SECURITIES PURCHASE AGREEMENT

 

SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of July 14, 2003,
between LifePoint, Inc., a corporation organized under the laws of the State of
Delaware (the "Company"), and each of the purchasers (individually, a
"Purchaser" and collectively the "Purchasers") set forth on the execution pages
hereof (the "Execution Pages" and each an "Execution Page").

  WHEREAS:

 A. The Company and each Purchaser are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by the
provisions of Rule 506 of Regulation D ("Regulation D"), as promulgated by the
United States Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "Securities Act").

 B. The Company desires to sell, and each Purchaser desires to purchase, upon
the terms and conditions stated in this Agreement, units (the "Units"), each
Unit consisting of (i) one share of the Company's Series D Convertible Preferred
Stock, par value $.001 per share (the "Preferred Stock"), convertible into
approximately 3,333 shares of the Company's common stock, par value $.001 per
share (the "Common Stock") (subject to adjustment for any stock dividends,
combinations or splits with respect to the Common Stock), and (ii) a warrant, in
the form attached hereto as Exhibit B (the "Warrants"), to acquire approximately
6,666 shares of Common Stock (subject to adjustment for any stock dividends,
combinations or splits with respect to the Common Stock). The rights,
preferences and privileges of the Preferred Stock, including the terms upon
which such Preferred Stock are convertible into shares of Common Stock, are set
forth in the form of Certificate of Designations, Preferences and Rights
attached hereto as Exhibit A (the "Certificate of Designation"). The shares of
Common Stock issuable upon conversion of the Preferred Stock pursuant to the
Certificate of Designation are referred to herein as the "Conversion Shares" and
the shares of Common Stock issuable upon exercise of or otherwise pursuant to
the Warrants are referred to herein as the "Warrant Shares." The Preferred
Stock, the Warrants, the Conversion Shares and the Warrant Shares are
collectively referred to herein as the "Securities" and each of them may
individually be referred to herein as a "Security."

 C. In connection with the Closing (as defined herein) pursuant to 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 Securities Act and the rules and regulations
promulgated thereunder, and applicable state securities laws.

 D. In connection with the Closing pursuant to this Agreement, the secured
creditors of the Company, General Conference Corporation of Seventh-Day
Adventists and Jonathan Pallin, (collectively, the "Lenders") have agreed to
enter into certain debt conversion agreements in the forms of Exhibit D and E
hereto (the "Debt Conversion Agreements"), and have agreed to enter into a
certain call option and subordination agreement in the form of Exhibit F hereto
(the "Call Option and Subordination Agreement" and, together with the Debt
Conversion Agreements, the "Debt Documents").

E. The requisite holders of Series C Preferred Stock of the Company have entered
into those certain amendment agreements dated May 30, 2003 and June 27, 2003 in
the forms of Exhibit G and H hereto (the "Amendment Agreements").

F. This Agreement, the Certificate of Designation, the Warrants, the
Registration Rights Agreement, the Debt Documents and the Amendment Agreements
are collectively referred to herein as the "Transaction Documents."

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

    PURCHASE AND SALE OF UNITS.

    (a) Purchase of Units. The issuance, sale and purchase of the Units shall
    take place in two (2) separate closings (each a "Closing" and collectively,
    the "Closings"), the first of which is hereinafter referred to as the "First
    Closing" and the second of which is hereinafter referred to as the "Second
    Closing." The purchase price (the "Purchase Price") per Unit at each such
    Closing shall be equal to One Thousand Dollars ($1,000). The Closings shall
    occur at the offices of Drinker Biddle & Reath LLP at One Logan Square, 18th
    & Cherry Streets, Philadelphia, Pennsylvania 19103.

    On the date of the First Closing, subject to the satisfaction (or waiver) of
    the conditions set forth in Sections 7 and 8 below, the Company shall issue
    and sell to each Purchaser and each Purchaser shall purchase from the
    Company the number of Units identified as "First Closing Units" on the
    signature page hereto executed by such Purchaser.
    
    On the date of the Second Closing, if any, subject to the satisfaction (or
    waiver) of the conditions set forth in Sections 7 and 8 below, the Company
    shall issue and sell to each Purchaser and each Purchaser shall purchase
    from the Company, the number of Units identified as "Second Closing Units"
    on the signature page hereto executed by such Purchaser.

    (b) Form of Payment. At the Closing, each Purchaser shall pay the aggregate
    Purchase Price for the Units being purchased by such Purchaser hereunder by
    (i) wire transfer to the Company, in accordance with the Company's wiring
    instructions below, or (ii) with respect to the Second Closing, cancellation
    of outstanding indebtedness of the Company pursuant to the Debt Conversion
    Agreements, in all cases against delivery of the duly executed certificates
    representing the Preferred Stock and Warrants being purchased by such
    Purchaser hereunder. The Company shall deliver such certificates and
    Warrants upon receipt of such aggregate Purchase Price. Each Purchaser who
    is paying the Purchase Price for the Units by wire transfer shall wire the
    funds to LifePoint via the provided wire instructions.

    (c) Closing Date. Subject to the satisfaction (or waiver) of the conditions
    thereto set forth in Section 7 and 8 below, the date and time of the
    issuance and sale of the Securities pursuant to this Agreement shall be (i)
    in the First Closing, 12:00 noon Eastern Time on July 14, 2003, and (ii) in
    the case of the Second Closing, 12:00 noon Eastern Time on the fifth trading
    day following notification of satisfaction (or waiver) of the conditions to
    such Closing set forth in Section 8(b) hereof or, in each case, such other
    time as may be mutually agreed upon by the Company and the Purchasers (the
    "Closing Date").

    (d) Additional Issuances. The Company shall have the right, at any time and
    from time to time, before the date of filing the registration statement
    pursuant to Section 2(a) of the Registration Rights Agreement to sell
    additional Units to one or more additional purchasers as determined by the
    Company on the same terms set forth in this Agreement, provided, however,
    that any such additional purchaser must meet the reasonable satisfaction of
    the Majority Holders (as defined below). Any additional purchaser so
    acquiring shall be considered a "Purchaser" for purposes of this Agreement
    and securities so acquired by such additional Purchaser shall be considered
    Preferred Stock, Warrants, Conversion Shares, Warrant Shares and Securities,
    as applicable, for purposes of this Agreement. Each Purchaser acknowledges
    that each such additional purchaser shall become a party to and shall
    execute counterpart copies of the Registration Rights Agreement, and in such
    event shall be entitled to the rights and have the obligations conferred
    thereby. In the event that additional Purchasers become parties to this
    Agreement, the Schedule of Exceptions may be revised by the Company to
    reflect additional information and/or subsequent events, provided, however,
    that nothing contained in a revised Schedule of Exceptions shall affect the
    Company's liability to the Purchasers or the Purchasers' rights hereunder.
    Each party hereto consents to such subsequent sales pursuant to this Section
    1(d). Notwithstanding the foregoing, in no event shall the Company offer or
    sell any Units or take any other action which would prevent the use of the
    exemption from securities registration afforded by the provisions of Rule
    506 of Regulation D with respect to any of the Securities offered hereby or
    require registration of any of such Securities under the Securities Act, nor
    shall the exercise by the Company of its rights under this Section 1(d) be
    permitted in any way to delay or jeopardize the ability of the Company to
    obtain the Stockholder Approvals (as defined below).

     

    PURCHASER'S REPRESENTATIONS, WARRANTIES AND COVENANTS. Each Purchaser
    severally, but not jointly, represents, warrants and agrees to the Company
    as follows:

    (a) Purchase for Own Account, Etc. Such Purchaser is purchasing the Units
    for such Purchaser's own account for investment only and not with a present
    view towards the public sale or distribution thereof, except pursuant to
    sales that are exempt from the registration requirements of the Securities
    Act and/or sales registered under the Securities Act. Such Purchaser
    understands that Purchaser must bear the economic risk of this investment
    indefinitely, unless the Securities are registered pursuant to the
    Securities Act and any applicable state securities or blue sky laws or an
    exemption from such registration is available, and that the Company has no
    present intention of registering the resale of any such Securities other
    than as contemplated by the Registration Rights Agreement. Notwithstanding
    anything in this Section 2(a) to the contrary, by making the representations
    herein, the Purchaser does not agree to hold 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 from the registration requirements under the Securities Act.

    (b) Accredited Investor Status. Such Purchaser is an "Accredited Investor"
    as that term is defined in Rule 501(a) of Regulation D under the Securities
    Act.

    (c) Reliance on Exemptions. Such Purchaser understands that the Units are
    being offered and sold to such Purchaser 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 such Purchaser's compliance with, the representations,
    warranties, agreements, acknowledgments and understandings of such Purchaser
    set forth herein in order to determine the availability of such exemptions
    and the eligibility of such Purchaser to acquire the Securities.

    (d) Information. Such Purchaser is knowledgeable, sophisticated and
    experienced in making, and is qualified to make, decisions with respect to
    investments in securities representing an investment decision like that
    involved in the purchase of the Securities, and such Purchaser or its
    counsel, if any, have been furnished 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 specifically requested by such
    Purchaser or its counsel. Neither such inquiries nor any other investigation
    conducted by such Purchaser or its counsel or any of its representatives
    shall modify, amend or affect such Purchaser's right to rely on the
    Company's representations and warranties contained in Section 3 below. Such
    Purchaser understands that such Purchaser's investment in the Securities
    involves a high degree of risk.

    (e)  Governmental Review. Such Purchaser 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 Resale. Such Purchaser understands that (i) except as
    provided in the Registration Rights Agreement, the sale or resale of the
    Securities have not been and are not being registered under the Securities
    Act or any state securities laws, and the Securities may not be transferred
    unless (a) the transfer is made pursuant to and as set forth in an effective
    registration statement under the Securities Act covering the Securities; or
    (b) such Purchaser shall have delivered to the Company an opinion of counsel
    (which opinion 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; or (c) sold under and in compliance with Rule 144
    promulgated under the Securities Act (or a successor rule) ("Rule 144"); or
    (d) sold or transferred in accordance with applicable securities laws to an
    affiliate of such Purchaser who agrees to sell or otherwise transfer the
    Securities only in accordance with the provisions of this Section 2(f) and
    who is an Accredited Investor; and (ii) neither the Company nor any other
    person is under any obligation to register such Securities under the
    Securities Act or any state securities laws (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, provided such pledge is consistent with applicable laws, rules
    and regulations, including those promulgated under the Securities Act.

