EXHIBIT 10.1

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                          SECURITIES PURCHASE AGREEMENT

                                  BY AND AMONG

                              NEOPROBE CORPORATION

                           BIOMEDICAL VALUE FUND, L.P.

                      BIOMEDICAL OFFSHORE VALUE FUND, LTD.

                                       AND

                                  DAVID C. BUPP

                        --------------------------------

                          DATED AS OF DECEMBER 13, 2004

                        --------------------------------

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                                TABLE OF CONTENTS

<TABLE>
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PAGE NO.
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<S>                                                                                   <C>
ARTICLE 1 DEFINITIONS..................................................................1
             1.1      DEFINITIONS......................................................1
             1.2      ACCOUNTING TERMS: FINANCIAL STATEMENTS...........................8
             1.3      KNOWLEDGE OF THE COMPANY.........................................8


ARTICLE 2 PURCHASE AND SALE OF THE SECURITIES..........................................8
             2.1      PURCHASE AND SALE OF THE NOTES...................................8
             2.2      PURCHASE AND SALE OF THE WARRANTS................................9
             2.3      CLOSING..........................................................9
             2.4      FINANCIAL ACCOUNTING POSITIONS; TAX REPORTING....................9


ARTICLE 3 CONDITIONS TO THE RESPECTIVE OBLIGATIONS OF THE PURCHASERS
          TO PURCHASE THE SECURITIES...................................................9
             3.1      REPRESENTATIONS AND WARRANTIES..................................10
             3.2      COMPLIANCE WITH THIS AGREEMENT..................................10
             3.3      SECRETARY'S CERTIFICATES........................................10
             3.4      DOCUMENTS.......................................................10
             3.5      PURCHASE OF SECURITIES PERMITTED BY APPLICABLE LAWS.............10
             3.6      OPINION OF COUNSEL..............................................10
             3.7      APPROVAL OF COUNSEL TO THE PURCHASERS...........................10
             3.8      CONSENTS AND APPROVALS..........................................11
             3.9      SECURITY AGREEMENT..............................................11
             3.10     NO MATERIAL JUDGMENT OR ORDER...................................11
             3.11     PRO FORMA BALANCE SHEET.........................................11
             3.12     GOOD STANDING CERTIFICATES......................................11
             3.13     NO LITIGATION...................................................11


ARTICLE 4 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY TO ISSUE AND
          SELL THE SECURITIES.........................................................12
             4.1      REPRESENTATIONS AND WARRANTIES..................................12
             4.2      COMPLIANCE WITH THIS AGREEMENT..................................12


ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............................12
             5.1      CORPORATE EXISTENCE AND POWER...................................12
             5.2      CORPORATE AUTHORIZATION; NO CONTRAVENTION.......................12
             5.3      GOVERNMENTAL AUTHORIZATION; THIRD PARTY CONSENTS................13
             5.4      BINDING EFFECT..................................................13
             5.5      NO LEGAL BAR....................................................13
             5.6      LITIGATION......................................................13
             5.7      COMPLIANCE WITH LAWS............................................13
             5.8      NO DEFAULT OR BREACH............................................14
             5.9      TITLE TO PROPERTIES AND ASSETS..................................14
             5.10     TAXES...........................................................14
             5.11     SEC REPORTS; FINANCIAL CONDITION................................14
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<TABLE>
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<S>          <C>                                                                     <C>
             5.12     OPERATING COMPANY...............................................15
             5.13     DISCLOSURE......................................................15
             5.14     ABSENCE OF CERTAIN CHANGES OR EVENTS............................16
             5.15     INVESTMENT COMPANY/GOVERNMENT REGULATIONS.......................16
             5.16     SUBSIDIARIES....................................................17
             5.17     CAPITALIZATION..................................................17
             5.18     PRIVATE OFFERING................................................18
             5.19     BROKER'S, FINDER'S OR SIMILAR FEES..............................18
             5.20     LABOR RELATIONS.................................................18
             5.21     ERISA -- EMPLOYEE BENEFIT PLANS.................................18
             5.22     INTELLECTUAL PROPERTY...........................................20
             5.23     INSURANCE.......................................................20
             5.24     SOLVENCY........................................................20
             5.25     REGISTRATION RIGHTS.............................................20
             5.26     PRICE OF COMMON STOCK...........................................21
             5.27     INTERNAL ACCOUNTING CONTROLS....................................21
             5.28     TRANSACTIONS WITH OFFICERS AND DIRECTORS........................21
             5.29     REGISTRATION STATEMENT MATTERS..................................21
             5.30     EXCHANGE ACT REGISTRATION.......................................22


ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS............................22
             6.1      AUTHORIZATION; NO CONTRAVENTION.................................22
             6.2      BINDING EFFECT..................................................22
             6.3      NO LEGAL BAR....................................................22
             6.4      PURCHASE FOR OWN ACCOUNT........................................22
             6.5      BROKER'S, FINDER'S OR SIMILAR FEES..............................23
             6.6      GOVERNMENTAL AUTHORIZATION; THIRD PARTY CONSENT.................23
             6.7      PURCHASER STATUS................................................23
             6.8      ACCESS TO INFORMATION...........................................23
             6.9      CERTAIN TRADING ACTIVITIES......................................23
             6.10     INDEPENDENT INVESTMENT DECISION.................................23


ARTICLE 7 INDEMNIFICATION; EXERCISE OF REMEDIES.......................................24

             7.1      INDEMNIFICATION.................................................24
             7.2      PROCEDURE; NOTIFICATION.........................................25
             7.3      REGISTRATION RIGHTS.............................................25
             7.4      EXERCISE OF REMEDIES............................................25


ARTICLE 8 AFFIRMATIVE COVENANTS.......................................................26
             8.1      INFORMATION.....................................................26
             8.2      RESERVATION OF SHARES...........................................26
             8.3      INSPECTION......................................................27
             8.4      PAYMENT OF NOTE.................................................27
             8.5      BOOKS AND RECORDS...............................................27
             8.6      USE OF PROCEEDS.................................................27
             8.7      BOARD NOMINEES; MANAGEMENT RIGHTS...............................27


ARTICLE 9 NEGATIVE COVENANTS..........................................................28
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<S>          <C>                                                                     <C>
             9.1      FUNDAMENTAL CHANGES; CONSOLIDATIONS, MERGERS AND ACQUISITIONS...28
             9.2      TRANSACTIONS WITH AFFILIATES....................................28
             9.3      NO INCONSISTENT AGREEMENTS......................................28
             9.4      LIMITATION ON INDEBTEDNESS......................................28
             9.5      LIMITATION ON LIENS.............................................29
             9.6      DISPOSITIONS OF ASSETS..........................................30
             9.7      LIMITATIONS ON RESTRICTED PAYMENTS..............................31
             9.8      FINANCIAL COVENANTS.............................................31
             9.9      CONTINGENT OBLIGATIONS..........................................31
             9.10     PRESS RELEASE; PUBLIC OFFERING MATERIALS........................32
             9.11     NO NEGATIVE PLEDGES.............................................32
             9.12     NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO THE COMPANY......32
             9.13     SALE LEASEBACKS.................................................32
             9.14     TAX ELECTION....................................................32
             9.15     INVESTMENTS.....................................................32


ARTICLE 10 REGISTRATION  COMPLIANCE WITH THE SECURITIES ACT...........................33
             10.1     REGISTRATION PROCEDURES AND EXPENSES............................33
             10.2     TRANSFER OF REGISTRABLE SHARES AFTER REGISTRATION...............34
             10.3     INDEMNIFICATION.................................................35
             10.4     TERMINATION OF CONDITIONS AND OBLIGATIONS.......................38
             10.5     INFORMATION AVAILABLE...........................................38
             10.6     ASSIGNMENT OF REGISTRATION RIGHTS...............................39
             10.7     DELAY IN FILING OR EFFECTIVENESS OF REGISTRATION STATEMENT......39
             10.8     SUSPENSION......................................................40


ARTICLE 11 MISCELLANEOUS..............................................................41
             11.1     SURVIVAL OF REPRESENTATIONS AND WARRANTIES......................41
             11.2     NOTICES.........................................................41
             11.3     SUCCESSORS AND ASSIGNS..........................................42
             11.4     AMENDMENT AND WAIVER............................................42
             11.5     SIGNATURES; COUNTERPARTS........................................43
             11.6     HEADINGS........................................................43
             11.7     GOVERNING LAW...................................................43
             11.8     JURISDICTION, JURY TRIAL WAIVER, ETC............................43
             11.9     SEVERABILITY....................................................44
             11.10    RULES OF CONSTRUCTION...........................................44
             11.11    ENTIRE AGREEMENT................................................44
             11.12    CERTAIN EXPENSES................................................44
             11.13    8-K FILING AND PUBLICITY........................................44
             11.14    FURTHER ASSURANCES..............................................45
             11.15    OBLIGATIONS OF THE PURCHASERS...................................45
             11.16    NO STRICT CONSTRUCTION..........................................45
</TABLE>

                                      iii

<PAGE>

                          SECURITIES PURCHASE AGREEMENT

      AGREEMENT,   dated  as  of  December  13,  2004,  by  and  among  NEOPROBE
CORPORATION (the "COMPANY"), a Delaware corporation, Biomedical Value Fund, L.P.
("BVF"), a Delaware limited  partnership,  Biomedical  Offshore Value Fund, Ltd.
("BOVF"  and  together  with  "BVF,"  the  "BV  FUNDS"),   an  exempted  company
incorporated  under the  provisions of the Companies Law of the Cayman  Islands,
and DAVID C. BUPP ("BUPP" and together with the BV Funds, each a "PURCHASER" and
collectively, the "PURCHASERS").

                              W I T N E S S E T H:

      WHEREAS,  the Company wishes to sell to (a) BVF and BVF wishes to purchase
from the  Company  (i) an 8%  Series A  Convertible  Promissory  Note  (the "BVF
NOTE"), due December 12, 2008, in the principal amount of $4,400,000, and (ii) a
warrant (the "BVF Warrant") to purchase  5,500,000 shares of common stock, $.001
par value per share,  of the Company  (the  "COMMON  STOCK"),  (b) BOVF and BOVF
wishes to purchase  from the Company (i) an 8% Series A  Convertible  Promissory
Note (the "BOVF  NOTE"),  due  December  12, 2008,  in the  principal  amount of
$3,600,000, and (ii) a warrant (the "BOVF WARRANT") to purchase 4,500,000 shares
of Common  Stock,  and (c) Bupp and Bupp wishes to purchase from the Company (i)
an 8% Series A Convertible  Promissory Note (the "BUPP NOTE"),  due December 12,
2008,  in the  principal  amount  of  $100,000,  and (ii) a warrant  (the  "BUPP
WARRANT")  to purchase  125,000  shares of Common  Stock,  in each case upon the
terms and subject to the conditions hereinafter set forth.

      NOW,  THEREFORE,  in  consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration,  the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:

                                   ARTICLE 1

                                   DEFINITIONS

      1.1  DEFINITIONS.  As used in  this  Agreement,  and  unless  the  context
requires a different meaning, the following terms have the meanings indicated:

      "AFFILIATE"  shall mean any Person  directly  or  indirectly  controlling,
controlled  by, or under common  control with the Company.  For purposes of this
definition,   "control"   (including  with  correlative   meanings,   the  terms
"controlling",  "controlled  by" and  under  "common  control  with")  means the
possession,  directly  or  indirectly,  of the  power to  direct  or  cause  the
direction  of the  management  and  policies  of a Person,  whether  through the
ownership of voting securities, by contract or otherwise.

      "AGREEMENT"  shall  mean  this  Agreement,   including  the  exhibits  and
schedules attached hereto, as the same may be amended,  supplemented or modified
in accordance with the terms hereof.

<PAGE>

      "ASSET  DISPOSITION"  shall mean the disposition,  whether by sale, lease,
transfer,  loss,  damage,  destruction,  condemnation or otherwise of any of the
following:  (a) any of the stock of or equity interests in the Company or any of
its  Subsidiaries  or (b) any or all of the assets of the  Company or any of its
Subsidiaries  other than sales of inventory in the ordinary  course of business.
"NET  PROCEEDS" of any Asset  Disposition  means cash  proceeds  received by the
Company  or any of its  Subsidiaries  from  any  Asset  Disposition  (including,
without  limitation,  insurance proceeds,  awards of condemnation,  and payments
under  notes or other debt  securities  received  in  connection  with any Asset
Disposition),  net of (x) the  costs  of such  sale,  lease,  transfer  or other
disposition  (including,  without  limitation,  Taxes attributable to such sale,
lease or transfer), and (y) amounts applied to repayment of Indebtedness secured
by a Lien on the asset or property disposed.

      "BOARD" shall mean the Board of Directors of the Company.

      "BV FUNDS" shall have the meaning set forth in the first paragraph of this
Agreement.

      "BOVF NOTE" shall mean the senior secured  convertible  promissory note in
the principal  amount of $3,600,000  referred to in the Whereas  clause  hereof,
which note is substantially in the form attached hereto as Exhibit A.

      "BOVF  WARRANT"  shall mean the warrant  referred to in the Whereas clause
hereof, which warrant is substantially in the form attached hereto as Exhibit B.

      "BUPP NOTE" shall mean the senior secured  convertible  promissory note in
the principal amount of $100,000 referred to in the Whereas clause hereof, which
note is substantially in the form attached hereto as Exhibit A.

      "BUPP  WARRANT"  shall mean the warrant  referred to in the Whereas clause
hereof, which warrant is substantially in the form attached hereto as Exhibit B.

      "BUSINESS  DAY" shall mean any day other than a Saturday,  Sunday or other
day on which commercial banks in the City of New York are authorized or required
by law or executive order to close.

      "BVF NOTE" shall mean the senior secured  convertible  promissory  note in
the principal  amount of $5,500,000  referred to in the Whereas  clause  hereof,
which note is substantially in the form attached hereto as Exhibit A.

      "BVF  WARRANT"  shall mean the warrant  referred to in the Whereas  clause
hereof, which warrant is substantially in the form attached hereto as Exhibit B.

      "BY-LAWS"  shall  mean,  unless  the  context  in which  such term is used
otherwise requires,  the By-laws of the Company or any of its Subsidiaries as in
effect on the Closing Date.

      "CAPITAL LEASE  OBLIGATIONS"  of any Person shall mean the  obligations of
such  Person  to pay  rent  or  other  amounts  under  any  lease  of (or  other
arrangement  conveying  the  right  to use)  real  or  personal  property,  or a
combination  thereof,  which  obligations  are  required  to be  classified  and
accounted  for as capital  leases on a balance  sheet of such Person  under GAAP
and,


                                       2
<PAGE>

for the purposes of this Agreement,  the amount of such  obligations at any time
shall be the  capitalized  amount thereof at such time  determined in accordance
with GAAP. The  determination of Capital Lease  Obligations at the relevant time
of determination  with respect to the Company and its Subsidiaries shall be made
on a consolidated basis in accordance with GAAP.

      "CASH" shall mean the currency of the United States of America.

      "CASH EQUIVALENTS" shall mean: (i) marketable direct obligations issued or
unconditionally  guaranteed  by the United  States  Government  or issued by any
agency thereof and backed by the full faith and credit of the United States,  in
each case  maturing  within one (1) year from the date of  acquisition  thereof;
(ii)  commercial  paper  maturing no more than one (1) year from the date issued
and, at the time of acquisition, having a rating of at least A-1 from Standard &
Poor's rating service or a least P-1 from Moody's Investors Service, Inc., (iii)
certificates  of deposit or bankers'  acceptances  maturing  within one (1) year
from the date of issuance  thereof  issued by, or overnight  reverse  repurchase
agreements  from,  any commercial  bank  organized  under the laws of the United
States of  America or any state  thereof  or the  District  of  Columbia  having
combined capital and surplus of not less than  $500,000,000;  (iv) time deposits
maturing no more than thirty  (30) days from the date of creation  thereof  with
commercial banks having membership in the Federal Deposit Insurance  Corporation
in  amounts  not  exceeding  the lesser of  $100,000  or the  maximum  amount of
insurance   applicable  to  the  aggregate  amount  of  the  Company's  and  its
Subsidiaries,  deposits at such institution;  and (v) deposits or investments in
mutual or similar  funds  offered or sponsored  by brokerage or other  companies
having membership in the Securities Investor  Protection  Corporation in amounts
not  exceeding  the  lesser of  $100,000  or the  maximum  amount  of  insurance
applicable  to the  aggregate  amount  of the  Company's  and its  Subsidiaries,
deposits at such institution.

      "CERTIFICATE OF INCORPORATION"  shall mean, unless the context in which it
is used shall otherwise require, the Certificate of Incorporation of the Company
or any of its Subsidiaries as in effect on the Closing Date.

      "CLOSING" shall have the meaning assigned to that term in Section 2.3.

      "CLOSING  DATE"  shall have the  meaning  assigned to that term in Section
2.3.

      "CODE" shall mean the Internal  Revenue Code of 1986,  as amended,  or any
successor statute thereto.

      "COMMISSION"  shall mean the  Securities  and Exchange  Commission  or any
similar agency then having jurisdiction to enforce the Securities Act.

      "COMMON STOCK" shall have the meaning assigned to that term in the Whereas
clause  hereof,  or any other capital stock of the Company into which such stock
is reclassified or reconstituted.

      "CONTINGENT OBLIGATION" as applied to any Person, shall mean any direct or
indirect liability, contingent or otherwise, of that Person: (i) with respect to
any indebtedness,  lease,  dividend or other obligation of another Person if the
primary purpose or intent of the Person


                                       3
<PAGE>

incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any  agreements  relating  thereto  will be complied  with,  or that the
holders of such  liability  will be protected (in whole or in part) against loss
with respect  thereto;  (ii) with respect to any letter of credit issued for the
account  of that  Person or as to which  that  Person is  otherwise  liable  for
reimbursement  of  drawings;  or (iii)  under  any  foreign  exchange  contract,
currency swap agreement, interest rate swap agreement or other similar agreement
or  arrangement  designed  to  alter  the  risks  of that  Person  arising  from
fluctuations in currency values or interest rates.  Contingent Obligations shall
include  (a) the  direct  or  indirect  guaranty,  endorsement  (other  than for
collection  or  deposit  in  the  ordinary   course  of  business),   co-making,
discounting with recourse or sale with recourse by such Person of the obligation
of  another,  (b) the  obligation  to make  take-or-pay  or similar  payments if
required  regardless  of  nonperformance  by any other  party or  parties  to an
agreement,  and (c) any liability of such Person for the  obligations of another
through  any  agreement  to  purchase,  repurchase  or  otherwise  acquire  such
obligation or any property  constituting security therefor, to provide funds for
the  payment or  discharge  of such  obligation  or to  maintain  the  solvency,
financial condition or any balance sheet item or level of income of another. The
amount  of any  Contingent  Obligation  shall  be  equal  to the  amount  of the
obligation  so  guaranteed  or  otherwise  supported  or,  if  not a  fixed  and
determined amount, the maximum amount so guaranteed.

