<PAGE>

                                                                  Exhibit  4.1
                                                                 -------------

                          SECURITIES PURCHASE AGREEMENT

     This  Securities  Purchase  Agreement  (this  "AGREEMENT")  is  dated as of
December  31,  2002,  by  and  among  Electric  Fuel  Corporation,  a  Delaware
corporation  (the  "COMPANY"),  and  the  purchasers identified on the signature
pages  hereto  (each  a  "PURCHASER"  and  collectively  the  "PURCHASERS").

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

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

                                   ARTICLE I.
                                  DEFINITIONS


   1.1   Definitions.  In  addition to  the  terms  defined  elsewhere  in  this
         -----------
Agreement,  for  all  purposes of this Agreement, the following terms shall have
the  meanings  indicated  in  this  Section  1.1:

     "ACTION"  means  any action, suit, inquiry, notice of violation, proceeding
(including any partial proceeding such as a deposition) or investigation pending
or threatened in writing against or affecting the Company, any Subsidiary or any
of  their respective properties before or by any court, arbitrator, governmental
or administrative agency, regulatory authority (federal, state, county, local or
foreign),  stock  market,  stock  exchange  or  trading  facility.

     "AFFILIATE"  means  any  Person that, directly or indirectly through one or
more  intermediaries,  controls  or  is controlled by or is under common control
with  a  Person,  as  such  terms  are  used  in  and  construed under Rule 144.

     "BUSINESS  DAY"  means  any  day  except Saturday, Sunday and any day which
shall  be  a federal legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to  close.

     "CLOSING"  means  the  closing  of  the purchase and sale of the Securities
pursuant  to  Section2.
              --------

     "CLOSING  DATE"  means  the  date  of  the  Closing.

     "COMMISSION"  means  the  Securities  and  Exchange  Commission.

     "COMMON  STOCK"  means  the common stock of the Company, $.01 par value per
share,  and  any  securities  into  which  such  common  stock  may hereafter be
reclassified.

<PAGE>

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

     "COMPANY  COUNSEL"  means  Yaakov  Har-Oz,  Esq.

     "DEBENTURES"  means  $3,500,000  in  the  aggregate  principal amount of 9%
Secured  Convertible Debentures due on the thirtieth (30th) month anniversary of
the  issuance  thereof,  in  the  form  of  Exhibit  A  hereto.
                                            ----------

     "EFFECTIVE  DATE"  means  the  date that the initial Registration Statement
required by the Registration Rights Agreement is first declared effective by the
Commission.

      "EXCHANGE  ACT"  means  the  Securities  Exchange  Act  of  1934,  as
amended.

     "FIRST  WARRANTS"  means  common  stock  purchase warrants issuable to each
Purchaser  at  the  Closing,  in  the  form  attached  hereto  as  Exhibit  C-1.
                                                                   ------------

     "INDEBTEDNESS"  shall mean the principal amount of, premium, if any, profit
participation,  if any, and accrued and unpaid interest on and all other amounts
and costs payable in respect of (a) indebtedness for money borrowed from others;
(b) indebtedness guaranteed, directly or indirectly, in any manner, or in effect
guaranteed,  directly  or  indirectly,  in  any  manner  through  an  agreement,
contingent  or  otherwise,  to supply funds to, or in any other manner invest in
the  debtor, or to purchase indebtedness, or to purchase and pay for property if
not delivered or pay for services if not performed, primarily for the purpose of
enabling  the debtor to make payment of the indebtedness or to assure the owners
of  the indebtedness against loss; (c) all indebtedness secured by any mortgage,
lien,  pledge,  charge  or other encumbrance upon property owned by the Company;
(d)  all  indebtedness  of  such Person created or arising under any conditional
sale,  lease (intended primarily as a financing device) or other title retention
or  security  agreement  with  respect  to property acquired by the Company even
though  the  rights  and  remedies  of  the  seller, lessor or lender under such
agreement  or  lease in the event of a default may be limited to repossession or
sale  of  such property; and (e) renewals, extensions and refundings of any such
Indebtedness.

     "INTELLECTUAL  PROPERTY SECURITY AGREEMENT" means the Intellectual Property
Security  Agreement,  dated  as  of the date of this Agreement, by and among the
Company,  the  subsidiaries of the Company party thereto, and the holders of the
Debentures,  pursuant  to  which  the  obligations  of  the  Company  under  the
Debentures  are  secured  by  the  intellectual  property of the Company and the
subsidiaries  party thereto,  such  agreement  in the form of Exhibit D attached
                                                              ---------
hereto.

     "INVESTMENT  AMOUNT"  means, with respect to each Purchaser, the investment
amount  indicated  below  such  Purchaser's  name  on the signature page of this
Agreement


                                      -2-
<PAGE>

     "LIEN"  means  any  lien,  charge, encumbrance, security interest, right of
first  refusal  or  other  restrictions  of  any  kind.

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

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

     "PURCHASER  PERCENTAGE"  means, with respect to a Purchaser, the percentage
equal  to  the  product  of  (x) a fraction, the numerator of which shall be the
Investment Amount paid by such Purchaser on the Closing Date and the denominator
of  which shall be the aggregate Investment Amount paid by all Purchasers on the
Closing  Date  times  (y)  100.

     "REGISTRATION  STATEMENT"  means  a  registration  statement  meeting  the
requirements  set  forth  in  the Registration Rights Agreement and covering the
resale  by  the  Purchasers  of  the  Underlying  Shares and the Warrant Shares.

     "REGISTRATION  RIGHTS  AGREEMENT"  means the Registration Rights Agreement,
dated as of the date of this Agreement, among the Company and the Purchasers, in
the  form  of  Exhibit  B  hereto.
               ----------

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

     "SECOND  WARRANTS"  means  common  stock purchase warrants issuable to each
Purchaser  at  the  Closing,  in  the  form  attached  hereto  as  Exhibit  C-2.
                                                                   ------------

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

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


     "SECURITY  AGREEMENT" means the Security Agreement, dated as of the date of
this  Agreement,  by  and  among the Company and the subsidiaries of the Company
party  thereto  and  the  holders  of  the  Debentures,  pursuant  to  which the
obligations of the Company under the Debentures are secured by the assets of the
Company  and  its  subsidiaries,  such  agreement  in  the  form  of  Exhibit E.
                                                                     ----------

     "SUBSIDIARY"  means  any  subsidiary  of the Company that is required to be
listed  in  Schedule  3.1(a), provided, that  to  the extent no subsidiaries are
            ----------------
listed  in Schedule  3.1(a),  any  reference  to  "Subsidiary" or "Subsidiaries"
in  the Transaction  Documents  shall  be  disregarded.

     "THIRD  WARRANTS"  means  common  stock  purchase warrants issuable to each
Purchaser  at  the  Closing,  in  the  form  attached  hereto  as  Exhibit  C-3.
                                                                   ------------


                                      -3-
<PAGE>

     "TRADING  DAY"  means  (i)  a  day on which the Common Stock is traded on a
Trading Market, or (ii) if the Common Stock is not listed on a Trading Market, a
day  on  which  the  Common  Stock  is traded in the over-the-counter market, as
reported  by  the OTC Bulletin Board, or (iii) if the Common Stock is not quoted
on  the  OTC  Bulletin  Board,  a day on which the Common Stock is quoted in the
over-the-counter  market  as  reported by Pink Sheets LLC (formerly the National
Quotation Bureau Incorporated) (or any similar organization or agency succeeding
to  its  functions  of  reporting  prices); provided, that in the event that the
Common  Stock is not listed or quoted as set forth in (i), (ii) and (iii) above,
then  Trading  Day  shall  mean  a  Business  Day.

