8-K

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                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 8-K

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

                          Date of Report: July 13, 2005

                         MSGI SECURITY SOLUTIONS , INC.

               (Exact name of Registrant as specified in charter)



  Nevada                       0-16730                 88-0085608
- --------------------------------------------------------------------------------
(State or other              (Commission              (I.R.S. Employer
jurisdiction of              File No.)              Identification No.)
incorporation)

                               575 Madison Avenue
                            New York, New York 10022
                    (Address of Principal Executive Offices)

                                  917-339-7134
              (Registrant's telephone number, including area code)

Item 1.01 Entry into a Material Definitive Agreement
Item 3.02  Unregistered Sale of Equity Securities

On July 13, 2005, MSGI Securities Solutions, Inc ("MSGI" or the "Company")
closed a Callable Secured Convertible Note financing of $3 million with a New
York based institutional investor. Mallon Associates, a leading investment bank
for the security industry, acted as the placement agent in this transaction.

The instrument requires repayment over 36 months with a maximum of 8% interest
per annum. Repayment shall be in cash or in registered shares of common stock.
The monthly amortization shall commence 90 days after closing according to a 33
month amortization schedule. At the Investor's option, the note may be repaid
upon the issuance of common stock at the conversion price; otherwise all
payments must be in cash. The Conversion price shall be equal to 75% of the
initial market price, which was $6.56. The interest rate resets to zero for any
monthly period in which the stock price is greater than 125% of the initial
market price. The Company granted registration rights to the investors for the
resale of the shares of common stock underlying the notes and certain warrants
that were issued in the transaction. The Company received $2 million in gross
proceeds upon closing, and will receive an additional $500,000 upon filing of
the registration statement relating to this offering, and $500,000 upon the
effectiveness of such registration statement.

The Company also issued warrants to the investors for the purchase of up to
75,000 shares of the Company's common stock, $0.01 par value, at an exercise
price of $7.50 per share. The placement agent received warrants for the purchase
of 12,195 shares of the Company's common stock, at an exercise price of $7.50
per share and a fee equal to 7% of the aggregate offering.

The issuance of the notes and warrants constituted a private placement and
therefore was exempt from registration in accordance with Regulation D of the
Securities Act of 1933, as amended.

The foregoing summary is qualified in its entirety by the Form of the Securities
Purchase Agreement, Form of Callable Secured Convertible Note, the Form of
Securities Purchase Warrant, Registration Rights Agreement, Security Agreement
and Form of Agent's Warrant incorporated herein as Exhibits 4.1, 4.2, 4.3, 4.4 ,
4.5 and 4.6

Item 9.01 Financial Statements and Exhibits

(a) N/A (b) N/A
(c) The following documents are filed herewith as exhibits to this Form 8-K:

Exhibit No.

4.1            Form of Securities Purchase Agreement
4.2            Form of Callable Secured Convertible Note
4.3            Form of Securities Purchase Warrant
4.4            Registration Rights Agreement
4.5            Security Agreement
4.6            Form of Agent's Warrant

99.1     Press Release issued by the Registrant dated July 14, 2005.



                                   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.

                          MSGI SECURITY SOLUTIONS, INC.

Date: July 19, 2005          By: /s/ Richard J. Mitchell III
                                 ----------------------------
                             Name:  Richard J. Mitchell III,
                                    Chief Accounting Officer





                                  EXHIBIT INDEX

Exhibit No.    Description of Exhibit

4.1            Form of Securities Purchase Agreement
4.2            Form of Callable Secured Convertible Note
4.3            Form of Securities Purchase Warrant
4.4            Registration Rights Agreement
4.5            Security Agreement
4.6            Form of Agent's Warrant

99.1     Press Release issued by the Registrant dated July 14, 2005.

EX-4

                          SECURITIES PURCHASE AGREEMENT


         SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of July __,
2005, by and among MSGI Security Solutions, Inc., a Nevada corporation, with
headquarters located at 575 Madison Avenue, New York, New York 10022 (the
"Company"), and each of the purchasers set forth on the signature pages hereto
(the "Buyers").

         WHEREAS:

A. The Company and the Buyers are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by the rules
and regulations as promulgated by the United States Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933
Act");

B. Buyers desire to purchase and the Company desires to issue and sell, upon the
terms and conditions set forth in this Agreement (i) 8% secured convertible
notes of the Company, in the form attached hereto as Exhibit "A", in the
aggregate principal amount of Three Million Dollars ($3,000,000) (together with
any note(s) issued in replacement thereof or as a dividend thereon or otherwise
with respect thereto in accordance with the terms thereof, the "Notes"),
convertible into shares of common stock, par value $.01 per share, of the
Company (the "Common Stock"), upon the terms and subject to the limitations and
conditions set forth in such Notes and (ii) warrants, in the form attached
hereto as Exhibit "B", to purchase an aggregate of 75,000 shares of Common Stock
(the "Warrants").

C. Each Buyer wishes to purchase, upon the terms and conditions stated in this
Agreement, such principal amount of Notes and number of Warrants as is set forth
immediately below its name on the signature pages hereto; and

D. Contemporaneous with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement, in
the form attached hereto as Exhibit "C" (the "Registration Rights Agreement"),
pursuant to which the Company has agreed to provide certain registration rights
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws.

         NOW THEREFORE, the Company and each of the Buyers severally (and not
jointly) hereby agree as follows:

1. PURCHASE AND SALE OF NOTES AND WARRANTS.

a. Purchase of Notes and Warrants. On the Closing Date (as defined below), the
Company shall issue and sell to each Buyer and each Buyer severally agrees to
purchase from the Company such principal amount of Notes and number of Warrants
as is set forth immediately below such Buyer's name on the signature pages
hereto.

b. 19.99% Limitation. The Buyer hereby agrees that the Company shall not be
required to issue, or reserve for issuance at any time (in connection with the
terms of this Agreement and the related Notes, Additional Notes, Warrants and
the Warrant issued to Mallon & Associates as placement agent), in the aggregate,
Common Stock equal to more than 19.99% of the Company's Common Stock outstanding
(on a pre-transaction basis).

c. Form of Payment. On the Closing Date (as defined below), (i) each Buyer shall
pay the purchase price for the Notes and the Warrants to be issued and sold to
it at the Closing (as defined below) (the "Purchase Price") by wire transfer of
immediately available funds to the Company, in accordance with the Company's
written wiring instructions, against delivery of the Notes in the principal
amount equal to the Purchase Price and the number of Warrants as is set forth
immediately below such Buyer's name on the signature pages hereto, and (ii) the
Company shall deliver such Notes and Warrants duly executed on behalf of the
Company, to such Buyer, against delivery of such Purchase Price.

d. Closing Date. Subject to the satisfaction (or written waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Notes and the Warrants pursuant to this
Agreement (the "Closing Date") shall be 12:00 noon, Eastern Standard Time on
July 12, 2005, or such other mutually agreed upon time. The closing of the
transactions contemplated by this Agreement (the "Closing") shall occur on the
Closing Date at such location as may be agreed to by the parties.

2. BUYERS' REPRESENTATIONS AND WARRANTIES. Each Buyer severally (and not
jointly) represents and warrants to the Company solely as to such Buyer that:

a. Investment Purpose. As of the date hereof, the Buyer is purchasing the Notes
and the shares of Common Stock issuable upon conversion of or otherwise pursuant
to the Notes (including, without limitation, such additional shares of Common
Stock, if any, as are issuable (i) on account of interest on the Notes, (ii) as
a result of the events described in Sections 1.3 and 1.4(g) of the Notes and
Section 2(c) of the Registration Rights Agreement or (iii) in payment of the
Standard Liquidated Damages Amount (as defined in Section 2(f) below) pursuant
to this Agreement, such shares of Common Stock being collectively referred to
herein as the "Conversion Shares") and the Warrants and the shares of Common
Stock issuable upon exercise thereof (the "Warrant Shares" and, collectively
with the Notes, Warrants and Conversion Shares, the "Securities") for its own
account and not with a present view towards the public sale or distribution
thereof, except pursuant to sales registered or exempted from registration under
the 1933 Act; provided, however, that by making the representations herein, the
Buyer does not agree to hold any of the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption under
the 1933 Act.

b. Accredited Investor Status. The Buyer is an "accredited investor" as that
term is defined in Rule 501(a) of Regulation D (an "Accredited Investor").

c. Reliance on Exemptions. The Buyer understands that the Securities are being
offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the Buyer's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Securities.

d. Information. The Buyer and its advisors, if any, have been, and for so long
as the Notes and Warrants remain outstanding will continue to be, furnished with
all materials relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Securities which have been
requested by the Buyer or its advisors. The Buyer and its advisors, if any, have
been, and for so long as the Notes and Warrants remain outstanding will continue
to be, afforded the opportunity to ask questions of the Company. Notwithstanding
the foregoing, the Company has not disclosed to the Buyer any material nonpublic
information and will not disclose such information unless such information is
disclosed to the public prior to or promptly following such disclosure to the
Buyer. Neither such inquiries nor any other due diligence investigation
conducted by Buyer or any of its advisors or representatives shall modify, amend
or affect Buyer's right to rely on the Company's representations and warranties
contained in Section 3 below. The Buyer understands that its investment in the
Securities involves a significant degree of risk.

e. Governmental Review. The Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed upon or
made any recommendation or endorsement of the Securities.

f. Transfer or Re-sale. The Buyer understands that (i) except as provided in the
Registration Rights Agreement, the sale or re-sale of the Securities has not
been and is not being registered under the 1933 Act or any applicable state
securities laws, and the Securities may not be transferred unless (a) the
Securities are sold pursuant to an effective registration statement under the
1933 Act, (b) the Buyer shall have delivered to the Company an opinion of
counsel that shall be in form, substance and scope customary for opinions of
counsel in comparable transactions to the effect that the Securities to be sold
or transferred may be sold or transferred pursuant to an exemption from such
registration, which opinion shall be accepted by the Company, (c) the Securities
are sold or transferred to an "affiliate" (as defined in Rule 144 promulgated
under the 1933 Act (or a successor rule) ("Rule 144")) of the Buyer who agrees
to sell or otherwise transfer the Securities only in accordance with this
Section 2(f) and who is an Accredited Investor, (d) the Securities are sold
pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S
under the 1933 Act (or a successor rule) ("Regulation S"), and the Buyer shall
have delivered to the Company an opinion of counsel that shall be in form,
substance and scope customary for opinions of counsel in corporate transactions,
which opinion shall be accepted by the Company; (ii) any sale of such Securities
made in reliance on Rule 144 may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any re-sale of such
Securities under circumstances in which the seller (or the person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined in
the 1933 Act) may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to register such Securities
under the 1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder (in each case, other than pursuant to the
Registration Rights Agreement). Notwithstanding the foregoing or anything else
contained herein to the contrary, the Securities may be pledged as collateral in
connection with a bona fide margin account or other lending arrangement. In the
event that the Company does not accept the opinion of counsel provided by the
Buyer with respect to the transfer of Securities pursuant to an exemption from
registration, such as Rule 144 or Regulation S, within three (3) business days
of delivery of the opinion to the Company, unless the Company's counsel
indicates the need for legal analysis of the legal opinion, the Company shall
pay to the Buyer liquidated damages of three percent (3%) of the outstanding
amount of the Notes per month plus accrued and unpaid interest on the Notes,
prorated for partial months, in cash ("Standard Liquidated Damages Amount"). If
the Company elects to be pay the Standard Liquidated Damages Amount in shares of
Common Stock, such shares shall be issued at the Conversion Price at the time of
payment.

g. Legends. The Buyer understands that the Notes and the Warrants and, until
such time as the Conversion Shares and Warrant Shares have been registered under
the 1933 Act as contemplated by the Registration Rights Agreement or otherwise
may be sold pursuant to Rule 144 or Regulation S without any restriction as to
the number of securities as of a particular date that can then be immediately
sold, the Conversion Shares and Warrant Shares may bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of the certificates for such Securities):

                  "The securities represented by this certificate have not been
                  registered under the Securities Act of 1933, as amended. The
                  securities may not be sold, transferred or assigned in the
                  absence of an effective registration statement for the
                  securities under said Act, or an opinion of counsel, in form,
                  substance and scope acceptable to the Company's counsel, that
                  registration is not required under said Act or unless sold
                  pursuant to Rule 144 or Regulation S under said Act."

         The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by applicable state securities laws, (a)
such Security is registered for sale under an effective registration statement
filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or
Regulation S without any restriction as to the number of securities as of a
particular date that can then be immediately sold, or (b) such holder provides
the Company with an opinion of counsel, in form, substance and scope customary
for opinions of counsel in comparable transactions, to the effect that a public
sale or transfer of such Security may be made without registration under the
1933 Act, which opinion shall be accepted by the Company so that the sale or
transfer is effected or (c) such holder provides the Company with reasonable
assurances that such Security can be sold pursuant to Rule 144 or Regulation S.
The Buyer agrees to sell all Securities, including those represented by a
certificate(s) from which the legend has been removed, in compliance with
applicable prospectus delivery requirements, if any.

h. Authorization; Enforcement. This Agreement and the Registration Rights
Agreement have been duly and validly authorized. This Agreement has been duly
executed and delivered on behalf of the Buyer, and this Agreement constitutes,
and upon execution and delivery by the Buyer of the Registration Rights
Agreement, such agreement will constitute, valid and binding agreements of the
Buyer enforceable in accordance with their terms.

i. Residency. The Buyer is a resident of the jurisdiction set forth immediately
below such Buyer's name on the signature pages hereto.

3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as otherwise disclosed
in the SEC Documents (as defined herein), the Company represents and warrants to
each Buyer that:

a. Organization and Qualification. The Company and each of its Subsidiaries (as
defined below), if any, is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is incorporated,
with full power and authority (corporate and other) to own, lease, use and
operate its properties and to carry on its business as and where now owned,
leased, used, operated and conducted. Schedule 3(a) sets forth a list of all of
the Subsidiaries of the Company and the jurisdiction in which each is
incorporated. The Company and each of its Subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which its ownership or use of property or the nature of the business
conducted by it makes such qualification necessary except where the failure to
be so qualified or in good standing would not have a Material Adverse Effect.
"Material Adverse Effect" means any material adverse effect on the business,
operations, assets, financial condition or prospects of the Company or its
Subsidiaries, if any, taken as a whole, or on the transactions contemplated
hereby or by the agreements or instruments to be entered into in connection
herewith. "Subsidiaries" shall have the meaning ascribed to "Significant
Subsidiary" under Rule 1-02(w) of Regulation S-X.

b. Authorization; Enforcement. (i) The Company has all requisite corporate power
and authority to enter into and perform this Agreement, the Registration Rights
Agreement, the Notes and the Warrants and to consummate the transactions
contemplated hereby and thereby and to issue the Securities, in accordance with
the terms hereof and thereof, (ii) the execution and delivery of this Agreement,
the Registration Rights Agreement, the Notes and the Warrants by the Company and
the consummation by it of the transactions contemplated hereby and thereby
(including without limitation, the issuance of the Notes and the Warrants and
the issuance and reservation for issuance of the Conversion Shares and Warrant
Shares issuable upon conversion or exercise thereof) have been duly authorized
by the Company's Board of Directors and no further consent or authorization of
the Company, its Board of Directors, or its shareholders is required, (iii) this
Agreement has been duly executed and delivered by the Company by its authorized
representative, and such authorized representative is the true and official
representative with authority to sign this Agreement and the other documents
executed in connection herewith and bind the Company accordingly, and (iv) this
Agreement constitutes, and upon execution and delivery by the Company of the
Registration Rights Agreement, the Notes and the Warrants, each of such
instruments will constitute, a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.

c. Capitalization. As of the date hereof, the authorized capital stock of the
Company consists of (i) 9,375,000 shares of Common Stock, of which 3,731,878
shares are issued and outstanding, 1,165,122 shares are reserved for issuance
pursuant to the Company's stock option plans, 843,074 shares are reserved for
issuance pursuant to securities (other than the Notes and the Warrants)
exercisable for, or convertible into or exchangeable for shares of Common Stock
and 742,642 shares are reserved for issuance upon conversion of the Notes and
the Additional Notes (as defined in Section 4(l)) and exercise of the Warrants)
(subject to adjustment pursuant to the Company's covenant set forth in Section
4(h) below); and (ii) 18,750 shares of preferred stock, of which 9,844 shares
are issued and outstanding. All of such outstanding shares of capital stock are,
or upon issuance will be, duly authorized, validly issued, fully paid and
nonassessable. No shares of capital stock of the Company are subject to
preemptive rights or any other similar rights of the shareholders of the Company
or any liens or encumbrances imposed through the actions or failure to act of
the Company. Except as disclosed in Schedule 3(c), as of the effective date of
this Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe for, puts, calls, rights of first refusal, agreements, understandings,
claims or other commitments or rights of any character whatsoever relating to,
or securities or rights convertible into or exchangeable for any shares of
capital stock of the Company or any of its Subsidiaries, or arrangements by
which the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries,
(ii) there are no agreements or arrangements under which the Company or any of
its Subsidiaries is obligated to register the sale of any of its or their
securities under the 1933 Act (except the Registration Rights Agreement) and
(iii) there are no anti-dilution or price adjustment provisions contained in any
security issued by the Company (or in any agreement providing rights to security
holders) that will be triggered by the issuance of the Notes, the Warrants, the
Conversion Shares or Warrant Shares. The Company has furnished to the Buyer true
and correct copies of the Company's Articles of Incorporation as in effect on
the date hereof ("Articles of Incorporation"), the Company's By-laws, as in
effect on the date hereof (the "By-laws"), and the terms of all securities
convertible into or exercisable for Common Stock of the Company and the material
rights of the holders thereof in respect thereto. The Company shall provide the
Buyer with a written update of this representation signed by the Company's Chief
Executive or Chief Financial Officer on behalf of the Company as of the Closing
Date.

d. Issuance of Shares. The Conversion Shares and Warrant Shares are duly
authorized and reserved for issuance and, upon conversion of the Notes and
exercise of the Warrants in accordance with their respective terms, will be
validly issued, fully paid and non-assessable, and free from all taxes, liens,
claims and encumbrances with respect to the issue thereof and shall not be
subject to preemptive rights or other similar rights of shareholders of the
Company and will not impose personal liability upon the holder thereof.

e. Acknowledgment of Dilution. The Company understands and acknowledges the
potentially dilutive effect to the Common Stock upon the issuance of the
Conversion Shares and Warrant Shares upon conversion of the Note or exercise of
the Warrants. The Company further acknowledges that its obligation to issue
Conversion Shares and Warrant Shares upon conversion of the Notes or exercise of
the Warrants in accordance with this Agreement, the Notes and the Warrants is
absolute and unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other shareholders of the Company.

f. No Conflicts. The execution, delivery and performance of this Agreement, the
Registration Rights Agreement, the Notes and the Warrants by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance and reservation for issuance of the
Conversion Shares and Warrant Shares) will not (i) materially conflict with or
result in a violation of any provision of the Articles of Incorporation or
By-laws or (ii) violate or conflict with, or result in a breach of any provision
of, or constitute a default (or an event which with notice or lapse of time or
both could become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture, patent,
patent license or instrument to which the Company or any of its Subsidiaries is
a party, or (iii) materially result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations and regulations of any self-regulatory organizations to which the
Company or its securities are subject) applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect). Neither
the Company nor any of its Subsidiaries is in violation of its Articles of
Incorporation, By-laws or other organizational documents and neither the Company
nor any of its Subsidiaries is in default (and no event has occurred which with
notice or lapse of time or both could put the Company or any of its Subsidiaries
in default) under, and neither the Company nor any of its Subsidiaries has taken
any action or failed to take any action that would give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a
party or by which any property or assets of the Company or any of its
Subsidiaries is bound or affected, except for possible defaults as would not,
individually or in the aggregate, have a Material Adverse Effect. The businesses
of the Company and its Subsidiaries, if any, are not being conducted, and shall
not be conducted so long as a Buyer owns any of the Securities, in violation of
any law, ordinance or regulation of any governmental entity. Except as
specifically contemplated by this Agreement and as required under the 1933 Act
and any applicable state securities laws, the Company is not required to obtain
any consent, authorization or order of, or make any filing or registration with,
any court, governmental agency, regulatory agency, self regulatory organization
or stock market or any third party in order for it to execute, deliver or
perform any of its obligations under this Agreement, the Registration Rights
Agreement, the Notes or the Warrants in accordance with the terms hereof or
thereof or to issue and sell the Notes and Warrants in accordance with the terms
hereof and to issue the Conversion Shares upon conversion of the Notes and the
Warrant Shares upon exercise of the Warrants. Except as disclosed in Schedule
3(f), all consents, authorizations, orders, filings and registrations which the
Company is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof. The Company is not in
violation of the listing requirements of the Nasdaq SmallCap (the "Nasdaq
SmallCap") and does not reasonably anticipate that the Common Stock will be
delisted by the Nasdaq SmallCap in the foreseeable future. The Company and its
Subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing.

g. SEC Documents; Financial Statements. Except as disclosed in Schedule 3(g),
the Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents (other than
exhibits to such documents) incorporated by reference therein, being hereinafter
referred to herein as the "SEC Documents"). The Company has delivered to each
Buyer true and complete copies of the SEC Documents, except for such exhibits
and incorporated documents. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the 1934 Act and the
rules and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with the
SEC, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. None of the statements made in any such SEC Documents is, or has
been, required to be amended or updated under applicable law (except for such
statements as have been amended or updated in subsequent filings prior the date
hereof). As of their respective dates, the financial statements of the Company
included in the SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto. Such financial statements have been prepared in
accordance with United States generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly present in all
material respects the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments). Except as
set forth in the financial statements of the Company included in the SEC
Documents, the Company has no liabilities, contingent or otherwise, other than
(i) liabilities incurred in the ordinary course of business subsequent to June
30, 2004 and (ii) obligations under contracts and commitments incurred in the
ordinary course of business and not required under generally accepted accounting
principles to be reflected in such financial statements, which, individually or
in the aggregate, are not material to the financial condition or operating
results of the Company.

h. Absence of Certain Changes. Since June 30, 2004, there has been no material
adverse change and no material adverse development in the assets, liabilities,
business, properties, operations, financial condition, results of operations or
prospects of the Company or any of its Subsidiaries.

i. Absence of Litigation. There is no action, suit, claim, proceeding, inquiry
or investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the Company
or any of its Subsidiaries, threatened against or affecting the Company or any
of its Subsidiaries, or their officers or directors in their capacity as such,
that could have a Material Adverse Effect. Schedule 3(i) contains a complete
list and summary description of any material pending or threatened proceeding
against or affecting the Company or any of its Subsidiaries. The Company and its
Subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing.

j. Patents, Copyrights, etc. The Company and each of its Subsidiaries owns or
possesses the requisite licenses or rights to use all patents, patent
applications, patent rights, inventions, know-how, trade secrets, trademarks,
trademark applications, service marks, service names, trade names and copyrights
("Intellectual Property") necessary to enable it to conduct its business as now
operated (and, except as set forth in Schedule 3(j) hereof, to the best of the
Company's knowledge, as presently contemplated to be operated in the future);
there is no claim or action by any person pertaining to, or proceeding pending,
or to the Company's knowledge threatened, which challenges the right of the
Company or of a Subsidiary with respect to any Intellectual Property necessary
to enable it to conduct its business as now operated (and, except as set forth
in Schedule 3(j) hereof, to the best of the Company's knowledge, as presently
contemplated to be operated in the future); to the best of the Company's
knowledge, the Company's or its Subsidiaries' current and intended products,
services and processes do not infringe on any Intellectual Property or other
rights held by any person; and the Company is unaware of any facts or
circumstances which might give rise to any of the foregoing. The Company and
each of its Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of their Intellectual Property.

