Document:

<PAGE>
EXHIBIT 4.20

THESE WARRANTS AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAW. THESE WARRANTS AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE
HEREOF MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF A REGISTRATION STATEMENT IN EFFECT UNDER SUCH ACT AND SUCH LAWS WITH RESPECT
TO THESE WARRANTS AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF, OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.

WARRANT CERTIFICATE      7,142,858 COMMON STOCK WARRANTS
NO. 190

                             USA TECHNOLOGIES, INC.
                             ----------------------
                             COMMON STOCK WARRANTS
                             ----------------------

                  (These Warrants will be void if not exercised
                   by the Termination Dates specified below.)

1.  Warrants.
    ---------

     Subject  to the terms  and  conditions  hereof,  this  certifies  that KAZI
MANAGEMENT VI, INC., is the owner of 7,142,858 Warrants (the "Warrants") of USA
Technologies,  Inc., a Pennsylvania  corporation (the "Company").  Each Warrant,
when vested in accordance with Section 3 hereof, entitles the holder to purchase
from the Company at any time prior to the  Termination  Date of such Warrant (as
set forth in Section 4 hereof),  one fully paid and non-assessable  share of the
Company's  Common  Stock,  without par value (the  "Common  Stock"),  subject to
adjustment as provided in Section 8 hereof.

2. Warrant Price.
   -------------

     a. The Warrants, when vested, shall be exercised by delivery to the Company
(prior to the  Termination  Dates for such  Warrants  as set forth in  Section 4
hereof) of the  applicable  Warrant  price for each share of Common  Stock being
purchased hereunder (the "Warrant Price"),  this Certificate,  and the completed
Election To Purchase Form which is attached hereto.

     b. The Warrant Price for the 7,142,858  shares of Common Stock  underlying
the  Warrants  evidenced by this  Certificate  shall be $.07 per share of Common
Stock. The Warrant Price shall be subject to adjustment as provided in Section 8
hereof.  The Warrant  Price is payable  either in cash or by certified  check or
bank draft payable to the order of the Company.

     3. Vesting of Warrants.  Notwithstanding  anything  contained herein to the
contrary, the Warrants shall not become vested unless and until the shareholders
of the Company  shall have  approved  the increase in the  authorized  number of
shares of Common Stock of the Company from  150,000,000  to  200,000,000  at the
special meeting of  shareholders of the Company  scheduled for October 28, 2002.
Unless  and  until  the  Warrants  become  vested,  this  Warrant  shall  not be
exercisable.

     4. Termination Date. Each Warrant, when vested in accordance with Section 3
hereof,  must be  exercised  in  accordance  with the terms  hereof prior to the
Termination Date relating to such Warrant,  all as set forth below ("Termination
Date").

Number
of Warrants                                 Termination Date
------------------------------------------------------------

3,571,429                                   60 days following the declaration of
                                            effectiveness under the Act by the
                                            Securities and Exchange Commission
                                            of the Registration Statement (as
                                            such term is defined in the
                                            Registration Rights Agreement dated
                                            of even date herewith between the
                                            Company and KAZI) covering the
                                            shares of Common Stock underlying
                                            this Warrant.

3,571,429                                   120 days following the declaration
                                            of effectiveness under the Act by
                                            the Securities and Exchange
                                            Commission of the Registration
                                            Statement (as such term is defined
                                            in the Registration Rights Agreement
                                            dated of even date herewith between
                                            the Company and KAZI) covering the
                                            shares of Common Stock underlying
                                            this Warrant.

On the Termination Date relating to any such Warrant any and all unexercised
rights hereunder relating to such Warrant shall become null and void and such
unexercised Warrant shall without any action on behalf of the Company become
null and void.

     5.  Exercise.
         ---------

     Upon the surrender of this  Certificate and payment of the Warrant Price as
aforesaid, the Company shall issue and cause to be delivered with all reasonable
dispatch to or upon the written order of the  registered  holder of this Warrant
and in such name or names as the registered holder may designate,  a certificate
or certificates  for the number of full shares of Common Stock so purchased upon
the exercise of any Warrant. Such certificate or certificates shall be deemed to
have been  issued  and any person so  designated  to be named  therein  shall be
deemed to have become a holder of record of such  Common  Stock on and as of the
date of the  delivery  to the  Company of this  Certificate  and  payment of the
Warrant  Price as  aforesaid.  If,  however,  at the date of  surrender  of this
Certificate and payment of such Warrant Price, the transfer books for the Common
Stock  purchasable  upon  the  exercise  of any  Warrant  shall be  closed,  the
certificates  for the Common Stock in respect to which any such Warrant are then
exercised  shall be issued and the owner of such  Common  Stock  shall  become a
record owner of such Common Stock on and as of the next date on which such books
shall be  opened,  and  until  such date the  Company  shall be under no duty to
deliver any certificate for such Common Stock.

     6. Partial  Exercise.
        ------------------

     The rights of purchase represented by the Warrants shall be exercisable, at
the election of the  registered  holder hereof,  either as an entirety,  or from
time to time for any part of the Common Stock specified herein and, in the event
that the  Warrants  are  exercised  with  respect to less than all of the Common
Stock  specified  herein  at any  time  prior  to the  Termination  Date,  a new
Certificate will be issued to such registered holder for the remaining number of
Warrants not so exercised.

     7.  Lost,  Mutilated  Certificate.
         ------------------------------

     In case this Common Stock Warrant Certificate shall become mutilated, lost,
stolen or destroyed,  the Company shall issue in exchange and  substitution  for
and  upon  cancellation  of the  mutilated  certificate,  or in  lieu  of and in
substitution for the Certificate lost,  stolen, or destroyed,  a new Certificate
of like tenor and  representing an equivalent  right or interest,  but only upon
receipt  of  evidence  satisfactory  to the  Company  of  such  loss,  theft  or
destruction of such certificate and indemnity,  if requested,  also satisfactory
to the Company.

