Document:

<TABLE>
<CAPTION>
Name                                       Dated           Amount         Maturity Date        Deb. No.
---------------------------------------    ------------    ----------     ---------------      ------------
<S>                                        <C>             <C>            <C>                  <C>
Atlantis Capital fund, Ltd.                Mar. 26, 1998    $   250,000    Mar. 16, 2000       MARCH-1998-104
Canadian Advantage Limited Partnership *   Mar. 26, 1998    $   625,000    Mar. 16, 2000       MARCH-1998-103
Dominion Capital Fund Ltd.                 Mar. 26, 1998    $ 1,750,000    Mar. 16, 2000       MARCH-1998-102
Sovereign Partners LP.                     Mar. 26, 1998    $ 2,875,000    Mar. 16, 2000       MARCH-1998-101

*    This document has been filed.
</TABLE>

<PAGE>

                                                                   Exhibit 10.24

                                FORM OF DEBENTURE

THE SECURITIES  OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE  REGISTRATION  REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE  TRANSFERRED  OR RESOLD  EXCEPT AS  PERMITTED  UNDER  SUCH LAWS  PURSUANT  TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES  AND EXCHANGE  COMMISSION OR ANY OTHER  REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.

ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

CONVERTIBLE DEBENTURE DUE                 March 16, 1998
                                          March 16, 2000
$625,000.00
Number      MARCH-1998-103

          FOR  VALUE  RECEIVED,   SWISSRAY  INTERNATIONAL,   INC.,  a  New  York
          corporation  (the  "Company"),  hereby  promises  to pay  to  Canadian
          Advantage LP. or registered  assigns (the "Holder") on March 16, 2000,
          (the "Maturity Date"), the principal amount of Six Hundred Twenty Five
          Thousand Dollars ($625,000) U.S., and to pay interest on the principal
          amount  hereof,  in such amounts,  at such times and on such terms and
          conditions as are specified herein.

Article 1. Interest

      The  Company  shall pay  interest on the unpaid  principal  amount of this
Debenture (the "Debenture") at the rate of Six Percent (6.0%) per year,  payable
at the time of each conversion until the principal amount hereof is paid in full
or has been converted. Interest shall be computed on the basis of a 360 day year
of 12, 30 day months.  Each payment  shall be paid in cash or in freely  trading
Common Stock of the Company,  at the Company's  option. If paid in Common Stock,
the  number of shares of the  Company's  Common  Stock to be  received  shall be
determined by dividing the dollar amount of the interest by the then  applicable
Market Price as of the interest  payment date.  "Market Price" shall mean 80% of
the average of the 10 day closing bid prices,  as reported by Bloomberg,  LP for
the ten (10) consecutive trading days immediately preceding

                                       1

<PAGE>   2

the date of conversion. If the interest is to be paid in cash, the Company shall
make such  payment  within 5  business  days of the date of  conversion.  If the
interest is to be paid in Common Stock,  said Common Stock shall be delivered to
the Holder, or per Holder's instructions,  within 5 business days of the date of
conversion. The Debentures are subject to automatic conversion at the end of two
years from the date of issuance at which time all Debentures outstanding will be
automatically  converted  based upon the formula set forth in Section  3.2.  The
closing  shall be deemed to have  occurred on the date the funds are received by
the Company or its Counsel (the "Closing Date").

Article 2. Method of Payment

      This  Debenture must be surrendered to the Company in order for the Holder
to receive  payment of the principal  amount hereof.  The Company shall have the
option of paying the interest on this  Debenture in United States  dollars or in
common stock upon conversion  pursuant to Article 1 hereof. The Company may draw
a check for the payment of interest to the order of the Holder of this Debenture
and mail it to the  Holder's  address as shown on the  Register  (as  defined in
Section  7.2  below).  Interest  and  principal  payments  shall be  subject  to
withholding  under  applicable  United States Federal  Internal  Revenue Service
Regulations.

Article 3.  Conversion

      Section 3.1.  Conversion Privilege

      (a) The Holder of this Debenture shall have the right,  at its option,  to
convert  it into  shares of common  stock,  par value  $0.01 per  share,  of the
Company  ("Common  Stock") at any time which is before the close of  business on
the Maturity Date,  except as set forth in Section  3.1(c) below.  The number of
shares of  Common  Stock  issuable  upon the  conversion  of this  Debenture  is
determined  pursuant to Section 3.2 and rounding the result to the nearest whole
share.

      (b)  Less  than  all of the  principal  amount  of this  Debenture  may be
converted  into  Common  Stock if the  portion  converted  is  $5,000 or a whole
multiple  of $5,000  and the  provisions  of this  Article  3 that  apply to the
conversion  of all of the  Debenture  shall  also apply to the  conversion  of a
portion of it. This Debenture may not be converted, whether in whole or in part,
except in accordance with Article 3.

      (c) In the event all or any portion of this Debenture remains  outstanding
on the second  anniversary of the date hereof,  the unconverted  portion of such
Debenture  will  automatically  be converted into shares of Common Stock on such
date in the manner set forth in Section 3.2.

      Section 3.2.  Conversion Procedure.

                                       2

<PAGE>   3

            (a)  Debentures.  Upon  receipt  by the  Company  or its  designated
attorney of a facsimile or original of Holder's  signed Notice of Conversion and
the original  Debenture to be converted in whole or in part,  the Company  shall
instruct its transfer agent to issue one or more Certificates  representing that
number of shares of Common  Stock into which the  Debenture  is  convertible  in
accordance  with the  provisions  regarding  conversion  set forth in  Exhibit D
hereto. The Seller's transfer agent or attorney shall act as Registrar and shall
maintain an appropriate ledger containing the necessary information with respect
to each Debenture.

            (b) Conversion Procedures.  The face amount of this Debenture may be
converted at the earlier of the effective date of the Registration  Statement or
sixty (60) days following the Closing Date. Such conversion shall be effectuated
by surrendering to the Company, or its attorney,  this Debenture to be converted
together with a facsimile or original of the signed  Notice of Conversion  which
evidences  Holder's  intention to convert the Debenture  indicated.  The date on
which the Notice of Conversion is effective  ("Conversion Date") shall be deemed
to be the  date  on  which  the  Holder  has  delivered  to the  Company  or its
designated  attorney a facsimile or original of the signed Notice of Conversion,
as long as the original Debenture(s) to be converted are received by the Company
or its designated  attorney within 5 business days thereafter.  Unless otherwise
notified  by the  Company in writing  via  facsimile  the  Company's  designated
attorney is Gary B. Wolff,  Esq.,  474 Third Avenue,  25th Floor,  New York, New
York 10017, (P) 212-644-6446, (F) 212-644-6498.

            (c) Common Stock to be Issued. Upon the conversion of any Debentures
and upon  receipt by the Company or its  attorney of a facsimile  or original of
Holder's  signed Notice of Conversion  Seller shall instruct  Seller's  transfer
agent to issue Stock  Certificates  without  restrictive legend or stop transfer
instructions,  if at that  time  the  Registration  Statement  has  been  deemed
effective (or with proper restrictive  legend if the Registration  Statement has
not as yet been declared effective),  in the name of Holder (or its nominee) and
in such  denominations to be specified at conversion  representing the number of
shares of Common Stock  issuable upon such  conversion,  as  applicable.  Seller
warrants that no instructions, other than these instructions, have been given or
will be given to the transfer agent and that the Common Stock shall otherwise be
freely  transferable  on the books and  records of Seller,  except as may be set
forth herein.

            (d) (i)  Conversion  Rate.  Holder  is  entitled,  at its  option to
convert the face amount of this Debenture, plus accrued interest, at the earlier
of the effective date of the Registration Statement or sixty (60) days following
the Closing Date, at 80% of the 10 day average closing bid price, as reported by
Bloomberg LP, for the ten (10) consecutive  trading days  immediately  preceding
the applicable Conversion Date (the "Conversion Price"). No fractional shares or
scrip  representing  fractions of shares will be issued on  conversion,  but the
number of shares  issuable  shall be rounded up or down,  as the case may be, to
the nearest whole share.

                                       3

<PAGE>   4

            (ii) Most Favored Financing. If after the Closing Date, but prior to
the Holder's  conversion of all the  Debentures,  the Company raises money under
either  Regulation D or Regulation S on terms that are more favorable than those
terms set forth in this  Debenture,  then in such event,  the Holder at its sole
option shall be entitled to completely  replace the terms of this Debenture with
the terms of the more beneficial Debenture as to that balance, including accrued
interest and any accumulated liquidated damages,  remaining on Holder's original
investment.  The  Debentures  are subject to a  mandatory,  24 month  conversion
feature at the end of which all  Debentures  outstanding  will be  automatically
converted,  upon the  terms  set forth in this  section  ("Mandatory  Conversion
Date").

            (e) Nothing contained in this Debenture shall be deemed to establish
or  require  the  payment of  interest  to the Holder at a rate in excess of the
maximum rate  permitted by governing law. In the event that the rate of interest
required to be paid  exceeds the maximum rate  permitted  by governing  law, the
rate of interest  required to be paid thereunder shall be automatically  reduced
to the maximum rate  permitted  under the governing law and such excess shall be
returned with reasonable promptness by the Holder to the Company.

            (f) It shall be the Company's  responsibility  to take all necessary
actions and to bear all such costs to issue the  Certificate  of Common Stock as
provided  herein,  including  the  responsibility  and cost for  delivery  of an
opinion letter to the transfer agent,  if so required.  The person in whose name
the  certificate  of Common  Stock is to be  registered  shall be  treated  as a
shareholder  of record on and after the conversion  date.  Upon surrender of any
Debentures  that are to be  converted  in part,  the Company  shall issue to the
Holder a new  Debenture  equal to the  unconverted  amount,  if so  requested in
writing by Holder.

            (g) Within five (5) business days after receipt of the documentation
referred to above in Section  3.2(b),  the Company shall deliver a  certificate,
without  stop  transfer  instructions,  for the number of shares of Common Stock
issuable upon the conversion.  It shall be the Company's  responsibility to take
all  necessary  actions and to bear all such costs to issue the Common  Stock as
provided  herein,  including  the cost for delivery of an opinion  letter to the
transfer  agent,  if so required.  The person in whose name the  certificate  of
Common Stock is to be registered  shall be treated as a shareholder of record on
and after the conversion  date.  Upon surrender of any Debentures that are to be
converted in part,  the Company shall issue to the Holder a new Debenture  equal
to the unconverted amount, if so requested in writing by Holder.

      In the event the Company does not make delivery of the Common Stock, as
instructed by Holder, within 8 business days after delivery of this original
Debenture, then in such event the Company shall pay to Holder an amount, in cash
in accordance with the following schedule, wherein "No. Business Days

                                       4

<PAGE>   5

Late" is defined  as the  number of  business  days  beyond the 8 business  days
delivery period.

<TABLE>

<CAPTION>

                                    Late Payment for Each
                                    $10,000 of Debenture

No. Business Days Late              Amount Being Converted

- ----------------------              ----------------------
<S>                                 <C>

      1                                   $100
      2                                   $200
      3                                   $300
      4                                   $400
      5                                   $500
      6                                   $600
      7                                   $700
      8                                   $800
      9                                   $900
      10                                  $1,000
      >10                                 $1,000 + $200 for each
                                          Business Day Beyond 10

</TABLE>

      The Company  acknowledges  that its  failure to deliver  the Common  Stock
within 8 business days after the Conversion Date will cause the Holder to suffer
damages in an amount  that will be  difficult  to  ascertain.  Accordingly,  the
parties agree that it is  appropriate  to include in this  Debenture a provision
for liquidated  damages.  The parties  acknowledge and agree that the liquidated
damages  provision set forth in this section  represents the parties' good faith
effort to qualify such  damages and, as such,  agree that the form and amount of
such  liquidated  damages are reasonable and will not constitute a penalty.  The
payment of liquidated damages shall not relieve the Company from its obligations
to deliver the Common Stock pursuant to the terms of this Debenture.

      To the extent that the  failure of the  Company to issue the Common  Stock
pursuant to this Section 3.2(g) is due to the  unavailability  of authorized but
unissued shares of Common Stock, the provisions of this Section 3.2(g) shall not
apply but instead the provisions of Section 3.2(h) shall apply.

      The Company shall make any payments  incurred under this Section 3.2(g) in
immediately  available  funds within five (5) business days from the  Conversion
Date if late.  Nothing  herein  shall  limit a Holder's  right to pursue  actual
damages or cancel the conversion for the Company's  failure to issue and deliver
Common Stock to the Holder within 8 business days after the Conversion Date.

