Document:

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                                                                     Exhibit 4.1

                          SECURITIES PURCHASE AGREEMENT

     This Securities Purchase Agreement (this "Agreement") is dated as of March
5, 2004, by and among Innovative Companies, Inc., a Florida corporation (the
"Company"), and the purchasers 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 (as defined below), 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 in the aggregate, up to $5 million of Preferred Stock and
Warrants on the Closing Date.

     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 agrees
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 Certificate of Designation (as defined
herein), and (b) the following terms have the meanings indicated in this Section
1.1:

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

          "Actual 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 shares of
     Preferred Stock, ignoring any conversion or exercise limits set forth
     therein, and assuming that any previously unconverted shares of Preferred
     Stock are held until the third anniversary of the Closing Date and all
     dividends are paid in shares of Common Stock until such third anniversary,
     subject to the limitation on the number of shares of Common Stock issuable
     hereunder set forth in Section 5(a)(iii) of the Certificate of Designation.

          "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.

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          "Certificate of Designation" means the Certificate of Designation to
     be filed prior to the Closing by the Company with the Secretary of State of
     Florida, in the form of Exhibit A attached hereto.

          "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) each Purchaser's obligations
     to pay the Subscription Amount have been satisfied or waived (ii) and 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 $0.01
     per share, and any securities into which such common stock shall
     hereinafter been reclassified 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 exchangeable for, or otherwise entitles the holder
     thereof to receive, Common Stock.

          "Company Counsel" means Sichenzia Ross Friedman Ference LLP, with
     office located at 1065 Avenue of the Americas, New York, New York, 10018.

          "Disclosure Schedules" means the Disclosure Schedules of the Company
     delivered concurrently herewith.

          "Effective Date" means the date that the Registration Statement is
     first declared effective by the Commission.

          "Exchange Act" means the Securities Exchange Act of 1934, as amended.

          "Exempt Issuance" 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 members of the Board
     of Directors of the Company or a majority of the members of a committee of
     directors established for such purpose, (b) securities upon the exercise of
     or conversion of any securities issued hereunder, convertible securities,
     options or warrants 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.

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

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

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

          "Losses" means any and all losses, claims, damages, liabilities,
     settlement costs and expenses, including without limitation costs of
     preparation and reasonable attorneys' fees.

          "Market Price" shall mean the average of the 10 VWAPs immediately
     prior to the date in question.

          "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).

          "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.

          "Preferred Stock" means the up to 5,000 shares of the Company's Series
     B Convertible Preferred Stock issued hereunder having the rights,
     preferences and privileges set forth in the Certificate of Designation.

          "Principal Market" initially means the NASDAQ Small-Cap Market and
     shall also include the American Stock Exchange, the New York Stock
     Exchange, or the NASDAQ National Market, whichever is at the time the
     principal trading exchange or market for the Common Stock, based upon share
     volume.

          "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.

          "Registration Rights Agreement" means the Registration Rights
     Agreement, dated the date hereof, among the Company and each Purchaser, in
     the form of Exhibit B.

          "Registration Statement" means a registration statement meeting the
     requirements set forth in the Registration Rights Agreement and covering
     the resale by the Purchasers of the Underlying Shares.

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

          "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

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     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 Preferred Stock, the Warrants and the
     Underlying Shares.

          "Securities Act" means the Securities Act of 1933, as amended.

          "Set Price" shall have the meaning ascribed to such term in the
     Certificate of Designations.

          "Shareholder Approval" means such approval as may be required by the
     applicable rules and regulations of the Principal 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 19.9% of the Company's
     issued and outstanding Common Stock on the Closing Date.

          "Stated Value" means $1,000 per share of Preferred Stock.

          "Subscription Amount" shall mean, as to each Purchaser, the amount to
     be paid for the Preferred Stock purchased hereunder as specified below such
     Purchaser's name on the signature page of this Agreement, in United States
     Dollars.

          "Subsidiary" means any subsidiary of the Company that is required to
     be listed in Schedule 3.1(a).

          "Trading Day" means any day during which the Principal Market shall be
     open for business.

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

          "Underlying Shares" means the shares of Common Stock issuable upon
     conversion of the Preferred Stock, upon exercise of the Warrants and issued
     and issuable in lieu of the cash payment of dividends on the Preferred
     Stock.

          "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 Principal Market, the daily volume weighted average price of
     the Common Stock for such date (or the nearest preceding date) on the
     Principal Market on which the Common Stock is then listed or quoted as
     reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m.
     Eastern Time to 4:02 p.m. Eastern Time); (b) if the Common Stock is not
     then listed or quoted on a Principal Market and if prices for the Common
     Stock are then quoted on the OTC Bulletin Board, the volume weighted
     average price of the Common

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     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 the National Quotation Bureau Incorporated (or a
     similar organization or agency succeeding to its functions of reporting
     prices), the most recent bid price per share of the Common Stock so
     reported; or (c) 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 Purchasers and reasonably acceptable to the Company.

          "Warrants" means the Common Stock Purchase Warrants, in the form of
     Exhibit C, delivered to the Purchasers at the Closing in accordance with
     Section 2.2 hereof, which warrants shall be exercisable immediately upon
     issuance for a term of 6 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, each Purchaser shall purchase from the
Company, severally and not jointly with the other Purchasers, and the Company
shall issue and sell to each Purchaser, (a) shares of Preferred Stock with an
aggregate Stated Value equal to such Purchaser's Subscription Amount; and (b)
the Warrants as determined pursuant to Section 2.2(a). The aggregate number of
shares of Preferred Stock sold hereunder shall be up to 5,000. Upon satisfaction
of the conditions set forth in Section 2.2, the Closing shall occur at the
offices of FW or such other location as the parties shall mutually agree.

     2.2  Conditions to Closing. The Closing is subject to the satisfaction or
waiver by the party to be benefited thereby of the following conditions:

          (a)  The Company shall have delivered or caused to be delivered to
     each Purchaser the following:

               (i)    this Agreement duly executed by the Company;

               (ii)   a certificate evidencing a number of shares of Preferred
          Stock equal to such Purchaser's Subscription Amount divided by the
          Stated Value, registered in the name of such Purchaser;

               (iii)  a Warrant registered in the name of such Purchaser to
          purchase up to a number of shares of Common Stock equal to 15% of such
          Purchaser's Subscription Amount divided by the Market Price on the
          date hereof, with an exercise price equal to $6.29, subject to
          adjustment therein;

               (iv)   a Warrant registered in the name of such Purchaser to
          purchase up

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          to a number of shares of Common Stock equal to 15% of such Purchaser's
          Subscription Amount divided by the Market Price on the date hereof,
          with an exercise price equal to $6.57, subject to adjustment therein;

               (v)    a legal opinion of Company Counsel, in the form of Exhibit
          D attached hereto, addressed to each Purchaser;

               (vi)   the written voting agreement, in the form of Exhibit F
          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 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;

               (vii)  agreements, in form satisfactory to the Purchasers, from
          Laurus Master Fund, Ltd., whereby Laurus and its Affiliates waive the
          effects of any anti-dilution provisions in any securities of the
          Company held by such entities or agreements with the Company as they
          relate to the transactions contemplated by the Transaction Documents;
          and

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

          (b)  At the Closing, each Purchaser shall have delivered or caused 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; and

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

          (c)  All representations and warranties of the other party contained
     herein shall remain true and correct as of the Closing Date and all
     covenants of the other party shall have been performed if due prior to such
     date.

