EXHIBIT 10.1

                               Vasomedical, Inc.

    Shares of Series D Convertible Preferred Stock and Common Stock Warrants

                             SUBSCRIPTION AGREEMENT
                             ----------------------

                                                                   July 19, 2005


M.A.G. Capital, LLC
Mercator Momentum Fund, LP
Mercator Momentum Fund III, LP
Monarch Pointe Fund, Ltd.
555 South Flower Street, Suite 4200
Los Angeles, California 90071

Ladies and Gentlemen:

Vasomedical,  Inc. a Delaware  corporation (the "Company"),  hereby confirms its
agreement with Mercator  Momentum Fund, LP, Mercator  Momentum Fund III, LP, and
Monarch Pointe Fund, Ltd.  (collectively,  the "Purchasers") and M.A.G. CAPITAL,
LLC ("MAG"), as set forth below.

1. The Securities.  Subject to the terms and conditions  herein  contained,  the
Company  proposes  to issue and sell to the  Purchasers  an  aggregate  of:  (a)
Twenty-Five  Thousand  (25,000)  shares of its  Non-Voting  Series D Convertible
Preferred Stock (the "Series D Stock"),  which shall be convertible  into shares
(the "Conversion  Shares") of the Company's Common Stock (the "Common Stock") in
accordance with the formula set forth in the Certificate of Designation  further
described  below and (b) One  Million  Eight  Hundred  Ninety-Two  Thousand  Two
Hundred Nineteen (1,892,219) warrants, substantially in the form attached hereto
at  Exhibit A (the  "Warrants"),  to  acquire up to One  Million  Eight  Hundred
Ninety-Two  Thousand Two Hundred  Nineteen  (1,892,219)  [calculated by dividing
$1,250,000 by the Ceiling Price] shares of Common Stock (the "Warrant  Shares").
The rights, preferences and privileges of the Series D Stock are as set forth in
the  Certificate of  Designation  of Series D Preferred  Stock as filed with the
Secretary of State of the State of Delaware (the  "Certificate of  Designation")
in the form attached  hereto as Exhibit B. The number of  Conversion  Shares and
Warrant  Shares  that any  Purchaser  may  acquire  at any time are  subject  to
limitation in the Certificate of Designation and in the Warrants,  respectively,
so that the aggregate  number of shares of Common Stock of which such  Purchaser
and all  persons  affiliated  with  such  Purchaser  have  beneficial  ownership
(calculated  pursuant to Rule 13d-3 of the  Securities  Exchange Act of 1934, as
amended)  does not at any time exceed 9.99% of the  Company's  then  outstanding
Common Stock.

The Series D Stock and the Warrants are sometimes herein  collectively  referred
to  as  the  "Securities."  This  Agreement,  the  Certificate  of  Designation,
Registration  Rights  Agreement and the Warrant  Agreements are sometimes herein
collectively referred to as the "Transaction Documents."

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The Securities  will be offered and sold to the  Purchasers  without such offers
and  sales  being  registered  under  the  Securities  Act of 1933,  as  amended
(together  with  the  rules  and  regulations  of the  Securities  and  Exchange
Commission  (the  "SEC")  promulgated  thereunder,  the  "Securities  Act"),  in
reliance on exemptions therefrom.

In connection  with the sale of the  Securities,  the Company has made available
(including electronically via the SEC's EDGAR system) to Purchasers its periodic
and current  reports,  forms,  schedules,  proxy  statements and other documents
(including  exhibits and all other information  incorporated by reference) filed
with the SEC  under  the  Securities  Exchange  Act of  1934,  as  amended  (the
"Exchange Act"). These reports, forms, schedules, statements, documents, filings
and amendments,  are collectively referred to as the "Disclosure Documents." All
references  in this  Agreement to financial  statements  and schedules and other
information  which is  "contained,"  "included"  or "stated"  in the  Disclosure
Documents  (or  other  references  of like  import)  shall be deemed to mean and
include all such financial  statements and  schedules,  documents,  exhibits and
other   information  which  is  incorporated  by  reference  in  the  Disclosure
Documents.

2.  Representations  and  Warranties of the Company.  Except as set forth on the
Disclosure  Schedule  (the  "Disclosure  Schedule")  delivered by the Company to
Purchasers  on the  Closing  Date (as  defined  in  Section  3 below)  or in the
Disclosure  Documents,  the Company  represents  and warrants to and agrees with
Purchasers and MAG as follows:

(a) The Disclosure  Documents as of their respective dates did not, and will not
(after giving  effect to any updated  disclosures  contained  therein) as of the
Closing Date, contain any untrue statement of a material fact or omit to state a
material  fact  necessary to make the  statements  therein,  in the light of the
circumstances  under  which  they were  made,  not  misleading.  The  Disclosure
Documents  and the  documents  incorporated  or  deemed  to be  incorporated  by
reference  therein,  at the time they were filed or hereafter are filed with the
SEC,  complied and will comply,  at the time of filing, in all material respects
with the requirements of the Securities Act and/or the Exchange Act, as the case
may be, as applicable.

(b) Schedule A attached hereto sets forth a complete list of the subsidiaries of
the Company (the  "Subsidiaries").  Each of the Company and its Subsidiaries has
been duly  incorporated  and each of the Company and the Subsidiaries is validly
existing in good standing as a corporation under the laws of its jurisdiction of
incorporation,  with the  requisite  corporate  power and  authority  to own its
properties  and  conduct its  business  as now  conducted  as  described  in the
Disclosure  Documents  and  is  duly  qualified  to  do  business  as a  foreign
corporation in good standing in all other  jurisdictions  where the ownership or
leasing  of  its  properties  or  the  conduct  of its  business  requires  such
qualification,   except  where  the  failure  to  be  so  qualified  would  not,
individually  or in  the  aggregate,  have  a  material  adverse  effect  on the
business,  condition (financial or other),  properties,  prospects or results of
operations  of the  Company  and the  Subsidiaries,  taken as a whole  (any such
event, a "Material  Adverse  Effect");  as of the Closing Date, the Company will
have the  authorized,  issued  and  outstanding  capitalization  set forth in on
Schedule B attached hereto (the "Company  Capitalization");  except as set forth
in the  Disclosure  Documents  or on Schedule  A, the Company  does not have any
subsidiaries  or own directly or  indirectly  any of the capital  stock or other
equity or long-term debt  securities of or have any equity interest in any other
person;  all of the  outstanding  shares of capital stock of the Company and the
Subsidiaries  have been duly authorized and validly  issued,  are fully paid and

