Document:

EXHIBIT 10.25

              CERTIFICATE TO SET FORTH DESIGNATIONS, VOTING POWERS,
              PREFERENCES, LIMITATIONS, RESTRICTIONS, AND RELATIVE
                  RIGHTS OF SERIES B 8% CUMULATIVE CONVERTIBLE
                   PREFERRED STOCK, $.001 PAR VALUE PER SHARE

         It is hereby certified that:

         I. The name of the corporation is Universal Communication Systems, Inc.
(the "Corporation"), a Nevada corporation.

         II. Set forth hereinafter is a statement of the voting powers,
preferences, limitations, restrictions, and relative rights of shares of Series
B 8% Cumulative Convertible Preferred Stock hereinafter designated as contained
in a resolution of the Board of Directors of the Corporation pursuant to a
provision of the Articles of Incorporation of the Corporation permitting the
issuance of said Series B 8% Cumulative Convertible Preferred Stock by
resolution of the Board of Directors:

         Series B 8% Cumulative Convertible Preferred Stock, $.001 par value.

         1. Designation: Number of Shares. The designation of said series of
Preferred Stock shall be Series B 8% Cumulative Convertible Preferred Stock (the
"Series B Preferred Stock"). The number of shares of Series B Preferred Stock
shall be 50,000. Each share of Series B Preferred Stock shall have a stated
value equal to $10 (as adjusted for any stock dividends, combinations or splits
with respect to such shares) (the "Stated Value"), and $.001 par value.

         2. Dividends.

            (a) The Holders of outstanding shares of Series B Preferred Stock
shall be entitled to receive preferential dividends in cash out of any funds of
the Corporation legally available at the time for declaration of dividends
before any dividend or other distribution will be paid or declared and set apart
for payment on any shares of any Common Stock, or other class of stock presently
authorized or to be authorized (the Common Stock, and such other stock being
hereinafter collectively the "Junior Stock") at the rate of 8% simple interest
per annum on the Stated Value per share payable commencing with the period
ending June 30, 2005 and semi-annually thereafter. At the Holder's option,
however, that dividend payments may be made in additional fully paid and non
assessable shares of Series B Preferred Stock at a rate of one share of Series B
Preferred Stock for each $10 of such dividend not paid in cash. The issuance of
such additional shares shall constitute full payment of such dividends.

            (b) The dividends on the Series B Preferred Stock at the rates
provided above shall be cumulative whether or not earned so that, if at any time
full cumulative dividends at the rate aforesaid on all shares of the Series B
Preferred Stock then outstanding from the date from and after which dividends
thereon are cumulative to the end of the quarterly dividend period next
preceding such time shall not have been paid or declared and set apart for
payment, or if the full dividend on all such outstanding Series B Preferred
Stock for the then current dividend period shall not have been paid or declared
and set apart for payment, the amount of the deficiency shall be paid or
declared and set apart for payment (but without interest thereon) before any sum

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shall be set apart for or applied by the Corporation or a subsidiary of the
Corporation to the purchase, redemption or other acquisition of the Series B
Preferred Stock or any shares of any other class of stock ranking on a parity
with the Series B Preferred Stock ("Parity Stock") and before any dividend or
other distribution shall be paid or declared and set apart for payment on any
Junior Stock and before any sum shall be set aside for or applied to the
purchase, redemption or other acquisition of Junior Stock.

            (c) Dividends on all shares of the Series B Preferred Stock shall
begin to accrue and be cumulative from and after the date of issuance thereof. A
dividend period shall be deemed to commence on the day following a dividend
payment date herein specified and to end on the next succeeding dividend payment
date herein specified.

         3. Liquidation Rights.

            (a) Upon the dissolution, liquidation or winding-up of the
Corporation, whether voluntary or involuntary, the Holders of the Series B
Preferred Stock shall be entitled to receive before any payment or distribution
shall be made on the Junior Stock, out of the assets of the Corporation
available for distribution to stockholders, the Stated Value per share of Series
B Preferred Stock and all accrued and unpaid dividends to and including the date
of payment thereof. Upon the payment in full of all amounts due to Holders of
the Series B Preferred Stock the Holders of the Common Stock of the Corporation
and any other class of Junior Stock shall receive all remaining assets of the
Corporation legally available for distribution. If the assets of the Corporation
available for distribution to the Holders of the Series B Preferred Stock shall
be insufficient to permit payment in full of the amounts payable as aforesaid to
the Holders of Series B Preferred Stock upon such liquidation, dissolution or
winding-up, whether voluntary or involuntary, then all such assets of the
Corporation shall be distributed to the exclusion of the Holders of shares of
Junior Stock ratably among the Holders of the Series B Preferred Stock.

            (b) The purchase or the redemption by the Corporation of all or
substantially all the shares of any class of stock, the merger or consolidation
of the Corporation with or into any other corporation or corporations or the
sale or transfer by the Corporation of all or substantially all of its assets
shall be deemed to be a liquidation, dissolution or winding-up of the
Corporation for the purposes of this paragraph 3.

         4. Conversion into Common Stock. Shares of Series B Preferred Stock
shall have the following conversion rights and obligations:

            (a) Subject to the further provisions of this paragraph 4 each
Holder of shares of Series B Preferred Stock shall have the right at any time
commencing after the issuance to the Holder of Series B Preferred Stock, to
convert such shares into fully paid and non-assessable shares of Common Stock of
the Corporation (as defined in paragraph 4(i) below) determined in accordance
with the Conversion Price provided in paragraph 4(b) below (the "Conversion
Price"). All issued or accrued but unpaid dividends may be converted at the
election of the Holder simultaneously with the conversion of principal amount of
Stated Value of Series B Preferred Stock being converted.

            (b) The number of shares of Common Stock issuable upon conversion of
each share of Series B Preferred Stock shall equal (i) the sum of (A) the Stated
Value per share and (B) at the Holder's election accrued and unpaid dividends on
such share, divided by (ii) the Conversion Price. The Conversion Price shall be
$0.015.

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            (c) Holder will give notice of its decision to exercise its right to
convert the Preferred Stock or part thereof by telecopying an executed and
completed Notice of Conversion (a form of which is annexed as EXHIBIT A to the
Certificate of Designation) to the Corporation via confirmed telecopier
transmission or otherwise pursuant to Section 13(a) of the subscription
agreement entered into between Holder and the Corporation ("Subscription
Agreement"). The Holder will not be required to surrender the Preferred Stock
certificate until the Preferred Stock has been fully converted. Each date on
which a Notice of Conversion is telecopied to the Corporation in accordance with
the provisions hereof shall be deemed a Conversion Date. The Corporation will
itself or cause the Corporation's transfer agent to transmit the Corporation's
Common Stock certificates representing the Common Stock issuable upon conversion
of the Preferred Stock to the Holder via express courier for receipt by such
Holder within five (5) business days after receipt by the Corporation of the
Notice of Conversion (the "Delivery Date"). In the event the Common Stock is
electronically transferable, then delivery of the Common Stock must be made by
electronic transfer provided request for such electronic transfer has been made
by the Holder. A Preferred Stock certificate representing the balance of the
Preferred Stock not so converted will be provided by the Corporation to the
Holder if requested by Holder, provided the Holder has delivered an original
Preferred Stock certificate to the Corporation. To the extent that a Holder
elects not to surrender Preferred Stock for reissuance upon partial payment or
conversion, the Holder hereby indemnifies the Corporation against any and all
loss or damage attributable to a third-party claim in an amount in excess of the
actual amount of the Stated Value of the Preferred Stock then owned by the
Holder.

                           In the case of the exercise of the conversion rights
set forth in paragraph 4(a) the conversion privilege shall be deemed to have
been exercised and the shares of Common Stock issuable upon such conversion
shall be deemed to have been issued upon the date of receipt by the Corporation
of the Notice of Conversion. The person or entity entitled to receive Common
Stock issuable upon such conversion shall, on the date such conversion privilege
is deemed to have been exercised and thereafter, be treated for all purposes as
the recordholder of such Common Stock and shall on the same date cease to be
treated for any purpose as the record Holder of such shares of Series B
Preferred Stock so converted.

                           Upon the conversion of any shares of Series B
Preferred Stock no adjustment or payment shall be made with respect to such
converted shares on account of any dividend on the Common Stock, except that the
Holder of such converted shares shall be entitled to be paid any dividends
declared on shares of Common Stock after conversion thereof.

                           The Corporation shall not be required, in connection
with any conversion of Series B Preferred Stock, and payment of dividends on
Series B Preferred Stock to issue a fraction of a share of its Series B
Preferred Stock and shall instead deliver a stock certificate representing the
next whole number.

                           The Corporation and Holder may not convert that
amount of the Series B Preferred Stock on a Conversion Date in amounts
inconsistent with the limitations set forth in the subscription agreement
entered into by the Corporation and Holder (or Holder's predecessor) relating to
the issuance of the Series B Preferred Stock ("Subscription Agreement") or that
would result in the Holder having a beneficial ownership of Common Stock which
would be in excess of the sum of (i) the number of shares of Common Stock
beneficially owned by the Holder and its affiliates on such Conversion Date, and
(ii) the number of shares of Common Stock issuable upon the conversion of the
Series B Preferred Stock with respect to which the determination of this proviso
is being made on such Conversion Date, which would result in beneficial
ownership by the Holder and its affiliates of more than 9.99% of the outstanding

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shares of Common Stock of the Corporation. For the purposes of the proviso to
the immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the Holder
shall not be limited to successive exercises which would result in the aggregate
issuance of more than 9.99%. The Holder may revoke the conversion limitation
described in this Paragraph upon 61 days prior notice to the Corporation. The
Holder may allocate which of the equity of the Corporation deemed beneficially
owned by the Holder shall be included in the 9.99% amount described above and
which shall be allocated to the excess above 9.99%.

            (d) The Conversion Price determined pursuant to Paragraph 4(b) shall
be subject to adjustment from time to time as follows:

                (i) In case the Corporation shall at any time (A) declare any
dividend or distribution on its Common Stock or other securities of the
Corporation other than the Series B Preferred Stock, (B) split or subdivide the
outstanding Common Stock, (C) combine the outstanding Common Stock into a
smaller number of shares, or (D) issue by reclassification of its Common Stock
any shares or other securities of the Corporation, then in each such event the
Conversion Price shall be adjusted proportionately so that the Holders of Series
B Preferred Stock shall be entitled to receive the kind and number of shares or
other securities of the Corporation which such Holders would have owned or have
been entitled to receive after the happening of any of the events described
above had such shares of Series B Preferred Stock been converted immediately
prior to the happening of such event (or any record date with respect thereto).
Such adjustment shall be made whenever any of the events listed above shall
occur. An adjustment made to the Conversion Price pursuant to this paragraph
4(d)(i) shall become effective immediately after the effective date of the event
retroactive to the record date, if any, for the event.

