8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 8-K

^{______________}

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  February 27, 2006

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UNIVERSAL COMMUNICATION SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

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Nevada	4812	860887822
(State or Other Jurisdiction	(Commission	(I.R.S. Employer
of Incorporation)	File Number)	Identification No.)

407 Lincoln Road., Suite 12F, Miami Beach, FL 33139

(Address of Principal Executive Office) (Zip Code)

305-672-6344

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01

Entry into a Material Definitive Agreement

On February 27, 2006, we completed a private placement pursuant to a Subscription Agreement which we entered into with several accredited and/or qualified institutional investors dated as of February 27, 2006, pursuant to which the investors subscribed to purchase an aggregate principal amount of $3,012,050 in 9% secured convertible promissory notes and 1 Class A and 1 Class B common stock purchase warrant for each 2 shares which would be issued on each closing date assuming full conversion of the secured convertible notes issued on that closing date. The terms of the subscription agreement call for two closings - an initial closing representing $1,506,025 of 9% secured convertible promissory notes, 75,301,250 Class A warrants and 75,301,250 Class B warrants and a second closing representing the balance. The second closing will occur on or before the fifth day following the effective date of the registration of these securities under the Subscriptio n Agreement, which is to occur within forty five days of the initial closing.

The secured convertible notes bear simple interest at 9% per annum payable monthly together with five and one half percent (5.5%) of the initial principal, all interest accrued and any other amounts not paid, commencing six months from the issuance date, and mature 2 years after the date of issuance. These payments may be made in cash or by the conversion of the amount due in the Company’s common stock at a conversion rate which is the lesser of $0.01 per share or 85% of the average closing bid price for the preceding five trading days, at the discretion of the investor. Each investor shall have the right to convert the secured convertible notes after the date of issuance at any time, until paid in full, at the election of the investor into fully paid and nonassessable shares of our common stock. The conversion price per share is $0.01. The conversion price is adjustable in the event of any stock split or reverse stock split, stock dividend, reclassification of common stock, recapitalization, merger or consolidation. In addition, the conversion price of the secured convertible notes will be adjusted in the event that we spin off or otherwise divest ourselves of a material part of our business or operations or dispose of all or a portion of our assets. Our obligation to repay all principal, and accrued and unpaid interest under the convertible notes is secured by all of our assets pursuant to a certain Security Agreement dated as of February 27, 2006.

We issued an aggregate of 75,301,250 Class A common stock purchase Warrants and 75,301,250 Class B common stock purchase Warrants to the investors, representing 1 Class A warrant issued for each 2 shares and 1 Class B warrant issued for each 2 shares, which would be issued on the first closing date assuming full conversion of the secured convertible notes issued on that closing date. The Class A warrants are exercisable until four years from the closing date at an exercise price of $0.02 per share, and the Class B warrants are exercisable for 180 days from the closing date at an exercise price of $0.015. The exercise price of the Class A and Class B warrants will be adjusted in the event of any stock split or reverse stock split, stock dividend, reclassification of common stock, recapitalization, merger or consolidation. In addition, the exercise price of the warrants will be adjusted in the event that we spin off or otherwise di vest ourselves of a material part of our business or operations or dispose of all or a portion of our assets.

We are obligated to file a registration statement registering the shares of our common stock issuable upon conversion of the secured promissory notes and exercise of the Class A and B warrants no later than 45 days after the initial closing date and cause it to be declared effective within 120 days after the closing date. If we do not meet the aforementioned filing and effectiveness deadlines, we shall pay to each investor an amount equal to 2% for each 30 days or part thereof thereafter, of the purchase price of the secured convertible notes remaining unconverted and purchase price of the shares of our common stock issued upon conversion of the notes.

On May 17, 2006, to induce the holders to exercise the Class A warrants, we entered into a letter agreement with the investors under which the parties agreed to modify the exercise price of the Class A warrants to $0.0075 per share, and the Company will issue to the Subscriber 75,301,250 additional Class B Common Stock Purchase Warrants exercisable at $0.015.

Item 2.03

Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant

The information reported in Item 1.01 is incorporated by reference into this Item 2.03.

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Item 3.02

Unregistered Sales of Equity Securities

The information reported in Item 1.01 is incorporated by reference into this Item 3.02. No underwriter or broker was employed in the transaction. The securities were deemed restricted securities for purposes of the Securities Act of 1933 as amended (the “Securities Act”). The securities were issued in transactions exempt from registration under the Securities Act in reliance on Section 4(2) and 4(6) of such Act.

Item 9.01

Financial Statements and Exhibits

(d)

Exhibits.

Exhibit No.	Description
10.1	Subscription Agreement dated as of February 27, 2006.
10.2	Form of Class A and Class B Common Stock Purchase Warrant.
10.3	Form of Secured Convertible Promissory Note.
10.4	Security Agreement dated as of February 27, 2006
10.5	Form of Guaranty.
10.6	Modification Agreement dated as of May 17, 2006.

3

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

Universal Communication Systems, Inc.
(Registrant)
By:	/s/  MICHAEL J. ZWEBNER
	Michael J. Zwebner Chairman and Chief Executive Officer

Date:  July 19, 2006

4

EX-10.1

                                                                    EXHIBIT 10.1

                             SUBSCRIPTION AGREEMENT

         THIS SUBSCRIPTION AGREEMENT (this "AGREEMENT"), dated as of February
___, 2006, by and among Universal Communication Systems, Inc., a Nevada
corporation (the "COMPANY"), and the subscribers identified on the signature
page hereto (each a "SUBSCRIBER" and collectively "SUBSCRIBERS").

         WHEREAS, the Company and the Subscribers are executing and delivering
this Agreement in reliance upon an exemption from securities registration
afforded by the provisions of Section 4(2), Section 4(6) and/or Regulation D
("REGULATION D") as promulgated by the United States Securities and Exchange
Commission (the "COMMISSION") under the Securities Act of 1933, as amended (the
"1933 ACT").

         WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the
Subscribers, as provided herein, and the Subscribers, in the aggregate, shall
purchase up to Three Million and Twelve Thousand and Fifty Dollars ($3,012,050)
(the "AGGREGATE PRINCIPAL Amount") of principal amount of promissory notes of
the Company ("NOTE" or "NOTES"), a form of which is annexed hereto as EXHIBIT A,
convertible into shares of the Company's common stock, $0.001 par value (the
"COMMON Stock"), at a per share conversion price set forth in the Note
("CONVERSION PRICE"); and share purchase warrants (the "WARRANTS"), in the form
annexed hereto as EXHIBIT B, to purchase shares of Common Stock (the "WARRANT
Shares"). The Notes, shares of Common Stock issuable upon conversion of the
Notes (the "SHARES"), the Warrants and the Warrant Shares are collectively
referred to herein as the "SECURITIES"; and

         WHEREAS, the aggregate proceeds of the sale of the Notes and the
Warrants contemplated hereby shall be held in escrow pending the closing of the
transactions contemplated by this Agreement pursuant to the terms of a Funds
Escrow Agreement to be executed by the parties substantially in the form
attached hereto as EXHIBIT C (the "ESCROW AGREEMENT").

         NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the Subscribers hereby
agree as follows:

                  1. (a) Aggregate Purchase Price. The aggregate purchase price
for the Notes (the "AGGREGATE PURCHASE PRICE") shall equal the result of (x)
divided by (y), where (x) equals the Aggregate Principal Amount and (y) equals
1.2048192. The aggregate principal amount of the Notes to be purchased by the
Subscribers shall, in the aggregate, be equal to the Aggregate Principal Amount.
Each date upon which a Closing occurs is a "CLOSING DATE".

                     (b) Initial Closing. Subject to the satisfaction or waiver
of the terms and conditions of this Agreement, on the Initial Closing Date, each
Subscriber shall purchase and the Company shall sell to each Subscriber a Note
in the principal amount designated on the signature page hereto ("INITIAL
CLOSING NOTES") and Warrants as described in Section 2 of this Agreement
("INITIAL CLOSING WARRANTS"). The Aggregate Purchase Amount of the Notes to be
purchased by the Subscribers on the Initial Closing Date shall be equal to One
Million Five Hundred and Six Thousand and Twenty-Five Dollars ($1,506,025) in
exchange for One Million Two Hundred and Fifty Thousand Dollars ($1,250,000) of
Aggregate Purchase Price (the "INITIAL CLOSING PURCHASE Price"). The "INITIAL
CLOSING DATE" shall be the date that the Initial Closing Purchase Price is
transmitted by wire transfer or otherwise to or for the benefit of the Company.
The consummation of the transactions contemplated herein for all closings shall
take place at the offices of Grushko & Mittman, P.C., 551 Fifth Avenue, Suite
1601, New York, New York 10176, upon the satisfaction of all conditions to
Closing set forth in this Agreement. Each of the Initial Closing Date and Second
Closing Date (as defined in Section 1(b) below) is referred to herein as a
"CLOSING DATE".

                                       1


                     (c) Second Closing. The closing date in relation to up to
One Million Five Hundred and Six Thousand and Twenty-Five Dollars ($1,506,025)
of Aggregate Principal Amount of Notes to be issued in exchange for One Million
Two Hundred and Fifty Thousand Dollars ($1,250,000) of Aggregate Purchase Price
(the "SECOND CLOSING PURCHASE PRICE") shall be on or before the fifth business
day after the Actual Effective Date as defined in Section 11.1(iv) (the "SECOND
CLOSING DATE"), provided the Company has increased its authorized shares to not
less than 1.5 billion shares. Subject to the satisfaction or waiver of the
conditions to closing on the Second Closing Date, each Subscriber shall purchase
and the Company shall sell to each Subscriber a Note in the Aggregate Principal
Amount designated on the signature page hereto ("SECOND CLOSING NOTES") and
Warrants as described in Section 2 of this Agreement ("SECOND CLOSING
WARRANTS"). The Second Closing Notes shall be nearly identical to the Notes
issuable on the Initial Closing Date and have the same maturity date as the
Initial Closing Notes. The Conversion Price (defined in Section 2.1 (b) of the
Note) of the Second Closing Notes shall be the same as the Conversion Price of
the Initial Closing Notes in effect on the Second Closing Date.

                     (d) Conditions to Second Closing. The occurrence of the
Second Closing is expressly contingent on (i) the truth and accuracy, on the
Effective Date as defined in Section 11.1(iv), Actual Effective Date and the
Second Closing Date of the representations and warranties of the Company and
Subscriber contained in this Agreement, (ii) continued compliance with the
covenants of the Company set forth in this Agreement, (iii) the non-occurrence
of any Event of Default (as defined in the Note) or other default by the Company
of its obligations and undertakings contained in this Agreement, (iv) the
authorized shares of the Company having been increased to not less than 1.5
billion shares, and (v) the delivery on the Second Closing Date of Second
Closing Notes for which the Company Shares issuable upon conversion have been
included in the Registration Statement, which must be effective as of the Second
Closing Date.

                     (e) Second Closing Deliveries. On the Second Closing Date,
the Company will deliver the Second Closing Notes and Second Closing Warrants to
the Escrow Agent and each Subscriber will deliver his portion of the Second
Closing Purchase Price to the Escrow Agent. On the Second Closing Date, the
Company will deliver a certificate ("SECOND CLOSING CERTIFICATE") signed by its
chief executive officer or chief financial officer (i) representing the truth
and accuracy of all the representations and warranties made by the Company
contained in this Agreement, as of the Initial Closing Date, the Actual
Effective Date and the Second Closing Date, as if such representations and
warranties were made and given on all such dates, (ii) certifying that the
information contained in the schedules and exhibits hereto is substantially
accurate as of the Second Closing Date, except for changes that do not
constitute Material Adverse Effect [as defined in Section 5(a)], (iii) adopting
and renewing the covenants and representations set forth in Sections 5, 7, 8, 9,
10, 11, and 12 of this Agreement in relation to the Second Closing Date, Second
Closing Notes and Second Closing Warrants, (iv) representing the timely
compliance by the Company with the Company's registration requirements set forth
in Section 11 of this Agreement, and (v) certifying that an Event of Default has
not occurred. A legal opinion nearly identical to the legal opinion referred to
in Section 6 of this Agreement shall be delivered to each Subscriber at the
Second Closing in relation to the Company, Second Closing Notes, and Second
Closing Warrants ("SECOND CLOSING LEGAL OPINION"). The Second Closing Legal
Opinion must state that the Registration Statement has been declared effective
by the Commission and remains effective as of the Second Closing Date.

                  2. Warrants. On each Closing Date, the Company will issue and
deliver Warrants to the Subscribers. One Class A Warrant and one Class B Warrant
will be issued for each two Shares which would be issued on each Closing Date
assuming the conversion of all of the Notes issued on the Closing Date at the
Conversion Price in effect on such Closing Date. The per Warrant Share exercise
price to acquire a Warrant Share upon exercise of a Class A Warrant shall be
$0.02. The per Warrant Share exercise price to acquire a Warrant Share upon
exercise of a Class B Warrant shall be $0.015. The Class A Warrants shall be
exercisable for four year after the Actual Effective Date. The Class B Warrants
shall be exercisable until the Registration Statement [as defined in Section
11.1(iv)] has been effective for 180 days.

                                       2


                  3. Security Interest. The Subscribers will be granted a
security interest in certain assets of the Company and Subsidiaries (as defined
in Section 5(a) of this Agreement), including ownership of the Subsidiaries, to
be memorialized in a "SECURITY AGREEMENT", a form of which is annexed hereto as
EXHIBIT D. Each Subsidiary will execute and deliver to the Subscribers a form of
"GUARANTY" annexed hereto as EXHIBIT E. The Company will execute such other
agreements, documents and financing statements reasonably requested by
Subscribers, which will be filed at the Company's expense with such
jurisdictions, states and counties designated by the Subscribers. The Company
will also execute all such documents reasonably necessary in the opinion of
Subscribers to memorialize and further protect the security interest described
herein. The Subscribers will appoint a Collateral Agent to represent them
collectively in connection with the security interest to be granted to the
Subscribers. The appointment will be pursuant to a "COLLATERAL AGENT AGREEMENT",
a form of which is annexed hereto as EXHIBIT F.

                  4. Subscriber's Representations and Warranties. Each
Subscriber hereby represents and warrants to and agrees with the Company only as
to such Subscriber that:

                     (a) Organization and Standing of the Subscribers. If the
Subscriber is an entity, such Subscriber is a corporation, partnership or other
entity duly incorporated or organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization.

                     (b) Authorization and Power. Each Subscriber has the
requisite power and authority to enter into and perform this Agreement and to
purchase the Notes and Warrants being sold to it hereunder. The execution,
delivery and performance of this Agreement by such Subscriber and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate or partnership action, and no further
consent or authorization of such Subscriber or its Board of Directors,
stockholders, partners, or members, as the case may be, is required. This
Agreement has been duly authorized, executed and delivered by such Subscriber
and constitutes, or shall constitute when executed and delivered, a valid and
binding obligation of the Subscriber enforceable against the Subscriber in
accordance with the terms thereof.

                     (c) No Conflicts. The execution, delivery and performance
of this Agreement and the consummation by such Subscriber of the transactions
contemplated hereby or relating hereto do not and will not (i) result in a
violation of such Subscriber's charter documents or bylaws or other
organizational documents or (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of any agreement, indenture or instrument or obligation to which
such Subscriber is a party or by which its properties or assets are bound, or
result in a violation of any law, rule, or regulation, or any order, judgment or
decree of any court or governmental agency applicable to such Subscriber or its
properties (except for such conflicts, defaults and violations as would not,
individually or in the aggregate, have a material adverse effect on such
Subscriber). Such Subscriber is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or to purchase the Notes or acquire the
Warrants in accordance with the terms hereof, provided that for purposes of the
representation made in this sentence, such Subscriber is assuming and relying
upon the accuracy of the relevant representations and agreements of the Company
herein.

                     (d) Information on Company. The Subscriber has been
furnished with or has had access at the EDGAR Website of the Commission to the
Company's Form 10-KSB for the year ended September 30, 2005 and all periodic
reports filed with the Commission thereafter until five (5) business days prior
to the Closing Date (hereinafter collectively referred to as the "REPORTS"). The
Subscriber has had an opportunity to ask questions and receive answers from
representatives of the Company. In addition, the Subscriber has received in
writing from the Company such other information concerning its operations,
financial condition and other matters as the Subscriber has requested in writing


                                       3


(such other information is collectively, the "OTHER WRITTEN Information"), and
considered all factors the Subscriber deems material in deciding on the
advisability of investing in the Securities.

                     (e) Information on Subscriber. The Subscriber is, and will
be at the time of the conversion of the Notes and exercise of the Warrants, an
"accredited investor", as such term is defined in Regulation D promulgated by
the Commission under the 1933 Act, is experienced in investments and business
matters, has made investments of a speculative nature and has purchased
securities of United States publicly-owned companies in private placements in
the past and, with its representatives, has such knowledge and experience in
financial, tax and other business matters as to enable the Subscriber to utilize
the information made available by the Company to evaluate the merits and risks
of and to make an informed investment decision with respect to the proposed
purchase, which represents a speculative investment. The Subscriber has the
authority and is duly and legally qualified to purchase and own the Securities.
The Subscriber is able to bear the risk of such investment for an indefinite
period and to afford a complete loss thereof. The information set forth on the
signature page hereto regarding the Subscriber is accurate.

                     (f) Purchase of Notes and Warrants. On the Closing Date,
the Subscriber will purchase the Notes and Warrants as principal for its own
account for investment only and not with a view toward, or for resale in
connection with, the public sale or any distribution thereof.

                     (g) Compliance with Securities Act. The Subscriber
understands and agrees that the Securities have not been registered under the
1933 Act or any applicable state securities laws, by reason of their issuance in
a transaction that does not require registration under the 1933 Act (based in
part on the accuracy of the representations and warranties of Subscriber
contained herein), and that such Securities must be held indefinitely unless a
subsequent disposition is registered under the 1933 Act or any applicable state
securities laws or is exempt from such registration.

                     (h) Shares Legend. The Shares and the Warrant Shares shall
bear the following or similar legend:

                  "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
                  REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE
                  SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
                  HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
                  STATEMENT UNDER SUCH SECURITIES ACT OR ANY APPLICABLE STATE
                  SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY
                  SATISFACTORY TO UNIVERSAL COMMUNICATION SYSTEMS, INC. THAT
                  SUCH REGISTRATION IS NOT REQUIRED."

                     (i) Warrants Legend. The Warrants shall bear the following

or similar legend:

                  "THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
                  THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
                  OF 1933, AS AMENDED. THIS WARRANT AND THE COMMON SHARES
                  ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
                  OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
                  EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID


                                       4


                  ACT OR ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF
                  COUNSEL REASONABLY SATISFACTORY TO UNIVERSAL COMMUNICATION
                  SYSTEMS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."

                     (j) Note Legend. The Note shall bear the following legend:

                  "THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF
                  THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
                  1933, AS AMENDED. THIS NOTE AND THE COMMON SHARES ISSUABLE
                  UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR
                  SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
                  REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN
                  OPINION OF COUNSEL REASONABLY SATISFACTORY TO UNIVERSAL
                  COMMUNICATION SYSTEMS, INC. THAT SUCH REGISTRATION IS NOT
                  REQUIRED."

                     (k) Communication of Offer. The offer to sell the
Securities was directly communicated to the Subscriber by the Company. At no
time was the Subscriber presented with or solicited by any leaflet, newspaper or
magazine article, radio or television advertisement, or any other form of
general advertising or solicited or invited to attend a promotional meeting
otherwise than in connection and concurrently with such communicated offer.

                     (l) Authority; Enforceability. This Agreement and other
agreements delivered together with this Agreement or in connection herewith have
been duly authorized, executed and delivered by the Subscriber and are valid and
binding agreements enforceable in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity; and Subscriber has full corporate
power and authority necessary to enter into this Agreement and such other
agreements and to perform its obligations hereunder and under all other
agreements entered into by the Subscriber relating hereto.

                     (m) Restricted Securities. Subscriber understands that the
Securities have not been registered under the 1933 Act and such Subscriber will
not sell, offer to sell, assign, pledge, hypothecate or otherwise transfer any
of the Securities unless pursuant to an effective registration statement under
the 1933 Act. Notwithstanding anything to the contrary contained in this
Agreement, such Subscriber may transfer (without restriction and without the
need for an opinion of counsel) the Securities to its Affiliates (as defined
below) provided that each such Affiliate is an "accredited investor" under
Regulation D and such Affiliate agrees to be bound by the terms and conditions
of this Agreement. For the purposes of this Agreement, an "AFFILIATE" of any
person or entity means any other person or entity directly or indirectly
controlling, controlled by or under direct or indirect common control with such
person or entity. Affiliate when employed in connection with the Company
includes each Subsidiary [as defined in Section 5(a)] of the Company, if any.
For purposes of this definition, "CONTROL" means the power to direct the
management and policies of such person or firm, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise.

                     (n) No Governmental Review. Each Subscriber understands
that no United States federal or state agency or any other governmental or state
agency has passed on or made recommendations or endorsement of the Securities or
the suitability of the investment in the Securities nor have such authorities
passed upon or endorsed the merits of the offering of the Securities.

                     (o) Correctness of Representations. Each Subscriber
represents as to such Subscriber that the foregoing representations and


                                       5


warranties are true and correct as of the date hereof and, unless a Subscriber
otherwise notifies the Company prior to the Closing Date shall be true and
correct as of the Closing Date.

                     (p) Survival. The foregoing representations and warranties
shall survive until three years after the Second Closing Date.

                  5. Company Representations and Warranties. The Company
represents and warrants to and agrees with each Subscriber that except as set
forth in the Reports and as otherwise qualified in the Transaction Documents:

                     (a) Due Incorporation. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power to own
its properties and to carry on its business as disclosed in the Reports. The
Company is duly qualified as a foreign corporation to do business and is in good
standing in each jurisdiction where the nature of the business conducted or
property owned by it makes such qualification necessary, other than those
jurisdictions in which the failure to so qualify would not have a Material
Adverse Effect. For purposes of this Agreement, a "MATERIAL ADVERSE EFFECT"
shall mean a material adverse effect on the financial condition, results of
operations, properties or business of the Company taken as a whole. For purposes
of this Agreement, "SUBSIDIARY" means, with respect to any entity at any date,
any corporation, limited or general partnership, limited liability company,
trust, estate, association, joint venture or other business entity of which more
than 50% of (i) the outstanding capital stock having (in the absence of
contingencies) ordinary voting power to elect a majority of the board of
directors or other managing body of such entity, (ii) in the case of a
partnership or limited liability company, the interest in the capital or profits
of such partnership or limited liability company or (iii) in the case of a
trust, estate, association, joint venture or other entity, the beneficial
interest in such trust, estate, association or other entity business is, at the
time of determination, owned or controlled directly or indirectly through one or
more intermediaries, by such entity.

                     (b) Outstanding Stock. All issued and outstanding shares of
capital stock of the Company have been duly authorized and validly issued and
are fully paid and nonassessable.

                     (c) Authority; Enforceability. This Agreement, the Notes,
the Warrants, the Escrow Agreement, Security Agreement, Collateral Agent
Agreement, Guaranty and any other agreements delivered together with this
Agreement or in connection herewith (collectively "TRANSACTION DOCUMENTS") have
been duly authorized, executed and delivered by the Company and Subsidiaries (as
the case may be) and are valid and binding agreements enforceable in accordance
with their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights generally and to general principles of equity.
The Company and Subsidiaries have full corporate power and authority necessary
to enter into and deliver the Transaction Documents and to perform their
obligations thereunder.

                     (d) Additional Issuances. There are no outstanding
agreements or preemptive or similar rights affecting the Company's common stock
or equity and no outstanding rights, warrants or options to acquire, or
instruments convertible into or exchangeable for, or agreements or
understandings with respect to the sale or issuance of any shares of common
stock or equity of the Company except as described on SCHEDULE 5(D).

                     (e) Consents. No consent, approval, authorization or order
of any court, governmental agency or body or arbitrator having jurisdiction over
the Company, or any of its Affiliates, any Principal Market (as defined in
Section 9(b) of this Agreement), nor the Company's shareholders is required for
the execution by the Company of the Transaction Documents and compliance and
performance by the Company of its obligations under the Transaction Documents,
including, without limitation, the issuance and sale of the Securities.

                                       6


                     (f) No Violation or Conflict. Assuming the representations
and warranties of the Subscribers in Section 4 are true and correct, neither the
issuance and sale of the Securities nor the performance of the Company's
obligations under this Agreement and all other agreements entered into by the
Company relating thereto by the Company will:

                         (i) violate, conflict with, result in a breach of, or
constitute a default (or an event which with the giving of notice or the lapse
of time or both would be reasonably likely to constitute a default in any
material respect) of a material nature under (A) the articles or certificate of
incorporation, charter or bylaws of the Company, (B) any decree, judgment,
order, law, treaty, rule, regulation or determination applicable to the Company
of any court, governmental agency or body, or arbitrator having jurisdiction
over the Company or over the properties or assets of the Company or any of its
Affiliates, (C) the terms of any bond, debenture, note or any other evidence of
indebtedness, or any agreement, stock option or other similar plan, indenture,
lease, mortgage, deed of trust or other instrument to which the Company or any
of its Affiliates is a party, by which the Company or any of its Affiliates is
bound, or to which any of the properties of the Company or any of its Affiliates
is subject, or (D) the terms of any "lock-up" or similar provision of any
underwriting or similar agreement to which the Company, or any of its Affiliates
is a party except the violation, conflict, breach, or default of which would not
have a Material Adverse Effect; or

                         (ii) result in the creation or imposition of any lien,
charge or encumbrance upon the Securities or any of the assets of the Company or
any of its Affiliates, except as contemplated herein; or

                         (iii) except as set forth in SCHEDULE 5(F), result in
the activation of any anti-dilution rights or a reset or repricing of any debt
or security instrument of any other creditor or equity holder of the Company,
nor result in the acceleration of the due date of any obligation of the Company;
or

                         (iv) except as set forth in SCHEDULE 5(F), result in
the activation of any piggy-back registration rights of any person or entity
holding securities or debt of the Company or having the right to receive
securities of the Company.

