Document:

Exhibit 10.1

                          SECURITIES PURCHASE AGREEMENT

         This Securities  Purchase  Agreement (this  "AGREEMENT") is dated as of
February ___, 2006 among Secured  Services,  Inc., a Delaware  corporation  (the
"COMPANY"),  and each purchaser  identified on the signature pages hereto (each,
including  its  successors  and assigns,  a  "PURCHASER"  and  collectively  the
"PURCHASERS").

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

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

                                    ARTICLE I.
                                   DEFINITIONS

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

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

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

                  "AUTHORIZED   SHARE  APPROVAL"  means  (i)  the  vote  by  the
         shareholders  of the Company to approve an amendment  to the  Company's
         certificate  of  incorporation  that increases the number of authorized
         shares of Common Stock from 50,000,000 to 300,000,000 (the "AMENDMENT")
         and (ii) the filing by the Company of the Amendment  with the Secretary
         of State of the State of Delaware and the  acceptance  of the Amendment
         by the Secretary of State of the State of Delaware.

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

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

                   "COMMISSION" means the Securities and Exchange Commission.

                  "COMMON  STOCK"  means the common  stock of the  Company,  par
         value $.0001 per share,  and any other class of  securities  into which
         such securities may hereafter have been reclassified or changed into.

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

                  "COMPANY COUNSEL" means Morse, Zelnick, Rose & Lander, LLP.

                  "CONVERSION  PRICE"  shall have the  meaning  ascribed to such
         term in the Debentures.

                  "DEBENTURES" means, the 7% Secured Convertible Debentures due,
         subject to the terms therein,  three years from their date of issuance,
         issued  by the  Company  to the  Purchasers  hereunder,  in the form of
         EXHIBIT A.

                  "DISCLOSURE SCHEDULES" shall have the meaning ascribed to such
         term in Section 3.1.

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

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

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

                  "EXEMPT  ISSUANCE"  means the issuance of (a) shares of Common
         Stock or options to key employees,  consultants,  officers or directors
         of  the  Company  pursuant  to  any  stock  or  option  plan  or  other
         compensatory arrangement duly adopted by a majority of the non-employee
         members of the Board of  Directors  of the Company or a majority of the
         members of a committee of non-employee  directors  established for such
         purpose;  PROVIDED,  HOWEVER,  issuances  to  such  consultants  of the
         Company shall not exceed,  in the  aggregate,  2,000,000  shares per 12
         month  period,  subject to  adjustment  for reverse  and forward  stock
         splits,   stock  dividends,   stock   combinations  and  other  similar
         transactions  of the Common Stock,  (b) securities upon the exercise or
         exchange of or conversion of

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         any  Securities  issued  hereunder  and/or  securities  exercisable  or
         exchangeable  for or convertible into shares of Common Stock issued and
         outstanding  on  the  date  of  this  Agreement,   provided  that  such
         securities  have not been amended  since the date of this  Agreement to
         increase the number of such  securities  or to decrease  the  exercise,
         exchange or conversion  price of any such  securities,  (c)  securities
         issued pursuant to acquisitions or strategic transactions, provided any
         such issuance shall only be to a Person which is, itself or through its
         subsidiaries,  an operating company in a business  synergistic with the
         business of the Company and in which the Company  receives  benefits in
         addition  to  the  investment  of  funds,   but  shall  not  include  a
         transaction  in which the Company is issuing  securities  primarily for
         the purpose of raising  capital or to an entity whose primary  business
         is  investing in  securities,  (d) up to, in the  aggregate,  2,000,000
         shares per 12 month  period,  subject to  adjustment  for  reverse  and
         forward stock splits,  stock  dividends,  stock  combinations and other
         similar  transactions  of the  Common  Stock,  of  Common  Stock to key
         officers,  employees  or  consultants  of  acquisition  targets  of the
         Company in consideration  for the extension of or entry into employment
         agreements  and (e) up to, in the  aggregate,  an  amount  equal to the
         difference  between $5 million and the aggregate  amounts  raised under
         this Agreement and any prior agreements entered into after February 15,
         2006,  of debentures  and warrants on the same terms and  conditions as
         the sale of the Debentures and Warrants  hereunder,  provided that such
         agreements  are  entered  into on or prior to  March  31,  2006 and the
         participating  investors  are  acceptable to the  Purchasers  holding a
         majority  of the  aggregate  principal  amount of the then  outstanding
         Debentures.

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

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

                  "INTELLECTUAL PROPERTY RIGHTS" shall have the meaning ascribed
         to such term in Section 3.1(o).

                  "ISLANDIA  BRIDGE  NOTES"  means (i) a $375,000  7.5%  Secured
         Promissory  Note  issued on  January  4, 2006 and due on March 7, 2006,
         (ii) a $100,000 7.5% Secured Promissory Note issued on February 1, 2006
         and due on March 7, 2006 and (iii) accrued and unpaid  interest on such
         Notes of $4,793.

                  "LEGEND REMOVAL DATE" shall have the meaning  ascribed to such
         term in Section 4.1(c).

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

                  "MATERIAL  ADVERSE EFFECT" shall have the meaning  assigned to
         such term in Section 3.1(b).

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

                  "MAXIMUM RATE" shall have the meaning ascribed to such term in
         Section 5.17.

                  "MIDSUMMER  BRIDGE  NOTES"  means (i) a $500,000  7.5% Secured
         Promissory  Note  issued on  December 7, 2005 and due on March 7, 2006,
         (ii) a $100,000 7.5% Secured Promissory Note issued on February 1, 2006
         and due on March 7, 2006 and (iii) accrued and unpaid  interest on such
         Notes of $9,082.

                  "PARTICIPATION  MAXIMUM"  shall have the  meaning  ascribed to
         such term in Section 4.13.

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

                  "PRE-NOTICE"  shall have the meaning  ascribed to such term in
         Section 4.13.

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

                  "PURCHASER PARTY" shall have the meaning ascribed to such term
         in Section 4.11.

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

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

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

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

                  "RULE  144"  means  Rule  144  promulgated  by the  Commission
         pursuant to the  Securities  Act, as such Rule may be amended from time
         to time,  or any similar rule or

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         regulation hereafter adopted by the Commission having substantially the
         same effect as such Rule.

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

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

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

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

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

                  "SHORT  SALES" shall  include all "short  sales" as defined in
         Rule 200 of Regulation SHO under the Exchange Act.

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

                  "SUBSEQUENT FINANCING" shall have the meaning ascribed to such
         term in Section 4.13.

                  "SUBSEQUENT  FINANCING NOTICE" shall have the meaning ascribed
         to such term in Section 4.13.

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

                  "SUBSIDIARY  GUARANTEE" means the Subsidiary Guarantee,  dated
         the date hereof, by each Subsidiary in favor of the Purchasers,  in the
         form of EXHIBIT F attached hereto.

                  "TRADING  DAY" means a day on which the Common Stock is traded
         on a Trading Market.

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

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

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

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

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

                  "WARRANT  SHARES"  means the shares of Common  Stock  issuable
         upon exercise of the Warrants.

                                   ARTICLE II.
                                PURCHASE AND SALE

         2.1      CLOSING.  On the Closing  Date,  upon the terms and subject to
the conditions set forth herein,  concurrent  with the execution and delivery of
this  Agreement  by the parties  hereto,  the Company  agrees to sell,  and each
Purchaser agrees to purchase in the aggregate,  severally and not jointly, up to
$5,000,000  principal amount of the Debentures.  Each Purchaser shall deliver to
the Company via wire transfer or a certified check  immediately  available funds
equal to  their  Subscription  Amount  and the  Company  shall  deliver  to each
Purchaser  their  respective  Debenture and Warrants as  determined  pursuant to
Section  2.2(a) and the other  items set forth in Section  2.2  issuable  at the
Closing.  Upon satisfaction of the conditions set forth in Sections 2.2 and 2.3,
the  Closing  shall  occur at the  offices of FW, or such other  location as the
parties shall mutually agree.

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         2.2      DELIVERIES.

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

                           (i)      this Agreement duly executed by the Company;

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

                           (iii)    a Debenture with a principal amount equal to
                  (A) in the case of Midsummer  Investment  Ltd.  ("MIDSUMMER"),
                  the sum of Midsummer's "Cash Payable at Closing," as indicated
                  on the signature page hereto,  and the aggregate dollar amount
                  of the Midsummer Bridge Notes and (B) in the case of Islandia,
                  L.P.  ("ISLANDIA"),  the sum of  Islandia's  "Cash  Payable at
                  Closing," as indicated on the signature  page hereto,  and the
                  aggregate  dollar amount of the Islandia Bridge Notes, in each
                  case registered in the name of such respective Purchaser;

                           (iv)     a  Warrant  registered  in the  name of such
                  Purchaser to purchase up to a number of shares of Common Stock
                  equal to 100% of such Purchaser's  Subscription Amount divided
                  by the initial  Conversion Price, with an exercise price equal
                  to $0.17, subject to adjustment therein;

                           (v)      the Security Agreement, duly executed by the
                  Company, along with all the Security Documents,  including the
                  Subsidiary Guarantees; and

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

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

                           (i)      this   Agreement   duly   executed  by  such
                  Purchaser;

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

                           (iii)    the  Midsummer  Bridge Notes to be delivered
                  by Midsummer and the Islandia  Bridge Notes to be delivered by
                  Islandia; and

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

         2.3      CLOSING CONDITIONS.

                  (a)      The   obligations   of  the  Company   hereunder   in
         connection  with the

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         Closing are subject to the following conditions being met:

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

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

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

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

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

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

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

                           (iv)     there  shall have been no  Material  Adverse
                  Effect with respect to the Company since the date hereof;

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

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                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

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

                  (a)      SUBSIDIARIES.   All  of  the  direct   and   indirect
         subsidiaries  of the  Company  are set forth on  SCHEDULE  3.1(a).  The
         Company owns, directly or indirectly, all of the capital stock or other
         equity  interests of each Subsidiary  free and clear of any Liens,  and
         all  the  issued  and  outstanding  shares  of  capital  stock  of each
         Subsidiary  are validly issued and are fully paid,  non-assessable  and
         free of  preemptive  and similar  rights to  subscribe  for or purchase
         securities. If the Company has no subsidiaries,  then references in the
         Transaction Documents to the Subsidiaries will be disregarded.

