Exhibit 4.1

                          SECURITIES PURCHASE AGREEMENT

      This Securities Purchase Agreement (this "Agreement") is dated as of March
31,  2005,  by and  among  Nutrition  21,  Inc.,  a New  York  corporation  (the
"Company"),  and the purchasers  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:  (a) capitalized terms that are not otherwise defined herein have the
meanings  given to such terms in the  Certificate  of  Designation  (as  defined
herein), and (b) 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).

            "Actual Minimum" means, as of any date, the maximum aggregate number
      of shares of Common  Stock  then  issued or  potentially  issuable  in the
      future  pursuant to the  Transaction  Documents,  including any Underlying
      Shares  issuable  upon  exercise or conversion in full of all Warrants and
      shares of Preferred Stock,  ignoring any conversion or exercise limits set
      forth  therein,  and assuming that any  previously  unconverted  shares of
      Preferred Stock are held until the fourth  anniversary of the Closing Date
      and all  dividends  are paid in shares of Common  Stock  until such fourth
      anniversary,  subject to the  limitation on the number of shares of Common
      Stock  issuable  hereunder  set  forth  in  Sections  6(c) and 6(d) of the
      Certificate of Designation.

            "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.

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            "Certificate of Designation" means the Certificate of Designation to
      be filed prior to the Closing by the Company  with the  Secretary of State
      of New York, in the form of Exhibit A attached hereto.

            "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,  for any date,  the price  determined by the
      first of the following  clauses that  applies:  (a) if the Common Stock is
      then  listed or quoted on a Trading  Market,  the closing bid price of the
      Common Stock for such date (or the nearest  preceding date) on the Trading
      Market on which the Common  Stock is then  listed or quoted as reported by
      Bloomberg  Financial L.P.  (based on a Trading Day from 9:30 a.m.  Eastern
      Time to 4:02  p.m.  Eastern  Time);  (b) if the  Common  Stock is not then
      listed or quoted on the OTC  Bulletin  Board and if prices  for the Common
      Stock are then reported in the "Pink Sheets" published by the 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 (c) in all other cases,  the fair market value of a share
      of Common Stock as determined by an independent appraiser selected in good
      faith by the Purchasers and reasonably acceptable to the Company.

            "Commission" means the Securities and Exchange Commission.

            "Common  Stock"  means the common  stock of the  Company,  par value
      $0.005  per  share,  and any other  class of  securities  into  which such
      securities may hereafter have been 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  exchangeable  for, or otherwise  entitles the holder
      thereof to receive, Common Stock.

            "Company Counsel" means Oscar D. Folger.

            "Conversion  Price" shall have the meaning  ascribed to such term in
      the Certificate of Designation.

            "Disclosure  Schedules" shall have the meaning ascribed to such term
      in Section 3.1.


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<PAGE>


            "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.

            "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  and
      consultants  to 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;  provided,  however,
      issuances  to such  consultants  of the Company  shall not exceed  200,000
      shares per 12 month period,  subject to adjustment for reverse and forward
      stock  splits,  stock  dividends,  stock  combinations  and other  similar
      transactions  of the Common Stock,  (b) securities upon the exercise of or
      conversion of any Securities  issued  hereunder,  convertible  securities,
      options or warrants  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 or conversion  price of any such  securities,  and (c) securities
      issued pursuant to acquisitions  or strategic  transactions,  provided any
      such issuance in a strategic  transaction shall be an Exempt Issuance only
      if to a Person which is, itself or through its subsidiaries,  an operating
      company in a business  synergistic with the business of the Company and in
      which the Company  receives  benefits 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.

            "Market  Price"  shall mean the average of the 10 VWAPs  immediately
      prior to the date hereof.

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

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<PAGE>

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

            "Maximum  Rate"  shall  have the  meaning  ascribed  to such term in
      Section 5.17.

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

            "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.

            "Preferred  Stock" means the up to 9,600 shares of the  Company's 6%
      Series I Convertible  Preferred Stock issued  hereunder having the rights,
      preferences and privileges set forth in the Certificate of Designation.

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

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

            "Purchaser  Party"  shall have the meaning  ascribed to such term in
      Section 4.11.

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

            "Registration  Statement" means a registration statement meeting the
      requirements set forth in the  Registration  Rights Agreement and covering
      the resale of the  Underlying  Shares by each Purchaser as provided for in
      the Registration Rights Agreement.

            "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  Preferred  Stock,  the  Warrants  and  the
      Underlying Shares.

