Document:

INSIDER PLEDGE AND ESCROW AGREEMENT

      THIS INSIDER  PLEDGE AND ESCROW  AGREEMENT (the  "Agreement")  is made and
entered  into as of March 8, 2006  (the  "Effective  Date")  by and among  BARRY
BROOKSTEIN (the "Pledgor"),  MONTGOMERY  EQUITY PARTNERS,  LTD. (the "Pledgee"),
COMPLIANCE  SYSTEMS  CORPORATION,  a Delaware  corporation (the "Company"),  and
DAVID GONZALEZ, ESQ., as escrow agent ("Escrow Agent").

                                    RECITALS:

      WHEREAS,  the Company shall issue and sell to the Pledgee,  as provided in
the Securities  Purchase Agreement of even date herewith between the Company and
the  Pledgee  (the  "Securities  Purchase  Agreement"),  and the  Pledgee  shall
purchase  up  to  One  Million  Dollars   ($1,000,000)  of  secured  convertible
debentures  (the  "Convertible  Debentures"),  which shall be  convertible  into
shares of the Company's  common  stock,  par value $0.001 per share (the "Common
Stock") (as converted, the "Conversion Shares"); and

      WHEREAS, to induce the Pledgee to enter into the transaction  contemplated
by the Securities Purchase Agreement,  the Convertible Debentures,  the Investor
Registration  Rights Agreement of even date herewith between the Company and the
Pledgee (the "Investor  Registration  Rights  Agreement"),  and the  Irrevocable
Transfer Agent Instructions among the Company,  the Pledgee, the Transfer Agent,
and the Escrow  Agent (the  "Transfer  Agent  Instructions")  (the  "Transaction
Documents"),  the  Pledgor  has  agreed to  irrevocably  pledge  to the  Pledgee
10,932,319 shares (the "Pledged Shares") of Common Stock  beneficially  owned by
the Pledgor in accordance with this Agreement.

      NOW,  THEREFORE,  for  and  in  consideration  of  the  mutual  covenants,
agreements, warranties, and representations 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:

                              TERMS AND CONDITIONS

1.  OBLIGATIONS  SECURED.  The  obligations  secured  hereby  are  any  and  all
obligations of the Company now existing or hereinafter  incurred to the Pledgee,
whether oral or written and whether arising before,  on or after the date hereof
including,  without limitation,  those obligations of the Company to the Pledgee
under the  Transaction  Documents and any other amounts now or hereafter owed to
the Pledgee by the Company thereunder (collectively, the "Obligations").

2.  PLEDGE AND TRANSFER OF PLEDGED SHARES.  The Pledgor hereby grants to Pledgee
an  irrevocable,  first  priority  security  interest in all  Pledged  Shares as
security for the Company's Obligations. Simultaneously with the execution of the
Transaction  Documents,  the  Pledgor  shall  deliver to the Escrow  Agent stock
certificates  made out in favor of the Pledgor  representing the Pledged Shares,
together with duly executed stock powers or other appropriate transfer documents
with  medallion  bank  guarantees  and  executed  in blank by the  Pledgor  (the
"Transfer Documents"),  and such stock certificates and Transfer Documents shall
be held by the Escrow Agent until the full payment of all Obligations due to the
Pledgee,  including  the  repayment  of all  amounts  owed by the Company to the
Pledgee  under  the  Convertible   Debentures  (whether  outstanding  principal,
interest, legal fees, or any other amounts owed to the Pledgee by the Company).

<PAGE>

3.  RIGHTS  RELATING  TO PLEDGED SHARES.  Upon  the occurrence of  an  Event  of
Default (as defined  herein),  the Pledgee shall be entitled to vote the Pledged
Shares,  receive dividends and other distributions  thereon, and enjoy all other
rights and privileges  incident to the ownership of the number of Pledged Shares
actually released from escrow in accordance with Section 6.1 hereof.

4.  RELEASE  OF  PLEDGED  SHARES  FROM  PLEDGE.  Upon  the full  payment  of all
Obligations  due to the Pledgee under the Transaction  Documents,  including the
repayment  of  all  amounts  owed  by  the  Company  to the  Pledgee  under  the
Convertible Debentures (whether outstanding principal, interest, legal fees, and
any other amounts owed to the Pledgee by the Company),  the parties hereto shall
notify the Escrow Agent to such effect in writing. Promptly upon receipt of such
written  notice,  the Escrow  Agent shall  return to the  Pledgor  the  Transfer
Documents and the certificates  representing  the Pledged Shares  (collectively,
the "Pledged Materials"), whereupon any and all rights of Pledgee in the Pledged
Materials shall be terminated.

5.  EVENT OF DEFAULT.  An "Event of  Default"  shall be deemed to have  occurred
under this Agreement upon an Event of Default under the Convertible Debentures.

6.  REMEDIES.

            a. Upon and anytime after the occurrence of an Event of Default, the
Pledgee shall have the right acquire the Pledged  Shares in accordance  with the
following procedure:  (a) the Pledgee shall provide written notice of such Event
of  Default  (the  "Default  Notice")  to the Escrow  Agent,  with a copy to the
Pledgor; (b) in a Default Notice the Pledgee shall specify the number of Pledged
Shares to be issued to the Plegdee, provided however, that the Pledgee shall not
have the right to acquire  such number of Pledged  Shares  which would cause the
Pledgee, together with its affiliates, to beneficially own in excess of 9.99% of
the  outstanding  capital  of  the  Pledgor  (unless  the  Pledgee  waives  such
limitation by providing 65 days'  advance  written  notice);  and (c) as soon as
practicable  after receipt of a Default  Notice,  the Escrow Agent shall deliver
the  specified  number of  Pledged  Shares  along with the  applicable  Transfer
Documents  to the  Pledgor's  Transfer  Agent  with  instructions  to issue such
Pledged Shares to the Pledgee in accordance with the Irrevocable  Transfer Agent
Instructions of even date herewith,  among the Pledgee,  the Pledgor, the Escrow
Agent, and the Transfer Agent.

            b. Upon receipt of the Pledged  Shares  issued to the  Pledgee,  the
Pledgee  shall  have the right to (i) sell the  Pledged  Shares and to apply the
proceeds of such sales, net of any selling commissions,  to the Obligations owed
to the  Pledgee  by the  Pledgor  under the  Transaction  Documents,  including,
without limitation,  outstanding principal,  interest, legal fees, and any other
amounts owed to the Pledgee,  and exercise all other rights and (ii) any and all
remedies of a secured  party with  respect to such  property as may be available
under the Uniform  Commercial Code as in effect in the State of New Jersey.  The
Pledgee shall have the absolute  right to sell or dispose of the Pledged  Shares
in any  manner it sees fit and shall  have no  liability  to the  Pledgor or any
other  party for  selling or  disposing  of such  Pledged  Shares  even if other
methods of sales or  dispositions  would or  allegedly  would  result in greater
proceeds than the method actually used.

                                       2
<PAGE>

            c. Each right,  power and remedy of the Pledgee provided for in this
Agreement or any other  Transaction  Document shall be cumulative and concurrent
and shall be in  addition  to every  other  such  right,  power or  remedy.  The
exercise or  beginning  of the exercise by the Pledgee of any one or more of the
rights,  powers  or  remedies  provided  for in  this  Agreement  or  any  other
Transaction  Document  or now or  hereafter  existing  at law or in equity or by
statute or otherwise  shall not preclude the  simultaneous  or later exercise by
the  Pledgee of all such other  rights,  powers or  remedies,  and no failure or
delay on the part of the  Pledgee to exercise  any such  right,  power or remedy
shall operate as a waiver thereof.  No notice to or demand on the Pledgor in any
case shall  entitle  it to any other or  further  notice or demand in similar or
other  circumstances  or constitute a waiver of any of the rights of the Pledgee
to any other further action in any circumstances  without demand or notice.  The
Pledgee  shall have the full power to enforce or to assign or contract is rights
under this Agreement to a third party.

