Document:

EXHIBIT 10.1

                          SECURITIES PURCHASE AGREEMENT

      This SECURITIES PURCHASE AGREEMENT (this  "AGREEMENT"),  dated as of March
21, 2005 (the "EXECUTION  DATE"),  is by and between  MediaBay,  Inc., a Florida
corporation (the "COMPANY"),  and each of the entities whose names appear on the
signature  pages  hereof.  Such  entities  are each  referred  to  herein  as an
"INVESTOR" and, collectively, as the "INVESTORS".

      A. The Company wishes to sell to each Investor,  and each Investor  wishes
to  purchase,  on the  terms and  subject  to the  conditions  set forth in this
Agreement,  (i)  shares  (the  "PREFERRED  SHARES")  of the  Company's  Series D
Convertible  Preferred  Stock  (the  "PREFERRED  STOCK")  having  the rights and
privileges  set forth in the form of Articles of  Amendment  attached  hereto as
Exhibit A (the  "ARTICLES OF  AMENDMENT"),  (ii) a warrant in the form  attached
hereto  as  Exhibit  B (each,  an  "OFFERING  WARRANT"  and,  collectively,  the
"OFFERING WARRANTS") and (iii) an additional warrant in the form attached hereto
as Exhibit C (a "PREFERRED  WARRANT"),  exercisable  by such Investor until (and
including)  the ninetieth  (90th) day  following the Effective  Date (as defined
below),  for the  purchase  of  additional  Preferred  Shares and an  additional
warrant,  identical  in form to the  Offering  Warrants  (each,  an  "ADDITIONAL
WARRANT" and,  collectively,  the  "ADDITIONAL  WARRANTS",  with such Additional
Warrants  and Offering  Warrants  being  collectively  referred to herein as the
"INVESTOR  WARRANTS"),  with the number of such additional Preferred Shares such
Investor  shall have the right to purchase  being equal to  twenty-five  percent
(25%) of the number of  Preferred  Shares  purchased  at the Closing (as defined
below) by such Investor hereunder,  for an aggregate exercise price equal to the
aggregate Stated Value of the Preferred Shares purchased upon such exercise.

      B. The Preferred  Stock will be convertible  into shares (the  "CONVERSION
SHARES") of the Company's  Common Stock (as defined below) at a conversion price
of $0.55 (subject to adjustment as provided in the Articles of  Amendment).  The
Offering Warrants issued to an Investor will entitle such Investor to purchase a
number of shares of Common Stock (the "OFFERING  WARRANT SHARES") equal to fifty
percent  (50%) of the  initial  number  of  Conversion  Shares  into  which  the
Preferred  Shares  purchased by such Investor at the Closing (as defined  below)
are convertible  (without regard to any limitation on such conversion  contained
herein or in the Articles of Amendment),  and the Additional  Warrants issued to
an Investor upon exercise of a Preferred  Warrant shall  initially  entitle such
Investor to purchase a number of shares of Common Stock (the "ADDITIONAL WARRANT
SHARES" and,  together with the Offering Warrant Shares,  the "INVESTOR  WARRANT
SHARES") equal to fifty percent (50%) of the initial number of Conversion Shares
into which the Preferred  Shares purchased by such Investor upon the exercise of
such Preferred Warrant are convertible (without regard to any limitation on such
conversion contained herein or in the Articles of Amendment).

      C. The Company has agreed to issue at the Closing to  Satellite  Strategic
Finance  Associates,   LLC  ("Satellite"),   in  consideration  for  Satellite's
consulting  services,  an  additional  warrant  in the form  attached  hereto as
Exhibit D (the "SATELLITE CONSULTING WARRANT"), which shall entitle Satellite to
purchase up to 250,000 shares of Common Stock (the  "SATELLITE  WARRANT  SHARES"
and, together with the Investor Warrant Shares,  the "WARRANT SHARES") and shall
otherwise  be on  substantially  the same terms as the  Investor  Warrants.  The
Investor Warrants and the Satellite Consulting Warrant are collectively referred
to herein as the "WARRANTS".  The Warrants will have an exercise price per share
equal to $0.56 (subject to adjustment as provided therein),  will be exercisable
commencing six (6) months following the Closing Date (as defined below) and will
expire on the date that is sixty-six (66) months following the Closing Date.

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      D. The Preferred Shares (including without limitation any Preferred Shares
purchased  pursuant to the  Preferred  Warrants),  the  Conversion  Shares,  the
Warrants  and the  Warrant  Shares are  collectively  referred  to herein as the
"SECURITIES".

      E. The Company  has agreed to effect the  registration  of the  Conversion
Shares and the Warrant  Shares,  other than in certain  respects the  Conversion
Shares and the  Warrant  Shares  issued or  issuable  to Goldman  (the  "GOLDMAN
SECURITIES")  under the  Securities  Act of 1933,  as amended  (the  "SECURITIES
ACT"),  pursuant to a Registration  Rights Agreement in the form attached hereto
as Exhibit E-1 (the "REGISTRATION RIGHTS AGREEMENT").

      F. The  Company  has  agreed to effect  the  registration  of the  Goldman
Securities under the Securities Act pursuant to a Registration  Rights Agreement
in the form  attached  hereto as Exhibit E-2 (the "GOLDMAN  REGISTRATION  RIGHTS
AGREEMENT").

      G.  The  sale of the  Preferred  Shares,  the  Investor  Warrants  and the
Preferred  Warrants by the  Company to the  Investors,  and the  issuance of the
Satellite  Consulting  Warrant by the Company to Satellite,  will be effected in
reliance  upon  the  exemption  from  securities  registration  afforded  by the
provisions of Regulation D  ("REGULATION  D"), as  promulgated by the Commission
(as defined below) under the Securities Act.

      In consideration of the mutual promises made herein and for other good and
valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
acknowledged, the Company and each Investor hereby agree as follows:

1. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS.

      1.1  Closing of  Purchase  and Sale;  Purchase  Price.  Upon the terms and
subject to the  satisfaction  or waiver of the conditions set forth herein,  the
Company  agrees to sell, and each Investor  agrees to purchase,  on the Closing,
the following securities (all of such purchases and sales,  collectively,  being
referred to herein as the  "FINANCING"):  (i) the number of Preferred Shares set
forth below such Investor's name on the signature pages hereof; (ii) an Offering
Warrant to purchase the number of Warrant Shares indicated on the signature page
hereof;  and (iii) a  Preferred  Warrant to purchase  (a) a number of  Preferred
Shares equal to 25% of the Preferred  Shares referred to in clause (i) above and
(b) an Additional Warrant to purchase a number of Warrant Shares equal to 25% of
the  Warrant  Shares  referred  to in (ii)  above.  The  purchase  price for the
Preferred Shares, Offering Warrant and Preferred Warrant being purchased by each
Investor on the Closing (the  "PURCHASE  PRICE") shall be equal to the aggregate
Stated Value of the Preferred  Shares being so purchased by such  Investor.  The
closing of the Financing (the  "CLOSING") will be deemed to occur at the offices
of Duval &  Stachenfeld,  LLP, 300 East 42nd Street,  New York,  New York 10017,
when (A) this Agreement and the other  Transaction  Documents (as defined below)
have been executed and  delivered by the Company and, to the extent  applicable,
by each Investor, (B) each of the conditions to the Closing described in Section
5 hereof  has been  satisfied  or waived by the  Company  or each  Investor,  as

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appropriate,  (C) pursuant to the terms of the Private Offering Escrow Agreement
in the form attached hereto as Exhibit F (the "INVESTOR ESCROW AGREEMENT"), each
Investor shall have, on or before the Closing Date, delivered the Purchase Price
payable by it to the Escrow Agent (as defined in the Investor Escrow  Agreement)
by wire transfer of immediately available funds, (D) the Escrow Agent shall have
delivered to the Company by wire  transfer of  immediately  available  funds the
amounts held in escrow  pursuant to the  Investor  Escrow  Agreement  (less such
amounts as are, pursuant to the Investor Escrow  Agreement,  to be paid to other
Persons),  and (E) the Company shall have delivered  duly executed  certificates
representing the Preferred Shares,  Offering Warrant and Preferred Warrant being
purchased by such Investor.  The date on which the Closing occurs is referred to
herein as the "CLOSING DATE".  Concurrently  with the Closing,  the Company will
enter into, and consummate the transactions contemplated by, that certain letter
agreement,  dated as of the date hereof,  between the Company and each of Forest
Hill Select Offshore, Ltd., Forest Hill Select Fund, L.P. and Lone Oak Partners,
L.P., in substantially the form attached hereto as Exhibit G.

      1.2 Certain Definitions.  When used herein, the following terms shall have
the respective meanings indicated:

            "ADDITIONAL  WARRANT" and "ADDITIONAL  WARRANTS" have the respective
meanings specified in the preamble to this Agreement.

            "AGREEMENT"  has  the  meaning  specified  in the  preamble  to this
Agreement.

            "AFFILIATE"  means,  as to any Person (the  "subject  Person"),  any
other Person (a) that directly or indirectly through one or more  intermediaries
controls or is  controlled  by, or is under  direct or indirect  common  control
with, the subject Person,  (b) that directly or indirectly  beneficially owns or
holds ten  percent  (10%) or more of any class of voting  equity of the  subject
Person,  or (c) ten  percent  (10%)  or more of the  voting  equity  of which is
directly or indirectly beneficially owned or held by the subject Person. For the
purposes  of this  definition,  "CONTROL"  when used with  respect to any Person
means the power to direct the management  and policies of such Person,  directly
or  indirectly,  whether  through the  ownership of voting  securities,  through
representation on such Person's board of directors or other management committee
or group, by contract or otherwise.

            "ARTICLES OF AMENDMENT" has the meaning specified in the preamble to
this Agreement.

            "AVAILABLE  UNDERSUBSCRIPTION  AMOUNT" has the meaning  specified in
Section 4.7(b) hereof.

            "BASIC AMOUNT" has the meaning specified in Section 4.7(a) hereof.

            "BOARD  OF  DIRECTORS"  or  "BOARD"  means  the  Company's  board of
directors, as constituted from time to time.

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            "BUSINESS  DAY" means any day other than a  Saturday,  a Sunday or a
day on which the New York Stock Exchange is closed or on which  commercial banks
located in New York City are required or authorized by law to close.

            "CAP  AMOUNT"  means  19.99% of the number of shares of Common Stock
outstanding on the

            Closing  Date,   immediately   prior  to  the  Closing  (subject  to
adjustment upon a stock split, stock dividend or similar event).

            "CLOSING" and "CLOSING DATE" have the respective  meanings specified
in Section 1.1

            hereof.

            "CLOSING BID PRICE" shall mean, for the Common Stock as of any date,
the closing bid price on such date for the Common Stock on the Principal  Market
as reported by Bloomberg  Financial Markets  ("BLOOMBERG"),  or if the Principal
Market begins to operate on an extended hours basis,  and does not designate the
closing  bid  price,  then the last bid price at 4:00 p.m.  (eastern  time),  as
reported by Bloomberg,  or if the  foregoing do not apply,  the last closing bid
price of the  Common  Stock in the  over-the-counter  market  on the  electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price is reported for such security by  Bloomberg,  the last closing trade price
for such security as reported by  Bloomberg,  or, if no last closing trade price
is reported for such security by Bloomberg, the average of the bid prices of any
market  makers for such security as reported in the "pink sheets" by Pink Sheets
LLC (formerly the National  Quotation  Bureau,  Inc.).  If the Closing Bid Price
cannot be  calculated  for the Common Stock on such date on any of the foregoing
bases,  then  the  Company  shall  submit  such  calculation  to an  independent
investment  banking  firm  of  national  reputation   reasonably  acceptable  to
Investors  holding a majority  of the  Preferred  Shares,  and shall  cause such
investment banking firm to perform such determination and notify the Company and
the  Investors  of the results of  determination  no later than two (2) Business
Days from the time such calculation was submitted to it by the Company. All such
determinations  shall be  appropriately  adjusted for any stock dividend,  stock
split or other similar transaction during such period.

            "COMMISSION"   means  the  United  States  Securities  and  Exchange
Commission.

            "COMMON STOCK" means the common stock, no par value, of the Company.

            "COMPANY"  has  the  meaning  specified  in  the  preamble  to  this
Agreement.

            "COMPANY  SUBSIDIARIES"  means each of ABC Investment  Corp.,  Inc.,
Audio Book Club,  Inc.,  MediaBay.com,  Inc.,  Radio  Spirits,  Inc.,  and Video
Yesteryear, Inc.

            "CONTROLLING  STOCKHOLDER"  has the  meaning  specified  in  Section
5.1.13 hereof.

            "CONVERSION  PRICE" has the  meaning  specified  in the  Articles of
Amendment.

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            "CONVERSION  SHARES" has the meaning  specified  in the  preamble to
this Agreement.

            "DEBT" as to any Person at any time,  means:  (a) all  indebtedness,
liabilities  and  obligations  of  such  Person  for  borrowed  money;  (b)  all
indebtedness,  liabilities  and  obligations  of such Person to pay the deferred
purchase price of Property or services,  except trade  accounts  payable of such
Person  arising in the ordinary  course of business that are (i) not past due by
more than 90 days or (ii) being  disputed in good faith by the Company;  (c) all
capital lease obligations of such Person; (d) all indebtedness,  liabilities and
obligations  of  others  guaranteed  by  such  Person;   (e)  all  indebtedness,
liabilities and obligations secured by a Lien existing on Property owned by such
Person,  whether or not the  indebtedness,  liabilities or  obligations  secured
thereby have been assumed by such Person or are non recourse to such Person; (f)
all reimbursement  obligations of such Person (whether  contingent or otherwise)
in respect of letters of credit, bankers' acceptances, surety or other bonds and
similar  instruments;  and (g) all indebtedness,  liabilities and obligations of
such Person to redeem or retire shares of capital stock of such Person.

            "DISCLOSURE  DOCUMENTS" means all SEC Documents filed by the Company
at least three (3)

            Business  Days  prior to the  Execution  Date  via the  Commission's
Electronic Data Gathering,  Analysis and Retrieval  system (EDGAR) in accordance
with the requirements of Regulation S-T under the Exchange Act.

            "DTC" has the meaning specified in Section 4.11 hereof.

            "EFFECTIVE  DATE"  means  the  later of (i) the  "Effective  Date as
defined in the Registration  Rights Agreement and (ii) the date that Stockholder
Approval has been obtained.

            "EMBARGOED PERSON" has the meaning specified in Section 3.27 hereof.

            "ENVIRONMENTAL LAW" means any federal, state,  provincial,  local or
foreign  law,  statute,  code or  ordinance,  principle  of common law,  rule or
regulation, as well as any Permit, order, decree, judgment or injunction issued,
promulgated,  approved  or entered  thereunder,  relating  to  pollution  or the
protection,  cleanup or restoration of the environment or natural resources,  or
to the public  health or safety,  or otherwise  governing the  generation,  use,
handling, collection,  treatment, storage, transportation,  recovery, recycling,
discharge or disposal of hazardous materials.

            "ERISA" means the Employee  Retirement  Income Security Act of 1974,
as amended, and the

            regulations and published interpretations thereunder.

            "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
(or any successor act).

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            "EXECUTION  DATE" has the meaning  specified in the preamble to this
Agreement.

            "EXCLUDED  SECURITY"  means  (i)  securities  purchased  under  this
Agreement;  (ii) securities  issued upon  conversion of the Preferred  Shares or
exercise of the Warrants; (iii) shares of Common Stock issuable or issued to (x)
employees,  consultants, officers or directors from time to time either directly
or upon the  exercise of options,  in such case  granted or to be granted by the
Board of Directors or a committee thereof,  pursuant to one or more stock option
plans,  stock incentive plans or restricted  stock plans or stock purchase plans
in effect as of the Closing Date or approved by the Board of Directors including
a majority of the Company's independent directors (as such term is defined under
Rule 4200(a)(15) of the Nasdaq Market Rules), or (y) consultants or vendors from
time to time upon the  exercise of options or warrants to purchase  Common Stock
that are outstanding on the date hereof or issued  hereafter,  provided any such
future  issuances are approved by the Board of Directors;  (iv) any  borrowings,
direct or indirect, from financial institutions by the Company that are approved
by the Board of Directors,  including  any type of loan or payment  evidenced by
any type of Debt  instrument,  provided  the value of the equity  portion of any
such borrowings, including warrants, options or other rights to purchase capital
stock and other interests  convertible  into capital stock of the Company,  does
not exceed  ten  percent  (10%) of such  borrowing;  (v) shares of Common  Stock
issued in connection with any stock split, stock dividend or recapitalization of
the  Company;  (vi)  shares  of  Common  Stock  issued  in  connection  with the
acquisition   by  the  Company  of  any   corporation  or  other  entity  or  of
substantially  all of the assets of any  corporation or other entity or division
or business unit thereof  occurring  after the Effective  Date;  (vii) shares of
Common Stock issued upon the exercise or  conversion  of any  securities  of the
Company  outstanding on the Execution Date; (viii) shares of Common Stock issued
to a Person in  connection  with a joint  venture,  strategic  alliance or other
commercial  relationship  with such  Person  relating  to the  operation  of the
Company's  business the primary purpose of which is not to raise equity capital;
and (ix) securities issued pursuant to a bona fide firm commitment  underwritten
public offering with a nationally recognized underwriter.

            "EXERCISE PRICE" has the meaning set forth in the Warrants.

            "FAST" has the meaning specified in Section 4.11 hereof.

            "FINANCING"  has  the  meaning  specified  in the  preamble  to this
Agreement.

            "GAAP" means generally accepted accounting principles,  applied on a
consistent  basis,  as set forth in (i)  opinions of the  Accounting  Principles
Board of the American Institute of Certified Public Accountants, (ii) statements
of the Financial  Accounting  Standards Board and (iii)  interpretations  of the
Commission and the Staff of the Commission. Accounting principles are applied on
a "consistent basis" when the accounting  principles applied in a current period
are comparable in all material respects to those accounting  principles  applied
in a preceding period.

            "GOLDMAN" means Goldman, Sachs & Co.

            "GOLDMAN REGISTRATION RIGHTS AGREEMENT" has the meaning specified in
the preamble to this Agreement.

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            "GOLDMAN  SECURITIES"  has the meaning  specified in the preamble to
this Agreement.

            "GOVERNMENTAL AUTHORITY" means any nation or government,  any state,
provincial or political subdivision thereof and any entity exercising executive,
legislative,  judicial,  regulatory or administrative functions of or pertaining
to  government,  including  without  limitation any stock  exchange,  securities
market or self-regulatory organization.

            "GOVERNMENTAL  REQUIREMENT" means any law, statute, code, ordinance,
order, rule, regulation,  judgment,  decree, injunction,  franchise,  license or
other directive or requirement of any federal, state, county, municipal, parish,
provincial or other Governmental Authority or any department, commission, board,
court, agency or any other instrumentality of any of them.

            "HERRICK PARTY" and "HERRICK  PARTIES" have the respective  meanings
specified in Section 4.9 hereof.

            "INVESTMENT  COMPANY ACT" has the meaning  specified in Section 3.24
hereof.

            "INVESTOR" and "INVESTORS" have the respective meanings specified in
the preamble to this Agreement.

            "INVESTOR ESCROW AGREEMENT" has the meaning specified in Section 1.1
hereof.

            "INVESTOR PARTY" has the meaning specified in Section 4.16 hereof.

            "INVESTOR  WARRANT"  and  "INVESTOR  WARRANTS"  have the  respective
meanings specified in the preamble to this Agreement.

            "INVESTOR  WARRANT SHARES" has the meaning specified in the preamble
to this Agreement.

            "INTELLECTUAL  PROPERTY" means any U.S. or foreign  patents,  patent
rights,  patent  applications,  trademarks,  trade names,  service marks,  brand
names,  logos and other trade  designations  (including  unregistered  names and
marks),  trademark and service mark  registrations and applications,  copyrights
and copyright registrations and applications, inventions, invention disclosures,
protected formulae,  formulations,  processes,  methods, trade secrets, computer
software, computer programs and source codes, manufacturing research and similar
technical information,  engineering know-how, customer and supplier information,
assembly and test data drawings or royalty rights.

            "KEY EMPLOYEES" means each of Jeffrey Dittus and Joseph Rosetti.

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            "LIEN"  means,  with  respect  to  any  Property,  any  mortgage  or
mortgages,  pledge,  hypothecation,  assignment,  deposit arrangement,  security
interest, tax lien, financing statement,  pledge, charge, or other lien, charge,
easement,  encumbrance,  preference,  priority or other  security  agreement  or
preferential  arrangement of any kind or nature whatsoever on or with respect to
such Property  (including,  without  limitation,  any conditional  sale or other
title retention  agreement having  substantially the same economic effect as any
of the foregoing).

            "MAJORITY  STOCKHOLDER CONSENT" has the meaning specified in Section
5.1.6 hereof.

            "MARKET PRICE" means, as of a particular date, the lesser of (i) the
average of each daily VWAP for the ten (10)  consecutive  Trading Days occurring
immediately  prior to (but not  including)  such date,  and (ii) the Closing Bid
Price on the Trading Day immediately preceding such date.

            "MATERIAL  ADVERSE  EFFECT"  means an effect  that is  material  and
adverse to (i) the  consolidated  business,  operations,  properties,  financial
condition,   prospects  or  results  of   operations  of  the  Company  and  its
Subsidiaries  taken  as a whole  or (ii) the  transactions  contemplated  by the
Articles of Amendment,  this Agreement or the other Transaction Documents or the
ability of the Company to perform its obligations with respect thereto.

            "MATERIAL  CONTRACTS"  means,  as  to  the  Company,  any  agreement
required  pursuant to Item 601 of Regulation S-B or Item 601 of Regulation  S-K,
as applicable, under the Securities Act to be filed as an exhibit to any report,
schedule, registration statement or definitive proxy statement filed or required
to be filed by the Company  with the  Commission  under the  Exchange Act or any
rule  or  regulation  promulgated  thereunder,   and  any  and  all  amendments,
modifications, supplements, renewals or restatements thereof.

            "NASD" means the National Association of Securities Dealers, Inc.

            "NOTICE OF ACCEPTANCE"  has the meaning  specified in Section 4.7(b)
hereof.

            "OFFER", "OFFER PERIOD" and "OFFERED SECURITIES" have the respective
meanings specified in Section 4.7(a) hereof.

            "OFFERING  WARRANTS"  has the meaning  specified  in the preamble to
this Agreement.

            "OFFERING  WARRANT SHARES" has the meaning specified in the preamble
to this Agreement.

            "OUTSTANDING   REGISTRABLE  SECURITIES"  means,  at  any  time,  all
Registrable  Securities  that at such time are either issued and  outstanding or
issuable  upon  conversion  of the  Preferred  Stock or exercise of the Warrants
(without regard to any limitation on such conversion or exercise).

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<PAGE>

            "PARI PASSU SECURITIES" means any securities  ranking by their terms
pari  passu  with the  Preferred  Stock in  respect  of  payment  of  dividends,
redemption or distribution upon liquidation.

            "PENSION PLAN" means an employee  benefit plan (as defined in ERISA)
maintained by the Company for employees of the Company or any of its Affiliates.

            "PERMITTED DEBT" means the following:

                  (a)  Debt  that  is  outstanding  on the  Execution  Date  and
disclosed in the Disclosure Documents or on Schedule 3.5 hereto,

                  (b) Debt  consisting  of a  working  capital  credit  facility
provided by a bank or other  financial  institution  that is secured only by the
Company's accounts receivable and/or inventory; and

                  (c) Debt  consisting  of  capitalized  lease  obligations  and
purchase money  indebtedness  incurred in connection with acquisition of capital
assets and obligations under sale-leaseback or similar arrangements  provided in
each case that such  obligations  are not  secured by Liens on any assets of the
Company or its Subsidiaries other than the assets so leased.

            "PERMITTED LIENS" means the following:

            (a)  encumbrances  consisting  of easements,  rights-of-way,  zoning
restrictions or other  restrictions on the use of real property or imperfections
to title that do not  (individually or in the aggregate)  materially  impair the
ability of the Company or any of its  Subsidiaries  to use such  Property in its
businesses, and none of which is violated in any material respect by existing or
proposed structures or land use;

            (b) Liens for taxes,  assessments or other governmental charges that
are not  delinquent  or which are being  contested in good faith by  appropriate
proceedings,  which  proceedings have the effect of preventing the forfeiture or
sale of the Property subject to such Liens, and for which adequate  reserves (as
determined in accordance with GAAP) have been established; and

            (c)  Liens  of  mechanics,  materialmen,   warehousemen,   carriers,
landlords or other similar statutory Liens securing obligations that are not yet
due and are  incurred  in the  ordinary  course of  business  or which are being
contested in good faith by appropriate  proceedings,  which proceedings have the
effect of  preventing  the  forfeiture  or sale of the Property  subject to such
Liens, for which adequate  reserves (as determined in accordance with GAAP) have
been established; and

            (d)  Liens  securing  any of the  Permitted  Debt  as  disclosed  on
Schedule 3.5 hereto.

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            "PERSON"  means any  individual,  corporation,  trust,  association,
company,  partnership,  joint venture,  limited liability  company,  joint stock
company, Governmental Authority or other entity.

            "PREFERRED   SHARES"  and  "PREFERRED  STOCK"  have  the  respective
meanings specified in the preamble to this Agreement.

            "PREFERRED  STOCK  TERMINATION  DATE"  means the first date on which
there are no Preferred Shares outstanding.

            "PREFERRED  WARRANT"  has the meaning  specified  in the preamble to
this Agreement.

            "PRINCIPAL  MARKET" means the principal  exchange or market on which
the Common Stock is listed or traded.

            "PROPERTY" means property and/or assets of all kinds,  whether real,
personal or mixed, tangible or intangible  (including,  without limitation,  all
rights relating thereto).

            "PRO RATA  SHARE"  means,  with  respect to an  Investor,  the ratio
determined  by dividing  (i) the number of  Preferred  Shares  purchased by such
Investor on the Closing  Date and upon  exercise of a Preferred  Warrant by (ii)
the aggregate  number of Preferred  Shares  purchased by all of the Investors on
the Closing Date and upon exercise of the Preferred Warrants.

            "PURCHASE PRICE" has the meaning specified in Section 1.1 hereof.

            "REGISTRABLE   SECURITIES"   has  the   meaning  set  forth  in  the
Registration Rights Agreement.

            "REGISTRATION  RIGHTS  AGREEMENT"  has the meaning  specified in the
preamble to this Agreement.

            "REGISTRATION   STATEMENT"   has  the   meaning  set  forth  in  the
Registration Rights Agreement.

            "REGULATION  D" has the meaning  specified  in the  preamble to this
Agreement.

            "RESERVED AMOUNT" has the meaning specified in Section 4.3 hereof.

            "RULE 144" means Rule 144 under the Securities Act, or any successor
provision.

            "SATELLITE"  has  the  meaning  specified  in the  preamble  to this
Agreement.

                                       10
<PAGE>

            "SATELLITE  CONSULTING  WARRANT" and "SATELLITE WARRANT SHARES" have
the respective meanings specified in the preamble to this Agreement.

            "SEC DOCUMENTS" has the meaning specified in Section 3.4 hereof.

            "SECURITIES"  has the  meaning  specified  in the  preamble  to this
Agreement.

            "SECURITIES  ACT" has the meaning  specified in the preamble to this
Agreement.

            "SENIOR  SECURITIES"  means (i) any Debt  issued or  assumed  by the
Company  and (ii) any  securities  of the  Company  which by their  terms have a
preference  over the  Preferred  Stock  in  respect  of  payment  of  dividends,
redemption or distribution upon liquidation.

            "STATED  VALUE"  means  $1,000  per  Preferred  Share,   subject  to
adjustment as provided in the Articles of Amendment.

            "STOCKHOLDER  APPROVAL" means the requisite  affirmative vote by the
Company's stockholders at a meeting of stockholders or by the written consent of
stockholders in lieu of such meeting  approving (i) the issuance of Common Stock
in excess of the Cap Amount in connection with the transactions  contemplated by
this Agreement,  the Articles of Amendment and the other Transaction  Documents,
(ii) an  increase  in the number of shares of the  Company's  authorized  Common
Stock  from  150,000,000  to  300,000,000,  and (iii)  solely  for  purposes  of
applicable Nasdaq regulations and listing  requirements,  a change of control of
the Company; provided, however that if Stockholder Approval is obtained by means
of written consent in lieu of a meeting,  such Stockholder Approval shall not be
deemed to have been obtained until such written consent has become effective and
the actions  consented to may be taken in  accordance  with the Exchange Act and
Regulation 14C promulgated thereunder.

            "SUBSEQUENT  PLACEMENT"  means  the  issuance,  sale,  exchange,  or
agreement or obligation to issue,  sell or exchange or reserve,  or agreement to
or set aside for issuance, sale or exchange, (1) any shares of Common Stock, (2)
any other equity security of the Company, including without limitation shares of
preferred  stock,  (3) any other  security of the Company  which by its terms is
convertible  into or  exchangeable or exercisable for any equity security of the
Company, or (4) any option, warrant or other right to subscribe for, purchase or
otherwise  acquire any such  security  described  in the  foregoing  clauses (1)
through (3); provided, however, that the issuance or sale, or agreement to issue
or sell, an Excluded Security shall not constitute a Subsequent Placement.

            "SUBSIDIARY" means, with respect to the Company,  any corporation or
other entity of which at least a majority of the outstanding  shares of stock or
other ownership  interests  having by the terms thereof ordinary voting power to
elect a  majority  of the board of  directors  (or  Persons  performing  similar
functions) of such corporation or entity  (irrespective of whether or not at the
time, in the case of a corporation,  stock of any other class or classes of such
corporation  shall have or might have voting power by reason of the happening of
any  contingency)  is at the time directly or indirectly  owned or controlled by
the Company or one or more of its Subsidiaries or by the Company and one or more
of its Subsidiaries.

                                       11
<PAGE>

            "TERMINATION  DATE"  means  the  first  date on which  there  are no
Preferred Shares or Warrants outstanding.

            "TRADING  DAY" means any day on which the Common  Stock is purchased
and sold on the Principal Market.

            "TRANSACTION DOCUMENTS" means (i) this Agreement, (ii) the Warrants,
(iii) the Registration  Rights Agreement,  (iv) the Goldman  Registration Rights
Agreement,  (v) the Preferred Warrants and (vi) all other agreements,  documents
and other  instruments  executed and delivered by or on behalf of the Company or
any of its officers at the Closing.

            "TRANSFER AGENT" has the meaning specified in Section 4.11 hereof.

            "UNDERSUBSCRIPTION  AMOUNT"  has the  meaning  specified  in Section
4.7(a) hereof.

            "VOTING  AGREEMENT"  has the  meaning  specified  in Section  5.1.13
hereof.

            "VWAP" on a Trading Day means the volume  weighted  average price of
the Common  Stock for such  Trading Day on the  Principal  Market as reported by
Bloomberg  Financial  Markets  or, if  Bloomberg  Financial  Markets is not then
reporting such prices, by a comparable  reporting service of national reputation
selected by the Investors and  reasonably  satisfactory  to the Company.  If the
VWAP cannot be calculated for the Common Stock on such Trading Day on any of the
foregoing  bases,   then  the  Company  shall  submit  such  calculation  to  an
independent investment banking firm of national reputation reasonably acceptable
to the Investors,  and shall cause such investment  banking firm to perform such
determination  and  notify  the  Company  and the  Investors  of the  results of
determination no later than two (2) Business Days from the time such calculation
was  submitted  to  it  by  the  Company.   All  such  determinations  shall  be
appropriately  adjusted  for any stock  dividend,  stock split or other  similar
transaction during such period.

            "WARRANT  SHARES" has the meaning  specified in the preamble to this
Agreement.

            "WARRANTS"  has  the  meaning  specified  in the  preamble  to  this
Agreement.

      1.3 Other  Definitional  Provisions.  All  definitions  contained  in this
Agreement  are equally  applicable to the singular and plural forms of the terms
defined.  The words  "hereof",  "herein"  and  "hereunder"  and words of similar
import referring to this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement.

                                       12
<PAGE>

2. REPRESENTATIONS AND WARRANTIES OF EACH INVESTOR.

      Each Investor (with respect to itself only) hereby represents and warrants
to the Company and agrees with the Company that:

      2.1  Authorization;  Enforceability.  Such  Investor  is duly and  validly
organized,  validly  existing  and  in  good  standing  under  the  laws  of the
jurisdiction of its incorporation or organization  with the requisite  corporate
power and  authority  to  purchase  the  Preferred  Shares,  the Warrant and the
Preferred  Warrant  being  purchased by it hereunder  and to execute and deliver
this Agreement and the other Transaction  Documents to which it is a party. This
Agreement  constitutes,  and upon  execution  and delivery  thereof,  each other
Transaction  Document to which such  Investor is a party will  constitute,  such
Investor's valid and legally binding obligation,  enforceable in accordance with
its  terms,  subject  to  (i)  applicable  bankruptcy,   insolvency,  fraudulent
transfer,   reorganization,   moratorium   or  other  similar  laws  of  general
application  relating to or  affecting  the  enforcement  of  creditors'  rights
generally and (ii) general principles of equity.