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nonassessable  and were not issued in  violation  of any  preemptive  or similar
rights and are owned free and clear of all liens,  encumbrances,  equities,  and
restrictions on transferability  (other than those imposed by the Securities Act
and the state  securities or "Blue Sky" laws) or voting;  except as set forth in
the Disclosure Documents,  all of the outstanding shares of capital stock of the
Subsidiaries are owned,  directly or indirectly,  by the Company;  except as set
forth in the  Disclosure  Documents,  no options,  warrants  or other  rights to
purchase from the Company or any Subsidiary,  agreements or other obligations of
the Company or any Subsidiary to issue or other rights to convert any obligation
into, or exchange any  securities  for,  shares of capital stock of or ownership
interests in the Company or any  Subsidiary are  outstanding;  and except as set
forth in the  Disclosure  Documents  or on  Schedule  C, there is no  agreement,
understanding  or  arrangement  among the Company or any  Subsidiary and each of
their  respective  stockholders  or any other person  relating to the ownership,
registration  or  disposition  of  any  capital  stock  of  the  Company  or any
Subsidiary or the election of directors of the Company or any  Subsidiary or the
governance  of the  Company's or any  Subsidiary's  affairs,  and, if any,  such
agreements,  understandings and arrangements will not be breached or violated as
a  result  of  the  execution  and  delivery  of,  or  the  consummation  of the
transactions contemplated by, the Transaction Documents.

(c) The Company has the  requisite  corporate  power and  authority  to execute,
deliver and perform its obligations under the Transaction Documents. Each of the
Transaction  Documents has been duly and validly  authorized by the Company and,
when executed and delivered by the Company,  will constitute a valid and legally
binding agreement of the Company,  enforceable against the Company in accordance
with  its  terms  except  as  the  enforcement  thereof  may be  limited  by (A)
bankruptcy,  insolvency,  reorganization,  fraudulent conveyance,  moratorium or
other  similar  laws  now  or  hereafter  in  effect  relating  to or  affecting
creditors'  rights  generally  or (B)  general  principles  of  equity  and  the
discretion  of the court before which any  proceeding  therefore  may be brought
(regardless of whether such  enforcement is considered in a proceeding at law or
in equity) (collectively, the "Enforceability Exceptions").

(d) The Series D Stock and the  Warrants  have been duly  authorized  and,  when
issued upon payment thereof in accordance  with this  Agreement,  will have been
validly issued,  fully paid and  non-assessable.  The Conversion Shares issuable
have been duly  authorized  and validly  reserved for issuance,  and when issued
upon  conversion  of the  Series D Stock  in  accordance  with the  terms of the
Certificate of Designation,  will have been validly issued,  fully paid and non-
assessable.  The Warrant Shares have been duly  authorized and validly  reserved
for issuance,  and when issued upon exercise of the Warrants in accordance  with
the terms thereof, will have been validly issued, fully paid and non-assessable.
The Common Stock of the Company conforms to the description thereof contained in
the Disclosure Documents.  The stockholders of the Company have no preemptive or
similar rights with respect to the Common Stock.

(e) No consent, approval,  authorization,  license, qualification,  exemption or
order of any court or governmental agency or body or third party is required for
the  performance  of the  Transaction  Documents  by  the  Company  or  for  the
consummation by the Company of any of the transactions  contemplated thereby, or
the  application  of the proceeds of the issuance of the Securities as described

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in  this  Agreement,  except  for  such  consents,  approvals,   authorizations,
licenses,  qualifications,  exemptions or orders (i) as have been obtained on or
prior to the Closing  Date,  (ii) as are not required to be obtained on or prior
to the Closing Date that will be obtained when required, or (iii) the failure to
obtain  which  would  not,  individually  or in the  aggregate,  have a Material
Adverse Effect.

(f) Except as set forth on Schedule  D, none of the Company or the  Subsidiaries
is (i) in material  violation  of its  articles of  incorporation  or bylaws (or
similar  organizational  document),  (ii) in breach or violation of any statute,
judgment,  decree,  order,  rule or  regulation  applicable  to it or any of its
properties or assets,  which breach or violation  would,  individually or in the
aggregate,  have a Material Adverse Effect,  or (iii) except as described in the
Disclosure  Documents,  in default (nor to the Company's knowledge has any event
occurred  which with  notice or passage of time,  or both,  would  constitute  a
default) in the performance or observance of any obligation, agreement, covenant
or condition contained in any contract, indenture, mortgage, deed of trust, loan
agreement,  note, lease, license,  franchise agreement,  permit,  certificate or
agreement or instrument to which it is a party or to which it is subject,  which
default would, individually or in the aggregate, have a Material Adverse Effect.

(g) The execution,  delivery and  performance by the Company of the  Transaction
Documents and the consummation by the Company of the  transactions  contemplated
thereby and the fulfillment of the terms thereof will not (a) violate,  conflict
with or  constitute  or result  in a breach  of or a default  under (or an event
that, with notice or lapse of time, or both,  would  constitute a breach of or a
default  under) any of (i) the terms or provisions  of any contract,  indenture,
mortgage,  deed of  trust,  loan  agreement,  note,  lease,  license,  franchise
agreement,  permit,  certificate  or agreement or instrument to which any of the
Company  or the  Subsidiaries  is a party  or to which  any of their  respective
properties  or assets are subject,  (ii) the  Certificate  of  Incorporation  or
bylaws of any of the  Company or the  Subsidiaries  (or  similar  organizational
document) or (iii) any statute,  judgment,  decree, order, rule or regulation of
any court or governmental  agency or other body applicable to the Company or the
Subsidiaries  or any of their  respective  properties or assets or (b) result in
the  imposition  of any lien upon or with  respect to any of the  properties  or
assets  now  owned  or  hereafter   acquired  by  the  Company  or  any  of  the
Subsidiaries;   which  violation,  conflict,  breach,  default  or  lien  would,
individually or in the aggregate, have a Material Adverse Effect.

(h) The audited  consolidated  financial  statements  included in the Disclosure
Documents  present  fairly  the  consolidated  financial  position,  results  of
operations,  cash flows and changes in shareholders' equity of the entities,  at
the dates and for the  periods to which they  relate and have been  prepared  in
accordance with generally accepted accounting principles applied on a consistent
basis; the interim un-audited  consolidated financial statements included in the
Disclosure Documents present fairly the consolidated financial position, results
of operations  and cash flows of the entities,  at the dates and for the periods
to which  they  relate  subject  to  year-end  audit  adjustments  and have been
prepared in accordance with generally accepted accounting  principles applied on
a consistent basis with the audited  consolidated  financial statements included
therein;  the selected financial and statistical data included in the Disclosure
Documents  present fairly the  information  shown therein and have been prepared
and  compiled  on a basis  consistent  with  the  audited  financial  statements

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included  therein,  except as otherwise  stated therein or in the notes thereto;
and each of the auditors  previously  engaged by the Company or to be engaged in
the  future  by the  Company  has  represented  to  the  Company  that  it is an
independent certified public accountant as required by the Securities Act for an
offering registered thereunder.

