Document:

EXHIBIT 10.5

                          SECURITIES PURCHASE AGREEMENT

      This  Securities  Purchase  Agreement  (this  "Agreement")  is dated as of
January  27,  2005  among  Duncan  Capital  Financial  Group,  Inc.,  a Delaware
corporation  (the  "Company"),  and each  purchaser  identified on the signature
pages hereto (each,  including its  successors  and assigns,  a "Purchaser"  and
collectively the "Purchasers").

      WHEREAS,  subject to the terms and  conditions set forth in this Agreement
and  pursuant to Section  4(2) of the  Securities  Act of 1933,  as amended (the
"Securities  Act") and Rule 506 promulgated  thereunder,  the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase  from the Company,  securities  of the Company as more fully
described in this Agreement.

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

                                   ARTICLE I.
                                   DEFINITIONS

      1.1  Definitions.  In  addition  to the terms  defined  elsewhere  in this
Agreement:  (a) capitalized terms that are not otherwise defined herein have the
meanings  given to such  terms in the Notes  (as  defined  herein),  and (b) the
following terms have the meanings indicated in this Section 1.1:

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

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

            "Closing"  means  the  closing  of  the  purchase  and  sale  of the
      Securities pursuant to Section 2.1.

            "Closing  Date" means the  Trading  Day when all of the  Transaction
      Documents  have been  executed  and  delivered by the  applicable  parties
      thereto, and all conditions  precedent to (i) the Purchasers'  obligations
      to pay the  Subscription  Amount  and (ii) the  Company's  obligations  to
      deliver the Securities have been satisfied or waived.

            "Commission" means the Securities and Exchange Commission.

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            "Common  Stock"  means the common  stock of the  Company,  par value
      $.001,  and any securities into which such common stock shall  hereinafter
      have been reclassified into.

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

            "Company Counsel" means Cohen, Tauber Spievack & Wagner, LLP.

            "Disclosure  Schedules" shall have the meaning ascribed to such term
      in Section 3.1 hereof.

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

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

            "KW" means  Keith  Wellner,  attorney  for DCOFI  Master  LDC,  with
      offices at 830 Third Avenue, New York, New York 10022.

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

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

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

            "Notes"  means,  the 12% Senior  Secured  Notes due,  subject to the
      terms therein,  December 31, 2005, issued by the Company to the Purchasers
      hereunder, in the form of Exhibit A.

            "Penalty Shares" means,  shares of registered  Common Stock issuable
      to the Purchasers in the event that the Notes are not repaid in accordance
      with their terms.

            "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.

            "Proceeding"  means  an  action,   claim,  suit,   investigation  or
      proceeding  (including,  without  limitation,  an investigation or partial
      proceeding, such as a deposition), whether commenced or threatened.

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

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

            "Securities" means the Notes and the Penalty Shares.

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

            "Security  Agreement" means the Security  Agreement,  dated the date
      hereof,  among the  Company and the  Purchasers,  in the form of Exhibit B
      attached hereto.

            "Security  Documents" means the Security  Agreement,  the Subsidiary
      Guarantee and any other documents and filing required  thereunder in order
      to grant the Purchasers a perfected security interest in all of the assets
      of the Company, including all UCC-1 filing receipts.

            "Subscription  Amount" means,  as to each  Purchaser,  the aggregate
      amount to be paid for Notes  purchased  hereunder as specified  below such
      Purchaser's  name on the signature  page of this Agreement and next to the
      heading "Subscription Amount", in United States Dollars and in immediately
      available funds.

            "Subsidiary"  means any  subsidiary  of the  Company as set forth on
      Schedule 3.1(a).

            "Subsidiary  Guarantee"  means the Subsidiary  Guarantee,  dated the
      date hereof,  among each of the  Subsidiaries  and the Purchasers,  in the
      form of Exhibit C attached hereto.

            "Trading  Day" means a day on which (i) the New York Stock  Exchange
      is open for business,  if the Common Stock is not publicly  traded or (ii)
      if the  Company's  Common  Stock is publicly  traded,  the Common Stock is
      traded on a Trading Market.

            "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 Nasdaq  SmallCap  Market,  the American Stock  Exchange,  the New York
      Stock Exchange, the Nasdaq National Market or the OTC Bulletin Board.

            "Transaction  Documents"  means  this  Agreement,   the  Notes,  the
      Security  Agreement,  the Subsidiary  Guarantee and any other documents or
      agreements  executed  in  connection  with the  transactions  contemplated
      hereunder.

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                                   ARTICLE II.
                                PURCHASE AND SALE

      2.1  Closing.  On the  Closing  Date,  upon the terms and  subject  to the
conditions set forth herein,  concurrent with the execution and delivery of this
Agreement by the parties hereto,  the Company agrees to sell, and each Purchaser
agrees to purchase,  $350,000  principal  amount of the Notes. On the subsequent
closing  date  (the  "Subsequent  Closing  Date"),  if any,  upon the  terms and
conditions herein (including,  specifically  Section 2.4), the Company agrees to
sell and each Purchaser  agrees to purchase up to $150,000  aggregate  principal
amount of the Notes (the "Balance"). Each Purchaser shall deliver to the Company
via wire  transfer or a certified  check  immediately  available  funds equal to
their Subscription  Amount and the Company shall deliver to each Purchaser their
respective Note as determined pursuant to Section 2.2(a) and the other items set
forth  in  Section  2.2  issuable  at  the  Closing.  Upon  satisfaction  of the
conditions  set forth in Section 2.2, the Closing  shall occur at the offices of
the Company, or such other location as the parties shall mutually agree.

      2.2 Deliveries.

            a)    On the Closing Date,  the Company shall deliver to the counsel
                  for  such  Purchasers  with  respect  to  each  Purchaser  the
                  following:

                        (i)   this Agreement duly executed by the Company;

                        (ii)  a Note  with a  principal  amount  equal  to  such
                              Purchaser's  Subscription  Amount,  in the name of
                              such Purchaser;

                        (iii) the   Security   Agreement   and  the   Subsidiary
                              Guarantee,  duly  executed by the  Company,  along
                              with all the Security Documents; and

                        (iv)  a legal opinion of Company Counsel.

            b)    On the Closing Date,  each Purchaser shall deliver or cause to
                  be delivered to Company Counsel the following:

                        (i)   this Agreement duly executed by such Purchaser;

                        (ii)  such  Purchaser's   Subscription  Amount  by  wire
                              transfer to the account of the Company; and

                        (iii) the  Security  Agreement,  duly  executed  by such
                              Purchaser.

      2.3 Closing Conditions.

            a)    The  obligations of the Company  hereunder in connection  with
                  the Closing are subject to the following conditions being met:

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                        (i)   the  accuracy in all material  respects  when made
                              and on the Closing Date of the representations and
                              warranties of the Purchasers contained herein;

                        (ii)  all  obligations,  covenants and agreements of the
                              Purchasers required to be performed at or prior to
                              the Closing Date shall have been performed; and

                        (iii) the  delivery by the  Purchasers  of the items set
                              forth in Section 2.2(b) of this Agreement.

            b)    The  respective  obligations  of the  Purchasers  hereunder in
                  connection  with the  Closing  are  subject  to the  following
                  conditions being met:

                        (i)   the  accuracy  in  all  material  respects  on the
                              Closing Date of the representations and warranties
                              of the Company contained herein;

                        (ii)  all  obligations,  covenants and agreements of the
                              Company  required to be  performed  at or prior to
                              the Closing Date shall have been performed;

                        (iii) the delivery by the Company of the items set forth
                              in Section 2.2(a) of this Agreement;

                        (iv)  there shall have been no Material  Adverse  Effect
                              with respect to the Company since the date hereof;
                              and

                        (v)   from  the  date  hereof  to the  Closing  Date,  a
                              banking  moratorium  shall not have been  declared
                              either  by the  United  States  or New York  State
                              authorities  nor shall  there  have  occurred  any
                              material  outbreak or escalation of hostilities or
                              other national or  international  calamity of such
                              magnitude  in  its  effect  on,  or  any  material
                              adverse change in, any financial  market which, in
                              each  case,  in the  reasonable  judgment  of each
                              Purchaser,  makes it  impracticable or inadvisable
                              to purchase the Notes at the Closing.

      2.4 Conditions for Delivering the Balance.

            c)    The  obligations  of the  Purchasers to deliver the Balance to
                  the Company are subject to the following conditions being met:

                        (i)   the continuing  accuracy in all material  respects
                              of  the  representations  and  warranties  of  the
                              Company contained herein;

                        (ii)  the  continuing  performance  of all  obligations,
                              covenants and  agreements of the Company  required
                              to  be  performed   pursuant  to  the  Transaction
                              Documents;

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                        (iii) the  delivery  by the  Company  of a Note or Notes
                              with a  principal  amount  equal to the Balance in
                              the name of such Purchaser;

                        (iv)  certification  from the  President  of the Company
                              that representations and warranties of the Company
                              are true and correct as of such date;

                        (v)   the  Company  shall  not be in  default  under any
                              material agreement;

                        (vi)  ninety  (90) days  shall  have  elapsed  since the
                              Closing Date;

                        (vii) no  material  adverse  change in the  business  or
                              prospects of the Company shall have occurred; and

                        (viii)the Company's  operations and financial  condition
                              shall be  acceptable  to the  Purchasers  in their
                              sole discretion.

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

      3.1  Representations  and  Warranties of the Company.  the Company  hereby
makes the representations and warranties set forth below to each Purchaser.

            (a) Subsidiaries. All of the direct and indirect subsidiaries of the
      Company are set forth in Item 2.01 of the Disclosure Schedule. The Company
      owns,  directly or  indirectly,  all of the capital  stock or other equity
      interests  of each  Subsidiary  free and clear of any  Liens,  and all the
      issued and  outstanding  shares of capital  stock of each  Subsidiary  are
      validly issued and are fully paid,  non-assessable  and free of preemptive
      and similar rights to subscribe for or purchase securities. If the Company
      has no subsidiaries,  then references in the Transaction  Documents to the
      Subsidiaries will be disregarded.

            (b)  Organization  and  Qualification.  Each of the  Company and the
      Subsidiaries  is an  entity  duly  incorporated  or  otherwise  organized,
      validly  existing and in good standing under the laws of the  jurisdiction
      of its  incorporation or organization (as applicable),  with the requisite
      power and authority to own and use its  properties and assets and to carry
      on its  business  as  currently  conducted.  Neither  the  Company nor any
      Subsidiary  is in  violation  or default of any of the  provisions  of its
      respective  certificate  or  articles  of  incorporation,  bylaws or other
      organizational  or  charter  documents.   Each  of  the  Company  and  the
      Subsidiaries is duly qualified to conduct business and is in good standing
      as a foreign corporation or other entity in each jurisdiction in which the
      nature  of the  business  conducted  or  property  owned by it makes  such
      qualification necessary, except where the failure to be so qualified or in
      good  standing,  as the  case may be,  could  not  have or  reasonably  be
      expected  to  result in (i) a  material  adverse  effect on the  legality,
      validity or  enforceability of any Transaction  Document,  (ii) a material
      adverse effect on the results of operations,  assets, business,  prospects
      or  financial  condition of the Company and the  Subsidiaries,  taken as a
      whole,  or (iii) a material  adverse  effect on the  Company's  ability to
      perform in any material  respect on a timely basis its  obligations  under
      any Transaction  Document (any of (i), (ii) or (iii), a "Material  Adverse
      Effect") and no Proceeding  has been  instituted in any such  jurisdiction
      revoking,  limiting or curtailing  or seeking to revoke,  limit or curtail
      such power and authority or qualification.

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<PAGE>

            (c)  Authorization;  Enforcement.  The  Company  has  the  requisite
      corporate  power  and  authority  to  enter  into  and to  consummate  the
      transactions  contemplated  by  each  of  the  Transaction  Documents  and
      otherwise  to carry out its  obligations  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  action is required by the Company in connection  therewith  other
      than in connection with the Required Approvals.  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.

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

            (e) Filings,  Consents and Approvals. 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 (the "Required Approvals").

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            (f) Issuance of the  Securities.  The Securities are duly authorized
      and,  when  issued  and  paid  for  in  accordance   with  the  applicable
      Transaction  Documents,  will be duly and validly  issued,  fully paid and
      nonassessable,  free and clear of all Liens  imposed by the Company  other
      than restrictions on transfer  provided for in the Transaction  Documents.
      The Penalty Shares, if and when issued in accordance with the terms of the
      Transaction  Documents,  will  be  registered,  freely  tradable,  validly
      issued, fully paid and nonassessable,  free and clear of all Liens imposed
      by the Company.  The Company has reserved from its duly authorized capital
      stock a number  of shares of Common  Stock  for  issuance  of the  Penalty
      Shares.  The Company has not,  and to the  knowledge  of the  Company,  no
      Affiliate of the Company has sold, offered for sale or solicited offers to
      buy or  otherwise  negotiated  in respect of any  security  (as defined in
      Section 2 of the Securities  Act) that would be integrated  with the offer
      or sale of the Securities in a manner that would require the  registration
      under the Securities Act of the sale of the Securities to the  Purchasers,
      or that would be integrated  with the offer or sale of the  Securities for
      purposes of the rules and regulations of any Trading Market.

