Document:

Exhibit 10.1 Employment Agreement, effective as of February 14, 2004, between
             Anaren, Inc. and Carl W. Gerst, Jr.

                              EMPLOYMENT AGREEMENT

            This sets forth the terms of the Employment Agreement ("Agreement")
made effective as of February 14, 2004 between Anaren, Inc. ("Employer"), a New
York corporation with common stock publicly traded on the NASDAQ, and Carl W.
Gerst, Jr. ("Employee" or "Mr. Gerst"), an individual currently residing at 115
E. Genesee Street, Skaneateles, New York 13152.

                                    RECITALS

A.    Mr. Gerst is a co-founder of Anaren and is currently employed by Anaren as
      its Chief Technical Officer.

B.    Mr. Gerst has served on Anaren's Board of Directors since the Company was
      first incorporated in 1967, and currently is Vice Chairman of the Board.

C.    Anaren desires to retain the services of Mr. Gerst and to induce him to
      remain with Anaren.

D.    The Compensation Committee of Anaren's Board recommended, and the Board
      unanimously approved at its February 14, 2004 regular meeting, that the
      Company enter into an Employment Agreement with Mr. Gerst whereby in the
      event of a Change of Control of the Company, defined below, and Mr.
      Gerst's employment is involuntarily terminated, or if Mr. Gerst becomes
      disabled or ceases to be employed with Employer after the Term of this
      Employment Agreement, Mr. Gerst would be entitled to certain severance pay
      and benefits as provided for in this Agreement.

<PAGE>

            IN CONSIDERATION of the mutual covenants and representations
contained herein, and other good and valuable consideration, receipt of which is
acknowledged, the parties agree as follows:

      1. Employment.

            (a) Term. Employer shall continue to employ Employee, and Employee
shall continue to serve, as its Chief Technical Officer for a forty (40) month
term commencing on February 14, 2004 and ending on June 30, 2007 ("Period of
Employment"), subject to termination as provided in this Agreement.

            (b) Salary. During the Period of Employment, Employee's Base Salary
shall be set by Employer's Board of Directors but shall not be below $250,000
("Base Salary"), provided Employee continues to work his current normal work
schedule. Employee's Base Salary is payable in accordance with Employer's
regular payroll procedures for executive employees.

            (c) Successor Agreement. In the event Employee elects not to retire
at the end of the Period of Employment, Employee and Employer shall commence
good faith negotiations for a successor agreement, to be completed by May 31,
2007. If Employee elects to retire or Employer and Employee cannot agree on the
terms of Employee's continued employment by June 30, 2007, Employee shall be
entitled to be paid, as "Severance Compensation", an amount equal to three years
of the Base Salary in effect on the date Employee's employment ends. Payments
required pursuant to the preceding sentence shall be paid, unless otherwise
agreed upon by the parties, in thirty-six (36) substantially equal installments,
with the first installment paid within 3 business days following the date
Employee's employment ends, and each succeeding installment paid on a monthly
basis thereafter. If Mr.

                                      -2-
<PAGE>

Gerst deceases prior to payment of the total Severance Compensation provided for
in this section (1(c)), Employer shall pay Mr. Gerst's spouse, Anne Marie Gerst,
any remaining severance compensation payments that were otherwise owed to Mr.
Gerst. It is the parties intent to pay the severance payments required by this
provision in such a manner to minimize any income tax obligations that would
otherwise be applicable. For the period during which the Severance Compensation
is paid, Employee shall not be eligible to participate in any Employer fringe
benefit plan except to the extent Employee is eligible for any post retirement
medical plan provided by Employer.

      2. Duties During The Period Of Employment. Employee shall continue to
perform his Chief Technical Officer duties, subject to the direction of
Employer's President & CEO and the discharge of such other duties and
responsibilities to Employer as may from time to time be reasonably assigned to
Employee by Employer's President & CEO. Employee shall devote his best efforts
to the affairs of Employer, serve faithfully and to the best of Employee's
ability, and devote all of Employee's working time and attention, knowledge,
experience, energy and skill to the business of Employer, except that Employee
may affiliate with professional associations, and civic organizations.

      3. Termination. Employee's employment by Employer shall be subject to
termination as follows:

            (a) Expiration of the Term. This Agreement shall terminate
automatically at the expiration of the Period of Employment, unless the parties
enter into a written agreement extending Employee's employment, except for the
continuing obligation of the parties as specified hereunder.

                                      -3-
<PAGE>

            (b) Termination Upon Death or Disability. This Agreement shall
terminate upon Employee's death or disability as follows:

                  (i)   This Agreement shall terminate automatically upon
                        Employee's death. In the event this Agreement is
                        terminated as a result of Employee's death, Employer
                        shall continue payments of Employee's Base Salary for a
                        period of ninety (90) days following Employee's death to
                        the beneficiary designated by Employee on the
                        "Beneficiary Designation Form" attached to this
                        Agreement as Appendix A.

                  (ii)  Employer may terminate this Agreement upon Employee's
                        disability. For the purpose of this Agreement,
                        Employee's inability to perform Employee's regular
                        duties by reason of physical or mental illness or injury
                        for a period of twenty-six (26) successive weeks
                        ("Disability Period") shall constitute "Disability." The
                        determination of Disability shall be made by a physician
                        selected by Employer and a physician selected by
                        Employee; provided, however, that if the two physicians
                        so selected shall disagree, the determination of
                        Disability shall be submitted to Arbitration in
                        accordance with the rules of the American Arbitration
                        Association, and the decision of the Arbitrator shall be
                        binding on both parties. During the Disability Period,
                        Employee shall be entitled to continue to receive his
                        regular Base Salary pursuant to Employer's short term
                        disability policy (and supplemented, if necessary, by

                                      -4-
<PAGE>

                        Employee's accrued but unused sick leave), reduced by
                        any other benefits to which Employee may be entitled for
                        the disability period on account of such disability,
                        including, but not limited to, benefits provided under
                        New York's Workers' Compensation law.

                  (iii) Upon termination of this Agreement due to Employee's
                        death or disability, Employer shall treat as immediately
                        exercisable each unexpired stock option held by Employee
                        that is not exercisable or that has not been fully
                        exercised, so as to permit Employee (or his beneficiary)
                        to purchase any portion or all of the Employer common
                        stock not yet purchased pursuant to each such option
                        until the one year anniversary of Employee's death or
                        disability.

                  (iv)  In the case of termination due to death, Mr. Gerst's
                        beneficiary will be entitled to life insurance proceeds
                        equal to three times Mr. Gerst's base salary at the time
                        of death. In the event these life insurance proceeds are
                        not paid to Mr. Gerst's beneficiary, Anaren will pay Mr.
                        Gerst's beneficiary the Severance Compensation provided
                        for in paragraph 1(c). Severance Compensation shall also
                        be payable to Mr. Gerst at the end of the Disability
                        Period if termination of this Agreement is due to
                        Employee's disability as defined in Section 3(b)(ii)
                        above.

            (c) Termination by Employer for Cause. Employer may terminate
Employee's employment immediately for "cause" by written notice to Employee. For
purpose of

                                      -5-
<PAGE>

this Agreement, termination shall be for "cause" if the termination results from
any of the following events:

                  (i)   material breach of this Agreement;

                  (ii)  documented misconduct as an executive or director of
                        Employer, including, but not limited to,
                        misappropriating any funds or property of Employer, or
                        attempting to obtain any personal benefit from any
                        transaction to which Employer is a party or from any
                        transaction which any third party in which Employee has
                        an interest which is adverse to the interest of
                        Employer, unless, in either case, Employee shall have
                        first obtained the written consent of Employer's
                        President & CEO;

                  (iii) unreasonable neglect or refusal to perform the duties
                        assigned to Employee;

                  (iv)  conviction of a crime other than a vehicle and traffic
                        misdemeanor;

                  (v)   documented failure to follow the reasonable, written
                        instructions of the Employer's President & CEO or the
                        Board of Directors of Employer; or

                  (vi)  any knowing and material violation of the Security and
                        Exchange Commissions or NASDAQ's rules or regulations.

            Notwithstanding any other term or provision of this Agreement to the
contrary, if Employee's employment is terminated for cause, Employee shall
forfeit all rights to payments and benefits otherwise provided pursuant to this
Agreement; provided, however, that Base Salary will be paid to Employee through
the date of termination.

                                      -6-
<PAGE>

            (d) Termination by Employee for Good Reason. Employee's employment
with Employer may be terminated by Employee for "good reason". For purposes of
this Agreement "good reason" shall mean:

                  (i)   the assignment to Employee of any duties inconsistent
                        with Employee's position (including any change in his
                        status, offices, and titles) authority, duties,
                        responsibilities, or work location as contemplated by
                        paragraphs 1 and 2 of this Agreement; or

                  (ii)  any failure by Employer to comply with any of the
                        provisions of this Agreement, other than an isolated,
                        insubstantial and inadvertent failure not occurring in
                        bad faith and which is remedied by Employer promptly
                        after receipt of notice thereof given by Employee.

            (e) Termination by Employer for Reasons Other Than Cause or by
Employee for Good Reason. In the event Employer terminates Employee for reasons
other than cause, or in the event Employee terminates employment for good
reason, Employer shall pay/provide to Employee :

                  (i)   the greater of (A) the Severance Compensation described
                        in and payable in accordance with subparagraph 1(d) of
                        this Agreement or (B) Employee's regular Base Salary for
                        the balance of the Period of Employment, paid in a
                        single sum within 60 days following termination; and

                  (ii)  the right to exercise each unexpired stock option held
                        by Employee that is not exercisable or that has not been
                        fully exercised, so as to

                                      -7-
<PAGE>

                        permit the Employee to purchase any portion or all of
                        the Employer stock not yet purchased pursuant to each
                        such option until the first anniversary of the
                        Employee's termination.

      4. Fringe Benefits.

            (a) Benefit Plans. During the Period of Employment, Employee shall
be eligible to participate in Employer's Deferred Compensation Plan for Certain
Executive Employees, any employee pension benefit plans (as determined and
defined under Section 3(2) of the Employee Retirement Income Security Act of
1974 as amended), Employer paid group life insurance plans, medical plans,
dental plans, short term and long term disability plans, business travel
insurance programs and other fringe benefit programs maintained by Employer for
the benefit of its executive employees, including but not limited to four (4)
weeks of paid vacation. Except as modified by this Agreement, participation in
any of Employer's benefit plans and programs shall be based on, and subject to
satisfaction of, the eligibility requirements and other conditions of such plans
and programs.

            (b) Expenses. Upon submission to Employer of vouchers or other
required documentation, Employee shall be reimbursed for Employee's actual
out-of-pocket travel and other expenses reasonably incurred and paid by Employee
in connection with Employee's duties.

            (c) Other Benefits. During the Period of Employment, Employee shall
be entitled to receive the following additional benefits:

                  (i)   Reimbursement, plus an appropriate tax adjustment
                        ("gross-up"), of an amount equal to the annual premium
                        on a $1.0 million whole life insurance policy, which is
                        owned by Employee.

                                      -8-
<PAGE>

      5. Stock Options.

            (a) Prior Stock Option Grants. Pursuant to Employer's 1996 and 2000
incentive stock option plans, Employee has been granted options to purchase
shares of common stock of Employer. The parties hereby agree that the Plans and
any implementing option grant agreement shall be amended, if necessary, to
incorporate specific terms of this Agreement regarding the exercise of options
following Employee's termination of employment.

