Document:

Exhibit 10.61

 

SECOND AMENDMENT TO

2001 STOCK PLAN

            This
Second Amendment (the "Second Amendment") to the 2001 Stock Plan
(the "Plan") of Home Solutions of America, Inc., a Delaware corporation (the "Company"), is dated as of June 17, 2005.

            WHEREAS,
on June 14, 2001, the Company's stockholders approved the Plan;

            WHEREAS,
on May 20, 2003, the Company's stockholders approved the First Amendment to the
Plan (the "First Amendment"), whereby the number of shares
available for grant thereunder was increased from 2,000,000 to 3,000,000;

            WHEREAS,
on June 17, 2005, at the Company's 2005 Annual Stockholders' Meeting, upon the
recommendation of the Company's Board of Directors, the Company's stockholders approved
amending the Plan to further increase the number of shares available for grant
thereunder, as evidenced by this Second Amendment.

            NOW
THEREFORE, the Company's stockholders have agreed as follows:

            1.         In
Section 3 of the Plan, entitled "Stock Subject to the Plan", the number "3,000,000"
is hereby deleted and replaced with the number "4,000,000."

            2.
        Except as expressly amended hereby and by the First Amendment, the Plan
remains in full force and effect.  Capitalized terms that are not defined
herein shall have the same meaning assigned to them in the Plan.

            IN
WITNESS WHEREOF, the Secretary of the Company has set his hand hereto as of the
date set forth above, to evidence the approval by the Company's stockholders of
this Second Amendment.

 

                                                            ______________________________________       

                                                            Rick
J. O'Brien, SecretaryExhibit 10.1

                              INVESTMENT AGREEMENT

         This INVESTMENT AGREEMENT (the "Agreement") is made and entered into as
of July 15,  2005,  by and among  MedSolutions,  Inc., a Texas  corporation,  on
behalf of itself and its subsidiaries  (MedSolutions,  Inc. and its Subsidiaries
are collectively referred to herein as the "Company") and Tate Investments, LLC,
a Wisconsin limited liability company (the "Investor").

                                    RECITALS:

         WHEREAS,  the  Company  desires  to raise  capital  to  retire  certain
existing indebtedness of the Company and its subsidiaries, and to make strategic
acquisitions;

         WHEREAS,  the Investor  has agreed to invest up to Two Million  Dollars
($2,000,000)  in the  Company  for such  purposes  through  both debt and equity
investments on the terms and conditions set forth in this Agreement;

         NOW,  THEREFORE,  in consideration of the promises and mutual covenants
contained in this Agreement, the Company and the Investor agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

         Section 1.1 Defined  Terms.  Capitalized  terms used in this  Agreement
which are not otherwise defined herein shall have the following meanings:

                  (a)  "Accounts"  shall  mean  all of  the  Company's  and  its
         Subsidiaries' rights to payment for goods (including freight and taxes)
         sold or leased or services performed thereby,  whether now in existence
         or arising from time to time hereafter,  including without  limitation,
         rights evidenced by an account,  note,  contract,  security  agreement,
         chattel paper, or other evidence of indebtedness or security,  together
         with (i) all security pledged, assigned,  hypothecated or granted to or
         held by the Company or any of its Subsidiaries to secure the foregoing,
         (ii) all of the Company's and each of its  Subsidiaries'  right,  title
         and interest in and to any goods,  the sale of which gave rise thereto,
         (iii) all guarantees,  endorsements and indemnifications on, or of, any
         of the foregoing,  (iv) all powers of attorney for the execution of any
         evidence of  indebtedness  or security or other  writing in  connection
         therewith,  (v) all books, records, ledger cards, and invoices relating
         thereto,  (vi) all evidences of the filing of financing  statements and
         other  statements  and  the   registration  of  other   instruments  in
         connection therewith and amendments thereto, notices to other creditors
         or secured parties,  and certificates from filing or other registration
         officers, (vii) all credit information,  reports and memoranda relating
         thereto,  and  (viii)  all  other  writings  related  in any way to the
         foregoing.

                  (b)  "Additional  Stock" shall mean any shares of Common Stock
         issued   (or   deemed  to  have  been   issued   pursuant   to  Section
         3.2(i)(ii)(C)(V)  hereof) after the Issue Date,  other than: (i) Common
         Stock   issued   pursuant  to  a   transaction   described  in  Section
         3.2(i)(ii)(D)  hereof,  (ii) shares issued or to be issued  pursuant to

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         the Investment Agreement;  (iii) Common Stock issued in connection with
         the  acquisition by the Company or any of its  Subsidiaries  of another
         entity;  or (iv) up to 106,666 shares of Common Stock issuable pursuant
         to stock options with  exercise  prices of $0.75 per share to be issued
         to Mr.  Alan  Larosee  and Mr.  David  Mack as  finders'  fees  for the
         transactions contemplated by the Investment Agreement.

                  (c)  "Advance"  shall mean each sum loaned by the  Investor to
         the Company under the Note from time to time pursuant to a Draw Notice.

                  (d)  "Affiliate"  shall mean with  respect to any Person,  any
         other Person  directly or  indirectly  controlling,  controlled  by, or
         under common  control with,  such first Person,  except a Subsidiary of
         the Company shall not be an Affiliate of the Company. A Person shall be
         deemed to  control a  corporation  or entity if such  Person  possesses
         directly or  indirectly,  the power to direct or cause the direction of
         the  management  and policies of such  corporation  or entity,  whether
         through the ownership of voting securities, by contract, or otherwise.

                  (e) "Articles" shall mean the Articles of Incorporation of the
         Company or a Subsidiary as the same may be amended from time to time.

                  (f) "Bylaws" shall mean the corporate bylaws of the Company or
         Subsidiary as the same may be amended from time to time.

                  (g)  "Capital  Call"  shall  mean  each sum  requested  by the
         Company under the Subscription  Agreement from time to time pursuant to
         a Capital Call Notice.

                  (h) "Capital Call Notice" shall mean a written notice from the
         Company  to the  Investor  that  the  Company  is  requesting  that the
         Investor  purchase a  specified  number of Common  Shares  (as  defined
         below) pursuant to the Subscription Agreement. Each Capital Call Notice
         shall set forth the number of Common  Shares the  Company is  tendering
         for sale, the current  Purchase  Price per share,  the date the Company
         desires to  effectuate  the sale,  which date shall not be earlier than
         fifteen (15) days after the date the Company  delivers the Capital Call
         Notice to the  Investor,  and  shall  contain  a  certification  by the
         Company's  Chief  Executive  Officer  that (i) the Company has complied
         with all of the  conditions  precedent  to a Capital  Call set forth in
         Section  4.2(d)(i)  hereof,  and (ii) the Company is in compliance with
         all of its covenants under this Agreement.

                  (i) "Common Stock" shall mean and include all shares of Common
         Stock of the Company,  and any rights,  options or warrants to purchase
         Common  Stock,  and all other  securities  of the Company  which may be
         issued in  exchange  for or in respect of such  shares of Common  Stock
         (whether  by  way  of  stock  split,   stock   dividend,   combination,
         reclassification, reorganization or any other means).

                  (j) "Deed of Trust" shall mean that certain deed of trust from
         the Company to the Investor  granting the Investor a continuing  second
         priority security interest in the Real Property.

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<PAGE>

                  (k) "Draw Notice" shall mean a written notice from the Company
         to the Investor  that the Company is  requesting  an Advance  under the
         Note.  Each Draw  Notice  shall set  forth  the  amount of the  Advance
         requested, the date such Advance is requested,  which date shall not be
         earlier than fifteen (15) days after the date the Company  delivers the
         Draw Notice to the Investor,  and shall contain a certification  by the
         Company's  Chief  Executive  Officer  that (i) the Company has complied
         with all of the  conditions  precedent  to an  Advance  as set forth in
         Sections  3.2(b) and (c),  as  applicable,  and (ii) the  Company is in
         compliance with all of its covenants under this Agreement.

                  (l) "EBITDA" shall mean income (or loss) from operations, plus
         net  interest  expense,  income  tax and  depreciation,  calculated  in
         accordance with GAAP. For purposes of this definition, income (or loss)
         from  operations  does not  include any gain from the sale of assets or
         the forgiveness, extinguishment or reclassification of debt (other than
         gain  resulting  from the  agreement by a vendor who provided  goods or
         services  to the Company in the  ordinary  course of business to accept
         less  than the face  amount  of an  invoice  previously  issued  by the
         vendor).

                  (m) "Event of  Default"  shall have the  meaning  set forth in
         Article IX hereof.

                  (n) "Initial  Capital Call Notice" shall mean the Capital Call
         Notice  submitted  to the  Investor at the Closing  pursuant to Section
         4.2(c) hereof.

                  (o)  "Initial  Advance"  shall  mean the  Advance  made at the
         Closing pursuant to the Initial Draw Notice.

                  (p) "Initial Capital Call" shall mean the Capital Call made in
         connection  with the  Closing  pursuant  to the  Initial  Capital  Call
         Notice.

                  (q) "Initial Draw Notice" shall mean the Draw Notice submitted
         to the Investor at the Closing pursuant to Section 3.2(b) hereof.

                  (r)  "Interest  Period"  shall  mean  any  one of  consecutive
         one-month  periods,  the  first  of which  shall  begin on the date the
         initial  Advance  is made under the Note and end on the last day of the
         month in which the initial  Advance is made and the rest of which shall
         each  begin on the first day of each full month  thereafter  and end on
         the last day of that month.

                  (s) "Issue  Date" shall mean the date upon which any shares of
         Common  Stock were issued to the  Investor  pursuant to this  Agreement
         and/or the Subscription Agreement.

                  (t)  "Knowledge."  An  individual  shall  be  deemed  to  have
         "Knowledge" of a particular fact or other matter if (i) such individual
         is  actually  aware  of such  fact or  other  matter,  or (ii) a person
         serving in the same  capacity as such  individual  would be expected to
         discover or otherwise become aware, after due inquiry,  of such fact or
         other matter in the course of  performing  the official  duties of such
         individual.  A  corporation  shall be deemed to have  "Knowledge"  of a
         particular fact or other matter if the chief  executive  officer or the
         chief financial  officer of the corporation has Knowledge (as set forth
         above) of such fact or other matter.

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<PAGE>

                  (u)  "Net  Income"   shall  mean  revenues   minus   expenses,
         depreciation,  interest and taxes,  calculated in accordance with GAAP.
         For purposes of this definition,  revenues do not include any gain from
         the   sale   of   assets   or  the   forgiveness,   extinguishment   or
         reclassification  of debt (other than gain resulting from the agreement
         by a vendor  who  provided  goods or  services  to the  Company  in the
         ordinary  course of  business to accept less than the face amount of an
         invoice previously issued by the vendor).

                  (v)  "Note"  shall  mean  the  Company's  One  Million  Dollar
         ($1,000,000) 10% Senior Convertible Note in the form attached hereto as
         Exhibit B, which will be issued by the  Company to the  Investor at the
         Closing.

                  (w)  "Outstanding  Principal"  shall  mean,  at any time,  the
         aggregate  sum of all  Advances  previously  made under the Note,  plus
         accrued but unpaid interest, less all amounts repaid under the Note.

                  (x)  "Projected  EBITDA" shall mean, for fiscal year 2005, the
         projected EBITDA for the Company and its Subsidiaries on a consolidated
         basis,  set  forth in the  Company's  pro  forma  financial  statements
         attached hereto as Exhibit A and incorporated herein by reference,  and
         for each  fiscal year  thereafter,  the  projected  EBITDA set forth in
         Exhibit A shall be adjusted  annually  for each such fiscal year by the
         mutual  agreement of the Company and the Investor on or before  January
         31st of each such  fiscal  year;  provided,  however,  that in no event
         shall the  projected  EBITDA for any such fiscal year reflect less than
         5% internal growth for such fiscal year over the immediately  preceding
         fiscal year. Projected EBITDA shall not include any expenses (including
         without   limitation,   expenses   incurred  in  connection   with  the
         transactions   contemplated  hereby),  which  are  capitalized  on  the
         Company's year end financial statements.  The Projected EBITDA shall be
         further adjusted as set forth in Section 3.2(i).

                  (y)  "Projected  Net Income" shall mean, for fiscal year 2005,
         the  projected  Net Income for the  Company and its  Subsidiaries  on a
         consolidated  basis,  set forth in the  Company's  pro forma  financial
         statements  attached  hereto as  Exhibit A and  incorporated  herein by
         reference,  and for each  fiscal year  thereafter,  the  projected  Net
         Income set forth in Exhibit A shall be adjusted  annually for each such
         fiscal year by the mutual  agreement of the Company and the Investor on
         or before  January  31st of each such fiscal year;  provided,  however,
         that in no event  shall the  projected  Net Income for any such  fiscal
         year reflect less than 5% internal growth for such fiscal year over the
         immediately  preceding  fiscal year.  The Projected Net Income shall be
         further  adjusted for  acquisitions  and  dispositions,  if any, as set
         forth in Section 3.2(i). For purposes of this definition, projected net
         income  does not  include  any gain  from  the  sale of  assets  or the
         forgiveness,  extinguishment  or  reclassification  of debt (other than
         gain  resulting  from the  agreement by a vendor who provided  goods or
         services  to the Company in the  ordinary  course of business to accept
         less  than the face  amount  of an  invoice  previously  issued  by the
         vendor).  Projected  Net Income  shall  also not  include  any  expense
         (including,  without  limitation,  expenses incurred in connection with
         the transactions contemplated by this Agreement), which are capitalized
         on the Company's year end financial statements).

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<PAGE>

                  (z) "Real  Property"  shall mean the  Company's  real  estate,
         improvements,  permits  and  approvals  associated  with the  Company's
         treatment/transfer  facility  in  Garland,  Texas,  which is more fully
         described in Exhibit C hereto.

                  (aa) "Related Party" shall mean (i) any officer or director of
         the Company or any  Subsidiary,  (ii) any Person directly or indirectly
         owning any shares of capital  stock of the  Company or any  Subsidiary,
         (iii) any Person who is related by blood,  adoption  or marriage to any
         Person  described in clause (i) or (ii),  or (iv) any  Affiliate of the
         Company or any Affiliate of any Person described in clause (i), (ii) or
         (iii);  provided,  however,  that the Company and any Subsidiary of the
         Company shall not be Related Parties.

                  (bb)  "Subscription  Agreement"  shall  mean the  Subscription
         Agreement in the form attached  hereto as Exhibit D, to be executed and
         delivered by the Investor to the Company as set forth in Article IV.

                  (cc)   "Subsequent   Advance"  shall  mean  any  Advance  made
         subsequent to the Initial Advance.

                  (dd)  "Subsequent  Capital  Call" shall mean any Capital  Call
         made subsequent to the Initial Capital Call.

                  (ee)  "Subsidiary"  shall mean any corporation or other entity
         of which the Company  either  directly or indirectly  owns greater than
         fifty percent (50%) of the total  combined  voting power of all classes
         of equity securities, at the time any determination is made.

                                   ARTICLE II

                                   INVESTMENT

         Section 2.1 Agreement to Invest.  The Investor  hereby agrees to invest
up to Two  Million  Dollars  ($2,000,000)  in the  Company,  on  the  terms  and
conditions set forth herein. Such investment will be structured as follows:  (a)
the Company will sell to the  Investor,  and the Investor will purchase from the
Company,  the  Company's  Up to  One  Million  Dollar  ($1,000,000)  10%  Senior
Convertible Note (the "Note"), and (b) the Investor will subscribe for up to One
Million Dollars ($1,000,000) of the Company's common stock, par value $.001 (the
"Common  Stock") at a purchase  price of  sixty-five  cents  ($0.65)  per share,
subject to adjustment at the time of each Capital Call as set forth herein.

         Section  2.2  Closing.  The  closing of the  transactions  contemplated
herein  (the  "Closing")  shall  take  place at the  offices  of the  Investor's
counsel, Davis & Kuelthau,  s.c., 300 N. Corporate Drive, Suite 150, Brookfield,
WI 53045 on July 15, 2005 at 10:00 a.m.,  or at such other time and place as the
Company and the Investor shall mutually agree.

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<PAGE>

                                   ARTICLE III

                          TERMS OF THE DEBT INVESTMENT

         Section  3.1  Debt  Investment.  In  consideration  for  the  Company's
issuance to the Investor of the Note, the Investor  hereby agrees to lend to the
Company up to One Million  Dollars  ($1,000,000) on the terms and conditions set
forth herein.

         Section 3.2 Terms of the Debt Investment.

                  (a) The Advances.  The Investor agrees to lend to the Company,
         in a series of  Advances,  such amounts as the Company may request from
         time to time in one or more Draw Notices,  until the earlier of October
         15, 2006, or such time as the  aggregate  amount of Advances made under
         the Note shall equal One Million Dollars ($1,000,000).

                  (b) Initial Advance.  At the Closing,  the Company may deliver
         to the Investor an Initial Draw Notice in an amount up to Three Hundred
         Thousand  Dollars  ($300,000).   The  amount  of  the  Initial  Advance
         requested and the amount of the initial  Capital Call  requested  shall
         not, in the aggregate,  exceed Six Hundred Thousand Dollars ($600,000).
         The proceeds of the Initial  Advance and the Initial Capital Call shall
         only be used to satisfy the Company's and its Subsidiaries  liabilities
         to the Internal  Revenue  Service for federal payroll tax arrearages in
         an amount sufficient to discharge at a minimum all federal tax liens on
         the assets of the  Company  with any  shortfall  representing  only the
         expected  adjustment  to penalties  anticipated  by the  Company's  tax
         advisors,  and with the balance being used to pay the Company's and its
         Subsidiaries'   scheduled  trade  payables  detailed  on  Schedule  3.2
         (including  $37,500  for  the  Investor's  legal  fees  related  to the
         transactions contemplated herein); provided, however, that in the event
         that the Company does not receive a favorable adjustment to its federal
         tax penalties as described  above,  the Company shall  promptly pay any
         outstanding federal tax obligations then due.

                  (c) Subsequent Advances.

                           (i)  Subsequent  Advances under the Note will be made
                  only upon the satisfaction of all of the following conditions:

                                    (A) The Company  shall deliver a Draw Notice
                           to the Company no later than  fifteen (15) days prior
                           to the date on which the Company  desires the Advance
                           to be made.

                                    (B) Any Draw Notice shall be  accompanied by
                           a  Capital  Call  Notice  in an  amount  equal to the
                           amount requested pursuant to such Draw Notice,  until
                           such  time as the  aggregate  amount  of all  Capital
                           Calls shall equal One Million Dollars ($1,000,000).

                                    (C)   All   of   the   representations   and
                           warranties  made by the Company in this Agreement are
                           true,  complete and correct in all material  respects
                           on the date of such Draw  Notice with the same effect
                           as though such  representations  and  warranties  had
                           been made on and as of the date of such Draw Notice.

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<PAGE>

                                    (D) On the  date of such  Draw  Notice,  the
                           Company  shall  have  complied  with and  shall be in
                           compliance  with all covenants of the Company in this
                           Agreement.

                                    (E) There  shall be no  continuing  Event of
                           Default.

                                    (F) The  Advance  requested  pursuant to the
                           Draw  Notice  shall  be made  only  for the  specific
                           purpose of making a strategic acquisition approved in
                           writing by the  Investor,  and is only in such amount
                           as the  Company  requires  (in  combination  with any
                           amounts   requested   pursuant  to  the  accompanying
                           Capital Call  Notice) to  effectuate  such  strategic
                           acquisition;  provided  however,  that  the  Investor
                           shall be deemed to have  approved any such  strategic
                           acquisition if it has not provided  written notice of
                           its  disapproval  and  the  reasons  therefor  to the
                           Company  within  fifteen  (15) days of its receipt of
                           the Draw Notice.

                                    (G) The  Company  shall have  submitted  its
                           acquisition  plan to the  Investor  for  review,  and
                           shall have  received  the  Investor's  prior  written
                           approval  for such  acquisition;  provided,  however,
                           that the  Investor  shall be deemed to have  approved
                           any  such  acquisition  plan if it has  not  provided
                           written  notice of its  disapproval  and the  reasons
                           therefor to the Company  within  fifteen (15) days of
                           its receipt of such acquisition plan.

                                    (H) The Company and the Investor  shall have
                           reached  a  written  agreement  with  respect  to the
                           adjustments  to the Projected  Net Income,  Projected
                           EBITDA and Schedule 8.11 to reflect the impact of the
                           proposed acquisition.

                           (ii) Each Advance (including any Initial Advance made
                  at Closing)  shall reduce the amount  available for Subsequent
                  Advances  under the Note by the amount of such  Advance,  such
                  that the aggregate  amount of all Advances made under the Note
                  may  never  exceed  an   aggregate  of  One  Million   Dollars
                  ($1,000,000).   Amounts   repaid  under  the  Note  shall  not
                  reinstate  any  amount  available  for  Draws  under the Note,
                  except that  amounts of the Initial  Advance  which are repaid
                  when due shall be reinstated and available for Draws under the
                  Note.

