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                                                                    Exhibit 10.1

                          SECURITIES PURCHASE AGREEMENT

     This Securities Purchase Agreement (this "Agreement") is dated as of July
17, 2006, among Alfacell Corporation, a Delaware corporation (the "Company"),
and each purchaser identified on the signature pages hereto (each, including its
successors and assigns, 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 of 1933, as amended (the
"Securities Act") and Rule 506 promulgated thereunder, the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase from the Company, 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 each Purchaser 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 have the
meanings indicated in this Section 1.1:

          "Action" shall have the meaning ascribed to such term in Section
     3.1(j).

          "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 under the Securities Act. With respect to a Purchaser, any investment
     fund or managed account that is managed on a discretionary basis by the
     same investment manager as such Purchaser will be deemed to be an Affiliate
     of such Purchaser.

          "Business Day" means any day except Saturday, Sunday, any day which
     shall be a federal legal holiday in the United States or any 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 Section 2.1.

          "Closing Date" means the Trading Day when all of the Transaction
     Documents have been executed and delivered by the applicable parties
     thereto, and all conditions precedent to (i) the Purchasers' obligations to
     pay the Subscription Amount and (ii) the Company's obligations to deliver
     the Securities have been satisfied or waived.

          "Closing Price" means on any particular date (a) the last reported
     closing price per share of Common Stock on such date on a Trading Market
     (as reported by Bloomberg L.P. at 4:15 PM (New York time)), or (b) if there
     is no such price on such date, then the


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     closing price on the Trading Market on the date nearest preceding such date
     (as reported by Bloomberg L.P. at 4:15 PM (New York time)), or (c) if the
     Common Stock is not then listed or quoted on a Trading Market and if prices
     for the Common Stock are then quoted on the Over the Counter Bulletin
     Board, then the last reported closing price per share of Common Stock on
     such date (or if none on such date, the preceding date) so reported, or (d)
     if the Common Stock is not then listed or quoted on the Trading Market and
     if prices for the Common Stock are then reported in the "pink sheets"
     published by Pink Sheets LLC (or a similar organization or agency
     succeeding to its functions of reporting prices), the most recent bid price
     per share of the Common Stock so reported, or (d) if the shares of Common
     Stock are not then publicly traded the fair market value of a share of
     Common Stock as determined by an appraiser selected in good faith by the
     Purchasers of a majority in interest of the Shares then outstanding.

          "Commission" means the Securities and Exchange Commission.

          "Common Stock" means the common stock of the Company, par value $0.001
     per share, and any other class of securities into which such securities may
     hereafter be reclassified or changed into.

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

          "Company Counsel" means Heller Ehrman LLP.

          "Disclosure Schedules" means the Disclosure Schedules of the Company
     delivered concurrently herewith.

          "Discussion Time" shall have the meaning ascribed to such term in
     Section 3.2(f).

          "Ms. Shogen" shall have the meaning ascribed to such term in Section
     4.18.

          "Effective Date" means the date that the initial Registration
     Statement filed by the Company pursuant to the Registration Rights
     Agreement is first declared effective by the Commission.

          "Evaluation Date" shall have the meaning ascribed to such term in
     Section 3.1(r).

          "Exchange Act" means the Securities Exchange Act of 1934, as amended,
     and the rules and regulations promulgated thereunder.

          "Exempt Issuance" means the issuance of (a) shares of Common Stock or
     options to employees, officers or directors of the Company pursuant to any
     stock or option plan duly adopted by a majority of the non-employee members
     of the Board of Directors of the Company or a majority of the members of a
     committee of non-employee directors established for such purpose, (b)
     securities upon the exercise or exchange of or


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     conversion of any Securities issued hereunder and/or other securities
     exercisable or exchangeable for or convertible into shares of Common Stock
     issued and outstanding on the date of this Agreement, provided that such
     securities have not been amended since the date of this Agreement to
     increase the number of such securities or to decrease the exercise,
     exchange or conversion price of any such securities, and (c) securities
     issued pursuant to acquisitions or strategic transactions approved by a
     majority of the disinterested directors, provided any such issuance shall
     only be to a Person which is, itself or through its subsidiaries, an
     operating company in which the Company receives consideration, property or
     services in addition to the investment of funds, but shall not include a
     transaction in which the Company is issuing securities primarily for the
     purpose of raising capital or to an entity whose primary business is
     investing in securities.

          "FW" means Feldman Weinstein LLP with offices located at 420 Lexington
     Avenue, Suite 2620, New York, New York 10170-0002.

          "GAAP" shall have the meaning ascribed to such term in Section 3.1(h).

          "Intellectual Property Rights" shall have the meaning ascribed to such
     term in Section 3.1(o).

          "Legend Removal Date" shall have the meaning ascribed to such term in
     Section 4.1(c).

          "Liens" means a lien, charge, security interest, encumbrance, right of
     first refusal, preemptive right or other restriction.

          "Material Adverse Effect" shall have the meaning assigned to such term
     in Section 3.1(b).

          "Material Permits" shall have the meaning ascribed to such term in
     Section 3.1(m).

          "Participation Maximum" shall have the meaning ascribed to such term
     in Section 4.13.

          "Per Share Purchase Price" equals $1.75, subject to adjustment for
     reverse and forward stock splits, stock dividends, stock combinations and
     other similar transactions of the Common Stock that occur after the date of
     this Agreement and prior to the Closing Date.

          "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.

          "Pre-Notice" shall have the meaning ascribed to such term in Section
     4.13.


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          "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.

          "ProMed" means ProMed Management, Inc.

          "Purchaser Party" shall have the meaning ascribed to such term in
     Section 4.9.

          "Registration Rights Agreement" means the Registration Rights
     Agreement, dated the date hereof, among the Company and the Purchasers, in
     the form of Exhibit A attached hereto.

          "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 Shares and the Warrant Shares.

          "Required Approvals" shall have the meaning ascribed to such term in
     Section 3.1(e).

          "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.

          "SEC Reports" shall have the meaning ascribed to such term in Section
     3.1(h).

          "Securities" means the Shares, the Warrants and the Warrant Shares.

          "Securities Act" means the Securities Act of 1933, as amended, and the
     rules and regulations promulgated thereunder.

          "Shares" means the shares of Common Stock issued or issuable to each
     Purchaser pursuant to this Agreement.

          "Short Sales" shall include all "short sales" as defined in Rule 200
     of Regulation SHO under the Exchange Act (but shall not be deemed to
     include the location and/or reservation of borrowable shares of Common
     Stock).

          "Subscription Amount" means, as to each Purchaser, the aggregate
     amount to be paid for Shares and Warrants purchased hereunder as specified
     below such Purchaser's name on the signature page of this Agreement and
     next to the heading "Subscription Amount", in United States Dollars and in
     immediately available funds.

          "Subsequent Financing" shall have the meaning ascribed to such term in
     Section 4.13.

          "Subsequent Financing Notice" shall have the meaning ascribed to such
     term in Section 4.13.


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          "Subsidiary" means any subsidiary of the Company as set forth on
     Schedule 3.1(a).

          "Trading Day" means a day on which the Common Stock is traded on a
     Trading Market.

          "Trading Market" means the following markets or exchanges on which the
     Common Stock is listed or quoted for trading on the date in question: the
     Nasdaq Capital Market, the American Stock Exchange, the New York Stock
     Exchange or the Nasdaq National Market.

          "Transaction Documents" means this Agreement, the Warrants, the
     Registration Rights Agreement and any other documents or agreements
     executed in connection with the transactions contemplated hereunder.

          "Warrants" means collectively the Company's Series A-1 and Series A-2
     Common Stock Purchase Warrants, in the form of Exhibit C delivered to the
     Purchasers at the Closing in accordance with Section 2.2(a) hereof, which
     Warrants shall become exercisable 6 months after their date of issuance as
     to the Series A-1 Warrants and the later of (a) 6 months after their date
     of issuance and (ii) January 1, 2007 as to the Series A-2 Warrants, both
     the Series A-1 and Series A-2 Warrants shall have a term of exercise equal
     to five years from the date hereof.