      "CONTRACTUAL  OBLIGATIONS"  shall mean as to any Person,  any provision of
any security issued by such Person or of any agreement,  undertaking,  contract,
indenture,  mortgage,  deed of trust or other instrument or arrangement (whether
in writing or  otherwise)  to which such Person is a party or by which it or any
of such Person's property is bound.

      "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended and the rules and regulations promulgated thereunder.

      "ERISA  AFFILIATE"  shall mean shall mean a  corporation  that is or was a
member of a controlled group of corporations with the Company within the meaning
of Section  4001(a) or (b) of ERISA or  Section  414(b) of the Code,  a trade or
business (including,  without limitation,  a sole  proprietorship,  partnership,
trust,  estate or  corporation)  that is under  common  control with the Company
within the meaning of Section  414(c) of the Code, or a trade or business  which
together with the Company is treated as a single  employer  under Section 414(m)
or (o) of the Code.

      "EVENT OF  DEFAULT"  shall have the  meaning  assigned to such term in the
Notes.

      "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder.

      "FINANCIAL  STATEMENTS"  shall have the  meaning  assigned to that term in
Section 5.11.

      "GAAP"  shall mean  generally  accepted  accounting  principles  in effect
within the United States, consistently applied.

      "GOVERNMENTAL  AUTHORITY" shall mean the government of any nation,  state,
city,  locality  or other  political  subdivision  of any  thereof,  any  entity
exercising  executive,  legislative,   judicial,  regulatory  or  administrative
functions of or pertaining to  government,  regulation  or  compliance,  and any
corporation  or other  entity  owned or  controlled,  through  stock or  capital
ownership or otherwise, by any of the foregoing.


                                       4
<PAGE>

      "INDEBTEDNESS"  shall mean as to any Person  (a) all  obligations  of such
Person for borrowed money (including, without limitation,  reimbursement and all
other  obligations  with respect to surety bonds,  unfunded credit  commitments,
letters of credit and bankers'  acceptances,  whether or not  matured),  (b) all
indebtedness,  obligations  or  liability  of such Person  (evidenced  by notes,
bonds,   debentures  or  similar  instruments)  whether  matured  or  unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, or joint
or several,  that should be classified as liabilities  in accordance  with GAAP,
including,  without  limitation,  any items so classified on a balance sheet and
any reimbursement  obligations in respect of letters of credit or obligations in
respect of bankers  acceptances,  (c) all  obligations of such Person to pay the
deferred  purchase price of property or services,  except trade accounts payable
and accrued  commercial or trade  liabilities  arising in the ordinary course of
business,  (d) all interest rate and currency swaps,  caps,  collars and similar
agreements or hedging  devices under which  payments are obligated to be made by
such Person,  whether  periodically or upon the happening of a contingency,  (e)
all  indebtedness  created or arising under any conditional  sale or other title
retention  agreement  with  respect to property  acquired  by such Person  (even
though the rights and remedies of the seller or lender  under such  agreement in
the event of default are limited to repossession or sale of such property),  (f)
all  obligations  of such Person  under  leases which have been or should be, in
accordance with GAAP,  recorded as capital leases, (g) all indebtedness  secured
by any Lien (other than Liens in favor of lessors under leases other than leases
included  in clause (f) above) on any  property  or asset  owned or held by that
Person  regardless of whether the  indebtedness  secured thereby shall have been
assumed by that Person or is non-recourse to the credit of that Person,  and (h)
any Contingent Obligation of such Person. The determination of the amount of the
Indebtedness at the relevant time of  determination  with respect to the Company
and its  Subsidiaries  shall be made on a consolidated  basis in accordance with
GAAP.

      "INTELLECTUAL  PROPERTY"  shall have the meaning  assigned to that term in
Section 5.22.

      "INVESTMENT"  shall  mean (i) any  direct or  indirect  purchase  or other
acquisition by the Company or any of its Subsidiaries of any beneficial interest
in, including,  without  limitation,  stock,  partnership  interest,  membership
interest or other equity  securities  of, any other Person  (other than a Person
that prior to the relevant  purchase or acquisition was a Subsidiary  Guarantor)
or (ii) any direct or  indirect  loan,  advance or capital  contribution  by the
Company or any of its  Subsidiaries to any other Person (other than a Subsidiary
Guarantor),   including,  without  limitation,  all  Indebtedness  and  accounts
receivable  from that other Person that are not current  assets or did not arise
from sales to that other Person in the ordinary  course of business.  The amount
of any Investment shall be the original cost of such Investment plus the cost of
all additions  thereto,  without any  adjustments  for increases or decreases in
value, or write-ups, write-downs or write-offs with respect to such Investment.

      "LIEN"  shall mean any  mortgage,  deed of trust,  pledge,  hypothecation,
assignment,  encumbrance,  lien (statutory or other), charge, claim, restriction
or  preference,  priority,  right or other  security  interest  or  preferential
arrangement  of any kind or nature  whatsoever  (excluding  preferred  stock and
equity related  preferences)  including,  without limitation,  those created by,
arising  under or evidenced  by any  conditional  sale or other title  retention
agreement,  the interest of a lessor under a Capital  Lease  Obligation,  or any
financing  lease having  substantially  the same  economic  effect as any of the
foregoing.


                                       5
<PAGE>

      "MULTIEMPLOYER PLAN" shall mean a multiemployer plan within the meaning of
Section 3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code.

      "MATERIAL  ADVERSE  EFFECT" shall mean a material  adverse effect on, or a
material  adverse change in, or a group of such effects on or changes in (i) the
assets, business, properties,  prospects,  operations, or financial condition of
the Company and its  Subsidiaries,  taken as a whole, or (ii) the ability of the
Company to perform its obligations under this Agreement.

      "NOTES" shall mean the BVF Note, the BOVF Note and the Bupp Note.

      "ORIGINAL BUPP NOTE" shall mean the 8.5% Senior Note of the Company, dated
April 2, 2003, in the original principal amount of $250,000, payable to Bupp.

      "PERMITTED  ENCUMBRANCES"  shall have the meaning assigned to such term in
Section 9.5 of this Agreement.

      "PERSON" shall mean any individual,  firm, corporation,  limited liability
company, partnership,  trust, incorporated or unincorporated association,  joint
venture,  joint stock  company,  Governmental  Authority  or other entity of any
kind, and shall include any successor (by merger or otherwise) of such entity.

      "PRO FORMA BALANCE  SHEET" shall mean the pro forma  consolidated  balance
sheet of the Company and its Subsidiaries delivered pursuant to Section 3.11.

      "PURCHASER  AFFILIATE"  shall  mean with  respect to each  Purchaser,  any
affiliate of such  Purchaser (as defined in Rule 405 under the  Securities  Act)
and any Person who controls  the  Purchaser  or any  affiliate of the  Purchaser
within the  meaning of  Section  15 of the  Securities  Act or Section 20 of the
Exchange Act.

      "PURCHASERS"  shall have the meaning set forth in the first  paragraph  of
this Agreement.

      "REGISTRABLE  SHARES"  shall  have the  meaning  assigned  to that term in
Section 10.1 of this Agreement.

      "REQUIREMENTS  OF LAW"  shall  mean as to any  Person,  provisions  of the
Certificate of Incorporation  and By-laws or other  organizational  or governing
documents of such Person,  or any law, treaty,  code, rule,  regulation,  right,
privilege, qualification, license or franchise or determination of an arbitrator
or a court or other Governmental  Authority,  in each case applicable or binding
upon such Person or any of such Person's property or to which such Person or any
of  such  Person's  property  is  subject  or  pertaining  to  any or all of the
transactions contemplated or referred to herein.

      "RESTRICTED  PAYMENT" shall mean: (i) any dividend or other  distribution,
direct or  indirect,  on account  of any  shares of any class of stock,  limited
liability company interest, or partnership interest of the Company or any of its
Subsidiaries now or hereafter  outstanding,


                                       6
<PAGE>

except a  dividend  payable  solely in shares  of that  class of stock,  limited
liability  company  interest,  or  partnership  interest  to the holders of that
class; (ii) any redemption,  conversion,  exchange,  retirement, sinking fund or
similar payment, purchase or other acquisition for value, direct or indirect, of
any  shares  of any  class of  stock,  limited  liability  company  interest  or
partnership  interest of the Company or any of its Subsidiaries now or hereafter
outstanding;  (iii) any payment or  prepayment  of interest  on,  principal  of,
premium,  if  any,  redemption,   conversion,  exchange,  purchase,  retirement,
defeasance,  sinking fund or similar  payment with respect to, any  Indebtedness
subordinated  to the  Indebtedness  existing  pursuant  to the  Notes,  and this
Agreement;  (iv) any payment made to retire,  or to obtain the surrender of, any
outstanding warrants,  options or other rights to acquire shares of any class of
stock,  limited  liability  company  interest,  or  partnership  interest of the
Company or any of its  Subsidiaries  now or hereafter  outstanding;  and (v) any
payment under any noncompete agreement.

      "SEC  REPORTS"  shall  mean  all  forms,  reports,  statements  and  other
documents (including,  without limitation,  exhibits,  annexes,  supplements and
amendments to such documents)  filed or required to be filed by the Company,  or
sent or made  available  by the  Company  to its  security  holders,  under  the
Exchange Act, the Securities Act, any national  securities exchange or quotation
system or comparable Governmental Authority.

      "SECURITIES" shall mean, collectively, the Notes and the Warrants.

      "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any
similar federal  statute,  and the rules and regulations  thereunder as the same
shall be in effect at the time.

      "SECURITY  AGREEMENT" shall mean the Security  Agreement  substantially in
the form attached hereto as Exhibit C.

      "SHORT SALES" shall mean, without limitation, all "short sales" as defined
in Rule 3b-3 of the  Exchange  Act and all types of direct  and  indirect  stock
pledges,  forward sale contracts,  options,  puts, calls, short sales, swaps and
similar  arrangements  (including on a total return basis),  and sales and other
transactions through non-US broker dealers or foreign regulated brokers.

      "SOLVENT"  shall mean,  with  respect to the Company and its  Subsidiaries
considered as a whole, based on the Pro Forma Balance Sheet, that (i) the assets
and the  property of the Company and its  Subsidiaries,  considered  as a whole,
exceed the aggregate liabilities (including, without limitation,  contingent and
unliquidated  liabilities) of the Company and its Subsidiaries,  considered as a
whole,  (ii)  after  giving  effect  to the  transactions  contemplated  by this
Agreement and the other Transaction Documents, the Company and its Subsidiaries,
considered as a whole,  will not be left with  unreasonably  small capital,  and
(iii) after giving effect to the  transactions  contemplated  by this Agreement,
the  Company  and its  Subsidiaries,  considered  as a  whole,  are able to both
service and pay their  liabilities  as they mature.  In computing  the amount of
contingent or  unliquidated  liabilities at any time, such  liabilities  will be
computed  as the  amount  that,  in light  of all the  facts  and  circumstances
existing at such time,  represents the amount that is likely to become an actual
or matured liability.


                                       7
<PAGE>

      "SUBSIDIARY"  shall mean,  with respect to any Person,  a  corporation  or
other  entity  of which 50% or more of the  voting  power of the  voting  equity
securities or equity interest is owned, directly or indirectly,  by such Person.
Unless   otherwise   qualified,   all  references  to  a   "Subsidiary"   or  to
"Subsidiaries"  in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Company.

      "SUBSIDIARY  GUARANTOR"  shall  mean any  wholly-owned  Subsidiary  of the
Company  incorporated  in any  jurisdiction of the United States that guaranties
the  Company's  obligations  under the Notes and this  Agreement  pursuant  to a
guaranty in form and substance reasonably acceptable to the BV Funds.

      "TAX" shall mean any  federal,  state,  local,  or foreign  income,  gross
receipts,  license, payroll,  employment excise,  severance,  stamp, occupation,
premium, windfall profits,  environmental (including taxes under Code Sec. 59A),
customs duties, capital stock, franchise, profits, withholding,  social security
(or similar), unemployment, disability, real property, personal property, sales,
use,  transfer,  registration,  value  added,  alternative  or  add-on  minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, and also includes an obligation to pay the taxes of another
person under Treas. Reg. ss. 1.1502-6 (or any similar provision of state, local,
or foreign law), as a transferee or successor, by contract, or otherwise.

      "TAX RETURN" shall mean any return, declaration, report, claim for refund,
or information return or statement relating to Taxes,  including any schedule or
attachment thereto, and including any amendment thereof.

      "TRANSACTION  DOCUMENTS"  shall mean  collectively,  this  Agreement,  the
Notes, the Warrants, and the Security Agreement.

      "WARRANTS"  shall  mean the BVF  Warrant,  the BOVF  Warrant  and the Bupp
Warrant.

      1.2 ACCOUNTING  TERMS:  FINANCIAL  STATEMENTS.  All accounting  terms used
herein and not expressly  defined in this  Agreement  shall have the  respective
meanings given to them in conformance with GAAP.  Financial statements and other
information  furnished  after the date hereof  pursuant to the  Agreement or the
other  Transaction  Documents  shall be prepared in  accordance  with GAAP as in
effect at the time of such preparation.

      1.3  KNOWLEDGE  OF THE COMPANY.  All  references  to the  knowledge of the
Company or to facts known by the Company  shall mean actual  knowledge or notice
of the Chief  Executive  Officer or Chief  Financial  Officer or other executive
officer of the Company.

                                   ARTICLE 2

                       PURCHASE AND SALE OF THE SECURITIES

      2.1  PURCHASE AND SALE OF THE NOTES.  Subject to the terms and  conditions
herein set forth, the Company agrees that it will issue and sell to (a) BVF, and
BVF agrees that it will  acquire from the Company on the Closing  Date,  the BVF
Note,  (b) BOVF,  and BOVF agrees that it will  acquire  from the Company on the
Closing Date,  the BOVF Note, and (c) Bupp, and Bupp agrees that he will acquire
from the Company on the Closing Date, the Bupp Note, in each case  appropriately
completed in conformity  herewith.  The purchase  price of the BVF Note shall be
$3,341,250,  the Purchase  Price of the BOVF Note shall be  $2,733,750,  and the
Purchase Price of the Bupp Note shall be $75,937.50.


                                       8
<PAGE>

      2.2 PURCHASE AND SALE OF THE WARRANTS. Subject to the terms and conditions
herein set forth, the Company agrees that it will issue and sell to (a) BVF, and
BVF agrees that it will  acquire from the Company on the Closing  Date,  the BVF
Warrant,  (b) BOVF, and BOVF agrees that it will acquire from the Company on the
Closing  Date,  the BOVF  Warrant,  and (c) Bupp,  and Bupp  agrees that it will
acquire from the Company on the Closing  Date,  the Bupp  Warrant,  in each case
appropriately  completed in conformity herewith. The purchase price for the Bupp
Warrant shall be  $1,058,750,  the purchase  price for the BOVF Warrant shall be
$866,250, and the purchase price for the Bupp Warrant shall be $24,062.50.

      2.3 CLOSING.  The purchase and issuance of the Securities shall take place
at the closing (the  "CLOSING") to be held at the offices of Morrison Cohen LLP,
909 Third Avenue, New York, New York 10022 at 10:00 a.m., Local Time, on Monday,
December  13,  2004 or such  other time and date as the  parties  may agree (the
"CLOSING DATE"). At the Closing, the Company shall deliver: (a) the BVF Note and
the BVF  Warrant to BVF against  delivery by BVF to the Company of the  purchase
price therefore, (b) the BOVF Note and the BOVF Warrant to BOVF against delivery
by BOVF to the Company of the purchase  price  therefore,  and (c) the Bupp Note
and the Bupp  Warrant to Bupp  against  delivery  by Bupp to the  Company of the
purchase price therefor.  In each case,  payment of such purchase price shall be
by wire transfer.

      2.4 FINANCIAL  ACCOUNTING  POSITIONS;  TAX REPORTING.  Each of the parties
hereto  agrees  to take  reporting  and  other  positions  with  respect  to the
Securities  which are  consistent  with the purchase price of the Securities set
forth herein for all financial accounting purposes, unless otherwise required by
applicable  GAAP or  Commission  rules (in which case the parties  agree only to
take positions  inconsistent with the purchase price of the Securities set forth
herein  provided that the BV Funds have consented  thereto,  which consent shall
not be unreasonably  withheld).  Each of the parties to this Agreement agrees to
take  reporting and other  positions  with respect to the  Securities  which are
consistent  with the purchase  price of the  Securities set forth herein for all
other purposes,  including without limitation,  for all federal, state and local
tax purposes.

                                   ARTICLE 3

                          CONDITIONS TO THE RESPECTIVE
                          OBLIGATIONS OF THE PURCHASERS
                           TO PURCHASE THE SECURITIES

      The  obligation of the  Purchasers to purchase the Notes and the Warrants,
to  pay  the  purchase  prices  therefor  at the  Closing  and  to  perform  any
obligations  hereunder shall be subject to the satisfaction as determined by, or
waived by, the  Purchasers of the following  conditions on or before the Closing
Date;  provided,  however,  that any waiver of a condition shall not be deemed a
waiver  of any  breach  of any  representation,  warranty,  agreement,  term  or
covenant  or of any  misrepresentation  by the  Company.  Except  to the  extent
expressly  so waived,  no  Purchaser  shall be  obligated to purchase any of the
Securities to be purchased by such Purchaser  hereunder  unless the purchase and
sale of all Securities contemplated by this Agreement shall occur concurrently.


                                       9
<PAGE>

      3.1 REPRESENTATIONS AND WARRANTIES.  The representations and warranties of
the Company contained in Article 5 hereof shall be true and correct at and as of
the date hereof and the Closing Date as if made at and as of such date.

      3.2 COMPLIANCE WITH THIS  AGREEMENT.  The Company shall have performed and
complied with all of its agreements  and  conditions  set forth or  contemplated
herein that are required to be  performed or complied  with by the Company on or
before the Closing Date, and the Purchasers shall have received at the Closing a
certificate to the foregoing effect, dated the Closing Date, and executed by the
Chief Executive Officer, President or a Vice President of the Company.