      6. Change of Control.

            (a) If Employee's employment with Employer is terminated by Employee
or Employer for any reason other than cause within two years following a "Change
of Control" that occurs during the Period of Employment, Employer shall:

                  (i)   pay Employee a severance benefit equal to the amount
                        (and at the time(s)) determined under subparagraph
                        3(e)(i) of this Agreement;

                  (ii)  treat as immediately exercisable each unexpired stock
                        option that is not otherwise exercisable or that has not
                        been fully exercised, so as to permit Employee to
                        purchase any portion or all of the Employer stock not
                        yet purchased pursuant to each such option until the
                        tenth anniversary of the date the option was granted to
                        Employee; and

                  (iii) waive all restrictions on any Employer stock granted to
                        Employee so as to permit Employee to dispose of any
                        restricted stock previously granted to Employee.

            (b) If any portion of the amounts paid to, or value received by
Employee following a "Change of Control" (whether paid or received pursuant to
his paragraph 6 or

                                      -9-
<PAGE>

otherwise) constitutes an "excess parachute payment" within the meaning of
Internal Revenue Code Section 280G, then the parties shall negotiate a
restructuring of payment dates and/or methods (but no payment amounts) to
minimize or eliminate the application of Section 280G. If an agreement to
restructure payments cannot be reached within sixty days of the date the first
payment is due under this paragraph 6, then payment shall be made without
restructuring. In that case, Employee shall be responsible for all taxes and
penalties payable by Employee as a result of Employee's receipt of an "excess
parachute payment".

            (c) For purpose of this paragraph 6, a "Change of Control" shall be
deemed to have occurred if:

                  (i)   any "person" including a "group" as determined in
                        accordance with Section 13D(3) of the Securities
                        Exchange Act of 1934, is or becomes a beneficial owner,
                        directly or indirectly, of securities of Employer
                        representing 30% or more of the combined voting power of
                        Employer's then outstanding securities;

                  (ii)  as a result of, or in connection with, any tender offer
                        or exchange offer, merger or other business combination
                        the persons who are directors of Employer before the
                        transaction shall cease to constitute a majority of the
                        Board of Directors of Employer or any successor to
                        Employer;

                  (iii) any tender offer or exchange offer, merger or other
                        business combination not approved by two-thirds of the
                        members of the Board of Directors in office immediately
                        prior to such event;

                                      -10-
<PAGE>

                  (iv)  Employer is merged or consolidated with another entity
                        and as a result of the merger or consolidation less than
                        70% of the outstanding voting securities of the
                        surviving or resulting corporation shall then be owned
                        in the aggregate by the former stockholders of Employer,
                        other than (A) affiliates within the meaning of the
                        Exchange Act or (B) any party to the merger or
                        consolidation;

                  (v)   A tender offer or exchange offer is made and consummated
                        for the ownership of securities of Employer representing
                        30% or more of the combined voting power of Employer's
                        then outstanding voting securities; or

                  (vi)  Employer transfers substantially all of its assets to
                        another corporation which is not controlled by Employer.

      7. Withholding. Employer shall deduct and withhold from compensation and
benefits provided under this Agreement all legally required taxes and any
benefit contributions required.

      8. Covenants.

            (a) Confidentiality. Employee shall not, without the prior written
consent of Employer, disclose or use in any way, either during his employment by
Employer or thereafter, except as required in the course of his employment by
Employer, any confidential business or technical information or trade secrets
acquired in the course of Employee's employment by Employer. Employee
acknowledges and agrees that it would be difficult to fully compensate Employer
for damages resulting from the breach or threatened breach of the foregoing
provision

                                      -11-
<PAGE>

and, accordingly, that Employer shall be entitled to temporary preliminary
injunctions and permanent injunctions to enforce this provision. Employer's
right to obtain injunctive relief shall not, however, diminish Employer's right
to claim and recover damages. Employee commits to use his best efforts to
prevent the publication or disclosure of any trade secret or any confidential
information concerning the business or finances of Employer or Employer's
affiliates, or any of its or their dealings, transactions or affairs which may
come to Employee's knowledge in the pursuance of its duties on behalf of
Employer.

            (b) No Competition. Employee's employment is subject to the
condition that during the term of his employment and for a period of thirty-six
(36) months from the date of the termination of his employment (the "Date of
Termination") Employee shall not, directly or indirectly, own, manage, operate,
control or participate in the ownership, management, operation or control of or
be connected as an officer, employee, partner, director, individual proprietor,
lender, consultant or otherwise, or have any financial interest in, or aid or
assist anyone else in the conduct of any entity or business ("a Competitive
Operation") which principal business directly competes with Employer on the Date
of Termination. Ownership by Employee of not more than 5% of the voting stock of
any publicly held corporation shall not constitute a violation of this
paragraph.

            (c) Certain Affiliates of Employer. It is understood that Employee
may have access to technical knowledge, trade secrets and customer lists of
affiliates of Employer or companies which Employer may acquire in the future and
may serve as a member of the board of directors or as an officer or employee of
an affiliate of Employer. Employee commits that he shall not, during the term of
his employment by Employer or for a period of thirty-six (36) months thereafter,
in any way, directly or indirectly, own, manage, operate, control or participate

                                      -12-
<PAGE>

in the ownership, management, operation or control of, or be connected as an
officer, employee, partner, director, individual proprietor, lender, consultant
or otherwise aid or assist anyone else in any business or operation which
competes with or engages in the business of such an affiliate.

            (d) Termination of Payments. Upon the breach by Employee of any
covenant under this paragraph 8, Employer may offset and/or recover from
Employee immediately any and all of the Severance Compensation paid to Employee
under subparagraph 1(d) hereof in addition to any and all other remedies
available to Employer under law or in equity.

      9. Notices. Any notice which may be given hereunder shall be sufficient if
in writing and mailed by certified mail, return receipt requested, to Employee
at his residence and to Employer at P.O. Box 178, 6635 Kirkville Road, E.
Syracuse, New York 13057 or at such other addresses as either Employee or
Employer may, by similar notice, designate.

      10. Rules, Regulations and Policies. Employee shall abide by and comply
with all of the rules, regulations, and policies of Employer, including without
limitation Employer's policy of strict adherence to, and compliance with, any
and all requirements of the Security and Exchange Commission and the NASDAQ.

      11. No Prior Restrictions. Employee affirms and represents that Employee
is under no obligation to any former employer or other third party which is in
any way inconsistent with, or which imposes any restriction upon, the employment
of Employee by Employer, or Employee's undertakings under this Agreement.

      12. Return of Employer's Property. After Employee has received notice of
termination or at the end of the term of this Agreement whichever first occurs,
Employee shall immediately return to Employer all documents and other property
in his possession belonging to Employer.

                                      -13-
<PAGE>

      13. Construction and Severability. The invalidity of any one or more
provisions of this Agreement or any part thereof, all of which are inserted
conditionally upon their being valid in law, shall not affect the validity of
any other provisions to this Agreement; and in the event that one or more
provisions contained herein shall be invalid, as determined by a court of
competent jurisdiction, this instrument shall be construed as if such invalid
provisions had not been inserted.

      14. Governing Law. This Agreement was executed and delivered in New York
and shall be construed and governed in accordance with the laws of the State of
New York.

      15. Assignability and Successors. This Agreement may not be assigned by
Employee or Employer, except that this Agreement shall be binding upon, and
shall inure to the benefit of the successor of Employer through merger,
acquisition or corporate reorganization.

      16. Miscellaneous.

            (a) This Agreement constitutes the entire understanding and
agreement between the parties with respect to Employee's employment with
Employer and shall supersede all prior understandings and agreements.

            (b) This Agreement cannot be amended, modified or supplemented in
any respect, except by a subsequent written agreement entered into by the
parties.

            (c) The services to be performed by Employee are special and unique;
it is agreed that any breach of this Agreement by Employee shall entitle
Employer (or any successor or assigns of Employer), in addition to any other
legal remedies available to it, to apply to any court of competent jurisdiction
to enjoin such breach.

      17. Counterparts. This Agreement may be executed in counterparts, which
together shall constitute one in the same instrument.

                                      -14-
<PAGE>

      18. Jurisdiction and Venue. The jurisdiction of any proceeding between the
parties arising out of, or with respect to this Agreement, shall be with New
York State Supreme Court, and venue shall be in Onondaga County. Each party
shall be subject to the personal jurisdiction of Onondaga County Supreme Court.

                                          ANAREN, INC.

                                          By: /s/Lawrence A. Sala
                                              -------------------
                                          Lawrence A. Sala, President & CEO

                                          Date: April 21, 2004

                                          /s/ Carl W. Gerst, Jr.
                                          ----------------------
                                          Carl W. Gerst, Jr.
                                          Chief Technical Officer

                                          Date: April 20, 2004

                                      -15-
<PAGE>

                                   APPENDIX A

                          BENEFICIARY DESIGNATION FORM

      Pursuant to the Employment Agreement between ANAREN, INC. and CARL W.
GERST, JR. dated as of February 14, 2004 ("Agreement"), I, Carl W. Gerst, Jr.
hereby designate Ann Marie Gerst, my spouse, as the beneficiary of amounts
payable upon my death in accordance with subparagraph 3(b)(ii) of the Agreement.
My beneficiary's current address is the same as mine.

Dated: April 20, 2004                                    /s/ Carl W. Gerst, Jr.
                                                         ----------------------
                                                             Carl W. Gerst, Jr.

/s/David M. Ferrara
-------------------
     Witness

                                      -16-Exhibit 4.1

                          SECURITIES PURCHASE AGREEMENT

      This Securities Purchase Agreement (this "Agreement") is dated as of April
__, 2004, by and among DynTek,  Inc. (the "Company"),  and the purchasers listed
on Schedule 1 hereto (each a "Purchaser" and collectively, the "Purchasers").

      WHEREAS,  subject to the terms and  conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act (as defined below),  and Rule
506  promulgated  thereunder,  the  Company  desires  to  issue  and sell to the
Purchasers,  and the Purchasers,  severally and not jointly,  desire to purchase
from the Company the (i) number of shares of Common Stock, and (ii) Warrants set
forth opposite each  Purchaser's  name on Schedule 1 hereto  (collectively,  the
"Offering").

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

                                   ARTICLE I.

                                   DEFINITIONS

      1.1  Definitions.  In  addition  to the terms  defined  elsewhere  in this
Agreement,  for all purposes of this  Agreement,  the  following  terms have the
meanings indicated in this Section 1.1:

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

      "Agent Shares" shall have the meaning ascribed to such term in Section 2.6
of this Agreement.

      "Agent  Warrant  Agreement"  shall  mean  the  Placement  Agent's  Warrant
Agreement dated as of the Closing Date.

      "Agent  Warrants" shall have the meaning  ascribed to such term in Section
2.6 of this Agreement.

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

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

      "Closing"  means the closing of the  purchase and sale of the Common Stock
and the Warrants  pursuant to Section 2.1 on April __, 2004,  or such other date
as agreed to by the parties.
<PAGE>

      "Closing Date" means the date of the Closing.