7.  REPRESENTATIONS, WARRANTIES AND COVENANTS.

            a. The Pledgor represents, warrants and covenants that:

                  (i) Pledgor is, and at the time when  pledged  hereunder  will
be, the legal,  beneficial and record owner of, and has (and will have) good and
valid  title to, all Pledged  Shares  pledged  hereunder,  subject to no pledge,
lien,  mortgage,  hypothecation,  security  interest,  charge,  option  or other
encumbrance whatsoever;

                  (ii)  Pledgor  has full  power,  authority  and legal right to
pledge all the Pledged Shares pledged pursuant to this Agreement; and

                  (iii)  all the  Pledged  Shares  have  been  duly and  validly
issued,  are fully  paid and  non-assessable  and are  subject  to no options to
purchase or similar rights.

            b. The Pledgor  covenants and agrees to take all reasonable steps to
defend the Pledgee's  right,  title and security  interest in and to the Pledged
Shares and the  proceeds  thereof  against the claims and demands of all persons
whomsoever  (other  than the  Pledgee  and the Escrow  Agent);  and the  Pledgor
covenants  and  agrees  that it will have like  title to and right to pledge any
other  property  at any time  hereafter  pledged to the  Pledgee  as  Collateral
hereunder  and will  likewise  take all  reasonable  steps to  defend  the right
thereto and security interest therein of the Pledgee.

            c. The Pledgor  covenants  and agrees to take no action  which would
violate or be inconsistent with any of the terms of any Transaction Document, or
which  would have the effect of  impairing  the  position  or  interests  of the
Pledgee under any Transaction Document.

            d. The  Pledgor  represents,  warrants  and  covenants  that (i) the
Pledgor has been the beneficial  owner of the Pledged Shares for a period of not
less than two (2) years as computed in accordance  with Rule 144(d)  promulgated
under the  Securities  Act of 1933, as amended,  and (ii) this Agreement is made
with  recourse.  Upon an Event of Default,  the Pledgee  shall be deemed to have
acquired the Pledged  Shares on the date they were acquired by the Pledgor.  The
Pledgor is an "affiliate" of the Company, as such term is defined in Rule 144(a)
promulgated under the Securities Act of 1933, as amended.

                                       3
<PAGE>

8.  CONCERNING THE ESCROW AGENT.

            a. The Escrow  Agent  undertakes  to perform only such duties as are
expressly set forth herein and no implied  duties or  obligations  shall be read
into this Agreement against the Escrow Agent.

            b.  The  Escrow  Agent  may act in  reliance  upon  any  writing  or
instrument  or signature  which it, in good faith,  believes to be genuine,  may
assume the validity and accuracy of any statement or assertion contained in such
a writing or instrument,  and may assume that any person  purporting to give any
writing, notice, advice or instructions in connection with the provisions hereof
has been duly  authorized  to do so. The Escrow Agent shall not be liable in any
manner for the sufficiency or correctness as to form, manner, and execution,  or
validity of any  instrument  deposited in this escrow,  nor as to the  identity,
authority,  or right of any person  executing the same; and its duties hereunder
shall be limited to the safekeeping of such certificates,  monies,  instruments,
or other document received by it as such escrow holder,  and for the disposition
of the same in  accordance  with the written  instruments  accepted by it in the
escrow.

            c. Pledgee and the Pledgor hereby agree, to defend and indemnify the
Escrow Agent and hold it harmless from any and all claims, liabilities,  losses,
actions, suits, or proceedings at law or in equity, or any other expenses, fees,
or charges of any character or nature which it may incur or with which it may be
threatened by reason of its acting as Escrow Agent under this Agreement;  and in
connection  therewith,  to  indemnify  the  Escrow  Agent  against  any  and all
expenses,  including attorneys' fees and costs of defending any action, suit, or
proceeding  or resisting  any claim (and any costs  incurred by the Escrow Agent
pursuant to Sections 6.4 or 6.5 hereof). The Escrow Agent shall be vested with a
lien on all property deposited hereunder, for indemnification of attorneys' fees
and court  costs  regarding  any suit,  proceeding  or  otherwise,  or any other
expenses,  fees, or charges of any character or nature, which may be incurred by
the Escrow Agent by reason of disputes arising between the makers of this escrow
as to the correct interpretation of this Agreement and instructions given to the
Escrow  Agent  hereunder,  or  otherwise,  with the right of the  Escrow  Agent,
regardless of the instructions aforesaid, to hold said property until and unless
said  additional  expenses,  fees, and charges shall be fully paid. Any fees and
costs  charged by the Escrow  Agent for serving  hereunder  shall be paid by the
Pledgor.

            d.  If  any  of the  parties  shall  be in  disagreement  about  the
interpretation  of this Agreement,  or about the rights and obligations,  or the
propriety of any action  contemplated by the Escrow Agent hereunder,  the Escrow
Agent may, at its sole discretion  deposit the Pledged  Materials with the Clerk
of the United  States  District  Court of New  Jersey,  sitting  in Newark,  New
Jersey,  and, upon notifying all parties concerned of such action, all liability
on the part of the Escrow  Agent  shall fully  cease and  terminate.  The Escrow
Agent  shall be  indemnified  by the  Pledgor,  the  Company and Pledgee for all
costs,  including  reasonable  attorneys'  fees in connection with the aforesaid
proceeding,  and shall be fully  protected  in  suspending  all or a part of its
activities  under this Agreement  until a final decision or other  settlement in
the proceeding is received.

                                       4
<PAGE>

            e. The Escrow  Agent may consult with counsel of its own choice (and
the costs of such  counsel  shall be paid by the Pledgor and  Pledgee) and shall
have full and  complete  authorization  and  protection  for any action taken or
suffered by it  hereunder  in good faith and in  accordance  with the opinion of
such  counsel.  The Escrow Agent shall not be liable for any mistakes of fact or
error of judgment, or for any actions or omissions of any kind, unless caused by
its willful misconduct or gross negligence.

            f. The Escrow Agent may resign upon ten (10) days' written notice to
the parties in this  Agreement.  If a successor  Escrow  Agent is not  appointed
within  this ten (10) day  period,  the  Escrow  Agent may  petition  a court of
competent jurisdiction to name a successor.

9.  CONFLICT WAIVER.  The Pledgor hereby  acknowledges  that the Escrow Agent is
general counsel to the Pledgee, a partner in the general partner of the Pledgee,
and counsel to the Pledgee in connection with the transactions  contemplated and
referred herein.  The Pledgor agrees that in the event of any dispute arising in
connection  with this Agreement or otherwise in connection  with any transaction
or  agreement  contemplated  and  referred  herein,  the Escrow  Agent  shall be
permitted to continue to represent  the Pledgee and the Pledgor will not seek to
disqualify such counsel and waives any objection Pledgor might have with respect
to the Escrow Agent acting as the Escrow Agent pursuant to this Agreement.

