Document:

Exhibit 10.1

                          SECURITIES PURCHASE AGREEMENT

        This Securities Purchase Agreement (this "Agreement") is dated as of
December __, 2005 among Electronic Sensor Technology, Inc., a Nevada corporation
(the "Company"), and each purchaser identified on the signature pages hereto
(each, including its successors and assigns, a "Purchaser" and collectively the
"Purchasers").

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

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

                                   ARTICLE I.
                                   DEFINITIONS

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

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

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

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

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

                "Commission" means the Securities and Exchange Commission.

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                "Common Stock" means the common stock of the Company, par value
        $.001 per share, and any other class of securities into which such
        securities may hereafter have been reclassified or changed into.

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

                "Company Counsel" means White & Case LLP.

                "Conversion Price" shall have the meaning ascribed to such term
        in the Debentures.

                "Debentures" means, the 8% Convertible Debentures due, subject
        to the terms therein, 4 years from their date of issuance, issued by the
        Company to the Purchasers hereunder, in the form of Exhibit A.

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

                "Effective Date" means the date that the initial Registration
        Statement filed by the Company pursuant to the Registration Rights
        Agreement is first declared effective by the Commission.

                "Evaluation Date" shall have the meaning ascribed to such term
        in Section 3.1(r).

                "Exchange Act" means the Securities Exchange Act of 1934, as
        amended, and the rules and regulations promulgated thereunder.

                "Exempt Issuance" means the issuance of (a) shares of Common
        Stock or options to employees, officers or directors of the Company
        pursuant to any stock or option plan duly adopted by a majority of the
        non-employee members of the Board of Directors of the Company or a
        majority of the members of a committee of non-employee directors
        established for such purpose, (b) securities upon the exercise or
        exchange of or conversion of any Securities issued hereunder and/or
        securities exercisable or exchangeable for or convertible into shares of
        Common Stock issued and outstanding on the date of this Agreement,
        provided that such securities have not been amended since the date of
        this Agreement to increase the number of such securities or to decrease
        the exercise, exchange or conversion price of any such securities, (c)
        securities issued pursuant to acquisitions or strategic transactions
        approved by a majority of the disinterested directors, provided any such
        issuance shall only be to a Person which is, itself or through its
        subsidiaries, an operating company in a business synergistic with the
        business of the Company and in which the Company receives benefits in
        addition to the investment of funds, but shall not include a transaction
        in which the Company is issuing

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        securities primarily for the purpose of raising capital or to an entity
        whose primary business is investing in securities and (d) up to
        1,500,000 shares of Common Stock or Common Stock Equivalents, in the
        aggregate, in any 12 month period issued (i) to consultants pursuant to
        a stock or option plan described in (a) above, (ii) in connection with
        compensation packages offered to attract new key employees for senior
        management positions or (iii) to James Frey or Matthew Collier in
        connection with the restructuring previously issued equity compensation
        to such individuals.

                "FW" means Feldman Weinstein LLP with offices located at 420
        Lexington Avenue, Suite 2620, New York, New York 10170-0002.

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

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

                "Legend Removal Date" shall have the meaning ascribed to such
        term in Section 4.1(c).

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

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

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

                "Maximum Rate" shall have the meaning ascribed to such term in
        Section 5.17.

                "Participation Maximum" shall have the meaning ascribed to such
        term in Section 4.13.

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

                "Pre-Notice" shall have the meaning ascribed to such term in
        Section 4.13.

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

                "Purchaser Party" shall have the meaning ascribed to such term
        in Section 4.11.

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

                "Registration Statement" means a registration statement meeting
        the requirements set forth in the Registration Rights Agreement and
        covering the resale of the Underlying Shares by each Purchaser as
        provided for in the Registration Rights Agreement.

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

                "Required Minimum" means, as of any date, the maximum aggregate
        number of shares of Common Stock then issued or potentially issuable in
        the future pursuant to the Transaction Documents, including any
        Underlying Shares issuable upon exercise or conversion in full of all
        Warrants and Debentures (including Underlying Shares issuable as payment
        of interest), ignoring any conversion or exercise limits set forth
        therein, and assuming that the Conversion Price is at all times on and
        after the date of determination 75% of the then Conversion Price on the
        Trading Day immediately prior to the date of determination.

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

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

                "Securities" means the Debentures, the Warrants, the Warrant
        Shares and the Underlying Shares.

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

                "Short Sales" shall include all "short sales" as defined in Rule
        200 of Regulation SHO under the Exchange Act (but shall not be deemed to
        include the location and/or reservation of borrowable shares of Common
        Stock).

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

                "Subsequent Financing" shall have the meaning ascribed to such
        term in Section 4.13.

                "Subsequent Financing Notice" shall have the meaning ascribed to
        such term in Section 4.13.

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

                "Trading Day" means a day on which the Common Stock is traded on
        a Trading Market.

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

                "Transaction Documents" means this Agreement, the Debentures,
        the Warrants, the Registration Rights Agreement and any other documents
        or agreements executed in connection with the transactions contemplated
        hereunder.

                "Underlying Shares" means the shares of Common Stock issued and
        issuable upon conversion of the Debentures and upon exercise of the
        Warrants and issued and issuable in lieu of the cash payment of interest
        on the Debentures in accordance with the terms of the Debentures.

                "VWAP" means, for any date, the price determined by the first of
        the following clauses that applies: (a) if the Common Stock is then
        listed or quoted on a Trading Market, the daily volume weighted average
        price of the Common Stock for such date (or the nearest preceding date)
        on the Trading Market on which the Common Stock is then listed or quoted
        as reported by Bloomberg Financial L.P. (based on a Trading Day from
        9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b) if the Common
        Stock is not then listed or quoted on the OTC Bulletin Board and if
        prices for the Common Stock are then reported in the "Pink Sheets"
        published by the Pink Sheets, LLC (or a similar organization or agency
        succeeding to its functions of reporting prices), the most recent bid
        price per share of the Common Stock so reported; or (c) in all other
        cases, the fair market value of a share of Common Stock as determined by
        an independent appraiser selected in good faith by the Purchasers and
        reasonably acceptable to the Company.

                "Warrants" means collectively the Common Stock purchase
        warrants, in the form of Exhibit C delivered to the Purchasers at the
        Closing in accordance with Section 2.2(a) hereof, which Warrants shall
        be exercisable immediately and have a term of exercise equal to 5 years.

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

                                   ARTICLE II.
                                PURCHASE AND SALE

        2.1     Closing. On the Closing Date, upon the terms and subject to the
conditions set forth herein, concurrent with the execution and delivery of this
Agreement by the parties hereto,

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the Company agrees to sell, and each Purchaser agrees to purchase in the
aggregate, severally and not jointly, up to $7,000,000 principal amount of the
Debentures. Each Purchaser shall deliver to the Company via wire transfer
immediately available funds equal to their Subscription Amount and the Company
shall deliver to each Purchaser their respective Debenture and Warrants as
determined pursuant to Section 2.2(a) and the other items set forth in Section
2.2 issuable at the Closing. Upon satisfaction of the conditions set forth in
Sections 2.2 and 2.3, the Closing shall occur at the offices of FW, or such
other location as the parties shall mutually agree.

        2.2     Deliveries.

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

                        (i)     this Agreement duly executed by the Company;

                        (ii)    a legal opinion of Company Counsel, in the form
                of Exhibit D attached hereto;

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

                        (iv)    a Warrant registered in the name of such
                Purchaser to purchase up to a number of shares of Common Stock
                equal to 75% of such Purchaser's Subscription Amount divided by
                $0.4328 with an exercise price equal to $0.4761 subject to
                adjustment therein; and

                        (v)     the Registration Rights Agreement duly executed
                by the Company.

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

                        (i)     this Agreement duly executed by such Purchaser;

                        (ii)    such Purchaser's Subscription Amount by wire
                transfer to the account as specified in writing by the Company;
                and

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

        2.3     Closing Conditions.

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

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

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

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

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

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

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

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

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

                        (v)     from the date hereof to the Closing Date,
                trading in the Common Stock shall not have been suspended by the
                Commission or the Company's principal Trading Market (except for
                any suspension of trading of limited duration agreed to by the
                Company, which suspension shall be terminated prior to the
                Closing), and, at any time prior to the Closing Date, trading in
                securities generally as reported by Bloomberg Financial Markets
                shall not have been suspended or limited, or minimum prices
                shall not have been established on securities whose trades are
                reported by such service, or on any Trading Market, nor shall a
                banking moratorium have been declared either by the United
                States or New York State authorities nor shall there have
                occurred any material outbreak or escalation of hostilities or
                other national or international calamity of such magnitude in
                its effect on, or any material adverse change in, any financial
                market which, in each case, in the reasonable judgment of each
                Purchaser, makes it impracticable or inadvisable to purchase the
                Debentures at the Closing.

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

        3.1     Representations and Warranties of the Company. Except as set
forth under the corresponding section of the disclosure schedules delivered to
the Purchasers concurrently herewith (the "Disclosure Schedules") which
Disclosure Schedules shall be deemed a part hereof, the Company hereby makes the
representations and warranties set forth below to each Purchaser.

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<PAGE>

                (a)     Subsidiaries. All of the direct and indirect
        subsidiaries of the Company are set forth on Schedule 3.1(a). The
        Company owns, directly or indirectly, all of the capital stock or other
        equity interests of each Subsidiary free and clear of any Liens, and all
        the issued and outstanding shares of capital stock of each Subsidiary
        are validly issued and are fully paid, non-assessable and free of
        preemptive and similar rights to subscribe for or purchase securities.
        If the Company has no subsidiaries, then references in the Transaction
        Documents to the Subsidiaries will be disregarded.

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

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

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

                (e)     Filings, Consents and Approvals. The Company is not
        required to obtain any consent, waiver, authorization or order of, give
        any notice to, or make any filing or registration with, any court or
        other federal, state, local or other governmental authority or other
        Person in connection with the execution, delivery and performance by the
        Company of the Transaction Documents, other than (i) filings required
        pursuant to Section 4.6, (ii) the filing with the Commission of the
        Registration Statement, (iii) the notice and/or application(s) to each
        applicable Trading Market for the issuance and sale of the Debentures
        and Warrants and the listing of the Underlying Shares for trading
        thereon in the time and manner required thereby and (iv) the filing of
        Form D with the Commission and such filings as are required to be made
        under applicable state securities laws (collectively, the "Required
        Approvals").

                (f)     Issuance of the Securities. The Securities are duly
        authorized and, when issued and paid for in accordance with the
        applicable Transaction Documents, will be duly and validly issued, fully
        paid and nonassessable, free and clear of all Liens imposed by the
        Company other than restrictions on transfer provided for in the
        Transaction Documents. The Underlying Shares, when issued in accordance
        with the terms of the Transaction Documents, will be validly issued,
        fully paid and nonassessable, free and clear of all Liens imposed by the
        Company. The Company has reserved from its duly authorized capital stock
        a number of shares of Common Stock for issuance of the Underlying Shares
        at least equal to the Required Minimum on the date hereof.

