Document:

Exhibit 10.46

                          SECURITIES PURCHASE AGREEMENT

         SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"),  dated as of December
11, 2006, by and among Midnight  Holdings Group,  Inc., a Delaware  corporation,
with headquarters  located at 22600 Hall Road, Suite 205, Clinton  Township,  MI
48036 (the  "COMPANY"),  and each of the  purchasers  set forth on the signature
pages hereto (the "BUYERS").

         WHEREAS:

         A. The  Company  and the  Buyers  are  executing  and  delivering  this
Agreement in reliance upon the exemption from securities  registration  afforded
by the rules and regulations as promulgated by the United States  Securities and
Exchange  Commission  (the "SEC") under the  Securities  Act of 1933, as amended
(the "1933 ACT");

         B. Buyers desire to purchase and the Company desires to issue and sell,
upon the  terms  and  conditions  set forth in this  Agreement  (i) 10%  secured
convertible notes of the Company, in the form attached hereto as EXHIBIT "A", in
the aggregate principal amount of Four Hundred Fifty Thousand Dollars ($450,000)
(together  with any note(s)  issued in  replacement  thereof or  otherwise  with
respect thereto in accordance with the terms thereof, the "NOTES"),  convertible
into shares of common stock,  par value  $.00005 per share,  of the Company (the
"COMMON  STOCK"),  upon the terms and subject to the  limitations and conditions
set  forth in such  Notes  and (ii)  warrants,  in the form  attached  hereto as
EXHIBIT "B", to purchase an aggregate of Nine Hundred Thousand  (900,000) shares
of Common Stock (the "WARRANTS");

         C. Each Buyer wishes to purchase,  upon the terms and conditions stated
in this Agreement,  such principal  amount of Notes and number of Warrants as is
set forth immediately below its name on the signature pages hereto; and

         D.  Contemporaneous  with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
in  the  form  attached  hereto  as  EXHIBIT  "C"  (the   "REGISTRATION   RIGHTS
AGREEMENT"),  pursuant  to which  the  Company  has  agreed to  provide  certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.

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         NOW  THEREFORE,  the Company and each of the Buyers  severally (and not
jointly) hereby agree as follows:

                  1. PURCHASE AND SALE OF NOTES AND WARRANTS.

              A. PURCHASE OF NOTES AND WARRANTS. On the Closing Date (as defined
below),  the Company shall issue and sell to each Buyer and each Buyer severally
agrees to purchase from the Company such principal amount of Notes and number of
Warrants as is set forth  immediately  below such Buyer's name on the  signature
pages hereto.

              B.  FORM OF  PAYMENT.  On the  Closing  Date (as  defined  below),
(i)each  Buyer shall pay the  purchase  price for the Notes  (less the  purchase
price paid with  respect to any Bridge  Note) and the  Warrants to be issued and
sold to it at the  Closing (as defined  below)  (the  "PURCHASE  PRICE") by wire
transfer of immediately  available funds to the Company,  in accordance with the
Company's  written  wiring  instructions,  against  delivery of the Notes in the
principal  amount equal to the  Purchase  Price and the number of Warrants as is
set forth immediately below such Buyer's name on the signature pages hereto, and
(ii) the Company  shall  deliver such Notes and Warrants duly executed on behalf
of the Company, to such Buyer, against delivery of such Purchase Price.

              C. CLOSING DATE.  Subject to the  satisfaction (or written waiver)
of the conditions  thereto set forth in Section 6 and Section 7 below,  the date
and time of the issuance and sale of the Notes and the Warrants pursuant to this
Agreement  (the "CLOSING  DATE") shall be 12:00 noon,  Eastern  Standard Time on
December 11, 2006, or such other  mutually  agreed upon time. The closing of the
transactions  contemplated by this Agreement (the "CLOSING")  shall occur on the
Closing Date at such location as may be agreed to by the parties.

               2. BUYERS'  REPRESENTATIONS AND WARRANTIES.  Each Buyer severally
          (and not jointly)  represents and warrants to the Company solely as to
          such Buyer that:

              A.  INVESTMENT  PURPOSE.  As of the  date  hereof,  such  Buyer is
purchasing the Notes and the shares of Common Stock issuable upon  conversion of
or  otherwise  pursuant  to  the  Notes  (including,  without  limitation,  such
additional  shares of Common  Stock,  if any, as are  issuable (i) on account of
interest on the Notes,  (ii) as a result of the events described in Sections 1.3
and 1.4(g) of the Notes and Section 2(c) of the Registration Rights Agreement or
(iii) in payment  of the  Standard  Liquidated  Damages  Amount  (as  defined in
Section  2(f) below)  pursuant to this  Agreement,  such shares of Common  Stock
being  collectively  referred  to herein  as the  "CONVERSION  SHARES")  and the
Warrants  and the shares of Common Stock  issuable  upon  exercise  thereof (the
"WARRANT  SHARES" and,  collectively  with the Notes,  Warrants  and  Conversion
Shares,  the  "SECURITIES")  for its own  account  and not with a  present  view
towards  the public  sale or  distribution  thereof,  except  pursuant  to sales
registered or exempted from registration under the 1933 Act; PROVIDED,  HOWEVER,
that by making the representations herein, such Buyer does not agree to hold any
of the  Securities for any minimum or other specific term and reserves the right
to dispose of the  Securities  at any time in  accordance  with or pursuant to a
registration statement or an exemption under the 1933 Act.

              B.  ACCREDITED  INVESTOR  STATUS.  Such  Buyer  is an  "accredited
investor" as that term is defined in Rule 501(a) of Regulation D (an "ACCREDITED
INVESTOR").

              C.  RELIANCE  ON  EXEMPTIONS.  Such  Buyer  understands  that  the
Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United

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States  federal and state  securities  laws and that the Company is relying upon
the  truth  and   accuracy   of,  and  such   Buyer's   compliance   with,   the
representations,  warranties, agreements,  acknowledgments and understandings of
such  Buyer set forth  herein in order to  determine  the  availability  of such
exemptions and the eligibility of such Buyer to acquire the Securities.

              D. INFORMATION.  Such Buyer and its respective  advisors,  if any,
have been  furnished with all materials  relating to the business,  finances and
operations  of the Company and  materials  relating to the offer and sale of the
Securities  which have been reasonably  requested by such Buyer or its advisors.
Such  Buyer  and  its  respective  advisors,  if any,  have  been  afforded  the
opportunity to ask questions of the Company.  Notwithstanding the foregoing, the
Company has not disclosed to such Buyer any material  nonpublic  information and
will not disclose such  information  unless such information is disclosed to the
public prior to or promptly  following  such  disclosure to such Buyer.  Neither
such inquiries nor any other due diligence investigation conducted by such Buyer
or any of its  respective  advisors or  representatives  shall modify,  amend or
affect  Buyer's right to rely on the Company's  representations  and  warranties
contained in Section 3 below.  Such Buyer understands that its investment in the
Securities involves a significant degree of risk.

              E.  GOVERNMENTAL  REVIEW.  Such Buyer  understands  that no United
States federal or state agency or any other  government or  governmental  agency
has passed upon or made any recommendation or endorsement of the Securities.

              F. TRANSFER OR RE-SALE.  Such Buyer understands that (i) except as
provided  in the  Registration  Rights  Agreement,  the sale or  re-sale  of the
Securities have not been and are not being  registered under the 1933 Act or any
applicable  state  securities  laws,  and the  Securities may not be transferred
unless  (a) the  Securities  are  sold  pursuant  to an  effective  registration
statement under the 1933 Act, (b) such Buyer shall have delivered to the Company
an opinion of counsel that shall be in form,  substance and scope  customary for
opinions of counsel in comparable transactions to the effect that the Securities
to be sold or transferred  may be sold or  transferred  pursuant to an exemption
from such registration,  which opinion shall be accepted by the Company, (c) the
Securities are sold or  transferred  to an  "affiliate"  (as defined in Rule 144
promulgated under the 1933 Act (or a successor rule) ("RULE 144")) of such Buyer
who agrees to sell or otherwise  transfer the Securities only in accordance with
this Section 2(f) and who is an Accredited  Investor,  or (d) the Securities are
sold pursuant to Rule 144, and such Buyer shall have delivered to the Company an
opinion of counsel  that shall be in form,  substance  and scope  customary  for
opinions of counsel in corporate  transactions,  which opinion shall be accepted
by the Company;  (ii) any sale of such  Securities  made in reliance on Rule 144
may be made only in accordance with the terms of said Rule and further,  if said
Rule is not applicable,  any re-sale of such Securities  under  circumstances in
which the seller (or the person  through whom the sale is made) may be deemed to
be an  underwriter  (as  that  term is  defined  in the 1933  Act)  may  require
compliance  with  some  other  exemption  under  the 1933 Act or the  rules  and
regulations of the SEC  thereunder;  and (iii) neither the Company nor any other
person is under any obligation to register such Securities under the 1933 Act or
any state  securities  laws or to comply  with the terms and  conditions  of any
exemption  thereunder  (in each case,  other than  pursuant to the  Registration
Rights  Agreement).  Notwithstanding  the foregoing or anything  else  contained
herein to the contrary, subject to applicable law, the Securities may be pledged
as  collateral in  connection  with a BONA FIDE margin  account or other lending
arrangement. In the event that the Company does not accept an opinion of counsel
provided by such Buyer with respect to the transfer of Securities pursuant to an
exemption  from  registration,  such as Rule 144, and such opinion is correct in
form and substance, within three (3) business days of delivery of the opinion to
the Company,  the Company  shall pay to such Buyer  liquidated  damages of three

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percent (3%) of the outstanding amount of the Notes held by such Buyer per month
plus accrued and unpaid interest on the Notes,  prorated for partial months,  in
cash or  shares at the  option  of the  Company  ("STANDARD  LIQUIDATED  DAMAGES
AMOUNT"). If the Company elects to pay the Standard Liquidated Damages Amount in
shares of Common Stock,  such shares shall be issued at the Conversion  Price at
the time of payment.

              G. LEGENDS. Such Buyer understands that the Notes and the Warrants
and,  until such time as the  Conversion  Shares and  Warrant  Shares  have been
registered  under  the  1933  Act as  contemplated  by the  Registration  Rights
Agreement or otherwise may be sold pursuant to Rule 144 without any  restriction
as to the  number  of  securities  as of a  particular  date  that  can  then be
immediately   sold,  the  Conversion  Shares  and  Warrant  Shares  may  bear  a
restrictive  legend in  substantially  the following  form (and a  stop-transfer
order may be placed against transfer of the certificates for such Securities):

                  "The securities  represented by this certificate have not been
                  registered  under the Securities Act of 1933, as amended.  The
                  securities  may  not  be  sold,   transferred,   assigned,  or
                  otherwise   disposed  of  in  the  absence  of  an   effective
                  registration  statement for the securities  under said Act, or
                  an opinion of counsel, in form,  substance and scope customary
                  for  opinions  of counsel  in  comparable  transactions,  that
                  registration  is not  required  under said Act or unless  sold
                  pursuant to Rule 144 under said Act."

          The legend set forth  above  shall be removed  and the  Company  shall
     issue a certificate  without such legend to the holder of any Security upon
     which it is stamped,  if, unless  otherwise  required by  applicable  state
     securities  laws,  (a)  such  Security  is  registered  for  sale  under an
     effective  registration statement filed under the 1933 Act or otherwise may
     be sold  pursuant to Rule 144 without any  restriction  as to the number of
     securities as of a particular  date that can then be immediately  sold, (b)
     such  holder  provides  the Company  with an opinion of  counsel,  in form,
     substance  and scope  customary  for  opinions  of  counsel  in  comparable
     transactions, to the effect that a public sale or transfer of such Security
     may be made without registration under the 1933 Act, which opinion shall be
     accepted by the Company so that the sale or  transfer is  effected,  or (c)
     such holder  provides  the Company  with  reasonable  assurances  that such
     Security  shall be sold pursuant to Rule 144. Such Buyer agrees to sell all
     Securities,  including those represented by a certificate(s) from which the
     legend has been removed, in compliance with applicable  prospectus delivery
     requirements, if any.

