Document:

SECURITIES PURCHASE AGREEMENT

            This Securities Purchase Agreement, dated as of November 4, 1999
(this "AGREEMENT"), by and between Commodore Applied Technologies, Inc., a
Delaware corporation, with principal executive offices located at 150 East 58th
Street, Suite 3400, New York, New York 10155 (the "COMPANY"), and The Shaar Fund
Ltd. ("BUYER").

            Whereas, Buyer desires to purchase from the Company, and the Company
desires to issue and sell to Buyer, upon the terms and subject to the conditions
of this Agreement, (i) 335,000 shares of the Company's Series E Convertible
Preferred Stock, par value $0.001 per share and liquidation preference of $10.00
per share (collectively, the "PREFERRED SHARES") and (ii) Common Stock Purchase
Warrants in the form attached hereto as Exhibit A to purchase 312,500 shares of
Common Stock (as defined below) (collectively, the "WARRANTS");

            Whereas, upon the terms and subject to the designations, preferences
and rights set forth in the Company's Certificate of Designation of Series E
Convertible Preferred Stock in the form attached hereto as Exhibit B (the
"CERTIFICATE OF DESIGNATION"), the Preferred Shares are convertible into shares
of the Company's common stock, par value $0.001 per share (the "COMMON STOCK");
and

            Whereas, the Warrants, upon the terms and subject to the conditions
specified in the Warrants, will be exercisable for a period of five years from
the date of issuance;

            Now, Therefore, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:

            I. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS

            A. TRANSACTION. Buyer hereby agrees to purchase from the Company,
and the Company has offered and hereby agrees to issue and sell to Buyer in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act of 1933, as amended (the "SECURITIES ACT"), the Preferred
Shares and the Warrants.

            B. PURCHASE PRICE; FORM OF PAYMENT. The purchase price for the
Preferred Shares and the Warrants to be purchased by Buyer hereunder shall be
$2,500,000 (the "PURCHASE PRICE"). Simultaneously with the execution of this
Agreement, Buyer shall pay the Purchase Price by wire transfer of immediately
available funds to the escrow agent (the "ESCROW AGENT") identified in those
certain Escrow Instructions of even date herewith, a copy of which is attached
hereto as Exhibit C (the "ESCROW INSTRUCTIONS"). Simultaneously with the
execution of this Agreement, the Company shall deliver one or more duly
authorized, issued and executed certificates (I/N/O Buyer or, if the Company
otherwise has been notified, I/N/O Buyer's nominee) evidencing the Preferred
Shares and the Warrants which Buyer is purchasing to the Escrow Agent or its
designated depository. By executing and delivering this Agreement, Buyer and the
Company each hereby agrees to observe the terms and conditions of the Escrow
Instructions, all of which are incorporated herein by reference as if fully set
forth herein.

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            C. METHOD OF PAYMENT. Payment into escrow of the Purchase Price
shall be made by wire transfer of immediately available funds to:

            The Bank of New York
            48 Wall Street
            New York, NY 10038

            ABA No.:             021000018

            For the Account of:  Cadwalader, Wickersham & Taft
                                 Trust Account IOLA Fund

            Account No.:         0902061070

               II. BUYER'S REPRESENTATIONS, WARRANTIES; ACCESS TO
                     INFORMATION; INDEPENDENT INVESTIGATION

            Buyer represents and warrants to and covenants and agrees with the
Company as follows:

            A. Buyer is purchasing the Preferred Shares, the Warrants, the
Common Stock issuable upon exercise of the Warrants (the "WARRANT SHARES"), the
Common Stock, if any, issuable in payment of dividends on the Preferred Shares
(the "DIVIDEND SHARES"), and the Common Stock issuable upon conversion or
redemption of the Preferred Shares (the "CONVERSION SHARES" and, collectively
with the Preferred Shares, the Warrants, the Warrant Shares and the Dividend
Shares, the "SECURITIES") for its own account, for investment purposes only and
not with a view towards or in connection with the public sale or distribution
thereof in violation of the Securities Act.

            B. Buyer is (i) an "ACCREDITED INVESTOR" within the meaning of Rule
501 of Regulation D under the Securities Act, (ii) experienced in making
investments of the kind contemplated by this Agreement, (iii) capable, by reason
of its business and financial experience, of evaluating the relative merits and
risks of an investment in the Securities, and (iv) able to afford the loss of
its investment in the Securities.

            C. Buyer understands that the Securities are being offered and sold
by the Company in reliance on an exemption from the registration requirements of
the Securities Act and equivalent state securities and "blue sky" laws, and that
the Company is relying upon the accuracy of, and Buyer's compliance with,
Buyer's representations, warranties and covenants set forth in this Agreement to
determine the availability of such exemption and the eligibility of Buyer to
purchase the Securities.

            D. Buyer understands that the Securities have not been approved or
disapproved by the Securities and Exchange Commission (the "COMMISSION") or any
state securities commission.

            E. This Agreement has been duly and validly authorized, executed and
delivered by Buyer and is a valid and binding agreement of Buyer enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally

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and except as rights to indemnity and contribution may be limited by federal or
state securities laws or the public policy underlying such laws.

            F. Neither Buyer nor its affiliates nor any person acting on its or
their behalf has the intention of entering, or will enter into, prior to the
closing, any put option, short position or other similar instrument or position
with respect to the Common Stock and neither Buyer nor any of its affiliates nor
any person acting on its or their behalf will use at any time shares of Common
Stock acquired pursuant to this Agreement to settle any put option, short
position or other similar instrument or position that may have been entered into
prior to the execution of this Agreement.

            G. Buyer has been given the opportunity for a reasonable time prior
to the date hereof to ask questions of, and receive answers from, the Company or
its representatives concerning the Company and the Securities, and has been
given the opportunity for a reasonable time prior to the date hereof to obtain
such additional information necessary to verify the accuracy of the information
which was provided to the extent the Company possesses such information or can
acquire it without unreasonable effort or expense.

            H. Buyer is not relying on the Company or its affiliates with
respect to economic considerations involved in an investment in the Securities.

            I. Buyer represents, warrants and agrees that it will not sell or
otherwise transfer the Securities without registration under the Securities Act
or an exemption therefrom and fully understands and agrees that it must bear the
economic risk of an investment in the Securities because, among other reasons,
the Securities have not been registered under the Securities Act or under the
securities laws of any state and, therefore, cannot be resold, pledged, assigned
or otherwise disposed of unless they are registered under the Securities Act and
under the applicable securities laws of such states prior to such resale,
pledge, assignment or other disposition, or an exemption from such registration
is available. In particular, Buyer is aware that the Securities, when issued,
will be "restricted securities," as such term is defined in Rule 144 promulgated
under the Securities Act ("Rule 144"), and they may not be sold pursuant to Rule
144 unless all of the conditions of Rule 144 are met. Buyer also understands
that, except as otherwise provided herein or in the Registration Rights
Agreement (as defined below), the Company is under no obligation to register the
Securities on its behalf or to assist it in complying with any exemption from
registration under the Securities Act or applicable state securities laws. Buyer
further understands that sales or transfers of the Securities are further
restricted by applicable state securities laws and the provisions of this
Agreement.

            J. No representations or warranties have been made to Buyer by the
Company, or any officer, employee, agent, affiliate or subsidiary of the
Company, other than the representations of the Company contained herein, and in
subscribing for the Securities Buyer is not relying upon any representations
other than those contained herein.

            K. Buyer is not purchasing the Securities as a result of or
subsequent to any advertisement, article, notice or other communication
published in any newspaper, magazine, or similar media or broadcast over
television or radio, any seminar or meeting or any solicitation of

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a subscription by a person or entity not previously known to Buyer in connection
with investments in securities generally.

            L. Neither the execution, delivery nor performance of this Agreement
or any other required documents by Buyer violates or conflicts with or creates
(with or without the giving of notice or the lapse of time, or both) a default
under, or a lien or encumbrance upon, any of Buyer's assets or properties
pursuant to or requires the consent, approval, or order of any government or
governmental agency or other person or entity under (x) any note, indenture,
lease, license or other material agreement to which Buyer is a party or by which
it or any of its assets or properties is bound, (y) any statute, law, rule,
regulation or court decree binding upon or applicable to Buyer or its assets or
properties, or (z) the charter or by-laws or other equivalent governing
documents of Buyer.

                       III. THE COMPANY'S REPRESENTATIONS

            The Company represents and warrants to Buyer that:

            A. CAPITALIZATION.

                  1. The authorized capital stock of the Company consists solely
            of: (i) 75,000,000 shares of Common Stock, of which 23,702,263
            shares are issued and outstanding on the date hereof; and (ii)
            10,000,000 shares of "blank check" preferred stock, of which (a)
            80,000 shares have been designated as Series A Preferred Stock, of
            which 18,000 were issued and have been retired, (b) 25,000 shares
            have been designated as Series B 6% Convertible Preferred Stock, of
            which 20,909 have been issued and are outstanding, (c) 15,000 shares
            have been designated as Series C 6% Convertible Preferred Stock, of
            which 10,189 have been issued and are outstanding, (d) 25,000 shares
            have been designated as Series D 6% Convertible Preferred Stock, of
            which 20,391 have been issued and are outstanding, in each case on
            the date hereof and (e) 335,000 shares have been designated as
            Series E Convertible Preferred Stock. All of the issued and
            outstanding shares of Common Stock and preferred stock, if any, have
            been duly authorized and validly issued and are fully paid and
            nonassessable. As of the date hereof, the Company has outstanding
            stock options and warrants to purchase 21,214,819 shares of Common
            Stock. Schedule III.A.1. hereto lists the exercise prices for each
            such stock option and warrant.

                  2. The Preferred Shares have been duly and validly authorized
            and reserved for issuance by the Company, and, when issued by the
            Company, will be duly and validly issued, fully paid and
            nonassessable and will not subject the holder thereof to personal
            liability solely by reason of being such holder. The Conversion
            Shares, the Dividend Shares and the Warrant Shares have been duly
            and validly authorized and reserved for issuance by the Company,
            and, when issued by the Company upon conversion of, or in lieu of
            accrued dividends on, the Preferred Shares and on exercise of the
            Warrants will be duly and validly issued, filly paid and
            nonassessable and will not subject the holder thereof to personal
            liability solely by reason of being such holder.

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                  3. Except as disclosed on Schedule III.A.3 there are no
            preemptive, subscription, "call," right of first refusal or other
            similar rights to acquire any capital stock of the Company or any of
            the subsidiaries of the Company (the "SUBSIDIARIES") or other voting
            securities of the Company that have been issued or granted to any
            person or any other obligations of the Company or any of its
            Subsidiaries to issue, grant, extend or enter into any security,
            option, warrant, "call," right, commitment, agreement, arrangement
            or undertaking with respect to any of their respective capital
            stock.

                  4. Schedule III.A.4. hereto lists all the Subsidiaries. Except
            as disclosed on Schedule III.A.4. hereto, the Company does not own
            or control, directly or indirectly, any interest in any other
            corporation, partnership, limited liability company, unincorporated
            business organization, association, trust or other business entity.

                  5. The Company has delivered to Buyer complete and correct
            copies of the Certificate of Incorporation and the By-Laws of the
            Company and the Subsidiaries, in each case as amended to the date of
            this Agreement. Except as set forth on Schedule III.A.5, the Company
            has made available to Buyer true and complete copies of all minutes
            of the Board of Directors of the Company (the "BOARD OF DIRECTORS")
            since October 1, 1996.

            B. ORGANIZATION; REPORTING COMPANY STATUS.

                  1. Each of the Company and each of the Subsidiaries is a
            corporation duly organized, validly existing and in good standing
            under the laws of the state of jurisdiction in which it is
            incorporated and is duly qualified as a foreign corporation in all
            jurisdictions in which the failure to so qualify would reasonably be
            expected to have a material adverse effect on the business,
            properties, prospects, condition (financial or otherwise) or results
            of operations of the Company and the Subsidiaries taken as a
            consolidated whole or on the consummation of any of the transactions
            contemplated by this Agreement (a "MATERIAL ADVERSE EFFECT").

                  2. The Company has registered the Common Stock pursuant to
            Section 12 of the Securities Exchange Act of 1934, as amended (the
            "EXCHANGE ACT"). The Common Stock is listed and traded on the
            American Stock Exchange (the "AMEX") and the Company has not
            received any notice regarding, and to its knowledge there is no
            threat of, the termination or discontinuance of the eligibility of
            the Common Stock for such listing.

            C. AUTHORIZATION. The Company (i) has duly and validly authorized
and reserved for issuance 10,000,000 shares of Common Stock, sufficient in
number for the conversion of and the payment of dividends (in lieu of cash
payments) on the Preferred Shares and the exercise of the Warrants, and (ii) at
all times from and after the date hereof shall have a sufficient number of
shares of Common Stock duly and validly authorized and reserved for issuance to
satisfy the conversion of Preferred Shares, the payment of dividends (in lieu of
cash

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<PAGE>

payments) on the Preferred Shares and the exercise of the Warrants. The Company
understands and acknowledges the potentially dilutive effect to the Common Stock
of the issuance of the Preferred Shares, the Conversion Shares, the Dividend
Shares and the Warrant Shares upon the conversion of, and payment of dividends
on, the Preferred Shares and the exercise of the Warrants, respectively. The
Company further acknowledges that, except as otherwise provided in Section 6.9
of the Certificate of Designation, its obligation to issue Conversion Shares
upon conversion of the Preferred Shares and Warrant Shares upon exercise of the
Warrants in accordance with this Agreement, the Certificate of Designation and
the Warrants is absolute and unconditional regardless of the dilutive effect
that such issuance may have on the ownership interests of other stockholders of
the Company and notwithstanding the commencement of any case under 11 U.S.C. ss.
101 et seq. (the "BANKRUPTCY CODE"). In the event the Company is a debtor under
the Bankruptcy Code, the Company hereby waives to the fullest extent permitted
any rights to relief it may have under 11 U.S.C. ss. 362 in respect of the
conversion of the Preferred Shares and the exercise of the Warrants. The Company
agrees, without cost or expense to Buyer, to take or consent to any and all
action necessary to effectuate relief under 11 U.S.C. ss. 362. Schedule III.C.
hereto sets forth (i) all issuances and sales by the Company since December 31,
1998 of its capital stock, and other securities convertible, exercisable or
exchangeable for capital stock of the Company, (ii) the amount of such
securities sold, including any underlying shares of capital stock, (iii) the
purchaser thereof, (iv) the amount paid therefor, and (v) the material terms of
all outstanding capital stock of the Company (other than the Common Stock).