     8.  Adjustments.
         ------------

     Subject and pursuant to the provisions of this Section 8, the Warrant Price
and number of shares of Common Stock subject to the Warrants shall be subject to
adjustment from time to time only as set forth hereinafter:

     a. In case the Company shall declare a Common Stock  dividend on the Common
Stock, then the Warrant Price shall be proportionately decreased as of the close
of business on the date of record of said Common Stock dividend in proportion to
such increase of outstanding shares of Common Stock.

     b. If the Company shall at any time subdivide its outstanding  Common Stock
by  recapitalization,  reclassification  or split-up thereof,  the Warrant Price
immediately prior to such subdivision shall be proportionately  decreased,  and,
if the Company shall at any time combine the outstanding  shares of Common Stock
by recapitalization, reclassification, or combination thereof, the Warrant Price
immediately prior to such combination shall be  proportionately  increased.  Any
such  adjustment  to the Warrant  Price shall  become  effective at the close of
business on the record date for such  subdivision  or  combination.  The Warrant
Price shall be  proportionately  increased or decreased,  as the case may be, in
proportion  to such  increase or  decrease,  as the case may be, of  outstanding
shares of Common Stock.

     c. Upon any  adjustment of the Warrant Price as hereinabove  provided,  the
number  of shares  of  Common  Stock  issuable  upon  exercise  of the  Warrants
remaining unexercised immediately prior to any such adjustment, shall be changed
to the number of shares determined by dividing (i) the appropriate Warrant Price
payable for the purchase of all shares of Common Stock issuable upon exercise of
all of the Warrants remaining  unexercised  immediately prior to such adjustment
by (ii) the Warrant Price per share of Common Stock in effect  immediately after
such adjustment.  Pursuant to this formula, the total sum payable to the Company
upon the exercise of the Warrants  remaining  unexercised  immediately  prior to
such adjustment shall remain constant.

     d. (i)If any  capital  reorganization  or  reclassification  of the capital
stock of the  Company,  or  consolidation  or merger of the Company with another
corporation,  person,  or entity, or the sale of all or substantially all of its
assets to another  corporation,  person, or entity,  shall be effected in such a
way that holders of Common Stock shall be entitled to receive stock, securities,
cash,  property,  or assets with respect to or in exchange for Common Stock, and
provided no election is made by the Company  pursuant to subsection (ii) hereof,
then, as a condition of such  reorganization,  reclassification,  consolidation,
merger or sale, the Company or such successor or purchasing corporation, person,
or entity,  as the case may be,  shall agree that the  registered  holder of the
Warrants  shall  have the right  thereafter  and until the  Termination  Date to
exercise  such  Warrants  for the kind and  amount of stock,  securities,  cash,
property,  or  assets  receivable  upon such  reorganization,  reclassification,
consolidation,  merger,  or sale by a holder  of the  number of shares of Common
Stock  for the  purchase  of which  such  Warrants  might  have  been  exercised
immediately  prior  to  such  reorganization,  reclassification,  consolidation,
merger or sale, subject to such subsequent adjustments which shall be equivalent
or nearly  equivalent as may be practicable to the  adjustments  provided for in
this Section 8.

     e.  Whenever the Warrant Price and number of shares of Common Stock subject
to this Warrant is adjusted as herein provided,  the Company shall promptly mail
to the registered holder of this Warrant a statement signed by an officer of the
Company  setting  forth the adjusted  Warrant  Price and the number of shares of
Common Stock subject to this Warrant, determined as so provided.

     f. This form of Certificate  need not be changed  because of any adjustment
which is required  pursuant to this Section 8.  However,  the Company may at any
time in its sole discretion  (which shall be conclusive)  make any change in the
form of this Certificate that the Company may deem appropriate and that does not
affect the substance hereof; and any Certificate  thereafter issued,  whether in
exchange or substitution for this  Certificate or otherwise,  may be in the form
as so changed.

     9. Reservation.
        ------------

     There has been  reserved,  and the Company shall at all times keep reserved
out of the authorized and unissued shares of Common Stock, a number of shares of
Common  Stock  sufficient  to provide for the  exercise of the right of purchase
represented by the Warrants.  The Company agrees that all shares of Common Stock
issued upon  exercise of the  Warrants  shall be, at the time of delivery of the
Certificates for such Common Stock,  validly issued and outstanding,  fully paid
and non-assessable.

     10. Fractional Shares.
         ------------------

     The Company shall not issue any fractional  shares of Common Stock pursuant
to any  exercise  of any Warrant and shall pay cash to the holder of any Warrant
in lieu of any such fractional shares.

     11. No Right.
         ---------

     The holder of any Warrants  shall not be entitled to any of the rights of a
shareholder  of the Company prior to the date of issuance of the Common Stock by
the Company pursuant to an exercise of any Warrant.

     12. Securities Laws; Non-Qualified Warrant.
         ---------------------------------------

     As a  condition  to  the  issuance  of any  Common  Stock  pursuant  to the
Warrants,  the holder of such  Common  Stock  shall  execute  and  deliver  such
representations,  warranties,  and covenants, that may be required by applicable
federal and state  securities law, or that the Company  determines is reasonably
necessary in connection with the issuance of such Common Stock. In addition, the
certificates  representing  the Common  Stock shall  contain  such  legends,  or
restrictive  legends,  or stop  transfer  instructions,  as shall be required by
applicable Federal or state securities laws, or as shall be reasonably  required
by the Company.

     13. Registration Rights.
         --------------------

     The shares of Common  Stock  underlying  this  Warrant  are  subject to and
covered by the Registration Rights Agreement dated of even date herewith between
the Company and KAZI.

     14.  Certain  Exercise  Limits.
          --------------------------

     Notwithstanding anything herein to the contrary, if and to the extent that,
on any date (the "Section 16 Determination  Date"),  the holding by KAZI of this
Warrant  would result in KAZI's  becoming  subject to the  provisions of Section
16(b) of the  Securities  Exchange Act of 1934,  as amended,  by virtue of being
deemed  the  "beneficial  owner"  of more  than  ten  percent  (10%) of the then
outstanding shares of Common Stock of the Company,  then KAZI shall not have the
right to exercise  any portion of this  Warrant as shall cause KAZI to be deemed
the  beneficial  owner of more than ten  percent  (10%) of the then  outstanding
shares of Common Stock of the Company  during the period  ending sixty (60) days
after the Section 16 Determination Date.

