Document:

Exhibit 10.1

                          SECURITIES PURCHASE AGREEMENT

      This  Securities  Purchase  Agreement  (this  "Agreement")  is dated as of
August 8, 2006 among Able Energy,  Inc., a Delaware corporation (the "Company"),
and each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a "Purchaser" and collectively the "Purchasers").

      WHEREAS,  subject to the terms and  conditions set forth in this Agreement
and  pursuant to Section  4(2) of the  Securities  Act of 1933,  as amended (the
"Securities  Act") and Rule 506 promulgated  thereunder,  the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase  from the Company,  securities  of the Company as more fully
described in this Agreement.

      NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement,  and for  other  good and  valuable  consideration  the  receipt  and
adequacy of which are hereby acknowledged,  the Company and each Purchaser agree
as follows:

                                   ARTICLE I.
                                   DEFINITIONS

      1.1  Definitions.  In  addition  to the terms  defined  elsewhere  in this
Agreement:  (a) capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Debentures (as defined herein),  and (b) the
following terms have the meanings indicated in this Section 1.1:

            "Able  Energy/All  American  Transaction"  shall  mean the  business
      combination of All American Plazas,  Inc., a Pennsylvania  corporation and
      the Company such that,  upon completion of the business  combination,  the
      Company owns all or substantially all of the assets of All American Plaza,
      Inc.,  whether  through the  payment of debt,  equity or any other form of
      consideration.

            "Able   Energy/All   American   Transaction   Documents"  means  the
      securities assumption,  amendment and issuance agreements, the convertible
      debentures,  the security agreements, the warrants and any other documents
      or agreements  executed in connection with the  transactions  contemplated
      under such securities assumption,  amendment and issuance agreements which
      shall be substantially in the form of Annex X to that Securities  Purchase
      Agreement, dated May 26, 2005.

            "Action"  shall have the  meaning  ascribed  to such term in Section
      3.1(j).

            "Additional Securities" shall have the meaning ascribed to such term
      in Section 4.18(a).

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            "Affiliate"  means any Person that,  directly or indirectly  through
      one or more  intermediaries,  controls  or is  controlled  by or is  under
      common  control  with a Person,  as such  terms are used in and  construed
      under Rule 144 under the Securities Act. With respect to a Purchaser,  any
      investment  fund or managed  account  that is  managed on a  discretionary
      basis by the same  investment  manager as such Purchaser will be deemed to
      be an Affiliate of such Purchaser.

            "Business Day" means any day except Saturday,  Sunday, any day which
      shall be a federal  legal holiday in the United States or any day on which
      banking  institutions  in the State of New York are authorized or required
      by law or other governmental action to close.

            "Closing"  means  the  closing  of  the  purchase  and  sale  of the
      Securities pursuant to Section 2.1.

            "Closing  Date" means the  Trading  Day when all of the  Transaction
      Documents  have been  executed  and  delivered by the  applicable  parties
      thereto, and all conditions  precedent to (i) the Purchasers'  obligations
      to pay the  Subscription  Amount  and (ii) the  Company's  obligations  to
      deliver the Securities have been satisfied or waived.

            "Commission" means the Securities and Exchange Commission.

            "Common  Stock"  means the common  stock of the  Company,  par value
      $0.001  per  share,  and any other  class of  securities  into  which such
      securities may hereafter be reclassified or changed into.

            "Common Stock  Equivalents"  means any  securities of the Company or
      the Subsidiaries  which would entitle the holder thereof to acquire at any
      time Common Stock,  including,  without  limitation,  any debt,  preferred
      stock, rights,  options,  warrants or other instrument that is at any time
      convertible into or exercisable or exchangeable for, or otherwise entitles
      the holder thereof to receive, Common Stock.

            "Company Counsel" means Law Offices of Kenneth Miller.

            "Conversion  Price" shall have the meaning  ascribed to such term in
      the Debentures.

            "Debentures" means, the Variable Rate Secured Convertible Debentures
      due, subject to the terms therein and the amortization  schedule,  2 years
      from  their  date of  issuance  issued by the  Company  to the  Purchasers
      hereunder, in the form of Exhibit A.

            "Disclosure  Schedules" shall have the meaning ascribed to such term
      in Section 3.1.

            "Effective  Date"  means  the  date  that the  initial  Registration
      Statement  filed  by  the  Company  pursuant  to the  Registration  Rights
      Agreement is first declared effective by the Commission.

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            "Evaluation  Date" shall have the  meaning  ascribed to such term in
      Section 3.1(r).

            "Exchange  Act"  means  the  Securities  Exchange  Act of  1934,  as
      amended, and the rules and regulations promulgated thereunder.

            "Exempt  Issuance"  means the issuance of (a) shares of Common Stock
      or options to employees,  officers or directors of the Company pursuant to
      any stock or option plan duly  adopted by a majority  of the  non-employee
      members of the Board of  Directors  of the  Company  or a majority  of the
      members of a committee  of  non-employee  directors  established  for such
      purpose,  (b) securities upon the exercise or exchange of or conversion of
      any Securities  issued hereunder  and/or other  securities  exercisable or
      exchangeable  for or  convertible  into shares of Common  Stock issued and
      outstanding on the date of this  Agreement,  provided that such securities
      have not been  amended  since the date of this  Agreement  to increase the
      number  of such  securities  or to  decrease  the  exercise,  exchange  or
      conversion price of any such securities, (c) securities issued pursuant to
      acquisitions  or  strategic  transactions  approved  by a majority  of the
      disinterested  directors,  provided any such  issuance  shall only be to a
      Person which is, itself or through its subsidiaries,  an operating company
      in a business  synergistic  with the  business of the Company and in which
      the Company receives  benefits in addition to the investment of funds, but
      shall not include a transaction in which the Company is issuing securities
      primarily for the purpose of raising capital or to an entity whose primary
      business  is  investing  in  equity  or  equity  linked  securities,   (d)
      securities issued to fuel suppliers of the Company provided such issuances
      do not exceed  $1,000,000 of Common Stock or Common Stock  Equivalents  in
      any 12 month  period,  (e) the one-time  issuance of  $6,000,000 of Common
      Stock to Trans Montaigne pursuant to convertible  indebtedness outstanding
      on the date  hereof  for a  conversion  price of at least  $6.00 per share
      provided  that such  shares do not have  registration  rights (or, if they
      have  registration  rights,  Trans  Montaigne  has entered into a one year
      lock-up  agreement on any securities of the Company it beneficially  owns,
      which lock-up agreement shall be in form and substance  acceptable to each
      Purchaser)  and (f)  securities  issued to the  purchasers  party to those
      certain Securities Purchase Agreements, dated May 26, 2005 and January 24,
      2006, by and among All American Plazas, Inc. and such purchasers (g) up to
      14.5 million shares of Common Stock (subject to adjustment for reverse and
      forward  stock  splits,  stock  dividends,  stock  combinations  and other
      similar transactions of the Common Stock that occur after the date of this
      Agreement)  issued to the  shareholders  of All American  Plazas,  Inc. in
      connection with the Able Energy/All American Transaction.

            "Force  Majeure"  shall mean any unusual  event  arising from causes
      reasonably  beyond the control of the Company that could not be reasonably
      anticipated  that causes a delay in or  prevents  the  performance  of any
      obligation  under this Agreement or the Transaction  Documents,  including
      but not limited to: acts of God; fire; war; terrorism; insurrection; civil
      disturbance;  explosion;  adverse  weather  conditions  that  could not be
      reasonably anticipated; unusual delay in transportation;  strikes or other
      labor disputes;  restraint by court order or order of public authority but
      not including delays solely caused by any action of, or failure to act by,
      the Commission or the Company's transfer agent.

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            "FW" means Feldman Weinstein & Smith LLP with offices located at 420
      Lexington Avenue, Suite 2620, New York, New York 10170-0002.

            "GAAP"  shall  have the  meaning  ascribed  to such term in  Section
      3.1(h).

            "Intellectual  Property  Rights" shall have the meaning  ascribed to
      such term in Section 3.1(o).

            "Legend  Removal Date" shall have the meaning  ascribed to such term
      in Section 4.1(c).

            "Liens" means a lien, charge, security interest,  encumbrance, right
      of first refusal, preemptive right or other restriction.

            "Material  Adverse  Effect" shall have the meaning  assigned to such
      term in Section 3.1(b).

            "Material  Permits" shall have the meaning  ascribed to such term in
      Section 3.1(m).

            "Maximum  Rate"  shall  have the  meaning  ascribed  to such term in
      Section 5.17.

            "Participation Maximum" shall have the meaning ascribed to such term
      in Section 4.13.

            "Person"  means an individual or  corporation,  partnership,  trust,
      incorporated  or  unincorporated   association,   joint  venture,  limited
      liability  company,  joint  stock  company,  government  (or an  agency or
      subdivision thereof) or other entity of any kind.

            "Pre-Notice" shall have the meaning ascribed to such term in Section
      4.13.

            "Proceeding"  means  an  action,   claim,  suit,   investigation  or
      proceeding  (including,  without  limitation,  an investigation or partial
      proceeding, such as a deposition), whether commenced or threatened.

            "Purchaser  Party"  shall have the meaning  ascribed to such term in
      Section 4.11.

            "Purchaser  Additional  Rights"  shall have the meaning  ascribed to
      such term in Section 4.18(a).

            "Registration   Rights  Agreement"  means  the  Registration  Rights
      Agreement, dated the date hereof, among the Company and the Purchasers, in
      the form of Exhibit B attached hereto.

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<PAGE>

            "Registration  Statement" means a registration statement meeting the
      requirements set forth in the  Registration  Rights Agreement and covering
      the resale of the  Underlying  Shares by each Purchaser as provided for in
      the Registration Rights Agreement.

            "Required Approvals" shall have the meaning ascribed to such term in
      Section 3.1(e).

            "Required  Minimum"  means,  as of any date,  the maximum  aggregate
      number of shares of Common  Stock then issued or  potentially  issuable in
      the future pursuant to the Transaction Documents, including any Underlying
      Shares  issuable  upon  exercise or conversion in full of all Warrants and
      Debentures  (including Underlying Shares issuable as payment of interest),
      ignoring any conversion or exercise limits set forth therein, and assuming
      that  the  Conversion  Price  is at all  times  on and  after  the date of
      determination  75%  of the  then  Conversion  Price  on  the  Trading  Day
      immediately prior to the date of determination.

            "Rule 144" means Rule 144 promulgated by the Commission  pursuant to
      the Securities  Act, as such Rule may be amended from time to time, or any
      similar rule or  regulation  hereafter  adopted by the  Commission  having
      substantially the same effect as such Rule.

            "SEC  Reports"  shall  have the  meaning  ascribed  to such  term in
      Section 3.1(h).

            "Securities" means the Debentures,  the Warrants, the Warrant Shares
      and the Underlying Shares.

            "Securities  Act" means the Securities Act of 1933, as amended,  and
      the rules and regulations promulgated hereunder.

            "Security  Agreement" means the Security  Agreement,  dated the date
      hereof,  among the  Company and the  Purchasers,  in the form of Exhibit F
      attached hereto.

            "Security   Documents"  shall  mean  the  Security  Agreement,   the
      Subsidiary   Guarantees  and  any  other  documents  and  filing  required
      thereunder  in order to grant the  Purchasers  a security  interest in the
      assets of the Company as provided in the Security Agreement, including all
      UCC-1 filing receipts.

            "Shareholder Approval" means such approval as may be required by the
      applicable  rules and  regulations of the Nasdaq  SmallCap  Market (or any
      successor entity) from the shareholders of the Company with respect to the
      transactions  contemplated  by the  Transaction  Documents,  including the
      issuance  of all of the  Underlying  Shares  and  shares of  Common  Stock
      issuable  upon  exercise of the Warrants in excess of 19.99% of the issued
      and outstanding Common Stock on the Closing Date.

            "Short Sales" shall include all "short sales" as defined in Rule 200
      of  Regulation  SHO under  the  Exchange  Act (but  shall not be deemed to
      include the location  and/or  reservation  of borrowable  shares of Common
      Stock).

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            "Subscription  Amount" means,  as to each  Purchaser,  the aggregate
      amount to be paid for  Debentures  and  Warrants  purchased  hereunder  as
      specified  below  such  Purchaser's  name  on the  signature  page of this
      Agreement and next to the heading "Subscription  Amount", in United States
      Dollars and in immediately available funds.

            "Subsequent  Financing" shall have the meaning ascribed to such term
      in Section 4.13.

            "Subsequent  Financing  Notice"  shall have the meaning  ascribed to
      such term in Section 4.13.

            "Subsidiary"  means any  subsidiary  of the  Company as set forth on
      Schedule 3.1(a).

            "Subsidiary  Guarantee"  means the Subsidiary  Guarantee,  dated the
      date  hereof,  executed  by  each  of the  Subsidiaries  in  favor  of the
      Purchasers, in the form of Exhibit G attached hereto.

            "Trading  Day" means a day on which the Common  Stock is traded on a
      Trading Market.

            "Trading  Market" means the following  markets or exchanges on which
      the Common  Stock is listed or quoted for trading on the date in question:
      the Nasdaq Capital Market, the American Stock Exchange, the New York Stock
      Exchange or the Nasdaq National Market.

            "Transaction  Documents" means this Agreement,  the Debentures,  the
      Warrants, the Registration Rights Agreement,  the Security Agreement,  the
      Security  Documents  and any other  documents  or  agreements  executed in
      connection with the transactions contemplated hereunder.

            "Underlying  Shares"  means the  shares of Common  Stock  issued and
      issuable upon conversion or redemption of the Debentures and upon exercise
      of the  Warrants  and issued and  issuable in lieu of the cash  payment of
      interest on the Debentures in accordance with the terms of the Debentures.

            "VWAP" means, for any date, the price determined by the first of the
      following clauses that applies:  (a) if the Common Stock is then listed or
      quoted on a Trading Market, the daily volume weighted average price of the
      Common Stock for such date (or the nearest  preceding date) on the Trading
      Market on which the Common  Stock is then  listed or quoted as reported by
      Bloomberg  L.P.  (based on a Trading Day from 9:30 a.m. New York City time
      to 4:02 p.m. New York City time);  (b) if the OTC Bulletin  Board is not a
      Trading Market,  the volume weighted average price of the Common Stock for
      such date (or the nearest  preceding date) on the OTC Bulletin Board;  (c)
      if the Common Stock is not then listed or quoted on the OTC Bulletin Board
      and if prices for the Common Stock are then  reported in the "Pink Sheets"
      published  by  Pink  Sheets,  LLC (or a  similar  organization  or  agency
      succeeding to its functions of reporting prices), the most recent

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      bid price per share of the Common Stock so  reported;  or (d) in all other
      cases,  the fair market value of a share of Common Stock as  determined by
      an  independent  appraiser  selected  in good faith by the  Purchaser  and
      reasonably acceptable to the Company.

            "Warrants" means collectively the Common Stock purchase warrants, in
      the form of  Exhibit C  delivered  to the  Purchasers  at the  Closing  in
      accordance with Section 2.2(a) hereof, which Warrants shall be exercisable
      immediately and have a term of exercise equal to 5 years.

            "Warrant  Shares"  means the shares of Common  Stock  issuable  upon
      exercise of the Warrants.

                                  ARTICLE II.
                                PURCHASE AND SALE

      2.1  Closing.  On the  Closing  Date,  upon the terms and  subject  to the
conditions  set forth herein,  substantially  concurrent  with the execution and
delivery of this  Agreement by the parties  hereto,  the Company agrees to sell,
and each  Purchaser  agrees to  purchase  in the  aggregate,  severally  and not
jointly, up to new cash Subscription Amounts of $2,000,000. Each Purchaser shall
deliver to the  Company  via wire  transfer  or a  certified  check  immediately
available funds equal to their Subscription Amount and the Company shall deliver
to each Purchaser their respective Debenture and Warrants as determined pursuant
to Section  2.2(a) and the other items set forth in Section 2.2  issuable at the
Closing.  Upon satisfaction of the conditions set forth in Sections 2.2 and 2.3,
the  Closing  shall  occur at the  offices of FW, or such other  location as the
parties shall mutually agree.

      2.2 Deliveries.

            (a) On the Closing  Date,  the Company  shall deliver or cause to be
      delivered to each Purchaser the following:

                  (i) this Agreement duly executed by the Company;

                  (ii) a  legal  opinion  of  Company  Counsel,  in the  form of
            Exhibit D attached hereto;

                  (iii)  a  Debenture  with a  principal  amount  equal  to such
            Purchaser's  Subscription  Amount,  registered  in the  name of such
            Purchaser;

                  (iv) a Warrant  registered  in the name of such  Purchaser  to
            purchase  up to a number of shares of Common  Stock equal to 100% of
            such  Purchaser's  principal  amount of  Debentures  divided  by the
            Conversion  Price,  with an exercise  price equal to $4,  subject to
            adjustment therein;

                  (v) a  Warrant  registered  in the name of such  Purchaser  to
            purchase  up to a number of shares of Common  Stock  equal to 50% of
            such Purchaser's

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            principal amount of Debentures divided by the Conversion Price, with
            an exercise price equal to $6, subject to adjustment therein;

                  (vi) a Warrant  registered  in the name of such  Purchaser  to
            purchase  up to a number of shares of Common  Stock  equal to 50% of
            such  Purchaser's  principal  amount of  Debentures  divided  by the
            Conversion  Price,  with an exercise  price equal to $7,  subject to
            adjustment therein;

                  (vii) the written voting  agreement,  in the form of Exhibit E
            attached hereto, of all of the officers,  directors and shareholders
            holding more than 10% of the issued and outstanding shares of Common
            Stock on the date  hereof to vote all Common  Stock owned by each of
            such officers,  directors and shareholders as of the record date for
            the  annual  meeting  of  shareholders  of the  Company  in favor of
            Shareholder Approval amounting to, in the aggregate, at least 51% of
            the issued and outstanding Common Stock;

                  (viii) the Security  Agreement,  duly  executed by the Company
            and  its  Subsidiaries,  along  with  all  the  Security  Documents,
            including the Subsidiary Guarantees;

                  (ix) a first  mortgage  of  $1,000,000  on that  certain  real
            property  owned,  as of the Closing Date, by the Company and located
            at 10 Industrial Park Road, Warrensburg,  New York, all as evidenced
            by  loan  documents  and  other   documentation   and   certificates
            acceptable to the Purchaser;

                  (x)  pursuant  to the  Security  Agreement  and along with all
            other items required thereunder,  a pledge of 10.5 million shares of
            common stock  (subject to  adjustment  for reverse and forward stock
            splits  and the  like) of CCI  Group  Inc.  for the  benefit  of the
            Purchasers  pursuant  to a  pledge  agreement  satisfactory  to  the
            Purchasers; and

                  (xi) the  Registration  Rights  Agreement duly executed by the
            Company.

            (b) On the Closing Date, each Purchaser shall deliver or cause to be
      delivered to the Company the following:

                  (i) this Agreement duly executed by such Purchaser;

                  (ii) such Purchaser's  Subscription Amount by wire transfer to
            the account as specified in writing by the Company;

                  (iii) the Security Agreement, duly executed by such Purchaser;
            and

                  (iv) the  Registration  Rights Agreement duly executed by such
            Purchaser.

      2.3 Closing Conditions.

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            (a) The obligations of the Company  hereunder in connection with the
      Closing are subject to the following conditions being met:

                  (i) the accuracy in all material respects when made and on the
            Closing Date of the representations and warranties of the Purchasers
            contained herein;

                  (ii)  all   obligations,   covenants  and  agreements  of  the
            Purchasers  required to be performed at or prior to the Closing Date
            shall have been performed; and

                  (iii) the delivery by the Purchasers of the items set forth in
            Section 2.2(b) of this Agreement.

            (b)  The  respective  obligations  of the  Purchasers  hereunder  in
      connection with the Closing are subject to the following  conditions being
      met:

            (i) the accuracy in all material respects on the Closing Date of the
      representations and warranties of the Company contained herein;

            (ii)  all  obligations,  covenants  and  agreements  of the  Company
      required to be  performed  at or prior to the Closing Date shall have been
      performed;

            (iii) the  delivery by the Company of the items set forth in Section
      2.2(a) of this Agreement;

            (iv) there shall have been no Material  Adverse  Effect with respect
      to the Company since the date hereof; and

            (v) from the date hereof to the Closing Date,  trading in the Common
      Stock shall not have been  suspended by the  Commission  or the  Company's
      principal  Trading Market (except for any suspension of trading of limited
      duration agreed to by the Company,  which  suspension  shall be terminated
      prior to the Closing), and, at any time prior to the Closing Date, trading
      in securities  generally as reported by Bloomberg L.P. shall not have been
      suspended or limited, or minimum prices shall not have been established on
      securities  whose trades are reported by such  service,  or on any Trading
      Market,  nor shall a banking  moratorium  have been declared either by the
      United States or New York State  authorities nor shall there have occurred
      any material  outbreak or escalation of  hostilities  or other national or
      international calamity of such magnitude in its effect on, or any material
      adverse  change in,  any  financial  market  which,  in each case,  in the
      reasonable   judgment  of  each  Purchaser,   makes  it  impracticable  or
      inadvisable to purchase the Debentures at the Closing.

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

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      3.1  Representations  and  Warranties of the Company.  Except as set forth
under the  corresponding  section of the disclosure  schedules  delivered to the
Purchasers  concurrently herewith (the "Disclosure  Schedules") which Disclosure
Schedules  shall be deemed a part  hereof and to qualify any  representation  or
warranty  otherwise  made herein to the extent of such  disclosure,  the Company
hereby  makes  the  representations  and  warranties  set  forth  below  to each
Purchaser.

            (a) Subsidiaries. All of the direct and indirect subsidiaries of the
      Company are set forth on Schedule  3.1(a).  The Company owns,  directly or
      indirectly,  all of the capital  stock or other  equity  interests of each
      Subsidiary free and clear of any Liens, and all the issued and outstanding
      shares of capital  stock of each  Subsidiary  are  validly  issued and are
      fully paid,  non-assessable  and free of preemptive  and similar rights to
      subscribe for or purchase securities.  If the Company has no subsidiaries,
      then all other references in the Transaction Documents to the Subsidiaries
      or any of them will be disregarded.

            (b)  Organization  and  Qualification.  The  Company and each of the
      Subsidiaries  is an  entity  duly  incorporated  or  otherwise  organized,
      validly  existing and in good standing under the laws of the  jurisdiction
      of its  incorporation or organization (as applicable),  with the requisite
      power and authority to own and use its  properties and assets and to carry
      on its  business  as  currently  conducted.  Neither  the  Company nor any
      Subsidiary  is in  violation  or default of any of the  provisions  of its
      respective  certificate  or  articles  of  incorporation,  bylaws or other
      organizational  or  charter  documents.   Each  of  the  Company  and  the
      Subsidiaries is duly qualified to conduct business and is in good standing
      as a foreign corporation or other entity in each jurisdiction in which the
      nature  of the  business  conducted  or  property  owned by it makes  such
      qualification necessary, except where the failure to be so qualified or in
      good  standing,  as the  case may be,  could  not  have or  reasonably  be
      expected  to  result in (i) a  material  adverse  effect on the  legality,
      validity or  enforceability of any Transaction  Document,  (ii) a material
      adverse effect on the results of operations,  assets, business,  prospects
      or condition (financial or otherwise) of the Company and the Subsidiaries,
      taken as a whole,  or (iii) a  material  adverse  effect on the  Company's
      ability  to  perform  in  any  material  respect  on a  timely  basis  its
      obligations  under any Transaction  Document (any of (i), (ii) or (iii), a
      "Material  Adverse  Effect") and no Proceeding has been  instituted in any
      such jurisdiction  revoking,  limiting or curtailing or seeking to revoke,
      limit or curtail such power and authority or qualification.