                  (d) Payment of Advances.  Upon  fulfillment  of the conditions
         precedent  to Closing set forth in Article  VII hereof with  respect to
         any Initial Advance,  and Section  3.2(c)(i) hereof with respect to any
         Subsequent  Advance,  the Investor shall make available to the Company,
         in  immediately  available  funds,  on the date  set  forth in the Draw
         Notice the amount of the Advance  requested.  The  Investor  shall make
         such funds  available  to the  Company by wire  transfer to the account
         specified  in such Draw Notice or in such other  manner as the Investor
         and the Company shall agree.

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<PAGE>

                  (e) Interest.  All Outstanding Principal due and payable under
         the Note shall bear  interest at a rate equal to ten percent  (10%) per
         annum, compounded annually. Interest shall accrue on the amount of each
         Advance from the time the  proceeds of such Advance are made  available
         to the Company until such time as such amounts are repaid.

                  (f)  Repayment.  The Initial  Advance will be payable in three
         (3) equal monthly  installments of interest only commencing thirty (30)
         days from the date of the Initial Advance and twelve (12) equal monthly
         installments   of  principal   and  interest   commencing   thereafter.
         Subsequent  Advances will be payable in thirty-six (36) installments as
         follows:  thirty-five  (35)  monthly  payments of interest  only on the
         first day of each calendar month  commencing  with the first day of the
         month (the "First  Payment  Date") that falls at least thirty (30) days
         after the date the first  Subsequent  Advance  is made by the  Investor
         under  the Note,  and a final  installment  in an  amount  equal to the
         Outstanding  Principal and any accrued but unpaid interest on the third
         anniversary  of the First Payment Date. Any monthly  interest  payments
         shall  be in an  amount  equal  to  interest  actually  accrued  on the
         Outstanding  Principal under the Note during the immediately  preceding
         Interest Period.  All payments by the Company to the Investor hereunder
         shall be made in lawful currency of the United States of America and in
         immediately  available  funds  no  later  than  1:00  p.m.,  Milwaukee,
         Wisconsin  time,  on the  due  date  at the  address  specified  by the
         Investor from time to time.

                  (g)   Prepayment.   On  or  after  the  eighteen   (18)  month
         anniversary  of the  Closing,  the Company may prepay any or all of the
         Outstanding  Principal  under  the Note,  and any  accrued  and  unpaid
         interest  thereon,  at any time and from time to time without the prior
         written  consent of the  Investor  and  without any premium or penalty;
         provided, however, that (i) the Company shall provide the Investor with
         thirty (30) days' prior  written  notice of its intent to prepay any or
         all of such  Outstanding  Principal,  and  (ii)  such  notice  shall be
         accompanied by either an irrevocable  written  commitment from a lender
         or other  financing  source to provide  financing for the prepayment or
         evidence  reasonably  satisfactory  to the  Investor  of the  Company's
         ability  to make the  proposed  prepayment.  The  Investor  may,  after
         receipt  of such  prepayment  notice,  elect to  convert,  pursuant  to
         Section 3.2(i) below, any or all of such Outstanding Principal proposed
         to be  prepaid  by  providing  written  notice  to the  Company  of the
         Investor's  intent  to  convert  prior  to the  effective  date of such
         prepayment.  Notice of prepayment pursuant to this Section 3.2(g) shall
         be irrevocable, and in the event the Company fails to prepay the amount
         specified in the  prepayment  notice (or to effectuate  any  conversion
         requested by the Investor in connection  therewith) upon the expiration
         of thirty (30) days from the date of the delivery of such  notice,  the
         Outstanding  Principal  under the note,  together  with any accrued and
         unpaid interest thereon, shall become immediately due and payable.

                  (h) Recordation of Advances and Repayments. The Investor shall
         record on  Schedule 1 of the Note the date and  amount of each  Advance
         and the date and amount of each  repayment  of interest or  Outstanding
         Principal.  The  failure to record or any error in  recording  any such
         Advance or repayment shall not, however,  affect the obligations of the
         Company hereunder or under the Note to repay the Outstanding  Principal
         amount of the Note together  with all interest  accruing  thereon,  nor
         shall such failure or error affect any rights of the Company  hereunder
         or under  applicable law.  Schedule 1 to the Note, as maintained by the
         Investor  shall,  absent manifest error or omission,  constitute  prima
         facie evidence of the amounts outstanding under the Note.

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<PAGE>

                  (i) Conversion.

                           (i) Right to Convert.  The  Investor,  at its option,
                  may,  from time to time or at any time,  convert any or all of
                  the  Outstanding  Principal  of the Note into  fully-paid  and
                  non-assessable  shares  of the  Company's  Common  Stock  (the
                  "Conversion  Shares"),  at  an  initial  conversion  price  of
                  sixty-five cents ($0.65) per share (the "Conversion Price").

                           (ii) Adjustment of Conversion  Price.  The Conversion
                  Price shall be adjusted as follows:

                                    (A)  At  the  time  the  Company's   audited
                           financial  statements  for any given  fiscal year are
                           filed with the  Securities  and  Exchange  Commission
                           ("SEC"), if the Company did not realize its Projected
                           EBITDA or Projected  Net Income for such fiscal year,
                           the  Conversion  Price for  Conversion  Shares issued
                           during and  subsequent  to the fiscal year covered by
                           the audited  financial  statements  shall be adjusted
                           downward by a percentage  equal to the greater of (I)
                           the percentage  difference  between  Projected EBITDA
                           and actual  EBITDA for such  fiscal  year or (II) the
                           percentage  difference  between  Projected Net Income
                           and actual Net Income for such  fiscal  year.  Within
                           ten (10) days after the Company's  audited  financial
                           statements  are filed with the SEC, the Company shall
                           issue   a   stock   certificate   to   the   Investor
                           representing   any   additional   Conversion   Shares
                           issuable  as a result of the  adjustment  under  this
                           Section 3.2(i)(ii).

                                    (B) At  the  time  the  Company  proposes  a
                           strategic  acquisition  to the Investor,  the Company
                           and  the  Investor   shall   mutually   agree  on  an
                           appropriate   adjustment  to  Projected   EBITDA  and
                           Projected  Net Income to reflect  the added  value to
                           the Company realized by such acquisition.

                                    (C) Upon the Issuance Of Additional Stock.

                                             (I) If  the  Company  shall  issue,
                                    after the Issue Date, any  Additional  Stock
                                    without    consideration,     or    for    a
                                    consideration   per  share   less  than  the
                                    Conversion Price in effect immediately prior
                                    to the  issuance of such  Additional  Stock,
                                    the Conversion  Price in effect  immediately
                                    prior to such issuance  shall  automatically
                                    be  reduced  to the per  share  price of the
                                    Additional Stock.

                                             (II)   No    adjustment    of   the
                                    Conversion  Price shall be made in an amount
                                    less  than  one  cent   ($0.01)  per  share,
                                    provided that any adjustments  which are not
                                    required  to  be  made  by  reason  of  this
                                    sentence shall be carried  forward and shall
                                    be  taken  into  account  in any  subsequent
                                    adjustment  made  prior to three  (3)  years

                                       9
<PAGE>

                                    from the date giving rise to the adjustment.
                                    Except to the limited extent provided for in
                                    Section  3.2(i)(ii)(E)  hereof no adjustment
                                    of the  Conversion  Price  pursuant  to this
                                    Section  3.2(i)(ii)(C) shall have the effect
                                    of increasing the Conversion Price above the
                                    Conversion Price in effect immediately prior
                                    to such adjustment.

                                             (III) In the  case of the  issuance
                                    of   Additional    Stock   for   cash,   the
                                    consideration  shall  be  deemed  to be  the
                                    amount   of  cash   paid   therefor   before
                                    deducting    any    reasonable    discounts,
                                    commissions or other expenses allowed,  paid
                                    or   incurred   by  the   Company   for  any
                                    underwriting or otherwise in connection with
                                    the issuance and sale thereof.

                                             (IV) In the case of the issuance of
                                    Additional  Stock  for  a  consideration  in
                                    whole  or  in  part  other  than  cash,  the
                                    consideration   other  than  cash  shall  be
                                    deemed  to be  the  fair  value  thereof  as
                                    determined  by  the  Company's   independent
                                    certified public accountants.

                                             (V) In  the  case  of the  issuance
                                    (whether  before,  on or after the  Issuance
                                    Date) of  options to  purchase  or rights to
                                    subscribe  for Common  Stock,  securities by
                                    their terms convertible into or exchangeable
                                    for Common  Stock or options to  purchase or
                                    rights to subscribe for such  convertible or
                                    exchangeable   securities,   the   following
                                    provisions  shall apply for all  purposes of
                                    this Section 3.2(i)(ii)(C):

                                                        (a)    The     aggregate
                                          maximum  number  of  shares  of Common
                                          Stock    deliverable   upon   exercise
                                          (assuming  the   satisfaction  of  any
                                          conditions   to  exercise,   including
                                          without  limitation,  the  passage  of
                                          time,  but without taking into account
                                          potential  anti-dilution  adjustments)
                                          of such  options to purchase or rights
                                          to subscribe for Common Stock shall be
                                          deemed to have been issued at the time
                                          such options or rights were issued and
                                          for  a  consideration   equal  to  the
                                          consideration   (determined   in   the
                                          manner     provided     in     Section
                                          3.2(i)(ii)(C)(III)     and     Section
                                          3.2(i)(ii)(C)(IV), if any, received by
                                          the Company  upon the issuance of such
                                          options  or  rights  plus the  minimum
                                          exercise   price   provided   in  such
                                          options or rights (without taking into
                                          account    potential     anti-dilution
                                          adjustments)   for  the  Common  Stock
                                          covered thereby.

                                                        (b)    The     aggregate
                                          maximum  number  of  shares  of Common
                                          Stock  deliverable upon the conversion
                                          of   or   exchange    (assuming    the
                                          satisfaction   of  any  conditions  to
                                          conversion   or  exchange,   including
                                          without  limitation,  the  passage  of
                                          time,  but without taking into account

                                       10
<PAGE>

                                          potential  anti-dilution  adjustments)
                                          for   any    such    convertible    or
                                          exchangeable  securities  or upon  the
                                          exercise  of  options to  purchase  or
                                          rights   to    subscribe    for   such
                                          convertible or exchangeable securities
                                          and  the   subsequent   conversion  or
                                          exchange  therefor  shall be deemed to
                                          have  been  issued  at the  time  such
                                          securities were issued or such options
                                          or  rights   were  issued  and  for  a
                                          consideration     equal     to     the
                                          consideration, if any, received by the
                                          Company  for any  such  securities  or
                                          related  options or rights  (excluding
                                          any  cash   received   on  account  of
                                          accrued     interest     or    accrued
                                          dividends),     plus    the    minimum
                                          additional  consideration,  if any, to
                                          be received  by the  Company  (without
                                          taking    into    account    potential
                                          anti-dilution  adjustments)  upon  the
                                          conversion   or   exchange   of   such
                                          securities  or  the  exercise  of  any
                                          related   options   or   rights   (the
                                          consideration   in  each  case  to  be
                                          determined  in the manner  provided in
                                          Section 3.2(i)(ii)(C)(III) and Section
                                          3.2(i)(ii)(C)(IV) hereof.

                                                        (c) In the  event of any
                                          change  in the  number  of  shares  of
                                          Common  Stock  deliverable  or in  the
                                          consideration  payable to the  Company
                                          upon   exercise  of  such  options  or
                                          rights  or  upon  conversion  of or in
                                          exchange  for  such   convertible   or
                                          exchangeable  securities,   including,
                                          but not limited to, a change resulting
                                          from  anti-dilution  adjustments,  the
                                          Conversion Price, to the extent in any
                                          way affected by or computed using such
                                          options,  rights or securities,  shall
                                          be  recomputed to reflect such change,
                                          but no  further  adjustment  shall  be
                                          made for the actual issuance of Common
                                          Stock   or   any   payment   of   such
                                          consideration upon the exercise of any
                                          such   options   or   rights   or  the
                                          conversion   or   exchange   of   such
                                          securities.

                                                        (d) Upon the  expiration
                                          of any such  options  or  rights,  the
                                          termination  of  any  such  rights  to
                                          convert or exchange or the  expiration
                                          of any  options  or rights  related to
                                          such   convertible   or   exchangeable
                                          securities,  the Conversion  Price, to
                                          the extent in any way  affected  by or
                                          computed using such options, rights or
                                          securities   or   options   or  rights
                                          related to such  securities,  shall be
                                          recomputed  to reflect the issuance of
                                          only the  number  of  shares of Common
                                          Stock (and convertible or exchangeable
                                          securities  which  remain  in  effect)
                                          actually  issued upon the  exercise of
                                          such  options  or  rights,   upon  the
                                          conversion   or   exchange   of   such
                                          securities or upon the exercise of the
                                          options  or  rights  related  to  such
                                          securities.

                                       11
<PAGE>

                                                        (e) The number of shares
                                          of Common Stock deemed  issued and the
                                          consideration   deemed  paid  therefor
                                          pursuant to  Sections 3.2(i)(ii)(C)(V)
                                          (a) and 3.2(i)(ii)(C)(V)(b) shall   be
                                          appropriately  adjusted to reflect any
                                          change,  termination  or expiration of
                                          the   type    described   in   Section
                                          3.2(i)(ii)(C)(V)(c)     and    Section
                                          3.2(i)(ii)(C)(V)(d).

                                    (D) Stock Splits,  Subdivisions,  Dividends,
                           Etc.  In the event the  Company  shall at any time or
                           from time to time  after the Issue  Date fix a record
                           date for the  effectuation  of a split or subdivision
                           of the  outstanding  shares  of  Common  Stock or the
                           determination  of holders of Common Stock entitled to
                           receive a dividend or other  distribution  payable in
                           additional shares of Common Stock or other securities
                           or rights  convertible  into, or entitling the holder
                           thereof to receive directly or indirectly, additional
                           shares of Common  Stock  (hereinafter  referred to as
                           "Common  Stock  Equivalents")  without the payment of
                           any  consideration  by such holder for the additional
                           shares of Common  Stock or Common  Stock  Equivalents
                           (including  the  additional  shares of  Common  Stock
                           issuable upon conversion or exercise thereof),  then,
                           as of such record date (or the date of such dividend,
                           distribution,  split or subdivision if no record date
                           is   fixed),    the   Conversion   Price   shall   be
                           appropriately  decreased so that the number of shares
                           of Common Stock issuable upon a conversion  under the
                           Investment   Agreement  and  a  purchase   under  the
                           Subscription   Agreement   shall  be   increased   in
                           proportion to such  increase in the aggregate  number
                           of  shares  of  Common  Stock  outstanding  and those
                           issuable   with   respect   to  such   Common   Stock
                           Equivalents  determined  from  time  to  time  in the
                           manner  provided  for  deemed  issuances  in  Section
                           3.2(i)(ii)(C)(V) hereof.

                                    (E) Combinations. If the number of shares of
                           Common Stock  outstanding at any time after the Issue
                           Date is decreased by a combination of the outstanding
                           shares of Common  Stock,  then  following  the record
                           date of such combination,  the Conversion Price shall
                           be  appropriately  increased  so that the  number  of
                           shares of Common Stock issuable on conversion of each
                           share of such series shall be decreased in proportion
                           to such decrease in outstanding shares.

                                    (F) Other Recapitalizations.  If at any time
                           or   from   time   to   time   there   shall   be   a
                           recapitalization  of the Common  Stock  (other than a
                           subdivision,   combination   or   other   transaction
                           provided for elsewhere  herein),  provision  shall be
                           made  so  that  the  Investor  shall   thereafter  be
                           entitled to receive, upon a conversion hereunder, the
                           number  of  shares  of stock or other  securities  or
                           property  of the Company or  otherwise,  to which the
                           Investor   would   have   been   entitled   on   such
                           recapitalization,  if such  conversion  had  occurred
                           prior to such  recapitalization.  In any  such  case,

                                       12
<PAGE>

                           appropriate   adjustment   shall   be   made  in  the
                           application  of the provisions of this Section 3.2(i)
                           with respect to the rights of the Investor  after the
                           recapitalization  to the end that the  provisions  of
                           hereof (including  adjustment of the Conversion Price
                           then in effect) shall be  applicable  after the event
                           as nearly equivalent as may be practicable.

                  (j)  Security.  As  collateral  security  for the  prompt  and
         complete payment and performance when due of the Company's  obligations
         under this  Agreement  and the Note,  the Company does hereby grant the
         Investor a continuing  first priority  security  interest in and to the
         Accounts of the Company and its Subsidiaries, and a continuing mortgage
         interest in and to the Real Property  (collectively the  "Collateral").
         The Deed of Trust  shall be subject and  subordinate  only to the first
         mortgage lien of First  American  Bank in the  principal  amount not to
         exceed Two Hundred Eight Thousand  Dollars  ($208,000) plus accrued and
         unpaid  interest  thereon,  and  shall be pari  passu  with the  second
         mortgage  liens of The Estate of Vivian  Erikson  and Ajit Brar  and/or
         Ajit and Saroj  Brar in the  aggregate  principal  amount not to exceed
         $792,000 plus accrued and unpaid interest thereon. At the Closing,  the
         Company  will  deliver to the  Investor  the Deed of Trust,  a Security
         Agreement  and  all  such  other   financing   statements,   documents,
         instruments  and agreements as the Investor may  reasonably  request to
         create and perfect its security interest in the Collateral.

                                   ARTICLE IV

                         TERMS OF THE EQUITY INVESTMENT

         Section 4.1 Equity Investment.  The Investor hereby agrees to subscribe
for and purchase an aggregate  amount up to One Million Dollars  ($1,000,000) of
the Company's Common Stock (the "Common Shares") on the terms and conditions set
forth herein.

         Section 4.2 Terms of Equity Investment.

                  (a)  Subscription  for Common  Shares.  Concurrently  with the
         execution of this  Agreement,  the Investor will execute and deliver to
         the Company the Subscription  Agreement  pursuant to which the Investor
         will subscribe for and agree to purchase the Common Shares.

                  (b) The Capital  Calls.  The  Investor  agrees to purchase the
         Common  Shares  in a series  of  transactions  in such  amounts  as the
         Company  may  request  from  time to time in one or more  Capital  Call
         Notices,  until the earlier of September  30, 2006, or such time as the
         aggregate amount of Capital Calls made under the Subscription Agreement
         shall equal One Million Dollars ($1,000,000.00).

                  (c) Initial  Capital  Call.  At the  Closing,  the Company may
         deliver to the Investor an Initial  Capital Call Notice in an amount up
         to Three Hundred Thousand Dollars  ($300,000.00),  provided that at the
         Closing the Company  must also  deliver to the Investor an Initial Draw
         Notice  in an amount  not less  than  Three  Hundred  Thousand  Dollars
         ($300,000.00). The amount of the Initial Capital Call and the amount of
         the Initial  Advance  shall not, in the  aggregate,  exceed Six Hundred

                                       13
<PAGE>

         Thousand  Dollars  ($600,000.00).  The proceeds of the Initial  Capital
         Call  and the  Initial  Advance  shall  only be used  for the  purposes
         specified in Section 3.2(b) hereof.

                  (d) Subsequent Capital Calls.

                           (i) Subsequent  Capital Calls under the  Subscription
                  Agreement  will be made only upon the  satisfaction  of all of
                  the following conditions:

                                    (A) The Company shall deliver a Capital Call
                           Notice to the  Investor  no later than  fifteen  (15)
                           days prior to the date on which the  Company  desires
                           the Capital Call to be subscribed.

                                    (B)  Any  Capital   Call  Notice   shall  be
                           accompanied  by a Draw  Notice in an amount  equal to
                           the amount  requested  pursuant to such  Capital Call
                           Notice,  until such time as the  aggregate  amount of
                           Capital   Calls  shall  equal  One  Million   Dollars
                           ($1,000,000).

                                    (C)   The   conditions   precedent   to  the
                           Investor's   making  of  an   Advance   in   Sections
                           3.2(c)(i)(C)-(H)  shall apply to the Capital  Call in
                           the same manner.

                           (ii) Each Capital Call (including any Initial Capital
                  Call  at  Closing)  shall  reduce  the  amount  available  for
                  Subsequent  Capital Calls under the Subscription  Agreement by
                  the amount of such Capital  Call,  such that the amount of all
                  Capital Calls made under the Subscription  Agreement may never
                  exceed an aggregate of One Million Dollars ($1,000,000.00).

                  (e)  Payment of Capital  Calls.  Upon the  fulfillment  of the
         conditions  precedent  to Closing  set forth in Article VII hereof with
         respect to any Initial Capital Call and Section  4.2(d)(i) with respect
         to any Subsequent Capital Call, the Investor shall,  against the tender
         by  the  Company  of  a  stock   certificate   or  stock   certificates
         representing  the number of Common Shares being  purchased  pursuant to
         such  Capital  Call,  make  available to the  Company,  in  immediately
         available funds, on the date set forth in the Capital Call Notice,  the
         amount of the Capital  Call  requested.  The  Investor  shall make such
         funds  available  to the  Company  by  wire  transfer  to  the  account
         specified  in the Capital  Call  Notice or in such other  manner as the
         Investor and the Company shall agree.

