Document:

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                          REGISTRATION RIGHTS AGREEMENT
                               dated May 25, 2000
                     between Leucadia National Corporation,
                        a New York corporation ("Parent")
              and the persons listed on the signature pages hereto
          (each a "Stockholder" and collectively, the "Stockholders").

            This Agreement is made in connection with the execution and delivery
of the Agreement and Plan of Merger dated May 25, 2000 (as such agreement may be
amended from time to time, the "Merger Agreement"), among Parent, Reliance Group
Holdings, Inc., a Delaware corporation, and Leucadia Acquisition Corp., a
Delaware corporation and a wholly-owned subsidiary of Parent. In order to induce
each person who is on the date hereof executing the Stockholders Agreement (as
defined in the Merger Agreement) to execute such Stockholders Agreement, and in
further consideration therefor, Parent has agreed to execute and deliver this
Agreement and provide the registration rights set forth in this Agreement.

            Accordingly, it is hereby agreed as follows:

            1. DEFINITIONS. Capitalized terms used but not otherwise defined
herein shall have the meanings assigned to such terms in the Merger Agreement.
For purposes of this Agreement, the following terms shall have the following
meanings:

            "BLACKOUT PERIOD" has the meaning specified in Section 6(b).

            "BUSINESS DAY" means a day, other than a Saturday or Sunday, on
which banking institutions and securities exchanges in New York, New York are
required to be open.

            "COUNSEL TO THE HOLDERS" means the single law firm from time to time
representing the Holders, as appointed by the Holders of a majority in number of
the Registrable Securities.

            "EFFECTIVE PERIOD" means, with respect to any Holder, a period
commencing on the date of this Agreement and ending on the earlier of (i) the
first date as of which all Registrable Securities cease to be Registrable
Securities and (ii) one year from the Effective Time.

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

            "HOLDER" means each Stockholder and each person who is an affiliate
(as defined in Rule 405 of the Securities Act) of such Stockholder that is a
holder of Registrable Securities.

            "MERGER REGISTRATION STATEMENT" means the S-4 (as defined in the
Merger Agreement).

            "NASD" means the National Association of Securities Dealers, Inc.

            "PROSPECTUS" means the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Securities
covered by any Registration Statement and by all other amendments and
supplements to the prospectus, including post-effective amendments and all
material incorporated by reference in such prospectus.

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            "REGISTRABLE SECURITIES" means, collectively, (i) the shares of
Parent Common Stock issued to the Stockholder pursuant to the Merger Agreement
(the "Shares") and (ii) any securities paid, issued or distributed in respect of
any Shares by way of stock dividend or distribution or stock split or in
connection with a combination of shares, recapitalization, reorganization,
merger, consolidation or otherwise.

            "REGISTRATION EXPENSES" means any and all expenses incident to
performance of or compliance with this Agreement, including, without limitation,
(i) all SEC, NASD and securities exchange registration and filing fees, (ii) all
fees and expenses of complying with state securities or blue sky laws (including
reasonable fees and disbursements of counsel for any underwriters in connection
with blue sky qualifications of the Registrable Securities), (iii) all printing,
messenger and delivery expenses, (iv) all fees and expenses incurred in
connection with the listing of the Registrable Securities on any securities
exchange or automated quotation system pursuant to Section 7(h), (v) the fees
and disbursements of counsel for Parent and of its independent public
accountants, (vi) the fees and expenses of any special experts retained by
Parent in connection with the requested registration, (vii) out-of-pocket
expenses of underwriters customarily paid by the issuer to the extent provided
for in any underwriting agreement, but excluding underwriting discounts and
commissions and transfer taxes, if any, and the fees and expenses of Counsel to
the Holders.

            "REGISTRATION STATEMENT" means any registration statement of Parent
referred to in Section 3 or 4, including any Prospectus, amendments and
supplements to any such registration statement, including post-effective
amendments, and any registration statement pursuant to Rule 462 under the
Securities Act, and all exhibits and all material incorporated by reference in
any such registration statement.

            "REGISTRATION HOLD PERIOD" means a Section 7(e) Period or a Section
7(m) Period.

            "RELATED SECURITIES" means any securities of Parent similar or
identical to any of the Registrable Securities, including, without limitation,
Parent Common Stock (other than the Shares) and all options, warrants, rights
and other securities convertible into, or exchangeable or exercisable for,
Parent Common Stock.

            "SECTION 6(A) PERIOD" has the meaning specified in Section 6(a).

            "SECTION 6(B)PERIOD" has the meaning specified in Section 6(b).

            "SECTION 7(E) PERIOD" has the meaning specified in Section 7(e).

            "SECTION 7(M) PERIOD" has the meaning specified in Section 7(m).

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

            "SHELF REGISTRATION" means a "shelf" registration statement on an
appropriate form pursuant to Rule 415 under the Securities Act (or any successor
rule that may be adopted by the SEC).

            "UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING" shall mean an
underwritten offering in which securities of Parent are sold to an underwriter
for reoffering to the public.

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            2. SECURITIES SUBJECT TO THIS AGREEMENT. The securities entitled to
the benefits of this Agreement are the Registrable Securities. For the purposes
of this Agreement, Registrable Securities will cease to be Registrable
Securities when and to the extent that (i) a Registration Statement covering
Registrable Securities has been declared effective under the Securities Act and
Registrable Securities have been disposed of pursuant to such effective
Registration Statement, (ii) Registrable Securities are distributed to the
public pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act, (iii) Registrable Securities have been otherwise transferred to
a party that is not an affiliate of a Stockholder and new certificates for such
Registrable Securities not bearing any securities laws legends shall have been
delivered by Parent or (iv) Registrable Securities have ceased to be
outstanding.

            3. PIGGY-BACK REGISTRATION RIGHTS; MERGER REGISTRATION STATEMENT.
(a) Whenever during the Effective Period Parent shall propose to file a
Registration Statement under the Securities Act (other than a registration
statement on Form S-4 or Form S-8 or any successor forms, or filed in connection
with an exchange offer or an offering of securities solely to existing
stockholders or employees of Parent), Parent shall (i) give written notice at
least 30 business days prior to the initial filing thereof to each Holder of
Registrable Securities then outstanding, specifying the approximate date on
which Parent proposes to file such Registration Statement and advising such
Holder of his right to have any or all of the Registrable Securities then held
by such Holder included among the securities to be covered thereby and (ii) at
the written request of any such Holder given to Parent within 20 business days
after the date of receipt of such written notice from Parent, include among the
securities covered by such Registration Statement the number of Registrable
Securities which such Holder shall have requested be so included (subject,
however, to reduction in accordance with paragraph (b) of this Section). Parent
shall use commercially reasonable efforts to cause the managing underwriter of
the proposed underwritten offering to permit the Holders of Registrable
Securities requested to be included in the Registration Statement for such
offering to include such securities in such offering on the same terms and
conditions as any similar securities of Parent included therein.

            (b) Each Holder of Registrable Securities desiring to participate in
an offering pursuant to Section 3(a) may include shares of Parent Common Stock
in any Registration Statement relating to such offering except as contemplated
by the next two succeeding sentences. If the lead managing underwriter selected
by Parent for an underwritten offering pursuant to Section 3(a) determines that
marketing factors require a limitation on the number of shares of Parent Common
Stock to be offered and sold by the stockholders of Parent in such offering,
there shall be included in the offering only that number of shares of Parent
Common Stock, if any, that such lead managing underwriter reasonably and in good
faith believes will not jeopardize the success of the offering of all the shares
of Parent Common Stock that Parent desires to sell for its own account. In such
event and provided the managing underwriter has so notified Parent in writing,
then Parent will include in such offering (i) first the shares of Parent Common
Stock which are to be sold by Parent and (ii) second, the number of shares of
Parent Common Stock to be offered and sold by stockholders of Parent, including
Holders of Registrable Securities, desiring to participate in such offering
that, in the opinion of such underwriter, can be sold, which shall be allocated
among such stockholders of Parent on a pro rata basis based on their holdings of
Parent Common Stock (subject to any written agreements between two or more
Holders requiring a different priority).