                (g)     Capitalization. The capitalization of the Company is as
        set forth on Schedule 3.1(g). The Company has not issued any capital
        stock since its most recently filed periodic report under the Exchange
        Act, other than pursuant to the exercise of employee stock options under
        the Company's stock option plans, the issuance of shares of Common Stock
        to employees pursuant to the Company's employee stock purchase plan and
        pursuant to the conversion or exercise of outstanding Common Stock
        Equivalents. No Person has any right of first refusal, preemptive right,
        right of participation, or any similar right to participate in the
        transactions contemplated by the Transaction Documents.

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

                (h)     SEC Reports; Financial Statements. The Company has filed
        all reports, schedules, forms, statements and other documents required
        to be filed by it under the Securities Act and the Exchange Act,
        including pursuant to Section 13(a) or 15(d) thereof, for the two years
        preceding the date hereof (or such shorter period as the Company was
        required by law to file such material) (the foregoing materials,
        including the exhibits thereto and documents incorporated by reference
        therein, being collectively referred to herein as the "SEC Reports") on
        a timely basis or has received a valid extension of such time of filing
        and has filed any such SEC Reports prior to the expiration of any such
        extension. As of their respective dates, the SEC Reports complied in all
        material respects with the requirements of the Securities Act and the
        Exchange Act and the rules and regulations of the Commission promulgated
        thereunder, and none of the SEC Reports, when filed, contained any
        untrue statement of a material fact or omitted to state a material fact
        required to be stated therein or necessary in order to make the
        statements therein, in the light of the circumstances under which they
        were made, not misleading. The financial statements of the Company
        included in the SEC Reports comply in all material respects with
        applicable accounting requirements and the rules and regulations of the
        Commission with respect thereto as in effect at the time of filing. Such
        financial statements have been prepared in accordance with United States
        generally accepted accounting principles applied on a consistent basis
        during the periods involved ("GAAP"), except as may be otherwise
        specified in such financial statements or the notes thereto and except
        that unaudited financial statements may not contain all footnotes

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        required by GAAP, and fairly present in all material respects the
        financial position of the Company and its consolidated subsidiaries as
        of and for the dates thereof and the results of operations and cash
        flows for the periods then ended, subject, in the case of unaudited
        statements, to normal, immaterial, year-end audit adjustments.

                (i)     Material Changes. Since the date of the latest audited
        financial statements included within the SEC Reports, except as
        specifically disclosed in the SEC Reports, (i) there has been no event,
        occurrence or development that has had or that could reasonably be
        expected to result in a Material Adverse Effect, (ii) the Company has
        not incurred any liabilities (contingent or otherwise) other than (A)
        trade payables and accrued expenses incurred in the ordinary course of
        business consistent with past practice and (B) liabilities not required
        to be reflected in the Company's financial statements pursuant to GAAP
        or required to be disclosed in filings made with the Commission, (iii)
        the Company has not altered its method of accounting, (iv) the Company
        has not declared or made any dividend or distribution of cash or other
        property to its stockholders or purchased, redeemed or made any
        agreements to purchase or redeem any shares of its capital stock and (v)
        the Company has not issued any equity securities to any officer,
        director or Affiliate, except pursuant to existing Company stock option
        plans. The Company does not have pending before the Commission any
        request for confidential treatment of information. Except for the
        issuance of the Securities contemplated by this Agreement or as set
        forth on Schedule 3.1(i), no event, liability or development has
        occurred or exists with respect to the Company or its Subsidiaries or
        their respective business, properties, operations or financial
        condition, that would be required to be disclosed by the Company under
        applicable securities laws at the time this representation is made that
        has not been publicly disclosed 1 Trading Day prior to the date that
        this representation is made.

                (j)     Litigation. There is no action, suit, inquiry, notice of
        violation, proceeding or investigation pending or, to the knowledge of
        the Company, threatened against or affecting the Company, any Subsidiary
        or any of their respective properties before or by any court,
        arbitrator, governmental or administrative agency or regulatory
        authority (federal, state, county, local or foreign) (collectively, an
        "Action") which (i) adversely affects or challenges the legality,
        validity or enforceability of any of the Transaction Documents or the
        Securities or (ii) could, if there were an unfavorable decision, have or
        reasonably be expected to result in a Material Adverse Effect. Neither
        the Company nor any Subsidiary, nor any director or officer thereof, is
        or has been the subject of any Action involving a claim of violation of
        or liability under federal or state securities laws or a claim of breach
        of fiduciary duty. There has not been, and to the knowledge of the
        Company, there is not pending or contemplated, any investigation by the
        Commission involving the Company or any current or former director or
        officer of the Company. The Commission has not issued any stop order or
        other order suspending the effectiveness of any registration statement
        filed by the Company or any Subsidiary under the Exchange Act or the
        Securities Act. None of the Company's or its Subsidiaries' employees is
        a member of a union that relates to such employee's relationship with
        the Company, and neither the Company or any of its Subsidiaries is a
        party to a collective bargaining agreement, and the Company and its
        Subsidiaries believe that their relationships with their employees are
        good. No executive officer, to the knowledge of the Company, is, or

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        is now expected to be, in violation of any material term of any
        employment contract, confidentiality, disclosure or proprietary
        information agreement or non-competition agreement, or any other
        contract or agreement or any restrictive covenant, and the continued
        employment of each such executive officer does not subject the Company
        or any of its Subsidiaries to any liability with respect to any of the
        foregoing matters. The Company and its Subsidiaries are in compliance
        with all U.S. federal, state, local and foreign laws and regulations
        relating to employment and employment practices, terms and conditions of
        employment and wages and hours, except where the failure to be in
        compliance could not, individually or in the aggregate, reasonably be
        expected to have a Material Adverse Effect.

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

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

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

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

                                       12
<PAGE>

                (o)     Patents and Trademarks. The Company and the Subsidiaries
        have, or have rights to use, all patents, patent applications,
        trademarks, trademark applications, service marks, trade names, trade
        secrets, inventions, copyrights, licenses and other intellectual
        property rights similar rights necessary or material for use in
        connection with their respective businesses as described in the SEC
        Reports and which the failure to so have could have a Material Adverse
        Effect (collectively, the "Intellectual Property Rights"). Neither the
        Company nor any Subsidiary has received a notice (written or otherwise)
        that the Intellectual Property Rights used by the Company or any
        Subsidiary violates or infringes upon the rights of any Person. To the
        knowledge of the Company, all such Intellectual Property Rights are
        enforceable and there is no existing infringement by another Person of
        any of the Intellectual Property Rights. The Company and its
        Subsidiaries have taken reasonable security measures to protect the
        secrecy, confidentiality and value of all of their intellectual
        properties, except where failure to do so could not, individually or in
        the aggregate, reasonably be expect to have a Material Adverse Effect.

                (p)     Insurance. The Company and the Subsidiaries are insured
        by insurers of recognized financial responsibility against such losses
        and risks and in such amounts as are prudent and customary in the
        businesses in which the Company and the Subsidiaries are engaged,
        including, but not limited to, directors and officers insurance coverage
        at least equal to the aggregate Subscription Amount. To the best
        knowledge of the Company, such insurance contracts and policies are
        accurate and complete. Neither the Company nor any Subsidiary has any
        reason to believe that it will not be able to renew its existing
        insurance coverage as and when such coverage expires or to obtain
        similar coverage from similar insurers as may be necessary to continue
        its business without a significant increase in cost.

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

                                       13
<PAGE>

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

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

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

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

                                       14
<PAGE>

                (v)     Registration Rights. Other than each of the Purchasers,
        no Person has any right to cause the Company to effect the registration
        under the Securities Act of any securities of the Company.

                (w)     Listing and Maintenance Requirements. The Company's
        Common Stock is registered pursuant to Section 12(g) of the Exchange
        Act, and the Company has taken no action designed to, or which to its
        knowledge is likely to have the effect of, terminating the registration
        of the Common Stock under the Exchange Act nor has the Company received
        any notification that the Commission is contemplating terminating such
        registration. The Company has not, in the 12 months preceding the date
        hereof, received notice from any Trading Market on which the Common
        Stock is or has been listed or quoted to the effect that the Company is
        not in compliance with the listing or maintenance requirements of such
        Trading Market.

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

                (y)     Disclosure. The Company confirms that neither it nor any
        other Person acting on its behalf has provided any of the Purchasers or
        their agents or counsel with any information that constitutes or might
        constitute material, nonpublic information. The Company understands and
        confirms that the Purchasers will rely on the foregoing representations
        and covenants in effecting transactions in securities of the Company.
        All disclosure provided to the Purchasers regarding the Company, its
        business and the transactions contemplated hereby, including the
        Disclosure Schedules to this Agreement, furnished by or on behalf of the
        Company with respect to the representations and warranties made herein
        are true and correct with respect to such representations and warranties
        and do not contain any untrue statement of a material fact or omit to
        state any material fact necessary in order to make the statements made
        therein, in light of the circumstances under which they were made, not
        misleading. The Company acknowledges and agrees that no Purchaser makes
        or has made any representations or warranties with respect to the
        transactions contemplated hereby other than those specifically set forth
        in Section 3.2 hereof.

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

                                       15
<PAGE>

        shareholder approval provisions, including, without limitation, under
        the rules and regulations of any Trading Market on which any of the
        securities of the Company are listed or designated.

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

                (bb)    Form SB-2 Eligibility. The Company is eligible to
        register the resale of the Underlying Shares for resale by the Purchaser
        on Form SB-2 promulgated under the Securities Act.

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

                                       16
<PAGE>

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

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

                (ff)    Accountants. The Company's accountants are set forth on
        Schedule 3.1(ff) of the Disclosure Schedule. To the knowledge of the
        Company, such accountants, who the Company expects will express their
        opinion with respect to the financial statements to be included in the
        Company's Annual Report on Form 10-KSB for the year ended December 31,
        2004 are a registered public accounting firm as required by the
        Securities Act.

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

                (hh)    No Disagreements with Accountants and Lawyers. There are
        no disagreements of any kind presently existing, or reasonably
        anticipated by the Company to arise, between the accountants and lawyers
        formerly or presently employed by the Company and the Company is current
        with respect to any fees owed to its accountants and lawyers.

                (ii)    Acknowledgment Regarding Purchasers' Purchase of
        Securities. The Company acknowledges and agrees that each of the
        Purchasers is acting solely in the capacity of an arm's length purchaser
        with respect to the Transaction Documents and the transactions
        contemplated hereby. The Company further acknowledges that no Purchaser
        is acting as a financial advisor or fiduciary of the Company (or in any
        similar capacity) with respect to this Agreement and the transactions
        contemplated hereby and any advice given by any Purchaser or any of
        their respective representatives or agents in connection with this
        Agreement and the transactions contemplated hereby is merely incidental
        to the Purchasers' purchase of the Securities. The Company further
        represents to each Purchaser that the Company's decision to enter into
        this Agreement has been based solely on the independent evaluation of
        the transactions contemplated hereby by the Company and its
        representatives.

