Exhibit 10.1




SECURITIES PURCHASE AGREEMENT


        This Securities Purchase Agreement (this "Agreement")
is dated as of May 28, 2004, among DDS Technologies USA, Inc., a Nevada
corporation (the "Company"), and the purchasers identified on the
signature pages hereto (each a "Purchaser" and collectively the "Purchasers").

        WHEREAS, subject to the terms and conditions set forth in
this Agreement and pursuant to Section 4(2) of the Securities Act (as defined
below), and Rule 506 promulgated thereunder, the Company desires to issue and
sell to the Purchasers, and the Purchasers, severally and not jointly, desire to
purchase from the Company in the aggregate, up to 1,100,000 shares of Common
Stock, and Warrants to purchase up to 1,100,000 shares of Common Stock.

        NOW, THEREFORE, IN CONSIDERATION of the mutual covenants
contained in this Agreement, and for other good and valuable consideration the
receipt and adequacy of which are hereby acknowledged, the Company and each
Purchaser agrees as follows:

ARTICLE I.

DEFINITIONS

        1.1    
Definitions. In addition to the terms defined
elsewhere in this Agreement, for all purposes of this Agreement, the following
terms have the meanings indicated in this Section 1.1:

"Action" shall have the
                        meaning ascribed to such term in Section 3.1(j).

                        "Affiliate" means any Person
                        that, directly or indirectly through one or more
                        intermediaries, controls or is controlled by or is under
                        common control with a Person as such terms are used in
                        and construed under Rule 144. With respect to a
                        Purchaser, any investment fund or managed account that
                        is managed on a discretionary basis by the same
                        investment manager as such Purchaser will be deemed to
                        be an Affiliate of such Purchaser.

                        "Business Day" means any day
                        except Saturday, Sunday and any day which shall be a
                        federal legal holiday or a day on which banking
                        institutions in the State of New York are authorized or
                        required by law or other governmental action to close.

                        "Closing" means the closing of
                        the purchase and sale of the Common Stock and the
                        Warrants pursuant to Section 2.1(a), on May 28, 2004 or
                        such other date as agreed to by the parties.

                        "Closing Date" means the date
                        of the Closing.

                        "Closing Price" means on any
                        particular date (a) the last reported closing bid price
                        per share of Common Stock on such date on the Trading
                        Market (as reported by Bloomberg L.P. at 4:15 PM (New
                        York time) as the last reported closing bid price for
                        regular session trading on such day), or (b) if there is
                        no such price on such date, then the closing bid price
                        on the Trading Market on the date nearest preceding such
                        date (as reported by Bloomberg L.P. at 4:15 PM (New York
                        time) as the closing bid price for regular session
                        trading on such day), or (c)  if the Common Stock
                        is not then listed or quoted on the Trading Market and
                        if prices for the Common Stock are then reported in the
                        "pink sheets" published by the National Quotation Bureau
                        Incorporated (or a similar organization or agency
                        succeeding to its functions of reporting prices), the
                        most recent bid price per share of the Common Stock so
                        reported, or (d) if the shares of Common Stock are not
                        then publicly traded the fair market value of a share of
                        Common Stock as determined by an appraiser selected in
                        good faith by the Purchasers of a majority in interest
                        of the Shares then outstanding.

                        1

            

                    "Commission" means the Securities and Exchange
Commission.

"Common Stock" means the
                        common stock of the Company, $0.0001 par value per
                        share, and any securities into which such common stock
                        may hereafter be reclassified.

                        "Common Stock Equivalents"
                        means any securities of the Company or the Subsidiaries
                        which would entitle the holder thereof to acquire at any
                        time Common Stock, including without limitation, any
                        debt, preferred stock, rights, options, warrants or
                        other instrument that is at any time convertible into or
                        exchangeable for, or otherwise entitles the holder
                        thereof to receive, Common Stock.

                        "Company Counsel" means
                        Hodgson Russ LLP, 150 King Street West, Suite 2309,
                        Toronto, Ontario.

                        "Disclosure Schedules" means
                        the Disclosure Schedules attached as Annex I
                        hereto.

                        "Effective Date" means the
                        date that the Registration Statement is first declared
                        effective by the Commission.

                        "Exchange Act" means the
                        Securities Exchange Act of 1934, as amended.

                        "Intellectual Property Rights"
                        shall have the meaning ascribed to such term in Section
                        3.1(o).

                        "Liens" means a lien, charge,
                        security interest, encumbrance, right of first refusal
                        or other restriction.

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

                        2

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

                        "Per Share Purchase Price"
                        equals $3.30.

                        "Person" means an individual
                        or corporation, partnership, trust, incorporated or
                        unincorporated association, joint venture, limited
                        liability company, joint stock company, government (or
                        an agency or subdivision thereof) or other entity of any
                        kind.

                        "Registration Statement" means
                        a registration statement meeting the requirements set
                        forth in the Registration Rights Agreement and covering
                        the resale by the Purchasers of the Shares and the
                        Warrant Shares.

                        "Registration Rights Agreement"
                        means the Registration Rights Agreement, dated as of the
                        date of this Agreement, among the Company and each
                        Purchaser, in the form of Exhibit A hereto.

                        "Rule 144" means Rule 144
                        promulgated by the Commission pursuant to the Securities
                        Act, as such Rule may be amended from time to time, or
                        any similar rule or regulation hereafter adopted by the
                        Commission having substantially the same effect as such
                        Rule. 

                        "SEC Reports" shall have the
                        meaning ascribed to such term in Section 3.1(h).

            

                    "Securities" means the Shares, the Warrants and the
Warrant Shares.

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

                        "Shares" means the shares of
                        Common Stock issued or issuable to each Purchaser
                        pursuant to this Agreement.

                        "Subscription Amount" means,
                        as to each Purchaser and the Closing, the amounts set
                        forth below such Purchaser's signature block on the
                        signature page hereto, in United States dollars and in
                        immediately available funds.

                        "Subsidiary" shall have the
                        meaning ascribed to such term in Section 3.1(a).

                        "Trading Day" means (i) a day
                        on which the Common Stock is traded on a Trading Market,
                        or (ii) if the Common Stock is not listed on a Trading
                        Market, a day on which the Common Stock is traded on the
                        over-the-counter market, as reported by the OTC Bulletin
                        Board, or (iii) if the Common Stock is not quoted on the
                        OTC Bulletin Board, a day on which the Common Stock is
                        quoted in the over-the-counter market as reported by the
                        National Quotation Bureau Incorporated (or any similar
                        organization or agency succeeding to its functions of
                        reporting prices); provided, that in the event that the
                        Common Stock is not listed or quoted as set forth in (i),
                        (ii) and (iii) hereof, then Trading Day shall mean a
                        Business Day.