10.  NOTICES. Unless otherwise provided herein, all demands,  notices, consents,
service of process,  requests  and other  communications  hereunder  shall be in
writing and shall be  delivered in person or by overnight  courier  service,  or
mailed by certified mail, return receipt requested, addressed:

If to the Company, to:          Compliance Systems Corporation
                                90 Pratt Oval
                                Glen Cove, NY 11542
                                Attention:  Dean Garfinkel
                                Telephone:  (516) 656-5155
                                Facsimile:  (516) 676-2420

With a copy to:                 Kirkpatrick & Lockhart Nicholson Graham, LLP
                                201 South Biscayne Boulevard, Suite 2000
                                Miami, Florida 33131
                                Attention:  Clayton E. Parker, Esq.
                                Telephone:  (305) 539-3306
                                Facsimile:  (305) 328-7095

If to the Pledgee:              Montgomery Equity Partners, Ltd.
                                101 Hudson Street, Suite 3700
                                Jersey City, NJ 07302
                                Attention:  Mark A. Angelo
                                Telephone:  (201) 985-8300
                                Facsimile:  (201) 985-8744

                                       5
<PAGE>

With copy to:                   Montgomery Equity Partners, Ltd.
                                101 Hudson Street, Suite 3700
                                Jersey City, NJ 07302
                                Attention:  David Gonzalez, Esq.
                                Telephone:  (201) 985-8300
                                Facsimile:  (201) 985-1964

If to the Pledgor, to:          Barry Brookstein
                                c/o Compliance Systems Corporation
                                90 Pratt Oval
                                Glen Cove, NY 11542
                                Telephone:  (516) 656-5155
                                Facsimile:  (516) 676-2420

Any such notice  shall be  effective  (a) when  delivered,  if delivered by hand
delivery or overnight courier service, or (b) five (5) days after deposit in the
United States mail, as applicable.

11.  BINDING EFFECT. All of the covenants and obligations contained herein shall
be binding upon and shall inure to the benefit of the respective parties,  their
successors and assigns.

12.  GOVERNING LAW; VENUE; SERVICE OF PROCESS.  The validity, interpretation and
performance of this Agreement shall be determined in accordance with the laws of
the State of New Jersey  applicable to contracts made and to be performed wholly
within that state  except to the extent that  Federal law  applies.  The parties
hereto agree that any  disputes,  claims,  disagreements,  lawsuits,  actions or
controversies  of any type or nature  whatsoever  that,  directly or indirectly,
arise from or relate to this Agreement,  including,  without limitation,  claims
relating to the  inducement,  construction,  performance  or termination of this
Agreement,  shall be  brought  in the state  superior  courts  located in Hudson
County, New Jersey or Federal district courts located in Newark, New Jersey, and
the parties  hereto  agree not to challenge  the  selection of that venue in any
such proceeding for any reason,  including,  without limitation,  on the grounds
that such venue is an inconvenient  forum. The parties hereto specifically agree
that  service  of process  may be made,  and such  service  of process  shall be
effective if made, pursuant to Section 8 hereto.

13.  ENFORCEMENT  COSTS. If any legal action or other  proceeding is brought for
the enforcement of this  Agreement,  or because of an alleged  dispute,  breach,
default  or   misrepresentation  in  connection  with  any  provisions  of  this
Agreement,  the  successful or prevailing  party or parties shall be entitled to
recover  reasonable  attorneys'  fees,  court costs and all expenses even if not
taxable as court costs (including,  without limitation, all such fees, costs and
expenses  incident  to  appeals),  incurred  in that  action or  proceeding,  in
addition to any other relief to which such party or parties may be entitled.

14.  REMEDIES CUMULATIVE.  No remedy herein conferred upon any party is intended
to be  exclusive  of any other  remedy,  and each and every such remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law, in equity, by statute, or otherwise.  No single or
partial  exercise  by any party of any right,  power or remedy  hereunder  shall
preclude any other or further exercise thereof.

                                       6
<PAGE>

15.  COUNTERPARTS.  This Agreement may be executed in one or more  counterparts,
each of which  shall be  deemed an  original,  but all of which  together  shall
constitute the same instrument.

16.  NO PENALTIES.  No provision of this  Agreement  is to be  interpreted  as a
penalty upon any party to this Agreement.

17.  JURY  TRIAL.  EACH  OF  THE  PLEDGEE  AND  THE  PLEDGOR  HEREBY  KNOWINGLY,
VOLUNTARILY AND  INTENTIONALLY  WAIVES THE RIGHT WHICH IT MAY HAVE TO A TRIAL BY
JURY OF ANY CLAIM,  DEMAND,  ACTION OR CAUSE OF ACTION BASED HEREON,  OR ARISING
OUT OF,  UNDER OR IN ANY WAY  CONNECTED  WITH THE DEALINGS  BETWEEN  PLEDGEE AND
PLEDGOR, THIS PLEDGE AND ESCROW AGREEMENT OR ANY DOCUMENT EXECUTED IN CONNECTION
HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,  STATEMENTS (WHETHER ORAL
OR WRITTEN) OR ACTIONS OF ANY PARTY  HERETO OR THERETO IN EACH CASE  WHETHER NOW
EXISTING  OR  HEREAFTER  ARISING,  AND  WHETHER  IN  CONTRACT,  TORT,  EQUITY OR
OTHERWISE.

         [SIGNATURE PAGE FOLLOWS; REMAINDER OF PAGE INTENTIONALLY BLANK]

                                       7
<PAGE>

      IN WITNESS  WHEREOF,  the parties  hereto have duly  executed this Insider
Pledge and Escrow Agreement as of the date first above written.

                              PLEDGEE:
                              MONTGOMERY EQUITY PARTNERS, LTD.

                              By:  Yorkville Advisors, LLC
                              Its: General Partner

                              By:
                                 ---------------------------
                              Name:  Mark Angelo
                              Title: Portfolio Manager

                              PLEDGOR:

                              By:
                                 ---------------------------
                              Name:  Barry Brookstein

                              COMPLIANCE SYSTEMS CORPORATION

                              By:
                                 ---------------------------
                              Name:  Dean Garfinkel
                              Title: Chairman

                              ESCROW AGENT

                              By:
                                 ---------------------------
                              Name: David Gonzalez, Esq.

                                       8
<PAGE>SECURITY AGREEMENT

      THIS  SECURITY  AGREEMENT  (the  "Agreement"),  is  entered  into and made
effective as of March 8, 2006, by and between COMPLIANCE SYSTEMS CORPORATION,  a
Nevada corporation (formerly GSA Publications, Inc.) with its principal place of
business  located at 90 Pratt Oval,  Glen Cove,  NY 11542 (the  "Company"),  and
Montgomery Equity Partners, Ltd. (the "Secured Party").

                                    RECITALS:

      WHEREAS,  the  Company  shall  issue  and sell to the  Secured  Party,  as
provided in the Securities  Purchase Agreement of even date herewith between the
Company and the Secured Party (the  "Securities  Purchase  Agreement"),  and the
Secured Party shall purchase up to One Million  Dollars  ($1,000,000) of secured
convertible   debentures  (the   "Convertible   Debentures"),   which  shall  be
convertible  into shares of the Company's  common  stock,  par value $0.001 (the
"Common  Stock") (as  converted,  the  "Conversion  Shares")  in the  respective
amounts  set forth  opposite  each  Buyer(s)  name on Schedule I attached to the
Securities Purchase Agreement.