            (c) A request by Holders to include Registrable Securities in a
proposed

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underwritten offering pursuant to Section 3(a) shall not be deemed to be a
request for a demand registration pursuant to Section 4.

            4. DEMAND REGISTRATION RIGHTS. (a) Upon the written request during
the Effective Period of Holders of at least 25% of the Registrable Securities
that Parent effect the registration with the SEC under and in accordance with
the provisions of the Securities Act of all or part of such Holder's or Holders'
Registrable Securities (which written request shall specify the aggregate number
of shares of Registrable Securities requested to be registered and the means of
distribution), Parent will file a Registration Statement covering such Holder's
or Holders' Registrable Securities requested to be registered (a "Specified
Registration Statement") within 45 business days after receipt of such request
and use commercially reasonable efforts to cause such registration statement to
be declared effective by the SEC and cleared or approved by all applicable state
securities or "Blue Sky" authorities, and to cause the registration of the
Registrable Securities covered thereby. Parent shall cause to be effective as of
the Closing Date a Specified Registration Statement. PROVIDED, HOWEVER, that
Parent shall not be required to take any action pursuant to this Section 4:

            (1) if prior to the date of such request Parent shall have effected
one registration pursuant to this Section 4;

            (2) if Parent shall at the time have effective a Shelf Registration
pursuant to which the Holder or Holders that requested registration could effect
the disposition of such Holder's or Holders' Registrable Securities in the
manner requested; or

            (3) during the pendency of any Blackout Period; PROVIDED FURTHER,
HOWEVER, that Parent shall be permitted to satisfy its obligations under this
Section 4(a) by amending (to the extent permitted by applicable law) any
registration statement previously filed by Parent under the Securities Act so
that such registration statement (as amended) shall permit the disposition (in
accordance with the intended methods of disposition) of all of the Registrable
Securities for which a demand for registration has been made under this Section
4(a); and upon such amendment such registration statement shall be deemed to be
a "Registration Statement" for all purposes of this Agreement. If Parent shall
so amend a previously filed registration statement, it shall be deemed to have
effected a registration for purposes of this Section 4.

            (b) The Holders delivering such request may distribute the
Registrable Securities covered by such request by means of an underwritten
offering or any other means, as determined by the Holders of a majority of
Registrable Securities so requested to be registered.

            (c) A registration requested pursuant to this Section 4 shall not be
deemed to be effected for purposes of this Section 4 if it has not been declared
effective by the SEC or become effective in accordance with the Securities Act
and the rules and regulations thereunder.

            (d) Holders of a number of the Registrable Securities representing a
majority of the Registrable Securities to be included in a Registration
Statement pursuant to this Section 4 may, at any time prior to the effective
date of the Registration Statement relating to such registration, revoke such
request by providing a written notice to Parent revoking such request. The
Holders of Registrable Securities who revoke such request shall reimburse Parent
for all its reasonable out-of-

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pocket expenses incurred in the preparation, filing and processing of the
Registration Statement; PROVIDED, HOWEVER, that, if such revocation was based on
(x) Parent's failure to comply in any material respect with its obligations
hereunder or (y) the occurrence of a Blackout Period, such reimbursement shall
not be required.

            (e) Parent will not include any securities which are not Registrable
Securities in any Registration Statement filed pursuant to a demand made under
this Section 4 without the prior written consent of the Holders of a majority in
number of the Registrable Securities covered by such Registration Statement.

            5. SELECTION OF UNDERWRITERS. In connection with any underwritten
offering pursuant to a Registration Statement filed pursuant to a demand made
pursuant to Section 4, Holders of a majority in number of the Registrable
Securities to be included in the Registration Statement shall have the right to
select a managing underwriter or underwriters to administer the offering, which
underwriter or underwriters shall be acceptable to Parent, acting reasonably.

            6. BLACKOUT PERIOD. (a) If (i) during the Effective Period, Parent
shall file or propose to file a registration statement (other than in connection
with the registration of securities issuable pursuant to a continuous pursuant
to Rule 415 under the Securities Act, an employee stock option, stock purchase,
dividend reinvestment plan or similar plan or pursuant to a merger, exchange
offer or a transaction of the type specified in Rule 145(a) under the Securities
Act) with respect to any securities of Parent and (ii) with reasonable prior
notice, (A) Parent (in the case of a non-underwritten offering pursuant to such
registration statement) determines in good faith, and advises the Holders in
writing, that a sale or distribution of Registrable Securities would materially
adversely affect such offering or (B) the managing underwriter or underwriters
(in the case of an underwritten offering) advise Parent in writing (in which
case Parent shall notify the Holders), that a sale or distribution of
Registrable Securities would adversely affect such offering, then Parent shall
not be obligated to effect the initial filing of a Registration Statement
pursuant to Section 4 during the period commencing on the date that is 30 days
prior to the date Parent in good faith estimates (as certified in writing by an
officer of Parent to the Holders following a request for registration pursuant
to Section 4(a)) will be the date of filing of, and ending on the date which is
30 days following the effective date of, such registration statement (a "Section
6(a) Period").

            (b) If Parent determines in good faith that the registration and
distribution of Registrable Securities (i) would materially impede, delay or
interfere with any pending material financing (other than a financing of the
type described in Section 6(a)), acquisition, corporate reorganization or other
significant transaction involving Parent or (ii) would require disclosure of
material of non-public material information, the disclosure of which would
materially and adversely affect Parent, and, in the case of (ii), Parent is
concurrently forbidding purchases or sales in the open market by senior
executives of Parent, Parent shall promptly give the Holders written notice of
such determination and shall be entitled to postpone the filing or effectiveness
of a Registration Statement for a reasonable period of time not to exceed 90
days (a "Section 6(b) Period" and, together with a Section 6(a) Period, a
"Blackout Period"); PROVIDED, HOWEVER, that Parent shall deliver to Counsel to
the Holders a general statement, signed by an officer of Parent, of the reasons
for such postponement or restriction on use and an estimate of the anticipated
delay. Parent shall promptly notify each Holder of the expiration or earlier
termination of a Section 6(b) Period.

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            (c) Notwithstanding anything in this Section 6 to the contrary, the
aggregate number of days included in all Blackout Periods and all Registration
Hold Periods during any consecutive 12 month period during the Effective Period
shall not exceed 60 days.

            7. REGISTRATION PROCEDURES. If and whenever Parent is required to
use commercially reasonable efforts to effect or cause the registration of any
Registrable Securities under the Securities Act as provided in this Agreement,
Parent will, as expeditiously as possible:

            (a) prepare and file with the SEC a Registration Statement with
respect to such Registrable Securities on any form for which Parent then
qualifies or which counsel for Parent shall deem appropriate, and which form
shall be available for the sale of the Registrable Securities in accordance with
the intended methods of distribution thereof (including, if so requested by the
Holders, distributions under Rule 415 under the Securities Act pursuant to a
Shelf Registration Statement), and use commercially reasonable efforts to cause
such Registration Statement to become and remain effective;

            (b) prepare and file with the SEC amendments and post-effective
amendments to such Registration Statement and such amendments and supplements to
the Prospectus used in connection therewith as may be necessary to maintain the
effectiveness of such registration or as may be required by the rules,
regulations or instructions applicable to the registration form utilized by
Parent or by the Securities Act or rules and regulations thereunder necessary to
keep such Registration Statement effective for up to 90 days, in the case of an
underwritten offering, or 180 days, in any other case, including without
limitation with respect to the Merger Registration Statement (or longer period
in the event of a Registration Hold Period during such 90 or 180 days, as
provided in this Section 7) and cause the Prospectus as so supplemented to be
filed pursuant to Rule 424 under the Securities Act, and to otherwise comply
with the provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement until the earlier of (x) such
90th or 180th day (or longer period) and (y) such time as all Registrable
Securities covered by such Registration Statement have ceased to be Registrable
Securities;