            (c)  Authorization;  Enforcement.  The  Company  has  the  requisite
      corporate  power  and  authority  to  enter  into  and to  consummate  the
      transactions  contemplated  by  each  of  the  Transaction  Documents  and
      otherwise  to carry out its  obligations  hereunder  and  thereunder.  The
      execution and delivery of each of the Transaction Documents by the Company
      and the consummation by it of the transactions contemplated hereby thereby
      have  been  duly  authorized  by all  necessary  action on the part of the
      Company and no further  action is required  by the  Company,  its board of
      directors  or its  stockholders  in  connection  therewith  other  than in
      connection with the Required Approvals. Each Transaction Document has been
      (or upon  delivery  will have been) duly executed by the Company and, when
      delivered in accordance with the terms hereof and thereof, will

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      constitute  the valid and binding  obligation  of the Company  enforceable
      against the Company in accordance  with its terms except (i) as limited by
      general  equitable  principles  and  applicable  bankruptcy,   insolvency,
      reorganization, moratorium and other laws of general application affecting
      enforcement  of  creditors'  rights  generally,  (ii) as  limited  by laws
      relating to the availability of specific performance, injunctive relief or
      other  equitable  remedies  and  (iii)  insofar  as  indemnification   and
      contribution provisions may be limited by applicable law.

            (d) No Conflicts.  The  execution,  delivery and  performance of the
      Transaction  Documents by the Company and the  consummation by the Company
      of the other transactions  contemplated hereby and thereby do not and will
      not: (i) conflict  with or violate any  provision of the  Company's or any
      Subsidiary's  certificate  or articles of  incorporation,  bylaws or other
      organizational or charter documents,  or (ii) conflict with, or constitute
      a default  (or an event  that with  notice or lapse of time or both  would
      become a default)  under,  result in the  creation of any Lien upon any of
      the  properties  or assets of the  Company or any  Subsidiary,  or give to
      others any rights of termination,  amendment, acceleration or cancellation
      (with or without notice, lapse of time or both) of, any agreement,  credit
      facility,  debt or other  instrument  (evidencing  a Company or Subsidiary
      debt or  otherwise)  or other  understanding  to which the  Company or any
      Subsidiary  is a party or by which any property or asset of the Company or
      any  Subsidiary  is bound or  affected,  or (iii)  subject to the Required
      Approvals,  conflict  with or  result  in a  violation  of any law,  rule,
      regulation,  order, judgment,  injunction,  decree or other restriction of
      any court or  governmental  authority to which the Company or a Subsidiary
      is subject  (including federal and state securities laws and regulations),
      or by which any property or asset of the Company or a Subsidiary  is bound
      or affected; except in the case of each of clauses (ii) and (iii), such as
      could not have or reasonably  be expected to result in a Material  Adverse
      Effect.

            (e) Filings,  Consents and Approvals. The Company is not required to
      obtain any consent, waiver, authorization or order of, give any notice to,
      or make any  filing or  registration  with,  any  court or other  federal,
      state, local or other governmental authority or other Person in connection
      with  the  execution,  delivery  and  performance  by the  Company  of the
      Transaction Documents, other than (i) filings required pursuant to Section
      4.6, (ii) the filing with the  Commission of the  Registration  Statement,
      (iii) the notice and/or  application(s) to each applicable  Trading Market
      for the  issuance  and  sale of the  Securities  and  the  listing  of the
      Underlying  Shares for  trading  thereon  in the time and manner  required
      thereby, (iv) the filing of Form D with the Commission and such filings as
      are required to be made under  applicable  state  securities laws and (vi)
      Shareholder Approval (collectively, the "Required Approvals").

            (f) Issuance of the  Securities.  The Securities are duly authorized
      and,  when  issued  and  paid  for  in  accordance   with  the  applicable
      Transaction  Documents,  will be duly and validly  issued,  fully paid and
      nonassessable,  free and

                                       11
<PAGE>

      clear of all Liens  imposed  by the  Company  other than  restrictions  on
      transfer provided for in the Transaction Documents. The Underlying Shares,
      when issued in  accordance  with the terms of the  Transaction  Documents,
      will be validly issued,  fully paid and  nonassessable,  free and clear of
      all Liens  imposed by the Company.  The Company has reserved from its duly
      authorized  capital  stock a number of shares of Common Stock for issuance
      of the  Underlying  Shares at least equal to the  Required  Minimum on the
      date hereof.

            (g)  Capitalization.  The  capitalization  of the  Company is as set
      forth on Schedule  3.1(g).  The  Company has not issued any capital  stock
      since its most  recently  filed  periodic  report under the Exchange  Act,
      other than  pursuant to the exercise of employee  stock  options under the
      Company's  stock option  plans,  the issuance of shares of Common Stock to
      employees  pursuant to the  Company's  employee  stock  purchase  plan and
      pursuant  to the  conversion  or  exercise  of  Common  Stock  Equivalents
      outstanding  as of the date of the most  recently  filed  periodic  report
      under  the  Exchange  Act.  No  Person  has any  right of  first  refusal,
      preemptive  right,  right  of  participation,  or  any  similar  right  to
      participate in the transactions contemplated by the Transaction Documents.
      Except as a result of the purchase and sale of the  Securities,  there are
      no outstanding options,  warrants, script rights to subscribe to, calls or
      commitments of any character whatsoever relating to, or securities, rights
      or obligations  convertible  into or exercisable or  exchangeable  for, or
      giving any Person any right to  subscribe  for or  acquire,  any shares of
      Common Stock, or contracts, commitments, understandings or arrangements by
      which  the  Company  or any  Subsidiary  is or may  become  bound to issue
      additional  shares  of  Common  Stock or  Common  Stock  Equivalents.  The
      issuance and sale of the Securities will not obligate the Company to issue
      shares of Common Stock or other  securities  to any Person (other than the
      Purchasers)  and  will not  result  in a right of any  holder  of  Company
      securities  to adjust the  exercise,  conversion,  exchange or reset price
      under any of such  securities.  All of the  outstanding  shares of capital
      stock of the  Company are validly  issued,  fully paid and  nonassessable,
      have been issued in compliance with all federal and state securities laws,
      and  none of such  outstanding  shares  was  issued  in  violation  of any
      preemptive   rights  or  similar  rights  to  subscribe  for  or  purchase
      securities.  No further approval or authorization of any stockholder,  the
      Board of  Directors  of the Company or others is required for the issuance
      and sale of the Securities.  There are no stockholders agreements,  voting
      agreements  or other  similar  agreements  with  respect to the  Company's
      capital  stock to which the Company is a party or, to the knowledge of the
      Company, between or among any of the Company's stockholders.

            (h) SEC  Reports;  Financial  Statements.  The Company has filed all
      reports,  schedules,  forms, statements and other documents required to be
      filed by it under  the  Securities  Act and the  Exchange  Act,  including
      pursuant to Section 13(a) or 15(d)  thereof,  for the two years  preceding
      the date hereof (or such shorter period as the Company was required by law
      or regulation to file such material) (the foregoing  materials,  including
      the exhibits  thereto and  documents  incorporated  by reference  therein,
      being  collectively  referred to herein as the "SEC  Reports") on a timely
      basis or has  received  a valid  extension  of such time of filing and has
      filed any such SEC Reports prior to the expiration of any such  extension.
      As of their  respective  dates,  the SEC Reports  complied in all material
      respects with the  requirements of the Securities Act and the Exchange Act
      and the rules and regulations of the Commission promulgated thereunder, as
      applicable,  and none of the SEC Reports, when filed, contained any untrue
      statement

                                       12
<PAGE>

      of a material  fact or omitted to state a  material  fact  required  to be
      stated  therein or necessary in order to make the statements  therein,  in
      the light of the circumstances under which they were made, not misleading.
      The financial statements of the Company included in the SEC Reports comply
      in all material respects with applicable  accounting  requirements and the
      rules and  regulations of the Commission with respect thereto as in effect
      at the time of filing.  Such  financial  statements  have been prepared in
      accordance with United States  generally  accepted  accounting  principles
      applied on a consistent basis during the periods involved ("GAAP"), except
      as may be otherwise  specified in such  financial  statements or the notes
      thereto and except that unaudited financial statements may not contain all
      footnotes  required by GAAP, and fairly  present in all material  respects
      the financial position of the Company and its consolidated subsidiaries as
      of and for the dates thereof and the results of operations  and cash flows
      for the periods then ended,  subject, in the case of unaudited statements,
      to normal, immaterial, year-end audit adjustments.

            (i) Material Changes. Since the date of the latest audited financial
      statements  included  within  the  SEC  Reports,  except  as  specifically
      disclosed  in a  subsequent  SEC  Report,  (i)  there  has been no  event,
      occurrence  or  development  that  has had or  that  could  reasonably  be
      expected to result in a Material Adverse Effect,  (ii) the Company has not
      incurred any  liabilities  (contingent or otherwise)  other than (A) trade
      payables and accrued expenses  incurred in the ordinary course of business
      consistent  with past  practice  and (B)  liabilities  not  required to be
      reflected  in the  Company's  financial  statements  pursuant  to  GAAP or
      disclosed in filings made with the  Commission,  (iii) the Company has not
      altered its method of  accounting,  (iv) the  Company has not  declared or
      made  any  dividend  or  distribution  of cash or  other  property  to its
      stockholders or purchased,  redeemed or made any agreements to purchase or
      redeem any shares of its capital  stock and (v) the Company has not issued
      any equity  securities  to any  officer,  director  or  Affiliate,  except
      pursuant to existing Company stock option plans. The Company does not have
      pending before the Commission  any request for  confidential  treatment of
      information.  Except for the issuance of the  Securities  contemplated  by
      this Agreement or as set forth on Schedule 3.1(i), no event,  liability or
      development  has  occurred  or exists  with  respect to the Company or its
      Subsidiaries  or their  respective  business,  properties,  operations  or
      financial condition, that would be required to be disclosed by the Company
      under applicable  securities laws at the time this  representation is made
      that has not been publicly disclosed at least one Trading Day prior to the
      date that this representation is made.

            (j)  Litigation.  There  is no  action,  suit,  inquiry,  notice  of
      violation, proceeding or investigation pending or, to the knowledge of the
      Company,  threatened  against or affecting the Company,  any Subsidiary or
      any of their  respective  properties  before or by any court,  arbitrator,
      governmental or administrative  agency or regulatory  authority  (federal,
      state,  county,  local or foreign)  (collectively,  an "Action") which (i)
      adversely  affects or challenges the legality,  validity or enforceability
      of any of the  Transaction  Documents or the Securities or (ii) could,  if
      there were an  unfavorable  decision,  have or  reasonably  be expected to
      result  in  a  Material  Adverse  Effect.  Neither  the  Company  nor  any
      Subsidiary,  nor any  director  or  officer  thereof,  is or has  been the
      subject of any

                                       13
<PAGE>

      Action  involving a claim of violation of or  liability  under  federal or
      state  securities laws or a claim of breach of fiduciary  duty.  There has
      not been,  and to the  knowledge of the  Company,  there is not pending or
      contemplated, any investigation by the Commission involving the Company or
      any current or former  director or officer of the Company.  The Commission
      has not issued any stop order or other order suspending the  effectiveness
      of any registration statement filed by the Company or any Subsidiary under
      the Exchange Act or the Securities Act.

            (k) Labor  Relations.  No material  labor dispute  exists or, to the
      knowledge of the Company, is imminent with respect to any of the employees
      of the Company which could  reasonably be expected to result in a Material
      Adverse Effect. None of the Company's or its Subsidiaries'  employees is a
      member of a union that relates to such  employee's  relationship  with the
      Company,  and neither the Company or any of its Subsidiaries is a party to
      a collective  bargaining  agreement,  and the Company and its Subsidiaries
      believe  that  their  relationships  with  their  employees  are good.  No
      executive officer, to the knowledge of the Company, is, or is now expected
      to be, in  violation  of any  material  term of any  employment  contract,
      confidentiality,   disclosure  or  proprietary  information  agreement  or
      non-competition  agreement,  or any other  contract  or  agreement  or any
      restrictive covenant,  and the continued employment of each such executive
      officer  does not subject the  Company or any of its  Subsidiaries  to any
      liability  with respect to any of the foregoing  matters.  The Company and
      its Subsidiaries are in compliance with all U.S. federal, state, local and
      foreign  laws  and  regulations  relating  to  employment  and  employment
      practices,  terms and conditions of employment and wages and hours, except
      where the failure to be in compliance  could not,  individually  or in the
      aggregate, reasonably be expected to have a Material Adverse Effect.

            (l)  Compliance.  Neither the Company nor any  Subsidiary  (i) is in
      default  under or in violation of (and no event has occurred  that has not
      been waived that, with notice or lapse of time or both,  would result in a
      default by the Company or any  Subsidiary  under),  nor has the Company or
      any Subsidiary  received  notice of a claim that it is in default under or
      that it is in violation of, any indenture, loan or credit agreement or any
      other agreement or instrument to which it is a party or by which it or any
      of its  properties is bound  (whether or not such default or violation has
      been waived),  (ii) is in violation of any order of any court,  arbitrator
      or governmental body, or (iii) is or has been in violation of any statute,
      rule  or  regulation  of any  governmental  authority,  including  without
      limitation all foreign,  federal,  state and local laws  applicable to its
      business and, to the  knowledge of the Company,  all such laws that affect
      the  environment,  except in each case as could not have or  reasonably be
      expected to result in a Material Adverse Effect.

            (m) Regulatory Permits. The Company and the Subsidiaries possess all
      certificates,   authorizations  and  permits  issued  by  the  appropriate
      federal,  state,  local or foreign  regulatory  authorities  necessary  to
      conduct  their  respective  businesses  as  described  in the SEC Reports,
      except  where  the  failure  to  possess  such  permits  could not have or
      reasonably be expected to result in a Material  Adverse Effect  ("Material

                                       14
<PAGE>

      Permits"),  and neither the Company nor any  Subsidiary  has  received any
      notice of proceedings  relating to the revocation or  modification  of any
      Material Permit.

            (n) Title to Assets.  The Company and the Subsidiaries have good and
      marketable  title in fee simple to all real property owned by them that is
      material to the business of the Company and the  Subsidiaries and good and
      marketable  title in all personal  property owned by them that is material
      to the business of the Company and the Subsidiaries, in each case free and
      clear of all Liens, except for Liens as do not materially affect the value
      of such  property and do not  materially  interfere  with the use made and
      proposed to be made of such  property by the Company and the  Subsidiaries
      and Liens for the payment of federal, state or other taxes, the payment of
      which is neither  delinquent  nor subject to penalties.  Any real property
      and facilities  held under lease by the Company and the  Subsidiaries  are
      held by them under valid, subsisting and enforceable leases with which the
      Company and the Subsidiaries are in compliance.

            (o) Patents and Trademarks.  The Company and the Subsidiaries  have,
      or have  rights to use,  all  patents,  patent  applications,  trademarks,
      trademark  applications,   service  marks,  trade  names,  trade  secrets,
      inventions,  copyrights,  licenses and other intellectual  property rights
      and similar rights  necessary or material for use in connection with their
      respective  businesses  as  described  in the SEC  Reports  and  which the
      failure to so have could have a Material Adverse Effect (collectively, the
      "Intellectual  Property  Rights").  Neither the Company nor any Subsidiary
      has  received  a notice  (written  or  otherwise)  that  the  Intellectual
      Property  Rights  used  by the  Company  or  any  Subsidiary  violates  or
      infringes upon the rights of any Person.  To the knowledge of the Company,
      all such  Intellectual  Property  Rights are  enforceable  and there is no
      existing  infringement  by  another  Person  of any  of  the  Intellectual
      Property Rights.  The Company and its  Subsidiaries  have taken reasonable
      security measures to protect the secrecy, confidentiality and value of all
      of their intellectual properties, except where failure to do so could not,
      individually or in the aggregate,  reasonably be expect to have a Material
      Adverse Effect.

            (p)  Insurance.  The  Company  and the  Subsidiaries  are insured by
      insurers of recognized  financial  responsibility  against such losses and
      risks and in such amounts as are prudent and  customary in the  businesses
      in which the Company and the Subsidiaries are engaged,  including, but not
      limited to,  directors and officers  insurance  coverage at least equal to
      the aggregate  Subscription Amount. Neither the Company nor any Subsidiary
      has any reason to believe  that it will not be able to renew its  existing
      insurance  coverage as and when such coverage expires or to obtain similar
      coverage  from  similar  insurers  as may be  necessary  to  continue  its
      business without a significant increase in cost.

            (q) Transactions With Affiliates and Employees.  Except as set forth
      in the SEC Reports,  none of the officers or directors of the Company and,
      to the  knowledge of the Company,  none of the employees of the Company is
      presently a party to any  transaction  with the Company or any  Subsidiary
      (other than for services as employees, officers and directors),  including
      any contract,  agreement or other arrangement providing

                                       15
<PAGE>

      for the  furnishing of services to or by,  providing for rental of real or
      personal property to or from, or otherwise  requiring  payments to or from
      any  officer,  director  or such  employee  or,  to the  knowledge  of the
      Company, any entity in which any officer,  director,  or any such employee
      has a substantial interest or is an officer, director, trustee or partner,
      in each case in excess of $60,000  other than (i) for payment of salary or
      consulting fees for services  rendered,  (ii)  reimbursement  for expenses
      incurred on behalf of the Company and (iii) for other  employee  benefits,
      including  stock  option  agreements  under any stock  option  plan of the
      Company.

            (r) Sarbanes-Oxley;  Internal Accounting Controls. The Company is in
      material  compliance with all provisions of the Sarbanes-Oxley Act of 2002
      which are  applicable  to it as of the Closing  Date.  The Company and the
      Subsidiaries  maintain a system of internal accounting controls sufficient
      to provide  reasonable  assurance  that (i)  transactions  are executed in
      accordance  with  management's  general or specific  authorizations,  (ii)
      transactions are recorded as necessary to permit  preparation of financial
      statements in conformity  with GAAP and to maintain asset  accountability,
      (iii) access to assets is permitted only in accordance  with  management's
      general or specific  authorization,  and (iv) the recorded  accountability
      for assets is compared with the existing  assets at  reasonable  intervals
      and  appropriate  action is taken  with  respect to any  differences.  The
      Company has established  disclosure controls and procedures (as defined in
      Exchange Act Rules  13a-15(e) and  15d-15(e)) for the Company and designed
      such   disclosure   controls  and   procedures  to  ensure  that  material
      information relating to the Company,  including its Subsidiaries,  is made
      known  to  the  certifying  officers  by  others  within  those  entities,
      particularly  during the period in which the Company's most recently filed
      periodic  report  under  the  Exchange  Act,  as the case may be, is being
      prepared.   The  Company's   certifying   officers   have   evaluated  the
      effectiveness  of the  Company's  controls and  procedures  as of the date
      prior to the filing date of the most recently filed periodic  report under
      the Exchange Act (such date, the "Evaluation Date"). The Company presented
      in its most  recently  filed  periodic  report  under the Exchange Act the
      conclusions of the  certifying  officers  about the  effectiveness  of the
      disclosure  controls and procedures  based on their  evaluations as of the
      Evaluation Date. Since the Evaluation Date, there have been no significant
      changes in the  Company's  internal  controls  (as such term is defined in
      Item 307(b) of Regulation S-K under the Exchange Act) or, to the knowledge
      of the  Company,  in other  factors  that could  significantly  affect the
      Company's internal controls.

            (s) Certain Fees. No brokerage or finder's fees or  commissions  are
      or will be payable  by the  Company to any  broker,  financial  advisor or
      consultant,  finder,  placement agent,  investment  banker,  bank or other
      Person with respect to the  transactions  contemplated  by the Transaction
      Documents.  The  Purchasers  shall have no obligation  with respect to any
      fees or with  respect to any claims made by or on behalf of other  Persons
      for  fees  of a type  contemplated  in  this  Section  that  may be due in
      connection   with  the   transactions   contemplated  by  the  Transaction
      Documents.

            (t) Private  Placement.  Assuming  the  accuracy  of the  Purchasers
      representations  and warranties set forth in Section 3.2, no  registration
      under  the  Securities

                                       16
<PAGE>

      Act is required for the offer and sale of the Securities by the Company to
      the  Purchasers  as  contemplated  hereby.  The  issuance  and sale of the
      Securities  hereunder does not contravene the rules and regulations of the
      Trading Market.

            (u) Investment Company.  The Company is not, and is not an Affiliate
      of, and immediately after receipt of payment for the Securities,  will not
      be or be an Affiliate of, an  "investment  company"  within the meaning of
      the Investment Company Act of 1940, as amended.  The Company shall conduct
      its  business  in a  manner  so that it will  not  become  subject  to the
      Investment Company Act.

            (v)  Registration  Rights.  Other  than each of the  Purchasers,  no
      Person has any right to cause the Company to effect the registration under
      the Securities Act of any securities of the Company.

            (w) Listing and Maintenance Requirements. The Company's Common Stock
      is registered  pursuant to Section 12(b) or 12(g) of the Exchange Act, and
      the Company has taken no action  designed to, or which to its knowledge is
      likely to have the effect of,  terminating the  registration of the Common
      Stock under the Exchange Act nor has the Company received any notification
      that the Commission is contemplating  terminating such  registration.  The
      Company  has not, in the 12 months  preceding  the date  hereof,  received
      notice  from any Trading  Market on which the Common  Stock is or has been
      listed or quoted to the effect that the Company is not in compliance  with
      the  listing or  maintenance  requirements  of such  Trading  Market.  The
      Company  is,  and  has no  reason  to  believe  that  it  will  not in the
      foreseeable future continue to be, in compliance with all such listing and
      maintenance requirements.

            (x) Application of Takeover  Protections.  The Company and its Board
      of Directors have taken all necessary  action,  if any, in order to render
      inapplicable any control share acquisition,  business combination,  poison
      pill  (including  any  distribution  under a  rights  agreement)  or other
      similar  anti-takeover   provision  under  the  Company's  Certificate  of
      Incorporation  (or similar charter  documents) or the laws of its state of
      incorporation  that is or could become  applicable to the  Purchasers as a
      result of the Purchasers and the Company  fulfilling their  obligations or
      exercising their rights under the Transaction Documents, including without
      limitation as a result of the Company's issuance of the Securities and the
      Purchasers' ownership of the Securities.

            (y)  Disclosure.  Except  with  respect  to the  material  terms and
      conditions of the transactions  contemplated by the Transaction Documents,
      the Company  confirms  that neither it nor any other Person  acting on its
      behalf has provided any of the  Purchasers or their agents or counsel with
      any information that it believes constitutes or might constitute material,
      nonpublic  information.  The Company  understands  and  confirms  that the
      Purchasers  will  rely  on  the  foregoing   representation  in  effecting
      transactions in securities of the Company.  All disclosure furnished by or
      on behalf of the Company to the  Purchasers  regarding  the  Company,  its
      business  and  the  transactions   contemplated   hereby,   including  the
      Disclosure   Schedules   to   this   Agreement,   with   respect   to  the
      representations  and  warranties  made  herein are true and  correct  with
      respect to such

                                       17
<PAGE>

      representations  and warranties and do not contain any untrue statement of
      a material fact or omit to state any material  fact  necessary in order to
      make the  statements  made therein,  in light of the  circumstances  under
      which they were made, not misleading.  The Company acknowledges and agrees
      that no Purchaser makes or has made any representations or warranties with
      respect  to  the  transactions   contemplated   hereby  other  than  those
      specifically set forth in Section 3.2 hereof.