                        3

                        "Trading Market" means the
                        following markets or exchanges on which the Common Stock
                        is listed or quoted for trading on the date in question:
                        the OTC Bulletin Board, the American Stock Exchange, the
                        New York Stock Exchange, the Nasdaq National Market or
                        the Nasdaq SmallCap Market.

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

                        "Warrants" means the Common
                        Stock Purchase Warrants, in the form of Exhibit B,
                        issuable to the Purchasers at Closing, which warrants
                        shall be exercisable immediately and have an exercise
                        price equal to $3.75 and a term of exercise of 3 years.

                        "Warrant Shares" means the
                        shares of Common Stock issuable upon exercise of the
                        Warrants.

            

ARTICLE II.

PURCHASE AND SALE

                    2.1     Closing. At the Closing, the Purchasers shall
purchase, severally and not jointly, and the Company shall issue and sell, in
the aggregate, a number of shares of Common Stock up to 1,100,000 shares of
Common Stock, and Warrants to purchase an equal number of shares of Common Stock
on the Closing Date. Each Purchaser shall purchase from the Company, and the
Company shall issue and sell to each Purchaser, a number of Shares equal to such
Purchaser's Subscription Amount divided by the Per Share Purchase Price. The
Warrants shall be issued, without additional consideration, on the basis of one
Warrant for each Share purchased. Upon satisfaction of the conditions set forth
in Section 2.2, the Closing shall occur at the Toronto offices of Hodgson Russ
LLP, or such other location as the parties shall mutually agree.

                    2.2     Closing Conditions.  At the Closing the Company shall
                        deliver or cause to be delivered to each Purchaser
                        (except as otherwise provided below):

(i)     this
                                                Agreement duly executed by the
                                                Company;

                                                (ii)     within 3
                                                Trading Days of the Closing
                                                Date, a certificate evidencing a
                                                number of Shares equal to such
                                                Purchaser's Subscription Amount
                                                divided by the Per Share
                                                Purchase Price, registered in
                                                the name of such Purchaser;

                                                (iii)     within
                                                3 Trading Days of the Closing
                                                Date, a Warrant, registered in
                                                the name of such Purchaser,
                                                pursuant to which such Purchaser
                                                shall have the right to acquire
                                                up to the number of shares of
                                                Common Stock equal to 100% of
                                                the Shares to be issued to such
                                                Purchaser at such Closing; and

                                                4

                                                (iv)     the
                                                Registration Rights Agreement
                                                duly executed by the Company.

                                    
                        
                                (b)     At the Closing each Purchaser
                        shall deliver or cause to be delivered to the Company
                        the following:

                        (i) this
                                                Agreement duly executed by such
                                                Purchaser;

                                                (ii) such
                                                Purchaser's Subscription Amount
                                                as to such Closing by wire
                                                transfer to the account of the
                                                Company as provided to the
                                                Purchasers in writing prior to
                                                the Closing Date; and

                                                (iii) the
                                                Registration Rights Agreement
                                                duly executed by such Purchaser.

                                    
                        
                                (c)     All representations and
                        warranties of each of the parties herein shall remain
                        true and correct as of the Closing Date.

                                (d)     As of the Closing Date, there
                        shall have been no Material Adverse Effect with respect
                        to the Company since the date hereof.

                                (e)     From the date hereof to the
                        Closing Date, trading in the Common Stock shall not have
                        been suspended by the Commission (except for any
                        suspension of trading of limited duration agreed to by
                        the Company, which suspension shall be terminated prior
                        to the Closing), and, at any time prior to the Closing
                        Date, trading in securities generally as reported by
                        Bloomberg Financial Markets shall not have been
                        suspended or limited, or minimum prices shall not have
                        been established on securities whose trades are reported
                        by such service, or on any Trading Market, nor shall a
                        banking moratorium have been declared either by the
                        United States or New York State authorities.

            

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

                    3.1        Representations and Warranties of the Company.
Except as set forth under the corresponding section of the Disclosure Schedules
delivered concurrently herewith, the Company hereby makes the following
representations and warranties as of the date hereof and as of the Closing Date
to each Purchaser:

        (a)    
                        Subsidiaries. The Company
                        has no direct or indirect subsidiaries. The Company
                        owns, directly or indirectly, all of the capital stock
                        of its Subsidiary free and clear of any lien, charge,
                        security interest, encumbrance, right of first refusal
                        or other restriction (collectively, "Liens"), and
                        all the issued and outstanding shares of capital stock
                        of each Subsidiary are validly issued and are fully
                        paid, non-assessable and free of preemptive and similar
                        rights. 

                        5

                                (b)     Organization and Qualification.
                        Each of the Company and the Subsidiaries is an entity
                        duly incorporated or otherwise organized, validly
                        existing and in good standing under the laws of the
                        jurisdiction of its incorporation or organization (as
                        applicable), with the requisite corporate power and
                        authority to own and use its properties and assets and
                        to carry on its business as currently conducted. Neither
                        the Company nor any Subsidiary is in violation of any of
                        the provisions of its respective certificate or articles
                        of incorporation, bylaws or other organizational or
                        charter documents. Each of the Company and the
                        Subsidiaries is duly qualified to conduct business and
                        is in good standing as a foreign corporation or other
                        entity in each jurisdiction in which the nature of the
                        business conducted or property owned by it makes such
                        qualification necessary, except where the failure to be
                        so qualified or in good standing, as the case may be,
                        would not have or reasonably be expected to result in (i)
                        a material adverse effect on the legality, validity or
                        enforceability of any Transaction Document, (ii) a
                        material adverse effect on the results of operations,
                        assets, business or financial condition of the Company
                        and the Subsidiaries, taken as a whole, or (iii) a
                        material adverse effect on the Company's ability to
                        perform in any material respect on a timely basis its
                        obligations under any Transaction Document (any of (i),
                        (ii) or (iii), a "Material Adverse Effect").

                                (c)     Authorization; Enforcement.
                        The Company has the requisite corporate power and
                        authority to enter into and to consummate the
                        transactions contemplated by each of the Transaction
                        Documents and otherwise to carry out its obligations
                        thereunder. The execution and delivery of each of the
                        Transaction Documents by the Company and the
                        consummation by it of the transactions contemplated
                        thereby have been duly authorized by all necessary
                        action on the part of the Company and no further action
                        is required by the Company in connection therewith. Each
                        Transaction Document has been (or upon delivery will
                        have been) duly executed by the Company and, when
                        delivered in accordance with the terms hereof, will
                        constitute the valid and binding obligation of the
                        Company enforceable against the Company in accordance
                        with its terms except (i) as limited by applicable
                        bankruptcy, insolvency, reorganization, moratorium and
                        other laws of general application affecting enforcement
                        of creditors' rights generally and (ii) as limited by
                        laws relating to the availability of specific
                        performance, injunctive relief or other equitable
                        remedies, and (iii) with respect to the indemnification
                        provisions set forth in the Registration Rights
                        Agreement, as limited by public policy.