      2.2 Accredited Investor. Such Investor is an "accredited investor" as that
term is defined  in Rule 501 of  Regulation  D and is  acquiring  the  Preferred
Shares, Warrant and Preferred Warrant being purchased by it hereunder solely for
its  own  account,  and  not  with a  present  view  to  the  public  resale  or
distribution  of all or any part  thereof,  except  pursuant  to sales  that are
registered  under,  or are exempt  from the  registration  requirements  of, the
Securities Act; provided,  however,  that, in making such  representation,  such
Investor does not agree to hold the  Securities for any minimum or specific term
and reserves the right to sell,  transfer or otherwise dispose of the Securities
at any time in accordance with the provisions of this Agreement, the Articles of
Amendment  and the  other  Transaction  Documents  and with  Federal  and  state
securities laws applicable to such sale, transfer or disposition.

      2.3  Information.  Such  Investor has had access to all of the  Disclosure
Documents.  To the extent requested by such Investor,  the Company has, prior to
the  Execution  Date,  provided such  Investor  with  information  regarding the
business,  operations and financial condition of the Company,  and has, prior to
the Execution Date, granted to such Investor the opportunity to ask questions of
and receive  satisfactory  answers  from  representatives  of the  Company,  its
officers,  directors,  employees and agents concerning the Company and materials
relating to the terms and  conditions  of the purchase and sale of the Preferred
Shares,  Warrants  and  Preferred  Warrants  hereunder,  and based  thereon such
Investor  believes  it  can  make  an  informed  decision  with  respect  to its
investment  in  the   Securities.   Neither  such   information  nor  any  other
investigation  conducted by such Investor or its  representatives  shall modify,
amend  or  otherwise  affect  such  Investor's  right  to rely on the  Company's
representations  and warranties  contained in this Agreement,  including without
limitation those set forth in Section 3.30 hereof.

      2.4 Limitations on Disposition. Such Investor acknowledges that, except as
provided in the  Registration  Rights  Agreement  and the  Goldman  Registration
Rights  Agreement,  the  Securities  have not been and are not being  registered
under  the  Securities  Act  and  may  not  be  transferred  or  resold  without
registration  under  the  Securities  Act or  unless  pursuant  to an  exemption
therefrom.

                                       13
<PAGE>

      2.5 Legend. Such Investor  understands that the certificates  representing
the Securities may bear at issuance a restrictive  legend in  substantially  the
following form:

                  "The securities  represented by this certificate have not been
                  registered  under the  Securities Act of 1933, as amended (the
                  "Securities  Act"), or the securities  laws of any state,  and
                  may not be offered  or sold  unless a  registration  statement
                  under the Securities Act and applicable  state securities laws
                  shall  have  become  effective  with  regard  thereto,  or  an
                  exemption  from  registration  under  the  Securities  Act and
                  applicable  state  securities  laws is available in connection
                  with such offer or sale.  Notwithstanding  the  foregoing  but
                  subject to compliance with the  requirements of the Securities
                  Act and applicable state securities laws, these securities and
                  the securities issuable upon exercise hereof may be pledged or
                  hypothecated  in connection with a bona fide margin account or
                  other loan secured by such securities."

                  Notwithstanding  the foregoing,  it is agreed that, as long as
(A) the resale or transfer (including without limitation a pledge) of any of the
Securities is registered pursuant to an effective  registration  statement,  (B)
such Securities  have been sold pursuant to Rule 144,  subject to receipt by the
Company  of  customary  documentation  in  connection  therewith,  or  (C)  such
Securities are eligible for resale under Rule 144(k) or any successor  provision
and the holder thereof  represents in writing that it is not an affiliate of the
Company and is eligible to use such rule for public resales of such  Securities,
the certificates representing such Securities shall be issued without any legend
or other  restrictive  language and, with respect to Securities  upon which such
legend is stamped,  the Company shall issue new certificates without such legend
to the holder upon request.

      2.6 Reliance on Exemptions.  Such Investor understands that the Securities
are being offered and sold to it in reliance upon specific  exemptions  from the
registration  requirements  of federal  and state  securities  laws and that the
Company  is  relying  upon the truth and  accuracy  of the  representations  and
warranties  of such  Investor  set forth in this Section 2 in order to determine
the  availability  of such  exemptions  and the  eligibility of such Investor to
acquire the Securities.

      2.7 Non-Affiliate Status. Such Investor is not an Affiliate of the Company
or, to its  knowledge,  any other  Investor and is not acting in  association or
concert with any other  Person with regard to its purchase of Preferred  Shares,
Warrants and  Preferred  Warrant or  otherwise  in respect of the Company.  Such
Investor's  investment  in the  Securities  is not for the purpose of acquiring,
directly or indirectly,  control of, and it has no intent to acquire or exercise
control of, the Company or to influence  the  decisions or policies of the Board
of Directors.

      2.8 Restricted Securities.

      (a)  Such  Investor   understands  and  agrees  that  the  Securities  are
"restricted securities" within the meaning of Rule 144 that can and will only be
resold by such  Investor  pursuant to (i) an  effective  registration  statement
under the Securities Act where the prospectus delivery requirements are complied
with or (ii) under an applicable  exemption from registration under the Act, and
in compliance with applicable state securities or "blue sky" laws.

                                       14
<PAGE>

      (b) Such  Investor  understands  that any sales by such Investor of any of
the  Securities  that  are not made in  compliance  with  paragraph  (a) of this
Section 2.8 could  subject the Company and such  Investor to possible  civil and
criminal liability under applicably federal securities laws and applicable state
securities or "blue sky" laws.

      (c) Such  Investor (i) agrees that it will only sell the  Securities  in a
transaction that complies in all material  respects with applicable  federal and
state securities laws, (ii) agrees that it will not sell or otherwise dispose of
or transfer the Securities or any interest therein in a transaction that is part
of a plan or scheme to evade the registration requirements of the Securities Act
and (iii)  acknowledges  and agrees that  notwithstanding  the removal  from the
certificates  representing the Securities of the legend set forth in Section 2.5
hereof upon  effectiveness of a registration  statement covering the Securities,
the Securities will remain  "restricted  securities"  until such Securities have
been sold pursuant to (x) an effective  registration  statement or (y) Rule 144,
and such Investor will remain responsible for compliance with applicable federal
and state  securities  laws in connection with any resale by the Investor of the
Securities.

      (d)  Such  Investor  understands  that  the  Company  is  relying  on  the
representations  of such  Investor  set  forth in this  Section  2.8 in order to
determine compliance with applicable securities laws in connection with the sale
of the Securities to such Investor, and such Investor hereby agrees to indemnify
and hold  harmless the Company and its  officers,  directors and agents from and
against, any liability it may incur (including  reasonable attorneys' fees) as a
result of any breach by such  Investor of the  representations  of such Investor
set forth in this Section 2.8.

3.  REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents
and  warrants  to each  Investor  and agrees  with such  Investor as follows and
acknowledges   that  such   Investor   is   relying   on  the   representations,
acknowledgments  and  agreements  made  by the  Company  in this  Article  3 and
elsewhere in this  Agreement in making  investing,  trading and other  decisions
concerning the Company's securities:

      3.1 Organization, Good Standing and Qualification. Each of the Company and
each of its Subsidiaries (including without limitation the Company Subsidiaries)
is duly organized,  validly  existing and in good standing under the laws of the
jurisdiction of its  incorporation  or organization  and has all requisite power
and authority to carry on its business as now conducted. Each of the Company and
each of its  Subsidiaries is duly qualified to transact  business and is in good
standing in each  jurisdiction  in which it conducts  business  except where the
failure so to qualify has not had or would not  reasonably be expected to have a
Material Adverse Effect.  The Company  Subsidiaries are the only Subsidiaries of
the Company that own or lease material assets or that conduct material  business
or  operations,  or that have done so at any time  during the twelve (12) months
immediately preceding the Execution Date.

      3.2 Authorization; Consents. The Company has the requisite corporate power
and  authority  to adopt and file the  Articles  of  Amendment  and  perform its
obligations  thereunder and to enter into and perform its obligations under this
Agreement  and the other  Transaction  Documents.  The Company has the requisite
corporate  power and authority to issue and sell the Preferred  Shares,  Warrant

                                       15
<PAGE>

and Preferred  Warrant to such Investor in accordance  with the terms hereof and
thereof,  to issue the Conversion Shares upon conversion of the Preferred Shares
and to issue and the Warrant  Shares upon exercise of the  Warrants.  Except for
Stockholder  Approval,  all  corporate  action on the part of the Company by its
officers, directors and stockholders necessary for the authorization,  execution
and delivery of, and the  performance by the Company of its  obligations  under,
the Articles of Amendment,  this Agreement and the other  Transaction  Documents
has been taken,  and no further  consent or  authorization  of the Company,  its
Board of Directors,  stockholders,  any  Governmental  Authority or organization
(other than (i) such approval as may be required  under the  Securities  Act and
applicable state securities laws in respect of the Registration Rights Agreement
and the Goldman Registration Rights Agreement,  (ii) the filing of a Form D with
the Commission and any applicable  state  securities  departments as provided in
Section  4.1 hereof and (iii) the filing  with  Nasdaq of a  Notification  Form:
Listing of  Additional  Shares  with  respect to the  Securities),  or any other
person or entity  is  required  (pursuant  to any rule of the NASD,  the  Nasdaq
National Market or otherwise).  The Board of Directors has determined, at a duly
convened meeting or pursuant to a unanimous  written consent,  that the issuance
and  sale  of  the  Securities,   and  the   consummation  of  the  transactions
contemplated  by the  Articles  of  Amendment,  this  Agreement  and  the  other
Transaction   Documents  (including  without  limitation  the  issuance  of  the
Conversion  Shares in accordance with the terms of the Preferred  Shares and the
Warrant Shares in accordance  with the terms of the  Warrants),  are in the best
interests of the Company. Except for the division of the Board of Directors into
three classes with staggered  terms,  the Company does not have any  shareholder
rights plan, "poison pill" or other anti-takeover plans or similar anti-takeover
arrangements or provisions under its Articles of  Incorporation  or bylaws.  The
Majority  Stockholder  Consent (i) has been duly  executed and  delivered to the
Company by holders of securities of the Company  representing  a majority of the
voting power of the Company's outstanding securities, (ii) constitutes the valid
and binding  action of the  stockholders  of the  Company,  subject  only to the
compliance  by the  Company  with the  provisions  of  Regulation  14C under the
Exchange Act, and (iii) has not been amended or superseded.

      3.3 Due  Execution;  Enforceability.  This  Agreement  has been and, at or
prior to the Closing, each other Transaction Document will be, duly executed and
delivered by the Company.  Each Transaction  Document  constitutes the valid and
legally binding obligation of the Company,  enforceable against it in accordance
with its terms,  subject to (i) applicable  bankruptcy,  insolvency,  fraudulent
transfer,   moratorium,   reorganization   or  other  similar  laws  of  general
application  relating to or  affecting  the  enforcement  of  creditors'  rights
generally and (ii) general principles of equity.

      3.4 SEC Documents;  Agreements;  Financial Statements;  Other Information.
The Company is subject to the reporting requirements of the Exchange Act and has
timely  filed  (subject to any  permitted  extensions  for which the Company has
timely  filed)  with  the  Commission  all  reports,   schedules,   registration
statements and definitive proxy statements that the Company was required to file
with the  Commission  on or after  December  31,  2003  (collectively,  the "SEC
DOCUMENTS").  The  Company is not aware of any event  occurring  or  expected to
occur on or prior to the  Closing  Date (other  than the  transactions  effected
hereby)  that would  require the filing of, or with respect to which the Company
intends  to file,  a Current  Report on Form 8-K  after  the  Closing.  Each SEC
Document, as of the date of the filing thereof with the Commission,  complied in
all material  respects with the  requirements  of the Securities Act or Exchange
Act, as applicable, and the rules and regulations promulgated thereunder and, as

                                       16
<PAGE>

of the date of such filing (or if amended or superseded by a filing prior to the
Execution Date, then on the date of such amending or superseding  filing),  such
SEC  Document  (including  all  exhibits  and  schedules  thereto and  documents
incorporated  by  reference  therein)  did not  contain an untrue  statement  of
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.  Except as described on Schedule 3.4, all
documents  required to be filed as exhibits to the SEC Documents have been filed
as required. Except as set forth in the Disclosure Documents, the Company has no
liabilities,  contingent or otherwise,  other than  liabilities  incurred in the
ordinary course of business which,  under GAAP, are not required to be reflected
in  the  financial   statements   included  in  the  SEC  Documents  and  which,
individually or in the aggregate,  are not material to the consolidated business
or financial condition of the Company and its Subsidiaries taken as a whole. The
financial  statements  included in the SEC Documents  complied as to form in all
material  respects with  applicable  accounting  requirements  and the published
rules and  regulations of the  Commission  with respect  thereto.  The financial
statements  included in the SEC Documents have been prepared in accordance  with
GAAP  consistently  applied at the times and during the periods involved (except
(i) as may be otherwise  indicated  in such  financial  statements  or the notes
thereto, or (ii) in the case of unaudited interim statements, to the extent they
may exclude  footnotes  or may be condensed  or summary  statements)  and fairly
present in all material respects the financial position of the Company as of the
dates thereof and the results of its  operations  and cash flows for the periods
then ended  (subject,  in the case of unaudited  statements,  to normal year-end
adjustments).

      3.5 Capitalization; Debt Schedule. The capitalization of the Company as of
the date hereof,  including its authorized  capital stock,  the number of shares
issued and outstanding,  the number of shares issuable and reserved for issuance
pursuant to the  Company's  stock  option  plans and  agreements,  the number of
shares issuable and reserved for issuance pursuant to securities (other than the
Preferred  Shares,   Warrants  and  Preferred  Warrants)   exercisable  for,  or
convertible  into or exchangeable  for any shares of Common Stock and the number
of shares initially to be reserved for issuance upon conversion of the Preferred
Shares and exercise of the Warrants and the  Preferred  Warrants is set forth on
Schedule 3.5 hereto. All outstanding shares of capital stock of the Company have
been validly  issued,  fully paid and  nonassessable,  and all shares of capital
stock  issued  by any  Subsidiary  have  been  validly  issued,  fully  paid and
nonassessable,  free and clear of all Liens  other  than  Permitted  Liens.  All
outstanding  shares  of  capital  stock of the  Company  were  issued,  sold and
delivered in full  compliance with all applicable  Federal and state  securities
laws.  No shares of the capital  stock of the Company are subject to  preemptive
rights or any other  similar  rights of  security  holders of the Company or any
Liens  created by or through the Company.  Except as set forth on Schedule  3.5,
there are no outstanding options, warrants, scrip, rights to subscribe to, calls
or commitments of any character  whatsoever relating to, or securities or rights
convertible into or exercisable or exchangeable for, any shares of capital stock
of the Company,  or  arrangements by which the Company is or may become bound to
issue  additional  shares  of  capital  stock  of  the  Company  or  any  of its
Subsidiaries  (whether  pursuant  to  anti-dilution,  "reset"  or other  similar
provisions).  Except as  disclosed  on  Schedule  3.5  hereto,  the Company or a
Subsidiary  or the Company owns all of the capital  stock of each  Subsidiary of
the Company. Except as described on Schedule 3.5 hereto, neither the Company nor
any of its Subsidiaries has any material Debt outstanding as of the date hereof.

                                       17
<PAGE>

      3.6 Due  Authorization;  Valid  Issuance.  The  Preferred  Shares are duly
authorized and, when issued,  sold and delivered in accordance with the terms of
the  Articles of Amendment  and the terms  hereof or the terms of the  Preferred
Warrant, as the case may be, (i) will be duly and validly issued, free and clear
of any Liens  imposed by or through the Company,  (ii)  assuming the accuracy of
each  Investor's  representations  in this Agreement,  will be issued,  sold and
delivered in compliance  with all applicable  Federal and state  securities laws
and (iii) will be entitled to all rights,  preferences and privileges  described
in the  Articles of  Amendment.  The  Warrants,  the  Conversion  Shares and the
Warrant  Shares are duly  authorized  and,  when issued,  sold and  delivered in
accordance with the terms of this Agreement, the Preferred Warrant, the Articles
of  Amendment  or the  Warrants,  as the case may be,  will be duly and  validly
issued, fully paid and nonassessable,  free and clear of any Liens imposed by or
through  the   Company   and,   assuming   the   accuracy  of  each   Investor's
representations  in this  Agreement,  will be  issued,  sold  and  delivered  in
compliance with all applicable Federal and state securities laws.

      3.7 No  Conflict.  Neither the Company nor any of its  Subsidiaries  is in
violation  of any  provisions  of its Articles of  Incorporation,  Bylaws or any
other governing document.  Neither the Company nor any of its Subsidiaries is in
violation  of or in default  (and no event has  occurred  which,  with notice or
lapse of time or both,  would  constitute a default)  under any provision of any
instrument  or  contract  to  which  it is a party  or by which it or any of its
Property  is  bound,  or in  violation  of any  provision  of  any  Governmental
Requirement applicable to the Company or any of its Subsidiaries, except for any
violation  or default  that has not had or would not  reasonably  be expected to
have a Material Adverse Effect.  The (i) execution,  delivery and performance of
this  Agreement  and  the  other  Transaction  Documents,  (ii)  filing  of  and
performance  of its  obligations  under  the  Articles  of  Amendment  and (iii)
consummation  of the  transactions  contemplated  hereby and thereby  (including
without limitation, the issuance of the Preferred Stock and the Warrants and the
reservation  for issuance and issuance of the Conversion  Shares and the Warrant
Shares) will not result in any  violation of any  provisions of the Company's or
any of its Subsidiary's Certificate or Articles of Incorporation,  Bylaws or any
other  governing  document or in a default under any provision of any instrument
or  contract  to which it is a party  or by which it or any of its  Property  is
bound,  or in  violation  of  any  provision  of  any  Governmental  Requirement
applicable to the Company or any of its  Subsidiaries  or be in conflict with or
constitute,  with or without the passage of time and giving of notice,  either a
default  under any such  provision,  instrument  or  contract  or an event which
results in the  creation of any Lien upon any assets of the Company or of any of
its  Subsidiaries  or the triggering of any preemptive or  anti-dilution  rights
(including without limitation  pursuant to any "reset" or similar provisions) or
rights of first refusal or first offer,  or any other rights that would allow or
permit the  holders of the  Company's  securities  or other  Persons to purchase
shares of Common Stock or other securities of the Company (whether pursuant to a
shareholder rights plan provision or otherwise).

      3.8 Financial Condition; Taxes; Litigation.

            3.8.1  The  financial  condition  of the  Company  and  each  of its
Subsidiaries  is, in all  material  respects,  as  described  in the  Disclosure
Documents,  except for changes in the  ordinary  course of  business  and normal
year-end  adjustments that are not, in the aggregate,  materially adverse to the
consolidated business or financial condition of the Company and its Subsidiaries
taken as a whole.  Except  as  otherwise  described  on  Schedule  3.8.1,  since
September  30, 2004,  there has occurred no (i) material  adverse  change to the
Company's business, operations,  properties,  financial condition, or results of
operations or (ii) change by the Company in its accounting principles,  policies
and methods except as required by changes in GAAP or applicable law.

                                       18
<PAGE>

            3.8.2 The Company and each of its  Subsidiaries (i) have prepared in
good faith and duly and timely filed  (subject to any  extensions  for which the
Company or its  Subsidiary (as the case my be) has timely filed) all tax returns
required to be filed by it and such  returns are  complete  and  accurate in all
material respects and (ii) have paid all taxes required to have been paid by it,
except for taxes  which it  reasonably  disputes in good faith or the failure of
which to pay has not had or would not  reasonably be expected to have a Material
Adverse  Effect.  Neither  the  Company  nor  any of its  Subsidiaries  has  any
liability  with  respect  to  accrued  taxes in excess of the  amounts  that are
described  as accrued in the most recent  financial  statements  included in the
Disclosure Documents.

            3.8.3 Except as described on Schedule 3.8.3, neither the Company nor
any of its  Subsidiaries  is the  subject of any  pending  or, to the  Company's
knowledge,   threatened  inquiry,   investigation  or  administrative  or  legal
proceeding by the Internal Revenue Service,  the taxing authorities of any state
or local jurisdiction, the Commission, the NASD, any state securities commission
or other Governmental Authority.

            3.8.4 Except as described  on Schedule  3.8.4,  there is no material
claim,  litigation  or  administrative  proceeding  pending or, to the Company's
knowledge,  threatened  or  contemplated,  against  the  Company  or  any of its
Subsidiaries,  or, to the Company's knowledge,  against any officer, director or
employee of the Company or any such  Subsidiary in connection with such person's
employment therewith. Neither the Company nor any of its Subsidiaries is a party
to or subject to the provisions  of, any order,  writ,  injunction,  judgment or
decree of any court or Governmental  Authority which has had or would reasonably
be expected to have a Material Adverse Effect.

            3.9 Form S-3.  The Company is eligible to register  the  Registrable
Securities (other than Registrable  Securities that are Goldman  Securities) for
resale  by each  Investor  on a  registration  statement  on Form S-3  under the
Securities  Act,  provided the  Commission  does not take the position that such
sale of the  Registrable  Securities by the  Investors is a primary  offering on
behalf of the  Company.  To the  Company's  knowledge,  there  exist no facts or
circumstances (including without limitation any required approvals or waivers of
any  circumstances  that may delay or  prevent  the  obtaining  of  accountant's
consents)   that  could   reasonably  be  expected  to  prohibit  or  delay  the
preparation, filing or effectiveness of such registration statement.

            3.10 Acknowledgement of Dilution.  The Company acknowledges that the
issuance of the Conversion  Shares upon  conversion of the Preferred  Shares and
issuance of Warrant  Shares upon exercise of the Warrants 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
obligation  to issue  Conversion  Shares  in  accordance  with the  terms of the
Articles of Amendment and to issue Warrant  Shares in accordance  with the terms
of the Warrants, is unconditional regardless of the effect of any such dilution.

                                       19
<PAGE>

            3.11 Intellectual Property. Except as set forth in Schedule 3.11:

                  (a) The Company and/or its Subsidiaries own, free and clear of
claims or rights or any other  Person,  with full right to use,  sell,  license,
sublicense,  dispose of, and bring actions for  infringement of, or has acquired
licenses or other rights to use, all  Intellectual  Property  necessary  for the
conduct of its  business as  presently  conducted  (other  than with  respect to
"off-the-shelf"  software  which is generally  commercially  available  and open
source software which may be subject to one or more "general public"  licenses).
All works that are used or incorporated  into the Company's or its Subsidiaries'
services,  products or services or products actively under development and which
are proprietary to the Company or its Subsidiaries  were developed by or for the
Company or its Subsidiaries by the current or former  employees,  consultants or
independent  contractors of the Company or its  Subsidiaries or purchased by the
Company or its  Subsidiaries  and are owned by the Company or its  Subsidiaries,
free and clear of claims and rights of any other Person.

                  (b)  The  business  of the  Company  and its  Subsidiaries  as
presently conducted and the production,  marketing, licensing, use and servicing
of any products or services of the Company and its  Subsidiaries  do not, to the
Company's knowledge, infringe or conflict with any patent, trademark, copyright,
or trade secret rights of any third parties or any other  Intellectual  Property
of any third  parties.  Neither  the  Company  nor any of its  Subsidiaries  has
received  written notice from any third party  asserting  that any  Intellectual
Property  owned or  licensed by the  Company or its  Subsidiaries,  or which the
Company  or its  Subsidiaries  otherwise  has the right to use,  is  invalid  or
unenforceable  by the Company or its  Subsidiaries,  as the case may be, and, to
the Company's knowledge,  there is no valid basis for any such claim (whether or
not pending or threatened).

                  (c) No  claim  is  pending  or,  to the  Company's  knowledge,
threatened against the Company or any of its Subsidiaries nor has the Company or
any of its Subsidiaries  received any written notice or other written claim from
any Person asserting that any of the Company's or its  Subsidiaries'  present or
contemplated  activities  infringe or may infringe in any  material  respect any
Intellectual  Property  of such  Person,  and the  Company  is not  aware of any
infringement by any other Person of any material rights of the Company or any of
its Subsidiaries under any Intellectual Property Rights.

                  (d) All licenses or other  agreements  under which the Company
or any of its Subsidiaries is granted Intellectual  Property (excluding licenses
to use  "off-the-shelf"  software utilized in the Company's or its Subsidiaries'
internal operations and which is generally commercially available) are listed in
Schedule 3.11.  Except as set forth on Schedule 3.11, all such licenses or other
agreements are in full force and effect and, to the Company's  knowledge,  there
is no  material  default  by any party  thereto.  The  Company  has no reason to
believe that the licensors under such licenses and other  agreements do not have
and did not have all  requisite  power and  authority to grant the rights to the
Intellectual Property purported to be granted thereby.

                  (e) All licenses or other  agreements  under which the Company
or any of its Subsidiaries has granted rights to Intellectual Property to others
(including all end-user agreements) are in full force and effect, there has been
no material  default by the Company or its  Subsidiaries  thereunder and, to the
Company's knowledge, there is no material default by any other party thereto.

                                       20
<PAGE>

                  (f) Each of the  Company and its  Subsidiaries  have taken all
steps required in accordance with commercially  reasonable  business practice to
establish  and  preserve  its  respective  ownership  in its owned  Intellectual
Property and to keep confidential all material technical  information  developed
by or belonging to the Company or its  Subsidiaries  which has not been patented
or  copyrighted.  Neither  the  Company  nor any of its  Subsidiaries  is making
unlawful  use of any  Intellectual  Property  of any  other  Person,  including,
without limitation,  any former employer of any past or present employees of the
Company  or  any  of  its  Subsidiaries.  Neither  the  Company  nor  any of its
Subsidiaries, nor, to the Company's knowledge, any of their respective employees
or consultants, has any agreements or arrangements with former employers of such
employees  or  consultants  relating  to  any  Intellectual   Property  of  such
employers,  which materially  interfere or conflict with the performance of such
employee's or consultant's  duties for the Company or its Subsidiaries or result
in any former employers of such employees and consultants  having any rights in,
or claims on, the Company's or its Subsidiaries'  Intellectual  Property. To the
Company's  knowledge,  the  activities of the  Company's  and its  Subsidiaries'
employees  and  consultants  (in  connection  with  activities  on behalf of the
Company  or  any  of  its   Subsidiaries)  do  not  violate  any  agreements  or
arrangements  which any such employees or consultants have with former employers
or other third parties.  Except as described in Schedule  3.11,  each current or
former  employee,  independent  contractor  or consultant of the Company and its
Subsidiaries  has executed  agreements  regarding  confidentiality,  proprietary
information  and  assignment of inventions  and copyrights to the Company or its
Subsidiaries  (as  the  case  may  be).  Neither  the  Company  nor  any  of its
Subsidiaries  has  received  written  notice that any  employee,  consultant  or
independent  contractor (in connection  with activities on behalf of the Company
or any of its Subsidiaries) is in violation of any agreement or in breach of any
agreement  or  arrangement  with  former  or  present   employers   relating  to
proprietary  information  or assignment of inventions.  Each employee  listed in
Schedule 3.11 has executed a  non-competition  agreement.  Without  limiting the
foregoing:  (i) the Company and each of its  Subsidiaries  have taken reasonable
security measures to guard against unauthorized  disclosure or use of any of its
Intellectual  Property;  and (ii) the Company has no reason to believe  that any
Person (including,  without limitation, any former employee or consultant of the
Company  or  its  Subsidiaries)  has  unauthorized  possession  of  any  of  its
Intellectual  Property,  or any part  thereof,  or that any Person has  obtained
unauthorized access to any of its Intellectual Property. The consummation of the
transactions  contemplated by the Articles of Amendment,  this Agreement and the
other Transaction Documents will not materially alter or impair, individually or
in the aggregate, any of such rights of the Company or its Subsidiaries.  Except
as set forth on Schedule 3.11 hereto,  the Company and its Subsidiaries each has
complied  in  all  material  respects  with  its  obligations  pursuant  to  all
agreements  relating  to  Intellectual  Property  rights that are the subject of
licenses granted by third parties,  except for any  non-compliance  that has not
had or would not reasonably be expected to have a Material Adverse Effect.

      3.12 Registration Rights; Rights of Participation.  Except as described on
Schedule 3.12 hereto,  (A) the Company has not granted or agreed to grant to any
person  or  entity  any  rights  (including,  without  limitation,  "piggy-back"
registration  rights) to have any securities of the Company  registered with the
Commission or any other  governmental  authority which has not been satisfied in
full prior to the date  hereof and (B) no person or entity,  including,  but not
limited  to,  current  or  former  stockholders  of the  Company,  underwriters,
brokers,  agents  or other  third  parties,  has any  right  of  first  refusal,
preemptive  right,  right of participation,  anti-dilutive  right or any similar
right to participate in, or to receive securities or other assets of the Company
solely as a result of the  transactions  contemplated  by this  Agreement or the
other Transaction Documents.

                                       21
<PAGE>

      3.13 Solicitation;  Other Issuances of Securities. Neither the Company nor
any of its  Subsidiaries  or  Affiliates,  nor any person acting on its or their
behalf,  (i)  has  engaged  in any  form  of  general  solicitation  or  general
advertising (within the meaning of Regulation D) in connection with the offer or
sale of the Securities, or (ii) has, directly or indirectly,  made any offers or
sales of any security or the right to purchase any  security,  or solicited  any
offers to buy any  security or any such right,  under  circumstances  that would
require  registration  of the Securities  under the Securities Act or that would
cause this offering of Securities  to be integrated  with any prior  offering of
securities of the Company for purposes of the Securities Act.

      3.14 Fees.  Except as  described  on  Schedule  3.14,  the  Company is not
obligated to pay any  compensation or other fee, cost or related  expenditure to
any underwriter,  broker,  agent or other  representative in connection with the
transactions  contemplated  hereby. The Company will indemnify and hold harmless
each Investor from and against any claim by any person or entity  alleging that,
as a result of any agreement or arrangement between such Person and the Company,
such  Investor is obligated to pay any such  compensation,  fee, cost or related
expenditure in connection with the transactions contemplated hereby.

      3.15  Foreign  Corrupt  Practices.   Neither  the  Company,   any  of  its
Subsidiaries  nor, to the Company's  knowledge,  any director,  officer,  agent,
employee or other person acting on behalf of the Company or any Subsidiary,  has
(i) used any corporate funds for any unlawful contribution,  gift, entertainment
or other unlawful expenses relating to political activity,  (ii) made any direct
or indirect unlawful payment to any foreign or domestic  government  official or
employee  (including without  limitation any bribe,  rebate,  payoff,  influence
payment, kickback or other unlawful payment), or (iii) violated any provision of
the Foreign Corrupt Practices Act of 1977, as amended.

      3.16 Key  Employees.  Each of the  Company's  Key  Employees  is currently
serving in the capacity described on Schedule 3.16. The Company has no knowledge
of any fact or circumstance  (including  without limitation (i) the terms of any
agreement to which such person is a party or any litigation in which such person
is or may become  involved and (ii) any illness or medical  condition that could
reasonably be expected to result in the disability or incapacity of such person)
that would limit or prevent any such person from  serving in such  capacity on a
full-time  basis in the foreseeable  future,  or of any intention on the part of
any such person to limit or terminate  his or her  employment  with the Company.
Except as set  forth on  Schedule  3.16,  no Key  Employee  has  borrowed  money
pursuant to a currently  outstanding loan that is secured by Common Stock or any
right or option to receive Common Stock.

      3.17  Employee  Matters.  There  is no  strike,  labor  dispute  or  union
organization activities pending or, to the knowledge of the Company,  threatened
between  it and its  employees  (or  between  any of its  Subsidiaries  and such
Subsidiary's  employees).  No employee  of the  Company  belongs to any union or
collective  bargaining  unit. The Company has complied in all material  respects
with all applicable  federal and state equal  opportunity and other laws related
to employment.

                                       22
<PAGE>

      3.18 Environment.  Neither the Company nor any of its Subsidiaries has any
liability under any Environmental Law, nor, to the knowledge of the Company,  do
any factors exist that are reasonably  likely to give rise to any such liability
that, individually or in the aggregate,  has had or would reasonably be expected
to  have  a  Material  Adverse  Effect.  Neither  the  Company  nor  any  of its
Subsidiaries  has  violated  any  Environmental  Law  applicable  to it  now  or
previously  in  effect,  other  than  such  violations  or  infringements  that,
individually  or in the  aggregate,  have not had and  would not  reasonably  be
expected to have a Material Adverse Effect.

      3.19 ERISA.  Except as described on Schedule 3.19, neither the Company nor
any of its  Subsidiaries  maintains  or  contributes  to, or has any  obligation
under,  any  Pension  Plan.  The  Company  and  each of its  Subsidiaries  is in
compliance in all material respects with the presently applicable  provisions of
ERISA and the United States  Internal  Revenue Code of 1986, as amended,  except
for matters that, individually or in the aggregate,  have not had, and would not
reasonably be expected to have, a Material Adverse Effect.