                (ii) For so long as Series B Preferred Stock is outstanding, if
the Corporation shall issue any Common Stock except for (i) employee stock
options or compensation plans, (ii) as full or partial consideration in
connection with any merger, consolidation or purchase of substantially all of
the securities or assets of any corporation or other entity, (iii) as has been
described in the reports publicly available at the EDGAR website of the
Securities and Exchange Commission prior to the first date of issuance of any
Series B Preferred Stock, or (iv) conversion of the Series B Preferred Stock or
exercise of Common Stock Purchase Warrants issued to the Holder
contemporaneously with the Series B Preferred Stock for consideration less than
the Conversion Price that would be in effect at the time of such issuance, then,
and thereafter successively upon each such issuance, the Conversion Price shall
be reduced to such other lower issuance price. For purposes of this adjustment,
the issuance of any security or debt instrument of the Corporation carrying the
right to convert such security or debt instrument into Common Stock or of any
warrant, right or option to purchase Common Stock shall result in an adjustment
to the Conversion Price upon the issuance of the above-described security, debt
instrument, warrant, right, or option. The reduction of the Conversion Price
described in this Section 4(d)(ii) is in addition to any other rights granted or
available to the Holder pursuant to agreement with the Corporation, at law,
equity or otherwise.

            (e) (i) In case of any merger of the Corporation with or into any
other corporation (other than a merger in which the Corporation is the surviving
or continuing corporation and which does not result in any reclassification,
conversion, or change of the outstanding shares of Common Stock) then unless the
right to convert shares of Series B Preferred Stock shall have terminated, as
part of such merger lawful provision shall be made so that Holders of Series B
Preferred Stock shall thereafter have the right to convert each share of Series
B Preferred Stock into the kind and amount of shares of stock and/or other
securities or property receivable upon such merger by a Holder of the number of
shares of Common Stock into which such shares of Series B Preferred Stock might

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have been converted immediately prior to such consolidation or merger. Such
provision shall also provide for adjustments which shall be as nearly equivalent
as may be practicable to the adjustments provided for in paragraph (d) of this
paragraph 4. The foregoing provisions of this paragraph 4(e) shall similarly
apply to successive mergers.

                (ii) In case of any sale or conveyance to another person or
entity of the property of the Corporation as an entirety, or substantially as an
entirety, in connection with which shares or other securities or cash or other
property shall be issuable, distributable, payable, or deliverable for
outstanding shares of Common Stock, then, unless the right to convert such
shares shall have terminated, lawful provision shall be made so that the Holders
of Series B Preferred Stock shall thereafter have the right to convert each
share of the Series B Preferred Stock into the kind and amount of shares of
stock or other securities or property that shall be issuable, distributable,
payable, or deliverable upon such sale or conveyance with respect to each share
of Common Stock immediately prior to such conveyance.

            (f) Whenever the number of shares to be issued upon conversion of
the Series B Preferred Stock is required to be adjusted as provided in this
paragraph 4, the Corporation shall forthwith compute the adjusted number of
shares to be so issued and prepare a certificate setting forth such adjusted
conversion amount and the facts upon which such adjustment is based, and such
certificate shall forthwith be filed with the Transfer Agent for the Series B
Preferred Stock and the Common Stock; and the Corporation shall mail to each
Holder of record of Series B Preferred Stock notice of such adjusted conversion
price.

            (g) In case at any time the Corporation shall propose:

                (i) to pay any dividend or distribution payable in shares upon
its Common Stock or make any distribution (other than cash dividends) to the
Holders of its Common Stock; or

                (ii) to offer for subscription to the Holders of its Common
Stock any additional shares of any class or any other rights; or

                (iii) any capital reorganization or reclassification of its
shares or the merger of the Corporation with another corporation (other than a
merger in which the Corporation is the surviving or continuing corporation and
which does not result in any reclassification, conversion, or change of the
outstanding shares of Common Stock); or

                (iv) the voluntary dissolution, liquidation or winding-up of the
Corporation; then, and in any one or more of said cases, the Corporation shall
cause at least fifteen (15) days prior notice of the date on which (A) the books
of the Corporation shall close or a record be taken for such stock dividend,
distribution, or subscription rights, or (B) such capital reorganization,
reclassification, merger, dissolution, liquidation or winding-up shall take
place, as the case may be, to be mailed to the Transfer Agent for the Series B
Preferred Stock and for the Common Stock and to the Holders of record of the
Series B Preferred Stock.

            (h) So long as any shares of Series B Preferred Stock shall remain
outstanding and the Holders thereof shall have the right to convert the same in
accordance with provisions of this paragraph 4 the Corporation shall at all
times reserve from the authorized and unissued shares of its Common Stock a
sufficient number of shares to provide for such conversions.

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            (i) The term Common Stock as used in this paragraph 4 shall mean the
$.001 par value Common Stock of the Corporation as such stock is constituted at
the date of issuance thereof or as it may from time to time be changed or shares
of stock of any class or other securities and/or property into which the shares
of Series B Preferred Stock shall at any time become convertible pursuant to the
provisions of this paragraph 4.

            (j) The Corporation shall pay the amount of any and all issue taxes
(but not income taxes) which may be imposed in respect of any issue or delivery
of stock upon the conversion of any shares of Series B Preferred Stock, but all
transfer taxes and income taxes that may be payable in respect of any change of
ownership of Series B Preferred Stock or any rights represented thereby or of
stock receivable upon conversion thereof shall be paid by the person or persons
surrendering such stock for conversion.

            (k) In the event a Holder shall elect to convert any shares of
Series B Preferred Stock as provided herein, the Corporation may not refuse
conversion based on any claim that such Holder or any one associated or
affiliated with such Holder has been engaged in any violation of law, or for any
other reason unless, an injunction from a court, on notice, restraining and or
enjoining conversion of all or part of said shares of Series B Preferred Stock
shall have been issued and the Corporation posts a surety bond for the benefit
of such Holder in the amount of 150% of the Stated Value of the Series B
Preferred Stock and dividends sought to be converted, which is subject to the
injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to such Holder in the event it obtains judgment.

            (l) In addition to any other rights available to the Holder, if the
Corporation fails to deliver to the Holder such certificate or certificates
pursuant to Section 4(c) by the Delivery Date and if after the Delivery Date the
Holder purchases (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by such Holder of the Common Stock
which the Holder anticipated receiving upon such conversion (a "Buy-In"), then
the Corporation shall pay in cash to the Holder (in addition to any remedies
available to or elected by the Holder) within five (5) business days of written
notice from the Holder, the amount by which (A) the Holder's total purchase
price (including brokerage commissions, if any) for the shares of Common Stock
so purchased exceeds (B) the aggregate Stated Value of the shares of Series B
Preferred Stock for which such conversion was not timely honored, together with
interest thereon at a rate of 15% per annum, accruing until such amount and any
accrued interest thereon is paid in full (which amount shall be paid as
liquidated damages and not as a penalty). For example, if the Holder purchases
shares of Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted conversion of $10,000 of Stated Value of
Series B Preferred Stock, the Corporation shall be required to pay the Holder
$1,000, plus interest. The Holder shall provide the Corporation written notice
indicating the amounts payable to the Holder in respect of the Buy-In.

         5. Voting Rights. The shares of Series B Preferred Stock shall not have
voting rights except as described in Section 6 hereof.

         6. Restrictions and Limitations.

            (a) Amendments to Charter. The Corporation shall not amend its
certificate of incorporation without the approval by the holders of at least a
majority of the then outstanding shares of Series B Preferred Stock if such
amendment would:

                (i) change the relative seniority rights of the holders of
Series B Preferred Stock as to the payment of dividends in relation to the
holders of any other capital stock of the Corporation, or create any other class
or series of capital stock entitled to seniority as to the payment of dividends
in relation to the holders of Series B Preferred Stock;

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                (ii) reduce the amount payable to the holders of Series B
Preferred Stock upon the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, or change the relative seniority of the
liquidation preferences of the holders of Series B Preferred Stock to the rights
upon liquidation of the holders of other capital stock of the Corporation, or
change the dividend rights of the holders of Series B Preferred Stock;

                (iii) cancel or modify the conversion rights of the holders of
Series B Preferred Stock provided for in Section 4 herein; or

                (iv) cancel or modify the rights of the holders of the Series B
Preferred Stock provided for in this Section 6.

         7. Event of Default. The occurrence of any of the following events of
default ("Event of Default") shall, after the applicable period to cure the
Event of Default, cause the dividend rate of 8% described in paragraph 2 hereof
to become 15% from and after the occurrence of such event (except in connection
with Section 7(i) below) and the Holder shall have the option to require the
Corporation to redeem the Series B Preferred Stock held by such Holder by the
immediate payment to the Holder by the Corporation of a sum of money equal to
the number of shares that would be issuable upon conversion of an amount of
Stated Value and accrued dividends designated by the Holder multiplied by the
average of the closing ask prices and closing bid prices of the Corporation's
Common Stock as reported by Bloomberg L.P. for the principal trading market for
the Common Stock for the five trading days preceding the date notice is given by
the Holder to the Corporation:

            (a) The Corporation fails to pay any dividend payment required to be
paid pursuant to the terms of paragraph 2 hereof or the failure to timely pay
any other sum of money due to the Holder from the Corporation and such failure
continues for a period of ten (10) days after written notice to the Corporation
from the Holder.

            (b) The Corporation breaches any material covenant, term or
condition of the Subscription Agreement or in this Certificate of Designation,
and such breach continues for a period of seven (7) days after written notice to
the Corporation from the Holder.

            (c) Any material representation or warranty of the Corporation made
in the Subscription Agreement pursuant to which the Series B Preferred Stock is
issued, or in any agreement, statement or certificate given in writing pursuant
thereto shall be false or misleading.

            (d) The Corporation or any of its subsidiaries shall make an
assignment of a substantial part of its property or business for the benefit of
creditors, or apply for or consent to the appointment of a receiver or trustee
for it or for a substantial part of its property or business, or such a receiver
or trustee shall otherwise be appointed.

            (e) Any money judgment, confession of judgment, writ or similar
process shall be entered against the Corporation, a subsidiary of the
Corporation, or their property or other assets for more than $50,000, and is not
vacated, satisfied, bonded or stayed within 45 days.

            (f) Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Corporation or
any of its subsidiaries, and is not dismissed within 45 days.

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            (g) An order entered by a court of competent jurisdiction, or by the
Securities and Exchange Commission, or by the National Association of Securities
Dealers, preventing purchase and sale transactions in the Corporation's Common
Stock.

            (h) The Corporation's failure to timely deliver Common Stock or a
replacement Preferred Stock certificate, if required, to the Holder pursuant to
paragraph 4 hereof or the Subscription Agreement.

            (i) The occurrence of a Non-Registration Event as described in
Section 11.4 of the Subscription Agreement.

            (j) Delisting of the Common Stock from the OTC Bulletin Board
("OTCBB") or such other principal exchange on which the Common Stock is listed
for trading; failure to comply with the requirements for continued listing on
the OTCBB for a period of three consecutive trading days; or notification from
the OTC Bulletin Board or any principal market that the Corporation is not in
compliance with the conditions for such continued listing on the OTCBB or other
principal market.

            (k) The Corporation effectuates a reverse split of its common stock
without the prior written consent of the Holder.

            (l) A default by the Corporation of a material term, covenant,
warranty or undertaking of any other agreement to which the Corporation and
Holder are parties, or the occurrence of a material event of default under any
such other agreement, in each case, which is not cured after any required notice
and/or cure period.