                     (g) The Securities. The Securities upon issuance:

                         (i) are, or will be, free and clear of any security
interests, liens, claims or other encumbrances, subject to restrictions upon
transfer under the 1933 Act and any applicable state securities laws;

                         (ii) have been, or will be, duly and validly authorized
and on the date of issuance of the Shares and upon exercise of the Warrants, the
Shares and Warrant Shares will be duly and validly issued, fully paid and
nonassessable or if registered pursuant to the 1933 Act, and resold pursuant to
an effective registration statement will be free trading and unrestricted;

                         (iii) will not have been issued or sold in violation of
any preemptive or other similar rights of the holders of any securities of the
Company;

                         (iv) will not subject the holders thereof to personal
liability by reason of being such holders, provided Subscriber's representations
herein are true and accurate and Subscribers take no actions or fail to take any
actions required for their purchase of the Securities to be in compliance with
all applicable laws and regulations; and

                         (v) provided Subscriber's representations herein are
true and accurate and Subscribers take no actions or fail to take any actions
required for their purchase of the Securities to be in compliance with all
applicable laws and regulations, will have been issued in reliance upon an
exemption from the registration requirements of and will not result in a
violation of Section 5 under the 1933 Act.

                                       7


                     (h) Litigation. There is no pending or threatened action,
suit, proceeding or investigation before any court, governmental agency or body,
or arbitrator having jurisdiction over the Company, or any of its Affiliates
that would affect the execution by the Company or the performance by the Company
of its obligations under the Transaction Documents. Except as disclosed in the
Reports or on SCHEDULE 5(H), there is no pending, or, to the knowledge of the
Company, basis for any, action, suit, proceeding or investigation before any
court, governmental agency or body, or arbitrator having jurisdiction over the
Company, or any of its Affiliates which litigation if adversely determined would
have a Material Adverse Effect.

                     (i) Reporting Company. The Company is a publicly-held
company subject to reporting obligations pursuant to Section 13 of the
Securities Exchange Act of 1934 (the "1934 ACT") and has a class of common
shares registered pursuant to Section 12(g) of the 1934 Act. Pursuant to the
provisions of the 1934 Act, the Company has filed all reports and other
materials required to be filed thereunder with the Commission during the
preceding twelve months.

                     (j) No Market Manipulation. The Company and its Affiliates
have not taken, and will not take, directly or indirectly, any action designed
to, or that might reasonably be expected to, cause or result in stabilization or
manipulation of the price of the Common Stock to facilitate the sale or resale
of the Securities or affect the price at which the Securities may be issued or
resold, provided, however, that this provision shall not prevent the Company
from engaging in investor relations/public relations activities consistent with
past practices.

                     (k) Information Concerning Company. The Reports contain all
material information relating to the Company and its operations and financial
condition as of their respective dates and all the information required to be
disclosed therein. Since the last day of the fiscal year of the most recent
audited financial statements included in the Reports ("LATEST FINANCIAL DATE"),
and except as modified in the Other Written Information or in the Schedules
hereto, there has been no Material Adverse Effect relating to the Company's
business, financial condition or affairs not disclosed in the Reports. The
Reports do not contain any 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 in light of the circumstances when made.

                     (l) Stop Transfer. The Company will not issue any stop
transfer order or other order impeding the sale, resale or delivery of any of
the Securities, except as may be required by any applicable federal or state
securities laws and unless contemporaneous notice of such instruction is given
to the Subscriber.

                     (m) Defaults. The Company is not in violation of its
articles of incorporation or bylaws. The Company is (i) not in default under or
in violation of any other material agreement or instrument to which it is a
party or by which it or any of its properties are bound or affected, which
default or violation would have a Material Adverse Effect, (ii) not in default
with respect to any order of any court, arbitrator or governmental body or
subject to or party to any order of any court or governmental authority arising
out of any action, suit or proceeding under any statute or other law respecting
antitrust, monopoly, restraint of trade, unfair competition or similar matters,
or (iii) to the Company's knowledge not in violation of any statute, rule or
regulation of any governmental authority which violation would have a Material
Adverse Effect.

                     (n) Not an Integrated Offering. Neither the Company, nor
any of its Affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales of any security or solicited any


                                       8


offers to buy any security under circumstances that would cause the offer of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
the OTC Bulletin Board ("BULLETIN BOARD") or any Principal Market [as defined in
Section 9(b)] which would impair the exemptions relied upon in this Offering or
the Company's ability to timely comply with its obligations hereunder. Nor will
the Company or any of its Affiliates take any action or steps that would cause
the offer or issuance of the Securities to be integrated with other offerings
which would impair the exemptions relied upon in this Offering or the Company's
ability to timely comply with its obligations hereunder. The Company will not
conduct any offering other than the transactions contemplated hereby that will
be integrated with the offer or issuance of the Securities, which would impair
the exemptions relied upon in this Offering or the Company's ability to timely
comply with its obligations hereunder.

                     (o) No General Solicitation. Neither the Company, nor any
of its Affiliates, nor to its knowledge, any person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the 1933 Act) in connection with the
offer or sale of the Securities.

                     (p) Listing. The Common Stock is quoted on the Bulletin
Board. The Company has not received any oral or written notice that the Common
Stock is not eligible nor will become ineligible for quotation on the Bulletin
Board nor that the Common Stock does not meet all requirements for the
continuation of such quotation.

                     (q) No Undisclosed Liabilities. The Company has no
liabilities or obligations which are material, individually or in the aggregate,
which are not disclosed in the Reports and Other Written Information, other than
those incurred in the ordinary course of the Company's businesses since the
Latest Financial Date and which, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect, except as disclosed on
SCHEDULE 5(Q).

                     (r) No Undisclosed Events or Circumstances. Since the
Latest Financial Date, no event or circumstance has occurred or exists with
respect to the Company or its businesses, properties, operations or financial
condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed in the Reports.

                     (s) Capitalization. The authorized and outstanding capital
stock of the Company as of the date of this Agreement and the Closing Date (not
including the Securities) are set forth on SCHEDULE 5(D). Except as set forth on
SCHEDULE 5(D), there are no options, warrants, or rights to subscribe to,
securities, rights or obligations convertible into or exchangeable for or giving
any right to subscribe for any shares of capital stock of the Company. All of
the outstanding shares of Common Stock of the Company have been duly and validly
authorized and issued and are fully paid and nonassessable.

                     (t) Dilution. The Company's executive officers and
directors understand the nature of the Securities being sold hereby and
recognize that the issuance of the Securities will have a potential dilutive
effect on the equity holdings of other holders of the Company's equity or rights
to receive equity of the Company. The board of directors of the Company has
concluded, in its good faith business judgment that the issuance of the
Securities is in the best interests of the Company. The Company specifically
acknowledges that its obligation to issue the Shares upon conversion of the
Notes, and the Warrant Shares upon exercise of the Warrants is binding upon the
Company and enforceable regardless of the dilution such issuance may have on the
ownership interests of other shareholders of the Company or parties entitled to
receive equity of the Company.

                     (u) No Disagreements with Accountants and Lawyers. There
are no disagreements of any kind presently existing, or reasonably anticipated


                                       9


by the Company to arise, between the Company and the accountants and lawyers
formerly or presently employed by the Company, including but not limited to
disputes or conflicts over payment owed to such accountants and lawyers, nor
have there been any such disagreements during the two years prior to the Initial
Closing Date.

                     (v) DTC Status. The Company's transfer agent is a
participant in and the Common Stock is eligible for transfer pursuant to the
Depository Trust Company Automated Securities Transfer Program. The name,
address, telephone number, fax number, contact person and email address of the
Company transfer agent is set forth on Schedule 5(v) hereto.

                     (w) Investment Company. Neither the Company nor any
Affiliate is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.

                     (x) Subsidiary Representations. Subject to SCHEDULE 5(X),
the Company makes each of the representations contained in Sections 5(a), (b),
(d), (e), (f), (h), (k), (m), (q), (r), (u) and (w) of this Agreement, as same
relate to each Subsidiary of the Company.

                     (y) Company Predecessor. All representations made by or
relating to the Company of a historical or prospective nature and all
undertakings described in Sections 9(g) through 9(l) shall relate, apply and
refer to the Company and its predecessors.

                     (z) Correctness of Representations. The Company represents
that the foregoing representations and warranties are true and correct as of the
date hereof in all material respects, and, unless the Company otherwise notifies
the Subscribers prior to each Closing Date, shall be true and correct in all
material respects as of each Closing Date.

                     (AA) Survival. The foregoing representations and warranties
shall survive until three years after the Second Closing Date.

                  6. Regulation D Offering. The offer and issuance of the
Securities to the Subscribers is being made pursuant to the exemption from the
registration provisions of the 1933 Act afforded by Section 4(2) or Section 4(6)
of the 1933 Act and/or Rule 506 of Regulation D promulgated thereunder. On the
Closing Date, the Company will provide an opinion reasonably acceptable to
Subscriber from the Company's legal counsel opining on the availability of an
exemption from registration under the 1933 Act as it relates to the offer and
issuance of the Securities and other matters reasonably requested by
Subscribers. A form of the legal opinion is annexed hereto as EXHIBIT G. The
Company will provide, at the Company's expense, such other legal opinions in the
future as are reasonably necessary for the issuance and resale of the Common
Stock issuable upon conversion of the Notes and exercise of the Warrants
pursuant to an effective registration statement and Rule 144 under the 1933 Act.

                  7.1. Conversion of Note.

                       (a) Upon the conversion of a Note or part thereof, the
Company shall, at its own cost and expense, take all necessary action, including
obtaining and delivering, an opinion of counsel to assure that the Company's
transfer agent shall issue stock certificates in the name of Subscriber (or its
permitted nominee) or such other persons as designated by Subscriber and in such
denominations to be specified at conversion representing the number of shares of
Common Stock issuable upon such conversion. The Company warrants that no
instructions other than these instructions have been or will be given to the
transfer agent of the Company's Common Stock and that the certificates
representing such shares shall contain no legend other than the usual 1933 Act
restriction from transfer legend. If and when the Subscriber sells the shares,
assuming (i) the Registration Statement (as defined below) is effective and the
prospectus, as supplemented or amended, contained therein is current and (ii)
the Subscriber confirms in writing to the transfer agent that the Subscriber has
complied with the prospectus delivery requirements, the restrictive legend can
be removed and the Shares will be free-trading, and freely transferable. In the
event that the Shares are sold in a manner that complies with an exemption from


                                       10


registration, the Company will promptly instruct its counsel to issue to the
transfer agent an opinion permitting removal of the legend (indefinitely, if
pursuant to Rule 144(k) of the 1933 Act, or for 90 days if pursuant to the other
provisions of Rule 144 of the 1933 Act).

                       (b) Subscriber will give notice of its decision to
exercise its right to convert the Note, interest, any sum due to the Subscriber
under the Transaction Documents including Liquidated Damages, or part thereof by
telecopying an executed and completed NOTICE OF CONVERSION (a form of which is
annexed as EXHIBIT A to the Note) to the Company via confirmed telecopier
transmission or otherwise pursuant to Section 13(a) of this Agreement. The
Subscriber will not be required to surrender the Note until the Note has been
fully converted or satisfied. Each date on which a Notice of Conversion is
telecopied to the Company in accordance with the provisions hereof shall be
deemed a CONVERSION DATE. The Company will itself or cause the Company's
transfer agent to transmit the Company's Common Stock certificates representing
the Shares issuable upon conversion of the Note to the Subscriber via express
courier for receipt by such Subscriber within three (3) business days after
receipt by the Company of the Notice of Conversion (such third day being the
"DELIVERY Date"). In the event the Shares are electronically transferable, then
delivery of the Shares must be made by electronic transfer provided request for
such electronic transfer has been made by the Subscriber and the Subscriber has
complied with all applicable securities laws in connection with the sale of the
Common Stock, including, without limitation, the prospectus delivery
requirements. A Note representing the balance of the Note not so converted will
be provided by the Company to the Subscriber if requested by Subscriber,
provided the Subscriber delivers the original Note to the Company. In the event
that a Subscriber elects not to surrender a Note for reissuance upon partial
payment or conversion, the Subscriber hereby indemnifies the Company against any
and all loss or damage attributable to a third-party claim in an amount in
excess of the actual amount then due under the Note. "BUSINESS DAY" and "TRADING
DAY" as employed in the Transaction Documents is a day that the New York Stock
Exchange is open for trading for three or more hours.

                       (c) The Company understands that a delay in the delivery
of the Shares in the form required pursuant to Section 7.1 hereof, or the
Mandatory Redemption Amount described in Section 7.2 hereof, respectively after
the Delivery Date or the Mandatory Redemption Payment Date (as hereinafter
defined) could result in economic loss to the Subscriber. As compensation to the
Subscriber for such loss, the Company agrees to pay (as liquidated damages and
not as a penalty) to the Subscriber for late issuance of Shares in the form
required pursuant to Section 7.1 hereof upon Conversion of the Note in the
amount of $100 per business day after the Delivery Date for each $10,000 of Note
principal amount being converted of the corresponding Shares which are not
timely delivered. The Company shall pay any payments incurred under this Section
in immediately available funds upon demand. Furthermore, in addition to any
other remedies which may be available to the Subscriber, in the event that the
Company fails for any reason to effect delivery of the Shares by the Delivery
Date or make payment by the Mandatory Redemption Payment Date, the Subscriber
may revoke all or part of the relevant Notice of Conversion or rescind all or
part of the notice of Mandatory Redemption by delivery of a notice to such
effect to the Company whereupon the Company and the Subscriber shall each be
restored to their respective positions immediately prior to the delivery of such
notice, except that the liquidated damages described above shall be payable
through the date notice of revocation or rescission is given to the Company.

                       (d) Nothing contained herein or in any document referred
to herein or delivered in connection herewith shall be deemed to establish or
require the payment of a rate of interest or other charges in excess of the
maximum permitted by applicable law. In the event that the rate of interest or
dividends required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Company to the Subscriber and thus refunded to the
Company.

                                       11


                  7.2. Mandatory Redemption at Subscriber's Election. In the
event (i) the Company is prohibited from issuing Shares, (ii) the Company fails
to timely deliver Shares on a Delivery Date, (iii) upon the occurrence of any
other Event of Default (as defined in the Note or in this Agreement), (iv) of
the liquidation, dissolution or winding up of the Company, or (v) a Change of
Control (as defined below) any of which that continues for more than ten days,
then at the Subscriber's election, the Company must pay to the Subscriber ten
(10) business days after request by the Subscriber, a sum of money determined by
multiplying up to the outstanding principal amount of the Note designated by the
Subscriber by 120%, together with accrued but unpaid interest thereon
("MANDATORY REDEMPTION PAYMENT"). The Mandatory Redemption Payment must be
received by the Subscriber on the same date as the Shares otherwise deliverable
or within ten (10) business days after request, whichever is sooner ("MANDATORY
REDEMPTION PAYMENT DATE"). Upon receipt of the Mandatory Redemption Payment, the
corresponding Note principal and interest will be deemed paid and no longer
outstanding. Liquidated damages calculated pursuant to Section 7.1(c) hereof,
that have been paid or accrued for the twenty day period prior to the actual
receipt of the Mandatory Redemption Payment by the Subscriber shall be credited
against the Mandatory Redemption Payment. For purposes of this Section 7.2,
"CHANGE IN CONTROL" shall mean (i) the Company no longer having a class of
shares publicly traded or listed on a Principal Market, (ii) the Company
becoming a Subsidiary of another entity, (iii) a majority of the board of
directors of the Company as of the Closing Date no longer serving as directors
of the Company except due to natural causes, or (iv) if the Chief Executive
Officer of the Company as of the Initial Closing Date no longer serves as Chief
Executive Officer of the Company.

                  7.3. Maximum Conversion. The Subscriber shall not be entitled
to convert on a Conversion Date that amount of the Note in connection with that
number of shares of Common Stock which would be in excess of the sum of (i) the
number of shares of common stock beneficially owned by the Subscriber and its
Affiliates on a Conversion Date, and (ii) the number of shares of Common Stock
issuable upon the conversion of the Note with respect to which the determination
of this provision is being made on a Conversion Date, which would result in
beneficial ownership by the Subscriber and its Affiliates of more than 4.99% of
the outstanding shares of common stock of the Company on such Conversion Date.
Beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13D-G thereunder.
Subject to the foregoing, the Subscriber shall not be limited to aggregate
conversions of only 4.99% and aggregate conversions by the Subscriber may exceed
4.99%. The Subscriber may waive the conversion limitation described in this
Section 7.3, in whole or in part, upon and effective after 61 days prior written
notice to the Company. The Subscriber may decide whether to convert a Note or
exercise Warrants to achieve an actual 4.99% ownership position.

                  7.4. Injunction Posting of Bond. In the event a Subscriber
shall elect to convert a Note or part thereof or exercise the Warrant in whole
or in part, the Company may not refuse conversion or exercise based on any claim
that such Subscriber or any one associated or affiliated with such Subscriber
has been engaged in any violation of law, or for any other reason, unless, an
injunction from a court, on notice, restraining and or enjoining conversion of
all or part of such Note or exercise of all or part of such Warrant shall have
been sought and obtained by the Company and the Company has posted a surety bond
for the benefit of such Subscriber in the amount of 120% of the outstanding
principal and interest of the Note, or aggregate purchase price of the Warrant
Shares which are sought to be subject to the injunction, which bond shall remain
in effect until the completion of arbitration/litigation of the dispute and the
proceeds of which shall be payable to such Subscriber to the extent Subscriber
obtains judgment.

                  7.5. Buy-In. In addition to any other rights available to the
Subscriber, if the Company fails to deliver to the Subscriber such shares
issuable upon conversion of a Note by the Delivery Date and if after seven (7)
business days after the Delivery Date the Subscriber purchases (in an open
market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by such Subscriber of the Common Stock which the


                                       12


Subscriber was entitled to receive upon such conversion (a "BUY-IN"), then the
Company shall pay in cash to the Subscriber (in addition to any remedies
available to or elected by the Subscriber) the amount by which (A) the
Subscriber's total purchase price (including brokerage commissions, if any) for
the shares of Common Stock so purchased exceeds (B) the aggregate principal
and/or interest amount of the Note for which such conversion was not timely
honored, together with interest thereon at a rate of 15% per annum, accruing
until such amount and any accrued interest thereon is paid in full (which amount
shall be paid as liquidated damages and not as a penalty). For example, if the
Subscriber purchases shares of Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted conversion of $10,000 of
note principal and/or interest, the Company shall be required to pay the
Subscriber $1,000, plus interest. The Subscriber shall provide the Company
written notice indicating the amounts payable to the Subscriber in respect of
the Buy-In.

                  7.6. Adjustments. The Conversion Price, Warrant exercise price
and amount of Shares issuable upon conversion of the Notes and exercise of the
Warrants shall be adjusted as described in this Agreement, the Notes and
Warrants.

                  7.7. Redemption. The Note and Warrants shall not be redeemable
or mandatorily convertible except as described in the Note and Warrants.

                  8. Broker/Legal Fees.

                     (a) Broker's Commission. The Company on the one hand, and
each Subscriber (for himself only) on the other hand, agrees to indemnify the
other against and hold the other harmless from any and all liabilities to any
persons claiming brokerage commissions or similar fees other than the one or
more entities identified on SCHEDULE 8 hereto, (each a "BROKER") on account of
services purported to have been rendered on behalf of the indemnifying party in
connection with this Agreement or the transactions contemplated hereby and
arising out of such party's actions. Anything in this Agreement to the contrary
notwithstanding, each Subscriber is providing indemnification only for such
Subscriber's own actions and not for any action of any other Subscriber. Each
Subscriber's liability hereunder is several and not joint. The Company agrees
that it will pay the Brokers the fees set forth on SCHEDULE 8 hereto ("BROKER'S
FEES"). The Company represents that there are no other parties entitled to
receive fees, commissions, or similar payments in connection with the offering
described in this Agreement except the Broker.

                     (b) Legal Fees. The Company shall pay to Grushko & Mittman,
P.C., a cash fee of $12,500 ("LEGAL FEES") as reimbursement for services
rendered to the Subscribers in connection with this Agreement and the purchase
and sale of the Notes and Warrants (the "OFFERING"). The Legal Fees and
reimbursement for estimated UCC searches and filing fees (less any amounts paid
prior to a Closing Date) will be payable on the Initial Closing Date out of
funds held pursuant to the Escrow Agreement.

                  9. Covenants of the Company. The Company covenants and agrees
with the Subscribers as follows:

                     (a) Stop Orders. The Company will advise the Subscribers,
within two hours after the Company receives notice of issuance by the
Commission, any state securities commission or any other regulatory authority of
any stop order or of any order preventing or suspending any offering of any
securities of the Company, or of the suspension of the qualification of the
Common Stock of the Company for offering or sale in any jurisdiction, or the
initiation of any proceeding for any such purpose.

                     (b) Listing. The Company shall promptly secure the listing
of the shares of Common Stock and the Warrant Shares upon each national
securities exchange, or electronic or automated quotation system upon which they
are or become eligible for listing and shall use commercially reasonable efforts
to maintain such listing so long as any Notes or Warrants are outstanding. The


                                       13


Company will maintain the listing of its Common Stock on the American Stock
Exchange, Nasdaq Capital Market, Nasdaq National Market System, Bulletin Board,
or New York Stock Exchange (whichever of the foregoing is at the time the
principal trading exchange or market for the Common Stock (the "PRINCIPAL
MARKET")), and will comply in all respects with the Company's reporting, filing
and other obligations under the bylaws or rules of the Principal Market, as
applicable. The Company will provide the Subscribers copies of all notices it
receives notifying the Company of the threatened and actual delisting of the
Common Stock from any Principal Market. As of the date of this Agreement, the
Bulletin Board is the Principal Market.

                     (c) Market Regulations. The Company shall notify the
Commission, the Principal Market and applicable state authorities, in accordance
with their requirements, of the transactions contemplated by this Agreement, and
shall take all other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Securities to the Subscribers and promptly provide copies
thereof to Subscriber.

                     (d) Filing Requirements. From the date of this Agreement
and until the sooner of (i) two (2) years after the Second Closing Date, or (ii)
until all the Shares and Warrant Shares have been resold or transferred by all
the Subscribers pursuant to the Registration Statement or pursuant to Rule 144,
without regard to volume limitations, the Company will (A) cause its Common
Stock to continue to be registered under Section 12(b) or 12(g) of the 1934 Act,
(B) comply in all respects with its reporting and filing obligations under the
1934 Act, (C) voluntarily comply with all reporting requirements that are
applicable to an issuer with a class of shares registered pursuant to Section
12(g) of the 1934 Act, if Company is not subject to such reporting requirements,
and (D) comply with all requirements related to any registration statement filed
pursuant to this Agreement. The Company will use its commercially reasonable
efforts not to take any action or file any document (whether or not permitted by
the 1933 Act or the 1934 Act or the rules thereunder) to terminate or suspend
such registration or to terminate or suspend its reporting and filing
obligations under said acts until two (2) years after the Second Closing Date.
Until the earlier of the resale of the Common Stock and the Warrant Shares by
each Subscriber or two (2) years after the Warrants have been exercised, the
Company will use its commercially reasonable efforts to continue the listing or
quotation of the Common Stock on a Principal Market and will comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the Principal Market; provided that the Company shall not be
required to consummate a reverse stock split in order to comply with the
foregoing covenant. The Company agrees to timely file a Form D with respect to
the Securities if required under Regulation D and to provide a copy thereof to
each Subscriber promptly after such filing.

                     (e) Use of Proceeds. The proceeds of the Offering will be
employed by the Company for general working capital. The net amount due the
Company from the Aggregate Purchase Price may not and will not be used for
accrued and unpaid officer and director salaries, payment of financing related
debt, redemption of outstanding notes or equity instruments of the Company,
litigation related settlements, brokerage fees, nor non-trade obligations
outstanding on a Closing Date. For so long as any Notes are outstanding, the
Company will not prepay any financing related debt obligations nor redeem any
equity instruments of the Company.

                     (f) Reservation. Prior to the Closing Date, the Company
undertakes to reserve, pro rata, on behalf of the Subscribers from its
authorized but unissued common stock, a number of common shares equal to 125% of
the amount of Common Stock necessary to allow each Subscriber to be able to
convert all Notes issuable pursuant to this Agreement and interest thereon and
reserve 100% of the amount of Warrant Shares issuable upon exercise of the
Warrants. After the Approval (as described in Section 9(s) of this Agreement),
the Company will reserve pro-rata on behalf of the Subscribers from its
authorized but unissued Common Stock a number of common shares equal to 250% of
the amount of Common Stock necessary to allow each Holder of a Note to be able
to convert all such outstanding Notes and interest and reserve the amount of
Warrant Shares issuable upon exercise of the Warrants. Failure to have
sufficient shares reserved pursuant to this Section 9(f) for five (5)
consecutive business days or fifteen (15) days in the aggregate shall be a


                                       14


material default of the Company's obligations under this Agreement and an Event
of Default under the Note.