k. No Materially Adverse Contracts, Etc. Neither the Company nor any of its
Subsidiaries is subject to any charter, corporate or other legal restriction, or
any judgment, decree, order, rule or regulation which in the judgment of the
Company's officers has or is expected in the future to have a Material Adverse
Effect. Neither the Company nor any of its Subsidiaries is a party to any
contract or agreement which in the judgment of the Company's officers has or is
expected to have a Material Adverse Effect.

l. Tax Status. Except as set forth on Schedule 3(l), since December 31, 2002,
the Company and each of its Subsidiaries has made or filed all federal, state
and foreign income and all other tax returns, reports and declarations required
by any jurisdiction to which it is subject (unless and only to the extent that
the Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on
its books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim. The Company has not executed a waiver with respect to
the statute of limitations relating to the assessment or collection of any
foreign, federal, state or local tax. Except as set forth on Schedule 3(l), none
of the Company's tax returns is presently being audited by any taxing authority.

m. Certain Transactions. Except as set forth on Schedule 3(m) and except for
arm's length transactions pursuant to which the Company or any of its
Subsidiaries makes payments in the ordinary course of business upon terms no
less favorable than the Company or any of its Subsidiaries could obtain from
third parties and other than the grant of stock options disclosed on Schedule
3(c), none of the officers, directors, or employees of the Company is presently
a party to any transaction with the Company or any of its Subsidiaries (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.

n. Disclosure. All information relating to or concerning the Company or any of
its Subsidiaries set forth in this Agreement and provided to the Buyers pursuant
to Section 2(d) hereof and otherwise in connection with the transactions
contemplated hereby is true and correct in all material respects and the Company
has not omitted to state any material fact necessary in order to make the
statements made herein or therein, in light of the circumstances under which
they were made, not misleading. No event or circumstance has occurred or exists
with respect to the Company or any of its Subsidiaries or its or their business,
properties, prospects, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed
(assuming for this purpose that the Company's reports filed under the 1934 Act
are being incorporated into an effective registration statement filed by the
Company under the 1933 Act).

o. Acknowledgment Regarding Buyers' Purchase of Securities. The Company
acknowledges and agrees that the Buyers are acting solely in the capacity of
arm's length purchasers with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that no Buyer is acting as
a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to this Agreement and the transactions contemplated hereby and any
statement made by any Buyer or any of their respective representatives or agents
in connection with this Agreement and the transactions contemplated hereby is
not advice or a recommendation and is merely incidental to the Buyers' purchase
of the Securities. The Company further represents to each Buyer that the
Company's decision to enter into this Agreement has been based solely on the
independent evaluation of the Company and its representatives.

p. No 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 in any security or solicited any offers to buy any security
under circumstances that would require registration under the 1933 Act of the
issuance of the Securities to the Buyers. The issuance of the Securities to the
Buyers will not be integrated with any other issuance of the Company's
securities (past, current or future) for purposes of any shareholder approval
provisions applicable to the Company or its securities.

q. No Brokers. Except for Mallon & Associates, the Company has taken no action
which would give rise to any claim by any person for brokerage commissions,
transaction fees or similar payments relating to this Agreement or the
transactions contemplated hereby.

r. Permits; Compliance. The Company and each of its Subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted (collectively, the "Company Permits"), and there is
no action pending or, to the knowledge of the Company, threatened regarding
suspension or cancellation of any of the Company Permits. Neither the Company
nor any of its Subsidiaries is in conflict with, or in default or violation of,
any of the Company Permits, except for any such conflicts, defaults or
violations which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect. Since June 30, 2004, neither the
Company nor any of its Subsidiaries has received any notification with respect
to possible conflicts, defaults or violations of applicable laws, except for
notices relating to possible conflicts, defaults or violations, which conflicts,
defaults or violations would not have a Material Adverse Effect.

s. Environmental Matters.

(i) Except as set forth in Schedule 3(s), there are, to the Company's knowledge,
with respect to the Company or any of its Subsidiaries or any predecessor of the
Company, no past or present violations of Environmental Laws (as defined below),
releases of any material into the environment, actions, activities,
circumstances, conditions, events, incidents, or contractual obligations which
may give rise to any common law environmental liability or any liability under
the Comprehensive Environmental Response, Compensation and Liability Act of 1980
or similar federal, state, local or foreign laws and neither the Company nor any
of its Subsidiaries has received any notice with respect to any of the
foregoing, nor is any action pending or, to the Company's knowledge, threatened
in connection with any of the foregoing. The term "Environmental Laws" means all
federal, state, local or foreign laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants contaminants, or toxic or hazardous
substances or wastes (collectively, "Hazardous Materials") into the environment,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials, as
well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.

(ii) Other than those that are or were stored, used or disposed of in compliance
with applicable law, no Hazardous Materials are contained on or about any real
property currently owned, leased or used by the Company or any of its
Subsidiaries, and no Hazardous Materials were released on or about any real
property previously owned, leased or used by the Company or any of its
Subsidiaries during the period the property was owned, leased or used by the
Company or any of its Subsidiaries, except in the normal course of the Company's
or any of its Subsidiaries' business.

(iii) Except as set forth in Schedule 3(s), there are no underground storage
tanks on or under any real property owned, leased or used by the Company or any
of its Subsidiaries that are not in compliance with applicable law.

t. Title to Property. The Company and its Subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in Schedule 3(t) or such as would not have
a Material Adverse Effect. Any real property and facilities held under lease by
the Company and its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as would not have a Material Adverse
Effect.

u. Insurance. The Company and each of its Subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in the
businesses in which the Company and its Subsidiaries are engaged. Neither the
Company nor any such Subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not have a Material Adverse Effect.
The Company has provided to Buyer true and correct copies of all policies
relating to directors' and officers' liability coverage, errors and omissions
coverage, and commercial general liability coverage.

v. Internal Accounting Controls. The Company and each of its Subsidiaries
maintain a system of internal accounting controls sufficient, in the judgment of
the Company's board of directors, to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.

w. Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries,
nor any director, officer, agent, employee or other person acting on behalf of
the Company or any Subsidiary has, in the course of his actions for, or on
behalf of, the Company, used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expenses relating to political activity;
made any direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; violated or is in
violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as
amended, or made any bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.

x. Solvency. The Company (after giving effect to the transactions contemplated
by this Agreement) is solvent (i.e., its assets have a fair market value in
excess of the amount required to pay its probable liabilities on its existing
debts as they become absolute and matured) and currently the Company has no
information that would lead it to reasonably conclude that the Company would
not, after giving effect to the transaction contemplated by this Agreement, have
the ability to, nor does it intend to take any action that would impair its
ability to, pay its debts from time to time incurred in connection therewith as
such debts mature. The Company did not receive a qualified opinion from its
auditors with respect to its most recent fiscal year end and, after giving
effect to the transactions contemplated by this Agreement, does not anticipate
or know of any basis upon which its auditors might issue a qualified opinion in
respect of its current fiscal year.

y. No Investment Company. The Company is not, and upon the issuance and sale of
the Securities as contemplated by this Agreement will not be an "investment
company" required to be registered under the Investment Company Act of 1940 (an
"Investment Company"). The Company is not controlled by an Investment Company.

z. Breach of Representations and Warranties by the Company. If the Company
breaches any of the representations or warranties set forth in this Section 3,
and in addition to any other remedies available to the Buyers pursuant to this
Agreement, the Company shall pay to the Buyer the Standard Liquidated Damages
Amount in cash or in shares of Common Stock at the option of the Company, until
such breach is cured. If the Company elects to pay the Standard Liquidated
Damages Amounts in shares of Common Stock, such shares shall be issued at the
Conversion Price at the time of payment.

4. COVENANTS.

a. Best Efforts. The parties shall use their best efforts to satisfy timely each
of the conditions described in Section 6 and 7 of this Agreement.

b. Form D; Blue Sky Laws. The Company agrees to file a Form D with respect to
the Securities as required under Regulation D and to provide a copy thereof to
each Buyer promptly after such filing. The Company shall, on or before the
Closing Date, take such action as the Company shall reasonably determine is
necessary to qualify the Securities for sale to the Buyers at the applicable
closing pursuant to this Agreement under applicable securities or "blue sky"
laws of the states of the United States (or to obtain an exemption from such
qualification), and shall provide evidence of any such action so taken to each
Buyer on or prior to the Closing Date.

c. Reporting Status; Eligibility to Use Form S-3, SB-2 or Form
S-1. The Company's Common Stock is registered under Section 12(g) of the 1934
Act. The Company represents and warrants that it meets the requirements for the
use of Form S-3 (or if the Company is not eligible for the use of Form S-3 as of
the Filing Date (as defined in the Registration Rights Agreement), the Company
may use the form of registration for which it is eligible at that time) for
registration of the sale by the Buyer of the Registrable Securities (as defined
in the Registration Rights Agreement). So long as the Buyer beneficially owns
any of the Securities, the Company shall timely file all reports required to be
filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate
its status as an issuer required to file reports under the 1934 Act even if the
1934 Act or the rules and regulations thereunder would permit such termination.
The Company further agrees to file all reports required to be filed by the
Company with the SEC in a timely manner so as to become eligible, and thereafter
to maintain its eligibility, for the use of Form S-3. The Company shall issue a
press release describing the materials terms of the transaction contemplated
hereby as soon as practicable following the Closing Date but in no event more
than two (2) business days of the Closing Date, which press release shall be
subject to prior review by the Buyers. The Company agrees that such press
release shall not disclose the name of the Buyers unless expressly consented to
in writing by the Buyers or unless required by applicable law or regulation, and
then only to the extent of such requirement.

d. Use of Proceeds. The Company shall use the proceeds from the sale of the
Notes and the Warrants in the manner set forth in Schedule 4(d) attached hereto
and made a part hereof and shall not, directly or indirectly, use such proceeds
for any loan to or investment in any other corporation, partnership, enterprise
or other person (except in connection with its currently existing direct or
indirect Subsidiaries)

e. Future Offerings. Subject to the exceptions described below, the Company will
not conduct any equity financing (including debt with an equity component)
("Future Offerings") during the period beginning on the Closing Date and ending
on the one (1) year anniversary of the Closing Date unless it shall have first
delivered to each Buyer, at least ten (10) business days prior to the closing of
such Future Offering, written notice describing the proposed Future Offering,
including the terms and conditions thereof and proposed definitive documentation
to be entered into in connection therewith, and providing each Buyer an option
during the ten (10) day period following delivery of such notice to purchase its
pro rata share (based on the ratio that the aggregate principal amount of Notes
purchased by it hereunder bears to the aggregate principal amount of Notes
purchased hereunder) of the securities being offered in the Future Offering on
the same terms as contemplated by such Future Offering (the limitations referred
to in this sentence and the preceding sentence are collectively referred to as
the "Capital Raising Limitations"). In the event the terms and conditions of a
proposed Future Offering are amended in any respect after delivery of the notice
to the Buyers concerning the proposed Future Offering, the Company shall deliver
a new notice to each Buyer describing the amended terms and conditions of the
proposed Future Offering and each Buyer thereafter shall have an option during
the ten (10) day period following delivery of such new notice to purchase its
pro rata share of the securities being offered on the same terms as contemplated
by such proposed Future Offering, as amended. The foregoing sentence shall apply
to successive amendments to the terms and conditions of any proposed Future
Offering. The Capital Raising Limitations shall not apply to any transaction
involving (i) issuances of securities in a firm commitment underwritten public
offering (excluding a continuous offering pursuant to Rule 415 under the 1933
Act) or (ii) issuances of securities as consideration for a merger,
consolidation or purchase of assets, or in connection with any strategic
partnership or joint venture (the primary purpose of which is not to raise
equity capital), or in connection with the disposition or acquisition of a
business, product or license by the Company. The Capital Raising Limitations
also shall not apply to the issuance of securities upon exercise or conversion
of the Company's options, warrants or other convertible securities outstanding
as of the date hereof or to the grant of additional options or warrants, or the
issuance of additional securities, under any Company stock option or restricted
stock plan approved by the shareholders of the Company.

f. Expenses. At the Closing, the Company shall reimburse Buyers for expenses
incurred by them in connection with the negotiation, preparation, execution,
delivery and performance of this Agreement and the other agreements to be
executed in connection herewith ("Documents"), including, without limitation,
attorneys' and consultants' fees and expenses, transfer agent fees, fees for
stock quotation services, fees relating to any amendments or modifications of
the Documents or any consents or waivers of provisions in the Documents, fees
for the preparation of opinions of counsel, escrow fees, and costs of
restructuring the transactions contemplated by the Documents. When possible, the
Company must pay these fees directly, otherwise the Company must make immediate
payment for reimbursement to the Buyers for all fees and expenses immediately
upon written notice by the Buyer or the submission of an invoice by the Buyer If
the Company fails to reimburse the Buyer in full within three (3) business days
of the written notice or submission of invoice by the Buyer, the Company shall
pay interest on the total amount of fees to be reimbursed at a rate of 15% per
annum.

g. Authorization and Reservation of Shares. The Company shall at all times have
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the full conversion or exercise of the
outstanding Notes and Warrants and issuance of the Conversion Shares and Warrant
Shares in connection therewith (based on the Conversion Price of the Notes or
Exercise Price of the Warrants in effect from time to time) and as otherwise
required by the Notes. The Company shall not reduce the number of shares of
Common Stock reserved for issuance upon conversion of Notes and exercise of the
Warrants without the consent of each Buyer. The Company shall at all times
maintain the number of shares of Common Stock so reserved for issuance at an
amount ("Reserved Amount") equal to the number that is then actually issuable
upon full conversion of the Notes and Additional Notes and upon exercise of the
Warrants (based on the Conversion Price of the Notes or the Exercise Price of
the Warrants in effect from time to time).

h. Listing. The Company shall promptly secure the listing of the Conversion
Shares and Warrant Shares upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and, so long as any Buyer owns any of
the Securities, shall maintain, so long as any other shares of Common Stock
shall be so listed, such listing of all Conversion Shares and Warrant Shares
from time to time issuable upon conversion of the Notes or exercise of the
Warrants. The Company will obtain and, so long as any Buyer owns any of the
Securities, maintain the listing and trading of its Common Stock on the OTCBB or
any equivalent replacement exchange, the Nasdaq National Market ("Nasdaq"), the
Nasdaq SmallCap Market ("Nasdaq SmallCap"), the New York Stock Exchange
("NYSE"), or the American Stock Exchange ("AMEX") and will comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the National Association of Securities Dealers ("NASD") and
such exchanges, as applicable. The Company shall promptly provide to each Buyer
copies of any notices it receives from the OTCBB and any other exchanges or
quotation systems on which the Common Stock is then listed regarding the
continued eligibility of the Common Stock for listing on such exchanges and
quotation systems.

i. Corporate Existence. So long as a Buyer beneficially owns any Notes or
Warrants, the Company shall maintain its corporate existence and shall not sell
all or substantially all of the Company's assets, except in the event of a
merger or consolidation or sale of all or substantially all of the Company's
assets, where the surviving or successor entity in such transaction (i) assumes
the Company's obligations hereunder and under the agreements and instruments
entered into in connection herewith and (ii) is a publicly traded corporation
whose Common Stock is listed for trading on the OTCBB, Nasdaq, Nasdaq SmallCap,
NYSE or AMEX.

j. No Integration. The Company shall not make any offers or sales of any
security (other than the Securities) under circumstances that would require
registration of the Securities being offered or sold hereunder under the 1933
Act or cause the offering of the Securities to be integrated with any other
offering of securities by the Company for the purpose of any stockholder
approval provision applicable to the Company or its securities.

k. Subsequent Investment. The Company and the Buyers agree that, upon the filing
by the Company of the Registration Statement to be filed pursuant to the
Registration Rights Agreement (the "Filing Date"), the Buyers shall purchase
additional Notes (the "Filing Notes") in the aggregate principal amount of Five
Hundred Thousand Dollars ($500,000) for an aggregate purchase price of Five
Hundred Thousand Dollars ($500,000), with the closing of such purchase to occur
within three (3) days of the Filing Date; provided, however, that the obligation
of each Buyer to purchase the Filing Notes is subject to the satisfaction, at or
before the closing of such purchase and sale, of the conditions set forth in
Section 7. The Company and the Buyers further agree that, upon the declaration
of effectiveness of the Registration Statement to be filed pursuant to the
Registration Rights Agreement (the "Effective Date"), the Buyers shall purchase
additional notes (the "Effectiveness Notes" and, collectively with the Filing
Notes, the "Additional Notes") in the aggregate principal amount of Five Hundred
Thousand Dollars ($500,000), for an aggregate purchase price of Five Hundred
Thousand Dollars ($500,000), with the closing of such purchase to occur within
three (3) days of the Effective Date; provided, however, that the obligation of
each Buyer to purchase the Additional Notes is subject to the satisfaction, at
or before the closing of such purchase and sale, of the conditions set forth in
Section 7; and, provided, further, that there shall not have been a Material
Adverse Effect as of such effective date. The terms of the Additional Notes
shall be identical to the terms of the Notes to be issued on the Closing Date.
The Common Stock underlying the Additional Notes shall be Registrable Securities
(as defined in the Registration Rights Agreement) and shall be included in the
Registration Statement to be filed pursuant to the Registration Rights
Agreement.

l. Key Man Insurance. The Company shall use its best efforts to obtain, on or
before five (5) business days from the date hereof, key man life insurance on
Jeremy Barbera.

m. Restriction on Short Sales. The Buyers agree that, so long as any of the
Notes remain outstanding, but in no event less than two (2) years from the date
hereof, the Buyers will not enter into or effect any "short sales" (as such term
is defined in Rule 3b-3 of the 1934 Act) of the Common Stock or hedging
transaction which establishes a net short position with respect to the Common
Stock.

n. Breach of Covenants. If the Company breaches any of the covenants set forth
in this Section 4, and in addition to any other remedies available to the Buyers
pursuant to this Agreement, the Company shall pay to the Buyers the Standard
Liquidated Damages Amount, in cash or in shares of Common Stock at the option of
the Company, until such breach is cured. If the Company elects to pay the
Standard Liquidated Damages Amount in shares, such shares shall be issued at the
Conversion Price at the time of payment.

5. TRANSFER AGENT INSTRUCTIONS. The Company shall issue irrevocable instructions
to its transfer agent to issue certificates, registered in the name of each
Buyer or its nominee, for the Conversion Shares and Warrant Shares in such
amounts as specified from time to time by each Buyer to the Company upon
conversion of the Notes or exercise of the Warrants in accordance with the terms
thereof (the "Irrevocable Transfer Agent Instructions"). Prior to registration
of the Conversion Shares and Warrant Shares under the 1933 Act or the date on
which the Conversion Shares and Warrant Shares may be sold pursuant to Rule 144
without any restriction as to the number of Securities as of a particular date
that can then be immediately sold, all such certificates shall bear the
restrictive legend specified in Section 2(g) of this Agreement. The Company
warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(f) hereof (in the case of the Conversion Shares and
Warrant Shares, prior to registration of the Conversion Shares and Warrant
Shares under the 1933 Act or the date on which the Conversion Shares and Warrant
Shares may be sold pursuant to Rule 144 without any restriction as to the number
of Securities as of a particular date that can then be immediately sold), will
be given by the Company to its transfer agent and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Registration Rights Agreement.
Nothing in this Section shall affect in any way the Buyer's obligations and
agreement set forth in Section 2(g) hereof to comply with all applicable
prospectus delivery requirements, if any, upon re-sale of the Securities. If a
Buyer provides the Company with (i) an opinion of counsel in form, substance and
scope acceptable to the Company's counsel, to the effect that a public sale or
transfer of such Securities may be made without registration under the 1933 Act
and such sale or transfer is effected or (ii) the Buyer provides reasonable
assurances that the Securities can be sold pursuant to Rule 144, the Company
shall permit the transfer, and, in the case of the Conversion Shares and Warrant
Shares, promptly instruct its transfer agent to issue one or more certificates,
free from restrictive legend, in such name and in such denominations as
specified by such Buyer. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyers, by vitiating
the intent and purpose of the transactions contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Section 5 may be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section, that the
Buyers shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate transfer, without the
necessity of showing economic loss and without any bond or other security being
required.

6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation of the Company
hereunder to issue and sell the Notes and Warrants to a Buyer at the Closing is
subject to the satisfaction, at or before the Closing Date of each of the
following conditions thereto, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion:

a. The applicable Buyer shall have executed this Agreement and the Registration
Rights Agreement, and delivered the same to the Company.

b. The applicable Buyer shall have delivered the Purchase Price in accordance
with Section 1(b) above.

c. The representations and warranties of the applicable Buyer shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date), and the applicable Buyer shall have performed,
satisfied and complied in all material respects with the covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the applicable Buyer at or prior to the Closing Date.

d. No litigation, statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by or in
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.

7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE. The obligation of each
Buyer hereunder to purchase the Notes and Warrants at the Closing is subject to
the satisfaction, at or before the Closing Date of each of the following
conditions, provided that these conditions are for such Buyer's sole benefit and
may be waived by such Buyer at any time in its sole discretion:

a. The Company shall have executed this Agreement and the Registration Rights
Agreement, and delivered the same to the Buyer.

b. The Company shall have delivered to such Buyer duly executed Notes (in such
denominations as the Buyer shall request) and Warrants in accordance with
Section 1(b) above.

c. The Irrevocable Transfer Agent Instructions, in form and substance
satisfactory to a majority-in-interest of the Buyers, shall have been delivered
to and acknowledged in writing by the Company's Transfer Agent. d. The
representations and warranties of the Company shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at such time (except for representations and warranties that speak as of a
specific date) and the Company shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by the Company at or
prior to the Closing Date. The Buyer shall have received a certificate or
certificates, executed by the chief executive officer of the Company, dated as
of the Closing Date, to the foregoing effect and as to such other matters as may
be reasonably requested by such Buyer including, but not limited to certificates
with respect to the Company's Articles of Incorporation, By-laws and Board of
Directors' resolutions relating to the transactions contemplated hereby.

e. No litigation, statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by or in
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.

f. No event shall have occurred which could reasonably be expected to have a
Material Adverse Effect on the Company.

g. The Conversion Shares and Warrant Shares shall have been authorized for
quotation on the Nasdaq SmallCap and trading in the Common Stock on the Nasdaq
SmallCap shall not have been suspended by the SEC or NASDAQ.

h. The Buyer shall have received an opinion of the Company's counsel, dated as
of the Closing Date, in form, scope and substance reasonably satisfactory to the
Buyer and in substantially the same form as Exhibit "D" attached hereto.

i. The Buyer shall have received an officer's certificate described in Section
3(c) above, dated as of the Closing Date.

8. GOVERNING LAW; MISCELLANEOUS.

a. Governing Law. THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES
OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE EXCLUSIVE
JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK
WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED
INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE
OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY
RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL
NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER
THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING
ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH
DISPUTE.

b. Counterparts; Signatures by Facsimile. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party.
This Agreement, once executed by a party, may be delivered to the other party
hereto by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.

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

d. Severability. In the event that any provision of this Agreement 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
provision hereof which may prove invalid or unenforceable under any law shall
not affect the validity or enforceability of any other provision hereof.

e. Entire Agreement; Amendments. This Agreement and the instruments referenced
herein contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor the Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.

f. Notices. Any notices required or permitted to be given under the terms of
this Agreement shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile and shall be effective five days
after being placed in the mail, if mailed by regular United States mail, or upon
receipt, if delivered personally or by courier (including a recognized overnight
delivery service) or by facsimile, in each case addressed to a party. The
addresses for such communications shall be:

                           If to the Company:

                                    MSGI Security Solutions, Inc.
                                    575 Madison Avenue
                                    New York, New York, 10022
                                    Attention: Chief Executive Officer
                                    Telephone: (917) 339-7150
                                    Facsimile: (917) 339-7166


                           With a copy to:

                                    Greenberg Traurig, LLP
                                    200 Park Avenue
                                    New York, New York
                                    Attention: Alan I. Annex, Esq.
                                    Telephone: (212) 801-9200
                                    Facsimile: (212) 801-6400

         If to a Buyer: To the address set forth immediately below such Buyer's
name on the signature pages hereto.