         8. Status of Converted or Redeemed Stock. In case any shares of Series
B Preferred Stock shall be redeemed or otherwise repurchased or reacquired, the
shares so redeemed, converted, or reacquired shall resume the status of
authorized but unissued shares of Preferred Stock and shall no longer be
designated as Series B Preferred Stock.

Dated: December 6, 2004

                                           UNIVERSAL COMMUNICATION SYSTEMS, INC.

                                           By: Michael Zwebner / CEO
                                               ---------------------------------

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                                    EXHIBIT A
                                    ---------

                              NOTICE OF CONVERSION

(To Be Executed By the Registered Holder in Order to Convert the Series B
Convertible Preferred Stock of Universal Communication Systems, Inc.)

         The undersigned hereby irrevocably elects to convert $______________ of
the Stated Value of the above Series B Convertible Preferred Stock into shares
of Common Stock of Universal Communication Systems, Inc. (the "Corporation")
according to the conditions hereof, as of the date written below.

Date of Conversion:
                   -------------------------------------------------------------

Applicable Conversion Price Per Share:
                                      ------------------------------------------

Number of Common Shares Issuable Upon This Conversion:
                                                      --------------------------
Select one:

         A Series B Convertible Preferred Stock certificate is being delivered
herewith. The unconverted portion of such certificate should be reissued and
delivered to the undersigned.

         A Series B Convertible Preferred Stock certificate is not being
delivered to Universal Communication Systems, Inc.

Signature:
          ----------------------------------------------------------------------

Print Name:
           ---------------------------------------------------------------------

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

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

Deliveries Pursuant to this Notice of Conversion Should Be Made to:

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

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                                       9EXHIBIT 10.26

                             SUBSCRIPTION AGREEMENT

         THIS SUBSCRIPTION AGREEMENT (this "Agreement"), dated as of December 6,
2004, by and among Universal Communication Systems, Inc., a Nevada corporation
(the "Company"), and the subscribers identified on the signature page hereto
(each a "Subscriber" and collectively "Subscribers").

         WHEREAS, the Company and the Subscribers are executing and delivering
this Agreement in reliance upon an exemption from securities registration
afforded by the provisions of Section 4(2), Section 4(6) and/or Regulation D
("Regulation D") as promulgated by the United States Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"1933 Act").

         WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the
Subscribers, as provided herein, and the Subscribers shall purchase, in the
aggregate, $250,000 (the "Purchase Price") of Stated Value amount of 8% Series B
Convertible Preferred Stock ("Preferred Stock") convertible into shares of the
Company's common stock, $.001 par value (the "Common Stock") at a per share
conversion price equal to $0.015 ("Conversion Price"), subject to adjustment as
described in this Agreement and the Certificate to Set Forth Designations,
Voting Powers, Preferences, Limitations, Restrictions, and Relative Rights of
Series B 8% Cumulative Convertible Preferred Stock, $.001 Par Value Per Share
("Certificate of Designation"), a form of which is attached hereto as EXHIBIT A;
and share purchase warrants (the "Warrants"), in the form attached hereto as
EXHIBIT B, to purchase shares of Common Stock (the "Warrant Shares"). The
Preferred Stock, shares of Common Stock issuable upon conversion of the
Preferred Stock (the "Shares"), the Warrants and the Warrant Shares are
collectively referred to herein as the "Securities"; and

         WHEREAS, the aggregate proceeds of the sale of the Preferred Stock and
the Warrants contemplated hereby may be held in escrow pursuant to the terms of
a Funds Escrow Agreement which may be executed by the parties substantially in
the form attached hereto as EXHIBIT C (the "Escrow Agreement").

         NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement, the Company and the Subscribers hereby
agree as follows:

                  1. Closing. Subject to the satisfaction or waiver of the terms
and conditions of this Agreement, on the Closing Date, each Subscriber shall
purchase and the Company shall sell to each Subscriber Preferred Stock in the
Stated Value amount designated on the signature page hereto. The aggregate
amount of the Preferred Stock to be purchased by the Subscribers on the Closing
Date shall, in the aggregate, be equal to the Purchase Price. The Closing Date
shall be the date that subscriber funds representing the net amount due the
Company from the Purchase Price is transmitted by wire transfer or otherwise to
or for the benefit of the Company.

                  2. Escrow Arrangements; Form of Payment. Upon execution hereof
by the parties and pursuant to the terms of the Escrow Agreement, each
Subscriber agrees to make the deliveries required of such Subscriber as set
forth in the Escrow Agreement and the Company agrees to make the deliveries
required of the Company as set forth in the Escrow Agreement.

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                  3. Warrants. On the Closing Date, the Company will issue
Warrants to the Subscribers. One (1) Warrant will be issued for each Share of
Common Stock which would be issuable upon conversion of the entire Purchase
Price on the Closing Date as if such Closing Date were the Conversion Date (as
defined in Section 4(c) of the Certificate of Designation). The per Warrant
Share exercise price to acquire a Warrant Share upon exercise of the Warrants
shall be $0.03. The Warrants shall be exercisable for five years after the issue
date of the Warrants.

                  4. Subscriber's Representations and Warranties. Each
Subscriber hereby represents and warrants to and agrees with the Company only as
to such Subscriber that:

                           (a) Information on Company. The Subscriber has been
furnished with or has had access at the EDGAR Website of the Commission to the
Company's Form 10-KSB for the year ended September 30, 2003 as filed with the
Commission, together with all subsequently filed Forms 10-QSB, 8-K, and filings
made with the Commission available at the EDGAR website (hereinafter referred to
collectively as the "Reports"). In addition, the Subscriber has received in
writing from the Company such other information concerning its operations,
financial condition and other matters as the Subscriber has requested in writing
(such other information is collectively, the "Other Written Information"), and
considered all factors the Subscriber deems material in deciding on the
advisability of investing in the Securities.

                           (b) Information on Subscriber. The Subscriber is, and
will be at the time of the conversion of the Preferred Stock and exercise of any
of the Warrants, an "accredited investor", as such term is defined in Regulation
D promulgated by the Commission under the 1933 Act, is experienced in
investments and business matters, has made investments of a speculative nature
and has purchased securities of United States publicly-owned companies in
private placements in the past and, with its representatives, has such knowledge
and experience in financial, tax and other business matters as to enable the
Subscriber to utilize the information made available by the Company to evaluate
the merits and risks of and to make an informed investment decision with respect
to the proposed purchase, which represents a speculative investment. The
Subscriber has the authority and is duly and legally qualified to purchase and
own the Securities. The Subscriber is able to bear the risk of such investment
for an indefinite period and to afford a complete loss thereof. The information
set forth on the signature page hereto regarding the Subscriber is accurate.

                           (c) Purchase of Preferred Stock and Warrants. On the
Closing Date, the Subscriber will purchase the Preferred Stock and Warrants as
principal for its own account and not with a view to any distribution thereof.

                           (d) Compliance with Securities Act. The Subscriber
understands and agrees that the Securities have not been registered under the
1933 Act or any applicable state securities laws, by reason of their issuance in
a transaction that does not require registration under the 1933 Act (based in
part on the accuracy of the representations and warranties of Subscriber
contained herein), and that such Securities must be held indefinitely unless a
subsequent disposition is registered under the 1933 Act or any applicable state
securities laws or is exempt from such registration. In any event, and subject
to compliance with applicable securities laws, the Subscriber may enter into
hedging transactions with third parties, which may in turn engage in short sales
of the Securities in the course of hedging the position they assume and the
Subscriber may also enter into short positions or other derivative transactions
relating to the Securities, or interests in the Securities, and deliver the
Securities, or interests in the Securities, to close out their short or other
positions or otherwise settle short sales or other transactions, or loan or
pledge the Securities, or interests in the Securities, to third parties that in
turn may dispose of these Securities.

                                       2
<PAGE>

                           (e) Shares Legend. The Shares and the Warrant Shares
shall bear the following or similar legend:

                  "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
                  REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE
                  SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
                  HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
                  STATEMENT UNDER SUCH SECURITIES ACT OR ANY APPLICABLE STATE
                  SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY
                  SATISFACTORY TO UNIVERSAL COMMUNICATION SYSTEMS, INC. THAT
                  SUCH REGISTRATION IS NOT REQUIRED."

                           (f) Warrants Legend. The Warrants shall bear the
following

or similar legend:

                  "THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
                  THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
                  OF 1933, AS AMENDED. THIS WARRANT AND THE COMMON SHARES
                  ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
                  OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
                  EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
                  ACT OR ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF
                  COUNSEL REASONABLY SATISFACTORY TO UNIVERSAL COMMUNICATION
                  SYSTEMS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."

                           (g) Preferred Stock Legend. The Preferred Stock shall
bear the following legend:

                  "THIS CERTIFICATE AND THE COMMON SHARES ISSUABLE UPON
                  CONVERSION OF THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
                  THE SECURITIES ACT OF 1933, AS AMENDED. THIS CERTIFICATE AND
                  THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS CERTIFICATE
                  MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
                  THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
                  CERTIFICATE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
                  SATISFACTORY TO UNIVERSAL COMMUNICATION SYSTEMS, INC. THAT
                  SUCH REGISTRATION IS NOT REQUIRED."

                           (h) Communication of Offer. The offer to sell the
Securities was directly communicated to the Subscriber by the Company. At no
time was the Subscriber presented with or solicited by any leaflet, newspaper or
magazine article, radio or television advertisement, or any other form of
general advertising or solicited or invited to attend a promotional meeting
otherwise than in connection and concurrently with such communicated offer.

                                       3
<PAGE>

                           (i) Authority; Enforceability. This Agreement and
other agreements delivered together with this Agreement or in connection
herewith have been duly authorized, executed and delivered by the Subscriber and
are valid and binding agreements enforceable in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity; and Subscriber
has full corporate power and authority necessary to enter into this Agreement
and such other agreements and to perform its obligations hereunder and under all
other agreements entered into by the Subscriber relating hereto.

                           (j) Restricted Securities. Subscriber understands
that the Securities have not been registered under the 1933 Act and such
Subscriber will not sell, offer to sell, assign, pledge, hypothecate or
otherwise transfer any of the Securities unless (i) pursuant to an effective
registration statement under the 1933 Act, (ii) such Subscriber provides the
Company with an opinion of counsel, in a form reasonably acceptable to the
Company, to the effect that a sale, assignment or transfer of the Securities may
be made without registration under the 1933 Act, or (iii) Subscriber provides
the Company with reasonable assurances (in the form of seller and broker
representation letters) that the Shares or the Warrant Shares, as the case may
be, can be sold pursuant to (A) Rule 144 promulgated under the 1933 Act, or (B)
Rule 144(k) promulgated under the 1933 Act, in each case following the
applicable holding period set forth therein. Notwithstanding anything to the
contrary contained in this Agreement, such Subscriber may transfer (without
restriction and without the need for an opinion of counsel) the Securities to
its Affiliates (as defined below) provided that each such Affiliate is an
"accredited investor" under Regulation D and such Affiliate agrees to be bound
by the terms and conditions of this Agreement.

                           (k) Correctness of Representations. Each Subscriber
represents as to such Subscriber that the foregoing representations and
warranties are true and correct as of the date hereof and, unless a Subscriber
otherwise notifies the Company prior to the Closing Date shall be true and
correct as of the Closing Date.

