Document:

SECURITIES PURCHASE

                                   AGREEMENT

                           Dated as of March 27, 2003

                                     among

                              INTELLI-CHECK, INC.

                                      and

                       THE PURCHASERS LISTED ON EXHIBIT A

<PAGE>

ARTICLE I       Purchase and Sale of Preferred Stock and Warrants              1

Section 1.1     Purchase and Sale of Preferred Stock and Warrants              1
Section 1.2     Purchase Price and Closing                                     1
Section 1.3     Warrants                                                       1
Section 1.4     Conversion Shares and Warrant Shares                           2

ARTICLE II      Representations and Warranties                                 2

Section 2.1     Representations and Warranties of the Company                  2
Section 2.2     Representations and Warranties of the Purchasers              12

ARTICLE III     Covenants                                                     14

Section 3.1     Securities Compliance                                         14
Section 3.2     Registration and Listing                                      14
Section 3.3     Inspection Rights                                             14
Section 3.4     Compliance with Laws                                          15
Section 3.5     Keeping of Records and Books of Account                       15
Section 3.6     Reporting Requirements                                        15
Section 3.7     Other Agreements                                              15
Section 3.8     Subsequent Financings; Right of First Refusal                 15
Section 3.9     Reservation of Shares                                         16
Section 3.10    Confidentiality                                               16

ARTICLE IV      Conditions                                                    17

Section 4.1     Conditions  Precedent to the Obligation of the Company to
                Close and to Sell the Shares and Warrants                     17

Section 4.2     Conditions Precedent to the Obligation of the Purchasers to
                Close and to Purchase the Shares and Warrants                 18

ARTICLE V       Certificate Legend                                            21

Section 5.1     Legend                                                        21

ARTICLE VI      Termination                                                   22

Section 6.1     Termination by Mutual Consent.  This Agreement may be
                terminated at any time prior to the  Closing  Date by
                the mutual  written  consent of the Company and the
                Purchaser.                                                    22

Section 6.2     Effect of Termination                                         22

ARTICLE VII     Indemnification                                               22

                                      -i-
<PAGE>

Section 7.1     General Indemnity                                             22

Section 7.2     Indemnification Procedure                                     22

ARTICLE VIII    Miscellaneous                                                 24

Section 8.1     Fees and Expenses                                             24

Section 8.2     Specific Enforcement; Consent to Jurisdiction.                24

Section 8.3     Entire Agreement; Amendment                                   25

Section 8.4     Notices                                                       25

Section 8.5     Waivers                                                       26

Section 8.6     Headings                                                      26

Section 8.7     Successors and Assigns                                        26

Section 8.8     No Third Party Beneficiaries                                  26

Section 8.9     Governing Law                                                 26

Section 8.10    Survival                                                      26

Section 8.11    Counterparts                                                  27

Section 8.12    Publicity                                                     27

Section 8.13    Severability                                                  27

Section 8.14    Further Assurances                                            27

                                      -ii-
<PAGE>
                         SECURITIES PURCHASE AGREEMENT

     This SECURITIES  PURCHASE AGREEMENT this  ("Agreement"),  dated as of March
27,  2003,  by and between  Intelli-Check,  Inc.,  a Delaware  corporation  (the
"Company"),  and the entities listed on Exhibit A hereto (each a "Purchaser" and
collectively, the "Purchasers"),  for the purchase and sale by the Purchasers of
shares of the Company's Series A 8% Convertible  Preferred Stock, par value $.01
per share (the  "Preferred  Stock"),  and  warrants  to  purchase  shares of the
Company's  common  stock,  par value $.001 per share (the "Common  Stock").

     The parties hereto agree as follows:

                                   ARTICLE I

               Purchase and Sale of Preferred Stock and Warrants

     Section 1.1  Purchase and Sale of Preferred  Stock and  Warrants.  Upon the
following  terms  and  conditions,  the  Company  shall  issue  and  sell to the
Purchasers, and the Purchasers shall purchase from the Company, 30,000 shares of
Preferred  Stock (the  "Shares")  at a price per share of $100 for an  aggregate
purchase price of $3,000,000  (the "Purchase  Price"),  and warrants to purchase
shares of Common Stock, in  substantially  the form attached hereto as Exhibit B
(the  "Warrants").  The Company and the  Purchasers are executing and delivering
this  Agreement  in  accordance  with and in reliance  upon the  exemption  from
securities  registration  afforded by Section 4(2) of the U.S. Securities Act of
1933, as amended,  and the rules and  regulations  promulgated  thereunder  (the
"Securities  Act"),  including  Regulation D ("Regulation  D"), and/or upon such
other exemption from the registration  requirements of the Securities Act as may
be available with respect to any or all of the investments to be made hereunder.
The  Preferred  Stock shall have such powers,  preferences  and rights,  and the
qualifications,  limitations  or  restrictions  thereof,  as  set  forth  in the
Certificate of Designation of Series A 8% Convertible  Preferred  Stock attached
hereto as Exhibit D,  subject to the  applicable  terms and  conditions  of this
Agreement and the Registration Rights Agreement (as defined below).

     Section 1.2  Purchase  Price and Closing.  The Company  agrees to issue and
sell to the Purchasers and, in consideration of and in express reliance upon the
representations,  warranties, covenants, terms and conditions of this Agreement,
the  Purchasers,  severally  but not  jointly,  agree to purchase  the number of
Shares and Warrants set forth opposite their  respective names on Exhibit A. The
closing of the  purchase  and sale of the Shares and  Warrants to be acquired by
the  Purchasers  from the Company under this  Agreement  shall take place at the
offices of the Company  located at 246 Crossways Park West,  Woodbury,  New York
11797 (the  "Closing")  at 10:00 a.m.,  Eastern  Standard  Time (i) on or before
March 27, 2003,  provided,  that all of the  conditions  set forth in Article IV
hereof and  applicable  to the Closing  shall have been  fulfilled  or waived in
accordance herewith, or (ii) at such other time and place or on such date as the
Purchasers and the Company may agree upon (the "Closing Date").

     Section  1.3  Warrants.  At the  Closing,  the  Company  shall issue to the
Purchasers  Warrants to purchase an aggregate of 113,636 shares of Common Stock.
The Warrants shall be  exercisable  for five (5) years from the date of issuance

<PAGE>

and shall have an exercise price equal to one hundred percent (100%) of the last
sales price (regular way during normal trading hours) of the Common Stock on the
trading day immediately preceding the Closing Date.

     Section  1.4  Conversion  Shares  and  Warrant  Shares.   The  Company  has
authorized  and  reserved  and  covenants  to continue  to  reserve,  out of its
authorized  but unissued  Common  Stock or its Common Stock held in treasury,  a
number  of shares of Common  Stock  equal to the  aggregate  number of shares of
Common Stock  necessary to effect the conversion of the Preferred  Stock and the
exercise of the Warrants.  The Company  shall,  from time to time, in accordance
with  the  General  Corporation  Law of the  State  of  Delaware,  increase  the
authorized  amount of its Common Stock if at any time the  authorized  amount of
its  Common  Stock  remaining  unissued  shall not be  sufficient  to permit the
conversion  of all  shares  of the  Preferred  Stock  at the  time  outstanding,
subject,  however,  to  stockholder  approval.  If any  shares of  Common  Stock
required to be reserved for issuance upon  conversion of shares of the Preferred
Stock  or  exercise  of the  Warrants  hereunder  require  registration  with or
approval of any governmental authority under any federal or state law before the
shares may be issued,  the Company will cause the shares to be so registered and
approved.  All shares of Common Stock delivered upon conversion of the Preferred
Stock or exercise of the Warrants shall,  upon delivery,  be duly authorized and
validly issued,  fully paid and  nonassessable,  free from all taxes,  liens and
charges with respect to the issue  thereof.  Any shares of Common Stock issuable
upon  conversion of the Preferred Stock (and such shares when issued) are herein
referred to as the "Conversion Shares". Any shares of Common Stock issuable upon
exercise of the Warrants (and such shares when issued) are herein referred to as
the "Warrant Shares".  The Shares,  the Conversion  Shares, the Warrants and the
Warrant   Shares  are   sometimes   collectively   referred  to  herein  as  the
"Securities".

                                   ARTICLE II

                         Representations and Warranties

     Section 2.1  Representations  and  Warranties  of the Company.  In order to
induce the  Purchasers  to enter into this  Agreement and to purchase the Shares
and  Warrants,  the  Company  hereby  makes the  following  representations  and
warranties to the Purchasers:

     (a)  Organization,  Good  Standing and Power.  The Company is a corporation
duly  incorporated,  validly existing and in good standing under the laws of the
State of  Delaware  and has the  requisite  corporate  power to own,  lease  and
operate its properties and assets and to conduct its business as it is now being
conducted.  The Company  does not have any  Subsidiaries  (as defined in Section
2.1(g)) or own  securities of any kind in any other entity,  except as set forth
on  Schedule  2.1(g)  hereto.  The  Company  is  duly  qualified  as  a  foreign
corporation  to do business  and is in good  standing in every  jurisdiction  in
which the nature of the business  conducted  or property  owned by it makes such
qualification  necessary,  except  for  any  jurisdiction(s)  (alone  or in  the
aggregate)  in which the  failure  to be so  qualified  will not have a Material
Adverse Effect.  For the purposes of this Agreement,  "Material  Adverse Effect"
means,  with  respect  to the  Company,  any  adverse  effect  on the  business,

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<PAGE>

operations, assets, prospects or financial condition of the Company and which is
material to the Company or which is likely to materially  hinder the performance
by the  Company of its  obligations  hereunder  and under the other  Transaction
Documents (as defined in Section 2.1(b) hereof).

     (b)  Authorization;  Enforcement.  The Company has the requisite  corporate
power and authority to enter into and perform this Agreement,  the  Registration
Rights  Agreement,   the  Warrants,  and  the  other  agreements  and  documents
contemplated  hereby and  thereby  and  executed  by the Company or to which the
Company is party (collectively,  the "Transaction Documents"),  and to issue and
sell the  Shares and the  Warrants  in  accordance  with the terms  hereof.  The
execution,  delivery and performance of the Transaction Documents by the Company
and the  consummation by it of the transactions  contemplated  thereby have been
duly and validly  authorized by all necessary  corporate action,  and, except as
set forth in Schedule 2.1(b), no further consent or authorization of the Company
or its Board of Directors or stockholders  is required.  This Agreement has been
duly executed and delivered by the Company. The other Transaction Documents will
have been duly executed and delivered by the Company at the Closing. Each of the
Transaction  Documents  constitutes,  or  shall  constitute  when  executed  and
delivered, a valid and binding obligation of the Company enforceable against the
Company in  accordance  with its  terms,  except as such  enforceability  may be
limited  by  applicable  bankruptcy,  reorganization,  moratorium,  liquidation,
conservatorship,   receivership  or  similar  laws  relating  to,  or  affecting
generally the  enforcement  of,  creditor's  rights and remedies or by equitable
principles or remedies of general application.

     (c)  Capitalization.  The  authorized  capital stock of the Company and the
shares  thereof  currently  issued and  outstanding as of March 21, 2003 are set
forth on Schedule 2.1(c) hereto.  All of the outstanding shares of the Company's
Common  Stock and any other  security of the Company  have been duly and validly
authorized.  Except as set forth on Schedule 2.1(c) hereto,  no shares of Common
Stock or any other security of the Company are entitled to preemptive  rights or
registration  rights  and there are no  outstanding  options,  warrants,  scrip,
rights to subscribe to, call or commitments of any character whatsoever relating
to, or securities or rights convertible into, any shares of capital stock of the
Company.  Furthermore,  except as set forth on Schedule  2.1(c) hereto or in any
Commission   Documents  (as  defined  below)  and  except  for  the  Transaction
Documents, there are no contracts, commitments,  understandings, or arrangements
by which the Company is or may become  bound to issue  additional  shares of the
capital stock of the Company or options,  securities or rights  convertible into
shares  of  capital  stock  of  the  Company.   Except  for  customary  transfer
restrictions  contained  in  agreements  entered into by the Company in order to
sell  restricted  securities or as provided on Schedule 2.1(c) hereto and except
as disclosed in any Commission Documents, the Company is not a party to or bound
by any agreement or understanding  granting registration or anti-dilution rights
to any person with  respect to any of its equity or debt  securities.  Except as
set forth on Schedule 2.1(c) or in any Commission Documents,  the Company is not
a  party  to,  and  it has no  knowledge  of,  any  agreement  or  understanding
restricting  the voting or transfer  of any shares of the  capital  stock of the
Company.  Except as set forth on  Schedule  2.1(c)  hereto or in any  Commission
Documents,  the offer and sale of all  capital  stock,  convertible  securities,
rights, warrants, or options of the Company issued prior to the Closing complied
with all applicable federal and state securities laws, and to the best knowledge
of the Company,  no holder of such  securities  has a right of rescission or has
made or  threatened  to make a claim for  rescission  or  damages  with  respect
thereto which could have a Material Adverse Effect. The Company has furnished or

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<PAGE>

made  available  to the  Purchasers  true and  correct  copies of the  Company's
Certificate   of   Incorporation   as  in  effect  on  the  date   hereof   (the
"Certificate"),  and the  Company's  Bylaws as in effect on the date hereof (the
"Bylaws").

     (d) Issuance of Securities. The Shares and the Warrants to be issued at the
Closing have been duly  authorized by all necessary  corporate  action and, when
paid for or issued in  accordance  with the terms  hereof,  the Shares  shall be
validly issued and outstanding,  fully paid and nonassessable and free and clear
of all  liens,  encumbrances  and  rights of first  refusal  of any kind and the
holders shall be entitled to all rights accorded to a holder of Preferred Stock.
When the  Conversion  Shares  are  issued  in  accordance  with the terms of the
Preferred Stock, such shares will be duly authorized by all necessary  corporate
action and validly issued and outstanding,  fully paid and  nonassessable,  free
and clear of all liens, encumbrances and rights of first refusal of any kind and
the  holders  shall be  entitled  to all rights  accorded  to a holder of Common
Stock.  When the Warrant  Shares are issued and paid for in accordance  with the
terms of this  Agreement and as set forth in the  Warrants,  such shares will be
duly  authorized  by all  necessary  corporate  action  and  validly  issued and
outstanding,  fully  paid  and  nonassessable,  free  and  clear  of all  liens,
encumbrances  and rights of first  refusal of any kind and the holders  shall be
entitled to all rights accorded to a holder of Common Stock.

     (e)  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) violate any
provision of the  Certificate  or Bylaws,  (ii)  conflict  with, or constitute a
default (or an event  which with notice or lapse of time or both would  become a
default)  under,  or  give to  others  any  rights  of  termination,  amendment,
acceleration  or  cancellation  of,  any  agreement,  mortgage,  deed of  trust,
indenture,  note, bond,  license,  lease agreement,  instrument or obligation to
which the Company is a party or by which the Company's  properties or assets are
bound, (iii) create or impose a lien,  mortgage,  security  interest,  charge or
encumbrance  of any nature on any  property  or asset of the  Company  under any
agreement  or any  commitment  to which the  Company  is a party or by which the
Company is bound or by which any of their  respective  properties  or assets are
bound,  or (iv) result in a violation  of any federal,  state,  local or foreign
statute,  rule,  regulation,  order,  judgment or decree (including  federal and
state securities laws and regulations) applicable to the Company or by which any
property  or asset of the  Company is bound or  affected,  except,  in all cases
other than  violations  pursuant to clauses (i) or (iv) (with respect to federal
and state securities laws) above,  for such conflicts,  defaults,  terminations,
amendments,   acceleration,   cancellations   and   violations   as  would  not,
individually or in the aggregate,  have a Material Adverse Effect.  The business
of the Company is not being  conducted in violation of any laws,  ordinances  or
regulations of any  governmental  entity,  except for possible  violations which
singularly  or in the  aggregate  do not and will not  have a  Material  Adverse
Effect. The Company is not required under federal,  state, foreign or local law,
rule or regulation to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to
execute,  deliver  or  perform  any of its  obligations  under  the  Transaction
Documents or issue and sell the Shares,  the Conversion  Shares, the Warrants or
the Warrant  Shares in accordance  with the terms hereof or thereof  (other than
any filings which may be required to be made by the Company with the  Securities
and Exchange Commission (the "Commission"), the American Stock Exchange prior to
or subsequent to the Closing, or state securities  administrators  subsequent to
the Closing, or any registration statement which may be filed pursuant hereto or
thereto).