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

                  (c)      AUTHORIZATION;   ENFORCEMENT.  The  Company  has  the
         requisite corporate power and authority to enter into and to consummate
         the transactions  contemplated by each of the Transaction Documents and
         otherwise to carry out its obligations  hereunder and  thereunder.  The
         execution  and  delivery of each of the  Transaction  Documents  by the
         Company and the  consummation  by it of the  transactions  contemplated
         thereby have been duly  authorized by all necessary  action on the part
         of the Company and no further  action is required by the  Company,  its
         board of directors or its  stockholders  in connection  therewith other
         than in  connection  with  the  Required  Approvals.  Each  Transaction
         Document has been (or upon  delivery  will have been) duly  executed by
         the Company and, when delivered in accordance with the terms hereof and
         thereof,  will  constitute  the valid  and  binding  obligation  of the
         Company enforceable against the Company in

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         accordance   with  its  terms  except  (i)  as  limited  by  applicable
         bankruptcy,  insolvency,  reorganization,  moratorium and other laws of
         general   application   affecting   enforcement  of  creditors'  rights
         generally and (ii) as limited by laws relating to the  availability  of
         specific performance, injunctive relief or other equitable remedies.

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

                  (e)      FILINGS,  CONSENTS AND APPROVALS.  The Company is not
         required to obtain any consent, waiver, authorization or order of, give
         any notice to, or make any filing or  registration  with,  any court or
         other federal,  state, local or other  governmental  authority or other
         Person in connection  with the execution,  delivery and  performance by
         the  Company  of the  Transaction  Documents,  other  than (i)  filings
         required  pursuant to Section 4.6, (ii) the filing with the  Commission
         of the Registration  Statement,  (iii) the notice and/or application(s)
         to each  applicable  Trading  Market for the  issuance  and sale of the
         Debentures  and Warrants and the listing of the  Underlying  Shares for
         trading  thereon in the time and manner  required  thereby and (iv) the
         filing of Form D with the  Commission  and such filings as are required
         to be made under applicable state  securities laws  (collectively,  the
         "REQUIRED APPROVALS").

                  (f)      ISSUANCE OF THE  SECURITIES.  The Securities are duly
         authorized  and,  when  issued  and  paid  for in  accordance  with the
         applicable  Transaction  Documents,  will be duly and  validly  issued,
         fully paid and  nonassessable,  free and clear of all Liens  imposed by
         the Company  other than  restrictions  on transfer  provided for in the
         Transaction Documents. The Underlying Shares, when issued in accordance
         with the terms of the  Transaction  Documents,  will be validly issued,
         fully paid and  nonassessable,  free and clear of all Liens  imposed by
         the Company.  As of the date hereof,  the Company has reserved from its
         duly  authorized  capital  stock an aggregate  of  1,000,000  shares of
         Common Stock for issuance of the Underlying Shares.

                                       10
<PAGE>

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

                  (h)      SEC REPORTS;  FINANCIAL  STATEMENTS.  The Company has
         filed all reports,  schedules,  forms,  statements and other  documents
         required to be filed by it under the  Securities  Act and the  Exchange
         Act, including pursuant to Section 13(a) or 15(d) thereof,  for the two
         years  preceding the date hereof (or such shorter period as the Company
         was required by law to file such material)  (the  foregoing  materials,
         including the exhibits thereto and documents  incorporated by reference
         therein, being collectively referred to herein as the "SEC REPORTS") on
         a timely basis or has received a valid extension of such time of filing
         and has filed any such SEC Reports prior to the  expiration of any such
         extension.  As of their  respective  dates, the SEC Reports complied in
         all material  respects with the  requirements of the Securities Act and
         the  Exchange  Act and the  rules  and  regulations  of the  Commission
         promulgated  thereunder,  and  none of the  SEC  Reports,  when  filed,
         contained any untrue statement of a material fact or omitted to state a
         material  fact  required to be stated  therein or necessary in order to
         make the statements  therein,  in the light of the circumstances  under
         which they were made, not misleading.  The financial  statements of the
         Company  included in the SEC Reports  comply in all  material  respects
         with applicable  accounting  requirements and the rules and regulations
         of the  Commission  with  respect  thereto  as in effect at the time of
         filing. Such

                                       11
<PAGE>

         financial  statements  have been  prepared  in  accordance  with United
         States generally accepted accounting principles applied on a consistent
         basis during the periods involved ("GAAP"),  except as may be otherwise
         specified in such financial  statements or the notes thereto and except
         that  unaudited  financial  statements  may not contain  all  footnotes
         required  by GAAP,  and fairly  present in all  material  respects  the
         financial position of the Company and its consolidated  subsidiaries as
         of and for the dates  thereof  and the results of  operations  and cash
         flows for the periods  then ended,  subject,  in the case of  unaudited
         statements, to normal, immaterial, year-end audit adjustments.

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

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

                  (k)      LABOR RELATIONS. No material labor dispute exists or,
         to the knowledge of the Company, is imminent with respect to any of the
         employees of the Company  which could  reasonably be expected to result
         in a Material Adverse Effect.

                                       12
<PAGE>

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

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

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

                  (o)      PATENTS   AND   TRADEMARKS.   The   Company  and  the
         Subsidiaries  have,  or  have  rights  to  use,  all  patents,   patent
         applications,  trademarks, trademark applications, service marks, trade
         names,  copyrights,  licenses  and other  similar  rights  necessary or
         material for use in  connection  with their  respective  businesses  as
         described  in the SEC  Reports  and which the  failure to so have could
         have  a  Material  Adverse  Effect  (collectively,   the  "INTELLECTUAL
         PROPERTY RIGHTS").  Neither the Company nor any Subsidiary has received
         a written  notice  that the  Intellectual  Property  Rights used by the
         Company or any Subsidiary  violates or infringes upon the rights of any
         Person. To the knowledge of the Company, all such Intellectual Property
         Rights are enforceable and there is no existing infringement by another
         Person of any of the Intellectual Property Rights of others.

                  (p)      INSURANCE.  The  Company  and  the  Subsidiaries  are
         insured by insurers of recognized financial responsibility against such
         losses and risks and in such  amounts as are prudent and  customary  in
         the businesses in which the Company and the Subsidiaries

                                       13
<PAGE>

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

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

                  (r)      SARBANES-OXLEY;  INTERNAL  ACCOUNTING  CONTROLS.  The
         Company  is  in  material   compliance   with  all  provisions  of  the
         Sarbanes-Oxley Act of 2002 which are applicable to it as of the Closing
         Date.  The Company and the  Subsidiaries  maintain a system of internal
         accounting controls sufficient to provide reasonable assurance that (i)
         transactions  are executed in accordance with  management's  general or
         specific authorizations, (ii) transactions are recorded as necessary to
         permit preparation of financial  statements in conformity with GAAP and
         to maintain asset  accountability,  (iii) access to assets is permitted
         only in accordance with management's general or specific authorization,
         and (iv) the recorded  accountability  for assets is compared  with the
         existing assets at reasonable intervals and appropriate action is taken
         with respect to any differences. The Company has established disclosure
         controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
         15d-15(e))  for the Company and designed such  disclosure  controls and
         procedures to ensure that  information  required to be disclosed by the
         Company in the reports it files or submits  under the  Exchange  Act is
         recorded,  processed,  summarized and reported, within the time periods
         specified in the Commission's rules and forms. The Company's certifying
         officers have evaluated the  effectiveness of the Company's  disclosure
         controls  and  procedures  as of the end of the  period  covered by the
         Company's most recently  filed  periodic  report under the Exchange Act
         (such date, the "EVALUATION  DATE").  The Company presented in its most
         recently filed periodic  report under the Exchange Act the  conclusions
         of the certifying  officers about the  effectiveness  of the disclosure
         controls and procedures based on their evaluations as of the Evaluation
         Date.  Since the  Evaluation  Date,  there  have been no changes in the
         Company's  internal  control over financial  reporting (as such term is
         defined in the

                                       14
<PAGE>

         Exchange Act) that has materially affected,  or is reasonably likely to
         materially  affect,  the  Company's  internal  control  over  financial
         reporting.

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

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

                  (u)      INVESTMENT COMPANY. The Company is not, and is not an
         Affiliate  of,  and  immediately  after  receipt  of  payment  for  the
         Securities,  will not be or be an Affiliate of, an "investment company"
         within the meaning of the  Investment  Company Act of 1940, as amended.
         The Company  shall conduct its business in a manner so that it will not
         become subject to the Investment Company Act.

                  (v)      REGISTRATION   RIGHTS.   Other   than   each  of  the
         Purchasers,  no Person has any right to cause the Company to effect the
         registration under the Securities Act of any securities of the Company.

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

                  (x)      APPLICATION OF TAKEOVER PROTECTIONS.  The Company and
         its Board of  Directors  have taken all  necessary  action,  if any, in
         order to render  inapplicable any control share  acquisition,  business
         combination,  poison pill  (including any  distribution  under a rights
         agreement) or other similar anti-takeover provision under the Company's
         Certificate of Incorporation (or similar charter documents) or the laws
         of its state of incorporation that is or could become applicable to the
         Purchasers  as a result of the  Purchasers  and the Company  fulfilling
         their obligations or exercising their rights under the

                                       15
<PAGE>

         Transaction Documents,  including without limitation as a result of the
         Company's  issuance of the Securities and the Purchasers'  ownership of
         the Securities.

                  (y)      DISCLOSURE.  The Company confirms that neither it nor
         any  other  Person  acting  on  its  behalf  has  provided  any  of the
         Purchasers  or  their  agents  or  counsel  with any  information  that
         constitutes or might constitute material,  nonpublic  information.  The
         Company  understands  and confirms that the Purchasers will rely on the
         foregoing  representations  and covenants in effecting  transactions in
         securities of the Company.  All  disclosure  provided to the Purchasers
         regarding the Company,  its business and the transactions  contemplated
         hereby, including the Disclosure Schedules to this Agreement, furnished
         by or on behalf of the Company with respect to the  representations and
         warranties  made  herein  are true and  correct  with  respect  to such
         representations  and warranties and do not contain any untrue statement
         of a material  fact or omit to state any  material  fact  necessary  in
         order  to  make  the   statements   made  therein,   in  light  of  the
         circumstances  under which they were made, not misleading.  The Company
         acknowledges  and  agrees  that no  Purchaser  makes  or has  made  any
         representations   or  warranties  with  respect  to  the   transactions
         contemplated  hereby other than those specifically set forth in Section
         3.2 hereof.