          "Warrant Shares" means the shares of Common Stock issuable upon
     exercise of the Warrants.

                                   ARTICLE II.
                                PURCHASE AND SALE

     2.1 Closing. On the Closing Date, upon the terms and subject to the
conditions set forth herein, substantially concurrent with the execution and
delivery of this Agreement by the parties hereto, the Company agrees to sell,
and each Purchaser agrees to purchase in the aggregate, severally and not
jointly, at least $11,300,000 of Shares and Warrants, provided, however, that
the number of Shares shall in no event exceed that number which is 19.9% of the
Company's issued and outstanding shares of Common Stock on the Trading Day
immediately prior to the date hereof. Each Purchaser shall deliver to the
account designated by C.E. Unterberg, Towbin via wire transfer or a certified
check immediately available funds equal to their Subscription Amount and the
Company shall deliver to each Purchaser their respective Shares and Warrants as
determined pursuant to Section 2.2(a) and the other items set forth in Section
2.2 issuable at the Closing. Upon satisfaction of the conditions set forth in
Sections 2.2 and 2.3, the Closing shall occur at the offices of FW, or such
other location as the parties shall mutually agree.

     2.2 Deliveries.

          (a) On or prior to the Closing Date, the Company shall deliver or
     cause to be delivered to each Purchaser the following:


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               (i) this Agreement duly executed by the Company;

               (ii) a legal opinion of Company Counsel, in the form of Exhibit B
          attached hereto;

               (iii) a certificate evidencing a number of Shares equal to such
          Purchaser's Subscription Amount divided by the Per Share Purchase
          Price, registered in the name of such Purchaser;

               (iv) a Series A-1 Warrant registered in the name of such
          Purchaser to purchase up to a number of shares of Common Stock equal
          to 50% of such Purchaser's Shares (rounded up to the nearest whole
          number) with an exercise price equal to $2.88, subject to adjustment
          therein;

               (v) a Series A-2 Warrant registered in the name of such Purchaser
          to purchase up to a number of shares of Common Stock equal to 50% of
          such Purchaser's Shares with an exercise price equal to $2.88, subject
          to adjustment therein;

               (vi) a lock-up agreement, in the form of Exhibit D attached
          hereto, duly executed by all officers and directors of the Company;

               (vii) an agreement with Ms. Shogen pursuant to the terms of
          Section 4.18; and

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

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

               (i) this Agreement duly executed by such Purchaser;

               (ii) such Purchaser's Subscription Amount by wire transfer to the
          account specified by C.E. Unterberg, Towbin (as agreed to by the
          Company); and

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

     2.3 Closing Conditions.

          (a) The obligations of the Company hereunder in connection with the
     Closing are subject to the following conditions being met:

               (i) the accuracy in all material respects when made and on the
          Closing Date of the representations and warranties of the Purchasers
          contained herein;


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               (ii) all obligations, covenants and agreements of the Purchasers
          required to be performed at or prior to the Closing Date shall have
          been performed; and

               (iii) the delivery by the Purchasers of the items set forth in
          Section 2.2(b) of this Agreement.

          (b) The respective obligations of the Purchasers hereunder in
     connection with the Closing are subject to the following conditions being
     met:

               (i) the accuracy in all material respects on the Closing Date of
          the representations and warranties of the Company contained herein;

               (ii) all obligations, covenants and agreements of the Company
          required to be performed at or prior to the Closing Date shall have
          been performed;

               (iii) the delivery by the Company of the items set forth in
          Section 2.2(a) of this Agreement;

               (iv) there shall have been no Material Adverse Effect with
          respect to the Company since the date hereof;

               (v) the Company shall have received at least $11,300,000 of
          Subscription Amounts;

               (vi) the Company shall have filed a Notification Form: Listing of
          Additional Shares related to the Shares and Warrant Shares and the
          Purchasers shall be given Satisfactory evidence that the Trading
          Market will not object.

               (vii) from the date hereof to the Closing Date, trading in the
          Common Stock shall not have been suspended by the Commission or the
          Company's principal Trading Market (except for any suspension of
          trading of limited duration agreed to by the Company, which suspension
          shall be terminated prior to the Closing), and, at any time prior to
          the Closing Date, trading in securities generally as reported by
          Bloomberg Financial Markets shall not have been suspended or limited,
          or minimum prices shall not have been established on securities whose
          trades are reported by such service, or on any Trading Market, nor
          shall a banking moratorium have been declared either by the United
          States or New York State authorities nor shall there have occurred any
          material outbreak or escalation of hostilities or other national or
          international calamity of such magnitude in its effect on, or any
          material adverse change in, any financial market which, in each case,
          in the reasonable judgment of each Purchaser, makes it impracticable
          or inadvisable to purchase the Shares at the Closing.


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                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

     3.1 Representations and Warranties of the Company. Except as set forth
under the corresponding section of the Disclosure Schedules which Disclosure
Schedules shall be deemed a part hereof and to qualify any representation or
warranty otherwise made herein to the extent of such disclosure, the Company
hereby makes the representations and warranties set forth below to each
Purchaser:

          (a) Subsidiaries. All of the direct and indirect subsidiaries of the
     Company are set forth on Schedule 3.1(a). The Company owns, directly or
     indirectly, all of the capital stock or other equity interests of each
     Subsidiary free and clear of any 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 to subscribe
     for or purchase securities. If the Company has no subsidiaries, then all
     other references in the Transaction Documents to the Subsidiaries or any of
     them will be disregarded.

          (b) Organization and Qualification. The Company and each of the
     Subsidiaries 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 or default 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 the Subsidiaries 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 have or reasonably be expected to result in
     (i) a material adverse effect on the legality, validity or enforceability
     of any Transaction Document, (ii) a material adverse effect on the results
     of operations, assets, business, prospects or condition (financial or
     otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii)
     a material adverse effect on the Company's ability to perform in any
     material respect on a timely basis its obligations under any Transaction
     Document (any of (i), (ii) or (iii), a "Material Adverse Effect") and no
     Proceeding has been instituted in any such jurisdiction revoking, limiting
     or curtailing or seeking to revoke, limit or curtail such power and
     authority or qualification.

          (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 hereunder and thereunder. The
     execution and delivery of each of the Transaction Documents by the Company
     and the consummation by it of the transactions contemplated hereby have
     been approved by the unanimous consent of the Board of Directors of the
     Company. The execution and delivery of each of the Transaction Documents by
     the Company and the consummation by it of the transactions contemplated
     hereby and thereby have been duly authorized by all necessary action on the
     part of the Company and no further action is


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     required by the Company, its board of directors or its stockholders in
     connection therewith other than in connection with the Required Approvals.
     Each Transaction Document has been (or upon delivery will have been) duly
     executed by the Company and, when delivered in accordance with the terms
     hereof and thereof, will constitute the valid and binding obligation of the
     Company enforceable against the Company in accordance with its terms except
     (i) as limited by general equitable principles and applicable bankruptcy,
     insolvency, reorganization, moratorium and other laws of general
     application affecting enforcement of creditors' rights generally, (ii) as
     limited by laws relating to the availability of specific performance,
     injunctive relief or other equitable remedies and (iii) insofar as
     indemnification and contribution provisions may be limited by applicable
     law.

          (d) No Conflicts. The execution, delivery and performance of the
     Transaction Documents by the Company, the issuance and sale of the Shares
     and the consummation by the Company of the other transactions contemplated
     hereby and 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, result in the creation
     of any Lien upon any of the properties or assets of the Company or any
     Subsidiary, 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) subject to the Required Approvals, conflict with or
     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
     have or reasonably be expected to result in a Material Adverse Effect.