      "Closing Price" means on any particular date (a) the last reported closing
bid  price per share of Common  Stock on such  date on the  Trading  Market  (as
reported by  Bloomberg  L.P. at 4:15 p.m.  (New York time) as the last  reported
closing bid price for regular  session  trading on such day), or (b) if there is
no such price on such date,  then the closing bid price on the Trading Market on
the date nearest preceding such date (as reported by Bloomberg L.P. at 4:15 p.m.
(New York time) as the  closing bid price for  regular  session  trading on such
day),  or (c) if the Common  Stock is not then  listed or quoted on the  Trading
Market and if prices for the Common Stock are then reported in the "pink sheets"
published  by  the  National   Quotation  Bureau   Incorporated  (or  a  similar
organization  or agency  succeeding to its functions of reporting  prices),  the
most recent bid price per share of the Common Stock so  reported,  or (d) if the
shares of Common Stock are not then  publicly  traded the fair market value of a
share of Common Stock as  determined  by an appraiser  selected in good faith by
the Purchasers of a majority in interest of the Shares then outstanding.

      "Commission" means the Securities and Exchange Commission.

      "Common  Stock" means the Class A common  stock of the Company,  par value
$.0001 per share,  and any  securities  into which such Class A common stock may
hereafter be reclassified.

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

      "Company Counsel" means Nixon Peabody LLP.

      "Disclosure Schedules" means the Disclosure Schedules attached hereto.

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

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

      "Indemnified  Party" shall have the meaning  ascribed to such term Section
5.16(b).

      "Indemnifying  Party"  shall  have the  meaning  ascribed  to such term in
Section 5.16(b).

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

      "Investor  Securities"  means the  Shares,  the  Warrants  and the Warrant
Shares.

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

                                      -2-
<PAGE>

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

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

      "Per Share Purchase Price" means $1.15,  subject to adjustment for reverse
or forward stock splits,  stock dividends,  stock combinations and other similar
transactions of the Common Stock that occur after the date of this Agreement and
before the Closing.

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

      "Placement Agent" means Duncan Capital LLC.

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

      "Registration  Rights Agreement" means the Registration  Rights Agreement,
dated as of the date of this Agreement, among the Company and each Purchaser, in
the form of EXHIBIT A hereto.

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

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

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

      "Series A Warrants"  means the common stock purchase  warrants in the form
of EXHIBIT B-1 hereto  issuable  to each  Purchaser  at  Closing;  such Series A
Warrants are  exercisable to purchase up to the number of shares of Common Stock
equal to 30% of the aggregate number of Shares to be issued to such Purchaser at
the Closing,  which shall have an exercise price equal to $1.75 per share and be
exercisable for a period of five years commencing on the date that is six months
from the Closing Date.

      "Series B Warrants"  means the common stock purchase  warrants in the form
of EXHIBIT B-2 hereto  issuable  to each  Purchaser  at  Closing;  such Series B
Warrants are  exercisable to purchase up to the number of shares of Common Stock
equal to 20% of the aggregate number of Shares to be issued to such Purchaser at
the Closing,  which shall have an exercise price equal to $1.50 per share and be
exercisable for a period of 180 days commencing on the Effective Date.

      "Shares"  means the shares of Common  Stock  purchased  by the  Purchasers
pursuant to this Agreement.

                                      -3-
<PAGE>

      "Subscription  Amount"  means as to each  Purchaser,  the amount set forth
below such  Purchaser's  signature block on the Signature Page of this Agreement
in United States Dollars and in immediately available funds.

      "Subsidiary"  shall  have the  meaning  ascribed  to such term in  Section
3.1(a).

      "Trading  Day"  means (i) a day on which the  Common  Stock is traded on a
Trading Market, or (ii) if the Common Stock is not quoted on a Trading Market, a
day on which  the  Common  Stock is  quoted  in the  over-the-counter  market as
reported  by  the  National  Quotation  Bureau   Incorporated  (or  any  similar
organization  or  agency  succeeding  to  its  functions  of  reporting  price);
provided, that in the event that the Common Stock is not listed or quoted as set
forth in (i), and (ii) hereof, then Trading Day shall mean a Business Day.

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

      "Transaction  Documents"  means this Agreement,  the  Registration  Rights
Agreement,  the Warrants,  the  Placement  Agent  Warrant  Agreement,  the Agent
Warrant(s) and any and all other documents or agreements  executed in connection
with the transactions contemplated hereunder.

      "Transaction  Securities"  means the  Shares,  the  Warrants,  the Warrant
Shares, the Agent Warrants and the Agent Shares.

      "Warrants" means  collectively the Series A Warrants and Series B Warrants
issuable to each Purchaser at Closing.

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

                                   ARTICLE II.

                                PURCHASE AND SALE

      2.1 Closing.  On the terms and subject to the conditions set forth in this
Agreement,  at the Closing,  the Company shall sell and issue to each  Purchaser
and each Purchaser  shall purchase from the Company (i) the number of Shares set
forth opposite such Purchaser's name on Schedule I hereto.  Each Purchaser shall
purchase  from  the  Company,  and the  Company  shall  issue  and  sell to each
Purchaser,  a number of Shares  equal to such  Purchaser's  Subscription  Amount
divided by the Per Share Purchase Price.  The Warrants shall be issued,  without
additional consideration,  on the basis of one Warrant for each Share purchased.
Upon  satisfaction of the conditions set forth in Section 2.2, the Closing shall
occur at the offices of Nixon Peabody,  LLP, located at 437 Madison Avenue,  New
York,  New York 10022,  or such other  location as the  parties  shall  mutually
agree.

      2.2 Closing Conditions.

                                      -4-
<PAGE>

            (a) At the Closing,  as a condition to the  Purchasers'  obligations
hereunder, the Company shall deliver or cause to be delivered to:

                  (i) each Purchaser,  an irrevocable  instruction letter to the
            Company's  transfer agent  authorizing  the issuance of a restricted
            stock  certificate  for such number of Shares set forth next to such
            Purchaser's name on Schedule 1 hereto purchased by each Purchaser;

                  (ii) each Purchaser,  a Series A Warrant and Series B Warrant,
            registered  in the name of such  Purchaser,  as duly executed by the
            Company, entitling such Purchaser to purchase such amount of Warrant
            Shares as are set forth next to such  Purchaser's name on Schedule 1
            hereto;

                  (iii) each Purchaser,  the Registration  Rights Agreement duly
            executed by the Company;

                  (iv) each  Purchaser,  this  Agreement  duly  executed  by the
            Company;

                  (v) each  Purchaser and the Placement  Agent,  a legal opinion
            from Company Counsel in form and substance  reasonably  satisfactory
            to the Purchasers and Placement Agent;

                  (vi) the Placement Agent, a certificate of the Chief Executive
            Officer of the Company stating, among other things, that (i) all the
            conditions  set forth in  Section  2.2 of this  Agreement  have been
            satisfied  in all,  (ii) except as set forth in any Schedule to this
            Agreement,  since  December  31,  2003,  there  has  been no  event,
            condition  or  circumstance  that  has had or  could  reasonably  be
            expected to have a Material  Adverse  Effect,  and (iii) the Company
            has complied in all material  respects  with all its  covenants  and
            agreements set forth in the Transaction Documents; and

                  (vii) the Placement  Agent,  a certificate of the Secretary of
            the Company  containing,  among other items true and complete copies
            of the  resolutions  of  the  Board  of  Directors  of  the  Company
            approving Transaction Documents,  Placement Agent compensation,  the
            Offering and all documents and matters relating thereto.

            (b) At the  Closing,  as a condition  to the  Company's  obligations
hereunder,  each Purchaser shall deliver or cause to be delivered to the Company
the following:

                  (i) this Agreement duly executed by such Purchaser;

                  (ii) such  Purchaser's  payment  for the Shares  and  Warrants
            being purchased from the escrow account by wire transfer; and

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

            (c) At the  Closing,  as a  condition  to each  party's  obligations
hereunder,  all  representations  and  warranties of each of the parties  herein
shall remain true and correct in all material respects as of the Closing Date.

                                      -5-
<PAGE>

            (d)  As of the  Closing  Date,  as a  condition  to the  Purchasers'
obligations  hereunder,  there shall have been no Material  Adverse  Effect with
respect to the Company since the date hereof.

            (e) From the date hereof to the Closing Date,  and as a condition to
the Purchasers' obligations, (i) trading in the Common Stock shall not have been
suspended by the  Commission  (except for any  suspension  of trading of limited
duration agreed to by the Company, which suspension shall be terminated prior to
Closing);  (ii) trading in securities generally shall not have been suspended or
limited,  or minimum prices shall not have been  established on securities whose
trades are  reported by such  service,  or on any Trading  Market;  and (iii) no
banking  moratorium  shall have been declared either by the United States or New
York State authorities.

      2.3 Escrow  Provisions.  Pending the sale of the Shares and the  Warrants,
all funds paid  hereunder  shall be  deposited  by the  Company  in escrow  with
Continental  Stock Transfer & Trust Company (the "Escrow Agent")  pursuant to an
escrow agreement by and among the Escrow Agent,  the Company,  and the Placement
Agent (the  "Escrow  Agreement").  If a Closing has not  occurred on or prior to
April __,  2004,  or such later date  mutually  agreed by Company and  Placement
Agent (the "Termination  Date"), then this Agreement shall be void and all funds
paid  hereunder by each Purchaser  shall be promptly  returned to each Purchaser
without interest and/or  deduction,  subject to Section 2.5 hereof. If a Closing
occurs on or prior to the Termination Date, then all net purchase price proceeds
shall promptly be paid over to the Company.

      2.4  Certificates.  Each  Purchaser  hereby  authorizes  and  directs  the
Company,  upon the Closing, to deliver certificates  representing the Shares and
Warrants  to be issued to such  Purchaser  pursuant  to this  Agreement  to each
Purchaser's address indicated in this Agreement.

      2.5 Return of Funds.  Each  Purchaser  hereby  authorizes  and directs the
Company and the Placement Agent to return any funds for unaccepted  purchases to
the same account from which the funds were drawn.

      2.6 Expenses;  Fees.  Simultaneously  with payment for and delivery of the
Shares and Warrants, at the Closing, the Company shall: (i) pay to the Placement
Agent a cash fee equal to eight (8%) percent of the aggregate  purchase price of
the Shares and Warrants  sold for the portion of the  aggregate  purchase  price
that is equal to or less than $5,000,000 and six (6%) percent for the portion of
the aggregate purchase price (if any) that is in excess of $5,000,000 (the "Cash
Fee"); (ii) reimburse the Placement Agent for its actual out-of-pocket  expenses
incurred in connection with the Offering,  including,  without  limitation,  the
reasonable  fees and expenses of its legal counsel,  not to exceed legal fees of
[$________];  (iii) pay all expenses in connection with the qualification of the
Securities under the blue sky laws of the states which the Placement Agent shall
designate,  including filing fees and disbursements in connection with such blue
sky  matters;  (iv) pay  certain  fees to the Escrow  Agent for acting as escrow
agent;  and (v) issue to the  Placement  Agent five year  warrants  (the  "Agent
Warrants")  to  purchase  such  number of shares of  Common  Stock  (the  "Agent
Shares") as shall equal ten (10%) percent of the aggregate  number of (a) Shares
sold in the  Offering, and (b) Warrant  Shares  issuable  upon  exercise of the
Warrants as of the Closing, at a per share exercise price equal to the Per Share
Purchase  Price.  The Company also agrees to pay the Placement  Agent a Cash Fee
upon its receipt of proceeds,  if any, with exercise of the Series B Warrants by
Purchasers.