     15. Applicable Law.
         ---------------

     The Warrants  and this  Certificate  shall be deemed to be a contract  made
under the laws of the Commonwealth of Pennsylvania and for all purposes shall be
construed in  accordance  with the laws thereof  regardless of its choice of law
rules.

<PAGE>

     IN WITNESS WHEREOF, USA TECHNOLOGIES, INC., has executed and delivered this
Certificate and caused its corporate seal to be affixed hereto.

                                                     USA TECHNOLOGIES, INC.

Corporate Seal                      By:        /s/ George R. Jensen, Jr.
                                            --------------------------------
                                                     George R. Jensen, Jr.
                                                     Chief Executive Officer

                                   Attest:    /s/ Leland P. Maxwell
                                            --------------------------------
                                               Leland P. Maxwell, Secretary

Dated: October 26, 2002

<PAGE>

USA TECHNOLOGIES, INC.
200 Plant Avenue
Wayne, Pennsylvania  19087
Attn:  George R. Jensen, Jr.,
           Chief Executive Officer

                              ELECTION TO PURCHASE

                  The undersigned hereby irrevocably elects to exercise the
right of purchase represented by the attached Warrant Certificate No. of the
Company. The undersigned desires to purchase shares of Common Stock provided for
therein and tenders herewith full payment of the Warrant Price for the shares of
Common Stock being purchased, all in accordance with the Certificate. The
undersigned requests that a Certificate representing such shares of Common Stock
shall be issued to and registered in the name of the undersigned, and delivered
to the undersigned at the following address: . If said number of shares of
Common Stock shall not be all the shares purchasable under the Certificate, then
a new Common Stock Warrant Certificate for the balance remaining of the shares
of Common Stock purchasable shall be issued to and registered in the name of the
undersigned, and delivered to the undersigned at the address set forth above.

Dated:              , 20                Signature:
       -------------    -----                     --------------------
<PAGE><PAGE>
EXHIBIT 4.21

                             SUBSCRIPTION AGREEMENT
                             ----------------------

          The Subscriber hereby agrees to purchase, and USA Technologies,  Inc.,
     a Pennsylvania  corporation  (the "Company")  hereby agrees to issue and to
     sell to the  Subscriber,  shares of the Company's no par value common stock
     (the "Company Shares") and common stock purchase warrants  representing the
     right to  purchase  one share per  warrant  of the  Company's  no par value
     common  stock  ("Warrants")  for the  aggregate  consideration  of $150,000
     ("Purchase Price").  The amount of Company Shares to be sold by the Company
     and purchased by the Subscriber shall be 1,500,000 Company Shares. The form
     of Warrant is annexed hereto as Exhibit A. The Company  Shares  included in
     the Securities (as hereinafter defined) are sometimes referred to herein as
     the  "Shares",  "Common  Shares" or "Common  Stock".  The  Company  Shares,
     Warrants,  and the Common  Stock  issuable  upon  exercise of the  Warrants
     ("Warrant   Shares")   are   collectively   referred   to  herein  as,  the
     "Securities".   Subject  to  the  terms  and  conditions  hereof  and  upon
     acceptance  of this  agreement by the  Subscriber,  at the Closing Date, as
     defined in Section  10(b),  the Company  shall issue,  sell and deliver the
     Company Shares and Warrants against payment,  by Subscriber of the Purchase
     Price, by a federal funds wire transfer of immediately available funds.

          The  Company  will also  issue and  deliver to the  Subscriber  on the
     Closing Date 750,000 Warrants. The per share "Purchase Price" of the Common
     Stock (as defined in the  Warrant)  shall be equal to the closing  price of
     the Company's  common stock for the trading day  immediately  preceding the
     Closing Date. The Warrants  shall be  exercisable  for five years after the
     Issue Date (as defined in the Warrant).

          The following terms and conditions shall apply to this subscription.

          1. Subscriber's Representations and Warranties. The Subscriber hereby
     represents and warrants to and agrees with the Company that:

          (a)      Information  on Company.
                   -----------------------

          The  Subscriber  has been  furnished  or has  obtained  from the EDGAR
     Website of the Securities and Exchange  Commission (the  "Commission")  the
     Company's  Form  10-KSB for the year ended June 30,  2002 as filed with the
     Commission on October 15, 2002,  together with all subsequently filed Forms
     10-Q,  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  from  the  Company  such  other
     information  concerning  its  operations,  financial  condition  and  other
     matters as the  Subscriber  has requested in writing (such  information  in
     writing 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 an "accredited investor", as such term is defined in
     Regulation D promulgated  by the  Commission  under the  Securities  Act of
     1933, as amended (the "1933 Act"), because Subscriber is a corporation with
     total  assets in excess  of  $5,000,000  and not  formed  for the  specific
     purpose of acquiring the  Securities,  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.   Subscriber  is  a
     corporation duly organized, validly existing and in good standing under the
     laws of Lichtenstein.

<PAGE>

                                        4

          (c)      Purchase of Company  Shares and Warrants.
                   ----------------------------------------

          On the Closing Date, the  Subscriber  will purchase the Company Shares
     and  Warrants  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,  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 is
     exempt from such registration.  In any event and subject to compliance with
     applicable securities laws, at any time following the earlier of the actual
     effective date of a registration  statement  described in Section 8 of this
     Agreement  or one  hundred  and twenty  days after the  Closing  Date,  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.

          (e)      Company Shares Legend.
                   ---------------------

          The Company 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 USA TECHNOLOGIES, INC. THAT SUCH REGISTRATION
                  IS NOT REQUIRED."

          (f)      Warrants Legend.
                   ---------------

          The Warrants shall bear the following or similar legend:

<PAGE>

"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 USA
TECHNOLOGIES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."

          (g)  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.

          (h) Correctness of Representations. The Subscriber represents that the
     foregoing  representations  and  warranties  are true and correct as of the
     date hereof and, unless the Subscriber otherwise notifies the Company prior
     to the Closing Date (as hereinafter defined),  shall be true and correct as
     of the Closing Date. The foregoing  representations  and  warranties  shall
     survive the Closing Date for a period of three years.

          2.       Company Representations and Warranties.
                   --------------------------------------

     The Company represents and warrants to and agrees with the 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.