            (g)  Capitalization.  The  capitalization  of the  Company is as set
      forth  in  Item  2.01,  the  Description  of  Securities  section  of  the
      Disclosure  Schedule.  The Company has not issued any capital  stock since
      December 14, 2004.  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 set
      forth in Item  2.01  and the  Description  of  Securities  section  of the
      Disclosure  Schedule,  as a  result  of  the  purchase  and  sale  of  the
      Securities,  there are no outstanding options,  warrants, script rights to
      subscribe to, calls or  commitments of any character  whatsoever  relating
      to, or securities,  rights or obligations convertible into or exchangeable
      for,  or giving any  Person any right to  subscribe  for or  acquire,  any
      shares of Common  Stock,  or  contracts,  commitments,  understandings  or
      arrangements by which the Company or any Subsidiary is or may become bound
      to issue  additional  shares  of Common  Stock,  or  securities  or rights
      convertible or exchangeable  into shares of Common Stock. The issuance and
      sale of the  Securities  will not  obligate the Company to issue shares of
      Common Stock or other securities to any Person (other than the Purchasers)
      and will not  result in a right of any  holder of  Company  securities  to
      adjust  the  exercise,  conversion,  exchange  or reset  price  under such
      securities.  All of the outstanding shares of capital stock of the Company
      are  validly  issued,  fully paid and  nonassessable,  have been issued in
      compliance  with all federal and state  securities  laws, and none of such
      outstanding  shares was issued in  violation of any  preemptive  rights or
      similar  rights  to  subscribe  for or  purchase  securities.  No  further
      approval or authorization  of any  stockholder,  the Board of Directors of
      the  Company  or  others  is  required  for the  issuance  and sale of the
      Securities.  There are no stockholders  agreements,  voting  agreements or
      other similar  agreements  with respect to the Company's  capital stock to
      which the Company is a party or, to the knowledge of the Company,  between
      or among any of the Company's stockholders.

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            (h) Offering  Memorandum;  Financial  Statements.  The  Confidential
      Offering  Memorandum  of the  Company  dated  December 3, 2004 is true and
      complete  in all  material  respects  and  does  not  contain  any  untrue
      statement of a material fact or omits 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 comply in all material  respects with
      applicable accounting  requirements as of the date therein. Such financial
      statements have been prepared in accordance  with United States  generally
      accepted  accounting  principles  applied on a consistent basis during the
      periods involved  ("GAAP"),  except as may be otherwise  specified in such
      financial  statements  or the notes  thereto  and  except  that  unaudited
      financial  statements may not contain all footnotes  required by GAAP, and
      fairly  present in all  material  respects the  financial  position of the
      Company and its consolidated  subsidiaries as of and for the dates thereof
      and the results of  operations  and cash flows for the periods then ended,
      subject,  in the case of  unaudited  statements,  to  normal,  immaterial,
      year-end audit adjustments.

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

            (j) Litigation.  Other than as set forth in the Disclosure  Schedule
      under the caption "Legal  Proceedings," there is no action, suit, inquiry,
      notice  of  violation,  proceeding  or  investigation  pending  or, to the
      knowledge of the Company, threatened against or affecting the Company, any
      Subsidiary or any of their respective  properties  before or by any court,
      arbitrator,  governmental or administrative agency or regulatory authority
      (federal,  state,  county, local or foreign)  (collectively,  an "Action")
      which (i)  adversely  affects or  challenges  the  legality,  validity  or
      enforceability  of any of the  Transaction  Documents or the Securities or
      (ii) could, if there were an unfavorable  decision,  have or reasonably be
      expected to result in a Material  Adverse Effect.  Neither the Company nor
      any Subsidiary,  nor any director or officer  thereof,  is or has been the
      subject of any Action involving a claim of violation of or liability under
      federal or state  securities  laws or a claim of breach of fiduciary duty.
      There has not been,  and to the  knowledge  of the  Company,  there is not
      pending or contemplated, any investigation by the Commission involving the
      Company or any current or former  director or officer of the Company.  The
      Commission  has not issued any stop order or other  order  suspending  the
      effectiveness  of any  registration  statement filed by the Company or any
      Subsidiary under the Exchange Act or the Securities Act.

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

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

            (m) Regulatory Permits. The Company and the Subsidiaries possess all
      certificates,   authorizations  and  permits  issued  by  the  appropriate
      federal,  state,  local or foreign  regulatory  authorities  necessary  to
      conduct their respective  businesses,  except where the failure to possess
      such  permits  could 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 and good and
      marketable  title in all personal  property owned by them that is material
      to the business of the Company and the Subsidiaries, in each case free and
      clear of all Liens, except for Liens as do not materially affect the value
      of such  property and do not  materially  interfere  with the use made and
      proposed to be made of such  property by the Company and the  Subsidiaries
      and Liens for the payment of federal, state or other taxes, the payment of
      which is neither  delinquent  nor subject to penalties.  Any real property
      and facilities  held under lease by the Company and the  Subsidiaries  are
      held by them under valid,  subsisting and enforceable  leases of which the
      Company and the Subsidiaries are in compliance.

            (o) Patents and Trademarks.  The Company and the Subsidiaries  have,
      or have  rights to use,  all  patents,  patent  applications,  trademarks,
      trademark applications,  service marks, trade names, copyrights,  licenses
      and other similar rights  necessary or material for use in connection with
      their respective  businesses and which the failure to so have could have 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  upon the rights of any Person.  To the
      knowledge  of the  Company,  all such  Intellectual  Property  Rights  are
      enforceable and there is no existing infringement by another Person of any
      of the Intellectual Property Rights of others.

                                       10
<PAGE>

            (p)  Insurance.  The Company does not maintain  any  insurance.  The
      Subsidiaries   are   insured   by   insurers   of   recognized   financial
      responsibility  against  such losses and risks and in such  amounts as are
      prudent and  customary in the  businesses  in which the  Subsidiaries  are
      engaged. To the best of Company's knowledge,  such insurance contracts and
      policies  are  accurate  and  complete.  No  Subsidiary  has any reason to
      believe that it will not be able to renew its existing  insurance coverage
      as and when such  coverage  expires  or to obtain  similar  coverage  from
      similar  insurers as may be necessary  to continue its business  without a
      significant increase in cost.

            (q)  Transactions  With Affiliates and Employees.  Other than as set
      forth in the Disclosure Schedule, none of the officers or directors of the
      Company and, to the knowledge of the Company, none of the employees of the
      Company is  presently a party to any  transaction  with the Company or any
      Subsidiary (other than for services as employees, officers and directors),
      including any contract,  agreement or other arrangement  providing for the
      furnishing of services to or by,  providing for rental of real or personal
      property  to or  from,  or  otherwise  requiring  payments  to or from any
      officer,  director or such  employee or, to the  knowledge of the Company,
      any entity in which any  officer,  director,  or any such  employee  has a
      substantial  interest or is an officer,  director,  trustee or partner, in
      each case in excess of  $50,000  other  than (i) for  payment of salary or
      consulting fees for services  rendered,  (ii)  reimbursement  for expenses
      incurred on behalf of the Company and (iii) for other  employee  benefits,
      including  stock  option  agreements  under any stock  option  plan of the
      Company.

            (r) Sarbanes-Oxley;  Internal Accounting Controls. The Company is in
      material  compliance with all provisions of the Sarbanes-Oxley Act of 2002
      which are  applicable  to it as of the Closing  Date.  The Company and the
      Subsidiaries  maintain a system of internal accounting controls sufficient
      to provide  reasonable  assurance  that (i)  transactions  are executed in
      accordance  with  management's  general or specific  authorizations,  (ii)
      transactions are recorded as necessary to permit  preparation of financial
      statements in conformity  with GAAP and to maintain asset  accountability,
      (iii) access to assets is permitted only in accordance  with  management's
      general or specific  authorization,  and (iv) the recorded  accountability
      for assets is compared with the existing  assets at  reasonable  intervals
      and  appropriate  action is taken  with  respect to any  differences.  The
      Company has established  disclosure controls and procedures (as defined in
      Exchange Act Rules  13a-15(e) and  15d-15(e)) for the Company and designed
      such   disclosure   controls  and   procedures  to  ensure  that  material
      information relating to the Company,  including its Subsidiaries,  is made
      known to the  certifying  officers by others  within those  entities.  The
      Company's  certifying  officers have  evaluated the  effectiveness  of the
      Company's  controls and procedures and since such date, there have been no
      significant  changes in the Company's  internal  controls (as such term is
      defined in Item 307(b) of  Regulation  S-K under the Exchange  Act) or, to
      the Company's knowledge,  in other factors that could significantly affect
      the Company's internal controls.

                                       11
<PAGE>

            (s) Certain Fees. No brokerage or finder's fees or  commissions  are
      or will be payable  by the  Company to any  broker,  financial  advisor or
      consultant,  finder,  placement agent,  investment  banker,  bank or other
      Person with respect to the  transactions  contemplated  by this Agreement.
      The Purchasers  shall have no obligation  with respect to any fees or with
      respect to any claims made by or on behalf of other  Persons for fees of a
      type  contemplated  in this Section that may be due in connection with the
      transactions contemplated by this Agreement.

            (t) Private  Placement.  Assuming  the  accuracy  of the  Purchasers
      representations  and warranties set forth in Section 3.2, no  registration
      under  the  Securities  Act is  required  for the  offer  and  sale of the
      Securities by the Company to the Purchasers as contemplated hereby.

            (u) Investment Company.  The Company is not, and is not an Affiliate
      of, and immediately after receipt of payment for the Securities,  will not
      be or be an Affiliate of, an  "investment  company"  within the meaning of
      the Investment Company Act of 1940, as amended.  The Company shall conduct
      its  business  in a  manner  so that it will  not  become  subject  to the
      Investment Company Act.

            (v)  Registration  Rights.  No  Person  has any  right to cause  the
      Company  to  effect  the  registration  under  the  Securities  Act of any
      securities of the Company.

            (w) Intentionally Omitted.

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

            (y) Disclosure.  The Company  confirms that neither it 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,  nonpublic  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 with
      respect to the  representations  and  warranties  made herein are true and
      correct with respect to such  representations  and  warranties  and do not
      contain  any  untrue  statement  of a  material  fact or omit to state any
      material fact necessary in order to make the statements  made therein,  in
      light of the circumstances under which they were made, not misleading. The
      Company  acknowledges  and agrees that no Purchaser  makes or has made any
      representations   or   warranties   with   respect  to  the   transactions
      contemplated hereby other than those specifically set forth in Section 3.2
      hereof.

                                       12
<PAGE>

            (z) No Integrated Offering. Assuming the accuracy of the Purchasers'
      representations  and  warranties  set forth in Section  3.2,  neither  the
      Company, nor any of its affiliates,  nor any Person acting on its or their
      behalf  has,  directly  or  indirectly,  made any  offers  or sales of any
      security or solicited any offers to buy any security,  under circumstances
      that would cause this offering of the  Securities  to be  integrated  with
      prior  offerings by the Company for purposes of the  Securities Act or any
      applicable shareholder 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.

            (aa) Solvency. Based on the financial condition of the Company as of
      the Closing Date after giving  effect to the receipt by the Company of the
      proceeds from the sale of the Securities hereunder, (i) the Company's fair
      saleable  value of its assets  exceeds the amount that will be required to
      be paid  on or in  respect  of the  Company's  existing  debts  and  other
      liabilities (including known contingent  liabilities) as they mature; (ii)
      the Company's assets do not constitute unreasonably small capital to carry
      on its  business  for the  current  fiscal  year as now  conducted  and as
      proposed to be conducted  including  its capital needs taking into account
      the  particular  capital  requirements  of the  business  conducted by the
      Company,  and  projected  capital  requirements  and capital  availability
      thereof; and (iii) the current cash flow of the Company, together with the
      proceeds  the  Company  would  receive,  were it to  liquidate  all of its
      assets,  after taking into account all anticipated uses of the cash, would
      be  sufficient  to pay all  amounts on or in respect of its debt when such
      amounts  are  required to be paid.  The  Company  does not intend to incur
      debts  beyond its  ability to pay such debts as they mature  (taking  into
      account  the timing and  amounts of cash to be payable on or in respect of
      its debt).  The Company  has no  knowledge  of any facts or  circumstances
      which  lead  it to  believe  that  it  will  file  for  reorganization  or
      liquidation   under  the   bankruptcy  or   reorganization   laws  of  any
      jurisdiction  within one year from the  Closing  Date.  Under the  heading
      "Indebtedness" in the Disclosure  Schedule,  it sets forth as of the dates
      hereof all outstanding  secured and unsecured  Indebtedness of the Company
      or any  Subsidiary,  or for  which  the  Company  or  any  Subsidiary  has
      commitments. For the purposes of this Agreement, "Indebtedness" shall mean
      (a) any  liabilities  for  borrowed  money or  amounts  owed in  excess of
      $50,000 (other than trade accounts payable incurred in the ordinary course
      of  business),  (b) all  guaranties,  endorsements  and  other  contingent
      obligations in respect of Indebtedness of others,  whether or not the same
      are or should be reflected in the  Company's  balance  sheet (or the notes
      thereto),  except guaranties by endorsement of negotiable  instruments for
      deposit or collection or similar  transactions  in the ordinary  course of
      business;  and (c) the  present  value of any lease  payments in excess of
      $50,000 due under leases  required to be  capitalized  in accordance  with
      GAAP. Neither the Company nor any Subsidiary is in default with respect to
      any Indebtedness.

                                       13
<PAGE>

            (bb) Tax Status.  Except for matters that would not, individually or
      in the  aggregate,  have or reasonably be expected to result in a Material
      Adverse  Effect,  the Company and each  Subsidiary has filed all necessary
      federal,  state and foreign  income and franchise tax returns and has paid
      or  accrued  all  taxes  shown  as due  thereon,  and the  Company  has no
      knowledge  of a tax  deficiency  which  has been  asserted  or  threatened
      against the Company or any Subsidiary.

            (cc) No General  Solicitation.  Neither  the  Company nor any person
      acting on behalf of the Company has offered or sold any of the  Securities
      by any form of general  solicitation or general  advertising.  The Company
      has offered the  Securities  for sale only to the  Purchasers  and certain
      other  "accredited  investors"  within  the  meaning of Rule 501 under the
      Securities Act.