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<PAGE>

     (f) Commission Documents;  Commission Filings;  Financial  Statements.  The
Common Stock is registered  pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"),  and, except as disclosed
on Schedule 2.1(f) hereto, the Company has timely filed all reports,  schedules,
forms,  statements  and  other  documents  required  to be  filed by it with the
Commission pursuant to the reporting requirements of the Exchange Act, including
material  filed  pursuant to Section  13(a) or 15(d) of the Exchange Act (all of
the  foregoing,  including  filings  incorporated  by reference  therein,  being
referred to herein as the "Commission Documents").  The Company has delivered or
made  available to the  Purchasers  true and complete  copies of the  Commission
Documents filed with the Commission since December 31, 2000. The Company has not
provided  to  the  Purchasers  any  material  non-public  information  or  other
information which, according to applicable law, rule or regulation,  should have
been  disclosed  publicly by the  Company  but which has not been so  disclosed,
other than with respect to the transactions  contemplated by this Agreement.  At
the time of its filing, the Form 10-Q for the fiscal quarter ended September 30,
2002 (the "Form 10-Q") complied in all material  respects with the  requirements
of the Exchange Act and the rules and regulations of the Commission  promulgated
thereunder  and  other  federal,  state and local  laws,  rules and  regulations
applicable  to such  documents,  and the Form 10-Q did not  contain  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. At the time of its
filing,  the Form 10-K for the fiscal  year ended  December  31, 2001 (the "Form
10-K") complied in all material  respects with the  requirements of the Exchange
Act and the rules and regulations of the Commission  promulgated  thereunder and
other federal,  state and local laws,  rules and regulations  applicable to such
documents,  and the Form 10-K did not contain 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.  As of their  respective  dates, the
financial  statements  of  the  Company  included  in the  Commission  Documents
complied  as to  form  in  all  material  respects  with  applicable  accounting
requirements  and the published rules and regulations of the Commission or other
applicable rules and regulations with respect thereto. Such financial statements
have been prepared in accordance with generally accepted  accounting  principles
("GAAP")  applied on a consistent  basis during the periods involved (except (i)
as may be otherwise indicated in such financial  statements or the Notes thereto
or (ii) in the case of unaudited interim statements,  to the extent they may not
include footnotes or may be condensed or summary statements), and fairly present
in all material  respects the financial  position of the Company as of the dates
thereof and the results of operations  and cash flows for the periods then ended
(subject,  in the  case  of  unaudited  statements,  to  normal  year-end  audit
adjustments).

     (g) Subsidiaries. The Company has no Subsidiaries. For the purposes of this
Agreement,  "Subsidiary"  shall mean any corporation or other entity of which at
least a majority of the securities or other  ownership  interest having ordinary
voting power (absolutely or contingently) for the election of directors or other
persons  performing  similar  functions  are  at  the  time  owned  directly  or
indirectly by the Company and/or any of its other Subsidiaries.

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<PAGE>

     (h) No Material  Adverse Change.  Since September 30, 2002, the Company has
not experienced or suffered any Material Adverse Effect,  except as disclosed on
Schedule 2.1(h) hereto.

     (i) No  Undisclosed  Liabilities.  Except as disclosed  on Schedule  2.1(i)
hereto, the Company has no liabilities,  obligations,  claims or losses (whether
liquidated or unliquidated,  secured or unsecured, absolute, accrued, contingent
or otherwise)  other than those set forth on the balance  sheet  included in the
Form 10-Q or incurred in the ordinary  course of the  Company's  business  since
September 30, 2002 and which,  individually or in the aggregate, do not or would
not have a Material Adverse Effect on the Company.

     (j) No  Undisclosed  Events or  Circumstances.  Since  September  30, 2002,
except as disclosed on Schedule  2.1(j)  hereto,  no event or  circumstance  has
occurred or exists  with  respect to the  Company or its  business,  properties,
prospects,  operations or financial condition, which, under applicable law, rule
or regulation,  requires  public  disclosure or  announcement by the Company but
which has not been so publicly announced or disclosed.

     (k)  Indebtedness.  Schedule 2.1(k) hereto sets forth as of the date hereof
all outstanding secured and unsecured  Indebtedness of the Company, or for which
the  Company  has  commitments,  which  Indebtedness  is  not  disclosed  in any
Commission Documents.  For the purposes of this Agreement,  "Indebtedness" shall
mean (a) any  liabilities  for borrowed money in excess of $100,000  (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 in excess of  $100,000,  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 $100,000 due under leases
required to be  capitalized  in  accordance  with GAAP.  Except as  disclosed on
Schedule  2.1(k) or in any Commission  Documents,  the Company is not in default
with respect to any Indebtedness.

     (l) Title to Assets.  The Company has good and  marketable  title to all of
its real  and  personal  property,  free and  clear of any  mortgages,  pledges,
charges,   liens,  security  interests  or  other  encumbrances  of  any  nature
whatsoever, except for those indicated on Schedule 2.1(l) hereto or disclosed in
any Commission Documents or such that,  individually or in the aggregate, do not
have a Material Adverse Effect. All material leases of the Company are valid and
subsisting and in full force and effect.

     (m) Actions  Pending.  Except as set forth in the  Commission  Documents or
Schedule  2.1(m)  hereto,  there  is  no  action,  suit,  claim,  investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the  knowledge  of the  Company,  threatened  against the  Company  which
questions  the  validity  of  this  Agreement  or any of the  other  Transaction
Documents  or any of the  transactions  contemplated  hereby or  thereby  or any
action taken or to be taken pursuant  hereto or thereto.  Except as set forth in
any Commission  Document or on Schedule  2.1(m) hereto:  (i) there is no action,
suit, claim, investigation, arbitration, alternate dispute resolution proceeding

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or other  proceeding  pending or, to the  knowledge of the  Company,  threatened
against or  involving  the  Company or any of its  properties  or assets,  which
individually or in the aggregate, would have a Material Adverse Effect, and (ii)
there are no outstanding orders,  judgments,  injunctions,  awards or decrees of
any court,  arbitrator or governmental or regulatory body against the Company or
any  officers or  directors of the Company in their  capacities  as such,  which
individually, or in the aggregate, would have a Material Adverse Effect.

     (n)  Compliance  with Law.  The  business  of the  Company  has been and is
presently being conducted in accordance with all applicable  federal,  state and
local governmental laws, rules, regulations and ordinances,  except as set forth
in  the  Commission  Documents  or on  Schedule  2.1(n)  hereto  or  such  that,
individually or in the aggregate,  the noncompliance  therewith would not have a
Material  Adverse  Effect.  The Company has all franchises,  permits,  licenses,
consents and other  governmental  or  regulatory  authorizations  and  approvals
necessary  for the conduct of its  business as now being  conducted by it unless
the failure to possess such franchises,  permits,  licenses,  consents and other
governmental or regulatory authorizations and approvals,  individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.

     (o) Taxes.  Except as set forth on Schedule  2.1(o)  hereto or disclosed in
the  Commission  Documents,  the Company has  accurately  prepared and filed all
federal, state and other tax returns required by law to be filed by it, has paid
or  made  provisions  for  the  payment  of all  taxes  shown  to be due and all
additional  assessments,  and adequate provisions have been and are reflected in
the financial  statements of the Company for all current taxes and other charges
to which the Company is subject  and which are not  currently  due and  payable.
Except as disclosed on Schedule  2.1(o)  hereto,  none of the federal income tax
returns of the Company have been audited by the Internal Revenue Service. Except
as disclosed in the  Commission  Documents,  the Company has no knowledge of any
additional assessments, adjustments or contingent tax liability (whether federal
or state) of any nature  whatsoever,  whether pending or threatened  against the
Company for any period, nor of any basis for any such assessment,  adjustment or
contingency.

     (p)  Certain  Fees.  Except as set forth on  Schedule  2.1(p)  hereto,  the
Company has not employed any broker or finder or incurred any  liability for any
brokerage or investment banking fees,  commissions,  finders'  structuring fees,
financial advisory fees or other similar fees in connection with the Transaction
Documents.

     (q)  Disclosure.  To the  best of the  Company's  knowledge,  neither  this
Agreement  or any  Transaction  Document  contains  any  untrue  statement  of a
material fact or omits to state a material  fact  necessary in order to make the
statements made herein or therein, in the light of the circumstances under which
they were made herein or therein, not misleading.

     (r) Intellectual Property.  Schedule 2.1(r) contains a complete and correct
list of all patents,  trademarks,  domain names (whether or not  registered) and
any patentable improvements or copyrightable derivative works thereof,  websites
and intellectual  property rights relating thereto,  service marks, trade names,
copyrights,  licenses  and  authorizations,  and all rights with  respect to the
foregoing held by the Company  (collectively,  the  "Proprietary  Rights").  The
Company owns or possesses all the  Proprietary  Rights,  which are necessary for
the conduct of its  business as now  conducted  without  any  conflict  with the
rights of others.  Except as disclosed in the  Commission  Documents or Schedule
2.1(r)  hereto,  (i) as of the  date  of this  Agreement,  the  Company  has not

                                       7
<PAGE>

received  any written  notice  that any  Proprietary  Rights have been  declared
unenforceable or otherwise invalid by any court or governmental agency, and (ii)
as of the date of this Agreement,  there is, to the knowledge of the Company, no
material existing  infringement,  misuse or  misappropriation of any Proprietary
Rights by others that could have a Material  Adverse Effect.  From September 30,
2002 to the date of this  Agreement,  the Company has not  received  any written
notice  alleging that the operation of the business of the Company  infringes in
any material respect upon the intellectual property rights of others.

     (s) Environmental Compliance. Except as disclosed on Schedule 2.1(s) hereto
or the Commission  Documents,  the Company has obtained all material  approvals,
authorization,  certificates,  consents,  licenses,  orders and permits or other
similar  authorizations  of all  governmental  authorities,  or from  any  other
person,  that are required under any Environmental  Laws. Schedule 2.1(s) hereto
sets forth all material permits,  licenses and other authorizations issued under
any Environmental Laws to the Company.  "Environmental Laws" shall mean all U.S.
Federal or state laws  applicable to the Company  relating to the  protection of
the environment including,  without limitation,  all requirements  pertaining to
reporting,  licensing,  permitting,  controlling,  investigating  or remediating
emissions,  discharges, releases or threatened releases of hazardous substances,
chemical substances, pollutants,  contaminants or toxic substances, materials or
wastes, whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture,  processing,  distribution,
use,  treatment,   storage,   disposal,   transport  or  handling  of  hazardous
substances, chemical substances,  pollutants,  contaminants or toxic substances,
material or wastes,  whether solid,  liquid or gaseous in nature.  Except as set
forth on Schedule  2.1(s)  hereto,  the Company has all  necessary  governmental
approvals required under all Environmental Laws and used in its business, except
for such instances as would not individually or in the aggregate have a Material
Adverse Effect.  The Company is also in compliance  with all other  limitations,
restrictions,  conditions,  standards,  requirements,  schedules and  timetables
required or imposed under all Environmental Laws where non-compliance could have
a Material  Adverse Effect.  Except for such instances as would not individually
or in the  aggregate  have a  Material  Adverse  Effect or as  disclosed  in the
Commission  Documents,   there  are  no  past  or  present  events,  conditions,
circumstances,  incidents,  actions  or  omissions  relating  to or in  any  way
affecting  the Company that violate or may violate any  Environmental  Law after
the Closing or that may give rise to any Environmental Liabilities, or otherwise
form the basis of any claim, action, demand, suit, proceeding, hearing, study or
investigation  (i) under any  Environmental  Law, or (ii) based on or related to
the manufacture,  processing,  distribution, use, treatment, storage (including,
without limitation, underground storage tanks), disposal, transport or handling,
or the  emission,  discharge,  release or  threatened  release of any  hazardous
substance.  "Environmental  Liabilities"  means  all  liabilities  of  a  person
(whether such  liabilities are owed by such person to governmental  authorities,
third  parties or  otherwise)  currently in existence or arising  hereafter  and
which arise under or relate to any Environmental Law.

     (t) Books and Records; Internal Accounting Controls. The books, records and
documents  of the  Company  accurately  reflect  in all  material  respects  the
information relating to the business of the Company, the location and collection
of  their  assets,  and  the  nature  of all  transactions  giving  rise  to the
obligations  or accounts  receivable  of the  Company.  The Company  maintains a
system of  internal  accounting  controls  sufficient,  in the  judgment  of the
Company's  board  of  directors,   to  provide  reasonable  assurance  that  (i)
transactions  are executed in accordance with  management's  general or specific

                                       8
<PAGE>

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 actions are taken with respect to any differences.

     (u) Material  Agreements.  Except for the  Transaction  Documents or as set
forth on Schedule  2.1(u) hereto,  or those that are included as exhibits to the
Commission  Documents,  the  Company  is not a  party  to any  written  or  oral
contract, instrument, agreement, commitment,  obligation, plan or arrangement, a
copy of which would be required to be filed with the  Commission  if the Company
were registering  securities under the Securities Act  (collectively,  "Material
Agreements").  Except as set forth in the  Commission  Documents  or on Schedule
2.1(u)  hereto,  the  Company has in all  material  respects  performed  all the
obligations  required  to be  performed  by  them to date  under  the  foregoing
agreements, have received no notice of default and, to the best of the Company's
knowledge,  are not in default under any Material  Agreement now in effect,  the
result of which  could  cause a  Material  Adverse  Effect.  No  written or oral
contract, instrument,  agreement (other than the Certificate of Designation with
respect  to  the  Preferred  Stock,  this  Agreement  or any  other  Transaction
Document(s)), commitment, obligation (other than any obligation imposed by state
law),  plan or  arrangement  of the Company limits or shall limit the payment of
dividends on its Common Stock.

     (v) Transactions  with  Affiliates.  Except as set forth on Schedule 2.1(v)
hereto or  disclosed  in any of the  Commission  Documents,  there are no loans,
leases,  agreements,  contracts,  royalty  agreements,  management  contracts or
arrangements or other continuing  transactions between (i) the Company or any of
its customers or  suppliers,  on the one hand,  and (ii) on the other hand,  any
officer,  employee,  consultant or director of the Company, or any person owning
any capital stock of the Company or any member of the  immediate  family of such
officer,  employee,  consultant,  director or stockholder or any  corporation or
other entity  controlled  by such  officer,  employee,  consultant,  director or
stockholder.

     (w) Securities Act of 1933.  Assuming the accuracy and  completeness of the
representations,  warranties and covenants of the Purchasers  contained  herein,
the Company has complied and will comply with all  applicable  federal and state
securities laws in connection  with the offer,  issuance and sale of the Shares,
the Conversion  Shares,  the Warrants and the Warrant Shares hereunder.  Neither
the Company nor anyone acting on its behalf, directly or indirectly, has or will
sell,  offer to sell or solicit offers to buy any of the Securities,  or similar
securities  to, or solicit  offers with respect  thereto from, or enter into any
preliminary  conversations or negotiations relating thereto with, any person, or
has taken or will take any action so as to require  registration of the issuance
and sale of any of the  Securities  under  the  registration  provisions  of the
Securities Act and applicable state securities laws. Neither the Company nor any
of its affiliates,  nor any person acting on its or their behalf, has engaged in
any form of general  solicitation or general  advertising (within the meaning of
Regulation D under the Securities  Act) in connection  with the offer or sale of
any of the Securities.

