Document:

Exhibit 10.05

                          GUARANTY AND PLEDGE AGREEMENT

            GUARANTY AND PLEDGE AGREEMENT (this "Agreement"), dated as of June
25, 2002, among Universe2U Inc., a Nevada corporation (the "Company"), Angelo
Boujos (the "Pledgor"), and AJW Partners, LLC, a limited liability company, New
Millennium Capital Partners II, LLC, a limited liability company, AJW/New
Millennium Offshore, Ltd., Pegasus Capital Partners, LLC (collectively herein,
the "Pledgees").

                              W I T N E S S E T H:

            WHEREAS, the Company and the Pledgees are parties to that certain
Securities Purchase Agreement, of even date herewith (the "Purchase Agreement"),
pursuant to which the Company (i) has issued (a) 12% secured convertible
debentures in the aggregate principal amount of $500,000 and (b) stock purchase
warrants to purchase an aggregate of 500,000 shares of the Company's common
stock, $0.00001 par value per share (the "Common Stock") and (ii) will issue,
pursuant to Section 4(l) of the Purchase Agreement, (a) 12% secured convertible
debentures in the aggregate principal amount of $1,000,000, and (b) stock
purchase warrants to purchase an aggregate of 1,000,000 shares of the Common
Stock; and

            WHEREAS, as a material inducement to the Pledgees to enter into the
Purchase Agreement, the Pledgees have required and the Pledgor has agreed,
subject to Section 2 hereof, (i) to unconditionally guarantee the timely and
full satisfaction of all obligations of the Company, whether matured or
unmatured, now or hereafter existing or created and becoming due and payable
(the "Obligations") to the Pledgees, their successors, endorsees, transferees or
assigns under the Transaction Documents (as defined in the Purchase Agreement)
to the extent of the Collateral (as defined in Section 5 hereof), and (ii) to
grant to the Pledgees, their successors, endorsees, transferees or assigns a
security interest in 3,000,000 shares of Common Stock currently owned by the
Pledgor (collectively, the "Shares"), as collateral security for Obligations.
Terms used and not defined herein shall have the meaning ascribed to them in the
Purchase Agreement.

            NOW, THEREFORE, in consideration of the foregoing recitals, and the
mutual covenants contained herein, the parties hereby agree as follows:

26.   Guaranty. Subject to Section 2 hereof, to the extent of the Collateral,
      the Pledgor hereby absolutely, unconditionally and irrevocably guarantees
      to the Pledgees, their successors, endorsees, transferees and assigns the
      due and punctual performance and payment of the Obligations owing to the
      Pledgees, their successors, endorsees, transferees or assigns when due,
      all at the time and place and in the amount and manner prescribed in, and
      otherwise in accordance with, the Transaction Documents. Notwithstanding
      anything to the contrary contained herein, Pledgor shall have no personal
      liability under this Agreement and the Pledgees' sole recourse shall be
      with respect to the Collateral.

27.   Rights Against Company. Pledgees shall use reasonable efforts to pursue
      all available remedies to enforce the Obligations, and Pledgees shall not
      be entitled to exercise their rights under this Agreement unless Pledgees
      (i) have instituted a suit, action or proceeding against the Company to
      compel performance or observance or to collect all or part of any such
      amount, either pursuant to the provisions of the Security Agreement of
      even date herewith by and among the Company and the Pledgees (the
      "Security Agreement") or at law or in equity, and (ii) have not recovered
      all losses, damages, costs and expenses from the Company within thirty
      (30) days of the institution of such suit, action or proceeding. In the
      event of a recovery by Pledgees of a portion, but not all, of its losses,
      damages, costs and expenses from the Company, such partial recovery shall
      reduce Pledgees' claims against the Collateral.

28.   Covenants of Pledgor. Subject to Section 2 and Section 11 hereof, the
      Pledgor hereby unconditionally covenants (i) that this Agreement will not
      be discharged except by complete performance of all the Obligations to the
      extent of the Collateral; (ii) agrees that this Agreement shall remain in
      full force and effect without regard to, and shall not be affected or
      impaired, without limitation, by, any invalidity, irregularity or
      unenforceability in whole or in part of the Transaction Documents or any
      limitation on the liability of the Company thereunder, or any limitation
      on the method or terms of payment thereunder which may now or hereafter be
      caused or imposed in any manner whatsoever; and (iii) waives diligence,
      presentment and protest with respect to, and notice of default in the
      performance or payment of any Obligation by the Company under or in
      connection with the Transaction Documents.

29.   Release. The obligations, covenants, agreements and duties of the Pledgor
      hereunder shall not be released, affected or impaired by any assignment or
      transfer, in whole or in part, of the Transaction Documents or any
      Obligation, although made without notice to or the consent of the Pledgor,
      or any waiver by the Pledgees, or by any other person, of the performance
      or observance by the Company or the Pledgor of any of the agreements,
      covenants, terms or conditions contained in the Transaction Documents, or
      any indulgence in or the extension of the time or renewal thereof, or the
      modification or amendment (whether material or otherwise), or the
      voluntary or involuntary liquidation, sale or other disposition of all or
      any portion of the stock or assets of the Company or the Pledgor, or any
      receivership, insolvency, bankruptcy, reorganization, or other similar
      proceedings, affecting the Company or the Pledgor or any assets of the
      Company or the Pledgor, or the release of any proper from any security for
      any Obligation, or the impairment of any such property or security, or the
      release or discharge of the Company or the Pledgor from the performance or
      observance of any agreement, covenant, term or condition contained in or
      arising out of the Transaction

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      Documents by operation of law, or the merger or consolidation of the
      Company, or any other cause, whether similar or dissimilar to the
      foregoing.

30.   Subrogation.

      A. Unless and until complete performance of all the Obligations to the
extent of the Collateral, the Pledgor shall not be entitled to exercise any
right of subrogation to any of the rights of the Pledgees against the Company or
any collateral security or guaranty held by the Pledgees for the payment or
performance of the Obligations, nor shall the Pledgor seek any reimbursement
from the Company in respect of payments made by the Pledgor hereunder.

      B. In the event that the Pledgor shall become obligated to perform or pay
any sums hereunder, or in the event that for any reason the Company is now or
shall hereafter become indebted to the Pledgor for borrowed money, the amount of
such sum shall at all times be subordinate as to lien, time of payment and in
all other respects, to the amounts owing to the Pledgees under the Transaction
Documents and the Pledgor shall not enforce or receive payment thereof until all
Obligations due to the Pledgees under the Transaction have been performed or
paid. Nothing herein contained is intended or shall be construed to give to the
Pledgor any right of subrogation in or under the Transaction Documents, or any
right to participate in any way therein, or in any right, title or interest in
the assets of the Pledgees.

