prepare and file with the  Commission  such  amendments,
          including post-effective  amendments,  to a Registration Statement and
          the  Prospectus  used in  connection  therewith as may be necessary to
          keep  a  Registration  Statement  continuously  effective  as  to  the
          applicable  Registrable  Securities for the  Effectiveness  Period and
          prepare  and file with the  Commission  such  additional  Registration
          Statements  in order to register for resale under the  Securities  Act
          all of the Registrable  Securities;  (ii) cause the related Prospectus
          to be amended or  supplemented by any required  Prospectus  supplement
          (subject to the terms of this  Agreement),  and as so  supplemented or
          amended to be filed pursuant to Rule 424; (iii) respond as promptly as
          reasonably  possible to any comments received from the Commission with
          respect to a  Registration  Statement or any amendment  thereto and as
          promptly as reasonably  possible provide the Holders true and complete
          copies of all correspondence  from and to the Commission relating to a
          Registration Statement;  provided, however, that if, in the opinion of
          counsel to the Company,  the  provision of such  correspondence  shall
          result in the  provision of material  non-public  information  to such
          Holders and a breach of Section 4.8 of the  Purchase  Agreement,  such
          Holders  shall  first  have  executed  a written  agreement  regarding
          confidentiality  and use of such  information;  and (iv) comply in all
          material  respects with the  provisions of the  Securities Act and the
          Exchange  Act  with  respect  to the  disposition  of all  Registrable
          Securities  covered by a Registration  Statement during the applicable
          period in accordance (subject to the terms of this Agreement) with the
          intended  methods of disposition  by the Holders  thereof set forth in
          such Registration  Statement as so amended or in such Prospectus as so
          supplemented.

               (c)  If  during   the   Effectiveness   Period,   the  number  of
          Registrable Securities at any time exceeds 90% of the number of shares
          of Common Stock then registered in a Registration Statement,  then the
          Company shall file as soon as reasonably  practicable  but in any case
          prior  to the  applicable  Filing  Date,  an  additional  Registration
          Statement  covering the resale by the Holders of not less than 125% of
          the number of such Registrable Securities.

               (d)  Notify the  Holders  of  Registrable  Securities  to be sold
          (which notice shall,  pursuant to clauses (ii) through (vi) hereof, be
          accompanied  by an  instruction  to suspend the use of the  Prospectus
          until the requisite  changes have been made) as promptly as reasonably
          possible (and, in the case of (i)(A) below, not less than four Trading
          Days  prior to such  filing)  and (if  requested  by any such  Person)
          confirm such notice in writing no later than one Trading Day following
          the day (i)(A)  when a  Prospectus  or any  Prospectus  supplement  or
          post-effective amendment to a Registration Statement is proposed to be
          filed; (B) when the Commission notifies the Company whether there will
          be  a  "review"  of  such  Registration  Statement  and  whenever  the
          Commission  comments in writing on such  Registration  Statement  (the
          Company shall provide true and complete copies thereof and all written
          responses  thereto to each of the Holders);  and (C) with respect to a
          Registration Statement or any post-effective  amendment, when the same
          has become  effective;  (ii) of any request by the  Commission  or any
          other  Federal  or state  governmental  authority  for  amendments  or
          supplements  to  a   Registration   Statement  or  Prospectus  or  for
          additional information; (iii) of the issuance by the Commission or any
          other  federal  or state  governmental  authority  of any  stop  order
          suspending the effectiveness of a Registration  Statement covering any
          or  all  of  the  Registrable  Securities  or  the  initiation  of any
          Proceedings  for that  purpose;  (iv) of the receipt by the Company of

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          any notification  with respect to the suspension of the  qualification
          or exemption from  qualification of any of the Registrable  Securities
          for sale in any jurisdiction,  or the initiation or threatening of any
          Proceeding  for such  purpose;  (v) of the  occurrence of any event or
          passage  of time that makes the  financial  statements  included  in a
          Registration   Statement  ineligible  for  inclusion  therein  or  any
          statement  made  in a  Registration  Statement  or  Prospectus  or any
          document   incorporated  or  deemed  to  be  incorporated  therein  by
          reference  untrue  in  any  material  respect  or  that  requires  any
          revisions to a Registration  Statement,  Prospectus or other documents
          so that, in the case of a Registration Statement or the Prospectus, as
          the case  may be,  it will  not  contain  any  untrue  statement  of a
          material fact or omit to state any material fact required to be stated
          therein or necessary to make the statements  therein,  in light of the
          circumstances under which they were made, not misleading; and (vi) the
          occurrence  or existence  of any pending  corporate  development  with
          respect to the Company  that the Company  believes may be material and
          that, in the  determination  of the Company,  makes it not in the best
          interest  of  the  Company  to  allow  continued   availability  of  a
          Registration  Statement or  Prospectus;  provided  that any and all of
          such information  shall remain  confidential to each Holder until such
          information otherwise becomes public, unless disclosure by a Holder is
          required by law;  provided,  further,  notwithstanding  each  Holder's
          agreement to keep such information  confidential,  the Holders make no
          acknowledgement  that any such  information  is  material,  non-public
          information.

               (e)  Use  its  commercially   reasonable  efforts  to  avoid  the
          issuance  of, or, if issued,  obtain the  withdrawal  of (i) any order
          suspending the effectiveness of a Registration  Statement, or (ii) any
          suspension of the qualification  (or exemption from  qualification) of
          any of the Registrable Securities for sale in any jurisdiction, at the
          earliest practicable moment.

               (f)  Furnish  to  each  Holder,  without  charge,  at  least  one
          conformed copy of each such Registration  Statement and each amendment
          thereto,  including financial statements and schedules,  all documents
          incorporated or deemed to be incorporated  therein by reference to the
          extent  requested  by such  Person,  and all  exhibits  to the  extent
          requested  by such Person  (including  those  previously  furnished or
          incorporated by reference) promptly after the filing of such documents
          with the Commission.

               (g)  Promptly  deliver to each Holder,  without  charge,  as many
          copies  of the  Prospectus  or  Prospectuses  (including  each form of
          prospectus)  and each amendment or supplement  thereto as such Persons
          may  reasonably  request in  connection  with resales by the Holder of
          Registrable  Securities.  Subject to the terms of this Agreement,  the
          Company  hereby  consents  to the  use of  such  Prospectus  and  each
          amendment  or  supplement  thereto by each of the  selling  Holders in
          connection  with the offering and sale of the  Registrable  Securities
          covered by such  Prospectus  and any amendment or supplement  thereto,
          except after the giving on any notice pursuant to Section 3(d).

               (h)  If NASDR  Rule 2710  requires  any  broker-dealer  to make a
          filing  prior to executing a sale by a Holder,  the Company  shall (i)
          make an  Issuer  Filing  with  the  NASDR,  Inc.  Corporate  Financing
          Department  pursuant to proposed  NASDR Rule  2710(b)(10)(A)(i),  (ii)
          respond  within five Trading Days to any comments  received from NASDR
          in  connection  therewith,  and (iii) pay the filing fee  required  in
          connection therewith.

               (i)  Prior to any resale of  Registrable  Securities by a Holder,
          use its  commercially  reasonable  efforts to  register  or qualify or
          cooperate with the selling Holders in connection with the registration
          or qualification (or exemption from the Registration or qualification)
          of such Registrable  Securities for the resale by the Holder under the
          securities  or Blue Sky laws of such  jurisdictions  within the United

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          States as any Holder  reasonably  requests  in  writing,  to keep each
          registration  or  qualification  (or  exemption  therefrom)  effective
          during  the  Effectiveness  Period and to do any and all other acts or
          things  reasonably   necessary  to  enable  the  disposition  in  such
          jurisdictions   of  the   Registrable   Securities   covered  by  each
          Registration  Statement;  provided,  that  the  Company  shall  not be
          required to qualify generally to do business in any jurisdiction where
          it is not then so  qualified,  subject the Company to any material tax
          in any such  jurisdiction  where it is not then so  subject  or file a
          general consent to service of process in any such jurisdiction.

               (j)  If requested by the Holders,  cooperate  with the Holders to
          facilitate  the  timely   preparation  and  delivery  of  certificates
          representing  Registrable  Securities  to be delivered to a transferee
          pursuant to a  Registration  Statement,  which  certificates  shall be
          free,  to the  extent  permitted  by the  Purchase  Agreement,  of all
          restrictive legends,  and to enable such Registrable  Securities to be
          in such denominations and registered in such names as any such Holders
          may request.

               (k)  Upon  the  occurrence  of any  event  contemplated  by  this
          Section 3, as promptly as reasonably  possible under the circumstances
          taking into account the Company's good faith assessment of any adverse
          consequences  to the Company  and its  stockholders  of the  premature
          disclosure of such event, prepare a supplement or amendment, including
          a  post-effective   amendment,   to  a  Registration  Statement  or  a
          supplement to the related  Prospectus or any document  incorporated or
          deemed to be  incorporated  therein by  reference,  and file any other
          required  document  so  that,  as  thereafter  delivered,   neither  a
          Registration  Statement  nor such  Prospectus  will  contain an untrue
          statement of a material fact or omit to state a material fact required
          to be stated therein or necessary to make the statements  therein,  in
          light of the circumstances under which they were made, not misleading.
          If the Company  notifies the Holders in  accordance  with clauses (ii)
          through  (vi)  of  Section  3(d)  above  to  suspend  the  use  of any
          Prospectus  until the requisite  changes to such  Prospectus have been
          made,  then the  Holders  shall  suspend use of such  Prospectus.  The
          Company will use its  commercially  reasonable  efforts to ensure that
          the  use  of  the   Prospectus  may  be  resumed  as  promptly  as  is
          practicable. The Company shall be entitled to exercise its right under
          this  Section  3(k) to  suspend  the  availability  of a  Registration
          Statement and Prospectus, subject to the payment of partial liquidated
          damages  pursuant to Section 2(b),  for a period not to exceed 60 days
          (which need not be consecutive days) in any 12 month period.

               (l)  Comply  with all  applicable  rules and  regulations  of the
          Commission.

               (m)  The Company may require  each  selling  Holder to furnish to
          the Company a certified statement as to the number of shares of Common
          Stock  beneficially  owned by such  Holder  and,  if  required  by the
          Commission, the person thereof that has voting and dispositive control
          over the Shares. During any periods that the Company is unable to meet
          its  obligations  hereunder  with respect to the  registration  of the
          Registrable Securities solely because any Holder fails to furnish such
          information  within three Trading Days of the Company's  request,  any
          liquidated  damages  that are  accruing at such time as to such Holder
          only  shall be tolled and any Event that may  otherwise  occur  solely
          because of such delay shall be suspended as to such Holder only, until
          such information is delivered to the Company.

     4. Registration Expenses. All fees and expenses incident to the performance
of or  compliance  with  this  Agreement  by the  Company  shall be borne by the
Company  whether  or not any  Registrable  Securities  are  sold  pursuant  to a
Registration  Statement.  The fees and  expenses  referred  to in the  foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including,  without  limitation,  fees and expenses (A) with respect to filings
required  to be made with the Trading  Market on which the Common  Stock is then
listed for trading,  (B) in compliance with applicable  state securities or Blue
Sky laws  reasonably  agreed to by the  Company in writing  (including,  without
limitation, fees and disbursements of counsel for the Company in connection with
Blue  Sky  qualifications  or  exemptions  of  the  Registrable  Securities  and

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determination  of the eligibility of the  Registrable  Securities for investment
under the laws of such jurisdictions as requested by the Holders) and (C) if not
previously paid by the Company in connection with an Issuer Filing, with respect
to any filing  that may be  required  to be made by any broker  through  which a
Holder intends to make sales of  Registrable  Securities  with NASD  Regulation,
Inc.  pursuant to the NASD Rule 2710, so long as the broker is receiving no more
than a  customary  brokerage  commission  in  connection  with such  sale,  (ii)
printing  expenses   (including,   without  limitation,   expenses  of  printing
certificates  for  Registrable  Securities and of printing  prospectuses  if the
printing of prospectuses is reasonably requested by the holders of a majority of
the  Registrable  Securities  included  in  a  Registration  Statement),   (iii)
messenger,  telephone  and delivery  expenses,  (iv) fees and  disbursements  of
counsel for the Company, (v) Securities Act liability insurance,  if the Company
so desires  such  insurance,  and (vi) fees and  expenses  of all other  Persons
retained by the Company in connection with the  consummation of the transactions
contemplated  by this Agreement.  In addition,  the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (including,  without limitation,
all salaries and expenses of its  officers  and  employees  performing  legal or
accounting  duties),  the expense of any annual  audit and the fees and expenses
incurred in  connection  with the listing of the  Registrable  Securities on any
securities  exchange  as  required  hereunder.  In no event shall the Company be
responsible  for any  broker or  similar  commissions  or,  except to the extent
provided for in the Transaction Documents,  any legal fees or other costs of the
Holders.

          5. Indemnification

               (a)  Indemnification   by  the   Company.   The  Company   shall,
          notwithstanding any termination of this Agreement,  indemnify and hold
          harmless each Holder,  the  officers,  directors,  members,  partners,
          agents,  brokers  (including  brokers  who offer and sell  Registrable
          Securities  as  principal  as a result of a pledge or any  failure  to
          perform under a margin call of Common Stock),  investment advisors and
          employees (and any other Persons with a functionally  equivalent  role
          of a Person holding such titles,  notwithstanding a lack of such title
          or any other title) of each of them, each Person who controls any such
          Holder  (within  the  meaning of Section 15 of the  Securities  Act or
          Section 20 of the Exchange Act) and the officers,  directors, members,
          partners,   agents  and  employees  (and  any  other  Persons  with  a
          functionally   equivalent  role  of  a  Person  holding  such  titles,
          notwithstanding  a lack of such title or any other title) of each such
          controlling Person, to the fullest extent permitted by applicable law,
          from and  against any and all losses,  claims,  damages,  liabilities,
          costs (including, without limitation,  reasonable attorneys' fees) and
          expenses  (collectively,  "Losses"),  as  incurred,  arising out of or
          relating to (1) any untrue or alleged  untrue  statement of a material
          fact contained in a Registration Statement, any Prospectus or any form
          of  prospectus  or in any  amendment or  supplement  thereto or in any
          preliminary prospectus,  or arising out of or relating to any omission
          or alleged  omission of a material fact required to be stated  therein
          or  necessary  to make  the  statements  therein  (in the  case of any
          Prospectus or form of prospectus  or supplement  thereto,  in light of
          the  circumstances  under which they were made) not  misleading or (2)
          any  violation or alleged  violation by the Company of the  Securities
          Act,  the  Exchange  Act or any state  securities  law, or any rule or
          regulation  thereunder,  in  connection  with the  performance  of its
          obligations  under this Agreement,  except to the extent,  but only to
          the extent,  that (i) such untrue  statements  or omissions  are based
          solely upon information  regarding such Holder furnished in writing to
          the Company by such Holder expressly for use therein, or to the extent
          that such information relates to such Holder or such Holder's proposed
          method of distribution of Registrable  Securities and was reviewed and
          expressly  approved in writing by such Holder  expressly  for use in a
          Registration Statement,  such Prospectus or such form of Prospectus or
          in any amendment or supplement  thereto (it being  understood that the
          Holder has  approved  Annex A hereto for this  purpose) or (ii) in the
          case of an  occurrence  of an event of the type  specified  in Section
          3(d)(ii)-(vi),  the use by such  Holder of an  outdated  or  defective
          Prospectus  after the Company has notified such Holder in writing that
          the  Prospectus  is outdated or defective  and prior to the receipt by
          such Holder of the Advice  contemplated  in Section 6(d).  The Company
          shall  notify  the  Holders  promptly  of the  institution,  threat or
          assertion of any  Proceeding  arising from or in  connection  with the
          transactions  contemplated  by this  Agreement of which the Company is
          aware.