            (h) The Company  shall at all times  reserve and have  available all
Common Stock  necessary to meet  conversion of the  Debentures by all Holders of
the entire amount of Debentures then outstanding. If, at any time Holder submits
a Notice of Conversion and the Company does not have  sufficient  authorized but
unissued  shares of Common Stock  available to effect,  in full, a conversion of
the Debentures (a "Conversion Default",  the date of such default being referred
to herein as the "Conversion Default Date"), the Company shall

                                       5

<PAGE>   6

issue to the Holder all of the shares of Common Stock which are  available,  and
the Notice of Conversion as to any Debentures  requested to be converted but not
converted  (the  "Unconverted  Debentures"),  upon Holder's sole option,  may be
deemed  null and void.  The  Company  shall  provide  notice of such  Conversion
Default ("Notice of Conversion  Default") to all existing Holders of outstanding
Debentures, by facsimile, within three (3) business day of such default (with

the  original  delivered  by  overnight  or two day  courier),  and  the  Holder
shall\give  notice to the  Company by  facsimile  within five  business  days of
receipt  of the  original  Notice  of  Conversion  Default  (with  the  original
delivered by overnight or two day courier) of its election to either  nullify or
confirm the Notice of Conversion.

      The  Company  agrees  to pay  to all  Holders  of  outstanding  Debentures
payments for a Conversion Default  ("Conversion Default Payments") in the amount
of  (N/365)  x (.24) x the  initial  issuance  price of the  outstanding  and/or
tendered but not converted  Debentures  held by each Holder where N = the number
of days from the Conversion Default Date to the date (the "Authorization  Date")
that the Company  authorizes  a  sufficient  number of shares of Common Stock to
effect  conversion  of all remaining  Debentures.  The Company shall send notice
("Authorization   Notice")  to  each  Holder  of  outstanding   Debentures  that
additional shares of Common Stock have been authorized,  the Authorization  Date
and the amount of Holder's  accrued  Conversion  Default  Payments.  The accrued
Conversion  Default  shall be paid in cash or shall be  convertible  into Common
Stock at the Conversion Rate, at the Holder's option, payable as follows: (i) in
the event Holder  elects to take such payment in cash,  cash  payments  shall be
made to such Holder of outstanding  Debentures by the fifth day of the following
calendar  month,  or (ii) in the event  Holder  elects to take such  payment  in
stock,  the Holder may convert  such  payment  amount  into Common  Stock at the
conversion  rate set forth in section  4(d) at anytime  after the 5th day of the
calendar  month  following  the  month in which  the  Authorization  Notice  was
received, until the expiration of the mandatory 24 month conversion period.

      The Company  acknowledges that its failure to maintain a sufficient number
of authorized but unissued shares of Common Stock to effect in full a conversion
of the Debentures will cause the Holder to suffer damages in an amount that will
be difficult to ascertain. Accordingly, the parties agree that it is appropriate
to include in this  Agreement a provision for  liquidated  damages.  The parties
acknowledge  and agree that the liquidated  damages  provision set forth in this
section  represents the parties' good faith effort to quantify such damages and,
as such,  agree  that  the  form  and  amount  of such  liquidated  damages  are
reasonable and will not constitute a penalty.  The payment of liquidated damages
shall not relieve the Company from its  obligations  to deliver the Common Stock
pursuant to the terms of this Debenture.

      Nothing herein shall limit the Holder's right to pursue actual damages for
the Company's  failure to maintain a sufficient  number of authorized  shares of
Common Stock.

                                       6

<PAGE>   7

            (i) The Company shall furnish to Holder such number of  prospectuses
and other documents incidental to the registration of the shares of Common Stock
underlying the Debentures, including any amendment of or supplements thereto.

            (j) The Holder is limited  in the  amount of this  Debenture  it may
convert and own.  Other than the Mandatory  Conversion  provisions  contained in
this Debenture  which are not limited by the following,  in no other event shall
the Holder be  entitled to convert  any amount of  Debentures  in excess of that
amount  upon  conversion  of which the sum of (1) the number of shares of Common
Stock  beneficially owned by the Holder and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unconverted  portion  of the  Debenture,  and (2) the number of shares of Common
Stock issuable upon the  conversion of the Debentures  with respect to which the
determination  of this  provision  is being  made,  would  result in  beneficial
ownership by the Holder and its affiliates of more than 4.9% of the  outstanding
shares of Common  Stock of the Company.  For  purposes of this  provision to the
immediately  preceding  sentence,  beneficial  ownership  shall be determined in
accordance  with  Section  13(d) of the  Securities  Exchange  Act of  1934,  as
amended,  and  Regulation  13 D-G  thereunder,  except as otherwise  provided in
clause (1) of such provision.

      Section 3.3.  Fractional  Shares.  The Company shall not issue  fractional
shares of Common Stock, or scrip representing fractions of such shares, upon the
conversion of this  Debenture.  Instead,  the Company shall round up or down, as
the case may be, to the nearest whole share.

      Section 3.4. Taxes on Conversion.  The Company shall pay any  documentary,
stamp or  similar  issue or  transfer  tax due on the  issue of shares of Common
Stock upon the conversion of this Debenture.  However,  the Holder shall pay any
such tax which is due  because  the  shares  are issued in a name other than its
name.

      Section  3.5.  Company to Reserve  Stock.  The Company  shall  reserve the
number of shares of Common  Stock  required  pursuant  to and upon the terms set
forth in Section 3(a) of the  Subscription  Agreement dated November of 1997, to
permit the conversion of this Debenture. All shares of Common Stock which may be
issued upon the conversion  hereof shall upon issuance be validly issued,  fully
paid and nonassessable  and free from all taxes,  liens and charges with respect
to the issuance thereof.

      Section  3.6.  Restrictions  on  Transfer.  This  Debenture  has not  been
registered  under the  Securities  Act of 1933,  as amended,  (the "Act") and is
being  issued  under  Section  4(2) of the  Act and  Rule  506 of  Regulation  D
promulgated under the Act. This Debenture and the Common Stock issuable upon the

                                       7

<PAGE>   8

conversion thereof may only be offered or sold pursuant to registration under or
an exemption from the Act.

      Section 3.7.  Mergers,  Etc. If the Company  merges or  consolidates  with
another corporation or sells or transfers all or substantially all of its assets
to another  person and the holders of the Common  Stock are  entitled to receive
stock,  securities  or property in respect of or in exchange  for Common  Stock,
then as a condition of such merger, consolidation, sale or transfer, the Company
and any such  successor,  purchaser or transferee  shall amend this Debenture to
provide  that it may  thereafter  be  converted  on the terms and subject to the
conditions  set forth  above  into the kind and amount of stock,  securities  or
property  receivable  upon such  merger,  consolidation,  sale or  transfer by a
holder of the number of shares of Common Stock into which this  Debenture  might
have been  converted  immediately  before such  merger,  consolidation,  sale or
transfer,  subject to adjustments  which shall be as nearly equivalent as may be
practicable to adjustments provided for in this Article 3.

Article 4.  Mergers

      The  Company  shall not  consolidate  or merge into,  or  transfer  all or
substantially  all of its assets to, any person,  unless such person  assumes in
writing the  obligations  of the Company under this  Debenture  and  immediately
after such  transaction no Event of Default exists.  Any reference herein to the
Company  shall  refer  to  such  surviving  or  transferee  corporation  and the
obligations of the Company shall terminate upon such written assumption.

Article 5.  Reports

      The Company will mail to the Holder  hereof at its address as shown on the
Register a copy of any annual,  quarterly  or current  report that it files with
the Securities and Exchange  Commission  promptly after the filing thereof and a
copy of any annual,  quarterly or other report or proxy  statement that it gives
to its  shareholders  generally  at the time such report or statement is sent to
shareholders.

Article 6.  Defaults and Remedies

      Section 6.1.  Events of Default.  An "Event of Default"  occurs if (a) the
Company does not make the payment of the  principal of this  Debenture  when the
same becomes due and payable at maturity, upon redemption or otherwise,  (b) the
Company does not make a payment, other than a payment of principal, for a period
of 5 business days  thereafter,  (c) the Company fails to comply with any of its
other agreements in this Debenture and such failure continues for the period and
after the notice  specified  below,  (d) the  Company  pursuant to or within the
meaning of any Bankruptcy Law (as hereinafter

                                       8

<PAGE>   9

defined): (i) commences a voluntary case; (ii) consents to the entry of an order
for relief against it in an involuntary  case; (iii) consents to the appointment
of a Custodian (as hereinafter defined) of it or for all or substantially all of
its property or (iv) makes a general assignment for the benefit of its creditors
or (v) a court of  competent  jurisdiction  enters an order or decree  under any
Bankruptcy  Law that:  (A) is for relief  against the Company in an  involuntary
case; (B) appoints a Custodian of the Company or for all or substantially all of
its  property or (C) orders the  liquidation  of the  Company,  and the order or
decree  remains  unstayed and in effect for 60 days,  (e) the  Company's  Common
Stock is no  longer  listed  on any  recognized  exchange  including  electronic
over-the-counter  bulletin  board.  As  used  in  this  Section  6.1,  the  term
"Bankruptcy Law" means Title 11 of the United States Code or any similar federal
or state law for the relief of debtors. The term "Custodian" means any receiver,
trustee,  assignee,  liquidator or similar  official under any Bankruptcy Law. A
default  under clause (c) above is not an Event of Default  until the holders of
at least 25% of the aggregate  principal  amount of the  Debentures  outstanding
notify the Company of such  default and the Company does not cure it within five
(5)  business  days after the  receipt of such  notice,  which must  specify the
default, demand that it be remedied and state that it is a "Notice of Default".

      Section 6.2.  Acceleration.  If an Event of Default occurs and is
continuing, the Holder hereof by notice to the Company, may declare the
remaining principal amount of this Debenture to be due and payable.  Upon
such declaration, the remaining principal amount shall be due and payable
immediately

Article 7.  Registered Debentures

      Section  7.1.  Series.  This  Debenture  is one of a  numbered  series  of
Debentures  which are identical  except as to the  principal  amount and date of
issuance  thereof and as to any restriction on the transfer  thereof in order to
comply with the Securities Act of 1933 and the regulations of the Securities and
Exchange  Commission  promulgated  thereunder.  Such  Debentures are referred to
herein collectively as the "Debentures". The Debentures shall be issued in whole
multiples of $5,000.

      Section  7.2.  Record  Ownership.  The  Company,  or its  attorney,  shall
maintain a register of the holders of the Debentures  (the  "Register")  showing
their  names and  addresses  and the serial  numbers  and  principal  amounts of
Debentures  issued to or  transferred  of record by them from time to time.  The
Register may be maintained in electronic,  magnetic or other  computerized form.
The Company may treat the person  named as the Holder of this  Debenture  in the
Register as the sole owner of this  Debenture.  The Holder of this  Debenture is
the  person  exclusively  entitled  to  receive  payments  of  interest  on this
Debenture, receive notifications with respect to this Debenture, convert it into
Common Stock and otherwise exercise all of the rights and powers as the absolute
owner hereof.

      Section 7.3. Registration of Transfer.  Transfers of this Debenture may be
registered on the books of the Company  maintained for such purpose  pursuant to
Section 7.2 above (i.e., the Register).  Transfers shall be registered when this
Debenture is presented to the Company with a request to register the transfer

                                       9

<PAGE>   10

hereof and the Debenture is duly endorsed by the appropriate person,  reasonable
assurances are given that the  endorsements  are genuine and effective,  and the
Company has received evidence  satisfactory to it that such transfer is rightful
and in compliance  with all  applicable  laws,  including tax laws and state and
federal  securities laws. When this Debenture is presented for transfer and duly
transferred hereunder, it shall be canceled and a new Debenture showing the name
of the  transferee as the record holder  thereof shall be issued in lieu hereof.
When this  Debenture is  presented  to the Company with a reasonable  request to
exchange it for an equal principal amount of Debentures of other  denominations,
the Company shall make such  exchange and shall cancel this  Debenture and issue
in lieu  thereof  Debentures  having  a total  principal  amount  equal  to this
Debenture in such denominations as agreed to by the Company and Holder.

