Exhibit 10.01


                          SECURITIES PURCHASE AGREEMENT

     SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of December 28,
2001, by and among Amnis Systems Inc., a Delaware corporation, with headquarters
located at 3450 Hillview Avenue, Palo Alto, California 94304 (the "COMPANY"),
and each of the purchasers set forth on the signature pages hereto (the
"BUYERS").

     WHEREAS:

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

     B.   Buyers  desire  to  purchase and the Company desires to issue and
sell, upon the terms and conditions set forth in this Agreement (i) 12%
convertible debentures of the Company, in the form attached hereto as EXHIBIT
"A", in the aggregate principal amount of One Million Dollars ($1,000,000)
(together with any debenture(s) issued in replacement thereof or as a dividend
thereon or otherwise with respect thereto in accordance with the terms thereof,
the "DEBENTURES"), convertible into shares of common stock, $0.0001 par value
per share, of the Company (the "COMMON STOCK"), upon the terms and subject to
the limitations and conditions set forth in such Debentures and (ii) warrants,
in the form attached hereto as EXHIBIT "B", to purchase One Million (1,000,000)
shares of Common Stock (the "WARRANTS");

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

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

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

     1.   PURCHASE  AND  SALE  OF  DEBENTURES  AND  WARRANTS.
          --------------------------------------------------

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


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

          c.   CLOSING  DATE.  Subject  to  the  satisfaction  (or  written
               -------------
waiver) of the conditions thereto set forth in Section 6 and Section 7 below,
the date and time of the issuance and sale of the Debentures and the Warrants
pursuant to this Agreement (the "CLOSING DATE") shall be 12:00 noon Pacific
Standard Time on December 28, 2001 or such other mutually agreed upon time. The
closing of the transactions contemplated by this Agreement (the "CLOSING") shall
occur on the Closing Date at such location as may be agreed to by the parties.

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

          a.   INVESTMENT  PURPOSE.  As  of  the  date hereof, the Buyer is
               -------------------
purchasing the Debentures and the shares of Common Stock issuable upon
conversion of or otherwise pursuant to the Debentures (including, without
limitation, such additional shares of Common Stock, if any, as are (i) issuable
pursuant to the investment options described in Section 1.1(b) of the Debentures
(the "INVESTMENT OPTIONS"), (ii) on account of interest on the Debentures, (iii)
as a result of the events described in Sections 1.3 and 1.4(g) of the Debentures
and Section 2(c) of the Registration Rights Agreement or (iv) in payment of the
Standard Liquidated Damages Amount (as defined in Section 2(f) below) pursuant
to this Agreement, such shares of Common Stock being collectively referred to
herein as the "CONVERSION SHARES") and the Warrants and the shares of Common
Stock issuable upon exercise thereof (the "WARRANT SHARES" and, collectively
with the Debentures, Warrants and Conversion Shares, the "SECURITIES") for its
own account and not with a present view towards the public sale or distribution
thereof, except pursuant to sales registered or exempted from registration under
the 1933 Act; provided, however, that by making the representations herein, the
Buyer does not agree to hold any of the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption under
the 1933 Act.

          b.   ACCREDITED  INVESTOR  STATUS.  The  Buyer  is an "accredited
               ----------------------------
investor" as that term is defined in Rule 501(a) of Regulation D (an "ACCREDITED
INVESTOR").

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


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

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

          f.     TRANSFER OR RE-SALE.  The Buyer understands that (i) except as
                 -------------------
provided in the Registration Rights Agreement, the sale or re-sale of the
Securities has not been and is not being registered under the 1933 Act or any
applicable state securities laws, and the Securities may not be transferred
unless (a) the Securities are sold pursuant to an effective registration
statement under the 1933 Act, (b) the Buyer shall have delivered to the Company
an opinion of counsel that shall be in form, substance and scope customary for
opinions of counsel in comparable transactions to the effect that the Securities
to be sold or transferred may be sold or transferred pursuant to an exemption
from such registration, which opinion shall be accepted by the Company, (c) the
Securities are sold or transferred to an "affiliate" (as defined in Rule 144
promulgated under the 1933 Act (or a successor rule) ("RULE 144")) of the Buyer
who agrees to sell or otherwise transfer the Securities only in accordance with
this Section 2(f) and who is an Accredited Investor, (d) the Securities are sold
pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S
under the 1933 Act (or a successor rule) ("REGULATION S"), and the Buyer shall
have delivered to the Company an opinion of counsel that shall be in form,
substance and scope customary for opinions of counsel in corporate transactions,
which opinion shall be accepted by the Company; (ii) any sale of such Securities
made in reliance on Rule 144 may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any re-sale of such
Securities under circumstances in which the seller (or the person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined in
the 1933 Act) may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to register such Securities
under the 1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder (in each case, other than pursuant to the
Registration Rights Agreement).  Notwithstanding the foregoing or anything else
contained herein to the contrary, the Securities may be pledged as collateral in
connection with a bona fide margin account or other lending arrangement.  In the
                  ---- ----
event that the Company does not accept the opinion of counsel provided by the
Buyer with respect to the transfer of Securities pursuant to an exemption from
registration, such as Rule 144 or Regulation S, within three (3) business days
of delivery of the opinion to the Company, the Company shall pay to the Buyer