          (d)  From the date hereof to the Closing Date, trading in the Common
     Stock shall not have been suspended by the Commission (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 Financial Markets 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 Principal 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

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     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 shares of Preferred Stock at the Closing.

                                   ARTICLE III
                         REPRESENTATIONS AND WARRANTIES

     3.1  Representations and Warranties of the Company. Except as set forth
under the corresponding section of the Disclosure Schedules which Disclosure
Schedules shall be deemed a part hereof, 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
     references in the Transaction Documents to the Subsidiaries will be
     disregarded.

          (b)  Organization and Qualification. Each of the Company and 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 financial condition 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 or thereunder. The
     execution and delivery of each of the Transaction Documents by the Company
     and the consummation by it of the transactions contemplated hereby or
     thereby

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     have been duly authorized by all necessary action on the part of the
     Company and no further consent or action is required by the Company other
     than Required Approvals. Each of the Transaction Documents has been (or
     upon delivery will be) duly executed by the Company and, when delivered in
     accordance with the terms hereof, will constitute the valid and binding
     obligation of the Company enforceable against the Company in accordance
     with its terms, subject to applicable bankruptcy, insolvency, fraudulent
     conveyance, reorganization, moratorium and similar laws affecting
     creditors' rights and remedies generally and general principles of equity.
     Neither the Company nor any Subsidiary is in violation of any of the
     provisions of its respective certificate or articles of incorporation,
     by-laws or other organizational or charter documents except where such
     violation could not, individually or in the aggregate, constitute a
     Material Adverse Effect.

          (d)  No Conflicts. The execution, delivery and performance of the
     Transaction Documents by the Company, the issuance and sale of the
     Securities and the consummation by the Company of the other transactions
     contemplated 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, or
     (iv) conflict with or violate the terms of any agreement by which the
     Company or any Subsidiary is bound or to which any property or asset of the
     Company or any 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. Neither the Company nor any
     Subsidiary is 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) the filings
     required under Section 4.9, (ii) the filing with the Commission of the
     Registration Statement, (iii) the application(s) to each applicable
     Principal Market for the listing of the Underlying Shares for trading
     thereon in the time and manner required thereby, (iv) the filing with the
     Commission of a Form D pursuant to Commission Regulation D, and (v)
     applicable Blue Sky filings (collectively, the "Required Approvals").

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          (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 clear of all Liens. 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 Actual Minimum on the date
     hereof.

          (g)  Capitalization. The capitalization of the Company is as described
     in the Company's most recent periodic report filed with the Commission. The
     Company has not issued any capital stock since such filing 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 outstanding Common Stock Equivalents outstanding.
     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 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 securities or rights convertible or exchangeable into shares of
     Common Stock. The issue 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 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 shares of
     Preferred Stock. Except as disclosed in the SEC Reports, 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 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 to file such material) (the foregoing materials,
     including the exhibits thereto, 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

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     the Commission promulgated thereunder, and none of the SEC Reports, when
     filed, contained any untrue statement 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 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 the SEC Reports, (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 required to be 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.

          (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 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

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     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.

          (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 except in each case as could not have 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, individually or in the
     aggregate, have or reasonably be expected to result in a Material Adverse
     Effect ("Material 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 of 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, copyrights, licenses and other
     similar rights that are 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

                                      -11-

<PAGE>

     Subsidiary has received a written notice 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
     of others.

          (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. To the best of
     Company's knowledge, such insurance contracts and policies are accurate and
     complete. 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 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

                                      -12-

<PAGE>

     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 Company's knowledge, 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 this Agreement. 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 this Agreement.

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

          (u)  Investment Company. The Company is not, and is not an Affiliate
     of, and immediately after receipt of payment for the shares of Preferred
     Stock, 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. 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(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 Principal 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 Principal 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.

                                      -13-

<PAGE>

          (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 the
     Company's issuance of the Securities and the Purchasers' ownership of the
     Securities.

          (y)  Disclosure. The Company confirms that, neither the Company nor
     any other Person acting on its behalf has provided any of the Purchasers or
     their agents or counsel with any information that constitutes or might
     constitute material, non-public information. The Company understands and
     confirms that the Purchasers will rely on the foregoing representations and
     covenants in effecting transactions in securities of the Company. All
     disclosure provided to the Purchasers regarding the Company, its business
     and the transactions contemplated hereby, including the Schedules to this
     Agreement, furnished by or on behalf of the Company with respect to the
     representations and warranties made herein are true and correct with
     respect to such 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. 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 which could violate any
     applicable shareholder approval provisions, including, without limitation,
     under the rules and regulations of the Principal Market.

          (aa) Solvency/Indebtedness. Based on the financial condition of the
     Company as of the Closing Date: (i) the fair saleable market 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 for the
     current fiscal year as now conducted and as proposed to be conducted
     including its capital needs taking into account the particular capital
     requirements of the business conducted by the Company, and projected
     capital requirements and capital availability thereof; and (iii) the
     current cash flow of the Company, together with the proceeds the Company
     would receive, were it to liquidate all of its assets, after taking into
     account all anticipated uses of the cash, would be sufficient to pay all
     amounts on or in respect of its debt when such amounts are required to be
     paid. The Company does not intend to incur

                                      -14-

<PAGE>

     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 set 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 $50,000
     (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
     $50,000 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.

          (bb) Form S-3 Eligibility. The Company is eligible to register the
     resale of its Common Stock by the Purchasers under Form S-3 promulgated
     under the Securities Act and the Company hereby covenants and agrees to use
     its best efforts to maintain its eligibility to use Form S-3 until the
     Registration Statement covering the resale of the shares of Preferred Stock
     shall have been filed with, and declared effective by, the Commission.

          (cc) Tax Status. The Company and each of its Subsidiaries has made or
     filed all federal, state and foreign income and all other tax returns,
     reports and declarations required by any jurisdiction to which it is
     subject (unless and only to the extent that the Company and each of its
     Subsidiaries has set aside on its books provisions reasonably adequate for
     the payment of all unpaid and unreported taxes) and has paid all taxes and
     other governmental assessments and charges that are material in amount,
     shown or determined to be due on such returns, reports and declarations,
     except those being contested in good faith and has set aside on its books
     provisions reasonably adequate for the payment of all taxes for periods
     subsequent to the periods to which such returns, reports or declarations
     apply. There are no unpaid taxes in any material amount claimed to be due
     by the taxing authority of any jurisdiction, and the officers of the
     Company know of no basis for any such claim. The Company has not executed a
     waiver with respect to the statute of limitations relating to the
     assessment or collection of any foreign, federal, statue or local tax. None
     of the Company's tax returns is presently being audited by any taxing
     authority.

