Document:

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                                                                     Exhibit 4.4

THIS SERIES C-2 WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT
AND UNDER APPLICABLE STATE SECURITIES LAWS OR COMPUTER MOTION, INC. SHALL HAVE
RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER
THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS
IS NOT REQUIRED.

                         SERIES C-2 WARRANT TO PURCHASE

                             SHARES OF COMMON STOCK

                                       OF

                              COMPUTER MOTION, INC.

                            Expires October 31, 2007

No.: W-C-2-___                                       Number of Shares: _________
Date of Issuance: October 31, 2002

        FOR VALUE RECEIVED, subject to the provisions hereinafter set forth, the
undersigned, Computer Motion, Inc., a Delaware corporation (together with its
successors and assigns, the "Issuer"), hereby certifies that
________________________________ or its registered assigns is entitled to
subscribe for and purchase, during the period specified in this Series C-2
Warrant, up to ____________________________ (__________) shares (subject to
adjustment as hereinafter provided) of the duly authorized, validly issued,
fully paid and non-assessable Common Stock of the Issuer, at an exercise price
per share equal to the Warrant Price then in effect, subject, however, to the
provisions and upon the terms and conditions hereinafter set forth. Capitalized
terms used in this Warrant and not otherwise defined herein shall have the
respective meanings specified in Section 9 hereof.

        1. Term. The right to subscribe for and purchase shares of Warrant Stock
represented hereby shall commence on the date of issuance of this Warrant and
shall expire at 5:00 p.m., eastern time, on October 31, 2007 (such period being
the "Term").

        2. Method of Exercise Payment; Issuance of New Warrant; Transfer and
Exchange.

        (a) Time of Exercise. The purchase rights represented by this Warrant
may be exercised in whole or in part at any time and from time to time during
the Term.

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        (b) Method of Exercise. The Holder hereof may exercise this Warrant, in
whole or in part, by the surrender of this Warrant (with the exercise form
attached hereto duly executed) at the principal office of the Issuer, together
with the payment to the Issuer of an amount of consideration therefor equal to
the Warrant Price in effect on the date of such exercise multiplied by the
number of shares of Warrant Stock with respect to which this Warrant is then
being exercised, payable at such Holder's election by (i) by certified or
official bank check or by wire transfer to an account designated by the Issuer
(ii) in the event the Warrant Stock is not registered on an effective
Registration Statement, or the effectiveness of such Registration Statement has
been suspended, by "cashless exercise" by surrender to the Issuer for
cancellation of a portion of this Warrant representing that number of unissued
shares of Warrant Stock which is equal to the quotient obtained by dividing (A)
the product obtained by multiplying the Warrant Price by the number of shares of
Warrant Stock being purchased upon such exercise by (B) the Per Share Market
Value as of the date of such exercise, or (iii) by a combination of the
foregoing methods of payment selected by the Holder of this Warrant. In any case
where the consideration payable upon such exercise is being paid in whole or in
part pursuant to the provisions of clause (ii) of this subsection (b), such
exercise shall be accompanied by written notice from the Holder of this Warrant
specifying the manner of payment thereof and containing a calculation showing
the number of shares of Warrant Stock with respect to which rights are being
surrendered thereunder and the net number of shares to be issued after giving
effect to such surrender.

        (c) Issuance of Stock Certificates. In the event of any exercise of the
rights represented by this Warrant in accordance with and subject to the terms
and conditions hereof, (i) certificates for the shares of Warrant Stock so
purchased shall be dated the date of such exercise and delivered to the Holder
hereof within a reasonable time, not exceeding three (3) Trading Days after such
exercise, and the Holder hereof shall be deemed for all purposes to be the
Holder of the shares of Warrant Stock so purchased as of the date of such
exercise, and (ii) unless this Warrant has expired, a new Warrant representing
the number of shares of Warrant Stock, if any, with respect to which this
Warrant shall not then have been exercised (less any amount thereof which shall
have been canceled in payment or partial payment of the Warrant Price as
hereinabove provided) shall also be issued to the Holder hereof at the Issuer's
expense within such time.

        (d) Transferability of Warrant. Subject to Section 2(e), this Warrant
may be transferred by a Holder without the consent of the Issuer. If transferred
pursuant to this paragraph and subject to the provisions of subsection (e) of
this Section 2, this Warrant may be transferred on the books of the Issuer by
the Holder hereof in person or by duly authorized attorney, upon surrender of
this Warrant at the principal office of the Issuer, properly endorsed (by the
Holder executing an assignment in the form attached hereto) and upon payment of
any necessary transfer tax or other governmental charge imposed upon such
transfer. This Warrant is exchangeable at the principal office of the Issuer for
Warrants for the purchase of the same aggregate number of shares of Warrant
Stock, each new Warrant to represent the right to purchase such number of shares
of Warrant Stock as the Holder hereof shall designate at the time of such
exchange. All Warrants issued on transfers or exchanges shall be dated the
Original Issue Date and shall be identical with this Warrant except as to the
number of shares of Warrant Stock issuable pursuant hereto.

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        (e) Compliance with Securities Laws.

               (i) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant or the shares of Warrant Stock to be issued upon
exercise hereof are being acquired solely for the Holder's own account and not
as a nominee for any other party, and for investment, and that the Holder will
not offer, sell or otherwise dispose of this Warrant or any shares of Warrant
Stock to be issued upon exercise hereof except pursuant to an effective
registration statement, or an exemption from registration, under the Securities
Act and any applicable state securities laws.

               (ii) Except as provided in paragraph (iii) below, this Warrant
and all certificates representing shares of Warrant Stock issued upon exercise
hereof shall be stamped or imprinted with a legend in substantially the
following form:

               THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON
               EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
               OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
               SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
               DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
               APPLICABLE STATE SECURITIES LAWS OR COMPUTER MOTION, INC. SHALL
               HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH
               SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF
               APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

               (iii) The restrictions imposed by this subsection (e) upon the
transfer of this Warrant or the shares of Warrant Stock to be purchased upon
exercise hereof shall terminate (A) when such securities shall have been resold
pursuant to an effective registration statement under the Securities Act, (B)
upon the Issuer's receipt of an opinion of counsel, in form and substance
reasonably satisfactory to the Issuer, addressed to the Issuer to the effect
that such restrictions are no longer required to ensure compliance with the
Securities Act and state securities laws or (C) upon the Issuer's receipt of
other evidence reasonably satisfactory to the Issuer that such registration and
qualification under the Securities Act and state securities laws are not
required. Whenever such restrictions shall cease and terminate as to any such
securities, the Holder thereof shall be entitled to receive from the Issuer (or
its transfer agent and registrar), without expense (other than applicable
transfer taxes, if any), new Warrants (or, in the case of shares of Warrant
Stock, new stock certificates) of like tenor not bearing the applicable legend
required by paragraph (ii) above relating to the Securities Act and state
securities laws.

        (f) Continuing Rights of Holder. The Issuer will, at the time of or at
any time after each exercise of this Warrant, upon the request of the Holder
hereof, acknowledge in writing the extent, if any, of its continuing obligation
to afford to such Holder all rights to which such Holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant,
provided that if any such Holder shall fail to make any such request, the
failure shall not affect the continuing obligation of the Issuer to afford such
rights to such Holder.

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        3. Stock Fully Paid; Reservation and Listing of Shares; Covenants.

        (a) Stock Fully Paid. The Issuer represents, warrants, covenants and
agrees that all shares of Warrant Stock which may be issued upon the exercise of
this Warrant or otherwise hereunder will, upon payment therefor in accordance
herewith, upon issuance, be duly authorized, validly issued, fully paid and
non-assessable and free from all taxes, liens and charges created by or through
Issuer. The Issuer further covenants and agrees that during the period within
which this Warrant may be exercised, the Issuer will at all times have
authorized and reserved for the purpose of the issue upon exercise of this
Warrant a sufficient number of shares of Common Stock to provide for the
exercise of this Warrant.

        (b) Reservation. If any shares of Common Stock required to be reserved
for issuance upon exercise of this Warrant or as otherwise provided hereunder
require registration or qualification with any governmental authority under any
federal or state law before such shares may be so issued, the Issuer will in
good faith use its best efforts as expeditiously as possible at its expense to
cause such shares to be duly registered or qualified. If the Issuer shall list
any shares of Common Stock on any securities exchange or market it will, at its
expense, list thereon, maintain and increase when necessary such listing, of,
all shares of Warrant Stock from time to time issued upon exercise of this
Warrant or as otherwise provided hereunder, and, to the extent permissible under
the applicable securities exchange rules, all unissued shares of Warrant Stock
which are at any time issuable hereunder, so long as any shares of Common Stock
shall be so listed. The Issuer will also so list on each securities exchange or
market, and will maintain such listing of, any other securities which the Holder
of this Warrant shall be entitled to receive upon the exercise of this Warrant
if at the time any securities of the same class shall be listed on such
securities exchange or market by the Issuer.

        (c) Covenants. The Issuer shall not by any action including, without
limitation, amending the Certificate of Incorporation or the by-laws of the
Issuer, or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such actions as may be necessary or appropriate to
protect the rights of the Holder hereof against dilution (to the extent
specifically provided herein) or impairment. Without limiting the generality of
the foregoing, the Issuer will (i) not permit the par value, if any, of its
Common Stock to exceed the then effective Warrant Price, (ii) not amend or
modify any provision of the Certificate of Incorporation or by-laws of the
Issuer in any manner that would adversely affect in any way the powers,
preferences or relative participating, optional or other special rights of the
Common Stock or which would adversely affect the rights of the Holders of the
Warrants, (iii) take all such action as may be reasonably necessary in order
that the Issuer may validly and legally issue fully paid and nonassessable
shares of Common Stock, free and clear of any liens, claims, encumbrances and
restrictions (other than as provided herein) upon the exercise of this Warrant,
and (iv) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
reasonably necessary to enable the Issuer to perform its obligations under this
Warrant.

        (d) Loss, Theft, Destruction of Warrants. Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft, destruction
or mutilation of any Warrant and, in the

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case of any such loss, theft or destruction, upon receipt of indemnity or
security satisfactory to the Issuer or, in the case of any such mutilation, upon
surrender and cancellation of such Warrant, the Issuer will make and deliver, in
lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like
tenor and representing the right to purchase the same number of shares of Common
Stock.

        (e) Registration Rights. The Warrant Stock of the Issuer is entitled to
the benefits and subject to the terms of the Registration Rights Agreement dated
the date hereof between the Issuer and the Holder and shall carry standard
piggy-back registration rights on any registration statement filed by the Issuer
under the Securities Act.

        4. Adjustment of Warrant Price. The number of shares of Common Stock for
which this Warrant is exercisable, and the price at which such shares may be
purchased upon exercise of this Warrant, shall be subject to adjustment from
time to time as set forth in this Section 4. The Issuer shall give the Holder
notice of any event described below which requires an adjustment pursuant to
this Section 4 in accordance with Section 5.

        (a) Recapitalization, Reorganization, Reclassification, Consolidation,
Merger or Sale.

               (i) In case the Issuer after the Original Issue Date shall do any
of the following (each, a "Triggering Event"): (a) consolidate with or merge
into any other Person and the Issuer shall not be the continuing or surviving
corporation of such consolidation or merger, or (b) permit any other Person to
consolidate with or merge into the Issuer and the Issuer shall be the continuing
or surviving Person but, in connection with such consolidation or merger, any
Capital Stock of the Issuer shall be changed into or exchanged for Securities of
any other Person or cash or any other property, or (c) transfer all or
substantially all of its properties or assets to any other Person, or (d) effect
a capital reorganization or reclassification of its Capital Stock, then, and in
the case of each such Triggering Event, proper provision shall be made so that,
upon the basis and the terms and in the manner provided in this Warrant, the
Holder of this Warrant shall be entitled (x) upon the exercise hereof at any
time after the consummation of such Triggering Event, to the extent this Warrant
is not exercised prior to such Triggering Event, to receive at the Warrant Price
in effect at the time immediately prior to the consummation of such Triggering
Event in lieu of the Common Stock issuable upon such exercise of this Warrant
prior to such Triggering Event, the Securities, cash and property to which such
Holder would have been entitled upon the consummation of such Triggering Event
if such Holder had exercised the rights represented by this Warrant immediately
prior thereto, subject to adjustments (subsequent to such corporate action) as
nearly equivalent as possible to the adjustments provided for elsewhere in this
Section 4 or (y) to sell this Warrant (or, at such Holder's election, a portion
hereof) concurrently with the Triggering Event to the Person continuing after or
surviving such Triggering Event, or to the Issuer (if Issuer is the continuing
or surviving Person) at a sales price equal to the amount of cash, property
and/or Securities to which a holder of the number of shares of Common Stock
which would otherwise have been delivered upon the exercise of this Warrant
would have been entitled upon the effective date or closing of any such
Triggering Event (the "Event Consideration"), less the amount or portion of such
Event Consideration having a fair value equal to the aggregate Warrant Price
applicable to this Warrant or the portion hereof so sold.