                  (f) Adjustment of the Purchase Price. The Purchase Price shall
         be adjusted as follows:

                           (i) At  the  time  the  Company's  audited  financial
                  statements  for any given  fiscal year are filed with the SEC,
                  if the  Company  did  not  realize  its  Projected  EBITDA  or
                  Projected Net Income for such fiscal year,  the Purchase Price
                  for Shares issued to the Investor  during,  and subsequent to,
                  the fiscal year  covered by the audited  statements,  shall be
                  adjusted  downward by a percentage equal to the greater of (A)
                  the percentage  difference between Projected EBITDA and actual
                  EBITDA for such fiscal year, or (B) the percentage  difference
                  between  Projected  Net  Income and actual Net Income for such
                  fiscal  year.  Within  ten (10) days  after the  filing of the

                                       14
<PAGE>

                  Company's  audited  financial  statements  with the  SEC,  the
                  Company  shall  issue  a  stock  certificate  to the  Investor
                  representing any additional Shares issuable as a result of the
                  adjustment under this Section 4.2(f)(i).

                           (ii) At the time the  Company  proposes  a  strategic
                  acquisition  to the  Investor,  the Company  and the  Investor
                  shall  mutually  agree  on an  appropriate  adjustment  to the
                  Projected EBITDA and Projected Net Income to reflect the added
                  value to the Company realized by such acquisition.

                           (iii) In the event of (A) the issuance of  Additional
                  Stock  in a  transaction  of the  type  described  in  Section
                  3.2(i)(ii)(C); (B) the issuance of Common Stock Equivalents in
                  a  transaction  described  in Section  3.2(i)(ii)(D);  (C) the
                  occurrence   of   a    transaction    described   in   Section
                  3.2(i)(ii)(E);   or  (D)  the   occurrence  of  a  transaction
                  described in Section  3.2(i)(ii)(F),  the Purchase Price shall
                  be adjusted in the same  manner as and  concurrently  with the
                  corresponding  adjustment of the Conversion  Price pursuant to
                  such sections.

                                    ARTICLE V

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

         The Company hereby represents and warrants to the Purchaser as follows;
provided, however, that any disclosures contained in the Company's annual report
on Form 10-KSB as filed with the SEC for the fiscal year ended December 31, 2004
and the Company's  quarterly report on Form 10-QSB as filed with the SEC for the
three months ended March 31, 2005 shall be deemed incorporated herein and in the
disclosure schedules attached hereto for all purposes:

         Section  5.1  Organization,  Qualification  and  Corporate  Power.  The
Company  is a  corporation  duly  incorporated,  validly  existing  and in  good
standing under the laws of the State of Texas and each of its  Subsidiaries  are
corporations duly incorporated,  validly existing and in good standing under the
laws of the states of their respective  incorporations.  The Company and each of
its  Subsidiaries  are duly  licensed or  qualified  to  transact  business as a
foreign  corporation and are in good standing in each  jurisdiction in which the
nature of the business transacted by it or the character of the properties owned
or  leased  by  it  requires  such  licensing  or   qualification,   except  for
jurisdictions  in which failure to so qualify or to so be in good standing could
not reasonably be expected to have a material adverse effect on the Company as a
whole.  The Company has the  corporate  power and  authority to own and hold its
properties  and to carry on its business as now  conducted and as proposed to be
conducted,  to execute,  deliver  and  perform  this  Agreement,  the Note,  the
Subscription Agreement,  the Investor's Rights Agreement, the Security Agreement
and the  Deed of  Trust  with  the  Investor  (this  Agreement,  the  Note,  the
Subscription  Agreement,   the  Security  Agreement,  the  Deed  of  Trust,  the
Investor's  Rights  Agreement  and the  other  agreements  and  documents  to be
executed and delivered  under this Agreement  shall  hereinafter be collectively
referred to as the  "Transaction  Documents"),  and to perform  its  obligations
thereunder.

                                       15
<PAGE>

         Section 5.2 Authorization of Agreements, Etc.

                  (a)  The   execution  and  delivery  by  the  Company  of  the
         Transaction  Documents,  and  the  performance  by the  Company  of its
         obligations  thereunder,  have been duly  authorized  by all  requisite
         corporate  action and will not violate any  provision of law, any order
         of any court or other agency of government,  the Company's  Articles or
         Bylaws,  or  any  provision  of  any  indenture,   agreement  or  other
         instrument  to which the Company or any of its  properties or assets is
         bound,  conflict  with,  result in a breach of or constitute  (with due
         notice  or lapse of time or both) a default  under any such  indenture,
         agreement or other instrument,  or result in the creation or imposition
         of any lien,  charge,  restriction,  claim or encumbrance of any nature
         whatsoever  upon any of the  properties or assets of the Company or any
         of its Subsidiaries.

                  (b) The Common  Shares  have been duly  authorized  and,  when
         issued in accordance with this Agreement, will be validly issued, fully
         paid and  nonassessable  shares of the  Company's  Common Stock with no
         personal liability  attaching to the ownership thereof and will be free
         and clear of all liens, charges, restrictions,  claims and encumbrances
         imposed by or through the Company.

         Section  5.3  Validity.  This  Agreement  has been  duly  executed  and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company,  enforceable in accordance with its terms,  except as limited by
applicable bankruptcy, insolvency, reorganization,  moratorium, and similar laws
affecting the enforcement of creditors'  rights generally and the application of
general  principles  of equity and judicial  discretion.  The other  Transaction
Documents,  when executed and delivered in accordance with this Agreement,  will
constitute the legal, valid and binding  obligations of the Company  enforceable
in  accordance  with  each of their  respective  terms,  except  as  limited  by
applicable bankruptcy, insolvency, reorganization,  moratorium, and similar laws
affecting the enforcement of creditors'  rights generally and the application of
general principles of equity and judicial discretion.

         Section 5.4 Authorized  Capital Stock. The authorized  capital stock of
the Company  consists of (a) 100,000,000  shares of preferred  stock,  par value
$.001,  500,000  of which  have  been  designated  as  Series A 10%  Convertible
Preferred Stock (so called herein),  and (b) 100,000,000 shares of Common Stock.
Immediately prior to the Closing, 283,172 shares of Series A Preferred Stock are
issued and  outstanding  and  18,332,948  shares of Common  Stock are issued and
18,320,748 shares are outstanding, fully paid and nonassessable with no personal
liability attaching to the ownership thereof. The powers,  preferences,  rights,
qualifications,  limitations and  restrictions in respect of the Preferred Stock
and  Common  Stock  are set forth in the  Company's  Articles,  Bylaws,  and the
Certificate of Designation of the Series A Preferred Stock, and all such powers,
preferences,  rights,  qualification,  limitations and  restrictions  are valid,
binding and  enforceable in accordance with all applicable  laws.  Except as set
forth in the attached  Schedule  5.4, (i) no person owns of record any shares of
Preferred  Stock or  Common  Stock  other  than as set  forth  on the  Company's
shareholder list, (ii) no subscription,  warrant, option,  convertible security,
or other right  (contingent  or other) to purchase or otherwise  acquire  equity
securities of the Company is authorized  or  outstanding,  and (iii) there is no
commitment by the Company to issue  shares,  subscriptions,  warrants,  options,
convertible  securities,  or other rights or to  distribute to holders of any of

                                       16
<PAGE>

its equity  securities or any evidence of indebtedness  or asset.  Except as set
forth in the Company's  Articles,  the Company has no obligation  (contingent or
otherwise)  to  purchase,  redeem,  or  otherwise  acquire  any  of  its  equity
securities  or any  interest  therein or to pay any  dividend  or make any other
distribution in respect thereof. To the Company's Knowledge, there are no voting
trusts or agreements,  pledge agreements,  buy-sell agreements,  rights of first
refusal,  preemptive rights or proxies relating to any securities of the Company
(whether  or not  the  Company  is a  party  thereto).  All  of the  outstanding
securities of the Company were issued in compliance with all applicable  federal
and state securities laws.

         Section 5.5  Financial  Statements.  The Company has  furnished  to the
Investor  the audited  financial  statements  of the Company for the fiscal year
ended  December 31, 2004 and the unaudited  financial  statements of the Company
for the period ending March 31, 2005 (collectively, the "Financial Statements").
The  Financial  Statements  are complete  and correct in all material  respects,
present fairly,  in accordance  with generally  accepted  accounting  principles
consistently applied, except for customary year end adjustments that may be made
to the March 31, 2005 unaudited  financial  statements,  the financial condition
and results of  operation  of the Company and the  Subsidiaries  for the periods
shown.  Neither the Company nor any Subsidiary has any liability,  contingent or
otherwise,  which is not  reflected  in or  reserved  against  in the  Financial
Statements in accordance  with GAAP that could  materially and adversely  affect
the financial condition of the Company or such Subsidiary. Since the date of the
most  recent  Financial  Statement,  (a) there has been no change in the assets,
liabilities or financial  condition of the Company or its Subsidiaries from that
reflected in the balance  sheet  (except for changes in the  ordinary  course of
business) which in the aggregate have been materially  adverse,  and (b) none of
the business, prospects, financial condition, operations, property or affairs of
the Company or its  Subsidiaries has been materially  adversely  affected by any
occurrence or  development,  individually  or in the  aggregate,  whether or not
insured against.

         Section 5.6 Events Subsequent to March 31, 2005. Except as set forth on
Schedule 5.6,  since March 31, 2005,  the Company has not: (a) issued any stock,
bond, or other corporate security; (b) borrowed any amount or incurred or become
subject to any  liability  (absolute,  accrued or  contingent),  except  current
liabilities  incurred  and  liabilities  under  contracts  entered  into  in the
ordinary course of business; (c) discharged or satisfied any lien or encumbrance
or  incurred  or  paid  any  obligation  or  liability  (absolute,   accrued  or
contingent)  other  than  current  liabilities  shown on the  balance  sheet and
current liabilities incurred since the date of the balance sheet in the ordinary
course  of  business;  (d)  declared  or made any  payment  or  distribution  to
shareholders  or purchased or redeemed any shares of its capital  stock or other
security;  (e)  mortgaged,  pledged,  encumbered or subjected to lien any of its
assets, tangible or intangible,  other than liens of current real property taxes
not yet due and payable; (f) sold, assigned,  or transferred any of its tangible
assets except in the ordinary course of business or cancelled any debt or claim;
(g) sold,  assigned,  transferred  any or granted  any  exclusive  license  with
respect to any patent,  trademark,  trade name, service mark,  copyright,  trade
secret or other  intangible  asset;  (h) suffered any loss of property or waived
any  right  of  substantial  value  whether  or not in the  ordinary  course  of
business;  (i) made any change in officer  compensation  except in the  ordinary
course of business  and  consistent  with past  practice;  (j) made any material
change in the manner of business or operations of the Company or any Subsidiary;
(k) entered into any transaction except in the ordinary course of business or as
otherwise contemplated hereby; or (l) entered into any commitment (contingent or
otherwise) to do any of the foregoing.

                                       17
<PAGE>

         Section 5.7  Litigation.  Except as disclosed on Schedule 5.7, there is
no (a) action,  suit,  claim,  proceeding  or  investigation  pending or, to the
Company's  Knowledge,  threatened against or affecting the Company or any of its
Subsidiaries,  at  law  or in  equity,  or  before  or by  any  federal,  state,
municipal, or other governmental department,  commission,  board, bureau, agency
or instrumentality,  domestic or foreign; (b) arbitration proceeding relating to
the Company or any of its Subsidiaries pending; (c) governmental inquiry pending
or, to the Company's  Knowledge,  threatened against or affecting the Company or
any of its  Subsidiaries  (including  without  limitation  any inquiry as to the
qualification  of the Company or any of its  Subsidiaries to hold or receive any
license or permit); (d) outstanding order, judgment,  writ or decree against the
Company or any of its Subsidiaries, and, to the Company's Knowledge, there is no
basis for any of the foregoing.  Neither the Company nor any of its Subsidiaries
have received an opinion or memorandum or legal advice from legal counsel to the
effect  that  it is  exposed,  from a  legal  standpoint,  to any  liability  or
disadvantage  which  may be  material  to  its  business,  prospects,  financial
condition, operations, property or affairs. The Company and its Subsidiaries are
not in default with respect to any order, writ, injunction or decree known to or
served  upon  the  Company  or any of its  Subsidiaries  of any  court or of any
federal, state, municipal or other governmental department,  commission,  board,
bureau,  agency, or instrumentality,  domestic or foreign. There is no action or
suit by the Company or any of its  Subsidiaries  pending,  or, to the  Company's
Knowledge, threatened or contemplated against others.

         Section 5.8 Compliance With Laws. The Company and its Subsidiaries have
complied, in all material respects, with all laws, rules, regulations and orders
applicable  to their  respective  businesses,  operations,  properties,  assets,
products  and  services.  The Company and its  Subsidiaries  have all  necessary
permits,  licenses and other authorizations required to conduct their respective
businesses as conducted and as proposed to be conducted, and the Company and its
Subsidiaries have been operating their respective  businesses pursuant to and in
compliance   with  the   terms  of  all  such   permits,   licenses   and  other
authorizations,  except  where  such  non-compliance  would not have a  material
adverse effect on the Company's or its  Subsidiaries'  respective  businesses as
currently  conducted.  There is no existing law, rule,  regulation or order, and
the Company and its Subsidiaries after due inquiry are not aware of any proposed
law, rule or regulation or order, whether federal, state, county or local, which
would  prohibit or  restrict  the Company or any of its  Subsidiaries  from,  or
otherwise materially adversely affect the Company or any of its Subsidiaries in,
conducting their respective businesses in any jurisdiction in which they are now
conducting business or in which they propose to conduct business.

         Section 5.9 Proprietary  Information of Third Parties. To the Company's
Knowledge,  no third  party has  claimed  or has reason to claim that any person
employed by or affiliated  with the Company or any of its  Subsidiaries  has (a)
violated or may be violating any of the terms or  conditions of his  employment,
non-competition or non-disclosure agreement with such third party, (b) disclosed
or may be  disclosing  or  utilized  or may be  utilizing  any  trade  secret or
proprietary  information or  documentation of such third party or (c) interfered
or may be interfering in the  employment  relationship  between such third party
and any of its  present  or  former  employees.  No third  party  has  requested
information from the Company or any of its Subsidiaries which suggests that such
a claim might be  contemplated.  To the Company's  actual  knowledge,  no person
employed  by or  affiliated  with the  Company  or any of its  Subsidiaries  has

                                       18
<PAGE>

employed  or  proposed  to  employ  any  trade  secret  or  any  information  or
documentation  proprietary to any former  employer,  and to the Company's actual
knowledge,  no person  employed by or affiliated  with the Company or any of its
Subsidiaries  has violated any confidential  relationship  which such person may
have had with any third party, in connection with the development or sale of any
service or proposed service of the Company or any of its  Subsidiaries,  and the
Company has no reason to believe there will be any such employment or violation.
To the Company's Knowledge, neither the execution or delivery of this Agreement,
or the carrying on of the business of the Company or any of its Subsidiaries, or
the  conduct or  proposed  conduct of the  business of the Company or any of its
Subsidiaries  will conflict with or result in a breach of the terms,  conditions
or  provisions  of or  constitute  a default  under any  contract,  covenant  or
instrument under which any such person is obligated.

         Section 5.10 Intellectual Property. Set forth in Schedule 5.10 attached
hereto is a list and brief  description  of all  domestic  and foreign  patents,
patent rights, patent applications,  trademarks, trademark applications, service
marks,  service  mark  applications,   trade  names  and  copyrights,   and  all
applications  for such which are in the process of being  prepared,  owned by or
registered  in the name of the Company or any of its  Subsidiaries,  or of which
the Company or any of its Subsidiaries is a licensor or licensee or in which the
Company  or  any of  its  Subsidiaries  has  any  right.  The  Company  and  its
Subsidiaries  own or  possess  adequate  licenses  or  other  rights  to use all
patents, patent applications, trademarks, trademark applications, service marks,
service mark applications,  trade names,  copyrights,  manufacturing  processes,
formulae, trade secrets, customer lists and know how (collectively "Intellectual
Property")  necessary  or  desirable to the conduct of its business as conducted
and  proposed  to be  conducted  and no claim is  pending  or, to the  Company's
Knowledge, threatened to the effect that the operations of the Company or any of
its Subsidiaries infringe upon or conflict with the asserted rights of any other
person under any Intellectual Property, and there is no basis for any such claim
(whether or not pending or threatened).  To the Company's Knowledge, no claim is
pending or threatened to the effect that any such Intellectual Property owned or
licensed by the Company or any of its Subsidiaries,  or which the Company or any
of its Subsidiaries otherwise has a right to use, is invalid or unenforceable by
the Company or any of its Subsidiaries, and there is no basis for any such claim
(whether pending or threatened). All prior art known to the Company which may be
or may have been  pertinent to the  examination  of any United  States patent or
patent  application  listed in Schedule 5.10 has been cited to the United States
Patent  and  Trademark  office.  To  the  Company's  Knowledge,   all  technical
information developed by and belonging to the Company or any of its Subsidiaries
which has not been patented has been kept confidential.

         Section 5.11 Title to Properties. The Company and its Subsidiaries have
good,  clear and  marketable  title to their  respective  properties  and assets
reflected  on the  Financial  Statements  or  acquired  since  the  date  of the
Financial  Statements  (other  than  properties  and assets  disposed  of in the
ordinary  course  of  business  since  the  date of the  most  recent  Financial
Statement),  and all such properties and assets are free and clear of mortgages,
pledges,  security interests,  liens,  charges,  claims,  restrictions and other
encumbrances (including without limitation,  easements and licenses),  except as
disclosed in Schedule  5.11 hereto.  To the  Company's  Knowledge,  there are no
condemnation,  environmental,  zoning or other land use regulation  proceedings,
either instituted or planned to be instituted,  which would adversely affect the
use or operation of the Company's or its Subsidiaries' properties and assets for
their  respective  intended uses and purposes,  or the value of such properties,
and the Company has not received  notice of any special  assessment  proceedings
which would affect such properties and assets.

                                       19
<PAGE>

         Section 5.12 Leasehold Interests.  Each lease or agreement to which the
Company or any of its  Subsidiaries is a party under which it is a lessee of any
property, real or personal, is a valid and subsisting agreement, duly authorized
and entered into by the Company or any  Subsidiary,  as the case may be, without
any  default of the  Company or any of its  Subsidiaries  thereunder  and to the
Company's Knowledge,  without any default thereunder of any other party thereto.
No event has occurred and is continuing  which, with due notice or lapse of time
or both, would constitute a default or event of default by the Company or any of
its  Subsidiaries  under  any  such  lease or  agreement  or,  to the  Company's
Knowledge,  by any other  party  thereto.  The  Company's  or its  Subsidiaries'
possession  of such  property  has not  been  disturbed  and,  to the  Company's
Knowledge,  no  claim  has  been  asserted  against  the  Company  or any of its
Subsidiaries adverse to its rights in such leasehold interests.

         Section  5.13 Taxes.  Except as otherwise  disclosed  in Schedule  5.13
hereto,  the Company  and each of its  Subsidiaries  has filed all tax  returns,
federal,  state,  county and local,  required to be filed by it, and the Company
and each of its  Subsidiaries has paid all taxes shown to be due by such returns
as well as all other taxes,  assessments  and  governmental  charges  which have
become due or payable,  including without limitation all taxes which the Company
and each of its  Subsidiaries  is  obligated to withhold  from amounts  owing to
employees, creditors and third parties. The Company and each of its Subsidiaries
has established  adequate reserves for all taxes accrued but not yet payable. To
the Company's Knowledge,  the federal income tax returns of the Company and each
of its Subsidiaries have never been audited by the Internal Revenue Service.  No
deficiency assessment with respect to or proposed adjustment of the Company's or
any of its Subsidiaries federal,  state, county or local taxes is pending or, to
the Company's Knowledge,  threatened.  Except as otherwise disclosed in Schedule
5.13,  there  is no tax  lien  (other  than for  current  taxes  not yet due and
payable),  whether  imposed  by any  federal,  state,  county,  or local  taxing
authority,  outstanding  against  the  assets,  properties  or  business  of the
Company.

         Section 5.14 Accounts.

                  (a)  Accuracy  of  Records.  So long as this  Agreement  is in
         effect and until all of its  obligations  hereunder  and under the Note
         shall have been fully  discharged,  all records,  papers and  documents
         relating to the  Accounts  are genuine  and in all  respects  what they
         purport to be, and all papers and documents  relating  thereto (i) will
         represent the genuine,  legal, valid and binding obligation (subject as
         to enforcement to bankruptcy, insolvency, reorganization and other laws
         of general applicability relating to or affecting creditors' rights and
         to  general  equity   principles)  of  the  account  debtor  evidencing
         indebtedness  unpaid and owed by such account debtor arising out of the
         performance  of labor or services or the sale or lease and  delivery of
         the merchandise listed therein, or both, (ii) will be the only original
         writings evidencing and embodying such obligation of the account debtor
         named  therein  (other than  copies  created  for  purposes  other than
         general  accounting  purposes),  (iii)  will  evidence  true and  valid
         obligations,  enforceable  in accordance  with their  respective  terms
         (subject as to enforcement to  bankruptcy,  insolvency,  reorganization
         and  other  laws of  general  applicability  relating  to or  affecting
         creditors' rights and to general equity  principles),  and (iv) will be
         in compliance  with and will conform in all material  respects with all
         applicable  federal,  state and local laws and  applicable  laws of any
         relevant foreign jurisdiction.