      WHEREAS,  to  induce  the  Secured  Party  to enter  into the  transaction
contemplated by the Securities Purchase Agreement,  the Convertible  Debentures,
the Investor  Registration  Rights  Agreement of even date herewith  between the
Company and the Secured Party (the "Investor  Registration  Rights  Agreement"),
the Pledge and Escrow  Agreement of even date  herewith  among the Company,  the
Secured Party and David Gonzalez, Esq. (the "Pledge Agreement"),  the Pledge and
Escrow Agreement of even date herewith among Barry Brookstein, the Secured Party
and David Gonzalez,  Esq. (the "Brookstein  Pledge  Agreement"),  the Pledge and
Escrow Agreement of either date herewith among Dean Garfinkel, the Secured Party
and  David  Gonzalez,  Esq.  (the  "Garfinkel  Pledge  Agreement"),  the  Escrow
Agreement of even date herewith among the Company,  the Secured Party, and David
Gonzalez,  Esq. (the "Escrow  Agreement"),  and the  Irrevocable  Transfer Agent
Instructions among the Company, the Secured Party, the Transfer Agent, and David
Gonzalez, Esq. (the "Transfer Agent Instructions")  (collectively referred to as
the "Transaction  Documents"),  the Company hereby grants to the Secured Party a
security interest in and to the pledged property  identified on Exhibit A hereto
(collectively  referred to as the "Pledged  Property") until the satisfaction of
the Obligations, as defined herein below.

      NOW,  THEREFORE,  for and in  consideration of the promises and the mutual
covenants herein contained,  and for other good and valuable consideration,  the
adequacy and receipt of which are hereby acknowledged, the parties hereto hereby
agree as follows:

                                   ARTICLE 1.

                        DEFINITIONS AND INTERPRETATIONS

      Section 1.1.      Recitals.

      The above recitals are true and correct and are  incorporated  herein,  in
their entirety, by this reference.

<PAGE>

      Section 1.2.      Interpretations.

      Nothing  herein  expressed or implied is intended or shall be construed to
confer upon any person other than the Secured  Party any right,  remedy or claim
under or by reason hereof.

      Section 1.3.      Obligations Secured.

      The obligations  secured hereby are any and all obligations of the Company
now  existing or  hereinafter  incurred to the Secured  Party,  whether  oral or
written  and whether  arising  before,  on or after the date  hereof  including,
without limitation,  those obligations of the Company to the Secured Party under
this  Agreement,  the  Transaction  Documents,  and  any  other  amounts  now or
hereafter  owed to the Secured  Party by the  Company  thereunder  or  hereunder
(collectively, the "Obligations").

                                   ARTICLE 2.

                 PLEDGED PROPERTY, ADMINISTRATION OF COLLATERAL
                      AND TERMINATION OF SECURITY INTEREST

      Section 2.1.      Pledged Property.

            (a) Company hereby pledges to the Secured Party,  and creates in the
Secured  Party for its  benefit,  a  security  interest  for such time until the
Obligations  are paid in full,  in and to all of the  property of the Company as
set forth in Exhibit  "A"  attached  hereto  and the  products  thereof  and the
proceeds of all such items (collectively, the "Pledged Property"):

            (b)   Simultaneously   with  the  execution  and  delivery  of  this
Agreement,  the  Company  shall make,  execute,  acknowledge,  file,  record and
deliver to the Secured Party any documents  reasonably  requested by the Secured
Party to perfect its security interest in the Pledged  Property.  Simultaneously
with the  execution  and  delivery of this  Agreement,  the Company  shall make,
execute,  acknowledge  and  deliver  to the  Secured  Party such  documents  and
instruments, including, without limitation, financing statements,  certificates,
affidavits  and forms as may, in the Secured  Party's  reasonable  judgment,  be
necessary to effectuate,  complete or perfect, or to continue and preserve,  the
security interest of the Secured Party in the Pledged Property,  and the Secured
Party shall hold such documents and instruments as secured party, subject to the
terms and conditions contained herein.

      Section 2.2.      Rights; Interests; Etc.

            (a) So long as no Event of Default (as  hereinafter  defined)  shall
have occurred and be continuing:

                  (i) the Company  shall be  entitled  to  exercise  any and all
rights  pertaining  to the Pledged  Property or any part thereof for any purpose
not inconsistent with the terms hereof; and

                  (ii) the  Company  shall be entitled to receive and retain any
and all payments paid or made in respect of the Pledged Property.

                                       2
<PAGE>

            (b) Upon the  occurrence  and during the  continuance of an Event of
Default:

                  (i) All rights of the Company to exercise  the rights which it
would otherwise be entitled to exercise pursuant to Section 2.2(a)(i) hereof and
to receive payments which it would otherwise be authorized to receive and retain
pursuant to Section  2.2(a)(ii)  hereof shall be suspended,  and all such rights
shall thereupon  become vested in the Secured Party who shall thereupon have the
sole right to exercise  such rights and to receive and hold as Pledged  Property
such  payments;  provided,  however,  that if the  Secured  Party  shall  become
entitled  and shall  elect to  exercise  its  right to  realize  on the  Pledged
Property  pursuant  to  Article 5 hereof,  then all cash  sums  received  by the
Secured Party,  or held by Company for the benefit of the Secured Party and paid
over  pursuant  to  Section  2.2(b)(ii)  hereof,  shall be applied  against  any
outstanding Obligations; and

                  (ii) All interest,  dividends,  income and other  payments and
distributions  which are received by the Company  contrary to the  provisions of
Section  2.2(b)(i)  hereof  shall be  received  in trust for the  benefit of the
Secured Party,  shall be segregated from other property of the Company and shall
be forthwith paid over to the Secured Party; or

                  (iii)  The  Secured  Party  in its  sole  discretion  shall be
authorized to sell any or all of the Pledged  Property at public or private sale
in order to recoup all of the outstanding  principal plus accrued  interest owed
pursuant to the Convertible Debenture as described herein

            (c) An "Event of  Default"  shall be deemed to have  occurred  under
this Agreement upon an Event of Default under the Convertible Debentures.

                                   ARTICLE 3.

                          ATTORNEY-IN-FACT; PERFORMANCE

      Section 3.1.      Secured Party Appointed Attorney-In-Fact.

      Upon the occurrence of an Event of Default,  the Company  hereby  appoints
the Secured Party as its attorney-in-fact,  with full authority in the place and
stead of the Company and in the name of the Company or  otherwise,  from time to
time in the  Secured  Party's  discretion  to take any action and to execute any
instrument  which the Secured Party may reasonably  deem necessary to accomplish
the purposes of this Agreement,  including,  without limitation,  to receive and
collect all instruments made payable to the Company representing any payments in
respect of the Pledged  Property or any part thereof and to give full  discharge
for the same.  The  Secured  Party may demand,  collect,  receipt  for,  settle,
compromise,  adjust, sue for,  foreclose,  or realize on the Pledged Property as
and when the Secured Party may determine. To facilitate collection,  the Secured
Party may notify  account  debtors and obligors on any Pledged  Property to make
payments directly to the Secured Party.

      Section 3.2.      Secured Party May Perform.

      If the  Company  fails to perform  any  agreement  contained  herein,  the
Secured Party, at its option, may itself perform,  or cause performance of, such
agreement,  and  the  expenses  of the  Secured  Party  incurred  in  connection
therewith shall be included in the Obligations secured hereby and payable by the
Company under Section 8.3.

                                       3
<PAGE>

                                   ARTICLE 4.

                         REPRESENTATIONS AND WARRANTIES

      Section 4.1.      Authorization; Enforceability.

      Each of the parties  hereto  represents and warrants that it has taken all
action  necessary to authorize the execution,  delivery and  performance of this
Agreement  and the  transactions  contemplated  hereby;  and upon  execution and
delivery,  this Agreement shall constitute a valid and binding obligation of the
respective party, subject to applicable bankruptcy, insolvency,  reorganization,
moratorium  and similar laws  affecting  creditors'  rights or by the principles
governing the availability of equitable remedies.