     "TRADING  MARKET"  means  whichever  of  the  New  York Stock Exchange, the
American  Stock  Exchange,  the  Nasdaq  National  Market or the Nasdaq SmallCap
Market  that  the  Common  Stock  is listed or quoted for trading on the date in
question.

     "TRANSACTION  DOCUMENTS" means this Agreement, the Debentures, the Security
Agreement,  the  Intellectual  Property  Security  Agreement,  the Warrants, the
Registration  Rights  Agreement,  the  Transfer Agent Instructions and any other
documents  or  agreements  executed  in  connection  with  the  transactions
contemplated  hereunder.

     "TRANSFER  AGENT  INSTRUCTIONS"  means  the  Company's  Transfer  Agent
Instructions  in  the  form  of  Exhibit  F.
                                 ----------

     "UNDERLYING SHARES" means the shares of Common Stock issuable in respect of
the  Debentures,  including  the  shares  of Common Stock issuable in respect of
interest  on  the  Debentures.

     "WARRANTS"  means  First  Warrants,  the  Second  Warrants  and  the  Third
Warrants.

     "WARRANT SHARES" means the shares of Common Stock issuable upon exercise of
the  Warrants.
                                   ARTICLE II.
                                PURCHASE AND SALE

   2.1  Closing.  Subject  to  the  terms  and  conditions  set  forth  in  this
        -------
Agreement,  at  the  Closing the Company shall issue and sell to each Purchaser,
and  each Purchaser shall, severally and not jointly, purchase from the Company,
the  Debentures  and  the  Warrants,  for the aggregate purchase price set forth
below  each  Purchaser's  address on the signature pages to this Agreement.  The
Closing  shall  take  place at the offices of Bryan Cave LLP, 1290 Avenue of the
Americas,  New  York,  NY  10104 on the date hereof or at such other location or
time  as  the  parties  may  agree.

   2.2  Closing  Deliveries.  (a)  At  the Closing, the Company shall deliver or
        -------------------
cause  to  be  delivered  to  each  Purchaser  the  following:

          (i)  this  Agreement  duly  executed  by  the  Company;

                                      -4-
<PAGE>


          (ii) a Debenture, registered in the name of such Purchaser, evidencing
     the  principal  amount  of  Debentures  purchased  by such Purchaser, which
     amount  is  such  Purchaser's  Investment  Amount;

          (iii)  a  certificate  evidencing  a  number of shares of Common Stock
     equal  to  (x)  387,301  times  (y)  such Purchaser's Purchaser Percentage,
     registered  in  the  name  of  such  Purchaser, which amount represents the
     payment  of  interest,  at  the  rate  of  9% per annum, on the outstanding
     principal  amount of the Debentures for the first nine months following the
     Closing  Date;

          (iv)  a  First  Warrant,  registered  in  the  name of such Purchaser,
     pursuant to which such Purchaser shall have the right to acquire the number
     of shares of Common Stock equal to (x) 1,166,700 times (y) such Purchaser's
     Purchaser  Percentage,  at  an  exercise  price  of  $.84  per  share;

          (v)  a  Second  Warrant,  registered  in  the  name of such Purchaser,
     pursuant to which such Purchaser shall have the right to acquire the number
     of shares of Common Stock equal to (x) 1,166,700 times (y) such Purchaser's
     Purchaser  Percentage,  at  an  exercise  price  of  $.89  per  share;

          (vi)  a  Third  Warrant,  registered  in  the  name of such Purchaser,
     pursuant to which such Purchaser shall have the right to acquire the number
     of  shares  of  Common  Stock equal to (x) 1,166,700 times such Purchaser's
     Purchaser  Percentage,  at  an  exercise  price  of  $.93  per  share;

          (vii)  the legal opinion of Company Counsel, in agreed form, addressed
     to  the  Purchasers;

          (viii) the Registration Rights Agreement duly executed by the Company;

          (ix)  the  Security  Agreement  duly  executed  by the Company and the
     subsidiaries  of  the  Company  party  thereto;

          (x)  the Intellectual Property Security Agreement duly executed by the
     Company  and  the  subsidiaries  of  the  Company  party  thereto;  and

          (xi)  the  Transfer  Agent  Instructions  executed  by the Company and
     delivered  to  and  acknowledged  by  the  Company's  transfer  agent.

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

          (i)  this  Agreement  duly  executed  by  such  Purchaser;


                                      -5-
<PAGE>

          (ii)  such Purchaser's Investment Amount, in United States dollars and
     in  immediately available funds, by wire transferr to an account designated
     in  writing  by  the  Company  for  such  purpose;

          (iii)  the  Security  Agreement  duly  executed  by  such  Purchaser;

          (iv)  the  Intellectual  Property  Security Agreement duly executed by
     such  Purchaser;  and

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

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

   5.1.  Representations  and  Warranties  of  the  Company.  The Company hereby
         --------------------------------------------------
makes  the  following  representations  and  warranties  to  each  Purchaser:

     (a) Subsidiaries.  The Company has no direct or indirect Subsidiaries other
         ------------
than  those  listed in Schedule 3.1(a).  Except as disclosed in Schedule 3.1(a),
                       ---------------                          ---------------
the  Company  owns,  directly  or  indirectly,  all of the capital stock of each
Subsidiary  free  and  clear  of  any  and  all  Liens,  and  all the issued and
outstanding  shares  of  capital stock of each Subsidiary are validly issued and
are  fully  paid,  non-assessable  and  free  of  preemptive and similar rights.

     (b) Organization and Qualification. Each of the Company and each Subsidiary
         ------------------------------
is  an  entity duly incorporated or otherwise organized, validly existing and in
good  standing  under  the  laws  of  the  jurisdiction  of its incorporation or
organization  (as applicable), with the requisite power and authority to own and
use  its  properties  and  assets  and  to  carry  on  its business as currently
conducted.  Neither the Company nor any Subsidiary is in violation of any of the
provisions of its respective certificate or articles of incorporation, bylaws or
other  organizational  or  charter  documents.  Each  of  the  Company  and each
Subsidiary  is  duly  qualified to conduct business and is in good standing as a
foreign  corporation or other entity in each jurisdiction in which the nature of
the  business  conducted  or  property  owned  by  it  makes  such qualification
necessary,  except  where the failure to be so qualified or in good standing, as
the case may be, could not, individually or in the aggregate, have or reasonably
be  expected  to  result  in  (i) an adverse effect on the legality, validity or
enforceability  of  any Transaction Document, (ii) a material and adverse effect
on  the  results  of  operations, assets, business or financial condition of the
Company  and  the Subsidiaries, taken as a whole, or (iii) an adverse impairment
to  the Company's ability to perform on a timely basis its obligations under any
Transaction  Document  (any of (i), (ii) or (iii), a "MATERIAL ADVERSE EFFECT").