            (z) No Integrated Offering. Assuming the accuracy of the Purchasers'
      representations  and  warranties  set forth in Section  3.2,  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 this offering of the  Securities  to be  integrated  with
      prior  offerings by the Company for purposes of the  Securities Act or the
      Trading Market.

            (aa) Solvency. Based on the financial condition of the Company as of
      the Closing Date after giving  effect to the receipt by the Company of the
      proceeds from the sale of the Securities hereunder,  (i) the fair saleable
      value of the Company's  assets exceeds the amount that will be required to
      be paid  on or in  respect  of the  Company's  existing  debts  and  other
      liabilities (including known contingent  liabilities) as they mature; (ii)
      the Company's assets do not constitute unreasonably small capital to carry
      on its business as now conducted and as proposed to be conducted including
      its capital needs taking into account the particular capital  requirements
      of  the  business   conducted  by  the  Company,   and  projected  capital
      requirements and capital availability  thereof; and (iii) the current cash
      flow of the Company, together with the proceeds the Company would receive,
      were it to  liquidate  all of its assets,  after  taking into  account all
      anticipated uses of the cash, would be sufficient to pay all amounts on or
      in respect of its  liabilities  when such amounts are required to be paid.
      The Company  does not intend to incur debts beyond its ability to pay such
      debts as they mature  (taking  into account the timing and amounts of cash
      to be payable on or in respect of its debt).  The Company has no knowledge
      of any facts or  circumstances  which lead it to believe that it will file
      for  reorganization  or liquidation under the bankruptcy or reorganization
      laws of any  jurisdiction  within one year from the Closing Date.  The SEC
      Reports  sets forth as of the dates  thereof all  outstanding  secured and
      unsecured Indebtedness of the Company or any Subsidiary,  or for which the
      Company  or any  Subsidiary  has  commitments.  For the  purposes  of this
      Agreement,  "Indebtedness"  shall mean (a) any  liabilities  for  borrowed
      money or amounts  owed in excess of $500,000  (other  than trade  accounts
      payable incurred in the ordinary course of business),  (b) all guaranties,
      endorsements and other  contingent  obligations in respect of Indebtedness
      of  others,  whether  or not the same are or  should be  reflected  in the
      Company's  balance  sheet (or the notes  thereto),  except  guaranties  by
      endorsement of negotiable instruments for deposit or collection or similar
      transactions in the ordinary course of business; and (c) the present value
      of any lease  payments in excess of $250,000 due under leases  required to
      be  capitalized  in  accordance  with GAAP.  Neither  the  Company nor any
      Subsidiary is in default with respect to any Indebtedness.

                                       18
<PAGE>

            (bb) Tax Status.  Except for matters that would not, individually or
      in the  aggregate,  have or reasonably be expected to result in a Material
      Adverse  Effect,  the Company and each  Subsidiary has filed all necessary
      federal,  state and foreign  income and franchise tax returns and has paid
      or  accrued  all  taxes  shown  as due  thereon,  and the  Company  has no
      knowledge  of a tax  deficiency  which  has been  asserted  or  threatened
      against the Company or any Subsidiary.

            (cc) No General  Solicitation.  Neither  the  Company nor any person
      acting on behalf of the Company has offered or sold any of the  Securities
      by any form of general  solicitation or general  advertising.  The Company
      has offered the  Securities  for sale only to the  Purchasers  and certain
      other  "accredited  investors"  within  the  meaning of Rule 501 under the
      Securities Act.

            (dd) Foreign  Corrupt  Practices.  Neither the  Company,  nor to the
      knowledge  of the Company,  any agent or other person  acting on behalf of
      the Company,  has (i) directly or indirectly,  used any funds for unlawful
      contributions,  gifts, entertainment or other unlawful expenses related to
      foreign or domestic political activity,  (ii) made any unlawful payment to
      foreign or domestic government officials or employees or to any foreign or
      domestic political parties or campaigns from corporate funds, (iii) failed
      to  disclose  fully any  contribution  made by the Company (or made by any
      person  acting on its behalf of which the  Company  is aware)  which is in
      violation of law, or (iv)  violated in any material  respect any provision
      of the Foreign Corrupt Practices Act of 1977, as amended.

            (ee)  Accountants.  The  Company's  accountants  are  set  forth  on
      Schedule  3.1(ee) of the  Disclosure  Schedule.  To the  knowledge  of the
      Company,  such  accountants,  who the Company  expects will express  their
      opinion with  respect to the  financial  statements  to be included in the
      Company's  Annual  Report on Form 10-K for the year ended  August 30, 2006
      are a registered public accounting firm as required by the Securities Act.

            (ff)  Seniority.  As of the Closing Date, no  Indebtedness  or other
      claim against the Company is senior to the Debentures in right of payment,
      whether with respect to interest or upon  liquidation or  dissolution,  or
      otherwise,  other than  indebtedness  secured by purchase  money  security
      interests  or  mortgages  (which is senior  only as to  underlying  assets
      covered thereby) and capital lease obligations (which is senior only as to
      the property covered thereby).

            (gg) No  Disagreements  with  Accountants and Lawyers.  There are no
      disagreements of any kind presently existing, or reasonably anticipated by
      the Company to arise,  between the Company and the accountants and lawyers
      formerly or  presently  employed by the Company and the Company is current
      with respect to any fees owed to its accountants and lawyers.

            (hh) Acknowledgment  Regarding  Purchasers'  Purchase of Securities.
      The Company  acknowledges and agrees that each of the Purchasers is acting
      solely in the  capacity of an arm's length  purchaser  with respect to the
      Transaction  Documents  and the

                                       19
<PAGE>

      transactions  contemplated  thereby. The Company further acknowledges that
      no Purchaser is acting as a financial  advisor or fiduciary of the Company
      (or in any similar capacity) with respect to the Transaction Documents and
      the  transactions  contemplated  thereby  and  any  advice  given  by  any
      Purchaser  or  any  of  their  respective  representatives  or  agents  in
      connection   with  the   Transaction   Documents   and  the   transactions
      contemplated  thereby is merely incidental to the Purchasers'  purchase of
      the Securities.  The Company further represents to each Purchaser that the
      Company's  decision to enter into this Agreement and the other Transaction
      Documents  has been  based  solely on the  independent  evaluation  of the
      transactions contemplated hereby by the Company and its representatives.

            (ii)   Acknowledgement   Regarding   Purchasers'  Trading  Activity.
      Anything  in  this   Agreement  or   elsewhere   herein  to  the  contrary
      notwithstanding  (except  for  Sections  3.2(f)  and 4.16  hereof),  it is
      understood and acknowledged by the Company (i) that none of the Purchasers
      have been asked to agree,  nor has any  Purchaser  agreed,  to desist from
      purchasing or selling,  long and/or short,  securities of the Company,  or
      "derivative"  securities  based on securities  issued by the Company or to
      hold the Securities for any specified  term; (ii) that past or future open
      market or other transactions by any Purchaser,  including Short Sales, and
      specifically  including,  without limitation,  Short Sales or "derivative"
      transactions,  before  or after  the  closing  of this or  future  private
      placement  transactions,  may  negatively  impact the market  price of the
      Company's  publicly-traded  securities;  (iii)  that  any  Purchaser,  and
      counter-parties  in "derivative"  transactions to which any such Purchaser
      is a party, directly or indirectly,  presently may have a "short" position
      in the Common Stock,  and (iv) that each Purchaser  shall not be deemed to
      have any affiliation  with or control over any arm's length  counter-party
      in any  "derivative"  transaction.  The Company  further  understands  and
      acknowledges  that  (a) one or  more  Purchasers  may  engage  in  hedging
      activities  at various  times  during the period that the  Securities  are
      outstanding,  including,  without limitation,  during the periods that the
      value of the Underlying Shares  deliverable with respect to Securities are
      being determined and (b) such hedging activities (if any) could reduce the
      value of the existing stockholders' equity interests in the Company at and
      after the time  that the  hedging  activities  are  being  conducted.  The
      Company  acknowledges that such  aforementioned  hedging activities do not
      constitute a breach of any of the Transaction Documents.

            (jj)  Manipulation  of  Price.  The  Company  has  not,  and  to its
      knowledge  no one  acting  on its  behalf  has,  (i)  taken,  directly  or
      indirectly, any action designed to cause or to result in the stabilization
      or  manipulation of the price of any security of the Company to facilitate
      the  sale  or  resale  of any of  the  Securities,  (ii)  sold,  bid  for,
      purchased,  or paid any compensation  for soliciting  purchases of, any of
      the securities of the Company or (iii) paid or agreed to pay to any person
      any compensation  for soliciting  another to purchase any other securities
      of the  Company,  other  than,  in the case of  clauses  (ii)  and  (iii),
      compensation paid to the Company's  placement agent in connection with the
      placement of the Securities.

            (kk) Form S-3  Eligibility.  The Company is eligible to register the
      resale of the  Underlying  Shares for resale by the  Purchaser on Form S-3
      promulgated under the

                                       20
<PAGE>

      Securities Act.

      3.2  Representations  and  Warranties of the  Purchasers.  Each  Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:

            (a)  Organization;  Authority.  Such  Purchaser  is an  entity  duly
      organized,  validly  existing and in good  standing  under the laws of the
      jurisdiction of its organization with full right, corporate or partnership
      power and  authority  to enter  into and to  consummate  the  transactions
      contemplated by the  Transaction  Documents and otherwise to carry out its
      obligations  hereunder  and  thereunder.   The  execution,   delivery  and
      performance by such  Purchaser of the  transactions  contemplated  by this
      Agreement have been duly authorized by all necessary  corporate or similar
      action on the part of such Purchaser.  Each Transaction  Document to which
      it is a party has been duly executed by such Purchaser, and when delivered
      by such Purchaser in accordance with the terms hereof, will constitute the
      valid  and  legally  binding  obligation  of such  Purchaser,  enforceable
      against it in accordance with its terms,  except (i) as limited by general
      equitable    principles    and    applicable    bankruptcy,    insolvency,
      reorganization, moratorium and other laws of general application affecting
      enforcement  of  creditors'  rights  generally,  (ii) as  limited  by laws
      relating to the availability of specific performance, injunctive relief or
      other  equitable  remedies  and  (iii)  insofar  as  indemnification   and
      contribution provisions may be limited by applicable law.

            (b) Own Account.  Such Purchaser understands that the Securities are
      "restricted  securities" and have not been registered under the Securities
      Act or any applicable state securities law and is acquiring the Securities
      as  principal  for  its  own  account  and  not  with  a  view  to or  for
      distributing or reselling such Securities or any part thereof in violation
      of the  Securities  Act or any  applicable  state  securities  law, has no
      present  intention of distributing  any of such Securities in violation of
      the  Securities  Act or any  applicable  state  securities  law and has no
      direct or indirect arrangement or understandings with any other persons to
      distribute  or  regarding  the   distribution  of  such  Securities  (this
      representation  and warranty not limiting such  Purchaser's  right to sell
      the  Securities  pursuant to the  Registration  Statement  or otherwise in
      compliance with applicable federal and state securities laws) in violation
      of the  Securities  Act or  any  applicable  state  securities  law.  Such
      Purchaser is acquiring the Securities  hereunder in the ordinary course of
      its business.

            (c)  Purchaser  Status.  At the time such  Purchaser was offered the
      Securities,  it was,  and at the date  hereof  it is,  and on each date on
      which it  exercises  any Warrants or converts  any  Debentures  it will be
      either: (i) an "accredited investor" as defined in Rule 501(a)(1), (a)(2),
      (a)(3),  (a)(7) or (a)(8)  under the  Securities  Act or (ii) a "qualified
      institutional  buyer" as defined in Rule 144A(a) under the Securities Act.
      Such Purchaser is not required to be registered as a  broker-dealer  under
      Section 15 of the Exchange Act.

            (d) Experience of Such Purchaser.  Such  Purchaser,  either alone or
      together with its representatives,  has such knowledge, sophistication and
      experience  in  business

                                       21
<PAGE>

      and  financial  matters so as to be capable of  evaluating  the merits and
      risks  of  the  prospective  investment  in  the  Securities,  and  has so
      evaluated the merits and risks of such investment.  Such Purchaser is able
      to bear the economic risk of an investment in the  Securities  and, at the
      present time, is able to afford a complete loss of such investment.

            (e) General  Solicitation.  Such  Purchaser  is not  purchasing  the
      Securities  as a result  of any  advertisement,  article,  notice or other
      communication   regarding  the  Securities  published  in  any  newspaper,
      magazine  or  similar  media  or  broadcast  over  television  or radio or
      presented  at any  seminar or any other  general  solicitation  or general
      advertisement.

            (f) Short Sales and Confidentiality  Prior To The Date Hereof. Other
      than  the  transaction  contemplated  hereunder,  such  Purchaser  has not
      directly or indirectly, nor has any Person acting on behalf of or pursuant
      to any  understanding  with  such  Purchaser,  executed  any  disposition,
      including  Short Sales, in the securities of the Company during the period
      commencing  from the time that such Purchaser  first received a term sheet
      (written or oral) from the Company or any other Person  setting  forth the
      material terms of the transactions  contemplated  hereunder until the date
      hereof ("Discussion Time").  Notwithstanding the foregoing, in the case of
      a Purchaser that is a multi-managed  investment  vehicle whereby  separate
      portfolio managers manage separate portions of such Purchaser's assets and
      the  portfolio  managers  have  no  direct  knowledge  of  the  investment
      decisions made by the portfolio  managers  managing other portions of such
      Purchaser's  assets,  the  representation set forth above shall only apply
      with  respect to the portion of assets  managed by the  portfolio  manager
      that made the investment  decision to purchase the  Securities  covered by
      this Agreement.  Other than to other Persons party to this Agreement, such
      Purchaser has maintained the confidentiality of all disclosures made to it
      in connection with this transaction  (including the existence and terms of
      this transaction).

                                  ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

      4.1 Transfer Restrictions.

            (a) The Securities may only be disposed of in compliance  with state
      and federal securities laws. In connection with any transfer of Securities
      other than pursuant to an effective registration statement or Rule 144, to
      the Company or to an  affiliate  of a Purchaser  or in  connection  with a
      pledge as  contemplated  in Section  4.1(b),  the  Company may require the
      transferor  thereof  to  provide  to the  Company  an  opinion  of counsel
      selected by the transferor and reasonably  acceptable to the Company,  the
      form and substance of which opinion  shall be reasonably  satisfactory  to
      the  Company,   to  the  effect  that  such   transfer  does  not  require
      registration of such transferred Securities under the Securities Act. As a
      condition of transfer,  any such  transferee  shall agree in writing to be
      bound by the  terms of this  Agreement  and  shall  have the  rights  of a
      Purchaser under this Agreement and the Registration Rights Agreement.

                                       22
<PAGE>

            (b) The Purchasers  agree to the imprinting,  so long as is required
      by this Section 4.1, of a legend on any of the Securities in the following
      form:

      [NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES
      ARE [EXERCISABLE]  [CONVERTIBLE]] HAVE BEEN REGISTERED WITH THE SECURITIES
      AND  EXCHANGE  COMMISSION  OR THE  SECURITIES  COMMISSION  OF ANY STATE IN
      RELIANCE UPON AN EXEMPTION FROM  REGISTRATION  UNDER THE SECURITIES ACT OF
      1933, AS AMENDED (THE  "SECURITIES  ACT"),  AND,  ACCORDINGLY,  MAY NOT BE
      OFFERED OR SOLD EXCEPT  PURSUANT TO AN  EFFECTIVE  REGISTRATION  STATEMENT
      UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN
      A  TRANSACTION  NOT  SUBJECT  TO,  THE  REGISTRATION  REQUIREMENTS  OF THE
      SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE  STATE SECURITIES LAWS AS
      EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE  TRANSFEROR TO SUCH EFFECT,
      THE  SUBSTANCE  OF WHICH SHALL BE  REASONABLY  ACCEPTABLE  TO THE COMPANY.
      THESE SECURITIES AND THE SECURITIES ISSUABLE UPON [EXERCISE]  [CONVERSION]
      OF THESE  SECURITIES MAY BE PLEDGED IN CONNECTION  WITH A BONA FIDE MARGIN
      ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

      The Company acknowledges and agrees that a Purchaser may from time to time
      pledge  pursuant  to a  bona  fide  margin  agreement  with  a  registered
      broker-dealer  or  grant  a  security  interest  in  some  or  all  of the
      Securities to a financial  institution that is an "accredited investor" as
      defined in Rule 501(a) under the Securities Act and who agrees to be bound
      by the provisions of this Agreement and the Registration  Rights Agreement
      and, if required under the terms of such  arrangement,  such Purchaser may
      transfer pledged or secured Securities to the pledgees or secured parties.
      Such a pledge or transfer  would not be subject to approval of the Company
      and no legal  opinion of legal  counsel of the pledgee,  secured  party or
      pledgor  shall be required in  connection  therewith.  Further,  no notice
      shall be required of such pledge. At the appropriate  Purchaser's expense,
      the Company will execute and deliver such  reasonable  documentation  as a
      pledgee  or  secured  party  of  Securities  may  reasonably   request  in
      connection with a pledge or transfer of the Securities,  including, if the
      Securities are subject to registration pursuant to the Registration Rights
      Agreement,   the  preparation  and  filing  of  any  required   prospectus
      supplement  under  Rule  424(b)(3)  under  the  Securities  Act  or  other
      applicable provision of the Securities Act to appropriately amend the list
      of Selling Stockholders thereunder.

            (c) Certificates  evidencing the Underlying Shares shall not contain
      any legend (including the legend set forth in Section 4.1(b) hereof):  (i)
      while a  registration  statement  (including the  Registration  Statement)
      covering  the resale of such  security is effective  under the  Securities
      Act, or (ii) following any sale of such Underlying Shares pursuant to Rule
      144, or (iii) if such  Underlying  Shares are eligible for sale under Rule
      144(k),   or  (iv)  if  such  legend  is  not  required  under  applicable
      requirements of the Securities Act (including judicial interpretations and
      pronouncements  issued by the staff of the

                                       23
<PAGE>

      Commission).  The Company shall cause its counsel to issue a legal opinion
      to the Company's  transfer  agent  promptly  after the  Effective  Date if
      required  by the  Company's  transfer  agent to effect the  removal of the
      legend  hereunder.  If all or any  portion  of a  Debenture  or Warrant is
      converted  or  exercised  (as  applicable)  at a  time  when  there  is an
      effective  registration  statement  to cover the resale of the  Underlying
      Shares,  or if such Underlying  Shares may be sold under Rule 144(k) or if
      such legend is not otherwise required under applicable requirements of the
      Securities  Act (including  judicial  interpretations  and  pronouncements
      issued by the staff of the Commission)  then such Underlying  Shares shall
      be issued free of all  legends.  The Company  agrees  that  following  the
      Effective Date or at such time as such legend is no longer  required under
      this Section  4.1(c),  it will, no later than three Trading Days following
      the delivery by a Purchaser to the Company or the Company's transfer agent
      of a certificate  representing  Underlying  Shares, as applicable,  issued
      with a  restrictive  legend (such third  Trading Day, the "Legend  Removal
      Date"),  deliver or cause to be delivered to such  Purchaser a certificate
      representing  such  shares  that is free  from all  restrictive  and other
      legends.  The  Company  may not make any  notation  on its records or give
      instructions  to any  transfer  agent  of the  Company  that  enlarge  the
      restrictions  on  transfer  set forth in this  Section.  Certificates  for
      Underlying Shares subject to legend removal hereunder shall be transmitted
      by the transfer  agent of the Company to the  Purchasers  by crediting the
      account of the Purchaser's  prime broker with the Depository Trust Company
      System.

            (d) In addition to such Purchaser's  other available  remedies,  the
      Company shall pay to a Purchaser,  in cash, as partial  liquidated damages
      and not as a penalty,  for each $1,000 of Underlying  Shares (based on the
      VWAP of the Common Stock on the date such  Securities are submitted to the
      Company's  transfer agent) delivered for removal of the restrictive legend
      and subject to Section 4.1(c),  $10 per Trading Day (increasing to $20 per
      Trading Day 10 Trading  Days after such  damages have begun to accrue) for
      each Trading Day after the second Trading Day following the Legend Removal
      Date until such certificate is delivered without a legend.  Nothing herein
      shall  limit  such  Purchaser's  right to pursue  actual  damages  for the
      Company's failure to deliver  certificates  representing any Securities as
      required by the Transaction  Documents,  and such Purchaser shall have the
      right  to  pursue  all  remedies  available  to it  at  law  or in  equity
      including,  without  limitation,  a decree of specific  performance and/or
      injunctive relief.  Notwithstanding anything herein to the contrary, as to
      any delays in  performance  caused solely and directly by a Force Majeure,
      the Trading  Days  during  which such delay is  occurring  shall be tolled
      hereunder  with respect to liquidated  damages,  provided that the Company
      has used,  and continues to use,  best efforts to perform its  obligations
      notwithstanding such Force Majeure.

            (e)  Each  Purchaser,  severally  and not  jointly  with  the  other
      Purchasers,  agrees  that  the  removal  of the  restrictive  legend  from
      certificates  representing  Securities as set forth in this Section 4.1 is
      predicated  upon the Company's  reliance that the Purchaser  will sell any
      Securities  pursuant  to  either  the  registration  requirements  of  the
      Securities Act, including any applicable prospectus delivery requirements,
      or an exemption  therefrom,  and that if Securities are sold pursuant to a
      Registration  Statement,  they will be sold in compliance with the plan of
      distribution set forth therein.

                                       24
<PAGE>

      4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance
of the  Securities  may result in dilution of the  outstanding  shares of Common
Stock,  which dilution may be substantial under certain market  conditions.  The
Company  further   acknowledges  that  its  obligations  under  the  Transaction
Documents,  including without  limitation its obligation to issue the Underlying
Shares pursuant to the Transaction Documents, are unconditional and absolute and
not  subject  to any  right  of  set  off,  counterclaim,  delay  or  reduction,
regardless  of the effect of any such dilution or any claim the Company may have
against any Purchaser and  regardless of the dilutive  effect that such issuance
may have on the ownership of the other stockholders of the Company.

      4.3 Furnishing of Information.  As long as any Purchaser owns  Securities,
the Company  covenants to timely file (or obtain  extensions in respect  thereof
and file within the applicable grace period) all reports required to be filed by
the Company  after the date hereof  pursuant to the Exchange Act. As long as any
Purchaser  owns  Securities,  if the  Company is not  required  to file  reports
pursuant to the Exchange Act, it will prepare and furnish to the  Purchasers and
make publicly  available in accordance  with Rule 144(c) such  information as is
required for the Purchasers to sell the  Securities  under Rule 144. The Company
further  covenants  that it will  take  such  further  action  as any  holder of
Securities may reasonably  request,  to the extent required from time to time to
enable  such  Person  to sell such  Securities  without  registration  under the
Securities Act within the requirements of the exemption provided by Rule 144.

      4.4  Integration.  The Company  shall not sell,  offer for sale or solicit
offers to buy or  otherwise  negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the  Securities  in a manner that would  require the  registration  under the
Securities  Act of the sale of the Securities to the Purchasers or that would be
integrated  with the offer or sale of the  Securities  for purposes of the rules
and regulations of any Trading Market.

      4.5  Conversion  and Exercise  Procedures.  The form of Notice of Exercise
included in the  Warrants and the form of Notice of  Conversion  included in the
Debentures set forth the totality of the  procedures  required of the Purchasers
in order to exercise the Warrants or convert the Debentures. No additional legal
opinion or other information or instructions shall be required of the Purchasers
to exercise their Warrants or convert their Debentures.  The Company shall honor
exercises of the Warrants and  conversions  of the  Debentures and shall deliver
Underlying Shares in accordance with the terms,  conditions and time periods set
forth in the Transaction Documents.