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

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<PAGE>

            "Shareholder Approval" means such approval as may be required by the
      applicable  rules and  regulations of the Trading Market (or any successor
      entity)  from  the  shareholders  of  the  Company  with  respect  to  the
      transactions  contemplated  by the  Transaction  Documents,  including the
      issuance  for an  effective  per share  price  below the market  price (as
      determined by the rules and  regulations of the principal  Trading Market)
      of all of the  Underlying  Shares in excess  of 19.99% of the  issued  and
      outstanding shares of Common Stock on the Closing Date.

            "Short Sales" shall include all "short sales" as defined in Rule 200
      of Regulation SHO under the Exchange Act.

            "Stated Value" means $1,000 per share of Preferred Stock.

            "Subscription  Amount" shall mean, as to each Purchaser,  the amount
      to be paid for the Preferred Stock 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.

            "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  SmallCap  Market,  the American Stock  Exchange,  the New York
      Stock Exchange, the Nasdaq National Market or the OTC Bulletin Board.

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

            "Underlying  Shares" means the shares of Common Stock  issuable upon
      conversion  of the  Preferred  Stock,  upon  exercise of the  Warrants and
      issued  and  issuable  in lieu of the cash  payment  of  dividends  on the
      Preferred Stock.

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<PAGE>

            "VWAP" means, for any date, the price determined by the first of the
      following clauses that applies:  (a) if the Common Stock is then listed or
      quoted on a Trading Market, the daily volume weighted average price of the
      Common Stock for such date (or the nearest  preceding date) on the Trading
      Market on which the Common  Stock is then  listed or quoted as reported by
      Bloomberg  Financial L.P.  (based on a Trading Day from 9:30 a.m.  Eastern
      Time to 4:02  p.m.  Eastern  Time);  (b) 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 OTC Bulletin  Board,  the volume  weighted  average
      price of the Common Stock for such date (or the nearest preceding date) on
      the OTC  Bulletin  Board;  (c) if the Common  Stock is not then  listed or
      quoted on the OTC  Bulletin  Board and if prices for the Common  Stock are
      then reported in the "Pink Sheets" published by the 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 (c) in all other cases,  the fair market value of a share of
      Common Stock as determined by an  independent  appraiser  selected in good
      faith by the Purchasers and reasonably acceptable to the Company.

            "Warrants" means collectively the 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 be exercisable
      immediately upon the 6 month  anniversary of the Initial Exercise Date (as
      defined in the Warrant) and have a term of exercise equal to five years.

            "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,  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, up to $9,600,000
of shares of  Preferred  Stock with an  aggregated  Stated  Value  equal to such
Purchaser's  Subscription  Amount and  Warrants  as  determined  by  pursuant to
Section  2.2(a)(iii).  The  aggregate  number of shares of Preferred  Stock sold
hereunder shall be up to 9,600.  Each Purchaser shall deliver to the Company via
wire transfer or a certified check of immediately available funds equal to their
Subscription  Amount  and the  Company  shall  deliver to each  Purchaser  their
respective  shares of  Preferred  Stock 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 the  Closing  Date,  the  Company  shall  deliver  or cause to be
            delivered to each Purchaser the following:

            (i)   this Agreement duly executed by the Company;

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<PAGE>

            (ii)  a certificate evidencing a number of shares of Preferred Stock
                  equal to such Purchaser's  Subscription  Amount divided by the
                  Stated Value, registered in the name of such Purchaser;

            (iii) a Warrant registered in the name of such Purchaser to purchase
                  up to a number of shares of Common  Stock equal to 35% of such
                  Purchaser's  Subscription  Amount divided by the Market Price,
                  with an exercise price equal to $1.3104, subject to adjustment
                  therein;

            (iv)  the  Registration   Rights  Agreement  duly  executed  by  the
                  Company; and

            (v)   a legal opinion of Company  Counsel,  in the form of Exhibit D
                  attached hereto.

      b)    On 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 as specified in writing 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;

            (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:

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<PAGE>

            (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; and

            (v)   From the date  hereof  to the  Closing  Date,  trading  in the
                  Common Stock shall not have been  suspended by the  Commission
                  (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 Preferred Stock at the Closing.


                                   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  delivered to the
Purchasers  concurrently herewith (the "Disclosure  Schedules") which Disclosure
Schedules  shall  be  deemed  a  part  hereof,  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  references  in the  Transaction
            Documents to the Subsidiaries will be disregarded.