      Section 7.4.  Worn or Lost  Debentures.  If this  Debenture  becomes worn,
defaced or mutilated but is still  substantially  intact and  recognizable,  the
Company  or its  agent  may  issue a new  Debenture  in  lieu  hereof  upon  its
surrender. Where the Holder of this Debenture claims that the Debenture has been
lost,  destroyed or wrongfully taken, the Company shall issue a new Debenture in
place of the original  Debenture if the Holder so requests by written  notice to
the Company  actually  received by the  Company  before it is notified  that the
Debenture  has  been  acquired  by a bona  fide  purchaser  and the  Holder  has
delivered  to the  Company an  indemnity  bond in such amount and issued by such
surety as the Company  deems  satisfactory  together  with an  affidavit  of the
Holder  setting forth the facts  concerning  such loss,  destruction or wrongful
taking and such other  information in such form with such proof or  verification
as the Company may request.

Article 8.  Notices

      Any  notice  which is  required  or  convenient  under  the  terms of this
Debenture  shall be duly given if it is in writing  and  delivered  in person or
mailed by first class mail,  postage  prepaid and  directed to the Holder of the
Debenture  at its address as it appears on the  Register or if to the Company to
its principal  executive offices,  with a copy by fax to Gary B. Wolff, Esq. 747
Third Avenue, New York, NY 10017. The time when such notice is sent shall be the
time of the giving of the notice.

Article 9.  Time

      Where this  Debenture  authorizes  or requires the payment of money or the
performance  of a condition  or  obligation  on a Saturday or Sunday or a public
holiday,  or authorizes or requires the payment of money or the performance of a
condition or obligation within, before or after a period of time computed from a
certain date, and such period of time ends on a Saturday or a Sunday or a public
holiday,  such payment may be made or condition or  obligation  performed on the
next succeeding business day, and if the period ends at a specified hour, such

                                       10

<PAGE>   11

payment may be made or condition  performed,  at or before the same hour of such
next  succeeding  business  day,  with the same  force and  effect as if made or
performed in accordance with the terms of this Debenture. A "business day" shall
mean a day on which  the banks in New York are not  required  or  allowed  to be
closed.

Article 10.  Waivers

      The holders of a majority in principal  amount of the Debentures may waive
a default or rescind the declaration of an Event of Default and its consequences
except for a default in the  payment of  principal  or  conversion  into  Common
Stock.

Article 11.  Rules of Construction

      In this Debenture,  unless the context  otherwise  requires,  words in the
singular number include the plural, and in the plural include the singular,  and
words of the masculine gender include the feminine and the neuter,  and when the
sense so  indicates,  words of the neuter  gender may refer to any  gender.  The
numbers and titles of sections  contained  in the  Debenture  are  inserted  for
convenience  of reference  only,  and they neither form a part of this Debenture
nor are they to be used in the construction or interpretation hereof.  Wherever,
in this Debenture,  a determination of the Company is required or allowed,  such
determination  shall be made by a  majority  of the  Board of  Directors  of the
Company and if it is made in good faith, it shall be conclusive and binding upon
the Company and the Holder of this Debenture.

Article 12.  Governing Law

      The validity,  terms,  performance and enforcement of this Debenture shall
be governed and construed by the  provisions  hereof and in accordance  with the
laws of the State of Delaware  applicable  to  agreements  that are  negotiated,
executed, delivered and performed solely in the State of Delaware.

Article 13. Litigation

      (a) Forum  Selection and Consent to  Jurisdiction.  Any  litigation  based
thereon,  or arising out of, under, or in connection with, this agreement or any
course of conduct,  course of dealing,  statements  (whether oral or written) or
actions of the Company or Holder shall be brought and maintained  exclusively in
irrevocably  submits to the  jurisdiction of the state and federal courts of the
State of Delaware for the purpose of any such  litigation as set forth above and
irrevocably  agrees  to be bound  by any  final  judgment  rendered  thereby  in
connection with such litigation. The Company further irrevocably consents to the
service of process by registered mail,  postage prepaid,  or by personal service
within or without the State of Delaware.  The Company  hereby  expressly and the
courts of the State of Delaware. The Company hereby expressly and

                                       11

<PAGE>   12

irrevocably  waives, to the fullest extent permitted by law, any objection which
it may have or hereafter may have to the laying of venue of any such  litigation
brought  in any  such  court  referred  to  above  and any  claim  that any such
litigation has been brought in any  inconvenient  forum.  To the extent that the
Company has or hereafter may acquire any immunity from jurisdiction of any court
or from any legal process (whether  through service or notice,  attachment prior
to judgment, attachment in aid of execution or otherwise) with respect to itself
or its property.  The Company hereby irrevocably waives such immunity in respect
of its obligations under this agreement and the other loan documents.

      (b) Waiver of Jury  Trial.  The Holder and the Company  hereby  knowingly,
voluntarily and intentionally  waive any rights they may have to a trial by jury
in respect of any  litigation  based  hereon,  or arising out of,  under,  or in
connection  with, this agreement,  or any course of conduct,  course of dealing,
statements  (whether  oral or written) or actions of the Holder or the  Company.
The Company  acknowledges  and agrees that it has received  full and  sufficient
consideration  for  this  provision  and  that  this  provision  is  a  material
inducement for the Holder entering into this agreement.

      (c)  Submission  To  Jurisdiction  . Any  legal  action or  proceeding  in
connection with this Agreement or the  performance  hereof may be brought in the
state and federal courts located in the State of Delaware and the parties hereby
irrevocably  submit to the  non-exclusive  jurisdiction  of such  courts for the
purpose of any such action or proceeding.

      IN WITNESS WHEREOF, the Company has duly executed this Debenture as of the
date first written above.

                                    SWISSRAY INTERNATIONAL, INC.

                                       By_____/s/ Ruedi G. Laupper______________

                                    Name:  Ruedi G. Laupper
                                    Title: Chairman and President

                                       12

<PAGE>   13

                                    Exhibit A

                              NOTICE OF CONVERSION

(To be Executed by the Registered Holder in order to Convert the Debentures.)

      The undersigned hereby irrevocably  elects, as of ______________,  199_ to
convert  $_________________  of the Debentures  into Shares of Common Stock (the
"Shares")  of SWISSRAY  INTERNATIONAL,  INC.  (the  "Company")  according to the
conditions set forth in the Subscription Agreement dated November ____, 1997.

Date of Conversion_________________________________________

Applicable Conversion Price_________________________________

Number of Shares Issuable upon this conversion______________

Signature___________________________________________________
                  [Name]

Address_____________________________________________________

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

Phone______________________   Fax___________________________

                                       13

<PAGE>   14

                             Assignment of Debenture

      The undersigned hereby sell(s) and assign(s) and transfer(s) unto

--------------------------------------------------------------------------------
                   (name, address and SSN or EIN of assignee)

                                          Dollars ($        )

--------------------------------------------------------------------------------
(principal amount of Debenture, $10,000 or integral multiples of $10,000)

of  principal  amount of this  Debenture  together  with all  accrued and unpaid
interest hereon.

Date:___________  Signed:_____________________________________________
                              (Signature must conform in all
                              respects to name of Holder shown
                              of face of Debenture)

Signature Guaranteed:<TABLE>
<CAPTION>
Name                                       Dated           Amount         Signatory
---------------------------------------    ------------    ----------     ---------------
<S>                                        <C>             <C>            <C>
Canadian Advantage Limited Partnership *   June. 16, 1998   $   200,000    Mark Valentine
Dominion Capital Fund Ltd.                 June. 16, 1998   $ 1,200,000    Mark Valentine
Sovereign Partners LP.                     June. 16, 1998   $   600,000    Mark Valentine

*    This document has been filed.
</TABLE>

<PAGE>

                                                                   Exhibit 10.26

                         -----------------------------
                          SWISSRAY INTERNATIONAL, INC.

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

THE SECURITIES  OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE  REGISTRATION  REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE  TRANSFERRED  OR RESOLD  EXCEPT AS  PERMITTED  UNDER  SUCH LAWS  PURSUANT  TO
REGISTRATION OR AN EXEMPTION  THEREFROM.  THE SECURITIES HAVE NOT BE APPROVED OR
DISAPPROVED BY THE SECURITIES  AND EXCHANGE  COMMISSION OR ANY OTHER  REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.

ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

                          Maximum Offering: $2,000,000

        This              offering   consists  of  $2,000,000   of   Convertible
                          Debentures of Swissray International, Inc.

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

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

                                        1

<PAGE>   2

                             SUBSCRIPTION PROCEDURES

      Convertible  Debentures of SWISSRAY  INTERNATIONAL,  INC.. (the "Company")
are  being  offered  in an  aggregate  amount  not  to  exceed  $2,000,000.  The
Debentures  will be  transferable  to the  extent  that  any  such  transfer  is
permitted by law. This  offering is being made in accordance  with the exemption
from  registration  under Section 4(2) of the Securities Act of 1933, as amended
(the  "Act")  and  Rule  506 of  Regulation  D  promulgated  under  the Act (the
"Regulation D Offering").

            The Investor Questionnaire is designed to enable the Investor to
      demonstrate the minimum legal requirements under federal and state
      securities laws to purchase the Debentures. The Signature Page for the
      Investor Questionnaire and the Subscription Agreement contain

      representations relating to the subscription.

            Also included is an Internal Revenue Service Form W-9: "Request for
            Taxpayer Identification Number and Certification" for U.S. citizens
            or residents of the U.S. for U.S. federal income tax purposes only.
            (Foreign investors should consult their tax advisors regarding the
            need to complete Internal Revenue Service Form W-9 and any other
            forms that may be required).

      If you are a foreign  person or  foreign  entity,  you may be subject to a
withholding  tax equal to 30% of any dividends paid by the Company.  In order to
eliminate  or reduce  such  withholding  tax you may submit a properly  executed
I.R.S.  Form 4224  (Exemption  from  Withholding  of Tax on  Income  Effectively
Connected  with the  Conduct of a Trade or  Business  in the  United  States) or
I.R.S. Form 1001 (Ownership  Exemption or Reduced Trade  Certificate),  claiming
exemption from  withholding or eligibility  for treaty benefits in the form of a
lower rate of withholding tax on interest or dividends.

      Payment must be made by wire transfer as provided below:

Immediately  available  funds  should be sent via wire  transfer  to the  escrow
account  stated  below  and  the  completed  subscription  documents  should  be
forwarded to the Escrow Agent. Your subscription  funds will be deposited into a
non-interest bearing escrow account of Joseph B. LaRocco, Esq., Escrow Agent, at
First  Union  Bank of  Connecticut,  Stamford,  Connecticut.  In the  event of a
termination of the Regulation D Offering or the rejection of this  subscription,
all subscription funds will be returned without interest.  The wire instructions
are as follows:

                                        2

<PAGE>   3

First Union Bank of Connecticut
Executive Office
300 Main Street, P.O. Box 700
Stamford, CT 06904-0700

ABA#:        021101108
Swift #:     FUNBUS33
Account #:   20000-2072298-4

Acct. Name:  Joseph B. LaRocco, Esq. Trustee Account

                                        3

<PAGE>   4

                             SUBSCRIPTION AGREEMENT

THE SECURITIES  OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE  REGISTRATION  REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE  TRANSFERRED  OR RESOLD  EXCEPT AS  PERMITTED  UNDER  SUCH LAWS  PURSUANT  TO
REGISTRATION OR AN EXEMPTION  THEREFROM.  THE SECURITIES HAVE NOT BE APPROVED OR
DISAPPROVED BY THE SECURITIES  AND EXCHANGE  COMMISSION OR ANY OTHER  REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.

ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

To: Swissray International. Inc.

      This Subscription Agreement is made between Swissray International,  Inc.,
("Company" or "Seller") a New York corporation,  and the undersigned prospective
purchaser  ("Purchaser") who is subscribing hereby for the Company's Convertible
Debentures (the  "Debentures").  The Debentures being offered will be separately
transferable,  to the extent that any such  transfer is  permitted  by law.  The
conversion terms of the Debentures are set forth in Section 4. This subscription
is submitted to you in accordance  with and subject to the terms and  conditions
described in this Subscription  Agreement dated June __, 1998, together with any
Exhibits  thereto,  relating to an offering (the "Offering") of up to $2,000,000
of  Debentures.  This Offering is comprised of an offering of the  Debentures to
accredited  investors  (the  "Regulation  D Offering")  in  accordance  with the
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended (the "Act"),  and Rule 506 of  Regulation  0  promulgated  under the Act
("Regulation D").