      4.6 Securities Laws Disclosure; Publicity. The Company shall, by 8:30 a.m.
Eastern  time on the second  Trading  Day  following  the date  hereof,  issue a
Current Report on Form 8-K  disclosing  the material  terms of the  transactions
contemplated  hereby, and shall attach the Transaction  Documents  thereto.  The
Company and each  Purchaser  shall  consult with each other in issuing any other
press releases with respect to the transactions contemplated hereby, and neither
the Company nor any  Purchaser  shall issue any such press  release or otherwise
make any such public  statement  without the prior consent of the Company,  with
respect to any press release of any  Purchaser,  or without the prior consent of
each Purchaser,  with respect to any

                                       25
<PAGE>

press release of the Company,  which consent shall not  unreasonably be withheld
or  delayed,  except if such  disclosure  is  required by law, in which case the
disclosing  party shall  promptly  provide the other party with prior  notice of
such public  statement or  communication.  Notwithstanding  the  foregoing,  the
Company shall not publicly  disclose the name of any  Purchaser,  or include the
name of any Purchaser in any filing with the Commission or any regulatory agency
or Trading Market,  without the prior written consent of such Purchaser,  except
(i)  as  required  by  federal   securities  law  in  connection  with  (A)  any
registration statement contemplated by the Registration Rights Agreement and (B)
the filing of final Transaction  Documents  (including  signature pages thereto)
with the Commission and (ii) to the extent such disclosure is required by law or
Trading  Market  regulations,  in  which  case the  Company  shall  provide  the
Purchasers with prior notice of such  disclosure  permitted under this subclause
(ii).

      4.7  Shareholder  Rights  Plan.  No claim will be made or  enforced by the
Company  or,  with the  consent  of the  Company,  any  other  Person,  that any
Purchaser is an "Acquiring Person" under any control share acquisition, business
combination,  poison pill (including any distribution  under a rights agreement)
or similar  anti-takeover  plan or arrangement in effect or hereafter adopted by
the Company,  or that any Purchaser could be deemed to trigger the provisions of
any such  plan or  arrangement,  by  virtue of  receiving  Securities  under the
Transaction  Documents or under any other agreement  between the Company and the
Purchasers.

      4.8 Non-Public Information.  Except with respect to the material terms and
conditions of the transactions  contemplated by the Transaction  Documents,  the
Company  covenants and agrees that neither it nor any other Person acting on its
behalf will provide any Purchaser or its agents or counsel with any  information
that the Company believes  constitutes material non-public  information,  unless
prior thereto such Purchaser shall have executed a written  agreement  regarding
the  confidentiality  and use of such information.  The Company  understands and
confirms that each Purchaser  shall be relying on the foregoing  representations
in effecting transactions in securities of the Company.

      4.9 Use of Proceeds.  Except as set forth on Schedule 4.9 attached hereto,
the Company shall use the net proceeds from the sale of the Securities hereunder
for payment to the Purchasers for all accrued but unpaid interest and other fees
owing on outstanding obligations of the Company and then for the working capital
purposes  and not for the  satisfaction  of any  portion of the  Company's  debt
(other than payment of trade  payables in the ordinary  course of the  Company's
business  and prior  practices),  to redeem  any  Common  Stock or Common  Stock
Equivalents or to settle any outstanding litigation.

      4.10 [INTENTIONALLY DELETED].

      4.11  Indemnification  of  Purchasers.  Subject to the  provisions of this
Section  4.11,  the  Company  will  indemnify  and hold each  Purchaser  and its
directors, officers, shareholders,  members, partners, employees and agents (and
any other Persons with a functionally  equivalent  role of a Person holding such
titles notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser  (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers,  shareholders,
agents,   members,   partners  or  employees  (and  any  other  Persons  with  a
functionally  equivalent role of a Person

                                       26
<PAGE>

holding such titles  notwithstanding a lack of such title or any other title) of
such  controlling  person (each, a "Purchaser  Party") harmless from any and all
losses,  liabilities,  obligations,  claims,  contingencies,  damages, costs and
expenses, including all judgments, amounts paid in settlements,  court costs and
reasonable  attorneys' fees and costs of  investigation  that any such Purchaser
Party may suffer or incur as a result of or relating to (a) any breach of any of
the representations,  warranties, covenants or agreements made by the Company in
this  Agreement  or in  the  other  Transaction  Documents  or  (b)  any  action
instituted against a Purchaser,  or any of them or their respective  Affiliates,
by any  stockholder  of the Company who is not an Affiliate  of such  Purchaser,
with  respect  to any  of  the  transactions  contemplated  by  the  Transaction
Documents  (unless  such  action  is  based  upon a breach  of such  Purchaser's
representations,  warranties or covenants under the Transaction Documents or any
agreements or  understandings  such Purchaser may have with any such stockholder
or any  violations by the Purchaser of state or federal  securities  laws or any
conduct by such Purchaser which constitutes  fraud,  gross  negligence,  willful
misconduct or malfeasance). If any action shall be brought against any Purchaser
Party in respect of which  indemnity may be sought  pursuant to this  Agreement,
such  Purchaser  Party shall  promptly  notify the  Company in writing,  and the
Company  shall have the right to assume the defense  thereof with counsel of its
own  choosing.  Any  Purchaser  Party  shall  have the right to employ  separate
counsel in any such action and participate in the defense thereof,  but the fees
and expenses of such  counsel  shall be at the expense of such  Purchaser  Party
except to the  extent  that (i) the  employment  thereof  has been  specifically
authorized  by the  Company in  writing,  (ii) the  Company  has failed  after a
reasonable  period of time to assume such defense and to employ counsel or (iii)
in such action there is, in the reasonable  opinion of such separate counsel,  a
material  conflict on any material issue between the position of the Company and
the  position  of such  Purchaser  Party,  in which  case the  Company  shall be
responsible  for the  reasonable  fees  and  expenses  of no more  than one such
separate  counsel.  The Company will not be liable to any Purchaser  Party under
this Agreement (i) for any settlement by a Purchaser Party effected  without the
Company's prior written  consent,  which shall not be  unreasonably  withheld or
delayed;  or (ii) to the  extent,  but only to the  extent  that a loss,  claim,
damage or liability is  attributable  to any Purchaser  Party's breach of any of
the representations,  warranties, covenants or agreements made by such Purchaser
Party in this Agreement or in the other Transaction  Documents.  Notwithstanding
anything herein to the contrary, without limiting any Purchaser's other remedies
at law or equity,  such Purchaser's right to receive  indemnification  hereunder
shall be limited to it Subscription Amount paid at the Closing.

      4.12 Reservation and Listing of Securities.

            (a) The Company  shall  maintain a reserve from its duly  authorized
      shares of Common Stock for issuance pursuant to the Transaction  Documents
      in such amount as may be required to fulfill its obligations in full under
      the Transaction Documents.

            (b) If, on any date,  the number of  authorized  but  unissued  (and
      otherwise  unreserved)  shares of Common  Stock is less than the  Required
      Minimum on such date, then the Board of Directors of the Company shall use
      commercially  reasonable  efforts to amend the  Company's  certificate  or
      articles  of  incorporation  to  increase  the  number of  authorized  but
      unissued  shares of Common Stock to at least the Required  Minimum at such
      time,  as soon as  possible  and in any event not later  than the 75th day
      after such date.

                                       27
<PAGE>

            (c) The Company  shall,  if  applicable:  (i) in the time and manner
      required  by the  principal  Trading  Market,  prepare  and file with such
      Trading Market an additional shares listing application  covering a number
      of shares of Common  Stock at least equal to the  Required  Minimum on the
      date of such  application,  (ii) take all steps  necessary  to cause  such
      shares of Common Stock to be approved  for listing on such Trading  Market
      as soon as possible  thereafter,  (iii) provide to the Purchasers evidence
      of such listing, and (iv) maintain the listing of such Common Stock on any
      date at least equal to the  Required  Minimum on such date on such Trading
      Market or another  Trading Market.  In addition,  the Company shall hold a
      special meeting of  shareholders  (which may also be at the annual meeting
      of shareholders) on or before August 31, 2006 for the purpose of obtaining
      Shareholder  Approval,  with the  recommendation of the Company's Board of
      Directors  that such  proposal be approved,  and the Company shall solicit
      proxies from its  shareholders in connection  therewith in the same manner
      as all  other  management  proposals  in  such  proxy  statement  and  all
      management-appointed  proxyholders  shall vote  their  proxies in favor of
      such proposal.  If the Company does not obtain Shareholder Approval at the
      first  meeting,  the  Company  shall  call a  meeting  every  four  months
      thereafter  to seek  Shareholder  Approval  until the  earlier of the date
      Shareholder   Approval  is  obtained  or  the  Debentures  are  no  longer
      outstanding.

      4.13 Participation in Future Financing.

            (a) Subject to the rights of the holders of the  Company's  Variable
      Rate  Convertible  Debentures  issued on August  12,  2005,  from the date
      hereof until the date that is the later of (i) 9 month  anniversary of the
      Effective Date and (ii) 15 months from the date hereof,  upon any issuance
      by the Company or any of its  Subsidiaries of Common Stock or Common Stock
      Equivalents (a  "Subsequent  Financing"),  each  Purchaser  shall have the
      right to participate in up to an amount of the Subsequent  Financing equal
      to 50% of the Subsequent  Financing (the  "Participation  Maximum") on the
      same terms, conditions and price provided for in the Subsequent Financing.

            (b) At least 5 Trading  Days prior to the closing of the  Subsequent
      Financing, the Company shall deliver to each Purchaser a written notice of
      its  intention  to effect a  Subsequent  Financing  ("Pre-Notice"),  which
      Pre-Notice  shall ask such  Purchaser if it wants to review the details of
      such financing (such additional notice, a "Subsequent  Financing Notice").
      Upon  the  request  of a  Purchaser,  and  only  upon a  request  by  such
      Purchaser,  for a Subsequent Financing Notice, the Company shall promptly,
      but no later than 1 Trading Day after such  request,  deliver a Subsequent
      Financing Notice to such Purchaser.  The Subsequent Financing Notice shall
      describe  in  reasonable  detail  the  proposed  terms of such  Subsequent
      Financing,  the amount of proceeds intended to be raised  thereunder,  the
      Person  or  Persons  through  or with whom such  Subsequent  Financing  is
      proposed to be  effected,  and  attached to which shall be a term sheet or
      similar document relating thereto.

            (c)  Any  Purchaser  desiring  to  participate  in  such  Subsequent
      Financing  must  provide  written  notice to the Company by not later than
      5:30 p.m.  (New York City  time) on the 5th  Trading  Day after all of the
      Purchasers  have received the Pre-Notice  that the

                                       28
<PAGE>

      Purchaser  is willing to  participate  in the  Subsequent  Financing,  the
      amount of the Purchaser's  participation,  and that the Purchaser has such
      funds ready,  willing, and available for investment on the terms set forth
      in the Subsequent Financing Notice. If the Company receives no notice from
      a Purchaser as of such 5th Trading Day, such Purchaser  shall be deemed to
      have notified the Company that it does not elect to participate.

            (d) If by 5:30  p.m.  (New York City  time) on the 5th  Trading  Day
      after all of the Purchasers have received the Pre-Notice, notifications by
      the  Purchasers of their  willingness  to  participate  in the  Subsequent
      Financing  (or  to  cause  their  designees  to  participate)  is,  in the
      aggregate,  less than the total amount of the Subsequent  Financing,  then
      the Company may effect the remaining portion of such Subsequent  Financing
      on the terms and with the  Persons set forth in the  Subsequent  Financing
      Notice.

            (e) If by 5:30  p.m.  (New York City  time) on the 5th  Trading  Day
      after all of the  Purchasers  have  received the  Pre-Notice,  the Company
      receives  responses  to a  Subsequent  Financing  Notice  from  Purchasers
      seeking to purchase  more than the aggregate  amount of the  Participation
      Maximum,  each such Purchaser shall have the right to purchase the greater
      of (a) their Pro Rata  Portion  (as  defined  below) of the  Participation
      Maximum and (b) the difference  between the Participation  Maximum and the
      aggregate  amount  of  participation  by all other  Purchasers.  "Pro Rata
      Portion"  is the  ratio  of (x)  the  Subscription  Amount  of  Securities
      purchased  on the  Closing  Date by a Purchaser  participating  under this
      Section  4.13 and (y) the sum of the  aggregate  Subscription  Amounts  of
      Securities  purchased on the Closing Date by all Purchasers  participating
      under this Section 4.13.

            (f) The Company must provide the Purchasers with a second Subsequent
      Financing  Notice,  and the  Purchasers  will  again  have  the  right  of
      participation  set forth above in this  Section  4.13,  if the  Subsequent
      Financing  subject  to the  initial  Subsequent  Financing  Notice  is not
      consummated  for any  reason on the  terms  set  forth in such  Subsequent
      Financing  Notice  within 60 Trading  Days  after the date of the  initial
      Subsequent Financing Notice.

            (g) Notwithstanding the foregoing, this Section 4.13 shall not apply
      in respect of an Exempt Issuance.

      4.14 Subsequent Equity Sales.

            (a) From the date  hereof  until 60 days after the  Effective  Date,
      neither the Company nor any Subsidiary  shall issue shares of Common Stock
      or Common  Stock  Equivalents;  provided,  however,  the 60 day period set
      forth in this  Section  4.14 shall be  extended  for the number of Trading
      Days  during  such  period in which (i)  trading  in the  Common  Stock is
      suspended by any Trading Market, or (ii) following the Effective Date, the
      Registration  Statement is not effective or the prospectus included in the
      Registration Statement may not be used by the Purchasers for the resale of
      the Underlying Shares.

                                       29
<PAGE>

            (b) From the date hereof until such time as no  Purchaser  holds any
      of the  Debentures,  the Company  shall be  prohibited  from  effecting or
      entering into an agreement to effect any Subsequent  Financing involving a
      "Variable Rate  Transaction".  The term "Variable Rate Transaction"  shall
      mean a  transaction  in which the Company  issues or sells (i) any debt or
      equity securities that are convertible  into,  exchangeable or exercisable
      for, or include  the right to receive  additional  shares of Common  Stock
      either (A) at a conversion,  exercise or exchange rate or other price that
      is based upon and/or varies with the trading  prices of or quotations  for
      the shares of Common Stock at any time after the initial  issuance of such
      debt or equity securities, or (B) with a conversion,  exercise or exchange
      price that is subject to being reset at some future date after the initial
      issuance  of such  debt or  equity  security  or upon  the  occurrence  of
      specified  or  contingent  events  directly or  indirectly  related to the
      business of the Company or the market for the Common  Stock or (ii) enters
      into any  agreement,  including,  but not  limited  to, an equity  line of
      credit,  whereby the Company may sell  securities  at a future  determined
      price.

            (c)  Unless  Shareholder  Approval  has  been  obtained  and  deemed
      effective,  the Company  shall not make any issuance  whatsoever of Common
      Stock or  Common  Stock  Equivalents  below  the then  Exercise  Price (as
      defined  in the  Warrants  issued  pursuant  to Section  2.2(a)(vi)).  Any
      Purchaser  shall be  entitled  to obtain  injunctive  relief  against  the
      Company to preclude any such  issuance,  which remedy shall be in addition
      to any right to collect damages.

            (d) Notwithstanding the foregoing, this Section 4.14 shall not apply
      in  respect  of (i) an  Exempt  Issuance,  except  that no  Variable  Rate
      Transaction  shall be an Exempt  Issuance  and (ii) prior to the date that
      the   Registration   Statement  is  filed  or  after  the  date  that  the
      Registration  Statement  is  declared  effective  by  the  Commission,  an
      issuance  of  $35,000,000  of  the  Company's  convertible  debentures  to
      Windstar  Financial  Corp.  and/or  its  Affiliates,  provided  that  such
      securities shall not be a Variable Rate Transaction.

      4.15 Equal Treatment of Purchasers.  No consideration  shall be offered or
paid to any  Person  to amend or  consent  to a waiver  or  modification  of any
provision of any of the Transaction  Documents unless the same  consideration is
also offered to all of the parties to the Transaction  Documents.  Further,  the
Company shall not make any payment of principal or interest on the Debentures in
amounts  which  are   disproportionate  to  the  respective   principal  amounts
outstanding  on  the  Debentures  at  any  applicable  time.  For  clarification
purposes,  this provision constitutes a separate right granted to each Purchaser
by the Company and negotiated separately by each Purchaser,  and is intended for
the  Company  to treat  the  Purchasers  as a class  and shall not in any way be
construed as the Purchasers  acting in concert or as a group with respect to the
purchase, disposition or voting of Securities or otherwise.

      4.16 Short Sales and Confidentiality After The Date Hereof. Each Purchaser
severally and not jointly with the other  Purchasers  covenants  that neither it
nor any Affiliate acting on its behalf or pursuant to any understanding  with it
will execute any Short Sales during the period commencing at the Discussion Time
and ending at the time that the transactions  contemplated by this Agreement are
first publicly announced as described in Section 4.6. Each Purchaser,

                                       30
<PAGE>

severally and not jointly with the other  Purchasers,  covenants that until such
time as the transactions  contemplated by this Agreement are publicly  disclosed
by the Company as described in Section 4.6,  such  Purchaser  will  maintain the
confidentiality   of  all  disclosures  made  to  it  in  connection  with  this
transaction  (including  the  existence  and  terms of this  transaction).  Each
Purchaser understands and acknowledges, severally and not jointly with any other
Purchaser,  that the  Commission  currently  takes the position that coverage of
short  sales of  shares  of the  Common  Stock  "against  the box"  prior to the
Effective Date of the Registration  Statement with the Securities is a violation
of Section 5 of the  Securities  Act, as set forth in Item 65, Section A, of the
Manual of Publicly  Available  Telephone  Interpretations,  dated  August  1997,
compiled  by the  Office of Chief  Counsel,  Division  of  Corporation  Finance.
Notwithstanding the foregoing,  no Purchaser makes any representation,  warranty
or covenant  hereby that it will not engage in Short Sales in the  securities of
the Company after the time that the transactions  contemplated by this Agreement
are first publicly  announced as described in Section 4.6.  Notwithstanding  the
foregoing, in the case of a Purchaser that is a multi-managed investment vehicle
whereby separate portfolio managers manage separate portions of such Purchaser's
assets and the  portfolio  managers have no direct  knowledge of the  investment
decisions  made  by the  portfolio  managers  managing  other  portions  of such
Purchaser's  assets,  the covenant set forth above shall only apply with respect
to the  portion  of  assets  managed  by the  portfolio  manager  that  made the
investment decision to purchase the Securities covered by this Agreement.

      4.17 Form D; Blue Sky Filings.  The Company agrees to timely file a Form D
with respect to the Securities as required  under  Regulation D and to provide a
copy  thereof,  promptly upon request of any  Purchaser.  The Company shall take
such action as the Company shall  reasonably  determine is necessary in order to
obtain  an  exemption  for,  or to  qualify  the  Securities  for,  sale  to the
Purchasers at the Closing under applicable  securities or "Blue Sky" laws of the
states of the United States, and shall provide evidence of such actions promptly
upon request of any Purchaser.

      4.18 Additional Investment.

            (a) From the date  hereof  until  the later of the date that (i) the
      Registration  Statement  is  filed  with the  Commission  or (ii) the Able
      Energy/All   American   Transaction  and  the  Able  Energy/All   American
      Transaction  Documents shall have been consummated and be effective,  each
      Purchaser may, in its sole determination, elect to purchase, severally and
      not  jointly  with the  other  Purchasers,  additional  debentures  with a
      principal amount of up to such Purchasers Subscription Amount and warrants
      to  acquire  shares of Common  Stock  (such  securities,  the  "Additional
      Securities" and such right to receive the Additional  Securities  pursuant
      to this Section 4.18, the "Purchaser Additional Rights").

            (b) Any Additional Right exercised by a Purchaser shall close within
      10 Trading  Days of a duly  delivered  exercise  notice by the  exercising
      Purchaser. Any additional investment in the Additional Securities shall be
      on terms, conditions and conversion and exercise prices identical to those
      set forth in the  Transaction  Documents,  mutatis  mutandis.  In order to
      effectuate a purchase and sale of the Additional  Securities,  the Company
      and the  Purchasers  shall  enter  into the  following  agreements:  (x) a
      Securities  Purchase  Agreement  identical  to  this  Agreement,   mutatis
      mutandis  and  shall

                                       31
<PAGE>

      include  updated  disclosure  schedules  and  (y)  a  registration  rights
      agreement identical to the Registration Rights Agreement, mutatis mutandis
      and shall include updated disclosure  schedules.  Any Purchaser may assign
      its Purchaser  Additional  Rights to any Affiliate of such Purchaser or to
      any other Purchaser.

                                   ARTICLE V.
                                  MISCELLANEOUS

      5.1 Termination.  This Agreement may be terminated by any Purchaser, as to
such Purchaser's obligations hereunder only and without any effect whatsoever on
the obligations between the Company and the other Purchasers,  by written notice
to the other  parties,  if the  Closing  has not been  consummated  on or before
August 15, 2006;  provided,  however,  that no such  termination will affect the
right of any party to sue for any breach by the other party (or parties).

      5.2 Fees and Expenses. At the Closing, the Company has agreed to reimburse
Lilac Ventures Master Fund Ltd.  ("Lilac") the  non-accountable  sum of $50,000,
for its legal  fees and  expenses,  $10,000  which  has been  paid  prior to the
Closing.  Accordingly,  in lieu of the foregoing payments,  the aggregate amount
that  Lilac is to pay for the  Securities  at the  Closing  shall be  reduced by
$40,000 in lieu thereof.  The Company  shall  deliver,  prior to the Closing,  a
completed and executed copy of the Closing  Statement,  attached hereto as Annex
A. Except as expressly set forth in the  Transaction  Documents to the contrary,
each party shall pay the fees and expenses of its advisers, counsel, accountants
and  other  experts,  if any,  and all other  expenses  incurred  by such  party
incident to the negotiation, preparation, execution, delivery and performance of
this Agreement.  The Company shall pay all transfer agent fees,  stamp taxes and
other taxes and duties levied in connection  with the delivery of any Securities
to the Purchasers.

      5.3  Entire  Agreement.  The  Transaction  Documents,  together  with  the
exhibits and schedules thereto,  contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.

      5.4 Notices.  Any and all notices or other  communications  or  deliveries
required or permitted to be provided  hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of  transmission,  if
such notice or  communication is delivered via facsimile at the facsimile number
set forth on the signature  pages  attached  hereto prior to 5:30 p.m. (New York
City  time)  on a  Trading  Day,  (b) the next  Trading  Day  after  the date of
transmission,  if such notice or communication is delivered via facsimile at the
facsimile  number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day,  (c) the 2nd Trading  Day  following  the date of mailing,  if sent by U.S.
nationally  recognized  overnight courier service, or (d) upon actual receipt by
the party to whom such  notice is  required  to be given.  The  address for such
notices and communications shall be as set forth on the signature pages attached
hereto.

                                       32
<PAGE>

      5.5  Amendments;  Waivers.  No provision of this  Agreement may be waived,
modified,  supplemented or amended except in a written instrument signed, in the
case of an  amendment,  by the Company and each  Purchaser  or, in the case of a
waiver,  by the party against whom  enforcement of any such waived  provision is
sought.  No waiver of any default  with respect to any  provision,  condition or
requirement of this Agreement  shall be deemed to be a continuing  waiver in the
future or a waiver of any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise  any right  hereunder  in any manner  impair the  exercise  of any such
right.

      5.6  Headings.  The  headings  herein  are for  convenience  only,  do not
constitute a part of this  Agreement  and shall not be deemed to limit or affect
any of the provisions hereof.