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<PAGE>
liquidated damages of three percent (3%) of the outstanding amount of the
Debentures per month plus accrued and unpaid interest on the Debentures,
prorated for partial months, in cash or shares at the option of the Buyer
("STANDARD LIQUIDATED DAMAGES AMOUNT").  If the Buyer elects to be paid the
Standard Liquidated Damages Amount in shares of Common Stock, such shares shall
be issued at the Conversion Price at the time of payment.

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

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

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

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

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


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<PAGE>
     3.     REPRESENTATIONS AND WARRANTIES OF THE COMPANY.  The Company
            ---------------------------------------------
represents and warrants to each Buyer that:

          a.     ORGANIZATION AND QUALIFICATION.  The Company and each of its
                 ------------------------------
Subsidiaries (as defined below), if any, is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated, with full power and authority (corporate and other) to
own, lease, use and operate its properties and to carry on its business as and
where now owned, leased, used, operated and conducted.  SCHEDULE 3(A) sets forth
a list of all of the Subsidiaries of the Company and the jurisdiction in which
each is incorporated.  The Company and each of its Subsidiaries is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which its ownership or use of property or the nature of
the business conducted by it makes such qualification necessary except where the
failure to be so qualified or in good standing would not have a Material Adverse
Effect.  "MATERIAL ADVERSE EFFECT" means any material adverse effect on the
business, operations, assets, financial condition or prospects of the Company or
its Subsidiaries, if any, taken as a whole, or on the transactions contemplated
hereby or by the agreements or instruments to be entered into in connection
herewith.  "SUBSIDIARIES" means any corporation or other organization, whether
incorporated or unincorporated, in which the Company owns, directly or
indirectly, any equity or other ownership interest.

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

          c.     CAPITALIZATION.  As of the date hereof, the authorized capital
                 --------------
stock of the Company consists of (i) 100,000,000 shares of Common Stock, of
which 12,382,816 shares are issued and outstanding, 9,493,482 shares are
reserved for issuance pursuant to the Company's stock option plans, 1,402,301
shares are reserved for issuance pursuant to securities (other than the
Debentures and the Warrants) exercisable for, or convertible into or
exchangeable for shares of Common Stock and 12,400,000 shares are reserved for
issuance upon conversion of the Debentures and the Additional Debentures (as
defined in Section 4(l)) and exercise of the Warrants (subject to adjustment
pursuant to the Company's covenant set forth in Section 4(h) below); and (ii)


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<PAGE>
20,000,000 shares of preferred stock, of which none are issued and outstanding.
All of such outstanding shares of capital stock are, or upon issuance will be,
duly authorized, validly issued, fully paid and nonassessable.  No shares of
capital stock of the Company are subject to preemptive rights or any other
similar rights of the stockholders of the Company or any liens or encumbrances
imposed through the actions or failure to act of the Company.  Except as
disclosed in SCHEDULE 3(C), as of the effective date of this Agreement, (i)
there are no outstanding options, warrants, scrip, rights to subscribe for,
puts, calls, rights of first refusal, agreements, understandings, claims or
other commitments or rights of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for any shares of capital
stock of the Company or any of its Subsidiaries, or arrangements by which the
Company or any of its Subsidiaries is or may become bound to issue additional
shares of capital stock of the Company or any of its Subsidiaries, (ii) there
are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of its or their securities
under the 1933 Act (except the Registration Rights Agreement) and (iii) there
are no anti-dilution or price adjustment provisions contained in any security
issued by the Company (or in any agreement providing rights to security holders)
that will be triggered by the issuance of the Debentures, the Warrants, the
Conversion Shares or Warrant Shares.  The Company has furnished to the Buyer
true and correct copies of the Company's Certificate of Incorporation as in
effect on the date hereof ("CERTIFICATE OF INCORPORATION"), the Company's
By-laws, as in effect on the date hereof (the "BY-LAWS"), and the terms of all
securities convertible into or exercisable for Common Stock of the Company and
the material rights of the holders thereof in respect thereto.  The Company
shall provide the Buyer with a written update of this representation signed by
the Company's Chief Executive or Chief Financial Officer on behalf of the
Company as of the Closing Date.