                                       17
<PAGE>

                (jj)    Acknowledgement Regarding Purchasers' Trading Activity.
        Anything in this Agreement or elsewhere herein to the contrary
        notwithstanding (except for Section 4.16 hereof), it is understood and
        agreed by the Company (i) that none of the Purchasers have been asked to
        agree, nor has any Purchaser agreed, to desist from purchasing or
        selling, long and/or short, securities of the Company, or "derivative"
        securities based on securities issued by the Company or to hold the
        Securities for any specified term; (ii) that past or future open market
        or other transactions by any Purchaser, including Short Sales, and
        specifically including, without limitation, Short Sales or "derivative"
        transactions, before or after the closing of this or future private
        placement transactions, may negatively impact the market price of the
        Company's publicly-traded securities; (iii) that any Purchaser, and
        counter parties in "derivative" transactions to which any such Purchaser
        is a party, directly or indirectly, presently may have a "short"
        position in the Common Stock, and (iv) that each Purchaser shall not be
        deemed to have any affiliation with or control over any arm's length
        counter-party in any "derivative" transaction. The Company further
        understands and acknowledges that (a) one or more Purchasers may engage
        in hedging activities at various times during the period that the
        Securities are outstanding, including, without limitation, during the
        periods that the value of the Underlying Shares deliverable with respect
        to Securities are being determined and (b) such hedging activities (if
        any) could reduce the value of the existing stockholders' equity
        interests in the Company at and after the time that the hedging
        activities are being conducted. The Company acknowledges that such
        aforementioned hedging activities do not constitute a breach of any of
        the Transaction Documents.

                (kk)    Manipulation of Price. The Company has not, and to its
        knowledge no one acting on its behalf has, (i) taken, directly or
        indirectly, any action designed to cause or to result in the
        stabilization or manipulation of the price of any security of the
        Company to facilitate the sale or resale of any of the Securities, (ii)
        sold, bid for, purchased, or, paid any compensation for soliciting
        purchases of, any of the Securities (other than for the placement
        agent's placement of the Securities), or (iii) paid or agreed to pay to
        any person any compensation for soliciting another to purchase any other
        securities of the Company.

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

                (a)     Organization; Authority. Such Purchaser is an entity
        duly organized, validly existing and in good standing under the laws of
        the jurisdiction of its organization with full right, corporate or
        partnership power and authority to enter into and to consummate the
        transactions contemplated by the Transaction Documents and otherwise to
        carry out its obligations hereunder and thereunder. The execution,
        delivery and performance by such Purchaser of the transactions
        contemplated by this Agreement have been duly authorized by all
        necessary corporate or similar action on the part of such Purchaser.

                                       18
<PAGE>

        Each Transaction Document to which it is a party has been duly executed
        by such Purchaser, and when delivered by such Purchaser in accordance
        with the terms hereof, will constitute the valid and legally binding
        obligation of such Purchaser, enforceable against it in accordance with
        its terms, except (i) as limited by general equitable principles and
        applicable bankruptcy, insolvency, reorganization, moratorium and other
        laws of general application affecting enforcement of creditors' rights
        generally, (ii) as limited by laws relating to the availability of
        specific performance, injunctive relief or other equitable remedies and
        (iii) insofar as indemnification and contribution provisions may be
        limited by applicable law.

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

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

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

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

                                       19
<PAGE>

                (f)     Short Sales and Confidentiality Prior To The Date
        Hereof. Other than the transaction contemplated hereunder, such
        Purchaser has not directly or indirectly, nor has any Person acting on
        behalf of or pursuant to any understanding with such Purchaser, executed
        any disposition, including Short Sales, in the securities of the Company
        during the period commencing from the time that such Purchaser first
        received a term sheet from the Company or any other Person setting forth
        the material terms of the transactions contemplated hereunder until the
        date hereof ("Discussion Time"). Notwithstanding the foregoing, in the
        case of a Purchaser that is a multi-managed investment vehicle whereby
        separate portfolio managers manage separate portions of such Purchaser's
        assets and the portfolio managers have no direct knowledge of the
        investment decisions made by the portfolio managers managing other
        portions of such Purchaser's assets, the representation set forth above
        shall only apply with respect to the portion of assets managed by the
        portfolio manager that made the investment decision to purchase the
        Securities covered by this Agreement. Other than to other Persons party
        to this Agreement, such Purchaser has maintained the confidentiality of
        all disclosures made to it in connection with this transaction
        (including the existence and terms of this transaction).

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

                                   ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

        4.1     Transfer Restrictions.

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

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

        [NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
        SECURITIES ARE [EXERCISABLE] [CONVERTIBLE]] HAVE BEEN REGISTERED WITH
        THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
        ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
        SECURITIES ACT OF 1933,

                                       20
<PAGE>

        AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED
        OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
        SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
        TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
        SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS
        AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH
        EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
        COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON [EXERCISE]
        [CONVERSION] OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
        BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

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

                (c)     Certificates evidencing the Underlying Shares shall not
        contain any legend (including the legend set forth in Section 4.1(b)
        hereof): (i) while a registration statement (including the Registration
        Statement) covering the resale of such security is effective under the
        Securities Act, or (ii) following any sale of such Underlying Shares
        pursuant to Rule 144, or (iii) if such Underlying Shares are eligible
        for sale under Rule 144(k), or (iv) if such legend is not required under
        applicable requirements of the Securities Act (including judicial
        interpretations and pronouncements issued by the staff of the
        Commission). The Company shall cause its counsel to issue a legal
        opinion to the Company's transfer agent promptly after the Effective
        Date if required by the Company's transfer agent to effect the removal
        of the legend hereunder. If all or any portion of a Debenture or Warrant
        is converted or exercised (as applicable) at a time when there is an
        effective registration statement to cover the resale of the Underlying
        Shares, or if such Underlying Shares may be sold under Rule 144(k) or if
        such legend is not otherwise required under applicable requirements of
        the Securities Act (including judicial interpretations thereof) then
        such Underlying Shares shall be issued free of all legends.

                                       21
<PAGE>

        The Company agrees that following the Effective Date or at such time as
        such legend is no longer required under this Section 4.1(c), it will, no
        later than three Trading Days following the delivery by a Purchaser to
        the Company or the Company's transfer agent of a certificate
        representing Underlying Shares, as applicable, issued with a restrictive
        legend (such third Trading Day, the "Legend Removal Date"), deliver or
        cause to be delivered to such Purchaser a certificate representing such
        shares that is free from all restrictive and other legends. The Company
        may not make any notation on its records or give instructions to any
        transfer agent of the Company that enlarge the restrictions on transfer
        set forth in this Section. Certificates for Securities subject to legend
        removal hereunder shall be transmitted by the transfer agent of the
        Company to the Purchasers by crediting the account of the Purchaser's
        prime broker with the Depository Trust Company System.

                (d)     In addition to such Purchaser's other available
        remedies, the Company shall pay to a Purchaser, in cash, as partial
        liquidated damages and not as a penalty, for each $1,000 of Underlying
        Shares (based on the VWAP of the Common Stock on the date such
        Securities are submitted to the Company's transfer agent) delivered for
        removal of the restrictive legend and subject to Section 4.1(c), $10 per
        Trading Day (increasing to $20 per Trading Day 5 Trading Days after such
        damages have begun to accrue) for each Trading Day after the second
        Trading Day after the Legend Removal Date until such certificate is
        delivered without a legend. Nothing herein shall limit such Purchaser's
        right to pursue actual damages for the Company's failure to deliver
        certificates representing any Securities as required by the Transaction
        Documents, and such Purchaser shall have the right to pursue all
        remedies available to it at law or in equity including, without
        limitation, a decree of specific performance and/or injunctive relief.

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

                (f)     Until the one year anniversary of the Effective Date,
        the Company shall not undertake a reverse or forward stock split or
        reclassification of the Common Stock without the prior written consent
        of the Purchasers holding a majority in principal amount outstanding of
        the Debentures.

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

                                       22
<PAGE>

        4.3     Furnishing of Information. As long as any Purchaser owns
Securities, the Company covenants to use commercially reasonable efforts to
timely file (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the Company after
the date hereof pursuant to the Exchange Act. As long as any Purchaser owns
Securities, if the Company is not required to file reports pursuant to the
Exchange Act, it will prepare and furnish to the Purchasers and make publicly
available in accordance with Rule 144(c) such information as is required for the
Purchasers to sell the Securities under Rule 144. The Company further covenants
that it will take such further action as any holder of Securities may reasonably
request, all to the extent required from time to time to enable such Person to
sell such Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144.

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

        4.5     Conversion and Exercise Procedures. The form of Notice of
Exercise included in the Warrants and the form of Notice of Conversion included
in the Debentures set forth the totality of the procedures required of the
Purchasers in order to exercise the Warrants or convert the Debentures. No
additional legal opinion or other information or instructions shall be required
of the Purchasers to exercise their Warrants or convert their Debentures. The
Company shall honor exercises of the Warrants and conversions of the Debentures
and shall deliver Underlying Shares in accordance with the terms, conditions and
time periods set forth in the Transaction Documents.

        4.6     Securities Laws Disclosure; Publicity. The Company shall, by
8:30 a.m. Eastern time on the Trading Day following the date hereof, issue a
Current Report on Form 8-K, reasonably acceptable to each Purchaser disclosing
the material terms of the transactions contemplated hereby, and shall attach the
Transaction Documents thereto. The Company and each Purchaser shall consult with
each other in issuing any other press releases with respect to the transactions
contemplated hereby, and neither the Company nor any Purchaser shall issue any
such press release or otherwise make any such public statement without the prior
consent of the Company, with respect to any press release of any Purchaser, or
without the prior consent of each Purchaser, with respect to any press release
of the Company, which consent shall not unreasonably be withheld, except if such
disclosure is required by law, in which case the disclosing party shall promptly
provide the other party with prior notice of such public statement or
communication. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Purchaser, or include the name of any Purchaser in any
filing with the Commission or any regulatory agency or Trading Market, without
the prior written consent of such Purchaser, except (i) as required by federal
securities law in connection with the registration statement contemplated by the
Registration Rights Agreement and (ii) to the extent such disclosure is required
by law or Trading Market regulations, in which case the Company shall provide
the Purchasers with prior notice of such disclosure permitted under subclause
(i) or (ii).

                                       23
<PAGE>

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

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

        4.9     Use of Proceeds. Except as set forth on Schedule 4.9 attached
hereto, the Company shall use the net proceeds from the sale of the Securities
hereunder for working capital purposes and not for the satisfaction of any
portion of the Company's debt (other than payment of trade payables in the
ordinary course of the Company's business and prior practices), to redeem any
Common Stock or Common Stock Equivalents or to settle any outstanding
litigation.