                                (d)     No Conflicts. The
                        execution, delivery and performance of the Transaction
                        Documents by the Company and the consummation by the
                        Company of the transactions contemplated thereby do not
                        and will not (i) conflict with or violate any provision
                        of the Company's or any Subsidiary's certificate or
                        articles of incorporation, bylaws or other
                        organizational or charter documents, or (ii) conflict
                        with, or constitute a default (or an event that with
                        notice or lapse of time or both would become a default)
                        under, or give to others any rights of termination,
                        amendment, acceleration or cancellation (with or without
                        notice, lapse of time or both) of, any agreement, credit
                        facility, debt or other instrument (evidencing a Company
                        or Subsidiary debt or otherwise) or other understanding
                        to which the Company or any Subsidiary is a party or by
                        which any property or asset of the Company or any
                        Subsidiary is bound or affected, or (iii) result in a
                        violation of any law, rule, regulation, order, judgment,
                        injunction, decree or other restriction of any court or
                        governmental authority to which the Company or a
                        Subsidiary is subject (including federal and state
                        securities laws and regulations), or by which any
                        property or asset of the Company or a Subsidiary is
                        bound or affected; except in the case of each of clauses
                        (ii) and (iii), such as would not have or reasonably be
                        expected to result in a Material Adverse Effect.

                        6

                                (e)     Filings, Consents and
                        Approvals. The Company is not required to obtain any
                        consent, waiver, authorization or order of, give any
                        notice to, or make any filing or registration with, any
                        court or other federal, state, local or other
                        governmental authority or other Person in connection
                        with the execution, delivery and performance by the
                        Company of the Transaction Documents, other than (a) the
                        filing with the Commission of the Registration
                        Statement, the application(s) to each Trading Market for
                        the listing of the Shares and Warrant Shares for trading
                        thereon in the time and manner required thereby, and
                        applicable Blue Sky filings, (b) such as have already
                        been obtained or such exemptive filings as are required
                        to be made under applicable securities laws, and (c)
                        such other filings as may be required following the
                        Closing Date under the Securities Act, the Exchange Act
                        and corporate law.

                                (f)     Issuance of the Securities.
                        The Securities are duly authorized and, when issued and
                        paid for in accordance with the Transaction Documents,
                        will be duly and validly issued, fully paid and
                        nonassessable, free and clear of all Liens. The Company
                        has reserved from its duly authorized capital stock the
                        maximum number of shares of Common Stock issuable
                        pursuant to this Agreement and the Warrants.

                                (g)     Capitalization. The
                        capitalization of the Company is as described in the
                        Company's most recent periodic report filed with the
                        Commission. The Company has not issued any capital stock
                        since such filing other than pursuant to the exercise of
                        employee stock options under the Company's stock option
                        plans and pursuant to the conversion or exercise of
                        Common Stock Equivalents outstanding on the date hereof.
                        No Person has any right of first refusal, preemptive
                        right, right of participation, or any similar right to
                        participate in the transactions contemplated by the
                        Transaction Documents. Except as a result of the
                        purchase and sale of the Securities and except for
                        employee stock options under the Company's stock option
                        plans, there are no outstanding options, warrants,
                        script rights to subscribe to, calls or commitments of
                        any character whatsoever relating to, or securities,
                        rights or obligations convertible into or exchangeable
                        for, or giving any Person any right to subscribe for or
                        acquire, any shares of Common Stock, or contracts,
                        commitments, understandings or arrangements by which the
                        Company or any Subsidiary is or may become bound to
                        issue additional shares of Common Stock, or securities
                        or rights convertible or exchangeable into shares of
                        Common Stock. The issue and sale of the Securities will
                        not obligate the Company to issue shares of Common Stock
                        or other securities to any Person (other than the
                        Purchasers) and will not result in a right of any holder
                        of Company securities to adjust the exercise,
                        conversion, exchange or reset price under such
                        securities.

                        7

                                (h)     SEC Reports; Financial
                        Statements. The Company has filed all reports
                        required to be filed by it under the Securities Act and
                        the Exchange Act, including pursuant to Section 13(a) or
                        15(d) of the Exchange Act, for the two years preceding
                        the date hereof (or such shorter period as the Company
                        was required by law to file such material) (the
                        foregoing materials, including the exhibits thereto,
                        being collectively referred to herein as the "SEC
                        Reports" and, together with the Disclosure Schedules
                        to this Agreement, the "Disclosure Materials") on
                        a timely basis or has received a valid extension of such
                        time of filing and has filed any such SEC Reports prior
                        to the expiration of any such extension. As of their
                        respective dates, the SEC Reports complied in all
                        material respects with the requirements of the
                        Securities Act and the Exchange Act and the rules and
                        regulations of the Commission promulgated thereunder, as
                        applicable, and none of the SEC Reports, when filed,
                        contained any untrue statement of a material fact or
                        omitted to state a material fact required to be stated
                        therein or necessary in order to make the statements
                        therein, in light of the circumstances under which they
                        were made, not misleading. The financial statements of
                        the Company included in the SEC Reports comply in all
                        material respects with applicable accounting
                        requirements and the rules and regulations of the
                        Commission with respect thereto as in effect at the time
                        of filing. Such financial statements have been prepared
                        in accordance with generally accepted accounting
                        principles applied on a consistent basis during the
                        periods involved ("GAAP"), except as may be
                        otherwise specified in such financial statements or the
                        notes thereto and except that unaudited financial
                        statements may not contain all footnotes required by
                        GAAP, and fairly present in all material respects the
                        financial position of the Company and its consolidated
                        subsidiaries as of and for the dates thereof and the
                        results of operations and cash flows for the periods
                        then ended, subject, in the case of unaudited
                        statements, to normal, immaterial, year-end audit
                        adjustments. 

                                (i)     Material Changes. Since
                        the date of the latest audited financial statements
                        included within the SEC Reports, except as disclosed in
                        the SEC Reports, (i) there has been no event, occurrence
                        or development that has had or that could reasonably be
                        expected to result in a Material Adverse Effect, (ii)
                        the Company has not incurred any liabilities (contingent
                        or otherwise) other than (A) trade payables and accrued
                        expenses incurred in the ordinary course of business
                        consistent with past practice and (B) liabilities not
                        required to be reflected in the Company's financial
                        statements pursuant to GAAP or required to be disclosed
                        in filings made with the Commission, (iii) the Company
                        has not altered its method of accounting, (iv) the
                        Company has not declared or made any dividend or
                        distribution of cash or other property to its
                        stockholders or purchased, redeemed or made any
                        agreements to purchase or redeem any shares of its
                        capital stock and (v) the Company has not issued any
                        equity securities to any officer, director or Affiliate,
                        except pursuant to existing Company stock option plans.
                        The Company does not have pending before the Commission
                        any request for confidential treatment of information.