          (e) Filings, Consents and Approvals. The Company is not required to
     obtain any consent, waiver, authorization or order of, give any notice to,
     or make any filing or registration 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) filings required pursuant to Section 4.4 of this
     Agreement, (ii) the filing with the Commission of the Registration
     Statement, (iii) application(s) to each applicable Trading Market for the
     listing of the Securities for trading thereon in the time and manner
     required thereby, and (iv) the filing of Form D with the Commission and
     such filings as are required to be made under applicable state securities
     laws (collectively, the "Required Approvals").

          (f) Issuance of the Securities. The Securities are duly authorized
     and, when issued and paid for in accordance with the applicable Transaction
     Documents, will be duly and validly issued, fully paid and nonassessable,
     free and clear of all Liens imposed by the Company other than restrictions
     on transfer provided for in the Transaction


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     Documents. The Warrant Shares, when issued in accordance with the terms of
     the Transaction Documents, will be validly issued, fully paid and
     nonassessable, free and clear of all Liens imposed by the Company. The
     Company has reserved from its duly authorized capital stock the maximum
     number of shares of Common Stock issuable pursuant to this Agreement and
     the Warrants.

          (g) Capitalization. The capitalization of the Company is as set forth
     on Schedule 3.1(g). The Company has not issued any capital stock since its
     most recently filed periodic report under the Exchange Act, other than
     pursuant to the exercise of employee and consultant stock options under the
     Company's stock option plans, the issuance of shares of Common Stock to
     employees and consultants pursuant to the Company's employee stock purchase
     plan and pursuant to the conversion or exercise of Common Stock Equivalents
     outstanding as of the date of the most recently filed periodic report under
     the Exchange Act. 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 set forth
     in Schedule 3.1(g) or as a result of the purchase and sale of the
     Securities, there are no outstanding options, warrants, script rights to
     subscribe to, calls or commitments of any character whatsoever relating to,
     or securities, rights or obligations convertible into or exercisable 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 Common Stock
     Equivalents. The issuance and sale of the Securities will not 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 any of such securities. All of the outstanding shares of
     capital stock of the Company are validly issued, fully paid and
     nonassessable, have been issued in compliance with all federal and state
     securities laws, and none of such outstanding shares was issued in
     violation of any preemptive rights or similar rights to subscribe for or
     purchase securities. No further approval or authorization of any
     stockholder, the Board of Directors of the Company or others is required
     for the issuance and sale of the Securities. There are no stockholders
     agreements, voting agreements or other similar agreements with respect to
     the Company's capital stock to which the Company is a party or, to the
     knowledge of the Company, between or among any of the Company's
     stockholders.

          (h) SEC Reports; Financial Statements. The Company has filed all
     reports, schedules, forms, statements and other documents 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 period commencing
     August 1, 2003 through the date hereof (or such shorter period as the
     Company was required by law or regulation to file such material) (the
     foregoing materials, including the exhibits thereto and documents
     incorporated by reference therein, being collectively referred to herein as
     the "SEC Reports") 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. 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


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     thereunder, as applicable, 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 the light of the circumstances under which they
     were made, not misleading. 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 United States 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 except that unaudited
     financial statements may not contain all footnotes required by GAAP, 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.

          (i) Material Changes; Undisclosed Events, Liabilities or Developments.
     Since the date of the latest audited financial statements included within
     the SEC Reports, except as specifically disclosed in a subsequent SEC
     Report, (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 disclosed in filings made with the
     Commission, (iii) the Company has not altered its method of accounting,
     (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. Except for the issuance of the
     Securities contemplated by this Agreement or as set forth on Schedule
     3.1(i), no event, liability or development has occurred or exists with
     respect to the Company or its Subsidiaries or their respective business,
     properties, operations or financial condition, that would be required to be
     disclosed by the Company under applicable securities laws at the time this
     representation is made that has not been publicly disclosed at least 1
     Trading Day prior to the date that this representation is made.

          (j) Litigation. There is no action, suit, inquiry, notice of
     violation, proceeding or investigation pending or, to the knowledge of the
     Company, threatened against or affecting the Company, any Subsidiary or any
     of their respective properties before or by any court, arbitrator,
     governmental or administrative agency or regulatory authority (federal,
     state, county, local or foreign) (collectively, an "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, have or reasonably be expected to result in a
     Material Adverse Effect. Except as set forth on Schedule 3.1(j), neither
     the Company nor any Subsidiary, nor any director or officer


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     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. Except as set forth on Schedule 3.1(j), 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 which could reasonably be expected to result in a Material
     Adverse Effect. None of the Company's or its Subsidiaries' employees is a
     member of a union that relates to such employee's relationship with the
     Company, and neither the Company or any of its Subsidiaries is a party to a
     collective bargaining agreement, and the Company and its Subsidiaries
     believe that their relationships with their employees are good. No
     executive officer, to the knowledge of the Company, is, or is now expected
     to be, in violation of any material term of any employment contract,
     confidentiality, disclosure or proprietary information agreement or
     non-competition agreement, or any other contract or agreement or any
     restrictive covenant, and the continued employment of each such executive
     officer does not subject the Company or any of its Subsidiaries to any
     liability with respect to any of the foregoing matters. The Company and its
     Subsidiaries are in compliance with all U.S. federal, state, local and
     foreign laws and regulations relating to employment and employment
     practices, terms and conditions of employment and wages and hours, except
     where the failure to be in compliance could not, individually or in the
     aggregate, reasonably be expected to have a Material Adverse Effect.

          (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 applicable to its
     business and all such laws that affect the environment, except in each case
     as could not 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 could not 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.


                                       12

<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 the business of the Company and the Subsidiaries and good and
     marketable title in all personal property owned by them that is material to
     the business of the Company and the Subsidiaries, in each case free and
     clear of all Liens, 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
     and Liens for the payment of federal, state or other taxes, the payment of
     which is neither delinquent nor subject to penalties. Any real property and
     facilities held under lease by the Company and the Subsidiaries are held by
     them under valid, subsisting and enforceable leases with which the Company
     and the Subsidiaries are in compliance.

          (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, trade secrets, inventions,
     copyrights, licenses and other intellectual property rights and similar
     rights 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 have a Material Adverse Effect (collectively, the "Intellectual
     Property Rights"). Neither the Company nor any Subsidiary has received a
     notice (written or otherwise) that the Intellectual Property Rights used by
     the Company or any Subsidiary violates or infringes upon the rights of any
     Person. 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. The Company and its
     Subsidiaries have taken reasonable security measures to protect the
     secrecy, confidentiality and value of all of their intellectual properties,
     except where failure to do so could not, individually or in the aggregate,
     reasonably be expected to have a Material Adverse Effect.

          (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, including, but not
     limited to, directors and officers insurance coverage equal to the amount
     set forth on Schedule 3.1(p). Neither the Company nor any Subsidiary has
     any reason to believe that it will not be able to renew its existing
     insurance coverage as and when such coverage expires or to obtain similar
     coverage from similar insurers as may be necessary to continue its business
     without a significant increase in cost.

          (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, in each case in excess of
     $60,000 other than (i) for payment of salary or


                                       13

<PAGE>

     consulting fees for services rendered, (ii) reimbursement for expenses
     incurred on behalf of the Company and (iii) for other employee benefits,
     including stock option agreements under any stock option plan of the
     Company.

          (r) Sarbanes-Oxley; Internal Accounting Controls. The Company is in
     material compliance with all provisions of the Sarbanes-Oxley Act of 2002
     which are applicable to it as of the Closing Date. The Company and the
     Subsidiaries maintain a system of internal accounting controls sufficient
     to provide reasonable assurance that (i) transactions are executed in
     accordance with management's general or specific authorizations, (ii)
     transactions are recorded as necessary to permit preparation of financial
     statements in conformity with GAAP 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. The Company
     has established disclosure controls and procedures (as defined in Exchange
     Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such
     disclosure controls and procedures to ensure that information required to
     be disclosed by the Company in the reports it files or submits under the
     Exchange Act is recorded, processed, summarized and reported, within the
     time periods specified in the Commission's rules and forms. The Company's
     certifying officers have evaluated the effectiveness of the Company's
     disclosure controls and procedures as of the end of the period covered by
     the Company's most recently filed periodic report under the Exchange Act
     (such date, the "Evaluation Date"). The Company presented in its most
     recently filed periodic report under the Exchange Act the conclusions of
     the certifying officers about the effectiveness of the disclosure controls
     and procedures based on their evaluations as of the Evaluation Date. Since
     the Evaluation Date, there have been no changes in the Company's internal
     control over financial reporting (as such term is defined in the Exchange
     Act) that has materially affected, or is reasonably likely to materially
     affect, the Company's internal control over financial reporting.