1. SUBSCRIPTION.

      (a) The  undersigned  hereby  irrevocably  subscribes  for and  agrees  to
purchase  $200,000 of the Company's  Debentures.  The Debentures shall pay an 6%
cumulative interest payable annually,  in cash or in freely trading Common Stock
of the Company, at the Company's option, at the time of each conversion. If paid
in Common  Stock,  the  number of shares  of the  Company's  Common  Stock to be
received  shall be  determined  by dividing the dollar amount of the dividend by
the then  applicable  Market Price,  as of the interest  payment  date.  "Market
Price" shall mean 80% of the 10-day average closing bid price, as

                                        4

<PAGE>   5

reported by Bloomberg, LP, for the ten (10) consecutive trading days immediately
preceding  the date of  conversion.  If the interest is to be paid in cash,  the
Company  shall  make  such  payment  within  5  business  days  of the  date  of
conversion.  If the  interest is to be paid in Common  Stock,  said Common Stock
shall be delivered to the Purchaser, or per Purchaser's  instructions,  within 5
business days of the date of conversion. The Debentures are subject to automatic
conversion  at the end of two years from the date of  issuance at which time all
Debentures  outstanding will be  automatically  converted based upon the formula
set forth in Section  4(d).  The closing shall be deemed to have occurred on the
date the funds are  received  by the  Company or its  designated  attorney  (the
"Closing Date").

      (b)  Upon  receipt  by  the  Company  of the  requisite  payment  for  the
Debentures  being purchased the Debentures so purchased will be forwarded by the
Escrow Agent, Joseph B. LaRocco, to the Purchaser and the name of such Purchaser
will be registered on the Debenture  transfer books of the Company as the record
owner of such  Debentures.  The Escrow  Agent shall not be liable for any action
taken or omitted by him in good faith and in no event shall the Escrow  Agent be
liable or  responsible  except for the Escrow  Agent's own gross  negligence  or
willful  misconduct.  The Escrow Agent has made no representations or warranties
in connection with this transaction and has not been involved in the negotiation
of the terms of this  Agreement  or any  matters  relative  thereto.  Seller and
Purchaser  each agree to indemnify  and hold  harmless the Escrow Agent from and
with respect to any suits, claims, actions or liabilities arising in any way out
of this transaction  including the obligation to defend any legal action brought
which in any way arises out of or is related to this Agreement. The Escrow Agent
is not  rendering  securities  advice to anyone  with  respect to this  proposed
transaction;  nor is the Escrow Agent opining on the  compliance of the proposed
transaction under applicable securities law.

2. REPRESENTATIONS AND WARRANTIES.

      The  undersigned  hereby  represents and warrants to, and agrees with, the
Company as follows:

            (a) The  undersigned has been furnished with, and has carefully read
      the applicable form of Debenture included herein as Exhibit A and the form
      of  Registration  Rights  Agreement  annexed  hereto  as  Exhibit  B  (the
      "Registration Rights Agreement"), and is familiar with and understands the
      terms  of  the   Offering.   With  respect  to  tax  and  other   economic
      considerations involved in his investment,  the undersigned is not relying
      on the Company.  The undersigned has carefully  considered and has, to the
      extent the undersigned believes such discussion necessary,  discussed with
      the  undersigned's  professional  legal,  tax,  accounting  and  financial
      advisors the  suitability  of an investment in the Company,  by purchasing
      the Debentures, for the undersigned's particular

                                        5

<PAGE>   6

      tax and financial  situation and has determined that the investment  being
      made by the undersigned is a suitable investment for the undersigned.

            (b) The  undersigned  acknowledges  that all documents,  records and
      books  pertaining to this  investment  which the undersigned has requested
      includes Form 10-KSB for the fiscal year ended June 30, 1997  inclusive of
      10-KSB/A1,  10-KSB/A2 and  10-KSB/A3 and Form 10-Q for the quarters  ended
      September  30,  1997,  December  31, 1997 and March 31, 1998  inclusive of
      10-Q/A1 for  September  30, 1997 and  December  31, 1997 (the  "Disclosure
      Documents")  have been made available for inspection by the undersigned or
      the undersigned has access to the Disclosure Documents.

            (c)  The  undersigned  has  had  a  reasonable  opportunity  to  ask
      questions of and receive answers from a person or persons acting on behalf
      of the Company  concerning  the Offering and all such  questions have been
      answered to the full satisfaction of the undersigned.

            (d)  The  undersigned  will  not  sell  or  otherwise  transfer  the
      Debentures  without   registration  under  the  Act  or  applicable  state
      securities  laws or an exemption  therefrom.  The Debentures have not been
      registered  under the Act or under the securities laws of any states.  The
      Common Stock  underlying the Debentures is to be registered by the Company
      pursuant to the terms of the Registration Rights Agreement attached hereto
      as  Exhibit B and  incorporated  herein  and made a part  hereof.  Without
      limiting  the right to convert the  Debentures  and sell the Common  Stock
      pursuant to the Registration Rights Agreement,  the undersigned represents
      that the  undersigned is purchasing  the Debentures for the  undersigned's
      own account,  for investment and not with a view to resale or distribution
      except in compliance with the Act. The undersigned has not offered or sold
      any portion of the Debentures being acquired nor does the undersigned have
      any  present  intention  of  dividing  the  Debentures  with  others or of
      selling,  distributing  or  otherwise  disposing  of  any  portion  of the
      Debentures   either   currently  or  after  the  passage  of  a  fixed  or
      determinable period of time or upon the occurrence or nonoccurrence of any
      predetermined  event or  circumstance  in violation of the Act.  Except as
      provided  in  the  Registration  Rights  Agreement,  the  Company  has  no
      obligation to register the Common Stock  issuable  upon  conversion of the
      Debentures.

            (e) The undersigned  recognizes that an investment in the Debentures
      involves  substantial  risks,  including loss of the entire amount of such
      investment. Further, the undersigned has carefully read and considered the
      schedule entitled Pending Litigation matters attached hereto as Exhibit C.

                                        6

<PAGE>   7

            (f) Legends.

                  (i)  The  undersigned   acknowledges   that  each  certificate
            representing  the  Debentures  unless  registered  pursuant  to  the
            Registration  Rights  Agreement,   shall  be  stamped  or  otherwise
            imprinted with a legend substantially in the following form:

            THE SECURITIES  EVIDENCED BY THIS  CERTIFICATE MAY NOT BE OFFERED OR
            SOLD,  TRANSFERRED,  PLEDGED,  HYPOTHECATED OR OTHERWISE DISPOSED OF
            EXCEPT (i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
            SECURITIES ACT OF 1933, AS AMENDED,  (ii) TO THE EXTENT  APPLICABLE,
            RULE 144 UNDER THE ACT (OR ANY SIMILAR  RULE UNDER SUCH ACT RELATING
            TO THE  DISPOSITION  OF  SECURITIES),  OR (iii) IF AN EXEMPTION FROM
            REGISTRATION UNDER SUCH ACT IS AVAILABLE.

            NOTWITHSTANDING  THE  FOREGOING,  THE  COMMON  STOCK  INTO WHICH THE
            SECURITIES  EVIDENCED BY THIS  CERTIFICATE  ARE CONVERTIBLE ARE ALSO
            SUBJECT TO THE REGISTRATION RIGHTS SET FORTH IN EACH OF THAT CERTAIN
            SUBSCRIPTION  AGREEMENT  AND  REGISTRATION  RIGHTS  AGREEMENT BY AND
            BETWEEN THE HOLDER HEREOF AND THE COMPANY, A COPY OF EACH IS ON FILE
            AT THE COMPANY'S PRINCIPAL EXECUTIVE OFFICE.

                  (ii) The Common Stock issued upon conversion shall contain the
            following legend if converted prior to effectiveness of Registration
            Statement:

            "No sale, offer to sell or transfer of the securities represented by
            this certificate shall be made unless a registration statement under
            the Federal Securities Act of 1933, as amended, with respect to such
            securities is then in effect or an exemption  from the  registration
            requirement  of  such  Act  is  then  in  fact  applicable  to  such
            securities."

                  (iii) Common Stock issued upon  conversion  and  subsequent to
            effective date of Registration Statement

                                        7

<PAGE>   8

            (pursuant  to which shares  underlying  conversion  are  registered)
            shall not bear any restrictive legend.

            (g) If this  Subscription  Agreement  is executed  and  delivered on
      behalf of a corporation, (i) such corporation has the full legal right and
      power and all authority and approval  required (a) to execute and deliver,
      or authorize  execution and delivery of, this  Subscription  Agreement and
      all other instruments  (including,  without  limitation,  the Registration
      Rights  Agreement)  executed  and  delivered  by  or  on  behalf  of  such
      corporation  in connection  with the purchase of the Debentures and (b) to
      purchase and hold the Debentures:  (ii) the signature of the party signing
      on behalf of such corporation is binding upon such corporation;  and (iii)
      such corporation has not been formed for the specific purpose of acquiring
      the Debentures,  unless each beneficial  owner of such entity is qualified
      as an accredited  investor within the meaning of Rule 501(a) of Regulation
      D  and  has   submitted   information   substantiating   such   individual
      qualification.

            (h) The  undersigned  shall  indemnify and hold harmless the Company
      and each  stockholder,  executive,  employee,  representative,  affiliate,
      officer,  director,  agent  (Including  Counsel) or control  person of the
      Company,  who is or may be a party or is or may be threatened to be made a
      party  to  any  threatened,   pending  or  contemplated  action,  suit  or
      proceeding, whether civil, criminal,  administrative or investigative,  by
      reason of or  arising  from any  actual or  alleged  misrepresentation  or
      misstatement  of facts or  omission  to  represent  or state facts made or
      alleged to have been made by the  undersigned to the Company or omitted or
      alleged  to  have  been  omitted  by  the   undersigned,   concerning  the
      undersigned  or the  undersigned's  subscription  for and  purchase of the
      Debentures or the undersigned's  authority to invest or financial position
      in connection with the Offering,  including,  without limitation, any such
      misrepresentation, misstatement or omission contained in this Subscription
      Agreement,  the  Questionnaire  or any  other  document  submitted  by the
      undersigned,  against  losses,  liabilities  and  expenses  for  which the
      Company,  or  any  stockholder,   executive,   employee,   representative,
      affiliate,  officer, director, agent (including Counsel) or control person
      of the Company has not otherwise  been  reimbursed  (including  attorneys'
      fees and disbursements,  judgments,  fines and amounts paid in settlement)
      actually and reasonably incurred by the Company, or such officer, director
      stockholder,    executive,    employee,    agent   (including    Counsel),
      representative,  affiliate  or  control  person  in  connection  with such
      action, suit or proceeding.

            (i) The  undersigned  is not  subscribing  for the  Debentures  as a
      result of, or pursuant  to, any  advertisement,  article,  notice or other
      communication  published in any  newspaper,  magazine or similar  media or
      broadcast over television or radio or presented at any seminar or meeting.

                                        8

<PAGE>   9

            (j) The  undersigned or the  undersigned's  representatives,  as the
      case may be, has such  knowledge  and  experience  in  financial,  tax and
      business   matters  so  as  to  enable  the  undersigned  to  utilize  the
      information  made  available to the  undersigned  in  connection  with the
      Offering  to  evaluate  the  merits  and  risks  of an  investment  in the
      Debentures  and to make  an  informed  investment  decision  with  respect
      thereto.

            (k) The Purchaser is purchasing  the  Debentures for its own account
      for  investment,  and not with a view  toward the  resale or  distribution
      thereof.  Purchaser  is  neither an  underwriter  of, nor a dealer in, the
      Debentures or the Common Stock issuable upon conversion thereof and is not
      participating  in the  distribution  or  resale of the  Debentures  or the
      Common Stock issuable upon conversion thereof.

            (l) There has never been  represented,  guaranteed,  or warranted to
      the  undersigned by any broker,  the Company,  its officers,  directors or
      agents, or employees or any other person,  expressly or by implication (i)
      the  percentage  of  profits  and/or  amount of or type of  consideration,
      profit  or loss to be  realized,  if any,  as a  result  of the  Company's
      operations;  and (ii) that the past  performance or experience on the part
      of the management of the Company,  or of any other person, will in any way
      result in the overall profitable operations of the Company.

      3. SELLER REPRESENTATIONS.

            (a) Concerning the  Securities.  The issuance,  sale and delivery of
the Debentures have been duly authorized by all required corporate action on the
part of Seller, and when issued, sold and delivered in accordance with the terms
hereof and thereof for the consideration  expressed herein and therein,  will be
duly and validly issued and enforceable in accordance with their terms,  subject
to the laws of bankruptcy and creditors'  rights  generally.  At least 4,000,000
shares of Common Stock  issuable upon  conversion of all the  Debentures  issued
pursuant to this offering have been duly and validly  reserved for issuance,  or
alternative  arrangements agreed to in writing to cover the contingency of their
being insufficient  reserved shares and, upon issuance shall be duly and validly
issued,  fully paid, and non-assessable  (the "Reserved  Shares").  From time to
time, the Company shall keep such additional  shares of Common Stock reserved so
as to allow for the  conversion of all the  Debentures  issued  pursuant to this
offering.