                                      -6-
<PAGE>

      2.7  Placement  Agent.  The  Investor  Securities  are being  offered on a
"best-effort" basis by the Placement Agent. The Placement Agreement reserves the
right, but is under no obligation, to sell to its affiliates Shares and Warrants
on the terms provided herein.

                                  ARTICLE III.

                         REPRESENTATIONS AND WARRANTIES

      3.1  Representations  and  Warranties of the Company.  Except as set forth
under  the  corresponding   section  of  the  Disclosure   Schedules   delivered
concurrently  herewith,  the Company hereby makes the following  representations
and  warranties  as of the  date  hereof  and as of the  Closing  Date  to  each
Purchaser:

            (a)  Subsidiaries.  Other than as disclosed in the SEC Reports,  the
Company has no direct or indirect  operating  subsidiaries (a  "Subsidiary"  and
collectively, the "Subsidiaries"). The Company owns, directly or indirectly, all
of the capital stock of each Subsidiary free and clear of any Liens, and all the
issued and  outstanding  shares of capital stock of each  Subsidiary are validly
issued and are fully paid,  non-assessable  and free of  preemptive  and similar
rights.

            (b)  Organization  and  Qualification.  Each of the  Company and the
Subsidiaries  is an entity duly  incorporated  or otherwise  organized,  validly
existing  and in  good  standing  under  the  laws  of the  jurisdiction  of its
incorporation  or organization  (as  applicable),  with the requisite  corporate
power and authority to own and use its properties and assets and to carry on its
business as currently  conducted.  Neither the Company nor any  Subsidiary is in
violation of any of the provisions of its respective  certificate or articles of
incorporation,  bylaws or other organizational or charter documents. Each of the
Company and the  Subsidiaries  is duly  qualified to conduct  business and is in
good standing as a foreign  corporation or other entity in each  jurisdiction in
which the nature of the business  conducted  or property  owned by it makes such
qualification necessary,  except where the failure to be so qualified or in good
standing,  as the case may be, would not result in (i) a material adverse effect
on the legality,  validity or enforceability of any Transaction Document, (ii) a
material  adverse  effect on the  results of  operations,  assets,  business  or
financial  condition of the Company and the  Subsidiaries,  taken as a whole, or
(iii) a  material  adverse  effect on the  Company's  ability  to perform in any
material  respect  on a timely  basis  its  obligations  under  any  Transaction
Document (any of (i), (ii) or (iii), a "Material Adverse Effect").

            (c)  Authorization;  Enforcement;  Validity.  The  Company  has  the
requisite  corporate  power and  authority to enter into and to  consummate  the
transactions  contemplated by each of the Transaction Documents and otherwise to
carry out its obligations thereunder.  The execution and delivery of each of the
Transaction  Documents  by  the  Company  and  the  consummation  by it  of  the
transactions  contemplated  thereby have been duly  authorized  by all necessary
action on the part of the Company and no further corporate action is required by
the Company in connection therewith. Each Transaction Document has been (or upon
delivery  will have been) duly  executed by the Company and,  when  delivered in
accordance  with the  terms  hereof,  will  constitute  the  valid  and  binding
obligation of the Company enforceable against the Company in accordance with its
terms   except   (i)  as   limited   by   applicable   bankruptcy,   insolvency,
reorganization,  moratorium  and other  laws of  general  application  affecting
enforcement of creditors' rights generally, and (ii) as limited by laws relating
to  the  availability  of  specific  performance,  injunctive  relief  or  other
equitable remedies, and (iii) with respect to the

                                      -7-
<PAGE>

indemnification  provisions set forth in the Registration  Rights Agreement,  as
limited by public policy.

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

            (e) Filings,  Consents and Approvals. The Company is not required to
obtain any consent,  waiver,  authorization  or order of, give any notice to, or
make any filing or registration  with, any court or other federal,  state, local
or  other  governmental  authority  or  other  Person  in  connection  with  the
execution, delivery and performance by the Company of the Transaction Documents,
other than the filing with the  Commission of the  Registration  Statement,  the
application(s)  and  approvals  to each  Trading  Market for the  listing of the
Shares,  Warrant Shares and the Agent Shares for trading thereon in the time and
manner  required  thereby,  applicable  Blue Sky  filings,  and the  filing of a
current report on Form 8-K under the Exchange Act.

            (f) Issuance of the Securities.  All of the  Transaction  Securities
have been duly  authorized  and, when issued and paid for in accordance with the
Transaction  Documents,  will  be  duly  and  validly  issued,  fully  paid  and
nonassessable,  free and clear of all Liens.  The Company has reserved  from its
duly  authorized  capital  stock such number of shares of Common  Stock so as to
permit the issuance of the Shares, the Warrant Shares and the Agent Shares.

            (g)  Capitalization.  Except  as set forth in the SEC  Reports,  the
capitalization  of the  Company is as  described  in the  Company's  most recent
periodic  report  filed  with the  Commission.  Except  as set  forth in the SEC
Reports,  the Company has not issued any capital  stock since such filing  other
than  pursuant to the exercise of employee  stock  options  under the  Company's
stock option plans and  pursuant to the  conversion  or exercise of Common Stock
Equivalents  outstanding  on the date  hereof.  No Person has any right of first
refusal,  preemptive  right,  right of  participation,  or any similar  right to
participate  in the  transactions  contemplated  by the  Transaction  Documents.
Except as a result of the  purchase  and sale of the  Securities,  for  employee
stock options under the Company's  stock option plans, or otherwise as reflected
in the SEC Reports, there are no outstanding options, warrants, script rights to
subscribe to, calls or commitments of any character  whatsoever  relating to, or
securities,  rights or  obligations  convertible  into or  exchangeable  for, or
giving any Person any right to  subscribe  for or acquire,  any shares of Common
Stock, or contracts,  commitments,  understandings  or arrangements by

                                      -8-
<PAGE>

which the Company or any  Subsidiary is or may become bound to issue  additional
shares of Common Stock, or securities or rights convertible or exchangeable into
shares of Common Stock.  The issue and sale of the Securities  will not obligate
the Company to issue  shares of Common Stock or other  securities  to any Person
(other  than the  Purchasers)  and will not  result in a right of any  holder of
Company securities to adjust the exercise,  conversion,  exchange or reset price
under such securities.

            (h) SEC  Reports;  Financial  Statements.  The Company has filed all
reports  required to be filed by it under the  Securities  Act and the  Exchange
Act,  including  pursuant to Section 13(a) or Section 15(d) of the Exchange Act,
for the two (2) years  preceding the date hereof (or such shorter  period as the
Company was required by law to file such  material)  (the  foregoing  materials,
including the exhibits  thereto,  being  collectively  referred to herein as the
"SEC Reports" and, together with the Disclosure Schedules to this Agreement, the
"Disclosure Materials").  As of their respective dates, the SEC Reports complied
in all material  respects with the  requirements  of the  Securities Act and the
Exchange  Act  and the  rules  and  regulations  of the  Commission  promulgated
thereunder,  as applicable,  and none of the SEC Reports, when filed,  contained
any  untrue  statement  of a material  fact or omitted to state a material  fact
required  to be stated  therein  or  necessary  in order to make the  statements
therein,  in  light  of the  circumstances  under  which  they  were  made,  not
misleading.  The financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting  requirements and the
rules and regulations of the Commission with respect thereto as in effect at the
time of filing. Such financial  statements have been prepared in accordance with
generally  accepted  accounting  principles applied on a consistent basis during
the periods  involved  ("GAAP"),  except as may be  otherwise  specified in such
financial  statements or the notes thereto and except that  unaudited  financial
statements may not contain all footnotes required by GAAP, and fairly present in
all material respects the financial position of the Company and its consolidated
subsidiaries  as of and for the dates thereof and the results of operations  and
cash  flows  for the  periods  then  ended,  subject,  in the case of  unaudited
statements, to normal, immaterial, year-end audit adjustments.

            (i) Material Changes. Since the date of the latest audited financial
statements  included  within the SEC  Reports,  except as  disclosed  in the SEC
Reports, (i) there has been no event,  occurrence or development that has had or
that could reasonably be expected to result in a Material  Adverse Effect,  (ii)
the Company has not incurred any material liabilities  (contingent or otherwise)
other than (A) trade  payables  and accrued  expenses  incurred in the  ordinary
course  of  business  consistent  with past  practice  and (B)  liabilities  not
required to be reflected in the Company's financial  statements pursuant to GAAP
or required  to be  disclosed  in filings  made with the  Commission,  (iii) the
Company  has not  altered  its method of  accounting,  (iv) the  Company has not
declared or made any dividend or  distribution  of cash or other property to its
holders  of  Common  Stock or  purchased,  redeemed  or made any  agreements  to
purchase or redeem any shares of its  capital  stock and (v) the Company has not
issued any equity  securities  to any  officer,  director or  Affiliate,  except
pursuant to existing  Company  stock  option  plans.  The Company  does not have
pending  before  the  Commission  any  request  for  confidential  treatment  of
information.

            (j) Litigation.  Except as disclosed in the SEC Reports, there is no
action, suit, inquiry, notice of violation,  proceeding or investigation pending
or, to the  knowledge  of the  Company,  threatened  against  or  affecting  the
Company,  any Subsidiary or any of their respective  properties before or by any
court,  arbitrator,  governmental  or  administrative  agency and/or

                                      -9-
<PAGE>

regulatory authority (federal,  state, county, local or foreign)  (collectively,
an "Action") which (i) adversely affects or challenges the legality, validity or
enforceability  of any of  the  Transaction  Documents  and/or  the  Transaction
Securities  or (ii)  could,  if  there  were an  unfavorable  decision,  have or
reasonably  be  expected  to result in a Material  Adverse  Effect.  Neither the
Company nor any Subsidiary,  nor, to the knowledge of the Company,  any director
or officer thereof,  except as disclosed in the SEC Reports,  is or has been the
subject of any Action  involving  a claim of  violation  of or  liability  under
federal or state securities laws or a claim of breach of fiduciary duty.  Except
as disclosed in the SEC Reports,  to the knowledge of the Company,  there is not
pending or contemplated, any investigation by the Commission and/or other entity
involving  the  Company  or any  current  or former  director  or officer of the
Company.  The Commission has not issued any stop order or other order suspending
the  effectiveness  of any  registration  statement  filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.

            (k) Labor  Relations.  No material  labor dispute  exists or, to the
knowledge of the Company,  is imminent  with respect to any of the  employees of
the Company which could  reasonably be expected to result in a Material  Adverse
Effect.

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

            (m) Regulatory Permits. The Company and the Subsidiaries possess all
certificates,  authorizations  and permits  issued by the  appropriate  federal,
state,  local or foreign  regulatory  authorities  necessary  to  conduct  their
respective businesses as described in the SEC Reports,  except where the failure
to possess such permits  would not have or reasonably be expected to result in a
Material Adverse Effect  ("Material  Permits"),  and neither the Company nor any
Subsidiary has received any notice of proceedings  relating to the revocation or
modification of any Material Permit.