    (g) Legends. Such Purchaser understands that the certificates for the
    Preferred Stock, Warrants and, until such time as the Conversion Shares and
    Warrant Shares have been registered under the Securities Act (including
    registration pursuant to Rule 416 thereunder) as contemplated by the
    Registration Rights Agreement or otherwise may be sold by such Purchaser
    under Rule 144(k), the certificates for the Conversion Shares and Warrant
    Shares shall bear a restrictive legend in substantially the following form:

     

    THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
    UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
    STATE OF THE UNITED STATES OR IN ANY OTHER JURISDICTION. THE SECURITIES
    REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE OF
    AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE
    SECURITIES LAWS UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE
    EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.

     

    THE COMPANY AGREES THAT IT SHALL, IMMEDIATELY FOLLOWING THE REGISTRATION
    STATEMENT (AS DEFINED IN THE REGISTRATION RIGHTS AGREEMENT) BEING DECLARED
    EFFECTIVE, DELIVER TO ITS TRANSFER AGENT AN OPINION LETTER OF COUNSEL,
    OPINING THAT AT ANY TIME THE REGISTRATION STATEMENT IS EFFECTIVE, THE
    TRANSFER AGENT SHALL ISSUE, IN CONNECTION WITH THE ISSUANCE OF THE
    CONVERSION SHARES AND WARRANT SHARES, CERTIFICATES REPRESENTING SUCH
    CONVERSION SHARES AND WARRANT SHARES WITHOUT THIS RESTRICTIVE LEGEND OR THE
    RESTRICTIVE LEGEND ABOVE, PROVIDED SUCH CONVERSION SHARES AND WARRANT SHARES
    ARE TO BE SOLD IN ACCORDANCE WITH THE PROSPECTUS CONTAINED IN THE
    REGISTRATION STATEMENT. UPON RECEIPT OF SUCH OPINION, THE COMPANY SHALL
    CAUSE THE TRANSFER AGENT TO CONFIRM, FOR THE BENEFIT OF THE HOLDERS, THAT NO
    FURTHER OPINION OF COUNSEL IS REQUIRED AT THE TIME OF TRANSFER IN ORDER TO
    ISSUE SUCH SHARES WITHOUT SUCH RESTRICTIVE LEGEND.

    The Company agrees that it shall, immediately following the Registration
    Statement (as defined in the Registration Rights Agreement) being declared
    effective, deliver to its transfer agent an opinion letter of counsel,
    opining that at any time the Registration Statement is effective, the
    transfer agent shall issue, in connection with the issuance of the
    Registrable Securities (as defined in the Registration Rights Agreement),
    certificates representing such Registrable Securities without the
    restrictive legend above, provided such Conversion Shares and Warrant Shares
    are to be sold pursuant to the prospectus contained in the Registration
    Statement. Upon receipt of such opinion, the Company shall cause the
    transfer agent to confirm, for the benefit of the holders, that no further
    opinion of counsel is required at the time of transfer in order to issue
    such shares without such restrictive legend. Notwithstanding the foregoing,
    following the First Closing, the Company may forward a letter to its
    transfer agent requesting the removal of the restrictive legend in the
    manner set forth in this paragraph, which request shall be acceptable to the
    Purchasers provided that the transfer agent sends a letter to the Company on
    or before the date of the Second Closing confirming that it will remove such
    legend in accordance with this paragraph. 

    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 state securities laws) (a) the
    sale of such Security is registered under the Securities Act (including
    registration pursuant to Rule 416 thereunder) as contemplated by the
    Registration Rights Agreement; (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
    Securities Act; or (c) such holder provides the Company with reasonable
    assurances that such Security can be sold under Rule 144(k). In the event
    the above legend is removed from any Security and thereafter the
    effectiveness of a registration statement covering such Security is
    suspended or the Company determines that a supplement or amendment thereto
    is required by applicable securities laws, then the Company may immediately
    place a stop-transfer order against the certificates with respect to the
    sale of any Security pursuant to such registration statement, and upon
    reasonable advance written notice to such Purchaser the Company may require
    that the above legend be placed on any such Security that cannot then be
    sold pursuant to an effective registration statement or under Rule 144 and
    such Purchaser shall cooperate in the replacement of such legend. Such
    legend shall thereafter be removed when such Security may again be sold
    pursuant to an effective registration statement or under Rule 144.

    (h) Authorization; Enforcement. This Agreement and the Registration Rights
    Agreement have been duly and validly authorized, executed and delivered on
    behalf of such Purchaser and are valid and binding agreements of such
    Purchaser enforceable against such Purchaser in accordance with their terms.

    (i)  Residency. Such Purchaser is a resident of the jurisdiction set forth
    under such Purchaser's name on the Execution Page hereto executed by such
    Purchaser. The Purchaser acknowledges that the Company has represented that
    no action has been or will be taken in any jurisdiction outside the United
    States by the Company that would permit an offering of the Securities, or
    possession or distribution of offering materials in connection with the
    issue of the Securities, in any jurisdiction outside the United States where
    action for that purpose is required except where such failure will prohibit
    the sale of the Securities hereunder. If the Purchaser is located or
    domiciled outside the United States it agrees to comply with all applicable
    laws and regulations in each foreign jurisdiction in which it purchases,
    offers, sells or delivers Securities or has in its possession or distributes
    any offering material, in all cases at its own expense.

    (j)  Prospectus Delivery Requirements. Each Purchaser covenants and agrees
    to comply with the prospectus delivery requirements under the Securities Act
    with respect to all sales of Common Stock made pursuant to a registration
    statement.

    (k) No Company Advice. Each Purchaser understands that nothing in this
    Agreement or any other materials presented to the Purchaser in connection
    with the purchase and sale of the Securities constitutes legal, tax or
    investment advice, including, without limitation, any filing obligations
    that such Purchaser may have under applicable securities laws. Each
    Purchaser has consulted such legal, tax and investment advisors as it, in
    its sole discretion, has deemed necessary or appropriate in connection with
    its purchase of Securities.

    Except as set forth in Section 2(j) and (k) above, the Purchasers'
    representations and warranties made in this Section 2 are made solely for
    the purpose of permitting the Company to make a determination that the offer
    and sale of the Preferred Stock and Warrants pursuant to this Agreement
    complies with applicable U.S. federal and state securities laws and not for
    any other purpose. The Company may not rely on such representations and
    warranties for any other purpose.

 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth on a
    Schedule of Exceptions executed and delivered by the Company to the
    Purchasers at the Closing (the "Schedule of Exceptions"), the Company
    represents and warrants to each Purchaser as follows

    (a) Organization and Qualification; Subsidiaries. The Company is a
    corporation duly organized and existing in good standing under the laws of
    the jurisdiction in which it is incorporated, and has the requisite
    corporate power to own its properties and to carry on its business as now
    being conducted. The Company has no, and at no point ever had any, direct or
    indirect subsidiaries (as defined by Rule 405 under the Securities Act) and
    the Company does not intend to form, purchase or otherwise create such a
    subsidiary in the foreseeable future. The Company is duly qualified as a
    foreign corporation to do business and is in good standing in every
    jurisdiction in which the nature of the business conducted by it makes such
    qualification necessary and where the failure so to qualify has had or could
    reasonably be expected to have a Material Adverse Effect. "Material Adverse
    Effect" means any material adverse effect on (i) the Securities, (ii) the
    ability of the Company to perform its obligations hereunder or under the
    other Transaction Documents or (iii) the business, operations, properties,
    prospects, financial condition or results of operations of the Company. 

    (b) Authorization; Enforcement. (i) The Company has the requisite corporate
    power and authority to enter into and perform its obligations under this
    Agreement and the other Transaction Documents, to issue and sell the Units
    in accordance with the terms hereof, to issue the Conversion Shares upon
    conversion of the Preferred Stock in accordance with the terms of the
    Certificate of Designation and to issue the Warrant Shares upon exercise of
    the Warrants in accordance with the terms of such Warrants, except as
    described in Section 3(c) below; (ii) the execution, delivery and
    performance of this Agreement and the other Transaction Documents by the
    Company and the consummation by it of the transactions contemplated hereby
    and thereby (including, without limitation, the issuance of the Preferred
    Stock and Warrants and the issuance and reservation for issuance of the
    Conversion Shares and Warrant Shares) 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 any committee of the Board of Directors
    is required subject to the consents and obligations set forth in Section
    3(c) below, and (iii) this Agreement constitutes, and, upon execution and
    delivery by the Company of the other Transaction Documents, such agreements
    will constitute, valid and binding obligations of the Company enforceable
    against the Company in accordance with their terms.

    (c) Reliance on Exemptions. Assuming the accuracy of the Purchaser's
    representations, warranties and agreements as set forth in Section 2, the
    offer and sale of the Units and Securities to the Purchasers as contemplated
    hereby is exempt from the registration requirements of the Securities Act.

    (d) Stockholder Authorization. Neither the execution, delivery or
    performance by the Company of this Agreement and the other Transaction
    Documents nor the consummation by it of the transactions contemplated hereby
    or thereby (including, without limitation, the issuance of the Preferred
    Stock or Warrants or the issuance or reservation for issuance of the
    Conversion Shares or Warrant Shares) requires any consent or authorization
    of the Company's stockholders, except that (i) the issuance of the
    Conversion Shares and the Warrant Shares and any other shares of Common
    Stock issuable in connection with the Preferred Stock and the Warrants
    requires the approval of the Company's stockholders pursuant to Rule 713
    promulgated by the American Stock Exchange ("AMEX") and (ii) approval of the
    Company's stockholders is required to increase the total number of
    authorized shares of the Company's Common Stock to permit the Conversion
    Shares and the Warrant Shares and any other shares of Common Stock issuable
    in connection with the Preferred Stock and the Warrants to be reserved for
    issuance (the foregoing required stockholder approvals are referred to as
    the "Stockholder Approvals"). Holders of the Company's Series C Convertible
    Preferred Stock (the "Series C Holders") consented to the issuance of the
    Securities pursuant to an Amendment Agreements dated May 30, 2003 and June
    27, 2003, which (together with all other Series C amendments) the Company
    has made available to each Purchaser, true and correct copies of which are
    attached hereto as Exhibit G and H, and such Amendment Agreements constitute
    a binding and enforceable agreements against the Series C Holders. 