                                       20
<PAGE>

                  (b) Maintenance of Records. The Company will keep and maintain
         at its own cost and expense  satisfactory  and complete  records of the
         Accounts,  including,  but not  limited  to,  records  of all  payments
         received, all credits granted thereon, all merchandise returned and all
         other dealings therewith,  and the Company will make the same available
         to the Investor for  inspection at the principal  executive  offices of
         the Company,  at the  Company's  own cost and expense,  during  regular
         business hours upon demand.  Upon the Investor's  request,  the Company
         shall,  at its own cost and expense,  deliver all tangible  evidence of
         the Accounts (including,  without limitation,  all documents evidencing
         the  Accounts)  to the  Investor or to its  representatives  (copies of
         which  evidence  may be retained  by the  Company) at any time upon its
         demand.

                  (c) Assignment of Payments. Upon the occurrence of an Event of
         Default hereunder,  and if the Investor so directs,  the Company agrees
         to cause  all  payments  on the  Accounts  to be made  directly  to the
         Investor.

                  (d)  Modification  of Terms.  The Company  shall not  rescind,
         subject to Section 5.14(e) or cancel any indebtedness  evidenced by any
         Account or modify any term thereof or make any adjustment  with respect
         thereto,  or  extend or renew the same,  or  compromise  or settle  any
         dispute,  claim, suit or legal proceeding relating thereto, or sell any
         Account or interest  therein,  without the prior written consent of the
         Investor.  The Company will duly fulfill all obligations on its part to
         be  fulfilled  under or in  connection  with the  Accounts  and will do
         nothing to impair the rights of the Investor in the Accounts.

                  (e)  Collection.  The  Company  shall  endeavor to cause to be
         collected  from  the  account  debtor  named  in each of the  Company's
         Accounts,  as and when due  (including,  without  limitation,  Accounts
         which are delinquent,  such Accounts to be collected in accordance with
         generally  accepted lawful  collection  procedures) any and all amounts
         owing under or on account of such  Accounts,  and apply  forthwith upon
         receipt thereof all such amounts as are so collected to the outstanding
         balance of such  Accounts,  except that,  prior to the occurrence of an
         Event of  Default,  the  Company  may allow in the  ordinary  course of
         business  as  adjustments  to  amounts  owing  under its  Accounts,  an
         extension or renewal of the time or times of payment, or settlement for
         less than the total unpaid balance, which the Company finds appropriate
         in accordance with sound business judgment.

         Section 5.15 Loans and Advances.  Except as set forth in Schedule 5.15,
neither the Company nor any of its  Subsidiaries  have any outstanding  loans or
advances to any person and are not obligated to make any such loans or advances.

         Section 5.16 Assumptions, Guaranties, Etc. Neither the Company, nor any
of its  Subsidiaries  have  assumed,  guaranteed,  endorsed or otherwise  become
directly  or  contingently  liable  on  any  indebtedness  of any  other  person
(excluding  the  Subsidiaries  in the case of the  Company)  (including  without
limitation,  liability by way of any  agreement,  contingent  or  otherwise,  to
purchase,  to provide funds for payment,  to supply funds to or otherwise invest
in the debtor,  or otherwise to assure the creditor  against  loss),  except for
guaranties by endorsement or negotiable instruments for deposit or collection in
the ordinary course of business.

                                       21
<PAGE>

         Section  5.17  Governmental  Approvals.  Subject to the accuracy of the
representations  and  warranties  of the  Investor  set forth in Article  VI, no
registration  or filing with,  or consent or approval of or other action by, any
federal,  state or other  governmental  agency or  instrumentality is or will be
necessary for the valid  execution,  delivery and  performance by the Company of
the  Transaction  Documents,  other than  filings  pursuant to federal and state
securities laws (all of which filings have been made by the Company,  other than
those  which are  required  to be made after the  Closing and which will be duly
made on a timely basis) in connection with the transactions contemplated hereby.

         Section 5.18  Disclosure.  Neither this Agreement,  nor any Schedule or
Exhibit to this  Agreement,  contains an untrue  statement of a material fact or
omits a material  fact  necessary  to make the  statements  contained  herein or
therein not misleading. None of the statements, documents, certificates or other
items  prepared  or supplied by the  Company  with  respect to the  transactions
contemplated  hereby contains an untrue  statement of a material fact or omits a
material fact necessary to make the statements contained therein not misleading.
There is no fact which the Company has not  disclosed  to the  Investor  and its
counsel  in  writing  and of which the  Company is aware  which  materially  and
adversely  affects  or could  materially  and  adversely  affect  the  business,
prospects, financial condition,  operations,  property or affairs of the Company
or its Subsidiaries.

         Section  5.19  Transactions  with  Affiliates.  Except as  disclosed in
Schedule  5.19 hereto,  no director,  officer,  employee or  shareholder  of the
Company or any of its Subsidiaries,  or member of the family of any such person,
or any corporation, partnership, trust or other entity in which any such person,
or any member of the family of any such person, has a substantial interest or is
an officer,  director,  trustee, partner or holder of more than five (5%) of the
outstanding  capital  stock  thereof,  is a party  to any  transaction  with the
Company or any of its Subsidiaries,  including any contract,  agreement or other
arrangement  providing for the employment of,  furnishing of services by, rental
of real or personal  property from or otherwise  requiring  payments to any such
person or firm,  other  than  employment-at-will  arrangements  in the  ordinary
course of business.

         Section  5.20  Offering  of the Common  Shares.  Except as set forth on
Schedule 5.20,  neither the Company nor any person authorized or employed by the
Company as agent, broker, dealer or otherwise in connection with the offering or
sale of the Common  Shares or any security of the Company  convertible  into the
Common  Shares has offered the Common  Shares or any such  similar  security for
sale to, or  solicited  any offer to buy the Common  Shares or any such  similar
security from, or otherwise  approached or negotiated with respect thereto with,
any person or persons,  and  neither  the  Company nor any person  acting on its
behalf has taken or will take any other action (including,  without  limitation,
any offer,  issuance or sale of any security of the Company under  circumstances
which might  require the  integration  of such  security  with the Common Shares
under the Securities Act or the rules and regulations  promulgated  thereunder),
in either  case so as to subject  the  offering,  the  issuance,  or sale of the
Common Shares to the registration requirements of the Securities Act.

         Section 5.21 Foreign  Corrupt  Practices Act. The Company has not taken
any action  which  would  cause it to be in  violation  of the  Foreign  Corrupt
Practices Act of 1977, as amended, or any rules and regulations  thereunder.  To

                                       22
<PAGE>

the Company's Knowledge after due inquiry, there is not now, and there has never
been, any  employment by the Company of, or beneficial  ownership in the Company
by, any governmental or political official in any country in the world.

         Section 5.22 Federal Reserve Regulations. The Company is not engaged in
the  business  of  extending  credit for the purpose of  purchasing  or carrying
margin securities  (within the meaning of Regulation G of the Board of Governors
of the Federal Reserve System), and no part of the proceeds of the Common Shares
will be used to  purchase or carry any margin  security  or to extend  credit to
others for the purpose of purchasing  or carrying any margin  security or in any
other manner which would  involve a violation of any of the  regulations  of the
Board of Governors of the Federal Reserve System.

                                   ARTICLE VI

                 REPRESENTATIONS AND WARRANTIES OF THE INVESTOR

         The Investor represents and warrants to the Company that:

         Section  6.1  Organization,  Qualification  and  Corporate  Power.  The
Investor is a limited  liability  company duly  organized  and validly  existing
under the laws of the State of  Wisconsin.  The  Investor  is duly  licensed  or
qualified to transact business as a foreign  corporation and is in good standing
in each jurisdiction in which the nature of the business transacted by it or the
character of the  properties  owned or leased by it requires  such  licensing or
qualification.  The Investor has the  corporate  power and  authority to own and
hold its  properties  and to  carry  on its  business  as now  conducted  and as
proposed  to be  conducted,  to execute,  deliver  and  perform the  Transaction
Documents, and to perform its obligations thereunder.

         Section  6.2  Authorization  of  Agreements,  Etc.  The  execution  and
delivery by the Investor of the  Transaction  Documents,  and the performance by
the Investor of its  obligations  thereunder,  have been duly  authorized by all
requisite limited liability company action and will not violate any provision of
law,  any  order of any  court or other  agency of  government,  the  Investor's
Articles of Organization, or any provision of any indenture,  agreement or other
instrument  to which the Investor or any of its  properties  or assets is bound,
conflict with,  result in a breach of or constitute (with due notice or lapse of
time or both) a default under any such indenture, agreement or other instrument,
or result in the creation or imposition of any lien, charge, restriction,  claim
or encumbrance of any nature  whatsoever upon any of the properties or assets of
the Investor.

         Section  6.3  Validity.  This  Agreement  has been  duly  executed  and
delivered  by  the  Investor  and  constitutes  the  legal,  valid  and  binding
obligation of the Investor,  enforceable in accordance with its terms, except as
limited by applicable bankruptcy,  insolvency,  reorganization,  moratorium, and
similar laws affecting the  enforcement of creditors'  rights  generally and the
application of general principles of equity and judicial  discretion.  The other
Transaction  Documents,  when  executed and  delivered in  accordance  with this
Agreement,  will  constitute  the legal,  valid and binding  obligations  of the
Investor  enforceable in accordance with each of their respective terms,  except

                                       23
<PAGE>

as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
similar laws affecting the  enforcement of creditors'  rights  generally and the
application of general principles of equity and judicial discretion.

         Section 6.4 Financial Sophistication; Accredited Investor. The Investor
has sufficient knowledge and experience in investing in companies similar to the
Company so as to be able to evaluate  the merits and risks of an  investment  in
the Company,  it is financially able to bear the risks thereof.  The Investor is
an "accredited  investor"  within the meaning of Regulation D promulgated  under
the Securities Act.

         Section 6.5  Opportunity  to Ask  Questions.  The  Investor  has had an
opportunity to discuss the Company's business,  management and financial affairs
with the  Company's  management,  to ask  questions  relating  to the  Company's
business,  management  and financial  affairs,  and to conduct all due diligence
deemed necessary before making an investment in the Company.

         Section  6.6  Investment  Intent.  The  Common  Shares,  the Note being
purchased by the Investor,  and the Conversion  Shares (the Common  Shares,  the
Note and the  Conversion  Shares  are  collectively  referred  to  herein as the
"Offered  Securities") are being acquired for its own account for the purpose of
investment,  not as a nominee  or  agent,  and not with a view to or for sale in
connection with any distribution  thereof,  and that the Investor has no present
intention of selling,  granting any  participation in or otherwise  distributing
the same. The Investor  further  represents  that the Investor does not have any
contract,  undertaking,  agreement  or  arrangement  with  any  person  to sell,
transfer  or grant  participations  to such  person or to any third  person with
respect to any of such Offered Securities.

         Section 6.7 No  Registration.  The  Investor  understands  that (i) the
Offered  Securities have not been registered  under the Securities Act by reason
of their issuance in a transaction exempt from the registration  requirements of
the Securities Act; (ii) the Offered Securities must be held indefinitely unless
a subsequent  disposition  of the Offered  Securities  is  registered  under the
Securities  Act and  applicable  state  securities  laws or is exempt  from such
registration;  (iii) the certificates representing the Common Shares will bear a
legend to such effect; and (iv) the Company will make a notation on its transfer
books to such effect.

         Section 6.8 Brokers.  The Investor has not employed any broker,  agent,
or finder in connection with any transaction  contemplated by this Agreement for
which the Company may be liable or responsible to pay.

                                   ARTICLE VII

               CONDITIONS PRECEDENT TO OBLIGATIONS OF THE INVESTOR

         The  obligation  of  the  Investor  to  consummate   the   transactions
contemplated  hereby  on the  Closing  date is, at the  option of the  Investor,
subject  to the  satisfaction,  on or before  the  Closing  date,  of all of the
following conditions, unless otherwise waived by the Investor:

         Section 7.1 Due  Diligence.  The Investor shall have completed all such
due diligence and investigation of the Company and its Subsidiaries, and each of

                                       24
<PAGE>

their  properties,  assets and  operations  as the  Investor  shall have  deemed
necessary  and  relevant  to its  determination  of  whether  or not to make the
investment in the Company contemplated hereby.

         Section 7.2 Representations and Warranties to be True and Correct.  The
representations  and warranties  contained in Article V shall be true,  complete
and correct in all  material  respects,  on and as of the Closing  date with the
same effect as though such  representations  and warranties had been made on and
as of such date.

         Section 7.3 Performance.  The Company shall have performed and complied
with all agreements  contained  herein required to be performed or complied with
by it prior to or at the Closing date.

         Section 7.4 All Proceedings to be Satisfactory. All corporate and other
proceedings  to be taken by the  Company  in  connection  with the  transactions
contemplated  hereby and all documents incident thereto shall be in satisfactory
form and  substance to the  Investor,  and the Investor  shall have received all
such  counterpart  originals  or  certified  copies of such  documents as it may
reasonably request.

         Section 7.5 No  Material  Adverse  Change.  The  business,  properties,
assets or condition (financial or otherwise) of the Company and its Subsidiaries
shall  not  have  been  materially  adversely  affected  since  the date of this
Agreement,  whether by fire, casualty, act of God or otherwise,  and there shall
have  been no other  changes  in the  business,  properties,  assets,  condition
(financial or  otherwise),  management or prospects of the Company or any of its
Subsidiaries  that  would  have a material  adverse  effect on their  respective
businesses or assets.

         Section 7.6 Shareholder Debt Interest Rate Reduction.  All indebtedness
of the Company or any of its Subsidiaries to the Company's existing shareholders
which is subject to the accrual of interest at a rate  greater  than ten percent
(10%) per annum shall have been renegotiated so that all such indebtedness shall
be subject to the accrual of interest at rate no greater than ten percent  (10%)
per annum,  and the  Company  shall have  provided  the  Investor  with all such
reasonable documentation of such reduction in interest rates as the Investor may
require.

         Section 7.7  Conversion of Employee and  Shareholder  Debt. The Company
shall have converted into the Company's  Common Stock or option  therefor,  at a
conversion  price  (or  exercise  price  as the  case  may  be)  not  less  than
seventy-five  cents  ($0.75)  per  share,  an  aggregate  amount of at least One
Million  One  Hundred  Eighty  Thousand  Dollars   ($1,180,000)  of  outstanding
principal and interest of notes issued to the Company's  shareholders and of the
Company's  indebtedness  to  certain  of its  employees  for  accrued  wages and
commissions recorded on the Company's March 31, 2005 Financial  Statements,  and
shall have provided the Investor with all such reasonable  documentation of such
conversions as the Investor may require.

         Section  7.8  Reduction  of  Med-Con  Note.   The  Company  shall  have
negotiated  and  completed  the  reduction  of  the  principal   amount  of  its
outstanding note obligation to Med-Con Waste Solutions, Inc. to an amount not to
exceed Five Hundred One Thousand Two Hundred Twenty Dollars ($501,220) and shall
have provided the Investor with all such reasonable  documentation  of such debt
reduction as the Investor may require.

                                       25
<PAGE>

         Section 7.9 Sarbanes-Oxley Act Compliance. The Company shall be in full
compliance with all federal securities laws, rules,  regulations,  and reporting
requirements,  including but not limited to the  provisions of and the rules and
regulations  promulgated under the  Sarbanes-Oxley Act of 2002, or at the option
of the  Investor,  shall have  submitted  to the Investor a schedule and plan to
bring the Company into compliance  therewith  within a reasonable time after the
date hereof.

         Section 7.10 Statement of Accounts. The Company shall have delivered to
the Investor a statement  reflecting all Accounts current as of twenty-four (24)
hours prior to the Closing.

         Section  7.11  Investors  Rights  Agreement.  The  Company  shall  have
executed and delivered to the Investor the  Investor's  Rights  Agreement,  in a
form  acceptable to the Investor which shall pertain to the Common Shares and to
any Conversion Shares (as defined in Section 3.2(i) above) and which is attached
hereto as Exhibit E.

         Section 7.12  Subscription  Agreement.  The Company shall have executed
and delivered the Subscription Agreement to the Investor in a form acceptable to
the Investor.

         Section 7.13 Deed of Trust.

                  (a) The Deed of Trust shall have been  executed and  delivered
         to the Investor and shall be in full force and effect.

                  (b) The Company shall have  provided to the Investor  evidence
         acceptable to the Investor that the Deed of Trust  interests of each of
         Don McAfee and Winship Moody shall have been released.

         Section 7.14 Financing Statements.  The Company shall have executed and
delivered  to the  Investor  the  Security  Agreement  and  all  such  financing
statements or other  documents or  instruments as may be required to perfect the
Investor's security interest in the Collateral.

         Section 7.15 Intercreditor  Agreement.  The Company shall have executed
and delivered to the Investor the  Intercreditor  Agreement in the form attached
hereto as Exhibit F.

         Section  7.16  Certificates.  The Company  shall have  delivered to the
Investor (a) a certificate  of the secretary of the Company dated as of the date
hereof, in form and substance satisfactory to the Investor, as to the incumbency
and signature of the officers of the Company  executing this Agreement or any of
the Transaction Documents and any certificate or other document or instrument or
resolution  to be  delivered  pursuant  hereto or thereto by or on behalf of the
Company,  together with evidence of the  incumbency of such  secretary;  and (b)
such other  certificates,  opinions,  or documents as are  otherwise  reasonably
required by the Investor.

         Section 7.17  Resolutions.  The Investor  shall have received a copy of
all of the  resolutions  (in form and  substance  satisfactory  to the Investor)
adopted by the Board of Directors of the Company  authorizing or relating to (a)
the execution,  delivery and  performance of this Agreement and the  Transaction
Documents  and the other  documents  and  instruments  provided  for  herein and
therein to which it is a party or is bound thereby,  and (b) the granting of the
security  interests,  all  certified  by  the  secretary  of the  Company.  Such

                                       26
<PAGE>

certificates  shall be dated the date of the  Closing  and shall  state that the
resolutions  set forth  therein  have not been  amended,  modified,  revoked  or
rescinded as of such date and are at such date in full force and effect.

         Section 7.18  Corporate  Documents.  The Investor  shall have  received
currently  certified  copies of the  Company's and the  Subsidiaries'  Articles,
Bylaws  and  current  good  standing  certificates  in each state any of them is
incorporated  and in all  foreign  states in which any of them is required to be
authorized  to do  business,  except for  jurisdictions  in which  failure to so
qualify could not  reasonably be expected to have a material  adverse  effect on
the Company as a whole.

         Section 7.19 Title  Insurance.  The Company shall have delivered to the
Investor, not less than ten (10) days prior to Closing, a commitment to issue to
Investor, a Lender's Policy of title insurance covering the Real Property in the
amount of One Million  Dollars  ($1,000,000) on a current ALTA form issued by an
insurer  acceptable to Investor.  At Closing,  the Company  shall,  at Company's
expense,  cause all standard  general  exceptions to the title  commitment to be
deleted  and shall  cause the title  company  to issue a Zoning  Endorsement,  a
Survey Endorsement, an Access Endorsement, a Comprehensive Endorsement and "Gap"
Endorsement.  At Closing the  Company  shall pay all  premiums  and fees for the
Lender's Policy and endorsements.

         Section 7.20  Survey.  The Investor  shall have been  provided,  at the
Company's  expense,  not less than ten (10) days prior to  Closing,  an original
survey of the Real Property with a then current date, certified to the Investor,
and to the title company, prepared by a registered land surveyor satisfactory to
the  Investor,  which survey shall  locate and describe the Real  Property,  all
improvements  thereon, all boundary lines thereof,  zoning setback dimensions in
relation  to the  improvements,  all  wetlands,  shorelands,  and  environmental
corridors  affecting  the  Property,  all  adjacent  roadways and other means of
access  and  limitations  thereon,  all  utilities  thereon or  adjacent  to the
property,  locating the well and septic  systems for the property,  if possible,
all apparent and recorded  easements and  rights-of-way  affecting the property,
the area of the property (to the nearest  1/1000 of an acre,  net of  roadways),
all  encroachments  affecting the property,  whether fixed to the ground or not,
overlaps,  and shall  otherwise  satisfy  all ALTA or Chapter  1071 of the Texas
Occupations  Code survey  standards so as to eliminate  any standard or specific
survey exception to the Lender's Policy of title insurance or commitment.

         Section 7.21 Legal Fees. The Company shall have reimbursed Investor for
the reasonable  costs and expenses  incurred by Investor in connection  with the
investigation,  preparation,  execution and delivery of this  Agreement (and due
diligence  related  thereto)  and the  other  instruments  and  documents  to be
delivered  hereunder and the transactions  contemplated  thereby,  including the
reasonable fees and disbursements of Davis & Kuelthau,  S.C., special counsel to
the  Investor;  provided,  however,  that such  reimbursement  shall not  exceed
Thirty-Seven  Thousand Five Hundred Dollars  ($37,500) and the Company shall not
pay its own counsel more than Thirty Thousand Dollars ($30,000) at the Closing.

