Document:

Exhibit 10.3

 

ALLIANCE FINANCIAL CORPORATION

 

RESTRICTED STOCK AGREEMENT

 

This sets forth the terms of the RESTRICTED STOCK AGREEMENT (“Agreement”), entered into as of the 5th day of May, 2006 by and between ALLIANCE FINANCIAL CORPORATION (“Company”) and J. Daniel Mohr, an employee of the Company or one of its subsidiaries (“Grantee”).

 

TERMS

 

1.          Definition of Terms. For purposes of this Agreement, all defined terms, as indicated by the capitalization of the first letter of such term, shall have the meanings specified in the Alliance Financial Corporation 1998 Long Term Incentive Compensation Plan (“Plan”) to the extent not specified in this Agreement. 

 

2.          Restricted Stock Grant. Pursuant to the Plan and subject to the terms and conditions of the Plan and this Agreement, the Company hereby grants to the Grantee, and the Grantee accepts, 2,500 shares of Common Stock of the Company (“Restricted Stock”). 

 

3.          Restrictions. The shares of Restricted Stock are awarded to the Grantee on the condition that the Grantee remain in the employment of the Company or its subsidiaries during the Forfeiture Periods described below.

 

a.            Except to the extent that the Forfeiture Period expires sooner pursuant to paragraph 3(b), the Forfeiture Period for all of the shares of Restricted Stock awarded pursuant to this Agreement shall expire on the seventh anniversary of the date of this Agreement. If the foregoing date occurs on a date that is not a normal business day of the Company, the date shall be deemed to occur on the next ensuing normal business day of the Company.

 

b.            Notwithstanding the provisions of paragraph 3(a), the Forfeiture Period for 1,250 shares of Restricted Stock awarded pursuant to this Agreement shall expire on the date described in (i) or (ii) below, if the applicable date occurs prior to the seventh anniversary of the date of this Agreement:

 

i.             if, for a period of at least fifteen consecutive trading days between the date of this Agreement and the third anniversary of the date of this Agreement, unrestricted shares of common stock of the Company have had a closing traded price on an established public market that equals at least 160 percent of the closing traded price of unrestricted shares of common stock of the Company on the date of this Agreement, then the Forfeiture Period described in this paragraph 3(b) shall expire on the first date on or after the third anniversary of the date of this Agreement on which unrestricted shares of common stock of the Company are traded on an established public market at a price that 

 

 

is at least equal to the closing traded price of unrestricted shares of common stock of the Company on the date of this Agreement; or

 

ii.            if later than the third anniversary of the date of this Agreement, the fifteen consecutive trading date on which unrestricted shares of common stock of the Company have had a closing traded price on an established public market that equals at least 160 percent of the closing traded price of unrestricted shares of common stock of the Company on the date of this Agreement. 

 

For purposes of this paragraph 3(b), only unrestricted shares of common stock of the Company that are traded by individuals and entities unrelated to the Company, its subsidiaries and its affiliates, and that are of the same type and class as the shares of Common Stock granted pursuant to this Agreement, shall be taken into account in determining if and when the applicable Forfeiture Period has expired. Subject to the other terms of this Agreement, if the Forfeiture Period for the shares of Restricted Stock described in this paragraph 3(b) does not expire prior to the seventh anniversary of this Agreement pursuant to this paragraph 3(b), then such Forfeiture Period shall expire on the seventh anniversary of this Agreement as provided in paragraph 3(a). 

 

c.            During the Forfeiture Period, the shares of Restricted Stock may not be sold, exchanged, transferred, pledged, hypothecated, or otherwise disposed of, and the Grantee agrees not to sell, exchange, transfer, pledge or otherwise dispose of any of such shares, or attempt to do so, during the Forfeiture Period.

 

4.          Termination. Except as provided in paragraphs 4(a), (b), (c) and (d) below, if the Grantee’s employment with the Company (or its subsidiaries) terminates prior to the expiration of the applicable Forfeiture Period, the Grantee shall, on the date employment terminates, forfeit and surrender to the Company the number of shares of Restricted Stock with respect to which the applicable Forfeiture Period is in effect on the date employment terminates.

 

a.            If the Grantee dies, or terminates employment with the Company (or its subsidiaries) because of disability, before the expiration of a Forfeiture Period, the applicable Forfeiture Period on the Restricted Stock granted pursuant to this Agreement shall expire on the date of death, or on the date that employment terminates because of disability, provided such date is not less than four years subsequent to the date of this Agreement. If the date of death or disability is within four years of the date of this Agreement, the Board of Directors, in its sole discretion, may waive the Forfeiture Period as to any or all of the Restricted Stock. 

 

b.            If the Grantee’s employment with the Company (or its subsidiaries) terminates prior to the expiration of an applicable Forfeiture Period as a result of the Grantee’s planned retirement in good standing, as determined by the Board of Directors in its sole discretion, the applicable Forfeiture Period on the Restricted Stock granted pursuant to this Agreement shall expire on the date of such approved planned retirement.

 

c.
            If the Grantee’s employment with the Company (or its subsidiaries),
or the successor of the Company (or its subsidiaries), terminates prior to the
expiration of an applicable 

 

 

 Forfeiture Period as a result of a termination of
the Grantee’s employment for “Good Reason” within 12 months after a “Change of Control” of the Company, the
applicable Forfeiture Period on the Restricted Stock granted pursuant to this
Agreement shall expire on the date of such termination. For purposes of this
paragraph 4(c), “Good reason” and “Change of Control” shall
have the meanings below.

 

i.             “Good Reason” shall mean a termination that is the direct result of an involuntary and material change in the Grantee’s title, duties, responsibilities and/or total compensation and benefits from the Company (or its subsidiaries), or the successor of the Company (or its subsidiaries).

 

	
             
 	
            ii.
 	
            A “Change of Control” shall be deemed to have occurred if:
 

 

A.           any “person,” including a “group” as determined in accordance with the Section 13(d)(3) of the Securities Exchange Act of 1934 (“Exchange Act”), is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 30 percent or more of the combined voting power of the Company’s then outstanding securities;

 

B.           as a result of, or in connection with, any tender offer or exchange offer, merger or other business combination (a “Transaction”), the persons who were directors of the Company before the Transaction shall cease to constitute a majority of the Board of Directors or the board of directors of any successor to the Company;

 

C.           the Company is merged or consolidated with another corporation and as a result of the merger or consolidation less than 70 percent of the outstanding voting securities of the surviving or resulting corporation shall then be owned in the aggregate by the former stockholders of the Company, other than (A) affiliates within the meaning of the Exchange Act, or (B) any party to the merger or consolidation;

 

D.           a tender offer or exchange offer is made and consummated for the ownership of securities of the Company representing 30 percent or more of the combined voting power of the Company’s then outstanding voting securities; or

 

E.           the Company transfers substantially all of its assets to another entity that is not owned or controlled by the Company.

 

d.            Notwithstanding the forgoing, the Board of Directors shall have the authority at any time to accelerate the time at which any or all or the restrictions set forth in this Agreement with respect to any or all shares of the Restricted Stock granted pursuant to under this Agreement shall expire.

 

 

 

5.
          Escrow. The certificate(s) of Restricted Stock
granted to the Grantee shall be retained in escrow by the Company (or its
designee) until the expiration of the applicable Forfeiture Period, at which time(s) certificate(s) without any restrictive legend affixed thereto shall be delivered by the Company (or its designee) to the Grantee. If shares of Restricted Stock are forfeited, the applicable certificate(s) of Restricted Stock shall be canceled of record.

 

6.          Incidents of Ownership. During the Forfeiture Period, the Grantee shall have all the rights of a shareholder with respect to shares of Restricted Stock, including the right to vote such shares at any meeting of shareholders of Common Stock and the right to receive all dividends paid with respect to such shares, subject, however, to the restrictions set forth in this Agreement.

 

7.          Internal Revenue Code Section 83(b) Election. The Grantee agrees, as a term and condition of receiving and accepting shares of Restricted Stock pursuant to this Agreement, not to make an election under Section 83(b) of the Internal Revenue Code of 1986, as amended, with respect to such shares of Restricted Stock. If the Grantee or his legal representative makes such an election without the consent of the Company, all shares of Restricted Stock held by the Grantee or his legal representative at the time shall be forfeited and canceled of record.

 

8.            Adjustments. In the event of a reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, rights offering, or any other change in the corporate structure or shares of the Company, the Board of Directors may make such adjustment equitably required in the number and kind of shares of Restricted Stock issued pursuant to this Agreement. Such adjustment shall be final and binding on the Company and the Grantee.

 

9.           No Right To Continued Employment. This Agreement shall not confer upon the Grantee any right to continued employment with the Company (or its subsidiaries) nor shall it interfere, in any way, with the right of the Company to modify the Grantee’s compensation, duties, and responsibilities, or the Company’s authority to terminate the Grantee’s employment.

 

10.        Withholding. The Company shall have the right to deduct any sums that federal, state or local tax laws require to be withheld upon the grant of Restricted Stock or upon the expiration of a Forfeiture Period. In the alternative, the Grantee may pay to the Company for deposit with the appropriate taxing authority, any amounts that federal, state or local tax laws require to be withheld upon the grant of Restricted Stock or upon the expiration of a Forfeiture Period.

 

11.        Notices. All notices and communications under this Agreement shall be in writing and shall be given by personal delivery or by registered or certified mail, return receipt requested, addressed to the residence of the Grantee and to the principal office of the Company, or such other address as may be designated by the Company or the Grantee. Notice shall be deemed given upon personal delivery or upon receipt.

 

 

 

 

12.        Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the successors and assigns of the Company, and the heirs, successors and permitted assigns of the Grantee.

 

13.        Governing Law. This Agreement shall be construed in accordance with the laws of the State of New York. The Grantee agrees to accept as binding, conclusive and final all decisions and interpretations of the Board of Directors with respect to any questions that may arise under the Plan and this Agreement.

 

14.        Acknowledgments by Grantee. The Grantee acknowledges that the Grantee has been advised, and that the Grantee understands, that:

 

a.            This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933;

 

b.            the grant of Restricted Stock pursuant to this Agreement may be subject to, or may become subject to, applicable reporting, disclosure and holding period restrictions imposed by Rule 144 under the Securities Act of 1933 and Section 16 of the Securities Exchange Act of 1934 (“Section 16”); and

 

c.            shares could be subject to Section 16(a) reporting requirements as well as the short swing trading prohibition contained in Section 16(b) which precludes any profit taking with respect to any stock transactions which occur within any six-month period.

 

The Company has caused this Restricted Stock Agreement to be executed by its duly authorized officer, and the Grantee has executed this Agreement, both as of the day and year first written above.

 

This Agreement has been signed by the Company and Grantee on May 3, 2006.

 

ALLIANCE FINANCIAL CORPORATION

 

 

By: /s/ Jack H. Webb

	
             
 	
            Jack H. Webb
 

Title: Chairman, President and CEO

 

GRANTEE

 

/s/J. Daniel Mohr

	
             
 	
            J. Daniel MohrEXHIBIT 10.1

                            CONFIDENTIALITY AGREEMENT

      The  undersigned  has  requested  that  Stellar  Technologies,  Inc.  (the
"Company") provide it with a copy of the Securities Purchase Agreement and other
documents (the "Offering Documents") relating to the Company's proposed offering
of shares of  preferred  stock  convertible  into shares of its common stock and
warrants to acquire shares of its common stock (the "Offering").

      As a condition to the receipt of the Offering  Documents,  the undersigned
acknowledges and agrees as follows:

      1.    The Offering  Documents  have been furnished to me on a confidential
            basis  solely  for  the  purpose  of  enabling  me to  evaluate  the
            Offering.

      2.    Certain  of the  information  contained  in the  Offering  Documents
            constitutes  material non public  information  under  United  States
            federal  securities laws, and that United States federal  securities
            laws  prohibit  any  person  who has  received  material  non-public
            information  relating  to the  Company  from  purchasing  or selling
            securities of the Company, or from communicating such information to
            any person under circumstances in which it is reasonably foreseeable
            that such  person is likely to purchase  or sell  securities  of the
            Company.

      3.    The undersigned  will not communicate  such information to any other
            person until such time as any such  non-public  information has been
            adequately disseminated to the public.

      IN WITNESS  WHEREOF,  the undersigned  acknowledges and agrees to abide by
the terms of this Confidentiality Agreement.

Date:                                     By:
     -----------------------                 -----------------------------------

                                          Name:
                                               ---------------------------------

                                          Title:
                                                --------------------------------

                                          Address:
                                                  ------------------------------

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

EXECUTION OF THIS  DOCUMENT  DOES NOT  INDICATE  ANY INTENT TO SUBSCRIBE  FOR OR
PURCHASE THE SECURITIES OFFERED IN THE OFFERING DOCUMENTS. THIS DOCUMENT MUST BE
SIGNED AT THE TIME YOU RECEIVE THE ATTACHED  OFFERING  DOCUMENTS AND RETURNED TO
THE SECRETARY OF THE COMPANY.

<PAGE>

                           STELLAR TECHNOLOGIES, INC.

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

                          Securities Purchase Agreement

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

                               Units Comprised of
                    Series B Convertible Preferred Stock and
                                    Warrants

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

                                  CONFIDENTIAL

<PAGE>

                            CONFIDENTIAL INFORMATION

      The Offeree,  by  accepting  the  Securities  Purchase  Agreement  and the
exhibits  hereto  relating  to  the  proposed   offering  of  Units  by  Stellar
Technologies,  Inc.  (the  "Company"),  comprised  of  shares  of its  Series  B
Convertible  Preferred Stock and warrants to acquire shares of its common stock,
acknowledges and agrees that: (i) the offering  documents have been furnished to
the Offeree on a  confidential  basis  solely for the  purpose of  enabling  the
Offeree  to  evaluate  the  offering;  (ii)  that the  Offeree  may not  further
distribute  the  offering  documents  without the prior  written  consent of the
Company, except to the Offeree's legal, financial or other personal advisors, if
any, who will use the  offering  documents on the  Offeree's  behalf  solely for
purposes of evaluating the offering;  (iii) any  reproduction or distribution of
the  offering  documents,  in  whole  or in  part,  or the  direct  or  indirect
disclosure  of the  contents of the  offering  documents  for any other  purpose
without the prior  written  consent of the Company is  prohibited;  and (iv) the
offeree  shall be bound by all terms and  conditions  specified  in the offering
documents.

                               NOTICE TO OFFEREES

      THE  SECURITIES   OFFERED  HEREBY  HAVE  NOT  BEEN  REGISTERED  UNDER  THE
SECURITIES  ACT OF 1933,  AS  AMENDED,  OR  REGISTERED  OR  QUALIFIED  UNDER THE
APPLICABLE  SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION.  THIS SECURITIES
PURCHASE  AGREEMENT AND THE OTHER OFFERING  DOCUMENTS DO NOT CONSTITUTE AN OFFER
TO SELL OR SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.

      THE  SECURITIES  ARE BEING OFFERED AND SOLD PURSUANT TO REGULATION S UNDER
THE  SECURITIES ACT FOR  INVESTMENT  PURPOSES ONLY,  WITHOUT A VIEW TO RESALE OR
DISTRIBUTION  THEREOF, AND MAY NOT BE TRANSFERRED,  RESOLD OR OFFERED FOR RESALE
IN THE UNITED STATES OR TO U.S.  PERSONS UNLESS  REGISTERED UNDER THE SECURITIES
ACT AND  REGISTERED OR QUALIFIED  UNDER THE  APPLICABLE  SECURITIES  LAWS OF ANY
STATE OR OTHER  JURISDICTION,  OR PURSUANT TO THE  AVAILABILITY  OF AN EXEMPTION
THEREFROM.

      HEDGING TRANSACTIONS, INCLUDING, BUT NOT LIMITED TO, SHORT SALES, SWAPS OR
DERIVATIVE  SECURITIES  TRANSACTIONS,  INVOLVING  THESE  SECURITIES  MAY  NOT BE
CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE SECURITIES
LAWS OF ANY STATE OR OTHER JURISDICTION.