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

        4.11    Indemnification of Purchasers. Subject to the provisions of this
Section 4.11, the Company will indemnify and hold the Purchasers and their
directors, officers, shareholders, members, partners, employees and agents
(each, a "Purchaser Party") harmless from any and all losses, liabilities,
obligations, claims, contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable attorneys'
fees and costs of investigation that any such Purchaser Party may suffer or
incur as a result of or relating to (a) any breach of any of the
representations, warranties, covenants or agreements made by the Company

                                       24
<PAGE>

in this Agreement or in the other Transaction Documents or (b) any action
instituted against a Purchaser, or any of them or their respective Affiliates,
by any stockholder of the Company who is not an Affiliate of such Purchaser,
with respect to any of the transactions contemplated by the Transaction
Documents (unless such action is based upon a breach of such Purchaser's
representations, warranties or covenants under the Transaction Documents or any
agreements or understandings such Purchaser may have with any such stockholder
or any violations by the Purchaser of state or federal securities laws or any
conduct by such Purchaser which constitutes fraud, gross negligence, willful
misconduct or malfeasance). If any action shall be brought against any Purchaser
Party in respect of which indemnity may be sought pursuant to this Agreement,
such Purchaser Party shall promptly notify the Company in writing, and the
Company shall have the right to assume the defense thereof with counsel of its
own choosing. Any Purchaser Party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Purchaser Party
except to the extent that (i) the employment thereof has been specifically
authorized by the Company in writing, (ii) the Company has failed after a
reasonable period of time to assume such defense and to employ counsel or (iii)
in such action there is, in the reasonable opinion of such separate counsel, a
material conflict on any material issue between the position of the Company and
the position of such Purchaser Party. The Company will not be liable to any
Purchaser Party under this Agreement (i) for any settlement by a Purchaser Party
effected without the Company's prior written consent, which shall not be
unreasonably withheld or delayed; or (ii) to the extent, but only to the extent
that a loss, claim, damage or liability is attributable to any Purchaser Party's
breach of any of the representations, warranties, covenants or agreements made
by the Purchasers in this Agreement or in the other Transaction Documents.

        4.12    Reservation and Listing of Securities.

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

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

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

                                       25
<PAGE>

        4.13    Participation in Future Financing.

                (a)     From the date hereof until the date that no Debentures
        remain outstanding, upon any financing by the Company or any of its
        Subsidiaries of Common Stock or Common Stock Equivalents (a "Subsequent
        Financing"), each Purchaser shall have the right to participate in up to
        an amount of the Subsequent Financing equal to the lesser of (a) the
        aggregate amount of the Subsequent Financing and (b) the aggregate
        principal amount of the Debentures issued pursuant to this Agreement at
        the Closing (the "Participation Maximum").

                (b)     At least 5 Trading Days prior to the closing of the
        Subsequent Financing, the Company shall deliver to each Purchaser a
        written notice of its intention to effect a Subsequent Financing
        ("Pre-Notice"), which Pre-Notice shall ask such Purchaser if it wants to
        review the details of such financing (such additional notice, a
        "Subsequent Financing Notice"). Upon the request of a Purchaser, and
        only upon a request by such Purchaser, for a Subsequent Financing
        Notice, the Company shall promptly, but no later than 1 Trading Day
        after such request, deliver a Subsequent Financing Notice to such
        Purchaser. The Subsequent Financing Notice shall describe in reasonable
        detail the proposed terms of such Subsequent Financing, the amount of
        proceeds intended to be raised thereunder, the Person with whom such
        Subsequent Financing is proposed to be effected, and attached to which
        shall be a term sheet or similar document relating thereto.

                (c)     Any Purchaser desiring to participate in such Subsequent
        Financing must provide written notice to the Company by not later than
        5:30 p.m. (New York City time) on the 5th Trading Day after all of the
        Purchasers have received the Pre-Notice that the Purchaser is willing to
        participate in the Subsequent Financing, the amount of the Purchaser's
        participation, and that the Purchaser has such funds ready, willing, and
        available for investment on the terms set forth in the Subsequent
        Financing Notice. If the Company receives no notice from a Purchaser as
        of such 5th Trading Day, such Purchaser shall be deemed to have notified
        the Company that it does not elect to participate.

                (d)     If by 5:30 p.m. (New York City time) on the 5th Trading
        Day after all of the Purchasers have received the Pre-Notice,
        notifications by the Purchasers of their willingness to participate in
        the Subsequent Financing (or to cause their designees to participate)
        is, in the aggregate, less than the total amount of the Subsequent
        Financing, then the Company may effect the remaining portion of such
        Subsequent Financing on the terms and to the Persons set forth in the
        Subsequent Financing Notice.

                (e)     If by 5:30 p.m. (New York City time) on the 5th Trading
        Day after all of the Purchasers have received the Pre-Notice, the
        Company receives responses to a Subsequent Financing Notice from
        Purchasers seeking to purchase more than the aggregate amount of the
        Participation Maximum, each such Purchaser shall have the right to
        purchase the greater of (a) their Pro Rata Portion (as defined below) of
        the Participation Maximum and (b) the difference between the
        Participation Maximum and the aggregate amount of participation by all
        other Purchasers. "Pro Rata Portion" is the ratio of (x) the
        Subscription Amount of Securities purchased on the Closing Date by a
        Purchaser participating under this Section 4.13 and (y) the sum of the
        aggregate Subscription Amounts of Securities purchased on the Closing
        Date by all Purchasers participating under this Section 4.13.

                                       26
<PAGE>

                (f)     The Company must provide the Purchasers with a second
        Subsequent Financing Notice, and the Purchasers will again have the
        right of participation set forth above in this Section 4.13, if the
        Subsequent Financing subject to the initial Subsequent Financing Notice
        is not consummated for any reason on the terms set forth in such
        Subsequent Financing Notice within 60 Trading Days after the date of the
        initial Subsequent Financing Notice.

                (g)     Notwithstanding the foregoing, this Section 4.13 shall
        not apply in respect of an Exempt Issuance.

        4.14    Subsequent Equity Sales.

                (a)     From the date hereof until 90 days after the Effective
        Date, neither the Company nor any Subsidiary shall issue shares of
        Common Stock or Common Stock Equivalents; provided, however, the 90 day
        period set forth in this Section 4.14 shall be extended for the number
        of Trading Days during such period in which (i) trading in the Common
        Stock is suspended by any Trading Market, or (ii) following the
        Effective Date, the Registration Statement is not effective or the
        prospectus included in the Registration Statement may not be used by the
        Purchasers for the resale of the Underlying Shares.

                (b)     From the date hereof until such time as the Purchasers
        hold less than 10% of the Securities acquired hereunder, the Company
        shall be prohibited from effecting or entering into an agreement to
        effect any Subsequent Financing involving a "Variable Rate Transaction".
        The term "Variable Rate Transaction" shall mean a transaction in which
        the Company issues or sells (i) any debt or equity securities that are
        convertible into, exchangeable or exercisable for, or include the right
        to receive additional shares of Common Stock either (A) at a conversion,
        exercise or exchange rate or other price that is based upon and/or
        varies with the trading prices of or quotations for the shares of Common
        Stock at any time after the initial issuance of such debt or equity
        securities, or (B) with a conversion, exercise or exchange price that is
        subject to being reset at some future date after the initial issuance of
        such debt or equity security or upon the occurrence of specified or
        contingent events directly or indirectly related to the business of the
        Company or the market for the Common Stock or (ii) enters into any
        agreement, including, but not limited to, an equity line of credit,
        whereby the Company may sell securities at a future determined price.

                (c)     Notwithstanding the foregoing, this Section 4.14 shall
        not apply in respect of an Exempt Issuance, except that no Variable Rate
        Transaction shall be an Exempt Issuance.

                                       27
<PAGE>

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

        4.16    Short Sales and Confidentiality After The Date Hereof. Each
Purchaser severally and not jointly with the other Purchasers covenants that
neither it nor any affiliates acting on its behalf or pursuant to any
understanding with it will execute any Short Sales during the period after the
Discussion Time and ending at the time that the transactions contemplated by
this Agreement are first publicly announced as described in Section 4.6. Each
Purchaser, severally and not jointly with the other Purchasers, covenants that
until such time as the transactions contemplated by this Agreement are publicly
disclosed by the Company as described in Section 4.6, such Purchaser will
maintain, the confidentiality of all disclosures made to it in connection with
this transaction (including the existence and terms of this transaction). Each
Purchaser understands and acknowledges, severally and not jointly with any other
Purchaser, that the Commission currently takes the position that coverage of
short sales of shares of the Common Stock "against the box" prior to the
Effective Date of the Registration Statement with the Securities is a violation
of Section 5 of the Securities Act, as set forth in Item 65, Section 5 under
Section A, of the Manual of Publicly Available Telephone Interpretations, dated
July 1997, compiled by the Office of Chief Counsel, Division of Corporation
Finance. Notwithstanding the foregoing, no Purchaser makes any representation,
warranty or covenant hereby that it will not engage in Short Sales in the
securities of the Company after the time that the transactions contemplated by
this Agreement are first publicly announced as described in Section 4.6.
Notwithstanding the foregoing, in the case of a Purchaser that is a
multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser's assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio managers
managing other portions of such Purchaser's assets, the covenant set forth above
shall only apply with respect to the portion of assets managed by the portfolio
manager that made the investment decision to purchase the Securities covered by
this Agreement.

        4.17    Directors and Officers Insurance. On or prior to the 90th
calendar day following the date hereof, the Company shall increase the coverage
under its existing directors and officers insurance policy to at least $5
million (the "Directors Insurance"). The Company shall maintain the full
coverage of the Directors Insurance until all of the Debentures are no longer
outstanding. Immediately upon the acquisition of such additional Directors
Insurance, the Company shall notify each Purchaser, in writing, of such
acquisition.

                                   ARTICLE V.
                                  MISCELLANEOUS

        5.1     Termination. This Agreement may be terminated by any Purchaser,
as to such Purchaser's obligations hereunder only and without any effect
whatsoever on the obligations between the Company and the other Purchasers, by
written notice to the other parties, if the Closing has not been consummated on
or before December 12, 2005; provided, however, that no such termination will
affect the right of any party to sue for any breach by the other party (or
parties).

                                       28
<PAGE>

        5.2     Fees and Expenses. At the Closing, the Company has agreed to
reimburse Midsummer Investment Ltd. ("Midsummer") the non-accountable sum of
$30,000, for its actual, reasonable, out-of-pocket legal fees and expenses,
$10,000 which shall have been paid prior to the Closing. Accordingly, in lieu of
the foregoing payments, the aggregate amount that Midsummer is to pay for the
Securities at the Closing shall be reduced by $20,000 in lieu thereof. The
Company shall deliver, prior to the Closing, a completed and executed copy of
the Closing Statement, attached hereto as Annex A. Except as expressly set forth
in the Transaction Documents to the contrary, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all transfer agent fees, stamp taxes and other taxes and duties levied
in connection with the delivery of any Securities.

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

        5.4     Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (a) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto prior to 5:30
p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the
date of transmission, if such notice or communication is delivered via facsimile
at the facsimile number set forth on the signature pages attached hereto on a
day that is not a Trading Day or later than 5:30 p.m. (New York City time) on
any Trading Day, (c) the 2nd Trading Day following the date of mailing, if sent
by U.S. nationally recognized overnight courier service, or (d) upon actual
receipt by the party to whom such notice is required to be given. The address
for such notices and communications shall be as set forth on the signature pages
attached hereto.

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

                                       29
<PAGE>

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

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

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

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

                                       30
<PAGE>

        5.10    Survival. The representations, warranties, covenants and other
agreements contained herein shall survive the Closing and the delivery, exercise
and/or conversion of the Securities, as applicable for the applicable statue of
limitations.

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

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

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

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

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

                                       31
<PAGE>

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

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

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

                                       32
<PAGE>

For reasons of administrative convenience only, Purchasers and their respective
counsel have chosen to communicate with the Company through FW. FW does not
represent all of the Purchasers but only Midsummer. The Company has elected to
provide all Purchasers with the same terms and Transaction Documents for the
convenience of the Company and not because it was required or requested to do so
by the Purchasers.