31.   Security. As collateral security for the punctual payment and performance,
      when due, by the Company of all the Obligations, the Pledgor hereby
      pledges with, hypothecates, transfers and assigns to the Pledgees all of
      the Shares and all proceeds, shares and other securities received,
      receivable or otherwise distributed in respect of or in exchange for the
      Shares, including, without limitation, any shares and other securities
      into which such Shares may be convertible or exchangeable (collectively,
      the "Additional Collateral" and together with the Shares, the
      "Collateral"). The Collateral shall be maintained by the escrow agent
      pursuant to that certain lock-up agreement dated May 8, 2002 executed by
      the Pledgor (the "Escrow Agent"). In the event that the Pledgees seek to
      enforce their rights against the Collateral upon a breach by the Company
      of the Obligations, the Company hereby agrees, upon request of the
      Pledgees, to terminate the lock-up agreement by notice to the Escrow
      Agent, which notice shall state that the termination has been requested by
      the Pledgees as a result of a breach by the Company of its Obligations.
      Pledgor hereby irrevocably instructs the Escrow Agent to deliver the
      Shares to the Pledgees upon termination of the lock-up agreement by the
      Company under such circumstances.

32.   Voting Power, Dividends, Etc. and other Agreements.

      A. Unless and until an Event of Default (as set forth in Section 7 hereof)
has occurred, the Pledgor shall be entitled to:

            1. Exercise all voting and/or consensual powers pertaining to the
Collateral, or any part thereof, for all purposes;

            2. Receive and retain dividends paid with respect to the Collateral;
and

            3. Receive the benefits of any income tax deductions available to
the Pledgor as a shareholder of the Company.

      B. The Pledgor agrees that it will not sell, assign, transfer, pledge,
hypothecate, encumber or otherwise dispose of the Collateral.

      C. The Pledgor and the Company jointly and severally agree to pay all
costs including all reasonable attorneys' fees and disbursements incurred by the
Pledgees in enforcing this Agreement in accordance with its terms.

33.   Default and Remedies.

      A. For the purposes of this Agreement, "Event of Default" shall mean:

            1. default in or under any of the Obligations after the expiration,
without cure, of any applicable cure period;

            2. a breach in any material respect by the Company of any of its
representations or warranties in the Transaction Documents; or

            3. a breach in any material respect by the Pledgor of any of its
representations or warranties in this Agreement.

      B. the Pledgees shall have the following rights upon any Event of Default:

            1. the rights and remedies provided by the Uniform Commercial Code
as adopted by the State of New York (the "UCC") (as said law may at any time be
amended);

            2. the right to receive and retain all dividends, payments and other
distributions of any kind upon any or all of the Collateral;

            3. the right to cause any or all of the Collateral to be transferred
to its own name or to the name of its designee and have such transfer recorded
in any place or places deemed appropriate by the Pledgees; and

            4. the right to sell, at a public or private sale, the Collateral or
any part thereof for cash, upon credit or for future delivery, and at such price
or prices in accordance with the UCC (as such law may be amended from time to
time). Upon any such sale the Pledgees shall have the right to deliver, assign
and transfer to the purchaser thereof the Collateral so sold. The Pledgees shall
give the Pledgor not less than ten (10) days' written notice of its intention to
make any such sale. Any such sale, shall be held at such time or times during
ordinary business hours and at such place or places as the Pledgees may fix in
the notice of such sale. The Pledgees may adjourn or cancel any sale or cause
the same to be adjourned from time to time by announcement at the time and place
fixed for the sale, and such sale may be made at any time or place to which the
same may be so adjourned. In case of any sale of all or any part of the
Collateral upon terms calling for payments in the future, any Collateral so sold
may be retained by the Pledgees until the selling price is paid by the purchaser
thereof, but the Pledgees shall

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<PAGE>

incur no liability in the case of the failure of such purchaser to take up and
pay for the Collateral so sold and, in the case of such failure, such Collateral
may again be sold upon like notice. The Pledgees, however, instead of exercising
the power of sale herein conferred upon them, may proceed by a suit or suits at
law or in equity to foreclose the security interest and sell the Collateral, or
any portion thereof, under a judgment or decree of a court or courts of
competent jurisdiction, the Pledgor having been given due notice of all such
action. The Pledgees shall incur no liability as a result of a sale of the
Collateral or any part thereof. All proceeds of any such sale, after deducting
the reasonable expenses and reasonable attorneys' fees incurred in connection
with such sale, shall be applied in reduction of the Obligations, and the
remainder, if any, shall be paid to the Pledgor.

34.   Application of Proceeds; Release. The proceeds of any sale or enforcement
      of or against all or any part of the Collateral, and any other cash or
      collateral at the time held by the Pledgees hereunder, shall be applied by
      the Pledgees first to the payment of the reasonable costs of any such sale
      or enforcement, then to reimburse the Pledgees for any damages, costs or
      expenses incurred by the Pledgees as a result of an Event of Default, then
      to the payment of the principal amount or stated valued (as applicable)
      of, and interest or dividends (as applicable) and any other payments due
      in respect of, the Obligations. The remainder, if any, shall be paid to
      the Pledgor. As used in this Agreement, "proceeds" shall mean cash,
      securities and other property realized in respect of, and distributions in
      kind of, the Collateral, including any thereof received under any
      reorganization, liquidation or adjustment of debt of any issuer of
      securities included in the Collateral.

35.   Representations and Warranties.

      A. The Pledgor hereby represents and warrants to the Pledgees that:

            1. the Pledgor has full power and authority and legal right to
pledge the Collateral to the Pledgees pursuant to this Agreement and this
Agreement constitutes a legal, valid and binding obligation of the Pledgor,
enforceable in accordance with its terms.

            2. the execution, delivery and performance of this Agreement and
other instruments contemplated herein will not violate any provision of any
order or decree of any court or governmental instrumentality or of any mortgage,
indenture, contract or other agreement to which the Pledgor is a party or by
which the Pledgor and the Collateral may be bound, and will not result in the
creation or imposition of any lien, charge or encumbrance on, or security
interest in, any of the Pledgor's properties pursuant to the provisions of such
mortgage, indenture, contract or other agreement.

            3. the Pledgor is the sole record and beneficial owner of all of the
Shares; and

            4. the Pledgor owns the Collateral free and clear of all Liens.