      NEITHER  THE  SECURITIES  AND  EXCHANGE   COMMISSION  NOR  THE  SECURITIES
COMMISSION  OR  OTHER  REGULATORY  AUTHORITY  OF ANY OR OTHER  JURISDICTION  HAS
APPROVED OR  DISAPPROVED  OF THESE  SECURITIES  OR PASSED  UPON THE  ADEQUACY OR
ACCURACY OF THIS SECURITIES PURCHASE AGREEMENT OR ANY OF THE OTHER OFFERING

<PAGE>

DOCUMENTS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

      INVESTORS MUST COMPLY WITH ALL APPLICABLE LAWS AND REGULATIONS IN FORCE IN
ANY  JURISDICTION IN WHICH THEY PURCHASE,  OFFER OR SELL THE SECURITIES AND MUST
OBTAIN ANY CONSENT,  APPROVAL OR PERMISSION REQUIRED FOR THE PURCHASE,  OFFER OR
SALE BY IT OF THE  SECURITIES  UNDER  THE LAWS AND  REGULATIONS  IN FORCE IN ANY
JURISDICTION TO WHICH IT IS SUBJECT OR IN WHICH IT MAKES SUCH PURCHASES,  OFFERS
OR SALES. THE COMPANY SHALL NOT HAVE ANY RESPONSIBILITY WITH RESPECT TO INVESTOR
COMPLIANCE THEREWITH.

      INVESTORS  ARE  EXPECTED TO CONDUCT AN  INDEPENDENT  INVESTIGATION  OF THE
RISKS POSED BY AN  INVESTMENT  IN THE  SECURITIES.  AN OFFICER OF THE COMPANY IS
AVAILABLE TO ANSWER  QUESTIONS  CONCERNING  THE COMPANY AND WILL,  UPON REQUEST,
MAKE AVAILABLE  SUCH OTHER  INFORMATION  AS QUALIFIED,  POTENTIAL  INVESTORS MAY
REASONABLY REQUEST AND THAT CAN BE PROVIDED BY THE COMPANY WITHOUT  UNREASONABLE
EFFORT OR EXPENSE.

      INVESTORS ARE ALSO EXPECTED TO CONSULT THEIR OWN  INVESTMENT,  LEGAL,  TAX
AND  ACCOUNTING   ADVISORS  TO  DETERMINE  WHETHER  THE  SECURITIES   CONSTITUTE
APPROPRIATE  INVESTMENTS FOR THEM AND THE APPLICABLE LEGAL, TAX,  REGULATORY AND
ACCOUNTING  TREATMENT  OF THE  SECURITIES.  IN  MAKING AN  INVESTMENT  DECISION,
INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THE
OFFERING,  INCLUDING THE MERITS AND RISKS  INVOLVED.  INVESTORS  SHOULD BE AWARE
THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL  RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.

<PAGE>

                             ADDITIONAL INFORMATION

      Stellar  Technologies,  Inc. (the "Company")  files annual,  quarterly and
current reports,  proxy statements and other information with the Securities and
Exchange  Commission  (the "SEC") under the Securities  Exchange Act of 1934, as
amended. Reports,  statements or other information that we file with the SEC are
available to the public at the SEC's Website at  http://www.sec.gov,  as well as
our  Website  at  www.stellartechnologies.com.  Documents  filed  with  the  SEC
include, but are not limited to, the following documents:

      o     Current Report on Form 8-K dated March 16, 2006;

      o     Quarterly  Report  on Form  10-QSB  for  the  fiscal  quarter  ended
            December 31, 2005;

      o     Current Report on Form 8-K dated December 13, 2005;

      o     Quarterly  Report  on Form  10-QSB  for  the  fiscal  quarter  ended
            September 30, 2005; and

      o     Annual  Report on Form  10-KSB  for the  fiscal  year ended June 30,
            2005.

      The Company  will  provide to each person to whom this  agreement is sent,
upon the  written or oral  request of such  person,  a copy of any or all of the
documents  referred  to above.  You may make such  requests at no cost to you by
writing or telephoning us at the following address or number:

                  Stellar Technologies, Inc.
                  7935 Airport Pulling Road
                  Suite 201
                  Naples, FL  34109
                  (239) 592-1816

      The  Company  has not  authorized  anyone to  provide  you with  different
information.  You should not assume that the  information  in this  agreement is
accurate  as of any date other than the date this  agreement  is sent to you for
review or that the  information  filed with the SEC is  accurate  as of any date
other  than the date set  forth on the  front of the  document  containing  such
information.

<PAGE>

CONFIDENTIAL

                          SECURITIES PURCHASE AGREEMENT

      THIS   SECURITIES   PURCHASE   AGREEMENT   (this    "Agreement"),    dated
_______________,  2006, by and between  STELLAR  TECHNOLOGIES,  INC., a Colorado
corporation (the "Company"),  and the purchaser or purchasers  identified on the
signature page hereof ("Purchaser").

                                R E C I T A L S:

      WHEREAS,  Purchaser  desires to purchase  and the Company  desires to sell
units  comprised  of shares of Series B Preferred  Stock (as defined  below) and
warrants to acquire shares of common stock on the terms and conditions set forth
herein.

      NOW, THEREFORE, in consideration of the premises hereof and the agreements
set forth herein below, the parties hereto hereby agree as follows:

      1. The Offering.

            (a) Private Offering.  The securities  offered by this Agreement are
being offered in a private  offering (the  "Offering") of shares of its Series B
Convertible  Preferred Stock, $.001 par value per share (the "Series B Preferred
Stock"),  convertible into shares of the Company's common stock, $.001 par value
per share (the "Common Stock"),  and warrants (the "Warrants") to acquire shares
of Common  Stock.  The shares of Series B Preferred  Stock and Warrants  will be
sold in units (the  "Units")  comprised  of one (1) share of Series B  Preferred
Stock and one (1)  Warrant.  The Company is offering up to 300,000  Units for an
aggregate purchase price of $4,500,000;  provided, however, that in the event of
any  over-allotments  of Units during the offering period,  the Company reserves
the right to sell Units for an aggregate  purchase price in excess of $4,500,000
to cover  such  over-allotments.  The Units will be sold on a  reasonable  "best
efforts"  basis at a  purchase  price of  $15.00  per  Unit  ("Purchase  Price")
pursuant to Rules 901 and 903 of Regulation S under the  Securities Act of 1933,
as amended (the "Securities Act"). The Units are being offered solely to persons
that are not "U.S.  Persons" as such term is defined in Rule 902 of Regulation S
under the Securities  Act during an offering  period that commenced on April 17,
2006 and terminates at the sole discretion of the Company.

                  (i) Each share of Series B  Preferred  Stock may be  converted
into that number of shares of Common Stock equal to the original  issue price of
the Series B Preferred Stock ($15.00) divided by $0.15 (as same may be adjusted,
the  "Conversion  Price").  The terms and  conditions  of the Series B Preferred
Stock are set forth in the  Certificate  of  Designation of Series B Convertible
Preferred Stock attached hereto and made a part hereof as Exhibit A.

                  (ii) Each Warrant is initially  exercisable  into 50 shares of
Common Stock at an initial  exercise price of $0.40 per share.  The terms of the
Warrant  are set forth in the Form of Warrant,  attached  hereto and made a part
hereof as Exhibit B. The shares of Series B Preferred  Stock,  the  Warrants and
shares of Common Stock issuable upon conversion of the

<PAGE>

shares of Series B Preferred  Stock or exercise of the Warrants are  hereinafter
referred to collectively as the "Securities."

            (b) Use of Proceeds.  Assuming all 300,000  Units are sold,  the net
proceeds to the Company are  estimated  to be  approximately  $4,120,000  (after
deducting  offering  expenses  payable by the Company  estimated  at $20,000 and
assuming  payment of the maximum amount of placement  agent and finders' fees of
up to $360,000). The Company intends to use the net proceeds for general working
capital  purposes  and  other  general  corporate  purposes  which  may  include
repayment of indebtedness.

            (c) Placement Agent and Finders Fees. The Company reserves the right
to pay cash fees to agents, brokers,  dealers and finders in connection with the
sale of the  Securities  in an amount  equal to up to eight  percent (8%) of the
Purchase  Price of such  Securities  and to issue  warrants  to such  persons to
purchase  shares of Common Stock equal to up to eight percent (8%) of the number
of shares of Common Stock  issuable  upon  conversion  of the shares of Series B
Preferred  Stock included in the Units issued  hereunder at an exercise price of
$0.40 per share which terminate three years after the date of issuance.

      2. Sale and Purchase of Securities.

            (a) Sale and  Purchase  of  Securities.  Subject  to the  terms  and
conditions  hereof,  the  Company  agrees  to sell,  and  Purchaser  irrevocably
subscribes  for and  agrees to  purchase,  the  number of Units set forth on the
signature  page of this  Agreement at a purchase  price of $15.00 per Unit.  The
aggregate  purchase  price for the Units shall be as set forth on the  signature
page hereto and shall be payable upon execution hereof by check or wire transfer
of immediately available funds.

            (b) Subscription  Procedure.  In order to purchase Units,  Purchaser
shall  deliver to the Company,  at its  principal  executive  office  identified
below:  (i) one completed and duly  executed  copy of this  Agreement;  and (ii)
immediately  available  funds,  or a certified  check or bank check in an amount
equal to the Purchase  Price.  Execution  and delivery of this  Agreement  shall
constitute an irrevocable subscription for that number of Units set forth on the
signature page hereto. The minimum investment that may be made by a Purchaser is
$45,000, although the Company may, in its sole discretion,  accept subscriptions
for a lesser amount. Payment for the Securities may be made by wire transfer to:

            AmSouth Bank
            Birmingham, AL
            S.W.I.F.T., TID: AMSBUS44
            TELEX: 682719
            AMSOBHM

                                       2
<PAGE>

            For Credit to:
                   Customer Name:     Stellar Technologies, Inc.
                   Customer Address:  7935 Airport Pulling Road
                                      Suite 201
                                      Naples, FL 34109
                                      USA
                   Customer Account:  0046696598
                   AmSouth Branch:    Vanderbilt

or by check made payable to: Stellar  Technologies,  Inc.,  7935 Airport Pulling
Road,  Suite 201,  Naples,  FL 34109.  Receipt by the Company of funds wired, or
deposit and collection by the Company of the check tendered  herewith,  will not
constitute acceptance of this Agreement by the Company. The Units subscribed for
will not be deemed to be issued to, or owned by, Purchaser until the Company has
executed this  Agreement.  All funds  tendered by Purchaser  will be held by the
Company pending acceptance or rejection of this Agreement by the Company and the
closing of Purchaser's purchase of Units. This Agreement will either be accepted
by the Company, in whole or in part, in its sole discretion,  or rejected by the
Company as promptly as practicable.  If this Agreement is accepted only in part,
Purchaser  agrees  to  purchase  such  smaller  number  of Units as the  Company
determines to sell to Purchaser.  If this  Agreement is rejected for any reason,
including the termination of the Offering by the Company, this Agreement and all
funds tendered herewith will be promptly returned to Purchaser, without interest
or  deduction  of any kind,  and this  Agreement  will be void and of no further
force or effect.

            (c)  Closing.  Subscriptions  will be accepted by the Company in its
sole  discretion.   Upon  the  Company's   execution  of  this  Agreement,   the
subscription  evidenced hereby, if not previously rejected by the Company, will,
in reliance upon Purchaser's representations and warranties contained herein, be
accepted,  in whole or in part, by the Company.  If Purchaser's  subscription is
accepted only in part,  this Agreement will be marked to indicate such fact, and
the  Company  will  return to  Purchaser  the  portion of the funds  tendered by
Purchaser  representing  the  unaccepted  portion of  Purchaser's  subscription,
without  interest or deduction of any kind. Upon acceptance of this Agreement in
whole or in part by the Company, the Company will issue certificates  evidencing
the Series B Preferred Stock registered in the name of Purchaser,  together with
a copy of  Purchaser's  executed  Agreement  countersigned  by the Company and a
Warrant ("Warrant Certificate") executed by the Company.

      3.  Representations and Warranties of Purchaser.  Purchaser represents and
warrants to the Company as follows:

            (a) Organization and Qualification.

                  (i) If  Purchaser is an entity,  Purchaser is duly  organized,
validly  existing and in good  standing  under the laws of its  jurisdiction  of
organization,  with the corporate or other entity power and authority to own and
operate its business as presently  conducted,  except where the failure to be or
have any of the foregoing would not have a material adverse effect on Purchaser,
and Purchaser is duly  qualified as a foreign  corporation or other entity to do
business and is in good standing in each jurisdiction where the character of its

                                       3
<PAGE>

properties  owned or held under  lease or the nature of their  activities  makes
such qualification necessary,  except for such failures to be so qualified or in
good standing as would not have a material adverse effect on it.

                  (ii) If Purchaser is an entity,  the address of its  principal
place of business is as set forth on the signature page hereto, and if Purchaser
is an individual,  the address of its principal residence is as set forth on the
signature page hereto.

            (b) Authority; Validity and Effect of Agreement.

                  (i) If Purchaser  is an entity,  Purchaser  has the  requisite
corporate  or other  entity  power and  authority  to execute and  deliver  this
Agreement and perform its obligations  under this  Agreement.  The execution and
delivery of this  Agreement by Purchaser,  the  performance  by Purchaser of its
obligations  hereunder and all other necessary  corporate or other entity action
on the part of Purchaser have been duly  authorized by its board of directors or
similar  governing body, and no other  corporate or other entity  proceedings on
the part of  Purchaser is  necessary  for  Purchaser to execute and deliver this
Agreement and perform its obligations hereunder.

                  (ii)  This  Agreement  has been duly and  validly  authorized,
executed and delivered by Purchaser  and,  assuming it has been duly and validly
executed and delivered by the Company,  constitutes  a legal,  valid and binding
obligation of Purchaser, in accordance with its terms.

            (c)  No  Conflict;   Required  Filings  and  Consents.  Neither  the
execution  and delivery of this  Agreement by Purchaser nor the  performance  by
Purchaser  of its  obligations  hereunder  will:  (i) if Purchaser is an entity,
conflict with Purchaser's  articles of incorporation or bylaws, or other similar
organizational  documents;  (ii) violate any statute,  law,  ordinance,  rule or
regulation,  applicable  to  Purchaser  or any of the  properties  or  assets of
Purchaser; or (iii) violate, breach, be in conflict with or constitute a default
(or an event  which,  with notice or lapse of time or both,  would  constitute a
default)  under, or permit the termination of any provision of, or result in the
termination of, the  acceleration of the maturity of, or the acceleration of the
performance of any obligation of Purchaser  under,  or result in the creation or
imposition  of any lien upon any  properties,  assets or business  of  Purchaser
under, any material contract or any order, judgment or decree to which Purchaser
is a party  or by  which  it or any of its  assets  or  properties  is  bound or
encumbered  except,  in the case of clauses (ii) and (iii), for such violations,
breaches, conflicts, defaults or other occurrences which, individually or in the
aggregate, would not have a material adverse effect on its obligation to perform
its covenants under this Agreement.

            (d) Accredited  Investor.  Purchaser is an "accredited  investor" as
that term is defined in Rule 501(a) of Regulation D under the Securities Act. If
Purchaser is an entity,  Purchaser  was not formed for the  specific  purpose of
acquiring the Securities,  and, if it was, all of Purchaser's  equity owners are
"accredited investors" as defined above.

            (e) "U.S.  Person".  The Investor:  (i) is executing and  delivering
this Agreement outside the United States, is not a "U.S. Person" as such term is
defined  in Rule  902 of  Regulation  S under  the  Securities  Act,  and is not
acquiring the securities for the account or

                                       4
<PAGE>

benefit of any "U.S.  Person"; or (ii) is a "U.S. Person" that is purchasing the
Securities  in a  transaction  that  does not  require  registration  under  the
Securities Act. A "U.S. Person" is defined in Rule 902 of Regulation S under the
Securities Act as:

                  (i) Any natural person resident in the United States;

                  (ii) Any partnership or corporation  organized or incorporated
under the laws of the United States;

                  (iii) Any estate of which any executor or  administrator  is a
U.S. Person;

                  (iv) Any trust of which any trustee is a U.S. Person;

                  (v) Any  agency or branch of a foreign  entity  located in the
United States;

                  (vi) Any  non-discretionary  account or similar account (other
than an estate or trust) held by a dealer or other  fiduciary for the benefit or
account of a U.S. Person;

                  (vii) Any discretionary account or similar account (other than
an estate or trust) held by a dealer or other fiduciary organized, incorporated,
or, if an individual, resident in the United States; and

                  (viii) Any partnership or corporation if:

                        (A)  Organized  or  incorporated  under  the laws of any
foreign jurisdiction; and

                        (B) Formed by a U.S. Person  principally for the purpose
of investing in securities not registered under the Securities Act, unless it is
organized or  incorporated,  and owned,  by accredited  investors (as defined in
Rule 501(a) under the Securities Act) that are not natural  persons,  estates or
trusts.