     (x) Governmental Approvals.  Except as set forth on Schedule 2.1(x) hereto,
and except for the filing of any notice prior or  subsequent to the Closing that
may be required under applicable state and/or federal  securities laws (which if

                                       9
<PAGE>

required,  shall  be  filed  on a  timely  basis),  no  authorization,  consent,
approval,  license,  exemption  of,  filing  or  registration  with any court or
governmental department,  commission,  board, bureau, agency or instrumentality,
domestic or foreign,  is or will be necessary  for, or in connection  with,  the
execution or delivery of the Shares and the Warrants, or, except as set forth in
this Agreement or any other  Transaction  Document,  for the  performance by the
Company of its obligations under the Transaction Documents.

     (y)  Employees.  The  Company  does  not  have  any  collective  bargaining
arrangements or agreements covering any of its employees. Except as set forth in
the Commission Documents or on Schedule 2.1(y) hereto, the Company does not have
any  employment   contract,   agreement   regarding   proprietary   information,
non-competition   agreement,    non-solicitation   agreement,    confidentiality
agreement,  or any other similar contract or restrictive  covenant,  relating to
the right of any officer,  employee or  consultant  to be employed or engaged by
the Company. Since September 30, 2002, no officer, consultant or key employee of
the Company whose termination,  either  individually or in the aggregate,  could
have a Material  Adverse  Effect,  has  terminated  or, to the  knowledge of the
Company,  has any present  intention of  terminating  his or her  employment  or
engagement with the Company.

     (z) Absence of Certain Developments.  Except as set forth in the Commission
Documents or on Schedule 2.1(z) hereto,  since  September 30, 2002,  Company has
not:

          (i) issued  any  stock,  bonds or other  corporate  securities  or any
     rights, options or warrants with respect thereto;

          (ii)  borrowed  any  amount  or  incurred  or  become  subject  to any
     liabilities (absolute or contingent) except current liabilities incurred in
     the ordinary  course of business  which are comparable in nature and amount
     to the  current  liabilities  incurred in the  ordinary  course of business
     during the  comparable  portion of its prior  fiscal  year,  as adjusted to
     reflect the current nature and volume of the Company's business;

          (iii) discharged or satisfied any material lien or encumbrance or paid
     a material amount of any obligation or liability  (absolute or contingent),
     other than current liabilities paid in the ordinary course of business;

          (iv)  declared  or made any payment or  distribution  of cash or other
     property  to  stockholders  with  respect to its  stock,  or  purchased  or
     redeemed,  or made any  agreements so to purchase or redeem,  any shares of
     its capital stock;

          (v) sold,  assigned  or  transferred  any other  tangible  assets,  or
     canceled any debts or claims, except in the ordinary course of business;

          (vi) sold,  assigned or  transferred  any patent  rights,  trademarks,
     trade  names,  copyrights,  trade  secrets  or other  intangible  assets or
     intellectual  property rights, which sale, assignment or transfer has had a
     Material  Adverse  Effect,   or  disclosed  any  proprietary   confidential

                                       10
<PAGE>

     information  to any person except in the ordinary  course of business or to
     the Purchasers or their representatives;

          (vii) suffered any substantial losses or waived any rights of material
     value,  whether or not in the ordinary course of business,  or suffered the
     loss of any material amount of prospective business;

          (viii)  made  any  changes  in  employee  compensation  except  in the
     ordinary course of business and consistent with past practices;

          (ix) made capital  expenditures or commitments therefor that aggregate
     in excess of $25,000;

          (x)  entered  into any other  transaction  other than in the  ordinary
     course of business, or entered into any other material transaction, whether
     or not in the ordinary course of business;

          (xi) made charitable contributions or pledges in excess of $25,000;

          (xii)  suffered any material  damage,  destruction  or casualty  loss,
     whether or not covered by insurance;

          (xiii)  experienced any material  problems with labor or management in
     connection  with the terms and  conditions  of their  employment;  or (xiv)
     entered  into an  agreement,  written  or  otherwise,  to  take  any of the
     foregoing actions.

     (aa) Use of Proceeds. Except as set forth on Schedule 2.1(aa), the proceeds
from the sale of the Shares and the  Warrants  will be used by the  Company  for
working capital purposes and, except as set forth on Schedule 2.1(aa), shall not
be used to repay  any  outstanding  Indebtedness  or any  loans to any  officer,
director, affiliate or insider of the Company.

     (bb) Public Utility Holding Company Act and Investment  Company Act Status.
The  Company is not a "holding  company" or a "public  utility  company" as such
terms are defined in the Public Utility Holding Company Act of 1935, as amended.
The Company is not, and as a result of and immediately upon Closing will not be,
an "investment  company" or a company  "controlled" by an "investment  company",
within the meaning of the Investment Company Act of 1940, as amended.

     (cc) ERISA.  No liability to the Pension Benefit  Guaranty  Corporation has
been  incurred with respect to any Plan by the Company which is or would cause a
Material  Adverse  Effect.  The execution and delivery of this Agreement and the
issue and sale of the Shares and the Warrants  will not involve any  transaction
which is subject to the  prohibitions  of Section 406 of ERISA or in  connection
with  which a tax could be imposed  pursuant  to  Section  4975 of the  Internal
Revenue Code of 1986, as amended (the "Code");  provided that, if any Purchaser,
or any person or entity that owns a beneficial interest in any Purchaser,  is an
"employee  pension  benefit  plan" (within the meaning of Section 3(2) of ERISA)

                                       11
<PAGE>

with respect to which the Company is a "party in  interest"  (within the meaning
of Section 3(14) of ERISA), the requirements of Sections 407(d)(5) and 408(e) of
ERISA, if applicable,  are met. As used in this Section 2.1(cc), the term "Plan"
shall mean an "employee pension benefit plan" (as defined in Section 3 of ERISA)
which is or has been established or maintained, or to which contributions are or
have been  made,  by the  Company  or by any trade or  business,  whether or not
incorporated,  which,  together with the Company,  is under common  control,  as
described in Section 414(b) or (c) of the Code.

     (dd)  Delisting  Notification.  The  Company  has not  received a delisting
notification from the American Stock Exchange,  and to its knowledge,  there are
no existing facts or circumstances  that could give rise to the delisting of the
Common Stock from the American Stock Exchange.

     Section 2.2 Representations  and Warranties of the Purchasers.  Each of the
Purchasers  hereby makes the  following  representations  and  warranties to the
Company  with  respect  solely  to  itself  and not with  respect  to any  other
Purchaser:

     (a)  Organization  and Standing of the  Purchasers.  If the Purchaser is an
entity,   such  Purchaser  is  a  corporation,   limited  liability  company  or
partnership  duly  incorporated  or  organized,  validly  existing  and in  good
standing  under  the  laws  of  the   jurisdiction  of  its   incorporation   or
organization.

     (b)  Authorization  and Power.  Each Purchaser has the requisite  power and
authority to enter into and perform the this Agreement,  the Registration Rights
Agreement,  the Warrants,  and the other  agreements and documents  contemplated
hereby and thereby and executed by the  Purchaser  or to which the  Purchaser is
party (collectively,  the "Purchaser Transaction Documents") and to purchase the
Shares and Warrants  being sold to it  hereunder.  The  execution,  delivery and
performance  of the Purchaser  Transaction  Documents by each  Purchaser and the
consummation  by it of the  transactions  contemplated  hereby  have  been  duly
authorized  by all necessary  corporate or  partnership  action,  and no further
consent  or   authorization  of  such  Purchaser  or  its  Board  of  Directors,
stockholders,  or partners, as the case may be, is required.  This Agreement has
been duly  authorized,  executed and  delivered by each  Purchaser.  Each of the
Purchaser Transaction Documents  constitutes,  or shall constitute when executed
and  delivered,  valid and binding  obligations  of each  Purchaser  enforceable
against  such   Purchaser  in  accordance   with  its  terms,   except  as  such
enforceability   may  be   limited   by   applicable   bankruptcy,   insolvency,
reorganization,   moratorium,  liquidation,  conservatorship,   receivership  or
similar laws relating to, or affecting  generally the enforcement of, creditor's
rights  and  remedies  or  by  equitable   principles  or  remedies  of  general
application.

     (c) Acquisition for Investment. Each Purchaser is purchasing the Shares and
acquiring the Warrants  solely for its own account for the purpose of investment
and not with a view to or for sale in connection with any distribution  thereof.
Each Purchaser does not have a present  intention to sell any of the Securities,
nor a present  arrangement  (whether or not legally  binding)  or  intention  to
effect any  distribution  of any of the  Securities  to or through any person or
entity; provided, however, that by making the representations herein and subject
to  Section  2.2(e)  below,  each  Purchaser  does not  agree to hold any of the
Securities  for any minimum or other  specific  term and  reserves  the right to

                                       12
<PAGE>

dispose of any of the  Securities  at any time in  accordance  with  federal and
state securities laws applicable to such  disposition  provided that the Company
receives an opinion of its counsel to the effect that such disposition  complies
with such laws. Each Purchaser  acknowledges  that it (i) has such knowledge and
experience in financial and business matters such that such Purchaser is capable
of evaluating  the merits and risks of its  investment  in the Company,  (ii) is
able  to  bear  the  financial  risks  associated  with  an  investment  in  the
Securities,  and (iii) has been given full access to such records of the Company
and to the officers of the Company as it has deemed  necessary or appropriate to
conduct its due diligence investigation.

     (d) Rule 144. Each Purchaser  understands  that the Securities must be held
indefinitely  unless such Securities are registered  under the Securities Act or
an exemption from registration is available. Each Purchaser acknowledges that it
is familiar with Rule 144 of the rules and  regulations  of the  Commission,  as
amended,  promulgated pursuant to the Securities Act ("Rule 144"), and that such
Purchaser  has been  advised that Rule 144 permits  resales  only under  certain
circumstances.  Each Purchaser  understands  that to the extent that Rule 144 is
not available,  such  Purchaser  will be unable to sell any  Securities  without
either  registration  under  the  Securities  Act or the  existence  of  another
exemption from such registration requirement, provided that the Company receives
an opinion  of its  counsel  to the  effect  that such sale is exempt  from such
registration requirement.

     (e) General.  Each  Purchaser  understands  that the  Securities  are being
offered and sold in reliance on a transactional  exemption from the registration
requirements  of federal  and state  securities  laws and the Company is relying
upon the truth,  accuracy and completeness of the  representations,  warranties,
agreements,  acknowledgments  and  understandings  of such  Purchaser  set forth
herein and in the other  Purchaser  Transaction  Documents in order to determine
the  applicability  of such  exemptions and the suitability of such Purchaser to
acquire the Securities. Each Purchaser understands that no United States federal
or state agency or any government or governmental agency has passed upon or made
any recommendation or endorsement with respect to any of the Securities.

     (f) Opportunities for Additional  Information.  Each Purchaser acknowledges
that such  Purchaser  has had the  opportunity  to ask  questions of and receive
answers from, or obtain additional  information from, the executive  officers of
the Company  concerning  the financial and other affairs of the Company,  and to
the extent  deemed  necessary  by such  Purchaser  in light of such  Purchaser's
personal  knowledge of the  Company's  affairs,  such  Purchaser  has asked such
questions and received answers to the full  satisfaction of such Purchaser,  and
such Purchaser desires to invest in the Company.

     (g)  No  General  Solicitation.   Each  Purchaser   acknowledges  that  the
Securities were not offered to such Purchaser by means of any form of general or
public   solicitation   or  general   advertising,   or  publicly   disseminated
advertisements or sales literature,  including (i) any  advertisement,  article,
notice or other communication  published in any newspaper,  magazine, or similar
media,  or broadcast over television or radio, or (ii) any seminar or meeting to
which  such   Purchaser   was  invited  by  any  of  the   foregoing   means  of
communications.

                                       13
<PAGE>

     (h)  Accredited  Investor.  Each  Purchaser is an  accredited  investor (as
defined in Rule 501 of Regulation D), and such Purchaser has such  experience in
business and financial  matters that it is capable of evaluating  the merits and
risks of an investment in the Securities.  Each Purchaser  acknowledges  that an
investment in the Securities is speculative and involves a high degree of risk.

                                  ARTICLE III

                                   Covenants

     The Company  covenants with each Purchaser as follows,  which covenants are
for the benefit of each  Purchaser  and their  respective  permitted  assignees.

     Section 3.1 Securities Compliance.  The Company shall notify the Commission
in accordance with their rules and regulations, of the transactions contemplated
by any of the Transaction  Documents and shall take all other  necessary  action
and  proceedings  as may be required and permitted by  applicable  law, rule and
regulation,  for  the  legal  and  valid  issuance  of  the  Securities  to  the
Purchasers,  or  their  respective  subsequent  holders.  Each  Purchaser  shall
cooperate  with the Company and its officers,  counsel and  representatives  and
provide information regarding Purchaser and the transactions contemplated hereby
and by any of the other Purchaser  Transaction Documents as reasonably requested
by the Company.

     Section 3.2  Registration  and  Listing.  The Company will cause its Common
Stock to continue to be registered  under Section 12(b) or 12(g) of the Exchange
Act, will comply in all respects with its reporting and filing obligations under
the Exchange Act, will comply with all requirements  related to any registration
statement filed pursuant to this Agreement, and will not take any action or file
any  document  (whether  or not  permitted  by the  Securities  Act or the rules
promulgated  thereunder)  to  terminate  or  suspend  such  registration  or  to
terminate or suspend its reporting and filing obligations under the Exchange Act
or Securities  Act, except as permitted  herein.  The Company shall use its best
efforts to continue  the listing or trading of its Common  Stock on the American
Stock  Exchange or any  successor  market.  The Company will  promptly  file the
"Listing  Application"  for, or in connection with, the issuance and delivery of
the Shares, the Conversion Shares, the Warrants and the Warrant Shares.

     Section 3.3 Inspection Rights. In the event the Registration  Statement (as
defined  in the  Registration  Rights  Agreement)  is not  effective,  has  been
suspended or is otherwise no longer effective,  the Company shall permit, during
normal  business  hours and upon  reasonable  request and reasonable  notice,  a
Purchaser or any employees,  agents or representatives  thereof that are parties
to an effective confidentiality agreement with the Company of appropriate scope,
so long as a Purchaser  shall be  obligated  hereunder to purchase the Shares or
shall  beneficially  own the Shares or Conversion  Shares,  or shall own Warrant
Shares or the Warrants which, in the aggregate,  represent more than two percent
(2%)  of  the  total  combined  voting  power  of  all  voting  securities  then
outstanding,  to examine and make  reasonable  copies of and  extracts  from the
records and books of account of, and visit and  inspect,  during the term of the
Warrants, the properties, assets, operations and business of the Company, and to

                                       14
<PAGE>

discuss the  affairs,  finances  and  accounts  of the  Company  with any of its
officers, consultants, directors, and key employees.

     Section  3.4  Compliance  with Laws.  The  Company  shall  comply  with all
applicable laws, rules,  regulations and orders,  the  noncompliance  with which
could have a Material Adverse Effect.

     Section 3.5 Keeping of Records and Books of Account. The Company shall keep
adequate records and books of account, in which complete entries will be made in
accordance with GAAP consistently applied.