      5.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their  successors and permitted  assigns.  The
Company may not assign this  Agreement  or any rights or  obligations  hereunder
without the prior written consent of each Purchaser (other than by merger).  Any
Purchaser may assign any or all of its rights under this Agreement to any Person
to whom such  Purchaser  assigns or  transfers  any  Securities,  provided  such
transferee  agrees in  writing  to be bound,  with  respect  to the  transferred
Securities,  by the  provisions of the  Transaction  Documents that apply to the
"Purchasers".

      5.8 No  Third-Party  Beneficiaries.  This  Agreement  is intended  for the
benefit of the parties  hereto and their  respective  successors  and  permitted
assigns and is not for the benefit of, nor may any provision  hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.11.

      5.9 Governing Law. All questions  concerning the  construction,  validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance  with the internal laws of the State of
New York,  without  regard to the  principles of conflicts of law thereof.  Each
party  agrees  that  all  legal  proceedings   concerning  the  interpretations,
enforcement and defense of the  transactions  contemplated by this Agreement and
any other Transaction  Documents  (whether brought against a party hereto or its
respective affiliates,  directors, officers, shareholders,  employees or agents)
shall be commenced  exclusively  in the state and federal  courts sitting in the
City of New  York.  Each  party  hereby  irrevocably  submits  to the  exclusive
jurisdiction  of the state and federal  courts  sitting in the City of New York,
borough  of  Manhattan  for the  adjudication  of any  dispute  hereunder  or in
connection  herewith or with any  transaction  contemplated  hereby or discussed
herein  (including  with respect to the  enforcement  of any of the  Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action  or  proceeding,  any  claim  that it is not  personally  subject  to the
jurisdiction of any such court, that such suit, action or proceeding is improper
or is an inconvenient  venue for such proceeding.  Each party hereby irrevocably
waives  personal  service of process and consents to process being served in any
such suit,  action or  proceeding  by mailing a copy thereof via  registered  or
certified  mail or overnight  delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this  Agreement and agrees that
such service shall constitute good and sufficient  service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to serve process in any other manner  permitted by law. The parties hereby waive
all  rights to a trial by jury.  If either  party

                                       33
<PAGE>

shall  commence  an  action or  proceeding  to  enforce  any  provisions  of the
Transaction  Documents,  then the prevailing  party in such action or proceeding
shall be reimbursed by the other party for its  reasonable  attorneys'  fees and
other  costs and  expenses  incurred  with the  investigation,  preparation  and
prosecution of such action or proceeding.

      5.10  Survival.  The  representations,  warranties,  covenants  and  other
agreements contained herein shall survive the Closing and the delivery, exercise
and/or conversion of the Securities,  as applicable for the applicable statue of
limitations.

      5.11   Execution.   This   Agreement  may  be  executed  in  two  or  more
counterparts,  all of which when taken  together shall be considered one and the
same agreement and shall become effective when  counterparts have been signed by
each party and  delivered  to the other  party,  it being  understood  that both
parties need not sign the same  counterpart.  In the event that any signature is
delivered by facsimile  transmission  or by e-mail  delivery of a ".pdf"  format
data file,  such  signature  shall create a valid and binding  obligation of the
party  executing (or on whose behalf such  signature is executed)  with the same
force and effect as if such facsimile or ".pdf"  signature page were an original
thereof.

      5.12 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent  jurisdiction to be invalid,  illegal,
void or  unenforceable,  the remainder of the terms,  provisions,  covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected,  impaired or  invalidated,  and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially  the same result as that  contemplated by such
term, provision,  covenant or restriction.  It is hereby stipulated and declared
to be the  intention of the parties that they would have  executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.

      5.13  Rescission and  Withdrawal  Right.  Notwithstanding  anything to the
contrary  contained in (and without  limiting any similar  provisions of) any of
the other  Transaction  Documents,  whenever  any  Purchaser  exercises a right,
election, demand or option under a Transaction Document and the Company does not
timely perform its related obligations within the periods therein provided, then
such Purchaser may rescind or withdraw, in its sole discretion from time to time
upon written notice to the Company,  any relevant notice,  demand or election in
whole or in part without  prejudice to its future actions and rights;  provided,
however,  in the case of a rescission of a conversion of a Debenture or exercise
of a Warrant,  the  Purchaser  shall be  required to return any shares of Common
Stock subject to any such rescinded conversion or exercise notice.

      5.14   Replacement  of  Securities.   If  any  certificate  or  instrument
evidencing any Securities is mutilated,  lost, stolen or destroyed,  the Company
shall  issue or cause to be issued in  exchange  and  substitution  for and upon
cancellation thereof (in the case of mutilation), or in lieu of and substitution
therefor,  a new  certificate or  instrument,  but only upon receipt of evidence
reasonably  satisfactory to the Company of such loss, theft or destruction.  The
applicant for a new  certificate or instrument  under such  circumstances  shall
also  pay any  reasonable  third-party

                                       34
<PAGE>

costs  (including  customary  indemnity)  associated  with the  issuance of such
replacement Securities.

      5.15  Remedies.  In  addition to being  entitled  to  exercise  all rights
provided herein or granted by law,  including  recovery of damages,  each of the
Purchasers  and the Company will be entitled to specific  performance  under the
Transaction  Documents.  The  parties  agree that  monetary  damages  may not be
adequate  compensation  for  any  loss  incurred  by  reason  of any  breach  of
obligations  contained in the  Transaction  Documents and hereby agrees to waive
and not to assert in any action for specific  performance of any such obligation
the defense that a remedy at law would be adequate.

      5.16 Payment Set Aside.  To the extent that the Company makes a payment or
payments to any Purchaser  pursuant to any  Transaction  Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such  enforcement  or exercise or any part thereof are  subsequently
invalidated,  declared to be fraudulent or  preferential,  set aside,  recovered
from, disgorged by or are required to be refunded,  repaid or otherwise restored
to the  Company,  a  trustee,  receiver  or  any  other  person  under  any  law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable  cause of action),  then to the extent of any such  restoration
the  obligation  or part thereof  originally  intended to be satisfied  shall be
revived and  continued  in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

      5.17 Usury. To the extent it may lawfully do so, the Company hereby agrees
not to insist upon or plead or in any manner  whatsoever  claim, and will resist
any and all efforts to be compelled  to take the benefit or advantage  of, usury
laws wherever enacted, now or at any time hereafter in force, in connection with
any claim, action or proceeding that may be brought by any Purchaser in order to
enforce any right or remedy under any Transaction Document.  Notwithstanding any
provision to the contrary contained in any Transaction Document, it is expressly
agreed  and  provided  that  the  total  liability  of  the  Company  under  the
Transaction  Documents  for payments in the nature of interest  shall not exceed
the maximum lawful rate authorized  under  applicable law (the "Maximum  Rate"),
and, without  limiting the foregoing,  in no event shall any rate of interest or
default  interest,  or both of them,  when aggregated with any other sums in the
nature  of  interest  that  the  Company  may  be  obligated  to pay  under  the
Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum
contract  rate of  interest  allowed by law and  applicable  to the  Transaction
Documents is  increased  or  decreased  by statute or any official  governmental
action subsequent to the date hereof,  the new maximum contract rate of interest
allowed by law will be the Maximum Rate applicable to the Transaction  Documents
from the  effective  date  forward,  unless such  application  is  precluded  by
applicable law. If under any circumstances whatsoever, interest in excess of the
Maximum  Rate  is  paid  by  the  Company  to  any  Purchaser  with  respect  to
indebtedness  evidenced  by the  Transaction  Documents,  such  excess  shall be
applied  by  such  Purchaser  to  the  unpaid  principal  balance  of  any  such
indebtedness  or be refunded to the Company,  the manner of handling such excess
to be at such Purchaser's election.

      5.18  Independent  Nature  of  Purchasers'  Obligations  and  Rights.  The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of

                                       35
<PAGE>

any other  Purchaser,  and no Purchaser  shall be responsible in any way for the
performance or  non-performance  of the obligations of any other Purchaser under
any Transaction  Document.  Nothing contained herein or in any other Transaction
Document, and no action taken by any Purchaser pursuant thereto, shall be deemed
to constitute the Purchasers as a partnership,  an association,  a joint venture
or any other kind of entity,  or create a presumption that the Purchasers are in
any way acting in concert or as a group with respect to such  obligations or the
transactions  contemplated by the Transaction Documents. Each Purchaser shall be
entitled to  independently  protect and  enforce its rights,  including  without
limitation  the  rights  arising  out of  this  Agreement  or  out of the  other
Transaction Documents,  and it shall not be necessary for any other Purchaser to
be  joined as an  additional  party in any  proceeding  for such  purpose.  Each
Purchaser has been represented by its own separate legal counsel in their review
and  negotiation of the  Transaction  Documents.  For reasons of  administrative
convenience  only,  Purchasers  and  their  respective  counsel  have  chosen to
communicate  with the  Company  through  FW.  FW does not  represent  all of the
Purchasers  but only Lilac.  The  Company has elected to provide all  Purchasers
with the same terms and Transaction Documents for the convenience of the Company
and not because it was required or requested to do so by the Purchasers.

      5.19  Liquidated  Damages.  The Company's  obligations  to pay any partial
liquidated  damages or other amounts owing under the Transaction  Documents is a
continuing  obligation of the Company and shall not  terminate  until all unpaid
partial liquidated damages and other amounts have been paid  notwithstanding the
fact that the instrument or security  pursuant to which such partial  liquidated
damages or other amounts are due and payable shall have been canceled.

      5.20  Construction.  The  parties  agree  that each of them  and/or  their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved  against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.

                            (Signature Pages Follow)

                                       36
<PAGE>

      IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this  Securities
Purchase   Agreement  to  be  duly  executed  by  their  respective   authorized
signatories as of the date first indicated above.

ABLE ENERGY, INC.                                Address for Notice:

By:__________________________________________
   Name:
   Title:

With a copy to (which shall not constitute notice):

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                      SIGNATURE PAGE FOR PURCHASER FOLLOWS]

                                       37
<PAGE>

        [PURCHASER SIGNATURE PAGES TO ABLE SECURITIES PURCHASE AGREEMENT]

      IN WITNESS WHEREOF,  the undersigned have caused this Securities  Purchase
Agreement to be duly executed by their respective  authorized  signatories as of
the date first indicated above.

Name of Purchaser: ________________________________________________________

Signature of Authorized Signatory of Purchaser: ___________________________

Name of Authorized Signatory: _____________________________________________

Title of Authorized Signatory: ____________________________________________

Email Address of Purchaser: _______________________________________________

Facsimile Number of Purchaser: ____________________________________________

Address for Notice of Purchaser:

Address for Delivery of Securities for Purchaser (if not same as above):

Subscription Amount:
Total principal amount of Debenture:
Warrant Shares:

EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]

                                       38
<PAGE>

                                                                         Annex A

                                CLOSING STATEMENT

Pursuant to the attached  Securities  Purchase  Agreement,  dated as of the date
hereto,  the  purchasers  shall  purchase up to  $2,000,000  of  Debentures  and
Warrants from Able Energy, Inc. (the "Company").  All funds will be wired into a
trust account  maintained by Feldman  Weinstein,  LLP, counsel to Lilac Ventures
Master Fund Ltd.  All funds will be disbursed  in  accordance  with this Closing
Statement.

Disbursement Date:    August ___, 2005

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

I. PURCHASE PRICE

                    Gross Proceeds to be Received in Trust           $2,000,000

II. DISBURSEMENTS

                     Lilac  Ventures  Master  Fund  Ltd.  (Fees and  $40,000
                    Expenses)
                    Lilac Ventures Master Fund Ltd.                  $
                    Cranshire Capital, LP                            $
                    Iroquios Master Fund Ltd.                        $
                    Smithfield Fiduciary LLC                         $
                    Crestview Capital Master, LLC                    $

Total Amount Disbursed:                                              $

WIRE INSTRUCTIONS:

To: _____________________________________

To: _____________________________________

                                       39EXHIBIT 10.2

                               SECURITY AGREEMENT

      SECURITY AGREEMENT,  dated as of August 8, 2006 (this "Agreement"),  among
Able  Energy,  Inc.,  a  Delaware  corporation  (the  "Company")  and all of the
Subsidiaries of the Company (such  subsidiaries,  the "Guarantors") (the Company
and Guarantors are collectively  referred to as the "Debtors") and the holder or
holders of the  Company's  Variable Rate Secured  Convertible  Debentures in the
original aggregate principal amount of $2,000,000 (the "Debentures"),  signatory
hereto, their endorsees,  transferees and assigns (collectively  referred to as,
the "Secured Parties").

                              W I T N E S S E T H:

      WHEREAS,  pursuant to the  Debentures,  the Secured Parties have severally
agreed to extend the loans to the Company evidenced by the Debentures;

      WHEREAS,  pursuant to a certain Subsidiary  Guarantee dated as of the date
hereof (the  "Guaranty"),  the Guarantors  have jointly and severally  agreed to
guaranty and act as surety for payment of such loans; and

      WHEREAS,  in order to induce  the  Secured  Parties  to  extend  the loans
evidenced  by the  Debentures,  each Debtor has agreed to execute and deliver to
the Secured Parties this Agreement and to grant the Secured Parties,  pari passu
with each other Secured Party, a perfected security interest in certain property
of such Debtor to secure the prompt  payment,  performance and discharge in full
of all of the Company's  obligations  under the Debenture and the other Debtor's
obligations under the Guaranty.

      NOW,  THEREFORE,  in consideration of the agreements  herein contained and
for other good and valuable consideration,  the receipt and sufficiency of which
is hereby acknowledged, the parties hereto hereby agree as follows:

      1. Certain  Definitions.  As used in this  Agreement,  the following terms
shall  have  the  meanings  set  forth in this  Section  1.  Terms  used but not
otherwise  defined in this  Agreement  that are  defined in Article 9 of the UCC
(such as "account", "chattel paper", "commercial tort claim", "deposit account",
"document",    "equipment",    "fixtures",   "general   intangibles",   "goods",
"instruments",  "inventory",  "investment property",  "letter-of-credit rights",
"proceeds" and  "supporting  obligations")  shall have the  respective  meanings
given such terms in Article 9 of the UCC.

            (a)  "Collateral"  means the collateral in which the Secured Parties
      are granted a security  interest by this Agreement and which shall include
      the following personal property of the Debtors, whether presently owned or
      existing  or  hereafter  acquired  or  coming  into  existence,   wherever
      situated,  and all additions and accessions  thereto and all substitutions
      and replacements thereof, and all proceeds, products and accounts thereof,
      including,  without limitation,  all proceeds from the sale or transfer of
      the Collateral  and

                                       1
<PAGE>

      of  insurance  covering  the  same and of any tort  claims  in  connection
      therewith, and all dividends,  interest,  cash, notes, securities,  equity
      interest  or other  property  at any time and from time to time  acquired,
      receivable or otherwise distributed in respect of, or in exchange for, any
      or all of the Pledged Securities (as defined below):

                  (i)  All  goods,  including,   without  limitations,  (A)  all
            machinery,  equipment,  computers,  motor vehicles,  trucks,  tanks,
            boats,  ships,  appliances,  furniture,  special and general  tools,
            fixtures,  test and quality  control  devices and other equipment of
            every kind and  nature  and  wherever  situated,  together  with all
            documents  of  title  and  documents   representing  the  same,  all
            additions and accessions thereto,  replacements  therefor, all parts
            therefor, and all substitutes for any of the foregoing and all other
            items used and useful in connection with any Debtor's businesses and
            all improvements thereto; and (B) all inventory;

                  (ii)  All  contract  rights  and  other  general  intangibles,
            including, without limitation, all partnership interests, membership
            interests,  stock  or  other  securities,  rights  under  any of the
            Organizational   Documents,   agreements   related  to  the  Pledged
            Securities,  licenses,  distribution and other agreements,  computer
            software (whether "off-the-shelf",  licensed from any third party or
            developed  by any Debtor),  computer  software  development  rights,
            leases,  franchises,  customer lists,  quality  control  procedures,
            grants  and  rights,  goodwill,  trademarks,  service  marks,  trade
            styles, trade names, patents, patent applications,  copyrights,  and
            income tax refunds;

                  (iii)  All  accounts,  together  with  all  instruments,   all
            documents of title representing any of the foregoing,  all rights in
            any merchandising, goods, equipment, motor vehicles and trucks which
            any of the same may represent,  and all right,  title,  security and
            guaranties  with  respect to each  account,  including  any right of
            stoppage in transit;

                  (iv) All documents,  letter-of-credit rights,  instruments and
            chattel paper;

                  (v) All commercial tort claims;

                  (vi)  All  deposit  accounts  and  all  cash  (whether  or not
            deposited in such deposit accounts);

                  (vii) All investment property;

                  (viii)All supporting obligations; and

                  (ix) All files,  records,  books of account,  business papers,
            and computer programs; and

                  (x)  the  products  and  proceeds  of  all  of  the  foregoing
            Collateral set forth in clauses (i)-(ix) above.

                                       2
<PAGE>

                  Without   limiting  the  generality  of  the  foregoing,   the
            "Collateral"  shall  include  all  investment  property  and general
            intangibles  respecting  ownership  and/or other equity interests in
            each Guarantor, including, without limitation, the shares of capital
            stock and the other equity interests listed on Schedule H hereto (as
            the same may be  modified  from time to time  pursuant  to the terms
            hereof),  including but not limited to 10.5 million shares of common
            stock of CCI Group,  Inc.  (subject  to  adjustment  for reverse and
            forward  stock  splits  the like),  and any other  shares of capital
            stock and/or other equity  interests of any other direct or indirect
            subsidiary of any Debtor obtained in the future,  and, in each case,
            all  certificates  representing  such shares and/or equity interests
            and,  in each case,  all rights,  options,  warrants,  stock,  other
            securities  and/or equity  interests that may hereafter be received,
            receivable or  distributed  in respect of, or exchanged  for, any of
            the foregoing (all of the foregoing  being referred to herein as the
            "Pledged  Securities") and all rights arising under or in connection
            with the  Pledged  Securities,  including,  but not  limited to, all
            dividends, interest and cash.

                  Notwithstanding the foregoing,  nothing herein shall be deemed
            to constitute  an assignment of any asset which,  in the event of an
            assignment,  becomes  void by  operation  of  applicable  law or the
            assignment of which is otherwise  prohibited  by applicable  law (in
            each case to the extent that such  applicable  law is not overridden
            by Sections  9-406,  9-407 and/or 9-408 of the UCC or other  similar
            applicable law); provided,  however, that to the extent permitted by
            applicable  law,  this  Agreement  shall  create  a  valid  security
            interest in such asset and, to the extent  permitted  by  applicable
            law, this Agreement  shall create a valid  security  interest in the
            proceeds of such asset.

            (b)  "Intellectual  Property" Except for the Hosting and Development
      Agreement  between  Able  Energy,  Inc.  and  Trans-Montaigne,  means  the
      collective reference to all rights,  priorities and privileges relating to
      intellectual property, whether arising under United States,  multinational
      or foreign  laws or  otherwise,  including,  without  limitation,  (i) all
      copyrights  arising under the laws of the United States, any other country
      or any political  subdivision thereof,  whether registered or unregistered
      and whether  published or unpublished,  all  registrations  and recordings
      thereof, and all applications in connection therewith,  including, without
      limitation,  all registrations,  recordings and applications in the United
      States Copyright Office, (ii) all letters patent of the United States, any
      other  country or any  political  subdivision  thereof,  all  reissues and
      extensions thereof,  and all applications for letters patent of the United
      States  or  any  other  country  and  all  divisions,   continuations  and
      continuations-in-part   thereof,   (iii)  all  trademarks,   trade  names,
      corporate names, company names, business names, fictitious business names,
      trade  dress,  service  marks,  logos,  domain  names and other  source or
      business identifiers,  and all goodwill associated therewith, now existing
      or  hereafter  adopted  or  acquired,  all  registrations  and  recordings
      thereof,  and all  applications  in connection  therewith,  whether in the
      United  States  Patent and  Trademark  Office or in any similar  office or
      agency of the United States, any State thereof or any other country or any
      political  subdivision  thereof,  or otherwise,  and all common law rights
      related  thereto,  (iv) all trade  secrets  arising  under the laws of the
      United States, any other country or any p

                                       3
<PAGE>

      olitical  subdivision  thereof,  (v) all  rights to obtain  any  reissues,
      renewals or extensions of the foregoing,  (vi) all licenses for any of the
      foregoing,  and  (vii)  all  causes  of  action  for  infringement  of the
      foregoing.

            (c) "Majority in Interest" shall mean, at any time of determination,
      the majority in interest (based on  then-outstanding  principal amounts of
      Debentures at the time of such determination) of the Secured Parties.

            (d) "Necessary Endorsement" shall mean undated stock powers endorsed
      in blank or other proper  instruments of assignment duly executed and such
      other  instruments  or  documents  as the Agent  (as that term is  defined
      below) may reasonably request.

            (e)  "Obligations"  means  all of the  liabilities  and  obligations
      (primary, secondary, direct, contingent, sole, joint or several) due or to
      become due, or that are now or may be hereafter contracted or acquired, or
      owing  to,  of any  Debtor  to the  Secured  Parties,  including,  without
      limitation,  all  obligations  under this Agreement,  the Debentures,  any
      prior  existing   notes  or   debentures,   the  Guaranty  and  any  other
      instruments,  agreements or other documents  executed and/or  delivered in
      connection  herewith or therewith,  in each case, whether now or hereafter
      existing,  voluntary  or  involuntary,  direct or  indirect,  absolute  or
      contingent,  liquidated or unliquidated,  whether or not jointly owed with
      others, and whether or not from time to time decreased or extinguished and
      later  increased,  created  or  incurred,  and all or any  portion of such
      obligations or liabilities that are paid, to the extent all or any part of
      such payment is avoided or recovered  directly or  indirectly  from any of
      the Secured Parties as a preference,  fraudulent  transfer or otherwise as
      such  obligations  may be amended,  supplemented,  converted,  extended or
      modified  from  time to  time.  Without  limiting  the  generality  of the
      foregoing, the term "Obligations" shall include,  without limitation:  (i)
      principal  of,  and  interest  on the  Debentures  and the loans  extended
      pursuant  thereto;  (ii)  any  and all  other  fees,  indemnities,  costs,
      obligations  and  liabilities of the Debtors from time to time under or in
      connection with this Agreement, the Debentures, the Guaranty and any other
      instruments,  agreements or other documents  executed and/or  delivered in
      connection herewith or therewith; and (iii) all amounts (including but not
      limited to post-petition  interest) in respect of the foregoing that would
      be payable but for the fact that the  obligations  to pay such amounts are
      unenforceable  or not  allowable  due to the  existence  of a  bankruptcy,
      reorganization or similar proceeding involving any Debtor.

            (f) "Organizational Documents" means with respect to any Debtor, the
      documents by which such Debtor was  organized  (such as a  certificate  of
      incorporation,   certificate   of  limited   partnership  or  articles  of
      organization,  and including,  without  limitation,  any  certificates  of
      designation  for preferred  stock or other forms of preferred  equity) and
      which relate to the internal  governance of such Debtor (such as bylaws, a
      partnership  agreement  or an  operating,  limited  liability  or  members
      agreement).

            (g) "UCC" means the Uniform Commercial Code of the State of New York
      and  or any  other  applicable  law  of any  state  or  states  which  has
      jurisdiction  with  respect

                                       4
<PAGE>

      to all, or any portion of, the Collateral or this Agreement,  from time to
      time. It is the intent of the parties that defined terms in the UCC should
      be construed in their broadest sense so that the term "Collateral" will be
      construed in its broadest  sense.  Accordingly  if there are, from time to
      time,  changes to defined  terms in the UCC that broaden the  definitions,
      they are  incorporated  herein and if existing  definitions in the UCC are
      broader  than  the  amended  definitions,   the  existing  ones  shall  be
      controlling.