                        8

                                (j)     Litigation. Except as
                        disclosed in the SEC Reports, there is no action, suit,
                        inquiry, notice of violation, proceeding or
                        investigation pending or, to the knowledge of the
                        Company, threatened against or affecting the Company,
                        any Subsidiary or any of their respective properties
                        before or by any court, arbitrator, governmental or
                        administrative agency or regulatory authority (federal,
                        state, county, local or foreign) (collectively, an "Action")
                        which (i) adversely affects or challenges the legality,
                        validity or enforceability of any of the Transaction
                        Documents or the Securities or (ii) could, if there were
                        an unfavorable decision, have or reasonably be expected
                        to result in a Material Adverse Effect. Neither the
                        Company nor any Subsidiary, nor, to the knowledge of the
                        Company, any director or officer thereof, is or has been
                        the subject of any Action involving a claim of violation
                        of or liability under federal or state securities laws
                        or a claim of breach of fiduciary duty. There has not
                        been, and to the knowledge of the Company, there is not
                        pending or contemplated, any investigation by the
                        Commission involving the Company or any current or
                        former director or officer of the Company. The
                        Commission has not issued any stop order or other order
                        suspending the effectiveness of any registration
                        statement filed by the Company or any Subsidiary under
                        the Exchange Act or the Securities Act.

                                (k)    
                        Labor Relations. No
                        material labor dispute exists or, to the knowledge of
                        the Company, is imminent with respect to any of the
                        employees of the Company which could reasonably be
                        expected to result in a Material Adverse Effect.

                                (l)     Compliance. Except as
                        disclosed in the SEC Reports, neither the Company nor
                        any Subsidiary (i) is in default under or in violation
                        of (and no event has occurred that has not been waived
                        that, with notice or lapse of time or both, would result
                        in a default by the Company or any Subsidiary under),
                        nor has the Company or any Subsidiary received notice of
                        a claim that it is in default under or that it is in
                        violation of, any indenture, loan or credit agreement or
                        any other agreement or instrument to which it is a party
                        or by which it or any of its properties is bound
                        (whether or not such default or violation has been
                        waived), (ii) is in violation of any order of any court,
                        arbitrator or governmental body, or (iii) is or has been
                        in violation of any statute, rule or regulation of any
                        governmental authority, including without limitation all
                        foreign, federal, state and local laws applicable to its
                        business, except in the case of clauses (i), (ii) and
                        (iii) as would not have or reasonably be expected to
                        result in a Material Adverse Effect.

                                (m)     Regulatory Permits. The
                        Company and the Subsidiaries possess all certificates,
                        authorizations and permits issued by the appropriate
                        federal, state, local or foreign regulatory authorities
                        necessary to conduct their respective businesses as
                        described in the SEC Reports, except where the failure
                        to possess such permits would not have or reasonably be
                        expected to result in a Material Adverse Effect ("Material
                        Permits"), and neither the Company nor any
                        Subsidiary has received any notice of proceedings
                        relating to the revocation or modification of any
                        Material Permit.

                        9

                                (n)     Title to Assets. The
                        Company and the Subsidiaries have good and marketable
                        title in fee simple to all real property owned by them
                        that is material to the business of the Company and the
                        Subsidiaries, taken as a whole, and good and marketable
                        title in all personal property owned by them that is
                        material to the business of the Company and the
                        Subsidiaries, taken as a whole, in each case free and
                        clear of all Liens, except for Liens as do not
                        materially affect the value of such property and do not
                        materially interfere with the use made and proposed to
                        be made of such property by the Company and the
                        Subsidiaries and Liens for the payment of federal, state
                        or other taxes, the payment of which is neither
                        delinquent nor subject to penalties. Any real property
                        and facilities held under lease by the Company and the
                        Subsidiaries are held by them under valid, subsisting
                        and enforceable leases with which the Company and the
                        Subsidiaries are in material compliance.

                                (o)     Patents and Trademarks. To
                        the knowledge of the Company and each Subsidiary, the
                        Company and the Subsidiaries have, or have rights to
                        use, all patents, patent applications, trademarks,
                        trademark applications, service marks, trade names,
                        copyrights, licenses and other similar rights that are
                        necessary or material for use in connection with their
                        respective businesses as described in the SEC Reports
                        and which the failure to so have could have or
                        reasonably be expected to result in a Material Adverse
                        Effect (collectively, the "Intellectual Property
                        Rights"). Neither the Company nor any Subsidiary has
                        received a written notice that the Intellectual Property
                        Rights used by the Company or any Subsidiary violates or
                        infringes the rights of any Person. To the knowledge of
                        the Company, all such Intellectual Property Rights are
                        enforceable.

                                (p)     Insurance. The Company and
                        the Subsidiaries currently hold no insurance but will
                        use the proceeds to this financing to put in place
                        insurance by insurers of recognized financial
                        responsibility against such losses and risks and in such
                        amounts as are prudent and customary in the businesses
                        (not less than $5 million) in which the Company and the
                        Subsidiaries are engaged within 45 days of the Closing
                        Date. Neither the Company nor any Subsidiary has any
                        reason to believe that it will not be able to obtain
                        such insurance or to renew its insurance coverage as and
                        when such coverage expires or to obtain similar coverage
                        from similar insurers as may be necessary to continue
                        its business without a significant increase in cost. 

                                (q)     Transactions With Affiliates
                        and Employees. Except as set forth in the SEC
                        Reports, none of the officers or directors of the
                        Company and, to the knowledge of the Company, none of
                        the employees of the Company is presently a party to any
                        transaction with the Company or any Subsidiary (other
                        than for services as employees, officers and directors),
                        including any contract, agreement or other arrangement
                        providing for the furnishing of services to or by,
                        providing for rental of real or personal property to or
                        from, or otherwise requiring payments to or from any
                        officer, director or such employee or, to the knowledge
                        of the Company, any entity in which any officer,
                        director, or any such employee has a substantial
                        interest or is an officer, director, trustee or partner,
                        in each case in excess of $60,000 other than (a) for
                        payment of salary or consulting fees for services
                        rendered, (b) reimbursement for expenses incurred on
                        behalf of the Company and (c) for other employee
                        benefits, including stock option agreements under any
                        stock option plan of the Company.

                        10

                                (r)     Internal Accounting Controls.
                        The Company and each of its subsidiaries maintains a
                        system of internal accounting controls sufficient to
                        provide reasonable assurance that (i) transactions are
                        executed in accordance with management's general or
                        specific authorizations, (ii) transactions are recorded
                        as necessary to permit preparation of financial
                        statements in conformity with GAAP and to maintain asset
                        accountability, (iii) access to assets is permitted only
                        in accordance with management's general or specific
                        authorization, and (iv) the recorded accountability for
                        assets is compared with the existing assets at
                        reasonable intervals and appropriate action is taken
                        with respect to any differences. The Company has
                        established disclosure controls and procedures (as
                        defined in Exchange Act Rules 13a-14 and 15d-14) for the
                        Company and designed such disclosure controls and
                        procedures to ensure that material information relating
                        to the Company, including its subsidiaries, is made
                        known to the certifying officers by others within those
                        entities, particularly during the period in which the
                        Company's Form 10-K or 10-Q, as the case may be, is
                        being prepared.