(i) Except as described in the Disclosure Documents, there is not pending or, to
the knowledge of the Company,  threatened any action, suit, proceeding,  inquiry
or investigation,  governmental or otherwise, to which any of the Company or the
Subsidiaries is a party, or to which their  respective  properties or assets are
subject,  before or brought by any court,  arbitrator or governmental  agency or
body,  that,  if  determined  adversely  to the Company or any such  Subsidiary,
would,  individually or in the aggregate, have a Material Adverse Effect or that
seeks to restrain,  enjoin,  prevent the consummation of or otherwise  challenge
the issuance or sale of the Securities to be sold  hereunder or the  application
of the proceeds therefrom or the other transactions  described in the Disclosure
Documents.

(j) The Company and the Subsidiaries  own or possess adequate  licenses or other
rights to use all patents,  trademarks,  service marks, trade names,  copyrights
and know-how  that are material and  necessary to conduct  their  businesses  as
described in the Disclosure  Documents.  None of the Company or the Subsidiaries
has  received  any  written  notice  of  infringement  of (or  knows of any such
infringement  of)  asserted  rights  of  others  with  respect  to any  patents,
trademarks,  service  marks,  trade names,  copyrights or know-how that, if such
assertion of infringement or conflict were sustained,  would, individually or in
the aggregate, have a Material Adverse Effect.

(k) Each of the Company and the  Subsidiaries  possesses all licenses,  permits,
certificates, consents, orders, approvals and other authorizations from, and has
made all  declarations  and filings with,  all federal,  state,  local and other
governmental authorities,  all self-regulatory  organizations and all courts and
other tribunals presently required or necessary to own or lease, as the case may
be, and to operate  its  respective  properties  and to carry on its  respective
businesses  as now or proposed to be  conducted  as set forth in the  Disclosure
Documents  ("Permits"),  except where the failure to obtain such  Permits  would
not,  individually or in the aggregate,  have a Material Adverse Effect and none
of the Company or the  Subsidiaries  has received  any notice of any  proceeding
relating to revocation or modification  of any such Permit,  except as described
in the  Disclosure  Documents and except where such  revocation or  modification
would not, individually or in the aggregate, have a Material Adverse Effect.

(l) Subsequent to the respective  dates as of which  information is given in the
Disclosure  Documents and except as described  therein,  (i) the Company and the
Subsidiaries have not incurred any material  liabilities or obligations,  direct
or  contingent,  or entered into any material  transactions  not in the ordinary
course of business or (ii) the Company and the  Subsidiaries  have not purchased
any of  their  respective  outstanding  capital  stock,  or  declared,  paid  or
otherwise  made  any  dividend  or  distribution  of any  kind  on any of  their
respective  capital stock or otherwise  (other than, with respect to any of such
Subsidiaries, the purchase of capital stock by the Company), (iii) there has not
been any material  increase in the long-term  indebtedness of the Company or any
of the  Subsidiaries,  (iv)  there  has not  occurred  any  event or  condition,

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individually or in the aggregate,  that has a Material  Adverse Effect,  and (v)
the  Company  and the  Subsidiaries  have not  sustained  any  material  loss or
interference  with respect to their  respective  businesses or  properties  from
fire, flood, hurricane,  earthquake,  accident or other calamity, whether or not
covered by  insurance,  or from any labor  dispute or any legal or  governmental
proceeding.

(m) There are no material legal or  governmental  proceedings  nor are there any
material  contracts  or other  documents  required by the  Securities  Act to be
described in a prospectus  that are not described in the  Disclosure  Documents.
Except as  described  in the  Disclosure  Documents,  none of the Company or the
Subsidiaries  is in  default  under  any  of  the  contracts  described  in  the
Disclosure Documents,  has received a notice or claim of any such default or has
knowledge of any breach of such contracts by the other party or parties thereto,
except  for such  defaults  or  breaches  as would not,  individually  or in the
aggregate, have a Material Adverse Effect.

(n) Each of the Company and the  Subsidiaries  has good and marketable  title to
all real property described in the Disclosure Documents as being owned by it and
good and marketable title to the leasehold estate in the real property described
therein  as  being  leased  by  it,  free  and  clear  of  all  liens,  charges,
encumbrances  or  restrictions,  except,  in  each  case,  as  described  in the
Disclosure  Documents or such as would not,  individually  or in the  aggregate,
have a Material Adverse Effect. All material leases, contracts and agreements to
which the Company or any of the  Subsidiaries is a party or by which any of them
is bound are valid and enforceable  against the Company or any such  Subsidiary;
subject to the Enforceability Exceptions,  are, to the knowledge of the Company,
valid and enforceable against the other party or parties thereto and are in full
force and effect.

(o) Each of the Company and the  Subsidiaries  has filed all necessary  federal,
state and foreign income and franchise tax returns,  except where the failure to
so file  such  returns  would  not,  individually  or in the  aggregate,  have a
Material Adverse Effect, and has paid all taxes shown as due thereon;  and other
than tax deficiencies  which the Company or any Subsidiary is contesting in good
faith and for which  adequate  reserves have been  provided in  accordance  with
generally accepted  accounting  principles,  there is no tax deficiency that has
been asserted against the Company or any Subsidiary that would,  individually or
in the aggregate, have a Material Adverse Effect.

(p) None of the Company or the Subsidiaries is, or immediately after the Closing
Date will be,  required  to  register  as an  "investment  company" or a company
"controlled  by" an  "investment  company"  within the meaning of the Investment
Company Act of 1940, as amended (the "Investment Company Act").

(q) None of the Company or the  Subsidiaries or, to the knowledge of any of such
entities'  directors,  officers,  employees,  agents or controlling persons, has
taken, directly or indirectly,  any action designed, or that might reasonably be
expected,  to cause or result in the  stabilization or manipulation of the price
of the Common Stock.

(r) None of the Company, the Subsidiaries or to the Company's knowledge,  any of
their respective Affiliates (as defined in Rule 501(b) of Regulation D under the
Securities Act) directly,  or through any agent,  engaged in any form of general
solicitation  or general  advertising  (as those terms are used in  Regulation D

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under the Securities  Act) in connection  with the offering of the Securities or
engaged in any other  conduct that would cause such  offering to be constitute a
public  offering  within  the  meaning of Section  4(2) of the  Securities  Act.
Assuming the accuracy of the representations and warranties of the Purchasers in
Section 6 hereof,  it is not  necessary in connection  with the offer,  sale and
delivery of the Securities to the Purchasers in the manner  contemplated by this
Agreement to register any of the Securities under the Securities Act.

(s) There is no  strike,  labor  dispute,  slowdown  or work  stoppage  with the
employees of the Company or any of the Subsidiaries  which is pending or, to the
knowledge of the Company or any of the Subsidiaries, threatened.