      Prior to conversion of all the Debentures, if at anytime the conversion of
all the  Debentures  outstanding  would  result  in an  insufficient  number  of
authorized  shares of Common Stock being available to cover all the conversions,
then in such  event,  the  Company  will  move to call and hold a  shareholder's
meeting within 60 days of such event for the purpose of  authorizing  additional
shares of  Common  Stock to  facilitate  the  conversions.  In such an event the
Company  shall  recommend to all  shareholders  to vote their shares in favor of
increasing the authorized  number of shares of Common Stock.  Seller  represents
and warrants that under no circumstances will it deny or

                                        9

<PAGE>   10

prevent Purchaser's right to convert the Debentures as permitted under the terms
of this Subscription Agreement or the Registration Rights Agreement.  Nothing in
this Section shall limit the  obligation of the Company to make the payments set
forth in Section 4(h).

            (b)  Authority  to Enter  Agreement.  This  Agreement  has been duly
authorized,  validly  executed and  delivered on behalf of Seller and is a valid
and  binding  agreement  in  accordance  with  its  terms,  subject  to  general
principals of equity and to bankruptcy or other laws  affecting the  enforcement
of creditors' rights generally.

            (c) Non-contravention.  The execution and delivery of this Agreement
and the  consummation  of the issuance of the Debentures,  and the  transactions
contemplated  by this Agreement do not and will not conflict with or result in a
breach by Seller of any of the terms or  provisions  of, or constitute a default
under,  the articles of  incorporation  or by-laws of Seller,  or any indenture,
mortgage,  deed of trust,  or other  material  agreement or  instrument to which
Seller is a party or by which it or any of its  properties  or assets are bound,
or any existing  applicable law, rule, or regulation of the United States or any
State thereof or any  applicable  decree,  judgment,  or order of any Federal or
State court,  Federal or State regulatory body,  administrative  agency or other
United States  governmental  body having  jurisdiction over Seller or any of its
properties or assets.

            (d) Company Compliance. The Company represents and warrants that the
Company  and  its  subsidiaries  are:  (i) in  full  compliance,  to the  extent
applicable,  with all reporting  obligations under either Section 13(a) or 15(d)
of the  Securities  Exchange  Act of 1934;  (ii) not in violation of any term or
provision of its Certificate of Incorporation  or by-laws;  (iii) not in default
in the  performance  or  observance  of any  obligation,  agreement or condition
contained in any bond, debenture,  note or any other evidence of indebtedness or
in any mortgage,  deed of trust,  indenture or other  instrument or agreement to
which  they are a party,  either  singly or  jointly,  by which it or any of its
property is bound or subject. Furthermore, the Company is not aware of any other
facts,  which it has not disclosed which could have a material adverse effect on
the  business,  condition,  (financial  or  otherwise),   operations,  earnings,
performance,  properties or prospects of the Company and its subsidiaries  taken
as a whole.

            (e) Pending Litigation.  Except as otherwise disclosed in Exhibit C,
there is (i) no action, suit or proceeding before or by any court, arbitrator or
governmental body now pending or, to the knowledge of the Company, threatened or
contemplated  to which the  Company  or any of its  subsidiaries  is or may be a
party  or to  which  the  business  or  property  of the  Company  or any of its
subsidiaries  is or may be  bound  or  subject,  (ii)  no  law,  statute,  rule,
regulation,  order or ordinance that has been enacted,  adopted or issued by any
Governmental Body or that, to the knowledge of the Company, has been proposed by
any   Governmental   Body  adversely   affecting  the  Company  or  any  of  its
subsidiaries, (iii) no injunction, restraining order or order of any nature by a
federal,  state or foreign court or Governmental Body of competent  jurisdiction
to which the Company or any of its  subsidiaries  is subject issued that, in the
case of clauses (i), (ii) and (iii) above, (x) is

                                       10

<PAGE>   11

reasonably likely,  singly or in the aggregate,  to result in a material adverse
effect  on  the  business,  condition,  (financial  or  otherwise),  operations,
earnings,  performance,   properties  or  prospects  of  the  Company,  and  its
subsidiaries  taken as a whole or (y) would  interfere with or adversely  affect
the  issuance of the  Debentures  or would be  reasonably  likely to render this
Subscription  Agreement or the Debentures,  or any portion  thereof,  invalid or
unenforceable.

            (f) Issuance of the Debentures. No action has been taken and no law,
statute,  rule,  regulation,  order or ordinance  has been  enacted,  adopted or
issued by any Governmental  Body that prevents the issuance of the Debentures or
the Common Stock issuable upon  conversion or exercise  thereof;  no injunction,
restraining  order  or order  of any  nature  by a  federal  or  state  court of
competent  jurisdiction  has been  issued  that  prevents  the  issuance  of the
Debentures or the Common Stock issuable upon  conversion or exercise  thereof or
suspends the sale of the Debentures or the Common Stock issuable upon conversion
thereof  in any  jurisdiction;  and no  action,  suit or  proceeding  is pending
against  or,  to the  best  knowledge  of the  Company,  threatened  against  or
affecting, the Company, any of its subsidiaries or, to the best knowledge of the
Company,  before any court or  arbitrator  or any  Governmental  Body  that,  if
adversely  determined,  would prohibit,  materially  interfere with or adversely
affect the  issuance or  marketability  of the  Debentures  or the Common  Stock
issuable  upon  conversion  or  exercise  thereof  or  render  the  Subscription
Agreement or the Debentures, or any portion thereof, invalid or unenforceable.

            (g) The Company shall  indemnify and hold harmless the Purchaser and
each  stockholder,  executive,  employee,  representative,  affiliate,  officer,
director or control person of the  Purchaser,  who is or may be a party or is or
may be threatened to be made a party to any threatened,  pending or contemplated
action,  suit  or  proceeding,   whether  civil,  criminal,   administrative  or
investigative,   by  reason  of  or   arising   from  any   actual  or   alleged
misrepresentation  or  misstatement  of facts or omission to  represent or state
facts  made or  alleged to have been made by the  Company  to the  Purchaser  or
omitted or alleged to have been omitted by the Company, concerning the Purchaser
or the  Purchaser's  subscription  for and  purchase  of the  Debentures  or the
Purchaser's  authority to invest or financial  position in  connection  with the
Offering,   including,   without   limitation,   any   such   misrepresentation,
misstatement  or  omission  contained  in  this  Subscription   Agreement,   the
Questionnaire  or any other document  submitted by the Company,  against losses,
liabilities and expenses for which the Purchaser, or any stockholder, executive,
employee, representative,  affiliate, officer, director or control person of the
Purchaser has not  otherwise  been  reimbursed  (including  attorneys'  fees and
disbursements,  judgments,  fines and amounts paid in  settlement)  actually and
reasonably incurred by the Purchaser,  or such officer,  director,  stockholder,
executive, employee,  representative,  affiliate or control person in connection
with such action, suit or proceeding.

            (h) No  Change.  Other  than  filings  required  by the  Blue Sky or
federal securities law and/or NASDAQ Rules and Regulations, no consent, approval
or authorization of or designation,  declaration or filing with any governmental
or other

                                       11

<PAGE>   12

regulatory  authority on the part of the Company is required in connection  with
the valid  execution,  delivery and performance of this Agreement.  Any required
qualification or notification under applicable federal securities laws and state
Blue Sky  laws of the  offer,  sale and  issuance  of the  Debentures,  has been
obtained  on or before  the date  hereof or will have been  obtained  within the
allowable period thereafter, and a copy thereof will be forwarded to Counsel for
the Purchaser.

            (i)  True  Statements.   Neither  this  Agreement  nor  any  of  the
"Disclosure Documents", as hereinafter defined, contains any untrue statement of
a material fact or omits to state any material  fact  necessary in order to make
the  statements  contained  herein or therein not misleading in the light of the
circumstances  under which such  statements  are made.  There  exists no fact or
circumstances  which, to the knowledge of the Company,  materially and adversely
affects  the  business,  properties  or  assets,  or  conditions,  financial  or
otherwise,  of the  Company,  which has not been set forth in this  Subscription
Agreement or disclosed in such documents.

            (j) The Purchaser has been advised that the Company has not retained
any independent professionals to review or comment on this Offering or otherwise
protect the  interests of the  Purchaser.  Although the Company has retained its
own  counsel,  neither  such  counsel  nor any other firm,  including  Joseph B.
LaRocco,  Esq., has acted on behalf of the Purchaser,  and the Purchaser  should
not rely on the Company's legal counsel or Joseph B. LaRocco,  Esq. with respect
to any matters herein described.

            (k) Prior Shares  Issued Under  Regulation S or Regulation D. In the
past six months the Company raised  $11,348,285 in Regulation S and Regulation D
offerings.

            (l)  Current  Authorized  Shares.  As of June 5,  1998,  there  were
50,000,000  authorized shares of Common Stock of which approximately  38,123,179
shares of Common Stock were deemed  issued and  outstanding  on a fully  diluted
basis.

            (m)  Disclosure  Documents.  The  Disclosure  Documents  are all the
documents (other than preliminary  materials) that the Company has been required
to file  with  the SEC from  June 30,  1997,  to the  date  hereof.  As of their
respective dates, and/or dates of amended filings with respect thereto,  none of
the Disclosure  Documents  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,  and no material  event has occurred since the
Company's  initial filing on Form 10-KSB for the year ended June 30,1997 (or the
filing of  necessary  amendments  thereto  so as to  restate  certain  financial
statements  for fiscal  years  ended June 30,  1997 and 1996) so as to  properly
record the accounting  treatment of certain beneficial  conversion  features and
debt issuance cost of convertible  debentures  issued during the year ended June
30, 1997 and the  auditing  for the value of stock  options  granted  during the
years June 30, 1997 and 1996, which could make any of the disclosures  contained
therein  (as  sussequently   amended  and  restated)  misleading  The  financial
statements  of the  Company  included  in the  Disclosure  Documents  have  been
prepared in accordance with generally accepted accounting  principles applied on
a consistent basis during the

                                       12

<PAGE>   13

periods  involved  (except as may be  indicated  in the audit  adjustments)  the
consolidated financial position of the Company and its consolidated subsidiaries
as at the dates thereof and the  consolidated  results of their  operations  and
changes in financial position for the periods then ended.

            (n) Information Supplied. The information supplied by the Company to
Purchaser in connection with the offering of the Debentures does not contain any
untrue  statement of a material fact or omit to state a material fact  necessary
to make the  statements,  in the light of the  circumstances  in which they were
made,  not  misleading.  There  exists no fact or  circumstances  which,  to the
knowledge  of the  Company,  materially  and  adversely  affects  the  business,
properties, assets, or conditions, financial or otherwise, of the Company, which
has not been set forth in this Agreement or disclosed in such documents.

            (o) Delivery Instructions.  On the Closing Date the Debentures being
purchased  hereunder  shall be  delivered to Joseph B.  LaRocco,  Esq. as Escrow
Agent,  who will  simultaneously  wire to the Company's  counsel the funds being
held in escrow,  less placement  fees, at which time the Escrow Agent shall then
have  the   Debentures   delivered  to  the  Purchaser,   per  the   Purchaser's
instructions.

            (p) Non-contravention,  The execution and delivery of this Agreement
by the Company,  the issuance of the  Debentures,  and the  consummation  by the
Company  of the  other  transactions  contemplated  by this  Agreement,  and the
Debentures  do not and will  not  conflict  with or  result  in a breach  by the
Company of any of the terms or provisions of, or constitute a default under, the
(i) certificate of incorporation or by-laws of the Company,  (ii) any indenture,
mortgage,  deed of trust, or other material agreement or instrument to which the
Company is a party or by which it or any of its  properties or assets are bound,
(iii)  any  material  existing  applicable  law,  rule,  or  regulation  or  any
applicable decree,  judgment,  or (iv) order of any court, United States federal
or state regulatory body,  administrative  agency,  or other  governmental  body
having jurisdiction over the Company or any of its properties or assets,  except
such conflict,  breach or default which would not have a material adverse effect
on the transactions contemplated herein.