                           With copy to:

                                    Ballard Spahr Andrews & Ingersoll, LLP
                                    1735 Market Street
                                    51st Floor
                                    Philadelphia, Pennsylvania  19103
                                    Attention:  Gerald J. Guarcini, Esq.
                                    Telephone:  215-864-8625
                                    Facsimile:  215-864-8999


         Each party shall provide notice to the other party of any change in
address.

g. Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and assigns. Neither the Company nor
any Buyer shall assign this Agreement or any rights or obligations hereunder
without the prior written consent of the other. Notwithstanding the foregoing,
subject to Section 2(f), any Buyer may assign its rights hereunder to any person
that purchases Securities in a private transaction from a Buyer or to any of its
"affiliates," as that term is defined under the 1934 Act, without the consent of
the Company.

h. Third Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns, and is not
for the benefit of, nor may any provision hereof be enforced by, any other
person.

i. Survival. The representations and warranties of the Company and the
agreements and covenants set forth in Sections 3, 4, 5 and 8 shall survive the
closing hereunder notwithstanding any due diligence investigation conducted by
or on behalf of the Buyers. The Company agrees to indemnify and hold harmless
each of the Buyers and all their officers, directors, employees and agents for
loss or damage arising as a result of or related to any breach or alleged breach
by the Company of any of its representations, warranties and covenants set forth
in Sections 3 and 4 hereof or any of its covenants and obligations under this
Agreement or the Registration Rights Agreement, including advancement of
expenses as they are incurred.

j. Publicity. The Company and each of the Buyers shall have the right to review
a reasonable period of time before issuance of any press releases with respect
to the transactions contemplated hereby; provided, however, that the Company
shall be entitled, without the prior approval of each of the Buyers, to make any
press release or SEC, Nasdaq SmallCap (or other applicable trading market) or
NASD filings with respect to such transactions as is required by applicable law
and regulations (although each of the Buyers shall be consulted by the Company
in connection with any such press release prior to its release and shall be
provided with a copy thereof and be given an opportunity to comment thereon).

k. Further Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

l. No Strict Construction. The language used in this Agreement will be deemed to
be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.

m. Remedies. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyers by vitiating the intent and
purpose of the transaction contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Agreement will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Agreement, that the Buyers shall
be entitled, in addition to all other available remedies at law or in equity,
and in addition to the penalties assessable herein, to an injunction or
injunctions restraining, preventing or curing any breach of this Agreement and
to enforce specifically the terms and provisions hereof, without the necessity
of showing economic loss and without any bond or other security being required.


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



MSGI SECURITY SOLUTIONS, INC.

EX-4

         THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED
         UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE
         SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
         AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT,
         OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE ACCEPTABLE TO THE
         COMPANY'S COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
         UNLESS SOLD PURSUANT TO RULE 144 OR REGULATION S UNDER SAID ACT.


                        CALLABLE SECURED CONVERTIBLE NOTE

New York, New York
July __, 2005                                                      $___________

                  FOR VALUE RECEIVED, MSGI SECURITY SOLUTIONS, INC., a Nevada
corporation (hereinafter called the "Borrower"), hereby promises to pay to the
order of __________. or registered assigns (the "Holder") the sum of
____________, payable $1/33rd of the original principal amount (the "Monthly
Amount") on the first day of each month commencing on October __, 2005 (each, a
"Repayment Date") with any unpaid principal balance due on July __, 2008 (the
"Maturity Date"), and to pay interest on the unpaid principal balance hereof at
the rate of eight percent (8%) (the "Interest Rate") per annum from July __,
2005 (the "Issue Date") until the same becomes due and payable, whether at
maturity or upon acceleration or by prepayment or otherwise; provided, however,
that on the last business day of each month after the Issue Date (each, a
"Determination Date"), if the Average Daily Price (as defined herein) of the
common stock, $.01 par value per share, of the Borrower (the "Common Stock") for
each day of the month ending on the applicable Determination Date exceeds one
hundred twenty five percent (125%) of the Initial Market Price (as defined
herein), the Interest Rate for such month shall automatically be reduced to zero
percent (0.0%). Any amount of principal or interest on this Note which is not
paid when due shall bear interest at the rate of fifteen percent (15%) per annum
from the due date thereof until the same is paid ("Default Interest"). Interest
shall commence accruing on the Issue Date, shall be computed on the basis of a
365-day year and the actual number of days elapsed and shall be payable monthly
in arrears. All payments due hereunder (to the extent not converted into Common
Stock in accordance with the terms hereof) shall be made in lawful money of the
United States of America. All payments shall be made at such address as the
Holder shall hereafter give to the Borrower by written notice made in accordance
with the provisions of this Note. Whenever any amount expressed to be due by the
terms of this Note is due on any day which is not a business day, the same shall
instead be due on the next succeeding day which is a business day and, in the
case of any interest payment date which is not the date on which this Note is
paid in full, the extension of the due date thereof shall not be taken into
account for purposes of determining the amount of interest due on such date. As
used in this Note, the term "business day" shall mean any day other than a
Saturday, Sunday or a day on which commercial banks in the city of New York, New
York are authorized or required by law or executive order to remain closed. Each
capitalized term used herein, and not otherwise defined, shall have the meaning
ascribed thereto in that certain Securities Purchase Agreement, dated July __,
2005, pursuant to which this Note was originally issued (the "Purchase
Agreement").

         This Note is free from all taxes, liens, claims and encumbrances with
respect to the issuance thereof and shall not be subject to preemptive rights or
other similar rights of shareholders of the Borrower and will not impose
personal liability upon the holder thereof. The obligations of the Borrower
under this Note shall be secured by that certain Security Agreement and
Intellectual Property Security Agreement, each dated July __, 2005, by and
between the Borrower and the Holder.

         The following terms shall apply to this Note:

ARTICLE I.
                           CONVERSION REPAYMENT OPTION

                  1.1 Payment of Monthly Amount in Cash or Common Stock. Subject
to the terms hereof, the Borrower shall have the option to elect to make payment
of the Monthly Amount on each Repayment Date either in cash or in shares of
Common Stock, or a combination of both. Each month by the fifth (5th) business
day prior to each Repayment Date (the "Notice Date"), the Borrower shall deliver
to Holder a written notice in the form of Exhibit B attached hereto electing to
convert the Monthly Amount payable on the next Repayment Date in either cash or
Common Stock, or a combination of both (each, a "Repayment Election Notice"). If
a Repayment Election Notice is not delivered by the Borrower on or before the
applicable Notice Date for such Repayment Date, then the Borrower shall pay the
Monthly Amount due on such Repayment Date in cash. Any portion of the Monthly
Amount paid in cash on a Repayment Date, shall be paid to the Holder in an
amount equal to the portion of the Monthly Amount due and owing to Holder on the
Repayment Date. If the Holder converts all or a portion of the Monthly Amount
into shares of Common Stock, the number of such shares to be issued by the
Borrower to the Holder on such Repayment Date shall be the number determined by
dividing (x) the portion of the Monthly Amount to be paid in shares of Common
Stock, by (y) the Conversion Price.

1.2 Credit Against Monthly Amount. Any amounts converted by the Holder pursuant
to Section 2.1 shall be deemed to constitute payments of outstanding principal
applying to Monthly Amounts for the remaining Repayment Dates in chronological
order.

ARTICLE II.                                               CONVERSION RIGHTS

2.1 Conversion Right. If the average of the Average Daily Prices (as defined in
Section 2.2(a)) for the preceding five (5) trading days is greater than the
Initial Market Price (as defined in Section 2.2(a)), the Holder shall have the
right from time to time, and at any time on or prior to the earlier of (i) the
Maturity Date and (ii) the date of payment of the Default Amount (as defined in
Article IV) pursuant to Section 2.6(a) or Article IV, the Optional Prepayment
Amount (as defined in Section 6.1) or any payments pursuant to Section 2.7, each
in respect of the remaining outstanding principal amount of this Note to convert
all or any part of the outstanding principal amount of this Note into fully paid
and non-assessable shares of Common Stock, as such Common Stock exists on the
Issue Date, or any shares of capital stock or other securities of the Borrower
into which such Common Stock shall hereafter be changed or reclassified at the
Conversion Price (defined herein (a "Conversion"); provided, however, that if an
Event of Default shall have occurred and be continuing, the Holder shall have
the right to convert all or any part of the outstanding principal amount of this
Note into fully paid and non-assessable shares of Common Stock at any time at
the Conversion Price; provided, further that in no event shall the Holder be
entitled to convert any portion of this Note in excess of that portion of this
Note upon conversion of which the sum of (1) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unconverted portion of the Notes or the unexercised or unconverted portion of
any other security of the Borrower (including, without limitation, the warrants
issued by the Borrower pursuant to the Purchase Agreement) subject to a
limitation on conversion or exercise analogous to the limitations contained
herein) and (2) the number of shares of Common Stock issuable upon the
conversion of the portion of this Note with respect to which the determination
of this proviso is being made, would result in beneficial ownership by the
Holder and its affiliates of more than 4.999% of the outstanding shares of
Common Stock. For purposes of the proviso 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 Regulations 13D-G thereunder,
except as otherwise provided in clause (1) of such proviso. The number of shares
of Common Stock to be issued upon each conversion of this Note shall be
determined by dividing the Conversion Amount (as defined below) by the
applicable Conversion Price then in effect on the date specified in the notice
of conversion, in the form attached hereto as Exhibit A (the "Notice of
Conversion"), delivered to the Borrower by the Holder in accordance with Section
2.4 below; provided that the Notice of Conversion is submitted by facsimile (or
by other means resulting in, or reasonably expected to result in, notice) to the
Borrower before 5:00 p.m., New York, New York time on such conversion date (the
"Conversion Date"). The term "Conversion Amount" means, with respect to any
conversion of this Note, the sum of (1) the principal amount of this Note to be
converted in such conversion plus (2) accrued and unpaid interest, if any, on
such principal amount at the interest rates provided in this Note to the
Conversion Date plus (3) Default Interest, if any, on the amounts referred to in
the immediately preceding clauses (1) and/or (2) plus (4) at the Holder's
option, any amounts owed to the Holder pursuant to Sections 2.3 and 2.4(g)
hereof or pursuant to Section 2(c) of that certain Registration Rights
Agreement, dated as of July 12, 2005, executed in connection with the initial
issuance of this Note and the other Notes issued on the Issue Date (the
"Registration Rights Agreement").

2.2      Conversion Price.

Calculation of Conversion Price. The conversion price shall be equal to
seventy-five percent (75%) of the Initial Market Price (as defined herein)
(subject, in each case, to equitable adjustments for stock splits, stock
dividends or rights offerings by the Borrower relating to the Borrower's
securities or the securities of any subsidiary of the Borrower, combinations,
recapitalization, reclassifications, extraordinary distributions and similar
events) (the "Conversion Price"). The "Initial Market Price" shall mean $6.56.
"Average Daily Price" means, for any security as of any date, the price based on
the VWAP. "VWAP" shall mean the daily volume weighted average price of the
Common Stock on the principal trading market for such security as reported by
Bloomberg, L.P. using the VWAP function. If the Average Daily Price cannot be
calculated for such security on such date in the manner provided above, the
Average Daily Price shall be the fair market value as mutually determined by the
Borrower and the holders of a majority in interest of the Notes being converted
for which the calculation of the Average Daily Price is required in order to
determine the Conversion Price of such Notes. "Trading Day" shall mean any day
on which the Common Stock is traded for any period on the Nasdaq SmallCap, or on
the principal securities exchange or other securities market on which the Common
Stock is then being traded.

2.3 Authorized Shares. The Borrower covenants that during the period the
conversion right exists, the Borrower will reserve from its authorized and
unissued Common Stock a sufficient number of shares, free from preemptive
rights, to provide for the issuance of Common Stock upon the full conversion of
this Note and the other Notes issued pursuant to the Purchase Agreement. The
Borrower is required at all times to have authorized and reserved two times the
number of shares that is actually issuable upon full conversion of the Notes
(based on the Conversion Price of the Notes or the Exercise Price of the
Warrants in effect from time to time) (the "Reserved Amount"). The Reserved
Amount shall be increased from time to time in accordance with the Borrower's
obligations pursuant to Section 4(h) of the Purchase Agreement. The Borrower
represents that upon issuance, such shares will be duly and validly issued,
fully paid and non-assessable. In addition, if the Borrower shall issue any
securities or make any change to its capital structure which would change the
number of shares of Common Stock into which the Notes shall be convertible at
the then current Conversion Price, the Borrower shall at the same time make
proper provision so that thereafter there shall be a sufficient number of shares
of Common Stock authorized and reserved, free from preemptive rights, for
conversion of the outstanding Notes. The Borrower (i) acknowledges that it has
irrevocably instructed its transfer agent to issue certificates for the Common
Stock issuable upon conversion of this Note, and (ii) agrees that its issuance
of this Note shall constitute full authority to its officers and agents who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for shares of Common Stock in accordance with the terms
and conditions of this Note.

                  If, at any time a Holder of this Note submits a Notice of
Conversion, and the Borrower does not have sufficient authorized but unissued
shares of Common Stock available to effect such conversion in accordance with
the provisions of this Article II (a "Conversion Default"), subject to Section
5.8, the Borrower shall issue to the Holder all of the shares of Common Stock
which are then available to effect such conversion. The portion of this Note
which the Holder included in its Conversion Notice and which exceeds the amount
which is then convertible into available shares of Common Stock (the "Excess
Amount") shall, notwithstanding anything to the contrary contained herein, not
be convertible into Common Stock in accordance with the terms hereof until (and
at the Holder's option at any time after) the date additional shares of Common
Stock are authorized by the Borrower to permit such conversion, at which time
the Conversion Price in respect thereof shall be the lesser of (i) the
Conversion Price on the Conversion Default Date (as defined below) and (ii) the
Conversion Price on the Conversion Date thereafter elected by the Holder in
respect thereof. In addition, the Borrower shall pay to the Holder payments
("Conversion Default Payments") for a Conversion Default in the amount of (x)
the sum of (1) the then outstanding principal amount of this Note plus (2)
accrued and unpaid interest on the unpaid principal amount of this Note through
the Authorization Date (as defined below) plus (3) Default Interest, if any, on
the amounts referred to in clauses (1) and/or (2), multiplied by (y) .24,
multiplied by (z) (N/365), where N = the number of days from the day the holder
submits a Notice of Conversion giving rise to a Conversion Default (the
"Conversion Default Date") to the date (the "Authorization Date") that the
Borrower authorizes a sufficient number of shares of Common Stock to effect
conversion of the full outstanding principal balance of this Note. The Borrower
shall use its best efforts to authorize a sufficient number of shares of Common
Stock as soon as practicable following the earlier of (i) such time that the
Holder notifies the Borrower or that the Borrower otherwise becomes aware that
there are or likely will be insufficient authorized and unissued shares to allow
full conversion thereof and (ii) a Conversion Default. The Borrower shall send
notice to the Holder of the authorization of additional shares of Common Stock,
the Authorization Date and the amount of Holder's accrued Conversion Default
Payments. The accrued Conversion Default Payments for each calendar month shall
be paid in cash or shall be convertible into Common Stock (at such time as there
are sufficient authorized shares of Common Stock) at the applicable Conversion
Price, at the Holder's option, as follows:

(a) In the event Holder elects to take such payment in cash, cash payment shall
be made to Holder by the fifth (5th) day of the month following the month in
which it has accrued; and

(b) In the event Holder elects to take such payment in Common Stock, the Holder
may convert such payment amount into Common Stock at the Conversion Price (as in
effect at the time of conversion) at any time after the fifth day of the month
following the month in which it has accrued in accordance with the terms of this
Article II (so long as there is then a sufficient number of authorized shares of
Common Stock).

                  The Holder's election shall be made in writing to the Borrower
at any time prior to 6:00 p.m., New York, New York time, on the third day of the
month following the month in which Conversion Default payments have accrued. If
no election is made, the Holder shall be deemed to have elected to receive cash.
Nothing herein shall limit the Holder's right to pursue actual damages (to the
extent in excess of the Conversion Default Payments) for the Borrower's failure
to maintain a sufficient number of authorized shares of Common Stock, and each
holder shall have the right to pursue all remedies available at law or in equity
(including degree of specific performance and/or injunctive relief).

                  The Holder hereby agrees that, regardless of any other
provision of this Note, the Warrants or the Purchase Agreement, the Company
shall at no time be required to issue Common Stock equal to more than 19.99% of
the Company's Common Stock in the aggregate outstanding, prior to any issuances
due to the Note or the Purchase Agreement, pursuant to this Note, default, or
the Purchase Agreement, Warrants or the Warrant issued to Mallon & Associates as
placement agent.

2.4      Method of Conversion.

(a) Mechanics of Conversion. Subject to Section 2.1, this Note may be converted
by the Holder in whole or in part at any time from time to time after the Issue
Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile or
other reasonable means of communication dispatched on the Conversion Date prior
to 6:00 p.m., New York, New York time) and (B) subject to Section 2.4(b),
surrendering this Note at the principal office of the Borrower.

(b) Surrender of Note Upon Conversion. Notwithstanding anything to the contrary
set forth herein, upon conversion of this Note in accordance with the terms
hereof, the Holder shall not be required to physically surrender this Note to
the Borrower unless the entire unpaid principal amount of this Note is so
converted. The Holder and the Borrower shall maintain records showing the
principal amount so converted and the dates of such conversions or shall use
such other method, reasonably satisfactory to the Holder and the Borrower, so as
not to require physical surrender of this Note upon each such conversion. At the
request of the Borrower, the Holder shall deliver a cross-receipt to the
Borrower acknowledging the principal amount converted. In the event of any
dispute or discrepancy, such records of the Borrower shall be controlling and
determinative in the absence of manifest error. Notwithstanding the foregoing,
if any portion of this Note is converted as aforesaid, the Holder may not
transfer this Note unless the Holder first physically surrenders this Note to
the Borrower, whereupon the Borrower will forthwith issue and deliver upon the
order of the Holder a new Note of like tenor, registered as the Holder (upon
payment by the Holder of any applicable transfer taxes) may request,
representing in the aggregate the remaining unpaid principal amount of this
Note. The Holder (and any permitted assignee), by acceptance of this Note,
acknowledges and agrees that, by reason of the provisions of this paragraph,
following conversion of a portion of this Note, the unpaid and unconverted
principal amount of this Note represented by this Note may be less than the
amount stated on the face hereof.

(c) Payment of Taxes. The Borrower shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issue and delivery of
shares of Common Stock or other securities or property on conversion of this
Note in a name other than that of the Holder (or in street name), and the
Borrower shall not be required to issue or deliver any such shares or other
securities or property unless and until the person or persons (other than the
Holder or the custodian in whose street name such shares are to be held for the
Holder's account) requesting the issuance thereof shall have paid to the
Borrower the amount of any such tax or shall have established to the
satisfaction of the Borrower that such tax has been paid.

(d) Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from
the Holder of a facsimile transmission (or other reasonable means of
communication) of a Notice of Conversion meeting the requirements for conversion
as provided in this Section 2.4, the Borrower shall issue and deliver or cause
to be issued and delivered to or upon the order of the Holder certificates for
the Common Stock issuable upon such conversion within three (3) business days
after such receipt (and, solely in the case of conversion of the entire unpaid
principal amount hereof, surrender of this Note) (such third business day being
hereinafter referred to as the "Deadline") in accordance with the terms hereof
and the Purchase Agreement.

(e) Obligation of Borrower to Deliver Common Stock. Upon receipt by the Borrower
of a Notice of Conversion, the Holder shall be deemed to be the holder of record
of the Common Stock issuable upon such conversion, the outstanding principal
amount and the amount of accrued and unpaid interest on this Note shall be
reduced to reflect such conversion, and, unless the Borrower defaults on its
obligations under this Article II, all rights with respect to the portion of
this Note being so converted shall forthwith terminate except the right to
receive the Common Stock or other securities, cash or other assets, as herein
provided, on such conversion. If the Holder shall have given a Notice of
Conversion as provided herein, the Borrower's obligation to issue and deliver
the certificates for Common Stock shall be absolute and unconditional,
irrespective of the absence of any action by the Holder to enforce the same, any
waiver or consent with respect to any provision thereof, the recovery of any
judgment against any person or any action to enforce the same, any failure or
delay in the enforcement of any other obligation of the Borrower to the holder
of record, or any setoff, counterclaim, recoupment, limitation or termination,
or any breach or alleged breach by the Holder of any obligation to the Borrower,
and irrespective of any other circumstance which might otherwise limit such
obligation of the Borrower to the Holder in connection with such conversion. The
Conversion Date specified in the Notice of Conversion shall be the Conversion
Date so long as the Notice of Conversion is received by the Borrower before 6:00
p.m., New York, New York time, on such date.

(f) Delivery of Common Stock by Electronic Transfer. In lieu of delivering
physical certificates representing the Common Stock issuable upon conversion (in
the case of a resale covered by an effective registration statement), provided
the Borrower's transfer agent is participating in the Depository Trust Company
("DTC") Fast Automated Securities Transfer ("FAST") program, upon request of the
Holder and its compliance with the provisions contained in Section 2.1 and in
this Section 2.4, the Borrower shall use its best efforts to cause its transfer
agent to electronically transmit the Common Stock issuable upon conversion to
the Holder by crediting the account of Holder's Prime Broker with DTC through
its Deposit Withdrawal Agent Commission ("DWAC") system.

(g) Failure to Deliver Common Stock Prior to Deadline. Without in any way
limiting the Holder's right to pursue other remedies, including actual damages
and/or equitable relief, the parties agree that if delivery of the Common Stock
issuable upon conversion of this Note is more than two (2) days after the
Deadline (other than a failure due to the circumstances described in Section 2.3
above, which failure shall be governed by such Section) the Borrower shall pay
to the Holder $2,000 per day in cash, for each day beyond the Deadline that the
Borrower fails to deliver such Common Stock. Such cash amount shall be paid to
Holder by the fifth day of the month following the month in which it has accrued
or, at the option of the Holder (by written notice to the Borrower by the first
day of the month following the month in which it has accrued), shall be added to
the principal amount of this Note, in which event interest shall accrue thereon
in accordance with the terms of this Note and such additional principal amount
shall be convertible into Common Stock in accordance with the terms of this
Note.

2.5 Concerning the Shares. The shares of Common Stock issuable upon conversion
of this Note may not be sold or transferred unless (i) such shares are sold
pursuant to an effective registration statement under the Act or (ii) the
Borrower or its transfer agent shall have been furnished with an opinion of
counsel (which opinion shall be in form, substance and scope acceptable to
Company ) to the effect that the shares to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration or (iii) such shares
are sold or transferred pursuant to Rule 144 under the Act (or a successor rule)
("Rule 144") or (iv) such shares are transferred to an "affiliate" (as defined
in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares
only in accordance with this Section 2.5 and who is an Accredited Investor (as
defined in the Purchase Agreement). Except as otherwise provided in the Purchase
Agreement (and subject to the removal provisions set forth below), until such
time as the shares of Common Stock issuable upon conversion of this Note have
been registered under the Act as contemplated by the Registration Rights
Agreement or otherwise may be sold pursuant to Rule 144 without any restriction
as to the number of securities as of a particular date that can then be
immediately sold, each certificate for shares of Common Stock issuable upon
conversion of this Note that has not been sold pursuant to an effective
registration statement or an exemption that permits removal of the legend, shall
bear a legend substantially in the following form, as appropriate:

         "THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED
         UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES MAY NOT BE
         SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
         REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION
         OF COUNSEL IN FORM, SUBSTANCE AND SCOPE ACCEPTABLE TO COMPANY COUNSEL,
         THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT UNLESS SOLD PURSUANT
         TO RULE 144 OR REGULATION S UNDER SAID ACT."