            (f) No Government  Review.  Purchaser  understands  that neither the
United States  Securities  and Exchange  Commission  ("SEC") nor any  securities
commission  or other  governmental  authority  of any  state,  country  or other
jurisdiction  has  approved  the  issuance of the  Securities  or passed upon or
endorsed the merits of the Securities, this Agreement or the Warrant Certificate
(collectively,   the  "Offering  Documents"),  or  confirmed  the  accuracy  of,
determined   the  adequacy  of,  or  reviewed  this  Agreement  or  the  Warrant
Certificate.

            (g)  Investment  Intent.  The  Securities are being acquired for the
Purchaser's own account for investment  purposes only, not as a nominee or agent
and not with a view to the  resale  or  distribution  of any part  thereof,  and
Purchaser has no present intention of selling,  granting any participation in or
otherwise distributing the same. By executing this Agreement,  Purchaser further
represents that Purchaser does not have any contract, undertaking,  agreement or
arrangement  with any person to sell,  transfer or grant  participation  to such
person or third person with respect to any of the Securities.

                                       5
<PAGE>

            (h)  Restrictions  on  Transfer.   Purchaser  understands  that  the
Securities are "restricted securities" as such term is defined in Rule 144 under
the  Securities  Act and have not been  registered  under the  Securities Act or
registered or qualified under any state securities law, and may not be, directly
or indirectly,  sold,  transferred,  offered for sale, pledged,  hypothecated or
otherwise  disposed of except in accordance  with the provisions of Regulation S
under the Securities Act, pursuant to registration  under the Securities Act and
registration or  qualification  under  applicable  state  securities laws or the
availability of an exemption  therefrom.  In any case where such an exemption is
relied upon by Purchaser from the  registration  requirements  of the Securities
Act and the registration or qualification  requirements of such state securities
laws,  Purchaser  shall  furnish the Company with an opinion of counsel  stating
that the proposed sale or other  disposition of such  securities may be effected
without  registration  under  the  Securities  Act and  will not  result  in any
violation of any applicable  state  securities laws relating to the registration
or  qualification  of  securities  for sale,  such  counsel  and  opinion  to be
satisfactory to the Company.  Purchaser acknowledges that it is able to bear the
economic risks of an investment in the  Securities  for an indefinite  period of
time,  and that its  overall  commitment  to  investments  that are not  readily
marketable is not disproportionate to its net worth.

            (i) Restrictions on Registration.  Purchaser  understands and agrees
that the Company is not permitted to register any transfer of the Securities not
made in accordance with the provisions of Regulation S, pursuant to registration
under the Securities Act and  registration  or  qualification  under  applicable
state  securities  laws,  or  pursuant  to  an  available  exemption  therefrom.
Purchaser further  understands and agrees that hedging  transactions,  including
but not limited to short sales, swaps or derivative securities  transactions may
not be conducted unless in compliance with the Securities Act.

            (j)   Investment   Experience.   Purchaser   has   such   knowledge,
sophistication and experience in financial, tax and business matters in general,
and  investments in securities in  particular,  that it is capable of evaluating
the merits and risks of this  investment  in the  Securities,  and Purchaser has
made such  investigations  in  connection  herewith  as it deemed  necessary  or
desirable so as to make an informed investment decision without relying upon the
Company  for legal or tax  advice  related  to this  investment.  In making  its
decision  to  acquire  the  Securities,   Purchaser  has  not  relied  upon  any
information  other than information  provided to Purchaser by the Company or its
representatives and contained herein and in the other Offering Documents.

            (k) Access to Information.  Purchaser  acknowledges  that it has had
access to and has reviewed all  documents  and records  relating to the Company,
including, but not limited to, the Company's Quarterly Report on Form 10-QSB for
the fiscal  quarter ended  December 31, 2005 and the Company's  Annual Report on
Form  10-KSB  for the  fiscal  year  ended  June 30,  2005,  that it has  deemed
necessary in order to make an informed  investment  decision  with respect to an
investment  in  the  Securities;   that  it  has  had  the  opportunity  to  ask
representatives  of the Company certain questions and request certain additional
information  regarding  the  terms and  conditions  of such  investment  and the
finances, operations,  business and prospects of the Company and has had any and
all such  questions  and  requests  answered  to its  satisfaction;  and that it
understands the risks and other considerations relating to such investment.

            (l)  Reliance on  Representations.  Purchaser  understands  that the
Securities  are being offered and sold to it in reliance on specific  exemptions
from the registration requirements of

                                       6
<PAGE>

the  federal and state  securities  laws and that the Company is relying in part
upon the truth and  accuracy  of,  and such  Purchaser's  compliance  with,  the
representations,  warranties, agreements,  acknowledgments and understandings of
such Purchaser set forth herein in order to determine the  availability  of such
exemptions  and the  eligibility  of such  Purchaser to acquire the  Securities.
Purchaser  represents  and  warrants to the Company  that any  information  that
Purchaser  has  heretofore  furnished  or  furnishes  herewith to the Company is
complete and accurate,  and further  represents and warrants that it will notify
and supply corrective information to the Company immediately upon the occurrence
of  any  change  therein  occurring  prior  to  the  Company's  issuance  of the
Securities.  Within five (5) days after  receipt of a request  from the Company,
Purchaser  will  provide  such  information  and deliver  such  documents as may
reasonably be necessary to comply with any and all laws and regulations to which
the Company is subject.

            (m)  No  General  Solicitation.  Purchaser  is  unaware  of,  and in
deciding to  participate  in the Offering is in no way relying upon, and did not
become  aware of the  Offering  through  or as a result  of, any form of general
solicitation or general advertising including,  without limitation, any article,
notice,  advertisement  or  other  communication  published  in  any  newspaper,
magazine  or  similar  media,  or  broadcast  over  television  or  radio or the
internet, in connection with the Offering.

            (n)  Placement  and  Finder's  Fees.  No agent,  broker,  investment
banker, finder,  financial advisor or other person acting on behalf of Purchaser
or under its authority is or will be entitled to any broker's or finder's fee or
any other commission or similar fee, directly or indirectly,  in connection with
the Offering, and no person is entitled to any fee or commission or like payment
in respect thereof based in any way on agreements, arrangements or understanding
made by or on behalf of Purchaser.

            (o)  Investment   Risks.   Purchaser   understands  that  purchasing
Securities in the Offering will subject  Purchaser to certain risks,  including,
but not  limited  to,  those set forth  under the  caption  "Risk  Factors"  and
elsewhere  in the  Company's  Annual  Report on Form  10-KSB and other  periodic
reports filed with the SEC, as well as each of the following:

                  (i) The offering  price of the  Securities  offered hereby has
been  determined  solely  by the  Company  and  does  not  necessarily  bear any
relationship to the value of the Company's assets, current or potential earnings
of the Company,  or any other recognized  criteria used for measuring value, and
therefore,  there can be no assurance  that the  offering  price of the Units is
representative of the actual value of the underlying Securities.

                  (ii) The  Company  has  experienced  net losses in each fiscal
quarter  since its inception  and expects to continue to incur  significant  net
losses  for the  foreseeable  future.  While the  Company  is unable to  predict
accurately its future operating expenses, it currently expects these expenses to
increase substantially as it implements its business plan.

                  (iii)  In order to fund its  future  operations,  attract  and
retain  employees,  consultants and other service  providers,  and satisfy other
obligations,  the Company may be required to issue  additional  shares of Common
Stock,  securities  exercisable or convertible  into shares of Common Stock,  or
debt.  Such  securities may be issued for a purchase  price  consisting of cash,
services  or other  consideration  that  may be  materially  different  than the
purchase price

                                       7
<PAGE>

of the Units.  The  issuance of any such  securities  may result in  substantial
dilution  to  the  relative  ownership   interests  of  the  Company's  existing
shareholders and substantial  reduction in net book value per share.  Additional
equity securities may have rights, preferences and privileges senior to those of
the holders of Common  Stock,  and any debt  financing  may involve  restrictive
covenants that may limit the Company's operating flexibility.

                  (iv) The  Company has  provided  herein that it intends to use
most of the net proceeds from the Offering for general working capital  purposes
and  other  general   corporate   purposes   which  may  include   repayment  of
indebtedness.  Thus,  Purchaser is making its investment in the Securities based
in part upon very limited  information  regarding the specific uses to which the
net proceeds will be applied.

                  (v)  An  investment  in the  Securities  may  involve  certain
material  legal,  accounting and federal and state tax  consequences.  Purchaser
should consult with its legal counsel,  accountant and/or business adviser as to
the legal, accounting, tax and related matters accompanying such an investment.

                  (vi) Funds  received in payment for the Units will be released
to the Company upon its execution of this Agreement. The Company is not required
to raise any minimum amount of proceeds  prior to obtaining such funds.  Because
there is no minimum amount of Units the Company must sell before accepting funds
in the  Offering,  investors  participating  in the Offering will not be assured
that the  Company  will have  sufficient  funds to execute  its  business  plan,
satisfy expected expenditures, repay indebtedness as it becomes due, and support
operations  over the next 12 months and will bear the risk that the Company will
be unable to secure the funds  necessary  to meet its  current  and  anticipated
financial obligations.

            (p) Exclusive Offering Documents. In making its decision to purchase
the  Securities  hereunder,  Purchaser  has not  relied on any  representations,
warranties or  information  other than those set forth in this  Agreement  which
Purchaser has  independently  investigated  and verified to its satisfaction and
neither  the  Company  nor  any  person  acting  on  its  behalf  has  made  any
representation or warranty regarding the Company or the Securities except as set
forth herein.

            (q)  Legends.   The  certificates  and  agreements   evidencing  the
Securities  shall have endorsed  thereon the following  legend (and  appropriate
notations thereof will be made in the Company's stock transfer books),  and stop
transfer  instructions  reflecting these restrictions on transfer will be placed
with the transfer agent of the Securities:

            THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
            SECURITIES  ACT OF 1933,  AS  AMENDED  (THE  "SECURITIES  ACT"),  OR
            APPLICABLE  STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD,
            TRANSFERRED OR OTHERWISE  DISPOSED OF EXCEPT IN ACCORDANCE  WITH THE
            PROVISIONS OF  REGULATION S UNDER THE  SECURITIES  ACT,  PURSUANT TO
            REGISTRATION

                                       8
<PAGE>

            UNDER THE SECURITIES ACT AND  REGISTRATION  OR  QUALIFICATION  UNDER
            APPLICABLE  SECURITIES LAWS OF ANY STATE OR OTHER  JURISDICTION,  OR
            PURSUANT TO AN EXEMPTION FROM SUCH  REGISTRATION  OR  QUALIFICATION.
            HEDGING  TRANSACTIONS,  INCLUDING,  BUT NOT LIMITED TO, SHORT SALES,
            SWAPS  OR  DERIVATIVE  SECURITIES   TRANSACTIONS,   INVOLVING  THESE
            SECURITIES  MAY NOT BE  CONDUCTED  UNLESS  IN  COMPLIANCE  WITH  THE
            SECURITIES ACT AND APPLICABLE  SECURITIES LAWS OF ANY STATE OR OTHER
            JURISDICTION.  NO TRANSFER OF THE SECURITIES  REPRESENTED HEREBY MAY
            BE MADE IN THE ABSENCE OF SUCH REGISTRATION OR QUALIFICATION  UNLESS
            THERE SHALL HAVE BEEN  DELIVERED TO THE ISSUER A WRITTEN  OPINION OF
            UNITED STATES COUNSEL OF RECOGNIZED STANDING,  IN FORM AND SUBSTANCE
            SATISFACTORY TO THE ISSUER,  TO THE EFFECT THAT SUCH TRANSFER MAY BE
            MADE WITHOUT  REGISTRATION OF SUCH  SECURITIES  UNDER THE SECURITIES
            ACT AND  REGISTRATION OR QUALIFICATION  UNDER APPLICABLE  SECURITIES
            LAWS OF ANY STATE OR OTHER JURISDICTION.

      4.  Representations and Warranties of the Company.  The Company represents
and warrants to Purchaser as follows:

            (a) Organization and  Qualification.  The Company is duly organized,
validly  existing and in good  standing  under the laws of its  jurisdiction  of
organization,  with the  corporate  power and  authority  to own and operate its
business as presently  conducted,  except where the failure to be or have any of
the  foregoing  would not have a material  adverse  effect on the  Company.  The
Company  is duly  qualified  as a  foreign  corporation  or other  entity  to do
business and is in good standing in each jurisdiction where the character of its
properties  owned or held under  lease or the nature of their  activities  makes
such qualification necessary,  except for such failures to be so qualified or in
good standing as would not have a material adverse effect on the Company.

            (b) Authority; Validity and Effect of Agreement.

                  (i)  The  Company  has  the  requisite   corporate  power  and
authority to execute and deliver this Agreement,  perform its obligations  under
this  Agreement,  and conduct the  Offering.  The execution and delivery of this
Agreement  by the Company,  the  performance  by the Company of its  obligations
hereunder,  the Offering and all other necessary corporate action on the part of
the Company have been duly  authorized by its board of  directors,  and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or the Offering. This Agreement has been duly and validly executed and
delivered  by the  Company  and,  assuming  that it has  been  duly  authorized,
executed and delivered by

                                       9
<PAGE>

Purchaser,  constitutes a legal, valid and binding obligation of the Company, in
accordance  with its terms,  subject to the effects of  bankruptcy,  insolvency,
fraudulent  conveyance,  reorganization,   moratorium  and  other  similar  laws
relating  to  or  affecting  creditors'  rights  generally,   general  equitable
principles  (whether  considered  in a  proceeding  in  equity or at law) and an
implied covenant of good faith and fair dealing.

                  (ii) The Securities have been duly authorized and will be free
and clear of all liens, charges,  restrictions,  claims and encumbrances imposed
by or through the Company.  The shares of Common Stock issuable upon  conversion
of the Notes or exercise of the Warrants  when issued and paid for in accordance
with the Notes or Warrants,  as  applicable,  will be duly  authorized,  validly
issued,  fully paid and  non-assessable  shares of Common Stock with no personal
liability  resulting  solely from the  ownership of such shares and will be free
and  clear of all  liens,  charges,  restrictions,  claims  and in  encumbrances
imposed by or through the Company.

            (c)  No  Conflict;   Required  Filings  and  Consents.  Neither  the
execution and delivery of this  Agreement by the Company nor the  performance by
the Company of its  obligations  hereunder will: (i) conflict with the Company's
certificate  of  incorporation  or  bylaws;  (ii)  violate  any  statute,   law,
ordinance,  rule  or  regulation,  applicable  to  the  Company  or  any  of the
properties or assets of the Company;  or (iii) violate,  breach,  be in conflict
with or constitute a default (or an event which, with notice or lapse of time or
both,  would  constitute  a default)  under,  or permit the  termination  of any
provision of, or result in the termination of, the  acceleration of the maturity
of, or the acceleration of the performance of any obligation of the Company,  or
result in the creation or imposition of any lien upon any properties,  assets or
business of the Company under, any material  contract or any order,  judgment or
decree to which the  Company  is a party or by which it or any of its  assets or
properties is bound or encumbered except, in the case of clauses (ii) and (iii),
for such violations,  breaches,  conflicts, defaults or other occurrences which,
individually  or in the aggregate,  would not have a material  adverse effect on
its obligation to perform its covenants under this Agreement.

            (d) Placement and Finder's Fees. Except as provided in Section 1(c),
neither the Company nor any of its respective officers, directors,  employees or
managers, has employed any broker,  dealer,  finder,  advisor or consultant,  or
incurred  any  liability  for  any  investment  banking  fees,  brokerage  fees,
commissions  or finders'  fees,  advisory fees or consulting  fees in connection
with the Offering for which the Company has or could have any liability.

      5.  Indemnification.  Purchaser  agrees  to  indemnify,  defend  and  hold
harmless the Company and its  respective  affiliates and agents from and against
any  and  all  demands,   claims,  actions  or  causes  of  action,   judgments,
assessments, losses, liabilities, damages or penalties and reasonable attorneys'
fees and related  disbursements  incurred  by the  Company  that arise out of or
result from a breach of any  representations  or  warranties  made by  Purchaser
herein,   and  Purchaser  agrees  that  in  the  event  of  any  breach  of  any
representations  or warranties made by Purchaser herein, the Company may, at its
option, forthwith rescind the sale of the Units to Purchaser.