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

        5.20    Construction. The parties agree that each of them and/or their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.

                            (Signature Pages Follow)

                                       33
<PAGE>

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

ELECTRONIC SENSOR TECHNOLOGY, INC.         Address for Notice:

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

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

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

                                       34
<PAGE>

        [PURCHASER SIGNATURE PAGES TO ESNR SECURITIES PURCHASE AGREEMENT]

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

Name of Purchaser: _________________________________________________________

Signature of Authorized Signatory of Purchaser: ____________________________

Name of Authorized Signatory: ______________________________________________

Title of Authorized Signatory: _____________________________________________

Email Address of Purchaser:_________________________________________________

Address for Notice of Purchaser:

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

Subscription Amount:
Warrant Shares:
EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]

                                       35
<PAGE>

                                                                         ANNEX A

                                CLOSING STATEMENT

Pursuant to the attached Securities Purchase Agreement, dated as of the date
hereto, the purchasers shall purchase up to $7,000,000 of Debentures and
Warrants from Electronic Sensor Technology, Inc. (the "Company"). All funds will
be wired into a trust account maintained by ____________, counsel to the
Company. All funds will be disbursed in accordance with this Closing Statement.

Disbursement Date:  December __, 2005

_____________________________________________________________________

I.   PURCHASE PRICE

                Gross Proceeds to be Received in Trust         $

II.  DISBURSEMENTS

                                                               $
                                                               $
                                                               $
                                                               $
                                                               $

Total Amount Disbursed:                                        $

WIRE INSTRUCTIONS:

To: _____________________________________

To: _____________________________________

                                       36Exhibit 10.2

                          REGISTRATION RIGHTS AGREEMENT

        This Registration Rights Agreement (this "Agreement") is made and
entered into as of December ___, 2005, among Electronic Sensor Technology, Inc.,
a Nevada corporation (the "Company"), and the purchasers signatory hereto (each
such purchaser is a "Purchaser" and collectively, the "Purchasers").

        This Agreement is made pursuant to the Securities Purchase Agreement,
dated as of the date hereof among the Company and the Purchasers (the "Purchase
Agreement").

        The Company and the Purchasers hereby agree as follows:

        1.      Definitions

            Capitalized terms used and not otherwise defined herein that are
defined in the Purchase Agreement shall have the meanings given such terms in
the Purchase Agreement. As used in this Agreement, the following terms shall
have the following meanings:

                "Advice" shall have the meaning set forth in Section 6(d).

                "Effectiveness Date" means, with respect to the initial
        Registration Statement required to be filed hereunder, the 90th calendar
        day following the date hereof (the 150th calendar day in the case of a
        "full review" by the Commission of the initial Registration Statement)
        and, with respect to any additional Registration Statements which may be
        required pursuant to Section 3(c) (including an additional Registration
        Statement filed pursuant to the second clause of the first sentence of
        Section 2(a)), the 60th calendar day following the date on which the
        Company first knows, or reasonably should have known, that such
        additional Registration Statement is required hereunder; provided,
        however, in the event the Company is notified by the Commission that one
        of the above Registration Statements will not be reviewed or is no
        longer subject to further review and comments, the Effectiveness Date as
        to such Registration Statement shall be the fifth Trading Day following
        the date on which the Company is so notified if such date precedes the
        dates required above.

                "Effectiveness Period" shall have the meaning set forth in
        Section 2(a).

                "Event" shall have the meaning set forth in Section 2(b).

                "Event Date" shall have the meaning set forth in Section 2(b).

                "Filing Date" means, with respect to the initial Registration
        Statement required hereunder, the 30th calendar day following the date
        hereof and, with respect to any additional Registration Statements which
        may be required pursuant to Section 3(c), the 30th day following the
        date on which the Company first knows, or reasonably should have known
        that such additional Registration Statement is required hereunder
        (including an additional Registration Statement filed pursuant to the
        second clause of the first sentence of Section 2(a), as to which the
        Filing Date shall be the 30th calendar day following the date a Holder
        requests that the Company file such additional Registration Statement) .

<PAGE>

                "Holder" or "Holders" means the holder or holders, as the case
        may be, from time to time of Registrable Securities.

                "Indemnified Party" shall have the meaning set forth in
        Section 5(c).

                "Indemnifying Party" shall have the meaning set forth in
        Section 5(c).

                "Losses" shall have the meaning set forth in Section 5(a).

                "Plan of Distribution" shall have the meaning set forth in
        Section 2(a).

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

                "Prospectus" means the prospectus included in a Registration
        Statement (including, without limitation, a prospectus that includes any
        information previously omitted from a prospectus filed as part of an
        effective registration statement in reliance upon Rule 430A promulgated
        under the Securities Act), as amended or supplemented by any prospectus
        supplement, with respect to the terms of the offering of any portion of
        the Registrable Securities covered by a Registration Statement, and all
        other amendments and supplements to the Prospectus, including
        post-effective amendments, and all material incorporated by reference or
        deemed to be incorporated by reference in such Prospectus.

                "Registrable Securities" means (i) all of the shares of Common
        Stock issuable upon conversion in full of the Debentures, (ii) all
        shares issuable as interest on the Debentures assuming all permissible
        interest payments are made in shares of Common Stock and the Debentures
        are held until maturity, (iii) all Warrant Shares, (iv) any securities
        issued or issuable upon any stock split, dividend or other distribution,
        recapitalization or similar event with respect to the foregoing and (v)
        any additional shares issuable in connection with any anti-dilution
        provisions in the Debentures or the Warrants (in each case, without
        giving effect to any limitations on conversion set forth in the
        Debenture or limitations on exercise set forth in the Warrant).

                "Registration Statement" means the registration statements
        required to be filed hereunder and any additional registration
        statements contemplated by Section 3(c), including (in each case) the
        Prospectus, amendments and supplements to such registration statement or
        Prospectus, including pre- and post-effective amendments, all exhibits
        thereto, and all material incorporated by reference or deemed to be
        incorporated by reference in such registration statement.

                                        2
<PAGE>

                "Rule 415" means Rule 415 promulgated by the Commission pursuant
        to the Securities Act, as such Rule may be amended from time to time, or
        any similar rule or regulation hereafter adopted by the Commission
        having substantially the same purpose and effect as such Rule.

                "Rule 424" means Rule 424 promulgated by the Commission pursuant
        to the Securities Act, as such Rule may be amended from time to time, or
        any similar rule or regulation hereafter adopted by the Commission
        having substantially the same purpose and effect as such Rule.

                "Selling Shareholder Questionnaire" shall have the meaning set
        forth in Section 3(a).

        2.      Shelf Registration

                (a)     On or prior to the initial Filing Date, the Company
        shall prepare and file with the Commission a "Shelf" Registration
        Statement covering the resale of 110% of the Registrable Securities
        (other than as to the Warrant Shares) on such Filing Date for an
        offering to be made on a continuous basis pursuant to Rule 415, and on
        or prior to each subsequent Filing Date, (including the Filing Date as
        to the Warrant Shares and any other Registrable Securities not covered
        by such initial Registration Statement, which Registration Statement
        shall be filed only after the Effective Date and within 30 calendar days
        that a Holder requests in writing that the Company file such
        Registration Statement), the Company shall prepare and file with the
        Commission a "Shelf" Registration Statement covering the resale of 130%
        of the Registrable Securities (including the Warrant Shares) on such
        Filing Date for an offering to be made on a continuous basis pursuant to
        Rule 415. Each Registration Statement filed hereunder shall be on Form
        S-3 (except if the Company is not then eligible to register for resale
        the Registrable Securities on Form S-3, in which case such registration
        shall be on another appropriate form in accordance herewith) and shall
        contain (unless otherwise directed by the Holders) substantially the
        "Plan of Distribution" attached hereto as Annex A. Subject to the terms
        of this Agreement, the Company shall use its best efforts to cause a
        Registration Statement to be declared effective under the Securities Act
        as promptly as possible after the filing thereof, but in any event prior
        to the applicable Effectiveness Date, and shall use its best efforts to
        keep such Registration Statement continuously effective under the
        Securities Act until all Registrable Securities covered by such
        Registration Statement have been sold or may be sold without volume
        restrictions pursuant to Rule 144(k) as determined by the counsel to the
        Company pursuant to a written opinion letter to such effect, addressed
        and acceptable to the Company's transfer agent and the affected Holders
        (the "Effectiveness Period"). The Company shall telephonically request
        effectiveness of a Registration Statement as of 5:00 pm Eastern Time on
        a Trading Day. The Company shall immediately notify the Holders via
        facsimile of the effectiveness of a Registration Statement on the same
        Trading Day that the Company telephonically confirms effectiveness with
        the Commission, which shall be the date requested for effectiveness of a
        Registration Statement. The Company shall, by 9:30 am Eastern Time on
        the Trading Day after the Effective Date (as defined in the Purchase
        Agreement), file a Form 424(b)(5) with the Commission. Failure to so
        notify the Holder within 1 Trading Day of such notification shall be
        deemed an Event under Section 2(b).

                                        3
<PAGE>

                (b)     If: (i) a Registration Statement is not filed on or
        prior to its Filing Date (if the Company files a Registration Statement
        without affording the Holders the opportunity to review and comment on
        the same as required by Section 3(a), the Company shall not be deemed to
        have satisfied this clause (i)), or (ii) the Company fails to file with
        the Commission a request for acceleration in accordance with Rule 461
        promulgated under the Securities Act, within five Trading Days of the
        date that the Company is notified (orally or in writing, whichever is
        earlier) by the Commission that a Registration Statement will not be
        "reviewed," or not subject to further review, or (iii) prior to its
        Effectiveness Date, the Company fails to file a pre-effective amendment
        and otherwise respond in writing to comments made by the Commission in
        respect of such Registration Statement within 15 calendar days after the
        receipt of comments by or notice from the Commission that such amendment
        is required in order for a Registration Statement to be declared
        effective, or (iv) a Registration Statement filed or required to be
        filed hereunder is not declared effective by the Commission by its
        Effectiveness Date, or (v) after the Effectiveness Date, a Registration
        Statement ceases for any reason to remain continuously effective as to
        all Registrable Securities for which it is required to be effective, or
        the Holders are not permitted to utilize the Prospectus therein to
        resell such Registrable Securities for 20 consecutive calendar days but
        no more than an aggregate of 30 calendar days during any 12-month period
        (which need not be consecutive Trading Days) (any such failure or breach
        being referred to as an "Event", and for purposes of clause (i) or (iv)
        the date on which such Event occurs, or for purposes of clause (ii) the
        date on which such five Trading Day period is exceeded, or for purposes
        of clause (iii) the date which such 15 calendar day period is exceeded,
        or for purposes of clause (v) the date on which such 20 or 30 calendar
        day period, as applicable, is exceeded being referred to as "Event
        Date"), then in addition to any other rights the Holders may have
        hereunder or under applicable law, on each such Event Date and on each
        monthly anniversary of each such Event Date (if the applicable Event
        shall not have been cured by such date) until the applicable Event is
        cured, the Company shall pay to each Holder an amount in cash, as
        partial liquidated damages and not as a penalty, equal to 2% of the
        aggregate purchase price paid by such Holder pursuant to the Purchase
        Agreement for any Registrable Securities then held by such Holder. If
        the Company fails to pay any partial liquidated damages pursuant to this
        Section in full within seven days after the date payable, the Company
        will pay interest thereon at a rate of 18% per annum (or such lesser
        maximum amount that is permitted to be paid by applicable law) to the
        Holder, accruing daily from the date such partial liquidated damages are
        due until such amounts, plus all such interest thereon, are paid in
        full. The partial liquidated damages pursuant to the terms hereof shall
        apply on a daily pro-rata basis for any portion of a month prior to the
        cure of an Event.