<PAGE>

               (b)  Indemnification by Holders. Each Holder shall, severally and
          not jointly,  indemnify and hold harmless the Company,  its directors,
          officers,  agents and employees,  each Person who controls the Company
          (within the meaning of Section 15 of the Securities Act and Section 20
          of the Exchange Act), and the directors, officers, agents or employees
          of such  controlling  Persons,  to the  fullest  extent  permitted  by
          applicable  law,  from and  against all Losses,  as  incurred,  to the
          extent arising out of or based solely upon: (x) such Holder's  failure
          to comply with the prospectus delivery  requirements of the Securities
          Act or (y) any untrue or alleged  untrue  statement of a material fact
          contained in any Registration Statement,  any Prospectus,  or any form
          of  prospectus,  or in any amendment or  supplement  thereto or in any
          preliminary prospectus,  or arising out of or relating to any omission
          or alleged  omission of a material fact required to be stated  therein
          or necessary to make the statements  therein not misleading (i) to the
          extent, but only to the extent, that such untrue statement or omission
          is contained in any information so furnished in writing by such Holder
          to  the  Company  specifically  for  inclusion  in  such  Registration
          Statement or such Prospectus (it being  understood that the Holder has
          approved for this purpose the Plan of Distribution  attached hereto in
          connection  with the initial  Registration  Statement)  or (ii) to the
          extent that (1) such untrue  statements  or omissions are based solely
          upon  information  regarding  such Holder  furnished in writing to the
          Company by such Holder  expressly  for use  therein,  or to the extent
          that such information relates to such Holder or such Holder's proposed
          method of distribution of Registrable  Securities and was reviewed and
          expressly  approved in writing by such Holder  expressly  for use in a
          Registration  Statement  (it  being  understood  that the  Holder  has
          approved  Annex A hereto for this  purpose),  such  Prospectus or such
          form of Prospectus or in any amendment or supplement thereto or (2) in
          the case of an occurrence of an event of the type specified in Section
          3(d)(ii)-(vi),  the use by such  Holder of an  outdated  or  defective
          Prospectus  after the Company has notified such Holder in writing that
          the  Prospectus  is outdated or defective  and prior to the receipt by
          such Holder of the Advice  contemplated  in Section  6(d). In no event
          shall the  liability  of any selling  Holder  hereunder  be greater in
          amount  than the dollar  amount of the net  proceeds  received by such
          Holder upon the sale of the Registrable Securities giving rise to such
          indemnification obligation.

               (c)  Conduct of  Indemnification  Proceedings.  If any Proceeding
          shall be brought or asserted  against any Person entitled to indemnity
          hereunder  (an  "Indemnified  Party"),  such  Indemnified  Party shall
          promptly  notify  the  Person  from  whom  indemnity  is  sought  (the
          "Indemnifying  Party") in writing,  and the  Indemnifying  Party shall
          have the right to assume the defense thereof, including the employment
          of counsel  reasonably  satisfactory to the Indemnified  Party and the
          payment of all fees and expenses  incurred in connection  with defense
          thereof;  provided,  that the failure of any Indemnified Party to give
          such  notice  shall  not  relieve  the   Indemnifying   Party  of  its
          obligations or  liabilities  pursuant to this  Agreement,  except (and
          only) to the extent that it shall be finally  determined by a court of
          competent  jurisdiction (which  determination is not subject to appeal
          or  further  review)  that such  failure  shall  have  prejudiced  the
          Indemnifying Party.

               An  Indemnified  Party  shall  have the right to employ  separate
          counsel  in any such  Proceeding  and to  participate  in the  defense
          thereof,  but the fees and  expenses of such  counsel  shall be at the
          expense  of  such  Indemnified  Party  or  Parties  unless:   (1)  the
          Indemnifying  Party  has  agreed  in  writing  to pay  such  fees  and
          expenses;  (2) the  Indemnifying  Party shall have failed  promptly to
          assume the defense of such Proceeding and to employ counsel reasonably
          satisfactory to such Indemnified Party in any such Proceeding;  or (3)
          the named  parties to any such  Proceeding  (including  any  impleaded
          parties)  include  both such  Indemnified  Party and the  Indemnifying
          Party, and such Indemnified Party shall reasonably believe, based upon
          the reasonable  opinion of separate counsel,  that a material conflict
          of interest is likely to exist if the same  counsel  were to represent
          such Indemnified  Party and the Indemnifying  Party (in which case, if
          such Indemnified Party notifies the Indemnifying Party in writing that
          it  elects  to  employ   separate   counsel  at  the  expense  of  the
          Indemnifying Party, the Indemnifying Party shall not have the right to
          assume the defense thereof and the reasonable fees and expenses of one
          separate counsel shall be at the expense of the  Indemnifying  Party).

<PAGE>

          The  Indemnifying  Party shall not be liable for any settlement of any
          such Proceeding  effected without its written  consent,  which consent
          shall not be  unreasonably  withheld.  No  Indemnifying  Party  shall,
          without the prior written consent of the Indemnified Party, effect any
          settlement  of  any  pending   Proceeding  in  respect  of  which  any
          Indemnified  Party is a party,  unless  such  settlement  includes  an
          unconditional  release of such Indemnified Party from all liability on
          claims that are the subject matter of such Proceeding.

               Subject to the terms of this  Agreement,  all reasonable fees and
          expenses  of the  Indemnified  Party  (including  reasonable  fees and
          expenses to the extent  incurred in connection with  investigating  or
          preparing to defend such Proceeding in a manner not inconsistent  with
          this Section)  shall be paid to the  Indemnified  Party,  as incurred,
          within ten Trading Days of written notice thereof to the  Indemnifying
          Party;  provided,  that the Indemnified Party shall promptly reimburse
          the  Indemnifying  Party for that  portion  of such fees and  expenses
          applicable  to such  actions for which such  Indemnified  Party is not
          entitled  to  indemnification  hereunder,  determined  based  upon the
          relative faults of the parties.

               (d)  Contribution.  If the indemnification  under Section 5(a) or
          5(b) is unavailable to an Indemnified Party or insufficient to hold an
          Indemnified  Party  harmless  for any Losses,  then each  Indemnifying
          Party  shall  contribute  to  the  amount  paid  or  payable  by  such
          Indemnified Party, in such proportion as is appropriate to reflect the
          relative  fault of the  Indemnifying  Party and  Indemnified  Party in
          connection with the actions,  statements or omissions that resulted in
          such Losses as well as any other  relevant  equitable  considerations.
          The relative fault of such  Indemnifying  Party and Indemnified  Party
          shall be determined  by reference to, among other things,  whether any
          action in question,  including any untrue or alleged untrue  statement
          of a material fact or omission or alleged omission of a material fact,
          has been taken or made by, or relates to information supplied by, such
          Indemnifying  Party or Indemnified  Party,  and the parties'  relative
          intent, knowledge, access to information and opportunity to correct or
          prevent such action, statement or omission. The amount paid or payable
          by a party as a result  of any  Losses  shall be  deemed  to  include,
          subject to the limitations set forth in this Agreement, any reasonable
          attorneys' or other reasonable fees or expenses incurred by such party
          in connection  with any Proceeding to the extent such party would have
          been  indemnified  for such fees or  expenses  if the  indemnification
          provided for in this Section was available to such party in accordance
          with its terms.

               The parties  hereto agree that it would not be just and equitable
          if  contribution  pursuant to this Section 5(d) were determined by pro
          rata  allocation  or by any other method of  allocation  that does not
          take into  account  the  equitable  considerations  referred to in the
          immediately  preceding  paragraph.  Notwithstanding  the provisions of
          this Section 5(d), no Holder shall be required to  contribute,  in the
          aggregate,  any amount in excess of the  amount by which the  proceeds
          actually  received  by such  Holder  from the sale of the  Registrable
          Securities subject to the Proceeding exceeds the amount of any damages
          that such Holder has otherwise  been required to pay by reason of such
          untrue or alleged  untrue  statement or omission or alleged  omission,
          except in the case of fraud by such Holder.

               The  indemnity  and  contribution  agreements  contained  in this
          Section are in addition to any liability that the Indemnifying Parties
          may have to the Indemnified Parties.

          6. Miscellaneous

               (a)  Remedies.  In the event of a breach by the  Company  or by a
          Holder, of any of their obligations under this Agreement,  each Holder
          or the Company,  as the case may be, in addition to being  entitled to
          exercise all rights granted by law and under this Agreement, including
          recovery of damages,  will be entitled to specific  performance of its
          rights  under this  Agreement.  The Company and each Holder agree that
          monetary  damages  would not  provide  adequate  compensation  for any
          losses  incurred by reason of a breach by it of any of the  provisions
          of this  Agreement and hereby further agrees that, in the event of any
          action for specific  performance  in respect of such breach,  it shall
          waive the defense that a remedy at law would be adequate.

<PAGE>

               (b)  No  Piggyback  on  Registrations.  Except  as set  forth  on
          Schedule  6(b)  attached  hereto,  neither  the Company nor any of its
          security  holders  (other than the Holders in such  capacity  pursuant
          hereto)  may  include   securities  of  the  Company  in  the  initial
          Registration  Statement  other  than the  Registrable  Securities.  No
          Person has any right to cause the  Company to effect the  registration
          under the Securities Act of any securities of the Company. The Company
          shall not file any other  registration  statements  until the  initial
          Registration Statement required hereunder is declared effective by the
          Commission,  provided  that this  Section  6(b) shall not prohibit the
          Company  from  filing   amendments  or  supplements  to   registration
          statements already filed.

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

               (d)  Discontinued   Disposition.   Each  Holder   agrees  by  its
          acquisition of such  Registrable  Securities  that,  upon receipt of a
          notice  from the  Company of the  occurrence  of any event of the kind
          described  in Section  3(d),  such Holder will  forthwith  discontinue
          disposition  of  such  Registrable  Securities  under  a  Registration
          Statement   until  such   Holder's   receipt  of  the  copies  of  the
          supplemented  Prospectus  and/or amended  Registration  Statement,  or
          until it is advised in writing (the  "Advice") by the Company that the
          use of the applicable  Prospectus may be resumed, and, in either case,
          has received copies of any additional or supplemental filings that are
          incorporated  or  deemed  to be  incorporated  by  reference  in  such
          Prospectus or  Registration  Statement.  The Company will use its best
          efforts  to ensure  that the use of the  Prospectus  may be resumed as
          promptly as it is  practicable.  The Company  agrees and  acknowledges
          that any periods  during  which the Holder is required to  discontinue
          the  disposition  of the  Registrable  Securities  hereunder  shall be
          subject to the provisions of Section 2(b).

               (e)  Piggy-Back   Registrations.   If  at  any  time  during  the
          Effectiveness Period there is not an effective  Registration Statement
          covering  all of the  Registrable  Securities  and the  Company  shall
          determine  to  prepare  and file with the  Commission  a  registration
          statement  relating to an offering  for its own account or the account
          of others under the  Securities  Act of any of its equity  securities,
          other  than on Form S-4 or Form S-8  (each as  promulgated  under  the
          Securities  Act)  or  their  then   equivalents   relating  to  equity
          securities to be issued solely in connection  with any  acquisition of
          any entity or business  or equity  securities  issuable in  connection
          with the  stock  option  or other  employee  benefit  plans,  then the
          Company   shall  send  to  each  Holder  a  written   notice  of  such
          determination  and, if within ten days after the date of such  notice,
          any such Holder shall so request in writing, the Company shall include
          in such  registration  statement  all or any part of such  Registrable
          Securities such Holder requests to be registered;  provided,  however,
          that,  the Company  shall not be required to register any  Registrable
          Securities  pursuant to this Section 6(e) that are eligible for resale
          pursuant to Rule 144(k)  promulgated  under the Securities Act or that
          are the  subject of a then  effective  Registration  Statement  or are
          subject to customary underwriter cutbacks applicable to all Holders of
          Registrable Securities.

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

               (g)  Notices.  Any and all  notices  or other  communications  or
          deliveries  required or  permitted to be provided  hereunder  shall be
          delivered as set forth in the Purchase Agreement.

<PAGE>

               (h)  Successors and Assigns.  This  Agreement  shall inure to the
          benefit of and be binding upon the successors and permitted assigns of
          each of the parties and shall inure to the benefit of each Holder. The
          Company may not assign its rights or obligations hereunder without the
          prior  written  consent of all of the Holders of the  then-outstanding
          Registrable Securities. Each Holder may assign their respective rights
          hereunder  in the manner and to the  Persons  as  permitted  under the
          Purchase Agreement.

               (i)  No Inconsistent  Agreements.  Neither the Company nor any of
          its  subsidiaries  has entered,  as of the date hereof,  nor shall the
          Company  or any of its  subsidiaries,  on or  after  the  date of this
          Agreement,  enter into any agreement  with respect to its  securities,
          that  would  have the effect of  impairing  the rights  granted to the
          Holders in this  Agreement or otherwise  conflicts with the provisions
          hereof.  Except as set forth on Schedule 6(i), neither the Company nor
          any of its  subsidiaries  has  previously  entered into any  agreement
          granting any registration rights with respect to any of its securities
          to any Person that have not been satisfied in full.

               (j)  Execution and  Counterparts.  This Agreement may be executed
          in any number of counterparts, each of which when so executed shall be
          deemed  to be an  original  and,  all of which  taken  together  shall
          constitute one and the same Agreement. In the event that any signature
          is delivered by facsimile transmission,  such signature shall create a
          valid binding  obligation  of the party  executing (or on whose behalf
          such signature is executed) the same with the same force and effect as
          if such facsimile signature were the original thereof.

               (k)  Governing Law. All questions  concerning  the  construction,
          validity,  enforcement and  interpretation  of this Agreement shall be
          determined with the provisions of the Purchase Agreement.

               (l)  Cumulative  Remedies.   The  remedies  provided  herein  are
          cumulative and not exclusive of any remedies provided by law.

               (m)  Severability.   If  any   term,   provision,   covenant   or
          restriction  of  this  Agreement  is  held  by a  court  of  competent
          jurisdiction  to be  invalid,  illegal,  void  or  unenforceable,  the
          remainder of the terms,  provisions,  covenants and  restrictions  set
          forth herein shall remain in full force and effect and shall in no way
          be affected, impaired or invalidated, and the parties hereto shall use
          their   commercially   reasonable   efforts  to  find  and  employ  an
          alternative means to achieve the same or substantially the same result
          as that contemplated by such term, provision, covenant or restriction.
          It is  hereby  stipulated  and  declared  to be the  intention  of the
          parties that they would have executed the remaining terms, provisions,
          covenants and restrictions  without  including any of such that may be
          hereafter declared invalid, illegal, void or unenforceable.