            D. AUTHORITY; VALIDITY AND ENFORCEABILITY. The Company has the
requisite corporate power and authority to file and perform its obligations
under the Certificate of Designation and to enter into the Documents (as
hereinafter defined), and to perform all of its obligations hereunder and
thereunder (including the issuance, sale and delivery to Buyer of the
Securities). The execution, delivery and performance by the Company of the
Documents, and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the filing of the Certificate
of Designation with the Delaware Secretary of State's office, the issuance of
the Preferred Shares and the Warrants and the issuance and reservation for
issuance of the Conversion Shares, the Dividend Shares and the Warrant Shares),
have been duly authorized by all necessary corporate action on the part of the
Company. Each of the Documents has been duly and validly executed and delivered
by the Company and the Certificate of Designation has been duly filed with the
Delaware Secretary of State's office by the Company and each Document
constitutes a valid and binding obligation of the Company enforceable against it
in accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and except as rights to indemnity and
contribution may be limited by federal or state securities laws or the public
policy underlying such laws. The Securities have been duly and validly
authorized for issuance by the Company and, when executed and delivered by the
Company, will be valid and binding obligations of the Company enforceable
against it in accordance with their terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally. For purposes of this
Agreement, the term "DOCUMENTS" means (i) this Agreement; (ii) the Registration
Rights Agreement of even date herewith between the Company and Buyer, a copy of
which is annexed hereto as Exhibit D (the

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"REGISTRATION RIGHTS AGREEMENT"); (iii) the Certificate of Designation; (iv) the
Warrants; and (v) the Escrow Instructions.

            E. VALIDITY OF ISSUANCE OF THE SECURITIES. The Preferred Shares as
of the Closing Date, the Conversion Shares and the Dividend Shares upon their
issuance in accordance with the Certificate of Designation, and the Warrant
Shares upon exercise of the Warrants, respectively, are or will be validly
issued and outstanding, fully paid and nonassessable, and not subject to any
preemptive rights, rights of first refusal, tag-along rights, drag-along rights
or other similar rights. The Warrants as of the Closing Date are or will be
validly issued.

            F. NON-CONTRAVENTION. Except as set forth on Schedule III.F. hereto,
the execution and delivery by the Company of the Documents, the issuance of the
Securities, and the consummation by the Company of the other transactions
contemplated hereby and thereby, including, without limitation, the filing of
the Certificate of Designation with the Delaware Secretary of State's office, do
not, and compliance with the provisions of this Agreement and other Documents
will not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of a
material benefit under, or result in the creation of any Lien (as defined below)
upon any of the properties or assets of the Company or any of its Subsidiaries
under, or result in the termination of, or require that any consent be obtained
or any notice be given with respect to, (i) the Certificate of Incorporation or
By-Laws of the Company or the comparable charter or organizational documents of
any of its Subsidiaries, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease, contract or other agreement, instrument or permit
applicable to the Company or any of its Subsidiaries or their respective
properties or assets, or (iii) any Law (as defined below) applicable to the
Company or any of its Subsidiaries or their respective properties or assets.

            G. APPROVALS. No authorization, approval or consent of any court or
public or governmental authority is required to be obtained by the Company for
the issuance and sale of the Preferred Shares or the Warrants (and the
Conversion Shares, the Dividend Shares and Warrant Shares) to Buyer as
contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained by the Company prior to the date hereof.

            H. COMMISSION FILINGS. The Company has properly and timely filed
with the Commission all reports, proxy statements, forms and other documents
required to be filed with the Commission under the Securities Act and the
Exchange Act since October 1, 1996 (the "COMMISSION FILINGS"). As of their
respective dates, (i) the Commission Filings complied in all material respects
with the requirements of the Securities Act or the Exchange Act as the case may
be, and the rules and regulations of the Commission promulgated thereunder
applicable to such Commission Filings, and (ii) none of the Commission Filings
contained at the time of their filing any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the Commission Filings, as of the dates of such documents, were true and
complete in all material respects and complied with applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto, have been prepared in accordance with generally accepted
accounting principles in the United States ("GAAP") (except in the case of

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the unaudited statements, as permitted by Form l0-Q under the Exchange Act)
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly presented the consolidated financial
position of the Company and its Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments that in the aggregate are not material and to any other adjustment
described therein).

            I. ABSENCE OF CERTAIN CHANGES. Since the Balance Sheet Date (as
defined in Section III.M.), there has not occurred any change, event or
development in the business, financial condition, prospects or results of
operations of the Company and the Subsidiaries, there has not existed any
condition having or reasonably likely to have a Material Adverse Effect, and the
Company and the Subsidiaries have conducted there respective businesses only in
the ordinary course.

            J. FULL DISCLOSURE. There is no fact known to the Company (other
than general economic or industry conditions known to the public generally) that
has not been fully disclosed in writing to Buyer that (i) reasonably could be
expected to have a Material Adverse Effect or (ii) reasonably could be expected
to materially and adversely affect the ability of the Company to perform its
obligations pursuant to the Documents.

            K. ABSENCE OF LITIGATION. Except as set forth on Schedule III.K,
there are (i) no suits, actions or proceedings pending or, to the knowledge of
the Company, threatened against the Company or any of its Subsidiaries, (ii) no
complaints, lawsuits, charges or other proceedings pending or, to the knowledge
of the Company, threatened in any forum by or on behalf of any present or former
employee of the Company or any of its Subsidiaries, any applicant for employment
or classes of the foregoing alleging breach of any express or implied contract
of employment, any applicable law governing employment or the termination
thereof or other discriminatory, wrongful or tortuous conduct in connection with
the employment relationship, or (iii) no judgments, decrees, injunctions or
orders of any governmental entity or arbitrator outstanding against the Company
or any Subsidiary.

            L. ABSENCE OF EVENTS OF DEFAULT. Except as set forth in Schedule
III.L, no "EVENT OF DEFAULT" (as defined in any agreement or instrument to which
the Company is a party) and no event which, with notice, lapse of time or both,
would constitute an Event of Default (as so defined), has occurred and is
continuing.

            M. FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES. The Company has
delivered to Buyer true and complete copies of the (i) audited balance sheet of
the Company and the Subsidiaries as at December 31, 1998 and 1997, respectively,
and the related audited statements of income, changes in stockholders' equity
and cash flows for the three fiscal years ended December 31, 1998, including the
related notes and schedules thereto and (ii) unaudited balance sheets of the
Company and the Subsidiaries and the statements of income, changes in
stockholders' equity and cash flows for each fiscal quarter ended since December
31, 1998, including the related notes and schedules, all certified by the chief
financial officer of the Company (collectively, the "FINANCIAL STATEMENTS"), and
all management letters, if any, from the Company's independent auditors relating
to the dates and periods covered by the Financial Statements. Each of the
Financial Statements is complete and correct in all material respects, has

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been prepared in accordance with GAAP (subject, in the case of the interim
Financial Statements, to normal year end adjustments and the absence of
footnotes), and fairly presents the financial position, results of operations
and cash flows of the Company as at the dates and for the periods indicated. For
purposes hereof, the audited balance sheet of the Company as at December 31,
1998 is hereinafter referred to as the "BALANCE SHEET" and December 31, 1998 is
hereinafter referred to as the "BALANCE SHEET DATE". Except as set forth on
Schedule III.M. hereto, the Company has no indebtedness, obligations or
liabilities of any kind (whether accrued, absolute, contingent or otherwise, and
whether due or to become due), which was not fully reflected in, reserved
against or otherwise described in the Balance Sheet or the notes thereto or was
not incurred in the ordinary course of business consistent with the Company's
past practices since the Balance Sheet Date.

            N. COMPLIANCE WITH LAWS; PERMITS. Each of the Company and each of
its Subsidiaries has complied and is in compliance with all laws, rules,
regulations, codes, ordinances and statutes (collectively, "LAWS") applicable to
it or to the conduct of its business. The Company possesses all material
permits, approvals, authorizations, licenses, certificates and consents from all
public and governmental authorities which are necessary to conduct its business.

            O. RELATED PARTY TRANSACTIONS. Except as set forth on Schedule
III.0. hereto, neither the Company nor any of its officers, directors or
"AFFILIATES" (as such term is defined in Rule 12b-2 under the Exchange Act) nor
any family member of any officer, director or Affiliate of the Company has
borrowed any moneys from or has outstanding any indebtedness or other similar
obligations to the Company or any of the Subsidiaries. Except as set forth on
Schedule III.0. hereto, neither the Company nor any of its officers, directors
or Affiliates nor any family member of any officer, director or Affiliate of the
Company (i) owns any direct or indirect interest constituting more than a 1%
equity (or similar profit participation) interest in, or controls or is a
director, officer, partner, member or employee of, or consultant to or lender to
or borrower from, or has the right to participate in the profits of, any person
or entity which is (x) a competitor, supplier, customer, landlord, tenant,
creditor or debtor of the Company or any Subsidiary, (y) engaged in a business
related to the business of the Company or any Subsidiary, or (z) a participant
in any transaction to which the Company or any Subsidiary is a party or (ii) is
a party to any contract, agreement, commitment or other arrangement with the
Company or any Subsidiary.

            P. INSURANCE. Each of the Company and each of the Subsidiaries
maintains property and casualty, general liability, workers' compensation,
environmental hazard, personal injury and other similar types of insurance with
financially sound and reputable insurers that is adequate, consistent with
industry standards and the Company's historical claims experience. Each of the
Company and each of the Subsidiaries has not received notice from, and has no
knowledge of any threat by, any insurer (that has issued any insurance policy to
the Company or the Subsidiaries) that such insurer intends to deny coverage
under or cancel, discontinue or not renew any insurance policy presently in
force.

            Q. SECURITIES LAW MATTERS. Assuming the accuracy of the
representations and warranties of Buyer set forth in Section II hereof, the
offer and sale by the Company of the Securities is exempt from (i) the
registration and prospectus delivery requirements of the

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Securities Act and the rules and regulations of the Commission thereunder and
(ii) the registration and/or qualification provisions of all applicable state
securities and "blue sky" laws. Other than pursuant to an effective registration
statement under the Securities Act, the Company has not issued, offered or sold
the Preferred Shares or any shares of Common Stock (including for this purpose
any securities of the same or a similar class as the Preferred Shares or Common
Stock, or any securities convertible into or exchangeable or exercisable for the
Preferred Shares or Common Stock or any such other securities) within the
one-year next preceding the date hereof, except as disclosed on Schedule III.Q.
hereto or otherwise previously disclosed in writing to Buyer, and the Company
shall not directly or indirectly take, and shall not permit any of its
directors, officers or Affiliates directly or indirectly to take, any action
(including, without limitation, any offering or sale to any person or entity of
the Preferred Shares or shares of Common Stock), so as to make unavailable the
exemption from Securities Act registration being relied upon by the Company for
the offer and sale to Buyer of the Preferred Shares and the Warrants (and the
Conversion Shares and the Warrant Shares) as contemplated by this Agreement. No
form of general solicitation or advertising has been used or authorized by the
Company or any of its officers, directors or Affiliates in connection with the
offer or sale of the Preferred Shares and the Warrants (and the Conversion
Shares and the Warrant Shares) as contemplated by this Agreement or any other
agreement to which the Company is a party.

            R. ENVIRONMENTAL MATTERS.

            Except as set forth on Schedule III.R. hereto:

                  1. The Company, the Subsidiaries and their respective
            operations are in compliance with all applicable Environmental Laws
            and all permits (including terms, conditions, and limitations
            therein) issued pursuant to Environmental Laws or otherwise.

                  2. Each of the Company and the Subsidiaries has all permits,
            licenses, waivers, exceptions, and exemptions required under all
            applicable Environmental Laws necessary to operate its business.

                  3. None of the Company or the Subsidiaries is the subject of
            any outstanding written order of or agreement with any governmental
            authority or person respecting (i) Environmental Laws or permits,
            (ii) Remedial Action or (iii) any Release or threatened Release of
            Hazardous Materials.

                  4. None of the Company or the Subsidiaries has received any
            written communication alleging that it is or may be in violation of
            any Environmental Law or any permit issued pursuant to any
            Environmental Law, or may have any liability under any Environmental
            Law.

                  5. None of the Company or the Subsidiaries has any liability,
            contingent or otherwise, in connection with any presence, treatment,
            storage, disposal or Release of any Hazardous Materials whether on
            property owned or operated by the Company and the Subsidiaries or
            property of third parties, and none of the Company or the
            Subsidiaries has transported, or arranged for

                                      -10-

<PAGE>

            transportation of, any Hazardous Materials for treatment or disposal
            of any property.

                  6. There are no investigations of the business, operations, or
            currently or previously owned, operated or leased property of the
            Company or any of the Subsidiaries pending or threatened which could
            lead to the imposition of any case or liability pursuant to any
            Environmental Law.

                  7. There is not located at any of the properties owned or
            operated by the Company or any of the Subsidiaries any (A)
            underground storage tank, (B) asbestos-containing material or (C)
            equipment containing polychlorinated biphenyls.

                  8. Each of the Company and the Subsidiaries has provided to
            Buyer all environmentally related assessments, audits, studies,
            reports, analyses, and results of investigations that have been
            performed with respect to the currently or previously owned, leased
            or operated properties or activities of the Company and the
            Subsidiaries.

                  9. There are no liens arising under or pursuant to any
            Environmental Law on any real property owned, operated, or leased by
            the Company or any of the Subsidiaries, and no action of any
            governmental authority has been taken or, to the knowledge of the
            Company, is in process of being taken which could subject any of
            such properties to such liens, and none of the Company or the
            Subsidiaries is or has been expected to be required to place any
            notice or restriction relating to the presence of Hazardous Material
            at any real property owned, operated, or leased by it in any deed to
            such property.

                  10. Neither the Company nor any of the Subsidiaries owns,
            operates or leases any hazardous waste generation, treatment,
            storage, or disposal facility, as such terms are used pursuant to
            the RCRA and related or analogous state, local, or foreign law. None
            of the properties owned, operated, or leased by the Company, the
            Subsidiaries or any predecessor of any of them is now, or was in the
            past, used in any part as a dump, landfill, or disposal site, and
            neither Company, the Subsidiaries nor any predecessor of them has
            filled any wetlands.