      3.20  Insurance.  The  Company  maintains  insurance  for  itself  and its
Subsidiaries in such amounts and covering such losses and risks as is reasonably
sufficient  and  customary  in the  businesses  in  which  the  Company  and its
Subsidiaries are engaged. No notice of cancellation has been received for any of
such  policies  and the  Company  is in  compliance  with all of the  terms  and
conditions  thereof.  The Company  has no reason to believe  that it will not be
able to renew any existing  insurance coverage as and when such coverage expires
or to obtain  similar  coverage  from  similar  insurers as may be  necessary to
continue doing business as currently conducted without a significant increase in
cost.  Without limiting the generality of the foregoing,  the Company  maintains
Director's  and  Officer's  insurance in an amount not less than $20 million for
each covered occurrence and in the aggregate.

      3.21  Property.  Schedule 3.21 sets forth all real  property  owned by the
Company or any of its  Subsidiaries.  The Company and its Subsidiaries have good
and marketable  title to all personal  Property and good and marketable title in
fee simple to all real  property  owned by them  which,  individually  or in the
aggregate,  is material to the business of the Company and its Subsidiaries,  in
each  such case free and clear of all Liens  except  for  Permitted  Liens.  Any
Property  held under  lease by the Company or its  Subsidiaries  is held by them
under valid,  subsisting and enforceable  leases with such exceptions as are not
material and do not  interfere  with the use made or proposed to be made of such
Property by the Company and its Subsidiaries.

      3.22  Regulatory  Permits.  The Company and its  Subsidiaries  possess all
certificates,  authorizations  and permits  issued by the  appropriate  federal,
state or foreign  regulatory  authorities  necessary to conduct their respective
businesses   other  than  where  the  failure  to  possess  such   certificates,
authorizations  or permits,  individually  or in the aggregate,  has not had and
would not reasonably be expected to have a Material Adverse Effect.  Neither the
Company nor any of its  Subsidiaries has received any notice or otherwise become
aware of any proceedings, inquiries or investigations relating to the revocation
or modification of any such certificate, authorization or permit.

                                       23
<PAGE>

      3.23 Exchange Act  Registration;  Listing.  The Company's  Common Stock is
registered  pursuant to Section  12(g) of the  Exchange Act and is listed on the
Nasdaq  National  Market.  Except as described on Schedule 3.23 hereto,  (i) the
Company currently meets the continuing  eligibility  requirements for listing on
the Nasdaq  National  Market,  and (ii) the Company has not  received any notice
from Nasdaq, the NASD or any other Person that it may not currently satisfy such
requirements or that such continued listing of the Company's Common Stock on the
Nasdaq National Market is in any way threatened. The Company has taken no action
designed to, or which, to the knowledge of the Company,  may have the effect of,
terminating  the  registration of the Common Stock under the Exchange Act or the
delisting of the Common Stock from the Nasdaq National Market.

      3.24 Investment  Company Status. The Company is not, and immediately after
receipt of payment for the Securities  issued under this Agreement and the other
Transaction  Documents  will  not  be,  an  "INVESTMENT  company"  or an  entity
"CONTROLLED"  by an  "INVESTMENT  COMPANY"  within the meaning of the Investment
Company Act of 1940, as amended (the "INVESTMENT  COMPANY ACT"), and the Company
shall conduct its business in a manner so that it will not become subject to the
Investment Company Act.

      3.25 Transfer  Taxes.  No stock transfer or other taxes (other than income
taxes) are required to be paid in  connection  with the issuance and sale of any
of the  Securities,  other than such taxes for which the Company has established
appropriate reserves and intends to pay in full on or before the Closing.

      3.26 Sarbanes-Oxley Act; Internal Controls and Procedures.  The Company is
in compliance in all material  respects with all applicable  requirements of the
Sarbanes-Oxley Act of 2002 and all applicable rules and regulations  promulgated
by the SEC  thereunder  that are  effective as of the date  hereof.  The Company
maintains internal accounting controls,  policies and procedures, and such books
and records as are reasonably designed to provide reasonable  assurance that (i)
all  transactions  to which the Company or any Subsidiary is a party or by which
its properties are bound are effected by a duly authorized  employee or agent of
the Company,  supervised by and acting within the scope of the authority granted
by  the  Company's  senior  management;  (ii)  the  recorded  accounting  of the
Company's  consolidated  assets is  compared  with  existing  assets at  regular
intervals;  and (iii) all transactions to which the Company or any Subsidiary is
a party,  or by which its properties  are bound,  are recorded (and such records
maintained)  in  accordance  with  all  Government  Requirements  and  as may be
necessary or appropriate to ensure that the financial  statements of the Company
are prepared in accordance with GAAP.

      3.27 Embargoed Person. None of the funds or other assets of the Company or
its Subsidiaries  constitutes property of, or is beneficially owned, directly or
indirectly,  by, any person  subject to trade  restrictions  under United States
law, including,  but not limited to, the International Emergency Economic Powers
Act, 50 U.S.C. ss. 1701 et seq., The Trading with the Enemy Act, 50 U.S.C.  App.
1 et seq., and any Executive  Orders or regulations  promulgated  under any such
United  States  laws (each,  an  "EMBARGOED  PERSON"),  with the result that the
investments  evidenced by the Securities are or would be in violation of law. To
the  Company's  knowledge,  no  Embargoed  Person has any interest of any nature
whatsoever  in the Company or any of its  Subsidiaries  with the result that the
investments  evidenced  by the  Securities  are or would be in violation of law.
None of the  funds or other  assets of the  Company  has been  derived  from any
unlawful  activity  with  the  result  that  the  investments  evidenced  by the
Securities are or would be in violation of law.

                                       24
<PAGE>

      3.28 Transactions with Interested Person.  Except as set forth in Schedule
3.28, no officer, director or employee of the Company or any of its Subsidiaries
is or has taken any steps to become 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.

      3.29  Customers;  Suppliers.  The  relationships  of the  Company  and its
Subsidiaries  with their  respective  customers and suppliers are  maintained on
commercially  reasonable  terms.  Except as set forth in  Schedule  3.29,  since
January 1, 2004,  no supplier of the Company or its  Subsidiaries  has canceled,
materially  modified,  or otherwise terminated its relationship with the Company
or its  Subsidiaries  or  decreased  materially  its supply of the  services  or
products of the Company or its Subsidiaries,  nor does any supplier have, to the
Company's  knowledge,  any plan or  intention  to do any of the  foregoing.  The
Company has no reason to believe that any of its or its Subsidiaries'  suppliers
will  experience  a  manufacturing  disruption,  a failure to dedicate  adequate
resources  to the  production,  assembly  or  testing  of the  Company's  or its
Subsidiaries' products, or financial instability, or that any such supplier will
be unable to  successfully  transition  its  manufacturing  capabilities  to the
future needs of the Company and its Subsidiaries.

      3.30 Full Disclosure.

            (a) No written  statement,  information,  report,  representation or
warranty made by the Company in this Agreement or any other Transaction Document
or  furnished  to such  Investor  by or on behalf of the  Company  or any of its
Subsidiaries  in connection  with the Closing or such  Investor's  due diligence
investigation   of  the  Company  (as  such  statement,   information,   report,
representation  or warranty may be amended or  supplemented  in writing prior to
the Execution Date) contains any untrue statement of a material fact or omits to
state any material fact necessary to make the statements  herein or therein,  in
light of the circumstances in which made, not misleading.

            (b) Following  the issuance of the press release and Current  Report
on Form 8-K in accordance with Section 4.1(c) hereof,  and, with respect to each
Investor,  except as otherwise provided in any written non-disclosure  agreement
relating to the delivery and/or  possession of material  non-public  information
heretofore entered into between the Company and such Investor (collectively, the
"NON-DISCLOSURE AGREEMENTS"), to the Company's knowledge, such Investor will not
possess any material non-public  information  concerning the Company (including,
without  limitation,  any  information  provided to such  Investor  prior to the
Execution Date, as referenced in Section 2.3).  Without  limiting the generality
of the  foregoing,  the  Company  confirms  that,  other  than  the  Transaction
Documents and the terms and conditions of the transactions  contemplated thereby
and by the  Articles  of  Amendment,  and except as  otherwise  provided  in the
Non-Disclosure  Agreements,  neither the  Company  nor any Person  acting on its
behalf has  provided  any  Investor  with any  material  non-public  information
concerning the Company. Each of the Non-Disclosure  Agreements shall survive the
execution of this  Agreement and the Closing  hereunder and shall remain in full
force and effect in accordance with the terms thereof, and the Company agrees to
comply fully with its obligations under each of the Non-Disclosure Agreements.

                                       25
<PAGE>

            (c) In addition to (and not by way of limitation  of) any obligation
the Company  may have under any of the  Non-Disclosure  Agreements,  the Company
shall,  not later than the earlier to occur of (i) the  Effective  Date and (ii)
ninety (90) days following the Closing Date (the earlier of such dates being the
"DISCLOSURE   DEADLINE"),   take  all  actions  necessary  (including,   without
limitation,   making  public   disclosure  of  information  in  compliance  with
Regulation  FD  under  the  Exchange  Act) in order to  ensure  that,  as of the
Disclosure  Deadline,  no  information  provided by the  Company,  or any Person
acting  on  its  behalf,  to any  Investor  on or  before  the  Execution  Date,
constitutes  (as of the Disclosure  Deadline)  material  non-public  information
concerning the Company.

            (d) The Company  acknowledges  that such  Investor is relying on the
representations,  acknowledgements  and  agreements  made by the Company in this
Section  3.30 and  elsewhere  in this  Agreement  in  making  trading  and other
decisions concerning the Company's securities.

      3.31 No Other  Agreements.  The Company has not,  directly or  indirectly,
entered into any agreement with or granted any right to any Investor relating to
the terms or  conditions  of the  transactions  contemplated  by the Articles of
Amendment or the Transaction Documents except as expressly set forth therein.

      3.32 Anti-Takeover Provisions. 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 or other similar anti-takeover provision
under  the laws of the  state  of its  incorporation  which  is or could  become
applicable to any Investor as a result of the transactions  contemplated by this
Agreement,   including,  without  limitation,  the  Company's  issuance  of  the
Securities and any and all Investors' ownership of the Securities.

      3.33 Solvency.  Based on the financial  condition of the Company as of the
Closing  Date after  giving  effect to the  Financing,  (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).

                                       26
<PAGE>

4. COVENANTS OF THE COMPANY AND EACH INVESTOR.

For the avoidance of doubt, a covenant by the Company,  in this Agreement or any
of the other Transaction Documents, to use its best efforts (or some other level
of efforts) to take a  particular  action is not breached so long as the Company
has used its best efforts (or such level other level of efforts, as the case may
be) to take such action, notwithstanding that the Company may be unsuccessful in
taking the such action.

      4.1 The Company agrees with each Investor that the Company will:

                  (a) file a Form D with the Commission and any applicable state
securities  departments with respect to the Securities  issued at the Closing as
and when  required  under  Regulation  D and will provide a copy thereof to such
Investor promptly after such filing;

                  (b) take such action as the Company reasonably determines upon
the advice of counsel is  necessary  to qualify  the  Securities  for sale under
applicable state or "blue-sky" laws or obtain an exemption therefrom,  and shall
provide evidence of any such action to such Investor at such Investor's request;

                  (c)  (i) on or  prior  to  8:30  a.m.  (eastern  time)  on the
Business Day  immediately  following the Execution  Date,  issue a press release
disclosing the material terms of this Agreement and the Financing and (ii) on or
prior to 8:30 a.m.  (eastern  time) on the second  Business  Day  following  the
Execution Date, file with the Commission a Current Report on Form 8-K disclosing
the material terms of this Agreement and the transactions  contemplated  hereby,
including as exhibits  this  Agreement,  the Articles of Amendment and the other
Transaction  Documents;  provided,  however,  that each  Investor  named therein
(except  solely as a result of the Investor  being named on a signature  page or
Schedule  to the  Agreement  or any other  Transaction  Document)  shall  have a
reasonable  opportunity  to review  and  comment  on any such  press  release or
Current Report on Form 8-K prior to the issuance or filing thereof.  Thereafter,
the Company shall timely file any filings and notices required by the Commission
or applicable law with respect to the transactions contemplated hereby;

                  (d) on the Closing Date,  concurrently with the Closing, repay
in full all indebtedness of the Company to Zohar CDO 2003-1,  Limited under that
certain Credit  Agreement,  dated as of April 28, 2004,  between the Company and
certain of its Subsidiaries,  as borrowers,  and Zohar CDO 2003-1,  Limited,  as
lender, as amended.

                                       27
<PAGE>

                  (e) on or  prior  to 8:30  a.m.  on the  second  Business  Day
following the Execution  Date,  file with the Commission  pursuant to Regulation
14C under the Exchange Act a preliminary  information  statement with respect to
Majority  Stockholder  Consent  and  shall  thereafter  take  such  action as is
necessary to comply with the  provisions of such  Regulation  14C and applicable
Florida law with  respect to such  Majority  Stockholder  Consent and to use its
best efforts to obtain Stockholder Approval as soon as practicable following the
Execution Date.

      4.2 The Company  agrees that it will,  during the period  beginning on the
Execution Date and ending on the Termination Date:

            (a) maintain its corporate existence in good standing;

            (b) maintain,  keep and preserve all of its Properties  necessary in
the proper conduct of its businesses in good repair, working order and condition
(ordinary wear and tear excepted) and make all necessary  repairs,  renewals and
replacements and improvements  thereto,  except where the failure to do so would
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect;

            (c) pay or  discharge  before  becoming  delinquent  (a) all  taxes,
levies,  assessments  and  governmental  charges  imposed on it or its income or
profits or any of its Property and (b) all lawful claims for labor, material and
supplies, which, if unpaid, might become a Lien upon any of its Property, except
where  the  failure  to  do  so  would  not  reasonably  be  expected  to  have,
individually or in the aggregate, a Material Adverse Effect; provided,  however,
that the  Company  shall not be  required  to pay or  discharge  any tax,  levy,
assessment or  governmental  charge,  or claim for labor,  material or supplies,
whose  amount,  applicability  or validity is being  contested  in good faith by
appropriate proceedings being diligently pursued and for which adequate reserves
have been established under GAAP;

            (d) comply  with all  Governmental  Requirements  applicable  to the
operation of its business (except that the failure to comply with a Governmental
Requirement  where the failure to do so does not have,  and would not reasonably
be expected to have, individually or in the aggregate with other failures of the
Company to comply with  Governmental  Requirements,  a Material  Adverse Effect,
shall not be deemed a breach of this Section 4.2(d));

            (e) use its best  efforts to comply with all  agreements,  documents
and  instruments  binding  on  it  or  affecting  its  Properties  or  business,
including,  without limitation, all Material Contracts,  except for instances of
noncompliance that would not reasonably be expected to have,  individually or in
the aggregate, a Material Adverse Effect;

            (f) provide each Investor  with copies of all materials  sent to its
stockholders, in each such case at the same time as such materials are delivered
to such stockholders;

            (g) timely file with the Commission all reports required to be filed
pursuant to the  Exchange  Act and  refrain  from  terminating  its status as an
issuer  required by the  Exchange  Act to file  reports  thereunder  even if the
Exchange  Act  or  the  rules  or  regulations   thereunder  would  permit  such
termination; provided, however, that the failure of the Company to timely file a
report  required to be filed  pursuant to the Exchange Act shall not be deemed a
breach of this  Section  4.2(g) if (i) the Company has used its best  efforts to
timely  file  such  report,  (ii)  such  failure  does not have  and  would  not
reasonably be expected to have, individually or in the aggregate with other such
failures, a Material Adverse Effect, and (ii) the Company pays to each Investor,
not later than five (5) Business Days following the filing of such report,  cash
in the amount of the product of (A) the aggregate Liquidation  Preference of the
Preferred Shares held by such Investor times (B) fifteen percent (15%) times (C)
a fraction,  the  numerator  of which is the number of days that the Company was
delinquent in filing such report and the denominator of which is 365;

                                       28
<PAGE>

            (h) until the Effective Date, take commercially  reasonable steps to
restrict  Key  Employees  from  selling  shares of Common  Stock,  other than in
connection  with any 10b-5(1)  trading plans in effect as of the Execution  Date
and disclosed to each Investor in writing; and

            (i)  use  commercially   reasonable  efforts  to  maintain  adequate
insurance   coverage   (including  D&O  insurance)  for  the  Company  and  each
Subsidiary.

      4.3  Reservation of Common Stock.  The Company shall, on the Closing Date,
have authorized and reserved for issuance, and shall keep available at all times
during  which  Preferred  Shares  or  Warrants  are  outstanding,  free from any
preemptive  rights,  a number of shares of Common Stock (the "RESERVED  AMOUNT")
that,  on the Closing  Date,  is not less than one hundred  twenty five  percent
(125%)  of the  maximum  number of shares  of  Common  Stock  issuable  upon (A)
conversion  of all of the  outstanding  Preferred  Shares and  Preferred  Shares
issuable  pursuant to the  Preferred  Warrants at the  Conversion  Price then in
effect  and  (B)  exercise  in  full  of  the  outstanding  Warrants,  including
Additional  Warrants issuable pursuant to the Preferred Warrants at the Exercise
Price then in effect,  in each case  without  regard to any  limitation  on such
conversion  or  exercise  that may  otherwise  be set forth in the  Articles  of
Amendment or the  Warrants,  and  including any shares of Common Stock issued or
issuable,  from  time  to  time,  as a  distribution  on or in  exchange  for or
otherwise with respect to any of the foregoing, whether as Dividends (as defined
in the Articles of Amendment),  default payments, on account of anti-dilution or
other adjustments or otherwise;  provided,  however, that prior to the date that
Stockholder  Approval is  obtained,  the  Reserved  Amount  shall be  75,000,000
shares.  The  Reserved  Amount  shall  be  allocated  in  accordance  with  each
Investor's Pro Rata Share. In the event that an Investor shall sell or otherwise
transfer any of such Investor's  Preferred  Shares or Warrants,  each transferee
shall be allocated a pro rata portion of such transferor's  Reserved Amount. Any
portion of the Reserved  Amount  allocated to any Investor or other Person which
no longer holds any Preferred  Shares or Warrants  shall be  reallocated  to the
remaining  Investors  pro rata  based on the number of  Outstanding  Registrable
Securities  held by such  Investors at such time. In the event that the Reserved
Amount is insufficient at any time to cover one hundred five percent 105% of the
Registrable  Securities  issuable upon the conversion of the Preferred Stock and
the exercise of the  Warrants  (based on the  Conversion  Price and the Exercise
Price then in effect,  and without regard to any  restriction on such conversion
or  exercise),  the  Company  shall  use its  best  efforts  (including  without
limitation  holding a meeting of its  stockholders)  to  increase  the  Reserved
Amount to cover one hundred  twenty five percent (125%) of the maximum number of
shares of Common Stock  issuable upon (A)  conversion of all of the  outstanding
Preferred  Shares  and  Preferred  Shares  issuable  pursuant  to the  Preferred
Warrants at the Conversion  Price then in effect and (B) exercise in full of the
outstanding  Warrants and Additional Warrants issuable pursuant to the Preferred
Warrants at the Exercise  Price then in effect,  in each case without  regard to
any limitation on such conversion or exercise that may otherwise be set forth in
the Articles of Amendment or the  Warrants,  and  including any shares of Common
Stock issued or issuable, from time to time, as a distribution on or in exchange
for or otherwise  with respect to any of the  foregoing,  whether as  Dividends,
default payments, on account of anti-dilution or other adjustments or otherwise,
such  increase  to be  effective  not later  than the  thirtieth  (30th) day (or
seventy-fifth (75th) day, in the event stockholder approval is required for such
increase)  following the Company's receipt of written notice of such deficiency.
Each  increase in the  Reserved  Amount  shall be  allocated  pro rata among the
Investors  based on the amount of Registrable  Securities  into which all of the
Preferred Shares and Warrants held by such Investor at the time of such increase
are  convertible  or  exercisable  (without  regard  to any  limitation  on such
conversion or exercise). While any Preferred Shares or Warrants are outstanding,
the Company  shall not reduce the Reserved  Amount  without  obtaining the prior
written consent of each Investor.

                                       29
<PAGE>

      4.4 Use of Proceeds.  The Company  shall use the proceeds from the sale of
the Securities for the purposes specified on Schedule 4.4 hereto.

      4.5  Limitation  on Debt and Liens.  During the  period  beginning  on the
Execution Date and ending on the Preferred Stock  Termination  Date, the Company
shall refrain, and shall ensure that each of its Subsidiaries refrains, (a) from
incurring any Debt (including without limitation by issuing any Debt securities)
or  increasing  the amount of any existing line of credit or other Debt facility
beyond the amount outstanding on the date hereof, other than Permitted Debt, and
(b) from granting,  establishing  or maintaining  any Lien on any of its assets,
including  without  limitation  any  pledge  of  securities  owned or held by it
(including  without  limitation any securities  issued by any such  Subsidiary),
other than (i) Permitted  Liens  (including the imposition of any Lien after the
Closing Date,  provided  that,  upon the  imposition of any  mechanic's,  tax or
similar statutory lien, the Company shall use commercially reasonable efforts to
remove such lien as soon as practicable (including without limitation contesting
such lien in good faith by appropriate proceedings)), (ii) any interest or title
of a lessor under any capitalized  lease obligation  provided that such Liens do
not extend to any  property or assets  which is not leased  property  subject to
such  capitalized  lease  obligation,  (iii)  purchase  money  Liens to  finance
property or assets of the Company or any  Subsidiary of the Company  acquired in
the  ordinary  course  of  business;  provided,  however,  that (A) the  related
purchase  money  Debt  shall  not  exceed  the cost of such  property  or assets
(including   the  cost  of   design,   development,   improvement,   production,
acquisition,  construction,  installation  and  integration)  and  shall  not be
secured  by any  property  or assets of the  Company  or any  Subsidiary  of the
Company other than the property and assets so acquired or  constructed  (and any
improvements)  and (B) the Lien  securing  such  purchase  money  Debt  shall be
created within ten (10) days of such  acquisition,  construction or improvement,
(iv) Liens upon  specific  items of inventory or other goods and proceeds of any
Person  securing such Person's  obligations  in respect of bankers'  acceptances
issued or created  for the account of such Person to  facilitate  the  purchase,
shipment or storage of such inventory or other goods, and (v) Liens  encumbering
deposits  made  to  secure  obligations  arising  from  statutory,   regulatory,
contractual, or warranty requirements of the Company or any of its subsidiaries,
including rights of offset and set off.

                                       30
<PAGE>

      4.6 Issuance Limitation. During the period beginning on the Execution Date
and ending on the Preferred Stock Termination Date, the Company shall not issue,
sell or  exchange,  or agree or  obligate  itself to issue,  sell or exchange or
reserve,  agree to or set aside for issuance,  sale or exchange,  (1) any Senior
Securities or Pari Passu Securities, (2) any other security of the Company which
by its terms is convertible  into or  exchangeable or exercisable for any Senior
Security or Pari Passu  Security,  or (3) any option,  warrant or other right to
subscribe for, purchase or otherwise acquire any such security  described in the
foregoing clauses (1) and (2); provided,  however,  that the foregoing shall not
apply to the issuance of Permitted Debt.

      4.7 Right of Participation.

            (a)  Offered  Securities.   From  the  Effective  Date  through  the
Termination  Date,  the  Company  will not,  directly  or  indirectly,  effect a
Subsequent  Placement,  unless in each such case the  Company  shall  have first
offered to sell to the Investors at least forty percent (40%) of the  securities
being offered in such Subsequent Placement (the securities being offered in such
Subsequent  Placement being referred to herein as the  "SUBSEQUENT  SECURITIES",
the securities being offered to the Investors pursuant to this Section 4.7 being
referred to herein as the "OFFERED  SECURITIES",  and the securities not offered
to the Investors  (i.e. up to sixty percent (60%) of the Subsequent  Securities)
being referred to herein as the "REMAINING SECURITIES"). The Company shall offer
to sell to each  Investor  (A) such  Investor's  Pro Rata  Share of the  Offered
Securities (the "BASIC AMOUNT"),  and (B) such additional portion of the Offered
Securities as such  Investor  shall  indicate it will purchase  should the other
Investors  subscribe for less than their Basic  Amounts (the  "UNDERSUBSCRIPTION
AMOUNT"), at a price and on such other terms as shall have been specified by the
Company in writing delivered to such Investor (the "Offer"),  which Offer by its
terms shall remain open to the  Investors  and  irrevocable  (unless the Company
determines  not to proceed  with,  or to reduce the amount of  securities  to be
issued  in,  the  Subsequent  Placement)  for a period of not less than ten (10)
Business Days from such Investor's  receipt of the terms of the Offer in writing
(the "OFFER PERIOD").

            (b) Notice of  Acceptance.  Each  Investor that wishes to accept the
Offer shall deliver  written  notice thereof (a "NOTICE OF  ACCEPTANCE")  to the
Company prior to the  expiration of the Offer Period,  specifying  the amount of
such  Investor's  Basic Amount that the Investor elects to purchase and, if such
Investor  elects to  purchase  all of its Basic  Amount,  the  Undersubscription
Amount that Investor  elects to purchase.  If the aggregate of the Basic Amounts
subscribed for by all Investors is less than the total Offered Securities,  each
Investor  who has  indicated  in its  Notice  of  Acceptance  that it  wishes to
purchase   Undersubscription   Amounts   shall  be  entitled  to  purchase   all
Undersubscription Amounts it has subscribed for; provided,  however, that if the
aggregate of the Undersubscription  Amounts subscribed for exceed the difference
between  the  Offered  Securities  and the  Basic  Amounts  subscribed  for (the
"AVAILABLE  UNDERSUBSCRIPTION AMOUNT"), each Investor who has subscribed for any
Undersubscription  Amount shall be entitled to purchase only that portion of the
Available  Undersubscription  Amount as the Undersubscription  Amount subscribed
for by such Investor bears to the total Undersubscription Amounts subscribed for
by all Investors, subject to rounding by the Board of Directors to the extent it
deems reasonably necessary.

            (c) Permitted Sales of Refused Securities. In the event that Notices
of  Acceptance  are not timely  delivered by the Investors in respect of all the
Offered  Securities,  the Company shall have sixty (60) days from the expiration
of the  Offer  Period  to close  the  sale of all or any  part of the  Remaining
Securities  and such Offered  Securities as to which a Notice of Acceptance  has
not been  given by an  Investor  (the  "REFUSED  SECURITIES")  to the  Person or
Persons  specified in the Offer, but only upon terms and conditions,  including,
without limitation, unit price and interest rates (if applicable), which are, in
the  aggregate,  no more  favorable  to such  other  Person or  Persons  or less
favorable to the Company than those set forth in the Offer.

                                       31
<PAGE>

            (d) Reduction in Amount of Offered Securities. In the event that the
Company proposes to sell less than all the Subsequent  Securities (any such sale
to be in the manner and on the terms  specified  in paragraph  (c) above),  then
each Investor may, at its option and in its sole and absolute discretion, reduce
the number or other units of the Offered  Securities  specified in its Notice of
Acceptance  to an amount  which shall be not less than the amount of the Offered
Securities  which such  Investor  elected to purchase  pursuant to paragraph (b)
above  multiplied by a fraction,  (A) the numerator of which shall be the amount
of Subsequent  Securities which the Company  actually  proposes to sell, and (B)
the  denominator of which shall be the amount of all Subsequent  Securities.  In
the event that any  Investor so elects to reduce the number or amount of Offered
Securities  specified in its Notice of  Acceptance,  the Company may not sell or
otherwise  dispose of more than the  reduced  amount of the  Offered  Securities
until such securities have been offered to the Investors in accordance herewith.

            (e)  Closing.  Upon each  closing of the  purchase and sale of Offer
Securities,  the Investor shall purchase from the Company, and the Company shall
sell to the Investor the number of Offered  Securities  specified in the Notices
of Acceptance,  as reduced pursuant to paragraph (d) above if the Investors have
so elected,  upon the terms and conditions  specified in the Offer. The purchase
by the  Investors  of any  Offered  Securities  is  subject  in all cases to the
preparation,  execution  and  delivery  by the Company  and the  Investors  of a
purchase  agreement  relating to such Offered  Securities  on the same terms and
conditions applicable to other Persons purchasing the Offered Securities.

            (f)  Further  Sale.  In each case,  any  Subsequent  Securities  not
purchased by the Investors or other Person or Persons in accordance herewith may
not be sold or otherwise disposed of by the Company until they are again offered
to the Investors under the procedures specified herein.

      4.8 Certain  Transactions.  During the period  beginning on the  Execution
Date  and  ending  on the  Termination  Date,  and  except  as may be  expressly
permitted or required by the Articles of Amendment or the Transaction  Documents
or as may be expressly required by the terms of the Company's Series B Preferred
Stock (with respect to shares of such Series B Preferred  Stock  outstanding  on
the  Execution  Date),  the  Company  shall  not,  nor will it permit any of its
Subsidiaries  to,  create  or  otherwise  cause or  permit  to  exist or  become
effective any  consensual  encumbrance or restriction of any kind on the ability
of the Company or any Subsidiary of the Company (a) to pay dividends or make any
other distribution to the Company or any Subsidiary of the Company in respect of
capital  stock or with  respect to any other  interest or  participation  in, or
measured by, its profits,  or (b) to pay any amounts that are or become  payable
under the Articles of Amendment or any of the Transaction Documents.

                                       32
<PAGE>

      4.9  Transactions  with  Affiliates.  The Company agrees that,  during the
period  beginning on the Execution Date and ending on the Termination  Date, any
transaction  or  arrangement  between  it or  any of its  Subsidiaries  and  any
Affiliate  or  employee  of the  Company  or any of its  Subsidiaries  shall  be
effected  only on an arms'  length  basis and shall be  approved by the Board of
Directors,  including  a  majority  of the  Company's  directors  not  having an
interest in such transaction.  Without limiting the generality of the foregoing,
during such period, and other than with the written consent of Investors holding
a majority of the then outstanding  Preferred Shares,  the Company shall not (i)
enter into any agreement or  arrangement  between the Company and Norton Herrick
or Huntington Corporation,  or any of their respective Affiliates (collectively,
the "HERRICK PARTIES", each being a "HERRICK PARTY"), other than as disclosed on
the Form 8-K to be filed by the Company  pursuant to Section 4.1(c)  hereof,  or
(ii) amend,  modify or waive  compliance  with any provision of any agreement or
arrangement  between  the  Company  and any  Herrick  Party in a manner  that is
unfavorable to the Company or to the Investors.

      4.10 Use of Investor  Name.  Except as may be required by  applicable  law
and/or this Agreement,  the Company shall not use,  directly or indirectly,  any
Investor's  name or the  name  of any of its  Affiliates  in any  advertisement,
announcement,  press  release  or  other  similar  communication  unless  it has
received  the prior  written  consent  of such  Investor  for the  specific  use
contemplated or as otherwise required by applicable law or regulation.

      4.11 Company's  Instructions to Transfer Agent. On or prior to the Closing
Date, the Company shall execute and deliver irrevocable written  instructions to
the transfer agent for its Common Stock (the "TRANSFER AGENT"), and provide each
Investor  with a  copy  thereof,  directing  the  Transfer  Agent  (i) to  issue
certificates  representing  Conversion  Shares upon  conversion of the Preferred
Shares and receipt of a valid  Conversion  Notice (as defined in the Articles of
Amendment) from an Investor,  in the amount specified in such Conversion Notice,
in the  name  of such  Investor  or its  nominee,  (ii)  to  issue  certificates
representing  Warrant  Shares upon exercise of the Warrants and (iii) to deliver
such  certificates  to such  Investor no later than the close of business on the
third (3rd)  business day following the related  Conversion  Date (as defined in
the Articles of Amendment) or Exercise Date (as defined in the Warrants), as the
case may be, in each  except to the  extent  any such  shares  are  subject to a
Dispute  Procedure  as such term is  defined in the  Articles  of  Amendment  or
Warrants as the case may be. Such  certificates  shall bear only such legends as
are required pursuant to Section 2.5 hereof or applicable law. The Company shall
instruct the transfer  agent that, in lieu of delivering  physical  certificates
representing  shares of  Common  Stock to an  Investor  upon  conversion  of the
Preferred Shares, or exercise of the Warrants, and as long as the Transfer Agent
is a  participant  in  the  Depository  Trust  Company  ("DTC")  Fast  Automated
Securities  Transfer  program  ("FAST"),  and such Investor has not informed the
Company  that it  wishes  to  receive  physical  certificates  therefor,  and no
restrictive legend is required to appear on any physical  certificate if issued,
the transfer agent may effect  delivery of Conversion  Shares or Warrant Shares,
as the case may be, by crediting  the account of such Investor or its nominee at
DTC for the number of shares for which delivery is required hereunder within the
time frame specified above for delivery of certificates.  The Company represents
to and agrees with each  Investor that it will not give any  instruction  to the
Transfer  Agent that will conflict with the foregoing  instruction  or otherwise
restrict such  Investor's  right to convert the  Preferred  Shares or to receive
Conversion  Shares in accordance  with the terms of the Articles of Amendment or
to  exercise  the  Warrant or to receive  Warrant  Shares  upon  exercise of the
Warrants.  In the event that the Company's  relationship with the Transfer Agent
should be terminated  for any reason,  the Company shall use its best efforts to
cause the Transfer  Agent to continue  acting as transfer  agent pursuant to the
terms hereof until such time that a successor transfer agent is appointed by the
Company and receives the instructions described above.