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

                  (aa)     SOLVENCY.  Based on the  financial  condition  of the
         Company as of the Closing  Date after  giving  effect to the receipt by
         the Company of the proceeds from the sale of the Securities  hereunder,
         (i) the Company's  fair saleable value of its assets exceeds the amount
         that will be  required  to be paid on or in  respect  of the  Company's
         existing  debts  and  other  liabilities  (including  known  contingent
         liabilities)  as  they  mature;   (ii)  the  Company's  assets  do  not
         constitute  unreasonably small capital to carry on its business for the
         current  fiscal year as now  conducted  and as proposed to be conducted
         including its capital needs taking into account the particular  capital
         requirements  of the business  conducted by the Company,  and projected
         capital  requirements and capital  availability  thereof; and (iii) the
         current  cash  flow of the  Company,  together  with the  proceeds  the
         Company would  receive,  were it to liquidate all of its assets,  after
         taking  into  account  all  anticipated  uses  of the  cash,  would  be
         sufficient  to pay all  amounts  on or in respect of its debt when such
         amounts are  required to be paid.  The Company does not intend to incur
         debts beyond its ability to pay such debts as they mature  (taking into
         account  the timing and  amounts of cash to be payable on or in respect
         of  its  debt).   The  Company  has  no   knowledge  of  any  facts  or
         circumstances   which  lead  it  to  believe  that  it  will  file  for
         reorganization  or liquidation  under the bankruptcy or  reorganization
         laws of

                                       16
<PAGE>

         any  jurisdiction  within  one year  from the  Closing  Date.  SCHEDULE
         3.1(aa) sets forth as of the dates thereof all outstanding  secured and
         unsecured  Indebtedness of the Company or any Subsidiary,  or for which
         the Company or any Subsidiary has commitments. For the purposes of this
         Agreement,  "INDEBTEDNESS"  shall mean (a) any liabilities for borrowed
         money or amounts owed in excess of $50,000  (other than trade  accounts
         payable  incurred  in  the  ordinary  course  of  business),   (b)  all
         guaranties, endorsements and other contingent obligations in respect of
         Indebtedness  of  others,  whether  or not the  same are or  should  be
         reflected in the Company's balance sheet (or the notes thereto), except
         guaranties  by  endorsement  of negotiable  instruments  for deposit or
         collection or similar  transactions in the ordinary course of business;
         and (c) the  present  value of any lease  payments in excess of $50,000
         due under leases  required to be capitalized  in accordance  with GAAP.
         Neither the Company nor any  Subsidiary  is in default  with respect to
         any Indebtedness.

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

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

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

                  (ee)     ACCOUNTANTS.  The Company's accountants are set forth
         on SCHEDULE 3.1(ee) of the Disclosure Schedule. To the knowledge of the
         Company,  such accountants,  who the Company expects will express their
         opinion with respect to the financial  statements to be included in the
         Company's  Annual  Report on Form  10-KSB  for the  fiscal  year  ended
         December 31, 2005 are a registered  public  accounting firm as required
         by the Securities Act.

                  (ff)     SENIORITY. As of the Closing Date, no indebtedness or
         other  equity of the  Company is senior to the  Debentures  in right of
         payment,  whether  with  respect to  interest  or upon  liquidation  or
         dissolution, or otherwise, other than indebtedness secured by

                                       17
<PAGE>

         purchase  money  security   interests  (which  is  senior  only  as  to
         underlying assets covered thereby) and capital lease obligations (which
         is senior only as to the property covered thereby).

                  (gg)     NO DISAGREEMENTS WITH ACCOUNTANTS AND LAWYERS.  There
         are no  disagreements  of any kind  presently  existing,  or reasonably
         anticipated  by the  Company  to arise,  between  the  accountants  and
         lawyers  formerly or presently  employed by the Company and the Company
         is  current  with  respect  to any  fees  owed to its  accountants  and
         lawyers.

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

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

                                       18
<PAGE>

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

         3.2      REPRESENTATIONS   AND  WARRANTIES  OF  THE  PURCHASERS.   Each
Purchaser hereby, for itself and for no other Purchaser, represents and warrants
as of the date hereof and as of the Closing Date to the Company as follows:

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

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

                                       19
<PAGE>

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

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

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

                  (f)      SHORT  SALES  AND  CONFIDENTIALITY  PRIOR TO THE DATE
         HEREOF.  Other  than  the  transaction  contemplated  hereunder,   such
         Purchaser has not directly or indirectly,  nor has any Person acting on
         behalf  of or  pursuant  to  any  understanding  with  such  Purchaser,
         executed any disposition,  including Short Sales (but not including the
         location and/or  reservation of borrowable  shares of Common Stock), in
         the  securities of the Company  during the period  commencing  from the
         time that such  Purchaser  first received a term sheet from the Company
         or  any  other  Person   setting  forth  the  material   terms  of  the
         transactions  contemplated hereunder until the date hereof ("DISCUSSION
         TIME").  Notwithstanding the foregoing, in the case of a Purchaser that
         is  a  multi-managed  investment  vehicle  whereby  separate  portfolio
         managers manage separate  portions of such  Purchaser's  assets and the
         portfolio managers have no direct knowledge of the investment decisions
         made  by  the  portfolio  managers  managing  other  portions  of  such
         Purchaser's assets, the representation set forth above shall only apply
         with respect to the portion of assets managed by the portfolio  manager
         that made the investment decision to purchase the Securities covered by
         this  Agreement.  Other than to other Persons party to this  Agreement,
         such Purchaser has maintained the  confidentiality  of all  disclosures
         made to it in connection with this transaction (including the existence
         and terms of this transaction).

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

                                       20
<PAGE>

                                  ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

         4.1      TRANSFER RESTRICTIONS.

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

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

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

                  The Company  acknowledges and agrees that a Purchaser may from
         time to time pledge  pursuant to a bona fide  margin  agreement  with a
         registered broker-dealer or grant a security interest in some or all of
         the  Securities  to a  financial  institution  that  is an  "accredited
         investor"  as defined in Rule 501(a) under the  Securities  Act and who
         agrees  to be  bound  by the  provisions  of  this  Agreement  and  the
         Registration  Rights Agreement and, if required under the terms of such
         arrangement,  such Purchaser may transfer pledged or secured Securities
         to the pledgees or secured parties. Such a pledge or transfer would not
         be subject to approval  of the  Company  and no legal  opinion of legal

                                       21
<PAGE>

         counsel of the pledgee,  secured  party or pledgor shall be required in
         connection  therewith.  Further,  no notice  shall be  required of such
         pledge.  At the  appropriate  Purchaser's  expense,  the  Company  will
         execute  and  deliver  such  reasonable  documentation  as a pledgee or
         secured party of Securities may reasonably request in connection with a
         pledge or transfer of the Securities,  including, if the Securities are
         subject to registration  pursuant to the Registration Rights Agreement,
         the preparation and filing of any required prospectus  supplement under
         Rule 424(b)(3) under the Securities Act or other  applicable  provision
         of the  Securities  Act to  appropriately  amend  the  list of  Selling
         Stockholders thereunder.

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

                  (d)      In  addition  to  such  Purchaser's  other  available
         remedies,  the Company  shall pay to a Purchaser,  in cash,  as partial
         liquidated damages and not as a penalty,  for each $2,000 of Underlying
         Shares  (based  on the  VWAP  of the  Common  Stock  on the  date  such
         Securities are submitted to the Company's transfer agent) delivered for
         removal of the restrictive  legend and subject to Section  4.1(c),  $10
         per Trading Day (increasing to $20 per Trading Day 5 Trading Days after
         such  damages  have begun to  accrue)  for each  Trading  Day after the
         second  Trading  Day  following  the  Legend  Removal  Date  until such
         certificate is delivered  without a legend.  Nothing herein shall limit
         such Purchaser's

                                       22
<PAGE>

         right to pursue  actual  damages for the  Company's  failure to deliver
         certificates representing any Securities as required by the Transaction
         Documents,  and such  Purchaser  shall  have the  right to  pursue  all
         remedies  available  to  it at  law  or in  equity  including,  without
         limitation, a decree of specific performance and/or injunctive relief.

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

                  (f)      Until the one year anniversary of the Effective Date,
         the Company  shall not  undertake  a reverse or forward  stock split or
         reclassification  of the Common Stock without the prior written consent
         of the Purchasers holding a majority in principal amount outstanding of
         the Debentures.

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

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

         4.4      INTEGRATION.  The  Company  shall not sell,  offer for sale or
solicit  offers to buy or  otherwise  negotiate  in respect of any  security (as
defined in Section 2 of the  Securities  Act) that would be integrated  with the
offer or sale of the Securities in a manner that would require the  registration
under the Securities Act of the sale of the Securities to the Purchasers or that
would be integrated with the offer or sale of the Securities for purposes of the
rules and regulations of any Trading Market.

                                       23
<PAGE>

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

         4.6      SECURITIES LAWS DISCLOSURE;  PUBLICITY.  The Company shall, by
8:30 a.m.  Eastern time on the Trading Day  following  the date hereof,  issue a
Current Report on Form 8-K, reasonably  acceptable to each Purchaser  disclosing
the material terms of the transactions contemplated hereby, and shall attach the
Transaction Documents thereto. The Company and each Purchaser shall consult with
each other in issuing any other press releases with respect to the  transactions
contemplated  hereby,  and neither the Company nor any Purchaser shall issue any
such press release or otherwise make any such public statement without the prior
consent of the Company,  with respect to any press release of any Purchaser,  or
without the prior consent of each  Purchaser,  with respect to any press release
of the Company, which consent shall not unreasonably be withheld, except if such
disclosure is required by law, in which case the disclosing party shall promptly
provide  the  other  party  with  prior  notice  of  such  public  statement  or
communication.  Notwithstanding  the  foregoing,  the Company shall not publicly
disclose the name of any Purchaser,  or include the name of any Purchaser in any
filing with the Commission or any regulatory  agency or Trading Market,  without
the prior written consent of such  Purchaser,  except (i) as required by federal
securities law in connection with the registration statement contemplated by the
Registration Rights Agreement and (ii) to the extent such disclosure is required
by law or Trading  Market  regulations,  in which case the Company shall provide
the Purchasers  with prior notice of such  disclosure  permitted under subclause
(i) or (ii).