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               (ii) Notwithstanding anything contained in this Warrant to the
contrary, the Issuer will not effect any Triggering Event unless, prior to the
consummation thereof, each Person (other than the Issuer) which may be required
to deliver any Securities, cash or property upon the exercise of this Warrant as
provided herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the Holder of this Warrant, (A) the obligations of the Issuer
under this Warrant (and if the Issuer shall survive the consummation of such
Triggering Event, such assumption shall be in addition to, and shall not release
the Issuer from, any continuing obligations of the Issuer under this Warrant)
and (B) the obligation to deliver to such Holder such shares of Securities, cash
or property as, in accordance with the foregoing provisions of this subsection
(a), such Holder shall be entitled to receive, and such Person shall have
similarly delivered to such Holder an opinion of counsel for such Person, which
counsel shall be reasonably satisfactory to such Holder, stating that this
Warrant shall thereafter continue in full force and effect and the terms hereof
(including, without limitation, all of the provisions of this subsection (a))
shall be applicable to the Securities, cash or property which such Person may be
required to deliver upon any exercise of this Warrant or the exercise of any
rights pursuant hereto.

               (iii) If with respect to any Triggering Event, the Holder of this
Warrant has exercised its right as provided in clause (y) of subparagraph (i) of
this subsection (a) to sell this Warrant or a portion thereof, the Issuer agrees
that as a condition to the consummation of any such Triggering Event the Issuer
shall secure such right of Holder to sell this Warrant to the Person continuing
after or surviving such Triggering Event and the Issuer shall not effect any
such Triggering Event unless upon or prior to the consummation thereof the
amounts of cash, property and/or Securities required under such clause (y) are
delivered to the Holder of this Warrant. The obligation of the Issuer to secure
such right of the Holder to sell this Warrant shall be subject to such Holder's
cooperation with the Issuer, including, without limitation, the giving of
customary representations and warranties to the purchaser in connection with any
such sale. Prior notice of any Triggering Event shall be given to the Holder of
this Warrant in accordance with Section 13 hereof.

        (b) Stock Dividends, Subdivisions and Combinations. If at any time the
Issuer shall:

                      (i) take a record of the holders of its Common Stock for
the purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Shares of Common Stock,

                      (ii) subdivide its outstanding shares of Common Stock into
a larger number of shares of Common Stock, or

                      (iii) combine its outstanding shares of Common Stock into
a smaller number of shares of Common Stock,

then (1) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (2) the Warrant Price then in
effect shall be adjusted to equal (A) the Warrant Price then in effect
multiplied by the number of

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shares of Common Stock for which this Warrant is exercisable immediately prior
to the adjustment divided by (B) the number of shares of Common Stock for which
this Warrant is exercisable immediately after such adjustment.

        (c) Certain Other Distributions. If at any time the Issuer shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive any dividend or other distribution of:

                      (i) cash (other than a cash dividend payable out of
earnings or earned surplus legally available for the payment of dividends under
the laws of the jurisdiction of incorporation of the Issuer),

                      (ii) any evidences of its indebtedness, any shares of
stock of any class or any other securities or property of any nature whatsoever
(other than cash, Common Stock Equivalents or Additional Shares of Common
Stock), or

                      (iii) any warrants or other rights to subscribe for or
purchase any evidences of its indebtedness, any shares of stock of any class or
any other securities or property of any nature whatsoever (other than cash,
Common Stock Equivalents or Additional Shares of Common Stock),

then (1) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the product of the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such
adjustment multiplied by a fraction (A) the numerator of which shall be the Per
Share Market Value of Common Stock at the date of taking such record and (B) the
denominator of which shall be such Per Share Market Value minus the amount
allocable to one share of Common Stock of any such cash so distributable and of
the fair value (as determined in good faith by the Board of Directors of the
Issuer and supported by an opinion from an investment banking firm of recognized
national standing acceptable to the Holder) of any and all such evidences of
indebtedness, shares of stock, other securities or property or warrants or other
subscription or purchase rights so distributable, and (2) the Warrant Price then
in effect shall be adjusted to equal (A) the Warrant Price then in effect
multiplied by the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the adjustment divided by (B) the number of
shares of Common Stock for which this Warrant is exercisable immediately after
such adjustment. A reclassification of the Common Stock (other than a change in
par value, or from par value to no par value or from no par value to par value)
into shares of Common Stock and shares of any other class of stock shall be
deemed a distribution by the Issuer to the holders of its Common Stock of such
shares of such other class of stock within the meaning of this Section 4(c) and,
if the outstanding shares of Common Stock shall be changed into a larger or
smaller number of shares of Common Stock as a part of such reclassification,
such change shall be deemed a subdivision or combination, as the case may be, of
the outstanding shares of Common Stock within the meaning of Section 4(b).

        (d) Issuance of Additional Shares of Common Stock.

               (i) If at any time the Issuer shall issue or sell any Additional
Shares of Common Stock to a third party other than the Holder of this Warrant in
exchange for consideration in an amount per Additional Share of Common Stock
which is less than the

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Warrant Price at the time the Additional Shares of Common Stock are issued or
sold, the adjustment required under Section 4(d) shall be made in accordance
with the formula in paragraph (ii) below. The provisions of paragraphs (i) of
Section 4(d) shall not apply to any issuance of Additional Shares of Common
Stock for which an adjustment is provided under Section 4(b) or 4(c). No
adjustment of the number of shares of Common Stock for which this Warrant shall
be exercisable shall be made under paragraph (i) of Section 4(d) upon the
issuance of any Additional Shares of Common Stock which are issued pursuant to
the exercise of any warrants or other subscription or purchase rights or
pursuant to the exercise of any conversion or exchange rights in any Common
Stock Equivalents, if any such adjustment shall previously have been made upon
the issuance of such warrants or other rights or upon the issuance of such
Common Stock Equivalents (or upon the issuance of any warrant or other rights
therefor) pursuant to Section 4(f).

               (ii) If the Issuer, at any time while this Warrant is
outstanding, shall issue any Additional Shares of Common Stock to a third party
other than the Holder of this Warrant (otherwise than as provided in the
foregoing subsections (a) through (c) of this Section 4), at a price per share
less than the Warrant Price then in effect or without consideration, then the
Warrant Price upon each such issuance shall be adjusted to that price determined
by multiplying the Warrant Price then in effect by a fraction:

                      (A) the numerator of which shall be equal to the sum of
               (x) the number of shares of Common Stock outstanding immediately
               prior to the issuance of such Additional Shares of Common Stock
               plus (y) the number of shares of Common Stock which the aggregate
               consideration for the total number of such Additional Shares of
               Common Stock so issued would purchase at a price per share equal
               to the greater of the Per Share Market Value then in effect and
               the Warrant Price then in effect, and

                      (B) the denominator of which shall be equal to the number
               of shares of Common Stock outstanding immediately after the
               issuance of such Additional Shares of Common Stock.

               (iii) The provisions of paragraph (ii) of Section 4(d) shall not
apply to any issuance of Additional Shares of Common Stock for which an
adjustment is provided under Section 4(a) through 4(c). No adjustment of the
number of shares of Common Stock for which this Warrant shall be exercisable
shall be made under paragraph (ii) of Section 4(d) upon the issuance of any
Additional Shares of Common Stock which are issued pursuant to the exercise of
any Common Stock Equivalents, if any such adjustment shall previously have been
made upon the issuance of such Common Stock Equivalents (or upon the issuance of
any warrant or other rights therefor) pursuant to Section 4(f).

        (e) Intentionally Omitted.

        (f) Issuance of Common Stock Equivalents. If at any time the Issuer
shall take a record of the Holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Issuer is the surviving
corporation) issue or sell, any Common Stock Equivalents, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
price per

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share for which Common Stock is issuable upon such conversion or exchange shall
be less than the Warrant Price in effect immediately prior to the time of such
issue or sale, then the number of shares of Common Stock for which this Warrant
is exercisable and the Warrant Price then in effect shall be adjusted as
provided in Section 4(d) on the basis that the maximum number of Additional
Shares of Common Stock necessary to effect the conversion or exchange of all
such Common Stock Equivalents shall be deemed to have been issued and
outstanding and the Issuer shall have received all of the consideration payable
therefor, if any, as of the date of actual issuance of such Common Stock
Equivalents. No further adjustments of the number of shares of Common Stock for
which this Warrant is exercisable and the Warrant Price then in effect shall be
made upon the actual issue of such Common Stock upon conversion or exchange of
such Common Stock Equivalents. Anything herein to the contrary notwithstanding,
if any adjustment to the Warrant Price made pursuant to this Section 4(f) would
result in a Warrant Price below the Market Price on the Closing Date, than the
Warrant Price shall be the Market Price on the Closing Date.

        (g) Superseding Adjustment. If, at any time after any adjustment of the
number of shares of Common Stock for which this Warrant is exercisable and the
Warrant Price then in effect shall have been made pursuant to Section 4(f) as
the result of any issuance of warrants, other rights or Common Stock
Equivalents, and (i) such warrants or other rights, or the right of conversion
or exchange in such other Common Stock Equivalents, shall expire, and all or a
portion of such warrants or other rights, or the right of conversion or exchange
with respect to all or a portion of such other Common Stock Equivalents, as the
case may be shall not have been exercised, or (ii) the consideration per share
for which shares of Common Stock are issuable pursuant to such Common Stock
Equivalents, shall be increased solely by virtue of provisions therein contained
for an automatic increase in such consideration per share upon the occurrence of
a specified date or event, then for each outstanding Warrant such previous
adjustment shall be rescinded and annulled and the Additional Shares of Common
Stock which were deemed to have been issued by virtue of the computation made in
connection with the adjustment so rescinded and annulled shall no longer be
deemed to have been issued by virtue of such computation. Upon the occurrence of
an event set forth in this Section 4(g) above, there shall be a recomputation
made of the effect of such Common Stock Equivalents on the basis of: (i)
treating the number of Additional Shares of Common Stock or other property, if
any, theretofore actually issued or issuable pursuant to the previous exercise
of any such warrants or other rights or any such right of conversion or
exchange, as having been issued on the date or dates of any such exercise and
for the consideration actually received and receivable therefor, and (ii)
treating any such Common Stock Equivalents which then remain outstanding as
having been granted or issued immediately after the time of such increase of the
consideration per share for which shares of Common Stock or other property are
issuable under such Common Stock Equivalents; whereupon a new adjustment of the
number of shares of Common Stock for which this Warrant is exercisable and the
Warrant Price then in effect shall be made, which new adjustment shall supersede
the previous adjustment so rescinded and annulled.

        (h) Purchase of Common Stock by the Issuer. If the Issuer at any time
while this Warrant is outstanding shall, directly or indirectly through a
Subsidiary or otherwise, purchase, redeem or otherwise acquire any shares of
Common Stock at a price per share greater than the Per Share Market Value, then
the Warrant Price upon each such purchase, redemption or acquisition shall be
adjusted to that price determined by multiplying such Warrant Price by a
fraction (i) the numerator of which shall be the number of shares of Common
Stock outstanding

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immediately prior to such purchase, redemption or acquisition minus the number
of shares of Common Stock which the aggregate consideration for the total number
of such shares of Common Stock so purchased, redeemed or acquired would purchase
at the Per Share Market Value; and (ii) the denominator of which shall be the
number of shares of Common Stock outstanding immediately after such purchase,
redemption or acquisition. For the purposes of this subsection (h), the date as
of which the Per Share Market Price shall be computed shall be the earlier of
(x) the date on which the Issuer shall enter into a firm contract for the
purchase, redemption or acquisition of such Common Stock, or (y) the date of
actual purchase, redemption or acquisition of such Common Stock. For the
purposes of this subsection (h), a purchase, redemption or acquisition of a
Common Stock Equivalent shall be deemed to be a purchase of the underlying
Common Stock, and the computation herein required shall be made on the basis of
the full exercise, conversion or exchange of such Common Stock Equivalent on the
date as of which such computation is required hereby to be made, whether or not
such Common Stock Equivalent is actually exercisable, convertible or
exchangeable on such date.