            (c) furnish to each Holder of such Registrable Securities such
number of copies of such Registration Statement and of each amendment and
post-effective amendment thereto (in each case including all exhibits), any
Prospectus or Prospectus supplement and such other documents as such Holder may
reasonably request in order to facilitate the disposition of the Registrable
Securities by such Holder (Parent hereby consenting to the use (subject to the
limitations set forth in the last paragraph of this Section 7) of the Prospectus
or any amendment or supplement thereto in connection with such disposition);

            (d) use commercially reasonable efforts to register or qualify such
Registrable Securities covered by such Registration Statement under such other
securities or blue sky laws of such jurisdictions as each Holder shall
reasonably request, and do any and all other acts and things which may be
reasonably necessary or advisable to enable such Holder to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
Holder, except that Parent shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdiction where, but
for the requirements of this Section 7(d), it would not be obligated to be so
qualified, to subject itself to taxation in any such jurisdiction, or to consent
to general service of process in any such jurisdiction;

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            (e) notify each Holder of any such Registrable Securities covered by
such Registration Statement, at any time when a Prospectus relating thereto is
required to be delivered under the Securities Act within the appropriate period
mentioned in Section 7(b), of Parent's becoming aware that the Prospectus
included in such Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing (the period during which the Holders
are required to refrain from effective public sales or distributions in such
case being referred to as a "Section 7(e) Period"), and prepare and furnish to
such Holder a reasonable number of copies of an amendment to such Registration
Statement or related Prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such Prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, and the time
during which such Registration Statement shall remain effective pursuant to
Section 7(b) shall be extended by the number of days in the Section 7(e) Period;

            (f) notify each Holder of Registrable Securities covered by such
Registration Statement at any time,

            (1) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to the Registration
Statement or any post-effective amendment, when the same has become effective;

            (2) of any request by the SEC for amendments or supplements to the
Registration Statement or the Prospectus or for additional information;

            (3) of the issuance by the SEC of any stop order of which Parent or
its counsel is aware or should be aware suspending the effectiveness of the
Registration Statement or any order preventing the use of a related Prospectus,
or the initiation or any threats of any proceedings for such purposes;

            (4) of the receipt by Parent of any notification of the suspension
of the qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or any threats of any proceeding for that
purpose; and

            (5) if at any time the representations and warranties of Parent
contemplated by paragraph (i)(1) below cease to be true and correct in any
material respect;

            (g) comply in all material respects with all applicable rules and
regulations of the SEC, and make available to the Holders an earnings statement
which shall satisfy the provisions of Section 11 (a) of the Securities Act;

            (h) use commercially reasonable efforts to cause all such
Registrable Securities to be listed on any securities exchange or automated
quotation system on which Parent Common Stock is then listed, if such
Registrable Securities are not already so listed and to provide a transfer agent
and registrar for such Registrable Securities covered by such Registration
Statement no later than the effective date of such Registration Statement;

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            (i) enter into agreements (including underwriting agreements) and
take all other appropriate and reasonable actions in order to expedite or
facilitate the disposition of such Registrable Securities and in such
connection, whether or not an underwriting agreement is entered into and whether
or not the registration is an underwritten registration:

            (1) make such representations and warranties to the Holders of such
Registrable Securities and the underwriters, if any, in form, substance and
scope as are customarily made by issuers to underwriters in comparable
underwritten offerings;

            (2) obtain opinions of counsel to Parent thereof (which counsel and
opinions (in form, scope and substance) shall be reasonably satisfactory to the
managing underwriters, if any, and the Holders of a majority in number of the
Registrable Securities being sold) addressed to each Holder and the
underwriters, if any, covering the matters customarily covered in opinions
requested in comparable underwritten offerings and such other matters as may be
reasonably requested by the Holders of a majority in number of the Registrable
Securities being sold and the managing underwriter, if any;

            (3) obtain "cold comfort" letters and bring-downs thereof from
Parent's independent certified public accountants addressed to the selling
Holders of Registrable Securities and the underwriters, if any, such letters to
be in customary form and covering matters of the type customarily covered in
"cold comfort" letters by independent public accountants in connection with
underwritten offerings;

            (4) if requested, provide indemnification to any and all
underwriters substantially identical to that contemplated by Section 10 hereof;
and

            (5) deliver such documents and certificates as may be reasonably
requested by the Holders of a majority in number of the Registrable Securities
being sold and the managing underwriters, if any.

            (j) cooperate with the Holders of Registrable Securities covered by
such Registration Statement and the managing underwriter or underwriters or
agents, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing the securities
to be sold under such Registration Statement, and enable such securities to be
in such denominations and registered in such names as the managing underwriter
or underwriters or agents, if any, or such Holders may request;

            (k) incorporate in a Prospectus supplement or post-effective
amendment such information as the managing underwriters or the Holders of a
majority in number of the Registrable Securities being sold believe should be
included therein relating to the plan of distribution with respect to such
Registrable Securities, and make all required filings of such Prospectus
supplement or post-effective amendment as promptly as practicable upon being
notified of the matters to be incorporated in such Prospectus supplement or
post-effective amendment;

            (l) provide any Holder of Registrable Securities included in such
Registration Statement, any underwriter participating in any disposition
pursuant to such Registration Statement and any attorney, accountant or other
agent retained by any such Holder or underwriter (collectively, the
"Inspectors") with reasonable access during business hours to appropriate
officers

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of Parent and Parent Subsidiaries to ask questions and to obtain information
reasonably requested by any such Inspector and make available for inspection
during business hours all financial and other records and other information,
corporate documents and properties of Parent and the Parent Subsidiaries and
affiliates (collectively, the "Records"), as shall be reasonably necessary to
enable them to exercise their due diligence responsibility; and

            (m) in the event of the issuance of any stop order of which Parent
or its counsel is aware or should be aware suspending the effectiveness of the
Registration Statement or of any order suspending or preventing the use of any
related Prospectus or suspending the qualification of any Registrable Securities
included in the Registration Statement for sale in any jurisdiction, Parent will
use commercially reasonable efforts promptly to obtain its withdrawal; and the
period for which the Registration Statement shall be kept effective shall be
extended by a number of days equal to the number of days between the issuance
and withdrawal of any stop orders (a "Section 7(m) Period").

            Parent may require each Holder of Registrable Securities as to which
any registration is being effected to furnish Parent with such information
regarding such Holder and material to the disclosure requirements relating to
the registration and the distribution of such securities as Parent may from time
to time reasonably request in writing.

            It shall be a condition precedent to the obligation of Parent to
take any action pursuant to this Agreement in respect of the securities which
are to be registered at the request of any Holder that such Holder shall furnish
to Parent such information regarding the securities held by such Holder and the
intended method of disposition thereof as Parent may reasonably request and as
shall be required in connection with the action taken by Parent.

            Each Holder of Registrable Securities agrees that, upon receipt of
any notice from Parent of the happening of any event of the kind described in
Section 7(e), such Holder will forthwith discontinue disposition of Registrable
Securities pursuant to the Prospectus or Registration Statement covering such
Registrable Securities until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 7(e), and, if so
directed by Parent, such Holder will deliver to Parent (at Parent's expense) all
copies, other than permanent file copies then in such Holder's possession, of
the Prospectus covering such Registrable Securities current at the time of
receipt of such notice.

            8. REGISTRATION EXPENSES. Parent will pay all Registration Expenses
and each Holder shall pay all underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of such Holder's
Registrable Securities pursuant to the Registration Statement.

            9. REPORTS UNDER THE EXCHANGE ACT. Parent agrees to:

            (a) file with the SEC in a timely manner all reports and other
documents required of Parent under the Exchange Act; and

            (b) furnish to any Holder, during the Effective Period, forthwith
upon request (A) a written statement by Parent that it has complied with the
current public information and reporting requirements of Rule 144 under the
Securities Act and the Exchange Act and (B) a copy of the most recent annual or
quarterly report of Parent and such other reports and documents so

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filed by Parent.