    (e) Capitalization. The capitalization of the Company as of the date hereof,
    including the authorized capital stock, the number of shares issued and
    outstanding, the number of shares issuable and reserved for issuance
    pursuant to the Company's stock option plans, the number of shares issuable
    and reserved for issuance pursuant to securities (other than the Preferred
    Stock and Warrants) exercisable or exchangeable for, or convertible into,
    any shares of capital stock and the number of shares to be reserved for
    issuance upon conversion of the Preferred Stock and exercise of the Warrants
    is set forth on Schedule 3(d). All of such outstanding shares of capital
    stock have been, or upon issuance in accordance with the terms of any such
    warrants, options or preferred stock, will be, validly issued, fully paid
    and non-assessable. No shares of capital stock of the Company (including the
    Preferred Stock, the Conversion Shares and the Warrant Shares) are subject
    to preemptive rights or any other similar rights of the stockholders of the
    Company or any liens or encumbrances. Except for the Securities and as set
    forth on Schedule 3(d), as of the date of this Agreement, (i) there are no
    outstanding options, warrants, scrip, rights to subscribe to, calls or
    commitments of any character whatsoever relating to, or securities or rights
    convertible into or exercisable or exchangeable for, any shares of capital
    stock of the Company, or arrangements by which the Company is or may become
    bound to issue additional shares of capital stock of the Company, nor are
    any such issuances or arrangements contemplated, (ii) there are no
    agreements or arrangements under which the Company is obligated to register
    the sale of any of its securities under the Securities Act (except the
    Registration Rights Agreements) and (iii) there are no outstanding
    securities or instruments of the Company which contain any redemption or
    similar provisions, and there are no contracts, commitments, understandings
    or arrangements by which the Company is or may become bound to redeem any
    security of the Company. Schedule 3(d) sets forth all of the Company issued
    securities or instruments containing antidilution or similar provisions that
    will be triggered by, and all of the resulting adjustments that will be made
    to such securities and instruments as a result of, the issuance of the
    Securities in accordance with the terms of this Agreement, the Certificate
    of Designation or the Warrants. The Company has furnished to the Purchasers
    true and correct copies of the Company's Amended and Restated Certificate of
    Incorporation as in effect on the date hereof ("Certificate of
    Incorporation"), the Company's Bylaws as in effect on the date hereof (the
    "Bylaws"), and all other instruments and agreements governing securities
    convertible into or exercisable or exchangeable for capital stock of the
    Company. The Certificate of Designation, in the form attached hereto, will
    be duly filed prior to Closing with the Secretary of State of the State of
    Delaware and, upon the issuance of the Preferred Stock in accordance with
    the terms hereof, each Purchaser shall be entitled to the rights set forth
    therein.  

    (f) Issuance of Shares. The Units are duly authorized and, upon issuance,
    delivery and payment therefor in accordance with the terms of this Agreement
    and the other Transaction Documents, will be validly issued, fully paid and
    non-assessable, and free from all taxes, liens, claims and encumbrances
    (other than restrictions on transfer contained in this Agreement and in the
    Registration Rights Agreements) and will not be subject to preemptive
    rights, rights of first refusal or other similar rights of stockholders of
    the Company or any other person and will not impose personal liability on
    the holders thereof. Subject to receipt of the Stockholder Approvals, the
    Conversion Shares will be duly authorized and reserved for issuance, and,
    upon conversion of the Preferred Stock in accordance with the terms thereof,
    will be validly issued, fully paid and non-assessable, and free from all
    taxes, liens, claims and encumbrances (other than restrictions on transfer
    contained in this Agreement and in the Registration Rights Agreements) and
    will not be subject to preemptive rights, rights of first refusal or other
    similar rights of stockholders of the Company and the issuance of the
    Conversion Shares in accordance with the terms of this Agreement and the
    Certificate of Designation will not impose personal liability upon the
    holder thereof. The Warrant Shares shall be duly authorized and reserved for
    issuance, and, upon exercise of the Warrants in accordance with the terms
    thereof, subject to receipt of the Stockholder Approvals, will be validly
    issued, fully paid and non-assessable, and free from all taxes, liens,
    claims and encumbrances (other than restrictions on transfer contained in
    this Agreement and in the Registration Rights Agreements) and will not be
    subject to preemptive rights, rights of first refusal or other similar
    rights of stockholders of the Company and the issuance of the Warrant Shares
    in accordance with the terms of this Agreement and the Warrant will not
    impose personal liability upon the holder thereof. 

    (g) No Conflicts. The execution, delivery and performance of this Agreement,
    the Warrants and the Registration Rights Agreement by the Company, the
    performance by the Company of its obligations under the Certificate of
    Designation, and the consummation by the Company of the transactions
    contemplated hereby and thereby (including, without limitation, the issuance
    and reservation for issuance, as applicable, of the Preferred Stock,
    Warrants, Conversion Shares and Warrant Shares) will not, subject to receipt
    of the Stockholders Approvals, (i) result in a violation of the Certificate
    of Incorporation or Bylaws or (ii) conflict with, or constitute a default
    (or an event that with notice or lapse of time or both would become a
    default) under, or give to others any rights of termination, amendment
    (including, without limitation, the triggering of any anti-dilution
    provisions), acceleration or cancellation of, any agreement, indenture or
    instrument to which the Company is a party, or result in a violation of any
    law, rule, regulation, order, judgment or decree (including United States
    federal and state securities laws and regulations and rules or regulations
    of any self-regulatory organizations to which either the Company or its
    securities are subject) applicable to the Company or by which any property
    or asset of the Company is bound or affected (except, with respect to clause
    (ii), for such conflicts, defaults, terminations, amendments, accelerations,
    cancellations and violations that have not had and could not reasonably be
    expected to have, individually or in the aggregate, a Material Adverse
    Effect). The Company is not in violation of its Certificate of
    Incorporation, Bylaws or other organizational documents. The Company is not
    in default (and no event has occurred which, with notice or lapse of time or
    both, would put the Company in default) under, nor has there occurred any
    event giving others (with notice or lapse of time or both) any rights of
    termination, amendment, acceleration or cancellation of, any agreement,
    indenture or instrument to which the Company is a party, except for such
    violations, defaults or events that have not and could not reasonably be
    expected to have, individually or in the aggregate, a Material Adverse
    Effect. The business of the Company is not being conducted, and shall not be
    conducted so long as a Purchaser owns any of the Preferred Stock, in
    violation of any law, ordinance or regulation of any governmental entity,
    except for possible violations the sanctions for which either singly or in
    the aggregate have not had and could not reasonably be expected to have a
    Material Adverse Effect. The Company and its board of directors have taken
    all necessary action, if any, in order to render inapplicable any control
    share acquisition, business combination, poison pill (including any
    distribution under a rights agreement) or other similar anti-takeover
    provision under its Certificate of Incorporation, bylaws, other agreements
    or instruments, or the laws of the state of its incorporation which is or
    could become applicable to the Purchasers as a result of the transactions
    contemplated by this Agreement, including without limitation, the Company's
    issuance of the Securities and any and all Purchaser's ownership of the
    Securities or the Purchaser's ownership of the Common Stock. Except as
    specifically contemplated by this Agreement (including without limitation
    receipt of the Stockholder Approvals and the filing and approval of the AMEX
    listing application for the Conversion Shares and the Warrant Shares) and
    the Registration Rights Agreement, the Company is not required to obtain any
    consent, approval, authorization or order of, or make any filing or
    registration with, any court or governmental agency or any regulatory or
    self regulatory agency in order for it to execute, deliver or perform any of
    its obligations under this Agreement, the Warrants or the Registration
    Rights Agreement or to perform its obligations under the Certificate of
    Designation, in each case in accordance with the terms hereof or thereof.
    Except as set forth on Schedule 3(f) of the Schedule of Exceptions, the
    Company is not in violation of the listing requirements of AMEX, has
    received no notice regarding the potential delisting of the Common Stock by
    AMEX, and does not reasonably anticipate that the Common Stock will be
    delisted by AMEX in the foreseeable future.

    (h) SEC Documents, Financial Statements. All reports, schedules, forms,
    statements and other documents required to be filed by the Company with the
    SEC pursuant to the reporting requirements of the Securities Exchange Act of
    1934, as amended (the "Exchange Act") (all of the foregoing filed prior to
    the date hereof and all exhibits included therein and financial statements
    and schedules thereto and documents incorporated by reference therein, being
    hereinafter referred to herein as the "SEC Documents") have been timely
    filed by the Company (within applicable extension periods) since December
    31, 1997. The SEC Documents are available on the SEC's web site at
    www.sec.gov. With respect to SEC Documents filed on or after December 31,
    1997, as of their respective dates, such SEC Documents complied in all
    material respects with the requirements of the Exchange Act or the
    Securities Act, as the case may be, 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 made prior to 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 applicable with respect thereto. Such financial
    statements have been prepared in accordance with U.S. generally accepted
    accounting principles ("GAAP"), 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
    financial position of the Company as of the dates thereof and the results of
    its operations and cash flows for the periods then ended (subject, in the
    case of unaudited statements, to immaterial year-end audit adjustments).
    Except as set forth in the financial statements of the Company included in
    the Select SEC Documents filed prior to the date hereof or as set forth in
    Schedule 3(g) of the Schedule of Exceptions, the Company has no liabilities,
    contingent or otherwise, other than (i) liabilities incurred in the ordinary
    course of business subsequent to the date of such financial statements and
    (ii) obligations under contracts and commitments incurred in the ordinary
    course of business and not required under GAAP to be reflected in such
    financial statements, which liabilities and obligations referred to in
    clauses (i) and (ii), individually or in the aggregate, are not material to
    the financial condition or operating results of the Company. For purposes of
    this Agreement, "Select SEC Documents" means the Company's (A) Proxy
    Statement for its fiscal year 2002 Annual Meeting, (B) Annual Report on Form
    10-K for the fiscal year ended March 31, 2002, (C) Quarterly Reports on Form
    10-Q for the fiscal quarters ended June 30, September 30 and December 31,
    2002, and (D) Current Reports on Form 8-K filed since December 31, 2002.

    (i) Dividends. After giving effect to the sale and purchase of Securities at
    the Closing pursuant to this Agreement, the Company shall be legally
    permitted to pay a dividend on the Preferred Stock in accordance with the
    Delaware General Corporation Law, and there are no agreements or instruments
    restricting such payments.

    (j) Absence of Certain Changes. Except as set forth on the Schedule of
    Exceptions, since December 31, 2002, there has been no material adverse
    change and no material adverse development in the business, properties,
    operations, prospects, financial condition or results of operations of the
    Company, except as disclosed in the SEC Documents filed prior to the date
    hereof. The Company has not taken any steps, and with the receipt of funds
    pursuant to this Agreement does not currently expect to take any steps, to
    seek protection pursuant to any bankruptcy or receivership law nor does the
    Company have any knowledge or reason to believe that its creditors intend to
    initiate involuntary bankruptcy proceedings with respect to the Company.

    (k) Transactions With Affiliates. Except as set forth on the Schedule of
    Exceptions, other than the grant of stock options pursuant to option plans
    disclosed in such SEC Documents, none of the officers, directors, or
    employees of the Company is presently a party to any transaction with the
    Company (other than for ordinary course services solely in their capacity as
    employees, officers or 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 such officer, director or employee or any
    corporation, partnership, trust or other entity in which any such officer,
    director, or employee has an ownership interest of five percent or more or
    is an officer, director, trustee or partner.