              H. AUTHORIZATION; ENFORCEMENT. This Agreement and the Registration
Rights Agreement have been duly and validly authorized.  This Agreement has been
duly  executed  and  delivered  on  behalf  of such  Buyer,  and this  Agreement
constitutes,  and upon execution and delivery by such Buyer of the  Registration
Rights  Agreement,  such agreement  will  constitute,  legal,  valid and binding
agreements of such Buyer enforceable in accordance with their respective terms.

              I.  RESIDENCY.  Such Buyer is a resident of the  jurisdiction  set
forth immediately below such Buyer's name on the signature pages hereto.

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                    3.  REPRESENTATIONS  AND  WARRANTIES  OF  THE  COMPANY.  The
          Company represents and warrants to each Buyer that:

              A.  ORGANIZATION  AND  QUALIFICATION.  The Company and each of its
Subsidiaries  (as defined  below),  if any,  is a  corporation  duly  organized,
validly  existing and in good  standing  under the laws of the  jurisdiction  in
which it is incorporated, with full power and authority (corporate and other) to
own,  lease,  use and operate its properties and to carry on its business as and
where now owned, leased, used, operated and conducted.  SCHEDULE 3(A) sets forth
a list of all of the  Subsidiaries  (as  defined  below) of the  Company and the
jurisdiction  in  which  each  is  incorporated.  The  Company  and  each of its
Subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which its ownership or use of property or
the nature of the business  conducted by it makes such  qualification  necessary
except where the failure to be so qualified or in good standing would not have a
Material  Adverse Effect.  "MATERIAL  ADVERSE EFFECT" means any material adverse
effect on the business,  operations, assets, financial condition or prospects of
the  Company  or  its  Subsidiaries,  if  any,  taken  as a  whole,  or  on  the
transactions  contemplated  hereby or by the  agreements  or  instruments  to be
entered into in connection  herewith.  "SUBSIDIARIES"  means any  corporation or
other organization, whether incorporated or unincorporated, in which the Company
owns, directly or indirectly, all of the equity or other ownership interests.

              B. AUTHORIZATION;  ENFORCEMENT.  (i) The Company has all requisite
corporate  power and  authority  to enter into and perform this  Agreement,  the
Registration  Rights  Agreement,  the Notes and the Warrants and, subject to the
adoption of necessary resolutions by the Board of Directors and the stockholders
of the Company to consummate the  transactions  contemplated  hereby and thereby
and to issue the  Securities,  in accordance  with the terms hereof and thereof,
(ii) the  execution  and delivery of this  Agreement,  the  Registration  Rights
Agreement, the Notes and the Warrants by the Company and, the consummation by it
of  the  transactions  contemplated  hereby  and  thereby  (including,   without
limitation,  the  issuance of the Notes and the  Warrants  and the  issuance and
reservation  for issuance of the Conversion  Shares and Warrant Shares  issuable
upon conversion or exercise  thereof) have been duly authorized by the Company's
Board of Directors and no further consent or authorization  of the Company,  its
Board of Directors,  or its  shareholders is required,  (iii) this Agreement has
been  duly   executed   and   delivered   by  the  Company  by  its   authorized
representative,  and such  authorized  representative  is the true and  official
representative  with  authority to sign this  Agreement and the other  documents
executed in connection herewith and bind the Company accordingly,  and (iv) this
Agreement  constitutes,  and upon  execution  and delivery by the Company of the
Registration  Rights  Agreement,  the  Notes  and  the  Warrants,  each  of such
instruments  will  constitute,  a legal,  valid and  binding  obligation  of the
Company enforceable against the Company in accordance with its respective terms.

              C.  CAPITALIZATION.  Except as set forth on SCHEDULE  3(C),  as of
June 30, 2006 hereof,  the authorized  capital stock of the Company  consists of
(i)  1,000,000,000  shares  of  Common  Stock,  par  value  $0.00005,  of  which
470,050,001  shares are issued and  outstanding  and (ii)  10,000,000  shares of
preferred  stock,  par  value  $0.001,   of  which  no  shares  are  issued  and
outstanding.  All of such  outstanding  shares of  capital  stock  are,  or upon
issuance will be, duly authorized, validly issued, fully paid and nonassessable.
No shares of capital  stock of the Company are subject to  preemptive  rights or
any other  similar  rights of the  shareholders  of the  Company or any liens or
encumbrances  imposed  through  the  actions or  failure to act of the  Company.
Except as  disclosed in SCHEDULE  3(C),  as of the date of this  Agreement,  (i)
there are no  outstanding  options,  warrants,  scrip,  rights to subscribe for,
puts,  calls,  rights  of  first refusal,  agreements,  understandings,  claims
or other  commitments  or  rights  of  any  character  whatsoever  relating  to,

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or  securities  or rights  convertible  into or  exchangeable  for any shares of
capital  stock of the Company or any of its  Subsidiaries,  or  arrangements  by
which the  Company or any of its  Subsidiaries  is or may become  bound to issue
additional  shares of capital  stock of the Company or any of its  Subsidiaries,
(ii) there are no agreements or  arrangements  under which the Company or any of
its  Subsidiaries  is  obligated  to  register  the  sale of any of its or their
securities  under the 1933 Act (except the  Registration  Rights  Agreement) and
(iii) there are no anti-dilution or price adjustment provisions contained in any
security issued by the Company (or in any agreement providing rights to security
holders) that will be triggered by the issuance of the Notes, the Warrants,  the
Conversion  Shares or Warrant  Shares.  The Company has made  available  to each
Buyer true copies of the Certificate of  Incorporation  as in effect on the date
hereof, the Company's By-laws,  as in effect on the date hereof (the "BY-LAWS"),
and the terms of all securities convertible into or exercisable for Common Stock
of the  Company  and the  material  rights of the  holders  thereof  in  respect
thereto.

              D. ISSUANCE OF SHARES.  The  Conversion  Shares and Warrant Shares
are duly  authorized and reserved for issuance and, upon conversion of the Notes
and exercise of the Warrants in accordance with their respective  terms, will be
validly issued,  fully paid and non-assessable,  and free from all taxes, liens,
claims  and  encumbrances  with  respect to the issue  thereof  and shall not be
subject to preemptive  rights or other  similar  rights of  shareholders  of the
Company and will not impose personal liability upon the holder thereof.

              E.  ACKNOWLEDGMENT  OF  DILUTION.   The  Company  understands  and
acknowledges  the  potentially  dilutive  effect to the  Common  Stock  upon the
issuance of the Conversion Shares and Warrant Shares upon conversion of the Note
or  exercise  of  the  Warrants.  The  Company  further  acknowledges  that  its
obligation to issue Conversion  Shares and Warrant Shares upon conversion of the
Notes or exercise of the Warrants in accordance with this  Agreement,  the Notes
and the Warrants is absolute and unconditional regardless of the dilutive effect
that such issuance may have on the ownership  interests of other shareholders of
the Company.

              F. NO CONFLICTS.  The execution,  delivery and performance of this
Agreement,  the Registration Rights Agreement, the Notes and the Warrants by the
Company and the  consummation  by the Company of the  transactions  contemplated
hereby and thereby (including,  without limitation, the issuance and reservation
for issuance of the Conversion  Shares and Warrant Shares) will not (i) conflict
with  or  result  in  a  violation  of  any  provision  of  the  Certificate  of
Incorporation or By-laws or (ii) violate or conflict with, or result in a breach
of any  provision  of, or constitute a default (or an event which with notice or
lapse of time or both  could  become a  default)  under,  or give to others  any
rights  of  termination,   amendment,   acceleration  or  cancellation  of,  any
agreement,  indenture, patent, patent license or instrument to which the Company
or any of its  Subsidiaries  is a party,  or (iii)  result in a violation of any
law, rule,  regulation,  order,  judgment or decree (including federal and state
securities  laws  and   regulations  and  regulations  of  any   self-regulatory
organizations  to which the Company or its  securities  are  currently  subject)
applicable to the Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries is bound or affected (except for
such conflicts, defaults, terminations, amendments, accelerations, cancellations
and violations as would not,  individually or in the aggregate,  have a Material
Adverse Effect). Neither the Company nor any of its Subsidiaries is in violation
of its Certificate of Incorporation,  By-laws or other organizational  documents
and neither the Company nor any of its  Subsidiaries is in default (and no event
has occurred which with notice or lapse of time or both could put the Company or
any of its  Subsidiaries in default)  under,  and neither the Company nor any of
its  Subsidiaries  has taken any action or failed to take any action  that would
give  to  others  any  rights  of   termination,   amendment,   acceleration  or
cancellation  of, any  agreement,  indenture  or instrument to which the Company

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or any of its  Subsidiaries is a party or by which any property or assets of the
Company or any of its  Subsidiaries  is bound or  affected,  except for possible
defaults as would not, individually or in the aggregate, have a Material Adverse
Effect.  The  businesses  of the Company and its  Subsidiaries,  if any, are not
being  conducted,  and shall not be conducted so long as a Buyer owns any of the
Securities, in violation of any law, ordinance or regulation of any governmental
entity,  which  violation  would  cause a  Material  Adverse  Effect.  Except as
specifically  contemplated  by this Agreement and as required under the 1933 Act
and any applicable  state securities laws, the Company is not required to obtain
any consent, authorization or order of, or make any filing or registration with,
any court,  governmental agency, regulatory agency, self regulatory organization
or stock  market  or any  third  party in order for it to  execute,  deliver  or
perform any of its obligations  under this Agreement,  the  Registration  Rights
Agreement,  the Notes or the  Warrants in  accordance  with the terms  hereof or
thereof or to issue and sell the Notes and Warrants in accordance with the terms
hereof and to issue the Conversion  Shares upon  conversion of the Notes and the
Warrant  Shares upon  exercise of the Warrants.  All  consents,  authorizations,
orders,  filings  and  registrations  which the  Company is  required  to obtain
pursuant  to the  preceding  sentence  have been  obtained  or will be  obtained
promptly after Closing effected on or prior to the date hereof.

              G. ABSENCE OF CERTAIN CHANGES.  Since December 31, 2005, there has
been no material  adverse  change and no  material  adverse  development  in the
assets,  liabilities,  business,  properties,  operations,  financial condition,
results of operations or prospects of the Company or any of its Subsidiaries.

              H.  ABSENCE  OF  LITIGATION.  There  is no  action,  suit,  claim,
proceeding,  inquiry  or  investigation  before or by any court,  public  board,
government  agency,  self-regulatory  organization  or body  pending  or, to the
knowledge  of the  Company  or any of its  Subsidiaries,  threatened  against or
affecting the Company or any of its Subsidiaries, or their officers or directors
in their capacity as such, that could have a Material  Adverse Effect.  SCHEDULE
3(H)  contains  a  complete  list and  summary  description  of any  pending  or
threatened   proceeding   against  or  affecting  the  Company  or  any  of  its
Subsidiaries, without regard to whether it would have a Material Adverse Effect.
The Company and its Subsidiaries are unaware of any facts or circumstances which
might give rise to any of the foregoing.