          (dd) No General Solicitation or Advertising in Regard to this
     Transaction. Neither the Company nor, to the knowledge of the Company, any
     of its directors or officers (i) has conducted or will conduct any general
     solicitation (as that term is used in Rule 502(c) of Regulation D) or
     general advertising with respect to the sale of the Preferred Stock or the
     Warrants, or (ii) made any offers or sales of any security or solicited any
     offers to buy any security under any circumstances that would require

                                      -15-

<PAGE>

     registration of the Preferred Stock, the Underlying Shares or the Warrants
     under the Securities Act or made any "directed selling efforts" as defined
     in Rule 902 of Regulation S.

          (ee) 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 corrupt 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.

          (ff) Acknowledgment Regarding Purchasers' Purchase of Securities. The
     Company acknowledges and agrees that the Purchasers are acting solely in
     the capacity of arm's length purchasers with respect to this Agreement and
     the transactions contemplated hereby. 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 this Agreement and the
     transactions contemplated hereby and any statement made by any Purchaser or
     any of their respective representatives or agents in connection with this
     Agreement and the transactions contemplated hereby is not advice or a
     recommendation and 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 has been based solely on
     the independent evaluation of the Company and its representatives.

          (gg) Seniority. As of the date of this Agreement, no other equity of
     the Company is senior to the Preferred Stock in right of payment, whether
     with respect to interest or upon liquidation or dissolution, or otherwise.

     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 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 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

                                      -16-

<PAGE>

     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)  Investment Intent. 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 for investment purposes only
     and not with a view to or for distributing or reselling such Securities or
     any part thereof, has no present intention of distributing any of such
     Securities and has no arrangement or understanding with any other persons
     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). Such Purchaser is acquiring
     the Securities hereunder in the ordinary course of its business. Such
     Purchaser does not have any agreement or understanding, directly or
     indirectly, with any Person to distribute any of the Securities.

          (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, 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 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.

     The Company acknowledges and agrees that each Purchaser does not make or
has not made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 3.2.

                                      -17-

<PAGE>

                                   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 and 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.

          (b)  Each Purchaser agrees to the imprinting, so long as is required
     by this Section 4.1(b), of the following legend on any certificate
     evidencing Securities:

     [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 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

                                      -18-

<PAGE>

     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 Underlying Shares shall not contain any
     legend (including the legend set forth in Section 4.1(b)): (i) while a
     registration statement (including the Registration Statement) covering the
     resale of such Underlying Shares is effective under the Securities Act, or
     (ii) following any sale of such Underlying Shares pursuant to Rule 144, or
     (iii) if such Securities 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 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 shares of Preferred Stock or
     any portion of a 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
     thereof) 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
     Securities issued with a restrictive legend (such date, the "Legend Removal
     Date"), deliver or cause to be delivered to such Purchaser a certificate
     representing such Underlying 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.

          (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 on the date such Securities are submitted to the Company's transfer
     agent) delivered for removal of the restrictive legend and subject to this
     Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading Day five
     (5) Trading Days after such damages have begun to accrue) for each Trading
     Day after the Legend Removal Date until such certificate is delivered.
     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

                                      -19-

<PAGE>

     relief.

          (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.

          (f)  Until the date that each Purchaser holds less than 20% of the
     shares of Preferred Stock initially purchased hereunder by such Purchaser,
     the Company shall not undertake a reverse or forward stock split or
     reclassification of the Common Stock without the prior written consent of
     the Purchasers holding a majority in interest of the shares of Preferred
     Stock.

     4.2  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. Upon the request
of any Purchaser, the Company shall deliver to such Purchaser a written
certification of a duly authorized officer as to whether it has complied with
the preceding sentence. As long as any Purchaser owns Securities, if the Company
is not required to file reports pursuant to such laws, it will prepare and
furnish to each Purchaser and make publicly available in accordance with Rule
144(c) such information as is required for each Purchaser 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, all to the extent
required from time to time to enable such Person to sell such Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144.

     4.3  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 Principal Market such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent transaction.

     4.4  Securities Laws Disclosure; Publicity. The Company shall, by 8:30 a.m.
Eastern time on the Trading Day following the date hereof, issue a press release
or file a Current Report on Form 8-K, in each case reasonably acceptable to each
Purchaser disclosing the material terms of the transactions contemplated hereby.
The Company and each Purchaser shall consult with each other in issuing any
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 press release of the Company, which consent
shall not unreasonably be withheld, except if such

                                      -20-

<PAGE>

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 Principal Market, without
the prior written consent of such Purchaser, except (i) as required by federal
securities law in connection with the registration statement contemplated by the
Registration Rights Agreement and (ii) to the extent such disclosure is required
by law or Principal Market regulations, in which case the Company shall provide
the Purchasers with prior notice of such disclosure permitted under subclause
(i) or (ii).

     4.5  Shareholders Rights Plan. No claim will be made or enforced by the
Company or, to the knowledge of the Company, any other Person that any Purchaser
is an "Acquiring Person" under any shareholders rights plan or similar 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. The Company shall
conduct its business in a manner so that it will not become subject to the
Investment Company Act.

     4.6  Non-Public Information. 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.

     4.7  Use of Proceeds. Except a set forth on Schedule 4.7, the Company shall
use the net proceeds from the sale of the Securities hereunder for working
capital purposes and not for the satisfaction of any portion of the Company's
debt (other than payment of trade payables, capital lease obligations, and
accrued expenses in the ordinary course of the Company's business and prior
practices), to redeem any Company equity or equity-equivalent securities. Prior
to the receipt of Shareholder Approval, the Company shall not declare or pay any
cash dividend on its shares of Common Stock while any shares of Preferred Stock
remain outstanding.

     4.8  Reimbursement. If any Purchaser becomes involved in any capacity in
any Proceeding by or against any Person who is a stockholder of the Company
(except as a result of sales, pledges, margin sales and similar transactions by
such Purchaser to or with any current stockholder), solely as a result of such
Purchaser's acquisition of the Securities under this Agreement, the Company will
reimburse such Purchaser for its reasonable legal and other expenses (including
the cost of any investigation preparation and travel in connection therewith)
incurred in connection therewith, as such expenses are incurred. The
reimbursement obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any Affiliates of the Purchasers who are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees and controlling persons (if any), as the case may
be, of the Purchasers and any such Affiliate, and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any

                                      -21-

<PAGE>

such Affiliate and any such Person. The Company also agrees that neither the
Purchasers nor any such Affiliates, partners, directors, agents, employees or
controlling persons shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the Company solely as a result of
acquiring the Securities under this Agreement.

     4.9  Indemnification of Purchasers. Subject to the provisions of this
Section 4.9, the Company will indemnify and hold the Purchasers and their
directors, officers, shareholders, partners, employees and agents (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 representation, 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. The Company will not be liable to any Purchaser Party under this
Agreement (i) for any settlement by an 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 the Purchasers
in this Agreement or in the other Transaction Documents.