            10. INDEMNIFICATION; CONTRIBUTION.

            (a) INDEMNIFICATION BY PARENT. Parent agrees to indemnify and hold
harmless each Holder of Registrable Securities, its officers, directors, agents,
trustees, stockholders, beneficiaries and each person who controls such Holder
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act), against all losses, claims, damages, liabilities and expenses
(including reasonable attorneys' fees, disbursements and expenses) incurred by
such party pursuant to any actual or threatened action, suit, proceeding or
investigation arising out of or based upon (i) any violation by Parent (or its
officers, directors, employees, agents, representatives or controlling persons)
of any Federal or state law, rule or regulation applicable to Parent and
relating to any action or inaction by Parent (or such other person) in
connection with the offer and sale of Registrable Securities (ii) any untrue or
alleged untrue statement of material fact contained in the Registration
Statement, any Prospectus or preliminary Prospectus, or any amendment or
supplement to any of the foregoing or (iii) any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein (in the case of a Prospectus or a preliminary Prospectus,
in light of the circumstances then existing) not misleading, except in each case
insofar as the same arise out of or are based upon any such untrue statement or
omission made in reliance on and in conformity with information with respect to
such indemnified party furnished in writing to Parent by such indemnified party
expressly for use therein. In connection with an underwritten offering, Parent
will indemnify the underwriters thereof, their officers, directors, agents,
trustees, stockholders and each person who controls such underwriters (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) to the same extent as provided above with respect to the indemnification of
the Holders of Registrable Securities.

            (b) INDEMNIFICATION BY HOLDERS OF REGISTRABLE SECURITIES. In
connection with the Registration Statement, each Holder will furnish to Parent
in writing such information, including the name, address and the amount of
Registrable Securities held by such Holder, as Parent reasonably requests for
use in such Registration Statement or the related Prospectus and agrees to
indemnify and hold harmless (in the same manner and to the same extent as set
forth in Section 10(a)) Parent and any of its directors, officers, and
controlling persons (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act), against any losses, claims, damages,
liabilities and expenses resulting from (i) any violation by such Holder (or its
officers, directors, agents, trustees, stockholders or controlling persons) of
any Federal or state law, rule or regulation relating to action or inaction by
such Holder (or such other person) in connection with its offer and sale of
Registrable Securities and (ii) any untrue or alleged untrue statement of a
material fact contained in, or any omission or alleged omission of a material
fact required to be stated in, such Registration Statement or Prospectus or any
amendment or supplement to either of them or necessary to make the statements
therein (in the case of a Prospectus, in the light of the circumstances then
existing) not misleading, but only to the extent that any such untrue statement
or omission is made in reliance on and in conformity with information with
respect to such Holder furnished in writing to Parent by such Holder
specifically for inclusion therein.

            (c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any person

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entitled to indemnification hereunder agrees to give prompt written notice to
the indemnifying party after the receipt by such indemnified party of any
written notice of the commencement of any action, suit, proceeding or
investigation or threat thereof made in writing for which such indemnified party
may claim indemnification or contribution pursuant to this Agreement (provided
that failure to give such notification shall not affect the obligations of the
indemnifying party pursuant to this Section 10 except to the extent the
indemnifying party shall have been actually materially prejudiced as a result of
such failure). In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate therein and, to the
extent that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under these indemnification provisions for any legal fees or expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation, unless (i) Parent has agreed to pay such fees and
expenses, (ii) Parent has failed to assume the defense, employ counsel or
effectively pursue the defense, or (iii) the named parties to an action
(including any impleaded parties) include both an indemnified party and an
indemnifying party and such indemnified party shall have been advised by its
counsel that representation of such indemnified party and the indemnifying party
by the same counsel would be inappropriate under applicable standards of
professional conduct (whether or not such representation by the same counsel has
been proposed) due to actual or potential differing interests between them, in
which event the indemnifying party shall not have the right to assume the
defense of such action and shall be obligated to pay the reasonable fees and
expenses of such additional counsel or counsels. No indemnifying party, in
defense of any such action, suit, proceeding or investigation, shall, except
with the written consent of each indemnified party, consent to the entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to all indemnified parties
of a full and complete release from all liability in respect to such action,
suit, proceeding or investigation.

            (d) CONTRIBUTION. If the indemnification from the indemnifying party
provided for in this Section 10 is unavailable to an indemnified party hereunder
in respect of any losses, claims, damages, liabilities or expenses referred to
herein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities and expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified party in connection with the actions which resulted in
such losses, claims, damages, liabilities and expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include any legal and other
fees and expenses reasonably incurred by such indemnified party in connection
with any investigation or proceeding.

                                       11
<PAGE>

            The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 10(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11 (f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. Each Holder's
obligation to contribute is several in the proportion that the proceeds of the
offering received by such Holder bears to the total proceeds of the offering,
and not joint.

            If indemnification is available under this Section 10, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in Section 10(a) or (b), as the case may be, without regard to the
relative fault of said indemnifying parties or indemnified party or any other
equitable consideration provided for in this Section 10(d).

            (e) In no event shall any Holder of Registrable Securities be liable
for any indemnification pursuant to Section 10(b) in an amount, or required to
contribute any amount pursuant to Section 10(d) or otherwise, in excess of the
amount by which the total price at which the Registrable Securities of such
Holder were offered to the public exceeds the amount of any damages which such
Holder has otherwise been required to pay by reason of such untrue statement or
omission.

            (f) The provisions of this Section 10 shall be in addition to any
liability which any indemnifying party may have to any indemnified party and
shall survive the termination of this Agreement.

            11. REPRESENTATIONS AND WARRANTIES. (a) ORGANIZATION AND EXISTENCE;
AUTHORITY. Parent is a corporation duly organized, validly existing and in good
standing under the laws of New York. Parent has all corporate power and
authority necessary to enter into this Agreement. The execution, delivery and
performance by Parent of this Agreement has been duly and validly authorized by
all necessary corporation action. This Agreement has been duly executed and
delivered by Parent and constitutes a valid and legally binding obligation of
Parent, enforceable against Parent in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and by the principles governing the availability of equitable remedies).

            (b) NO CONFLICT. Neither the execution, delivery or performance by
Parent of this Agreement, nor the consummation by Parent of the transactions
contemplated hereby, will (i) violate or conflict with any provision of the
Certificate of Incorporation or Bylaws of Parent, (ii) violate, conflict with,
result in a breach of or constitute (with or without notice or lapse of time or
both) a default under, give rise to a right of termination or cancellation of,
or result in any change in the terms of, any contract or permit to which Parent
is a party or by which Parent is bound or affected, or to which any of the
properties or assets of Parent are subject, (iii) violate or conflict with any
order, judgment, injunction, award or decree of any governmental authority
applicable to Parent or too the properties or assets of Parent, or (iv) violate
or conflict with any statute, law or regulation of any jurisdiction applicable
to Parent or to the properties or assets of Parent; other than, in the case of
clauses (ii), (iii) and (iv) above, any such conflicts, violations, defaults,
rights or changes that individually or in the aggregate are not reasonably
likely to have a Material Adverse Effect on Parent or interfere in any material
way with the ability of Parent to consummate the

                                       12
<PAGE>

transactions contemplated hereby.

            (c) CONSENTS. No consent, authorization, order or approval of,
registration or filing with, or notice to, any governmental authority is
required to be obtained, made or given by or with respect to Parent in
connection with the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby, other than any of the
foregoing which are required pursuant to the Securities Act or any applicable
state securities or blue sky law or which, if not obtained or made, are not
reasonably likely to individually or in the aggregate have a Material Adverse
Effect on Parent or interfere in any material way with the ability of Parent to
consummate the transactions contemplated hereby.

            12. MISCELLANEOUS REMEDIES. (a) The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity. If any Holder should institute an
action or proceeding seeking specific enforcement of the provisions hereof, then
Parent hereby waives the claim or defense that such Holder has an adequate
remedy at law and hereby agrees not to assert in any such action or proceeding
the claim that such a remedy of law exists.