                                       4
<PAGE>

        3.      Registration Procedures.

        In connection with the Company's registration obligations hereunder, the
Company shall:

                (a)     Not less than three Trading Days prior to the filing of
        each Registration Statement or any related Prospectus or any amendment
        or supplement thereto (including any document that would be incorporated
        or deemed to be incorporated therein by reference), the Company shall,
        (i) furnish to each Holder copies of all such documents proposed to be
        filed, which documents (other than those incorporated or deemed to be
        incorporated by reference) will be subject to the review of such
        Holders, and (ii) cause its officers and directors, counsel and
        independent certified public accountants to respond to such inquiries as
        shall be necessary, in the reasonable opinion of respective counsel to
        conduct a reasonable investigation within the meaning of the Securities
        Act. The Company shall not file a Registration Statement or any such
        Prospectus or any amendments or supplements thereto to which the Holders
        of a majority of the Registrable Securities shall reasonably object in
        good faith, provided that, the Company is notified of such objection in
        writing no later than 5 Trading Days after the Holders have been so
        furnished copies of such documents. Each Holder agrees to furnish to the
        Company a completed Questionnaire in the form attached to this Agreement
        as Annex B (a "Selling Shareholder Questionnaire") not less than two
        Trading Days prior to the Filing Date or by the end of the fourth
        Trading Day following the date on which such Holder receives draft
        materials in accordance with this Section.

                (b)     (i) Prepare and file with the Commission such
        amendments, including post-effective amendments, to a Registration
        Statement and the Prospectus used in connection therewith as may be
        necessary to keep a Registration Statement continuously effective as to
        the applicable Registrable Securities for the Effectiveness Period and
        prepare and file with the Commission such additional Registration
        Statements in order to register for resale under the Securities Act all
        of the Registrable Securities; (ii) cause the related Prospectus to be
        amended or supplemented by any required Prospectus supplement (subject
        to the terms of this Agreement), and as so supplemented or amended to be
        filed pursuant to Rule 424; (iii) respond as promptly as reasonably
        possible to any comments received from the Commission with respect to a
        Registration Statement or any amendment thereto and as promptly as
        reasonably possible provide the Holders true and complete copies of all
        correspondence from and to the Commission relating to a Registration
        Statement; and (iv) comply in all material respects with the provisions
        of the Securities Act and the Exchange Act with respect to the
        disposition of all Registrable Securities covered by a Registration
        Statement during the applicable period in accordance (subject to the
        terms of this Agreement) with the intended methods of disposition by the
        Holders thereof set forth in such Registration Statement as so amended
        or in such Prospectus as so supplemented.

                (c)     If during the Effectiveness Period, the number of
        Registrable Securities at any time exceeds 90% of the number of shares
        of Common Stock then registered in a Registration Statement, then the
        Company shall file as soon as reasonably practicable but in any case
        prior to the applicable Filing Date, an additional Registration
        Statement covering the resale by the Holders of not less than 130% of
        the number of such Registrable Securities.

                                        5
<PAGE>

                (d)     Notify the Holders of Registrable Securities to be sold
        (which notice shall, pursuant to clauses (ii) through (vi) hereof, be
        accompanied by an instruction to suspend the use of the Prospectus until
        the requisite changes have been made) as promptly as reasonably possible
        (and, in the case of (i)(A) below, not less than five Trading Days prior
        to such filing) and (if requested by any such Person) confirm such
        notice in writing no later than one Trading Day following the day (i)(A)
        when a Prospectus or any Prospectus supplement or post-effective
        amendment to a Registration Statement is proposed to be filed; (B) when
        the Commission notifies the Company whether there will be a "review" of
        such Registration Statement and whenever the Commission comments in
        writing on such Registration Statement (the Company shall provide true
        and complete copies thereof and all written responses thereto to each of
        the Holders); and (C) with respect to a Registration Statement or any
        post-effective amendment, when the same has become effective; (ii) of
        any request by the Commission or any other Federal or state governmental
        authority for amendments or supplements to a Registration Statement or
        Prospectus or for additional information; (iii) of the issuance by the
        Commission or any other federal or state governmental authority of any
        stop order suspending the effectiveness of a Registration Statement
        covering any or all of the Registrable Securities or the initiation of
        any Proceedings for that purpose; (iv) of the receipt by the Company of
        any notification with respect to the suspension of the qualification or
        exemption from qualification of any of the Registrable Securities for
        sale in any jurisdiction, or the initiation or threatening of any
        Proceeding for such purpose; (v) of the occurrence of any event or
        passage of time that makes the financial statements included in a
        Registration Statement ineligible for inclusion therein or any statement
        made in a Registration Statement or Prospectus or any document
        incorporated or deemed to be incorporated therein by reference untrue in
        any material respect or that requires any revisions to a Registration
        Statement, Prospectus or other documents so that, in the case of a
        Registration Statement or the Prospectus, as the case may be, it will
        not contain any untrue statement of a material fact or omit to state any
        material fact required to be stated therein or necessary to make the
        statements therein, in light of the circumstances under which they were
        made, not misleading; and (vi) the occurrence or existence of any
        pending corporate development with respect to the Company that the
        Company believes may be material and that, in the determination of the
        Company, makes it not in the best interest of the Company to allow
        continued availability of a Registration Statement or Prospectus;
        provided that any and all of such information shall remain confidential
        to each Holder until such information otherwise becomes public, unless
        disclosure by a Holder is required by law; provided, further,
        notwithstanding each Holder's agreement to keep such information
        confidential, the Holders make no acknowledgement that any such
        information is material, non-public information.

                (e)     Use its best efforts to avoid the issuance of, or, if
        issued, obtain the withdrawal of (i) any order suspending the
        effectiveness of a Registration Statement, or (ii) any suspension of the
        qualification (or exemption from qualification) of any of the
        Registrable Securities for sale in any jurisdiction, at the earliest
        practicable moment.

                                        6
<PAGE>

                (f)     Furnish to each Holder, without charge, at least one
        conformed copy of each such Registration Statement and each amendment
        thereto, including financial statements and schedules, all documents
        incorporated or deemed to be incorporated therein by reference to the
        extent requested by such Person, and all exhibits to the extent
        requested by such Person (including those previously furnished or
        incorporated by reference) promptly after the filing of such documents
        with the Commission.

                (g)     Promptly deliver to each Holder, without charge, as many
        copies of the Prospectus or Prospectuses (including each form of
        prospectus) and each amendment or supplement thereto as such Persons may
        reasonably request in connection with resales by the Holder of
        Registrable Securities. Subject to the terms of this Agreement, the
        Company hereby consents to the use of such Prospectus and each amendment
        or supplement thereto by each of the selling Holders in connection with
        the offering and sale of the Registrable Securities covered by such
        Prospectus and any amendment or supplement thereto, except after the
        giving on any notice pursuant to Section 3(d).

                (h)     If NASDR Rule 2710 requires any broker-dealer to make a
        filing prior to executing a sale by a Holder, the Company shall (i) make
        an Issuer Filing with the NASDR, Inc. Corporate Financing Department
        pursuant to proposed NASDR Rule 2710(b)(10)(A)(i), (ii) respond within
        five Trading Days to any comments received from NASDR in connection
        therewith, (iii) and pay the filing fee required in connection
        therewith.

                (i)     Prior to any resale of Registrable Securities by a
        Holder, use its commercially reasonable efforts to register or qualify
        or cooperate with the selling Holders in connection with the
        registration or qualification (or exemption from the Registration or
        qualification) of such Registrable Securities for the resale by the
        Holder under the securities or Blue Sky laws of such jurisdictions
        within the United States as any Holder reasonably requests in writing,
        to keep each registration or qualification (or exemption therefrom)
        effective during the Effectiveness Period and to do any and all other
        acts or things reasonably necessary to enable the disposition in such
        jurisdictions of the Registrable Securities covered by each Registration
        Statement; provided, that the Company shall not be required to qualify
        generally to do business in any jurisdiction where it is not then so
        qualified, subject the Company to any material tax in any such
        jurisdiction where it is not then so subject or file a general consent
        to service of process in any such jurisdiction.

                (j)     If requested by the Holders, cooperate with the Holders
        to facilitate the timely preparation and delivery of certificates
        representing Registrable Securities to be delivered to a transferee
        pursuant to a Registration Statement, which certificates shall be free,
        to the extent permitted by the Purchase Agreement, of all restrictive
        legends, and to enable such Registrable Securities to be in such
        denominations and registered in such names as any such Holders may
        request.

                (k)     Upon the occurrence of any event contemplated by this
        Section 3, as promptly as reasonably possible under the circumstances
        taking into account the Company's good faith assessment of any adverse
        consequences to the Company and its stockholders of the premature
        disclosure of such event, prepare a supplement or

                                        7
<PAGE>

        amendment, including a post-effective amendment, to a Registration
        Statement or a supplement to the related Prospectus or any document
        incorporated or deemed to be incorporated therein by reference, and file
        any other required document so that, as thereafter delivered, neither a
        Registration Statement nor such Prospectus will contain an untrue
        statement of a material fact or omit to state a material fact required
        to be stated therein or necessary to make the statements therein, in
        light of the circumstances under which they were made, not misleading.
        If the Company notifies the Holders in accordance with clauses (ii)
        through (vi) of Section 3(d) above to suspend the use of any Prospectus
        until the requisite changes to such Prospectus have been made, then the
        Holders shall suspend use of such Prospectus. The Company will use its
        best efforts to ensure that the use of the Prospectus may be resumed as
        promptly as is practicable. The Company shall be entitled to exercise
        its right under this Section 3(k) to suspend the availability of a
        Registration Statement and Prospectus, subject to the payment of partial
        liquidated damages pursuant to Section 2(b), for a period not to exceed
        60 days (which need not be consecutive days) in any 12 month period.

                (l)     Comply with all applicable rules and regulations of the
        Commission.

                (m)     The Company may require each selling Holder to furnish
        to the Company a certified statement as to the number of shares of
        Common Stock beneficially owned by such Holder and, if required by the
        Commission, the person thereof that has voting and dispositive control
        over the Shares. During any periods that the Company is unable to meet
        its obligations hereunder with respect to the registration of the
        Registrable Securities solely because any Holder fails to furnish such
        information within three Trading Days of the Company's request, any
        liquidated damages that are accruing at such time as to such Holder only
        shall be tolled and any Event that may otherwise occur solely because of
        such delay shall be suspended as to such Holder only, until such
        information is delivered to the Company.