                     (g) Taxes. From the date of this Agreement and until the
conversion or satisfaction of the Note, in its entirety, the Company will
promptly pay and discharge, or cause to be paid and discharged, when due and
payable, all lawful taxes, assessments and governmental charges or levies
imposed upon the income, profits, property or business of the Company; provided,
however, that any such tax, assessment, charge or levy need not be paid if the
validity thereof shall currently be contested in good faith by appropriate
proceedings and if the Company shall have set aside on its books adequate
reserves with respect thereto, and provided, further, that the Company will pay
all such taxes, assessments, charges or levies forthwith upon the commencement
of proceedings to foreclose any lien which may have attached as security
therefore.

                     (h) Insurance. From the date of this Agreement and until
the conversion or satisfaction of the Note, in its entirety, the Company will
keep its assets which are of an insurable character insured by financially sound
and reputable insurers against loss or damage by fire, explosion and other risks
customarily insured against by companies in the Company's line of business, in
amounts sufficient to prevent the Company from becoming a co-insurer and not in
any event less than one hundred percent (100%) of the insurable value of the
property insured less reasonable deductible amounts; and the Company will
maintain, with financially sound and reputable insurers, insurance against other
hazards and risks and liability to persons and property to the extent and in the
manner customary for companies in similar businesses similarly situated and to
the extent available on commercially reasonable terms.

                     (i) Books and Records. From the date of this Agreement and
until the conversion or satisfaction of the Note, in its entirety, the Company
will keep true records and books of account in which full, true and correct
entries will be made of all dealings or transactions in relation to its business
and affairs in accordance with generally accepted accounting principles applied
on a consistent basis.

                     (j) Governmental Authorities. From the date of this
Agreement and until the conversion or satisfaction of the Note, in its entirety,
the Company shall duly observe and conform in all material respects to all valid
requirements of governmental authorities relating to the conduct of its business
or to its properties or assets.

                     (k) Intellectual Property. From the date of this Agreement
and until the conversion or satisfaction of the Note, in its entirety, the
Company shall maintain in full force and effect its corporate existence, rights
and franchises and all licenses and other rights to use intellectual property
owned or possessed by it and reasonably deemed to be necessary to the conduct of
its business, unless it is sold for value.

                     (l) Properties. From the date of this Agreement and until
the conversion or satisfaction of the Note, in its entirety, the Company will
keep its properties in good repair, working order and condition, reasonable wear
and tear excepted, and from time to time make all necessary and proper repairs,
renewals, replacements, additions and improvements thereto; and the Company will
at all times comply with each provision of all leases to which it is a party or
under which it occupies property if the breach of such provision could
reasonably be expected to have a Material Adverse Effect.

                     (m) Confidentiality/Public Announcement. From the date of
this Agreement and until the sooner of (i) two (2) years after the Closing Date,
or (ii) until all the Shares and Warrant Shares have been resold or transferred
by all the Subscribers pursuant to the Registration Statement or pursuant to
Rule 144, without regard to volume limitations, the Company agrees that except
in connection with a Form 8-K or the Registration Statement or as otherwise


                                       15


required in any other Commission filing, it will not disclose publicly or
privately the identity of the Subscribers unless expressly agreed to in writing
by a Subscriber, only to the extent required by law and then only upon five days
prior notice to Subscriber. In any event and subject to the foregoing, the
Company shall file a Form 8-K or make a public announcement describing the
Offering not later than the first business day after the Closing Date. In the
Form 8-K or public announcement, the Company will specifically disclose the
amount of Common Stock outstanding immediately after the closing. A form of the
proposed Form 8-K or public announcement to be employed in connection with the
closing is annexed hereto as EXHIBIT H.

                     (n) Further Registration Statements. Except for a
registration statement filed on behalf of the Subscribers pursuant to Section 11
of this Agreement, and as set forth on SCHEDULE 11.1 hereto, the Company will
not file any registration statements or amend any already filed registration
statement to increase the amount of Common Stock registered therein, or reduce
the price of which such Common Stock registered therein, including but not
limited to Forms S-8, with the Commission or with state regulatory authorities
without the consent of the Subscriber until the expiration of the "EXCLUSION
PERIOD", which shall be defined as the sooner of (i) the Registration Statement
having been current and available for use in connection with the resale of all
of the Registrable Securities (as defined in Section 11.1(i) for a period of 180
days, or (ii) until all the Shares and Warrant Shares have been resold or
transferred by the Subscribers pursuant to the Registration Statement or Rule
144, without regard to volume limitations. The Exclusion Period will be tolled
during the pendency of an Event of Default as defined in the Note.

                     (o) Blackout. The Company undertakes and covenants that
until the end of the Exclusion Period, the Company will not enter into any
acquisition, merger, exchange or sale or other transaction that could have the
effect of delaying the effectiveness of any pending Registration Statement or
causing an already effective Registration Statement to no longer be effective or
current for a period of twenty (20) or more days in the aggregate.

                     (p) Non-Public Information. The Company covenants and
agrees that neither it nor any other person acting on its behalf will provide
any Subscriber or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior thereto such
Subscriber shall have agreed in writing to receive such information. The Company
understands and confirms that each Subscriber shall be relying on the foregoing
representations in effecting transactions in securities of the Company.

                     (q) Offering Restrictions. Until the expiration of the
Exclusion Period and during the pendency of an Event of Default, except for the
Excepted Issuances, the Company will not enter into an agreement to nor issue
any equity, convertible debt or other securities convertible into common stock
or equity of the Company nor modify any of the foregoing which may be
outstanding at anytime, without the prior written consent of the Subscriber,
which consent may be withheld for any reason. For so long as the Notes are
outstanding, except for the Excepted Issuances, the Company will not enter into
any equity line of credit or similar agreement, nor issue nor agree to issue any
floating or variable priced equity linked instruments nor any of the foregoing
or equity with price reset rights. The only officer, director, employee and
consultant stock option or stock incentive plan currently in effect or
contemplated by the Company has been submitted to the Subscribers. No other plan
will be adopted nor may any options or equity not included in such plan be
issued for so long as any sum is outstanding under the Note.

                     (r) Negative Pledge. So long as any Notes are outstanding
without the consent of the Subscribers, the Company shall not, and shall cause
each of its Subsidiaries not to, create, incur, assume or suffer to exist any
pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim,
security interest, security title, mortgage, security deed or deed of trust,
easement or encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including any lease
or title retention agreement, any financing lease having substantially the same


                                       16


economic effect as any of the foregoing, and the filing of, or agreement to
give, any financing statement perfecting a security interest under the Uniform
Commercial Code or comparable law of any jurisdiction) (each, a "LIEN") upon any
of its property, whether now owned or hereafter acquired except for (i) the
Excepted Issuances (as defined in Section 12(a) hereof), (ii) (a) Liens imposed
by law for taxes that are not yet due or are being contested in good faith and
for which adequate reserves have been established in accordance with generally
accepted accounting principles; (b) carriers', warehousemen's, mechanics',
material men's, repairmen's and other like Liens imposed by law, arising in the
ordinary course of business and securing obligations that are not overdue by
more than 30 days or that are being contested in good faith and by appropriate
proceedings; (c) pledges and deposits made in the ordinary course of business in
compliance with workers' compensation, unemployment insurance and other social
security laws or regulations; (d) deposits to secure the performance of bids,
trade contracts, leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature, in each case in the
ordinary course of business; (e) Liens created with respect to the financing of
the purchase of new property in the ordinary course of the Company's business up
to the amount of the purchase price of such property, or (f) easements, zoning
restrictions, rights-of-way and similar encumbrances on real property imposed by
law or arising in the ordinary course of business that do not secure any
monetary obligations and do not materially detract from the value of the
affected property (each of (a) through (f), a "PERMITTED LIEN") and (iii)
indebtedness for borrowed money which is not senior or pari passu in right of
payment to the payment of the Notes.

                     (s) Approval. The Company undertakes to file a preliminary
proxy statement (the "PROXY STATEMENT") with the Commission not later than ten
(10) days after the Closing Date ("PROXY FILING DATE") for a meeting of the
Company's shareholders. The Company covenants to use its best efforts to solicit
the approval of the Company's shareholders in the Proxy Statement to increase
the authorized shares of the Company's Common Stock to not less than 1.5 billion
shares (the "RESOLUTIONS") and thereafter effectuate the Resolutions (such
effectuation the "APPROVAL"). The Company will hold a meeting of its
shareholders to obtain their consent and approval of the Resolutions upon the
soonest to occur of (i) 50 days after the Closing Date if the Proxy Statement is
not reviewed by the Commission, (ii) 75 days after the Closing Date if the Proxy
Statement is reviewed by the Commission, or (iii) 30 days after the Commission
indicates orally or in writing that it has no further comments on the Proxy
Statement or that all comments have been responded to satisfactorily (the
earliest of which is the "REQUIRED MEETING DATE"). Each of (w) failure to file
the Proxy Statement by the Proxy Filing Date, (x) conduct the meeting of
shareholders by the Required Meeting Date, (y) have the shares reserved by the
Board of Directors by the Required Meeting Date, or (z) if the Resolutions are
approved by the shareholders but not effectuated within three (3) days after the
meeting of shareholders (each of which is an "APPROVAL DEFAULT") is an Event of
Default under the Note for which liquidated damages will accrue at the rate of
two percent (2%) for each thirty (30) days, or pro rata portion thereof during
the pendency of such default. Liquidated damages for an Approval Default that
accrue at the same time as liquidated damages for a Non-Registration Event (as
defined in Section 11.4 hereof) shall be limited to the greater of the amount of
such damages which may accrue.

                  10. Covenants of the Company and Subscriber Regarding
Indemnification.

                      (a) The Company agrees to indemnify, hold harmless,
reimburse and defend the Subscribers, the Subscribers' officers, directors,
agents, Affiliates, control persons, and principal shareholders, against any
claim, cost, expense, liability, obligation, loss or damage (including
reasonable legal fees) of any nature, incurred by or imposed upon the Subscriber
or any such person which results, arises out of or is based upon (i) any
material misrepresentation by Company or material breach of any warranty by
Company in this Agreement or in any Exhibits or Schedules attached hereto, or
other agreement delivered pursuant hereto; or (ii) after any applicable notice
and/or cure periods, any material breach or default in performance by the
Company of any covenant or undertaking to be performed by the Company hereunder,
or any other agreement entered into by the Company and Subscriber relating
hereto.

                      (b) Each Subscriber agrees to indemnify, hold harmless,
reimburse and defend the Company and each of the Company's officers, directors,


                                       17


agents, Affiliates, control persons and principal shareholders against any
claim, cost, expense, liability, obligation, loss or damage (including
reasonable legal fees) of any nature, incurred by or imposed upon the Company or
any such person which results, arises out of or is based upon (i) any material
misrepresentation by such Subscriber in this Agreement or in any Exhibits or
Schedules attached hereto, or other agreement delivered pursuant hereto; or (ii)
after any applicable notice and/or cure periods, any material breach or default
in performance by such Subscriber of any covenant or undertaking to be performed
by such Subscriber hereunder, or any other agreement entered into by the Company
and Subscribers, relating hereto.

                      (c) In no event shall the liability of any Subscriber or
permitted successor hereunder or under any Transaction Document or other
agreement delivered in connection herewith be greater in amount than the dollar
amount of the net proceeds actually received by such Subscriber upon the sale of
Registrable Securities (as defined herein).

                      (d) The procedures set forth in Section 11.6 shall apply
to the indemnification set forth in Sections 10(a) and 10(b) above.

                  11.1. Registration Rights. The Company hereby grants the
following registration rights to holders of the Securities.

                        (i) On one occasion, for a period commencing one hundred
and twenty-one (121) days after the Closing Date, but not later than two (2)
years after the Closing Date, upon a written request therefor from any record
holder or holders of more than 50% of the Shares issued and issuable upon
conversion of the outstanding Notes and outstanding Warrant Shares, the Company
shall prepare and file with the Commission a registration statement under the
1933 Act registering the Registrable Securities, as defined in Section 11.1(iv)
hereof, which are the subject of such request for unrestricted public resale by
the holder thereof. For purposes of Sections 11.1(i) and 11.1(ii), Registrable
Securities shall not include Securities which are (A) registered for resale in
an effective registration statement, (B) included for registration in a pending
registration statement, or (C) which have been issued without further transfer
restrictions after a sale or transfer pursuant to Rule 144 under the 1933 Act.
Upon the receipt of such request, the Company shall promptly give written notice
to all other record holders of the Registrable Securities that such registration
statement is to be filed and shall include in such registration statement
Registrable Securities for which it has received written requests within ten
(10) days after the Company gives such written notice. Such other requesting
record holders shall be deemed to have exercised their demand registration right
under this Section 11.1(i).

                        (ii) If the Company at any time proposes to register any
of its securities under the 1933 Act for sale to the public, whether for its own
account or for the account of other security holders or both, except with
respect to registration statements on Forms S-4, S-8 or another form not
available for registering the Registrable Securities for sale to the public,
provided the Registrable Securities are not otherwise registered for resale by
the Subscribers or holder of Registrable Securities ("HOLDER") pursuant to an
effective registration statement, each such time it will give at least fifteen
(15) days' prior written notice to the record holder of the Registrable
Securities of its intention so to do. Upon the written request of the holder,
received by the Company within ten (10) days after the giving of any such notice
by the Company, to register any of the Registrable Securities not previously
registered, the Company will cause such Registrable Securities as to which
registration shall have been so requested to be included with the securities to
be covered by the registration statement proposed to be filed by the Company,
all to the extent required to permit the sale or other disposition of the
Registrable Securities so registered by the holder of such Registrable
Securities (the "SELLER" or "SELLERS"). In the event that any registration
pursuant to this Section 11.1(ii) shall be, in whole or in part, an underwritten
public offering of common stock of the Company, the number of shares of
Registrable Securities to be included in such an underwriting may be reduced by
the managing underwriter if and to the extent that the Company and the
underwriter shall reasonably be of the opinion that such inclusion would
adversely affect the marketing of the securities to be sold by the Company
therein; provided, however, that the Company shall notify the Seller in writing
of any such reduction. Notwithstanding the foregoing provisions, or Section 11.4


                                       18


hereof, the Company may withdraw or delay or suffer a delay of any registration
statement referred to in this Section 11.1(ii) without thereby incurring any
liability to the Seller.

                        (iii) If, at the time any written request for
registration is received by the Company pursuant to Section 11.1(i), the Company
has determined to proceed with the actual preparation and filing of a
registration statement under the 1933 Act in connection with the proposed offer
and sale for cash of any of its securities for the Company's own account and the
Company actually does file such other registration statement, such written
request shall be deemed to have been given pursuant to Section 11.1(ii) rather
than Section 11.1(i), and the rights of the holders of Registrable Securities
covered by such written request shall be governed by Section 11.1(ii).

                        (iv) The Company shall file with the Commission a Form
SB-2 registration statement (the "REGISTRATION STATEMENT") (or such other form
that it is eligible to use) in order to register the Registrable Securities for
resale and distribution under the 1933 Act within forty-five (45) calendar days
after the Initial Closing Date (the "FILING DATE"), and use its commercially
reasonable efforts to cause to be declared effective not later than one-hundred
and twenty (120) calendar days after the Initial Closing Date (the "EFFECTIVE
DATE"). The Company will register not less than a number of shares of common
stock in the aforedescribed registration statement that is equal to 175% of the
Shares issuable upon conversion of all of the Notes issuable to the Subscribers,
and 100% of the Warrant Shares issuable pursuant to this Agreement upon exercise
of the Warrants (collectively the "REGISTRABLE SECURITIES"). The Registrable
Securities shall be reserved and set aside exclusively for the benefit of each
Subscriber and Warrant holder, pro rata, and not issued, employed or reserved
for anyone other than each such Subscriber and Warrant holder. The Registration
Statement will immediately be amended or additional registration statements will
be immediately filed by the Company as necessary to register additional shares
of Common Stock to allow the public resale of all Common Stock included in and
issuable by virtue of the Registrable Securities. Except with the written
consent of the Subscriber, or as described on SCHEDULE 11.1 hereto, no
securities of the Company other than the Registrable Securities will be included
in the Registration Statement. It shall be deemed a Non-Registration Event if at
any time after the date the Registration Statement is declared effective by the
Commission ("ACTUAL EFFECTIVE DATE") the Company has registered for unrestricted
resale on behalf of the Subscribers fewer than 125% of the amount of Common
Shares issuable upon full conversion of all sums due under the Notes and 100% of
the Warrant Shares issuable upon exercise of the Warrants.

                  11.2. Registration Procedures. If and whenever the Company is
required by the provisions of Section 11.1(i), 11.1(ii), or (iv) to effect the
registration of any Registrable Securities under the 1933 Act, the Company will,
as expeditiously as possible:

                        (a) subject to the timelines provided in this Agreement,
prepare and file with the Commission a registration statement required by
Section 11, with respect to such securities and use its best efforts to cause
such registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as herein provided), promptly
provide to the holders of the Registrable Securities copies of all filings and
Commission letters of comment and notify Subscribers (by telecopier and by
e-mail addresses provided by Subscribers) and Grushko & Mittman, P.C. (by
telecopier and by email to Counslers@aol.com) on or before 6:00 PM EST on the
business after the day that the Company receives notice that (i) the Commission
has no comments or no further comments on the Registration Statement, and (ii)
the registration statement has been declared effective (failure to timely
provide notice as required by this Section 11.2(a) shall be a material breach of
the Company's obligation and an Event of Default as defined in the Notes and a
Non-Registration Event as defined in Section 11.4 of this Agreement);

                        (b) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in


                                       19


connection therewith as may be necessary to keep such registration statement
effective until such registration statement has been effective for a period of
two (2) years, and comply with the provisions of the 1933 Act with respect to
the disposition of all of the Registrable Securities covered by such
registration statement in accordance with the Sellers' intended method of
disposition set forth in such registration statement for such period;

                        (c) furnish to the Sellers, at the Company's expense,
such number of copies of the registration statement and the prospectus included
therein (including each preliminary prospectus) as such persons reasonably may
request in order to facilitate the public sale or their disposition of the
securities covered by such registration statement or make them electronically
available;

                        (d) use its commercially reasonable best efforts to
register or qualify the Registrable Securities covered by such registration
statement under the securities or "blue sky" laws of New York and such
jurisdictions as the Sellers shall request in writing, provided, however, that
the Company shall not for any such purpose be required to qualify generally to
transact business as a foreign corporation in any jurisdiction where it is not
so qualified or to consent to general service of process in any such
jurisdiction;

                        (e) if applicable, list the Registrable Securities
covered by such registration statement with any securities exchange on which the
Common Stock of the Company is then listed;

                        (f) notify the Subscribers within four hours of the
Company's becoming aware that a prospectus relating thereto is required to be
delivered under the 1933 Act, of the happening of any event of which the Company
has knowledge as a result of which the prospectus contained in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing or which becomes subject to a Commission, state or other governmental
order suspending the effectiveness of the registration statement covering any of
the Shares; and

                        (g) provided same would not be in violation of the
provision of Regulation FD under the 1934 Act, make available for inspection by
the Sellers, and any attorney, accountant or other agent retained by the Seller
or underwriter, all publicly available, non-confidential financial and other
records, pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors and employees to supply all publicly
available, non-confidential information reasonably requested by the seller,
attorney, accountant or agent in connection with such registration statement.

                  11.3. Provision of Documents. In connection with each
registration described in this Section 11, each Seller will furnish to the
Company in writing such information and representation letters with respect to
itself and the proposed distribution by it as reasonably shall be necessary in
order to assure compliance with federal and applicable state securities laws.

                  11.4. Non-Registration Events. The Company and the Subscribers
agree that the Sellers will suffer damages if the Registration Statement is not
filed by the Filing Date and not declared effective by the Commission by the
Effective Date, and any registration statement required under Section 11.1(i) or
11.1(ii) is not filed within 60 days after written request and declared
effective by the Commission within 120 days after such request, and maintained
in the manner and within the time periods contemplated by Section 11 hereof, and
it would not be feasible to ascertain the extent of such damages with precision.
Accordingly, if (A) the Registration Statement is not filed on or before the
Filing Date, (B) is not declared effective on or before the Effective Date, (C)
due to the action or inaction of the Company the Registration Statement is not
declared effective within three (3) business days after receipt by the Company


                                       20


or its attorneys of a written or oral communication from the Commission that the
Registration Statement will not be reviewed or that the Commission has no
further comments, (D) if the registration statement described in Sections
11.1(i) or 11.1(ii) is not filed within 60 days after such written request, or
is not declared effective within 120 days after such written request, or (E) any
registration statement described in Sections 11.1(i), 11.1(ii) or 11.1(iv) is
filed and declared effective but shall thereafter cease to be effective without
being succeeded within fifteen (15) business days by an effective replacement or
amended registration statement or for a period of time which shall exceed 30
days in the aggregate per year (defined as a period of 365 days commencing on
the Actual Effective Date (each such event referred to in clauses A through E of
this Section 11.4 is referred to herein as a "Non-Registration Event"), then the
Company shall deliver to the holder of Registrable Securities, as liquidated
damages, an amount equal to two percent (2%) for each thirty (30) days or part
thereof of the Aggregate Principal Amount of the Notes remaining unconverted and
purchase price of Shares issued upon conversion of the Notes and exercise of
Warrants owned of record by such holder which are subject to such
Non-Registration Event ("LIQUIDATED DAMAGES"). The Company must pay the
Liquidated Damages in cash. The Liquidated Damages must be paid within ten (10)
days after the end of each thirty (30) day period or shorter part thereof for
which Liquidated Damages are payable. In the event a Registration Statement is
filed by the Filing Date but is withdrawn prior to being declared effective by
the Commission, then such Registration Statement will be deemed to have not been
filed. All oral or written comments received from the Commission relating to the
Registration Statement must be satisfactorily responded to within ten (10)
business days after receipt of comments from the Commission. Failure to timely
respond to Commission comments is a Non-Registration Event for which Liquidated
Damages shall accrue and be payable by the Company to the holders of Registrable
Securities at the same rate set forth above. Notwithstanding the foregoing, the
Company shall not be liable to the Subscriber under this Section 11.4 for any
events or delays occurring as a consequence of the acts or omissions of the
Subscribers contrary to the obligations undertaken by Subscribers in this
Agreement. Liquidated Damages will not accrue nor be payable pursuant to this
Section 11.4 nor will a Non-Registration Event be deemed to have occurred for
times during which Registrable Securities are transferable by the holder of
Registrable Securities pursuant to Rule 144(k) under the 1933 Act.

                  11.5. Expenses. All expenses incurred by the Company in
complying with Section 11, including, without limitation, all registration and
filing fees, printing expenses (if required), fees and disbursements of counsel
and independent public accountants for the Company, fees and expenses (including
reasonable counsel fees) incurred in connection with complying with state
securities or "blue sky" laws, fees of the National Association of Securities
Dealers, Inc., transfer taxes, and fees of transfer agents and registrars, are
called "REGISTRATION EXPENSES." All underwriting discounts and selling
commissions applicable to the sale of Registrable Securities are called "SELLING
EXPENSES." The Company will pay all Registration Expenses in connection with the
registration statement under Section 11. Selling Expenses in connection with
each registration statement under Section 11 shall be borne by the Seller and
may be apportioned among the Sellers in proportion to the number of shares sold
by the Seller relative to the number of shares sold under such registration
statement or as all Sellers thereunder may agree.

                  11.6. Indemnification and Contribution.

                        (a) In the event of a registration of any Registrable
Securities under the 1933 Act pursuant to Section 11, the Company will, to the
extent permitted by law, indemnify and hold harmless the Seller, each officer of
the Seller, each director of the Seller, each underwriter of such Registrable
Securities thereunder and each other person, if any, who controls such Seller or
underwriter within the meaning of the 1933 Act, against any losses, claims,
damages or liabilities, joint or several, to which the Seller, or such
underwriter or controlling person may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Registrable Securities were registered under the 1933 Act
pursuant to Section 11, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based


                                       21


upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances when made, and will subject to the provisions of
Section 11.6(c) reimburse the Seller, each such underwriter and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable to
the Seller to the extent that any such damages arise out of or are based upon an
untrue statement or omission made in any preliminary prospectus if (i) the
Seller failed to send or deliver a copy of the final prospectus delivered by the
Company to the Seller with or prior to the delivery of written confirmation of
the sale by the Seller to the person asserting the claim from which such damages
arise, (ii) the final prospectus would have corrected such untrue statement or
alleged untrue statement or such omission or alleged omission, or (iii) to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by any such Seller, or
any such controlling person in writing specifically for use in such registration
statement or prospectus.

                        (b) In the event of a registration of any of the
Registrable Securities under the 1933 Act pursuant to Section 11, each Seller
severally but not jointly will, to the extent permitted by law, indemnify and
hold harmless the Company, and each person, if any, who controls the Company
within the meaning of the 1933 Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the 1933 Act, against
all losses, claims, damages or liabilities, joint or several, to which the
Company or such officer, director, underwriter or controlling person may become
subject under the 1933 Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in the registration statement under which such Registrable Securities were
registered under the 1933 Act pursuant to Section 11, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereof,
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 not misleading, and will reimburse the Company and each such
officer, director, underwriter and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided, however,
that the Seller will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
such Seller, as such, furnished in writing to the Company by such Seller
specifically for use in such registration statement or prospectus, and provided,
further, however, that the liability of the Seller hereunder shall be limited to
the net proceeds actually received by the Seller from the sale of Registrable
Securities covered by such registration statement.