            (b) AMENDMENTS AND WAIVERS. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless Parent has obtained the written consent of Holders of at least a majority
in number of the Registrable Securities then outstanding.

            (c) NOTICES. Any notice required to be given hereunder shall be
sufficient if in writing, and sent by facsimile transmission and by courier
service (with proof of service), hand delivery or certified or registered mail
(return receipt requested and first-class postage prepaid), addressed as
follows:

            (i) if to a Holder of Registrable Securities, at the address of such
      Holder below such Holder's name on the signature pages hereof or, if not a
      party hereto or the date hereof, such other address as such Holder may
      designate to Parent in writing; and

            (ii)  if to Parent to:

                  Leucadia National Corporation
                  315 Park Avenue South
                  New York, New York  10010
                  Attention:  President
                  Facsimile:  (212) 598-3241

            with copies to:

                  Weil, Gotshal & Manges LLP
                  767 Fifth Avenue

                                       13
<PAGE>

                  New York, New York  10153
                  Attention:  Stephen E. Jacobs, Esq.
                  Facsimile:  (212) 310-8007

or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.

            (d) SUCCESSORS AND ASSIGNS; BENEFICIARIES. This Agreement shall
inure to the benefit of and be binding upon the parties hereto, any Holder other
than the Stockholders and to any indemnified party pursuant to Section 10 hereof
and any successors of any of the foregoing.

            (e) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.

            (f) DESCRIPTIVE HEADINGS. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.

            (g) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof.

            (h) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired thereby and that all remaining provisions contained herein shall not be
in any way impaired thereby.

            (i) ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression and a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter hereof.
There are no restrictions, promises, warranties or undertakings with respect to
the subject matter hereof, other than those set forth or referred to herein.
This Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.

                                       14
<PAGE>

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

                                    LEUCADIA NATIONAL CORPORATION

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

                                    ------------------------------------
                                    Name:

                                    ------------------------------------
                                    Name:

                                    ------------------------------------
                                    Name:

                                       15EXHIBIT 4.1

                         REGISTRATION RIGHTS AGREEMENT

            THIS REGISTRATION RIGHTS AGREEMENT, dated as of May 19, 2000 (this
"Agreement"), is made by and between HENLEY HEALTHCARE, INC., a Texas
corporation, with headquarters located at 120 Industrial Boulevard, Sugar Land,
TX 77478 (the "Company"), and each entity named on a signature page hereto
(each, an "Initial Investor") (each agreement with an Initial Investor being
deemed a separate and independent agreement between the Company and such Initial
Investor, except that each Initial Investor acknowledges and consents to the
rights granted to each other Initial Investor under such agreement).

                             W I T N E S S E T H:

            WHEREAS, upon the terms and subject to the conditions of the
Securities Purchase Agreement, dated as of May 19, 2000, between the Initial
Investor and the Company (the "Securities Purchase Agreement"; terms not
otherwise defined herein shall have the meanings ascribed to them in the
Securities Purchase Agreement), the Company has agreed to issue and sell to the
Initial Investor shares of Series D Convertible Preferred Stock of the Company
having an aggregate stated value of $3,500,000 (the "Preferred Stock"); and

            WHEREAS, the Company has agreed to issue the Warrants to the Initial
Investor in connection with the issuance of the Preferred Stock; and

            WHEREAS, the Preferred Stock (which term, for purposes of this
Agreement, shall include Periodic Amount Shares, as defined below) is
convertible into shares of Common Stock (the "Conversion Shares"; which term,
for purposes of this Agreement, shall include shares of Common Stock of the
Company issuable in lieu of accrued dividends on conversion as contemplated by
the Preferred Stock) upon the terms and subject to the conditions contained in
the Certificate of Designations and the Warrants may be exercised for the
purchase of shares of Common Stock (the "Warrant Shares") upon the terms and
conditions of the Warrants; and

            WHEREAS, to induce the Initial Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), with respect to the Conversion Shares and the Warrant Shares;

            NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agree as follows:

            1. DEFINITIONS.As used in this Agreement, the following terms shall
have the following meanings:

                                      1
<PAGE>
            (a) "Investor" means the Initial Investor and any permitted
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof and who holds Preferred Stock,
Warrants or Registrable Securities.

            (b) "Potential Material Event" means any of the following: (i) the
possession by the Company of material information not ripe for disclosure in a
registration statement, which shall be evidenced by determinations in good faith
by the Board of Directors of the Company that disclosure of such information in
the registration statement would be detrimental to the business and affairs of
the Company; or (ii) any material engagement or activity by the Company which
would, in the good faith determination of the Board of Directors of the Company,
be adversely affected by disclosure in a registration statement at such time,
which determination shall be accompanied by a good faith determination by the
Board of Directors of the Company that the registration statement would be
materially misleading absent the inclusion of such information.

            (c) "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").

            (d) "Registrable Securities" means the Conversion Shares and the
Warrant Shares.

            (e) "Registration Statement" means a registration statement of the
Company under the Securities Act covering Registrable Securities.

            (f) "Required Effective Date" means the relevant Initial Required
Effective Date or Increased Required Effective Date (as those terms are defined
below).

            2.    REGISTRATION.

            (A)   MANDATORY REGISTRATION.

            (i) The Company shall prepare and file with the SEC, as soon as
possible after the Closing Date but no later than thirty (30) days after the
Closing Date (the "Required Filing Date"), either a Registration Statement on
Form S-3 or an amendment to an existing Registration Statement, in either event
registering for resale by the Investor a sufficient number of shares of Common
Stock for the Initial Investors to sell the Registrable Securities (or such
lesser number as may be required by the SEC, but in no event less than the
number of shares equal to the sum of (A) two hundred percent (200%) of the
number of shares into which the Preferred Stock and all dividends thereon
through the second anniversary of the Closing Date would be convertible at the
time of filing of such Registration Statement (assuming for such purposes that
all shares of Initial Preferred Stock and Additional Preferred Stock had been
issued, had been eligible to be converted, and had been converted, into
Conversion Shares in accordance with their terms, whether or not such issuance,
accrual of dividends, eligibility or conversion had in fact occurred as of such
date) and (B) the number of shares which would be issued upon exercise of all of
the Warrants, if contemplated by the

                                      2
<PAGE>
Securities Purchase Agreement, at the time of filing of the Registration
Statement (assuming for such purposes that all Warrants had been issued, were
eligible to be exercised and had been exercised in accordance with their terms,
whether or not such issuance, eligibility or exercise had in fact occurred as of
such date). The Registration Statement (W) shall include only the Registrable
Securities and the shares specifically listed on EXHIBIT 1 annexed hereto, and
(X) shall also state that, in accordance with Rule 416 and 457 under the
Securities Act, it also covers such indeterminate number of additional shares of
Common Stock as may become issuable upon conversion of the Preferred Stock and
the exercise of the Warrants to prevent dilution resulting from stock splits, or
stock dividends. The Company will use its reasonable best efforts to cause such
Registration Statement to be declared effective on a date (the "Initial Required
Effective Date") which is no later than the earlier of (Y) five (5) days after
oral or written notice by the SEC that it may be declared effective or (Z)
ninety (90) days after the Initial Closing Date.