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

          e.     ACKNOWLEDGMENT OF DILUTION.  The Company understands and
                 --------------------------
acknowledges the potentially dilutive effect to the Common Stock upon the
issuance of the Conversion Shares and Warrant Shares upon conversion of the
Debenture and exercise of the Investment Options, or exercise of the Warrants.
The Company further acknowledges that its obligation to issue Conversion Shares
and Warrant Shares upon conversion of the Debentures and exercise of the
Investment Options or exercise of the Warrants in accordance with this
Agreement, the Debentures and the Warrants is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other stockholders of the Company.

          f.     NO CONFLICTS.  The execution, delivery and performance of this
                 ------------
Agreement, the Registration Rights Agreement, the Debentures and the Warrants by
the Company and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the issuance and reservation
for issuance of the Conversion Shares and Warrant Shares) will not (i) conflict
with or result in a violation of any provision of the Certificate of


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Incorporation or By-laws or (ii) violate or conflict with, or result in a breach
of any provision of, or constitute a default (or an event which with notice or
lapse of time or both could become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture, patent, patent license or instrument to which the Company
or any of its Subsidiaries is a party, or (iii)  result in a violation of any
law, rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and regulations of any self-regulatory
organizations to which the Company or its securities are subject) applicable to
the Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected (except for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect).  Neither the Company nor any of its Subsidiaries is in
violation of its Certificate of Incorporation, By-laws or other organizational
documents and neither the Company nor any of its Subsidiaries is in default (and
no event has occurred which with notice or lapse of time or both could put the
Company or any of its Subsidiaries in default) under, and neither the Company
nor any of its Subsidiaries has taken any action or failed to take any action
that would give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its Subsidiaries is a party or by which any property or assets of the
Company or any of its Subsidiaries is bound or affected, except for possible
defaults as would not, individually or in the aggregate, have a Material Adverse
Effect. The businesses of the Company and its Subsidiaries, if any, are not
being conducted, and shall not be conducted so long as a Buyer owns any of the
Securities, in violation of any law, ordinance or regulation of any governmental
entity which would have a Material Adverse Effect.  Except as specifically
contemplated by this Agreement and as required under the 1933 Act and any
applicable state securities laws, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court, governmental agency, regulatory agency, self regulatory organization or
stock market or any third party in order for it to execute, deliver or perform
any of its obligations under this Agreement, the Registration Rights Agreement,
the Debentures or the Warrants in accordance with the terms hereof or thereof or
to issue and sell the Debentures and Warrants in accordance with the terms
hereof and to issue the Conversion Shares upon conversion of the Debentures and
exercise of the Investment Options and the Warrant Shares upon exercise of the
Warrants.  Except as disclosed in SCHEDULE 3(F), all consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior to
the date hereof.  The Company does not reasonably anticipate that the Common
Stock will be delisted by the Over-the-Counter Bulletin Board (the "OTCBB") in
the foreseeable future.  The Company and its Subsidiaries are unaware of any
facts or circumstances which might give rise to any of the foregoing.

          g.     SEC DOCUMENTS; FINANCIAL STATEMENTS.  Since April 16, 2001, the
                 -----------------------------------
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 ACT")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents (other than
exhibits to such documents) incorporated by reference therein, being hereinafter
referred to herein as the "SEC DOCUMENTS").  The Company has delivered to each
Buyer true and complete copies of the SEC Documents, except for such exhibits
and incorporated documents.  As of their respective dates, the SEC Documents


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<PAGE>
complied in all material respects with the requirements of the 1934 Act and the
rules and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with the
SEC, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.  None of the statements made in any such SEC Documents is, or
has been, required to be amended or updated under applicable law (except for
such statements as have been amended or updated in subsequent filings prior the
date hereof).  As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto.  Such financial statements have
been prepared in accordance with United States generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements) and fairly present
in all material respects the consolidated financial position of the Company and
its consolidated Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments).
Except as set forth in the financial statements of the Company included in the
SEC Documents, the Company has no liabilities, contingent or otherwise, other
than (i) liabilities incurred in the ordinary course of business subsequent to
April 16, 2001 and (ii) obligations under contracts and commitments incurred in
the ordinary course of business and not required under generally accepted
accounting principles to be reflected in such financial statements, which,
individually or in the aggregate, are not material to the financial condition or
operating results of the Company.