      3.3  SECRETARY'S   CERTIFICATES.   The  Purchasers   shall  have  received
certificates  from  the  Company,  dated  the  Closing  Date and  signed  by the
Secretary or an Assistant  Secretary  of the  Company,  certifying  (a) that the
attached copies of the Certificate of Incorporation  and By-laws of the Company,
and resolutions of the Board approving the Transaction  Documents to which it is
a party and the  transactions  contemplated  hereby  and  thereby  are all true,
complete and correct and remain unamended and in full force and effect,  and (b)
the incumbency and specimen  signature of each officer of the Company  executing
any Transaction  Document to which it is a party or any other document delivered
in connection herewith and therewith on behalf of the Company.

      3.4  DOCUMENTS.  The  Purchasers  shall have received  true,  complete and
correct copies of such agreements, schedules, exhibits, certificates, documents,
financial  information  and  filings as they may request in  connection  with or
relating to the  transactions  contemplated  hereby,  all in form and  substance
satisfactory to the Purchasers.

      3.5 PURCHASE OF SECURITIES  PERMITTED BY APPLICABLE  LAWS. The acquisition
of and payment for the Securities to be acquired by the Purchasers hereunder and
the consummation of the transactions  contemplated hereby and by the Transaction
Documents (a) shall not be prohibited by any  Requirement  of Law, (b) shall not
subject  the  Purchasers  to any  penalty or other  onerous  condition  under or
pursuant  to  any  Requirement  of  Law,  and  (c)  shall  be  permitted  by all
Requirements of Law to which either Purchaser or the  transactions  contemplated
by or referred to herein or in the  Transaction  Documents are subject;  and the
Purchasers  shall have received such  certificates or other evidence as they may
reasonably request to establish compliance with this condition.

      3.6 OPINION OF COUNSEL.  The Purchasers  shall have received an opinion of
outside  counsel to the Company,  dated as of the Closing Date,  relating to the
transactions  contemplated  by or  referred  to  herein,  in form and  substance
acceptable to the Purchasers.

      3.7  APPROVAL OF COUNSEL TO THE  PURCHASERS.  All actions and  proceedings
hereunder  and all  agreements,  schedules,  exhibits,  certificates,  financial
information, filings and other documents required to be delivered by the Company
and each of its Subsidiaries hereunder or in connection with the consummation of
the transactions  contemplated hereby, and all other related matters, shall have
been in form and  substance  acceptable  to Morrison  Cohen LLP,  counsel to the
Purchasers,  in its reasonable  judgment  (including,  without  limitation,  the
opinion of counsel referred to in Section 3.6 hereof).


                                       10
<PAGE>

      3.8 CONSENTS AND APPROVALS. All consents, exemptions,  authorizations,  or
other actions by, or notices to, or filings with,  Governmental  Authorities and
other  Persons in respect of all  Requirements  of Law and with respect to those
Contractual  Obligations of the Company and each of its Subsidiaries  necessary,
desirable, or required in connection with the execution, delivery or performance
(including,  without  limitation,  the  payment of interest on the Notes and the
issuance of Common Stock upon the exercise of the  Warrants) by the Company,  or
enforcement against the Company,  of the Transaction  Documents to which it is a
party  shall  have  been  obtained  and be in full  force  and  effect,  and the
Purchasers shall have been furnished with appropriate  evidence thereof, and all
waiting  periods shall have lapsed  without  extension or the  imposition of any
conditions or restrictions.

      3.9 SECURITY AGREEMENT. The Company shall have duly executed and delivered
the Security Agreement.

      3.10 NO MATERIAL JUDGMENT OR ORDER. There shall not be on the Closing Date
any judgment or order of a court of competent  jurisdiction or any ruling of any
Governmental  Authority or any condition  imposed under any  Requirement  of Law
which,  in the judgment of the  Purchasers,  would  prohibit the purchase of the
Securities  hereunder or subject the  Purchasers to any penalty or other onerous
condition  under or pursuant to any Requirement of Law if the Securities were to
be purchased hereunder.

      3.11 PRO FORMA BALANCE SHEET.

      The Company shall have  delivered to the Purchasers as of the Closing Date
a pro forma consolidated balance sheet of the Company and its Subsidiaries as of
October 31, 2004, including pro forma adjustments reflecting the consummation of
the transactions contemplated by the Transaction Documents,  including,  without
limitation, all material fees and expenses in connection therewith, certified by
the chief financial officer of the Company that it fairly presents the financial
condition  of the  Company on such date a pro forma basis as  described  in this
Section.

      3.12 GOOD STANDING  CERTIFICATES.  The Company shall have delivered to the
Purchasers as of the Closing Date,  good standing  certificates  for the Company
and  each of its  Subsidiaries  for each of their  respective  jurisdictions  of
incorporation and all other jurisdictions where they do business.

      3.13 NO LITIGATION.  No action, suit or proceeding before any court or any
Governmental Authority shall have been commenced or threatened, no investigation
by any Governmental  Authority shall have been commenced and no action,  suit or
proceeding by any Governmental  Authority shall have been threatened against any
Purchaser, the Company or Subsidiary (i) seeking to restrain,  prevent or change
the transactions  contemplated hereby or questioning the validity or legality of
any of such  transactions,  or (ii) which would,  if resolved  adversely to such
Purchaser,  Company or any  Subsidiary,  severally or in the  aggregate,  have a
Material Adverse Effect.


                                       11
<PAGE>

                                   ARTICLE 4

                          CONDITIONS TO THE OBLIGATIONS
                 OF THE COMPANY TO ISSUE AND SELL THE SECURITIES

      The  obligations  of the Company to issue and sell the  Securities  and to
perform its other obligations hereunder relating thereto shall be subject to the
satisfaction  as  determined  by, or waived  by, the  Company  of the  following
conditions on or before the Closing Date:

      4.1 REPRESENTATIONS AND WARRANTIES.  The representations and warranties of
the Purchasers contained in Article 6 hereof shall be true and correct at and as
of the date hereof and the Closing Date as if made at and as of such date.

      4.2 COMPLIANCE  WITH THIS AGREEMENT.  The Purchasers  shall have performed
and complied with all of their respective agreements and conditions set forth or
contemplated  herein that are required to be  performed or complied  with by the
Purchasers on or before the Closing Date.

                                   ARTICLE 5

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

      The Company hereby represents and warrants to the Purchasers as follows:

      5.1  CORPORATE   EXISTENCE  AND  POWER.   The  Company  and  each  of  its
Subsidiaries:  (a) is a corporation duly organized, validly existing and in good
standing under the laws of the  jurisdiction of its  incorporation;  (b) has all
requisite  corporate  power and  authority to own and operate its  property,  to
lease the property it operates as lessee and to conduct the business in which it
is currently, or is currently proposed to be, engaged; (c) is, duly qualified as
a  foreign  entity,  licensed  and in  good  standing  under  the  laws  of each
jurisdiction where its ownership,  lease or operation of property or the conduct
of its  business  requires  such  qualification,  except to the extent  that the
failure to so qualify would not have a Material Adverse Effect;  and (d) has the
corporate  power and authority to execute,  deliver and perform its  obligations
under each Transaction  Document to which it is or will be a party and to borrow
hereunder.  Schedule  5.1  contains a true,  complete  and  correct  list of the
Company and each Subsidiary and each jurisdiction where its ownership,  lease or
operation  of  property or the conduct of its  business  would  require it to be
qualified to do business as a foreign entity.

      5.2 CORPORATE AUTHORIZATION; NO CONTRAVENTION. The execution, delivery and
performance by the Company of this Agreement and each other Transaction Document
to  which  it is or will be a party  and the  consummation  of the  transactions
contemplated hereby and thereby, including,  without limitation, the issuance of
the Securities:  (a) has been duly authorized by all necessary corporate, and if
required,  stockholder  action;  (b) do not and will not contravene the terms of
the Certificate of Incorporation or By-Laws of the Company or any Subsidiary, or
any amendment  thereof or any  Requirement  of Law  applicable to such Person or
such  Person's


                                       12
<PAGE>

assets,  business  or  properties;  (c) do not and will not (i)  conflict  with,
contravene,  result in any material  violation or breach of or material  default
under (with or without the giving of notice or the lapse of time or both),  (ii)
create in any other  Person a right or claim of  termination  or  amendment,  or
(iii) require any material  modification  or acceleration or cancellation of any
Contractual Obligation of the Company or any of its Subsidiaries; and (d) do not
and will not result in the creation of any Lien (or obligation to create a Lien)
against any material property or asset of the Company or any of its Subsidiaries
other than the Lien created by the Security Agreement.

      5.3  GOVERNMENTAL  AUTHORIZATION;   THIRD  PARTY  CONSENTS.  No  approval,
consent, compliance, exemption, authorization, or other action by, or notice to,
or filing with, any Governmental Authority or any other Person in respect of any
Requirement of Law or Contractual  Obligation,  and no lapse of a waiting period
under a Requirement of Law or Contractual  Obligation,  is necessary or required
in connection with the execution, delivery or performance by (including, without
limitation,  the payment of interest on the Notes and the  issuance of shares of
capital stock upon the exercise of the Warrants),  or enforcement  against,  the
Company  to  which  it is a  party  or  the  consummation  of  the  transactions
contemplated hereby or thereby.

      5.4 BINDING  EFFECT.  This Agreement has been, and each of the Transaction
Documents  to which the Company  will be a party to will be, duly  executed  and
delivered by the Company, and this Agreement  constitutes,  and such Transaction
Documents  will  constitute,  the legal,  valid and  binding  obligation  of the
Company  enforceable  against the Company in  accordance  with their  respective
terms,  except  as  enforceability  may be  limited  by  applicable  bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors'  rights
generally and by general principles of equity relating to enforceability.

      5.5 NO LEGAL BAR.  Neither the execution,  delivery and performance of the
Transaction  Documents  nor the issuance of or  performance  of the terms of the
Securities  will violate in any material  respect any  Requirement of Law or any
Contractual  Obligation of the Company or any of its  Subsidiaries.  Neither the
Company nor any of its  Subsidiaries  has previously  entered into any agreement
which is currently in effect or to which the Company or any of its  Subsidiaries
is currently  bound,  granting  any rights to any Person which are  inconsistent
with the rights to be granted by the Company in the Transaction Documents.

      5.6  LITIGATION.  Except as set forth on Schedule 5.6,  there are no legal
actions, suits, proceedings,  claims or disputes pending or, to the knowledge of
the  Company,  threatened,  at law,  in  equity,  in  arbitration  or before any
Governmental   Authority  against  or  affecting  the  Company  or  any  of  its
Subsidiaries  (or,  as  applicable,  to the  Company's  knowledge,  any of their
respective  shareholders,   directors,   officers,   employees  or  agents).  No
injunction, writ, temporary restraining order, decree or any order of any nature
has been  issued  by any court or other  Governmental  Authority  purporting  to
enjoin or restrain the execution,  delivery or  performance  of the  Transaction
Documents.

      5.7 COMPLIANCE WITH LAWS. The Company and each of its  Subsidiaries are in
compliance. in all material respects, with all Requirements of Law.


                                       13
<PAGE>

      5.8 NO DEFAULT OR BREACH. No event has occurred and is continuing or would
result from the  incurring of  obligations  by the Company and its  Subsidiaries
under the Transaction  Documents which constitutes or, with the giving of notice
or lapse of time or both,  would  constitute  an Event of  Default.  Neither the
Company nor any of its  Subsidiaries  is in default under or with respect to any
Contractual Obligation in any material respect.

      5.9 TITLE TO  PROPERTIES  AND  ASSETS.  The  properties  and assets of the
Company and the Subsidiaries are owned by the Company and the Subsidiaries  free
and clear of all Liens other than  Permitted  Encumbrances.  With respect to the
property and assets it leases,  each of the Company and its  Subsidiaries  is in
compliance with such leases in all material respects.

      5.10 TAXES.  Each of the Company and its  Subsidiaries has timely filed or
has valid  extensions  of the time to file all Tax Returns due prior to the date
hereof, such Tax Returns are complete and accurate in all material respects. The
Company and the Subsidiaries  have paid or accrued all Taxes due (whether or not
shown as due on such Tax  Returns),  and neither the Company nor any  Subsidiary
has knowledge of any material Tax deficiency which has been or might be asserted
or threatened against it. None of the Company or its Subsidiaries has waived any
statute of  limitations  in respect of Taxes or agreed to any  extension of time
with  respect to a Tax  assessment  deficiency.  Except as set forth on Schedule
5.10,  the Company  has no material  tax  liability  with  respect to Taxes that
accrued on or before  September  30, 2004 in excess of the amounts  accrued with
respect thereto that are reflected in the Company's  financial  statements as of
September  30,  2004.  Neither the Company  nor any of the  Subsidiaries  is the
subject of any  pending  or, to the  Company's  knowledge,  threatened  inquiry,
investigation  or  administrative  or legal  proceeding by the Internal  Revenue
Service or the taxing authority of any other jurisdiction.

      5.11 SEC REPORTS; FINANCIAL CONDITION.

            (a) SEC Reports.  The Company has made  available to the  Purchasers
through the Commission's website  (www.sec.gov) prior to the date hereof all SEC
Reports filed by the Company with the Commission since September 30, 2002. Since
September  30,  2002,  the Company has filed in a timely  manner all SEC Reports
required  to be  filed  by it with  the  Commission  pursuant  to the  reporting
requirements  of the  Exchange  Act.  The  Company  is not  aware  of any  event
occurring  on or  prior  to  the  Closing  Date  (other  than  the  transactions
contemplated  by this  Agreement)  that would  require  the filing of a Form 8-K
after the Closing.  Each of the SEC Reports,  as of the respective dates thereof
(or, if amended or superseded by a filing prior to the Closing Date, then on the
date of such filing), did not contain any untrue statement of a material fact or
omit to state a material  fact  necessary in order to make the  statements  made
therein,  in  light  of the  circumstances  under  which  they  were  made,  not
misleading. Each SEC Report, as it may have been subsequently amended by filings
made by the Company with the  Commission  prior to the date hereof,  complied in
all material  respects with the  requirements  of the Exchange Act applicable to
such SEC  Report.  No  Subsidiary  of the  Company is  subject  to the  periodic
reporting  requirements of the Exchange Act or is otherwise required to file any
documents with the Commission or any national  securities  exchange or quotation
service or comparable Governmental Authority.


                                       14
<PAGE>

            (b)  Sarbanes-Oxley.  The  Chief  Executive  Officer  and the  Chief
Financial  Officer of the Company have signed,  and the Company has furnished to
the  Commission,  all  certifications  required by  Sections  302 and 906 of the
Sarbanes-Oxley  Act of 2002. Such  certifications  contain no  qualifications or
exceptions  to the  matters  certified  therein  and have not been  modified  or
withdrawn;  and neither the Company nor any of its officers has received  notice
from  any   governmental   entity   questioning  or  challenging  the  accuracy,
completeness, form or manner of filing or submission of such certifications. The
Company is otherwise in compliance in all material  respects with all applicable
effective  provisions  of the  Sarbanes-Oxley  Act of  2002  and the  rules  and
regulations issued thereunder by the Commission.

            (c) Financial Statements. Each of the consolidated balance sheets of
the Company and its  Subsidiaries  and the related  consolidated  statements  of
income,  stockholders'  equity and cash flow,  together  with the notes  thereto
(collectively,   the   "FINANCIAL   STATEMENTS"),   which  are  included  in  or
incorporated  by  reference  into the SEC  Reports of the  Company  filed  since
September  30, 2002 fairly  present,  in all material  respects,  the  financial
position of the Company and each of its  Subsidiaries as of the respective dates
thereof, and the results of operations and cash flows of the Company and each of
its  Subsidiaries as of the respective  dates or for the respective  periods set
forth  therein,  all in conformity  with GAAP  consistently  applied  during the
periods  involved,  except  as  otherwise  set forth in the  notes  thereto  and
subject,  in the case of unaudited  quarterly  financial  statements,  to normal
year-end audit adjustments.  Except as set forth in the financial  statements in
the above-referenced SEC Reports, neither the Company nor any Subsidiary has any
liabilities  (whether  accrued,  absolute,  contingent  or  otherwise,  known or
unknown,  and whether due or to become  due),  other than  liabilities  incurred
since September 30, 2004 in the ordinary course of business, which (individually
or in the aggregate ) are material to the Company and the Subsidiaries, taken as
a whole.

            (d) Pro Forma Balance Sheet.  The Pro Forma Balance Sheet  delivered
to the Purchasers  sets forth the assets and liabilities of the Company and each
of its Subsidiaries on a pro forma  consolidated basis after taking into account
the  consummation of the  transactions  contemplated in this Agreement as of the
Closing  Date.  The Pro Forma  Balance Sheet has been prepared by the Company in
accordance with GAAP,  consistently applied, and fairly presents in all material
respects the assets and  liabilities  of the Company and its  Subsidiaries  on a
consolidated  basis as of October 31, 2004,  reflecting the  consummation of the
transactions  contemplated  in this Agreement and based on the  assumptions  set
forth therein as of the Closing Date.

      5.12  OPERATING  COMPANY.  The  Company  is "an entity  that is  primarily
engaged, directly or through a majority owned subsidiary or subsidiaries, in the
production  or sale of a  product  or  service  other  than  the  investment  of
"capital"  within  the  meaning  of the  U.S.  Department  of Labor  plan  asset
regulations, 29 C.F. R. ss.2510.3-101.

      5.13 DISCLOSURE.

            (a) Agreement and Other Documents. This Agreement, together with all
exhibits  and  schedules  hereto,  and the  agreements,  certificates  and other
documents furnished to the Purchasers by the Company and its Subsidiaries at the
Closing, do not contain any untrue statement of a material fact or omit to state
a material fact  necessary in order to make the statements  contained  herein or
therein,  in the light of the  circumstances  under  which they were  made,  not
misleading.


                                       15
<PAGE>

            (b) Material Adverse Effects. There is no fact known to the Company,
which the Company has not  disclosed in the SEC Reports or to the  Purchasers in
writing  which has a Material  Adverse  Effect or,  insofar as the  Company  can
reasonably foresee, is likely to result in a Material Adverse Effect.

            (c) Material Non-Public Information. The Company has not provided to
the  Purchasers  any  material  non-public  information  other than  information
related  to the  transactions  contemplated  by  this  Agreement,  all of  which
information  related to the transactions  contemplated hereby shall be disclosed
by the Company pursuant to Section 11.13 hereof.