     (c) Authorization; Enforcement.  The  Company  has  the requisite corporate
         ---------------------------
power  and  authority  to  enter  into  and  to  consummate  the  transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations  thereunder.  The  execution and delivery of each of the Transaction
Documents  by  the  Company  and  the  consummation  by  it  of the transactions
contemplated  thereby  have  been duly authorized by all necessary action on the
part  of  the  Company  and  no  further  action  is  required by the Company in
connection therewith.  Each Transaction Document has been (or upon delivery will

                                      -6-
<PAGE>


have  been)  duly executed by the Company and, when delivered in accordance with
the  terms  hereof,  will  constitute  the  valid  and binding obligation of the
Company enforceable against the Company in accordance with its terms, except (a)
as  such enforceability may be limited by bankruptcy, insolvency, reorganization
or  similar laws affecting creditors' rights generally, (b) as enforceability of
any indemnification and contribution provisions may be limited under the federal
and state securities laws and public policy, and (c) that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable  defenses  and  to  the  discretion  of  the  court  before  which any
proceeding  therefor  may  be  brought.

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

     (e) Filings, Consents and Approvals. Neither the Company nor any Subsidiary
         -------------------------------
is  required  to obtain any consent, waiver, authorization or order of, give any
notice  to,  or make any filing or registration (collectively, "CONSENTS") with,
any  court  or  other  federal,  state, local or other governmental authority or
other  Person  in connection with the execution, delivery and performance by the
Company  of  the Transaction Documents, other than (i) the filing of appropriate
UCC  financing  statements  with  the  appropriate  states and other authorities
pursuant  to  the  Security  Agreement  and  the  Intellectual Property Security
Agreement,  (ii)  the  filing  with  the  Commission of one or more Registration
Statements  in  accordance  with  the  requirements  of  the Registration Rights
Agreement,  (iii)  the  application(s)  to  the  Nasdaq  National Market for the
listing  of  the Underlying Shares and Warrant Shares for trading thereon if and
in  the  time and manner required thereby, (iv) all filings required pursuant to
Section  4.5  hereof, and (v) those Consents set forth in Schedule 3.1(e), which
                                                          ---------------
Consents  have  been  obtained  prior  to  the  date  hereof.

     (f) Issuance of  the  Securities.  The Securities have been duly authorized
         -----------------------------
and, when issued and paid for in accordance with the Transaction Documents, will
be  duly and validly issued, fully paid and nonassessable, free and clear of all
Liens.  The  Company  has  reserved  from  its duly authorized capital stock the
maximum number of shares of Common Stock issuable pursuant to the Debentures and
the  Warrants in order to issue the full number of Underlying Shares and Warrant

                                      -7-
<PAGE>

Shares  as  are  or  may  become  issuable  in  accordance with the terms of the
Debentures  and  Warrants.

     (g) Capitalization. The number of shares and type of all authorized, issued
         --------------
and  outstanding  capital  stock of the Company is set forth in Schedule 3.1(g).
                                                                ---------------
Except  as  set  forth  in  Schedule  3.1(g),  no  securities of the Company are
                            ----------------
entitled  to  preemptive or similar rights, and no Person has any right of first
refusal,  preemptive  right,  right  of  participation,  or any similar right to
participate  in  the  transactions  contemplated  by  the Transaction Documents.
Except  as  a  result  of  the purchase and sale of the Securities and except as
disclosed  in Schedule 3.1(g), there are no outstanding options, warrants, scrip
              ---------------
rights  to  subscribe  to,  calls  or  commitments  of  any character whatsoever
relating  to,  or  securities,  rights  or  obligations  convertible  into  or
exchangeable  for,  or  giving any Person any right to subscribe for or acquire,
any  shares  of  Common  Stock,  or  contracts,  commitments,  understandings or
arrangements  by  which  the Company or any Subsidiary is or may become bound to
issue  additional shares of Common Stock, or securities or rights convertible or
exchangeable  into  shares  of  Common  Stock.  Except  as set forth in Schedule
                                                                        --------
3.1(g),  the  issue and sale of the Securities will not, immediately or with the
-----
passage  of  time, obligate the Company to issue shares of Common Stock or other
securities  to  any  Person (other than the Purchasers) and will not result in a
right  of  any  holder of Company securities to adjust the exercise, conversion,
exchange  or  reset  price  under  such  securities.

     (h) SEC Reports;  Financial  Statements.  The Company has filed all reports
         ------------------------------------
required  to  be  filed  by  it  under  the Securities Act and the Exchange Act,
including  pursuant  to  Section  13(a)  or  15(d)  thereof,  for  the two years
preceding the date hereof (or such shorter period as the Company was required by
law  to  file such reports) (the foregoing materials being collectively referred
to  herein  as  the  "SEC  REPORTS"  and,  together  with  the Schedules to this
Agreement, the "DISCLOSURE MATERIALS") on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension.  The Company has delivered to the Purchasers a
copy  of all SEC Reports filed within the 10 days preceding the date hereof.  As
of  their  respective  dates,  the SEC Reports complied in all material respects
with  the  requirements of the Securities Act and the Exchange Act and the rules
and  regulations  of  the Commission promulgated thereunder, and none of the SEC
Reports,  when  filed,  contained  any  untrue  statement  of a material fact or
omitted  to  state a material fact required to be stated therein or necessary in
order  to make the statements therein, in light of the circumstances under which
they  were  made,  not  misleading.  The  Company  is  in  compliance  with  the
Sarbanes-Oxley Act of 2002, and the rules and regulations promulgated thereunder
by  all  government  and  regulatory  authorities  and  agencies.  The financial
statements  of  the  Company  included in the SEC Reports comply in all material
respects  with  applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing.  Such
financial  statements  have  been prepared in accordance with generally accepted
accounting  principles applied on a consistent basis during the periods involved
("GAAP"),  except  as may be otherwise specified in such financial statements or
the  notes  thereto,  and  fairly present in all material respects the financial
position  of  the  Company  and  its consolidated Subsidiaries as of and for the
dates  thereof and the results of operations and cash flows for the periods then
ended,  subject,  in  the  case  of unaudited statements, to normal, immaterial,
year-end  audit  adjustments.


                                      -8-
<PAGE>


     (i) Material Changes.  Since  the  date  of  the  latest  audited financial
         -----------------
statements  included within the SEC Reports, except as specifically disclosed in
the SEC Reports, (i) there has been no event, occurrence or development that has
had or that could reasonably be expected to result in a Material Adverse Effect,
(ii)  the  Company  has  not  incurred any liabilities (contingent or otherwise)
other  than  (A)  trade  payables  and accrued expenses incurred in the ordinary
course  of  business  consistent  with  past  practice  and  (B) liabilities not
required  to be reflected in the Company's financial statements pursuant to GAAP
or  required  to  be  disclosed  in  filings made with the Commission, (iii) the
Company  has  not  altered  its  method  of  accounting  or  the identity of its
auditors, (iv) the Company has not declared or made any dividend or distribution
of cash or other property to its stockholders or purchased, redeemed or made any
agreements  to  purchase  or redeem any shares of its capital stock, and (v) the
Company  has  not  issued  any  equity  securities  to  any officer, director or
Affiliate,  except  pursuant to existing Company stock option plans. The Company
does  not  have  pending  before  the  Commission  any  request for confidential
treatment  of  information.