                  11. The purchase that is the subject of this Agreement will
            not require any governmental approvals under Environmental Laws,
            including those that are triggered by sales or transfers of
            businesses or real property, including, as examples and without
            limitation, the New Jersey Industrial Site Recovery Act, N.J. Stat.
            13:1K-7 et. seq., and the Connecticut Transfer of Establishments
            Act, Conn. Gen. Stat. ss. 22a-134 et seq.

                  12. There is no currently existing requirement or requirement
            to be imposed in the future by any Environmental Law or
            Environmental Permit which could result in the incurrence of a cost
            that could be reasonably expected to have a Material Adverse Effect.

                                      -11-

<PAGE>

                  13. Each of the Company and each of the Subsidiaries has
            disclosed to Buyer all other acts or conditions that could result in
            any costs or liabilities under Environmental Laws.

            For purposes of this Section III.R.:

            "ENVIRONMENTAL LAW" means any foreign, federal, state or local
statute, regulation, ordinance, or common law as now or hereafter in effect in
any way relating to the protection of human health, safety or welfare, or the
environment including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, the Hazardous Materials Transportation
Act, the Resource Conservation and Recovery Act ("RCRA"), the Clean Water Act,
the Clean Air Act, the Toxic Substances Control Act, the Federal Insecticide,
Fungicide, and Rodenticide Act, and the Occupational Safety and Health Act, and
the regulations promulgated pursuant thereto.

            "HAZARDOUS MATERIAL" means any substance that is listed, classified
or regulated pursuant to any Environmental Law, including petroleum, gasoline,
and any other petroleum product, by-product, fraction or derivative, asbestos or
asbestos-containing material, lead-containing paint, water, or plumbing,
polychlorinated biphenyls, radioactive materials and radon.

            "RELEASE" means any placement, release, spill, filtration, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, migration,
or leaching to, through, or under the indoor or outdoor environment, or into,
through, under, or out of any property.

            "REMEDIAL ACTION" means all actions to (x) clean up, remove,
remediate, treat or in any other way address any Hazardous Material; (y) prevent
or contain the Release of any Hazardous Material; or (z) perform studies and
investigations or post-remedial monitoring and care in relation to (x) and (y)
above.

            S. LABOR MATTERS. Neither the Company nor any of the Subsidiaries is
party to any labor or collective bargaining agreement and there are no labor or
collective bargaining agreements which pertain to employees of the Company. No
employees of the Company or the Subsidiaries are represented by any labor
organization and none of such employees has made a pending demand for
recognition, and there are no representation proceedings or petitions seeking a
representation proceeding presently pending or, to the Company's knowledge,
threatened to be brought or filed, with the National Labor Relations Board or
other labor relations tribunal. To the knowledge of the Company, there is no
organizing activity involving the Company or the Subsidiaries pending or to the
Company's knowledge, threatened by any labor organization or group of employees
of the Company or the Subsidiaries. There are no (i) strikes, work stoppages,
slowdowns, lockouts or arbitrations or (ii) material grievances or other labor
disputes pending or, to the knowledge of the Company, threatened against or
involving the Company or the Subsidiaries. There are no unfair labor practice
charges, grievances or complaints pending or, to the knowledge of the Company,
threatened by or on behalf of any employee or group of employees of the Company
or the Subsidiaries.

                                      -12-

<PAGE>

            T. ERISA MATTERS. All Plans maintained by the Company, its
Subsidiaries and ERISA Affiliates are listed in Schedule III.T. and copies of
all material documentation or general distributions relating to such Plans
(including, but not limited to, copies of written Plans, written descriptions of
oral Plans, summary plan descriptions, trust agreements, the three most recent
annual returns, employee communications and IRS determination letters) have been
delivered or will have been made available for review by the Buyer. Each Plan
has at all times been maintained and administered in all material respects in
accordance with its terms and the requirements of applicable law, including
ERISA and the Code, and each Plan intended to qualify under Section 401(a) of
the Code has at all times since its adoption been so qualified, and each trust
which forms a part of any such plan has at all times since its adoption been
tax-exempt under Section 501(a) of the Code. The Company, its Subsidiaries and
its ERISA Affiliates are in compliance in all material respects with all
provisions of ERISA applicable to it. No Reportable Event has occurred, been
waived or exists as to which the Company, its Subsidiaries or any ERISA
Affiliate was required to file a report with the PBGC, and the present value of
all liabilities under each Pension Plan (based on those assumptions used to fund
such Plans) listed in Schedule III.T. did not, as of the most recent annual
valuation date applicable thereto, exceed the value of the assets of such
Pension Plan. None of the Company, its Subsidiaries or ERISA Affiliates has
incurred, or reasonably expects to incur, any Withdrawal Liability with respect
to any Multi-employer Plan that could result in a Material Adverse Effect. None
of the Company, its Subsidiaries or ERISA Affiliates has received any
notification that any Multi-employer Plan is in reorganization or has been
terminated within the meaning of Title IV of ERISA, and no Multi-employer Plan
is reasonably expected to be in reorganization or termination where such
reorganization or termination has resulted or could reasonably be expected to
result in increases to the contributions required to be made to such Plan or
otherwise. No direct, contingent or secondary liability has been incurred or is
expected to be incurred by the Company or its Subsidiaries under Title IV of
ERISA to any party with respect to any Plan, or with respect to any other Plan
presently or heretofore maintained or contributed to by any ERISA Affiliate.
Neither the Company, its Subsidiaries, or ERISA Affiliate has incurred any
liability for any tax imposed under section 4971 through 4980B of the Code or
civil liability under section 502(i) or (1) of ERISA. No suit, action or other
litigation (excluding claims for benefits incurred in the ordinary course of
plan activities and any other claim which could reasonably be expected to result
in a material liability or expense to the Company, its Subsidiaries or ERISA
Affiliates) has been brought or, to the knowledge of the Company, threatened
against or with respect to any Plan and there are no facts or circumstances
known to the Company, its Subsidiaries or ERISA Affiliates that could reasonably
be expected to give rise to any such suit, action or other litigation. All
contributions to Plans that were required to be made under such Plans have been
made, and all benefits accrued under any unfunded Plan have been paid, accrued
or otherwise adequately reserved to the extent required in accordance with
generally accepted accounting principles, all of which accruals under unfunded
Plans are as disclosed in Schedule III.T., and the Company, its Subsidiaries and
ERISA Affiliates have each performed all material obligations required to be
performed under all Plans. The execution, delivery and performance of this
Agreement, the Preferred Shares, the Warrants and the Registration Rights
Agreement and the consummation of the transactions contemplated hereby and
thereby (including, without limitation, the offer, issue and sale by the Company
and its Subsidiaries, and the purchase by the Buyer, of the Preferred Shares,
the Conversion Shares, the Warrants, the Warrant Shares and

                                      -13-

<PAGE>

Dividend Shares) will not involve any "prohibited transaction" within the
meaning of ERISA or the Code with respect to any Plan.

            For purposes of this Section III.T.:

            "ERISA" means the Employee Retirement Income Security Act of 1974,
or any successor statute, together with the regulations thereunder, as the same
may be amended from time to time.

            "ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that was, is or hereafter may become, a member of a group of which
the Company is a member and which is treated as a single employer under Section
414 of the Internal Revenue Code of 1986, as amended (the "INTERNAL REVENUE
CODE").

            "MULTI-EMPLOYER PLAN" means a multi-employer plan as defined in
Section 4001(a)(3) of ERISA to which the Company or any ERISA Affiliate (other
than one considered an ERISA Affiliate only pursuant to subsections (m) or (o)
of Section 414 of the Internal Revenue Code) is making or accruing an obligation
to make contributions, or has within any of the preceding six plan years made or
accrued an obligation to make contributions.

            "PBGC" means the Pension Benefit Guaranty Corporation referred to
and defined in ERISA or any successor thereto.

            "PLAN" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, leave of absence,
severance, layoff, vacation, day or dependent care, legal services, cafeteria,
life, health, accident, disability, workmen's compensation or other insurance,
separation or other employee benefit plan, practice, policy or arrangement of
any kind, whether written or oral, or whether for the benefit of a single
individual or more than one individual including, but not limited to, any
"employee benefit plan" within the meaning of Section 3(3) of ERISA, including
any Pension Plan.

            "PENSION PLAN" means any pension plan (other than a Multi-employer
Plan) subject to the provision of Title IV of ERISA or Section 412 of the
Internal Revenue Code that is maintained for employees of the Company, its
Subsidiaries, or any ERISA Affiliate.

            "REPORTABLE EVENT" means any reportable event as defined in Section
4043(b) of ERISA or the regulations issued thereunder with respect to a Plan.

            "WITHDRAWAL LIABILITY" means liability to a Multi-employer Plan as a
result of a complete or partial withdrawal from such Multi-employer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.

            U. TAX MATTERS.

                  1. The Company has filed all material Tax Returns which it is
            required to file under applicable Laws; all such Tax Returns are
            true and accurate in all material respects and have been prepared in
            compliance with all applicable

                                      -14-

<PAGE>

            Laws; the Company has paid all Taxes due and owing by it (whether or
            not such Taxes are required to be shown on a Tax Return) and has
            withheld and paid over to the appropriate taxing authorities all
            Taxes which it is required to withhold from amounts paid or owing to
            any employee, stockholder, creditor or other third parties; and
            since the Balance Sheet Date, the charges, accruals and reserves for
            Taxes with respect to the Company (including any provisions for
            deferred income taxes) reflected on the books of the Company are
            adequate to cover any Tax liabilities of the Company if its current
            tax year were treated as ending on the date hereof.

                  2. No claim has been made by a taxing authority in a
            jurisdiction where the Company does not file tax returns that such
            corporation is or may be subject to taxation by that jurisdiction.
            There are no foreign, federal, state or local tax audits or
            administrative or judicial proceedings pending or being conducted
            with respect to the Company; no information related to Tax matters
            has been requested by any foreign, federal, state or local taxing
            authority; and, except as disclosed above, no written notice
            indicating an intent to open an audit or other review has been
            received by the Company from any foreign, federal, state or local
            taxing authority. There are no material unresolved questions or
            claims concerning the Company's Tax liability. The Company (A) has
            not executed or entered into a closing agreement pursuant to Section
            7121 of the Internal Revenue Code or any predecessor provision
            thereof or any similar provision of state, local or foreign law; or
            (B) has not agreed to or is required to make any adjustments
            pursuant to Section 481(a) of the Internal Revenue Code or any
            similar provision of state, local or foreign law by reason of a
            change in accounting method initiated by the Company or any of its
            subsidiaries or has any knowledge that the IRS has proposed any such
            adjustment or change in accounting method, or has any application
            pending with any taxing authority requesting permission for any
            changes in accounting methods that relate to the business or
            operations of the Company. The Company has not been a United States
            real property holding corporation within the meaning of Section
            897(c)(2) of the Internal Revenue Code during the applicable period
            specified in Section 897(c)(1)(A)(ii) of the Internal Revenue Code.

                  3. The Company has not made an election under Section 341(f)
            of the Internal Revenue Code. The Company is not liable for the
            Taxes of another person that is not a subsidiary of the Company
            under (A) Treas. Reg. Section 1.1502-6 (or comparable provisions of
            state, local or foreign law), (B) as a transferee or successor, (C)
            by contract or indemnity or (D) otherwise. The Company is not a
            party to any tax sharing agreement. The Company has not made any
            payments, is obligated to make payments or is a party to an
            agreement that could obligate it to make any payments that would not
            be deductible under Section 280G of the Internal Revenue Code.

            For purposes of this Section III.U.:

            "IRS" means the United States Internal Revenue Service.

                                      -15-

<PAGE>

            "TAX" or "TAXES" means federal, state, county, local, foreign, or
other income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications, real or
personal property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.

            "TAX RETURN" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including any
amendment thereof.

            V. PROPERTY. Except as set forth on Schedule III.V, each of the
Company and each of the Subsidiaries has good and marketable title to all of its
assets and properties material to the conduct of its business, free and clear of
any liens, pledges, security interests, claims, encumbrances or other
restrictions of any kind (collectively, "LIENS"). With respect to any assets or
properties it leases, each of the Company and its Subsidiaries holds a valid and
subsisting leasehold interest therein, free and clear of any Liens, is in
compliance, in all material respects, with the terms of the applicable lease,
and enjoys peaceful and undisturbed possession under such lease. All of the
assets and properties of the Company and its Subsidiaries that are material to
the conduct of business as presently conducted or as proposed to be conducted by
it are in good operating condition and repair. The inventory of the Company and
its Subsidiaries is in good and marketable condition, does not include any
material quantity of items which are obsolete, damaged or slow moving, and is
salable (or may be leased) in the normal course of business as currently
conducted by it.

            W. INTELLECTUAL PROPERTY. The Company owns or possesses adequate and
enforceable rights to use all patents, patent applications, trademarks,
trademark applications, trade names, service marks, copyrights, copyright
applications, licenses, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures) and other similar rights and proprietary knowledge (collectively,
"INTANGIBLES") necessary for the conduct of its business as now being conducted.
Except as set forth on Schedule III.W, the Company has all right, title and
interest in all of the Intangibles, free and clear of any and all Liens. The
Company is not infringing upon or in conflict with any right of any other person
with respect to any Intangibles. Except as disclosed on Schedule III.W. hereto,
(i) no claims have been asserted by any individual, partnership, corporation,
unincorporated organization or association, limited liability company, trust or
other entity (collectively, a "PERSON") contesting the validity, enforceability,
use or ownership of any Intangibles, and the Company has no knowledge of any
basis for such claim, and (ii) neither the Company nor the Subsidiaries has any
knowledge of infringement or misappropriation of the Intangibles by any third
party.

            X. CONTRACTS. All contracts, agreements, notes, instruments,
franchises, leases, licenses, commitments, arrangements or understanding,
written or oral (collectively, "CONTRACTS") which are material to the business
and operations of the Company and the Subsidiaries are in full force and effect
and constitute legal, valid and binding obligations of the Company and the
Subsidiaries and, to the best knowledge of the Company, the other parties
thereto; the Company and the Subsidiaries and, to the best knowledge of the
Company, each

                                      -16-

<PAGE>

other party thereto, have performed in all material respects all obligations
required to be performed by them under the Contracts, and no material violation
or default exists in respect thereof, nor any event that with notice or lapse of
time, or both, would constitute a default thereof, on the part of the Company
and the Subsidiaries or, to the best knowledge of the Company, any other party
thereto; none of the Contracts is currently being renegotiated; and the
validity, effectiveness and continuation of all Contracts will not be materially
adversely affected by the transactions contemplated by this Agreement.