          (s) Certain Fees. Except as set forth on Schedule 3.1(s), 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 the Transaction Documents. The Purchasers shall have no
     obligation with respect to any fees or with respect to any claims 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
     the Transaction Documents.

          (t) Private Placement. Assuming the accuracy of the Purchasers
     representations and warranties set forth in Section 3.2, no registration
     under the Securities Act is required for the offer and sale of the
     Securities by the Company to the Purchasers as contemplated hereby. The
     issuance and sale of the Securities hereunder does not contravene the rules
     and regulations of the Trading Market.

          (u) Investment Company. The Company is not, and is not an Affiliate
     of, and immediately after receipt of payment for the Securities, will not
     be or be an Affiliate of,


                                       14

<PAGE>

     an "investment company" within the meaning of the Investment Company Act of
     1940, as amended. The Company shall conduct its business in a manner so
     that it will not become subject to the Investment Company Act.

          (v) Registration Rights. Other than each of the Purchasers, no Person
     has any right to cause the Company to effect the registration under the
     Securities Act of any securities of the Company other than those securities
     which are currently registered on an effective registration statement on
     file with the Commission.

          (w) Listing and Maintenance Requirements. The Company's Common Stock
     is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and
     the Company has taken no action designed to, or which to its knowledge is
     likely to have the effect of, terminating the registration of the Common
     Stock under the Exchange Act nor has the Company received any notification
     that the Commission is contemplating terminating such registration. The
     Company has not, in the 12 months preceding the date hereof, received
     notice 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. The Company
     is, and has no reason to believe that it will not in the foreseeable future
     continue to be, in compliance with all such listing and maintenance
     requirements.

          (x) Application of Takeover Protections. 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 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 as a result of the
     Purchasers and the Company fulfilling their obligations or exercising their
     rights under the Transaction Documents, including without limitation as a
     result of the Company's issuance of the Securities and the Purchasers'
     ownership of the Securities.

          (y) Disclosure. Except with respect to the material terms and
     conditions of the transactions contemplated by the Transaction Documents,
     the Company confirms that, neither it nor any other Person acting on its
     behalf has provided any of the Purchasers or their agents or counsel with
     any information that it believes constitutes or might constitute material,
     non-public information. The Company understands and confirms that the
     Purchasers will rely on the foregoing representation in effecting
     transactions in securities of the Company. All disclosure furnished by or
     on behalf of the Company to the Purchasers regarding the Company, its
     business and the transactions contemplated hereby, including the Disclosure
     Schedules to this Agreement, with respect to the representations and
     warranties made herein are true and correct with respect to such
     representations and warranties 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. The Company acknowledges and agrees that no
     Purchaser makes or has made any representations or warranties with respect
     to the transactions contemplated hereby other than those specifically set
     forth in Section 3.2 hereof.


                                       15

<PAGE>

          (z) No Integrated Offering. Assuming the accuracy of the Purchasers'
     representations and warranties set forth in Section 3.2, 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 cause this offering of the Securities to be integrated with
     prior offerings by the Company for purposes of the Securities Act or any
     applicable shareholder approval provisions of any Trading Market on which
     any of the securities of the Company are listed or designated.

          (aa) Solvency. Based on the financial condition of the Company as of
     the Closing Date after giving effect to the receipt by the Company of the
     proceeds from the sale of the Securities hereunder, (i) the fair saleable
     value of the Company's 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; and
     (ii) the existing cash 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 liabilities 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). The
     Company has no knowledge of any facts or circumstances which lead it to
     believe that it will file for reorganization or liquidation under the
     bankruptcy or reorganization laws of any jurisdiction within one year from
     the Closing Date. The SEC Reports set forth as of the dates thereof all
     outstanding secured and unsecured Indebtedness of the Company or any
     Subsidiary, or for which the Company or any Subsidiary has commitments. For
     the purposes of this Agreement, "Indebtedness" shall mean (a) any
     liabilities for borrowed money or amounts owed in excess of $50,000 (other
     than trade accounts payable incurred in the ordinary course of business),
     (b) all guaranties, endorsements and other contingent obligations in
     respect of Indebtedness of others, whether or not the same are or should be
     reflected in the Company's balance sheet (or the notes thereto), except
     guaranties by endorsement of negotiable instruments for deposit or
     collection or similar transactions in the ordinary course of business; and
     (c) the present value of any lease payments in excess of $50,000 due under
     leases required to be capitalized in accordance with GAAP. Neither the
     Company nor any Subsidiary is in default with respect to any Indebtedness.

          (bb) Tax Status. Except for matters that would not, individually or in
     the aggregate, have or reasonably be expected to result in a Material
     Adverse Effect, the Company and each Subsidiary has filed all necessary
     federal, state and foreign income and franchise tax returns and has paid or
     accrued all taxes shown as due thereon, and the Company has no knowledge of
     a tax deficiency which has been asserted or threatened against the Company
     or any Subsidiary.

          (cc) No General Solicitation. Neither the Company nor any person
     acting on behalf of the Company has offered or sold any of the Securities
     by any form of general solicitation or general advertising. The Company has
     offered the Securities for sale only to the Purchasers and certain other
     "accredited investors" within the meaning of Rule 501 under the Securities
     Act.


                                       16
<PAGE>

          (dd) Foreign Corrupt Practices. Neither the Company, nor to the
     knowledge of the Company, any agent or other person acting on behalf of the
     Company, has (i) directly or indirectly, used any funds for unlawful
     contributions, gifts, entertainment or other unlawful expenses related to
     foreign or domestic political activity, (ii) made any unlawful payment to
     foreign or domestic government officials or employees or to any foreign or
     domestic political parties or campaigns from corporate funds, (iii) failed
     to disclose fully any contribution made by the Company (or made by any
     person acting on its behalf of which the Company is aware) which is in
     violation of law, or (iv) violated in any material respect any provision of
     the Foreign Corrupt Practices Act of 1977, as amended.

          (ee) Accountants. The Company's accountants are set forth on Schedule
     3.1(ee) of the Disclosure Schedule. To the knowledge of the Company, such
     accountants, who the Company expects will express their opinion with
     respect to the financial statements to be included in the Company's Annual
     Report on Form 10-K for the year ending July 31, 2006, are a registered
     public accounting firm as required by the Exchange Act.

          (ff) Acknowledgment Regarding Purchasers' Purchase of Securities. The
     Company acknowledges and agrees that each of the Purchasers is acting
     solely in the capacity of an arm's length purchaser with respect to the
     Transaction Documents and the transactions contemplated thereby. The
     Company further acknowledges that no Purchaser is acting as a financial
     advisor or fiduciary of the Company (or in any similar capacity) with
     respect to the Transaction Documents and the transactions contemplated
     thereby and any advice given by any Purchaser or any of their respective
     representatives or agents in connection with the Transaction Documents and
     the transactions contemplated thereby is merely incidental to the
     Purchasers' purchase of the Securities. The Company further represents to
     each Purchaser that the Company's decision to enter into this Agreement and
     the other Transaction Documents has been based solely on the independent
     evaluation of the transactions contemplated hereby by the Company and its
     representatives.