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

               (o)  Independent  Nature of Holders'  Obligations and Rights. The
          obligations  of each Holder  hereunder  are several and not joint with
          the obligations of any other Holder hereunder,  and no Holder shall be
          responsible in any way for the  performance of the  obligations of any
          other  Holder  hereunder.  Nothing  contained  herein  or in any other
          agreement or document delivered at any closing, and no action taken by
          any Holder pursuant  hereto or thereto,  shall be deemed to constitute
          the Holders as a partnership,  an association,  a joint venture or any
          other kind of entity,  or create a presumption that the Holders are in
          any way acting in concert  with  respect  to such  obligations  or the
          transactions  contemplated  by this  Agreement.  Each Holder  shall be
          entitled  to  protect  and  enforce  its  rights,   including  without
          limitation the rights arising out of this Agreement,  and it shall not
          be necessary for any other Holder to be joined as an additional  party
          in any proceeding for such purpose.

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

<PAGE>

                                             ELECTRONIC CONTROL SECURITY, INC.

                                             By: /s/ Arthur Barchenko
                                                 -------------------------------
                                                 Name: Arthur Barchenko
                                                 Title: President

                       [SIGNATURE PAGE OF HOLDERS FOLLOWS]

<PAGE>

                     [SIGNATURE PAGE OF HOLDERS TO EKCS RRA]

Name of Holder:
               -------------------------------
Signature of Authorized Signatory of Holder:
                                            -------------------------------
Name of Authorized Signatory:
                             -------------------------------
Title of Authorized Signatory:
                              -------------------------------

                           [SIGNATURE PAGES CONTINUE]Exhibit 10.1

                          SECURITIES PURCHASE AGREEMENT

     This  Securities  Purchase  Agreement  (this  "Agreement")  is  dated as of
January  11,  2006  among  Electronic  Control  Security,  Inc.,  a  New  Jersey
corporation  (the  "Company"),  and each  purchaser  identified on the signature
pages hereto (each,  including its  successors  and assigns,  a "Purchaser"  and
collectively the "Purchasers").

     WHEREAS,  subject to the terms and  conditions  set forth in this Agreement
and  pursuant to Section  4(2) of the  Securities  Act of 1933,  as amended (the
"Securities Act"), and Rule 506 promulgated  thereunder,  the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase  from the Company,  securities  of the Company as more fully
described in this Agreement.

     NOW, THEREFORE,  IN CONSIDERATION of the mutual covenants contained in this
Agreement,  and for  other  good and  valuable  consideration  the  receipt  and
adequacy of which are hereby acknowledged,  the Company and each Purchaser agree
as follows:

                                    ARTICLE I
                                   DEFINITIONS

     1.1  Definitions.  In  addition  to the  terms  defined  elsewhere  in this
Agreement:  (a) capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Debentures (as defined herein),  and (b) the
following terms have the meanings  indicated in this Section 1.1:

          "Action"  shall  have the  meaning  ascribed  to such term in  Section
     3.1(j).

          "Affiliate" means any Person that,  directly or indirectly through one
     or more  intermediaries,  controls or is  controlled  by or is under common
     control with a Person,  as such terms are used in and construed  under Rule
     144 under the Securities  Act. With respect to a Purchaser,  any investment
     fund or managed  account  that is managed on a  discretionary  basis by the
     same investment manager as such Purchaser will be deemed to be an Affiliate
     of such Purchaser.

          "Closing" means the closing of the purchase and sale of the Securities
     pursuant to Section 2.1.

          "Closing  Date"  means  the  Trading  Day when all of the  Transaction
     Documents  have been  executed  and  delivered  by the  applicable  parties
     thereto, and all conditions precedent to (i) the Purchasers' obligations to
     pay the Subscription  Amount and (ii) the Company's  obligations to deliver
     the Securities have been satisfied or waived.

          "Commission" means the Securities and Exchange Commission.

          "Common Stock" means the common stock of the Company, par value $0.001
     per share, and any other class of securities into which such securities may
     hereafter have been reclassified or changed into.

          "Common Stock  Equivalents" means any securities of the Company or the
     Subsidiaries  which would entitle the holder thereof to acquire at any time
     Common Stock,  including,  without limitation,  any debt,  preferred stock,
     rights,  options,  warrants  or  other  instrument  that  is  at  any  time
     convertible into or exercisable or exchangeable for, or otherwise  entitles
     the holder thereof to receive, Common Stock.

          "Company Counsel" means Greenberg Traurig, LLP.

<PAGE>

          "Conversion Price" shall have the meaning ascribed to such term in the
     Debentures.

          "Debentures"  means,  the Senior Secured  Convertible  Debentures due,
     subject to the terms  therein,  three  years  from their date of  issuance,
     issued by the Company to the Purchasers  hereunder,  in the form of Exhibit
     A.

          "Disclosure Schedules" shall have the meaning ascribed to such term in
     Section 3.1.

          "Effective  Date"  means  the  date  that  the  initial   Registration
     Statement  filed  by  the  Company  pursuant  to  the  Registration  Rights
     Agreement is first declared effective by the Commission.

          "Evaluation  Date"  shall have the  meaning  ascribed  to such term in
     Section 3.1(r).

          "Exchange Act" means the Securities  Exchange Act of 1934, as amended,
     and the rules and regulations promulgated thereunder.

          "Exempt  Issuance"  means the issuance of (a) up to 1,500,000  shares,
     subject  to  adjustment  for  reverse  and  forward  stock  splits,   stock
     dividends,  stock combinations and other similar transactions of the Common
     Stock  that  occur  after the date of this  Agreement,  of Common  Stock or
     options to employees,  officers or directors of the Company pursuant to any
     stock or option plan duly adopted by a majority of the members of the Board
     of  Directors of the Company or a majority of the members of a committee of
     directors established for such purpose which shares have an effective price
     per share  upon  issuance  of at least  110% of the  average of the 5 VWAPs
     immediately  prior to the date of issuance of the Common  Stock or options,
     as the case may be, (b)  securities  upon the  exercise  or  exchange of or
     conversion of any Securities issued hereunder and/or securities exercisable
     or exchangeable  for or convertible  into shares of Common Stock issued and
     outstanding on the date of this Agreement (including shares of Common Stock
     issued as  payment  of  dividends  on the  Company's  outstanding  Series B
     Convertible  Preferred Stock),  provided that such securities have not been
     amended  since the date of this  Agreement  to increase  the number of such
     securities or to decrease the exercise, exchange or conversion price of any
     such  securities  and (c) securities  issued  pursuant to  acquisitions  or
     strategic transactions or in lieu of cash payments for services provided by
     public or investor  relations firms (provided that such issuances to public
     or investor relations firms shall not exceed 100,000 shares in any 12 month
     period)  approved by a majority of  directors,  provided any such  issuance
     pursuant  to  acquisitions  or  strategic  transactions  shall only be to a
     Person which is, itself or through its  subsidiaries,  an operating company
     in a business synergistic with the business of the Company and in which the
     Company receives benefits in addition to the investment of funds, but shall
     not  include a  transaction  in which the  Company  is  issuing  securities
     primarily for the purpose of raising  capital or to an entity whose primary
     business is investing in securities.

          "FW" means Feldman Weinstein LLP with offices located at 420 Lexington
     Avenue, Suite 2620, New York, New York 10170-0002.

          "GAAP" shall have the meaning ascribed to such term in Section 3.1(h).

          "Intellectual Property Rights" shall have the meaning ascribed to such
     term in Section 3.1(o).

          "Legend Removal Date" shall have the meaning  ascribed to such term in
     Section 4.1(c).

          "Liens" means a lien, charge, security interest, encumbrance, right of
     first refusal, preemptive right or other restriction.

<PAGE>

          "Material Adverse Effect" shall have the meaning assigned to such term
     in Section 3.1(b).

          "Material  Permits"  shall have the  meaning  ascribed to such term in
     Section 3.1(m).

          "Maximum Rate" shall have the meaning ascribed to such term in Section
     5.17.

          "Participation  Maximum" shall have the meaning  ascribed to such term
     in Section 4.13.

          "Person"  means an  individual  or  corporation,  partnership,  trust,
     incorporated  or  unincorporated   association,   joint  venture,   limited
     liability  company,  joint  stock  company,  government  (or an  agency  or
     subdivision thereof) or other entity of any kind.

          "Pre-Notice"  shall have the meaning  ascribed to such term in Section
     4.13.

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

          "Purchaser  Party"  shall have the  meaning  ascribed  to such term in
     Section 4.11.

          "Registration   Rights   Agreement"  means  the  Registration   Rights
     Agreement,  dated the date hereof, among the Company and the Purchasers, in
     the form of Exhibit B attached hereto.

          "Registration  Statement" means a registration  statement  meeting the
     requirements  set forth in the  Registration  Rights Agreement and covering
     the resale of the  Underlying  Shares by each  Purchaser as provided for in
     the Registration Rights Agreement.

          "Required  Approvals"  shall have the meaning ascribed to such term in
     Section 3.1(e).

          "Required Minimum" means, as of any date, the maximum aggregate number
     of shares of Common Stock then issued or potentially issuable in the future
     pursuant to the  Transaction  Documents,  including any  Underlying  Shares
     issuable upon exercise or conversion in full of all Warrants and Debentures
     (including Underlying Shares issuable as payment of interest), ignoring any
     conversion  or exercise  limits set forth  therein,  and assuming  that the
     Conversion Price is at all times on and after the date of determination 75%
     of the then Conversion  Price on the Trading Day  immediately  prior to the
     date of determination.

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

          "SEC Reports" shall have the meaning  ascribed to such term in Section
     3.1(h).

          "Securities"  means the Debentures,  the Warrants,  the Warrant Shares
     and the Underlying Shares.

          "Securities Act" means the Securities Act of 1933, as amended.

          Security  Agreement"  means  the  Security  Agreement,  dated the date
     hereof,  among the  Company  and the  Purchasers,  in the form of Exhibit E
     attached hereto.

          "Security Documents" shall mean the Security Agreement, the Subsidiary
     Guarantees and any other documents and filings required thereunder in order
     to grant the Purchasers a first priority security interest in the assets of
     the Company as  provided in the  Security  Agreement,  including  all UCC-1
     filing financing statements.

<PAGE>

          "Short  Sales" shall  include all "short sales" as defined in Rule 200
     of  Regulation  SHO  under  the  Exchange  Act (but  shall not be deemed to
     include the location  and/or  reservation  of  borrowable  shares of Common
     Stock).

          "Subscription  Amount"  means,  as to each  Purchaser,  the  aggregate
     amount  to be paid for  Debentures  and  Warrants  purchased  hereunder  as
     specified  below  such  Purchaser's  name  on the  signature  page  of this
     Agreement and next to the heading  "Subscription  Amount", in United States
     Dollars and in immediately available funds.

          "Subsequent Financing" shall have the meaning ascribed to such term in
     Section 4.13.

          "Subsequent  Financing Notice" shall have the meaning ascribed to such
     term in Section 4.13.

          "Subsidiary"  means  any  subsidiary  of the  Company  as set forth on
     Schedule 3.1(a).

          "Subsidiary Guarantee" means the Subsidiary Guarantee,  dated the date
     hereof,  among each of the Subsidiaries and the Purchasers,  in the form of
     Exhibit F attached hereto.

          "Trading  Day"  means a day on which  the  Common  Stock is  traded or
     quoted on a Trading Market.

          "Trading Market" means the following markets or exchanges on which the
     Common Stock is listed or quoted for trading on the date in  question:  the
     NASD OTC Bulletin  Board,  the Nasdaq  Capital  Market,  the American Stock
     Exchange, the New York Stock Exchange or the Nasdaq National Market.

          "Transaction  Documents"  means this Agreement,  the  Debentures,  the
     Security Agreement, the Subsidiary Guarantee, all other Security Documents,
     the Warrants,  the Registration Rights Agreement and any other documents or
     agreements  executed  in  connection  with  the  transactions  contemplated
     hereunder.

          "Underlying  Shares"  means  the  shares of Common  Stock  issued  and
     issuable  upon  conversion  of the  Debentures  and  upon  exercise  of the
     Warrants and issued and issuable in lieu of the cash payment of interest on
     the Debentures in accordance with the terms of the Debentures.

          "VWAP" means,  for any date, the price  determined by the first of the
     following  clauses that applies:  (a) if the Common Stock is then listed or
     quoted on a Trading Market,  the daily volume weighted average price of the
     Common Stock for such date (or the nearest  preceding  date) on the Trading
     Market on which the Common  Stock is then  listed or quoted as  reported by
     Bloomberg  Financial  L.P.  (based on a Trading Day from 9:30 a.m.  Eastern
     Time to 4:02 p.m. Eastern Time); (b) if the Common Stock is not then listed
     or quoted on a Trading  Market and if prices for the Common  Stock are then
     quoted on the OTC Bulletin Board,  the volume weighted average price of the
     Common  Stock  for such  date (or the  nearest  preceding  date) on the OTC
     Bulletin Board; (c) if the Common Stock is not then listed or quoted on the
     OTC Bulletin  Board and if prices for the Common Stock are then reported in
     the  "Pink  Sheets"  published  by  the  Pink  Sheets,  LLC  (or a  similar
     organization  or agency  succeeding to its functions of reporting  prices),
     the most recent bid price per share of the Common Stock so reported; or (c)
     in all other  cases,  the fair market  value of a share of Common  Stock as
     determined by an independent,  nationally-recognized  appraiser selected in
     good faith by the Purchasers and reasonably acceptable to the Company.

<PAGE>

          "Warrants" means collectively the Common Stock purchase  warrants,  in
     the form of  Exhibit  C  delivered  to the  Purchasers  at the  Closing  in
     accordance with Section 2.2(a) hereof,  which Warrants shall be exercisable
     immediately and have a term of exercise equal to three years.

          "Warrant  Shares"  means  the  shares of Common  Stock  issuable  upon
     exercise of the Warrants.

                                   ARTICLE II.
                                PURCHASE AND SALE

     2.1  Closing.  On the  Closing  Date,  upon the  terms and  subject  to the
conditions set forth herein,  concurrent with the execution and delivery of this
Agreement by the parties hereto,  the Company agrees to sell, and each Purchaser
agrees to purchase in the aggregate, severally and not jointly, up to $1,000,000
principal amount of the Debentures.  Each Purchaser shall deliver to the Company
via wire  transfer or a certified  check  immediately  available  funds equal to
their Subscription  Amount and the Company shall deliver to each Purchaser their
respective  Debenture and Warrants as determined  pursuant to Section 2.2(a) and
the  other  items  set  forth in  Section  2.2  issuable  at the  Closing.  Upon
satisfaction  of the  conditions  set forth in Sections 2.2 and 2.3, the Closing
shall  occur at the offices of FW, or such other  location as the parties  shall
mutually agree.

     2.2  Deliveries.

          (a)  On the Closing  Date,  the Company  shall  deliver or cause to be
     delivered to each Purchaser the following:

               (i)  this Agreement duly executed by the Company;

               (ii) a legal opinion of Company Counsel, in the form of Exhibit D
          attached hereto;

               (iii) a  Debenture   with  a  principal   amount  equal  to  such
          Purchaser's  Subscription  Amount,  registered  in the  name  of  such
          Purchaser;

               (iv) a  Warrant  registered  in the  name  of such  Purchaser  to
          purchase up to a number of shares of Common Stock equal to 50% of such
          Purchaser's  Subscription Amount divided by the Conversion Price, with
          an  exercise  price  equal to $2.00 per share,  subject to  adjustment
          therein;

               (v)  the Security Agreement duly executed by the Company and each
          Subsidiary,  as well as all other Security Documents, duly executed by
          the parties thereto;

               (vi) the Subsidiary  Guarantee duly executed by each  Subsidiary;
          and

               (vii) the  Registration  Rights  Agreement  duly  executed by the
          Company.