        4.      Registration Expenses. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not any Registrable Securities are sold pursuant to a
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the Trading Market on which the Common Stock is then
listed for trading, (B) in compliance with applicable state securities or Blue
Sky laws reasonably agreed to by the Company in writing (including, without
limitation, fees and disbursements of counsel for the Company in connection with
Blue Sky qualifications or exemptions of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as requested by the Holders) and (C) if not
previously paid by the Company in connection with an Issuer Filing, with respect
to any filing that may be required to be made by any broker through which a
Holder intends to make sales of Registrable Securities with NASD Regulation,
Inc. pursuant to the NASD Rule 2710, so long as the broker is receiving no more
than a customary brokerage commission in connection with such sale, (ii)
printing expenses (including, without limitation, expenses of printing
certificates for Registrable Securities and of printing prospectuses if the
printing of prospectuses is reasonably requested by the holders of a

                                        8
<PAGE>

majority of the Registrable Securities included in a Registration Statement),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, (v) Securities Act liability insurance, if the Company
so desires such insurance, and (vi) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder. In no event shall the Company be
responsible for any broker or similar commissions or, except to the extent
provided for in the Transaction Documents, any legal fees or other costs of the
Holders.

        5.      Indemnification

                (a)     Indemnification by the Company. The Company shall,
        notwithstanding any termination of this Agreement, indemnify and hold
        harmless each Holder, the officers, directors, agents, brokers
        (including brokers who offer and sell Registrable Securities as
        principal as a result of a pledge or any failure to perform under a
        margin call of Common Stock), investment advisors and employees of each
        of them, each Person who controls any such Holder (within the meaning of
        Section 15 of the Securities Act or Section 20 of the Exchange Act) and
        the officers, directors, agents and employees of each such controlling
        Person, to the fullest extent permitted by applicable law, from and
        against any and all losses, claims, damages, liabilities, costs
        (including, without limitation, reasonable attorneys' fees) and expenses
        (collectively, "Losses"), as incurred, arising out of or relating to (1)
        any untrue or alleged untrue statement of a material fact contained in a
        Registration Statement, any Prospectus or any form of prospectus or in
        any amendment or supplement thereto or in any preliminary prospectus, or
        arising out of or relating to any omission or alleged omission of a
        material fact required to be stated therein or necessary to make the
        statements therein (in the case of any Prospectus or form of prospectus
        or supplement thereto, in light of the circumstances under which they
        were made) not misleading or (2) any violation or alleged violation by
        the Company of the Securities Act, the Exchange Act or any state
        securities law, or any rule or regulation thereunder, in connection with
        the performance of its obligations under this Agreement, except to the
        extent, but only to the extent, that (i) such untrue statements or
        omissions or violations of law, rule or regulation are based solely upon
        information regarding such Holder furnished in writing to the Company by
        such Holder expressly for use therein, or to the extent that such
        information relates to such Holder or such Holder's proposed method of
        distribution of Registrable Securities and was reviewed and expressly
        approved in writing by such Holder expressly for use in a Registration
        Statement, such Prospectus or such form of Prospectus or in any
        amendment or supplement thereto (it being understood that the Holder has
        approved Annex A hereto for this purpose) or (ii) in the case of an
        occurrence of an event of the type specified in Section 3(d)(ii)-(vi),
        the use by such Holder of an outdated or defective Prospectus after the
        Company has notified such Holder in writing that the Prospectus is
        outdated or defective and prior to the receipt by such Holder of the
        Advice contemplated in Section 6(d). The Company shall notify the
        Holders promptly of the institution, threat or assertion of any
        Proceeding arising from or in connection with the transactions
        contemplated by this Agreement of which the Company is aware.

                                        9
<PAGE>

                (b)     Indemnification by Holders. Each Holder shall,
        severally and not jointly, indemnify and hold harmless the Company, its
        directors, officers, agents and employees, each Person who controls the
        Company (within the meaning of Section 15 of the Securities Act and
        Section 20 of the Exchange Act), and the directors, officers, agents or
        employees of such controlling Persons, to the fullest extent permitted
        by applicable law, from and against all Losses, as incurred, to the
        extent arising out of or based solely upon: (x) such Holder's failure to
        comply with the prospectus delivery requirements of the Securities Act
        or (y) any untrue or alleged untrue statement of a material fact
        contained in any Registration Statement, any Prospectus, or any form of
        prospectus, or in any amendment or supplement thereto or in any
        preliminary prospectus, or arising out of or relating to any omission or
        alleged omission of a material fact required to be stated therein or
        necessary to make the statements therein not misleading (i) to the
        extent, but only to the extent, that such untrue statement or omission
        is contained in any information so furnished in writing by such Holder
        to the Company specifically for inclusion in such Registration Statement
        or such Prospectus or (ii) to the extent that (1) such untrue statements
        or omissions are based solely upon information regarding such Holder
        furnished in writing to the Company by such Holder expressly for use
        therein, or to the extent that such information relates to such Holder
        or such Holder's proposed method of distribution of Registrable
        Securities and was reviewed and expressly approved in writing by such
        Holder expressly for use in a Registration Statement (it being
        understood that the Holder has approved Annex A hereto for this
        purpose), such Prospectus or such form of Prospectus or in any amendment
        or supplement thereto or (2) in the case of an occurrence of an event of
        the type specified in Section 3(d)(ii)-(vi), the use by such Holder of
        an outdated or defective Prospectus after the Company has notified such
        Holder in writing that the Prospectus is outdated or defective and prior
        to the receipt by such Holder of the Advice contemplated in Section
        6(d). In no event shall the liability of any selling Holder hereunder be
        greater in amount than the dollar amount of the net proceeds received by
        such Holder upon the sale of the Registrable Securities giving rise to
        such indemnification obligation.

                (c)     Conduct of Indemnification Proceedings. If any
        Proceeding shall be brought or asserted against any Person entitled to
        indemnity hereunder (an "Indemnified Party"), such Indemnified Party
        shall promptly notify the Person from whom indemnity is sought (the
        "Indemnifying Party") in writing, and the Indemnifying Party shall have
        the right to assume the defense thereof, including the employment of
        counsel reasonably satisfactory to the Indemnified Party and the payment
        of all fees and expenses incurred in connection with defense thereof;
        provided, that the failure of any Indemnified Party to give such notice
        shall not relieve the Indemnifying Party of its obligations or
        liabilities pursuant to this Agreement, except (and only) to the extent
        that it shall be finally determined by a court of competent jurisdiction
        (which determination is not subject to appeal or further review) that
        such failure shall have prejudiced the Indemnifying Party.

                                       10
<PAGE>

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

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

                (d)     Contribution. If the indemnification under Section 5(a)
        or 5(b) is unavailable to an Indemnified Party or insufficient to hold
        an Indemnified Party harmless for any Losses, then each Indemnifying
        Party shall contribute to the amount paid or payable by such Indemnified
        Party, in such proportion as is appropriate to reflect the relative
        fault of the Indemnifying Party and Indemnified Party in connection with
        the actions, statements or omissions that resulted in such Losses as
        well as any other relevant equitable considerations. The relative fault
        of such Indemnifying Party and Indemnified Party shall be determined by
        reference to, among other things, whether any action in question,
        including any untrue or alleged untrue statement of a material fact or
        omission or alleged omission of a material fact, has been taken or made
        by, or relates to information supplied by, such Indemnifying Party or
        Indemnified Party, and the parties' relative intent, knowledge, access
        to information and opportunity to correct or prevent such action,
        statement or omission. The amount paid or payable by a party as a result
        of any Losses shall be deemed to include, subject to the limitations set
        forth in this Agreement, any

                                       11
<PAGE>

        reasonable attorneys' or other reasonable fees or expenses incurred by
        such party in connection with any Proceeding to the extent such party
        would have been indemnified for such fees or expenses if the
        indemnification provided for in this Section was available to such party
        in accordance with its terms.

                The parties hereto agree that it would not be just and equitable
        if contribution pursuant to this Section 5(d) were determined by pro
        rata allocation or by any other method of allocation that does not take
        into account the equitable considerations referred to in the immediately
        preceding paragraph. Notwithstanding the provisions of this Section
        5(d), no Holder shall be required to contribute, in the aggregate, any
        amount in excess of the amount by which the proceeds actually received
        by such Holder from the sale of the Registrable Securities subject to
        the Proceeding exceeds the amount of any damages that such Holder has
        otherwise been required to pay by reason of such untrue or alleged
        untrue statement or omission or alleged omission, except in the case of
        fraud by such Holder.

                The indemnity and contribution agreements contained in this
        Section are in addition to any liability that the Indemnifying Parties
        may have to the Indemnified Parties.

        6.      Miscellaneous

        (a)     Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.

        (b)     No Piggyback on Registrations. Except as set forth on
Schedule 6(b) attached hereto, neither the Company nor any of its security
holders (other than the Holders in such capacity pursuant hereto) may include
securities of the Company in the initial Registration Statement other than the
Registrable Securities. No Person has any right to cause the Company to effect
the registration under the Securities Act of any securities of the Company. The
Company shall not file any other registration statements until the initial
Registration Statement required hereunder is declared effective by the
Commission, provided that this Section 6(b) shall not prohibit the Company from
filing amendments to registration statements already filed.

        (c)     Compliance. Each Holder covenants and agrees that it will comply
with the prospectus delivery requirements of the Securities Act as applicable to
it in connection with sales of Registrable Securities pursuant to a Registration
Statement.

                                       12
<PAGE>

        (d)     Discontinued Disposition. Each Holder agrees by its acquisition
of such Registrable Securities that, upon receipt of a notice from the Company
of the occurrence of any event of the kind described in Section 3(d), such
Holder will forthwith discontinue disposition of such Registrable Securities
under a Registration Statement until such Holder's receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement, or until it is
advised in writing (the "Advice") by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement. The
Company will use its best efforts to ensure that the use of the Prospectus may
be resumed as promptly as it practicable. The Company agrees and acknowledges
that any periods during which the Holder is required to discontinue the
disposition of the Registrable Securities hereunder shall be subject to the
provisions of Section 2(b).

        (e)     Piggy-Back Registrations. If at any time during the
Effectiveness Period there is not an effective Registration Statement covering
all of the Registrable Securities and the Company shall determine to prepare and
file with the Commission a registration statement relating to an offering for
its own account or the account of others under the Securities Act of any of its
equity securities, other than on Form S-4 or Form S-8 (each as promulgated under
the Securities Act) or their then equivalents relating to equity securities to
be issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with the stock option or other employee
benefit plans, then the Company shall send to each Holder a written notice of
such determination and, if within fifteen days after the date of such notice,
any such Holder shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
Holder requests to be registered; provided, however, that, the Company shall not
be required to register any Registrable Securities pursuant to this Section 6(e)
that are eligible for resale pursuant to Rule 144(k) promulgated under the
Securities Act or that are the subject of a then effective Registration
Statement.

        (f)     Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and each Holder of the then outstanding Registrable Securities. Notwithstanding
the foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of Holders and that
does not directly or indirectly affect the rights of other Holders may be given
by Holders of all of the Registrable Securities to which such waiver or consent
relates; provided, however, that the provisions of this sentence may not be
amended, modified, or supplemented except in accordance with the provisions of
the immediately preceding sentence.