                        (c) Promptly after receipt by an indemnified party
hereunder of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party hereunder, notify the indemnifying party in writing thereof, but the
omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to such indemnified party, except and only if and to
the extent the indemnifying party is prejudiced by such omission. In case any
such action shall be brought against any indemnified party and it shall notify
the indemnifying party of the commencement thereof, the indemnifying party shall
be entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel reasonably satisfactory to such
indemnified party, and, after notice from the indemnifying party to such
indemnified party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this Section 11.6(c) for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected, provided,
however, that, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded based upon the advice of counsel that there may be reasonable defenses
available to it which are different from or additional to those available to the
indemnifying party or if the interests of the indemnified party reasonably may
be deemed to conflict with the interests of the indemnifying party, the
indemnified parties, as a group, shall have the right to select one separate
counsel and to assume such legal defenses and otherwise to participate in the
defense of such action, with the reasonable expenses and fees of such separate


                                       22


counsel and other expenses related to such participation to be reimbursed by the
indemnifying party as incurred.

                        (d) In order to provide for just and equitable
contribution in the event of joint liability under the 1933 Act in any case in
which either (i) a Seller, or any controlling person of a Seller, makes a claim
for indemnification pursuant to this Section 11.6 but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 11.6 provides for indemnification in
such case, or (ii) contribution under the 1933 Act may be required on the part
of the Seller or controlling person of the Seller in circumstances for which
indemnification is not provided under this Section 11.6; then, and in each such
case, the Company and the Seller will contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after contribution
from others) in such proportion so that the Seller is responsible only for the
portion represented by the percentage that the public offering price of its
securities offered by the registration statement bears to the public offering
price of all securities offered by such registration statement, provided,
however, that, in any such case, (y) the Seller will not be required to
contribute any amount in excess of the public offering price of all such
securities sold by it pursuant to such registration statement; and (z) no person
or entity guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) will be entitled to contribution from any person or
entity who was not guilty of such fraudulent misrepresentation.

                  11.7. Delivery of Unlegended Shares.

                        (a) Within three (3) business days (such third business
day being the "UNLEGENDED SHARES DELIVERY DATE") after the business day on which
the Company has received (i) a notice that Shares or Warrant Shares or any other
Common Stock held by a Subscriber have been sold pursuant to the Registration
Statement or Rule 144 under the 1933 Act, (ii) a representation that the
prospectus delivery requirements, or the requirements of Rule 144, as applicable
and if required, have been satisfied, (iii) the original share certificates
representing the shares of Common Stock that have been sold, and (iv) in the
case of sales under Rule 144, customary representation letters of the Subscriber
and/or Subscriber's broker regarding compliance with the requirements of Rule
144, the Company at its expense, (y) shall deliver, and shall cause legal
counsel selected by the Company to deliver to its transfer agent (with copies to
Subscriber) an appropriate instruction and opinion of such counsel, directing
the delivery of shares of Common Stock without any legends including the legend
set forth in Section 4(h) above, reissuable pursuant to any effective and
current Registration Statement described in Section 11 of this Agreement or
pursuant to Rule 144 under the 1933 Act (the "UNLEGENDED SHARES"); and (z) cause
the transmission of the certificates representing the Unlegended Shares together
with a legended certificate representing the balance of the submitted share
certificates, if any, to the Subscriber at the address specified in the notice
of sale, via express courier, by electronic transfer or otherwise on or before
the Unlegended Shares Delivery Date.

                        (b) In lieu of delivering physical certificates
representing the Unlegended Shares, if the Company's transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer program, upon request of a Subscriber, so long as the certificates
therefor do not bear a legend and the Subscriber is not obligated to return such
certificate for the placement of a legend thereon, the Company shall cause its
transfer agent to electronically transmit the Unlegended Shares by crediting the
account of Subscriber's prime Broker with DTC through its Deposit Withdrawal
Agent Commission system. Such delivery must be made on or before the Unlegended
Shares Delivery Date.

                        (c) The Company understands that a delay in the delivery
of the Unlegended Shares pursuant to Section 11 hereof later than two business
days after the Unlegended Shares Delivery Date could result in economic loss to
a Subscriber. As compensation to a Subscriber for such loss, the Company agrees


                                       23


to pay late payment fees (as liquidated damages and not as a penalty) to the
Subscriber for late delivery of Unlegended Shares in the amount of $100 per
business day after the Delivery Date for each $10,000 of purchase price of the
Unlegended Shares subject to the delivery default. If during any 360 day period,
the Company fails to deliver Unlegended Shares as required by this Section 11.7
for an aggregate of thirty (30) days, then each Subscriber or assignee holding
Securities subject to such default may, at its option, require the Company to
redeem all or any portion of the Shares and Warrant Shares subject to such
default at a price per share equal to 120% of the amount purchased of such
Common Stock and Warrant Shares ("UNLEGENDED REDEMPTION AMOUNT"). The amount of
the aforedescribed liquidated damages that have accrued or been paid for the
twenty day period prior to the receipt by the Subscriber of the Unlegended
Redemption Amount shall be credited against the Unlegended Redemption Amount.
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand.

                        (d) In addition to any other rights available to a
Subscriber, if the Company fails to deliver to a Subscriber Unlegended Shares as
required pursuant to this Agreement, within seven (7) business days after the
Unlegended Shares Delivery Date and the Subscriber purchases (in an open market
transaction or otherwise) shares of common stock to deliver in satisfaction of a
sale by such Subscriber of the shares of Common Stock which the Subscriber was
entitled to receive from the Company (a "BUY-IN"), then the Company shall pay in
cash to the Subscriber (in addition to any remedies available to or elected by
the Subscriber) the amount by which (A) the Subscriber's total purchase price
(including brokerage commissions, if any) for the shares of common stock so
purchased exceeds (B) the aggregate purchase price of the shares of Common Stock
delivered to the Company for reissuance as Unlegended Shares together with
interest thereon at a rate of 15% per annum, accruing until such amount and any
accrued interest thereon is paid in full (which amount shall be paid as
liquidated damages and not as a penalty). For example, if a Subscriber purchases
shares of Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to $10,000 of purchase price of shares of Common Stock
delivered to the Company for reissuance as Unlegended Shares, the Company shall
be required to pay the Subscriber $1,000, plus interest. The Subscriber shall
provide the Company written notice indicating the amounts payable to the
Subscriber in respect of the Buy-In.

                        (e) In the event a Subscriber shall request delivery of
Unlegended Shares as described in Section 11.7 and the Company is required to
deliver such Unlegended Shares pursuant to Section 11.7, the Company may not
refuse to deliver Unlegended Shares based on any claim that such Subscriber or
any one associated or affiliated with such Subscriber has been engaged in any
violation of law, or for any other reason, unless, an injunction or temporary
restraining order from a court, on notice, restraining and or enjoining delivery
of such Unlegended Shares or exercise of all or part of said Warrant shall have
been sought and obtained and the Company has posted a surety bond for the
benefit of such Subscriber in the amount of 120% of the amount of the aggregate
purchase price of the Common Stock and Warrant Shares which are subject to the
injunction or temporary restraining order, which bond shall remain in effect
until the completion of arbitration/litigation of the dispute and the proceeds
of which shall be payable to such Subscriber to the extent Subscriber obtains
judgment in Subscriber's favor.

                  12. (a) Right of First Refusal. Until the end of the Exclusion
Period, the Subscribers shall be given not less than the later of ten (10)
business days prior written notice of any proposed sale by the Company of its
common stock or other securities or debt obligations, except in connection with
(i) full or partial consideration in connection with a strategic merger,
acquisition, consolidation or purchase of substantially all of the securities or
assets of a corporation or other entity which holders of such securities or debt
are not at any time granted registration rights, (ii) the Company's issuance of
securities in connection with strategic license agreements and other partnering
arrangements so long as such issuances are not for the purpose of raising
capital which holders of such securities or debt are not at any time granted
registration rights, (iii) as a result of the exercise of Warrants or conversion


                                       24


of Notes which are granted or issued pursuant to this Agreement, (iv) the
payment of any interest on the Notes and liquidated damages or other damages
pursuant to the Transaction Documents, (v) upon the exercise or conversion of
any of the outstanding securities set forth on SCHEDULE 5(D), and (vi) the
Company's issuance of securities pursuant to its compensation plans previously
disclosed to the Subscribers (collectively the foregoing are "EXCEPTED
ISSUANCES"). The Subscribers who exercise their rights pursuant to this Section
12(a) shall have the right during the ten (10) business days following receipt
of the notice to purchase such offered common stock, debt or other securities in
accordance with the terms and conditions set forth in the notice of sale in the
same proportion to each other as their purchase of Notes in the Offering for up
to 100% of the amount of securities or debt issued in such other offering. In
the event such terms and conditions are modified during the notice period, the
Subscribers shall be given prompt notice of such modification and shall have the
right during the ten (10) business days following the notice of modification to
exercise such right; provided, however, that the action of the pricing mechanism
shall not be deemed a modification of such terms or conditions.

                        (b) Favored Nations Provision. Other than in connection
with the Excepted Issuances, if at any time Notes or Warrants are outstanding
the Company shall offer, issue or agree to issue any common stock or securities
convertible into or exercisable for shares of common stock (or modify any of the
foregoing which may be outstanding) to any person or entity at an effective
price per share or conversion or exercise price per share which shall be less
than the Conversion Price in respect of the Shares, or if less than the Warrant
exercise price in respect of the Warrant Shares, without the consent of each
Subscriber holding Notes, Shares, Warrants, or Warrant Shares, then the Company
shall issue, for each such occasion, additional shares of Common Stock to each
Subscriber so that the average per share purchase price of the shares of Common
Stock issued to the Subscriber (of only the Common Stock or Warrant Shares still
owned by the Subscriber) is equal to such other lower effective price per share
and the Conversion Price and Warrant exercise price shall automatically be
adjusted as provided in the Notes and the Warrants. The average purchase price
of the Shares and average exercise price in relation to the Warrant Shares shall
be calculated separately for the Shares and Warrant Shares. The foregoing
calculation and issuance shall be made separately for Shares received upon
conversion and separately for Warrant Shares. The delivery to the Subscriber of
the additional shares of Common Stock shall be not later than the closing date
of the transaction giving rise to the requirement to issue additional shares of
Common Stock. The Subscriber is granted the registration rights described in
Section 11 hereof in relation to such additional shares of Common Stock except
that the Filing Date and Effective Date vis-a-vis such additional common shares
shall be, respectively, the thirtieth (30th) and sixtieth (60th) date after the
closing date giving rise to the requirement to issue the additional shares of
Common Stock. For purposes of the issuance and adjustment described in this
paragraph, the issuance of any security of the Company carrying the right to
convert such security into shares of Common Stock or of any warrant, right or
option to purchase Common Stock shall result in the issuance of the additional
shares of Common Stock upon the sooner of the agreement to or actual issuance of
such convertible security, warrant, right or option and again at any time upon
any subsequent issuances of shares of Common Stock upon exercise of such
conversion or purchase rights if such issuance is at a price lower than the
Conversion Price or Warrant exercise price in effect upon such issuance. The
rights of the Subscriber set forth in this Section 12 are in addition to any
other rights the Subscriber has pursuant to this Agreement, the Note, any
Transaction Document, and any other agreement referred to or entered into in
connection herewith.

                        (c) Paid In Kind. The Subscriber may demand that some or
all of the sums payable to the Subscriber pursuant to Sections 7.1(c), 7.2, 7.5,
11.4, 11.7(c), 11.7(d) and 11.7(e) that are not paid within ten business days of
the required payment date be paid in shares of Common Stock valued at the
Conversion Price in effect at the time Subscriber makes such demand. In addition
to any other rights granted to the Subscriber herein, the Subscriber is also
granted the registration rights set forth in Section 11.1(ii) hereof in relation
to the aforedescribed shares of Common Stock.

                        (d) Maximum Exercise of Rights. In the event the
exercise of the rights described in Sections 12(a), 12(b) and 12(c) would result
in the issuance of an amount of Common Stock of the Company that would exceed
the maximum amount that may be issued to a Subscriber calculated in the manner
described in Section 7.3 of this Agreement, then the issuance of such additional
shares of Common Stock of the Company to such Subscriber will be deferred in
whole or in part until such time as such Subscriber is able to beneficially own
such Common Stock without exceeding the maximum amount set forth calculated in


                                       25


the manner described in Section 7.3 of this Agreement. The determination of when
such Common Stock may be issued shall be made by each Subscriber as to only such
Subscriber.

                  13.   Miscellaneous.

                        (a) Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to the Company, to: Universal Communication
Systems, Inc., 407 Lincoln Road, Suite 12F, Miami Beach, FL 33139, Attn: Michael
J. Zwebner, CEO, telecopier: (305) 672-1965, with a copy by telecopier only to:
Torys LLP, 466 Lexington Avenue, New York, NY 10017, Attn: Andrew J. Beck, Esq.,
telecopier: (212) 682-0200, and (ii) if to the Subscriber, to: the one or more
addresses and telecopier numbers indicated on the signature pages hereto, with
an additional copy by telecopier only to: Grushko & Mittman, P.C., 551 Fifth
Avenue, Suite 1601, New York, New York 10176, telecopier number: (212) 697-3575,
and (iii) if to the Broker, to: the address and telecopier number set forth on
SCHEDULE 8 hereto.

                        (b) Entire Agreement; Assignment. This Agreement and
other documents delivered in connection herewith represent the entire agreement
between the parties hereto with respect to the subject matter hereof and may be
amended only by a writing executed by both parties. Neither the Company nor the
Subscribers have relied on any representations not contained or referred to in
this Agreement and the documents delivered herewith. No right or obligation of
the Company shall be assigned without prior notice to and the written consent of
the Subscribers.

                        (c) Counterparts/Execution. This Agreement may be
executed in any number of counterparts and by the different signatories hereto
on separate counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute but one and the same
instrument. This Agreement may be executed by facsimile signature and delivered
by facsimile transmission.

                        (d) Law Governing this Agreement. This Agreement shall
be governed by and construed in accordance with the laws of the State of New
York without regard to conflicts of laws principles that would result in the
application of the substantive laws of another jurisdiction. Any action brought
by either party against the other concerning the transactions contemplated by
this Agreement shall be brought only in the civil or state courts of New York or
in the federal courts located in New York County. THE PARTIES AND THE
INDIVIDUALS EXECUTING THIS AGREEMENT AND OTHER AGREEMENTS REFERRED TO HEREIN OR
DELIVERED IN CONNECTION HEREWITH ON BEHALF OF THE COMPANY AGREE TO SUBMIT TO THE
JURISDICTION OF SUCH COURTS AND WAIVE TRIAL BY JURY. The prevailing party shall
be entitled to recover from the other party its reasonable attorney's fees and
costs. In the event that any provision of this Agreement or any other agreement
delivered in connection herewith is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any such provision which


                                       26


may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision of any agreement.

                        (e) Specific Enforcement, Consent to Jurisdiction. To
the extent permitted by law, the Company and Subscriber acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to one or more preliminary and final injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof, this being in addition to any other remedy to which
any of them may be entitled by law or equity. Subject to Section 13(d) hereof,
each of the Company, Subscriber and any signator hereto in his personal capacity
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction in New York of
such court, that the suit, action or proceeding is brought in an inconvenient
forum or that the venue of the suit, action or proceeding is improper. Nothing
in this Section shall affect or limit any right to serve process in any other
manner permitted by law.

                        (f) Independent Nature of Subscribers. The Company
acknowledges that the obligations of each Subscriber under the Transaction
Documents are several and not joint with the obligations of any other
Subscriber, and no Subscriber shall be responsible in any way for the
performance of the obligations of any other Subscriber under the Transaction
Documents. The Company acknowledges that each Subscriber has represented that
the decision of each Subscriber to purchase Securities has been made by such
Subscriber independently of any other Subscriber and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company which may have been made or
given by any other Subscriber or by any agent or employee of any other
Subscriber, and no Subscriber or any of its agents or employees shall have any
liability to any Subscriber (or any other person) relating to or arising from
any such information, materials, statements or opinions. The Company
acknowledges that nothing contained in any Transaction Document, and no action
taken by any Subscriber pursuant hereto or thereto (including, but not limited
to, the (i) inclusion of a Subscriber in the Registration Statement and (ii)
review by, and consent to, such Registration Statement by a Subscriber) shall be
deemed to constitute the Subscribers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the
Subscribers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. The
Company acknowledges that each Subscriber shall be entitled to independently
protect and enforce its rights, including without limitation, the rights arising
out of the Transaction Documents, and it shall not be necessary for any other
Subscriber to be joined as an additional party in any proceeding for such
purpose. The Company acknowledges that it has elected to provide all Subscribers
with the same terms and Transaction Documents for the convenience of the Company
and not because Company was required or requested to do so by the Subscribers.
The Company acknowledges that such procedure with respect to the Transaction
Documents in no way creates a presumption that the Subscribers are in any way
acting in concert or as a group with respect to the Transaction Documents or the
transactions contemplated thereby.

                        (g) Damages. In the event the Subscriber is entitled to
receive any liquidated damages pursuant to the Transactions, the Subscriber may
elect to receive the greater of actual damages or such liquidated damages.

                        (h) Consent. As used in the Agreement, "consent of the
Subscribers" or similar language means the consent of holders of not less than
75% of the total of the Shares issued and issuable upon conversion of
outstanding Notes owned by Subscribers on the date consent is requested.

                                       27


                        (i) No consideration shall be offered or paid to any
person to amend or consent to a waiver or modification of any provision of the
Transaction Documents unless the same consideration is also offered and paid to
all the Subscribers and their permitted successors and assigns.



                      [THIS SPACE INTENTIONALLY LEFT BLANK]

                                       28


                  SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (A)


         Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.

                                     UNIVERSAL COMMUNICATION SYSTEMS, INC.
                                     a Nevada corporation




                                     By:_________________________________
                                              Name:  Michael J. Zwebner
                                              Title:  CEO

                                              Dated: February ___, 2006




- ------------------------------------------------ ---------------------- -------------------- ------------------- ------------------
SUBSCRIBER                                       NOTE PRINCIPAL AMOUNT  PURCHASE PRICE       CLASS A WARRANTS    CLASS B WARRANTS
- ------------------------------------------------ ---------------------- -------------------- ------------------- ------------------
                                                                                                     
ALPHA CAPITAL AKTIENGESELLSCHAFT                 (Each Closing Date)    (Each Closing Date)  15,060,250          15,060,250
Pradafant 7                                      $301,205.00            $250,000.00
9490 Furstentums
Vaduz, Lichtenstein
Fax: 011-42-32323196






- --------------------------------
(Signature)
By:
- ------------------------------------------------ ---------------------- -------------------- ------------------- ------------------







                  SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (B)

         Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.

                                     UNIVERSAL COMMUNICATION SYSTEMS, INC.
                                     a Nevada corporation




                                     By:_________________________________
                                              Name:  Michael J. Zwebner
                                              Title:  CEO

                                              Dated: February ___, 2006




- ------------------------------------------------ ---------------------- -------------------- ------------------- ------------------
SUBSCRIBER                                       NOTE PRINCIPAL AMOUNT  PURCHASE PRICE       CLASS A WARRANTS    CLASS B WARRANTS
- ------------------------------------------------ ---------------------- -------------------- ------------------- ------------------
                                                                                                     
BRISTOL INVESTMENT FUND, LTD.                    (Each Closing Date)    (Each Closing Date)  24,096,400          24,096,400
Caledonian Fund Services Limited                 $481,928.00            $400,000.00
69 Dr. Roy's Drive
George Town, Grand Cayman
Cayman Islands
Fax: (310) 696-0334






- --------------------------------
(Signature)
By:
- ------------------------------------------------ ---------------------- -------------------- ------------------- ------------------





                  SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (C)


         Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.

                                     UNIVERSAL COMMUNICATION SYSTEMS, INC.
                                     a Nevada corporation




                                     By:_________________________________
                                              Name:  Michael J. Zwebner
                                              Title:  CEO

                                              Dated: February ___, 2006




- ------------------------------------------------ ---------------------- -------------------- ------------------- ------------------
SUBSCRIBER                                       NOTE PRINCIPAL AMOUNT  PURCHASE PRICE       CLASS A WARRANTS    CLASS B WARRANTS
- ------------------------------------------------ ---------------------- -------------------- ------------------- ------------------
                                                                                                     
MONTGOMERY EQUITY PARTNERS                       (Each Closing Date)    (Each Closing Date)  36,144,600          36,144,600
                                                 $722,892.00            $600,000.00








- --------------------------------
(Signature)
By:
- ------------------------------------------------ ---------------------- -------------------- ------------------- ------------------





                                           LIST OF EXHIBITS AND SCHEDULES

         Exhibit A                  Form of Note

         Exhibit B                  Form of Class A and Class B Warrant

         Exhibit C                  Escrow Agreement

         Exhibit D                  Form of Security Agreement

         Exhibit E                  Form of Guaranty

         Exhibit F                  Form of Collateral Agent Agreement

         Exhibit G                  Form of Legal Opinion

         Exhibit H                  Form of Form 8-K or Public Announcement

         Schedule 5(d)              Additional Issuances / Capitalization

         Schedule 5(f)              Violations or Conflicts

         Schedule 5(h)              Litigation

         Schedule 5(q)              Undisclosed Liabilities

         Schedule 5(x)              Subsidiaries

         Schedule 5(v)              Transfer Agent

         Schedule 8                 Broker

         Schedule 9(e)              Use of Proceeds

         Schedule 11.1              Other Registrable Securities




                                  SCHEDULE 5(D)

         As of January 27, 2006 the Company had 315,042,257 shares of Common
Stock outstanding. A description of the Company's capitalization, including all
warrants, options and convertible securities, is contained in its Form 10-KSB
for the fiscal year ended September 30, 2005.




                                  SCHEDULE 5(F)

         The transactions contemplated by this Agreement may trigger
anti-dilution rights in the Company's outstanding preferred stock and 6% and 10%
convertible debentures and associated warrants. The filing of the Registration
Statement may trigger piggyback registration rights of the holders of such
securities.





                                  SCHEDULE 5(H)

         A description of litigation involving the Company is contained in its
Form 10-KSB for the fiscal year ended September 30, 2005.






                                  SCHEDULE 5(Q)

         None






                                  SCHEDULE 5(V)

         Nevada Agency & Trust Company
         50 West Liberty Street, Suite 880
         Reno, Nevada  89501
         Tel.: 775-322-0626
         Fax:  775-322-5623

         Attention: Mary J. Ramsey / Amanda Cardinelli
         e-mail: mary@natco.org




                                  SCHEDULE 5(X)

         Atmospheric Water Technology, Inc. is not in good standing in Texas





                                   SCHEDULE 8

                                     BROKERS

                                [TO BE COMPLETED]

EX-10.2

                                                                    EXHIBIT 10.2

THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO UNIVERSAL COMMUNICATION SYSTEMS, INC. THAT SUCH REGISTRATION IS
NOT REQUIRED.

                                        Right to Purchase ________ shares of
                                        Common Stock of Universal Communication
                                        Systems, Inc. (subject to adjustment as
                                        provided herein)

            FORM OF CLASS A AND CLASS B COMMON STOCK PURCHASE WARRANT

No. 2006-A/B-001                                  Issue Date: February ___, 2006

         UNIVERSAL COMMUNICATION SYSTEMS, INC., a corporation organized under
the laws of the State of Nevada (the "Company"), hereby certifies that, for
value received, _________________, ______________________________________ or its
assigns (the "Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company at any time after the Issue Date until 5:00 p.m.,
E.S.T on the [FOUR (4TH) ANNIVERSARY FOR CLASS A WARRANT, 180 DAYS FOR CLASS B
WARRANT] after the Actual Effective Date (as defined in Section 11.1(iv) of the
Subscription Agreement) (the "Expiration Date"), ________ fully paid and
nonassessable shares of Common Stock at a per share purchase price of [$0.02 FOR
CLASS A WARRANTS, $0.015 FOR CLASS B WARRANTS]. The aforedescribed purchase
price per share, as adjusted from time to time as herein provided, is referred
to herein as the "Purchase Price." The number and character of such shares of
Common Stock and the Purchase Price are subject to adjustment as provided
herein. The Company may reduce the Purchase Price without the consent of the
Holder. Capitalized terms used and not otherwise defined herein shall have the
meanings set forth in that certain Subscription Agreement (the "SUBSCRIPTION
AGREEMENT"), dated February ___, 2006, entered into by the Company and Holders
of the Warrants.

         As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:

         (a) The term "Company" shall include Universal Communication Systems,
Inc. and any corporation which shall succeed or assume the obligations of
Universal Communication Systems, Inc. hereunder.

         (b) The term "Common Stock" includes (a) the Company's Common Stock,
$0.001 par value per share, as authorized on the date of the Subscription
Agreement, and (b) any other securities into which or for which any of the
securities described in (a) may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.

         (c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 5 or otherwise.

         (d) The term "Warrant Shares" shall mean the Common Stock issuable upon
exercise of this Warrant.

                                       1


         1. Exercise of Warrant.

            1.1. Number of Shares Issuable upon Exercise. From and after the
Issue Date through and including the Expiration Date, the Holder hereof shall be
entitled to receive, upon exercise of this Warrant in whole in accordance with
the terms of subsection 1.2 or upon exercise of this Warrant in part in
accordance with subsection 1.3, shares of Common Stock of the Company, subject
to adjustment pursuant to Section 4.