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

                                (t)     Private Placement.
                        Assuming the accuracy of the Purchasers representations
                        and warranties set forth in Section 3.2, no registration
                        under the Securities Act is required for the offer and
                        sale of the Securities by the Company to the Purchasers
                        as contemplated hereby. The issuance and sale of the
                        Securities hereunder does not contravene the rules and
                        regulations of the Trading Market.

                                (u)     Investment Company. The
                        Company is not, and is not an Affiliate of, an
                        "investment company" within the meaning of the
                        Investment Company Act of 1940, as amended.

                                (v)     Listing and Maintenance
                        Requirements. The Company has not, in the 12 months
                        preceding the date hereof, received notice from any
                        Trading Market on which the Common Stock is or has been
                        listed or quoted to the effect that the Company is not
                        in compliance with the listing or maintenance
                        requirements of such Trading Market. The Company is, and
                        has no reason to believe that it will not in the
                        foreseeable future continue to be, in compliance with
                        all such listing and maintenance requirements.

                        11

                                (w)     Application of Takeover
                        Protections. The Company and its Board of Directors
                        have taken all necessary action, if any, in order to
                        render inapplicable any control share acquisition,
                        business combination, poison pill (including any
                        distribution under a rights agreement) or other similar
                        anti-takeover provision under the Company's Certificate
                        of Incorporation (or similar charter documents) or the
                        laws of its state of incorporation that is or could
                        become applicable to the Purchasers as a result of the
                        Purchasers and the Company fulfilling their obligations
                        or exercising their rights under the Transaction
                        Documents, including without limitation the Company's
                        issuance of the Securities and the Purchasers' ownership
                        of the Securities.

                                (x)     Disclosure. The Company
                        confirms that, neither the Company nor any other Person
                        acting on its behalf has provided any of the Purchasers
                        or their agents or counsel with any information that
                        constitutes or might constitute material, non-public
                        information. The Company understands and confirms that
                        the Purchasers will rely on the foregoing
                        representations and covenants in effecting transactions
                        in securities of the Company. All disclosure provided to
                        the Purchasers regarding the Company, its business and
                        the transactions contemplated hereby, including the
                        Disclosure Schedules to this Agreement, furnished by or
                        on behalf of the Company are true and correct and do not
                        contain any untrue statement of a material fact or omit
                        to state any material fact necessary in order to make
                        the statements made therein, in light of the
                        circumstances under which they were made, not
                        misleading.

                                (y)     Solvency. Based on the
                        financial condition of the Company as of the Closing
                        Date, (i) the Company's fair saleable value of its
                        assets exceeds the amount that will be required to be
                        paid on or in respect of the Company's existing debts
                        and other liabilities (including known contingent
                        liabilities) as they mature; (ii) the Company's assets
                        do not constitute unreasonably small capital to carry on
                        its business for the current fiscal year as now
                        conducted and as proposed to be conducted including its
                        capital needs taking into account the particular capital
                        requirements of the business conducted by the Company,
                        and projected capital requirements and capital
                        availability thereof, and including the anticipated
                        proceeds of the sale of the Securities; and (iii) the
                        current cash flow of the Company, together with the
                        proceeds the Company would receive, were it to liquidate
                        all of its assets, after taking into account all
                        anticipated uses of the cash, would be sufficient to pay
                        all amounts on or in respect of its debt when such
                        amounts are required to be paid. The Company does not
                        intend to incur debts beyond its ability to pay such
                        debts as they mature (taking into account the timing and
                        amounts of cash to be payable on or in respect of its
                        debt).

            

                    3.2     Representations and Warranties of the Purchasers.
Each Purchaser hereby, for itself and for no other Purchaser, represents and
warrants as of the date hereof and as of the Closing Date to the Company as
follows:

12

        (a)     Organization; Authority.
                        Such Purchaser is an entity duly organized, validly
                        existing and in good standing under the laws of the
                        jurisdiction of its organization with full right,
                        corporate or partnership power and authority to enter
                        into and to consummate the transactions contemplated by
                        the Transaction Documents and otherwise to carry out its
                        obligations thereunder. The execution, delivery and
                        performance by such Purchaser of the transactions
                        contemplated by this Agreement has been duly authorized
                        by all necessary corporate or similar action on the part
                        of such Purchaser. Each Transaction Document to which it
                        is a party has been duly executed by such Purchaser, and
                        when delivered by such Purchaser in accordance with the
                        terms hereof, will constitute the valid and legally
                        binding obligation of such Purchaser, enforceable
                        against it in accordance with its terms.

                                (b)     Investment Intent. Such
                        Purchaser understands that the Securities are
                        "restricted securities" and have not been registered
                        under the Securities Act or any applicable state
                        securities law and is acquiring the Securities as
                        principal for its own account for investment purposes
                        only and not with a view to or for distributing or
                        reselling such Securities or any part thereof, has no
                        present intention of distributing any of such Securities
                        and has no arrangement or understanding with any other
                        persons regarding the distribution of such Securities
                        (this representation and warranty not limiting such
                        Purchaser's right to sell the Securities pursuant to the
                        Registration Statement or otherwise in compliance with
                        applicable federal and state securities laws). Such
                        Purchaser is acquiring the Securities hereunder in the
                        ordinary course of its business. Such Purchaser does not
                        have any agreement or understanding, directly or
                        indirectly, with any Person to distribute any of the
                        Securities.

                                (c)     Purchaser Status. At the
                        time such Purchaser was offered the Securities, it was,
                        and at the date hereof it is an "accredited investor" as
                        defined in Rule 501(a) under the Securities Act. Such
                        Purchaser is not required to be registered as a
                        broker-dealer under Section 15 of the Exchange Act. 

                                (d)     Experience of Such Purchaser.
                        Such Purchaser, either alone or together with its
                        representatives, has such knowledge, sophistication and
                        experience in business and financial matters so as to be
                        capable of evaluating the merits and risks of the
                        prospective investment in the Securities, and has so
                        evaluated the merits and risks of such investment. Such
                        Purchaser is able to bear the economic risk of an
                        investment in the Securities and, at the present time,
                        is able to afford a complete loss of such investment.

                                (e)     General Solicitation. Such
                        Purchaser is not purchasing the Securities as a result
                        of any advertisement, article, notice or other
                        communication regarding the Securities published in any
                        newspaper, magazine or similar media or broadcast over
                        television or radio or presented at any seminar or any
                        other general solicitation or general advertisement.