            (ii) If at any time (an "Increased Registered Shares Date"), the
number of shares of Common Stock represented by the Registrable Shares, issued
or to be issued as contemplated by the Transaction Agreements, exceeds the
aggregate number of shares of Common Stock then registered, the Company shall
either (X) amend the relevant Registration Statement filed by the Company
pursuant to the preceding provisions of this Section 2, if such Registration
Statement has not been declared effective by the SEC at that time, to register,
in the aggregate, at least the number of shares (the "Increased Shares Amount")
equal to (A) (I) the number of shares theretofore issued on conversion of the
Preferred Stock (including any dividends paid on conversion by the issuance of
Conversion Shares) plus (II) two hundred percent (200%) of the number of shares
into which the unconverted Preferred Stock and all dividends thereon through the
second anniversary of the Closing Date would be convertible at the Increased
Registered Shares Date (assuming for such purposes that all such shares of
Preferred Stock had been issued, had been eligible to be converted, and had been
converted, into Conversion Shares in accordance with their terms, whether or not
such issuance, accrual of dividends, eligibility or conversion had in fact
occurred as of such date) and (B) the number of shares which would be issued
upon exercise of all of the Warrants (assuming for such purposes that all
Warrants had been issued, had been eligible to be exercised and had been
exercised in accordance with their terms, whether or not such issuance,
eligibility or exercise had in fact occurred as of such date), or (Y) if such
Registration Statement has been declared effective by the SEC at that time, file
with the SEC an additional Registration Statement on Form S-3 or other
appropriate registration statement form (an "Additional Registration Statement")
to register the number of shares equal to the excess of the Increased Shares
Amount over the aggregate number of shares of Common Stock already registered.
The Company will use its reasonable best efforts to cause such Registration
Statement to be declared effective on a date (each, an "Increased Required
Effective Date") which is no later than (Q) with respect to a Registration
Statement under clause (X) of this subparagraph (ii), the Initial Required
Effective Date and (R) with respect to an Additional Registration Statement, the
earlier of (I) five (5) days after notice by the SEC that it may be declared
effective or (II) forty-five (45) days after the Increased Registered Shares
Date.

            (iii) The provisions of this Agreement apply to Registration
Statements for Registrable Securities applicable to transactions consummated on
the Additional Closing Date, except as the context may otherwise require.

                                      3
<PAGE>
            (B)   PAYMENTS BY THE COMPANY.

                  (i) If the Registration Statement covering the Registrable
Securities is not filed in proper form with the SEC by the Required Filing Date,
the Company will make payment to the Initial Investor in such amounts and at
such times as shall be determined pursuant to this Section 2(b).

                  (ii) If the Registration Statement covering the Registrable
Securities is not effective by the relevant Required Effective Date or if the
Investor is restricted from making sales of Registrable Securities covered by
any previously effective Registration Statement at any time (the date such
restriction commences, a "Restricted Sale Date") after the relevant Effective
Date other than during a Permitted Suspension Period (as defined below), then
the Company will make payments to the Initial Investor in such amounts and at
such times as shall be determined pursuant to this Section 2(b).

                  (iii) The amount (the "Periodic Amount") to be paid by the
Company to the Initial Investor shall be determined as of each Computation Date
(as defined below) and such amount shall be equal to the Periodic Amount
Percentage (as defined below) of the Purchase Price for all Preferred Stock for
the period from the date following the relevant Required Effective Date or
Restricted Sale Date, as the case may be, to the first relevant Computation
Date, and thereafter to each subsequent Computation Date. The "Periodic Amount
Percentage" means (A) two percent (2.0%; except that, prior to the Effective
Date, such amount shall be prorated on a daily basis if such first Computation
Date is less than thirty (30) days after the Required Effective Date) and (B)
two percent (2%) of the Purchase Price of all Preferred Stock to each
Computation Date thereafter. Anything in the preceding provisions of this
paragraph (iii) to the contrary notwithstanding, after the Effective Date the
Purchase Price for such Preferred Stock shall be deemed to refer to the sum of
(X) the principal amount of all Preferred Stock not yet converted and (Y) the
Held Shares Value (as defined below). The "Held Shares Value" means, for shares
acquired by the Investor upon a conversion within the thirty (30) days preceding
the Restricted Sale Date, but not yet sold by the Investor, the principal amount
of the Preferred Stock converted into such Conversion Shares; provided, however,
that if the Investor effected more than one conversion during such thirty (30)
day period and sold less than all of such shares, the sold shares shall be
deemed to be derived first from the conversions in the sequence of such
conversions (that is, for example, until the number of shares from the first of
such conversions have been sold, all shares shall be deemed to be from the first
conversion; thereafter, from the second conversion until all such shares are
sold). By way of illustration and not in limitation of the foregoing, if the
Registration Statement is not declared effective until one hundred sixty-five
(165) days after the Initial Closing Date, the Periodic Amount will aggregate
six percent (6%) of the Purchase Price of the Preferred Stock theretofore issued
(2% for days 91-120, plus 2% for days 121-150, plus 2% for days 151-165).

                  (iv) Each Periodic Amount will be payable by the Company,
except as provided in the other provisions of this subparagraph (iv), in cash or
other immediately available funds to the Investor (1) on the day after the
Required Filing Date or the Required Effective Date, as the case may be, and (2)
on the earlier of (A) each thirtieth day thereafter, (B) the third business day
after

                                      4
<PAGE>
the date the Registration Statement is filed or is declared effective, or (C)
the third business day after the Registration Statement has its restrictions
removed after the Effective Date, as the case may be, in each case without
requiring demand therefor by the Investor. Notwithstanding the provisions of the
first sentence of this subparagraph (iv), at the option of the Investor,
exercisable in its sole and absolute discretion by written notice to the Company
at any time before the Periodic Amount is paid, all or a portion of the Periodic
Amount shall be paid by the issuance of additional shares of Series D Preferred
Stock to the Investor ("Periodic Amount Shares") having a stated value equal to
the Periodic Amount being paid thereby.

                  (v) The parties acknowledge that the damages which may be
incurred by the Investor if the Registration Statement is not filed by the
Required Filing Date or the Registration Statement has not been declared
effective by a Required Effective Date, including if the right to sell
Registrable Securities under a previously effective Registration Statement is
suspended, may be difficult to ascertain. The parties agree that the Periodic
Amounts represent a reasonable estimate on the part of the parties, as of the
date of this Agreement, of the amount of such damages.

                  (vi) Notwithstanding the foregoing, the amounts payable by the
Company pursuant to this provision shall not be payable (i) to the extent any
delay in the effectiveness of the Registration Statement occurs because of an
act of, or a failure to act or to act timely by the Initial Investor or its
counsel, (ii) in the event all of the Registrable Securities may be sold
pursuant to Rule 144 or another available exemption under the Act without volume
or other restrictions or limits or (iii) with respect to a Permitted Suspension
Period.

                  (vii) "Computation Date" means (A) the date which is the
earlier of (1) thirty (30) days after the Required Filing Date, any relevant
Required Effective Date or a Restricted Sale Date, as the case may be, or (2)
the date after the Required Filing Date, such Required Effective Date or
Restricted Sale Date on which the Registration Statement is filed (with respect
to payments due as contemplated by Section 2(b)(i) hereof) or is declared
effective or has its restrictions removed (with respect to payments due as
contemplated by Section 2(b)(ii) hereof), as the case may be, and (B) each date
which is the earlier of (1) thirty (30) days after the previous Computation Date
or (2) the date after the previous Computation Date on which the Registration
Statement is filed (with respect to payments due as contemplated by Section
2(b)(i) hereof) or is declared effective or has its restrictions removed (with
respect to payments due as contemplated by Section 2(b)(ii) hereof), as the case
may be.