(t) Each of the Company and the Subsidiaries carries general liability insurance
coverage as set forth on Schedule E.

(u) Each of the  Company  and the  Subsidiaries  maintains  internal  accounting
controls which provide  reasonable  assurance that (A) transactions are executed
in accordance with management's authorization,  (B) transactions are recorded as
necessary to permit  preparation  of its  financial  statements  and to maintain
accountability  for its  assets,  and  (C)  access  to its  material  assets  is
permitted only in accordance with management's  authorization and (D) the values
and amounts  reported  for its material  assets are  compared  with its existing
assets at reasonable intervals.

(v) Except for fees payable to MAG and Wharton  Capital and  Capitoline  Finance
Group  and  their  affiliates,  the  Company  does  not know of any  claims  for
services, either in the nature of a finder's fee or financial advisory fee, with
respect to the offering of the Securities and the  transactions  contemplated by
the Transaction Documents.

(w) The Common Stock is traded on the NASDAQ Small Cap (the "NASDAQ Small Cap").
Except as described in the Disclosure Documents, the Company currently is not in
violation  of, and the  consummation  of the  transactions  contemplated  by the
Transaction  Documents will not violate, any rule of the National Association of
Securities Dealers.

(x) The  Company is  eligible  to use Form S-3 for the resale of the  Conversion
Shares and the Warrant Shares by Purchasers or their transferees and the Warrant
Shares by  Purchasers,  MAG or their  transferees.  The Company has no reason to
believe that it is not capable of satisfying the  registration or  qualification
requirements (or an exemption  therefrom)  necessary to permit the resale of the
Conversion Shares and the Warrant Shares under the securities or "blue sky" laws
of any jurisdiction within the United States.

(y) Set forth on Schedule F is the  Company's  intended use of the proceeds from
this transaction.

(z) None of the officers or  directors of the Company (i) has been  convicted of
any crime (other than traffic violations or misdemeanors not involving fraud) or
is currently under investigation or indictment for any such crime, (ii) has been
found by a court or  governmental  agency to have  violated  any  securities  or
commodities  law or to have committed fraud or is currently a party to any legal

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proceeding  in  which  either  is  alleged,  (iii)  has been  the  subject  of a
proceeding under the bankruptcy laws or any similar state laws, or (iv) has been
an officer, director, general partner, or managing member of an entity which has
been the subject of such a proceeding.

(aa) The Company's most recent SEC review  commenced on April 12, 2005. To date,
there has been no response from the SEC to the Company's written submission.

(bb) The Company's CUSIP number is 922321 10 4.

3.   Purchase, Sale and Delivery of the Securities.

(a)   Issuance   of  Series  D  Stock  and   Warrants.   On  the  basis  of  the
representations,  warranties,  agreements  and  covenants  herein  contained and
subject to the terms and  conditions  herein set forth,  the  Company  agrees to
issue and sell to the  Purchasers,  and  Purchasers  agree to purchase  from the
Company,  25,000  shares of Series D Stock at $100.00  per share in the  amounts
shown on the signature page hereto.  In connection with the purchase and sale of
Series D Stock,  for no additional  consideration,  the  Purchasers and MAG will
receive  Warrants to purchase up to an aggregate  of 1,892,219  shares of Common
Stock , subject to adjustment  as set forth in the Warrants,  in the amounts set
forth on the signature page hereto.

(b) Closing.  The closing of the  transactions  described herein (the "Closing")
shall take place at a time and on a date (the "Closing Date") to be specified by
the parties,  which will be no later than 5:00 p.m.  (Pacific  time) on July 20,
2005.  On the Closing  Date,  the Company  shall  deliver  (a)  certificates  in
definitive form for the Series D Stock in the names and amounts set forth on the
signature page hereto,  (b) Warrants,  in the names and amounts set forth on the
signature  page  hereto,   (c)  the  Subscription   Agreement,   Certificate  of
Designation and Registration  Rights Agreement,  each duly executed on behalf of
the  Company,  and (d) the  Opinion of Counsel  in the form  attached  hereto as
Exhibit C. On the Closing Date, Purchasers shall deliver (i) 70% of the Purchase
Price or  $1,750,000  by wire  transfer of  immediately  available  funds to the
Company, and (ii) the Subscription  Agreement and Registration Rights Agreement,
each duly executed on behalf of the  Purchasers  and MAG. The Closing will occur
when all  documents  and  instruments  necessary  or  appropriate  to effect the
transactions  contemplated  herein are  exchanged by the parties and all actions
taken at the Closing will be deemed to be taken simultaneously.

(c) Payment of Fees.  Upon  receipt by the Company of the  Purchase  Price,  the
Company shall deliver to MAG by wire transfer of  immediately  available  funds,
the Due  Diligence  Fee in the  amount of  $125,000,  and the legal  fees in the
amount of $15,000.

(d)  Conditions to Final  Funding.  Provided that no Event of Default,  (as that
term is defined in Section 10 below) has occurred, within two trading days after
Company  (i) files  the  Registration  Statement  and (ii)  delivers  to MAG and
Purchaser a certificate executed on behalf of the Company by its Chief Financial
Officer certifying that all  representations  and warranties made by the Company
herein  are true and  correct  in all  material  respects  as of the date of the

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Registration  Statement,  the  Purchaser  covenants and agrees to deliver to the
Company  the  balance  of the  Purchase  Price or  $750,000.  In the event  that
Purchaser  fails to deliver the balance of the  Purchase  Price  within ten (10)
trading days after the conditions to delivery set forth in this Section 3(d) are
satisfied,  then the number of shares of Series D Stock  issued to  Purchaser in
excess of the Purchaser  Price  actually paid by Purchaser  shall  automatically
cancel and all of the Warrants shall automatically cancel.

(e) In the  event  that on or  before  70  days  after  the  Closing  Date,  the
conditions to funding the balance of the Purchase  Price have not been satisfied
by Company or waived in writing by Purchaser and MAG,  then (a) the  Purchaser's
obligation to fund the balance of the Purchase  Price shall  terminate,  and (b)
the  number  of  shares  Series D Stock  issued  to  Purchaser  in excess of the
Purchaser  Price  actually paid by Purchaser  shall  automatically  cancel.  The
Warrants shall be remain in full force and effect as originally issued.

4. Certain Covenants of the Company.  The Company covenants and agrees with each
Purchaser as follows:

(a) None of the Company or any of its  Affiliates  will sell,  offer for sale or
solicit  offers to buy or otherwise  negotiate in respect of any  "security" (as
defined in the  Securities  Act) which could be integrated  with the sale of the
Securities in a manner which would require the registration under the Securities
Act of the Securities.

(b) The Company will not become,  at any time prior to the  expiration  of three
years after the Closing Date, an open-end  investment  company,  unit investment
trust,  closed-end investment company or face-amount certificate company that is
or is required to be registered under the Investment Company Act.