      6. Registration Rights. The Company covenants and agrees as follows:

            6.1 For the  purpose of this  Section 6, the  following  definitions
shall apply:

                                       10
<PAGE>

                  (a) "Exchange Act" shall mean the  Securities  Exchange Act of
1934, as amended,  and the rules and regulations of the SEC  thereunder,  all as
the same shall be in effect at the time.

                  (b) "Person" shall mean an individual, partnership (general or
limited), corporation, limited liability company, joint venture, business trust,
cooperative,  association or other form of business organization, whether or not
regarded  as a legal  entity  under  applicable  law,  a trust  (inter  vivos or
testamentary),  an  estate  of a  deceased,  insane  or  incompetent  person,  a
quasi-governmental  entity,  a government  or any agency,  authority,  political
subdivision or other instrumentality thereof, or any other entity.

                  (c) "Register,"  "registered," and "registration"  shall refer
to a registration  effected by preparing and filing a registration  statement in
compliance   with  the  Securities   Act,  and  the   declaration  or  order  of
effectiveness of such registration statement or document by the SEC.

                  (d)  "Registration  Statement"  shall  mean  any  registration
statement  of the  Company  filed with the SEC  pursuant  to the  provisions  of
Section 6.2 of this Agreement,  which covers the resale of the Restricted  Stock
on an  appropriate  form  then  permitted  by  the  SEC  to  be  used  for  such
registration and the sales  contemplated to be made thereby under the Securities
Act, or any similar rule that may be adopted by the SEC, and all  amendments and
supplements  to such  registration  statement,  including  any  pre-  and  post-
effective  amendments thereto,  in each case including the prospectus  contained
therein,  all  exhibits  thereto and all  materials  incorporated  by  reference
therein.

                  (e)  "Restricted  Stock"  shall  mean (i) the shares of Common
Stock issuable upon conversion of the Series B Preferred Stock;  (ii) the shares
of Common Stock issuable upon exercise of the Warrants; and (iii) any additional
shares of Common Stock of the Company  issued or issuable  after the date hereof
in respect of any of the  foregoing  securities,  by way of a stock  dividend or
stock split; provided that as to any particular shares of Restricted Stock, such
securities  shall cease to constitute  Restricted  Stock when (x) a Registration
Statement  with  respect  to the  sale  of such  securities  shall  have  become
effective under the Securities Act and such securities  shall have been disposed
of thereunder,  (y) such securities are permitted to be transferred  pursuant to
Rule 144(k) (or any successor  provision to such rule) under the  Securities Act
or (z) such securities are otherwise  freely  transferable to the public without
further registration under the Securities Act.

                  (f) "Selling  Stockholders" shall mean Purchaser and any other
purchaser of Units in the Offering, and their respective successors and assigns.

            6.2. Registration of the Securities.

                  (a) The  Company  shall  notify all  Selling  Stockholders  in
writing at least ten (10) days prior to the filing of any registration statement
under the  Securities  Act for the  purpose  of  registering  securities  of the
Company,  excluding registration statements on SEC Forms S-4, S-8 or any similar
or successor  forms,  and excluding that certain  registration  statement of the
Company on SEC Form SB-2, Registration No. 333-126453, initially filed with

                                       11
<PAGE>

the SEC on or about July 7, 2005 and any  amendments  thereto,  and will  afford
each such Selling  Stockholder an  opportunity  to include in such  registration
statement all or part of such Restricted Stock held by such Selling Stockholder.
Each Selling Stockholder desiring to include in any such registration  statement
all or any part of the Restricted  Stock held by it shall,  within five (5) days
after the  above-described  notice  from the  Company,  so notify the Company in
writing.  Such notice  shall state the  intended  method of  disposition  of the
Restricted Stock by such Selling  Stockholder.  If a Selling Stockholder decides
not to  include  all of  its  Restricted  Stock  in any  registration  statement
thereafter filed by the Company,  such Selling  Stockholder  shall  nevertheless
continue to have the right to include  any  Restricted  Stock in any  subsequent
registration statement or registration statements as may be filed by the Company
with respect to offerings of its  securities,  all upon the terms and conditions
set  forth  herein.  The  Company  may,  without  the  consent  of  the  Selling
Stockholders,  withdraw  such  registration  statement  prior  to  its  becoming
effective if the proposal to register the  securities  proposed to be registered
thereby is abandoned.

                  (b) In the event  that any  registration  pursuant  to Section
6.2(a) shall be, in whole or in part, an underwritten  public offering of Common
Stock on behalf of the Company,  all  Purchasers  proposing to distribute  their
Restricted  Stock  through such  underwriting  shall enter into an  underwriting
agreement in customary form with the  underwriter or  underwriters  selected for
such underwriting by the Company.  If the managing  underwriter  thereof advises
the Company in writing that in its opinion the number of securities requested to
be included  in such  registration  exceeds  the number  which can be sold in an
orderly manner in such offering within a price range  acceptable to the Company,
the Company shall include in such  registration  (i) first,  the  securities the
Company  proposes to sell, and (ii) second,  the Restricted  Stock and any other
registrable   securities   eligible  and   requested  to  be  included  in  such
registration to the extent that the number of shares to be registered under this
clause  (ii) will not,  in the opinion of the  managing  underwriter,  adversely
affect the  offering of the  securities  pursuant to clause (i). In such a case,
shares shall be registered pro rata among the holders of such  Restricted  Stock
and  registrable  securities  on the basis of the number of shares  eligible for
registration  that are owned by all such holders and requested to be included in
such registration.

                  (c) Notwithstanding anything to the contrary contained herein,
the Company's  obligation in Sections  6.2(a) and 6.2(b) above shall extend only
to the  inclusion  of the  Restricted  Stock in a  Registration  Statement.  The
Company  shall  have no  obligation  to  assure  the  terms  and  conditions  of
distribution, to obtain a commitment from an underwriter relative to the sale of
the Restricted Stock or to otherwise assume any  responsibility  for the manner,
price or terms of the distribution of the Restricted Stock.

                  (d) The Company  shall have the right to terminate or withdraw
any  registration   initiated  by  it  under  this  Section  6.2  prior  to  the
effectiveness of such registration  without thereby  incurring  liability to the
holders of the Restricted Stock, regardless of whether any holder has elected to
include securities in such registration.  The Registration  Expenses (as defined
in Section 6.5) of such withdrawn  registration shall be borne by the Company in
accordance with Section 6.4 hereof.

            6.3. Registration  Procedures.  Whenever it is obligated to register
any Restricted Stock pursuant to this Agreement, the Company shall:

                                       12
<PAGE>

                  (a)  prepare  and file with the SEC a  Registration  Statement
with  respect to the  Restricted  Stock in the  manner set forth in Section  6.2
hereof and use its reasonable best efforts to cause such Registration  Statement
to become  effective as promptly as possible and to remain  effective  until the
earlier of: (i) the sale of all shares of Restricted Stock covered thereby, (ii)
the  availability  under Rule 144 for the Selling  Stockholder  to freely resell
without restriction all Restricted Stock covered thereby, or (iii) two (2) years
from the date of this Agreement;

                  (b) prepare and file with the SEC such  amendments  (including
post-effective  amendments) and supplements to such  Registration  Statement and
the  prospectus  used in  connection  therewith as may be necessary to keep such
Registration  Statement  effective  for the period  specified in Section  6.3(a)
above  and to  comply  with  the  provisions  of the  Act  with  respect  to the
disposition of all Restricted  Stock covered by such  Registration  Statement in
accordance   with  the  intended   method  of  disposition  set  forth  in  such
Registration Statement for such period;

                  (c) furnish to the Selling  Stockholders such number of copies
of the Registration  Statement and the prospectus  included  therein  (including
each preliminary  prospectus) as such person may reasonably  request in order to
facilitate the public sale or other  disposition of the Restricted Stock covered
by such Registration Statement;

                  (d) use its reasonable best efforts to register or qualify the
Restricted  Stock  covered  by  such  Registration  Statement  under  the  state
securities  laws  of  such  jurisdictions  as  any  Selling   Stockholder  shall
reasonably request;  provided,  however, that the Company shall not for any such
purpose be  required  to qualify  generally  to  transact  business as a foreign
corporation  in any  jurisdiction  where it is not so qualified or to consent to
general service of process in any such jurisdiction;

                  (e) in the event of any underwritten  public  offering,  enter
into and perform its obligations under an underwriting  agreement,  in usual and
customary  form,  with  the  managing  underwriter(s)  of  such  offering.  Each
Purchaser  participating in such underwriting  shall also enter into and perform
its obligations under such an agreement, as described in Section 6.2(b);

                  (f)  immediately  notify each Selling  Stockholder at any time
when a prospectus relating thereto is required to be delivered under the Act, of
the happening of any event as a result of which the prospectus contained in such
Registration  Statement,  as then in effect,  includes an untrue  statement of a
material  fact or omits to state a material  fact  required or  necessary  to be
stated therein in order to make the statements  contained therein not misleading
in light of the  circumstances  under which they were made. The Company will use
reasonable efforts to amend or supplement such prospectus in order to cause such
prospectus  not to include any untrue  statement  of a material  fact or omit to
state a material  fact  required to be stated  therein or  necessary to make the
statements therein not misleading in the light of the circumstances  under which
they were made;

                  (g)  prepare  and  file  with  the  SEC  such  amendments  and
supplements to such Registration Statement and the prospectus used in connection
with such Registration

                                       13
<PAGE>

Statements as may be necessary to comply with the  provisions of the  Securities
Act  with  respect  to  the  disposition  of  all  securities  covered  by  such
Registration Statement;

                  (h) use its  reasonable  best  efforts to list the  Restricted
Stock  covered by such  Registration  Statement  on each  exchange or  automated
quotation  system on which  similar  securities  issued by the  Company are then
listed  (with the  listing  application  being made at the time of the filing of
such Registration Statement or as soon thereafter as is reasonably practicable);

                  (i) notify each Selling  Stockholder  of any threat by the SEC
or state  securities  commission to undertake a stop order with respect to sales
under the Registration Statement; and

                  (j) cooperate in the timely removal of any restrictive legends
from the shares of Restricted Stock in connection with the resale of such shares
covered by an effective Registration Statement.

            6.4. Delay of Registration.  No Selling  Stockholder  shall have any
right to obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any  controversy  that might arise with respect to
the interpretation or implementation of this Section 6.

            6.5 Expenses.

                  (a)  For  the   purposes  of  this   Section   6.5,  the  term
"Registration  Expenses"  shall mean:  all  expenses  incurred by the Company in
complying with Section 6.2 of this Agreement, including, without limitation, all
registration  and filing fees,  printing  expenses,  fees and  disbursements  of
counsel and independent  public  accountants  for the Company,  fees under state
securities laws, fees of the National  Association of Securities  Dealers,  Inc.
("NASD"),  fees and  expenses  of  listing  shares  of  Restricted  Stock on any
securities  exchange or automated quotation system on which the Company's shares
are  listed  and fees of  transfer  agents  and  registrars.  The term  "Selling
Expenses"  shall  mean:  all  underwriting  discounts  and  selling  commissions
applicable   to  the  sale  of   Restricted   Stock  and  all   accountable   or
non-accountable expenses paid to any underwriter in respect of such sale.

                  (b) Except as otherwise  provided herein, the Company will pay
all Registration  Expenses in connection with the Registration  Statements filed
pursuant to Section 6.2 of this  Agreement.  All Selling  Expenses in connection
with any Registration Statements filed pursuant to Section 6.2 of this Agreement
shall be borne by the Selling  Stockholders  pro rata on the basis of the number
of shares  registered  by each Selling  Stockholder  whose shares of  Restricted
Stock are covered by such Registration  Statement, or by such persons other than
the  Company  (except  to the extent  the  Company  may be a seller) as they may
agree.

            6.6. Obligations of the Selling Stockholders.

                  (a) In  connection  with  each  registration  hereunder,  each
Selling Stockholder will furnish to the Company in writing such information with
respect to it and the

                                       14
<PAGE>

securities  held  by it and  the  proposed  distribution  by  it,  as  shall  be
reasonably  requested  by  the  Company  in  order  to  assure  compliance  with
applicable  federal  and  state  securities  laws as a  condition  precedent  to
including  the  Selling  Stockholder's  Restricted  Stock  in  the  Registration
Statement.  Each Selling  Stockholder  shall also promptly notify the Company of
any  changes in such  information  included  in the  Registration  Statement  or
prospectus as a result of which there is an untrue statement of material fact or
an omission  to state any  material  fact  required  or  necessary  to be stated
therein in order to make the  statements  contained  therein not  misleading  in
light of the circumstances under which they were made.

                  (b)  In  connection  with  the  filing  of  the   Registration
Statement, each Selling Stockholder shall furnish to the Company in writing such
information  and  affidavits  as the  Company  reasonably  requests  for  use in
connection with such Registration Statement or prospectus.

                  (c) In  connection  with each  registration  pursuant  to this
Agreement,  each Selling Stockholder agrees that it will not effect sales of any
Restricted  Stock  until  notified by the  Company of the  effectiveness  of the
Registration Statement,  and thereafter will suspend such sales after receipt of
telegraphic  or written  notice from the Company to suspend  sales to permit the
Company to correct or update a Registration Statement or prospectus.  At the end
of any period  during  which the  Company is  obligated  to keep a  Registration
Statement  current,   each  Selling   Stockholder  shall  discontinue  sales  of
Restricted Stock pursuant to such Registration  Statement upon receipt of notice
from the Company of its  intention to remove from  registration  the  Restricted
Stock  covered by such  Registration  Statement  that remains  unsold,  and each
Selling  Stockholder shall notify the Company of the number of shares registered
which remain unsold immediately upon receipt of such notice from the Company.

            6.7. Information Blackout and Holdbacks.

                  (a)  At  any  time  when  a  Registration  Statement  effected
pursuant to Section 6.2 is  effective,  upon written  notice from the Company to
Purchaser  that  the  Company  has  determined  in good  faith  that the sale of
Restricted Stock pursuant to the Registration Statement would require disclosure
of non-public material information,  Purchaser shall suspend sales of Restricted
Stock  pursuant to such  Registration  Statement  until such time as the Company
notifies  Purchaser  that such material  information  has been  disclosed to the
public or has ceased to be material, or that sales pursuant to such Registration
Statement may otherwise be resumed.

                  (b)  Notwithstanding  any other  provision of this  Agreement,
Purchaser  shall not effect any public  sale or  distribution  (including  sales
pursuant to Rule 144 under the Securities Act), if and when available, of equity
securities of the Company, or any securities convertible into or exchangeable or
exercisable  for such  securities,  during  the  thirty  (30) days  prior to the
commencement  of any primary  offering to be undertaken by the Company of shares
of its unissued Common Stock ("Primary Offering"),  which may also include other
securities,  and ending one hundred  twenty (120) days after  completion  of any
such Primary  Offering,  unless the Company,  in the case of a  non-underwritten
Primary Offering,  or the managing  underwriter,  in the case of an underwritten
Primary Offering, otherwise agree.

                                       15
<PAGE>

            6.8. Indemnification.

                  (a) The Company agrees to indemnify,  to the extent  permitted
by  law,  each  Selling  Stockholder,   such  Selling  Stockholder's  respective
partners,  officers,  directors,  underwriters  and each Person who controls any
Selling  Stockholder  (within the  meaning of the  Securities  Act)  against all
losses,  claims,  damages,  liabilities  and  expenses  caused by (i) any untrue
statement  of or alleged  untrue  statement  of material  fact  contained in the
Registration Statement, prospectus or preliminary prospectus or any amendment or
supplement thereto,  (ii) any omission of or alleged omission of a material fact
required to be stated  therein or necessary to make the  statements  therein not
misleading,  or (iii) any  violation or alleged  violation by the Company of the
Securities  Act,  the  Exchange  Act,  any state  securities  law or any rule or
regulation  promulgated  under the Securities Act, the Exchange Act or any state
securities  law in  connection  with the offering  covered by such  Registration
Statement  ("Violations");  provided,  however,  that  the  indemnity  agreement
contained in this Section  6.8(a) shall not apply to amounts paid in  settlement
of any such loss,  claim,  damage,  liability  or action if such  settlement  is
effected  without  the  consent  of the  Company,  which  consent  shall  not be
unreasonably  withheld,  nor shall the Company be liable in for any loss, claim,
damage, liability or action to the extent that it arises out of or is based upon
a Violation  which occurs in reliance  upon and in conformity  with  information
furnished  to  the  Company  by  such  Selling  Stockholder,  partner,  officer,
director, underwriter or controlling person of such Selling Stockholder.