      5.14 ABSENCE OF CERTAIN  CHANGES OR EVENTS.  Since September 30, 2004, the
business and operations of the Company and each  Subsidiary  have been conducted
in the ordinary course consistent with past practice, and there has not been:

            (a) any  declaration,  setting  aside or payment of any  dividend or
other  distribution  of the assets of the Company or any Subsidiary with respect
to any  shares  of  capital  stock  of the  Company  or  any  Subsidiary  or any
repurchase,  redemption or other acquisition by the Company or any Subsidiary of
any outstanding shares of the Company's or any Subsidiary's capital stock;

            (b) any  damage,  destruction  or loss,  whether  or not  covered by
insurance, except for such occurrences, individually and collectively, that have
not had,  and would not  reasonably  be  expected  to have,  a Material  Adverse
Effect;

            (c) any waiver by the Company or any  Subsidiary of a valuable right
or of a material debt owed to it;

            (d) any  material  change  or  amendment  to,  or any  waiver of any
material  right  under any  Contractual  Obligation  by which the Company or any
Subsidiary or any of the Company's or any  Subsidiary's  assets or properties is
bound or subject;

            (e) any change by the Company in its accounting principles,  methods
or  practices  or in the  manner  in which it keeps  its  accounting  books  and
records,  except  any  such  change  required  by a  change  in  GAAP  or by the
Commission; or

            (f) any other event or condition of any  character,  except for such
events and  conditions  that have not resulted,  and are not expected to result,
either individually or collectively, in a Material Adverse Effect.

      5.15  INVESTMENT  COMPANY/GOVERNMENT  REGULATIONS.  The  Company is not an
"investment  company" within the meaning of the Investment  Company Act of 1940,
as amended.  Neither the Company nor its  Subsidiaries  is subject to regulation
under the Public Utility  Holding  Company Act of 1935, as amended,  the Federal
Power Act,  the  Interstate  Commerce  Act, or any  federal or state  statute or
regulation limiting its ability to incur Indebtedness.


                                       16
<PAGE>

      5.16 SUBSIDIARIES.

            (a) Schedule  5.16 sets forth a complete and accurate list of all of
the Subsidiaries of the Company together with their respective  jurisdictions of
incorporation  or organization.  All of the outstanding  shares of capital stock
of, or other equity  interests in, the  Subsidiaries  are validly issued,  fully
paid and nonassessable.  Except as set forth on Schedule 5.16, as of the Closing
Date,  all of the  outstanding  shares of capital  stock of, or other  ownership
interests in, each of the  Subsidiaries  are owned by the Company or by a wholly
owned  Subsidiary  free and clear of any Liens.  No Subsidiary  has  outstanding
options, warrants, subscriptions, calls, rights, convertible securities or other
agreements or commitments  obligating the Subsidiary to issue,  transfer or sell
any securities of the Subsidiary.

            (b) Except for the Subsidiaries of the Company, the Company does not
own of  record  or  beneficially,  directly  or  indirectly,  (i) any  shares of
outstanding  capital stock or securities  convertible  into capital stock of any
other corporation,  or (ii) any equity, voting or participating  interest in any
limited liability  company,  partnership,  joint venture or other  non-corporate
business enterprises.

      5.17 CAPITALIZATION.

            (a) As of the Closing  Date,  the  authorized  capital  stock of the
Company  consists of  100,000,000  shares of Common Stock,  of which  58,288,057
shares are issued and  outstanding,  and  5,000,000  shares of preferred  stock,
$.001 par value, of which 500,000 shares have been designated as Series A Junior
Participating Preferred Stock (collectively  "Preferred Stock"). The Company has
no shares of capital  stock held in  treasury.  As of the  Closing  Date,  after
giving  effect  to  the  transactions  contemplated  hereby  and  in  the  other
Transaction Documents, the authorized capital stock of the Company shall consist
of 100,000,000 shares of Common Stock and 500,000 shares of Preferred Stock, and
there will be: (i)  58,288,057  shares of Common Stock  issued and  outstanding;
(ii) 20,250,000  shares of Common Stock reserved for issuance upon conversion of
the Notes,  (iii)  10,125,000  shares of Common Stock reserved for issuance upon
exercise of the Warrants;  (iv)  4,950,973  shares of Common Stock  reserved for
issuance  pursuant to the exercise of stock options  issuable in accordance with
the  terms  of one or  more  stock  option  plans  of the  Company  ("MANAGEMENT
OPTIONS"),  and (v) no shares of  Preferred  Stock issued and  outstanding.  All
outstanding  shares of capital stock of the Company have been duly authorized by
all necessary  corporate action.  All outstanding shares of capital stock of the
Company are,  and the shares of Common Stock  issuable  upon  conversion  of the
Notes and upon  exercise of the  Warrants in  accordance  with their  respective
terms,  when issued,  will be, validly issued,  fully paid and nonassessable and
shall be free and clear of all Liens and the issuance of  foregoing  has been or
will be, as the case may be, in compliance  with all applicable  Requirements of
Law has not been or will  not be,  as the case  may be,  subject  to  preemptive
rights  in  favor of any  Person  and will not  result  in the  issuance  of any
additional  shares of  capital  stock of the  Company or the  triggering  of any
anti-dilution or similar rights contained in any options,  warrants,  debentures
or other securities or agreements of the Company.

            (b) On the Closing Date,  except for the Notes, the Warrants and the
Management Options,  and except as set forth on Schedule 5.17(b),  there will be
no outstanding  securities convertible into or exchangeable for capital stock of
the Company or any of its  Subsidiaries or options,  warrants or other rights to
purchase or subscribe to capital stock of the Company or any of its Subsidiaries
or contracts,  commitments,  agreements,  understandings  or arrangements of any
kind to which the Company or any of its  Subsidiaries is a party relating to the
issuance of any capital  stock of the  Company or any of its  Subsidiaries,  any
such  convertible or  exchangeable  securities or any such options,  warrants or
rights.


                                       17
<PAGE>

      5.18  PRIVATE  OFFERING.  No  form  of  general  solicitation  or  general
advertising  was  used  by the  Company  or any of its  Subsidiaries,  or  their
respective  representatives  in  connection  with  the  offer  or  sale  of  the
Securities.  No registration of the Securities or Common Stock issuable upon the
conversion  of  the  notes  or the  exercise  of the  Warrants  pursuant  to the
provisions of the Securities Act or state  securities or "blue sky" laws will be
required  for the offer,  sale or  issuance of the  Securities  pursuant to this
Agreement or of the Common Stock  issuable  upon  conversion of the Notes or the
exercise of the Warrants.  The Company agrees that neither it, nor anyone acting
on its behalf,  will offer or sell the Securities or any other security so as to
require  the  registration  of the  Securities  or Common  Stock  issuable  upon
conversion  of  the  Notes  or the  exercise  of the  Warrants  pursuant  to the
provisions  of the  Securities  Act or any state  securities or "blue sky" laws,
unless such Securities or Common Stock issuable upon the conversion of the Notes
or the exercise of the Warrants are so registered.

      5.19 BROKER'S,  FINDER'S OR SIMILAR FEES.  Except as set forth in Schedule
5.19,  there are no  brokerage  commissions,  finder's  fees or similar  fees or
commissions  payable in connection  with the  transactions  contemplated  hereby
based on any agreement,  arrangement or understanding with the Company or any of
its Subsidiaries, or any action taken by any of them.

      5.20 LABOR RELATIONS.  Neither the Company nor any of its Subsidiaries has
committed  or is engaged in any unfair  labor  practice.  Except as set forth in
Schedule 5.20,  there is (a) no unfair labor practice  complaint  pending or, to
the  knowledge  of the  Company,  threatened  against  the Company or any of its
Subsidiaries  before the  National  Labor  Relations  Board and no  grievance or
arbitration  proceeding arising out of or under collective bargaining agreements
is so pending or, to the  knowledge of the Company,  threatened,  (b) no strike,
labor dispute, slowdown or stoppage pending or, to the knowledge of the Company,
threatened  against  the  Company  or any of its  Subsidiaries,  and  (c) to the
knowledge of the Company, no union representation question existing with respect
to the  employees  of the  Company  or any  of  its  Subsidiaries  and no  union
organizing  activities  are taking  place.  Neither the Company,  nor any of its
Subsidiaries, is a party to any collective bargaining agreement.

      5.21 ERISA -- EMPLOYEE BENEFIT PLANS.

            (a) Employee Benefit Plans and Liabilities.  Neither the Company nor
any ERISA Affiliate has contributed to nor has any actual or contingent,  direct
or indirect,  liability  in respect of any employee  benefit plan (as defined in
Section 3(3) of ERISA) or other employee benefit arrangement, payment, policy or
program of any kind whatsoever not subject to ERISA (collectively, the "PLANS"),
within the  five-consecutive-year  period immediately preceding the first day of
the year in which the Closing  Date  occurs  other than those  liabilities  with
respect to such Plans specifically  described on Schedule 5.21. Schedule 5.21(a)
sets forth all Plans. At no time during such five year period has the Company or
any ERISA Affiliate  participated in or contributed to any Multiemployer Plan or
other plan subject to Title IV of ERISA,  nor during


                                       18
<PAGE>

such  period  has the  Company  or any  ERISA  Affiliate  had an  obligation  to
participate  in or  contribute  to any such  Multiemployer  Plan.  No  agreement
subject to section 4204 of ERISA has been entered  into in  connection  with the
transactions   contemplated  in  this   Agreement.   There  are  no  outstanding
liabilities of the Company or any ERISA Affiliate to any employee  benefit plans
previously maintained by the Company or any ERISA Affiliate,  and the Company is
not aware of any potential  liabilities  in connection  therewith.  There are no
actions,  suits or  claims,  other than for  benefits  in the  ordinary  course,
pending or, to the knowledge of the Company,  threatened against the Company, an
ERISA  Affiliate  or the Plans  which  might  subject  the  Company or any ERISA
Affiliate to any material liability.

            (b) Plan  Compliance.  The Company is in  compliance in all material
respects with all reporting, disclosure and registration requirements applicable
to it under the Code,  ERISA and all  federal  and state  securities  laws,  and
Department  of Labor,  Internal  Revenue  Service and  Securities  and  Exchange
Commission rules and regulations promulgated thereunder,  with respect to all of
the Plans, and is not subject to any liability, in any material respect, whether
asserted or not, for any penalties to any Governmental Authority for late filing
of any return,  report or other governmental filing. No civil or criminal action
brought  pursuant to the  provisions  of Title I, Subtitle B, Part 5 of ERISA or
any other federal or state law is pending or threatened against any fiduciary of
the Plans.  No Plan, or any fiduciary  thereof,  has been, or is currently,  the
direct or indirect  subject of an audit,  investigation  or  examination  by any
Governmental Authority.  All of the Plans comply currently, and have complied at
all times (and all former Plans have complied at all times in the past), both as
to form and operation,  in all material respects,  with their terms and with all
Laws. Each of the Plans  maintained by the Company that is an "employee  benefit
pension  plan"  (within the meaning of Section  3(2)(A) of ERISA) has obtained a
favorable determination (covering all changes or amendments applicable under Law
from the Internal Revenue Service as to its qualification  under Sections 401(a)
and 501(a) of the Code or is within the remedial  amendment  period (as provided
in Section  401(b) of the Code) for making any required  changes or  amendments,
and nothing  has  occurred  before or after the date of each such  determination
letter as would  adversely  affect  such  qualification.  All  amounts  that are
currently owing to Plan participants (including,  without imitation, former Plan
participants),  or  contributions  required  to be made to the  Plans  have been
timely paid or contributed with respect to all periods prior to the Closing Date
or provided for by adequate reserves on the Pro Forma Balance Sheet.

            (c) Prohibited Transactions. No Plan, nor any related trust, nor the
Company,  nor any  trustee,  administrator  or  other  "party  in  interest"  or
"disqualified  person"  (within the meaning of Section 3(14) of ERISA or Section
4975(e)(2) of the Code,  respectively) with respect to the Plans, has engaged in
any  nonexempt  "prohibited  transaction"  (within the meaning of Section 406 of
ERISA or Section 4975(c) of the Code,  respectively)  which could subject any of
the Plans or related trusts, or any trustee, administrator or other fiduciary of
any such Plan, or any Purchaser,  or any other party dealing with the Plans,  to
the penalties or excise tax imposed on prohibited transactions by Section 502 of
ERISA or Section 4975 of the Code which could have a material  adverse effect on
the Condition of the Company.

            (d) COBRA and Health Costs.  Except as set forth in Schedule 5.21(d)
of the  Disclosure  Schedule,  the Company has  complied  with the  continuation
coverage  requirements  of group health plans  provided in Section  4980B of the
Code,  Sections 601 et seq. of ERISA,  the


                                       19
<PAGE>

Family  and  Medical  Leave  Act  of  1994,  and  the  regulations   promulgated
thereunder,  and (ii)  there are no  individual  claims by any  employee  of the
Company  for any illness or  accident  which is  expected  to exceed  $25,000 in
health  related  costs  to the  Company  within  the  twelve  (12)-month  period
following the Closing Date.

            (e) Miscellaneous.  Neither the Company nor any Plan provides for or
promises retiree, medical,  disability or life insurance benefits to any current
or former employee,  officer or director of the Company, other than continuation
coverage required by section 4980B of the Code. The Company is not a party to or
obligated under any agreement,  plan,  contract or other  arrangements that will
result,  separately or in the aggregate, in the payment of any "excess parachute
payment" within the meaning of Code ss.280G.

      5.22 INTELLECTUAL PROPERTY. Except as set forth in Schedule 5.22: (i) each
of the Company and its  Subsidiaries  owns or has obtained valid and enforceable
licenses or options for the inventions, patent applications, patents, trademarks
(both  registered  and  unregistered),   trade  names,  trademark  applications,
copyrights,  copyright  applications,  maskworks,  maskwork applications,  trade
secrets,  fictitious business names,  service marks,  service mark applications,
know  how,  customer  lists,  franchise  systems,  computer  software,  computer
program, designs, blueprints, engineering drawings, proprietary products, source
code,  technology,  proprietary rights or other intellectual  property rights or
intangible  assets and all licenses and other rights  required to use or exploit
any of the  foregoing,  currently  used in the conduct of the  Company's and its
Subsidiaries' business (collectively, the "INTELLECTUAL PROPERTY"); and (ii) (a)
there are no third  parties who have any  ownership  rights to any  Intellectual
Property  that is  owned  by,  or has  been  licensed  to,  the  Company  or any
Subsidiary  that would  preclude  the  Company or any of its  Subsidiaries  from
conducting  its  business as  currently  conducted  and have a Material  Adverse
Effect,  except  for the  ownership  rights of the  owners  of the  Intellectual
Property  licensed or optioned  by the Company or its  Subsidiaries;  (b) to the
knowledge of the  Company,  there are  currently  no sales of any products  that
would constitute an infringement by third parties of any  Intellectual  Property
owned,  licensed or optioned by the Company or any  Subsidiary;  (c) there is no
pending or, to the Company's knowledge,  threatened action, suit,  proceeding or
claim by others challenging the rights of the Company or any Subsidiary in or to
any  Intellectual  Property  owned,  licensed  or optioned by the Company or any
Subsidiary;  (d) there is no pending or, to the Company's knowledge,  threatened
action, suit, proceeding or claim by others challenging the validity or scope of
any  Intellectual  Property  owned,  licensed  or optioned by the Company or any
Subsidiary;  and  (e)  there  is no  pending  or,  to the  Company's  knowledge,
threatened  action,  suit,  proceeding  or claim  by  others  that  the  Company
infringes or otherwise violates any patent, trademark,  copyright,  trade secret
or other proprietary right of others,  other than non-material  actions,  suits,
proceedings and claims.

      5.23  INSURANCE.  Each  of the  Company  and  its  Subsidiaries  maintains
insurance of the types and in the amounts that the Company  reasonably  believes
is prudent and  adequate  for its  business,  all of which  insurance is in full
force and effect.

      5.24 SOLVENCY.  The Company and its  Subsidiaries,  taken as a whole,  are
Solvent.

      5.25 REGISTRATION  RIGHTS.  Except as provided in Article 10 hereof, or as
set forth in Schedule 5.25, effective upon the Closing,  neither Company nor any
Subsidiary is currently subject to any agreement providing any Person any rights
(including piggyback  registration rights) to have any securities of the Company
or any Subsidiary registered with the Commission or registered or qualified with
any other Governmental Authority.


                                       20
<PAGE>

      5.26 PRICE OF COMMON STOCK.  The Company has not taken any action intended
to stabilize or manipulate the price of the Company's shares of the Common Stock
to facilitate the sale or resale of the Registrable  Shares. The Company has not
repurchased any of its shares of Common Stock since September 30, 2004.

      5.27 INTERNAL ACCOUNTING CONTROLS.

            (a) The Company and the  Subsidiaries  maintain a system of internal
accounting  controls  sufficient  to  provide  reasonable   assurance  that  (i)
transactions  are executed in accordance with  management's  general or specific
authorizations,   (ii)   transactions   are  recorded  as  necessary  to  permit
preparation of financial  statements in conformity  with GAAP, to maintain asset
accountability and to provide reasonable  assurance regarding the reliability of
financial reporting, (iii) access to assets is permitted only in accordance with
management's   general  or  specific   authorization,   and  (iv)  the  recorded
accountability  for assets is compared  with the existing  assets at  reasonable
intervals and appropriate actions are taken with respect to any differences. The
Company  has not  been  advised  by its  auditors  that  there  are  significant
deficiencies  or material  weaknesses  in the  current  design or  operation  of
internal  controls  over  financial  reporting  that are  reasonably  likely  to
adversely affect the Company's ability to record, process,  summarize and report
financial information.

            (b) Since  September  30,  2004,  to the  knowledge  of the Company,
neither the Company, any Subsidiary,  nor any director,  officer or employee, or
(to  the  knowledge  of  the  Company)  any  auditor,  accountant,  attorney  or
representative of the Company or any Subsidiary has received or otherwise had or
obtained knowledge of (i) any written complaint,  allegation, assertion or claim
regarding the accounting or auditing practices,  procedures,  methodologies,  or
methods of the Company or any Subsidiary or their respective internal accounting
controls,  including any complaint,  allegation,  assertion or claim that any of
the Company or any Subsidiary has engaged in questionable accounting or auditing
practices,  or (ii) any fraud, whether or not material, that involves management
or other employees of the Company or any Subsidiary who have a significant  role
in the Company's or any Subsidiary's internal controls.

            5.28 TRANSACTIONS  WITH OFFICERS AND DIRECTORS.  Except as disclosed
in the SEC Reports, none of the officers or directors of the Company has entered
into any  transaction  with the Company or any Subsidiary that would be required
to be disclosed  pursuant to Item 404(a),  (b) or (c) of  Regulation  S-K of the
Commission.