     4.10 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 130% of (i) the
     Actual Minimum on such date, minus (ii) the number of shares of Common
     Stock previously issued pursuant

                                      -22-

<PAGE>

     to the Transaction Documents, 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 Actual
     Minimum at such time (minus the number of shares of Common Stock previously
     issued pursuant to the Transaction Documents), as soon as possible and in
     any event not later than the 75th day after such date; provided that the
     Company will not be required at any time to authorize a number of shares of
     Common Stock greater than the maximum remaining number of shares of Common
     Stock that could possibly be issued after such time pursuant to the
     Transaction Documents.

          (c)  The Company shall: (i) in the time and manner required by the
     Principal Market, prepare and file with such Principal Market an additional
     shares listing application covering a number of shares of Common Stock at
     least equal to the Actual 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 the Principal Market as soon as possible
     thereafter, (iii) provide to each Purchaser evidence of such listing, and
     (iv) use reasonable efforts to maintain the listing of such Common Stock on
     such Principal Market or another Principal Market. In addition, the Company
     shall hold a special meeting of shareholders (which may also be at the
     annual meeting of shareholders) at the earliest practical date, but in no
     event later than August 31, 2004, 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.

          (d)  If, on any date, the Company is listed on a different Principal
     Market, then the Company shall take the necessary actions to list all of
     the Underlying Shares and Warrant Shares on such Principal Market as soon
     as reasonably possible.

     4.11 Conversion and Exercise Procedures. The form of Election to Purchase
included in the Warrants and the forms of Conversion Notice included in the
Certificate of Designation set forth the totality of the procedures required in
order to exercise the Warrants or convert the Preferred Stock. No additional
legal opinion or other information or instructions shall be necessary to enable
each Purchaser to exercise their Warrants or convert their Preferred Stock. The
Company shall honor exercises of the Warrants and conversions of the Preferred
Stock and shall deliver Underlying Shares in accordance with the terms,
conditions and time periods set forth in the Transaction Documents. 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 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.

                                      -23-

<PAGE>

     4.12 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. 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 to treat for the Company 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.

     4.13 Participation in Future Financing. For as long as the Preferred Stock
remains outstanding, upon any financing by the Company of its Common Stock or
Common Stock Equivalents (a "Subsequent Financing"), except to the extent any
such financing or partial financing is undertaken by the Laurus Master Fund
("Laurus") (provided that, and for clarification, the right of participation
shall be effective as to any portion of such financing not subscribed to by
Laurus), each Purchaser shall have the right to participate in up to 100% of
such Subsequent Financing. At least 10 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 with whom such Subsequent Financing is
proposed to be effected, and attached to which shall be a term sheet or similar
document relating thereto. If by 6:30 p.m. (New York City time) on the 10/th/
Trading Day after all of the Purchasers have received the Pre-Notice,
notifications of the Purchasers of their willingness to participate in the
Subsequent Financing (or to cause their designees to provide) 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 to the Persons set forth in the Subsequent Financing Notice. If the
Company receives no notice from a Purchaser as of such 10/th/ Trading Day, such
Purchaser shall be deemed to have notified the Company that it does not elect to
participate. 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. In the event the Company
receives responses to Subsequent Financing Notices from Purchasers seeking to
purchase more than the aggregate amount of the Subsequent Financing, each such
Purchaser shall have the right to purchase their Pro Rata Portion (as defined
below) of the Subsequent Financing. "Pro Rata Portion" is the ratio of (x) the
Subscription Amount of a participating Purchaser and (y) the sum of the
aggregate Subscription Amount of all participating Purchasers. Notwithstanding
the foregoing, this Section 4.13 shall not apply in respect of an Exempt
Issuance.

                                      -24-

<PAGE>

     4.14 Future Financings. From the date hereof until 90 days after the
Effective Date, other than as contemplated by this Agreement, neither the
Company nor any Subsidiary (with respect to Common Stock Equivalents) shall
issue or sell any Common Stock or Common Stock Equivalents entitling any Person
to acquire shares of Common Stock. Notwithstanding anything herein to the
contrary, the 90 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 Principal 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 each Purchaser for the resale of
the Underlying Shares. Notwithstanding anything to the contrary herein, this
Section 4.14 shall not apply in respect of an Exempt Issuance. In addition to
the limitations set forth herein, from the date hereof until such time as no
Purchaser holds any of the Preferred Stock, the Company shall be prohibited from
effecting or enter into an agreement to effect any Subsequent Financing
involving a "Variable Rate Transaction" or an "MFN Transaction" (each as defined
below). 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. The term "MFN
Transaction" shall mean a transaction in which the Company issues or sells any
securities in a capital raising transaction or series of related transactions
which grants to an investor the right to receive additional shares based upon
future transactions of the Company on terms more favorable than those granted to
such investor in such offering. In addition, unless Shareholder Approval has
been obtained and deemed effective in accordance with Section 4.10(c), the
Company shall not make any issuance whatsoever of Common Stock or Common Stock
Equivalents which would cause any adjustment of the Set Price to the extent the
holders of Preferred Stock would not be permitted, pursuant to Section 5(a)(iii)
of the Certificate of Designations, to convert their respective outstanding
Preferred Stock and Warrants in full.

                                    ARTICLE V
                                  MISCELLANEOUS

     5.1  Fees and Expenses. At the Closing, the Company shall reimburse
Midsummer Capital, LLC ("Midsummer") $30,000 for its legal fees and expenses
(less any amounts previously paid). Except as otherwise set forth in this
Agreement, 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 stamp and other taxes
and duties levied in connection with the sale of the Securities.

     5.2  Entire Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject

                                      -25-

<PAGE>

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.

     5.3  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
specified on the signature page prior to 5:30 p.m. (New York City time) on a
Trading Day and an electronic confirmation of delivery is received by the
sender, (b) the next Trading Day after the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile number specified in
this Section 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) three Trading Days 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 addresses for such notices and communications are those set forth on the
signature pages hereof, or such other address as may be designated in writing
hereafter, in the same manner, by such Person.

     5.4  Amendments; Waivers. No provision of this Agreement may be waived 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 waiver 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 either party to exercise any right hereunder in
any manner impair the exercise of any such right.

     5.5  Construction. 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. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.

     5.6  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. 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 hereof that apply to the "Purchasers".

     5.7  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 4.9.

                                      -26-

<PAGE>

     5.8  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 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 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 manner
permitted by law. The parties hereby waive all rights to a trial by jury. If
either party 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 attorneys' fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.

     5.9  Survival. The representations and warranties contained herein shall
survive the Closing and the delivery, exercise and/or conversion of the
Securities, as applicable.

     5.10 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, 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 signature page
were an original thereof.

     5.11 Severability. If any provision of this Agreement is held to be invalid
or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

     5.12 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
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

                                      -27-

<PAGE>

rescission of a conversion of the Preferred Stock or exercise of the Warrant,
the Purchaser shall be required to return any shares of Common Stock subject to
such conversion or exercise notice.

     5.13 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, 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 and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.

     5.14 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of each
Purchaser 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 described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.

     5.15 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.