                  The legend set forth above shall be removed and the Borrower
shall issue to the Holder a new certificate therefor free of any transfer legend
if (i) the Borrower or its transfer agent shall have received an opinion of
counsel, in form, substance and scope acceptable to Company counsel, to the
effect that a public sale or transfer of such Common Stock may be made without
registration under the Act and the shares are so sold or transferred, (ii) such
Holder provides the Borrower or its transfer agent with reasonable assurances
that the Common Stock issuable upon conversion of this Note (to the extent such
securities are deemed to have been acquired on the same date) can be sold
pursuant to Rule 144 or (iii) in the case of the Common Stock issuable upon
conversion of this Note, such security is registered for sale by the Holder
under an effective registration statement filed under the Act or otherwise may
be sold pursuant to Rule 144 without any restriction as to the number of
securities as of a particular date that can then be immediately sold. Nothing in
this Note shall (i) limit the Borrower's obligation under the Registration
Rights Agreement or (ii) affect in any way the Holder's obligations to comply
with applicable prospectus delivery requirements upon the resale of the
securities referred to herein.

2.6      Effect of Certain Events.

(a) Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale,
conveyance or disposition of all or substantially all of the assets of the
Borrower, the effectuation by the Borrower of a transaction or series of related
transactions in which more than 50% of the voting power of the Borrower is
disposed of, or the consolidation, merger or other business combination of the
Borrower with or into any other Person (as defined below) or Persons when the
Borrower is not the survivor shall either: (i) be deemed to be an Event of
Default (as defined in Article IV) pursuant to which the Borrower shall be
required to pay to the Holder upon the consummation of and as a condition to
such transaction an amount equal to the Default Amount (as defined in Article
IV) or (ii) be treated pursuant to Section 2.6(b) hereof. "Person" shall mean
any individual, corporation, limited liability company, partnership,
association, trust or other entity or organization.

(b) Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note
is issued and outstanding and prior to conversion of all of the Notes, there
shall be any merger, consolidation, exchange of shares, recapitalization,
reorganization, or other similar event, as a result of which shares of Common
Stock of the Borrower shall be changed into the same or a different number of
shares of another class or classes of stock or securities of the Borrower or
another entity, or in case of any sale or conveyance of all or substantially all
of the assets of the Borrower other than in connection with a plan of complete
liquidation of the Borrower, then the Holder of this Note shall thereafter have
the right to receive upon conversion of this Note, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore issuable upon conversion, such stock, securities or
assets which the Holder would have been entitled to receive in such transaction
had this Note been converted in full immediately prior to such transaction
(without regard to any limitations on conversion set forth herein), and in any
such case appropriate provisions shall be made with respect to the rights and
interests of the Holder of this Note to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Conversion
Price and of the number of shares issuable upon conversion of the Note) shall
thereafter be applicable, as nearly as may be practicable in relation to any
securities or assets thereafter deliverable upon the conversion hereof. The
Borrower shall not effect any transaction described in this Section 2.6(b)
unless (a) it first gives, to the extent practicable, of the record date of the
special meeting of shareholders to approve, or if there is no such record date,
the consummation of, such merger, consolidation, exchange of shares,
recapitalization, reorganization or other similar event or sale of assets
(during which time the Holder shall be entitled to convert this Note) at the
same time the Company delivers notice to shareholders entitled to vote on such
transaction, and (b) the resulting successor or acquiring entity (if not the
Borrower) assumes by written instrument the obligations of this Section 2.6(b).
The above provisions shall similarly apply to successive consolidations,
mergers, sales, transfers or share exchanges.

(c) Adjustment Due to Distribution. If the Borrower shall declare or make any
distribution of its assets (or rights to acquire its assets) to holders of
Common Stock as a dividend, stock repurchase, by way of return of capital or
otherwise (including any dividend or distribution to the Borrower's shareholders
in cash or shares (or rights to acquire shares) of capital stock of a subsidiary
(i.e., a spin-off)) (a "Distribution"), then the Holder of this Note shall be
entitled, upon any conversion of this Note after the date of record for
determining shareholders entitled to such Distribution, to receive the amount of
such assets which would have been payable to the Holder with respect to the
shares of Common Stock issuable upon such conversion had such Holder been the
holder of such shares of Common Stock on the record date for the determination
of shareholders entitled to such Distribution.

(d) Purchase Rights. If, at any time when any Notes are issued and outstanding,
the Borrower issues any convertible securities or rights to purchase stock,
warrants, securities or other property (the "Purchase Rights") pro rata to the
record holders of any class of Common Stock, then the Holder of this Note will
be entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such Holder could have acquired if such Holder
had held the number of shares of Common Stock acquirable upon complete
conversion of this Note (without regard to any limitations on conversion
contained herein) immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights or, if no such record is taken,
the date as of which the record holders of Common Stock are to be determined for
the grant, issue or sale of such Purchase Rights.

(e) Notice of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Conversion Price as a result of the events described in this
Section 2.6, the Borrower, at its expense, shall promptly compute such
adjustment or readjustment and prepare and furnish to the Holder of a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Borrower
shall, upon the written request at any time of the Holder, furnish to such
Holder a like certificate setting forth (i) such adjustment or readjustment,
(ii) the Conversion Price at the time in effect and (iii) the number of shares
of Common Stock and the amount, if any, of other securities or property which at
the time would be received upon conversion of the Note.

2.7 Status as Shareholder. Subject to applicable state law, upon submission of a
Notice of Conversion by a Holder, (i) the shares covered thereby (other than the
shares, if any, which cannot be issued because their issuance would exceed such
Holder's allocated portion of the Reserved Amount or Maximum Share Amount) shall
be deemed converted into shares of Common Stock and (ii) the Holder's rights as
a Holder of such converted portion of this Note shall cease and terminate,
excepting only the right to receive certificates for such shares of Common Stock
and to any remedies provided herein or otherwise available at law or in equity
to such Holder because of a failure by the Borrower to comply with the terms of
this Note. Notwithstanding the foregoing, if a Holder has not received
certificates for all shares of Common Stock prior to the tenth (10th) business
day after the expiration of the Deadline with respect to a conversion of any
portion of this Note for any reason, then (unless the Holder otherwise elects to
retain its status as a holder of Common Stock by so notifying the Borrower) the
Holder shall regain the rights of a Holder of this Note with respect to such
unconverted portions of this Note and the Borrower shall, as soon as
practicable, return such unconverted Note to the Holder or, if the Note has not
been surrendered, adjust its records to reflect that such portion of this Note
has not been converted. In all cases, the Holder shall retain all of its rights
and remedies (including, without limitation, (i) the right to receive Conversion
Default Payments pursuant to Section 2.3 to the extent required thereby for such
Conversion Default and any subsequent Conversion Default and (ii) the right to
have the Conversion Price with respect to subsequent conversions determined in
accordance with Section 2.3) for the Borrower's failure to convert this Note.

ARTICLE III.                                              CERTAIN COVENANTS

3.1 Distributions on Capital Stock. So long as the Borrower shall have any
obligation under this Note, the Borrower shall not without the Holder's written
consent (a) pay, declare or set apart for such payment, any dividend or other
distribution (whether in cash, property or other securities) on shares of
capital stock other than dividends on shares of Common Stock solely in the form
of additional shares of Common Stock or (b) directly or indirectly or through
any subsidiary make any other payment or distribution in respect of its capital
stock except for distributions pursuant to any shareholders' rights plan which
is approved by a majority of the Borrower's disinterested directors.

3.2 Restriction on Stock Repurchases. So long as the Borrower shall have any
obligation under this Note, the Borrower shall not without the Holder's written
consent redeem, repurchase or otherwise acquire (whether for cash or in exchange
for property or other securities or otherwise) in any one transaction or series
of related transactions any shares of capital stock of the Borrower or any
warrants, rights or options to purchase or acquire any such shares.

3.3 Borrowings. So long as the Borrower shall have any obligation under this
Note, the Borrower shall not, without the Holder's written consent, create,
incur, assume or suffer to exist any liability for borrowed money, except (a)
borrowings in existence or committed on the date hereof and of which the
Borrower has informed Holder in writing prior to the date hereof, (b)
indebtedness to trade creditors or financial institutions incurred in the
ordinary course of business or (c) borrowings, the proceeds of which shall be
used to repay this Note.

3.4 Sale of Assets. So long as the Borrower shall have any obligation under this
Note, the Borrower shall not, without the Holder's written consent, sell, lease
or otherwise dispose of any significant portion of its assets outside the
ordinary course of business. Any consent to the disposition of any assets may be
conditioned on a specified use of the proceeds of disposition.

3.5 Advances and Loans. So long as the Borrower shall have any obligation under
this Note, the Borrower shall not, without the Holder's written consent, lend
money, give credit or make advances to any person, firm, joint venture or
corporation, including, without limitation, officers, directors, employees,
subsidiaries and affiliates of the Borrower, except loans, credits or advances
(a) in existence or committed on the date hereof and which the Borrower has
informed Holder in writing prior to the date hereof, (b) made in the ordinary
course of business or (c) not in excess of $50,000.

3.6 Contingent Liabilities. So long as the Borrower shall have any obligation
under this Note, the Borrower shall not, without the Holder's written consent,
assume, guarantee, endorse, contingently agree to purchase or otherwise become
liable upon the obligation of any person, firm, partnership, joint venture or
corporation, except by the endorsement of negotiable instruments for deposit or
collection and except assumptions, guarantees, endorsements and contingencies
(a) in existence or committed on the date hereof and which the Borrower has
informed Holder in writing prior to the date hereof, and (b) similar
transactions in the ordinary course of business.

ARTICLE IV.                                               EVENTS OF DEFAULT

                  If any of the following events of default (each, an "Event of
Default") shall occur:

4.1      Failure  to Pay  Principal  or  Interest.

The Borrower fails to pay the principal hereof or interestthereon when due on
this Note, whether at maturity, upon a Trading Market Prepayment Event pursuant
to Section 2.7, upon acceleration or otherwise;


4.2 Conversion and the Shares. The Borrower fails to issue shares of Common
Stock to the Holder (or announces or threatens that it will not honor its
obligation to do so) upon exercise by the Holder of the conversion rights of the
Holder in accordance with the terms of this Note (for a period of at least
thirty (30) days, if such failure is solely as a result of the circumstances
governed by Section 2.3 and the Borrower is using its best efforts to authorize
a sufficient number of shares of Common Stock as soon as practicable), fails to
transfer or cause its transfer agent to transfer (electronically or in
certificated form) any certificate for shares of Common Stock issued to the
Holder upon conversion of or otherwise pursuant to this Note as and when
required by this Note or the Registration Rights Agreement, or fails to remove
any restrictive legend (or to withdraw any stop transfer instructions in respect
thereof) on any certificate for any shares of Common Stock issued to the Holder
upon conversion of or otherwise pursuant to this Note as and when required by
this Note or the Registration Rights Agreement (or makes any announcement,
statement or threat that it does not intend to honor the obligations described
in this paragraph) and any such failure shall continue uncured (or any
announcement, statement or threat not to honor its obligations shall not be
rescinded in writing) for ten (10) days after the Borrower shall have been
notified thereof in writing by the Holder;

4.3 Failure to Timely File Registration or Effect Registration. The Borrower
fails to file the Registration Statement within thirty (30) days following the
Closing Date (as defined in the Purchase Agreement) or obtain effectiveness with
the Securities and Exchange Commission of the Registration Statement within one
hundred twenty (120) days following the Closing Date (as defined in the Purchase
Agreement) or such Registration Statement lapses in effect (or sales cannot
otherwise be made thereunder effective, whether by reason of the Borrower's
failure to amend or supplement the prospectus included therein in accordance
with the Registration Rights Agreement or otherwise) for more than twenty (20)
consecutive days or forty (40) days in any twelve month period after the
Registration Statement becomes effective;

4.4 Breach of Covenants. The Borrower breaches any material covenant or other
material term or condition contained in Sections 2.3, 2.6 or 2.7 of this Note,
or Sections 4(c), 4(e), 4(h), 4(i), 4(j) or 5 of the Purchase Agreement and such
breach continues for a period of ten (10) days after written notice thereof to
the Borrower from the Holder;

4.5 Breach of Representations and Warranties. Any representation or warranty of
the Borrower made herein or in any agreement, statement or certificate given in
writing pursuant hereto or in connection herewith (including, without
limitation, the Purchase Agreement and the Registration Rights Agreement), shall
be false or misleading in any material respect when made and the breach of which
has (or with the passage of time will have) a material adverse effect on the
rights of the Holder with respect to this Note, the Purchase Agreement or the
Registration Rights Agreement;

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

4.7 Judgments. Any money judgment, writ or similar process shall be entered or
filed against the Borrower or any subsidiary of the Borrower or any of its
property or other assets for more than $200,000, and shall remain unvacated,
unbonded or unstayed for a period of twenty (20) days unless otherwise consented
to by the Holder, which consent will not be unreasonably withheld;

4.8 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Borrower or any
subsidiary of the Borrower;

4.9 Delisting of Common Stock. The Borrower shall fail to maintain the listing
of the Common Stock on at least one of the OTCBB or an equivalent replacement
exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York
Stock Exchange, or the American Stock Exchange; or

4.10     Default  Under Other  Notes.

An Event of Default has occurred and is continuing under any of the other Notes
issued pursuant to the Purchase Agreement,

then, upon the occurrence and during the continuation of any Event of Default
specified in Section 4.1, 4.2, 4.3, 4.4, 4.5, 4.7, 4.9, or 4.10, at the option
of the Holders of a majority of the aggregate principal amount of the
outstanding Notes issued pursuant to the Purchase Agreement exercisable through
the delivery of written notice to the Borrower by such Holders (the "Default
Notice"), and upon the occurrence of an Event of Default specified in Section
4.6 or 4.8, the Notes shall become immediately due and payable and the Borrower
shall pay to the Holder, in full satisfaction of its obligations hereunder, an
amount equal to the greater of (i) 130% times the sum of (w) the then
outstanding principal amount of this Note plus (x) accrued and unpaid interest
on the unpaid principal amount of this Note to the date of payment (the
"Mandatory Prepayment Date") plus (y) Default Interest, if any, on the amounts
referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder
pursuant to Sections 2.3 and 2.4(g) hereof or pursuant to Section 2(c) of the
Registration Rights Agreement (the then outstanding principal amount of this
Note to the date of payment plus the amounts referred to in clauses (x), (y) and
(z) shall collectively be known as the "Default Sum") or (ii) the "parity value"
of the Default Sum to be prepaid, where parity value means (a) the highest
number of shares of Common Stock issuable upon conversion of or otherwise
pursuant to such Default Sum in accordance with Article I, treating the Trading
Day immediately preceding the Mandatory Prepayment Date as the "Conversion Date"
for purposes of determining the lowest applicable Conversion Price, unless the
Default Event arises as a result of a breach in respect of a specific Conversion
Date in which case such Conversion Date shall be the Conversion Date),
multiplied by (b) the highest Closing Price for the Common Stock during the
period beginning on the date of first occurrence of the Event of Default and
ending one day prior to the Mandatory Prepayment Date (the "Default Amount") and
all other amounts payable hereunder shall immediately become due and payable,
all without demand, presentment or notice, all of which hereby are expressly
waived, together with all costs, including, without limitation, legal fees and
expenses, of collection, and the Holder shall be entitled to exercise all other
rights and remedies available at law or in equity. If the Borrower fails to pay
the Default Amount within five (5) business days of written notice that such
amount is due and payable, then the Holder shall have the right at any time, so
long as the Borrower remains in default (and so long and to the extent that
there are sufficient authorized shares), to require the Borrower, upon written
notice, to immediately issue, in lieu of the Default Amount, the number of
shares of Common Stock of the Borrower equal to the Default Amount divided by
the Conversion Price then in effect.

ARTICLE V.                                                  MISCELLANEOUS

5.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the
Holder 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 privileges. All rights and remedies existing hereunder are
cumulative to, and not exclusive of, any rights or remedies otherwise available.

5.2 Notices. Any notice herein required or permitted to be given shall be in
writing and may be personally served or delivered by courier or sent by United
States mail and shall be deemed to have been given upon receipt if personally
served (which shall include telephone line facsimile transmission) or sent by
courier or three (3) days after being deposited in the United States mail,
certified, with postage pre-paid and properly addressed, if sent by mail. For
the purposes hereof, the address of the Holder shall be as shown on the records
of the Borrower; and the address of the Borrower shall be 575 Madison Avenue,
NY, NY 10022, facsimile number: (917) 339-7166. Both the Holder and the Borrower
may change the address for service by service of written notice to the other as
herein provided.

5.3 Amendments. This Note and any provision hereof may only be amended by an
instrument in writing signed by the Borrower and the Holder. The term "Note" and
all reference thereto, as used throughout this instrument, shall mean this
instrument (and the other Notes issued pursuant to the Purchase Agreement) as
originally executed, or if later amended or supplemented, then as so amended or
supplemented.

5.4 Assignability. This Note shall be binding upon the Borrower and its
successors and assigns, and shall inure to be the benefit of the Holder and its
successors and assigns. Each transferee of this Note must be an "accredited
investor" (as defined in Rule 501(a) of the 1933 Act). Notwithstanding anything
in this Note to the contrary, this Note may be pledged as collateral in
connection with a bona fide margin account or other lending arrangement.

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

5.6 Governing Law. THIS NOTE SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES
OF CONFLICT OF LAWS. THE BORROWER AND HOLDER HEREBY SUBMIT TO THE EXCLUSIVE
JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK
WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS NOTE, THE AGREEMENTS ENTERED INTO
IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH
PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE
OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY
RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL
NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER
THIS NOTE SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING ATTORNEYS'
FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH DISPUTE.

5.7 Certain Amounts. Whenever pursuant to this Note the Borrower is required to
pay an amount in excess of the outstanding principal amount (or the portion
thereof required to be paid at that time) plus accrued and unpaid interest plus
Default Interest on such interest, the Borrower and the Holder agree that the
actual damages to the Holder from the receipt of cash payment on this Note may
be difficult to determine and the amount to be so paid by the Borrower
represents stipulated damages and not a penalty and is intended to compensate
the Holder in part for loss of the opportunity to convert this Note and to earn
a return from the sale of shares of Common Stock acquired upon conversion of
this Note at a price in excess of the price paid for such shares pursuant to
this Note. The Borrower and the Holder hereby agree that such amount of
stipulated damages is not plainly disproportionate to the possible loss to the
Holder from the receipt of a cash payment without the opportunity to convert
this Note into shares of Common Stock.

5.8 Allocations of Maximum Share Amount and Reserved Amount. The Maximum Share
Amount and Reserved Amount shall be allocated pro rata among the Holders of
Notes based on the principal amount of such Notes issued to each Holder. Each
increase to the Maximum Share Amount and Reserved Amount shall be allocated pro
rata among the Holders of Notes based on the principal amount of such Notes held
by each Holder at the time of the increase in the Maximum Share Amount or
Reserved Amount. In the event a Holder shall sell or otherwise transfer any of
such Holder's Notes, each transferee shall be allocated a pro rata portion of
such transferor's Maximum Share Amount and Reserved Amount. Any portion of the
Maximum Share Amount or Reserved Amount which remains allocated to any person or
entity which does not hold any Notes shall be allocated to the remaining Holders
of Notes, pro rata based on the principal amount of such Notes then held by such
Holders.

5.9 Damages Shares. The shares of Common Stock that may be issuable to the
Holder pursuant to Sections 2.3 and 2.4(g) hereof and pursuant to Section 2(c)
of the Registration Rights Agreement ("Damages Shares") shall be treated as
Common Stock issuable upon conversion of this Note for all purposes hereof and
shall be subject to all of the limitations and afforded all of the rights of the
other shares of Common Stock issuable hereunder, including without limitation,
the right to be included in the Registration Statement filed pursuant to the
Registration Rights Agreement. For purposes of calculating interest payable on
the outstanding principal amount hereof, except as otherwise provided herein,
amounts convertible into Damages Shares ("Damages Amounts") shall not bear
interest but must be converted prior to the conversion of any outstanding
principal amount hereof, until the outstanding Damages Amounts is zero.

5.10 Denominations. At the request of the Holder, upon surrender of this Note,
the Borrower shall promptly issue new Notes in the aggregate outstanding
principal amount hereof, in the form hereof, in such denominations of at least
$50,000 as the Holder shall request.

5.11     Purchase  Agreement.

By its acceptance of this Note, each Holder agrees to be bound by the applicable
terms of the Purchase Agreement.

5.12 Notice of Corporate Events. Except as otherwise provided below, the Holder
of this Note shall have no rights as a Holder of Common Stock unless and only to
the extent that it converts this Note into Common Stock. The Borrower shall
provide the Holder with prior notification of any meeting of the Borrower's
shareholders (and copies of proxy materials and other information sent to
shareholders). In the event of any taking by the Borrower of a record of its
shareholders for the purpose of determining shareholders who are entitled to
receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire (including by way of merger, consolidation,
reclassification or recapitalization) any share of any class or any other
securities or property, or to receive any other right, or for the purpose of
determining shareholders who are entitled to vote in connection with any
proposed sale, lease or conveyance of all or substantially all of the assets of
the Borrower or any proposed liquidation, dissolution or winding up of the
Borrower, the Borrower shall mail a notice to the Holder, simultaneously with
any notice mailed to shareholders, of the date on which any such record is to be
taken for the purpose of such dividend, distribution, right or other event, and
a brief statement regarding the amount and character of such dividend,
distribution, right or other event to the extent known at such time. The
Borrower shall make a public announcement of any event requiring notification to
the Holder hereunder substantially simultaneously with the notification to the
Holder in accordance with the terms of this Section 5.12.

5.13 Remedies. The Borrower acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder, by vitiating the intent and
purpose of the transaction contemplated hereby. Accordingly, the Borrower
acknowledges that the remedy at law for a breach of its obligations under this
Note will be inadequate and agrees, in the event of a breach or threatened
breach by the Borrower of the provisions of this Note, that the Holder shall be
entitled, in addition to all other available remedies at law or in equity, and
in addition to the penalties assessable herein, to an injunction or injunctions
restraining, preventing or curing any breach of this Note and to enforce
specifically the terms and provisions thereof, without the necessity of showing
economic loss and without any bond or other security being required.