      Section 4.2.      Ownership of Pledged Property.

      Except as otherwise  indicated in the Disclose Schedule attached hereto as
Schedule  A, the  Company  warrants  and  represents  that it is the  legal  and
beneficial  owner of the Pledged  Property free and clear of any lien,  security
interest, option or other charge or encumbrance except for the security interest
created by this Agreement.

                                   ARTICLE 5.

                    DEFAULT; REMEDIES; SUBSTITUTE COLLATERAL

      Section 5.1.      Default and Remedies.

            (a) If an  Event  of  Default  occurs,  then in each  such  case the
Secured Party may declare the Obligations to be due and payable immediately,  by
a  notice  in  writing  to the  Company,  and upon  any  such  declaration,  the
Obligations shall become immediately due and payable.

            (b) Upon the  occurrence  of an Event of Default,  the Secured Party
shall: (i) be entitled to receive all distributions  with respect to the Pledged
Property,  (ii) to cause the Pledged Property to be transferred into the name of
the Secured Party or its nominee,  (iii) to dispose of the Pledged Property, and
(iv) to realize upon any and all rights in the Pledged Property then held by the
Secured Party.

      Section 5.2.      Method of Realizing Upon the Pledged Property: Other
                        Remedies.

      Upon the occurrence of an Event of Default,  in addition to any rights and
remedies  available at law or in equity,  the following  provisions shall govern
the Secured Party's right to realize upon the Pledged Property:

                                       4
<PAGE>

            (a) Any item of the Pledged  Property  may be sold for cash or other
value in any number of lots at brokers board, public auction or private sale and
may be sold without  demand,  advertisement  or notice  (except that the Secured
Party shall give the Company ten (10) days' prior written notice of the time and
place  or of the  time  after  which  a  private  sale  may be made  (the  "Sale
Notice")),  which notice period is hereby agreed to be commercially  reasonable.
At any  sale or sales  of the  Pledged  Property,  the  Company  may bid for and
purchase the whole or any part of the Pledged Property and, upon compliance with
the terms of such  sale,  may hold,  exploit  and  dispose  of the same  without
further  accountability  to the  Secured  Party.  The Company  will  execute and
deliver,  or cause to be executed and delivered,  such  instruments,  documents,
assignments,  waivers,  certificates,  and  affidavits and supply or cause to be
supplied such further  information  and take such further  action as the Secured
Party reasonably shall require in connection with any such sale.

            (b) Any cash being held by the Secured Party as Pledged Property and
all cash  proceeds  received  by the  Secured  Party  in  respect  of,  sale of,
collection  from,  or other  realization  upon  all or any  part of the  Pledged
Property shall be applied as follows:

                  (i) to the payment of all  amounts  due the Secured  Party for
the expenses  reimbursable to it hereunder or owed to it pursuant to Section 8.3
hereof;

                  (ii) to the payment of the Obligations then due and unpaid.

                  (iii) the balance,  if any, to the person or persons  entitled
thereto, including, without limitation, the Company.

            (c) In addition to all of the rights and remedies  which the Secured
Party may have pursuant to this  Agreement,  the Secured Party shall have all of
the rights and remedies provided by law, including,  without  limitation,  those
under the Uniform Commercial Code.

                  (i) If the  Company  fails  to pay such  amounts  due upon the
occurrence  of an Event of Default which is  continuing,  then the Secured Party
may institute a judicial  proceeding  for the  collection of the sums so due and
unpaid,  may  prosecute  such  proceeding  to judgment  or final  decree and may
enforce the same against the Company and collect the monies  adjudged or decreed
to be payable in the manner  provided  by law out of the  property  of  Company,
wherever situated.

                  (ii)  The  Company  agrees  that it shall  be  liable  for any
reasonable fees,  expenses and costs incurred by the Secured Party in connection
with  enforcement,  collection and  preservation of the  Transaction  Documents,
including,  without  limitation,  reasonable  legal fees and expenses,  and such
amounts shall be deemed  included as  Obligations  secured hereby and payable as
set forth in Section 8.3 hereof.

      Section 5.3.      Proofs of Claim.

            In  case  of  the   pendency   of  any   receivership,   insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relating to the Company or the property of the Company
or of such other obligor or its creditors,  the Secured Party  (irrespective  of
whether the Obligations shall then be due and payable as therein expressed or by
declaration  or otherwise  and  irrespective  of whether the Secured Party shall
have made any demand on the Company for the payment of the Obligations), subject
to the rights of Previous Security Holders, shall be entitled and empowered,  by
intervention in such proceeding or otherwise:

                                       5
<PAGE>

                  (i) to file and  prove a claim  for the  whole  amount  of the
Obligations  and to file such other  papers or  documents as may be necessary or
advisable in order to have the claims of the Secured Party  (including any claim
for the  reasonable  legal fees and expenses and other expenses paid or incurred
by the Secured  Party  permitted  hereunder  and of the Secured Party allowed in
such judicial proceeding), and

                  (ii) to  collect  and  receive  any  monies or other  property
payable or  deliverable  on any such claims and to distribute  the same; and any
custodian,  receiver,  assignee,  trustee,  liquidator,  sequestrator  or  other
similar  official in any such judicial  proceeding  is hereby  authorized by the
Secured  Party to make such payments to the Secured Party and, in the event that
the Secured Party shall  consent to the making of such payments  directed to the
Secured  Party,  to pay to the Secured  Party any amounts  for  expenses  due it
hereunder.

      Section 5.4.      Duties Regarding Pledged Property.

      The Secured Party shall have no duty as to the collection or protection of
the Pledged  Property  or any income  thereon or as to the  preservation  of any
rights pertaining thereto, beyond the safe custody and reasonable care of any of
the Pledged Property actually in the Secured Party's possession.

                                   ARTICLE 6.

                              AFFIRMATIVE COVENANTS

      The Company  covenants and agrees that, from the date hereof and until the
Obligations  have been fully paid and satisfied,  unless the Secured Party shall
consent otherwise in writing (as provided in Section 8.4 hereof):

      Section 6.1.      Existence, Properties, Etc.

            (a) The  Company  shall  do,  or cause to be done,  all  things,  or
proceed with due  diligence  with any actions or courses of action,  that may be
reasonably necessary (i) to maintain Company's due organization, valid existence
and good  standing  under  the laws of its state of  incorporation,  and (ii) to
preserve  and keep in full  force and effect all  qualifications,  licenses  and
registrations in those  jurisdictions in which the failure to do so could have a
Material Adverse Effect (as defined below); and (b) the Company shall not do, or
cause to be done, any act impairing the Company's  corporate  power or authority
(i) to carry on the Company's business as now conducted,  and (ii) to execute or
deliver this Agreement or any other document  delivered in connection  herewith,
including,  without limitation,  any UCC-1 Financing  Statements required by the
Secured  Party  to  which  it is or  will  be a  party,  or  perform  any of its
obligations  hereunder or thereunder.  For purpose of this  Agreement,  the term
"Material  Adverse  Effect"  shall  mean any  material  and  adverse  affect  as
determined by Secured Party in its sole discretion,  whether  individually or in
the aggregate, upon (a) the Company's assets, business,  operations,  properties
or condition,  financial or otherwise;  (b) the Company's to make payment as and
when due of all or any part of the Obligations; or (c) the Pledged Property.

                                       6
<PAGE>

      Section 6.2.      Financial Statements and Reports.