      B. The Company represents and warrants to the Pledgees that:

            1. it has no knowledge that any of the representations or warranties
of the Pledgor herein are incorrect or false in any material respect;

            2. all of the Shares were validly issued, fully paid and
non-assessable; and

            3. the Pledgor is the record holder of the Shares.

36.   No Waiver; No Election of Remedies. No failure on the part of the Pledgees
      to exercise, and no delay in exercising, any right, power or remedy
      hereunder shall operate as a waiver thereof; nor shall any single or
      partial exercise by the Pledgees of any right, power or remedy preclude
      any other or further exercise thereof or the exercise of any other right,
      power or remedy. The remedies herein provided are cumulative and are not
      exclusive of any remedies provided by law. In addition, the exercise of
      any right or remedy of the Pledgees at law or equity or under this
      Agreement or any of the documents shall not be deemed to be an election of
      Pledgee's rights or remedies under such documents or at law or equity.

37.   Termination. This Agreement shall terminate on the earlier of the date on
      which (i) the Company grants the Pledgees a security interest in all of
      the assets of the Company as set forth in the Security Agreement
      subordinate to the rights of no other parties except the rights of
      Laurentian Bank of Canada in funds held for the benefit of the Company or
      its subsidiaries at such bank and in certain contract receivables as may
      exist from time to time or (ii) all Obligations have been performed,
      satisfied, paid or discharged in full.

38.   Further Assurances. The parties hereto agree that, from time to time upon
      the written request of any party hereto, they will execute and deliver
      such further documents and do such other acts and things as such party may
      reasonably request in order fully to effect the purposes of this
      Agreement.

39.   Miscellaneous.

      A. Modification. This Agreement contains the entire understanding between
the parties with respect to the subject matter hereof and specifically
incorporates all prior oral and written agreements relating to the subject
matter hereof. No portion or provision of this Agreement may be changed,
modified, amended, waived, supplemented, discharged, canceled or terminated
orally or by any course of dealing, or in any manner other than by an agreement
in writing, signed by the party to be charged.

      B. Notice. 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 (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 6:30 p.m. (New York City
time) on a Business Day (as defined in the Purchase Agreement), (ii) the
Business Day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified

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<PAGE>

in this Agreement later than 6:30 p.m. (New York City time) on any date and
earlier than 11:59 p.m. (New York City time) on such date, (iii) the Business
Day following the date of mailing, if sent by nationally recognized overnight
courier services, or (iv) upon actual receipt by the party to whom such notice
is required to be given. The address for such notices and communications shall
be as follows:

           If to the Company:            Universe2U Inc.
                                         30 West Beaver Creek Road, Suite 109
                                         Richmond Hill, Ontario, Canada L4B 3K1
                                         Facsimile No.: 905-709-5246
                                         Attn: Kim Allen

           With copies to:               Ehrenreich Eilenberg & Krause LLP
                                         11 East 44th Street, 17th Floor
                                         New York, NY  10017
                                         Facsimile No.: 212-986-2399
                                         Attn:  Keith Moskowitz, Esq.

           If to the Pledgor:            Angelo Boujos
                                         c/o Universe2U Inc.
                                         30 West Beaver Creek Road, Suite 109
                                         Richmond Hill, Ontario, Canada L4B 3K1
                                         Facsimile No.: 905-709-5246

           With copies to:               Chitiz Pathak
                                         154 University Avenue
                                         Suite 500
                                         Toronto, Ontario M5J 2S2
                                         Facsimile No.: (416) 368-0300
                                         Attn: Paul Pathak

           If to the Pledgees:           AJW Partners, LLC
                                         1044 Northern Boulevard
                                         Suite 302
                                         Roslyn, NY  11576
                                         Facsimile No.: (516) 739-7115
                                         Attn: Corey Ribotsky

                                         New Millennium Capital Partners II, LLC
                                         1044 Northern Boulevard
                                         Suite 302
                                         Roslyn, NY 11576
                                         Facsimile No.: (516) 739-7115
                                         Attn: Corey Ribotsky

                                         AJW/New Millennium Offshore, Ltd.
                                         1044 Northern Boulevard
                                         Suite 302
                                         Roslyn, NY  11576
                                         Facsimile No.: (516) 739-7115
                                         Attn: Corey Ribotsky

                                         Pegasus Capital Partners, LLC
                                         1044 Northern Boulevard
                                         Suite 302
                                         Roslyn, NY 11576
                                         Facsimile No.:  (516) 739-7115
                                         Attn: Corey Ribotsky

           With copies to:               Ballard Spahr Andrews & Ingersoll, LLP
                                         1735 Market Street, 51st Fl.
                                         Philadelphia, PA  19103
                                         Facsimile No.: (215) 864-8999
                                         Attn: Gerald J. Guarcini, Esq.

      C. Invalidity. If any part of this Agreement is contrary to, prohibited
by, or deemed invalid under applicable laws or regulations, such provision shall
be inapplicable and deemed omitted to the extent so contrary, prohibited or
invalid, but the remainder hereof shall not be invalidated thereby and shall be
given effect so far as possible.

      D. Benefit of Agreement. This Agreement shall be binding upon and inure to
the parties hereto and their respective successors and assigns.

      E. Mutual Agreement. This Agreement embodies the arm's length negotiation
and mutual agreement between the parties hereto and shall not be construed
against either party as having been drafted by it.

      F. New York Law to Govern. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York without regard to the principals of conflicts of law thereof. 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, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim

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<PAGE>

that it is not personally subject to the jurisdiction of any such court or that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof 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.

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<PAGE>

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

                                        UNIVERSE2U INC.

                                        By: /s/ Kim Allen
                                            ------------------------------------
                                            Kim Allen
                                            Chief Executive Officer

                                        Pledgees:

                                        AJW PARTNERS, LLC
                                        By: First Street Manager II, LLC

                                            By: /s/ Corey S. Ribotsky
                                                --------------------------------
                                                Corey S. Ribotsky
                                                Manager

                                        NEW MILLENNIUM CAPITAL PARTNERS II, LLC
                                        By: First Street Manager II, LLC

                                            By: /s/ Corey S. Ribotsky
                                                --------------------------------
                                                Corey S. Ribotsky
                                                Manager

                                        AJW/NEW MILLENNIUM OFFSHORE, LTD.
                                        By: First Street Manager II, LLC

                                            By: /s/ Corey S. Ribotsky
                                                --------------------------------
                                                Corey S. Ribotsky
                                                Manager

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<PAGE>

                                        PEGASUS CAPITAL PARTNERS, LLC
                                        By: Pegasus Manager, LLC

                                            By: /s/ Corey S. Ribotsky
                                                --------------------------------
                                                Corey S. Ribotsky
                                                Manager

                                        Pledgor:

                                         /s/ Angelo Boujos
                                        ----------------------------------------
                                        Angelo Boujos

                                        Number of Shares subject to this pledge:
                                        3,000,000

                                        Date such Shares were acquired:
                                        May 17, 2000

Acknowledgement by Escrow Agent:

By execution hereof, Escrow Agent acknowledges that it holds the Collateral
pursuant to the terms of the lock-up agreement referred to in Section 6 of this
Agreement, as well as for the benefit of Pledgees under this Agreement, and
agrees to deliver the Collateral to Pledgees upon termination of the lock-up
agreement under the circumstances described in Paragraph 6 of this Agreement.

