Exhibit 4.17

                                                             EXECUTION VERSION


                   COMMON STOCK AND WARRANT PURCHASE AGREEMENT

         This COMMON STOCK AND WARRANT PURCHASE AGREEMENT (this "Agreement") is
made as of January 31, 2003 by and between EP MedSystems, Inc., a New Jersey
corporation with its principal office at 575 Route 73 North, Building D, West
Berlin, New Jersey 08091-9293 (the "Company"), and each of the several
purchasers named in Exhibit A attached hereto (each, a "Purchaser" and
collectively, the "Purchasers").

         WHEREAS, the Company desires to issue and sell to the Purchasers an
aggregate of (i) up to 3,000,000 shares (the "Shares") of the authorized but
unissued shares of Company common stock, no par value, stated value $0.001 per
share (the "Common Stock") and (ii) warrants to purchase an aggregate of up to
1,200,000 shares of Common Stock (the "Warrants"); and

         WHEREAS, each Purchaser, severally, wishes to purchase the number of
Shares and Warrants shown next to its name on Exhibit A hereto, all upon the
terms and subject to the conditions set forth in this Agreement.

         NOW THEREFORE, in consideration of the mutual agreements,
representations, warranties and covenants herein contained, the parties hereto
agree as follows:

1. Definitions. As used in this Agreement, the following terms shall have the
following respective meanings:

         "Affiliate" of a party means any corporation or other business entity
controlled by, controlling or under common control with such party. For this
purpose "control" shall mean direct or indirect beneficial ownership of fifty
percent (50%) or more of the voting or income interest in such corporation or
other business entity.

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

         "GAAP" means United States generally accepted accounting principles.

         "Majority Purchasers" shall mean Purchasers which, at any given time,
hold greater than fifty percent (50%) of the voting power of the outstanding
Shares.

         "Material Adverse Effect" shall mean a material adverse effect on the
prospects (financial or other), condition, business, operations, assets,
liabilities, or results of operations of the Company and its subsidiaries, taken
as a whole.

         "NASD" means the National Association of Securities Dealers, Inc.

         "Person" means an individual, corporation, company, partnership, firm,
association, joint venture, trust, unincorporated organization, government,
governmental body, agency, political subdivision or other entity.
<PAGE>

         "Registration Rights Agreement" shall mean that certain Registration
Rights Agreement, dated as of the Closing Date, among the Company and the
Purchasers.

         "SEC" shall mean the Securities and Exchange Commission.

         "Securities Act" shall mean the Securities Act of 1933, as amended, and
all of the rules and regulations promulgated thereunder.

2. Purchase and Sale of Shares.

     2.1 Purchase  and Sale.  Subject to and upon the terms and  conditions  set
forth in this Agreement,  the Company agrees to issue,  sell and deliver to each
Purchaser,  and each  Purchaser,  severally,  hereby agrees to purchase from the
Company,  at the Initial  Closing,  (i) the number of shares of Common Stock set
forth opposite the name of such Purchaser under the heading "Number of Shares to
be  Purchased" on Exhibit A hereto,  at a purchase  price of $1.23 per ---------
share (the "Purchase  Price") and (ii) Warrants to purchase the number of shares
issuable upon exercise of the Warrants (the "Warrant  Shares") under the heading
"Number of Warrant  Shares" (the aggregate  number of shares of Common Stock and
Warrants  purchased by all such Purchasers at the Initial Closing,  the "Minimum
Issue").  The total  purchase  price payable by each Purchaser for the number of
shares of Common Stock that such  Purchaser  is hereby  agreeing to purchase and
the Warrants to be issued to such  Purchaser  is set forth  opposite the name of
such  Purchaser  under the  heading  "Purchase  Price" on Exhibit A hereto.  The
Company  shall be  obligated  to register  the Shares and the Warrant Shares
pursuant to the terms and conditions set forth in the Registration Rights
Agreement.

         2.2 Initial Closing. The purchase and sale of the Minimum Issue shall
take place at 10:00 a.m. EST on or about January 31, 2003, at the offices of
Kelley Drye & Warren LLP in New York, New York, or on such other date and at
such other location as the parties may mutually agree (which time and place are
designated as the "Initial Closing" and the date and time of the Initial Closing
are referred to as the "Initial Closing Date").

         2.3 Deferred Closings. The Company may, solely within its discretion,
sell additional shares of Common Stock and Warrants, after the Initial Closing
Date, but on or prior to the date of the Filing Date Deadline (as defined in the
Registration Rights Agreement), at one or more subsequent closings, at the
Purchase Price, but otherwise on the same terms and conditions set forth herein
(each such closing, an "Additional Closing", and the date and time of each
Additional Closing, an "Additional Closing Date". At any Additional Closing,
upon execution of this Agreement, a purchaser of Common Stock and Warrants
pursuant to the terms hereof shall become a party hereto and shall be included
within the meaning of Purchaser hereunder, and Schedule A shall be amended to
include that purchaser, without any further consent or action on the part of the
Purchasers or the Company.

         2.4 Independent Purchasers. 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 this Agreement and the transactions contemplated
hereby and that each Purchaser has separately negotiated the terms of this
Agreement. Nothing contained herein or in any agreement or document relating to
this transaction, and no action taken by any Purchaser, shall be deemed to
constitute the Purchasers as, or to create any presumption that the Purchasers
are in any way acting in concert or as, a group with respect to the obligations
or transaction hereunder. No Purchaser has relied upon any other Purchaser for
advice in entering into the transactions contemplated hereby.
<PAGE>

3. Representations and Warranties of the Company. The Company hereby represents
and warrants to each of the Purchasers as follows:

     3.1  Organization  and Good  Standing.  The Company is a  corporation  duly
organized,  validly existing and in good standing under the laws of the State of
New Jersey and has all requisite power and authority, and all necessary licenses
and  permits,  to own and lease its  properties  and assets  and to Conduct  its
business as now conducted.  Each  subsidiary as referred to in the SEC Documents
(as hereinafter  defined) is a corporation duly organized,  validly existing and
in good standing under the laws of the jurisdiction of its incorporation and has
all requisite power and authority,  and all necessary  licenses and permits,  to
own and lease its  properties  and  assets and to conduct  its  business  as now
conducted. The Company and its subsidiaries are each qualified to do business as
a foreign  corporation  and are in good standing in all states where the conduct
of their  respective  businesses  or their  ownership  or  leasing  of  property
requires  such  qualification,  except where the failure to so qualify would not
have a Material Adverse Effect The Company does not own or control,  directly or
indirectly,  any  interest  in  any  other  corporation,   partnership,  limited
liability company,  unincorporated business organization,  association, trust or
other business entity.

3.2      Capitalization.

     (a) The authorized  capital stock of the Company consists of: (i) 5,000,000
shares of  preferred  stock of the  Company,  no par value per  share,  of which
373,779 shares are issued and outstanding;  and (ii) 25,000,000 shares of Common
Stock, no par value,  $.001 stated value per share, of which  15,098,736  shares
are issued and outstanding and all such  outstanding  shares are validly issued,
fully paid and  nonassessable;  (iii) 1,000,000  shares of Common Stock reserved
for issuance  pursuant to the  Company's  1995 Long Term  Incentive  Plan;  (iv)
480,000 shares of Common Stock  reserved for issuance  pursuant to the Company's
1995 Director  Option Plan;  and (v) 575,000 shares of Common Stock reserved for
issuance  pursuant to the Company's 2002 Stock Option Plan.  With respect to the
1995 Long Term  Incentive  Plan,  the 1995 Director  Option Plan, the 2002 Stock
Option Plan and other  non-plan  stock  options and  warrants,  an  aggregate of
2,911,129  options and warrants have been granted or issued and are  outstanding
as of December 30, 2002.

     (b) There are no  preemptive  or similar  rights to purchase  or  otherwise
acquire shares of capital stock of the Company  pursuant to any provision of law
or the Amended  and  Restated  Certificate  of  Incorporation  or By-Laws of the
Company or by agreement or otherwise. Except as set forth in this Section 3.2 or
on Schedule 3.2, there are no outstanding  subscriptions,  warrants,  options or
other rights or  commitments  of any character to subscribe for or purchase from
the Company,  or obligating the Company to issue, any shares of capital stock of
the Company or any securities convertible into or exchangeable for such shares.

     (c) There are no  stockholder  agreements,  voting  agreements,  or similar
agreements  with respect to the Common Stock to which the Company is a party, or
to the knowledge of the Company,  by or between any  stockholders of the Company
or any of its Affiliates.
<PAGE>

     3.3 Authorization.  The Company has all requisite  corporate power to enter
into this Agreement and the Registration Rights Agreement, to issue the Warrants
and the Warrant  Shares and to carry out and perform its  obligations  under the
terms  of this  Agreement  and the  Registration  Rights  Agreement  (including,
without  limitation,  the issuance of the Shares).  All corporate  action on the
part of the Company, its officers,  directors and stockholders necessary for the
authorization,  execution,  delivery  and  performance  of this  Agreement,  the
Registration  Rights  Agreement  and the  Warrants and the  consummation  of the
transactions  contemplated  herein and  therein  has been taken or will be taken
prior to the Closing Date.  When executed and delivered by the Company,  each of
this  Agreement,  the  Registration  Rights  Agreement  and the  Warrants  shall
constitute the legal, valid and binding  obligation of the Company,  enforceable
against the Company in accordance with their  respective  terms,  except as such
may be limited by bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally and by general equitable principles.

     3.4 Valid  Issuance  of the  Shares.  The  Shares  being  purchased  by the
Purchasers  hereunder  will,  upon  issuance  pursuant to the terms  hereof,  be
validly issued,  fully paid and nonassessable.  Except for blue sky filing fees,
if any,  there are no state or city  taxes,  fees or other  charges  payable  in
connection  with the execution or delivery of this Agreement,  the  Registration
Rights Agreement and the Shares.