            (dd) Foreign  Corrupt  Practices.  Neither the  Company,  nor to the
      knowledge  of the Company,  any agent or other person  acting on behalf of
      the Company,  has (i) directly or  indirectly,  used any corrupt funds for
      unlawful  contributions,  gifts,  entertainment or other unlawful expenses
      related to foreign or domestic political activity,  (ii) made any unlawful
      payment to foreign or domestic government officials or employees or to any
      foreign or domestic  political  parties or campaigns from corporate funds,
      (iii) failed to disclose  fully any  contribution  made by the Company (or
      made by any  person  acting on its  behalf of which the  Company is aware)
      which is in violation of law, or (iv) violated in any material respect any
      provision of the Foreign Corrupt Practices Act of 1977, as amended

            (ee)  Accountants.  The Company's  accountants  are Rothstein Kass &
      Company.  To the Company's  knowledge,  such  accountants are a registered
      public accounting firm.

            (ff)  Seniority.  As of the Closing Date, no  indebtedness  or other
      equity of the Company is senior to or pari passu with,  the Notes in right
      of  payment,  whether  with  respect to interest  or upon  liquidation  or
      dissolution,  or otherwise,  other than  indebtedness  secured by purchase
      money  security  interests  (which is senior only as to underlying  assets
      covered thereby) and capital lease obligations (which is senior only as to
      the property covered thereby).

            (gg) No  Disagreements  with  Accountants and Lawyers.  There are no
      disagreements of any kind presently existing, or reasonably anticipated by
      the Company to arise,  between  the  accountants  and lawyers  formerly or
      presently  employed by the Company and the Company is current with respect
      to  any  fees  owed  to  its  accountants  and  lawyers.  By  making  this
      representation   the  Company   does  not,   in  any  manner,   waive  the
      attorney/client  privilege or the  confidentiality  of the  communications
      between the Company and its lawyers.

            (hh) Acknowledgment  Regarding  Purchasers'  Purchase of Securities.
      The Company  acknowledges and agrees that each of the Purchasers is acting
      solely in the  capacity of an arm's length  purchaser  with respect to the
      Transaction  Documents  and  the  transactions  contemplated  hereby.  The
      Company  further  acknowledges  that no Purchaser is acting as a financial
      advisor or  fiduciary  of the Company (or in any  similar  capacity)  with
      respect to this Agreement and the transactions contemplated hereby and any
      advice given by any Purchaser or any of their  respective  representatives
      or  agents  in  connection  with  this  Agreement  and  the   transactions
      contemplated  hereby is merely  incidental to the Purchasers'  purchase of
      the Securities.  The Company further represents to each Purchaser that the
      Company's  decision to enter into this  Agreement has been based solely on
      the independent evaluation of the transactions  contemplated hereby by the
      Company and its representatives.  The Company further acknowledges that in
      addition to purchasing Securities,  the Purchasers or their affiliates may
      directly or indirectly own debt,  Common Stock and Preferred  Stock in the
      Company and that such  parties,  exercising  their  rights  hereunder  may
      adversely  impact their other holdings as well as the other equity holders
      in the Company.

                                       14
<PAGE>

      3.2  Representations  and  Warranties of the  Purchasers.  Each  Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:

            (a)  Organization;  Authority.  Such  Purchaser  is an  entity  duly
      organized,  validly  existing and in good  standing  under the laws of the
      jurisdiction of its organization with full right, corporate or partnership
      power and  authority  to enter  into and to  consummate  the  transactions
      contemplated by the  Transaction  Documents and otherwise to carry out its
      obligations  thereunder.  The execution,  delivery and performance by such
      Purchaser of the  transactions  contemplated  by this  Agreement have been
      duly  authorized by all necessary  corporate or similar action on the part
      of such Purchaser.  Each  Transaction  Document to which it is 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, except (i) as limited by general equitable  principles and
      applicable bankruptcy,  insolvency,  reorganization,  moratorium and other
      laws of general  application  affecting  enforcement of creditors'  rights
      generally,  (ii)  as  limited  by laws  relating  to the  availability  of
      specific  performance,  injunctive relief or other equitable  remedies and
      (iii)  insofar  as  indemnification  and  contribution  provisions  may be
      limited by applicable law.

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

                                       15
<PAGE>

            (c)  Purchaser  Status.  At the time such  Purchaser was offered the
      Securities, it was, and at the date hereof it is, and on the date on which
      it purchases the Notes  (including any note issued in connection  with the
      Balance),  it will be either:  (i) an "accredited  investor" as defined in
      Rule 501(a)(1),  (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act
      or (ii) a "qualified institutional buyer" as defined in Rule 144A(a) under
      the  Securities  Act. Such Purchaser is not required to be registered as a
      broker-dealer under Section 15 of the Exchange Act.

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

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

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

                                   ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

      4.1 Transfer Restrictions.

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

                                       16
<PAGE>

            (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  Securities  in the
      following form:

      [NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES
      ARE [EXERCISABLE]  [CONVERTIBLE]] HAVE BEEN REGISTERED WITH THE SECURITIES
      AND  EXCHANGE  COMMISSION  OR THE  SECURITIES  COMMISSION  OF ANY STATE IN
      RELIANCE UPON AN EXEMPTION FROM  REGISTRATION  UNDER THE SECURITIES ACT OF
      1933, AS AMENDED (THE  "SECURITIES  ACT"),  AND,  ACCORDINGLY,  MAY NOT BE
      OFFERED OR SOLD EXCEPT  PURSUANT TO AN  EFFECTIVE  REGISTRATION  STATEMENT
      UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN
      A  TRANSACTION  NOT  SUBJECT  TO,  THE  REGISTRATION  REQUIREMENTS  OF THE
      SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE  STATE SECURITIES LAWS AS
      EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE  TRANSFEROR TO SUCH EFFECT,
      THE  SUBSTANCE  OF WHICH SHALL BE  REASONABLY  ACCEPTABLE  TO THE COMPANY.
      THESE  SECURITIES  AND THE  SECURITIES  ISSUABLE  UPON  EXERCISE  OF THESE
      SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
      OTHER LOAN SECURED BY SUCH SECURITIES.

            The Company  acknowledges  and agrees that a Purchaser may from time
      to time pledge pursuant to a bona fide margin  agreement with a registered
      broker-dealer  or  grant  a  security  interest  in  some  or  all  of the
      Securities to a financial  institution that is an "accredited investor" as
      defined in Rule 501(a) under the Securities Act and who agrees to be bound
      by the provisions of this Agreement and the Registration  Rights Agreement
      and, if required under the terms of such  arrangement,  such Purchaser may
      transfer pledged or secured Securities to the pledgees or secured parties.
      Such a pledge or transfer  would not be subject to approval of the Company
      and no legal  opinion of legal  counsel of the pledgee,  secured  party or
      pledgor  shall be required in  connection  therewith.  Further,  no notice
      shall be required of such pledge. At the appropriate  Purchaser's expense,
      the Company will execute and deliver such  reasonable  documentation  as a
      pledgee  or  secured  party  of  Securities  may  reasonably   request  in
      connection with a pledge or transfer of the Securities,  including, if the
      Securities are subject to registration pursuant to the Registration Rights
      Agreement,   the  preparation  and  filing  of  any  required   prospectus
      supplement  under  Rule  424(b)(3)  under  the  Securities  Act  or  other
      applicable provision of the Securities Act to appropriately amend the list
      of Selling Stockholders thereunder.

            (c) Once  registered,  certificates  evidencing  the Penalty  Shares
      shall not  contain any legend  (including  the legend set forth in Section
      4.1(b) hereof).

      4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance
of the  Securities  may result in dilution of the  outstanding  shares of Common
Stock,  which dilution may be substantial under certain market  conditions.  The
Company  further   acknowledges  that  its  obligations  under  the  Transaction
Documents,  including  without  limitation  its  obligation to issue the Penalty
Shares pursuant to the Transaction Documents, are unconditional and absolute and
not  subject  to any  right  of  set  off,  counterclaim,  delay  or  reduction,
regardless  of the effect of any such dilution or any claim the Company may have
against any Purchaser and  regardless of the dilutive  effect that such issuance
may have on the ownership of the other stockholders of the Company.

                                       17
<PAGE>

      4.3 Furnishing of Information.  As long as any Purchaser owns  Securities,
the Company  covenants to timely file (or obtain  extensions in respect  thereof
and file within the applicable grace period) all reports required to be filed by
the Company  after the date hereof  pursuant to the Exchange Act. As long as any
Purchaser  owns  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 the  Securities  under Rule 144. The Company
further  covenants  that it will  take  such  further  action  as any  holder of
Securities may reasonably request,  all to the extent required from time to time
to enable such Person to sell such  Securities  without  registration  under the
Securities Act within the limitation of the exemptions provided by Rule 144.

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

      4.5 Intentionally Omitted.

      4.6 Securities Laws Disclosure;  Publicity. The Company and each Purchaser
shall  consult with each other in issuing any other press  releases with respect
to the  transactions  contemplated  hereby,  and  neither  the  Company  nor any
Purchaser  shall issue any such press release or otherwise  make any such public
statement  without the prior  consent of the Company,  with respect to any press
release of any Purchaser,  or without the prior consent of each Purchaser,  with
respect  to  any  press  release  of  the  Company,   which  consent  shall  not
unreasonably be withheld, except if such 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  a
registration statement 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).

      4.7  Shareholder  Rights  Plan.  No claim will be made or  enforced by the
Company or, to the knowledge of the Company, any other Person that any Purchaser
is an "Acquiring  Person" under any  shareholder  rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the  provisions of any such plan or  arrangement,  by
virtue of  receiving  Securities  under the  Transaction  Documents or under any
other  agreement  between  the  Company and the  Purchasers.  The Company  shall
conduct  its  business  in a manner so that it will not  become  subject  to the
Investment Company Act.

                                       18
<PAGE>

      4.8 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.

      4.9 Use of Proceeds.  The Company shall use the net proceeds from the sale
of the Securities hereunder for working capital and general corporate purposes.

      4.10  Reimbursement.  If any Purchaser becomes involved in any capacity in
any  Proceeding  by or against  any Person who is a  stockholder  of the Company
(except as a result of sales, pledges,  margin sales and similar transactions by
such Purchaser to or with any current  stockholder),  solely as a result of such
Purchaser's acquisition of the Securities under this Agreement, the Company will
reimburse such Purchaser for its reasonable legal and other expenses  (including
the cost of any  investigation  preparation and travel in connection  therewith)
incurred  in  connection   therewith,   as  such  expenses  are  incurred.   The
reimbursement  obligations  of the  Company  under  this  paragraph  shall be in
addition to any  liability  which the Company may otherwise  have,  shall extend
upon the same terms and  conditions to any  Affiliates of the Purchasers who are
actually  named in such  action,  proceeding  or  investigation,  and  partners,
directors,  agents,  employees and controlling persons (if any), as the case may
be, of the  Purchasers  and any such  Affiliate,  and shall be binding  upon and
inure  to  the  benefit  of  any   successors,   assigns,   heirs  and  personal
representatives  of the Company,  the  Purchasers and any such Affiliate and any
such Person.  The Company also agrees that neither the  Purchasers  nor any such
Affiliates,  partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company  solely as a result of acquiring  the  Securities  under
this Agreement.

      4.11  Indemnification  of  Purchasers.  Subject to the  provisions of this
Section  4.11,  the Company will  indemnify  and hold the  Purchasers  and their
directors,  officers,  shareholders,  partners,  employees and agents  (each,  a
"Purchaser Party") harmless from any and all losses,  liabilities,  obligations,
claims,  contingencies,  damages,  costs and expenses,  including all judgments,
amounts paid in  settlements,  court costs and  reasonable  attorneys'  fees and
costs of  investigation  that any such Purchaser  Party may suffer or incur as a
result  of or  relating  to (a)  any  breach  of  any  of  the  representations,
warranties,  covenants or agreements made by the Company in this Agreement or in
the  other  Transaction  Documents  or  (b)  any  action  instituted  against  a
Purchaser, or any of them or their respective Affiliates,  by any stockholder of
the Company who is not an  Affiliate of such  Purchaser,  with respect to any of
the transactions  contemplated by the Transaction  Documents (unless such action
is  based  upon a  breach  of such  Purchaser's  representation,  warranties  or
covenants  under the Transaction  Documents or any agreements or  understandings
such  Purchaser  may have with any such  stockholder  or any  violations  by the
Purchaser of state or federal  securities  laws or any conduct by such Purchaser
which constitutes fraud,  gross negligence,  willful misconduct or malfeasance).
If any action shall be brought  against any Purchaser  Party in respect of which
indemnity may be sought pursuant to this  Agreement,  such Purchaser Party shall
promptly notify the Company in writing,  and the Company shall have the right to
assume the defense thereof with counsel of its own choosing. Any Purchaser Party
shall  have  the  right to  employ  separate  counsel  in any  such  action  and
participate  in the defense  thereof,  but the fees and expenses of such counsel
shall be at the expense of such  Purchaser  Party  except to the extent that (i)
the  employment  thereof  has been  specifically  authorized  by the  Company in
writing, (ii) the Company has failed after a reasonable period of time to assume
such  defense  and to employ  counsel or (iii) in such  action  there is, in the
reasonable opinion of such separate counsel, a material conflict on any material
issue  between the  position of the Company and the  position of such  Purchaser
Party.  The  Company  will not be  liable  to any  Purchaser  Party  under  this
Agreement  (i) for any  settlement  by a Purchaser  Party  effected  without the
Company's prior written  consent,  which shall not be  unreasonably  withheld or
delayed;  or (ii) to the  extent,  but only to the  extent  that a loss,  claim,
damage or liability is  attributable  to any Purchaser  Party's breach of any of
the representations,  warranties, covenants or agreements made by the Purchasers
in this Agreement or in the other Transaction Documents.

                                       19
<PAGE>

      4.12 Reservation and Listing of Securities.

            (a) The Company  shall  maintain a reserve from its duly  authorized
      shares of Common Stock for issuance pursuant to the Transaction  Documents
      in such amount as may be required to fulfill its obligations in full under
      the Transaction Documents.