ARTICLE VI.                                                  CALL OPTION

6.1 Call Option. Notwithstanding anything to the contrary contained in this
Article VI so long as (i) no Event of Default or Trading Market Prepayment Event
shall have occurred and be continuing, and (ii) the Borrower has a sufficient
number of authorized shares of Common Stock reserved for issuance upon full
conversion of the Notes, then, at any time after the Issue Date, the Borrower
shall have the right, exercisable on not less than ten (10) Business Days prior
written notice to the Holders of the Notes (which notice may not be sent to the
Holders of the Notes until the Borrower is permitted to prepay the Notes
pursuant to this Section 6.1), to prepay all of the outstanding Notes in
accordance with this Section 6.1 (an "Optional Prepayment"). Any notice of an
Optional Prepayment hereunder (the "Optional Prepayment Notice") shall be
delivered to the Holders of the Notes at their registered addresses appearing on
the books and records of the Borrower and shall state (1) that the Borrower is
exercising its right to prepay all of the Notes issued on the Issue Date and (2)
the date of prepayment (the "Optional Prepayment Date"). On the Optional
Prepayment Date for prepayment the Borrower shall make payment of the Optional
Prepayment Amount (as defined below) to or upon the order of the Holders as
specified by the Holders in writing to the Borrower at least one (1) business
day prior to the Optional Prepayment Date. If the Borrower exercises its right
to prepay the Notes, the Borrower shall make payment to the holders of an amount
in cash (the "Optional Prepayment Amount") equal to (1) if the Common Stock is
trading at or below $6.00 per share, 125% multiplied by the sum of (w) the then
outstanding principal amount of this Note plus (x) accrued and unpaid interest
on the unpaid principal amount of this Note to the Optional Prepayment Date plus
(y) Default Interest, if any, on the amounts referred to in clauses (w) and (x)
plus (z) any amounts owed to the Holder pursuant to Sections 2.3 and 2.4(g)
hereof or pursuant to Section 2(c) of the Registration Rights Agreement (the
then outstanding principal amount of this Note to the date of payment plus the
amounts referred to in clauses (x), (y) and (z) shall collectively be known as
the "Optional Prepayment Sum") or (2) if the Common Stock is trading above $6.00
per share, the Optional Prepayment Sum plus the product of (A) the number of
shares of Common Stock then issuable upon full conversion of this Note (based
upon the then applicable Conversion Price and without regard to the limitation
set forth in Section 2.1) multiplied by (B) the difference between the average
of the Average Daily Prices for the Common Stock for the preceding five (5) days
minus the then applicable Conversion Price. Notwithstanding notice of an
Optional Prepayment, the Holders shall at all times prior to the Optional
Prepayment Date maintain the right to convert all or any portion of the Notes in
accordance with Article II and any portion of Notes so converted after receipt
of an Optional Prepayment Notice and prior to the Optional Prepayment Date set
forth in such notice and payment of the aggregate Optional Prepayment Amount
shall be deducted from the principal amount of Notes which are otherwise subject
to prepayment pursuant to such notice. If the Borrower delivers an Optional
Prepayment Notice and fails to pay the Optional Prepayment Amount due to the
Holders of the Notes within three (3) business days following the Optional
Prepayment Date, the Borrower shall forever forfeit its right to redeem the
Notes pursuant to this Section 6.1.











                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]








                  IN WITNESS WHEREOF, Borrower has caused this Note to be signed
in its name by its duly authorized officer this ___ day of July, 2005.


                                         MSGI SECURITY SOLUTIONS, INC.



                                         By:      ______________________________
                                                  Jeremy Barbera
                                                  Chief Executive Officer





                                    EXHIBIT A

                              NOTICE OF CONVERSION
                    (To be Executed by the Registered Holder
                                          in order to Convert the Notes)

                  The undersigned hereby irrevocably elects to convert
$__________ principal amount of the Note (defined below) into shares of common
stock, par value $.01 per share ("Common Stock"), of MSGI Security Solutions,
Inc., a Nevada corporation (the "Borrower") according to the conditions of the
convertible Notes of the Borrower dated as of July 12, 2005 (the "Notes"), as of
the date written below. If securities are to be issued in the name of a person
other than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto and is delivering herewith such certificates. No fee will
be charged to the Holder for any conversion, except for transfer taxes, if any.
A copy of each Note is attached hereto (or evidence of loss, theft or
destruction thereof).

                  In the case of a resale covered by an effective registration
statement, the Borrower shall electronically transmit the Common Stock issuable
pursuant to this Notice of Conversion to the account of the undersigned or its
nominee with DTC through its Deposit Withdrawal Agent Commission system ("DWAC
Transfer").

         Name of DTC Prime Broker:
                                  ----------------------------------------------
         Account Number:
                        --------------------------------------------------------

                  In lieu of receiving shares of Common Stock issuable pursuant
to this Notice of Conversion by way of a DWAC Transfer, the undersigned hereby
requests that the Borrower issue a certificate or certificates for the number of
shares of Common Stock set forth below (which numbers are based on the Holder's
calculation attached hereto) in the name(s) specified immediately below or, if
additional space is necessary, on an attachment hereto:

         Name:
              ------------------------------------------------------------------
         Address:
                 ---------------------------------------------------------------

                  The undersigned represents and warrants that all offers and
sales by the undersigned of the securities issuable to the undersigned upon
conversion of the Notes shall be made pursuant to registration of the securities
under the Securities Act of 1933, as amended (the "Act"), or pursuant to an
exemption from registration under the Act.

                  Date of Conversion:___________________________
                  Applicable Conversion Price:____________________
                  Number of Shares of Common Stock to be Issued Pursuant to
                  Conversion of the Notes:______________
                  Signature:___________________________________
                  Name:______________________________________
                  Address:____________________________________






The Borrower shall issue and deliver shares of Common Stock to an overnight
courier not later than three business days following receipt of the original
Note(s) to be converted, and shall make payments pursuant to the Notes for the
number of business days such issuance and delivery is late.






                                    EXHIBIT B

                           CONVERSION ELECTION NOTICE


   (To be executed by the Holder in order to convert all or part of a Monthly
                           Amount into Common Stock)



[Name and Address of Holder]

Holder hereby elects to convert $_______________ of the Monthly Amount due on
[specify applicable Repayment Date] under the Callable Secured Convertible Note
issued by MSGI SECURITY SOLUTIONS, INC. dated July ____, 2005 by delivery of
Shares of Common Stock of MSGI SECURITY SOLUTIONS, INC. on and subject to the
conditions set forth in Article II of such Note.

1. Initial Market Price: $

2. Amount to be Paid: $

3. Shares To Be Delivered (2 divided by 1):

4.       Cash payment to be made by Borrower:                 $
                                                               -----------------


Date:
     -------------------------------                 ---------------------------


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

EX-4

         THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT
         HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
         EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN A SECURITIES PURCHASE
         AGREEMENT DATED AS OF JULY __, 2005, NEITHER THIS WARRANT NOR ANY OF
         SUCH SHARES MAY BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
         EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER SAID ACT OR,
         AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE, ACCEPTABLE TO THE
         COMPANY'S COUNSEL, THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR
         UNLESS SOLD PURSUANT TO RULE 144 OR REGULATION S UNDER SUCH ACT.

                                                             Right to
                                                             Purchase ____
                                                             Shares of Common
                                                             Stock, par value
                                                             $.01 per share

                             STOCK PURCHASE WARRANT

         THIS CERTIFIES THAT, for value received, _______, is entitled to
purchase from MSGI Security Solutions, Inc. a Nevada corporation (the
"Company"), at any time or from time to time during the period specified in
Paragraph 2 hereof, _________ fully paid and nonassessable shares of the
Company's Common Stock, par value $.01 per share (the "Common Stock"), at an
exercise price per share equal to $7.50 (the "Exercise Price"). The term
"Warrant Shares," as used herein, refers to the shares of Common Stock
purchasable hereunder. The Warrant Shares and the Exercise Price are subject to
adjustment as provided in Paragraph 4 hereof. The term "Warrants" means this
Warrant and the other warrants issued pursuant to that certain Securities
Purchase Agreement, dated July __, 2005, by and among the Company and the Buyers
listed on the execution page thereof (the "Securities Purchase Agreement").

         This Warrant is subject to the following terms, provisions, and
conditions:

1.       Manner of Exercise; Issuance of Certificates; Payment for Shares.

(a) Subject to the provisions hereof, this Warrant may be exercised by the
holder hereof, in whole or in part, by the surrender of this Warrant, together
with a completed exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and upon (i)
payment to the Company in cash, by certified or official bank check or by wire
transfer for the account of the Company of the Exercise Price for the Warrant
Shares specified in the Exercise Agreement or (ii) if the resale of the Warrant
Shares by the holder is not then registered pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), delivery to the Company of a written notice of an election to
effect a "Cashless Exercise" (as defined in Section 11(c) below) for the Warrant
Shares specified in the Exercise Agreement. The Warrant Shares so purchased
shall be deemed to be issued to the holder hereof or such holder's designee, as
the record owner of such shares, as of the close of business on the date on
which this Warrant shall have been surrendered, the completed Exercise Agreement
shall have been delivered, and payment shall have been made for such shares as
set forth above. Certificates for the Warrant Shares so purchased, representing
the aggregate number of shares specified in the Exercise Agreement, shall be
delivered to the holder hereof within a reasonable time, not exceeding three (3)
business days, after this Warrant shall have been so exercised. The certificates
so delivered shall be in such denominations as may be requested by the holder
hereof and shall be registered in the name of such holder. If this Warrant shall
have been exercised only in part, then, unless this Warrant has expired, the
Company shall, at its expense, at the time of delivery of such certificates,
deliver to the holder a new Warrant representing the number of shares with
respect to which this Warrant shall not then have been exercised. In addition to
all other available remedies at law or in equity, if the Company fails to
deliver certificates for the Warrant Shares within three (3) business days after
this Warrant is exercised, then the Company shall pay to the holder in cash a
penalty (the "Penalty") equal to 2% of the number of Warrant Shares that the
holder is entitled to multiplied by the Market Price (as hereinafter defined)
for each day that the Company fails to deliver certificates for the Warrant
Shares. For example, if the holder is entitled to 100,000 Warrant Shares and the
Market Price is $2.00, then the Company shall pay to the holder $4,000 for each
day that the Company fails to deliver certificates for the Warrant Shares. The
Penalty shall be paid to the holder by the fifth day of the month following the
month in which it has accrued.

                  Notwithstanding anything in this Warrant to the contrary, in
no event shall the holder of this Warrant be entitled to exercise a number of
Warrants (or portions thereof) in excess of the number of Warrants (or portions
thereof) upon exercise of which the sum of (i) the number of shares of Common
Stock beneficially owned by the holder and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unexercised Warrants and the unexercised or unconverted portion of any other
securities of the Company (including the Notes (as defined in the Securities
Purchase Agreement)) subject to a limitation on conversion or exercise analogous
to the limitation contained herein) and (ii) the number of shares of Common
Stock issuable upon exercise of the Warrants (or portions thereof) with respect
to which the determination described herein is being made, would result in
beneficial ownership by the holder and its affiliates of more than 4.9% of the
outstanding shares of Common Stock. For 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-G
thereunder, except as otherwise provided in clause (i) of the preceding
sentence. Notwithstanding anything to the contrary contained herein, the
limitation on exercise of this Warrant set forth herein may not be amended
without (i) the written consent of the holder hereof and the Company and (ii)
the approval of a majority of shareholders of the Company.

(b) Redemption Right. The Company shall be entitled, on any day (the
"Calculation Date") on which the Closing Price (as defined below) of the Common
Stock for ten (10) consecutive Trading Days (as defined below) is equal to or
greater than $11.25, to deliver a written notice (the "Redemption Notice") to
the Holder that the Company will redeem this Warrant (the "Redemption Date") at
the Redemption Price (as defined below) provided, however, that the Company
shall have such right if and only if (x) for a period of thirty (30) days prior
to the Calculation Date and (y) at all times during such thirty (30) day period
and continuing through the Redemption Date, the Warrant Shares issuable upon
exercise of the Warrants are (i) authorized and reserved for issuance, (ii)
registered for resale under the Securities Act of 1933, as amended, by the
holder of this Warrant (or may otherwise be resold publicly without restriction)
and sales of the Warrant Shares may be made continuously thereunder during such
time periods, and (iii) listed for trading on each principal exchange or market
on which the shares of Common Stock of the Company were then traded. The
Redemption Price shall be paid by the Company to the Holder within two (2)
business days of the Redemption Date. The "Redemption Price" shall equal the
Closing Price (as defined below) on the Redemption Date less the Exercise Price,
multiplied by the number of Warrants being redeemed hereunder. Nothing in this
Section 1(b) shall prohibit exercise of the Warrant otherwise permitted pursuant
to the terms of this Warrant during the pendency of any Redemption Notice prior
to the payment of the Redemption Price. "Trading Day" shall mean any day on
which the Common Stock is traded for any period on the Over-the-Counter Bulletin
Board (the "OTCBB"), or on the principal securities exchange or other securities
market on which the Common Stock is then being traded. "Closing Price," as of
any date, (i) means the last reported sale price for the shares of Common Stock
on the OTCBB as reported by Bloomberg Financial Markets or other similar
reliable reporting service as designated by the Holder ("Bloomberg"), or (ii) if
the OTCBB is not the principal trading market for the shares of Common Stock,
the last reported sale price on the principal trading market for the Common
Stock as reported by Bloomberg, or (iii) if the last reported sale price cannot
be determined as of such date on any of the foregoing bases, the Closing Price
shall be the fair market value as reasonably determined in good faith by the
Board of Directors of the Company or, at the option of a majority-in-interest of
the holders of the outstanding Warrants, by an independent investment bank of
nationally recognized standing in the valuation of businesses similar to the
business of the corporation.

2. Period of Exercise. This Warrant is exercisable at any time or from time to
time on or after the date on which this Warrant is issued and delivered pursuant
to the terms of the Securities Purchase Agreement and before 5:00 p.m., New
York, New York time on the fifth (5th) anniversary of the date of issuance (the
"Exercise Period").

3. Certain Agreements of the Company. The Company hereby covenants and agrees as
follows:

(a) Shares to be Fully Paid. All Warrant Shares will, upon issuance in
accordance with the terms of this Warrant, be validly issued, fully paid, and
nonassessable and free from all taxes, liens, and charges with respect to the
issue thereof.

(b) Reservation of Shares. During the Exercise Period, the Company shall at all
times have authorized, and reserved for the purpose of issuance upon exercise of
this Warrant, a sufficient number of shares of Common Stock to provide for the
exercise of this Warrant.

(c) Listing. The Company shall promptly secure the listing of the shares of
Common Stock issuable upon exercise of the Warrant upon each national securities
exchange or automated quotation system, if any, upon which shares of Common
Stock are then listed (subject to official notice of issuance upon exercise of
this Warrant) and shall maintain, so long as any other shares of Common Stock
shall be so listed, such listing of all shares of Common Stock from time to time
issuable upon the exercise of this Warrant; and the Company shall so list on
each national securities exchange or automated quotation system, as the case may
be, and shall maintain such listing of, any other shares of capital stock of the
Company issuable upon the exercise of this Warrant if and so long as any shares
of the same class shall be listed on such national securities exchange or
automated quotation system.

(d) Certain Actions Prohibited. The Company will not, by amendment of its
charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Exercise Price then in effect, and (ii)
will take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.

(e) Successors and Assigns. This Warrant will be binding upon any entity
succeeding to the Company by merger, consolidation, or acquisition of all or
substantially all the Company's assets.

4. Antidilution Provisions. During the Exercise Period, the Exercise Price and
the number of Warrant Shares shall be subject to adjustment from time to time as
provided in this Paragraph 4.

         In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
to the nearest cent.

(a) Subdivision or Combination of Common Stock. If the Company at any time
subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company at any
time combines (by reverse stock split, recapitalization, reorganization,
reclassification or otherwise) the shares of Common Stock acquirable hereunder
into a smaller number of shares, then, after the date of record for effecting
such combination, the Exercise Price in effect immediately prior to such
combination will be proportionately increased.

(b) Adjustment in Number of Shares. Upon each adjustment of the Exercise Price
pursuant to the provisions of this Paragraph 4, the number of shares of Common
Stock issuable upon exercise of this Warrant shall be adjusted by multiplying a
number equal to the Exercise Price in effect immediately prior to such
adjustment by the number of shares of Common Stock issuable upon exercise of
this Warrant immediately prior to such adjustment and dividing the product so
obtained by the adjusted Exercise Price.

(c) Consolidation, Merger or Sale. In case of any consolidation of the Company
with, or merger of the Company into any other corporation, or in case of any
sale or conveyance of all or substantially all of the assets of the Company
other than in connection with a plan of complete liquidation of the Company,
then as a condition of such consolidation, merger or sale or conveyance,
adequate provision will be made whereby the holder of this Warrant will have the
right to acquire and receive upon exercise of this Warrant in lieu of the shares
of Common Stock immediately theretofore acquirable upon the exercise of this
Warrant, such shares of stock, securities or assets as may be issued or payable
with respect to or in exchange for the number of shares of Common Stock
immediately theretofore acquirable and receivable upon exercise of this Warrant
had such consolidation, merger or sale or conveyance not taken place. In any
such case, the Company will make appropriate provision to insure that the
provisions of this Paragraph 4 hereof will thereafter be applicable as nearly as
may be in relation to any shares of stock or securities thereafter deliverable
upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor corporation (if other than the Company) assumes by
written instrument the obligations under this Paragraph 4 and the obligations to
deliver to the holder of this Warrant such shares of stock, securities or assets
as, in accordance with the foregoing provisions, the holder may be entitled to
acquire.

(d) Distribution of Assets. In case the Company shall declare or make any
distribution of its assets (including cash) to holders of Common Stock as a
partial liquidating dividend, by way of return of capital or otherwise, then,
after the date of record for determining shareholders entitled to such
distribution, but prior to the date of distribution, the holder of this Warrant
shall be entitled upon exercise of this Warrant for the purchase of any or all
of the shares of Common Stock subject hereto, to receive the amount of such
assets which would have been payable to the holder had such holder been the
holder of such shares of Common Stock on the record date for the determination
of shareholders entitled to such distribution.

(e) Notice of Adjustment. Upon the occurrence of any event which requires any
adjustment of the Exercise Price, then, and in each such case, the Company shall
give notice thereof to the holder of this Warrant, which notice shall state the
Exercise Price resulting from such adjustment and the increase or decrease in
the number of Warrant Shares purchasable at such price upon exercise, setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based. Such calculation shall be certified by the Chief
Financial Officer of the Company.

(f) No Fractional Shares. No fractional shares of Common Stock are to be issued
upon the exercise of this Warrant, but the Company shall pay a cash adjustment
in respect of any fractional share which would otherwise be issuable in an
amount equal to the same fraction of the Market Price of a share of Common Stock
on the date of such exercise.

(g) Other Notices. In case at any time:

(i) the Company shall declare any dividend upon the Common Stock payable in
shares of stock of any class or make any other distribution (including dividends
or distributions payable in cash out of retained earnings) to the holders of the
Common Stock;

(ii) the Company shall offer for subscription pro rata to the holders of the
Common Stock any additional shares of stock of any class or other rights;

(iii) there shall be any capital reorganization of the Company, or
reclassification of the Common Stock, or consolidation or merger of the Company
with or into, or sale of all or substantially all its assets to, another
corporation or entity; or

(iv) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company;

then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also specify the date
on which the holders of Common Stock shall be entitled to receive such dividend,
distribution, or subscription rights or to exchange their Common Stock for stock
or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed in
respect thereto. Failure to give any such notice or any defect therein shall not
affect the validity of the proceedings referred to in clauses (i), (ii), (iii)
and (iv) above.

(h) Certain Events. If any event occurs of the type contemplated by the
adjustment provisions of this Paragraph 4 but not expressly provided for by such
provisions, the Company will give notice of such event as provided in Paragraph
4(g) hereof, and the Company's Board of Directors will make an appropriate
adjustment in the Exercise Price and the number of shares of Common Stock
acquirable upon exercise of this Warrant so that the rights of the holder shall
be neither enhanced nor diminished by such event.

(i) Certain Definitions.

(i) "Common Stock Deemed Outstanding" shall mean the number of shares of Common
Stock actually outstanding (not including shares of Common Stock held in the
treasury of the Company), plus (x) pursuant to Paragraph 4(b)(i) hereof, the
maximum total number of shares of Common Stock issuable upon the exercise of
Options, as of the date of such issuance or grant of such Options, if any, and
(y) pursuant to Paragraph 4(b)(ii) hereof, the maximum total number of shares of
Common Stock issuable upon conversion or exchange of Convertible Securities, as
of the date of issuance of such Convertible Securities, if any.

(ii) "Market Price," as of any date, (i) means the average of the last reported
sale prices for the shares of Common Stock on the OTCBB for the five (5) Trading
Days immediately preceding such date as reported by Bloomberg, or (ii) if the
OTCBB is not the principal trading market for the shares of Common Stock, the
average of the last reported sale prices on the principal trading market for the
Common Stock during the same period as reported by Bloomberg, or (iii) if market
value cannot be calculated as of such date on any of the foregoing bases, the
Market Price shall be the fair market value as reasonably determined in good
faith by (a) the Board of Directors of the Company or, at the option of a
majority-in-interest of the holders of the outstanding Warrants by (b) an
independent investment bank of nationally recognized standing in the valuation
of businesses similar to the business of the corporation. The manner of
determining the Market Price of the Common Stock set forth in the foregoing
definition shall apply with respect to any other security in respect of which a
determination as to market value must be made hereunder.

(iii) "Common Stock," for purposes of this Paragraph 4, includes the Common
Stock, par value $.01 per share, and any additional class of stock of the
Company having no preference as to dividends or distributions on liquidation,
provided that the shares purchasable pursuant to this Warrant shall include only
shares of Common Stock, par value $.01 per share, in respect of which this
Warrant is exercisable, or shares resulting from any subdivision or combination
of such Common Stock, or in the case of any reorganization, reclassification,
consolidation, merger, or sale of the character referred to in Paragraph 4(e)
hereof, the stock or other securities or property provided for in such
Paragraph.

5. Issue Tax. The issuance of certificates for Warrant Shares upon the exercise
of this Warrant shall be made without charge to the holder of this Warrant or
such shares for any issuance tax or other costs in respect thereof, provided
that the Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of any certificate
in a name other than the holder of this Warrant.

6. No Rights or Liabilities as a Shareholder. This Warrant shall not entitle the
holder hereof to any voting rights or other rights as a shareholder of the
Company. No provision of this Warrant, in the absence of affirmative action by
the holder hereof to purchase Warrant Shares, and no mere enumeration herein of
the rights or privileges of the holder hereof, shall give rise to any liability
of such holder for the Exercise Price or as a shareholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.

7. Transfer, Exchange, and Replacement of Warrant.

(a) Restriction on Transfer. This Warrant and the rights granted to the holder
hereof are transferable, in whole or in part, upon surrender of this Warrant,
together with a properly executed assignment in the form attached hereto, at the
office or agency of the Company referred to in Paragraph 7(e) below, provided,
however, that any transfer or assignment shall be subject to the conditions set
forth in Paragraph 7(f) hereof and to the applicable provisions of the
Securities Purchase Agreement. Until due presentment for registration of
transfer on the books of the Company, the Company may treat the registered
holder hereof as the owner and holder hereof for all purposes, and the Company
shall not be affected by any notice to the contrary. Notwithstanding anything to
the contrary contained herein, the registration rights described in Paragraph 8
are assignable only in accordance with the provisions of that certain
Registration Rights Agreement, dated July 12, 2005, by and among the Company and
the other signatories thereto (the "Registration Rights Agreement").

(b) Warrant Exchangeable for Different Denominations. This Warrant is
exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Paragraph 7(e) below, for new Warrants of
like tenor representing in the aggregate the right to purchase the number of
shares of Common Stock which may be purchased hereunder, each of such new
Warrants to represent the right to purchase such number of shares as shall be
designated by the holder hereof at the time of such surrender.

(c) Replacement of Warrant. Upon 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, upon delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company,
or, in the case of any such mutilation, upon surrender and cancellation of this
Warrant, the Company, at its expense, will execute and deliver, in lieu thereof,
a new Warrant of like tenor.

(d) Cancellation; Payment of Expenses. Upon the surrender of this Warrant in
connection with any transfer, exchange, or replacement as provided in this
Paragraph 7, this Warrant shall be promptly canceled by the Company. The Company
shall pay all taxes (other than securities transfer taxes) and all other
expenses (other than legal expenses, if any, incurred by the holder or
transferees) and charges payable in connection with the preparation, execution,
and delivery of Warrants pursuant to this Paragraph 7.

(e) Register. The Company shall maintain, at its principal executive offices (or
such other office or agency of the Company as it may designate by notice to the
holder hereof), a register for this Warrant, in which the Company shall record
the name and address of the person in whose name this Warrant has been issued,
as well as the name and address of each transferee and each prior owner of this
Warrant.