                  (b) To the extent  permitted by law, each Selling  Stockholder
shall  indemnify  and hold  harmless the  Company,  each of its  directors,  its
officers and each person, if any, who controls the Company within the meaning of
the Securities Act, any underwriter  and any other Selling  Stockholder  selling
securities  under  such  registration  statement  or any of such  other  Selling
Stockholder's  partners,  directors or officers or any person who controls  such
Selling Stockholder,  against any losses,  claims, damages or liabilities (joint
or  several)  to which the Company or any such  director,  officer,  controlling
person,  underwriter or other such Selling  Stockholder,  or partner,  director,
officer or  controlling  person of such other  Selling  Stockholder,  may become
subject  under the  Securities  Act, the Exchange Act or other  federal or state
law,  insofar as such  losses,  claims,  damages or  liabilities  (or actions in
respect  thereto) arise out of or are based upon any Violation,  in each case to
the extent (and only to the extent) that such  Violation  occurs (i) in reliance
upon and in conformity with information furnished by such Selling Stockholder to
the Company, (ii) as a result of any failure to deliver a copy of the prospectus
relating to such Registration Statement, or (iii) as a result of any disposition
of the  Restricted  Stock in a manner  that fails to comply  with the  permitted
methods of distribution identified within the Registration Statement.

                  (c) Any Person entitled to indemnification hereunder shall (i)
give prompt written notice to the  indemnifying  party of any claim with respect
to which it seeks  indemnification  (provided  that the  failure to give  prompt
notice shall not impair any Person's right to  indemnification  hereunder to the
extent such failure has not prejudiced the indemnifying  party), and (ii) unless
in such indemnified  party's reasonable  judgment a conflict of interest between
such indemnified and indemnifying  parties may exist with respect to such claim,
permit such indemnifying  party to assume the defense of such claim with counsel
reasonably  satisfactory to the  indemnified  party. If such defense is assumed,
the indemnifying  party shall not be subject to any liability for any settlement
made by the indemnified party without its

                                       16
<PAGE>

consent (but such consent shall not be unreasonably  withheld).  An indemnifying
party who is not  entitled  to, or elects not to,  assume the defense of a claim
shall not be obligated to pay the fees and expenses of more than one counsel for
all parties  indemnified by such indemnifying  party with respect to such claim,
unless  in the  reasonable  judgment  of any  indemnified  party a  conflict  of
interest  may  exist  between  such  indemnified  party  and any  other  of such
indemnified parties with respect to such claim.

                  (d) If the indemnification provided for in this Section 6.8 is
held by a court of competent  jurisdiction  to be  unavailable to an indemnified
party with respect to any losses,  claims,  damages or  liabilities  referred to
herein,  the indemnifying  party, in lieu of indemnifying such indemnified party
thereunder,  shall to the extent  permitted by applicable  law contribute to the
amount  paid or  payable  by such  indemnified  party as a result of such  loss,
claim,  damage or liability in such  proportion as is appropriate to reflect the
relative fault of the indemnifying  party on the one hand and of the indemnified
party on the other in  connection  with the  violation(s)  described  in Section
6.8(a) that resulted in such loss,  claim,  damage or liability,  as well as any
other relevant equitable considerations.  The relative fault of the indemnifying
party and of the  indemnified  party  shall be  determined  by a court of law by
reference to, among other things, whether the untrue or alleged untrue statement
of a  material  fact  or the  omission  to  state a  material  fact  relates  to
information  supplied by the indemnifying  party or by the indemnified party and
the parties' relative intent,  knowledge,  access to information and opportunity
to correct or prevent such  statement or  omission;  provided,  that in no event
shall  any  contribution  by a  Selling  Stockholder  hereunder  exceed  the net
proceeds from the offering received by such Selling Stockholder.

                  (e) The  indemnification  provided  for under  this  Agreement
shall remain in full force and effect regardless of any investigation made by or
on behalf of the  indemnified  party or any  officer,  director  or  controlling
Person of such  indemnified  party and shall survive the transfer of securities.
The Company also agrees to make such  provisions as are reasonably  requested by
any indemnified  party for contribution to such party in the event the Company's
indemnification is unavailable for any reason.

      7. Confidentiality. Purchaser acknowledges and agrees that:

            (a) All of the  information  contained  herein is of a  confidential
nature and may be regarded as material  non-public  information under Regulation
FD of the Securities Act.

            (b) This  Agreement  has been  furnished to Purchaser by the Company
for the  sole  purpose  of  enabling  Purchaser  to  consider  and  evaluate  an
investment in the Company,  and will be kept  confidential  by Purchaser and not
used for any other purpose.

            (c) The existence of this  Agreement and the  information  contained
herein shall not, without the prior written consent of the Company, be disclosed
by Purchaser to any person or entity,  other than Purchaser's personal financial
and legal  advisors  for the sole purpose of  evaluating  an  investment  in the
Company,  and Purchaser  will not,  directly or  indirectly,  disclose or permit
Purchaser's  personal  financial  and legal  advisors to  disclose,  any of such
information without the prior written consent of the Company.

                                       17
<PAGE>

            (d) Purchaser shall make its  representatives  aware of the terms of
this  section and to be  responsible  for any breach of this  Agreement  by such
representatives.

            (e) Purchaser  shall not,  without the prior written  consent of the
Company,  directly or indirectly,  make any statements,  public announcements or
release to trade publications or the press with respect to the subject matter of
this Agreement and the other Offering Documents.

            (f) If Purchaser decides to not pursue further  investigation of the
Company or to not  participate in the Offering,  Purchaser will promptly  return
this Agreement, the other Offering Documents and any accompanying  documentation
to the Company.

      8.  Non-Public   Information.   Purchaser  acknowledges  that  information
concerning  the  matters  that are the  subject  matter  of this  Agreement  may
constitute   material   non-public   information  under  United  States  federal
securities  laws,  and that United States federal  securities  laws prohibit any
person who has received material non-public  information relating to the Company
from purchasing or selling securities of the Company, or from communicating such
information  to  any  person  under  circumstances  in  which  it is  reasonably
foreseeable  that such person is likely to purchase  or sell  securities  of the
Company.  Accordingly,  until such time as any such  non-public  information has
been adequately disseminated to the public, Purchaser shall not purchase or sell
any  securities of the Company,  or  communicate  such  information to any other
person.

      9. Entire Agreement.  This Agreement contains the entire agreement between
the parties and supersedes all prior agreements and understandings, both written
and oral,  between the parties with respect to the subject matter hereto, and no
party  shall be  liable  or  bound  to any  other  party  in any  manner  by any
warranties, representations,  guarantees or covenants except as specifically set
forth in this  Agreement.  Nothing in this  Agreement,  express or  implied,  is
intended  to  confer  upon any  party  other  than the  parties  hereto or their
respective  successors  and  assigns  any  rights,   remedies,   obligations  or
liabilities under or by reason of this Agreement,  except as expressly  provided
in this Agreement.

      10.  Amendment  and  Modification.  This  Agreement  may  not be  amended,
modified or  supplemented  except by an  instrument  or  instruments  in writing
signed by the party against whom enforcement of any such amendment, modification
or supplement is sought.

      11. Extensions and Waivers. At any time prior to the Closing,  the parties
hereto  entitled to the benefits of a term or provision  may (a) extend the time
for the  performance  of any of the  obligations  or other  acts of the  parties
hereto,  (b)  waive  any  inaccuracies  in the  representations  and  warranties
contained herein or in any document,  certificate or writing delivered  pursuant
hereto,  or (c) waive  compliance  with any obligation,  covenant,  agreement or
condition  contained  herein.  Any  agreement on the part of a party to any such
extension  or  waiver  shall be valid  only if set  forth  in an  instrument  or
instruments in writing signed by the party against whom  enforcement of any such
extension  or waiver is  sought.  No  failure  or delay on the part of any party
hereto in the  exercise  of any right  hereunder  shall  impair such right or be
construed  to  be  a  waiver  of,  or   acquiescence   in,  any  breach  of  any
representation, warranty, covenant or agreement.

                                       18
<PAGE>

      12. Successors and Assigns. This Agreement shall be binding upon and inure
to the  benefit  of the  parties  hereto  and their  respective  successors  and
assigns,  provided,  however,  that no party  hereto  may  assign  its rights or
delegate its obligations  under this Agreement without the express prior written
consent of the other  party  hereto.  Except as  provided  in  Sections 5 and 6,
nothing in this  Agreement  is  intended  to confer  upon any person not a party
hereto (and their successors and assigns) any rights,  remedies,  obligations or
liabilities under or by reason of this Agreement.

      13.   Survival  of   Representations,   Warranties  and   Covenants.   The
representations  and warranties  contained  herein shall survive the Closing and
shall  thereupon  terminate  two  years  from  the  Closing,   except  that  the
representations  contained in Sections 3(a),  3(b), 4(a), and 4(b) shall survive
indefinitely. All covenants and agreements contained herein which by their terms
contemplate  actions  following the Closing shall survive the Closing and remain
in full force and effect in accordance with their terms. All other covenants and
agreements  contained  herein shall not survive the Closing and shall  thereupon
terminate.

      14.  Headings;   Definitions.  The  Section  headings  contained  in  this
Agreement are inserted for convenience of reference only and will not affect the
meaning  or  interpretation  of  this  Agreement.  All  references  to  Sections
contained herein mean Sections of this Agreement unless  otherwise  stated.  All
capitalized terms defined herein are equally applicable to both the singular and
plural forms of such terms

      15.  Severability.  If any provision of this Agreement or the  application
thereof to any person or circumstance is held to be invalid or  unenforceable to
any extent,  the  remainder  of this  Agreement  shall  remain in full force and
effect and shall be reformed to render the Agreement valid and enforceable while
reflecting to the greatest extent permissible the intent of the parties.

      16. Notices.  All notices  hereunder  shall be sufficiently  given for all
purposes  hereunder if in writing and delivered  personally,  sent by documented
overnight  delivery  service or, to the extent  receipt is confirmed,  telecopy,
telefax or other electronic  transmission  service to the appropriate address or
number as set forth below:

            If to the Company:

                  Stellar Technologies, Inc.
                  7935 Airport Pulling Road
                  Suite 201
                  Naples, FL 34109
                  Attention:  Chief Executive Officer

            with a copy to:

                  Fox Rothschild LLP
                  997 Lenox Drive, Building 3
                  Lawrenceville, NJ  08648
                  Attention:  Vincent A. Vietti, Esquire

                                       19
<PAGE>

            If to Purchaser:

            To that address indicated on the signature page hereof.

      17.  Governing Law. This  Agreement  shall be governed by and construed in
accordance  with the laws of the State of  Florida,  without  regard to the laws
that might  otherwise  govern under  applicable  principles of conflicts of laws
thereof,  except to the extent that the General  Corporation Law of the State of
Colorado shall apply to the internal corporate governance of the Company.

      18.  Arbitration.  If a dispute  arises as to the  interpretation  of this
Agreement,  it shall be decided in an arbitration  proceeding  conforming to the
Rules  of  the  American  Arbitration   Association   applicable  to  commercial
arbitration  then in effect at the time of the dispute.  The  arbitration  shall
take  place  in  Miami,  Florida.  The  decision  of the  arbitrators  shall  be
conclusively  binding  upon the parties and final,  and such  decision  shall be
enforceable  as a judgment in any court of competent  jurisdiction.  The parties
shall share equally the costs of the arbitration.

      19.  Counterparts.  This  Agreement  may  be  executed  and  delivered  by
facsimile  in two or more  counterparts,  each of which shall be deemed to be an
original, but all of which together shall constitute one and the same agreement.

                            [Signature page follows]

                                       20
<PAGE>

      IN WITNESS WHEREOF, intending to be legally bound, the parties hereto have
caused this Agreement to be executed as of the date set forth below.

                                           PURCHASER

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

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

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

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

                                           Number of Units Purchased: __________

                                           Purchase Price
                                           @ $15.00 per Unit: $_________________

                                           STELLAR TECHNOLOGIES, INC.

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

                                       21
<PAGE>

                                     Form of
                           Certificate of Designation
                                       of
                      Series B Convertible Preferred Stock
                                       of
                           Stellar Technologies, Inc.

                      Pursuant to Section 7-106-102 of the
                        Colorado Business Corporation Act

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

Stellar  Technologies,  Inc., a Colorado corporation (the  "Corporation"),  does
hereby  certify  that,  pursuant to the  authority  contained in its Articles of
Incorporation,  as amended,  and in  accordance  with the  provisions of Section
7-106-102 of the Colorado Business  Corporation Act, the Corporation's  Board of
Directors  has duly  adopted  the  following  resolutions  creating  a series of
Preferred Stock designated as Series B Convertible Preferred Stock:

      RESOLVED,  that the Corporation  hereby designates and creates a series of
the  authorized  Preferred  Stock of the  Corporation,  designated  as  Series B
Convertible Preferred Stock, as follows:

      FIRST: that, of the 10,000,000 shares of Preferred Stock, par value $0.001
per share, authorized to be issued by the Corporation, 400,000 shares are hereby
designated as "Series B Convertible  Preferred  Stock." The rights,  preference,
privileges and restrictions granted to and imposed upon the Series B Convertible
Preferred Stock are as set forth below:

      1. Definitions. For purposes of this resolution, the following definitions
shall apply:

            (a) "Board" shall mean the Board of Directors of the Corporation.

            (b) "Common Stock" shall mean the Common Stock, $0.001 par value per
share, of the Corporation.

            (c) "Conversion Price" shall mean $0.15 per share, as adjusted.

            (d)  "Original  Issue  Price"  shall  mean  $15.00 per share for the
Series B Preferred Stock.

            (e)  "Series B  Preferred  Stock"  shall mean the Series B Preferred
Convertible Stock, $0.001 par value per share, of the Corporation.

      2. Dividends and Distributions.

            (a) The holders of the then outstanding shares of Series B Preferred
Stock  shall be  entitled to  receive,  in  preference  to the holders of Junior
Securities (as defined in Section

<PAGE>

2(d) below),  cumulative  dividends (the "Series B  Payment-in-Kind  Dividends")
when and as if they may be declared by the Board out of funds legally  available
therefore,  at a per share equal to eight percent (8%) per annum of the Original
Issue Price (based on a 365 day year).  The Series B  Payment-in-Kind  Dividends
shall accrue on the Series B Preferred Stock  commencing on the date of original
issuance thereof.

            (b) All  Series B  Payment-in-Kind  Dividends  shall be  cumulative,
whether or not earned or declared and whether or not there are profits,  surplus
or  other  funds  of the  Corporation  legally  available  for  the  payment  of
dividends. All Series B Payment-in-Kind  Dividends payable by the Corporation on
the Series B Preferred  Stock pursuant to this Section 2 shall be paid in shares
of Common Stock valued for this purpose in accordance with the formula set forth
in  Section  2(c)  below.  In  conjunction  with  the  payment  of any  Series B
Payment-in-Kind  Dividend,  the Corporation  shall promptly issue and deliver to
the  holders  of the  shares of  Series B  Preferred  Stock,  a  certificate  or
certificates  for the  number of  additional  shares  of  Common  Stock to be so
issued.  Any shares of Common  Stock issued to the holders of Series B Preferred
Stock on account of any Series B Payment-in-Kind  Dividend shall be deemed to be
issued on the Dividend  Payment  Date (as defined in Section  2(c)  below).  All
numbers  relating to the  calculation  of  dividends  pursuant to this Section 2
shall be subject to  appropriate  adjustment  whenever there shall occur a stock
split,  combination,  reclassification  or  other  similar  event  involving  or
affecting  a change in the  Corporation's  capital  structure  to provide to the
holders of shares of Series B  Preferred  Stock the same  economic  return  with
respect to Series B Payment-in-Kind Dividends as they would have received in the
absence of such event.