            (q) No Default.  Except as may be set forth in the Company's  report
on form 10-KSB for the fiscal year ending June 30, 1997, as initially  filed and
subsequently  amended,  the  Company  is not in default  in the  performance  or
observance  of  any  material  obligation,   agreement,  covenant  or  condition
contained in any indenture, mortgage, deed of trust or other material instrument
or agreement to which it is a party or by which it or its property is bound, and
neither  the  execution  of,  nor  the  delivery  by the  Company  of,  nor  the
performance  by the Company of its  obligations  under,  this  Agreement  or the
Debentures,  other than the conversion provision thereof,  will conflict with or
result in the  breach or  violation  of any of the  terms or  provisions  of, or
constitute  a default or result in the  creation  or  imposition  of any lien or
charge on any  assets or  properties  of the  Company  under,  (i) any  material
indenture, mortgage, deed of trust or other material agreement applicable to the
Company or  instrument  to which the Company is a party or by which it is bound,
(ii)  any  statute  applicable  to  the  Company  or  its  property,  (iii)  the
Certificate of

                                       13

<PAGE>   14

Incorporation or By-Laws of the Company, (iv) any decree, judgment,  order, rule
or regulation of any court or  governmental  agency or body having  jurisdiction
over the Company  regulation of any court or governmental  agency or body having
jurisdiction  over the Company or its properties,  or (v) the Company's  listing
agreement for its Common Stock.

            (r) Use of Proceeds. The Company represents that the net proceeds of
this offering will be used for working capital.

            (s) The Purchaser has been advised that the Company has entered into
a consulting agreement with Net Financial International,  Ltd. pursuant to which
it will pay a fee of 10% of the gross proceeds of this offering.

      4. TERMS OF CONVERSION.

            (a)  Debentures.  Upon  receipt  by the  Company  or its  designated
attorney of a facsimile or original of  Purchasers  signed  Notice of Conversion
and the original  Debenture  to be  converted  in whole or in part,  the Company
shall instruct its transfer agent to issue one or more Certificates representing
that number of shares of Common Stock into which the Debenture is convertible in
accordance  with the  provisions  regarding  conversion  set forth in  Exhibit D
hereto. The Seller's transfer agent or attorney shall act as Registrar and shall
maintain an appropriate ledger containing the necessary information with respect
to each Debenture.

            (b) Conversion Procedures.  The face amount of each Debenture may be
converted at the earlier of the effective date of the Registration  Statement or
sixty (60) days following the Closing Date. Such conversion shall be effectuated
by surrendering to the Company, or its attorney,  the Debentures to be converted
together with a facsimile or original of the signed  Notice of Conversion  which
evidences Purchasers intention to convert those Debentures  indicated.  The date
on which the Notice of  Conversion  is  effective  ("Conversion  Date") shall be
deemed to be the date on which the  Purchaser  has  delivered  to the  Company a
facsimile  or  original  of the  signed  Notice  of  Conversion,  as long as the
original  Debentures  to be  converted  are  received  by  the  Company  or  its
designated attorney within 5 business days thereafter. Unless otherwise notified
by the Company in writing via facsimile,  the Company's  designated  attorney is
Gary B. Wolff,  Esq., 747 Third Avenue,  New York, NY 10017 (P) 212-644-6446 (f)
212-644-6498.

            (c) Common Stock to be Issued. Upon the conversion of any Debentures
and upon  receipt by the Company or its  designated  attorney of a facsimile  or
original of Purchasers  signed Notice of Conversion (see Exhibit D) Seller shall
instruct Seller's transfer agent to issue Stock Certificates without restrictive
legend or stop transfer instructions, if at that time the Registration Statement
has been deemed effective (or with proper restrictive legend if the Registration
Statement has not as yet been declared effective),  in the name of Purchaser (or
its nominee) and in such

                                       14

<PAGE>   15

denominations to be specified at conversion representing the number of shares of
Common Stock issuable upon such conversion, as applicable.  Seller warrants that
no instructions, other than these instructions, have been given or will be given
to the  transfer  agent and that the  Common  Stock  shall  otherwise  be freely
transferable  on the books and  records  of  Seller,  except as may be set forth
herein.

            (d) (i) Conversion Rate.  Purchaser is entitled,  at its option,  to
convert the face amount of each Debenture, plus accrued interest, at the earlier
of the effective date of the Registration Statement or sixty (60) days following
the Closing Date, at 80% of the 10 day average closing bid price, as reported by
Bloomberg,  LP for the 10  consecutive  trading days  immediately  preceding the
applicable  Conversion Date (the "Conversion  Price").  No fractional  shares or
scrip  representing  fractions of shares will be issued on  conversion,  but the
number of shares  issuable  shall be rounded up or down,  as the case may be, to
the nearest whole share.

            (ii) Most Favored Financing. If after the Closing Date, but prior to
the Purchaser's conversion of all the Debentures, the Company raises money under
either  Regulation D or Regulation S on terms that are more favorable than those
terms  set  forth  in this  Subscription  Agreement,  then in  such  event,  the
Purchaser at its sole option shall be entitled to  completely  replace the terms
of  this   Subscription   Agreement  with  the  terms  of  the  more  beneficial
Subscription  Agreement as to that balance,  including  accrued interest and any
accumulated  liquidated damages,  remaining on Purchaser's  original investment.
The Debentures are subject to a mandatory,  24 month  conversion  feature at the
end of which all Debentures  outstanding will be automatically  converted,  upon
the terms set forth in this section ("Mandatory Conversion Date").

            (e) Nothing contained in this Subscription Agreement shall be deemed
to  establish  or require the payment of interest to the  Purchaser at a rate in
excess of the maximum rate  permitted  by  governing  law. In the event that the
rate of interest  required to be paid  exceeds the  maximum  rate  permitted  by
governing  law,  the rate of interest  required to be paid  thereunder  shall be
automatically  reduced to the maximum rate permitted under the governing law and
such excess shall be returned with reasonable promptness by the Purchaser to the
Company.

            (f) it shall be the Company's  responsibility  to take all necessary
actions and to bear all such costs to issue the  Certificate  of Common Stock as
provided  herein,  including  the  responsibility  and cost for  delivery  of an
opinion letter to the transfer agent,  if so required.  The person in whose name
the  certificate  of Common  Stock is to be  registered  shall be  treated  as a
shareholder  of record on and after the conversion  date.  Upon surrender of any
Debentures  that are to be  converted  in part,  the Company  shall issue to the
Purchaser a new Debenture  equal to the unconverted  amount,  if so requested in
writing by Purchaser.

                                       15

<PAGE>   16

            (g) Within five (5) business days after receipt of the documentation
referred to above in Section 4(b),  the Company  shall deliver a certificate  in
accordance  with Section 4(c) for the number of shares of Common Stock  issuable
upon  the  conversion.  It  shall be the  Company's  responsibility  to take all
necessary  actions  and to bear all such  costs to  issue  the  Common  Stock as
provided  herein,  including  the cost for delivery of an opinion  letter to the
transfer  agent,  if so required.  The person in whose name the  certificate  of
Common Stock is to be registered  shall be treated as a shareholder of record on
and after the conversion  date.  Upon surrender of any Debentures that are to be
converted  in part,  the Company  shall issue to the  Purchaser a new  Debenture
equal to the unconverted amount, if so requested in writing by Purchaser.

      In the event the Company does not make  delivery of the Common  Stock,  as
instructed by Purchaser,  within 8 business days after  delivery of the original
Debenture,  then in such event the Company shall pay to Purchaser an amount,  in
cash in accordance with the following schedule, wherein "No. Business Days Late"
is defined as the number of business  days beyond the 8 business  days  delivery
period.

<TABLE>

<CAPTION>

                                     Late Payment for Each
                                      $10,000 of Debenture

No. Business Days Late               Amount Being Converted

- ----------------------               ----------------------
        <S>                                   <C>

          1                                   $100
          2                                   $200
          3                                   $300
          4                                   $400
          5                                   $500
          6                                   $600
          7                                   $700
          8                                   $800
          9                                   $900
         10                                   $1,000
        >10                                   $1,000 + $200 for each
                                              Business Day Beyond 10

</TABLE>

      The Company  acknowledges  that its  failure to deliver  the Common  Stock
within 8 business  days after the  Conversion  Date will cause the  Purchaser to
suffer  damages in an amount that will be difficult to  ascertain.  Accordingly,
the  parties  agree  that it is  appropriate  to  include  in this  Agreement  a
provision for liquidated  damages.  The parties  acknowledge  and agree that the
liquidated  damages provision set forth in this section  represents the parties'
good faith effort to qualify such damages and, as such,  agree that the form and
amount of such  liquidated  damages are  reasonable  and will not  constitute  a
penalty.  The payment of  liquidated  damages shall not relieve the Company from
its  obligations  to deliver  the  Common  Stock  pursuant  to the terms of this
Agreement.

      To the extent that the  failure of the  Company to issue the Common  Stock
pursuant to this Section 4(g) is due to the unavailability of authorized but

                                       16

<PAGE>   17

unissued  shares of Common Stock,  the provisions of this Section 4(g) shall not
apply but instead the provisions of Section 4(h) shall apply.

      The Company  shall make any payments  incurred  under this Section 4(g) in
immediately  available  funds within five (5) business days from the  Conversion
Date if late.  Nothing  herein shall limit a Purchaser's  right to pursue actual
damages or cancel the conversion for the Company's  failure to issue and deliver
Common Stock to the Holder within 8 business days after the Conversion Date.

            (h) The  Company  shall at all times  reserve  (or make  alternative
written  arrangements  for  reservation  or  contribution  of  shares)  and have
available all Common Stock necessary to meet conversion of the Debentures by all
Purchasers of the entire amount of Debentures then outstanding.  If, at any time
Purchaser  submits  a  Notice  of  Conversion  and the  Company  does  not  have
sufficient authorized but unissued shares of Common Stock (or alternative shares
of Common Stock as may be contributed by stockholders)  available to effect,  in
full, a conversion of the Debentures (a "Conversion  Default",  the date of such
default being referred to herein as the "Conversion  Default Date"), the Company
shall  issue to the  Purchaser  all of the  shares  of  Common  Stock  which are
available,  and the Notice of  Conversion as to any  Debentures  requested to be
converted but not converted (the  "Unconverted  Debentures"),  upon  Purchaser's
sole option,  may be deemed null and void.  The Company shall provide  notice of
such  Conversion  Default  ("Notice  of  Conversion  Default")  to all  existing
Purchasers of outstanding  Debentures,  by facsimile,  within three (3) business
day of such  default  (with  the  original  delivered  by  overnight  or two day
courier), and the Purchaser shall give notice to the Company by facsimile within
five business days of receipt of the original Notice of Conversion Default (with
the  original  delivered  by  overnight  or two day  courier) of its election to
either nullify or confirm the Notice of Conversion.

      The Company  agrees to pay to all  Purchasers  of  outstanding  Debentures
payments for a Conversion Default  ("Conversion Default Payments") in the amount
of  (N/365)  x (.24) x the  initial  issuance  price of the  outstanding  and/or
tendered  but not  converted  Debentures  held by each  Purchaser  where N = the
number of days from the Conversion Default Date to the date (the  "Authorization
Date") that the Company authorizes a sufficient number of shares of Common Stock
to effect conversion of all remaining Debentures.  The Company shall send notice
("Authorization  Notice")  to each  Purchaser  of  outstanding  Debentures  that
additional shares of Common Stock have been authorized,  the Authorization  Date
and the amount of Purchaser's  accrued Conversion Default Payments.  The accrued
Conversion  Default  shall be paid in cash or shall be  convertible  into Common
Stock at the Conversion Rate, at the Purchaser's option, payable as follows: (i)
in the event Purchaser  elects to take such payment in cash, cash payments shall
be made to such  Purchaser  of  outstanding  Debentures  by the fifth day of the
following  calendar month,  or (ii) in the event  Purchaser  elects to take such
payment in stock,  the  Purchaser  may convert such  payment  amount into Common
Stock at the conversion  rate set forth in section 4(d) at anytime after the 5th
day of the calendar month following the month in which the

                                       17

<PAGE>   18

Authorization  Notice was  received,  until the  expiration  of the mandatory 24
month conversion period.

      The company  acknowledges that its failure to maintain a sufficient number
of authorized but unissued shares of Common Stock to effect in full a conversion
of the  Debentures  will cause the Purchaser to suffer damages in an amount that
will be  difficult  to  ascertain.  Accordingly,  the  parties  agree that it is
appropriate to include in this Agreement a provision for liquidated damages. The
parties acknowledge and agree that the liquidated damages provision set forth in
this section  represents the parties' good faith effort to quantify such damages
and,  as such,  agree that the form and amount of such  liquidated  damages  are
reasonable and will not constitute a penalty.  The payment of liquidated damages
shall not relieve the Company from its  obligations  to deliver the Common Stock
pursuant to the terms of this Agreement.