(c) None of the  proceeds of the Series D Stock will be used to reduce or retire
any  insider  note or  convertible  debt held by an officer or  director  of the
Company.

(d)  Subject to  Section 10 of this  Agreement,  the  Conversion  Shares and the
Warrant  Shares  will be eligible  for  trading on the NASDAQ  Small Cap or such
market  on which  the  Company's  shares  are  subsequently  listed  or  traded,
including  the  over-the-counter   bulletin  board,  immediately  following  the
effectiveness of the Registration Statement.

(e) The Company will use commercially  reasonable  efforts to do and perform all
things  required to be done and  performed  by it under this  Agreement  and the
other Transaction  Documents and to satisfy all conditions precedent on its part
to the  obligations  of the  Purchasers  to purchase and accept  delivery of the
Securities.

(f)  Commencing  on the  Closing  Date and  continuing  until  the  Registration
Statement is deemed  effective by the SEC, the Purchasers  shall have a right of
first  refusal  (the "Right of First  Refusal")  on any  financing  in which the
Company  is the  issuer  of  debt  or  equity  securities.  Notwithstanding  the
foregoing,  the Right of First  Refusal  shall not apply to  financing  in which
Company issues debt or equity securities to officers or directors of the Company
where the terms of such financing are no more favorable than the terms set forth
herein and the  securities  are issued at or above the volume  weighted  average
price on the date of issuance.

                                       9
<PAGE>

5. Conditions of the Purchasers'  Obligations.  The obligation of each Purchaser
to purchase and pay for the  Securities is subject to the  following  conditions
unless waived in writing by the Purchaser:

(a)  The  representations  and  warranties  of the  Company  contained  in  this
Agreement  shall  be true and  correct  in all  material  respects  (other  than
representations  and warranties with a Material Adverse Effect qualifier,  which
shall be true and correct as written) on and as of the Closing Date; the Company
shall have complied in all material  respects with all  agreements and satisfied
all conditions on its part to be performed or satisfied hereunder at or prior to
the Closing Date.

(b) None of the issuance and sale of the  Securities  pursuant to this Agreement
or any of  the  transactions  contemplated  by  any  of  the  other  Transaction
Documents  shall be enjoined  (temporarily  or  permanently)  and no restraining
order or other injunctive  order shall have been issued in respect thereof;  and
there  shall  not  have  been  any  legal   action,   order,   decree  or  other
administrative proceeding instituted or, to the Company's knowledge,  threatened
against  the Company or against any  Purchaser  relating to the  issuance of the
Securities or any  Purchaser's  activities in connection  therewith or any other
transactions  contemplated by this Agreement, the other Transaction Documents or
the Disclosure Documents.

(c) The Purchasers shall have received certificates,  dated the Closing Date and
signed by the Chief  Executive  Officer and the Chief  Financial  Officer of the
Company, to the effect of paragraphs 5(a) and (b).

(d) The  Purchasers  shall have  received  an opinion of  Beckman,  Lieberman  &
Barandes,  LLP with  respect to the  authorization  of the  Series D Stock,  the
Conversion  Shares,  the  Warrants  and the Warrant  Shares and other  customary
matters in the form attached hereto as Exhibit C.

6. Representations and Warranties of the Purchasers.

(a) Each  Purchaser  and MAG  represents  and  warrants to the Company  that the
Securities to be acquired by it hereunder  (including the Conversion  Shares and
the Warrant Shares that it may acquire upon conversion or exercise  thereof,  as
the case may be) are being  acquired for its own account for investment and with
no intention  of  distributing  or  reselling  such  Securities  (including  the
Conversion  Shares and the Warrant Shares that it may acquire upon conversion or
exercise thereof, as the case may be) or any part thereof or interest therein in
any transaction which would be in violation of the securities laws of the United
States of America  or any  State.  Nothing  in this  Agreement,  however,  shall
prejudice or otherwise limit a Purchaser's right to sell or otherwise dispose of
all or any part of such  Conversion  Shares or Warrant Shares under an effective
registration   statement  under  the  Securities  Act  and  in  compliance  with
applicable state  securities laws or under an exemption from such  registration.
By  executing  this  Agreement,  each  Purchaser  further  represents  that such
Purchaser does not have any contract, undertaking, agreement or arrangement with
any person to sell,  transfer or grant  participation to any Person with respect
to any of the Securities.

(b) Each  Purchaser  and MAG  understands  that the  Securities  (including  the
Conversion  Shares and the Warrant Shares that it may acquire upon conversion or

                                       10
<PAGE>

exercise  thereof,  as the  case may be) have  not  been  registered  under  the
Securities Act and may not be offered,  resold, pledged or otherwise transferred
except (a) pursuant to an exemption from  registration  under the Securities Act
(and, if requested by the Company,  based upon an opinion of counsel  acceptable
to the Company) or pursuant to an  effective  registration  statement  under the
Securities Act and (b) in accordance with all applicable  securities laws of the
states of the United States and other jurisdictions.

Each Purchaser and MAG agrees to the imprinting, so long as appropriate,  of the
following  legend on the Securities  (including  the  Conversion  Shares and the
Warrant Shares that it may acquire upon conversion or exercise  thereof,  as the
case may be):

The shares of stock evidenced by this certificate have not been registered under
the U.S.  Securities  Act of 1933,  as amended,  and may not be  offered,  sold,
pledged  or  otherwise  transferred  ("transferred")  in  the  absence  of  such
registration  or an  applicable  exemption  therefrom.  In the  absence  of such
registration,  such  shares  may  not be  transferred  unless,  if  the  Company
requests,  the Company has received a written  opinion  from counsel  reasonably
satisfactory  to the Company in form and substance  satisfactory  to the Company
stating  that such  transfer  is being made in  compliance  with all  applicable
federal and state securities laws.

The legend set forth above may be removed if and when the  Conversion  Shares or
the Warrant Shares, as the case may be, are disposed of pursuant to an effective
registration  statement under the Securities Act or in the opinion of counsel to
the Company  experienced  in the area of United States Federal  securities  laws
such  legends  are no  longer  required  under  applicable  requirements  of the
Securities Act. The Series D Stock, the Warrants,  the Conversion Shares and the
Warrant Shares shall also bear any other legends required by applicable  Federal
or state  securities  laws,  which legends may be removed when in the opinion of
counsel to the Company  experienced in the applicable  securities laws, the same
are no longer  required under the  applicable  requirements  of such  securities
laws. The Company agrees that it will provide each Purchaser, upon request, with
a substitute certificate, not bearing such legend at such time as such legend is
no longer  applicable.  Each  Purchaser  agrees  that,  in  connection  with any
transfer of the  Conversion  Shares or the  Warrant  Shares by it pursuant to an
effective  registration  statement under the Securities Act, such Purchaser will
comply with all prospectus  delivery  requirements  of the  Securities  Act. The
Company makes no representation, warranty or agreement as to the availability of
any exemption  from  registration  under the  Securities Act with respect to any
resale of the Series D Stock, the Warrants, the Conversion Shares or the Warrant
Shares.