      2. Grant of Perfected Security Interest.  As an inducement for the Secured
Parties to extend the loans as  evidenced  by the  Debentures  and to secure the
complete and timely payment,  performance and discharge in full, as the case may
be,  of  all  of  the  Obligations,   each  Debtor  hereby  unconditionally  and
irrevocably pledges, grants and hypothecates to the Secured Parties a continuing
and  perfected  security  interest in and to, a lien upon and a right of set-off
against all of their respective right, title and interest of whatsoever kind and
nature in and to, the  Collateral  (the  "Security  Interest").  Notwithstanding
anything  herein to the contrary,  in the event the Company  obtains a long-term
non-equity  linked loan facility of  immediately  available  cash proceeds of at
least $100 million,  and not more than $150 million,  with Manns Haggerskjold of
North America,  Ltd. and/or Windstar  Financial Corp.  and/or their  Affiliates,
each Secured  Party,  severally and not jointly with the other Secured  Parties,
shall use commercially  reasonable  efforts to negotiate with Manns Haggerskjold
of North  America,  Ltd.  and/or  Windstar  Financial  Corp.  and  the Company a
subordination of the Obligations provided that any subordination agreement shall
not impede upon each Secured  Parties  negotiated  benefits,  including  but not
limited  to the right to  convert,  collect  regularly  scheduled  interest  and
principal  payments,  seek  specific  performance  by  the  Company  and  demand
liquidated damage payments. The acceptability of such subordination agreement by
the Secured Parties shall be in the sole determination of the Agent.

      3.  Delivery  of  Certain  Collateral.  Contemporaneously  or prior to the
execution of this Agreement,  each Debtor shall deliver or cause to be delivered
to the Agent (a) any and all certificates and other instruments  representing or
evidencing the Pledged  Securities,  and (b) any and all  certificates and other
instruments or documents representing any of the other Collateral, in each case,
together with all  Necessary  Endorsements.  The Debtors are,  contemporaneously
with the execution hereof,  delivering to Agent, or have previously delivered to
Agent, a true and correct copy of each Organizational  Document governing any of
the Pledged Securities.

      4. Representations,  Warranties,  Covenants and Agreements of the Debtors.
Each Debtor  represents  and warrants  to, and  covenants  and agrees with,  the
Secured Parties as follows:

            (a) Each Debtor has the requisite  corporate,  partnership,  limited
      liability  company  or  other  power  and  authority  to enter  into  this
      Agreement  and  otherwise  to carry  out its  obligations  hereunder.  The
      execution,  delivery and  performance by each Debtor of this Agreement and
      the  filings  contemplated  therein  have  been  duly  authorized  by  all
      necessary  action  on the part of such  Debtor  and no  further  action is
      required by such Debtor.  This  Agreement  has been duly  executed by each
      Debtor. This Agreement constitutes the legal, valid and binding obligation
      of each Debtor,  enforceable  against each Debtor in  accordance  with its
      terms  except  as  such   enforceability  may  be  limited  by

                                       5
<PAGE>

      applicable  bankruptcy,  insolvency,  reorganization  and similar  laws of
      general  application  relating to or affecting  the rights and remedies of
      creditors and by general principles of equity.

            (b) The Debtors  have no place of  business  or offices  where their
      respective  books of account and records are kept (other than  temporarily
      at the offices of its attorneys or accountants) or places where Collateral
      is stored or located,  except as set forth on Schedule A attached  hereto.
      Except as specifically  set forth on Schedule A, each Debtor is the record
      owner of the real property  where such  Collateral  is located,  and there
      exist no  mortgages  or other liens on any such real  property  except for
      Permitted  Liens (as defined in the  Debentures).  Except as  disclosed on
      Schedule A, none of such Collateral is in the possession of any consignee,
      bailee, warehouseman, agent or processor.

            (c) Except for Permitted  Liens (as defined in the  Debentures)  and
      except as set forth on  Schedule B attached  hereto,  the  Debtors are the
      sole owner of the Collateral (except for non-exclusive licenses granted by
      any  Debtor in the  ordinary  course of  business),  free and clear of any
      liens, security interests,  encumbrances,  rights or claims, and are fully
      authorized  to grant the  Security  Interest.  There is not on file in any
      governmental  or  regulatory  authority,  agency  or  recording  office an
      effective financing statement,  security agreement, license or transfer or
      any notice of any of the foregoing (other than those that will be filed in
      favor of the  Secured  Parties  pursuant  to this  Agreement)  covering or
      affecting any of the  Collateral.  So long as this  Agreement  shall be in
      effect, the Debtors shall not execute and shall not knowingly permit to be
      on file in any such office or agency any such financing statement or other
      document or instrument (except to the extent filed or recorded in favor of
      the Secured Parties pursuant to the terms of this Agreement).

            (d) No  written  claim  has been  received  that any  Collateral  or
      Debtor's  use of any  Collateral  violates  the rights of any third party.
      There has been no adverse  decision  to any  Debtor's  claim of  ownership
      rights in or exclusive rights to use the Collateral in any jurisdiction or
      to any Debtor's  right to keep and maintain such  Collateral in full force
      and effect,  and there is no proceeding  involving said rights pending or,
      to the best knowledge of any Debtor, threatened before any court, judicial
      body,   administrative   or   regulatory   agency,   arbitrator  or  other
      governmental authority.

            (e) Each Debtor shall at all times maintain its books of account and
      records  relating to the Collateral at its principal place of business and
      its  Collateral at the  locations set forth on Schedule A attached  hereto
      and may not  relocate  such  books of  account  and  records  or  tangible
      Collateral  unless it  delivers  to the  Secured  Parties at least 30 days
      prior to such relocation (i) written notice of such relocation and the new
      location  thereof  (which  must be  within  the  United  States)  and (ii)
      evidence that  appropriate  financing  statements  under the UCC and other
      necessary documents have been filed and recorded and other steps have been
      taken to perfect the  Security  Interest to create in favor of the Secured
      Parties  a  valid,   perfected  and  continuing   perfected  lien  in  the
      Collateral.

                                       6
<PAGE>

            (f) This Agreement  creates in favor of the Secured Parties a valid,
      security  interest in the Collateral,  subject only to Permitted Liens (as
      defined in the  Debentures)  securing the payment and  performance  of the
      Obligations.   Upon  making  the  filings  described  in  the  immediately
      following  paragraph,  all  security  interests  created  hereunder in any
      Collateral  which may be  perfected  by  filing  Uniform  Commercial  Code
      financing statements shall have been duly perfected. Except for the filing
      of the Uniform  Commercial  Code financing  statements  referred to in the
      immediately  following  paragraph,  the  recordation  of the  Intellectual
      Property Security  Agreement (as defined below) with respect to copyrights
      and copyright  applications in the United States Copyright Office referred
      to in paragraph (m), the execution and delivery of deposit account control
      agreements  satisfying the requirements of Section  9-104(a)(2) of the UCC
      with respect to each deposit  account of the Debtors,  and the delivery of
      the certificates and other instruments provided in Section 3, no action is
      necessary  to create,  perfect or protect the security  interests  created
      hereunder.  Without  limiting the generality of the foregoing,  except for
      the  filing  of  said  financing  statements,   the  recordation  of  said
      Intellectual  Property Security Agreement,  and the execution and delivery
      of said  deposit  account  control  agreements,  no  consent  of any third
      parties and no  authorization,  approval or other action by, and no notice
      to or filing  with,  any  governmental  authority  or  regulatory  body is
      required  for  (i)  the  execution,   delivery  and  performance  of  this
      Agreement,  (ii) the  creation or  perfection  of the  Security  Interests
      created hereunder in the Collateral or (iii) the enforcement of the rights
      of the Secured Parties hereunder.

            (g) Each Debtor hereby  authorizes  the Secured  Parties,  or any of
      them, to file one or more financing statements under the UCC, with respect
      to the Security Interest with the proper filing and recording  agencies in
      any jurisdiction deemed proper by them.

            (h) The execution, delivery and performance of this Agreement by the
      Debtors does not (i) violate any of the  provisions of any  Organizational
      Documents  of any Debtor or any  judgment,  decree,  order or award of any
      court,  governmental  body or  arbitrator or any  applicable  law, rule or
      regulation applicable to any Debtor or (ii) conflict with, or constitute a
      default  (or an event  that  with  notice  or lapse of time or both  would
      become a default)  under,  or give to others  any  rights of  termination,
      amendment,  acceleration or cancellation (with or without notice, lapse of
      time or both) of, any agreement, credit facility, debt or other instrument
      (evidencing  any Debtor's  debt or otherwise)  or other  understanding  to
      which  any  Debtor  is a party or by which  any  property  or asset of any
      Debtor is bound or affected.  No consent  (including,  without limitation,
      from  stockholders  or creditors of any Debtor) is required for any Debtor
      to enter into and perform its obligations hereunder.

            (i) The capital stock and other equity  interests listed on Schedule
      H hereto  represent all of the capital stock and other equity interests of
      the Guarantors, and represent all capital stock and other equity interests
      owned,  directly  or  indirectly,  by the  Company.  All  of  the  Pledged
      Securities  are  validly  issued,  fully paid and  nonassessable,  and the
      Company is the legal and beneficial owner of the Pledged Securities,  free
      and clear of any lien,  security interest or other encumbrance  except for
      the security interests created by this Agreement and other Permitted Liens
      (as defined in the Debenture).

                                       7
<PAGE>

            (j) The ownership  and other equity  interests in  partnerships  and
      limited  liability  companies  (if any)  included in the  Collateral  (the
      "Pledged  Interests")  by their express terms do not provide that they are
      securities  governed  by  Article  8 of the  UCC  and  are  not  held in a
      securities account or by any financial intermediary.

            (k) Each Debtor  shall at all times  maintain the liens and Security
      Interest  provided for hereunder as valid and perfected liens and security
      interests in the  Collateral  in favor of the Secured  Parties  until this
      Agreement and the Security Interest hereunder shall be terminated pursuant
      to Section 11 hereof. Each Debtor hereby agrees to defend the same against
      the  claims  of any  and all  persons  and  entities.  Each  Debtor  shall
      safeguard  and  protect  all  Collateral  for the  account of the  Secured
      Parties. At the request of the Secured Parties,  each Debtor will sign and
      deliver  to the  Secured  Parties  at any time or from time to time one or
      more  financing   statements  pursuant  to  the  UCC  in  form  reasonably
      satisfactory  to the  Secured  Parties and will pay the cost of filing the
      same in all public offices wherever filing is, or is deemed by the Secured
      Parties to be, necessary or desirable to effect the rights and obligations
      provided for herein.  Without  limiting the  generality of the  foregoing,
      each  Debtor  shall pay all fees,  taxes and other  amounts  necessary  to
      maintain the  Collateral  and the Security  Interest  hereunder,  and each
      Debtor shall obtain and furnish to the Secured  Parties from time to time,
      upon demand, such releases and/or subordinations of claims and liens which
      may  be  required  to  maintain  the  priority  of the  Security  Interest
      hereunder.

            (l)  Subject  to  Section  14,  no  Debtor  will  transfer,  pledge,
      hypothecate,  encumber,  license,  sell or otherwise dispose of any of the
      Collateral  (except for non-exclusive  licenses granted by a Debtor in its
      ordinary  course of  business  and sales of  inventory  by a Debtor in its
      ordinary  course of  business)  without  the prior  written  consent  of a
      Majority in Interest.

            (m) Each Debtor shall keep and preserve its equipment, inventory and
      other tangible  Collateral in good  condition,  repair and order and shall
      not  operate or locate any such  Collateral  (or cause to be  operated  or
      located) in any area excluded from insurance coverage.

            (n) Each Debtor shall maintain with financially  sound and reputable
      insurers,  insurance with respect to the Collateral against loss or damage
      of the kinds and in the amounts customarily insured against by entities of
      established reputation having similar properties similarly situated and in
      such amounts as are  customarily  carried under similar  circumstances  by
      other such  entities and  otherwise as is prudent for entities  engaged in
      similar  businesses  but  in  any  event  sufficient  to  cover  the  full
      replacement  cost thereof.  Each Debtor shall cause each insurance  policy
      issued in  connection  herewith to provide,  and the insurer  issuing such
      policy to  certify to the Agent that (a) the Agent will be named as lender
      loss payee and additional insured under each such insurance policy; (b) if
      such  insurance be proposed to be cancelled or materially  changed for any
      reason  whatsoever,  such insurer will promptly  notify the Agent and such
      cancellation or change shall not be effective as to the Agent for at least
      thirty  (30) days after  receipt by the Agent

                                       8
<PAGE>

      of such notice,  unless the effect of such change is to extend or increase
      coverage  under the policy;  and (c) the Agent will have the right (but no
      obligation)  at its  election  to remedy  any  default  in the  payment of
      premiums  within  thirty  (30) days of  notice  from the  insurer  of such
      default.  If no Event of Default (as defined in the Debenture)  exists and
      if the  proceeds  arising out of any claim or series of related  claims do
      not exceed $100,000, loss payments in each instance will be applied by the
      applicable  Debtor to the  repair  and/or  replacement  of  property  with
      respect to which the loss was incurred to the extent reasonably  feasible,
      and any loss payments or the balance thereof remaining,  to the extent not
      so applied, shall be payable to the applicable Debtor, provided,  however,
      that payments  received by any Debtor after an Event of Default occurs and
      is  continuing  or in excess of $100,000 for any  occurrence  or series of
      related  occurrences  shall be paid to the Agent and,  if received by such
      Debtor,  shall be held in trust for and immediately paid over to the Agent
      unless otherwise directed in writing by the Agent. Copies of such policies
      or the related certificates, in each case, naming the Agent as lender loss
      payee and  additional  insured  shall be  delivered  to the Agent at least
      annually and at the time any new policy of insurance is issued.

            (o) Each Debtor shall,  within ten (10) days of obtaining  knowledge
      thereof, advise the Secured Parties promptly, in sufficient detail, of any
      substantial  change in the Collateral,  and of the occurrence of any event
      which would have a material  adverse effect on the value of the Collateral
      or on the Secured Parties' security interest therein.

            (p) Each Debtor  shall  promptly  execute and deliver to the Secured
      Parties such further deeds, mortgages,  assignments,  security agreements,
      financing  statements or other  instruments,  documents,  certificates and
      assurances  and take such further  action as the Secured  Parties may from
      time to time  request and may in its sole  discretion  deem  necessary  to
      perfect,  protect or  enforce  its  security  interest  in the  Collateral
      including,  without limitation, if applicable,  the execution and delivery
      of  a  separate   security   agreement   with  respect  to  each  Debtor's
      Intellectual  Property  ("Intellectual  Property  Security  Agreement") in
      which the Secured Parties have been granted a security interest hereunder,
      substantially  in  a  form  acceptable  to  the  Secured  Parties,   which
      Intellectual  Property Security  Agreement,  other than as stated therein,
      shall be subject to all of the terms and conditions hereof.

            (q)  Each  Debtor  shall  permit  the  Secured   Parties  and  their
      representatives  and agents to inspect the  Collateral at any time, and to
      make copies of records pertaining to the Collateral as may be requested by
      a Secured Party from time to time.

            (r)  Each  Debtor  shall  take all  steps  reasonably  necessary  to
      diligently  pursue and seek to  preserve,  enforce and collect any rights,
      claims,  causes  of action  and  accounts  receivable  in  respect  of the
      Collateral.

            (s) Each  Debtor  shall  promptly  notify  the  Secured  Parties  in
      sufficient  detail upon  becoming  aware of any  attachment,  garnishment,
      execution or other legal process  levied against any Collateral and of any
      other  information  received by such Debtor that

                                       9
<PAGE>

      may materially  affect the value of the Collateral,  the Security Interest
      or the rights and remedies of the Secured Parties hereunder.

            (t) All information heretofore,  herein or hereafter supplied to the
      Secured  Parties  by or on  behalf  of  any  Debtor  with  respect  to the
      Collateral  is accurate and  complete in all  material  respects as of the
      date furnished.

            (u) The Debtors  shall at all times  preserve and keep in full force
      and effect their  respective  valid  existence  and good  standing and any
      rights and franchises material to its business.

            (v)  No  Debtor  will  change  its  name,   type  of   organization,
      jurisdiction of organization,  organizational identification number (if it
      has  one),  legal or  corporate  structure,  or  identity,  or add any new
      fictitious  name unless it provides at least 30 days prior written  notice
      to the Secured  Parties of such  change  and, at the time of such  written
      notification,  such Debtor  provides any  financing  statements or fixture
      filings necessary to perfect and continue perfected the perfected security
      Interest granted and evidenced by this Agreement.

            (w) No Debtor may  consign any of its  Inventory  or sell any of its
      Inventory on bill and hold,  sale or return,  sale on  approval,  or other
      conditional  terms of sale  without  the consent of a Majority in Interest
      which  shall  not be  unreasonably  withheld,  except to the  extent  such
      consignment  or sale does not exceed 15% of the total  value of all of the
      Company's finished goods in Inventory.

            (x) No  Debtor  may  relocate  its chief  executive  office to a new
      location without providing 30 days prior written  notification  thereof to
      the  Secured  Parties  and  so  long  as,  at the  time  of  such  written
      notification,  such Debtor  provides any  financing  statements or fixture
      filings necessary to perfect and continue perfected the perfected security
      Interest granted and evidenced by this Agreement.

            (y) Each Debtor was organized and remains organized solely under the
      laws of the  state  set  forth  next to such  Debtor's  name in the  first
      paragraph of this  Agreement.  Schedule D attached  hereto sets forth each
      Debtor's  organizational  identification number or, if any Debtor does not
      have one, states that one does not exist.

            (z) (i) The actual  name of each Debtor is the name set forth in the
      preamble above;  (ii) no Debtor has any trade names except as set forth on
      Schedule E attached  hereto;  (iii) no Debtor has used any name other than
      that stated in the  preamble  hereto or as set forth on Schedule E for the
      preceding  five  years;  and (iv) no entity has merged  into any Debtor or
      been acquired by any Debtor within the past five years except as set forth
      on Schedule E.

            (aa) At any time and from time to time that any Collateral  consists
      of  instruments,  certificated  securities  or other items that require or
      permit  possession by the

                                       10
<PAGE>

      secured  party to  perfect  the  security  interest  created  hereby,  the
      applicable Debtor shall deliver such Collateral to the Agent.

            (bb) Each Debtor, in its capacity as issuer, hereby agrees to comply
      with any and all orders and  instructions  of Agent  regarding the Pledged
      Interests  consistent with the terms of this Agreement without the further
      consent of any Debtor as  contemplated  by Section 8-106 (or any successor
      section) of the UCC.  Further,  each Debtor agrees that it shall not enter
      into a similar  agreement (or one that would confer  "control"  within the
      meaning of Article 8 of the UCC) with any other person or entity.

            (cc) Each Debtor shall cause all tangible chattel paper constituting
      Collateral  to be  delivered  to the Agent,  or, if such  delivery  is not
      possible,  then to cause such  tangible  chattel paper to contain a legend
      noting  that  it is  subject  to the  security  interest  created  by this
      Agreement.  To the  extent  that any  Collateral  consists  of  electronic
      chattel paper,  the applicable  Debtor shall cause the underlying  chattel
      paper to be "marked"  within the  meaning of Section  9-105 of the UCC (or
      successor section thereto).

            (dd) If there is any investment property or deposit account included
      as  Collateral  that can be  perfected  by  "control"  through  an account
      control  agreement,  the  applicable  Debtor  shall  cause such an account
      control agreement,  in form and substance in each case satisfactory to the
      Secured Parties, to be entered into and delivered to the Secured Parties.

            (ee) To the extent that any Collateral  consists of letter-of-credit
      rights,  the applicable  Debtor shall cause the issuer of each  underlying
      letter of credit to consent to an  assignment  of the proceeds  thereof to
      the Secured Parties.

            (ff) To the extent that any  Collateral is in the  possession of any
      third party, the applicable  Debtor shall join with the Secured Parties in
      notifying such third party of the Secured  Parties'  security  interest in
      such   Collateral   and   shall  use  its  best   efforts   to  obtain  an
      acknowledgement  and  agreement  from such third party with respect to the
      Collateral, in form and substance satisfactory to the Secured Parties.

            (gg) If any Debtor  shall at any time hold or  acquire a  commercial
      tort claim,  such Debtor shall  promptly  notify the Secured  Parties in a
      writing signed by such Debtor of the particulars  thereof and grant to the
      Secured  Parties in such  writing a security  interest  therein and in the
      proceeds thereof, all upon the terms of this Agreement,  with such writing
      to be in form and substance satisfactory to the Secured Parties.

            (hh) Each Debtor shall  immediately  provide  written  notice to the
      Secured  Parties of any and all accounts which arise out of contracts with
      any  governmental  authority  and, to the extent  necessary  to perfect or
      continue the  perfected  status of the Security  Interest in such accounts
      and proceeds thereof,  shall execute and deliver to the Secured Parties an
      assignment  of claims for such  accounts  and  cooperate  with the Secured
      Parties in taking any other steps required,  in their judgment,  under the
      Federal  Assignment of Claims Act or any similar  federal,  state or local
      statute  or rule to  perfect  or

                                       11
<PAGE>

      continue the  perfected  status of the Security  Interest in such accounts
      and proceeds thereof.

            (ii) Each  Debtor  shall  cause each  subsidiary  of such  Debtor to
      immediately become a party hereto (an "Additional  Debtor"),  by executing
      and delivering an Additional  Debtor Joinder in substantially  the form of
      Annex A attached hereto and comply with the provisions  hereof  applicable
      to the Debtors.  Concurrent therewith, the Additional Debtor shall deliver
      replacement  schedules for, or  supplements to all other  Schedules to (or
      referred to in) this Agreement, as applicable, which replacement schedules
      shall  supersede,  or  supplements  shall modify,  the  Schedules  then in
      effect. The Additional Debtor shall also deliver such opinions of counsel,
      authorizing   resolutions,   good   standing   certificates,    incumbency
      certificates,  organizational  documents,  financing  statements and other
      information  and  documentation  as the  Secured  Parties  may  reasonably
      request.  Upon  delivery  of the  foregoing  to the Secured  Parties,  the
      Additional  Debtor shall be and become a party to this  Agreement with the
      same rights and  obligations  as the Debtors,  for all purposes  hereof as
      fully and to the same  extent as if it were an original  signatory  hereto
      and  shall be  deemed to have  made the  representations,  warranties  and
      covenants  set forth  herein as of the date of  execution  and delivery of
      such Additional Debtor Joinder, and all references herein to the "Debtors"
      shall be deemed to include each Additional Debtor.

            (jj) Each Debtor  shall vote the Pledged  Securities  to comply with
      the covenants and agreements set forth herein and in the Debentures.

            (kk) Each Debtor shall register the pledge of the applicable Pledged
      Securities  on the books of such  Debtor.  Each Debtor  shall  notify each
      issuer of Pledged  Securities  to  register  the pledge of the  applicable
      Pledged Securities in the name of the Secured Parties on the books of such
      issuer.  Further, except with respect to certificated securities delivered
      to  the  Agent,   the   applicable   Debtor  shall  deliver  to  Agent  an
      acknowledgement of pledge (which, where appropriate, shall comply with the
      requirements   of  the  relevant  UCC  with  respect  to   perfection   by
      registration)  signed by the issuer of the applicable Pledged  Securities,
      which acknowledgement shall confirm that: (a) it has registered the pledge
      on its books and records; and (b) at any time directed by Agent during the
      continuation of an Event of Default,  such issuer will transfer the record
      ownership  of such  Pledged  Securities  into the name of any  designee of
      Agent,  will take such steps as may be necessary  to effect the  transfer,
      and will  comply  with all  other  instructions  of Agent  regarding  such
      Pledged Securities without the further consent of the applicable Debtor.