          h.     ABSENCE OF CERTAIN CHANGES.  Since April 16, 2001, there has
                 --------------------------
been no material adverse change and no material adverse development in the
assets, liabilities, business, properties, operations, financial condition,
results of operations or prospects of the Company or any of its Subsidiaries.

          i.     ABSENCE OF LITIGATION.  There is no action, suit, claim,
                 ---------------------
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened against or
affecting the Company or any of its Subsidiaries, or their officers or directors
in their capacity as such, that could have a Material Adverse Effect.  SCHEDULE
3(I) contains a complete list and summary description of any pending or
threatened proceeding against or affecting the Company or any of its
Subsidiaries, without regard to whether it would have a Material Adverse Effect.
The Company and its Subsidiaries are unaware of any facts or circumstances which
might give rise to any of the foregoing.

          j.     PATENTS, COPYRIGHTS, ETC.
                 ------------------------

               (i)     The Company and each of its Subsidiaries owns or
possesses the requisite licenses or rights to use all patents, patent
applications, patent rights, inventions, know-how, trade secrets, trademarks,
trademark applications, service marks, service names, trade names and copyrights
("INTELLECTUAL PROPERTY") necessary to enable it to conduct its business as now


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<PAGE>
operated (and, except as set forth in SCHEDULE 3(J) hereof, to the best of the
Company's knowledge, as presently contemplated to be operated in the future);
there is no claim or action by any person pertaining to, or proceeding pending,
or to the Company's knowledge threatened, which challenges the right of the
Company or of a Subsidiary with respect to any Intellectual Property necessary
to enable it to conduct its business as now operated (and, except as set forth
in SCHEDULE 3(J) hereof, to the best of the Company's knowledge, as presently
contemplated to be operated in the future); to the best of the Company's
knowledge, the Company's or its Subsidiaries' current and intended products,
services and processes do not infringe on any Intellectual Property or other
rights held by any person; and the Company is unaware of any facts or
circumstances which might give rise to any of the foregoing.  The Company and
each of its Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of their Intellectual Property.

               (ii)     All of the Company's computer software and computer
hardware, and other similar or related items of automated, computerized or
software systems that are used or relied on by the Company in the conduct of its
business or that were, or currently are being, sold or licensed by the Company
to customers (collectively, "INFORMATION TECHNOLOGY"), are Year 2000 Compliant.
For purposes of this Agreement, the term "YEAR 2000 COMPLIANT" means, with
respect to the Company's Information Technology, that the Information Technology
is designed to be used prior to, during and after the calendar Year 2000, and
the Information Technology used during each such time period will accurately
receive, provide and process date and time data (including, but not limited to,
calculating, comparing and sequencing) from, into and between the 20th and 21st
centuries, including the years 1999 and 2000, and leap-year calculations, and
will not malfunction, cease to function, or provide invalid or incorrect results
as a result of the date or time data, to the extent that other information
technology, used in combination with the Information Technology, properly
exchanges date and time data with it.  The Company has delivered to the Buyers
true and correct copies of all analyses, reports, studies and similar written
information, whether prepared by the Company or another party, relating to
whether the Information Technology is Year 2000 Compliant, if any.

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

          l.     TAX STATUS.  Except as set forth on SCHEDULE 3(L), the Company
                 ----------
and each of its Subsidiaries has made or filed all federal, state and foreign
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on
its books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply.  There are no unpaid taxes in any material amount claimed to be due by


                                       49
<PAGE>
the taxing authority of any jurisdiction, and the officers of the Company know
of no basis for any such claim.  The Company has not executed a waiver with
respect to the statute of limitations relating to the assessment or collection
of any foreign, federal, state or local tax.  Except as set forth on SCHEDULE
3(L), none of the Company's tax returns is presently being audited by any taxing
authority.

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

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

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

          p.     NO INTEGRATED OFFERING.  Neither the Company, nor any of its
                 ----------------------
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales in any security or solicited any offers to
buy any security under circumstances that would require registration under the


                                       50
<PAGE>
1933 Act of the issuance of the Securities to the Buyers.  The issuance of the
Securities to the Buyers will not be integrated with any other issuance of the
Company's securities (past, current or future) for purposes of any stockholder
approval provisions applicable to the Company or its securities.

          q.     NO BROKERS.  The Company has taken no action which would give
                 ----------
rise to any claim by any person for brokerage commissions, transaction fees or
similar payments relating to this Agreement or the transactions contemplated
hereby.