    (l) Absence of Litigation. Except as publicly disclosed in the Select SEC
    Documents, there is no action, suit, proceeding, inquiry or investigation
    before or by any court, public board, government agency, self-regulatory
    organization or body, including, without limitation, the SEC or AMEX,
    pending or, to the knowledge of the Company, threatened against or affecting
    the Company or any of its respective directors or officers in their
    capacities as such. There are no facts which, if known by a potential
    claimant or governmental authority, could give rise to a claim or proceeding
    which, if asserted or conducted with results unfavorable to the Company,
    could reasonably be expected to have a Material Adverse Effect.

    (m) Intellectual Property. The Company owns or is duly licensed (and, in
    such event, has the unfettered right to grant sublicenses) to use all
    patents, patent applications, trademarks, trademark applications, trade
    names, service marks, copyrights, copyright applications, licenses, permits,
    inventions, discoveries, processes, scientific, technical, engineering and
    marketing data, object and source codes, know-how (including trade secrets
    and other unpatented and/or unpatentable proprietary or confidential
    information, systems or procedures) and other similar rights and proprietary
    knowledge (collectively, "Intangibles") necessary for the conduct of its
    business as now being conducted and as presently contemplated to be
    conducted in the future. The Company does not infringe and is not in
    conflict with any right of any other person with respect to any Intangibles
    which could reasonably expect to have a Material Adverse Affect. Except as
    set forth on Schedule 3(l) of the Schedule of Exceptions, the Company has
    not received written notice of any pending conflict with or infringement
    upon such third party Intangibles. Set forth on Schedule 3(l) of the
    Schedule of Exceptions, is a list of each patent, registered copyright,
    copyright application, registered trademark, trademark application, license
    or permit for which the termination of the Company's ownership of, or right
    to use, could reasonably be expected to have a Material Adverse Effect. The
    Company has not entered into any consent agreement, indemnification
    agreement, forbearance to sue or settlement agreement with respect to the
    validity of the Company's ownership or right to use its Intangibles and
    there is no reasonable basis for any such claim to be successful. The
    Intangibles are valid and enforceable and no registration relating thereto
    has lapsed, expired or been abandoned or canceled or is the subject of
    cancellation or other adversarial proceedings, and all applications therefor
    are pending and in good standing. The Company has complied, in all material
    respects, with its contractual obligations relating to the protection of the
    Intangibles used pursuant to licenses. No person is infringing on or
    violating the Intangibles owned or used by the Company.

    (n) Foreign Corrupt Practices. Neither the Company nor any director, officer
    or, to the Company's knowledge, any employee, any agent or other person
    acting on behalf of the Company 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; or made any bribe, rebate, payoff, influence payment,
    kickback or other unlawful payment to any foreign or domestic government
    official or employee.

    (o) Disclosure. All information relating to or concerning the Company set
    forth in this Agreement or provided to any Purchaser pursuant to Section
    2(d) hereof or 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 its business, properties, prospects, operations or
    financial conditions, which has not been publicly disclosed but, under
    applicable law, rule or regulation, would be required to be disclosed by the
    Company in a registration statement filed on the date hereof by the Company
    under the Securities Act with respect to a primary issuance of the Company's
    securities.

    (p) Acknowledgment Regarding Purchasers' Purchase of the Units. The Company
    acknowledges and agrees that none of the Purchasers are acting as a
    financial advisor or fiduciary of the Company (or in any similar capacity)
    with respect to this Agreement, the other Transaction Documents, or the
    transactions contemplated hereby and thereby, the relationship between the
    Company and the Purchasers is "arms-length" and any statement made by any
    Purchaser or any of its representatives or agents in connection with this
    Agreement and the transactions contemplated hereby is merely incidental to
    such Purchaser's purchase of Securities and has not been relied upon by the
    Company, its officers or directors in any way, and that, except as set forth
    on the Schedule of Exceptions, no Purchaser is (i) an officer or director of
    the Company, (ii) an "affiliate" of the Company (as defined in Rule 144) or
    (iii) a "beneficial owner" of more than 5% of the Common Stock (as defined
    for purposes of Rule 13d-3 of the Exchange Act). The Company further
    acknowledges that the Company's decision to enter into this Agreement has
    been based solely on an independent evaluation by the Company and its
    representatives.

    (q) Form S-3 Eligibility. The Company is currently eligible to register the
    resale of its Common Stock on a registration statement filed on Form S-3
    under the Securities Act. Subject to receipt of the Stockholder Approvals,
    there exist no facts or circumstances that would prohibit or delay the
    preparation and filing of a registration statement on Form S-3 with respect
    to the Registrable Securities (as defined in the Registration Rights
    Agreement). The Company has no basis to believe that its past or present
    independent public auditors will withhold their consent to the inclusion, or
    incorporation by reference, of their audit opinion concerning the Company's
    financial statements which are included in the Registration Statement
    required to be filed pursuant to the Registration Rights Agreement.

    (r) No General Solicitation. Neither the Company nor any distributor
    participating on the Company's behalf in the transactions contemplated
    hereby (if any) nor any person acting for the Company, or any such
    distributor, has conducted any "general solicitation," as such term is
    defined in Regulation D, with respect to any of the Securities being offered
    hereby.

    (s) 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 of any security or solicited any offers to buy any
    security under circumstances that would require registration of the
    Securities being offered hereby under the Securities Act or cause this
    offering of Securities to be integrated with any prior offering of
    securities of the Company for purposes of the Securities Act.

    (t) No Brokers. The Company has taken no action which would give rise to any
    claim by any person for brokerage commissions or finder's fees or for
    similar payments by any Purchaser relating to this Agreement or the
    transactions contemplated hereby. Other than (i) Roth Capital Partners, or
    (ii) as contemplated in Section 4(e) of this Agreement or in any of the
    other Transaction Documents, no other person or entity is entitled to
    payment by the Company of fees, commissions and reimbursement of expenses in
    connection with the transactions contemplated hereby.

    (u) Acknowledgment Regarding Securities. The Company's executive officers
    have studied and fully understand the nature of the Securities being sold
    hereunder. The Company acknowledges that its obligation to issue Conversion
    Shares upon conversion of the Preferred Stock in accordance with the
    Certificate of Designation is, other than as set forth in the Certificate of
    Designation, and subject to receipt of the Stockholder Approvals, absolute
    and unconditional, regardless of the dilution that such issuance may have on
    the ownership interests of other stockholders and the availability of
    remedies provided for in the Transaction Documents relating to a failure or
    refusal to issue Conversion Shares. Taking the foregoing into account, the
    Company's Board of Directors has determined in its good faith business
    judgment that the issuance of the Preferred Stock and Warrants hereunder and
    the consummation of the other transactions contemplated hereby are in the
    best interests of the Company and its stockholders. The Company fully
    intends to honor its obligations hereunder to issue Conversion Shares upon
    conversion of the Preferred Stock regardless of the dilution that such
    issuance may have on the ownership interests of other stockholders and the
    availability of remedies provided for in the Transaction Documents relating
    to their failure or refusal to issue Conversion Shares.

    (v) Title. The Company has good and marketable title in fee simple to all
    real property and good and merchantable title to all personal property owned
    by it that is material to the business of the Company, in each case free and
    clear of all liens, encumbrances and defects except such as do not
    materially affect the value of such property and do not materially interfere
    with the use made and proposed to be made of such property by the Company.
    Any real property and facilities held under lease by the Company are held by
    it under valid, subsisting and enforceable leases with such exceptions as
    are not material and do not materially interfere with the use made and
    proposed to be made of such property and buildings by the Company.

    (w) Tax Status. Except as set forth in the Select SEC Documents, the Company
    has made or filed all foreign, U.S. federal, state, provincial and local
    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 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 any statute of limitations relating to the assessment or collection of
    any foreign, federal, state, provincial or local tax. None of the Company's
    tax returns is presently being audited by any taxing authority.

     

    (x) Key Employees. Each of the Company's directors, officers and any Key
    Employee (as defined below) is currently serving the Company in the capacity
    disclosed in the Select SEC Documents. No Key Employee is, or is now
    expected to be, in violation of any material term of any employment
    contract, confidentiality, disclosure or proprietary information agreement,
    non-competition agreement, or any other contract or agreement or any
    restrictive covenant, and the continued employment of each Key Employee does
    not subject the Company to any liability with respect to any of the
    foregoing matters. No Key Employee has, to the knowledge of the Company, any
    intention to terminate or limit his employment with, or services to, the
    Company, nor is any such Key Employee subject to any constraints which would
    cause such employee to be unable to devote his full time and attention to
    such employment or services. "Key Employee" means the persons listed on
    Schedule 3(w) of the Schedule of Exceptions and any individual who assumes
    or performs any of the duties of a Key Employee.

    (y) Employee Relations. (i) The Company is not involved in any material
    union labor dispute nor, to the knowledge of the Company, is any such
    dispute threatened. The Company believes that its relations with its
    employees are good. No executive officer (as defined in Rule 501(f) of the
    Securities Act) has notified the Company that such officer intends to leave
    the Company or otherwise terminate such officer's employment with the
    Company; and (ii) the Company is in compliance with all federal, state,
    local and foreign laws and regulations respecting employment and employment
    practices, terms and conditions of employment and wages and hours, except
    where failure to be in compliance would not, either individually or in the
    aggregate, reasonably be expected to result in a Material Adverse Effect.

    (z) Insurance. The Company has in force fire, casualty, product liability
    and other insurance policies, with extended coverage, sufficient in amount
    to allow it to replace any of its material properties or assets which might
    be damaged or destroyed or sufficient to cover liabilities to which the
    Company may reasonably become subject, and such types and amounts of other
    insurance with respect to its business and properties, on both a per
    occurrence and an aggregate basis, as are customarily carried by persons
    engaged in the same or similar business as the Company. No default or event
    has occurred that could give rise to a default under any such policy.

    (aa) Environmental Matters. There is no environmental litigation or other
    environmental proceeding pending or, to the Company's knowledge, threatened
    by any governmental regulatory authority or others with respect to the
    current or any former business of the Company or any partnership or joint
    venture currently or at any time affiliated with the Company. No state of
    facts exists as to environmental matters or Hazardous Substances (as defined
    below) that involves the reasonable likelihood of a material capital
    expenditure by the Company or that may otherwise have a Material Adverse
    Effect. No Hazardous Substances have been treated, stored or disposed of, or
    otherwise deposited, in or on the properties owned or leased by the Company
    or by any partnership or joint venture currently or at any time affiliated
    with the Company in violation of any applicable environmental laws. The
    environmental compliance programs of the Company comply in all respects with
    all environmental laws, whether federal, state, provincial or local,
    currently in effect. As used herein, "Hazardous Substances" means any
    substance, waste, contaminant, pollutant or material that has been
    determined by any governmental authority to be capable of posing a risk of
    injury to health, safety, property or the environment.