            (b) If, on any date,  the number of  authorized  but  unissued  (and
      otherwise  unreserved)  shares  of Common  Stock is less than the  Penalty
      Shares to be issued,  then the Board of Directors of the Company shall use
      commercially  reasonable  efforts to amend the  Company's  certificate  or
      articles  of  incorporation  to  increase  the  number of  authorized  but
      unissued  shares of  Common  Stock to at least  the  Penalty  Shares to be
      issued at such time,  as soon as possible  and in any event not later than
      the 75th day after such date.

            (c) The Company  shall,  if  applicable:  (i) in the time and manner
      required by the Trading Market,  prepare and file with such Trading Market
      an additional  shares listing  application  covering a number of shares of
      Common  Stock at least equal to the  Required  Minimum on the date of such
      application,  (ii) take all steps necessary to cause such shares of Common
      Stock to be approved for listing on the Trading Market as soon as possible
      thereafter,  (iii) provide to the Purchasers evidence of such listing, and
      (iv)  maintain the listing of such Common Stock on any date at least equal
      to the  Required  Minimum on such date on such  Trading  Market or another
      Trading Market.

      4.13 Equal Treatment of Purchasers.  No consideration  shall be offered or
paid to any  person  to amend or  consent  to a waiver  or  modification  of any
provision of any of the Transaction  Documents unless the same  consideration is
also offered to all of the parties to the Transaction  Documents.  Further,  the
Company  shall not make any  payment of  principal  or  interest on the Notes in
amounts  which  are   disproportionate  to  the  respective   principal  amounts
outstanding on the Notes at any applicable  time.  For  clarification  purposes,
this  provision  constitutes a separate  right granted to each  Purchaser by the
Company and negotiated  separately by each  Purchaser,  and is intended to treat
for the  Company  the  Note  holders  as a  class  and  shall  not in any way be
construed as the Purchasers  acting in concert or as a group with respect to the
purchase, disposition or voting of Securities or otherwise.

                                       20
<PAGE>

      4.14 Most Favored Nation Provision. Other than with respect to a financing
with Laurus Funds or another senior lender (i) at a conversion price at or above
$0.87 per share of Common  Stock and (ii) that closes  prior to April 30,  2005,
any time the Company effects a Subsequent  Financing,  each Purchaser may elect,
in its sole discretion, to exchange all or some of its Notes then held by it for
the securities  issued in a Subsequent  Financing based on the then  outstanding
principal amount of the Note plus accrued but unpaid interest and any other fees
then owed by the Company to the Purchaser, and the effective price at which such
securities are sold in such Subsequent Financing.

                                   ARTICLE V.
                                  MISCELLANEOUS

      5.1  Termination.  This Agreement may be terminated by any  Purchaser,  by
written notice to the other parties,  if the Closing has not been consummated on
or before February 28, 2005;  provided that no such  termination will affect the
right of any party to sue for any breach by the other party (or parties).

      5.2 Fees. At the Closing, the Company has agreed to (i) reimburse DC Asset
Management LLC ("DCAM") reasonable legal fees and expenses not to exceed $20,000
and (ii) pay DCAM $25,000 as a structuring fee. Except as expressly set forth in
the  Transaction  Documents to the  contrary,  each party shall pay the fees and
expenses of its advisers,  counsel,  accountants and other experts,  if any, and
all  other  expenses  incurred  by  such  party  incident  to  the  negotiation,
preparation,  execution, delivery and performance of this Agreement. The Company
shall pay all transfer agent fees, stamp taxes and other taxes and duties levied
in connection with the issuance of any Securities.

      5.3  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.

      5.4 Notices.  Any and all notices or other  communications  or  deliveries
required or permitted to be provided  hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of  transmission,  if
such notice or  communication is delivered via facsimile at the facsimile number
set forth on the signature  pages  attached  hereto prior to 5:30 p.m. (New York
City  time)  on a  Trading  Day,  (b) the next  Trading  Day  after  the date of
transmission,  if such notice or communication is delivered via facsimile at the
facsimile  number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day, (c) the second  Trading Day following the date of mailing,  if sent by U.S.
nationally  recognized  overnight courier service, or (d) upon actual receipt by
the party to whom such  notice is  required  to be given.  The  address for such
notices and communications shall be as set forth on the signature pages attached
hereto.

                                       21
<PAGE>

      5.5 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.

      5.6  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.

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

      5.8 No  Third-Party  Beneficiaries.  This  Agreement  is intended  for the
benefit of the parties  hereto and their  respective  successors  and  permitted
assigns and is not for the benefit of, nor may any provision  hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.11.

      5.9 Governing Law. All questions  concerning the  construction,  validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance  with the internal laws of the State of
New York,  without  regard to the  principles of conflicts of law thereof.  Each
party  agrees  that  all  legal  proceedings   concerning  the  interpretations,
enforcement and defense of the  transactions  contemplated by this Agreement and
any other Transaction  Documents  (whether brought against a party hereto or its
respective affiliates,  directors, officers, shareholders,  employees or agents)
shall be commenced  exclusively  in the state and federal  courts sitting in the
City of New  York.  Each  party  hereby  irrevocably  submits  to the  exclusive
jurisdiction  of the state and federal  courts  sitting in the City of New York,
borough  of  Manhattan  for the  adjudication  of any  dispute  hereunder  or in
connection  herewith or with any  transaction  contemplated  hereby or discussed
herein  (including  with respect to the  enforcement  of any of the  Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action  or  proceeding,  any  claim  that it is not  personally  subject  to the
jurisdiction of any such court, that such suit, action or proceeding is improper
or inconvenient venue for such proceeding.  Each party hereby irrevocably waives
personal  service of process and  consents to process  being  served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or  overnight  delivery  (with  evidence of  delivery) to such party at the
address in effect for  notices to it under this  Agreement  and agrees that such
service  shall  constitute  good and  sufficient  service of process  and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to serve  process in any manner  permitted by law. The parties  hereby waive all
rights  to a trial  by jury.  If  either  party  shall  commence  an  action  or
proceeding to enforce any  provisions  of the  Transaction  Documents,  then the
prevailing  party in such action or proceeding  shall be reimbursed by the other
party for its  attorneys'  fees and other costs and expenses  incurred  with the
investigation, preparation and prosecution of such action or proceeding.

                                       22
<PAGE>

      5.10 Survival.  The representations and warranties  contained herein shall
survive  the  Closing  and  the  delivery,  exercise  and/or  conversion  of the
Securities, as applicable for a period of 2 years.

      5.11   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.

      5.12  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.

      5.13  Rescission and  Withdrawal  Right.  Notwithstanding  anything to the
contrary  contained in (and  without  limiting  any similar  provisions  of) the
Transaction  Documents,  whenever  any  Purchaser  exercises a right,  election,
demand or option  under a  Transaction  Document and the Company does not timely
perform its related  obligations within the periods therein provided,  then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice,  demand or election in whole
or in part  without  prejudice  to its  future  actions  and  rights;  provided,
however,  in the case of a rescission of a conversion  of a Note,  the Purchaser
shall be  required  to return  any  shares of Common  Stock  subject to any such
rescinded conversion or exercise notice.

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

                                       23
<PAGE>

      5.15  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.

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

      5.17 Usury. To the extent it may lawfully do so, the Company hereby agrees
not to insist upon or plead or in any manner  whatsoever  claim, and will resist
any and all efforts to be compelled  to take the benefit or advantage  of, usury
laws wherever enacted, now or at any time hereafter in force, in connection with
any claim, action or proceeding that may be brought by any Purchaser in order to
enforce any right or remedy under any Transaction Document.  Notwithstanding any
provision to the contrary contained in any Transaction Document, it is expressly
agreed  and  provided  that  the  total  liability  of  the  Company  under  the
Transaction  Documents  for payments in the nature of interest  shall not exceed
the maximum lawful rate authorized  under  applicable law (the "Maximum  Rate"),
and, without  limiting the foregoing,  in no event shall any rate of interest or
default  interest,  or both of them,  when aggregated with any other sums in the
nature  of  interest  that  the  Company  may  be  obligated  to pay  under  the
Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum
contract  rate of  interest  allowed by law and  applicable  to the  Transaction
Documents is  increased  or  decreased  by statute or any official  governmental
action subsequent to the date hereof,  the new maximum contract rate of interest
allowed by law will be the Maximum Rate applicable to the Transaction  Documents
from the  effective  date  forward,  unless such  application  is  precluded  by
applicable law. If under any circumstances whatsoever, interest in excess of the
Maximum  Rate  is  paid  by  the  Company  to  any  Purchaser  with  respect  to
indebtedness  evidenced  by the  Transaction  Documents,  such  excess  shall be
applied  by  such  Purchaser  to  the  unpaid  principal  balance  of  any  such
indebtedness  or be refunded to the Company,  the manner of handling such excess
to be at such Purchaser's election.

      5.18  Independent  Nature  of  Purchasers'  Obligations  and  Rights.  The
obligations of each Purchaser under any Transaction Document are several and not
joint with the  obligations of any other  Purchaser,  and no Purchaser  shall be
responsible  in any way for the  performance  of the  obligations  of any  other
Purchaser under any Transaction  Document.  Nothing  contained  herein or in any
Transaction  Document,  and no action taken by any Purchaser  pursuant  thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint  venture  or any other kind of entity,  or create a  presumption  that the
Purchasers  are in any way acting in concert or as a group with  respect to such
obligations or the transactions  contemplated by the Transaction Document.  Each
Purchaser  shall be  entitled to  independently  protect and enforce its rights,
including without  limitation the rights arising out of this Agreement or out of
the other  Transaction  Documents,  and it shall not be necessary  for any other
Purchaser  to be  joined  as an  additional  party  in any  proceeding  for such
purpose.  Each Purchaser has been  represented by its own separate legal counsel
in their review and  negotiation of the  Transaction  Documents.  For reasons of
administrative  convenience only,  Purchasers and their respective  counsel have
chosen to communicate  with the Company through KW. KW does not represent all of
the Purchasers but only DCOFI Master LDC. 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.

                                       24
<PAGE>

      5.19  Liquidated  Damages.  The Company's  obligations  to pay any partial
liquidated  damages or other amounts owing under the Transaction  Documents is a
continuing  obligation of the Company and shall not  terminate  until all unpaid
partial liquidated damages and other amounts have been paid  notwithstanding the
fact that the instrument or security  pursuant to which such partial  liquidated
damages or other amounts are due and payable shall have been canceled.

                            (Signature Pages Follow)

                                       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.

DUNCAN CAPITAL FINANCIAL GROUP, INC.                 Address for Notice:
                                                     -------------------

                                                     830 Third Avenue
/s/ Richard Stierwalt                                New York, New York 10022
---------------------
Richard Stierwalt
President
                                                     Telephone: 212-581-5150
                                                     Facsimile: 212-581-7010

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

Adam Stein, Esq.
Cohen, Tauber Spievack &Wagner, LLP
420 Lexington Avenue
New York, NY 10170

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

                                       26
<PAGE>

[PURCHASER SIGNATURE PAGES TO DUNCAN CAPITAL FINANCIAL GROUP SECURITIES PURCHASE
                                   AGREEMENT]

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

Name of Investing Entity: DCOFI Master LDC
                          -----------------
Signature of Authorized Signatory of Investing Entity: /s/ Jeff Haas
                                                       --------------
Name of Authorized Signatory: /s/ Jeff Haas
                              --------------
Title of Authorized Signatory: Authorized Signatory
                               --------------------
Email Address of Authorized Entity:_____________________________________

Address for Notice of Investing Entity:

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

Subscription Amount:
EIN Number:

                           [SIGNATURE PAGES CONTINUE]

                                       27EXHIBIT 10.6

                               SECURITY AGREEMENT

      SECURITY AGREEMENT, dated as of January 27, 2005 (this "Agreement"), among
Duncan Capital Financial Group, Inc., a Delaware corporation (the "Company") and
all of the  Subsidiaries of the Company (such  subsidiaries,  the  "Guarantors")
(the Company and Guarantors are  collectively  referred to as the "Debtors") and
the holder or holders of the Company's 12% Senior Secured Notes due December 31,
2005 in the  original  aggregate  principal  amount of $500,000  (the  "Notes"),
signatory  hereto,  their  endorsees,   transferees  and  assigns  (collectively
referred to as, the "Secured Parties").

                              W I T N E S S E T H:

      WHEREAS,  pursuant to the Notes, the Secured Parties have severally agreed
to extend the loans to the Company evidenced by the Notes;

      WHEREAS,  pursuant to a certain Subsidiary  Guarantee dated as of the date
hereof (the  "Guaranty"),  the Guarantors  have jointly and severally  agreed to
guaranty and act as surety for payment of such loans; and

      WHEREAS,  in order to induce  the  Secured  Parties  to  extend  the loans
evidenced  by the Notes,  each  Debtor has agreed to execute  and deliver to the
Secured Parties this Agreement and to grant the Secured Parties, pari passu with
each other Secured Party, a perfected  security  interest in certain property of
such Debtor to secure the prompt  payment,  performance and discharge in full of
all of the  Company's  obligations  under  the  Notes  and  the  other  Debtors'
obligations under the Guaranty.

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

      1. Certain  Definitions.  As used in this  Agreement,  the following terms
shall  have  the  meanings  set  forth in this  Section  1.  Terms  used but not
otherwise  defined in this  Agreement  that are  defined in Article 9 of the UCC
(such as "account", "chattel paper", "commercial tort claim", "deposit account",
"document",    "equipment",    "fixtures",   "general   intangibles",   "goods",
"instruments",  "inventory",  "investment property",  "letter-of-credit rights",
"proceeds" and  "supporting  obligations")  shall have the  respective  meanings
given such terms in Article 9 of the UCC.