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<PAGE>

      (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  financial  condition 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 thereunder.  The execution and delivery of
            each  of  the   Transaction   Documents   by  the  Company  and  the
            consummation  by it of the  transactions  contemplated  thereby have
            been  duly  authorized  by all  necessary  action on the part of the
            Company  and  no  further  action  is  required  by the  Company  in
            connection  therewith  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,  will  constitute  the valid and
            binding obligation of the Company enforceable against the Company in
            accordance  with its  terms  except  (i) as  limited  by  applicable
            bankruptcy, insolvency, reorganization, moratorium and other laws of
            general  application  affecting  enforcement  of  creditors'  rights
            generally and (ii) as limited by laws  relating to the  availability
            of  specific  performance,  injunctive  relief  or  other  equitable
            remedies.

      (d)   No  Conflicts.  The  execution,  delivery  and  performance  of  the
            Transaction  Documents  by the Company and the  consummation  by the
            Company of the other  transactions  contemplated  thereby do not and
            will  not:  (i)  conflict  with  or  violate  any  provision  of the
            Company's   or  any   Subsidiary's   certificate   or   articles  of
            incorporation,  bylaws or other organizational or charter documents,
            or (ii)  conflict  with,  or  constitute a default (or an event that
            with notice or lapse of time or both would become a default)  under,
            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

                                       9
<PAGE>

            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  4.6,  (ii)  the  filing  with  the
            Commission of the  Registration  Statement,  (iii) the notice and/or
            application(s)  to each  applicable  Trading Market for the issuance
            and sale of the Preferred  Stock and Warrants and the listing of the
            Underlying  Shares  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  Documents.   The  Underlying  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 a number of  shares  of Common  Stock for
            issuance  of the  Underlying  Shares  at least  equal to the  Actual
            Minimum on the date hereof.

      (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  stock options under
            the Company's  stock option plans,  the issuance of shares of Common
            Stock to employees pursuant to the Company's employee stock purchase
            plan and  pursuant to the  conversion  or  exercise  of  outstanding
            Common Stock Equivalents.  No Person has any right of first refusal,
            preemptive right,  right of  participation,  or any similar right to
            participate  in the  transactions  contemplated  by the  Transaction
            Documents.  Except  as a  result  of the  purchase  and  sale of the
            Securities,  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 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

                                       10
<PAGE>

            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  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
            shares of Preferred  Stock.  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.

      (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 two
            years  preceding  the date  hereof  (or such  shorter  period as the
            Company was required by law 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 thereunder,  and
            none of the SEC Reports, when filed,  contained any untrue statement
            of a material  fact or omitted to state a material  fact required to
            be  stated  therein  or  necessary  in order to make the  statements
            therein,  in light of the circumstances  under which they were made,
            not misleading.  The 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.  Since the date of the latest  audited  financial
            statements  included within the SEC Reports,  except as specifically
            disclosed  in  the  SEC  Reports,  (i)  there  has  been  no  event,
            occurrence or development  that has had or that could  reasonably be
            expected to result in a Material  Adverse  Effect,  (ii) the Company
            has not incurred any material liabilities  (contingent or otherwise)
            other than (A) trade payables and accrued  expenses  incurred in the
            ordinary  course of business  consistent  with past practice and (B)
            liabilities not required to be reflected in the Company's  financial
            statements  pursuant to GAAP or required to be  disclosed in filings
            made with the  Commission,  (iii) the  Company  has not  altered its

                                       11
<PAGE>

            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.

      (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.  Neither  the  Company  nor  any  Subsidiary,  nor  (to  the
            knowledge of the Company)  any officer  thereof,  is or has been the
            subject of any Action involving a claim of violation of or liability
            under  federal  or state  securities  laws or a claim of  breach  of
            fiduciary  duty.  There has not been,  and to the  knowledge  of the
            Company, there is not pending or contemplated,  any investigation by
            the Commission  involving the Company or any current  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.

      (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 material 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 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
            except in each case as could not have 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.  To the extent  material  to the  business  of the
            Company and the Subsidiaries,  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, 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 of
            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,  copyrights,
            licenses and other similar rights that are necessary or material for
            use in connection with their  respective  businesses as described in
            the SEC  Reports  and  which the  failure  to so have  could  have a
            Material Adverse Effect  (collectively,  the "Intellectual  Property
            Rights").  Neither  the Company nor any  Subsidiary  has  received a
            written  notice that the  Intellectual  Property  Rights used by the
            Company or any  Subsidiary  violates or infringes upon the rights of
            any Person.  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 of others.