          (b)  On the Closing Date,  each Purchaser shall deliver or cause to be
     delivered to the Company the following:

               (i)  this Agreement duly executed by such Purchaser;

               (ii) such Purchaser's Subscription Amount by wire transfer to the
          account as specified in writing by the Company;

               (iii) the Security Agreement duly executed by such Purchaser; and

               (iv) the  Registration  Rights  Agreement  duly  executed by such
          Purchaser.

<PAGE>

     2.3  Closing Conditions.

          (a)  The  obligations of the Company  hereunder in connection with the
     Closing are subject to the following conditions being met:

               (i)  the accuracy in all material  respects  when made and on the
          Closing Date of the  representations  and warranties of the Purchasers
          contained herein;

               (ii) all obligations,  covenants and agreements of the Purchasers
          required to be  performed  at or prior to the Closing  Date shall have
          been performed; and

               (iii) the  delivery by the  Purchasers  of the items set forth in
          Section 2.2(b) of this Agreement.

          (b)  The  respective   obligations  of  the  Purchasers  hereunder  in
     connection with the Closing are subject to the following  conditions  being
     met:

               (i)  the accuracy in all material respects on the Closing Date of
          the representations and warranties of the Company contained herein;

               (ii) all  obligations,  covenants  and  agreements of the Company
          required to be  performed  at or prior to the Closing  Date shall have
          been performed;

               (iii) the  delivery  by the  Company  of the  items  set forth in
          Section 2.2(a) of this Agreement;

               (iv) as of the  Closing  Date,  there shall have been no Material
          Adverse Effect with respect to the Company since the date hereof; and

               (v)  from the date  hereof to the  Closing  Date,  trading in the
          Common Stock shall not have been suspended by the  Commission  (except
          for any  suspension  of trading of limited  duration  agreed to by the
          Company,  which  suspension shall be terminated prior to the Closing),
          and,  at any time prior to the  Closing  Date,  trading in  securities
          generally as reported by Bloomberg  Financial  Markets  shall not have
          been  suspended  or  limited,  or minimum  prices  shall not have been
          established  on securities  whose trades are reported by such service,
          or on any Trading  Market,  nor shall a banking  moratorium  have been
          declared either by the United States or New York State authorities nor
          shall there have  occurred  any  material  outbreak or  escalation  of
          hostilities  or  other  national  or  international  calamity  of such
          magnitude  in its effect on, or any  material  adverse  change in, any
          financial  market which,  in each case, in the reasonable  judgment of
          each Purchaser,  makes it impracticable or inadvisable to purchase the
          Debentures at the Closing.

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

     3.1  Representations  and  Warranties  of the Company.  Except as set forth
under the  corresponding  section of the disclosure  schedules  delivered to the
Purchasers  concurrently herewith (the "Disclosure  Schedules") which Disclosure
Schedules  shall  be  deemed  a  part  hereof,  the  Company  hereby  makes  the
representations and warranties set forth below to each Purchaser.

          (a)  Subsidiaries.  All of the direct and indirect subsidiaries of the
     Company are set forth on Schedule  3.1(a).  Except as stated  therein,  the
     Company  owns,  directly or  indirectly,  all of the capital stock or other
     equity  interests of each Subsidiary  free and clear of any 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 to subscribe for or purchase securities.  If the Company
     has no  subsidiaries,  then references in the Transaction  Documents to the
     Subsidiaries will be disregarded.

<PAGE>

          (b)  Organization  and  Qualification.  The  Company  and  each of the
     Subsidiaries is an entity duly incorporated or otherwise organized, validly
     existing and in good  standing  under the laws of the  jurisdiction  of its
     incorporation or organization (as applicable), with the requisite corporate
     power and authority to own and use its  properties  and assets and to carry
     on its  business  as  currently  conducted.  Neither  the  Company  nor any
     Subsidiary  is in  violation  of any of the  provisions  of its  respective
     certificate or articles of incorporation, bylaws or other organizational or
     charter  documents.  Each  of the  Company  and  the  Subsidiaries  is duly
     qualified  to  conduct  business  and  is in  good  standing  as a  foreign
     corporation or other entity 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, could not have or  reasonably  be expected to result in
     (i) a material adverse effect on the legality,  validity or  enforceability
     of any Transaction Document,  (ii) a material adverse effect on the results
     of operations,  assets,  business or financial condition of the Company and
     the  Subsidiaries,  taken as a whole, or (iii) a material adverse effect on
     the Company's  ability to perform in any material respect on a timely basis
     its obligations under any Transaction  Document (any of (i), (ii) or (iii),
     a "Material  Adverse  Effect") and no Proceeding has been instituted in any
     such  jurisdiction  revoking,  limiting or curtailing or seeking to revoke,
     limit or curtail such power and authority or qualification.

          (c)  Authorization;   Enforcement.   The  Company  has  the  requisite
     corporate  power  and  authority  to  enter  into  and  to  consummate  the
     transactions   contemplated  by  each  of  the  Transaction  Documents  and
     otherwise  to carry  out its  obligations  hereunder  and  thereunder.  The
     execution and delivery of each of the Transaction  Documents by the Company
     and the  consummation by it of the transactions  contemplated  thereby have
     been duly authorized by all necessary action on the part of the Company and
     no further action is required by the Company, its board of directors or its
     stockholders  in connection  therewith  other than in  connection  with the
     Required  Approvals.  Each Transaction  Document has been (or upon delivery
     will have been)  duly  executed  by the  Company  and,  when  delivered  in
     accordance with the terms hereof and thereof, will constitute the valid and
     binding  obligation  of the  Company  enforceable  against  the  Company in
     accordance  with its terms except (i) as limited by applicable  bankruptcy,
     insolvency,   reorganization,   moratorium   and  other   laws  of  general
     application affecting  enforcement of creditors' rights generally,  (ii) as
     limited by laws  relating  to the  availability  of  specific  performance,
     injunctive  relief  or  other  equitable  remedies  and  (iii)  insofar  as
     indemnification  and  contribution  provisions may be limited by applicable
     law.

          (d)  No Conflicts.  The  execution,  delivery and  performance  of the
     Transaction Documents by the Company and the consummation by the Company of
     the transactions  contemplated  hereby and thereby do not and will not: (i)
     conflict with or violate any provision of the Company's or any Subsidiary's
     certificate or articles of incorporation, bylaws or other organizational or
     charter  documents,  or (ii) conflict  with, or constitute a default (or an
     event  that with  notice or lapse of time or both  would  become a default)
     under,  result in the  creation of any Lien upon any of the  properties  or
     assets of the  Company or any  Subsidiary,  or give to others any rights of
     termination,  amendment,  acceleration  or  cancellation  (with or  without
     notice, lapse of time or both) of, any agreement,  credit facility, debt or
     other instrument  (evidencing a Company or Subsidiary debt or otherwise) or
     other understanding to which the Company or any Subsidiary is a party or by
     which any  property or asset of the Company or any  Subsidiary  is bound or
     affected,  or (iii)  subject to the Required  Approvals,  conflict  with or
     result  in a  violation  of any law,  rule,  regulation,  order,  judgment,
     injunction,  decree  or other  restriction  of any  court  or  governmental
     authority  to which the  Company  or a  Subsidiary  is  subject  (including
     federal  and  state  securities  laws and  regulations),  or by  which  any
     property  or asset of the  Company or a  Subsidiary  is bound or  affected;
     except in the case of each of  clauses  (ii) and  (iii),  such as could not
     have or reasonably be expected to result in a Material Adverse Effect.

          (e)  Filings,  Consents and Approvals.  The Company is not required to
     obtain any consent, waiver,  authorization or order of, give any notice to,

<PAGE>

     or make any filing or registration with, any court or other federal, state,
     local or other  governmental  authority or other Person in connection  with
     the execution,  delivery and  performance by the Company of the Transaction
     Documents,  other than (i) filings required pursuant to Section 4.6 of this
     Agreement,  (ii)  the  filing  with  the  Commission  of  the  Registration
     Statement,  (iii)  the  notice  and/or  application(s)  to each  applicable
     Trading Market for the issuance and sale of the Debentures and Warrants and
     the listing of the  Underlying  Shares for trading  thereon in the time and
     manner  required  thereby and (iv) the filing of Form D with the Commission
     and  such  filings  as are  required  to be  made  under  applicable  state
     securities laws (collectively, the "Required Approvals").

          (f)  Issuance of the  Securities.  The Securities are duly  authorized
     and, when issued and paid for in accordance with the applicable Transaction
     Documents,  will be duly and validly issued,  fully paid and nonassessable,
     free and clear of all Liens imposed by the Company other than  restrictions
     on transfer  provided  for in the  Transaction  Documents.  The  Underlying
     Shares,  when  issued  in  accordance  with the  terms  of the  Transaction
     Documents,  will be validly issued, fully paid and nonassessable,  free and
     clear of all Liens  imposed by the Company.  The Company has reserved  from
     its duly  authorized  capital  stock a number of shares of Common Stock for
     issuance of the Underlying Shares at least equal to the Required Minimum on
     the date hereof.

          (g)  Capitalization. The capitalization of the Company is as set forth
     on Schedule 3.1(g).  The Company has not issued any capital stock since its
     most recently  filed  periodic  report under the Exchange  Act,  other than
     pursuant to the  exercise of employee  stock  options  under the  Company's
     stock  option  plans,  the  issuance of shares of Common Stock to employees
     pursuant to the Company's  employee stock purchase plan and pursuant to the
     conversion or exercise of outstanding Common Stock  Equivalents.  No Person
     has any right of first refusal,  preemptive right,  right of participation,
     or any similar right to participate in the transactions contemplated by the
     Transaction  Documents.  Except as set forth on  Schedule  3.1(g)  and as a
     result of the purchase and sale of the Securities, there are no outstanding
     options,  warrants,  script rights to subscribe to, calls or commitments of
     any character whatsoever relating to, or securities,  rights or obligations
     convertible  into or exercisable or exchangeable  for, or giving any Person
     any right to  subscribe  for or  acquire,  any shares of Common  Stock,  or
     contracts, commitments, understandings or arrangements by which the Company
     or any  Subsidiary  is or may become  bound to issue  additional  shares of
     Common  Stock or Common  Stock  Equivalents.  The  issuance and sale of the
     Securities will not obligate the Company to issue shares of Common Stock or
     other  securities  to any Person (other than the  Purchasers)  and will not
     result  in a right of any  holder  of  Company  securities  to  adjust  the
     exercise, conversion, exchange or reset price under such securities. All of
     the outstanding  shares of capital stock of the Company are validly issued,
     fully  paid and  nonassessable,  have been  issued in  compliance  with all
     federal and state securities laws, and none of such outstanding  shares was
     issued in violation of any preemptive rights or similar rights to subscribe
     for or purchase  securities.  No further  approval or  authorization of any
     stockholder,  the Board of  Directors  of the Company or others is required
     for the  issuance  and sale of the  Securities.  There are no  stockholders
     agreements,  voting agreements or other similar  agreements with respect to
     the  Company's  capital  stock to which the  Company  is a party or, to the
     knowledge  of  the  Company,   between  or  among  any  of  the   Company's
     stockholders.

          (h)  SEC  Reports;  Financial  Statements.  The  Company has filed all
     reports,  schedules,  forms,  statements and other documents required to be
     filed  by it under  the  Securities  Act and the  Exchange  Act,  including
     pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the
     date hereof (or such  shorter  period as the Company was required by law to
     file such  material)  (the  foregoing  materials,  including  the  exhibits
     thereto and documents incorporated by reference therein, being collectively
     referred to herein as the "SEC  Reports") on a timely basis or has received
     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 Commission promulgated  thereunder,  and none of the SEC

<PAGE>

     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
     Commission  with respect  thereto as in effect at the time of filing.  Such
     financial  statements  have been prepared in accordance  with United States
     generally  accepted  accounting  principles  applied on a consistent  basis
     during the periods involved ("GAAP"),  except as may be otherwise specified
     in such financial statements or the notes thereto and except that unaudited
     financial  statements  may not contain all footnotes  required by GAAP, 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.

          (i)  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 and
     accrued  expenses  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 GAAP or required to be disclosed
     in filings made with the Commission,  (iii) the Company has not altered its
     method  of  accounting,  (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   Commission   any  request  for   confidential   treatment  of
     information. Except for the issuance of the Securities contemplated by this
     Agreement  or as set  forth on  Schedule  3.1(i),  no event,  liability  or
     development  has  occurred  or exists  with  respect to the  Company or its
     Subsidiaries  or  their  respective  business,  properties,  operations  or
     financial condition,  that would be required to be disclosed by the Company
     under applicable  securities laws at the time this  representation  is made
     that has not been  publicly  disclosed 1 Trading Day prior to the date that
     this representation is made.

          (j)  Litigation.   There  is  no  action,  suit,  inquiry,  notice  of
     violation,  proceeding or investigation pending or, to the knowledge of the
     Company, threatened against or affecting the Company, any Subsidiary or any
     of  their  respective  properties  before  or  by  any  court,  arbitrator,
     governmental or  administrative  agency or regulatory  authority  (federal,
     state,  county,  local or foreign)  (collectively,  an "Action")  which (i)
     adversely affects or challenges the legality, validity or enforceability of
     any of the Transaction  Documents or the Securities or (ii) could, if there
     were an unfavorable decision, have or reasonably be expected to result in a
     Material  Adverse Effect.  Neither the Company nor any Subsidiary,  nor any
     director  or  officer  thereof,  is or has been the  subject  of any Action
     involving  a claim of  violation  of or  liability  under  federal or state
     securities laws or a claim of breach of fiduciary duty. There has not been,
     and to the knowledge of the Company,  there is not pending or contemplated,
     any investigation by the Commission involving the Company or any current or
     former  director or officer of the Company.  The  Commission has not issued
     any  stop  order  or  other  order  suspending  the  effectiveness  of  any
     registration  statement  filed by the Company or any  Subsidiary  under the
     Exchange Act or the Securities Act.

          (k)  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  which could  reasonably be expected to result in a Material
     Adverse Effect.  None of the Company's or its Subsidiaries'  employees is a
     member of a union that  relates to such  employee's  relationship  with the
     Company, and neither the Company or any of its Subsidiaries is a party to a
     collective  bargaining  agreement,  and the  Company  and its  Subsidiaries
     believe  that  their  relationships  with  their  employees  are  good.  No
     executive officer, to the knowledge of the Company,  is, or is now expected
     to be,  in  violation  of any  material  term of any  employment  contract,
     confidentiality,   disclosure  or  proprietary   information  agreement  or

<PAGE>

     non-competition  agreement,  or any  other  contract  or  agreement  or any
     restrictive  covenant,  and the continued employment of each such executive
     officer  does not  subject the  Company or any of its  Subsidiaries  to any
     liability with respect to any of the foregoing matters. The Company and its
     Subsidiaries  are in compliance  with all U.S.  federal,  state,  local and
     foreign  laws  and  regulations   relating  to  employment  and  employment
     practices,  terms and conditions of employment and wages and hours,  except
     where the failure to be in  compliance  could not,  individually  or in the
     aggregate, reasonably be expected to have a Material Adverse Effect.