                           (l) Survival. The foregoing representations and
warranties shall survive the Closing Date for a period of two years.

                  5. Company Representations and Warranties. The Company
represents and warrants to and agrees with each Subscriber that:

                           (a) Due Incorporation. The Company and each of its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the respective jurisdictions of their incorporation
and have the requisite corporate power to own their properties and to carry on
their business as now being conducted. The Company and each of its subsidiaries
is duly qualified as a foreign corporation to do business and is in good
standing in each jurisdiction where the nature of the business conducted or
property owned by it makes such qualification necessary, other than those
jurisdictions in which the failure to so qualify would not have a material
adverse effect on the business, operations or financial condition of the
Company.

                           (b) Outstanding Stock. All issued and outstanding
shares of capital stock of the Company and each of its subsidiaries have been
duly authorized and validly issued and are fully paid and nonassessable.

                           (c) Authority; Enforceability. This Agreement, the
Preferred Stock, the Warrants, the Escrow Agreement and any other agreements
delivered together with this Agreement or in connection herewith (collectively

                                       4
<PAGE>

"Transaction Documents") have been duly authorized, executed and delivered by
the Company and are valid and binding agreements enforceable in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights generally and to general principles of equity.
The Company has full corporate power and authority necessary to enter into and
deliver the Transaction Documents and to perform its obligations thereunder.

                           (d) Additional Issuances. There are no outstanding
agreements or preemptive or similar rights affecting the Company's Common Stock
or equity and no outstanding rights, warrants or options to acquire, or
instruments convertible into or exchangeable for, or agreements or
understandings with respect to the sale or issuance of any shares of Common
Stock or equity of the Company or other equity interest in any of the
subsidiaries of the Company except as described on SCHEDULE 5(D).

                           (e) Consents. No consent, approval, authorization or
order of any court, governmental agency or body or arbitrator having
jurisdiction over the Company, or any of its affiliates, the American Stock
Exchange, the National Association of Securities Dealers, Inc., Nasdaq SmallCap
Market, the OTC Bulletin Board ("Bulletin Board") nor the Company's shareholders
is required for the execution by the Company of the Transaction Documents and
compliance and performance by the Company of its obligations under the
Transaction Documents, including, without limitation, the issuance and sale of
the Securities.

                           (f) No Violation or Conflict. Assuming the
representations and warranties of the Subscribers in Section 4 are true and
correct, neither the issuance and sale of the Securities nor the performance of
the Company's obligations under this Agreement and all other agreements entered
into by the Company relating thereto by the Company will:

                                    (i) violate, conflict with, result in a
breach of, or constitute a default (or an event which with the giving of notice
or the lapse of time or both would be reasonably likely to constitute a default)
under (A) the articles or certificate of incorporation, charter or bylaws of the
Company, (B) to the Company's knowledge, any decree, judgment, order, law,
treaty, rule, regulation or determination applicable to the Company of any
court, governmental agency or body, or arbitrator having jurisdiction over the
Company or any of its subsidiaries or over the properties or assets of the
Company or any of its affiliates, (C) the terms of any bond, debenture, note or
any other evidence of indebtedness, or any agreement, stock option or other
similar plan, indenture, lease, mortgage, deed of trust or other instrument to
which the Company or any of its affiliates or subsidiaries is a party, by which
the Company or any of its affiliates or subsidiaries is bound, or to which any
of the properties of the Company or any of its affiliates or subsidiaries is
subject, or (D) the terms of any "lock-up" or similar provision of any
underwriting or similar agreement to which the Company, or any of its affiliates
or subsidiaries is a party except the violation, conflict, breach, or default of
which would not have a material adverse effect on the Company; or

                                    (ii) result in the creation or imposition of
any lien, charge or encumbrance upon the Securities or any of the assets of the
Company, its subsidiaries or any of its affiliates; or

                                    (iii) result in the activation of any
anti-dilution rights or a reset or repricing of any debt or security instrument
of any other creditor or equity holder of the Company, nor result in the
acceleration of the due date of any obligation of the Company; or

                                       5
<PAGE>

                                    (iv) result in the activation of any
piggy-back registration rights of any person or entity holding securities of the
Company or having the right to receive securities of the Company.

                           (g) The Securities. The Securities upon issuance:

                                    (i) are, or will be, free and clear of any
security interests, liens, claims or other encumbrances, subject to restrictions
upon transfer under the 1933 Act and any applicable state securities laws;

                                    (ii) have been, or will be, duly and validly
authorized and on the date of conversion of the Preferred Stock, the date of
issuance of the Shares and upon exercise of the Warrants, the Preferred Stock,
the Shares and Warrant Shares will be duly and validly issued, fully paid and
nonassessable (and if registered pursuant to the 1933 Act, and resold pursuant
to an effective registration statement will be free trading and unrestricted,
provided that each Subscriber complies with the prospectus delivery requirements
of the 1933 Act);

                                    (iii) will not have been issued or sold in
violation of any preemptive or other similar rights of the holders of any
securities of the Company; and

                                    (iv) will not subject the holders thereof to
personal liability by reason of being such holders.

                           (h) Litigation. There is no pending or, to the best
knowledge of the Company, threatened action, suit, proceeding or investigation
before any court, governmental agency or body, or arbitrator having jurisdiction
over the Company, or any of its affiliates that would affect the execution by
the Company or the performance by the Company of its obligations under the
Transaction Documents. Except as disclosed in the Reports, there is no pending
or, to the best knowledge of the Company, basis for or threatened action, suit,
proceeding or investigation before any court, governmental agency or body, or
arbitrator having jurisdiction over the Company, or any of its affiliates which
litigation if adversely determined would have a material adverse effect on the
Company.

                           (i) Reporting Company. The Company is a publicly-held
company subject to reporting obligations pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended (the "1934 Act") and has a class of
common shares registered pursuant to Section 12(g) of the 1934 Act. Pursuant to
the provisions of the 1934 Act, the Company has and will have timely filed all
reports and other materials required to be filed thereunder with the Commission
during the twelve months preceding the date of this Agreement and the Closing
Date.

                           (j) No Market Manipulation. The Company has not
taken, and will not take, directly or indirectly, any action designed to, or
that might reasonably be expected to, cause or result in stabilization or
manipulation of the price of the Common Stock of the Company to facilitate the
sale or resale of the Securities or affect the price at which the Securities may
be issued or resold.

                           (k) Information Concerning Company. The Reports
contain all material information relating to the Company and its operations and
financial condition as of their respective dates which information is required
to be disclosed therein. Since the date of the most recently dated financial
statements included in the Reports, and except as modified in the Other Written
Information or in the Schedules hereto, there has been no material adverse
change in the Company's business, financial condition or affairs not disclosed
in the Reports. The Reports do not contain any untrue statement of a material

                                       6
<PAGE>

fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the circumstances when
made.

                           (l) Stop Transfer. The Securities, when issued, will
be restricted securities. The Company will not issue any stop transfer order or
other order impeding the sale, resale or delivery of any of the Securities,
except as may be required by any applicable federal or state securities laws and
unless contemporaneous notice of such instruction is given to the Subscriber.

                           (m) Defaults. The Company is not in violation of its
certificate or articles of incorporation or bylaws. The Company, other than as
set forth in SCHEDULE 5(M), is (i) not in default under or in violation of any
other material agreement or instrument to which it is a party or by which it or
any of its properties are bound or affected, which default or violation would
have a material adverse effect on the Company, (ii) not in default with respect
to any order of any court, arbitrator or governmental body or subject to or
party to any order of any court or governmental authority arising out of any
action, suit or proceeding under any statute or other law respecting antitrust,
monopoly, restraint of trade, unfair competition or similar matters, or (iii) to
its knowledge not in violation of any statute, rule or regulation of any
governmental authority which violation would have a material adverse effect on
the Company.

                           (n) No Integrated Offering. Neither the Company, nor
any of its affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales of any security or solicited any
offers to buy any security under circumstances that would cause the offer of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
the Bulletin Board. Nor will the Company or any of its affiliates or
subsidiaries take any action or steps that would cause the offer of the
Securities to be integrated with other offerings. The Company will not conduct
any offering other than the transactions contemplated hereby that will be
integrated with the offer or issuance of the Securities.

                           (o) No General Solicitation. Neither the Company, nor
any of its affiliates, nor to its knowledge, any person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the 1933 Act) in connection with the
offer or sale of the Securities.

                           (p) Listing. The Company's Common Stock is quoted on
the Bulletin Board. The Company has not received any oral or written notice that
its Common Stock is not eligible nor will become ineligible for quotation on the
Bulletin Board nor that its Common Stock does not meet all requirements for the
continuation of such quotation and the Company satisfies and as of the Closing
Date, the Company will satisfy all the requirements for the continued quotation
of its Common Stock on the Bulletin Board.

                           (q) No Undisclosed Liabilities. The Company has no
liabilities or obligations which are material, individually or in the aggregate,
which are not disclosed in the Reports and Other Written Information, other than
those incurred in the ordinary course of the Company's businesses since
September 30, 2003 and which, individually or in the aggregate, would reasonably
be expected to have a material adverse effect on the Company's financial
condition, other than as set forth in SCHEDULE 5(Q).

                           (r) No Undisclosed Events or Circumstances. Since
September 30, 2003, no event or circumstance has occurred or exists with respect
to the Company or its businesses, properties, operations or financial condition,

                                       7
<PAGE>

that, under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the Reports.

                           (s) Capitalization. The authorized and outstanding
capital stock of the Company as of the date of this Agreement and the Closing
Date are set forth on SCHEDULE 5(S). Except as set forth in the Reports and
Other Written Information and SCHEDULE 5(D), there are no options, warrants, or
rights to subscribe to, securities, rights or obligations convertible into or
exchangeable for or giving any right to subscribe for any shares of capital
stock of the Company. All of the outstanding shares of Common Stock of the
Company have been duly and validly authorized and issued and are fully paid and
nonassessable.

                           (t) Dilution. The Company's executive officers and
directors have studied and fully understand the nature of the Securities being
sold hereby and recognize that they have a potential dilutive effect on the
equity holdings of other holders of the Company's equity or rights to receive
equity of the Company. The board of directors of the Company has concluded, in
its good faith business judgment, that such issuance is in the best interests of
the Company. The Company specifically acknowledges that its obligation to issue
the Shares upon conversion of the Preferred Stock and exercise of the Warrants
is binding upon the Company and enforceable, except as otherwise described in
this Subscription Agreement or the Certificate of Designation, regardless of the
dilution such issuance may have on the ownership interests of other shareholders
of the Company or parties entitled to receive equity of the Company.

                           (u) No Disagreements with Accountants and Lawyers.
There are no disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise, between the Company and the accountants and
lawyers formerly or presently employed by the Company, including but not limited
to disputes or conflicts over payment owed to such accountants and lawyers.

                           (v) Investment Company. The Company is not, and is
not an Affiliate (as defined in Rule 405 under the 1933 Act) of, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.

                           (w) Correctness of Representations. The Company
represents that the foregoing representations and warranties are true and
correct as of the date hereof in all material respects, and, unless the Company
otherwise notifies the Subscribers prior to the Closing Date, shall be true and
correct in all material respects as of the Closing Date.

                           (x) Survival. The foregoing representations and
warranties shall survive the Closing Date for a period of two years.