            Y. REGISTRATION RIGHTS. Except as set forth on Schedule III.Y, no
Person has, and as of the Closing (as defined below), no Person shall have,
demand, "piggy-back" or other rights to cause the Company to file any
registration statement under the Securities Act, relating to any of its
securities or to participate in any such registration statement.

            Z. DIVIDENDS. The timely payment of dividends on the Preferred
Shares as specified in the Certificate of Designation is not prohibited by the
Certificate of Incorporation or By-Laws of the Company or any agreement,
contract, documents or other undertaking to which the Company or any of the
Subsidiaries is a party.

            AA. INVESTMENT COMPANY ACT. Neither the Company nor any of the
Subsidiaries is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended (the "INVESTMENT COMPANY ACT"), nor is the
Company nor any of the Subsidiaries directly or indirectly controlled by or
acting on behalf of any Person which is an "investment company" within the
meaning of the Investment Company Act.

            BB. BUSINESS PLAN. Any business information of the Company
previously submitted to Buyer in any form, including the projections contained
therein, was prepared by the senior management of the Company in good faith and
is based on assumptions that the Company believes are reasonable. The Company is
not aware of any fact or condition that could reasonably be expected to result
in the Company not achieving the results described in such business plan.

            CC. YEAR 2000 COMPLIANCE. The Company is currently reviewing its
products, business and operations that could be adversely affected by the risk
that computer applications used by the Company and the Subsidiaries may be
unable to recognize and properly perform date-sensitive functions involving
dates prior to and after December 31, 1999 (the "YEAR 2000 PROBLEM"). The
Company believes its internal information and business systems will be able to
perform properly date-sensitive functions for all dates before and after January
1, 2000. In addition, the Company is currently surveying those vendors,
suppliers and other third parties (collectively, the "OUTSIDE PARTIES") with
which the Company and the Subsidiaries do business and whose failure to
adequately address the Year 2000 Problem could reasonably be expected to
adversely affect the business and operations of the Company and the
Subsidiaries. Based upon the aforementioned internal review and surveys of the
Outside Parties as of the date of this Agreement, the Year 2000 Problem has not
resulted in, and is not reasonably expected to have, a Material Adverse Effect.

            DD. INTERNAL CONTROLS AND PROCEDURES. The Company maintains accurate
books and records and internal accounting controls that provide reasonable
assurance that (i) all transactions to which the Company or each of the
Subsidiaries is a party or by which its

                                      -17-

<PAGE>

properties are bound are executed with management's authorization; (ii) the
reported accountability of the Company's and the Subsidiaries' assets is
compared with existing assets at regular intervals; (iii) access to the
Company's and the Subsidiaries' assets is permitted only in accordance with
management's authorization; and (iv) all transactions to which each of the
Company and the Subsidiaries is a party or by which its properties are bound are
recorded as necessary to permit preparation of the financial statements of the
Company in accordance with GAAP.

            EE. PAYMENTS AND CONTRIBUTIONS. Neither the Company nor any of its
Subsidiaries nor any of their respective directors, officers or, to their
respective knowledge, other employees has (i) used any company funds for any
unlawful contribution, endorsement, gift, entertainment or other unlawful
expense relating to political activity; (ii) made any direct or indirect
unlawful payment of company funds to any foreign or domestic government official
or employee; (iii) violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977, as amended; or (iv) made any bribe, rebate,
payoff, influence payment, kickback or other similar payment to any person with
respect to the company matters.

            FF. NO MISREPRESENTATION. No representation or warranty of the
Company contained in this Agreement, any schedule, annex or exhibit hereto or
any agreement, instrument or certificate furnished by the Company to Buyer
pursuant to this Agreement, contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, not misleading.

            GG. FINDER'S FEE. There are no finder's fee, brokerage commission or
like payment in connection with the transactions contemplated by this Agreement
for which Buyer is liable or responsible. The Company will be solely responsible
for the payment of a finder's fee and brokerage commission to Avalon Research,
Inc.

                    IV. CERTAIN COVENANTS AND ACKNOWLEDGMENTS

            A. RESTRICTIVE LEGEND. Buyer acknowledges and agrees that, upon
issuance pursuant to this Agreement, the Securities (including any Dividends
Shares, Conversion Shares or the Warrant Shares) shall have endorsed thereon a
legend in substantially the following form (and a stop-transfer order may be
placed against transfer of the Preferred Shares, the Warrant Shares and the
Conversion Shares until such legend has been removed):

      "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
      1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
      STATE, AND ARE BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE
      REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THESE
      SECURITIES MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
      REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
      AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
      ACT OR SUCH OTHER LAWS."

                                      -18-

<PAGE>

            B. FILINGS. The Company shall make all necessary Commission Filings
and "blue sky" filings required to be made by the Company in connection with the
sale of the Securities to Buyer as required by all applicable Laws, and shall
provide a copy thereof to Buyer promptly after such filing.

            C. REPORTING STATUS. So long as Buyer beneficially owns any of the
Securities, the Company shall timely file all reports required to be filed by it
with the Commission pursuant to Section 13 or 15(d) of the Exchange Act.

            D. USE OF PROCEEDS. The Company shall use the net proceeds from the
sale of the Securities (excluding amounts paid by the Company for Buyer's
out-of-pocket costs and expenses whether or accounted for or incurred in
connection with the transactions contemplated by this Agreement (including the
fees and disbursements of Buyer's legal counsel) and finder's fees in connection
with such sale) solely for general corporate and working capital purposes.

            E. LISTING. Except to the extent the Company lists its Common Stock
on The New York Stock Exchange, the Company shall use its best efforts to
maintain its listing of the Common Stock on the Amex. If the Common Stock is
delisted from the Amex, the Company will use its best efforts to list the Common
Stock as promptly as possible on the most liquid national securities exchange or
quotation system that the Common Stock is qualified to be listed on.

            F. RESERVED CONVERSION SHARES. The Company at all times from and
after the date hereof shall have such number of shares of Common Stock duly and
validly authorized and reserved for issuance as shall be sufficient for the
conversion in full of, and the payment of dividends on, the Preferred Shares and
the exercise in full of the Warrants.

            G. RIGHT OF FIRST REFUSAL. The Company will use its best efforts to
provide Buyer with the opportunity to provide the financing in connection with
any financing contemplated by the Company that includes either the issuance of
equity securities or securities convertible into equity securities at a price
less than the Current Market Price (as defined in the Certificate of
Designation) on the date of issuance or the issuance of debt securities at a
price less than par value or having an effective annual interest rate in excess
of 9.9%.

            H. INFORMATION. Each of the parties hereto acknowledges and agrees
that Buyer shall not be provided with, nor be given access to, any material
non-public information relating to the Company and the Subsidiaries.

            I. EXEMPTION FROM INVESTMENT COMPANY ACT. The Company shall conduct
its business, and shall cause the Subsidiaries to conduct their businesses, in a
manner so that neither the Company nor any Subsidiary shall become an
"investment company" within the meaning of the Investment Company Act.

            J. ACCOUNTING AND RESERVES. The Company shall maintain a standard
and uniform system of accounting and shall keep proper books and records and
accounts in which full, true and correct entries shall be made of its
transactions, all in accordance with GAAP applied on a consistent basis through
all periods, and shall set aside on such books for each fiscal

                                      -19-

<PAGE>

year all such proper reserves for depreciation, obsolescence, amortization, bad
debts and other purposes in connection with its operations as are required by
such principles so applied.

            K. TRANSACTIONS WITH AFFILIATES. Neither the Company nor any of its
Subsidiaries shall, directly or indirectly, enter into any transaction or
agreement with any stockholder, officer director or Affiliate of the Company or
family member of any officer, director or Affiliate of the Company, unless the
transaction or agreement is (i) reviewed and approved by a majority of
Disinterested Directors (as defined below) and (ii) on terms no less favorable
to the Company or the applicable Subsidiary than those obtainable from a
non-affiliated person. A "DISINTERESTED DIRECTOR" shall mean an individual who
is not and who has not been an officer or employee of the Company and who is not
a member of the family of, controlled by or under common control with, any such
officer or employee.

            L. ISSUANCES OF ADDITIONAL CONVERTIBLE PREFERRED SHARES OR
CONVERTIBLE DEBENTURES. The Company shall not file with the Commission a
registration statement relating to the offer and sale of any additional
warrants, convertible preferred stock or convertible debt securities or Common
Stock into which any such convertible securities or warrants are convertible
into, unless, with respect to the registration of convertible securities or
warrants the terms of the convertible securities or warrants so registered
provide that under no circumstances will the securities be convertible into
Common Stock at a conversion price below $0.50 and, with respect to the
registration of Common Stock into which such convertible securities or warrants
are exchangeable into, the exchange of such convertible securities or warrants
into Common Stock will not occur at a price below $.50, in each case, until the
Registration Statement (as defined in the Registration Rights Agreement) shall
have been declared effective by the Commission and the Registration Statement
shall continuously be effective and in compliance with the provisions of the
Securities Act applicable thereto for a period of six months.

            M. CERTAIN RESTRICTION. So long as any Preferred Shares are
outstanding: (i) if any interest or dividends which shall have accrued on any
Preferred Shares shall not have been fully paid, when due or if the Company is
in default on any of the terms of any of the Documents, no dividends shall be
declared or paid or set apart for payment or other distribution declared or made
upon Junior Securities (as defined in the Certificate of Designation), which is
issued and outstanding as of the Closing Date, (ii) no dividends shall be
declared or paid or set apart for payment or other distribution declared or made
upon Junior Securities which shall be authorized or issued following the Closing
Date, and (iii) nor shall any Junior Securities be redeemed, purchased or
otherwise acquired (other than a redemption, purchase or other acquisition of
shares of Common Stock made for purposes of an employee incentive or benefit
plan (including a stock option plan) of the Company or any Subsidiary, for any
consideration (or any moneys be paid to or made available for a sinking fund for
the redemption of any shares of any such stock) by the Company, directly or
indirectly.

            N. TRANSFER AGENT. If requested by Buyer, the Company shall replace
the then Transfer Agent for the Common Stock with a Transfer Agent designated by
Buyer.

            0. CERTAIN RESTRICTIONS. Neither Buyer nor its affiliates nor any
person acting on its or their behalf shall enter into any put option, short
position or other similar

                                      -20-

<PAGE>

instrument or position with respect to the Common Stock and neither Buyer nor
any of its affiliates nor any person acting on its or their behalf will use at
any time shares of Common Stock acquired pursuant to this Agreement to settle
any put option, short position or other similar instrument or position that may
have been entered into prior to the execution of this Agreement; provided,
however, that nothing in this Section IV.O. shall operate to forbid Buyer or any
of its affiliates or any person acting on its or their behalf from selling, or
entering into any other transaction with respect to, the Common Stock
contemporaneously with or following such date and time as the person or persons
in whose name or names the Common Stock delivered at conversion of Preferred
Shares, as provided in the Certificate of Designation, shall be issuable shall
be deemed to have become the holder or holders of record of the Common Shares
represented thereby and all voting and other rights associated with the
beneficial ownership of such Common Shares shall have vested with such person or
persons.

                         V. TRANSFER AGENT INSTRUCTIONS

            A. The Company undertakes and agrees that no instruction other than
the instructions referred to in this Section V and customary stop transfer
instructions prior to the registration and sale of the Common Stock pursuant to
an effective Securities Act registration statement will be given to its transfer
agent for the Common Stock and that the Conversion Shares, the Dividend Shares
and the Warrants Shares otherwise shall be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement, the
Registration Rights Agreement and applicable law. Nothing contained in this
Section V.A. shall affect in any way Buyer's obligations and agreement to comply
with all applicable securities laws upon resale of such Common Stock. If, at any
time, Buyer provides the Company with an opinion of counsel reasonably
satisfactory to the Company that registration of the resale by Buyer of such
Common Stock is not required under the Securities Act and that the removal of
restrictive legends is permitted under applicable law, the Company shall permit
the transfer of such Common Stock and, promptly instruct the Company's transfer
agent to issue one or more certificates for Common Stock without any restrictive
legends endorsed thereon.

            B. Buyer shall have the right to convert the Preferred Shares by
telecopying an executed and completed Notice of Conversion (as defined in the
Certificate of Designation) to the Company. Each date on which a Notice of
Conversion is telecopied to and received by the Company in accordance with the
provisions hereof shall be deemed a Conversion Date (as defined in the
Certificate of Designation). The Company shall transmit the certificates
evidencing the shares of Common Stock issuable upon conversion of any Preferred
Shares (together with certificates evidencing any Preferred Shares not being so
converted) to Buyer via express courier, by electronic transfer or otherwise,
within five business days after receipt by the Company of the Notice of
Conversion (the "DELIVERY DATE"). Within 30 days after Buyer delivers the Notice
of Conversion to the Company, Buyer shall deliver to the Company the Preferred
Shares being converted.

            C. Buyer shall have the right to purchase shares of Common Stock
pursuant to exercise of the Warrants in accordance with its applicable terms of
the Warrants. The last date that the Company may deliver shares of Common Stock
issuable upon any exercise of Warrants is referred to herein as the "WARRANT
DELIVERY DATE."

                                      -21-

<PAGE>

            D. The Company understands that a delay in the issuance of the
shares of Common Stock issuable in lieu of cash dividends on the Preferred
Shares, upon the conversion of the Preferred Shares or exercise of the Warrants
beyond the applicable Dividend Payment Due Date (as defined in the Certificate
of Designation), Delivery Date or Warrant Delivery Date could result in economic
loss to Buyer. As compensation to Buyer for such loss (and not as a penalty),
the Company agrees to pay to Buyer for late issuance of Common Stock issuable in
lieu of cash dividends on the Preferred Shares, upon conversion of the Preferred
Shares or exercise of the Warrants in accordance with the following schedule
(where "NO. BUSINESS DAYS" is defined as the number of business days beyond five
business days from the Dividend Payment Due Date, the Delivery Date or the
Warrant Delivery Date, as applicable):

                                      COMPENSATION FOR EACH 10 SHARES OF
                                    PREFERRED SHARES NOT CONVERTED TIMELY OR
                                     500 SHARES OF COMMON STOCK ISSUABLE IN
                                    PAYMENT OF DIVIDENDS OR UPON EXERCISE OF
      NO. BUSINESS DAYS                 WARRANTS NOT ISSUED TIMELY
      -----------------             ----------------------------------------
           1                                             $25
           2                                              50
           3                                              75
           4                                             100
           5                                             125
           6                                             150
           7                                             175
           8                                             200
           9                                             225
           10                                            250
       more than 10                 $250 + $100 for each Business Day Late
                                    beyond 10 days

The Company shall pay to Buyer the compensation described above by the transfer
of immediately available funds upon Buyer's demand. Nothing herein shall limit
Buyer's right to pursue actual damages for the Company's failure to issue and
deliver Common Stock to Buyer, and in addition to any other remedies which may
be available to Buyer, in the event the Company fails for any reason to effect
delivery of such shares of Common Stock within five business days after the
relevant Dividend Payment Due Date, the Delivery Date or the Warrant Delivery
Date, as applicable, Buyer shall be entitled to rescind the relevant Notice of
Conversion or exercise of Warrants by delivering a notice to such effect to the
Company whereupon the Company and Buyer shall each be restored to their
respective original positions immediately prior to delivery of such Notice of
Conversion on delivery.