      5.29 REGISTRATION  STATEMENT MATTERS.  The Company is eligible to register
the Registrable Shares for resale in a secondary offering by each Purchaser on a
registration statement on Form SB-2. To the Company's knowledge,  there exist no
facts or circumstances  (including  without limitation any required approvals or
waivers  or any  circumstances  that  may  delay or  prevent  the  obtaining  of
accountant's  consents) that  reasonably  could be expected to prohibit or delay
the  preparation and filing of the  registration  statement on Form SB-2 for the
resale of the Registrable Shares by the Purchasers contemplated by Article 10 of
this Agreement.


                                       21
<PAGE>

      5.30 EXCHANGE ACT REGISTRATION. The Common Stock is registered pursuant to
Section 12(g) of the Exchange Act, and the Company has taken no action  designed
to, or which, to the knowledge of the Company,  is likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act.

                                   ARTICLE 6

                               REPRESENTATIONS AND
                          WARRANTIES OF THE PURCHASERS

      Each Purchaser,  severally but not jointly, hereby represents and warrants
as to itself as follows:

      6.1  AUTHORIZATION;   NO  CONTRAVENTION.   The  execution,   delivery  and
performance by it of this  Agreement:  (a) is within its power and authority and
has been duly  authorized by all necessary  action;  (b) does not contravene the
terms of its organizational documents or any amendment thereof; and (c) will not
violate,  conflict with or result in any breach or  contravention  of any of its
Contractual Obligations, or any order or decree directly relating to it.

      6.2 BINDING EFFECT. This Agreement has been duly executed and delivered by
it and this  Agreement  constitutes  its legal,  valid and  binding  obligation,
enforceable  against it in accordance with its terms,  except as  enforceability
may be limited by applicable bankruptcy,  insolvency,  or similar laws affecting
the  enforcement  of  creditors'  rights  generally or by  equitable  principles
relating to enforceability.

      6.3 NO  LEGAL  BAR.  The  execution,  delivery  and  performance  of  this
Agreement by it will not violate any Requirement of Law applicable to it.

      6.4 PURCHASE FOR OWN ACCOUNT. The Securities to be acquired by it pursuant
to this  Agreement are being or will be acquired for its own account and with no
intention of  distributing  or reselling such  securities or any part thereof in
any transaction  that would be in violation of the securities laws of the United
States of America, or any state, without prejudice, however, to its right at all
times  to sell or  otherwise  dispose  of all or any  part of the  Notes  or the
Warrants, under an effective registration statement under the Securities Act, or
under an exemption from such  registration  available  under the Securities Act,
and subject, nevertheless, to the disposition of its property being at all times
within its control.  If the Purchaser  should in the future decide to dispose of
any of the  Securities,  the Purchaser  understands and agrees that it may do so
only in compliance with the Securities Act and applicable state securities laws,
as then in  effect.  It agrees  to the  imprinting  of a legend on  certificates
representing  all of the  Securities to the following  effect:  "THE  SECURITIES
REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED,  OR THE  SECURITIES  LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE
DISPOSED OF EXCEPT  PURSUANT TO AN EFFECTIVE  REGISTRATION  STATEMENT UNDER SUCH
ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE  EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS."


                                       22
<PAGE>

      6.5  BROKER'S,   FINDER'S  OR  SIMILAR   FEES.   There  are  no  brokerage
commissions,  finder's fees or similar fees or commissions payable in connection
with the transactions contemplated hereby based on any agreement, arrangement or
understanding with it or any action taken by it.

      6.6 GOVERNMENTAL AUTHORIZATION; THIRD PARTY CONSENT. No approval, consent,
compliance,  exemption,  authorization,  or other  action  by, or notice  to, or
filing with,  any  Governmental  Authority or any other Person in respect of any
Requirement of Law, and no lapse of a waiting period under a Requirement of Law,
is  necessary  or  required  in  connection  with  the  execution,  delivery  or
performance  by  it  or  enforcement   against  it  of  this  Agreement  or  the
transactions contemplated hereby.

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

      6.8 ACCESS TO INFORMATION.

      Such  Purchaser  acknowledges  that it has reviewed  the SEC Reports,  the
Schedules to this Agreement and other information  furnished by the Company, and
has been  afforded (i) the  opportunity  to ask such  questions as it has deemed
necessary  of, and to  receive  answers  from,  representatives  of the  Company
concerning  the terms and  conditions of the offering of the  Securities and the
merits and risks of  investing  in the  Securities;  (ii) access to  information
about the Company and  Subsidiaries and their  respective  financial  condition,
results of operations, business, properties, management and prospects sufficient
to enable it to evaluate its  investment;  and (iii) the  opportunity  to obtain
such additional  information  that the Company  possesses or can acquire without
unreasonable  effort or expense that is necessary to make an informed investment
decision with respect to the investment.

      6.9 CERTAIN TRADING ACTIVITIES.

      Such Purchaser has not directly or  indirectly,  nor has any Person acting
on behalf of or pursuant to any understanding with such Investor, engaged in any
transactions in the securities of the Company (including,  without  limitations,
any Short Sales involving the Company's  securities)  since the earlier to occur
of (1) the time that such  Purchaser was first  contacted by or on behalf of the
Company regarding an investment in the Company and (2) the 30th day prior to the
date of this Agreement.  Such Purchaser covenants that neither it nor any Person
acting on its behalf or pursuant to any understanding with it will engage in any
transactions in the securities of the Company  (including  Short Sales) prior to
the time that the  transactions  contemplated  by this  Agreement  are  publicly
disclosed.

      6.10 INDEPENDENT INVESTMENT DECISION.

      Such Purchaser has  independently  evaluated the merits of its decision to
purchase  Securities pursuant to the Transaction  Documents.  Such Purchaser has
not relied on the  business or legal advice of the Company or any of its agents,
counsel or Affiliates in making its investment decision hereunder,  and confirms
that none of such Persons has made any  representations  or  warranties  to such
Purchaser in connection  with the  transactions  contemplated by the Transaction
Documents other than as contained therein.


                                       23
<PAGE>

                                    ARTICLE 7

                      INDEMNIFICATION; EXERCISE OF REMEDIES

      7.1  INDEMNIFICATION.  In  addition  to all other  sums due  hereunder  or
provided  for in this  Agreement,  the  Company  agrees  to  indemnify  and hold
harmless  the  Purchasers  and  their  respective  Affiliates  and each of their
respective  officers,  directors,  agents,  employees,  Subsidiaries,  partners,
members,  attorneys,  accountants and controlling persons (each, an "INDEMNIFIED
PARTY") to the  fullest  extent  permitted  by law from and  against any and all
losses, claims,  damages,  expenses (including,  without limitation,  reasonable
fees,  disbursements  and other  charges of counsel  and costs of  investigation
incurred by an Indemnified Party in any action or proceeding between the Company
(or any of its Subsidiaries) and such Indemnified Party (or Indemnified Parties)
or between an Indemnified Party (or Indemnified  Parties) and any third party or
otherwise) or other liabilities,  losses, or diminution in value  (collectively,
"LIABILITIES") resulting from or arising out of any breach of any representation
or warranty,  covenant or agreement of the Company or any of its Subsidiaries in
this Agreement,  the Notes, the Warrants,  or the other  Transaction  Documents,
including  without  limitation,  the failure to make payment when due of amounts
owing  pursuant  to this  Agreement,  the  Notes,  the  Warrants,  or the  other
Transaction  Documents,  on the  due  date  thereof  (whether  at the  scheduled
maturity,  by acceleration or otherwise) or any legal,  administrative  or other
actions  (including,   without  limitation,   actions  brought  by  any  of  the
Purchasers,  the Company,  any of its  Subsidiaries  or any holders of equity or
indebtedness  of the Company or any of its  Subsidiaries  or derivative  actions
brought by any Person claiming  through or in the Company's or any  Subsidiary's
name),  proceedings or investigations  (whether formal or informal),  or written
threats  thereof,  based upon,  relating  to or arising  out of the  Transaction
Documents,  the transactions  contemplated  thereby,  or any Indemnified Party's
role therein or in the transactions  contemplated  thereby;  provided,  however,
that the Company  shall not be liable under this  Section 7.1 to an  Indemnified
Party: (a) for any amount paid by the Indemnified  Party in settlement of claims
by the Indemnified  Party without the Company's consent (which consent shall not
be  unreasonably  withheld),  (b) to the extent  that it is  finally  judicially
determined that such Liabilities  resulted primarily from the willful misconduct
or gross  negligence of such  Indemnified  Party or (c) to the extent that it is
finally judicially  determined that such Liabilities resulted primarily from the
breach by any indemnified  Party of any  representation,  warranty,  covenant or
other agreement of such Indemnified Party contained in this Agreement; provided,
further,  that if and to the extent that such  indemnification  is unenforceable
for any reason,  the Company shall make the maximum  contribution to the payment
and satisfaction of such Liabilities which shall be permissible under applicable
laws. In connection with the obligation of the Company to indemnify for expenses
as set forth above, the Company further agrees, upon presentation of appropriate
invoices  containing  reasonable detail, to reimburse each Indemnified Party for
all such expenses (including,  without limitation, fees, disbursements and other
charges of counsel and costs of investigation  incurred by an Indemnified  Party
in any action or proceeding between the Company (or any of its Subsidiaries) and
such Indemnified Party (or Indemnified  Parties) or between an Indemnified Party
(or Indemnified  Parties) and any third party or otherwise) as they are incurred
by such Indemnified Party;  provided,  however,  that if an Indemnified Party is
reimbursed  hereunder for any expenses,  such reimbursement of expenses shall be
refunded to the extent it is finally judicially  determined that the Liabilities
in  question  resulted  primarily  from  (i) the  willful  misconduct  or  gross
negligence of such Indemnified  Party or (ii) the breach by an Indemnified Party
of any representation, warranty, covenant or other agreement of such Indemnified
Party contained in this Agreement or any other Transaction Document.


                                       24
<PAGE>

      7.2 PROCEDURE;  NOTIFICATION.  Each Indemnified Party under this Article 7
will,  promptly after the receipt of notice of the  commencement  of any action,
investigation,  claim or other  proceeding  against  such  Indemnified  Party in
respect of which  indemnity may be sought from the Company under this Article 7,
notify the Company in writing of the commencement  thereof.  The omission of any
Indemnified  Party so to notify the Company of any such action shall not relieve
the  Company  from any  liability  which it may have to such  Indemnified  Party
unless,  and only to the extent that,  such  omission  materially  and adversely
affects the Company's  substantive rights or defenses.  In case any such action,
claim or other proceeding shall be brought against any Indemnified  Party and it
shall  notify the Company of the  commencement  thereof,  the  Company  shall be
entitled  to  assume  the  defense  thereof  at its own  expense,  with  counsel
satisfactory to such  Indemnified  Party in its reasonable  judgment;  provided,
however,  that any  Indemnified  Party may, at its own expense,  retain separate
counsel to participate in such defense.  Notwithstanding  the foregoing,  in any
action,  claim or  proceeding  in which the  Company,  on the one  hand,  and an
Indemnified  Party, on the other hand, is, or is reasonably  likely to become, a
party, such Indemnified Party shall have the right to employ separate counsel at
the  Company's  expense and to control its own defense of such action,  claim or
proceeding if, in the reasonable opinion of counsel to such Indemnified Party, a
conflict or potential conflict exists between the Company,  on the one hand, and
such  Indemnified  Party,  on the other  hand,  that  would  make such  separate
representation advisable. The Company agrees that it will not, without the prior
written consent of the BV Funds,  settle,  compromise or consent to the entry of
any judgment in any pending or threatened claim,  action or proceeding  relating
to the matters  contemplated hereby (if any Indemnified Party is a party thereto
or has  been  actually  threatened  to be  made a  party  thereto)  unless  such
settlement,  compromise  or consent  includes  an  unconditional  release of the
Purchasers and each other  Indemnified  Party from all liability arising or that
may arise out of such claim,  action or  proceeding.  The  Company  shall not be
liable for any settlement of any claim, action or proceeding effected against an
Indemnified  Party  without  its written  consent,  which  consent  shall not be
unreasonably  withheld.  The rights  accorded to Indemnified  Parties  hereunder
shall be in addition to any rights that any Indemnified Party may have at common
law, by separate agreement or otherwise.

      7.3 REGISTRATION RIGHTS.  Notwithstanding anything to the contrary in this
Article 7, the indemnification  and contribution  provisions of Article 10 shall
govern any claim made with respect to  registration  statements  filed  pursuant
thereto or sales made thereunder.

      7.4  EXERCISE  OF  REMEDIES.   For  so  long  as  any   obligations   (the
"OBLIGATIONS") under this Agreement, the Notes, the Security Agreement or any of
the other Transaction  Documents are outstanding,  no Purchaser may, without the
prior written consent of the BV Funds:

            (a)  declare,  or join in the  declaration  by any  person or entity
other than  either of the BV Funds,  of any  Obligations  to be due and  payable
prior to the  maturity  thereof or  otherwise  accelerate  the  maturity  of the
principal of any  Obligations,  accrued  interest  thereon or other  amounts due
thereunder or with respect thereto; or


                                       25
<PAGE>

            (b) take any  other  action  against  any the  Company  or any other
obligor  of the  Obligations  in  connection  with the  Obligations,  including,
without  limitation,  commencing any  administrative,  legal or equitable action
against the Company or any such obligor (including,  without limitation,  filing
and joining in the filing of any insolvency  petition against the Company or any
such obligor).

                                   ARTICLE 8

                              AFFIRMATIVE COVENANTS

      Until the payment by the Company of all  principal  of and interest on the
Notes and all other amounts due to Purchasers under this Agreement and the other
Transaction  Documents,  including,  without limitation,  all fees, expenses and
amounts due in respect of  indemnity  obligations  under  Article 7, the Company
hereby covenants and agrees with each of the Purchasers as follows:

      8.1  INFORMATION.  The  Company  shall  maintain,  and  cause  each of its
Subsidiaries to maintain, a system of accounting established and administered in
accordance  with sound  business  practices to permit  preparation  of financial
statements in conformity  with GAAP. The Company shall deliver to the Purchasers
the information described below:

            (a) Events of Default,  Etc.  Promptly  upon the  Company  obtaining
knowledge  of any of the  following  events or  conditions,  the  Company  shall
deliver  copies of all  notices  given or  received by the Company or any of its
Subsidiaries  with respect to any such event or condition and a  certificate  of
the  Company's  Chief  Executive  Officer  specifying  the  nature and period of
existence of such event or condition  and what action the Company has taken,  is
taking and proposes to take with  respect  thereto:  (i) any  condition or event
that  constitutes  a breach  of any  provision  of this  Agreement  or any other
Transaction  Document;  (ii) any notice that any Person has given to the Company
or any Subsidiary,  or any other action, taken with respect to a claimed default
in any agreement  evidencing  Indebtedness  or any other  material  agreement to
which the Company or any Subsidiary is a party;  or (iii) any event or condition
that could reasonably be expected to result in any Material Adverse Effect.  The
Company shall deliver to the  Purchasers  within thirty (30) days  following the
last day of each month, a certificate of the Company's Chief  Financial  Officer
stating  that to his or her  knowledge no Event of Default  shall have  occurred
during the period covered thereby, except as specified in such certificate.

            (b) Other Information. With reasonable promptness, the Company shall
deliver  such  other  information  and  data  (including,   without  limitation,
financial  information  and data)  with  respect  to the  Company  or any of its
Subsidiaries as from time to time may be reasonably requested by the BV Funds.

      8.2 RESERVATION OF SHARES. The Company shall at all times reserve and keep
available  out of its  authorized  capital  stock,  solely  for the  purpose  of
issuance or delivery upon  conversion of the Notes and exercise of the Warrants,
the  maximum  number  of  shares  of  capital  stock  that  may be  issuable  or
deliverable upon such conversion or exercise, as the case may be. Such shares of
capital stock shall,  when issued or delivered in accordance  with the Notes and
the Warrants,  as the case may be, be duly and validly issued and fully paid and
non-assessable.  The Company shall issue such capital  stock in accordance  with
the  provisions  of the Notes and the  Warrants,  as the case may be,  and shall
otherwise comply, in each case, with the terms thereof.


                                       26
<PAGE>

      8.3  INSPECTION.  The  Company  will  permit,  and will  cause each of its
Subsidiaries to permit, representatives of the BV Funds to visit and inspect any
of their properties, to examine their corporate, financial and operating records
and make copies  thereof or abstracts  therefrom,  and to discuss their affairs,
finances and accounts with their respective directors,  officers and independent
public  accountants,  all at such reasonable  times during normal business hours
and as often as may be reasonably  requested,  upon  reasonable  advance notice;
provided, however, that no such inspection,  examination or inquiry, the failure
to  conduct  same,  nor  any  knowledge  of any  Purchaser,  including,  without
limitation,  any knowledge  obtained by any BV Fund in connection  with any such
inspection,  investigation  or inquiry,  shall constitute a waiver of any rights
such Purchaser may have under any representation,  warranty,  covenant,  term or
agreement under any of the Transaction Documents. Except as provided in the next
sentence,  the Company shall bear all of its own costs in connection with the BV
Funds'  exercise  of their  rights  under  this  Section  8.3.  If the BV Funds'
exercise their rights under this Section 8.3 more than once in any  twelve-month
period,  the BV Funds shall,  unless the Company is in default of any  provision
under  this  Agreement  or any of the  other  Transaction  Documents,  bear  any
reasonable charges by the Company's  independent  public  accountants  resulting
from the exercise of such rights  except with respect to the first such exercise
in each such twelve-month period.

      8.4 PAYMENT OF NOTE.  The Company shall pay the principal of,  interest on
and other  amounts  due in  respect  of, the Note on the dates and in the manner
provided in the Notes.

      8.5 BOOKS AND  RECORDS.  The  Company  shall,  and shall cause each of its
Subsidiaries  to, keep  proper  books of record and  account,  in which full and
correct entries shall be made of all financial  transactions  and the assets and
business of the Company and each of its  Subsidiaries  in  accordance  with GAAP
consistently  applied to the Company and its Subsidiaries  taken as a whole. The
Company will continue to maintain the Internal  Accounting Controls specified in
Section 5.27(a).

      8.6 USE OF  PROCEEDS.  The Company  shall use the  proceeds of the sale of
Securities  hereunder only as follows:  (i) for the payment of fees and expenses
in  connection  with the  transactions  contemplated  hereunder and in the other
Transaction Documents,  (ii) for the development of Lymphoseek,  (iii) repayment
of up to $250,000 in principal  amount of the Original  Bupp Note,  and (iv) for
general corporate purposes.

      8.7 BOARD NOMINEES; MANAGEMENT RIGHTS.

      The Board (or if it then exists,  the  nominating  committee of the Board)
shall nominate one independent director,  reasonably acceptable to the BV Funds,
for election to the Board at each meeting of the  stockholders of the Company at
which directors are to be elected and shall recommend to such  stockholders that
they vote in favor of such nominee's election to the Board.