     3.5 Valid  Issuance of the  Warrants.  The Warrants  when issued,  sold and
delivered to each  Purchaser in accordance  with this Agreement will be duly and
validly issued, fully paid and non-assessable.  There are no New Jersey state or
city taxes,  fees or other charges  payable in connection  with the execution or
delivery of the Warrants.

     3.6 Financial Statements.  The Company has made available to each Purchaser
its audited  Statements of Income,  Stockholders'  Equity and Cash Flows for the
fiscal year ended  December 31, 2001,  its audited  Balance Sheet as of December
31, 2001,  its  unaudited  Statements of Income,  Stockholders'  Equity and Cash
Flows for the period from  December 31, 2001 through  September 30, 2002 and its
unaudited Balance Sheet as of September 30, 2002. All such financial  statements
are  hereinafter  referred to collectively  as the "Financial  Statements."  The
Financial  Statements have been prepared in accordance  with generally  accepted
accounting principles applied on a consistent basis during the periods involved,
and fairly  present,  in all material  respects,  the financial  position of the
Company  and the  results of its  operations  as of the date and for the periods
indicated thereon,  except that the unaudited financial statements may not be in
accordance with generally accepted accounting  principles because of the absence
of footnotes normally contained therein and are subject to normal year-end audit
adjustments  which,  individually,  and in the aggregate,  will not be material.
Since September 30, 2002, to the Company's knowledge, (i) except as set forth on
Schedule 3.6, there has been no  development  or change (actual or  threatened),
individually or in the aggregate,  having a Material Adverse Effect, (ii) except
as set forth in an SEC  Document  (as defined  below),  there does not exist any
condition reasonably likely to result in a Material Adverse Effect and (iii) the
Company has conducted its business  only in the ordinary  course.  Except as set
forth  on  Schedule  3.6,  the  Company  has  no  indebtedness,  obligations  or
liabilities of any kind (whether accrued, absolute, contingent or otherwise, and
whether  due or to become  due)  which  were not fully  reflected  in,  reserved
against or otherwise described in the Financial Statements or the notes thereto,
or incurred in the ordinary  course of business  consistent  with the  Company's
past  practices  since  September  30,  2002,  and in any such case  which  were
required generally to be reflected in such Financial  Statements under GAAP, all
of which  individually and in the aggregate do not and would not have a Material
Adverse Effect.
<PAGE>

     3.7 SEC Documents. The Company has made available to each Purchaser, a true
and complete  copy of the  Company's  Annual  Report on Form 10K-SB for the year
ended  December 31, 2001,  the  Company's  Quarterly  Reports on Form 10-QSB for
three months ended March 31, 2002,  June 30, 2002 and September 30, 2002 and any
other  statement,   report,  registration  statement  (other  than  registration
statements on Form S-8) or definitive  proxy statement filed by the Company with
the SEC during the period  commencing  December  31, 2001 and ending on the date
hereof. The Company will, promptly upon the filing thereof,  also made available
to each  Purchaser  all  statements,  reports  (including,  without  limitation,
Quarterly Reports on Form 10-QSB and Current Reports on Form 8-K),  registration
statements and  definitive  proxy  statements  filed by the Company with the SEC
during the period  commencing  on the date hereof and ending on the Closing Date
(all such materials  required to be furnished to each Purchaser pursuant to this
sentence  or  pursuant  to the  next  preceding  sentence  of this  Section  3.7
being called, collectively,  the "SEC Documents").  Since January 1,2002,  the
 Company  has timely made all filings  required to be made by it under
the Exchange Act, the Securities Act and the securities  laws of any state,  and
any rules and regulations promulgated thereunder.  The SEC Documents complied or
will comply in all material  respects with the  requirements of the Exchange Act
or the Securities Act, as applicable, and none of the SEC Documents contained or
will contain any untrue  statement of a material fact or omitted or will omit to
state a material  fact  required to be stated  therein or  necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading,  as of their respective  filing dates,  except to the
extent  corrected by a  subsequently  filed SEC Document filed prior to the date
hereof. The Company is eligible to use a registration statement on Form S-3 with
respect to the  registration of Registrable  Securities (as such term is defined
in the  Registration  Rights  Agreement)  pursuant  to the  Registration  Rights
Agreement.

     3.8  Consents.  Except for  filings  under  federal  and  applicable  state
securities laws and except for violations or potential  violations  which either
individually or in the aggregate would not have a Material  Adverse Effect,  all
permits, consents,  approvals, orders,  authorizations of, or declarations to or
filings  with any  federal,  state,  local or  foreign  court,  governmental  or
regulatory authority,  or other person (including third party consents) required
on the part of the  Company  in  connection  with  the  execution,  delivery  or
performance  of this  Agreement and the  Registration  Rights  Agreement and the
consummation  of the  transactions  contemplated  herein and  therein  have been
obtained or will be obtained prior to the Closing Date, and will be effective as
of the Closing Date.
<PAGE>

     3.9 No  Conflict.  The  execution  and  delivery  of  this  Agreement,  the
Registration   Rights  Agreement  and  the  Warrants  by  the  Company  and  the
consummation of the  transactions  contemplated  hereby and thereby  (including,
without  limitation,  the issuance of the Share and the  Warrants)  will not (x)
conflict with or result in any  violation of or default (with or without  notice
or lapse  of  time,  or both)  under,  or give  rise to a right of  termination,
cancellation  or  acceleration  of any  obligation  or to a loss  of a  material
benefit  under (i) any  provision  of the Amended and  Restated  Certificate  of
Incorporation  or bylaws of the  Company or (ii) any  agreement  or  instrument,
permit,  franchise,  license,  judgment, order, statute, law, ordinance, rule or
regulations,  applicable  to  the  Company,  any of its  subsidiaries  or  their
respective  properties  or assets or (y)  result  in the  creation  of any lien,
security  interest,  charge  or  encumbrance  upon the  Company's  or any of its
subsidiaries' assets, properties, or outstanding capital stock.

     3.10  Brokers or  Finders.  Except for Adams  Harkness  & Hill,  Inc.  (the
"Placement  Agent"),  the  Company  has not dealt  with any  broker or finder in
connection with the transactions contemplated by this Agreement, and, except for
certain fees and expenses  payable by the Company to the  Placement  Agent,  the
Company  has not  incurred,  and shall not incur,  directly or  indirectly,  any
liability  for any  brokerage  or  finders'  fees or agents  commissions  or any
similar   charges  in  connection   with  this  Agreement  or  any   transaction
contemplated hereby.

     3.11  Nasdaq  National  Market.  The  Common  Stock is listed on The Nasdaq
National  Market,  and  except  as set  forth on  Schedule  3.11,  there  are no
proceedings  to revoke or suspend such  listing.  The Common Stock is registered
pursuant to Section  12(g) of the Exchange  Act. 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, or
except as set forth on Schedule 3.11, delisting the Common Stock from The Nasdaq
National  Market.  Except as set forth on  Schedule  3.11,  the  Company has not
received any  notification  that, and has no knowledge that, the SEC or the NASD
is contemplating  terminating such listing or registration.  The issuance of the
Shares does not require stockholder approval,  including, without limitation, as
may be required pursuant to the Nasdaq Marketplace Rules.

     3.12 Absence of Litigation. Except as set forth in the SEC Documents, there
is  no  action,  suit  or  proceeding  or,  to  the  Company's  knowledge,   any
investigation,  pending, or to the Company's knowledge,  threatened by or before
any  governmental  body  against the Company or any of its  subsidiaries  and in
which an unfavorable  outcome,  ruling or finding in any said matter, or for all
matters taken as a whole,  might have a Material  Adverse Effect.  The foregoing
includes, without limitation, any such action, suit, proceeding or investigation
that questions this Agreement or the Registration Rights Agreement, the issuance
of the  Warrants  or the right of the  Company to  execute,  deliver and perform
under same.

     3.13  Fiduciary  Duties.  The Company  represents and warrants that, to the
best of its  knowledge,  none of its  directors  or  officers is or has been the
subject of, or a defendant  in: (i) an  enforcement  action or  prosecution  (or
settlement in lieu thereof)  brought by a governmental  authority  relating to a
violation of securities,  fiduciary or criminal laws, or (ii) a civil action (or
settlement in lieu thereof)  brought by  stockholders or investors for violation
of duties owed to the stockholders or investors.

     3.14 Title to Property and Assets. Each of the Company and its subsidiaries
owns its  property  and assets free and clear of all  mortgages,  liens,  loans,
claims,  charges  and  encumbrances,  except as set forth on  Schedule  3.14 and
except such encumbrances and liens that arise in the ordinary course of business
and do not materially impair their respective  ownership or use of such property
or assets.  With  respect to  property  and assets it leases,  the Company is in
material compliance with such leases and, to the best of its knowledge,  holds a
valid leasehold  interest free of any liens,  charges,  claims or  encumbrances,
except to extent such would not have a Material Adverse Effect.
<PAGE>

3.15     Patents. Trademarks. Proprietary Rights.
         ---------------------------------------

     (a) To the Company's  knowledge,  each of the Company and its  subsidiaries
owns or has the right to use all of the Intellectual Property Rights (as defined
below),  except where such failure would not have a material  adverse  effect on
the business, properties or assets of the Company and its subsidiaries, taken as
a whole.  For purposes of this Agreement,  "Intellectual  Property Rights" means
all patents, copyrights,  trademarks, service marks, trade names, permits, trade
secrets,  computer  programs,  software designs and related  materials and other
intellectual  property  that are used by the  Company  or a  subsidiary  and are
material to the conduct of the Company's or a subsidiary's business.