                            VI. DELIVERY INSTRUCTIONS

            The Securities shall be delivered by the Company to the Escrow Agent
pursuant to Section I.B. hereof on a "delivery-against-payment basis" at the
Closing.

                                      -22-

<PAGE>

                                VII. CLOSING DATE

            The date and time (the "CLOSING DATE") of the issuance and sale of
the Preferred Shares and the Warrants (the "CLOSING") shall be the date hereof
or such other as shall be mutually agreed upon in writing. The issuance and sale
of the Securities shall occur on the Closing Date at the offices of the Escrow
Agent. Notwithstanding anything to the contrary contained herein, the Escrow
Agent shall not be authorized to release to the Company the Purchase Price and
to Buyer the certificate(s) (I/N/O Buyer or I/N/O Buyer's nominee) evidencing
the Securities being purchased by Buyer unless the conditions set forth in
Section VIII.C. and IX.H. hereof have been satisfied.

                  VIII. CONDITIONS TO THE COMPANY'S OBLIGATIONS

            Buyer understands that the Company's obligation to sell the
Securities on the Closing Date to Buyer pursuant to this Agreement is
conditioned upon:

            A. Delivery by Buyer to the Escrow Agent of the Purchase Price;

            B. The accuracy on the Closing Date of the representations and
warranties of Buyer contained in this Agreement as if made on the Closing Date
(except for representations and warranties which, by their express terms, speak
as of and relate to a specified date, in which case such accuracy shall be
measured as of such specified date) and the performance by Buyer in all material
respects on or before the Closing Date of all covenants and agreements of Buyer
required to be performed by it pursuant to this Agreement on or before the
Closing Date; and

            C. There shall not be in effect any Law or order, ruling, judgment
or writ of any court or public or governmental authority restraining, enjoining
or otherwise prohibiting any of the transactions contemplated by this Agreement.

                      IX. CONDITIONS TO BUYER'S OBLIGATIONS

            The Company understands that Buyer's obligation to purchase the
Securities on the Closing Date pursuant to this Agreement is conditioned upon:

            A. Delivery by the Company to Buyer of evidence that the Certificate
of Designation has been filed and is effective.

            B. Delivery by the Company to the Escrow Agent of one or more
certificates (I/N/O Buyer or I/N/O Buyer's nominee) evidencing the Securities to
be purchased by Buyer pursuant to this Agreement;

            C. The accuracy on the Closing Date of the representations and
warranties of the Company contained in this Agreement as if made on the Closing
Date (except for representations and warranties which, by their express terms,
speak as of and relate to a specified date, in which case such accuracy shall be
measured as of such specified date) and the performance by the Company in all
material respects on or before the Closing Date of all covenants and agreements
of the Company required to be performed by it pursuant to this

                                      -23-

<PAGE>

Agreement on or before the Closing Date, all of which shall be confirmed to
Buyer by the chief executive officer of the Company by delivery of the
certificate to that effect;

            D. Buyer having received an opinion of counsel for the Company,
dated the Closing Date, in form, scope and substance reasonably satisfactory to
Buyer as to the matters set forth in Annex A;

            E. There not having occurred (i) any general suspension of trading
in, or limitation on prices listed for, the Common Stock on the Amex, (ii) the
declaration of a banking moratorium or any suspension of payments in respect of
banks in the United States, (iii) the commencement of a war, armed hostilities
or other international or national calamity directly or indirectly involving the
United States or any of its territories, protectorates or possessions, or (iv)
in the case of the foregoing existing at the date of this Agreement, a material
acceleration or worsening thereof;

            F. There not having occurred any event or development, and there
being in existence no condition, having or which reasonably and foreseeable
could have a Material Adverse Effect;

            G. The Company shall have delivered to Buyer (as provided in the
Escrow Instructions) reimbursement of Buyer's out-of-pocket costs and expenses
whether or not accounted for or incurred in connection with the transactions
contemplated by this Agreement (including the fees and disbursements of Buyer's
legal counsel) of $60,000;

            H. There shall not be in effect any Law or order, ruling, judgment
or writ of any court or public or governmental authority restraining, enjoining
or otherwise prohibiting any of the transactions contemplated by this Agreement;

            I. Delivery by the Company of irrevocable instructions to the
Company's transfer agent to reserve 10,000,000 shares of Common Stock for
issuance of the Conversion Shares, the Dividend Shares and the Warrant Shares;

            J. The Company shall have obtained all consents, approvals or
waivers from governmental authorities and third persons necessary for the
execution, delivery and performance of the Documents and the transactions
contemplated thereby, all without material cost to the Company; and

            K. Buyer shall have received such additional documents,
certificates, payment, assignments, transfers and other delivers, as it or its
legal counsel may reasonably request and as are customary to effect a closing of
the matters herein contemplated.

                                 X. TERMINATION

            A. TERMINATION BY MUTUAL WRITTEN CONSENT. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned, for any
reason and at any time prior to the Closing Date, by the mutual written consent
of the Company and Buyer.

                                      -24-

<PAGE>

            B. TERMINATION BY THE COMPANY OR BUYER. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned by action
of the Company or Buyer if (i) the Closing shall not have occurred at or prior
to 5:00 p.m., New York City time, on October [__], 1999 (the "LATEST CLOSING
DATE"); provided, however, that the right to terminate this Agreement pursuant
to this Section X.B. shall not be available to any party whose failure to
fulfill any of its obligations under this Agreement has been the cause of or
resulted in the failure of the Closing to occur at or before such time and date;
provided, further, however, that if the Closing shall not have occurred on or
prior to the Latest Closing Date, the Closing may only occur after the Latest
Closing Date with the written consent of Buyer.

            C. TERMINATION BY BUYER. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned by Buyer at any time prior to
the Closing Date, if (i) the Company shall have failed to comply with any of its
covenants or agreements contained in this Agreement, (ii) there shall have been
a breach by the Company with respect to any representation or warranty made by
it in this Agreement, (iii) there shall have occurred any event or development,
or there shall be in existence any condition, having or reasonably likely to
have a Material Adverse Effect or (iv) the Company shall have failed to satisfy
the conditions provided in Section IX hereof.

            D. TERMINATION BY THE COMPANY. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned by the Company at any time
prior to the Closing Date, if (i) Buyer shall have failed to comply with any of
its covenants or agreements contained in this Agreement or (ii) there shall have
been a breach by Buyer with respect to any representation or warranty made by it
in this Agreement, or (iii) Buyer shall have failed to satisfy the conditions
provided in Section VIII hereof.

            E. EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to this Section X, this Agreement shall thereafter become
void and have no effect, and no party hereto shall have any liability or
obligation to any other party hereto in respect of this Agreement, except that
the provisions of Article XI, this Section X.E. and Section X.F. shall survive
any such termination; provided, however, that no party shall be released from
any liability hereunder if this Agreement is terminated and the transactions
contemplated hereby abandoned by reason of (i) willful failure of such party to
perform its obligations hereunder or (ii) any misrepresentation made by such
party of any matter set forth herein.

                          XI. SURVIVAL; INDEMNIFICATION

            A. The representations, warranties and covenants made by each of the
Company and Buyer in this Agreement, the annexes, schedules and exhibits hereto
and in each instrument, agreement and certificate entered into and delivered by
them pursuant to this Agreement, shall survive the Closing and the consummation
of the transactions contemplated hereby. In the event of a breach or violation
of any of such representations, warranties or covenants, the party to whom such
representations, warranties or covenants have been made shall have all rights
and remedies for such breach or violation available to it under the provisions
of this Agreement or otherwise, whether at law or in equity, irrespective of any
investigation made by or on behalf of such party on or prior to the Closing
Date.

                                      -25-

<PAGE>

            B. The Company hereby agrees to indemnify and hold harmless Buyer,
its Affiliates and their respective officers, directors, partners and members
(collectively, the "BUYER INDEMNITEES"), from and against any and all losses,
claims, damages, judgments, penalties, liabilities and deficiencies
(collectively, "LOSSES"), and agrees to reimburse Buyer Indemnitees for all
out-of-pocket expenses (including the reasonable fees and expenses of legal
counsel), in each case promptly as incurred by Buyer Indemnitees and to the
extent arising out of or in connection with:

                  1. any breach of any of the Company's representations or
            warranties contained in this Agreement or the other Documents, or
            the annexes, schedules or exhibits hereto or thereto or any
            instrument, agreement or certificate entered into or delivered by
            the Company pursuant to this Agreement or the other Documents;

                  2. the purchase of the Preferred Shares and the Warrants, the
            conversion of the Preferred Shares, the exercise of the Warrants,
            the consummation of the transactions contemplated by this Agreement
            and the other Documents, the use of any of the proceeds of the
            Purchase Price by the Company, the purchase or ownership of any or
            all of the Securities, the performance by the parties hereto of
            their respective obligations hereunder and under the Documents or
            any claim, litigation, investigation, proceedings or governmental
            action relating to any of the foregoing, whether or not Buyer is a
            party thereto; and

                  3. resales of the Common Shares by Buyer in the manner and as
            contemplated by this Agreement and the Registration Rights
            Agreement.

            C. Buyer hereby agrees to indemnify and hold harmless the Company,
its Affiliates and their respective officers, directors, partners and members
(collectively, the "COMPANY INDEMNITEES"), from and against any and all Losses,
and agrees to reimburse the Company Indemnitees for all out-of-pocket expenses
(including the reasonable fees and expenses of legal counsel), in each case
promptly as incurred by the Company Indemnitees and to the extent arising out of
or in connection with:

                  1. any misrepresentation, omission of fact, or breach of any
            of Buyer's representations or warranties contained in this Agreement
            or the other Documents, or the annexes, schedules or exhibits hereto
            or thereto or any instrument, agreement or certificate entered into
            or delivered by Buyer pursuant to this Agreement or the other
            Documents; and

                  2. any failure by Buyer to perform in any material respect any
            of its covenants, agreements, undertakings or obligations set forth
            in this Agreement or the other Documents or any instrument,
            certificate or agreement entered into or delivered by Buyer pursuant
            to this Agreement or the other Documents.

            D. Promptly after receipt by either party hereto seeking
indemnification pursuant to this Section XI (an "INDEMNIFIED PARTY") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "CLAIM"), the Indemnified Party
promptly shall notify the party against whom indemnification

                                      -26-

<PAGE>

pursuant to this Section XI is being sought (the "INDEMNIFYING PARTY") of the
commencement thereof; but the omission to so notify the Indemnifying Party shall
not relieve it from any liability that it otherwise may have to the Indemnified
Party except to the extent that the Indemnifying Party is materially prejudiced
and forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay such fees,
out-of-pocket costs and expenses, (y) the Indemnified Party and the Indemnifying
Party reasonably shall have concluded that representation of the Indemnified
Party and the Indemnifying Party by the same legal counsel would not be
appropriate due to actual or, as reasonably determined by legal counsel to the
Indemnified Party, potentially differing interests between such parties in the
conduct of the defense of such Claim, or if there may be legal defenses
available to the Indemnified Party that are in addition to or disparate from
those available to the Indemnifying Party, or (z) the Indemnifying Party shall
have failed to employ legal counsel reasonably satisfactory to the Indemnified
Party within a reasonable period of time after notice of the commencement of
such Claim. If the Indemnified Party employs separate legal counsel in
circumstances other than as described in clauses (x), (y) or (z) above, the
fees, costs and expenses of such legal counsel shall be borne exclusively by the
Indemnified Party. Except as provided above, the Indemnifying Party shall not,
in connection with any Claim in the same jurisdiction, be liable for the fees
and expenses of more than one firm of legal counsel for the Indemnified Party
(together with appropriate local counsel). The Indemnifying Party shall not,
without the prior written consent of the Indemnified Party (which consent shall
not unreasonably be withheld), settle or compromise any Claim or consent to the
entry of any judgment that does not include an unconditional release of the
Indemnified Party from all liabilities with respect to such Claim or judgment.

            E. In the event one party hereunder should have a claim for
indemnification that does not involve a claim or demand being asserted by a
third party, the Indemnified Party promptly shall deliver notice of such claim
to the Indemnifying Party. If the Indemnified Party disputes the claim, such
dispute shall be resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration conducted in accordance with the
procedures and rules of the American Arbitration Association. Judgment upon any
award rendered by any arbitrators may be entered in any court having competent
jurisdiction thereof.

                               XII. GOVERNING LAW

            This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York, without regard to the conflicts of law
principles of such state.

                                      -27-

<PAGE>

                        XIII. SUBMISSION TO JURISDICTION

            Each of the parties hereto consents to the exclusive jurisdiction of
the federal courts whose districts encompass any part of the City of New York or
the state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and the other
Documents. Each party hereto hereby irrevocably and unconditionally waives, to
the fullest extent it may effectively do so, any defense of an inconvenient
forum or improper venue to the maintenance of such action or proceeding in any
such court and any right of jurisdiction on account of its place of residence or
domicile. Each party hereto irrevocably and unconditionally consents to the
service of any and all process in any such action or proceeding in such courts
by the mailing of copies of such process by certified or registered airmail at
its address specified in Section XIX. Each party hereto agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.

                            XIV. WAIVER OF JURY TRIAL

            TO THE FULLEST EXTENT PERMITTED BY LAW, EACH OF THE PARTIES HERETO
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ITS RESPECTIVE RIGHTS TO
A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY OTHER DOCUMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THIS AGREEMENT AND OTHER DOCUMENTS. EACH PARTY HERETO (i)
CERTIFIES THAT NEITHER OF THEIR RESPECTIVE REPRESENTATIVES, AGENTS OR ATTORNEYS
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (ii) ACKNOWLEDGES THAT
IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS HEREIN.