      Nothing herein shall limit the Purchaser's  right to pursue actual damages
for the Company's  failure to maintain a sufficient  number of authorized shares
of Common Stock.

            (i)  The  Company  shall   furnish  to  Purchaser   such  number  of
prospectuses and other documents incidental to the registration of the shares of
Common  Stock   underlying  the  Debentures,   including  any  amendment  of  or
supplements thereto.

5. LIMITS ON AMOUNT OF CONVERSION AND OWNERSHIP.

      Other than the Mandatory Conversion provisions contained in this Agreement
which are not limited by the following, in no other event shall the Purchaser be
entitled  to convert  that  amount of  Debentures  in excess of that amount upon
conversion  of  which  the sum of (1) the  number  of  shares  of  Common  Stock
beneficially  owned by the  Purchaser and its  affiliates  (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unconverted  portion of the Debentures),  and (2) the number of shares of Common
Stock issuable upon the  conversion of the Debentures  with respect to which the
determination  of this  proviso  is  being  made,  would  result  in  beneficial
ownership  by the  Purchaser  and  its  affiliates  of  more  than  4.9%  of the
outstanding  shares  of  Common  Stock  of the  Company.  For  purposes  of this
provision to the immediately  preceding sentence,  beneficial ownership shall be
determined in accordance  with Section 13 (d) of the Securities  Exchange Act of
1934, as amended, and Regulation 13 D-G thereunder, except as otherwise provided
in clause (1) of such provision.

6. DELIVERY INSTRUCTIONS.

       Prior to or on the Closing Date the Company  shall  deliver to the Escrow
Agent an opinion letter signed by counsel for the Company in the form attached

                                       18

<PAGE>   19

hereto as Exhibit E. Also,  prior to or on the Closing  Date the  Company  shall
deliver to the Escrow Agent a signed  Registration  Rights Agreement in the form
attached hereto as Exhibit B. The Debentures being purchased  hereunder shall be
delivered  to Joseph B.  LaRocco,  Esq. as Escrow  Agent,  who will hold them in
escrow  until  funds have been wired to the Company or its Counsel at which time
the Escrow Agent shall then have the Debentures delivered to the Purchaser,  per
the Purchaser's instructions.

7. UNDERSTANDINGS.

      The undersigned  understands,  acknowledges and agrees with the Company as
follows:

FOR ALL SUBSCRIBERS:

      (a) This Subscription may be rejected, in whole or in part, by the Company
in its sole and absolute  discretion at any time before the date set for closing
unless  the  Company  has  given  notice  of  acceptance  of  the  undersigned's
subscription by signing this Subscription Agreement.

      (b)  No  U.S.  federal  or  state  agency  or  any  agency  of  any  other
jurisdiction  has made any finding or  determination  as to the  fairness of the
terms of the Offering for  investment nor any  recommendation  or endorsement of
the Debentures.

      (c) The representations,  warranties and agreements of the undersigned and
the Company  contained  herein and in any other writing  delivered in connection
with the  transactions  contemplated  hereby  shall be true and  correct  in all
material respects on and as of the date of the sale of the Debentures, and as of
the date of the  conversion and exercise  thereof,  as if made on and as of such
date and shall survive the execution and delivery of this Subscription Agreement
and the purchase of the Debentures.

            (d) IN MAKING AN INVESTMENT DECISION,  PURCHASERS MUST RELY ON THEIR
OWN  EXAMINATION  OF THE COMPANY AND THE TERMS OF THE  OFFERING,  INCLUDING  THE
MERITS AND RISKS  INVOLVED.  THE  DEBENTURES  HAVE NOT BEEN  RECOMMENDED  BY ANY
FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE
FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY
OF ANY  MEMORANDUM OR THIS  DOCUMENT.  ANY  REPRESENTATION  TO THE CONTRARY IS A
CRIMINAL OFFENSE.

      (e) The  Regulation D Offering is intended to be exempt from  registration
under the Securities Act by virtue of Section 4(2) of the Securities Act

                                       19

<PAGE>   20

and the  provisions of Regulation D thereunder,  which is in part dependent upon
the truth,  completeness  and accuracy of the statements made by the undersigned
herein and in the Questionnaire.

      (f) It is understood that in order not to jeopardize the Offering's exempt
status under Section 4(2) of the Securities Act and Regulation D, any transferee
may, at a minimum, be required to fulfill the investor suitability  requirements
thereunder.

      (g) THE DEBENTURES MAY NOT BE TRANSFERRED, RESOLD OR OTHERWISE DISPOSED OF
EXCEPT AS PERMITTED  UNDER THE SECURITIES ACT AND  APPLICABLE  STATE  SECURITIES
LAWS,  PURSUANT TO REGISTRATION  OR EXEMPTION  THEREFROM.  PURCHASERS  SHOULD BE
AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL  RISKS OF THIS INVESTMENT
FOR AN INDEFINITE PERIOD OF TIME.

      (h) NASAA UNIFORM LEGEND

      IN  MAKING  AN  INVESTMENT  DECISION  INVESTORS  MUST  RELY ON  THEIR  OWN
EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE
OFFERING,  INCLUDING THE MERITS AND RISKS  INVOLVED.  THESE  SECURITIES HAVE NOT
BEEN  RECOMMENDED  BY ANY FEDERAL OR STATE  SECURITIES  COMMISSION OR REGULATORY
AUTHORITY.  FURTHERMORE,  THE  FOREGOING  AUTHORITIES  HAVE  NOT  CONFIRMED  THE
ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT.  ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.  THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY  AND  RESALE  AND MAY NOT BE  TRANSFERRED  OR  RESOLD  EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT OF 1933 AND THE APPLICABLE  STATE  SECURITIES
LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE
THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.

9. Litigation.

      (a) Forum  Selection and Consent to  Jurisdiction.  Any  litigation  based
thereon,  or arising out of, under, or in connection with, this agreement or any
course of conduct,  course of dealing,  statements  (whether oral or written) or
actions of the Company or Holder shall be brought and maintained  exclusively in
the  courts  of  the  State  of New  York.  The  Company  hereby  expressly  and
irrevocably  submits to the  jurisdiction of the state and federal courts of the
State

                                       20

<PAGE>   21

of New York for the  purpose  of any such  litigation  as set  forth  above  and
irrevocably  agrees  to be bound  by any  final  judgment  rendered  thereby  in
connection with such litigation. The Company further irrevocably consents to the
service of process by registered mail,  postage prepaid,  or by personal service
within or  without  the State of New York.  The  Company  hereby  expressly  and
irrevocably  waives, to the fullest extent permitted by law, any objection which
it may have or hereafter may have to the laying of venue of any such  litigation
brought  in any  such  court  referred  to  above  and any  claim  that any such
litigation has been brought in any  inconvenient  forum.  To the extent that the
Company has or hereafter may acquire any immunity from jurisdiction of any court
or from any legal process (whether  through service or notice,  attachment prior
to judgment, attachment in aid of execution or otherwise) with respect to itself
or its property,  the Company hereby irrevocably waives such immunity in respect
of its obligations under this agreement and the other loan documents.

      (b) Waiver of Jury  Trial.  The Holder and the Company  hereby  knowingly,
voluntarily and intentionally  waive any rights they may have to a trial by jury
in respect of any  litigation  based  hereon,  or arising out of,  under,  or in
connection  with, this agreement,  or any course of conduct,  course of dealing,
statements  (whether  oral or written) or actions of the Holder or the  Company.
The Company  acknowledges  and agrees that it has received  full and  sufficient
consideration  for  this  provision  and  that  this  provision  is  a  material
inducement for the Holder entering into this agreement.

      (c)  Submission  To  Jurisdiction.  Any  legal  action  or  proceeding  in
connection with this Agreement or the  performance  hereof may be brought in the
state and federal courts located in the State of New York and the parties hereby
irrevocably  submit to the  non-exclusive  jurisdiction  of such  courts for the
purpose of any such action or proceeding.

10. MISCELLANEOUS.

      (a) All pronouns and any variations thereof used herein shall be deemed to
refer  to the  masculine,  feminine,  impersonal,  singular  or  plural,  as the
identity of the person or persons may require.

      (b) Neither this Subscription  Agreement nor any provision hereof shall be
waived, modified, changed, discharged,  terminated,  revoked or canceled, except
by an instrument in writing signed by the party  effecting the same against whom
any change, discharge or termination is sought.

      (c)  Notices  required  or  permitted  to be given  hereunder  shall be in
writing and shall be deemed to be sufficiently  given when personally  delivered
or sent by registered mail, return receipt requested,  addressed:  (i) if to the
Company, at SWISSRAY  International,  Inc., 200 East 32nd Street, Suite 34B, New
York, New York 10017 with a copy to Gary B. Wolff, P.C., 747 Third

                                       21

<PAGE>   22

Avenue,  25th Floor, New York, NY 10017 and (ii) if to the  undersigned,  at the
address  for  correspondence  set forth in the  Questionnaire,  or at such other
address as may have been  specified by written  notice given in accordance  with
this paragraph 9(c).

      (d) This Subscription Agreement shall be enforced,  governed and construed
in all respects in  accordance  with the laws of the State of New York,  as such
laws are  applied  by New York  courts to  agreements  entered  into,  and to be
performed  in,  New York by and  between  residents  of New  York,  and shall be
binding  upon  the  undersigned,   the  undersigned's   heirs,   estate,   legal
representatives,  successors  and  assigns and shall inure to the benefit of the
Company,  its  successors  and assigns.  If any  provision of this  Subscription
Agreement is invalid or  unenforceable  under any  applicable  statue or rule of
law, then such provisions shall be deemed  inoperative to the extent that it may
conflict  therewith and shall be deemed modified to conform with such statute or
rule of law. Any provision hereof that may prove invalid or unenforceable  under
any law shall not affect the validity or  enforceability  of any other provision
hereof.

      (e) This Subscription  Agreement,  together with Exhibits A, B, C, D and E
attached hereto and made a part hereof,  constitute the entire agreement between
the parties  hereto with respect to the subject matter hereof and may be amended
only by a writing executed by both parties hereto. An executed facsimile copy of
the Subscription Agreement shall be effective as an original.

11. SIGNATURE.

      The signature of this  Subscription  Agreement is contained as part of the
applicable Subscription Package, entitled "Signature Page."

                   (BALANCE OF PAGE INTENTIONALLY LEFT BLANK)

                                       22

<PAGE>   23

                          SWISSRAY INTERNATIONAL, INC.

                            CORPORATION QUESTIONNAIRE

                          Investor Name: Canadian Advantage Limited Partnership

      The  information  contained in this  Questionnaire  is being  furnished in
order  to  determine  whether  the  undersigned  CORPORATION'S  Subscription  to
purchase the Debentures described in the Subscription Agreement may be accepted.

      ALL  INFORMATION   CONTAINED  IN  THIS   QUESTIONNAIRE   WILL  BE  TREATED
CONFIDENTIALLY.  The  undersigned  CORPORATION  understands,  however,  that the
Company may present this  Questionnaire to such parties as it deems  appropriate
if called upon to establish  that the proposed  offer and sale of the Debentures
is exempt  from  registration  under the  Securities  Act of 1933,  as  amended.
Further, the undersigned  CORPORATION  understands that the offering is required
to be reported to the Securities and Exchange Commission,  NASDAQ and to various
state securities and "blue sky" regulators.

      IN ADDITION TO SIGNING THE SIGNATURE  PAGE,  THE  UNDERSIGNED  CORPORATION
MUST COMPLETE FORM W-9 ATTACHED HERETO.

I. PLEASE CHECK EACH OF THE STATEMENTS BELOW THAT APPLIES TO THE CORPORATION.

|-|
            1. The  undersigned  CORPORATION:  (a) has total assets in excess of
            $5,000,000; (b) was not formed for the specific purpose of acquiring
            the  Debentures  and (c)  has  its  principal  place  of business in
            Toronto, Canada.

|-|
            2. Each of the  shareholders of the undersigned  CORPORATION is able
            to certify that such shareholder meets at least one of the following
            three conditions:

                  (a)   the shareholder is a natural person whose individual net
                        worth* or joint net worth with his or her spouse exceeds
                        $1,000,000; or

                  (b)   the   shareholder   is  a  natural  person  who  had  an
                        individual income* in excess of $200,000 in each of 1996
                        and 1997 and who reasonably expects an individual income
                        in excess of $200,000 in 1998; or

                                       23

<PAGE>   24

                  (c)   Each of the shareholders of the undersigned  CORPORATION
                        is able to certify  that such  shareholder  is a natural
                        person who,  together with his or her spouse,  has had a
                        joint  income in excess of  $300,000 in each of 1996 and
                        1997 and who reasonably expects a joint income in excess
                        of $300,000 during 1998; and the undersigned CORPORATION
                        has its principal place of business in ________________.