(f) Exercise or Transfer Without Registration. If, at the time of the surrender
of this Warrant in connection with any exercise, transfer, or exchange of this
Warrant, this Warrant (or, in the case of any exercise, the Warrant Shares
issuable hereunder), shall not be registered under the Securities Act of 1933,
as amended (the "Securities Act") and under applicable state securities or blue
sky laws, the Company may require, as a condition of allowing such exercise,
transfer, or exchange, (i) that the holder or transferee of this Warrant, as the
case may be, furnish to the Company a written opinion of counsel, which opinion
and counsel are acceptable to the Company, to the effect that such exercise,
transfer, or exchange may be made without registration under said Act and under
applicable state securities or blue sky laws, (ii) that the holder or transferee
execute and deliver to the Company an investment letter in form and substance
acceptable to the Company and (iii) that the transferee be an "accredited
investor" as defined in Rule 501(a) promulgated under the Securities Act;
provided that no such opinion, letter or status as an "accredited investor"
shall be required in connection with a transfer pursuant to Rule 144 under the
Securities Act. The first holder of this Warrant, by taking and holding the
same, represents to the Company that such holder is acquiring this Warrant for
investment and not with a view to the distribution thereof.

8. Registration Rights. The initial holder of this Warrant (and certain
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in Section 2 of the Registration
Rights Agreement.

9. Notices. All notices, requests, and other communications required or
permitted to be given or delivered hereunder to the holder of this Warrant shall
be in writing, and shall be personally delivered, or shall be sent by certified
or registered mail or by recognized overnight mail courier, postage prepaid and
addressed, to such holder at the address shown for such holder on the books of
the Company, or at such other address as shall have been furnished to the
Company by notice from such holder. All notices, requests, and other
communications required or permitted to be given or delivered hereunder to the
Company shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed, to the office of the Company at 575 Madison Avenue, NY,
NY 10022, Attention: Chief Executive Officer, or at such other address as shall
have been furnished to the holder of this Warrant by notice from the Company.
Any such notice, request, or other communication may be sent by facsimile, but
shall in such case be subsequently confirmed by a writing personally delivered
or sent by certified or registered mail or by recognized overnight mail courier
as provided above. All notices, requests, and other communications shall be
deemed to have been given either at the time of the receipt thereof by the
person entitled to receive such notice at the address of such person for
purposes of this Paragraph 9, or, if mailed by registered or certified mail or
with a recognized overnight mail courier upon deposit with the United States
Post Office or such overnight mail courier, if postage is prepaid and the
mailing is properly addressed, as the case may be.

10. Governing Law. THIS WARRANT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES
OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE EXCLUSIVE
JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK
WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS WARRANT, THE AGREEMENTS ENTERED
INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE
OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY
RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL
NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER
THIS WARRANT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING
ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH
DISPUTE.

11. Miscellaneous.

(a) Amendments. This Warrant and any provision hereof may only be amended by an
instrument in writing signed by the Company and the holder hereof.

(b) Descriptive Headings. The descriptive headings of the several paragraphs of
this Warrant are inserted for purposes of reference only, and shall not affect
the meaning or construction of any of the provisions hereof.

(c) Cashless Exercise. Notwithstanding anything to the contrary contained in
this Warrant, if the resale of the Warrant Shares by the holder is not then
registered pursuant to an effective registration statement under the Securities
Act, this Warrant may be exercised by presentation and surrender of this Warrant
to the Company at its principal executive offices with a written notice of the
holder's intention to effect a cashless exercise, including a calculation of the
number of shares of Common Stock to be issued upon such exercise in accordance
with the terms hereof (a "Cashless Exercise"). In the event of a Cashless
Exercise, in lieu of paying the Exercise Price in cash, the holder shall
surrender this Warrant for that number of shares of Common Stock determined by
multiplying the number of Warrant Shares to which it would otherwise be entitled
by a fraction, the numerator of which shall be the difference between the then
current Market Price per share of the Common Stock and the Exercise Price, and
the denominator of which shall be the then current Market Price per share of
Common Stock. For example, if the holder is exercising 100,000 Warrants with a
per Warrant exercise price of $0.75 per share through a cashless exercise when
the Common Stock's current Market Price per share is $2.00 per share, then upon
such Cashless Exercise the holder will receive 62,500 shares of Common Stock.

(d) Remedies. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the holder, by vitiating the intent and
purpose of the transaction contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Warrant will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Warrant, that the holder shall
be entitled, in addition to all other available remedies at law or in equity,
and in addition to the penalties assessable herein, to an injunction or
injunctions restraining, preventing or curing any breach of this Warrant and to
enforce specifically the terms and provisions thereof, without the necessity of
showing economic loss and without any bond or other security being required.













                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]






     IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.

                                          MSGI SECURITY SOLUTIONS, INC.



                                          By: _______________________________
                                               Jeremy Barbera
                                               Chief Executive Officer


Dated as of July ___, 2005






PHL_A #1951922 v1
                           FORM OF EXERCISE AGREEMENT



                                                      Dated:  ________ __, 200_



To:      ______________________





         The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase ________ shares of Common Stock covered by
such Warrant, and makes payment herewith in full therefor at the price per share
provided by such Warrant in cash or by certified or official bank check in the
amount of, or, if the resale of such Common Stock by the undersigned is not
currently registered pursuant to an effective registration statement under the
Securities Act of 1933, as amended, by surrender of securities issued by the
Company (including a portion of the Warrant) having a market value (in the case
of a portion of this Warrant, determined in accordance with Section 11(c) of the
Warrant) equal to $_________. Please issue a certificate or certificates for
such shares of Common Stock in the name of and pay any cash for any fractional
share to:



                                        Name:    ______________________________


                                        Signature:
                                        Address:____________________________
                                                ____________________________


                                      Note:   The above signature should
                                              correspond exactly with the name
                                              on the face of the within Warrant,
                                              if applicable.


and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any fraction of a share paid in cash.






PHL_A #1951922 v1                                         1
PHL_A #1951922 v1
                               FORM OF ASSIGNMENT





         FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth
hereinbelow, to:


Name of Assignee                    Address                         No of Shares







, and hereby irrevocably constitutes and appoints
___________________________________ as agent and attorney-in-fact to transfer
said Warrant on the books of the within-named corporation, with full power of
substitution in the premises.



Dated:   ________ __, 200_



In the presence of:                  ______________________________

                                Name:______________________________


                                Signature:_________________________
                                Title of Signing Officer or Agent (if any):
                                         ______________________________
                                Address: ______________________________
                                         ______________________________


                             Note:    The above signature should correspond
                                      exactly with the name on the face of the
                                      within Warrant, if applicable.

EX-4

                          REGISTRATION RIGHTS AGREEMENT


         REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of July __,
2005, by and among MSGI Security Solutions, Inc., a Nevada corporation with its
headquarters located at 575 Madison Avenue, New York, NY 10022 (the "Company"),
and each of the undersigned (together with their respective affiliates and any
assignee or transferee of all of their respective rights hereunder, the "Initial
Investors").

         WHEREAS:

A. In connection with the Securities Purchase Agreement by and among the parties
hereto of even date herewith (the "Securities Purchase Agreement"), the Company
has agreed, upon the terms and subject to the conditions contained therein, to
issue and sell to the Initial Investors (i) secured convertible notes in the
aggregate principal amount of up to Three Million Dollars ($3,000,000) (the
"Notes") that are convertible into shares of the Company's common stock (the
"Common Stock"), upon the terms and subject to the limitations and conditions
set forth in such Notes and (ii) warrants (the "Warrants") to acquire an
aggregate of 75,000 shares of Common Stock, upon the terms and conditions and
subject to the limitations and conditions set forth in the Warrants; and

B. To induce the Initial Investors to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 Act"), and applicable state securities laws;

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
of the Initial Investors hereby agree as follows:

1. DEFINITIONS.

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

(i) "Investors" means the Initial Investors and any transferee or assignee who
agrees to become bound by the provisions of this Agreement in accordance with
Section 9 hereof.

(ii) "register," "registered," and "registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the 1933 Act and pursuant to Rule 415 under the 1933 Act or any
successor rule providing for offering securities on a continuous basis ("Rule
415"), and the declaration or ordering of effectiveness of such Registration
Statement by the United States Securities and Exchange Commission (the "SEC").

(iii) "Registrable Securities" means the Conversion Shares issued or issuable
upon conversion or otherwise pursuant to the Notes and Additional Notes (as
defined in the Securities Purchase Agreement) including, without limitation,
Damages Shares (as defined in the Notes) issued or issuable pursuant to the
Notes, shares of Common Stock issued or issuable in payment of the Standard
Liquidated Damages Amount (as defined in the Securities Purchase Agreement),
shares issued or issuable in respect of interest or in redemption of the Notes
in accordance with the terms thereof) and Warrant Shares issuable, upon exercise
or otherwise pursuant to the Warrants, and any shares of capital stock issued or
issuable as a dividend on or in exchange for or otherwise with respect to any of
the foregoing.

(iv) "Registration Statement" means a registration statement of the Company
under the 1933 Act.

b. Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Securities Purchase Agreement or the
Convertible Note.

2. REGISTRATION.

a. Mandatory Registration. The Company shall prepare, and, on or prior to twenty
(20) days from the date of Closing (as defined in the Securities Purchase
Agreement) (the "Filing Date"), file with the SEC a Registration Statement on
Form S-3 (or, if Form S-3 is not then available, on such form of Registration
Statement as is then available to effect a registration of the Registrable
Securities, subject to the consent of the Initial Investors, which consent will
not be unreasonably withheld) covering the resale of the Registrable Securities
underlying the Notes and Warrants issued or issuable pursuant to the Securities
Purchase Agreement, which Registration Statement, to the extent allowable under
the 1933 Act and the rules and regulations promulgated thereunder (including
Rule 416), shall state that such Registration Statement also covers such
indeterminate number of additional shares of Common Stock as may become issuable
upon conversion of or otherwise pursuant to the Notes and exercise of the
Warrants to prevent dilution resulting from stock splits, stock dividends or
similar transactions. The number of shares of Common Stock initially included in
such Registration Statement shall be no less than an amount equal to the sum of
the number of Conversion Shares that are then issuable upon conversion of the
Notes and Additional Notes (based on the Conversion Price), and the number of
Warrant Shares that are then issuable upon exercise of the Warrants, without
regard to any limitation on the Investor's ability to convert the Notes or
exercise the Warrants. The Company acknowledges that the number of shares
initially included in the Registration Statement represents a good faith
estimate of the maximum number of shares issuable upon conversion of the Notes
and upon exercise of the Warrants.

b. Payments by the Company. The Company shall use its best efforts to obtain
effectiveness of the Registration Statement as soon as practicable. If (i) the
Registration Statement(s) covering the Registrable Securities required to be
filed by the Company pursuant to Section 2(a) hereof is not filed by the Filing
Date or declared effective by the SEC on or prior to ninety (90) days from the
date of Closing (as defined in the Securities Purchase Agreement), or (ii) after
the Registration Statement has been declared effective by the SEC, sales of all
of the Registrable Securities cannot be made pursuant to the Registration
Statement, or (iii) the Common Stock is not listed or included for quotation on
the Nasdaq National Market ("Nasdaq"), the Nasdaq SmallCap Market ("Nasdaq
SmallCap"), the New York Stock Exchange (the "NYSE") or the American Stock
Exchange (the "AMEX") after being so listed or included for quotation, or (iv)
the Common Stock ceases to be traded on the Over-the-Counter Bulletin Board (the
"OTCBB") or any equivalent replacement exchange prior to being listed or
included for quotation on one of the aforementioned markets, then the Company
will make payments to the Investors in such amounts and at such times as shall
be determined pursuant to this Section 2(c) as partial relief for the damages to
the Investors by reason of any such delay in or reduction of their ability to
sell the Registrable Securities (which remedy shall not be exclusive of any
other remedies available at law or in equity). The Company shall pay to each
holder of the Notes or Registrable Securities an amount equal to the then
outstanding principal amount of the Notes (and, in the case of holders of
Registrable Securities, the principal amount of Notes from which such
Registrable Securities were converted) ("Outstanding Principal Amount"),
multiplied by the Applicable Percentage (as defined below) times the sum of: (i)
the number of months (prorated for partial months) after the Filing Date or the
end of the aforementioned ninety (90) day period and prior to the date the
Registration Statement is declared effective by the SEC, provided, however, that
there shall be excluded from such period any delays which are solely
attributable to changes required by the Investors in the Registration Statement
with respect to information relating to the Investors, including, without
limitation, changes to the plan of distribution, or to the failure of the
Investors to conduct their review of the Registration Statement pursuant to
Section 3(h) below in a reasonably prompt manner; (ii) the number of months
(prorated for partial months) that sales of all of the Registrable Securities
cannot be made pursuant to the Registration Statement after the Registration
Statement has been declared effective (including, without limitation, when sales
cannot be made by reason of the Company's failure to properly supplement or
amend the prospectus included therein in accordance with the terms of this
Agreement, but excluding any days during an Allowed Delay (as defined in Section
3(f)); and (iii) the number of months (prorated for partial months) that the
Common Stock is not listed or included for quotation on the OTCBB, Nasdaq,
Nasdaq SmallCap, NYSE or AMEX or that trading thereon is halted after the
Registration Statement has been declared effective. The term "Applicable
Percentage" means two hundredths (.02). (For example, if the Registration
Statement becomes effective one (1) month after the end of such ninety (90) day
period, the Company would pay $5,000 for each $250,000 of Outstanding Principal
Amount. If thereafter, sales could not be made pursuant to the Registration
Statement for an additional period of one (1) month, the Company would pay an
additional $5,000 for each $250,000 of Outstanding Principal Amount.) Such
amounts shall be paid in cash or, at the Company's option, in shares of Common
Stock priced at the Conversion Price (as defined in the Notes) on such payment
date.

c. Eligibility for Form S-3, SB-2 or S-1; Conversion to Form S-3. The Company
represents and warrants that it meets the requirements for the use of Form S-3,
SB-2 or S-1 for registration of the sale by the Initial Investors and any other
Investors of the Registrable Securities. The Company agrees to file all reports
required to be filed by the Company with the SEC in a timely manner so as to
remain eligible or become eligible, as the case may be, and thereafter to
maintain its eligibility, for the use of Form S-3. If the Company is not
currently eligible to use Form S-3, not later than five (5) business days after
the Company first meets the registration eligibility and transaction
requirements for the use of Form S-3 (or any successor form) for registration of
the offer and sale by the Initial Investors and any other Investors of
Registrable Securities, the Company shall file a Registration Statement on Form
S-3 (or such successor form) with respect to the Registrable Securities covered
by the Registration Statement on Form SB-2 or Form S-1, whichever is applicable,
filed pursuant to Section 2(a) (and include in such Registration Statement on
Form S-3 the information required by Rule 429 under the 1933 Act) or convert the
Registration Statement on Form SB-2 or Form S-1, whichever is applicable, filed
pursuant to Section 2(a) to a Form S-3 pursuant to Rule 429 under the 1933 Act
and cause such Registration Statement (or such amendment) to be declared
effective no later than ninety (90) days after filing. In the event of a breach
by the Company of the provisions of this Section 2(e), the Company will be
required to make payments pursuant to Section 2(c) hereof.

3. OBLIGATIONS OF THE COMPANY.

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

a. The Company shall prepare promptly, and file with the SEC not later than the
Filing Date, a Registration Statement with respect to the number of Registrable
Securities provided in Section 2(a), and thereafter use its best efforts to
cause such Registration Statement relating to Registrable Securities to become
effective as soon as possible after such filing but in no event later than
ninety (90) days from the date of Closing), and keep the Registration Statement
effective pursuant to Rule 415 at all times until such date as is the earlier of
(i) the date on which all of the Registrable Securities have been sold and (ii)
the date on which the Registrable Securities (in the opinion of counsel to the
Initial Investors) may be immediately sold to the public without registration or
restriction (including, without limitation, as to volume by each holder thereof)
under the 1933 Act (the "Registration Period"), which Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein) shall 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.

b. The Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statements and
the prospectus used in connection with the Registration Statements as may be
necessary to keep the Registration Statements effective at all times during the
Registration Period, and, during such period, comply with the provisions of the
1933 Act with respect to the disposition of all Registrable Securities of the
Company covered by the Registration Statements until such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof as set forth in the
Registration Statements. In the event the number of shares available under a
Registration Statement filed pursuant to this Agreement is insufficient to cover
all of the Registrable Securities issued or issuable upon conversion of the
Notes and exercise of the Warrants, the Company shall amend the Registration
Statement, or file a new Registration Statement (on the short form available
therefor, if applicable), or both, so as to cover all of the Registrable
Securities, in each case, as soon as practicable, but in any event within
fifteen (15) days after the necessity therefor arises (based on the market price
of the Common Stock and other relevant factors on which the Company reasonably
elects to rely). The Company shall use its best efforts to cause such amendment
and/or new Registration Statement to become effective as soon as practicable
following the filing thereof, but in any event within thirty (30) days after the
date on which the Company files the new registration statement. The provisions
of Section 2(c) above shall be applicable with respect to such obligation, with
the ninety (90) days running from the day the Company reasonably first
determines (or reasonably should have determined) the need therefor.

c. The Company shall furnish to each Investor whose Registrable Securities are
included in a Registration Statement and its legal counsel (i) promptly (but in
no event more than two (2) business days) after the same is prepared and
publicly distributed, filed with the SEC, or received by the Company, one copy
of each Registration Statement and any amendment thereto, each preliminary
prospectus and prospectus and each amendment or supplement thereto, and, in the
case of the Registration Statement referred to in Section 2(a), each letter
written by or on behalf of the Company to the SEC or the staff of the SEC, and
each item of correspondence from the SEC or the staff of the SEC, in each case
relating to such Registration Statement (other than any portion of any thereof
which contains information for which the Company has sought confidential
treatment), and (ii) promptly (but in no event more than two (2) business days)
after the Registration Statement is declared effective by the SEC, such number
of copies of a prospectus, including a preliminary prospectus, and all
amendments and supplements thereto and such other documents as such Investor may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Investor. The Company will immediately notify each
Investor by facsimile of the effectiveness of each Registration Statement or any
post-effective amendment. The Company will promptly (but in no event more than
ten (10) business days) respond to any and all comments received from the SEC
(which comments shall promptly be made available to the Investors upon request),
with a view towards causing each Registration Statement or any amendment thereto
to be declared effective by the SEC as soon as practicable, shall promptly file
an acceleration request as soon as practicable (but in no event more than two
(2) business days) following the resolution or clearance of all SEC comments or,
if applicable, following notification by the SEC that any such Registration
Statement or any amendment thereto will not be subject to review and shall
promptly file with the SEC a final prospectus as soon as practicable (but in no
event more than two (2) business days) following receipt by the Company from the
SEC of an order declaring the Registration Statement effective. In the event of
a breach by the Company of the provisions of this Section 3(c), the Company will
be required to make payments pursuant to Section 2(c) hereof.

d. The Company shall use reasonable efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statements under such other
securities or "blue sky" laws of such jurisdictions in the United States as the
Investors who hold a majority in interest of the Registrable Securities being
offered reasonably request, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (a) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d), (b) subject itself to general taxation in any such
jurisdiction, (c) file a general consent to service of process in any such
jurisdiction, (d) provide any undertakings that cause the Company undue expense
or burden, or (e) make any change in its charter or bylaws, which in each case
the Board of Directors of the Company determines to be contrary to the best
interests of the Company and its shareholders.

e. As promptly as practicable after becoming aware of such event, the Company
shall notify each Investor of the happening of any event, of which the Company
has knowledge, as a result of which the prospectus included in any Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and use its best efforts promptly to
prepare a supplement or amendment to any Registration Statement to correct such
untrue statement or omission, and deliver such number of copies of such
supplement or amendment to each Investor as such Investor may reasonably
request; provided that, for not more than ten (10) consecutive trading days (or
a total of not more than twenty (20) trading days in any twelve (12) month
period), the Company may delay the disclosure of material non-public information
concerning the Company (as well as prospectus or Registration Statement
updating) the disclosure of which at the time is not, in the good faith opinion
of the Company, in the best interests of the Company (an "Allowed Delay");
provided, further, that the Company shall promptly (i) notify the Investors in
writing of the existence of (but in no event, without the prior written consent
of an Investor, shall the Company disclose to such investor any of the facts or
circumstances regarding) material non-public information giving rise to an
Allowed Delay and (ii) advise the Investors in writing to cease all sales under
such Registration Statement until the end of the Allowed Delay. Upon expiration
of the Allowed Delay, the Company shall again be bound by the first sentence of
this Section 3(f) with respect to the information giving rise thereto.

f. The Company shall use its best efforts to prevent the issuance of any stop
order or other suspension of effectiveness of any Registration Statement, and,
if such an order is issued, to obtain the withdrawal of such order at the
earliest possible moment and to notify each Investor who holds Registrable
Securities being sold of the issuance of such order and the resolution thereof.

g. The Company shall permit a single firm of counsel designated by the Initial
Investors to review such Registration Statement and all amendments and
supplements thereto (as well as all requests for acceleration or effectiveness
thereof) a reasonable period of time prior to their filing with the SEC, and not
file any document which contains information with respect to the Investors to
which such counsel reasonably objects and will not request acceleration of such
Registration Statement without prior notice to such counsel. The sections of
such Registration Statement covering information with respect to the Investors,
the Investor's beneficial ownership of securities of the Company or the
Investors intended method of disposition of Registrable Securities shall conform
to the information provided to the Company by each of the Investors.

h. The Company shall make generally available to its security holders as soon as
practicable, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions of
Rule 158 under the 1933 Act) covering a twelve-month period beginning not later
than the first day of the Company's fiscal quarter next following the effective
date of the Registration Statement.

i. At the request of any Investor, the Company shall furnish, on the date of
effectiveness of a Registration Statement an opinion, dated as of such date,
from counsel representing the Company for purposes of such Registration
Statement, in form, scope and substance acceptable to the counsel for the
Company addressed to the Investors.

j. The Company shall make available for inspection by (i) any Investor, and (ii)
one firm of attorneys and one firm of accountants or other agents retained by
the Initial Investors, (collectively, the "Inspectors") all pertinent financial
and other records, and pertinent corporate documents and properties of the
Company, including without limitation, records of conversions by other holders
of convertible securities issued by the Company and the issuance of stock to
such holders pursuant to the conversions (collectively, the "Records"), as shall
be reasonably deemed necessary by each Inspector to enable each Inspector to
exercise its due diligence responsibility, and cause the Company's officers,
directors and employees to supply all information which any Inspector may
reasonably request for purposes of such due diligence; provided, however, that
each Inspector shall hold in confidence and shall not make any disclosure
(except to an Investor) of any Record or other information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (b) the release of such Records is ordered pursuant to a subpoena or
other order from a court or government body of competent jurisdiction, or (c)
the information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
3(k). Each Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein (or in any other confidentiality agreement between
the Company and any Investor) shall be deemed to limit the Investor's ability to
sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.

k. The Company shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Company unless (i) disclosure
of such information is necessary to comply with federal or state securities
laws, (ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other order from a court
or governmental body of competent jurisdiction, or (iv) such information has
been made generally available to the public other than by disclosure in
violation of this or any other agreement. The Company agrees that it shall, upon
learning that disclosure of such information concerning an Investor is sought in
or by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to such Investor prior to making such disclosure, and
allow the Investor, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.

l. The Company shall (i) cause all the Registrable Securities covered by the
Registration Statement to be listed on each national securities exchange on
which securities of the same class or series issued by the Company are then
listed, if any, if the listing of such Registrable Securities is then permitted
under the rules of such exchange, or (ii) to the extent the securities of the
same class or series are not then listed on a national securities exchange,
secure the designation and quotation, of all the Registrable Securities covered
by the Registration Statement on Nasdaq or, if not eligible for Nasdaq, on
Nasdaq SmallCap or, if not eligible for Nasdaq or Nasdaq SmallCap, on the OTCBB
and, without limiting the generality of the foregoing, to arrange for at least
two market makers to register with the National Association of Securities
Dealers, Inc. ("NASD") as such with respect to such Registrable Securities.

m. The Company shall provide a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the effective date
of the Registration Statement.

n. The Company shall cooperate with the Investors who hold Registrable
Securities being offered to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to a Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
Investors may reasonably request and registered in such names as the Investors
may request, and, within three (3) business days after a Registration Statement
which includes Registrable Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel selected by the Company to
deliver, to the transfer agent for the Registrable Securities (with copies to
the Investors whose Registrable Securities are included in such Registration
Statement) an instruction in the form attached hereto as Exhibit 1 and an
opinion of such counsel in the form attached hereto as Exhibit 2.

o. At the request of the holders of a majority-in-interest of the Registrable
Securities, the Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and any prospectus used in connection with the Registration Statement
as may be necessary in order to change the plan of distribution set forth in
such Registration Statement.

p. Except for the shares underlying the Warrant issued to Mallon & Associates,
from and after the date of this Agreement, the Company shall not, and shall not
agree to, allow the holders of any securities of the Company to include any of
their securities in any Registration Statement under Section 2(a) hereof or any
amendment or supplement thereto under Section 3(b) hereof without the consent of
the holders of a majority-in-interest of the Registrable Securities.

q. The Company shall take all other reasonable actions necessary to expedite and
facilitate disposition by the Investors of Registrable Securities pursuant to a
Registration Statement.