          (l)  Compliance.  Neither  the Company  nor any  Subsidiary  (i) is in
     default  under or in violation  of (and no event has occurred  that has not
     been waived that,  with notice or lapse of time or both,  would result in a
     default by the Company or any Subsidiary under), nor has the Company or any
     Subsidiary  received  notice of a claim that it is in default under or that
     it is in violation of, any indenture, loan or credit agreement or any other
     agreement or instrument to which it is a party or by which it or any of its
     properties  is bound  (whether or not such  default or  violation  has been
     waived),  (ii) is in  violation  of any order of any court,  arbitrator  or
     governmental  body,  or (iii) is or has been in  violation  of any statute,
     rule  or  regulation  of  any  governmental  authority,  including  without
     limitation  all foreign,  federal,  state and local laws  applicable to its
     business except in each case as could not have a Material Adverse Effect.

          (m)  Regulatory Permits.  The Company and the Subsidiaries possess all
     certificates, authorizations and permits issued by the appropriate federal,
     state, local or foreign regulatory  authorities  necessary to conduct their
     respective  businesses  as described  in the SEC Reports,  except where the
     failure to possess such permits could not have or reasonably be expected to
     result in a Material Adverse Effect ("Material  Permits"),  and neither the
     Company nor any Subsidiary has received any notice of proceedings  relating
     to the revocation or modification of any Material Permit.

          (n)  Title to Assets.  The Company and the Subsidiaries  have good and
     marketable  title in fee simple to all real property  owned by them that is
     material to the business of the Company and the  Subsidiaries  and good and
     marketable title in all personal property owned by them that is material to
     the  business of the Company  and the  Subsidiaries,  in each case free and
     clear of all Liens,  except for Liens as do not materially affect the value
     of such  property  and do not  materially  interfere  with the use made and
     proposed to be made of such  property  by the Company and the  Subsidiaries
     and Liens for the payment of federal,  state or other taxes, the payment of
     which is neither delinquent nor subject to penalties. Any real property and
     facilities held under lease by the Company and the Subsidiaries are held by
     them under valid,  subsisting and  enforceable  leases of which the Company
     and the Subsidiaries are in compliance.

          (o)  Patents and Trademarks.  To the knowledge of the Company and each
     Subsidiary,  the Company and the Subsidiaries  have, or have rights to use,
     all  patents,  patent  applications,  trademarks,  trademark  applications,
     service marks, trade names, trade secrets, copyrights, licenses and similar
     rights  necessary or material for use in connection  with their  respective
     businesses as described in the SEC Reports and which the failure to so have
     could  reasonably  have  a  Material  Adverse  Effect  (collectively,   the
     "Intellectual Property Rights"). Neither the Company nor any Subsidiary has
     received a notice  (written or otherwise)  that the  Intellectual  Property
     Rights used by the Company or any Subsidiary violates or infringes upon the
     rights  of  any  Person.  To  the  knowledge  of  the  Company,   all  such
     Intellectual  Property  Rights  are  enforceable  and there is no  existing
     infringement by another Person of any of the  Intellectual  Property Rights
     of others. The Company and its Subsidiaries have taken reasonable  security
     measures to protect the secrecy,  confidentiality and value of all of their
     intellectual  properties,   except  where  failure  to  do  so  could  not,
     individually  or in the aggregate,  reasonably be expect to have a Material
     Adverse Effect.

<PAGE>

          (p)  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,  including,  but not
     limited to, directors and officers insurance coverage at least equal to the
     aggregate  Subscription Amount. To the best knowledge of the Company,  such
     insurance  contracts  and policies are accurate and  complete.  Neither the
     Company nor any  Subsidiary  has any reason to believe  that it will not be
     able to renew its  existing  insurance  coverage as and when such  coverage
     expires or to obtain  similar  coverage  from  similar  insurers  as may be
     necessary to continue its business without a significant increase in cost.

          (q)  Transactions  With Affiliates and Employees.  Except as set forth
     in the SEC  Reports,  none of the officers or directors of the Company and,
     to the  knowledge of the Company,  none of the  employees of the Company is
     presently a party to any  transaction  with the  Company or any  Subsidiary
     (other than for services as employees,  officers and directors),  including
     any contract,  agreement or other arrangement  providing for the furnishing
     of services to or by, providing for rental of real or personal  property to
     or from, or otherwise  requiring payments to or from any officer,  director
     or such employee or, to the  knowledge of the Company,  any entity in which
     any officer,  director,  or any such employee has a substantial interest or
     is an  officer,  director,  trustee or  partner,  in each case in excess of
     $60,000  other  than (i) for  payment  of  salary  or  consulting  fees for
     services  rendered,  (ii)  reimbursement for expenses incurred on behalf of
     the Company and (iii) for other employee  benefits,  including stock option
     agreements under any stock option plan of the Company.

          (r)  Sarbanes-Oxley;  Internal Accounting Controls.  The Company is in
     material  compliance with all provisions of the  Sarbanes-Oxley Act of 2002
     which are applicable to it as of the Closing Date. The Company  maintains 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 GAAP 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 most recently filed periodic  report under the Exchange
     Act,  as the  case may be,  is being  prepared.  The  Company's  certifying
     officers have  evaluated the  effectiveness  of the Company's  controls and
     procedures  as of the date  prior to the filing  date of the most  recently
     filed periodic  report under the Exchange Act (such date,  the  "Evaluation
     Date").  The Company  presented in its most recently filed periodic  report
     under the Exchange Act 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 307(b) of  Regulation  S-K under the  Exchange
     Act) or, to the  knowledge  of the  Company,  in other  factors  that could
     significantly affect the Company's internal controls.

          (s)  Certain Fees. No brokerage or finder's fees or commissions are or
     will  be  payable  by the  Company  to any  broker,  financial  advisor  or
     consultant,  finder,  placement  agent,  investment  banker,  bank or other
     Person with respect to the  transactions  contemplated  by the  Transaction
     Documents. The Purchasers shall have no obligation with respect to any fees
     or with  respect to any claims  made by or on behalf of other  Persons  for
     fees of a type  contemplated  in this Section that may be due in connection
     with the transactions contemplated by the Transaction Documents.

<PAGE>

          (t)  Private  Placement.  Assuming  the  accuracy  of  the  Purchasers
     representations  and warranties  set forth in Section 3.2, no  registration
     under  the  Securities  Act is  required  for  the  offer  and  sale of the
     Securities by the Company to the  Purchasers as  contemplated  hereby.  The
     issuance and sale of the Securities hereunder does not contravene the rules
     and regulations of the Trading Market.

          (u)  Investment  Company.  The Company is not, and is not an Affiliate
     of, and immediately  after receipt of payment for the Securities,  will not
     be or be an Affiliate of, an "investment company" within the meaning of the
     Investment Company Act of 1940, as amended.

          (v)  Registration  Rights.  Other than as set forth on Schedule 3.1(v)
     and each of the Purchasers, no Person has any right to cause the Company to
     effect the  registration  under the Securities Act of any securities of the
     Company.

          (w)  Listing and Maintenance Requirements.  The Company's Common Stock
     is  registered  pursuant  to Section  12(g) of the  Exchange  Act,  and the
     Company  has taken no action  designed  to,  or which to its  knowledge  is
     likely to have the effect of,  terminating  the  registration of the Common
     Stock under the Exchange Act nor has the Company  received any notification
     that the Commission is  contemplating  terminating such  registration.  The
     Company  has not,  in the 12 months  preceding  the date  hereof,  received
     notice  from any  Trading  Market on which the Common  Stock is or has been
     listed or quoted to the effect that the Company is not in  compliance  with
     the listing or maintenance requirements of such Trading Market. The Company
     is, and has no reason to believe that it will not in the foreseeable future
     continue  to be,  in  compliance  with all  such  listing  and  maintenance
     requirements.

          (x)  Application of Takeover Protections. The Company and its Board of
     Directors  have  taken all  necessary  action,  if any,  in order to render
     inapplicable any control share acquisition,  business  combination,  poison
     pill (including any distribution under a rights agreement) or other similar
     anti-takeover  provision under the Company's  Certificate of  Incorporation
     (or similar  charter  documents) or the laws of its state of  incorporation
     that is or could become  applicable  to the  Purchasers  as a result of the
     Purchasers and the Company fulfilling their obligations or exercising their
     rights under the Transaction  Documents,  including without  limitation the
     Company's  issuance of the Securities and the Purchasers'  ownership of the
     Securities.

          (y)  Disclosure.  The Company  confirms  that neither it nor any other
     Person  acting on its behalf has  provided any of the  Purchasers  or their
     agents or counsel with any information that constitutes or might constitute
     material, non-public information. The Company understands and confirms that
     the Purchasers will rely on the foregoing  representations and covenants in
     effecting  transactions  in  securities  of  the  Company.  All  disclosure
     provided to the  Purchasers  regarding  the  Company,  its business and the
     transactions  contemplated  hereby,  including the Disclosure  Schedules to
     this  Agreement,  furnished  by or on behalf of the Company with respect to
     the  representations  and warranties  made herein are true and correct with
     respect to such  representations  and  warranties  and do not  contain  any
     untrue  statement  of a material  fact or omit to state any  material  fact
     necessary in order to make the  statements  made  therein,  in light of the
     circumstances under which they were made, not misleading.

          (z)  No Integrated Offering.  Assuming the accuracy of the Purchasers'
     representations  and  warranties  set forth in  Section  3.2,  neither  the
     Company,  nor any of its Affiliates,  nor any Person acting on its or their
     behalf  has,  directly  or  indirectly,  made  any  offers  or sales of any
     security or solicited any offers to buy any security,  under  circumstances
     that would cause this  offering of the  Securities  to be  integrated  with
     prior  offerings by the Company for purposes of the  Securities  Act or any
     applicable shareholder approval provisions,  including, without limitation,
     under the rules and  regulations  of any Trading Market on which any of the
     securities of the Company are listed or designated.

<PAGE>

          (aa) Solvency.  Based on the financial  condition of the Company as of
     the Closing Date after  giving  effect to the receipt by the Company of the
     proceeds from the sale of the Securities hereunder,  (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).  The  Company  has no
     knowledge  of any facts or  circumstances  which lead it to believe that it
     will  file for  reorganization  or  liquidation  under  the  bankruptcy  or
     reorganization  laws of any  jurisdiction  within one year from the Closing
     Date.  The SEC  Reports set forth as of the dates  thereof all  outstanding
     secured and unsecured Indebtedness of the Company or any Subsidiary, or for
     which the Company or any  Subsidiary has  commitments.  For the purposes of
     this Agreement,  "Indebtedness" shall mean (a) any liabilities for borrowed
     money or amounts  owed in excess of  $50,000  (other  than  trade  accounts
     payable  incurred in the ordinary course of business),  (b) all guaranties,
     endorsements and other contingent obligations in respect of Indebtedness of
     others, whether or not the same are or should be reflected in the Company's
     balance sheet (or the notes thereto),  except  guaranties by endorsement of
     negotiable instruments for deposit or collection or similar transactions in
     the  ordinary  course of business;  and (c) the present  value of any lease
     payments in excess of $50,000 due under leases  required to be  capitalized
     in  accordance  with GAAP.  Neither the Company  nor any  Subsidiary  is in
     default with respect to any Indebtedness.

          (bb) [RESERVED].

          (cc) Tax Status. Except for matters that would not, individually or in
     the  aggregate,  have or  reasonably  be  expected  to result in a Material
     Adverse  Effect,  the Company and each  Subsidiary  has filed all necessary
     federal, state and foreign income and franchise tax returns and has paid or
     accrued all taxes shown as due thereon, and the Company has no knowledge of
     a tax deficiency which has been asserted or threatened  against the Company
     or any Subsidiary.

          (dd) No  General  Solicitation.  Neither  the  Company  nor any person
     acting on behalf of the Company  has offered or sold any of the  Securities
     by any form of general solicitation or general advertising. The Company has
     offered the  Securities  for sale only to the  Purchasers and certain other
     "accredited  investors" within the meaning of Rule 501 under the Securities
     Act.

          (ee) Foreign  Corrupt  Practices.  Neither  the  Company,  nor  to the
     knowledge of the Company, any agent or other person acting on behalf of the
     Company,  has (i)  directly  or  indirectly,  used any funds  for  unlawful
     contributions,  gifts,  entertainment or other unlawful expenses related to
     foreign or domestic political  activity,  (ii) made any unlawful payment to
     foreign or domestic government  officials or employees or to any foreign or
     domestic  political parties or campaigns from corporate funds, (iii) failed
     to  disclose  fully any  contribution  made by the  Company (or made by any
     person  acting on its  behalf of which the  Company  is aware)  which is in
     violation of law, or (iv) violated in any material respect any provision of
     the Foreign Corrupt Practices Act of 1977, as amended.

          (ff) Accountants.  The Company's accountants are set forth on Schedule
     3.1(ff) of the Disclosure Schedule.  To the knowledge of the Company,  such
     accountants,  who  expressed  their  opinion with respect to the  financial
     statements  included in the Company's  Annual Report on Form 10-KSB for the
     year ended June 30, 2005 are an independent,  registered  public accounting
     firm as required by the Securities Act.

<PAGE>

          (gg) Seniority.  As of the  Closing  Date,  no  indebtedness  or other
     equity of the  Company  is senior to the  Debentures  in right of  payment,
     whether with respect to interest or upon  liquidation  or  dissolution,  or
     otherwise,  other than  indebtedness  secured by  purchase  money  security
     interests  (which is senior only as to underlying  assets covered  thereby)
     and capital  lease  obligations  (which is senior  only as to the  property
     covered thereby).

          (hh) No  Disagreements  with  Accountants  and  Lawyers.  There are no
     material  disagreements  of any  kind  presently  existing,  or  reasonably
     anticipated by the Company to arise,  between the  accountants  and lawyers
     formerly  or  presently  employed by the Company and the Company is current
     with respect to any fees owed to its accountants and lawyers.

          (ii) Acknowledgment Regarding Purchasers' Purchase of Securities.  The
     Company  acknowledges  and  agrees  that each of the  Purchasers  is acting
     solely in the  capacity of an arm's  length  purchaser  with respect to the
     Transaction Documents and the transactions contemplated hereby. The Company
     further  acknowledges that no Purchaser is acting as a financial advisor or
     fiduciary of the Company (or in any similar  capacity) with respect to this
     Agreement and the transactions  contemplated hereby and any advice given by
     any  Purchaser  or any of their  respective  representatives  or  agents in
     connection with this Agreement and the transactions  contemplated hereby is
     merely  incidental  to the  Purchasers'  purchase  of the  Securities.  The
     Company further represents to each Purchaser that the Company's decision to
     enter  into  this  Agreement  has  been  based  solely  on the  independent
     evaluation of the transactions  contemplated  hereby by the Company and its
     representatives.