                        13

                                (f)     Compliance with the Securities
                        Laws. Such Purchaser agrees to comply with the
                        requirements of Regulation M, if applicable, with
                        respect to the sale of the Shares by the Purchaser. Such
                        Purchaser hereby confirms its understanding that it may
                        not cover short sales made prior to the Effective Date
                        with Shares registered for resale on the Registration
                        Statement, nor may it pledge, hypothecate, lend or
                        otherwise facilitate short sales of Company shares. The
                        Purchaser acknowledges that it does not intend to cover
                        short positions made by it before the Effective Date
                        with Shares held by it and registered on the
                        Registration Statement.

            

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

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

                    4.1     Transfer Restrictions. The Securities may only be
                        disposed of in compliance with state and federal
                        securities laws. In connection with any transfer of
                        Securities other than pursuant to an effective
                        registration statement, to the Company, to an Affiliate
                        of a Purchaser or in connection with a pledge as
                        contemplated in Section 4.1(b), the Company may require
                        the transferor thereof to provide to the Company an
                        opinion of counsel selected by the transferor, the form
                        and substance of which opinion shall be reasonably
                        satisfactory to the Company, to the effect that such
                        transfer does not require registration of such
                        transferred Securities under the Securities Act. As a
                        condition of transfer, any such transferee shall agree
                        in writing to be bound by the terms of this Agreement
                        and shall have the rights of a Purchaser under this
                        Agreement and the Registration Rights Agreement.

        (b)     The Purchasers agree to the
                        imprinting, so long as is required by this Section
                        4.1(b), of a legend on any of the Securities in the
                        following form:

                        THESE
                                                SECURITIES HAVE NOT BEEN
                                                REGISTERED WITH THE SECURITIES
                                                AND EXCHANGE COMMISSION OR THE
                                                SECURITIES COMMISSION OF ANY
                                                STATE IN RELIANCE UPON AN
                                                EXEMPTION FROM REGISTRATION
                                                UNDER THE SECURITIES ACT OF
                                                1933, AS AMENDED (THE
                                                "SECURITIES ACT"), AND,
                                                ACCORDINGLY, MAY NOT BE OFFERED
                                                OR SOLD EXCEPT PURSUANT TO AN
                                                EFFECTIVE REGISTRATION STATEMENT
                                                UNDER THE SECURITIES ACT OR
                                                PURSUANT TO AN AVAILABLE
                                                EXEMPTION FROM, OR IN A
                                                TRANSACTION NOT SUBJECT TO, THE
                                                REGISTRATION REQUIREMENTS OF THE
                                                SECURITIES ACT AND IN ACCORDANCE
                                                WITH APPLICABLE STATE SECURITIES
                                                LAWS AS EVIDENCED BY A LEGAL
                                                OPINION OF COUNSEL TO THE
                                                TRANSFEROR TO SUCH EFFECT, THE
                                                SUBSTANCE OF WHICH SHALL BE
                                                REASONABLY ACCEPTABLE TO THE
                                                COMPANY. THESE SECURITIES MAY BE
                                                PLEDGED IN CONNECTION WITH A
                                                BONA FIDE MARGIN ACCOUNT WITH A
                                                REGISTERED BROKER-DEALER OR
                                                OTHER LOAN WITH A FINANCIAL
                                                INSTITUTION THAT IS AN
                                                "ACCREDITED INVESTOR" AS DEFINED
                                                IN RULE 501(a) UNDER THE
                                                SECURITIES ACT.

                                                14

                                    
                        
                                The Company acknowledges and agrees
                        that a Purchaser may from time to time pledge pursuant
                        to a bona fide margin agreement with a registered
                        broker-dealer or grant a security interest in some or
                        all of the Securities to a financial institution that is
                        an "accredited investor" as defined in Rule 501(a) under
                        the Securities Act and, if required under the terms of
                        such arrangement, such Purchaser may transfer pledged or
                        secured Securities to the pledgees or secured parties.
                        Such a pledge or transfer would not be subject to
                        approval of the Company and no legal opinion of legal
                        counsel of the pledgee, secured party or pledgor shall
                        be required in connection therewith. Further, no notice
                        shall be required of such pledge. At the appropriate
                        Purchaser's expense, the Company will execute and
                        deliver such reasonable documentation as a pledgee or
                        secured party of Securities may reasonably request in
                        connection with a pledge or transfer of the Securities,
                        including the preparation and filing of any required
                        prospectus supplement under Rule 424(b)(3) under the
                        Securities Act or other applicable provision of the
                        Securities Act to appropriately amend the list of
                        Selling Stockholders thereunder.

                                (c)     Certificates evidencing the
                        Shares and Warrant Shares shall not contain any legend
                        (including the legend set forth in Section 4.1(b)), (i)
                        while a registration statement (including the
                        Registration Statement) covering the resale of such
                        security is effective under the Securities Act, or (ii)
                        following any sale of such Shares or Warrant Shares
                        pursuant to Rule 144, or (iii) if such Shares or Warrant
                        Shares are eligible for sale under Rule 144(k), or (iv)
                        if such legend is not required under applicable
                        regulation of the Securities Act (including judicial
                        interpretations and pronouncements issued by the Staff
                        of the Commission). The Company shall cause its counsel
                        to issue a legal opinion to the Company's transfer agent
                        promptly after the Effective Date if required by the
                        Company's transfer agent to effect the removal of the
                        legend hereunder. If all or any portion of a Warrant is
                        exercised at a time when there is an effective
                        registration statement to cover the resale of the
                        Warrant Shares, such Warrant Shares shall be issued free
                        of all legends. The Company agrees that following the
                        Effective Date or at such time as such legend is no
                        longer required under this Section 4.1(c), it will, no
                        later than three Trading Days following the delivery by
                        a Purchaser to the Company or the Company's transfer
                        agent of a certificate representing Shares or Warrant
                        Shares, as the case may be, issued with a restrictive
                        legend, deliver or cause to be delivered to such
                        Purchaser a certificate representing such Securities
                        that is free from all restrictive and other legends. The
                        Company may not make any notation on its records or give
                        instructions to any transfer agent of the Company that
                        enlarge the restrictions on transfer set forth in this
                        Section.

                                (d)     Each Purchaser severally and not
                        jointly agrees that the removal of the restrictive
                        legend from certificates representing Securities as set
                        forth in this Section 4.1 is predicated upon the
                        Company's reliance that the Purchaser will sell any
                        Securities pursuant to either the registration
                        requirements of the Securities Act, including any
                        applicable prospectus delivery requirements, or an
                        exemption therefrom.