            3. OBLIGATIONS OF THE COMPANY. In connection with the registration
of the Registrable Securities, the Company shall do each of the following:

            (a) Prepare promptly, and file with the SEC by the Required Filing
Date a Registration Statement with respect to not less than the number of
Registrable Securities provided in Section 2(a) above, and thereafter use its
reasonable best efforts to cause such Registration Statement relating to
Registrable Securities to become effective by the Required Effective Date and
keep the Registration Statement effective at all times during the period (the
"Registration Period") continuing until the earliest of (i) the date that is
three (3) years after the last day of the calendar

                                      5
<PAGE>
month following the month in which the relevant Effective Date occurs, (ii) the
date when the Investors may sell all Registrable Securities under Rule 144
without volume or other restrictions or limits or (iii) the date the Investors
no longer own any of the Registrable Securities, which Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading;

            (b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;

            (c) Permit a single firm of counsel designated by the Initial
Investors to review the Registration Statement and all amendments and
supplements thereto a reasonable period of time (but not less than three (3)
business days) prior to their filing with the SEC, and not file any document in
a form to which such counsel reasonably objects;

            (d) Notify each Investor and such Investor's legal counsel
identified to the Company and which has requested by written notice to the
Company that it receive such notification (which, until further notice, shall be
deemed to be Krieger & Prager LLP, Attn: Samuel Krieger, Esq., which firm has
requested to receive such notification; each, an "Investor's Counsel"), and any
managing underwriters immediately (and, in the case of (i)(A) below, not less
than three (3) business days prior to such filing) and (if requested by any such
person) confirm such notice in writing no later than one (1) business day
following the day (i)(A) when a Prospectus or any Prospectus supplement or post-
effective amendment to the Registration Statement is proposed to be filed; (B)
whenever the SEC notifies the Company whether there will be a "review" of such
Registration Statement; (C) whenever the Company receives (or a representative
of the Company receives on its behalf) any oral or written comments from the SEC
in respect of a Registration Statement (copies or, in the case of oral comments,
summaries of such comments shall be promptly furnished by the Company to the
Investors); and (D) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the SEC or any other Federal or state governmental authority for
amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement covering any or all
of the Registrable Securities or the initiation of any proceedings for that
purpose; (iv) if at any time any of the representations or warranties of the
Company contained in any agreement (including any underwriting agreement)
contemplated hereby ceases to be true and correct in all material respects; (v)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or

                                      6
<PAGE>
threatening of any proceeding for such purpose; and (vi) of the occurrence of
any event that to the best knowledge of the Company makes any statement made in
the Registration Statement or Prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. In addition, the Company shall furnish the Investor's
Counsel with copies of all intended written responses to the comments
contemplated in clause (C) of this Section 3(d) not later than one (1) business
day in advance of the filing of such responses with the SEC so that the
Investors shall have the opportunity to comment thereon;

            (e) Furnish to each Investor and such Investor's Counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one (1) copy of the Registration Statement,
each preliminary prospectus and prospectus, and each amendment or supplement
thereto, and (ii) such number of copies of a prospectus, and all amendments and
supplements thereto and such other documents, as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor;

            (f) As promptly as practicable after becoming aware thereof, notify
each Investor of the happening of any event of which the Company has knowledge,
as a result of which the prospectus included in the Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and use its best efforts promptly to prepare a supplement or
amendment to the Registration Statement or other appropriate filing with the SEC
to correct such untrue statement or omission, and deliver a number of copies of
such supplement or amendment to each Investor as such Investor may reasonably
request;

            (g) As promptly as practicable after becoming aware thereof, notify
each Investor who holds Registrable Securities being sold (or, in the event of
an underwritten offering, the managing underwriters) of the issuance by the SEC
of a Notice of Effectiveness or any notice of effectiveness or any stop order or
other suspension of the effectiveness of the Registration Statement at the
earliest possible time;

            (h) Notwithstanding the foregoing, if at any time or from time to
time after the date of effectiveness of the Registration Statement, the Company
notifies the Investors in writing of the existence of a Potential Material
Event, the Investors shall not offer or sell any Registrable Securities, or
engage in any other transaction involving or relating to the Registrable
Securities, from the time of the giving of notice with respect to a Potential
Material Event until such Investor receives written notice from the Company that
such Potential Material Event either has been disclosed to the public or no
longer constitutes a Potential Material Event; PROVIDED, HOWEVER, that the
Company may not so suspend the right to such holders of Registrable Securities
during the periods the Registration Statement is required to be in effect other
than during a Permitted Suspension Period (and the

                                      7
<PAGE>
applicable provisions of Section 2(b) shall apply with respect to any such
suspension other than during a Permitted Suspension Period) . The term
"Permitted Suspension Period" means up to two such suspension periods during any
consecutive 12-month period, each of which suspension period shall not either
(i) be for more than ten (10) days or (ii) begin less than ten (10) business
days after the last day of the preceding suspension (whether or not such last
day was during or after a Permitted Suspension Period); provided further that
the Company shall, if lawful to do so, provide the Investor with at least two
(2) business days' notice of the existence (but not the substance of) a
Potential Material Event;

            (i) Use its reasonable efforts to secure and maintain the
designation of all the Registrable Securities covered by the Registration
Statement on the "Nasdaq/SmallCap Market" of the National Association of
Securities Dealers Automated Quotations System ("NASDAQ") within the meaning of
Rule 11Aa2-1 of the SEC under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the quotation of the Registrable Securities on The
Nasdaq/SmallCap Market; and, without limiting the generality of the foregoing,
to arrange for at least two market makers to register with the National
Association of Securities Dealers, Inc. as such with respect to such Registrable
Securities;

            (j) Provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement;

            (k) Cooperate with the Investors who hold Registrable Securities
being offered to facilitate the timely preparation and delivery of certificates
for the Registrable Securities to be offered pursuant to the Registration
Statement and enable such certificates for the Registrable Securities to be in
such denominations or amounts as the case may be, as the Investors may
reasonably request, and, within five (5) business days after a Registration
Statement which includes Registrable Securities is ordered effective by the SEC,
the Company shall deliver, and shall cause legal counsel selected by the Company
to deliver, to the transfer agent for the Registrable Securities (with copies to
the Investors whose Registrable Securities are included in such Registration
Statement) an appropriate instruction and opinion of such counsel; and

            (l) Take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities pursuant to
the Registration Statement.

            4. OBLIGATIONS OF THE INVESTORS. In connection with the registration
of the Registrable Securities, the Investors shall have the following
obligations:

            (a) It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of the Registrable
Securities held by it, as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request. At
least ten (10) days prior to the first anticipated filing date of the
Registration Statement,

                                      8
<PAGE>
the Company shall notify each Investor of the information the Company requires
from each such Investor (the "Requested Information") if such Investor has any
Registrable Securities included in the Registration Statement. If at least two
(2) business days prior to the filing date the Company has not received the
Requested Information from an Investor (a "Non-Responsive Investor"), then the
Company may file the Registration Statement without including Registrable
Securities of such Non- Responsive Investor;

            (b) Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement; and

            (c) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(f) or
3(g), above, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(f) or 3(g) and, if
so directed by the Company, such Investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.

            5. EXPENSES OF REGISTRATION. All reasonable expenses (other than
underwriting discounts and commissions of the Investor) incurred in connection
with registrations, filings or qualifications pursuant to Section 3, but
including, without limitation, all registration, listing, and qualifications
fees, printers and accounting fees, the fees and disbursements of counsel for
the Company shall be borne by the Company. In addition, a fee for a single
counsel for the Investors (as a group and not individually) equal to $3,500 for
the Registration Statement covering the Registrable Securities applicable to the
Preferred Stock and Warrants issued on the Initial Closing Date and $2,000 for
each Registration Statement covering Registrable Securities applicable to the
Additional Preferred Stock issued on the Additional Closing Date, shall be borne
by the Company.