                  6. Regulation D Offering. The offer and issuance of the
Securities to the Subscribers is being made pursuant to the exemption from the
registration provisions of the 1933 Act afforded by Section 4(2) or Section 4(6)
of the 1933 Act and/or Rule 506 of Regulation D promulgated thereunder. On the
closing date, the Company will provide an opinion reasonably acceptable to
Subscriber from the Company's legal counsel opining on the availability of an
exemption from registration under the 1933 Act as it relates to the offer and
issuance of the Securities and other matters reasonably requested by a
Subscriber. A form of the legal opinion is annexed hereto as EXHIBIT D. The
Company will provide, at the Company's expense, such other legal opinions in the
future as are reasonably necessary for the conversion of the Preferred Stock and
exercise of the Warrants and resale of the Shares and Warrant Shares.

                                       8
<PAGE>

                  7.1. Conversion of Preferred Stock.

                           (a) The Preferred Stock and dividends payable thereon
at the Subscriber's option in the form of additional shares of Preferred Stock,
will be convertible according to the procedures and terms set forth in the
Certificate of Designation.

                           (b) Upon the conversion of the Preferred Stock or
part thereof ("Conversion"), the Company shall, at its own cost and expense,
take all necessary action (including obtaining and delivering, an opinion of
counsel to be delivered to the Company's transfer agent) and issue or cause to
be issued stock certificates in the name of Subscriber or such other persons as
designated by Subscriber and in such denominations to be specified at conversion
representing the number of shares of common stock issuable upon such conversion.
The Company warrants that no instructions other than these instructions have
been or will be given to the transfer agent of the Company's Common Stock and
that, unless waived by the Subscriber, the Shares will be free-trading, and
freely transferable, and will not contain a legend restricting the resale or
transferability of the Shares provided the Shares are being sold pursuant to an
effective registration statement covering the Shares or are otherwise exempt
from registration.

                           (c) The Company understands that a delay in the
delivery of the Company Shares after Conversion, and delivery of Preferred Stock
certificates representing the unconverted balance of a Preferred Stock
certificate tendered for Conversion, beyond the date described for such delivery
set forth in the Certificate of Designation, or late delivery of a Mandatory
Redemption Payment (as defined in Section 7.2 herein), as the case may be, (each
of the foregoing a "Delivery Date") could result in economic loss to the
Subscriber. As compensation to the Subscriber for such loss, the Company agrees
to pay liquidated damages to the Subscriber for late delivery of Shares upon
Conversion and late delivery of a Preferred Stock certificate for the
unconverted portion of a Preferred Stock or late delivery of a Mandatory
Redemption Payment, in the amount of $100 per business day after the Delivery
Date for each $10,000 of Stated Value of Preferred Stock being converted and
Preferred Stock certificate remaining undelivered or Mandatory Redemption
Payment not paid. The Company shall pay any payments incurred under this Section
in immediately available funds upon demand. Furthermore, in addition to any
other remedies which may be available to the Subscriber, in the event that the
Company fails for any reason to effect delivery of the Shares within three
business days after the Delivery Date, the Subscriber will be entitled to revoke
the relevant Notice of Conversion by delivery of a notice of revocation to the
Company whereupon the Company and the Subscriber shall each be restored to their
respective positions immediately prior to the delivery of such notice of
revocation, except that liquidated damages described above shall be payable
through the date notice of revocation is given to the Company.

                           (d) Nothing contained herein or in any document
referred to herein or delivered in connection herewith shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest or dividends required to be paid or other charges hereunder exceed the
maximum permitted by such law, any payments in excess of such maximum shall be
credited against amounts owed by the Company to the Subscriber and thus refunded
to the Company.

                  7.2. Mandatory Redemption at Subscriber's Election. In the
event the Company fails to timely deliver Shares on a Delivery Date, or upon the
occurrence of any other Event of Default (as defined in the Certificate of
Designation) within the control of the Company, or for any reason other than
pursuant to the limitations set forth in Section 4(c) of the Certificate of
Designation, then at the Subscriber's election, the Company must pay to the
Subscriber ten (10) business days after request by the Subscriber or on the

                                       9
<PAGE>

Delivery Date (if requested by the Subscriber) a sum of money determined by (i)
multiplying the Stated Value of the Preferred Stock designated by the Subscriber
by 130%, or (ii) multiplying the number of Shares otherwise deliverable upon
conversion of the Stated Value of the Preferred Stock designated by the
Subscriber (with the date of giving of such designation being a Deemed
Conversion Date) at the Conversion Price by the highest closing price of the
Common Stock on the principal market from the Deemed Conversion Date until the
day prior to the receipt of the Mandatory Redemption Payment, whichever is
greater ("Mandatory Redemption Payment"). The Mandatory Redemption Payment must
be received by the Subscriber on the same date as the Shares otherwise
deliverable or within ten (10) business days after request, whichever is sooner
("Mandatory Redemption Payment Date"). Upon receipt of the Mandatory Redemption
Payment, the corresponding Preferred Stock Stated Value will be deemed paid and
no longer outstanding.

                  7.3 Adjustments. The Conversion Price and amount of Shares
issuable upon conversion of the Preferred Stock shall be adjusted to offset the
effect of stock splits, stock dividends, pro rata distributions of property or
equity interests to the Company's shareholders.

                  7.4. Redemption. The Company may not redeem the Preferred
Stock without the consent of the holder of the Preferred Stock.

                  8. Finder's Fee.

                           (a) Finder's Fee. The Company on the one hand, and
each Subscriber (for himself only) on the other hand, agree to indemnify the
other against and hold the other harmless from any and all liabilities to any
persons claiming brokerage commissions or finder's fees other than Libra
Finance, S.A. ("Finder") on account of services purported to have been rendered
on behalf of the indemnifying party in connection with this Agreement or the
transactions contemplated hereby and arising out of such party's actions.
Anything to the contrary in this Agreement notwithstanding, each Subscriber is
providing indemnification only for such Subscriber's own actions and not for any
action of any other Subscriber. Each Subscriber's liability hereunder is several
and not joint. The Company agrees that it will pay the Finder a fee equal to 10%
of the Purchase Price ("Finder's Fees"). The Company represents that there are
no other parties entitled to receive fees, commissions, or similar payments in
connection with the Offering except the Finder.

                           (b) Finder's Preferred Stock. The Finder's Fees
payable to the Finder in connection with the Purchase Price shall be payable by
delivery on the Closing Date of 2,500 Preferred Shares having the stated value
of the Finder's Fee. The Preferred Stock deliverable in payment of Finder's Fees
is referred to as "Finder's Shares." All the representations, covenants,
warranties, undertakings, remedies, liquidated damages, indemnification, and
other rights including but not limited to registration rights made or granted to
or for the benefit of the Subscribers are hereby also made and granted to the
Finder in respect of the Finder's Shares and the Shares issuable upon conversion
of the Finder's Preferred Stock. References to Preferred Stock herein shall
include the Finder's Shares and references to Shares shall include Shares
issuable upon conversion of the Finder's Shares.

                  9. Covenants of the Company. The Company covenants and agrees
with the Subscribers as follows:

                           (a) Stop Orders. The Company will advise the
Subscribers, promptly after it receives notice of issuance by the Commission,
any state securities commission or any other regulatory authority of any stop
order or of any order preventing or suspending any offering of any securities of
the Company, or of the suspension of the qualification of the Common Stock of
the Company for offering or sale in any jurisdiction, or the initiation of any
proceeding for any such purpose.

                                       10
<PAGE>

                           (b) Listing. The Company shall promptly secure the
listing of the shares of Common Stock issuable upon conversion of the Preferred
Stock and the Warrant Shares upon each national securities exchange, or
quotation system, if any, upon which shares of common stock are then listed
(subject to official notice of issuance) and shall maintain such listing so long
as any Securities are outstanding. The Company will maintain the listing of its
Common Stock on the American Stock Exchange, Nasdaq SmallCap Market, Nasdaq
National Market System, OTC Bulletin Board, or New York Stock Exchange
(whichever of the foregoing is at the time the principal trading exchange or
market for the Common Stock [the "Principal Market"]), and will comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the Principal Market, as applicable. The Company will provide
the Subscribers copies of all notices it receives notifying the Company of the
threatened and actual delisting of the Common Stock from any Principal Market.
As of the date of this Agreement and the Initial Closing Date, the Bulletin
Board is and will be the Principal Market.

                           (c) Market Regulations. The Company shall notify the
Commission, the Principal Market and applicable state authorities, in accordance
with their requirements, of the transactions contemplated by this Agreement, and
shall take all other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Securities to the Subscribers and promptly provide copies
thereof to Subscriber.

                           (d) Reporting Requirements. From the date of this
Agreement and until the sooner of (i) two (2) years after the Closing Date, or
(ii) until all the Shares and Warrant Shares have been resold or transferred by
all the Subscribers pursuant to the Registration Statement or pursuant to Rule
144, without regard to volume limitations, the Company will (v) cause its Common
Stock to continue to be registered under Section 12(b) or 12(g) of the 1934 Act,
(x) comply in all respects with its reporting and filing obligations under the
1934 Act, (y) comply with all reporting requirements that are applicable to an
issuer with a class of shares registered pursuant to Section 12(b) or 12(g) of
the 1934 Act, as applicable, and (z) comply with all requirements related to any
registration statement filed pursuant to this Agreement. The Company will use
its best efforts not to take any action or file any document (whether or not
permitted by the 1933 Act or the 1934 Act or the rules thereunder) to terminate
or suspend such registration or to terminate or suspend its reporting and filing
obligations under said acts until two (2) years after the Closing Date. Until
the earlier of the resale of the Common Stock and the Warrant Shares by each
Subscriber or at least two (2) years after the Warrants have been exercised, the
Company will use its best efforts to continue the listing or quotation of the
Common Stock on the Principal Market (or other market with the reasonable
consent of Subscribers holding a majority of the Shares and Warrant Shares), and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Principal Market. The Company
agrees to file a Form D with respect to the Securities as required under
Regulation D and to provide a copy thereof to each Subscriber promptly after
such filing.

                           (e) Use of Proceeds. The Purchase Price may not and
will not be used for accrued and unpaid officer and director salaries, payment
of financing related debt, nor redemption of outstanding redeemable notes or
equity instruments of the Company.

                           (f) Reservation. The Company undertakes to reserve,
pro rata on behalf of each holder of Preferred Stock or Warrants, from its
authorized but unissued common stock, at all times that Preferred Stock or
Warrants remain outstanding, a number of common shares equal to not less than
124% of the amount of Common Shares necessary to allow each such holder at all
times to be able to convert all such outstanding Preferred Stock, and one common
share for each Warrant Share. Failure to have sufficient shares reserved
pursuant to this Section 9(f) for three consecutive business days or ten days in
the aggregate shall be an Event of Default under the Preferred Stock.