                                       27
<PAGE>

                                   ARTICLE 9

                               NEGATIVE COVENANTS

      Until the payment by the Company of all  principal  of and interest on the
Notes and all other  amounts  due at the time of payment of such  principal  and
interest  to the  Purchasers  under  this  Agreement  and the other  Transaction
Documents,  including, without limitation, all fees, expenses and amounts due at
such time in respect  of  indemnity  obligations  under  Article 7, the  Company
hereby covenants and agrees with the Purchasers as follows:

      9.1 FUNDAMENTAL  CHANGES;  CONSOLIDATIONS,  MERGERS AND ACQUISITIONS.  The
Company  shall not,  and shall not permit any of its  Subsidiaries  directly  or
indirectly  to:  (a)  amend,  modify  or  waive  any  term or  provision  of its
Certificate  of  Incorporation,  By-laws or other  organizational  or  governing
agreements and documents, unless required by law; (b) enter into any transaction
of merger or consolidation; (c) liquidate, wind-up or dissolve itself (or suffer
any liquidation or dissolution);  or (d) acquire by purchase or otherwise all or
any substantial part of the business or assets of any other Person.

      9.2  TRANSACTIONS  WITH  AFFILIATES.  Except  in the  ordinary  course  of
business and consistent  with past  practices,  the Company shall not, and shall
not  permit  any of its  Subsidiaries  to,  (a) enter  into any  transaction  or
agreement or other Contractual  Obligation with, or make any payment (other than
pursuant to agreements  existing on the date hereof or subsequently  approved by
the BV Funds) to, any Affiliate,  (b) amend or terminate any existing  agreement
with any  Affiliate,  (c) purchase  from or provide to an Affiliate any selling,
general,  management or administrative services, (d) directly or indirectly make
any sales to or purchases  from an  Affiliate  or (e) increase the  compensation
being paid to an Affiliate.

      9.3 NO  INCONSISTENT  AGREEMENTS.  None  of  the  Company  nor  any of its
Subsidiaries  shall  enter  into any  Contractual  Obligation  or enter into any
amendment or other modification to any currently existing Contractual Obligation
of the Company,  or any of their  Subsidiaries,  which by its terms restricts or
prohibits  the ability of the Company to pay the principal of or interest on the
Notes or to fully satisfy all of the obligations under the Transaction Documents
of the Company or any of its Subsidiaries.

      9.4  LIMITATION  ON  INDEBTEDNESS.  The Company  shall not,  and shall not
cause,  suffer or permit any of its  Subsidiaries  to,  directly or  indirectly,
collectively  and in  the  aggregate,  issue,  assume  or  otherwise  incur  any
Indebtedness, other than:

            (a) Indebtedness created under this Agreement;

            (b) Non-current liabilities for post-employment healthcare and other
insurance benefits;

            (c) Trade payables and accrued expenses, in each case arising in the
ordinary course of business;

            (d) Indebtedness secured by a Lien permitted under Section 9.5; and


                                       28
<PAGE>

            (e) Indebtedness between and/or among the Company and the Subsidiary
Guarantors; and

            (f) Loans by the Company to Cardiosonix  Ltd. in the ordinary course
of business consistent with past practices.

      9.5 LIMITATION ON LIENS. The Company, will not, and will not permit any of
its Subsidiaries,  directly or indirectly, to create, incur, assume or permit to
exist any Lien on or with respect to any property or asset  (including,  without
limitation,  any  document  or  instrument  with  respect  to goods or  accounts
receivable) of the Company or its  Subsidiaries,  whether now owned or hereafter
acquired,  or any income or profits  therefrom,  except Permitted  Encumbrances.
"PERMITTED ENCUMBRANCES" means the following:

            (a) Liens for Taxes, assessments or other governmental charges which
are not yet due and  payable or which are being  contested  in good faith with a
reserve or other appropriate provision having been made therefor;

            (b)  Liens  of   landlords,   carriers,   warehousemen,   mechanics,
materialmen  and other similar  liens imposed by law,  which are incurred in the
ordinary  course of business for sums not more than thirty (30) days  delinquent
or which are being  contested  in good faith;  provided  that a reserve or other
appropriate  provision shall have been made therefor and the aggregate amount of
such Liens is less than $100,000;

            (c) Liens (other than any Lien imposed under or in  connection  with
ERISA)  incurred  or  deposits  made  in the  ordinary  course  of  business  in
connection with workers' compensation, unemployment insurance and other types of
social security, or to secure the performance of tenders, statutory obligations,
surety,  stay,  customs and appeal bonds, bids,  leases,  government  contracts,
trade  contracts,  performance  and  return of money  bonds  and  other  similar
obligations (exclusive of obligations for the payment of borrowed money);

            (d) Deposits in an aggregate amount not to exceed $100,000,  made in
the ordinary course of business to secure liability to insurance carriers;

            (e) Liens for purchase money obligations to acquire assets; provided
that:

                  (i) each such Lien attaches to such asset concurrently with or
      within 10 days after acquisition thereof;

                  (ii) does not exceed the purchase price of such asset; and

                  (iii) the  Indebtedness  secured by all such Liens,  shall not
      exceed $1,000,000; and

                  (iv) each such Lien encumbers only the asset so purchased;

            (f) Any  attachment  or judgment Lien not  constituting  an Event of
Default;


                                       29
<PAGE>

            (g) Leases or  subleases  granted to others not  interfering  in any
material respect with the business of the Company or any of its Subsidiaries;

            (h) Easements, rights of way, restrictions and other similar charges
or  encumbrances  not  interfering  in any  material  respect  with the ordinary
conduct of the business of the Company or any of its Subsidiaries; and

            (i) Liens  existing on the date hereof and renewals  and  extensions
thereof, which Liens are set forth on Schedule 9.5 hereto.


      9.6 DISPOSITIONS OF ASSETS.  The Company will not, and will not permit any
of its  Subsidiaries,  directly or  indirectly,  to convey,  sell (pursuant to a
sale/leaseback or otherwise), lease, sublease, transfer or otherwise dispose of,
or grant any  Person an option to  acquire,  in one  transaction  or a series of
transactions,  any material amount of its property,  business or assets,  or the
capital stock of or other equity interests in any of its  Subsidiaries,  whether
now owned or hereafter acquired, except for:

            (a) Bona fide sales of  inventory,  including,  without  limitation,
real estate acquired in the ordinary  course of business,  to customers for fair
value in the ordinary course of business and dispositions of obsolete  equipment
not used or useful in the business;

            (b) Asset Dispositions if all of the following conditions are met:

                  (i) the market value of assets sold or  otherwise  disposed of
      (by the Company and its Subsidiaries  taken as a whole) in any fiscal year
      do not exceed $500,000;

                  (ii) the Net  Proceeds  received is at least equal to the fair
      market value of such assets;

                  (iii) at least 75% of the consideration received is cash;

                  (iv) after giving effect to the sale or other  disposition  of
      the assets  included  within the Asset  Disposition  and the  repayment of
      Indebtedness with the proceeds thereof, the Company would be in compliance
      on a pro forma  basis with the  covenants  set forth in Section 9.8 hereof
      recomputed  for the most  recently  ended month for which  information  is
      available and is in compliance with all other terms and conditions of this
      Agreement; and

                  (v) no Event of Default  then exists or shall result from such
      sale or other disposition.

            (c)  Licenses,   assignments  or  other  transfers  of  Intellectual
Property of the Company or Subsidiaries,  or rights therein,  in connection with
cooperative  research  and  development  agreements,   strategic  alliances,  or
agreements providing for the manufacturing,  distribution or sale of products or
services of the Company or Subsidiaries.


                                       30
<PAGE>

      9.7 LIMITATIONS ON RESTRICTED  PAYMENTS.  The Company shall not, and shall
not permit any of its Subsidiaries to declare, or make any Restricted Payment.

      9.8  FINANCIAL  COVENANTS.  The  Company  covenants  and agrees that until
payment in full of all  Indebtedness  hereunder and under the Notes, the Company
shall  comply with and shall cause each of its  Subsidiaries  to comply with all
covenants in this Section 9.8  applicable  to such Person.  Compliance  with the
covenants in this Section 9.8 shall be  determined  on a  consolidated  basis in
accordance with GAAP consistently applied, unless explicitly stated otherwise.

            (a) Revenues.  The Company shall not permit revenues for the Company
and its Subsidiaries, on a consolidated basis, for each twelve (12) month period
set forth below to be less than the amount set forth below for such period:

             Period                                         Amount
             ------                                         ------

1/1/05 to and including 12/31/05                          $5,400,000
1/1/06 to and including 12/31/06                          $6,500,000
Each twelve month period thereafter                       $9,000,000


The provisions of this Section 9.8(a) shall  terminate upon the earlier to occur
of the following: (i) the Company receives an approval letter from the U.S. Food
and Drug Administration or the European Medicines Agency to market Lymphoseek or
(ii) the Company  enters into a  partnership  or other  strategic  alliance with
another  Person who has the  resources  (financial  and  otherwise)  to actively
develop the RIGScan CR technology and such Person agrees to actively develop the
RIGScan  CR  technology  and  bear  50% of the  costs  of such  development.  In
addition,  compliance  with the  provisions of this Section  9.8(a) shall not be
required with respect to any twelve (12) month period  indicated in this Section
9.8(a), if a the end of such period,  the Company and its Subsidiaries will have
cash and Cash Equivalents greater than $8,000,000.

            (b) Cash and Cash  Equivalents.  As of the end of each six (6) month
period set forth below, the Company and its Subsidiaries will have cash and Cash
Equivalents  equal to at least the amount set forth  below with  respect to such
period:

             Period                                         Amount
             ------                                         ------

1/1/05 to and including 6/30/05                           $4,500,000
7/1/05 to and including 12/31/05                          $4,000,000
Each six month period thereafter                          $3,500,000


      9.9 CONTINGENT OBLIGATIONS. The Company shall not, nor shall it permit any
of their  Subsidiaries  directly or  indirectly to create or become or be liable
with respect to any  Contingent  Obligation  except those;  (a)  resulting  from
endorsements of negotiable  instruments for collection in the ordinary course of
business; (b) arising under this Agreement; (c) existing on the Closing Date and
as  described  in Schedule  9.12  annexed  hereto;  (d) arising  with respect to
customary  indemnification and purchase price adjustment obligations incurred in
connection with any Asset  Dispositions;  (e) incurred in the ordinary course of
business   with   respect   to  surety  and  appeal


                                       31
<PAGE>

bonds,  performance  and  return-of-money  bonds  and  similar  obligations  not
exceeding any time outstanding $50,000 in aggregate liability; (f) incurred with
respect to any Indebtedness  permitted  pursuant to Section 9.4 hereof;  (g) not
otherwise  permitted  by  clauses  (a)  through  (f)  above  so long as any such
Contingent  Obligations,  in the aggregate at any time outstanding do not exceed
$50,000.

      9.10 PRESS RELEASE;  PUBLIC OFFERING MATERIALS.  Except as may be required
by applicable law or as permitted  under Section 11.13,  neither the Company nor
any of its  Affiliates  shall,  nor shall the  Company or any of its  Affiliates
permit any of their respective  Subsidiaries to disclose the name of any BV Fund
or any of its  Affiliates  in any  press  release  or in any  prospectus,  proxy
statement or other  materials filed with the  governmental  entity relating to a
public  offering of the capital  stock or other equity  interest of the Company,
any of its Affiliates or any of their  respective  Subsidiaries  without such BV
Fund's or such Affiliate's prior written consent which shall not be unreasonably
withheld.

      9.11 NO NEGATIVE PLEDGES. The Company will not, and will not permit any of
its  Subsidiaries,  directly or indirectly to enter into or assume any agreement
prohibiting  the  creation  or  assumption  of any Lien upon its  properties  or
assets, whether now owned or hereafter acquired.

      9.12 NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO THE COMPANY. Except as
otherwise  provided herein, the Company will not, and will not permit any of its
Subsidiaries,  directly or indirectly to create or otherwise  cause or suffer to
exist or become effective any consensual  encumbrance or restriction of any kind
on the ability of the Company or any such  Subsidiary  to: (a) pay  dividends or
make any other distribution on any of such Subsidiary's capital stock (or equity
interest) owned by the Company or any Subsidiary;  (b) subject to  subordination
provisions  for the  benefit of  Purchasers,  pay any  Indebtedness  owed to the
Company or any other  Subsidiary;  (c) make loans or  advances to the Company or
any other  Subsidiary;  or (d)  transfer  any of its  property  or assets to the
Company or any other Subsidiary.

      9.13 SALE LEASEBACKS.  The Company shall not and shall not cause or permit
any of its  Subsidiaries  to  engage  in any  sale-leaseback,  synthetic  lease,
"off-balance"  sheet transaction or similar  transaction or financing  involving
any of its assets.

      9.14 TAX  ELECTION.  The Company will not make any  elections to treat the
Company as anything other than an association  taxable as a corporation for U.S.
federal income tax purposes.

      9.15 INVESTMENTS. Except in the ordinary course of business and consistent
with past  practices,  the  Company  shall not,  and shall not permit any of its
Subsidiaries,  directly  or  indirectly,  to make or own any  Investment  in any
Person except:  (a) Investments in Cash Equivalents;  (b) intercompany  loans to
the  extent  permitted  under  Section  or 9.2;  and (c) loans and  advances  to
employees for moving,  entertainment,  travel and other similar  expenses in the
ordinary  course of business not to exceed $ 50,000 in the aggregate at any time
outstanding.


                                       32
<PAGE>

                                   ARTICLE 10

                                  REGISTRATION
                       COMPLIANCE WITH THE SECURITIES ACT

      10.1 REGISTRATION PROCEDURES AND EXPENSES.

            (a) The Company shall, as soon as reasonably practicable,  but in no
event later than  thirty  (30) days  following  the  Closing  Date (the  "FILING
DATE"),  prepare and file with the Commission a  registration  statement on Form
SB-2  relating  to the sale of the  shares  issuable  upon the  exercise  of the
Warrants and the  conversion  of the Notes  (together  with any shares of Common
Stock issued as a dividend or other distribution with respect to, or in exchange
for,  or in  replacement  of,  such  shares,  the  "REGISTRABLE  SHARES") by the
Purchasers  from  time to time  on  Nasdaq  or the  facilities  of any  national
securities  exchange or inter-dealer  quotation system on which the Common Stock
is then  traded  or in  privately  negotiated  transactions  (such  registration
statement, the "REGISTRATION STATEMENT").  If Form SB-2 is not available at that
time,  the Company  will file a  registration  statement or such form as is then
available to effect a registration  of the  Registrable  Shares,  subject to the
consent of a majority of the  Registrable  Shares,  which  consent  shall not be
unreasonably withheld.

            (b) The Company  shall use its best efforts to cause the  Commission
to declare the Registration Statement effective within ninety (90) calendar days
after the Closing Date (the "REQUIRED EFFECTIVE DATE").  However, so long as the
Company filed the Registration Statement by the Filing Date, if the Registration
Statement receives  Commission review,  then the Required Effective Date will be
the one hundred  twentieth  (120th)  calendar  day after the Closing  Date.  The
Company's best efforts will include,  but not be limited to, promptly responding
to all  comments  received  from the  staff of the  Commission.  If the  Company
receives  notification from the Commission that the Registration  Statement will
receive no action or review from the Commission,  then the Company will, subject
to its  rights  under  this  Agreement,  use its  best  efforts  to  cause  such
Registration  Statement to become  effective within five (5) business days after
such Commission notification.

            (c) The Company  shall use its best efforts to promptly  prepare and
file with the Commission  such  amendments and  supplements to the  Registration
Statement and the prospectus used in connection therewith as may be necessary to
keep the Registration  Statement  effective until the earlier of (i) three years
after the Closing  Date and (ii) such time as all  Registrable  Shares have been
sold pursuant to the Registration Statement.

            (d) The Company shall furnish (i) to each  Purchaser with respect to
the  Registrable  Shares  by  e-mail  or  other  prompt  means  one  copy of the
prospectus promptly after effectiveness of the Registration Statement and in any
case before the next opening of the principal market for the Registrable  Shares
and (ii) to each Purchaser with respect to the  Registrable  Shares (and to each
underwriter,  if any,  of the  Registrable  Shares)  such  number  of  copies of
prospectuses  and such other documents as such Purchaser may reasonably  request
within a  reasonable  time,  in order to  facilitate  the  public  sale or other
disposition of all or any of the Registrable Shares held by the Purchaser.


                                       33
<PAGE>

            (e) The  Company  shall file  documents  required of the Company for
normal Blue Sky  clearance in states  specified in writing by any  Purchaser and
reasonably acceptable to the Company; provided,  however, that the Company shall
not be required to (i) qualify to do business in any jurisdiction where it would
not  otherwise  be required to qualify but for this Section  10.1;  (ii) subject
itself to taxation in any such jurisdiction; (iii) provide any undertakings that
cause material expense or burden to the Company;  or (iv) make any change to its
organizational documents, which in each case the Board determines to be contrary
to the best interests of the Company and its stockholders.

            (f) The Company shall use its best efforts to cause all  Registrable
Shares to be listed on each securities exchange or inter-dealer quotation system
on which  similar  securities  issued by the  Company are then listed or traded,
assuming  such  listing is required  to permit  transactions  in the  Registered
Securities on such exchange or quotation system.

            (g) The  Company  shall bear all  expenses  in  connection  with the
procedures  in  paragraphs  (a)  through  (f)  of  this  Section  10.1  and  the
registration of the Registrable  Shares pursuant to the Registration  Statement,
including  the  reasonable  fees  and  expenses  of  one  legal  counsel  to the
Purchasers who shall be selected by the BV Funds  ("PURCHASERS'  COUNSEL"),  but
excluding underwriting discounts, brokerage fees and commissions incurred by the
Purchasers.

            (h)  The  Company  shall  promptly  notify  the  Purchasers  of  the
effectiveness of the Registration Statement,  and any post-effective  amendments
thereto,  as well as of the  receipt by the  Company  of any stop  orders of the
Commission  with respect to the  Registration  Statement  and the lifting of any
such order.

            (i) The  Company  shall  permit  Purchasers'  Counsel  to review the
Registration  Statement and all  amendments  and  supplements  thereto,  and any
comments  made  by the  staff  of the  Commission  concerning  the  transactions
contemplated by the Registration  Statement and the Company's responses thereto,
within  a  reasonable  period  of time  prior  to the  filing  thereof  with the
Commission  (or,  in the case of comments  made by the staff of the  Commission,
within  a  reasonable  period  of time  following  the  receipt  thereof  by the
Company).