            (ll) Subject to the terms of this Agreement, in the event that, upon
      an occurrence  of an Event of Default,  Agent shall sell all or any of the
      Pledged  Securities  to  another  party  or  parties  (herein  called  the
      "Transferee")  or  shall  purchase  or  retain  all or any of the  Pledged
      Securities,  each Debtor shall, to the extent  applicable:  (i) deliver to
      Agent  or  the   Transferee,   as  the  case  may  be,  the   articles  of
      incorporation,  bylaws,  minute books, stock certificate books,  corporate
      seals, deeds, leases, indentures,  agreements,  evidences of indebtedness,
      books of account, financial records and all other

                                       12
<PAGE>

      Organizational  Documents  and records of the Debtors and their direct and
      indirect subsidiaries; (ii) use its best efforts to obtain resignations of
      the persons  then  serving as officers  and  directors  of the Debtors and
      their direct and indirect subsidiaries, if so requested; and (iii) use its
      best efforts to obtain any approvals that are required by any governmental
      or regulatory  body in order to permit the sale of the Pledged  Securities
      to the  Transferee or the purchase or retention of the Pledged  Securities
      by Agent and allow the Transferee or Agent to continue the business of the
      Debtors and their direct and indirect subsidiaries.

            (mm) Without limiting the generality of the other obligations of the
      Debtors  hereunder,  each Debtor shall promptly (i) cause to be registered
      at the United States Copyright Office all of its material copyrights, (ii)
      cause the  security  interest  contemplated  hereby  with  respect  to all
      Intellectual  Property registered at the United States Copyright Office or
      United  States  Patent and  Trademark  Office to be duly  recorded  at the
      applicable  office,  and (iii) give the Agent notice  whenever it acquires
      (whether  absolutely  or by license) or creates  any  additional  material
      Intellectual Property.

            (nn) Each  Debtor  will from time to time,  at the joint and several
      expense of the  Debtors,  promptly  execute and  deliver all such  further
      instruments  and  documents,  and take all such  further  action as may be
      necessary or desirable,  or as the Secured Parties may reasonably request,
      in order to perfect and protect any security interest granted or purported
      to be granted  hereby or to enable the  Secured  Parties to  exercise  and
      enforce  their  rights  and  remedies  hereunder  and with  respect to any
      Collateral or to otherwise carry out the purposes of this Agreement.

            (oo)  Schedule F attached  hereto lists all of the  patents,  patent
      applications,  registered copyrights, and domain names owned by any of the
      Debtors as of the date hereof.  Schedule F lists all material  licenses in
      favor of any  Debtor  for the use of any  patents,  copyrights  and domain
      names as of the date hereof. All material patents of the Debtors have been
      duly recorded at the United  States  Patent and  Trademark  Office and all
      material  copyrights  of the Debtors have been duly recorded at the United
      States Copyright Office.

            (pp) Except as set forth on Schedule G attached hereto,  none of the
      account  debtors or other  persons  or  entities  obligated  on any of the
      Collateral is a governmental  authority covered by the Federal  Assignment
      of Claims Act or any similar  federal,  state or local  statute or rule in
      respect of such Collateral.

      5. Effect of Pledge on Certain Rights. If any of the Collateral subject to
this Agreement consists of nonvoting equity or ownership  interests  (regardless
of class,  designation,  preference or rights) that may be converted into voting
equity or ownership  interests upon the occurrence of certain events (including,
without limitation, upon the transfer of all or any of the other stock or assets
of the  issuer),  it is  agreed  that the  pledge of such  equity  or  ownership
interests pursuant to this Agreement or the enforcement of any of Agent's rights
hereunder  shall not be deemed to be the type of event which would  trigger such
conversion rights notwithstanding any provisions in the Organizational Documents
or agreements to which any Debtor is subject or to which any Debtor is party.

                                       13
<PAGE>

      6. Defaults. The following events shall be "Events of Default":

            (a) The  occurrence  of an  Event  of  Default  (as  defined  in the
      Debenture) under the Debenture;

            (b) Any  representation  or warranty of any Debtor in this Agreement
      shall prove to have been incorrect in any material respect when made;

            (c) The  failure by any  Debtor to  observe  or  perform  any of its
      obligations  hereunder for five (5) days after  delivery to such Debtor of
      notice of such  failure  by or on behalf of a Secured  Party  unless  such
      default is capable of cure but cannot be cured  within such time frame and
      such Debtor is using best efforts to cure same in a timely fashion; or

            (d) If any  provision  of this  Agreement  shall at any time for any
      reason be declared to be null and void, or the validity or  enforceability
      thereof  shall  be  contested  by any  Debtor,  or a  proceeding  shall be
      commenced  by  any  Debtor,  or  by  any  governmental   authority  having
      jurisdiction  over any Debtor,  seeking to  establish  the  invalidity  or
      unenforceability thereof, or any Debtor shall deny that any Debtor has any
      liability or obligation purported to be created under this Agreement.

      7. Duty To Hold In Trust.

            (a) Upon the  occurrence  of any  Event of  Default  and at any time
      thereafter,  each  Debtor  shall,  upon  receipt of any  revenue,  income,
      dividend, interest or other sums subject to the Security Interest, whether
      payable  pursuant to the Debenture or otherwise,  or of any check,  draft,
      note, trade acceptance or other instrument evidencing an obligation to pay
      any such sum,  hold the same in trust for the  Secured  Parties  and shall
      forthwith  endorse and transfer any such sums or instruments,  or both, to
      the Secured Parties,  pro-rata in proportion to their initial purchases of
      Debentures for application to the  satisfaction of the Obligations (and if
      any  Debenture is not  outstanding,  pro-rata in proportion to the initial
      purchases of the remaining Debentures).

            (b) If any Debtor shall become  entitled to receive or shall receive
      any securities or other property (including, without limitation, shares of
      Pledged Securities or instruments representing Pledged Securities acquired
      after the date hereof, or any options,  warrants,  rights or other similar
      property or certificates  representing a dividend,  or any distribution in
      connection  with any  recapitalization,  reclassification  or  increase or
      reduction of capital,  or issued in connection with any  reorganization of
      such Debtor or any of its direct or indirect  subsidiaries)  in respect of
      the Pledged Securities  (whether as an addition to, in substitution of, or
      in exchange for, such Pledged Securities or otherwise), such Debtor agrees
      to (i) accept the same as the agent of the Secured Parties;  (ii) hold the
      same in trust on behalf of and for the benefit of the Secured Parties; and
      (iii) to deliver any and all  certificates  or instruments  evidencing the
      same to Agent on or before the close of business on the fifth business day
      following the receipt  thereof by

                                       14
<PAGE>

      such  Debtor,  in the exact  form  received  together  with the  Necessary
      Endorsements,  to be held by Agent subject to the terms of this  Agreement
      as Collateral.

      8. Rights and Remedies Upon Default.

            (a) Upon the  occurrence  of any  Event of  Default  and at any time
      thereafter,  the Secured  Parties,  acting through any agent  appointed by
      them for  such  purpose,  shall  have the  right  to  exercise  all of the
      remedies  conferred  hereunder and under the  Debentures,  and the Secured
      Parties  shall have all the rights and  remedies of a secured  party under
      the UCC. Without limitation,  the Secured Parties shall have the following
      rights and powers:

                  (i)  The  Secured   Parties  shall  have  the  right  to  take
            possession of the Collateral and, for that purpose,  enter, with the
            aid and assistance of any person, any premises where the Collateral,
            or any part  thereof,  is or may be placed and remove the same,  and
            each Debtor shall  assemble the  Collateral and make it available to
            the  Secured  Parties  at places  which the  Secured  Parties  shall
            reasonably  select,  whether at such Debtor's premises or elsewhere,
            and make available to the Secured Parties, without rent, all of such
            Debtor's  respective  premises and facilities for the purpose of the
            Secured  Parties  taking  possession  of,  removing  or putting  the
            Collateral in saleable or disposable form.

                  (ii) Upon notice to the  Debtors by Agent,  all rights of each
            Debtor to exercise the voting and other  consensual  rights which it
            would  otherwise  be  entitled  to  exercise  and all rights of each
            Debtor  to  receive  the  dividends  and  interest  which  it  would
            otherwise be  authorized  to receive and retain,  shall cease.  Upon
            such  notice,  Agent shall have the right to receive  any  interest,
            cash  dividends  or other  payments  on the  Collateral  and, at the
            option of Agent,  to exercise in such Agent's  discretion all voting
            rights  pertaining  thereto.  Without limiting the generality of the
            foregoing,  Agent shall have the right (but not the  obligation)  to
            exercise  all rights with respect to the  Collateral  as it were the
            sole and absolute owners thereof, including,  without limitation, to
            vote and/or to exchange,  at its sole discretion,  any or all of the
            Collateral   in   connection   with   a   merger,    reorganization,
            consolidation,  recapitalization or other readjustment concerning or
            involving  the  Collateral  or any  Debtor  or any of its  direct or
            indirect subsidiaries.

                  (iii) The Secured  Parties shall have the right to operate the
            business  of each  Debtor  using the  Collateral  and shall have the
            right to assign, sell, lease or otherwise dispose of and deliver all
            or any  part  of the  Collateral,  at  public  or  private  sale  or
            otherwise,   either   with  or   without   special   conditions   or
            stipulations,  for cash or on credit or for future delivery, in such
            parcel or  parcels  and at such  time or times and at such  place or
            places,  and upon such terms and  conditions as the Secured  Parties
            may deem  commercially  reasonable,  all without (except as shall be
            required by applicable  statute and cannot be waived)  advertisement
            or demand upon or notice to any Debtor or right of  redemption  of a
            Debtor,  which

                                       15
<PAGE>

            are hereby expressly waived. Upon each such sale, lease,  assignment
            or other transfer of  Collateral,  the Secured  Parties may,  unless
            prohibited by applicable law which cannot be waived, purchase all or
            any part of the Collateral  being sold,  free from and discharged of
            all trusts,  claims, right of redemption and equities of any Debtor,
            which are hereby waived and released.

                  (iv) The  Secured  Parties  shall  have the right (but not the
            obligation)  to notify any account  debtors and any  obligors  under
            instruments  or  accounts to make  payments  directly to the Secured
            Parties and to enforce the  Debtors'  rights  against  such  account
            debtors and obligors.

                  (v) The Secured  Parties may (but are not obligated to) direct
            any financial intermediary or any other person or entity holding any
            investment  property to transfer the same to the Secured  Parties or
            their designee.

                  (vi)  The  Secured  Parties  may (but  are not  obligated  to)
            transfer any or all Intellectual  Property registered in the name of
            any Debtor at the United States  Patent and Trademark  Office and/or
            Copyright  Office  into  the  name  of the  Secured  Parties  or any
            designee or any purchaser of any Collateral.

            (b) The Agent may comply with any applicable law in connection  with
      a disposition  of Collateral  and such  compliance  will not be considered
      adversely  to  affect  the  commercial  reasonableness  of any sale of the
      Collateral.   The  Agent  may  sell  the  Collateral  without  giving  any
      warranties and may  specifically  disclaim such  warranties.  If the Agent
      sells any of the  Collateral on credit,  the Debtors will only be credited
      with payments  actually made by the  purchaser.  In addition,  each Debtor
      waives  any and all  rights  that it may  have to a  judicial  hearing  in
      advance of the  enforcement  of any of the  Agent's  rights  and  remedies
      hereunder,  including, without limitation, its right following an Event of
      Default to take immediate possession of the Collateral and to exercise its
      rights and remedies with respect thereto.

            (c) For the purpose of enabling the Agent to further exercise rights
      and remedies  under this  Section 8 or elsewhere  provided by agreement or
      applicable law, each Debtor hereby grants to the Agent, for the benefit of
      the Agent and the Secured Parties,  an irrevocable,  nonexclusive  license
      (exercisable  without  payment of royalty  or other  compensation  to such
      Debtor) to use, license or sublicense  following an Event of Default,  any
      Intellectual  Property now owned or hereafter acquired by such Debtor, and
      wherever the same may be located,  and including in such license access to
      all media in which any of the licensed items may be recorded or stored and
      to all computer software and programs used for the compilation or printout
      thereof.

      9. Applications of Proceeds. The proceeds of any such sale, lease or other
disposition of the Collateral  hereunder shall be applied first, to the expenses
of retaking,  holding, storing,  processing and preparing for sale, selling, and
the like  (including,  without  limitation,  any  taxes,  fees and  other  costs
incurred  in  connection  therewith)  of  the  Collateral,   to  the  reasonable
attorneys' fees and expenses  incurred by the Secured Parties in enforcing their
rights hereunder and in connection with collecting, storing and disposing of the
Collateral,  and then to  satisfaction

                                       16
<PAGE>

of the Obligations pro rata among the Secured Parties (based on then-outstanding
principal amounts of Debentures at the time of any such  determination),  and to
the payment of any other  amounts  required by applicable  law,  after which the
Secured  Parties shall pay to the applicable  Debtor any surplus  proceeds.  If,
upon the sale,  license or other  disposition  of the  Collateral,  the proceeds
thereof are  insufficient  to pay all  amounts to which the Secured  Parties are
legally entitled,  the Debtors will be liable for the deficiency,  together with
interest thereon, at the rate of 10% per annum or the lesser amount permitted by
applicable law (the "Default  Rate"),  and the reasonable  fees of any attorneys
employed  by the  Secured  Parties to  collect  such  deficiency.  To the extent
permitted by applicable law, each Debtor waives all claims,  damages and demands
against the Secured Parties arising out of the repossession,  removal, retention
or sale of the Collateral,  unless due solely to the gross negligence or willful
misconduct of the Secured Parties as determined by a final judgment (not subject
to further appeal) of a court of competent jurisdiction.

      10.  Securities Law Provision.  Each Debtor  recognizes  that Agent may be
limited  in its  ability  to  effect a sale to the  public of all or part of the
Pledged  Securities by reason of certain  prohibitions  in the Securities Act of
1933, as amended, or other federal or state securities laws  (collectively,  the
"Securities  Laws"),  and may be  compelled  to resort to one or more sales to a
restricted  group of  purchasers  who may be  required  to agree to acquire  the
Pledged Securities for their own account,  for investment and not with a view to
the distribution or resale thereof. Each Debtor agrees that sales so made may be
at prices and on terms less favorable than if the Pledged  Securities  were sold
to the public, and that Agent has no obligation to delay the sale of any Pledged
Securities for the period of time  necessary to register the Pledged  Securities
for sale to the public under the Securities  Laws.  Each Debtor shall  cooperate
with Agent in its attempt to satisfy any requirements  under the Securities Laws
(including,  without limitation,  registration thereunder if requested by Agent)
applicable to the sale of the Pledged Securities by Agent.

      11.  Costs  and  Expenses.  Each  Debtor  agrees  to  pay  all  reasonable
out-of-pocket  fees,  costs and expenses  incurred in connection with any filing
required  hereunder,  including  without  limitation,  any financing  statements
pursuant  to  the  UCC,   continuation   statements,   partial  releases  and/or
termination   statements  related  thereto  or  any  expenses  of  any  searches
reasonably required by the Secured Parties. The Debtors shall also pay all other
claims and charges which in the reasonable  opinion of the Secured Parties might
prejudice,  imperil or otherwise affect the Collateral or the Security  Interest
therein.  The Debtors  will also,  upon demand,  pay to the Secured  Parties the
amount of any and all reasonable  expenses,  including the  reasonable  fees and
expenses of its counsel and of any experts and agents, which the Secured Parties
may incur in connection  with (i) the  enforcement of this  Agreement,  (ii) the
custody  or  preservation  of,  or  the  sale  of,  collection  from,  or  other
realization upon, any of the Collateral, or (iii) the exercise or enforcement of
any of the rights of the Secured  Parties under the  Debentures.  Until so paid,
any  fees  payable  hereunder  shall be added  to the  principal  amount  of the
Debentures and shall bear interest at the Default Rate.

      12. Responsibility for Collateral.  The Debtors assume all liabilities and
responsibility  in connection with all Collateral,  and the Obligations shall in
no way be affected or diminished by reason of the loss,  destruction,  damage or
theft of any of the  Collateral or its  unavailability  for any reason.  Without
limiting the generality of the foregoing,  (a) neither the Agent nor any Secured
Party (i) has any duty  (either  before or after an Event of Default) to

                                       17
<PAGE>

collect  any  amounts in respect of the  Collateral  or to  preserve  any rights
relating to the Collateral,  or (ii) has any obligation to clean-up or otherwise
prepare the Collateral for sale, and (b) each Debtor shall remain  obligated and
liable  under each  contract  or  agreement  included  in the  Collateral  to be
observed  or  performed  by such  Debtor  thereunder.  Neither the Agent nor any
Secured Party shall have any obligation or liability  under any such contract or
agreement  by reason of or arising out of this  Agreement  or the receipt by the
Agent or any Secured Party of any payment relating to any of the Collateral, nor
shall the Agent or any Secured  Party be  obligated in any manner to perform any
of the  obligations  of any Debtor  under or  pursuant  to any such  contract or
agreement,  to make  inquiry  as to the  nature or  sufficiency  of any  payment
received by the Agent or any Secured Party in respect of the Collateral or as to
the  sufficiency  of any  performance  by any party  under any such  contract or
agreement,  to  present or file any  claim,  to take any  action to enforce  any
performance  or to  collect  the  payment  of any  amounts  which  may have been
assigned to the Agent or to which the Agent or any Secured Party may be entitled
at any time or times.

      13. Security Interest Absolute.  All rights of the Secured Parties and all
obligations  of the  Debtors  hereunder,  shall be absolute  and  unconditional,
irrespective of: (a) any lack of validity or  enforceability  of this Agreement,
the Debentures or any agreement  entered into in connection  with the foregoing,
or any portion hereof or thereof; (b) any change in the time, manner or place of
payment  or  performance  of,  or in  any  other  term  of,  all  or  any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from the Debentures or any other  agreement  entered into in connection with the
foregoing; (c) any exchange,  release or nonperfection of any of the Collateral,
or any release or amendment or waiver of or consent to departure  from any other
collateral for, or any guaranty,  or any other  security,  for all or any of the
Obligations; (d) any action by the Secured Parties to obtain, adjust, settle and
cancel in its sole discretion any insurance claims or matters made or arising in
connection  with the  Collateral;  or (e) any  other  circumstance  which  might
otherwise  constitute any legal or equitable defense available to a Debtor, or a
discharge of all or any part of the Security Interest granted hereby.  Until the
Obligations  shall  have  been paid and  performed  in full,  the  rights of the
Secured  Parties  shall  continue  even if the  Obligations  are  barred for any
reason, including, without limitation, the running of the statute of limitations
or bankruptcy.  Each Debtor expressly  waives  presentment,  protest,  notice of
protest,  demand, notice of nonpayment and demand for performance.  In the event
that at any time any transfer of any  Collateral or any payment  received by the
Secured Parties hereunder shall be deemed by final order of a court of competent
jurisdiction to have been a voidable  preference or fraudulent  conveyance under
the bankruptcy or insolvency laws of the United States, or shall be deemed to be
otherwise  due to any party other than the Secured  Parties,  then,  in any such
event, each Debtor's  obligations  hereunder shall survive  cancellation of this
Agreement, and shall not be discharged or satisfied by any prior payment thereof
and/or  cancellation  of this  Agreement,  but shall  remain a valid and binding
obligation  enforceable in accordance with the terms and provisions hereof. Each
Debtor  waives all right to require the Secured  Parties to proceed  against any
other person or entity or to apply any Collateral  which the Secured Parties may
hold at any time,  or to marshal  assets,  or to pursue any other  remedy.  Each
Debtor waives any defense arising by reason of the application of the statute of
limitations to any obligation secured hereby.

                                       18
<PAGE>

      14. Term of  Agreement.  This  Agreement and the Security  Interest  shall
terminate  on the date on which  all  payments  under the  Debentures  have been
indefeasibly  paid  in  full  and  all  other  Obligations  have  been  paid  or
discharged;  provided, however, that all indemnities of the Debtors contained in
this Agreement (including, without limitation, Annex B hereto) shall survive and
remain  operative and in full force and effect  regardless of the termination of
this Agreement.  Notwithstanding  anything herein to the contrary, the shares of
common  stock of CCI Group Inc.  pledged to the  Secured  Parties at the Closing
shall be returned to the  Company  and the  Security  Interest as to such shares
only  shall  terminate  on the  earlier  of (a) the date on  which  (i) the Able
Energy/All American  Transaction has been consummated,  (ii) the Able Energy/All
American  Transaction  Documents  have been fully  executed and delivered to the
Secured Parties and (iii) clauses (i)-(vii) of the "Equity Conditions",  as that
term is defined at page 3 of the Variable Rate Secured Convertible  Debenture to
be issued as part of the Able Energy/All American Transaction  Documents are met
at such time,  (b) the date that the Secured  Parties have converted into Common
Stock  more  than,  in  the  aggregate,  50%  of  the  principal  amount  of the
Debentures,  (c) the date that the  Company may  exercise  an Option  Redemption
under  Section  6(a) of the  Debenture  and the  proceeds  from the sale of such
shares are first applied to the redemption of the Debentures in full pursuant to
a duly authorized  Optional  Redemption Notice (the Company shall be required to
establish an escrow  account and procedures to ensure that all such proceeds are
paid to the  Secured  Parties  in  satisfaction  of the  obligations  under  the
Debentures  in  full)  or  (d)  the  Company  delivers  to the  Secured  Parties
substitute collateral of equal or greater value than the value of such shares as
determined in the sole and final discretion of the Agent.

      15. Power of Attorney; Further Assurances.

            (a) Each  Debtor  authorizes  the Secured  Parties,  and does hereby
      make,  constitute  and appoint the  Secured  Parties and their  respective
      officers,  agents,  successors or assigns with full power of substitution,
      as such Debtor's true and lawful attorney-in-fact, with power, in the name
      of the various  Secured  Parties or such Debtor,  to, after the occurrence
      and during the  continuance of an Event of Default,  (i) endorse any note,
      checks,  drafts,  money orders or other instruments of payment  (including
      payments  payable  under or in  respect  of any  policy of  insurance)  in
      respect of the  Collateral  that may come into  possession  of the Secured
      Parties;  (ii) to sign and endorse any financing statement pursuant to the
      UCC or any invoice,  freight or express bill,  bill of lading,  storage or
      warehouse receipts, drafts against debtors, assignments, verifications and
      notices in connection with accounts,  and other documents  relating to the
      Collateral;  (iii) to pay or discharge taxes, liens, security interests or
      other  encumbrances at any time levied or placed on or threatened  against
      the Collateral;  (iv) to demand, collect, receipt for, compromise,  settle
      and sue for monies due in respect of the  Collateral;  (v) to transfer any
      Intellectual  Property or provide  licenses  respecting  any  Intellectual
      Property; and (vi) generally, at the option of the Secured Parties, and at
      the expense of the Debtors,  at any time, or from time to time, to execute
      and deliver any and all documents and  instruments  and to do all acts and
      things which the Secured  Parties deem necessary to protect,  preserve and
      realize upon the Collateral and the Security  Interest  granted therein in
      order to effect the intent of this  Agreement  and the  Debentures  all as
      fully and  effectually  as the Debtors  might or could do; and each Debtor
      hereby  ratifies all that said attorney  shall

                                       19
<PAGE>

      lawfully do or cause to be done by virtue  hereof.  This power of attorney
      is coupled with an interest and shall be irrevocable  for the term of this
      Agreement  and  thereafter  as long  as any of the  Obligations  shall  be
      outstanding. The designation set forth herein shall be deemed to amend and
      supersede any inconsistent  provision in the  Organizational  Documents or
      other  documents or  agreements to which any Debtor is subject or to which
      any Debtor is a party.  Without  limiting the generality of the foregoing,
      after the  occurrence  and during the  continuance of an Event of Default,
      each  Secured  Party is  specifically  authorized  to execute and file any
      applications for or instruments of transfer and assignment of any patents,
      trademarks,  copyrights  or other  Intellectual  Property  with the United
      States Patent and Trademark Office and the United States Copyright Office.