                                       11
<PAGE>

                           (g) Taxes. From the date of this Agreement and until
the sooner of (i) two (2) years after the Closing Date, or (ii) until all the
Shares and Warrant Shares have been resold or transferred by all the Subscribers
pursuant to the Registration Statement or pursuant to Rule 144, without regard
to volume limitations, the Company will promptly pay and discharge, or cause to
be paid and discharged, when due and payable, all lawful taxes, assessments and
governmental charges or levies imposed upon the income, profits, property or
business of the Company; provided, however, that any such tax, assessment,
charge or levy need not be paid if the validity thereof shall currently be
contested in good faith by appropriate proceedings and if the Company shall have
set aside on its books adequate reserves with respect thereto, and provided,
further, that the Company will pay all such taxes, assessments, charges or
levies forthwith upon the commencement of proceedings to foreclose any lien
which may have attached as security therefore.

                           (h) Insurance. From the date of this Agreement and
until the sooner of (i) two (2) years after the Closing Date, or (ii) until all
the Shares and Warrant Shares have been resold or transferred by all the
Subscribers pursuant to the Registration Statement or pursuant to Rule 144,
without regard to volume limitations, the Company will keep its assets which are
of an insurable character insured by financially sound and reputable insurers
against loss or damage by fire, explosion and other risks customarily insured
against by companies in the Company's line of business, in amounts sufficient to
prevent the Company from becoming a co-insurer and not in any event less than
one hundred percent (100%) of the insurable value of the property insured; and
the Company will maintain, with financially sound and reputable insurers,
insurance against other hazards and risks and liability to persons and property
to the extent and in the manner customary for companies in similar businesses
similarly situated and to the extent available on commercially reasonable terms.

                           (i) Books and Records. From the date of this
Agreement and until the sooner of (i) two (2) years after the Closing Date, or
(ii) until all the Shares and Warrant Shares have been resold or transferred by
all the Subscribers pursuant to the Registration Statement or pursuant to Rule
144, without regard to volume limitations, the Company will keep true records
and books of account in which full, true and correct entries will be made of all
dealings or transactions in relation to its business and affairs in accordance
with generally accepted accounting principles applied on a consistent basis.

                           (j) Governmental Authorities. From the date of this
Agreement and until the sooner of (i) two (2) years after the Closing Date, or
(ii) until all the Shares and Warrant Shares have been resold or transferred by
all the Subscribers pursuant to the Registration Statement or pursuant to Rule
144, without regard to volume limitations, the Company shall duly observe and
conform in all material respects to all valid requirements of governmental
authorities relating to the conduct of its business or to its properties or
assets.

                           (k) Intellectual Property. From the date of this
Agreement and until the sooner of (i) two (2) years after the Closing Date, or
(ii) until all the Shares and Warrant Shares have been resold or transferred by
all the Subscribers pursuant to the Registration Statement or pursuant to Rule
144, without regard to volume limitations, the Company shall maintain in full
force and effect its corporate existence, rights and franchises and all licenses
and other rights to use intellectual property owned or possessed by it and
reasonably deemed to be necessary to the conduct of its business.

                           (l) Properties. From the date of this Agreement and
until the sooner of (i) two (2) years after the Closing Date, or (ii) until all
the Shares and Warrant Shares have been resold or transferred by all the
Subscribers pursuant to the Registration Statement or pursuant to Rule 144,
without regard to volume limitation, the Company will keep its properties in
good repair, working order and condition, reasonable wear and tear excepted, and
from time to time make all necessary and proper repairs, renewals, replacements,
additions and improvements thereto; and the Company will at all times comply

                                       12
<PAGE>

with each provision of all leases to which it is a party or under which it
occupies property if the breach of such provision could reasonably be expected
to have a material adverse effect.

                           (m) Confidentiality/Public Announcement. From the
date of this Agreement and until the sooner of (i) two (2) years after the
Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
or transferred by all the Subscribers pursuant to the Registration Statement or
pursuant to Rule 144, without regard to volume limitations, the Company agrees
that it will not disclose publicly or privately the identity of the Subscribers
unless expressly agreed to in writing by a Subscriber or only to the extent
required by law and then only upon ten days prior notice to Subscriber. In any
event and subject to the foregoing, the Company undertakes to file a Form 8-K or
make a public announcement describing the Offering not later than the Closing
Date. In the Form 8-K or public announcement, the Company will specifically
disclose the amount of Common Stock outstanding immediately after the Closing
and may identify the Subscribers.

                           (n) Further Registration Statements. Except for a
registration statement filed on behalf of the Subscribers pursuant to Section 11
of this Agreement, and except in accordance with any pre-existing contractual
agreements of the Company as described on SCHEDULE 11.1 hereto, the Company will
not file any registration statements, including but not limited to Form S-8,
with the Commission or with state regulatory authorities without the consent of
the Subscriber until sixty (60) days after the actual effective date of
Registration Statement described in Section 11 of this Agreement ("Actual
Effective Date") during which such registration statement shall be current and
available for use in connection with the public resale of the Shares and Warrant
Shares ("Exclusion Period").

                           (o) Blackout. The Company undertakes and covenants
that until the first to occur of (i) the end of the Exclusion Period, or (ii)
until all the Shares and Warrant Shares have been resold pursuant to such
registration statement, the Company will not enter into any acquisition, merger,
exchange or sale or other transaction that could have the effect of delaying the
effectiveness of any pending registration statement or causing an already
effective registration statement to no longer be effective or current.

                           (p) Disclosure. The Company confirms that, neither
the Company nor any other person acting on its behalf has provided any of the
Subscriber or their agents or counsel with any information that constitutes or
might constitute material, non-public information. The Company understands and
confirms that the Subscriber will rely on the foregoing representations and
covenants in effecting transactions in securities of the Company. All disclosure
provided to the Subscriber regarding the Company, its business and the
transactions contemplated hereby, including the schedules to this Agreement,
furnished by or on behalf of the Company are true and correct in all material
respects and do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading.

                  10. Covenants of the Company and Subscriber Regarding
Indemnification.

                           (a) The Company agrees to indemnify, hold harmless,
reimburse and defend the Subscribers, the Subscribers' officers, directors,
agents, affiliates, control persons, and principal shareholders, against any
claim, cost, expense, liability, obligation, loss or damage (including
reasonable legal fees) of any nature, incurred by or imposed upon the Subscriber
or any such person which results, arises out of or is based upon (i) any
material misrepresentation by Company or breach of any warranty by Company in
this Agreement or in any Exhibits or Schedules attached hereto, or other
agreement delivered pursuant hereto; or (ii) after any applicable notice and/or

                                       13
<PAGE>

cure periods, any breach or default in performance by the Company of any
covenant or undertaking to be performed by the Company hereunder, or any other
agreement entered into by the Company and Subscriber relating hereto.

                           (b) Each Subscriber agrees to indemnify, hold
harmless, reimburse and defend the Company and each of the Company's officers,
directors, agents, affiliates, control persons against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees) of any
nature, incurred by or imposed upon the Company or any such person which
results, arises out of or is based upon (i) any material misrepresentation by
such Subscriber in this Agreement or in any Exhibits or Schedules attached
hereto, or other agreement delivered pursuant hereto; or (ii) after any
applicable notice and/or cure periods, any breach or default in performance by
such Subscriber of any covenant or undertaking to be performed by such
Subscriber hereunder, or any other agreement entered into by the Company and
Subscribers relating hereto.

                           (c) In no event shall the liability of any Subscriber
or permitted successor hereunder or under any other agreement delivered in
connection herewith be greater in amount than the dollar amount of the net
proceeds received by such Subscriber upon the sale of Registrable Securities (as
defined herein) giving rise to such indemnification obligation.

                           (d) The procedures set forth in Section 11.6 shall
apply to the indemnifications set forth in Sections 10(a) and 10(b) above.

                  11.1. Registration Rights. The Company hereby grants the
following registration rights to holders of the Securities.

                           (i) On one occasion, for a period commencing one
hundred and fifty-one (151) days after the Closing Date, but not later than two
(2) years after the Closing Date ("Request Date"), upon a written request
therefor from any record holder or holders of more than 50% of the Shares and
Warrant Shares actually issued upon exercise of the Warrants, the Company shall
prepare and file with the Commission a registration statement under the 1933 Act
registering the Shares and Warrant Shares including Shares issuable upon
exercise of the Finder's Preferred Stock and dividends paid and payable on the
Preferred Stock in the form of additional Preferred Stock at the Subscriber's
option (collectively "Registrable Securities") which are the subject of such
request for unrestricted public resale by the holder thereof. For purposes of
Sections 11.1(i) and 11.1(ii), Registrable Securities shall not include
Securities which are registered for resale in an effective registration
statement or included for registration in a pending registration statement, or
which have been issued without further transfer restrictions after a sale or
transfer pursuant to Rule 144 under the 1933 Act. Upon the receipt of such
request, the Company shall promptly give written notice to all other record
holders of the Registrable Securities that such registration statement is to be
filed and shall include in such registration statement Registrable Securities
for which it has received written requests within ten (10) days after the
Company gives such written notice. Such other requesting record holders shall be
deemed to have exercised their demand registration right under this Section
11.1(i).

                           (ii) If the Company at any time proposes to register
any of its securities under the 1933 Act for sale to the public, whether for its
own account or for the account of other security holders or both, except with
respect to registration statements on Forms S-4, S-8 or another form not
available for registering the Registrable Securities for sale to the public,
provided the Registrable Securities are not otherwise registered for resale by
the Subscribers or Holder pursuant to an effective registration statement, each

                                       14
<PAGE>

such time it will give at least fifteen (15) days' prior written notice to the
record holder of the Registrable Securities of its intention so to do. Upon the
written request of the holder, received by the Company within ten (10) days
after the giving of any such notice by the Company, to register any of the
Registrable Securities not previously registered, the Company will cause such
Registrable Securities as to which registration shall have been so requested to
be included with the securities to be covered by the registration statement
proposed to be filed by the Company, all to the extent required to permit the
sale or other disposition of the Registrable Securities so registered by the
holder of such Registrable Securities (the "Seller" or "Sellers"). In the event
that any registration pursuant to this Section 11.1(ii) shall be, in whole or in
part, an underwritten public offering of Common Stock of the Company, the number
of shares of Registrable Securities to be included in such an underwriting may
be reduced by the managing underwriter if and to the extent that the Company and
the underwriter shall reasonably be of the opinion that such inclusion would
adversely affect the marketing of the securities to be sold by the Company
therein; provided, however, that the Company shall notify the Seller in writing
of any such reduction. Notwithstanding the foregoing provisions, or Section 11.4
hereof, the Company may withdraw or delay or suffer a delay of any registration
statement referred to in this Section 11.1(ii) without thereby incurring any
liability to the Seller.

                           (iii) If, at the time any written request for
registration is received by the Company pursuant to Section 11.1(i), the Company
has determined to proceed with the actual preparation and filing of a
registration statement under the 1933 Act in connection with the proposed offer
and sale for cash of any of its securities for the Company's own account and the
Company actually does file such other registration statement, such written
request shall be deemed to have been given pursuant to Section 11.1(ii) rather
than Section 11.1(i), and the rights of the holders of Registrable Securities
covered by such written request shall be governed by Section 11.1(ii).