     (b) To the Company's knowledge, the Company's and each subsidiary's use and
enjoyment  of the  Intellectual  Property  Rights do not  violate any license or
conflict with or infringe the intellectual property rights of others in a manner
which would  materially and adversely affect the business,  assets,  properties,
operations  or  condition  (financial  or  otherwise)  of the  Company  and  its
subsidiaries, taken as a whole.

     3.16 Environmental  Matters.  Except as set forth in the SEC Documents,  to
the Company's  knowledge,  neither the Company nor any of its subsidiaries is in
violation  of  any  applicable  statute,  law  or  regulation  relating  to  the
environment or occupational health and safety,  which violation could reasonably
be  expected  to result in a  Material  Adverse  Effect,  and to the best of its
knowledge,  no  expenditures  are  required  in  order to  comply  with any such
existing  statute,  law or regulation,  which  expenditures  could reasonably be
expected to result in a Material Adverse Effect.

     3.17  Permits.  Each of the  Company  and its  subsidiaries  possesses  all
franchises,  certificates,  licenses,  authorizations  and  permits  or  similar
authority  necessary to conduct its business as described in the SEC  Documents,
except where the failure to possess such permits would not,  individually  or in
the  aggregate,   have  a  material   adverse  effect  on  the  Company  or  its
subsidiaries, or their businesses,  properties,  assets, operations or condition
(financial or otherwise) taken as a whole ("Material Permits"),  and neither the
Company nor any such subsidiary has received any notice of proceedings  relating
to the revocation or modification of any Material Permit.

     3.18 Employees.  To the Company's  knowledge,  no strike,  labor dispute or
union organizing activities are pending or threatened against the Company or any
of its  subsidiaries  by its  employees.  No  employees  belong  to a  union  or
collective  bargaining unit. Neither the Company nor any of its subsidiaries has
any workers' compensation liabilities.

     3.19 Tax  Matters.  The  Company  has filed all tax  returns and reports as
required by federal,  state, local, and foreign law and has paid all taxes shown
thereon  that have  become  due and  payable.  Such  returns  and  reports  were
materially  accurate  and  complete  when filed and  reflect all taxes and other
assessments due thereunder to be paid by the Company,  except those contested by
it in good  faith.  The  provision  for  taxes of the  Company  included  in the
provision  for accrued  liabilities  in the  Company's  financial  statements is
adequate for taxes due or accrued as of the date thereof.  The Company has never
had any material tax deficiency proposed or assessed against it.
<PAGE>

     3.20  Compliance  with Laws. The business and operations of the Company and
each of its  subsidiaries  have been conducted in accordance with all applicable
laws,  rules and  regulations  of all  governmental  agencies,  authorities  and
instrumentalities (including,  without limitation, under the Employee Retirement
Income Security Act of 1974, as amended,  laws and  regulations  administered by
the Food and Drug  Administration,  and all laws  relating to the  employment of
labor),  except for such  violations  which  would not,  individually  or in the
aggregate, have a Material Adverse Effect.

     3.21  Insurance.  The  Company  and  each  of  its  subsidiaries  maintains
insurance of the type and in the amount  reasonably  adequate for its  business,
including, but not limited to, insurance covering all real and personal property
owned  or  leased  by the  Company  against  theft,  damage,  destruction,  acts
vandalism, and all other risks customarily insured against by similarly situated
companies, all of which insurance is in full force and effect.

     3.22  Investment  Company Act. The Company is not an  "investment  company"
within the  meaning  of the  Investment  Company  Act of 1940,  as amended  (the
"Investment  Company  Act"),  and the  Company  is not  directly  or  indirectly
controlled by or acting on behalf of any person that is an "investment  company"
within the meaning of the Investment Company Act.

     3.23  Compliance  With  Securities  Laws.  Assuming  the  accuracy  of  the
representations  and warranties of the Purchasers set forth in Section 4 hereof,
the offer and sale by the Company of the Shares,  the  Warrants  and the Warrant
Shares are exempt from the registration and prospectus delivery  requirements of
the Securities Act. Other than pursuant to an effective  registration  statement
under the Securities Act, the Company has not issued, offered or sold any shares
of Common  Stock  (including  for this purpose any  securities  of the same or a
similar class as the Common Stock) within the six (6) month period preceding the
date hereof or taken any other  action,  or failed to take any action,  that, in
any such case,  would (i)  eliminate  the  availability  of the  exemption  from
registration  under Regulation D under the Securities Act in connection with the
offer  and  sale  of  the  Shares,  the  Warrants  and  the  Warrant  Shares  as
contemplated  hereby or (ii) cause the  offering of the Shares  pursuant to this
Agreement to be integrated  with prior  offerings by the Company for purposes of
the Securities Act or any applicable stockholder approval provisions, including,
without limitation,  under the rules and regulations of the NASD, as applicable.
The Company shall not directly or indirectly  take,  and shall not permit any of
its directors, officers or Affiliates directly or indirectly to take, any action
(including,  without limitation, any offering or sale to any person or entity of
the Shares or any Common Stock) that will make  unavailable  the exemption  from
registration  under the  Securities Act being relied upon by the Company for the
offer and sale to the  Purchasers  of the Shares,  the  Warrants and the Warrant
Shares as contemplated by this Agreement,  including,  without  limitation,  the
filing of a registration  statement under the Securities Act. No form of general
solicitation  or  advertising  within  the  meaning  of Rule  502(c)  under  the
Securities  Act  has  been  used  or  authorized  by the  Company  or any of its
officers,  directors or Affiliates  in connection  with the offer or sale of the
Shares, the Warrants and the Warrant Shares as contemplated by this Agreement or
any other agreement to which the Company is a party.
<PAGE>

     3.24 Registration  Rights.  Except as set forth on Schedule 3.24 or the SEC
Documents,  there are no persons with  registration  or other similar  rights to
have  any  securities  registered  pursuant  to the  Registration  Statement  or
otherwise registered by the Company under the Securities Act which have not been
satisfied.

     3.25 Related Party  Transactions.  Except as set forth in the SEC Documents
and on Schedule 3.25, neither the Company nor any of its officers,  directors or
Affiliates  nor any family  member of any officer,  director or Affiliate of the
Company has  borrowed any moneys from or has  outstanding  any  indebtedness  or
other similar obligations to the Company.  Except as set forth on Schedule 3.25,
neither the Company nor any of its  officers,  directors or  Affiliates  nor any
family member of any officer,  director or Affiliate of the Company (i) owns any
direct or  indirect  interest  constituting  more than a 1% equity  (or  similar
profit  participation)  interest  in, or  controls  or is a  director,  officer,
partner,  member or employee of, or consultant or lender to or borrower from, or
has the right to  participate in the profits of, any person or entity which is a
participant  in any  transaction  to which the  Company  is a party or (ii) is a
party to any  contract,  agreement,  commitment  or other  arrangement  with the
Company.

     3.26 Contracts.  All contracts and agreements filed or required to be filed
as exhibits to the SEC  Documents  filed prior to the date  hereof,  except such
contracts  and  agreements  that have expired by their own terms  (collectively,
"Contracts")  are in full  force and  effect  and  constitute  legal,  valid and
binding  obligations  of the Company and, to the best  knowledge of the Company,
the other  parties  thereto;  the  Company  and,  to the best  knowledge  of the
Company,  each other party thereto,  have performed in all material respects all
obligations  required  to be  performed  by them  under  the  Contracts,  and no
material violation or default exists in respect thereof, nor any event that with
notice or lapse of time, or both,  would  constitute a default  thereof,  on the
part of the Company or, to the best  knowledge of the  Company,  any other party
thereto;  none  of the  Contracts  is  currently  being  renegotiated;  and  the
validity, effectiveness and continuation of all Contracts will not be materially
adversely affected by the transactions contemplated by this Agreement.

     3.27  Disclosure.  Neither  this  Agreement  nor  the SEC  Documents  taken
together  contain any untrue  statement  of a material  fact nor omit to state a
material  fact  necessary in order to make the  statements  contained  herein or
therein,  in  light  of the  circumstances  under  which  they  were  made,  not
misleading.   Except   with   respect  to  a  Purchaser   who  has   executed  a
non-disclosure/confidentiality  agreement  with the Company prior to the Closing
Date, the Company confirms that neither it, nor, to its knowledge, any Person on
its behalf,  has provided any of the  Purchasers or their agents or counsel with
any information that constitutes, or might reasonably be expected to constitute,
material, non-public information. The Company understands and confirms that each
of such  Purchasers  will rely on the  foregoing  representations  in  effecting
transactions in securities of the Company.
<PAGE>

4. Representations, Warranties and Agreements of the Purchasers. Each Purchaser
severally for itself, and not jointly with the other Purchasers, represents and
warrants to, and agrees with, the Company as follows:

     4.1  Authorization.  Such  Purchaser  has all  requisite  power  under  its
constituent  documents to enter into each of this Agreement and the Registration
Rights Agreement and to carry out and perform its obligations under the terms of
this Agreement and the Registration Rights Agreement.  All action on the part of
such  Purchaser  and, if  applicable,  its  officers,  directors,  stockholders,
managers, members and equityholders necessary for the authorization,  execution,
delivery and performance of this Agreement and the Registration Rights Agreement
and the  consummation of the  transactions  contemplated  herein and therein has
been  taken.  When  executed  and  delivered,  each  of this  Agreement  and the
Registration  Rights  Agreement  will  constitute  the legal,  valid and binding
obligation of such Purchaser,  enforceable  against such Purchaser in accordance
with  its  terms,  except  as such may be  limited  by  bankruptcy,  insolvency,
reorganization  or other  laws  affecting  creditors'  rights  generally  and by
general equitable principles.