<PAGE>

          (b)      Outstanding  Stock.
                   ------------------

          All issued and outstanding  shares of capital stock of the Company and
     each of its  subsidiaries  has been duly  authorized and validly issued and
     are fully paid and non-assessable.

           (c)      Authority;  Enforceability.
                    --------------------------

          This Agreement,  the Warrant and other agreements  delivered  together
     with this  Agreement or in connection  herewith 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;  and the Company has full
     corporate  power and  authority  necessary  to enter  into this  Agreement,
     Warrant and such other agreements and to perform its obligations  hereunder
     and under all other agreements entered into by the Company relating hereto.

          (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 in Schedule 2(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  ("Amex"),
     the National Association of Securities Dealers, Inc. ("NASD"),  Nasdaq, the
     OTC Bulletin  Board  ("Bulletin  Board") or the Company's  Shareholders  is
     required for execution of this Agreement,  and all other agreements entered
     into by the Company relating thereto,  including,  without limitation,  the
     issuance and sale of the  Securities,  and the performance of the Company's
     obligations hereunder and under all such other agreements.

           (f)      No  Violation or Conflict.
                    -------------------------

          Assuming the  representations  and  warranties  of the  Subscriber  in
     Section  1 are  true  and  correct  and the  Subscriber  complies  with its
     obligations  under this  Agreement,  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:

<PAGE>

          (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 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  affiliates  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  is a party,  by
     which the Company or any of its affiliates is bound, or to which any of the
     properties of the Company or any of its  affiliates 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 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.

          (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 State laws;

          (ii) have been,  or will be,  duly and validly  authorized  and on the
     date of issuance and on the Closing Date,  and the Warrants are  exercised,
     the  Securities   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 the  Subscriber  complies with the  Prospectus
     delivery requirements);

          (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 this
     Agreement,  and all other  agreements  entered into by the Company relating
     hereto.  Except as disclosed in the Reports or Other  Written  Information,
     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  which  litigation if adversely  determined  could have a
     material adverse effect on the Company.

          (i)      Reporting  Company.
                   ------------------

          The  Company  is  a   publicly-held   company   subject  to  reporting
     obligations  pursuant to Sections 15(d) and 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. The Company's common
     stock  is  listed  for  trading  on the  Bulletin  Board.  Pursuant  to the
     provisions  of the 1934 Act,  the  Company  has filed all reports and other
     materials  required to be filed thereunder with the Securities and Exchange
     Commission during the preceding twelve months.

          (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 financial statements included in the Reports, and except as modified in
     the Other Written Information or in the Schedule 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  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  are  restricted  securities  as of the  date  of this
     Agreement.  The  Company  will not issue any stop  transfer  order or other
     order impeding the sale,  resale or delivery of the  Securities,  except as
     may be required by federal securities laws.

          (m)      Defaults.
                   --------

          The Company is not in violation of its  Articles of  Incorporation  or
     ByLaws.  The  Company 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 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, and listed for trading on the
     Bulletin  Board.  The Company has not received  any oral or written  notice
     that its Common Stock will be delisted from the Bulletin Board nor that its
     common stock does not meet all  requirements  for the  continuation of such
     listing.  The Company  satisfies the requirements for the continued listing
     of the 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  June  30,  2002  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 2(q).

          (r)      No  Undisclosed  Events  or  Circumstances.
                   ------------------------------------------

          Since June 30, 2002, no event or  circumstance  has occurred or exists
     with respect to the Company or its  businesses,  properties,  operations or
     financial  condition,  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 2(s).
     Except  as set  forth in the  Reports  and Other  Written  Information  and
     Schedule 2(s), 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  interests  of other
     holders of the Company's securities.  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.

          (u)      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,  will be true and correct as of the Closing  Date in all material
     respects,  and, unless the Company otherwise  notifies the Subscriber prior
     to the Closing Date, shall be true and correct in all material  respects as
     of the Closing Date. The foregoing  representations  and  warranties  shall
     survive the Closing Date for a period of three years.

          3. Regulation D Offering.  This Offering is being made pursuant to the
     exemption from the  registration  provisions of the Securities Act of 1933,
     as amended, afforded by 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 the  Regulation  D exemption  as it relates to the offer and issuance of
     the Securities. A form of the legal opinion is annexed hereto as Exhibit B.
     The  Company  will  provide,  at the  Company's  expense,  such other legal
     opinions in the future as are reasonably  necessary for the exercise of the
     Warrants.
          4.   Reissuance  of   Securities.   The  Company   agrees  to  reissue
     certificates  representing the Securities  without the legends set forth in
     Sections  1(e) and 1(f)  above at such time as (a) the  holder  thereof  is
     permitted to and disposes of such Securities pursuant to Rule 144(d) and/or
     Rule  144(k)  under  the  1933 Act in the  opinion  of  counsel  reasonably
     satisfactory  to the  Company,  or (b) upon resale  subject to an effective
     registration  statement after the Securities are registered  under the 1933
     Act. The Company agrees to cooperate with the Subscriber in connection with
     all resales  pursuant  to Rule  144(d) and Rule  144(k) and  provide  legal
     opinions at the Company's  expense necessary to allow such resales provided
     the  Company  and  its  counsel  receive   reasonably   requested   written
     representations  from the Subscriber and selling broker,  if any.  Provided
     the Subscriber provides required certifications and representation letters,
     if any,  if the  Company  fails to remove  any legend as  required  by this
     Section 4 (a "Legend Removal Failure"),  then beginning on the tenth (10th)
     day following the date that the Subscriber has requested the removal of the
     legend and  delivered  all items  reasonably  required by the Company to be
     delivered by the Subscriber,  that the Company  continues to fail to remove
     such legend,  the Company shall pay to each Subscriber or assignee  holding
     shares,  subject to a Legend Removal Failure, as liquidated damages and not
     a penalty an amount equal to ten percent (10%) of the Purchase Price of the
     shares subject to a Legend  Removal  Failure for each 15-day period or part
     thereof  that such  failure  continues.  If during  any  twelve  (12) month
     period,  the Company fails to remove any legend as required by this Section
     4 for an aggregate of thirty (30) days, each Subscriber or assignee holding
     Securities subject to a Legend Removal Failure may, at its option,  require
     the Company to purchase all or any portion of the  Securities  subject to a
     Legend Removal  Failure held by such  Subscriber or assignee at a price per
     share equal to 130% of the applicable Purchase Price.