        (i) Other Provisions applicable to Adjustments under this Section. The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Warrant Price then in effect provided for in this Section 4:

               (i) Computation of Consideration. To the extent that any
Additional Shares of Common Stock or any Common Stock Equivalents (or any
warrants or other rights therefor) shall be issued for cash consideration, the
consideration received by the Issuer therefor shall be the amount of the cash
received by the Issuer therefor, or, if such Additional Shares of Common Stock
or Common Stock Equivalents are offered by the Issuer for subscription, the
subscription price, or, if such Additional Shares of Common Stock or Common
Stock Equivalents are sold to underwriters or dealers for public offering
without a subscription offering, the initial public offering price (in any such
case subtracting any amounts paid or receivable for accrued interest or accrued
dividends and without taking into account any compensation, discounts or
expenses paid or incurred by the Issuer for and in the underwriting of, or
otherwise in connection with, the issuance thereof). To the extent that such
issuance shall be for a consideration other than cash, then, except as herein
otherwise expressly provided, the amount of such consideration shall be deemed
to be the fair value of such consideration at the time of such issuance as
determined in good faith by the Board of Directors of the Issuer. In case any
Additional Shares of Common Stock or any Common Stock Equivalents (or any
warrants or other rights therefor) shall be issued in connection with any merger
in which the Issuer issues any securities, the amount of consideration therefor
shall be deemed to be the fair value, as determined in good faith by the Board
of Directors of the Issuer, of such portion of the assets and business of the
nonsurviving corporation as such Board in good faith shall determine to be
attributable to such Additional Shares of Common Stock, Common Stock
Equivalents, or any warrants or other rights therefor, as the case may be. The
consideration for any Additional Shares of Common Stock issuable pursuant to any
warrants or other rights to subscribe for or purchase the same shall be the
consideration received by the Issuer for issuing such warrants or other rights
plus the additional consideration payable to the Issuer upon exercise of such
warrants or other rights. The consideration for any Additional Shares of Common
Stock issuable pursuant to the terms of any Common Stock Equivalents shall be
the consideration received by the Issuer for issuing warrants or other rights to
subscribe for or purchase such Common Stock Equivalents, plus the consideration
paid or payable to the Issuer in respect of the subscription for or purchase of
such

<PAGE>
Common Stock Equivalents, plus the additional consideration, if any, payable to
the Issuer upon the exercise of the right of conversion or exchange in such
Common Stock Equivalents. In case of the issuance at any time of any Additional
Shares of Common Stock or Common Stock Equivalents in payment or satisfaction of
any dividends upon any class of stock other than Common Stock, the Issuer shall
be deemed to have received for such Additional Shares of Common Stock or Common
Stock Equivalents a consideration equal to the amount of such dividend so paid
or satisfied.

               (ii) When Adjustments to Be Made. The adjustments required by
this Section 4 shall be made whenever and as often as any specified event
requiring an adjustment shall occur, except that any adjustment of the number of
shares of Common Stock for which this Warrant is exercisable that would
otherwise be required may be postponed (except in the case of a subdivision or
combination of shares of the Common Stock, as provided for in Section 4(b)) up
to, but not beyond the date of exercise if such adjustment either by itself or
with other adjustments not previously made adds or subtracts less than one
percent (1%) of the shares of Common Stock for which this Warrant is exercisable
immediately prior to the making of such adjustment. Any adjustment representing
a change of less than such minimum amount (except as aforesaid) which is
postponed shall be carried forward and made as soon as such adjustment, together
with other adjustments required by this Section 4 and not previously made, would
result in a minimum adjustment or on the date of exercise. For the purpose of
any adjustment, any specified event shall be deemed to have occurred at the
close of business on the date of its occurrence.

               (iii) Fractional Interests. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into account to
the nearest one one-hundredth (1/100th) of a share.

               (iv) When Adjustment Not Required. If the Issuer shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled. In addition, no adjustment shall be required under
Section 4(d)(i) hereof in the event the Issuer issues or sells Additional Shares
in a transaction whose primary purpose is to establish a relationship with the
recipient thereof for strategic reasons and not to raise capital.

        (k) Form of Warrant after Adjustments. The form of this Warrant need not
be changed because of any adjustments in the Warrant Price or the number and
kind of Securities purchasable upon the exercise of this Warrant.

        (l) Escrow of Warrant Stock. If, after any property becomes
distributable pursuant to this Section 4 by reason of the taking of any record
of the holders of Common Stock, but prior to the occurrence of the event for
which such record is taken, and the Holder exercises this Warrant, any shares of
Common Stock issuable upon exercise by reason of such adjustment shall be deemed
the last shares of Common Stock for which this Warrant is exercised
(notwithstanding any other provision to the contrary herein) and such shares or
other property shall be held in escrow for the Holder by the Issuer to be issued
to the Holder upon and to the extent that the

<PAGE>
event actually takes place, upon payment of the current Warrant Price.
Notwithstanding any other provision to the contrary herein, if the event for
which such record was taken fails to occur or is rescinded, then such escrowed
shares shall be cancelled by the Issuer and escrowed property returned.

        5. Notice of Adjustments. Whenever the Warrant Price or Warrant Share
Number shall be adjusted pursuant to Section 4 hereof (for purposes of this
Section 5, each an "adjustment"), the Issuer shall cause its Chief Financial
Officer to prepare and execute a certificate setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated (including a description of the
basis on which the Board made any determination hereunder), and the Warrant
Price and Warrant Share Number after giving effect to such adjustment, and shall
cause copies of such certificate to be delivered to the Holder of this Warrant
promptly after each adjustment. Any dispute between the Issuer and the Holder of
this Warrant with respect to the matters set forth in such certificate may at
the option of the Holder of this Warrant be submitted to one of the national
accounting firms currently known as the "big four" selected by the Holder,
provided that the Issuer shall have ten (10) days after receipt of notice from
such Holder of its selection of such firm to object thereto, in which case such
Holder shall select another such firm and the Issuer shall have no such right of
objection. The firm selected by the Holder of this Warrant as provided in the
preceding sentence shall be instructed to deliver a written opinion as to such
matters to the Issuer and such Holder within thirty (30) days after submission
to it of such dispute. Such opinion shall be final and binding on the parties
hereto. The fees and expenses of such accounting firm shall be paid by the
Issuer.

        6. Fractional Shares. No fractional shares of Warrant Stock will be
issued in connection with an exercise hereof, but in lieu of such fractional
shares, the Issuer shall make a cash payment therefor equal in amount to the
product of the applicable fraction multiplied by the Per Share Market Value then
in effect.

        7. Ownership Cap and Certain Exercise Restrictions.

        (a) Notwithstanding anything to the contrary set forth in this Warrant,
at no time may a holder of this Warrant exercise this Warrant if the number of
shares of Common Stock to be issued pursuant to such exercise would exceed, when
aggregated with all other shares of Common Stock owned by such holder at such
time, the number of shares of Common Stock which would result in such holder
owning more than 4.999% of all of the Common Stock outstanding at such time;
provided, however, that upon a holder of this Warrant providing the Issuer with
sixty-one (61) days notice (pursuant to Section 13 hereof) (the "Waiver Notice")
that such holder would like to waive this Section 7(a) with regard to any or all
shares of Common Stock issuable upon exercise of this Warrant, this Section 7(a)
will be of no force or effect with regard to all or a portion of the Warrant
referenced in the Waiver Notice.

        (b) The Holder may not exercise the Warrant hereunder to the extent such
exercise would result in the Holder beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules thereunder) in
excess of 9.999% of the then issued and outstanding shares of Common Stock,
including shares issuable upon conversion of the Series C Preferred Stock and
the exercise of the Warrant held by the Holder after application of this
Section.

<PAGE>
        8. Call. Notwithstanding anything herein to the contrary, at any time
following the six month anniversary of the Original Issue Date, the Issuer, at
its option, may call up to one hundred percent (100%) of this Warrant if the Per
Share Market Value of the Common Stock has been equal to or greater than Four
Dollars and Forty Cents ($4.40) for a period of ten (10) consecutive Trading
Days immediately prior to the date of delivery of the Call Notice (a "Call
Notice Period") by providing the Holder of this Warrant written notice pursuant
to Section 13 (the "Call Notice"); provided, that the Registration Statement (as
defined below) has been declared effective and has been effective, without lapse
or suspension of any kind, for a period of 60 consecutive calendar days;
provided, further, that the Registration Statement must be effective from the
date of delivery of the Call Notice until the date which is the later of (i) the
date the Holder exercises the Warrant pursuant to the Call Notice and (ii) the
20th day after the Holder receives the Call Notice (the "Early Termination
Date"). The rights and privileges granted pursuant to this Warrant with respect
to the shares of Warrant Stock subject to the Call Notice (the "Called Warrant
Shares") shall expire on the Early Termination Date if this Warrant is not
exercised with respect to such Called Warrant Shares prior to such Early
Termination Date. In the event this Warrant is not exercised with respect to the
Called Warrant Shares, the Issuer shall remit to the Holder of this Warrant (i)
$.10 per Called Warrant Share and (ii) a new Warrant representing the number of
shares of Warrant Stock, if any, which shall not have been subject to the Call
Notice upon the Holder tendering to the Issuer the applicable Warrant
certificate.

        9. Definitions. For the purposes of this Warrant, the following terms
have the following meanings:

               "Additional Shares of Common Stock" means all shares of Common
        Stock issued by the Issuer after the Original Issue Date, and all shares
        of Other Common, if any, issued by the Issuer after the Original Issue
        Date, except (i) the Warrant Stock; (ii) shares of Common Stock issuable
        upon conversion of the Series C Preferred Stock; (iii) shares of Common
        Stock issuable as payment of dividends on the Series C Preferred Stock;
        (iv) shares of Common Stock to be issued to strategic partners and/or in
        connection with a strategic merger or acquisition; (v) shares of Common
        Stock or the issuance of options to purchase shares of Common Stock to
        employees, officers, directors, consultants and vendors in accordance
        with the Issuer's equity incentive policies; and (vi) the issuance of
        Securities pursuant to the conversion or exercise of convertible or
        exercisable securities issued or outstanding prior to the date hereof.

               "Certificate of Incorporation" means the Certificate of
        Incorporation of the Issuer as in effect on the Original Issue Date, and
        as hereafter from time to time amended, modified, supplemented or
        restated in accordance with the terms hereof and thereof and pursuant to
        applicable law.

               "Board" shall mean the Board of Directors of the Issuer.

               "Capital Stock" means and includes (i) any and all shares,
        interests, participations or other equivalents of or interests in
        (however designated) corporate stock, including, without limitation,
        shares of preferred or preference stock, (ii) all partnership interests
        (whether general or limited) in any Person which is a partnership, (iii)
        all membership

<PAGE>
        interests or limited liability company interests in any limited
        liability company, and (iv) all equity or ownership interests in any
        Person of any other type.

               "Common Stock" means the Common Stock, par value $.001 per share,
        of the Issuer and any other Capital Stock into which such stock may
        hereafter be changed.

               "Common Stock Equivalent" means any Convertible Security or
        warrant, option or other right to subscribe for or purchase any
        Additional Shares of Common Stock or any Convertible Security.

               "Convertible Securities" means evidences of Indebtedness, shares
        of Capital Stock or other Securities which are or may be at any time
        convertible into or exchangeable for Additional Shares of Common Stock.
        The term "Convertible Security" means one of the Convertible Securities.