     4.2  Purchase  Entirely for Own Account.  Such  Purchaser is acquiring  the
Shares being purchased by it hereunder for investment,  for its own account, and
not for  resale  or with a view to  distribution  thereof  in  violation  of the
Securities Act.

     4.3 Investor  Status;  Etc. Such Purchaser  certifies and represents to the
Company  that at the time  such  Purchaser  acquires  any of the.  Shares,  such
Purchaser will be an "Accredited  Investor" as defined in Rule 501 of Regulation
D promulgated  under the Securities Act and was not organized for the purpose of
acquiring the Shares.  Such Purchaser's  financial  condition is such that it is
able to bear the risk of holding the Shares for an indefinite period of time and
the risk of loss of its entire investment.  Such Purchaser has been afforded the
opportunity  to ask questions of and receive  answers from the management of the
Company  concerning this investment and has sufficient  knowledge and experience
in investing in companies similar to the Company in terms of the Company's stage
of  development  so as to be  able to  evaluate  the  risks  and  merits  of its
investment in the Company.

     4.4 Shares Not Registered.  Such Purchaser  understands that the Shares and
the Warrant Shares have not been registered  under the Securities Act, by reason
of their issuance by the Company in a transaction  exempt from the  registration
requirements  of the Securities  Act, and that the Shares,  the Warrants and the
Warrant  Shares must continue to be held by such  Purchaser  unless a subsequent
disposition  thereof is registered  under the  Securities  Act or is exempt from
such   registration.   The  Purchaser   understands  that  the  exemptions  from
registration  afforded  by Rule 144 (the  provisions  of which  are known to it)
promulgated  under the  Securities  Act  depend on the  satisfaction  of various
conditions,  and that,  if  applicable,  Rule 144 may afford the basis for sales
only in limited amounts.

     4.5 No  Conflict.  The  execution  and delivery of this  Agreement  and the
Registration  Rights  Agreement by such Purchaser and the  consummation by it of
the  transactions  contemplated  hereby and thereby  will not  conflict  with or
result in any violation of or default by such Purchaser  (with or without notice
or  lapse of  time,  or both)  under  (i) any  provision  of the  organizational
documents  of  such  Purchaser  or  (ii)  any  judgment,  order,  statute,  law,
ordinance,  rule or regulations,  applicable to such Purchaser or its respective
properties or assets.
<PAGE>

     4.6 Brokers. Such Purchaser has not retained,  utilized or been represented
by any broker or finder in connection with the transactions contemplated by this
Agreement.

     4.7 Consents. All consents,  approvals,  orders and authorizations required
on the part of such  Purchaser in  connection  with the  execution,  delivery or
performance  of  this  Agreement  and  the   consummation  of  the  transactions
contemplated herein have been obtained and are effective as of the Closing Date.

     4.8 Agreement with Respect to Sales of Shares. Such Purchaser will not, and
will cause each of its  Affiliates  and any Person acting on its or their behalf
not to,  directly or  indirectly,  offer,  sell,  pledge,  transfer or otherwise
dispose of (or solicit any offers to buy,  purchase or otherwise acquire or take
a pledge of) any of the shares of Common Stock,  except in  compliance  with the
Securities Act,  applicable  state  securities laws and the respective rules and
regulations promulgated thereunder.

     5.   Conditions Precedent.

     5.1  Conditions  to the  Obligation of the  Purchasers  to  Consummate  the
Closing.  The  obligation  of each  Purchaser to  consummate  the Closing and to
purchase and pay for the Shares being purchased by it pursuant to this Agreement
is subject to the satisfaction of the following  conditions precedent (or waiver
by such Purchaser):

     (a) The  representations  and  warranties  contained  herein of the Company
shall be true and correct on and as of the Closing  Date with the same force and
effect as though made on and as of the  Closing  Date (it being  understood  and
agreed by each Purchaser that, in the case of any representation and warranty of
the Company  contained herein which is not hereinabove  qualified by application
thereto of a materiality standard, such representation and warranty need be true
and  correct  only in all  material  respects  in  order to  satisfy  as to such
representation  or warranty the  condition  precedent set forth in the foregoing
provisions of this Section 5.1(a)). ---------------

     (b) Prior to the  Closing  Date,  no  Material  Adverse  Event  shall  have
occurred  and the  Company  shall  have  performed  all  covenants,  agreements,
obligations  and conditions  herein  required to be performed or observed by the
Company on or prior to the Closing Date.

     (c) No suit, action, or other proceeding  challenging this Agreement or the
transactions  contemplated  hereby,  or seeking to prohibit,  alter,  prevent or
materially  delay the  Closing,  shall  have been  instituted  before any court,
arbitrator or governmental body, agency or official and shall be pending.

     (d) The purchase of and payment for the Shares by such  Purchasers  and the
issuance of the Warrants to such  Purchasers  shall not be prohibited by any law
or  governmental  order  or  regulation.  All  necessary  consents,   approvals,
licenses, permits, orders and authorizations of, or registrations,  declarations
and filings with,  any  governmental  or  administrative  agency or of any other
person with respect to any of the transactions  contemplated  hereby (including,
without limitation, the issuance of the Shares and the Warrants) shall have been
duly obtained or made and shall be in full force and effect.
<PAGE>

     (e) The Company  shall have complied with all  applicable  requirements  of
federal and state  securities or "blue sky" laws with respect to the issuance of
the Shares,  and each Purchaser,  at such Purchaser's  request,  shall have been
provided reasonable evidence thereof.

     (f) The Shares shall have been approved for listing on The Nasdaq  National
Market or the Nasdaq SmallCap  Market,  and each Purchaser,  at such Purchaser's
request, shall have been provided reasonable evidence thereof.

     (g)  The  Registration  Rights  Agreement  shall  have  been  executed  and
delivered by the Company.

     (h) The Warrants shall have been executed and delivered by the Company.

     (i)  Each of EGS  Private  Healthcare  Partnership,  L.P.  and EGS  Private
Healthcare  Counterpart L.P. shall have converted the outstanding  principal and
unpaid  interest  on its  respective  Bridge Note issued by the Company to it on
December 30, 2002 into Shares  simultaneously  with the sale of the other Shares
to the Purchasers.

     (j) A certificate  shall have been delivered by the Company,  signed by its
President  or  Chief   Executive   Officer,   to  the  effect   that:   (i)  the
representations  and  warranties of the Company  contained in this Agreement are
true and correct in all  material  respects on and as of the  Closing  Date,  as
though  newly  made on and as of  that  date  (except  for  representations  and
warranties which speak as of the date of the Agreement or as of another specific
date or period  covered  thereby) and (ii) the Company has performed or complied
with, in all material respects, all of its covenants contained in this Agreement
and required to be performed or complied with on or before Closing Date.

     (k) The  Company  shall  have  delivered  to each  Purchaser  an opinion of
counsel for the Company,  dated the Closing Date, in  substantially  the form of
Exhibit B attached hereto.

     (l) A single stock  certificate  shall have been  delivered by the Company,
registered  in the  name of such  Purchaser  or  nominee  as  designated  by the
Purchaser  in  writing,  representing  the  number of  shares  of  Common  Stock
purchased by such  Purchaser,  free of all restrictive and other legends (except
as provided in Section 6.2 hereof and  otherwise in the form of good  delivery),
against  payment of the purchase  price therefor by wire transfer of immediately
available  funds to such account or accounts as the Company  shall  designate in
writing.

     (m) All  instruments  and  corporate  proceedings  in  connection  with the
transactions  contemplated  by this  Agreement to be  consummated at the Closing
shall  be  satisfactory  in form  and  substance  to such  Purchaser,  and  such
Purchaser  shall  have  received  copies  (executed  or  certified,  as  may  be
appropriate) of all documents which such Purchaser may have reasonably requested
in connection with such transactions.
<PAGE>

     5.2  Conditions to the Obligation of the Company to Consummate the Closing.
The  obligation of the Company to consummate  the Closing,  to issue and sell to
each  Purchaser  the Shares to be purchased by it at the Closing and to issue to
each  Purchaser the Warrants to be issued to it at the Closing is subject to the
satisfaction of the following conditions precedent (or waiver by the Company):

     (a) The representations  and warranties  contained herein of such Purchaser
shall be true and correct on and as of the Closing  Date with the same force and
effect as though made on and as of the  Closing  Date (it being  understood  and
agreed by the Company  that, in the case of any  representation  and warranty of
each  Purchaser   contained  herein  which  is  not  hereinabove   qualified  by
application thereto of a materiality standard,  such representation and warranty
need be true and correct only in all material respects in order to satisfy as to
such  representation  or  warranty  the  condition  precedent  set  forth in the
foregoing provisions of this Section 5.2(a)).

     (b)  The  Registration  Rights  Agreement  shall  have  been  executed  and
delivered by each Purchaser.

     (c) Such  Purchaser  shall have  performed all  obligations  and conditions
herein  required  to be  performed  or observed by it on or prior to the Closing
Date.

     (d)  No  proceeding   challenging   this  Agreement  or  the   transactions
contemplated hereby, or seeking to prohibit,  alter, prevent or materially delay
the  Closing,  shall  have been  instituted  before  any  court,  arbitrator  or
governmental body, agency or official and shall be pending.

     (e) The sale of the Shares by the Company and the  issuance of the Warrants
by the  Company  shall not be  prohibited  by any law or  governmental  order or
regulation.  All necessary consents,  approvals,  licenses,  permits, orders and
authorizations  of,  or  registrations,   declarations  and  filings  with,  any
governmental or administrative agency or of any other person with respect to any
of the  transactions  contemplated  hereby shall have been duly obtained or made
and shall be in full force and effect.