(c) Each  Purchaser and MAG is an  "accredited  investor"  within the meaning of
Rule 501(a) of Regulation D under the Securities Act. Neither  Purchaser nor MAG
learned of the opportunity to acquire  Securities or any other security issuable
by the Company through any form of general advertising or public solicitation.

(d) Each  Purchaser and MAG  represents  and warrants to the Company that it has
such knowledge,  sophistication and experience in business and financial matters
so as to be  capable  of  evaluating  the  merits  and risks of the  prospective
investment in the  Securities,  having been  represented by counsel,  and has so

                                       11
<PAGE>

evaluated  the  merits  and  risks  of such  investment  and is able to bear the
economic risk of such  investment  and, at the present time, is able to afford a
complete loss of such investment.

(e) Each Purchaser  represents and warrants to the Company that (i) the purchase
of the  Securities  to be purchased by it has been duly and properly  authorized
and this  Agreement  has been duly executed and delivered by it or on its behalf
and  constitutes  the valid and legally  binding  obligation  of the  Purchaser,
enforceable  against the  Purchaser  in  accordance  with its terms,  subject to
bankruptcy,  insolvency,  fraudulent  transfer,  reorganization,  moratorium and
similar laws of general applicability relating to or affecting creditors' rights
generally  and to  general  principles  of  equity;  (ii)  the  purchase  of the
Securities  to be purchased by it does not conflict with or violate its charter,
by-laws or any law,  regulation  or court order  applicable to it; and (iii) the
purchase of the  Securities to be purchased by it does not impose any penalty or
other onerous condition on the Purchaser under or pursuant to any applicable law
or governmental regulation.

(f) Each  Purchaser and MAG  represents and warrants to the Company that neither
it nor any of its directors,  officers,  employees,  agents, partners,  members,
controlling  persons or  shareholders  holding  5% or more of the  Common  Stock
outstanding on the Closing Date, has taken or will take, directly or indirectly,
any actions designed,  or might reasonably be expected to cause or result in the
stabilization or manipulation of the price of the Common Stock.

(g) Each Purchaser and MAG acknowledges it or its representatives  have reviewed
the Disclosure Documents and further acknowledges that it or its representatives
have 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 the Company's financial condition,  results of operations,
business,  properties,  management  and  prospects  sufficient  to  enable it to
evaluate its investment in the  Securities;  and (iii) the opportunity to obtain
such additional  information  which the Company possesses or can acquire without
unreasonable  effort or expense  that is  necessary  to verify the  accuracy and
completeness of the information contained in the Disclosure Documents.

(h) Each  Purchaser and MAG  represents  and warrants to the Company that it has
based its  investment  decision  solely upon the  information  contained  in the
Disclosure  Documents and such other information as may have been provided to it
or its  representatives  by the Company in response to their inquiries,  and has
not based its investment  decision on any research or other report regarding the
Company  prepared by any third party ("Third  Party  Reports").  Each  Purchaser
understands  and  acknowledges  that (i) the Company  does not endorse any Third
Party  Reports  and (ii) its actual  results  may differ  materially  from those
projected in any Third Party Report.

(i)  Each  Purchaser  and  MAG  understands  and   acknowledges   that  (i)  any
forward-looking  information  included in the Disclosure  Documents  supplied to
Purchaser   by  the  Company  or  its   management   is  subject  to  risks  and
uncertainties,  including  those  risks  and  uncertainties  set  forth  in  the
Disclosure  Documents;   and  (ii)  the  Company's  actual  results  may  differ
materially  from  those  projected  by the  Company  or its  management  in such
forward-looking information.

                                       12
<PAGE>

(j) Each Purchaser and MAG understands and acknowledges  that (i) the Securities
are offered and sold without  registration under the Securities Act in a private
placement that is exempt from the registration  provisions of the Securities Act
and (ii) the  availability  of such  exemption  depends in part on, and that the
Company and its counsel will rely upon,  the accuracy  and  truthfulness  of the
foregoing representations and Purchaser hereby consents to such reliance.

7.  Covenants  of  Purchasers  Not to Short  Stock.  Purchasers,  on  behalf  of
themselves and their  affiliates,  hereby covenant and agree not to, directly or
indirectly,  offer to "short sell", contract to "short sell" or otherwise "short
sell" the securities of the Company,  including,  without limitation,  shares of
Common Stock that will be received as a result of the conversion of the Series D
Stock or the exercise of the Warrants.

8.   Termination.

(a) This  Agreement may be  terminated in the sole  discretion of the Company by
notice to each Purchaser if at the Closing Date:

(i) the  representations  and warranties  made by any Purchaser in Section 6 are
not true and correct in all material respects; or

(ii) as to the Company,  the sale of the Securities  hereunder (i) is prohibited
or enjoined by any  applicable law or  governmental  regulation or (ii) subjects
the  Company  to any  penalty,  or in its  reasonable  judgment,  other  onerous
condition under or pursuant to any applicable law or government  regulation that
would  materially  reduce  the  benefits  to  the  Company  of the  sale  of the
Securities  to  such  Purchaser,  so long as  such  regulation,  law or  onerous
condition was not in effect in such form at the date of this Agreement.

(b) This  Agreement  may be  terminated by any Purchaser or MAG by notice to the
Company given in the event that the Company  shall have failed,  refused or been
unable  to  satisfy  all  material  conditions  on its part to be  performed  or
satisfied  hereunder on or prior to the Closing  Date, or if after the execution
and  delivery of this  Agreement  and  immediately  prior to the  Closing  Date,
trading in  securities  of the  Company on the NASDAQ  Small Cap shall have been
suspended.

(c) This Agreement may be terminated by mutual written consent of all parties.

9.  Registration.  Within 45 days after the  Closing  Date,  the  Company  shall
prepare and file with the SEC a  Registration  Statement  covering the resale of
the maximum number of Conversion Shares issuable upon conversion of the Series D
Stock and the Warrant Shares (collectively,  the "Registrable  Securities"),  as
set forth in the  Registration  Rights  Agreement  attached hereto as Exhibit D.
Within 90 days after  filing the  Registration  Statement,  the Company will use
commercially  reasonable  efforts to have the  Registration  Statement  declared
effective by the SEC.