               "Governmental Authority" means any governmental, regulatory or
        self-regulatory entity, department, body, official, authority,
        commission, board, agency or instrumentality, whether federal, state or
        local, and whether domestic or foreign.

               "Holders" mean the Persons who shall from time to time own any
        Warrant. The term "Holder" means one of the Holders.

               "Independent Appraiser" means a nationally recognized or major
        regional investment banking firm or firm of independent certified public
        accountants of recognized standing (which may be the firm that regularly
        examines the financial statements of the Issuer) that is regularly
        engaged in the business of appraising the Capital Stock or assets of
        corporations or other entities as going concerns, and which is not
        affiliated with either the Issuer or the Holder of any Warrant.

               "Issuer" means Computer Motion, Inc., a Delaware corporation,
        and its successors.

               "Nasdaq" means The Nasdaq National Market.

               "Original Issue Date" means October 31, 2002.

               "OTC Bulletin Board" means the over-the-counter electronic
        bulletin board.

               "Other Common" means any other Capital Stock of the Issuer of any
        class which shall be authorized at any time after the date of this
        Warrant (other than Common Stock) and which shall have the right to
        participate in the distribution of earnings and assets of the Issuer
        without limitation as to amount.

               "Person" means an individual, corporation, limited liability
        company, partnership, joint stock company, trust, unincorporated
        organization, joint venture, Governmental Authority or other entity of
        whatever nature.

<PAGE>

               "Per Share Market Value" means on any particular date (a) the
        VWAP of the Common Stock on such date on the Nasdaq or another
        registered national stock exchange on which the Common Stock is then
        listed, or if there is no such price on such date, then the VWAP on such
        exchange or quotation system on the date nearest preceding such date, or
        (b) if the Common Stock is not listed then on the Nasdaq or any other
        registered national stock exchange, the VWAP for a share of Common Stock
        in the over-the-counter market, as reported by the OTC Bulletin Board or
        in the National Quotation Bureau Incorporated or similar organization or
        agency succeeding to its functions of reporting prices) at the close of
        business on such date, or (c) if the Common Stock is not then reported
        by the OTC Bulletin Board or the National Quotation Bureau Incorporated
        (or similar organization or agency succeeding to its functions of
        reporting prices), then the average of the "Pink Sheet" quotes for the
        relevant conversion period, as determined in good faith by the holder,
        or (d) if the Common Stock is not then publicly traded the fair market
        value of a share of Common Stock as determined by an Independent
        Appraiser selected in good faith by at least ninety percent (90%) of the
        Holders; provided, however, that the Issuer, after receipt of the
        determination by such Independent Appraiser, shall have the right to
        select an additional Independent Appraiser, in which case, the fair
        market value shall be equal to the average of the determinations by each
        such Independent Appraiser; and provided, further that all
        determinations of the Per Share Market Value shall be appropriately
        adjusted for any stock dividends, stock splits or other similar
        transactions during such period. The determination of fair market value
        by an Independent Appraiser shall be based upon the fair market value of
        the Issuer determined on a going concern basis as between a willing
        buyer and a willing seller and taking into account all relevant factors
        determinative of value, and shall be final and binding on all parties.
        In determining the fair market value of any shares of Common Stock, no
        consideration shall be given to any restrictions on transfer of the
        Common Stock imposed by agreement or by federal or state securities
        laws, or to the existence or absence of, or any limitations on, voting
        rights.

               "Purchase Agreement" means the Series C Convertible Preferred
        Stock Purchase Agreement dated as of October 31, 2002 among the Issuer
        and the investors a party thereto.

               "Registration Rights Agreement" means the Registration Rights
        Agreement dated as of October 31, 2002 among the Issuer and the
        investors a party thereto.

               "Securities" means any debt or equity securities of the Issuer,
        whether now or hereafter authorized, any instrument convertible into or
        exchangeable for Securities or a Security, and any option, warrant or
        other right to purchase or acquire any Security. "Security" means one of
        the Securities.

               "Securities Act" means the Securities Act of 1933, as amended, or
        any similar federal statute then in effect.

               "Series C Preferred Stock" means the Company's Series C
        Convertible Preferred Stock issued and sold by the Company to the
        investors pursuant to the Purchase Agreement.

<PAGE>
               "Subsidiary" means any corporation at least 50% of whose
        outstanding Voting Stock shall at the time be owned directly or
        indirectly by the Issuer or by one or more of its Subsidiaries, or by
        the Issuer and one or more of its Subsidiaries.

               "Term" has the meaning specified in Section 1 hereof.

               "Trading Day" means (a) a day on which the Common Stock is traded
        on the Nasdaq, or (b) if the Common Stock is not listed on the Nasdaq, a
        day on which the Common Stock is traded on any other registered national
        stock exchange, or (c) if the Common Stock is not traded on any other
        registered national stock exchange, a day on which the Common Stock is
        traded on the OTC Bulletin Board, or (d) if the Common Stock is not
        traded on the OTC Bulletin Board, a day on which the Common Stock is
        quoted in the over-the-counter market as reported by the National
        Quotation Bureau Incorporated (or any similar organization or agency
        succeeding its functions of reporting prices); provided, however, that
        in the event that the Common Stock is not listed or quoted as set forth
        in (a), (b) and (c) hereof, then Trading Day shall mean any day except
        Saturday, Sunday and any day which shall be a legal holiday or a day on
        which banking institutions in the State of New York are authorized or
        required by law or other government action to close.

               "Voting Stock" means, as applied to the Capital Stock of any
        corporation, Capital Stock of any class or classes (however designated)
        having ordinary voting power for the election of a majority of the
        members of the Board of Directors (or other governing body) of such
        corporation, other than Capital Stock having such power only by reason
        of the happening of a contingency.

               "VWAP" means the Volume Weighted Average Price (based on a
        Trading Day from 9:30 a.m. to 4:00 p.m.) on Nasdaq as reported by
        Bloomberg Financial LP using the AQR function for a share of the Common
        Stock for such Trading Day.

               "Warrants" means the Warrants issued and sold pursuant to the
        Purchase Agreement, including, without limitation, this Warrant, and any
        other warrants of like tenor issued in substitution or exchange for any
        thereof pursuant to the provisions of Section 2(c), 2(d) or 2(e) hereof
        or of any of such other Warrants.

               "Warrant Price" means U.S. $2.20, as such price may be adjusted
        from time to time as shall result from the adjustments specified in this
        Warrant, including Section 4 hereto.

               "Warrant Share Number" means at any time the aggregate number of
        shares of Warrant Stock which may at such time be purchased upon
        exercise of this Warrant, after giving effect to all prior adjustments
        and increases to such number made or required to be made under the terms
        hereof.

               "Warrant Stock" means Common Stock issuable upon exercise of any
        Warrant or Warrants or otherwise issuable pursuant to any Warrant or
        Warrants.
<PAGE>
        10. Other Notices. In case at any time:

                             (A)    the Issuer shall make any distributions to
                                    the holders of Common Stock; or

                             (B)    the Issuer shall authorize the granting to
                                    all holders of its Common Stock of rights to
                                    subscribe for or purchase any shares of
                                    Capital Stock of any class or of any Common
                                    Stock Equivalents or other rights; or

                             (C)    there shall be any reclassification of the
                                    Capital Stock of the Issuer; or

                             (D)    there shall be any capital reorganization by
                                    the Issuer; or

                             (E)    there shall be any (i) consolidation or
                                    merger involving the Issuer or (ii) sale,
                                    transfer or other disposition of all or
                                    substantially all of the Issuer's property,
                                    assets or business (except a merger or other
                                    reorganization in which the Issuer shall be
                                    the surviving corporation and its shares of
                                    Capital Stock shall continue to be
                                    outstanding and unchanged and except a
                                    consolidation, merger, sale, transfer or
                                    other disposition involving a wholly-owned
                                    Subsidiary); or

                             (F)    there shall be a voluntary or involuntary
                                    dissolution, liquidation or winding-up of
                                    the Issuer or any partial liquidation of the
                                    Issuer or distribution to holders of Common
                                    Stock;

then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least ten (10)
days prior to the action in question and not less than ten (10) days prior to
the record date or the date on which the Issuer's transfer books are closed in
respect thereto. The Issuer shall give to the Holder notice of all meetings and
actions by written consent of its stockholders, at the same time in the same
manner as notice of any meetings of stockholders is required to be given to
stockholders who do not waive such notice (or, if such requires no notice, then
two (2) Trading Days written notice thereof describing the matters upon which
action is to be taken). The Holder shall have the right to send two (2)
representatives selected by it to each meeting, who shall be permitted to
attend, but not vote at, such meeting and any adjournments thereof. This Warrant
entitles the Holder to receive copies of all financial and other information
distributed or required to be distributed to the holders of the Common Stock.

<PAGE>
        11. Amendment and Waiver. Any term, covenant, agreement or condition in
this Warrant may be amended, or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), by a written instrument or written instruments executed by the
Issuer and at least ninety percent (90%) of the Holders; provided, however, that
no such amendment or waiver shall reduce the Warrant Share Number, increase the
Warrant Price, shorten the period during which this Warrant may be exercised or
modify any provision of this Section 11 without the consent of the Holder of
this Warrant.

        12. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.

        13. Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earlier of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice prior to 5:00 p.m., eastern time, on a
Trading Day, (ii) the Trading Day after the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile telephone number
specified for notice later than 5:00 p.m., eastern time, on any date and earlier
than 11:59 p.m., eastern time, on such date, (iii) the Trading Day following the
date of mailing, if sent by nationally recognized overnight courier service or
(iv) actual receipt by the party to whom such notice is required to be given.
The addresses for such communications shall be with respect to the Holder of
this Warrant or of Warrant Stock issued pursuant hereto, addressed to such
Holder at its last known address or facsimile number appearing on the books of
the Issuer maintained for such purposes, or with respect to the Issuer,
addressed to:

                             Computer Motion, Inc.
                             130-B Cremona Drive
                             Goleta, CA 93117
                             Attention:  Robert Duggan
                             Telecopier:  (805) 968-4920
                             Telephone:  (805) 685-3729 [x.113]

with copies (which copies shall not constitute notice to the Company) to:

                             Stradling, Yocca, Carlson & Rauth
                             302 Olive Street
                             Santa Barbara, CA 93101
                             Attention: David E. Lafitte, Esq.
                             Telecopier: (805) 564-1422
                             Telephone: (805) 564-0065

Copies of notices to the Holder shall be sent to Jenkens & Gilchrist Parker
Chapin LLP, The Chrysler Building, 405 Lexington Avenue, New York, New York
10174, Attention: Christopher S. Auguste, Esq., Telecopier no.: (212) 704-6288.
Any party hereto may from time to time

<PAGE>
change its address for notices by giving at least ten (10) days written notice
of such changed address to the other party hereto.

        14. Warrant Agent. The Issuer may, by written notice to each Holder of
this Warrant, appoint an agent having an office in New York, New York for the
purpose of issuing shares of Warrant Stock on the exercise of this Warrant
pursuant to subsection (b) of Section 2 hereof, exchanging this Warrant pursuant
to subsection (d) of Section 2 hereof or replacing this Warrant pursuant to
subsection (d) of Section 3 hereof, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.

        15. Remedies. The Issuer stipulates that the remedies at law of the
Holder of this Warrant in the event of any default or threatened default by the
Issuer in the performance of or compliance with any of the terms of this Warrant
are not and will not be adequate and that, to the fullest extent permitted by
law, such terms may be specifically enforced by a decree for the specific
performance of any agreement contained herein or by an injunction against a
violation of any of the terms hereof or otherwise.

        16. Successors and Assigns. This Warrant and the rights evidenced hereby
shall inure to the benefit of and be binding upon the successors and assigns of
the Issuer, the Holder hereof and (to the extent provided herein) the Holders of
Warrant Stock issued pursuant hereto, and shall be enforceable by any such
Holder or Holder of Warrant Stock.

        17. Modification and Severability. If, in any action before any court or
agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.

        18. Headings. The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.

                            [Signature page follows.]

<PAGE>
        IN WITNESS WHEREOF, the Issuer has executed this Series C-2 Warrant as
of the day and year first above written.

                                            COMPUTER MOTION, INC.