     (f) Such  Purchaser  shall have  executed  and  delivered  to the Company a
Investor Questionnaire,  in substantially the form attached hereto as Exhibit C,
pursuant to which each such  Purchaser  shall provide  information  necessary to
confirm each such Purchaser's  status as an "accredited  investor" (as such term
is defined in Rule 501 promulgated under the Securities Act).

     (g) The Company shall have received  executed  agreements  from each of the
Purchasers to purchase, in accordance with this Agreement,  the number of shares
of Common  Stock set forth on  Exhibit A  opposite  its name  under the  heading
"Number  of  Shares  to  be  Purchased."

     (h) All  instruments  and  corporate  proceedings  in  connection  with the
transactions  contemplated  by this  Agreement to be  consummated at the Closing
shall be  satisfactory  in form and  substance to the  Company,  and the Company
shall have received counterpart  originals,  or certified or other copies of all
documents,   including,  without  limitation,  records  of  corporate  or  other
proceedings, which it may have reasonably requested in connection therewith.
<PAGE>

     (i)  Purchasers  shall have  committed,  pursuant to the terms  hereof,  to
purchase an aggregate of at least two million (2,000,000) Shares.

     (j)  Each of EGS  Private  Healthcare  Partnership,  L.P.  and EGS  Private
Healthcare  Counterpart L.P. shall have converted the outstanding  principal and
unpaid  interest  on its  respective  Bridge Note issued by the Company to it on
December 30, 2002 into Shares  simultaneously  with the sale of the other Shares
to the Purchasers.

6.       Transfer; Legends.

     6.1 Securities Law Transfer Restrictions.  No Purchaser shall sell, assign,
pledge,  transfer  or  otherwise  dispose or  encumber  any of the Shares  being
purchased  by it  hereunder  and  Warrants  being  issued to it hereunder or any
Warrant  Shares,  except:  (i) pursuant to an effective  registration  statement
under  the  Securities  Act or (ii)  pursuant  to an  available  exemption  from
registration  under the Securities Act and applicable state securities laws and,
if reasonably  requested by the Company,  upon delivery by such  Purchaser of an
opinion of counsel reasonably satisfactory to the Company to the effect that the
proposed  transfer  is exempt from  registration  under the  Securities  Act and
applicable  state  securities  laws.  Any transfer or purported  transfer of the
Shares in  violation of this  Section 6.1 shall be  -----------  voidable by the
Company; provided,  however, that no opinion will be required in connection with
(1) a public  sale or  transfer  of  Shares or  Warrant  Shares  pursuant  to an
effective  registration  statement  in  connection  with  which  such  Purchaser
represents  in writing to the Company  that such  Shares or Warrant  Shares have
been or are being sold pursuant to such  registration  statement;  (ii) a public
sale of Shares or Warrant  Shares  pursuant to Rule 144 under the Securities Act
if such Purchaser has delivered to the Company a customary and accurate Rule 144
broker's and seller's  representation letter; or (iii) a sale of shares pursuant
to Rule 144(k) under the  Securities  Act if such Purchaser has delivered to the
Company a customary and accurate Rule 144 seller's  representation  letter.  The
Company  shall not  register  any  transfer  of the Shares  and each  Warrant in
violation  of this Section  --------  6.1. The Company may, and may instruct any
transfer agent for the Company, to place such --- stop transfer orders as may be
required on the transfer books of the Company in order to ensure compliance with
the provisions of this Section 6.1. -----------

     6.2 Legends. Each certificate requesting any of the Shares and each Warrant
shall be endorsed with a legend in  substantially  the form set forth below, and
each Purchaser covenants that, except to the extent such restrictions are waived
by the  Company,  it shall  not  transfer  the  shares  represented  by any such
certificate  or any Warrant or any Warrant  Shares  without  complying  with the
restrictions on transfer described in this Agreement and the legends endorsed on
such certificate:
<PAGE>

          THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
          REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
          "ACT") OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
          OFFERED, SOLD, ASSIGNED, PLEDGED TRANSFERRED OR OTHERWISE
          DISPOSED OF (1) IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
          STATEMENT UNDER THE ACT AND SUCH LAWS OR (II) PURSUANT TO AN
          AVAILABLE EXEMPTION FROM REGISTRATION UNDER SAID ACT, AND TO
          THE EXTENT REQUIRED BY SECTION 6.1 OF THE STOCK PURCHASE
          AGREEMENT PURSUANT TO WHICH THE SHARES REPRESENTED HEREBY WERE
          ACQUIRED, UPON DELIVERY OF AN OPINION OF COUNSEL REASONABLY
          SATISFACTORY TO TEE COMPANY THAT THE PROPOSED TRANSFER IS
          EXEMPT FROM THE ACT AND SUCH LAWS.

     6.3 Removal of Legends. Any legend endorsed on a certificate evidencing the
Shares shall be removed,  and the Company shall issue a certificate without such
legend to the holder of such Shares,  if such Shares are being sold  pursuant to
an effective registration statement under the Securities Act or pursuant to Rule
144 promulgated  thereunder,  and the purchaser  thereof may immediately  resell
such Shares without  restriction and without  registration;  provided,  however,
that in the case of a sale  pursuant to Rule 144,  such  holder of Shares  shall
provide such  information  as is  reasonably  requested by the Company to ensure
that such Shares may be sold in reliance on Rule 144.

     7.  Termination;  Liabilities  Consequent  Thereon.  This  Agreement may be
terminated and the  transactions  contemplated  hereunder  abandoned at any time
prior to the Closing only as follows:

     (a) with  respect to a  Purchaser,  by such  Purchaser,  upon notice to the
Company if the conditions set forth in Section 5.1 shall not have been satisfied
on or prior to February 15, 2003; or

     (b) with  respect  to a  Purchaser,  by the  Company,  upon  notice to such
Purchaser  if the  conditions  set forth in Section 5.2 to be  satisfied by such
Purchaser shall not have been satisfied on or prior to February 15, 2003; or

     (c) at any time by mutual  agreement  of the  Company and not less than two
(2)  Purchasers  who  represent at least fifty percent (50%) of the Shares being
sold hereunder; or

     (d) with respect to a Purchaser,  by such Purchaser,  if there has been any
breach of any  representation or warranty or any material breach of any covenant
of the Company  contained  herein and the same has not been cured within 15 days
after notice thereof (it being  understood and agreed by each Purchaser that, in
the case of any representation or warranty of the Company contained herein which
is not hereinabove  qualified by application thereto of a materiality  standard,
such  representation  or  warranty  will be  deemed to have  been  breached  for
purposes of this Section 7.1(d) only if such  representation or warranty was not
true and correct  inall  material  respects at the time such  representation  or
warranty was made by the Company); or
<PAGE>

     (e) by the  Company  with  respect  to a  Purchaser,  if there has been any
breach of any representation, warranty or any material breach of any covenant of
such Purchaser  contained  herein and the same has not been cured within 15 days
after notice thereof (it being understood and agreed by the Company that, in the
case of any representation and warranty of the Purchaser  contained herein which
is not hereinabove  qualified by application thereto of a materiality  standard,
such  representation  or  warranty  will be  deemed to have  been  breached  for
purposes of this Section 7.1(e) only if such  representation or warranty was not
true and correct in all  material  respects at the time such  representation  or
warranty was made by such Purchaser).

                  Any termination pursuant to this Section 7 shall be without
liability on the part of any party, unless such termination is the result of a
material breach of this Agreement by a party to this Agreement in which case
such breaching party shall remain liable for such breach notwithstanding any
termination of this Agreement.

8. Miscellaneous Provisions.

     8.1 Use of Proceeds.  The Company  shall use the net proceeds from the sale
of the Shares for general  corporate and working capital  purposes and may use a
portion of such  proceeds  to repay a portion  of  indebtedness  outstanding  to
Medtronic, Inc. on the date hereof.

     8.2 Filings.  The Company shall make all necessary filings with the SEC and
"blue sky"  filings  required to be made by the Company in  connection  with the
sale of the Shares,  and the  issuance of the  Warrants,  to the  Purchasers  as
required  by all  applicable  laws,  and  shall  provide a copy  thereof  to the
Purchasers promptly after such filing.

     8.3 Public Statements or Releases.  The Company shall, on the Closing Date,
issue a press release  reasonably  acceptable to the  Purchasers  disclosing all
material terms of the transactions  contemplated hereby. On or before 8:30 a.m.,
Eastern time, the first business day following last Additional Closing Date, the
Company  shall  file a Current  Report on Form 8-K with the SEC  describing  the
terms of the  transactions  contemplated  by this  Agreement  and  including  as
exhibits  to such  Current  Report  on Form 8-K this  Agreement  and the form of
Warrants,  in the form  required by the Exchange  Act.  Thereafter,  the Company
shall timely file any filings and notices  required by the SEC or applicable law
with respect to the transactions  contemplated hereby and provide copies thereof
to the  Purchasers  promptly  after  filing.  The  Company  shall,  at least one
business day prior to the filing or dissemination of any disclosure  required by
this paragraph,  provide a copy thereof to the Purchasers for their review.  The
Company and the  Purchasers  shall  consult with each other in issuing any press
releases  or  otherwise   making   public   statements   or  filings  and  other
communications  with the SEC or any  regulatory  agency or trading  market  with
respect to the transactions  contemplated  hereby, and neither party shall issue
any such press  release or  otherwise  make,  issue or release  any such  public
statement, filing or other communication,  or otherwise disclose or use, without
the prior  consent  of the other  parties,  the  existence  or status  of,  this
Agreement or the transactions  provided for herein, 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,  filing  or other
communication.  Notwithstanding the foregoing, nothing in this Section 8.3 shall
prevent any of the Company hereto from making such other public announcements or
filings  as  it  may  consider   necessary  with  respect  to  the  transactions
contemplated  hereby  in order  to  satisfy  its  legal  obligations;  provided,
however,  the Company shall not publicly disclose the name of any Purchaser,  or
include the name of any  Purchaser in any filing with the SEC or any  regulatory
agency or trading  market,  without the prior written consent of such Purchaser,
except  to  the  extent  such  disclosure  (but  not  any  disclosure  as to the
controlling  Persons thereof) is required by law or trading market  regulations,
in which case the Company shall provide the Purchasers with prior notice of such
disclosure. Neither the Company nor any Person acting on its behalf will provide
any Purchaser with material, nonpublic information about the Company unless such
Purchaser  consents  to receive  such  information  in  writing  in advance  and
executes a non-disclosure/confidentiality  agreement with the Company, in a form
acceptable to the Company.
<PAGE>

     8.4 Further  Assurances.  The parties  agree to cooperate  fully to execute
such further  instruments,  documents  and  agreements  and to give such further
written  assurances,  as may be  reasonably  requested  by any  party to  better
evidence and reflect the transactions  described herein and contemplated hereby,
and to carry into effect the intents and purposes of this Agreement.