            (j) Notwithstanding the foregoing, it shall be a condition precedent
to the  obligations of the Company to take any action pursuant to paragraphs (a)
through  (f) of this  Section  10.1  with  respect  to a  Purchaser,  that  such
Purchaser shall furnish to the Company such information  regarding  itself,  the
Registrable  Shares  to be sold by the  Purchaser,  and the  intended  method of
disposition  of such  Registrable  Shares as shall be  required  to  effect  the
registration  of the  Registrable  Shares,  all of  which  information  shall be
furnished  to the Company in writing  specifically  for use in the  Registration
Statement.  For purposes of this Article 10, each  Purchaser  shall be deemed to
hold the  Registrable  Securities  held by such  Purchaser  and all  Registrable
Securities  issuable  upon the  conversion  of any Notes and the exercise of any
Warrants held by such  Purchaser.  Notwithstanding  any other  provision of this
Agreement, the Company may include in any Registration Statement shares issuable
upon the exercise of any warrants  issued as  compensation to the brokers listed
on Schedule 5.19.

      10.2  TRANSFER  OF  REGISTRABLE   SHARES  AFTER   REGISTRATION.   While  a
Registration  Statement is effective and available  for resale,  each  Purchaser
agrees that it will not effect any disposition of the Registrable  Shares issued
to such  Purchaser  upon the  conversion  of the  Notes or the  exercise  of the
Warrants that would  constitute a sale within the meaning of the Securities Act,
except as contemplated  in the  Registration  Statements  referred to in Section
10.1  hereof in the  section  titled  "Plan of  Distribution"  or pursuant to an
applicable  exemption from registration,  the availability of which is confirmed
in writing by counsel to such Purchaser (the form,  substance and scope of which
opinion  shall be  reasonably  acceptable  to the Company) and  delivered to the
Company,  and that it will  promptly  notify the  Company of any  changes in the
information set forth in the Registration Statements regarding such Purchaser or
its plan of distribution.


                                       34
<PAGE>

      10.3  INDEMNIFICATION.   For  purpose  of  this  Section  10.3,  the  term
"REGISTRATION STATEMENT" shall include any final prospectus, exhibit, supplement
or  amendment  included  in or relating  to, and any  document  incorporated  by
reference in, the Registration Statement referred to in Section 10.1 hereof.

            (a) The Company agrees to indemnify and hold harmless each Purchaser
and each of such Purchaser's  Purchaser  Affiliates against any losses,  claims,
damages,  liabilities or expenses,  joint or several, to which such Purchaser or
Purchaser  Affiliate may become subject,  under the Securities Act, the Exchange
Act, or any other federal or state statutory law or regulation, or at common law
or otherwise  (including in settlement of any litigation,  if such settlement is
effected  with the  written  consent of the  Company),  insofar as such  losses,
claims,  damages,  liabilities  or expenses  (or  actions in respect  thereof as
contemplated  below)  arise out of or are based  upon any  untrue  statement  or
alleged  untrue  statement of any material  fact  contained in the  Registration
Statement, including the prospectus, financial statements and schedules, and all
other documents filed as a part thereof, as amended at the time of effectiveness
of the  Registration  Statement,  including any information  deemed to be a part
thereof as of the time of effectiveness  pursuant to paragraph (b) of Rule 430A,
or pursuant to Rule 434, of the Rules and Regulations, or the prospectus, in the
form first  filed with the  Commission  pursuant to Rule 424(b) of the Rules and
Regulations,  or  filed  as part of the  Registration  Statement  at the time of
effectiveness  if no  Rule  424(b)  filing  is  required,  or any  amendment  or
supplement  thereto,  (a  "PROSPECTUS")  or arise out of or are  based  upon the
omission or alleged omission to state in any of them a material fact required to
be stated  therein  or  necessary  to make the  statements  in the  Registration
Statement or Prospectus not misleading in the light of the  circumstances  under
which  they were  made,  or arise out of or are based in whole or in part on any
material breach of the  representations  and warranties of the Company contained
in this  Agreement,  or any  material  breach by the Company of its  obligations
hereunder,  and will  reimburse  such  Purchaser or Purchaser  Affiliate for any
legal and other  expenses  as such  expenses  are  reasonably  incurred  by such
Purchaser or Purchaser  Affiliate in connection with  investigating,  defending,
settling,  compromising  or paying  any such  loss,  claim,  damage,  liability,
expense or action; provided, however, that the Company will not be liable in any
such case to the  extent,  but only to the  extent,  that any such loss,  claim,
damage,  liability  or  expense  arises  out of or is based  upon (i) an  untrue
statement or alleged untrue  statement or omission or alleged omission made in a
Registration Statement or the Prospectus in reliance upon and in conformity with
written  information  furnished to the Company by or on behalf of such Purchaser
expressly for use therein,  or (ii) the failure of such Purchaser to comply with
the covenants and agreements contained in Section 10.2 or 10.8 hereof respecting
the  sale  of  the   Registrable   Shares,   or  (iii)  the  inaccuracy  of  any
representations  made by such Purchaser herein or (iv) any statement or omission
in any  Prospectus  that is  corrected  in any  subsequent  Prospectus  that was
delivered  to such  Purchaser  prior  to the  pertinent  sale or  sales  by such
Purchaser.


                                       35
<PAGE>

            (b) Each  Purchaser  as to itself will  severally,  but not jointly,
indemnify  and hold  harmless the Company,  each of its  directors,  each of its
officers  who signed a  Registration  Statement  and each  person,  if any,  who
controls the Company  within the meaning of Section 15 of the  Securities Act or
Section 20 of the Exchange Act, against any losses, claims, damages, liabilities
or expenses to which the Company,  each of its  directors,  each of its officers
who signed such Registration Statement or controlling person may become subject,
under the  Securities  Act,  the  Exchange  Act,  or any other  federal or state
statutory  law or  regulation,  or at  common  law or  otherwise  (including  in
settlement of any  litigation,  if such  settlement is effected with the written
consent of such Purchaser) insofar as such losses, claims, damages,  liabilities
or expenses (or actions in respect thereof as  contemplated  below) arise out of
or are based upon (i) any failure of such Purchaser to comply with the covenants
and agreements  contained in Section 10.2 or 10.8 hereof  respecting the sale of
the Registrable Shares or (ii) any material breach of any representation made by
such  Purchaser  herein or (iii) any untrue or alleged  untrue  statement of any
material fact contained in such Registration  Statement,  the Prospectus related
thereto,  or arise out of or are based upon the omission or alleged  omission to
state therein a material fact required to be stated therein or necessary to make
the  statements in such  Registration  Statement or Prospectus not misleading in
the light of the  circumstances  under which they were made, in each case to the
extent,  but only to the extent,  that such untrue  statement or alleged  untrue
statement  or  omission  or  alleged  omission  was  made in  such  Registration
Statement  or  Prospectus,  in  reliance  upon and in  conformity  with  written
information  furnished  to the  Company  by  such  Purchaser  expressly  for use
therein,  and such Purchaser will reimburse the Company,  each of its directors,
each of its  officers  who signed such  Registration  Statement  or  controlling
person for any legal and other expense reasonably incurred by the Company,  each
of its directors, each of its officers who signed such Registration Statement or
controlling  person  in  connection  with  investigating,  defending,  settling,
compromising  or paying  any such loss,  claim,  damage,  liability,  expense or
action;  provided,  however,  that the  obligations of each Purchaser under this
Section 10.3 shall not exceed the net proceeds to such  Purchaser  from the sale
of Registrable Shares pursuant to such Registration Statement.

            (c)  Promptly  after  receipt  by an  indemnified  party  under this
Section  10.3 of  notice of the  threat  or  commencement  of any  action,  such
indemnified  party will, if a claim in respect  thereof is to be made against an
indemnifying  party under this Section 10.3,  promptly  notify the  indemnifying
party in writing thereof;  but the omission so to notify the indemnifying  party
will not  relieve  it from any  liability  which it may have to any  indemnified
party for contribution or otherwise under the indemnity  agreement  contained in
this  Section  10.3  (except to the extent  that such  omission  materially  and
adversely  affects the  indemnifying  person's  ability to defend such  action).
Subject to  provisions  hereinafter  stated,  in case any such action is brought
against any  indemnified  party and such  indemnified  party seeks or intends to
seek  indemnity  from an  indemnifying  party,  the  indemnifying  party will be
entitled to  participate  in, and, to the extent that it may wish,  jointly with
all other indemnifying parties similarly notified, to assume the defense thereof
with  counsel  reasonably  satisfactory  to such  indemnified  party;  provided,
however, if the defendants in any such action include both the indemnified party
and the  indemnifying  party,  and the  indemnifying  party and the  indemnified
party,  based upon the


                                       36
<PAGE>

advice of such indemnified party's counsel, shall have reasonably concluded that
there may be a conflict of interest  between the  positions of the  indemnifying
party and the indemnified  party in conducting the defense of any such action or
that  there  may be legal  defenses  available  to it and/or  other  indemnified
parties  which  are  different  from or  additional  to those  available  to the
indemnifying  party,  the  indemnified  party or parties shall have the right to
select  separate  counsel  to  assume  such  legal  defenses  and  to  otherwise
participate in the defense of such action on behalf of such indemnified party or
parties.  Upon receipt of notice from the indemnifying party to such indemnified
party of its  election so to assume the  defense of such action and  approval by
the indemnified party of counsel,  the indemnifying  party will not be liable to
such  indemnified  party under this Section 10.3 for any legal or other expenses
subsequently  incurred by such indemnified  party in connection with the defense
thereof  unless (i) the  indemnified  party shall have  employed such counsel in
connection  with the assumption of legal defenses in accordance with the proviso
to the preceding sentence (it being understood,  however,  that the indemnifying
party shall not be liable for the  expenses of more than one  separate  counsel,
approved  by  such  indemnifying   party,  which  such  approval  shall  not  be
unreasonably   withheld,   in  the  case  of  paragraph  (a),  representing  the
indemnified  parties  who are parties to such action  (plus  local  counsel,  if
appropriate)  or (ii) the  indemnifying  party shall not have  employed  counsel
reasonably  satisfactory to the  indemnified  party to represent the indemnified
party within a reasonable time after notice of  commencement of action,  in each
of which  cases the  reasonable  fees and  expenses  of counsel  shall be at the
expense of the indemnifying  party. In no event shall any indemnifying person be
liable in respect of any amounts  paid in  settlement  of any action  unless the
indemnifying  person  shall have  approved the terms of such  settlement,  which
consent  shall not be  unreasonably  withheld.  No  indemnifying  person  shall,
without  the  prior  written  consent  of the  indemnified  person,  effect  any
settlement  of any  pending  or  threatened  proceeding  in respect of which any
indemnified person is or could have been a party and indemnification  could have
been  sought  hereunder  by such  indemnified  person,  unless  such  settlement
includes an unconditional  release of such indemnified person from all liability
on claims that are the subject matter of such proceeding.

            (d) If the  indemnification  provided  for in this  Section  10.3 is
required  by its  terms  but is for  any  reason  held to be  unavailable  to or
otherwise  insufficient to hold harmless an indemnified  party under  paragraphs
(a), (b) or (c) of this Section 10.3 in respect to any losses, claims,  damages,
liabilities or expenses  referred to herein,  then each applicable  indemnifying
party shall contribute to the amount paid or payable by such  indemnified  party
as a result of any losses, claims, damages,  liabilities or expenses referred to
herein (i) in such proportion as is appropriate to reflect the relative benefits
received by the  Company and the  Purchasers  from the  placement  of the Common
Stock  contemplated  by this  Agreement  or (ii) if the  allocation  provided by
clause (i) above is not  permitted by applicable  law, in such  proportion as is
appropriate to reflect not only the relative  benefits referred to in clause (i)
above but the relative  fault of the Company and the  Purchasers  in  connection
with the  statements or omissions or  inaccuracies  in the  representations  and
warranties  in this  Agreement  that resulted in such losses,  claims,  damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and a Purchaser on
the  other  shall  be  deemed  to  be  in  the  same  proportion  as  the  total
consideration  paid by such Purchaser to the Company  pursuant to this Agreement
and the other Transaction  Documents for the Registrable Shares acquired by such
Purchaser that were sold pursuant to the relevant  Registration  Statement bears
to the difference (the "DIFFERENCE") between the amount such


                                       37
<PAGE>

Purchaser  paid for the  Registrable  Shares  that  were sold  pursuant  to such
Registration Statement and the amount received by such Purchaser from such sale.
The  relative  fault of the Company on the one hand and a Purchaser on the other
shall be determined  by reference to, among other things,  whether the untrue or
alleged  statement  of a material  fact or the  omission or alleged  omission to
state a material fact or the inaccurate or the alleged inaccurate representation
and/or  warranty  relates  to  information  supplied  by the  Company or by such
Purchaser and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission.  The amount
paid  or  payable  by a  party  as a  result  of the  losses,  claims,  damages,
liabilities and expenses  referred to above shall be deemed to include,  subject
to the limitations set forth in paragraph (c) of this Section 10.3, any legal or
other fees or  expenses  reasonably  incurred by such party in  connection  with
investigating  or defending  any action or claim.  The  provisions  set forth in
paragraph  (c) of this  Section 10.3 with respect to the notice of the threat or
commencement of any threat or action shall apply if a claim for  contribution is
to be made under this  paragraph  (d);  provided,  however,  that no  additional
notice  shall be required  with respect to any threat or action for which notice
has been given under paragraph (c) for purposes of indemnification.  The Company
and the Purchasers agree that it would not be just and equitable if contribution
pursuant to this  Section  10.3 were  determined  solely by pro rata  allocation
(even if the  Purchasers  were treated as one entity for such purpose) or by any
other  method  of  allocation  which  does not  take  account  of the  equitable
considerations referred to in this paragraph.  Notwithstanding the provisions of
this Section  10.3, no Purchaser  shall be required to contribute  any amount in
excess of the amount by which the  Difference  exceeds the amount of any damages
which such Purchaser has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent  misrepresentation  (within  the  meaning  of  Section  11(f)  of the
Securities  Act) shall be entitled to  contribution  from any person who was not
guilty of such  fraudulent  misrepresentation.  The  Purchasers'  obligation  to
contribute  pursuant to this  Section  10.3 is several  and not joint.

            (e) Each Purchaser  hereby  acknowledges  that it is a sophisticated
business Person who was represented by counsel during the negotiations regarding
the provisions  hereof  including,  without  limitation,  the provisions of this
Section 10.3,  and is fully  informed  regarding  said  provisions.  Each of the
Company and the  Purchasers  are advised that federal or state public  policy as
interpreted by the courts in certain jurisdictions may be contrary to certain of
the  provisions of this Section 10.3, and each of the Company and the Purchasers
hereby expressly waive and relinquish any right or ability to assert such public
policy as a defense to a claim under this Section 10.3 and further agrees not to
attempt to assert any such defense.

      10.4 TERMINATION OF CONDITIONS AND OBLIGATIONS.  The conditions  precedent
imposed by this Article 10 upon the  transferability  of the Registrable  Shares
held by a Purchaser shall cease and terminate as to any particular number of the
Registrable  Shares  upon  the  earliest  to  occur  of (i)  the  sale  of  such
Registrable Shares pursuant to a Registration  Statement,  (ii) the sale of such
Registrable  Shares  pursuant to Rule 144 under the  Securities  Act or (iii) at
such time as an opinion of counsel reasonably satisfactory in form and substance
to the Company and such  Purchaser  shall have been  rendered to the effect that
such conditions are not necessary in order to comply with the Securities Act.

      10.5 INFORMATION AVAILABLE. As long as any Purchaser holds any Registrable
Shares and the  Company is subject to the filing  requirements  of the  Exchange
Act,  the  Company  covenants  to timely file (or obtain  extensions  in respect
thereof and file within the applicable  grace period) all reports required to be
filed by the Company after the date hereof pursuant to the Exchange Act. So long
as a  Registration  Statement  is effective  covering the resale of  Registrable
Shares held by any  Purchaser,  the Company will furnish to the  Purchaser  upon
such Purchaser's request:


                                       38
<PAGE>

            (a) as soon as practicable  after  available (but in the case of the
Company's  Annual  Report to  Stockholders,  concurrently  with  delivery to its
shareholders generally) one copy of (i) its Annual Report to Stockholders (which
Annual Report shall contain financial statements audited in accordance with U.S.
generally  accepted  accounting  principles by a nationally  recognized  firm of
certified public  accountants),  (ii) if not included in substance in the Annual
Report to Stockholders,  upon the request of any Purchaser, its Annual Report on
Form 10-K or 10-KSB,  (iii) upon the  request of any  Purchaser,  its  Quarterly
Reports on Form 10-Q or 10-QSB,  (iv) upon the  request  of any  Purchaser,  its
Current Reports on Form 8-K, and (v) a full copy of the particular  Registration
Statement  covering  the  Registrable  Shares  (the  foregoing,  in  each  case,
excluding exhibits);

            (b) all  exhibits  excluded  by the  parenthetical  to  subparagraph
(a)(v) of this Section 10.5; and

            (c) upon the  reasonable  request  of any  Purchaser,  a  reasonable
number of copies of the  prospectuses  and supplements  thereto to supply to any
other party requiring such prospectuses and supplements.

      10.6  ASSIGNMENT  OF  REGISTRATION  RIGHTS.  The rights of each  Purchaser
hereunder,  including  the right to have the Company  register  the  Registrable
Shares  pursuant  to this  Agreement,  will be  automatically  assigned  by such
Purchaser to transferees or assignees of the Registrable Shares, but only if (a)
such Purchaser  agrees in writing with the transferee or assignee to assign such
rights,  and a copy of such  agreement  is  furnished  to the  Company  within a
reasonable time after such  assignment,  (b) the Company is, within a reasonable
time after such transfer or  assignment,  furnished  with written  notice of the
name and address of such transferee or assignee and the Registrable  Shares with
respect to which such registration rights are being transferred or assigned, (c)
after such transfer or assignment,  the further  disposition of such Registrable
Shares by the transferee or assignee is restricted  under the Securities Act and
applicable state securities laws, (d) at or before the time the Company received
the written notice  contemplated by clause (b) of this sentence,  the transferee
or  assignee  agrees  in  writing  with  the  Company  to be bound by all of the
provisions  contained herein, (e) the transferee is an "accredited  investor" as
that  term is  defined  in Rule 501 of  Regulation  D, and (f) the  transfer  of
Registrable Shares is made in accordance with the provisions of Section 10.2 and
Section 10.8 hereof.