    (bb) Regulatory Permits. The Company possesses all certificates,
    authorizations and permits issued by the appropriate federal, state,
    provincial or foreign regulatory authorities which are material to conduct
    its business, and the Company has not received any written notice of any
    proceeding relating to the revocation or modification of any such
    certificate, authorization or permit.

     

 2. COVENANTS.

    (a) Best Efforts. The parties shall use their best efforts timely to satisfy
    each of the conditions described in Section 7 and Section 8 of this
    Agreement.

    (b) Form D; Blue Sky Laws. The Company shall file with the SEC a Form D with
    respect to the Securities as required under Regulation D and provide a copy
    thereof to each Purchaser promptly after such filing. The Company shall take
    such action as the Company shall reasonably determine is necessary to
    qualify the Securities for sale to each Purchaser pursuant to this Agreement
    under applicable securities or "blue sky" laws of the states of the United
    States or obtain an exemption therefrom and within five (5) days thereafter,
    shall provide the Purchasers with evidence of any such action so taken.
    Within two (2) trading days after the Closing Date, the Company shall file a
    Form 8-K with the SEC concerning this Agreement and the transactions
    contemplated hereby, which Form 8-K shall attach this Agreement and its
    Exhibits as exhibits to such Form 8-K (the "8-K Filing"). From and after the
    8-K Filing, the Company hereby acknowledges that no Purchaser shall be in
    possession of any material nonpublic information received from the Company
    or any of its respective officers, directors, employees or agents, that is
    not disclosed in the 8-K Filing. The Company shall not, and shall cause each
    of its respective officers, directors, employees and agents not to, provide
    any Purchaser with any material nonpublic information regarding the Company
    from and after the 8-K Filing without the express written consent of such
    Purchaser, provided, however, that a Purchaser which exercises its rights
    under Section 4(n) shall be deemed to have given such express written
    consent. In the event of a breach of the foregoing covenant by the Company
    or any of its respective officers, directors, employees and agents, in
    addition to any other remedy provided herein or in the other Transaction
    Documents, a Purchaser shall have the right to request in writing that the
    Company promptly make a public disclosure, in the form of a press release,
    public advertisement or otherwise, of such material nonpublic information.
    If the Company refuses to promptly make such a disclosure, the Company and
    the requesting Purchaser shall meet (in person or telephonically) within two
    (2) business days to resolve the issue. Unless the parties agree that
    disclosure is not required, the Company shall either: (i) commence a
    Disclosure Delay Period (as defined in the Registration Rights Agreement),
    or (ii) if the Company's Board of Directors does not believe in good faith
    that the conditions to commencing a Disclosure Delay Period set forth in the
    Registration Rights Agreement have been satisfied, make a prompt public
    disclosure of the nonpublic information at issue. Subject to the foregoing,
    neither the Company nor any Purchaser shall issue any press releases or any
    other public statements with respect to the transactions contemplated
    hereby; provided, however, that the Company shall be entitled, without the
    prior approval of any Purchaser, to make any press release or other public
    disclosure with respect to such transactions (i) in substantial conformity
    with the 8-K Filing and contemporaneously therewith and (ii) as is required
    by applicable law and regulations (provided that in the case of clause (i)
    each Purchaser shall be consulted by the Company in connection with any such
    press release or other public disclosure prior to its release if such press
    release or other public disclosure contains the name of such Purchaser).

    (c) Reporting Status. So long as any Purchaser beneficially owns any of the
    Securities, the Company shall timely file (within applicable extension
    periods) all reports required to be filed with the SEC pursuant to the
    Exchange Act, and the Company shall not terminate its status as an issuer
    required to file reports under the Exchange Act even if the Exchange Act or
    the rules and regulations thereunder would permit such termination. In
    addition, the Company shall take all actions necessary to meet the
    "registrant eligibility" requirements set forth in the general instructions
    to Form S-3 or any successor form thereto, to continue to be eligible to
    register the resale of its Common Stock on a registration statement on Form
    S-3 under the Securities Act.

    (d) Use of Proceeds. The Company shall use the proceeds from the sale of the
    Units for general corporate purposes and working capital and shall otherwise
    be subject to the limitations set forth on Schedule 4(d) hereof, which
    Schedule 4(d) shall be deemed an essential part of this Agreement.

    (e) Expenses. The Company shall pay to BayStar Capital II, LP ("BayStar")
    and New England Partners ("NEP") at the Closing, reimbursement for the
    out-of-pocket expenses reasonably incurred by BayStar and NEP, their
    affiliates, and their advisors in connection with the negotiation,
    preparation, execution and delivery of this Agreement and the other
    Transaction Agreements and the consummation of the transactions contemplated
    hereby and thereby, including, without limitation, reasonable due diligence
    and attorneys' fees and expenses, up to an aggregate of $50,000 (the
    "Expenses") upon presentation of receipts to the Company. At the Closing,
    the Expenses will be paid by delivery by the Company by wire transfer of
    immediately available funds to BayStar and NEP upon presentation of receipts
    to the Company. In the event the Purchasers expect their actual
    out-of-pocket expenses to exceed $50,000, the Purchasers shall seek approval
    from the Company (not to be unreasonably withheld or delayed) in advance of
    incurring any such additional expenses, and any such approved expenses shall
    be reimbursed by the Company.

    (f) Financial Information. Until a Purchaser transfers, assigns or sells all
    of its Securities, the Company shall notify such Purchaser of the release
    of, and, if not available on the SEC Edgar System, shall deliver to such
    Purchaser, via electronic transmission or otherwise, copies of the following
    reports: (i) within ten (10) days of filing with the SEC, its Annual Report
    on Form 10-K, its Quarterly Reports on Form 10-Q, its proxy statements and
    any Current Reports on Form 8-K; and (ii) within one (1) day after release
    all press releases issued by the Company.

    (g) Reservation of Shares. Subject to receipt of the Stockholder Approvals,
    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 of the outstanding Preferred Stock and issuance of the
    Conversion Shares in connection therewith, the payment of dividends on the
    Preferred Stock in the form of shares of Common Stock, and the full exercise
    of the Warrants and the issuance of the Warrant Shares in connection
    therewith, in each case to the extent required by the Certificate of
    Designation and the Warrants (collectively, the "Issuance Obligations"). In
    the event such number of shares becomes insufficient to satisfy the Issuance
    Obligations, the Company shall take all necessary action to authorize and
    reserve such additional shares of Common Stock necessary to satisfy the
    Issuance Obligations.

    (h) Listing. Promptly following receipt of the Stockholder Approvals, the
    Company shall file an Application for Listing of Additional Shares with
    respect to the Conversion Shares and the Warrant Shares with AMEX. From the
    time that such listing form has been approved and thereafter, the Company
    shall maintain, so long as any Purchaser (or any of their affiliates) own
    any Securities, the listing of all Conversion Shares and Warrant Shares from
    time to time issuable upon conversion of the Preferred Stock and exercise of
    the Warrants on each national securities exchange or automated quotation
    system on which shares of Common Stock are currently listed. The Company
    will use its best efforts to continue the listing and trading of its Common
    Stock on AMEX, the New York Stock Exchange (the "NYSE"), the Nasdaq National
    Market (the "NNM") or the Nasdaq SmallCap Market (the "NSCM") and will
    comply in all material respects with the reporting, filing and other
    obligations under the bylaws or rules of AMEX and such exchanges and
    national automated stock quotation systems, as applicable. The Company shall
    promptly provide to each holder of Preferred Stock and/or Warrants copies of
    any notices it receives regarding the continued eligibility of the Common
    Stock for trading on AMEX or, if applicable, any securities exchange or
    automated quotation system on which securities of the same class or series
    issued by the Company are then listed or quoted, if any.

     

    (i) Corporate Existence. So long as a Purchaser beneficially owns any
    Securities, the Company shall maintain its corporate existence, and in the
    event of a merger, consolidation or sale of all or substantially all of the
    Company's assets, the Company shall ensure that the surviving or successor
    entity in such transaction (i) assumes the Company's obligations hereunder
    and under the other Transaction Documents and the agreements and instruments
    entered into in connection herewith and therewith regardless of whether or
    not the Company would have had a sufficient number of shares of Common Stock
    authorized and available for issuance in order to effect the conversion of
    all Preferred Stock and exercise in full of all Warrants outstanding as of
    the date of such transaction, and (ii) except in the event of a merger,
    consolidation of the Company into any other Company, or the sale or
    conveyance of all or substantially all of the assets of the Company where
    the consideration consists solely of cash, the surviving or successor entity
    is a publicly traded corporation whose common stock is listed for trading on
    the AMEX, the NYSE, the NNM, or the NSCM.

    (j) No Integrated Offerings. 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 Securities Act or cause this offering of the Securities to be integrated
    with any other offering of securities by the Company for purposes of the
    Securities Act or any stockholder approval provision applicable to the
    Company or its securities.

    (k) Legal Compliance. The Company shall conduct its business in compliance
    with all laws, ordinances or regulations of governmental entities applicable
    to such businesses, except where the failure to do so would not have a
    Material Adverse Effect.

    (l) Redemptions and Dividends. So long as any Purchaser beneficially owns
    any Preferred Stock, the Company shall not, without first obtaining the
    written approval of the holders of the Majority Holders, repurchase, redeem,
    or declare or pay any cash dividend or premium or distribution on, or
    otherwise repay or prepay on account of, any shares of capital stock or
    other outstanding indebtedness of the Company except as provided pursuant to
    Schedule 4(d) hereof; provided, however, that the foregoing shall not
    prohibit the Company from repurchasing, redeeming or declaring or paying
    cash dividends or distributions on Preferred Stock provided that any such
    repurchases, redemptions, dividends and distributions are made solely in
    accordance with the terms of such Preferred Stock as in effect on the date
    hereof.

    (m) Other Registration Rights. The Company shall not grant any rights to
    register any of the securities of the Company, through demand rights,
    piggyback rights, or otherwise, to any person (a "Third Party"), provided,
    however, that the holders of the Preferred Stock and the parties set forth
    on Schedule 4(m) to the Schedule of Exceptions shall not be deemed to be
    Third Parties. If any Third Party has any such registration rights in effect
    on the date hereof, the Company shall, prior to the Closing, have all such
    Third Parties irrevocably waive such registration rights in form and
    substance reasonably satisfactory to the Purchasers, provided that, at a
    minimum, such waiver will prohibit (a) any such Third Party from including
    any securities in a Registration Statement (as defined in the Registration
    Rights Agreement), and (b) any such Third Party from exercising any right to
    register the Company's securities during the Registration Period.