          (jj) Acknowledgement Regarding Purchasers' Trading Activity.  Anything
     in this  Agreement  or  elsewhere  herein to the  contrary  notwithstanding
     (except  for  Section  4.16  hereof),  it is  understood  and agreed by the
     Company (i) that none of the  Purchasers  has been asked to agree,  nor has
     any Purchaser  agreed,  to desist from  purchasing or selling,  long and/or
     short,  securities  of the Company,  or  "derivative"  securities  based on
     securities  issued  by the  Company  or to  hold  the  Securities  for  any
     specified term; (ii) that past or future open market or other  transactions
     by any  Purchaser,  including  Short  Sales,  and  specifically  including,
     without  limitation,  Short Sales or "derivative"  transactions,  before or
     after the closing of this or future  private  placement  transactions,  may
     negatively  impact  the  market  price  of  the  Company's  publicly-traded
     securities;  (iii) that any Purchaser,  and counter parties in "derivative"
     transactions  to  which  any  such  Purchaser  is  a  party,   directly  or
     indirectly,  presently may have a "short" position in the Common Stock; and
     (iv) that each Purchaser shall not be deemed to have any  affiliation  with
     or  control  over  any  arm's  length  counter-party  in  any  "derivative"
     transaction.  The Company further understands and acknowledges that (a) one
     or more Purchasers may engage in hedging activities at various times during
     the  period  that  the  Securities  are  outstanding,   including,  without
     limitation,  during the  periods  that the value of the  Underlying  Shares
     deliverable  with respect to Securities  are being  determined and (b) such
     hedging  activities  (if  any)  could  reduce  the  value  of the  existing
     stockholders'  equity  interests  in the Company at and after the time that
     the hedging activities are being conducted.  The Company  acknowledges that
     such aforementioned hedging activities do not constitute a breach of any of
     the Transaction Documents.

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

<PAGE>

     3.2  Representations  and  Warranties  of the  Purchasers.  Each  Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:

          (a)  Organization;   Authority.  Such  Purchaser  is  an  entity  duly
     organized,  validly  existing  and in good  standing  under the laws of the
     jurisdiction of its organization with full right,  corporate or partnership
     power  and  authority  to enter  into and to  consummate  the  transactions
     contemplated  by the  Transaction  Documents and otherwise to carry out its
     obligations   hereunder  and  thereunder.   The  execution,   delivery  and
     performance  by such  Purchaser of the  transactions  contemplated  by this
     Agreement have been duly  authorized by all necessary  corporate or similar
     action on the part of such Purchaser. Each Transaction Document to which it
     is a party has been duly executed by such Purchaser,  and when delivered by
     such  Purchaser in accordance  with the terms hereof,  will  constitute the
     valid and legally binding obligation of such Purchaser, enforceable against
     it in accordance with its terms, except (i) as limited by general equitable
     principles   and   applicable   bankruptcy,   insolvency,   reorganization,
     moratorium and other laws of general application  affecting  enforcement of
     creditors'  rights  generally,  (ii) as  limited  by laws  relating  to the
     availability of specific performance,  injunctive relief or other equitable
     remedies and (iii) insofar as indemnification  and contribution  provisions
     may be limited by applicable law.

          (b)  Own Account.  Such Purchaser  understands that the Securities are
     "restricted  securities" and have not been registered  under the Securities
     Act or any applicable  state securities law and is acquiring the Securities
     as principal for its own account and not with a view to or for distributing
     or  reselling  such  Securities  or any part  thereof in  violation  of the
     Securities  Act or any  applicable  state  securities  law,  has no present
     intention  of  distributing  any of such  Securities  in  violation  of the
     Securities  Act  or  any  applicable   state  securities  law  and  has  no
     arrangement  or  understanding   with  any  other  persons   regarding  the
     distribution  of such  Securities  (this  representation  and  warranty not
     limiting  such  Purchaser's  right to sell the  Securities  pursuant to the
     Registration  Statement or otherwise in compliance with applicable  federal
     and  state  securities  laws) in  violation  of the  Securities  Act or any
     applicable state securities law. Such Purchaser is acquiring the Securities
     hereunder in the ordinary  course of its business.  Such Purchaser does not
     have any  agreement  or  understanding,  directly or  indirectly,  with any
     Person to distribute any of the Securities.

          (c)  Purchaser  Status.  At the time such  Purchaser  was  offered the
     Securities, it was, and at the date hereof it is, and on each date on which
     it exercises any Warrants or converts any Debentures it will be either: (i)
     an  "accredited  investor" as defined in Rule  501(a)(1),  (a)(2),  (a)(3),
     (a)(7)  or  (a)(8)   under  the   Securities   Act  or  (ii)  a  "qualified
     institutional  buyer" as defined in Rule 144A(a) under the Securities  Act.
     Such  Purchaser is not required to be registered as a  broker-dealer  under
     Section 15 of the Exchange Act.

          (d)  Experience of Such  Purchaser.  Such  Purchaser,  either alone or
     together with its representatives,  has such knowledge,  sophistication and
     experience  in  business  and  financial  matters  so as to be  capable  of
     evaluating  the  merits  and  risks of the  prospective  investment  in the
     Securities,  and has so evaluated the merits and risks of such  investment.
     Such  Purchaser is able to bear the economic  risk of an  investment in the
     Securities  and, at the present  time, is able to afford a complete loss of
     such investment.

          (e)  General  Solicitation.  Such  Purchaser  is  not  purchasing  the
     Securities  as a result  of any  advertisement,  article,  notice  or other
     communication regarding the Securities published in any newspaper, magazine
     or similar media or broadcast over  television or radio or presented at any
     seminar or any other general solicitation or general advertisement.

          (f)  Short Sales and Confidentiality  Prior To The Date Hereof.  Other
     than  the  transaction  contemplated  hereunder,  such  Purchaser  has  not
     directly or indirectly,  nor has any Person acting on behalf of or pursuant
     to  any  understanding  with  such  Purchaser,  executed  any  transaction,

<PAGE>

     including  Short Sales,  in the securities of the Company during the period
     commencing  from the time that such  Purchaser  first received a term sheet
     from the Company or any other Person  setting  forth the material  terms of
     the transactions  contemplated hereunder until the date hereof ("Discussion
     Time"). Notwithstanding the foregoing, in the case of a Purchaser that is a
     multi-managed investment vehicle whereby separate portfolio managers manage
     separate  portions of such  Purchaser's  assets and the portfolio  managers
     have no direct knowledge of the investment  decisions made by the portfolio
     managers   managing  other  portions  of  such  Purchaser's   assets,   the
     representation set forth above shall only apply with respect to the portion
     of  assets  managed  by the  portfolio  manager  that  made the  investment
     decision to purchase the Securities  covered by this Agreement.  Other than
     to other Persons party to this Agreement, such Purchaser has maintained the
     confidentiality  of all  disclosures  made to it in  connection  with  this
     transaction (including the existence and terms of this transaction).

          The Company  acknowledges and agrees that each Purchaser does not make
     or has not made any  representations  or  warranties  with  respect  to the
     transactions contemplated hereby other than those specifically set forth in
     this Section 3.2.

                                   ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

     4.1  Transfer Restrictions.

          (a)  The Securities  may only be disposed of in compliance  with state
     and federal  securities laws. In connection with any transfer of Securities
     other than pursuant to an effective  registration statement or Rule 144, to
     the Company,  to an Affiliate of a Purchaser or in connection with a pledge
     as contemplated  in Section 4.1(b),  the Company may require the transferor
     thereof  to provide to the  Company an opinion of counsel  selected  by the
     transferor and reasonably acceptable to the Company, the form and substance
     of which opinion shall be reasonably  satisfactory  to the Company,  to the
     effect that such transfer does not require registration of such transferred
     Securities  under the Securities Act. As a condition of transfer,  any such
     transferee  shall  agree  in  writing  to be  bound  by the  terms  of this
     Agreement and shall have the rights of a Purchaser under this Agreement and
     the Registration Rights Agreement.

          (b)  The Purchasers agree to the imprinting, so long as is required by
     this Section 4.1(b),  of a legend on any of the Securities in the following
     form:

     [NEITHER] THESE  SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES
     ARE [EXERCISABLE]  [CONVERTIBLE]]  HAVE BEEN REGISTERED WITH THE SECURITIES
     AND  EXCHANGE  COMMISSION  OR THE  SECURITIES  COMMISSION  OF ANY  STATE IN
     RELIANCE UPON AN EXEMPTION  FROM  REGISTRATION  UNDER THE SECURITIES ACT OF
     1933,  AS AMENDED (THE  "SECURITIES  ACT"),  AND,  ACCORDINGLY,  MAY NOT BE
     OFFERED OR SOLD EXCEPT  PURSUANT  TO AN  EFFECTIVE  REGISTRATION  STATEMENT
     UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE  EXEMPTION FROM, OR IN
     A  TRANSACTION  NOT  SUBJECT  TO,  THE  REGISTRATION  REQUIREMENTS  OF  THE
     SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE  STATE  SECURITIES LAWS AS
     EVIDENCED BY A LEGAL  OPINION OF COUNSEL TO THE  TRANSFEROR TO SUCH EFFECT,
     THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE
     SECURITIES  AND THE SECURITIES  ISSUABLE UPON EXERCISE OF THESE  SECURITIES
     MAY BE PLEDGED IN CONNECTION  WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
     SECURED BY SUCH SECURITIES.

<PAGE>

     The Company  acknowledges and agrees that a Purchaser may from time to time
pledge pursuant to a bona fide margin agreement with a registered  broker-dealer
or grant a security  interest  in some or all of the  Securities  to a financial
institution that is an "accredited investor" as defined in Rule 501(a) under the
Securities  Act and who agrees to be bound by the  provisions of this  Agreement
and the  Registration  Rights Agreement and, if required under the terms of such
arrangement,  such Purchaser may transfer  pledged or secured  Securities to the
pledgees or secured  parties.  Such a pledge or transfer would not be subject to
approval of the Company and no legal  opinion of legal  counsel of the  pledgee,
secured party or pledgor shall be required in connection therewith.  Further, no
notice shall be required of such pledge. At the appropriate Purchaser's expense,
the Company will execute and deliver such reasonable  documentation as a pledgee
or secured  party of Securities  may  reasonably  request in  connection  with a
pledge or transfer of the Securities,  including,  if the Securities are subject
to registration  pursuant to the Registration Rights Agreement,  the preparation
and filing of any required prospectus  supplement under Rule 424(b)(3) under the
Securities  Act  or  other  applicable   provision  of  the  Securities  Act  to
appropriately amend the list of Selling Stockholders thereunder.

          (c)  Certificates  evidencing the Underlying  Shares shall not contain
     any legend  (including the legend set forth in Section 4.1(b) hereof):  (i)
     while a  registration  statement  (including  the  Registration  Statement)
     covering the resale of such security is effective under the Securities Act,
     or (ii) following any sale of such Underlying  Shares pursuant to Rule 144,
     or (iii) if such Underlying Shares are eligible for sale under Rule 144(k),
     or (iv) if such legend is not required under applicable requirements of the
     Securities  Act  (including  judicial  interpretations  and  pronouncements
     issued by the staff of the Commission). The Company shall cause its counsel
     to issue a legal opinion to the Company's transfer agent promptly after the
     Effective  Date if required by the Company's  transfer  agent to effect the
     removal of the legend  hereunder.  If all or any portion of a Debenture  or
     Warrant is converted or exercised (as  applicable)  at a time when there is
     an effective  registration  statement to cover the resale of the Underlying
     Shares,  or if such  Underlying  Shares may be sold under Rule 144(k) or if
     such legend is not otherwise required under applicable  requirements of the
     Securities  Act  (including  judicial  interpretations  thereof)  then such
     Underlying  Shares shall be issued free of all legends.  The Company agrees
     that  following  the  Effective  Date or at such time as such  legend is no
     longer  required  under this Section  4.1(c),  it will, no later than three
     Trading  Days  following  the delivery by a Purchaser to the Company or the
     Company's transfer agent of a certificate  representing  Underlying Shares,
     as  applicable,  issued with a restrictive  legend (such third Trading Day,
     the  "Legend  Removal  Date"),  deliver  or cause to be  delivered  to such
     Purchaser  a  certificate  representing  such  shares that is free from all
     restrictive and other legends. The Company may not make any notation on its
     records or give  instructions  to any  transfer  agent of the Company  that
     enlarge  the   restrictions   on  transfer  set  forth  in  this   Section.
     Certificates  for Securities  subject to legend removal  hereunder shall be
     transmitted  by the  transfer  agent of the  Company to the  Purchasers  by
     crediting the account of the  Purchaser's  prime broker with the Depository
     Trust Company System.

          (d)  In addition to such  Purchaser's  other available  remedies,  the
     Company shall pay to a Purchaser,  in cash, as partial  liquidated  damages
     and not as a penalty,  for each $1,000 of  Underlying  Shares (based on the
     VWAP of the Common Stock on the date such  Securities  are submitted to the
     Company's  transfer agent) delivered for removal of the restrictive  legend
     and subject to Section  4.1(c),  $10 per Trading Day (increasing to $20 per
     Trading  Day 5 Trading  Days after such  damages  have begun to accrue) for
     each  Trading  Day after such second  Trading Day after the Legend  Removal
     Date until such certificate is delivered  without a legend.  Nothing herein
     shall  limit  such  Purchaser's  right to  pursue  actual  damages  for the
     Company's  failure to deliver  certificates  representing any Securities as
     required by the  Transaction  Documents,  and such Purchaser shall have the
     right to pursue all remedies available to it at law or in equity including,
     without  limitation,  a decree of specific  performance  and/or  injunctive
     relief.

          (e)  Each  Purchaser,   severally  and  not  jointly  with  the  other
     Purchasers,  agrees  that  the  removal  of  the  restrictive  legend  from
     certificates  representing  Securities  as set forth in this Section 4.1 is
     predicated  upon the Company's  reliance  that the Purchaser  will sell any
     Securities  pursuant  to  either  the  registration   requirements  of  the
     Securities Act, including any applicable prospectus delivery  requirements,
     or an exemption therefrom.

<PAGE>

          (f)  Until the one year anniversary of the Effective Date, the Company
     shall not undertake a reverse or forward stock split or reclassification of
     the Common  Stock  without  the prior  written  consent  of the  Purchasers
     holding a majority  in  principal  amount  outstanding  of the  Debentures,
     provided that such consent is not required when the  outstanding  principal
     amount of Debentures is less than $200,000.

     4.2  Acknowledgment of Dilution. The Company acknowledges that the issuance
of the  Securities  may result in dilution of the  outstanding  shares of Common
Stock,  which dilution may be substantial under certain market  conditions.  The
Company  further   acknowledges  that  its  obligations  under  the  Transaction
Documents,  including without  limitation its obligation to issue the Underlying
Shares pursuant to the Transaction Documents, are unconditional and absolute and
not  subject  to any  right  of  set  off,  counterclaim,  delay  or  reduction,
regardless  of the effect of any such dilution or any claim the Company may have
against any Purchaser and  regardless of the dilutive  effect that such issuance
may have on the ownership of the other stockholders of the Company.

     4.3  Furnishing of Information.  As long as any Purchaser owns  Securities,
the Company  covenants to timely file (or obtain  extensions in respect  thereof
and file within the applicable grace period) all reports required to be filed by
the Company  after the date hereof  pursuant to the Exchange Act. As long as any
Purchaser  owns  Securities,  if the  Company is not  required  to file  reports
pursuant to the Exchange Act, it will prepare and furnish to the  Purchasers and
make publicly  available in accordance  with Rule 144(c) such  information as is
required for the Purchasers to sell the  Securities  under Rule 144. The Company
further  covenants  that it will  take  such  further  action  as any  holder of
Securities may reasonably request,  all to the extent required from time to time
to enable such Person to sell such  Securities  without  registration  under the
Securities Act within the limitation of the exemptions provided by Rule 144.