                                        Escrow Agent:

                                        /s/ Richard M. Barnowski
                                        ----------------------------------------

                                       7Exhibit 10.06

                          REGISTRATION RIGHTS AGREEMENT

      REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of June 25,
2002, by and Universe2U Inc., a Nevada corporation, with its headquarters
located at 30 West Beaver Creek Road, Suite 109, Richmond Hill, Ontario, Canada
L4B 3K1 (the "Company"), and each of the undersigned (together with their
respective affiliates and any assignee or transferee of all of their respective
rights hereunder, the "Initial Investors").

      WHEREAS:

      G. In connection with the Securities Purchase Agreement by and among the
parties hereto of even date herewith (the "Securities Purchase Agreement"), the
Company has agreed, upon the terms and subject to the conditions contained
therein, to issue and sell to the Initial Investors (i) convertible debentures
in the aggregate principal amount of up to One Million Five Hundred Thousand
Dollars ($1,500,000) (the "Debentures") that are convertible into shares of the
Company's common stock (the "Common Stock"), upon the terms and subject to the
limitations and conditions set forth in such Debentures and (ii) warrants (the
"Warrants") to acquire an aggregate of 1,500,000 shares of Common Stock, upon
the terms and conditions and subject to the limitations and conditions set forth
in the Warrants dated June 25, 2002; and

      H. To induce the Initial Investors to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 Act"), and applicable state securities laws;

      NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each of the
Initial Investors hereby agree as follows:

            1. DEFINITIONS.

                  a. As used in this Agreement, the following terms shall have
the following meanings:

                        (i) "Investors" means the Initial Investors and any
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.

                        (ii) "register," "registered," and "registration" refer
to a registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").

                        (iii) "Registrable Securities" means the Conversion
Shares issued or issuable upon conversion or otherwise pursuant to the
Debentures and Additional Debentures (as defined in the Securities Purchase
Agreement) including, without limitation, Damages Shares (as defined in the
Debentures) issued or issuable pursuant to the Debentures, shares of Common
Stock issued or issuable in payment of the Standard Liquidated Damages Amount
(as defined in the Securities Purchase Agreement), shares issued or issuable in
respect of interest or in redemption of the Debentures in accordance with the
terms thereof, Warrant Shares issuable upon exercise or otherwise pursuant to
the Warrants and Additional Warrants (as defined in the Securities Purchase
Agreement), and any shares of capital stock issued or issuable as a dividend on
or in exchange for or otherwise with respect to any of the foregoing.

                        (iv) "Registration Statement" means a registration
statement of the Company under the 1933 Act.

                  b. Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth in the Securities Purchase
Agreement or the Convertible Debenture.

            2. REGISTRATION.

                  a. Mandatory Registration. The Company shall prepare, and, on
or prior to thirty (30) days from the date of Closing (as defined in the
Securities Purchase Agreement) (the "Filing Date"), file with the SEC a
Registration Statement on Form S-3 (or, if Form S-3 is not then available, on
such form of Registration Statement as is then available to effect a
registration of the Registrable Securities, subject to the consent of the
Initial Investors for any form other than Form SB-2, which consent will not be
unreasonably withheld) covering the resale of the Registrable Securities
underlying the Debentures and Warrants issued or issuable pursuant to the
Securities Purchase Agreement, which Registration Statement, to the extent
allowable under the 1933 Act and the rules and regulations promulgated
thereunder (including Rule 416), shall state that such Registration Statement
also covers such indeterminate number of additional shares of Common Stock as
may become issuable upon conversion of or otherwise pursuant to the Debentures
and exercise of the Warrants to prevent dilution resulting from stock splits,
stock dividends or similar transactions. The number of shares of Common Stock
initially included in such Registration Statement shall be no less than an
amount equal to two (2) times the sum of the number of Conversion Shares that
are then issuable upon conversion of the Debentures and Additional Debentures
(based on the Variable Conversion Price as would then be in effect and assuming
the Variable Conversion Price is the Conversion Price at such time), and the
number of Warrant Shares that are then issuable upon exercise of the Warrants,
without regard to any limitation on the Investor's ability to convert the
Debentures or exercise the Warrants. The Company acknowledges that the

<PAGE>

number of shares initially included in the Registration Statement will represent
a good faith estimate of the maximum number of shares issuable upon conversion
of the Debentures and upon exercise of the Warrants.

                  b. Underwritten Offering. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) hereof involves an underwritten
offering, the Investors who hold a majority in interest of the Registrable
Securities subject to such underwritten offering, with the consent of a
majority-in-interest of the Initial Investors, shall have the right to select
one legal counsel and an investment banker or bankers and manager or managers to
administer the offering, which investment banker or bankers or manager or
managers shall be reasonably satisfactory to the Company.