     5.16 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 any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
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 Document. 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

                                      -28-

<PAGE>

only Midsummer Investment Ltd. 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.

     5.17 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.

                            [SIGNATURE PAGE FOLLOWS]

                                      -29-

<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.

INNOVATIVE COMPANIES, INC.              Address for Notice:
                                        -------------------

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

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

Thomas A. Rose
Darrin M. Ocasio
Sichenzia Ross Friedman Ference LLP
1065 Avenue of the Americas
New York, New York 10018

Wire Instructions:           attached as Annex A
-----------------

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

                                      -30-

<PAGE>

        [PURCHASER SIGNATURE PAGES TO GORX 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 Investing Entity: _______________________
Signature of Authorized Signatory of Investing Entity: ______________________
Name of Authorized Signatory: _______________________
Title of Authorized Signatory: ______________________
Email Address of Authorized Signatory:_________________________

Address for Notice of Investing Entity:

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

Subscription Amount:
Shares of Preferred Stock:
Warrant Shares:
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]

                                      -31-<PAGE>

                                                                     Exhibit 4.2

                          REGISTRATION RIGHTS AGREEMENT

     This Registration Rights Agreement (this "Agreement") is made and entered
into as of March 5, 2004, among Innovative Companies, Inc., a Florida
corporation (the "Company"), and the purchasers signatory hereto (each such
purchaser is a "Purchaser" and all such purchasers are, collectively, the
"Purchasers").

     This Agreement is made pursuant to the Securities Purchase Agreement, dated
as of the date hereof among the Company and the Purchasers (the "Purchase
Agreement").

     The Company and the Purchasers hereby agree as follows:

     1. Definitions

     Capitalized terms used and not otherwise defined herein that are defined in
the Purchase Agreement shall have the meanings given such terms in the Purchase
Agreement. As used in this Agreement, the following terms shall have the
following meanings:

          "Effectiveness Date" means, with respect to the initial Registration
     Statement required to be filed hereunder, the 180/th/ calendar day
     following the Closing Date and, with respect to any additional Registration
     Statements which may be required pursuant to Section 3(c), the 90/th/
     calendar day following the date on which the Company first knows, or
     reasonably should have known, that such additional Registration Statement
     is required hereunder; provided, however, in the event the Company is
     notified by the Commission that one of the above Registration Statements
     will not be reviewed or is no longer subject to further review and
     comments, the Effectiveness Date as to such Registration Statement shall be
     the fifth Trading Day following the date on which the Company is so
     notified if such date precedes the dates required above.

          "Effectiveness Period" shall have the meaning set forth in Section
     2(a).

          "Filing Date" means, with respect to the initial Registration
     Statement required hereunder, the 30/th/ calendar day following the Closing
     Date and, with respect to any additional Registration Statements which may
     be required pursuant to Section 3(c), the 15/th/ day following the date on
     which the Company first knows, or reasonably should have known that such
     additional Registration Statement is required hereunder.

          "Holder" or "Holders" means the holder or holders, as the case may be,
     from time to time of Registrable Securities.

                                        1

<PAGE>

          "Indemnified Party" shall have the meaning set forth in Section 5(c)
     hereof.

          "Indemnifying Party" shall have the meaning set forth in Section 5(c)
     hereof.

          "Losses" shall have the meaning set forth in Section 5(a).

          "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.

          "Prospectus" means the prospectus included in a Registration Statement
     (including, without limitation, a prospectus that includes any information
     previously omitted from a prospectus filed as part of an effective
     registration statement in reliance upon Rule 430A promulgated under the
     Securities Act), as amended or supplemented by any prospectus supplement,
     with respect to the terms of the offering of any portion of the Registrable
     Securities covered by a Registration Statement, and all other amendments
     and supplements to the Prospectus, including post-effective amendments, and
     all material incorporated by reference or deemed to be incorporated by
     reference in such Prospectus.

          "Registrable Securities" means, as of the date in question, (i) all of
     the shares of Common Stock issuable upon conversion in full of the shares
     of Preferred Stock, (ii) all shares issuable as dividends on the Preferred
     Stock assuming all interest payments are made in shares of Common Stock and
     the Preferred Stock is held for at least 3 years, (iii) all Warrant Shares,
     (iv) any securities issued or issuable upon any stock split, dividend or
     other distribution recapitalization or similar event with respect to the
     foregoing and (v) any additional shares issuable in connection with any
     anti-dilution provisions associated with the Preferred Stock.

          "Registration Statement" means the registration statements required to
     be filed hereunder and any additional registration statements contemplated
     by Section 3(c), including (in each case) the Prospectus, amendments and
     supplements to such registration statement or Prospectus, including pre-
     and post-effective amendments, all exhibits thereto, and all material
     incorporated by reference or deemed to be incorporated by reference in such
     registration statement.

          "Rule 415" means Rule 415 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 purpose and effect as such Rule.

          "Rule 424" means Rule 424 promulgated by the Commission pursuant to
     the Securities Act, as such Rule may be amended from time to time, or any

                                        2

<PAGE>

     similar rule or regulation hereafter adopted by the Commission having
     substantially the same purpose and effect as such Rule.

          "Securities Act" means the Securities Act of 1933, as amended.

          "Underlying Shares" means the shares of Common Stock issuable upon
     conversion of the Preferred Stock and the Warrant Shares.

          "Warrants" shall mean the Common Stock purchase warrants issued to the
     Purchasers pursuant to the Purchase Agreement.

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

     2. Shelf Registration

          (a) On or prior to each Filing Date, the Company shall prepare and
file with the Commission a "Shelf" Registration Statement covering the resale of
130% of the Registrable Securities on such Filing Date for an offering to be
made on a continuous basis pursuant to Rule 415. The Registration Statement
shall be on Form S-3 (unless the Company is not then eligible to register for
resale the Registrable Securities on Form S-3, in which case such registration
shall be on another appropriate form in accordance herewith) and shall contain
(unless otherwise directed by the Holders) substantially the "Plan of
Distribution" attached hereto as Annex A. Subject to the terms of this
Agreement, the Company shall use its best efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event prior to the applicable
Effectiveness Date, and shall use its best efforts to keep such Registration
Statement continuously effective under the Securities Act until all Registrable
Securities covered by such Registration Statement have been sold or may be sold
without volume restrictions pursuant to Rule 144(k) as determined by the counsel
to the Company pursuant to a written opinion letter to such effect, addressed
and acceptable to the Company's transfer agent and the affected Holders (the
"Effectiveness Period"). The Company shall immediately notify the Holders via
facsimile of the effectiveness of the Registration Statement on the same day
that the Company receives notification of the effectiveness from the Commission.
Failure to so notify the Holder within 1 Trading Day of such notification shall
be deemed an Event under Section 2(b).