                        15

            

                    4.2     Furnishing of Information. As long as any
Purchaser owns Securities, the Company covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all
reports required to be filed by the Company after the date hereof pursuant to
the Exchange Act. Upon the request of any such holder of Securities, the Company
shall deliver to such holder a written certification of a duly authorized
officer as to whether it has complied with the preceding sentence. As long as
any Purchaser owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Securities under Rule 144. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to time
to enable such Person to sell such Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144.

                    4.3     Integration. The Company shall not sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any security
(as defined in Section 2 of the Securities Act) that would be integrated with
the offer or sale of the Securities in a manner that would require the
registration under the Securities Act of the sale of the Securities to the
Purchasers or that would be integrated with the offer or sale of the Securities
for purposes of the rules and regulations of any Trading Market.

                    4.4     Securities Laws Disclosure; Publicity. The Company
shall, by 8:30 a.m. Eastern time on the 2nd Business Day following
the date of this Agreement, issue a press release or file a Current Report on
Form 8-K, in each case reasonably acceptable to each Purchaser disclosing the
transactions contemplated hereby and make such other filings and notices in the
manner and time required by the Commission. The Company and each Purchaser shall
consult with each other in issuing any press releases with respect to the
transactions contemplated hereby, and neither the Company nor any Purchaser
shall issue any such press release or otherwise make any such public statement
without the prior consent of the Company, with respect to any press release of
any Purchaser, or without the prior consent of each Purchaser, with respect to
any press release of the Company, which consent shall not unreasonably be
withheld, except if such disclosure is required by law, in which case the
disclosing party shall promptly provide the other party with prior notice of
such public statement or communication. Notwithstanding the foregoing, the
Company shall not publicly disclose the name of any Purchaser, or include the
name of any Purchaser in any filing with the Commission or any regulatory agency
or Trading Market, without the prior written consent of such Purchaser, except (i)
as required by federal securities law in connection with the registration
statement contemplated by the Registration Rights Agreement and (ii) to the
extent such disclosure is required by law or Trading Market regulations, in
which case the Company shall provide the Purchasers with prior notice of such
disclosure permitted under subclause (i) or (ii).

16

                    4.5     Shareholders Rights Plan. No claim will be made or
enforced by the Company or any other Person that any Purchaser is an "Acquiring
Person" under any shareholders rights plan or similar plan or arrangement in
effect or hereafter adopted by the Company, or that any Purchaser could be
deemed to trigger the provisions of any such plan or arrangement, by virtue of
receiving Securities under the Transaction Documents or under any other
agreement between the Company and the Purchasers.

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

                    4.7     Use of Proceeds. The Company shall use the net
proceeds from the sale of the Securities hereunder for (i) general working
capital purposes, (ii) to finance the manufacture of machinery which employs
disaggregation dry system technology for lease to customers, primarily located
in the United States, and (iii) not for the satisfaction of any portion of the
Company's debt (other than payment of trade payables in the ordinary course of
the Company's business and prior practices), to redeem any Company equity or
equity-equivalent securities or to settle any outstanding litigation, or to make
any payment to any director or officer, other than salary and reimbursement of
expenses in accordance with past practice.

                    4.8     Reimbursement. If any Purchaser becomes involved
in any capacity in any Proceeding by or against any Person who is a stockholder
of the Company (except as a result of sales, pledges, margin sales and similar
transactions by such Purchaser to or with any current stockholder), solely as a
result of such Purchaser's acquisition of the Securities under this Agreement,
the Company will reimburse such Purchaser for its reasonable legal and other
expenses (including the cost of any investigation preparation and travel in
connection therewith) incurred in connection therewith, as such expenses are
incurred. The reimbursement obligations of the Company under this paragraph
shall be in addition to any liability which the Company may otherwise have,
shall extend upon the same terms and conditions to any Affiliates of the
Purchasers who are actually named in such action, proceeding or investigation,
and partners, directors, agents, employees and controlling persons (if any), as
the case may be, of the Purchasers and any such Affiliate, and shall be binding
upon and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company solely as a result of acquiring the Securities under
this Agreement.

                    4.9     Indemnification of Purchasers. The Company will
indemnify and hold the Purchasers and their directors, officers, shareholders,
partners, employees and agents (each, a "Purchaser Party") harmless from
any and all losses, liabilities, obligations, claims, contingencies, damages,
costs and expenses, including all judgments, amounts paid in settlements, court
costs and reasonable attorneys' fees and costs of investigation that any such
Purchaser Party may suffer or incur as a result of or relating to: (a) any
misrepresentation, breach or inaccuracy, or any allegation by a third party
that, if true, would constitute a breach or inaccuracy, of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other Transaction Documents; or (b) any cause of action,
suit or claim brought or made against such Purchaser Party and arising solely
out of or solely resulting from the execution, delivery, performance or
enforcement of this Agreement or any of the other Transaction Documents and
without causation by any other activity, obligation, condition or liability
pertaining to such Purchaser. The Company will reimburse such Purchaser for its
reasonable legal and other expenses (including the cost of any investigation,
preparation and travel in connection therewith) incurred in connection
therewith, as such expenses are incurred.

17

                    4.10     
Reservation of Common Stock. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Shares pursuant to this
Agreement and Warrant Shares pursuant to the Warrants. 

                    4.11     
Listing of Common Stock. The Company hereby agrees to use commercially
reasonable efforts to maintain the listing of the Common Stock on the Trading
Market, and as soon as reasonably practicable following the Closing (but not
later than the earlier of the Effective Date and the first anniversary of the
Closing Date) to list the applicable Shares and Warrant Shares on the Trading
Market. The Company further agrees, if the Company applies to have the Common
Stock traded on any other Trading Market, it will include in such application
the Shares and Warrant Shares, and will take such other action as is necessary
or desirable in the opinion of the Purchasers to cause the Shares and Warrant
Shares to be listed on such other Trading Market as promptly as possible. The
Company will take all action reasonably necessary to continue the listing and
trading of its Common Stock on a Trading Market and will comply in all respects
with the Company's reporting, filing and other obligations under the bylaws or
rules of the Trading Market.

                    4.12     Prohibition of Short Sales. Prior to the
Effective Date, each Purchaser shall not effect any "short sale" of the
Company's common stock. Each Purchaser acknowledges and agrees that, in the
event of an actual or threatened breach of any of the provisions of this
Agreement by such party, the harm to the others will be immediate, substantial
and irreparable and the monetary damages will be inadequate. Accordingly, each
Purchaser agrees that, in such event, the others will be entitled to equitable
relief, including an injunction and an order of specific performance, in
addition to any and all other remedies at law or in equity.

18

ARTICLE V.

MISCELLANEOUS

                    5.1     Fees and Expenses. Except as otherwise set forth
in this Agreement, each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all stamp and other taxes
and duties levied in connection with the sale of the Securities.

                    5.2     Entire Agreement. The Transaction Documents,
together with the exhibits and schedules thereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules. 