     (j) Litigation. Except  as set forth in Schedule 3.1(j), there is no Action
         ----------                          ---------------
which  (i)  adversely  affects  or  challenges  the  legality,  validity  or
enforceability  of  any  of  the Transaction Documents or the Securities or (ii)
could,  if there were an unfavorable decision, individually or in the aggregate,
have  or reasonably be expected to result in a Material Adverse Effect.  Neither
the  Company  nor any Subsidiary, nor any director or officer thereof, is or has
been  the  subject  of any Action involving a claim of violation of or liability
under  federal  or state securities laws or a claim of breach of fiduciary duty.
There has not been, and to the knowledge of the Company, there is not pending or
contemplated,  any  investigation by the Commission involving the Company or any
current  or  former  director or officer of the Company.  The Commission has not
issued  any  stop  order  or  other  order  suspending  the effectiveness of any
registration statement filed by the Company or any Subsidiary under the Exchange
Act  or  the  Securities  Act.

     (k) Labor  Relations. No material labor dispute exists or, to the knowledge
         ----------------
of the Company, is imminent with respect to any of the employees of the Company.

     (l) Compliance.  Neither the  Company  nor any Subsidiary (i) is in default
         ----------
under  or  in  violation  of (and no event has occurred that has not been waived
that,  with  notice  or  lapse of time or both, would result in a default by the
Company or any Subsidiary under), nor has the Company or any Subsidiary received
notice of a claim that it is in default under or that it is in violation of, any
indenture,  loan  or  credit  agreement  or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether or
not  such  default  or  violation  has been waived), (ii) is in violation of any
order  of any court, arbitrator or governmental body, or (iii) is or has been in
violation  of  any  statute,  rule  or regulation of any governmental authority,
including without limitation all foreign, federal, state and local laws relating
to  taxes,  environmental  protection,  occupational  health and safety, product
quality  and  safety  and  employment  and labor matters, except in each case as
could  not,  individually or in the aggregate, have or reasonably be expected to
result  in  a  Material  Adverse  Effect.

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

                                      -9-
<PAGE>

    (n) Title  to  Assets.  The  Company  and  the  Subsidiaries  have  good and
        -----------------
marketable  title  in  fee  simple  to  all  real property owned by them that is
material  to  their  respective  businesses and good and marketable title in all
personal property owned by them that is material to their respective businesses,
in each case free and clear of all Liens, except as set forth in Schedule 3.1(n)
                                                                 ---------------
and  except for Liens as do not materially affect the value of such property and
do  not  materially  interfere with the use made and proposed to be made of such
property  by  the Company and the Subsidiaries. Any real property and facilities
held  under  lease  by  the  Company and the Subsidiaries are held by them under
valid,  subsisting  and  enforceable  leases  of  which  the  Company  and  the
Subsidiaries  are  in  compliance  in  all  material  respects.

    (o) Patents  and Trademarks.  The Company and the Subsidiaries have, or have
        -----------------------
rights  to  use,  all  patents,  patent  applications,  trademarks,  trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights  that  are  necessary  or  material  for  use  in  connection  with their
respective  businesses  as described in the SEC Reports and which the failure to
so  have could, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect (collectively, the "INTELLECTUAL PROPERTY
RIGHTS").  Neither  the Company nor any Subsidiary has received a written notice
that  the  Intellectual  Property  Rights  used by the Company or any Subsidiary
violates or infringes upon the rights of any Person.  Except as set forth in the
SEC  Reports,  to  the  knowledge of the Company, all such Intellectual Property
Rights  are  enforceable and there is no existing infringement by another Person
of  any  of  the  Intellectual  Property  Rights.

    (p) Insurance.  The  Company and the Subsidiaries are insured by insurers of
        ---------
recognized  financial  responsibility  against such losses and risks and in such
amounts  as are prudent and customary in the businesses in which the Company and
the Subsidiaries are engaged.  The Company has no reason to believe that it will
not  be  able to renew its existing insurance coverage as and when such coverage
expires  or to obtain similar coverage from similar insurers as may be necessary
to  continue  its  business  without  a significant increase in cost, other than
anticipated  increases in the market price of officers' and directors' liability
insurance  generally.

    (q) Transactions  With Affiliates and Employees.  Except as set forth in the
        -------------------------------------------
SEC  Reports,  none  of  the  officers  or  directors of the Company and, to the
knowledge  of  the  Company, none of the employees of the Company is presently a
party  to  any  transaction  with  the Company or any Subsidiary (other than for
services  as  employees,  officers  and  directors),  including  any  contract,
agreement  or  other  arrangement providing for the furnishing of services to or
by,  providing  for rental of real or personal property to or from, or otherwise
requiring  payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee  has  a  substantial  interest  or  is an officer, director, trustee or
partner.

     (r) Internal Accounting Controls. The Company and the Subsidiaries maintain
         ----------------------------
a  system of internal accounting controls which the audit committee of the board
of  directors  reasonably believes is sufficient to provide reasonable assurance
that  (i)  transactions  are executed in accordance with management's general or

                                      -10-
<PAGE>


specific  authorizations,  (ii) transactions are recorded as necessary to permit
preparation  of  financial  statements  in  conformity  with  generally accepted
accounting  principles  and  to  maintain  asset accountability, (iii) access to
assets  is  permitted  only  in accordance with management's general or specific
authorization,  and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect  to  any  differences.

    (s) Solvency.  Based  on  the  financial  condition of the Company as of the
        --------
Closing  Date,  (i)  the Company's fair saleable value of its assets exceeds the
amount  that  will  be  required  to  be  paid on or in respect of the Company's
existing debts and other liabilities (including known contingent liabilities) as
they  mature;  (ii)  the  Company's  assets do not constitute unreasonably small
capital  to  carry  on its business for the current fiscal year as now conducted
and  as proposed to be conducted including its capital needs taking into account
the  particular  capital  requirements of the business conducted by the Company,
and  projected  capital requirements and capital availability thereof; and (iii)
the  current  cash  flow  of the Company, together with the proceeds the Company
would receive, were it to liquidate all of its assets, after taking into account
all  anticipated  uses of the cash, would be sufficient to pay all amounts on or
in  respect  of its debt when such amounts are required to be paid.  The Company
does  not  intend  to  incur  debts beyond its ability to pay such debts as they
mature  (taking  into account the timing and amounts of cash to be payable on or
in  respect  of  its  debt).

    (t) Certain  Fees.  Except  as described in Schedule 3.1(t), no brokerage or
        -------------                           ---------------
finder's  fees  or  commissions  are  or  will  be payable by the Company to any
broker,  financial  advisor  or  consultant, finder, placement agent, investment
banker,  bank  or  other Person with respect to the transactions contemplated by
this  Agreement.  The  Purchasers  shall  have no obligation with respect to any
fees  or with respect to any claims (other than such fees or commissions owed by
a Purchaser pursuant to written agreements executed by such Purchaser which fees
or commissions shall be the sole responsibility of such Purchaser) made by or on
behalf of other Persons for fees of a type contemplated in this Section that may
be  due  in  connection  with  the  transactions contemplated by this Agreement.