     4.4  Integration.  The  Company  shall not 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 Purchasers or that would be
integrated  with the offer or sale of the  Securities  for purposes of the rules
and regulations of any Trading Market.

     4.5  Conversion  and  Exercise  Procedures.  The form of Notice of Exercise
included in the  Warrants and the form of Notice of  Conversion  included in the
Debentures set forth the totality of the  procedures  required of the Purchasers
in order to exercise the Warrants or convert the Debentures. No additional legal
opinion or other information or instructions shall be required of the Purchasers
to exercise their Warrants or convert their Debentures.  The Company shall honor
exercises of the Warrants and  conversions  of the  Debentures and shall deliver
Underlying Shares in accordance with the terms,  conditions and time periods set
forth in the Transaction Documents.

     4.6  Securities  Laws  Disclosure;  Publicity.  The Company shall, by 10:30
a.m.  Eastern time on the Trading Day following  the date hereof,  issue a press
release  disclosing the material terms of the transactions  contemplated  hereby
and shall, within one Trading Day thereafter, file a Current Report on Form 8-K,
reasonably  acceptable to each  Purchaser,  disclosing the material terms of the
transactions  contemplated  hereby,  and shall attach the Transaction  Documents
thereto. The Company and each Purchaser shall consult with each other in issuing
any other press releases with respect to the transactions  contemplated  hereby,
and neither the Company nor any Purchaser  shall issue any such press release or
otherwise  make any such  public  statement  without  the prior  consent  of the
Company,  with  respect to any press  release of any  Purchaser,  or without the
prior  consent  of each  Purchaser,  with  respect  to any press  release of the
Company,  which  consent  shall not  unreasonably  be  withheld,  except if such
disclosure is required by law, in which case the disclosing party shall promptly
provide  the  other  party  with  prior  notice  of  such  public  statement  or
communication.  Notwithstanding  the  foregoing,  the Company shall not publicly

<PAGE>

disclose the name of any Purchaser,  or include the name of any Purchaser in any
filing with the Commission or any regulatory  agency or Trading Market,  without
the prior written consent of such  Purchaser,  except (i) as required by federal
securities law in connection with the registration statement contemplated by the
Registration Rights Agreement and (ii) to the extent such disclosure is required
by law or Trading  Market  regulations,  in which case the Company shall provide
the Purchasers  with prior notice of such  disclosure  permitted under subclause
(i) or (ii).

     4.7  Shareholder  Rights  Plan.  No claim will be made or  enforced  by the
Company or, to the knowledge of the Company, any other Person that any Purchaser
is an "Acquiring  Person" under any  shareholder  rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the  provisions of any such plan or  arrangement,  by
virtue of  receiving  Securities  under the  Transaction  Documents or under any
other  agreement  between  the  Company and the  Purchasers.  The Company  shall
conduct  its  business  in a manner so that it will not  become  subject  to the
Investment Company Act.

     4.8  Non-Public Information.  The Company covenants and agrees that neither
it nor any other Person  acting on its behalf will provide any  Purchaser or its
agents or counsel with any  information  that the Company  believes  constitutes
material non-public information,  unless prior thereto such Purchaser shall have
executed  a written  agreement  regarding  the  confidentiality  and use of such
information.  The Company  understands and confirms that each Purchaser shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.

     4.9  Use of Proceeds.  Except as set forth on Schedule 4.9 attached hereto,
the Company shall use the net proceeds from the sale of the Securities hereunder
for working capital  purposes and not for the satisfaction of any portion of the
Company's debt (other than payment of trade  payables in the ordinary  course of
the  Company's  business  and prior  practices),  to redeem any Common  Stock or
Common Stock Equivalents or to settle any outstanding litigation.

     4.10 [RESERVED].

     4.11 Indemnification  of  Purchasers.  Subject  to the  provisions  of this
Section  4.11,  the Company will  indemnify  and hold the  Purchasers  and their
directors, officers, shareholders,  members, partners, employees and agents (and
any other Persons with a functionally  equivalent  role of a Person holding such
titles notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser  (within the meaning of Section 15 of the Securities Act
and  Section 20 of the  Exchange  Act),  and the  directors,  officers,  agents,
members,  partners  or  employees  (and any other  Persons  with a  functionally
equivalent role of a Person holding such titles  notwithstanding  a lack of such
title or any other title) of such controlling person (each, a "Purchaser Party")
harmless   from  any  and  all   losses,   liabilities,   obligations,   claims,
contingencies,  damages,  costs and expenses,  including all judgments,  amounts
paid in  settlements,  court costs and reasonable  attorneys'  fees and costs of
investigation  that any such Purchaser  Party may actually  suffer or incur as a
result  of or  relating  to (a)  any  breach  of  any  of  the  representations,
warranties,  covenants or agreements made by the Company in this Agreement or in
the  other  Transaction  Documents  or  (b)  any  action  instituted  against  a
Purchaser, or any of them or their respective Affiliates,  by any stockholder of
the Company who is not an  Affiliate of such  Purchaser,  with respect to any of
the transactions  contemplated by the Transaction  Documents (unless such action
is based  upon a  breach  of such  Purchaser's  representations,  warranties  or
covenants  under the Transaction  Documents or any agreements or  understandings
such  Purchaser  may have with any such  stockholder  or any  violations  by the
Purchaser of state or federal  securities  laws or any conduct by such Purchaser
which constitutes fraud,  gross negligence,  willful misconduct or malfeasance).
If any action shall be brought  against any Purchaser  Party in respect of which
indemnity may be sought pursuant to this  Agreement,  such Purchaser Party shall
promptly notify the Company in writing,  and the Company shall have the right to
assume the defense thereof with counsel of its own choosing. Any Purchaser Party
shall  have  the  right to  employ  separate  counsel  in any  such  action  and
participate  in the defense  thereof,  but the fees and expenses of such counsel

<PAGE>

shall be at the expense of such  Purchaser  Party  except to the extent that (i)
the  employment  thereof  has been  specifically  authorized  by the  Company in
writing, (ii) the Company has failed after a reasonable period of time to assume
such  defense  and to employ  counsel or (iii) in such  action  there is, in the
reasonable opinion of such separate counsel, a material conflict on any material
issue  between the  position of the Company and the  position of such  Purchaser
Party.  The  Company  will not be  liable  to any  Purchaser  Party  under  this
Agreement  (i) for any  settlement  by a Purchaser  Party  effected  without the
Company's prior written  consent,  which shall not be  unreasonably  withheld or
delayed;  or (ii) to the  extent,  but only to the  extent  that a loss,  claim,
damage or liability is  attributable  to any Purchaser  Party's breach of any of
the representations,  warranties, covenants or agreements made by the Purchasers
in this Agreement or in the other Transaction Documents.

     4.12 Reservation and Listing of Securities.

          (a)  The Company  shall  maintain a reserve  from its duly  authorized
     shares of Common Stock for issuance  pursuant to the Transaction  Documents
     in such number as may be required to fulfill its  obligations in full under
     the Transaction Documents.

          (b)  If, on any date,  the  number of  authorized  but  unissued  (and
     otherwise  unreserved)  shares  of Common  Stock is less than the  Required
     Minimum on such date,  then the Board of Directors of the Company shall use
     commercially  reasonable  efforts  to amend the  Company's  certificate  or
     articles of incorporation to increase the number of authorized but unissued
     shares of Common  Stock to at least the Required  Minimum at such time,  as
     soon as  possible  and in any event not later  than the 75th day after such
     date.

          (c)  The  Company  shall,  if  applicable:  (i) in the time and manner
     required by the Trading  Market,  prepare and file with such Trading Market
     an additional  shares  listing  application  covering a number of shares of
     Common  Stock at least  equal to the  Required  Minimum on the date of such
     application,  (ii) take all steps reasonably necessary to cause such shares
     of Common Stock to be approved for listing on the Trading Market as soon as
     possible  thereafter,  (iii)  provide to the  Purchasers  evidence  of such
     listing,  and (iv) maintain the listing of such Common Stock on any date at
     least equal to the Required  Minimum on such date on such Trading Market or
     another Trading Market.

     4.13 Participation in Future Financing.

          (a)  Subject to Section  4.13(g),  from the date hereof until the date
     that is the 12 month  anniversary of the Effective Date, upon any financing
     by the Company or any of its  Subsidiaries  of Common Stock or Common Stock
     Equivalents (a "Subsequent Financing"), each Purchaser shall have the right
     to participate in up to an amount of the Subsequent Financing equal to 100%
     of the Subsequent Financing (the "Participation Maximum").

          (b)  At least 5 Trading  Days prior to the  closing of the  Subsequent
     Financing,  the Company shall deliver to each Purchaser a written notice of
     its  intention  to  effect a  Subsequent  Financing  ("Pre-Notice"),  which
     Pre-Notice  shall ask such  Purchaser  if it wants to review the details of
     such financing (such additional notice, a "Subsequent  Financing  Notice").
     Upon the request of a Purchaser, and only upon a request by such Purchaser,
     for a Subsequent Financing Notice, the Company shall promptly, but no later
     than 1 Trading  Day after  such  request,  deliver a  Subsequent  Financing
     Notice to such Purchaser. The Subsequent Financing Notice shall describe in
     reasonable  detail the proposed  terms of such  Subsequent  Financing,  the
     amount of proceeds intended to be raised  thereunder,  the Person with whom
     such Subsequent Financing is proposed to be effected, and attached to which
     shall be a term sheet or similar document relating thereto.

          (c)  Any  Purchaser   desiring  to  participate  in  such   Subsequent
     Financing must provide written notice to the Company by not later than 5:30
     p.m.  (New  York  City  time)  on the  4th  Trading  Day  after  all of the
     Purchasers  have received the  Pre-Notice  that the Purchaser is willing to
     participate  in the  Subsequent  Financing,  the amount of the  Purchaser's
     participation,  and that the Purchaser has such funds ready,  willing,  and
     available for investment on the terms set forth in the Subsequent Financing
     Notice.  If the Company  receives no notice from a Purchaser as of such 4th
     Trading Day,  such  Purchaser  shall be deemed to have notified the Company
     that it does not elect to participate.

<PAGE>

          (d)  If by 5:30 p.m. (New York City time) on the 4th Trading Day after
     all of the Purchasers  have received the Pre-Notice,  notifications  by the
     Purchasers of their willingness to participate in the Subsequent  Financing
     (or to cause their  designees to  participate)  is, in the aggregate,  less
     than the total  amount of the  Subsequent  Financing,  then the Company may
     effect the remaining portion of such Subsequent  Financing on the terms and
     to the Persons set forth in the Subsequent Financing Notice.

          (e)  If by 5:30 p.m. (New York City time) on the 4th Trading Day after
     all of the Purchasers  have received the Pre-Notice,  the Company  receives
     responses  to a  Subsequent  Financing  Notice from  Purchasers  seeking to
     purchase more than the aggregate amount of the Participation  Maximum, each
     such  Purchaser  shall have the right to purchase  the greater of (a) their
     Pro Rata Portion (as defined  below) of the  Participation  Maximum and (b)
     the difference  between the Participation  Maximum and the aggregate amount
     of participation by all other  Purchasers.  "Pro Rata Portion" is the ratio
     of (x) the Subscription Amount of Securities  purchased on the Closing Date
     by a Purchaser participating under this Section 4.13 and (y) the sum of the
     aggregate  Subscription Amounts of Securities purchased on the Closing Date
     by all Purchasers participating under this Section 4.13.

          (f)  The Company must provide the Purchasers with a second  Subsequent
     Financing  Notice,  and  the  Purchasers  will  again  have  the  right  of
     participation  set forth  above in this  Section  4.13,  if the  Subsequent
     Financing  subject  to  the  initial  Subsequent  Financing  Notice  is not
     consummated  for any  reason  on the  terms  set  forth in such  Subsequent
     Financing  Notice  within 60  Trading  Days  after the date of the  initial
     Subsequent Financing Notice.

          (g)  Notwithstanding the foregoing,  this Section 4.13 shall not apply
     in respect of an Exempt Issuance.

     4.14 Subsequent Equity Sales.

          (a)  Subject to Section  4.14(c),  from the date hereof  until 90 days
     after the  Effective  Date,  neither the Company nor any  Subsidiary  shall
     issue  shares  of  Common  Stock or  Common  Stock  Equivalents;  provided,
     however, the 90 day period set forth in this Section 4.14 shall be extended
     for the number of Trading  Days  during such period in which (i) trading in
     the Common Stock is suspended by any Trading Market,  or (ii) following the
     Effective  Date,  the  Registration  Statement  is  not  effective  or  the
     prospectus  included in the  Registration  Statement may not be used by the
     Purchasers for the resale of the Underlying Shares.

          (b)  From the date hereof until such time as no Purchaser holds any of
     the Securities,  the Company shall be prohibited from effecting or entering
     into an agreement to effect any Subsequent  Financing involving a "Variable
     Rate  Transaction".  The term  "Variable  Rate  Transaction"  shall  mean a
     transaction  in which  the  Company  issues or sells (i) any debt or equity
     securities that are convertible  into,  exchangeable or exercisable for, or
     include the right to receive  additional  shares of Common Stock either (A)
     at a  conversion,  exercise or  exchange  rate or other price that is based
     upon and/or varies with the trading  prices of or quotations for the shares
     of Common  Stock at any time  after the  initial  issuance  of such debt or
     equity  securities,  or (B) with a conversion,  exercise or exchange  price
     that is  subject  to being  reset at some  future  date  after the  initial
     issuance  of such  debt  or  equity  security  or upon  the  occurrence  of
     specified  or  contingent  events  directly  or  indirectly  related to the
     business of the  Company or the market for the Common  Stock or (ii) enters
     into any  agreement,  including,  but not  limited  to, an  equity  line of
     credit,  whereby  the Company may sell  securities  at a future  determined
     price.  Notwithstanding  anything  herein to the  contrary,  the payment of
     reasonable and customary dividends and interest at not less than 90% of the
     then market price of the Common  Stock shall not be deemed a Variable  Rate
     Transaction.

<PAGE>

          (c)  Notwithstanding the foregoing,  this Section 4.14 shall not apply
     in respect of an Exempt Issuance,  except that no Variable Rate Transaction
     shall be an Exempt Issuance.

     4.15 Equal Treatment of Purchasers.  No  consideration  shall be offered or
paid to any  person  to amend or  consent  to a waiver  or  modification  of any
provision of any of the Transaction  Documents unless the same  consideration is
also offered to all of the parties to the Transaction  Documents.  Further,  the
Company shall not make any payment of principal or interest on the Debentures in
amounts  which  are   disproportionate  to  the  respective   principal  amounts
outstanding  on  the  Debentures  at  any  applicable  time.  For  clarification
purposes,  this provision constitutes a separate right granted to each Purchaser
by the Company and negotiated separately by each Purchaser,  and is intended for
the  Company  to treat  the  Purchasers  as a class  and shall not in any way be
construed as the Purchasers  acting in concert or as a group with respect to the
purchase, disposition or voting of Securities or otherwise.