                    5.3     Notices. Any and all notices or other
communications or deliveries required or permitted to be provided hereunder
shall be in writing and shall be deemed given and effective on the earliest of
(a) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified on the signature pages attached
hereto prior to 6:30 p.m. (New York City time) on a Trading Day, (b) the next
Trading Day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number on the signature pages attached
hereto on a day that is not a Trading Day or later than 6:30 p.m. (New York City
time) on any Trading Day, (c) the Trading Day following the date of mailing, if
sent by U.S. nationally recognized overnight courier service, or (d) upon actual
receipt by the party to whom such notice is required to be given. The address
for such notices and communications shall be as set forth on the signature pages
attached hereto.

                    5.4     Amendments; Waivers. No provision of this
Agreement may be waived or amended except in a written instrument signed, in the
case of an amendment, by the Company and each Purchaser or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought. No
waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of either party to
exercise any right hereunder in any manner impair the exercise of any such
right.

                    5.5     Construction. The headings herein are for
convenience only, do not constitute a part of this Agreement and shall not be
deemed to limit or affect any of the provisions hereof. The language used in
this Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will be applied
against any party.

                    5.6     Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
permitted assigns. The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of each Purchaser. Any
Purchaser may assign any or all of its rights under this Agreement to any
Person, provided such transferee agrees in writing to be bound, with respect to
the transferred Securities, by the provisions hereof that apply to the
"Purchasers".

19

                    5.7     No Third-Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their respective successors
and permitted assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other Person.

                    5.8     Governing Law. All questions concerning the
construction, validity, enforcement and interpretation of the Transaction
Documents shall be governed by and construed and enforced in accordance with the
internal laws of the State of New York, without regard to the principles of
conflicts of law thereof. Each party agrees that all legal proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement and any other Transaction Documents (whether
brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced exclusively in
the state and federal courts sitting in the City of New York. Each party hereto
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, New York for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to the
enforcement of any of the Transaction Documents), and hereby irrevocably waives,
and agrees not to assert in any suit, action or proceeding, any claim that it is
not personally subject to the jurisdiction of any such court, that such suit,
action or proceeding is improper. Each party hereto hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by delivering a copy thereof via overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. Each party hereto (including its affiliates, agents, officers,
directors and employees) hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby. If either party shall commence an action or proceeding to
enforce any provisions of a Transaction Document, then the prevailing party in
such action or proceeding shall be reimbursed by the other party for its
attorneys fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such action or proceeding.

                    5.9     Survival. The representations, warranties,
agreements and covenants contained herein shall survive the Closing and delivery
of the Shares.

                   5.10   Execution. This Agreement may be executed in two
or more counterparts, all of which when taken together shall be considered one
and the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party, it being understood that
both parties need not sign the same counterpart. In the event that any signature
is delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.

20

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

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

                    5.13    Remedies. In addition to being entitled to
exercise all rights provided herein or granted by law, including recovery of
damages, each of the Purchasers and the Company will be entitled to specific
performance under the Transaction Documents. The parties agree that monetary
damages may not be adequate compensation for any loss incurred by reason of any
breach of obligations described in the foregoing sentence and hereby agrees to
waive in any action for specific performance of any such obligation the defense
that a remedy at law would be adequate.

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

21

                    5.15     Independent Nature of Purchasers' Obligations and
Rights. The obligations of each Purchaser under any Transaction Document are
several and not joint with the obligations of any other Purchaser, and no
Purchaser shall be responsible in any way for the performance of the obligations
of any other Purchaser under any Transaction Document. Nothing contained herein
or in any Transaction Document, and no action taken by any Purchaser pursuant
thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Document. Each Purchaser shall be entitled to independently protect
and enforce its rights, including without limitation, the rights arising out of
this Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose. Each Purchaser has been represented by its own
separate legal counsel in their review and negotiation of the Transaction
Documents. The Company has elected to provide all Purchasers with the same terms
and Transaction Documents for the convenience of the Company and not because it
was required or requested to do so by the Purchasers.


(Signature Page Follows)


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                    IN WITNESS WHEREOF, the parties hereto have caused this
Securities Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

	

                        DDS TECHNOLOGIES USA, INC. 	 	Address for Notice:
	 	 	150 East Palmetto Park Road
	 	 	Suite 510 
	 	 	Boca Raton, Florida 33432
	By:	 	 	Attn: Joe Fasciglione
	 	Name: 	 	Tel: (561) 750-4450
	 	Title: 	 	Fax:
	 	 	 
	With copy to (which shall not constitute notice):
	 	 	 
	Attn: Joseph P. Galda	 	 
	Tel: 416-595-2575	 	 
	Fax: 416-595-5021	 	 
	 	 	 
	
[SIGNATURE PAGE CONTINUES]

                        




23

(PURCHASER'S SIGNATURE PAGE)

                                                                                                
                                                                                                                                                            [___________________________________]

                                                                                                

                                                                                                                                                            By:__________________________

                                                                                                                                                           
                                                                                                Name: 

                                                                                                                                                           
                                                                                                Title: 


                                                                                    Subscription Amount: $

                        

                                                                                                
                                                                                                                                                            [___________________________________]

                                                                                                

                                                                                                                                                            By:__________________________

                                                                                                                                                           
                                                                                                Name: 

                                                                                                                                                           
                                                                                                Title: 


                                                                                    Subscription Amount: $


                                                                                                                                                            [___________________________________]

                                                                                                

                                                                                                                                                            By:__________________________

                                                                                                                                                           
                                                                                                Name: 

                                                                                                                                                           
                                                                                                Title: 



                                                             Subscription Amount: $




Address for all notices:

 

 

 

                                                            
With a copy to:

Hodgson Russ LLP

150 King Street West, Suite 2309

Toronto, Ontario M5H 1J9 Canada

Tel: (416) 595-2675

Fax: (416) 595-5021

Attn: Joseph P. Galda

24



 


ANNEX I

DISCLOSURE SCHEDULE 3.1

3.1(s)         Certain placement agents will receive selling commissions of ten
percent (10%) of the Per Share Purchase Price. In addition, the Company will
issue to certain placement agents a warrant (the "Agent's Warrant") to purchase
a number of shares of the Company's stock equal to five percent (5%) of the
total number of shares of the Company's common stock into which the total number
of Shares sold pursuant to this offering are convertible. The Agent's Warrant
will be for a team of three years and the price of shares of common stock
subject to the Agent's Warrant shall be at an exercise price equal to the
exercise price of the Warrants. Placement agents may select other selling agents
who are registered with the Securities and Exchange Commission and are members
in good standing of the National Association of Securities Dealers, Inc. to
participate in placing the Securities pursuant to a selling agent agreement. The
selling agents will receive a portion of the sales commissions payable to such
placement agents.

25




EXHIBIT A

REGISTRATION RIGHTS AGREEMENT




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EXHIBIT B

COMMON STOCK PURCHASE WARRANT




27