      (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 at
            least equal to the  aggregate  Subscription  Amount.  To the best of
            Company's  knowledge,  such  insurance  contracts  and  policies are
            accurate and complete.  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 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.

                                       13
<PAGE>

      (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 material information relating to the Company,  including
            its Subsidiaries, is made known to the certifying officers by others
            within those entities,  particularly  during the period in which the
            Company's  most recently  filed  periodic  report under the Exchange
            Act, as the case may be, is being prepared. The Company's certifying
            officers have evaluated the effectiveness of the Company's  controls
            and  procedures  as of the date prior to the filing date of the 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
            significant changes in the Company's internal controls (as such term
            is defined in Item 307(b) of Regulation  S-K under the Exchange Act)
            or,  to  the  Company's  knowledge,  in  other  factors  that  could
            significantly affect the Company's internal controls.

      (s)   Certain Fees. No brokerage or finder's  fees or  commissions  are or
            will be payable by the Company to any broker,  financial  advisor or
            consultant,  finder,  placement agent,  investment  banker,  bank or
            other Person with respect to the  transactions  contemplated by this
            Agreement.  The Purchasers  shall have no obligation with respect to
            any fees or with respect to any claims made by or on behalf of other
            Persons for fees of a type  contemplated in this Section that may be
            due  in  connection  with  the  transactions  contemplated  by  this
            Agreement.

      (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.

                                       14
<PAGE>

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

      (w)   Listing and Maintenance Requirements.  The Company's Common Stock is
            registered  pursuant to Section  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,  provided that the price of the Common Stock continues
            to meet the minimum price  requirements for continued listing on the
            Trading Market.

      (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 the Company's issuance of the Securities and the
            Purchasers' ownership of the Securities.

      (y)   Disclosure.  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  constitutes  or
            might  constitute  material,   nonpublic  information.  The  Company
            understands  and  confirms  that  the  Purchasers  will  rely on the
            foregoing representations and covenants in effecting transactions in
            securities of the Company. All disclosure provided to the Purchasers
            regarding   the  Company,   its   business   and  the   transactions
            contemplated  hereby,  including  the  Disclosure  Schedules to this
            Agreement,  furnished by or on behalf of the Company 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,
            including,  without  limitation,  under the rules and regulations 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
            Company's  fair saleable value of its assets exceeds the amount that
            will  be  required  to be  paid on or in  respect  of the  Company's
            existing debts and other  liabilities  (including  known  contingent
            liabilities)  as they  mature;  (ii)  the  Company's  assets  do not
            constitute  unreasonably  small capital to carry on its business for
            the  current  fiscal  year as now  conducted  and as  proposed to be
            conducted  including  its  capital  needs  taking  into  account the
            particular  capital  requirements  of the business  conducted by the
            Company, and projected capital requirements and capital availability
            thereof;  and (iii) the current cash flow of the  Company,  together
            with the proceeds the Company  would  receive,  were it to liquidate
            all of its assets, after taking into account all anticipated uses of
            the cash, would be sufficient to pay all amounts on or in respect of
            its debt when such amounts are required to be paid. The Company does
            not intend to incur  debts  beyond its  ability to pay such debts as
            they mature  (taking  into account the timing and amounts of cash to
            be  payable  on or in  respect  of its  debt).  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.

                                       16
<PAGE>

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

      (cc)  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.

      (dd)  No   General   Solicitation.   Other   than  the  filing  of  resale
            registration  statements,  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  other
            than the filing of the  Registration  Statement under the Securities
            Act.  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.

      (ee)  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.

      (ff)  Accountants.  The  Company's  accountants  are set forth on Schedule
            3.1(ff) of the Disclosure Schedule. To the Company's knowledge, 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 June 30, 2005,  are a
            registered public accounting firm as required by the Securities Act.

      (gg)  Seniority.  As of the Closing Date, no  indebtedness or other equity
            of the Company is senior to the Preferred Stock in right of payment,
            whether with respect to interest or upon liquidation or dissolution,
            or  otherwise,  other than  indebtedness  secured by purchase  money
            security  interests  (which is senior only as to  underlying  assets
            covered thereby) and capital lease obligations (which is senior only
            as to the property covered thereby).