                           XV. COUNTERPARTS; EXECUTION

            This Agreement may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all the counterparts shall
together constitute one and the same instrument. A facsimile transmission of
this signed Agreement shall be legal and binding on all parties hereto.

                                  XVI. HEADINGS

            The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.

                                      -28-

<PAGE>

                               XVII. SEVERABILITY

            In the event any one or more of the provisions contained in this
Agreement or in the other Documents should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein or therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.

            XVIII. ENTIRE AGREEMENT; REMEDIES, AMENDMENTS AND WAIVERS

            This Agreement and the Documents constitute the entire agreement
among the parties pertaining to the subject matter hereof and supersedes all
prior agreements, understandings, negotiations and discussions, whether oral or
written, of the parties. No supplement, modification or waiver of this Agreement
shall be binding unless executed in writing by all parties. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.

                                  XIX. NOTICES

            Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally recognized overnight courier service, and shall be deemed given
when so delivered personally or by overnight courier service, or, if mailed,
three (3) days after the date of deposit in the United States mails, as follows:

            A.    if to the Company, to:

                  Commodore Applied Technologies, Inc.
                  150 East 58th Street, Suite 3400
                  New York, NY 10155
                  Attention:
                  (212) 308-5800
                  (212) 752-0731 (Fax)

                  with a copy to:

                  Greenberg Traurig
                  200 Park Avenue
                  New York, NY 10166
                  Attention: Stephen A. Weiss, Esq.
                  (212) 801-9253
                  (212) 801-6400 (Fax)

            B.    if to Buyer, to:

                                      -29-

<PAGE>

                  The Shaar Fund Ltd.
                  c/o Levinson Capital Management
                  2 World Trade Center, Suite 1820
                  New York, NY 10048
                  Attention:   Samuel Levinson
                  (212) 432-7711
                  (212) 432-7771 (Fax)

                  with a copy to:

                  Cadwalader, Wickersham & Taft
                  100 Maiden Lane
                  New York, NY 10038
                  Attention:   Dennis J. Block, Esq.
                  (212) 504-5555
                  (212) 504-5557 (Fax)

            C.    if to the Escrow Agent, to:

                  Cadwalader, Wickersham & Taft
                  100 Maiden Lane
                  New York, NY 10038
                  Attention:   Dennis J. Block, Esq.
                  (212) 504-5555
                  (212) 504-5557 (Fax)

The Company, Buyer or the Escrow Agent may change the foregoing address by
notice given pursuant to this Section XIII.

                               XX. CONFIDENTIALITY

            Each of the Company and Buyer agrees to keep confidential and not to
disclose to or use for the benefit of any third party the terms of this
Agreement or any other information which at any time is communicated by the
other party as being confidential without the prior written approval of the
other party; provided, however, that this provision shall not apply to
information which, at the time of disclosure, is already part of the public
domain (except by breach of this Agreement) and information which is required to
be disclosed by law (including, without limitation, pursuant to Item 601(b)(10)
of Regulation S-K under the Securities Act and the Exchange Act).

                                 XXI. ASSIGNMENT

            This Agreement shall not be assignable by either of the parties
hereto prior to the Closing without the prior written consent of the other
party, and any attempted assignment contrary to the provisions hereby shall be
null and void; provided, however, that Buyer may assign its rights and
obligations hereunder, in whole or in part, to any affiliate of Buyer.

                                      -30-

<PAGE>

            IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement on the date first above written.

                                   COMMODORE APPLIED TECHNOLOGIES, INC.

                                   By: /s/ Paul Hannesson
                                       -----------------------------------------
                                       Name: Paul Hannesson
                                       Title: CEO

                                   THE SHAAR FUND LTD.

                                   By:
                                       -----------------------------------------
                                       Name: Samuel Levinson
                                       Title: Managing Director

                                      -31-

<PAGE>

            IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement on the date first above written.

                                   COMMODORE APPLIED TECHNOLOGIES, INC.

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

                                   THE SHAAR FUND LTD.

                                   By: /s/ Samuel Levinson
                                       -----------------------------------------
                                       Name: Samuel Levinson
                                       Title: Managing Director

                                      -31-REGISTRATION RIGHTS AGREEMENT

            THIS REGISTRATION RIGHTS AGREEMENT, dated as of November 4, 1999
(this "AGREEMENT"), by and between Commodore Applied Technologies, Inc., a
Delaware corporation, with principal executive offices located at 150 East 58th
Street, Suite 3400, New York, New York 10155 (the "COMPANY"), and The Shaar Fund
Ltd. (the "INITIAL INVESTOR").

            WHEREAS, upon the terms and subject to the conditions of the
Securities Purchase Agreement dated as of November 4, 1999, by and between the
Initial Investor and the Company (the "SECURITIES PURCHASE AGREEMENT"), the
Company has agreed to issue and sell to the Initial Investor (i) 335,000 shares
of Series E Convertible Preferred Stock, par value $0.001 per share (the
"PREFERRED SHARES"), which, upon the terms of and subject to the conditions of
the Company's Certificate of Designation of Series E Convertible Preferred Stock
(the "CERTIFICATE OF DESIGNATION"), are convertible into shares of the Company's
common stock, par value $0.001 per share (the "COMMON STOCK") and (ii) Common
Stock Purchase Warrants (the "WARRANTS") to purchase 312,500 shares of Common
Stock; and

            WHEREAS, to induce the Initial Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide with respect to
the Common Stock issued or issuable in lieu of cash dividend payments on the
Preferred Shares, upon conversion of the Preferred Shares and exercise of the
Warrants certain registration rights under the Securities Act;

            NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:

            1. DEFINITIONS

            (a) As used in this Agreement, the following terms shall have the
meanings:

                  (i) "AFFILIATE," of any specified Person means any other
      Person who directly, or indirectly through one or more intermediaries, is
      in control of, is controlled by, or is under common control with, such
      specified Person. For purposes of this definition, control of a Person
      means the power, directly or indirectly, to direct or cause the direction
      of the management and policies of such Person whether by contract,
      securities, ownership or otherwise; and the terms "CONTROLLING" and
      "CONTROLLED" have the respective meanings correlative to the foregoing.

                  (ii) "CLOSING DATE" means the date and time of the issuance
      and sale of the Preferred Shares and the Warrants pursuant to the
      Securities Purchase Agreement.

                  (iii) "COMMISSION" means the Securities and Exchange
      Commission.

<PAGE>

                  (iv) "CURRENT MARKET PRICE" means on any date of determination
      the closing price of a Common Share on such day as reported on the Amex;
      provided, if such security is listed and admitted to trading on the
      NASDAQ, the closing bid price of a Common Share on such day as reported on
      the NASDAQ, or, if not quoted or listed or admitted to trading on any
      national securities exchange or quotation system, the closing bid price of
      such security on the over-the-counter market on the day in question as
      reported by Bloomberg LP, or a similar generally accepted reporting
      service, as the case may be.

                  (v) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
      as amended, and the rules and regulations of the Commission thereunder, or
      any similar successor statute.

                  (vi) "INVESTOR" means each of the Initial Investor and any
      transferee or assignee of Registrable Securities which agrees to become
      bound by all of the terms and provisions of this Agreement in accordance
      with Section 8 hereof.

                  (vii) "NASDAQ" means the Nasdaq National Market or the Nasdaq
      SmallCap Market, as the case may be.

                  (viii) "PERSON" means any individual, partnership,
      corporation, limited liability company, joint stock company, association,
      trust, unincorporated organization, or a government or agency or political
      subdivision thereof.

                  (ix) "PROSPECTUS" means the prospectus (including, without
      limitation, any preliminary prospectus and any final prospectus filed
      pursuant to Rule 424(b) under the Securities Act, including any prospectus
      that discloses information previously omitted from a prospectus filed as
      part of an effective registration statement in reliance on Rule 430A under
      the Securities Act) included in the Registration Statement, as amended or
      supplemented by any prospectus supplement with respect to the terms of the
      offering of any portion of the Registrable Securities covered by the
      Registration Statement and by all other amendments and supplements to such
      prospectus, including all material incorporated by reference in such
      prospectus and all documents filed after the date of such prospectus by
      the Company under the Exchange Act and incorporated by reference therein.

                  (x) "PUBLIC OFFERING" means an offer registered with the
      Commission and the appropriate state securities commissions by the Company
      of its Common Stock and made pursuant to the Securities Act.

                  (xi) "REGISTRABLE SECURITIES" means the Common Stock issued or
      issuable (i) in lieu of cash dividend payments on the Preferred Shares,
      (ii) upon conversion or redemption of the Preferred Shares or (iii) upon
      exercise of the Warrants; provided, however, a share of Common Stock shall
      cease to be a Registrable Security for purposes of this Agreement when it
      no longer is a Restricted Security.

                  (xii) "REGISTRATION STATEMENT" means a registration statement
      of the Company filed on an appropriate form under the Securities Act
      providing for the

                                       2

<PAGE>

      registration of, and the sale on a continuous or delayed basis by the
      holders of, all of the Registrable Securities pursuant to Rule 415 under
      the Securities Act, including the Prospectus contained therein and forming
      a part thereof, any amendments to such registration statement and
      supplements to such Prospectus, and all exhibits to and other material
      incorporated by reference in such registration statement and Prospectus.

                  (xiii) "RESTRICTED SECURITY" means any share of Common Stock
      issued or issuable in lieu of cash dividend payments on the Preferred
      Shares, upon conversion or redemption of the Preferred Shares or exercise
      of the Warrants except any such share that (i) has been registered
      pursuant to an effective registration statement under the Securities Act
      and sold in a manner contemplated by the prospectus included in such
      registration statement, (ii) has been transferred in compliance with the
      resale provisions of Rule 144 under the Securities Act (or any successor
      provision thereto) or is transferable pursuant to paragraph (k) of Rule
      144 under the Securities Act (or any successor provision thereto), or
      (iii) otherwise has been transferred and a new share of Common Stock not
      subject to transfer restrictions under the Securities Act has been
      delivered by or on behalf of the Company.

                  (xiv) "SECURITIES ACT" means the Securities Act of 1933, as
      amended, and the rules and regulations of the Commission thereunder, or
      any similar successor statute.

            (b) All capitalized terms used and not defined herein have the
respective meaning assigned to them in the Securities Purchase Agreement.

            2. REGISTRATION

            (a) FILING AND EFFECTIVENESS OF REGISTRATION STATEMENT. The Company
shall prepare and file with the Commission not later than 60 days after the
Closing Date, a Registration Statement relating to the offer and sale of the
Registrable Securities in the amount of 7,500,000 shares of Common Stock and
shall use its best efforts to cause the Commission to declare such Registration
Statement effective under the Securities Act as promptly as practicable but in
no event later than April 30, 2000. The Company shall promptly (and, in any
event, no more than 24 hours after it receives comments from the Commission),
notify the Buyer when and if it receives any comments from the Commission on the
Registration Statement and promptly forward a copy of such comments, if they are
in writing, to the Buyer. At such time after the filing of the Registration
Statement pursuant to this Section 2(a) as the Commission indicates, either
orally or in writing, that it has no further comments with respect to such
Registration Statement or that it is willing to entertain appropriate requests
for acceleration of effectiveness of such Registration Statement, the Company
shall promptly, and in no event later than two business days after receipt of
such indication from the Commission, request that the effectiveness of such
Registration Statement be accelerated within 48 hours of the Commission's
receipt of such request. Except as set forth on Schedule A annexed hereto, the
Company shall not include any other securities in the Registration Statement
relating to the offer and sale of the Registrable Securities. The Company shall
notify the Initial Investor by written notice that such Registration Statement
has been declared effective by the Commission within 24 hours of such
declaration by the Commission.

                                       3

<PAGE>

            (b) REGISTRATION DEFAULT. If the Registration Statement covering the
Registrable Securities required to be filed by the Company pursuant to Section
2(a), is not (i) filed with the Commission within 75 days after the Closing Date
or (ii) declared effective by the Commission on or before April 30, 2000 (either
of which, without duplication, an "INITIAL DATE"), then the Company shall make
the payments to the Initial Investor as provided in the next sentence as
liquidated damages and not as a penalty. The amount to be paid by the Company to
the Initial Investor shall be determined as of each Computation Date (as defined
below), and such amount shall be equal to, in the case of clause (ii) above, 1%
of the Purchase Price (as defined in the Securities Purchase Agreement) from the
Initial Date to the first Computation Date and, in the case of clause (i) above,
from the Initial Date to the first Computation Date and for each Computation
Date thereafter and in the case of clause (ii) above from the first Computation
Date to the next Computation Date and for each Computation Date thereafter, 2%
of the Purchase Price, calculated, in each case, on a pro rata basis to the date
on which the Registration Statement is filed with (in the event of an Initial
Date pursuant to clause (i) above) or declared effective by (in the event of an
Initial Date pursuant to clause (ii) above) the Commission (the "PERIODIC
AMOUNT") provided, however, that in no event shall the liquidated damages be
less than $25,000; provided, further, however, that if the Registration
Statement is not declared effective by the Commission within 210 days after the
Initial Date set forth in clause (ii) above, then the Liquidated Damage Rate
shall increase to 4%; provided, further, however, that the Liquidated Damage
Rate shall increase by 1% for each 30 day period after the 210th day after the
Initial Date set forth in clause (ii) above that the Registration Statement is
not declared effective by the Commission. The full Periodic Amount shall be paid
by the Company to the Initial Investor by wire transfer of immediately available
funds within three days after each Computation Date.

            As used in this Section 2(b), "COMPUTATION DATE" means the date
which is 30 days after the Initial Date and, if the Registration Statement
required to be filed by the Company pursuant to Section 2(a) has not theretofore
been declared effective by the Commission, each date which is 30 days after the
previous Computation Date until such Registration Statement is so declared
effective.

            (c) ELIGIBILITY FOR USE OF FORM S-3. The Company agrees that at such
time as it meets all the requirements for the use of Securities Act Registration
Statement on Form S-3 it shall file all reports and information required to be
filed by it with the Commission in a timely manner and take all such other
action so as to maintain such eligibility for the use of such form.