            1.2. Full Exercise. This Warrant may be exercised in full by the
Holder hereof by delivery of an original or facsimile copy of the form of
subscription attached as Exhibit A hereto (the "Subscription Form") duly
executed by such Holder and surrender of the original Warrant within four (4)
days of exercise, to the Company at its principal office or at the office of its
Warrant Agent (as provided hereinafter), accompanied by payment, in cash, wire
transfer or by certified or official bank check payable to the order of the
Company, in the amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then exercisable by the Purchase Price then in
effect.

            1.3. Partial Exercise. This Warrant may be exercised in part (but
not for a fractional share) by surrender of this Warrant in the manner and at
the place provided in subsection 1.2 except that the amount payable by the
Holder on such partial exercise shall be the amount obtained by multiplying (a)
the number of whole shares of Common Stock designated by the Holder in the
Subscription Form by (b) the Purchase Price then in effect. On any such partial
exercise, the Company, at its expense, will forthwith issue and deliver to or
upon the order of the Holder hereof a new Warrant of like tenor, in the name of
the Holder hereof or as such Holder (upon payment by such Holder of any
applicable transfer taxes) may request, the whole number of shares of Common
Stock for which such Warrant may still be exercised.

            1.4. Fair Market Value. Fair Market Value of a share of Common Stock
as of a particular date (the "Determination Date") shall mean:

                 (a) If the Company's Common Stock is traded on an exchange or
is quoted on the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ"), National Market System, the NASDAQ Capital Market or the
American Stock Exchange, LLC, then the closing or last sale price, respectively,
reported for the last business day immediately preceding the Determination Date;

                 (b) If the Company's Common Stock is not traded on an exchange
or on the NASDAQ National Market System, the NASDAQ Capital Market or the
American Stock Exchange, Inc., but is traded in the over-the-counter market,
then the average of the closing bid and ask prices reported for the last
business day immediately preceding the Determination Date;

                 (c) Except as provided in clause (d) below, if the Company's
Common Stock is not publicly traded, then as the Holder and the Company agree,
or in the absence of such an agreement, by arbitration in accordance with the
rules then standing of the American Arbitration Association, before a single
arbitrator to be chosen from a panel of persons qualified by education and
training to pass on the matter to be decided; or

                 (d) If the Determination Date is the date of a liquidation,
dissolution or winding up, or any event deemed to be a liquidation, dissolution
or winding up pursuant to the Company's charter, then all amounts to be payable
per share to holders of the Common Stock pursuant to the charter in the event of
such liquidation, dissolution or winding up, plus all other amounts to be
payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of all of the Warrants are outstanding
at the Determination Date.

                                       2


            1.5. Company Acknowledgment. The Company will, at the time of the
exercise of the Warrant, upon the request of the Holder hereof acknowledge in
writing its continuing obligation to afford to such Holder any rights to which
such Holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the Holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such Holder any such rights.

            1.6. Trustee for Warrant Holders. In the event that a qualified bank
or trust company shall have been appointed as trustee for the Holder of the
Warrants pursuant to Subsection 3.2, such bank or trust company shall have all
the powers and duties of a warrant agent (as hereinafter described) and shall
accept, in its own name for the account of the Company or such successor person
as may be entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 1.

            1.7 Delivery of Stock Certificates, etc. on Exercise. The Company
agrees that the shares of Common Stock purchased upon exercise of this Warrant
shall be deemed to be issued to the Holder hereof as the record owner of such
shares as of the close of business on the date on which this Warrant shall have
been surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within three (3) business days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the Holder hereof, or as such Holder
(upon payment by such Holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such Holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such Holder would
otherwise be entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share of Common Stock, together with any other stock or
other securities and property (including cash, where applicable) to which such
Holder is entitled upon such exercise pursuant to Section 1 or otherwise.

         2. Cashless Exercise.

            (a) Except as described below, if a Registration Statement (as
defined in the Subscription Agreement) ("Registration Statement") is effective
and the Holder may sell its shares of Common Stock upon exercise hereof pursuant
to the Registration Statement, this Warrant may be exercisable in whole or in
part for cash only as set forth in Section 1 above. If no such Registration
Statement is available during the time that such Registration Statement is
required to be effective pursuant to the terms of the Subscription Agreement,
then commencing one year after the Issue Date, payment upon exercise may be made
at the option of the Holder either in (i) cash, wire transfer or by certified or
official bank check payable to the order of the Company equal to the applicable
aggregate Purchase Price, (ii) by cashless exercise in accordance with Section
(b) below or (iii) by a combination of any of the foregoing methods, for the
number of shares of Common Stock specified in such form (as such exercise number
shall be adjusted to reflect any adjustment in the total number of shares of
Common Stock issuable to the Holder per the terms of this Warrant) and the
Holder shall thereupon be entitled to receive the number of duly authorized,
validly issued, fully-paid and non-assessable shares of Common Stock (or Other
Securities) determined as provided herein.

            (b) If the Fair Market Value of one share of Common Stock is greater
than the Purchase Price (at the date of calculation as set forth below), in lieu
of exercising this Warrant for cash, the Holder may elect to receive shares
equal to the value (as determined below) of this Warrant (or the portion thereof
being cancelled) by surrender of this Warrant at the principal office of the
Company together with the properly endorsed Subscription Form in which event the
Company shall issue to the Holder a number of shares of Common Stock computed
using the following formula:

                                       3


                           X=Y (A-B)
                                C

                  Where    X=       the number of shares of Common Stock to be
                                    issued to the Holder

                           Y=       the number of shares of Common Stock
                                    purchasable under the Warrant or, if only a
                                    portion of the Warrant is being exercised,
                                    the portion of the Warrant being exercised
                                    (at the date of such calculation)

                           A=       the highest Fair Market Value of one share
                                    of the Company's Common Stock during the
                                    five trading days preceding the date of
                                    exercise

                           B=       Purchase Price (as adjusted to the date of
                                    such calculation)

                           C=       lowest Fair Market Value of one share of the
                                    Company's Common Stock during the five
                                    trading days preceding the Closing Date

            (c) The Holder may employ the cashless exercise feature described in
Section (b) above only during the pendency of a Non-Registration Event as
described in Section 11 of the Subscription Agreement. For purposes of Rule 144
promulgated under the 1933 Act, it is intended, understood and acknowledged that
the Warrant Shares issued in a cashless exercise transaction shall be deemed to
have been acquired by the Holder, and the holding period for the Warrant Shares
shall be deemed to have commenced, on the date this Warrant was originally
issued pursuant to the Subscription Agreement.

         3. Adjustment for Reorganization, Consolidation, Merger, etc.

            3.1. Reorganization, Consolidation, Merger, etc. In case at any time
or from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder of this
Warrant, on the exercise hereof as provided in Section 1, at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such Holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
Holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 4.

            3.2. Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, prior to such dissolution, shall at its expense deliver or cause to
be delivered the stock and other securities and property (including cash, where
applicable) receivable in accordance with Section 3.1 by the Holder of the
Warrants upon their exercise after the effective date of such dissolution
pursuant to this Section 3 to a bank or trust company (a "Trustee") having its
principal office in New York, NY, as trustee for the Holder of the Warrants.

            3.3. Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the Other Securities and property receivable
on the exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following any such


                                       4


transfer, as the case may be, and shall be binding upon the issuer of any Other
Securities, including, in the case of any such transfer, the person acquiring
all or substantially all of the properties or assets of the Company, whether or
not such person shall have expressly assumed the terms of this Warrant as
provided in Section 4. In the event this Warrant does not continue in full force
and effect after the consummation of the transaction described in this Section
3, then only in such event will the Company's securities and property (including
cash, where applicable) receivable by the Holder of the Warrants be delivered to
the Trustee as contemplated by Section 3.2.

            3.4 Share Issuance. Until the Expiration Date, if the Company shall
issue any Common Stock except for the Excepted Issuances (as defined in the
Subscription Agreement), prior to the complete exercise of this Warrant for a
consideration less than the Purchase Price that would be in effect at the time
of such issue, then, and thereafter successively upon each such issue, the
Purchase Price shall be reduced to such other lower issue price. For purposes of
this adjustment, the issuance of any security or debt instrument of the Company
carrying the right to convert such security or debt instrument into Common Stock
or of any warrant, right or option to purchase Common Stock shall result in an
adjustment to the Purchase Price upon the issuance of the above-described
security, debt instrument, warrant, right, or option if such issuance is at a
price lower than the Purchase Price in effect upon such issuance. The reduction
of the Purchase Price described in this Section 3.4 is in addition to the other
rights of the Holder described in the Subscription Agreement.

         4. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Purchase Price then in effect. The
Purchase Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 4.
The number of shares of Common Stock that the Holder of this Warrant shall
thereafter, on the exercise hereof as provided in Section 1, be entitled to
receive shall be adjusted to a number determined by multiplying the number of
shares of Common Stock that would otherwise (but for the provisions of this
Section 4) be issuable on such exercise by a fraction of which (a) the numerator
is the Purchase Price that would otherwise (but for the provisions of this
Section 4) be in effect, and (b) the denominator is the Purchase Price in effect
on the date of such exercise.

         5. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrants, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Purchase Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the Holder of the Warrant and any
Warrant Agent of the Company (appointed pursuant to Section 11 hereof).

         6. Reservation of Stock, etc. Issuable on Exercise of Warrant;
Financial Statements. The Company will at all times reserve and keep available,
solely for issuance and delivery on the exercise of the Warrants, all shares of


                                       5


Common Stock (or Other Securities) from time to time issuable on the exercise of
the Warrant. This Warrant entitles the Holder hereof to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Company's Common Stock.

         7. Assignment; Exchange of Warrant. Subject to compliance with
applicable securities laws, this Warrant, and the rights evidenced hereby, may
be transferred by any registered holder hereof (a "Transferor"). On the
surrender for exchange of this Warrant, with the Transferor's endorsement in the
form of Exhibit B attached hereto (the "Transferor Endorsement Form") and
together with an opinion of counsel reasonably satisfactory to the Company that
the transfer of this Warrant will be in compliance with applicable securities
laws, the Company at its expense, twice, only, but with payment by the
Transferor of any applicable transfer taxes, will issue and deliver to or on the
order of the Transferor thereof a new Warrant or Warrants of like tenor, in the
name of the Transferor and/or the transferee(s) specified in such Transferor
Endorsement Form (each a "Transferee"), calling in the aggregate on the face or
faces thereof for the number of shares of Common Stock called for on the face or
faces of the Warrant so surrendered by the Transferor. No such transfers shall
result in a public distribution of the Warrant.

         8. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense, twice only, will execute and deliver, in lieu thereof, a new Warrant of
like tenor.

         9. Registration Rights. The Holder of this Warrant has been granted
certain registration rights by the Company. These registration rights are set
forth in the Subscription Agreement. The terms of the Subscription Agreement are
incorporated herein by this reference.

         10. Maximum Exercise. The Holder shall not be entitled to exercise this
Warrant on an exercise date, in connection with that number of shares of Common
Stock which would be in excess of the sum of (i) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates on an exercise date,
and (ii) the number of shares of Common Stock issuable upon the exercise of this
Warrant with respect to which the determination of this limitation is being made
on an exercise date, which would result in beneficial ownership by the Holder
and its affiliates of more than 4.99% of the outstanding shares of Common Stock
on such date. For the purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder. Subject to
the foregoing, the Holder shall not be limited to aggregate exercises which
would result in the issuance of more than 4.99%. The restriction described in
this paragraph may be waived, in whole or in part, upon sixty-one (61) days
prior notice from the Holder to the Company. The Holder may decide whether to
convert a Convertible Note or exercise this Warrant to achieve an actual 4.99%
ownership position.

         11. Warrant Agent. The Company may, by written notice to the Holder of
the Warrant, appoint an agent (a "Warrant Agent") for the purpose of issuing
Common Stock (or Other Securities) on the exercise of this Warrant pursuant to
Section 1, exchanging this Warrant pursuant to Section 7, and replacing this
Warrant pursuant to Section 8, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such
office by such Warrant Agent.

         12. Transfer on the Company's Books. Until this Warrant is transferred
on the books of the Company, the Company may treat the registered holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.

         13. Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)


                                       6


deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur or (c) three
business days after deposited in the mail if delivered pursuant to subsection
(ii) above. The addresses for such communications shall be: (i) if to the
Company to: Universal Communication Systems, Inc., 407 Lincoln Road, Suite 12F,
Miami Beach, FL 33139, Attn: Michael J. Zwebner, CEO, telecopier: (305)
672-1965, with a copy by telecopier only to: Torys LLP, 466 Lexington Avenue,
New York, NY 10017, Attn: Andrew J. Beck, Esq., telecopier: (212) 682-0200, and
(ii) if to the Holder, to the addresses and telecopier number set forth in the
first paragraph of this Warrant, with an additional copy by telecopier only to:
Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176,
telecopier number: (212) 697-3575.

         14. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of New York. Any dispute relating to this Warrant shall be
adjudicated in New York County in the State of New York. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.

                                       7



         IN WITNESS WHEREOF, the Company has executed this Warrant as of the
date first written above.

                                           UNIVERSAL COMMUNICATION SYSTEMS, INC.



                                           By:__________________________________
                                                     Name:
                                                     Title:


Witness:

___________________________________

                                       8


                                    EXHIBIT A
                              FORM OF SUBSCRIPTION
                   (to be signed only on exercise of Warrant)

TO:  UNIVERSAL COMMUNICATION SYSTEMS, INC.

The undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____), hereby irrevocably elects to purchase (check applicable box):

___      ________ shares of the Common Stock covered by such Warrant; or
___      the maximum number of shares of Common Stock covered by such Warrant
pursuant to the cashless exercise procedure set forth in Section 2.

The undersigned herewith makes payment of the full purchase price for such
shares at the price per share provided for in such Warrant, which is
$___________. Such payment takes the form of (check applicable box or boxes):
___ $__________ in lawful money of the United States; and/or
___ the cancellation of the Warrant to the extent necessary, in accordance with
the formula set forth in Section 2, to exercise this Warrant with respect to the
maximum number of shares of Common Stock purchasable pursuant to the cashless
exercise procedure set forth in Section 2.

The undersigned requests that the certificates for such shares be issued in the
name of, and delivered to _____________________________________ whose address is
________________________________________________________________________________
________________________________________________________________________________
Number of Shares of Common Stock Beneficially Owned on the date of exercise:
Less than five percent (5%) of the outstanding Common Stock of Universal
Communication Systems, Inc.

The undersigned represents and warrants that the representations and warranties
in Section 4 of the Subscription Agreement (as defined in this Warrant) are true
and accurate with respect to the undersigned on the date hereof.

The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act"), or pursuant to an exemption from
registration under the Securities Act.
Dated:___________________
                                    (Signature must conform to name of holder as
                                    specified on the face of the Warrant)

                                    ____________________________________________
                                    ____________________________________________
                                    (Address)

                                       9


                                    EXHIBIT B

                         FORM OF TRANSFEROR ENDORSEMENT
                   (To be signed only on transfer of Warrant)

                  For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of UNIVERSAL COMMUNICATION SYSTEMS, INC. to which the
within Warrant relates specified under the headings "Percentage Transferred" and
"Number Transferred," respectively, opposite the name(s) of such person(s) and
appoints each such person Attorney to transfer its respective right on the books
of UNIVERSAL COMMUNICATION SYSTEMS, INC. with full power of substitution in the
premises.

- ---------------------------- ------------------------------ --------------------
Transferees                  Percentage Transferred         Number Transferred
- ---------------------------- ------------------------------ --------------------

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

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

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


Dated:  ______________, ___________             ________________________________
                                                (Signature must conform to name
                                                of holder as specified on the
                                                face of the warrant)

Signed in the presence of:

___________________________________             ________________________________
         (Name)
                                                ________________________________
                                                               (address)

ACCEPTED AND AGREED:                            ________________________________
[TRANSFEREE]                                    ________________________________
                                                               (address)

___________________________________
         (Name)

                                       10

EX-10.3

                                                                    EXHIBIT 10.3

         THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE
         HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
         THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE
         MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
         ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER
         SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO UNIVERSAL
         COMMUNICATION SYSTEMS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

PRINCIPAL AMOUNT $_______________                 ISSUE DATE: FEBRUARY ___, 2006
PURCHASE PRICE $_________________

                       SECURED CONVERTIBLE PROMISSORY NOTE

         FOR VALUE RECEIVED, UNIVERSAL COMMUNICATION SYSTEMS, INC., a Nevada
corporation (hereinafter called "Borrower"), hereby promises to pay to
____________________________,___________________________________, (the "Holder")
or its registered assigns or successors in interest or order, without demand,
the sum of [_________________________________________________] Dollars
($___________) ("Principal Amount"), with simple and unpaid interest thereon, on
February ____, 2008 (the "Maturity Date"), if not sooner paid.

         This Note has been entered into pursuant to the terms of a subscription
agreement between the Borrower, the Holder and certain other holders (the "Other
Holders") of secured convertible promissory notes (the "Other Notes"), dated of
even date herewith (the "Subscription Agreement"), and shall be governed by the
terms of such Subscription Agreement. Unless otherwise separately defined
herein, all capitalized terms used in this Note shall have the same meaning as
is set forth in the Subscription Agreement. The following terms shall apply to
this Note:

                                    ARTICLE I

                   INTEREST; AMORTIZATION; SECURITY AGREEMENT

         1.1. Interest Rate. Subject to Section 6.7 hereof, interest payable on
this Note shall accrue at a rate per annum (the "Interest Rate") of nine percent
(9%). Interest on the Principal Amount shall accrue from the date of this Note
and shall be payable, in arrears, together with Principal Amount payments as
described below and on the Maturity Date, whether by acceleration or otherwise.

         1.2. Minimum Monthly Principal Payments. Amortizing payments of the
outstanding Principal Amount and interest of this Note shall commence on the six
month anniversary date of this Note and on the same day of each month thereafter
(each a "Repayment Date") until the Principal Amount and interest have been
repaid in full, whether by the payment of cash or by the conversion of such
Principal Amount and interest into Common Stock pursuant to the terms hereof.
Subject to Section 2.1 and Article 3 below, on each Repayment Date the Borrower
shall make payments to the Holder in the amount of five and one-half percent
(5.5%) of the initial Principal Amount ("Fixed Principal Portion"), all interest
accrued on the Note as of the Repayment Date and any other amounts which are
then owing under this Note that have not been paid (collectively, the "Monthly
Amount"). In addition to the regular payment of the Monthly Amount, additional
payments (each an "Interim Payment") will be required to be made at the written


                                       1


election of the Holder (a form of which is annexed hereto) for each and every
day (each a "Determination Date") the total reported dollar volume of the Common
Stock exceeds $46,000 ("Liquidity Benchmark"). The amount of each Interim
Payment will be determined by multiplying the Fixed Principal Portion by a
fraction the numerator of which is the total reported dollar volume of the
Common Stock on a Determination Date and the denominator of which is the
Liquidity Benchmark. The Holder must give written notice to the Borrower within
two business days after a Determination Date of Holder's election to receive an
Interim Payment. If such notice is given, the Holder may elect to receive and
the Borrower must pay or deliver (i) cash on the business day immediately
following the date notice is given, or (ii) Common Stock valued at eighty-five
percent (85%) of the average closing bid price of the Common Stock as reported
by Bloomberg L.P. for the five (5) trading days preceding the date notice is
given by the Holder of the demand for an Interim Payment. If the Holder elects
to receive Common Stock in satisfaction of an Interim Payment, then the date of
the Holder's notice shall be deemed a Conversion Date and the Common Stock must
be delivered in the same manner and under the same conditions as required in
connection with a Notice of Conversion. All payments of cash or amounts
converted into Common Stock pursuant to this Note by the Holder or Borrower
shall be applied first against outstanding fees and damages, then accrued
interest on the Principal Amount and then to Principal Amounts of not yet due
Monthly Amounts, commencing with the Monthly Amount next payable and then
Monthly Amounts thereafter in reverse chronological order. Any Principal Amount,
interest and any other sum arising under the Transaction Documents that remains
outstanding on the Maturity Date shall be due and payable on the Maturity Date.

         1.3. Default Interest Rate. Following the occurrence and during the
continuance of an Event of Default, which, if susceptible to cure is not cured
within ten (10) days, otherwise then from the first date of such occurrence, the
annual interest rate on this Note shall (subject to Section 6.7) automatically
be increased to fifteen percent (15%).

                                   ARTICLE II

                              CONVERSION REPAYMENT

         2.1. Payment of Monthly Amount in Cash or Common Stock. Subject to
Section 3.2 hereof, the Borrower, at the Borrower's election, shall pay the
Monthly Amount (i) in cash within one (1) business day after the applicable
Repayment Date, or (ii) in registered Common Stock at an applied conversion rate
equal to the lesser of (A) the Fixed Conversion Price (as defined in Section 3.1
hereof), or (B) eighty-five percent (85%) of the average closing bid prices of
the Common Stock as reported by Bloomberg L.P. for the Principal Market for the
five (5) trading days preceding such Repayment Date (as such amount may be
adjusted as described herein). The Borrower must send notice to the Holder by
confirmed telecopier not later than 3:00 PM, New York City time on the
twenty-second Trading Day preceding a Repayment Date notifying Holder of
Borrower's election to pay the Monthly Redemption Amount in cash or stock. The
Notice must state the amount of the Monthly Redemption Amount and include
supporting calculations. Elections by the Borrower must be made to all Holders
of Notes similar to this Note in proportion to the relative Note principal held
by such Note Holders. If such notice (x) is not timely sent, or (y) if the
Monthly Redemption Amount is not timely delivered, or (z) if the Borrower elects
to pay the Monthly Redemption Amount with Common Stock, then the Holder shall
have the right to elect in writing within three trading days prior to the
applicable Repayment Date or required Delivery Date, as the case may be with
respect to (x) and (y), whether to be paid in cash or Common Stock, or in the
case of (z) defer the payment of the relevant Monthly Redemption Amount that the
Borrower has elected to pay with Common Stock until the conversion of the
deferred amount by the Holder. Such Holder's election shall not be construed to
be a waiver of any default by Borrower relating to non-timely compliance by
Borrower with any of its obligations under this Note. Nor shall the Borrower's
compliance with Holder's election be a default of any of Borrower's obligations
under this Note. Shares of Common Stock must be delivered to the Holder not
later than three (3) business days after the applicable Repayment Date.
Whichever of the Principal Market or such other principal market or exchange
where the Common Stock is listed or traded is the principal trading exchange or
market for the Common Stock is the Principal Market.

         2.2. No Effective Registration. Notwithstanding anything to the
contrary herein, no amount payable hereunder may be paid in shares of Common


                                       2


Stock by the Borrower without the Holder's consent unless (a) either (i) an
effective current Registration Statement covering the shares of Common Stock to
be issued in satisfaction of such obligations exists, or (ii) an exemption from
registration of the Common Stock is available pursuant to Rule 144(k) of the
1933 Act, and (b) no Event of Default hereunder (or an event that with the
passage of time or the giving of notice could become an Event of Default),
exists and is continuing, unless such event or Event of Default is cured within
any applicable cure period or is otherwise waived in writing by the Holder in
whole or in part at the Holder's option.

                                   ARTICLE III

                                CONVERSION RIGHTS

         3.1. Holder's Conversion Rights. Subject to Section 3.2, the Holder
shall have the right, but not the obligation at all times, to convert all or any
portion of the then aggregate outstanding Principal Amount of this Note, into
shares of Common Stock, subject to the terms and conditions set forth in this
Article III at the rate of $0.01 per share of Common Stock ("Fixed Conversion
Price") as same may be adjusted pursuant to this Note and the Subscription
Agreement. The Holder may exercise such right by delivery to the Borrower of a
written Notice of Conversion pursuant to Section 3.3. After the occurrence of an
Event of Default, the Fixed Conversion Price shall be the lesser of the Fixed
Conversion Price or 75% of the VWAP for the five trading days prior to a
Conversion Date.

         3.2. Conversion Limitation. The Holder shall not be entitled to convert
on a Conversion Date that amount of the Note in connection with that number of
shares of Common Stock which would be in excess of the sum of (i) the number of
shares of Common Stock beneficially owned by the Holder and its affiliates on a
Conversion Date, (ii) any Common Stock issuable in connection with the
unconverted portion of the Note, and (iii) the number of shares of Common Stock
issuable upon the conversion of the Note with respect to which the determination
of this provision is being made on a Conversion Date, which would result in
beneficial ownership by the Holder and its affiliates of more than 4.99% of the
outstanding shares of Common Stock of the Borrower on such Conversion Date. For
the purposes of the provision to the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder. Subject to
the foregoing, the Holder shall not be limited to aggregate conversions of only
4.99% and aggregate conversion by the Holder may exceed 4.99%. The Holder shall
have the authority and obligation to determine whether the restriction contained
in this Section 3.2 will limit any conversion hereunder and to the extent that
the Holder determines that the limitation contained in this Section applies, the
determination of which portion of the Notes are convertible shall be the
responsibility and obligation of the Holder. The Holder may waive the conversion
limitation described in this Section 3.2, in whole or in part, upon and
effective after 61 days prior written notice to the Borrower. The Holder may
decide whether to convert a Note or exercise Warrants to achieve an actual 4.99%
ownership position.