                                       27
<PAGE>

                                  ARTICLE VIII

                            COVENANTS OF THE COMPANY

         Section 8.1 Corporate Existence.  The Company shall, until the later of
the date the Company shall have satisfied all of its obligations  under the Note
or the date the Common Stock owned by the Investor is  registered  with the SEC,
maintain  and  cause  each of its  Subsidiaries  to  maintain  their  respective
corporate existence, rights and franchises in full force and effect.

         Section 8.2  Maintenance  of Properties.  The Company shall,  until the
later of the date the Company shall have satisfied all of its obligations  under
the Note or the date the Common Stock owned by the Investor is  registered  with
the SEC,  maintain and cause each of its Subsidiaries to maintain and keep their
respective  properties in good repair,  working order and condition  (other than
ordinary  wear  and  tear),  so that the  businesses  carried  on in  connection
therewith may be properly conducted at all times.

         Section 8.3 Financial  Statements.  The Company  covenants  that for so
long as the Company shall have outstanding  obligations  under the Note, that it
will deliver to the Investor:

                  (a) as soon as practicable and in any event within  forty-five
         (45) days after the end of each  fiscal  quarter in each  fiscal  year,
         consolidated statements of income,  stockholder's equity and cash flows
         of the Company and its  Subsidiaries  for the period from the beginning
         of the current  fiscal year to the end of such  fiscal  quarter,  and a
         consolidated  balance sheet of the Company and its  Subsidiaries  as of
         the  end of  such  fiscal  quarter,  setting  forth  in  each  case  in
         comparative  form figures for the  corresponding  fiscal quarter in the
         previous fiscal year, all in reasonable detail,  prepared in accordance
         with generally  accepted  accounting  principles  applicable to interim
         financial  statements  and certified by the Company's  Chief  Executive
         Officer and Chief Financial Officer.

                  (b) as soon as practicable and in any event within ninety (90)
         days  after  each  fiscal  year,  consolidated  statements  of  income,
         stockholder's equity and cash flows of the Company and its Subsidiaries
         for such fiscal year and a  consolidated  balance  sheet of the Company
         and its  Subsidiaries as of the end of such fiscal year,  setting forth
         in each case in comparative  form  corresponding  consolidated  figures
         from the previous annual audit, all in reasonable  detail,  prepared in
         accordance with generally accepted accounting  principles and certified
         by the Company's  independent  auditors,  Chief  Executive  Officer and
         Chief Financial Officer.

                  (c) no less than monthly, a current statement of all Accounts.

         Section 8.4  Collateral  Administration.  So long as the Company  shall
have outstanding obligations under the Note:

                  (a) The Company will, and will cause its  Subsidiaries to, pay
         and discharge all taxes, assessments and governmental charges or levies
         imposed  upon  the  Company  or any of its  Subsidiaries  or any of the
         property or assets of the Company or any of its Subsidiaries,  prior to

                                       28
<PAGE>

the date on which  penalties  attach  thereto,  and all lawful claims which,  if
unpaid, might become a lien or charge upon the Collateral,  except to the extent
that the imposition of any such tax, assessment,  charge or levy or the validity
of any such claim is being  contested in good faith by  appropriate  proceedings
and the Company has set aside  adequate  reserves  with respect to any such tax,
assessment, charge, levy or claim so contested; and

                  (b) The  Company  will,  and will cause its  Subsidiaries  to,
         allow any  representative  of the  Investor to visit and inspect any of
         the Company's or its Subsidiaries' properties, to examine the Company's
         or its  Subsidiaries'  books of record and  account  and to discuss the
         Company's or its Subsidiaries' affairs,  finances and accounts with the
         Company's or its  Subsidiaries'  officers,  all at such reasonable time
         and as often as the Investor may reasonably request;

                  (c) The Company will not, and will not permit its Subsidiaries
         to, do anything to impair the rights of the Investor in the Collateral.

         Section 8.5 Insurance.  The Company  covenants that, until the later of
the date the Company shall have satisfied all of its obligations  under the Note
or the date the Common Stock owned by the Investor is  registered  with the SEC,
it will, and will cause each of its  Subsidiaries to maintain,  with financially
sound  and  reputable  insurers,  insurance  with  respect  to their  respective
properties and businesses  against such  casualties and  contingencies,  of such
types,  and on such  terms and in such  amounts as is  customary  in the case of
entities of established  reputations engaged in the same or similar business and
similarly situated.

         Section 8.6 Compliance with Laws. The Company shall, until the later of
the date the Company shall have satisfied all of its obligations  under the Note
or the date the Common Stock owned by the Investor is  registered  with the SEC,
comply,  and cause each Subsidiary to comply,  with all applicable laws,  rules,
regulations  and orders,  noncompliance  with which could  materially  adversely
affect its business or condition, financial or otherwise.

         Section 8.7 Reserve for Conversion  Shares.  The Company shall,  for so
long as the Company shall have  outstanding  obligations  under the Note, at all
times reserve and keep available out of its  authorized  but unissued  shares of
Common  Stock,  for the purpose of effecting the  conversion of any  Outstanding
Principal  under  the  Note  and  otherwise  complying  with  the  terms of this
Agreement, such number of its duly authorized shares of Common Stock as shall be
sufficient to effect the conversion of any Outstanding  Principal under the Note
from time to time or otherwise to comply with the terms of this Agreement. If at
any time the number of authorized but unissued  shares of Common Stock shall not
be sufficient to effect the conversion of any  Outstanding  Principal  under the
Note or otherwise to comply with the terms of this  Agreement,  the Company will
forthwith  take  such  corporate  action as may be  necessary  to  increase  its
authorized but unissued shares of Common Stock to such number of shares as shall
be  sufficient  for such  purposes.  The Company will obtain any  authorization,
consent,  approval  or other  action  by or make any  filing  with any  court or
administrative  body that may be  required  under  applicable  federal and state
securities  laws in connection  with the issuance of shares of Common Stock upon
conversion of any Outstanding Principal under the Note.

                                       29
<PAGE>

         Section 8.8 Change in the Nature of Business.  The Company shall, until
the later of the date the Company shall have  satisfied  all of its  obligations
under the Note or the date the Common Stock owned by the Investor is  registered
with the SEC, not make, or permit any Subsidiary to make, any material change in
the nature of its business as now conducted and proposed to be conducted.

         Section 8.9  Dividends and  Distributions.  Until the later of the date
the Company shall have  satisfied all of its  obligations  under the Note or the
date the Common  Stock owned by the  Investor is  registered  with the SEC,  the
Company shall not pay any dividend on any of the Company's equity  securities or
make any distribution to any of the Company's  shareholders,  whether in cash or
in-kind.  Notwithstanding  the  foregoing,  this  prohibition  on dividends  and
distributions  shall not apply to the ten percent (10%) dividend  payable on the
Company's Series A Preferred Stock.

         Section 8.10  Prohibition on New  Indebtedness.  Until the later of the
date the Company shall have satisfied all of its  obligations  under the Note or
the date the Common  Stock  owned by the  Investor is  registered  with the SEC,
neither  the  Company  nor  any of its  Subsidiaries  shall  incur  any  further
indebtedness of any kind other than purchase money indebtedness  incurred in the
ordinary course of business and operating debt if (a) the consolidated net worth
of the Company at the end of the then immediately  preceding calendar quarter is
less than the amount set forth on Schedule 8.11 at the respective date set forth
on  Schedule  8.11;  or  (b)  the  incurrence  of  such  debt  shall  cause  the
consolidated  net worth of the  Company  to fall  below the  amount set forth on
Schedule 8.11 for the end of the  then-current  calendar  quarter.  In the event
either or of the conditions set forth in the preceding  clauses (a) or (b) shall
exist,  the  Investor  shall  not  unreasonably  withhold  its  waiver  of  this
prohibition on the incurrence of new  indebtedness  by the Company or any of its
Subsidiaries  in  connection  with the financing of an  acquisition  by or other
legitimate  business  purpose  of  the  Company.  The  "reasonableness"  of  the
Investor's  decision  with  respect to the  consent  required  pursuant  to this
Section 8.10 shall be determined based on the following  factors:  (x) the value
to the Investor created by the use of proceeds of the proposed indebtedness; (y)
the  impact of the  additional  indebtedness  on the  credit  worthiness  of the
Company;  and (z) the impact of the  proposed  indebtedness  on the value of the
collateral securing the obligations of the Company to the Investor.

         Section 8.11 Financial  Covenants.  The Company  covenants that, for as
long as the Company shall have outstanding  obligations  under the Note, it will
not permit its  consolidated  net worth at any  calendar  quarter end to be less
than the amounts set forth on Schedule 8.11, at the respective date set forth on
Schedule  8.11.  The  obligation  of the  Investor to fund any  Capital  Call or
Advance shall be subject to the adjustment of Schedule 8.11, to the satisfaction
of Investor,  to reflect the impact on the projected  results of operations as a
result of any proposed acquisition.

         Section 8.12 Liens. The Company covenants that it will not, for so long
as the Company shall have outstanding  obligations  under the Note, and will not
permit any of its Subsidiaries to, create,  incur, assume or suffer to exist any
lien upon any property of the Company or any of its Subsidiaries except:

                                       30
<PAGE>

                  (a) liens for taxes, assessments,  or government charges which
         are not yet due or  delinquent  or which  are being  contested  in good
         faith by appropriate  proceedings  and provided that adequate  reserves
         with  respect  thereto  are  maintained  on the books of the Company in
         accordance with generally accepted accounting principles;

                  (b)  carriers',  warehousemen's,  mechanics'  material  men's,
         repairmen's' or other liens arising by operation of law in the ordinary
         course of business;

                  (c)  pledges or  deposits  made in  connection  with  workers'
         compensation laws, unemployment insurance laws, social security laws or
         other similar laws;

                  (d) liens existing as of the date hereof; and

                  (e) liens granted in connection with  additional  indebtedness
         incurred in compliance with Section 8.10 hereof.

         Section 8.13 Related Party Transactions.  The Company covenants that it
will not, and will not permit any of its Subsidiaries to, until the later of the
date the Company shall have satisfied all of its  obligations  under the Note or
the date the Common  Stock  owned by the  Investor is  registered  with the SEC,
enter  into,  directly  or  indirectly,  any  transaction,   (including  without
limitation,  the purchase,  lease, sale or exchange or properties of any kind or
rendering  of  any  service)  with  a  Related  Party,  except  pursuant  to the
reasonable  requirements of the Company's or such  Subsidiary's  business and on
fair and reasonable  terms no less  favorable to the Company or such  Subsidiary
than would be obtainable in a comparable arms' length  transaction with a person
or entity not a Related Party of the Company.

         Section 8.14 Executive  Compensation.  The Company shall not, until the
later of the date the Company shall have satisfied all of its obligations  under
the Note or the date the Common Stock owned by the Investor is  registered  with
the SEC, increase the base compensation of any of the executive  officers of the
Company or any of its Subsidiaries  more than five percent (5%) annually without
the prior consent of the Investor.

         Section 8.15 Restrictive Agreements Prohibited.  Until the later of the
date the Company shall have satisfied all of its  obligations  under the Note or
the date the Common  Stock  owned by the  Investor is  registered  with the SEC,
neither  the  Company nor any of its  Subsidiaries  shall  become a party to any
agreement  which  by its  terms  restricts  the  Company's  performance  of this
Agreement or any of the Transaction Documents.

         Section  8.16  Sale;  Merger.  Until the later of the date the  Company
shall  have  satisfied  all of its  obligations  under  the Note or the date the
Common Stock owned by the Investor is registered with the SEC, the Company shall
not sell all or a  substantial  portion  of its or its  Subsidiaries'  assets or
merge or enter into any  combination  or  consolidation  with another  person or
entity, in which the Company is not the surviving entity.

         Section 8.17 Board  Meetings.  The Company shall, at all times prior to
the  registration  of the  Common  Stock  owned  by the  Investor  with the SEC,
schedule and hold regular meetings of its Board of Directors not less frequently
than once every ninety (90) days.  The Company shall  reimburse  the  Investor's

                                       31
<PAGE>

designees for direct out-of-pocket  expenses incurred in attending such meetings
and  shall  compensate  such  designees  according  to  the  Company's  Director
compensation policies then in effect.

         Section 8.18 Board Composition.

                  (a) The Company shall not,  prior to the  registration  of the
         Common Stock owned by the Investor  with the SEC,  increase the size of
         its Board of Directors to more than five (5) members  unless Mr. Joseph
         Tate  decides  to  become a  director  in  addition  to the  Investor's
         director  nominee  as  described  below,  in which  event  the Board of
         Directors  shall  have no more  than  seven (7)  members.  The Board of
         Directors  shall  nominate  one  designee  selected by the Investor for
         election  to the  Board of  Directors  at each  annual  meeting  of the
         Company's  shareholders,  and  shall  recommend  the  election  of such
         designee to the Company's shareholders;  provided, however, that in the
         event that Mr. Joseph Tate is designated by the Investor in addition to
         its first nominee for nomination by the Board of Directors for election
         to the Board of Directors,  then the Board of Directors  shall nominate
         two designees  (one of which shall be Mr. Joseph Tate)  selected by the
         Investor for election to the Board of Directors at each annual  meeting
         of the Company's shareholders, and shall recommend the election of such
         designees to the Company's  shareholders;  provided  further,  however,
         that  the  Investor's  designee(s)  must be  qualified  to  serve  as a
         director  of an issuer  subject to the  reporting  requirements  of the
         Securities Exchange Act of 1934, as amended.

                  (b)  The  Investor's  right  to  nominate   designees  to  the
         Company's  Board of  Directors  pursuant  to this  Section  8.18  shall
         continue until such time as:

                           (i) the Investor  effectuates,  in one or a series of
                  transactions, a transfer of Common Stock owned by the Investor
                  whereby  the  number of shares  of Common  Stock  owned by the
                  Investor after such transfer is less than seventy-five percent
                  (75%) of the  number of shares  of Common  Stock  owned by the
                  Investor  before the  transfer,  at which time the  Investor's
                  right  to  nominate   designees  to  the  Company's  Board  of
                  Directors  will be  reduced to the right to  nominate  one (1)
                  designee; or

                           (ii) the Investor effectuates,  in one or a series of
                  transactions, a transfer of shares of Common Stock whereby the
                  number of shares of Common Stock owned by the  Investor  after
                  the transfer is less than fifty percent (50%) of the number of
                  shares  of  Common  Stock  owned by the  Investor  before  the
                  transfer,  at which such time the Investor's right to nominate
                  designees  to  the  Company's   Board  of  Directors  will  be
                  eliminated; or

                           (iii) the Common  Stock owned by the  Investor  shall
                  have been registered with the SEC.

                                       32
<PAGE>

                                   ARTICLE IX

                                EVENTS OF DEFAULT

         Section 9.1 Events of Default.  The  occurrence of any of the following
shall constitute an Event of Default (so called herein) hereunder:

                  (a) The Company  defaults in any payment due under the Note if
         and when due;

                  (b) Any  representation or warranty made by the Company herein
         shall be false in any material respect on the date as of which made;

                  (c) The  Company  fails to  materially  perform or observe any
         agreement,  covenant,  term  or  condition  herein  or in  any  of  the
         Transaction Documents; or

                  (d) The Company shall declare  bankruptcy,  become  insolvent,
         make an  assignment  for the benefit of  creditors,  or  petitions  any
         tribunal or consents to the appointment of, or taking of possession by,
         a trustee, receiver, custodian, liquidator or other similar official of
         the Company or any Subsidiary.

         Section 9.2 Upon the  occurrence  of an Event of Default,  the Investor
may, at its option:

                  (a)  Declare  all  outstanding  sums under the Note to be, and
         such sums shall thereupon be and become, immediately due and payable;

                  (b)  Cancel  the   Subscription   Agreement  with  no  further
         obligation to the Investor; and/or

                  (c)  Proceed  to protest  and  enforce  its rights  under this
         Agreement,  the Note and the  Transaction  Documents by exercising  all
         such  remedies  available  to the  Investor  in respect  thereof  under
         applicable law.

                  No remedy  conferred  in this  Agreement  upon the Investor is
         intended to be exclusive of any other  remedy,  and each and every such
         remedy  shall be  cumulative  and in  addition  to every  other  remedy
         conferred herein or now or hereafter existing at law or in equity or by
         statute or otherwise.

                                    ARTICLE X

                                  MISCELLANEOUS

         Section 10.1 Expenses.  Except as set forth in Section 7.19, each party
will pay its own  expenses  in  connection  with the  transactions  contemplated
hereby.

                                       33
<PAGE>

         Section  10.2  Survival  of  Agreements.   All  covenants   agreements,
representations  and  warranties  made  herein  or in  any  of  the  Transaction
Documents or any certificate or instrument delivered to the Investor pursuant to
or in connection with this Agreement or any of the  Transaction  Documents shall
survive the  execution  and delivery of all of the  Transaction  Documents,  the
issuance,  sale  and  delivery  of the  Note  and  the  Common  Shares,  and all
statements contained in any certificate herewith or therewith shall be deemed to
constitute representations and warranties made by the Company.

         Section  10.3  Parties in Interest;  Assignment.  All  representations,
covenants and  agreements  contained in this Agreement by or on behalf of any of
the  parties  hereto  shall  bind and  inure to the  benefit  of the  respective
successors  and assigns of the parties  hereto whether so expressed or not. This
Agreement  may not be assigned by either party hereto  without the prior written
consent of the other party hereto.

         Section  10.4  Notices.  All  notices,  requests,  consents  and  other
communications  hereunder  shall be in writing and shall be delivered in person,
mailed by certified or registered  mail,  return receipt  requested,  or sent by
facsimile, addressed as follows:

                  (a) if to the Company:     MedSolutions, Inc. 12750
                                             Merit Drive Park Central
                                             VII, Suite 770 Dallas, TX
                                             75251 Attn: President
                                             Facsimile: (972) 931-2250

                      With a copy to:        Fish & Richardson P.C.
                                             5000 Bank One Center
                                             1717 Main Street
                                             Dallas, TX 75201
                                             Attn: Steven R. Block
                                             Facsimile: (214) 747-2091

                  (b) if to the Investor:    Tate Investments, LLC 3252 N.
                                             Lake Drive Milwaukee, WI
                                             53211 Attn: Joseph P. Tate
                                             Facsimile: (414) 962-7960

                      With a copy to:        Davis & Kuelthau, S.C.
                                             300 N. Corporate Dr., Suite 150
                                             Brookfield, WI 53045
                                             Attn: Peter J. Ruud
                                             Facsimile: (262) 792-2471

         Section 10.5  Governing  Law. This  Agreement  shall be governed by and
construed in accordance  with the laws of the State of Wisconsin  without regard
to principles of conflicts of laws.

                                       34
<PAGE>

         Section 10.6 Entire Agreement. This Agreement,  including the Schedules
and Exhibits  hereto,  constitutes the sole and entire  agreement of the parties
with respect to the subject matter hereof. All Schedules and Exhibits hereto are
hereby incorporated herein by reference.

         Section 10.7  Counterparts.  This  Agreement  may be executed in two or
more counterparts,  each of which shall be deemed an original,  but all of which
together shall constitute one and the same instrument.

         Section 10.8 Amendments. This Agreement may not be amended or modified,
and no  provisions  hereof  may be waived  without  the  written  consent of the
Company and the Investor.

         Section 10.9 Severability.  If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative  authority, the
validity of any other  provision of the entire  Agreement  shall not be affected
thereby.

         Section 10.10 Headings.  The headings and titles used in this Agreement
are  for  convenience  only  and  are  not to be  considered  in  construing  or
interpreting any term or provision of this Agreement.

         Section 10.11 Termination.  Notwithstanding any other provision of this
Agreement to the contrary, if the Closing has not occurred on or before July 11,
2005, this Agreement shall immediately terminate effective as of such date.

         IN WITNESS  WHEREOF,  the Company and the Investor  have  executed this
Investment Agreement as of the day and year first written above.

THE COMPANY:                                      THE INVESTOR:

MedSolutions, Inc.                                Tate Investments, LLC

By:  /s/ Matthew H. Fleeger                       By: /s/ Joseph P. Tate
    -----------------------------                    ---------------------------
    Matthew H. Fleeger, President                    Joseph P. Tate, Sole Member

                                       35
<PAGE>

                                    EXHIBIT A

                   Consolidated Pro-forma Financial Statements
                                       of
                               MedSolutions, Inc.

2005 Projected EBITDA:          $1,804,083

2005 Projected Net Income:      $759,232

<PAGE>

                                    EXHIBIT B

  Form of Up to One Million Dollars ($1,000,000.00) 10% Senior Convertible Note

<PAGE>

                     10% SENIOR CONVERTIBLE PROMISSORY NOTE

$1,000,000                                                      July _____, 2005

         FOR  VALUE  RECEIVED,  MEDSOLUTIONS,  INC.,  a Texas  corporation  (the
"Borrower"),  agrees and promises to pay to TATE  INVESTMENTS,  LLC, a Wisconsin
limited  liability  company (the "Lender") at its principal place of business at
3252 North Lake Drive,  Milwaukee,  Wisconsin  53211,  or at such other place or
places as the Holder may  designate  in  writing,  the  principal  amount of One
Million Dollars  ($1,000,000.00) or so much thereof as may have been advanced by
the Holder  hereunder with interest as provided  herein,  in legal tender of the
United States of America, in immediately available funds, as set forth herein:

         1.  Advances.  The Lender  shall  advance any sum that the Borrower may
request from time to time prior to October 15, 2006 so long as: (a) the Borrower
shall have satisfied all conditions  precedent to such advance set forth in that
certain Investment Agreement of even date herewith executed between the Borrower
and the  Lender  (the  "Investment  Agreement"),  (b) the sum  requested  by the
Borrower  shall not cause the  aggregate  amount of all advances made under this
Note to exceed One Million Dollars ($1,000,000), and (c) no Event of Default (as
defined in the  Investment  Agreement)  shall have  occurred.  A schedule of all
advances  and  repayments  is set forth on  Schedule  1  hereto.  As of the date
hereof,  the Lender has made an "Initial  Advance" to the Borrower in the amount
of $300,000.00.