          5.       Finder's Fee/Legal Fee.

          (a)      Legal Fee.
                   ---------

          The  Company  shall pay to  Grushko &  Mittman,  P.C.,  counsel to the
     Subscriber a fee of $15,000  ("Legal Fees") (of which $3,000 has previously
     been  paid)  as  reimbursement  for  services  rendered  to  Subscriber  in
     connection  with this  Agreement  and the  purchase and sale of the Company
     Shares and  Warrants  for the  aggregate  Purchase  Price of $150,000  (the
     "Offering")  and acting as escrow  agent for the  Offering.  The Legal Fees
     will be payable  out of funds held  pursuant  to a funds  escrow  agreement
     ("Escrow  Agreement")  to be entered  into by the Company,  Subscriber  and
     Escrow Agent in connection with the Offering.

          (b)      Finder.
                   ------

          The  Company on the one hand,  and the  Subscriber  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.  The Company agrees that it
     will pay the  Finder a cash fee  equal  to 10% of the  Purchase  Price  and
     Second Closing Purchase Price (as defined in Section 9.1 of this Agreement)
     on the Closing  Date and Second  Closing Date (as defined in Section 9.1 of
     this  Agreement)  directly  out of the funds  held  pursuant  to the Escrow
     Agreement or other escrow  agreement to be entered into in connection  with
     the Second Closing.  The Company represents that there are no other parties
     entitled to receive fees,  commissions,  or similar  payments in connection
     with the offering described in this Agreement except the Finder.

          6.          Covenants of the Company.
                      ------------------------

          The Company covenants and agrees with the Subscriber as follows:

          (a)   Stop  Orders.
                ------------

          The Company  will advise the  Subscriber,  promptly  after it receives
     notice of issuance by the  Securities  and Exchange  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.

          (b)   Listing.
                -------

          The Company shall promptly  secure the listing of the Company  Shares,
     and Common  Stock  issuable  upon the  exercise of the  Warrants  upon each
     national securities  exchange,  or automated 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,  NASD OTC Bulletin  Board (or any successor  entity or the proposed
     "Bulletin Board  Exchange"),  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  Bulletin  Board and such  exchanges,  as  applicable.  The
     Company  will  provide  the  Subscriber  copies of all  notices it receives
     notifying the Company of the threatened and actual  delisting of the Common
     Stock from any Principal Market.

          (c)   Market  Regulations.
                -------------------

          The Company  shall  notify the  Commission,  the Bulletin  Board,  the
     Principal Market and applicable state authorities, in accordance with their
     requirements,  if any, 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 Subscriber and promptly
     provide copies thereof to Subscriber.

          (d)   Reporting  Requirements.
                -----------------------

          From the  Closing  Date and  until at least  two (2)  years  after the
     actual  effective date of the  Registration  Statement on Form SB-2 or such
     other  Registration  Statement  described in Section  8.1(iv)  hereof,  the
     Company will (i) cause its Common Stock to continue to be registered  under
     Sections  12(b) or 12(g) of the Exchange  Act,  (ii) comply in all respects
     with its reporting  and filing  obligations  under the Exchange Act,  (iii)
     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
     Exchange Act, as applicable,  and (iv) 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 Act or the  Exchange  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 the
     later of two (2) years after the actual  effective date of the Registration
     Statement on Form SB-2 or such other  Registration  Statement  described in
     Section  8.1(iv)  hereof.  Until the  earlier of the resale of the  Company
     Shares by the  Subscriber or at least two (2) years after the Warrants have
     been  exercised,  the Company  will use its best  efforts to  continue  the
     listing of the Common Stock on the Principal  Market and will comply in all
     respects with the Company's  reporting,  filing and other obligations under
     the bylaws or rules of Principal Market.

          (e)   Use of Proceeds.
                ---------------

          The  Purchase  Price will be used by the Company  for general  working
     capital,  and may not and will not be used for accrued  and unpaid  officer
     and director  salaries,  future officer and director  salaries,  payment of
     financing  related debt,  redemption  of  outstanding  redeemable  notes or
     equity instruments of the Company nor non-trade obligations  outstanding on
     the Closing Date.

          (f)   Reservation  of Common Stock.
                ----------------------------

          The Company  undertakes  to reserve from its  authorized  but unissued
     common stock,  at all times that Warrants remain  outstanding,  a number of
     common shares equal to the amount of common  shares  issuable upon exercise
     of the Warrants.

          (g)   Taxes.
                -----

          For a period of two years  after the date  hereof,  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.
                ---------

          For a period of two years after the date hereof, 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 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.
                -------------------

          For a period of two years after the date hereof, 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.
               -------------------------

          For a period of two years after the date  hereof,  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.
                ----------------------

          For a period of two years after the date  hereof,  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.
                -----------

          For a period of two years after the date hereof, 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  needful  and  proper
     repairs,  renewals,  replacements,  additions and improvements thereto; and
     the Company will at all times  comply 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)   Blackout.
                --------

          The Company  undertakes and covenants that until the first to occur of
     (i) the registration statement described in Section 8.1(iv) being effective
     for one hundred and eighty (180) business days,  (ii) until all the Company
     Shares have been resold pursuant to said registration  statement,  or (iii)
     two years  after the  Closing  Date,  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, causing an already effective registration statement to no longer
     be  effective  or  current,  or require  the filing of an  amendment  to an
     already effective registration statement.

          (n)  Confidentiality.
               ----------------

          For a period of two years after the date  hereof,  the Company  agrees
     that it will  not  disclose  publicly  or  privately  the  identity  of the
     Subscriber  unless expressly agreed to in writing by the Subscriber or only
     to the extent required by law.

          7.  Covenants of the Company and Subscriber Regarding Indemnification.
              ------------------------------------------------------------------

          (a) The Company  agrees to  indemnify,  hold  harmless,  reimburse and
     defend Subscriber,  Subscriber's 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  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 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)  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
     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 Subscriber of any covenant or  undertaking to be performed by Subscriber
     hereunder,  or  any  other  agreement  entered  into  by  the  Company  and
     Subscribes relating hereto.