                  c. Payments by the Company. The Company shall use its best
efforts to obtain effectiveness of the Registration Statement as soon as
practicable. If (i) the Registration Statement(s) covering the Registrable
Securities required to be filed by the Company pursuant to Section 2(a) hereof
is not filed by the Filing Date or declared effective by the SEC on or prior to
ninety (90) days from the date of Closing, or (ii) after the Registration
Statement has been declared effective by the SEC, sales of all of the
Registrable Securities cannot be made pursuant to the Registration Statement, or
(iii) the Common Stock is not listed or included for quotation on the Nasdaq
National Market ("Nasdaq"), the Nasdaq SmallCap Market ("Nasdaq SmallCap"), the
New York Stock Exchange (the "NYSE") or the American Stock Exchange (the "AMEX")
after being so listed or included for quotation, or (iv) the Common Stock ceases
to be traded on the Over-the-Counter Bulletin Board (the "OTCBB") prior to being
listed or included for quotation on one of the aforementioned markets, then the
Company will make payments to the Investors in such amounts and at such times as
shall be determined pursuant to this Section 2(c) as partial relief for the
damages to the Investors by reason of any such delay in or reduction of their
ability to sell the Registrable Securities (which remedy shall not be exclusive
of any other remedies available at law or in equity). The Company shall pay to
each holder of the Debentures or Registrable Securities an amount equal to the
then outstanding principal amount of the Debentures (and, in the case of holders
of Registrable Securities, the principal amount of Debentures from which such
Registrable Securities were converted) ("Outstanding Principal Amount"),
multiplied by the Applicable Percentage (as defined below) times the sum of: (i)
the number of months (prorated for partial months) after the Filing Date or the
end of the aforementioned ninety (90) day period and prior to the date the
Registration Statement is declared effective by the SEC, provided, however, that
there shall be excluded from such period any delays which are solely
attributable to the Investors in the Registration Statement with respect to
information relating to the Investors, including, without limitation, changes to
the plan of distribution, or to the failure of the Investors to conduct their
review of the Registration Statement pursuant to Section 3(h) below in a
reasonably prompt manner; (ii) the number of months (prorated for partial
months) that sales of all of the Registrable Securities cannot be made pursuant
to the Registration Statement after the Registration Statement has been declared
effective (including, without limitation, when sales cannot be made by reason of
the Company's failure to properly supplement or amend the prospectus included
therein in accordance with the terms of this Agreement, but excluding any days
during an Allowed Delay (as defined in Section 3(f)); and (iii) the number of
months (prorated for partial months) that the Common Stock is not listed or
included for quotation on the OTCBB, Nasdaq, Nasdaq SmallCap, NYSE or AMEX or
that trading thereon is halted after the Registration Statement has been
declared effective (provided, however, that any coterminus periods shall not be
double counted). The term "Applicable Percentage" means two hundredths (.02).
(For example, if the Registration Statement becomes effective one (1) month
after the end of such thirty-day period, the Company would pay $5,000 for each
$250,000 of Outstanding Principal Amount. If thereafter, sales could not be made
pursuant to the Registration Statement for an additional period of one (1)
month, the Company would pay an additional $5,000 for each $250,000 of
Outstanding Principal Amount.) Such amounts shall be paid in cash or, at each
Investor's option, in shares of Common Stock priced at the Conversion Price (as
defined in the Debentures) on such payment date.

                  d. Piggy-Back Registrations. Subject to the last sentence of
this Section 2(d), if at any time prior to the expiration of the Registration
Period (as hereinafter defined) the Company shall determine to file with the SEC
a Registration Statement relating to an offering for its own account or the
account of others under the 1933 Act of any of its equity securities (other than
on Form S-4 or Form S-8 or their then equivalents relating to equity securities
to be issued solely in connection with any acquisition of any entity or business
or equity securities issuable in connection with stock option or other employee
benefit plans), the Company shall send to each Investor who is entitled to
registration rights under this Section 2(d) written notice of such determination
and, if within fifteen (15) days after the effective date of such notice, such
Investor shall so request in writing, the Company shall include in such
Registration Statement all or any part of the Registrable Securities such
Investor requests to be registered, except that if, in connection with any
underwritten public offering for the account of the Company the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in the Registration Statement because, in
such underwriter(s)' judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Registration Statement only such limited
portion of the Registrable Securities with respect to which such Investor has
requested inclusion hereunder as the underwriter shall permit. Any exclusion of
Registrable Securities shall be made pro rata among the Investors seeking to
include Registrable Securities in proportion to the number of Registrable
Securities sought to be included by such

                                       2
<PAGE>

Investors; provided, however, that the Company shall not exclude any Registrable
Securities unless the Company has first excluded all outstanding securities, the
holders of which are not entitled to inclusion of such securities in such
Registration Statement or are not entitled to pro rata inclusion with the
Registrable Securities; and provided, further, however, that, after giving
effect to the immediately preceding proviso, any exclusion of Registrable
Securities shall be made pro rata with holders of other securities having the
right to include such securities in the Registration Statement other than
holders of securities entitled to inclusion of their securities in such
Registration Statement by reason of demand registration rights. No right to
registration of Registrable Securities under this Section 2(d) shall be
construed to limit any registration required under Section 2(a) hereof. If an
offering in connection with which an Investor is entitled to registration under
this Section 2(d) is an underwritten offering, then each Investor whose
Registrable Securities are included in such Registration Statement shall, unless
otherwise agreed by the Company, offer and sell such Registrable Securities in
an underwritten offering using the same underwriter or underwriters and, subject
to the provisions of this Agreement, on the same terms and conditions as other
shares of Common Stock included in such underwritten offering. Notwithstanding
anything to the contrary set forth herein, the registration rights of the
Investors pursuant to this Section 2(d) shall only be available in the event the
Company fails to timely file, obtain effectiveness or maintain effectiveness of
any Registration Statement to be filed pursuant to Section 2(a) in accordance
with the terms of this Agreement.

                  e. Eligibility for Form S-3, SB-2 or S-1: Conversion to Form
S-3. The Company represents and warrants that it meets the requirements for the
use of Form S-3, SB-2 or S-1 for registration of the sale by the Initial
Investors and any other Investors of the Registrable Securities. The Company
agrees to file all reports required to be filed by the Company with the SEC in a
timely manner so as to remain eligible or become eligible, as the case may be,
and thereafter to maintain its eligibility, for the use of Form S-3. If the
Company is not currently eligible to use Form S-3, not later than five (5)
business days after the Company first meets the registration eligibility and
transaction requirements for the use of Form S-3 (or any successor form) for
registration of the offer and sale by the Initial Investors and any other
Investors of Registrable Securities, the Company shall file a Registration
Statement on Form S-3 (or such successor form) with respect to the Registrable
Securities covered by the Registration Statement on Form SB-2 or Form S-1,
whichever is applicable, filed pursuant to Section 2(a) (and include in such
Registration Statement on Form S-3 the information required by Rule 429 under
the 1933 Act) or convert the Registration Statement on Form SB-2 or Form S-1,
whichever is applicable, filed pursuant to Section 2(a) to a Form S-3 pursuant
to Rule 429 under the 1933 Act and cause such Registration Statement (or such
amendment) to be declared effective no later than forty-five (45) days after
filing. In the event of a breach by the Company of the provisions of this
Section 2(e), the Company will be required to make payments pursuant to Section
2(c) hereof.