4. OBLIGATIONS OF THE INVESTORS.

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

a. It shall be a condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall furnish
to the Company such information regarding itself, the Registrable Securities
held by it and the intended method of disposition of the Registrable Securities
held by it as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. At least three (3) business
days prior to the first anticipated filing date of the Registration Statement,
the Company shall notify each Investor of the information the Company requires
from each such Investor.

b. Each Investor, by such Investor's acceptance of the Registrable Securities,
agrees to cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of the Registration Statements
hereunder, unless such Investor has notified the Company in writing of such
Investor's election to exclude all of such Investor's Registrable Securities
from the Registration Statements.

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

5. EXPENSES OF REGISTRATION.

         All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualification fees, printers and accounting fees, the
fees and disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel selected by the Initial Investors pursuant to
Sections 2(b) and 3(h) hereof shall be borne by the Company.

6.       INDEMNIFICATION.

         In the event any Registrable Securities are included in a Registration
Statement under this Agreement:

a. To the extent permitted by law, the Company will indemnify, hold harmless and
defend (i) each Investor who holds such Registrable Securities, (ii) the
directors, officers, partners, employees, agents and each person who controls
any Investor within the meaning of the 1933 Act or the Securities Exchange Act
of 1934, as amended (the "1934 Act"), if any, (each, an "Indemnified Person"),
against any joint or several losses, claims, damages, liabilities or expenses
(collectively, together with actions, proceedings or inquiries by any regulatory
or self-regulatory organization, whether commenced or threatened, in respect
thereof, "Claims") to which any of them may become subject insofar as such
Claims arise out of or are based upon: (i) any untrue statement or alleged
untrue statement of a material fact in a Registration Statement or the omission
or alleged omission to state therein a material fact required to be stated or
necessary to make the statements therein not misleading; (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading; or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities (the matters in the foregoing clauses (i) through (iii) being,
collectively, "Violations"). Subject to the restrictions set forth in Section
6(c) with respect to the number of legal counsel, the Company shall reimburse
the Indemnified Person, promptly as such expenses are incurred and are due and
payable, for any reasonable legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished to the Company by any Indemnified Person expressly
for use in connection with the preparation of such Registration Statement or any
such amendment thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to Section 3(c) hereof; (ii) shall not apply
to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld; and (iii) with respect to any preliminary prospectus,
shall not inure to the benefit of any Indemnified Person if the untrue statement
or omission of material fact contained in the preliminary prospectus was
corrected on a timely basis in the prospectus, as then amended or supplemented,
such corrected prospectus was timely made available by the Company pursuant to
Section 3(c) hereof, and the Indemnified Person was promptly advised in writing
not to use the incorrect prospectus prior to the use giving rise to a Violation
and such Indemnified Person, notwithstanding such advice, used it. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Person and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section 9.

b. In connection with any Registration Statement in which an Investor is
participating, each such Investor agrees severally and not jointly to indemnify,
hold harmless and defend, to the same extent and in the same manner set forth in
Section 6(a), the Company, each of its directors, each of its officers who signs
the Registration Statement, each person, if any, who controls the Company within
the meaning of the 1933 Act or the 1934 Act, and any other shareholder selling
securities pursuant to the Registration Statement or any of its directors or
officers or any person who controls such shareholder within the meaning of the
1933 Act or the 1934 Act (collectively and together with an Indemnified Person,
an "Indemnified Party"), against any Claim to which any of them may become
subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim
arises out of or is based upon any Violation by such Investor, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished to the Company by such
Investor expressly for use in connection with such Registration Statement; and
subject to Section 6(c) such Investor will reimburse any legal or other expenses
(promptly as such expenses are incurred and are due and payable) reasonably
incurred by them in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section 6(b)
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of such Investor, which consent shall
not be unreasonably withheld; provided, further, however, that the Investor
shall be liable under this Agreement (including this Section 6(b) and Section 7)
for only that amount as does not exceed the net proceeds to such Investor as a
result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(b) with respect to any
preliminary prospectus shall not inure to the benefit of any Indemnified Party
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented.

c. Promptly after receipt by an Indemnified Person or Indemnified Party under
this Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The indemnifying party shall pay for only one separate legal counsel
for the Indemnified Persons or the Indemnified Parties, as applicable, and such
legal counsel shall be selected by Investors holding a majority-in-interest of
the Registrable Securities included in the Registration Statement to which the
Claim relates (with the approval of a majority-in-interest of the Initial
Investors), if the Investors are entitled to indemnification hereunder, or the
Company, if the Company is entitled to indemnification hereunder, as applicable.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
actually prejudiced in its ability to defend such action. The indemnification
required by this Section 6 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as such expense,
loss, damage or liability is incurred and is due and payable.

7. CONTRIBUTION.

         To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of such fraudulent misrepresentation, and (iii)contribution (together
with any indemnification or other obligations under this Agreement) by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.

8.       REPORTS UNDER THE 1934 ACT.

         With a view to making available to the Investors the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation of
the SEC that may at any time permit the investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to:

a. make and keep public information available, as those terms are understood and
defined in Rule 144;

b. file with the SEC in a timely manner all reports and other documents required
of the Company under the 1933 Act and the 1934 Act so long as the Company
remains subject to such requirements (it being understood that nothing herein
shall limit the Company's obligations under Section 4(c) of the Securities
Purchase Agreement) and the filing of such reports and other documents is
required for the applicable provisions of Rule 144; and

c. furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the 1933 Act and
the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested to permit the Investors to
sell such securities pursuant to Rule 144 without registration.

9. AMENDMENT OF REGISTRATION RIGHTS.

         Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with written consent of the Company, each
of the Initial Investors (to the extent such Initial Investor still owns
Registrable Securities) and Investors who hold a majority interest of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon each Investor and the Company.

10. MISCELLANEOUS.

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

b. Any notices required or permitted to be given under the terms hereof shall be
sent by certified or registered mail (return receipt requested) or delivered
personally or by courier (including a recognized overnight delivery service) or
by facsimile and shall be effective five days after being placed in the mail, if
mailed by regular United States mail, or upon receipt, if delivered personally
or by courier (including a recognized overnight delivery service) or by
facsimile, in each case addressed to a party. The addresses for such
communications shall be:

                           If to the Company:

                           MSGI Security Solutions, Inc.
                           575 Madison Avenue
                           New York, New York, 10022
                           Attention: Chief Executive Officer
                           Telephone: (917) 339-7150
                           Facsimile: (917) 339-7166





                           With a copy to:

                           Greenberg Traurig, LLP
                           200 Park Avenue
                           New York, New York
                           Attention: Alan I. Annex, Esq.
                           Telephone: (212) 801-9200
                           Facsimile: (212) 801-6400



If to an Investor: to the address set forth immediately below such Investor's
name on the signature pages to the Securities Purchase Agreement.

                           With a copy to:

                           Ballard Spahr Andrews & Ingersoll, LLP
                           1735 Market Street
                           51st Floor
                           Philadelphia, Pennsylvania  19103
                           Attention:  Gerald J. Guarcini, Esq.
                           Telephone:  215-865-8625
                           Facsimile:  215-864-8999


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

d. THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF
CONFLICT OF LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION
OF THE UNITED STATES FEDERAL COURTS LOCATED NEW YORK, NEW YORK WITH RESPECT TO
ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED INTO IN
CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH
PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE
OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY
RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL
NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER
THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING
ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH
DISPUTE.

e. In the event that any provision of this Agreement 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 provision hereof which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision hereof.

f. This Agreement, the Notes, the Warrants and the Securities Purchase Agreement
(including all schedules and exhibits thereto) constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein. This Agreement and the
Securities Purchase Agreement supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.

g. Subject to the requirements of Section 9 hereof, this Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
assigns.

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

i. This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original but all of which shall constitute one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. This Agreement, once executed by a
party, may be delivered to the other party hereto by facsimile transmission of a
copy of this Agreement bearing the signature of the party so delivering this
Agreement.

j. Each party shall do and perform, or cause to be done and performed, all such
further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.

k. Except as otherwise provided herein, all consents and other determinations to
be made by the Investors pursuant to this Agreement shall be made by Investors
holding a majority of the Registrable Securities, determined as if the all of
the Notes then outstanding have been converted into for Registrable Securities.

l. The Company acknowledges that a breach by it of its obligations hereunder
will cause irreparable harm to each Investor by vitiating the intent and purpose
of the transactions contemplated hereby. Accordingly, the Company acknowledges
that the remedy at law for breach of its obligations under this Agreement will
be inadequate and agrees, in the event of a breach or threatened breach by the
Company of any of the provisions under this Agreement, that each Investor shall
be entitled, in addition to all other available remedies in law or in equity,
and in addition to the penalties assessable herein, to an injunction or
injunctions restraining, preventing or curing any breach of this Agreement and
to enforce specifically the terms and provisions hereof, without the necessity
of showing economic loss and without any bond or other security being required.

m. The language used in this Agreement will be deemed to be the language chosen
by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.





                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]






         IN WITNESS WHEREOF, the Company and the undersigned Initial Investors
have caused this Agreement to be duly executed as of the date first above
written.


MSGI SECURITY SOLUTIONS, INC.

EX-4

                               SECURITY AGREEMENT


         SECURITY AGREEMENT (this "Agreement"), dated as of July __, 2005, by
and among MSGI Security Solutions, Inc., a Nevada corporation ("Company"), and
the secured parties signatory hereto and their respective endorsees, transferees
and assigns (collectively, the "Secured Party").

                              W I T N E S S E T H:

         WHEREAS, pursuant to a Securities Purchase Agreement, dated the date
hereof, between Company and the Secured Party (the "Purchase Agreement"),
Company has agreed to issue to the Secured Party and the Secured Party has
agreed to purchase from Company certain of Company's 8% Callable Secured
Convertible Notes, due three years from the date of issue (the "Notes"), which
are convertible into shares of Company's Common Stock, par value $.01 per share
(the "Common Stock"). In connection therewith, Company shall issue the Secured
Party certain Common Stock purchase warrants (the "Warrants"); and

         WHEREAS, in order to induce the Secured Party to purchase the Notes,
Company has agreed to execute and deliver to the Secured Party this Agreement
for the benefit of the Secured Party and to grant to it a first priority
security interest in certain property of Company to secure the prompt payment,
performance and discharge in full of all of Company's obligations under the
Notes and exercise and discharge in full of Company's obligations under the
Warrants.

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

1.                Certain Definitions. As used in this Agreement, the following
                  terms shall have the meanings set forth in this Section 1.
                  Terms used but not otherwise defined in this Agreement that
                  are defined in Article 9 of the UCC (such as "general
                  intangibles" and "proceeds") shall have the respective
                  meanings given such terms in Article 9 of the UCC.

(a)               "Collateral" means the collateral in which the Secured Party
                  is granted a security interest by this Agreement and which
                  shall include the following, whether presently owned or
                  existing or hereafter acquired or coming into existence, and
                  all additions and accessions thereto and all substitutions and
                  replacements thereof, and all proceeds, products and accounts
                  thereof, including, without limitation, all proceeds from the
                  sale or transfer of the Collateral and of insurance covering
                  the same in connection therewith:

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

(ii)              All Inventory of the Company; and

(iii)             All of the Company's contract rights and general intangibles,
                  including, without limitation, all partnership interests,
                  stock or other securities, licenses, distribution and other
                  agreements, computer software development rights, leases,
                  franchises, customer lists, quality control procedures, grants
                  and rights, goodwill, trademarks, service marks, trade styles,
                  trade names, patents, patent applications, copyrights, deposit
                  accounts, and income tax refunds (collectively, the "General
                  Intangibles"); and

(iv)              All Receivables of the Company including all insurance
                  proceeds, and rights to refunds or indemnification whatsoever
                  owing, together with all instruments, all documents of title
                  representing any of the foregoing, all rights in any
                  merchandising, goods, equipment, motor vehicles and trucks
                  which any of the same may represent, and all right, title,
                  security and guaranties with respect to each Receivable,
                  including any right of stoppage in transit; and

(v)               All of the Company's documents, instruments and chattel paper,
                  files, records, books of account, business papers, computer
                  programs and the products and proceeds of all of the foregoing
                  Collateral set forth in clauses (i)-(iv) above.

(b)               "Company" shall mean, collectively, Company and all of the
                  subsidiaries of Company, a list of which is contained in
                  Schedule A, attached hereto.

(c)               "Obligations" means all of the Company's obligations under
                  this Agreement and the Notes, in each case, whether now or
                  hereafter existing, voluntary or involuntary, direct or
                  indirect, absolute or contingent, liquidated or unliquidated,
                  whether or not jointly owed with others, and whether or not
                  from time to time decreased or extinguished and later
                  decreased, created or incurred, and all or any portion of such
                  obligations or liabilities that are paid, to the extent all or
                  any part of such payment is avoided or recovered directly or
                  indirectly from the Secured Party as a preference, fraudulent
                  transfer or otherwise as such obligations may be amended,
                  supplemented, converted, extended or modified from time to
                  time.

(d)               "UCC" means the Uniform Commercial Code, as currently in
                  effect in the State of New York.

2.                Grant of Security Interest. As an inducement for the Secured
                  Party to purchase the Notes and to secure the complete and
                  timely payment, performance and discharge in full, as the case
                  may be, of all of the Obligations, the Company hereby,
                  unconditionally and irrevocably, pledges, grants and
                  hypothecates to the Secured Party, a continuing security
                  interest in, a continuing first lien upon, and a right of
                  set-off against, in each case to the fullest extent permitted
                  by law, all of the Company's right, title and interest of
                  whatsoever kind and nature in and to the Collateral (the
                  "Security Interest").

3.                Representations, Warranties, Covenants and Agreements of the
                  Company. Except as otherwise disclosed in the Company's
                  filings with the Securities and Exchange Commission, the
                  Company represents and warrants to, and covenants and agrees
                  with, the Secured Party as follows:

(a)               Each of the Company and the Company's subsidiaries has the
                  requisite corporate power and authority to enter into this
                  Agreement and otherwise to carry out its obligations
                  thereunder. The execution, delivery and performance by the
                  Company of this Agreement and the filings contemplated therein
                  have been duly authorized by all necessary action on the part
                  of the Company and no further action is required by the
                  Company. This Agreement constitutes a legal, valid and binding
                  obligation of the Company enforceable in accordance with its
                  terms, except as enforceability may be limited by bankruptcy,
                  insolvency, reorganization, moratorium or similar laws
                  affecting the enforcement of creditor's rights generally.

(b)               The Company is the sole owner of the Collateral (except for
                  non-exclusive licenses granted by the Company in the ordinary
                  course of business), free and clear of any liens, security
                  interests, encumbrances, rights or claims, and is fully
                  authorized to grant the Security Interest in and to pledge the
                  Collateral. There is not on file in any governmental or
                  regulatory authority, agency or recording office an effective
                  financing statement, security agreement, license or transfer
                  or any notice of any of the foregoing (other than those that
                  have been filed in favor of the Secured Party pursuant to this
                  Agreement) covering or affecting any of the Collateral.

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

(d)               The execution, delivery and performance of this Agreement does
                  not conflict with or cause a breach or default, or an event
                  that with or without the passage of time or notice, shall
                  constitute a breach or default, under any agreement to which
                  the Company is a party or by which the Company is bound. No
                  consent (including, without limitation, from stock holders or
                  creditors of the Company) is required for the Company to enter
                  into and perform its obligations hereunder.

(e)               The Company shall at all times maintain the liens and Security
                  Interest provided for hereunder as valid and perfected first
                  priority liens and security interests in the Collateral in
                  favor of the Secured Party until this Agreement and the
                  Security Interest hereunder shall terminate pursuant to
                  Section 11. The Company hereby agrees to defend the same
                  against any and all persons. The Company shall safeguard and
                  protect all Collateral for the account of the Secured Party.
                  Without limiting the generality of the foregoing, the Company
                  shall pay all fees, taxes and other amounts necessary to
                  maintain the Collateral and the Security Interest hereunder,
                  and the Company shall obtain and furnish to the Secured Party
                  from time to time, upon demand, such releases and/or
                  subordinations of claims and liens which may be required to
                  maintain the priority of the Security Interest hereunder.

(f)               The Company will not transfer, pledge, hypothecate, encumber,
                  license (except for in the ordinary course of business and in
                  connection with any receivables financing the Company may
                  obtain), sell or otherwise dispose of any of the Collateral
                  without the prior written consent of the Secured Party.

(g)               The Company shall keep and preserve its Equipment, Inventory
                  and other tangible Collateral in good condition, repair and
                  order and shall not operate or locate any such Collateral (or
                  cause to be operated or located) in any area excluded from
                  insurance coverage.

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

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

(j)               The Company shall permit the Secured Party and its
                  representatives and agents to inspect the Collateral at any
                  time, and to make copies of records pertaining to the
                  Collateral as may be requested by the Secured Party from time
                  to time.

(k)               The Company will take all steps reasonably necessary to
                  diligently pursue and seek to preserve, enforce and collect
                  any rights, claims, causes of action and accounts receivable
                  in respect of the Collateral.

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

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

(n)               Schedule A attached hereto contains a list of all of the
                  subsidiaries of Company.

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

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

(b)               Any representation or warranty of the Company in this
                  Agreement or in the Intellectual Property Security Agreement
                  shall prove to have been incorrect in any material respect
                  when made;

(c)               The failure by the Company to observe or perform any of its
                  obligations hereunder or in the Intellectual Property Security
                  Agreement for ten (10) days after receipt by the Company of
                  notice of such failure from the Secured Party; and

(d)               Any breach of, or default under, the Warrants.

5.                Duty To Hold In Trust. Upon the occurrence of any Event of
                  Default and at any time thereafter, the Company shall, upon
                  receipt by it of any revenue, income or other sums subject to
                  the Security Interest, whether payable pursuant to the Notes
                  or otherwise, or of any check, draft, note, trade acceptance
                  or other instrument evidencing an obligation to pay any such
                  sum, hold the same in trust for the Secured Party and shall
                  forthwith endorse and transfer any such sums or instruments,
                  or both, to the Secured Party for application to the
                  satisfaction of the Obligations.

6.                Rights and Remedies Upon Default. Upon occurrence of any Event
                  of Default and at any time thereafter, the Secured Party shall
                  have the right to exercise all of the remedies conferred
                  hereunder and under the Notes, and the Secured Party shall
                  have all the rights and remedies of a secured party under the
                  UCC and/or any other applicable law (including the Uniform
                  Commercial Code of any jurisdiction in which any Collateral is
                  then located). Without limitation, the Secured Party shall
                  have the following rights and powers:

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

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

7.                Applications of Proceeds. The proceeds of any such sale, lease
                  or other disposition of the Collateral hereunder shall be
                  applied first, to the expenses of retaking, holding, storing,
                  processing and preparing for sale, selling, and the like
                  (including, without limitation, any taxes, fees and other
                  costs incurred in connection therewith) of the Collateral, to
                  the reasonable attorneys' fees and expenses incurred by the
                  Secured Party in enforcing its rights hereunder and in
                  connection with collecting, storing and disposing of the
                  Collateral, and then to satisfaction of the Obligations, and
                  to the payment of any other amounts required by applicable
                  law, after which the Secured Party shall pay to the Company
                  any surplus proceeds. If, upon the sale, license or other
                  disposition of the Collateral, the proceeds thereof are
                  insufficient to pay all amounts to which the Secured Party is
                  legally entitled, the Company will be liable for the
                  deficiency, together with interest thereon, at the rate of 15%
                  per annum (the "Default Rate"), and the reasonable fees of any
                  attorneys employed by the Secured Party to collect such
                  deficiency. To the extent permitted by applicable law, the
                  Company waives all claims, damages and demands against the
                  Secured Party arising out of the repossession, removal,
                  retention or sale of the Collateral, unless due to the gross
                  negligence or willful misconduct of the Secured Party.

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

9.                Responsibility for Collateral. The Company assumes all
                  liabilities and responsibility in connection with all
                  Collateral, and the obligations of the Company hereunder or
                  under the Notes and the Warrants shall in no way be affected
                  or diminished by reason of the loss, destruction, damage or
                  theft of any of the Collateral or its unavailability for any
                  reason.

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

11.               Term of Agreement. This Agreement and the Security Interest
                  shall terminate on the date on which all payments under the
                  Notes have been made in full and all other Obligations have
                  been paid or discharged. Upon such termination, the Secured
                  Party, at the request and at the expense of the Company, will
                  join in executing any termination statement with respect to
                  any financing statement executed and filed pursuant to this
                  Agreement.

12.               Power of Attorney; Further Assurances.

(a)               The Company authorizes the Secured Party, and does hereby
                  make, constitute and appoint it, and its respective officers,
                  agents, successors or assigns with full power of substitution,
                  as the Company's true and lawful attorney-in-fact, with power,
                  in its own name or in the name of the Company, to, after the
                  occurrence and during the continuance of an Event of Default,
                  (i) endorse any notes, checks, drafts, money orders, or other
                  instruments of payment (including payments payable under or in
                  respect of any policy of insurance) in respect of the
                  Collateral that may come into possession of the Secured Party;
                  (ii) to sign and endorse any UCC financing statement or any
                  invoice, freight or express bill, bill of lading, storage or
                  warehouse receipts, drafts against debtors, assignments,
                  verifications and notices in connection with accounts, and
                  other documents relating to the Collateral; (iii) to pay or
                  discharge taxes, liens, security interests or other
                  encumbrances at any time levied or placed on or threatened
                  against the Collateral; (iv) to demand, collect, receipt for,
                  compromise, settle and sue for monies due in respect of the
                  Collateral; and (v) generally, to do, at the option of the
                  Secured Party, and at the Company's expense, at any time, or
                  from time to time, all acts and things which the Secured Party
                  deems necessary to protect, preserve and realize upon the
                  Collateral and the Security Interest granted therein in order
                  to effect the intent of this Agreement, the Notes and the
                  Warrants, all as fully and effectually as the Company might or
                  could do; and the Company hereby ratifies all that said
                  attorney shall lawfully do or cause to be done by virtue
                  hereof. This power of attorney is coupled with an interest and
                  shall be irrevocable for the term of this Agreement and
                  thereafter as long as any of the Obligations shall be
                  outstanding.