    (u) Certain  Registration  Matters. Assuming the accuracy of the Purchasers'
        ------------------------------
representations  and warranties set forth in Section 3.2(b)-(f), no registration
under  the  Securities  Act is required for the offer and sale of the Underlying
Shares  and  Warrant  Shares by the Company to the Purchasers as contemplated by
the  Transaction  Documents.  The  Company is eligible to register the resale of
its  Common  Stock for resale by the Purchasers under Form S-3 promulgated under
the Securities Act.  Except as described in Schedule 3.1(u), the Company has not
                                            ----------------
granted  or  agreed  to  grant  to any Person any rights (including "piggy-back"
registration  rights)  to have any securities of the Company registered with the
Commission  or  any  other  governmental authority that have not been satisfied.

    (v) Listing  and  Maintenance  Requirements.  Except as set forth in the SEC
        ---------------------------------------
Reports  or  as  set  forth  in Schedule 3.1(v), the Company has not, in the two
                                ---------------
years  preceding  the  date  hereof,  received notice (written or oral) from any
Trading  Market on which the Common Stock is or has been listed or quoted to the
effect  that  the  Company  is not in compliance with the listing or maintenance
requirements  of  such  Trading Market.  Except for the maintenance of the $1.00
minimum  bid  price  (pursuant  to the rules and regulations of the Nasdaq Stock
Market),  the  Company  is  currently  in  compliance  with all such listing and
maintenance requirements. The issuance and sale of the Securities hereunder does
not  contravene  the rules and regulations of the Trading Market and no approval

                                      -11-
<PAGE>

of  the  shareholders  of  the  Company is required for the Company to issue and
deliver  to  the  Purchasers  the  maximum  number  of  shares  of  Common Stock
contemplated by this Agreement, including by reason of the issuance of shares of
Common  Stock  upon conversion in full of the Debentures and the issuance of the
Warrant  Shares  upon  exercise  in  full  of  the  Warrants.

    (w) Investment  Company.  The Company is not, and is not an Affiliate of, an
        -------------------
"investment  company"  within the meaning of the Investment Company Act of 1940,
as  amended.

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

    (y) Ranking  of  Debentures.  Except  as  set  forth  on Schedule 3.1(y), no
        -----------------------                              ---------------
Indebtedness of the Company is senior to or ranks pari passu with the Debentures
in  right  of payment, whether with respect of payment of redemptions, interest,
damages  or  upon  liquidation  or  dissolution  or  otherwise.

    (z) Disclosure.  The  Company confirms that neither it nor any Person acting
        ----------
on its behalf has provided any of the Purchasers or their agents or counsel with
any  information  that  the  Company  believes  constitutes material, non-public
information.  The Company understands and confirms that the Purchasers will rely
on  the  foregoing  representations  and  covenants in effecting transactions in
securities  of the Company.  All disclosure provided to the Purchasers regarding
the Company, its business and the transactions contemplated hereby, furnished by
or  on  behalf  of  the  Company  (including  the  Company's representations and
warranties  set forth in this Agreement) are true and correct and do not contain
any  untrue  statement  of  a  material  fact or omit to state any material fact
necessary  in  order  to  make  the  statements  made  therein,  in light of the
circumstances  under  which  they  were  made,  not  misleading.
   3.4   Representations  and  Warranties  of  the  Purchasers.  Each  Purchaser
        -----------------------------------------------------
hereby,  for  itself  and for no other Purchaser, represents and warrants to the
Company  as  follows:

    (a) Organization;  Authority.  Such  Purchaser  is an entity duly organized,
        ------------------------
validly  existing and in good standing under the laws of the jurisdiction of its
organization  with the requisite corporate or partnership power and authority to
enter  into  and  to  consummate the transactions contemplated by the applicable
Transaction Documents and otherwise to carry out its obligations thereunder. The
execution,  delivery  and performance by such Purchaser of the transactions
contemplated  by  this  Agreement  has  been  duly  authorized  by all necessary
corporate or partnership action on the part of such Purchaser.  Each Transaction
Document  to  which  such  Purchaser  is  a party has been duly executed by such
Purchaser,  and  when  delivered  by such Purchaser in accordance with the terms
hereof,  will  constitute  the  valid  and  legally  binding  obligation of such

                                      -12-
<PAGE>

Purchaser,  enforceable  against  it in accordance with its terms, except (a) as
such  enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (b) as enforceability of any
indemnification and contribution provisions may be limited under the federal and
state  securities  laws  and  public policy, and (c) that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable  defenses  and  to  the  discretion  of  the  court  before  which any
proceeding  therefor  may  be  brought.

    (b) Investment  Intent.  Such  Purchaser  is  acquiring  the  Securities  as
        ------------------
principal  for  its own account for investment purposes only and not with a view
to or for distributing or reselling such Securities or any part thereof, without
prejudice,  however, to such Purchaser's right at all times to sell or otherwise
dispose  of  all  or  any  part of such Securities in compliance with applicable
federal  and  state securities laws.  Nothing contained herein shall be deemed a
representation  or  warranty  by  such  Purchaser to hold the Securities for any
period  of  time.  Such  Purchaser  is acquiring the Securities hereunder in the
ordinary  course  of its business. Such Purchaser does not have any agreement or
understanding,  directly or indirectly, with any Person to distribute any of the
Securities.

   (c) Purchaser  Status.  At  the  time  such  Purchaser  was  offered  the
       -----------------
Securities,  it  was, and at the date hereof it is, and on each date on which it
exercises  the  Warrants it will be, an "accredited investor" as defined in Rule
501(a)  under  the  Securities  Act.  Such  Purchaser  is  not  a  registered
broker-dealer  under  Section  15  of  the  Exchange  Act.

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

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

   (f)  Access to Information.  Such Purchaser acknowledges that it has reviewed
        ---------------------
the  Disclosure  Materials and has been afforded (i) the opportunity to ask such
questions  as  it  has  deemed  necessary  of,  and  to  receive  answers  from,
representatives  of  the  Company  concerning  the  terms  and conditions of the
offering  of  the  Securities  and  the  merits  and  risks  of investing in the
Securities;  (ii)  access  to information about the Company and the Subsidiaries
and  their  respective  financial  condition,  results  of operations, business,
properties,  management  and  prospects  sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information that
the Company possesses or can acquire without unreasonable effort or expense that
is  necessary  to  make  an  informed  investment  decision  with respect to the
investment.  Neither  such inquiries nor any other investigation conducted by or
on  behalf  of  such  Purchaser  or its representatives or counsel shall modify,
amend  or  affect  such  Purchaser's  right  to  rely on the truth, accuracy and
completeness  of  the Disclosure Materials and the Company's representations and
warranties  contained  in  the  Transaction  Documents.


                                      -13-
<PAGE>


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

                                   ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

4.1     Transfer  Restrictions.  (a)     Securities  may  only be disposed of in
        ----------------------
compliance  with  state  and  federal  securities  laws.  In connection with any
transfer  of  the  Securities  other  than pursuant to an effective registration
statement,  to the Company, to an Affiliate of a Purchaser or in connection with
a  pledge  as  contemplated  in  Section  4.1(b),  the  Company  may require the
transferor  thereof  to provide to the Company an opinion of counsel selected by
the  transferor,  the  form  and  substance of which opinion shall be reasonably
satisfactory  to  the Company, to the effect that such transfer does not require
registration  of  such  transferred  Securities  under  the  Securities  Act.