            (a)  "Collateral"  means the collateral in which the Secured Parties
      are granted a security  interest by this Agreement and which shall include
      the following personal property of the Debtors, whether presently owned or
      existing  or  hereafter  acquired  or  coming  into  existence,   wherever
      situated,  and all additions and accessions  thereto and all substitutions
      and replacements thereof, and all proceeds, products and accounts thereof,
      including,  without limitation,  all proceeds from the sale or transfer of
      the Collateral  and of insurance  covering the same and of any tort claims
      in  connection  therewith,  and  all  dividends,  interest,  cash,  notes,
      securities, equity interest or other property at any time and from time to
      time  acquired,  receivable or otherwise  distributed in respect of, or in
      exchange for, any or all of the Pledged Securities (as defined below):

<PAGE>

                  (i)  All  goods,  including,   without  limitations,  (A)  all
            machinery,  equipment,  computers,  motor vehicles,  trucks,  tanks,
            boats,  ships,  appliances,  furniture,  special and general  tools,
            fixtures,  test and quality  control  devices and other equipment of
            every kind and  nature  and  wherever  situated,  together  with all
            documents  of  title  and  documents   representing  the  same,  all
            additions and accessions thereto,  replacements  therefor, all parts
            therefor, and all substitutes for any of the foregoing and all other
            items used and useful in connection with any Debtor's businesses and
            all improvements thereto; and (B) all inventory;

                  (ii)  All  contract  rights  and  other  general  intangibles,
            including, without limitation, all partnership interests, membership
            interests,  stock  or  other  securities,  rights  under  any of the
            Organizational   Documents,   agreements   related  to  the  Pledged
            Securities,  licenses,  distribution and other agreements,  computer
            software (whether "off-the-shelf",  licensed from any third party or
            developed  by any Debtor),  computer  software  development  rights,
            leases,  franchises,  customer lists,  quality  control  procedures,
            grants  and  rights,  goodwill,  trademarks,  service  marks,  trade
            styles,  trade  names,  patents,  patent  applications,  copyrights,
            Intellectual Property, and income tax refunds;

                  (iii)  All  accounts,  together  with  all  instruments,   all
            documents of title representing any of the foregoing,  all rights in
            any merchandising, goods, equipment, motor vehicles and trucks which
            any of the same may represent,  and all right,  title,  security and
            guaranties  with  respect to each  account,  including  any right of
            stoppage in transit;

                  (iv) All documents,  letter-of-credit rights,  instruments and
            chattel paper;

                  (v) All commercial tort claims;

                  (vi)  All  deposit  accounts  and  all  cash  (whether  or not
            deposited in such deposit accounts);

                  (vii) All investment property;

                  (viii) All supporting obligations; and

                  (ix) All files,  records,  books of account,  business papers,
            and computer programs; and

<PAGE>

                  (x)  the  products  and  proceeds  of  all  of  the  foregoing
            Collateral set forth in clauses (i)-(ix) above.

                  Without   limiting  the  generality  of  the  foregoing,   the
            "Collateral"  shall  include  all  investment  property  and general
            intangibles  respecting  ownership  and/or other equity interests in
            each Guarantor, including, without limitation, the shares of capital
            stock and the other equity interests listed on Schedule H hereto (as
            the same may be  modified  from time to time  pursuant  to the terms
            hereof),  and any other shares of capital  stock and/or other equity
            interests of any other direct or indirect  subsidiary  of any Debtor
            obtained  in  the  future,  and,  in  each  case,  all  certificates
            representing  such shares and/or equity interests and, in each case,
            all rights, options, warrants, stock, other securities and/or equity
            interests that may hereafter be received,  receivable or distributed
            in respect of, or exchanged  for, any of the  foregoing  (all of the
            foregoing being referred to herein as the "Pledged  Securities") and
            all  rights  arising  under  or  in  connection   with  the  Pledged
            Securities,  including, but not limited to, all dividends,  interest
            and cash.

                  Notwithstanding the foregoing,  nothing herein shall be deemed
            to constitute  an assignment of any asset which,  in the event of an
            assignment,  becomes  void by  operation  of  applicable  law or the
            assignment of which is otherwise  prohibited  by applicable  law (in
            each case to the extent that such  applicable  law is not overridden
            by Sections  9-406,  9-407 and/or 9-408 of the UCC or other  similar
            applicable law); provided,  however, that to the extent permitted by
            applicable  law,  this  Agreement  shall  create  a  valid  security
            interest in such asset and, to the extent  permitted  by  applicable
            law, this Agreement  shall create a valid  security  interest in the
            proceeds of such asset.

            (b)  "Intellectual  Property" means the collective  reference to all
      rights,  priorities  and  privileges  relating to  intellectual  property,
      whether  arising  under United  States,  multinational  or foreign laws or
      otherwise, including, without limitation, (i) all copyrights arising under
      the  laws  of the  United  States,  any  other  country  or any  political
      subdivision  thereof,  whether  registered  or  unregistered  and  whether
      published or unpublished,  all registrations and recordings  thereof,  and
      all applications in connection therewith,  including,  without limitation,
      all  registrations,  recordings  and  applications  in the  United  States
      Copyright Office,  (ii) all letters patent of the United States, any other
      country or any political  subdivision thereof, all reissues and extensions
      thereof,  and all  applications for letters patent of the United States or
      any    other    country    and   all    divisions,    continuations    and
      continuations-in-part   thereof,   (iii)  all  trademarks,   trade  names,
      corporate names, company names, business names, fictitious business names,
      trade  dress,  service  marks,  logos,  domain  names and other  source or
      business identifiers,  and all goodwill associated therewith, now existing
      or  hereafter  adopted  or  acquired,  all  registrations  and  recordings
      thereof,  and all  applications  in connection  therewith,  whether in the
      United  States  Patent and  Trademark  Office or in any similar  office or
      agency of the United States, any State thereof or any other country or any
      political  subdivision  thereof,  or otherwise,  and all common law rights
      related  thereto,  (iv) all trade  secrets  arising  under the laws of the
      United States, any other country or any political subdivision thereof, (v)
      all  rights  to  obtain  any  reissues,  renewals  or  extensions  of  the
      foregoing,  (vi) all  licenses  for any of the  foregoing,  and  (vii) all
      causes of action for infringement of the foregoing.

<PAGE>

            (c) "Majority in Interest" shall mean, at any time of determination,
      the majority in interest (based on  then-outstanding  principal amounts of
      Notes at the time of such determination) of the Secured Parties.

            (d) "Necessary Endorsement" shall mean undated stock powers endorsed
      in blank or other proper  instruments of assignment duly executed and such
      other  instruments  or  documents  as the Secured  Parties may  reasonably
      request.

            (e) "Obligations"  means all of the Debtors'  obligations under this
      Agreement,  the Notes, the Guaranty and any other instruments,  agreements
      or other  documents  executed and/or  delivered in connection  herewith or
      therewith,  in each case, whether now or hereafter existing,  voluntary or
      involuntary,  direct or indirect,  absolute or  contingent,  liquidated or
      unliquidated,  whether or not jointly owed with others, and whether or not
      from time to time decreased or extinguished and later  increased,  created
      or incurred,  and all or any portion of such  obligations  or  liabilities
      that are paid, to the extent all or any part of such payment is avoided or
      recovered  directly or  indirectly  from any of the  Secured  Parties as a
      preference,  fraudulent  transfer or otherwise as such  obligations may be
      amended, supplemented,  converted, extended or modified from time to time.
      Without limiting the generality of the foregoing,  the term  "Obligations"
      shall include,  without limitation:  (i) principal of, and interest on the
      Notes  and the loans  extended  pursuant  thereto;  (ii) any and all other
      fees, indemnities,  costs, obligations and liabilities of the Debtors from
      time to time under or in connection  with this Agreement,  the Notes,  the
      Guaranty and any other instruments, agreements or other documents executed
      and/or  delivered  in  connection  herewith  or  therewith;  and (iii) all
      amounts  (including but not limited to post-petition  interest) in respect
      of the  foregoing  that  would  be  payable  but for  the  fact  that  the
      obligations to pay such amounts are  unenforceable or not allowable due to
      the  existence  of a  bankruptcy,  reorganization  or  similar  proceeding
      involving any Debtor.

            (f) "Organizational Documents" means with respect to any Debtor, the
      documents by which such Debtor was  organized  (such as a  certificate  of
      incorporation,   certificate   of  limited   partnership  or  articles  of
      organization,  and including,  without  limitation,  any  certificates  of
      designation  for preferred  stock or other forms of preferred  equity) and
      which relate to the internal  governance of such Debtor (such as bylaws, a
      partnership  agreement  or an  operating,  limited  liability  or  members
      agreement).

            (g) "UCC" means the Uniform Commercial Code of the State of New York
      and  or any  other  applicable  law  of any  state  or  states  which  has
      jurisdiction  with  respect to all, or any portion of, the  Collateral  or
      this  Agreement,  from time to time.  It is the intent of the parties that
      defined  terms in the UCC should be construed in their  broadest  sense so
      that  the term  "Collateral"  will be  construed  in its  broadest  sense.
      Accordingly  if there are, from time to time,  changes to defined terms in
      the UCC that broaden the definitions,  they are incorporated herein and if
      existing  definitions in the UCC are broader than the amended definitions,
      the existing ones shall be controlling.

<PAGE>

      2. Grant of Perfected Security Interest.  As an inducement for the Secured
Parties to extend the loans as evidenced by the Notes and to secure the complete
and timely  payment,  performance  and discharge in full, as the case may be, of
all of the  Obligations,  each Debtor  hereby  unconditionally  and  irrevocably
pledges,  grants  and  hypothecates  to the  Secured  Parties a  continuing  and
perfected  security  interest  in and to, a lien  upon  and a right  of  set-off
against all of their respective right, title and interest of whatsoever kind and
nature in and to, the Collateral (the "Security Interest").

      3.  Delivery  of  Certain  Collateral.  Contemporaneously  or prior to the
execution of this Agreement,  each Debtor shall deliver or cause to be delivered
to the  Secured  Parties  (a) any and all  certificates  and  other  instruments
representing  or  evidencing  the  Pledged  Securities,  and  (b)  any  and  all
certificates  and other  instruments or documents  representing any of the other
Collateral, in each case, together with all Necessary Endorsements.  The Debtors
are,  contemporaneously  with the  execution  hereof,  delivering to the Secured
Parties, or have previously delivered to the Secured Parties, a true and correct
copy of each Organizational Document governing any of the Pledged Securities.

      4. Representations,  Warranties,  Covenants and Agreements of the Debtors.
Each Debtor  represents  and warrants  to, and  covenants  and agrees with,  the
Secured Parties as follows:

            (a) Each Debtor has the requisite  corporate,  partnership,  limited
      liability  company  or  other  power  and  authority  to enter  into  this
      Agreement  and  otherwise  to carry  out its  obligations  hereunder.  The
      execution,  delivery and  performance by each Debtor of this Agreement and
      the  filings  contemplated  therein  have  been  duly  authorized  by  all
      necessary  action  on the part of such  Debtor  and no  further  action is
      required by such Debtor.  This  Agreement  has been duly  executed by each
      Debtor. This Agreement constitutes the legal, valid and binding obligation
      of each Debtor,  enforceable  against each Debtor in  accordance  with its
      terms  except  as  such   enforceability  may  be  limited  by  applicable
      bankruptcy,  insolvency,   reorganization  and  similar  laws  of  general
      application  relating to or affecting the rights and remedies of creditors
      and by general principles of equity.

            (b) The Debtors  have no place of  business  or offices  where their
      respective  books of account and records are kept (other than  temporarily
      at the offices of its attorneys or accountants) or places where Collateral
      is stored or located,  except as set forth on Schedule A attached  hereto.
      Except as specifically  set forth on Schedule A, each Debtor is the record
      owner of the real property  where such  Collateral  is located,  and there
      exist no  mortgages  or other liens on any such real  property  except for
      Permitted Liens (as defined in the Notes). Except as disclosed on Schedule
      A, none of such Collateral is in the possession of any consignee,  bailee,
      warehouseman, agent or processor.

<PAGE>

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

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

            (e) Each Debtor shall at all times maintain its books of account and
      records  relating to the Collateral at its principal place of business and
      its  Collateral at the  locations set forth on Schedule A attached  hereto
      and may not  relocate  such  books of  account  and  records  or  tangible
      Collateral  unless it  delivers  to the  Secured  Parties at least 30 days
      prior to such relocation (i) written notice of such relocation and the new
      location  thereof  (which  must be  within  the  United  States)  and (ii)
      evidence that  appropriate  financing  statements  under the UCC and other
      necessary documents have been filed and recorded and other steps have been
      taken to perfect the  Security  Interest to create in favor of the Secured
      Parties a valid, perfected and continuing perfected first priority lien in
      the Collateral.

            (f) This Agreement  creates in favor of the Secured Parties a valid,
      security interest in the Collateral,  securing the payment and performance
      of the Obligations.  Upon making the filings  described in the immediately
      following  paragraph,  all  security  interests  created  hereunder in any
      Collateral  which may be  perfected  by  filing  Uniform  Commercial  Code
      financing statements shall have been duly perfected. Except for the filing
      of the Uniform  Commercial  Code financing  statements  referred to in the
      immediately  following  paragraph,  the  recordation  of the  Intellectual
      Property Security  Agreement (as defined below) with respect to copyrights
      and copyright  applications in the United States Copyright Office referred
      to in paragraph (p), the execution and delivery of deposit account control
      agreements  satisfying the requirements of Section  9-104(a)(2) of the UCC
      with respect to each deposit  account of the Debtors,  and the delivery of
      the certificates and other instruments provided in Section 3, no action is
      necessary  to create,  perfect or protect the security  interests  created
      hereunder.  Without  limiting the generality of the foregoing,  except for
      the  filing  of  said  financing  statements,   the  recordation  of  said
      Intellectual  Property Security Agreement,  and the execution and delivery
      of said  deposit  account  control  agreements,  no  consent  of any third
      parties and no  authorization,  approval or other action by, and no notice
      to or filing  with,  any  governmental  authority  or  regulatory  body is
      required  for  (i)  the  execution,   delivery  and  performance  of  this
      Agreement,  (ii) the  creation or  perfection  of the  Security  Interests
      created hereunder in the Collateral or (iii) the enforcement of the rights
      of the Secured Parties hereunder.