     Section  3.6  Reporting  Requirements.  The Company  shall  furnish two (2)
copies of the  following  to the  Purchasers  in a timely  manner so long as the
Purchasers  shall  be  obligated  hereunder  to  purchase  the  Shares  or shall
beneficially  own the  Shares or  Warrants,  or shall own  Conversion  Shares or
Warrant Shares which, in the aggregate,  represent more than one percent (1%) of
the total combined voting power of all voting securities then outstanding:

     (a)  Quarterly  Reports  filed with the  Commission on Form 10-Q as soon as
available, and in any event within forty-five (45) days after the end of each of
the first three (3) fiscal quarters of the Company;

     (b)  Annual  Reports  filed  with the  Commission  on Form  10-K as soon as
available, and in any event within ninety (90) days after the end of each fiscal
year of the Company; and

     (c) Copies of all notices and  information,  including  without  limitation
notices and proxy statements in connection with any meetings,  that are provided
to holders of shares of Common  Stock,  contemporaneously  with the  delivery of
such notices or information to such holders of Common Stock.

     Section  3.7  Other  Agreements.  The  Company  shall  not  enter  into any
agreement  containing  any provision that would violate the terms of, or cause a
default under, any material term of any Transaction Document.

     Section 3.8 Subsequent  Financings;  Right of First Refusal. (a) Until such
time as all of the Shares are redeemed or converted to  Conversion  Shares,  the
Company covenants and agrees to promptly notify (in no event later than five (5)
days  after  making or  receiving  an  applicable  offer) in  writing (a "Rights
Notice") the  Purchasers of the terms and  conditions  of any proposed  offer or
sale to or exchange with (or other type of  distribution  to) any third party (a
"Subsequent Financing"),  of any securities of the Company (whether equity, debt
or   otherwise),    including   convertible   and   non-convertible   securities
(collectively, the "Financing Securities"). The Rights Notice shall describe, in
reasonable detail, the proposed Subsequent Financing,  the proposed closing date
of the Subsequent Financing, which shall not be within twenty (20) calendar days
from the date of the Rights  Notice nor later than forty five (45) calendar days
from the date of the Rights Notice,  including,  without limitation,  all of the
material  terms and  conditions  thereof.  The Rights  Notice shall provide each
Purchaser  an option (the  "Rights  Option")  during the ten (10)  trading  days
following delivery of the Rights Notice (the "Option Period") to purchase all or
any  portion  of  the  Financing  Securities  contemplated  by  such  Subsequent

                                       15
<PAGE>
Financing on the same,  absolute  terms and conditions as  contemplated  by such
Subsequent Financing (the "First Refusal Rights"). Delivery of any Rights Notice
constitutes a representation and warranty by the Company that there are no other
material terms and conditions, arrangements,  agreements or otherwise except for
those disclosed in the Rights Notice, to provide additional  compensation to any
party participating in any proposed  Subsequent  Financing,  including,  but not
limited to,  additional  compensation  based on changes in the purchase price or
any type of reset or adjustment  of a purchase or  conversion  price or to issue
additional  securities  at any  time  after  the  closing  date of a  Subsequent
Financing.  If the  Company  does not  receive  notice of exercise of the Rights
Option from any of the Purchasers  within the Option  Period,  the Company shall
have the right to close the Subsequent  Financing on the scheduled  closing date
with a third party;  provided that all of the material  terms and  conditions of
the  closing  are the same as those  provided  to the  Purchasers  in the Rights
Notice.  If the closing of the proposed  Subsequent  Financing does not occur on
that date,  any closing of the  contemplated  Subsequent  Financing or any other
Subsequent  Financing  shall be subject to all of the provisions of this Section
3.8, including, without limitation, the delivery of a new Rights Notice.

     (b) For  purposes  of this  Agreement,  a Permitted  Financing  (as defined
hereinafter)  shall not be  considered  a  Subsequent  Financing.  A  "Permitted
Financing"  shall  mean (i)  shares  of Common  Stock to be issued to  strategic
partners  and/or in  connection  with a strategic  merger or  acquisition;  (ii)
shares of Common Stock or the  issuance of options to purchase  shares of Common
Stock to employees,  officers, directors,  consultants and vendors in accordance
with the Company's equity incentive  policies;  (iii) the issuance of securities
pursuant to an underwritten public offering of the Company's securities; or (iv)
the conversion or exercise of convertible  or exercisable  securities  issued or
outstanding  prior to the date hereof;  provided,  that, the conversion price or
exercise  price  shall not be reset to provide for the  issuance  of  additional
shares of Common Stock.

     Section 3.9 Reservation of Shares. So long as the Shares or Warrants remain
outstanding,  the Company  shall take all action  necessary to at all times have
authorized,  and  reserved for the purpose of  issuance,  the maximum  number of
shares of Common Stock to effect the  conversion  of the Shares and the exercise
of the Warrants.

     Section 3.10  Confidentiality.  Each Purchaser covenants and agrees to keep
confidential any and all material non-public information which it has heretofore
obtained or shall  hereafter  obtain,  directly or indirectly,  from the Company
pursuant to this Agreement or any other Transaction  Document or otherwise,  and
agrees not to use the same except for the purpose of this Agreement or any other
Transaction  Document  or to disclose  the same to any party  except as provided
below,  without the Company's prior written consent;  provided that the terms of
this Section 3.10 shall not extend to any such information that :

     (a) is already publicly known:

     (b) has become publicly known without any fault of such Purchaser;

     (c) is required  to be  disclosed  by such  Purchaser  to any  governmental
authority or court of law as a result of operation of law,  regulation  or court
order;  provided,  however,  that such  Purchaser  shall have first given prompt

                                       16
<PAGE>

written  notice  of  such  requirement  to  the  Company  (if  permissible)  and
cooperates  with  the  Company  to  restrict  such   disclosure   and/or  obtain
confidential treatment thereof.

The foregoing  notwithstanding,  the Purchaser may disclose such  information to
each of its directors,  officers, employees, partners and representatives (which
representatives  have a need to  know  such  information);  provided  that  such
Purchaser  informs  such persons of the  restrictions  set forth in this Section
3.10 with respect to such  information and such persons agree to comply with the
provisions of this Section 3.10.  Each  Purchaser  further agrees to give prompt
notice to the Company of any  disclosure  made by such  Purchaser  or any of its
directors,  officers,  employees,  partners or representatives in breach of this
Section  3.10,  to the extent such  Purchase has  knowledge of such  disclosure;
provided that such Purchaser  shall have no liability for losses incurred by the
Company  or  any  of  its  directors,   officers,  employees,   stockholders  or
representatives  solely as the result of the  Company's  failure,  following its
actual  receipt of notice from such  Purchaser of disclosure of  information  in
breach of this Agreement, to make prompt public disclosure of the information so
disclosed in compliance  with  Regulation FD. For purposes of this Section 3.10,
the  knowledge  of a  Purchaser  shall mean the actual  knowledge  of the person
executing  this  Agreement on such  Purchaser's  behalf or any successor to such
person.

                                   ARTICLE IV

                                   Conditions

     Section 4.1 Conditions  Precedent to the Obligation of the Company to Close
and to Sell the Shares and Warrants.  The obligation hereunder of the Company to
close and issue and sell the Shares and the  Warrants to the  Purchasers  on the
Closing Date is subject to the satisfaction or waiver, at or before the Closing,
of the conditions set forth below.  These  conditions are for the Company's sole
benefit and may be waived by the Company at any time in its sole discretion.

     (a)  Accuracy  of  the  Purchasers'  Representations  and  Warranties.  The
representations and warranties of each Purchaser  Transaction Documents shall be
true and correct in all material respects as of the date when made and as of the
Closing  Date as  though  made at that  time,  except  for  representations  and
warranties that are expressly made as of a particular  date, which shall be true
and correct in all material respects as of such date.

     (b)  Performance by the  Purchasers.  Each Purchaser  shall have performed,
satisfied and complied in all material  respects with all covenants,  agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Purchasers at or prior to the Closing Date.

     (c) No Injunction.  No statute, rule, regulation,  executive order, decree,
ruling or injunction shall have been enacted,  entered,  promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.

                                       17
<PAGE>

     (d) No Proceedings or Litigation.  No action, suit or proceeding before any
arbitrator  or any  governmental  authority  shall have been  commenced,  and no
investigation by any governmental authority shall have been threatened,  against
the Company,  or any of the  officers,  directors or  affiliates of the Company,
seeking to restrain,  prevent or changes the  transactions  contemplated by this
Agreement, or seeking damages in connection with such transactions.

     (e)  Resolutions.  The  Board of  Directors  of each  Purchaser  or body or
persons having similar  authority on behalf of such Purchaser shall have adopted
resolutions   consistent  with  Section  2.2(b)  hereof  in  a  from  reasonably
acceptable to the Company (the "Purchaser Resolutions").

     (f)  Delivery  of Purchase  Price.  The  Purchase  Price for the Shares and
Warrants shall have been delivered to the Company at the Closing.

     (g) Delivery of Purchaser Transaction Documents.  The Purchaser Transaction
Documents  shall have been duly executed and delivered by the  Purchasers to the
Company.

     (h) Amex Approval. The American Stock Exchange shall have approved issuance
of the Securities under the terms of the Transaction Documents.

     (i) Receipt of Documents. The Company shall have received such certificates
and documents as the Company or its counsel shall reasonably require incident to
the Closing.

     (j)  Secretary's  Certificate.  Each Purchaser that is an entity shall have
delivered  to the  Company a  secretary's  certificate,  dated as of the Closing
Date, as to (i) the Purchaser Resolutions, and (ii) the authority and incumbency
of the  officers  or  other  representatives  of such  Purchaser  executing  the
Purchaser  Transaction Documents and any other documents required to be executed
or delivered in connection therewith.

     (k)  Officer's  or  Purchaser's  Certificate.  On the  Closing  Date,  each
Purchaser  shall have delivered to the Company a certificate  (if such Purchaser
is an entity,  the  certificate  shall be of an executive  officer of, or person
holding a position of similar  authority with, such Purchaser),  dated as of the
Closing  Date,  confirming  the  accuracy of such  Purchaser's  representations,
warranties  and covenants  contained  herein and in each of the other  Purchaser
Transaction  Documents as of the Closing Date and  confirming  the compliance by
such Purchaser with the conditions precedent set forth in this Section 4.1 as of
the Closing Date.

     Section 4.2  Conditions  Precedent to the  Obligation of the  Purchasers to
Close and to Purchase the Shares and Warrants.  The obligation  hereunder of the
Purchasers to purchase the Shares and Warrants and consummate  the  transactions
contemplated by this Agreement is subject to the  satisfaction or waiver,  at or
before the Closing,  of each of the conditions set forth below. These conditions
are for the Purchasers'  sole benefit and may be waived by the Purchasers at any
time in their sole discretion.

                                       18
<PAGE>

     (a) Accuracy of the Company's  Representations and Warranties.  Each of the
representations  and  warranties of the Company in this Agreement and in each of
the Transaction  Documents shall be true and correct in all material respects as
of the  Closing  Date,  except  for  representations  and  warranties  that  are
expressly made as of a particular  date,  which shall be true and correct in all
material respects as of such date.

     (b) Performance by the Company. The Company shall have performed, satisfied
and complied in all  respects  with all  covenants,  agreements  and  conditions
required by this  Agreement to be  performed,  satisfied or complied with by the
Company at or prior to the Closing Date.

     (c) No  Suspension,  Etc.  Trading in the Company's  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  ("Bloomberg")
shall not have been suspended or limited,  or minimum prices shall not have been
established on securities whose trades are reported by Bloomberg,  or on the New
York  Stock  Exchange  or the  American  Stock  Exchange,  nor  shall a  banking
moratorium  have been  declared  either by the  United  States or New York State
authorities,  nor shall  there  have  occurred  any  national  or  international
calamity  or crisis of such  magnitude  in its  effect on any  financial  market
which,  in each case, in the  reasonable  judgment of the  Purchasers,  makes it
impracticable or inadvisable to purchase the Shares.

     (d) No Injunction.  No statute, rule, regulation,  executive order, decree,
ruling or injunction shall have been enacted,  entered,  promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.

     (e) No Proceedings or Litigation.  No action, suit or proceeding before any
arbitrator  or any  governmental  authority  shall have been  commenced,  and no
investigation by any governmental authority shall have been threatened,  against
the Company or any of the  officers,  directors  or  affiliates  of the Company,
seeking to restrain,  prevent or change the  transactions  contemplated  by this
Agreement, or seeking damages in connection with such transactions.

     (f) Opinion of Counsel,  Etc. The Purchasers shall have received an opinion
of counsel to the Company, dated the Closing Date,  substantially in the form of
Exhibit C hereto, and such other certificates and documents as the Purchasers or
their counsel shall reasonably require incident to the Closing.

     (g) Warrants and Shares. The Company shall have delivered to the Purchasers
the originally  executed  Warrants (in such  denominations as each Purchaser may
request  but in no event in  denominations  of less  than  100) and  shall  have
delivered  certificates  representing the Shares (in such  denominations as each
Purchaser may request) being acquired by the Purchasers at the Closing.

                                       19
<PAGE>

     (h)  Resolutions.  The Board of Directors of the Company shall have adopted
resolutions   consistent  with  Section  2.1(b)  hereof  in  a  form  reasonably
acceptable to the Purchasers (the "Resolutions").

     (i) Certificate of Designations.  As of the Closing Date, the Company shall
have filed with the Delaware  Secretary of State a Certificate  of  Designations
authorizing the Preferred Stock in substantially  the Form of Exhibit D attached
hereto.

     (j)  Reservation of Shares.  As of the Closing Date, the Company shall have
reserved out of its  authorized  and unissued  Preferred  Stock,  solely for the
purpose of effecting the issuance of the Shares, a number of shares of Preferred
Stock equal to the aggregate  number of the Shares.  As of the Closing Date, the
Company shall have  reserved out of its  authorized  and unissued  Common Stock,
solely  for the  purpose  of  effecting  the  conversion  of the  Shares and the
exercise of the Warrants, a number of shares of Common Stock equal to the number
of Conversion  Shares and the number of Warrant Shares  issuable upon conversion
of the Preferred Stock and the exercise of the Warrants, respectively,  assuming
the  Warrants  are  exercised  and the Shares are  converted on the Closing Date
(assuming the Warrants are fully exercisable and the Shares fully convertible on
such date  regardless of any limitation on the timing or amount of such exercise
or conversion).

     (k)  Secretary's  Certificate.  The  Company  shall have  delivered  to the
Purchasers a  secretary's  certificate,  dated as of the Closing Date, as to (i)
the Resolutions,  (ii) the Certificate,  (iii) the Bylaws,  each as in effect at
the  Closing,  and (iv) the  authority  and  incumbency  of the  officers of the
Company executing the Transaction  Documents and any other documents required to
be executed or delivered in connection therewith.

     (l)  Officer's  Certificate.  On the Closing  Date,  the Company shall have
delivered  to the  Purchasers  a  certificate  of an  executive  officer  of the
Company,  dated as of the Closing Date, confirming the accuracy of the Company's
representations,  warranties and covenants  contained  herein and in each of the
other Transaction Documents as of the Closing Date and confirming the compliance
by the Company with the conditions precedent set forth in this Section 4.2 as of
the Closing Date.

     (m)  Fees and  Expenses.  As of the  Closing  Date,  all fees and  expenses
required  to be  paid  by  the  Company  in  connection  with  the  transactions
contemplated by this Agreement shall have been, or authorized to be, paid by the
Company.

     (n)  Registration  Rights  Agreement.  As of the Closing Date,  the parties
shall have entered into the Registration Rights Agreement in the Form of Exhibit
E attached hereto.

     (o)  Material  Adverse  Effect.  No  Material  Adverse  Effect  shall  have
occurred.