         2. Interest.  The unpaid principal amount from time to time outstanding
shall bear interest from the date of this Note until paid at a rate equal to ten
percent (10%) per year. Interest shall be computed for the actual number of days
elapsed  on the basis of a year of 360 days.  From and after an Event of Default
(as  defined  in the  Investment  Agreement),  and for so long as such  Event of
Default shall  continue,  the unpaid  principal  balance of this Note shall bear
interest  at an annual  rate  equal to the prime rate as  published  in the Wall
Street Journal from time to time, plus eight percent (8%).

         3. Repayment.

                  (a) The Initial  Advance set forth on Schedule 1 hereto  shall
         be repaid in three (3) equal  monthly  installments  of  interest  only
         commencing  thirty (30) days from the date hereof and twelve (12) equal
         monthly installments of principal and interest commencing thereafter.

                  (b)  Subsequent   advances   hereunder   shall  be  repaid  in
         thirty-six  (36)  installments  as follows:  thirty-five  (35)  monthly
         payments  of  interest  only on the  first day of each  calendar  month
         commencing with the first day of the month that is at least thirty (30)
         days after the date of the first subsequent  advance  hereunder,  and a
         final  installment in an amount equal to the outstanding  principal and
         any accrued but unpaid interest on the third anniversary of the date of
         the first subsequent advance hereunder.

<PAGE>

                  (c) Amounts due and payable  hereunder  may be prepaid only in
         the manner set forth in the Investment Agreement.

         4.  Investment  Agreement.   This  Note  was  issued  pursuant  to  the
Investment  Agreement.  Reference  is made  to the  Investment  Agreement  for a
description  of the agreement  between the parties  pertaining to the payment of
and possible conversion of this Note. The parties shall be bound by the terms of
the Investment  Agreement.  All capitalized  terms which are not defined in this
Note  shall  have  the  meanings  prescribed  to such  terms  in the  Investment
Agreement.

         5.  Security.  This Note is being executed and delivered in conjunction
with, and the  principal,  interest and all other sums due hereunder are secured
by a security interest  pursuant to that certain Security  Agreement and Deed of
Trust of even date herewith  executed by and between the Borrower,  on behalf of
itself  and  its  subsidiaries,  and  the  Lender  pursuant  to  the  Investment
Agreement.

         6. Events of Default;  Consequences.  In the event of the occurrence of
an Event of Default by the Borrower (as defined in the Investment Agreement) the
Lender may:

                  (a) declare the entire unpaid  principal  amount of this Note,
         together  with  interest  accrued,  immediately  due and payable at the
         place of payment,  without presentment,  protest, notice or demand, all
         of which are expressly waived;

                  (b) proceed to protest and enforce its rights  hereunder,  and
         under the Security  Agreement,  the Deed of Trust and/or the Investment
         Agreement.

         7.  Conversion.  This Note shall be  convertible  into shares of Common
Stock of the Borrower as provided in the Investment Agreement.

THIS NOTE IS SUBJECT TO THE TERMS AND  CONDITIONS  OF THE  INVESTMENT  AGREEMENT
EXECUTED BETWEEN THE BORROWER HEREOF AND THE LENDER.

                                                MEDSOLUTIONS, INC.

                                                By:
                                                   -----------------------------
                                                   Matthew H. Fleeger, President

<PAGE>

                                   Schedule 1

                             Advances and Repayments

Date                 Amount          Advance (A)           Outstanding Principal
----                 ------          -----------           ---------------------
                                     or Repayment (R)      Balance
                                     ----------------      -------

July 15, 2005      $300,000.00          Advance                 $300,000.00

<PAGE>

                                    EXHIBIT C

                          Description of Real Property

BEING all of Lot 3, Block B, of KINGSLEY ROAD PROPERTIES INDUSTRIAL DISTRICT, an
addition to the City of Garland,  Dallas County,  Texas,  recorded in Volume 49,
Page 41,  of the Map  Records  of DALLAS  County,  Texas,  said lot  being  more
particularly described as follows;

BEGINNING  at a nail  set in the  west  R.O.W.  line of  Industrial  Lane (a 60'
R.O.W.)  and at the  common  southeast  corner  of said Lot 3 and the  northeast
corner of Lot 2 of said  addition,  said point being the N 00(degree) 10' 02" E,
793.71 feet from the present  intersection  of the west line of Industrial  Lane
with the north R.O.W. line of Kingsley Road (a variable width R.O.W.);

THENCE N 89(degree)  49' 58" W, 328.64 feet along the common line of said Lots 2
and 3 to a 1/2" iron rod set in the east line of a 50' wide railroad spur;

THENCE N 00(degree)  34' 00" E, 400.01 feet along the east line of said railroad
spur  to a cross  cut at the  common  northwest  corner  of  said  Lot 3 and the
southwest corner of Lot 4 of said addition;

THENCE S 89(degree)  49' 58" E, 325.85 feet along the common line of said Lots 3
and 4 to a 1/2" iron rod set in the west line of Industrial Lane;

THENCE S  00(degree)  10' 02" W, 400.00  feet along the west line of  Industrial
Lane to the point of beginning and containing  130,897.14  square feet or 3.0050
acres of land, more or less.

<PAGE>

                                    EXHIBIT D

                             Subscription Agreement

<PAGE>

                             SUBSCRIPTION AGREEMENT

         This SUBSCRIPTION  AGREEMENT (the "Agreement") is made and entered into
as of July ___, 2005, by and among MEDSOLUTIONS,  INC., a Texas corporation (the
"Company"), and TATE INVESTMENTS, LLC, (the "Purchaser").

                                    RECITALS:

         WHEREAS,  the Company and the Purchaser  have entered into that certain
Investment   Agreement,   dated  as  of  even  date  herewith  (the  "Investment
Agreement"),  pursuant to which the Company agrees to sell to the Purchaser, and
the Purchaser agrees to purchase from the Company,  in a series of transactions,
up to One Million Dollars  ($1,000,000)  of the Company's  Common Stock upon the
terms and conditions set forth herein and in the Investment Agreement.

         NOW,  THEREFORE,  in consideration of the promises and mutual covenants
contained in this Agreement, the Company and the Purchaser agree as follows:

                                    ARTICLE I

                          SUBSCRIPTION FOR COMMON STOCK

         1.1  Delivery  of  Subscription  Agreement.  This  Agreement  is  being
delivered  pursuant  to and as a condition  to the  closing of the  transactions
contemplated  in the  Investment  Agreement,  attached  hereto as Exhibit A, the
terms of which are incorporated herein by reference.

         1.2 Subscription for Common Shares. The Purchaser hereby subscribes for
an aggregate  amount of up to One Million Dollars  ($1,000,000) of the Company's
Common  Stock (the  "Common  Shares").  The  Purchaser's  purchase of the Common
Shares  hereunder  shall  occur in a series  of  transactions  (each a  "Capital
Call"),  in such  amounts as the Company may request,  at a purchase  price (the
"Purchase  Price") of sixty-five cents ($0.65) per share,  subject to adjustment
as set forth in the Investment Agreement.

         1.3 Termination of Purchaser's Subscription. The Purchaser's obligation
to purchase the Common  Shares  pursuant to this  Agreement  will  automatically
terminate  upon the  earlier  of (a) such  time as the  aggregate  amount of all
Capital  Calls made by the  Company  pursuant  hereto  shall  equal One  Million
Dollars  ($1,000,000)  or (b) October 15, 2006, and the Purchaser  shall have no
further liability to the Company hereunder.

         1.4 Purchase  Price.  The Purchase  Price for the Common  Shares,  with
respect to any Initial Capital Call hereunder shall be sixty-five  cents ($0.65)
per  share.  The  Purchase  Price for the  Common  Shares  with  respect  to any
subsequent  Capital Call  hereunder  shall be the Purchase  Price,  as adjusted,
pursuant to Section 4.2(f) of the Investment Agreement, in effect on the date of
the issuance of the Common Shares.

         1.5 Initial Capital Call.  Pursuant to Section 4.2(c) of the Investment
Agreement,  and subject to the  satisfaction  by the  Company of the  conditions
precedent  to Closing  set forth in the  Investment  Agreement,  the Company may
deliver to the  Purchaser an Initial  Capital Call at the Closing (as defined in
the Investment Agreement).  Upon satisfaction of the aforementioned  conditions,

<PAGE>

and the  delivery to the  Purchaser  by the Company of the Initial  Capital Call
Notice,  the Purchaser shall deliver to the Company the amount  requested in the
Initial  Capital Call Notice,  and the Company  shall deliver to the Purchaser a
certificate or certificates  representing  the number of Common Shares purchased
by the  Purchaser,  which number of shares shall be  determined  by dividing the
amount requested in the Initial Capital Call Notice by the Purchase Price.

         1.6  Subsequent  Capital  Calls.  Pursuant  to  Section  4.2(d)  of the
Investment  Agreement,  the Company may, at any time and from time to time prior
to the termination of the  Purchaser's  obligation to purchase the Common Shares
as set forth in Section  1.3 hereof,  make a Capital  Call on the  Purchaser  by
delivering  a Capital  Call Notice to the  Purchaser  in the manner set forth in
Section 4.2(d) of the Investment Agreement. Upon the satisfaction by the Company
of the  conditions  for  subsequent  Capital  Calls set forth in the  Investment
Agreement,  the  Purchaser  shall,  on the date set  forth in the  Capital  Call
Notice,  deliver to the Company the amount requested in such Capital Call Notice
and the Company shall deliver to the  Purchaser a  certificate  or  certificates
representing  the number of Common  Shares  purchased  by the  Purchaser,  which
number of shares shall be  determined  by dividing the amount  requested in such
Capital Call Notice by the then applicable Purchase Price.

         1.7  Reduction of  Subscription  Amount.  Each  Capital Call  hereunder
(including  any Initial  Capital  Call) shall  reduce the amount  available  for
subsequent  Capital Calls hereunder by the amount of such Capital Call such that
the amount of all Capital  Calls made  hereunder  may never  exceed an aggregate
amount of One Million Dollars ($1,000,000).

                                   ARTICLE II

                         REPRESENTATIONS AND WARRANTIES

         The Purchaser hereby acknowledges,  represents, certifies, warrants and
agrees as follows:

         2.1  Accredited  Investor.  The Purchaser is an  "accredited  investor"
within the meaning of Rule 501 of Regulation D promulgated  under the Securities
Act of 1933, as amended (the "Securities Act").

         2.2 Financial  Sophistication.  The Purchaser has sufficient  knowledge
and experience in investing in companies similar to the Company so as to be able
to  evaluate  the  merits  and risks of an  investment  in the  Company,  and is
financially  able to bear the risks thereof.  The Purchaser has  participated in
other  privately  placed  investments  and/or has the  capacity  to protect  his
interest in his  investment  in the Common  Shares.  The  Purchaser's  financial
condition is such that it has no need for  liquidity  with respect to the Common
Shares and is able to bear the  economic  risk of the  investment  in the Common
Shares for an indefinite period of time, including the risk of losing all of its
investment.

         2.3 Opportunity to Ask Questions.  The Purchaser has had an opportunity
to discuss the Company's  business,  management  and financial  affairs with the
Company's  management,  to ask  questions  relating to the  Company's  business,

<PAGE>

management  and  financial  affairs,  and to conduct  all due  diligence  deemed
necessary by the Purchaser and its advisors before acquiring the Common Shares.

         2.4  Investment  Intent.  The Common  Shares being  purchased are being
acquired for the  Purchaser's  own account for the purpose of investment and are
not being purchased for subdivision,  fractionalization, resale or distribution;
the Purchaser has no contract,  undertaking,  agreement or arrangement  with any
person to sell, transfer or pledge all or any part of the Common Shares, and has
no plan or intent to enter into any such contract, undertaking or arrangement.

         2.5 No  Registration.  The Purchaser  acknowledges and understands that
(a) the  Common  Shares  have not been and  will  not be  registered  under  the
Securities  Act or any  applicable  state  securities  laws by  reason  of their
issuance in a  transaction  exempt  from the  registration  requirements  of the
Securities  Act pursuant to Section  4(2)  thereof and Rule 506 of  Regulation D
promulgated  thereunder and similar state law exemptions;  (b) the Common Shares
must be held indefinitely  unless a subsequent  disposition of the Common Shares
is registered  under the Securities Act and applicable  state securities laws or
is exempt from such  registration  and the Purchaser may not transfer the Common
Shares,  or any  interest  therein,  unless  and until the  Company  shall  have
consented  thereto,  provided  further that the Purchaser shall provide,  if the
Company so requires,  an opinion of counsel  satisfactory to the Company and its
counsel,  that the intended  disposition  will not violate the Securities Act or
any  applicable  state  securities  laws or the  rules  and  regulations  of the
Securities and Exchange  Commission or of any state securities  commission;  (c)
the  certificates  representing  the  Common  Shares  will bear a legend to such
effect;  and (d) the Company will make a notation on its transfer  books to such
effect.

         2.6 Tax Matters.  The  Purchaser  has either  secured  independent  tax
advice with respect to an  investment  in the Common  Shares or is  sufficiently
familiar  with  the  income  taxation  of  corporations   that  it  deemed  such
independent tax advice unnecessary.

         2.7 No General Solicitation. The Purchaser was not induced to invest in
the  Company  by  any  form  of  general  solicitation  or  general  advertising
including,  but not limited to: (a) any advertisement,  article, notice or other
communication published in any newspaper, magazine or similar media or broadcast
over the television or radio;  or (b) any seminar or meeting whose attendees had
been invited by any general solicitation or general advertising.

         2.8 High Risk. The Purchaser is aware of the fact that an investment in
the Common Shares is very speculative and involves a high degree of risk of loss
of the entire economic investment in the Common Shares.

         2.9 No Review.  The Purchaser  acknowledges  no federal or state agency
has (a)  reviewed  or passed  upon the  adequacy  of the  offering of the Common
Shares, (b) made any finding or determination as to the fairness of the terms of
an  investment  in  the  Common  Shares,  or  (c)  made  any  recommendation  or
endorsement of the Common Shares as an investment.

         2.10 No Brokers.  All of the  negotiations  concerning this transaction
have  been  carried  on  solely  by the  parties  hereto  and  their  respective
employees,  counsel (if any) and financial advisors. The Purchaser has not dealt
with  any  broker  or other  person  who  could  claim a  broker's  fee or other

<PAGE>

remuneration  with  regard to any  purchase  of the  Common  Shares,  nor is the
Purchaser aware of any commission or other  remuneration  being paid or given or
to be paid or given  directly or indirectly  with regard to such  purchase.  The
Purchaser  has relied  upon his own legal  counsel as to all legal  matters  and
questions  presented with reference to the offering of the Common Shares and has
relied upon the Purchaser's  accountants or other financial  advisors and/or the
Purchaser's  financial  experience  as to all  financial  matters and  questions
presented with respect to the transaction contemplated hereby.

         2.11 Compliance with Applicable Law. The Purchaser  recognizes that the
securities laws and  regulations of certain states,  including the states of the
Purchaser's principal place of business and incorporation, may impose additional
requirements  relating  to the offer and  purchase  of the  Common  Shares.  The
Purchaser  hereby  agrees to  execute,  deliver and comply with the terms of any
additions,  supplements or amendments to this Agreement that are required by the
Company in connection therewith.

                                   ARTICLE III

                                  MISCELLANEOUS

         3.1 Survival of Agreements. All covenants, agreements,  representations
and warranties made in this Agreement or any certificate or instrument delivered
to the Purchaser or the Company pursuant to or in connection with this Agreement
shall survive the execution  and delivery of this  Agreement,  and the issuance,
sale and delivery of the Common Shares.

         3.2 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Wisconsin  without regard to principles
of conflicts of laws.

         3.3 Entire  Agreement.  This  Agreement,  including  the  Schedules and
Exhibits hereto (including,  without limitation,  the Investment Agreement,  and
the Schedules and Exhibits  thereto),  constitutes the sole and entire agreement
of the parties with respect to the subject  matter  hereof.  All  Schedules  and
Exhibits hereto are hereby incorporated herein by reference.

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

         3.5 Amendments.  This Agreement may not be amended or modified,  and no
provisions  hereof may be waived without the written  consent of the Company and
the Purchaser.

         3.6 Severability.  If any provision of this Agreement shall be declared
void or unenforceable by any judicial or administrative  authority, the validity
of any other provision of the entire Agreement shall not be affected thereby.

         3.7  Headings.  The headings and titles used in this  Agreement are for
convenience  only and are not to be considered in construing or interpreting any
term or provision of this Agreement.

<PAGE>

         IN WITNESS  WHEREOF,  the Company and the Purchaser  have executed this
Subscription Agreement as of the day and year first written above.

COMPANY:                                             PURCHASER:

MEDSOLUTIONS, INC.                                   TATE INVESTMENTS, LLC

By:
   -----------------------------                     ---------------------------
   Matthew H. Fleeger, President                     Joseph P. Tate, Sole Member

<PAGE>

                                    EXHIBIT E

                       Form of Investor's Rights Agreement

<PAGE>

                           INVESTOR'S RIGHTS AGREEMENT

         THIS INVESTOR'S  RIGHTS AGREEMENT (the  "Agreement") is made as of this
15th day of July,  2005, by and among  MEDSOLUTIONS,  INC., a Texas  corporation
(the  "Company"),  and TATE  INVESTMENTS,  LLC, a  Wisconsin  limited  liability
company (the "Shareholder").

         WHEREAS,  the  Shareholder  is  acquiring  up to  Two  Million  Dollars
($2,000,000)  of  the  Company's  Common  Stock  pursuant  to  the  terms  of an
Investment  Agreement  of  even  date  herewith  between  the  Company  and  the
Shareholder (the "Investment Agreement");

         WHEREAS,  a condition to the  obligations  of the  Shareholder  and the
Company under the Investment  Agreement is that the  Shareholder and the Company
enter into this Agreement for the purpose of defining certain rights  pertaining
to the Common Stock to be acquired by the Shareholder pursuant to the Investment
Agreement and other corporate matters, all as hereinafter set forth.

         NOW,  THEREFORE,  in  consideration of the foregoing and the agreements
set forth below, the parties hereby agree with each other as follows:

         1. Certain Defined Terms. As used in this Agreement,  capitalized terms
not otherwise defined herein shall have the following respective meanings:

                  (a)  "Common  Shares"  shall  mean and  include  all shares of
         Common Stock now owned by the  Shareholder  or hereafter  issued to the
         Shareholder  by the  Company  pursuant  to the  Subscription  Agreement
         and/or the Investment  Agreement,  and any other shares of Common Stock
         issued as (or issuable upon the  conversion or exercise of any warrant,
         right or  other  security  which  is  issued  as) a  dividend  or other
         distribution  with respect to, or in exchange for or in replacement of,
         the Common Shares.

                  (b) "Common Stock" shall mean and include all shares of Common
         Stock of the Company, and any rights,  options, or warrants to purchase
         Common  Stock,  and all other  securities  of the Company  which may be
         issued in  exchange  for or in respect of such  shares of Common  Stock
         (whether  by  way  of  stock  split,   stock   dividend,   combination,
         reclassification, reorganization or any other means).

                  (c)  "Conversion  Shares" shall mean and include all shares of
         Common  Stock issued to the  Shareholder  by the Company as a result of
         one or  more  conversions  of  Outstanding  Principal  under  the  Note
         pursuant to the  Investment  Agreement,  and any other shares of Common
         Stock issued as (or  issuable  upon the  conversion  or exercise of any
         warrant,  right or other  security  which is issued as) a  dividend  or
         other   distribution  with  respect  to,  or  in  exchange  for  or  in
         replacement of, the Conversion Shares.

                  (d) "Exchange Act" shall mean the  Securities  Exchange Act of
         1934, as amended.

                  (e)  "Issue  Date"  shall  mean the date upon which any Common
         Shares or Conversion Shares were first issued.

<PAGE>

                  (f) "Note" shall mean that  certain Up to One Million  Dollars
         ($1,000,000)  10% Senior  Convertible Note of even date herewith issued
         to the Shareholder pursuant to the Investment Agreement.

                  (g)  "Outstanding  Principal" shall have the meaning set forth
         in the Investment Agreement.

                  (h) "Principal  Stockholders"  shall mean those persons listed
         on Schedule 1 hereto.

                  (i) "Register," "Registered," or "Registration" shall refer to
         a  registration   effected  by  preparing  and  filing  a  registration
         statement or similar  document in compliance  with the Securities  Act,
         and the declaration or ordering of effectiveness  of such  registration
         statement or document.