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

                                      -10-
<PAGE>

            (o) Patents and Trademarks. To the knowledge of the Company and each
Subsidiary,  the Company and the  Subsidiaries  have, or have rights to use, all
patents, patent applications, trademarks, trademark applications, service marks,
trade names, copyrights, licenses and other similar rights that are necessary or
material for use in connection with their respective  businesses as described in
the SEC  Reports  and which the  failure to so have  would  result in a Material
Adverse Effect (collectively,  the "Intellectual Property Rights").  Neither the
Company nor any Subsidiary  has received a written notice that the  Intellectual
Property Rights used by the Company or any Subsidiary  violates or infringes the
rights of any Person.  To the  knowledge of the Company,  all such  Intellectual
Property Rights are enforceable.

            (p) Transactions With Affiliates and Employees.  Except as set forth
in the SEC Reports,  none of the  officers,  directors  and/or  employees of the
Company and the  Subsidiaries  are, to the knowledge of the Company,  a party to
any transaction  with the Company or any Subsidiary  (other than for services as
employees,  officers and directors),  including any contract, agreement or other
arrangement  providing for the  furnishing  of services to or by,  providing for
rental of real or personal property to or from, or otherwise  requiring payments
to or from any officer,  director or such  employee or, to the  knowledge of the
Company, any entity in which any officer,  director,  or any such employee has a
substantial  interest or is an officer,  director,  trustee or partner,  in each
case in excess of  $60,000  other than (a) for  payment of salary or  consulting
fees for services rendered, (b) reimbursement for expenses incurred on behalf of
the  Company  and  (c) for  other  employee  benefits,  including  stock  option
agreements under any stock option plan of the Company.

            (q)  Internal  Accounting  Controls.  The  Company  and  each of its
subsidiaries  maintains a system of internal  accounting  controls sufficient to
provide  reasonable  assurance that (i)  transactions are executed in accordance
with  management's  general or specific  authorizations,  (ii)  transactions are
recorded  as  necessary  to  permit  preparation  of  financial   statements  in
conformity  with GAAP and to  maintain  asset  accountability,  (iii)  access to
assets is permitted  only in accordance  with  management's  general or specific
authorization,  and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.  The Company has established disclosure controls and
procedures  (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Company
and designed  such  disclosure  controls and  procedures to ensure that material
information relating to the Company,  including its Subsidiaries,  is made known
to the certifying officers by others within those entities,  particularly during
the  period in which  the  Company's  Form 10-K or 10-Q,  as the case may be, is
being prepared.

            (r) Certain Fees. Except for payments payable to the Placement Agent
by the  Company,  the  Company  has not  entered  into an  agreement  to pay any
brokerage  or finder's  fees or  commissions  to any person  including,  but not
limited to, any  broker,  financial  advisor or  consultant,  finder,  placement
agent,  investment banker, bank or other Person with respect to the transactions
contemplated  by this  Agreement.  The Purchasers  shall have no obligation with
respect to any fees or with  respect to any claims made by or on behalf of other
Persons  for  fees of a type  contemplated  in this  Section  that may be due in
connection with the transactions  contemplated by this Agreement,  except to the
extent a Purchaser made an agreement to make any such payment.

                                      -11-
<PAGE>

            (s) Private  Placement.  Assuming  the  accuracy  of the  Purchasers
representations  and warranties set forth in Section 3.2, no registration  under
the Securities Act is required for the offer and sale of the Investor Securities
by the Company to the Purchasers as contemplated  hereby.  The issuance and sale
of the  Transaction  Securities  hereunder  does not  contravene  the  rules and
regulations of the Trading Market.

            (t) Investment Company.  The Company is not, and is not an Affiliate
of, an "investment  company" within the meaning of the Investment Company Act of
1940, as amended.

            (u) Listing and  Maintenance  Requirements.  The Company has not, in
the twelve (12)  months  preceding  the date  hereof,  received  notice from any
Trading  Market on which the Common Stock is or has been listed or quoted to the
effect that the  Company is not in  compliance  with the listing or  maintenance
requirements of such Trading Market, other than a letter from the Trading Market
on which the Common Stock is or has been listed or quoted  notifying the Company
that its  securities  would be delisted if the  trading  price did not  increase
above One Dollar ($1.00) per share. The Company is, and has no reason to believe
that it will not in the  foreseeable  future  continue to be, in compliance with
all such listing and  maintenance  requirements,  other than  potential  trading
price issues concerning such Trading Market's rules and regulations.

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

            (w) No General Solicitation.  Neither the Company, its Subsidiaries,
any of their  affiliates  nor any person acting on their behalf,  has engaged in
any form of general  solicitation or general  advertising (within the meaning of
Regulation D under the Securities  Act) in connection  with the offer or sale of
the Transaction Securities.

            (x) No Integrated  Offering.  Neither the Company, its Subsidiaries,
any of their  affiliates nor any person acting on their behalf has,  directly or
indirectly,  made any offers or sales of any security or solicited any offers to
buy any security,  under circumstances that would require registration of any of
the Transaction  Securities under the Securities Act or cause the Offering to be
integrated  with prior  offerings by the Company for purposes of the  Securities
Act  or  any  applicable  stockholder  approval  provisions,  including  without
limitation,  under  the rules  and  regulations  of any  exchange  or  automated
quotation  system on which any of the  securities  of the  Company are listed or
designated.  None of the Company,  its  Subsidiaries,  their  affiliates and any
person  acting on their behalf will take any action or steps  referred to in the
preceding  sentence that would require  registration  of any of the  Transaction
Securities  under the Securities Act or cause the Offering to be integrated with
other offerings.

                                      -12-
<PAGE>

            (y) Registration  Rights.  Except with respect to Purchasers and the
Placement Agent and except as provided on Schedule 3.1(y) hereto,  no person has
any right to cause the Company to effect the  registration  under the Securities
Act of any securities of the Company.

            (z) Right of First  Refusal.  Except  with  regard to the  Placement
Agreement and Duncan Capital, LLC, no person, firm or other business entity is a
party to any  agreement,  contract or  understanding,  written or oral entitling
such party to a right of first  refusal with respect to offerings of  securities
by the Company.

            (aa) Disclosure.  The Company confirms that, neither the Company nor
any other  Person  acting on its behalf has provided  any of the  Purchasers  or
their  agents  or  counsel  with  any  information  that  constitutes  or  might
constitute  material,   non-public  information.  The  Company  understands  and
confirms  that the  Purchasers  will rely on the foregoing  representations  and
covenants in effecting transactions in securities of the Company. All disclosure
provided  to  the  Purchasers  regarding  the  Company,  its  business  and  the
transactions  contemplated  hereby,  including the Disclosure  Schedules to this
Agreement,  furnished by or on behalf of the Company are true and correct and do
not  contain  any  untrue  statement  of a  material  fact or omit to state  any
material fact necessary in order to make the statements  made therein,  in light
of the circumstances under which they were made, not misleading.

            (bb) Insurance.  Each of the Company and its  Subsidiaries  maintain
insurance  of the types and in the amounts  deemed  adequate  for its  business,
including,  but not limited to, product liability insurance,  insurance covering
real and personal  property owned or leased by the Company and its  subsidiaries
against  theft,  damage,  destruction,  acts of  vandalism  and all other  risks
customarily insured against, all of which insurance is in full force and effect.

            (cc)  Conduct of  Business.  Since  December  31, 2003 and except as
otherwise stated in the SEC Reports, the Company has not (a) incurred any debts,
obligations or liabilities,  absolute, accrued, contingent or otherwise, whether
due or to become  due,  except  current  liabilities  incurred  in the usual and
ordinary  course of  business,  having a Material  Adverse  Effect,  (b) made or
suffered  any  changes  in  its  contingent  obligations  by  way  of  guaranty,
endorsement  (other than the  endorsement of checks for deposit in the usual and
ordinary course of business),  indemnity,  warranty or otherwise, (c) discharged
or satisfied  any liens other than those  securing,  or paid any  obligation  or
liability other than, current liabilities shown on the balance sheet dated as at
December 31, 2003 and forming part of the SEC Reports,  and current  liabilities
incurred since December 31, 2003, in each case in the usual and ordinary  course
of  business,  (d)  mortgaged,  pledged or  subjected to lien any of its assets,
tangible or intangible, (e) sold, transferred or leased any of its assets except
in the usual and ordinary  course of business,  (f) cancelled or compromised any
debt or claim, or waived or released any right, of material value,  (g) suffered
any physical  damage,  destruction or loss (whether or not covered by insurance)
adversely affecting the properties or business of the Company,  (h) entered into
any  transaction  other than in the usual and ordinary course of business except
for  this  Agreement  and  the  related  agreements   referred  to  herein,  (i)
encountered any labor  difficulties or labor union  organizing  activities,  (j)
made or  granted  any wage or salary  increase  or entered  into any  employment
agreement, (k) issued or sold any shares of capital stock or other securities or
granted any options with respect thereto, or modified any equity security of the
Company,  (l) declared or paid any dividends on or made any other  distributions
with  respect  to, or  purchased  or  redeemed,  any of its  outstanding  equity
securities,  (m) suffered or experienced any change in,

                                      -13-
<PAGE>

or condition  affecting,  its condition  (financial or  otherwise),  properties,
assets,  liabilities,  business  operations or results of operations  other than
changes,  events or conditions in the usual and ordinary course of its business,
having (either by itself or in conjunction  with all such other changes,  events
and conditions) a Material Adverse Effect, (n) made any change in the accounting
principles,  methods or practices followed by it or depreciation or amortization
policies or rates  theretofore  adopted,  or (o) entered  into any  agreement or
otherwise  obligated  itself,  to  do  any  of  the  foregoing  other  than  its
agreements, currently held in escrow subject to meeting closing conditions, with
Young  and  Williams,  PC and its  affiliates  for the  management  and  related
transactions related to the Company's child support enforcement business.

      3.2  Representations  and  Warranties of the  Purchasers.  Each  Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing  Date to the Company,  acknowledging  that the
Company is relying upon the accuracy and completeness of the representations and
warranties  set forth herein to, among other  things,  ensure that  registration
under Section 5 of the  Securities  Act is not required in  connection  with the
sale of the Securities hereby, as follows:

            (a)  Organization;  Authority.  Such  Purchaser,  if  not a  natural
person, is an entity duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization  with full right,  corporate or
partnership power and authority to enter into and to consummate the transactions
contemplated  by the  Transaction  Documents  and  otherwise  to  carry  out its
obligations  thereunder.  The  execution,   delivery  and  performance  by  such
Purchaser  of the  transactions  contemplated  by this  Agreement  has been duly
authorized  by all  necessary  corporate  or similar  action on the part of such
Purchaser.  Each  Transaction  Document  to  which it is a party  has been  duly
executed by such  Purchaser,  and when delivered by such Purchaser in accordance
with the terms hereof,  will constitute the valid and legally binding obligation
of such Purchaser, enforceable against it in accordance with its terms.

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

            (c)  Purchaser  Status.  At the time such  Purchaser was offered the
Shares  and  Warrants,  it was,  and at the  date  hereof  it is an  "accredited
investor" as defined in Rule 501(a) under the Securities  Act. Such Purchaser is
not, and is not required to be,  registered as a broker-dealer  under Section 15
of the Exchange Act. In making an investment  decision as to whether to purchase
the Shares and Warrants  offered  hereby,  each Purchaser has relied solely upon
the SEC Reports and the  representation  and warranties of the Company contained
herein.  Each Purchaser has had the opportunity to ask questions of, and receive
answers  from,

                                      -14-
<PAGE>

representatives  of the Company  concerning the Company and the officers and all
such questions  have been asked and answered by the Company to the  satisfaction
of the Purchaser.