         3.3. Mechanics of Holder's Conversion.

              (a) In the event that the Holder elects to convert any amounts
outstanding under this Note into Common Stock, the Holder shall give notice of
such election by delivering an executed and completed notice of conversion (a
"Notice of Conversion") to the Borrower, which Notice of Conversion shall
provide a breakdown in reasonable detail of the Principal Amount, accrued
interest and amounts being converted. The original Note is not required to be
surrendered to the Borrower until all sums due under the Note have been paid. On
each Conversion Date (as hereinafter defined) and in accordance with its Notice
of Conversion, the Holder shall make the appropriate reduction to the Principal
Amount, accrued interest and fees as entered in its records. Each date on which
a Notice of Conversion is delivered or telecopied to the Borrower in accordance
with the provisions hereof shall be deemed a "Conversion Date." A form of Notice
of Conversion to be employed by the Holder is annexed hereto as Exhibit A.

                                       3


              (b) Pursuant to the terms of a Notice of Conversion, the Borrower
will issue instructions to the transfer agent accompanied by an opinion of
counsel, if so required by the Borrower's transfer agent and shall cause the
transfer agent to transmit the certificates representing the Conversion Shares
to the Holder by crediting the account of the Holder's designated broker with
the Depository Trust Corporation ("DTC") through its Deposit Withdrawal Agent
Commission ("DWAC") system within three (3) business days after receipt by the
Borrower of the Notice of Conversion (the "Delivery Date"). In the case of the
exercise of the conversion rights set forth herein the conversion privilege
shall be deemed to have been exercised and the Conversion Shares issuable upon
such conversion shall be deemed to have been issued upon the date of receipt by
the Borrower of the Notice of Conversion. The Holder shall be treated for all
purposes as the record holder of such shares of Common Stock, unless the Holder
provides the Borrower written instructions to the contrary. Notwithstanding the
foregoing to the contrary, the Borrower or its transfer agent shall only be
obligated to issue and deliver the shares to the DTC on the Holder's behalf via
DWAC (or certificates free of restrictive legends) if the registration statement
providing for the resale of the shares of Common Stock issuable upon the
conversion of this Note is effective and the Holder has complied with all
applicable securities laws in connection with the sale of the Common Stock,
including, without limitation, the prospectus delivery requirements. In the
event that Conversion Shares cannot be delivered to the Holder via DWAC, the
Borrower shall deliver physical certificates representing the Conversion Shares
by the Delivery Date.

         3.4. Conversion Mechanics.

              (a) The number of shares of Common Stock to be issued upon each
conversion of this Note pursuant to this Article III shall be determined by
dividing that portion of the Principal Amount and interest and fees to be
converted, if any, by the then applicable Fixed Conversion Price.

              (b) The Fixed Conversion Price and number and kind of shares or
other securities to be issued upon conversion shall be subject to adjustment
from time to time upon the happening of certain events while this conversion
right remains outstanding, as follows:

                  A. Merger, Sale of Assets, etc. If the Borrower at any time
shall consolidate with or merge into or sell or convey all or substantially all
its assets to any other corporation, this Note, as to the unpaid principal
portion thereof and accrued interest thereon, shall thereafter be deemed to
evidence the right to purchase such number and kind of shares or other
securities and property as would have been issuable or distributable on account
of such consolidation, merger, sale or conveyance, upon or with respect to the
securities subject to the conversion or purchase right immediately prior to such
consolidation, merger, sale or conveyance. The foregoing provision shall
similarly apply to successive transactions of a similar nature by any such
successor or purchaser. Without limiting the generality of the foregoing, the
anti-dilution provisions of this Section shall apply to such securities of such
successor or purchaser after any such consolidation, merger, sale or conveyance.

                  B. Reclassification, etc. If the Borrower at any time shall,
by reclassification or otherwise, change the Common Stock into the same or a
different number of securities of any class or classes, this Note, as to the
unpaid principal portion thereof and accrued interest thereon, shall thereafter
be deemed to evidence the right to purchase an adjusted number of such
securities and kind of securities as would have been issuable as the result of
such change with respect to the Common Stock immediately prior to such
reclassification or other change.

                  C. Stock Splits, Combinations and Dividends. If the shares of
Common Stock are subdivided or combined into a greater or smaller number of
shares of Common Stock, or if a dividend is paid on the Common Stock in shares
of Common Stock, the Conversion Price shall be proportionately reduced in case
of subdivision of shares or stock dividend or proportionately increased in the


                                       4


case of combination of shares, in each such case by the ratio which the total
number of shares of Common Stock outstanding immediately after such event bears
to the total number of shares of Common Stock outstanding immediately prior to
such event.

                  D. Share Issuance. So long as this Note is outstanding, if the
Borrower shall issue any Common Stock except for the Excepted Issuances (as
defined in the Subscription Agreement), prior to the complete conversion or
payment of this Note, for a consideration less than the Fixed Conversion Price
that would be in effect at the time of such issue, then, and thereafter
successively upon each such issuance, the Fixed Conversion Price shall be
reduced to such other lower issue price. For purposes of this adjustment, the
issuance of any security or debt instrument of the Borrower carrying the right
to convert such security or debt instrument into Common Stock or of any warrant,
right or option to purchase Common Stock shall result in an adjustment to the
Fixed Conversion Price upon the issuance of the above-described security, debt
instrument, warrant, right, or option and again upon the issuance of shares of
Common Stock upon exercise of such conversion or purchase rights if such
issuance is at a price lower than the then applicable Conversion Price. The
reduction of the Fixed Conversion Price described in this paragraph is in
addition to the other rights of the Holder described in the Subscription
Agreement.

              (c) Whenever the Conversion Price is adjusted pursuant to Section
3.4(b) above, the Borrower shall promptly mail to the Holder a notice setting
forth the Conversion Price after such adjustment and setting forth a statement
of the facts requiring such adjustment.

         3.5. Reservation. During the period the conversion right exists,
Borrower will reserve from its authorized and unissued Common Stock not less
than the number of shares to provide for the issuance of Common Stock upon the
full conversion of this Note as further described in the Subscription Agreement.
Borrower represents that upon issuance, such shares will be duly and validly
issued, fully paid and non-assessable. Borrower agrees that its issuance of this
Note shall constitute full authority to its officers, agents, and transfer
agents who are charged with the duty of executing and issuing stock certificates
to execute and issue the necessary certificates for shares of Common Stock upon
the conversion of this Note.

         3.6 Issuance of Replacement Note. Upon any partial conversion of this
Note, a replacement Note containing the same date and provisions of this Note
shall, at the written request of the Holder, be issued by the Borrower to the
Holder for the outstanding Principal Amount of this Note and accrued interest
which shall not have been converted or paid, provided Holder has surrendered an
original Note to the Company. In the event that the Holder elects not to
surrender a Note for reissuance upon partial payment or conversion, the Holder
hereby indemnifies the Borrower against any and all loss or damage attributable
to a third-party claim in an amount in excess of the actual amount then due
under the Note.

                                   ARTICLE IV

                                SECURITY INTEREST

         4. Security Interest/Waiver of Automatic Stay. This Note is secured by
a security interest granted to the Collateral Agent for the benefit of the
Holder pursuant to a Security Agreement, as delivered by Borrower to Holder. The
Borrower acknowledges and agrees that should a proceeding under any bankruptcy
or insolvency law be commenced by or against the Borrower, or if any of the
Collateral (as defined in the Security Agreement) should become the subject of
any bankruptcy or insolvency proceeding, then the Holder should be entitled to,
among other relief to which the Holder may be entitled under the Transaction
Documents and any other agreement to which the Borrower and Holder are parties
(collectively, "Loan Documents") and/or applicable law, an order from the court
granting immediate relief from the automatic stay pursuant to 11 U.S.C. Section
362 to permit the Holder to exercise all of its rights and remedies pursuant to
the Loan Documents and/or applicable law. TO THE EXTENT PERMITTED BY LAW, THE


                                       5


BORROWER EXPRESSLY WAIVES THE BENEFIT OF THE AUTOMATIC STAY IMPOSED BY 11 U.S.C.
SECTION 362. FURTHERMORE, THE BORROWER EXPRESSLY ACKNOWLEDGES AND AGREES THAT
NEITHER 11 U.S.C. SECTION 362 NOR ANY OTHER SECTION OF THE BANKRUPTCY CODE OR
OTHER STATUTE OR RULE (INCLUDING, WITHOUT LIMITATION, 11 U.S.C. SECTION 105)
SHALL STAY, INTERDICT, CONDITION, REDUCE OR INHIBIT IN ANY WAY THE ABILITY OF
THE HOLDER TO ENFORCE ANY OF ITS RIGHTS AND REMEDIES UNDER THE LOAN DOCUMENTS
AND/OR APPLICABLE LAW. The Borrower hereby consents to any motion for relief
from stay that may be filed by the Holder in any bankruptcy or insolvency
proceeding initiated by or against the Borrower and, further, agrees not to file
any opposition to any motion for relief from stay filed by the Holder. The
Borrower represents, acknowledges and agrees that this provision is a specific
and material aspect of the Loan Documents, and that the Holder would not agree
to the terms of the Loan Documents if this waiver were not a part of this Note.
The Borrower further represents, acknowledges and agrees that this waiver is
knowingly, intelligently and voluntarily made, that neither the Holder nor any
person acting on behalf of the Holder has made any representations to induce
this waiver, that the Borrower has been represented (or has had the opportunity
to he represented) in the signing of this Note and the Loan Documents and in the
making of this waiver by independent legal counsel selected by the Borrower and
that the Borrower has discussed this waiver with counsel.

                                    ARTICLE V

                                EVENTS OF DEFAULT

         The occurrence of any of the following events of default ("Event of
Default") shall, at the option of the Holder hereof, make all sums of principal
and interest then remaining unpaid hereon and all other amounts payable
hereunder immediately due and payable, upon demand, without presentment, or
grace period, all of which hereby are expressly waived, except as set forth
below:

         5.1 Failure to Pay Principal or Interest. The Borrower fails to pay any
installment of Principal Amount, interest or other sum due under this Note or
any Transaction Document when due and such failure continues for a period of
five (5) business days after the due date.

         5.2 Breach of Covenant. The Borrower breaches any material covenant or
other term or condition of the Subscription Agreement, this Note or other
Transaction Document in any material respect and such breach, if subject to
cure, continues for a period of ten (10) business days after written notice to
the Borrower from the Holder.

         5.3 Breach of Representations and Warranties. Any material
representation or warranty of the Borrower made herein, in the Subscription
Agreement, Transaction Document or in any agreement, statement or certificate
given in writing pursuant hereto or in connection herewith or therewith shall be
false or misleading in any material respect as of the date made and the Closing
Date.

         5.4 Receiver or Trustee. The Borrower or any Subsidiary of Borrower
shall make an assignment for the benefit of creditors, or apply for or consent
to the appointment of a receiver or trustee for them or for a substantial part
of their property or business; or such a receiver or trustee shall otherwise be
appointed.

         5.5 Judgments. Any money judgment, writ or similar final process shall
be entered or filed against Borrower or any subsidiary of Borrower or any of
their property or other assets for more than $50,000, and shall remain
unvacated, unbonded or unstayed for a period of forty-five (45) days.

         5.6 Non-Payment. The Borrower shall have received a notice of default,
which remains uncured for a period of more than thirty (30) business days, on
the payment of any one or more debts or obligations aggregating in excess of One
Hundred Thousand Dollars (US $100,000.00) beyond any applicable grace period;

                                       6


         5.7 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law,
or the issuance of any notice in relation to such event, for the relief of
debtors shall be instituted by or against the Borrower or any Subsidiary of
Borrower and if instituted against them are not dismissed within sixty (60) days
of initiation.

         5.8 Delisting. Failure of the Common Stock to be quoted or listed on
the OTC Bulletin Board ("Bulletin Board") or other Principal Market; failure to
comply with the requirements for continued listing on the Bulletin Board for a
period of five consecutive trading days; or notification from the Bulletin Board
or any Principal Market that the Borrower is not in compliance with the
conditions for such continued listing on the Bulletin Board or other Principal
Market.

         5.9 Stop Trade. An SEC or judicial stop trade order or Principal Market
trading suspension with respect to Borrower's Common Stock that lasts for five
or more consecutive trading days.

         5.10 Failure to Deliver Common Stock or Replacement Note. Borrower's
failure to timely deliver Common Stock to the Holder pursuant to and in the form
required by this Note or the Subscription Agreement, and, if requested by
Borrower, a replacement Note.

         5.11 Non-Registration Event. The occurrence of a Non-Registration Event
as described in the Subscription Agreement.

         5.12 Reverse Splits. The Borrower effectuates a reverse split of its
Common Stock without twenty days prior written notice to the Holder.

         5.13 Reservation Default. Failure by the Borrower to have reserved for
issuance upon conversion of the Note the amount of Common Stock as set forth in
this Note and the Subscription Agreement.

         5.14 Cross Default. A default by the Borrower of a material term,
covenant, warranty or undertaking of any Transaction Document or other agreement
to which the Borrower and Holder are parties, or the occurrence of a material
event of default under any such other agreement which is not cured after any
required notice and/or cure period.

                                   ARTICLE VI

                                  MISCELLANEOUS

         6.1 Failure or Indulgence Not Waiver. No failure or delay on the part
of Holder hereof in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.

         6.2 Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the


                                       7


transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to the Borrower to: Universal Communication
Systems, Inc., 407 Lincoln Road, Suite 12F, Miami Beach, FL 33139, Attn: Michael
J. Zwebner, CEO, telecopier: (305) 672-1965, with a copy by telecopier only to:
Torys LLP, 466 Lexington Avenue, New York, NY 10017, Attn: Andrew J. Beck, Esq.,
telecopier: (212) 682-0200, and (ii) if to the Holder, to the name, address and
telecopy number set forth on the front page of this Note, with a copy by
telecopier only to Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New
York, New York 10176, telecopier number: (212) 697-3575.

         6.3 Amendment Provision. The term "Note" and all reference thereto, as
used throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented.

         6.4 Assignability. This Note shall be binding upon the Borrower and its
successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns.

         6.5 Cost of Collection. If default is made in the payment of this Note,
Borrower shall pay the Holder hereof reasonable costs of collection, including
reasonable attorneys' fees.

         6.6 Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without regard to conflicts
of laws principles that would result in the application of the substantive laws
of another jurisdiction. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement shall be brought only
in the state courts of New York or in the federal courts located in the state of
New York. Both parties and the individual signing this Note on behalf of the
Borrower agree to submit to the jurisdiction of such courts. The prevailing
party shall be entitled to recover from the other party its reasonable
attorney's fees and costs. In the event that any provision of this Note is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable under any law
shall not affect the validity or unenforceability of any other provision of this
Note. Nothing contained herein shall be deemed or operate to preclude the Holder
from bringing suit or taking other legal action against the Borrower in any
other jurisdiction to collect on the Borrower's obligations to Holder, to
realize on any collateral or any other security for such obligations, or to
enforce a judgment or other court order in favor of the Holder.

         6.7 Maximum Payments. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Borrower to the Holder and thus refunded to the
Borrower.

         6.8. Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Note and, therefore, stipulates that the
rule of construction that ambiguities are to be resolved against the drafting
party shall not be applied in the interpretation of this Note to favor any party
against the other.

         6.9 Redemption. This Note may not be redeemed or called without the
consent of the Holder except as described in this Note.

         6.10 Shareholder Status. The Holder shall not have rights as a
shareholder of the Borrower with respect to unconverted portions of this Note.


                                       8


However, the Holder will have the rights of a shareholder of the Borrower with
respect to the Shares of Common Stock to be received after delivery by the
Holder of a Conversion Notice to the Borrower.

         IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its
name by an authorized officer as of the ____ day of February, 2006.


                                           UNIVERSAL COMMUNICATION SYSTEMS, INC.


                                           By:__________________________________
                                                   Name:
                                                   Title:

WITNESS:



______________________________________

                                       9


                              NOTICE OF CONVERSION

(To be executed by the Registered Holder in order to convert the Note)


         The undersigned hereby elects to convert $_________ of the principal
and $_________ of the interest due on the Note issued by Universal Communication
Systems, Inc. on February ____, 2006 into Shares of Common Stock of Universal
Communication Systems, Inc. (the "Borrower") according to the conditions set
forth in such Note, as of the date written below.



Date of Conversion:_____________________________________________________________


Conversion Price:_______________________________________________________________


Number of Shares of Common Stock Beneficially Owned on the Conversion Date: Less
than 5% of the outstanding Common Stock of Universal Communication Systems, Inc.


Shares To Be Delivered:_________________________________________________________


Signature:______________________________________________________________________


Print Name:_____________________________________________________________________


Address:________________________________________________________________________

        ________________________________________________________________________


                                       10

EX-10.4

                                                                    EXHIBIT 10.4

                               SECURITY AGREEMENT

1.       Identification.

         This Security Agreement (the "Agreement"), dated as of February ____,
2006, is entered into by and between Universal Communication Systems, Inc., a
Nevada corporation ("Parent"), the Subsidiaries of the Parent identified on
Annex I hereto (each a "Guarantor" and together with Parent, each a "Debtor" and
collectively the "Debtors"), and Barbara R. Mittman, as collateral agent acting
in the manner and to the extent described in the Collateral Agent Agreement
defined below (the "Collateral Agent"), for the benefit of the parties
identified on Schedule A hereto (collectively, the "Lenders").

2.       Recitals.

         2.1 The Lenders have made, are making and will be making loans to
Parent (the "Loans"). It is beneficial to each Debtor that the Loans were made
and are being made.

         2.2 The Loans are and will be evidenced by certain convertible
promissory notes (each a "Convertible Note") issued by Parent on or about the
date of and after the date of this Agreement pursuant to subscription agreements
(each a "Subscription Agreement") to which Parent and Lenders are parties. The
Notes are further identified on Schedule A hereto and were and will be executed
by Parent as "Borrower" or "Debtor" for the benefit of each Lender as the
"Holder" or "Lender" thereof. Schedule A hereto may be amended to include such
other Lenders who become parties hereto and sign this Agreement, the Collateral
Agent Agreement and any other agreement reasonably requested by the Collateral
Agent, who will have purchased Notes pursuant to the Subscription Agreement.

         2.3 In consideration of the Loans made and to be made by Lenders to
Parent and for other good and valuable consideration, and as security for the
performance by Parent of its obligations under the Notes and as security for the
repayment of the Loans and all other sums due from Debtors to Lenders arising
under the Transaction Documents (as defined in the Subscription Agreement), and
any other agreement between or among them (collectively, the "Obligations"),
each Debtor, for good and valuable consideration, receipt of which is
acknowledged, has agreed to grant to the Collateral Agent, for the benefit of
the Lenders, a security interest in the Collateral (as such term is hereinafter
defined), on the terms and conditions hereinafter set forth. Obligations include
all future advances by Lenders to Debtor made pursuant to the Subscription
Agreement.

         2.4 The Lenders have appointed Barbara R. Mittman as Collateral Agent
pursuant to that certain Collateral Agent Agreement dated at or about February
____, 2006 ("Collateral Agent Agreement"), among the Lenders and Collateral
Agent.

         2.5 The following defined terms which are defined in the Uniform
Commercial Code in effect in the State of New York on the date hereof are used
herein as so defined: Accounts, Chattel Paper, Documents, Equipment, General
Intangibles, Instruments, Inventory and Proceeds.

3.       Grant of General Security Interest in Collateral.

         3.1 As security for the Obligations of Debtors, each Debtor hereby
grants the Collateral Agent, for the benefit of the Lenders, a security interest
in the Collateral.

         3.2 "Collateral" shall mean all of the following property of Debtors:

                                       1
(Security Agreement)


             (A) All now owned and hereafter acquired right, title and interest
of Debtors in, to and in respect of all Accounts, Goods, real or personal
property, all present and future books and records relating to the foregoing and
all products and Proceeds of the foregoing, and as set forth below:

                 (i)  All now owned and hereafter acquired right, title and
interest of Debtors in, to and in respect of all: Accounts, interests in goods
represented by Accounts, returned, reclaimed or repossessed goods with respect
thereto and rights as an unpaid vendor; contract rights; Chattel Paper;
investment property; General Intangibles (including but not limited to, tax and
duty claims and refunds, registered and unregistered patents, trademarks,
service marks, certificates, copyrights, trade names, applications for the
foregoing, trade secrets, goodwill, processes, drawings, blueprints, customer
lists, licenses, whether as licensor or licensee, choses in action and other
claims, and existing and future leasehold interests in equipment, real estate
and fixtures); Documents; Instruments; letters of credit, bankers' acceptances
or guaranties; cash moneys, deposits; securities, bank accounts, deposit
accounts, credits and other property now or hereafter owned or held in any
capacity by Debtors, as well as agreements or property securing or relating to
any of the items referred to above;

                 (ii) Goods: All now owned and hereafter acquired right, title
and interest of Debtors in, to and in respect of goods, including, but not
limited to:

                      (a) All Inventory, wherever located, whether now owned or
hereafter acquired, of whatever kind, nature or description, including all raw
materials, work-in-process, finished goods, and materials to be used or consumed
in Debtors' business; finished goods, timber cut or to be cut, oil, gas,
hydrocarbons, and minerals extracted or to be extracted, and all names or marks
affixed to or to be affixed thereto for purposes of selling same by the seller,
manufacturer, lessor or licensor thereof and all Inventory which may be returned
to any Debtor by its customers or repossessed by any Debtor and all of Debtors'
right, title and interest in and to the foregoing (including all of a Debtor's
rights as a seller of goods);

                      (b) All Equipment and fixtures, wherever located, whether
now owned or hereafter acquired, including, without limitation, all machinery,
furniture and fixtures, and any and all additions, substitutions, replacements
(including spare parts), and accessions thereof and thereto (including, but not
limited to Debtors' rights to acquire any of the foregoing, whether by exercise
of a purchase option or otherwise);

                 (iii) Property: All now owned and hereafter acquired right,
title and interests of Debtors in, to and in respect of any other personal
property in or upon which a Debtor has or may hereafter have a security
interest, lien or right of setoff;

                 (iv) Books and Records: All present and future books and
records relating to any of the above including, without limitation, all computer
programs, printed output and computer readable data in the possession or control
of the Debtors, any computer service bureau or other third party; and

                 (v) Products and Proceeds: All products and Proceeds of the
foregoing in whatever form and wherever located, including, without limitation,
all insurance proceeds and all claims against third parties for loss or
destruction of or damage to any of the foregoing.

             (B) All now owned and hereafter acquired right, title and interest
of Debtors in, to and in respect of the following:

                 (i) the shares of stock, partnership interests, member
interests or other equity interests at any time and from time to time acquired
by Debtors of any and all entities now or hereafter existing, (such entities,
being hereinafter referred to collectively as the "Pledged Issuers" and


                                       2
(Security Agreement)


individually as a "Pledged Issuer"), the certificates representing such shares,
partnership interests, member interests or other interests, all options and
other rights, contractual or otherwise, in respect thereof and all dividends,
distributions, cash, instruments, investment property and other property from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such shares, partnership interests, member interests
or other interests;

                 (ii) all additional shares of stock, partnership interests,
member interests or other equity interests from time to time acquired by
Debtors, of any Pledged Issuer, the certificates representing such additional
shares, all options and other rights, contractual or otherwise, in respect
thereof and all dividends, distributions, cash, instruments, investment property
and other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such additional
shares, interests or equity; and

                 (iii) all security entitlements of Debtors in, and all Proceeds
of any and all of the foregoing in each case, whether now owned or hereafter
acquired by a Debtor and howsoever its interest therein may arise or appear
(whether by ownership, security interest, lien, claim or otherwise).

         Notwithstanding anything to the contrary contained herein or any
Transaction Document, Collateral shall not include any personal property which
is, or at the time of a Debtor's acquisition thereof shall be subject to a
purchase money mortgage or other purchase money lien or security interest
(including capital leases).

         3.3 The Collateral Agent is hereby specifically authorized, after the
Maturity Date (defined in the Notes) accelerated or otherwise, or after an Event
of Default (as defined herein) and the expiration of any applicable cure period,
to transfer any Collateral into the name of the Collateral Agent and to take any
and all action deemed advisable to the Collateral Agent to remove any transfer
restrictions affecting the Collateral.

4.       Perfection of Security Interest.

         4.1 Each Debtor shall prepare, execute and deliver to the Collateral
Agent UCC-1 Financing Statements. The Collateral Agent is instructed to prepare
and file at each Debtor's cost and expense, financing statements in such
jurisdictions deemed advisable to the Collateral Agent, including but not
limited to the State of Nevada. The Financing Statements are deemed to have been
filed for the benefit of the Collateral Agent and Lenders identified on Schedule
A hereto.

         4.2 The Parent shall deliver to Collateral Agent promptly stock
certificates representing all of the shares of outstanding capital stock of the
Guarantor (the "Securities"). All such certificates shall be held by or on
behalf of Collateral Agent pursuant hereto and shall be delivered in suitable
form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment or undated stock powers executed in blank,
all in form and substance satisfactory to Collateral Agent.

         4.3 All other certificates and instruments constituting Collateral from
time to time required to be pledged to Collateral Agent pursuant to the terms
hereof (the "Additional Collateral") shall be delivered to Collateral Agent
promptly upon receipt thereof by or on behalf of Debtors. All such certificates
and instruments shall be held by or on behalf of Collateral Agent pursuant
hereto and shall be delivered in suitable form for transfer by delivery, or
shall be accompanied by duly executed instruments of transfer or assignment or
undated stock powers executed in blank, all in form and substance satisfactory
to Collateral Agent. If any Collateral consists of uncertificated securities,
unless the immediately following sentence is applicable thereto, Debtors shall
cause Collateral Agent (or its custodian, nominee or other designee) to become
the registered holder thereof, or cause each issuer of such securities to agree
that it will comply with instructions originated by Collateral Agent with
respect to such securities without further consent by Debtors. If any Collateral
consists of security entitlements, Debtors shall transfer such security
entitlements to Collateral Agent (or its custodian, nominee or other designee)
or cause the applicable securities intermediary to agree that it will comply
with entitlement orders by Collateral Agent without further consent by Debtors.