              I.  PATENTS,   COPYRIGHTS,  ETC.  The  Company  and  each  of  its
Subsidiaries  owns or  possesses  the  requisite  licenses  or rights to use all
patents,  patent  applications,   patent  rights,  inventions,  know-how,  trade
secrets, trademarks, trademark applications, service marks, service names, trade
names and copyrights ("INTELLECTUAL PROPERTY") necessary to enable it to conduct
its business as now operated  (and, to the best of the Company's  knowledge,  as
presently  contemplated  to be  operated  in the  future);  there is no claim or
action by any person pertaining to, or proceeding  pending,  or to the Company's
knowledge  threatened,  which  challenges  the  right  of  the  Company  or of a
Subsidiary with respect to any Intellectual  Property  necessary to enable it to
conduct  its  business  as now  operated  (and,  to the  best  of the  Company's
knowledge,  as presently contemplated to be operated in the future); to the best
of the  Company's  knowledge,  the  Company's or its  Subsidiaries'  current and
intended  products,  services and processes do not infringe on any  Intellectual
Property or other  rights held by any person;  and the Company is unaware of any
facts or  circumstances  which  might  give  rise to any of the  foregoing.  The
Company and each of its Subsidiaries have taken reasonable  security measures to
protect the secrecy, confidentiality and value of their Intellectual Property.

              J. NO MATERIALLY ADVERSE  CONTRACTS,  ETC. Neither the Company nor
any of its  Subsidiaries  is subject to any  charter,  corporate  or other legal
restriction,  or any judgment,  decree,  order,  rule or regulation which in the
judgment of the  Company's  officers  has or is expected in the future to have a

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Material  Adverse Effect.  Neither the Company nor any of its  Subsidiaries is a
party to any  contract  or  agreement  which in the  judgment  of the  Company's
officers has or is expected to have a Material Adverse Effect.

              K. TAX STATUS.  Except as set forth on SCHEDULE  3(K), 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.  To the  Company's  knowledge,  there are no unpaid taxes in any material
amount  claimed  to be due by the  taxing  authority  of any  jurisdiction.  The
Company  has not  executed a waiver with  respect to the statute of  limitations
relating to the assessment or collection of any foreign, federal, state or local
tax.  Except as set forth on SCHEDULE 3(K), none of the Company's tax returns is
presently being audited by any taxing authority.

              L. CERTAIN TRANSACTIONS.  Except as set forth on SCHEDULE 3(L) and
except for arm's length transactions pursuant to which the Company or any of its
Subsidiaries  makes  payments in the ordinary  course of business  upon terms no
less  favorable  than the Company or any of its  Subsidiaries  could obtain from
third  parties and other than the grant of stock  options  disclosed on SCHEDULE
3(C), none of the officers,  directors, or employees of the Company is presently
a party to any transaction  with the Company or any of its  Subsidiaries  (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 corporation, partnership, trust or other entity in
which any officer,  director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.

              M.  DISCLOSURE.  All  information  relating to or  concerning  the
Company or any of its  Subsidiaries  set forth in this Agreement and provided to
the Buyers  pursuant to Section 2(d) hereof and otherwise in connection with the
transactions  contemplated hereby is, to the knowledge of the Company,  true and
correct in all  material  respects  and the Company has not omitted to state any
material fact necessary in order to make the statements  made herein or therein,
in light of the circumstances under which they were made, not misleading. To the
knowledge of the Company,  no event or circumstance  has occurred or exists with
respect to the  Company  or any of its  Subsidiaries  or its or their  business,
properties,   prospects,   operations  or  financial  conditions,  which,  under
applicable law, rule or regulation,  requires public  disclosure or announcement
by the  Company  but  which  has not been so  publicly  announced  or  disclosed
(assuming for this purpose that the  Company's  reports filed under the 1934 Act
are being  incorporated  into an effective  registration  statement filed by the
Company under the 1933 Act).

              N.  ACKNOWLEDGMENT  REGARDING BUYERS' PURCHASE OF SECURITIES.  The
Company  acknowledges  and  agrees  that the  Buyers  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 Buyer
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 Buyer

                                       8
<PAGE>

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  Buyers'  purchase  of  the
Securities.  The Company  further  represents  to each Buyer that the  Company's
decision to enter into this  Agreement has been based solely on the  independent
evaluation of the Company and its representatives.

              O. NO INTEGRATED  OFFERING.  Except for sales of securities to the
Buyers and affiliates thereof heretofore  consummated,  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 in any security or solicited any
offers to buy any security under  circumstances that would require  registration
under the 1933 Act of the issuance of the Securities to the Buyers. The issuance
of the  Securities to the Buyers will not be integrated  with any other issuance
of the  Company's  securities  (past,  current or future)  for  purposes  of any
shareholder approval provisions applicable to the Company or its securities.

              P. NO BROKERS.  The  Company has taken no action  which would give
rise to any claim by any person for brokerage  commissions,  transaction fees or
similar  payments  relating to this Agreement or the  transactions  contemplated
hereby.

              Q. PERMITS;  COMPLIANCE.  The Company and each of its Subsidiaries
is in possession of all material franchises, grants,  authorizations,  licenses,
permits, easements, variances, exemptions, consents, certificates, approvals and
orders  necessary to own,  lease and operate its  properties and to carry on its
business as it is now being conducted (collectively, the "COMPANY PERMITS"), and
there is no action  pending  or, to the  knowledge  of the  Company,  threatened
regarding suspension or cancellation of any of the Company Permits.  Neither the
Company  nor any of its  Subsidiaries  is in  conflict  with,  or in  default or
violation  of,  any of the  Company  Permits,  except  for any  such  conflicts,
defaults  or  violations  which,  individually  or in the  aggregate,  would not
reasonably be expected to have a Material  Adverse  Effect.  Since  December 31,
2005,  neither  the  Company  nor  any  of its  Subsidiaries  has  received  any
notification  with  respect to possible  conflicts,  defaults or  violations  of
applicable laws, except for notices relating to possible conflicts,  defaults or
violations,  which  conflicts,  defaults or violations would not have a Material
Adverse Effect.

              R. ENVIRONMENTAL MATTERS.

                 (I)  There  are, to the Company's knowledge,  with  respect  to
          the  Company  or any of its  Subsidiaries  or any  predecessor  of the
          Company,  no present  violations  of  Environmental  Laws (as  defined
          below),  releases  of any  material  into  the  environment,  actions,
          activities,   circumstances,   conditions,   events,   incidents,   or
          contractual  obligations  which  may  give  rise  to  any  common  law
          environmental  liability  or any  liability  under  the  Comprehensive
          Environmental  Response,  Compensation  and  Liability  Act of 1980 or
          similar federal,  state, local or foreign laws and neither the Company
          nor any of its  Subsidiaries  has  received any notice with respect to
          any of the  foregoing,  nor is any action pending or, to the Company's
          knowledge,  threatened in connection  with any of the  foregoing.  The
          term "ENVIRONMENTAL LAWS" means all material federal,  state, local or
          foreign laws  relating to pollution or  protection  of human health or
          the environment (including,  without limitation,  ambient air, surface
          water,  groundwater,  land surface or subsurface  strata),  including,
          without limitation, laws relating to emissions,  discharges,  releases
          or threatened releases of chemicals, pollutants contaminants, or toxic
          or   hazardous   substances   or  wastes   (collectively,   "HAZARDOUS
          MATERIALS")  into  the  environment,  or  otherwise  relating  to  the
          manufacture,   processing,   distribution,  use,  treatment,  storage,
          disposal,

                                       9
<PAGE>

          transport  or  handling  of  Hazardous  Materials,   as  well  as  all
          authorizations,   codes,   decrees,   demands   or   demand   letters,
          injunctions,  judgments,  licenses, notices or notice letters, orders,
          permits, plans or regulations issued, entered, promulgated or approved
          thereunder.

               (II) Other than those that are or were  stored,  used or disposed
          of in  compliance  with  applicable  law, no Hazardous  Materials  are
          contained on or about any real  property  currently  owned,  leased or
          used  by the  Company  or any of its  Subsidiaries,  and no  Hazardous
          Materials  were  released  on or about  any real  property  previously
          owned, leased or used by the Company or any of its Subsidiaries during
          the period the  property  was owned,  leased or used by the Company or
          any of its Subsidiaries,  except in the normal course of the Company's
          or any of its Subsidiaries' business.

               (III) There are no underground storage tanks on or under any real
          property  owned,  leased  or  used  by  the  Company  or  any  of  its
          Subsidiaries that are not in compliance with applicable law.

              S. TITLE TO PROPERTY.  Except as set forth on SCHEDULE  3(S),  the
Company and its Subsidiaries have good and marketable title to all real property
and good and  marketable  title to all personal  property owned by them which is
material to the business of the Company and its Subsidiaries,  in each case free
and clear of all liens and  encumbrances  and, to the  knowledge of the Company,
defects or such as would not have a Material Adverse Effect. To the knowledge of
the Company,  any real property and  facilities  held under lease by the Company
and its  Subsidiaries  are held by them under valid,  subsisting and enforceable
leases with such exceptions as would not have a Material Adverse Effect.

              T. INSURANCE. The Company and each of its Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such  amounts as  management  of the  Company  believes to be prudent and
customary  in the  businesses  in which the  Company  and its  Subsidiaries  are
engaged.  Neither the Company nor any such  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 at a cost that would not have a Material
Adverse Effect. The Company has provided to Buyer true and correct copies of all
policies  relating to directors' and officers'  liability  coverage,  errors and
omissions coverage, and commercial general liability coverage.

              U.  INTERNAL  ACCOUNTING  CONTROLS.  The  Company  and each of its
Subsidiaries  maintain a system of internal accounting controls  sufficient,  in
the  judgment  of the  Company's  board  of  directors,  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  generally
accepted  accounting  principles  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.

              V. FOREIGN CORRUPT PRACTICES.  Neither the Company, nor any of its
Subsidiaries,  nor any director, officer, agent, employee or other person acting
on behalf of the  Company or any  Subsidiary  has,  in the course of his actions
for, or on behalf of, the  Company,  used any  corporate  funds for any unlawful
contribution,  gift,  entertainment  or  other  unlawful  expenses  relating  to
political activity;  made

                                       10
<PAGE>

any direct or indirect  unlawful  payment to any foreign or domestic  government
official or employee from  corporate  funds;  violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or made
any bribe, rebate, payoff, influence payment, kickback or other unlawful payment
to any foreign or domestic government official or employee.

              W. SOLVENCY.  The Company (after giving effect to the transactions
contemplated by this Agreement) is solvent (I.E.,  its assets have a fair market
value in excess of the amount  required to pay its probable  liabilities  on its
existing  debts as they become  absolute and matured) and  currently the Company
has no  information  that would lead it to reasonably  conclude that the Company
would  not,  after  giving  effect  to  the  transaction  contemplated  by  this
Agreement, have the ability to, nor does it intend to take any action that would
impair its  ability to, pay its debts from time to time  incurred in  connection
therewith as such debts mature.

              X. NO  INVESTMENT  COMPANY.  The  Company  is not,  and  upon  the
issuance and sale of the Securities as  contemplated  by this Agreement will not
be an  "investment  company"  required  to be  registered  under the  Investment
Company Act of 1940 (an "INVESTMENT COMPANY").  The Company is not controlled by
an Investment Company.

              Y. BREACH OF REPRESENTATIONS AND WARRANTIES BY THE COMPANY. If the
Company  breaches any of the  representations  or  warranties  set forth in this
Section  3, and in  addition  to any  other  remedies  available  to the  Buyers
pursuant to this  Agreement,  the Company  shall pay to the Buyers the  Standard
Liquidated  Damages Amount in cash or in shares of Common Stock at the option of
the  Company,  until  such  breach is cured.  If the  Company  elects to pay the
Standard Liquidated Damages Amounts in shares of Common Stock, such shares shall
be issued at the Conversion Price at the time of payment.