          r.     PERMITS; COMPLIANCE.  The Company and each of its Subsidiaries
                 -------------------
is in possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted (collectively, the "COMPANY PERMITS"), and there is
no action pending or, to the knowledge of the Company, threatened regarding
suspension or cancellation of any of the Company Permits.  Neither the Company
nor any of its Subsidiaries is in conflict with, or in default or violation of,
any of the Company Permits, except for any such conflicts, defaults or
violations which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect.  Since April 16, 2001, neither the
Company nor any of its Subsidiaries has received any notification with respect
to possible conflicts, defaults or violations of applicable laws, except for
notices relating to possible conflicts, defaults or violations, which conflicts,
defaults or violations would not have a Material Adverse Effect.

          s.     ENVIRONMENTAL MATTERS.
                 ---------------------

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

               (ii)     Other than those that are or were stored, used or
disposed of in compliance with applicable law, no Hazardous Materials are
contained on or about any real property currently owned, leased or used by the


                                       51
<PAGE>
Company or any of its Subsidiaries, and no Hazardous Materials were released on
or about any real property previously owned, leased or used by the Company or
any of its Subsidiaries during the period the property was owned, leased or used
by the Company or any of its Subsidiaries, except in the normal course of the
Company's or any of its Subsidiaries' business.

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

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

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

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

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


                                       52
<PAGE>
as amended, or made any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment to any foreign or domestic government official or
employee.

          x.     [RESERVED]

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

          z.     BREACH OF REPRESENTATIONS AND WARRANTIES BY THE COMPANY.  If
                 --------------------------------------------------------
the Company breaches any of the representations or warranties set forth in this
Section 3, and in addition to any other remedies available to the Buyers
pursuant to this Agreement, the Company shall pay to the Buyer the Standard
Liquidated Damages Amount in cash or in shares of Common Stock at the option of
the Buyer, until such breach is cured.  If the Buyers elect to be paid the
Standard Liquidated Damages Amounts in shares of Common Stock, such shares shall
be issued at the Conversion Price at the time of payment.

          4.     COVENANTS.
                 ---------

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

               b.     BLUE SKY LAWS.  The Company shall, on or before the
                      -------------
Closing Date, take such action as the Company shall reasonably determine is
necessary to qualify the Securities for sale to the Buyers at the applicable
closing pursuant to this Agreement under applicable securities or "blue sky"
laws of the states of the United States (or to obtain an exemption from such
qualification), and shall provide evidence of any such action so taken to each
Buyer on or prior to the Closing Date.

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


                                       53
<PAGE>
               d.     USE OF PROCEEDS.  The Company shall use the proceeds from
                      ---------------
the sale of the Debentures and the Warrants in the manner set forth in SCHEDULE
4(D) attached hereto and made a part hereof  and shall not, directly or
indirectly, use such proceeds for any loan to or investment in any other
corporation, partnership, enterprise or other person (except in connection with
its currently existing direct or indirect Subsidiaries)

               e.     FUTURE OFFERINGS.  Subject to the exceptions described
                      ----------------
below, the Company will not, without the prior written consent of a
majority-in-interest of the Buyers, not to be unreasonably withheld, negotiate
or contract with any party to obtain additional equity financing (including debt
financing with an equity component) that involves (A) the issuance of Common
Stock at a discount to the market price of the Common Stock on the date of
issuance (taking into account the value of any warrants or options to acquire
Common Stock issued in connection therewith) or (B) the issuance of convertible
securities that are convertible into an indeterminate number of shares of Common
Stock or (C) the issuance of warrants during the period (the "LOCK-UP PERIOD")
beginning on the Closing Date and ending on the later of (i) two hundred seventy
(270) days from the Closing Date and (ii) one hundred eighty  (180) days from
the date the Registration Statement (as defined in the Registration Rights
Agreement) is declared effective (plus any days in which sales cannot be made
thereunder).  In addition, subject to the exceptions described below, the
Company will not conduct any equity financing (including debt with an equity
component) ("FUTURE OFFERINGS") during the period beginning on the Closing Date
and ending two (2) years after the end of the Lock-up Period unless it shall
have first delivered to each Buyer, at least twenty (20) business days prior to
the closing of such Future Offering, written notice describing the proposed
Future Offering, including the terms and conditions thereof and proposed
definitive documentation to be entered into in connection therewith, and
providing each Buyer an option during the fifteen (15) day period following
delivery of such notice to purchase its pro rata share (based on the ratio that
the aggregate principal amount of Debentures purchased by it hereunder bears to
the aggregate principal amount of Debentures purchased hereunder) of the
securities being offered in the Future Offering on the same terms as
contemplated by such Future Offering (the limitations referred to in this
sentence and the preceding sentence are collectively referred to as the "CAPITAL
RAISING LIMITATIONS").  In the event the terms and conditions of a proposed
Future Offering are amended in any respect after delivery of the notice to the
Buyers concerning the proposed Future Offering, the Company shall deliver a new
notice to each Buyer describing the amended terms and conditions of the proposed
Future Offering and each Buyer thereafter shall have an option during the
fifteen (15) day period following delivery of such new notice to purchase its
pro rata share of the securities being offered on the same terms as contemplated
by such proposed Future Offering, as amended.  The foregoing sentence shall
apply to successive amendments to the terms and conditions of any proposed
Future Offering.  The Capital Raising Limitations shall not apply to any
transaction involving (i) issuances of securities in a firm commitment
underwritten public offering (excluding a continuous offering pursuant to Rule
415 under the 1933 Act) or (ii) issuances of securities as consideration for a
merger, consolidation or purchase of assets, or in connection with any strategic
partnership or joint venture (the primary purpose of which is not to raise
equity capital), or in connection with the disposition or acquisition of a
business, product or license by the Company.  The Capital Raising Limitations
also shall not apply to the issuance of securities upon exercise or conversion
of the Company's options, warrants or other convertible securities outstanding
as of the date hereof or to the grant of additional options or warrants, or the
issuance of additional securities, under any Company stock option or restricted