      The Company shall  furnish to the Secured  Party within a reasonable  time
(which for  quarterly or monthly  financial  information  shall mean at least 60
days after the close of such period and for annual financial  information  shall
mean at least 90 days after the close of the fiscal year) such financial data as
the Secured Party may reasonably request,  including,  without  limitation,  the
following:

            (a) The balance  sheet of the Company as of the close of each fiscal
year,  the statement of earnings and retained  earnings of the Company as of the
close of such fiscal year,  and statement of cash flows for the Company for such
fiscal year,  all in reasonable  detail,  prepared in accordance  with generally
accepted  accounting  principles  consistently  applied,  certified by the chief
executive and chief financial  officers of the Company as being true and correct
and  accompanied  by a certificate  of the chief  executive and chief  financial
officers of the Company, stating that the Company has kept, observed,  performed
and fulfilled  each covenant,  term and condition of this Agreement  during such
fiscal  year  and  that no  Event  of  Default  hereunder  has  occurred  and is
continuing, or if an Event of Default has occurred and is continuing, specifying
the nature of same,  the period of  existence of same and the action the Company
proposes to take in connection therewith;

            (b) A balance  sheet of the  Company as of the close of each  month,
and  statement of earnings and retained  earnings of the Company as of the close
of  such  month,  all  in  reasonable  detail,  and  prepared  substantially  in
accordance with generally accepted accounting  principles  consistently applied,
certified by the chief executive and chief financial  officers of the Company as
being true and correct; and

            (c) Copies of all accountants'  reports and  accompanying  financial
reports  submitted to the Company by independent  accountants in connection with
each annual examination of the Company.

      Section 6.3.      Accounts and Reports.

      The Company shall  maintain a standard  system of accounting in accordance
with generally accepted accounting principles  consistently applied and provide,
at its sole expense, to the Secured Party the following:

            (a)  as  soon  as   available,   a  copy  of  any  notice  or  other
communication  alleging any nonpayment or other material  breach or default,  or
any  foreclosure or other action  respecting any material  portion of its assets
and properties,  received  respecting any of the  indebtedness of the Company in
excess of $25,000 (other than the  Obligations),  or any demand or other request
for  payment  under any  guaranty,  assumption,  purchase  agreement  or similar
agreement or arrangement respecting the indebtedness or obligations of others in
excess of $25,000,  including  any received  from any person acting on behalf of
the Secured Party or beneficiary thereof; and

            (b) within fifteen (15) days after the making of each  submission or
filing,  a copy of any report,  financial  statement,  notice or other document,
whether periodic or otherwise,  submitted to the shareholders of the Company, or
submitted to or filed by the Company with any governmental  authority  involving
or affecting (i) the Company that could have a Material Adverse Effect; (ii) the
Obligations;  (iii)  any  part  of the  Pledged  Property;  or  (iv)  any of the
transactions contemplated in this Agreement.

                                       7
<PAGE>

      Section 6.4.      Maintenance of Books and Records; Inspection.

      The Company shall  maintain its books,  accounts and records in accordance
with generally accepted accounting  principles  consistently applied, and permit
the Secured Party, its officers and employees and any  professionals  designated
by the  Secured  Party in  writing,  at any time to visit and inspect any of its
properties  (including but not limited to the collateral  security  described in
the  Transaction  Documents),  corporate  books and  financial  records,  and to
discuss  its  accounts,  affairs  and  finances  with any  employee,  officer or
director thereof.

      Section 6.5.      Maintenance and Insurance.

            (a) The Company shall maintain or cause to be maintained, at its own
expense,  all of its assets and  properties in good working order and condition,
making all necessary repairs thereto and renewals and replacements thereof.

            (b) The Company shall maintain or cause to be maintained, at its own
expense, insurance in form, substance and amounts (including deductibles), which
the Company deems reasonably  necessary to the Company's business,  (i) adequate
to insure all assets and properties of the Company,  which assets and properties
are of a  character  usually  insured by persons  engaged in the same or similar
business  against loss or damage  resulting from fire or other risks included in
an extended coverage policy; (ii) against public liability and other tort claims
that may be incurred by the Company; (iii) as may be required by the Transaction
Documents  and/or  applicable  law and (iv) as may be  reasonably  requested  by
Secured Party, all with adequate, financially sound and reputable insurers.

      Section 6.6.      Contracts and Other Collateral.
                        ------------------------------

      The Company shall perform all of its obligations  under or with respect to
each  instrument,  receivable,  contract  and other  intangible  included in the
Pledged  Property  to which the Company is now or  hereafter  will be party on a
timely basis and in the manner therein required,  including, without limitation,
this Agreement.

      Section 6.7.      Defense of Collateral, Etc.

      The Company shall defend and enforce its right,  title and interest in and
to any part of: (a) the Pledged  Property;  and (b) if not  included  within the
Pledged  Property,  those assets and properties whose loss could have a Material
Adverse Effect,  the Company shall defend the Secured  Party's right,  title and
interest in and to each and every part of the Pledged Property, each against all
manner of claims and demands on a timely  basis to the full extent  permitted by
applicable law.

                                       8
<PAGE>

      Section 6.8.      Payment of Debts, Taxes, Etc.

      The Company shall pay, or cause to be paid,  all of its  indebtedness  and
other liabilities and perform, or cause to be performed,  all of its obligations
in accordance with the respective terms thereof, and pay and discharge, or cause
to be paid or discharged,  all taxes, assessments and other governmental charges
and levies  imposed upon it, upon any of its assets and  properties on or before
the last day on which the same may be paid without  penalty,  as well as pay all
other  lawful  claims  (whether  for  services,  labor,  materials,  supplies or
otherwise) as and when due

      Section 6.9.      Taxes and Assessments; Tax Indemnity.

      The  Company  shall (a) file all tax  returns  and  appropriate  schedules
thereto that are required to be filed under applicable law, prior to the date of
delinquency,  (b) pay and  discharge  all taxes,  assessments  and  governmental
charges or levies imposed upon the Company,  upon its income and profits or upon
any  properties  belonging  to it, prior to the date on which  penalties  attach
thereto,  and (c) pay all taxes,  assessments and governmental charges or levies
that,  if  unpaid,  might  become a lien or charge  upon any of its  properties;
provided,  however,  that the  Company in good faith may  contest  any such tax,
assessment,  governmental  charge or levy described in the foregoing clauses (b)
and (c) so long as appropriate reserves are maintained with respect thereto.

      Section 6.10.     Compliance with Law and Other Agreements.

      The Company shall  maintain its business  operations and property owned or
used in connection  therewith in  compliance  with (a) all  applicable  federal,
state and  local  laws,  regulations  and  ordinances  governing  such  business
operations and the use and ownership of such property,  and (b) all  agreements,
licenses,  franchises,  indentures and mortgages to which the Company is a party
or by which the Company or any of its properties is bound.  Without limiting the
foregoing,  the Company shall pay all of its indebtedness promptly in accordance
with the terms thereof.

      Section 6.11.     Notice of Default.

      The  Company  shall  give  written  notice  to the  Secured  Party  of the
occurrence  of any  default  or Event  of  Default  under  this  Agreement,  the
Transaction  Documents  or any other  agreement  of Company  for the  payment of
money, promptly upon the occurrence thereof.

      Section 6.12.     Notice of Litigation.