            3. OBLIGATIONS OF THE COMPANY.

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

                  a. The Company shall prepare promptly, and file with the SEC
not later than the Filing Date, a Registration Statement with respect to the
number of Registrable Securities provided in Section 2(a), and thereafter use
its best efforts to cause such Registration Statement relating to Registrable
Securities to become effective as soon as possible after such filing but in no
event later than ninety (90) days from the date of Closing), and keep the
Registration Statement effective pursuant to Rule 415 at all times until such
date as is the earlier of (i) the date on which all of the Registrable
Securities have been sold and (ii) the date on which the Registrable Securities
(in the opinion of counsel to the Initial Investors) may be immediately sold to
the public without registration or restriction (including without limitation as
to volume by each holder thereof) under the 1933 Act (the "Registration
Period"), which Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein) shall not contain any 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 not misleading.

                  b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statements and the prospectus used in connection with the
Registration Statements as may be necessary to keep the Registration Statements
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the disposition of
all Registrable Securities of the Company covered by the Registration Statements
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statements. In the event the number of
shares available under a Registration Statement filed pursuant to this Agreement
is insufficient to cover all of the Registrable Securities issued or issuable
upon conversion of the Debentures and exercise of the Warrants, the Company
shall amend the Registration Statement, or file a new Registration Statement (on
the short form available therefor, if applicable), or both, so as to cover all
of the Registrable Securities, in each case, as soon as practicable, but in any
event within fifteen (15) days after the necessity therefor arises (based on the
market price of the Common Stock and other relevant factors on which the Company
reasonably elects to rely). The Company shall use its best efforts to cause such
amendment and/or new Registration Statement to become effective as soon as
practicable following the filing thereof, but in any event within forty-five
(45) days

                                       3
<PAGE>

after the date on which such amendment and/or new Registration Statement is
filed. The provisions of Section 2(c) above shall be applicable with respect to
such obligation, with the ninety (90) days running from the day the Company
reasonably first determines (or reasonably should have determined) the need
therefor.

                  c. The Company shall furnish to each Investor whose
Registrable Securities are included in a Registration Statement and its legal
counsel (i) promptly (but in no event more than two (2) business days) after the
same is prepared and publicly distributed, filed with the SEC, or received by
the Company, one copy of each Registration Statement and any amendment thereto,
each preliminary prospectus and prospectus and each amendment or supplement
thereto, and, in the case of the Registration Statement referred to in Section
2(a), each letter written by or on behalf of the Company to the SEC or the staff
of the SEC, and each item of correspondence from the SEC or the staff of the
SEC, in each case relating to such Registration Statement (other than any
portion of any thereof which contains information for which the Company has
sought confidential treatment), and (ii) promptly (but in no event more than two
(2) business days) after the Registration Statement is declared effective by the
SEC, such number of copies of a prospectus, including a preliminary prospectus,
and all amendments and supplements thereto and such other documents as such
Investor may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Investor. The Company will immediately
notify each Investor by facsimile of the effectiveness of each Registration
Statement or any post-effective amendment. The Company will promptly (but in no
event more than five (5) business days) respond to any and all comments received
from the SEC (which comments shall promptly be made available to the Investors
upon request), with a view towards causing each Registration Statement or any
amendment thereto to be declared effective by the SEC as soon as practicable,
shall promptly file an acceleration request as soon as practicable (but in no
event more than two (2) business days) following the resolution or clearance of
all SEC comments or, if applicable, following notification by the SEC that any
such Registration Statement or any amendment thereto will not be subject to
review and shall promptly file with the SEC a final prospectus as soon as
practicable (but in no event more than two (2) business days) following receipt
by the Company from the SEC of an order declaring the Registration Statement
effective. In the event of a breach by the Company of the provisions of this
Section 3(c), the Company will be required to make payments pursuant to Section
2(c) hereof.

                  d. The Company shall use reasonable efforts to (i) register
and qualify the Registrable Securities covered by the Registration Statements
under such other securities or "blue sky" laws of such jurisdictions in the
United States as the Investors who hold a majority in interest of the
Registrable Securities being offered reasonably request, (ii) prepare and file
in those jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (a) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (b) subject itself
to general taxation in any such jurisdiction, (c) file a general consent to
service of process in any such jurisdiction, (d) provide any undertakings that
cause the Company undue expense or burden, or (e) make any change in its charter
or bylaws, which in each case the Board of Directors of the Company determines
to be contrary to the best interests of the Company and its stockholders.

                  e. In the event Investors who hold a majority-in-interest of
the Registrable Securities being offered in the offering (with the approval of a
majority-in-interest of the Initial Investors) select underwriters for the
offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering.

                  f. As promptly as practicable after becoming aware of such
event, the Company shall notify each Investor of the happening of any event, of
which the Company has knowledge, as a result of which the prospectus included in
any Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and use its best
efforts promptly to prepare a supplement or amendment to any Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request; provided that, for not more than ten (10) consecutive
trading days (or a total of not more than twenty (20) trading days in any twelve
(12) month period), the Company may delay the disclosure of material non-public
information concerning the Company (as well as prospectus or Registration
Statement updating) the disclosure of which at the time is not, in the good
faith opinion of the Company, in the best interests of the Company (an "Allowed
Delay"); provided, further, that the Company shall promptly (i) notify the
Investors in writing of the existence of (but in no event, without the prior
written consent of an Investor, shall the Company disclose to such investor any
of the facts or circumstances regarding) material non-public information giving
rise to an Allowed Delay and (ii) advise the Investors in writing to cease all
sales under such Registration Statement until the end of the Allowed Delay. Upon
expiration of the Allowed Delay, the Company shall again be

                                       4
<PAGE>

bound by the first sentence of this Section 3(f) with respect to the information
giving rise thereto.

                  g. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of any
Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order at the earliest possible moment and to notify each
Investor who holds Registrable Securities being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance of such order
and the resolution thereof.

                  h. The Company shall permit a single firm of counsel
designated by the Initial Investors to review such Registration Statement and
all amendments and supplements thereto (as well as all requests for acceleration
or effectiveness thereof) a reasonable period of time prior to their filing with
the SEC, and not file any document in a form to which such counsel reasonably
objects and will not request acceleration of such Registration Statement without
prior notice to such counsel. The sections of such Registration Statement
covering information with respect to the Investors, the Investor's beneficial
ownership of securities of the Company or the Investors intended method of
disposition of Registrable Securities shall conform to the information provided
to the Company by each of the Investors.

                  i. The Company shall make generally available to its security
holders as soon as practicable, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the 1933 Act) covering a twelve-month
period beginning not later than the first day of the Company's fiscal quarter
next following the effective date of the Registration Statement.