                                       20
<PAGE>
                                   ARTICLE V

                               Certificate Legend

     Section  5.1  Legend.   Each  certificate   representing  the  Shares,  the
Conversion  Shares,  the  Warrants  and the Warrant  Shares  shall be stamped or
otherwise  imprinted  with a  legend  substantially  in the  following  form (in
addition to any legend  required by  applicable  state  securities or "blue sky"
laws):

     THE SECURITIES  REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE NOT
     BEEN  REGISTERED  UNDER  THE  SECURITIES  ACT  OF  1933,  AS  AMENDED  (THE
     "SECURITIES  ACT")  OR ANY  STATE  SECURITIES  LAWS  AND MAY  NOT BE  SOLD,
     TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES
     ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR INTELLI-CHECK, INC. SHALL
     HAVE  RECEIVED  AN  OPINION  OF  ITS  COUNSEL  THAT  REGISTRATION  OF  SUCH
     SECURITIES  UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE
     STATE SECURITIES LAWS IS NOT REQUIRED.

     Each certificate representing any Shares shall also be stamped or otherwise
imprinted with a legend substantially in the following form:

     INTELLI-CHECK,  INC.  WILL  FURNISH  TO  EACH  HOLDER  OF ITS  SERIES  A 8%
     CONVERTIBLE  PREFERRED  STOCK WHO SO REQUESTS  WITHOUT CHARGE A COPY OF THE
     CERTIFICATE  OF  DESIGNATION   SETTING  FORTH  THE  POWERS,   DESIGNATIONS,
     PREFERENCES AND RELATIVE,  PARTICIPATING,  OPTIONAL OR OTHER SPECIAL RIGHTS
     OF SUCH STOCK AND ANY OTHER CLASS OR SERIES THEREOF AND THE QUALIFICATIONS,
     LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES  AND/OR RIGHTS.

     The  Company  agrees  to  reissue  certificates  representing  any  of  the
Securities, without the legend set forth above, if at such time, prior to making
any  transfer of any such  Securities,  such holder  thereof  shall give written
notice to the  Company  describing  the  manner and terms of such  transfer  and
removal as the Company may reasonably  request.  Such proposed transfer will not
be effected  until:  (a) the Company has notified such holder that either (i) in
the opinion of Company counsel,  the registration of the Shares,  the Conversion
Shares,  Warrants or Warrant  Shares under the Securities Act is not required in
connection with such proposed transfer,  or (ii) a registration  statement under
the  Securities  Act covering  such proposed  disposition  has been filed by the
Company with the Commission and has become  effective  under the Securities Act;
and (b) the Company has  notified  such holder that either (i) in the opinion of

                                       21
<PAGE>

Company counsel, the registration or qualification under the securities or "blue
sky"  laws of any  state  is not  required  in  connection  with  such  proposed
disposition,  or (ii) compliance with applicable  state securities or "blue sky"
laws has been effected.  The Company will use its best efforts to respond to any
such notice  from a holder  within  five (5) days.  In the case of any  proposed
transfer  under this Section 5.1,  the Company  will use  reasonable  efforts to
comply with any such applicable  state  securities or "blue sky" laws, but shall
in no event be required, in connection  therewith,  to qualify to do business in
any  state  where it is not then  qualified  or to take any  action  that  would
subject it to tax or to the general  service of process in any state where it is
not then subject.  The  restrictions  on transfer  contained in this Section 5.1
shall be in addition to, and not by way of limitation of, any other restrictions
on transfer contained in any other section of this Agreement.

                                   ARTICLE VI

                                  Termination

     Section 6.1 Termination by Mutual Consent. This Agreement may be terminated
at any time  prior to the  Closing  Date by the  mutual  written  consent of the
Company and the Purchasers.

     Section  6.2  Effect of  Termination.  In the event of  termination  by the
Company or the  Purchasers,  written notice thereof shall  forthwith be given to
the other party and the  transactions  contemplated  by this Agreement  shall be
terminated  without further action by any party. If this Agreement is terminated
as provided in Section 6.1 herein,  this  Agreement  shall become void and of no
further force and effect, except for Sections 3.10, 8.1 and 8.2, and Article VII
herein.  Nothing in this  Section  6.2 shall be deemed to release the Company or
any  Purchaser  from any liability  for any breach under this  Agreement,  or to
impair  the  rights  of  the  Company  or  such  Purchaser  to  compel  specific
performance by the other party of its obligations under this Agreement.

                                  ARTICLE VII

                                Indemnification

     Section 7.1 General  Indemnity.  The Company  agrees to indemnify  and hold
harmless each  Purchaser  (and its respective  directors,  officers,  employees,
affiliates, agents, successors and assigns) from and against any and all losses,
liabilities,  deficiencies,  costs,  damages and  expenses  (including,  without
limitation,  reasonable attorneys' fees, charges and disbursements)  incurred by
each  Purchaser or any such person as a result of any inaccuracy in or breach of
the  representations,  warranties or covenants made by the Company  herein.  The
Purchasers  severally  but not jointly  agree to indemnify and hold harmless the
Company and its directors,  officers, employees,  affiliates, agents, successors
and assigns  from and against  any and all  losses,  liabilities,  deficiencies,
costs,   damages  and  expenses  (including,   without  limitation,   reasonable
attorneys' fees, charges and disbursements) incurred by the Company as result of
any inaccuracy in or breach of the representations, warranties or covenants made
by the Purchasers herein.

     Section   7.2   Indemnification    Procedure.   Any   party   entitled   to
indemnification  under  this  Article  VII (an  "indemnified  party")  will give
written notice to the  indemnifying  party of any matters giving rise to a claim
for  indemnification;  provided,  that the  failure  of any  party  entitled  to

                                       22
<PAGE>

indemnification  hereunder  to give notice as provided  herein shall not relieve
the indemnifying  party of its obligations  under this Article VII except to the
extent that the  indemnifying  party is actually  prejudiced  by such failure to
give  notice.  In case any  action,  proceeding  or claim is brought  against an
indemnified party in respect of which  indemnification is sought hereunder,  the
indemnifying  party  shall be  entitled  to  participate  in and,  unless in the
reasonable  judgment of the indemnified  party a conflict of interest between it
and the indemnifying party may exist with respect to such action,  proceeding or
claim, to assume the defense thereof with counsel reasonably satisfactory to the
indemnified  party.  In  the  event  that  the  indemnifying  party  advises  an
indemnified  party  that  it  will  contest  such a  claim  for  indemnification
hereunder,  or fails,  within thirty (30) days of receipt of any indemnification
notice to notify such person in writing of the indemnifying  party's election to
defend,  settle  or  compromise,  at its sole  cost  and  expense,  any  action,
proceeding or claim (or  discontinues its defense at any time after it commences
such defense),  then the indemnified party may, at its option, defend, settle or
otherwise compromise or pay such action or claim. In any event, unless and until
the  indemnifying  party  elects in  writing  to assume  and does so assume  the
defense of any such claim,  proceeding or action, the indemnified  party's costs
and expenses  arising out of the defense,  settlement  or compromise of any such
action,   claim  or  proceeding  shall  be  losses  subject  to  indemnification
hereunder.  The indemnified  party shall  cooperate fully with the  indemnifying
party in connection  with any negotiation or defense of any such action or claim
by the  indemnifying  party  and shall  furnish  to the  indemnifying  party all
information  reasonably available to the indemnified party which relates to such
action or claim. The indemnifying  party shall keep the indemnified  party fully
apprised  at  all  times  as to the  status  of the  defense  or any  settlement
negotiations  with respect thereto.  If the indemnifying  party elects to defend
any such  action or claim,  then the  indemnified  party  shall be  entitled  to
participate  in such  defense  with  counsel  of its choice at its sole cost and
expense.  The  indemnifying  party shall not be liable for any settlement of any
action,  claim  or  proceeding  effected  without  its  prior  written  consent.
Notwithstanding  anything in this Article VII to the contrary,  the indemnifying
party shall not, without the indemnified  party's prior written  consent,  which
consent may not be  unreasonably  withheld,  settle or  compromise  any claim or
consent to entry of any  judgment in respect  thereof  which  imposes any future
obligation  on  the  indemnified  party  or  which  does  not  include,   as  an
unconditional  term thereof,  the giving by the claimant or the plaintiff to the
indemnified  party of a release from all liability in respect of such claim.  If
the  indemnifying  party fails or refuses to promptly  assume the defense of any
such claim,  proceeding  or action,  then the  indemnification  required by this
Article VII shall be made by periodic  payments of the amount thereof during the
course of investigation  or defense,  as and when bills are received or expense,
loss,  damage  or  liability  is  incurred,  so  long as the  indemnified  party
irrevocably  agrees to refund such moneys if it is  ultimately  determined  by a
court  of   competent   jurisdiction   that  such  party  was  not  entitled  to
indemnification.  The indemnity agreements contained herein shall be in addition
to (a) any cause of action or similar  rights of the  indemnified  party against
the indemnifying party or others, and (b) any liabilities the indemnifying party
may be subject to pursuant to applicable law.

                                       23
<PAGE>

                                  ARTICLE VIII

                                 Miscellaneous

     Section 8.1 Fees and  Expenses.  Each party shall pay the fees and expenses
of its advisors,  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;  provided, however, that,
upon  presentment of appropriate  documentation,  the Company shall pay all fees
and expenses (including attorneys' fees and expenses) incurred by the Purchasers
in connection with the preparation,  negotiation, execution and delivery of this
Agreement and the other Transaction Documents and the transactions  contemplated
thereunder up to $35,000,  regardless of whether or not Closing  occurs  (unless
the failure of the Closing to occur is a result of a breach by any  Purchaser of
this  Agreement or the  termination  of this  Agreement by any Purchaser for any
reason other than breach hereof by the Company, in which event the Company shall
not be required to pay such fees or  expenses).  In addition,  the Company shall
pay all  reasonable  fees and expenses  incurred by the Purchasers in connection
with any  amendments,  modifications  or waivers of this Agreement or any of the
other  Transaction  Documents or incurred in connection  with the enforcement of
this Agreement and any of the other Transaction  Documents,  including,  without
limitation, all reasonable attorneys' fees, disbursements and expenses.

     Section 8.2 Specific Enforcement; Consent to Jurisdiction.

     (a) The Company and the Purchasers  acknowledge and agree that  irreparable
damage would occur in the event that any of the  provisions of this Agreement or
the other  Transaction  Documents  were not performed in  accordance  with their
specific terms or were  otherwise  breached.  It is accordingly  agreed that the
parties  shall be entitled to an injunction  or  injunctions  to prevent or cure
breaches of the provisions of this Agreement or the other Transaction  Documents
and to enforce  specifically  the terms and provisions  hereof or thereof,  this
being in  addition  to any other  remedy to which any of them may be entitled by
law or equity.

     (b) The Company and each  Purchaser  (i) hereby  irrevocably  submit to the
non-exclusive  jurisdiction  of the United States District Courts sitting in the
Northern  District of Texas and the Eastern or Southern District of New York for
the  purposes of any suit,  action or  proceeding  arising out of or relating to
this  Agreement or any of the other  Transaction  Documents or the  transactions
contemplated  hereby or thereby,  and (ii) hereby waive, and agree not to assert
in any such suit,  action or  proceeding,  any claim  that it is not  personally
subject  to the  jurisdiction  of each  such  court,  that the  suit,  action or
proceeding  is brought in an  inconvenient  forum or that the venue of the suit,
action or  proceeding  is improper.  The Company and each  Purchaser  consent to
process  being served in any such suit,  action or  proceeding by mailing a copy
thereof  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 in this Section 8.2 shall affect
or limit any right to serve  process in any other  manner  permitted by law. The
Company and the Purchasers  hereby agree that the prevailing  party in any suit,
action or proceeding  arising out of or relating to the Shares,  this Agreement,
the  Registration  Rights  Agreement  or the  Warrants,  shall  be  entitled  to
reimbursement for reasonable legal fees from the non-prevailing party.

                                       24
<PAGE>

     Section 8.3 Entire Agreement;  Amendment.  This Agreement,  the Transaction
Documents  and  the   Purchaser   Transaction   Documents   contain  the  entire
understanding  and agreement of the parties with respect to the matters  covered
hereby and, except as specifically set forth herein or in any of the Transaction
Documents  or  Purchaser  Transaction  Documents,  neither  the  Company nor any
Purchaser  make any  representation,  warranty,  covenant  or  undertaking  with
respect to such  matters.  This  Agreement,  the  Transaction  Documents and the
Purchaser   Transaction   Documents  supersede  all  prior   understandings  and
agreements with respect to said subject matter,  all of which are merged herein.
No provision of this  Agreement may be waived or amended other than by a written
instrument  signed by the Company and the Purchasers and their permitted assigns
owning  of record  at least a  majority  in  interest  of the then-  outstanding
Shares, and no provision hereof may be waived other than by a written instrument
signed by the party against whom  enforcement  of any such waiver is sought.  No
amendment to this Agreement  shall be effective to the extent that it applies to
less than all of the holders of the Shares  then  outstanding  or  violates  any
provision of the General  Corporation Law of Delaware or any requirements of the
American Stock Exchange. 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 or holders of Shares,  as the case may
be.

     Section  8.4  Notices.  Any  notice,  demand,   request,  waiver  or  other
communication  required or permitted to be given  hereunder  shall be in writing
and shall be deemed  given and  received  (a) upon hand  delivery or delivery by
telecopy or facsimile at the address or number designated below (if delivered on
a  business  day  during  normal  business  hours  where  such  notice  is to be
received), or the first business day following such delivery (if delivered other
than on a business day during normal  business  hours where such notice is to be
received),  or (b) on the second  business day  following the date of mailing by
express  courier  service,  fully  prepaid,  addressed to such address,  or upon
actual receipt of such mailing,  whichever shall first occur.  The addresses for
such communications shall be:

If to the Company:              Intelli-Check, Inc.
                                246 Crossways Park West
                                Woodbury, New York  11797
                                Attention:  Frank Mandelbaum
                                Telecopier:  (516) 992-1918
                                Telephone:  (516) 992-1900

with copies (which copies
shall not constitute notice
to the Company) to:             Beckman, Lieberman & Barandes, LLP
                                100 Jericho Quadrangle, Suite 225
                                Jericho, New York  11753
                                Attention: Diane Phillips, Esq.
                                Telecopier: (516) 827-0621
                                Telephone: (516) 822-4820

                                       25
<PAGE>

If to any Purchaser: At the address of such Purchaser set forth on Exhibit A to
                                this Agreement.

with copies to:                 Warren W. Garden, Esq.
                                Fish & Richardson P.C.
                                5000 Bank One Center
                                1717 Main Street
                                Dallas, Texas  75201
                                Telecopier: (214) 747-2091
                                Telephone: (214) 747-4010

     Any party  hereto may from time to time  change its  address for notices by
giving at least ten (10) days  written  notice of such  changed  address  to the
other party or parties hereto in accordance  with the provisions of this Section
8.3.

     Section 8.5 Waivers.  No waiver by any party 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 other provision,  condition
or requirement  hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right accruing
to it thereafter.

     Section 8.6 Headings. The article,  section and subsection headings in this
Agreement  are for  convenience  only and  shall not  constitute  a part of this
Agreement  for any other  purpose and shall not be deemed to limit or affect any
of the provisions hereof.

     Section 8.7  Successors and Assigns.  This Agreement  shall be binding upon
and inure to the  benefit of the  parties  and their  successors  and  permitted
assigns.  After the Closing,  the assignment by a party to this Agreement of any
rights  hereunder  shall not affect  the  obligations  of such party  under this
Agreement.