          (c) The  procedures  set  forth  in  Section  8.6  shall  apply to the
     indemnifications set forth in Sections 7(a) and 7(b) above.

          8.1.     Registration  Rights.
                   --------------------

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

          (i) On one  occasion,  for a  period  commencing  121 days  after  the
     Closing  Date,  but not later  than  three  years  after the  Closing  Date
     ("Request  Date"),  the Company,  upon a written request  therefor from any
     record  holder or holders of more than 50% of the Company  Shares  actually
     issued  hereunder (the Company Shares issued hereunder on the Closing Date,
     the Second Closing Shares, and one share of common stock issued or issuable
     upon exercise of the Warrants and Second  Closing  Warrants as if same were
     issued on the Closing Date,  collectively  the  "Registrable  Securities"),
     shall prepare and file with the Commission a registration  statement  under
     the 1933 Act covering the Registrable  Securities  which are the subject of
     such  request,  unless such  Registrable  Securities  are the subject of an
     effective  registration statement or included for registration in a pending
     registration  statement. In addition, 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 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
     8.1(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   Subscriber  or  Holder   pursuant  to  an  effective
     registration statement, each such time it will give at least 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 10 days after the giving of any such notice by the Company,
     to register any of the Registrable Securities,  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").  In the event that any  registration  pursuant  to this  Section
     8.1(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 8.4 hereof,
     the  Company may  withdraw  or delay or suffer a delay of any  registration
     statement referred to in this Section 8.1(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  8.1(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  8.1(ii) rather than
     Section  8.1(i),  and the rights of the holders of  Registrable  Securities
     covered by such written request shall be governed by Section 8.1(ii).

          (iv) The Company shall file with the  Commission  prior to the Closing
     Date (the "Filing  Date"),  and use its  reasonable  commercial  efforts to
     cause to be declared  effective  within  ninety (90) 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 the number of Company Shares issued on the Closing Date and Second
     Closing Shares  issuable on the Second Closing Date and one share of common
     stock for each of the common shares  issuable upon exercise of the Warrants
     and Second Closing Warrants as if same were issued on the Closing Date. The
     Registrable  Securities shall be reserved and set aside exclusively for the
     benefit of the Subscriber,  and not issued, employed or reserved for anyone
     other than the Subscriber.  Such registration statement will immediately be
     amended or additional  registration statements will be immediately filed by
     the Company as necessary to register additional Company Shares 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  8.1(iv)  except as  disclosed on Schedule  8.1,
     without the written consent of the Subscriber.

          8.2.     Registration  Procedures.
                   ------------------------

          If and  whenever the Company is required by the  provisions  hereof to
     effect the  registration of any shares of Registrable  Securities under the
     1933 Act, the Company will, as expeditiously as possible:

          (a)  prepare and file with the  Commission  a  registration  statement
     required by Section 8.1, 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  Registrable
     Securities  ("Sellers")  copies of all  filings and  Commission  letters of
     comment;

          (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 later of: (i) until twelve months after all
     the Company  Shares are eligible for resale  pursuant to Rule 144(k) of the
     1933 Act; or (ii) until such registration  statement has been effective for
     a period of not less than 365 days,  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
     Seller's  intended  method of  disposition  set forth in such  registration
     statement for such period;

          (c) furnish to the Seller,  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  Seller's
     Registrable  Securities  covered by such  registration  statement under the
     securities  or  "blue  sky"  laws  of  such  jurisdictions  as the  Seller,
     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) 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 Seller 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;

          (g)  provided  same  would not be in  violation  of the  provision  of
     Regulation  FD under the 1934 Act,  make  available  for  inspection by the
     Seller, 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.

          8.3.  Provision of  Documents.  In connection  with each  registration
     described  in this  Section 8, the 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. In connection  with each  registration  pursuant to Section 8.1(i) or
     8.1(ii)  covering  an  underwritten  public  offering,  the Company and the
     Seller  agree  to  enter  into  a  written   agreement  with  the  managing
     underwriter in such form and containing such provisions as are customary in
     the securities  business for such an arrangement  between such  underwriter
     and companies of the Company's size and investment stature.

          8.4.  Non-Registration  Events.  The Company and the Subscriber  agree
     that the Seller will suffer damages if any registration  statement required
     under  Section  8.1(i) or 8.1(ii)  above is not filed  within 60 days after
     written request by the Holder and not declared  effective by the Commission
     within  120 days after  such  request or within 120 days after the  Closing
     Date in reference to the Registration  Statement on Form SB-2 or such other
     form described in Section 8.1(iv),  and maintained in the manner and within
     the time  periods  contemplated  by  Section 8 hereof,  and it would not be
     feasible  to  ascertain   the  extent  of  such  damages  with   precision.
     Accordingly, if (i) the Registration Statement described in Sections 8.1(i)
     or 8.1(ii) is not filed within 60 days of such written  request,  or is not
     declared  effective by the  Commission  on or prior to the date that is 120
     days after such request, or (ii) the registration statement on Form SB-2 or
     such other form described in Section  8.1(iv) is not declared  effective on
     or before the sooner of 120 days after the Closing Date, or within ten (10)
     business days of receipt by the Company of a written or oral  communication
     from the Commission that the  registration  statement  described in Section
     8.1(iv) will not be reviewed, or (iii) any registration statement described
     in Sections 8.1(i),  8.1(ii) or 8.1(iv) is filed and declared effective but
     shall thereafter cease to be effective (without being succeeded immediately
     by an additional registration statement filed and declared effective) for a
     period of time which shall exceed 45 days in the aggregate per year or more
     than  20  consecutive  calendar  days  (defined  as a  period  of 365  days
     commencing on the date the  Registration  Statement is declared  effective)
     (each such event referred to in clauses (i), (ii) and (iii) of this Section
     8.4 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  of  additional  Company  Shares  ("Additional  Company
     Shares")  equal to four  Additional  Company  Shares  for each ten  Company
     Shares  held by the  Subscriber  which are  subject  to a  Non-Registration
     Event.  Such Additional  Company Shares must be delivered to the Subscriber
     within three business days of the occurrence of the Non-Registration Event.
     In respect to the Additional  Company Shares, the Subscriber is granted the
     registration rights described in Section 8.1(i) hereof immediately upon the
     occurrence  of a  Non-Registration  Event and may exercise  those rights in
     relation to the issued or issuable Additional Company Shares without regard
     to the proportion of outstanding  Company  Shares such  Additional  Company
     Shares represent.  Additionally, for so long as such Non-Registration Event
     shall continue for more than 60 days (in the aggregate),  the Company shall
     pay in  cash  as  Liquidated  Damages  to each  holder  of any  Registrable
     Securities  an amount  equal to one (1%)  percent  for each 30 days or part
     thereof beyond the initial 60 days of the pendency of the  Non-Registration
     Event of the  Purchase  Price  of the  Company  Shares  and  actually  paid
     Purchase  Price (as defined in the  Warrant) of the Common  Stock issued or
     issuable  upon  exercise  of the  Warrant,  during  the  pendency  of  such
     Non-Registration  Event for the Registrable  Securities  owned of record by
     such holder as of or subsequent to the occurrence of such  Non-Registration
     Event.  Payments to be made  pursuant to this  Section 8.4 shall be due and
     payable within ten (10) business days after demand in immediately available
     funds. The Additional Company Shares shall be deemed Registrable Securities
     for all purposes from and after the occurrence of a Non-Registration Event.