                                            By:
                                               ---------------------------------
                                               Name:
                                               Title:

<PAGE>
                                  EXERCISE FORM

                              COMPUTER MOTION, INC.

The undersigned _______________, pursuant to the provisions of the within Series
C-2 Warrant, hereby elects to purchase _____ shares of Common Stock of Computer
Motion, Inc. covered by the within Series C-2 Warrant.

Dated:                              Signature
      -----------------                       ----------------------------------
                                    Address
                                            ------------------------------

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

                                   ASSIGNMENT

FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation.

Dated:                              Signature
      -----------------                       ----------------------------------
                                    Address
                                            ------------------------------

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

                               PARTIAL ASSIGNMENT

FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.

Dated:                              Signature
      -----------------                       ----------------------------------
                                    Address
                                            ------------------------------

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

                                 FOR USE BY THE ISSUER ONLY:

This Warrant No. W-_____ canceled (or transferred or exchanged) this _____ day
of ___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock in
the name of _______________.<PAGE>
                                                                    Exhibit 10.1

                  SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE

                                    AGREEMENT

                          DATED AS OF OCTOBER 31, 2002

                                      AMONG

                              COMPUTER MOTION, INC.

                                       AND

                       THE PURCHASERS LISTED ON EXHIBIT A

<PAGE>
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                            PAGE
                                                                                            ----
<S>                                                                                         <C>
ARTICLE I         Purchase and Sale of Series C Convertible Preferred Stock
                  and Warrants...............................................................1

        Section 1.1   Purchase and Sale of Common Stock and Warrants.........................1
        Section 1.2   Purchase Price and Closing.............................................1
        Section 1.3   Warrants...............................................................2
        Section 1.4   Warrant Shares.........................................................2
        Section 1.5   Subsequent Sales of Series C Preferred Shares..........................2

ARTICLE II        Representations and Warranties.............................................2

        Section 2.1   Representations and Warranties of the Company..........................2
        Section 2.2   Representations and Warranties of the Purchasers......................12

ARTICLE III       Covenants.................................................................14

        Section 3.1   Securities Compliance.................................................14
        Section 3.2   Registration and Listing..............................................14
        Section 3.3   Inspection Rights.....................................................15
        Section 3.4   Compliance with Laws..................................................15
        Section 3.5   Keeping of Records and Books of Account...............................15
        Section 3.6   Reporting Requirements................................................15
        Section 3.7   Other Agreements......................................................16
        Section 3.8   Subsequent Financings; Right of First Refusal.........................16
        Section 3.9   Reservation of Shares.................................................16
        Section 3.10  Non-public Information................................................17

ARTICLE IV        Conditions................................................................18

        Section 4.1   Conditions Precedent to the Obligation of the Company to
                      Close and to Sell the Series C Preferred Stock and
                      Warrants..............................................................18
        Section 4.2   Conditions Precedent to the Obligation of the Purchasers
                      to Close and to Purchase the Series C Preferred Stock
                      and Warrants..........................................................19
        Section 4.3   Conditions Precedent to the Obligation of St. Cloud Capital to
                      Close and to Purchase the Series C Preferred Stock and Warrants.......19

ARTICLE V         Certificate Legend........................................................21

        Section 5.1   Legend................................................................21

ARTICLE VI        Termination...............................................................22
</TABLE>

<PAGE>
                               Table of Contents
                                  (continued)

<TABLE>
<CAPTION>
                                                                                            PAGE
                                                                                            ----
<S>                                                                                         <C>
        Section 6.1   Termination by Mutual Consent. This Agreement may be
                      terminated at any time prior to the Closing Date by the
                      mutual written consent of the Company and the Purchaser...............22
        Section 6.2   Effect of Termination.................................................22

ARTICLE VII       Indemnification...........................................................23

        Section 7.1   General Indemnity.....................................................23
        Section 7.2   Indemnification Procedure.............................................23

ARTICLE VIII      Miscellaneous.............................................................24

        Section 8.1   Fees and Expenses.....................................................24
        Section 8.2   Specific Enforcement; Consent to Jurisdiction.........................24
        Section 8.3   Entire Agreement; Amendment...........................................25
        Section 8.4   Notices...............................................................25
        Section 8.5   Waivers...............................................................26
        Section 8.6   Headings..............................................................26
        Section 8.7   Successors and Assigns................................................26
        Section 8.8   No Third Party Beneficiaries..........................................26
        Section 8.9   Governing Law.........................................................26
        Section 8.10  Survival..............................................................27
        Section 8.11  Counterparts..........................................................27
        Section 8.12  Publicity.............................................................27
        Section 8.13  Severability..........................................................27
        Section 8.14  Further Assurances....................................................27
</TABLE>

<PAGE>
                   SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT

        This SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this
"Agreement"), dated as of October 31, 2002, by and between Computer Motion,
Inc., a Delaware corporation (the "Company"), and the entities listed on Exhibit
A hereto (each a "Purchaser" and collectively, the "Purchasers"), for the
purchase and sale of shares of the Company's Series C Convertible Preferred
Stock, par value $.001 per share, and warrants to purchase shares of the
Company's Common Stock by the Purchasers.

        The parties hereto agree as follows:

                                    ARTICLE I

                         PURCHASE AND SALE OF SECURITIES

               Section 1.1 Purchase and Sale of Securities. Upon the following
terms and conditions, the Company shall issue and sell to the Purchasers, and
the Purchasers, severally but not jointly, shall purchase from the Company, up
to an aggregate of 8,965 shares of the Company's Series C-1 Convertible
Preferred Stock, par value $.001 per share (the "Series C-1 Preferred Shares")
and 1,785 shares of the Company's Series C-2 Convertible Preferred Stock, par
value $.001 per share (the "Series C-2 Preferred Shares" and together with the
Series C-1 Preferred Shares, the "Series C Preferred Shares") and Series C-1
Warrants and Series C-2 Warrants to purchase shares of the Company's Common
Stock, in substantially the form attached hereto as Exhibit B-1 and Exhibit B-2,
respectively (collectively, the "Warrants"), set forth with respect to such
Purchaser on Exhibit A hereto. The "Stated Value" of the Series C Preferred
Shares shall be One Thousand Four Hundred Dollars ($1,400) per share. The
Company and the Purchasers are executing and delivering this Agreement in
accordance with and in reliance upon the exemption from securities registration
afforded by Section 4(2) of the U.S. Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder (the "Securities Act"), including
Regulation D ("Regulation D"), and/or upon such other exemption from the
registration requirements of the Securities Act as may be available with respect
to any or all of the investments to be made hereunder. As set forth in the
Certificate of Designations Setting Forth the Preferences, Rights and
Limitations of the Series C Convertible Preferred Stock of the Company (the
"Certificate of Designations"), the rights, preferences and privileges of the
Series C-1 Preferred Shares and the Series C-2 Preferred Shares shall be
identical in all respects except that dividends payable on the Series C-2
Preferred Shares shall be payable only in cash.

        Section 1.2 Purchase Price and Closing. The Company agrees to issue and
sell to the Purchasers and, in consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Purchasers, severally but not jointly, agree to purchase the Series C-1
Preferred Shares and Series C-2 Preferred Shares, as the case may be, and
Warrants set forth opposite their respective names on Exhibit A for an aggregate
purchase price of up to Fifteen Million Dollars ($15,000,000) which shall be
payable in cash or the cancellation of indebtedness as set forth opposite their
respective names on Exhibit A. The closing of the purchase and sale of the
Series C Preferred Shares and Warrants to be

<PAGE>
acquired by the Purchasers from the Company under this Agreement shall take
place at the offices of Jenkens & Gilchrist Parker Chapin LLP, The Chrysler
Building, 405 Lexington Avenue, New York, New York 10174 (the "Closing") at
10:00 a.m., New York time (i) on or before October 31, 2002, provided, that all
of the conditions set forth in Article IV hereof and applicable to the Closing
shall have been fulfilled or waived in accordance herewith or (ii) at such other
time and place or on such date as the Purchasers and the Company may agree upon
(the "Closing Date").

               Section 1.3 Warrants. At the Closing, the Company shall have
issued to the Purchasers Series C-1 Warrants and Series C-2 Warrants to purchase
up to an aggregate of Four Million Two Hundred Eighty Five Thousand Seven
Hundred Fourteen (4,285,714) shares of Common Stock. The Warrants shall be
exercisable for five (5) years in accordance with their respective terms and
shall have exercise prices equal to the Warrant Price (as defined in each
Warrant).

               Section 1.4 Reservation of Shares. The Company has authorized and
has reserved and covenants to continue to reserve, free of preemptive rights and
other similar contractual rights of stockholders, a number of its authorized but
unissued shares of Common Stock equal to the aggregate number of shares of
Common Stock necessary to effect the conversion of the Series C Preferred Shares
and the exercise of the Warrants. Any shares of Common Stock issuable upon
conversion of the Series C Preferred Shares (and such shares when issued) are
herein referred to as the "Conversion Shares". Any shares of Common Stock
issuable upon exercise of the Warrants (and such shares when issued) are herein
referred to as the "Warrant Shares". The Conversion Shares and the Warrant
Shares are sometimes collectively referred to as the "Shares". The Series C
Preferred Shares, the Conversion Shares, the Warrants and the Warrant Shares are
sometimes collectively referred to herein as the "Securities".

               Section 1.5 Subsequent Sales of Series C Preferred Shares. The
closing of the sale of the Series C Preferred Shares to St. Cloud Capital in the
aggregate amount of $1,500,000 Stated Value shall be subject to satisfaction of
the condition set forth in Section 4.3 below and shall occur on or before the
Filing Date, as that term is defined in the Registration Rights Agreement.

                                   ARTICLE II

                         REPRESENTATIONS AND WARRANTIES

               Section 2.1 Representations and Warranties of the Company. In
order to induce the Purchasers to enter into this Agreement and to purchase the
Series C Preferred Shares, the Company hereby makes the following
representations and warranties to the Purchasers:

               (a) Organization, Good Standing and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has the requisite corporate power to own,
lease and operate its properties and assets and to conduct its business as it is
now being conducted. The Company does not have any Subsidiaries (as defined in
Section 2.1(g)) or own securities of any kind in any other entity except as set
forth on Schedule 2.1(g) hereto. The Company and each such Subsidiary is duly
qualified as a foreign

<PAGE>
corporation to do business and is in good standing in every jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary except for any jurisdiction(s) (alone or in the
aggregate) in which the failure to be so qualified will not have a Material
Adverse Effect. For the purposes of this Agreement, "Material Adverse Effect"
means any adverse effect on the business, operations, properties, prospects or
financial condition of the Company or its Subsidiaries and which is material to
such entity or other entities controlling or controlled by such entity or which
is likely to materially hinder the performance by the Company of its obligations
hereunder and under the other Transaction Documents (as defined in Section
2.1(b) hereof).

               (b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and perform this Agreement, the
Registration Rights Agreement and the Warrants (collectively, the "Transaction
Documents") and to issue and sell the Securities in accordance with the terms
hereof and the Warrants, as applicable. The execution, delivery and performance
of the Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly and validly authorized by all
necessary corporate action, and, except as set forth in Schedule 2.1(b), no
further consent or authorization of the Company or its Board of Directors or
stockholders is required. This Agreement has been duly executed and delivered by
the Company. The other Transaction Documents will have been duly executed and
delivered by the Company at the Closing. Each of the Transaction Documents
constitutes, or shall constitute when executed and delivered, a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, reorganization, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally the enforcement
of, creditor's rights and remedies or by other equitable principles of general
application.