                                       54
<PAGE>
stock plan approved by the Stockholders of the Company.  In the event that the
Company completes a Future Offering on terms more favorable to another investor
than the transaction contemplated hereby, the terms of the Debentures and the
Warrants will be amended to reflect such more favorable terms.

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

               g.     FINANCIAL INFORMATION.  The Company agrees to send the
                      ---------------------
following reports to each Buyer until such Buyer transfers, assigns, or sells
all of the Securities: (i) within ten (10) days after the filing with the SEC, a
copy of its Annual Report on Form 10-KSB, its Quarterly Reports on Form 10-QSB
and any Current Reports on Form 8-K; (ii) within one (1) day after release,
copies of all press releases issued by the Company or any of its Subsidiaries;
and (iii) contemporaneously with the making available or giving to the
stockholders of the Company, copies of any notices or other information the
Company makes available or gives to such stockholders.

               h.     AUTHORIZATION AND RESERVATION OF SHARES.  The Company
                      ---------------------------------------
shall at all times have authorized, and reserved for the purpose of issuance, a
sufficient number of shares of Common Stock to provide for the full conversion
or exercise of the outstanding Debentures and Warrants and issuance of the
Conversion Shares and Warrant Shares in connection therewith (based on the
Conversion Price of the Debentures or Exercise Price of the Warrants in effect
from time to time) and as otherwise required by the Debentures (including
sufficient shares to provide for the full exercise of the Investment Options).
The Company shall not reduce the number of shares of Common Stock reserved for
issuance upon conversion of Debentures and exercise of the Warrants without the
consent of each Buyer.  The Company shall  at all times maintain the number of
shares of Common Stock so reserved for issuance at an amount ("RESERVED AMOUNT")
equal to no less than two (2) times the number that is then actually issuable
upon full conversion of the Debentures and Additional Debentures (and exercise
of the Investment Options) and upon exercise of the Warrants (based on the
Conversion Price of the Debentures and assuming full exercise of the Investment
Options or the Exercise Price of the Warrants in effect from time to time).  If
at any time the number of shares of Common Stock authorized and reserved for
issuance ("AUTHORIZED AND RESERVED SHARES") is below the Reserved Amount, the
Company will promptly take all corporate action necessary to authorize and
reserve a sufficient number of shares, including, without limitation, calling a
special meeting of stockholders to authorize additional shares to meet the


                                       55
<PAGE>
Company's obligations under this Section 4(h), in the case of an insufficient
number of authorized shares, obtain stockholder approval of an increase in such
authorized number of shares, and voting the management shares of the Company in
favor of an increase in the authorized shares of the Company to ensure that the
number of authorized shares is sufficient to meet the Reserved Amount.  If the
Company fails to obtain such shareholder approval within thirty (30) days
following the date on which the number of Authorized and Reserved Shares exceeds
the Reserved Amount, the Company shall pay to the Borrower the Standard
Liquidated Damages Amount, in cash or in shares of Common Stock at the option of
the Buyer.  If the Buyer elects to be paid the Standard Liquidated Damages
Amount in shares of Common Stock, such shares shall be issued at the Conversion
Price at the time of payment.  In order to ensure that the Company has
authorized a sufficient amount of shares to meet the Reserved Amount at all
times, the Company must deliver to the Buyer at the end of every month a list
detailing (1) the current amount of shares authorized by the Company and
reserved for the Buyer; and (2) amount of shares issuable upon conversion of the
Debentures and upon exercise of the Warrants and as payment of interest accrued
on the Debentures for one year.  If the Company fails to provide such list
within five (5) business days of the end of each month, the Company shall pay
the Standard Liquidated Damages Amount, in cash or in shares of Common Stock at
the option of the Buyer, until the list is delivered.  If the Buyer elects to be
paid the Standard Liquidated Damages Amount in shares of Common Stock, such
shares shall be issued at the Conversion Price at the time of payment.