          (gg) Acknowledgement Regarding Purchasers' Trading Activity. Anything
     in this Agreement or elsewhere herein to the contrary notwithstanding
     (except for Sections 3.2(f) and 4.15 hereof), it is understood and
     acknowledged by the Company (i) that none of the Purchasers have been asked
     to agree, nor has any Purchaser agreed, to desist from purchasing or
     selling, long and/or short, securities of the Company, or "derivative"
     securities based on securities issued by the Company or to hold the
     Securities for any specified term; (ii) that past or future open market or
     other transactions by any Purchaser, including Short Sales, and
     specifically including, without limitation, Short Sales or "derivative"
     transactions, before or after the closing of this or future private
     placement transactions, may negatively impact the market price of the
     Company's publicly-traded securities; (iii) that any Purchaser, and
     counter-parties in "derivative" transactions to which any such Purchaser is
     a party, directly or indirectly, presently may have a "short" position in
     the Common Stock, and (iv) that each Purchaser shall not be deemed to have
     any affiliation with or control over any arm's length counter-party in any
     "derivative" transaction. The Company further understands and acknowledges
     that (a) one or more Purchasers may engage in hedging activities at various
     times during the period that the


                                       17

<PAGE>

     Securities are outstanding, including, without limitation, during the
     periods that the value of the Warrant Shares deliverable with respect to
     Securities are being determined and (b) such hedging activities (if any)
     could reduce the value of the existing stockholders' equity interests in
     the Company at and after the time that the hedging activities are being
     conducted. The Company acknowledges that such aforementioned hedging
     activities do not constitute a breach of any of the Transaction Documents.

          (hh) Manipulation of Price. During the 3 months prior to the date
     hereof and other than in connection with the sale of the Securities, the
     Company has not, and to its knowledge no one acting on its behalf has, (i)
     taken, directly or indirectly, any action designed to cause or to result in
     the stabilization or manipulation of the price of any security of the
     Company to facilitate the sale or resale of any of the Securities, (ii)
     sold, bid for, purchased, or, paid any compensation for soliciting
     purchases of, any of the Securities, or (iii) paid or agreed to pay to any
     person any compensation for soliciting another to purchase any other
     securities of the Company, other than, in the case of clauses (ii) and
     (iii), compensation paid to the Company's placement agent in connection
     with the placement of the Securities.

          (ii) Form S-3 Eligibility. The Company is eligible to register the
     resale of the Securities for resale by the Purchaser on Form S-3
     promulgated under the Securities Act.

     3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date 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 full right, corporate or partnership
     power and authority to enter into and to consummate the transactions
     contemplated by the Transaction Documents and otherwise to carry out its
     obligations hereunder and thereunder. The execution, delivery and
     performance by such Purchaser of the transactions contemplated by this
     Agreement have been duly authorized by all necessary corporate or similar
     action on the part of such Purchaser. Each Transaction Document to which it
     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 Purchaser, enforceable against
     it in accordance with its terms, except (i) as limited by general equitable
     principles and applicable bankruptcy, insolvency, reorganization,
     moratorium and other laws of general application affecting enforcement of
     creditors' rights generally, (ii) as limited by laws relating to the
     availability of specific performance, injunctive relief or other equitable
     remedies and (iii) insofar as indemnification and contribution provisions
     may be limited by applicable law.

          (b) Own Account. Such Purchaser understands that the Securities are
     "restricted securities" and have not been registered under the Securities
     Act or any applicable state securities law and is acquiring the Securities
     as principal for its own account and not with a view to or for distributing
     or reselling such Securities or any part thereof in violation of the
     Securities Act or any applicable state securities law, has no


                                       18

<PAGE>

     present intention of distributing any of such Securities in violation of
     the Securities Act or any applicable state securities law and has no direct
     or indirect arrangement or understandings with any other persons to
     distribute or regarding the distribution of such Securities (this
     representation and warranty not limiting such Purchaser's right to sell the
     Securities pursuant to the Registration Statement or otherwise in
     compliance with applicable federal and state securities laws) in violation
     of the Securities Act or any applicable state securities law. Such
     Purchaser is acquiring the Securities hereunder in the ordinary course of
     its business.

          (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 any Warrants, it will be either: (i) an "accredited investor"
     as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the
     Securities Act or (ii) a "qualified institutional buyer" as defined in Rule
     144A(a) under the Securities Act. Such Purchaser is not required to be
     registered as a 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) Short Sales and Confidentiality Prior To The Date Hereof. Other
     than the transaction contemplated hereunder, such Purchaser has not
     directly or indirectly, nor has any Person acting on behalf of or pursuant
     to any understanding with such Purchaser, executed any disposition,
     including Short Sales, in the securities of the Company during the period
     commencing from the time that such Purchaser first received a term sheet
     (written or oral) from the Company or any other Person setting forth the
     material terms of the transactions contemplated hereunder until the date
     hereof ("Discussion Time"). Notwithstanding the foregoing, in the case of a
     Purchaser that is a multi-managed investment vehicle whereby separate
     portfolio managers manage separate portions of such Purchaser's assets and
     the portfolio managers have no direct knowledge of the investment decisions
     made by the portfolio managers managing other portions of such Purchaser's
     assets, the representation set forth above shall only apply with respect to
     the portion of assets managed by the portfolio manager that made the
     investment decision to purchase the Securities covered by this Agreement.
     Other than to other Persons party to this Agreement, such Purchaser has
     maintained the confidentiality of all disclosures made to it in connection
     with this transaction (including the existence and terms of this
     transaction).


                                       19

<PAGE>

                                   ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

     4.1  Transfer Restrictions.

          (a) The Securities may only be disposed of in compliance with state
     and federal securities laws. In connection with any transfer of Securities
     other than pursuant to an effective registration statement or Rule 144, to
     the Company or 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 and reasonably acceptable to the Company, 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. As a condition of
     transfer, any such transferee shall agree in writing to be bound by the
     terms of this Agreement and shall have the rights of a Purchaser under this
     Agreement and the Registration Rights Agreement.

          (b) The Purchasers agree to the imprinting, so long as is required by
     this Section 4.1, of a legend on any of the Securities in the following
     form:

          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 MAY BE PLEDGED
          IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED
          BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN
          "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a) UNDER THE SECURITIES
          ACT 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 with a registered
     broker-dealer or grant a security interest in some or all of the Securities
     to a financial institution that is an "accredited investor" as defined in
     Rule 501(a) under the Securities Act and who agrees to be bound by the
     provisions of this Agreement and the Registration Rights Agreement 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


                                       20

<PAGE>

     transfer would not be subject to approval of the Company and no legal
     opinion of legal counsel of 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, if the Securities are subject to
     registration pursuant to the Registration Rights Agreement, the preparation
     and filing of any required prospectus supplement under Rule 424(b)(3) under
     the Securities Act or other applicable provision of the Securities Act to
     appropriately amend the list of Selling Stockholders thereunder.

          (c) Certificates evidencing the 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 security is effective under the Securities Act,
     or (ii) following any sale of such Shares or Warrant Shares pursuant to
     Rule 144, or (iii) if such 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 a legal opinion to the Company's transfer agent
     promptly after the Effective Date if required by the Company's transfer
     agent to effect the removal of the legend hereunder. If all or any portion
     of a Warrant is exercised at a time when there is an effective registration
     statement to cover the resale of the Warrant Shares, such Warrant Shares
     shall be issued free of all legends. The Company agrees that following the
     Effective Date or at such time as such legend is no longer required under
     this Section 4.1(c), it 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 Shares or Warrant Shares, as the case may be,
     issued with a restrictive legend (such third Trading Day, the "Legend
     Removal Date"), deliver or cause to be delivered to such Purchaser a
     certificate representing such 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. Certificates for
     Securities subject to legend removal hereunder shall be transmitted by the
     transfer agent of the Company to the Purchasers by crediting the account of
     the Purchaser's prime broker with the Depository Trust Company System.