      10.7 DELAY IN FILING OR  EFFECTIVENESS  OF  REGISTRATION  STATEMENT.  If a
Registration  Statement  is not filed by the Company with the  Commission  on or
prior to the Filing Date, then for each day following the Filing Date, until but
excluding the date such Registration Statement is filed, or if such Registration
Statement is not declared  effective by the Commission by the Required Effective
Date, then for each day following the relevant  Required  Effective Date,  until
but  excluding the date the  Commission  declares  such  Registration  Statement
effective, the


                                       39
<PAGE>

Company  shall,  for each such day, pay each  Purchaser with respect to any such
failure,  as liquidated damages and not as a penalty, an amount equal to 0.0667%
of the total  consideration  paid by such Purchaser for its  Registrable  Shares
covered by such Registration  Statement pursuant to this Agreement;  and for any
such day, such payment shall be made no later than the first business day of the
calendar  month  next  succeeding  the month in which such day  occurs.  If such
Purchaser  shall  be  prohibited  from  selling   Registrable   Shares  under  a
Registration Statement as a result of a Suspension of more than thirty (30) days
or  Suspensions on more than two (2) occasions of not more than thirty (30) days
each in any  12-month  period,  then for each  day on which a  Suspension  is in
effect that exceeds the maximum  allowed period for a Suspension or Suspensions,
but not including any day on which a Suspension is lifted, the Company shall pay
such Purchaser,  as liquidated damages and not as a penalty,  an amount equal to
0.0667% of the total  consideration  paid by such Purchaser for its  Registrable
Shares  covered by such  Registration  Statement  pursuant to this Agreement for
each such day, and such payment  shall be made no later than the first  business
day of the calendar  month next  succeeding  the month in which such day occurs.
For purposes of this Section  10.7, a Suspension  shall be deemed  lifted on the
date  that  notice  that the  Suspension  has been  lifted is  delivered  to the
Purchasers  pursuant  to  Section  11.2 of this  Agreement.  Any  payments  made
pursuant to this Section 10.7 shall not  constitute  the  Purchasers'  exclusive
remedy for such events.  Notwithstanding the foregoing  provisions,  in no event
shall the Company be obligated to pay such  liquidated  damages to more than one
Purchaser in respect of the same Registrable Shares for the same period of time.
The liquidated  damage payments imposed hereunder shall be made to the Purchaser
in cash.

      10.8 SUSPENSION.  Each Purchaser hereby covenants as to itself  severally,
but not jointly, with the Company not to make any sale of the Registrable Shares
under the  Registration  Statement  without  effectively  causing the prospectus
delivery  requirement  under the Securities Act to be satisfied.  Each Purchaser
acknowledges  that there may occasionally be times when the Company must suspend
the use of the  prospectus  forming  a part  of the  Registration  Statement  (a
"SUSPENSION") until such time as an amendment to the Registration  Statement has
been filed by the Company and declared effective by the Commission, or such time
as such prospectus has been supplemented,  or until such time as the Company has
filed an appropriate  report with the  Commission  pursuant to the Exchange Act.
Each Purchaser hereby covenants as to itself severally, but not jointly, that it
will not sell any  Registrable  Shares  pursuant to such  prospectus  during the
period  commencing  at the time at  which  it  receives  written  notice  of the
Suspension of the use of such prospectus  (without  providing any other material
information  other than at the written  request of such Purchaser) and ending at
the time the Company gives such Purchaser written notice that such Purchaser may
thereafter effect sales pursuant to such prospectus.  The Company shall not, and
shall  use  commercially  reasonable  efforts  to  cause  each of its  officers,
directors, employees and agents not to, provide such Purchaser with any material
nonpublic  information  regarding  the  Company  other  than the  notice  of the
Suspension,  with no other  information,  without the express written consent of
such Purchaser.  The Purchasers shall not be prohibited from selling Registrable
Shares under the Registration  Statement as a result of Suspensions on more than
two (2) occasions of not more than thirty (30) days each in any 12-month period,
unless,  in the good faith judgment of the Board following the written advice of
counsel,  the sale of  Registrable  Shares under the  Registration  Statement in
reliance on this  paragraph  would be reasonably  likely to cause a violation of
the Securities  Act or the Exchange Act;  provided that the Company shall remain
liable for  liquidated  damages  pursuant to Section 10.7 hereof with respect to
any Suspensions exceeding the aforementioned two permitted 30-day Suspensions in
any 12-month period.


                                       40
<PAGE>

                                   ARTICLE 11

                                  MISCELLANEOUS

      11.1   SURVIVAL   OF   REPRESENTATIONS   AND   WARRANTIES.   All   of  the
representations  and  warranties  made herein shall  survive the  execution  and
delivery of this Agreement,  any investigation by or on behalf of any Purchaser,
acceptance  of the  Securities  and payment  therefor,  or  termination  of this
Agreement.

      11.2 NOTICES. All notices,  demands and other communications  provided for
or permitted  hereunder  shall be made in writing and shall be by  registered or
certified  first-class mail, return receipt requested,  telecopier (with receipt
confirmed), courier service or personal delivery:

            (a) if to BVF or BOVF:

                                  c/o Great Point Partners LLC
                                  2 Pickwick Plaza, Suite 450
                                  Greenwich, CT 06830
                                  Telecopier No.: (203) 552-1724
                                  Attention: David E. Kroin


                                  with a copy to:

                                  Morrison Cohen LLP
                                  909 Third Avenue
                                  New York, New York  10022
                                  Telecopier No.: (212) 735-8708
                                  Attention: David A. Scherl, Esq.

            (b) if to Bupp:

                                  c/o Neoprobe Corporation
                                  425 Metro Place North, Suite 300
                                  Dublin, Ohio  43017-1367
                                  Telecopier No.: (614) 793-7520
                                  Attention: David C. Bupp, Chief Executive
                                             Officer and President

            (c) if to the Company:

                                  Neoprobe Corporation
                                  425 Metro Place North, Suite 300
                                  Dublin, Ohio  43017-1367
                                  Telecopier No.: (614) 793-7520
                                  Attention: Brent L. Larson, Vice President
                                           - Finance and Chief Financial Officer


                                       41
<PAGE>

                                  with a copy to:

                                  Porter, Wright, Morris & Arthur, LLP
                                  41 South High Street, Suite 2800
                                  Columbus, Ohio  43215
                                  Telecopier No.: (614) 227-2100
                                  Attention: William J. Kelly, Jr., Esq.

      All such  notices  and  communications  shall be  deemed to have been duly
given:  when  delivered by hand,  if  personally  delivered;  when  delivered by
courier,  if delivered by commercial  overnight courier service; if mailed, five
Business  Days  after  being  deposited  in the  mail,  postage  prepaid;  or if
telecopied, when receipt is acknowledged.

      11.3 SUCCESSORS AND ASSIGNS.  This Agreement shall inure to the benefit of
and be binding upon the successors and permitted  assigns of the parties hereto.
Subject to applicable  securities laws and any  restrictions  contained  herein,
each  Purchaser  may  assign  any  of its  respective  rights  under  any of the
Transaction  Documents  to any Person and any holder of a Note, a Warrant or any
Common Stock issuable upon conversion of any Note or the exercise of any Warrant
may assign,  in whole or in part,  the Note, the Warrant or such Common Stock to
any Person. The Company may not assign any of its rights, or delegate any of its
obligations,  under this Agreement  without the prior written  consent of the BV
Funds,  and any such  purported  assignment  by the Company  without the written
consent of the BV Funds  shall be void and of no effect.  Except as  provided in
Article 7, no Person  other than the  parties  hereto and their  successors  and
permitted  assigns is intended  to be a  beneficiary  of any of the  Transaction
Documents.

      11.4 AMENDMENT AND WAIVER.

            (a) No failure or delay on the part of any of the parties  hereto in
exercising  any  right,  power or remedy  hereunder  shall  operate  as a waiver
thereof,  nor shall any single or partial  exercise of any such right,  power or
remedy  preclude  any other or further  exercise  thereof or the exercise of any
other right,  power or remedy.  The remedies  provided for in this Agreement are
cumulative  and are not  exclusive of any remedies  that may be available to the
parties hereto at law, in equity or otherwise.

            (b) Any amendment, supplement or modification of or to any provision
of this  Agreement,  any waiver of any provision of this Agreement or any of the
other Transaction Documents,  and any consent to any departure by any party from
the terms of any  provision of this  Agreement  or any of the other  Transaction
Documents,  shall be  effective:  (i) only if it is made or given in writing and
signed  by the  Company  and the BV  Funds;  provided,  however,  that  any such
proposed  amendment,   supplement,   modification,  or  waiver  that  materially
adversely


                                       42
<PAGE>

affects Bupp in a manner  different  from the BV Funds shall require the consent
of Bupp; and (ii) only in the specific instance and for the specific purpose for
which made or given.  No  amendment,  supplement  or  modification  of or to any
provision of this Agreement or any of the other  Transaction  Documents,  or any
waiver of any such  provision or consent to any  departure by any party from the
terms  of any  such  provision  may be  made  orally.  Except  where  notice  is
specifically  required by this Agreement,  no notice to or demand on the Company
in any case shall  entitle the Company to any other or further  notice or demand
in similar or other circumstances.

      11.5 SIGNATURES; COUNTERPARTS. Telefacsimile transmissions of any executed
original   document  and/or   retransmission   of  any  executed   telefacsimile
transmission  shall be  deemed  to be the same as the  delivery  of an  executed
original.  At the request of any party hereto,  the other  parties  hereto shall
confirm  telefacsimile  transmissions by executing  duplicate original documents
and delivering the same to the requesting  party or parties.  This Agreement may
be executed in any number of counterparts  and by the parties hereto in separate
counterparts,  each of which when so executed  shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.

      11.6  HEADINGS.  The headings in this  Agreement  are for  convenience  of
reference only and shall not limit or otherwise affect the meaning hereof.

      11.7  GOVERNING  LAW. THIS  AGREEMENT  SHALL BE GOVERNED BY,  CONSTRUED IN
ACCORDANCE WITH, AND ENFORCED UNDER, THE LAW OF THE STATE OF NEW YORK APPLICABLE
TO AGREEMENTS OR  INSTRUMENTS  ENTERED INTO AND PERFORMED  ENTIRELY  WITHIN SUCH
STATE  EXCEPT TO THE EXTENT  THAT THE GENERAL  CORPORATIONS  LAW OF THE STATE OF
DELAWARE SHALL APPLY.

      11.8 JURISDICTION, JURY TRIAL WAIVER, ETC.

            (a) EACH PARTY TO THIS AGREEMENT HEREBY  IRREVOCABLY AGREES THAT THE
ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
NOTES,  THE WARRANTS OR ANY AGREEMENTS OR  TRANSACTIONS  CONTEMPLATED  HEREBY OR
THEREBY  MAY BE  BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED
STATES OF AMERICA FOR THE  SOUTHERN  DISTRICT  OF NEW YORK AND HEREBY  EXPRESSLY
SUBMITS TO THE PERSONAL  JURISDICTION  AND VENUE OF SUCH COURTS FOR THE PURPOSES
THEREOF AND EXPRESSLY WAIVES ANY CLAIM OF IMPROPER VENUE AND ANY CLAIM THAT SUCH
COURTS ARE AN INCONVENIENT FORUM. EACH PARTY HEREBY IRREVOCABLY  CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED  COURTS IN ANY SUCH SUIT, ACTION
OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED  MAIL,
POSTAGE  PREPAID,  TO ITS ADDRESS  SET FORTH IN SECTION  11.2,  SUCH  SERVICE TO
BECOME EFFECTIVE 10 DAYS AFTER SUCH MAILING.

            (b) EACH OF THE COMPANY AND ITS SUBSIDIARIES HEREBY WAIVES ITS RIGHT
TO A JURY TRIAL WITH  RESPECT TO ANY ACTION OR CLAIM


                                       43
<PAGE>

ARISING OUT OF ANY DISPUTE IN CONNECTION  WITH THIS  AGREEMENT,  THE NOTES,  THE
WARRANTS OR ANY OF THE OTHER  TRANSACTION  DOCUMENTS,  ANY RIGHTS OR OBLIGATIONS
HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.  EACH
OF THE COMPANY AND ITS SUBSIDIARIES (I) CERTIFIES THAT NO REPRESENTATIVE,  AGENT
OR ATTORNEY OF ANY PURCHASER HAS REPRESENTED,  EXPRESSLY OR OTHERWISE, THAT SUCH
PURCHASER  WOULD NOT, IN THE EVENT OF LITIGATION,  SEEK TO ENFORCE THE FOREGOING
WAIVERS AND (II) ACKNOWLEDGES THAT EACH PURCHASER HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT,  AND THE OTHER TRANSACTION  DOCUMENTS TO WHICH IT IS A PARTY BY,
AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED HEREIN.

      11.9 SEVERABILITY.  If any one or more of the provisions contained in this
Agreement,  or the  application  thereof in any  circumstance,  is held invalid,
illegal or unenforceable in any respect for any reason,  the validity,  legality
and  enforceability  of any such  provision  in every  other  respect and of the
remaining  provisions  hereof  shall  not be in any  way  impaired,  unless  the
provisions held invalid, illegal or unenforceable shall substantially impair the
benefits of the  remaining  provisions  of this  Agreement.  The parties  hereto
further agree to replace such  invalid,  illegal or  unenforceable  provision of
this Agreement with a valid, legal and enforceable  provision that will achieve,
to the extent  possible,  the  economic,  business  and other  purposes  of such
invalid, illegal or unenforceable provision.

      11.10 RULES OF CONSTRUCTION.  Unless the context otherwise requires,  "or"
is not exclusive, and references to sections or subsections refer to sections or
subsections of this Agreement.

      11.11 ENTIRE  AGREEMENT.  This  Agreement,  together with the exhibits and
schedules hereto and the other Transaction Documents, is intended by the parties
as a final  expression  of their  agreement  and  intended to be a complete  and
exclusive  statement of the agreement and understanding of the parties hereto in
respect  of the  subject  matter  contained  herein  and  therein.  There are no
restrictions,  promises, warranties or undertakings,  other than those set forth
or referred to herein or therein. This Agreement, together with the exhibits and
schedules  hereto,  and the  other  Transaction  Documents  supersede  all prior
agreements and  understandings  between the parties with respect to such subject
matter.

      11.12  CERTAIN  EXPENSES.  The  Company  will  pay  all  expenses  of  the
Purchasers  (including,  without limitation,  fees, charges and disbursements of
counsel)  in  connection  with this  Agreement  and any  amendment,  supplement,
modification  or waiver of or to any  provision of this  Agreement or any of the
other  Transaction  Documents  or any  documents  relating  thereto  (including,
without  limitation,  a response to a request by the Company for the Purchasers'
consent to any action otherwise prohibited hereunder or thereunder),  or consent
to any  departure  from,  the terms of any  provision of this  Agreement or such
other documents.

      11.13 8-K FILING  AND  PUBLICITY.  As soon as  practicable  following  the
Closing  but in no event  later  than 8:30  a.m.  EST on the day  following  the
Closing, the Company shall file a Current Report on Form 8-K with the Commission
describing  the terms of the  transactions  contemplated  by this  Agreement and
attaching this Agreement and the press release  referred to below as exhibits to
such filing (the "8-K  FILING").  Except as may be required by  applicable  law,
neither  the  Company nor any  Purchaser  shall issue any press  releases or any
other public  statements with respect to the  transactions  contemplated by this
Agreement;  provided,  however, that the Company shall be entitled,  without the
prior  approval of any  Purchaser,  to issue any press release or make any other
public  disclosure  (including a press release  (concerning  the offering of the
Securities)  pursuant to Rule 135(c) under the  Securities  Act) with respect to
such  transactions  (i) in  substantial  conformity  with the 8-K  Filing,  and,
provided  further,  that no such  release may  identify a Purchaser  unless such
Purchaser has consented thereto in writing, or as required by law.


                                       44
<PAGE>

      11.14 FURTHER ASSURANCES. Each of the parties shall execute such documents
and perform such further acts  (including,  without  limitation,  obtaining  any
consents, exemptions, authorizations, or other actions by, or giving any notices
to, or making any filings with, any Governmental  Authority or any other Person)
as may be  reasonably  required  or  desirable  to carry out or to  perform  the
provisions of this Agreement,  including,  without limitation,  any post-closing
assignment(s)  by any  Purchaser of a portion of the  Securities to a Person not
currently a party hereto.

      11.15 OBLIGATIONS OF THE PURCHASERS.  Each Purchaser's obligations and the
obligations  of the Company  hereunder are subject to the execution and delivery
of this  Agreement by the other  Purchasers.  The  obligations of each Purchaser
shall be several and not joint and no Purchaser  shall be liable or  responsible
for the acts or omissions of any other Purchaser.

      11.16 NO STRICT CONSTRUCTION. The parties hereto have participated jointly
in the  negotiation  and drafting of this  Agreement  and the other  Transaction
Documents.  In the event an  ambiguity  or question of intent or  interpretation
arises under any provision of this Agreement or any Transaction  Document,  this
Agreement or such other  Transaction  Document  shall be construed as if drafted
jointly by the  parties  thereto,  and no  presumption  or burden of proof shall
arise  favoring or  disfavoring  any party by virtue of the authorship of any of
the provisions of this Agreement or any other Transaction Document. No knowledge
of, or investigation, including without limitation, due diligence investigation,
conducted by, or on behalf of, any Purchaser  shall limit,  modify or affect the
representations  set forth in  Article 5 of this  Agreement  or the right of any
Purchaser to rely thereon.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                       45
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by as of the date first above written.

                                  NEOPROBE CORPORATION


                                  By:  /s/ Brent L. Larson
                                       -----------------------------------------
                                       Name:  Brent L. Larson
                                       Title: VP Finance / CFO

                                  BIOMEDICAL VALUE FUND, L.P.

                                  By:  GREAT POINT GP, LLC,
                                       its general partner


                                       By: /s/ David E. Kroin
                                          --------------------------------------
                                           Name:  David E. Kroin
                                           Title: Managing Director

                                  BIOMEDICAL OFF SHORE VALUE
                                  FUND, LTD.

                                  By:  GREAT POINT PARTNERS, LLC,
                                       its investment manager


                                       By: /s/ David E. Kroin
                                           -------------------------------------
                                           Name:  David E. Kroin
                                           Title: Managing Director


                                       /s/ David C. Bupp
                                       -----------------------------------------
                                       DAVID C. BUPP


                [SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
<PAGE>

                                    EXHIBIT A

                      FORM OF 8% SERIES A CONVERTIBLE NOTE


                                       A-1
<PAGE>


                                    EXHIBIT B

                                 FORM OF WARRANT


                                       B-1
<PAGE>


                                    EXHIBIT C

                           FORM OF SECURITY AGREEMENT


                                       C-1