                  (j) "Registrable  Securities" shall mean the Common Shares and
         the Conversion Shares. Notwithstanding the foregoing, the Common Shares
         and  the  Conversion  Shares  shall  only  be  treated  as  Registrable
         Securities  if and so long as they have not been (i) sold to or through
         a  broker-dealer  or  underwriter  in a public  distribution  or public
         securities  transaction,  or (ii) sold in a transaction exempt from the
         registration and prospectus delivery requirements of the Securities Act
         under  Section  4(1)  thereof so that all  transfer  restrictions  with
         respect  thereto,  if any,  are removed upon the  consummation  of such
         sale.

                  (k) "SEC" shall mean the Untied States Securities and Exchange
         Commission.

                  (l) "Securities Act" shall mean the Securities Act of 1933, as
         amended.

                  (m)   "Subscription   Agreement"   shall  mean  that   certain
         Subscription  Agreement  of even date  herewith  executed  between  the
         Shareholder and the Company  whereby the Shareholder  subscribed for up
         to One Million Dollars ($1,000,000) of the Company's Common Stock.

         2. Registration Rights.

                  (a) Request for Registration.

                           (i) If the Company shall  receive,  at any time after
                  December 31, 2006, a written request from the Shareholder that
                  the Company file a registration statement under the Securities
                  Act with respect to any or all of the  Registrable  Securities
                  then owned by the Shareholder, then the Company shall, use its
                  best  efforts  to  effect as soon as  practicable,  and in any
                  event   within   ninety  (90)  days  of  such   request,   the
                  Registration  under  the  Securities  Act of  the  Registrable
                  Securities requested to be Registered.

                           (ii) If the  Shareholder  intends to  distribute  the
                  Registrable Securities covered by its request for Registration
                  pursuant   to   Section   2(a)(i)   hereof   by  means  of  an
                  underwriting,  the Shareholder  shall so advise the Company in
                  such  request.   The  underwriter  will  be  selected  by  the
                  Shareholder and shall be reasonably acceptable to the Company.
                  The  Shareholder  shall (together with the Company as provided

<PAGE>

                  in  Section   2(d)(v)   hereof)  enter  into  an  underwriting
                  agreement  in   customary   form  with  the   underwriter   or
                  underwriters  selected for such underwriting.  Notwithstanding
                  any other  provision of this Section 2(a), if the  underwriter
                  advises  the  Company in writing  that the  marketing  factors
                  require  a   limitation   on  the   number  of  shares  to  be
                  underwritten,  then the Company shall notify the  Shareholder,
                  and the number of Shares of Registrable Securities that may be
                  included in the  underwriting  shall be reduced by such number
                  as the underwriter may require;  provided,  however,  that the
                  number of shares of  Registrable  Securities to be included in
                  such  underwriting  shall  not be  reduced  unless  all  other
                  securities are first entirely excluded from the offering.

                           (iii)  Notwithstanding the foregoing,  if the Company
                  shall  furnish the  Shareholder  a  certificate  signed by the
                  President  of the  Company  stating  that  in the  good  faith
                  judgment  of the  Company's  Board of  Directors,  it would be
                  seriously  detrimental to the Company and its stockholders for
                  such  registration  statement  to be filed and it is therefore
                  essential  to defer such  filing,  the Company  shall have the
                  right to defer  such  filing  for a  period  of not more  than
                  ninety (90) days after  receipt of the  Shareholder's  request
                  for Registration;  provided,  however,  that the Company shall
                  not use this  right  more  than once in any  twenty-four  (24)
                  month period.

                           (iv) In addition,  the Company shall not be obligated
                  to effect,  or to take any action to effect,  any Registration
                  pursuant to this Section 2(a):

                                    (A) After the Company has  effected  one (1)
                           Registration  pursuant  to  Section  2(a),  and  such
                           Registrations   have   been   declared   or   ordered
                           effective; or

                                    (B) During the period starting with the date
                           sixty  (60) days  prior to the  Company's  good faith
                           estimate  of the date of filing  of,  and ending on a
                           date  one  hundred   eighty   (180)  days  after  the
                           effective date of, a Registration  subject to Section
                           2(b)  hereof;  provided  that the Company is actively
                           employing  in good  faith all  reasonable  efforts to
                           cause   such   registration   statement   to   become
                           effective.

                  (b) Company Registration. If (but without any obligation to do
         so) the  Company  proposes to Register  (including  for this  purpose a
         Registration  effected by the Company for  stockholders  other than the
         Shareholder)  any of its  Common  Stock  under  the  Securities  Act in
         connection with a public offering of securities  solely for cash (other
         than a  Registration  relating  solely  to the  sale of  securities  to
         participants  in a Company stock plan or a transaction  covered by Rule
         145 under the  Securities  Act, or any  Registration  on any form which
         does  not  include  substantially  the  same  information  as  would be
         required to be included in a registration  statement  covering the sale
         of the  Registrable  Securities),  the  Company  shall,  at such  time,
         promptly give the Shareholder written notice of such Registration. Upon
         the written  request of the  Shareholder  given within twenty (20) days
         after mailing of such notice by the Company in accordance  with Section
         11 hereof, the Company shall, subject to the provisions of Section 2(g)
         hereof,  cause to be  Registered  under the  Securities  Act all of the
         Registrable  Securities  that  the  Shareholder  has  requested  to  be
         Registered.

<PAGE>

                  (c) Company's  Right to Register  Shareholder's  Common Stock.
         The  Company  may,  at  any  time  after  December  31,  2006,  file  a
         registration  statement under the Securities Act with respect to all of
         the Registrable Securities then owned by the Shareholder.

                  (d) Obligations of the Company.  Whenever  required under this
         Section 2 to effect the Registration of any Registrable  Securities (or
         when the  Company  elects to effect  the  Registration  of  Registrable
         Securities under Section 2(c) of this Agreement), the Company shall, as
         expeditiously as reasonably possible:

                           (i)  Prepare  and file  with  the SEC a  registration
                  statement  with respect to such  Registrable  Securities as to
                  which Registration under this Section 2 shall be required, and
                  use its best efforts to cause such  registration  statement to
                  become  effective,  and, upon the request of the  Shareholder,
                  keep such  registration  statement  effective for up to ninety
                  (90) days. The Company shall not be required to file, cause to
                  become   effective  or  maintain  the   effectiveness  of  any
                  registration  statement that  contemplates  a distribution  of
                  securities on a delayed or continuous  basis  pursuant to Rule
                  415 under the Securities Act.

                           (ii)  Prepare  and file with the SEC such  amendments
                  and  supplements  to  such  registration   statement  and  the
                  prospectus used in connection with such registration statement
                  as may be  necessary  to  comply  with the  provisions  of the
                  Securities  Act  with  respect  to  the   disposition  of  all
                  securities  covered by such  registration  statement for up to
                  ninety (90) days.

                           (iii)  Furnish  to the  Shareholder  such  number  of
                  copies of a prospectus, including a preliminary prospectus, in
                  conformity  with the  requirements  of the Securities Act, and
                  such other documents as the Shareholder may reasonably request
                  in order to  facilitate  the  disposition  of the  Registrable
                  Securities.

                           (iv) Use its best efforts to Register and qualify the
                  securities  covered by such registration  statement under such
                  other  securities  or blue sky laws of such  jurisdictions  as
                  shall be reasonably  requested by the  Shareholder,  provided,
                  however,  that the Company shall not be required in connection
                  therewith or as a condition  thereto to qualify to do business
                  in such jurisdictions.

                           (v) In the event of any underwritten public offering,
                  enter into and perform its  obligations  under an underwriting
                  agreement,  in usual and  customary  form,  with the  managing
                  underwriter of such offering. The Shareholder shall also enter
                  into and  perform  its  obligations  under  such  underwriting
                  agreement.

                           (vi)  Notify  the  Shareholder  at  any  time  when a
                  prospectus   relating  to  the   Registrable   Securities   so
                  registered  is required to be delivered  under the  Securities
                  Act or the  happening  of any  event as a result  of which the
                  prospectus included in such registration statement, as then in
                  effect,  includes an untrue  statement  of a material  fact or
                  omits to state a material fact  required to be stated  therein
                  or necessary to make the statements  therein not misleading in
                  light of the circumstances  then existing,  such obligation to
                  continue for ninety (90) days.

<PAGE>

                           (vii)   Cause   all   such   Registrable   Securities
                  registered  pursuant  hereto to be  listed on each  securities
                  exchange on which similar securities issued by the Company are
                  then listed.

                           (viii) Provide a transfer agent and registrar for all
                  Registrable  Securities registered pursuant hereto and a CUSIP
                  number  for all such  securities,  in each case not later than
                  the effective date of such Registration.

                           (ix) Use its best efforts to furnish,  at the request
                  of the  Shareholder,  on the date the  Registrable  Securities
                  registered  pursuant hereto are delivered to the  underwriters
                  for sale in connection  with a  Registration  pursuant to this
                  Section  2,  if  such   securities   are  being  sold  through
                  underwriters,  or,  if  such  securities  are not  being  sold
                  through  underwriters,  on  the  date  that  the  registration
                  statement with respect to such securities  becomes  effective,
                  (A) an opinion,  dated such date, of the counsel  representing
                  the Company for the purposes of such Registration, in form and
                  substance  as  is  customarily  given  to  underwriters  in an
                  underwritten  public offering,  addressed to the underwriters,
                  if any,  and to the  Shareholder,  and (B) a letter dated such
                  date, from the independent certified public accountants of the
                  Company,  in form and  substance  as is  customarily  given by
                  independent certified public accountants to underwriters in an
                  underwritten  public offering,  addressed to the underwriters,
                  if any, and to the Shareholder.

                  (e) Furnish Information.  It shall be a condition precedent to
         the  obligations  of the  Company to take any action  pursuant  to this
         Section  2  with  respect  to  the  Registrable   Securities  that  the
         Shareholder  shall  furnish to the Company such  information  regarding
         itself,  the  Registrable  Securities,   and  the  intended  method  of
         disposition  of such  securities  as shall be  required  to effect  the
         Registration  of the Registrable  Securities.  In the event the Company
         elects to effect a registration  of the  Registrable  Securities  under
         Section 2(c), it shall be an affirmative  obligation of the Shareholder
         to furnish the information described in this Section 2(e).

                  (f)  Expenses  of   Registration.   All  expenses  other  than
         underwriting  discounts and  commissions  incurred in  connection  with
         Registrations,  filings or  qualifications  pursuant to this  Section 2
         including   (without   limitation)   all   Registration,   filing   and
         qualification   fees,   printer's  and   accounting   fees,   fees  and
         disbursements  of  counsel  for the  Company,  shall  be  borne  by the
         Company.

                  (g) Underwriting Requirements. In connection with any offering
         involving an underwriting of shares of the Company's capital stock, the
         Company shall not be required  under Section 2(b) hereof to include any
         of  the  Registrable   Securities  in  such  underwriting   unless  the
         Shareholder accepts the terms of the underwriting as agreed upon by the
         Company  and  the  underwriters  selected  by it (or by  other  persons
         entitled to select the underwriters), and then only in such quantity as
         the underwriters determine in their sole discretion will not jeopardize
         the success of the  offering  by the  Company.  If the total  amount of
         securities, including Registrable Securities, requested by stockholders
         to be included in the offering  exceeds the amount of  securities to be
         sold (other than by the  Company)  that the  underwriters  determine in
         their sole  discretion is compatible  with the success of the offering,
         then the Company  shall be required  to include in such  offering  only
         that number of securities,  including Registrable Securities, which the
         underwriters determine in their sole discretion will not jeopardize the
         success of the offering (the  securities so included to be  apportioned

<PAGE>

         pro  rata  among  all  of  the  selling  stockholders   (including  the
         Shareholder) according to the total amount of securities entitled to be
         included  therein  owned by each  selling  stockholder  (including  the
         Shareholder) but in no event shall the amount of Registrable Securities
         included in the offering be reduced below fifteen  percent (15%) of the
         total  amount of  securities  included  in such  offering,  unless such
         offering is the initial public offering of the Company's securities, in
         which  case,  the  Registrable   Securities  may  be  excluded  if  the
         underwriters  make the determination  above and no other  stockholder's
         securities are included in such offering.

                  (h) Indemnification.  In the event any Registrable  Securities
         are included in a registration statement pursuant to this Section 2:

                           (i) To the extent  permitted by law, the Company will
                  indemnify and hold harmless the  Shareholder,  any underwriter
                  (as defined in the Securities Act) for such  Shareholder,  and
                  each  person  if  any,  who  controls   the   Shareholder   or
                  underwriter  within the meaning of the  Securities  Act or the
                  Exchange  Act,  against  any  losses,   claims,   damages,  or
                  liabilities  (joint  or  several)  to which  they  may  become
                  subject  under the  Securities  Act, the Exchange Act or other
                  federal or state law, insofar as such losses, claims, damages,
                  or liabilities (or actions in respect thereof) arise out of or
                  are based upon any of the following  statements,  omissions or
                  violations  (collectively  a  "Violation"):   (A)  any  untrue
                  statement  or alleged  untrue  statement  of a  material  fact
                  contained  in  such  registration  statement,   including  any
                  preliminary  prospectus or final prospectus  contained therein
                  or in any supplements or amendments thereto,  (B) the omission
                  or alleged  omission therein of a material fact required to be
                  stated  therein,  or necessary to make the statements  therein
                  not misleading,  or (C) any violation or alleged  violation by
                  the Company of the Securities Act, the Exchange Act, any state
                  securities  laws or any rule or regulation  promulgated  under
                  the Securities  Act, the Exchange Act or any state  securities
                  law; and the Company will pay the Shareholder,  underwriter or
                  controlling  person, as incurred,  any legal or other expenses
                  reasonably  incurred by them in connection with  investigating
                  or  defending  any such  loss,  claim,  damage,  liability  or
                  action;  provided,   however,  that  the  indemnity  agreement
                  contained in this Section  2(h)(i)  shall not apply to amounts
                  paid in settlement of any such loss, claim, damage,  liability
                  or action if such  settlement is effected  without the consent
                  of the  Company  (which  consent  shall  not  be  unreasonably
                  withheld), nor shall the Company be liable to the Shareholder,
                  underwriter  or controlling  person for any such loss,  claim,
                  damage,  liability or action to the extent it arises out of or
                  is based on a Violation  which occurs in reliance  upon and in
                  conformity with written  information  furnished  expressly for
                  use in such  Registration by the Shareholder,  the underwriter
                  or controlling person.

                           (ii) To the extent  permitted by law, the Shareholder
                  will  indemnify  and hold  harmless the  Company,  each of its
                  directors,   each  of  its   officers   who  has   signed  the
                  registration  statement,  each person if any, who controls the
                  Company  within  the  meaning  of  the  Securities  Act or the
                  Exchange Act, any underwriter,  any other stockholder  selling
                  securities in such registration  statement and any controlling
                  person of any such underwriter or other  stockholder,  against
                  any  losses,  claims,  damages,  or  liabilities,   (joint  or
                  several)  to which any of the  foregoing  persons  may  become
                  subject,  under the Securities  Act, the Exchange Act or other
                  federal or state law, insofar as such losses, claims, damages,
                  or liabilities (or actions in respect thereto) arise out of or
                  are based upon any Violation,  in each case to the extent (and
                  only to the  extent)  that such  Violation  occurs in reliance
                  upon and in conformity with written  information  furnished by
                  the  Shareholder  expressly  for use in  connection  with such
                  Registration,  and the Shareholder shall pay, as incurred, any

<PAGE>

                  legal or other  expenses  reasonably  incurred  by any  person
                  intended to be indemnified  pursuant to this Section 2(h)(ii),
                  in connection with  investigating  or defending any such loss,
                  claim, damage,  liability or action,  provided,  however, that
                  the  indemnity  agreement  contained in this Section  2(h)(ii)
                  shall  not apply to  amounts  paid in  settlement  of any such
                  loss, claim, damage, liability or action if such settlement is
                  effected without the consent of the Shareholder (which consent
                  shall  not be  unreasonably  withheld),  provided,  that in no
                  event shall any indemnity  under this Section  2(h)(ii) exceed
                  the  net   proceeds   from  the   offering   received  by  the
                  Shareholder,  except  in the  case  of  willful  fraud  by the
                  Shareholder.

                           (iii) Promptly after receipt by an indemnified  party
                  under this Section 2(h) of notice of the  commencement  of any
                  action (including any governmental  action),  such indemnified
                  party  will,  if a  claim  in  respect  thereof  is to be made
                  against  any  indemnifying  party  under  this  Section  2(h),
                  deliver  to the  indemnifying  party a  written  notice of the
                  commencement thereof and the indemnifying party shall have the
                  right to  participate  in, and to the extent the  indemnifying
                  party so desires,  jointly with any other  indemnifying  party
                  similarly noticed,  to assume the defense thereof with counsel
                  mutually satisfactory to the parties; provided,  however, that
                  an  indemnified  party  (together  with all other  indemnified
                  parties  which  may be  represented  without  conflict  by one
                  counsel) shall have the right to retain one separate  counsel,
                  with  the  reasonable  fees  and  expenses  to be  paid by the
                  indemnifying  party,  if  representation  of such  indemnified
                  party by the counsel retained by the indemnifying  party would
                  be  inappropriate   due  to  actual  or  potential   differing
                  interests  between such indemnified  party and any other party
                  represented  by counsel  in such  proceeding.  The  failure to
                  deliver  written  notice to the  indemnifying  party  within a
                  reasonable  time  of  the  commencement  of  any  action,   if
                  prejudicial  to its  ability  to  defend  such  action,  shall
                  relieve  the  indemnifying  party  of  any  liability  to  the
                  indemnified party under this Section 2(h), but the omission so
                  to deliver written notice to the  indemnifying  party will not
                  relieve  it  of  any  liability   that  it  may  have  to  any
                  indemnified party otherwise than under this Section 2(h).

                           (iv)  If the  indemnification  provided  for in  this
                  Section 2(h) is held by a court of competent  jurisdiction  to
                  be  unavailable  to an  indemnified  party with respect to any
                  loss, liability,  claim, damage or expense referred to herein,
                  then the  indemnifying  party,  in lieu of  indemnifying  such
                  indemnified  party  hereunder,  shall contribute to the amount
                  paid or payable by such indemnified  party as a result of such
                  loss, liability,  claim, damage, or expense in such proportion
                  as is  appropriate  to  reflect  the  relative  fault  of  the
                  indemnifying  party on the one hand and the indemnified  party
                  on the other in  connection  with the  statements or omissions
                  that  resulted  in such  loss,  liability,  claim,  damage  or
                  expense   as   well   as   any   other   relevant    equitable
                  considerations;   provided,   that  in  no  event   shall  any
                  contribution by the Shareholder under this Section 2(h) exceed
                  the  net   proceeds   from  the   offering   received  by  the
                  Shareholder,  except  in the  case  of  willful  fraud  by the
                  Shareholder.  The relative fault of the indemnifying party and
                  of the indemnified  party shall be determined by reference to,
                  among  other  things,  whether  the untrue or  alleged  untrue
                  statement  of a  material  fact  or the  omission  to  state a
                  material   fact  relates  to   information   supplied  by  the
                  indemnifying  party  or  by  the  indemnified  party  and  the
                  parties' relative intent, knowledge, access to information and
                  opportunity to correct or prevent such statement or omission.

<PAGE>

                           (v) Notwithstanding the foregoing, to the extent that
                  the provisions on indemnification  and contribution  contained
                  in the underwriting  agreement entered into in connection with
                  the  underwritten  public  offering  are in conflict  with the
                  foregoing  provision,   the  provisions  in  the  underwriting
                  agreement shall control.

                           (vi)  The   obligations   of  the   Company  and  the
                  Shareholder   under  this  Section  2(h)  shall   survive  the
                  completion  of any  offering of  Registrable  Securities  in a
                  registration statement under Section 2, and otherwise.

         3. Co-Sale Rights.

                  (a)  Co-Sale   Right.   If  one  or  more  of  the   Principal
         Stockholders  (the "Selling  Stockholders"),  in one  transaction  or a
         series of related  transactions  desire to enter into an  agreement  to
         transfer  more  than  twenty  percent  (20%) in the  aggregate,  of the
         Company's  then issued and  outstanding  Common  Stock to a third party
         (the  "Buyer"),   such  Principal   Stockholder(s)  shall  provide  the
         Shareholder  with  written  notice of the proposed  transaction  (which
         notice  shall  specify  the  terms  and  conditions  of  such  proposed
         transaction)  and the  Shareholder  shall have the  right,  but not the
         obligation,  exercisable  for a period of ten (10) days, to sell to the
         Buyer,  upon the same terms and  conditions  contained in the notice of
         the  proposed  transaction,  its "Co-Sale Pro Rata Share" of the equity
         securities  proposed to be sold. For purposes hereof, the Shareholder's
         "Co-Sale Pro Rata Share" shall be determined by multiplying  the number
         of  shares of the  Company's  Common  Stock to be sold in the  proposed
         transaction  by a  fraction,  the  numerator  of which is the number of
         shares of Common Stock in the Company owned by the  Shareholder and the
         denominator  of  which  is the  sum  of the  number  of  shares  of the
         Company's  Common  Stock  held by the  Selling  Stockholder(s)  and the
         Shareholder.  In the  event  the  Shareholder  exercises  its  right to
         participate  in  any  transaction  pursuant  to  this  Section  3,  the
         Shareholder  shall be required to bear its  proportionate  share of the
         expenses of the transaction,  including without  limitation,  legal and
         accounting fees and expenses.  To the extent the Shareholder  exercises
         its right of  participation in accordance with the terms and conditions
         set forth herein,  the number of shares of the  Company's  Common Stock
         which the Selling Stockholder(s) may sell in the proposed sale shall be
         correspondingly reduced. If the Shareholder fails to notify the Company
         and  Selling  Stockholder(s)  of its  election  to  participate  in the
         proposed  sale  within  ten (10) days  after  notice is given  pursuant
         hereto, the Shareholder shall be deemed to have waived its rights under
         this Section 3.