          (d) In addition to such Purchaser's other available remedies, the
     Company shall pay to a Purchaser, in cash, as partial liquidated damages
     and not as a penalty, for each $1,000 of Shares or Warrant Shares (based on
     the Closing Price of the Common Stock on the date such Securities are
     submitted to the Company's transfer agent) delivered for removal of the
     restrictive legend and subject to Section 4.1(c), $10 per Trading Day
     (increasing to $20 per Trading Day five (5) Trading Days after such damages
     have begun to accrue) for each Trading Day after the Legend Removal Date
     until such certificate is delivered without a legend. Nothing herein shall
     limit such Purchaser's right to pursue actual damages for the Company's
     failure to deliver certificates representing any Securities as required by
     the Transaction Documents, and such Purchaser shall have the right to
     pursue all remedies available to it at law or in


                                       21

<PAGE>

     equity including, without limitation, a decree of specific performance
     and/or injunctive relief.

          (e) Each Purchaser, severally and not jointly with the other
     Purchasers, agrees that the removal of the restrictive legend from
     certificates representing Securities as set forth in this Section 4.1 is
     predicated upon the Company's reliance that the Purchaser will sell any
     Securities pursuant to either the registration requirements of the
     Securities Act, including any applicable prospectus delivery requirements,
     or an exemption therefrom, and that if Securities are sold pursuant to a
     Registration Statement, they will be sold in compliance with the plan of
     distribution set forth therein. Each Purchaser, severally and not jointly
     with the other Purchasers, agrees that if it is notified by the Company at
     any time after the Legend Removal Date that the registration statement
     registering the resale of the Shares or the Warrant Shares is not effective
     or that the prospectus included in such registration statement no longer
     complies with the requirements of Section 10 of the Securities Act, the
     Purchaser will refrain from selling such Shares and Warrant Shares until
     such time as the Purchaser is notified by the Company that such
     registration statement is effective or such prospectus is compliant with
     Section 10 of the Exchange Act, unless such Purchaser is able to, and does,
     sell such Shares or Warrant Shares pursuant to an available exemption from
     the registration requirements of Section 5 of the Securities Act.

     4.2 Furnishing of Information. As long as any Purchaser owns 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. As long as any
Purchaser owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, 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 Securities under Rule 144. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, to the extent required from time to time to
enable such Person to sell such Securities without registration under the
Securities Act within the requirements of the exemption provided by Rule 144.

     4.3 Integration. The Company shall not 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 such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent transaction.

     4.4 Securities Laws Disclosure; Publicity. The Company shall, within 4
Trading Days of the date hereof, issue a Current Report on Form 8-K, disclosing
the material terms of the transactions contemplated hereby, and shall attach the
Transaction Documents thereto. The Company shall make no other public disclosure
of the transactions contemplated by this Agreement prior to the time that the
Current Report on Form 8-K is filed with the Commission


                                       22

<PAGE>

as required above. The Company and each Purchaser shall consult with each other
in issuing any other press releases with respect to the transactions
contemplated hereby, and neither the Company nor any Purchaser shall issue any
press release or otherwise make any such public statement without the prior
consent of the Company, with respect to any press release of any Purchaser, or
without the prior consent of each Purchaser, with respect to any press release
of the Company, which consent shall not unreasonably be withheld or delayed,
except if such disclosure is required by law, in which case the disclosing party
shall promptly provide the other party with prior notice of such public
statement or communication. 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 (i) as
required by federal securities law in connection with (A) any registration
statement contemplated by the Registration Rights Agreement and (B) the filing
of final Transaction Documents (including signature pages thereto) with the
Commission and (ii) 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 permitted under this subclause (ii).

     4.5 Shareholder Rights Plan. No claim will be made or enforced by the
Company or, with the consent of the Company, any other Person, that any
Purchaser is an "Acquiring Person" under any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or similar anti-takeover 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 Securities under the
Transaction Documents or under any other agreement between the Company and the
Purchasers.

     4.6 Non-Public Information. Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, 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.

     4.7 Use of Proceeds. Except as set forth on Schedule 4.7 attached hereto,
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 payables in the ordinary course of
the Company's business and prior practices), to redeem any Common Stock or
Common Stock Equivalents, to settle any outstanding litigation or for any
investment not directly related to the business of the Company (other than
towards the hiring of an investor relations firm pursuant to Section 4.19.

     4.8 Reimbursement. If any Purchaser becomes involved in any capacity in any
Proceeding by or against any Person who is a stockholder and except if such
claim arises primarily from a breach of such Purchaser's representations,
warranties or covenants under the Transaction Documents or any agreements or
understandings such Purchaser may have with any such stockholder of the Company
(except as a result of sales, pledges, margin sales and similar


                                       23

<PAGE>

transactions by such Purchaser to or with any other stockholder), solely as a
result of such Purchaser's acquisition of the Securities under this Agreement,
the Company will reimburse such Purchaser 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. The reimbursement obligations of the Company under this paragraph
shall be in addition to any liability which the Company may otherwise have,
shall extend upon the same terms and conditions to any Affiliates of the
Purchasers who are actually named in such action, proceeding or investigation,
and partners, directors, agents, employees and controlling persons (if any), as
the case may be, of the Purchasers and any such Affiliate, and shall be binding
upon and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company solely as a result of acquiring the Securities under
this Agreement, except if such claim arises primarily from a breach of such
Purchaser's representations, warranties or covenants under the Transaction
Documents or any agreements or understandings such Purchaser may have with any
such stockholder or any violations by the Purchaser of state or federal
securities laws or any conduct by such Purchaser which constitutes fraud, gross
negligence, willful misconduct or malfeasance.

     4.9 Indemnification of Purchasers. Subject to the provisions of this
Section 4.9, the Company will indemnify and hold each Purchaser and its
directors, officers, shareholders, members, partners, employees and agents (and
any other Persons with a functionally equivalent role of a Person holding such
titles notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (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 that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a
Purchaser, or any of them or their respective Affiliates, by any stockholder of
the Company who is not an Affiliate of such Purchaser, with respect to any of
the transactions contemplated by the Transaction Documents (unless such action
is based upon a breach of such Purchaser's representations, warranties or
covenants under the Transaction Documents or any agreements or understandings
such Purchaser may have with any such stockholder or any violations by the
Purchaser of state or federal securities laws or any conduct by such Purchaser
which constitutes fraud, gross negligence, willful misconduct or malfeasance).
If any action shall be brought against any Purchaser Party in respect of which
indemnity may be sought pursuant to this Agreement, such Purchaser Party shall
promptly notify the Company in writing, and the Company shall have the right to
assume the defense thereof with counsel of its own choosing reasonably
acceptable to the Purchaser Party. Any Purchaser Party shall have the right to
employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Purchaser Party except to the extent that (i) the employment thereof has


                                       24

<PAGE>

been specifically authorized by the Company in writing, (ii) the Company has
failed after a reasonable period of time to assume such defense and to employ
counsel or (iii) in such action there is, in the reasonable opinion of such
separate counsel, a material conflict on any material issue between the position
of the Company and the position of such Purchaser Party, in which case the
Company shall be responsible for the reasonable fees and expenses of no more
than one such separate counsel. The Company will not be liable to any Purchaser
Party under this Agreement (i) for any settlement by a Purchaser Party effected
without the Company's prior written consent; or (ii) to the extent, but only to
the extent that a loss, claim, damage or liability is attributable to any
Purchaser Party's breach of any of the representations, warranties, covenants or
agreements made by such Purchaser Party in this Agreement or in the other
Transaction Documents.

     4.10 Reservation of Common Stock. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Shares pursuant to this
Agreement and Warrant Shares pursuant to any exercise of the Warrants.

     4.11 Listing of Common Stock. The Company hereby agrees to use best efforts
to maintain the listing of the Common Stock on a Trading Market, and as soon as
reasonably practicable following the Closing (but not later than the earlier of
the Effective Date and the first anniversary of the Closing Date) to list all of
the Shares and Warrant Shares on such Trading Market. The Company further
agrees, if the Company applies to have the Common Stock traded on any other
Trading Market, it will include in such application all of the Shares and
Warrant Shares, and will take such other action as is necessary to cause all of
the Shares and Warrant Shares to be listed on such other Trading Market as
promptly as possible. The Company will take all action reasonably necessary to
continue the listing and trading of its Common Stock on a Trading Market and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Trading Market.