     4.16 Short Sales and Confidentiality  After The Date Hereof. Each Purchaser
severally and not jointly with the other  Purchasers  covenants  that neither it
nor any Affiliates acting on its behalf or pursuant to any understanding with it
will  execute any Short Sales during the period  after the  Discussion  Time and
ending at the time that the  transactions  contemplated  by this  Agreement  are
first publicly announced as described in Section 4.6. Each Purchaser,  severally
and not jointly with the other Purchasers, covenants that until such time as the
transactions  contemplated  by this  Agreement  are  publicly  disclosed  by the
Company  as  described  in  Section  4.6,  such  Purchaser  will  maintain,  the
confidentiality   of  all  disclosures  made  to  it  in  connection  with  this
transaction  (including  the  existence  and  terms of this  transaction).  Each
Purchaser understands and acknowledges, severally and not jointly with any other
Purchaser,  that the  Commission  currently  takes the position that coverage of
short  sales of  shares  of the  Common  Stock  "against  the box"  prior to the
Effective Date of the Registration  Statement with the Securities is a violation
of Section 5 of the  Securities  Act,  as set forth in Item 65,  Section 5 under
Section A, of the Manual of Publicly Available Telephone Interpretations,  dated
July 1997,  compiled by the Office of Chief  Counsel,  Division  of  Corporation
Finance.  Notwithstanding the foregoing,  no Purchaser makes any representation,
warranty  or  covenant  hereby  that it will not  engage  in Short  Sales in the
securities of the Company after the time that the  transactions  contemplated by
this  Agreement  are first  publicly  announced  as  described  in Section  4.6.
Notwithstanding   the  foregoing,   in  the  case  of  a  Purchaser  that  is  a
multi-managed  investment  vehicle whereby  separate  portfolio  managers manage
separate portions of such Purchaser's  assets and the portfolio managers have no
direct  knowledge of the  investment  decisions  made by the portfolio  managers
managing other portions of such Purchaser's assets, the covenant set forth above
shall only apply with respect to the portion of assets  managed by the portfolio
manager that made the investment  decision to purchase the Securities covered by
this Agreement.

     4.17 Cash  and  Cash   Equivalents.   So  long  as  any  Debentures  remain
outstanding,  the Company and its  Subsidiaries  shall  maintain a  consolidated
cash, cash equivalents and accounts receivable balance equal to at least 125% of
the aggregate principal balance of the Debentures then outstanding. In addition,
so long as any Debentures remain outstanding, the value of the Company's and its
Subsidiaries'  consolidated inventory as set forth in its balance sheet included
in its most recent periodic  report shall exceed 80% of the aggregate  principal
balance  of the  Debentures  then  outstanding  as of the  filing  date  of such
periodic  report.  The Company's  periodic  reports pursuant to the Exchange Act
shall be dispositive  and conclusive as to whether such  requirements  have been
met.

                                   ARTICLE V.
                                  MISCELLANEOUS

     5.1  Termination.  This Agreement may be terminated by any Purchaser, as to
such Purchaser's obligations hereunder only and without any effect whatsoever on
the obligations between the Company and the other Purchasers,  by written notice
to the other  parties,  if the  Closing  has not been  consummated  on or before
January 17, 2006;  provided,  however,  that no such termination will affect the
right of any party to sue for any breach by the other party (or parties).

<PAGE>

     5.2  Fees and Expenses. At the Closing, the Company has agreed to reimburse
Bluegrass Growth Fund Partners,  LLC  ("Bluegrass") the  non-accountable  sum of
$30,000,  for its actual,  reasonable,  out-of-pocket  legal fees and  expenses,
$10,000 which shall have been paid prior to the Closing. Accordingly, in lieu of
the foregoing  payments,  the aggregate  amount that Bluegrass is to pay for the
Securities  at the  Closing  shall be  reduced by  $20,000.  The  Company  shall
deliver,  prior to the Closing,  a completed  and  executed  copy of the Closing
Statement,  attached  hereto as Annex A.  Except as  expressly  set forth in the
Transaction  Documents  to the  contrary,  each  party  shall  pay the  fees and
expenses of its advisers,  counsel,  accountants and other experts,  if any, and
all  other  expenses  incurred  by  such  party  incident  to  the  negotiation,
preparation,  execution, delivery and performance of this Agreement. The Company
shall pay all transfer agent fees, stamp taxes and other taxes and duties levied
in connection with the delivery of the Securities.

     5.3  Entire  Agreement.  The  Transaction  Documents,   together  with  the
exhibits and schedules thereto,  contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.

     5.4  Notices.  Any and all notices or other  communications  or  deliveries
required or permitted to be provided  hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of  transmission,  if
such notice or  communication is delivered via facsimile at the facsimile number
set forth on the signature  pages  attached  hereto prior to 5:30 p.m. (New York
City  time)  on a  Trading  Day,  (b) the next  Trading  Day  after  the date of
transmission,  if such notice or communication is delivered via facsimile at the
facsimile  number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day,  (c) the 2nd Trading  Day  following  the date of mailing,  if sent by U.S.
nationally  recognized  overnight courier service, or (d) upon actual receipt by
the party to whom such  notice is  required  to be given.  The  address for such
notices and communications shall be as set forth on the signature pages attached
hereto.

     5.5  Amendments;  Waivers.  No provision of this Agreement may be waived or
amended except in a written instrument  signed, in the case of an amendment,  by
the Company and each Purchaser or, in the case of a waiver, by the party against
whom  enforcement  of any such waiver is sought.  No waiver of any default  with
respect to any provision,  condition or  requirement of this Agreement  shall be
deemed to be a  continuing  waiver in the  future or a waiver of any  subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise  any right  hereunder in
any manner impair the exercise of any such right.

     5.6  Headings.  The  headings  herein  are  for  convenience  only,  do not
constitute a part of this  Agreement  and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent,  and no
rules of strict construction will be applied against any party.

     5.7  Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their  successors and permitted  assigns.  The
Company may not assign this  Agreement  or any rights or  obligations  hereunder
without the prior written  consent of each  Purchaser.  Any Purchaser may assign
any or all of its  rights  under  this  Agreement  to any  Person  to whom  such
Purchaser  assigns or transfers any Securities,  provided such transferee agrees
in  writing to be bound,  with  respect to the  transferred  Securities,  by the
provisions hereof that apply to the "Purchasers".

     5.8  No  Third-Party  Beneficiaries.  This  Agreement  is intended  for the
benefit of the parties  hereto and their  respective  successors  and  permitted
assigns and is not for the benefit of, nor may any provision  hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.11.

<PAGE>

     5.9  Governing Law. All questions  concerning the  construction,  validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance  with the internal laws of the State of
New York,  without  regard to the  principles of conflicts of law thereof.  Each
party  agrees  that  all  legal  proceedings   concerning  the  interpretations,
enforcement and defense of the  transactions  contemplated by this Agreement and
any other Transaction  Documents  (whether brought against a party hereto or its
respective Affiliates,  directors, officers, shareholders,  employees or agents)
shall be commenced  exclusively  in the state and federal  courts sitting in the
City of New  York.  Each  party  hereby  irrevocably  submits  to the  exclusive
jurisdiction  of the state and federal  courts  sitting in the City of New York,
borough  of  Manhattan  for the  adjudication  of any  dispute  hereunder  or in
connection  herewith or with any  transaction  contemplated  hereby or discussed
herein  (including  with respect to the  enforcement  of any of the  Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action  or  proceeding,  any  claim  that it is not  personally  subject  to the
jurisdiction of any such court, that such suit, action or proceeding is improper
or inconvenient venue for such proceeding.  Each party hereby irrevocably waives
personal  service of process and  consents to process  being  served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or  overnight  delivery  (with  evidence of  delivery) to such party at the
address in effect for  notices to it under this  Agreement  and agrees that such
service  shall  constitute  good and  sufficient  service of process  and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to serve  process in any manner  permitted by law. The parties  hereby waive all
rights  to a trial  by jury.  If  either  party  shall  commence  an  action  or
proceeding to enforce any  provisions  of the  Transaction  Documents,  then the
prevailing  party in such action or proceeding  shall be reimbursed by the other
party for its reasonable fees and other costs and expenses, including attorneys'
fees,  incurred with the  investigation,  preparation  and  prosecution  of such
action or proceeding.

     5.10 Survival.  The representations  and warranties  contained herein shall
survive  the  Closing  and  the  delivery,  exercise  and/or  conversion  of the
Securities, as applicable, for the applicable statue of limitations.

     5.11 Execution. This Agreement may be executed in two or more counterparts,
all of which when taken  together shall be considered one and the same agreement
and shall become effective when  counterparts have been signed by each party and
delivered to the other  party,  it being  understood  that both parties need not
sign the same  counterpart.  In the event that any  signature  is  delivered  by
facsimile  transmission,  such  signature  shall  create  a  valid  and  binding
obligation  of the  party  executing  (or on  whose  behalf  such  signature  is
executed)  with the same force and effect as if such  facsimile  signature  page
were an original thereof.

     5.12 Severability. If any provision of this Agreement is held to be invalid
or  unenforceable  in  any  respect,  the  validity  and  enforceability  of the
remaining  terms  and  provisions  of  this  Agreement  shall  not in any way be
affected or impaired  thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor,  and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

     5.13 Rescission  and  Withdrawal  Right.  Notwithstanding  anything  to the
contrary  contained in (and  without  limiting  any similar  provisions  of) the
Transaction  Documents,  whenever  any  Purchaser  exercises a right,  election,
demand or option  under a  Transaction  Document and the Company does not timely
perform its related  obligations within the periods therein provided,  then such
Purchaser 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;  provided,
however,  in the case of a rescission of a conversion of a Debenture or exercise
of a Warrant,  the  Purchaser  shall be  required to return any shares of Common
Stock subject to any such rescinded conversion or exercise notice.

     5.14 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

<PAGE>

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.

     5.15 Remedies.  In  addition  to being  entitled  to  exercise  all  rights
provided herein or granted by law,  including  recovery of damages,  each of the
Purchasers  and the Company will be entitled to specific  performance  under the
Transaction  Documents.  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.

     5.16 Payment Set Aside.  To the extent that the Company  makes a payment or
payments to any Purchaser  pursuant to any  Transaction  Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such  enforcement  or exercise or any part thereof are  subsequently
invalidated,  declared to be fraudulent or  preferential,  set aside,  recovered
from, disgorged by or are required to be refunded,  repaid or otherwise restored
to the  Company,  a  trustee,  receiver  or  any  other  person  under  any  law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable  cause of action),  then to the extent of any such  restoration
the  obligation  or part thereof  originally  intended to be satisfied  shall be
revived and  continued  in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

     5.17 Usury.  To the extent it may lawfully do so, the Company hereby agrees
not to insist upon or plead or in any manner  whatsoever  claim, and will resist
any and all efforts to be compelled  to take the benefit or advantage  of, usury
laws wherever enacted, now or at any time hereafter in force, in connection with
any claim, action or proceeding that may be brought by any Purchaser in order to
enforce any right or remedy under any Transaction Document.  Notwithstanding any
provision to the contrary contained in any Transaction Document, it is expressly
agreed  and  provided  that  the  total  liability  of  the  Company  under  the
Transaction  Documents  for payments in the nature of interest  shall not exceed
the maximum lawful rate authorized  under  applicable law (the "Maximum  Rate"),
and, without  limiting the foregoing,  in no event shall any rate of interest or
default  interest,  or both of them,  when aggregated with any other sums in the
nature  of  interest  that  the  Company  may  be  obligated  to pay  under  the
Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum
contract  rate of  interest  allowed by law and  applicable  to the  Transaction
Documents is  increased  or  decreased  by statute or any official  governmental
action subsequent to the date hereof,  the new maximum contract rate of interest
allowed by law will be the Maximum Rate applicable to the Transaction  Documents
from the  effective  date  forward,  unless such  application  is  precluded  by
applicable law. If under any circumstances whatsoever, interest in excess of the
Maximum  Rate  is  paid  by  the  Company  to  any  Purchaser  with  respect  to
indebtedness  evidenced  by the  Transaction  Documents,  such  excess  shall be
applied  by  such  Purchaser  to  the  unpaid  principal  balance  of  any  such
indebtedness  or be refunded to the Company,  the manner of handling such excess
to be at such Purchaser's election.

     5.18 Independent   Nature  of  Purchasers'   Obligations  and  Rights.  The
obligations of each Purchaser under any Transaction Document are several and not
joint with the  obligations of any other  Purchaser,  and no Purchaser  shall be
responsible  in any way for the  performance  of the  obligations  of any  other
Purchaser under any Transaction  Document.  Nothing  contained  herein or in any
Transaction  Document,  and no action taken by any Purchaser  pursuant  thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint  venture  or any other kind of entity,  or create a  presumption  that the
Purchasers  are in any way acting in concert or as a group with  respect to such
obligations or the transactions  contemplated by the Transaction Documents. Each
Purchaser  shall be  entitled to  independently  protect and enforce its rights,
including without  limitation the rights arising out of this Agreement or out of
the other  Transaction  Documents,  and it shall not be necessary  for any other
Purchaser  to be  joined  as an  additional  party  in any  proceeding  for such
purpose.  Each Purchaser has been  represented by its own separate legal counsel

<PAGE>

in their review and  negotiation of the  Transaction  Documents.  For reasons of
administrative  convenience only,  Purchasers and their respective  counsel have
chosen to communicate  with the Company through FW. FW does not represent all of
the  Purchasers  but only  Bluegrass.  The  Company  has  elected to provide all
Purchasers with the same terms and Transaction  Documents for the convenience of
the  Company  and not  because  it was  required  or  requested  to do so by the
Purchasers.

     5.19 Liquidated  Damages.  The  Company's  obligations  to pay any  partial
liquidated  damages or other amounts owing under the Transaction  Documents is a
continuing  obligation of the Company and shall not  terminate  until all unpaid
partial liquidated damages and other amounts have been paid  notwithstanding the
fact that the instrument or security  pursuant to which such partial  liquidated
damages or other amounts are due and payable shall have been canceled.

     5.20 Construction.  The  parties  agree  that  each  of them  and/or  their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved  against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.

                            (Signature Pages Follow)

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective  authorized  signatories as of
the date first indicated above.

ELECTRONIC CONTROL SECURITY, INC.                    Address for Notice:

By: /s/ Arthur Barchenko                             790 Bloomfield Avenue,
    ----------------------                           Bldg. C-1
    Name: Arthur Barchenko                           Clifton, NJ 07012
    Title: President                                 Attn: Mr. Arthur Barchenko,
                                                     President

With a copy to (which shall not constitute notice):
Greenberg Traurig, LLP
MetLife Building
200 Park Avenue, 15th Floor
New York, NY 10166
Attn: Spencer G. Feldman, Esq.

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                      SIGNATURE PAGE FOR PURCHASER FOLLOWS]

<PAGE>

     [PURCHASER SIGNATURE PAGES TO EKCS SECURITIES PURCHASE AGREEMENT]

     IN WITNESS WHEREOF,  the undersigned  have caused this Securities  Purchase
Agreement to be duly executed by their respective  authorized  signatories as of
the date first indicated above.

Name of Purchaser:
                  --------------------------------------------------------------
Signature of Authorized Signatory of Purchaser:
                                               ---------------------------------
Name of Authorized Signatory:
                             ---------------------------------------------------
Title of Authorized Signatory:
                              --------------------------------------------------
Email Address of Purchaser:
                           -----------------------------------------------------

Address for Notice of Purchaser:

Address for Delivery of Securities for Purchaser (if not same as above):

Subscription Amount:
Warrant Shares:
EIN Number:

                           [SIGNATURE PAGES CONTINUE]

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