          (b)     Certificates  evidencing  the  Securities  will  contain  the
following  legend,  so  long  as  is  required  by  this  Section  4.1(c):
                                                          ---------------
          [NEITHER]  THESE  SECURITIES  [NOR  THE  SECURITIES  ISSUABLE  UPON
          [EXERCISE][CONVERSION] OF THESE SECURITIES] HAVE [NOT] BEEN REGISTERED
          WITH  THE  SECURITIES  AND  EXCHANGE  COMMISSION  OR  THE  SECURITIES
          COMMISSION  OF  ANY  STATE  IN  RELIANCE  UPON  AN  EXEMPTION  FROM
          REGISTRATION  UNDER  THE  SECURITIES  ACT  OF  1933,  AS  AMENDED (THE
          "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
          PURSUANT  TO  AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
          ACT  OR  PURSUANT  TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
          NOT  SUBJECT  TO,  THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
          AND  IN  ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED
          BY  A  LEGAL  OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
          SUBSTANCE  OF  WHICH  SHALL  BE  REASONABLY ACCEPTABLE TO THE COMPANY.
          THESE  SECURITIES  AND  THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
          SECURITIES  MAY  BE  PLEDGED  IN  CONNECTION  WITH  A BONA FIDE MARGIN
          ACCOUNT  OR  OTHER  LOAN  SECURED  BY  SUCH  SECURITIES.

          The  Company acknowledges and agrees that a Purchaser may from time to
time  pledge  pursuant  to  a  bona  fide  margin  agreement or grant a security
interest  in  some  or all of the Securities and, if required under the terms of
such  arrangement,  such Purchaser may transfer pledged or secured Securities to
the pledgees or secured parties.  Such a pledge or transfer would not be subject
to  approval  or consent of the Company and no legal opinion of legal counsel to
the pledgee, secured party or pledgor shall be required in connection therewith.
Further,  no  notice  shall  be  required  of  such  pledge.  At the appropriate
Purchaser's  expense,  the  Company  will  execute  and  deliver such reasonable
documentation as a pledgee or secured party of Securities may reasonably request
in  connection  with  a  pledge  or  transfer  of  the  Securities including the
preparation  and  filing  of  any  required  prospectus  supplement  under  Rule
424(b)(3)  of the Securities Act or other applicable provision of the Securities
Act  to  appropriately  amend  the  list  of  Selling  Stockholders  thereunder.

                                      -14-
<PAGE>

          (c)     Certificates  evidencing  the  Underlying  Shares  and Warrant
Shares  shall  not contain any legend (including the legend set forth in Section
4.1(b)):  (i)  while  a  registration  statement  (including  the  Registration
Statement)  covering  the resale of such Underlying Shares and Warrant Shares is
effective  under  the  Securities  Act,  or  (ii)  following  any  sale  of such
Underlying  Shares  or  Warrant  Shares  pursuant  to Rule 144, or (iii) if such
Underlying  Shares or Warrant Shares are eligible for sale under Rule 144(k), or
(iv)  if  such  legend  is  not  required  under  applicable requirements of the
Securities  Act (including judicial interpretations and pronouncements issued by
the  Staff of the Commission).  The Company shall cause its counsel to issue the
legal  opinion  included  in  the  Transfer  Agent Instructions to the Company's
transfer  agent  on the Effective Date.  Following the Effective Date or at such
earlier  time  as  a  legend is no longer required for the Underlying Shares and
Warrant  Shares under this Section 4.1(c), the Company will, no later than three
Trading  Days  following  the  delivery  by  a  Purchaser  to the Company or the
Company's  transfer  agent  of  a  certificate representing Underlying Shares or
Warrant Shares containing a restrictive legend, deliver or cause to be delivered
to  such  Purchaser a certificate representing such Underlying Shares or Warrant
Shares that is free from all restrictive and other legends.  The Company may not
make  any  notation on its records or give instructions to any transfer agent of
the Company that enlarge the restrictions on transfer set forth in this Section.

   4.2   Furnishing  of  Information.  As  long  as  any  Purchaser  owns  the
        ---------------------------
Securities,  the  Company  covenants  to  timely  file  (or obtain extensions in
respect  thereof  and  file  within  the  applicable  grace  period) all reports
required  to  be  filed  by  the  Company  after the date hereof pursuant to the
Exchange Act.  Upon the request of any such Person, the Company shall deliver to
such  Person  a  written  certification  of a duly authorized officer as to
whether  it  has complied with the preceding sentence.  As long as any Purchaser
owns Securities, if the Company is not required to file reports pursuant to such
laws,  it will prepare and furnish to the Purchasers and make publicly available
in  accordance  with  Rule  144(c)  such  information  as  is  required  for the
Purchasers  to sell the Underlying Shares and Warrant Shares under Rule 144. The
Company further covenants that it will take such further action as any holder of
Securities  may reasonably request, all to the extent required from time to time
to  enable such Person to sell such Underlying Shares and Warrant Shares without
registration  under  the  Securities Act within the limitation of the exemptions
provided  by  Rule  144.

   4.3  Integration.  The  Company  shall not, and shall use its best efforts to
        -----------
ensure  that  no Affiliate of the Company shall, sell, offer for sale or solicit
offers  to  buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers, or that would be
integrated  with  the  offer or sale of the Securities for purposes of the rules
and  regulations  of  any  Trading  Market.


   4.4  Subsequent  Registrations  and  Subsequent  Placements.
        ------------------------------------------------------

    (a) Prior  to  the Effective Date, the Company shall not file a registration
statement  (including any shelf registration statements) (other than on Form S-8
or  pursuant  to  the  Registration  Rights  Agreement) with the Commission with
respect to any securities of the Company (other than pre-effective amendments to
Registration  Statement  Nos.  333-99559  and  333-99673).

                                      -15-
<PAGE>

    (b) Prior  to the expiration of the first anniversary of the Effective Date,
the  Company  will not, directly or indirectly, offer, sell, grant any option to
purchase,  or  otherwise  dispose  of (or announce any offer, sale, grant or any
option to purchase or other disposition of)  any of Common Stock or Common Stock
Equivalents  or  any  of  its  Subsidiaries' equity or Common Stock Equivalents,
including without limitation, pursuant to a private placement, an equity line of
credit  or  a shelf registration statement in accordance with Rule 415 under the
Securities  Act,  (such  offer,  sale,  grant, disposition or announcement being
referred to as "SUBSEQUENT PLACEMENT"), unless: (i) the Company delivers to each
Purchaser  a written notice (the "SUBSEQUENT PLACEMENT NOTICE") of its intention
to  effect  such  Subsequent  Placement, which Subsequent Placement Notice shall
describe  in  reasonable detail the proposed terms of such Subsequent Placement,
the  amount  of  proceeds intended to be raised thereunder, the Person with whom
such  Subsequent  Placement  is  proposed  to be effected, and attached to which
shall  be  a  term  sheet  or  similar  document  relating thereto and (ii) such
Purchaser  shall not have notified the Company by 6:30 p.m. (New York City time)
on  the  seventh  Trading  Day  after  (but  not  including)  its receipt of the
Subsequent  Placement  Notice  of  its  willingness  to provide (or to cause its
designee  to  provide),  subject  to  completion  of  mutually  acceptable
documentation,  all  or  part of such financing to the Company on the same terms
set  forth  in the Subsequent Placement Notice.  If the Purchasers shall fail to
so  notify  the  Company  of  their  willingness  to  participate in full in the
Subsequent  Placement,  the  Company  may  effect  the remaining portion of such
Subsequent Placement on the terms and to the Persons set forth in the Subsequent
Placement  Notice.  The  Company  shall  provide  the  Purchasers  with a second
Subsequent  Placement  Notice  and  the  Purchasers will again have the right of
first  refusal  set  forth  in  this Section 4.4(b), if the Subsequent Placement
subject  to  the  initial Subsequent Placement Notice is not consummated for any
reason  on  the terms set forth in such Subsequent Notice within 30 Trading Days
after  the  date  of  the  initial  Subsequent  Placement Notice with the Person
identified  in  the  Subsequent  Placement Notice.  If the Purchasers indicate a
willingness  to  provide  financing  in  excess  of  the amount set forth in the
Subsequent  Placement  Notice,  then  each Purchaser will be entitled to provide
financing  pursuant to such Subsequent Placement Notice up to an amount equal to
such  Purchaser  Percentage  of  the  financing,  but  the  Company shall not be
required  to  accept financing from the Purchasers in an amount in excess of the
amount  set  forth  in  the  Subsequent  Placement  Notice.