                           (iv) The Company shall file with the Commission not
later than ninety (90) days after the Closing Date (the "Filing Date"), and
cause to be declared effective within one hundred and fifty (150) days after the
Closing Date (the "Effective Date"), a Form SB-2 registration statement (the
"Registration Statement") (or such other form that it is eligible to use) in
order to register the Registrable Securities for resale and distribution under
the 1933 Act. The Company will register not less than a number of shares of
common stock in the aforedescribed registration statement that is equal to 124%
of the Shares issuable upon conversion of the Preferred Stock and 100% of the
Warrant Shares issuable upon exercise of the Warrants. The Registrable
Securities shall be reserved and set aside exclusively for the benefit of each
holder of Registrable Securities, and not issued, employed or reserved for
anyone other than each such holder. Such Registration Statement will immediately
be amended or additional registration statements will be immediately filed by
the Company as necessary to register additional shares of Common Stock to allow
the public resale of all Common Stock included in and issuable by virtue of the
Registrable Securities. No securities of the Company other than the Registrable
Securities will be included in the registration statement described in this
Section 11.1(iv) except as disclosed on SCHEDULE 11.1, without the written
consent of Subscriber.

                  11.2. Registration Procedures. If and whenever the Company is
required by the provisions of Section 11.1(i), 11.1(ii), or (iv) to effect the
registration of any Registrable Securities under the 1933 Act, the Company will,
as expeditiously as possible:

                           (a) subject to the timelines provided in this
Agreement, prepare and file with the Commission a registration statement
required by Section 11, with respect to such securities and use its best efforts
to cause such registration statement to become and remain effective for the
period of the distribution contemplated thereby (determined as herein provided),
and promptly provide to the holders of the Registrable Securities copies of all
filings and Commission letters of comment and notify Grushko & Mittman, P.C.
within twenty-four (24) hours of declaration of effectiveness of the
registration statement;

                                       15
<PAGE>

                           (b) prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective until the sooner of (i) two (2) years after the Closing
Date, or (ii) until the Shares and Warrant Shares may be publicly resold
pursuant to Rule 144(k) without regard to volume limitations, and comply with
the provisions of the 1933 Act with respect to the disposition of all of the
Registrable Securities covered by such registration statement in accordance with
the Sellers' intended method of disposition set forth in such registration
statement for such period;

                           (c) furnish to the Sellers, at the Company's expense,
such number of copies of the registration statement and the prospectus included
therein (including each preliminary prospectus) as such persons reasonably may
request in order to facilitate the public sale or their disposition of the
securities covered by such registration statement;

                           (d) use its best efforts to register or qualify the
Sellers' Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the Sellers shall request
in writing, 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) if applicable, list the Registrable Securities
covered by such registration statement with any securities exchange on which the
Common Stock of the Company is then listed;

                           (f) immediately notify the Sellers when a prospectus
relating thereto is required to be delivered under the 1933 Act, of the
happening of any event of which the Company has knowledge 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 to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing; and

                           (g) provided same would not be in violation of the
provision of Regulation FD under the 1934 Act, make available for inspection by
the Sellers, and any attorney, accountant or other agent retained by the Seller
or underwriter, all publicly available, non-confidential financial and other
records, pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors and employees to supply all publicly
available, non-confidential information reasonably requested by the seller,
attorney, accountant or agent in connection with such registration statement.

                  11.3. Provision of Documents. In connection with each
registration described in this Section 11, each Seller will furnish to the
Company in writing such information and representation letters with respect to
itself and the proposed distribution by it as reasonably shall be necessary in
order to assure compliance with federal and applicable state securities laws.

                  11.4. Non-Registration Events. The Company and the Subscribers
agree that the Sellers will suffer damages if the Registration Statement is not
filed by the Filing Date and not declared effective by the Commission by the
Effective Date, and any registration statement required under Section 11.1(i) or
11.1(ii) is not filed within 60 days after written request and declared
effective by the Commission within 120 days after such request, and maintained
in the manner and within the time periods contemplated by Section 11 hereof, and
it would not be feasible to ascertain the extent of such damages with precision.
Accordingly, if (i) the Registration Statement is not filed on or before the
Filing Date or is not declared effective on or before the sooner of the

                                       16
<PAGE>

Effective Date, or within three (3) business days of receipt by the Company of a
written or oral communication from the Commission that the Registration
Statement will not be reviewed or that the Commission has no further comments,
(ii) if the registration statement described in Sections 11.1(i) or 11.1(ii) is
not filed within 60 days after such written request, or is not declared
effective within 120 days after such written request, or (iii) any registration
statement described in Sections 11.1(i), 11.1(ii) or 11.1(iv) is filed and
declared effective but shall thereafter cease to be effective (without being
succeeded within ten (10) business days by an effective replacement or amended
registration statement) for a period of time which shall exceed 30 days in the
aggregate per year (defined as a period of 365 days commencing on the date the
Registration Statement is declared effective) or more than 20 consecutive days
(each such event referred to in clauses (i), (ii) and (iii) of this Section 11.4
is referred to herein as a "Non-Registration Event"), then the Company shall
deliver to the holder of Registrable Securities, as Liquidated Damages, an
amount equal to two percent (2%) for each thirty days or part thereof of the
Purchase Price of the Preferred Stock and Shares and actually paid "Purchase
Price" (as defined in the Warrants) of Warrant Shares issued or issuable upon
exercise of the Warrants, whether or not such Warrants have been exercised in
whole or in part, for the Registrable Securities owned of record by such holder
as of and during the pendency of such Non-Registration Event which are subject
to such Non-Registration Event. The Company must pay the Liquidated Damages in
cash within ten (10) days after the end of each thirty (30) day period or
shorter part thereof for which Liquidated Damages are payable. In the event a
Registration Statement is filed by the Filing Date but is withdrawn prior to
being declared effective by the Commission, then such Registration Statement
will be deemed to have not been filed.

                  11.5. Expenses. All expenses incurred by the Company in
complying with Section 11, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, fees and expenses (including
reasonable counsel fees) incurred in connection with complying with state
securities or "blue sky" laws, fees of the National Association of Securities
Dealers, Inc., transfer taxes, fees of transfer agents and registrars, costs of
insurance are called "Registration Expenses." All underwriting discounts and
selling commissions applicable to the sale of Registrable Securities, including
any fees and disbursements of any counsel to the Seller, are called "Selling
Expenses." The Company will pay all Registration Expenses in connection with the
registration statement under Section 11. Selling Expenses in connection with
each registration statement under Section 11 shall be borne by the Seller and
may be apportioned among the Sellers in proportion to the number of shares sold
by the Seller relative to the number of shares sold under such registration
statement or as all Sellers thereunder may agree.

                  11.6. Indemnification and Contribution.

                           (a) In the event of a registration of any Registrable
Securities under the 1933 Act pursuant to Section 11, the Company will, to the
extent permitted by law, indemnify and hold harmless the Seller, each officer of
the Seller, each director of the Seller, each underwriter of such Registrable
Securities thereunder and each other person, if any, who controls such Seller or
underwriter within the meaning of the 1933 Act, against any losses, claims,
damages or liabilities, joint or several, to which the Seller, or such
underwriter or controlling person may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Registrable Securities was registered under the 1933 Act
pursuant to Section 11, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances when made, and will subject to the provisions of
Section 11.6(c) reimburse the Seller, each such underwriter and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable to
the Seller to the extent that any such damages arise out of or are based upon an
untrue statement or omission made in any preliminary prospectus if (i) the
Seller failed to send or deliver a copy of the final prospectus delivered by the
Company to the Seller with or prior to the delivery of written confirmation of

                                       17
<PAGE>

the sale by the Seller to the person asserting the claim from which such damages
arise, (ii) the final prospectus would have corrected such untrue statement or
alleged untrue statement or such omission or alleged omission, or (iii) to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by any such Seller, or
any such controlling person in writing specifically for use in such registration
statement or prospectus.

                           (b) In the event of a registration of any of the
Registrable Securities under the 1933 Act pursuant to Section 11, each Seller
severally but not jointly will, to the extent permitted by law, indemnify and
hold harmless the Company, and each person, if any, who controls the Company
within the meaning of the 1933 Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the 1933 Act, against
all losses, claims, damages or liabilities, joint or several, to which the
Company or such officer, director, underwriter or controlling person may become
subject under the 1933 Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in the registration statement under which such Registrable Securities were
registered under the 1933 Act pursuant to Section 11, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereof,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and each such
officer, director, underwriter and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided, however,
that the Seller will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
such Seller, as such, furnished in writing to the Company by such Seller
specifically for use in such registration statement or prospectus, and provided,
further, however, that the liability of the Seller hereunder shall be limited to
the net proceeds actually received by the Seller from the sale of Registrable
Securities included for resale in such registration statement.

                           (c) Promptly after receipt by an indemnified party
hereunder of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party hereunder, notify the indemnifying party in writing thereof, but the
omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to such indemnified party other than under this
Section 11.6(c) and shall only relieve it from any liability which it may have
to such indemnified party under this Section 11.6(c), except and only if and to
the extent the indemnifying party is prejudiced by such omission. In case any
such action shall be brought against any indemnified party and it shall notify
the indemnifying party of the commencement thereof, the indemnifying party shall
be entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel reasonably satisfactory to such
indemnified party, and, after notice from the indemnifying party to such
indemnified party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this Section 11.6(c) for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected, provided,
however, that, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be reasonable defenses available to it which are
different from or additional to those available to the indemnifying party or if
the interests of the indemnified party reasonably may be deemed to conflict with
the interests of the indemnifying party, the indemnified parties, as a group,
shall have the right to select one separate counsel and to assume such legal

                                       18
<PAGE>

defenses and otherwise to participate in the defense of such action, with the
reasonable expenses and fees of such separate counsel and other expenses related
to such participation to be reimbursed by the indemnifying party as incurred.

                           (d) In order to provide for just and equitable
contribution in the event of joint liability under the 1933 Act in any case in
which either (i) a Seller, or any controlling person of a Seller, makes a claim
for indemnification pursuant to this Section 11.6 but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 11.6 provides for indemnification in
such case, or (ii) contribution under the 1933 Act may be required on the part
of the Seller or controlling person of the Seller in circumstances for which
indemnification is not provided under this Section 11.6; then, and in each such
case, the Company and the Seller will contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after contribution
from others) in such proportion so that the Seller is responsible only for the
portion represented by the percentage that the public offering price of its
securities offered by the registration statement bears to the public offering
price of all securities offered by such registration statement, provided,
however, that, in any such case, (y) the Seller will not be required to
contribute any amount in excess of the public offering price of all such
securities offered by it pursuant to such registration statement; and (z) no
person or entity guilty of fraudulent misrepresentation (within the meaning of
Section 10(f) of the 1933 Act) will be entitled to contribution from any person
or entity who was not guilty of such fraudulent misrepresentation.