               (c) Capitalization. The authorized capital stock of the Company
and the shares thereof currently issued and outstanding as of June 30, 2002 are
set forth on Schedule 2.1(c) hereto. All of the outstanding shares of the
Company's Common Stock and any other security of the Company have been duly and
validly authorized. Except as set forth in this Agreement and as set forth on
Schedule 2.1(c) hereto, no shares of Common Stock or any other security of the
Company are entitled to preemptive rights or registration rights and there are
no outstanding options, warrants, scrip, rights to subscribe to, call or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company. Furthermore,
except as set forth in this Agreement and as set forth on Schedule 2.1(c)
hereto, there are no contracts, commitments, understandings, or arrangements by
which the Company is or may become bound to issue additional shares of the
capital stock of the Company or options, securities or rights convertible into
shares of capital stock of the Company. Except for customary transfer
restrictions contained in agreements entered into by the Company in order to
sell restricted securities or as provided on Schedule 2.1(c) hereto, the Company
is not a party to or bound by any agreement or understanding granting
registration or anti-dilution rights to any person with respect to any of its
equity or debt securities. Except as set forth on Schedule 2.1(c), the Company
is not a party to, and it has no knowledge of, any agreement or understanding
restricting the voting or transfer of any shares of the capital stock of the
Company. Except as set forth on Schedule 2.1(c) hereto, the offer and sale of
all capital stock, convertible securities, rights, warrants, or options of the
Company issued prior to the Closing complied with all

<PAGE>
applicable federal and state securities laws, and no holder of such securities
has a right of rescission or claim for damages with respect thereto which could
have a Material Adverse Effect. The Company has furnished or made available to
the Purchasers true and correct copies of the Company's Certificate of
Incorporation as in effect on the date hereof (the "Certificate"), and the
Company's Bylaws as in effect on the date hereof (the "Bylaws").

               (d) Issuance of Securities. The Series C Preferred Shares and the
Warrants to be issued at the Closing have been duly authorized by all necessary
corporate action and, when paid for or issued in accordance with the terms
hereof, the Series C Preferred Shares shall be validly issued and outstanding,
free and clear of all liens, encumbrances and rights of refusal of any kind.
When the Conversion Shares are issued in accordance with the terms of this
Agreement and the Certificate of Designations and the Warrant Shares are issued
and paid for in accordance with the terms of this Agreement and as set forth in
the Warrants, such shares will be duly authorized by all necessary corporate
action and validly issued and outstanding, fully paid and nonassessable, free
and clear of all liens, encumbrances and rights of refusal of any kind and the
holders shall be entitled to all rights accorded to a holder of Common Stock.

               (e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not (i) violate any
provision of the Company's Certificate or Bylaws or any Subsidiary's comparable
charter documents, (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond,
license, lease agreement, instrument or obligation to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries' respective properties or assets are bound, (iii) create or impose
a lien, mortgage, security interest, charge or encumbrance of any nature on any
property or asset of the Company or any of its Subsidiaries under any agreement
or any commitment to which the Company or any of its Subsidiaries is a party or
by which the Company or any of its Subsidiaries is bound or by which any of
their respective properties or assets are bound, or (iv) result in a violation
of any federal, state, local or foreign statute, rule, regulation, order,
judgment or decree (including federal and state securities laws and regulations)
applicable to the Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries are bound or affected, except,
in all cases other than violations pursuant to clauses (i) or (iv) (with respect
to federal and state securities laws) above, for such conflicts, defaults,
terminations, amendments, acceleration, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect. The
business of the Company and its Subsidiaries is not being conducted in violation
of any laws, ordinances or regulations of any governmental entity, except for
possible violations which singularly or in the aggregate do not and will not
have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries
is required under federal, state, foreign or local law, rule or regulation to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under the Transaction Documents or
issue and sell the Series C Preferred Shares, the Conversion Shares, the
Warrants and the Warrant Shares in accordance with the terms hereof or thereof
(other than any filings which may be required to be made by the Company with the
Commission, the Nasdaq National Market prior to or subsequent to the Closing, or
state securities

<PAGE>
administrators subsequent to the Closing, or any registration statement which
may be filed pursuant hereto).

               (f) Commission Documents, Financial Statements. The Common Stock
of the Company is registered pursuant to Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, except as
disclosed on Schedule 2.1(f) hereto, the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the Commission pursuant to the reporting requirements of the Exchange Act,
including material filed pursuant to Section 13(a) or 15(d) of the Exchange Act
(all of the foregoing including filings incorporated by reference therein being
referred to herein as the "Commission Documents"). The Company has delivered or
made available to the Purchasers true and complete copies of the Commission
Documents filed with the Commission since June 30, 2002 The Company has not
provided to the Purchasers any material non-public information or other
information which, according to applicable law, rule or regulation, should have
been disclosed publicly by the Company but which has not been so disclosed,
other than with respect to the transactions contemplated by this Agreement. At
the time of its filing, the Form 10-Q for the fiscal quarter ended June 30, 2002
(the "Form 10-Q") complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder and other federal, state and local laws, rules and regulations
applicable to such documents, and the Form 10-Q did not contain 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. As of their
respective dates, the financial statements of the Company included in the
Commission Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission or other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the Notes thereto or (ii) in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed or summary
statements), and fairly present in all material respects the financial position
of the Company and its Subsidiaries as of the dates thereof and the results of
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).

               (g) Subsidiaries. Schedule 2.1(g) hereto sets forth each
Subsidiary of the Company, showing the jurisdiction of its incorporation or
organization and showing the percentage of each person's ownership of the
outstanding stock or other interests of such Subsidiary. For the purposes of
this Agreement, "Subsidiary" shall mean any corporation or other entity of which
at least a majority of the securities or other ownership interest having
ordinary voting power (absolutely or contingently) for the election of directors
or other persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other Subsidiaries. All of the
outstanding shares of capital stock of each Subsidiary have been duly authorized
and validly issued, and are fully paid and nonassessable. There are no
outstanding preemptive, conversion or other rights, options, warrants or
agreements granted or issued by or binding upon any Subsidiary for the purchase
or acquisition of any shares of capital stock of any Subsidiary or any other
securities convertible into, exchangeable for or evidencing the rights to
subscribe for any shares of such capital stock. Neither the Company nor any

<PAGE>
Subsidiary is subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of the capital stock of any Subsidiary
or any convertible securities, rights, warrants or options of the type described
in the preceding sentence except as set forth on Schedule 2.1(g) hereto. Neither
the Company nor any Subsidiary is party to, nor has any knowledge of, any
agreement restricting the voting or transfer of any shares of the capital stock
of any Subsidiary.

               (h) No Material Adverse Change. Since June 30, 2002, the Company
has not experienced or suffered any Material Adverse Effect, except as disclosed
on Schedule 2.1(h) hereto.

               (i) No Undisclosed Liabilities. Except as disclosed on Schedule
2.1(i) hereto, neither the Company nor any of its Subsidiaries has any
liabilities, obligations, claims or losses (whether liquidated or unliquidated,
secured or unsecured, absolute, accrued, contingent or otherwise) other than
those incurred in the ordinary course of the Company's or its Subsidiaries
respective businesses since June 30, 2002 and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect on the Company or
its Subsidiaries.

               (j) No Undisclosed Events or Circumstances. Since June 30, 2002,
except as disclosed on Schedule 2.1(j) hereto, no event or circumstance has
occurred or exists with respect to the Company or its Subsidiaries or their
respective businesses, properties, prospects, operations or financial condition,
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.

               (k) Indebtedness. Schedule 2.1(k) hereto sets forth as of the
date hereof all outstanding secured and unsecured Indebtedness of the Company or
any Subsidiary, or for which the Company or any Subsidiary has commitments. For
the purposes of this Agreement, "Indebtedness" shall mean (a) any liabilities
for borrowed money in excess of $100,000 (other than trade accounts payable
incurred in the ordinary course of business), (b) all guaranties, endorsements
and other contingent obligations in respect of Indebtedness of others, whether
or not the same are or should be reflected in the Company's balance sheet (or
the Notes thereto), except guaranties by endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary course of
business; and (c) the present value of any lease payments in excess of $100,000
due under leases required to be capitalized in accordance with GAAP. Except as
disclosed on Schedule 2.1(k), neither the Company nor any Subsidiary is in
default with respect to any Indebtedness.

               (l) Title to Assets. Each of the Company and the Subsidiaries has
good and marketable title to all of its real and personal property, free and
clear of any mortgages, pledges, charges, liens, security interests or other
encumbrances of any nature whatsoever, except for those indicated on Schedule
2.1(l) hereto or such that, individually or in the aggregate, do not have a
Material Adverse Effect. All said leases of the Company and each of its
Subsidiaries are valid and subsisting and in full force and effect.

               (m) Actions Pending. There is no action, suit, claim,
investigation, arbitration, alternate dispute resolution proceeding or other
proceeding pending or, to the knowledge of the

<PAGE>
Company, threatened against the Company or any Subsidiary which questions the
validity of this Agreement or any of the other Transaction Documents or any of
the transactions contemplated hereby or thereby or any action taken or to be
taken pursuant hereto or thereto. Except as set forth on Schedule 2.1(m) hereto,
there is no action, suit, claim, investigation, arbitration, alternate dispute
resolution proceeding or other proceeding pending or, to the knowledge of the
Company, threatened, against or involving the Company, any Subsidiary or any of
their respective properties or assets, which individually or in the aggregate,
would have a Material Adverse Effect. There are no outstanding orders,
judgments, injunctions, awards or decrees of any court, arbitrator or
governmental or regulatory body against the Company or any Subsidiary or any
officers or directors of the Company or Subsidiary in their capacities as such,
which individually or in the aggregate, would have a Material Adverse Effect.

               (n) Compliance with Law. The business of the Company and the
Subsidiaries has been and is presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances, except as set forth in the Commission Documents or on Schedule
2.1(n) hereto or such that, individually or in the aggregate, the noncompliance
therewith would not have a Material Adverse Effect. The Company and each of its
Subsidiaries have all franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it unless the failure to
possess such franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.

               (o) Taxes. Except as set forth on Schedule 2.1(o) hereto, the
Company and each of the Subsidiaries has accurately prepared and filed all
federal, state and other tax returns required by law to be filed by it, has paid
or made provisions for the payment of all taxes shown to be due and all
additional assessments, and adequate provisions have been and are reflected in
the financial statements of the Company and the Subsidiaries for all current
taxes and other charges to which the Company or any Subsidiary is subject and
which are not currently due and payable. Except as disclosed on Schedule 2.1(o)
hereto, none of the federal income tax returns of the Company or any Subsidiary
have been audited by the Internal Revenue Service. The Company has no knowledge
of any additional assessments, adjustments or contingent tax liability (whether
federal or state) of any nature whatsoever, whether pending or threatened
against the Company or any Subsidiary for any period, nor of any basis for any
such assessment, adjustment or contingency.

               (p) Certain Fees. Except as set forth on Schedule 2.1(p) hereto,
the Company has not employed any broker or finder or incurred any liability for
any brokerage or investment banking fees, commissions, finders' structuring
fees, financial advisory fees or other similar fees in connection with the
Transaction Documents.

               (q) Disclosure. To the best of the Company's knowledge, neither
this Agreement or the Schedules hereto nor any other documents, certificates or
instruments furnished to the Purchasers by or on behalf of the Company or any
Subsidiary in connection with the transactions contemplated by this Agreement
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made herein or therein, in the light
of the circumstances under which they were made herein or therein, not
misleading.

<PAGE>
               (r) Operation of Business. The Company and each of the
Subsidiaries owns or possesses all patents, trademarks, domain names (whether or
not registered) and any patentable improvements or copyrightable derivative
works thereof, websites and intellectual property rights relating thereto,
service marks, trade names, copyrights, licenses and authorizations, and all
rights with respect to the foregoing, which are necessary for the conduct of its
business as now conducted without any conflict with the rights of others.