10.  Event of Default.  If an Event of Default (as defined  below)  occurs,  the
Purchasers  and MAG shall  have the right to  exercise  any or all of the rights
given to the Purchasers and MAG relating to the Securities, as further described
in the Certificate of Designation. In addition, the price at which the shares of
Series D Stock may be  converted  into Common Stock shall be reduced from 85% of
the Market Price (as defined in the  Certificate of  Designation)  to 75% of the
Market  Price,  subject to the Ceiling  Price and Floor Price as those terms are
defined  in the  Certificate  of  Designation.  The  Purchaser  and MAG need not

                                       13
<PAGE>

provide and the Company hereby waives any presentment,  demand, protest or other
notice  of any kind,  and the  Purchaser  and MAG may  immediately  and  without
expiration  of any grace  period  enforce any and all of its rights and remedies
hereunder  and all other  remedies  available to it under  applicable  law. Such
declaration may be rescinded and annulled by Purchaser and MAG at any time prior
to  payment  hereunder.  No  such  rescission  or  annulment  shall  affect  any
subsequent Event of Default or impair any right consequent thereon.

An "Event of  Default"  shall  mean (a) the  commencement  by the  Company  of a
voluntary  case or  proceeding  under the  bankruptcy  laws,  (b) the  breach by
Company of any of the  covenants  or  representations  made herein  which is not
cured  within 15 days after  receipt of written  notice from  Purchaser  of such
breach,  or (c) the  Company's  failure to: (i)  discharge  or stay a bankruptcy
proceeding  within 90 days of such action being taken against the Company,  (ii)
file the  Registration  Statement  with the SEC within 45 days after the Closing
Date, (iii) have the  Registration  Statement deemed effective by the SEC within
90 days after the date of filing of the Registration  Statement and maintain the
effectiveness thereafter; (iv) maintain trading of the Company's Common Stock on
the  NASDAQ  Small Cap except  for any  periods  when the stock is listed on the
over-the-counter  bulletin board, the NASDAQ National Stock Market,  the AMEX or
the NYSE, (v) pay the expenses referred to below or the Due Diligence Fee within
three  (3) days  after the  Closing;  (vi) pay  dividends  when due out of funds
legally  available  therefore.,  or (vii) deliver to Purchasers,  or Purchasers'
broker, as directed, Common Stock that Purchasers have converted within five (5)
business days of such conversions.

IN THE EVENT THAT (A) THE COMPANY FAILS TO FILE THE REGISTRATION  STATEMENT WITH
THE SEC WITHIN 45 DAYS AFTER THE CLOSING DATE (B) THE REGISTRATION  STATEMENT IS
NOT DEEMED EFFECTIVE BY THE SEC WITHIN 90 DAYS AFTER INITIAL FILING,  OR (C) THE
COMPANY FAILS TO MAINTAIN THE  EFFECTIVENESS OF THE REGISTRATION  STATEMENT ONCE
DEEMED EFFECTIVE, AS A REMEDY FOR SUCH AN EVENT OF DEFAULT, COMPANY SHALL PAY TO
PURCHASERS,  IN CASH,  $1,467 FOR EACH DAY THAT SUCH AN EVENT OF DEFAULT REMAINS
UNCURED.  PURCHASERS AND COMPANY  ACKNOWLEDGE  AND AGREE THAT THEY HAVE MUTUALLY
DISCUSSED THE IMPRACTICALITY AND EXTREME DIFFICULTY OF FIXING THE ACTUAL DAMAGES
PURCHASERS  WOULD INCUR IN THE CASE OF SUCH AN EVENT OF  DEFAULT,  AND THAT AS A
RESULT OF SUCH  DISCUSSION  THE PARTIES  AGREE THAT $1,467 FOR EACH DAY THAT THE
REGISTRATION STATEMENT FILING IS DELAYED REPRESENTS A REASONABLE ESTIMATE OF THE
ACTUAL  DAMAGES  WHICH  PURCHASERS  WOULD  INCUR IN THE CASE OF SUCH AN EVENT OF
DEFAULT. PURCHASERS AND COMPANY SPECIFICALLY AND EXPRESSLY AGREE TO ABIDE BY THE
TERMS AND PROVISIONS OF THIS PARAGRAPH CONCERNING LIQUIDATED DAMAGES.

                                       14
<PAGE>

11. Notices. All communications  hereunder shall be in writing and shall be hand
delivered,  mailed by first-class mail,  couriered by next-day air courier or by
facsimile and  confirmed in writing (i) if to the Company,  at the addresses set
forth below, or (ii) if to a Purchaser or MAG, to the address set forth for such
party on the signature page hereto.

If to the Company:

Vasomedical Inc
180 Linden Avenue
Westbury, NY 11590
Phone: 516-997-4600
Fax: 516-997-2299

Attention: Thomas W. Fry

with a copy to:

Beckman, Lieberman & Barandes, LLP
100 Jericho Quadrangle
Suite 329
Jericho, New York  11753
Attn: David H. Lieberman, Esq. Telephone:  516-433-1200Facsimile:  516-433-5858

Communications  shall be  deemed to be  given:  (i)  three (3) days  after it is
received  if sent by  facsimile  at the  address  and  number  set forth  above;
provided that notices given by facsimile  shall not be effective,  unless either
(a) a duplicate  copy of such  facsimile  notice is promptly given by depositing
the same in the mail,  postage  prepaid and  addressed to the party as set forth
below or (b) the receiving party delivers a written  confirmation of receipt for
such notice by any other  method  permitted  under this  paragraph;  and further
provided  that  any  notice  given  by  facsimile   received   after  5:00  p.m.
(recipient's time) or on a non-business day shall be deemed received on the next
business  day;  (ii) five (5) business  days after  deposit in the United States
mail, certified, return receipt requested, postage prepaid, and addressed to the
party as set forth below;  or (iii) the next  business day after deposit with an
international  overnight  delivery  service,  postage prepaid,  addressed to the
party as set forth below with next  business day delivery  guaranteed;  provided
that the sending  party  receives  confirmation  of delivery  from the  delivery
service provider.

Change of a party's address or facsimile  number may be designated  hereunder by
giving  notice  to all of the  other  parties  hereto  in  accordance  with this
Section.

12. Survival Clause. The respective representations,  warranties, agreements and
covenants of the Company and the Purchasers  set forth in this  Agreement  shall
survive until the first anniversary of the Closing.

                                       15
<PAGE>

13. Fees and Expenses.  Within three (3) days of Closing,  the Company agrees to
pay Purchasers'  legal expenses  incurred in connection with the preparation and
negotiation of the Transaction  Documents equal to $15,000.  Any amounts paid by
Company upon execution of the Term Sheet will be credited against this amount.

14.  Legal Fees.  If any action at law or in equity is  necessary  to enforce or
interpret  the terms of this  Agreement,  the  Warrants  or the  Certificate  of
Designation,  the prevailing  party or parties shall be entitled to receive from
the other  party or parties  reasonable  attorneys'  fees,  costs and  necessary
disbursements  in addition to any other relief to which the prevailing  party or
parties may be reasonably entitled.