                  (b)  Agreement  to be Bound by this  Section 3. The  Principal
         Stockholders  have executed  Addendum A to this  Agreement  whereby the
         Principal  Stockholders have agreed that the provisions of this Section
         3 shall be binding  upon each of them with  respect to any Common Stock
         now owned or hereafter acquired by each of them.

         4. Rule 144 Reporting.  With a view to making available the benefits of
certain rules and  regulations  of the SEC which may at any time permit the sale
of the Registrable  Securities to the public without Registration,  at all times
after  ninety  (90) days  after any  registration  statement  covering  a public
offering of  securities  of the Company  under the  Securities  Act shall become
effective, the Company agrees to:

<PAGE>

                  (a) Make and keep public information available, as those terms
         are understood and defined in Rule 144 under the Securities Act;

                  (b) File with the SEC in a timely manner all reports and other
         documents  required of the  Company  under the  Securities  Act and the
         Exchange Act; and

                  (c) Furnish the  Shareholder  forthwith upon request a written
         statement  by the  Company  as to its  compliance  with  the  reporting
         requirements  of Rule 144 and of the  Securities  Act and the  Exchange
         Act,  a copy of the most  recent  annual  or  quarterly  report  of the
         Company, and such other reports or documents so filed by the Company as
         the Shareholder  may reasonably  request in availing itself of any rule
         or  regulation  of  the  SEC  allowing  the  Shareholder  to  sell  the
         Registrable Securities without Registration.

         5. Board Representation.

                  (a) The Company shall not,  prior to the  registration  of the
         Common Stock owned by the Shareholder  with the SEC,  increase the size
         of its Board of  Directors  to more than five (5)  members  unless  Mr.
         Joseph   Tate   decides  to  become  a  director  in  addition  to  the
         Shareholders'  director  nominee as described below, in which event the
         Board of Directors shall have no more than seven (7) members. The Board
         of Directors of the Company shall nominate one (1) designee selected by
         the  Shareholder  for election to the Board of Directors at each annual
         meeting of the Company's shareholders, and shall recommend the election
         of such  designee  to the  Company's  shareholders,  and the  Principal
         Shareholders  shall vote their  shares of Common  Stock in favor of the
         election of such designee;  provided,  however,  that in the event that
         Mr. Joseph Tate is designated  by the  Shareholder,  in addition to its
         first nominee for  nomination by the Board of Directors for election to
         the Board of Directors,  then the Board of Directors shall nominate two
         (2) designees  (one of which shall be Mr. Joseph Tate)  selected by the
         Shareholder  for  election  to the Board of  Directors  at each  annual
         meeting of the Company's shareholders, and shall recommend the election
         of such  designees to the  Company's  shareholders,  and the  Principal
         Shareholders  shall vote their  shares of Common  Stock in favor of the
         election  of  such  designees;  provided  further,  however,  that  the
         Shareholder's  designee(s)  must be qualified to serve as a director of
         an issuer  subject  to the  reporting  requirements  of the  Securities
         Exchange Act of 1934, as amended.

                  (b)  Agreement  to be Bound by this  Section 5. The  Principal
         Stockholders  have executed  Addendum A to this  Agreement  whereby the
         Principal  Stockholders have agreed that the provisions of this Section
         5 shall be binding  upon each of them with  respect to any Common Stock
         now owned or hereafter acquired by each of them.

                  (c) Termination of  Representation  Rights.  The Shareholder's
         right  to  nominate  designees  to the  Company's  Board  of  Directors
         pursuant to Section 5(a) hereof shall  continue until such time as: (i)
         the  Shareholder  effectuates,  in one or a series of  transactions,  a
         transfer  of shares of Common  Stock  whereby  the  number of shares of
         Common Stock owned by the Shareholder  after such transfer is less than
         seventy-five  percent  (75%) of the  number of  shares of Common  Stock
         owned by the  Shareholder  before the transfer,  at which such time the
         Shareholder's  right to nominate  designees to the  Company's  Board of
         Directors  will be reduced to the right to designate one (1) nominee to
         the Company's Board of Directors; or (ii) the Shareholder  effectuates,

<PAGE>

         in one or a series  of  transactions,  a  transfer  of shares of Common
         Stock  whereby  the  number  of shares  of  Common  Stock  owned by the
         Shareholder  after the transfer is less than fifty percent (50%) of the
         number of shares of Common Stock owned by the Shareholder  prior to the
         transfer,  at which  such  time the  Shareholder's  right to  designate
         nominees to the Company's  Board of Directors  will be  eliminated;  or
         (iii)  the  Common  Stock  owned by the  Shareholder  shall  have  been
         registered with the United States Securities and Exchange Commission.

         6. No Impairment. The Company will not, by amendment of its Articles of
Incorporation  or  Bylaws  or  through  any  reorganization,   recapitalization,
transfer  of  assets,  consolidation,  merger,  dissolution,  issue  or  sale of
securities or any other voluntary action,  avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed  hereunder by the
Company,  but will at all times in good faith  assist in the carrying out of all
provisions  of this  Agreement  and in the  taking of all such  action as may be
necessary  or  appropriate  in order to protect  the  rights of the  Shareholder
hereunder  against  impairment.

         7. Term.  This Agreement  shall continue in full force and effect until
(a) terminated by the unanimous  consent of the Shareholder and the Company;  or
(b) the Shareholder no longer holds any shares of Common Stock in the Company.

         8. This Agreement  Governs.  In the event of any inconsistency  between
this Agreement and any of the Bylaws or resolutions of the Board of Directors or
the stockholders of the Company whether now existing or hereafter adopted,  this
Agreement shall prevail and govern in the matter.

         9.  Successors and Assigns.  This  Agreement  shall be binding upon and
shall inure to the benefit of the respective  parties hereto,  and to the extent
permitted hereby, their respective successors and assigns.

         10.  Headings.  All section  headings and paragraph  titles or captions
contained in this Agreement are for  convenience of reference only and shall not
be deemed to modify, describe,  limit, extend or define the terms hereof, or the
scope of this  Agreement,  nor are they  relevant to the intent of any provision
hereof.

         11.  Notice.  All  notices,   requests,   demands,  consents  or  other
communications  required or  permitted  to be given  pursuant to this  Agreement
shall be in writing and delivered by hand, by overnight courier delivery service
or by certified mail,  return receipt  requested,  postage prepaid  addressed as
follows:

                  if to the Company:         MedSolutions, Inc.
                                             Attn:  President
                                             12750 Merit Drive
                                             Park Central VII, Suite 770
                                             Dallas, TX  75251
                                             Facsimile:  (972) 931-2250

<PAGE>

                  with a copy to:            Fish & Richardson, P.C.
                                             Attn:  Steven R. Block
                                             5000 Bank One Center
                                             1717 Main Street
                                             Dallas, TX  75201
                                             Facsimile:  (214) 747-2091

                  if to the Shareholder:     Tate Investments, LLC
                                             Attn:  Joseph P. Tate
                                             3252 North Lake Drive
                                             Milwaukee, WI  53211
                                             Facsimile:  (414) 962-7960

                  with a copy to:            Davis & Kuelthau, s.c.
                                             Attn:  Peter J. Ruud
                                             300 N. Corporate Drive, Suite 150
                                             Brookfield, WI  53045
                                             Facsimile:  (262) 792-2471

Notices shall be deemed given when actually  received,  which shall be deemed to
be not later that the next  business day if sent by  overnight  courier or after
five (5) business days if sent by mail.

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

         13.  Validity.  If any provision of this Agreement  shall be held to be
invalid,  illegal or  unenforceable  in any respect,  such  invalid,  illegal or
unenforceable  provision shall not affect any other provision  hereof,  and this
Agreement  shall be  construed  as if such  invalid,  illegal  or  unenforceable
provision had never been contained herein.

         14. Entire  Agreement and  Amendments.  It is mutually  understood  and
agreed that this  Agreement  sets forth the entire  agreement and  understanding
between the parties hereto with respect to the subject  matter hereof,  and that
this Agreement  supercedes all prior  agreements  and  understandings  among the
parties  hereto and shall not be  supplemented,  modified or amended except by a
written  instrument  dated  subsequent to the date hereof,  signed by (a) a duly
authorized  officer of the  Company,  and (b) a duly  authorized  officer of the
Shareholder.

         15.  Applicable  Law. This Agreement shall be governed by and construed
in  accordance  with  the laws of the  State  of  Wisconsin  without  regard  to
principles of conflicts of laws.

         IN WITNESS WHEREOF,  the parties hereto have executed this Agreement or
caused this Agreement to be executed as of the day and year first written above.

MEDSOLUTIONS, INC.                                TATE INVESTMENTS, LLC

By:                                               By:
   -----------------------------                     ---------------------------
   Matthew H. Fleeger, President                     Joseph P. Tate, Sole Member

<PAGE>

                                   Schedule 1
                                   ----------

                             Principal Stockholders

Mark Altenau, M.D.
Ajit S. Brar
Beverly Fleeger
Matthew H. Fleeger
Winship B. Moody

<PAGE>

                                   Addendum A
                                   ----------

         The undersigned,  for good and valuable consideration,  the receipt and
sufficiency of which is hereby acknowledged,  hereby  unconditionally agree that
the terms and provisions of Sections 3 and 6 of the Investor's  Rights Agreement
(the  "Agreement")  dated July 15, 2005, by and between  MedSolutions,  Inc. and
Tate  Investments,  LLC, and to which this Addendum is attached and incorporated
into by  reference,  shall apply to and be binding upon each of the  undersigned
and any and all  Common  Stock  (as  defined  in the  Agreement)  now  owned  or
hereafter acquired by any of the undersigned.

         IN WITNESS  WHEREOF,  the undersigned  have executed this Addendum A to
the Agreement as of the 15th day of July, 2005.

----------------------------                        ----------------------------
Mathew H. Fleeger                                   Ajit S. Brar

----------------------------                        ----------------------------
Beverly Fleeger                                     Winship B. Moody

----------------------------
Mark Altenau, M.D.

<PAGE>

                                    EXHIBIT F

                         Form of Intercreditor Agreement

<PAGE>

                             INTERCREDITOR AGREEMENT

         This INTERCREDITOR AGREEMENT (hereinafter  "Agreement") is entered into
as of July __, 2005, among ______________,  The Executor/Personal Representative
of The  Estate  of VIVIAN  S.  ERIKSEN,  and AJIT S.  BRAR,  (collectively,  the
"Existing  Lien  Holders"),  and TATE  INVESTMENTS,  LLC,  a  Wisconsin  limited
liability  company ("Tate") (Tate and the Existing Lien Holders are individually
referred to as a "Creditor" and collectively referred to as the "Creditors").

                                    RECITALS

         WHEREAS,  Tate has  provided  and may  from  time to time  continue  to
provide credit to MedSolutions,  Inc. a Texas corporation,  and its subsidiaries
(including,   without  limitation,   Enviroclean   Management  Services,   Inc.)
("Enviroclean")  (MedSolutions,  Inc.  and  its  subsidiaries  are  collectively
referred to as the "Borrower");

         WHEREAS, Tate has been granted a lien and security interest against the
real  estate  and  improvements  owned by  Enviroclean  described  on  Exhibit A
attached  hereto  and  incorporated  herein  by  reference,  together  with  all
fixtures,   proceeds,   products  and  supporting   obligations  therefore  (the
"Collateral");

         WHEREAS,  Borrower is indebted to the Existing  Lien  Holders,  and the
indebtedness  of Borrower to the  Existing  Lien  Holders is also secured by the
Collateral; and

         WHEREAS, the Creditors desire to enter into this Agreement to establish
the priority of their liens and security interests in the Collateral.

         NOW, THEREFORE, in consideration of the premises and for other good and
valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
acknowledged by each of the parties hereto, the parties hereto agree as follows:

         1. Collateral Priority. The Creditors agree that no Creditor's lien and
security  interest in the  Collateral  shall be prior to or  subordinate  to any
other Creditor's lien and security interest in the Collateral, and that the lien
and security  interest of each Creditor in the  Collateral  shall be treated for
all  purposes  as equal in priority  to the lien and  security  interest of each
other  Creditor.  In the event of default by the Borrower in its  obligations to
any party to this Agreement which are secured by the Collateral, all proceeds of
sale of the  Collateral,  after the  payment of the cost of sale and  reasonable
attorneys'  fees,  shall  be  shared  by  the  Creditors  in  proportion  to the
outstanding   balance  of  the  principal  and  interest  on  their   respective
obligations secured by the Collateral as of the date of sale.

         2.  Liquidation  or  Bankruptcy  of the  Borrower.  In the event of any
insolvency  proceeding  involving the Borrower then, and in any such event,  any
payment,  application or distribution of any kind or character,  either in cash,
securities  or other  property  which  shall be  payable or  deliverable  to the
parties upon or with respect to the sale or disposition of the Collateral  shall
be shared by the  Creditors  in  proportion  to the  outstanding  balance of the
principal and interest on their respective obligations secured by the Collateral
as of the date of such distribution.

<PAGE>

         3.  Extent of  Agreement.  The lien  priorities  specified  herein  are
applicable irrespective of the time, manner or order of attachment or perfection
of any security  interests,  liens or claims,  or the time or order of filing or
any  financing  statements  or Deeds of Trust,  or the giving or failure to give
notice of the acquisition or expected acquisition of any purchase money security
interests or other security interests.

         4. Continuing  Agreement.  This Agreement shall constitute a continuing
agreement of lien and  security  interest  priority and each party may,  without
notice to any other party, lend money, extend credit and provide other financial
services  to or on  behalf of  Borrower  on the  basis of this  Agreement.  This
Agreement shall constitute the entire agreement between the parties with respect
to the subject  matter  hereof and shall not be amended  except with the written
consent  of all  parties  hereto.  The lien  and  security  interest  priorities
specified  herein shall remain in full force and effect,  regardless  or whether
either party rescinds,  amends,  waives any provision or, terminates or reforms,
by litigation or otherwise,  its respective financing agreement or agreements or
any other agreement with Borrower.

         5. Notice of Default,  Acceleration,  Etc. Each Creditor agrees to give
notice to one another  upon the default in the  payment or  performance,  or the
acceleration,  of any of the indebtedness of the Borrower to them and upon their
taking any action to enforce any of their remedies against any of the Collateral
(a "Default  Notice").  Each Creditor agrees to hold any proceeds of the sale or
disposition of any Collateral  which is received by the Creditor in trust and to
immediately  deliver  to each other  Creditor  the other  Creditors'  respective
proportionate share as set forth in this Agreement.

         6. Delivery of Payment.  Should any payment on an obligation secured by
the Collateral, or the proceeds of the sale or disposition of any Collateral, be
received by any Creditor which is inconsistent with the terms of this Agreement,
the Creditor  receiving  such payment,  Collateral  or proceeds  shall hold such
amount  in trust  and  immediately  deliver  to each  other  Creditor  the other
Creditors' respective proportionate share as set forth in this Agreement.

         7. Waivers.  No delay on the part of any party in exercising any right,
power or privilege granted  hereunder shall operate as a waiver thereof,  and no
purported  waiver of any  default,  breach or violation of any term or provision
contained herein shall be deemed to be a waiver of such term or provision unless
the waiver is in writing and signed by the waiving  party.  No such waiver shall
in any event be deemed a waiver of any  subsequent or other  default,  breach or
violation.  The rights or remedies herein expressly specified are cumulative and
not exclusive of any other rights and remedies which the parties would otherwise
have.

         8. Successors and Assigns;  Assignment. This Agreement shall be binding
upon and inure to the benefit of each of the parties hereto and their respective
successors and assigns. References herein to each party shall be deemed to refer
to such party and its  successors  and  assigns.  No other  person shall have or
obtain  any right  benefit,  priority  or  interest  under this  Agreement.  Any
assignment  by  any  party  of any  security  interest,  lien  or  claim  in any
Collateral or any financing statement covering the same shall be subject to this
Agreement.

         9.  Attorneys'  Fees and Costs. In the event of any dispute between the
parties  arising in  relation  to this  Agreement,  each party shall pay its own
attorneys' fees and costs.

<PAGE>

         10.   Counterparts.   This   Agreement  may  be  executed  in  multiple
counterparts,  each of which, when so executed, shall be deemed an original, but
all of such  counterparts  taken  together,  shall  constitute  one and the same
agreement.

         11.  Notice.  Any notices and demands under or related to this document
shall be in writing and  delivered to the intended  party at its address  stated
herein,  by  one of the  following  means:  (a)  by  hand,  (b) by a  nationally
recognized  overnight  courier  service,  or  (c)  by  certified  mail,  postage
prepared, with return receipt requested.  Notice shall be deemed given: (a) upon
receipt if delivered  by hand,  (b) on the Delivery Day after the day of deposit
with a nationally  recognized courier service,  or (c) on the third Delivery Day
after the notice is deposited in the mail. "Delivery Day" means a day other than
a Saturday,  a Sunday,  or any other day on which national banking  associations
are  authorized  to be closed.  Any party may change its address for purposes of
the receipt of notices and demands by giving notice of such change in the manner
provided in this provision.

         IN  WITNESS  WHEREOF,  this  Agreement  has been duly  executed  by the
parties hereto.

                                                 TATE INVESTMENTS, LLC

Dated:___________________                        By:____________________________
                                                    Joseph P. Tate, Sole Member

                                                    Address: 3252 N. Lake Drive
                                                             Milwaukee, WI 53211
STATE OF__________________ )
                           ) ss.
COUNTY OF_________________ )

         This instrument was acknowledged before me on _______________, 2005, by
Joseph P. Tate, as the sole member of Tate Investments, LLC, a Wisconsin limited
liability company, on behalf of said limited liability company.

                                       ____________________________
                                       ____________________________ (print name)
                                       Notary Public, State of _________________
                                       My Commission:___________________________

                                       Estate of Vivian S. Eriksen
Dated:___________________              By:______________________________________
                                          ___________________, Executor/Personal
                                                               Representative

                                       Address: ________________________________
                                                ________________________________

<PAGE>

STATE OF__________________ )
                           ) ss.
COUNTY OF_________________ )

         This  instrument was  acknowledged  before me on  __________,  2005, by
______________________,  to me known to be the Executor/Personal  Representative
of the Estate of Vivian S. Eriksen..

                                       ____________________________
                                       ____________________________ (print name)
                                       Notary Public, State of _________________
                                       My Commission:___________________________

Dated:___________________              _________________________________________
                                       Ajit S. Brar

                                       Address: ________________________________
                                                ________________________________

STATE OF__________________ )
                           ) ss.
COUNTY OF_________________ )

This instrument was acknowledged before me on ___________, 2005 by Ajit S. Brar.

                                       ____________________________

                                       ____________________________ (print name)
                                       Notary Public, State of _________________
                                       My Commission:___________________________

Acknowledged and consented to by:

MedSolutions, Inc.                         Enviroclean Management Services, Inc.

By: _____________________________          By: _________________________________
    Matthew H. Fleeger, President              Matthew H. Fleeger, President
    Date: ____________, 2005                   Date: _____________, 2005

<PAGE>

                                    EXHIBIT A

                                       To

                             INTERCREDITOR AGREEMENT

Lot 3, Block B, of KINGSLEY ROAD PROPERTIES  INDUSTRIAL DISTRICT, an Addition to
the City of Garland, Dallas County, Texas, according to the Map thereof recorded
in Volume 49, Page 41, of the Map Records of Dallas County, Texas.

AFTER RECORDING RETURN TO:
Peter J. Ruud
Davis & Kuelthau, S.C.
300 N. Corporate Drive
Suite 150
Brookfield, WI 53045

<PAGE>

                                  SCHEDULE 8.11

                       Consolidated Net Worth Improvement

      Date                                                     Minimum Net Worth
      ----                                                     -----------------

September 30, 2005                                                $  653,136

December 31, 2005                                                 $  771,948

March 31, 2006                                                    $  892,383

June 30, 2006                                                     $1,014,460

September 30, 2006                                                $1,138,201

December 31, 2006                                                 $1,263,627

March 31, 2007                                                    $1,390,757

June 30, 2007                                                     $1,519,614

September 30, 2007                                                $1,650,218

December 31, 2007                                                 $1,782,593

March 31, 2008                                                    $1,916,760

June 30, 2008                                                     $2,052,742

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00087-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00087-of-00352.parquet"}]]