      The Company shall give notice, in writing, to the Secured Party of (a) any
actions,  suits or  proceedings  wherein  the  amount  at issue is in  excess of
$50,000,  instituted by any persons against the Company, or affecting any of the
assets of the Company,  and (b) any dispute,  not resolved  within  fifteen (15)
days of the  commencement  thereof,  between the Company on the one hand and any
governmental  or regulatory  body on the other hand,  which might  reasonably be
expected  to have a  Material  Adverse  Effect  on the  business  operations  or
financial condition of the Company.

                                       9
<PAGE>

                                   ARTICLE 7.

                               NEGATIVE COVENANTS

      The Company  covenants  and agrees  that,  from the date hereof  until the
Obligations  have been fully paid and satisfied,  the Company shall not,  unless
the Secured Party shall consent otherwise in writing:

      Section 7.1.      Liens and Encumbrances.

      The Company shall not directly or indirectly make, create,  incur,  assume
or permit to exist any assignment, transfer, pledge, mortgage, security interest
or other lien or  encumbrance  of any  nature in, to or against  any part of the
Pledged Property or of the Company's  capital stock, or offer or agree to do so,
or own or acquire or agree to acquire  any asset or  property  of any  character
subject to any of the foregoing  encumbrances  (including any  conditional  sale
contract or other title retention  agreement),  or assign,  pledge or in any way
transfer or encumber  its right to receive any income or other  distribution  or
proceeds from any part of the Pledged  Property or the Company's  capital stock;
or enter into any  sale-leaseback  financing  respecting any part of the Pledged
Property as lessee,  or cause or assist the inception or  continuation of any of
the  foregoing,  except in  connection  with the Company  leasing or  purchasing
office equipment,  computer and networking equipment,  co-location equipment and
other equipment and supplies in the ordinary  course of the Company's  business,
provided  such  equipment  and supplies do not, in the  aggregate,  exceed fifty
thousand dollars ($50,000.00) per annum.

      Section   7.2.    Certificate   of   Incorporation,    By-Laws,   Mergers,
                        Consolidations, Acquisitions and Sales.

      Without  the prior  express  written  consent of the  Secured  Party,  the
Company shall not: (a) Amend its  Certificate of  Incorporation  or Bylaws;  (b)
issue  or sell its  stock,  stock  options,  bonds,  notes  or  other  corporate
securities  or  obligations;  (c) be a party  to any  merger,  consolidation  or
corporate reorganization, (d) purchase or otherwise acquire all or substantially
all of the assets or stock of, or any partnership or joint venture  interest in,
any other person, firm or entity, (e) sell,  transfer,  convey, grant a security
interest in or lease all or any substantial  part of its assets,  nor (f) create
any subsidiaries nor convey any of its assets to any subsidiary.

      Section 7.3.      Management, Ownership.

      The Company shall not materially change its ownership,  executive staff or
management  without  the  prior  written  consent  of  the  Secured  Party.  The
ownership, executive staff and management of the Company are material factors in
the Secured Party's willingness to institute and maintain a lending relationship
with the Company.

      Section 7.4.      Dividends, Etc.

      The Company  shall not declare or pay any dividend of any kind, in cash or
in property, on any class of its capital stock, nor purchase,  redeem, retire or
otherwise  acquire for value any shares of such stock, nor make any distribution
of any kind in respect thereof,  nor make any return of capital to shareholders,
nor make any payments in respect of any  pension,  profit  sharing,  retirement,
stock option,  stock bonus,  incentive  compensation  or similar plan (except as
required  or  permitted  hereunder),  without the prior  written  consent of the
Secured Party.

                                       10
<PAGE>

      Section 7.5.      Guaranties; Loans.

      The  Company  shall not  guarantee  nor be liable in any  manner,  whether
directly or  indirectly,  or become  contingently  liable after the date of this
Agreement in connection  with the  obligations or  indebtedness of any person or
persons,  except  for  (i)  the  indebtedness  currently  secured  by the  liens
identified on the Pledged  Property  identified on Exhibit A hereto and (ii) the
endorsement  of  negotiable  instruments  payable to the  Company for deposit or
collection  in the ordinary  course of business.  The Company shall not make any
loan,  advance or  extension  of credit to any  person  other than in the normal
course of its business.

      Section 7.6.      Debt.

      The  Company  shall  not  create,  incur,  assume  or  suffer to exist any
additional  indebtedness of any description whatsoever in an aggregate amount in
excess of $100,000  (excluding  any  indebtedness  of the Company to the Secured
Party,  trade  accounts  payable and accrued  expenses  incurred in the ordinary
course of business and the endorsement of negotiable  instruments payable to the
Company,  respectively  for  deposit or  collection  in the  ordinary  course of
business).

      Section 7.7.      Conduct of Business.

      The  Company  will  continue to engage,  in an  efficient  and  economical
manner, in a business of the same general type as conducted by it on the date of
this Agreement.

      Section 7.8.      Places of Business.

      The  location of the  Company's  chief place of business is 90 Pratt Oval,
Glen Cove,  NY 11542.  The  Company  shall not change the  location of its chief
place of business,  chief executive office or any place of business disclosed to
the Secured Party or move any of the Pledged  Property from its current location
without  thirty (30) days'  prior  written  notice to the Secured  Party in each
instance.

                                   ARTICLE 8.

                                  MISCELLANEOUS

      Section 8.1.      Notices.

      All  notices or other  communications  required or  permitted  to be given
pursuant to this  Agreement  shall be in writing and shall be considered as duly
given on:  (a) the date of  delivery,  if  delivered  in person,  by  nationally
recognized  overnight  delivery  service or (b) five (5) days  after  mailing if
mailed from within the  continental  United  States by  certified  mail,  return
receipt requested to the party entitled to receive the same:

                                       11
<PAGE>

If to the Secured Party:     Montgomery Equity Partners, Ltd.
                             101 Hudson Street - Suite 3700
                             Jersey City, New Jersey 07302
                             Attention: Mark Angelo
                                         Portfolio Manager
                             Telephone:  (201) 986-8300
                             Facsimile:  (201) 985-8266

With a copy to:              David Gonzalez, Esq.
                             101 Hudson Street, Suite 3700
                              Jersey City, NJ 07302
                             Telephone:  (201) 985-8300
                             Facsimile:  (201) 985-8266

And if to the Company:       Compliance Systems Corporation
                             90 Pratt Oval
                             Glen Cove, NY 11542
                             Attention:  Dean Garfinkel
                             Telephone:  (516) 656-5155
                             Facsimile:  (516) 676-2420

With a copy to:              Kirkpatrick & Lockhart Nicholson Graham, LLP
                             201 South Biscayne Boulevard, Suite 2000
                             Miami, Florida 33131
                             Attention:  Clayton E. Parker, Esq.
                             Telephone:  (305) 539-3306
                             Facsimile:  (305) 328-7095

      Any party may  change  its  address  by giving  notice to the other  party
stating its new address.  Commencing on the tenth (10th) day after the giving of
such notice, such newly designated address shall be such party's address for the
purpose of all notices or other communications required or permitted to be given
pursuant to this Agreement.

      Section 8.2.      Severability.

      If any provision of this Agreement shall be held invalid or unenforceable,
such  invalidity  or  unenforceability  shall attach only to such  provision and
shall not in any  manner  affect or render  invalid or  unenforceable  any other
severable  provision of this Agreement,  and this Agreement shall be carried out
as if any such invalid or unenforceable provision were not contained herein.

      Section 8.3.      Expenses.

      In the event of an Event of Default,  the Company  will pay to the Secured
Party the amount of any and all  reasonable  expenses,  including the reasonable
fees  and  expenses  of its  counsel,  which  the  Secured  Party  may  incur in
connection  with: (i) the custody or  preservation  of, or the sale,  collection
from, or other realization upon, any of the Pledged Property;  (ii) the exercise
or enforcement of any of the rights of the Secured Party  hereunder or (iii) the
failure by the Company to perform or observe any of the provisions hereof.