     8.5 Notification of Effectiveness  of Registration  Statement.  The Company
covenants that it will provide  written  notice to each Purchaser  (which notice
may be in electronic form) that the Company's registration statement on Form S-3
registering  the Shares sold  hereunder and the Warrant Shares to the Purchasers
has been declared  effective by the SEC,  which notice shall be given  promptly,
but in no event more than five (5) days after the Company has received notice of
such effectiveness from the SEC.

     8.6  Rights  Cumulative.  Each and all of the  various  rights,  powers and
remedies  of the  parties  shall  be  considered  to be  cumulative  with and in
addition to any other rights, powers and remedies which such parties may have at
law or in  equity  in the  event  of the  breach  of any of the  terms  of  this
Agreement.  The exercise or partial exercise of any right, power or remedy shall
neither  constitute the exclusive  election  thereof nor the waiver of any other
right, power or remedy available to such party.

     8.7  Pronouns.  All pronouns or any  variation  thereof  shall be deemed to
refer to the masculine,  feminine or neuter, singular or plural, as the identity
of the person, persons, entity or entities may require.
<PAGE>

8.8      Notices.

     (a) Any notices, reports or other correspondence  (hereinafter collectively
referred to as  "correspondence")  required or permitted  to be given  hereunder
shall be sent by postage  prepaid  first class  mail,  courier or  facsimile  or
delivered  by hand to the  party to whom  such  correspondence  is  required  or
permitted to be given hereunder. The date of giving any notice shall be the date
of its actual receipt.

(b) All correspondence to the Company shall be addressed as follows:

                           EP MedSystems, Inc.
                           575 Route 73 North
                           Building D
                           West Berlin, New Jersey  08091-9293
                           Attention:  President and Chief Executive Officer
                           Facsimile:  (856) 753-8544

                           with a copy to:

                           Kelley Drye & Warren LLP
                           101 Park Avenue
                           New York, NY 10178
                           Attention:  Salvatore J. Vitiello
                           Facsimile:  (212) 808-7897

     (c) All  correspondence to any Purchaser shall be sent to such Purchaser at
the address set forth in Exhibit A.

     (d) Any entity may change the address to which  correspondence  to it is to
be addressed by notification as provided for herein.

     8.9  Captions.  The captions and paragraph  headings of this  Agreement are
solely for the convenience of reference and shall not affect its interpretation.

     8.10  Severability.  Should any part or provision of this Agreement be held
unenforceable  or in conflict with the  applicable  laws or  regulations  of any
jurisdiction,  the invalid or unenforceable part or provisions shall be replaced
with a  provision  which  accomplishes,  to the extent  possible,  the  original
business  purpose of such part or provision in a valid and  enforceable  manner,
and the  remainder  of this  Agreement  shall  remain  binding  upon the parties
hereto.

     8.11 Governing Law; Injunctive Relief.

     (a) This  Agreement  shall be governed by and construed in accordance  with
the internal and substantive laws of the State of New York and without regard to
any conflicts of laws concepts that would apply the substantive law of any other
jurisdiction.

     (b) Each of the parties  hereto  acknowledges  and agrees that damages will
not be an adequate remedy for any material breach or violation of this Agreement
if such material breach or violation would cause immediate and irreparable  harm
(an "Irreparable Breach").  Accordingly, in the event of a threatened or ongoing
Irreparable Breach, each party hereto shall be entitled to seek, in any state or
federal court in the State of New York,  equitable  relief of a kind appropriate
in light of the nature of the ongoing or threatened  Irreparable  Breach,  which
relief may include,  without  limitation,  specific  performance  or  injunctive
relief;   provided,   however,  that  if  the  party  bringing  such  action  is
unsuccessful  in  obtaining  the relief  sought,  the moving party shall pay the
non-moving  party's  costs,   including  actual  attorney's  fees,  incurred  in
connection  with defending such action.  Such remedies shall not be the parties'
exclusive  remedies,  but shall be in addition to all other remedies provided in
this Agreement.

     8.12  Waiver.  No  waiver  of any  term,  provision  or  condition  of this
Agreement,  whether by conduct or otherwise, in any one or more instances, shall
be deemed to be, or be construed as, a further or continuing  waiver of any such
term,  provision  or  condition  or as a waiver of any other term,  provision or
condition of this Agreement.
<PAGE>

     8.13  Expenses.  Each  party  will  bear  its own  costs  and  expenses  in
connection with this Agreement.

     8.14  Assignment.  The rights and  obligations  of the parties hereto shall
inure to the benefit of and shall be binding upon the authorized  successors and
permitted  assigns  of each  party.  No  Purchaser  may  assign  its  rights  or
obligations  under this Agreement or designate another person (i) to perform all
or part of its  obligations  under this Agreement or (ii) to have all or part of
its rights and  benefits  under this  Agreement,  in each case without the prior
written consent of the Company, which consent will not be unreasonably withheld.
In the event of any assignment in accordance  with the terms of this  Agreement,
the assignee  shall  specifically  assume and be bound by the  provisions of the
Agreement  by  executing  and  agreeing to an  assumption  agreement  reasonably
acceptable to the other party.

     8.15 Survival.  The respective  representations and warranties given by the
parties hereto, and the other covenants and agreements  contained herein,  shall
survive the Closing Date and the consummation of the  transactions  contemplated
herein for a period of two years,  without regard to any  investigation  made by
any party.

     8.16 Entire Agreement. This Agreement along with the schedules and exhibits
attached  hereto and  incorporated  herewith  constitute  the  entire  agreement
between the parties  hereto  respecting the subject matter hereof and supersedes
all  prior  agreements,   negotiations,   understandings,   representations  and
statements  respecting the subject matter  hereof,  whether  written or oral. No
modification, alteration, waiver or change in any of the terms of this Agreement
shall be valid or binding  upon the  parties  hereto  unless made in writing and
duly  executed  by the  Company  and (a)  prior to  Closing,  not less  than two
Purchasers  who  represent at least fifty percent (50%) of the Shares being sold
hereunder or (b) following Closing, the Majority Purchasers;  provided, however,
that, in each case, no such  amendment  shall  increase the  obligations  of any
Purchaser without such Purchaser's written consent.

8.17                  Counterparts. This Agreement may be executed
                      simultaneously in two or more counterparts, each of which
                      shall be deemed an original, but all of which together
                      shall constitute one and the same instrument.

         [The remainder of this page has been intentionally left blank;
                            signature page follows.]


<PAGE>



         IN WITNESS WHEREOF, the parties hereto have executed this Common Stock
and Warrant Purchase Agreement as of the day and year first above written.

                           EP MedSystems, Inc.



                           By:
                                    --------------------------------------
                                    Reinhard Schmidt
                                    President and Chief Executive Officer



THE PURCHASER'S SIGNATURE TO THE INVESTOR QUESTIONNAIRE DATED EVEN DATE HEREWITH
SHALL CONSTITUTE THE PURCHASER'S SIGNATURE TO THIS COMMON STOCK AND WARRANT
PURCHASE AGREEMENT.

<PAGE>

<TABLE>
<CAPTION>
<S>                                <C>                            <C>                         <C>                   <C>



                                                             Exhibit A

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PURCHASER                     ADDRESS                      NUMBER OF SHARES         NUMBER OF WARRANT       PURCHASE PRICE
                                                                                         SHARES                   ($)
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</TABLE>


<PAGE>





                                    Exhibit B

                        Form of Kelley Drye & Warren LLP

                                  See attached.

<PAGE>


                                                     January 31, 2003



To the Purchasers listed on Exhibit A hereto:

         We have acted as special counsel to EP Medsystems, Inc. (the
"Corporation") in connection with the Common Stock and Warrant Purchase
Agreement (the "Agreement"), dated as of January 29, 2003, by and among the
Corporation and the Purchasers listed on Exhibit A hereto.

         This opinion is delivered to you pursuant to Section 5.1 of the
Agreement. Capitalized terms used herein without definition shall have the
meanings specified in the Agreement.