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

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

         4.9      USE OF PROCEEDS.  Except as set forth on SCHEDULE 4.9 attached
hereto,  the Company shall use the net proceeds from the sale of the  Securities
hereunder  for working  capital  purposes  and not for the  satisfaction  of any
portion of the Company's debt (other than payment

                                       24
<PAGE>

of trade  payables in the ordinary  course of the  Company's  business and prior
practices),  to redeem any Common Stock or Common Stock Equivalents or to settle
any outstanding litigation.

         4.10     REIMBURSEMENT.  If  any  Purchaser  becomes  involved  in  any
capacity in any  Proceeding by or against any Person who is a stockholder of the
Company  (except  as a result  of  sales,  pledges,  margin  sales  and  similar
transactions  by such Purchaser to or with any other  stockholder),  solely as a
result of such  Purchaser's  acquisition of the Securities under this Agreement,
the Company will reimburse  such  Purchaser for its  reasonable  legal and other
expenses  (including  the cost of any  investigation  preparation  and travel in
connection  therewith)  incurred in connection  therewith,  as such expenses are
incurred.  The  reimbursement  obligations  of the Company under this  paragraph
shall be in addition to any  liability  which the  Company may  otherwise  have,
shall  extend  upon the same  terms  and  conditions  to any  Affiliates  of the
Purchasers who are actually named in such action,  proceeding or  investigation,
and partners,  directors, agents, employees and controlling persons (if any), as
the case may be, of the Purchasers and any such Affiliate,  and shall be binding
upon and inure to the benefit of any  successors,  assigns,  heirs and  personal
representatives  of the Company,  the  Purchasers and any such Affiliate and any
such Person.  The Company also agrees that neither the  Purchasers  nor any such
Affiliates,  partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company  solely as a result of acquiring  the  Securities  under
this Agreement.

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

                                       25
<PAGE>

such action and participate in the defense thereof, but the fees and expenses of
such  counsel  shall be at the  expense of such  Purchaser  Party  except to the
extent that (i) the employment  thereof has been specifically  authorized by the
Company in writing,  (ii) the Company has failed  after a  reasonable  period of
time to assume such defense and to employ  counsel or (iii) in such action there
is, in the reasonable  opinion of such separate counsel,  a material conflict on
any material  issue between the position of the Company and the position of such
Purchaser  Party,  in  which  case the  Company  shall  be  responsible  for the
reasonable  fees and  expenses of no more than one such  separate  counsel.  The
Company will not be liable to any Purchaser  Party under this  Agreement (i) for
any settlement by a Purchaser Party effected without the Company's prior written
consent,  which shall not be  unreasonably  withheld or delayed;  or (ii) to the
extent,  but only to the  extent  that a loss,  claim,  damage or  liability  is
attributable  to any  Purchaser  Party's  breach of any of the  representations,
warranties,  covenants  or  agreements  made by  such  Purchaser  Party  in this
Agreement or in the other Transaction Documents.

         4.12     RESERVATION AND LISTING OF SECURITIES.

                  (a)      On the date  hereof,  the  Company  shall  maintain a
         reserve  from its duly  authorized  shares of Common Stock for issuance
         pursuant to the Transaction  Documents an aggregate of 1,000,000 shares
         of Common Stock.

                  (b)      On the business day immediately following the date on
         which Authorized Share Approval is obtained, the Company shall maintain
         a reserve from its duly authorized  shares of Common Stock for issuance
         pursuant  to  the  Transaction  Documents  in an  amount  equal  to the
         Required Minimum on such date.

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

                  (d)      The Company shall, if applicable: (i) in the time and
         manner  required  by the  Trading  Market,  prepare  and file with such
         Trading  Market an additional  shares  listing  application  covering a
         number of shares of Common Stock at least equal to the Required Minimum
         on the date of such application, (ii) take all steps necessary to cause
         such shares of Common  Stock to be approved  for listing on the Trading
         Market as soon as possible thereafter,  (iii) provide to the Purchasers
         evidence of such listing,  and (iv) maintain the listing of such Common
         Stock on any date at least equal to the  Required  Minimum on such date
         on such Trading  Market or another  Trading  Market.  In addition,  the
         Company  shall  hold an  annual  meeting  of  shareholders  within  105
         calendar  days  of  the  date  hereof  for  the  purpose  of  obtaining
         Authorized  Share Approval,  with the  recommendation  of the Company's
         Board of  Directors  that such  proposal be  approved,  and the Company
         shall solicit proxies from its shareholders in connection  therewith in
         the  same  manner  as all  other  management  proposals  in such  proxy
         statement and all  management-appointed  proxyholders  shall vote their
         proxies  in favor of such  proposal.  If

                                       26
<PAGE>

         the  Company  does not obtain  Authorized  Share  Approval at the first
         meeting,  the Company shall call a meeting every four months thereafter
         to seek  Authorized  Share  Approval  until  the  earlier  of the  date
         Authorized  Share  Approval is obtained or the Debentures are no longer
         outstanding.

         4.13     PARTICIPATION IN FUTURE FINANCING.

                  (a)      From  the date  hereof  until  the  date  that is the
         Debentures are no longer outstanding, upon any financing by the Company
         or any of its Subsidiaries of Common Stock or Common Stock  Equivalents
         (a  "SUBSEQUENT  FINANCING"),  each  Purchaser  shall have the right to
         participate in up to an amount of the Subsequent Financing equal to the
         such amount that would keep such Purchaser's  ownership in the Company,
         including  for  purposes of such  calculation,  shares of Common  Stock
         underlying fully paid convertible derivatives of the Company, including
         the  Debentures  and  excluding  the shares of Common Stock  underlying
         derivative  securities of the Company that require cash payments by the
         holders thereof for exercise,  after the Subsequent  Financing equal to
         such  Purchaser's   ownership  in  the  Company  immediately  prior  to
         Subsequent Financing (the "PARTICIPATION MAXIMUM").

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

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

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

                                       27
<PAGE>

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

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

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

         4.14     SUBSEQUENT EQUITY SALES.

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

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

                                       28
<PAGE>

         to, an equity line of credit,  whereby the Company may sell  securities
         at a future determined price.

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

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

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

         4.17     APPOINTMENT  OF 2  ADDITIONAL  DIRECTORS.  The  Company  shall
appoint (or cause its board of directors or shareholders to appoint) two persons
selected by Midsummer at Midsummer's sole discretion as members of the Company's
board of directors, which

                                       29
<PAGE>

appointments shall be effective  immediately  following the Closing. The Company
shall  use  best  efforts  to  nominate,  solicit  proxies  and  recommend  that
shareholders  vote in favor  of such  two  persons,  or  their  replacements  as
selected by  Midsummer  in  Midsummer's  sole  discretion,  for  re-election  as
directors of the Company at each annual  meeting or at each  special  meeting of
the  shareholders  of the Company at which the election of directors is a matter
to be acted  upon  until  such  time as  Midsummer  holds  less  than 25% in the
aggregate principal amount of the 7.5% Convertible  Debentures due June 13, 2008
and the  Debentures  purchased  by  Midsummer  pursuant to this  Agreement.  The
Company  shall take all  further  actions  reasonably  necessary  to satisfy the
covenants herein.

                                    ARTICLE V.
                                  MISCELLANEOUS

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

         5.2      FEES AND EXPENSES.  At the Closing,  the Company has agreed to
reimburse  Midsummer for its actual,  reasonable,  out-of-pocket  legal fees and
expenses.  The Company  shall  deliver,  prior to the Closing,  a completed  and
executed copy of the Closing  Statement,  attached  hereto as ANNEX A. Except as
expressly set forth in the  Transaction  Documents to the  contrary,  each party
shall pay the fees and expenses of its advisers, counsel,  accountants and other
experts,  if any, and all other expenses  incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement.
The Company shall pay all transfer  agent fees,  stamp taxes and other taxes and
duties levied in connection with the delivery of any Securities.

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

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

                                       30
<PAGE>

receipt by the party to whom such notice is  required  to be given.  The address
for such notices and communications shall be as set forth on the signature pages
attached hereto.

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

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

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

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

         5.9      GOVERNING  LAW. All  questions  concerning  the  construction,
validity,  enforcement and interpretation of the Transaction  Documents shall be
governed by and construed  and enforced in accordance  with the internal laws of
the State of New York,  without  regard to the  principles  of  conflicts of law
thereof.   Each  party  agrees  that  all  legal   proceedings   concerning  the
interpretations,  enforcement  and defense of the  transactions  contemplated by
this Agreement and any other  Transaction  Documents  (whether brought against a
party hereto or its respective affiliates,  directors,  officers,  shareholders,
employees  or agents)  shall be commenced  exclusively  in the state and federal
courts sitting in the City of New York. Each party hereby irrevocably submits to
the exclusive  jurisdiction  of the state and federal courts sitting in the City
of New York,  borough of Manhattan for the adjudication of any dispute hereunder
or in  connection  herewith  or with  any  transaction  contemplated  hereby  or
discussed  herein  (including  with  respect  to the  enforcement  of any of the
Transaction Documents),  and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding,  any claim that it is not personally  subject
to the jurisdiction of any such court,  that such suit,  action or proceeding is
improper  or  inconvenient   venue  for  such  proceeding.   Each  party  hereby
irrevocably  waives  personal  service of process and consents to process  being
served in any such suit, action or proceeding by mailing

                                       31
<PAGE>

a copy thereof via  registered  or certified  mail or overnight  delivery  (with
evidence of  delivery)  to such party at the address in effect for notices to it
under this  Agreement  and agrees that such service  shall  constitute  good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law. The parties  hereby waive all rights to a trial by jury. If either party
shall  commence  an  action or  proceeding  to  enforce  any  provisions  of the
Transaction  Documents,  then the prevailing  party in such action or proceeding
shall be reimbursed by the other party for its  attorneys'  fees and other costs
and expenses  incurred with the  investigation,  preparation  and prosecution of
such action or proceeding.