          (b) If: (i) a Registration Statement is not filed on or prior to its
Filing Date (if the Company files a Registration Statement without affording the
Holders the opportunity to review and comment on the same as required by Section
3(a), the Company shall not be deemed to have satisfied clause (i)), or (ii) the
Company fails to file with the Commission a request for acceleration in
accordance with Rule 461 promulgated under the Securities Act, within five
Trading Days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that a Registration Statement will not
be "reviewed," or not subject to further review, or (iii) prior to its

                                        3

<PAGE>

Effectiveness Date, the Company fails to file a pre-effective amendment and
otherwise respond in writing to comments made by the Commission in respect of
such Registration Statement within 10 Trading Days after the receipt of comments
by or notice from the Commission that such amendment is required in order for a
Registration Statement to be declared effective, or (iv) a Registration
Statement filed or required to be filed hereunder is not declared effective by
the Commission by its Effectiveness Date, or (v) after the Effectiveness Date, a
Registration Statement ceases for any reason to remain continuously effective as
to all Registrable Securities for which it is required to be effective, or the
Holders are not permitted to utilize the Prospectus therein to resell such
Registrable Securities for 15 consecutive days or an aggregate of 25 days during
any 12-month period (which need not be consecutive days) (any such failure or
breach being referred to as an "Event", and for purposes of clause (i) or (iv)
the date on which such Event occurs, or for purposes of clause (ii) the date on
which such five Trading Day period is exceeded, or for purposes of clause (iii)
the date which such 10 Trading Day period is exceeded, or for purposes of clause
(v) the date on which such 15 or 25 day period, as applicable, is exceeded being
referred to as "Event Date"), then, on each such Event Date and every monthly
anniversary thereof until the applicable Event is cured, the Company shall pay
to each Holder an amount in cash, as partial liquidated damages and not as a
penalty, equal to 2.0% per month, pro rata on a daily basis, of (i) the
Subscription Amount paid by such Holder pursuant to the Purchase Agreement, and
(ii) if the Warrants are "in the money" and then held by the Holder, the value
of any outstanding Warrants (valued at the difference between the average of the
VWAPs during the applicable month and the Exercise Price multiplied by the
number of shares of Common Stock the Warrants are exercisable into). If the
Company fails to pay any liquidated damages pursuant to this Section in full
within seven days after the date payable, the Company will pay interest thereon
at a rate of 18% per annum (or such lesser maximum amount that is permitted to
be paid by applicable law) to the Holder, accruing daily from the date such
liquidated damages are due until such amounts, plus all such interest thereon,
are paid in full. The liquidated damages pursuant to the terms hereof shall
apply on a pro-rata basis for any portion of a month prior to the cure of an
Event.

     3. Registration Procedures

          In connection with the Company's registration obligations hereunder,
the Company shall:

          (a) Not less than three Trading Days prior to the filing of each
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall, (i) furnish to each
Holder copies of all such documents proposed to be filed, which documents (other
than those incorporated or deemed to be incorporated by reference) will be
subject to the review of such Holders, and (ii) cause its officers and
directors, counsel and independent certified public accountants to respond to
such inquiries as shall be necessary, in the reasonable opinion of respective
counsel to conduct a reasonable investigation within the meaning of the
Securities Act. The Company shall not file the Registration Statement or any
such Prospectus or any

                                        4

<PAGE>

amendments or supplements thereto to which the Holders of a majority of the
Registrable Securities shall reasonably and in good faith object, provided, the
Company is notified of such objection in writing no later than 3 Trading Days
after the Holders have been so furnished copies of such documents.

          (b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to a Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep a
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the Commission
such additional Registration Statements in order to register for resale under
the Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement
(subject to the terms of this Agreement), and as so supplemented or amended to
be filed pursuant to Rule 424; (iii) respond as promptly as reasonably possible,
and in any event within 10 Trading Days, to any comments received from the
Commission with respect to a Registration Statement or any amendment thereto and
as promptly as reasonably possible provide the Holders true and complete copies
of all correspondence from and to the Commission relating to a Registration
Statement; and (iv) comply in all material respects with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by a Registration Statement during the applicable
period in accordance (subject to the terms of this Agreement) with the intended
methods of disposition by the Holders thereof set forth in such Registration
Statement as so amended or in such Prospectus as so supplemented.

          (c) If during the Effectiveness Period, the number of Registrable
Securities at any time exceeds 85% of the number of shares of Common Stock then
registered in a Registration Statement, then the Company shall file as soon as
reasonably practicable but in any case prior to the applicable Filing Date, an
additional Registration Statement covering the resale by the Holders of not less
than 130% of the number of such Registrable Securities.

          (d) Notify the Holders of Registrable Securities to be sold (which
notice shall, pursuant to clauses (ii) through (vi) hereof, shall be accompanied
by an instruction to suspend the use of the Prospectus until the requisite
changes have been made) as promptly as reasonably possible (and, in the case of
(i)(A) below, not less than five Trading Days prior to such filing) and (if
requested by any such Person) confirm such notice in writing no later than one
Trading Day following the day (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment to a Registration Statement is proposed
to be filed; (B) when the Commission notifies the Company whether there will be
a "review" of such Registration Statement and whenever the Commission comments
in writing on such Registration Statement (the Company shall provide true and
complete copies thereof and all written responses thereto to each of the
Holders); and (C) with respect to a Registration Statement or any post-effective
amendment, when the same has become effective; (ii) of any request by the
Commission or any other Federal or state governmental authority for amendments
or supplements to a Registration Statement or Prospectus or for additional
information; (iii) of the issuance by

                                        5

<PAGE>

the Commission of any stop order suspending the effectiveness of a Registration
Statement covering any or all of the Registrable Securities or the initiation of
any Proceedings for that purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; (v) of the occurrence of any event or passage of time that makes the
financial statements included in a Registration Statement ineligible for
inclusion therein or any statement made in a Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to a
Registration Statement, Prospectus or other documents so that, in the case of a
Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading; and
(vi) the occurrence or existence of any pending corporate development with
respect to the Company that the Company believes may be material and that, in
the determination of the Company, makes it not in the best interest of the
Company to allow continued availability or the Registration Statement or
Prospectus; provided that any and all of such information shall remain
confidential to each Holder until such information otherwise becomes public,
unless disclosure by a Holder is required by law; provided, further,
notwithstanding each Holder's agreement to keep such information confidential,
the Holders make no acknowledgement that any such information is material,
non-public information.

          (e) Promptly deliver to each Holder, without charge, as many copies of
the Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably request. Subject
to the terms of this Agreement, the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.

          (f) Use commercially reasonable efforts to register or qualify the
resale of such Registrable Securities as required under applicable securities or
Blue Sky laws of each State within the United States as any Holder requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period; provided, that the Company
shall not be required to qualify generally to do business in any jurisdiction
where it is not then so qualified or subject the Company to any material tax in
any such jurisdiction where it is not then so subject.

          (g) Cooperate with the Holders to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be delivered
to a transferee pursuant to a Registration Statement, which certificates shall
be free, to the extent permitted by the Purchase Agreement, of all restrictive
legends, and to enable such Registrable Securities to be in such denominations
and registered in such names as any such Holders may request.