    (ii) Except as on Schedule 4(m) to the Schedule of Exceptions, the Company
    shall not allow any shareholders of the Company, other than the holders of
    the Preferred Stock, to have any registration rights with respect to
    securities of the Company. Except as set forth in Schedule 4(m) to the
    Schedule of Exceptions, if any shareholders of the Company have any such
    rights, the Company shall, prior to the First Closing Date hereof, have all
    such shareholders irrevocably waive such registration rights.

    (n) Information. The Company will furnish upon request to each Purchaser, so
    long as it holds any Preferred Stock, (i) within 10 days of the filing with
    the SEC of its annual reports on Form 10-K, a certificate of the President,
    a Vice President or a senior financial officer of the Company stating that,
    based upon such examination or investigation and review of this Agreement as
    in the opinion of the signer is necessary to enable the signer to express an
    informed opinion with respect thereto, the Company is not or has not during
    such period been in default in the performance or observance of any of the
    terms, covenants or conditions hereof, or, if the Company shall be or shall
    have been in default, specifying all such defaults, and the nature and
    period of existence thereof, and what action the Company or such Subsidiary
    has taken, is taking or proposes to take with respect thereto; and (ii) the
    information the Company must deliver to any holder or to any prospective
    transferee of Securities in order to permit the sale or other transfer of
    such Securities pursuant to Rule 144A of the SEC or any similar rule then in
    effect. The Company will keep at its principal executive office a true copy
    of this Agreement (as at the time in effect), and cause the same to be
    available for inspection at such office during normal business hours and
    upon reasonable notice by any holder of Securities or any prospective
    transferee of Securities designated by a holder thereof.

    (o) Inspection of Properties and Books. So long as any Purchaser shall
    beneficially own any Securities, such Purchaser and its representatives and
    agents (collectively, the "Inspectors") shall have the right, at such
    Purchaser's expense during normal business hours and upon reasonable notice,
    to visit and inspect any of the properties of the Company, to examine the
    books of account and records of the Company, to make or be provided with
    copies and extracts therefrom, to discuss the affairs, finances and accounts
    of the Company with, and to be advised as to the same by, its officers,
    employees and independent public accountants (and by this provision the
    Company authorizes such accountants to discuss such affairs, finances and
    accounts, whether or not a representative of the Company is present) all at
    such reasonable times and intervals and to such reasonable extent as such
    Purchaser may desire; provided, however, that each Inspector shall hold in
    confidence and shall not make any disclosure (except to such Purchaser) of
    any such 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 information is necessary to avoid or
    correct a misstatement or omission in any Registration Statement filed
    pursuant to the Registration Rights Agreement, (b) the release of such
    information is ordered pursuant to a subpoena or other order from a court or
    government body of competent jurisdiction, or (c) such information has been
    made generally available to the public other than by disclosure in violation
    of this or any other agreement. Each Purchaser agrees that it shall, upon
    learning that disclosure of such information 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 information deemed confidential.

    (p) Pledge of Securities. The Company acknowledges and agrees that the Units
    may be pledged by a Purchaser in connection with a bona fide margin
    agreement or other loan or financing arrangement that is secured by the
    Units and the Securities. The pledge of Units and the Securities shall not
    be deemed to be a transfer, sale or assignment of the Units hereunder, and
    no Purchaser effecting a pledge of Units and the Securities shall be
    required to provide the Company with any notice thereof or otherwise make
    any delivery to the Company pursuant to this Agreement or any other
    Transaction Document. The Company hereby agrees to execute and deliver such
    documentation as a pledgee of the Units may reasonably request in connection
    with a pledge of the Units and the Securities to such pledgee by a
    Purchaser.

    (q) Variable Securities. The Company shall not, in any manner, issue or sell
    any rights, warrants or options to subscribe for or purchase Common Stock,
    or any other securities directly or indirectly convertible into or
    exchangeable or exercisable for Common Stock, at an effective conversion,
    exchange or exercise price that varies or may vary with the market price of
    the Common Stock, including by way of one or more reset(s) to any fixed
    price.

     

    (r) Stockholder Approvals; Issuance Limitations.

    (i) Within five (5) business days of the First Closing, the Company shall
    file with the SEC a Proxy Statement or Consent (the "Proxy Statement"), to
    be submitted to stockholders of the Company in connection with the
    Stockholder Approvals, and the Company shall use its best efforts to obtain
    the Stockholder Approvals as promptly as practicable following the First
    Closing. If the Stockholder Approvals have not been obtained within 75 days
    following the First Closing (the "Repurchase Event"), the Company shall
    immediately notify the holders of such failure and, within five days after
    the occurrence of the Repurchase Event, purchase from each holder of
    Preferred Stock, at a per share price equal to the Face Amount (as defined
    in the Certificate of Designations) plus accrued Dividends through the
    repurchase date, (the "Per Share Repurchase Price"), all shares of Preferred
    Stock (together with Warrants to purchase that number of Warrant Shares
    issuable with such number of shares) held by each Purchaser.

     

    (ii) If at any time following receipt of the stockholder approval referred
    to in Section 4(q)(i) above, the Company is prohibited by Rule 713 of the
    AMEX Company Guide or any successor or similar rule, or the rules of any
    other securities exchange or automated quotation system on which the Common
    Stock is then listed or traded (a "Triggering Event"), from issuing all of
    the shares of Common Stock issuable upon complete conversion of the
    Preferred Stock and complete exercise of the Warrants (without giving effect
    to the limitations on conversion and exercise contained in Article IV.D of
    the Certificate of Designation and Section 7(g) of the Warrants), the
    Company shall immediately notify the holders of such Triggering Event and,
    within a period of five (5) days after the occurrence of such Triggering
    Event, purchase from each holder of the Preferred Stock, at a per share
    purchase price equal to the greater of (a)(x) the quotient of the Face
    Amount plus accrued Dividends (y) divided by the Conversion Price and (z)
    multiplied by the Market Price, and (b)(x) the Face Amount together with
    accrued Dividends through the repurchase date (y) multiplied by 1.25 (the
    "Per Share Price"), such whole number of Preferred Stock such that the
    Common Stock issuable upon complete conversion of the Preferred Stock and
    complete exercise of the Warrants (without giving effect to the limitations
    on conversion and exercise contained in Article IV.D in the Certificate of
    Designations and Section 7(g) of the Warrants) is no longer prohibited by
    Rule 713 of the AMEX Company Guide (or any successor or similar rule) or the
    rules of any other securities exchange or automated quotation system on
    which the Common Stock is then listed or traded. The terms "Face Amount,"
    "Dividends," "Conversion Price" and "Market Price" shall have the meanings
    ascribed to them in the Certificate of Designations.

    (s) Waivers and Consents. Prior to the effectiveness of any Registration
    Statement filed in accordance with Section 2(a) of the Registration Rights
    Agreement, the Company shall have obtained proper waivers from any security
    holders having registration rights, if any, consistent with the provisions
    of Section 4(m) of this Agreement.

    (t) Confidential Agreement. Except for any disclosure required by applicable
    law or rules of the SEC or AMEX, the Company and each Purchaser will, and
    will direct its respective representatives to, hold in confidence all
    information concerning this Agreement and the placement of shares hereunder
    until the earlier of such time as (i) the Company has made a public
    announcement concerning the Agreement and the placement of shares hereunder
    or (ii) this Agreement is terminated.

     

 3. PARTICIPATION RIGHT

(a) Participation Right. Subject to the terms and conditions specified in this
Section 5, until the third anniversary of the Issuance Date, the holders of
shares of Preferred Stock shall have a right to participate with respect to the
issuance or possible issuance of any equity or equity-linked securities or debt
which is convertible into equity or in which there is an equity component,
including, but not limited to, any additional issuance of Preferred Stock, (as
the case may be, "Additional Shares"), on the same terms and conditions as
offered by the Company to the other purchasers of such Additional Shares. Each
time the Company proposes to offer any Additional Shares, the Company shall make
an offering of such Additional Shares to each holder of shares of Preferred
Stock in accordance with the following provisions:

 i.   The Company shall deliver a notice (the "Issuance Notice") to the holders
      of shares of Preferred Stock stating (a) its bona fide intention to offer
      such Additional Shares, (b) the number of such Additional Shares to be
      offered, (c) the price and terms, if any, upon which it proposes to offer
      such Additional Shares, and (d) the anticipated closing date of the sale
      of such Additional Shares.
 ii.  By written notification received by the Company, within 20 business days
      after giving of the Issuance Notice, any holder of shares of Preferred
      Stock may elect to purchase or obtain, at the price and on the terms
      specified in the Issuance Notice (provided that if the price is to be paid
      in whole or in part in consideration other than cash, the holders of
      Preferred Stock exercising their rights hereunder shall have the option to
      pay such consideration in cash equal to the fair market value of such
      non-cash consideration (valued in accordance with the method set forth in
      Article XI.D(ii)(f) of the Certificate of Designation, up to that number
      of such Additional Shares which equals such holder's Pro Rata Amount (as
      defined below). The "Pro Rata Amount" for any given holder of shares of
      Preferred Stock shall equal that portion of the Additional Shares that the
      Company proposes to offer which equals the proportion that the number of
      shares of Common Stock that such holder owns or has the right to acquire
      (without giving effect to the limitations contained in Article IV.D of the
      Certificate of Designation) bears to the total number of shares of Common
      Stock then outstanding (assuming in each case the full conversion,
      exercise or exchange of all Convertible Securities and Purchase Rights
      then outstanding); provided, however, that in the event that any such
      holder exercises its right to pay the consideration for the Additional
      Shares purchasable hereunder with shares of Preferred Stock increased (but
      not decreased) to the extent necessary to equal (x) such number of shares
      of Common Stock (if the Additional Shares being issued are Common Stock)
      or (y) that number of Additional Shares as are convertible into or
      exercisable or exchangeable for such number of shares of Common Stock (if
      the Additional Shares being issued are Convertible Securities or Purchase
      Rights), as is obtained by dividing (a) the Redemption Amount attributable
      to such holder's shares of Preferred Stock being redeemed by (b)(i) the
      price per share at which such Common Stock is being issued (if the
      Additional Shares being issued are Common Stock) or (ii) the conversion,
      exercise or exchange price at which such Additional Shares are convertible
      into or exercisable or exchangeable for shares of Common Stock (if the
      Additional Shares being issued are Convertible Securities or Purchase
      Rights), and in such event the Company shall be obligated to sell such
      number of Additional Shares to each such holder, even if the aggregate Pro
      Rata Amount for all such holders exceeds the aggregate amount of
      Additional Shares that the Company had initially proposed to offer. The
      Company shall promptly, in writing, inform each holder of shares of
      Preferred Stock which elects to purchase all of the Additional Shares
      available to it ("Fully-Exercising Holder") of any other holder's failure
      to do likewise. During the five-day period commencing after such
      information is given, each Fully-Exercising Holder shall be entitled to
      obtain that portion of the Additional Shares for which the holders of
      shares of Preferred Stock were entitled to subscribe but which were not so
      subscribed for by such holders which is equal to the proportion that the
      number of shares of Preferred Stock held by such Fully-Exercising Holder
      bears to the total number of shares of Preferred Stock held by all
      Fully-Exercising Holders who wish to purchase any of the unsubscribed
      shares.
 iii. If all Additional Shares which the holders of shares of Preferred Stock
      are entitled to obtain pursuant to subparagraph (ii) of this Section 5 are
      not elected to be obtained as provided in such subparagraph, the Company
      may, during the 75-day period following the expiration of the period
      provided in such subparagraph, offer the remaining unsubscribed portion of
      such Additional Shares to any person or persons at a price not less than,
      and upon terms no more favorable to the offeree than, those specified in
      the Issuance Notice. If the Company does not consummate the sale of such
      Additional Shares within such period, the right provided hereunder shall
      be deemed to be revived and such Additional Shares shall not be offered or
      sold unless first reoffered to the holders of shares of Preferred Stock in
      accordance herewith.
 iv.  The participation right set forth in this Section 5 may not be assigned or
      transferred, except that such right is assignable by each holder of shares
      of Preferred Stock to any wholly-owned subsidiary or parent of, or to any
      corporation or entity that is, within the meaning of the Securities Act of
      1933, as amended, controlling, controlled by or under common control with,
      any such holder.
 v.   The purchase right granted by this Section 5 shall not apply to: (i) the
      grant or exercise of any stock, options or warrants which may hereafter be
      granted or exercised under any equity incentive plan of the Company now
      existing or to be implemented in the future which is approved in good
      faith by the Board of Directors of the Company or a committee of
      non-employee directors established for such purpose; (ii) the conversion
      of the Series D Preferred Stock or the exercise of the Warrants; (iii) the
      issuance of securities in connection with a bona fide business
      acquisition; (iv) the issuance of stock, warrants or other securities or
      rights to persons or entities in connection with commercial lease lines or
      bank financing provided that such issuances are primarily for purposes
      other than equity financing; or (v) the issuance of securities in
      connection with strategic transactions involving the Company and other
      entities, including joint ventures, manufacturing, marketing or
      distribution arrangements (but excluding any sale of substantially all of
      the Company's assets or any merger or consolidation of the Corporation
      into or with another entity in which the holders of the capital stock of
      the Company immediately prior to such merger or consolidation do not hold
      at least fifty percent (50%) in voting power of the surviving
      corporation).

(b) Consideration for Preferred Shares. In the event that any holder of shares
of Preferred Stock exercises its participation right under this Section 5 and
also exercises its redemption right pursuant to Article VIII.A(ix) of the
Certificate of Designation, such holder shall be entitled to use the shares of
Preferred Stock that are being so redeemed as the consideration for the purchase
of its allocated portion of Additional Shares pursuant to this Section 5, with
the shares of Preferred Stock being valued at the Redemption Amount for such
purpose.

 

 1. TRANSFER AGENT INSTRUCTIONS.

    (a) If the Company's transfer agent is participating in the Depository Trust
    Company ("DTC") Fast Automated Securities Transfer program, and so long as
    the certificates therefor do not bear a legend and the holder of the
    Preferred Stock or Warrants (any and each a "Holder") thereof is not then
    required to return such certificate for the placement of a legend thereon,
    the Company shall cause its transfer agent to electronically transmit all
    Conversion Shares and Warrant Shares to the Holder by crediting the account
    of the Holder or its nominee with DTC through its Deposit Withdrawal Agent
    Commission System ("DTC Transfer"). If the aforementioned conditions to a
    DTC Transfer are not satisfied, the Company shall deliver to the Holder
    physical certificates representing the Conversion Shares and Warrant Shares,
    as applicable. Further, the Holder may instruct the Company to deliver to
    the Holder physical certificates representing the Conversion Shares and
    Warrant Shares in lieu of delivering such shares by way of DTC Transfer.

    (b) The Company warrants that no instruction other than such instructions
    referred to in this Section 6, the Registration Rights Agreement and stop
    transfer instructions to give effect to Section 2(f) or 2(g) hereof, 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 each Purchaser's
    obligations and agreement set forth in Section 2(g) hereof to resell the
    Securities pursuant to an effective registration statement or under an
    exemption from the registration requirements of applicable securities law.

    (c) If any Purchaser provides the Company and the transfer agent with an
    opinion of counsel, which opinion of counsel shall be in form, substance and
    scope customary for opinions of counsel in comparable transactions, to the
    effect that the Securities have been sold or transferred pursuant to an
    exemption from registration, or any Purchaser provides the Company with an
    opinion of counsel, which opinion of counsel shall be in form, substance and
    scope customary for opinions of counsel in comparable transactions and
    reasonably acceptable to the Company, to the effect that such Securities may
    be sold under Rule 144(k), 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 in such name and in such
    denominations as specified by such Purchaser. The Company shall assume the
    reasonable costs associated with any such opinion.

     

    CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.

     

    The obligation of the Company hereunder to issue and sell the Units to each
    Purchaser hereunder at each of the First Closing and the Second Closing
    (collectively the "Closings") is subject to the satisfaction, at or before
    the Closings, 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) Each Purchaser shall have executed such Purchaser's Execution Page to
    this Agreement and the other Transaction Documents and delivered executed
    copies of the same to the Company via facsimile, to be followed with
    originals sent via overnight courier.

    (b) Each Purchaser shall have delivered such Purchaser's Purchase Price for
    the Units being purchased at the Closings in accordance with Section 1(b)
    above.

    (c) The representations and warranties of each Purchaser shall be true and
    correct 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, which representations and warranties shall be true and
    correct as of such date), and such Purchaser 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 such Purchaser at or prior to the Closing Date.

    (d) No statute, rule, regulation, executive order, decree, ruling or
    injunction shall have been enacted, entered, promulgated or endorsed by 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.

     

    CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE.

 

The obligation of each Purchaser (which shall be several but not joint)
hereunder to purchase the Units to be purchased by it at each of the First
Closing and the Second Closing is subject to the satisfaction, at or before each
of the Closing Date for the First Closing and the Second Closing, respectively,
of each of the following conditions, provided that such conditions are for such
Purchaser's sole benefit and may be waived by such Purchaser at any time in such
Purchaser's sole discretion:

(a) As to the First Closing:

 

The Company shall have executed this Agreement and the other Transaction
Documents and delivered executed copies of the same to such Purchaser via
facsimile, to be followed with originals sent via overnight courier.

The Certificate of Designation shall have been filed and accepted for filing
with the Secretary of State of the State of Delaware and a copy thereof
certified by the Secretary of State of Delaware shall have been delivered to
such Purchaser.

The Company shall have delivered to such Purchaser duly executed certificates
and Warrants (each in such denominations as such Purchaser shall request)
representing the Preferred Stock and Warrants being so purchased by such
Purchaser at the Closing in accordance with Section 1(b) above.

Trading in the Common Stock shall not have been suspended by the SEC or AMEX.

The representations and warranties of the Company shall be true and correct 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,
which representations and warranties shall be true and correct as of such 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 Company shall have delivered for the benefit of the
Purchasers, a certificate, executed by the Chief Executive Officer of the
Company after reasonable investigation, dated as of the Closing Date to the
foregoing effect and as to such other matters as may reasonably be requested by
such Purchaser prior to the Closing.

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

Each Purchaser 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
Purchaser and in substantially the form of Exhibit D attached hereto.

There shall have been no material adverse changes and no material adverse
developments in the business, properties, operations, prospects, financial
condition or results of operations of the Company, taken as a whole, since the
date hereof, and no information, of which the Purchasers are not currently
aware, shall come to the attention of the Purchasers that might have a Material
Adverse Effect.

Each Purchaser shall have received a copy of resolutions, duly adopted by the
Board of Directors of the Company, which shall be in full force and effect at
the time of the Closing, authorizing the consummation by the Company of the
transactions contemplated hereby and by the other Transaction Documents,
certified as such by the Secretary or Assistant Secretary of the Company and
such other documents reasonably requested by such Purchaser.

The Company shall have delivered to each Purchaser copies of the Debt Documents
executed by the Lenders and dated the date hereof.

The Company shall have delivered to Purchaser a copy of that certain letter
agreement of even date herewith addressed to BayStar (the "Letter Agreement")
containing original signatures.

 

As to the Second Closing:

The Company shall have executed this Agreement and the other Transaction
Documents and delivered executed copies of the same to such Purchaser via
facsimile, to be followed with originals sent via overnight courier.

The Company shall have delivered to such Purchaser duly executed certificates
and Warrants (each in such denominations as such Purchaser shall request)
representing the Preferred Stock and Warrants being so purchased by such
Purchaser at the Closing in accordance with Section 1(b) above.

Trading in the Common Stock shall not have been suspended by the SEC or AMEX.

The representations and warranties of the Company shall be true and correct as
of the date when made and as of the Second Closing Date as though made at that
time (except for representations and warranties that speak as of a specific
date, which representations and warranties shall be true and correct as of such
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 Second Closing Date. The Company shall have delivered for the benefit of
the Purchasers, a certificate, executed by the Chief Executive Officer of the
Company after reasonable investigation, dated as of the Second Closing Date to
the foregoing effect and as to such other matters as may reasonably be requested
by such Purchaser prior to the Second Closing.

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

Each Purchaser shall have received an opinion of the Company's counsel, dated as
of the Second Closing Date, in form, scope and substance reasonably satisfactory
to the Purchaser and in substantially the form of Exhibit D attached hereto.

There shall have been no material adverse changes and no material adverse
developments in the business, properties, operations, prospects, financial
condition or results of operations of the Company, taken as a whole, since the
date hereof, and no information, of which the Purchasers are not currently
aware, shall come to the attention of the Purchasers that might have a Material
Adverse Effect.

The resolutions, duly adopted by the Board of Directors of the Company, and
delivered at the First Closing, shall be in full force and effect at the time of
the Second Closing, authorizing the consummation by the Company of the
transactions contemplated hereby and by the other Transaction Documents, and
such other documents reasonably requested by such Purchaser.