     Section 8.8 No Third Party  Beneficiaries.  This  Agreement is intended for
the benefit of the parties hereto and their respective  permitted successors and
assigns and is not for the benefit of, nor may any provision  hereof be enforced
by, any other person (other than indemnified parties, as contemplated by Article
VII).

     Section  8.9  Governing  Law.  This  Agreement  shall  be  governed  by and
construed in accordance with the internal laws of the State of Delaware, without
giving  effect to the  choice of law  provisions.  This  Agreement  shall not be
interpreted  or construed  with any  presumption  against the party causing this
Agreement to be drafted.

     Section 8.10 Survival.  The  representations  and warranties of the Company
and the Purchasers  contained in Sections 2.1(o),  2.1(s) and 3.10 shall survive
until the  expiration  of the  applicable  statutes  of  limitations,  and those
contained in Article II, with the exception of Sections 2.1(o), 2.1(s) and 3.10,
shall survive the  execution and delivery  hereof and the Closing until the date
two (2) years from the Closing Date,  and the agreements and covenants set forth
in  Articles  I,  III,  V,  VII and VIII of this  Agreement  shall  survive  the
execution and delivery hereof and the Closing hereunder.

                                       26
<PAGE>

     Section 8.11 Counterparts.  This Agreement may be executed in any number of
counterparts,  all of which taken  together  shall  constitute  one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties  hereto,  it being  understood that all
parties need not sign the same counterpart.

     Section 8.12 Publicity.  The Company agrees that it will not disclose,  and
will not include in any public announcement, the names of the Purchasers without
the consent of the  Purchasers  in  accordance  with Section 8.3,  which consent
shall  not be  unreasonably  withheld  or  delayed,  or unless  and  until  such
disclosure is required by law, rule or applicable  regulation,  and then only to
the extent of such requirement.

     Section 8.13  Severability.  The provisions of this Agreement are severable
and, in the event that any court of competent  jurisdiction shall determine that
any one or more of the  provisions or part of the  provisions  contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other  provision or part of a provision of this Agreement and this Agreement
shall be reformed and  construed as if such invalid or illegal or  unenforceable
provision,  or part of such provision,  had never been contained herein, so that
such  provisions  would be valid,  legal and  enforceable  to the maximum extent
possible.

     Section 8.14 Further Assurances. From and after the date of this Agreement,
upon  the  request  of the  Purchasers  or the  Company,  the  Company  and each
Purchaser  shall  execute  and deliver  such  instruments,  documents  and other
writings as may be  reasonably  necessary  or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement,  the Warrants
and the Registration Rights Agreement.

                                       27
<PAGE>

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

                                  INTELLI-CHECK, INC.

                                  By:/s/
                                     -----------------------------------
                                     Name:
                                     Title:

                                GRYPHON MASTER FUND, L.P.

                                By:  Gryphon Partners, L.P., its General Partner

                                   By:  Gryphon Management Partners, L.P.,
                                           its General Partner

                                    By:  Gryphon Advisors, LLC,
                                           its General Partner

                                      By:
                                          /s/
                                         -------------------------------
                                          E.B. Lyon, IV, Authorized Agent

                                       28
<PAGE>
                                   EXHIBIT A
                                   ---------
                               LIST OF PURCHASERS
<TABLE>
<CAPTION>
Names and Addresses of  Number of Shares   Number of Warrants      Dollar Amount
Purchasers                Purchased            Purchased           of Investment
----------                ---------            ---------           -------------
<S>                         <C>                 <C>                 <C>
Gryphon Master Fund, L.P.   30,000              113,636             $3,000,000
500 Crescent Court
Suite 270
Dallas, Texas  75201
Attn:  E.B. Lyon, IV
</TABLE>
                                      A-1
<PAGE>

                                   EXHIBIT B
                                   ---------
                                FORM OF WARRANT

                                      B-1
<PAGE>

                                   EXHIBIT C
                                   ---------
                                FORM OF OPINION

                                      C-1
<PAGE>

                                   EXHIBIT D
                                   ---------
                      FORM OF CERTIFICATE OF DESIGNATIONS

                                      D-1
<PAGE>

                                   EXHIBIT E
                                   ---------
                     FORM OF REGISTRATION RIGHTS AGREEMENT

                                      E-1REGISTRATION RIGHTS AGREEMENT
                         -----------------------------

     This Registration  Rights Agreement (this  "Agreement") is made and entered
into as of  March  27,  2003,  by and  among  Intelli-Check,  Inc.,  a  Delaware
corporation  (the  "Company"),  and the persons and entities listed on Exhibit A
hereto (each, a "Purchaser" and, collectively, the "Purchasers").

     WHEREAS,  upon the terms and subject to the  conditions  of the  Securities
Purchase Agreement, dated as of the date hereof (the "Purchase Agreement"),  the
Company has agreed to issue and sell shares of its Preferred  Stock and Warrants
to purchase shares of its Common Stock to the Purchasers; and

     WHEREAS,  to induce the  Purchasers  to execute and  deliver  the  Purchase
Agreement and to purchase the Shares and the Warrants, the Company has agreed to
provide certain registration rights under the Securities Act of 1933, as amended
(the "Securities  Act"), with respect to the Shares,  the Conversion Shares, the
Warrants and the Warrant  Shares (each as  respectively  defined in the Purchase
Agreement).

     NOW,  THEREFORE,  in consideration of the  representations,  warranties and
agreements  contained  herein and other  good and  valuable  consideration,  the
receipt and legal adequacy of which are hereby acknowledged by the parties,  the
Company and the Purchasers hereby agree as follows:

     1. Definitions.

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

     "Affiliate"  means,  with  respect to any  Person,  any other  Person  that
directly or indirectly controls or is controlled by or under common control with
such Person.  For the  purposes of this  definition,  "control,"  when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the  direction  of the  management  and policies of such Person,
whether  through the ownership of voting  securities,  by contract or otherwise;
and  the  terms  "affiliated,"  "controlling"  and  "controlled"  have  meanings
correlative to the foregoing.

     "AMEX" shall mean the American Stock Exchange.

     "Blackout Period" shall have the meaning set forth in Section 3(m).

"Board" shall have the meaning set forth in Section 3(m).

     "Business Day" means any day except Saturday, Sunday and any day which is a
legal  holiday or a day on which banking  institutions  in the state of New York
generally  are  authorized  or  required by law or other  government  actions to
close.
<PAGE>

     "Commission" means the Securities and Exchange Commission.

     "Common Shares" shall have the meaning set forth in the definition of

     "Registrable Securities."

     "Common Stock" means the Company's Common Stock, $.001 par value.

     "Effectiveness  Date" means with respect to the Registration  Statement the
earlier of (i) the 90th day following the Closing Date, before which the Company
will use its commercially reasonable efforts to cause the Registration Statement
to become effective, and (ii) the date which is within five (5) Business Days of
the date on which the  Commission  informs the Company that the  Commission  (a)
will not review the  Registration  Statement or (b) that the Company may request
the acceleration of the effectiveness of the Registration Statement.

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

     "Event" shall have the meaning set forth in Section 8(d).

     "Exchange Act" means the Securities Exchange Act of 1934, as amended.

     "Filing Date" means the date that the Registration Statement is required to
be filed which date shall be within thirty (30) days from the Closing Date.

     "Holder" means, collectively,  each holder from time to time of Registrable
Securities including,  without limitation,  each Purchaser and its assignees. To
the extent this Agreement  refers to an election,  consent,  waiver,  request or
approval of or by a Holder,  such  reference  shall mean an  election,  consent,
waiver,  request or  approval  by the  holders of a majority  in interest of the
then-outstanding Registrable Securities (on an as converted basis).

     "Indemnified Party" shall have the meaning set forth in Section 6(c).

     "Indemnifying Party" shall have the meaning set forth in Section 6(c).

     "Liquidated Damages" shall have the meaning set forth in Section 8(d).

     "Losses" shall have the meaning set forth in Section 6(a).

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

     "Preferred Shares" shall have the meaning set forth in the definition of

     "Registrable Securities."

     "Preferred Stock" means the Company's 8% Convertible  Preferred Stock, $.01
par value.

                                       2
<PAGE>

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

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

     "Registrable  Securities" means (i) the shares of Preferred Stock issued or
issuable  pursuant to the Purchase  Agreement,  and upon any stock split,  stock
dividend,  recapitalization  or  similar  event with  respect to such  shares of
Preferred Stock and any other securities issued in exchange of or replacement of
such shares of Preferred Stock (collectively,  the "Preferred Shares"); until in
the case of any of the Preferred  Shares (a) a Registration  Statement  covering
such Preferred Share has been declared effective by the Commission and continues
to be effective during the Effectiveness  Period; or (b) such Preferred Share is
sold in compliance  with Rule 144 or may be sold pursuant to Rule 144(k),  after
which time such Preferred  Share shall not be a Registrable  Security;  (ii) the
Warrants issued or issuable pursuant to the Purchase Agreement until in the case
of any of the Warrants (a) a  Registration  Statement  covering such Warrant has
been declared  effective by the Commission and continues to be effective  during
the Effectiveness  Period,  (b) such Warrant is sold in compliance with Rule 144
or may be sold pursuant to Rule 144(k),  or (c) such Warrant is fully  exercised
for  shares of Common  Stock,  after  which  time  such  Warrant  shall not be a
Registrable  Security;  and (iii) the shares of Common Stock issued and issuable
pursuant  to the  conversion  of the  Preferred  Stock and the  exercise  of the
Warrants,  as the  case  may be,  and  upon any  stock  split,  stock  dividend,
recapitalization  or similar  event with  respect to such shares of Common Stock
and any other securities  issued in exchange of or replacement of such shares of
Common Stock  (collectively,  the "Common Shares");  until in the case of any of
the Common Shares (a) a  Registration  Statement  covering such Common Share has
been declared  effective by the Commission and continues to be effective  during
the  Effectiveness  Period,  or (b) such Common Share is sold in compliance with
Rule 144 or may be sold  pursuant to Rule  144(k),  after which time such Common
Share shall not be a Registrable Security.

     "Registration  Statement" means the registration  statement,  including 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 in such registration  statement,  for
the Shares,  the Conversion Shares, the Warrants and the Warrant Shares required
to be filed by the Company with the Commission pursuant to this Agreement.

     "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.

                                       3
<PAGE>

     "Rule 158" means Rule 158  promulgated  by the  Commission  pursuant to the
Securities  Act, as such Rule may be amended  from time to time,  or any similar
rule or regulation  hereafter adopted by the Commission having substantially the
same effect as such Rule.

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

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

     "Special  Counsel"  means any special  counsel to Holder,  for which Holder
will be  reimbursed by the Company  pursuant to Section 5 of this  Agreement and
Section 8.1 of the Purchase Agreement.

     2. Registration.  On or prior to the Filing Date, the Company shall prepare
and file with the Commission a Registration Statement covering the resale of the
Registrable Securities for an offering to be made on a continuous basis pursuant
to Rule 415.  The  Registration  Statement  shall be on Form S-3  (except if the
Company is not then eligible to register for resale the  Registrable  Securities
on Form S-3,  in which case such  registration  shall be on another  appropriate
form in accordance with the Securities Act and the rules promulgated thereunder)
and shall contain (except if otherwise  directed by the Purchasers) the "Plan of
Distribution" attached hereto as Exhibit B. The Company shall (i) not permit any
securities  other  than  the  Registrable  Securities  to  be  included  in  the
Registration  Statement,  (ii) use its commercially  reasonable efforts to cause
the  Registration  Statement to be declared  effective  under the Securities Act
(including   filing  with  the   Commission  a  request  for   acceleration   of
effectiveness in accordance with Rule 12dl-2  promulgated under the Exchange Act
within five (5) Business  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 be subject to further  review) as soon
as  possible  after  the  filing  thereof,   but  in  any  event  prior  to  the
Effectiveness  Date,  and (iii) keep such  Registration  Statement  continuously
effective  under  the  Securities  Act  for a  period  of  two  years  from  the
Effectiveness  Date or such earlier date as all the Registrable  Securities have
been sold or are saleable under Rule 144(k) (the "Effectiveness Period").

     3. Registration Procedures; Company's Obligations.

     In connection  with the  registration of the  Registrable  Securities,  the
Company shall:

     (a) Prepare and file with the  Commission on or prior to the Filing Date, a
Registration  Statement  on Form S-3 (or if the Company is not then  eligible to
register for resale the  Registrable  Securities  on Form S-3 such  registration
shall be on another  appropriate  form in accordance with the Securities Act and
the Rules  promulgated  thereunder) in accordance  with the method or methods of
distribution thereof as specified by the Holder (except if otherwise directed by
the  Holder),  and  use  its  commercially   reasonable  efforts  to  cause  the
Registration  Statement  to become  effective  and remain  effective as provided
herein;  provided,  however, that not less than three (3) Business Days prior to
the  filing of the  Registration  Statement  or any  related  Prospectus  or any
amendment  or  supplement   thereto   (including  any  document  that  would  be
incorporated therein by reference),  the Company shall (i) furnish to the Holder

                                       4
<PAGE>

and any  Special  Counsel,  copies of all such  documents  proposed to be filed,
which documents (other than those  incorporated by reference) will be subject to
the  timely  review of and  comment  by such  Special  Counsel,  and (ii) at the
request of the Holder 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 such  Special  Counsel,  to conduct a  reasonable
investigation  within the meaning of the  Securities  Act. The Company shall not
file the  Registration  Statement or any such  Prospectus  or any  amendments or
supplements  thereto to which the Holder or any Special Counsel shall reasonably
object in writing within three (3) Business Days of their receipt thereof.

     (b) (i) Prepare and file with the  Commission  such  amendments,  including
post-effective  amendments, to the Registration Statement as may be necessary to
keep the  Registration  Statement  continuously  effective as to the  applicable
Registrable  Securities  for the  Effectiveness  Period 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,  and as so  supplemented or amended to be filed pursuant to Rule 424
(or any similar  provisions then in force) promulgated under the Securities Act;
(iii) respond promptly to any comments received from the Commission with respect
to the Registration  Statement or any amendment thereto and promptly provide the
Holder true and complete copies of all correspondence from and to the Commission
relating to the Registration Statement; 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 the  Registration
Statement  during the applicable  period in accordance with the intended methods
of  disposition  by the Holder  set forth in the  Registration  Statement  as so
amended or in such Prospectus as so supplemented.

     (c) Notify the Holder of Registrable  Securities to be sold and any Special
Counsel  promptly  (and,  in the case of (i)(A)  below,  not less than three (3)
Business  Days prior to such filing and, in the case of (i)(B) or (i)(C)  below,
no  later  than  the  first  Business  Day  following  the  date  on  which  the
Registration  Statement becomes effective) and (if requested by any such Person)
confirm such notice in writing no later than three (3) Business  Days  following
the day (i)(A) when a Prospectus or any Prospectus  supplement or post-effective
amendment to the  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,  and (C) with respect to the 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 the Registration Statement or Prospectus or for
additional  information;  (iii) of the  issuance by the  Commission  of any stop
order suspending the effectiveness of the 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 any notification with respect to
the suspension of the  qualification  or exemption from  qualification of any of
the Registrable  Securities for sale in any  jurisdiction,  or the initiation or
threatening of any Proceeding for such purpose; and (v) of the occurrence of any
event that makes any statement made in the Registration  Statement or Prospectus
or any document  incorporated or deemed to be incorporated  therein by reference

                                       5
<PAGE>

untrue  in  any  material   respect  or  that  requires  any  revisions  to  the
Registration  Statement,  Prospectus or other  documents so that, in the case of
the  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 the light of the circumstances under which they were made, not misleading.

     The Company shall promptly furnish to the Special Counsel,  without charge,
(i) any  correspondence  from the  Commission or the  Commission's  staff to the
Company or its representatives  relating to any Registration Statement, and (ii)
promptly after the same is prepared and filed with the Commission, a copy of any
written response to the correspondence received from the Commission.