                  4. COVENANTS.

              A. BEST  EFFORTS.  The  parties  shall use their  best  efforts to
satisfy timely each of the conditions  agreed to thereby  described in Section 6
and 7 of this Agreement.

              B. FORM D; BLUE SKY LAWS. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to make available a
copy thereof to each Buyer  promptly after such filing.  The Company shall,  on,
before or promptly after the Closing Date, take such action as the Company shall
reasonably  determine  is necessary  to qualify the  Securities  for sale to the
Buyers  under  applicable  securities  or "blue  sky" laws of the  states of the
United  States (or to obtain an exemption  from such  qualification),  and shall
make available evidence of any such action so taken to each Buyer on or prior to
the Closing Date.

              C.  REPORTING  STATUS;  ELIGIBILITY  TO USE FORM S-3, SB-2 OR FORM
S-1. The Company  represents  and warrants that it shall use its best efforts to
meet the requirements for the use of Form S-3 (or if the Company is not eligible
for the use of Form S-3 as of the Filing  Date (as  defined in the  Registration
Rights Agreement),  the Company may use the form of registration for which it is
eligible  at  that  time)  for  registration  of the  sale by the  Buyer  of the
Registrable  Securities (as defined in the Registration  Rights  Agreement).  So
long as any Buyer beneficially owns any of the Securities, the Company shall use
its best  efforts to timely file all  reports  required to be filed with the SEC
pursuant to the 1934 Act, and the Company  shall not  terminate its status as an
issuer  required to file reports  under the  1934  Act  even  if the 1934 Act or

                                       11
<PAGE>

the rules and regulations thereunder would permit such termination.  The Company
further  agrees that it shall use its best efforts to file all reports  required
to be filed by the  Company  with the SEC in a  timely  manner  so as to  become
eligible,  and thereafter to maintain its eligibility,  for the use of Form S-3.
The Company shall issue a press release  describing  the materials  terms of the
transaction  contemplated  hereby as soon as  practicable  following the Closing
Date but in no event more than five (5) business days of the Closing Date, which
press release shall be subject to prior review by the Buyers. The Company agrees
that  such  press  release  shall not  disclose  the name of the  Buyers  unless
expressly consented to in writing by the Buyers or unless required by applicable
law or regulation, and then only to the extent of such requirement.

              D. USE OF PROCEEDS.  The Company  shall use the proceeds  from the
sale of the Notes and the  Warrants  for general  working  capital  purposes and
shall  not,  directly  or  indirectly,  use  such  proceeds  for any  loan to or
investment  in any other  corporation,  partnership,  enterprise or other person
(except  in  connection   with  its  currently   existing   direct  or  indirect
Subsidiaries.

              E. FUTURE  OFFERINGS.  Subject to the exceptions  described below,
the   Company   will   not,   without   the   prior   written   consent   of   a
majority-in-interest  of the Buyers, not to be unreasonably withheld,  negotiate
or contract with any party to obtain additional equity financing (including debt
financing  with an equity  component)  that  involves (A) the issuance of Common
Stock at a  discount  to the  market  price of the  Common  Stock on the date of
issuance  (taking  into  account the value of any warrants or options to acquire
Common Stock issued in connection  therewith) or (B) the issuance of convertible
securities that are convertible into an indeterminate number of shares of Common
Stock or (C) the issuance of warrants  during the period (the "LOCK-UP  PERIOD")
beginning on the Closing Date and ending on the later of (i) two hundred seventy
(270) days from the Closing Date and (ii) one hundred eighty (180) days from the
date  the  Registration   Statement  (as  defined  in  the  Registration  Rights
Agreement)  is declared  effective  (plus any days in which sales cannot be made
thereunder). In addition, subject to the exceptions described below, the Company
will not conduct any equity financing  (including debt with an equity component)
("FUTURE  OFFERINGS") during the period beginning on the Closing Date and ending
two (2) years  after the end of the  Lock-up  Period  unless it shall have first
delivered to each Buyer, at least twenty (20) business days prior to the closing
of such Future Offering, written notice describing the proposed Future Offering,
including the terms and conditions thereof and proposed definitive documentation
to be entered into in connection  therewith,  and providing each Buyer an option
during the fifteen (11) day period following delivery of such notice to purchase
its pro rata share (based on the ratio that the  aggregate  principal  amount of
Notes purchased by it hereunder bears to the aggregate principal amount of Notes
purchased  hereunder) of the securities  being offered in the Future Offering on
the same terms as contemplated by such Future Offering (the limitations referred
to in this sentence and the preceding  sentence are collectively  referred to as
the "CAPITAL RAISING  LIMITATIONS").  In the event the terms and conditions of a
proposed Future Offering are amended in any respect after delivery of the notice
to the Buyers concerning the proposed Future Offering, the Company shall deliver
a new notice to each Buyer  describing  the amended terms and  conditions of the
proposed Future Offering and each Buyer  thereafter  shall have an option during
the fifteen  (15) day period  following  delivery of such new notice to purchase
its pro  rata  share  of the  securities  being  offered  on the  same  terms as
contemplated  by such  proposed  Future  Offering,  as  amended.  The  foregoing
sentence shall apply to successive amendments to the terms and conditions of any
proposed Future Offering. The Capital Raising Limitations shall not apply to any
transaction   involving  (i)  issuances  of  securities  in  a  firm  commitment
underwritten  public offering  (excluding a continuous offering pursuant to Rule
415 under the 1933 Act) or (ii) issuances of securities as  consideration  for a
merger, consolidation or purchase of assets, or in connection with any strategic
partnership or joint venture (the primary purpose of which is not to raise

                                       12
<PAGE>

equity  capital),  or in connection  with the  disposition  or  acquisition of a
business,  product or license by the Company.  The Capital  Raising  Limitations
also shall not apply to the issuance of  securities  upon exercise or conversion
of the Company's options,  warrants or other convertible  securities outstanding
as of the date hereof or to the grant of additional options or warrants,  or the
issuance of additional securities,  under any Company stock option or restricted
stock plan approved by the shareholders of the Company.

              F. EXPENSES.  At the Closing,  the Company shall reimburse  Buyers
for expenses  incurred by them in connection with the negotiation,  preparation,
execution,  delivery and performance of this Agreement and the other  agreements
to  be  executed  in  connection  herewith  ("DOCUMENTS"),   including,  without
limitation,  attorneys' and consultants' fees and expenses, transfer agent fees,
fees  for  stock  quotation  services,   fees  relating  to  any  amendments  or
modifications  of the  Documents or any consents or waivers of provisions in the
Documents,  fees for the  preparation  of opinions of counsel,  escrow fees, and
costs of  restructuring  the  transactions  contemplated  by the Documents in an
amount not to exceed  $30,000.  When  possible,  the Company must pay these fees
directly, otherwise the Company must make immediate payment for reimbursement to
the Buyers for all fees and  expenses  immediately  upon  written  notice by the
Buyer or the  submission  of an invoice by the Buyer.  If the  Company  fails to
reimburse the Buyer in full within three (3) business days of the written notice
or  submission  of invoice by the Buyer,  the Company  shall pay interest on the
total amount of fees to be reimbursed at a rate of 15% per annum.

              G. FINANCIAL INFORMATION. The Company agrees to send the following
reports to each Buyer until such Buyer transfers,  assigns,  or sells all of the
Securities:  (i) within  ten (10) days after the filing  with the SEC, a copy of
its Annual  Report on Form 10-KSB its  Quarterly  Reports on Form 10-QSB and any
Current  Reports on Form 8-K; (ii) within one (1) day after  release,  copies of
all press releases issued by the Company or any of its  Subsidiaries;  and (iii)
contemporaneously with the making available or giving to the shareholders of the
Company,  copies of any notices or other information the Company makes available
or gives to such shareholders.

              H.  AUTHORIZATION AND RESERVATION OF SHARES.  The Company shall at
all  times  have  authorized,  and  reserved  for the  purpose  of  issuance,  a
sufficient  number of shares of Common Stock to provide for the full  conversion
or exercise of the outstanding Notes and Warrants and issuance of the Conversion
Shares and Warrant Shares in connection therewith (based on the Conversion Price
of the Notes or Exercise  Price of the Warrants in effect from time to time) and
as otherwise  required by the Notes.  The Company shall not reduce the number of
shares of Common  Stock  reserved  for  issuance  upon  conversion  of Notes and
exercise of the Warrants without the consent of each Buyer. The Company shall at
all times maintain the number of shares of Common Stock so reserved for issuance
at an amount ("RESERVED  AMOUNT") equal to no less than two (2) times the number
that is then  actually  issuable  upon  full  conversion  of the  Notes and upon
exercise  of the  Warrants  (based on the  Conversion  Price of the Notes or the
Exercise Price of the Warrants in effect from time to time).  If at any time the
number  of  shares  of  Common  Stock   authorized  and  reserved  for  issuance
("AUTHORIZED  AND RESERVED  SHARES") is below the Reserved  Amount,  the Company
will  promptly take all  corporate  action  necessary to authorize and reserve a
sufficient number of shares,  including,  without limitation,  calling a special
meeting of  shareholders  to authorize  additional  shares to meet the Company's
obligations  under this Section 4(h), in the case of an  insufficient  number of
authorized shares, obtain shareholder approval of an increase in such authorized
number of shares, and voting the management shares of the Company in favor of an
increase  in the  authorized  shares of the Company to ensure that the number of
authorized  shares is  sufficient  to meet the Reserved  Amount.  If the Company
fails to obtain such  shareholder  approval within sixty (60) days following the
date on which the number of Reserved  Amount exceeds the Authorized and Reserved
Shares,  the Company  shall pay to the

                                       13
<PAGE>

Buyers the Standard  Liquidated  Damages Amount,  in cash or in shares of Common
Stock at the option of each  Buyer.  If a Buyer  elects to be paid the  Standard
Liquidated Damages Amount in shares of Common Stock, such shares shall be issued
at the  Conversion  Price at the time of  payment.  In order to ensure  that the
Company has authorized a sufficient amount of shares to meet the Reserved Amount
at  all  times,  the  Company  shall  use  its  best  efforts  to  deliver  to a
representative for the Buyers at the end of every month a list detailing (1) the
current amount of shares  authorized by the Company and reserved for the Buyers;
and (2) amount of shares issuable upon conversion of the Notes and upon exercise
of the Warrants and as payment of interest accrued on the Notes for one year. If
the Company  fails to provide such list within five (5) business  days of having
received  a  written  demand  therefor,  the  Company  shall  pay  the  Standard
Liquidated Damages Amount, in cash or in shares of Common Stock at the option of
the  Buyer,  until the list is  delivered.  If the  Buyer  elects to be paid the
Standard  Liquidated Damages Amount in shares of Common Stock, such shares shall
be issued at the Conversion Price at the time of payment.