                  j. At the request of any Investor, the Company shall furnish,
on the date that Registrable Securities are delivered to an underwriter, if any,
for sale in connection with any Registration Statement or, if such securities
are not being sold by an underwriter, on the date of effectiveness thereof (i)
an opinion, dated as of such date, from counsel representing the Company for
purposes of such Registration Statement, in form, scope and substance as is
customarily given in an underwritten public offering, addressed to the
underwriters, if any, and the Investors and (ii) a letter, dated such date, from
the Company's independent certified public accountants in form and substance as
is customarily given by independent certified public accountants to underwriters
in an underwritten public offering, addressed to the underwriters, if any, and
the Investors.

                  k. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to a
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Initial Investors, (iv) one firm of attorneys
and one firm of accountants or other agents retained by all other Investors, and
(v) one firm of attorneys retained by all such underwriters (collectively, the
"Inspectors") all pertinent financial and other records, and pertinent corporate
documents and properties of the Company, including without limitation, records
of conversions by other holders of convertible securities issued by the Company
and the issuance of stock to such holders pursuant to the conversions
(collectively, the "Records"), as shall be reasonably deemed necessary by each
Inspector to enable each Inspector to exercise its due diligence responsibility,
and cause the Company's officers, directors and employees to supply all
information which any Inspector may reasonably request for purposes of such due
diligence; provided, however, that each Inspector shall hold in confidence and
shall not make any disclosure (except to an Investor) of any Record or other
information which the Company determines in good faith to be confidential, and
of which determination the Inspectors are so notified, unless (a) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission in
any Registration Statement, (b) the release of such Records is ordered pursuant
to a subpoena or other order from a court or government body of competent
jurisdiction, or (c) the information in such Records has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company shall not be required to disclose any confidential
information in such Records to any Inspector until and unless such Inspector
shall have entered into confidentiality agreements (in form and substance
satisfactory to the Company) with the Company with respect thereto,
substantially in the form of this Section 3(k). Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential. Nothing herein (or in any other
confidentiality agreement between the Company and any Investor) shall be deemed
to limit the Investor's ability to sell Registrable Securities in a manner which
is otherwise consistent with applicable laws and regulations.

                  l. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor prior
to making such disclosure, and

                                       5
<PAGE>

allow the Investor, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.

                  m. The Company shall (i) use reasonable efforts to cause all
the Registrable Securities covered by the Registration Statement to be listed on
each national securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) to the extent the securities of the same class or series are not then
listed on a national securities exchange, secure the designation and quotation,
of all the Registrable Securities covered by the Registration Statement on
Nasdaq or, if not eligible for Nasdaq, on Nasdaq SmallCap or, if not eligible
for Nasdaq or Nasdaq SmallCap, on the OTCBB and, without limiting the generality
of the foregoing, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. ("NASD") as such with respect
to such Registrable Securities.

                  n. The Company shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.

                  o. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to a Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or the Investors may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Investors may request, and, within three (3)
business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall
cause legal counsel selected by the Company to deliver, to the transfer agent
for the Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) an instruction in the
form attached hereto as Exhibit 1 and an opinion of such counsel in the form
attached hereto as Exhibit 2.

                  p. At the request of the holders of a majority-in-interest of
the Registrable Securities, the Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement and any prospectus used in connection with the
Registration Statement as may be necessary in order to change the plan of
distribution set forth in such Registration Statement.

                  q. From and after the date of this Agreement, the Company
shall not, and shall not agree to, allow the holders of any securities of the
Company to include any of their securities in any Registration Statement under
Section 2(a) hereof or any amendment or supplement thereto under Section 3(b)
hereof without the consent of the holders of a majority-in-interest of the
Registrable Securities.

                  r. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to a Registration Statement.

            4. OBLIGATIONS OF THE INVESTORS.

      In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:

                  a. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least three (3)
business days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Investor of the information the Company
requires from each such Investor.

                  b. Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statements hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statements.

                  c. In the event Investors holding a majority-in-interest of
the Registrable Securities being registered (with the approval of the Initial
Investors) determine to engage the services of an underwriter, each Investor
agrees to enter into and perform such Investor's obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from such Registration Statement.

                  d. Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(f)
or 3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed by
the Company, such Investor shall deliver to the

                                       6
<PAGE>

Company (at the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in such Investor's possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice.

                  e. No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting arrangements in
usual and customary form entered into by the Company, (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions and any expenses in excess of those
payable by the Company pursuant to Section 5 below.

            5. EXPENSES OF REGISTRATION.

      All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualification fees, printers and accounting fees, the
fees and disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel selected by the Initial Investors pursuant to
Sections 2(b) and 3(h) hereof shall be borne by the Company.

            6. INDEMNIFICATION.

      In the event any Registrable Securities are included in a Registration
Statement under this Agreement:

                  a. To the extent permitted by law, the Company will indemnify,
hold harmless and defend (i) each Investor who holds such Registrable
Securities, (ii) the directors, officers, partners, employees, agents and each
person who controls any Investor within the meaning of the 1933 Act or the
Securities Exchange Act of 1934, as amended (the "1934 Act"), if any, (iii) any
underwriter (as defined in the 1933 Act) for the Investors, and (iv) the
directors, officers, partners, employees and each person who controls any such
underwriter within the meaning of the 1933 Act or the 1934 Act, if any (each, an
"Indemnified Person"), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced
or threatened, in respect thereof, "Claims") to which any of them may become
subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading; (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final prospectus (as amended
or supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading; or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities (the matters in the foregoing clauses (i) through (iii)
being, collectively, "Violations"). Subject to the restrictions set forth in
Section 6(c) with respect to the number of legal counsel, the Company shall
reimburse the Indemnified Person, promptly as such expenses are incurred and are
due and payable, for any reasonable legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by any Indemnified Person
or underwriter for such Indemnified Person expressly for use in connection with
the preparation of such Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c) hereof; (ii) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld; and
(iii) with respect to any preliminary prospectus, shall not inure to the benefit
of any Indemnified Person if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on a timely basis in the
prospectus, as then amended or supplemented, such corrected prospectus was
timely made available by the Company pursuant to Section 3(c) hereof, and the
Indemnified Person was promptly advised in writing not to use the incorrect
prospectus prior to the use giving rise to a Violation and such Indemnified
Person, notwithstanding such advice, used it. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.

                  b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not jointly
to indemnify, hold harmless and defend, to the same extent and in the same
manner set forth in Section 6(a), the Company, each of its directors, each of
its officers who signs the Registration Statement, each person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act, any
underwriter and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any person who
controls such stockholder or underwriter within the meaning of the 1933 Act or
the 1934 Act (collectively and together with an Indemnified Person, an
"Indemnified Party"), against any Claim to which any of them may become subject,
under the 1933 Act, the 1934