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

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

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

         5.13     RESCISSION AND WITHDRAWAL RIGHT.  Notwithstanding  anything to
the contrary  contained in (and without limiting any similar  provisions of) the
Transaction  Documents,  whenever  any  Purchaser  exercises a right,  election,
demand or option  under a  Transaction  Document and the Company does not timely
perform its related  obligations within the periods therein provided,  then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice,  demand or election in whole
or in part  without  prejudice  to its  future  actions  and  rights;  PROVIDED,
HOWEVER,  in the case of a rescission of a conversion of a Debenture or exercise
of a Warrant,  the  Purchaser  shall be  required to return any shares of Common
Stock subject to any such rescinded conversion or exercise notice.

         5.14     REPLACEMENT  OF SECURITIES.  If any  certificate or instrument
evidencing any Securities is mutilated,  lost, stolen or destroyed,  the Company
shall  issue or cause to be issued in  exchange  and  substitution  for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument,  but only upon receipt of evidence reasonably satisfactory to the
Company  of such  loss,  theft  or  destruction  and  customary  and  reasonable
indemnity,  if requested.  The  applicants  for a new  certificate or instrument
under such

                                       32
<PAGE>

circumstances  shall also pay any reasonable  third-party  costs associated with
the issuance of such replacement Securities.

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

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

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

         5.18     INDEPENDENT NATURE OF PURCHASERS'  OBLIGATIONS AND RIGHTS. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of

                                       33
<PAGE>

any other  Purchaser,  and no Purchaser  shall be responsible in any way for the
performance of the  obligations  of any other  Purchaser  under any  Transaction
Document. Nothing contained herein or in any Transaction Document, and no action
taken by any  Purchaser  pursuant  thereto,  shall be deemed to  constitute  the
Purchasers as a partnership,  an association,  a joint venture or any other kind
of entity,  or create a presumption that the Purchasers are in any way acting in
concert  or as a group  with  respect to such  obligations  or the  transactions
contemplated by the Transaction  Documents.  Each Purchaser shall be entitled to
independently  protect and enforce its rights,  including without limitation the
rights arising out of this Agreement or out of the other Transaction  Documents,
and it shall  not be  necessary  for any  other  Purchaser  to be  joined  as an
additional  party in any  proceeding  for such purpose.  Each Purchaser has been
represented by its own separate legal counsel in their review and negotiation of
the  Transaction  Documents.  For reasons of  administrative  convenience  only,
Purchasers  and their  respective  counsel have chosen to  communicate  with the
Company  through  FW.  FW does  not  represent  all of the  Purchasers  but only
Midsummer. The Company has elected to provide all Purchasers with the same terms
and Transaction  Documents for the convenience of the Company and not because it
was required or requested to do so by the Purchasers.

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

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

                            (SIGNATURE PAGES FOLLOW)

                                       34
<PAGE>

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

SECURED SERVICES, INC.                                ADDRESS FOR NOTICE:

BY:__________________________________________         11490 Commerce Park Drive
   NAME:                                              Suite 240
   TITLE:                                             Reston, Virginia 20191

WITH A COPY TO (WHICH SHALL NOT
CONSTITUTE NOTICE):

MORSE, ZELNICK, ROSE & LANDER LLP
ATTN: STEPHEN ZELNICK, ESQ.
405 PARK AVENUE, SUITE 1401
NEW YORK, NEW YORK 10022

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

                                       35
<PAGE>

        [PURCHASER SIGNATURE PAGES TO SSVC SECURITIES PURCHASE AGREEMENT]

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

Name of Purchaser: ________________________________________________________

SIGNATURE OF AUTHORIZED SIGNATORY OF PURCHASER: ________________________________

Name of Authorized Signatory: __________________________________________________

Title of Authorized Signatory: _________________________________________________

Email Address of Purchaser: ________________________________________________

Facsimile Number of Purchaser: ___________________________________________

Address for Notice of Purchaser:

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

Principal amount of Bridge Notes: __________________

Accrued and unpaid interest on Bridge Notes: ________________

Cash Payable at Closing: _________________

Subscription Amount: ______________________

Warrant Shares:
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]

                                       36
<PAGE>

                                                                         ANNEX A

                                CLOSING STATEMENT

Pursuant to the attached  Securities  Purchase  Agreement,  dated as of the date
hereto,  the  purchasers  shall  purchase up to  $5,000,000  of  Debentures  and
Warrants from Secured  Services,  Inc. (the "COMPANY").  All funds will be wired
into a trust account maintained by Morse,  Zelnick,  Rose & Lander, LLP, counsel
to the  Company.  All funds will be disbursed  in  accordance  with this Closing
Statement.

DISBURSEMENT DATE:    February __, 2006

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

I.   PURCHASE PRICE

                      GROSS PROCEEDS TO BE RECEIVED IN TRUST              $

II.  DISBURSEMENTS

                                                                          $
                                                                          $
                                                                          $
                                                                          $
                                                                          $

TOTAL AMOUNT DISBURSED:                                                   $

WIRE INSTRUCTIONS:

To: _____________________________________

To: _____________________________________

                                       37Exhibit 10.2

                                                                       EXHIBIT B

                          REGISTRATION RIGHTS AGREEMENT

         This  Registration  Rights  Agreement  (this  "AGREEMENT")  is made and
entered into as of February __, 2006 among  Secured  Services,  Inc., a Delaware
corporation  (the  "COMPANY"),  and the purchasers  signatory  hereto (each such
purchaser is a "PURCHASER" and collectively, the "PURCHASERS").

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

         The Company and the Purchasers hereby agree as follows:

      1. DEFINITIONS

         CAPITALIZED  TERMS  USED  AND NOT  OTHERWISE  DEFINED  HEREIN  THAT ARE
DEFINED IN THE PURCHASE  AGREEMENT  SHALL HAVE THE MEANINGS  GIVEN SUCH TERMS IN
THE PURCHASE  AGREEMENT.  As used in this  Agreement,  the following terms shall
have the following meanings:

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

                  "EFFECTIVENESS  DATE"  means,  with  respect  to  the  initial
         Registration  Statement  required  to be  filed  hereunder,  the  120th
         calendar day following  the date hereof (the 150th  calendar day in the
         case  of a  "regulatory  review"  by  the  Commission  of  the  initial
         Registration   Statement)   and,   with   respect  to  any   additional
         Registration Statements which may be required pursuant to Section 3(c),
         the 90th  calendar day  following  the date on which the Company  first
         knows,   or  reasonably   should  have  known,   that  such  additional
         Registration Statement is required hereunder; PROVIDED, HOWEVER, in the
         event the Company is notified by the  Commission  that one of the above
         Registration Statements will not be reviewed or is no longer subject to
         further  review  and  comments,  the  Effectiveness  Date  as  to  such
         Registration  Statement  shall be the fifth  Trading Day  following the
         date on which the  Company is so  notified  if such date  precedes  the
         dates required above.

                  "EFFECTIVENESS  PERIOD"  shall have the  meaning  set forth in
         Section 2(a).

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

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

                  "FILING DATE" means, with respect to the initial  Registration
         Statement  required  hereunder,  the 15th  calendar day  following  the
         filing of the Form 10-KSB for the fiscal year ended  December  31, 2005
         with the Commission but in no event later than April 30, 2006 and, with
         respect to any additional Registration Statements which may be required
         pursuant to Section 3(c),  the 30th day following the date on which the
         Company first

                                       1
<PAGE>

         knows,   or   reasonably   should  have  known  that  such   additional
         Registration Statement is required hereunder.

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

                  "INDEMNIFIED  PARTY"  shall  have  the  meaning  set  forth in
         Section 5(c).

                  "INDEMNIFYING  PARTY"  shall  have the  meaning  set  forth in
         Section 5(c).

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

                  "PLAN OF  DISTRIBUTION"  shall have the  meaning  set forth in
         Section 2(a).

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

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

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

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

                  "RULE  415"  means  Rule  415  promulgated  by the  Commission
         pursuant to the  Securities  Act, as such Rule may be amended from time
         to time, or any similar rule or

                                       2
<PAGE>

         regulation hereafter adopted by the Commission having substantially the
         same purpose and effect as such Rule.

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

                  "SELLING SHAREHOLDER QUESTIONNAIRE" shall have the meaning set
         forth in Section 3(a).

      2. SHELF REGISTRATION

         (a)      On or prior to each Filing Date, the Company shall prepare and
file with the Commission a "Shelf" Registration Statement covering the resale of
130% of the  Registrable  Securities  issuable  as of such  Filing  Date  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  herewith) and
shall contain (unless otherwise directed by the Holders) substantially the "PLAN
OF  DISTRIBUTION"  attached  hereto  as ANNEX A.  Subject  to the  terms of this
Agreement,  the  Company  shall use its best  efforts to cause the  Registration
Statement  to be  declared  effective  under the  Securities  Act as promptly as
possible  after the filing  thereof,  but in any event  prior to the  applicable
Effectiveness  Date,  and shall use its best  efforts to keep such  Registration
Statement  continuously effective under the Securities Act until all Registrable
Securities covered by such Registration  Statement have been sold or may be sold
without volume restrictions pursuant to Rule 144(k) as determined by the counsel
to the Company  pursuant to a written  opinion letter to such effect,  addressed
and  acceptable to the Company's  transfer  agent and the affected  Holders (the
"EFFECTIVENESS  PERIOD").  After 4:00 pm  Eastern  Time on the  Trading  Day the
Registration Statement is declared effective, and by 9:00 am Eastern Time on the
Trading  Day  after  the  Effective  Date,  the  Company  shall (i) file a final
Prospectus with the Commission  pursuant to Rule 424 and (ii) immediately notify
the  Holders  via  facsimile  or e-mail  of  effectiveness  of the  Registration
Statement.  Failure  to so  notify  the  Holder  within  1  Trading  Day of such
notification or effectiveness or failure to file a final Prospectus as aforesaid
shall be deemed an Event under Section 2(b).