* For purposes of this  Questionnaire,  the term "net worth" means the excess of
total assets over total liabilities.  In determining  income, an investor should
add to his or her adjusted gross income any amounts  attributable  to tax-exempt
income received, losses claimed as a limited partner in any limited partnership,
deductions claimed for depletion, contributions to IRA or Keogh retirement plan,
alimony payments and any amount by which income from long-term capital gains has
been reduced in arriving at adjusted gross income.

|-|
            3. The undersigned CORPORATION is:

                  (a) a bank as defined in Section 3(a)(2) of the Securities
                  Act; or

                  (b) a savings and loan  association  or other  institution  as
                  defined in Section  3(a)(5)(A) of the  Securities  Act whether
                  acting in its individual or fiduciary capacity; or

                  (c) a broker or dealer  registered  pursuant  to Section 15 of
                  the Securities Exchange Act of 1934; or

                  (d) an insurance company as defined in Section 2(13) of the
                  Securities Act; or

                  (e) An  investment  company  registered  under the  investment
                  Company  Act of  1940 or a  business  development  company  as
                  defined in Section  2(a)(48) of the Investment  Company Act of
                  1940; or

                  (f) a small business  investment  company licensed by the U.S.
                  Small Business  Administration under Section 301 (c) or (d) of
                  the Small Business Investment Act of 1958; or

                  (g) a private  business  development  company  as  defined  in
                  Section 202(a) (22) of the Investment Advisors Act of 1940.

                                       24

<PAGE>   25

II. OTHER CERTIFICATIONS.

      By signing the Signature Page, the undersigned certifies the following:

      (a) That the  CORPORATION'S  purchase of the Debentures will be solely for
      the  CORPORATION'S own account and not for the account of any other person
      or entity; and

      (b) that the CORPORATION'S  name,  address of principal place of business,
      place of incorporation and taxpayer  identification number as set forth in
      this Questionnaire are true, correct and complete.

III. GENERAL INFORMATION

      (a) PROSPECTIVE PURCHASER (THE CORPORATION)

 (a)   PROSPECTIVE PURCHASER (THE CORPORATION)

Name: Canadian Advantage Limited Partnership

Principal Place of Business:  Toronto, Canada___________________________________
365 Bay Street, 10th Floor, Toronto Ontario M5H-2V2
--------------------------------------------------------------------------------

Address for Correspondence (if different):             SAME

                                          --------------------------------------
                                                (Number and Street)

--------------------------------------------------------------------------------
      (City)                        (State)                 (Zip Code)

Telephone Number:___________________(416) 860-8313______________________________
                        (Area Code)       (Number)

Jurisdiction of Incorporation:_______________Toronto, Canada____________________

Date of Formation:_________________________N/A__________________________________

Taxpayer Identification Number:_________________________________________________

Number of Shareholders:______________UNLIMITED__________________________________

      (b)  INDIVIDUAL  WHO IS  EXECUTING  THIS  QUESTIONNAIRE  ON  BEHALF OF THE
CORPORATION.

Name:_________________________________________Mark Valentine____________________

Position or Title:___________________________General Partner____________________

                                       25

<PAGE>   26

                          SWISSRAY INTERNATIONAL, INC.

                           CORPORATION SIGNATURE PAGE

      Your signature on this Corporation  Signature Page evidences the agreement
by  the  Purchaser  to be  bound  by  the  Questionnaire  and  the  Subscription
Agreement.

      1. The undersigned hereby represents that (a) the information contained in
the  Questionnaire  is complete and accurate and (b) the  Purchaser  will notify
SWISSRAY  INTERNATIONAL,  INC.  immediately if any material change in any of the
information  occurs  prior  to the  acceptance  of the  undersigned  Purchaser's
subscription  and  will  promptly  send  SWISSRAY  INTERNATIONAL,  INC.  written
confirmation of such change.

      2. The undersigned  officer of the Purchaser  hereby certifies that he has
read and understands this Subscription Agreement.

      3. The undersigned officer of the Purchaser hereby represents and warrants
that he has been  duly  authorized  by all  requisite  action on the part of the
Corporation to acquire the Debentures  and sign this  Subscription  Agreement on
behalf  of  CALD______________  and,  further,  that  Mark Valentine    has  all
requisite  authority to purchase the Debentures and enter into this Subscription
Agreement.

$200,000                                     June 16, 98
-----------------------------------       --------------------------------
Amount of Debentures subscribed for                      Date
                                          Canadian Advantage Limited Partnership
                                          --------------------------------
                                                     (Purchaser)

                                          By:_/s/ Mark Valentine________________
                                                     (Signature)

                                          Name:______Mark Valentine_____________
                                                 (Please Type or Print)

                                          Title:____General Partner_____________
                                                 (Please Type or Print)

      THE DEBENTURES HAVE NOT BEEN REGISTERED  UNDER THE SECURITIES ACT OF 1933.
AS AMENDED (THE "ACT"),  AND MAY NOT BE OFFERED,  SOLD OR OTHERWISE  TRANSFERRED
UNLESS SUCH SECURITIES ARE INCLUDED IN AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT.

                                       26

<PAGE>   27

                             COMPANY ACCEPTANCE PAGE

This Subscription Agreement accepted
and agreed to this 12 day of June, 1998

SWISSRAY INTERNATIONAL, INC.

BY ______/s/ Ruedi G. Laupper______________________________________
   Ruedi G. Laupper, its Chairman and President
   duly authorized

                                       27

<PAGE>   28

                                    Exhibit D

                              NOTICE OF CONVERSION

           (To be Executed by the Registered owner in order to Convert

                                 the Debentures

      The undersigned  hereby  irrevocably  elects, as of ____________,  199_ to
convert  $_________  of  Convertible  Debentures  into Common  Stock of SWISSRAY
INTERNATIONAL, INC. (the "Company") according to the conditions set forth in the
Subscription Agreement dated June __, 1998.

Date of Conversion_________________________________________

Applicable Conversion Price________________________________

Number of Shares Issuable upon this conversion_____________

Signature__________________________________________________
                 [Name]

Address____________________________________________________

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

Phone____________________ Fax______________________________

                                       28

<PAGE>   29

                                    Exhibit E

_____________, 1998

Purchasers of [Company] [Describe Securities]

                                  Re: [Company]

Ladies and Gentlemen:

      We have acted as counsel to [Company],  a corporation  incorporated  under
the laws of the State of ___________  (the  "Company"),  in connection  with the
proposed issuance and sale of convertible debentures (the "Securities") pursuant
to the Distribution  Agreement and the related Subscription Agreement (including
all Exhibits and Appendices thereto) (collectively the "Agreements").

      In  connection  with  rendering  the  opinions set forth  herein,  we have
examined drafts of the Agreement,  the Company's  Certificate of  Incorporation,
and its Bylaws, as amended to date [other documents - describe], the proceedings
of the Company's  Board of Directors  taken in connection with entering into the
Agreements,  and such  other  documents,  agreements  and  records  as we deemed
necessary to render the opinions set forth below.

      In conducting our  examination,  we have assumed the  following:  (i) that
each of the Agreements  has been executed by each of the parties  thereto in the
same form as the  forms  which we have  examined,  (ii) the  genuineness  of all
signatures, the legal capacity of natural persons, the authenticity and accuracy
of all documents  submitted to us as originals,  and the conformity to originals
of all documents  submitted to us as copies,  (iii) that each of the  Agreements
has been duly and validly  authorized,  executed  and  delivered by the party or
parties  thereto  other than the Company,  and (iv) that each of the  Agreements
constitutes  the valid and  binding  agreement  of the party or parties  thereto
other than the Company,  enforceable against such party or parties in accordance
with the Agreements' terms.

      Based upon the subject to the foregoing, we are of the opinion that:

      1. The Company  has been duly  incorporated  and is validly  existing as a
corporation in good standing under the laws of the State of ___________, is duly

                                       29

<PAGE>   30

qualified to do business as a foreign corporation and is in good standing in all
jurisdictions  where the Company owns or leases properties,  maintains employees
or  conducts  business,  except  for  jurisdictions  in which the  failure to so
qualify  would not have a material  adverse  effect on the Company,  and has all
requisite  corporate  power and authority to own its  properties and conduct its
business.

      2. The authorized  capital stock of the Company consists of _______ shares
of  Common  Stock,   __________  par  value  per  share,  ("Common  Stock")  and
____________  Preferred Stock, par value $________ per share;  [describe classes
if applicable]

      3. The Common  Stock is  registered  pursuant to Section  12(b) or Section
12(g) of the  Securities  Exchange  Act of 1934,  as amended and the Company has
timely filed all the material required to be filed pursuant to Sections 13(a) or
15(d) of such Act for a period  of at least  twelve  months  preceding  the date
hereof;

      4. When duly  countersigned by the Company's transfer agent and registrar,
and  delivered  to you  or  upon  your  order  against  payment  of  the  agreed
consideration therefor in accordance with the provisions of the Agreements,  the
Securities  [and any  Common  Stock to be  issued  upon  the  conversion  of the
Securities]  as described  in the  Agreements  represented  thereby will be duly
authorized and validly issued, fully paid and nonassessable;

      5. The Company has the  requisite  corporate  power and authority to enter
into the  Agreements and to sell and deliver the Securities and the Common Stock
to be  issued  upon  the  conversion  of  the  Securities  as  described  in the
Agreements;  each of the Agreements has been duly and validly  authorized by all
necessary  corporate action by the Company to our knowledge,  no approval of any
governmental or other body is required for the execution and delivery of each of
the  Agreements  by  the  Company  or  the   consummation  of  the  transactions
contemplated  thereby; each of the Agreements has been duly and validly executed
and  delivered  by and on behalf  of the  Company,  and is a valid  and  binding
agreement of the Company,  enforceable in accordance  with its terms,  except as
enforceability  may be  limited  by general  equitable  principles,  bankruptcy,
insolvency,  fraudulent  conveyance,  reorganization,  moratorium  or other laws
affecting creditors rights generally,  and except as to compliance with federal,
state, and foreign securities laws, as to which no opinion is expressed;

      6.  To the  best of our  knowledge,  after  due  inquiry,  the  execution,
delivery and performance of the Agreements by the Company and the performance of
its obligations  thereunder do not and will not constitute a breach or violation
of any of the terms and provisions of, or constitute a default under or conflict
with or violate any provision of (i) the Company's  Certificate of Incorporation
or By-Laws, (ii) any indenture, mortgage, deed of trust, agreement

                                       30

<PAGE>   31

or other  instrument  to which the Company is party or by which it or any of its
property is bound,  (iii) any applicable statute or regulation or as other, (iv)
or any  judgment,  decree  or order of any  court or  governmental  body  having
jurisdiction over the Company or any of its property.

      7. The  issuance of Common  Stock upon  conversion  of the  debentures  in
accordance with the terms and conditions of the Agreements, will not violate the
applicable listing agreement between the Company and any securities  exchange or
market on which the Company's securities are listed.

      8. To the best of our knowledge, after due inquiry, there is no pending or
threatened  litigation,  investigation or other proceedings  against the Company
[except as described in Exhibit A hereto].

      9. The Company  complies with the eligibility  requirements for the use of
Form 5-3, under the Securities Act of 1933, as amended.

Note: Use this where Registration Rights were included in the offering and the
Company is S-3 eligible.

      This  opinion is  rendered  only with regard to the matters set out in the
numbered  paragraphs  above.  No other  opinions are intended nor should they be
inferred.  This opinion is based  solely upon the laws of the United  States and
the State of _____________  and does not include an  interpretation or statement
concerning  the  laws  of  any  other  state  or  jurisdiction.  Insofar  as the
enforceability of the Agreements may be governed by the laws of other states, we
have  assumed  that such laws are  identical  in all respects to the laws of the
State of _____________.

       The  opinions  expressed  herein  are given to you solely for your use in
connection  with the  transaction  contemplated by the Agreements and may not be
relied upon by any other person or entity or for any other  purpose  without our
prior consent.

                                           Very truly yours,

                                           By: _________________

                                       31

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