         In connection with this opinion, we have examined and relied upon: (i)
the Agreement and the exhibits and schedules thereto, the Registration Rights
Agreement and the Warrants (collectively, the "Transaction Agreements"); (ii)
the Certificate of Incorporation and Bylaws, as amended to date, of the
Corporation and the minute books, stock records and records of corporate
proceedings of the Corporation; (iii) advice from the State of New Jersey dated
January 31, 2003 as to the good standing of the Corporation and (iv) originals
or copies certified or otherwise identified to our satisfaction of such records,
agreements, instruments and certificates of public officials as we have deemed
necessary and relevant to form the basis for our opinions herein. In our
examination, we have assumed, and express no opinion as to, the genuineness of
all signatures, the authenticity and completeness of all documents submitted to
us as originals, the conformity to originals of all documents submitted to us as
copies, the authenticity of the originals of such latter documents and the legal
competence or capacity of all natural persons. We have assumed that (x) you have
received all documents which you were required to receive under the Agreement,
(y) you have satisfied those legal requirements applicable to you to the extent
necessary to make the Transaction Agreements enforceable against you, and (z)
that the Transaction Agreements are an obligation binding upon you.

         As to matters of fact relevant to this opinion, with your consent, we
have relied solely upon (a) our examination of the documents referred to above
and have assumed the current accuracy and completeness of the information
obtained from public officials and records included in the documents referred to
above; (b) our actual knowledge (i.e. conscious awareness); (c) the
representations and warranties of the Corporation as set forth in the
Transaction Agreements and any other certificates and documents delivered at the
closing of the Agreement (the "Closing") and (d) the representations and
warranties made by representatives of the Corporation to us in certificates
signed by such representatives. We have made no independent investigation or
other attempt to verify the accuracy of any of such information, representations
or warranties or to determine the existence or non-existence of any other
factual matters, except as expressly set forth herein and without limiting the
foregoing, we have not, in rendering the opinions given in paragraph 5 and 7,
reviewed court or other public records; however, we are not aware of any facts
that would lead us to believe that any of the opinions expressed herein are not
accurate.
<PAGE>

         As used in this opinion, the phrases "to the best of our knowledge,"
"to our knowledge," "known to us," or phrases of like import refer only to the
actual knowledge (i.e. conscious awareness) of the attorneys currently in this
firm who our records indicate have devoted substantive attention to the matters
directly related to the Transaction Agreements and the transactions contemplated
thereby and mean that such attorneys have not been informed by the Corporation
that the matters stated are factually incorrect or have no actual knowledge
(i.e. conscious awareness) that the matters stated are factually incorrect.

         We do not assume any responsibility for the accuracy, completeness or
fairness of any information, including, but not limited to, financial
information, furnished to you by the Corporation concerning the business, assets
and affairs of the Corporation or any other information furnished to you by the
Corporation or furnished by us as counsel to the Corporation, except for our
conclusions of law in this opinion letter.

         When statements in this opinion are qualified by the term "material,"
those statements involve judgments and opinions as to the materiality or lack of
materiality of any matter to the Corporation or its business, prospects, assets
or financial condition, which are entirely those of the Corporation and it
officers, after having been advised by us as to the legal effect and
consequences of such matters; however, such opinions and judgments are not known
to us to be incorrect.

         The opinions herein are subject to the following qualifications:

         (a) We express no opinion as to the enforceability of any provision of
the Agreement or other instruments to the extent such provision may be subject
to, and affected by, applicable bankruptcy, insolvency, moratorium or similar
state or federal laws affecting the rights and remedies of creditors generally
(including, without limitation, fraudulent transfer laws) or equitable
principles, including, without limitation, the duty to act in good faith.

         (b) We express no opinion with respect to the enforceability of
provisions in the Agreement providing for (i) specific performance, injunctive
relief or other equitable remedies, regardless of whether such enforceability is
sought in a proceeding in equity or at law, (ii) any indemnification, hold
harmless or exculpation, the enforceability of which may be limited by
applicable federal and state securities laws and general principles of public
policy; or (iii) a choice of law to the extent limited by the choice-of-law
rules of the State of New York and general principles of public policy.
<PAGE>

         (c) We express no opinion concerning any law other than the law of the
State New York, the corporate law of the State of New Jersey and the federal law
of the United States, and we express no opinion with respect to the
applicability thereto, or the effect thereof of the laws of any other
jurisdiction, or in the case of New Jersey, any other laws, or as to matters of
municipal law or the laws of any local agencies within any state. To the extent
that the laws of any other jurisdiction are applicable to any of the Transaction
Agreements, we have assumed instead that such Transaction Documents would be
construed and enforced in accordance with the laws of the State of New York
without giving effect to any choice of law rules of such state that might
require the application of another state's laws.

         (d) We have been advised by the Corporation that all shares of the
Corporation's capital stock prior to the date hereof are fully paid; we have
relied upon such advice and have made no independent investigation thereof.

         (f) We have assumed there was no misrepresentation, omission or deceit
by any person in connection with the execution, delivery or performance of any
of the documents referred to herein or any of the transactions contemplated by
such documents. We have assumed that there are no agreements or understandings,
written or oral, between the Corporation and other parties and any other person
that would define, supplement or qualify the terms of the Transaction Agreements
to which any of the Corporation or other parties is a party and that there are
no terminations, modifications, waivers or amendments to any agreements reviewed
by us undisclosed to us by the Corporation after our inquiry of the Corporation.

         (g) We express no opinion as to compliance with applicable antifraud or
antitrust statutes, rules or regulations of applicable state and federal law.

         (h) We express no opinion with respect to or regarding any matters
pertaining to patents, trademarks or copyrights.

         (i) Insofar as this opinion relates to any mortgage, indenture, lease,
contract or other agreement or undertaking of the Corporation (the "Documents"),
our opinion is limited to those Documents which are in writing and are filed as
exhibits to the SEC Documents (the "Scheduled Agreements"), and no opinion is
expressed herein as to any mortgage, indenture, lease, contract or other
agreement (oral or written) or undertaking of the Corporation other than the
Scheduled Agreements. In rendering our opinions insofar as they require
interpretation of contracts and other documents attached as exhibits to the SEC
Documents, we express no opinion with respect to the compliance by the
Corporation with, or any financial calculations or data in respect of, financial
covenants included in any such exhibit. In rendering our opinions insofar as
they require interpretation of any contract or other document attached as
exhibits to the SEC Documents, we have also assumed that all courts of competent
jurisdiction would enforce such agreements as written but would apply the
internal laws of the State of New York without giving effect to any choice of
law provisions contained therein or any choice of law principles that would
result in application of the internal laws of any other state and to the extent
that any questions of legality or legal construction have arisen in connection
with our review, we have applied the internal laws of the State of New York in
resolving such questions. We advise you that certain of the exhibits to the SEC
Documents may be governed by other laws, that such laws may vary substantially
from the law assumed to govern for purposes of this opinion and that this
opinion may not be relied upon as to whether or not a breach or default would
occur under the law actually governing such exhibits. In rendering our opinions
insofar as they require interpretation of the exhibits to the SEC Documents, we
have also assumed that all consents or waivers necessary under such contracts as
a result of the transactions contemplated by the Agreement have been obtained
from the parties thereto as of the Closing.
<PAGE>

         Based upon and subject to the foregoing, it is our opinion that:

         1. The Corporation is validly existing and in good standing under the
laws of the jurisdiction of its incorporation.

         2. The authorized capital stock of the Corporation consists of:

                  a. Preferred Stock: 5,000,000 shares of preferred stock, of
which 373,779 shares are validly issued and outstanding, fully paid, and
nonassessable; and

                  b. Common Stock: 25,000,000 shares of Common Stock of which
15,098,736 shares are validly issued and outstanding, fully paid and
nonassessable.

         3. The shares of Common Stock and the Warrants to be issued and sold to
you under the Agreement, when issued, sold and delivered in accordance with the
terms of the Agreement, will be validly issued, fully paid and nonassessable,
and to our knowledge will not violate any preemptive rights (by virtue of
holding such Common Stock) under applicable law, the Certificate of
Incorporation, Bylaws, or any Scheduled Agreement.

         4. All corporate action on the part of the Corporation necessary for
the authorization, execution and delivery of, and performance of all obligations
under, the Agreement, and for the authorization, issuance and delivery of the
shares of Common Stock and the Warrants being sold under the Agreement, has been
taken. The Agreement, when executed and delivered by or on behalf of the
Corporation, will constitute a valid and legally binding obligation of the
Corporation, enforceable against the Corporation in accordance with its terms.
The Corporation has obtained all necessary consents, authorizations, approvals
and orders from, and has made all registrations, qualifications, designations,
declarations or filings with all federal, state or other relevant governmental
authorities required on the part of the Corporation in connection with the
consummation of the transactions contemplated by the Agreement, except (i) such
as may be required pursuant to the Registration Rights Agreement; (ii) filings
with the Securities and Exchange Commission and certain state securities law
administrators which are permitted to be filed by applicable laws, rules or
regulations subsequent to the issuance and sale of the shares and the issuance
of the Warrants pursuant to the Agreement or which are not required by
applicable state securities laws, rules or regulations to be filed as a
condition to the reliance by the Corporation upon certain exemptions from the
registration or qualification requirements under such state securities laws; or
(iii) where the failure to make or obtain any of such authorizations, approvals,
consents, exemptions, registrations or filings would be reasonably likely not to
have a material adverse effect on the Corporation.
<PAGE>

         5. The execution, delivery and performance of the Agreement by the
Corporation will not result in any violation of, be in conflict with, or
constitute a default under, any provision of any judgment, decree or order of
any court or administrative body to which the Corporation is a party and of
which we have knowledge.

         6. Based in part on your representations contained in Section 4 of the
Agreement, and except as may be required pursuant to the Registration Rights
Agreement, it is not necessary in connection with the offer, sale and issuance
of the shares of Common Stock and the Warrants pursuant to the Agreement to
register any of such shares of Common Stock and Warrants under the Securities
Act of 1933, as amended (the "Act"), as such is in effect as of the date hereof.