                                       33
<PAGE>

      4.12 No Adverse Action.  The Company and its  Subsidiaries  shall refrain,
during the period  beginning on the Execution Date and ending on the Termination
Date, from taking any action or entering into any  arrangement  which in any way
materially  and adversely  affects the  provisions of the Articles of Amendment,
this Agreement or any other Transaction Document.

      4.13 Limitations on Disposition.  No Investor shall sell, transfer, assign
or dispose of any Securities, unless:

            (a)  either  (i) there is then in effect an  effective  registration
statement  under the Securities Act covering such proposed  disposition and such
disposition is made in accordance with such registration  statement or (ii) such
securities may be sold pursuant to Rule 144(k) or any successor provision; or

            (b) such  Investor  has  notified the Company in writing of any such
disposition,  received the Company's written consent (which consent shall not be
unreasonably  withheld or delayed) to such disposition and furnished the Company
with an opinion of counsel,  reasonably  satisfactory to the Company,  that such
disposition  will  not  require   registration  of  such  Securities  under  the
Securities Act;  provided,  however,  that no such consent or opinion of counsel
will be required (A) if the sale,  transfer or assignment  complies with federal
and state  securities laws and is made to an Affiliate of such Investor which is
also an "accredited  investor" as that term is defined in Rule 501 of Regulation
D, (B) if the sale, transfer or assignment is made pursuant to Rule 144 and such
Investor  provides  the Company with  evidence  reasonably  satisfactory  to the
Company that the proposed transaction  satisfies the requirements of Rule 144 or
(C) in connection  with a bona fide pledge or  hypothecation  of any  Securities
under a margin  arrangement with a broker-dealer or other financial  institution
or the sale of any such  Securities  by such  broker-dealer  or other  financial
institution  following such  Investor's  default under such margin  arrangement;
provided,  in the  case  of any  such  transfer  or  disposition  other  than as
described  in  paragraph  (a) or clauses (B) or (C) of this  paragraph  (b), the
transferee of such Securities makes representations to the Company substantially
similar to those made by the Investors in Section 2.8 hereof.

      4.14 Disclosure of Information. The Company agrees that it will not at any
time following the Execution Date disclose  material  non-public  information to
any Investor without first obtaining such Investor's  written consent to receive
such information.  If the Company breaches this Section 4.14, it shall promptly,
and no  later  than  one  business  day  following  such  breach,  make a public
disclosure, in compliance with Regulation FD under the Exchange Act, of all such
material non-public information theretofore disclosed to such Investor in breach
of this Section 4.14.

      4.15 Listing. The Company (i) promptly following the Closing shall use its
best efforts to cause the Common Stock,  including all of the Conversion  Shares
issuable upon  conversion of the Preferred  Shares and all of the Warrant Shares
issuable upon exercise of the Warrants (without regard to any limitation on such
conversion or exercise),  to be listed on the Nasdaq National  Market,  and (ii)
use  its  commercially  reasonable  efforts  to  maintain  the  designation  and
quotation,  or listing,  of the Common Stock on the Nasdaq National Market,  the
Nasdaq  SmallCap Market or the New York Stock Exchange for a minimum of five (5)
years  following  the Closing  Date.  The Company  shall use its best efforts to
maintain  the listing of the Common Stock on the Nasdaq  National  Market or the
Nasdaq  SmallCap  Market for a minimum of five (5) years  following  the Closing
Date (or, if earlier,  until such time as the Common  Stock is listed on the New
York Stock Exchange).

                                       34
<PAGE>

         4.16 Indemnification of Investors.  The Company will indemnify and hold
each Investor and its  directors,  managers,  officers,  shareholders,  members,
partners, employees and agents (each, an "INVESTOR 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 Investor
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 an Investor,  or any of them or their respective  Affiliates,
by any stockholder of the Company who is not an Affiliate of such Investor, with
respect to any of the  transactions  contemplated by the  Transaction  Documents
(unless   such   action  is  based   upon  (i)  a  breach  of  such   Investor's
representation,  warranties or covenants under the Transaction  Documents,  (ii)
any  agreements  or  understandings   such  Investor  may  have  with  any  such
stockholder,  (iii)  any  violations  by  such  Investor  of  state  or  federal
securities  laws or (iv) any conduct by such Investor which  constitutes  fraud,
gross  negligence,  willful  misconduct or malfeasance).  If any action shall be
brought  against any Investor Party in respect of which  indemnity may be sought
pursuant  to this  Agreement,  such  Investor  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 that is  reasonably  acceptable to such
Investor  Party (and Blank Rome LLP shall be deemed to be reasonably  acceptable
to such  Investor  Party).  Any  Investor  Party  shall have the right to employ
separate counsel in any such action and participate in the defense thereof,  but
the fees and expenses of such counsel  shall be at the expense of such  Investor
Party except that the Company shall pay the reasonable fees and expenses of such
counsel 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 Investor Party or a conflict of interest that would,  under
applicable  attorney codes of ethics,  require the retention of separate counsel
for the Company and such Investor  Party.  The Company will not be liable to any
Investor  Party under this Agreement (i) for any settlement by an Investor 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 such Investor Party's
fraud,  gross negligence,  willful misconduct or malfeasance or to such Investor
Party's  breach  of  any  of  the  representations,   warranties,  covenants  or
agreements  made by such Investor in this Agreement or in the other  Transaction
Documents.

                                       35
<PAGE>

      4.17 No  Integrated  Offerings.  The Company  shall not make any offers or
sales of any security (other than the Securities) under circumstances that would
require  registration  of the  sale  of the  Securities  being  offered  or sold
hereunder  under the  Securities Act or cause this offering of the Securities to
be integrated  with any other offering of securities by the Company for purposes
of  any  stockholder  approval  provision  applicable  to  the  Company  or  its
securities.

      4.18 Board of Directors. The Company and the Board of Directors shall take
all  action  necessary  (including,  without  limitation,   promptly  appointing
replacement  directors,  in accordance  with the Articles of  Incorporation  and
Bylaws of the  Company,  to fill  vacancies  created  by the  resignation  of an
directors) to cause the  composition  of the Board of Directors to comply (or to
continue to comply,  as the case may be) with all Governmental  Requirements and
with the listing criteria of the Principal Market.

5. CONDITIONS TO CLOSING.

      5.1 Conditions to Investors'  Obligations at the Closing.  Each Investor's
obligations to effect the Closing,  including without  limitation its obligation
to purchase  Preferred Shares,  Warrants and a Preferred Warrant at the Closing,
are conditioned upon the fulfillment (or waiver by such Investor in its sole and
absolute discretion) of each of the following events as of the Closing Date, and
the  Company  shall use  commercially  reasonable  efforts to cause each of such
conditions to be satisfied:

            5.1.1       the  representations  and  warranties of the Company set
                        forth in this  Agreement  and in the  other  Transaction
                        Documents  that  are not  qualified  by  materiality  or
                        "Material  Adverse  Effect" shall be true and correct in
                        all  material  respects,  and  the  representations  and
                        warranties  of the Company  set forth in this  Agreement
                        and  in  the  other   Transaction   Documents  that  are
                        qualified by  materiality or "Material  Adverse  Effect"
                        shall be true in all respects,  in each case, as of such
                        date as if made on such date  (except that to the extent
                        that any such  representation  or warranty  relates to a
                        particular  date, in which case such  representation  or
                        warranty  shall  be true  and  correct  in all  material
                        respects as of that particular date);

            5.1.2       the Company shall have complied with or performed in all
                        material respects all of the agreements, obligations and
                        conditions set forth in the Articles of Amendment,  this
                        Agreement and the other  Transaction  Documents that are
                        required to be complied with or performed by the Company
                        on or before such date;

            5.1.3       the Company  shall have filed the  Articles of Amendment
                        with the Secretary of State of the State of Florida, and
                        shall have delivered to such Investor  written  evidence
                        of the acceptance of such filing;

            5.1.4       the  Closing  Date  shall  occur on the  Execution  Date
                        unless a later date is  mutually  agreed by the  Company
                        and such Investor;

                                       36
<PAGE>

            5.1.5       the  Company  shall have  delivered  to such  Investor a
                        certificate,  signed by the Chief Executive  Officer and
                        Chief Financial Officer of the Company,  certifying that
                        the conditions specified in this paragraph 5.1 have been
                        fulfilled as of the Closing  Date,  it being  understood
                        that  such  Investor  may  rely on such  certificate  as
                        though  it were a  representation  and  warranty  of the
                        Company made herein;

            5.1.6       the  Company  shall have  delivered  to such  Investor a
                        certificate,  signed by the  Secretary  or an  Assistant
                        Secretary of the Company, (A) attaching (i) the Articles
                        of  Incorporation  and  By-Laws  of  the  Company,  (ii)
                        resolutions   passed  by  its  Board  of   Directors  to
                        authorize the  transactions  contemplated  hereby and by
                        the other Transaction  Documents,  and (iii) the written
                        consent of stockholders of the Company holding shares of
                        the Company's  capital stock  representing a majority of
                        the voting power of the  Company's  outstanding  capital
                        stock (the "MAJORITY STOCKHOLDER CONSENT") approving (x)
                        the issuance of Common Stock in excess of the Cap Amount
                        in connection with the transactions contemplated by this
                        Agreement,  the  Articles  of  Amendment  and the  other
                        Transaction Documents,  (y) an increase in the number of
                        shares of the  Company's  authorized  Common  Stock from
                        150,000,000 to  300,000,000  and (z) solely for purposes
                        of   applicable    Nasdaq    regulations   and   listing
                        requirements,  a change of control of the  Company;  and
                        (B) certifying that such documents are true and complete
                        copies of the originals and that such  resolutions  have
                        not been amended or superseded, it being understood that
                        such Investor may rely on such  certificate as though it
                        were a  representation  and warranty of the Company made
                        herein;

            5.1.7       the Company  shall have  delivered  to such  Investor an
                        opinion  of  counsel  for the  Company,  dated as of the
                        Closing Date, in the form attached hereto as Exhibit H;

            5.1.8       the Company  shall have  delivered to such  Investor the
                        duly executed  Investor  Warrant and Preferred  Warrant,
                        and  certificates  representing  the  Preferred  Shares,
                        being purchased by such Investor at the Closing;

            5.1.9       the Company  shall have  delivered to Satellite the duly
                        executed Satellite Consulting Warrant;

            5.1.10      the Company  shall have  executed and  delivered to such
                        Investor  the  Registration  Rights  Agreement  and  the
                        Company shall have executed and delivered to Goldman the
                        Goldman Registration Rights Agreement;

                                       37
<PAGE>

            5.1.11      the  principal  amount of the  convertible  subordinated
                        notes issued by the Company and shares of the  Company's
                        Series A Preferred Stock,  each as described on Schedule
                        5.1.11  hereto,  shall have been converted in accordance
                        with the terms thereof into shares of Common Stock;

            5.1.12      an  escrow  agreement  in the form  attached  hereto  as
                        Exhibit I (the  "STOCKHOLDER  ESCROW  AGREEMENT")  shall
                        have been  executed and delivered by the Company and the
                        other  parties  named  therein,  and the  shares  of the
                        Company's   Series  A  Preferred   Stock  and  Series  C
                        Preferred  Stock set  forth on  Schedule  5.1.12  hereto
                        shall  have  been  placed  in  escrow  pursuant  to  the
                        Stockholder  Escrow Agreement,  which Stockholder Escrow
                        Agreement shall provide (x) that such  securities  shall
                        remain in escrow  until the  earlier of (i) such time as
                        Stockholder  Approval has been obtained and (ii) June 1,
                        2005,  (y) for the  Company to  deposit  with the escrow
                        agent  under the  Stockholder  Escrow  Agreement  at the
                        Closing  agreement  the funds  necessary  to redeem such
                        securities,  and (z) for such  securities  and  funds to
                        remain  in escrow  pursuant  to the  Stockholder  Escrow
                        Agreement   until  the  earlier  of  (i)  such  time  as
                        Stockholder Approval has been obtained, after which such
                        securities  shall be redeemed by the  Company,  and (ii)
                        June 1, 2005;

            5.1.13      each of the record holders of the  securities  described
                        on Schedules 5.1.11 and 5.1.12 hereto (the  "CONTROLLING
                        STOCKHOLDERS")  shall have delivered to the Company, and
                        the Company  shall have  executed and  delivered to each
                        Controlling  Stockholder,  an  agreement,  in  the  form
                        attached hereto as Exhibit J, (the "VOTING  AGREEMENT"),
                        pursuant  to  which  (i)  each  Controlling  Stockholder
                        grants to the chairman  and/or  president of the Company
                        such Controlling Stockholder's irrevocable proxy to vote
                        all  voting  securities  of  the  Company  held  by  the
                        Controlling  Stockholder with specific  instructions (x)
                        not to vote such  securities in favor of any action that
                        would be inconsistent with the transactions contemplated
                        by this  Agreement  and (y) to vote such  securities  in
                        favor of Stockholder Approval and in favor of any action
                        (other than any action described in the foregoing clause
                        (x)),  including without  limitation with respect to the
                        election  of  directors,  recommended  by the  Board  of
                        Directors;  and (ii) each Controlling Stockholder agrees
                        not to exercise any voting rights  (whether at a meeting
                        of stockholders  or by written  consent) with respect to
                        any  voting  securities  of the  Company  held  by  such
                        Controlling  Stockholder,  other  than any  such  voting
                        rights  exercised  pursuant to the proxy included in the
                        Voting Agreement;

                                       38
<PAGE>

            5.1.14      the Company shall have obtained the written agreement of
                        each Key  Employee  to refrain  from  selling  shares of
                        Common Stock prior to the Effective Date;

            5.1.15      there shall have occurred no material  adverse change in
                        the   Company's   consolidated   business  or  financial
                        condition  since the date of the  Company's  most recent
                        audited financial statements contained in the Disclosure
                        Documents;

            5.1.16      the Common Stock shall be actively  traded and quoted on
                        the Nasdaq National Market;

            5.1.17      the  Company  shall have  authorized  and  reserved  for
                        issuance upon  conversion  of the  Preferred  Shares and
                        exercise  of the  Warrants  a number of shares of Common
                        Stock equal to not less than the Reserved Amount;

            5.1.18      there  shall  be no  injunction,  restraining  order  or
                        decree  of  any  nature  of  any  court  or   Government
                        Authority  of competent  jurisdiction  that is in effect
                        that  restrains or  prohibits  the  consummation  of the
                        transactions   contemplated   hereby  or  by  the  other
                        Transaction Documents;

            5.1.19      each of Norton Herrick and Huntington  Corporation shall
                        have waived in writing  such  holder's  right to include
                        such holder's  shares of Common Stock (whether  issuable
                        upon  conversion of convertible  preferred  stock,  upon
                        exercise of warrants,  or otherwise) in the Registration
                        Statement  or in the  registration  statement,  if  any,
                        filed  pursuant  to  the  Goldman   Registration  Rights
                        Agreement,   or   otherwise  to   participate   in  such
                        registration   pursuant  to  the   Registration   Rights
                        Agreement or the Goldman  Registration  Rights Agreement
                        of the Conversion Shares and Warrant Shares,  other than
                        as  set  forth  in  that  certain   Registration  Rights
                        Agreement,  dated  as of the  date  hereof,  among  such
                        holders and the Company and  attached  hereto as Exhibit
                        K; and

            5.1.20      each of Stephen Yarvis, Paul Ehrlich,  Paul Neuwirth and
                        Richard  Berman shall have executed and delivered to the
                        Company a letter agreement,  in the form attached hereto
                        as Exhibit L,  pursuant to which each such Person  shall
                        agree, immediately upon the request of Joseph Rosetti or
                        any  successor  Chairman  of the Board,  to resign  such
                        Person's position as a director of the Company.

      5.2  Conditions  to Company's  Obligations  at the Closing.  The Company's
obligations  to effect the Closing with each Investor are  conditioned  upon the
fulfillment  (or waiver by the Company in its sole and absolute  discretion)  of
each of the following events as of the Closing Date:

                                       39
<PAGE>

            5.2.1       the  representations and warranties of such Investor set
                        forth in this  Agreement  and in the  other  Transaction
                        Documents  that  are not  qualified  by  materiality  or
                        "Material  Adverse  Effect" shall be true and correct in
                        all  material  respects,  and  the  representations  and
                        warranties of such Investor set forth in this  Agreement
                        and  in  the  other   Transaction   Documents  that  are
                        qualified by materiality  shall be true in all respects,
                        in each  case,  as of such  date as if made on such date
                        (except that to the extent that any such  representation
                        or warranty  relates to a particular date, in which case
                        such  representation  or  warranty  shall  be  true  and
                        correct in all material  respects as of that  particular
                        date);

            5.2.2       such Investor  shall have complied with or performed all
                        of the agreements,  obligations and conditions set forth
                        in this Agreement and in the other Transaction Documents
                        that are  required to be complied  with or  performed by
                        such Investor on or before the Closing Date;

            5.2.3       there  shall  be no  injunction,  restraining  order  or
                        decree  of  any  nature  of  any  court  or   Government
                        Authority  of competent  jurisdiction  that is in effect
                        that  restrains or  prohibits  the  consummation  of the
                        transactions   contemplated   hereby  or  by  the  other
                        Transaction Documents;

            5.2.4       such  Investor  shall  have  executed  each  Transaction
                        Document to which it is a party and shall have delivered
                        the same to the Company; and

            5.2.5       such  Investor  shall have  tendered to the Escrow Agent
                        the Purchase  Price for the Preferred  Shares,  Investor
                        Warrant and Preferred  Warrant being  purchased by it at
                        the Closing in accordance with the terms of the Investor
                        Escrow  Agreement  and the Escrow  Agent shall have been
                        authorized  to release and deliver the  Purchase  Price,
                        less  the  Placement   Agent  Fee,  to  the  Company  in
                        accordance   with  the  terms  of  the  Investor  Escrow
                        Agreement.

6. MISCELLANEOUS.

            6.1  Survival;   Severability.   The  representations,   warranties,
covenants  and  indemnities  made by the  parties  herein,  in the  Articles  of
Amendment  and in the other  Transaction  Documents  shall  survive  the Closing
notwithstanding  any due  diligence  investigation  made by or on  behalf of the
party seeking to rely thereon. In the event that any provision of this Agreement
becomes or is  declared  by a court of  competent  jurisdiction  to be  illegal,
unenforceable  or void,  this Agreement  shall continue in full force and effect
without said provision;  provided, that in such case the parties shall negotiate
in good  faith to  replace  such  provision  with a new  provision  which is not
illegal,  unenforceable  or  void,  as long  as  such  new  provision  does  not
materially change the economic benefits of this Agreement to the parties.

                                       40
<PAGE>

            6.2  Successors  and  Assigns.  The  terms  and  conditions  of this
Agreement  shall  inure to the  benefit  of and be binding  upon the  respective
successors  and  permitted  assigns of the parties.  Nothing in this  Agreement,
express or implied,  is intended to confer upon any party other than the parties
hereto  or  their  respective  successors  and  permitted  assigns  any  rights,
remedies,  obligations  or  liabilities  under or by reason  of this  Agreement,
except as expressly  provided in this  Agreement.  Each  Investor may assign its
rights  and  obligations  hereunder,  in  connection  with any  private  sale or
transfer of Preferred Shares or Warrants in accordance with the terms hereof, as
long as, as a condition  precedent to such transfer,  the transferee executes an
acknowledgment  agreeing  to be  bound  by the  applicable  provisions  of  this
Agreement,  in which case the term  "INVESTOR"  shall be deemed to refer to such
transferee as though such  transferee  were an original  signatory  hereto.  The
Company may not assign its rights or obligations under this Agreement.

            6.3 No  Reliance.  Each  party  acknowledges  that  (i) it has  such
knowledge in business and financial matters as to be fully capable of evaluating
this  Agreement,   the  other  Transaction   Documents,   and  the  transactions
contemplated  hereby  and  thereby,  (ii) it is not  relying  on any  advice  or
representation  of any  other  party  in  connection  with  entering  into  this
Agreement, the other Transaction Documents, or such transactions (other than the
representations  made in this  Agreement  or the other  Transaction  Documents),
(iii) it has not  received  from any party any  assurance or guarantee as to the
merits (whether legal, regulatory, tax, financial or otherwise) of entering into
this  Agreement or the other  Transaction  Documents or the  performance  of its
obligations  hereunder and  thereunder,  and (iv) it has consulted  with its own
legal, regulatory, tax, business, investment,  financial and accounting advisors
to the extent that it has deemed necessary,  and has entered into this Agreement
and the other Transaction Documents based on its own independent judgment and on
the  advice of its  advisors  as it has  deemed  necessary,  and not on any view
(whether written or oral) expressed by any party.

            6.4 Independent  Nature of Investors'  Obligations  and Rights.  The
obligations  of each  Investor  hereunder  are  several  and not joint  with the
obligations  of  the  other  Investors  hereunder,  and  no  Investor  shall  be
responsible  in any way for the  performance  of the  obligations  of any  other
Investor hereunder. Nothing contained herein, in the Articles of Amendment or in
any other  Transaction  Document,  and no action taken by any Investor  pursuant
hereto or thereto, shall be deemed to constitute any Investors as a partnership,
an  association,  a joint  venture or any other kind of entity,  or a "group" as
described in Section 13(d) of the Exchange Act, or create a presumption that any
Investors are in any way acting in concert with respect to such  obligations  or
the  transactions  contemplated  by  this  Agreement.  Each  Investor  has  been
represented  by its own separate  counsel in  connection  with the  transactions
contemplated hereby,  shall be entitled  individually to protect and enforce its
rights,  including without limitation rights arising out of this Agreement,  the
Articles of Amendment or the other  Transaction  Documents,  and it shall not be
necessary  for any other  Investor  to be joined as an  additional  party in any
proceeding for such purpose.

            6.5 Other  Engagements and Activities.  Notwithstanding  anything in
any of the  Transaction  Documents to the contrary,  no Affiliate of an Investor
shall  be  restricted  in any way from  engaging  in any  brokerage,  investment
advisory, financial advisory,  anti-raid advisory,  financing, asset management,
trading,  market making,  arbitrage or other similar activities conducted in the
ordinary course of business.

                                       41
<PAGE>

            6.6 Injunctive  Relief.  The Company  acknowledges and agrees that a
breach by it of its obligations  hereunder will cause  irreparable  harm to each
Investor  and that the remedy or  remedies  at law for any such  breach  will be
inadequate and agrees, in the event of any such breach, in addition to all other
available remedies, such Investor shall be entitled to an injunction restraining
any breach and requiring immediate and specific  performance of such obligations
without the necessity of showing economic loss.

            6.7 Governing Law; Jurisdiction. This Agreement shall be governed by
and  construed  under the laws of the State of New York  applicable to contracts
made and to be  performed  entirely  within  the State of New York.  Each  party
hereby  irrevocably  submits to the non-exclusive  jurisdiction of the state and
federal courts  sitting in the City and County of New York for the  adjudication
of any dispute  hereunder  or in  connection  herewith  or with any  transaction
contemplated  hereby  (including  without  limitation  any dispute under or with
respect to the Articles of Amendment,  the Preferred Shares, the Warrants or the
Preferred Warrants),  and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding  involving the Investor or permitted  assignee of
the Investor, any claim that it is not personally subject to the jurisdiction of
any  such  court,  that  such  suit,  action  or  proceeding  is  brought  in an
inconvenient  forum or that the  venue of 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.

            6.8  Counterparts.  This  Agreement may be executed in any number of
counterparts,  each of  which  shall be  deemed  an  original,  and all of which
together  shall  constitute one and the same  instrument.  This Agreement may be
executed and delivered by facsimile transmission.

            6.9  Headings.  The  headings  used in this  Agreement  are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.

            6.10 Notices. Any notice, demand or request required or permitted to
be given by the Company or an Investor  pursuant to the terms of this  Agreement
shall be in writing and shall be deemed delivered (i) when delivered  personally
or by verifiable facsimile  transmission,  unless such delivery is made on a day
that is not a Business  Day,  in which case such  delivery  will be deemed to be
made on the next  succeeding  Business  Day, (ii) on the next Business Day after
timely  delivery to an overnight  courier and (iii) on the Business Day actually
received if deposited in the U.S. mail  (certified or  registered  mail,  return
receipt requested, postage prepaid), addressed as follows:

                                       42
<PAGE>

                  If to the Company:

                  MediaBay, Inc.
                  2 Ridgedale Avenue, Suite 300
                  Cedar Knolls, New Jersey 07927
                  Attn:    Chief Executive Officer and
                           Chief Financial Officer
                  Tel:     (973) 539-9528
                  Fax:     (973) 539-1273

                  with a copy to:

                  Blank Rome LLP
                  The Chrysler Building
                  405 Lexington Avenue
                  New York, NY  10174
                  Attn:    Robert J. Mittman
                  Tel:     (212) 885-5000
                  Fax:     (212) 885-5001

and if to any Investor, to such address for such Investor as shall appear on the
signature page hereof  executed by such  Investor,  or as shall be designated by
such Investor in writing to the Company in accordance with this Section 6.10.

            6.11 Expenses. The Company and each Investor shall pay all costs and
expenses that it incurs in connection with the negotiation,  execution, delivery
and performance of this Agreement or the other Transaction Documents,  provided,
however,  that that the  Company  shall,  at the  Closing,  pay up to $55,000 in
immediately available funds for all reasonable out-of-pocket expenses (including
without  limitation  reasonable  legal  fees  and  expenses)  incurred  or to be
incurred by Satellite in connection with its due diligence  investigation of the
Company and the negotiation, preparation, execution, delivery and performance of
this Agreement,  the Articles of Amendment and the other  Transaction  Documents
(regardless of whether the Closing occurs).  At the Closing,  the amount due for
such fees and  expenses  (which may include  fees and  expenses  estimated to be
incurred for  completion of the  transaction  and  post-closing  matters) may be
netted out of the Purchase  Price payable by Satellite.  In the event the amount
paid by the Company  for such fees and  expenses is less than the amount of fees
and expenses actually incurred by Satellite, the Company shall promptly pay such
deficiency  (up to $55,000  in the  aggregate,  including  any  amounts  paid at
Closing) within thirty (30) days following receipt of an invoice therefor.

                                       43
<PAGE>

            6.12 Entire Agreement;  Amendments.  This Agreement, the Articles of
Amendment and the other  Transaction  Documents  constitute the entire agreement
between  the  parties  with regard to the  subject  matter  hereof and  thereof,
superseding  all prior  agreements or  understandings,  whether written or oral,
between or among the parties, other than any Non-Disclosure  Agreement,  each of
which  shall  survive  the  Closing  and  continue  in full  force and effect in
accordance with the terms thereof.  Except as expressly provided herein, neither
this Agreement nor any term hereof may be amended  except  pursuant to a written
instrument  executed by the Company and the holders of at least two-thirds (2/3)
of the  Registrable  Securities  into  which  all of the  Preferred  Shares  and
Warrants then outstanding are convertible or exercisable  (without regard to any
limitation  on such  conversion  or  exercise),  and no provision  hereof may be
waived  other  than by a written  instrument  signed by the party  against  whom
enforcement  of any such  waiver  is  sought.  Any  waiver or  consent  shall be
effective only in the specific  instance and for the specific  purpose for which
given.  Neither the Company nor any Person acting on its behalf shall,  directly
or  indirectly,  pay  or  cause  to be  paid  any  consideration  (immediate  or
contingent),  whether  by way of  interest,  fee,  payment  for the  redemption,
conversion or exercise of the Securities, or otherwise, to an Investor for or as
an inducement to, or in connection  with the  solicitation  of, any amendment of
any of the terms of this  Agreement,  the  Articles of  Amendment  or any of the
other Transaction Documents, unless such consideration is required to be paid to
all of the Investors bound by such amendment.

                           [Signature Pages to Follow]

                                       44
<PAGE>

      IN WITNESS WHEREOF, the undersigned have executed this Securities Purchase
Agreement as of the date first-above written.

MEDIABAY, INC.

By:  /s/ Jeffrey Dittus
     ----------------------------------
     Name:  Jeffrey Dittus
     Title:  Chief Executive Officer

SATELLITE STRATEGIC FINANCE ASSOCIATES, LLC

By:  Satellite Asset Management, L.P., its Manager

By:  /s/ Simon Raykher
     ----------------------------------
     Name: Simon Raykher
     Title:  General Counsel

ADDRESS:

         c/o Satellite Advisors, L.L.C.
         623 Fifth Avenue, 20th Floor
         New York, New York 10022
         Tel: 212-209-2000
         Fax: 212-209-2021

         With a copy to:

         Duval & Stachenfeld LLP
         300 East 42nd Street
         New York, New York 10017
         Attn: Robert L. Mazzeo, Esq.
         Tel:  212-883-1700
         Fax:  212-883-8883

Number of Preferred Shares to be Purchased:  4,316
                                             -----

Number of Warrant Shares initially
issuable upon exercise of Investor Warrant:  3,923,636
                                             ---------

<PAGE>

      IN WITNESS WHEREOF, the undersigned have executed this Securities Purchase
Agreement as of the date first-above written.

MEDIABAY, INC.

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

SATELLITE STRATEGIC FINANCE PARTNERS, LTD

By:      Satellite Asset Management, L.P., its Manager

         By:  /s/ Simon Raykher
              ----------------------------
              Name:  Simon Raykher
              Title:  General Counsel

ADDRESS:

         c/o Satellite Advisors, L.L.C.
         623 Fifth Avenue, 20th Floor
         New York, New York 10022
         Tel:     212-209-2000
         Fax:     212-209-2021

         With a copy to:

         Duval & Stachenfeld LLP
         300 East 42nd Street
         New York, New York 10017
         Attn:    Robert L. Mazzeo, Esq.
         Tel:     212-883-1700
         Fax:     212-883-8883

Number of Preferred Shares to be Purchased:  10,684
                                             ------

Number of Warrant Shares initially
issuable upon exercise of Investor Warrant:  9,712,727
                                             ---------

<PAGE>

      IN WITNESS WHEREOF, the undersigned have executed this Securities Purchase
Agreement as of the date first-above written.

MEDIABAY, INC.

By:      /s/ Jeffrey Dittus
         -----------------------------------
         Name:  Jeffrey Dittus
         Title:  Chief Executive Officer

-------------------------------------------
                  Investor Name

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

ADDRESS:

         ___________________________
         ___________________________
         Attn:  ____________________
         Tel:     __________________
         Fax:     __________________

         With a copy to:

         ___________________________
         ___________________________
         Attn:  ____________________
         Tel:     __________________
         Fax:     __________________

Number of Preferred Shares to be Purchased: _______________

Number of Warrant Shares initially
issuable upon exercise of Investor Warrant: _______________

<PAGE>

      IN WITNESS WHEREOF, the undersigned have executed this Securities Purchase
Agreement as of the date first-above written.

MEDIABAY, INC.

By:      __________________________
         Name:
         Title:

LONE OAK PARTNERS, L.P.

By:      Forest Hill Capital, its Manager

         By:  /s/  Mark Lee
              -----------------------------------
              Name:  Mark Lee
              Title:  President

ADDRESS:

         100 Morgan Keegan Drive
         Suite 430
         Little Rock, AR 72202
         Attn:  J.P. Brizzolara
         Tel:     501-666-3031
         Fax:     501-666-4492

         With a copy to:

         ___________________________
         ___________________________
         Attn:  ____________________
         Tel:     __________________
         Fax:     __________________

Number of Preferred Shares to be Purchased:   305
                                            ---------

Number of Warrant Shares initially
issuable upon exercise of Investor Warrant:   277,273
                                            ---------

<PAGE>

      IN WITNESS WHEREOF, the undersigned have executed this Securities Purchase
Agreement as of the date first-above written.

MEDIABAY, INC.

By:      __________________________
         Name:
         Title:

FOREST HILL SELECT OFFSHORE, LTD.

By:      Forest Hill Capital, its Manager

         By:   /s/  Mark Lee
               -----------------------------------
               Name:  Mark Lee
               Title:  President

ADDRESS:

         100 Morgan Keegan Drive
         Suite 430
         Little Rock, AR 72202
         Attn:  J.P. Brizzolara
         Tel:     501-666-3031
         Fax:     501-666-4492

         With a copy to:

         ___________________________
         ___________________________
         Attn:  ____________________
         Tel:     __________________
         Fax:     __________________

Number of Preferred Shares to be Purchased:   270
                                            ------

 Number of Warrant Shares initially
issuable upon exercise of Investor Warrant:   245,455
                                            ---------

<PAGE>

      IN WITNESS WHEREOF, the undersigned have executed this Securities Purchase
Agreement as of the date first-above written.

MEDIABAY, INC.

By:      __________________________
         Name:
         Title:

FOREST HILL SELECT FUND, L.P.