    (c) The restrictive period set forth in the first sentence of Section 4.4(b)
shall be extended for the number of Trading Days during such period in which (i)
trading  in  the  Common  Stock  is  suspended  by  any  Trading Market, or (ii)
following the Effective Date, the Registration Statement is not effective or the
prospectus  included  in  the  Registration  Statement  may  not  be used by the
Purchasers  for  the  resale  of  the  Underlying Shares and the Warrant Shares.

    (d) The  restrictions  contained  in  Sections 4.4(b) shall not apply to any
grant  or  issuance  by the Company of any of the following: (i) the issuance of
securities  upon  the  exercise  or  conversion  of any Common Stock Equivalents
issued by the Company prior to the date of this Agreement and listed on Schedule
3.1(g), and (ii) the grant of options or warrants, or the issuance of additional


                                      -16-
<PAGE>

securities,  under  any  duly  authorized Company stock option, restricted stock
plan  or stock purchase plan in existence on the Closing Date (but not as to any
amendments  or  other  modifications  to  the  number  of  Common Stock issuable
thereunder,  the  terms  set  forth  therein,  or  the  exercise price set forth
therein).

   4.5  Securities  Laws Disclosure; Publicity.  The Company shall no later than
        --------------------------------------
January  6,  2003,  (x)  issue  a  press  release  reasonably  acceptable to the
Purchasers  disclosing  the  transactions  contemplated  hereby  and  (y) file a
Current  Report on Form 8-K disclosing the transactions contemplated hereby, and
shall make such other filings and notices in the manner and time required by the
Commission.  Notwithstanding  the foregoing, the Company shall not publicly
disclose  the name of any Purchaser, or include the name of any Purchaser in any
filing  with  the Commission or any regulatory agency or Trading Market, without
the  prior  written  consent  of  such  Purchaser,  except  to  the  extent such
disclosure  is  required by law or Trading Market regulations, in which case the
Company  shall  provide  the  Purchasers  with  prior notice of such disclosure.


   4.6  Indemnification  of Purchasers.  The Company will indemnify and hold the
        ------------------------------
Purchasers  and their directors, officers, shareholders, partners, employees and
agents  (each,  a  "PURCHASER  PARTY")  harmless  from  any  and  all  losses,
liabilities,  obligations,  claims,  contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys'  fees  and  costs  of investigation (collectively, "LOSSES") that any
such  Purchaser  Party may suffer or incur as a result of or relating to (a) any
misrepresentation,  breach  or  inaccuracy,  or  any allegation by a third party
that,  if  true,  would  constitute  a  breach  or  inaccuracy,  of  any  of the
representations,  warranties, covenants or agreements made by the Company in any
Transaction  Document;  or (b) any Action brought or made against such Purchaser
Party  and  solely  arising  out  of  or resulting from the execution, delivery,
performance  or  enforcement  of  this Agreement or any of the other Transaction
Documents.  In  addition  to  the  indemnity  contained herein, the Company will
reimburse  each  Purchaser  Party  for  its  reasonable legal and other expenses
(including  the  cost of any investigation, preparation and travel in connection
therewith)  incurred  in  connection  therewith,  as such expenses are incurred.

   4.7  Shareholders  Rights  Plan.  No  claim  will  be made or enforced by the
        --------------------------
Company  or  any  other Person that any Purchaser is an "Acquiring Person" under
any  shareholders  rights  plan  or  similar  plan  or  arrangement in effect or
hereafter  adopted  by  the  Company,  or  that any Purchaser could be deemed to
trigger  the  provisions of any such plan or arrangement, by virtue of receiving
the  Securities  under  the  Transaction  Documents or under any other agreement
between  the  Company  and  the  Purchasers.

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

   4.9  Use  of  Proceeds.  The Company shall use the net proceeds from the sale
        -----------------
of  the  Securities  hereunder  for  working  capital  purposes  and not for the
satisfaction  of  any portion of the Company's debt (other than payment of trade

                                      -17-
<PAGE>

receivables  and  accrued  expenses  in  the  ordinary  course  of the Company's
business  and  consistent with prior practices), to redeem any Company equity or
equity-equivalent  securities  or  to  settle  any  outstanding  litigation.

   4.10  Secured  Obligation.  The  payment obligations under the Debentures are
         -------------------
secured  pursuant  to  the  Security  Agreement  and  the  Intellectual Property
Security  Agreement.

                                   ARTICLE V.
                                  MISCELLANEOUS

    5.1. Fees  and  Expenses.  At  the  Closing, the Company shall reimburse the
         -------------------
Purchasers  for their legal fees and expenses in connection with the preparation
and  negotiation  of  the  Transaction Documents by paying $32,500 to Bryan Cave
LLP.  Except  as  specified  in  the  immediately  preceding  sentence  and  as
contemplated in the Registration Rights Agreement, each party shall pay the fees
and  expenses  of  its advisers, counsel, accountants and other experts, if
any,  and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement.  The Company
shall  pay  all  stamp  and other taxes and duties levied in connection with the
sale of the Securities.  In addition to the foregoing, the Company shall pay the
fees  described  in  Schedule  3.1(t)  no  later  than  January  3,  2003.

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

    5.3 Notices.  Any  and  all  notices  or  other communications or deliveries
        -------
required  or permitted to be provided hereunder shall be in writing and shall be
deemed  given  and effective on the earliest of (a) the date of transmission, if
such  notice or communication is delivered via facsimile at the facsimile number
specified  in  this Section prior to 6:30 p.m. (New York City time) on a Trading
Day,  (b) the next Trading Day after the date of transmission, if such notice or
communication  is  delivered  via facsimile at the facsimile number specified in
this  Section  on  a  day that is not a Trading Day or later than 6:30 p.m. (New
York  City  time)  on any Trading Day, (c) the Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service, or (d)
upon  actual  receipt  by the party to whom such notice is required to be given.
The  address  for  such  notices  and  communications  shall  be  as  follows:

       If  to  the  Company:    Electric  Fuel  Corporation
                                632  Broadway
                                Suite  301
                                New  York,  NY  10012
                                Facsimile  No.:  (212)  529-5800
                                Attn:  Chief  Financial  Officer  and General
                                Counsel

                                      -18-
<PAGE>

        With  a  copy  to:      Electric  Fuel  (E.F.L.)  Ltd.
                                Western  Industrial  Zone
                                Beit  Shemesh  99000,  Israel
                                Facsimile  No.:  011-972-2-990-6688
                                Attn.:  Chief  Financial  Officer and General
                                        Counsel

        If  to  a  Purchaser:   To the address set forth under such Purchaser's
                                name on  the  signature  pages  hereof;

     or  such  other  address  as may be designated in writing hereafter, in the
same  manner,  by  such  Person.