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

     (e) If requested by the Holder,  (i) promptly  incorporate  in a Prospectus
supplement  or  post-effective  amendment  to the  Registration  Statement  such
information as the Company  reasonably  agrees should be included  therein,  and
(ii)  make  all  required   filings  of  such  Prospectus   supplement  or  such
post-effective  amendment as soon as practicable  after the Company has received
notification of the matters to be incorporated in such Prospectus  supplement or
post-effective amendment.

     (f) Furnish to the Holder and any Special Counsel, without charge, at least
one conformed copy of each  Registration  Statement and each amendment  thereto,
including  financial  statements and schedules,  all documents  incorporated  or
deemed to be incorporated  therein by reference,  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 the Holder and any Special Counsel, without charge,
as  many  copies  of the  Registration  Statement,  Prospectus  or  Prospectuses
(including each form of prospectus) and each amendment or supplement  thereto as
such Persons may reasonably request;  and the Company hereby consents to the use
of such  Prospectus  and each  amendment  or  supplement  thereto by the selling
Holder in connection  with the offering and sale of the  Registrable  Securities
covered by such Prospectus and any amendment or supplement thereto.

     (h)  Prior  to any  public  offering  of  Registrable  Securities,  use its
commercially  reasonable  efforts to register or qualify or  cooperate  with the
selling Holder and any Special  Counsel in connection  with the  registration or
qualification  (or exemption from such  registration or  qualification)  of such
Registrable  Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as the Holder reasonably requests
in  writing,  to keep each such  registration  or  qualification  (or  exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or  things  necessary  or  advisable  to  enable  the  disposition  in such
jurisdictions of the Registrable Securities covered by a Registration Statement;
provided,  however,  that the Company shall not be required to qualify generally

                                       6
<PAGE>

to do business in any jurisdiction  where it is not then so qualified or to take
any  action  that would  subject  it to  general  service of process in any such
jurisdiction  where it is not then so subject or subject  the Company to any tax
in any such jurisdiction where it is not then so subject.

     (i) Cooperate  with the Holder to  facilitate  the timely  preparation  and
delivery of certificates representing Registrable Securities to be sold pursuant
to a Registration  Statement and to enable such Registrable  Securities to be in
such  denominations  and  registered  in such names as the Holder may request at
least two (2) Business Days prior to any sale of Registrable Securities.

     (j) Upon the  occurrence  of any event  contemplated  by  Section  3(c)(v),
promptly   prepare  a  supplement  or  amendment,   including  a  post-effective
amendment,  to  the  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 the 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 the light
of the circumstances under which they were made, not misleading.

     (k) Use its  commercially  reasonable  efforts  to  cause  all  Registrable
Securities relating to such Registration  Statement to be listed on the AMEX and
any other securities  exchange,  quotation  system,  market or  over-the-counter
bulletin board,  if any, on which the same securities  issued by the Company are
then listed as and when required pursuant to the Purchase Agreement.

     (l)  Comply  in  all  material  respects  with  all  applicable  rules  and
regulations  of the  Commission  and make  generally  available  to its security
holders  earning  statements  satisfying  the provisions of Section 11(a) of the
Securities  Act and Rule 158 not later than  forty- five (45) days after the end
of any twelve (12) month period (or ninety (90) days after the end of any twelve
(12) month period if such period is a fiscal year)  commencing  on the first day
of the first  fiscal  quarter of the  Company  after the  effective  date of the
Registration  Statement,  which statement  shall conform to the  requirements of
Rule 158.

     (m) If (i) there is material non-public  information  regarding the Company
which the Company's Board of Directors (the "Board")  reasonably  determines not
to be in the  Company's  best  interest to disclose and which the Company is not
otherwise  required  to  disclose,  or  (ii)  there  is a  significant  business
opportunity  (including,  but not limited to, the  acquisition or disposition of
assets  (other  than  in  the  ordinary  course  of  business)  or  any  merger,
consolidation,  tender  offer or other  similar  transaction)  available  to the
Company which the Board  reasonably  determines  not to be in the Company's best
interest to disclose and which the Company  would be required to disclose  under
the  Registration  Statement,  then the Company may suspend  effectiveness  of a
Registration  Statement and suspend the sale of Registrable  Securities  under a
Registration Statement one (1) time every three (3) months or three (3) times in
any  twelve  month  period,  provided  that  the  Company  may not  suspend  its
obligation  for more than thirty (30) days in the  aggregate in any twelve month
period if suspension  is for any of the reasons  listed above or sixty (60) days
in the  aggregate  in any twelve  month  period for any other  reason  (each,  a

                                       7
<PAGE>

"Blackout  Period");  provided,  however,  that  no  such  suspension  shall  be
permitted for more than twenty (20)  consecutive  days,  arising out of the same
set of facts, circumstances or transactions.

     (n) Within two (2) Business  Days after the  Registration  Statement  which
includes the Registrable Securities is ordered effective by the Commission,  the
Company shall deliver, and shall cause legal counsel for the Company to deliver,
to the transfer agent for such Registrable Securities (with copies to the Holder
whose  Registrable  Securities  are  included  in such  Registration  Statement)
confirmation that the Registration  Statement has been declared effective by the
Commission in the form attached hereto as Exhibit C.

     4. Registration Procedures; Holder's Obligations

     In connection  with the  registration of the  Registrable  Securities,  the
Holder shall:

     (a) If the Registration Statement refers to the Holder by name or otherwise
as the holder of any  securities  of the Company,  have the right to require (if
such  reference  to the  Holder  by name or  otherwise  is not  required  by the
Securities Act or any similar federal statute then in force) the deletion of the
reference  to the Holder in any  amendment  or  supplement  to the  Registration
Statement filed or prepared subsequent to the time that such reference ceases to
be required.

     (b)  (i)  not  sell  any  Registrable  Securities  under  the  Registration
Statement  until it has  received  copies of the  Prospectus  as then amended or
supplemented  as  contemplated  in Section 3(g) and notice from the Company that
such  Registration  Statement and any post-  effective  amendments  thereto have
become  effective  as  contemplated  by  Section  3(c),  (ii)  comply  with  the
prospectus  delivery  requirements  of the Securities Act as applicable to it in
connection  with sales of Registrable  Securities  pursuant to the  Registration
Statement,  and (iii) furnish to the Company  information  regarding such Holder
and the distribution of such Registrable  Securities as is required by law to be
disclosed in the Registration  Statement,  and the Company may exclude from such
registration  the  Registrable  Securities  of the Holder if it fails to furnish
such  information  within  a  reasonable  time  prior  to  the  filing  of  each
Registration  Statement,  supplemented  Prospectus  and/or amended  Registration
Statement.

     (c) upon  receipt of a notice  from the  Company of the  occurrence  of any
event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or
3(m), forthwith discontinue disposition of such Registrable Securities under the
Registration  Statement  until  the  Holder's  receipt  of  the  copies  of  the
supplemented  Prospectus and/or amended Registration  Statement  contemplated by
Section  3(j),  or until it is advised in writing 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.

     5. Registration Expenses

     All  reasonable  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 the  Registration  Statement  is filed or becomes  effective  and
whether or not any Registrable  Securities are sold pursuant to the Registration
Statement.  The fees and expenses  referred to in the foregoing  sentence  shall
include, without limitation, the following: (i) all registration and filing fees
(including,  without  limitation,  fees and expenses (A) with respect to filings

                                       8
<PAGE>

required to be made with the AMEX and each other  securities  exchange or market
on which Registrable  Securities are required  hereunder to be listed,  (B) with
respect  to  filings  required  to be  made  with  the  Commission,  and  (C) in
compliance  with state  securities  or Blue Sky laws);  (ii)  printing  expenses
(including,   without   limitation,   expenses  of  printing   certificates  for
Registrable   Securities  and  of  printing  prospectuses  if  the  printing  of
prospectuses  is  requested  by the  holders  of a majority  of the  Registrable
Securities included in the Registration Statement);  (iii) messenger,  telephone
and delivery  expenses;  (iv) fees and disbursements of counsel for the Company;
and (v) fees and  expenses  of all other  Persons  retained  by the  Company  in
connection  with  the  consummation  of the  transactions  contemplated  by this
Agreement,  including,  without  limitation,  the Company's  independent  public
accountants  (including the expenses of any comfort letters or costs  associated
with the  delivery by  independent  public  accountants  of a comfort  letter or
comfort letters).  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.

     6. Indemnification

     (a) Indemnification by the Company. The Company shall,  notwithstanding any
termination of this  Agreement,  indemnify and hold harmless the Purchaser,  its
permitted assignees, officers, directors, 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, each Person who controls any such Purchaser or permitted assignee
(within  the  meaning of Section 15 of the  Securities  Act or Section 20 of the
Exchange  Act) and the  officers,  directors,  agents and employees of each such
controlling Person, and the respective successors,  assigns, estate and personal
representatives  of each of the foregoing,  to the fullest  extent  permitted by
applicable  law,  from  and  against  any  and  all  claims,  losses,   damages,
liabilities,  penalties,  judgments, costs (including, without limitation, costs
of  investigation)  and  expenses  (including,  without  limitation,  reasonable
attorneys' fees and expenses) (collectively, "Losses"), as incurred, arising out
of or  relating to any untrue or alleged  untrue  statement  of a material  fact
contained in the  Registration  Statement,  any  Prospectus,  as supplemented or
amended, if applicable, 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 the light of the  circumstances  under  which they were
made) not  misleading,  except (i) to the extent,  but only to the extent,  that
such untrue statements or omissions are based solely upon information  regarding
the Holder  furnished in writing to the Company by the Holder  expressly for use
                                       9
<PAGE>
therein,  which information was reviewed and expressly approved by the Holder or
Special Counsel expressly for use in the Registration Statement, such Prospectus
or such form of Prospectus or in any amendment or supplement thereto, or (ii) as
a result of the  failure of the Holder to  deliver a  Prospectus,  as amended or
supplemented,  to a purchaser in connection  with an offer or sale.  The Company
shall notify the Holder promptly of the institution,  threat or assertion of any
Proceeding  of which the Company is aware in  connection  with the  transactions
contemplated  by this  Agreement.  Such indemnity shall remain in full force and
effect  regardless of any  investigation  made by or on behalf of an Indemnified
Party (as defined in Section 6(c) hereof) and shall  survive the transfer of the
Registrable Securities by the Holder.

     (b)  Indemnification  by Purchaser.  Purchaser and its permitted  assignees
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, and the respective successors, assigns, estate and personal
representatives  of each of the foregoing,  to the fullest  extent  permitted by
applicable law, from and against any and all Losses, as incurred, arising out of
or  relating  to any  untrue or alleged  untrue  statement  of a  material  fact
contained in the  Registration  Statement,  any  Prospectus,  as supplemented or
amended, if applicable, 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 the light of the  circumstances  under  which they were
made) not  misleading,  to the  extent,  but only to the  extent,  that (i) such
untrue  statement or omission is contained in or omitted from any information so
furnished  in  writing  by the  Holder or the  Special  Counsel  to the  Company
specifically for inclusion in the Registration Statement or such Prospectus, and
(ii) such  information was reasonably  relied upon by the Company for use in the
Registration  Statement,  such  Prospectus or such form of prospectus or, to the
extent  that such  information  relates to the Holder or the  Holder's  proposed
method of  distribution  of Registrable  Securities,  was reviewed and expressly
approved  in  writing  by the  Holder  expressly  for  use  in the  Registration
Statement,   such   Prospectus   or   such   form  of   Prospectus   Supplement.
Notwithstanding  anything to the contrary  contained herein, the Holder shall be
liable  under this  Section 6(b) for only that amount as does not exceed the net
proceeds  to the  Holder  as a  result  of the  sale of  Registrable  Securities
pursuant to such Registration Statement.

     (c) Conduct of  Indemnification  Proceedings.  If any  Proceeding  shall be
brought or asserted against any Person entitled to indemnity pursuant to Section
6(a) or 6(b) hereunder (an "Indemnified Party"), such Indemnified Party promptly
shall notify the Person from whom indemnity is sought (the "Indemnifying  Party)
in  writing,  and the  Indemnifying  Party  shall  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
such failure shall have  materially and adversely  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:  (i) the  Indemnifying  Party has agreed in writing to pay such
fees and expenses;  or (ii) 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 (iii) 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 have been  advised by counsel  that a 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

                                       10
<PAGE>

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 such counsel shall be at the expense of
the  Indemnifying  Party).  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,   conditioned  or  delayed.  No
Indemnifying  Party shall,  without the prior written consent of the Indemnified
Party, which consent shall not unreasonably be withheld, conditioned or delayed,
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.

     If the  Indemnifying  Party fails or refuses to promptly assume the defense
of any  Proceeding,  then 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 (10)  Business  Days of  written  notice  thereof  to the
Indemnifying  Party  (regardless of whether it is ultimately  determined that an
Indemnified Party is not entitled to indemnification  hereunder;  provided, that
the  Indemnifying  Party may require  such  Indemnified  Party to  undertake  to
reimburse  all such fees and  expenses  to the extent it is  finally  judicially
determined  that  such  Indemnified  Party is not  entitled  to  indemnification
hereunder or pursuant to applicable law).

     (d) Contribution. If a claim for indemnification under Section 6(a) or 6(b)
is  unavailable  to an  Indemnified  Party  because of a failure or refusal of a
governmental  authority to enforce such  indemnification  in accordance with its
terms (by reason of public policy or otherwise),  then each Indemnifying  Party,
in lieu of indemnifying such Indemnified  Party,  shall contribute to the amount
paid or payable by such  Indemnified  Party as a result of such Losses,  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 Section 6(c), 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 under
Section 6(a) or 6(b) was available to such party in  accordance  with its terms.
Notwithstanding  anything to the contrary  contained herein, the Holder shall be
liable or required to contribute under this Section 6(d) for only that amount as
does not  exceed  the net  proceeds  to the  Holder  as a result  of the sale of
Registrable Securities pursuant to the Registration Statement.

                                       11
<PAGE>

     The  parties  hereto  agree  that it  would  not be just and  equitable  if
contribution  pursuant  to  this  Section  6(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.
No Person guilty of fraudulent  misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to  contribution  from any Person
who was not  guilty of such  fraudulent  misrepresentation.  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.

     7. Rule 144.

     As long as the Holder owns Registrable 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 Section  13(a) or 15(d) of the  Exchange Act and to
promptly  furnish the Holder with true and complete  copies of all such filings.
As long  as the  Holder  owns  Registrable  Securities,  if the  Company  is not
required to file reports pursuant to Section 13(a) or 15(d) of the Exchange Act,
it will  prepare  and  furnish  to the  Holder and make  publicly  available  in
accordance  with Rule 144(c)  promulgated  under the  Securities  Act annual and
quarterly financial statements,  together with a discussion and analysis of such
financial statements in form and substance  substantially  similar to those that
would otherwise be required to be included in reports  required by Section 13(a)
or 15(d) of the Exchange Act, as well as any other information required thereby,
in the time period that such filings  would have been required to have been made
under the Exchange  Act. The Company  further  covenants  that it will take such
further action as the Holder may reasonably request,  all to the extent required
from time to time to enable the Holder to sell  Warrants,  Preferred  Shares and
Common  Shares  without   registration  under  the  Securities  Act  within  the
limitation  of the  exemptions  provided  by  Rule  144  promulgated  under  the
Securities Act, including providing any legal opinions of counsel to the Company
referred to in the  Purchase  Agreement.  Upon the  request of any  Holder,  the
Company  shall  deliver  to  such  Holder  a  written  certification  of a  duly
authorized officer as to whether it has complied with such requirements.