              I.  LISTING.  The Company shall use its best efforts to secure the
listing  of  the  Conversion  Shares  and  Warrant  Shares  upon  each  national
securities  exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed  (subject to official  notice of issuance)  and, so
long as any Buyer owns any of the  Securities,  shall  maintain,  so long as any
other shares of Common Stock shall be so listed,  such listing of all Conversion
Shares and Warrant  Shares from time to time  issuable  upon  conversion  of the
Notes or exercise of the  Warrants.  The Company will use best efforts to obtain
and, so long as any Buyer owns any of the  Securities,  maintain the listing and
trading of its Common Stock on the OTCBB or any equivalent replacement exchange,
the Nasdaq  National  Market  ("NASDAQ"),  the Nasdaq  SmallCap  Market ("NASDAQ
SMALLCAP"), the New York Stock Exchange ("NYSE"), or the American Stock Exchange
("AMEX") and will comply in all respects  with the Company's  reporting,  filing
and other obligations  under the bylaws or rules of the National  Association of
Securities Dealers ("NASD") and such exchanges, as applicable. The Company shall
promptly  provide to each Buyer copies of any notices it receives from the OTCBB
and any other  exchanges or quotation  systems on which the Common Stock is then
listed  regarding the continued  eligibility  of the Common Stock for listing on
such exchanges and quotation systems.

              J. CORPORATE  EXISTENCE.  So long as a Buyer beneficially owns any
Notes or Warrants,  the Company shall maintain its corporate existence and shall
not sell all or substantially all of the Company's  assets,  except in the event
of a  merger  or  consolidation  or  sale  of  all or  substantially  all of the
Company's  assets,  where the surviving or successor  entity in such transaction
(i) assumes the Company's  obligations  hereunder and under the  agreements  and
instruments  entered into in connection  herewith and (ii) is a publicly  traded
corporation  whose  Common  Stock is listed for  trading  on the OTCBB,  Nasdaq,
Nasdaq SmallCap, NYSE or AMEX.

              K. NO INTEGRATION.  The Company shall not make any offers or sales
of any  security  (other than the  Securities)  under  circumstances  that would
require registration of the Securities being offered or sold hereunder under the
1933 Act or cause the offering of the Securities to be integrated with any other
offering  of  securities  by the  Company  for the  purpose  of any  stockholder
approval provision applicable to the Company or its securities.

              L.  BREACH  OF  COVENANTS.  If  the  Company  breaches  any of the
covenants  set forth in this  Section 4, and in addition  to any other  remedies
available to the Buyers pursuant to this Agreement, the Company shall pay to the
Buyers the Standard  Liquidated  Damages Amount,  in cash or in shares of Common
Stock at the option of the Company,  until such breach is cured.  If the Company
elects to pay the

                                       14
<PAGE>

Standard Liquidated Damages Amount in shares, such shares shall be issued at the
Conversion Price at the time of payment.

               5.  TRANSFER   AGENT   INSTRUCTIONS.   The  Company  shall  issue
          irrevocable  instructions to its transfer agent to issue certificates,
          registered  in the  name  of  each  Buyer  or  its  nominee,  for  the
          Conversion Shares and Warrant Shares in such amounts as specified from
          time to time by each Buyer to the Company upon conversion of the Notes
          or exercise of the Warrants in accordance  with the terms thereof (the
          "IRREVOCABLE TRANSFER AGENT  INSTRUCTIONS").  Prior to registration of
          the  Conversion  Shares and Warrant  Shares  under the 1933 Act or the
          date on which the  Conversion  Shares and  Warrant  Shares may be sold
          pursuant  to Rule 144  without  any  restriction  as to the  number of
          Securities as of a particular date that can then be immediately  sold,
          all such certificates  shall bear the restrictive  legend specified in
          Section  2(g)  of  this  Agreement.   The  Company  warrants  that  no
          instruction  other than the  Irrevocable  Transfer Agent  Instructions
          referred to in this Section 5, and stop transfer  instructions to give
          effect to Section  2(f) hereof (in the case of the  Conversion  Shares
          and Warrant Shares, prior to registration of the Conversion Shares and
          Warrant  Shares under the 1933 Act or the date on which the Conversion
          Shares and Warrant Shares may be sold pursuant to Rule 144 without any
          restriction  as to the number of  Securities  as of a particular  date
          that can then be  immediately  sold),  will be given by the Company to
          its transfer agent and that the Securities  shall  otherwise be freely
          transferable  on the books and records of the Company,  subject to and
          to the extent provided in this Agreement and the  Registration  Rights
          Agreement.  Nothing  in this  Section  shall  affect  in any way  each
          Buyer's  obligations and agreement set forth in Section 2(g) hereof to
          comply with all applicable prospectus delivery  requirements,  if any,
          upon re-sale of the  Securities.  If a Buyer provides the Company with
          (i) an opinion of counsel in form,  substance and scope  customary for
          opinions in comparable transactions,  to the effect that a public sale
          or transfer of such Securities may be made without  registration under
          the 1933 Act and such sale or  transfer  is effected or (ii) the Buyer
          provides  reasonable  assurances  that  the  Securities  can  be  sold
          pursuant to Rule 144, the Company shall permit the  transfer,  and, in
          the  case  of the  Conversion  Shares  and  Warrant  Shares,  promptly
          instruct its transfer  agent to issue one or more  certificates,  free
          from  restrictive  legend,  in such name and in such  denominations as
          specified by such Buyer. The Company  acknowledges that a breach by it
          of its  obligations  hereunder  will  cause  irreparable  harm  to the
          Buyers,  by  vitiating  the  intent and  purpose  of the  transactions
          contemplated  hereby.  Accordingly,  the Company acknowledges that the
          remedy at law for a breach of its obligations under this Section 5 may
          be  inadequate  and  agrees,  in the event of a breach  or  threatened
          breach by the  Company of the  provisions  of this  Section,  that the
          Buyers shall be entitled, in addition to all other available remedies,
          to an  injunction  restraining  any  breach  and  requiring  immediate
          transfer,  without the necessity of showing  economic loss and without
          any bond or other security being required.

               6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation
          of the Company hereunder to issue and sell the Notes and Warrants to a
          Buyer at the Closing is subject to the satisfaction,  at or before the
          Closing Date of each of the  following  conditions  thereto,  provided
          that these  conditions  are for the Company's  sole benefit and may be
          waived by the Company at any time in its sole discretion:

             A. The applicable Buyer shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to the Company.

                                       15
<PAGE>

              B. The applicable Buyer shall have delivered the Purchase Price in
accordance with Section 1(b) above.

              C. The  representations  and  warranties of the  applicable  Buyer
shall be true and correct in all material  respects as of the date when made and
as of the Closing Date as though made at that time  (except for  representations
and warranties that speak as of a specific date), and the applicable Buyer shall
have  performed,  satisfied  and  complied  in all  material  respects  with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied  with by the  applicable  Buyer at or prior to the Closing
Date.

              D. No litigation,  statute,  rule,  regulation,  executive  order,
decree,  ruling or injunction shall have been enacted,  entered,  promulgated or
endorsed by or in any court or governmental  authority of competent jurisdiction
or  any   self-regulatory   organization   having  authority  over  the  matters
contemplated  hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.

                 7. CONDITIONS  TO  EACH BUYER'S  OBLIGATION  TO  PURCHASE.  The
          obligation of each Buyer  hereunder to purchase the Notes and Warrants
          at the  Closing  is  subject  to the  satisfaction,  at or before  the
          Closing Date of each of the following conditions,  provided that these
          conditions are for such Buyer's sole benefit and may be waived by such
          Buyer at any time in its sole discretion:

              A.  The  Company  shall  have  executed  this  Agreement  and  the
Registration Rights Agreement, and delivered the same to the Buyer.

              B. The Company  shall have  delivered to such Buyer duly  executed
Notes (in such  denominations  as the  Buyer  shall  request)  and  Warrants  in
accordance with Section 1(b) above.

              C.  The  Irrevocable  Transfer  Agent  Instructions,  in form  and
substance satisfactory to a majority-in-interest  of the Buyers, shall have been
delivered to and acknowledged in writing by the Company's Transfer Agent.

              D. The representations and warranties of the Company shall be true
and  correct  in all  material  respects  as of the date when made and as of the
Closing  Date as  though  made at such  time  (except  for  representations  and
warranties  that  speak  as of a  specific  date)  and the  Company  shall  have
performed,  satisfied and complied in all material  respects with the covenants,
agreements and conditions required by this Agreement to be performed,  satisfied
or complied with by the Company at or prior to the Closing Date. The Buyer shall
have received a certificate  or  certificates,  executed by the chief  executive
officer of the Company,  dated as of the Closing Date,  to the foregoing  effect
and as to such  other  matters  as may be  reasonably  requested  by such  Buyer
including,  but not  limited  to  certificates  with  respect  to the  Company's
Articles of Incorporation,  By-laws and Board of Directors' resolutions relating
to the transactions contemplated hereby.

              E. No litigation,  statute,  rule,  regulation,  executive  order,
decree,  ruling or injunction shall have been enacted,  entered,  promulgated or
endorsed by or in any court or governmental  authority of competent jurisdiction
or  any   self-regulatory   organization   having  authority  over  the  matters
contemplated  hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.

                                       16
<PAGE>

              F. No event shall have occurred which could reasonably be expected
to have a Material Adverse Effect on the Company.

              G.  The  Buyer  shall  have  received  an  officer's   certificate
described in Section 3(c) above, dated as of the Closing Date.

                  8. GOVERNING LAW; MISCELLANEOUS.

              A. GOVERNING LAW. THIS  AGREEMENT  SHALL BE ENFORCED,  GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED  ENTIRELY WITHIN SUCH STATE,  WITHOUT REGARD
TO THE  PRINCIPLES OF CONFLICT OF LAWS.  THE PARTIES HERETO HEREBY SUBMIT TO THE
EXCLUSIVE  JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK,
NEW  YORK  WITH  RESPECT  TO ANY  DISPUTE  ARISING  UNDER  THIS  AGREEMENT,  THE
AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS  CONTEMPLATED
HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING.  BOTH PARTIES FURTHER AGREE
THAT  SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED
IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY  OTHER  MANNER   PERMITTED  BY  LAW.   BOTH  PARTIES   AGREE  THAT  A  FINAL
NON-APPEALABLE  JUDGMENT IN ANY SUCH SUIT OR PROCEEDING  SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER  JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL  MANNER.  THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE  ARISING  UNDER
THIS  AGREEMENT  SHALL  BE  RESPONSIBLE  FOR ALL FEES  AND  EXPENSES,  INCLUDING
ATTORNEYS'  FEES,  INCURRED  BY THE  PREVAILING  PARTY IN  CONNECTION  WITH SUCH
DISPUTE.

              B.  COUNTERPARTS;  SIGNATURES BY FACSIMILE.  This Agreement may be
executed in one or more counterparts,  each of which shall be deemed an original
but all of which shall  constitute  one and the same  agreement and shall become
effective when  counterparts have been signed by each party and delivered to the
other party.  This Agreement,  once executed by a party, may be delivered to the
other party hereto by facsimile transmission of a copy of this Agreement bearing
the signature of the party so delivering this Agreement.

              C. HEADINGS. The headings of this Agreement are for convenience of
reference only and shall not form part of, or affect the interpretation of, this
Agreement.

              D. SEVERABILITY. In the event that any provision of this Agreement
is invalid or  unenforceable  under any applicable  statute or rule of law, then
such  provision  shall be deemed  inoperative to the extent that it may conflict
therewith  and shall be deemed  modified to conform with such statute or rule of
law. Any provision hereof which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.

              E.  ENTIRE   AGREEMENT;   AMENDMENTS.   This   Agreement  and  the
instruments  referenced  herein contain the entire  understanding of the parties
with  respect  to  the  matters  covered  herein

                                       17
<PAGE>

and therein and, except as specifically set forth herein or therein, neither the
Company  nor  the  Buyer  makes  any  representation,   warranty,   covenant  or
undertaking with respect to such matters.  No provision of this Agreement may be
waived or amended other than by an instrument in writing  signed by the party to
be charged with enforcement.