                                       3
(Security Agreement)


         4.4 Within five (5) days after the receipt by a Debtor of any
Additional Collateral, a Pledge Amendment, duly executed by such Debtor, in
substantially the form of Annex I hereto (a "Pledge Amendment"), shall be
delivered to Collateral Agent in respect of the Additional Collateral to be
pledged pursuant to this Agreement. Each Debtor hereby authorizes Collateral
Agent to attach each Pledge Amendment to this Agreement and agrees that all
certificates or instruments listed on any Pledge Amendment delivered to
Collateral Agent shall for all purposes hereunder constitute Collateral.

         4.5 If Debtor shall receive, by virtue of Debtor being or having been
an owner of any Collateral, any (i) stock certificate (including, without
limitation, any certificate representing a stock dividend or distribution in
connection with any increase or reduction of capital, reclassification, merger,
consolidation, sale of assets, combination of shares, stock split, spin-off or
split-off), promissory note or other instrument, (ii) option or right, whether
as an addition to, substitution for, or in exchange for, any Collateral, or
otherwise, (iii) dividends payable in cash (except such dividends permitted to
be retained by Debtor pursuant to Section 5.1 hereof) or in securities or other
property or (iv) dividends or other distributions in connection with a partial
or total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in surplus, Debtor shall receive such stock
certificate, promissory note, instrument, option, right, payment or distribution
in trust for the benefit of Collateral Agent, shall segregate it from Debtor's
other property and shall deliver it forthwith to Collateral Agent, in the exact
form received, with any necessary endorsement and/or appropriate stock powers
duly executed in blank, to be held by Collateral Agent as Collateral and as
further collateral security for the Obligations.

5.       Distribution.

         5.1 So long as no Event of Default exists, Debtors shall be entitled to
exercise all voting power and receive payments pertaining to any of the
Collateral, provided such exercise is not contrary to the interests of the
Lenders and does not impair the Collateral.

         5.2. At any time an Event of Default exists or has occurred, all rights
of Debtors, upon notice given by Collateral Agent, to exercise the voting power
and receive payments, which it would otherwise be entitled to pursuant to
Section 5.1, shall cease and all such rights shall thereupon become vested in
Collateral Agent, which shall thereupon have the sole right to exercise such
voting power and receive such payments.

         5.3 All dividends, distributions, interest and other payments which are
received by Debtors contrary to the provisions of Section 5.2 shall be received
in trust for the benefit of Collateral Agent as security and Collateral for
payment of the Obligations, shall be segregated from other funds of Debtors, and
shall be forthwith paid over to Collateral Agent as Collateral in the exact form
received with any necessary endorsement and/or appropriate stock powers duly
executed in blank, to be held by Collateral Agent as Collateral and as further
collateral security for the Obligations.

6.       Further Action By Debtors; Covenants and Warranties.

         6.1 Collateral Agent at all times shall have a perfected security
interest in the Collateral, the Securities, and the Additional Collateral (the
"Perfected Collateral"). Each Debtor has and will continue to have full title to
the Collateral free from any liens, leases, encumbrances, judgments or other
claims. Collateral Agent's security interest in the Collateral constitutes and
will continue to constitute a first, prior and indefeasible security interest in
favor of Collateral Agent subordinate only to the senior security interest
described on Schedule 6.1 hereto. Each Debtor will do all acts and things, and


                                       4
(Security Agreement)


will execute and file all instruments (including, but not limited to, security
agreements, financing statements, continuation statements, etc.) reasonably
requested by Collateral Agent to establish, maintain and continue the perfected
security interest of Collateral Agent in the Perfected Collateral, and will
promptly on demand, pay all costs and expenses of filing and recording,
including the costs of any searches reasonably deemed necessary by Collateral
Agent from time to time to establish and determine the validity and the
continuing priority of the security interest of Collateral Agent, and also pay
all other claims and charges that, in the opinion of Collateral Agent, exercised
in good faith, are reasonably likely to materially prejudice, imperil or
otherwise affect the Collateral or Collateral Agent's or Lenders' security
interests therein.

         6.2 Other than in the ordinary course of business, for fair value and
in cash, and except for Collateral which is substituted by assets of identical
or greater value (with the consent of the Collateral Agent) or which has become
obsolete or is of inconsequential value, each Debtor will not sell, transfer,
assign or pledge those items of Collateral (or allow any such items to be sold,
transferred, assigned or pledged), without the prior written consent of
Collateral Agent other than a transfer of the Collateral to a wholly-owned
subsidiary or to another Debtor on prior notice to Collateral Agent, and
provided the Collateral remains subject to the security interest herein
described. Although Proceeds of Collateral are covered by this Agreement, this
shall not be construed to mean that Collateral Agent consents to any sale of the
Collateral, except as provided herein. Sales of Collateral in the ordinary
course of business shall be free of the security interest of Lenders and
Collateral Agent and Lenders and Collateral Agent shall promptly execute such
documents (including without limitation releases and termination statements) as
may be required by Debtors to evidence or effectuate the same.

         6.3 Each Debtor will, at all reasonable times during regular business
hours and upon reasonable notice, allow Collateral Agent or its representatives
free and complete access to the Collateral and all of such Debtor's records
which in any way relate to the Collateral, for such inspection and examination
as Collateral Agent reasonably deems necessary.

         6.4 Each Debtor, at its sole cost and expense, will protect and defend
this Security Agreement, all of the rights of Collateral Agent and Lenders
hereunder, and the Collateral against the claims and demands of all other
persons.

         6.5 Debtors will promptly notify Collateral Agent of any levy,
distraint or other seizure by legal process or otherwise of any part of the
Collateral, and of any threatened or filed claims or proceedings that are
reasonably likely to affect or impair any of the rights of Collateral Agent
under this Security Agreement in any material respect.

         6.6 Each Debtor, at its own expense, will obtain and maintain in force
insurance policies covering losses or damage to those items of Collateral which
constitute physical personal property, which insurance shall be of the types
customarily insured against by companies in the same or similar business,
similarly situated, in such amounts (with such deductible amounts) as is
customary for such companies under the same or similar circumstances, similarly
situated. Debtors shall make the Collateral Agent a loss payee thereon to the
extent of its interest in the Collateral. Collateral Agent is hereby irrevocably
(until the Obligations are paid in full) appointed each Debtor's
attorney-in-fact to endorse any check or draft that may be payable to such
Debtor as proceeds of such insurance so that Collateral Agent may collect the
proceeds payable for any loss under such insurance. The proceeds of such
insurance, less any costs and expenses incurred or paid by Collateral Agent in
the collection thereof, shall be applied either toward the cost of the repair or
replacement of the items damaged or destroyed, or on account of any sums secured
hereby, whether or not then due or payable.

         6.7 Collateral Agent may, at its option, and without any obligation to
do so, pay, perform and discharge any and all amounts, costs, expenses and
liabilities herein agreed to be paid or performed by Debtor. Upon Debtor's
failure to do so, all amounts expended by Collateral Agent in so doing shall
become part of the Obligations secured hereby, and shall be immediately due and
payable by Debtor to Collateral Agent upon demand and shall bear interest at the


                                       5
(Security Agreement)


lesser of 15% per annum or the highest legal amount from the dates of such
expenditures until paid.

         6.8 Upon the request of Collateral Agent, Debtors will furnish to
Collateral Agent within five (5) business days thereafter, or to any proposed
assignee of this Security Agreement, a written statement in form reasonably
satisfactory to Collateral Agent, duly acknowledged, certifying the amount of
the principal and interest and any other sum then owing under the Obligations,
whether to its knowledge any claims, offsets or defenses exist against the
Obligations or against this Security Agreement, or any of the terms and
provisions of any other agreement of Debtors securing the Obligations. In
connection with any assignment by Collateral Agent of this Security Agreement,
each Debtor hereby agrees to cause the insurance policies required hereby to be
carried by such Debtor, if any, to be endorsed in form satisfactory to
Collateral Agent or to such assignee, with loss payable clauses in favor of such
assignee, and to cause such endorsements to be delivered to Collateral Agent
within ten (10) calendar days after request therefor by Collateral Agent.

         6.9 Each Debtor will, at its own expense, make, execute, endorse,
acknowledge, file and/or deliver to the Collateral Agent from time to time such
vouchers, invoices, schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, reports and
other reasonable assurances or instruments and take further steps relating to
the Collateral and other property or rights covered by the security interest
hereby granted, as the Collateral Agent may reasonably require to perfect its
security interest hereunder.

         6.10 Debtors represent and warrant that they are the true and lawful
exclusive owners of the Collateral, free and clear of any liens and
encumbrances.

         6.11 Each Debtor hereby agrees not to divest itself of any right under
the Collateral except as permitted herein absent prior written approval of the
Collateral Agent, except to a subsidiary organized and located in the United
States on prior notice to Collateral Agent provided the Collateral remains
subject to the security interest herein described.

         6.12 Each Debtor shall cause each Subsidiary of such Debtor in
existence on the date hereof and each Subsidiary not in existence on the date
hereof to execute and deliver to Collateral Agent promptly and in any event
within 10 days after the formation, acquisition or change in status thereof (A)
a guaranty guaranteeing the Obligations and (B) if requested by Collateral
Agent, a security and pledge agreement substantially in the form of this
Agreement together with (x) certificates evidencing all of the capital stock of
each Subsidiary of and any entity owned by such Subsidiary, (y) undated stock
powers executed in blank with signatures guaranteed, and (z) such opinion of
counsel and such approving certificate of such Subsidiary as Collateral Agent
may reasonably request in respect of complying with any legend on any such
certificate or any other matter relating to such shares and (C) such other
agreements, instruments, approvals, legal opinions or other documents reasonably
requested by Collateral Agent in order to create, perfect, establish the first
priority of or otherwise protect any lien purported to be covered by any such
pledge and security agreement or otherwise to effect the intent that all
property and assets of such Subsidiary shall become Collateral for the
Obligations. For purposes of this Agreement, "Subsidiary" means, with respect to
any entity at any date, any corporation, limited or general partnership, limited
liability company, trust, estate, association, joint venture or other business
entity) of which more than 50% of (A) the outstanding capital stock having (in
the absence of contingencies) ordinary voting power to elect a majority of the
board of directors or other managing body of such entity, (B) in the case of a
partnership or limited liability company, the interest in the capital or profits
of such partnership or limited liability company or (C) in the case of a trust,
estate, association, joint venture or other entity, the beneficial interest in
such trust, estate, association or other entity business is, at the time of
determination, owned or controlled directly or indirectly through one or more
intermediaries, by such entity. ANNEX I ANNEXED HERETO CONTAINS A LIST OF ALL
SUBSIDIARIES OF THE DEBTORS AS OF THE DATE OF THIS AGREEMENT.

                                       6
(Security Agreement)


7.       Power of Attorney.

         At any time an Event of Default exists or has occurred, each Debtor
hereby irrevocably constitutes and appoints the Collateral Agent as the true and
lawful attorney of such Debtor, with full power of substitution, in the place
and stead of such Debtor and in the name of such Debtor or otherwise, at any
time or times, in the discretion of the Collateral Agent, to take any action and
to execute any instrument or document which the Collateral Agent may deem
necessary or advisable to accomplish the purposes of this Agreement. This power
of attorney is coupled with an interest and is irrevocable until the Obligations
are satisfied.

8.       Performance By The Collateral Agent.

         If a Debtor fails to perform any material covenant, agreement, duty or
obligation of such Debtor under this Agreement, the Collateral Agent may, after
any applicable cure period, at any time or times in its discretion, take action
to effect performance of such obligation. All reasonable expenses of the
Collateral Agent incurred in connection with the foregoing authorization shall
be payable by Debtors as provided in Paragraph 12.1 hereof. No discretionary
right, remedy or power granted to the Collateral Agent under any part of this
Agreement shall be deemed to impose any obligation whatsoever on the Collateral
Agent with respect thereto, such rights, remedies and powers being solely for
the protection of the Collateral Agent.

9.       Event of Default.

         An event of default ("Event of Default") shall be deemed to have
occurred hereunder upon the occurrence of any event of default as defined and
described in this Agreement, in the Notes, the Subscription Agreement, and any
other agreement to which Debtor and a Lender are parties. Upon and after any
Event of Default, after the applicable cure period, if any, any or all of the
Obligations shall become immediately due and payable at the option of the
Collateral Agent, for the benefit of the Lenders, and the Collateral Agent may
dispose of Collateral as provided below. A default by Debtor of any of its
material obligations pursuant to this Agreement and any of the Transaction
Documents (as defined in the Subscription Agreement) shall be an Event of
Default hereunder and an "Event of Default" as defined in the Notes, and
Subscription Agreement.

10.      Disposition of Collateral.

         Upon and after any Event of Default which is then continuing,

         10.1 The Collateral Agent may exercise its rights with respect to each
and every component of the Collateral, without regard to the existence of any
other security or source of payment for the Obligations. In addition to other
rights and remedies provided for herein or otherwise available to it, the
Collateral Agent shall have all of the rights and remedies of a lender on
default under the Uniform Commercial Code then in effect in the State of New
York.

         10.2 If any notice to Debtors of the sale or other disposition of
Collateral is required by then applicable law, five business (5) days prior
written notice (which Debtors agree is reasonable notice within the meaning of
Section 9.612(a) of the Uniform Commercial Code) shall be given to Debtors of
the time and place of any sale of Collateral which Debtors hereby agree may be
by private sale. The rights granted in this Section are in addition to any and
all rights available to Collateral Agent under the Uniform Commercial Code.

         10.3 The Collateral Agent is authorized, at any such sale, if the
Collateral Agent deems it advisable to do so, in order to comply with any
applicable securities laws, to restrict the prospective bidders or purchasers to


                                       7
(Security Agreement)


persons who will represent and agree, among other things, that they are
purchasing the Collateral for their own account for investment, and not with a
view to the distribution or resale thereof, or otherwise to restrict such sale
in such other manner as the Collateral Agent deems advisable to ensure such
compliance. Sales made subject to such restrictions shall be deemed to have been
made in a commercially reasonable manner.

         10.4 All proceeds received by the Collateral Agent for the benefit of
the Lenders in respect of any sale, collection or other enforcement or
disposition of Collateral, shall be applied (after deduction of any amounts
payable to the Collateral Agent pursuant to Paragraph 12.1 hereof) against the
Obligations pro rata among the Lenders in proportion to their interests in the
Obligations. Upon payment in full of all Obligations, Debtors shall be entitled
to the return of all Collateral, including cash, which has not been used or
applied toward the payment of Obligations or used or applied to any and all
costs or expenses of the Collateral Agent incurred in connection with the
liquidation of the Collateral (unless another person is legally entitled
thereto). Any assignment of Collateral by the Collateral Agent to Debtors shall
be without representation or warranty of any nature whatsoever and wholly
without recourse. To the extent allowed by law, each Lender may purchase the
Collateral and pay for such purchase by offsetting up to such Lender's pro rata
portion of the purchase price with sums owed to such Lender by Debtors arising
under the Obligations or any other source.

11.      Waiver of Automatic Stay. Debtor acknowledges and agrees that should a
proceeding under any bankruptcy or insolvency law be commenced by or against
Debtor, or if any of the Collateral should become the subject of any bankruptcy
or insolvency proceeding, then the Collateral Agent should be entitled to, among
other relief to which the Collateral Agent or Lenders may be entitled under the
Note, Subscription Agreement and any other agreement to which the Debtor,
Lenders or Collateral Agent are parties, (collectively "Loan Documents") and/or
applicable law, an order from the court granting immediate relief from the
automatic stay pursuant to 11 U.S.C. Section 362 to permit the Collateral Agent
to exercise all of its rights and remedies pursuant to the Loan Documents and/or
applicable law. Debtor EXPRESSLY WAIVES THE BENEFIT OF THE AUTOMATIC STAY
IMPOSED BY 11 U.S.C. SECTION 362. FURTHERMORE, Debtor EXPRESSLY ACKNOWLEDGES AND
AGREES THAT NEITHER 11 U.S.C. SECTION 362 NOR ANY OTHER SECTION OF THE
BANKRUPTCY CODE OR OTHER STATUTE OR RULE (INCLUDING, WITHOUT LIMITATION, 11
U.S.C. SECTION 105) SHALL STAY, INTERDICT, CONDITION, REDUCE OR INHIBIT IN ANY
WAY THE ABILITY OF THE COLLATERAL AGENT TO ENFORCE ANY OF ITS RIGHTS AND
REMEDIES UNDER THE LOAN DOCUMENTS AND/OR APPLICABLE LAW. Debtor hereby consents
to any motion for relief from stay which may be filed by the Collateral Agent in
any bankruptcy or insolvency proceeding initiated by or against Debtor, and
further agrees not to file any opposition to any motion for relief from stay
filed by the Collateral Agent. Debtor represents, acknowledges and agrees that
this provision is a specific and material aspect of this Agreement, and that the
Collateral Agent would not agree to the terms of this Agreement if this waiver
were not a part of this Agreement. Debtor further represents, acknowledges and
agrees that this waiver is knowingly, intelligently and voluntarily made, that
neither the Collateral Agent nor any person acting on behalf of the Collateral
Agent has made any representations to induce this waiver, that Debtor has been
represented (or has had the opportunity to be represented) in the signing of
this Agreement and in the making of this waiver by independent legal counsel
selected by Debtor and that Debtor has had the opportunity to discuss this
waiver with counsel. Debtor further agrees that any bankruptcy or insolvency
proceeding initiated by Debtor will only be brought in the Federal Court within
the Southern District of New York.

12.      Miscellaneous.

         12.1 Expenses. Debtors shall pay to the Collateral Agent, on demand,
the amount of any and all reasonable expenses, including, without limitation,
attorneys' fees, legal expenses and brokers' fees, which the Collateral Agent
may incur in connection with (a) sale, collection or other enforcement or
disposition of Collateral; (b) exercise or enforcement of any of the rights,
remedies or powers of the Collateral Agent hereunder or with respect to any or
all of the Obligations upon breach or threatened breach; or (c) failure by
Debtors to perform and observe any agreements of Debtors contained herein which
are performed by the Collateral Agent.

                                       8
(Security Agreement)


         12.2 Waivers, Amendment and Remedies. No course of dealing by the
Collateral Agent and no failure by the Collateral Agent to exercise, or delay by
the Collateral Agent in exercising, any right, remedy or power hereunder shall
operate as a waiver thereof, and no single or partial exercise thereof shall
preclude any other or further exercise thereof or the exercise of any other
right, remedy or power of the Collateral Agent. No amendment, modification or
waiver of any provision of this Agreement and no consent to any departure by
Debtors therefrom, shall, in any event, be effective unless contained in a
writing signed by the Collateral Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. The rights, remedies and powers of the Collateral Agent, not only
hereunder, but also under any instruments and agreements evidencing or securing
the Obligations and under applicable law are cumulative, and may be exercised by
the Collateral Agent from time to time in such order as the Collateral Agent may
elect.

         12.3 Notices. All notices or other communications given or made
hereunder shall be in writing and shall be personally delivered or deemed
delivered the first business day after being faxed (provided that a copy is
delivered by first class mail) to the party to receive the same at its address
set forth below or to such other address as either party shall hereafter give to
the other by notice duly made under this Section:

                  To Debtors:         Universal Communication Systems, Inc.
                                      407 Lincoln Road, Suite 12F
                                      Miami Beach, FL 33139
                                      Attn: Michael J. Zwebner, CEO
                                      Fax: (305) 672-1965

                  With a copy by telecopier only to:

                                      Torys LLP
                                      466 Lexington Avenue
                                      New York, NY 10017
                                      Attn: Andrew J. Beck, Esq.
                                      Fax: (212) 682-0200


                  To Lenders:         To the addresses and telecopier numbers
                                      set forth on Schedule A


                  To the Collateral Agent:

                                      Barbara R. Mittman, Esq.
                                      Grushko & Mittman, P.C.
                                      551 Fifth Avenue, Suite 1601
                                      New York, NY 10176
                                      Fax: (212) 697-3575

                  With a copy by telecopier only to:

                                      Grushko & Mittman, P.C.
                                      551 Fifth Avenue, Suite 1601
                                      New York, New York 10176
                                      Fax: (212) 697-3575

Any party may change its address by written notice in accordance with this
paragraph.

                                       9
(Security Agreement)


         12.4 Term; Binding Effect. This Agreement shall (a) remain in full
force and effect until payment and satisfaction in full of all of the
Obligations; (b) be binding upon each Debtor, and its successors and permitted
assigns; and (c) inure to the benefit of the Collateral Agent, for the benefit
of the Lenders and their respective successors and assigns.

         12.5 Captions. The captions of Paragraphs, Articles and Sections in
this Agreement have been included for convenience of reference only, and shall
not define or limit the provisions hereof and have no legal or other
significance whatsoever.

         12.6 Governing Law; Venue; Severability. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without regard to conflicts of laws principles that would result in the
application of the substantive laws of another jurisdiction, except to the
extent that the perfection of the security interest granted hereby in respect of
any item of Collateral may be governed by the law of another jurisdiction. Any
legal action or proceeding against a Debtor with respect to this Agreement may
be brought in the courts in the State of New York or of the United States for
the Southern District of New York, and, by execution and delivery of this
Agreement, each Debtor hereby irrevocably accepts for itself and in respect of
its property, generally and unconditionally, the jurisdiction of the aforesaid
courts. Each Debtor hereby irrevocably waives any objection which they may now
or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement brought in the
aforesaid courts and hereby further irrevocably waives and agrees not to plead
or claim in any such court that any such action or proceeding brought in any
such court has been brought in an inconvenient forum. If any provision of this
Agreement, or the application thereof to any person or circumstance, is held
invalid, such invalidity shall not affect any other provisions which can be
given effect without the invalid provision or application, and to this end the
provisions hereof shall be severable and the remaining, valid provisions shall
remain of full force and effect.

         12.7 Entire Agreement. This Agreement contains the entire agreement of
the parties and supersedes all other agreements and understandings, oral or
written, with respect to the matters contained herein.

         12.8 Counterparts/Execution. This Agreement may be executed in any
number of counterparts and by the different signatories hereto on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument. This
Agreement may be executed by facsimile signature and delivered by facsimile
transmission.

13.      Intercreditor Terms. As between the Lenders, any distribution under
paragraph 10.4 shall be made proportionately based upon the remaining principal
amount (plus accrued and unpaid interest) to each as to the total amount then
owed to the Lenders as a whole. The rights of each Lender hereunder are pari
passu to the rights of the other Lenders hereunder. Any recovery hereunder shall
be shared ratably among the Lenders according to the then remaining principal
amount owed to each (plus accrued and unpaid interest) as to the total amount
then owed to the Lenders as a whole.

14.      Termination; Release. When the Obligations have been indefeasibly paid
and performed in full or all outstanding Convertible Notes have been converted
to common stock pursuant to the terms of the Convertible Notes and the
Subscription Agreements, this Agreement shall terminate, and the Collateral
Agent, at the request and sole expense of the Debtors, will execute and deliver
to the Debtors the proper instruments (including UCC termination statements)
acknowledging the termination of the Security Agreement, and duly assign,
transfer and deliver to the Debtors, without recourse, representation or
warranty of any kind whatsoever, such of the Collateral, including, without
limitation, Securities and any Additional Collateral, as may be in the
possession of the Collateral Agent.
                                       10
(Security Agreement)


15.      Collateral Agent.

         15.1 Collateral Agent Powers. The powers conferred on the Collateral
Agent hereunder are solely to protect its interest (on behalf of the Lenders) in
the Collateral and shall not impose any duty on it to exercise any such powers.

         15.2 Reasonable Care. The Collateral Agent is required to exercise
reasonable care in the custody and preservation of any Collateral in its
possession; provided, however, that the Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral if it takes such action for that purposes as any owner thereof
reasonably requests in writing at times other than upon the occurrence and
during the continuance of any Event of Default, but failure of the Collateral
Agent, to comply with any such request at any time shall not in itself be deemed
a failure to exercise reasonable care.





        THIS SECURITY AGREEMENT MAY BE SIGNED BY FACSIMILE SIGNATURE AND
                 DELIVERED BY CONFIRMED FACSIMILE TRANSMISSION.


                      [THIS SPACE INTENTIONALLY LEFT BLANK]


                                       11
(Security Agreement)


         IN WITNESS WHEREOF, the undersigned have executed and delivered this
Security Agreement, as of the date first written above.