               (s) Environmental Compliance. Except as disclosed on Schedule
2.1(s) hereto, the Company and each of its Subsidiaries have obtained all
material approvals, authorization, certificates, consents, licenses, orders and
permits or other similar authorizations of all governmental authorities, or from
any other person, that are required under any Environmental Laws. Schedule
2.1(s) hereto sets forth all material permits, licenses and other authorizations
issued under any Environmental Laws to the Company or its Subsidiaries.
"Environmental Laws" shall mean all applicable laws relating to the protection
of the environment including, without limitation, all requirements pertaining to
reporting, licensing, permitting, controlling, investigating or remediating
emissions, discharges, releases or threatened releases of hazardous substances,
chemical substances, pollutants, contaminants or toxic substances, materials or
wastes, whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in nature. Except as set
forth on Schedule 2.1(s) hereto, the Company has all necessary governmental
approvals required under all Environmental Laws and used in its business or in
the business of any of its Subsidiaries, except for such instances as would not
individually or in the aggregate have a Material Adverse Effect. The Company and
each of its Subsidiaries are also in compliance with all other limitations,
restrictions, conditions, standards, requirements, schedules and timetables
required or imposed under all Environmental Laws. Except for such instances as
would not individually or in the aggregate have a Material Adverse Effect, there
are no past or present events, conditions, circumstances, incidents, actions or
omissions relating to or in any way affecting the Company or its Subsidiaries
that violate or may violate any Environmental Law after the Closing or that may
give rise to any environmental liability, or otherwise form the basis of any
claim, action, demand, suit, proceeding, hearing, study or investigation (i)
under any Environmental Law, or (ii) based on or related to the manufacture,
processing, distribution, use, treatment, storage (including, without
limitation, underground storage tanks), disposal, transport or handling, or the
emission, discharge, release or threatened release of any hazardous substance.
"Environmental Liabilities" means all liabilities of a person (whether such
liabilities are owed by such person to governmental authorities, third parties
or otherwise) whether currently in existence or arising hereafter which arise
under or relate to any Environmental Law.

               (t) Books and Records; Internal Accounting Controls. The records
and documents of the Company and its Subsidiaries accurately reflect in all
material respects the information relating to the business of the Company and
the Subsidiaries, the location and collection of their assets, and the nature of
all transactions giving rise to the obligations or accounts receivable of the
Company or any Subsidiary. The Company and each of its Subsidiaries maintain a
system of internal accounting controls sufficient, in the judgment of the
Company's board of directors, to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded

<PAGE>
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
actions are taken with respect to any differences.

               (u) Material Agreements. Except for the Transaction Documents and
as set forth on Schedule 2.1(u) hereto, neither the Company nor any Subsidiary
is a party to any written or oral contract, instrument, agreement, commitment,
obligation, plan or arrangement, a copy of which would be required to be filed
with the Commission (collectively, "Material Agreements") if the Company or any
Subsidiary were registering securities under the Securities Act. The Company and
each of its Subsidiaries has in all material respects performed all the
obligations required to be performed by them to date under the foregoing
agreements, have received no notice of default and, to the best of the Company's
knowledge are not in default under any Material Agreement now in effect, the
result of which could cause a Material Adverse Effect. No written or oral
contract, instrument, agreement, commitment, obligation, plan or arrangement of
the Company or of any Subsidiary limits or shall limit the payment of dividends
on its Common Stock.

               (v) Transactions with Affiliates. Except as set forth on Schedule
2.1(v) hereto, there are no loans, leases, agreements, contracts, royalty
agreements, management contracts or arrangements or other continuing
transactions between (a) the Company, any Subsidiary or any of their respective
customers or suppliers on the one hand, and (b) on the other hand, any officer,
employee, consultant or director of the Company, or any of its Subsidiaries, or
any person owning any capital stock of the Company or any Subsidiary or any
member of the immediate family of such officer, employee, consultant, director
or stockholder or any corporation or other entity controlled by such officer,
employee, consultant, director or stockholder, or a member of the immediate
family of such officer, employee, consultant, director or stockholder.

               (w) Securities Act of 1933. The Company has complied and will
comply with all applicable federal and state securities laws in connection with
the offer, issuance and sale of the Series C Preferred Shares, the Conversion
Shares, the Warrants and the Warrant Shares hereunder. Neither the Company nor
anyone acting on its behalf, directly or indirectly, has or will sell, offer to
sell or solicit offers to buy any of the Securities, or similar securities to,
or solicit offers with respect thereto from, or enter into any preliminary
conversations or negotiations relating thereto with, any person, or has taken or
will take any action so as to bring the issuance and sale of any of the
Securities under the registration provisions of the Securities Act and
applicable state securities laws. Neither the Company nor any of its affiliates,
nor any person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) in connection with the offer or sale of any of the
Securities.

               (x) Governmental Approvals. Except as set forth on Schedule
2.1(x) hereto, and except for the filing of any notice prior or subsequent to
the Closing that may be required under applicable state and/or federal
securities laws (which if required, shall be filed on a timely basis), no
authorization, consent, approval, license, exemption of, filing or registration
with any

<PAGE>
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary for, or in
connection with, the execution or delivery of the Series C Preferred Shares and
the Warrants, or for the performance by the Company of its obligations under the
Transaction Documents.

               (y) Employees. Neither the Company nor any Subsidiary has any
collective bargaining arrangements or agreements covering any of its employees.
Except as set forth in the Commission Documents or on Schedule 2.1(y) hereto,
neither the Company nor any Subsidiary has any employment contract, agreement
regarding proprietary information, non-competition agreement, non-solicitation
agreement, confidentiality agreement, or any other similar contract or
restrictive covenant, relating to the right of any officer, employee or
consultant to be employed or engaged by the Company or such Subsidiary. Since
June 30, 2002, no officer, consultant or key employee of the Company or any
Subsidiary whose termination, either individually or in the aggregate, could
have a Material Adverse Effect, has terminated or, to the knowledge of the
Company, has any present intention of terminating his or her employment or
engagement with the Company or any Subsidiary.

               (z) Absence of Certain Developments. Except as set forth in the
Commission Documents or on Schedule 2.1(z) hereto, since June 30, 2002, neither
the Company nor any Subsidiary has:

                      (i) issued any stock, bonds or other corporate securities
or any rights, options or warrants with respect thereto;

                      (ii) borrowed any amount or incurred or become subject to
any liabilities (absolute or contingent) except current liabilities incurred in
the ordinary course of business which are comparable in nature and amount to the
current liabilities incurred in the ordinary course of business during the
comparable portion of its prior fiscal year, as adjusted to reflect the current
nature and volume of the Company's or such Subsidiary's business;

                      (iii) discharged or satisfied any lien or encumbrance or
paid any obligation or liability (absolute or contingent), other than current
liabilities paid in the ordinary course of business;

                      (iv) declared or made any payment or distribution of cash
or other property to stockholders with respect to its stock, or purchased or
redeemed, or made any agreements so to purchase or redeem, any shares of its
capital stock;

                      (v) sold, assigned or transferred any other tangible
assets, or canceled any debts or claims, except in the ordinary course of
business;

                      (vi) sold, assigned or transferred any patent rights,
trademarks, trade names, copyrights, trade secrets or other intangible assets or
intellectual property rights, or disclosed any proprietary confidential
information to any person except in the ordinary course of business or to the
Purchasers or its representatives;

<PAGE>
                      (vii) suffered any substantial losses or waived any rights
of material value, whether or not in the ordinary course of business, or
suffered the loss of any material amount of prospective business;

                      (viii) made any changes in employee compensation except in
the ordinary course of business and consistent with past practices;

                      (ix) made capital expenditures or commitments therefor
that aggregate in excess of $25,000;

                      (x) entered into any other transaction other than in the
ordinary course of business, or entered into any other material transaction,
whether or not in the ordinary course of business;

                      (xi) made charitable contributions or pledges in excess of
$25,000;

                      (xii) suffered any material damage, destruction or
casualty loss, whether or not covered by insurance;

                      (xiii) experienced any material problems with labor or
management in connection with the terms and conditions of their employment;

                      (xiv) effected any two or more events of the foregoing
kind which in the aggregate would cause a Material Adverse Effect; or

                      (xv) entered into an agreement, written or otherwise, to
take any of the foregoing actions.

               (aa) Use of Proceeds. Except as set forth on Schedule 2.1(aa),
the proceeds from the sale of the Series C Preferred Shares and the Warrant
Shares will be used by the Company for working capital purposes and, except as
set forth on Schedule 2.1(aa), shall not be used to repay any outstanding
Indebtedness or any loans to officers, directors, affiliates or insiders of the
Company.

               (bb) Public Utility Holding Company Act and Investment Company
Act Status. The Company is not a "holding company" or a "public utility company"
as such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.

               (cc) ERISA. No liability to the Pension Benefit Guaranty
Corporation has been incurred with respect to any Plan by the Company or any of
its Subsidiaries which is or would cause a Material Adverse Effect. The
execution and delivery of this Agreement and the issue and sale of the Series C
Preferred Shares and the Warrant Shares will not involve any transaction which
is subject to the prohibitions of Section 406 of ERISA or in connection with

<PAGE>
which a tax could be imposed pursuant to Section 4975 of the Internal Revenue
Code of 1986, as amended, provided that, if any Purchaser, or any person or
entity that owns a beneficial interest in any Purchaser, is an "employee pension
benefit plan" (within the meaning of Section 3(2) of ERISA) with respect to
which the Company is a "party in interest" (within the meaning of Section 3(14)
of ERISA), the requirements of Sections 407(d)(5) and 408(e) of ERISA, if
applicable, are met. As used in this Section 2.1(cc), the term "Plan" shall mean
an "employee pension benefit plan" (as defined in Section 3 of ERISA) which is
or has been established or maintained, or to which contributions are or have
been made, by the Company or any Subsidiary or by any trade or business, whether
or not incorporated, which, together with the Company or any Subsidiary, is
under common control, as described in Section 414(b) or (c) of the Code.

               (dd) Dilutive Effect. The Company understands and acknowledges
that the number of Conversion Shares issuable upon conversion of the Series C
Preferred Shares and the Warrant Shares issuable upon exercise of the Warrants
will increase in certain circumstances. The Company further acknowledges that
its obligation to issue Conversion Shares upon conversion of the Series C
Preferred Shares in accordance with this Agreement and the Certificate of
Designations and its obligations to issue the Warrant Shares upon exercise of
the Warrants in accordance with this Agreement and the Warrants, is, in each
case, absolute and unconditional regardless of the dilutive effect that such
issuance may have on the ownership interest of other stockholders of the
Company.

               (ee) Delisting Notification. The Company has not received a
delisting notification from The Nasdaq National Market.

               Section 2.2 Representations and Warranties of the Purchasers.
Each of the Purchasers, severally but not jointly, hereby makes the following
representations and warranties to the Company with respect solely to itself and
not with respect to any other Purchaser:

               (a) Organization and Standing of the Purchasers. If the Purchaser
is an entity, such Purchaser is a corporation, limited liability company or
partnership duly incorporated or organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization.

               (b) Authorization and Power. Each Purchaser has the requisite
power and authority to enter into and perform the Transaction Documents and to
purchase the Series C Preferred Shares and Warrants being sold to it hereunder.
The execution, delivery and performance of the Transaction Documents by each
Purchaser and the consummation by it of the transactions contemplated hereby
have been duly authorized by all necessary corporate or partnership action, and
no further consent or authorization of such Purchaser or its Board of Directors,
stockholders, or partners, as the case may be, is required. This Agreement has
been duly authorized, executed and delivered by each Purchaser. The other
Transaction Documents constitute, or shall constitute when executed and
delivered, a valid and binding obligations of each Purchaser enforceable against
such Purchaser in accordance with their terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor's rights and remedies or by
other equitable principles of general application.

<PAGE>
               (c) Acquisition for Investment. Each Purchaser is purchasing the
Series C Preferred Shares and acquiring the Warrants solely for its own account
for the purpose of investment and not with a view to or for sale in connection
with distribution. Each Purchaser does not have a present intention to sell any
of the Securities, nor a present arrangement (whether or not legally binding) or
intention to effect any distribution of any of the Securities to or through any
person or entity; provided, however, that by making the representations herein
and subject to Section 2.2(e) below, each Purchaser does not agree to hold any
of the Securities for any minimum or other specific term and reserves the right
to dispose of any of the Securities at any time in accordance with federal and
state securities laws applicable to such disposition. Each Purchaser
acknowledges that it (i) has such knowledge and experience in financial and
business matters such that Purchaser is capable of evaluating the merits and
risks of Purchaser's investment in the Company and is (ii) able to bear the
financial risks associated with an investment in the Securities and (iii) that
it has been given full access to such records of the Company and the
Subsidiaries and to the officers of the Company and the Subsidiaries as it has
deemed necessary or appropriate to conduct its due diligence investigation.