          8.5. Expenses.  All expenses incurred by the Company in complying with
     Section 8, 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,  and 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 special counsel to the Seller,
     are called  "Selling  Expenses".  The Seller  shall pay the fees of its own
     additional counsel, if any. The Company will pay all Registration  Expenses
     in  connection  with the  registration  statement  under Section 8. Selling
     Expenses in connection  with each  registration  statement  under Section 8
     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.

          8.6.     Indemnification and Contribution.
                   --------------------------------

          (a) In the event of a registration of any Registrable Securities under
     the 1933 Act  pursuant  to  Section  8, 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 8, 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 8.6(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 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 8, the Seller  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 8, 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 gross  proceeds  received by the
     Seller from the sale of Registrable Securities covered by 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 8.6(c)
     and shall  only  relieve  it from any  liability  which it may have to such
     indemnified party under this Section 8.6(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  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  8.6(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 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)
     the Seller,  or any  controlling  person of the  Seller,  makes a claim for
     indemnification   pursuant  to  this  Section  8.6  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 8.6 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 8.6;  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.

           8.7.     Delivery of Unlegended Shares.
                    -----------------------------

          (a) Within  three (3)  business  days (such third  business  day,  the
     "Delivery Date") after the business day on which the Company has received a
     notice   that  (i)   Registrable   Securities   have  been  sold,   (ii)  a
     representation  that the prospectus delivery  requirements,  if applicable,
     have been satisfied,  and (iii) and the original Company Share certificate,
     the  Company at its  expense,  (i) 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, for the delivery of unlegended Company Shares issuable pursuant to
     any effective and current registration  statement described in Section 8 of
     this  Agreement   (the   "Unlegended   Shares");   and  (ii)  transmit  the
     certificates   representing   the  Unlegended   Shares,   with  a  legended
     certificate  representing  the balance of the unsold  Company Shares to the
     Subscriber  at the  address  specified  in the notice of sale,  via express
     courier,  by  electronic  transfer or  otherwise  on or before the Delivery
     Date.

          (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 the  Subscriber  and its  compliance  with  the
     provisions  contained  in  this  paragraph,  so  long  as the  certificates
     therefore  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 use its best  efforts to 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.

          (c) The  Company  understands  that a  delay  in the  delivery  of the
     Unlegended  Shares  pursuant to Section 8 hereof  beyond the Delivery  Date
     could result in economic loss to the  Subscriber.  As  compensation  to the
     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 Company Shares
     delivered to the Company for reissuance as Unlegended  Shares.  The Company
     shall pay any payments incurred under this Section in immediately available
     funds upon demand.

          (d) In addition to any other rights  available to the  Subscriber,  if
     the Company fails to deliver to the Subscriber Unlegended Shares within ten
     (10) calendar days after the Delivery Date and the Subscriber purchases (in
     an open market  transaction or otherwise) shares of common stock to deliver
     in  satisfaction  of a sale by such  Subscriber of the Company Shares which
     the Subscriber  anticipated  receiving from the Company (a "Buy-In"),  then
     the  Company  shall  pay in  cash to the  Subscriber  (in  addition  to any
     remedies available to or elected by the Subscriber) the amount by which (A)
     the Subscriber's total purchase price (including brokerage commissions,  if
     any) for the shares of common stock so purchased  exceeds (B) the aggregate
     Purchase  Price  of  the  Company  Shares  delivered  to  the  Company  for
     reissuance as Unlegended  Shares,  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 Subscriber  purchases shares of
     Common  Stock  having a total  purchase  price of $11,000 to cover a Buy-In
     with respect to $10,000 of Purchase  Price of Company  Shares  delivered to
     the Company for  reissuance  as  Unlegended  Shares,  the Company  shall be
     required to pay the Subscriber $1,000, plus interest.  The Subscriber shall
     provide the Company  written notice  indicating the amounts  payable to the
     Subscriber in respect of the Buy-In.

          9.       Second Closing.
                   --------------

          9.1. Second Closing Securities. The Subscriber agrees to purchase from
     the  Company and the Company  agrees to sell to the  Subscriber  additional
     Company  Shares  ("Second  Closing  Shares")  and one  Warrant for each two
     Second Closing Shares ("Second Closing  Warrants" and collectively with the
     Second Closing Shares and Common Stock issuable upon exercise of the Second
     Closing Warrants - "Second Closing  Securities").  The closing date for the
     purchase of the Second Closing Shares and Second Closing  Warrants shall be
     the  seventh   business  day  after  the  actual   effective  date  of  the
     Registration  Statement  described  in  Section  8.1(iv)  ("Second  Closing
     Date").  The purchase price of the Second Closing Shares and Second Closing
     Warrants shall be $150,000 ("Second Closing Purchase Price"). The amount of
     Second Closing Shares to be sold by the Company and purchased by Subscriber
     shall be  1,500,000.  The  Company  will  also  issue  and  deliver  to the
     Subscriber on the Second Closing Date 750,000 Second Closing Warrants.  The
     per share "Purchase  Price" of the Common Stock (as defined in the Warrant)
     issuable upon exercise of the Second Closing  Warrants shall be the closing
     price  of the  Company's  Common  Stock  for the  trading  day  immediately
     preceding the Second  Closing Date.  The Second  Closing  Warrants shall be
     exercisable for five years after the Second Closing Date.