            (d) ADDITIONAL REGISTRATION STATEMENT. In the event the Current
Market Price declines to $.50 per share or less and each time thereafter that
the Current Market Price declines by 20% (each such date, a "DECLINE DATE"), the
Company shall, to the extent required by the Securities Act (because the
additional shares were not covered by the Registration Statement filed pursuant
to Section 2(a)), as reasonably determined by the Initial Investor, file an
additional Registration Statement (an "ADDITIONAL REGISTRATION STATEMENT") or
pre-effective amendment to the original Registration Statement with the
Commission for such additional number of Registrable Securities as would be
issuable upon conversion of the Preferred Shares and exercise of the Warrants
(the "ADDITIONAL REGISTRABLE SECURITIES") in addition to those previously
registered, assuming (x) with respect to the first Additional Registration
Statement, a Conversion Price of $.50 per share and (y) with respect to each
succeeding Additional

                                       4

<PAGE>

Registration Statement, a Conversion Price of 20% less than the Conversion Price
assumed with respect to the immediately preceding Additional Registration
Statement The Company shall, to the extent required by the Securities Act, as
reasonably determined by the Initial Investor, prepare and file with the
Commission not later than the 30th day thereafter, a Registration Statement
relating to the offer and sale of such Additional Registrable Securities and
shall use its best efforts to cause the Commission to declare such Registration
Statement effective under the Securities Act as promptly as practicable but not
later than 60 days thereafter. The Company shall not include any other
securities in the Registration Statement relating to the offer and sale of such
Additional Registrable Securities.

            If the Additional Registration Statement is not (i) filed with the
Commission within 30 days after the Decline Date or (ii) declared effective by
the Commission within 90 days after the Decline Date (either of which, without
duplication, an "ADDITIONAL REGISTRATION DATE"), then the Company shall make the
payments to the Initial Investor at the Liquidated Damage Rate from the
Additional Registration Date to the first Additional Computation Date and for
each Additional Computation Date thereafter, calculated on a pro rata basis to
the date on which the Additional Registration Statement is filed with (in the
event of an Additional Registration Date pursuant to clause (i) above) or
declared effective by (in the event of an Additional Registration Date pursuant
to clause (ii) above) the Commission (the "ADDITIONAL PERIODIC AMOUNT")
provided, however, that in no event shall the liquidated damages be less than
$25,000; provided, further, however, that if the Additional Registration
Statement is not declared effective by the Commission within 120 days after the
Additional Registration Date set forth in clause (ii) above, then the Liquidated
Damage Rate shall increase to 4%; provided, further, however, that the
Liquidated Damage Rate shall increase by 1% for each 30 day period after the
120th day after the Additional Registration Date set forth in clause (ii) above
that the Additional Registration Statement is not declared effective by the
Commission. The full Additional Periodic Amount shall be paid by the Company to
the Initial Investor by wire transfer of immediately available funds within
three days after each Additional Computation Date.

            As used in this Section 2(d), "ADDITIONAL COMPUTATION DATE" means
the date which is 30 days after the Additional Registration Date and, if the
Additional Registration Statement required to be filed by the Company pursuant
to this Section 2(d) has not theretofore been declared effective by the
Commission, each date which is 30 days after the previous Additional Computation
Date until such Additional Registration Statement is so declared effective.

            Notwithstanding anything to the contrary, express or implied,
contained in this Section 2(d), the obligations of the Company to file any
Additional Registration Statement(s) pursuant to the provisions hereof shall be
subject at all times to the limitations set forth in Section 6.9 of the
Certificate of Designation applicable to the Preferred Shares.

            (e) (i) If the Company proposes to register any of its warrants,
      Common Stock or any other shares of common stock of the Company under the
      Securities Act (other than a registration (A) on Form S-8 or S-4 or any
      successor or similar forms, (B) relating to Common Stock or any other
      shares of common stock of the Company issuable upon exercise of employee
      share options or in connection with any employee benefit or similar plan
      of the Company or (C) in connection with a direct or indirect acquisition
      by

                                       5

<PAGE>

      the Company of another Person or any transaction with respect to which
      Rule 145 (or any successor provision) under the Securities Act applies),
      whether or not for sale for its own account, it will each such time, give
      prompt written notice at least 20 days prior to the anticipated filing
      date of the registration statement relating to such registration to each
      Investor, which notice shall set forth such Investor's rights under this
      Section 3(e) and shall offer such Investor the opportunity to include in
      such registration statement such number of Registrable Securities as such
      Investor may request. Upon the written request of any Investor made within
      10 days after the receipt of notice from the Company (which request shall
      specify the number of Registrable Securities intended to be disposed of by
      such Investor), the Company will use its best efforts to effect the
      registration under the Securities Act of all Registrable Securities that
      the Company has been so requested to register by each Investor, to the
      extent requisite to permit the disposition of the Registrable Securities
      so to be registered; provided, however, that (A) if such registration
      involves a Public Offering, each Investor must sell its Registrable
      Securities to any underwriters selected by the Company with the consent of
      such Investor on the same terms and conditions as apply to the Company and
      (B) if, at any time after giving written notice of its intention to
      register any Registrable Securities pursuant to this Section 3 and prior
      to the effective date of the registration statement filed in connection
      with such registration, the Company shall determine for any reason not to
      register such Registrable Securities, the Company shall give written
      notice to each Investor and, thereupon, shall be relieved of its
      obligation to register any Registrable Securities in connection with such
      registration. The Company's obligations under this Section 2(e) shall
      terminate on the date that the registration statement to be filed in
      accordance with Section 2(a) is declared effective by the Commission.

                  (ii) If a registration pursuant to this Section 2(e) involves
      a Public Offering and the managing underwriter thereof advises the Company
      that, in its view, the number of shares of Common Stock, Warrants or other
      shares of Common Stock that the Company and the Investors intend to
      include in such registration exceeds the largest number of shares of
      Common Stock or Warrants (including any other shares of Common Stock or
      Warrants of the Company) that can be sold without having an adverse effect
      on such Public Offering (the "MAXIMUM OFFERING SIZE"), the Company will
      include in such registration only such number of shares of Common Stock or
      Warrants, as applicable, as does not exceed the Maximum Offering Size, and
      the number of shares in the Maximum Offering Size shall be allocated among
      the Company, the Investors and any other sellers of Common Stock or
      Warrants in such Public Offering ("THIRD-PARTY SELLERS"), first, pro rata
      among the Investors until all the shares of Common Stock or Warrants
      originally proposed to be offered for sale by the Investors have been
      allocated, and second, pro rata among the Company and any Third-Party
      Sellers, in each case on the basis of the relative number of shares of
      Common Stock or Warrants originally proposed to be offered for sale under
      such registration by each of the Investors, the Company and the
      Third-Party Sellers, as the case may be. If as a result of the proration
      provisions of this Section 2(e)(ii), any Investor is not entitled to
      include all such Registrable Securities in such registration, such
      Investor may elect to withdraw its request to include any Registrable
      Securities in such registration. With respect to registrations pursuant to
      this Section 2(e), the number of securities required to satisfy any
      underwriters' over-allotment option shall be allocated among the Company,
      the Investors and any Third Party Seller pro rata on the

                                       6

<PAGE>

      basis of the relative number of securities offered for sale under such
      registration by each of the Investors, the Company and any such Third
      Party Sellers before the exercise of such over-allotment option.

            3. OBLIGATIONS OF THE COMPANY

            In connection with the registration of the Registrable Securities,
the Company shall:

            (a) Promptly (i) prepare and file with the Commission such
amendments (including post-effective amendments) to the Registration Statement
and supplements to the Prospectus as may be necessary to keep the Registration
Statement continuously effective and in compliance with the provisions of the
Securities Act applicable thereto so as to permit the Prospectus forming part
thereof to be current and useable by Investors for resales of the Registrable
Securities for a period of five years from the date on which the Registration
Statement is first declared effective by the Commission (the "EFFECTIVE TIME")
or such shorter period that will terminate when all the Registrable Securities
covered by the Registration Statement have been sold pursuant thereto in
accordance with the plan of distribution provided in the Prospectus, transferred
pursuant to Rule 144 under the Securities Act or otherwise transferred in a
manner that results in the delivery of new securities not subject to transfer
restrictions under the Securities Act (the "REGISTRATION PERIOD") and (ii) take
all lawful action such that each of (A) the Registration Statement and any
amendment thereto does not, when it becomes effective, 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, not misleading and
(B) the Prospectus forming part of the Registration Statement, and any amendment
or supplement thereto, does not at any time during the Registration Period
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.

            (b) During the Registration Period, comply with the provisions of
the Securities Act with respect to the Registrable Securities of the Company
covered by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the Investors as set forth in the Prospectus forming part of the
Registration Statement;

            (c) (i) Prior to the filing with the Commission of any Registration
Statement (including any amendments thereto) and the distribution or delivery of
any Prospectus (including any supplements thereto), provide (A) draft copies
thereof to the Investors and reflect in such documents all such comments as the
Investors (and their counsel) reasonably may propose and (B) to the Investors a
copy of the accountant's consent letter to be included in the filing and (ii)
furnish to each Investor whose Registrable Securities are included in the
Registration Statement and its legal counsel identified to the Company, (A)
promptly after the same is prepared and publicly distributed, filed with the
Commission, or received by the Company, one copy of the Registration Statement,
each Prospectus, and each amendment or supplement thereto, and (B) such number
of copies of the Prospectus and all amendments and supplements thereto and such

                                       7

<PAGE>

other documents, as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor;

            (d) (i) Register or qualify the Registrable Securities covered by
the Registration Statement under such securities or "blue sky" laws of such
jurisdictions as the Investors who hold a majority-in-interest of the
Registrable Securities being offered reasonably request, (ii) prepare and file
in such jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof at all times during the Registration Period,
(iii) take all such other lawful actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period, and (iv) take all such other lawful actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (B) subject itself to general taxation in any such jurisdiction or
(C) file a general consent to service of process in any such jurisdiction;

            (e) As promptly as practicable after becoming aware of such event,
notify each Investor of the occurrence of any event, as a result of which the
Prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and
promptly prepare an amendment to the Registration Statement and supplement to
the Prospectus to correct such untrue statement or omission, and deliver a
number of copies of such supplement and amendment to each Investor as such
Investor may reasonably request;

            (f) As promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the Commission of any stop order or other suspension of the effectiveness of the
Registration Statement at the earliest possible time and take all lawful action
to effect the withdrawal, recession or removal of such stop order or other
suspension;

            (g) Cause all the Registrable Securities covered by the Registration
Statement to be listed on the principal national securities exchange, and
included in an inter-dealer quotation system of a registered national securities
association, on or in which securities of the same class or series issued by the
Company are then listed or included;

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

            (i) Cooperate with the Investors who hold Registrable Securities
being offered to facilitate the timely preparation and delivery of certificates
for the Registrable Securities to be offered pursuant to the registration
statement and enable such certificates for the Registrable Securities to be in
such denominations or amounts, as the case may be, as the Investors reasonably
may request and registered in such names as the Investor may request; and,
within three business days after a registration statement which includes
Registrable Securities is

                                       8

<PAGE>

declared effective by the Commission, deliver and cause legal counsel selected
by the Company to deliver to the transfer agent for the Registrable Securities
(with copies to the Investors whose Registrable Securities are included in such
registration statement) an appropriate instruction and, to the extent necessary,
an opinion of such counsel;

            (j) Take all such other lawful actions reasonably necessary to
expedite and facilitate the disposition by the Investors of their Registrable
Securities in accordance with the intended methods therefor provided in the
Prospectus which are customary under the circumstances;

            (k) Make generally available to its security holders as soon as
practicable, but in any event not later than three (3) months after (i) the
effective date (as defined in Rule 158(c) under the Securities Act) of the
Registration Statement, and (ii) the effective date of each post-effective
amendment to the Registration Statement, as the case may be, an earnings
statement of the Company and its subsidiaries complying with Section 11(a) of
the Securities Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);

            (l) In the event of an underwritten offering, promptly include or
incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the managers reasonably agree should
be included therein and to which the Company does not reasonably object and make
all required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after it is notified of the matters to be included or
incorporated in such Prospectus supplement or post-effective amendment;

            (m) (i) Make reasonably available for inspection by Investors, any
underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by such
Investors or any such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and (ii) cause the Company's officers, directors and employees to
supply all information reasonably requested by such Investors or any such
underwriter, attorney, accountant or agent in connection with the Registration
Statement, in each case, as is customary for similar due diligence examinations;
provided, however, that all records, information and documents that are
designated in writing by the Company, in good faith, as confidential,
proprietary or containing any material nonpublic information shall be kept
confidential by such Investors and any such underwriter, attorney, accountant or
agent (pursuant to an appropriate confidentiality agreement in the case of any
such holder or agent), unless such disclosure is made pursuant to judicial
process in a court proceeding (after first giving the Company an opportunity
promptly to seek a protective order or otherwise limit the scope of the
information sought to be disclosed) or is required by law, or such records,
information or documents become available to the public generally or through a
third party not in violation of an accompanying obligation of confidentiality;
and provided, further, that, if the foregoing inspection and information
gathering would otherwise disrupt the Company's conduct of its business, such
inspection and information gathering shall, to the maximum extent possible, be
coordinated on behalf of the Investors and the other parties entitled thereto by
one firm of counsel designed by and on behalf of the majority in interest of
Investors and other parties;

                                       9

<PAGE>

            (n) In connection with any underwritten offering, make such
representations and warranties to the Investors participating in such
underwritten offering and to the managers, in form, substance and scope as are
customarily made by the Company to underwriters in secondary underwritten
offerings;

            (o) In connection with any underwritten offering, obtain opinions of
counsel to the Company (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managers) addressed to the
underwriters, covering such matters as are customarily covered in opinions
requested in secondary underwritten offerings (it being agreed that the matters
to be covered by such opinions shall include, without limitation, as of the date
of the opinion and as of the Effective Time of the Registration Statement or
most recent post-effective amendment thereto, as the case may be, the absence
from the Registration Statement and the Prospectus, including any documents
incorporated by reference therein, of an untrue statement of a material fact or
the omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading, subject to customary
limitations);

            (p) In connection with any underwritten offering, obtain "cold
comfort" letters and updates thereof from the independent public accountants of
the Company (and, if necessary, from the independent public accountants of any
subsidiary of the Company or of any business acquired by the Company, in each
case for which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to each underwriter
participating in such underwritten offering (if such underwriter has provided
such letter, representations or documentation, if any, required for such cold
comfort letter to be so addressed), in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
secondary underwritten offerings;

            (q) In connection with any underwritten offering, deliver such
documents and certificates as may be reasonably required by the managers, if
any; and

            (r) In the event that any broker-dealer registered under the
Exchange Act shall be an "AFFILIATE" (as defined in Rule 2729(b)(1) of the rules
and regulations of the National Association of Securities Dealers, Inc. (the
"NASD RULES") (or any successor provision thereto)) of the Company or has a
"CONFLICT OF INTEREST" (as defined in Rule 2720(b)(7) of the NASD Rules (or any
successor provision thereto)) and such broker-dealer shall underwrite,
participate as a member of an underwriting syndicate or selling group or assist
in the distribution of any Registrable Securities covered by the Registration
Statement, whether as a holder of such Registrable Securities or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, the Company shall assist such broker-dealer in complying
with the requirements of the NASD Rules, including, without limitation, by (A)
engaging a "QUALIFIED INDEPENDENT UNDERWRITER" (as defined in Rule 2720(b)(15)
of the NASD Rules (or any successor provision thereto)) to participate in the
preparation of the Registration Statement relating to such Registrable
Securities, to exercise usual standards of due diligence in respect thereof and
to recommend the public offering price of such Registrable Securities, (B)
indemnifying such qualified independent underwriter to the extent of the
indemnification of underwriters provided in Section 5 hereof, and (C) providing
such information to such broker-

                                       10

<PAGE>

dealer as may be required in order for such broker-dealer to comply with the
requirements of the NASD Rules.