                                       7
<PAGE>

Act or otherwise, insofar as such Claim arises out of or is based upon any
Violation by such Investor, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and subject to Section 6(c) such
Investor will reimburse any legal or other expenses (promptly as such expenses
are incurred and are due and payable) reasonably incurred by them in connection
with investigating or defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 6(b) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent shall not be unreasonably
withheld; provided, further, however, that the Investor shall be liable under
this Agreement (including this Section 6(b) and Section 7) for only that amount
as does not exceed the net proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(b) with respect to any preliminary prospectus shall
not inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented.

                  c. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. The indemnifying party shall pay for only one
separate legal counsel for the Indemnified Persons or the Indemnified Parties,
as applicable, and such legal counsel shall be selected by Investors holding a
majority-in-interest of the Registrable Securities included in the Registration
Statement to which the Claim relates (with the approval of a
majority-in-interest of the Initial Investors), if the Investors are entitled to
indemnification hereunder, or the Company, if the Company is entitled to
indemnification hereunder, as applicable. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is actually prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.

            7. CONTRIBUTION.

      To the extent any indemnification by an indemnifying party is prohibited
or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of such fraudulent misrepresentation, and (iii) contribution (together
with any indemnification or other obligations under this Agreement) by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.

            8. REPORTS UNDER THE 1934 ACT.

      With a view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the investors to sell securities of the Company
to the public without registration ("Rule 144"), the Company agrees to:

                  a. make and keep public information available, as those terms
are understood and defined in Rule 144;

                  b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and

                  c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii)

                                       8
<PAGE>

a copy of the most recent annual or quarterly report of the Company and such
other reports and documents so filed by the Company, and (iii) such other
information as may be reasonably requested to permit the Investors to sell such
securities pursuant to Rule 144 without registration.

            9. ASSIGNMENT OF REGISTRATION RIGHTS.

      The rights under this Agreement shall be automatically assignable by the
Investors to any transferee of all or any portion of Registrable Securities if:
(i) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement, and (vi) such transferee shall be an "accredited investor" as that
term defined in Rule 501 of Regulation D promulgated under the 1933 Act.

            10. AMENDMENT OF REGISTRATION RIGHTS.

      Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with written consent of the Company and Investors who
hold a majority interest of the Registrable Securities. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each Investor
and the Company.

            11. MISCELLANEOUS.

                  a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.

                  b. Any notices required or permitted to be given under the
terms hereof shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile and shall be effective five days
after being placed in the mail, if mailed by regular United States mail, or upon
receipt, if delivered personally or by courier (including a recognized overnight
delivery service) or by facsimile, in each case addressed to a party. The
addresses for such communications shall be:

                  If to the Company:

                  Universe2U Inc.
                  30 West Beaver Creek Road, Suite 109
                  Richmond Hill, Ontario, Canada L4B 3K1
                  Attention: Kim Allen
                  Telephone: 905-709-5241
                  Facsimile: 905-709-5264
                  Email: kallen@universe2u.com

                  With a copy to:

                  Keith Moskowitz, Esq.
                  Ehrenreich Eilenberg & Krause LLP
                  11 East 44th Street, 17th Floor
                  New York, NY 10017
                  Telephone: 212-986-9700
                  Facsimile: 212-986-2399
                  Email: km@ezlaw.com

If to an Investor: to the address set forth immediately below such Investor's
name on the signature pages to the Securities Purchase Agreement.

                  With a copy to:

                  Ballard Spahr Andrews & Ingersoll, LLP
                  1735 Market Street
                  51st Floor
                  Philadelphia, Pennsylvania  19103
                  Attention: Gerald J. Guarcini, Esq.
                  Telephone: 215-865-8625
                  Facsimile: 215-864-8999
                  Email: guarcini@ballardspahr.com

                  c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.

                  d. THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED NEW YORK, NEW
YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE AGREEMENTS
ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE

                                       9
<PAGE>

OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH
PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS
MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE
PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE
THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT
OR IN ANY OTHER LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE
ARISING UNDER THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES,
INCLUDING ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH
SUCH DISPUTE.

                  e. In the event that any provision of this Agreement is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any provision hereof which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.

                  f. This Agreement, the Warrants and the Securities Purchase
Agreement (including all schedules and exhibits thereto) constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein and therein. This Agreement and the
Securities Purchase Agreement supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.

                  g. Subject to the requirements of Section 9 hereof, this
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and assigns.

                  h. The headings in this Agreement are for convenience of
reference only and shall not form part of, or affect the interpretation of, this
Agreement.

                  i. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party. This Agreement, once
executed by a party, may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement. j. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

                  k. Except as otherwise provided herein, all consents and other
determinations to be made by the Investors pursuant to this Agreement shall be
made by Investors holding a majority of the Registrable Securities, determined
as if the all of the Debentures and Warrants then outstanding have been
converted into or exercised for Registrable Securities.

                  l. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to each Investor by vitiating
the intent and purpose of the transactions contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for breach of its obligations under
this Agreement will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of any of the provisions under this Agreement,
that each Investor shall be entitled, in addition to all other available
remedies in law or in equity, and in addition to the penalties assessable
herein, to an injunction or injunctions restraining, preventing or curing any
breach of this Agreement and to enforce specifically the terms and provisions
hereof, without the necessity of showing economic loss and without any bond or
other security being required.

                  m. 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.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       10
<PAGE>

      IN WITNESS WHEREOF, the Company and the undersigned Initial Investors have
caused this Agreement to be duly executed as of the date first above written.

UNIVERSE2U INC.

/s/ Kim Allen Kim Allen
----------------------------------------
Chief Executive Officer

AJW PARTNERS, LLC
By: SMS Group, LLC

/s/ Corey S. Ribotsky
----------------------------------------
Corey S. Ribotsky
Manager

NEW MILLENNIUM CAPITAL PARTNERS II, LLC
By: First Street Manager II, LLC

/s/ Corey S. Ribotsky
----------------------------------------
Corey S. Ribotsky
Manager

AJW/NEW MILLENNIUM OFFSHORE, LTD.
By: First Street Manager II, LLC

/s/ Corey S. Ribotsky
----------------------------------------
Corey S. Ribotsky
Manager

PEGASUS CAPITAL PARTNERS, LLC
By: Pegasus Manager, LLC

/s/ Corey S. Ribotsky
----------------------------------------
Corey S. Ribotsky
Manager

                                       11

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