<PAGE>

            (g) Each Debtor hereby  authorizes  the Secured  Parties,  or any of
      them, to file one or more financing statements under the UCC, with respect
      to the Security Interest with the proper filing and recording  agencies in
      any jurisdiction deemed proper by them.

            (h) The execution, delivery and performance of this Agreement by the
      Debtors does not (i) violate any of the  provisions of any  Organizational
      Documents  of any Debtor or any  judgment,  decree,  order or award of any
      court,  governmental  body or  arbitrator or any  applicable  law, rule or
      regulation applicable to any Debtor 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  any Debtor's  debt or otherwise)  or other  understanding  to
      which  any  Debtor  is a party or by which  any  property  or asset of any
      Debtor is bound or affected.  No consent  (including,  without limitation,
      from  stockholders  or creditors of any Debtor) is required for any Debtor
      to enter into and perform its obligations hereunder.

            (i) The capital stock and other equity  interests listed on Schedule
      H hereto  represent all of the capital stock and other equity interests of
      the Guarantors, and represent all capital stock and other equity interests
      owned,  directly  or  indirectly,  by the  Company.  All  of  the  Pledged
      Securities  are  validly  issued,  fully paid and  nonassessable,  and the
      Company is the legal and beneficial owner of the Pledged Securities,  free
      and clear of any lien,  security interest or other encumbrance  except for
      the security interests created by this Agreement.

            (j) The ownership  and other equity  interests in  partnerships  and
      limited  liability  companies  (if any)  included in the  Collateral  (the
      "Pledged  Interests")  by their express terms do not provide that they are
      securities  governed  by  Article  8 of the  UCC  and  are  not  held in a
      securities account or by any financial intermediary.

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

<PAGE>

            (l) No Debtor will transfer, pledge, hypothecate, encumber, license,
      sell  or  otherwise   dispose  of  any  of  the  Collateral   (except  for
      non-exclusive  licenses  granted  by a Debtor  in its  ordinary  course of
      business  and sales of  inventory  by a Debtor in its  ordinary  course of
      business) without the prior written consent of a Majority in Interest.

            (m) Each Debtor shall keep and preserve its equipment, inventory and
      other tangible  Collateral in good  condition,  repair and order and shall
      not  operate or locate any such  Collateral  (or cause to be  operated  or
      located) in any area excluded from insurance coverage.

            (n) Each Debtor shall maintain with financially  sound and reputable
      insurers,  insurance with respect to the Collateral against loss or damage
      of the kinds and in the amounts customarily insured against by entities of
      established reputation having similar properties similarly situated and in
      such amounts as are  customarily  carried under similar  circumstances  by
      other such  entities and  otherwise as is prudent for entities  engaged in
      similar  businesses  but  in  any  event  sufficient  to  cover  the  full
      replacement  cost thereof.  Each Debtor shall cause each insurance  policy
      issued in  connection  herewith to provide,  and the insurer  issuing such
      policy to certify to the Secured Parties that (a) the Secured Parties will
      be named as lender  loss  payee and  additional  insured  under  each such
      insurance  policy;  (b) if such  insurance  be proposed to be cancelled or
      materially changed for any reason  whatsoever,  such insurer will promptly
      notify the Secured  Parties and such  cancellation  or change shall not be
      effective  as to the Secured  Parties for at least  thirty (30) days after
      receipt by the Secured  Parties of such notice,  unless the effect of such
      change is to extend or increase  coverage  under the  policy;  and (c) the
      Secured Parties will have the right (but no obligation) at its election to
      remedy any default in the payment of premiums  within  thirty (30) days of
      notice  from the  insurer  of such  default.  If no Event of  Default  (as
      defined in the  Debenture)  exists and if the proceeds  arising out of any
      claim or series of related claims do not exceed $50,000,  loss payments in
      each  instance  will be  applied  by the  applicable  Debtor to the repair
      and/or replacement of property with respect to which the loss was incurred
      to the extent  reasonably  feasible,  and any loss payments or the balance
      thereof remaining,  to the extent not so applied,  shall be payable to the
      applicable Debtor, provided, however, that payments received by any Debtor
      after an Event of Default occurs and is continuing or in excess of $50,000
      for any occurrence or series of related  occurrences  shall be paid to the
      Secured  Parties and, if received by such  Debtor,  shall be held in trust
      for and  immediately  paid over to the Secured  Parties  unless  otherwise
      directed in writing by the Secured Parties. Copies of such policies or the
      related  certificates,  in each case, naming the Secured Parties as lender
      loss  payee and  additional  insured  shall be  delivered  to the  Secured
      Parties at least  annually  and at the time any new policy of insurance is
      issued.

<PAGE>

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

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

            (q)  Each  Debtor  shall  permit  the  Secured   Parties  and  their
      representatives  and agents to inspect the  Collateral at any time, and to
      make copies of records pertaining to the Collateral as may be requested by
      a Secured Party from time to time.

            (r)  Each  Debtor  shall  take all  steps  reasonably  necessary  to
      diligently  pursue and seek to  preserve,  enforce and collect any rights,
      claims,  causes  of action  and  accounts  receivable  in  respect  of the
      Collateral.

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

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

<PAGE>

            (u) The Debtors  shall at all times  preserve and keep in full force
      and effect their  respective  valid  existence  and good  standing and any
      rights and franchises material to its business.

            (v)  No  Debtor  will  change  its  name,   type  of   organization,
      jurisdiction of organization,  organizational identification number (if it
      has  one),  legal or  corporate  structure,  or  identity,  or add any new
      fictitious  name unless it provides at least 30 days prior written  notice
      to the Secured  Parties of such  change  and, at the time of such  written
      notification,  such Debtor  provides any  financing  statements or fixture
      filings necessary to perfect and continue perfected the perfected security
      Interest granted and evidenced by this Agreement.

            (w) No Debtor may  consign any of its  Inventory  or sell any of its
      Inventory on bill and hold,  sale or return,  sale on  approval,  or other
      conditional  terms of sale  without  the consent of a Majority in Interest
      which  shall  not be  unreasonably  withheld,  except to the  extent  such
      consignment  or sale does not exceed 15% of the total  value of all of the
      Company's finished goods in Inventory.

            (x) No  Debtor  may  relocate  its chief  executive  office to a new
      location without providing 30 days prior written  notification  thereof to
      the  Secured  Parties  and  so  long  as,  at the  time  of  such  written
      notification,  such Debtor  provides any  financing  statements or fixture
      filings necessary to perfect and continue perfected the perfected security
      Interest granted and evidenced by this Agreement.

            (y) Each Debtor was organized and remains organized solely under the
      laws of the  state  set  forth  next to such  Debtor's  name in the  first
      paragraph of this  Agreement.  Schedule D attached  hereto sets forth each
      Debtor's  organizational  identification number or, if any Debtor does not
      have one, states that one does not exist.

            (z) (i) The actual  name of each Debtor is the name set forth in the
      preamble above;  (ii) no Debtor has any trade names except as set forth on
      Schedule E attached  hereto;  (iii) no Debtor has used any name other than
      that stated in the  preamble  hereto or as set forth on Schedule E for the
      preceding  five  years;  and (iv) no entity has merged  into any Debtor or
      been acquired by any Debtor within the past five years except as set forth
      on Schedule E.

            (aa) At any time and from time to time that any Collateral  consists
      of  instruments,  certificated  securities  or other items that require or
      permit  possession by the secured  party to perfect the security  interest
      created hereby, the applicable Debtor shall deliver such Collateral to the
      Secured Parties.

            (bb) Each Debtor, in its capacity as issuer, hereby agrees to comply
      with any and all orders and instructions of the Secured Parties  regarding
      the Pledged Interests  consistent with the terms of this Agreement without
      the further consent of any Debtor as contemplated by Section 8-106 (or any
      successor  section) of the UCC. Further,  each Debtor agrees that it shall
      not enter into a similar  agreement  (or one that would  confer  "control"
      within  the  meaning  of  Article 8 of the UCC)  with any other  person or
      entity.

<PAGE>

            (cc) Each Debtor shall cause all tangible chattel paper constituting
      Collateral to be delivered to the Secured Parties, or, if such delivery is
      not  possible,  then to cause  such  tangible  chattel  paper to contain a
      legend noting that it is subject to the security  interest created by this
      Agreement.  To the  extent  that any  Collateral  consists  of  electronic
      chattel paper,  the applicable  Debtor shall cause the underlying  chattel
      paper to be "marked"  within the  meaning of Section  9-105 of the UCC (or
      successor section thereto).

            (dd) If there is any investment property or deposit account included
      as  Collateral  that can be  perfected  by  "control"  through  an account
      control  agreement,  the  applicable  Debtor  shall  cause such an account
      control agreement,  in form and substance in each case satisfactory to the
      Secured Parties, to be entered into and delivered to the Secured Parties.

            (ee) To the extent that any Collateral  consists of letter-of-credit
      rights,  the applicable  Debtor shall cause the issuer of each  underlying
      letter of credit to consent to an  assignment  of the proceeds  thereof to
      the Secured Parties.

            (ff) To the extent that any  Collateral is in the  possession of any
      third party, the applicable  Debtor shall join with the Secured Parties in
      notifying such third party of the Secured  Parties'  security  interest in
      such   Collateral   and   shall  use  its  best   efforts   to  obtain  an
      acknowledgement  and  agreement  from such third party with respect to the
      Collateral, in form and substance satisfactory to the Secured Parties.

            (gg) If any Debtor  shall at any time hold or  acquire a  commercial
      tort claim,  such Debtor shall  promptly  notify the Secured  Parties in a
      writing signed by such Debtor of the particulars  thereof and grant to the
      Secured  Parties in such  writing a security  interest  therein and in the
      proceeds thereof, all upon the terms of this Agreement,  with such writing
      to be in form and substance satisfactory to the Secured Parties.

            (hh) Each Debtor shall  immediately  provide  written  notice to the
      Secured  Parties of any and all accounts which arise out of contracts with
      any  governmental  authority  and, to the extent  necessary  to perfect or
      continue the  perfected  status of the Security  Interest in such accounts
      and proceeds thereof,  shall execute and deliver to the Secured Parties an
      assignment  of claims for such  accounts  and  cooperate  with the Secured
      Parties in taking any other steps required,  in their judgment,  under the
      Federal  Assignment of Claims Act or any similar  federal,  state or local
      statute  or rule to  perfect  or  continue  the  perfected  status  of the
      Security Interest in such accounts and proceeds thereof.

            (ii) Each  Debtor  shall  cause each  subsidiary  of such  Debtor to
      immediately become a party hereto (an "Additional  Debtor"),  by executing
      and delivering an Additional  Debtor Joinder in substantially  the form of
      Annex A attached hereto and comply with the provisions  hereof  applicable
      to the Debtors.  Concurrent therewith, the Additional Debtor shall deliver
      replacement  schedules for, or  supplements to all other  Schedules to (or
      referred to in) this Agreement, as applicable, which replacement schedules
      shall  supersede,  or  supplements  shall modify,  the  Schedules  then in
      effect. The Additional Debtor shall also deliver such opinions of counsel,
      authorizing   resolutions,   good   standing   certificates,    incumbency
      certificates,  organizational  documents,  financing  statements and other
      information  and  documentation  as the  Secured  Parties  may  reasonably
      request.  Upon  delivery  of the  foregoing  to the Secured  Parties,  the
      Additional  Debtor shall be and become a party to this  Agreement with the
      same rights and  obligations  as the Debtors,  for all purposes  hereof as
      fully and to the same  extent as if it were an original  signatory  hereto
      and  shall be  deemed to have  made the  representations,  warranties  and
      covenants  set forth  herein as of the date of  execution  and delivery of
      such Additional Debtor Joinder, and all references herein to the "Debtors"
      shall be deemed to include each Additional Debtor.

<PAGE>

            (jj) Each Debtor  shall vote the Pledged  Securities  to comply with
      the covenants and agreements set forth herein and in the Notes.

            (kk) Each Debtor shall register the pledge of the applicable Pledged
      Securities  on the books of such  Debtor.  Each Debtor  shall  notify each
      issuer of Pledged  Securities  to  register  the pledge of the  applicable
      Pledged Securities in the name of the Secured Parties on the books of such
      issuer.  Further, except with respect to certificated securities delivered
      to the Secured Parties, the applicable Debtor shall deliver to the Secured
      Parties an  acknowledgement  of pledge (which,  where  appropriate,  shall
      comply  with  the  requirements  of  the  relevant  UCC  with  respect  to
      perfection by registration) signed by the issuer of the applicable Pledged
      Securities,   which   acknowledgement  shall  confirm  that:  (a)  it  has
      registered  the  pledge  on its  books  and  records;  and (b) at any time
      directed by the Secured  Parties  during the  continuation  of an Event of
      Default,  such issuer will  transfer the record  ownership of such Pledged
      Securities into the name of any designee of the Secured Parties, will take
      such steps as may be  necessary  to effect the  transfer,  and will comply
      with all other  instructions of the Secured Parties regarding such Pledged
      Securities without the further consent of the applicable Debtor.

            (ll) In the event that,  upon an  occurrence of an Event of Default,
      the Secured  Parties  shall sell all or any of the Pledged  Securities  to
      another  party  or  parties  (herein  called  the  "Transferee")  or shall
      purchase  or retain  all or any of the  Pledged  Securities,  each  Debtor
      shall, to the extent applicable: (i) deliver to the Secured Parties or the
      Transferee,  as the case may be, the  articles of  incorporation,  bylaws,
      minute books, stock certificate  books,  corporate seals,  deeds,  leases,
      indentures,  agreements,  evidences  of  indebtedness,  books of  account,
      financial  records and all other  Organizational  Documents and records of
      the Debtors and their direct and indirect subsidiaries;  (ii) use its best
      efforts to obtain resignations of the persons then serving as officers and
      directors of the Debtors and their direct and indirect subsidiaries, if so
      requested; and (iii) use its best efforts to obtain any approvals that are
      required by any  governmental  or  regulatory  body in order to permit the
      sale of the  Pledged  Securities  to the  Transferee  or the  purchase  or
      retention of the Pledged  Securities by the Secured  Parties and allow the
      Transferee or the Secured  Parties to continue the business of the Debtors
      and their direct and indirect subsidiaries.