            (d) Experience of Such Purchaser.  Each  Purchaser,  either alone or
together  with its  representatives,  has  such  knowledge,  sophistication  and
experience in business and  financial  matters so as to be capable of evaluating
the merits and risks of the prospective  investment in the Investor  Securities,
and has so evaluated the merits and risks of such investment.  Such Purchaser is
able to bear the economic risk of an investment in the Investor  Securities and,
at the present time, is able to afford a complete loss of such investment.

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

            (f) Compliance with the Securities  Laws.  Such Purchaser  agrees to
comply with the requirements of Regulation M, if applicable, with respect to the
resale of the  Shares by the  Purchaser.  Such  Purchaser  hereby  confirms  its
understanding that it may not cover short sales made prior to the Effective Date
with shares of Common Stock registered for resale on the Registration Statement.

            (g) No  Conflicts.  Neither  the  execution  and  delivery  of  this
Agreement  and/or  any  Transaction  Document,   nor  the  consummation  of  the
Transactions  contemplated  hereby,  will  violate  any  constitution,  statute,
regulation, rule, injunction,  judgment, order, decree, ruling, charge, or other
restriction of any government,  governmental agency, or court to which Purchaser
is subject or any  provision of its  organizational  documents or other  similar
governing instruments.

            (h) No Advice.  Purchaser understands that nothing in this Agreement
or any other  materials  presented to Purchaser in connection  with the purchase
and sale of the Investor Securities constitutes legal, tax or investment advice.
Purchaser has consulted such legal,  tax and  investment  advisors as it, in its
sole  discretion,  has deemed  necessary or appropriate  in connection  with its
purchase of the Investor Securities.

            (i) No  Litigation,  Etc.  There  is no  action,  suit,  proceeding,
judgment,  claim or investigation pending or, to the knowledge of the Purchaser,
threatened  against  the  Purchaser  which could  reasonably  be expected in any
manner to challenge or seek to prevent, enjoin, alter or materially delay any of
the transactions contemplated by the Transaction Documents.

            (j)  Approvals.  The  execution,  delivery  and  performance  by the
Purchaser  of this  Agreement  and the  Transaction  Documents  to which it is a
party,  and the  consummation  of the  transactions  set forth herein require no
material action by or in respect of, or material  filing with, any  governmental
body,  agency,  official  or  authority,  by the  Purchaser  other  than (i) any
filings,  authorizations,  consents and  approvals as may be required  under the
Hart-Scott-Rodino  Improvements Act of 1976, as amended;  (ii) the filing by the
Purchaser  with the  Commission of such reports under the Exchange Act as may be
required in connection  with this Agreement,  the Transaction  Documents and the
transactions  contemplated  hereby,  and  (iii)  any  filings  required  by  the
securities or blue sky laws of the various states.

                                      -15-
<PAGE>

            (k)  Placement  Agent.   Each  Purchaser  agrees  that  neither  the
Placement  Agent  nor any of its  respective  directors,  officers,  affiliates,
employees  or agents  shall be liable to the  Purchaser  for any action taken or
omitted to be taken by it in connection therewith, except for willful misconduct
or gross negligence.

      The Company  acknowledges  and agrees that each Purchaser does not make or
has not made any  representations or warranties with respect to the transactions
contemplated  hereby other than those specifically set forth in this Section 3.2
and Section 4.1.

                                   ARTICLE IV.

                         OTHER AGREEMENTS OF THE PARTIES

      4.1 Transfer Restrictions.

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

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

      THESE  SECURITIES  HAVE NOT BEEN  REGISTERED WITH THE SECURITIES AND
      EXCHANGE  COMMISSION  OR THE  SECURITIES  COMMISSION OF ANY STATE IN
      RELIANCE UPON AN EXEMPTION  FROM  REGISTRATION  UNDER THE SECURITIES
      ACT OF 1933, AS AMENDED (THE "SECURITIES  ACT"),  AND,  ACCORDINGLY,
      MAY  NOT  BE  OFFERED  OR  SOLD  EXCEPT  PURSUANT  TO  AN  EFFECTIVE
      REGISTRATION  STATEMENT  UNDER THE  SECURITIES ACT OR PURSUANT TO AN
      AVAILABLE  EXEMPTION  FROM, OR IN A  TRANSACTION  NOT SUBJECT TO THE
      REGISTRATION  REQUIREMENTS  OF THE  SECURITIES ACT AND IN ACCORDANCE
      WITH  APPLICABLE  STATE  SECURITIES  LAWS  AS  EVIDENCED  BY A LEGAL
      OPINION OF COUNSEL TO THE  TRANSFEROR TO SUCH EFFECT,  THE SUBSTANCE
      OF WHICH  SHALL  BE  REASONABLY  ACCEPTABLE  TO THE  COMPANY.  THESE
      SECURITIES  MAY BE PLEDGED  IN  CONNECTION  WITH A BONA FIDE  MARGIN
      ACCOUNT  WITH  A  REGISTERED  BROKER-DEALER  OR  OTHER  LOAN  WITH A
      FINANCIAL INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN
      RULE 501(a) UNDER THE SECURITIES ACT.

                                      -16-
<PAGE>

      The Company acknowledges and agrees that a Purchaser may from time to time
pledge pursuant to a bona fide margin agreement with a registered  broker-dealer
or grant a security  interest  in some or all of the  Investor  Securities  to a
financial institution that is an "accredited investor" as defined in Rule 501(a)
under the Securities  Act and, if required under the terms of such  arrangement,
such  Purchaser  may  transfer  pledged or secured  Investor  Securities  to the
pledgees or secured  parties.  Such a pledge or transfer would not be subject to
approval of the Company and no legal  opinion of legal  counsel of the  pledgee,
secured party or pledgor  shall be required in connection  with the grant of the
pledge.  Further,  no notice  shall be required  of grant of the pledge.  At the
appropriate  Purchaser's  expense,  the Company  will  execute and deliver  such
reasonable documentation as a pledgee or secured party of Transaction Securities
may reasonably  request in connection  with a pledge or transfer of the Investor
Securities,  including  the  preparation  and filing of any required  prospectus
supplement  under Rule 424(b)(3)  under the  Securities Act or other  applicable
provision  of the  Securities  Act to  appropriately  amend the list of  selling
stockholders  thereunder.  Notwithstanding  anything to the  contrary,  any such
pledgee  shall  not be  entitled  to any  rights  under  any of the  Transaction
Documents unless and until such pledgee executes a written agreement to be bound
by Purchasers' obligations under the Transaction Documents.

            (c)  Subject  to  compliance  with all laws,  rules and  regulations
including,  but not  limited  to,  the  Securities  Act and  the  Exchange  Act,
certificates  evidencing  the Shares and  Warrant  Shares  shall not contain any
legend  (including  the legend set forth in Section  4.1(b)),  (i) following any
sale of the  Shares or  Warrant  Shares  pursuant  to a  registration  statement
(including the Registration  Statement) covering the resale of such security, or
(ii) following any sale of the Shares or Warrant Shares pursuant to Rule 144, or
(iii) if such Shares or Warrant  Shares are  eligible for sale under Rule 144(k)
and appropriate  documentation is provided  satisfactory to legal counsel to the
Company,  or (iv) if such legend is not required under applicable  regulation of
the Securities Act (including judicial interpretations and pronouncements issued
by the Staff of the Commission).  Subject to compliance with all laws, rules and
regulations  including,  but not limited to, the Securities Act and the Exchange
Act,  the  Company  shall  cause its  counsel  to issue a legal  opinion  to the
Company's  transfer  agent  promptly after the Effective Date if required by the
Company's  transfer agent to effect the removal of the legend hereunder.  If all
or any portion of a Warrant is  exercised  at a time when there is an  effective
registration  statement to cover the resale of the Warrant Shares,  such Warrant
Shares shall be issued free of all legends. The Company agrees that at such time
as such legend is no longer  required under and pursuant to this Section 4.1(c),
it will, upon written request from the Purchaser and following the submission to
the Company  counsel of such materials as shall be reasonably  requested by such
counsel therefore, no later than four (4) Trading Days following the delivery by
a Purchaser  to the Company or the  Company's  transfer  agent of a  certificate
representing  Shares and/or  Warrant  Shares,  as the case may be, issued with a
restrictive  legend,  deliver or cause to be delivered to such  Purchaser  (i) a
certificate  representing  such securities that is free from all restrictive and
other legends, or (ii) in lieu of delivering physical certificates  representing
the Shares and/or Warrant Shares, and provided that the Company's transfer agent
is  participating  in  the  Depository  Trust  Company  ("DTC")  Fast  Automated
Securities  Transfer  (or FAST)  program,  upon  request of the  Purchaser,  the
Company shall use its reasonable  commercial efforts to cause its transfer agent
to  electronically  transmit the Shares and/or  Warrant  Shares by crediting the
account of the Purchaser's prime broker with DTC through its Deposit  Withdrawal
Agent Commission (or DWAC) system.  The Company

                                      -17-
<PAGE>

may not make any  notation on its records or give  instructions  to any transfer
agent of the Company that enlarge the restrictions on transfer set forth in this
Section.

            (d) Each Purchaser severally and not jointly agrees that the removal
of the  restrictive  legend from  certificates  representing  the Shares and the
Warrant Shares as set forth in this Section 4.1 is predicated upon the Company's
reliance that the Purchaser will sell any Investor Securities pursuant to either
the  registration  requirements of the Securities Act,  including any applicable
prospectus delivery requirements, or an exemption therefrom.

      4.2  Furnishing  of  Information.  Until  the date no  Purchaser  owns any
Investor Securities,  the Company covenants and agrees to timely file (or obtain
extensions in respect  thereof and file within the applicable  grace period) all
reports  required to be filed by the Company  after the date hereof  pursuant to
the Exchange  Act.  Upon the request of any such holder of Investor  Securities,
the  Company  shall  deliver to such  holder a written  certification  of a duly
authorized  officer as to whether it has complied with the  preceding  sentence.
Until the date no Purchaser owns any Investor Securities,  if the Company is not
required to file  reports  pursuant  to the  Exchange  Act, it will  prepare and
furnish to the  Purchasers and make publicly  available in accordance  with Rule
144(c) such information as is required for the Purchasers to sell any Shares and
Warrant Shares under Rule 144. The Company further  covenants and agrees that it
will  take  such  further  action  as any  holder  of  Investor  Securities  may
reasonably request,  all to the extent required from time to time to enable such
person to sell any Shares and  Warrant  Shares  without  registration  under the
Securities Act within the limitation of the exemptions provided by Rule 144.