         (b)      If: (i) a  Registration  Statement is not filed on or prior to
its Filing Date (if the Company files a Registration Statement without affording
the  Holders  the  opportunity  to review and comment on the same as required by
Section  3(a),  the Company  shall not be deemed to have  satisfied  this clause
(i)),  or (ii) the  Company  fails to file with the  Commission  a  request  for
acceleration in accordance  with Rule 461 promulgated  under the Securities Act,
within five Trading Days of the date that the Company is notified  (orally or in
writing,  whichever is earlier) by the Commission that a Registration  Statement
will not be "reviewed," or not subject to further review,  or (iii) prior to its
Effectiveness  Date,  the Company  fails to file a  pre-effective  amendment and
otherwise  respond in writing to comments  made by the  Commission in respect of
such  Registration  Statement  within 10  calendar  days  after the  receipt  of
comments by or

                                       3
<PAGE>

notice  from the  Commission  that such  amendment  is  required  in order for a
Registration  Statement  to  be  declared  effective,  or  (iv)  a  Registration
Statement filed or required to be filed  hereunder is not declared  effective by
the Commission by its Effectiveness  Date, (v) after the  Effectiveness  Date, a
Registration Statement ceases for any reason to remain continuously effective as
to all Registrable  Securities for which it is required to be effective,  or the
Holders  are not  permitted  to utilize  the  Prospectus  therein to resell such
Registrable  Securities  for 10  consecutive  calendar  days but no more than an
aggregate  of 15 calendar  days during any  12-month  period  (which need not be
consecutive  Trading Days) or (vi) the Company fails to obtain  Authorized Share
Approval  within 120  calendar  days of the  Closing  Date (any such  failure or
breach being referred to as an "EVENT",  and for purposes of clause (i), (iv) or
(vi) the date on which such Event  occurs,  or for  purposes  of clause (ii) the
date on which such five  Trading  Day period is  exceeded,  or for  purposes  of
clause  (iii) the date which such 10  calendar  day period is  exceeded,  or for
purposes of clause (v) the date on which such 10 or 15 calendar  day period,  as
applicable,  is exceeded being referred to as "EVENT DATE"), then in addition to
any other rights the Holders may have hereunder or under applicable law, on each
such Event Date and on each monthly  anniversary of each such Event Date (if the
applicable  Event shall not have been cured by such date)  until the  applicable
Event is  cured,  the  Company  shall pay to each  Holder an amount in cash,  as
partial  liquidated  damages and not as a penalty,  equal to 2% of the aggregate
purchase  price paid by such Holder  pursuant to the Purchase  Agreement for any
Registrable  Securities then held by such Holder, subject to an overall limit of
up to 24 months of partial liquidated  damages.  If the Company fails to pay any
partial  liquidated  damages  pursuant to this Section in full within seven days
after the date payable,  the Company will pay interest  thereon at a rate of 18%
per  annum  (or such  lesser  maximum  amount  that is  permitted  to be paid by
applicable  law) to the  Holder,  accruing  daily  from  the date  such  partial
liquidated  damages are due until such amounts,  plus all such interest thereon,
are paid in full. The partial  liquidated  damages  pursuant to the terms hereof
shall  apply on a daily  pro-rata  basis for any portion of a month prior to the
cure of an Event.

      3. REGISTRATION PROCEDURES

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

         (a)      Not less than two  Trading  Days  prior to the  filing of each
Registration  Statement or any related Prospectus or any amendment or supplement
thereto  (including  any  document  that would be  incorporated  or deemed to be
incorporated  therein by  reference),  the  Company  shall,  (i) furnish to each
Holder copies of all such documents proposed to be filed, which documents (other
than those  incorporated  or deemed to be  incorporated  by  reference)  will be
subject  to the  review  of such  Holders,  and  (ii)  cause  its  officers  and
directors,  counsel and independent  certified public  accountants to respond to
such inquiries as shall be necessary,  in the  reasonable  opinion of respective
counsel  to  conduct  a  reasonable  investigation  within  the  meaning  of the
Securities Act. The Company shall not file a Registration  Statement or any such
Prospectus or any  amendments or  supplements  thereto to which the Holders of a
majority of the Registrable  Securities shall  reasonably  object in good faith,
provided  that,  the Company is notified of such  objection  in writing no later
than 5 Trading  Days after the  Holders  have been so  furnished  copies of such
documents.   Each   Holder   agrees  to  furnish  to  the  Company  a  completed
Questionnaire in

                                       4
<PAGE>

the  form  attached  to  this  Agreement  as  Annex  B (a  "SELLING  SHAREHOLDER
QUESTIONNAIRE")  not less than two  Trading  Days prior to the Filing Date or by
the end of the  fourth  Trading  Day  following  the date on which  such  Holder
receives draft materials in accordance with this Section.

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

         (c)      If during the Effectiveness  Period, the number of Registrable
Securities  at any time exceeds 85% of the number of shares of Common Stock then
registered in a Registration  Statement,  then the Company shall file as soon as
reasonably  practicable but in any case prior to the applicable  Filing Date, an
additional Registration Statement covering the resale by the Holders of not less
than 130% of the number of such Registrable Securities.

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

                                       5
<PAGE>

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

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

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

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

         (h)      Prior to any resale of Registrable Securities by a Holder, use
its commercially reasonable efforts to register or qualify or cooperate with the
selling  Holders  in  connection  with the  registration  or  qualification  (or
exemption from the Registration or qualification) of such Registrable Securities
for the  resale  by the  Holder  under the  securities  or Blue Sky laws of such
jurisdictions  within the United  States as any Holder  reasonably  requests  in
writing,  to keep each  registration or qualification  (or exemption  therefrom)
effective  during the  Effectiveness  Period and to do any and all other acts or
things reasonably necessary to enable the disposition in such

                                       6
<PAGE>

jurisdictions  of  the  Registrable  Securities  covered  by  each  Registration
Statement; provided, that the Company shall not be required to qualify generally
to do business in any  jurisdiction  where it is not then so qualified,  subject
the Company to any material tax in any such jurisdiction where it is not then so
subject  or  file  a  general   consent  to  service  of  process  in  any  such
jurisdiction.

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

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

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

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

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

                                       7
<PAGE>

Event that may otherwise  occur solely  because of such delay shall be suspended
as to such Holder only, until such information is delivered to the Company.

       4. REGISTRATION  EXPENSES.   All  fees  and  expenses   incident  to  the
performance  of or compliance  with this Agreement by the Company shall be borne
by the Company whether or not any Registrable  Securities are sold pursuant to a
Registration  Statement.  The fees and  expenses  referred  to in the  foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including,  without  limitation,  fees and expenses (A) with respect to filings
required  to be made with the Trading  Market on which the Common  Stock is then
listed for trading,  (B) in compliance with applicable  state securities or Blue
Sky laws  reasonably  agreed to by the  Company in writing  (including,  without
limitation, fees and disbursements of counsel for the Company in connection with
Blue  Sky  qualifications  or  exemptions  of  the  Registrable  Securities  and
determination  of the eligibility of the  Registrable  Securities for investment
under the laws of such jurisdictions as requested by the Holders) and (C) if not
previously paid by the Company in connection with an Issuer Filing, with respect
to any filing  that may be  required  to be made by any broker  through  which a
Holder intends to make sales of  Registrable  Securities  with NASD  Regulation,
Inc.  pursuant to the NASD Rule 2710, so long as the broker is receiving no more
than a  customary  brokerage  commission  in  connection  with such  sale,  (ii)
printing  expenses   (including,   without  limitation,   expenses  of  printing
certificates  for  Registrable  Securities and of printing  prospectuses  if the
printing of prospectuses is reasonably requested by the holders of a majority of
the  Registrable  Securities  included  in  a  Registration  Statement),   (iii)
messenger,  telephone  and delivery  expenses,  (iv) fees and  disbursements  of
counsel for the Company, (v) Securities Act liability insurance,  if the Company
so desires  such  insurance,  and (vi) fees and  expenses  of all other  Persons
retained by the Company in connection with the  consummation of the transactions
contemplated  by this Agreement.  In addition,  the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (including,  without limitation,
all salaries and expenses of its  officers  and  employees  performing  legal or
accounting  duties),  the expense of any annual  audit and the fees and expenses
incurred in  connection  with the listing of the  Registrable  Securities on any
securities  exchange  as  required  hereunder.  In no event shall the Company be
responsible  for any  broker or  similar  commissions  or,  except to the extent
provided for in the Transaction Documents,  any legal fees or other costs of the
Holders.

      5. INDEMNIFICATION

                  (a)      (a)  INDEMNIFICATION  BY  THE  COMPANY.  The  Company
         shall, notwithstanding any termination of this Agreement, indemnify and
         hold harmless each Holder, the officers,  directors, members, partners,
         agents,  brokers  (including  brokers  who offer  and sell  Registrable
         Securities  as  principal  as a result  of a pledge or any  failure  to
         perform under a margin call of Common Stock),  investment  advisors and
         employees (and any other Persons with a functionally equivalent role of
         a Person holding such titles,  notwithstanding  a lack of such title or
         any other  title) of each of them,  each Person who  controls  any such
         Holder  (within  the  meaning of Section  15 of the  Securities  Act or
         Section 20 of the Exchange Act) and the officers,  directors,  members,
         shareholders,  partners,  agents and  employees  (and any other Persons
         with a  functionally  equivalent  role of a Person holding such titles,
         notwithstanding a lack of such title or any other title) of

                                       8
<PAGE>

         each such  controlling  Person,  to the  fullest  extent  permitted  by
         applicable law, from and against any and all losses,  claims,  damages,
         liabilities,   costs   (including,   without   limitation,   reasonable
         attorneys' fees) and expenses  (collectively,  "LOSSES"),  as incurred,
         arising  out of or  relating  to  (1)  any  untrue  or  alleged  untrue
         statement of a material fact contained in a Registration Statement, any
         Prospectus  or any form of prospectus or in any amendment or supplement
         thereto or in any preliminary prospectus, or arising out of or relating
         to any omission or alleged  omission of a material  fact required to be
         stated therein or necessary to make the statements therein (in the case
         of any Prospectus or form of prospectus or supplement thereto, in light
         of the circumstances  under which they were made) not misleading or (2)
         any  violation or alleged  violation  by the Company of the  Securities
         Act,  the  Exchange  Act or any state  securities  law,  or any rule or
         regulation  thereunder,  in  connection  with  the  performance  of its
         obligations under this Agreement, except to the extent, but only to the
         extent,  that (i) such untrue  statements or omissions are based solely
         upon  information  regarding  such Holder  furnished  in writing to the
         Company by such Holder expressly for use therein, or to the extent that
         such  information  relates  to such  Holder or such  Holder's  proposed
         method of distribution  of Registrable  Securities and was reviewed and
         expressly  approved  in writing by such Holder  expressly  for use in a
         Registration  Statement,  such Prospectus or such form of Prospectus or
         in any amendment or supplement  thereto (it being  understood  that the
         Holder has  approved  Annex A hereto for this  purpose)  or (ii) in the
         case of an  occurrence  of an event of the type  specified  in  Section
         3(d)(iii)-(vi),  the use by such  Holder of an  outdated  or  defective
         Prospectus  after the Company has notified  such Holder in writing that
         the  Prospectus  is outdated or  defective  and prior to the receipt by
         such Holder of the Advice  contemplated  in Section  6(d).  The Company
         shall  notify  the  Holders  promptly  of the  institution,  threat  or
         assertion  of any  Proceeding  arising from or in  connection  with the
         transactions  contemplated  by this  Agreement  of which the Company is
         aware.