        (g)     Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be delivered as
set forth in the Purchase Agreement.

        (h)     Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
all of the Holders of the then-outstanding Registrable Securities. Each Holder
may assign their respective rights hereunder in the manner and to the Persons as
permitted under the Purchase Agreement.

                                       13
<PAGE>

        (i)     No Inconsistent Agreements. Neither the Company nor any of its
subsidiaries has entered, as of the date hereof, nor shall the Company or any of
its subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities, that would have the effect of
impairing the rights granted to the Holders in this Agreement or otherwise
conflicts with the provisions hereof. Except as set forth on Schedule 6(i),
neither the Company nor any of its subsidiaries has previously entered into any
agreement granting any registration rights with respect to any of its securities
to any Person that have not been satisfied in full.

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

        (k)     Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be determined
with the provisions of the Purchase Agreement.

        (l)     Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.

        (m)     Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.

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

        (o)     Independent Nature of Holders' Obligations and Rights. The
obligations of each Holder hereunder are several and not joint with the
obligations of any other Holder hereunder, and no Holder shall be responsible in
any way for the performance of the obligations of any other Holder hereunder.
Nothing contained herein or in any other agreement or document delivered at any
closing, and no action taken by any Holder pursuant hereto or thereto, shall be
deemed to constitute the Holders as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Holders
are in any way acting in concert with respect to such

                                       14
<PAGE>

obligations or the transactions contemplated by this Agreement. Each Holder
shall be entitled to protect and enforce its rights, including without
limitation the rights arising out of this Agreement, and it shall not be
necessary for any other Holder to be joined as an additional party in any
proceeding for such purpose.

                              ********************

                                       15
<PAGE>

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

                                             ELECTRONIC SENSOR TECHNOLOGY, INC.

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

                       [SIGNATURE PAGE OF HOLDERS FOLLOWS]

                                       16
<PAGE>

                     [SIGNATURE PAGE OF HOLDERS TO ESNR RRA]

Name of Holder: _________________________

Signature of Authorized Signatory of Holder: _____________________________

Name of Authorized Signatory:_________________________

Title of Authorized Signatory:________________________

                           [SIGNATURE PAGES CONTINUE]

                                       17
<PAGE>

                              Plan of Distribution

        Each Selling Stockholder (the "Selling Stockholders") of the common
stock ("Common Stock") of Electronic Sensor Technology, Inc., a Nevada
corporation (the "Company") and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of Common Stock on the Trading Market or any other stock exchange, market or
trading facility on which the shares are traded or in private transactions.
These sales may be at fixed or negotiated prices. A Selling Stockholder may use
any one or more of the following methods when selling shares:

        o       ordinary brokerage transactions and transactions in which the
                broker-dealer solicits purchasers;

        o       block trades in which the broker-dealer will attempt to sell the
                shares as agent but may position and resell a portion of the
                block as principal to facilitate the transaction;

        o       purchases by a broker-dealer as principal and resale by the
                broker-dealer for its account;

        o       an exchange distribution in accordance with the rules of the
                applicable exchange;

        o       privately negotiated transactions;

        o       settlement of short sales entered into after the effective date
                of the registration statement of which this prospectus is a
                part;

        o       broker-dealers may agree with the Selling Stockholders to sell a
                specified number of such shares at a stipulated price per share;

        o       a combination of any such methods of sale;

        o       through the writing or settlement of options or other hedging
                transactions, whether through an options exchange or otherwise;
                or

        o       any other method permitted pursuant to applicable law.

        The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), if available, rather
than under this prospectus.

        Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated, but, except as set forth in a supplement to this Prospectus, in the
case of an agency transaction not in excess of a customary brokerage commission
in compliance with NASDR Rule 2440; and in the case of a principal transaction a
markup or markdown in compliance with NASDR IM-2440.

                                       18
<PAGE>

        In connection with the sale of the Common Stock or interests therein,
the Selling Stockholders may enter into hedging transactions with broker-dealers
or other financial institutions, which may in turn engage in short sales of the
Common Stock in the course of hedging the positions they assume. The Selling
Stockholders may also sell shares of the Common Stock short and deliver these
securities to close out their short positions, or loan or pledge the Common
Stock to broker-dealers that in turn may sell these securities. The Selling
Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).

        The Selling Stockholders and any broker dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. Each Selling Stockholder has
informed the Company that it does not have any written or oral agreement or
understanding, directly or indirectly, with any person to distribute the Common
Stock. In no event shall any broker-dealer receive fees, commissions and markups
which, in the aggregate, would exceed eight percent (8%).

        The Company is required to pay certain fees and expenses incurred by the
Company incident to the registration of the shares. The Company has agreed to
indemnify the Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.

        Because Selling Stockholders may be deemed to be "underwriters" within
the meaning of the Securities Act, they will be subject to the prospectus
delivery requirements of the Securities Act. In addition, any securities covered
by this prospectus which qualify for sale pursuant to Rule 144 under the
Securities Act may be sold under Rule 144 rather than under this prospectus.
Each Selling Stockholder has advised us that they have not entered into any
written or oral agreements, understandings or arrangements with any underwriter
or broker-dealer regarding the sale of the resale shares. There is no
underwriter or coordinating broker acting in connection with the proposed sale
of the resale shares by the Selling Stockholders.

        We agreed to keep this prospectus effective until the earlier of (i) the
date on which the shares may be resold by the Selling Stockholders without
registration and without regard to any volume limitations by reason of Rule
144(e) under the Securities Act or any other rule of similar effect or (ii) all
of the shares have been sold pursuant to the prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale shares will be
sold only through registered or licensed brokers or dealers if required under
applicable state securities laws. In addition, in certain states, the resale
shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.

                                       19
<PAGE>

        Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the resale shares may not simultaneously
engage in market making activities with respect to the Common Stock for the
applicable restricted period, as defined in Regulation M, prior to the
commencement of the distribution. In addition, the Selling Stockholders will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including Regulation M, which may limit the timing of
purchases and sales of shares of the Common Stock by the Selling Stockholders or
any other person. We will make copies of this prospectus available to the
Selling Stockholders and have informed them of the need to deliver a copy of
this prospectus to each purchaser at or prior to the time of the sale.

                                       20
<PAGE>
                                                                         ANNEX B

                       ELECTRONIC SENSOR TECHNOLOGY, INC.

                 SELLING SECURITYHOLDER NOTICE AND QUESTIONNAIRE

        The undersigned beneficial owner of common stock, par value $.001 per
share (the "Common Stock"), of Electronic Sensor Technology, Inc., a Nevada
corporation (the "Company"), (the "Registrable Securities") understands that the
Company has filed or intends to file with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-3 (the "Registration
Statement") for the registration and resale under Rule 415 of the Securities Act
of 1933, as amended (the "Securities Act"), of the Registrable Securities, in
accordance with the terms of the Registration Rights Agreement, dated as of
December __, 2005 (the "Registration Rights Agreement"), among the Company and
the Purchasers named therein. A copy of the Registration Rights Agreement is
available from the Company upon request at the address set forth below. All
capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in the Registration Rights Agreement.

        Certain legal consequences arise from being named as a selling
securityholder in the Registration Statement and the related prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are advised
to consult their own securities law counsel regarding the consequences of being
named or not being named as a selling securityholder in the Registration
Statement and the related prospectus.

                                     NOTICE

        The undersigned beneficial owner (the "Selling Securityholder") of
Registrable Securities hereby elects to include the Registrable Securities owned
by it and listed below in Item 3 (unless otherwise specified under such Item 3)
in the Registration Statement.

                                       21
<PAGE>

The undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate:

                                  QUESTIONNAIRE

1.      NAME.

        (a)     Full Legal Name of Selling Securityholder

                ________________________________________________________________

        (b)     Full Legal Name of Registered Holder (if not the same as (a)
                above) through which Registrable Securities Listed in Item 3
                below are held:

                ________________________________________________________________

        (c)     Full Legal Name of Natural Control Person (which means a natural
                person who directly or indirectly alone or with others has power
                to vote or dispose of the securities covered by the
                questionnaire):

                ________________________________________________________________

2.      ADDRESS FOR NOTICES TO SELLING SECURITYHOLDER:

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________

Telephone: _____________________________________________________________________

Fax: ___________________________________________________________________________

Contact Person:_________________________________________________________________

3.      BENEFICIAL OWNERSHIP OF REGISTRABLE SECURITIES:

        (a)     Type and Principal Amount of Registrable Securities beneficially
                owned:

                ________________________________________________________________

                ________________________________________________________________

                ________________________________________________________________

                                       22
<PAGE>

4.      BROKER-DEALER STATUS:

        (a)     Are you a broker-dealer?

                                     Yes [ ]   No  [ ]

        (b)     If "yes" to Section 4(a), did you receive your Registrable
                Securities as compensation for investment banking services to
                the Company.

                                     Yes [ ]   No  [ ]

        Note:   If no, the Commission's staff has indicated that you should be
                identified as an underwriter in the Registration Statement.

        (c)     Are you an affiliate of a broker-dealer?

                                     Yes [ ]   No  [ ]

        (d)     If you are an affiliate of a broker-dealer, do you certify that
                you bought the Registrable Securities in the ordinary course of
                business, and at the time of the purchase of the Registrable
                Securities to be resold, you had no agreements or
                understandings, directly or indirectly, with any person to
                distribute the Registrable Securities?

                                     Yes [ ]   No  [ ]

        Note:   If no, the Commission's staff has indicated that you should be
                identified as an underwriter in the Registration Statement.

5.      BENEFICIAL OWNERSHIP OF OTHER SECURITIES OF THE COMPANY OWNED BY THE
        SELLING SECURITYHOLDER.

        Except as set forth below in this Item 5, the undersigned is not the
        beneficial or registered owner of any securities of the Company other
        than the Registrable Securities listed above in Item 3.

        (a)     Type and Amount of Other Securities beneficially owned by the
                Selling Securityholder:

                ________________________________________________________________

                ________________________________________________________________

                                       23
<PAGE>

6.      RELATIONSHIPS WITH THE COMPANY:

        Except as set forth below, neither the undersigned nor any of its
        affiliates, officers, directors or principal equity holders (owners of
        5% of more of the equity securities of the undersigned) has held any
        position or office or has had any other material relationship with the
        Company (or its predecessors or affiliates) during the past three years.

        State any exceptions here:

        ________________________________________________________________________

        ________________________________________________________________________

        The undersigned agrees to promptly notify the Company of any
inaccuracies or changes in the information provided herein that may occur
subsequent to the date hereof at any time while the Registration Statement
remains effective.

        By signing below, the undersigned consents to the disclosure of the
information contained herein in its answers to Items 1 through 6 and the
inclusion of such information in the Registration Statement and the related
prospectus and any amendments or supplements thereto. The undersigned
understands that such information will be relied upon by the Company in
connection with the preparation or amendment of the Registration Statement and
the related prospectus.

        IN WITNESS WHEREOF the undersigned, by authority duly given, has caused
this Notice and Questionnaire to be executed and delivered either in person or
by its duly authorized agent.

Dated: _________________               Beneficial Owner:________________________

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

PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND
RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:

                                       24

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