     4.12 Equal Treatment of Purchasers. No consideration shall be offered or
paid to any Person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents. For
clarification purposes, this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated separately by each Purchaser, and
is intended to treat for the Company the Purchasers as a class and shall not in
any way be construed as the Purchasers acting in concert or as a group with
respect to the purchase, disposition or voting of Securities or otherwise.

     4.13 Participation in Future Financing.

          (a) From the date hereof until the date that is the 18 month
     anniversary of the date hereof, upon any issuance by the Company or any of
     its Subsidiaries of Common Stock or Common Stock Equivalents (a "Subsequent
     Financing"), each Purchaser shall have the right to participate in up to an
     amount of the Subsequent Financing equal to an amount that will allow such
     Purchaser to maintain its percentage ownership in the Company's Common
     Stock at the time of the Subsequent Financing (the "Participation


                                       25

<PAGE>

     Maximum") on the same terms, conditions and price provided for in the
     Subsequent Financing; provided, however, if a Purchaser's Subscription
     Amount (including and aggregated with the Subscription Amounts of any of
     such Purchaser's Affiliates) (each such Purchaser, a "Qualified Purchaser")
     is equal to or greater than $2 million, such Purchaser's Participation
     Maximum shall be up to an amount equal to the lesser of (a) the aggregate
     amount of the Subsequent Financing and (b) such Purchaser's Subscription
     Amount.

          (b) At least 5 Trading Days prior to the closing of the Subsequent
     Financing, the Company shall deliver to each Purchaser a written notice of
     its intention to effect a Subsequent Financing ("Pre-Notice"), which
     Pre-Notice shall ask such Purchaser if it wants to review the details of
     such financing (such additional notice, a "Subsequent Financing Notice").
     Upon the request of a Purchaser, and only upon a request by such Purchaser,
     for a Subsequent Financing Notice, the Company shall promptly, but no later
     than 1 Trading Day after such request, deliver a Subsequent Financing
     Notice to such Purchaser. The Subsequent Financing Notice shall describe in
     reasonable detail the proposed terms of such Subsequent Financing, the
     amount of proceeds intended to be raised thereunder, the Person or Persons
     through or with whom such Subsequent Financing is proposed to be effected,
     and attached to which shall be a term sheet or similar document relating
     thereto.

          (c) Any Purchaser desiring to participate in such Subsequent Financing
     must provide written notice to the Company by not later than 5:30 p.m. (New
     York City time) on the 5th Trading Day after all of the Purchasers have
     received the Pre-Notice that the Purchaser is willing to participate in the
     Subsequent Financing, the amount of the Purchaser's participation, and that
     the Purchaser has such funds ready, willing, and available for investment
     on the terms set forth in the Subsequent Financing Notice. If the Company
     receives no notice from a Purchaser as of such 5th Trading Day, such
     Purchaser shall be deemed to have notified the Company that it does not
     elect to participate.

          (d) If by 5:30 p.m. (New York City time) on the 5th Trading Day after
     all of the Purchasers have received the Pre-Notice, notifications by the
     Purchasers of their willingness to participate in the Subsequent Financing
     (or to cause their designees to participate) is, in the aggregate, less
     than the total amount of the Subsequent Financing, then the Company may
     effect the remaining portion of such Subsequent Financing on the terms and
     with the Persons set forth in the Subsequent Financing Notice.

          (e) If by 5:30 p.m. (New York City time) on the 5th Trading Day after
     all of the Purchasers have received the Pre-Notice, the Company receives
     responses to a Subsequent Financing Notice from Purchasers seeking to
     purchase, in the aggregate, more than the aggregate amount of the
     Subsequent Financing, each such Purchaser shall have the right to purchase
     their Pro Rata Portion (as defined below) of the Subsequent Financing. "Pro
     Rata Portion" is the ratio of (x) the Subscription Amount of Securities
     purchased on the Closing Date by a Qualified Purchaser participating under
     this Section 4.13 and (y) the sum of the aggregate Subscription Amounts of
     Securities purchased on the Closing Date by all Purchasers participating
     under this Section 4.13.


                                       26

<PAGE>

          (f) The Company must provide the Purchasers with a second Subsequent
     Financing Notice, and the Purchasers will again have the right of
     participation set forth above in this Section 4.13, if the Subsequent
     Financing subject to the initial Subsequent Financing Notice is not
     consummated for any reason substantially on the terms set forth in such
     Subsequent Financing Notice within 60 Trading Days after the date of the
     initial Subsequent Financing Notice.

          (g) Notwithstanding the foregoing, this Section 4.13 shall not apply
     in respect of an Exempt Issuance or a firm commitment underwritten public
     offering.

     4.14 Subsequent Equity Sales.

          (a) From the date hereof until 90 days after the Effective Date,
     neither the Company nor any Subsidiary shall issue shares of Common Stock
     or Common Stock Equivalents; provided, however, the 90 day period set forth
     in this Section 4.14 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 Shares
     and Warrant Shares.

          (b) From the date hereof until the one-year anniversary from the
     Closing Date, the Company shall be prohibited from effecting or entering
     into an agreement to effect any Subsequent Financing involving a "Variable
     Rate Transaction". The term "Variable Rate Transaction" shall mean a
     transaction in which the Company issues or sells (i) any debt or equity
     securities that are convertible into, exchangeable or exercisable for, or
     include the right to receive additional shares of Common Stock either (A)
     at a conversion, exercise or exchange rate or other price that is based
     upon and/or varies with the trading prices of or quotations for the shares
     of Common Stock at any time after the initial issuance of such debt or
     equity securities, or (B) with a conversion, exercise or exchange price
     that is subject to being reset at some future date after the initial
     issuance of such debt or equity security or upon the occurrence of
     specified or contingent events directly or indirectly related to the
     business of the Company or the market for the Common Stock or (ii) enters
     into any agreement, including, but not limited to, an equity line of
     credit, whereby the Company may sell securities at a future determined
     price. Any Purchaser shall be entitled to obtain injunctive relief against
     the Company to preclude any such issuance, which remedy shall be in
     addition to any right to collect damages.

          (c) Notwithstanding the foregoing, this Section 4.14 shall not apply
     in respect of an Exempt Issuance, except that no Variable Rate Transaction
     shall be an Exempt Issuance.

     4.15 Short Sales and Confidentiality After The Date Hereof. Each Purchaser
severally and not jointly with the other Purchasers covenants that neither it
nor any Affiliate acting on its behalf or pursuant to any understanding with it
will execute any Short Sales during the period commencing at the Discussion Time
and ending at the time that the transactions contemplated by


                                       27

<PAGE>

this Agreement are first publicly announced as described in Section 4.4. Each
Purchaser, severally and not jointly with the other Purchasers, covenants that
until such time as the transactions contemplated by this Agreement are publicly
disclosed by the Company as described in Section 4.4, such Purchaser will
maintain the confidentiality of all disclosures made to it in connection with
this transaction (including the existence and terms of this transaction). Each
Purchaser understands and acknowledges, severally and not jointly with any other
Purchaser, that the Commission currently takes the position that coverage of
short sales of shares of the Common Stock "against the box" prior to the
Effective Date of the Registration Statement with the Securities is a violation
of Section 5 of the Securities Act, as set forth in Item 65, Section A, of the
Manual of Publicly Available Telephone Interpretations, dated July 1997,
compiled by the Office of Chief Counsel, Division of Corporation Finance.
Notwithstanding the foregoing, no Purchaser makes any representation, warranty
or covenant hereby that it will not engage in Short Sales in the securities of
the Company after the time that the transactions contemplated by this Agreement
are first publicly announced as described in Section 4.4. Notwithstanding the
foregoing, in the case of a Purchaser that is a multi-managed investment vehicle
whereby separate portfolio managers manage separate portions of such Purchaser's
assets and the portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of such
Purchaser's assets, the covenant set forth above shall only apply with respect
to the portion of assets managed by the portfolio manager that made the
investment decision to purchase the Securities covered by this Agreement.