By:      Forest Hill Capital, its Manager

         By: /s/  Mark Lee
             -----------------------------------
             Name:  Mark Lee
             Title:  President

ADDRESS:

         100 Morgan Keegan Drive
         Suite 430
         Little Rock, AR 72202
         Attn:  J.P. Brizzolara
         Tel:     501-666-3031
         Fax:     501-666-4492

         With a copy to:

         ___________________________
         ___________________________
         Attn:  ____________________
         Tel:     __________________
         Fax:     __________________

Number of Preferred Shares to be Purchased:   1,325
                                            --------

Number of Warrant Shares initially
issuable upon exercise of Investor Warrant:   1,204,545
                                            -----------

<PAGE>

      IN WITNESS WHEREOF, the undersigned have executed this Securities Purchase
Agreement as of the date first-above written.

MEDIABAY, INC.

By:      __________________________
         Name:
         Title:

RADCLIFFE  SPC,  LTD.  for and on behalf of the  Class A  Convertible  Crossover
Segregated Portfolio*

*Tax ID# 98-0381209

By:      RGC Management Company, LLC

         By: /s/  Gerald F. Stahlecker
             --------------------------
             Name:  Gerald F. Stahlecker
             Title:  Managing Director

ADDRESS:

         c/o RG Capital Management, L.P.
         3 Bala Plaza - East, Suite 501
         Bala Cynwyd, PA 19004
         Attn:  Gerald F. Stahlecker
         Tel:     610-617-5900
         Fax:     610-617-0580

         With a copy to:

         Drinker Biddle & Reath, LLP
         One Logan Square
         18th & Cherry Streets
         Philadelphia, PA 19103-6996
         Attn:  Stephen T. Burdumy, Esq.
         Tel:     215-988-2880
         Fax:     215-988-2757

Number of Preferred Shares to be Purchased:   4,000
                                            -------

Number of Warrant Shares initially
issuable upon exercise of Investor Warrant:   3,636,364
                                            -----------

<PAGE>

      IN WITNESS WHEREOF, the undersigned have executed this Securities Purchase
Agreement as of the date first-above written.

MEDIABAY, INC.

By:      __________________________
         Name:
         Title:

GOLDMAN, SACHS & CO.

By:

         By: /s/  Scott Lange
            -------------------------
            Name:  Scott Lange
            Title:  Managing Director

ADDRESS:

         1 New York Plaza
         New York, New York 10004
         Attn:
         Tel:     212-357-7922
         Fax:     212-428-3505

         With a copy to:

         Brown Raysman Millstein Felder & Steiner
         900 Third Avenue
         New York, New York 10022
         Attn:  Stuart Bressman
         Tel:     212-895-2110
         Fax:     212-895-2900

Number of Preferred Shares to be Purchased:   3,000
                                            -------

 Number of Warrant Shares initially
issuable upon exercise of Investor Warrant:  2,727,273
                                            ----------

<PAGE>

      IN WITNESS WHEREOF, the undersigned have executed this Securities Purchase
Agreement as of the date first-above written.

MEDIABAY, INC.

By:      __________________________
         Name:
         Title:

PALISADES MASTER FUND, L.P.

By:      Discovery Management Ltd.

         By: /s/  David K. Sims
             -----------------------------------
             Name:  David K. Sims
             Title:  Authorized Signatory

ADDRESS:

         P.O. Box 972, Road Town,
         TORTOLA,  BRITISH  VIRGIN  ISLANDS
         Attn:  Les Elliott
         Tel: 284-494-4770
         Fax: 284-494-4771

         With a copy to:

         ___________________________
         ___________________________
         Attn:  ____________________
         Tel:     __________________
         Fax:     __________________

Number of Preferred Shares to be Purchased:   2,000
                                            -------

 Number of Warrant Shares initially
issuable upon exercise of Investor Warrant:   1,818,182
                                            -----------

<PAGE>

      IN WITNESS WHEREOF, the undersigned have executed this Securities Purchase
Agreement as of the date first-above written.

MEDIABAY, INC.

By:      __________________________
         Name:
         Title:

CCM MASTER QUALIFIED FUND, LTD.

By:      Coghill Capital Management, LLC, its Manager

         By:      /s/  Clint D. Coghill
                  -----------------------------------
                  Name:  Clint D. Coghill
                  Title:  President & Chief Investment Officer

ADDRESS:

         CCM MASTER QUALIFIED FUND, LTD.
         c/o Coghill Capital Management, LLC
         One North Wacker Drive, Suite 4350
         Chicago, IL 60606
         Attn:  Kelly Darin
         Tel:     312-324-2000
         Fax:     312-324-2001

         With a copy to:

         Seward & Kissell LLP
         One Battery Park Plaza
         New York, NY 10004
         Attn:  Spiros Maliagros
         Tel:     212-574-1305
         Fax:     212-480-8421

Number of Preferred Shares to be Purchased:   10,000
                                            --------

Number of Warrant Shares initially

issuable upon exercise of Investor Warrant:   9,090,909
                                            -----------

<PAGE>

                              DISCLOSURE SCHEDULES

                                 TO THAT CERTAIN

                          SECURITIES PURCHASE AGREEMENT

                              DATED MARCH 21, 2005

<PAGE>

General Terms of Schedules:

1. Unless the context otherwise requires,  any terms used herein but not defined
herein  shall have the  meanings  ascribed  thereto in the  Securities  Purchase
Agreement dated as of March 21, 2005 (the  "Securities  Purchase  Agreement") by
and between  MediaBay,  Inc., a Florida  corporation (the "Company") and each of
the entities  whose names appear on the signature  pages thereof  (collectively,
the "Investors").

2. No disclosure of any matter contained herein shall create an implication that
such  matter  meets  any  standard  of  materiality.  Matters  reflected  in the
following  Schedules  are not  necessarily  limited to matters  required  by the
Securities Purchase Agreement to be reflected in the Schedules.  Such additional
matters are set forth for  informational  purposes  only and do not  necessarily
include other matters of a similar  nature,  nor shall the inclusion of any item
be construed as implying that any such item is "material" for any purpose.

3. Any fact or item which is clearly  disclosed in any Schedule  attached hereto
in such a way as to make its relevance or  applicability  to information  called
for by another  Schedule  attached  hereto  reasonably  apparent shall be deemed
disclosed in such other  Schedule,  to the same extent as if specific  reference
thereto were made in such other Schedule.

4. Headings and introductory  language have been inserted in the sections of the
Schedules  for  convenience  of  reference  only and shall to no extent have the
effect of amending or changing  the express  description  of the Sections as set
forth in the Securities Purchase Agreement.

<PAGE>

                                  SCHEDULE 3.4

                        Agreements Not Filed with the SEC

Attached hereto is a true and complete copy of that certain Employment Agreement
dated January 28, 2004 between the Company and Jeffrey Dittus.

<PAGE>

                                  SCHEDULE 3.5

                          Capitalization; Debt Schedule

CAPITALIZATION

Common Stock

There are 150,000,000 shares of the Company's Common Stock authorized and, as of
March 21, 2005,  24,969,278 shares of Common Stock issued and outstanding.  Upon
Stockholder  Approval,   there  will  be  300,000,000  shares  of  Common  Stock
authorized.

Preferred Stock

There are 5,000,000 shares of the Company's Preferred Stock authorized, of which
(i) 75,000 shares are  designated as Series A Preferred  Stock,  (ii) 10,000 are
designated  as Series B Preferred  Stock,  and (iii)  100,000 are  designated as
Series C Preferred Stock.

There  are (i)  25,000  shares  of the  Series  A  Preferred  Stock  issued  and
outstanding,  (ii)  200  shares  of the  Series B  Preferred  Stock  issued  and
outstanding,  and (iii) 43,527 shares of the Series C Preferred Stock issued and
outstanding.

Stock Option Plan1

The Company's 1997 Stock Option Plan (the "1997 Plan") provides for the grant of
stock

options to  purchase up to  2,000,000  shares.  As of March 1, 2005,  options to
purchase an  aggregate  of  1,977,000  shares of Common  Stock have been granted
under the 1997 Plan.

A total of  2,500,000  shares of common  stock have been  reserved  for issuance
pursuant to the 1999 Stock Option Plan (the "1999  Plan").  As of March 1, 2005,
options to purchase an aggregate  of 2,379,843  shares of Common Stock have been
granted under the 1999 Plan.

The  Company's  2000  Stock  Incentive  Plan (the "2000  Plan"),  the 2001 Stock
Incentive  Plan (the "2001 Plan") and the 2004 Stock  Incentive  Plan (the "2004
Plan")  each  provide  for the  grant  of any or all of the  following  types of
awards:  (1) stock  options,  which may be either  incentive  stock  options  or
non-qualified  stock options,  (2) restricted  stock, (3) deferred stock and (4)
other stock-based awards.

A total of  3,500,000  shares of Common  Stock have been  reserved  for issuance
pursuant to the 2000 Plan. As of March 1, 2005, options to purchase an aggregate
of 3,418,250 shares of Common Stock have been granted under the 2000 Plan..

A total of  3,500,000  shares of Common  Stock have been  reserved  for issuance
pursuant to the 2001 Plan. As of March 1, 2005, options to purchase an aggregate
of 3,417,000 shares of Common Stock have been granted under the 2001 Plan.
------------------------
1 No additional options under these Plans granted since March 1, 2005.

<PAGE>

A total of  7,500,000  shares of Common  Stock have been  reserved  for issuance
pursuant to the 2004 Plan. As of March 1, 2005, options to purchase an aggregate
of 450,000 shares of Common Stock have been granted under the 2004 Plan.

Other Convertible or Exercisable Securities

As  outlined in the table  below,  the Company has issued to Herrick (i) certain
convertible promissory notes (the "Herrick Notes"), (ii) shares of the Company's
(A) Series A Convertible  Preferred Stock and (B) Series C Convertible Preferred
Stock.2 In  addition,  as noted  below,  the  Company  has issued to  Huntingdon
certain  convertible  promissory  notes (the  "Huntingdon  Notes")  and Series C
Convertible Preferred Stock.3
<TABLE>
<CAPTION>

                                                                  Accrued
                                                                  Interest/
                                                                 Dividends (as    Accrual Rate of
                                                      Principal    March 17,    Interest/Dividends
   Name              Security           Issue Date     Amount        2005)         Per Diem4
   ----              --------           ----------     ------        -----         ---------
<S>             <C>                    <C>          <C>          <C>          <C>
Herrick          Convertible Notes      12/31/1998   $1,984,250   $1,326,149   $   1,006.28
Herrick          Convertible Notes      12/31/2002   $  500,000   $   46,773   $     136.11
Huntington       Convertible Notes      04/30/2000   $  800,000   $   95,153   $     533.66
Huntington       Convertible Notes      04/30/2000   $2,500,000   $  158,980   $     296.70

Herrick          Series A Convertible   01/18/2002   $2,500,000   $  184,375   $     625.00
                 Preferred Stock
Herrick          Series C Convertible   05/25/2004   $1,181,419   $  116,173   $     393.81
                 Preferred Stock
</TABLE>

2 Pursuant to that certain  agreement  by and between the  Company,  Herrick and
Huntingdon (the  "Herrick/Huntingdon  Agreement"),  (i) Herrick will convert the
principal  amount of the Herrick Notes and  $1,068,400 of stated  capital of his
Series A Preferred Stock into Common Stock, and (ii) the Company will redeem the
remaining $1,431,600 of stated capital of Herrick's Series A Preferred Stock and
$1,181,419 of stated capital of Herrick's  Series C Preferred Stock. All accrued
and unpaid interest and dividends as of the Closing Date will be paid.

3 Pursuant to the  Herrick/Huntingdon  Agreement (i) Huntingdon will convert the
Huntingdon Notes into Common Stock,  (ii) the Company will redeem  $3,171,278 of
stated capital of Huntingdon's  Series C Preferred  Stock, and (iii) the Company
will pay to  Huntingdon  all  accrued  but unpaid  interest  on notes  issued to
Huntingdon which were previously  canceled (which amounts to $11,913 as of March
17, 2005 and accruing at a rate of $2.53 per diem thereafter).

4 All accrued  interest and  dividends  shall  continue to accrue from March 17,
2005 until the Closing Date at these listed per diem rates. All accrued interest
and dividends shall continue to accrue from the Closing Date at these listed per
diem  rates   until   paid,   except   that,   pursuant  to  the  terms  of  the
Herrick/Huntingdon Agreement, Herrick and Huntingdon, as applicable, have waived
their rights to all dividends accruing on the Remaining Series A Preferred Stock
and Series C Preferred Stock subsequent to the Closing Date.

<PAGE>

<TABLE>
<CAPTION>
<S>             <C>                    <C>          <C>          <C>          <C>
Huntington       Series C Convertible   05/25/2004   $3,171,278   $  311,842   $   1,057.09
                 Preferred Stock
</TABLE>

20,000 shares of Series B Preferred Stock are convertible  into 25,974 shares of
Common Stock at a conversion price of $0.77 per share.

As of March 1, 2005,  the  Company has issued  outstanding  warrants to purchase
15,809,598 shares of Common Stock.5 Below is a list detailing such warrants:

                                          GRANT DATE      GRANTED       PRICE

Herrick                                   05/25/2004     3,029,230      $0.53
Huntington                                10/03/2002       250,000      $2.00
Huntington                                10/10/2002        37,500      $2.00
Huntington                                11/15/2002       140,000      $1.25
Huntington                                05/25/2004     8,131,538      $0.53
                                                        11,588,268

Alpha Capital AG,                         01/29/2004       294,118      $1.28
Bonanza Master Fund LTD                   01/29/2004       588,236      $1.28
Bridges & Pipes                           10/01/2003        25,000      $0.80
Bridges & Pipes                           04/01/2004        25,000      $0.80
Bridges & Pipes                           01/29/2004       201,765      $1.28
Colbart Birnet, LP                        01/29/2004        88,236      $1.28
Ellis International Limited Inc           01/29/2004       147,059      $1.28
Forest Hill Select Fund, L.P.             12/14/2004        39,000      $1.42
Forest Hill Select Fund, L.P.             10/11/2004       311,000      $0.83*
Forest Hill Select Offshore Ltd.          12/14/2004         1,000      $1.42
Forest Hill Select Offshore Ltd.          10/11/2004         9,000      $0.83*
Gryphon Master Fund, LP                   01/29/2004       294,118      $1.28
Lone Oak Partners, L.P.                   12/14/2004        10,000      $1.42
Lone Oak Partners, L.P.                   10/11/2004        80,000      $0.83*
RHP Master Fund, Ltd.                     01/29/2004       176,471      $1.28
Rockwood, Inc.                            01/29/2004       205,000      $1.28
Rockwood, Inc.                            04/12/2004       500,884      $1.28
Sandor Capital Master Fund, LP            01/29/2004       150,000      $1.28
SRG Capital, LLC                          01/29/2004       147,059      $1.28
Truk International Fund, LP               01/29/2004        88,236      $1.28
                                                         3,381,182

Amari, Carl                               01/03/2003        50,000      $3.00
Blakely Jr., Robert  R.                   01/29/2004        13,334      $1.28
Brunella Jacs LLC                         10/01/2003        50,000      $0.80
Brunella Jacs LLC                         04/01/2004        50,000      $0.80
Bunzl, Stephen                            10/01/2003        50,000      $0.80
Bunzl, Stephen                            04/01/2004        50,000      $0.80
Griffith, Scott  R.                       01/29/2004        13,333      $1.28
Gross Foundation, Inc.                    01/29/2004        58,824      $1.28
Haas, Marvin                              10/01/2003        25,000      $0.80
Haas, Marvin                              04/01/2004        25,000      $0.80
Hamblett, Michael  R.                     01/29/2004        58,824      $1.28
Investor relations int'l                  11/17/2003       150,000      $0.94
Isaacs, Michael                           10/01/2003        10,000      $0.80

5 No additional warrants have been issued since March 1, 2005.

<PAGE>

Isaacs, Michael                           04/01/2004        10,000      $0.80
Lemak, John  S.                           01/29/2004        60,000      $1.28
Levin, Dennis                             02/18/2003        40,000      $1.50
MFW Associates                            10/01/2003        25,000      $0.80
MFW Associates                            04/01/2004        25,000      $0.80
Shelmire III, Jesse  B.                   01/29/2004        13,333      $1.28
Wittenstein, Myles                        10/01/2003        25,000      $0.80
Wittenstein, Myles                        04/01/2004        25,000      $0.80
Zecher, Brian                             10/01/2003         6,250      $0.80
Zecher, Brian                             04/01/2004         6,250      $0.80
                                                           840,148

TOTAL                                                15,809,598

* See "Material Debt Outstanding - Forest Hill Debt." 6

Shares Reserved for Issuance upon Conversion of the Preferred Stock and Exercise
of the Warrants

<TABLE>
<CAPTION>

Investor                   Preferred            Warrants            Additional             Additional
                            Shares                               Preferred Shares           Warrants
<S>                       <C>                 <C>               <C>                      <C>
Satellite Strategic            4,316            3,923,636               1,079                980,909
Finance
Associates, LLC

Satellite Strategic           10,664            9,712,727               2,671              2,428,182
Finance Partners,
Ltd.

CCM Master                    10,000            9,090,909               2,500              2,272,727
Qualified Fund,
Ltd.

Radcliffe SPC,                 4,000            3,636,364               1,000                909,091
Ltd. for and on
behalf of the Class
A Convertible
Crossover
Segregated
Portfolio

</TABLE>

------------------------------
6 Pursuant to a certain Securities Purchase Agreement dated October 11, 2004, as
amended on December  14,  2004 and  February  8, 2005 (the  "October  Securities
Purchase  Agreement"),  by and among the  Company,  Forest Hill Select  Offshore
Ltd.,  Forest Hill Select Fund,  L.P. and Lone Oak Partners L.P.  (collectively,
the  "Forest  Hill  Parties"),  the  Company  agreed to issue to the Forest Hill
Parties  warrants  (the "Forest Hill  Warrants") to purchase  400,000  shares of
Common Stock at an exercise  price of $0.83 per share  during the five  (5)-year
period commencing on October 11, 2004.

<PAGE>

<TABLE>
<CAPTION>

Investor                   Preferred            Warrants            Additional             Additional
                            Shares                               Preferred Shares           Warrants
<S>                       <C>                 <C>               <C>                      <C>
Goldman, Sachs & Co.           3,000            2,727,273                750                 681,818

Palisades Master Fund, L.P.    2,000            1,818,182                500                 454,546

Forest Hill Select Fund,       1,325            1,204,545                331                 301,136
L.P.

Forest Hill Select               270              245,455                 68                  61,364
Offshore, Ltd.

Lone Oak Partners, L.P.          305              277,273                 76                  69,318

</TABLE>

Other  Outstanding  Commitments  by which the  Company  may be Required to Issue
Additional Shares

Pursuant to three separate agreements each dated April 28, 2004 (the "April 28th
Agreements") between the Company and each of Herrick,  Huntingdon and N. Herrick
Irrevocable ABC Trust, respectively, each party may have the right (the "Warrant
Amendment Rights") to require the Company to hold a shareholder meeting in order
to amend certain warrants to provide for full ratchet  anti-dilution  protection
under certain conditions.  Pursuant to the Herrick/Huntingdon Agreement, Herrick
and Huntingdon have waived and agreed to eliminate such Warrant Amendment Rights
including, but not limited to, with respect to the warrants sold pursuant to the
HH Securities Purchase Agreement (as defined in Schedule 3.12).

See footnote 8 for additional  issuances that shall be issued to the Forest Hill
Parties.

The Effective Date Payment  described under "Material Debt  Outstanding - Forest
Hill Debt" may be paid in the form of Common Stock under certain conditions.

Pursuant to a marketing consulting agreement,  the Company is obligated to issue
to Terra  Nova  Capital  100,000  options  to be issued  under the 2004 Plan and
expiring 5 years from the date such  options  are  granted,  exercisable  at the
market price of the Company's Common Stock as of the grant date.

Merriman  Curhan Ford & Co.  ("MCF") and Duncan  Capital,  LLC  ("Duncan")  will
receive  warrants  to purchase  shares of Common  Stock in  connection  with the
Capital Raising Transaction as described in Schedule 3.14.

<PAGE>

MATERIAL DEBT OUTSTANDING

Herrick and Huntingdon Notes

The  outstanding  principal  and  accrued  interest  on the  Herrick  Notes  and
Huntingdon  Notes (See this  Schedule  3.5 and  footnotes 2, 3 and 4), which are
being converted upon the Closing, and liens securing certain of such notes.

Herrick/Huntingdon Agreement

Pursuant to the Herrick/Huntingdon  Agreement, the Company is required to redeem
the  remaining  $1,431,600  of stated  capital of  Herrick's  Series A Preferred
Stock,  $1,181,419 of stated capital of Herrick's  Series C Preferred  Stock and
$3,171,278 of stated capital of Huntingdon's Series C Preferred Stock.

Pursuant to the Herrick/Huntingdon Agreement, the Company is required to pay all
accrued but unpaid  interest  and  dividends as outlined in the chart above (See
this Schedule 3.5 and footnotes 2, 3 and 4)

Zohar Senior Notes

The Company has issued and outstanding  Senior Notes in the principal  amount of
$9.5 million  pursuant to that certain Credit  Agreement dated April 28, 2004 by
and among the Company (the "Zohar Credit Agreement"), certain of subsidiaries of
the Company as guarantors,  Zohar CDO 2003-1, Limited ("Zohar"),  as lender, and
Zohar,  as agent.7 In addition,  ABC Investment  Corp.,  MediaBay.com,  Inc. and
Video  Yesteryear,  Inc., each a subsidiary of the Company,  executed a Guaranty
dated April 28, 2004 whereby each is a guarantor under the Credit Agreement.

Forest Hill Debt

Pursuant to a letter  agreement  dated  February 8, 2005 (the  "February  Letter
Agreement"),  if the last sale price of the Common  Stock is below  $0.75 on the
date on which a registration  statement covering the securities  purchased under
the October Securities  Purchase Agreement is declared effective by the SEC (the
"Registration Effective Date"), the Company shall be obligated to make a payment
to the Forest Hill  Parties in an aggregate  amount  equal to (A) $250,000  (pro
rata in proportion to the number of shares initially  purchased by them pursuant
to the October Securities  Purchase Agreement) less (B) the value of the 119,048
shares of its Common  Stock issued to the Forest Hill Parties in January 2005 on
the Registration Effective Date based on the last sale price of the Common Stock
on the Registration Effective Date (the "Effective Date Payment").

Pursuant to February Letter Agreement, if, at any time prior to the Registration
Effective Date, the last sale price of the Common Stock is above $4.00 per share
(the "Target Price"),  each of the Forest Hill Parties shall have the right (the
"Put Right"),  exercisable  in writing within five business days after the first
trading day on which the last sale price of the Common Stock is above the Target
Price,  to require the Company to purchase  200,000  shares of Common Stock at a
price of $3.00 per share. The Company's maximum  potential  obligation under the
Put Right is $600,000.8

------------------------------
7 Simultaneous  with the  consummation of the Financing,  the Company will repay
all principal  and accrued but unpaid  interest due pursuant to the Senior Notes
in the amount of $9,436,829.41 (including certain legal fees).

<PAGE>

3. Premier Agreement

Pursuant to that certain agreement dated April 1, 2004 (the "Premier Agreement")
by and among the Company,  Premier Electronic  Laboratories,  Inc.  ("Premier"),
Edison Realty and Marketing, Inc. and Video Yesteryear, Inc., the Company agreed
to pay  Premier  $950,000 in cash,  without  interest,  as follows:  (i) $14,000
simultaneously  with the execution and delivery of the Premier  Agreement,  (ii)
$7,000 per month in 34 equal  consecutive  monthly  payments on the first day of
each calendar month  commencing  July 1, 2004 and concluding  April 1, 2007, and
(iii) $19,389 per month in 36 consecutive  monthly  payments on the first day of
each calendar month commencing May 1, 2007 and concluding April 1, 2010.

Permitted Debt

The Company has and will  continue to have  outstanding  payables  and  customer
credit  balances  which are or will become more than 90 days past due, but as to
which payment has not been requested. If payment is requested,  any such payable
or customer  credit balance as to which payment is requested  shall no longer be
Permitted  Debt if,  within 20 Business  Days of the request  for  payment,  the
Company has not (i) paid such  payable or customer  credit  balance in full,  or
(ii) entered into an agreement with the payee  requesting the settlement  and/or
repayment of the payable or customer credit balance.

Other Debt

Immediately prior to Closing,  in connection with the Herrick Notes,  Huntingdon
Notes and the Senior Notes issued pursuant to the Zohar Credit Agreement,  liens
(the "Liens") shall exist on substantially all of the Company's assets. All such
Notes shall be repaid in connection  with the Financing  and, upon the filing of
Form UCC-3's with the appropriate Secretary of State, the Liens may be removed.

------------------------------
8 The  Company  intends  to enter  into a letter  agreement  (the  "Forest  Hill
Agreement")  with the Forest Hill Parties  whereby the Forest Hill Parties agree
to return and have  cancelled  the Forest Hill  Shares and Forest Hill  Warrants
issued  pursuant  to  the  October  Securities   Purchase   Agreement,   and  in
consideration thereof, the Company shall credit the Forest Hill Parties $900,000
(pro rata based on their initial investment), which shall be applied towards the
purchase of  $900,000 of the  Securities  pursuant  to the  Securities  Purchase
Agreement.

<PAGE>

                                 SCHEDULE 3.8.1

                         Changes to Financial Condition

The Company expects to report a loss of approximately  $18.0 to $19.0 million in
the fourth  quarter.  This  amount and the  amounts  below are  preliminary  and
subject to final audit by the Company's auditors and may vary significantly from
the final  audited  results.  Included in this  expected  loss are the following
non-cash  adjustments or write-offs relating to the Company's change in strategy
as follows (amounts are approximate):

                                                        (000)'s
                                                        -------
Deferred Tax Asset                                      $14,753
Inventory Obsolescence ABC                              $   870
Inventory Obsolescence RSI                              $   560
Royalty Advances ABC                                    $   214
Deferred Member Acquisition Costs                       $   846

In addition the Company will lose  substantially  all of its Net Operating  Loss
Carryforwards as result of the Financing and related transactions.

In the first quarter of 2005,  the Company will report an  additional  charge to
reflect the write-off of unamortized  financing charges related to the repayment
of the Company's senior debt.

<PAGE>

                                 SCHEDULE 3.8.3

                        Pending Inquiries/Investigations

The Company receives inquiries from time to time from various taxing authorities
as to certain  filings that may have been required or as to requests for payment
in a  particular  jurisdiction.  None  of  these  amounts  are  material  either
individually or in the aggregate.

<PAGE>

                                 SCHEDULE 3.8.4

                                   Litigation

None.

<PAGE>

                                  SCHEDULE 3.11

                             Intellectual Property

Intellectual Property Rights

Attached hereto is a list of all licenses and other  agreements  under which the
Company or any of its subsidiaries has been granted intellectual property.

The  Company has an  agreement  with a  publisher  under which it made  periodic
payments  for a series of  audiobook  titles.  The  agreement  provides  for the
Company to make additional payments of approximately  $700,000, some of which is
past due which amounts are in dispute.  The Company does not believe that it can
profitably  license the additional  titles and is negotiating with the publisher
to revise,  amend or cancel the  agreement.  The Company  does not believe  that
canceling the agreement  would have a material  adverse  effect on its business,
however it does want to maintain a good relationship with the publisher.

Confidentiality Agreements

To the best of the Company's knowledge,  all of the Company's employees (current
or former),  independent  contractors  and/or consultants of the Company and its
Subsidiaries have executed  agreements  regarding  confidentiality,  proprietary
information  and  assignment of inventions  and copyrights to the Company or its
Subsidiaries  (as the case may be),  except for independent  contractors  and/or
consultants of the Company that were not given access to material,  confidential
information of the Company.

Employees as Parties to a Non-Competition Agreement

Jeffrey Dittus, John Levy, Joseph Rosetti and Howard Herrick.

Non-Compliance

As of the Closing Date,  certain  royalty  payments have not been made and there
have  been  no  requests  for  royalty  statements  or  payments  in  connection
therewith.  The publishers and other  rightsholders  have not requested  royalty
statements or payments.  The amounts, all of which are accrued for and reflected
in the Company's financial statements.

<PAGE>

                                  SCHEDULE 3.12

                         Piggy-Back Registration Rights

The following Persons have the registration rights outlined below:

UNREGISTERED PLAN OPTIONS

<TABLE>
<CAPTION>

       Name                           Registration Rights          Grant Date      Granted
<S>                                  <C>                          <C>             <C>
Financial Globe, Inc.                        None                  10/04/2004     100,000*
Financial Globe, Inc.                        None                  10/04/2004     100,000*
Financial Globe, Inc.                        None                  10/04/2004     100,000*
Rubenstein Public Relations,                 Piggyback             09/22/2004     100,000*
Inc.

UNREGISTERED NON-PLAN WARRANTS AND OPTIONS

             Name                      Registration Rights        Grant Date     Granted

Amari, Carl                                  None                  01/03/03        50,000*
Bridges & Pipes,                             Piggyback             10/01/03        25,000*
Bridges & Pipes                              Piggyback             04/01/04        25,000*
Brunella Jacs LLC                            Piggyback             10/01/03        50,000*
Brunella Jacs LLC                            Piggyback             04/01/04        50,000*
Bunzl, Stephen                               Piggyback             10/01/03        50,000*
Bunzl, Stephen                               Piggyback             04/01/04        50,000*
Forest Hill Select Fund, L.P.                Demand                10/11/04       311,000*
Forest Hill Select Fund, L.P.                Demand                12/14/04        39,000*
Forest Hill Select Offshore                  Demand                10/11/04         9,000*
Ltd.
Forest Hill Select Offshore                  Demand                12/14/04         1,000*
Ltd.
Haas, Marvin                                 Piggyback             10/01/03        25,000*
Haas, Marvin                                 Piggyback             04/01/04        25,000*
Herrick                                      Demand                05/25/04     3,029,230
Huntington                                   Demand                10/03/02       250,000
Huntington                                   Demand                10/10/02        37,500
Huntington                                   Demand                11/15/02       140,000
Huntington                                   Demand                05/25/04     8,131,538
Investor Relations Int'l                     None                  11/17/03       150,000*
Isaacs, Michael                              Piggyback             10/01/03        10,000*
Isaacs, Michael                              Piggyback             04/01/04        10,000*
Levin, Dennis                                None                  02/18/03        40,000*
Lone Oak Partners, L.P.                      Demand                10/11/04        80,000*
Lone Oak Partners, L.P.                      Demand                12/14/04        10,000*
MFW Associates                               Piggyback             10/01/03        25,000*
MFW Associates                               Piggyback             04/01/04        25,000*
Rockwood, Inc.                               Piggyback             04/12/04       500,884*
Wittenstein, Myles                           Piggyback             10/01/03        25,000*
Wittenstein, Myles                           Piggyback             04/01/04        25,000*
Zecher, Brian                                Piggyback             10/01/03         6,250*

</TABLE>

<TABLE>
<CAPTION>

SERIES B PREFERRED STOCK

             Name                      Registration Rights      Grant Date         Granted
<S>                                  <C>                       <C>             <C>
John Levy                                    Piggyback             05/03           25,974*

UNREGISTERED STOCK

             Name                      Registration Rights      Grant Date         Granted

Forest Hill Select Fund, L.P.                Demand                10/13/2004   1,400,000**
Forest Hill Select Offshore                  Demand                10/13/2004      40,000**
Ltd.
Lone Oak Partners, L.P.                      Demand                10/13/2004     360,000**
Forest Hill Select Fund, L.P.                Demand               February-05      92,593*
Forest Hill Select Offshore                  Demand               February-05       2,646*
Ltd.
Lone Oak Partners, L.P.                      Demand               February-05      23,810*
Celebrity Newsletter (Larry                  Piggyback             11/1/2004       25,000*
King)

</TABLE>

OTHER

<TABLE>
<CAPTION>

             Name                      Registration Rights                 Granted
<S>                                  <C>                          <C>
Merriman Curhan Ford & Co.                   Piggyback            All the warrants issuable to MCF
                                                                  and Duncan as set forth on
                                                                  Schedule 3.14.*
Duncan Capital, LLC                          Piggyback

</TABLE>

* The  Company  intends to  include  the shares of Common  Stock  issuable  upon
exercise of these options and warrants,  as the case may be, in the Registration
Statement.

**See footnote 6 of Schedule 3.5.

The holders  (and/or their  assignees) of  registrable  securities  covered by a
currently effective  registration  statement (to the extent such shares have not
been sold) have certain demand and/or "piggy-back" registration rights.

The Company has entered  into a  registration  rights  agreement  dated the date
hereof with Herrick and Huntingdon in which the parties are granted "piggy-back"
registration  rights and, with respect to the shares of Common Stock issuable to
Herrick  and  Huntingdon  upon  conversion  of the  Herrick  Notes and  Series A
Preferred  Stock,   Herrick  and  Huntingdon  are  granted  the  same  automatic
registration rights as the Investors under the Registration Rights Agreement and
will  be  included  in the  Registration  Statement.  In  addition,  if the  SEC
determines  that the offering of all or part of the shares  reported for Herrick
and  Huntingdon  does  not  meet  the  eligibility  requirements  for  filing  a
Registration  Statement  on Form S-3,  the  Company  shall  file a  Registration
Statement on Form S-1 or S-2 covering such shares.