                                       12
<PAGE>

      Section 8.4.      Waivers, Amendments, Etc.

      The Secured  Party's  delay or failure at any time or times  hereafter  to
require  strict  performance  by  Company  of any  undertakings,  agreements  or
covenants shall not waiver,  affect,  or diminish any right of the Secured Party
under this Agreement to demand strict compliance and performance  herewith.  Any
waiver by the  Secured  Party of any Event of Default  shall not waive or affect
any other Event of Default, whether such Event of Default is prior or subsequent
thereto and whether of the same or a different type.  None of the  undertakings,
agreements  and  covenants of the Company  contained in this  Agreement,  and no
Event of Default,  shall be deemed to have been waived by the Secured Party, nor
may this  Agreement  be  amended,  changed  or  modified,  unless  such  waiver,
amendment,  change or  modification  is  evidenced by an  instrument  in writing
specifying  such waiver,  amendment,  change or  modification  and signed by the
Secured Party.

      Section 8.5.      Continuing Security Interest.

      This Agreement shall create a continuing  security interest in the Pledged
Property and shall: (i) remain in full force and effect until payment in full of
the  Obligations;  and (ii) be binding upon the Company and its  successors  and
heirs and (iii) inure to the benefit of the Secured Party and its successors and
assigns.  Upon the  payment  or  satisfaction  in full of the  Obligations,  the
Company shall be entitled to the return, at its expense,  of such of the Pledged
Property as shall not have been sold in  accordance  with  Section 5.2 hereof or
otherwise applied pursuant to the terms hereof.

      Section 8.6.      Independent Representation.

      Each party hereto  acknowledges and agrees that it has received or has had
the opportunity to receive  independent legal counsel of its own choice and that
it has been sufficiently apprised of its rights and responsibilities with regard
to the substance of this Agreement.

      Section 8.7.      Applicable Law:  Jurisdiction.

      This Agreement shall be governed by and interpreted in accordance with the
laws of the State of New Jersey  without regard to the principles of conflict of
laws.  The parties  further agree that any action between them shall be heard in
Hudson County,  New Jersey,  and expressly consent to the jurisdiction and venue
of the  Superior  Court of New Jersey,  sitting in Hudson  County and the United
States  District  Court for the  District of New Jersey  sitting in Newark,  New
Jersey  for the  adjudication  of any civil  action  asserted  pursuant  to this
Paragraph.

      Section 8.8.      Waiver of Jury Trial.

      AS A FURTHER INDUCEMENT FOR THE SECURED PARTY TO ENTER INTO THIS AGREEMENT
AND TO MAKE THE  FINANCIAL  ACCOMMODATIONS  TO THE COMPANY,  THE COMPANY  HEREBY
WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING  RELATED IN ANY WAY TO
THIS AGREEMENT AND/OR ANY AND ALL OTHER DOCUMENTS RELATED TO THIS TRANSACTION.

                                       13
<PAGE>

      Section 8.9.      Entire Agreement.

      This  Agreement  constitutes  the entire  agreement  among the parties and
supersedes any prior agreement or  understanding  among them with respect to the
subject matter hereof.

         [SIGNATURE PAGE FOLLOWS; REMAINDER OF PAGE INTENTIONALLY BLANK]

                                       14
<PAGE>

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

                                        COMPANY:
                                        COMPLIANCE SYSTEMS CORPORATION

                                        By:
                                           -----------------------------
                                        Name:  Dean Garfinkel
                                        Title: President

                                        SECURED PARTY:
                                        MONTGOMERY EQUITY PARTNERS, LTD.

                                        BY:   YORKVILLE ADVISORS, LLC
                                        ITS:  GENERAL PARTNER

                                        By:
                                           -----------------------------
                                        Name:  Mark Angelo
                                        Title: Portfolio Manager

                                       15
<PAGE>

                                    EXHIBIT A
                         DEFINITION OF PLEDGED PROPERTY

      For the purpose of securing prompt and complete payment and performance by
the  Company  of  all  of  the  Obligations,  the  Company  unconditionally  and
irrevocably hereby grants to the Secured Party a continuing security interest in
and to, and lien upon, the following Pledged Property of the Company:

            (a)  all  goods  of  the  Company,  including,  without  limitation,
machinery,  equipment, furniture,  furnishings,  fixtures, signs, lights, tools,
parts,  supplies  and  motor  vehicles  of every  kind and  description,  now or
hereafter owned by the Company or in which the Company may have or may hereafter
acquire any interest, and all replacements, additions, accessions, substitutions
and proceeds thereof,  arising from the sale or disposition  thereof,  and where
applicable,  the proceeds of insurance  and of any tort claims  involving any of
the foregoing;

            (b) all inventory of the Company, including, but not limited to, all
goods, wares,  merchandise,  parts, supplies,  finished products, other tangible
personal  property,  including such inventory as is temporarily out of Company's
custody or  possession  and  including  any returns  upon any  accounts or other
proceeds,  including insurance proceeds,  resulting from the sale or disposition
of any of the foregoing;

            (c) all  contract  rights and general  intangibles  of the  Company,
including, without limitation,  goodwill, trademarks, trade styles, trade names,
leasehold interests,  partnership or joint venture interests, patents and patent
applications,  copyrights,  deposit  accounts  whether  now  owned or  hereafter
created;

            (d) all documents, warehouse receipts, instruments and chattel paper
of the Company whether now owned or hereafter created;

            (e) all accounts and other  receivables,  instruments or other forms
of  obligations  and  rights to  payment  of the  Company  (herein  collectively
referred  to as  "Accounts"),  together  with the  proceeds  thereof,  all goods
represented  by such  Accounts  and all such goods that may be  returned  by the
Company's  customers,  and  all  proceeds  of any  insurance  thereon,  and  all
guarantees,  securities  and liens which the Company may hold for the payment of
any such  Accounts  including,  without  limitation,  all rights of  stoppage in
transit,  replevin and reclamation and as an unpaid vendor and/or lienor, all of
which  the  Company  represents  and  warrants  will be bona  fide and  existing
obligations of its respective customers, arising out of the sale of goods by the
Company in the ordinary course of business;

            (f) to the extent assignable,  all of the Company's rights under all
present and future  authorizations,  permits,  licenses and franchises issued or
granted in connection with the operations of any of its facilities;

            (g)  all  products  and  proceeds  (including,  without  limitation,
insurance proceeds) from the above-described Pledged Property.

                                      A-1
<PAGE>

                                   SCHEDULE A

                               DISCLOSURE SCHEDULE

      The following is a list of liens,  security  interests,  options and other
charges or encumbrances on the Pledged Property as of the date hereof:

                                                                       BALANCE
Secured Debt (UCC's Filed):
  Notes Payable - Robert Lippe                                         27,794.00

  Capitalized Leases Payable:
    Dell Financial Services                                             7,452.00
    Bank of the West                                                   29,898.00
    GE Capital                                                         19,518.00
    Axis Capital Inc.                                                  12,885.00
    M&T Credit Services LLC                                            13,884.00
    Netbank Business Finance (formerly Republic Leasing)               24,392.00
    US Bancorp                                                         29,346.00
  Total Leases Payable                                                137,375.00

  Secured Lease - Ford Credit                                           5,850.00

Total Secured Debt                                                    171,019.00

                                      A-2
<PAGE>

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