The debt referenced in the Debt Conversion Agreements dated the date hereof
shall have been converted in accordance with the terms of the Debt Conversion
Agreements.

The Stockholder Approvals shall have been obtained.

The Company shall have received the agreements described on Schedule 4(d)
hereof, in form and substance satisfactory to the Purchasers in their sole and
absolute discretion.

 

GOVERNING LAW; MISCELLANEOUS.

 

Governing Law; Jurisdiction. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware applicable to contracts
made and to be performed in the State of Delaware. The Company and each of the
Purchasers irrevocably consent to the jurisdiction of the United States federal
courts and the state courts located in the State of Delaware in any suit or
proceeding based on or arising under this Agreement and irrevocably agree that
all claims in respect of such suit or proceeding may be determined in such
courts. The Company and each of the Purchasers irrevocably waive the defense of
an inconvenient forum to the maintenance of such suit or proceeding. The Company
and each of the Purchasers further agrees that service of process mailed by
first class mail shall be deemed in every respect effective service of process
in any such suit or proceeding. Nothing herein shall affect the right of the
Company or any Purchaser to serve process in any other manner permitted by law.
The Company and each of the Purchasers agrees 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.

Counterparts

. This Agreement may be executed in two or more counterparts, all of which shall
be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party.
This Agreement, once executed by a party, may be delivered to the other parties
hereto by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement. In the event any signature
is delivered by facsimile transmission, the party using such means of delivery
shall cause the manually executed Execution Page(s) hereof to be physically
delivered to the other party within five (5) days of the execution hereof,
provided that the failure to so deliver any manually executed Execution Page
shall not affect the validity or enforceability of this Agreement.

Construction

. Whenever the context requires, the gender of any word used in this Agreement
includes the masculine, feminine or neuter, and the number of any word includes
the singular or plural. Unless the context otherwise requires, all references to
articles and sections refer to articles and sections of this Agreement, and all
references to schedules are to schedules attached hereto, each of which is made
a part hereof for all purposes. The descriptive headings of the several articles
and sections of this Agreement are inserted for purposes of reference only, and
shall not affect the meaning or construction of any of the provisions hereof.

Severability

. If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.

Entire Agreement; Amendments

. This Agreement, the other Transaction Documents (including any schedules and
exhibits hereto and thereto) and the Letter Agreement contain the entire
understanding of the Purchasers, the Company, their affiliates and persons
acting on their behalf with respect to the matters covered herein and therein
and, except as specifically set forth herein or therein, neither the Company nor
any Purchaser makes any representation, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived other than
by an instrument in writing signed by the party to be charged with enforcement
and no provision of this Agreement may be amended other than by an instrument in
writing signed by the Company and each Purchaser.

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, by responsible overnight carrier or by
confirmed facsimile, and shall be effective five (5) days after being placed in
the mail, if mailed, or upon receipt or refusal of receipt, if delivered
personally or by responsible overnight carrier or confirmed facsimile, in each
case addressed to a party. The addresses for such communications shall be:

If to the Company:

 

LifePoint, Inc.

1205 South DuPont Street

Ontario, CA 91761

Telephone: (909) 418-3000

Fax: (909) 418-3003

Attn: Chief Executive Officer

with a copy simultaneously transmitted by like means to (which transmittal shall
not constitute notice hereunder):

Latham & Watkins LLP

701 "B" Street, Suite 2100

San Diego, CA 92101

Telephone: (619) 236-1234

Fax: (619) 696-7419

Attn: David A. Hahn, Esq.

 

If to any Purchaser, to such address set forth under such Purchaser's name on
the Execution Page hereto executed by such Purchaser.

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

Successors and Assigns

. This Agreement shall be binding upon and inure to the benefit of the parties
and their successors and assigns. Except as provided herein, the Company shall
not assign this Agreement or any rights or obligations hereunder. Any Purchaser
may assign or transfer the Securities pursuant to the terms of the Certificate
of Designation, the Warrants and this Agreement or assign such Purchaser's
rights hereunder or thereunder to any other person or entity. In addition, and
notwithstanding anything to the contrary contained in this Agreement, the
Registration Rights Agreement or the Warrants, the Securities may be pledged and
all rights of any Purchaser under this Agreement or any other agreement or
document related to the transactions contemplated hereby may be assigned,
without further consent of the Company, to a bona fide pledgee in connection
with such Purchaser's margin or brokerage account, provided such pledge is
consistent with applicable laws, rules and regulations, including those
promulgated under the Securities Act.

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; provided that Section
4(e) may be enforced by either BayStar or NEP.

Survival. The representations and warranties of the Company and the agreements
and covenants of the parties set forth in Sections 2, 3, 4, 5, 6, 7, 8 and 9
(including, but not limited to, the participation rights of the Purchasers set
forth in Section 5) hereof shall survive the Closings notwithstanding any due
diligence investigation conducted by or on behalf of any Purchaser. Moreover,
none of the representations and warranties made by the Company herein shall act
as a waiver of any rights or remedies any Purchaser may have under applicable
U.S. federal or state securities laws.

Publicity

. Except as otherwise set forth in the Registration Rights Agreement, the
Company and each Purchaser whose name shall appear therein shall have the right
to approve before issuance any press releases, SEC or AMEX filings, or any other
public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of the Purchasers, to make any press release or SEC or AMEX filings
with respect to such transactions as is required by applicable law and
regulations (although the Purchasers shall be consulted by the Company in
connection with any such press release which contains such Purchaser's name and
filing prior to its release and shall be provided with a copy thereof).

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.

Payment Set Aside

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

Joint Participation in Drafting

. Each party to this Agreement has participated in the negotiation and drafting
of this Agreement and the other Transaction Documents. As such, the language
used herein and therein shall be deemed to be the language chosen by the parties
hereto to express their mutual intent, and no rule of strict construction will
be applied against any party to this Agreement.

Equitable Relief

. The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to each Purchaser 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 hereunder (including, but not
limited to, its obligations pursuant to Section 5 hereof) will be inadequate and
agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Agreement (including, but not limited to, its obligations
pursuant to Section 5 hereof), that each Purchaser shall be entitled, in
addition to all other available remedies, to an injunction restraining any
breach and requiring immediate issuance and transfer of the Securities, without
the necessity of showing economic loss and without any bond or other security
being required.

Indemnification by Company

. In consideration of each Purchaser's execution and delivery of this Agreement
and the other Transaction Documents and purchase of the Securities hereunder,
and in addition to all of the Company's other obligations under this Agreement
and the other Transaction Documents, from and after the Closing, the Company
shall defend, protect, indemnify and hold harmless each Purchaser and each other
holder of the Securities and all of their stockholders, partners, members,
officers, directors, employees and direct or indirect investors and any of the
foregoing persons' agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement, collectively, the "Indemnitees") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and disbursements
(the "Indemnified Liabilities"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (i) any misrepresentation or breach of any
representation or warranty made by the Company in this Agreement, any other
Transaction Document or any other certificate, instrument or document
contemplated hereby or thereby, (ii) any breach of any covenant, agreement or
obligation of the Company contained in this Agreement, any other Transaction
Document or any other certificate, instrument or document contemplated hereby or
thereby or (iii) any cause of action, suit or claim brought or made against such
Indemnitee by a third party (including for these purposes a derivative action
brought on behalf of the Company) and arising out of or resulting from (A) the
execution, delivery, performance or enforcement of this Agreement, any other
Transaction Document or any other certificate, instrument or document
contemplated hereby or thereby, (B) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of the issuance
and sale of the Securities, (C) any disclosure made by such Purchaser pursuant
to Section 4(b) or 4(n) hereof, or (D) the status of such Purchaser or holder of
the Securities as an investor in the Company. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law. Except as
otherwise set forth herein, the mechanics and procedures with respect to the
rights and obligations under this Section 9(o) shall be the same as those set
forth in Section 6 of the Registration Rights Agreement.

Knowledge

. As used in this Agreement, the term "knowledge" with respect to the Company
shall mean and include actual knowledge of the Company's directors and executive
officers and that knowledge which a reasonably prudent business person, acting
in his/her capacity as either a director or an executive officer, as applicable,
could have obtained in the management of his or her business affairs after
making due inquiry and exercising due diligence which a prudent business person
should have made or exercised, as applicable, with respect thereto.

Additional Acknowledgement

. Each Purchaser acknowledges that it has independently evaluated the merits of
the transactions contemplated by this Agreement and the other Transaction
Documents, that it has independently determined to enter into the transactions
contemplated hereby and thereby, that it is not relying on any advice from or
evaluation by any other Purchaser, and that it is not acting in concert with any
other Purchaser in making its purchase of securities hereunder. The Purchasers
and, to its knowledge, the Company agree that the Purchasers have not taken any
actions that would deem such Purchasers to be members of a "group" for purposes
of Section 13(d) of the Exchange Act and the Purchasers have not agreed to act
together for the purpose of acquiring, holding, voting or disposing of equity
securities of the Company. Each Purchaser further acknowledges that BayStar has
retained Drinker Biddle & Reath LLP ("DB&R") to act as its counsel in connection
with the transactions contemplated by this Agreement and the other Transaction
Documents and that DB&R has not acted as counsel for any of the other Purchasers
in connection therewith and none of the other Purchasers have the status of a
client of DB&R for conflict of interest or other purposes as a result thereof.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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

 

 

LIFEPOINT, INC.

 

 

By:

Name: Linda H. Masterson

Title: Chief Executive Officer

 

 

PURCHASERS:

 

BAYSTAR CAPITAL II, LP

 

By:

Name: ____________________________

Title: ______________________________

 

ADDRESS: __________________________

____________________________________

____________________________________

 

Attn: ________________________________

 

Telephone: ____________________________

Facsimile: _____________________________

E-mail: _______________________________

 

First Closing Units: _________________________

Second Closing Units: _______________________

Purchase Price ($1,000 per Unit): $ _____________

 

 

 

NEW ENGLAND PARTNERS

 

By:

Name: ____________________________

Title: ______________________________

 

ADDRESS: __________________________

____________________________________

____________________________________

 

Attn: ________________________________

 

Telephone: ____________________________

Facsimile: _____________________________

E-mail: _______________________________

 

 

First Closing Units: _________________________

Second Closing Units: _______________________

Purchase Price ($1,000 per Unit): $ _____________

 

 

PURCHASERS: ___________________________

 

Name: _____________________________

Title: ______________________________

 

ADDRESS: __________________________

____________________________________

____________________________________

 

ATTN: ______________________________

 

Telephone: ____________________________

Facsimile: _____________________________

E-mail: _______________________________

 

Attn: ________________________________

 

First Closing Units: _________________________

Second Closing Units: _______________________

Purchase Price ($1,000 per Unit): $ _____________