15. 8K Filing and Press Releases.  The Company shall file a Form 8K with the SEC
within 5 trading days after the Closing Date setting  forth the general terms of
the  transaction.  Neither party shall issue any press release  relating to this
transaction  without the prior written consent of the other party, which consent
shall not be unreasonably withheld or delayed.

16. Successors. This Agreement shall inure to the benefit of and be binding upon
Purchasers,  MAG and the  Company  and  their  respective  successors  and legal
representatives,  and  nothing  expressed  or  mentioned  in this  Agreement  is
intended or shall be  construed  to give any other person any legal or equitable
right, remedy or claim under or in respect of this Agreement,  or any provisions
herein contained;  this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive  benefit of such persons and
for the benefit of no other  person.  Neither the Company nor any  Purchaser may
assign this  Agreement or any rights or obligation  hereunder  without the prior
written consent of the other party.

17. No Waiver;  Modifications in Writing. No failure or delay on the part of the
Company, MAG or any Purchaser 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.  Except as otherwise  set
forth  herein,  the  remedies  provided  for herein are  cumulative  and are not
exclusive  of any remedies  that may be  available  to the  Company,  MAG or any
Purchaser  at law or in equity or  otherwise.  No  waiver of or  consent  to any
departure  by the  Company,  MAG or any  Purchaser  from any  provision  of this
Agreement  shall be effective  unless signed in writing by the party entitled to
the benefit  thereof,  provided that notice of any such waiver shall be given to
each party hereto as set forth below.  Except as otherwise  provided herein,  no
amendment,  modification or termination of any provision of this Agreement shall
be  effective  unless  signed in writing by or on behalf of each of the Company,
MAG and the Purchasers.  Any amendment,  supplement or modification of or to any
provision of this Agreement,  any waiver of any provision of this Agreement, and
any consent to any departure by the Company, MAG or any Purchaser from the terms
of any  provision  of this  Agreement  shall be  effective  only in the specific
instance  and for the  specific  purpose for which made or given.  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.

                                       16
<PAGE>

18. Entire  Agreement.  This  Agreement,  together with  Transaction  Documents,
constitutes  the entire  agreement  among the parties  hereto and supersedes all
prior agreements,  understandings and arrangements,  oral or written,  among the
parties hereto with respect to the subject matter hereof and thereof.

19.  Severability.  If any provision of this  Agreement is held to be invalid or
unenforceable in any respect,  the validity and  enforceability of the remaining
terms and  provisions  of this  Agreement  shall not in any way be  affected  or
impaired thereby.

20. APPLICABLE LAW. THE VALIDITY AND  INTERPRETATION OF THIS AGREEMENT,  AND THE
TERMS AND  CONDITIONS  SET FORTH  HEREIN  SHALL BE GOVERNED BY AND  CONSTRUED IN
ACCORDANCE  WITH THE LAWS OF THE STATE OF NEW  YORK,  WITHOUT  GIVING  EFFECT TO
PROVISIONS  RELATING TO  CONFLICTS OF LAW TO THE EXTENT THE  APPLICATION  OF THE
LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

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

22. If the foregoing  correctly sets forth our  understanding,  please  indicate
your acceptance thereof in the space provided below for that purpose,  whereupon
this  Agreement  shall  constitute a binding  agreement  among the Company,  the
Purchasers and MAG.

23. Upon  written  notice from Company to  Purchaser  (a  "Mandatory  Conversion
Notice"),  provided that the closing price of the Common Stock exceeds $1.30 per
share for at least the 20  consecutive  trading days  immediately  preceding the
Mandatory  Conversion  Notice,  and the  Registration  Statement  is  effective,
Company  may  require  Purchaser  to  convert  all  or a  portion  of  the  then
outstanding  Series D Preferred  Stock.  The Mandatory  Conversion  Notice shall
state the number of shares of Common Stock  outstanding  and number of shares to
be  converted.  Any  conversion  shall be  subject to  limitation  such that the
beneficial  ownership  of  Purchaser  and its  affiliates  shall  remain  in the
aggregate below 9.99% of the total Common Stock outstanding at all times.

Very truly yours,

VASOMEDICAL, INC.

By:     /s/ Thomas Glover
        -----------------
Name:   Thomas Glover
Title:     President

                                       17
<PAGE>

ACCEPTED AND AGREED:
Mercator Momentum Fund, LP              Mercator Momentum Fund III, LP
By:     M.A.G. CAPITAL, LLC             By:     M.A.G. CAPITAL, LLC
Its:    General Partner                 Its:    General Partner

        /s/ David Firestone                     /s/ David Firestone
        -------------------                     -------------------
        David Firestone                         David Firestone
        Managing Member                         Managing Member

M.A.G. CAPITAL, LLC                     Monarch Pointe Fund, Ltd.


By:/s/ David Firestone                By:/s/ David Firestone
   -------------------                   -------------------
Name: David Firestone                   Name: David Firestone
Its:  Managing Member                   Its:  President


                                     Addresses for Notice to Purchasers and MAG:

                                     M.A.G. CAPITAL, LLC
                                     555 South Flower Street, Suite 4200
                                     Los Angeles, California 90071
                                     Attention:  David Firestone
                                     Facsimile:  (213) 533-8285
                                     with copy to:

                                     David C. Ulich, Esq.
                                     Sheppard, Mullin, Richter & Hampton LLP
                                     333 South Hope Street, 48th Floor
                                     Los Angeles, California 90071
                                     Facsimile: (213) 620-1398


<TABLE>
<CAPTION>
---------------------------------- ---------------- ---------------- ---------------- --------------- ----------------
                                      Mercator         Mercator
                                   Momentum Fund,    Momentum Fund   Monarch Pointe       M.A.G.
                                         LP             III, LP        Fund, Ltd.      Capital, LLC        Total
---------------------------------- ---------------- ---------------- ---------------- --------------- ----------------
<S>                                      <C>              <C>            <C>                  <C>         <C>
Total Purchase Price                     $ 625,000        $ 385,000      $ 1,490,000                      $ 2,500,000
---------------------------------- ---------------- ---------------- ---------------- --------------- ----------------
Paid At Closing                          $ 437,500        $ 269,500      $ 1,043,000          $    -      $ 1,750,000
---------------------------------- ---------------- ---------------- ---------------- --------------- ----------------
Paid At Registration Filing              $ 187,500        $ 115,500        $ 447,000          $    -        $ 750,000
---------------------------------- ---------------- ---------------- ---------------- --------------- ----------------

Preferred Shares                             6,250            3,850           14,900               -           25,000
---------------------------------- ---------------- ---------------- ---------------- --------------- ----------------
Warrants @ $.69/share                      378,444          233,121          902,210         378,444        1,892,219
---------------------------------- ---------------- ---------------- ---------------- --------------- ----------------
</TABLE>





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