                  11.7. Delivery of Unlegended Shares.

                           (a) Within three (3) business days (such third (3rd)
business day, the "Unlegended Shares Delivery Date") after the business day on
which the Company has received (i) a notice that Registrable Securities have
been sold either pursuant to the Registration Statement or Rule 144 under the
1933 Act, (ii) a representation that the prospectus delivery requirements, or
the requirements of Rule 144, as applicable, have been satisfied, and (iii) the
original share certificates representing the shares of Common Stock that have
been sold, and (iv) in the case of sales under Rule 144, customary
representation letters of the Subscriber and/or Subscriber's broker regarding
compliance with the requirements of Rule 144, the Company at its expense, (y)
shall deliver, and shall cause legal counsel selected by the Company to deliver,
to its transfer agent (with copies to Subscriber) an appropriate instruction and
opinion of such counsel, directing the delivery of shares of Common Stock
without any legends including the legends set forth in Sections 4(e) and 4(f)
above, issuable pursuant to any effective and current Registration Statement
described in Section 11 of this Agreement or pursuant to Rule 144 under the 1933
Act (the "Unlegended Shares"); and (z) cause the transmission of the
certificates representing the Unlegended Shares together with a legended
certificate representing the balance of the unsold shares of Common Stock, if
any, to the Subscriber at the address specified in the notice of sale, via
express courier, by electronic transfer or otherwise on or before the Unlegended
Shares Delivery Date. Transfer fees shall be the responsibility of the Seller.

                           (b) In lieu of delivering physical certificates
representing the Unlegended Shares, if the Company's transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer program, upon request of a Subscriber, so long as the certificates
therefor do not bear a legend and the Subscriber is not obligated to return such
certificate for the placement of a legend thereon, the Company shall cause its
transfer agent to electronically transmit the Unlegended Shares by crediting the
account of Subscriber's prime Broker with DTC through its Deposit Withdrawal
Agent Commission system. Such delivery must be made on or before the Unlegended
Shares Delivery Date.

                                       19
<PAGE>

                           (c) The Company understands that a delay in the
delivery of the Unlegended Shares pursuant to Section 11 hereof beyond the
Unlegended Shares Delivery Date could result in economic loss to a Subscriber.
As compensation to a Subscriber for such loss, the Company agrees to pay late
payment fees (as liquidated damages and not as a penalty) to the Subscriber for
late delivery of Unlegended Shares in the amount of $100 per business day after
the Delivery Date for each $10,000 of purchase price of the Unlegended Shares
subject to the delivery default. If during any 360 day period, the Company fails
to deliver Unlegended Shares as required by this Section 11.7 for an aggregate
of thirty (30) days, then each Subscriber or assignee holding Securities subject
to such default may, at its option, require the Company to purchase all or any
portion of the Shares and Warrant Shares subject to such default at a price per
share equal to 130% of the purchase price of such Shares and Warrant Shares. The
Company shall pay any payments incurred under this Section in immediately
available funds upon demand.

                  12. (a) Right of First Refusal. During the Exclusion Period,
the Subscribers shall be given not less than ten (10) business days prior
written notice of any proposed sale by the Company of its Common Stock or other
securities or debt obligations, except in connection with (i) employee stock
options or compensation plans, (ii) as full or partial consideration in
connection with any merger, consolidation or purchase of substantially all of
the securities or assets of any corporation or other entity, (iii) as has been
described in the Reports or Other Written Information filed or delivered to the
Subscribers prior to the date of this Agreement, or (iv) conversion of the
Shares or upon exercise of the Warrants (collectively "Excepted Issuances"). The
Subscribers who exercise their rights pursuant to this Section 12(a) shall have
the right during the ten (10) business days following receipt of the notice to
purchase all of such offered Common Stock, debt or other securities in
accordance with the terms and conditions set forth in the notice of sale in the
same proportion to each other as their purchase of Shares in the Offering. In
the event such terms and conditions are modified during the notice period, the
Subscribers shall be given prompt notice of such modification and shall have the
right during the original notice period or for a period of ten (10) business
days following the notice of modification, whichever is longer, to exercise such
right.

                           (b) Offering Restrictions. Except as disclosed in the
Reports or Other Written Information filed with the Commission or made available
to the Subscriber prior to the Initial Closing Date, or in connection with
Excepted Issuances, the Company will not issue any equity, convertible debt or
other securities convertible into common stock on any terms more favorable to
such other investor than any of the terms of the Offering, until after the
Exclusion Period without the prior written consent of the Subscriber, which
consent may be withheld for any reason.

                           (c) Favored Nations Provision. Except for the
Excepted Issuances, if at any time during the Exclusion Period the Company shall
offer, issue or agree to issue any Common Stock or securities convertible into
or exercisable for shares of Common Stock (or modify any of the foregoing which
may be outstanding at any time prior to the Closing Date) to any person or
entity at a price per share or conversion or exercise price per share which
shall be less than the Conversion Price of the Preferred Stock, without the
consent of each Subscriber holding Preferred Stock or Shares, then the Company
shall issue, for each such occasion, additional shares of Common Stock to each
Subscriber and Finder so that the average per share purchase price of the shares
of Common Stock issued to the Subscriber (of only the Common Stock or Warrant
Shares still owned by the Subscriber and Finder) is equal to such other lower
price per share and the Conversion Price and Warrant exercise price shall be
reduced to such other lower amount. The delivery to the Subscriber of the
additional shares of Common Stock shall be not later than the closing date of
the transaction giving rise to the requirement to issue additional shares of
Common Stock. The Subscriber is granted the registration rights described in
Section 11 hereof in relation to such additional shares of Common Stock except
that the Filing Date and Effective Date vis-a-vis such additional common shares
shall be, respectively, the sixtieth (60th) and one hundred and twentieth
(120th) date after the closing date giving rise to the requirement to issue the
additional shares of Common Stock. For purposes of the issuance and adjustments
described in this paragraph, the issuance of any security of the Company

                                       20
<PAGE>

carrying the right to convert such security into shares of Common Stock or of
any warrant, right or option to purchase Common Stock shall result in the
issuance of the additional shares of Common Stock upon the issuance of such
convertible security, warrant, right or option and again upon any subsequent
issuances of shares of Common Stock upon exercise of such conversion or purchase
rights if such issuance is at a price lower than the then Conversion Price. The
rights of the Subscriber set forth in this Section 12 are in addition to any
other rights the Subscriber has pursuant to this Agreement and any other
agreement referred to or entered into in connection herewith.

                           (d) Maximum Exercise of Rights. In the event the
exercise of the rights described in Sections 12(a) and 12(c) would result in the
issuance of an amount of Common Stock of the Company that would exceed the
maximum amount that may be issued to a Subscriber calculated in the manner
described in Section 4(c) of the Certificate of Designation, then the issuance
of such additional shares of Common Stock of the Company to such Subscriber will
be deferred in whole or in part until such time as such Subscriber is able to
beneficially own such Common Stock without exceeding the maximum amount set
forth calculated in the manner described in Section 4(c) of the Certificate of
Designation. The determination of when such Common Stock may be issued shall be
made by each Subscriber as to only such Subscriber.

                  13. Miscellaneous.

                           (a) Notices. All notices, demands, requests,
consents, approvals, and other communications required or permitted hereunder
shall be in writing and, unless otherwise specified herein, shall be (i)
personally served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable air courier
service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or
facsimile, addressed as set forth below or to such other address as such party
shall have specified most recently by written notice. Any notice or other
communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be: (i) if to the
Company, to: Universal Communication Systems, Inc., 407 Lincoln Road, Suite 12F,
Miami Beach, FL 33139, Attn: Michael J. Zwebner, CEO, telecopier: (305)
672-1965, with a copy by telecopier only to:Torys LLP, 466 Lexington Avenue, New
York, NY 10017, Attn: Andrew J. Beck, Esq., telecopier: (212) 682-0200, and (ii)
if to the Subscribers, to: the one or more addresses and telecopier numbers
indicated on the signature pages hereto, with an additional copy by telecopier
only to: Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New
York 10176, telecopier number: (212) 697-3575.

                           (b) Closing. The consummation of the transactions
contemplated herein shall take place at the offices of Grushko & Mittman, P.C.,
551 Fifth Avenue, Suite 1601, New York, New York 10176, upon the satisfaction of
all conditions to Closing set forth in this Agreement ("Closing Date").

                           (c) Entire Agreement; Assignment. This Agreement and
other documents delivered in connection herewith represent the entire agreement
between the parties hereto with respect to the subject matter hereof and may be

                                       21
<PAGE>

amended only by a writing executed by both parties. Neither the Company nor the
Subscribers have relied on any representations not contained or referred to in
this Agreement and the documents delivered herewith. No right or obligation of
either party shall be assigned by that party without prior notice to and the
written consent of the other party.

                           (d) Counterparts/Execution. This Agreement may be
executed in any number of counterparts and by the different signatories hereto
on separate counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute but one and the same
instrument. This Agreement may be executed by facsimile signature and delivered
by facsimile transmission.

                           (e) Law Governing this Agreement. This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York without regard to principles of conflicts of laws. Any action brought
by either party against the other concerning the transactions contemplated by
this Agreement shall be brought only in the state courts of New York or in the
federal courts located in the state of New York. THE PARTIES AND THE INDIVIDUALS
EXECUTING THIS AGREEMENT AND OTHER AGREEMENTS REFERRED TO HEREIN OR DELIVERED IN
CONNECTION HEREWITH ON BEHALF OF THE COMPANY AGREE TO SUBMIT TO THE JURISDICTION
OF SUCH COURTS AND WAIVE TRIAL BY JURY. The prevailing party shall be entitled
to recover from the other party its reasonable attorney's fees and costs. In the
event that any provision of this Agreement or any other agreement delivered in
connection herewith is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision of any agreement.

                           (f) Specific Enforcement, Consent to Jurisdiction.
The Company and Subscriber acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof, this being in addition
to any other remedy to which any of them may be entitled by law or equity.
Subject to Section 13(e) hereof, each of the Company, Subscriber and any
signator hereto in his personal capacity hereby waives, and agrees not to assert
in any such suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction in New York of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. Nothing in this Section shall affect or limit
any right to serve process in any other manner permitted by law.

                           (g) Equitable Adjustment. The Securities and the
purchase prices of Securities shall be equitably adjusted to offset the effect
of stock splits, stock dividends, and distributions of property or equity
interests of the Company to its shareholders.

                      [THIS SPACE INTENTIONALLY LEFT BLANK]

                                       22
<PAGE>

                    SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT

         Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.

                                     UNIVERSAL COMMUNICATION
                                     SYSTEMS, INC.
                                     a Nevada corporation
                                     By
                                              Name: Michael J. Zwebner
                                              Title: CEO

                                     Dated: December 6, 2004

<TABLE>
<CAPTION>
------------------------------------ --------------------------- --------------------------------
SUBSCRIBER                           PURCHASE PRICE AND STATED   WARRANTS ISSUABLE ON CLOSING
                                     VALUE OF PREFERRED STOCK    DATE
------------------------------------ --------------------------- --------------------------------
<S>                                  <C>                         <C>
                                     $250,000.00                 16,666,667

------------------------------------
(Signature)
ALPHA CAPITAL AKTIENGESELLSCHAFT
Pradafant 7
9490 Furstentums
Vaduz, Lichtenstein
Fax: 011-42-32323196
------------------------------------ --------------------------- --------------------------------
</TABLE>

<PAGE>

                         LIST OF EXHIBITS AND SCHEDULES

         Exhibit A                  Certificate of Designation

         Exhibit B                  Form of Warrant

         Exhibit C                  Escrow Agreement

         Exhibit D                  Form of Legal Opinion

         Schedule 5(d)              Additional Issuances

         Schedule 5(m)              Defaults

         Schedule 5(q)              Undisclosed Liabilities

         Schedule 5(s)              Capitalization

         Schedule 11.1              Other Securities to be Registered

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