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

(c)               The Company hereby irrevocably appoints the Secured Party as
                  the Company's attorney-in-fact, with full authority in the
                  place and stead of the Company and in the name of the Company,
                  from time to time in the Secured Party's discretion, to take
                  any action and to execute any instrument which the Secured
                  Party may deem necessary or advisable to accomplish the
                  purposes of this Agreement, including the filing, in its sole
                  discretion, of one or more financing or continuation
                  statements and amendments thereto, relative to any of the
                  Collateral without the signature of the Company where
                  permitted by law.

13.               Notices. All notices, requests, demands and other
                  communications hereunder shall be in writing, with copies to
                  all the other parties hereto, and shall be deemed to have been
                  duly given when (i) if delivered by hand, upon receipt, (ii)
                  if sent by facsimile, upon receipt of proof of sending
                  thereof, (iii) if sent by nationally recognized overnight
                  delivery service (receipt requested), the next business day or
                  (iv) if mailed by first-class registered or certified mail,
                  return receipt requested, postage prepaid, four days after
                  posting in the U.S. mails, in each case if delivered to the
                  following addresses:

         If to the Company:                 MSGI Security Solutions, Inc.
                                            575 Madison Avenue
                                            New York, New York, 10022
                                            Attention: Chief Executive Officer
                                            Telephone: (917) 339-7150
                                            Facsimile: (917) 339-7166



         With a copy to:            Greenberg Traurig, LLP
                                            200 Park Avenue
                                            New York, New York
                                            Attention: Alan I. Annex, Esq.
                                            Telephone: (212) 801-9200
                                            Facsimile: (212) 801-6400

         If to the Secured Party:

         With a copy to:

                                          Ballard Spahr Andrews & Ingersoll, LLP
                                          1735 Market Street, 51st Floor
                                          Philadelphia, Pennsylvania  19103
                                          Attention:  Gerald J. Guarcini, Esq.
                             Facsimile: 215-864-8999

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

15. Miscellaneous.

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

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

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

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

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

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

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

(h) This Agreement shall be construed in accordance with the laws of the State
of New York, except to the extent the validity, perfection or enforcement of a
security interest hereunder in respect of any particular Collateral which are
governed by a jurisdiction other than the State of New York in which case such
law shall govern. Each of the parties hereto irrevocably submit to the exclusive
jurisdiction of any New York State or United States Federal court sitting in
Manhattan county over any action or proceeding arising out of or relating to
this Agreement, and the parties hereto hereby irrevocably agree that all claims
in respect of such action or proceeding may be heard and determined in such New
York State or Federal court. The parties hereto agree that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
The parties hereto further waive any objection to venue in the State of New York
and any objection to an action or proceeding in the State of New York on the
basis of forum non conveniens.
(i) EACH PARTY HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY
DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATER OF
THIS AGREEMENT, INCLUDING WITHOUT LIMITATION CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY
HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT FOR EACH PARTY TO
ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH PARTY HAS ALREADY RELIED ON THIS
WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH PARTY WILL CONTINUE TO RELY
ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY FURTHER WARRANTS AND
REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT
SUCH PARTY HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS RIGHTS TO A JURY TRIAL
FOLLOWING SUCH CONSULTATION. THIS WAIVER IS IRREVOCABLE, MEANING THAT,
NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS AND SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. IN THE EVENT OF A
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.

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













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                                       B-1

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


                          MSGI SECURITY SOLUTIONS, INC.

EX-4

         THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE
TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT") SHALL HAVE BECOME EFFECTIVE WITH RESPECT
THERETO OR (ii) RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE SECURITIES
ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS SUCH
TRANSFER IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. THIS LEGEND SHALL
BE ENDORSED UPON ANY WARRANT ISSUED IN EXCHANGE FOR THIS WARRANT OR ANY SHARES
OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT.


No. ___                                                                   ______

                    AGENT'S WARRANT TO PURCHASE COMMON STOCK

                                       OF

                          MSGI SECURITY SOLUTIONS, INC.

         This is to Certify That, FOR VALUE RECEIVED, C.E. Unterberg, Towbin or
assigns ("Holder"), is entitled to purchase, subject to the provisions of this
Warrant, from MSGI Security Solutions, Inc., a Nevada corporation (the
"Company"), twelve thousand one hundred twenty one (12,195) fully paid, validly
issued and nonassessable shares of the common stock of the Company ("Common
Stock") at an exercise price of $7.50 per share (the "Exercise Price") at any
time or from time to time during the period from July __, 2005 through
July __, 2010 (the "Exercise Period"). The shares of Common Stock deliverable
upon such exercise, are hereinafter sometimes referred to as "Warrant Shares."
This Warrant, together with warrants of like tenor, constituting in the
aggregate warrants (the "Warrants") to purchase up to a maximum of 87,195 shares
of Common Stock, and Convertible Notes in the aggregate principal amount of up
to $3,000,000 is being issued in connection with a private placement of the
Company's securities (the "Offering"). This Warrant is being issued to the
Holder in accordance with the engagement letter entered into between Mallon
Associates and the Company, dated January 28, 2005.

1. EXERCISE OF WARRANT.

(a) This Warrant may be exercised in whole or in part at any time or from time
to time during the Exercise Period; provided, however, that (i) if such day is a
day on which banking institutions in the State of New York are authorized by law
to close, then on the next succeeding day which shall not be such a day, and
(ii) in the event of any merger, consolidation or sale of substantially all the
assets of the Company as an entirety, resulting in any distribution to the
Company's stockholders, prior to termination of the Exercise Period, the Holder
shall have the right to exercise this Warrant commencing at such time through
the termination of the Exercise Period into the kind and amount of shares of
stock and other securities and property (including cash) receivable by a holder
of the number of shares of Common Stock into which this Warrant might have been
exercisable immediately prior thereto. This Warrant may be exercised by
presentation and surrender hereof to the Company at its principal office with
the Purchase Form annexed hereto duly executed and accompanied by payment of the
Exercise Price for the number of Warrant Shares specified in such form. As soon
as practicable after each such exercise of this Warrant, following the receipt
of good and available funds, the Company shall issue and deliver to the Holder a
certificate or certificates for the Warrant Shares issuable upon such exercise,
registered in the name of the Holder or its designee and bearing a restrictive
legend substantially similar to the one set forth on the front page of this
Warrant. If this Warrant should be exercised in part only, the Company shall,
upon surrender of this Warrant for cancellation, execute and deliver a new
Warrant evidencing the rights of the Holder thereof to purchase the balance of
the Warrant Shares purchasable thereunder. As of the end of business on the date
of receipt by the Company of this Warrant at its office in proper form for
exercise, the Holder shall be deemed to be the holder of record of the shares of
Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of the Company shall then be closed or that certificates
representing such shares shall not then be physically delivered to the Holder.

(b) At any time during the Exercise Period, the Holder may, at its option,
exercise this Warrant by exchanging this Warrant, in whole or in part (a
"Warrant Exchange"), into the number of Warrant Shares determined in accordance
with this Section (a)(2), by surrendering this Warrant at the principal office
of the Company or at the office of its stock transfer agent, accompanied by a
properly prepared notice stating such Holder's intent to effect such exchange,
the number of Warrant Shares to be exchanged and the date on which the Holder
requests that such Warrant Exchange occur (the "Notice of Exchange"). The
Warrant Exchange shall take place on the date specified in the Notice of
Exchange or, if later, the date the Notice of Exchange is received by the
Company (the "Exchange Date"). Certificates for the shares issuable upon such
Warrant Exchange and, if applicable, a new warrant of like tenor evidencing the
balance of the shares remaining subject to this Warrant, shall be issued as of
the Exchange Date and delivered to the Holder as soon as practicable following
the Exchange Date and, if deemed appropriate by the Company, bearing a
restrictive legend substantially similar to the one set forth on the front page
of this Warrant.

2. RESERVATION OF SHARES. The Company shall at all times reserve for issuance
and/or delivery upon exercise of the Warrants such number of shares of Common
Stock as shall be required for issuance and delivery upon exercise of the
Warrants.

3. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company or at the office of its stock transfer
agent, if any, for other warrants of different denominations entitling the
holder thereof to purchase in the aggregate the same number of shares of Common
Stock purchasable hereunder. Upon surrender of this Warrant to the Company at
its principal office or at the office of its stock transfer agent, if any, with
the Assignment Form annexed hereto duly executed by the Holder and funds
sufficient to pay any transfer tax delivered by the Holder, the Company shall,
without charge, subject to the Holder's compliance with the restrictive legend
set forth on the front page of this Warrant, execute and deliver a new Warrant
in the name of the assignee named in such instrument of assignment and this
Warrant shall promptly be cancelled. This Warrant may be divided or combined
with other warrants that carry the same rights upon presentation hereof at the
principal office of the Company or at the office of its stock transfer agent, if
any, together with a written notice specifying the denominations in which new
warrants are to be issued to the Holder and signed by the Holder hereof. The
term "Warrants" as used herein includes any warrants into which this Warrant may
be divided or exchanged. Upon receipt by the Company of evidence satisfactory to
it of the loss, theft, destruction or mutilation of this Warrant, and (in the
case of loss, theft or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
will execute and deliver a new Warrant of like tenor and date. Any such new
Warrant executed and delivered shall constitute an additional contractual
obligation on the part of the Company, whether or not this Warrant so lost,
stolen, destroyed, or mutilated shall be at any time enforceable by anyone.

4. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to
any rights of a shareholder in the Company, either at law or equity, and the
rights of the Holder are limited to those expressed in this Warrant and are not
enforceable against the Company except to the extent set forth herein.

5. ADJUSTMENT PROVISIONS. The Exercise Price in effect at any time and the
number and kind of securities purchasable upon the exercise of the Warrants
shall be subject to adjustment from time to time upon the happening of certain
events as follows:

(a) In case the Company shall hereafter (i) declare a dividend or make a
distribution on its outstanding Common Stock in shares of Common Stock, (ii)
subdivide or reclassify its outstanding Common Stock into a greater number of
shares, or (iii) combine or reclassify its outstanding Common Stock into a
smaller number of shares, the Exercise Price in effect at the time of the record
date for such dividend or distribution or of the effective date of such
subdivision, combination or reclassification shall be adjusted so that it shall
equal the price determined by multiplying the Exercise Price by a fraction, the
denominator of which shall be the number of shares of Common Stock outstanding
after giving effect to such action, and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such action.
Such adjustment shall be made successively whenever any event listed above shall
occur.

(b) Whenever the Exercise Price payable upon exercise of each Warrant is
adjusted pursuant to Subsection (1) above, the number of Warrant Shares
purchasable upon exercise of this Warrant shall simultaneously be adjusted to
the number of Warrant Shares resulting from multiplying the number of Warrant
Shares initially issuable upon exercise of this Warrant by the Exercise Price in
effect immediately prior to such adjustment and dividing the product so obtained
by the Exercise Price, as adjusted.

(c) In the event that at any time, as a result of an adjustment similar to any
adjustment made pursuant to Subsection (1) above, the Holder of this Warrant
thereafter shall become entitled to receive any shares of the Company, other
than Common Stock, thereafter the number of such other shares so receivable upon
exercise of this Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in Subsection (1) above.

(d) Irrespective of any adjustments in the Exercise Price or the number or kind
of shares purchasable upon exercise of this Warrant, Warrants theretofore issued
may continue to express the same price and number and kind of shares as are
stated in the similar Warrants initially issuable pursuant to this Warrant.

6. RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any reclassification,
capital reorganization or other change of outstanding Common Stock of the
Company, or in case of any consolidation or merger of the Company with or into
another corporation (other than a merger with a subsidiary in which merger the
Company is the continuing corporation and which does not result in any
reclassification, capital reorganization or other change of outstanding Common
Stock of the class issuable upon exercise of this Warrant) or in case of any
sale, lease or conveyance to another corporation of the property of the Company
as an entirety, the Company shall, as a condition precedent to such transaction
and to the extent reasonably deemed necessary, cause effective provisions to be
made so that the Holder shall have the right thereafter by exercising this
Warrant at any time prior to the expiration of the Warrant, to purchase the kind
and amount of shares of stock and other securities and property receivable upon
such reclassification, capital reorganization and other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
that might have been purchased upon exercise of this Warrant immediately prior
to such reclassification, change, consolidation, merger, sale or conveyance. Any
such provision shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Warrant. The foregoing provisions of this Section (f) shall similarly apply to
successive reclassifications, capital reorganizations and changes of Common
Stock and to successive consolidations, mergers, sales or conveyances. In the
event that in connection with any such capital reorganization or
reclassification, consolidation, merger, sale or conveyance, additional shares
of Common Stock shall be issued in exchange, conversion, substitution or
payment, in whole or in part, for a security of the Company other than Common
Stock, any such issue shall be treated as an issue of Common Stock covered by
the provisions of Subsection (1) of Section (e) hereof.

7. "PIGGYBACK" REGISTRATION UNDER THE SECURITIES ACT OF 1933. At any time after
the issuance date of this Warrant, if the Company shall determine to proceed
with the actual preparation and filing of a new registration statement under the
1933 Act in connection with the proposed offer and sale of any of its securities
by it or any of its security holders (other than a registration statement on
Form S-4, S-8 or other limited purpose form), the Company will give written
notice of its determination to the Holder. Upon the written request from the
Holder, within 15 days after receipt of any such notice from the Company, the
Company will, except as herein provided, cause the shares underlying this
Warrant covered by such request (the "Requested Stock") to be included in such
registration statement, all to the extent requisite to permit the sale or other
disposition by the Holder; provided, further, that nothing herein shall prevent
the Company from, at any time, abandoning or delaying any registration. If any
registration pursuant to this Section (g) shall be underwritten in whole or in
part, the Company may require that the Requested Stock be included in the
underwriting on the same terms and conditions as the securities otherwise being
sold through the underwriters. In such event, the Holder shall, if requested by
the underwriters, execute an underwriting agreement containing customary
representations and warranties by selling stockholders and a lock-up. If in the
good faith judgment of the managing underwriter of such public offering the
inclusion of all of the Requested Stock would reduce the number of shares to be
offered by the Company or interfere with the successful marketing of the shares
of stock offered by the Company, the number of shares of Requested Stock
otherwise to be included in the underwritten public offering may be reduced pro
rata (by number of shares) among the Holder and all other holders of
registration rights who have requested inclusion of their securities or excluded
in their entirety if so required by the underwriter. To the extent only a
portion of the Requested Stock is included in the underwritten public offering,
those shares of Requested Stock which are thus excluded from the underwritten
public offering and any other securities of the Company held by such holders
shall be withheld from the market by the Holder for a period, not to exceed 90
days, which the managing underwriter reasonably determines is necessary in order
to effect the underwritten public offering. The obligation of the Company under
this Section (g) shall not apply after the earlier of (a) the date that all of
the shares underlying this Warrant have been sold pursuant to Rule 144 under the
1933 Act or an effective registration statement, or (b) such time as the shares
underlying this Warrant are eligible for immediate resale pursuant to Rule
144(k) under the 1933 Act.

8. HOLDER REPRESENTATIONS AND WARRANTIES. The Company is issuing this Warrant to
the Holder in reliance on the following:

(a) As of the date hereof, the Holder is receiving this Warrant and the shares
of Common Stock issuable upon conversion of or otherwise pursuant to this
Warrant, such shares of Common Stock (the "Warrant Shares" or the "Securities")
for its own account and not with a present view towards the public sale or
distribution thereof, except pursuant to sales registered or exempted from
registration under the 1933 Act; provided, however, that by making the
representations herein, the Holder does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.

(b) The Holder is an "accredited investor" as that term is defined in Rule
501(a) of Regulation D (an "Accredited Investor").

(c) The Holder understands that the Securities are being offered and sold to it
in reliance upon specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying
upon the truth and accuracy of, and the Holder's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Holder set forth herein in order to determine the availability of such
exemptions and the eligibility of the Holder to acquire the Securities.

(d) The Holder understands that no United States federal or state agency or any
other government or governmental agency has passed upon or made any
recommendation or endorsement of the Securities. (e) The Holder understands that
(i) except as provided in Section 7 hereof, the sale or re-sale of the
Securities has not been and is not being registered under the 1933 Act or any
applicable state securities laws, and the Securities may not be transferred
unless (a) the Securities are sold pursuant to an effective registration
statement under the 1933 Act, (b) the Holder shall have delivered to the Company
an opinion of counsel that shall be in form, substance and scope customary for
opinions of counsel in comparable transactions to the effect that the Securities
to be sold or transferred may be sold or transferred pursuant to an exemption
from such registration, which opinion shall be accepted by the Company, (c) the
Securities are sold or transferred to an "affiliate" (as defined in Rule 144
promulgated under the 1933 Act (or a successor rule) ("Rule 144")) of the Holder
who agrees to sell or otherwise transfer the Securities only in accordance with
this Section 2(f) and who is an Accredited Investor, (d) the Securities are sold
pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S
under the 1933 Act (or a successor rule) ("Regulation S"), and the Holder shall
have delivered to the Company an opinion of counsel that shall be in form,
substance and scope customary for opinions of counsel in corporate transactions,
which opinion shall be accepted by the Company; (ii) any sale of such Securities
made in reliance on Rule 144 may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any re-sale of such
Securities under circumstances in which the seller (or the person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined in
the 1933 Act) may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to register such Securities
under the 1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder (in each case, other than pursuant to
Section 7 hereof).

(f) The Holder understands that the Warrants and, until such time as the Warrant
Shares have been registered under the 1933 Act as contemplated by the
Registration Rights Agreement or otherwise may be sold pursuant to Rule 144 or
Regulation S without any restriction as to the number of securities as of a
particular date that can then be immediately sold, the Warrant Shares may bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for such Securities):

                  "The securities represented by this certificate have not been
                  registered under the Securities Act of 1933, as amended. The
                  securities may not be sold, transferred or assigned in the
                  absence of an effective registration statement for the
                  securities under said Act, or an opinion of counsel, in form,
                  substance and scope acceptable to the Company's counsel, that
                  registration is not required under said Act or unless sold
                  pursuant to Rule 144 or Regulation S under said Act."

         The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by applicable state securities laws, (a)
such Security is registered for sale under an effective registration statement
filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or
Regulation S without any restriction as to the number of securities as of a
particular date that can then be immediately sold, or (b) such holder provides
the Company with an opinion of counsel, in form, substance and scope customary
for opinions of counsel in comparable transactions, to the effect that a public
sale or transfer of such Security may be made without registration under the
1933 Act, which opinion shall be accepted by the Company so that the sale or
transfer is effected or (c) such holder provides the Company with reasonable
assurances that such Security can be sold pursuant to Rule 144 or Regulation S.

9. MODIFICATION OF AGREEMENT. The provisions of this Warrant may from time to
time be amended, modified or waived, if such amendment, modification or waiver
is applicable to all of the Warrants and is in writing and consented to by the
Company and the Holder.

10. CORPORATE APPROVALS. The Company represents that all corporate actions on
the part of the Company, its officers, directors and shareholders necessary for
the sale and issuance of the shares pursuant hereto and the performance of the
Company's obligations hereunder were taken prior to and are effective as of the
effective date of this Warrant.

11. NO CONTRAVENTION. The Company will not, by amendment of its certificate of
incorporation or through any consolidation, merger, reorganization, transfer of
assets, dissolution, issue or sale of securities or other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
of the terms and in the taking of all actions necessary or appropriate in order
to protect the rights of the holder of this Warrant.

         IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its name by its duly authorized officer.


                          MSGI SECURITY SOLUTIONS, INC.




                                            By:_________________________________
                                                 Name:
                                                 Title:



Dated: July __, 2005





                                  PURCHASE FORM


                                                    Dated ____________________
1. The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing shares of Common Stock of MSGI Security Solutions, Inc.
(or such number of shares of Common Stock or other securities or property to
which the undersigned is entitled in lieu thereof or in addition thereto under
the provisions of the Warrant).

2. The undersigned encloses herewith a bank draft, certified check or money
order payable to the Company in payment of the exercise price determined under,
and on the terms specified in, the Warrant.

3. The undersigned hereby irrevocably directs that the said shares be issued and
delivered as follows:


Name(s) in Full Address(es) Number of Shares S.S. or IRS #
- ------------------------------- ---------------------------- -------------------
- ------------------------------- ---------------------------- -------------------

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

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

4. The undersigned hereby represents that the representations and warranties in
Section 8 of the Warrant Agreement are true and correct as of the date hereof.



- ----------------------------
Signature of Subscriber


- -----------------------------
Print Name











                                 ASSIGNMENT FORM


FOR VALUE RECEIVED,                                     hereby sells, assigns
                    -----------------------------------
and transfers unto


Name ______________________________
(Please typewrite or print in block letters)


Address _____________________________

the right to purchase Common Stock represented by this Warrant to the extent of
shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint ______________ Attorney, to transfer the same on the
books of the Company with full power of substitution in the premises.

Date ____________________

Signature ______________________

EX-99.1

              MSGI CLOSES $3 MILLION CONVERTIBLE PRIVATE PLACEMENT


New York, New York, July 14, 2005 - MSGI Security Solutions, Inc. (Nasdaq: MSGI)
today announced that it has closed a $3 million Convertible Note financing with
a New York based institutional investor. Mallon Associates, the leading
investment bank for the security industry, acted as the financial advisor in
this transaction.

The instrument requires repayment over 36 months with a maximum of 8% interest
per annum. Repayment shall be in cash or in registered shares of common stock.
The monthly amortization shall commence 90 days after closing according to a 33
month amortization schedule. At the Investor's option, the Company may repay in
common stock at the conversion price; otherwise all payments must be in cash.
The interest rate resets to zero for any monthly period in which the stock price
is greater than 125% of the initial market price. The Company received $2
million in gross proceeds upon closing, and will receive an additional $500,000
upon filing of a registration statement, and $500,000 upon the effectiveness of
the registration statement.

Jeremy Barbera, Chairman and CEO of MSGI Security Solutions, said, "we recently
acquired the AONet International facility in Milan and entered into a new
business venture with VeriSign, Inc. aimed at the estimated $1 billion legal
interception and homeland security market in Italy - which is our first
deployment country. The proceeds from this financing will be utilized for these
purposes as well as general working capital.

Our principal focus in the United States is on covert and overt wireless video
surveillance, via our FDA and Innalogic operating subsidiaries; through which we
have already completed several successful missions for a U.S. Department of
Homeland Security agency. In Italy, we will continue to expand upon the AONet
facility while developing new legal interception business for the VeriSign(R)
NetDiscovery(TM) Service. Additionally, our investment bankers have brought us a
number of strategic acquisitions, in the United States and Europe, which are
being evaluated as we continue to grow MSGI into a global leader in the security
industry."

About MSGI
MSGI Security Solutions, Inc. (Nasdaq: MSGI) is an international proprietary
solutions provider developing a combination of innovative emerging businesses
that leverage information and technology. MSGI is principally focused on the
homeland security, public safety and law-enforcement services industry. The
Company is headquartered in New York City, and has regional offices in
Washington DC; and Milan, Italy. MSGI acquires material interests in high-growth
technology and software development businesses. These firms are led by
successful entrepreneurs and experienced management teams that have developed
end-to-end client solutions that meet current and emerging market needs.


The Company is currently comprised of three operating companies and a
significant unconsolidated investment which collectively deliver a powerful
array of strategic synergies for cross-selling and joint product development.
MSGI is engaged in an ongoing corporate growth program whose focus is
acquisitions, strategic alliances and co-branding relationships in the United
States and Europe. More information on MSGI is available on the Company's
website at: http://www.msgisecurity.com.


The information contained in this news release, other than historical
information, consists of forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. These
statements may involve risks and uncertainties that could cause actual results
to differ materially from those described in such statements. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to have been correct. Important factors, including general economic
conditions, spending levels and other factors could cause actual results to
differ materially from the Company's expectations.


                                      * * *