The Company has entered into another  registration  rights  agreement  dated the
date  hereof  with  Herrick  and  Huntingdon  in which the  parties  are granted
"piggy-back" registration rights and, with respect to the shares of Common Stock
issuable to Herrick and Huntingdon upon exercise of the warrants held by Herrick
and  Huntingdon as set forth under  Schedule  3.5,  Herrick and  Huntingdon  are
granted  substantially the same automatic  registration  rights as the Investors
under the Registration Rights Agreement, except that the Company is not required
to file this registration statement (the "Second Registration  Statement") until
30 days after the effective date of the Registration Statement.

<PAGE>

The shares of Common Stock issuable upon conversion or exercise, as the case may
be, of the Preferred  Stock and Warrants issued to the Forest Hill Parties under
the  Securities  Purchase  Agreement  shall  be  included  in  the  Registration
Statement.  The Forest Hill Parties have  registration  rights under an existing
agreement whereby the Company agreed to file a registration  statement  covering
the securities issued to the Forest Hill Parties to be effective by May 1, 2005.
In addition, see Schedule 3.5 regarding the Forest Hill Debt.

On the  Closing  Date,  pursuant to a  securities  purchase  agreement  (the "HH
Securities Purchase Agreement"),  Herrick and/or Huntingdon will sell to certain
purchasers (the "Purchasers") 9,090,909 shares of Common Stock (the "HH Shares")
at $.55 per share and shall transfer to such  Purchasers  certain  warrants (the
"HH Warrants") for each HH Share  purchased by such  Purchasers (an aggregate of
4,545,455 warrants).  The HH Shares and the shares of Common Stock issuable upon
exercise  of the HH  Warrants  will  be  included  in  the  Second  Registration
Statement.

<PAGE>

                                 SCHEDULE 3.14

                                      Fees

Pursuant to that certain letter agreement dated December 17, 2004, as amended on
March 21, 2005, and in consideration for certain financial  advisory and capital
raising services (the "Capital Raising Transaction"), MCF is entitled to receive
the  following  compensation:  (i) a cash payment in the amount equal to 7.5% of
the Purchase  Price,  (ii)  warrants to purchase that number of shares of Common
Stock equal to (a) 7.5% of the Conversion Shares issuable upon conversion of the
Preferred  Shares issued at the Closing  (calculated as if such Preferred Shares
were converted on the Closing Date), and (b) 7.5% of the Warrant Shares issuable
upon exercise of the Investor  Warrants issued at the Closing  (calculated as if
such Investor Warrants were exercised on the Closing Date), and (iii) if, and to
the extent that, the Preferred Warrants are exercised,  (A) a cash payment equal
to 7.5% of the exercise  price of such  Preferred  Warrants  (i.e.,  7.5% of the
Stated Value of the  Preferred  Shares  issuable  upon exercise of the Preferred
Warrants)  and (B) warrants to purchase that number shares of Common Stock equal
to (1) 7.5% of the Conversion  Shares  issuable upon conversion of the Preferred
Shares issued upon such exercise  (calculated  as if such  additional  Preferred
Shares were converted on the date they are issued) and (2) 7.5% of the shares of
Common Stock issuable upon exercise of the Additional  Warrants issued upon such
exercise  (calculated as if such Additional  Warrants were exercised on the date
they are  issued)  (collectively,  the "MCF  Financing  Fee").  MCF shall not be
entitled to any  compensation  in connection  with any securities  issued to the
Forest  Hill  Parties  pursuant  to the Forest  Hill  Agreement  and  Securities
Purchase Agreement.

In addition, MCF is entitled to a fee of $175,000 for its services in connection
with the sale, pursuant to the HH Securities Purchase Agreement, of common stock
and warrants to the Purchasers.

Duncan is entitled to receive from MCF 10% of the MCF Financing Fee when payable
to MCF in accordance with the foregoing paragraph.

<PAGE>

                                 SCHEDULE 3.16

                                  Key Employees

Joseph Rosetti and Jeffrey Dittus.

<PAGE>

                                 SCHEDULE 3.19

                                  Pension Plans

The Company provides a self-directed 401K for employees who wish to participate.
The Company does not contribute any money to the plan.

<PAGE>

                                 SCHEDULE 3.21

                                    Property

None.

<PAGE>

                                 SCHEDULE 3.23

                         Nasdaq Notices; Non-Compliance

Non-Compliance

The Company's Common Stock is currently below the minimum per share  requirement
($1.00) for continued listing on the Nasdaq market. See "Nasdaq Notices" below.

The Company  expects that upon filing its Form 10-K for the year ended  December
31, 2004, it will report shareholders' equity below $10 million.

Nasdaq Notices

The Company received a letter dated March 8, 2005 from Nasdaq Stock Market, Inc.
that the Company is not in  compliance  with the  minimum per share  requirement
($1.00) for continued  listing on the exchange  under NASDAQ  Marketplace  Rules
4310(c)(4).  The Company has 180 days to  demonstrate  compliance  by having its
stock  trade over  $1.00 for a minimum  of ten  consecutive  trading  days.  The
Company  shall use  commercially  reasonable  efforts to maintain its  continued
listing on the exchange.

<PAGE>

                                 SCHEDULE 3.28

                      Transactions with Interested Persons

As of December 31, 2004, the Company owed to Herrick and his affiliates $314,910
for  reimbursement  of expenses and  services.  On April 28, 2004, in connection
with the agreements  described below, the Company agreed to repay  approximately
$639,000 as  follows:  (i) $40,500 per month on the first of each month from May
2004 through and including July 2005 and (ii) $31,410 on August 1, 2005.

The Company and The Herrick  Company,  Inc. share an umbrella  insurance  policy
(the  "Insurance  Policy") with a limit of $20 million of coverage.  Pursuant to
the terms of the  Herrick/Huntingdon  Agreement,  on or before the expiration of
the Insurance Policy,  the Company shall use commercially  reasonable efforts to
enter into a new umbrella insurance policy whereby the Company shall be the sole
insured party.

The Company  has issued to Herrick and  Huntingdon  notes,  preferred  stock and
warrants set forth on Schedule 3.5.

On November 15, 2002, the Company entered into an indemnification agreement with
Herrick  pursuant  to which,  the  Company  agreed to  indemnify  Herrick to the
maximum  extent  permitted by the corporate  laws of the State of Florida or, if
more favorable,  Articles of Incorporation and By-Laws in effect at the time the
agreement was executed, against all claims (as defined in the agreement) arising
from  or out of or  related  to  Herrick's  services  as an  officer,  director,
employee,  consultant or agent of the Company or any  subsidiary or in any other
capacity.

On November  15,  2002,  the Company  entered  into an  agreement  with  Herrick
pursuant to which  Herrick  agreed to resign as Chairman  upon the lenders under
the  senior  credit  facility  consent  to  such  resignation  or the  Company's
repayment  of the  facility  as to  permit  Carl  Wolf to  become  Chairman.  As
consideration, Herrick was given the right to nominate up to four members of the
Board of  Directors  of the Company and the Company  agreed not to increase  the
number of directors to more than seven members without Herrick's consent.

On May 7, 2003,  the Company sold 3,350 shares of a newly created Series B Stock
with a liquidation preference of $100 per share for $335,000. Of the total sold,
200 shares  ($20,000) were purchased by John Levy,  Executive Vice President and
Chief Financial Officer of the Company. Under a subscription agreement,  certain
"piggy-back" registration rights were granted.

On April 28, 2004,  the Company  entered into a new credit  agreement.  Herrick,
Huntingdon and N. Herrick Irrevocable ABC Trust (the "Trust"),  of which Herrick
was  the  beneficiary,  consented  to the new  credit  agreement  and the  other
transactions  described  above and entered into a  subordination  agreement with
Zohar. The new credit  agreement  required the aggregate amount of principal and
interest owed by the Company to Herrick,  Huntingdon and the Trust be reduced to
$6,800,000  ("Permissible  Debt") by June 1, 2004, and that the Permissible Debt
be further  reduced by up to an  additional  $1,800,000  if the Company does not
raise at least $2,000,000 in additional equity in each of the two calendar years
following the execution of the new credit agreement.

<PAGE>

Pursuant  to an  agreement  dated  April  28,  2004,  on May 25,  2004,  Herrick
exchanged  accrued and unpaid  interest  and  dividends  (including  accrued and
unpaid interest distributed by the Trust to Herrick) owed to Herrick aggregating
$1,181,419 into (i) 11,814 shares of Series C Convertible Preferred Stock with a
liquidation  preference  of $100 per  share  convertible  into an  aggregate  of
1,514,615 shares of Common Stock at an effective  conversion price of $0.78, and
(ii) warrants to purchase  3,029,230  shares of Common  Stock.  The warrants are
exercisable until April 28, 2014 at an exercise price of $0.53.

Pursuant to an  agreement  dated April 28,  2004,  on May 25,  2004,  Huntingdon
exchanged  the  principal of the  $500,000  principal  amount  note,  $1,000,000
principal amount note,  $150,000  principal  amount note and $350,000  principal
amount  note held by  Huntingdon,  plus  accrued  and  unpaid  interest  owed to
Huntingdon aggregating $1,171,278 into (i) 31,713 shares of Series C Convertible
Preferred  Stock  convertible  into an aggregate  of 4,065,768  shares of Common
Stock at an effective  conversion  price of $0.78, and (ii) warrants to purchase
an aggregate of 8,131,538  shares of Common Stock.  The warrants are exercisable
until  April  28,  2014 at an  exercise  price of  $0.53.  If the  amount of the
Permissible Debt is required to be reduced due to the Company's failure to raise
the requisite  additional equity, such reduction will automatically occur by the
exchange of Permissible Debt held by Huntingdon for additional  shares of Series
C Convertible  Preferred Stock in an aggregate  liquidation  preference equal to
the amount of debt  exchanged  and  warrants  to  purchase a number of shares of
Common  Stock equal to two times the number of shares of Common  Stock  issuable
upon conversion of the Series C Convertible Preferred Stock.

Herrick and  Huntingdon  agreed not to demand  repayment of their debt until the
earlier of (i) the repayment of the New Credit  Agreement or (ii) June 28, 2007.
The remaining  promissory  notes held by Herrick,  Huntingdon  and the Trust are
guaranteed by certain  subsidiaries  of the Company and secured by a lien on the
assets of the Company and certain subsidiaries of the Company.

In  connection  with an  agreement to  terminate  and a  consulting  termination
agreement, the non-competition and nondisclosure covenants of the XNH Consulting
Services, Inc. consulting agreement were extended until December 31, 2006.

See the  Herrick/Huntingdon  Agreement  and the  exhibits  thereto  described in
footnotes 2 and 3.

The Company,  Herrick and Huntingdon shall enter into a voting agreement whereby
each shall authorize the chairman and/or  president of the Company to vote their
voting securities pursuant to the terms set forth in Section 5.1.13 of the Asset
Purchase Agreement.

The Company has entered  into a  registration  rights  agreement  dated the date
hereof with Herrick and Huntingdon in which the parties are granted "piggy-back"
registration  rights and, with respect to the shares of Common Stock issuable to
Herrick  and  Huntingdon  upon  conversion  of the  Herrick  Notes and  Series A
Preferred  Stock,   Herrick  and  Huntingdon  are  granted  the  same  automatic
registration rights as the Investors under the Registration Rights Agreement.

<PAGE>

The Company has entered into another  registration  rights  agreement  dated the
date  hereof  with  Herrick  and  Huntingdon  in which the  parties  are granted
"piggy-back" registration rights and, with respect to the shares of Common Stock
issuable to Herrick and Huntingdon upon exercise of the warrants held by Herrick
and  Huntingdon as set forth under  Schedule  3.5,  Herrick and  Huntingdon  are
granted  substantially the same automatic  registration  rights as the Investors
under the Registration Rights Agreement,  except that the Company is required to
file the Second Registration Statement.

On the Closing  Date,  the  Company  shall  become a party to the HH  Securities
Purchase Agreement and shall deliver an acknowledgment  letter to the Purchasers
whereby the Company shall acknowledge that the Purchasers are the new holders of
the HH Shares and HH  Warrants  and shall be  entitled  to all the  registration
rights associated therewith.

See the October Securities Purchase Agreement, the February Letter Agreement and
Forest Hill Agreement set forth in Schedule 3.5.

<PAGE>

                                 SCHEDULE 3.29

                              Customers; Suppliers

Fulfillment  Agreement  with  Bookspan  expires  April  2005 and the  Company is
negotiating to extend such agreement to continue on a  month-to-month  basis. In
addition, the Company is exploring other options.

See Schedule 3.11 regarding non-compliance.

<PAGE>

                                  SCHEDULE 4.4

                                 Use of Proceeds

The Company shall use proceeds to:

o     Make payment under the Premier Agreement (See Schedule 3.5);

o     Repay  principal and accrued  interest on the Senior Notes issued to Zohar
      (See Schedule 3.5 and footnote 7);

o     (i) Redeem (A) the balance of Herrick's  Series A Preferred Stock, (B) all
      of Herrick's Series C Preferred Stock, and (C) all of Huntingdon's  Series
      C Preferred  Stock,  (ii) pay all  accrued but unpaid  interest on certain
      notes issued to Huntingdon which were previously  canceled,  (iii) pay all
      accrued but unpaid  interest on the Herrick  Notes as of the Closing  Date
      immediately upon  conversion,  (iv) pay all accrued but unpaid interest on
      the Huntingdon  Notes as of the Closing Date  immediately upon conversion,
      and (v) pay all accrued but unpaid  dividends  on the  Remaining  Series A
      Preferred  Stock and the Series C Preferred  Stock as of the Closing Date,
      in cash to Herrick and  Huntingdon,  as  applicable,  on the Closing Date9
      (See Schedule 3.5 and footnotes 2, 3 and 4);

o     Pay MCF the MCF Financing Fee;

o     Pay MCF a fee of $175,000  for its services in  connection  with the sale,
      pursuant to the HH  Securities  Purchase  Agreement,  of common  stock and
      warrants to the Purchasers;

o     Pay legal fees of  Investors'  counsel,  Duval &  Stachenfeld  LLP,  up to
      $55,000; and

o     Pay the Company's legal fees and other expenses related to the Financing.

The Company will use the remaining funds for general working capital purposes.

-------------------------
9 Pursuant to the terms of the Herrick/Huntingdon  Agreement, Herrick
and  Huntingdon,  as  applicable,  have  waived  their  rights to all  dividends
accruing on the Remaining  Series A Preferred Stock and Series C Preferred Stock
subsequent to the Closing Date.

<PAGE>

                                 SCHEDULE 5.1.11

                 Convertible Subordinated Notes Being Converted
<TABLE>
<CAPTION>

                       Principal                              Conversion    Shares Issuable Upon
Holder                   Amount          Issue Date              Price           Conversion
------                 ---------         ----------           ----------    --------------------
<S>                   <C>            <C>                   <C>              <C>
Herrick                $1,984,250     December 31, 1998     $   0.56            3,543,303

Herrick                $  500,000     December 31, 2002     $   0.56              892,857

Huntingdon             $  800,000     April 30, 2000        $   0.56            1,428,571

Huntingdon             $2,500,000     April 30, 2000        $   0.56            4,464,285

</TABLE>

              Convertible Series A Preferred Stock Being Converted

             Holder            Series    Conversion Price       Stated Capital
             ------            ------    ----------------       --------------
             Herrick              A           $0.56              $1,068,400

<PAGE>

                                 SCHEDULE 5.1.12

              Series A and Series C Preferred Stock Being Redeemed

                                            Conversion
             Holder            Series         Price             Stated Capital
             ------            ------       ----------          --------------
             Herrick               A           $0.56             $1,431,600
             Herrick               C           $0.78             $1,181,419
             Huntingdon            C           $0.78             $3,171,278

<PAGE>

                                    EXHIBIT A

                              ARTICLES OF AMENDMENT

See Exhibit No. 3.1.

<PAGE>

                                    EXHIBIT B

                                 FORM OF WARRANT

See Exhibit No. 10.2.

<PAGE>

                                    EXHIBIT C

                            FORM OF PREFERRED WARRANT

See Exhibit No. 10.3.

<PAGE>

                                    EXHIBIT D

         FORM OF WARRANT TO SATELLITE STRATEGIC FINANCE ASSOCIATES, LLC

See Exhibit No. 10.4.

<PAGE>

                                   EXHIBIT E-1

                          REGISTRATION RIGHTS AGREEMENT

See Exhibit No. 4.1.

<PAGE>

                                   EXHIBIT E-2

                      GOLDMAN REGISTRATION RIGHTS AGREEMENT

See Exhibit No. 4.2.

<PAGE>

                                    EXHIBIT F

                            INVESTOR ESCROW AGREEMENT

<PAGE>

                        PRIVATE OFFERING ESCROW AGREEMENT

      THIS  ESCROW  AGREEMENT,   dated  as  of  March  21,  2005  (this  "ESCROW
AGREEMENT"),  is entered into by and between MediaBay,  Inc. (the "COMPANY") and
Wells Fargo Bank, National Association (the "ESCROW AGENT").

      WHEREAS,  the Company  intends to issue and sell, and each of the entities
listed  on  Exhibit  A  hereto  (each,  an  "INVESTOR"  and  collectively,   the
"INVESTORS")  intends  to  purchase,  certain  securities  of the  Company  (the
"SECURITIES")  pursuant  to a  Securities  Purchase  Agreement  by and among the
Company and each of the Investors, a copy of which is attached hereto as Exhibit
B (the "SECURITIES PURCHASE AGREEMENT");

      WHEREAS,  it has been determined  that,  pending the Closing under (and as
defined in) the Securities Purchase  Agreement,  each Investor will deposit with
the Escrow  Agent the amount,  as set forth  opposite  such  Investor's  name on
Exhibit A hereto,  to be paid by such Investor in respect of the Purchase  Price
payable  by such  Investor  under (and as defined  in) the  Securities  Purchase
Agreement,  such amount to be held and released in accordance  with the terms of
this Escrow Agreement; and

      WHEREAS, the Escrow Agent is willing to accept appointment as Escrow Agent
solely for the expressed duties, terms and conditions outlined herein.

      NOW, THEREFORE, in consideration of the premises set forth above and other
good and valuable  consideration,  the receipt of which is hereby  acknowledged,
the parties hereto agree as follows:

      1. PROCEEDS TO BE HELD IN ESCROW.  All such funds  received from Investors
by the Escrow Agent  ("INVESTOR  FUNDS") shall be retained in a separate account
by the Escrow Agent (the "ESCROW  ACCOUNT") and invested as stated herein.  Each
Investor  that deposits  funds with the Escrow Agent in  accordance  herewith is
referred to herein as a  "PURCHASER".  The  Investor  Funds,  together  with all
earnings  thereon,  are referred to herein as the "ESCROW AMOUNT".  All Investor
Funds so  deposited  shall  remain the  property  of the  respective  Purchasers
depositing  such Investor Funds and shall not be subject to any liens or charges
by the Company or the Escrow Agent,  or judgments or creditors'  claims  against
the Company, unless and until such Investor Funds are released to the Company as
hereinafter  provided. As and when the Escrow Agent receives Investor Funds, the
Escrow Agent shall notify the Company of the amount of Investors  Funds received
and from whom such Investor Funds have been received.

      2. INVESTOR INFORMATION.  The amount to be deposited with the Escrow Agent
by  each  Investor,   together  with  each  such  Investor's   address  and  tax
identification  number (if  applicable),  is set forth on Exhibit A hereto.  The
Escrow Agent will not use the information  provided to it by the Company and the
Investors for any purpose other than to fulfill its obligations as Escrow Agent.
The  Company  and the  Escrow  Agent  will  treat all  Investor  information  as
confidential.

<PAGE>

      3. DISBURSEMENT OF FUNDS.

                  (a) If:

                           (x)      Investors  have  deposited  with the  Escrow
                                    Agent,  in  the  aggregate,  not  less  than
                                    $35,000,000; and

                           (y)      the   Escrow    Agent   has    received   an
                                    Authorization    to   Disburse   Funds,   in
                                    substantially  the form  attached  hereto as
                                    Exhibit  C (the  "AUTHORIZATION"),  executed
                                    (which   execution   may   be  in   separate
                                    counterparts   and  may  be  transmitted  by
                                    facsimile)  by (i) the  Company  and (ii) by
                                    each Purchaser;

then, upon the satisfaction of such conditions,  the Escrow Agent shall promptly
pay out and deliver the Escrow Amount in accordance  with the  instructions  set
forth on the Authorization (the "ESCROW Release").  Upon the satisfaction of the
conditions  set forth in clauses (x) and (y) above,  (i) the  Closing  under the
Securities  Purchase  Agreement  shall occur,  (ii) each  Purchaser  shall,  for
purposes of the Securities  Purchase  Agreement and for all other  purposes,  be
deemed to have  delivered  to the Company  the  Purchase  Price  payable by such
Purchaser  under the Securities  Purchase  Agreement and (iii) the Company shall
forthwith  (and in any event not later than the close of business on the Closing
Date) deliver to each  Purchaser all  certificates  representing  the Securities
purchased by such Purchaser  under the Securities  Purchase  Agreement.  For the
avoidance of doubt,  no portion of the Escrow Amount shall be released  pursuant
to this  Section 3(a) unless and until the  conditions  set forth in clauses (x)
and (y) above have been satisfied.

            (b) In the event that, for any reason  whatsoever (and  irrespective
of fault),  the Escrow  Release  has not  occurred on or prior to March 23, 2005
(the "TERMINATION DATE"), then, not later than the close of business on the next
following business day (which for purposes hereof shall mean a date on which the
Escrow Agent is open for business), the Escrow Agent shall release, pay over and
return to each  Purchaser,  by wire  transfer in  accordance  with wire transfer
instructions provided in writing to the Escrow Agent by such Purchaser,  without
charge  or  deduction,  an  amount  equal  to the sum of (i) the  amount  of the
Investor Funds previously  delivered to the Escrow Agent hereunder plus (ii) the
amount of any  interest or other amount  earned on such amount (such  release of
funds in accordance with this Section 3(b) being an "ESCROW TERMINATION").

      4. DUTY AND  LIABILITY  OF THE ESCROW  AGENT.  The sole duty of the Escrow
Agent, other than as herein specified, shall be to receive the Escrow Amount and
hold them subject to release in accordance herewith,  and the Escrow Agent shall
be under no duty to  determine  whether the Company or any Investor is complying
with requirements of the Securities  Purchase Agreement or any other Transaction
Document (as defined in the Securities Purchase Agreement.  The Escrow Agent may
conclusively  rely upon and shall be  protected  in acting  upon any  statement,
certificate, notice, request, consent, order or other document believed by it to
be genuine and to have been signed or  presented by the proper party or parties.
The Escrow Agent shall have no duty or  liability to verify any such  statement,
certificate,  notice,  request,  consent,  order or other document, and its sole
responsibility  shall  be to act only as  expressly  set  forth  in this  Escrow
Agreement.  The Escrow Agent shall be under no obligation to institute or defend
any action,  suit or proceeding in connection with this Escrow  Agreement unless
first indemnified to its  satisfaction.  The Escrow Agent may consult counsel of
its own choice in respect of any question  arising  under this Escrow  Agreement
and the Escrow Agent shall not be liable for any action taken or omitted in good
faith upon advice of such counsel.

                                      9
<PAGE>

      5. ESCROW AGENT'S FEE. The Escrow Agent shall be entitled to  compensation
for its  services as stated in the fee  schedule  attached  hereto as Exhibit D,
which  compensation  shall be paid by the  Company.  The fee agreed upon for the
services  rendered  hereunder  is intended as full  compensation  for the Escrow
Agent's services as contemplated by this Escrow  Agreement;  provided,  however,
that in the event  that the  Escrow  Agent  renders  any  material  service  not
contemplated by this Escrow Agreement, or there is any assignment of interest in
the  subject  matter of this  Escrow  Agreement,  or any  material  modification
hereof, or if any material controversy arises hereunder,  or the Escrow Agent is
made a party  to any  litigation  pertaining  to this  Escrow  Agreement  or the
subject matter hereof, then the Escrow Agent shall be reasonably compensated for
such extraordinary services and reimbursed for all costs and expenses, including
reasonable attorney's fees, occasioned by any delay, controversy,  litigation or
event, and the same shall be recoverable solely from the Company.

      6.  INVESTMENT  OF  PROCEEDS.  The Escrow  Amount shall be credited by the
Escrow Agent and recorded in the Escrow Account.  Such funds will be invested in
the Wells Fargo Prime Investment Money Market Fund. Any interest received by the
Escrow Agent with  respect to the Escrow  Amount shall become part of the Escrow
Amount  and  shall be  disbursed  (i) in the  event  of the  Escrow  Release  in
accordance with Section 3(a) hereof, to the Company,  or (ii) in the event of an
Escrow  Termination in accordance  with Section 3(b) hereof,  to the Purchasers,
pro rata in proportion to the amount of Investor Funds deposited with the Escrow
Agent by each Purchaser.

      7. TAX MATTERS.

            (a) The parties agree that, for tax reporting purposes, all interest
or other  taxable  income  earned on the Escrow  Amount in any tax year shall be
taxable  to party  or  parties  receiving  such  interest  or  other  income  in
accordance  with  Section  6  hereof.  On or  prior to the  payment  of any such
interest or other  income,  the parties to whom such interest or other income is
to be paid shall provide Escrow Agent with certified tax identification  numbers
by  furnishing  appropriate  IRS forms W-9 or W-8 and other forms and  documents
that Escrow Agent may reasonably request. The parties hereto understand that, if
such tax reporting  documentation  is not so certified to Escrow  Agent,  Escrow
Agent may be required  by the  Internal  Revenue  Code of 1986,  as amended,  to
withhold a portion of any interest or other income  earned on the Escrow  Amount
pursuant to this Escrow Agreement.

                                       10
<PAGE>

            (b) To the extent that Escrow Agent  becomes  liable for the payment
of any taxes in respect of income  derived from the  investment of Escrow Amount
held or payments made  hereunder,  Escrow Agent shall satisfy such  liability to
the extent possible from the Escrow Amount.  The Company agrees to indemnify and
hold  Escrow  Agent  harmless  from and against  any taxes,  additions  for late
payment,  interest,  penalties and other  expenses that may be assessed  against
Escrow  Agent on or with respect to any payment or other  activities  under this
Escrow  Agreement  unless any such tax,  addition  for late  payment,  interest,
penalties and other  expenses shall arise out of or be caused by the actions of,
or failure to act, by Escrow Agent.

      8. NOTICES. All notices, requests, demands, and other communications under
this Escrow Agreement, shall be in writing and shall be deemed to have been duly
given  (a) on the date of  service  if  served  personally  on the party to whom
notice is to be given, (b) on the day of transmission if sent by facsimile/email
transmission to the facsimile  number/email  address given below, and telephonic
confirmation of receipt is obtained  promptly after  completion of transmission,
or (c) on the day after delivery to Federal Express or similar overnight courier
or the Express Mail service  maintained by the United States Postal Service,  to
the parties as follows:

         If to the Company:

         MediaBay, Inc.
         2 Ridgedale Avenue
         Cedar Knolls, NJ 07927
         Attn: Jeffrey Dittus, Chief Executive Officer
         Phone: (973) 539-9528
         Fax: (973) 539-1273

         If to Escrow Agent:

         Wells Fargo Bank, National Association
         Corporate Trust Services
         707 Wiltshire Blvd., 17th Floor
         Los Angeles, CA  90017
         Attention: Regina Vergara
         Telephone:        (213) 614-3352
         Facsimile:        (213) 614-3355

and if to any  Purchaser,  to such  address  for such  Purchaser  as  appears on
Exhibit A hereto or as shall be designated  by such  Purchaser in writing to the
Escrow Agent. Any party may change its address for purposes of this paragraph by
giving the other party written notice of the new address in the manner set forth
above.

      9.  INDEMNIFICATION  OF ESCROW AGENT.  The Company hereby  indemnifies and
holds harmless the Escrow Agent from and against,  any and all loss,  liability,
cost, damage and expense,  including,  without  limitation,  reasonable  counsel
fees, which the Escrow Agent may suffer or incur by reason of any action,  claim
or proceeding brought against the Escrow Agent arising out of or relating in any
way to this Escrow  Agreement or any transaction to which this Escrow  Agreement
relates  unless such action,  claim or  proceeding  is the result of the willful
misconduct or gross negligence of the Escrow Agent.

                                       11
<PAGE>

      10.  SUCCESSORS AND ASSIGNS.  Except as otherwise  provided in this Escrow
Agreement,  no party hereto shall assign this Escrow  Agreement or any rights or
obligations  hereunder  without the prior  written  consent of the other parties
hereto and any such  attempted  assignment  without such prior  written  consent
shall be void and of no force and effect.  This Escrow  Agreement shall inure to
the benefit of and shall be binding upon the successors and permitted assigns of
the parties hereto.

      11. THIRD PARTY  BENEFICIARIES.  Each Purchaser is an intended third party
beneficiary of this Escrow Agreement and of each of the provisions  hereof,  and
the parties hereto agree that each Purchaser may enforce this Escrow  Agreement,
and each of the provisions  hereof, to the same extent as if such Purchaser were
a party hereto.

      12. GOVERNING LAW; JURISDICTION. This Escrow Agreement shall be construed,
performed,  and enforced in accordance  with, and governed by, the internal laws
of the State of New York,  without  giving effect to the principles of conflicts
of laws thereof that would  result in the  application  of the laws of any other
jurisdiction.

      13.  SEVERABILITY.  In the event that any part of this Escrow Agreement is
declared by any court or other judicial or administrative body to be null, void,
or  unenforceable,  said  provision  shall  survive  to the  extent it is not so
declared,  and all of the other provisions of this Escrow Agreement shall remain
in full force and effect.

      14. AMENDMENTS; WAIVERS. This Escrow Agreement may be amended or modified,
and any of the terms,  covenants,  representations,  warranties,  or  conditions
hereof  may be  waived,  only by a written  instrument  executed  by each of the
parties hereto and consented to by each  Purchaser,  or in the case of a waiver,
by the  party or  Purchaser  waiving  compliance.  Any  waiver  by any  party or
Purchaser of any condition,  or of the breach of any provision,  term, covenant,
representation,  or warranty  contained in this Escrow Agreement,  in any one or
more instances, shall not be deemed to be nor construed as further or continuing
waiver of any such  condition,  or of the breach of any other  provision,  term,
covenant, representation, or warranty of this Escrow Agreement.

      15.  ENTIRE   AGREEMENT.   This  Escrow  Agreement   contains  the  entire
understanding  among the parties hereto with respect to the escrow  contemplated
hereby and supersedes and replaces all prior and contemporaneous  agreements and
understandings, oral or written, with regard to such escrow.

      16. SECTION  HEADINGS.  The section  headings in this Escrow Agreement are
for reference  purposes only and shall not affect the meaning or  interpretation
of this Escrow Agreement.

      17.  COUNTERPARTS.  This Escrow Agreement may be executed in counterparts,
and by facsimile transmission, and each counterpart shall be deemed an original,
but all of which counterparts together shall constitute the same instrument.

                                       12
<PAGE>

      18.  RESIGNATION.  Escrow  Agent may resign upon 30 days  advance  written
notice to the parties  hereto.  If a  successor  Escrow  Agent is not  appointed
within the 30-day period  following  such notice,  Escrow Agent may petition any
court of competent  jurisdiction to name a successor  Escrow Agent or interplead
the Investor Amount with such court,  whereupon  Escrow Agent's duties hereunder
shall terminate.

                            [Signature Pages Follow]

<PAGE>

      IN WITNESS  WHEREOF,  the parties hereto have caused this Escrow Agreement
to be executed as of the day and year first set forth above.

MEDIABAY, INC.

By:      __________________________
         Name:
         Title:

Wells Fargo Bank, National Association, as Escrow Agent

By:
   --------------------------------------------------
Its:
    -------------------------------------------------

<PAGE>

                                    EXHIBIT A

4. List of Investors

<TABLE>
<CAPTION>

                  Name & Address of Investor                               Tax                      Investor  Funds
                  --------------------------                               ----                     ---------------
                                                                           ID                       Amount
                                                                           ---                      ------
                                                                           Number
                                                                           ------
                 <S>                                                      <C>                      <C>
                  Satellite      Strategic      Finance                                             $ 4,316,000.00
                  Associates, LLC
                  c/o Satellite Advisors, L.L.C.
                  623 Fifth Avenue, 20th Floor
                  New York, New York 10022
                  Fax:     212-209-2021

                  Satellite      Strategic      Finance                                             $10,684,000.00
                  Partners, Ltd.
                  c/o Satellite Advisors, L.L.C.
                  623 Fifth Avenue, 20th Floor
                  New York, New York 10022
                           Fax:     212-209-2021

                  CCM Master Qualified Fund, Ltd.                                                   $10,000,000.00
         c/o Coghill Capital

                  Radcliffe SPC. Ltd.                                                               $ 4,000,000.00
         c/o RG Capital Management, L.P.
         3 Bala Plaza - East, Suite 501
         Bala Cynwyd, PA  19004
         Attn: Gerald F. Stahlecker

         Fax:  610-617-0580

                  Goldman, Sachs & Co.                                                              $ 3,000,000.00
         One New York Plaza
         New York, NY  10004
         Fax:  212-428-3505

                  Discovery Management Ltd.                                                         $ 2,000,000.00
         c/o Palisades Master Fund, L.P.