            (c) If the Corporation  declares Series B Payment-in-Kind  Dividends
to the  holders of shares of Series B Preferred  Stock,  such  payment  shall be
equal to the number of shares of Common  Stock that the dividend  payment  would
purchase for a purchase  price equal to average  daily Closing Price (as defined
in Section 2(e) below) for the five (5) consecutive  Trading Days (as defined in
Section  2(e)  below)  immediately  preceding  the date on which  such  Series B
Payment-in-Kind  Dividends are to be paid (each, a "Dividend Payment Date"), and
the  Corporation  shall pay such  dividend,  including  all shares (and any cash
adjustment),  within  three (3) business  days of the Dividend  Payment Date for
which such payment in shares of Common Stock applies.  In lieu of any fractional
share of Common  Stock which would  otherwise be issued in payment of a dividend
on a Dividend  Payment  Date,  the  Corporation  shall pay a cash  adjustment in
respect  of such  fractional  interest  in an  amount in cash  (computed  to the
nearest cent) equal to the Closing Price  multiplied by the fractional  interest
to the nearest  1/100th of a percent  that  otherwise  would have been issued in
payment of such  dividend.  On each Dividend  Payment Date,  all dividends  that
shall  have  accrued  on each  share of  Series B  Convertible  Preferred  Stock
outstanding  on such  Dividend  Payment Date shall  accumulate  and be deemed to
become "due" whether or not there shall be funds  legally  available for payment
thereof.  Dividends paid on shares of Series B Convertible Preferred Stock in an
amount less than the total amount of such dividends at the time  accumulated and
payable on such shares shall be  allocated  pro rata on a  share-by-share  basis
among all such shares at the time outstanding.

            (d) Unless full  cumulative  dividends  on the Series B  Convertible
Preferred  Stock have been paid,  or declared and sums set aside for the payment
thereof, dividends, other than in Common Stock or other securities of a class or
series of stock of the Corporation  the terms of which do not expressly  provide
that it ranks senior to or on a parity with the Series B

                                       2
<PAGE>

Convertible Preferred Stock as to dividend  distributions and distributions upon
the  liquidation,  winding-up and dissolution of the Corporation  (collectively,
"Junior  Securities"),  may not be paid,  or  declared  and sums set  aside  for
payment thereof,  and other  distributions may not be made upon the Common Stock
or other Junior Securities.

            (e) "Closing Price" for any day, means:  (i) the last reported sales
price  regular way of the Common Stock on such day on the  principal  securities
exchange  on which the Common  Stock is then listed or admitted to trading or on
Nasdaq,  as  applicable,  (ii) if no sale  takes  place  on such day on any such
securities  exchange or system, the average of the closing bid and asked prices,
regular way, on such day for the Common Stock as  officially  quoted on any such
securities exchange or system,  (iii) if on such day such shares of Common Stock
are not then listed or admitted to trading on any securities exchange or system,
the last reported  sale price,  regular way, on such day for the Common Stock in
the  domestic  over-the-counter  market as  reported by the  National  Quotation
Bureau, Incorporated, or any other successor organization, (iv) if no sale takes
place on such day, the average of the high and low bid price of the Common Stock
on such day in the domestic  over-the-counter market as reported by the National
Quotation Bureau, Incorporated,  or any other successor organization,  or (v) if
no bid and asked  prices  are  reported  for the  Common  Stock by the  National
Quotation Bureau, Incorporated or any other successor organization for such day,
the average of the high and low bid and asked price of any of the market  makers
for the Common Stock as reported in the "pink sheets" by the Pink Sheets LLC. If
at any time such shares of Common Stock are not listed on any domestic  exchange
or  quoted  in the  NASDAQ  System or the  domestic  over-the-counter  market or
reported in the "pink  sheets," the Closing Price shall be the fair market value
thereof  determined by the Board of Directors of the  Corporation in good faith.
"Trading  Day" means a day on which the  securities  exchange,  association,  or
quotation system on which shares of Common Stock are listed for trading shall be
open for  business or, if the shares of Common Stock shall not be listed on such
exchange,  association,  or quotation system for such day, a day with respect to
which  trades in the United  States  domestic  over-the-counter  market shall be
reported. Any reference to "distribution"  contained in this Section 2 shall not
be deemed to include any  distribution  made in connection with any liquidation,
winding-up or dissolution of the Corporation, as to which Section 3 shall apply.

      3. Liquidation  Rights.  In the event of any  liquidation,  dissolution or
winding up of the Corporation,  whether voluntary or involuntary,  the funds and
assets of the Corporation that may be legally  distributed to the  Corporation's
stockholders  (the  "Available  Funds  and  Assets"),  shall be  distributed  to
stockholders in the following manner:

            (a) Liquidation Preference.  Subject to the rights of holders of any
series of preferred stock which by its terms is senior to the Series B Preferred
Stock  with  respect  to  liquidation,  the  holders  of each  share of Series B
Preferred  Stock  then  outstanding  shall be  entitled  to be paid,  out of the
Available  Funds and  Assets,  and prior and in  preference  to any  payment  or
distribution  (or any  setting  apart of any  payment  or  distribution)  of any
Available Funds and Assets on any Junior  Securities,  an amount per share equal
to the Original Issue Price of the Series B Preferred Stock plus all accrued but
unpaid dividends;  provided, however, that in the event that the Available Funds
and Assets are insufficient to permit each holder of Series B Preferred Stock to
receive an amount per share  equal to the  Original  Issue Price of the Series B
Preferred Stock,  then, and in that event, the amount so distributable  shall be
distributed among

                                       3
<PAGE>

the holders of the Series B Preferred  Stock,  pro rata,  based on the number of
shares of Series B Preferred Stock held by each; and further, provided, that any
such  payments or  distributions  shall be made on parity  with any  payments or
distributions  made to the holders of any other series of preferred  stock which
by its terms is pari passu with the Series B Preferred Stock.

            (b)  Non-Cash  Consideration.  If  any  assets  of  the  Corporation
distributed to stockholders in connection with any liquidation,  dissolution, or
winding up of the Corporation are other than cash, then the value of such assets
shall be their fair market value as  reasonably  determined by the Board in good
faith,  except  that any  securities  to be  distributed  to  stockholders  in a
liquidation,  dissolution,  or winding up of the Corporation  shall be valued as
follows:

                  (1) The  method of  valuation  of  securities  not  subject to
investment letter or other similar  restrictions on free marketability  shall be
as follows:

                        (i) if the  securities  are then  traded  on a  national
securities  exchange or the NASDAQ National Market System (or a similar national
quotation  system),  then the value  shall be deemed  to be the  average  of the
closing  prices of the  securities  on such  exchange  or system over the 30-day
period ending three (3) days prior to the distribution;

                        (ii) if actively traded over-the-counter, then the value
shall be deemed to be the  average of the  closing  bid  prices  over the 30-day
period ending three (3) days prior to the closing of such merger,  consolidation
or sale; and

                        (iii) if  there is no  active  public  market,  then the
value shall be the fair market value thereof, as determined in good faith by the
Board.

                  (2)  The  method  of  valuation  of   securities   subject  to
investment letter or other restrictions on free  marketability  shall be to make
an  appropriate  discount  from the market value  determined as above in Section
3(b)(1)(i),  (ii) or (iii) to reflect the approximate fair market value thereof,
as reasonably determined in good faith by the Board.

      4.  Voting  Rights.  Each  holder of  Series B  Preferred  Stock  shall be
entitled to vote together with the Common Stock and all other series and classes
of stock  permitted to vote with the Common Stock on all matters  submitted to a
vote of the holders of the Common Stock  (including  election of  directors)  in
accordance with the provisions of this Section 4, except with respect to matters
in respect of which one or more other classes of Preferred Stock or Common Stock
is entitled to vote as a separate class under the Colorado Business  Corporation
Act or the  provisions  of this  Certificate.  Each holder of Series B Preferred
Stock  shall be entitled to notice of any  stockholders'  meeting in  accordance
with the bylaws of the  Corporation  at the same time and in the same  manner as
notice is given to all other stockholders entitled to vote at such meetings. For
each  vote in which  holders  of  Series  B  Preferred  Stock  are  entitled  to
participate,  the  holder of each  share of Series B  Preferred  Stock  shall be
entitled to that number of votes per share to which such holder  would have been
entitled  had such share of Series B Preferred  Stock then been  converted  into
shares of Common Stock  pursuant to the  provisions of Section 5 hereof,  at the
record  date for the  determination  of those  holders  entitled to vote on such
matters  or, if no such  record  date is  established,  at the date such vote is
taken or any written consent of stockholders is solicited.

                                       4
<PAGE>

      5. Conversion.

            (a)  Subject  to the  provisions  of this  Section  5, each share of
Series B Preferred Stock shall be convertible into that number of fully paid and
nonassessable  shares of Common Stock  determined by dividing the Original Issue
Price by the Conversion Price in effect on the date of the conversion.

            (b) The Conversion  Price and the number of shares of stock or other
securities  or property into which the Series B Preferred  Stock is  convertible
are subject to adjustment from time to time as follows:

                  (1)  Reorganization,  Merger or Sale of Assets. If at any time
while  the  Series  B  Preferred  Stock  is  outstanding  there  shall  be (i) a
reorganization  (other  than  a  combination,   reclassification,   exchange  or
subdivision  of  shares  otherwise  provided  for  herein),  (ii)  a  merger  or
consolidation  with or into another  corporation in which the Corporation is not
the surviving entity, or a reverse triangular merger in which the Corporation is
the  surviving  entity  but  the  shares  of  the  Corporation's  capital  stock
outstanding  immediately  prior to the  merger  are  converted  by virtue of the
merger  into  other  property,  whether  in the  form  of  securities,  cash  or
otherwise,  or (iii) a sale or  transfer  of the  Corporation's  properties  and
assets as, or substantially as, an entirety to any other person, then, as a part
of  such  reorganization,   merger,  consolidation,  sale  or  transfer,  lawful
provision  shall be made so that a holder  of  Series B  Preferred  Stock  shall
thereafter  be entitled  to receive  upon  conversion  of the Series B Preferred
Stock  the  number of shares of stock or other  securities  or  property  of the
successor corporation resulting from such reorganization, merger, consolidation,
sale or transfer that a holder of the shares  deliverable upon conversion of the
Series  B  Preferred   Stock  would  have  been  entitled  to  receive  in  such
reorganization,  consolidation,  merger,  sale  or  transfer  if  the  Series  B
Preferred  Stock had been  converted  immediately  before  such  reorganization,
merger,  consolidation,  sale or transfer,  all subject to further adjustment as
provided in this Section 5. The  foregoing  provisions  of this Section  5(b)(1)
shall similarly apply to successive  reorganizations,  consolidations,  mergers,
sales and transfers and to the stock or securities of any other corporation that
are at the time receivable upon the conversion of the Series B Preferred  Stock.
If  the  per-share  consideration  payable  to the  Corporation  for  shares  in
connection with any such  transaction is in a form other than cash or marketable
securities,  then the value of such  consideration  shall be  determined in good
faith by the Board. In all events, appropriate adjustment (as determined in good
faith by the Board) shall be made in the  application  of the  provisions of the
Series B  Preferred  Stock  with  respect to the  rights  and  interests  of the
Corporation after the transaction,  to the end that the provisions of the Series
B Preferred  Stock shall be applicable  after that event,  as near as reasonably
may be, in relation to any shares or other property deliverable after that event
upon conversion of the Series B Preferred Stock.

                  (2)  Reclassification.  If the Corporation,  at any time while
the Series B Preferred Stock, or any portion thereof,  remains  outstanding,  by
reclassification of securities or otherwise,  shall change any of the securities
as to which conversion  rights under the Series B Preferred Stock exist into the
same or a different  number of  securities  of any other  class or classes,  the
Series B Preferred  Stock shall  thereafter  represent the right to acquire such
number and kind of  securities as would have been issuable as the result of such
change with respect to the securities that were subject to the conversion rights
under the Series B Preferred Stock

                                       5
<PAGE>

immediately prior to such  reclassification or other change and number of shares
received upon such conversion  shall be appropriately  adjusted,  all subject to
further adjustment as provided in this Section 5.

                  (3)  Split,  Subdivision  or  Combination  of  Shares.  If the
Corporation  at any time  while the Series B  Preferred  Stock,  or any  portion
thereof, remains outstanding shall split, subdivide or combine the securities as
to which  conversion  rights under the Series B Preferred  Stock  exist,  into a
different  number of securities of the same class, the Conversion Price shall be
proportionately   decreased   in  the  case  of  a  split  or   subdivision   or
proportionately increased in the case of a combination.

                  (4) Adjustments for Dividends in Stock or Other  Securities or
Property. If while the Series B Preferred Stock, or any portion hereof,  remains
outstanding  the holders of the securities as to which  conversion  rights under
the Series B Preferred  Stock exist at the time shall have  received,  or, on or
after the record  date fixed for the  determination  of  eligible  stockholders,
shall have become  entitled  to  receive,  without  payment  therefor,  other or
additional  stock or other  securities  or  property  (other  than  cash) of the
Corporation  by way of dividend,  then and in each case,  the Series B Preferred
Stock shall represent the right to acquire upon  conversion,  in addition to the
number of shares of the  security  receivable  upon  conversion  of the Series B
Preferred Stock, and without payment of any additional  consideration  therefor,
the amount of such other or  additional  stock or other  securities  or property
(other than cash) of the Corporation  that such holder would hold on the date of
such conversion had it been the holder of record of the security receivable upon
conversion  of  the  Series  B  Preferred  Stock  on the  date  hereof  and  had
thereafter,  during the period from the date hereof to and including the date of
such conversion,  retained such shares and/or all other additional stock,  other
securities  or property as aforesaid  during such period,  giving  effect to all
adjustments called for during such period by the provisions of this Section 5.

            (c) Each share of Series B Convertible  Preferred Stock  outstanding
on the Mandatory  Conversion  Date (as defined herein) shall  automatically  and
without any action on the part of the holder  thereof,  convert into that number
of fully paid and  nonassessable  shares of Common Stock  determined by dividing
the  Original  Issue  Price by the  Conversion  Price in  effect  at the time of
conversion.  The term "Mandatory  Conversion Date" is the date, if any, on which
(i) the average of the Closing Prices of the Corporation's  Common Stock over 20
consecutive  trading days equals or exceeds $0.75 per share; and (ii) the shares
of Common Stock  issuable upon  conversion  of the Series B Preferred  Stock are
either  subject to an effective  registration  statement  permitting  the public
resale of such shares under the  Securities Act of 1933, as amended (the "Act"),
or  transferable  pursuant  to Rule  144(k)  promulgated  under the Act.  On the
Mandatory  Conversion  Date,  the  outstanding  shares of  Series B  Convertible
Preferred Stock shall be converted  automatically  without any further action by
the holders of such shares and whether or not the certificates representing such
shares are  surrendered  to the  Corporation  or its transfer  agent;  provided,
however,  that the  Corporation  shall not be  obligated  to issue  certificates
evidencing the shares of Common Stock issuable upon  conversion of any shares of
Series B Convertible Preferred Stock unless certificates  evidencing such shares
of Series B Convertible  Preferred Stock are either delivered to the Corporation
or the holder notifies the Corporation  that such  certificates  have been lost,
stolen, or destroyed,  and executes an agreement satisfactory to the Corporation
to indemnify the Corporation from any loss incurred by it in connection

                                       6
<PAGE>

therewith.  Upon the  occurrence  of the  automatic  conversion  of the Series B
Convertible  Preferred  Stock  pursuant to this Section 5(c), the holders of the
Series  B  Convertible   Preferred  Stock  shall   surrender  the   certificates
representing  the Series B Convertible  Preferred  Stock for which the Mandatory
Conversion  Date has  occurred  to the  Corporation  and the  Corporation  shall
deliver the shares of Common  Stock  issuable  upon such  conversion  as soon as
practicable  following the holder's delivery of the applicable  certificates for
the  Series B  Convertible  Preferred  Stock  within  three  (3)  business  days
following the date on which the Corporation receives the applicable certificates
for the Series B Convertible Preferred Stock from the holder.

      6. Reports as to Adjustments. Whenever the Conversion Price or the kind of
securities or other  property into which each share of Series B Preferred  Stock
is  convertible  is adjusted as  provided in Section 5 hereof,  the  Corporation
shall promptly mail to the holders of record of the outstanding shares of Series
B Preferred Stock at their respective  addresses as the same shall appear in the
Corporation's  stock records a notice stating that the Conversion Price has been
adjusted  and setting  forth the new  Conversion  Price (or  describing  the new
securities,  cash or other  property into which each share of Series B Preferred
Stock is convertible as a result of such  adjustment),  a brief statement of the
facts  requiring such  adjustment  and the  computation  thereof,  and when such
adjustment became effective.