              F.  NOTICES.  Any notices  required or permitted to be given under
the  terms of this  Agreement  shall be sent by  certified  or  registered  mail
(return receipt  requested) or delivered  personally or by courier  (including a
recognized  overnight  delivery  service) or by facsimile and shall be effective
five days after being  placed in the mail,  if mailed by regular  United  States
mail,  or upon  receipt,  if  delivered  personally  or by courier  (including a
recognized  overnight delivery service) or by facsimile,  in each case addressed
to a party. The addresses for such communications shall be:

                           If to the Company:

                                    Midnight Holdings Group, Inc.
                                    22600 Hall Road, Suite 205
                                    Clinton Township, MI  48036
                                    Attention:  Chief Executive Officer
                                    Telephone:  586-468-8741
                                    Facsimile:  586-468-8768

                           With a copy to:

                                    Reitler Brown & Rosenblatt LLC
                                    800 Third Avenue, 21st Floor
                                    New York, NY  10022
                                    Attention:  Robert Steven Brown, Esq.
                                    Telephone:  212-209-3060
                                    Facsimile:  212-371-5500

         If to a Buyer: To the address set forth  immediately below such Buyer's
name on the signature pages hereto.

                           With copy to:

                                    Ballard Spahr Andrews & Ingersoll, LLP
                                    1735 Market Street
                                    51st Floor
                                    Philadelphia, Pennsylvania  19103
                                    Attention:  Gerald J. Guarcini, Esq.
                                    Telephone:  215-864-8625
                                    Facsimile:  215-864-8999
                                    Email:  guarcini@ballardspahr.com

         Each party  shall  provide  notice to the other  party of any change in
address.

                                       18
<PAGE>

              G.  SUCCESSORS AND ASSIGNS.  This Agreement  shall be binding upon
and inure to the  benefit  of the  parties  and their  successors  and  assigns.
Neither the Company nor any Buyer shall  assign this  Agreement or any rights or
obligations   hereunder   without  the  prior  written  consent  of  the  other.
Notwithstanding the foregoing, subject to Section 2(f), any Buyer may assign its
rights  hereunder to any person who is an  "Accredited  Investor" that purchases
Securities in a private  transaction from a Buyer or to any of its "affiliates,"
as that term is defined under the 1934 Act, without the consent of the Company.

              H. THIRD PARTY  BENEFICIARIES.  This Agreement is intended for the
benefit of the parties  hereto and their  respective  permitted  successors  and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

              I. SURVIVAL. The representations and warranties of the Company and
the  agreements  and covenants set forth in Sections 3, 4, 5 and 8 shall survive
the closing hereunder  notwithstanding any due diligence investigation conducted
by or on behalf of the Buyers. The Company agrees to indemnify and hold harmless
each of the Buyers and all their officers,  directors,  employees and agents for
loss or damage arising as a result of or related to any breach or alleged breach
by the Company of any of its representations, warranties and covenants set forth
in Sections 3 and 4 hereof or any of its  covenants and  obligations  under this
Agreement  or  the  Registration  Rights  Agreement,  including  advancement  of
reasonable expenses as they are incurred.

              J.  PUBLICITY.  The Company and each of the Buyers  shall have the
right to  review a  reasonable  period  of time  before  issuance  of any  press
releases,  SEC,  OTCBB or NASD  filings,  or any other  public  statements  with
respect to the transactions  contemplated hereby;  PROVIDED,  HOWEVER,  that the
Company shall be entitled,  without the prior approval of each of the Buyers, to
make any press release or SEC,  OTCBB (or other  applicable  trading  market) or
NASD filings with respect to such  transactions as is required by applicable law
and  regulations  (although each of the Buyers shall be consulted by the Company
in  connection  with any such press  release  prior to its  release and shall be
provided with a copy thereof and be given an opportunity to comment thereon).

              K. FURTHER  ASSURANCES.  Each party shall do and perform, or cause
to be done and  performed,  all such further acts and things,  and shall execute
and deliver all such other agreements, certificates,  instruments and documents,
as the other party may  reasonably  request in order to carry out the intent and
accomplish  the  purposes  of  this  Agreement  and  the   consummation  of  the
transactions contemplated hereby.

              L. NO STRICT  CONSTRUCTION.  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.

              M. REMEDIES.  The Company  acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyers by vitiating the
intent and purpose of the  transaction  contemplated  hereby.  Accordingly,  the
Company  acknowledges  that the  remedy at law for a breach  of its  obligations
under this Agreement will be inadequate and agrees,  in the event of a breach or
threatened  breach by the Company of the provisions of this Agreement,  that the
Buyers shall be entitled,  in addition to all other available remedies at law or
in equity, and in addition to the penalties  assessable herein, to an injunction
or  injunctions  restraining,  preventing or curing any breach of this Agreement
and to  enforce

                                       19
<PAGE>

specifically the terms and provisions  hereof,  without the necessity of showing
economic loss and without any bond or other security being required.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       20
<PAGE>

         IN WITNESS WHEREOF,  the undersigned Buyers and the Company have caused
this Agreement to be duly executed as of the date first above written.

MIDNIGHT HOLDINGS GROUP, INC.

_________________________________________________
Nicholas Cocco
Chief Executive Officer

AJW PARTNERS, LLC
By:  SMS Group, LLC

_________________________________________________
Corey S. Ribotsky
Manager

RESIDENCE:  Delaware

ADDRESS:    1044 Northern Boulevard
            Suite 302
            Roslyn, New York  11576
            Facsimile:  (516) 739-7115
            Telephone:  (516) 739-7110

AGGREGATE SUBSCRIPTION AMOUNT:

         Aggregate Principal Amount of Notes:                      $
         Number of Warrants:
         Aggregate Remaining Purchase Price (after
         accounting for any principal of Bridge Note):             $

                                       21
<PAGE>

AJW OFFSHORE, LTD.
By:  First Street Manager II, LLC

_________________________________________________
Corey S. Ribotsky
Manager

RESIDENCE: Cayman Islands

ADDRESS:   AJW Offshore, Ltd.
           P.O. Box 32021 SMB
           Grand Cayman, Cayman Island, B.W.I.

AGGREGATE SUBSCRIPTION AMOUNT:

         Aggregate Principal Amount of Notes:                       $
         Number of Warrants:
         Aggregate Remaining Purchase Price (after
         accounting for any principal of Bridge Note):              $

                                       22
<PAGE>

AJW QUALIFIED PARTNERS, LLC
By:  AJW Manager, LLC

_________________________________________________
Corey S. Ribotsky
Manager

RESIDENCE:     New York

ADDRESS:       1044 Northern Boulevard
               Suite 302
               Roslyn, New York  11576
               Facsimile:        (516) 739-7115
               Telephone:        (516) 739-7110

AGGREGATE SUBSCRIPTION AMOUNT:

         Aggregate Principal Amount of Notes:                    $
         Number of Warrants:
         Aggregate Remaining Purchase Price (after
         accounting for any principal of Bridge Note):           $

                                       23
<PAGE>

NEW MILLENNIUM CAPITAL PARTNERS II, LLC
By:  First Street Manager II, LLP

_________________________________________________
Corey S. Ribotsky
Manager

RESIDENCE:   New York

ADDRESS:     1044 Northern Boulevard
             Suite 302
             Roslyn, New York  11576
             Facsimile:        (516) 739-7115
             Telephone:        (516) 739-7110

AGGREGATE SUBSCRIPTION AMOUNT:

         Aggregate Principal Amount of Notes:                   $
         Number of Warrants:
         Aggregate Remaining Purchase Price (after
         accounting for any principal of Bridge Note):          $

                                       24
<PAGE>

                                                                       EXHIBIT A

                                  FORM OF NOTE
                                  ------------

                                 (See Attached)

                                       25
<PAGE>

                                                                       EXHIBIT B

                                 FORM OF WARRANT
                                 ---------------

                                 (See Attached)

                                       26
<PAGE>

                                                                       EXHIBIT C

                      FORM OF REGISTRATION RIGHTS AGREEMENT
                      -------------------------------------

                                 (See Attached)

                                       27Exhibit 10.47

                               SECURITY AGREEMENT

         SECURITY AGREEMENT (this "AGREEMENT"), dated as of December 11, 2006,
by and among Midnight Holdings Group, Inc., a Delaware corporation ("COMPANY"),
and the secured parties signatory hereto and their respective endorsees,
transferees and assigns (collectively, the "SECURED PARTY").

                              W I T N E S S E T H:

         WHEREAS, pursuant to a Securities Purchase Agreement, dated the date
hereof, between Company and the Secured Party (the "PURCHASE AGREEMENT"),
Company has agreed to issue to the Secured Party and the Secured Party has
agreed to purchase from Company certain of Company's 10% Secured Convertible
Notes, due three years from the date of issue (the "NOTES"), which are
convertible into shares of Company's Common Stock, par value $.00005 per share
(the "COMMON STOCK"). In connection therewith, Company shall issue the Secured
Party certain Common Stock purchase warrants dated as of the date hereof to
purchase the number of shares of Common Stock indicated below each Secured
Party's name on the Purchase Agreement (the "WARRANTS"); and

         WHEREAS, in order to induce the Secured Party to purchase the Notes,
Company has agreed to execute and deliver to the Secured Party this Agreement
for the benefit of the Secured Party and to grant to it a first priority
security interest in certain property of Company to secure the prompt payment,
performance and discharge in full of all of Company's obligations under the
Notes and exercise and discharge in full of Company's obligations under the
Warrants.

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

         1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings set forth in this Section 1. Terms used but not
otherwise defined in this Agreement that are defined in Article 9 of the UCC
(such as "GENERAL INTANGIBLES" and "PROCEEDS") shall have the respective
meanings given such terms in Article 9 of the UCC.

         (a) "COLLATERAL" means the collateral in which the Secured Party is
granted a security interest by this Agreement and which shall include the
following, whether presently owned or existing or hereafter acquired or coming
into existence, and all additions and accessions thereto and all substitutions
and replacements thereof, and all proceeds, products and accounts thereof,
including, without limitation, all proceeds from the sale or transfer of the
Collateral and of insurance covering the same and of any tort claims in
connection therewith:

                  (i) All Goods of the Company, including, without limitations,
         all machinery, equipment, computers, motor vehicles, trucks, tanks,
         boats, ships, appliances, furniture, special and general tools,
         fixtures, test and quality control

<PAGE>

         devices and other equipment of every kind and nature and
         wherever situated, together with all documents of title and documents
         representing the same, all additions and accessions thereto,
         replacements therefor, all parts therefor, and all substitutes for any
         of the foregoing and all other items used and useful in connection with
         the Company's businesses and all improvements thereto (collectively,
         the "EQUIPMENT"); and

                  (ii) All Inventory of the Company; and

                  (iii) All of the Company's contract rights and general
         intangibles, including, without limitation, all partnership interests,
         stock or other securities, licenses, distribution and other agreements,
         computer software development rights, leases, franchises, customer
         lists, quality control procedures, grants and rights, goodwill,
         trademarks, service marks, trade styles, trade names, patents, patent
         applications, copyrights, deposit accounts, and income tax refunds
         (collectively, the "GENERAL INTANGIBLES"); and

                  (iv) All Receivables of the Company including all insurance
         proceeds, and rights to refunds or indemnification whatsoever owing,
         together with all instruments, all documents of title representing any
         of the foregoing, all rights in any merchandising, goods, equipment,
         motor vehicles and trucks which any of the same may represent, and all
         right, title, security and guaranties with respect to each Receivable,
         including any right of stoppage in transit; and

                  (v) All of the Company's documents, instruments and chattel
         paper, files, records, books of account, business papers, computer
         programs and the products and proceeds of all of the foregoing
         Collateral set forth in clauses (i)-(iv) above.