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

   5.5  Construction.  The  headings  herein  are  for  convenience only, do not
        ------------
constitute  a  part of this Agreement and shall not be deemed to limit or affect
any  of  the  provisions  hereof.  The  language  used in this Agreement will be
deemed  to be the language chosen by the parties to express their mutual intent,
and  no  rules  of  strict construction will be applied against any party.  This
Agreement  shall  be  construed  as  if  drafted  jointly by the parties, and no
presumption  or burden of proof shall arise favoring or disfavoring any party by
virtue  of  the  authorship  of  any  provisions of this Agreement or any of the
Transaction  Documents.

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

   5.7  No Third-Party  Beneficiaries.  This  Agreement  is  intended  for  the
        ------------------------------
benefit  of  the  parties  hereto  and their respective successors and permitted
assigns  and is not for the benefit of, nor may any provision hereof be enforced
by,  any  other  Person,  except  as  otherwise  set  forth  in  Section  4.6.

   5.8  Liquidated  Damages.  The  Company's  obligations  to pay any liquidated
        -------------------
damages  or  other amounts owing under the Transaction Documents is a continuing
obligation  of  the  Company and shall not terminate until all unpaid liquidated
damages  and  other  amounts  have  been  paid notwithstanding the fact that the
instrument  or  security  pursuant  to  which  such  liquidated damages or other
amounts  are  due  and payable shall have been canceled. Such liquidated damages
are  not  to  be  construed  as  the  sole damages for remedies available to the
Persons  entitled  to  the same.  The parties hereby agree that all remedies and
damages  are  cumulative.

                                      -19-
<PAGE>

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

   5.10  Survival.  The  representations,  warranties,  agreements and covenants
         --------
contained  herein  shall  survive the Closing and the delivery of the Underlying
Shares  and  Warrant  Shares,  as  applicable.

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

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


                                      -20-
<PAGE>

   5.13  Rescission  and  Withdrawal  Right.  Notwithstanding  anything  to  the
         ----------------------------------
contrary  contained  in  (and  without  limiting  any similar provisions of) the
Transaction  Documents,  whenever  any  Purchaser  exercises  a right, election,
demand  or  option  under a Transaction Document and the Company does not timely
perform  its  related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written  notice to the Company, any relevant notice, demand or election in whole
or  in  part  without  prejudice  to  its  future  actions  and  rights.
5.14     Replacement of Securities.  If any certificate or instrument evidencing
any  Securities is mutilated, lost, stolen or destroyed, the Company shall issue
or  cause  to  be  issued in exchange and substitution for and upon cancellation
thereof,  or  in  lieu  of  and  substitution  therefor,  a  new  certificate or
instrument,  but  only  upon  receipt of evidence reasonably satisfactory to the
Company  of  such  loss,  theft  or  destruction  and  customary  and reasonable
indemnity,  if  requested.  The  applicants  for a new certificate or instrument
under  such  circumstances  shall  also  pay  any  reasonable  third-party costs
associated  with  the issuance of such replacement Securities.  If a replacement
certificate  or  instrument  evidencing  any  Securities  is  requested due to a
mutilation  thereof,  the  Company  may  require  delivery  of  such  mutilated
certificate  or  instrument  as  a  condition  precedent  to  any  issuance of a
replacement.

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

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

   5.17  Independent  Nature  of  Purchasers'  Obligations  and  Rights.  The
         --------------------------------------------------------------
obligations of each Purchaser under any Transaction Document are several and not
joint  with  the  obligations  of any other Purchaser, and no Purchaser shall be
responsible  in  any  way  for  the  performance of the obligations of any other
Purchaser  under  any  Transaction Document.  Nothing contained herein or in any
Transaction  Document,  and  no  action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint  venture  or  any  other  kind of entity, or create a presumption that the
Purchasers  are  in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents.  Each


                                      -21-
<PAGE>


Purchaser  shall  be  entitled  to independently protect and enforce its rights,
including  without limitation the rights arising out of this Agreement or out of
the  other  Transaction  Documents,  and it shall not be necessary for any other
Purchaser  to  be  joined  as  an  additional  party  in any proceeding for such
purpose.

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                             SIGNATURE PAGES FOLLOW]









                                      -22-
<PAGE>

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



                         ELECTRIC  FUEL  CORPORATION
                         By:
                         --------------------------------------
                         Name:
                         Title:














                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                             SIGNATURE PAGES FOLLOW]




                                      -23-
<PAGE>

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

                         ZLP  MASTER  TECHNOLOGY  FUND,  LTD.

                         By:______________________________
                         Name:
                         Title:

                         Investment  Amount:  $2,000,000

                         Address  for  Notice:
                         45  Broadway  -  28th  Floor
                         New  York,  NY  10006
                         Facsimile  No.:  (  )
                         Attn:

                         With  a  copy  to:

                         Bryan  Cave  LLP
                         1290  Avenue  of  the  Americas
                         New  York,  NY  10104
                         Facsimile  No.:  (212)  541-4630  and  (212)  541-1432
                         Attn:  Eric  L.  Cohen,  Esq.


                                      -24-
<PAGE>


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

                         SMITHFIELD  FIDUCIARY  LLC

                         By:_____________________________________
                         Name:
                         Title:

                         Investment  Amount:  $1,000,000

                         Address  for  Notice:

                         c/o  Highbridge  Capital  Management,  LLC
                         9  West  57th  Street,  27th  Floor
                         New  York,  New  York  10019
                         Attention:  Ari  J.  Storch  /  Adam  J.  Chill
                         Facsimile:  212-751-0755
                         Telephone:  212-287-4720

                         With  a  copy  to:

                         Bryan  Cave  LLP
                         1290  Avenue  of  the  Americas
                         New  York,  NY  10104
                         Facsimile  No.:  (212)  541-4630  and
                                          (212)  541-1432
                          Attn:  Eric  L.  Cohen,  Esq.


                                      -25-
<PAGE>


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


                                   VERTICAL  VENTURES  INVESTMENTS,  LLC

                                   By:_________________________________
                                   Name:
                                   Title:

                                   Investment Amount: $500,000


                                   Address for Notice:
                                   c/o Vertical Ventures, LLC
                                   900 Third Avenue, 26th Floor
                                   New York, NY 10022
                                   Facsimile No.: (646) 274-1728
                                   Attn: Joshua Silverman

                                   With a copy to:

                                   Bryan Cave LLP
                                   1290 Avenue of the Americas
                                   New York, NY 10104
                                   Facsimile No.: (212) 541-4630 and
                                                  (212) 541-1432
                                   Attn: Eric L. Cohen, Esq.



                                      -26-


<PAGE>