          9.2.  Conditions to Second  Closing.  The requirement of Subscriber to
     proceed with the Second  Closing is expressly  contingent  on the truth and
     accuracy,   on  the  Closing  Date  and  Second   Closing   Date,   of  the
     representations  and  warranties  of the Company  contained in Section 2 of
     this Agreement.  The Second Closing is further expressly  contingent on the
     non-occurrence of any Registration  Default or other default by the Company
     of its obligation and  undertakings  contained in this  Agreement,  and the
     delivery  of  Second   Closing  Shares  that  have  been  included  in  the
     registration   statement  described  in  Section  8.1(iv),  which  must  be
     effective as of the Second Closing Date.

          9.3.  Second  Closing  Deliveries.  On the Second  Closing  Date,  the
     Company will deliver the Second Closing Shares and Second Closing Warrants,
     and the  Subscriber  will deliver the Second  Closing  Purchase  Price (the
     "Second Closing").  The Company will deliver a certificate ("Second Closing
     Certificate")  signed by its chief  operating  officer and chief  financial
     officer (i) representing the truth and accuracy of all the  representations
     and warranties made by the Company  contained in this Agreement,  as of the
     Closing Date, the actual effective date of the  Registration  Statement and
     the Second Closing Date as if such representations and warranties were made
     and given on each of such dates, (ii) adopting the covenants of the Company
     set forth in Section 6 of this  Agreement in relation to the Second Closing
     Securities,  and (iii)  representing  the timely  compliance by the Company
     with the Company's registration requirements set forth in Section 8 of this
     Agreement.  A legal opinion nearly  identical to the legal opinion referred
     to in Section 3 of this  Agreement  shall be delivered to the Subscriber at
     the  Second   Closing  in  relation  to  the  Company  and  Second  Closing
     Securities.  The  legal  opinion  must  state  that all of the  Registrable
     Securities have been included for registration in an effective
     registration statement.

          9.4.  Second Closing  Finder's Fee. The Finders shall receive from the
     Company a Finder's Fee in  connection  with the Second  Closing in the same
     proportion  as received in  connection  with the  Closing,  and on the same
     terms and conditions as set forth in Section 6(b) of this Agreement.

          9.5. Second Closing Limitation. A Second Closing may not take place in
     connection with that amount of Second Closing  Securities which would be in
     excess of the sum of (y) the number of shares of Common Stock  beneficially
     owned by a Subscriber on the Effective  Date,  and (z) the number of shares
     of Second Closing  Securities  with respect to which the  determination  of
     this  proviso is being made on the  Effective  Date,  which would result in
     beneficial   ownership  by  the  Subscriber  of  more  than  9.99%  of  the
     outstanding  shares of Common Stock of the Company on the  Effective  Date.
     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.  The  Subscriber may revoke the  restriction  described in this
     paragraph upon 75 days prior notice to the Company.  The  Subscriber  shall
     have the  right to  determine  which of the  equity of the  Company  deemed
     beneficially  owned  by the  Subscriber  shall  be  included  in the  9.99%
     described above and which shall be allocated to the excess above 9.99%.

          10.      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 USA
     Technologies,  Inc., 200 Plant Avenue,  Wayne,  PA 19087,  Attn:  George R.
     Jensen, Jr., telecopier: (610) 989-0344, with a copy by telecopier only to:
     Lurio & Associates,  One Commerce  Square,  Suite 2340, 2005 Market Street,
     Philadelpha, PA 19103-7015, Attn: Douglas M. Lurio, Esq., telecopier: (215)
     665-8582, and (ii) if to the Subscriber,  to the name, address and telecopy
     number set forth on the  signature  page hereto,  with a 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.  The  closing  date shall be the date
     that subscriber funds  representing the net amount due the Company from the
     Purchase Price of the Offering is transmitted by wire transfer or otherwise
     to the Company (the "Closing Date"). The Subscriber agrees that the Closing
     must take place not later than one  business day after the  Subscriber  has
     been notified by the Company of the Filing 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 amended only by a writing  executed by
     both  parties.  Neither the Company  nor the  Subscriber  has 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)   Execution.
                ----------

          This  Agreement  may be executed  by  facsimile  transmission,  and in
     counterparts, each of which will be deemed an original.

          (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. Both parties and the individuals  executing this Agreement and
     other  agreements  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 or thereof, this being in addition to any other remedy to
     which any of them may be  entitled  by law or  equity.  Subject  to Section
     10(e) hereof,  each of the Company and Subscriber 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 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.

<PAGE>

                      [THIS SPACE INTENTIONALLY LEFT BLANK]

<PAGE>

                  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.

                                                      USA TECHNOLOGIES, INC.
                                                      A Pennsylvania Corporation

                                                     /s/ George R. Jensen, Jr.
                                                      By:_______________________
                                                              Name:
                                                              Title:

                                                      Dated: November 4, 2002

------------------------------------ ------------- -------------- -------------
SUBSCRIBER                           PURCHASE      WARRANTS       SECOND
                                     PRICE                        CLOSING
                                                                  PURCHASE
                                                                  PRICE
------------------------------------ ------------- -------------- -------------
------------------------------------ ------------- -------------- -------------
                                     $150,000.00   Warrants to    $150,000.00
                                                   Purchase
                                                   750,000
                                                   Common Shares

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

<PAGE>

                         LIST OF EXHIBITS AND SCHEDULES

         Exhibit A                  Form of Warrant

         Exhibit B                  Form of Legal Opinion

         Schedule 2(d)              Additional Issuances

         Schedule 2(q)              Undisclosed Liabilities

         Schedule 2(s)              Capitalization

         Schedule 8.1               Other Securities to be Registered

<PAGE>

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