      7. No  Re-issuance  of  Preferred  Stock.  No share or  shares of Series B
Preferred Stock acquired by the  Corporation by reason of redemption,  purchase,
conversion  or  otherwise  shall  be  reissued,  and all  such  shares  shall be
canceled,  retired and eliminated from the shares which the Corporation shall be
authorized to issue.

SECOND:  That  such  determination  of  the  designation,  preferences  and  the
relative,  participating,  optional  or other  rights,  and the  qualifications,
limitations or restrictions  thereof,  relating to the Series B Preferred Stock,
was duly  made by the  Board of  Directors  pursuant  to the  provisions  of the
Articles  of  Incorporation  of the  Corporation,  and in  accordance  with  the
provisions of Section 7-106-102 of the Colorado Business Corporation Act.

      IN WITNESS  WHEREOF,  the  Corporation  has caused this  Designation to be
executed this ______ day of April, 2006.

                                               STELLAR TECHNOLOGIES, INC.

                                               By:
                                                   -----------------------------
                                                   Name:  Mark Sampson
                                                   Title: President

                                       7
<PAGE>

                                                                       Exhibit B

WARRANT NO.: Reg S [_________]

                    FORM OF WARRANT TO PURCHASE COMMON STOCK
                          OF STELLAR TECHNOLOGIES, INC.

THIS WARRANT AND THE  SECURITIES  TO BE ISSUED UPON ITS  EXERCISE  HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES  ACT"),
OR APPLICABLE  STATE  SECURITIES  LAWS. THIS WARRANT MAY NOT BE EXERCISED UNLESS
THE HOLDER THEREOF  PROVIDES THE ISSUER WITH A WRITTEN  CERTIFICATION  THAT THIS
WARRANT IS NOT BEING EXERCISED BY OR ON BEHALF OF ANY "U.S. PERSON" AS SUCH TERM
IS DEFINED IN RULE 902 OF REGULATION S UNDER THE  SECURITIES  ACT, OR PROVIDES A
WRITTEN  OPINION OF UNITED STATES  COUNSEL OF RECOGNIZED  STANDING,  IN FORM AND
SUBSTANCE  SATISFACTORY  TO THE ISSUER,  TO THE EFFECT THAT THIS WARRANT AND THE
SECURITIES  TO BE  ISSUED  UPON ITS  EXERCISE  HAVE  BEEN  REGISTERED  UNDER THE
SECURITIES ACT AND REGISTERED OR QUALIFIED UNDER  APPLICABLE  SECURITIES LAWS OF
ANY  STATE OR OTHER  JURISDICTION,  OR ARE  EXEMPT  FROM  SUCH  REGISTRATION  OR
QUALIFICATION.  THIS WARRANT AND THE  SECURITIES  TO BE ISSUED UPON ITS EXERCISE
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF, EXCEPT IN ACCORDANCE WITH
THE  PROVISIONS  OF  REGULATION  S  UNDER  THE  SECURITIES   ACT,   PURSUANT  TO
REGISTRATION  UNDER THE SECURITIES ACT AND REGISTRATION OR  QUALIFICATION  UNDER
APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION, OR PURSUANT TO AN
EXEMPTION  FROM  SUCH  REGISTRATION  OR  QUALIFICATION.   HEDGING  TRANSACTIONS,
INCLUDING,  BUT NOT LIMITED TO,  SHORT  SALES,  SWAPS OR  DERIVATIVE  SECURITIES
TRANSACTIONS,  INVOLVING  THESE  SECURITIES  MAY  NOT  BE  CONDUCTED  UNLESS  IN
COMPLIANCE  WITH THE SECURITIES ACT AND APPLICABLE  SECURITIES LAWS OF ANY STATE
OR OTHER JURISDICTION.  NO TRANSFER OF THE SECURITIES  REPRESENTED HEREBY MAY BE
MADE IN THE ABSENCE OF SUCH  REGISTRATION  OR  QUALIFICATION  UNLESS THERE SHALL
HAVE BEEN DELIVERED TO THE ISSUER A WRITTEN  OPINION OF UNITED STATES COUNSEL OF
RECOGNIZED  STANDING,  IN FORM AND SUBSTANCE  SATISFACTORY TO THE ISSUER, TO THE
EFFECT THAT SUCH TRANSFER MAY BE MADE WITHOUT  REGISTRATION  OF SUCH  SECURITIES
UNDER THE SECURITIES ACT AND  REGISTRATION  OR  QUALIFICATION  UNDER  APPLICABLE
SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION.

      This  WARRANT   ("Warrant")  is  to  verify  that,  FOR  VALUE   RECEIVED,
[_____________________________]  ("Holder") is entitled to purchase,  subject to
the terms and conditions  hereof,  from STELLAR  TECHNOLOGIES,  INC., a Colorado
corporation (the

<PAGE>

"Company"),  [_____________]  shares of common stock, $.001 par value per share,
of the Company (the "Common Stock"), at any time during the period commencing at
9:00 a.m.,  Eastern Standard Time on the date hereof (the  "Commencement  Date")
and ending at 5:00 p.m. Eastern Standard Time on the third (3rd)  anniversary of
the  Commencement  Date (the  "Termination  Date"),  at an  exercise  price (the
"Exercise  Price")  of $.40 per share of Common  Stock.  The number of shares of
Common Stock  purchasable  upon exercise of this Warrant and the Exercise  Price
per share shall be subject to adjustment  from time to time upon the  occurrence
of certain events as set forth below.

      The shares of Common  Stock or any other shares or other units of stock or
other securities or property,  or any combination thereof,  then receivable upon
exercise of this Warrant,  as adjusted from time to time, are sometimes referred
to hereinafter  as "Exercise  Shares." The exercise price per share as from time
to time in effect is referred to hereinafter as the "Exercise Price."

1. Exercise of Warrant; Issuance of Exercise Shares.

      (a) Exercise of Warrant.  Subject to the terms hereof, the purchase rights
represented  by this Warrant are  exercisable by the Holder in whole or in part,
at any time,  or from time to time,  by the  surrender  of this  Warrant and the
Notice of Exercise  annexed  hereto duly completed and executed on behalf of the
Holder,  at the office of the  Company  (or such  other  office or agency of the
Company as it may designate by notice in writing to the Holder at the address of
the Holder appearing on the books of the Company)  accompanied by payment of the
Exercise Price in full either: (i) in cash or by bank or certified check for the
Exercise  Shares  with  respect to which  this  Warrant  is  exercised;  (ii) by
delivery to the Company of shares of the  Company's  Common  Stock having a Fair
Market Value (as defined  below) equal to the  aggregate  Exercise  Price of the
Exercise Shares being  purchased that Holder is the record and beneficial  owner
of and that have  been held by the  Holder  for at least six (6)  months;  (iii)
provided  that the sale of the  Exercise  Shares  are  covered  by an  effective
registration  statement,  by  delivering  to the  Company a Notice  of  Exercise
together with an irrevocable  direction to a broker-dealer  registered under the
Securities  Exchange Act of 1934,  as amended (the  "Exchange  Act"),  to sell a
sufficient  portion  of the  Exercise  Shares  and  deliver  the sales  proceeds
directly to the Company to pay the Exercise Price; or (iv) by any combination of
the  procedures  set forth in  subsections  (i),  (ii) and (iii) of this Section
1(a).  For the purposes of this Section  1(a),  "Fair Market  Value" shall be an
amount equal to the average of the Current  Market Value (as defined  below) for
the ten (10) days preceding the Company's receipt of the duly executed Notice of
Exercise form attached hereto as Appendix A.

      In the event that this  Warrant  shall be duly  exercised in part prior to
the Termination  Date, the Company shall issue a new Warrant or Warrants of like
tenor evidencing the rights of the Holder thereof to purchase the balance of the
Exercise Shares purchasable under the Warrant so surrendered that shall not have
been purchased.

      (b)  Issuance of Exercise  Shares:  Delivery of Warrant  Certificate.  The
Company  shall,  within  ten  (10)  business  days or as soon  thereafter  as is
practicable  of the exercise of this Warrant,  issue in the name of and cause to
be delivered to the Holder one or more  certificates  representing  the Exercise
Shares to which the Holder shall be entitled upon such exercise under

                                       2
<PAGE>

the terms hereof.  Such certificate or certificates shall be deemed to have been
issued and the Holder  shall be deemed to have  become the record  holder of the
Exercise Shares as of the date of the due exercise of this Warrant.

      (c) Exercise Shares Fully Paid and Non-assessable.  The Company agrees and
covenants that all Exercise Shares issuable upon the due exercise of the Warrant
represented  by this Warrant  certificate  ("Warrant  Certificate")  will,  upon
issuance  and payment  therefor in  accordance  with the terms  hereof,  be duly
authorized,  validly issued, fully paid and non-assessable and free and clear of
all taxes  (other than taxes  which,  pursuant to Section 2 hereof,  the Company
shall not be obligated to pay) or liens, charges, and security interests created
by the Company with respect to the issuance thereof.

      (d) Reservation of Exercise Shares.  The Company covenants that during the
term that this  Warrant  is  exercisable,  the  Company  will  reserve  from its
authorized  and unissued  Common Stock a sufficient  number of shares to provide
for the issuance of the Exercise  Shares upon the exercise of this Warrant,  and
from  time to time will take all steps  necessary  to amend its  certificate  of
incorporation to provide sufficient  reserves of shares of Common Stock issuable
upon the exercise of the Warrant.

      (e)  Fractional  Shares.  The  Company  shall  not be  required  to  issue
fractional  shares of capital  stock  upon the  exercise  of this  Warrant or to
deliver Warrant  Certificates that evidence  fractional shares of capital stock.
In the event  that any  fraction  of an  Exercise  Share  would,  except for the
provisions  of this  subsection  (e),  be  issuable  upon the  exercise  of this
Warrant, the Company shall pay to the Holder exercising the Warrant an amount in
cash  equal to such  fraction  multiplied  by the  Current  Market  Value of the
Exercise  Share on the last business day prior to the date on which this Warrant
is exercised.  For purposes of this  subsection  (e), the "Current Market Value"
for any day shall be determined as follows:

            (i) if the Exercise Shares are traded in the over-the-counter market
and not on any  national  securities  exchange  and not on the  NASDAQ  National
Market  System or NASDAQ  Small Cap  Market  (together,  the  "NASDAQ  Reporting
System"),  the  average of the mean  between  the last bid and asked  prices per
share,  as reported by the National  Quotation  Bureau,  Inc.,  or an equivalent
generally accepted reporting service, or if not so reported,  the average of the
closing bid and asked  prices for an Exercise  Share as furnished to the Company
by any member of the National Association of Securities Dealers,  Inc., selected
by the Company for that purpose; or

            (ii) if the  Exercise  Shares  are  listed or  traded on a  national
securities  exchange or the NASDAQ  Reporting  System,  the closing price on the
principal national securities exchange on which they are so listed or traded, on
the NASDAQ Reporting  System, as the case may be, on the last business day prior
to the date of the exercise of this Warrant.  The closing  price  referred to in
this  clause  (ii) shall be the last  reported  sales  price or, in case no such
reported  sale takes place on such day, the average of the reported  closing bid
and asked prices,  in either case on the national  securities  exchange on which
the Exercise Shares are then listed or in the NASDAQ Reporting System; or

                                       3
<PAGE>

            (iii) if no such  closing  price or closing bid and asked prices are
available,  as determined in any  reasonable  manner as may be prescribed by the
Board of Directors of the Company.

2. Payment of Taxes.

      (a) Stamp Taxes. The Company will pay all documentary stamp taxes, if any,
attributable  to the initial  issuance of Exercise  Shares upon the  exercise of
this Warrant;  provided,  however, that the Company shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in the
issue of any Warrant  Certificates or any  certificates for Exercise Shares in a
name other than that of the Holder of a Warrant Certificate surrendered upon the
exercise of a Warrant, and the Company shall not be required to issue or deliver
such certificates  unless or until the person or persons requesting the issuance
thereof  shall  have paid to the  Company  the  amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.

      (b) Withholding. The Holder shall pay to the Company, or make arrangements
satisfactory  to the Company  regarding  payment of, any federal,  state,  local
and/or  payroll taxes of any kind required by law to be withheld with respect to
the grant of this Warrant or the issuance of the  Exercise  Shares.  The Company
may, to the extent  permitted by law,  deduct any such taxes from any payment of
any kind  otherwise  due to the Holder  whether or not pursuant to this Warrant.
The  Holder  may  elect,  with the  consent  of the  Company,  to have  such tax
withholding  obligation satisfied,  in whole or in part, by: (i) authorizing the
Company to withhold from the Exercise  Shares a number of shares of Common Stock
having an aggregate Fair Market Value that would satisfy the minimum withholding
amount due, or (ii) delivering to the Company a number of shares of Common Stock
of which the Holder is the record and  beneficial  owner and that have been held
by the Holder for at least six (6) months with an  aggregate  Fair Market  Value
that would satisfy the minimum  withholding  amount due. The Company may require
that any  fractional  share amount be settled in cash.  For the purposes of this
Section 2, Fair  Market  Value shall be  determined  as of the date on which the
amount of tax to be withheld is determined.

3.  Mutilated  or Missing  Warrant  Certificates.  In case any Warrant  shall be
mutilated,  lost, stolen or destroyed,  the Company may in its discretion issue,
in exchange and substitution for and upon cancellation of the mutilated Warrant,
or in lieu of and in substitution for the Warrant lost,  stolen or destroyed,  a
new Warrant or Warrants  of like tenor and in the same  aggregate  denomination,
but only (i) in the case of loss, theft or destruction, upon receipt of evidence
satisfactory  to the Company of such loss,  theft or destruction of such Warrant
and indemnity or bond, if requested,  also  satisfactory to them and (ii) in the
case of mutilation, upon surrender of the mutilated Warrant. Applicants for such
substitute Warrants shall also comply with such other reasonable regulations and
pay such other reasonable charges as the Company or its counsel may prescribe.

4. Rights of Holder.  The Holder  shall not, by virtue of anything  contained in
this Warrant or otherwise, be entitled to any right whatsoever, either in law or
equity, of a stockholder of the Company, including without limitation, the right
to  receive  dividends  or to vote  or to  consent  or

                                       4
<PAGE>

to receive notice as a shareholder in respect of the meetings of shareholders or
the election of directors of the Company or any other matter.

5.  Registration of Transfers and Exchanges.  The Warrant shall be transferable,
subject  to the  provisions  of  Section  7  hereof,  only upon the books of the
Company, if any, to be maintained by it for that purpose,  upon surrender of the
Warrant  Certificate to the Company at its principal  office  accompanied (if so
required by the Company) by a written  instrument or  instruments of transfer in
form  satisfactory  to the Company and duly executed by the Holder thereof or by
the duly appointed legal representative thereof or by a duly authorized attorney
and upon  payment of any  necessary  transfer tax or other  governmental  charge
imposed  upon  such  transfer.  In all cases of  transfer  by an  attorney,  the
original letter of attorney,  duly approved,  or an official copy thereof,  duly
certified,  shall be deposited and remain with the Company.  In case of transfer
by executors,  administrators,  guardians or other legal  representatives,  duly
authenticated evidence of their authority shall be produced, and may be required
to be  deposited  and remain with the Company in its  discretion.  Upon any such
registration of transfer,  a new Warrant shall be issued to the transferee named
in such instrument of transfer, and the surrendered Warrant shall be canceled by
the Company.

      Any  Warrant  may be  exchanged,  at the option of the Holder  thereof and
without change,  when surrendered to the Company at its principal  office, or at
the office of its transfer  agent, if any, for another Warrant or other Warrants
of like tenor and  representing  in the aggregate the right to purchase from the
Company a like number and kind of Exercise Shares as the Warrant surrendered for
exchange or transfer,  and the Warrant so  surrendered  shall be canceled by the
Company or transfer agent, as the case may be.