<PAGE>

                  Forest Hill Select Fund, L.P.                                                     $1,325,000.0010
                  Forest Hill Select Offshore, Ltd.                                                 $    270,000.00*
                  Lone Oak Partners L.P.                                                            $    305,000.00*
         100 Morgan Keegan Drive, Suite 430
         Little Rock, AR  72202
         Attn:  J.P. Brizzolara

         Fax:  501-666-4492

</TABLE>

-------------------------------
10 Aggregate cash amount for Forest Hill Select Fund,  L.P.,  Forest Hill Select
Offshore,  Ltd. and Lone Oak Partners is  $1,000,000.00;  remaining  $900,000.00
being invested by these entities being paid in non-cash consideration.

<PAGE>

                                    EXHIBIT G

                          FOREST HILL LETTER AGREEMENT

See Exhibit No. 10.10.

<PAGE>

                                    EXHIBIT H

                           FORM OF OPINION OF COUNSEL

<PAGE>

                                                              March ___, 2005

To the Investors set forth
on the Signature Pages to the Securities
Purchase Agreement
(as defined below)

                           Re:      MediaBay, Inc.

Ladies and Gentlemen:

      We are  securities  counsel to MediaBay,  Inc.  (the  "Company"),  and are
rendering this opinion on behalf of the Company,  in connection with the private
offering  of (a)  35,900  shares  ("Offering  Shares")  of Series D  Convertible
Preferred  Stock,  no par value  ("Series D Preferred  Stock"),  (b)  32,636,364
five-year common stock purchase warrants ("Offering  Warrants") and (c) warrants
(the "Over-Allotment  Warrants") exercisable for a limited time, to purchase (i)
up to 8,975 additional shares of Series D Preferred Stock  ("Additional  Shares"
and,  together  with the  Offering  Shares,  the  "Preferred  Shares")  and (ii)
8,159,091  additional  warrants identical to the Offering Warrants  ("Additional
Warrants" and, together with the Offering Warrants, the "Warrants"), pursuant to
the terms and subject to the  conditions  set forth in the  Securities  Purchase
Agreement dated the date hereof (the "Purchase  Agreement")  between the Company
and each of the investors  signatory thereto (the "Investors").  All capitalized
terms used in this letter and not  otherwise  defined  herein have the  meanings
ascribed to them in the Purchase Agreement.

      As a basis for rendering the opinion  contained  herein,  we have examined
the  Purchase  Agreement,   the  Offering  Warrants,   the  Registration  Rights
Agreement, the Over-Allotment Warrants, the Escrow Agreement, the Proxy, and the
agreements  of the Key  Employees  delivered  pursuant  to Section  5.1.4 of the
Purchase  Agreement (the "Key Employee Lock-Up  Agreement")  (collectively,  the
"Transaction Documents").  We have also examined originals, or copies, certified
or  otherwise  identified  to  our  satisfaction,  of  (i)  the  Certificate  of
Incorporation, as amended, of the Company (the "Certificate"); (ii) the By-Laws,
as amended,  of the Company (the  "By-Laws");  (iii) minutes of certain meetings
and/or unanimous consents of the Board of Directors of the Company; (iv) Consent
of the Majority  Shareholders  to Action taken in Lieu of a Meeting  dated March
_____, 2005 (the "Stockholder Consent") and (v) Good Standing Certificate of the
Company  for the  State  of  Florida  dated  March  ___,  2005,  without  having
undertaken any independent  investigation  to determine the existence or absence
of  the  factual  conditions  or  circumstances  set  forth  therein.   In  such

<PAGE>

examination,  we have assumed the authenticity of all documents  submitted to us
as originals,  the conformity with originals of all documents submitted to us as
certified  copies or  otherwise  satisfactorily  identified  as true and correct
copies of originals and the  correctness  of all  statements  of fact  contained
therein.  With  respect to such  examination,  we have also  assumed (i) the due
organization,  valid  existence  and good standing of each party (other than the
Company)  to each of the  instruments,  documents  and  agreements  referred  to
herein;  (ii) the full  corporate  and other power and  authority  of each party
(other than the Company with respect to the  Transaction  Documents)  to execute
each of the instruments,  documents and agreements referred to herein; (iii) the
legality,  validity,   enforceability  and  binding  nature  of  the  respective
obligations  of each  party  (other  than (i) the  Company  with  respect to the
Transaction  Documents  and the  Controlling  Stockholders  with  respect to the
Stockholder  Consent)  to  each of the  instruments,  documents  and  agreements
referred to herein;  and (iv) the due  authorization,  execution and delivery of
each of the  instruments,  documents and  agreements  referred to herein by each
party  thereto  (other  than  the  Company  with  respect  to  the   Transaction
Documents).  We have  relied,  to the  extent we deemed  proper,  as to  factual
matters,  upon  certificates  of  appropriate  state  and  local  officials  and
executives  of the  Company,  upon  representations  of  representatives  of the
Company and upon the factual  matters set forth in or  otherwise  supporting  or
underlying  the  representations,  warranties,  covenants and  agreements of the
Company  and  Investors  contained  in the  Transaction  Documents.  We have not
independently  investigated or verified the facts represented in such agreements
or certificates, and do not opine as to the accuracy of any such facts.

      Our opinions are limited solely to matters  governed by the Securities Act
of 1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934,
as  amended  (the  "Exchange  Act")  the  laws of the  State of New York and the
Florida Business  Corporation Act. In addition,  without limiting the generality
of the  foregoing,  no opinion is rendered  herein with respect to (i) whether a
federal or state  court  within or outside of New York would give  effect to any
New York law  provision  in the  Transaction  Documents;  or (ii) the  effect of
applicable laws and court decisions which may hereafter be enacted,  promulgated
or made and which may limit or render unenforceable  certain rights and remedies
under the  Transaction  Documents;  or (iii)  any  provisions  contained  in the
Transaction  Documents in which the parties  agree to agree or  cooperate,  with
respect to any matter, at some time in the future.

      Please be advised that with respect to  statements  made in the  following
opinion that are modified by phrases such as "to our knowledge,"  "known to us,"
"we know of" or similar  language,  such phrases are  intended to indicate  that
during the course of our  representation  of the Company in connection  with the
transactions  contemplated by the Purchase Agreement, no information has come to
the  attention  of the  attorneys  of  this  firm  who are  currently  providing
substantive attention to Company matters to give such attorneys actual knowledge
of factual  conditions or circumstances  that are contrary to the statements set
forth therein, but that we have not undertaken any independent  investigation to
determine the existence or absence of such factual  conditions or circumstances.
Without limited the generality of the foregoing, in connection with our opinions
below, we have not performed any litigation, lien, judgment, tax, UCC or similar
searches  with respect to the Company.  No inference as to our  knowledge of the
existence or absence of any fact should be drawn from our  representation of the
Company or the rendering of the opinion set forth below.

<PAGE>

      With  respect  to  paragraph  2 below,  we  express  no  opinion as to (i)
limitations resulting from applicable  bankruptcy,  insolvency,  reorganization,
arrangement,  moratorium,  fraudulent  conveyance  or transfer and other laws or
equitable  principles  (whether  applied  in a  proceeding  at law or in equity)
relating to or affecting any rights, powers, preferences,  remedies or interests
of creditors generally; (ii) the availability of equitable remedies,  including,
without limitation, specific performance or injunctive relief; (iii) Federal and
state  laws  or  public  policies   relating  to  the   enforceability   of  the
indemnification,  contribution  and hold  harmless  provisions  contained in the
Transaction  Documents;  (iv)  the  acceleration  of any  obligations  or  other
exercise  of  rights  or  remedies  upon  the   occurrence  of  a  technical  or
non-material  breach or  violation  or  notwithstanding  any course of  conduct,
action or  dealing on any  Investor's  part;  (v)  provisions  which  purport to
establish evidentiary standards or render ineffective any waiver or modification
not in writing;  (vi)  liability  limitations  with respect to third  parties or
liquidated  damages;  (vii) provisions imposing  penalties,  forfeitures,  legal
costs or late payment charges upon delinquency in payment or the occurrence of a
default;  (viii) provisions  allowing the institution of judicial or nonjudicial
proceedings or the exercise of any other rights, without notice to the person or
entity  against whom  enforcement  is sought;  (ix)  provisions  implying that a
person or entity may act in any manner that is not commercially reasonable where
absolute discretion is reserved;  (x) provisions relating to payment of costs of
indemnity,  court costs, attorneys' fees and expenses which may be chargeable or
recoverable  in any judicial  proceedings  in excess of those which are actually
incurred and would be reasonable;  (xi) provisions which may be limited by rules
or  principles  of equity  or  public  policy  affecting  enforcement  including
(without  limitation) those pertaining to good faith,  fair dealing,  diligence,
reasonableness,  unconscionability,  impossibility of performance or other cure,
surety rights or defenses,  waiver,  laches,  estoppel or judicial deference and
(xii) any provisions contained in the Transaction Documents in which the parties
agree to agree or  cooperate,  with  respect to any matter,  at some time in the
future.

      As you are  aware,  the  Company's  Common  Stock is listed on the  Nasdaq
National  Market  System  ("NMS"),  and Rule  4350(i) of the Rules of the Nasdaq
Stock Market, Inc.  ("Nasdaq") require,  among other things, an issuer listed on
NMS to (i) obtain  shareholder  approval in connection with a transaction  other
than a public offering involving the sale, issuance or potential issuance by the
issuer of common stock (or  securities  convertible  into common stock) equal to
20% or more of the common stock or 20% or more of the voting  power  outstanding
before the  issuance  for less than the  greater of book or market  value of the
stock, and (ii) submit a notification  form for listing of additional  shares in
connection  with a transaction  involving the issuance or potential  issuance of
10% or more of the voting power outstanding before the issuance at least 15 days
before such issuance. Upon conversion of the Preferred Shares and/or exercise of
the Warrants,  the number of underlying  shares underlying such Preferred Shares
and/or Warrants (i) exceeds the threshold for which Nasdaq requires  shareholder
approval,  (ii) exceeds the Company's  authorized Common Stock, and (iii) solely
for purpose of  applicable  Nasdaq  regulations  and listing  requirements,  may
result in a change of control of the  Company  under Rule  4350(i)(1)(B)  of the
Nasdaq Rules. While the Company has obtain shareholder  approval with respect to
issuing shares of Common Stock in connection with the transactions  contemplated
by the  Transaction  Documents  and to  increase  authorized  Common  Stock from
150,000,000 to 300,000,000  (the  "Shareholder  Approval"),  the Company may not
issue shares in excess of the Cap Amount or file the Articles of Amendment  with
the  Department  of State of the State of  Florida  until it  satisfies  certain
information  requirements  to the  shareholders  of the Company not party to the
Shareholder Consent,  under Section 607.0704 of the Florida Business Corporation

<PAGE>

Act (the "Florida Act") and Regulation 14C of the Exchange Act. In addition, the
Company has not submitted a notification  form for listing of additional  shares
in connection with this  transaction.  After the Articles of Amendment are filed
with the  Department  of State of the  State of  Florida,  the  Company  will be
authorized  to issue up to  300,000,000  shares of  Common  Stock.  Because  the
Articles of Amendment and Warrants provide for certain anti-dilution  protection
and the  potential to reset the  conversion  price of the  Preferred  Series and
exercise  price of the  Warrants  the  Company may become  obligated  to issue a
number of shares of Common Stock in connection with the Transaction Documents in
excess of the  difference  between  the  300,000,000  authorized  shares and the
number  of  shares  outstanding  and  reserved  for  issuance  (the  "Authorized
Amount"). Our opinion below is qualified in its entirety by, and subject to, the
foregoing.

      The term  "Material  Agreements"  means each document  filed as an item 10
exhibits to the  Company's  Form 10-K for the year ended  December  31, 2003 and
Form 10-Q for the quarters ended March 31, 2004, June 30, 2004 and September 30,
2004.  No opinion is given as to whether the  Material  Agreements  are the only
agreements material to the Company.

      Based  upon and  subject to the  foregoing,  and  subject  to the  further
qualifications set forth below, we are of the opinion that:

            1. The Company has been duly  incorporated  and is validly  existing
and in good standing under the laws of the State of Florida. The Company has the
requisite  corporate power and authority necessary to own or hold its properties
and to conduct its business as described in the Company's  Annual Report on Form
10-K for the year ended  December  31, 2003 and Form 10-Q for the quarter  ended
September 30, 2004.

            2. The Company has the  requisite  corporate  power and authority to
enter into and perform its obligations  under the  Transaction  Documents and to
issue Series D Preferred  Stock,  (ii) the Warrants,  (iii) the shares of Common
Stock issuable upon conversion of the Preferred Shares (the "Conversion Shares")
(other than the issuance of Common Stock in excess of the Authorized Amount) and
(iv) the shares of Common Stock  issuable  upon  exercise of the  Warrants  (the
"Warrant  Shares")  (other than the  issuance  of Common  Stock in excess of the
Authorized  Amount).  The  Shareholder  Approval  constitutes a valid  corporate
action by the  Company's  shareholders  to approve the matters  covered  thereby
pursuant to Section  607.0704 of the Florida Act and for the Company to file the
Articles of Amendment  with the  Department of State of the State of Florida and
issue shares of Common Stock up to the  Authorized  Amount.  The  execution  and
delivery of the Transaction  Documents by the Company and the consummation by it
of the  transactions  contemplated  thereby  (other than the  issuance of Common
Stock in excess of the  Authorized  Amount)  have  been duly  authorized  by all
necessary  corporate  action and no  further  consent  or  authorization  of the
Company or its Board of  Directors  or  stockholders  is  required.  Each of the
Transaction  Documents  has been duly  executed and delivered by the Company and
the certificates  representing the Offering  Shares,  and the Additional  Shares
upon their issuance,  and Offering Warrants,  and Additional Warrants upon their
issuance,  have  been,  and will be in the  case of the  Additional  Shares  and
Additional Warrants, duly executed, issued and delivered by the Company. Each of
the  Transaction  Documents  constitute  valid and  binding  obligations  of the
Company  enforceable  against the Company in  accordance  with their  respective
terms.

<PAGE>

            3.  The  execution,  delivery  and  performance  of the  Transaction
Documents by the Company and the consummation of the Company of the transactions
contemplated  thereby,  including,  without  limitation,  the  issuance  of  the
Preferred Shares, the Warrants, the Conversion Shares and the Warrant Shares, do
not (i)  result  in a  violation  of the  Company's  Articles  of  Incorporation
By-Laws;  or (ii)  result in a violation  of any  federal or state law,  rule or
regulation as to which an attorney  practicing  in New York applying  reasonable
diligence  would  recognize as  applicable  to the Company and the  transactions
contemplated  by the  Agreements,  except  for  such  violations,  conflicts  or
defaults as would not, individually or in the aggregate, have a Material Adverse
Effect.

            4. The  authorized  capital  stock  of the  Company  consists  of an
aggregate  of  150,000,000  shares  of  Common  Stock  and  5,000,000  shares of
preferred stock, no par value. Upon the Shareholder  Consent becoming  effecting
in  accordance  with  Regulation  14C of the  Exchange Act and the filing by the
Company of Articles of  Amendment  to its  Articles  of  Incorporation  with the
Department  of  State  of the  State  of  Florida  reflecting  the  increase  in
authorized capital set forth in the Shareholder  Consent,  the authorized common
stock of the Company will be increased to 300,000,000 shares of Common Stock.

            5. The Conversion  Shares and Warrant Shares have been duly reserved
for issuance from the authorized but unissued Common Stock of the Company (other
than the issuance of shares of Common Stock in excess of the Authorized Amount).
When issued,  the Conversion  Shares and Warrant Shares will be validly  issued,
fully paid and nonassessable, and free of any liens, encumbrances and preemptive
or similar  rights  contained  in the  company's  Articles or By-Laws or, in any
Material Agreement to which the Company is party.

            6. Assuming (i) the accuracy of the  representations  of the Company
and the  Investors  in the  Transaction  Documents,  (ii) that the  Company  has
complied in all material  respects with the  requirements of Section 4(2) of the
Securities Act (and the provisions of Regulation D promulgated thereunder),  and
(iii) that the Company is not disqualified  under Rule 507 of the Securities Act
from using the exemption  available under Rule 506 under the Securities Act, the
issuance  and sale of the  Preferred  Shares and  Warrants by the Company to the
Investors in accordance with the terms of the Purchase  Agreement will be exempt
from the  registration  requirements  of the Securities  Act,  subject to timely
filing of a Form D pursuant to  Regulation D  promulgated  under the  Securities
Act.

            7. To our  knowledge,  except as set forth in the  Schedules  to the
Purchase  Agreement,  there  is no  demand,  suit,  action,  claim,  assessment,
proceeding or investigation,  pending or threatened in writing,  (i) which could
reasonably be expected to have a Material Adverse Effect on the Company, or (ii)
challenges or may have the effect of preventing,  delaying,  making illegal,  or
otherwise  interfering  with  the  transactions  contemplated  by  the  Purchase
Agreement.

      Our  opinion is limited to the matters  expressly  stated  herein,  and no
opinion is implied  or may be  inferred  beyond  the  matters  expressly  stated
herein.  This opinion is based upon the state of the law and factual  situations
known to us as of the date of this  opinion,  and we  assume  no  obligation  to
update or supplement  such opinion to reflect any facts or  circumstances  which
may  hereafter  come to our  attention or any change in law which may  hereafter
occur.  We bring to your  attention the fact that the opinions set forth in this
letter are expressions of professional judgment and not a guaranty of a result.

<PAGE>

      This opinion is being  delivered  to you pursuant to Section  5.1.7 of the
Purchase  Agreement  solely for your  benefit  and may not be used,  circulated,
quoted, relied upon, or otherwise referred to in any manner by you for any other
purpose or by any other person for any purpose.

                                                     Very truly yours,

                                                     BLANK ROME LLP

<PAGE>

                                    EXHIBIT I

                          STOCKHOLDER ESCROW AGREEMENT

<PAGE>

                                ESCROW AGREEMENT

      ESCROW AGREEMENT dated as of March 19, 2005, by and among MediaBay,  Inc.,
a Florida corporation (the "COMPANY"),  Norton Herrick  ("HERRICK"),  Huntingdon
Corporation, a Delaware corporation ("HUNTINGDON") and Blank Rome LLP, as escrow
agent (the "ESCROW AGENT").

                                    RECITALS

      A. The  Company,  Herrick  and  Huntingdon  are  parties  to that  certain
Agreement  dated as of March  19,  2005  (the  "HERRICK/HUNTINGDON  AGREEMENT"),
pursuant to which the  Company has agreed to (A) redeem from  Herrick (i) 14,316
shares  Series A  Preferred  Stock,  no par  value,  for a  redemption  price of
$1,431,600  (the  "SERIES A ESCROW  FUNDS"),  and (ii)  11,814  shares  Series C
Preferred Stock, no par value, for a redemption price $1,181,400  (together with
the Series A Escrow  Funds,  the "HERRICK  ESCROW  FUNDS"),  and (B) redeem from
Huntingdon  31,713  shares of Series C  Preferred  Stock,  no par  value,  for a
redemption price of $3,171,300 (the "HUNTINGDON ESCROW FUNDS", and together with
Herrick  Escrow  Funds,  the  "ESCROW  FUNDS").  Capitalized  terms used but not
otherwise  defined  herein  shall  have  the  meaning  ascribed  to  them in the
Herrick/Huntingdon Agreement.

      B.  Pursuant  to the  Herrick/Huntingdon  Agreement,  (i) the  Company  is
required  to place into  escrow the Escrow  Funds,  (ii)  Herrick is required to
place into escrow the Herrick Stock Certificates,  which certificates shall have
attached  to them a stock  power  endorsed  in blank  for  transfer,  and  (iii)
Huntingdon is required to place into escrow the Huntingdon  Stock  Certificates,
which  certificates  shall have attached to them a stock power endorsed in blank
for transfer,  to be held in escrow by the Escrow Agent pursuant to Section 6 of
the Herrick/Huntingdon Agreement and the terms and conditions set forth herein.

      NOW,  THEREFORE,  in  consideration  of the  foregoing  and of the  mutual
covenants hereinafter set forth, the parties hereto agree as follows:

      1. Appointment.  The Company, Herrick and Huntingdon do hereby appoint and
designate  the Escrow Agent as escrow  agent for the purposes set forth  herein,
and the Escrow Agent does hereby  accept such  appointment  subject to the terms
and conditions set forth herein.

      2. Establishment of Escrow.

            (a)  Simultaneously  with the execution and delivery hereof, (i) the
Company is depositing  the Escrow Funds with the Escrow  Agent,  (ii) Herrick is
depositing the Herrick Stock  Certificates,  which certificates have attached to
them a stock  power  endorsed in blank for  transfer,  and (iii)  Huntingdon  is
depositing the Huntingdon Stock  Certificates,  which certificates have attached
to them a stock power endorsed in blank for transfer.

            (b) The Escrow  Agent is  authorized  and  instructed  to invest the
Escrow  Funds in one or more  interest-bearing  accounts  of the Escrow  Agent's
choice in one or more banks or financial  institutions  of having a net worth of
at least  $100,000,000  each,  the terms of which  accounts  shall  provide that
withdrawals  may be made only by Escrow  Agent.  Interest  earned on the  Escrow
Funds (the "INTEREST") shall be payable to Herrick and Huntingdon, pro rata base
on the  amount of Escrow  Funds  distributed  to such  party.  All  Interest  or
earnings on the Escrow Funds will be  chargeable to Herrick and  Huntingdon,  as
applicable,  for tax purposes. Escrow Agent will not be responsible for any loss
incurred as a result of any deposits or investments made in accordance with this
Section 2(b).

<PAGE>

      3. Release from Escrow;  Escrow Period. On the Redemption Date and without
any further action by the parties hereto,  the Escrow Agent shall distribute (A)
the Herrick  Escrow Funds and Interest  thereon to Herrick and the Herrick Stock
Certificates  to the Company,  and (B) the Huntingdon  Escrow Funds and Interest
thereon to Huntingdon and the Huntingdon Stock Certificates to the Company.

      4. Duties and Responsibilities of the Escrow Agent.

            (a) The duties and  responsibilities  of the Escrow Agent  hereunder
shall be determined  solely by the express  provisions of this Escrow  Agreement
and no other or further duties or responsibilities  shall be implied. The Escrow
Agent shall be under no obligation  to refer to any  documents  between or among
the parties related in any way to this Escrow Agreement.

            (b) The Escrow Agent's only obligations hereunder, and the only acts
the Escrow  Agent shall take  hereunder,  is to hold in escrow the Escrow  Funds
(including  Interest),  the Herrick Stock  Certificates and the Huntingdon Stock
Certificates (collectively,  the "ESCROW ITEMS") and to release the Escrow Items
only in accordance with Section 3 of this  Agreement.  The Escrow Agent may rely
and shall be protected in acting upon the written  instructions  by the Company,
Herrick  and  Huntingdon  furnished  to it  hereunder  and  believed by it to be
genuine and to have been signed or presented by the proper party.

            (c) The Escrow  Agent  shall not be liable  for any action  taken or
omitted by it in good faith unless a court of competent jurisdiction  determines
that the  Escrow  Agent's  willful  misconduct  was the cause of any loss to the
Company, Herrick or Huntingdon. The Escrow Agent may consult with counsel of its
own  choice  and,  at its  option,  may act as its  own  counsel  in  connection
herewith.

      5.  Indemnification.  The Company,  Herrick and Huntingdon hereby agree to
jointly and  severally  indemnify  the Escrow Agent for, and to hold it harmless
against,  any loss,  liability or expense,  arising out of or in connection with
this Escrow Agreement and carrying out its duties hereunder,  including, without
limitation, reasonable attorneys' fees and other costs and expenses of defending
itself against any claim of liability, except to the extent such loss, liability
or expense is the result of the Escrow  Agent's  willful  misconduct;  provided,
however,  that the  foregoing  provisions of this Section 5 shall not affect the
rights and  remedies of the  Company,  Herrick and  Huntingdon  as against  each
other. Anything in this Escrow Agreement to the contrary notwithstanding,  in no
event shall the Escrow  Agent be liable for special,  indirect or  consequential
loss or damage of any kind  whatsoever  (including,  but not  limited  to,  lost
profits),  even if the Escrow Agent has been advised of the  likelihood  of such
loss or damage and regardless of the form of action.

<PAGE>

      6. Notices.  All notices and communications  hereunder shall be in writing
and shall be sent by certified or registered mail, return receipt requested, air
courier, personal delivery or verified facsimile, as follows:

         If to the Escrow Agent:      Blank Rome LLP
                                      405 Lexington Avenue
                                      New York, New York 10174
                                      Attn:  Robert J. Mittman, Esq.
                                      Facsimile:  (212) 885-5001

         If to the Company:           MediaBay, Inc.
                                      2 Ridgedale Avenue
                                      Cedar Knolls, New Jersey  07962
                                      Attention:  Chief Executive Officer and
                                                  Chief Financial Officer
                                      Telephone:  (973) 539-9528
                                      Facsimile:  (973) 539-1273

         If to Herrick:               Norton Herrick
                                      2 Ridgedale Avenue
                                      Cedar Knolls, New Jersey  07962
                                      Telephone:  (973) 539-1390
                                      Facsimile:  (973) 539-0596

         If to Huntingdon:            Huntingdon Corporation
                                      2 Ridgedale Avenue
                                      Cedar Knolls, New Jersey  07962
                                      Attn:  Norton Herrick
                                      Telephone:  (973) 539-1390
                                      Facsimile:  (973) 539-0596

or to such  other  address as any of the above may have  furnished  to the other
parties in writing by certified or registered  mail,  return receipt  requested,
air courier,  personal delivery,  or verified facsimile,  and any such notice or
communication given in the manner specified in this Section 6 shall be deemed to
have been duly given on the date received by the recipient  party.  In the event
that  the  Escrow  Agent,  in its  sole  discretion,  shall  determine  that any
emergency exists,  the Escrow Agent may use such other means of  communications,
as the Escrow Agent deems advisable.

      7.  Amendment.  The  provisions  of this Escrow  Agreement  may be waived,
altered, amended or supplemented,  in whole or in part, only by a writing signed
by all of the parties to be charged with such waiver,  alteration,  amendment or
supplement.

      8.  Binding  Agreement.  This Escrow  Agreement  shall be binding upon and
inure  to the  benefit  of each  of the  parties  hereto  and  their  respective
successors and assigns.

<PAGE>

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

      10.  Conflict  Waiver.  The parties hereto  acknowledge and agree that the
Escrow Agent  currently  represents  and may continue to represent  the Company,
Herrick and Huntingdon. The parties hereto waive the right to raise any claim of
conflict   or  any  claim  of  a  similar   nature  in   connection   with  such
representation.

      11. Governing Law;  Jurisdiction.  This Escrow Agreement shall be governed
by and  construed in  accordance  with the laws of the State of New York without
regard to its principles of conflicts of laws and any action  brought  hereunder
shall be brought exclusively in the Federal or state courts located in the State
of New York, County of New York. With respect to any action brought hereunder in
said  courts,  each party  hereto (a)  irrevocably  waives any  objection on the
grounds  of  venue,  forum   non-conveniens  or  any  similar  grounds  and  (b)
irrevocably consents to service of process in any manner permitted by applicable
law and consents to the jurisdiction of said courts.

                           - SIGNATURE PAGE FOLLOWS -

<PAGE>

         IN WITNESS  WHEREOF,  the  parties  hereto  have  executed  this Escrow
Agreement as of the day and year first above written.

                               MediaBay, Inc.

                               By:
                                   ----------------------------------------
                                   Name:    Jeffrey A. Dittus

                                   Title:   Chief Executive Officer

                               Huntingdon Corporation

                               By:
                                   ----------------------------------------
                                   Name:    Norton Herrick

                                   Title:   President

                               --------------------------------------------
                               NORTON HERRICK

                               ESCROW AGENT:

                               BLANK ROME LLP

                               By:
                                  -------------------------------
                                  Brad L. Shiffman, Partner

<PAGE>

                                    EXHIBIT J

                                VOTING AGREEMENT

See Exhibit No. 10.8.

<PAGE>

                                    EXHIBIT K

                          REGISTRATION RIGHTS AGREEMENT

See Exhibit Nos. 4.3 and 4.4.

<PAGE>

                                    EXHIBIT L

                          BOARD MEMBER LETTER AGREEMENT

See Exhibit No. 10.11.EXHIBIT 10.2

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED FOR SALE, SOLD OR
TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS SHALL BE EFFECTIVE WITH RESPECT THERETO, OR AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER. SUBJECT TO COMPLIANCE
WITH THE REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS, THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY
BE PLEDGED OR HYPOTHECATED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY THIS WARRANT OR ANY OF THE SECURITIES ISSUABLE UPON
EXERCISE OF THIS WARRANT.

                                     WARRANT

                            TO PURCHASE COMMON STOCK

                                       OF

                                 MEDIABAY, INC.

Issue Date:  March __, 2005                                     Warrant No.  __

      THIS CERTIFIES that [NAME] or any subsequent holder hereof (the "Holder"),
has the right to purchase from MEDIABAY, INC., a Florida corporation (the
"Company"), up to [NUMBER] fully paid and nonassessable shares of the Company's
common stock, no par value (the "Common Stock"), subject to adjustment as
provided herein, at a price per share equal to the Exercise Price (as defined
below), at any time and from time to time beginning on the date that is six (6)
months following the date on which this Warrant is originally issued (the "Issue
Date") and ending at 6:00 p.m., eastern time, on the date that is sixty-six (66)
months following the Issue Date (or, if such date is not a Business Day, on the
Business Day immediately following such date) (the "Expiration Date"). This
Warrant is issued pursuant to a Securities Purchase Agreement, dated as of March
__, 2005 (the "Securities Purchase Agreement"). Capitalized terms used herein
and not otherwise defined shall have the respective meanings set forth in the
Securities Purchase Agreement.
<PAGE>

      1. Exercise.

            (a) Right to Exercise; Exercise Price. The Holder shall have the
right to exercise this Warrant at any time and from time to time during the
period beginning on the on the date that is six (6) months following the Issue
Date and ending on the Expiration Date as to all or any part of the shares of
Common Stock covered hereby (the "Warrant Shares"). The "Exercise Price" for
each Warrant Share purchased by the Holder upon the exercise of this Warrant
shall be equal to $0.56, subject to adjustment for the events specified in
Section 6 below.

            (b) Exercise Notice. In order to exercise this Warrant, the Holder
shall send to the Company by facsimile transmission, at any time prior to 6:00
p.m., eastern time, on the Business Day on which the Holder wishes to effect
such exercise (the "Exercise Date"), (i) a notice of exercise in substantially
the form attached hereto as Exhibit A (the "Exercise Notice"), and (ii) a copy
of the original Warrant, and, in the case of a Cash Exercise (as defined below),
the Holder shall pay the Exercise Price to the Company by wire transfer. The
Holder shall promptly thereafter send the original of the Exercise Notice and
the original Warrant to the Company. The Exercise Notice shall state the name or
names in which the shares of Common Stock that are issuable on such exercise
shall be issued. In the case of a dispute between the Company and the Holder as
to the calculation of the Exercise Price or the number of Warrant Shares
issuable hereunder (including, without limitation, the calculation of any
adjustment pursuant to Section 6 below), the Company shall issue to the Holder
the number of Warrant Shares that are not disputed within the time periods
specified in Section 2 below and shall submit the disputed calculations to a
certified public accounting firm of national reputation (other than the
Company's regularly retained accountants) within two (2) Business Days following
the date on which the Holder's Exercise Notice is delivered to the Company. The
Company shall cause such accountant to calculate the Exercise Price and/or the
number of Warrant Shares issuable hereunder and to notify the Company and the
Holder of the results in writing no later than three (3) Business Days following
the day on which such accountant received the disputed calculations (the
"Dispute Procedure"). Such accountant's calculation shall be deemed conclusive
absent manifest error. The fees of any such accountant shall be borne by the
party whose calculations were most at variance with those of such accountant.

            (c) Holder of Record. The Holder shall, for all purposes, be deemed
to have become the holder of record of the Warrant Shares specified in an
Exercise Notice on the Exercise Date specified therein, irrespective of the date
of delivery of such Warrant Shares. Except as specifically provided herein,
nothing in this Warrant shall be construed as conferring upon the Holder hereof
any rights as a stockholder of the Company prior to the Exercise Date.

            (d) Cancellation of Warrant. This Warrant shall be canceled upon its
exercise in full and, if this Warrant is exercised in part, the Company shall,
at the time that it delivers Warrant Shares to the Holder pursuant to such
exercise as provided herein or, if later, upon the Company's receipt of the
Warrant following such partial exercise, issue a new warrant, and deliver to the
Holder a certificate representing such new warrant, with terms identical in all
respects to this Warrant (except that such new warrant shall be exercisable into
the number of shares of Common Stock with respect to which this Warrant shall
remain unexercised); provided, however, that the Holder shall be entitled to
exercise all or any portion of such new warrant at any time following the time
at which this Warrant is exercised, regardless of whether the Company has
actually issued such new warrant or delivered to the Holder a certificate
therefor.