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

      4.4 Securities Laws Disclosure;  Publicity. The Company shall use its best
efforts to by 9:00 a.m.,  Eastern Daylight Time, on the first Business following
this  Agreement  issue a press  release  (which  shall be followed by a Form 8-K
filing within one (1) Business Day of the Closing) and, in any event, by the end
of business on the  Business Day  following  the Closing  issue a press  release
(which  shall be  followed  by a Form 8-K filing  within two (2)  Business  Days
thereafter),  in either case disclosing the transactions contemplated hereby and
make such other  filings  and  notices in the  manner and time  required  by the
Commission. The Company and the Placement Agent shall consult with each other in
issuing any press releases with respect to the transactions contemplated hereby,
and  neither  the  Company  nor the  Placement  Agent shall issue any such press
release or otherwise make any such public statement without the prior consent of
the  Company,  with  respect to any press  release of the  Placement  Agent,  or
without the prior  consent of the  Placement  Agent,  with  respect to any press
release of the Company,  which  consent  shall not  unreasonably  be withheld or
delayed,  except  if such  disclosure  is  required  by law,  in which  case the
disclosing  party shall  promptly  provide the other party with prior  notice of
such public  statement or  communication.  Notwithstanding  the  foregoing,  the
Company shall not publicly  disclose the name of any  Purchaser,  or include the
name of any Purchaser in any filing with the Commission or any regulatory agency
or Trading Market,  without the prior written consent of such Purchaser,  except
(i) as required by federal  securities law in connection  with the

                                      -18-
<PAGE>

registration  statement  contemplated by the  Registration  Rights Agreement and
(ii)  to the  extent  such  disclosure  is  required  by law or  Trading  Market
regulations,  in which case the Company shall provide the Purchasers  with prior
notice of such disclosure permitted under subclause (i) or (ii).

      4.5  Shareholders  Rights  Plan.  No claim will be made or enforced by the
Company or any other Person that any  Purchaser is an  "Acquiring  Person" under
any  shareholders  rights  plan or  similar  plan or  arrangement  in  effect or
hereafter  adopted  by the  Company,  or that any  Purchaser  could be deemed to
trigger the provisions of any such plan or  arrangement,  by virtue of receiving
Investor Securities under the Transaction Documents or under any other agreement
between the Company and the Purchasers.

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

      4.7 Use of Proceeds.  The Company covenants and agrees that all of the net
proceeds that it receives  from the sale of the Shares and Warrants  pursuant to
this Agreement,  although distributed,  allocated and expended by the Company in
its sole  discretion,  shall be used for general  working  capital and corporate
purposes.

      4.8  Reimbursement.  If any Purchaser  becomes involved in any capacity in
any  Proceeding  by or against  any Person who is a  stockholder  of the Company
(except as a result of sales, pledges,  margin sales and similar transactions by
such Purchaser to or with any current  stockholder),  solely as a result of such
Purchaser's acquisition of the Securities under this Agreement, and provided any
such person has  complied  with all laws,  rules and  regulations  and is not in
breach of any of its representations,  warranties,  or agreements made in any of
the  Transaction  Documents,  the Company will  reimburse such Purchaser for its
reasonable  legal and other expenses  (including  the cost of any  investigation
preparation  and  travel  in  connection   therewith)   incurred  in  connection
therewith,  as such expenses are incurred. The reimbursement  obligations of the
Company under this  paragraph  shall be in addition to any  liability  which the
Company may otherwise  have,  shall extend upon the same terms and conditions to
any  Affiliates  of the  Purchasers  who are  actually  named  in  such  action,
proceeding or  investigation,  and partners,  directors,  agents,  employees and
controlling persons (if any), as the case may be, of the Purchasers and any such
Affiliate, and shall be binding upon and inure to the benefit of any successors,
assigns,  heirs and personal  representatives of the Company, the Purchasers and
any such Affiliate and any such Person. The Company also agrees that neither the
Purchasers nor any such Affiliates,  partners,  directors,  agents, employees or
controlling  persons  shall  have any  liability  to the  Company  or any Person
asserting  claims on behalf of or in right of the Company  solely as a result of
acquiring the Securities under this Agreement, provided such person has complied
with  all  laws,  rules  and  regulations  and is not  in  breach  of any of its
representations,  warranties  and  agreements  made  in any  of the  Transaction
Documents.

      4.9 Form D and Blue Sky.  The Company  shall file a Form D with respect to
the Transaction  Securities as required under  Regulation D under the Securities
Act and, upon written request, provide a copy thereof to the Placement Agent for
distribution to the Purchasers

                                      -19-
<PAGE>

promptly after such filing.  The Company shall,  on or before the Closing,  take
such action as the Company shall  reasonably  determine is necessary in order to
obtain an exemption for or to qualify any Transaction Securities for sale to the
Purchasers   and/or  the  Placement  Agent  pursuant  to  this  Agreement  under
applicable securities or "Blue Sky" laws of the states of the United States, and
shall provide evidence of any such action so taken to the Purchasers on or prior
to the Closing by providing  copies of such filings to the Placement  Agent. The
Company shall make all filings and reports relating to the offer and sale of the
Transaction  Securities required under applicable  securities or "Blue Sky" laws
of the states of the United States following the Closing.

      4.10  Reservation of Common Stock. As of the date hereof,  the Company has
reserved  and the Company  shall  continue to reserve and keep  available at all
times, free of preemptive  rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue the Shares,  the Warrant Shares
and the Agent Shares.

      4.11 Listing of Common  Stock.  The Company  hereby agrees to use its best
efforts to  maintain  the  listing of the Common  Stock on its  current  Trading
Market, and promptly file with the Trading Market to list the applicable Shares,
Warrant  Shares and Agent  Shares on the Trading  Market.  The  Company  further
agrees,  if the  Company  applies to have the Common  Stock  traded on any other
Trading Market,  it will include in such application the Shares,  Warrant Shares
and Agent Shares and will take such other action as is necessary or desirable in
the  opinion of the  Purchasers  to cause the Shares,  Warrant  Shares and Agent
Shares to be listed on such other  Trading  Market as promptly as possible.  The
Company  will take all action  reasonably  necessary to continue the listing and
trading of its Common Stock on its current  Trading Market and will use its best
efforts to comply in all material respects with the Company's reporting,  filing
and other obligations under the bylaws or rules of the Trading Market.

      4.12  Indemnification by the Purchasers.  Each of the Purchasers severally
and not  jointly  agrees to  indemnify  and hold  harmless  the  Company and its
officers,  directors,  agents,  representatives,  shareholders and employees and
each of their  respective  affiliates,  from  and  against  any and all  losses,
liabilities,  obligations,  claims, contingencies,  damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys'  fees and costs of  investigation  that any such  party may suffer or
incur which are caused by or arise out of (i) any material  misrepresentation or
material breach or default in the performance by it of any covenant or agreement
made by it in this Agreement or in any of the Transaction Documents; or (ii) any
material misrepresentation or material breach of warranty or representation made
by it in this Agreement or in any of the Transaction Documents.  Notwithstanding
anything to the contrary  provided  herein or  elsewhere,  the liability of each
Purchaser  under this  Section  4.10 shall be limited to the amount  paid by the
Purchaser  pursuant  hereto  to  purchase  the  Investor  Securities,   and  the
procedures and timing for  indemnification  by the Purchasers under this Section
4.10 shall follow the  procedures  and  provisions of Sections  5.16(b) and (c),
mutatis  mutandis,  with  respect  to  indemnification  by  the  Company  of the
Purchasers.

      4.13 Reporting Obligations. So long as any Purchaser beneficially owns any
Investor  Securities,  the Company shall continue to file or furnish pursuant to
the Exchange Act or the Securities  Act, and the Company shall use  commercially
reasonable  best  efforts to maintain  its status as an issuer  required to file
such reports under the Exchange Act. In addition,  during such

                                      -20-
<PAGE>

same period,  the Company  shall take all actions  necessary to continue to meet
the "registrant eligibility"  requirements set forth in the general instructions
to Form S-3 or any  successor  form  thereto,  to  continue  to be  eligible  to
register the resale of the Shares, the Warrant Shares and the Agent Shares under
the Securities Act on such Form.

                                   ARTICLE V.

                                  MISCELLANEOUS

      5.1 Fees and Expenses.  Except as otherwise  set forth in this  Agreement,
each party shall pay the fees and expenses of its advisers, counsel, accountants
and  other  experts,  if any,  and all other  expenses  incurred  by such  party
incident to the negotiation, preparation, execution, delivery and performance of
this  Agreement;  provided,  however,  that the  Company  shall pay a maximum of
[$_________]  for the  aggregate  fees and expenses of counsel to the  Placement
Agent.  The  Company  shall pay all stamp and other  taxes and duties  levied in
connection with the sale of the Securities.

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

      5.3 Notices.  Any and all notices or other  communications  or  deliveries
required or permitted to be provided  hereunder shall be in writing and shall be
deemed  given  and  effective  on (a) the  next  Business  Day,  if sent by U.S.
nationally  recognized overnight courier service for next day priority delivery,
or (b) upon  actual  receipt by the party to whom such  notice is required to be
given. The address for such notices and  communications  to the Company shall be
as set forth below and for each Purchaser shall be as set forth on the signature
pages attached hereto.

      If to the Company:

            DynTek, Inc.
            18881 Karman Avenue
            Suite 250
            Irvine, CA  92612
            Attention: Mr. Steven Ross, President
            Telephone: (949) 798-7201

                                      -21-
<PAGE>

      With a copy to:

            Nixon Peabody LLP
            437 Madison Avenue
            New York, NY  10022
            Attention:  Peter W. Rothberg, Esq.
            Telephone:  212-940-3106
            Fax:  866-947-2410

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

      5.5  Construction.  The headings herein are for  convenience  only, do not
constitute a part of this  Agreement  and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent,  and no
rules of strict construction will be applied against any party.

      5.6 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their  successors and permitted  assigns.  The
Company may not assign this  Agreement  or any rights or  obligations  hereunder
without the prior written consent of each Purchaser. Any Purchaser, however, may
assign any or all of its Investor  Securities and/or rights under this Agreement
to any Person,  provided  such  transferee  agrees in writing to be bound,  with
respect to the transferred Investor Securities and otherwise,  by the provisions
hereof that apply to the "Purchasers."

      5.7 No  Third-Party  Beneficiaries.  This  Agreement  is intended  for the
benefit of the parties  hereto and their  respective  successors  and  permitted
assigns and is not for the benefit of, nor may any provision  hereof be enforced
by, any other Person.

      5.8 Governing  Law. This  Agreement  shall be governed by and construed in
accordance with the internal laws of the State of New York without regard to the
conflicts of laws  principles  thereof.  The parties  hereto hereby  irrevocably
agree that any suit or proceeding arising directly and/or indirectly pursuant to
or under this  Agreement,  shall be brought  solely in a federal or state  court
located in the City, County and State of New York. By its execution hereof,  the
parties hereby covenant and irrevocably  submit to the in personam  jurisdiction
of the federal  and state  courts  located in the City,  County and State of New
York and agree  that any  process in any such  action may be served  upon any of
them  personally,  or by certified  mail or  registered  mail upon them or their
agent,  return  receipt  requested,  with the same full  force and  effect as if
personally served upon them in New York City. The parties hereto waive any claim
that  any such  jurisdiction  is not a  convenient  forum  for any such  suit or
proceeding  and any defense or lack of in  personam  jurisdiction  with  respect
thereto.  In the event of any such action or  proceeding,  the

                                      -22-
<PAGE>

party  prevailing  therein  shall be  entitled  to payment  from the other party
hereto of its reasonable counsel fees and disbursements.