      (hh)  No Disagreements with Accountants and Lawyers. There are no material
            disagreements  presently existing, or reasonably  anticipated by the
            Company to arise,  between the accountants  and lawyers  formerly or
            presently  employed by the  Company and the Company is current  with
            respect to any fees owed to its accountants and lawyers.

                                       17
<PAGE>

      (ii)  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  hereby.  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 this Agreement
            and the transactions contemplated hereby and any advice given by any
            Purchaser or any of their  respective  representatives  or agents in
            connection  with this  Agreement and the  transactions  contemplated
            hereby 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 has been based
            solely   on  the   independent   evaluation   of  the   transactions
            contemplated hereby by the Company and its representatives.

      (jj)  Acknowledgement Regarding Purchasers' Trading Activity.  Anything in
            this Agreement or elsewhere  herein to the contrary  notwithstanding
            (except for Section 4.16 hereof), it is understood and agreed 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  does  not  make  or has  not  made  any  representations  or
warranties other than those specifically set forth in this Section 3.1.

      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 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
            Documents  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.

                                       18
<PAGE>

      (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  present  intention  of
            distributing  any of such  Securities in violation of the Securities
            Act or any applicable state securities law and has no arrangement or
            understanding  with any other persons  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.   Such   Purchaser   does  not  have  any   agreement   or
            understanding, directly or indirectly, with any Person to distribute
            any of the Securities.

      (c)   Purchaser  Status.  At the  time  such  Purchaser  was  offered  the
            Securities,  it was,  and at the date hereof it is, and on each date
            on  which it  exercises  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.   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  (but  not  including  the  location  and/or

                                       19
<PAGE>

            reservation of borrowable shares of Common Stock), in the securities
            of the Company during the period  commencing from the time that such
            Purchaser  first received a term sheet 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).

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


                                   ARTICLE IV
                         OTHER AGREEMENTS OF THE PARTIES

      4.1 Transfer Restrictions.

      (a)   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(b),  of a legend on any of the  Securities  in the
            following form:

            [NEITHER]  THESE  SECURITIES  [NOR THE  SECURITIES  INTO WHICH THESE
            SECURITIES ARE  [EXERCISABLE]  [CONVERTIBLE]]  HAVE 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


                                       20
<PAGE>

            TRANSACTION  NOT SUBJECT TO, THE  REGISTRATION  REQUIREMENTS  OF THE
            SECURITIES ACT AND IN ACCORDANCE  WITH APPLICABLE  STATE  SECURITIES
            LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
            SUCH EFFECT,  THE SUBSTANCE OF WHICH SHALL BE REASONABLY  ACCEPTABLE
            TO THE COMPANY.  THESE  SECURITIES AND THE SECURITIES  ISSUABLE UPON
            EXERCISE OF THESE  SECURITIES  MAY BE PLEDGED IN  CONNECTION  WITH A
            BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

                  The Company  acknowledges and agrees that a Purchaser may from
            time to time pledge pursuant to a bona fide margin  agreement 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
            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 Underlying Shares shall not contain any
            legend  (including the legend set forth in Section  4.1(b)  hereof):
            (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  Underlying
            Shares pursuant to Rule 144, or (iii) if such Underlying  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 shares of
            Preferred  Stock  or  any  portion  of a  Warrant  is  converted  or
            exercised  (as  applicable)  at a time  when  there is an  effective
            registration statement to cover the resale of the Underlying Shares,
            or if such  Underlying  Shares may be sold  under Rule  144(k) or if
            such legend is not otherwise required under applicable  requirements
            of the Securities Act (including judicial  interpretations  thereof)
            then such Underlying 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  Underlying Shares, as applicable,  issued


                                       21
<PAGE>

            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 Underlying  Shares
            (based on the VWAP 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 7 Trading Days after
            such  damages  have begun to accrue) for each  Trading Day after the
            second  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 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.  Unless  pursuant  to an
            exemption under the Securities Act, no Purchaser shall engage in the
            sale of any  Securities  during  periods in which such  Purchaser is
            advised  by the  Company  that  there is no  effective  Registration
            Statement.

      (f)   Until the one year  anniversary  of the Effective  Date, 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 of Preferred Stock.

      4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance
of the  Securities  may result in dilution of the  outstanding  shares of Common
Stock,  which dilution may be substantial under certain market  conditions.  The
Company  further   acknowledges  that  its  obligations  under  the  Transaction
Documents,  including without  limitation its obligation to issue the Underlying
Shares pursuant to the Transaction Documents, are unconditional and absolute and
not  subject  to any  right  of  set  off,  counterclaim,  delay  or  reduction,
regardless  of the effect of any such dilution or any claim the Company may have
against any Purchaser and  regardless of the dilutive  effect that such issuance
may have on the ownership of the other stockholders of the Company.