                  (b) "COMPANY" shall mean, collectively, Company and all of the
subsidiaries of Company, a list of which is contained in SCHEDULE A, attached
hereto.

                  (c) "OBLIGATIONS" means all of the Company's obligations under
this Agreement and the Notes, in each case, whether now or hereafter existing,
voluntary or involuntary, direct or indirect, absolute or contingent, liquidated
or unliquidated, whether or not jointly owed with others, and whether or not
from time to time decreased or extinguished and later decreased, created or
incurred, and all or any portion of such obligations or liabilities that are
paid, to the extent all or any part of such payment is avoided or recovered
directly or indirectly from the Secured Party as a preference, fraudulent
transfer or otherwise as such obligations may be amended, supplemented,
converted, extended or modified from time to time.

                  (d) "UCC" means the Uniform Commercial Code, as currently in
effect in the State of New York.

         2. GRANT OF SECURITY INTEREST. As an inducement for the Secured Party
to purchase the Notes and to secure the complete and timely payment, performance
and discharge in full, as the case may be, of all of the Obligations, the
Company hereby, unconditionally and irrevocably, pledges, grants and
hypothecates to the Secured Party, a continuing security interest in, a

                                       2

<PAGE>

continuing first lien upon, an unqualified right to possession and disposition
of and a right of set-off against, in each case to the fullest extent permitted
by law, all of the Company's right, title and interest of whatsoever kind and
nature in and to the Collateral (the "SECURITY INTEREST").

         3. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE
COMPANY. The Company represents and warrants to, and covenants and agrees with,
the Secured Party as follows:

                  (a) The Company has the requisite corporate power and
authority to enter into this Agreement and otherwise to carry out its
obligations thereunder. The execution, delivery and performance by the Company
of this Agreement and the filings contemplated therein have been duly authorized
by all necessary action on the part of the Company and no further action is
required by the Company. This Agreement constitutes a legal, valid and binding
obligation of the Company enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditor's rights
generally.

                  (b) The Company represents and warrants that it has no place
of business or offices where its respective books of account and records are
kept (other than temporarily at the offices of its attorneys or accountants) or
places where Collateral is stored or located, except as has been disclosed to
the Secured Party;

                  (c) Except as set forth on SCHEDULE 3(c), the Company is the
sole owner or lessor (as the case may be) of the Collateral (except for
non-exclusive licenses granted by the Company in the ordinary course of
business), free and clear of any liens, security interests, encumbrances, rights
or claims, and is fully authorized to grant the Security Interest in and to
pledge the Collateral. There is not on file in any governmental or regulatory
authority, agency or recording office an effective financing statement, security
agreement, license or transfer or any notice of any of the foregoing (other than
those that have been filed in favor of the Secured Party pursuant to this
Agreement) covering or affecting any of the Collateral. So long as this
Agreement shall be in effect, the Company shall not execute and shall not
knowingly permit to be on file in any such office or agency any such financing
statement or other document or instrument (except to the extent filed or
recorded in favor of the Secured Party pursuant to the terms of this Agreement).

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

                  (e) The Company shall at all times maintain its books of
account and records relating to the Collateral at its principal place of
business and may not relocate such books of account and records or tangible
Collateral unless it delivers to the Secured Party at least 30 days

                                       3

<PAGE>

prior to such relocation (i) written notice of such relocation and the new
location thereof (which must be within the United States) and (ii) evidence that
appropriate financing statements and other necessary documents have been filed
and recorded and other steps have been taken to perfect the Security Interest to
create in favor of the Secured Party valid, perfected and continuing first
priority liens in the Collateral.

                  (f) This Agreement creates in favor of the Secured Party a
valid security interest in the Collateral securing the payment and performance
of the Obligations and, upon making the filings described in the immediately
following sentence, a perfected first priority security interest in such
Collateral. Except for the filing of financing statements on Form-1 under the
UCC in the proper jurisdiction, no authorization or approval of or filing with
or notice to any governmental authority or regulatory body is required either
(i) for the grant by the Company of, or the effectiveness of, the Security
Interest granted hereby or for the execution, delivery and performance of this
Agreement by the Company or (ii) for the perfection of or exercise by the
Secured Party of its rights and remedies hereunder.

                  (g) On the date of execution of this Agreement, the Company
will deliver to the Secured Party one or more executed UCC financing statements
on Form-1 with respect to the Security Interest for filing in the proper
jurisdiction, attached hereto and in such other jurisdictions as may be
requested by the Secured Party.

                  (h) The execution, delivery and performance of this Agreement
does not conflict with or cause a breach or default, or an event that with or
without the passage of time or notice, shall constitute a breach or default,
under any agreement to which the Company is a party or by which the Company is
bound. No consent (including, without limitation, from stock holders or
creditors of the Company) is required for the Company to enter into and perform
its obligations hereunder.

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

                  (j) The Company will not transfer, pledge, hypothecate,
encumber, license (except for non-exclusive licenses granted by the Company in
the ordinary course of business),

                                       4

<PAGE>

sell or otherwise dispose of any of the Collateral without the prior written
consent of the Secured Party.

                  (k) The Company shall keep and preserve its Equipment,
Inventory and other tangible Collateral in good condition, repair and order and
shall not operate or locate any such Collateral (or cause to be operated or
located) in any area excluded from insurance coverage.

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

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

                  (n) The Company shall permit the Secured Party and its
representatives and agents to inspect the Collateral at any time, and to make
copies of records pertaining to the Collateral as may be requested by the
Secured Party from time to time.

                  (o) The Company will take all steps reasonably necessary to
diligently pursue and seek to preserve, enforce and collect any rights, claims,
causes of action and accounts receivable in respect of the Collateral.

                  (p) The Company shall promptly notify the Secured Party in
sufficient detail upon becoming aware of any attachment, garnishment, execution
or other legal process levied against any Collateral and of any other
information received by the Company that may materially affect the value of the
Collateral, the Security Interest or the rights and remedies of the Secured
Party hereunder.

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

                  (r) SCHEDULE 3(a) to the Purchase Agreement contains a list of
all of the wholly-owned subsidiaries of Company.

         4. DEFAULTS. The following events shall be "EVENTS OF DEFAULT":

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

                                       5

<PAGE>

                  (b) Any representation or warranty of the Company in this
Agreement or in the Intellectual Property Security Agreement shall prove to have
been incorrect in any material respect when made;

                  (c) The failure by the Company to observe or perform any of
its obligations hereunder or in the Intellectual Property Security Agreement for
ten (10) days after receipt by the Company of notice of such failure from the
Secured Party; and

                  (d) Any breach of, or default under, the Warrants.

             5. DUTY TO HOLD IN TRUST. Upon the occurrence of any Event of
Default and at any time thereafter, the Company shall, upon receipt by it of any
revenue, income or other sums subject to the Security Interest, whether payable
pursuant to the Notes or otherwise, or of any check, draft, note, trade
acceptance or other instrument evidencing an obligation to pay any such sum,
hold the same in trust for the Secured Party and shall forthwith endorse and
transfer any such sums or instruments, or both, to the Secured Party for
application to the satisfaction of the Obligations.

             6. RIGHTS AND REMEDIES UPON DEFAULT. Upon occurrence of any
Event of Default and at any time thereafter, the Secured Party shall have the
right to exercise all of the remedies conferred hereunder and under the Notes,
and the Secured Party shall have all the rights and remedies of a secured party
under the UCC and/or any other applicable law (including the Uniform Commercial
Code of any jurisdiction in which any Collateral is then located). Without
limitation, the Secured Party shall have the following rights and powers:

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

                  (b) The Secured Party shall have the right to operate the
business of the Company using the Collateral and shall have the right to assign,
sell, lease or otherwise dispose of and deliver all or any part of the
Collateral, at public or private sale or otherwise, either with or without
special conditions or stipulations, for cash or on credit or for future
delivery, in such parcel or parcels and at such time or times and at such place
or places, and upon such terms and conditions as the Secured Party may deem
commercially reasonable, all without (except as shall be required by applicable
statute and cannot be waived) advertisement or demand upon or notice to the
Company or right of redemption of the Company, which are hereby expressly
waived. Upon each such sale, lease, assignment or other transfer of Collateral,
the Secured Party may, unless prohibited by applicable law which cannot be
waived, purchase all or any part of the Collateral being sold, free from and
discharged of all trusts, claims, right of redemption and equities of the
Company, which are hereby waived and released.

                                       6

<PAGE>

         7. APPLICATIONS OF PROCEEDS. The proceeds of any such sale, lease or
other disposition of the Collateral hereunder shall be applied first, to the
expenses of retaking, holding, storing, processing and preparing for sale,
selling, and the like (including, without limitation, any taxes, fees and other
costs incurred in connection therewith) of the Collateral, to the reasonable
attorneys' fees and expenses incurred by the Secured Party in enforcing its
rights hereunder and in connection with collecting, storing and disposing of the
Collateral, and then to satisfaction of the Obligations, and to the payment of
any other amounts required by applicable law, after which the Secured Party
shall pay to the Company any surplus proceeds. If, upon the sale, license or
other disposition of the Collateral, the proceeds thereof are insufficient to
pay all amounts to which the Secured Party is legally entitled, the Company will
be liable for the deficiency, together with interest thereon, at the rate of 15%
per annum (the "DEFAULT RATE"), and the reasonable fees of any attorneys
employed by the Secured Party to collect such deficiency. To the extent
permitted by applicable law, the Company waives all claims, damages and demands
against the Secured Party arising out of the repossession, removal, retention or
sale of the Collateral, unless due to the gross negligence or willful misconduct
of the Secured Party.

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

         9. RESPONSIBILITY FOR COLLATERAL. The Company assumes all liabilities
and responsibility in connection with all Collateral, and the obligations of the
Company hereunder or under the Notes and the Warrants shall in no way be
affected or diminished by reason of the loss, destruction, damage or theft of
any of the Collateral or its unavailability for any reason.

         10. SECURITY INTEREST ABSOLUTE. All rights of the Secured Party and all
Obligations of the Company hereunder, shall be absolute and unconditional,
irrespective of: (a) any lack of validity or enforceability of this Agreement,
the Notes, the Warrants or any agreement entered into in connection with the
foregoing, or any portion hereof or thereof; (b) any change in the time, manner
or place of payment or performance of, or in any other term of, all or any of
the Obligations, or any other amendment or waiver of or any consent to any
departure from the Notes, the Warrants or any other agreement entered into in
connection with the foregoing; (c) any exchange, release or nonperfection of any
of the Collateral, or any release or amendment or waiver of or consent to
departure from any other collateral for, or any guaranty, or any other security,
for all or any of the Obligations; (d) any action by the Secured Party to
obtain, adjust, settle and cancel in its sole discretion any insurance claims or
matters made or arising in connection with the Collateral; or (e) any other
circumstance which might otherwise constitute

                                       7

<PAGE>

any legal or equitable defense available to the Company, or a discharge of all
or any part of the Security Interest granted hereby. Until the Obligations shall
have been paid and performed in full, the rights of the Secured Party shall
continue even if the Obligations are barred for any reason, including, without
limitation, the running of the statute of limitations or bankruptcy. The Company
expressly waives presentment, protest, notice of protest, demand, notice of
nonpayment and demand for performance. In the event that at any time any
transfer of any Collateral or any payment received by the Secured Party
hereunder shall be deemed by final order of a court of competent jurisdiction to
have been a voidable preference or fraudulent conveyance under the bankruptcy or
insolvency laws of the United States, or shall be deemed to be otherwise due to
any party other than the Secured Party, then, in any such event, the Company's
obligations hereunder shall survive cancellation of this Agreement, and shall
not be discharged or satisfied by any prior payment thereof and/or cancellation
of this Agreement, but shall remain a valid and binding obligation enforceable
in accordance with the terms and provisions hereof. The Company waives all right
to require the Secured Party to proceed against any other person or to apply any
Collateral which the Secured Party may hold at any time, or to marshal assets,
or to pursue any other remedy. The Company waives any defense arising by reason
of the application of the statute of limitations to any obligation secured
hereby.