            (b)  On  a  continuing  basis,  each  Debtor  will  make,   execute,
      acknowledge, deliver, file and record, as the case may be, with the proper
      filing and  recording  agencies in any  jurisdiction,  including,  without
      limitation, the jurisdictions indicated on Schedule C attached hereto, all
      such  instruments,  and take all such action as may  reasonably  be deemed
      necessary or advisable, or as reasonably requested by the Secured Parties,
      to perfect the Security  Interest granted hereunder and otherwise to carry
      out the  intent  and  purposes  of this  Agreement,  or for  assuring  and
      confirming  to the Secured  Parties the grant or perfection of a perfected
      security interest in all the Collateral under the UCC.

            (c) Each Debtor hereby  irrevocably  appoints the Secured Parties as
      such  Debtor's  attorney-in-fact,  with  full  authority  in the place and
      instead of such Debtor and in the name of such  Debtor,  from time to time
      in the Secured Parties' discretion,  to take any action and to execute any
      instrument  which the Secured  Parties may deem  necessary or advisable to
      accomplish the purposes of this  Agreement,  including the filing,  in its
      sole discretion,  of one or more financing or continuation  statements and
      amendments  thereto,  relative  to  any  of  the  Collateral  without  the
      signature  of  such  Debtor  where   permitted  by  law,  which  financing
      statements  may (but need not) describe the  Collateral as "all assets" or
      "all  personal  property" or words of like  import,  and ratifies all such
      actions  taken by the Secured  Parties.  This power of attorney is coupled
      with an interest and shall be  irrevocable  for the term of this Agreement
      and thereafter as long as any of the Obligations shall be outstanding.

      16.  Notices.  All  notices,  requests,  demands and other  communications
hereunder shall be subject to the notice provision of the Purchase Agreement (as
such term is defined in the Debentures).

      17.  Other  Security.  To the  extent  that  the  Obligations  are  now or
hereafter  secured by property  other than the  Collateral or by the  guarantee,
endorsement or property of any other person, firm,  corporation or other entity,
then the  Secured  Parties  shall have the  right,  in its sole  discretion,  to
pursue,  relinquish,  subordinate,  modify or take any other action with respect
thereto,  without in any way modifying or affecting any of the Secured  Parties'
rights and remedies hereunder.

      18.  Appointment  of Agent.  The  Secured  Parties  hereby  appoint  Lilac
Ventures Mater Fund Ltd. to act as their agent ("Lilac" or "Agent") for purposes
of exercising any and all

                                       20
<PAGE>

rights and remedies of the Secured Parties  hereunder.  Such  appointment  shall
continue  until  revoked in writing by a Majority in  Interest,  at which time a
Majority in Interest shall appoint a new Agent; provided,  that Lilac may not be
removed as Agent unless Lilac shall then hold less than $50,000 principal amount
of Debentures. The Agent shall have the rights,  responsibilities and immunities
set forth in Annex B hereto.

      19. Miscellaneous.

            (a) No  course  of  dealing  between  the  Debtors  and the  Secured
      Parties, nor any failure to exercise, nor any delay in exercising,  on the
      part of the Secured Parties,  any right,  power or privilege  hereunder or
      under the  Debentures  shall  operate as a waiver  thereof;  nor shall any
      single or partial exercise of any right,  power or privilege  hereunder or
      thereunder  preclude any other or further exercise thereof or the exercise
      of any other right, power or privilege.

            (b) All of the rights  and  remedies  of the  Secured  Parties  with
      respect to the Collateral, whether established hereby or by the Debentures
      or by any other  agreements,  instruments  or documents or by law shall be
      cumulative and may be exercised singly or concurrently.

            (c) This Agreement  constitutes the entire  agreement of the parties
      with respect to the subject matter hereof and is intended to supersede all
      prior  negotiations,  understandings  and agreements with respect thereto.
      Except as specifically  set forth in this Agreement,  no provision of this
      Agreement  may be  modified  or  amended  except  by a  written  agreement
      specifically referring to this Agreement and signed by the parties hereto.

            (d) In the  event  any  provision  of this  Agreement  is held to be
      invalid,  prohibited or  unenforceable in any jurisdiction for any reason,
      unless such provision is narrowed by judicial construction, this Agreement
      shall,  as  to  such  jurisdiction,  be  construed  as  if  such  invalid,
      prohibited or  unenforceable  provision had been more narrowly drawn so as
      not to be invalid,  prohibited or unenforceable.  If,  notwithstanding the
      foregoing,  any  provision  of  this  Agreement  is  held  to be  invalid,
      prohibited or unenforceable  in any  jurisdiction,  such provision,  as to
      such jurisdiction,  shall be ineffective to the extent of such invalidity,
      prohibition or unenforceability without invalidating the remaining portion
      of such  provision or the other  provisions of this  Agreement and without
      affecting the validity or  enforceability  of such  provision or the other
      provisions of this Agreement in any other jurisdiction.

            (e) No  waiver of any  breach or  default  or any right  under  this
      Agreement  shall be  considered  valid unless in writing and signed by the
      party giving such  waiver,  and no such waiver shall be deemed a waiver of
      any subsequent breach or default or right,  whether of the same or similar
      nature or otherwise.

            (f) This Agreement shall be binding upon and inure to the benefit of
      each party hereto and its successors and assigns.

                                       21
<PAGE>

            (g) Each  party  shall take such  further  action  and  execute  and
      deliver such further documents as may be necessary or appropriate in order
      to carry out the provisions and purposes of this Agreement.

            (h) All questions concerning the construction, validity, enforcement
      and  interpretation  of this Agreement  shall be governed by and construed
      and  enforced in  accordance  with the  internal  laws of the State of New
      York,  without regard to the principles of conflicts of law thereof.  Each
      Debtor  agrees  that  all  proceedings   concerning  the  interpretations,
      enforcement and defense of the transactions contemplated by this Agreement
      and  the  Debenture  (whether  brought  against  a  party  hereto  or  its
      respective  affiliates,   directors,  officers,  shareholders,   partners,
      members,  employees or agents) shall be commenced exclusively in the state
      and federal courts sitting in the City of New York,  Borough of Manhattan.
      Each Debtor hereby  irrevocably  submits to the exclusive  jurisdiction of
      the state and federal courts  sitting in the City of New York,  Borough of
      Manhattan for the  adjudication of any dispute  hereunder or in connection
      herewith or with any transaction  contemplated hereby or discussed herein,
      and hereby irrevocably waives, and agrees not to assert in any proceeding,
      any claim that it is not  personally  subject to the  jurisdiction  of any
      such court,  that such  proceeding  is improper.  Each party hereto hereby
      irrevocably  waives  personal  service of process and  consents to process
      being  served  in any  such  proceeding  by  mailing  a copy  thereof  via
      registered  or certified  mail or  overnight  delivery  (with  evidence of
      delivery)  to such party at the  address in effect for notices to it under
      this  Agreement  and agrees that such service  shall  constitute  good and
      sufficient service of process and notice thereof. Nothing contained herein
      shall be  deemed  to limit in any way any  right to serve  process  in any
      manner permitted by law. Each party hereto hereby  irrevocably  waives, to
      the fullest extent permitted by applicable law, any and all right to trial
      by  jury  in any  legal  proceeding  arising  out of or  relating  to this
      Agreement  or the  transactions  contemplated  hereby.  If any party shall
      commence a proceeding to enforce any  provisions of this  Agreement,  then
      the prevailing  party in such proceeding  shall be reimbursed by the other
      party for its  reasonable  attorney's  fees and other  costs and  expenses
      incurred  with the  investigation,  preparation  and  prosecution  of such
      proceeding.

            (i) This  Agreement  may be executed in any number of  counterparts,
      each of which when so executed  shall be deemed to be an original and, all
      of which taken together shall  constitute one and the same  Agreement.  In
      the event that any signature is delivered by facsimile transmission,  such
      signature  shall create a valid binding  obligation of the party executing
      (or on whose behalf such  signature  is  executed)  the same with the same
      force and effect as if such facsimile signature were the original thereof.

            (j) All  Debtors  shall  jointly  and  severally  be liable  for the
      obligations of each Debtor to the Secured Parties hereunder.

            (k) Each Debtor shall  indemnify,  reimburse  and hold  harmless the
      Secured  Parties and their  respective  partners,  members,  shareholders,
      officers,  directors,  employees and agents (collectively,  "Indemnitees")
      from  and  against  any  and all  losses,

                                       22
<PAGE>

      claims, liabilities, damages, penalties, suits, costs and expenses, of any
      kind or nature,  (including fees relating to the cost of investigating and
      defending  any of the  foregoing)  imposed  on,  incurred  by or  asserted
      against such  Indemnitee  in any way related to or arising from or alleged
      to arise from this  Agreement or the  Collateral,  except any such losses,
      claims,  liabilities,  damages, penalties, suits, costs and expenses which
      result from the gross  negligence or willful  misconduct of the Indemnitee
      as determined by a final,  nonappealable  decision of a court of competent
      jurisdiction. This indemnification provision is in addition to, and not in
      limitation of, any other indemnification provision in the Debentures,  the
      Purchase  Agreement  (as such term is  defined in the  Debentures)  or any
      other  agreement,  instrument or other  document  executed or delivered in
      connection herewith or therewith.

            (l) Nothing in this Agreement shall be construed to subject Agent or
      any Secured  Party to  liability  as a partner in any Debtor or any if its
      direct or indirect  subsidiaries  that is a partnership  or as a member in
      any Debtor or any of its direct or indirect subsidiaries that is a limited
      liability company,  nor shall Agent or any Secured Party be deemed to have
      assumed  any  obligations  under  any  partnership  agreement  or  limited
      liability company agreement,  as applicable,  of any such Debtor or any if
      its direct or indirect  subsidiaries  or  otherwise,  unless and until any
      such Secured Party  exercises its right to be substituted  for such Debtor
      as a partner or member, as applicable, pursuant hereto.

            (m) To the extent  that the grant of the  security  interest  in the
      Collateral  and the  enforcement  of the terms hereof require the consent,
      approval or action of any partner or member, as applicable,  of any Debtor
      or any direct or indirect  subsidiary of any Debtor or compliance with any
      provisions  of any of the  Organizational  Documents,  the Debtors  hereby
      grant such consent and approval and waive any such  noncompliance with the
      terms of said documents.

                            [SIGNATURE PAGES FOLLOW]

                                       23
<PAGE>

      IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
to be duly executed on the day and year first above written.

ABLE ENERGY, INC.

By:__________________________________________
   Name:
   Title:

[SUBSIDIARY]

By:__________________________________________
   Name:
   Title:

                       [SIGNATURE PAGE OF HOLDERS FOLLOWS]

                                       24
<PAGE>

                     [SIGNATURE PAGE OF HOLDERS TO ABLE SA]

 Name of Investing Entity: __________________________
 Signature of Authorized Signatory of Investing entity: ________________________
 Name of Authorized Signatory: _________________________
 Title of Authorized Signatory: __________________________

                       [SIGNATURE PAGE OF HOLDERS FOLLOWS]

                                       25
<PAGE>

                                   SCHEDULE A

Principal Place of Business of Debtors:

Locations Where Collateral is Located or Stored:

                                       26
<PAGE>

                                   SCHEDULE B

                                       27
<PAGE>

                                   SCHEDULE C

                                       28
<PAGE>

                                   SCHEDULE D

                      Organizational Identification Numbers

                                       29
<PAGE>

                                   SCHEDULE E

                         Names; Mergers and Acquisitions

                                       30
<PAGE>

                                   SCHEDULE F

                              Intellectual Property

                                       31
<PAGE>

                                   SCHEDULE G

                                 Account Debtors

                                       32
<PAGE>

                                   SCHEDULE H

                               Pledged Securities

                                       33
<PAGE>

                                     ANNEX A
                                       to
                                    SECURITY
                                    AGREEMENT

                        FORM OF ADDITIONAL DEBTOR JOINDER

                   Security Agreement dated as of [_____ ___,
                         200__ made by Able Energy, Inc.
        and its subsidiaries party thereto from time to time, as Debtors
                               to and in favor of
        the Secured Parties identified therein (the "Security Agreement")

      Reference is made to the Security Agreement as defined above;  capitalized
terms used herein and not otherwise defined herein shall have the meanings given
to such terms in, or by reference in, the Security Agreement.

      The undersigned hereby agrees that upon delivery of this Additional Debtor
Joinder to the Secured Parties referred to above,  the undersigned  shall (a) be
an Additional Debtor under the Security  Agreement,  (b) have all the rights and
obligations of the Debtors under the Security Agreement as fully and to the same
extent as if the undersigned was an original signatory thereto and (c) be deemed
to have made the representations and warranties set forth in Section ___ therein
as of the date of execution  and  delivery of this  Additional  Debtor  Joinder.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,  THE UNDERSIGNED  SPECIFICALLY
GRANTS TO THE  SECURED  PARTIES A SECURITY  INTEREST IN THE  COLLATERAL  AS MORE
FULLY SET FORTH IN THE SECURITY  AGREEMENT  AND  ACKNOWLEDGES  AND AGREES TO THE
WAIVER OF JURY TRIAL PROVISIONS SET FORTH THEREIN.

      Attached  hereto are  supplemental  and/or  replacement  Schedules  to the
Security Agreement, as applicable.

      An  executed  copy of this  Joinder  shall  be  delivered  to the  Secured
Parties,  and the Secured Parties may rely on the matters set forth herein on or
after the date hereof. This Joinder shall not be modified, amended or terminated
without the prior written consent of the Secured Parties.

<PAGE>

      IN WITNESS WHEREOF, the undersigned has caused this Joinder to be executed
in the name and on behalf of the undersigned.

                                            [Name of Additional Debtor]

                                            By:
                                            Name:
                                            Title:

                                            Address:

Dated:

<PAGE>

                                    [ANNEX B
                                       to
                                    SECURITY
                                    AGREEMENT

                                    THE AGENT

            1.  Appointment.  The Secured  Parties (all  capitalized  terms used
herein and not otherwise defined shall have the respective  meanings provided in
the Security Agreement to which this Annex B is attached (the "Agreement")),  by
their  acceptance  of the benefits of the  Agreement,  hereby  designate  [_____
("[_____"  or  "Agent")  as the  Agent  to act as  specified  herein  and in the
Agreement. Each Secured Party shall be deemed irrevocably to authorize the Agent
to take such action on its behalf under the  provisions of the Agreement and any
other  Transaction  Document (as such term is defined in the  Debentures) and to
exercise such powers and to perform such duties  hereunder and thereunder as are
specifically  delegated  to or  required  of the Agent by the terms  hereof  and
thereof and such other powers as are reasonably  incidental  thereto.  The Agent
may perform any of its duties hereunder by or through its agents or employees.

            2.   Nature  of   Duties.   The  Agent   shall  have  no  duties  or
responsibilities except those expressly set forth in the Agreement.  Neither the
Agent  nor any of its  partners,  members,  shareholders,  officers,  directors,
employees  or agents  shall be liable for any  action  taken or omitted by it as
such under the Agreement or hereunder or in connection herewith or therewith, be
responsible  for the  consequence  of any  oversight  or  error of  judgment  or
answerable for any loss,  unless caused solely by its or their gross  negligence
or willful  misconduct as determined by a final judgment (not subject to further
appeal) of a court of competent  jurisdiction.  The duties of the Agent shall be
mechanical and  administrative in nature;  the Agent shall not have by reason of
the  Agreement or any other  Transaction  Document a fiduciary  relationship  in
respect of any Debtor or any Secured Party;  and nothing in the Agreement or any
other Transaction Document,  expressed or implied, is intended to or shall be so
construed  as to  impose  upon the  Agent  any  obligations  in  respect  of the
Agreement or any other Transaction Document except as expressly set forth herein
and therein.

            3. Lack of Reliance on the Agent. Independently and without reliance
upon the Agent, each Secured Party, to the extent it deems appropriate, has made
and  shall  continue  to  make  (i)  its own  independent  investigation  of the
financial  condition  and  affairs  of  the  Company  and  its  subsidiaries  in
connection with such Secured Party's investment in the Debtors, the creation and
continuance of the Obligations, the transactions contemplated by the Transaction
Documents,  and the taking or not taking of any action in connection  therewith,
and  (ii) its own  appraisal  of the  creditworthiness  of the  Company  and its
subsidiaries,  and of the value of the  Collateral  from  time to time,  and the
Agent shall have no duty or responsibility,  either initially or on a continuing
basis, to provide any Secured Party with any credit, market or other information
with respect thereto,  whether coming into its possession before any Obligations
are  incurred  or at any  time or  times  thereafter.  The  Agent  shall  not be
responsible  to the Debtors or any

<PAGE>

Secured  Party for any recitals,  statements,  information,  representations  or
warranties herein or in any document,  certificate or other writing delivered in
connection herewith, or for the execution, effectiveness, genuineness, validity,
enforceability,  perfection,  collectibility,  priority  or  sufficiency  of the
Agreement or any other Transaction  Document,  or for the financial condition of
the  Debtors or the value of any of the  Collateral,  or be required to make any
inquiry  concerning  either the  performance  or observance of any of the terms,
provisions or conditions of the Agreement or any other Transaction  Document, or
the financial  condition of the Debtors,  or the value of any of the Collateral,
or the existence or possible  existence of any default or Event of Default under
the Agreement, the Debentures or any of the other Transaction Documents.

            4.  Certain  Rights of the Agent.  The Agent shall have the right to
take any action with respect to the Collateral,  on behalf of all of the Secured
Parties. To the extent practical,  the Agent shall request instructions from the
Secured Parties with respect to any material act or action (including failure to
act) in connection  with the Agreement or any other  Transaction  Document,  and
shall  be  entitled  to act or  refrain  from  acting  in  accordance  with  the
instructions  of Secured  Parties  holding a  majority  in  principal  amount of
Debentures  (based on  then-outstanding  principal  amounts of Debentures at the
time of any such  determination);  if such instructions are not provided despite
the Agent's request  therefor,  the Agent shall be entitled to refrain from such
act or taking such  action,  and if such  action is taken,  shall be entitled to
appropriate indemnification from the Secured Parties in respect of actions to be
taken by the Agent;  and the Agent  shall not incur  liability  to any person or
entity  by reason of so  refraining.  Without  limiting  the  foregoing,  (a) no
Secured Party shall have any right of action  whatsoever  against the Agent as a
result of the Agent acting or  refraining  from acting  hereunder in  accordance
with the terms of the  Agreement  or any  other  Transaction  Document,  and the
Debtors  shall have no right to question or challenge  the  authority of, or the
instructions  given to, the Agent  pursuant to the  foregoing  and (b) the Agent
shall not be  required  to take any action  which the Agent  believes  (i) could
reasonably be expected to expose it to personal liability or (ii) is contrary to
this Agreement, the Transaction Documents or applicable law.

            5. Reliance. The Agent shall be entitled to rely, and shall be fully
protected  in  relying,  upon  any  writing,   resolution,   notice,  statement,
certificate,  telex, teletype or telecopier message, cablegram, radiogram, order
or other document or telephone message signed, sent or made by the proper person
or entity,  and, with respect to all legal  matters  pertaining to the Agreement
and the other Transaction  Documents and its duties  thereunder,  upon advice of
counsel  selected by it and upon all other matters  pertaining to this Agreement
and the other Transaction  Documents and its duties  thereunder,  upon advice of
other  experts  selected by it.  Anything to the contrary  notwithstanding,  the
Agent shall have no  obligation  whatsoever  to any Secured Party to assure that
the Collateral  exists or is owned by the Debtors or is cared for,  protected or
insured or that the liens granted  pursuant to the Agreement  have been properly
or sufficiently or lawfully created,  perfected,  or enforced or are entitled to
any particular priority.

<PAGE>

            6.  Indemnification.  To the extent that the Agent is not reimbursed
and  indemnified by the Debtors,  the Secured Parties will jointly and severally
reimburse and indemnify the Agent,  in proportion to their  initially  purchased
respective  principal  amounts  of  Debentures,  from  and  against  any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs,  expenses or disbursements of any kind or nature  whatsoever which may be
imposed on,  incurred by or asserted  against the Agent in performing its duties
hereunder or under the Agreement or any other  Transaction  Document,  or in any
way  relating  to or  arising  out of the  Agreement  or any  other  Transaction
Document except for those determined by a final judgment (not subject to further
appeal) of a court of competent  jurisdiction  to have resulted  solely from the
Agent's own gross negligence or willful  misconduct.  Prior to taking any action
hereunder as Agent,  the Agent may require each Secured Party to deposit with it
sufficient sums as it determines in good faith is necessary to protect the Agent
for costs and expenses associated with taking such action.

            7. Resignation by the Agent.

            (a) The Agent may resign from the  performance  of all its functions
      and duties under the Agreement and the other Transaction  Documents at any
      time  by  giving  30  days'  prior  written  notice  (as  provided  in the
      Agreement) to the Debtors and the Secured Parties.  Such resignation shall
      take effect upon the  appointment of a successor Agent pursuant to clauses
      (b) and (c) below.

            (b) Upon any such notice of resignation, the Secured Parties, acting
      by a Majority in Interest, shall appoint a successor Agent hereunder.

            (c) If a  successor  Agent shall not have been so  appointed  within
      said 30-day  period,  the Agent shall then  appoint a successor  Agent who
      shall  serve as Agent  until such time,  if any,  as the  Secured  Parties
      appoint a successor  Agent as provided above. If a successor Agent has not
      been appointed within such 30-day period, the Agent may petition any court
      of competent  jurisdiction  or may  interplead the Debtors and the Secured
      Parties in a proceeding for the appointment of a successor  Agent, and all
      fees,  including,  but not limited to,  extraordinary fees associated with
      the filing of interpleader  and expenses  associated  therewith,  shall be
      payable by the Debtors on demand.

            8. Rights with respect to Collateral. Each Secured Party agrees with
all other  Secured  Parties  and the Agent (i) that it shall not,  and shall not
attempt to,  exercise any rights with  respect to its  security  interest in the
Collateral,  whether  pursuant to any other  agreement or otherwise  (other than
pursuant to this  Agreement),  or take or institute any action against the Agent
or any of the other Secured  Parties in respect of the  Collateral or its rights
hereunder (other than any such action arising from the breach of this Agreement)
and (ii) that  such  Secured  Party  has no other  rights  with  respect  to the
Collateral  other than as set forth in this Agreement and the other  Transaction
Documents.  Upon the  acceptance  of any  appointment  as Agent  hereunder  by a
successor  Agent,  such successor  Agent shall  thereupon  succeed to and become
vested with all the rights,

<PAGE>

powers, privileges and duties of the retiring Agent and the retiring Agent shall
be discharged  from its duties and  obligations  under the Agreement.  After any
retiring  Agent's  resignation or removal  hereunder as Agent, the provisions of
the  Agreement  including  this  Annex B shall  inure to its  benefit  as to any
actions taken or omitted to be taken by it while it was Agent.

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