     8. Miscellaneous.

     (a) Remedies. Except as otherwise specifically set forth in this Agreement,
the  remedies  provided  in  this  Agreement  and  the  Purchase  Agreement  are
cumulative and not exclusive of any remedies  provided by law. In the event of a
breach by the  Company or by the Holder of any of their  obligations  under this
Agreement,  the 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 the 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.

                                       12
<PAGE>

     (b)  No  Inconsistent  Agreements.  Neither  the  Company  nor  any  of its
Affiliates  has as of the date hereof entered into, nor shall the Company or any
of its  Affiliates,  on or after the date of this  Agreement,  enter  into,  any
agreement with respect to its securities  that is  inconsistent  with the rights
granted  to the  Holder  in this  Agreement  or  otherwise  conflicts  with  the
provisions hereof. Without limiting the generality of the foregoing, without the
written  consent of the Holder,  the  Company  shall not grant to any Person the
right to request the Company to register any securities of the Company under the
Securities Act if the rights so granted are inconsistent with the rights granted
to the Holder set forth herein,  or otherwise prevent the Company with complying
with all of its obligations hereunder.

     (c) No  Piggyback  on  Registrations.  Neither  the  Company nor any of its
security  holders (other than the Holder in such capacity  pursuant  hereto) may
include securities of the Company in the Registration Statement.

     (d) Failure to File  Registration  Statement and Other Events.  The Company
and the Holder  agree that the Holder  will suffer  damages if the  Registration
Statement  is not  filed  on or  prior  to the  Filing  Date or is not  declared
effective by the Commission on or prior to the Effectiveness Date and maintained
in the manner contemplated herein during the Effectiveness  Period or if certain
other events occur.  The Company and the Holder  further agree that it would not
be feasible to ascertain the extent of such damages with precision. Accordingly,
if (i) the  Registration  Statement is not filed on or prior to the Filing Date,
or is not declared  effective by the Commission on or prior to the Effectiveness
Date,  or (ii) the  Company  fails to file with the  Commission  a  request  for
acceleration in accordance with Rule 12dl-2  promulgated  under the Exchange Act
within five (5) Business  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) the
Registration  Statement is filed with and declared  effective by the  Commission
but  thereafter  ceases  to be  effective  or  available  as to all  Registrable
Securities at any time during the Effectiveness Period,  without being succeeded
within a reasonable period by a subsequent Registration Statement filed with and
declared  effective by the Commission,  or (iv) the Company  suspends the use of
the  Prospectus  forming  a part of such  Registration  Statement  for more than
thirty (30) days in any period of 365 consecutive  days if the Company  suspends
in reliance on its ability to do so due to the existence of a development  that,
in the good faith discretion of the Board, makes it appropriate to so suspend or
which renders the Company unable to comply with the Commission requirements,  or
the  Company  suspends  the  use of  the  Prospectus  forming  a  part  of  such
Registration  Statement  for more  than  sixty  (60)  days in any  period of 365
consecutive days for any other reason, or (v) during the  Effectiveness  Period,
trading in the Warrants,  Preferred Stock or Common Stock shall be suspended for
any reason for more than five (5) Business  Days in the  aggregate,  or (vi) the
Company  breaches in a material  respect any covenant or other  material term or
condition in the Transaction  Documents (other than a representation or warranty
contained  therein)  or any  other  agreement,  document,  certificate  or other
instrument delivered in connection with the transactions contemplated hereby and
thereby,  and such  breach  continues  for a period  of thirty  (30) days  after
written notice thereof to the Company, or (vii) the Company has breached Section
3(n) of this  Agreement  (any such  failure or breach  being  referred  to as an
"Event"), the Company shall pay as liquidated damages for such failure or breach
and not as a penalty (the "Liquidated Damages") to the Holder an amount equal to

                                       13
<PAGE>

one percent (1%) of the purchase price of the Preferred Stock paid by the Holder
pursuant to the Purchase Agreement for the first thirty (30) day period, one and
one-half  percent  (1%) of such  purchase  price for the second  thirty (30) day
period,  and two percent (2%) of such purchase price for each subsequent  thirty
(30) day period, pro rated for any period less than thirty (30) days,  following
the Event until the  applicable  Event has been cured;  provided,  however,  the
Purchaser will waive any Liquidated Damages if the Company cures such failure or
breach prior to the end of the first thirty (30) day period. Payments to be made
pursuant to this Section 8(d) shall be due and payable  immediately  upon demand
in cash.  The parties agree that the Liquidated  Damages  represent a reasonable
estimate on the part of the parties,  as of the date of this  Agreement,  of the
amount  of  damages  that may be  incurred  by the  Holder  if the  Registration
Statement  is not filed on or prior to the Filing Date or has not been  declared
effective by the Commission on or prior to the Effectiveness Date and maintained
in the manner  contemplated  herein  during the  Effectiveness  Period or if any
other Event as described herein has occurred.  Purchaser agrees that the receipt
of the Liquidated  Damages shall be Purchaser's  sole and exclusive remedy under
this Agreement or otherwise for a default under this subsection 8(d) (except for
specific  performance)  and in no event shall the Company be liable for any lost
profits,  consequential,  special,  punitive  or  similar  damages no matter how
identified, resulting from such default.

     (e) Consent to Jurisdiction.  Both the Company and the Purchaser (i) hereby
irrevocably  submit  to the  non-exclusive  jurisdiction  of the  United  States
District  Courts  sitting in the  Northern  District of Texas and the Eastern or
Southern District of New York for the purposes of any suit, action or proceeding
arising out of or relating to this Agreement or the Purchase Agreement, and (ii)
hereby waive,  and agree not to assert in any such suit,  action or  proceeding,
any claim that it is not personally  subject to the  jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient  forum or that
the venue of the suit,  action or proceeding  is improper.  Both the Company and
the  Purchasers  consent to  process  being  served in any such suit,  action or
proceeding  by mailing a copy thereof 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 in this
Section  8(e)  shall  affect or limit any  right to serve  process  in any other
manner permitted by law.

     (f) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended,  modified or supplemented,  and
waivers or consents to departures  from the provisions  hereof may not be given,
unless the same shall be in writing and signed by the Company and the Purchaser.

     (g)  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 earlier of (i) the date of  transmission,  if
such  notice or  communication  is  delivered  via  facsimile  at the  facsimile
telephone number specified for notice prior to 5:00 p.m., Eastern Standard Time,
on a Business Day, (ii) the first  Business Day after the date of  transmission,
if such notice or  communication  is delivered  via  facsimile at the  facsimile
telephone  number  specified for notice later than 5:00 p.m.,  Eastern  Standard
Time, on any date and earlier than 11:59 p.m.,  Eastern  Standard  Time, on such
date,  (iii)  the  Business  Day  following  the  date  of  mailing,  if sent by
nationally  recognized  overnight courier service, or (iv) actual receipt by the
party to whom such notice is required to be given.

                                       14
<PAGE>
        (x)      if to the Company:

                Intelli-Check, Inc.
                246 Crossways Park West
                Woodbury, New York 11797
                Tel. No.: (516) 992-1900
                Fax No.: (516) 992-1918
                Attn: Frank Mandelbaum

        with a copy to:
                Beckman, Lieberman & Barandes, LLP
                100 Jericho Quadrangle, Suite 225
                Jericho, New York  11753
                Tel. No.: (516) 822-4820
                Fax No.: (516) 827-0621
                Attn: Diane Phillips, Esq.

        (y)     if to any Purchaser:

                At the address of such Purchaser set forth on Exhibit A to this
                Agreeement.

        with a copy to:

               Fish & Richardson P.C.
               5000 Bank One Center
               1717 Main Street
               Dallas, Texas  75201
               Tel. No.: (214) 747-4010
               Fax No.: (214) 747-2091
               Attn:  Warren W. Garden

or to such other address or addresses or facsimile number or numbers as any such
party may most recently have  designated in writing to the other parties  hereto
by such notice.

     (h) Successors and Assigns.  This Agreement shall be binding upon and inure
to the benefit of the parties and their  successors  and  permitted  assigns and
shall inure to the benefit of the Holder and its  successors  and  assigns.  The
Company  may not  assign  this  Agreement  or any of its  respective  rights  or
obligations hereunder without the prior written consent of the Purchasers.  Each
Purchaser  may assign its rights  hereunder  in the manner and to the Persons as
permitted under the Purchase Agreement.

     (i) Assignment of Registration  Rights. The rights of the Holder hereunder,
including  the  right  to have  the  Company  register  for  resale  Registrable
Securities in accordance with the terms of this  Agreement,  shall be assignable
by each Holder to any transferee of the Holder of all or a portion of the shares
of  Registrable  Securities  if:  (i) the  Holder  agrees  in  writing  with the
transferee  or assignee to assign such rights,  and a copy of such  agreement is
furnished to the Company within a reasonable  time after such  assignment;  (ii)
the Company is,  within a  reasonable  time after such  transfer or  assignment,
furnished with written notice of (A) the name and address of such  transferee or

                                       15
<PAGE>

assignee,  and (B) the securities with respect to which such registration rights
are being  transferred or assigned;  (iii) following such transfer or assignment
the further  disposition  of such  securities by the  transferee or assignees is
restricted  under the Securities Act and applicable  state securities laws; (iv)
at or before the time the Company  receives the written notice  contemplated  by
clause (ii) of this Section,  the transferee or assignee  agrees in writing with
the Company to be bound by all of the provisions of this Agreement; and (v) such
transfer shall have been made in accordance with the applicable  requirements of
the  Purchase  Agreement  and shall be for no less  than 50% of the  Registrable
Securities.  In  addition,  the Holder shall have the right to assign its rights
hereunder  to any other  Person with the prior  written  consent of the Company,
which consent shall not be unreasonably  withheld,  conditioned or delayed.  The
rights to assignment  shall apply to the Holder (and to  subsequent)  successors
and assigns.  In the event of an assignment  pursuant to this Section 8(i),  the
Purchaser shall pay all incremental  costs and expenses  incurred by the Company
in  connection  with filing a  Registration  Statement  (or an  amendment to the
Registration  Statement)  to  register  the  shares  of  Registrable  Securities
assigned to any assignee or transferee of the Purchaser.

     (j)  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. This  Agreement  shall be governed by and construed in
accordance with the laws of the State of Delaware,  without regard to principles
of  conflicts  of law  thereof.  This  Agreement  shall  not be  interpreted  or
construed  with any  presumption  against the party causing this Agreement to be
drafted.

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

     (m)  Termination.  This Agreement  shall terminate on the date on which all
remaining  Registrable  Securities may be sold without  restriction  pursuant to
Rule 144(k) of the Securities Act.

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

                                       16
<PAGE>

     (o)  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.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       17
<PAGE>

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

                                INTELLI-CHECK, INC.
                                By:   /s/
                                     -----------------------------------
                                    Name:
                                    Title:

                              GRYPHON MASTER FUND, L.P.

                                By:  Gryphon Partners, L.P., its General Partner

                                  By:  Gryphon Management Partners, L.P.,
                                           its General Partner

                                    By:  Gryphon Advisors, LLC,
                                           its General Partner

                                       By: /s/
                                           -------------------------------
                                           E.B. Lyon, IV, Authorized Agent

<PAGE>

                                   EXHIBIT A
                                   ---------
                                   PURCHASERS

Gryphon Master Fund, L.P.
500 Crescent Court
Suite 270
Dallas, Texas  75201
Tel. No.: (214) 871-6998
Fax No.: (214) 871-6909
Attn:  E.B. Lyon, IV

                                      A-1
<PAGE>
                                   EXHIBIT B
                                   ---------
                              PLAN OF DISTRIBUTION

     We are  registering  the  warrants  and the shares of  preferred  stock and
common stock on behalf of the selling stockholders.  The warrants and the shares
of preferred  stock and common stock may be sold in one or more  transactions at
fixed prices, at prevailing market prices at the time of sale, at prices related
to the  prevailing  market prices,  at varying prices  determined at the time of
sale, or at negotiated  prices.  These sales may be effected at various times in
one or more of the following transactions, or in other kinds of transactions:

     --   transactions  on  the  American  Stock  Exchange  or on  any  national
          securities  exchange  or  U.S.  inter-dealer  system  of a  registered
          national  securities   association  on  which  the  warrants  and  our
          preferred  stock and common  stock may be listed or quoted at the time
          of sale;

     --   in the over-the-counter market;

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

     --   in connection with short sales of the shares;

     --   by pledge to secure or in payment of debt and other obligations;

     --   through the  writing of options,  whether the options are listed on an
          options exchange or otherwise;

     --   in connection with the writing of non-traded and exchange-traded  call
          options, in hedge transactions and in settlement of other transactions
          in standardized or over-the-counter options; or

     --   through a combination of any of the above transactions.

     The selling  stockholder  and its  successors,  including its  transferees,
pledgees or donees or their successors,  may sell the warrants,  preferred stock
and common stock directly to purchasers or through underwriters,  broker-dealers
or agents, who may receive compensation in the form of discounts, concessions or
commissions  from the selling  stockholder or the purchasers.  These  discounts,
concessions or commissions as to any particular  underwriter,  broker-dealer  or
agent may be in excess of those customary in the types of transactions involved.

     In addition,  any securities  covered by this prospectus  which qualify for
sale  pursuant  to Rule 144 of the  Securities  Act may be sold  under  Rule 144
rather than pursuant to this prospectus.

     We entered  into a  registration  rights  agreement  for the benefit of the
selling stockholders to register the warrants and our preferred stock and common

                                      B-1
<PAGE>

stock under  applicable  federal and state  securities  laws.  The  registration
rights agreement provides for  cross-indemnification of the selling stockholders
and us and our respective  directors,  officers and controlling  persons against
specific  liabilities  in  connection  with the offer and sale of the  warrants,
preferred  stock and common stock,  including  liabilities  under the Securities
Act.  We will pay  substantially  all of the  expenses  incurred  by the selling
stockholders incident to the offering and sale of the warrants,  preferred stock
and common stock.

                                      B-2
<PAGE>

                                   EXHIBIT C
                                   ---------
                        FORM OF NOTICE OF EFFECTIVENESS
                           OF REGISTRATION STATEMENT

[Name and address of Transfer Agent]
_________________
_________________
_________________

Attn:  ____________

Re:     Intelli-Check, Inc.
        -------------------

Ladies and Gentlemen:

     We  are  counsel  to  Intelli-Check,  Inc.,  a  Delaware  corporation  (the
"Company"),  and have  represented  the Company in connection  with that certain
Securities Purchase Agreement (the "Purchase Agreement"),  dated as of March __,
2003, by and between the Company and the purchasers  (the  "Purchasers"  and the
"Holders")  named therein pursuant to which the Company issued to the Purchasers
shares (the "Preferred Shares") of its 8% Convertible  Preferred Stock, $.01 par
value (the "Preferred Stock").  Pursuant to the Purchase Agreement,  the Company
has also entered into a Registration  Rights  Agreement with the Purchasers (the
"Registration Rights Agreement"),  dated as of March __, 2003, pursuant to which
the Company agreed,  among other things, to register the Registrable  Securities
(as defined in the  Registration  Rights  Agreement),  including  the  Preferred
Shares,  under the  Securities  Act of 1933,  as amended  (the "1933  Act").  In
connection  with  the  Company's   obligations  under  the  Registration  Rights
Agreement,  on _________ __, 2003, the Company filed a Registration Statement on
Form  S-3  (File  No.  333-________)  (the  "Registration  Statement")  with the
Securities  and Exchange  Commission  (the "SEC")  relating to the resale of the
Registrable   Securities  which  names  the  Holders  as  selling   stockholders
thereunder.

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

                                        Very truly yours,

                                        By:

cc:     [PURCHASERS]

                                      C-1

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