         11. TERM OF AGREEMENT. This Agreement and the Security
Interest shall terminate on the date on which all amounts outstanding under the
Notes are no longer outstanding and all other Obligations have been paid or
discharged. Upon such termination, the Secured Party, at the request and at the
expense of the Company, will join in executing any termination statement with
respect to any financing statement executed and filed pursuant to this
Agreement.

         12. POWER OF ATTORNEY; FURTHER ASSURANCES.

                  (a) The Company authorizes the Secured Party, and does hereby
make, constitute and appoint it, and its respective officers, agents, successors
or assigns with full power of substitution, as the Company's true and lawful
attorney-in-fact, with power, in its own name or in the name of the Company, to,
after the occurrence and during the continuance of an Event of Default, (i)
endorse any notes, checks, drafts, money orders, or other instruments of payment
(including payments payable under or in respect of any policy of insurance) in
respect of the Collateral that may come into possession of the Secured Party;
(ii) to sign and endorse any UCC financing statement or any invoice, freight or
express bill, bill of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications and notices in connection with accounts, and
other documents relating to the Collateral; (iii) to pay or discharge taxes,
liens, security interests or other encumbrances at any time levied or placed on
or threatened against the Collateral; (iv) to demand, collect, receipt for,
compromise, settle and sue for monies due in respect of the Collateral; and (v)
generally, to do, at the option of the Secured Party, and at the Company's
expense, at any time, or from time to time, all acts and things which the
Secured Party deems necessary to protect, preserve and realize upon the
Collateral and the Security Interest granted therein in order to effect the
intent of this Agreement, the Notes and the Warrants, all as fully and
effectually as the Company might or could do; and the Company hereby ratifies
all that said attorney shall lawfully do or cause to be done by virtue hereof.
This power of attorney is coupled with an interest and shall be irrevocable for
the term of this Agreement and thereafter as long as any of the Obligations
shall be outstanding.

                                       8
<PAGE>

                  (b) On a continuing basis, the Company will make, execute,
acknowledge, deliver, file and record, as the case may be, in the proper filing
and recording places in any jurisdiction, all such instruments, and take all
such action as may reasonably be deemed necessary or advisable, or as reasonably
requested by the Secured Party, to perfect the Security Interest granted
hereunder and otherwise to carry out the intent and purposes of this Agreement,
or for assuring and confirming to the Secured Party the grant or perfection of a
security interest in all the Collateral.

                  (c) The Company hereby irrevocably appoints the Secured Party
as the Company's attorney-in-fact, with full authority in the place and stead of
the Company and in the name of the Company, from time to time in the Secured
Party's discretion, to take any action and to execute any instrument which the
Secured Party may deem necessary or advisable to accomplish the purposes of this
Agreement, including the filing, in its sole discretion, of one or more
financing or continuation statements and amendments thereto, relative to any of
the Collateral without the signature of the Company where permitted by law.

         13. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing, with copies to all the other parties hereto, and
shall be deemed to have been duly given when (i) if delivered by hand, upon
receipt, (ii) if sent by facsimile, upon receipt of proof of sending thereof,
(iii) if sent by nationally recognized overnight delivery service (receipt
requested), the next business day or (iv) if mailed by first-class registered or
certified mail, return receipt requested, postage prepaid, four days after
posting in the U.S. mails, in each case if delivered to the following addresses:

       If to the Company:            Midnight Holdings Group, Inc.
                                     22600 Hall Road, Suite 205
                                     Clinton Township, MI 48036
                                     Attention: Chief Executive Officer
                                     Telephone: 586-468-8741
                                     Facsimile:   586-468-8768

         With a copy to:             Reitler Brown & Rosenblatt LLC
                                     800 Third Avenue, 21st Floor
                                     New York, NY  10022
                                     Attention:  Robert Brown, Esq.
                                     Telephone:  212-209-3060
                                     Facsimile:   212-371-5500

                                       9

<PAGE>

         If to the Secured Party:    AJW Partners, LLC
                                     AJW Offshore, Ltd.
                                     AJW Qualified Partners, LLC
                                     New Millennium Capital Partners II, LLC
                                     1044 Northern Boulevard
                                     Suite 302
                                     Roslyn, New York  11576
                                     Attention:  Corey Ribotsky
                                     Facsimile:  516-739-7115

         With a copy to:

                                     Ballard Spahr Andrews & Ingersoll, LLP
                                     1735 Market Street, 51st Floor
                                     Philadelphia, Pennsylvania  19103
                                     Attention:  Gerald J. Guarcini, Esq.
                                     Facsimile:  215-864-8999

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

         15. MISCELLANEOUS.

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

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

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

                  (d) In the event that any provision of this Agreement is held
to be invalid, prohibited or unenforceable in any jurisdiction for any reason,
unless such provision is narrowed by judicial construction, this Agreement
shall, as to such jurisdiction, be construed as if such invalid, prohibited or
unenforceable provision had been more narrowly drawn so as not to be invalid,
prohibited or unenforceable. If, notwithstanding the foregoing, any provision of
this

                                       10

<PAGE>

Agreement is held to be invalid, prohibited or unenforceable in any
jurisdiction, such provision, as to such jurisdiction, shall be ineffective to
the extent of such invalidity, prohibition or unenforceability without
invalidating the remaining portion of such provision or the other provisions of
this Agreement and without affecting the validity or enforceability of such
provision or the other provisions of this Agreement in any other jurisdiction.

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

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

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

                  (h) This Agreement shall be construed in accordance with the
laws of the State of New York, except to the extent the validity, perfection or
enforcement of a security interest hereunder in respect of any particular
Collateral which are governed by a jurisdiction other than the State of New York
in which case such law shall govern. Each of the parties hereto irrevocably
submit to the exclusive jurisdiction of any New York State or United States
Federal court sitting in Manhattan county over any action or proceeding arising
out of or relating to this Agreement, and the parties hereto hereby irrevocably
agree that all claims in respect of such action or proceeding may be heard and
determined in such New York State or Federal court. The parties hereto agree
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. The parties hereto further waive any objection to venue
in the State of New York and any objection to an action or proceeding in the
State of New York on the basis of forum non conveniens.

                  (i) EACH PARTY HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRAIL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING
OF ANY DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATER OF THIS AGREEMENT, INCLUDING WITHOUT LIMITATION CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.
EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT FOR
EACH PARTY TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH PARTY HAS ALREADY
RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH PARTY WILL
CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY
FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL, AND THAT SUCH PARTY HAS KNOWINGLY AND VOLUNTARILY WAIVES ITS RIGHTS TO
A JURY TRIAL

                                       11

<PAGE>

FOLLOWING SUCH CONSULTATION. THIS WAIVER IS IRREVOCABLE, MEANING THAT,
NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS AND SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. IN THE EVENT OF A
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.

                  (j) 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.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       12

<PAGE>

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

                            MIDNIGHT HOLDINGS GROUP, INC.

                            By: _____________________________________
                                Nicholas Cocco
                                Chief Executive Officer

                            AJW PARTNERS, LLC
                            By: SMS Group, LLC

                            By: _____________________________________
                                Corey S. Ribotsky
                                Manager

                            AJW OFFSHORE, LTD.
                            By:  First Street Manager II, LLC

                            By: _____________________________________
                                Corey S. Ribotsky
                                Manager

                            AJW QUALIFIED PARTNERS, LLC
                            By:  AJW Manager, LLC

                            By: _____________________________________
                                Corey S. Ribotsky
                                Manager

                            NEW MILLENNIUM CAPITAL PARTNERS II, LLP
                            By:  First Street Manager II, LLC

                            By:  _____________________________________
                                 Corey S. Ribotsky
                                 Manager

                                       13

<PAGE>

                            WHOLLY-OWNED SUBSIDIARIES OF
                            MIDNIGHT HOLDINGS GROUP, INC.:

                            MIDNIGHT AUTO HOLDINGS, INC.,
                            a Michigan corporation

                            By: Midnight Holdings Group, Inc., its parent

                            By:___________________________________
                               Nicholas Cocco
                               Chief Executive Officer

                            MIDNIGHT AUTO FRANCHISE CORP.,
                            a Michigan corporation

                            By: Midnight Holdings Group, Inc., its parent

                            By:___________________________________
                               Nicholas Cocco
                               Chief Executive Officer

                            ALL NIGHT AUTO(R) STORES, INC.,
                            a Michigan corporation

                            By: Midnight Holdings Group, Inc., its parent

                            By:___________________________________
                               Nicholas Cocco
                               Chief Executive Officer

                                       14

<PAGE>

                            ALL NIGHT AUTO INC.,
                            a Michigan corporation -does business as All Night
                            Auto of Troy

                            By: Midnight Holdings Group, Inc., its parent

                            By:___________________________________
                               Nicholas Cocco
                               Chief Executive Officer

                            ALL NIGHT AUTO-GROSSE POINTE, INC.,
                            a Michigan corporation - did
                            business as All Night Auto of Grosse
                            Pointe (Facility is now shut down.)

                            By: Midnight Holdings Group, Inc., its parent

                            By:___________________________________
                               Nicholas Cocco
                               Chief Executive Officer

                            ALL NIGHT AUTO OF NORMAL NORTH,
                            a Michigan corporation

                            By: Midnight Holdings Group, Inc., its parent

                            By:___________________________________
                               Nicholas Cocco
                               Chief Executive Officer

                                       15

<PAGE>

                            ALL NIGHT AUTO OF AURORA,
                            a Michigan corporation

                            By: Midnight Holdings Group, Inc., its parent

                            By:___________________________________
                               Nicholas Cocco
                               Chief Executive Officer

                            ALL NIGHT AUTO OF JOLIET,
                            a Michigan corporation

                            By: Midnight Holdings Group, Inc., its parent

                            By:___________________________________
                               Nicholas Cocco
                               Chief Executive Officer

                            ALL NIGHT AUTO OF FORT WAYNE,
                            a Michigan corporation

                            By: Midnight Holdings Group, Inc., its parent

                            By:___________________________________
                               Nicholas Cocco
                               Chief Executive Officer

                                       16

<PAGE>

                                   SCHEDULE A

PRINCIPAL PLACE OF BUSINESS OF THE COMPANY:

         22600 Hall Road, Suite 205 Clinton Township, MI  48036

LOCATIONS WHERE COLLATERAL IS LOCATED OR STORED:

         3872 Rochester Road, Troy, MI 48083
         989 S. Eola Road, Aurora, IL  60504
         13 Westport Court, Bloomington, IL 61704
         9500 West 179th Street, Tinley Park, IL  60477
         9502 West 179th Street, Tinley Park, IL  60477
         1835 East Guadalupe, Suite 116, Tempe, AZ  85283

LIST OF SUBSIDIARIES OF THE COMPANY:

         Midnight Auto Holdings, Inc.
         Midnight Auto Franchise Corp.
         All Night Auto, Inc.
         All Night Auto Grosse Pointe, Inc.
         All Night Auto Stores, Inc.
         All Night Auto of Normal North, Inc.
         All Night Auto of Aurora, Inc.
         All Night Auto of Joliet, Inc.
         All Night Auto of Fort Wayne, Inc.

                                       17

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