                                        6

<PAGE>

          (h) Upon the occurrence of any event contemplated by this Section 3,
as promptly as reasonably possible under the circumstances taking into account
the Company's good faith assessment of any adverse consequences to the Company
and its stockholders of the premature disclosure of such event, prepare a
supplement or amendment, including a post-effective amendment, to a Registration
Statement or a supplement to the related Prospectus or any document incorporated
or deemed to be incorporated therein by reference, and file any other required
document so that, as thereafter delivered, neither a Registration Statement nor
such Prospectus will contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. If the Company notifies the Holders in accordance with clauses
(ii) through (v) of Section 3(d) above to suspend the use of the use of any
Prospectus until the requisite changes to such Prospectus have been made, then
the Holders shall suspend use of such Prospectus. The Company will use its best
efforts to ensure that the use of the Prospectus may be resumed as promptly as
is practicable. The Company shall be entitled to exercise its right under this
Section 3(h) to suspend the availability of a Registration Statement and
Prospectus, subject to the payment of liquidated damages pursuant to Section
2(b), for a period not to exceed 60 days (which need not be consecutive days) in
any 12 month period.

          (i) Comply with all applicable rules and regulations of the
Commission.

          (j) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of a
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.

          (k) The Company may require, at any time prior to the third Trading
Day prior to the Filing Date, each Holder to furnish to the Company a statement
as to the number of shares of Common Stock beneficially owned by such Holder
and, if requested by the Commission, the controlling person thereof, within
three Trading days of the Company's request. During any periods that the Company
is unable to meet its obligations hereunder with respect to the registration of
the Registrable Securities solely because any Holder fails to furnish such
information within three Trading Days of the Company's request, any liquidated
damages that are accruing at such time shall be tolled as to such Holder only
and any Event that may otherwise occur solely because of such delay shall be
suspended as to such Holder only, until such information is delivered to the
Company.

     4. Registration Expenses. All fees and expenses incident to the performance
of or compliance with this Agreement by the Company shall be borne by the
Company whether or not any Registrable Securities are sold pursuant to the
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the Principal Market on

                                        7

<PAGE>

which the Common Stock is then listed for trading, and (B) in compliance with
applicable state securities or Blue Sky laws reasonably agreed to by the Company
in writing (including, without limitation, fees and disbursements of counsel for
the Company in connection with Blue Sky qualifications or exemptions of the
Registrable Securities and determination of the eligibility of the Registrable
Securities for investment under the laws of such jurisdictions as requested by
the Holders), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses
requested by the Holders), (iii) messenger, telephone and delivery expenses,
(iv) fees and disbursements of counsel for the Company, and (v) fees and
expenses of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement. In addition,
the Company shall be responsible for all of its internal expenses incurred in
connection with the consummation of the transactions contemplated by this
Agreement (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit and the fees and expenses incurred in connection with the
listing of the Registrable Securities on any securities exchange as required
hereunder. In no event shall the Company be responsible for any broker or
similar commissions or, except to the extent provided for in the Transaction
Documents, any legal fees or other costs of the Holders.

     5. Indemnification

          (a) Indemnification by the Company. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents, brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any failure to
perform under a margin call of Common Stock), investment advisors and employees
of each of them, each Person who controls any such Holder (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) and the
officers, directors, agents and employees of each such controlling Person, to
the fullest extent permitted by applicable law, from and against any and all
losses, claims, damages, liabilities, costs (including, without limitation,
costs of preparation and reasonable attorneys' fees) and expenses (collectively,
"Losses"), as incurred, arising out of or relating to any untrue or alleged
untrue statement of a material fact contained in a Registration Statement, any
Prospectus or any form of prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in light of the circumstances under which
they were made) not misleading, except to the extent, but only to the extent,
that (1) such untrue statements or omissions or alleged untrue statements or
omissions are based upon information regarding such Holder furnished in writing
to the Company by such Holder expressly for use therein, or to the extent that
such information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in a Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto
or (2) in the case of an occurrence of an event of the type specified

                                        8

<PAGE>

in Section 3(d)(ii)-(vi), the use by such Holder of an outdated or defective
Prospectus after the Company has notified such Holder in writing that the
Prospectus is outdated or defective and prior to the receipt by such Holder of
the Advice contemplated in Section 6(e). The Company shall notify the Holders
promptly of the institution, threat or assertion of any Proceeding arising from
or in connection with the transactions contemplated by this Agreement of which
the Company is aware.

          (b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising out of or based upon any untrue statement of a
material fact contained in any Registration Statement, any Prospectus, or any
form of prospectus, or in any amendment or supplement thereto, or arising solely
out of or based solely upon: (i) such Holder's failure to comply with the
prospectus delivery requirements of the Securities Act or (ii) any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading to the extent, but only to the extent, such untrue
statement or omission is contained in any information so furnished in writing by
such Holder to the Company specifically for inclusion in such Registration
Statement or such Prospectus or to the extent that (1) such untrue statements or
omissions are based upon information regarding such Holder furnished in writing
to the Company by such Holder expressly for use therein, or to the extent such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto
or (2) in the case of an occurrence of an event of the type specified in Section
3(d)(ii)-(vi), the use by such Holder of an outdated or defective Prospectus
after the Company has notified such Holder in writing that the Prospectus is
outdated or defective and prior to the receipt by such Holder of the Advice
contemplated in Section 6(e). In no event shall the liability of any selling
Holder hereunder be greater in amount than the dollar amount of the net proceeds
received by such Holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.

          (c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that such failure shall have prejudiced the
Indemnifying Party.

                                        9

<PAGE>

          An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a material conflict of interest is
likely to exist if the same counsel were to represent such Indemnified Party and
the Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and the expense of one such counsel for each
Holder shall be at the expense of the Indemnifying Party). The Indemnifying
Party shall not be liable for any settlement of any such Proceeding effected
without its written consent, which consent shall not be unreasonably withheld.
No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.

          Subject to the terms of this Agreement, all fees and expenses of the
Indemnified Party (including reasonable fees and expenses to the extent incurred
in connection with investigating or preparing to defend such Proceeding in a
manner not inconsistent with this Section) shall be paid to the Indemnified
Party, as incurred, within ten Trading Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).

          (d) Contribution. If a claim for indemnification under Section 5(a) or
5(b) is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or

                                       10

<PAGE>

payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.

          The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), no Holder shall be required
to contribute, in the aggregate, any amount in excess of the amount by which the
proceeds actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission.

          The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.

     6. Miscellaneous

          (a) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and all of the Holders of the then outstanding Registrable Securities.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Holders and that does not directly or indirectly affect the rights of other
Holders may be given by Holders of all of the Registrable Securities to which
such waiver or consent relates; provided, however, that the provisions of this
sentence may not be amended, modified, or supplemented except in accordance with
the provisions of the immediately preceding sentence.

          (b) No Inconsistent Agreements. Neither the Company nor any of its
subsidiaries has entered, as of the date hereof, nor shall the Company or any of
its subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities, that would have the effect of
impairing the rights granted to the Holders in this Agreement or otherwise
conflicts with the provisions hereof. Except as set forth on Schedule 6(b),
neither the Company nor any of its subsidiaries has previously entered into any
agreement granting any registration rights with respect to any of its securities
to any Person that have not been satisfied in full.