6. Adjustment of Exercise Shares and Exercise Price.  The Exercise Price and the
number and kind of Exercise Shares purchasable upon the exercise of this Warrant
shall be subject to  adjustment  from time to time upon the happening of certain
events as hereinafter provided. The Exercise Price in effect at any time and the
number and kind of securities purchasable upon exercise of each Warrant shall be
subject to adjustment as follows:

      (a) In case of any  consolidation  or merger of the Company  with  another
corporation  (other than a merger with another  corporation in which the Company
is the surviving  corporation and which does not result in any  reclassification
or  change  -- other  than a change  in par  value,  or from par value to no par
value,  or from no par value to par value,  or as a result of a  subdivision  or
combination -- of outstanding  Common Stock  issuable upon such  exercise),  the
rights of the Holder of this Warrant  shall be adjusted in the manner  described
below:

            (i) In the event that the Company is the surviving corporation or is
merged  into a wholly  owned  subsidiary  for the purpose of  incorporating  the
Company in a different  jurisdiction,  this Warrant  shall,  without  payment of
additional  consideration therefor, be deemed modified so as to provide that the
Holder of this Warrant,  upon the exercise  thereof,  shall procure,  in lieu of
each share of Common Stock theretofore issuable upon such exercise, the kind and
amount of shares of stock, other securities,  money and property receivable upon
such  reclassification,  change,  consolidation  or merger by the holder of each
share of Common Stock, had exercise of this Warrant occurred  immediately  prior
to such  reclassification,  change,  consolidation  or merger.  This Warrant (as
adjusted) shall be deemed to provide for further

                                       5
<PAGE>

adjustments  that shall be as nearly  equivalent  as may be  practicable  to the
adjustments  provided for in this Section 6. The  provisions  of this clause (i)
shall similarly apply to successive reclassifications,  changes,  consolidations
and mergers.

            (ii) In the event that the Company is not the surviving  corporation
(except in the case of a merger of the Company  into a wholly  owned  subsidiary
for the  purpose of  incorporating  the  Company in a  different  jurisdiction),
Holder shall be given at least  fifteen (15) days prior  written  notice of such
transaction and shall be permitted to exercise this Warrant, to the extent it is
exercisable as of the date of such notice,  during this fifteen (15) day period.
Upon  expiration  of such  fifteen  (15) day  period,  this  Warrant  and all of
Holder's rights hereunder shall terminate.

      (b) If the  Company,  at any  time  while  this  Warrant,  or any  portion
thereof, remains outstanding and unexpired, by reclassification of securities or
otherwise,  shall change any of the securities as to which purchase rights under
this  Warrant  exist into the same or a different  number of  securities  of any
other class or classes,  this Warrant  shall  thereafter  represent the right to
acquire such number and kind of  securities  as would have been  issuable as the
result of such change with  respect to the  securities  that were subject to the
purchase rights under this Warrant immediately prior to such reclassification or
other change and the Exercise Price therefor  shall be  appropriately  adjusted,
all subject to further adjustment as provided in this Section 6.

      (c) In case the Company shall (i) pay a dividend or make a distribution on
its shares of Common Stock in shares of Common Stock, (ii) subdivide or classify
its outstanding  Common Stock into a greater number of shares,  or (iii) combine
or reclassify its outstanding  Common Stock into a smaller number of shares, the
Exercise  Price in effect at the time of the record  date for such  dividend  or
distribution  or of the  effective  date of  such  subdivision,  combination  or
reclassification,  shall be  proportionally  adjusted so that the Holder of this
Warrant  exercised  after such date shall be entitled  to receive the  aggregate
number and kind of shares  that,  if this  Warrant  had been  exercised  by such
Holder  immediately  prior to such date,  he would have owned upon such exercise
and been entitled to receive upon such  dividend,  subdivision,  combination  or
reclassification.  For example, if the Company declares a 2 for 1 stock dividend
or stock split and the Exercise Price  immediately prior to such event was $2.00
per share,  the adjusted  Exercise Price  immediately  after such event would be
$1.00 per share. Such adjustment shall be made  successively  whenever any event
listed above shall occur.  Whenever the Exercise  Price payable upon exercise of
each Warrant is adjusted pursuant to this subsection (c), the number of Exercise
Shares  purchasable  upon  exercise  of this  Warrant  shall  simultaneously  be
adjusted by multiplying  the number of Exercise Shares  initially  issuable upon
exercise of this Warrant by the Exercise  Price in effect on the date hereof and
dividing the product so obtained by the Exercise Price, as adjusted.

      (d) In the event  that at any  time,  as a result  of an  adjustment  made
pursuant  to  subsection  (a),  (b) or (c)  above,  the  Holder of this  Warrant
thereafter  shall become entitled to receive any Exercise Shares of the Company,
other  than  Common  Stock,  thereafter  the  number  of such  other  shares  so
receivable  upon exercise of this Warrant  shall be subject to  adjustment  from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in subsections (a), (b) or
(c) above.

                                       6
<PAGE>

      (e) Irrespective of any adjustments in the Exercise Price or the number or
kind of Exercise  Shares  purchasable  upon exercise of this  Warrant,  Warrants
theretofore  or  thereafter  issued may  continue  to express the same price and
number  and kind of  shares  as are  stated in the  similar  Warrants  initially
issuable pursuant to this Warrant.

      (f)  Whenever  the  Exercise  Price  shall be  adjusted as required by the
provisions of the foregoing  Section 6, the Company shall  forthwith file in the
custody of its Secretary or an Assistant  Secretary at its principal  office and
with its stock  transfer  agent,  if any, an officer's  certificate  showing the
adjusted  Exercise  Price  determined  as  herein  provided,  setting  forth  in
reasonable detail the facts requiring such adjustment,  including a statement of
the number of additional shares of Common Stock, if any, and such other facts as
shall be  necessary  to show the  reason for and the  manner of  computing  such
adjustment.  Each such  officer's  certificate  shall be made  available  at all
reasonable  times for inspection by the holder and the Company shall,  forthwith
after each such adjustment, mail a copy by certified mail of such certificate to
the Holder.

      (g) All  calculations  under this  Section 6 shall be made to the  nearest
cent or to the nearest one  one-hundredth  (1/100th) of a share, as the case may
be.

7. Investment Intent, Exercise Restrictions and Transfer Restrictions.

      (a) The Holder of this Warrant,  by acceptance  hereof,  acknowledges that
this  Warrant  and  the  Exercise  Shares  to be  issued  upon  exercise  hereof
(collectively, the "Securities") are being acquired for the Holder's own account
for  investment  purposes  only  and not with a view  to,  or with  any  present
intention  of,  distributing  or reselling  any of such  Securities.  The Holder
acknowledges  and agrees that the Securities have not been registered  under the
Securities Act or under any state  securities  laws, and that the Securities may
not be, directly or indirectly,  sold,  transferred,  offered for sale, pledged,
hypothecated or otherwise disposed of without  registration under the Securities
Act and  applicable  state  securities  laws,  except  pursuant to an  available
exemption from such registration.  The Holder  acknowledges and agrees that this
Warrant may not be  exercised  unless the Holder  provides  the  Company  with a
written  certification  that this Warrant is not being exercised by or on behalf
of any "U.S.  Person" as such term is defined in Rule 902 of Regulations S under
the  Securities  Act, or provides a written  opinion of United States counsel of
recognized standing,  in form and substance  satisfactory to the Company, to the
effect that this Warrant and the  Securities to be issued upon its exercise have
been  registered  under the  Securities  Act and  registered or qualified  under
applicable  securities  laws of any state or other  jurisdiction,  or are exempt
from such registration or qualification. The Holder acknowledges and agrees that
hedging  transactions,  including  but not  limited  to  short  sales,  swaps or
derivative  securities  transactions  may not be conducted  unless in compliance
with the  Securities  Act.  The Holder  further  acknowledges  that  neither the
Securities  and Exchange  Commission  ("SEC") nor any  securities  commission or
other governmental authority has: (i) approved the transfer of the Securities or
passed upon or endorsed  the merits of the transfer of the  Securities;  or (ii)
confirmed the accuracy of, determined the adequacy of, or reviewed this Warrant.
The Holder has such knowledge,  sophistication and experience in financial,  tax
and business  matters in general,  and  investments in securities in particular,
that it is capable of evaluating the merits and risks of this  investment in the
Securities,  and the Holder has made such  investigations in connection herewith
as it deemed necessary or desirable so as to make an

                                       7
<PAGE>

informed  investment  decision without relying upon the Company for legal or tax
advice related to this investment.

      (b) The  certificates  evidencing  any  Exercise  Shares  issued  upon the
exercise of this Warrant shall have endorsed  thereon (except to the extent that
the  restrictions  described  in any such legend are no longer  applicable)  the
following  legend,  appropriate  notations thereof will be made in the Company's
stock  transfer  books,   and  stop  transfer   instructions   reflecting  these
restrictions  on transfer will be placed with the transfer agent of the Exercise
Shares.

      THE  SECURITIES  REPRESENTED  HEREBY  HAVE NOT BEEN  REGISTERED  UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED (THE  "SECURITIES  ACT"), OR APPLICABLE
      STATE SECURITIES  LAWS.  THESE SECURITIES MAY NOT BE SOLD,  TRANSFERRED OR
      OTHERWISE  DISPOSED  OF  EXCEPT  IN  ACCORDANCE  WITH  THE  PROVISIONS  OF
      REGULATION S UNDER THE SECURITIES ACT, PURSUANT TO REGISTRATION  UNDER THE
      SECURITIES  ACT  AND  REGISTRATION  OR   QUALIFICATION   UNDER  APPLICABLE
      SECURITIES  LAWS OF ANY STATE OR OTHER  JURISDICTION,  OR  PURSUANT  TO AN
      EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION.  HEDGING  TRANSACTIONS,
      INCLUDING, BUT NOT LIMITED TO, SHORT SALES, SWAPS OR DERIVATIVE SECURITIES
      TRANSACTIONS,  INVOLVING THESE  SECURITIES MAY NOT BE CONDUCTED  UNLESS IN
      COMPLIANCE  WITH THE SECURITIES ACT AND APPLICABLE  SECURITIES LAWS OF ANY
      STATE OR OTHER  JURISDICTION.  NO TRANSFER OF THE  SECURITIES  REPRESENTED
      HEREBY MAY BE MADE IN THE ABSENCE OF SUCH  REGISTRATION  OR  QUALIFICATION
      UNLESS THERE SHALL HAVE BEEN DELIVERED TO THE ISSUER A WRITTEN  OPINION OF
      UNITED  STATES  COUNSEL  OF  RECOGNIZED  STANDING,  IN FORM AND  SUBSTANCE
      SATISFACTORY  TO THE ISSUER,  TO THE EFFECT THAT SUCH TRANSFER MAY BE MADE
      WITHOUT  REGISTRATION  OF SUCH  SECURITIES  UNDER THE  SECURITIES  ACT AND
      REGISTRATION  OR  QUALIFICATION  UNDER  APPLICABLE  SECURITIES LAWS OF ANY
      STATE OR OTHER JURISDICTION.

8.  Indemnification.  Holder agrees to  indemnify,  defend and hold harmless the
Company and its  respective  affiliates  and agents from and against any and all
demands, claims, actions or causes of action,  judgments,  assessments,  losses,
liabilities,  damages or penalties and  reasonable  attorneys'  fees and related
disbursements  incurred by the Company that arise out of or result from a breach
of any  representations,  warranties,  covenants  or  agreements  made by Holder
herein,   and   Holder   agrees   that  in  the  event  of  any  breach  of  any
representations,  warranties, covenants or agreements made by Holder herein, the
Company  may, at its option,  forthwith  rescind the issuance of this Warrant to
Holder.

                                       8
<PAGE>

9. Registration  Rights.  The Holder shall be entitled to the rights and subject
to the  obligations set forth in Section 6 of that certain  Securities  Purchase
Agreement  dated on or about the date  hereof by and between the Company and the
Holder.

10. Notices.  All notices or other communications under this Warrant shall be in
writing  and  shall be  deemed  to have  been  given on the day of  delivery  if
delivered  by hand,  on the  fifth day  after  deposit  in the mail if mailed by
certified  mail,  postage  prepaid,  return  receipt  requested,  or on the next
business day after mailing if sent by a nationally  recognized overnight courier
such as federal express, addressed as follows:

            If to the Company:

                  Stellar Technologies, Inc.
                  7935 Airport Pulling Road
                  Suite 210
                  Naples, FL 34109
                  Attention:  Chief Executive Officer

            with a copy to:

                  Fox Rothschild LLP
                  997 Lenox Drive, Building 3
                  Lawrenceville, NJ  08646
                  Attention:  Vincent A. Vietti, Esquire

            and to the  Holder at the  address of the  Holder  appearing  on the
            books of the Company or the Company's transfer agent, if any.

      Either of the  Company  or the  Holder  may from time to time  change  the
address  to  which  notices  to it are  to be  mailed  hereunder  by  notice  in
accordance with the provisions of this Section 10.

11. Supplements and Amendments.  The Company may from time to time supplement or
amend this  Warrant  without the approval of any holders of Warrants in order to
cure any ambiguity or to correct or supplement  any provision  contained  herein
which may be defective or inconsistent with any other provision,  or to make any
other  provisions  in regard to matters or questions  herein  arising  hereunder
which the Company may deem necessary or desirable and which shall not materially
adversely affect the interests of the Holder.

12.  Successors  and Assigns.  This Warrant shall inure to the benefit of and be
binding on the respective  successors,  assigns and legal representatives of the
Holder and the Company.

13.  Severability.  If for any reason any provision,  paragraph or terms of this
Warrant is held to be  invalid  or  unenforceable,  all other  valid  provisions
herein  shall  remain in full force and effect  and all  terms,  provisions  and
paragraphs of this Warrant shall be deemed to be severable.

                                       9
<PAGE>

14.  Governing  Law.  This  Agreement  shall be  governed  by and  construed  in
accordance  with the laws of the State of  Florida,  without  regard to the laws
that might  otherwise  govern under  applicable  principles of conflicts of laws
thereof,  except to the extent that the General  Corporation Law of the State of
Colorado shall apply to the internal corporate governance of the Company.

15.  Headings.  Section and subsection  headings used herein are included herein
for convenience of reference only and shall not affect the  construction of this
Warrant nor constitute a part of this Warrant for any other purpose.

      IN WITNESS  WHEREOF,  the  Company  has caused  these  presents to be duly
executed as of the ___ day of ______________, 2006.

                                            STELLAR TECHNOLOGIES, INC.

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

                                       10
<PAGE>

                                   APPENDIX A
                               NOTICE OF EXERCISE

To:   Stellar Technologies, Inc.
      7935 Airport Pulling Road
      Suite 210
      Naples, FL 34109

      Attention: Chief Executive Officer

      (1) The  undersigned  hereby  elects to  purchase  ____________  shares of
Common Stock of Stellar Technologies, Inc., a Colorado corporation,  pursuant to
the terms of the attached Warrant,  and tenders herewith payment of the Exercise
Price for such shares in full in accordance with the terms of the Warrant in the
following manner (please check one or more of the following choices):

      |_|   In cash;

      |_|   Cashless exercise through a broker; or

      |_|   Delivery of previously owned shares of Common Stock.

      (2) In  exercising  this  Warrant,  the  undersigned  hereby  confirms and
acknowledges that the shares of Common Stock to be issued upon conversion hereof
are being acquired solely for the account of the  undersigned,  not as a nominee
for any other party,  and for  investment  purposes only (unless such shares are
subject to resale pursuant to an effective prospectus), and that the undersigned
will not offer,  sell or  otherwise  dispose of any such shares of Common  Stock
except under circumstances that will not result in a violation of the Securities
Act of 1933, as amended (the "Securities Act"), or any state securities laws.

      (3) The undersigned hereby certifies that:

      |_|   This  Warrant  is not being  exercised  by or on behalf of any "U.S.
            Person" as such term is defined  in Rule 902 of  Regulation  S under
            the Securities Act, or

      |_|   Enclosed is a written opinion of United States counsel of recognized
            standing,  in form and substance  satisfactory to the issuer, to the
            effect that this  warrant and the  securities  to be issued upon its
            exercise  have  been   registered   under  the  Securities  Act  and
            registered  or qualified  under  applicable  securities  laws of any
            state or other jurisdiction, or are exempt from such registration or
            qualification.

      (4) Terms not otherwise  defined in this Notice of Exercise shall have the
meanings ascribed to such terms in the attached Warrant.

      (5) Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned.

                                                HOLDER

--------------------------                      --------------------------------
(Date)                                          (Signature)

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