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

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


                                       56
<PAGE>
               k.     NO INTEGRATION.  The Company shall not make any offers or
                      --------------
sales of any security (other than the Securities) under circumstances that would
require registration of the Securities being offered or sold hereunder under the
1933 Act or cause the offering of the Securities to be integrated with any other
offering of securities by the Company for the purpose of any stockholder
approval provision applicable to the Company or its securities.

               l.     SUBSEQUENT INVESTMENT.  The Company and the Buyers agree
                      ---------------------
that, upon the declaration of effectiveness of the Registration Statement to be
filed pursuant to the Registration Rights Agreement (the "EFFECTIVE DATE"), the
Buyers shall purchase additional debentures ("ADDITIONAL DEBENTURES") in the
aggregate principal amount of Five Hundred Thousand Dollars ($500,000) for an
aggregate purchase price of Five Hundred Thousand Dollars ($500,000), with the
closing of such purchase to occur within ten (10) business days of the Effective
Date; provided, however, that the obligation of each Buyer to purchase the
      --------  -------
Additional Debentures is subject to the satisfaction, at or before the closing
of such purchase and sale, of the conditions set forth in Section 7; and,
provided, further, that there shall not have been a Material Adverse Effect as
--------  -------
of such effective date.  The terms of the Additional Debentures shall be
identical to the terms of the Debentures to be issued on the Closing Date.  The
Common Stock underlying the Additional Debentures shall be Registrable
Securities (as defined in the Registration Rights Agreement) and shall be
included in the Registration Statement to be filed pursuant to the Registration
Rights Agreement.

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

               n.     LIMITATIONS ON SHORT SALES.  The Buyers agree that they
                      --------------------------
will not enter into any Short Sales (as hereinafter defined) from the period
commencing on the Closing Date and ending on the date which all of the
Debentures have been converted and all of the Warrants have been exercised and
such Conversion Shares and Warrant Shares are covered by the Registration
Statement (as defined in the Registration Rights Agreement).  For purposes of
this Section 4(n), a "SHORT SALE" by a Buyer shall mean a sale of Common Stock
by a Buyer that is marked as a short sale and that is made at a time when there
is no equivalent offsetting long position in Common Stock held by such Buyer.
For purposes of determining whether there is an equivalent offsetting long
position in Common Stock held by a Buyer, Conversion Shares that have not yet
been converted pursuant to the Debentures (including Conversion Shares issuable
upon exercise of the Investment Options) and Warrant Shares that have not yet
been issued upon exercise of the Warrants shall be deemed to be held long by
such Buyer, and the amount of shares of Common Stock held in a long position
shall be the number of Conversion Shares issuable upon conversion of the
Debentures assuming such holder converted all the outstanding principal amount
of the Debentures on such date and with respect to Warrant Shares, the number of
Warrant Shares issuable upon exercise of the Warrants assuming such holder
exercised all of the Warrants on such date.


                                       57
<PAGE>
          5.     TRANSFER AGENT INSTRUCTIONS.  The Company shall issue
                 ---------------------------
irrevocable instructions to its transfer agent to issue certificates, registered
in the name of each Buyer or its nominee, for the Conversion Shares and Warrant
Shares in such amounts as specified from time to time by each Buyer to the
Company upon conversion of the Debentures (including upon exercise of the
Investment Options) or exercise of the Warrants in accordance with the terms
thereof (the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS").  Prior to registration
of the Conversion Shares and Warrant Shares under the 1933 Act or the date on
which the Conversion Shares and Warrant Shares may be sold pursuant to Rule 144
without any restriction as to the number of Securities as of a particular date
that can then be immediately sold, all such certificates shall bear the
restrictive legend specified in Section 2(g) of this Agreement.  The Company
warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(f) hereof (in the case of the Conversion Shares and
Warrant Shares, prior to registration of the Conversion Shares and Warrant
Shares under the 1933 Act or the date on which the Conversion Shares and Warrant
Shares may be sold pursuant to Rule 144 without any restriction as to the number
of Securities as of a particular date that can then be immediately sold), will
be given by the Company to its transfer agent and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Registration Rights Agreement.
Nothing in this Section shall affect in any way the Buyer's obligations and
agreement set forth in Section 2(g) hereof to comply with all applicable
prospectus delivery requirements, if any, upon re-sale of the Securities.  If a
Buyer provides the Company with (i) an opinion of counsel in form, substance and
scope customary for opinions in comparable transactions, to the effect that a
public sale or transfer of such Securities may be made without registration
under the 1933 Act and such sale or transfer is effected or (ii) the Buyer
provides reasonable assurances that the Securities can be sold pursuant to Rule
144, the Company shall permit the transfer, and, in the case of the Conversion
Shares and Warrant Shares, promptly instruct its transfer agent to issue one or
more certificates, free from restrictive legend, in such name and in such
denominations as specified by such Buyer.  The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the
Buyers, by vitiating the intent and purpose of the transactions contemplated
hereby.  Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5 may be inadequate and agrees, in
the event of a breach or threatened breach by the Company of the provisions of
this Section, that the Buyers shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and requiring
immediate transfer, without the necessity of showing economic loss and without
any bond or other security being required.