            6. INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:

            (a) To the extent permitted by law, the Company will indemnify and
hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within the meaning of the
Securities Act or the Exchange Act (each, an "Indemnified Person" or
"Indemnified Party"), against any losses, claims, damages, liabilities or
expenses (joint or several) incurred (collectively, "Claims") to which any of
them may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations in the Registration Statement, or
any post-effective amendment thereof, or any prospectus

                                      9
<PAGE>
included therein: (i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any post-effective
amendment thereof or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, (ii) any untrue statement or alleged untrue statement of
a material fact contained in the final prospectus (as amended or supplemented,
if the Company files any amendment thereof or supplement thereto with the SEC)
or the omission or alleged omission to state therein any material fact necessary
to make the statements made therein, in light of the circumstances under which
the statements therein were made, not misleading or (iii) any violation or
alleged violation by the Company of the Securities Act, the Exchange Act, any
state securities law or any rule or regulation under the Securities Act, the
Exchange Act or any state securities law (the matters in the foregoing clauses
(i) through (iii) being, collectively, "Violations"). Subject to clause (b) of
this Section 6, the Company shall reimburse the Investors, promptly as such
expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a) shall not
(I) apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of any Indemnified Person expressly for use in
connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, after such prospectus was made
available by the Company pursuant to Section 3(c) hereof; (II) be available to
the extent such Claim is based on a failure of the Investor to deliver or cause
to be delivered the prospectus made available by the Company or the amendment or
supplement thereto made available by the Company; (III) be available to the
extent such Claim is based on the delivery of a prospectus by the Investor after
receiving notice from the Company under Section 3(f), (g) or (h) hereof (other
than a notice regarding the effectiveness of the Registration Statement or any
amendment or supplement thereto), or (IV) apply to amounts paid in settlement of
any Claim if such settlement is effected without the prior written consent of
the Company, which consent shall not be unreasonably withheld or delayed. Each
Investor will indemnify the Company and its officers, directors and agents
(each, an "Indemnified Person" or "Indemnified Party") against any claims
arising out of or based upon a Violation which occurs in reliance upon and in
conformity with information furnished in writing to the Company, by or on behalf
of such Investor, expressly for use in connection with the preparation of the
Registration Statement or the amendment or supplement thereto, subject to such
limitations and conditions as are applicable to the Indemnification provided by
the Company to this Section 6. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Person and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9.

            (b) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be. In case any such action is

                                      10
<PAGE>
brought against any Indemnified Person or Indemnified Party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, assume the defense thereof,
subject to the provisions herein stated and after notice from the indemnifying
party to such Indemnified Person or Indemnified Party of its election so to
assume the defense thereof, the indemnifying party will not be liable to such
Indemnified Person or Indemnified Party under this Section 6 for any legal or
other reasonable out-of-pocket expenses subsequently incurred by such
Indemnified Person or Indemnified Party in connection with the defense thereof
other than reasonable costs of investigation, unless the indemnifying party
shall not pursue the action to its final conclusion. The Indemnified Person or
Indemnified Party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and reasonable
out-of-pocket expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the Indemnified Person or
Indemnified Party provided such counsel is of the opinion that all defenses
available to the Indemnified Party can be maintained without prejudicing the
rights of the indemnifying party. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action. The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due and
payable.

            7. CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted by
law; PROVIDED, HOWEVER, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6; (b) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty of such fraudulent
misrepresentation; and (c) except where the seller has committed fraud (other
than a fraud by reason of the information included or omitted from the
Registration Statement as to which the Company has not given notice as
contemplated under Section 3 hereof) or intentional misconduct, contribution by
any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such Registrable
Securities.

            8. REPORTS UNDER EXCHANGE ACT. With a view to making available to
the Investors the benefits of Rule 144 promulgated under the Securities Act or
any other similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to:

            (a) make and keep public information available, as those terms are
understood and defined in Rule 144;

                                      11
<PAGE>
            (b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and

            (c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.

            9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of the Registrable
Securities (or all or any portion of any unconverted Preferred Stock or
unexercised Warrant) only if: (a) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment, (b) the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee or
assignee and (ii) the securities with respect to which such registration rights
are being transferred or assigned, (c) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act and applicable state securities
laws, (d) at or before the time the Company received the written notice
contemplated by clause (b) of this sentence the transferee or assignee agrees in
writing with the Company to be bound by all of the provisions contained herein,
and (e) such transfer of Registrable Securities is completed and disclosed to
the Company prior to the initial Effective Date or involves the transfer of
Registrable Securities resulting from the conversion of Preferred Stock having a
stated value of at least $200,000. In the event of any delay in filing or
effectiveness of the Registration Statement as a result of such assignment, the
Company shall not be liable for any damages arising from such delay, or the
payments set forth in Section 2(b) hereof arising from such delay.

            10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Investors who
hold a sixty-seven (67%) percent interest of the Registrable Securities (as
calculated by the stated value of the Preferred Stock without any reference to
the Warrant Shares). Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon each Investor and the Company.

            11.   MISCELLANEOUS.

            (a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.

                                      12
<PAGE>
            (b) Notices required or permitted to be given hereunder shall be
given in the manner contemplated by the Securities Purchase Agreement, (i) if to
the Company or to the Initial Investor, to their respective address contemplated
by the Securities Purchase Agreement, and (ii) if to any other Investor, at such
address as such Investor shall have provided in writing to the Company, or at
such other address as each such party furnishes by notice given in accordance
with this Section 11(b).

            (c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.

            (d) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the jurisdiction
of the federal courts whose districts encompass any part of the City of New York
or the state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on FORUM NON COVENIENS, to the bringing of any such proceeding in such
jurisdictions. To the extent determined by such court, either party hereto shall
reimburse the other party for any reasonable legal fees and disbursements
incurred by such party in enforcement of or protection of any of its rights
under this Agreement.

            (e) If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.

            (f) Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.

            (g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.

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

            (i) 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. This Agreement, once executed by a party, may be delivered
to the other party hereto by telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.

            (j) The Company acknowledges that any failure by the Company to
perform its obligations under Section 3(a) hereof, or any delay in such
performance could result in loss to the

                                      13
<PAGE>
Investors, and the Company agrees that, in addition to any other liability the
Company may have by reason of such failure or delay, the Company shall be liable
for all direct damages caused by any such failure or delay, unless the same is
the result of force majeure. Neither party shall be liable for consequential
damages.

            (k) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof. This Agreement may be amended only by an instrument in writing signed by
the party to be charged with enforcement thereof.

                 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                      14
<PAGE>
            IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of the
day and year first above written.

                              COMPANY:
                              HENLEY HEALTHCARE, INC.

                              By:/S/ MIKE BARBOUR
                              Name: Mike Barbour
                              Title: President and Chief Executive Officer

                              INITIAL INVESTOR:

                              THE ENDEAVOUR CAPITAL FUND S.A.
                               [PRINT NAME OF INITIAL INVESTOR]

                              By:/S/ SHMULI MARGULIES
                              Name: Shmuli Margulies
                              Title: Director

                                      15
<PAGE>
            IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of the
day and year first above written.

                              COMPANY:
                              HENLEY HEALTHCARE, INC.

                              By:/S/ MIKE BARBOUR
                              Name: Mike Barbour
                              Title: President and Chief Executive Officer

                              INITIAL INVESTOR:

                              ESQUIRE TRADE & INVEST INC.
                               [PRINT NAME OF INITIAL INVESTOR]

                              By:/S/ ROLAND WINIGER
                              Name: Roland Winiger
                              Title: Director
<PAGE>
            IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of the
day and year first above written.

                              COMPANY:
                              HENLEY HEALTHCARE, INC.

                              By:/S/ MIKE BARBOUR
                              Name: Mike Barbour
                              Title: President and Chief Executive Officer

                              INITIAL INVESTOR:

                              CELESTE TRUST REG
                               [PRINT NAME OF INITIAL INVESTOR]

                              By:/S/ THOMAS HACKL
                              Name: Thomas Hackl
                              Title:

<PAGE>
                                    EXHIBIT 1

            SHARES PERMITTED TO BE INCLUDED IN REGISTRATION STATEMENT

<TABLE>
<CAPTION>
                                      SHARES OF
                                       COMMON
    SHAREHOLDER NAME                    STOCK         OWNED/DESCRIPTION OF RIGHT TO ACQUIRE
    ----------------                 -----------      -------------------------------------
<S>                                  <C>              <C>
The Endeavour Capital Fund S.A.        50,000         Warrants, issued April 28, 2000,
                                                      exercisable at $2.00/share, with piggy
                                                      back registration rights
Union Atlantic LC or its              Based on        385 shares of Series D Convertible
designees                            Conversion       Preferred Stock, convertible as provided
                                       Price          in Certificate of Designations
Union Atlantic LC or its               125,000        Warrants, issued May 23, 2000,
designees                                             exercisable at $2.19/share, with piggy
                                                      back registration rights
Union Atlantic LC or its               50,000         Warrants, to be issued on the Additional
designees                                             Closing Date, exercisable at $2.19/share,
                                                      with piggy back registration rights
</TABLE>

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