<PAGE>

            (mm) Without limiting the generality of the other obligations of the
      Debtors  hereunder,  each Debtor shall promptly (i) cause to be registered
      at the United States Copyright Office all of its material copyrights, (ii)
      cause the  security  interest  contemplated  hereby  with  respect  to all
      Intellectual  Property registered at the United States Copyright Office or
      United  States  Patent and  Trademark  Office to be duly  recorded  at the
      applicable  office,  and (iii) give the Secured Parties notice whenever it
      acquires  (whether  absolutely  or by license)  or creates any  additional
      material Intellectual Property.

            (nn) Each  Debtor  will from time to time,  at the joint and several
      expense of the  Debtors,  promptly  execute and  deliver all such  further
      instruments  and  documents,  and take all such  further  action as may be
      necessary or desirable,  or as the Secured Parties may reasonably request,
      in order to perfect and protect any security interest granted or purported
      to be granted  hereby or to enable the  Secured  Parties to  exercise  and
      enforce  their  rights  and  remedies  hereunder  and with  respect to any
      Collateral or to otherwise carry out the purposes of this Agreement.

            (oo)  Schedule F attached  hereto lists all of the  patents,  patent
      applications,  trademarks, trademark applications,  registered copyrights,
      and  domain  names  owned by any of the  Debtors  as of the  date  hereof.
      Schedule F lists all material  licenses in favor of any Debtor for the use
      of any  patents,  trademarks,  copyrights  and domain names as of the date
      hereof.  All material patents and trademarks of the Debtors have been duly
      recorded at the United States Patent and Trademark Office and all material
      copyrights  of the Debtors  have been duly  recorded at the United  States
      Copyright Office.

            (pp) Except as set forth on Schedule G attached hereto,  none of the
      account  debtors or other  persons  or  entities  obligated  on any of the
      Collateral is a governmental  authority covered by the Federal  Assignment
      of Claims Act or any similar  federal,  state or local  statute or rule in
      respect of such Collateral.

      5. Effect of Pledge on Certain Rights. If any of the Collateral subject to
this Agreement consists of nonvoting equity or ownership  interests  (regardless
of class,  designation,  preference or rights) that may be converted into voting
equity or ownership  interests upon the occurrence of certain events (including,
without limitation, upon the transfer of all or any of the other stock or assets
of the  issuer),  it is  agreed  that the  pledge of such  equity  or  ownership
interests  pursuant to this  Agreement or the  enforcement of any of the Secured
Parties'  rights  hereunder  shall not be  deemed to be the type of event  which
would  trigger such  conversion  rights  notwithstanding  any  provisions in the
Organizational  Documents  or  agreements  to which any  Debtor is subject or to
which any Debtor is party.

      6. Defaults. The following events shall be "Events of Default":

<PAGE>

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

            (b) Any  representation  or warranty of any Debtor in this Agreement
      shall prove to have been incorrect in any material respect when made;

            (c) The  failure by any  Debtor to  observe  or  perform  any of its
      obligations  hereunder for five (5) days after  delivery to such Debtor of
      notice of such  failure  by or on behalf of a Secured  Party  unless  such
      default is capable of cure but cannot be cured  within such time frame and
      such Debtor is using best efforts to cure same in a timely fashion; or

            (d) If any  provision  of this  Agreement  shall at any time for any
      reason be declared to be null and void, or the validity or  enforceability
      thereof  shall  be  contested  by any  Debtor,  or a  proceeding  shall be
      commenced  by  any  Debtor,  or  by  any  governmental   authority  having
      jurisdiction  over any Debtor,  seeking to  establish  the  invalidity  or
      unenforceability thereof, or any Debtor shall deny that any Debtor has any
      liability or obligation purported to be created under this Agreement.

      7. Duty To Hold In Trust.

            (a) Upon the  occurrence  of any  Event of  Default  and at any time
      thereafter,  each  Debtor  shall,  upon  receipt of any  revenue,  income,
      dividend, interest or other sums subject to the Security Interest, whether
      payable pursuant to the Notes or otherwise,  or of any check, draft, note,
      trade acceptance or other  instrument  evidencing an obligation to pay any
      such  sum,  hold the same in  trust  for the  Secured  Parties  and  shall
      forthwith  endorse and transfer any such sums or instruments,  or both, to
      the Secured Parties,  pro-rata in proportion to their initial purchases of
      Notes for application to the  satisfaction of the Obligations  (and if any
      Debenture  is not  outstanding,  pro-rata  in  proportion  to the  initial
      purchases of the remaining Notes).

            (b) If any Debtor shall become  entitled to receive or shall receive
      any securities or other property (including, without limitation, shares of
      Pledged Securities or instruments representing Pledged Securities acquired
      after the date hereof, or any options,  warrants,  rights or other similar
      property or certificates  representing a dividend,  or any distribution in
      connection  with any  recapitalization,  reclassification  or  increase or
      reduction of capital,  or issued in connection with any  reorganization of
      such Debtor or any of its direct or indirect  subsidiaries)  in respect of
      the Pledged Securities  (whether as an addition to, in substitution of, or
      in exchange for, such Pledged Securities or otherwise), such Debtor agrees
      to (i) accept the same as the agent of the Secured Parties;  (ii) hold the
      same in trust on behalf of and for the benefit of the Secured Parties; and
      (iii) to deliver any and all  certificates  or instruments  evidencing the
      same to the  Secured  Parties  on or before the close of  business  on the
      fifth  business day following the receipt  thereof by such Debtor,  in the
      exact form received together with the Necessary  Endorsements,  to be held
      by the  Secured  Parties  subject  to  the  terms  of  this  Agreement  as
      Collateral.

<PAGE>

      8. Rights and Remedies Upon Default.

            (a) Upon the  occurrence  of any  Event of  Default  and at any time
      thereafter,  the Secured  Parties,  acting through any agent  appointed by
      them for  such  purpose,  shall  have the  right  to  exercise  all of the
      remedies conferred  hereunder and under the Notes, and the Secured Parties
      shall have all the rights and  remedies of a secured  party under the UCC.
      Without  limitation,  the Secured Parties shall have the following  rights
      and powers:

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

                  (ii) Upon notice to the Debtors by the  Secured  Parties,  all
            rights of each  Debtor to exercise  the voting and other  consensual
            rights  which it would  otherwise  be entitled  to exercise  and all
            rights of each Debtor to receive the dividends and interest which it
            would  otherwise be authorized  to receive and retain,  shall cease.
            Upon  such  notice,  the  Secured  Parties  shall  have the right to
            receive  any  interest,  cash  dividends  or other  payments  on the
            Collateral  and,  at the option oft, to exercise in such the Secured
            Parties'  discretion all voting rights pertaining  thereto.  Without
            limiting the generality of the foregoing,  the Secured Parties shall
            have the right (but not the  obligation) to exercise all rights with
            respect to the  Collateral  as it were the sole and absolute  owners
            thereof, including,  without limitation, to vote and/or to exchange,
            at its sole  discretion,  any or all of the Collateral in connection
            with a merger,  reorganization,  consolidation,  recapitalization or
            other  readjustment  concerning or involving  the  Collateral or any
            Debtor or any of its direct or indirect subsidiaries.

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

<PAGE>

                  (iv) The  Secured  Parties  shall  have the right (but not the
            obligation)  to notify any account  debtors and any  obligors  under
            instruments  or  accounts to make  payments  directly to the Secured
            Parties and to enforce the  Debtors'  rights  against  such  account
            debtors and obligors.

                  (v) The Secured  Parties may (but are not obligated to) direct
            any financial intermediary or any other person or entity holding any
            investment  property to transfer the same to the Secured  Parties or
            their designee.

                  (vi)  The  Secured  Parties  may (but  are not  obligated  to)
            transfer any or all Intellectual  Property registered in the name of
            any Debtor at the United States  Patent and Trademark  Office and/or
            Copyright  Office  into  the  name  of the  Secured  Parties  or any
            designee or any purchaser of any Collateral.

            (b) The  Secured  Parties  may  comply  with any  applicable  law in
      connection  with a disposition of Collateral and such  compliance will not
      be considered  adversely to affect the  commercial  reasonableness  of any
      sale of the  Collateral.  The  Secured  Parties  may sell  the  Collateral
      without  giving  any  warranties  and  may   specifically   disclaim  such
      warranties.  If the Secured Parties sells any of the Collateral on credit,
      the  Debtors  will only be credited  with  payments  actually  made by the
      purchaser.  In addition, each Debtor waives any and all rights that it may
      have to a judicial  hearing in  advance of the  enforcement  of any of the
      Secured  Parties'  rights  and  remedies  hereunder,   including,  without
      limitation,  its right  following  an Event of Default  to take  immediate
      possession of the  Collateral and to exercise its rights and remedies with
      respect thereto.

            (c) For the  purpose  of  enabling  the  Secured  Parties to further
      exercise rights and remedies under this Section 8 or elsewhere provided by
      agreement or  applicable  law,  each Debtor  hereby  grants to the Secured
      Parties an irrevocable,  nonexclusive license (exercisable without payment
      of  royalty  or other  compensation  to such  Debtor)  to use,  license or
      sublicense  following an Event of Default,  any Intellectual  Property now
      owned or hereafter  acquired by such Debtor,  and wherever the same may be
      located, and including in such license access to all media in which any of
      the licensed items may be recorded or stored and to all computer  software
      and programs used for the compilation or printout thereof.

      9. Applications of Proceeds. The proceeds of any such sale, lease or other
disposition of the Collateral  hereunder shall be applied first, to the expenses
of retaking,  holding, storing,  processing and preparing for sale, selling, and
the like  (including,  without  limitation,  any  taxes,  fees and  other  costs
incurred  in  connection  therewith)  of  the  Collateral,   to  the  reasonable
attorneys' fees and expenses  incurred by the Secured Parties in enforcing their
rights hereunder and in connection with collecting, storing and disposing of the
Collateral,  and then to  satisfaction  of the  Obligations  pro rata  among the
Secured  Parties (based on  then-outstanding  principal  amounts of Notes at the
time  of any  such  determination),  and to the  payment  of any  other  amounts
required by  applicable  law,  after which the Secured  Parties shall pay to the
applicable  Debtor any surplus  proceeds.  If,  upon the sale,  license or other
disposition of the Collateral,  the proceeds thereof are insufficient to pay all
amounts to which the Secured Parties are legally  entitled,  the Debtors will be
liable for the deficiency,  together with interest thereon,  at the rate of 112%
per annum or the lesser amount permitted by applicable law (the "Default Rate"),
and the  reasonable  fees of any  attorneys  employed by the Secured  Parties to
collect such deficiency.  To the extent permitted by applicable law, each Debtor
waives all claims,  damages and demands  against the Secured Parties arising out
of the repossession,  removal,  retention or sale of the Collateral,  unless due
solely to the gross  negligence or willful  misconduct of the Secured Parties as
determined  by a final  judgment  (not subject to further  appeal) of a court of
competent jurisdiction.

<PAGE>

      10.  Securities Law  Provision.  Each Debtor  recognizes  that the Secured
Parties  may be limited in its  ability to effect a sale to the public of all or
part  of the  Pledged  Securities  by  reason  of  certain  prohibitions  in the
Securities Act of 1933, as amended,  or other federal or state  securities  laws
(collectively,  the "Securities Laws"), and may be compelled to resort to one or
more sales to a restricted  group of purchasers  who may be required to agree to
acquire the Pledged  Securities  for their own account,  for  investment and not
with a view to the distribution or resale thereof. Each Debtor agrees that sales
so made  may be at  prices  and on  terms  less  favorable  than if the  Pledged
Securities  were  sold to the  public,  and  that  the  Secured  Parties  has no
obligation  to delay the sale of any Pledged  Securities  for the period of time
necessary  to register the Pledged  Securities  for sale to the public under the
Securities  Laws.  Each Debtor shall  cooperate with the Secured  Parties in its
attempt  to satisfy  any  requirements  under the  Securities  Laws  (including,
without limitation, registration thereunder if requested by the Secured Parties)
applicable to the sale of the Pledged Securities by the Secured Parties.

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

      12. Responsibility for Collateral.  The Debtors assume all liabilities and
responsibility  in connection with all Collateral,  and the Obligations shall in
no way be affected or diminished by reason of the loss,  destruction,  damage or
theft of any of the  Collateral or its  unavailability  for any reason.  Without
limiting the generality of the foregoing,  (a) no Secured Party (i) has any duty
(either  before or after an Event of  Default) to collect any amounts in respect
of the Collateral or to preserve any rights relating to the Collateral,  or (ii)
has any obligation to clean-up or otherwise prepare the Collateral for sale, and
(b) each  Debtor  shall  remain  obligated  and liable  under each  contract  or
agreement  included in the Collateral to be observed or performed by such Debtor
thereunder.  No Secured Party shall have any  obligation or liability  under any
such contract or agreement by reason of or arising out of this  Agreement or the
receipt by any Secured Party of any payment  relating to any of the  Collateral,
nor shall the any Secured Party be obligated in any manner to perform any of the
obligations  of any Debtor under or pursuant to any such  contract or agreement,
to make inquiry as to the nature or sufficiency  of any payment  received by any
Secured  Party in  respect of the  Collateral  or as to the  sufficiency  of any
performance  by any party under any such  contract or  agreement,  to present or
file any claim,  to take any action to enforce any performance or to collect the
payment of any amounts  which may have been assigned to any Secured Party may be
entitled at any time or times.