         (b)      INDEMNIFICATION BY HOLDERS.  Each Holder shall,  severally and
not jointly,  indemnify and hold harmless the Company, its directors,  officers,
agents and employees,  each Person who controls the Company  (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors,  officers,  agents or employees of such controlling  Persons,  to the
fullest  extent  permitted by applicable  law,  from and against all Losses,  as
incurred,  to the extent  arising out of or based solely upon: (x) such Holder's
failure to comply with the prospectus  delivery  requirements  of the Securities
Act or (y) any untrue or alleged  untrue  statement of a material fact contained
in any Registration Statement, any Prospectus,  or any form of prospectus, or in
any amendment or supplement thereto or in any preliminary prospectus, or arising
out of or  relating  to any  omission  or alleged  omission  of a material  fact
required to be stated  therein or necessary to make the  statements  therein not
misleading (i) to the extent, but only to the extent, that such untrue statement
or omission is  contained  in any  information  so  furnished in writing by such
Holder to the Company specifically for inclusion in such Registration  Statement
or such  Prospectus  or (ii) to the extent  that (1) such untrue  statements  or
omissions are based solely upon  information  regarding such Holder furnished in
writing to the  Company by such  Holder  expressly  for use  therein,  or to the
extent that such  information  relates to such Holder or such Holder's  proposed
method of distribution of Registrable  Securities and was reviewed and expressly
approved  in  writing  by such  Holder  expressly  for  use in the  Registration
Statement (it being  understood  that the Holder has approved Annex A hereto for
this

                                       9
<PAGE>

purpose),  such  Prospectus  or such form of  Prospectus  or in any amendment or
supplement  thereto or (2) in the case of an  occurrence of an event of the type
specified  in Section  3(d)(ii)-(vi),  the use by such  Holder of an outdated or
defective  Prospectus after the Company has notified such Holder in writing that
the  Prospectus is outdated or defective and prior to the receipt by such Holder
of the Advice  contemplated  in Section 6(d). In no event shall the liability of
any selling Holder  hereunder be greater in amount than the dollar amount of the
net proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.

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

         An Indemnified Party shall have the right to employ separate counsel in
any such Proceeding and to participate in the defense thereof,  but the fees and
expenses of such counsel  shall be at the expense of such  Indemnified  Party or
Parties  unless:  (1) the  Indemnifying  Party has agreed in writing to pay such
fees and  expenses;  (2) the  Indemnifying  Party shall have failed  promptly to
assume  the  defense  of  such  Proceeding  and  to  employ  counsel  reasonably
satisfactory to such Indemnified Party in any such Proceeding;  or (3) the named
parties to any such Proceeding  (including any impleaded  parties)  include both
such Indemnified  Party and the Indemnifying  Party, and such Indemnified  Party
shall reasonably believe that a material conflict of interest is likely to exist
if  the  same  counsel  were  to  represent  such  Indemnified   Party  and  the
Indemnifying  Party (in which  case,  if such  Indemnified  Party  notifies  the
Indemnifying  Party in writing that it elects to employ separate  counsel at the
expense of the Indemnifying  Party,  the  Indemnifying  Party shall not have the
right to assume the defense  thereof and the reasonable fees and expenses of one
separate  counsel  shall  be at the  expense  of the  Indemnifying  Party).  The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected  without its written  consent,  which consent shall not be unreasonably
withheld.  No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any  Indemnified  Party is a party,  unless  such  settlement  includes an
unconditional  release of such  Indemnified  Party from all  liability on claims
that are the subject matter of such Proceeding.

         Subject  to the  terms  of this  Agreement,  all  reasonable  fees  and
expenses of the Indemnified Party (including reasonable fees and expenses to the
extent  incurred in connection  with  investigating  or preparing to defend such
Proceeding in a manner not inconsistent  with this Section) shall be paid to the
Indemnified  Party,  as  incurred,  within ten  Trading  Days of written  notice
thereof to the Indemnifying  Party;  provided,  that the Indemnified Party shall
promptly

                                       10
<PAGE>

reimburse  the  Indemnifying  Party for that  portion of such fees and  expenses
applicable to such actions for which such  Indemnified  Party is not entitled to
indemnification  hereunder,  determined  based upon the  relative  faults of the
parties.

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

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

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

      6. MISCELLANEOUS

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

                                       11
<PAGE>

         (b)      NO PIGGYBACK ON REGISTRATIONS. Except as set forth on SCHEDULE
6(b) attached hereto, neither the Company nor any of its security holders (other
than the Holders in such capacity pursuant hereto) may include securities of the
Company in the Registration Statement other than the Registrable Securities. The
Company  shall  not file any other  registration  statements  until the  initial
Registration   Statement   required  hereunder  is  declared  effective  by  the
Commission,  provided that this Section 6(b) shall not prohibit the Company from
filing amendments to registration statements already filed.

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

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

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

         (f)      AMENDMENTS  AND WAIVERS.  The  provisions  of this  Agreement,
including  the  provisions  of this  sentence,  may not be amended,  modified or
supplemented,  and waivers or consents to departures from the provisions  hereof
may not be given,  unless the same shall be in writing and signed by the Company
and each Holder of the then outstanding Registrable

                                       12
<PAGE>

Securities.  Notwithstanding  the foregoing,  a waiver or consent to depart from
the provisions  hereof with respect to a matter that relates  exclusively to the
rights of Holders and that does not directly or indirectly  affect the rights of
other  Holders may be given by Holders of all of the  Registrable  Securities to
which such waiver or consent relates; PROVIDED,  HOWEVER, that the provisions of
this sentence may not be amended, modified, or supplemented except in accordance
with the provisions of the immediately preceding sentence.

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

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

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

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

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

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

         (m)      SEVERABILITY.  If any term, provision, covenant or restriction
of this  Agreement is held by a court of competent  jurisdiction  to be invalid,
illegal,  void  or  unenforceable,  the  remainder  of  the  terms,  provisions,
covenants  and  restrictions  set forth  herein  shall  remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto  shall use their  commercially  reasonable  efforts to find and employ an
alternative  means to achieve the same or substantially  the same result as that
contemplated  by such term,  provision,  covenant or  restriction.  It is hereby
stipulated and declared to be the intention of the parties that

                                       13
<PAGE>

they  would  have  executed  the  remaining  terms,  provisions,  covenants  and
restrictions  without  including  any of such  that  may be  hereafter  declared
invalid, illegal, void or unenforceable.

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

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

                              ********************

                                       14
<PAGE>

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

                         SECURED SERVICES, INC.

                         By:__________________________________________
                            Name:
                            Title:

                       [SIGNATURE PAGE OF HOLDERS FOLLOWS]

                                       15
<PAGE>

                      [HOLDER'S SIGNATURE PAGE TO SSVC RRA]

Name of Holder: __________________________

SIGNATURE OF AUTHORIZED SIGNATORY OF HOLDER: __________________________

Name of Authorized Signatory: _________________________

Title of Authorized Signatory: __________________________

E-mail of Authorized Signatory: _________________________

                           [SIGNATURE PAGES CONTINUE]

                                       16
<PAGE>

                                     ANNEX A

                              PLAN OF DISTRIBUTION

         Each Selling  Stockholder  (the "SELLING  STOCKHOLDERS")  of the common
stock ("COMMON STOCK") of Secured  Services,  Inc., a Delaware  corporation (the
"COMPANY") and any of their pledgees,  assignees and successors-in-interest may,
from  time to time,  sell  any or all of their  shares  of  Common  Stock on the
Trading Market or any other stock exchange,  market or trading facility on which
the shares are traded or in private transactions. These sales may be at fixed or
negotiated  prices.  A  Selling  Stockholder  may  use  any  one or  more of the
following methods when selling shares:

               o    ordinary  brokerage  transactions  and transactions in which
                    the broker-dealer solicits purchasers;

               o    block trades in which the broker-dealer will attempt to sell
                    the shares as agent but may position and resell a portion of
                    the block as principal to facilitate the transaction;

               o    purchases by a broker-dealer  as principal and resale by the
                    broker-dealer for its account;

               o    an exchange distribution in accordance with the rules of the
                    applicable exchange;

               o    privately negotiated transactions;

               o    settlement  of short  sales  entered  into after the date of
                    this prospectus;

               o    broker-dealers  may agree with the Selling  Stockholders  to
                    sell a specified number of such shares at a stipulated price
                    per share;

               o    a combination of any such methods of sale;

               o    through  the  writing  or  settlement  of  options  or other
                    hedging transactions, whether through an options exchange or
                    otherwise; or

               o    any other method permitted pursuant to applicable law.

         The Selling  Stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), if available,  rather
than under this prospectus.

         Broker-dealers  engaged by the  Selling  Stockholders  may  arrange for
other  brokers-dealers  to  participate  in sales.  Broker-dealers  may  receive
commissions or discounts from the Selling Stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares,  from the purchaser) in amounts to be
negotiated,  but, except as set forth in a supplement to this Prospectus, in the
case of an agency transaction not in excess of a customary brokerage  commission
in compliance with NASDR Rule 2440; and in the case of a principal transaction a
markup or markdown in compliance with NASDR IM-2440.