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

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


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

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

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

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

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

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

               c.     The Irrevocable Transfer Agent Instructions, in form and
substance satisfactory to a majority-in-interest of the Buyers, shall have been
delivered to and acknowledged in writing by the Company's Transfer Agent.

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

               e.     No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction


                                       59
<PAGE>
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.

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

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

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

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

          8.     GOVERNING LAW; MISCELLANEOUS.
                 ----------------------------

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

               b.     COUNTERPARTS; SIGNATURES BY FACSIMILE.  This Agreement may
                      -------------------------------------
be executed in one or more counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same agreement and shall
become effective when counterparts have been signed by each party and delivered
to the other party.  This Agreement, once executed by a party, may be delivered


                                       60
<PAGE>
to the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.

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

               c.     SEVERABILITY.  In the event that any provision of this
                      ------------
Agreement is invalid or enforceable under any applicable statute or rule of law,
then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law.  Any provision hereof which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other
provision hereof.

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

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

          If to the Company:

               Amnis Systems Inc.
               3450 Hillview Avenue
               Palo Alto, California  94304
               Attention:  President and Chief Executive Officer
               Telephone:  650-850-0200
               Facsimile:  650-354-8854
               Email:  Liccardo@amnisinc.com

          With copy to:

               Leland, Parachini, Steinberg, Matzger & Melnick, LLP
               333 Market Street, 27th Floor
               San Francisco, California 94105
               Attention:  Edward V. Pollack, Esq.


                                       61
<PAGE>
               Telephone:  415-957-1800
               Facsimile:  415-974-1520
               Email:  epollack@lpslaw.com

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

          With copy to:

               Bristol DLP, LLC
               Investment Manager
               6363 Sunset Blvd., Fifth Floor
               Hollywood,  California 90028
               Attention: Amy Wang, Esq.
               Telephone:  323-769-2852
               Facsimile: 323-468-8307
               Email:  amy@bristolcompanies.net

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

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

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

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

               j.     PUBLICITY.  The Company and each of the Buyers shall have
                      ---------
the right to review a reasonable period of time before issuance of any press
releases, SEC, OTCBB or NASD filings, or any other public statements with
respect to the transactions contemplated hereby; provided, however, that the
                                                 --------  -------
Company shall be entitled, without the prior approval of each of the Buyers, to


                                       62
<PAGE>
make any press release or SEC, OTCBB (or other applicable trading market) or
NASD filings with respect to such transactions as is required by applicable law
and regulations (although each of the Buyers shall be consulted by the Company
in connection with any such press release prior to its release and shall be
provided with a copy thereof and be given an opportunity to comment thereon).

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

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

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



                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                       63
<PAGE>
     IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused this
Agreement to be duly executed as of the date first above written.


AMNIS SYSTEMS INC.

By:     ________________________________
        Michael A. Liccardo
        President and Chief Executive Officer

BRISTOL INVESTMENT FUND, LTD.

By:     ________________________________
        Diane Derycz Kessler
        Director

RESIDENCE:   Cayman Islands

ADDRESS:     Caledonian House
             Jennett Street
             George Town
             Grand Cayman, Cayman Islands
             Facsimile:     441-295-2305
             Telephone:     441-298-5067


AGGREGATE SUBSCRIPTION AMOUNT:

      Aggregate Principal Amount of Debentures:                      $  500,000
      Number of Warrants:                                             1,000,000
      Aggregate Purchase Price:                                      $  500,000


                                       64
<PAGE>
                                    EXHIBITS

Exhibit A - Form of Debenture
Exhibit B - Form of Warrant
Exhibit C - Form of Registration Rights Agreement



<PAGE>