                                       2
<PAGE>

            (e) Investment Representations. The delivery by the Holder to the
Company of an Exercise Notice shall be deemed to be a representation and
warranty made by such Holder of the representations and warranties set forth in
Sections 2.2, 2.4, 2.5, 2.6 and 2.8 of the Securities Purchase Agreement as to
the Warrant Shares to be issued upon such exercise.

      2. Delivery of Warrant Shares Upon Exercise. Upon receipt of a fax copy of
an Exercise Notice pursuant to Section 1 above, the Company shall, (A) in the
case of a Cash Exercise, no later than the close of business on the later to
occur of (i) the third (3rd) Business Day following the Exercise Date specified
in such Exercise Notice and (ii) such later date on which the Company shall have
received payment of the Exercise Price, (B) in the case of a Cashless Exercise
(as defined below), no later than the close of business on the third (3rd)
Business Day following the Exercise Date specified in such Exercise Notice, and
(C) with respect to Warrant Shares that are the subject of a Dispute Procedure,
the close of business on the third (3rd) Business Day following the
determination made pursuant to Section 1(b) (each of the dates specified in (A),
(B) or (C) being referred to as a "Delivery Date"), issue and deliver or caused
to be delivered to the Holder the number of Warrant Shares as shall be
determined as provided herein. The Company shall effect delivery of Warrant
Shares to the Holder, as long as the Company's designated transfer agent (the
"Transfer Agent") participates in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer program ("FAST") and no restrictive legend is
required pursuant to the terms of this Warrant or the Securities Purchase
Agreement, by crediting the account of the Holder or its nominee at DTC (as
specified in the applicable Exercise Notice) with the number of Warrant Shares
required to be delivered, no later than the close of business on such Delivery
Date. In the event that the Transfer Agent is not a participant in FAST or if
the Holder so specifies in a Exercise Notice or otherwise in writing on or
before the Exercise Date, the Company shall effect delivery of Warrant Shares by
delivering to the Holder or its nominee physical certificates representing such
Warrant Shares, no later than the close of business on such Delivery Date.
Warrant Shares delivered to the Holder shall not contain any restrictive legend
unless such legend is required pursuant to the terms of the Securities Purchase
Agreement.

      3. Failure to Deliver Warrant Shares.

            (a) In the event that the Company fails for any reason to deliver to
the Holder the number of Warrant Shares specified in the applicable Exercise
Notice on or before the Delivery Date therefor and such failure to deliver
Warrant Shares continues for two (2) Business Days following the delivery of
written notice thereof from such Holder (an "Exercise Default"), the Company
shall pay to the Holder payments ("Exercise Default Payments") in the amount of
(i) (N/365) multiplied by (ii) the aggregate Exercise Price of the Warrant
Shares which are the subject of such Exercise Default multiplied by (iii) the
lower of fifteen percent (15%) per annum and the maximum interest rate permitted
by applicable law (the "Default Interest Rate"), where "N" equals the number of
days elapsed between the original Delivery Date of such Warrant Shares and the
date on which all of such Warrant Shares are issued and delivered to the Holder.
Cash amounts payable hereunder shall be paid on or before the fifth (5th)
Business Day of each calendar month following the calendar month in which such
amount has accrued. The first occurrence of an Exercise Default with respect to
a Holder shall not be deemed to be a Fundamental Change (under and as defined in
the Articles of Amendment) giving rise to a Mandatory Redemption right under the
Articles of Amendment provided such Exercise Default is cured within two (2)
Business Days following written notice to the Company thereof, and no Exercise
Default with respect to any Holder shall be deemed to be a Fundamental Change
giving rise to a Mandatory Redemption right with respect to any other Holder.

                                       3
<PAGE>

            (b) In the event of an Exercise Default, the Holder may, upon
written notice to the Company (an "Exercise Default Notice"), regain on the date
of such notice the rights of the Holder under the exercised portion of this
Warrant that is the subject of such Exercise Default. In the event of such
Exercise Default and delivery of an Exercise Default Notice, the Holder shall
retain all of the Holder's rights and remedies with respect to the Company's
failure to deliver such Warrant Shares (including without limitation the right
to receive the cash payments as specified in Section 3(a) above).

            (c) The Holder's rights and remedies hereunder are cumulative, and
no right or remedy is exclusive of any other. In addition to the amounts
specified herein, the Holder shall have the right to pursue all other remedies
available to it at law or in equity (including, without limitation, a decree of
specific performance and/or injunctive relief). Nothing herein shall limit the
Holder's right to pursue actual damages for the Company's failure to issue and
deliver Warrant Shares on the applicable Delivery Date (including, without
limitation, damages relating to any purchase of Common Stock by the Holder to
make delivery on a sale effected in anticipation of receiving Warrant Shares
upon exercise, such damages to be in an amount equal to (A) the aggregate amount
paid by the Holder for the Common Stock so purchased minus (B) the aggregate
amount of net proceeds, if any, received by the Holder from the sale of the
Warrant Shares issued by the Company pursuant to such exercise).

      4. Exercise Limitations. In no event shall a Holder be permitted to
exercise this Warrant, or part hereof, if, upon such exercise, either:

            (a) the number of shares of Common Stock beneficially owned by the
Holder, together with its Affiliates (other than shares which would otherwise be
deemed beneficially owned except for being subject to a limitation on conversion
or exercise analogous to the limitation contained in this Section 4(a)), would
exceed the Exercise Limitation (as defined below) in effect at such time. As
used herein, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and the rules
thereunder. To the extent that the limitation contained in this Section 4(a)
applies, the submission of an Exercise Notice by the Holder shall be deemed to
be the Holder's representation that this Warrant is exercisable pursuant to the
terms hereof and the Company shall be entitled to rely on such representation
without making any further inquiry as to whether this Section 4(a) applies.
Nothing contained herein shall be deemed to restrict the right of a Holder to
exercise this Warrant, or part thereof, at such time as such exercise will not
violate the provisions of this Section 4(a). For purposes hereof, "Exercise
Limitation" means, at a given time, 4.99% of the number of shares of Common
Stock issued and outstanding at such time (assuming for such purposes, that the
such exercise or partial exercise has been effected as of the relevant date);
provided, however, that the Holder may elect, upon sixty-one (61) days' prior
written notice from the Holder to the Company, to change the Exercise Limitation
applicable to the Holder and its Affiliates to 9.5% of the number of shares of
Common Stock issued and outstanding at such time (assuming for such purposes,
that the such exercise or partial exercise has been effected as of the relevant
date). This Section 4(a) may not be amended unless such amendment is approved by
the holders of a majority of the Common Stock then outstanding; or

                                       4
<PAGE>

            (b) the number of Warrant Shares that the Holder would receive upon
such exercise, when added to the number of Warrant Shares previously received by
the Holder pursuant to this Warrant and the other Warrants issued pursuant to
the Securities Purchase Agreement and the number of shares of Common Stock
received by the Holder upon conversion of the Preferred Shares, would exceed the
product of (A) 19.99% of the number of shares of Common Stock outstanding on the
Issue Date immediately prior to the Closing (subject to adjustment upon a stock
split, stock dividend or similar event) (the "Cap Amount") multiplied by (B) a
fraction, the numerator of which is the number of Warrant Shares originally
issuable under this Warrant and the denominator of which is the aggregate number
of Warrant Shares originally issuable under all of the Warrants (such product,
the "Allocation Amount"); provided, that none of the provisions of this
paragraph (b) shall apply if Stockholder Approval (as defined below) has been
obtained or the Holder has delivered to the Company a legal opinion reasonably
acceptable to the Company that such approval is not required under the
applicable listing requirements of the Principal Market. In the event that any
Holder to which this Warrant was originally issued shall sell or otherwise
transfer any part of this Warrant, the remaining Warrant Shares constituting
such transferring Holder's Allocation Amount shall be allocated between the
transferring Holder and the transferee in proportion to amount of this Warrant
transferred. In the event that, at any time, the aggregate number of Warrant
Shares issued and issuable under this Warrant and the Holder's Preferred Shares
exceeds eighty percent (80%) of the Holder's Allocation Amount, the Company
shall, upon the written request of the Holder, hold as promptly as reasonably
practicable a special meeting of its stockholders for the purpose of obtaining,
and use its best all commercially reasonable efforts to obtain, Stockholder
Approval. In the event that the stockholders do not approve such transactions at
such meeting, the Company shall continue to use all commercially reasonable its
best efforts to seek such approval as soon as practicable after such meeting,
but no less frequently than quarterly thereafter. "Stockholder Approval" means
the affirmative vote of the holders of such number of votes cast at a meeting of
stockholders approving the issuance of Common Stock in excess of the Cap Amount
as may be required under the applicable listing requirements of the Principal
Market.

                                       5
<PAGE>

      5. Payment of the Exercise Price; Cashless Exercise. The Holder may pay
the Exercise Price in either of the following forms or, at the election of
Holder, a combination thereof:

            (a) through a cash exercise (a "Cash Exercise") by delivering
immediately available funds, or

            (b) if an effective Registration Statement is not available for the
resale of all of the Warrant Shares issuable hereunder at the time an Exercise
Notice is delivered to the Company, through a cashless exercise (a "Cashless
Exercise"), as hereinafter provided. The Holder may effect a Cashless Exercise
by surrendering this Warrant to the Company and noting on the Exercise Notice
that the Holder wishes to effect a Cashless Exercise, upon which the Company
shall issue to the Holder the number of Warrant Shares determined as follows:

                  X = Y x (A-B)/A

where:            X = the number of Warrant Shares to be issued to the Holder;

                  Y = the number of Warrant Shares with respect to
                      which this Warrant is being exercised;

                  A = the Market Price (as defined in the Articles of
                      Amendment) as of the Exercise Date; and

                  B = the Exercise Price.

For purposes of Rule 144, it is intended and acknowledged that the Warrant
Shares issued in a Cashless Exercise transaction shall be deemed to have been
acquired by the Holder, and the holding period for the Warrant Shares required
by Rule 144 shall be deemed to have been commenced, on the Issue Date.

      6. Anti-Dilution Adjustments; Distributions; Other Events. The Exercise
Price and the number of Warrant Shares issuable hereunder shall be subject to
adjustment from time to time as provided in this Section 6. In the event that
any adjustment of the Exercise Price required herein results in a fraction of a
cent, the Exercise Price shall be rounded up or down to the nearest one
hundredth of a cent.

            (a) Subdivision or Combination of Common Stock. If the Company, at
any time after the Issue Date, subdivides (by any stock split, stock dividend,
recapitalization, reorganization, reclassification or otherwise) the outstanding
shares of Common Stock into a greater number of shares, then effective upon the
close of business on the record date for effecting such subdivision, the
Exercise Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company, at any time after the Issue Date,
combines (by reverse stock split, recapitalization, reorganization,
reclassification or otherwise) the outstanding shares of Common Stock into a
smaller number of shares, then, effective upon the close of business on the
record date for effecting such combination, the Exercise Price in effect
immediately prior to such combination will be proportionally increased.

                                       6
<PAGE>

            (b) Distributions. If, at any time after the Issue Date, the Company
declares or makes any distribution of cash or any other assets (or rights to
acquire such assets) to holders of Common Stock, as a partial liquidating
dividend or otherwise, including without limitation any dividend or distribution
to the Company's stockholders in shares (or rights to acquire shares) of capital
stock of a subsidiary) (a "Distribution"), the Company shall deliver written
notice of such Distribution (a "Distribution Notice") to the Holder at least
twenty (20) days prior to the earlier to occur of (i) the record date for
determining stockholders entitled to such Distribution (the "Record Date") and
(ii) the date on which such Distribution is made (the "Distribution Date") (the
earlier of such dates being referred to as the "Determination Date"). In the
Distribution Notice to a Holder, the Company shall indicate whether the Company
has elected (A) to deliver to such Holder, upon any exercise of this Warrant
after the Determination Date, the same amount and type of assets being
distributed in such Distribution as though the Holder were, on the Determination
Date, a holder of a number of shares of Common Stock into which this Warrant is
exercisable as of such Determination Date (such number of shares to be
determined at the Exercise Price then in effect and without giving effect to any
limitations on such exercise) or (B) upon any exercise of this Warrant on or
after the Determination Date, to reduce the Exercise Price applicable to such
exercise by reducing the Exercise Price in effect on the Business Day
immediately preceding the Record Date by an amount equal to the fair market
value of the assets to be distributed divided by the number of shares of Common
Stock as to which such Distribution is to be made, such fair market value to be
reasonably determined in good faith by the Company's Board of Directors. If the
Company does not notify the Holders of its election pursuant to the preceding
sentence on or prior to the Determination Date, the Company shall be deemed to
have elected clause (A) of the preceding sentence.

            (c) Dilutive Issuances.

                  (i) Adjustment Upon Dilutive Issuance. If, at any time after
the Issue Date, the Company issues or sells, or in accordance with subparagraph
(ii) of this paragraph (c), is deemed to have issued or sold, any shares of
Common Stock for per share consideration less than the Exercise Price on the
date of such issuance or sale (a "Dilutive Issuance"), then effective
immediately upon such Dilutive Issuance, the Exercise Price shall be adjusted so
as to equal the consideration received or receivable by the Company (on a per
share basis) for the additional shares of Common Stock so issued, sold or deemed
issued or sold in such Dilutive Issuance (which, in the case of a deemed
issuance or sale, shall be calculated in accordance with subparagraph (ii)
below). For the avoidance of doubt, no adjustment shall be made pursuant to this
clause (c)(i) if such adjustment would result in an increase in the Exercise
Price then in effect.

                  (ii) Effect On Exercise Price Of Certain Events. For purposes
of determining the adjusted Exercise Price under subparagraph (i) of this
paragraph (c), the following will be applicable:

                                       7
<PAGE>

                  (A) Issuance Of Purchase Rights. If the Company issues or
            sells any options, warrants or other rights to purchase or subscribe
            for Common Stock or Convertible Securities ("Purchase Rights"),
            whether or not immediately exercisable, and the price per share for
            which Common Stock is issuable upon the exercise of such Purchase
            Rights (and the price of any conversion of any securities or other
            instruments which are convertible into or exercisable or
            exchangeable for Common Stock ("Convertible Securities"), if
            applicable) is less than the Exercise Price in effect on the date of
            issuance or sale of such Purchase Rights, then the maximum total
            number of shares of Common Stock issuable upon the exercise of all
            such Purchase Rights (assuming full conversion, exercise or exchange
            of Convertible Securities, if applicable) shall, as of the date of
            the issuance or sale of such Purchase Rights, be deemed to be
            outstanding and to have been issued and sold by the Company for such
            price per share. For purposes of the preceding sentence, the "price
            per share for which Common Stock is issuable upon the exercise of
            such Purchase Rights" shall be determined by dividing (x) the total
            amount, if any, received or receivable by the Company as
            consideration for the issuance or sale of all such Purchase Rights,
            plus the minimum aggregate amount of additional consideration, if
            any, payable to the Company upon the exercise of all such Purchase
            Rights, plus, ---- in the case of Convertible Securities issuable
            upon the exercise of such Purchase Rights, the minimum aggregate
            amount of additional consideration payable upon the conversion,
            exercise or exchange thereof (determined in accordance with the
            calculation method set forth in subparagraph (ii)(B) below) at the
            time such Convertible Securities first become convertible,
            exercisable or exchangeable, by (y) the maximum total number of
            shares of Common Stock issuable upon the exercise of all such
            Purchase Rights (assuming full conversion, exercise or exchange of
            Convertible Securities, if applicable). No further adjustment to the
            Exercise Price shall be made upon the actual issuance of such Common
            Stock upon the exercise of such Purchase Rights or upon the
            conversion, exercise or exchange of Convertible Securities issuable
            upon exercise of such Purchase Rights.

                  (B) Issuance Of Convertible Securities. If the Company issues
            or sells any Convertible Securities, whether or not immediately
            convertible, exercisable or exchangeable, and the price per share
            for which Common Stock is issuable upon such conversion, exercise or
            exchange is less than the Exercise Price in effect on the date of
            issuance or sale of such Convertible Securities, then the maximum
            total number of shares of Common Stock issuable upon the conversion,
            exercise or exchange of all such Convertible Securities shall, as of
            the date of the issuance or sale of such Convertible Securities, be
            deemed to be outstanding and to have been issued and sold by the
            Company for such price per share. If the Convertible Securities so
            issued or sold do not have a fluctuating conversion or exercise
            price or exchange ratio, then for the purposes of the immediately
            preceding sentence, the "price per share for which Common Stock is
            issuable upon such conversion, exercise or exchange" shall be
            determined by dividing (x) the total amount, if any, received or
            receivable by the Company as consideration for the issuance or sale
            of all such Convertible Securities, plus the minimum aggregate
            amount of additional consideration, if any, payable to the Company
            upon the conversion, exercise or exchange thereof (determined in
            accordance with the calculation method set forth in this
            subparagraph (ii)(B)), by (y) the maximum total number of shares of
            Common Stock issuable upon the exercise, conversion or exchange of
            all such Convertible Securities. If the Convertible Securities so
            issued or sold have a fluctuating conversion or exercise price or
            exchange ratio (a "Variable Rate Convertible Security"), then for
            purposes of the first sentence of this subparagraph (B), the "price
            per share for which Common Stock is issuable upon such conversion,
            exercise or exchange" shall be deemed to be the lowest price per
            share which would be applicable (assuming all holding period and
            other conditions to any discounts contained in such Variable Rate
            Convertible Security have been satisfied) if the conversion price of
            such Variable Rate Convertible Security on the date of issuance or
            sale thereof were seventy-five percent (75%) of the actual
            conversion price on such date (or such higher minimum conversion
            price if such Variable Rate Convertible Security is subject to a
            minimum conversion price) (the "Assumed Variable Market Price"),
            and, further, if the conversion price of such Variable Rate
            Convertible Security at any time or times thereafter is less than or
            equal to the Assumed Variable Market Price last used for making any
            adjustment under this paragraph (c) with respect to any Variable
            Rate Convertible Security, the Exercise Price in effect at such time
            shall be readjusted to equal the Exercise Price which would have
            resulted if the Assumed Variable Market Price at the time of
            issuance of the Variable Rate Convertible Security had been
            seventy-five percent (75%) of the actual conversion price of such
            Variable Rate Convertible Security existing at the time of the
            adjustment required by this sentence; provided, however, that if the
            conversion or exercise price or exchange ratio of a Convertible
            Security may fluctuate solely as a result of provisions designed to
            protect against dilution, such Convertible Security shall not be
            deemed to be a Variable Rate Convertible Security. No further
            adjustment to the Exercise Price shall be made upon the actual
            issuance of such Common Stock upon conversion, exercise or exchange
            of such Convertible Securities.

                                       8
<PAGE>

                  (C) Change In Option Price Or Conversion Rate. If, following
            an adjustment to the Exercise Price upon the issuance of Purchase
            Rights or Convertible Securities pursuant to a Dilutive Issuance,
            there is a change at any time in (x) the amount of additional
            consideration payable to the Company upon the exercise of any
            Purchase Rights; (y) the amount of additional consideration, if any,
            payable to the Company upon the conversion, exercise or exchange of
            any Convertible Securities; or (z) the rate at which any Convertible
            Securities are convertible into or exercisable or exchangeable for
            Common Stock (in each such case, other than under or by reason of
            provisions designed to protect against dilution), then in any such
            case, the Exercise Price in effect at the time of such change shall
            be readjusted to the Exercise Price which would have been in effect
            at such time had such Purchase Rights or Convertible Securities
            still outstanding provided for such changed additional consideration
            or changed conversion, exercise or exchange rate, as the case may
            be, at the time initially issued or sold.

                                       9
<PAGE>

                  (D) Calculation Of Consideration Received. If any Common
            Stock, Purchase Rights or Convertible Securities are issued or sold
            for cash, the consideration received therefor will be the amount
            received by the Company therefore. In case any Common Stock,
            Purchase Rights or Convertible Securities are issued or sold for a
            consideration part or all of which shall be other than cash, the
            amount of the consideration other than cash received by the Company
            (including the net present value of the consideration expected by
            the Company for the provided or purchased services) shall be the
            fair market value of such consideration, except where such
            consideration consists of publicly traded securities, in which case
            the amount of consideration received by the Company will be the
            Market Price thereof on the date of receipt. Notwithstanding
            anything else herein to the contrary, if Common Stock Purchase
            Rights or Convertible Securities are issued or sold in conjunction
            with each other as part of a single transaction or in a series of
            related transactions, the Holder may elect to determine the amount
            of consideration deemed to be received by the Company therefor by
            deducting the fair value of any type of securities (the "Disregarded
            Securities") issued or sold in such transaction or series of
            transactions. If the Holder makes an election pursuant to the
            immediately preceding sentence, no adjustment to the Exercise Price
            shall be made pursuant to this paragraph (c) for the issuance of the
            Disregarded Securities or upon any conversion, exercise or exchange
            thereof. The independent members of the Company's Board of Directors
            shall calculate reasonably and in good faith, using standard
            commercial valuation methods appropriate for valuing such assets,
            the fair market value of any consideration other than cash or
            securities.

                  (E) Issuances Without Consideration Pursuant to Existing
            Securities. If the Company issues (or becomes obligated to issue)
            shares of Common Stock pursuant to any anti-dilution or similar
            adjustments (other than as a result of stock splits, stock dividends
            and the like) contained in any Convertible Securities or Purchase
            Rights outstanding as of the date hereof, then all shares of Common
            Stock so issued shall be deemed to have been issued for no
            consideration.

                  (iii) Exceptions To Adjustment Of Exercise Price.
Notwithstanding the foregoing, no adjustment to the Exercise Price shall be made
pursuant to this paragraph (c) upon the issuance of any Excluded Securities. For
purposes hereof, "Excluded Securities" means (A) securities purchased under the
Securities Purchase Agreement; (B) securities issued upon conversion of the
Preferred Shares or exercise of the Warrants; (C) shares of Common Stock
issuable or issued to (x) employees, consultants, officers or directors from
time to time either directly or upon the exercise of options, in such case
granted or to be granted by the Board of Directors or a committee thereof,
pursuant to one or more stock option plans, stock incentive plans or restricted
stock plans or stock purchase plans in effect as of the Closing Date or approved
by the Board of Directors including a majority of the Company's independent
directors (as such term is defined under Rule 4200(a)(15) of the Nasdaq Market
Rules), or (y) consultants or vendors pursuant to options or warrants to
purchase Common Stock that are outstanding on the date hereof or issued
hereafter, provided such issuances are approved by the Board of Directors;
provided, that in the case of any such options described in this clause (C) that
are issued after the date hereof, only options exercisable for a maximum of 10%
of the number of shares outstanding on the Closing Date shall be included as
"Excluded Securities" (it being understood that such number does not include any
options the issuance of which is not a Dilutive Issuance); (D) except as
required by paragraph (c)(ii)(E) above, shares of Common Stock issued in
connection with any Convertible Securities or Purchase Rights outstanding on the
date hereof; (E) shares of Common Stock issued to a Person in connection with a
joint venture, strategic alliance or other commercial relationship with such
Person relating to the operation of the Company's business and not for the
purpose of raising equity capital; (F) shares of Common Stock issued in
connection with the acquisition by the Company of any corporation or other
entity or of substantially all of the assets of any corporation or other entity
or division or business unit thereof occurring after the Effective Date.

                                       10
<PAGE>

                  (iv) Notice Of Adjustments. Upon the occurrence of one or more
adjustments or readjustments of the Exercise Price pursuant to this paragraph
(c) or any change in the number or type of stock, securities and/or other
property issuable upon exercise of this Warrant, the Company, at its expense,
shall promptly compute such adjustment or readjustment or change and prepare and
furnish to the Holder a notice (an "Adjustment Notice") setting forth such
adjustment or readjustment or change and showing in detail the facts upon which
such adjustment or readjustment or change is based, and, on or before the time
that it delivers an Adjustment Notice, publicly disclose the contents thereof.
The failure of the Company to deliver an Adjustment Notice shall not affect the
validity of any such adjustment.

            (d) Major Transactions. In the event of a merger, consolidation,
business combination, tender offer, exchange of shares, recapitalization,
reorganization, redemption or other similar event, as a result of which shares
of Common Stock shall be changed into the same or a different number of shares
of the same or another class or classes of stock or securities or other assets
(including, without limitation, cash) of the Company or another entity (other
than any exchange of shares, recapitalization, reorganization, redemption or
other similar event that does not result in a change in the identity, percentage
ownership or relative rights of the stockholders of the Company), or the Company
shall sell all or substantially all of its assets (each of the foregoing being a
"Major Transaction"), the Company will give the Holder at least twenty (20)
Trading Days written notice prior to the earlier of (x) the closing or
effectiveness of such Major Transaction and (y) the record date for the receipt
of such shares of stock or securities or other assets. In the event of a Major
Transaction, the Holder shall be permitted (but shall not be required) to either
(i) require the Company to repurchase this Warrant for an amount equal to the
value of this Warrant calculated pursuant to the Black-Scholes pricing model
(with a maximum volatility of 100%) or (ii) exercise this Warrant in whole or in
part at any time prior to the record date for the receipt of such consideration
and shall be entitled to receive, for each share of Common Stock issuable to
Holder upon such exercise, the same per share consideration payable to the other
holders of Common Stock in connection with such Major Transaction. If and to the
extent that the Holder retains any portion of this Warrant following such record
date, the Company will cause the surviving or, in the event of a sale of assets,
purchasing entity, as a condition precedent to such Major Transaction, to assume
the obligations of the Company under this Warrant, with such adjustments to the
Exercise Price and the securities covered hereby as may be necessary in order to
preserve the economic benefits of this Warrant to the Holder.

                                       11
<PAGE>

            (e) Adjustments; Additional Shares, Securities or Assets. In the
event that at any time, as a result of an adjustment made pursuant to this
Section 6, the Holder of this Warrant shall, upon exercise of this Warrant,
become entitled to receive securities or assets (other than Common Stock) then,
wherever appropriate, all references herein to shares of Common Stock shall be
deemed to refer to and include such shares and/or other securities or assets;
and thereafter the number of such shares and/or other securities or assets shall
be subject to adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this Section 6. Any adjustment
made herein that results in a decrease in the Exercise Price shall also effect a
proportional increase in the number of shares of Common Stock into which this
Warrant is exercisable.

      7. Fractional Interests. No fractional shares or scrip representing
fractional shares shall be issuable upon the exercise of this Warrant, but on
exercise of this Warrant, the Holder hereof may purchase only a whole number of
shares of Common Stock. If, on exercise of this Warrant, the Holder hereof would
be entitled to a fractional share of Common Stock or a right to acquire a
fractional share of Common Stock, the Company shall, in lieu of issuing any such
fractional share, pay to the Holder an amount in cash equal to the product
resulting from multiplying such fraction by the Market Price as of the Exercise
Date.

      8. Transfer of this Warrant. The Holder may sell, transfer, assign, pledge
or otherwise dispose of this Warrant, in whole or in part, as long as such sale
or other disposition is made pursuant to an effective registration statement or
an exemption from the registration requirements of the Securities Act. Upon such
transfer or other disposition (other than a pledge), the Holder shall deliver
this Warrant to the Company together with a written notice to the Company,
substantially in the form of the Transfer Notice attached hereto as Exhibit B
(the "Transfer Notice"), indicating the person or persons to whom this Warrant
shall be transferred and, if less than all of this Warrant is transferred, the
number of Warrant Shares to be covered by the part of this Warrant to be
transferred to each such person. Within three (3) Business Days of receiving a
Transfer Notice and the original of this Warrant, the Company shall deliver to
the each transferee designated by the Holder a Warrant or Warrants of like tenor
and terms for the appropriate number of Warrant Shares and, if less than all
this Warrant is transferred, shall deliver to the Holder a Warrant for the
remaining number of Warrant Shares.

      9. Benefits of this Warrant. This Warrant shall be for the sole and
exclusive benefit of the Holder of this Warrant and nothing in this Warrant
shall be construed to confer upon any person other than the Holder of this
Warrant any legal or equitable right, remedy or claim hereunder.

                                       12
<PAGE>

      10. Loss, theft, destruction or mutilation of Warrant. Upon receipt by the
Company of evidence of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) of indemnity reasonably
satisfactory to the Company, and upon surrender of this Warrant, if mutilated,
the Company shall execute and deliver a new Warrant of like tenor and date.

      11. Certain Agreements of the Company.

            The Company hereby covenants and agrees as follows:

            (a) Shares to be Fully Paid. All Warrant Shares shall, upon issuance
in accordance with the terms of this Warrant, be validly issued, fully paid and
non-assessable and free from all taxes, liens, claims and encumbrances.

            (b) Certain Actions Prohibited. The Company shall not, by amendment
of its Articles of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities, or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed by it hereunder, but will at all
times in good faith assist in the carrying out of all the provisions of this
Warrant and in the taking of all such action as may reasonably be requested by
the holder of this Warrant in order to protect the economic benefit inuring to
the holder hereof and the exercise privilege of the holder of this Warrant
against impairment, consistent with the tenor and purpose of this Warrant.
Without limiting the generality of the foregoing, the Company (i) shall not
increase the par value of any shares of Common Stock receivable upon the
exercise of this Warrant above the Exercise Price then in effect, and (ii) shall
take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.

      12. Notice or Demands. Any notice, demand or request required or permitted
to be given by the Company or the Holder pursuant to the terms of this Warrant
shall be in writing and shall be deemed delivered (i) when delivered personally
or by verifiable facsimile transmission, unless such delivery is made on a day
that is not a Business Day, in which case such delivery will be deemed to be
made on the next succeeding Business Day, (ii) on the next Business Day after
timely delivery to an overnight courier and (iii) on the Business Day actually
received if deposited in the U.S. mail (certified or registered mail, return
receipt requested, postage prepaid), addressed as follows:

            If to the Company:

            MediaBay, Inc.
            2 Ridgedale Avenue, Suite 300
            Cedar Knolls, New Jersey 07927
            Attn: Chief Executive Officer and
                  Chief Financial Officer
            Tel: (973) 539-9528
            Fax: (973) 539-1273

                                       13
<PAGE>

            with a copy to:

            Blank Rome LLP
            The Chrysler Building
            405 Lexington Avenue
            New York, NY  10174
            Attn: Robert J. Mittman
            Tel: (212) 885-5000
            Fax: (212) 885-5001

and if to the Holder, to such address as the Holder shall have furnished to the
Company in writing.

      13. Applicable Law. This Warrant is issued under and shall for all
purposes be governed by and construed in accordance with the laws of the State
of New York applicable to contracts made and to be performed entirely within the
State of New York.

      14. Amendments. No amendment, modification or other change to, or waiver
of any provision of, this Warrant may be made unless such amendment,
modification or change is set forth in writing and is signed by the Company and
the Holder.

      15. Successors and Assigns. The terms and conditions of this Warrant shall
inure to the benefit of and be binding upon the respective successors and
permitted assigns of the parties including, without limitation, upon any entity
succeeding to the Company by merger, consolidation, or acquisition of all or
substantially all of the Company's assets.

      16. Entire Agreement. This Warrant, the Securities Purchase Agreement, the
Articles of Amendment, the Registration Rights Agreement, and the other
Transaction Documents 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 Warrant, the Securities Purchase
Agreement, the Articles of Amendment, the Registration Rights Agreement, and the
other Transaction Documents supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof,
including, without limitation, any nondisclosure or similar agreement heretofore
entered into between the Holder and the Company.

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

                           [Signature Page to Follow]

                                       14
<PAGE>

      IN WITNESS WHEREOF, the Company has duly executed and delivered this
Warrant as of the Issue Date.

                                        MEDIABAY, INC.

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

<PAGE>

                                                            EXHIBIT A to WARRANT

                                 EXERCISE NOTICE

      The undersigned Holder hereby irrevocably exercises the right to purchase
of the shares of Common Stock ("Warrant Shares") of ___________________________
evidenced by the attached Warrant (the "Warrant"). Capitalized terms used herein
and not otherwise defined shall have the respective meanings set forth in the
Warrant.

      1. Form of Exercise Price. The Holder intends that payment of the Exercise
Price shall be made as:

            ______ a Cash Exercise with respect to _________________ Warrant
Shares; and/or

            ______ a Cashless Exercise with respect to _________________ Warrant
Shares, as permitted by Section 5(b) of the attached Warrant.

      2. Payment of Exercise Price. In the event that the Holder has elected a
Cash Exercise with respect to some or all of the Warrant Shares to be issued
pursuant hereto, the Holder shall pay the sum of $________________ to the
Company in accordance with the terms of the Warrant.

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

-----------------------------------
      Name of Registered Holder

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

<PAGE>

                                                            EXHIBIT B to WARRANT

                                 TRANSFER NOTICE

FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant hereby sells,
assigns and transfers unto the person or persons named below the right to
purchase shares of the Common Stock of _____________________ evidenced by the
attached Warrant.

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

-----------------------------------
      Name of Registered Holder

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

Transferee Name and Address:

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

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

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

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