                                       22
<PAGE>

      4.3 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,  all to the extent required from time to time
to enable such Person to sell such  Securities  without  registration  under the
Securities Act within the limitation of the exemptions provided by Rule 144.

      4.4  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.

      4.5  Conversion  and Exercise  Procedures.  The form of Notice of Exercise
included  in  the  Warrants  and  the  Notice  of  Conversion  included  in  the
Certificate of Designation set forth the totality of the procedures  required of
the Purchasers in order to exercise the Warrants or convert the Preferred Stock.
No  additional  legal  opinion or other  information  or  instructions  shall be
required of the Purchasers to exercise their Warrants or convert their Preferred
Stock.  The Company shall honor exercises of the Warrants and conversions of the
Preferred  Stock and shall  deliver  Underlying  Shares in  accordance  with the
terms, conditions and time periods set forth in the Transaction Documents.

      4.6 Securities Laws Disclosure; Publicity. The Company shall, by 8:30 a.m.
Eastern  time on the  Trading Day  following  the date  hereof,  issue a Current
Report on Form 8-K,  reasonably  acceptable  to each  Purchaser  disclosing  the
material terms of the  transactions  contemplated  hereby,  and shall attach the
Transaction Documents thereto as exhibits.  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 such 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,  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 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 subclause (i) or (ii).

                                       23
<PAGE>

      4.7  Shareholder  Rights  Plan.  No claim will be made or  enforced by the
Company or, to the knowledge of the Company, any other Person that any Purchaser
is an "Acquiring  Person" under any  shareholder  rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the  provisions of any such plan or  arrangement,  by
virtue of  receiving  Securities  under the  Transaction  Documents or under any
other  agreement  between  the  Company and the  Purchasers.  The Company  shall
conduct  its  business  in a manner so that it will not  become  subject  to the
Investment Company Act.

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

      4.9 Use of Proceeds.  Except as set forth on Schedule 4.9 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 Common Stock or Common
Stock Equivalents or to settle any outstanding litigation.

      4.10  Reimbursement.  If any Purchaser becomes involved in any capacity in
any  Proceeding  by or against  any Person who is a  stockholder  of the Company
(except as a result of sales, pledges,  margin sales and similar transactions by
such  Purchaser  to or with any current  stockholder),  solely as a result of an
improper action or omission by the Company in connection  with 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.

      4.11  Indemnification  of  Purchasers.  Subject to the  provisions of this
Section  4.11,  the Company will  indemnify  and hold the  Purchasers  and their
directors,  officers,  shareholders,  partners,  employees and agents  (each,  a
"Purchaser Party") harmless from any and all losses,  liabilities,  obligations,
claims,  contingencies,  damages,  costs and expenses,  including all judgments,


                                       24
<PAGE>

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  representation,  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. 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 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.  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,  which shall not be  unreasonably  withheld or
delayed;  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 the Purchasers
in this Agreement or in the other Transaction Documents.

      4.12 Reservation and Listing of Securities.

      (a)   The Company shall maintain a reserve from its duly authorized shares
            of Common Stock for issuance  pursuant to the Transaction  Documents
            in such amount as may be required to fulfill its obligations in full
            under the Transaction Documents.

      (b)   (b) The  Company  shall on or  before  July 15,  2005 hold a special
            meeting of shareholders of the Company at which shareholders will be
            asked  to  approve  an  increase  in the  number  of  the  Company's
            authorized   shares  of  common  stock  to  100,000,000,   with  the
            recommendation  of  the  Company's  Board  of  Directors  that  such
            proposal be approved.  The Company  shall  solicit  proxies from its
            shareholders in connection therewith in the same manner as all other
            management    proposals   in   such   proxy    statement   and   all
            management-appointed  proxyholders shall vote their proxies in favor
            of such proposal.

      (c)   The Company  shall,  if  applicable:  (i) prepare and file with such
            Trading Market an additional shares listing  application  covering a
            number  of  shares  of  Common  Stock at least  equal to the  Actual
            Minimum (as to shares  issuable as  dividends,  if permitted) on the
            date of such  application,  (ii) take all steps  necessary  to cause
            such  shares of  Common  Stock to be  approved  for  listing  on the
            Trading Market as soon as possible thereafter,  (iii) provide to the
            Purchasers  evidence of such listing,  and (iv) maintain the listing
            of such  Common  Stock  on any date at  least  equal  to the  Actual
            Minimum  on such  date on such  Trading  Market or  another  Trading
            Market.