                                       17
<PAGE>

         In connection  with the sale of the Common Stock or interests  therein,
the Selling Stockholders may enter into hedging transactions with broker-dealers
or other financial institutions,  which may in turn engage in short sales of the
Common Stock in the course of hedging the  positions  they  assume.  The Selling
Stockholders  may also sell shares of the Common  Stock short and deliver  these
securities  to close out their  short  positions,  or loan or pledge  the Common
Stock to  broker-dealers  that in turn may sell these  securities.  The  Selling
Stockholders   may  also  enter   into   option  or  other   transactions   with
broker-dealers  or other  financial  institutions or the creation of one or more
derivative  securities which require the delivery to such broker-dealer or other
financial  institution of shares offered by this  prospectus,  which shares such
broker-dealer  or  other  financial  institution  may  resell  pursuant  to this
prospectus (as supplemented or amended to reflect such transaction).

         The  Selling  Stockholders  and any  broker-dealers  or agents that are
involved  in selling  the shares may be deemed to be  "underwriters"  within the
meaning of the Securities Act in connection with such sales. In such event,  any
commissions  received  by such  broker-dealers  or agents  and any profit on the
resale  of the  shares  purchased  by  them  may be  deemed  to be  underwriting
commissions or discounts under the Securities Act. Each Selling  Stockholder has
informed  the  Company  that it does not have any written or oral  agreement  or
understanding,  directly or indirectly, with any person to distribute the Common
Stock. In no event shall any broker-dealer receive fees, commissions and markups
which, in the aggregate, would exceed eight percent (8%).

         The Company is required to pay certain  fees and  expenses  incurred by
the Company incident to the  registration of the shares.  The Company has agreed
to indemnify the Selling  Stockholders against certain losses,  claims,  damages
and liabilities, including liabilities under the Securities Act.

         Because Selling Stockholders may be deemed to be "underwriters"  within
the  meaning of the  Securities  Act,  they will be  subject  to the  prospectus
delivery requirements of the Securities Act. In addition, any securities covered
by this  prospectus  which  qualify  for sale  pursuant  to Rule 144  under  the
Securities  Act may be sold under Rule 144  rather  than under this  prospectus.
Each  Selling  Stockholder  has advised us that they have not  entered  into any
written or oral agreements,  understandings or arrangements with any underwriter
or  broker-dealer  regarding  the  sale  of  the  resale  shares.  There  is  no
underwriter or  coordinating  broker acting in connection with the proposed sale
of the resale shares by the Selling Stockholders.

         We agreed to keep this  prospectus  effective  until the earlier of (i)
the date on which the shares may be resold by the Selling  Stockholders  without
registration  and  without  regard to any volume  limitations  by reason of Rule
144(e) under the  Securities Act or any other rule of similar effect or (ii) all
of the shares have been sold  pursuant to the  prospectus  or Rule 144 under the
Securities  Act or any other rule of similar  effect.  The resale shares will be
sold only through  registered or licensed  brokers or dealers if required  under
applicable  state securities  laws. In addition,  in certain states,  the resale
shares may not be sold unless they have been registered or qualified for sale in
the applicable  state or an exemption  from the  registration  or  qualification
requirement is available and is complied with.

                                       18
<PAGE>

         Under  applicable  rules and  regulations  under the Exchange  Act, any
person engaged in the  distribution of the resale shares may not  simultaneously
engage in market making activities with respect to the Common Stock for a period
of two business days prior to the commencement of the distribution. In addition,
the  Selling  Stockholders  will be  subject  to  applicable  provisions  of the
Exchange Act and the rules and regulations  thereunder,  including Regulation M,
which may limit the timing of purchases  and sales of shares of the Common Stock
by the Selling  Stockholders  or any other  person.  We will make copies of this
prospectus  available to the Selling  Stockholders and have informed them of the
need to deliver a copy of this  prospectus to each  purchaser at or prior to the
time of the sale.

                                       19
<PAGE>

                                                                         ANNEX B

                             SECURED SERVICES, INC.

                 SELLING SECURITYHOLDER NOTICE AND QUESTIONNAIRE

         The undersigned beneficial owner of common stock, par value $0.0001 per
share (the "COMMON STOCK"),  of Secured Services,  Inc., a Delaware  corporation
(the "COMPANY"), (the "REGISTRABLE SECURITIES") understands that the Company has
filed or  intends  to file with the  Securities  and  Exchange  Commission  (the
"COMMISSION")   a  registration   statement  on  Form  S-3  (the   "REGISTRATION
STATEMENT") for the registration and resale under Rule 415 of the Securities Act
of 1933, as amended (the "SECURITIES  ACT"), of the Registrable  Securities,  in
accordance  with the terms of the  Registration  Rights  Agreement,  dated as of
February __, 2006 (the "REGISTRATION  RIGHTS AGREEMENT"),  among the Company and
the Purchasers  named therein.  A copy of the  Registration  Rights Agreement is
available  from the Company  upon  request at the address set forth  below.  All
capitalized  terms not otherwise defined herein shall have the meanings ascribed
thereto in the Registration Rights Agreement.

         Certain  legal  consequences  arise  from  being  named  as  a  selling
securityholder  in  the  Registration  Statement  and  the  related  prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are advised
to consult their own securities law counsel  regarding the consequences of being
named  or not  being  named  as a  selling  securityholder  in the  Registration
Statement and the related prospectus.

                                     NOTICE

         The  undersigned  beneficial  owner (the "SELLING  SECURITYHOLDER")  of
Registrable Securities hereby elects to include the Registrable Securities owned
by it and listed below in Item 3 (unless otherwise  specified under such Item 3)
in the Registration Statement.

                                       20
<PAGE>

The  undersigned  hereby  provides the following  information to the Company and
represents and warrants that such information is accurate:

                                  QUESTIONNAIRE

1.       NAME.

         (a)      Full Legal Name of Selling Securityholder

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

         (b)      Full Legal Name of  Registered  Holder (if not the same as (a)
                  above) through which  Registrable  Securities Listed in Item 3
                  below are held:

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

         (c)      Full Legal  Name of  Natural  Control  Person  (which  means a
                  natural person who directly or indirectly alone or with others
                  has power to vote or dispose of the securities  covered by the
                  questionnaire):

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

2.  ADDRESS FOR NOTICES TO SELLING SECURITYHOLDER:

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

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

--------------------------------------------------------------------------------
Telephone:
          ----------------------------------------------------------------------
Fax:
    ----------------------------------------------------------------------------
Contact Person:
                ----------------------------------------------------------------

3.  BENEFICIAL OWNERSHIP OF REGISTRABLE SECURITIES:

         (a)      Type and Number of Registrable Securities beneficially owned:

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

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

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

                                       21
<PAGE>

4.  BROKER-DEALER STATUS:

         (a) Are you a broker-dealer?

                                    Yes [ ]      No [ ]

         (b)      If "yes" to Section  4(a),  did you receive  your  Registrable
                  Securities as compensation for investment  banking services to
                  the Company.

                                    Yes [ ]      No [ ]

         Note:    If no, the  Commission's  staff has indicated  that you should
                  be identified as an underwriter in the Registration Statement.

         (c)      Are you an affiliate of a broker-dealer?

                                    Yes [ ]      No [ ]

         (d)      If you are an  affiliate  of a  broker-dealer,  do you certify
                  that you bought the  Registrable  Securities  in the  ordinary
                  course of  business,  and at the time of the  purchase  of the
                  Registrable  Securities to be resold, you had no agreements or
                  understandings,  directly  or  indirectly,  with any person to
                  distribute the Registrable Securities?

                                    Yes [ ]      No [ ]

         Note:    If no, the  Commission's  staff has indicated  that you should
                  be identified as an underwriter in the Registration Statement.

5. BENEFICIAL  OWNERSHIP OF OTHER SECURITIES OF THE COMPANY OWNED BY THE SELLING
   SECURITYHOLDER.

         EXCEPT AS SET FORTH  BELOW IN THIS ITEM 5, THE  UNDERSIGNED  IS NOT THE
         BENEFICIAL OR REGISTERED  OWNER OF ANY  SECURITIES OF THE COMPANY OTHER
         THAN THE REGISTRABLE SECURITIES LISTED ABOVE IN ITEM 3.

         (a)      Type and Amount of Other Securities beneficially  owned by the
                  Selling Securityholder:

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

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

                                       22
<PAGE>

6.  RELATIONSHIPS WITH THE COMPANY:

         EXCEPT AS SET  FORTH  BELOW,  NEITHER  THE  UNDERSIGNED  NOR ANY OF ITS
         AFFILIATES,  OFFICERS, DIRECTORS OR PRINCIPAL EQUITY HOLDERS (OWNERS OF
         5% OF MORE OF THE EQUITY  SECURITIES OF THE  UNDERSIGNED)  HAS HELD ANY
         POSITION OR OFFICE OR HAS HAD ANY OTHER MATERIAL  RELATIONSHIP WITH THE
         COMPANY  (OR ITS  PREDECESSORS  OR  AFFILIATES)  DURING  THE PAST THREE
         YEARS.

         State any exceptions here:

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

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

         The   undersigned   agrees  to  promptly  notify  the  Company  of  any
inaccuracies  or  changes  in the  information  provided  herein  that may occur
subsequent  to the date  hereof  at any time  while the  Registration  Statement
remains effective.

         By signing  below,  the  undersigned  consents to the disclosure of the
information  contained  herein  in its  answers  to  Items 1  through  6 and the
inclusion of such  information  in the  Registration  Statement  and the related
prospectus  and  any  amendments  or  supplements   thereto.   The   undersigned
understands  that  such  information  will  be  relied  upon by the  Company  in
connection with the preparation or amendment of the  Registration  Statement and
the related prospectus.

         IN WITNESS WHEREOF the undersigned, by authority duly given, has caused
this Notice and  Questionnaire  to be executed and delivered either in person or
by its duly authorized agent.

Dated:                              Beneficial Owner:
       --------------------------                    ---------------------------

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

PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED  NOTICE AND  QUESTIONNAIRE,  AND
RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:

                                       23

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