      5.9 Survival.  The representations,  warranties,  agreements and covenants
contained  herein  shall  survive  the  Closing  and  delivery of the Shares and
Warrants for a period of twelve (12) months.

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

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

      5.12 Replacement of Investor Securities.  If any certificate or instrument
evidencing any Investor Securities is mutilated,  lost, stolen or destroyed, the
Company shall issue or cause to be issued in exchange and  substitution  for and
upon  cancellation  thereof,  or in lieu  of and  substitution  therefor,  a new
certificate  or  instrument,  but  only  upon  receipt  of  evidence  reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable  indemnity,  if requested.  The applicants  for a new  certificate or
instrument under such  circumstances  shall also pay any reasonable  third-party
costs associated with the issuance of such replacement Investor Securities.

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

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

                                      -23-
<PAGE>

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

      5.16 Indemnification by the Company.

            (a) The  Company  shall,  notwithstanding  any  termination  of this
Agreement,  indemnify and hold harmless each Purchaser, the officers, directors,
agents  and  employees  of each of  them,  each  Person  who  controls  any such
Purchaser  (within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act) and the officers,  directors,  agents and employees of each
such controlling Person, to the fullest extent permitted by applicable law, from
and against any and all losses, claims, damages, liabilities,  costs (including,
without limitation, reasonable attorneys' fees) and expenses (including the cost
(including without limitation, reasonable attorneys' fees) and expenses relating
to an  Indemnified  Party's (as defined below) actions to enforce the provisions
of this Section  5.16)  (collectively,  "Losses"),  as  incurred,  to the extent
arising  out of or relating to (i) any  material  misrepresentation  or material
breach of any  representation or warranty made by the Company in the Transaction
Documents, or, (ii) any material breach of any covenant, agreement or obligation
of the Company  contained in the  Transaction  Documents,  or (iii) any cause of
action, suit or claim brought or made against such Indemnified Party and arising
out of or resulting from the execution,  delivery, performance or enforcement of
the  Transaction  Documents  executed  pursuant hereto by any of the Indemnified
Parties. If the  indemnification  provided for in this Section 5.16 is held by a
court of competent  jurisdiction to be unavailable to an Indemnified  Party with
respect to any Losses,  then the Indemnifying  Party (as defined below), in lieu
of indemnifying such Indemnified Party hereunder, shall contribute to the amount
paid or  payable  by such  Indemnified  Party  as a  result  of  Losses  in such
proportion as is appropriate  to reflect the relative fault of the  Indemnifying
Party on the one hand and of the  Indemnified  Party on the other in  connection
with the actions or omissions  that resulted in such Losses as well as any other
relevant  equitable  considerations.  The Company  shall  notify the  Purchasers
promptly of the institution,  threat or assertion of any proceeding of which the
Company  is  aware in  connection  with the  transactions  contemplated  by this
Agreement.

            (b) Conduct of Indemnification  Proceedings. If any proceeding shall
be brought or asserted  against any Person  entitled to indemnity  hereunder (an
"Indemnified  Party"),  such Indemnified Party shall promptly notify the Company
(the "Indemnifying Party") in writing,

                                      -24-
<PAGE>

and the  Indemnifying  Party shall have the right to assume the defense thereof,
including the employment of counsel  reasonably  satisfactory to the Indemnified
Party and the  payment of all fees and  expenses  incurred  in  connection  with
defense thereof; provided, however, that the failure of any Indemnified Party to
give such notice shall not relieve the Indemnifying  Party of its obligations or
liabilities pursuant to this Agreement,  except (and only) to the extent that it
shall be finally  judicially  determined  by a court of  competent  jurisdiction
(which  determination  is not  subject  to appeal or further  review)  that such
failure shall have materially and adversely prejudiced the Indemnifying Party.

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

            (c) Timing of  Payments.  All  reasonable  fees and  expenses of the
Indemnified Party (including reasonable fees and expenses to the extent incurred
in connection  with  investigating  or preparing to defend such  proceeding in a
manner not inconsistent  with this Section 5.16 shall be paid to the Indemnified
Party,  as incurred,  within ten (10) Trading Days of written  notice thereof to
the Indemnifying  Party;  provided,  however,  that the Indemnified  Party shall
promptly  reimburse  the  Indemnifying  Party for that  portion of such fees and
expenses  applicable  to such  actions for which such  Indemnified  Party is not
entitled to indemnification hereunder, determined based upon the relative faults
of the parties.

                  (Remainder of Page Intentionally Left Blank)

                                      -25-
<PAGE>

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

                                          DYNTEK, INC.

                                          By:
                                             -----------------------------------
                                                Steven Ross
                                                Chief Executive Officer

                                      -26-
<PAGE>

                            PURCHASERS SIGNATURE PAGE

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

------------------------------------
Address

------------------------------------
Facsimile Number

------------------------------------
Tax Id #:

Subscription Amount:$
                     ---------------

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

------------------------------------
Address

------------------------------------
Facsimile Number

------------------------------------
Tax Id #:

Subscription Amount:$
                     ---------------

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

------------------------------------
Address

------------------------------------
Facsimile Number

------------------------------------
Tax Id #:

Subscription Amount:$
                     ---------------

                                      -27-
<PAGE>

                         INDEX OF EXHIBITS AND SCHEDULES

                                    EXHIBITS

Exhibit A       -     Form of Registration Rights Agreement

Exhibit B-2     -     Form of Series A Warrant

Exhibit B-2     -     Form of Series B Warrant

                                    SCHEDULES

Schedule 1      -     List of Purchasers and Securities Received

Schedule 3.1(y)       Registration Rights Agreement
<PAGE>

                                    EXHIBIT A

                      FORM OF REGISTRATION RIGHTS AGREEMENT
<PAGE>

                                   EXHIBIT B-1

                            FORM OF SERIES A WARRANT
<PAGE>

                                   EXHIBIT B-2

                            FORM OF SERIES B WARRANT
<PAGE>

                                   SCHEDULE 1

                         LIST OF PURCHASERS AND AMOUNTS

Name of Purchaser                Amount of Shares and Warrant Shares Purchased
-----------------                ---------------------------------------------

1._________________________     _____ Shares      ______ Series A Warrant Shares

                                                  ______ Series B Warrant Shares

2._________________________     _____ Shares      ______ Series A Warrant Shares

                                                  ______ Series B Warrant Shares

3._________________________     _____ Shares      ______ Series A Warrant Shares

                                                  ______ Series B Warrant Shares

4._________________________     _____ Shares      ______ Series A Warrant Shares

                                                  ______ Series B Warrant Shares

5._________________________     _____ Shares      ______ Series A Warrant Shares

                                                  ______ Series B Warrant Shares

6._________________________     _____ Shares      ______ Series A Warrant Shares

                                                  ______ Series B Warrant Shares

7._________________________     _____ Shares      ______ Series A Warrant Shares

                                                  ______ Series B Warrant Shares

8._________________________     _____ Shares      ______ Series A Warrant Shares

                                                  ______ Series B Warrant Shares
<PAGE>

                                SCHEDULE 3.1 (y)

                          Form S-3 Selling Stockholders

      Name                                                        Shares
      -----------------------------------------------            ---------
      21st Century Investor LLC                                    120,000
      Adams, Donald                                              1,440,000
      Adkins, Douglas                                              840,000
      Alec Balestra Irrevocable Trust                              138,000
      Armitage, Barclay M                                          240,000
      Assante, Michael J                                           300,000
      Attanasi, Louis J                                             60,000
      Barnet Resnick Trust                                         120,000
      Becker, Martin                                                60,000
      Ben-Yishay, Arie                                             180,000
      Berg, Jack                                                   120,000
      Bergstein, Jay                                                60,000
      Bindseil, Edwin R                                             60,000
      Blockstein, David                                             24,000
      Bradley, Charles                                              60,000
      Broadband Capital Management                                 360,000
      Brunnschweiler, Christian and Erika                          153,000
      C. Peter Clapp Revocable Trust                               237,600
      Cabral, Raymond P                                             60,000
      Calcagno, Salvatore                                           68,000
      Carter, Jeffrey                                               60,000
      Castrovinci, Louis                                            48,000
      Cocke, Gregory (South West Securities as IRA Custodian)      345,600
      Cocke, Gregory and Susan                                     771,800
      Cocke, Susan (South West Securities as IRA Custodian)         64,800
      Cohen, Richard                                               240,000
      Cosentino, Samuel                                            100,000
      De Cresenzo, Al                                               24,000
      DeSimone, Dominick                                           414,400
      Ditri, Arnold                                                240,000
      Drucker, Mel                                                  71,400
      Duncan Capital LLC                                           466,667
      Erlanger, Jack                                                60,000
      Filon, William                                                60,000
      Finkle, S. Marcus                                            120,000
      Giaccio, John                                                 34,000
      Gillings, Robert                                              37,400
      Grinbaum, Mark and Tatyana                                    60,000
      H.T. Ardinger                                                 75,758
      Hansen, J. Burke                                              60,000
      Harms, William H                                             240,000
      Heim, William                                                100,800
      Inskip, Harold                                                60,000
      Iverson, Anita                                                90,000

<PAGE>

      Name                                                        Shares
      -----------------------------------------------            ---------
      Justin Balestra Irrevocable Trust                            138,000
      King, Christopher and Michele                                261,830
      Lange, Daniel and Claire                                      60,000
      Laurus Master Fund, Ltd.                                   4,313,889
      Leviticus Partners LP                                        600,000
      Lisyansky, Alexander                                          84,000
      Lyons , Frank                                                120,000
      Mahler, Richard                                               24,000
      Maltese, Robert                                              204,000
      Marks, Fredric                                                14,000
      McGregor, Dan                                                102,000
      Meshel, Jeffrey                                              120,000
      Montalbine, Robert                                            78,000
      MSR Consultants                                              227,273
      Murello, Robert                                               60,000
      Onischenko,Tarras                                             24,000
      Page, Neil                                                    36,000
      Pericelli, Louis                                              24,000
      Philip L. Byrnes Trust                                        60,000
      Puccio, Frederick J                                          300,000
      Puccio, Jr., Gerry                                           420,000
      Puma, Joseph                                               1,071,200
      Rabito, Louis and Anthony Agresti                             24,000
      RBD Limited                                                  240,000
      Realty Appraisal Defined Benefit Pension Plan                 78,000
      RH Damon & Co.                                             2,067,692
      Roschwalb, Arthur                                             48,000
      Rosenbaum, Michael                                           480,000
      Ruggieri, David                                              600,000
      Ruggieri, David and Victoria                                 227,273
      Russ, Kenneth and Joanne                                      78,000
      Russ, Linda                                                   12,000
      Scamardella, John                                            720,000
      Serrano, Joseph and Pilar                                    251,600
      Sharkey, Kenneth                                              60,000
      Silvaslian, Peter K                                          120,000
      Silvaslian, Peter K. and Lillian                             290,000
      Sunderman Setty MD Trust                                     120,000
      Trimble, Russell H. and Setsuko I                            120,000
      Trust for the Young Family                                   120,000
      Valko, Steven J                                              189,600
      Vega, Ricardo                                                 69,600
      Vingan, Roy                                                  120,000
      Welch, Herbert                                               347,854
      William Armitage Trust                                       240,000
      Williamson, Lee A                                            360,000
      Total                                                     23,871,036
                                                                ==========

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