                                       25
<PAGE>

      4.13 Participation in Future Financing.

      (a)   From the date hereof  until the date that is the first date on which
            no Preferred Stock is outstanding, upon any financing 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 the lesser of (i) the  amount of the  Subsequent
            Financing and (ii) the aggregate Stated Value of all Preferred Stock
            issued on the Closing  Date to the  Purchasers  (the  "Participation
            Maximum").

      (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  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 fifth 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 fifth 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  to  the  Persons  set  forth  in the
            Subsequent Financing Notice.

      (e)   If by 5:30 p.m.  (New York City time) on the fifth 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  more  than  the   aggregate   amount  of  the
            Participation  Maximum,  each such Purchaser shall have the right to
            purchase  the  greater  of (a) their Pro Rata  Portion  (as  defined
            below) of the Participation  Maximum and (b) the difference  between


                                       26
<PAGE>

            the Participation  Maximum and the aggregate amount of participation
            by all other Purchasers.  "Pro Rata Portion" is the ratio of (x) the
            Subscription Amount of Securities purchased on the Closing Date by a
            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.

      (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 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 (i) an Exempt Issuance,  (ii) an issuance of Common Stock
            or Common Stock Equivalents, or a series of such issuances, of up to
            $1,000,000,  in the aggregate,  for all such issuances,  over any 12
            month  period  or  (iii)  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 Underlying Shares.

      (b)   From the date hereof  until such time as no  Purchaser  holds any of
            the  Securities,  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.

                                       27
<PAGE>

      (c)   Unless Shareholder  Approval has been obtained and deemed effective,
            the Company  shall not make any issuance  whatsoever of Common Stock
            or Common  Stock  Equivalents  for an effective  per share  purchase
            price of Common Stock of less than  $1.2638,  subject to  adjustment
            for  reverse  and  forward  stock  splits,  stock  dividends,  stock
            combinations and other similar transactions of the Common Stock. 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.

      (d)   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 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.

      4.16 Short Sales and  Confidentiality.  Each  Purchaser  severally and not
jointly with the other  Purchasers  covenants that neither it nor any affiliates
acting on its behalf or pursuant to any  understanding  with it will execute any
Short Sales during the period after the  Discussion  Time and ending at the time
that  the  transactions  contemplated  by  this  Agreement  are  first  publicly
announced as described in Section 4.6. 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 4.6, 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 5 under  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 4.6.  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.


                                       28
<PAGE>

                                    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 April
5, 2005;  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
Midsummer Capital, LLC ("Midsummer") up to $40,000, for its actual,  reasonable,
out-of-pocket  legal fees and expenses,  $20,000 of which shall be paid prior to
the Closing Date. Accordingly,  in lieu of the foregoing payments, the aggregate
amount that  Midsummer  is to pay for the  Securities  at the  Closing  shall be
reduced by $20,000 in lieu  thereof.  The Company  shall  deliver,  prior to the
Closing, a completed and executed copy of the Closing Statement, attached hereto
as Annex A. 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.

      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.

      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 second  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.

                                       29
<PAGE>

      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 Purchasers  then holding at least 66% of the  Securities  issued
hereunder or, in the case of a waiver,  by the party against whom enforcement of
any such  waiver is  sought.  No  waiver  of any  default  with  respect  to any
provision,  condition or requirement  of this Agreement  shall be deemed to be a
continuing  waiver  in the  future or a waiver of any  subsequent  default  or a
waiver of any other provision,  condition or requirement  hereof,  nor shall any
delay or omission of either party to exercise any right  hereunder in any manner
impair the exercise of any such right.

      5.6  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. 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.

      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.  Any Purchaser may assign
any or all of its  rights  under  this  Agreement  to any  Person  to whom  such
Purchaser  assigns or transfers any Securities,  provided such transferee agrees
in  writing to be bound,  with  respect to the  transferred  Securities,  by the
provisions hereof that apply to the "Purchasers".

      5.8 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  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 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 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  attorneys'  fees and other costs and expenses  incurred  with the
investigation, preparation and prosecution of such action or proceeding.