            4. OBLIGATIONS OF THE INVESTORS

            In connection with the registration of the Registrable Securities,
the Investors shall have the following obligations:

            (a) It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. As least seven
days prior to the first anticipated filing date of the Registration Statement,
the Company shall notify each Investor of the information the Company requires
from each such Investor (the "REQUESTED INFORMATION") if such Investor elects to
have any of its Registrable Securities included in the Registration Statement.
If at least two business days prior to the anticipated filing date the Company
has not received the Requested Information from an Investor (a "NON-RESPONSIVE
INVESTOR"), then the Company may file the Registration Statement without
including Registrable Securities of such Non-Responsive Investor and have no
further obligations to the Non-Responsive Investor;

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

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

            5. EXPENSES OF REGISTRATION

            All expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Section 3, but including, without limitation, all registration, listing, and
qualifications fees, printing and engraving fees, accounting fees, and the fees
and disbursements of counsel for the Company, and the reasonable fees of one
firm of counsel to the holders of a majority in interest of the Registrable
Securities shall be borne by the Company.

                                       11

<PAGE>

            6. INDEMNIFICATION AND CONTRIBUTION

            (a) The Company shall indemnify and hold harmless each Investor and
each underwriter, if any, which facilitates the disposition of Registrable
Securities, and each of their respective officers and directors and each person
who controls such Investor or underwriter within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act (each such person being
sometimes hereinafter referred to as an "INDEMNIFIED PERSON") from and against
any losses, claims, damages or liabilities, joint or several, to which such
Indemnified Person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or an
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, not misleading, or
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any Prospectus or an omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and the Company hereby agrees to
reimburse such Indemnified Person for all reasonable legal and other expenses
incurred by them in connection with investigating or defending any such action
or claim as and when such expenses are incurred; provided, however that the
Company shall not be liable to any such Indemnified Person in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon (i) an untrue statement or alleged untrue statement made in, or an
omission or alleged omission from, such Registration Statement or Prospectus in
reliance upon and in conformity with written information furnished to the
Company by such Indemnified Person expressly for use therein or (ii) in the case
of the occurrence of an event of the type specified in Section 3(e), the use by
the Indemnified Person of an outdated or defective Prospectus after the Company
has provided to such Indemnified Person an updated Prospectus correcting the
untrue statement or alleged untrue statement or omission or alleged omission
giving rise to such loss, claim, damage or liability.

            (b) INDEMNIFICATION BY THE INVESTORS AND UNDERWRITERS. Each Investor
agrees, as a consequence of the inclusion of any of its Registrable Securities
in a Registration Statement, and each underwriter, if any, which facilitates the
disposition of Registrable Securities shall agree, as a consequence of
facilitating such disposition of Registrable Securities, severally and not
jointly, to (i) indemnify and hold harmless the Company, its directors
(including any person who, with his or her consent, is named in the Registration
Statement as a director nominee of the Company), its officers who sign any
Registration Statement and each person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any losses, claims, damages or liabilities to which the
Company or such other persons may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in such Registration Statement or
Prospectus or arise out of or are based upon the omission or alleged omission to
state therein 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, in the case of the Prospectus), not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company

                                       12

<PAGE>

by such holder or underwriter expressly for use therein; provided, however, that
no Investor or underwriter shall be liable under this Section 6(b) for any
amount in excess of the net proceeds paid to such Investor or underwriter in
respect of shares sold by it, and (ii) reimburse the Company for any legal or
other expenses incurred by the Company in connection with investigating or
defending any such action or claim as such expenses are incurred.

            (c) NOTICE OF CLAIMS, ETC. Promptly after receipt by a party seeking
indemnification pursuant to this Section 6 (an "INDEMNIFIED PARTY") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "CLAIM"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Section 6 is being sought (the "INDEMNIFYING PARTY") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party,
except to the extent that the Indemnifying Party is materially prejudiced and
forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay such fees, costs
and expenses, (y) the Indemnified Party and the Indemnifying Party shall
reasonably have concluded that representation of the Indemnified Party by the
Indemnifying Party by the same legal counsel would not be appropriate due to
actual or, as reasonably determined by legal counsel to the Indemnified Party,
potentially differing interests between such parties in the conduct of the
defense of such Claim, or if there may be legal defenses available to the
Indemnified Party that are in addition to or disparate from those available to
the Indemnifying Party, or (z) the Indemnifying Party shall have failed to
employ legal counsel reasonably satisfactory to the Indemnified Party within a
reasonable period of time after notice of the commencement of such Claim. If the
Indemnified Party employs separate legal counsel in circumstances other than as
described in clauses (x), (y) or (z) above, the fees, costs and expenses of such
legal counsel shall be borne exclusively by the Indemnified Party. Except as
provided above, the Indemnifying Party shall not, in connection with any Claim
in the same jurisdiction, be liable for the fees and expenses of more than one
firm of counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnified Party shall not, without the prior written consent of
the Indemnifying Party (which consent shall not unreasonably be withheld),
settle or compromise any Claim or consent to the entry of any judgment that does
not include an unconditional release of the Indemnifying Party from all
liabilities with respect to such Claim or judgment.

            (d) CONTRIBUTION. If the indemnification provided for in this
Section 6 is unavailable to or insufficient to hold harmless an Indemnified
Person under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to therein, then
each Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and the Indemnified Party in connection
with the statements or omissions

                                       13

<PAGE>

which resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), 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 the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by such Indemnifying Party or by
such Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 6(d) were determined by pro rata allocation (even if
the Investors or any underwriters were treated as one entity for such purpose)
or by any other method of allocation which does not take account of the
equitable considerations referred to in this Section 6(d). The amount paid or
payable by an Indemnified Party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any such action
or claim. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
obligations of the Investors and any underwriters in this Section 6(d) to
contribute shall be several in proportion to the percentage of Registrable
Securities registered or underwritten, as the case may be, by them and not
joint.

            (e) Notwithstanding any other provision of this Section 6, in no
event shall any (i) Investor be required to undertake liability to any person
under this Section 6 for any amounts in excess of the dollar amount of the
proceeds to be received by such Investor from the sale of such Investor's
Registrable Securities (after deducting any fees, discounts and commissions
applicable thereto) pursuant to any Registration Statement under which such
Registrable Securities are to be registered under the Securities Act and (ii)
underwriter be required to undertake liability to any Person hereunder for any
amounts in excess of the aggregate discount, commission or other compensation
payable to such underwriter with respect to the Registrable Securities
underwritten by it and distributed pursuant to the Registration Statement.

            (f) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under this
Section 6 shall be in addition to any liability which such Indemnified Person
may otherwise have to the Company. The remedies provided in this Section 6 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to an indemnified party at law or in equity.

            7. RULE 144

            With a view to making available to the Investors the benefits of
Rule 144 under the Securities Act or any other similar rule or regulation of the
Commission that may at any time permit the Investors to sell securities of the
Company to the public without registration ("RULE 144"), the Company agrees to
use its best efforts to:

            (a) comply with the provisions of paragraph (c) (1) of Rule 144; and

                                       14

<PAGE>

            (b) file with the Commission in a timely manner all reports and
other documents required to be filed by the Company pursuant to Section 13 or
15(d) under the Exchange Act; and, if at any time it is not required to file
such reports but in the past had been required to or did file such reports, it
will, upon the request of any Investor, make available other information as
required by, and so long as necessary to permit sales of, its Registrable
Securities pursuant to Rule 144.

            8. ASSIGNMENT

            The rights to have the Company register Registrable Securities
pursuant to this Agreement shall be automatically assigned by the Investors to
any permitted transferee of all or any portion of such Registrable Securities
(or all or any portion of any Preferred Shares or Warrant of the Company which
is convertible into such securities) only if: (a) the Investor agrees in writing
with the transferee or assignee to assign such rights, and a copy of such
agreement is furnished to the Company within a reasonable time after such
assignment, (b) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (i) the name and address of such
transferee or assignee and (ii) the securities with respect to which such
registration rights are being transferred or assigned, (c) immediately following
such transfer or assignment, the securities so transferred or assigned to the
transferee or assignee constitute Restricted Securities, and (d) at or before
the time the Company received the written notice contemplated by clause (b) of
this sentence the transferee or assignee agrees in writing with the Company to
be bound by all of the provisions contained herein.

            9. AMENDMENT AND WAIVER

            Any provision of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who hold a majority-in-interest of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 9 shall be binding
upon each Investor and the Company.

            10. CHANGES IN COMMON STOCK

            If, and as often as, there are any changes in the Common Stock by
way of stock split, stock dividend, reverse split, combination or
reclassification, or through merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof, as may be required, so that the rights and privileges
granted hereby shall continue with respect to the Common Stock as so changed.

            11. MISCELLANEOUS

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

                                       15

<PAGE>

            (b) If, after the date hereof and prior to the Commission declaring
the Registration Statement to be filed pursuant to Section 2(a) effective under
the Securities Act, the Company grants to any Person any registration rights
with respect to any Company securities which are more favorable to such other
Person than those provided in this Agreement, then the Company forthwith shall
grant (by means of an amendment to this Agreement or otherwise) identical
registration rights to all Investors hereunder.

            (c) Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally recognized overnight courier service, and shall be deemed given
when so delivered personally or by overnight courier service, or, if mailed,
three days after the date of deposit in the United States mails, as follows:

                  (i)   if to the Company, to:

                        Commodore Applied Technologies, Inc.
                        150 East 58th Street, Suite 3400
                        New York, NY 10155
                        Attention:
                        (212) 308-5800
                        (212) 752-0731 (Fax)

                        with a copy to:

                        Greenberg Traurig
                        200 Park Avenue
                        New York, NY 10166
                        Attention: Stephen A. Weiss, Esq.
                        (212) 801-9253
                        (212) 801-6400 (Fax)

                  (ii) if to the Initial Investor, to:

                        The Shaar Fund Ltd.,
                        do Levinson Capital Management
                        2 World Trade Center, Suite 1820
                        New York, NY 10048
                        Attention: Samuel Levinson
                        (212) 432-7711
                        (212) 432-7771 (Fax)

                                       16

<PAGE>

                        with a copy to:

                        Cadwalader, Wickersham & Taft
                        100 Maiden Lane
                        New York, NY 10038
                        Attention: Dennis J. Block, Esq.
                        (212) 504-5555
                        (212) 504-5557 (Fax)

                  (iii) if to any other Investor, at such address as such
      Investor shall have provided in writing to the Company.

The Company, the Initial Investor or any Investor may change the foregoing
address by notice given pursuant to this Section 11(c).

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

            (e) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York. Each of the parties consents
to the jurisdiction of the federal courts whose districts encompass any part of
the City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions.

            (f) The remedies provided in this Agreement are cumulative and not
exclusive of any remedies provided by law. 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 best 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.

            (g) The Company shall not enter into any agreement with respect to
its securities that is inconsistent with the rights granted to the holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The Company is not currently a party to any agreement
granting any registration rights with respect to any of its securities to any
person which conflicts with the Company's obligations hereunder or gives any
other party the right to include any securities in any Registration Statement
filed pursuant hereto, except for such rights and conflicts as have been
irrevocably waived. Without limiting the generality of the foregoing, without
the written consent of the holders of a majority in interest of the Registrable
Securities, the Company shall not grant to any person the right to request it to
register any of its

                                       17

<PAGE>

securities under the Securities Act unless the rights so granted are subject in
all respect to the prior rights of the holders of Registrable Securities set
forth herein, and are not otherwise in conflict or inconsistent with the
provisions of this Agreement. The restrictions on the Company's rights to grant
registration rights under this paragraph shall terminate on the date the
Registration Statement to be filed pursuant to Section 2(a) is declared
effective by the Commission.

            (h) This Agreement, the Securities Purchase Agreement, the Escrow
Instructions, dated as of a date even herewith (the "ESCROW INSTRUCTIONS"),
between the Company, the Initial Investor and Cadwalader, Wickersham & Taft, the
Preferred Shares and the Warrants constitute the entire agreement among the
parties hereto with respect to the subject matter hereof There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement, the Securities Purchase Agreement, the
Escrow Instructions, the Certificate of Designation and the Warrants supersede
all prior agreements and undertakings among the parties hereto with respect to
the subject matter hereof.

            (i) Subject to the requirements of Section 8 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.

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

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

            (1) The Company acknowledges that any failure by the Company to
perform its obligations under Section 3, or any delay in such performance could
result in direct damages to the Investors and the Company agrees that, in
addition to any other liability the Company may have by reason of any such
failure or delay, the Company shall be liable for all direct damages caused by
such failure or delay.

            (m) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. A facsimile transmission of this signed Agreement shall be
legal and binding on all parties hereto.

                            [SIGNATURE PAGE FOLLOWS.]

                                       18

<PAGE>

            IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed and delivered as of the date first above written.

                               COMMODORE APPLIED TECHNOLOGIES, INC.

                               By: /s/ Paul Hannesson
                                   -------------------------------------
                                   Name: Paul Hannesson
                                   Title: CEO

                               THE SHAAR FUND LTD.

                               By:
                                   -------------------------------------
                                   Name: Samuel Levinson
                                   Title: Managing Director

                                       19

<PAGE>

            IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed and delivered as of the date first above written.

                               COMMODORE APPLIED TECHNOLOGIES, INC.

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

                               THE SHAAR FUND LTD.

                               By: /s/ Samuel Levinson
                                   -------------------------------------
                                   Name: Samuel Levinson
                                   Title: Managing Director

                                       19

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