"DEBTOR"                                    "THE COLLATERAL AGENT"
UNIVERSAL COMMUNICATION SYSTEMS, INC.       BARBARA R. MITTMAN
a Nevada corporation

By: __________________________________      ____________________________________
Its: _________________________________

"SUBSIDIARY"                                "SUBSIDIARY"
AIRWATER CORPORATION                        AIRWATER PATENTS CORP.
A Florida corporation                       A Florida corporation
By: __________________________________      By:_________________________________
Its: _________________________________      Its: _______________________________

"SUBSIDIARY"                                "SUBSIDIARY"
AIR WATER FRIDGES AND FREEZERS INC.         ATOMOSPHERIC WATER TECHNOLOGIES
A Florida corporation                       A Texas corporation
By: __________________________________      By:_________________________________
Its: _________________________________      Its: _______________________________

"SUBSIDIARY"                                "SUBSIDIARY"
MILLENNIUM ELECTRIC TOU, LTD.               MISA WATER PRODUCTS, LTD.
An Israeli corporation                      A Florida corporation
By: __________________________________      By:_________________________________
Its: _________________________________      Its: _______________________________

"SUBSIDIARY"                                "SUBSIDIARY"
SOLAR ONE, INC.                             SOLAR STYLE, LTD.
A Florida corporation                       An Israeli corporation
By: __________________________________      By:_________________________________
Its: _________________________________      Its: _______________________________

"SUBSIDIARY"
SOLAR STYLE (USA), INC.
A Florida corporation
By: __________________________________
Its: _________________________________

                             APPROVED BY "LENDERS":

- --------------------------------------      ------------------------------------
ALPHA CAPITAL AKTIENGESELLSCHAFT            BRISTOL INVESTMENT FUND, LTD.

- --------------------------------------      ------------------------------------
MONTGOMERY EQUITY PARTNERS

                                       12
(Security Agreement)


                        SCHEDULE A TO SECURITY AGREEMENT



- ------------------------------------------------------------- ------------------------------- ----------------------------
LENDER                                                        PRINCIPAL AMOUNT OF NOTE TO     PRINCIPAL AMOUNT OF NOTE
                                                              BE ISSUED AT INITIAL CLOSING    TO BE ISSUED AT SECOND
                                                                                              CLOSING
- ------------------------------------------------------------- ------------------------------- ----------------------------
                                                                                        
ALPHA CAPITAL AKTIENGESELLSCHAFT                              $301,205.00                     $301,205.00
Pradafant 7
9490 Furstentums
Vaduz, Lichtenstein
Fax: 011-42-32323196
- ------------------------------------------------------------- ------------------------------- ----------------------------
BRISTOL INVESTMENT FUND, LTD.                                 $481,928.00                     $481,928.00
Caledonian Fund Services Limited
69 Dr. Roy's Drive
George Town, Grand Cayman
Cayman Islands
Fax: (310) 696-0334
- ------------------------------------------------------------- ------------------------------- ----------------------------
MONTGOMERY EQUITY PARTNERS                                    $722,892.00                     $722,892.00





- ------------------------------------------------------------- ------------------------------- ----------------------------
TOTALS                                                        $1,506,025.00                   $1,506,025.00
- ------------------------------------------------------------- ------------------------------- ----------------------------


                                       13
(Security Agreement)

                                     ANNEX I

                                       TO

                               SECURITY AGREEMENT

                                PLEDGE AMENDMENT

         This Pledge Amendment, dated _________ __ 200_, is delivered pursuant
to Section 4.3 of the Security Agreement referred to below. The undersigned
hereby agrees that this Pledge Amendment may be attached to the Security
Agreement, dated February ____, 2006, as it may heretofore have been or
hereafter may be amended, restated, supplemented or otherwise modified from time
to time and that the shares listed on this Pledge Amendment shall be hereby
pledged and assigned to Collateral Agent and become part of the Collateral
referred to in such Security Agreement and shall secure all of the Obligations
referred to in such Security Agreement.



- --------------------------------- ------------------------- ---------------- --------------- -------------- --------------------
NAME OF ISSUER                    JURISDICTION OF           PERCENT OWNED    NUMBER OF       CLASS          CERTIFICATE
                                  INCORPORATION             BY PARENT        SHARES                         NUMBER(S)
- --------------------------------- ------------------------- ---------------- --------------- -------------- --------------------
                                                                                             
AirWater Corporation              Florida                   100%
- --------------------------------- ------------------------- ---------------- --------------- -------------- --------------------
AirWater Patents Corp.            Florida                   100%
- --------------------------------- ------------------------- ---------------- --------------- -------------- --------------------
Air Water Fridges and Freezers,   Florida                   100%
Inc.
- --------------------------------- ------------------------- ---------------- --------------- -------------- --------------------
Atmospheric Water Technologies    Texas                     92%
- --------------------------------- ------------------------- ---------------- --------------- -------------- --------------------
Millennium Electric TOU, Ltd.     Israel                    100%
- --------------------------------- ------------------------- ---------------- --------------- -------------- --------------------
Misa Water Products, Ltd.         Florida                   100%
- --------------------------------- ------------------------- ---------------- --------------- -------------- --------------------
Solar One, Inc.                   Florida                   100%
- --------------------------------- ------------------------- ---------------- --------------- -------------- --------------------
Solar Style, Ltd.                 Israel                    100%
- --------------------------------- ------------------------- ---------------- --------------- -------------- --------------------
Solar Style (USA), Inc.           Florida                   100%
- --------------------------------- ------------------------- ---------------- --------------- -------------- --------------------



                                      UNIVERSAL COMMUNICATION SYSTEMS, INC.




                                      By:   ____________________________________


                                       14
(Security Agreement)

EX-10.5

                                                                    EXHIBIT 10.5

                                FORM OF GUARANTY

1.       Identification.

         This Guaranty (the "Guaranty"), dated as of February ____, 2006, is
entered into by the Subsidiaries of the Parent identified on Annex I to the
Security Agreement (each a "Guarantor"), for the benefit of the parties
identified on Schedule A hereto (each a "Lender" and collectively, the
"Lenders").

2.       Recitals.

         2.1 Guarantor is a direct or indirect subsidiary of Universal
Communication Systems, Inc., a Nevada corporation ("Parent"). The Lenders have
made, are making and will be making loans to Parent (the "Loans"). Guarantor
will obtain substantial benefit from the proceeds of the Loans.

         2.2 The Loans are and will be evidenced by certain convertible
promissory notes (each a "Convertible Note" and collectively, the "Convertible
Notes") issued by Parent on, about or after the date of this Guaranty pursuant
to subscription agreements dated at or about the date hereof ("Subscription
Agreements"). The Convertible Notes are further described on Schedule A hereto
and were and will be executed by Parent as "Borrower" or "Debtor" for the
benefit of each Lender as the "Holder" or "Lender" thereof.

         2.3 In consideration of the Loans made and to be made by Lenders to
Parent and for other good and valuable consideration, and as security for the
performance by Parent of its obligations under the Convertible Notes and as
security for the repayment of the Loans and all other sums due from Debtor to
Lenders arising under the Convertible Notes, Subscription Agreements and any
other agreement between or among them relating to the foregoing (collectively,
the "Obligations"), Guarantor, for good and valuable consideration, receipt of
which is acknowledged, has agreed to enter into this Guaranty. Obligations
include all future advances by Lenders to Parent made by Lenders pursuant to the
Subscription Agreement.

         2.4 The Lenders have appointed Barbara R. Mittman as Collateral Agent
pursuant to that certain Collateral Agent Agreement dated at or about February
____, 2006 ("Collateral Agent Agreement"), among the Lenders and Collateral
Agent.

3.       Guaranty.

         3.1 Guaranty. Guarantor hereby unconditionally and irrevocably
guarantees, jointly and severally with any other Guarantor, the punctual
payment, performance and observance when due, whether at stated maturity, by
acceleration or otherwise, of all of the Obligations now or hereafter existing,
whether for principal, interest (including, without limitation, all interest
that accrues after the commencement of any insolvency, bankruptcy or
reorganization of Parent, whether or not constituting an allowed claim in such
proceeding), fees, commissions, expense reimbursements, liquidated damages,
indemnifications or otherwise (such obligations, to the extent not paid by
Parent being the "Guaranteed Obligations"), and agrees to pay any and all costs,
fees and expenses (including reasonable counsel fees and expenses) incurred by
Collateral Agent and the Lenders in enforcing any rights under the guaranty set
forth herein. Without limiting the generality of the foregoing, Guarantor's
liability shall extend to all amounts that constitute part of the Guaranteed
Obligations and would be owed by Parent to Collateral Agent and the Lenders, but
for the fact that they are unenforceable or not allowable due to the existence
of an insolvency, bankruptcy or reorganization involving Parent.

         3.2 Guaranty Absolute. Guarantor guarantees that the Guaranteed
Obligations will be paid strictly in accordance with the terms of the


                                       1
(Guaranty Agreement)


Convertible Notes, regardless of any law, regulation or order now or hereafter
in effect in any jurisdiction affecting any of such terms or the rights of
Collateral Agent or the Lenders with respect thereto. The obligations of
Guarantor under this Guaranty are independent of the Guaranteed Obligations, and
a separate action or actions may be brought and prosecuted against Guarantor to
enforce such obligations, irrespective of whether any action is brought against
Parent or any other Guarantor or whether Parent or any other Guarantor is joined
in any such action or actions. The liability of Guarantor under this Guaranty
constitutes a primary obligation, and not a contract of surety, and to the
extent permitted by law, shall be irrevocable, absolute and unconditional
irrespective of, and Guarantor hereby irrevocably waives any defenses it may now
or hereafter have in any way relating to, any or all of the following:

             (a) any lack of validity or enforceability of the Convertible Notes
or any agreement or instrument relating thereto;

             (b) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Guaranteed Obligations, or any other
amendment or waiver of or any consent to departure from the Convertible Notes,
including, without limitation, any increase in the Guaranteed Obligations
resulting from the extension of additional credit to Parent or otherwise;

             (c) any taking, exchange, release, subordination or non-perfection
of any Collateral, or any taking, release or amendment or waiver of or consent
to departure from any other guaranty, for all or any of the Guaranteed
Obligations;

             (d) any change, restructuring or termination of the corporate,
limited liability company or partnership structure or existence of Parent; or

             (e) any other circumstance (including, without limitation, any
statute of limitations) or any existence of or reliance on any representation by
Collateral Agent or the Lenders that might otherwise constitute a defense
available to, or a discharge of, Parent or any other guarantor or surety.

This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by Collateral Agent, the Lenders or any other
entity upon the insolvency, bankruptcy or reorganization of the Parent or
otherwise (and whether as a result of any demand, settlement, litigation or
otherwise), all as though such payment had not been made.

         3.3 Waiver. Guarantor hereby waives promptness, diligence, notice of
acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Guaranty and any requirement that Collateral Agent or the
Lenders exhaust any right or take any action against any Borrower or any other
person or entity or any Collateral. Guarantor acknowledges that it will receive
direct and indirect benefits from the financing arrangements contemplated herein
and that the waiver set forth in this Section 3.3 is knowingly made in
contemplation of such benefits. Guarantor hereby waives any right to revoke this
Guaranty, and acknowledges that this Guaranty is continuing in nature and
applies to all Guaranteed Obligations, whether existing now or in the future.

         3.4 Continuing Guaranty; Assignments. This Guaranty is a continuing
guaranty and shall (a) remain in full force and effect until the later of the
indefeasible cash payment in full of the Guaranteed Obligations and all other
amounts payable under this Guaranty, the Subscription Agreements and Convertible
Notes, (b) be binding upon Guarantor, its successors and assigns and (c) inure
to the benefit of and be enforceable by the Lenders and their successors,
pledgees, transferees and assigns. Without limiting the generality of the
foregoing clause (c), any Lender may pledge, assign or otherwise transfer all or
any portion of its rights and obligations under this Guaranty (including,
without limitation, all or any portion of its Convertible Notes owing to it) to
any other Person, and such other Person shall thereupon become vested with all


                                       2
(Guaranty Agreement)


the benefits in respect thereof granted such Collateral Agent or Lender herein
or otherwise.

         3.5 Subrogation. No Guarantor will exercise any rights that it may now
or hereafter acquire against the Collateral Agent or any Lender or other
Guarantor (if any) that arise from the existence, payment, performance or
enforcement of such Guarantor's obligations under this Guaranty, including,
without limitation, any right of subrogation, reimbursement, exoneration,
contribution or indemnification, whether or not such claim, remedy or right
arises in equity or under contract, statute or common law, including, without
limitation, the right to take or receive from the Collateral Agent or any Lender
or other Guarantor (if any), directly or indirectly, in cash or other property
or by set-off or in any other manner, payment or security solely on account of
such claim, remedy or right, unless and until all of the Guaranteed Obligations
and all other amounts payable under this Guaranty shall have been indefeasibly
paid in full in cash.

         3.6 Maximum Obligations. Notwithstanding any provision herein contained
to the contrary, Guarantor's liability with respect to the Obligations shall be
limited to an amount not to exceed, as of any date of determination, the amount
that could be claimed by Lenders from Guarantor without rendering such claim
voidable or avoidable under Section 548 of the Bankruptcy Code or under any
applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance
Act or similar statute or common law.

4.       Miscellaneous.

         4.1 Expenses. Guarantor shall pay to the Lenders, on demand, the amount
of any and all reasonable expenses, including, without limitation, attorneys'
fees, legal expenses and brokers' fees, which the Lenders may incur in
connection with exercise or enforcement of any the rights, remedies or powers of
the Lenders hereunder or with respect to any or all of the Obligations.

         4.2 Waivers, Amendment and Remedies. No course of dealing by the
Lenders and no failure by the Lenders to exercise, or delay by the Lenders, in
exercising, any right, remedy or power hereunder shall operate as a waiver
thereof, and no single or partial exercise thereof shall preclude any other or
further exercise thereof or the exercise of any other right, remedy or power of
the Lenders. No amendment, modification or waiver of any provision of this
Guaranty and no consent to any departure by Guarantor therefrom, shall, in any
event, be effective unless contained in a writing signed by the Majority in
Interest (as such term is defined in the Collateral Agent Agreement) or the
Lender or Lenders against whom such amendment, modification or waiver is sought,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. The rights, remedies and powers of
the Lenders, not only hereunder, but also under any instruments and agreements
evidencing or securing the Obligations and under applicable law are cumulative,
and may be exercised by the Lenders from time to time in such order as the
Lenders may elect.

         4.3 Notices. All notices or other communications given or made
hereunder shall be in writing and shall be personally delivered or deemed
delivered the first business day after being faxed (provided that a copy is
delivered by first class mail) to the party to receive the same at its address
set forth below or to such other address as either party shall hereafter give to
the other by notice duly made under this Section:

             To Parent and
             Guarantor, to:           Universal Communication Systems, Inc.
                                      407 Lincoln Road, Suite 12F
                                      Miami Beach, FL 33139
                                      Attn: Michael J. Zwebner, CEO
                                      Fax: (305) 672-1965

                                       3
(Guaranty Agreement)


             With a copy by telecopier only to:

                                      Torys LLP
                                      466 Lexington Avenue
                                      New York, NY 10017
                                      Attn: Andrew J. Beck, Esq.
                                      Fax: (212) 682-0200


                  To Lenders:         To the addresses and telecopier numbers
                                      set forth on Schedule A


                  To the Collateral Agent:

                                      Barbara R. Mittman, Esq.
                                      Grushko & Mittman, P.C.
                                      551 Fifth Avenue, Suite 1601
                                      New York, NY 10176
                                      Fax: (212) 697-3575


                  With a copy to:     Grushko & Mittman, P.C.
                                      551 Fifth Avenue, Suite 1601
                                      New York, New York 10176
                                      Fax: (212) 697-3575

Any party may change its address by written notice in accordance with this
paragraph.

         4.4 Term; Binding Effect. This Guaranty shall (a) remain in full force
and effect until payment and satisfaction in full of all of the Obligations; (b)
be binding upon Guarantor and its successors and permitted assigns; and (c)
inure to the benefit of the Lenders and their respective successors and assigns.
All the rights and benefits granted by Guarantor to the Collateral Agent and
Lenders hereunder and other agreements and documents delivered in connection
therewith are deemed granted to both the Collateral Agent and Lenders. Upon the
payment in full of the Obligations, (i) this Guaranty shall terminate and (ii)
the Lenders will, upon Guarantor's request and at Guarantor's expense, execute
and deliver to Guarantor such documents as Guarantor shall reasonably request to
evidence such termination, all without any representation, warranty or recourse
whatsoever.

         4.5 Captions. The captions of Paragraphs, Articles and Sections in this
Guaranty have been included for convenience of reference only, and shall not
define or limit the provisions hereof and have no legal or other significance
whatsoever.

         4.6 Governing Law; Venue; Severability. This Guaranty shall be governed
by and construed in accordance with the laws of the State of New York without
regard to principles of conflicts or choice of law. Any legal action or
proceeding against Guarantor with respect to this Guaranty may be brought in the
courts of the State of New York or of the United States for the Southern
District of New York, and, by execution and delivery of this Guaranty, Guarantor
hereby irrevocably accepts for itself and in respect of its property, generally
and unconditionally, the jurisdiction of the aforesaid courts. Guarantor hereby
irrevocably waives any objection which they may now or hereafter have to the
laying of venue of any of the aforesaid actions or proceedings arising out of or
in connection with this Guaranty brought in the aforesaid courts and hereby
further irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been brought in
an inconvenient forum. If any provision of this Guaranty, or the application


                                       4
(Guaranty Agreement)


thereof to any person or circumstance, is held invalid, such invalidity shall
not affect any other provisions which can be given effect without the invalid
provision or application, and to this end the provisions hereof shall be
severable and the remaining, valid provisions shall remain of full force and
effect.

         4.7 Satisfaction of Obligations. For all purposes of this Guaranty, the
payment in full of the Obligations shall be conclusively deemed to have occurred
when either the Obligations have been indefeasibly paid in cash or all
outstanding Convertible Notes have been converted to common stock pursuant to
the terms of the Convertible Notes and the Subscription Agreements.

         4.8 Counterparts/Execution. This Agreement may be executed in any
number of counterparts and by the different signatories hereto on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument. This
Agreement may be executed by facsimile signature and delivered by facsimile
transmission.

                                       5
(Guaranty Agreement)


         IN WITNESS WHEREOF, the undersigned have executed and delivered this
Guaranty, as of the date first written above.

"GUARANTOR"                                 "GUARANTOR"
AIRWATER CORPORATION                        AIRWATER PATENTS CORP.
A Florida corporation                       A Florida corporation
By: __________________________________      By:_________________________________
Its: _________________________________      Its: _______________________________

"GUARANTOR"                                 "GUARANTOR"
AIR WATER FRIDGES AND FREEZERS INC.         ATOMOSPHERIC WATER TECHNOLOGIES
A Florida corporation                       A Texas corporation
By: __________________________________      By:_________________________________
Its: _________________________________      Its: _______________________________

"GUARANTOR"                                 "GUARANTOR"
MILLENNIUM ELECTRIC TOU, LTD.               MISA WATER PRODUCTS, LTD.
An Israeli corporation                      A Florida corporation
By: __________________________________      By:_________________________________
Its: _________________________________      Its: _______________________________

"GUARANTOR"                                 "GUARANTOR"
SOLAR ONE, INC.                             SOLAR STYLE, LTD.
A Florida corporation                       An Israeli corporation
By: __________________________________      By:_________________________________
Its: _________________________________      Its: _______________________________

"GUARANTOR"
SOLAR STYLE (USA), INC.
A Florida corporation
By: __________________________________
Its: _________________________________

                             APPROVED BY "LENDERS":


- --------------------------------------      ------------------------------------
ALPHA CAPITAL AKTIENGESELLSCHAFT            BRISTOL INVESTMENT FUND, LTD.



- --------------------------------------      ------------------------------------
MONTGOMERY EQUITY PARTNERS


        THIS GUARANTY AGREEMENT MAY BE SIGNED BY FACSIMILE SIGNATURE AND
                 DELIVERED BY CONFIRMED FACSIMILE TRANSMISSION.

                                       6
(Guaranty Agreement)


                             SCHEDULE A TO GUARANTY



- ---------------------------------- ------------------------------- ----------------------------
LENDER                             PRINCIPAL AMOUNT OF NOTE TO     PRINCIPAL AMOUNT OF NOTE
                                   BE ISSUED AT INITIAL CLOSING    TO BE ISSUED AT SECOND
                                                                   CLOSING
- ---------------------------------- ------------------------------- ----------------------------
                                                             
ALPHA CAPITAL AKTIENGESELLSCHAFT   $301,205.00                     $301,205.00
Pradafant 7
9490 Furstentums
Vaduz, Lichtenstein
Fax: 011-42-32323196
- ---------------------------------- ------------------------------- ----------------------------
BRISTOL INVESTMENT FUND, LTD.      $481,928.00                     $481,928.00
Caledonian Fund Services Limited
69 Dr. Roy's Drive
George Town, Grand Cayman
Cayman Islands
Fax: (310) 696-0334
- ---------------------------------- ------------------------------- ----------------------------
MONTGOMERY EQUITY PARTNERS         $722,892.00                     $722,892.00





- ---------------------------------- ------------------------------- ----------------------------
TOTALS                             $1,506,025.00                   $1,506,025.00
- ---------------------------------- ------------------------------- ----------------------------


                                       7
(Guaranty Agreement)

EX-10.6

                                                                    EXHIBIT 10.6

                      MODIFICATION AND AMENDMENT AGREEMENT

         This Modification and Amendment Agreement ("Agreement") dated as of MAY
17TH, 2006 is entered into by and among Universal Communication Systems, Inc., a
Nevada corporation (the "Company") and the subscribers identified on the
signature page hereto (each a "Subscriber" and collectively "Subscribers").

         WHEREAS, the Company and the Subscribers are parties to a Subscription
Agreement ("Subscription Agreement") dated February 27, 2006 relating to an
aggregate investment by Subscribers of up to $3,012,050.00 of principal amount
of promissory notes of the Company convertible into shares of the Company's
$.001 par value common stock and Warrants in the amounts set forth on Schedule A
attached hereto; and

         WHEREAS, the Company and Subscribers desire to restructure the terms of
the Transaction Documents to their mutual benefit.

         NOW THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement, the Company and the Subscribers hereby
agree as follows:

         1. All the capitalized terms employed herein shall have the meanings
attributed to them in the Subscription Agreement and the documents and
agreements delivered therewith ("Transaction Documents").

         2. The exercise price of the Class A Common Stock Purchase Warrants is
hereby reduced to $0.0075.

         3. Within ten (10) days of execution of this Agreement, Subscribers
shall exercise an aggregate of Class A Common Stock Purchase Warrants as more
fully described on Schedule A hereto.

         4. The Company will issue to each Subscriber additional Class B Common
Stock Purchase Warrants as more fully described on Schedule A hereto exercisable
at $0.015 ("Replacement Warrants").

         5. The Company will file an amended Registration Statement to reflect
the terms of this Agreement not later than FIFTEEN (15) DAYS after the exercise
of the Warrants described in Section 3 herein and cause such amendment to be
declared effective by the Commission not later than JULY 17, 2006. Failure to
comply with the foregoing filing and effective dates shall be a Non-Registration
Event in connection with which Liquidated Damages shall accrue in the amounts
set forth in Section 11.4 of the Subscription Agreement. Such additional
securities are deemed Registrable Securities.

         6. For the benefit of the parties hereto, the Company hereby makes all
the representations, warranties, covenants undertakings and indemnifications
contained in the Transaction Documents, as if such representations were made by
the Company as of this date. The Subscribers hereby make all of the
representations, warranties, covenants, indemnifications and undertakings
contained in the Transaction Documents as if such representations were made by
the Subscribers as of this date.

         7. All other terms and conditions of the Transaction Documents,
including any damages or interest which have accrued shall remain in full force
and effect and payable.

         8. Each of the undersigned states that he has read the foregoing
Agreement and understands and agrees to it.

                                       1


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

                                            UNIVERSAL COMMUNICATION
                                            SYSTEMS, INC.
                                            the "Company"



                                                 /s/ Michael Zwebner
                                                 -------------------
                                            By:  Michael Zwebner / CEO


- --------------------------------            ------------------------------------
ALPHA CAPITAL AKTIENGESELLSCHAFT            BRISTOL INVESTMENT FUND, LTD.




- --------------------------------
MONTGOMERY EQUITY PARTNERS

                                       2

                                                    SCHEDULE A


- ----------------------------------- -------------- ----------------- ------------------- ------------------- ----------- -----------
SUBSCRIBER                          PURCHASE       PRINCIPAL AMOUNT  CLASS A WARRANTS    CLASS B WARRANTS    CLASS A     CLASS B
                                    PRICE ON       OF NOTE TO BE     TO BE ISSUED ON     TO BE ISSUED ON     WARRANTS    REPLACEMENT
                                    EACH CLOSING   ISSUED AT EACH    EACH CLOSING DATE   EACH CLOSING DATE   TO BE       WARRANTS TO
                                    DATE           CLOSING DATE                                              EXERCISED   BE ISSUED
- ----------------------------------- -------------- ----------------- ------------------- ------------------- ----------- -----------
                                                                                                       
ALPHA CAPITAL AKTIENGESELLSCHAFT    $250,000.00    $301,205.00       15,060,250          15,060,250
Pradafant 7
9490 Furstentums
Vaduz, Lichtenstein
Fax: 011-42-32323196
- ----------------------------------- -------------- ----------------- ------------------- ------------------- ----------- -----------
BRISTOL INVESTMENT FUND, LTD.       $400,000.00    $481,928.00       24,096,400          24,096,400
Caledonian Fund Services Limited
69 Dr. Roy's Drive
George Town, Grand Cayman
Cayman Islands
Fax: (310) 696-0334
- ----------------------------------- -------------- ----------------- ------------------- ------------------- ----------- -----------
MONTGOMERY EQUITY PARTNERS          $600,000.00    $722,892.00       36,144,600          36,144,600




- ----------------------------------- -------------- ----------------- ------------------- ------------------- ----------- -----------
TOTALS                              $1,250,000.00  $1,506,025.00
- ----------------------------------- -------------- ----------------- ------------------- ------------------- ----------- -----------


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