     4.16 Form D; Blue Sky Filings. The Company agrees to timely file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof, promptly upon request of any Purchaser. The Company shall take
such action as the Company shall reasonably determine is necessary in order to
obtain an exemption for, or to qualify the Securities for, sale to the
Purchasers at the Closing under applicable securities or "Blue Sky" laws of the
states of the United States, and shall provide evidence of such actions promptly
upon request of any Purchaser.

     4.17 Capital Changes. Until the earlier of (a) one year anniversary of the
Effective Date and (b) the date that (1) the Company has entered into a
pharmaceutical or biotech corporate partnership agreement for territories which
include the United States with a public company having either (A) a market
capitalization on such date greater than $350 million or (B) annual product
sales for the most recent fiscal year of greater than $150 million and (2) such
agreement is widely disseminated to the public by the Company, the Company shall
not undertake a reverse or forward stock split or reclassification of the Common
Stock without the prior written consent of the Purchasers holding a majority in
interest of the Shares unless such capital change is being undertaken in
connection with (a) acquisitions or strategic transactions approved by a
majority of the disinterested directors, provided any such transactions shall
only be to a Person which is, itself or through its subsidiaries, an operating
company and in which the Company receives consideration, property or services in
addition to the investment of funds, but shall not include a transaction in
which the Company is issuing securities primarily for the purpose of raising
capital or to an entity whose primary business is investing in securities or (b)
the simultaneous widely disseminated public release of either (1) final positive
survival data of the Phase IIIb trial or (2) positive, statistically significant
interim survival data of the Phase IIIb as specified in the protocol.


                                       28

<PAGE>

     4.18 Kuslima Shogen Indebtedness. All indebtedness owed by Kuslima Shogen,
her assignees and her Affiliates (collectively, "Ms. Shogen") to the Company,
including but not limited to, the 8% note due August 1, 2008 with a principal
amount of $168,488 currently outstanding on the date hereof, shall be paid in
full to the Company on or before August 1, 2008. Any bonus awarded, net of
taxes, by the Company to Ms. Shogen prior to payment in full of any outstanding
indebtedness owed by Ms. Shogen to the Company shall be applied to the reduction
of such outstanding indebtedness on a $1 for $1 basis. Prior to the Closing Date
the Company shall enter into an irrevocable agreement with Ms. Shogen,
acceptable the Purchasers, pursuant to which Ms. Shogen shall agree to the
aforementioned terms, naming the Purchasers as third party beneficiaries. The
Company shall not renegotiate the terms of any indebtedness (including any
forgiveness of indebtedness) with Ms. Shogen.

     4.19 Investor Relations Firm. On or prior to the 30th day following the
date hereof, the Company shall have hired an investor relations firm consented
to by the Purchasers managed by ProMed (whose consent shall not be unreasonably
withheld) that caters to the small emerging biotechnology companies. The Company
shall cause it executive officers to be available for presentations to the
investment community as recommended by the Company's investor relations firm and
shall otherwise use best efforts to ensure the execution and success of the
program put forth by such investor relations firm; provided that the commitment
required by the Company and the management to such program shall be commercially
reasonable.

                                   ARTICLE V.
                                  MISCELLANEOUS

     5.1 Termination. This Agreement may be terminated by any Purchaser, as to
such Purchaser's obligations hereunder only and without any effect whatsoever on
the obligations between the Company and the other Purchasers, by written notice
to the other parties, if the Closing has not been consummated on or before July
21, 2006; provided, however, that no such termination will affect the right of
any party to sue for any breach by the other party (or parties).

     5.2 Fees and Expenses. At the Closing, the Company has agreed to reimburse
the Purchasers managed by ProMed the non-accountable sum of $30,000, for its
legal fees and expenses, $10,000 which has been paid prior to the Closing.
Accordingly, in lieu of the foregoing payments, the aggregate amount that ProMed
is to pay for the Securities at the Closing shall, at the option of ProMed, be
reduced by $20,000 in lieu thereof or paid directly from the account designated
by C.E. Unterberg, Towbin per the instructions of ProMed. Except as expressly
set forth in the Transaction Documents to the contrary, 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 transfer agent fees, stamp taxes and other taxes and duties levied
in connection with the delivery of any Securities to the Purchasers.

     5.3 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.


                                       29

<PAGE>

     5.4 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
set forth on the signature pages attached hereto prior to 5:30 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 set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day, (c) the 2nd 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 set forth on the signature pages attached
hereto.

     5.5 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 Purchaser or, in the case of a waiver, by the party against
whom enforcement of any such waived provision 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 any party to exercise any
right hereunder in any manner impair the exercise of any such right.

     5.6 Headings. 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.

     5.7 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 each Purchaser (other than by merger). 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 of the Transaction Documents that apply to the
"Purchasers".

     5.8 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 4.9.

     5.9 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents 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 conflicts of law thereof. Each
party agrees that all legal 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, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York. Each party 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


                                       30

<PAGE>

herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the Transaction Documents),
and hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is improper or is an
inconvenient venue for such proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or 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 other manner permitted by law. The parties hereby waive
all rights to a trial by jury. If either party shall commence an action or
proceeding to enforce any provisions of the Transaction Documents, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its reasonable attorneys' fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceeding.

     5.10 Survival. The representations and warranties contained herein shall
survive the Closing and the delivery of the Shares and Warrant Shares.

     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 both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a ".pdf" format data file, 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 or ".pdf" signature page were an original thereof.

     5.12 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.

     5.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) any of
the other 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.


                                       31

<PAGE>

     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 (in the case of mutilation), 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. The applicant
for a new certificate or instrument under such circumstances shall also pay any
reasonable third-party costs (including customary indemnity) associated with the
issuance of such replacement Securities.

     5.15 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 contained in the Transaction Documents and hereby agrees to waive
and not to assert 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 or non-performance of the obligations
of any other Purchaser under any Transaction Document. Nothing contained herein
or in any other 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 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. Each Purchaser has been represented by its own
separate legal counsel in their review and negotiation of the Transaction
Documents. For reasons of administrative convenience only, Purchasers and their
respective counsel have chosen to communicate with the Company through FW. FW
does not represent all of the Purchasers but only ProMed, who has acted as
placement agent to the transaction. The Company has elected to provide all
Purchasers with the same terms and Transaction Documents for the convenience of
the Company and not because it was required or requested to do so by the
Purchasers.


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<PAGE>

     5.18 Liquidated Damages. The Company's obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.

     5.19 Construction. The parties agree that each of them and/or their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.

                            (Signature Pages Follow)


                                       33

<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.

ALFACELL CORPORATION                                Address for Notice: ________


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

With a copy to (which shall not constitute notice): ____________________________

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                      SIGNATURE PAGE FOR PURCHASER FOLLOWS]


                                       34

<PAGE>

        [PURCHASER SIGNATURE PAGES TO ACEL SECURITIES PURCHASE AGREEMENT]

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

Name of Purchaser:
                   -------------------------------------------------------------


Signature of Authorized Signatory of Purchaser:
                                                --------------------------------
Name of Authorized Signatory:
                              --------------------------------------------------
Title of Authorized Signatory:
                               -------------------------------------------------
Email Address of Purchaser:
                            ----------------------------------------------------
Fax Number of Purchaser:
                         -------------------------------------------------------
Address for Notice of Purchaser:

________________________________________________________________________________

Address for Delivery of Securities for Purchaser (if not same as above):

________________________________________________________________________________

Subscription Amount: __________________

Shares: _______________________________

Warrant Shares: _______________________

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]


                                       35