                                       30
<PAGE>

      5.10 Survival.  The representations and warranties  contained herein shall
survive  the  Closing  and  the  delivery,  exercise  and/or  conversion  of the
Securities, as applicable for the applicable statue of limitations.

      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,  such  signature  shall create a valid and
binding  obligation of the party executing (or on whose behalf such signature is
executed)  with the same force and effect as if such  facsimile  signature  page
were an original thereof.

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

      5.13  Rescission and  Withdrawal  Right.  Notwithstanding  anything to the
contrary  contained in (and  without  limiting  any similar  provisions  of) the
Transaction  Documents,  whenever  any  Purchaser  exercises a right,  election,
demand or option under a  Transaction  Documents 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;  provided,
however,  in the case of a rescission of a conversion of the Preferred  Stock or
exercise of a Warrant,  the Purchaser  shall be required to return any shares of
Common Stock subject to any such rescinded conversion or exercise notice.

      5.14   Replacement  of  Securities.   If  any  certificate  or  instrument
evidencing any Securities is mutilated,  lost, stolen or destroyed,  the Company
shall  issue or cause to be issued in  exchange  and  substitution  for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument,  but only upon receipt of evidence reasonably satisfactory to the
Company  of such  loss,  theft  or  destruction  and  customary  and  reasonable
indemnity,  if requested.  The  applicants  for a new  certificate or instrument
under  such  circumstances  shall  also  pay any  reasonable  third-party  costs
associated with the issuance of such replacement Securities.

      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  described in the  foregoing  sentence and hereby agrees to waive in
any action for specific  performance  of any such  obligation the defense that a
remedy at law would be adequate.

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

                                       31
<PAGE>

      5.17 Usury. To the extent it may lawfully do so, the Company hereby agrees
not to insist upon or plead or in any manner  whatsoever  claim, and will resist
any and all efforts to be compelled  to take the benefit or advantage  of, usury
laws wherever enacted, now or at any time hereafter in force, in connection with
any claim, action or proceeding that may be brought by any Purchaser in order to
enforce any right or remedy under any Transaction Document.  Notwithstanding any
provision to the contrary contained in any Transaction Document, it is expressly
agreed  and  provided  that  the  total  liability  of  the  Company  under  the
Transaction  Documents  for payments in the nature of interest  shall not exceed
the maximum lawful rate authorized  under  applicable law (the "Maximum  Rate"),
and, without  limiting the foregoing,  in no event shall any rate of interest or
default  interest,  or both of them,  when aggregated with any other sums in the
nature  of  interest  that  the  Company  may  be  obligated  to pay  under  the
Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum
contract  rate of  interest  allowed by law and  applicable  to the  Transaction
Documents is  increased  or  decreased  by statute or any official  governmental
action subsequent to the date hereof,  the new maximum contract rate of interest
allowed by law will be the Maximum Rate applicable to the Transaction  Documents
from the  effective  date  forward,  unless such  application  is  precluded  by
applicable law. If under any circumstances whatsoever, interest in excess of the
Maximum  Rate  is  paid  by  the  Company  to  any  Purchaser  with  respect  to
indebtedness  evidenced  by the  Transaction  Documents,  such  excess  shall be
applied  by  such  Purchaser  to  the  unpaid  principal  balance  of  any  such
indebtedness  or be refunded to the Company,  the manner of handling such excess
to be at such Purchaser's election.

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


                                       32
<PAGE>

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

      5.19  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.

      5.20  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 PAGE FOLLOWS]


                                       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.


NUTRITION 21, INC.                               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 NXXI 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:________________________________

Address for Notice of Purchaser:




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





Subscription Amount:
Shares of Preferred Stock:
Warrant Shares:
EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]




                                       35
<PAGE>

                                                                         Annex A

                                CLOSING STATEMENT

Pursuant to the attached Securities Purchase Agreement, dated as of the date
hereto, the purchasers shall purchase up to $9,600,000 of Preferred Stock and
Warrants from Nutrition 21, Inc., a New York corporation (the "Company"). All
funds will be wired into a trust account maintained by ____________, counsel to
the Company. All funds will be disbursed in accordance with this Closing
Statement.

Disbursement Date:    March ___, 2005


I.   PURCHASE PRICE

                               Gross Proceeds to be Received in Trust   $

II.  DISBURSEMENTS

                                                                        $
                                                                        $
                                                                        $
                                                                        $
                                                                        $

Total Amount Disbursed:                                                 $



WIRE INSTRUCTIONS:


To:
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To:
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