         7. Except as set forth in the SEC Documents, we are not aware of any
action, suit or proceeding at law or in equity or by or before any governmental
instrumentality or agency now pending or threatened against the Corporation or
any of its properties or assets.


         This opinion is intended solely for your use and is not to be made
available to or relied upon by other persons or entities without our prior
written consent.

                                                     Very truly yours,


                                                     KELLEY DRYE & WARREN LLP



<PAGE>



                                    Exhibit A

                                   PURCHASERS



<PAGE>

                                    Schedules


         The following Schedules are provided, as of January 31, 2003, pursuant
to the Common Stock and Warrant Purchase Agreement, dated as of January 31, 2003
(the Agreement").

         The Schedule numbers correspond to the section numbers in the
Agreement; however, any information disclosed herein under any Schedule number
shall be deemed to be disclosed and incorporated with respect to any other
section under the Agreement where such disclosure would be appropriate. Any
terms defined in the Agreement shall have the same meaning when used in these
Schedules as when used in the Agreement, unless the context otherwise requires.



<PAGE>



                                                                   Schedule 3.2


   Outstanding Subscriptions, Warrants, Options or Other Rights or Commitments


     (i) On November 21, 2002, the Company received two $375,000  mortgage loans
on the Company's  West Berlin,  N.J.  corporate  office  building (the "Mortgage
Loans").  The Mortgage Loans mature on January 15, 2006, bear interest at a rate
of 8.0 % per annum, and principal and interest thereon are initially and through
December 31, 2003  convertible,  at the lender's option,  into Common Stock at a
conversion  price equal to $2.14, an amount in excess of the market price of the
Common Stock on the date of the funding of the loan.  Beginning  January 1, 2004
through  December 31, 2004,  principal and unpaid interest are convertible  into
Common Stock at $2.50 per share.  Beginning January 1, 2005 through the Maturity
Date, principal and unpaid interest are convertible into Common Stock of Company
at $3.00 per share.

     (ii) On December 30, 2002,  the Company  received  loans (the "EGS Loans"),
aggregating to $1.0 million from EGS Private  Healthcare  Partnership,  L.P. and
EGS  Private  Healthcare  Counterpart,  L.P.,  each  of  which  is  a  Purchaser
(together,  the "EGS Entities").  The EGS Loans bear interest at a rate of 10.0%
per annum,  are secured by the  Company's  accounts  receivable,  inventory  and
equipment,  and  mature  on June  30,  2003;  however,  principal  and  interest
outstanding  on the EGS  Loans  will be  converted  into the  Common  Stock  and
Warrants  issued to the Purchasers  pursuant to the Agreement and will be deemed
to be repaid in full upon such  conversion.  In conjunction  with the EGS Loans,
the Company issued to the EGS Entities warrants (the "EGS Warrants") to purchase
an aggregate of 50,000  shares of Common Stock.  However,  the EGS Warrants will
vest only if, by the close of business on January 31, 2003, the Initial  Closing
has not occurred.  The EGS Warrants would be exercisable  for Common Stock at an
exercise  price  of  $2.58  per  share,  subject  to  stock  split  and  similar
adjustments, at any time before 5 p.m. on January 31, 2008.



<PAGE>


                                                                Schedule 3.6


      Developments or Changes that may Result in a Material Adverse Effect


         On January 9, 2003, the Company was advised by NASDAQ that it was not
in compliance with the $10 million stockholders' equity standard for continued
listing set forth in Marketplace Rule 4450(a)(3). Compliance with this new
standard was required as of November 2002. The Company will request a hearing
before a NASDAQ Listing Qualifications Panel to review the Staff Determination.
If the Company is unsuccessful in its appeal, it intends to apply for listing on
the NASDAQ SmallCap Market. However, there can be no assurance that the Company
will meet the listing standard requirements of the NASDAQ SmallCap Market.


     Indebtedness, Obligations or Liabilities Not Reflected in the Financial
                                   Statements


(i) The Financial Statements covering the period from December 31, 2001 through
September 30, 2002 do not reflect obligations under contracts or commitments for
which expenses have not yet been incurred, entered into or arisen in the
ordinary course of business and, consistent with generally accepted accounting
principles and with past practices, that individually or in the aggregate do not
have a Material Adverse Effect.

(ii) As described on Schedule 3.2, the Company received the Mortgage Loans with
respect to the Company's West Berlin, N.J. corporate office building.

(iii) As described on Schedule 3.2, on December 30, 2002, the Company received
the EGS Loans having an aggregate principal amount of $1.0 million.






<PAGE>


                                                                  Schedule 3.11


         Proceedings to Revoke or Suspend the Listing on Common Stock on
                           The NASDAQ National Market


         On January 9, 2003, the Company was advised by NASDAQ that it was not
in compliance with the $10 million stockholders' equity standard for continued
listing set forth in Marketplace Rule 4450(a)(3). Compliance with this new
standard was required as of November 2002. The Company will request a hearing
before a NASDAQ Listing Qualifications Panel to review the Staff Determination.
If the Company is unsuccessful in its appeal, it intends to apply for listing on
the NASDAQ SmallCap Market. However, there can be no assurance that the Company
will meet the listing standard requirements of the NASDAQ SmallCap Market.




<PAGE>



                                                                  Schedule 3.14


            Mortgages, Liens, Loans, Claims, Charges and Encumbrances


         In connection with the EGS Loans, the Company assigned and granted to
the EGS Entities a first priority pledge and security interest in all of the
Company's accounts receivable, inventory and equipment. Such liens will be
released upon conversion of the EGS Loans, promptly following the Closing Date.

         In connection with the Mortgage Loans (as defined on Schedule 3.2), the
Company granted a first priority security interest in the building owned by the
Company and located at 575 Route 73 North - Building D West Berlin, New Jersey
08091.



<PAGE>



                                                                  Schedule 3.24


    Persons with Registration or Similar Rights to Have Securities Registered
                     Pursuant to the Registration Statement
         or Otherwise Registered by the Company under the Securities Act


         If the EGS Warrants vest, as described on Schedule 3.2, the 50,000
shares of Common Stock issuable upon the exercise of the EGS Warrants are
required to be included as "Registrable Securities", as defined in, and pursuant
to, the Registration Rights Agreement.



<PAGE>



                                                                  Schedule 3.25


                           Related Party Transactions


1. Abhijeet Lele is a member of the Board of Directors of the Company and is a
Managing Member of the General Partner of each of the EGS Entities that provided
the EGS Loans.





<PAGE>


1.                                                                         Page
Definitions..................................................................1

2. Purchase and Sale of
Shares.......................................................................2

         2.1      Purchase and Sale..........................................2

         2.2      ...........................................................2

         2.2 Initial Closing.................................................2

         2.3      ...........................................................2

3. Representations and Warranties of the
Company......................................................................3

         3.1      Organization and Good Standing.............................3

         3.2      Capitalization.............................................3

         3.3      Authorization............................................ .4

         3.4      Valid Issuance of the Shares...............................4

         3.5      Valid Issuance of the Warrants.............................4

         3.6      Financial Statements.......................................4

         3.7      SEC Documents..............................................5

         3.8      Consents...................................................5

         3.9      No Conflict................................................5

         3.10     Brokers or Finders.........................................6

         3.11     Nasdaq National Market.....................................6

         3.12     Absence of Litigation......................................6

         3.13     Fiduciary Duties...........................................6

         3.14     Title to Property and Assets...............................6

         3.15     Patents. Trademarks. Proprietary Rights....................7

         3.16     Environmental Matters......................................7

         3.17     Permits....................................................7

         3.18     Employees..................................................7

         3.19     Tax Matters................................................7

         3.20     Compliance with Laws.......................................8

         3.21     Insurance..................................................8

         3.22     Investment Company Act.....................................8

         3.23     Compliance With Securities Laws............................8

         3.24     Registration Rights........................................9

         3.25     Related Party Transactions.................................9

         3.26     Contracts..................................................9

         3.27     Disclosure.................................................9

4. Representations, Warranties and Agreements of the
Purchasers...........................................10

         4.1      Authorization..............................................10

         4.2      Purchase Entirely for Own Account..........................10

         4.3      Investor Status; Etc.......................................10

         4.4      Shares Not Registered......................................10

         4.5      No Conflict................................................10

         4.6      Brokers....................................................11

         4.7      Consents...................................................11

         4.8      Agreement with Respect to Sales of Shares..................11

5. Conditions
Precedent....................................................................11

         5.1      Conditions to the
                  Obligation of the Purchasers to Consummate
                  the Closing................................................11

         5.2      Conditions to the
                  Obligation of the Company to Consummate
                  the Closing................................................13

6. Transfer;
Legends......................................................................14

         6.1      Securities Law Transfer Restrictions.......................14

         6.2      Legends................................................... 14

         6.3      Removal of Legends.........................................15

7. Termination; Liabilities Consequent Thereon. .............................15

8. Miscellaneous
Provisions...................................................................16

         8.1      Use of Proceeds............................................16

         8.2      Filings....................................................16

         8.3      Public Statements or Releases..............................16

         8.4      Further Assurances.........................................17

         8.5      Notification of Effectiveness of Registration Statement....17

         8.6      Rights Cumulative..........................................17

         8.7      Pronouns...................................................17

         8.8      Notices....................................................17

         8.9      Captions...................................................18

         8.10     Severability...............................................18

         8.11     Governing Law; Injunctive Relief...........................18

         8.12     Waiver.....................................................18

         8.13     Expenses...................................................19

         8.14     Assignment.................................................19

         8.15     Survival...................................................19

         8.16     Entire Agreement...........................................19

         8.17     Counterparts...............................................19

Exhibit A....................................................................21

Exhibit B....................................................................22

Schedules....................................................................23