<PAGE>

      13. Security Interest Absolute.  All rights of the Secured Parties and all
obligations  of the  Debtors  hereunder,  shall be absolute  and  unconditional,
irrespective of: (a) any lack of validity or  enforceability  of this Agreement,
the Notes or any agreement entered into in connection with the foregoing, or any
portion  hereof or  thereof;  (b) any  change  in the  time,  manner or place of
payment  or  performance  of,  or in  any  other  term  of,  all  or  any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from the  Notes or any  other  agreement  entered  into in  connection  with the
foregoing; (c) any exchange,  release or nonperfection of any of the Collateral,
or any release or amendment or waiver of or consent to departure  from any other
collateral for, or any guaranty,  or any other  security,  for all or any of the
Obligations; (d) any action by the Secured Parties to obtain, adjust, settle and
cancel in its sole discretion any insurance claims or matters made or arising in
connection  with the  Collateral;  or (e) any  other  circumstance  which  might
otherwise  constitute any legal or equitable defense available to a Debtor, or a
discharge of all or any part of the Security Interest granted hereby.  Until the
Obligations  shall  have  been paid and  performed  in full,  the  rights of the
Secured  Parties  shall  continue  even if the  Obligations  are  barred for any
reason, including, without limitation, the running of the statute of limitations
or bankruptcy.  Each Debtor expressly  waives  presentment,  protest,  notice of
protest,  demand, notice of nonpayment and demand for performance.  In the event
that at any time any transfer of any  Collateral or any payment  received by the
Secured Parties hereunder shall be deemed by final order of a court of competent
jurisdiction to have been a voidable  preference or fraudulent  conveyance under
the bankruptcy or insolvency laws of the United States, or shall be deemed to be
otherwise  due to any party other than the Secured  Parties,  then,  in any such
event, each Debtor's  obligations  hereunder shall survive  cancellation of this
Agreement, and shall not be discharged or satisfied by any prior payment thereof
and/or  cancellation  of this  Agreement,  but shall  remain a valid and binding
obligation  enforceable in accordance with the terms and provisions hereof. Each
Debtor  waives all right to require the Secured  Parties to proceed  against any
other person or entity or to apply any Collateral  which the Secured Parties may
hold at any time,  or to marshal  assets,  or to pursue any other  remedy.  Each
Debtor waives any defense arising by reason of the application of the statute of
limitations to any obligation secured hereby.

<PAGE>

      14. Term of  Agreement.  This  Agreement and the Security  Interest  shall
terminate  on the  date  on  which  all  payments  under  the  Notes  have  been
indefeasibly  paid  in  full  and  all  other  Obligations  have  been  paid  or
discharged;  provided, however, that all indemnities of the Debtors contained in
this Agreement  shall survive and remain  operative and in full force and effect
regardless of the termination of this Agreement.

      15. Power of Attorney; Further Assurances.

            (a) Each  Debtor  authorizes  the Secured  Parties,  and does hereby
      make,  constitute  and appoint the  Secured  Parties and their  respective
      officers,  agents,  successors or assigns with full power of substitution,
      as such Debtor's true and lawful attorney-in-fact, with power, in the name
      of the various  Secured  Parties or such Debtor,  to, after the occurrence
      and during the  continuance of an Event of Default,  (i) endorse any note,
      checks,  drafts,  money orders or other instruments of payment  (including
      payments  payable  under or in  respect  of any  policy of  insurance)  in
      respect of the  Collateral  that may come into  possession  of the Secured
      Parties;  (ii) to sign and endorse any financing statement pursuant to the
      UCC or any invoice,  freight or express bill,  bill of lading,  storage or
      warehouse receipts, drafts against debtors, assignments, verifications and
      notices in connection with accounts,  and other documents  relating to the
      Collateral;  (iii) to pay or discharge taxes, liens, security interests or
      other  encumbrances at any time levied or placed on or threatened  against
      the Collateral;  (iv) to demand, collect, receipt for, compromise,  settle
      and sue for monies due in respect of the  Collateral;  (v) to transfer any
      Intellectual  Property or provide  licenses  respecting  any  Intellectual
      Property; and (vi) generally, at the option of the Secured Parties, and at
      the expense of the Debtors,  at any time, or from time to time, to execute
      and deliver any and all documents and  instruments  and to do all acts and
      things which the Secured  Parties deem necessary to protect,  preserve and
      realize upon the Collateral and the Security  Interest  granted therein in
      order to effect  the intent of this  Agreement  and the Notes all as fully
      and  effectually  as the Debtors might or could do; and each Debtor hereby
      ratifies all that said attorney  shall  lawfully do or cause to be done by
      virtue  hereof.  This power of  attorney is coupled  with an interest  and
      shall be irrevocable for the term of this Agreement and thereafter as long
      as any of the Obligations shall be outstanding.  The designation set forth
      herein shall be deemed to amend and supersede any  inconsistent  provision
      in the Organizational  Documents or other documents or agreements to which
      any Debtor is subject or to which any Debtor is a party.  Without limiting
      the  generality  of the  foregoing,  after the  occurrence  and during the
      continuance  of an Event of Default,  each Secured  Party is  specifically
      authorized  to execute and file any  applications  for or  instruments  of
      transfer and  assignment of any patents,  trademarks,  copyrights or other
      Intellectual  Property with the United States Patent and Trademark  Office
      and the United States Copyright Office.

            (b)  On  a  continuing  basis,  each  Debtor  will  make,   execute,
      acknowledge, deliver, file and record, as the case may be, with the proper
      filing and  recording  agencies in any  jurisdiction,  including,  without
      limitation, the jurisdictions indicated on Schedule C attached hereto, all
      such  instruments,  and take all such action as may  reasonably  be deemed
      necessary or advisable, or as reasonably requested by the Secured Parties,
      to perfect the Security  Interest granted hereunder and otherwise to carry
      out the  intent  and  purposes  of this  Agreement,  or for  assuring  and
      confirming  to the Secured  Parties the grant or perfection of a perfected
      security interest in all the Collateral under the UCC.

<PAGE>

            (c) Each Debtor hereby  irrevocably  appoints the Secured Parties as
      such  Debtor's  attorney-in-fact,  with  full  authority  in the place and
      instead of such Debtor and in the name of such  Debtor,  from time to time
      in the Secured Parties' discretion,  to take any action and to execute any
      instrument  which the Secured  Parties may deem  necessary or advisable to
      accomplish the purposes of this  Agreement,  including the filing,  in its
      sole discretion,  of one or more financing or continuation  statements and
      amendments  thereto,  relative  to  any  of  the  Collateral  without  the
      signature  of  such  Debtor  where   permitted  by  law,  which  financing
      statements  may (but need not) describe the  Collateral as "all assets" or
      "all  personal  property" or words of like  import,  and ratifies all such
      actions  taken by the Secured  Parties.  This power of attorney is coupled
      with an interest and shall be  irrevocable  for the term of this Agreement
      and thereafter as long as any of the Obligations shall be outstanding.

      16.  Notices.  All  notices,  requests,  demands and other  communications
hereunder shall be subject to the notice provision of the Purchase Agreement (as
such term is defined in the Notes).

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

      18. Intentionally Omitted.

      19. Miscellaneous.

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

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

<PAGE>

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

            (d) In the  event  any  provision  of this  Agreement  is held to be
      invalid,  prohibited or  unenforceable in any jurisdiction for any reason,
      unless such provision is narrowed by judicial construction, this Agreement
      shall,  as  to  such  jurisdiction,  be  construed  as  if  such  invalid,
      prohibited or  unenforceable  provision had been more narrowly drawn so as
      not to be invalid,  prohibited or unenforceable.  If,  notwithstanding the
      foregoing,  any  provision  of  this  Agreement  is  held  to be  invalid,
      prohibited or unenforceable  in any  jurisdiction,  such provision,  as to
      such jurisdiction,  shall be ineffective to the extent of such invalidity,
      prohibition or unenforceability without invalidating the remaining portion
      of such  provision or the other  provisions of this  Agreement and without
      affecting the validity or  enforceability  of such  provision or the other
      provisions of this Agreement in any other jurisdiction.

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

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

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

            (h) All questions concerning the construction, validity, enforcement
      and  interpretation  of this Agreement  shall be governed by and construed
      and  enforced in  accordance  with the  internal  laws of the State of New
      York,  without regard to the principles of conflicts of law thereof.  Each
      Debtor  agrees  that  all  proceedings   concerning  the  interpretations,
      enforcement and defense of the transactions contemplated by this Agreement
      and the Notes  (whether  brought  against a party hereto or its respective
      affiliates,   directors,   officers,   shareholders,   partners,  members,
      employees  or  agents)  shall be  commenced  exclusively  in the state and
      federal courts sitting in the City of New York, Borough of Manhattan. Each
      Debtor hereby  irrevocably  submits to the exclusive  jurisdiction  of the
      state and  federal  courts  sitting  in the City of New York,  Borough  of
      Manhattan for the  adjudication of any dispute  hereunder or in connection
      herewith or with any transaction  contemplated hereby or discussed herein,
      and hereby irrevocably waives, and agrees not to assert in any proceeding,
      any claim that it is not  personally  subject to the  jurisdiction  of any
      such court,  that such  proceeding  is improper.  Each party hereto hereby
      irrevocably  waives  personal  service of process and  consents to process
      being  served  in any  such  proceeding  by  mailing  a copy  thereof  via
      registered  or certified  mail or  overnight  delivery  (with  evidence of
      delivery)  to such party at the  address in effect for notices to it under
      this  Agreement  and agrees that such service  shall  constitute  good and
      sufficient service of process and notice thereof. Nothing contained herein
      shall be  deemed  to limit in any way any  right to serve  process  in any
      manner permitted by law. Each party hereto hereby  irrevocably  waives, to
      the fullest extent permitted by applicable law, any and all right to trial
      by  jury  in any  legal  proceeding  arising  out of or  relating  to this
      Agreement  or the  transactions  contemplated  hereby.  If any party shall
      commence a proceeding to enforce any  provisions of this  Agreement,  then
      the prevailing  party in such proceeding  shall be reimbursed by the other
      party for its  reasonable  attorney's  fees and other  costs and  expenses
      incurred  with the  investigation,  preparation  and  prosecution  of such
      proceeding.

<PAGE>

            (i) This  Agreement  may be executed in any number of  counterparts,
      each of which when so executed  shall be deemed to be an original and, all
      of which taken together shall  constitute one and the same  Agreement.  In
      the event that any signature is delivered by facsimile transmission,  such
      signature  shall create a valid binding  obligation of the party executing
      (or on whose behalf such  signature  is  executed)  the same with the same
      force and effect as if such facsimile signature were the original thereof.

            (j) All  Debtors  shall  jointly  and  severally  be liable  for the
      obligations of each Debtor to the Secured Parties hereunder.

            (k) Each Debtor shall  indemnify,  reimburse  and hold  harmless the
      Secured  Parties and their  respective  partners,  members,  shareholders,
      officers,  directors,  employees and agents (collectively,  "Indemnitees")
      from  and  against  any  and all  losses,  claims,  liabilities,  damages,
      penalties,  suits, costs and expenses,  of any kind or nature,  (including
      fees  relating  to the  cost of  investigating  and  defending  any of the
      foregoing)  imposed on, incurred by or asserted against such Indemnitee in
      any way related to or arising from or alleged to arise from this Agreement
      or the Collateral,  except any such losses, claims, liabilities,  damages,
      penalties,   suits,  costs  and  expenses  which  result  from  the  gross
      negligence  or willful  misconduct  of the  Indemnitee  as determined by a
      final,  nonappealable decision of a court of competent jurisdiction.  This
      indemnification provision is in addition to, and not in limitation of, any
      other  indemnification  provision in the Notes, the Purchase Agreement (as
      such term is defined in the Notes) or any other  agreement,  instrument or
      other document executed or delivered in connection herewith or therewith.

            (l)  Nothing in this  Agreement  shall be  construed  to subject any
      Secured Party to liability as a partner in any Debtor or any if its direct
      or  indirect  subsidiaries  that is a  partnership  or as a member  in any
      Debtor or any of its  direct or  indirect  subsidiaries  that is a limited
      liability  company,  nor any Secured  Party be deemed to have  assumed any
      obligations  under any partnership  agreement or limited liability company
      agreement,  as  applicable,  of any such  Debtor  or any if its  direct or
      indirect  subsidiaries  or  otherwise,  unless and until any such  Secured
      Party  exercises its right to be substituted  for such Debtor as a partner
      or member, as applicable, pursuant hereto.

<PAGE>

            (m) To the extent  that the grant of the  security  interest  in the
      Collateral  and the  enforcement  of the terms hereof require the consent,
      approval or action of any partner or member, as applicable,  of any Debtor
      or any direct or indirect  subsidiary of any Debtor or compliance with any
      provisions  of any of the  Organizational  Documents,  the Debtors  hereby
      grant such consent and approval and waive any such  noncompliance with the
      terms of said documents.

                            [SIGNATURE PAGES FOLLOW]

<PAGE>

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

DUNCAN CAPITAL FINANCIAL GROUP, INC.

/s/ Richard Stierwalt
---------------------

Subsidiary
PENSION ADMINISTRATION SERVICES, INC.

/s/ Richard Stierwalt
---------------------
CEO
Subsidiary
COMPLETE INVESTMENT MANAGEMENT OF PHILADELPHIA, INC.

/s/ Richard Stierwalt
---------------------
CEO

Subsidiary
MD BLUESTEIN, INC.

/s/ Richard Stierwalt
---------------------
CEO

--------------------------------------------------------------------------------

                       [SIGNATURE PAGE OF HOLDERS FOLLOWS]

<PAGE>

        [SIGNATURE PAGE OF HOLDERS TO DUNCAN CAPITAL FINANCIAL GROUP SA]

         Name of Investing Entity: DCOFI Master LDC
                                   -----------------
         Signature of Authorized Signatory of Investing entity: Jeff Haas
                                                                ---------
         Name of Authorized Signatory: Jeff Haas
                                       ---------
         Title of Authorized Signatory: Authorized Signatory
                                        --------------------

                       [SIGNATURE PAGE OF HOLDERS FOLLOWS]

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