          (c) No Piggyback on Registrations. Except as set forth on Schedule
6(c) attached hereto, neither the Company nor any of its security holders (other
than the Holders in such capacity pursuant hereto) may include securities of the
Company in the

                                       11

<PAGE>

Registration Statement other than the Registrable Securities, and the Company
shall not after the date hereof enter into any agreement providing any such
right to any of its security holders. The Company shall not file any other
registration statements until the initial Registration Statement required
hereunder is declared effective by the Commission, provided that this Section
6(c) shall not prohibit the Company from filing amendments to registration
statements already filed.

          (d) Compliance. Each Holder covenants and agrees that it will comply
with the prospectus delivery requirements of the Securities Act as applicable to
it in connection with sales of Registrable Securities pursuant to the
Registration Statement.

          (e) Discontinued Disposition. Each Holder agrees by its acquisition of
such Registrable Securities that, upon receipt of a notice from the Company of
the occurrence of any event of the kind described in Sections 3(d)(ii), (iii) or
(vi), such Holder will forthwith discontinue disposition of such Registrable
Securities under a Registration Statement until such Holder's receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 3(h), or until it is advised in writing (the "Advice")
by the Company that the use of the applicable Prospectus may be resumed, and, in
either case, has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement. The Company may provide appropriate stop orders to
enforce the provisions of this paragraph. The Company agrees and acknowledges
that any period during which the Holder is required to discontinue the
disposition of the Registrable Securities hereunder shall be subject to the
provisions of Section 2(b).

          (f) Piggy-Back Registrations. If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of the
Registrable Securities and the Company shall determine to prepare and file with
the Commission a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Holder written notice of such
determination and, if within fifteen days after receipt of such notice, any such
Holder shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
holder requests to be registered.

          (g) Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be delivered as set forth
in the Purchase Agreement.

          (h) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of each of the
parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
all of the Holders of the then-outstanding

                                       12

<PAGE>

Registrable Securities. Each Holder may assign their respective rights hereunder
in the manner and to the Persons as permitted under the Purchase Agreement.

          (i) Counterparts. 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) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be determined
in accordance with the provisions of the Purchase Agreement.

          (k) Cumulative Remedies. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.

          (l) 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 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.

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

          (n) Remedies. In the event of a breach by the Company or by a Holder,
of any of their obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all rights granted by
law and under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.

          (o) Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser hereunder are several and not joint with the
obligations of any other Purchaser hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained

                                       13

<PAGE>

herein or in any other agreement or document delivered at any closing, and no
action taken by any Purchaser pursuant hereto or 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 with respect to such obligations or the transactions
contemplated by this Agreement. Each Purchaser shall be entitled to protect and
enforce its rights, including without limitation the rights arising out of this
Agreement, and it shall not be necessary for any other Purchaser to be joined as
an additional party in any proceeding for such purpose.

                              ********************

                                       14

<PAGE>

     IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.

                                        INNOVATIVE COMPANIES, INC.

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

                       [SIGNATURE PAGE OF HOLDERS FOLLOWS]

                                       15

<PAGE>

                    [PURCHASER'S SIGNATURE PAGE TO GORX RRA]

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

                           [SIGNATURE PAGES CONTINUE]

                                       16

<PAGE>

                                     ANNEX A

                              Plan of Distribution
                              --------------------

     Each Selling Stockholder (the "Selling Stockholders") of the common stock
("Common Stock") of Innovative Companies, Inc., a Florida corporation (the
"Company") and any of their pledgees, assignees and successors-in-interest may,
from time to time, sell any or all of their shares of Common Stock on the
American Stock Exchange or any other stock exchange, market or trading facility
on which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. A Selling Stockholder may use any one or more of the
following methods when selling shares:

          .  ordinary brokerage transactions and transactions in which the
             broker-dealer solicits purchasers;

          .  block trades in which the broker-dealer will attempt to sell the
             shares as agent but may position and resell a portion of the block
             as principal to facilitate the transaction;

          .  purchases by a broker-dealer as principal and resale by the
             broker-dealer for its account;

          .  an exchange distribution in accordance with the rules of the
             applicable exchange;

          .  privately negotiated transactions;

          .  settlement of short sales;

          .  broker-dealers may agree with the Selling Stockholders to sell a
             specified number of such shares at a stipulated price per share;

          .  a combination of any such methods of sale;

          .  through the writing or settlement of options or other hedging
             transactions, whether through an options exchange or otherwise; or

          .  any other method permitted pursuant to applicable law.

     The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), if available, rather
than under this prospectus.

     Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if any broker-dealer acts as
agent for the

                                       17

<PAGE>

purchaser of shares, from the purchaser) in amounts to be negotiated. Each
Selling Stockholder does not expect these commissions and discounts relating to
its sales of shares to exceed what is customary in the types of transactions
involved.

     In connection with the sale of our common stock or interests therein, the
Selling Stockholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume. The Selling
Stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The Selling
Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).

     The Selling Stockholders and any broker-dealers or agents that are involved
in selling the shares may be deemed to be "underwriters" within the meaning of
the Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Each Selling Stockholder has informed the
Company that it does not have any agreement or understanding, directly or
indirectly, with any person to distribute the Common Stock.

     The Company is required to pay certain fees and expenses incurred by the
Company incident to the registration of the shares. The Company has agreed to
indemnify the Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.

     Because Selling Stockholders may be deemed to be "underwriters" within the
meaning of the Securities Act, they will be subject to the prospectus delivery
requirements of the Securities Act. In addition, any securities covered by this
prospectus which qualify for sale pursuant to Rule 144 under the Securities Act
may be sold under Rule 144 rather than under this prospectus. Each Selling
Stockholder has advised us that they have not entered into any agreements,
understandings or arrangements with any underwriter or broker-dealer regarding
the sale of the resale shares. There is no underwriter or coordinating broker
acting in connection with the proposed sale of the resale shares by the Selling
Stockholders.

     We agreed to keep this prospectus effective until the earlier of (i) the
date on which the shares may be resold by the Selling Stockholders without
registration and without regard to any volume limitations by reason of Rule
144(e) under the Securities Act or any other rule of similar effect or (ii) all
of the shares have been sold pursuant to the prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale shares will be
sold only through registered or licensed brokers or dealers if

                                       18

<PAGE>

required under applicable state securities laws. In addition, in certain states,
the resale shares may not be sold unless they have been registered or qualified
for sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with.

     Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the resale shares may not simultaneously engage
in market making activities with respect to our common stock for a period of two
business days prior to the commencement of the distribution. In addition, the
Selling Stockholders will be subject to applicable provisions of the Exchange
Act and the rules and regulations thereunder, including Regulation M, which may
limit the timing of purchases and sales of shares of our common stock by the
Selling Stockholders or any other person. We will make copies of this prospectus
available to the Selling Stockholders and have informed them of the need to
deliver a copy of this prospectus to each purchaser at or prior to the time of
the sale.

                                       19

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