               (d) Rule 144. Each Purchaser understands that the Securities must
be held indefinitely unless such Securities are registered under the Securities
Act or an exemption from registration is available. Each Purchaser acknowledges
that such person is familiar with Rule 144 of the rules and regulations of the
Commission, as amended, promulgated pursuant to the Securities Act ("Rule 144"),
and that such Purchaser has been advised that Rule 144 permits resales only
under certain circumstances. Each Purchaser understands that to the extent that
Rule 144 is not available, such Purchaser will be unable to sell any Securities
without either registration under the Securities Act or the existence of another
exemption from such registration requirement.

               (e) General. Each Purchaser understands that the Securities are
being offered and sold in reliance on a transactional exemption from the
registration requirements of federal and state securities laws and the Company
is relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of such Purchaser set forth
herein in order to determine the applicability of such exemptions and the
suitability of such Purchaser to acquire the Securities. Each Purchaser
understands that no United States federal or state agency or any government or
governmental agency has passed upon or made any recommendation or endorsement of
the Securities.

               (f) Opportunities for Additional Information. Each Purchaser
acknowledges that such Purchaser has had the opportunity to ask questions of and
receive answers from, or obtain additional information from, the executive
officers of the Company concerning the financial and other affairs of the
Company, and to the extent deemed necessary in light of such Purchaser's
personal knowledge of the Company's affairs, such Purchaser has asked such
questions and received answers to the full satisfaction of such Purchaser, and
such Purchaser desires to invest in the Company.

               (g) No General Solicitation. Each Purchaser acknowledges that the
Securities were not offered to such Purchaser by means of any form of general or
public solicitation or general advertising, or publicly disseminated
advertisements or sales literature, including (i) any advertisement, article,
notice or other communication published in any newspaper, magazine, or

<PAGE>
similar media, or broadcast over television or radio, or (ii) any seminar or
meeting to which such Purchaser was invited by any of the foregoing means of
communications.

               (h) Accredited Investor. Each Purchaser is an accredited investor
(as defined in Rule 501 of Regulation D), and such Purchaser has such experience
in business and financial matters that it is capable of evaluating the merits
and risks of an investment in the Securities. Each Purchaser acknowledges that
an investment in the Securities is speculative and involves a high degree of
risk.

               (i) Limitations on Short Sales. The Purchasers agree that neither
they, nor any of their respective affiliates (or any other third party acting on
the instructions of the Purchasers or their respective affiliates), have entered
into any Short Sales (as hereinafter defined) following the receipt of any
information or documents related to the sale of the Series C Preferred Shares
contemplated herein. For purposes of this Section 2.2(i), a "Short Sale" by a
Purchaser shall mean a sale of Common Stock by a Purchaser that is marked as a
short sale and that is made at a time when there is no equivalent offsetting
long position in Common Stock held by such Purchaser.

                                   ARTICLE III

                                    COVENANTS

        The Company covenants with each Purchaser as follows, which covenants
are for the benefit of each Purchaser and their respective permitted assignees.

               Section 3.1 Securities Compliance.

               (a) The Company shall notify the Commission in accordance with
their rules and regulations, of the transactions contemplated by any of the
Transaction Documents and shall take all other necessary action and proceedings
as may be required and permitted by applicable law, rule and regulation, for the
legal and valid issuance of the Securities to the Purchasers, or their
respective subsequent holders.

               (b) Unless waived by a Purchaser by means of providing sixty-one
(61) days notice to the Company, the Company covenants and agrees that the
number of Conversion Shares issuable upon conversion of the Series C Preferred
Shares and the number of Warrant Shares issuable upon any exercise of the
Warrants by a Purchaser shall not exceed the number of such shares that, when
aggregated with all other shares of Common Stock then owned by a Purchaser
beneficially or deemed beneficially owned by a Purchaser, would result in a
Purchaser owning more than 4.99% of all of such Common Stock as would be
outstanding on such date of conversion or such date of exercise of the Warrants,
as determined in accordance with Section 16 of the Exchange Act and the
regulations promulgated thereunder.

               Section 3.2 Registration and Listing. The Company will cause its
Common Stock to continue to be registered under Sections 12(b) or 12(g) of the
Exchange Act, will comply in all respects with its reporting and filing
obligations under the Exchange Act, will comply with all requirements related to
any registration statement filed pursuant to this

<PAGE>
Agreement, and will not take any action or file any document (whether or not
permitted by the Securities Act or the rules promulgated thereunder) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under the Exchange Act or Securities Act, except as
permitted herein. The Company shall use its best efforts to continue the listing
or trading of its Common Stock on the Nasdaq National Market or any successor
market. The Company will promptly file the "Listing Application" for, or in
connection with, the issuance and delivery of the Conversion Shares and the
Warrant Shares.

               Section 3.3 Inspection Rights. In the event the Registration
Statement (as defined in the Registration Rights Agreement) is not effective or
has been suspended, the Company shall permit, during normal business hours and
upon reasonable request and reasonable notice, a Purchaser or any employees,
agents or representatives thereof, so long as a Purchaser shall beneficially own
the Series C Preferred Shares, or shall own Warrants to purchase Warrant Shares
which, in the aggregate, represent more than two percent (2%) of the total
combined voting power of all voting securities then outstanding, to examine and
make reasonable copies of and extracts from the records and books of account of,
and visit and inspect, during the term of the Warrants, the properties, assets,
operations and business of the Company and any Subsidiary, and to discuss the
affairs, finances and accounts of the Company and any Subsidiary with any of its
officers, consultants, directors, and key employees.

               Section 3.4 Compliance with Laws. The Company shall comply, and
cause each Subsidiary to comply, with all applicable laws, rules, regulations
and orders, noncompliance with which could have a Material Adverse Effect.

               Section 3.5 Keeping of Records and Books of Account. The Company
shall keep and cause each Subsidiary to keep adequate records and books of
account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Company and
its Subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.

               Section 3.6 Reporting Requirements. If the Company ceases to file
its periodic reports with the Commission, or if the Commission ceases making
these periodic reports available via the Internet without charge, then the
Company shall furnish the following to each Purchaser so long as such Purchaser
shall be obligated hereunder to purchase the Series C Preferred Shares or shall
beneficially own any Securities which, in the aggregate, represent more than one
percent (1%) of the total combined voting power of all voting securities then
outstanding:

               (a) Quarterly Reports filed with the Commission on Form 10-QSB as
soon as available, and in any event within forty-five (45) days after the end of
each of the first three fiscal quarters of the Company;

               (b) Annual Reports filed with the Commission on Form 10-KSB as
soon as available, and in any event within ninety (90) days after the end of
each fiscal year of the Company; and

<PAGE>
               (c) Copies of all notices and information, including without
limitation notices and proxy statements in connection with any meetings, that
are provided to holders of shares of Common Stock, contemporaneously with the
delivery of such notices or information to such holders of Common Stock.

               Section 3.7 Other Agreements. The Company shall not enter into
any agreement in which the terms of such agreement would restrict or impair the
right or ability to perform of the Company or any Subsidiary under any
Transaction Document.

               Section 3.8 Subsequent Financings; Right of Exchange. Commencing
on the Closing Date and ending on the date that all of the Series C Preferred
Shares are no longer outstanding, if the Company enters into any offering (a
"New Financing") of its equity securities or of securities convertible into
equity securities ("New Securities"), then the Purchasers in their sole
discretion may exchange the Series C Preferred Shares, at face value plus all
accrued and unpaid dividends thereon, for the New Securities issued or to be
issued in the New Financing. The Company covenants and agrees to promptly notify
in writing the Purchasers of the terms and conditions of any such proposed New
Financing.

               Section 3.9 Distributions. So long as any Series C Preferred
Shares or Warrants remain outstanding, the Company agrees that it shall not (i)
declare or pay any dividends or make any distributions to any holder(s) of
Common Stock or (ii) purchase or otherwise acquire for value, directly or
indirectly, any Common Stock or other equity security of the Company.

               Section 3.10 Status of Dividends. The Company covenants and
agrees that (i) no Federal income tax return or claim for refund of Federal
income tax or other submission to the Internal Revenue Service (the "Service")
will adversely affect the Series C Preferred Shares, any other series of its
Preferred Stock, or the Common Stock, and any deduction shall not operate to
jeopardize the availability to Purchasers of the dividends received deduction
provided by Section 243(a)(1) of the Code or any successor provision, (ii) in no
report to shareholders or to any governmental body having jurisdiction over the
Company or otherwise will it treat the Series C Preferred Shares other than as
equity capital or the dividends paid thereon other than as dividends paid on
equity capital unless required to do so by a governmental body having
jurisdiction over the accounts of the Company or by a change in generally
accepted accounting principles required as a result of action by an
authoritative accounting standards setting body, and (iii) other than pursuant
to this Agreement or the Certificate of Designations, it will take no action
which would result in the dividends paid by the Company on the Series C
Preferred Shares out of the Company's current or accumulated earnings and
profits being ineligible for the dividends received deduction provided by
Section 243(a)(1) of the Code. The preceding sentence shall not be deemed to
prevent the Company from designating the Series C Preferred Stock as
"Convertible Preferred Stock" in its annual and quarterly financial statements
in accordance with its prior practice concerning other series of preferred stock
of the Company. Notwithstanding the foregoing, the Company shall not be required
to restate or modify its tax returns for periods prior to the Closing Date. In
the event that the Purchasers have reasonable cause to believe that dividends
paid by the Company on the Series C Preferred Shares out of the Company's
current or accumulated earnings and profits will not be treated as eligible for
the dividends received deduction provided by Section 243(a)(1) of the Code, or
any successor

<PAGE>
provision, the Company will, at the reasonable request of the Purchasers of 51%
of the outstanding Series C Preferred Shares, join with the Purchasers in the
submission to the Service of a request for a ruling that dividends paid on the
Shares will be so eligible for Federal income tax purposes, at the Purchasers
expense. In addition, the Company will reasonably cooperate with the Purchasers
(at Purchasers' expense) in any litigation, appeal or other proceeding
challenging or contesting any ruling, technical advice, finding or determination
that earnings and profits are not eligible for the dividends received deduction
provided by Section 243(a)(1) of the Code, or any successor provision to the
extent that the position to be taken in any such litigation, appeal, or other
proceeding is not contrary to any provision of the Code or incurred in
connection with any such submission, litigation, appeal or other proceeding.
Notwithstanding the foregoing, nothing herein contained shall be deemed to
preclude the Company from claiming a deduction with respect to such dividends if
(i) the Code shall hereafter be amended, or final Treasury regulations
thereunder are issued or modified, to provide that dividends on the Series C
Preferred Shares or Conversion Shares should not be treated as dividends for
Federal income tax purposes or that a deduction with respect to all or a portion
of the dividends on the Shares is allowable for Federal income tax purposes, or
(ii) in the absence of such an amendment, issuance or modification and after a
submission of a request for ruling or technical advice, the service shall rule
or advise that dividends on the shares should not be treated as dividends for
Federal income tax purposes. If the Service determines that the Series C
Preferred Shares or Conversion Shares constitute debt, the Company may file
protective claims for refund.

               Section 3.11 Reservation of Shares. So long as the Series C
Preferred Shares and the Warrants remain outstanding, the Company shall take all
action necessary to at all times have authorized, and reserved for the purpose
of issuance, the maximum number of shares of Common Stock to effect the
conversion of the Series C Preferred Shares and the exercise of the Warrants.

               Section 3.12 Non-public Information. Neither the Company nor any
of its officers or agents shall disclose any material non-public information
about the Company to the Purchasers and neither the Purchasers nor any of their
affiliates, officers or agents will solicit any material non-public information
from the Company.

               Section 3.13 Stockholder Approval. Within twenty (20) days
following the Closing, the Company shall solicit by proxy stockholder approval
to authorize (i) the issuance to the Purchasers of shares of Common Stock which
the Purchasers could acquire upon conversion of the Preferred Shares in
accordance with the terms thereof, which maximum amount is in excess of 20% of
the currently outstanding shares of Common Stock of the Company and (ii) the
purchase by Robert W. Duggan of up to an aggregate of four million dollars
($4,000,000) Stated Value of Series C Preferred Shares. If stockholder approval
is not obtained within ninety (90) days following the Closing, each Purchaser
shall have the option to redeem one-half (1/2) of its Series C Preferred Shares
originally purchased at a redemption price of one hundred fifteen percent (115%)
of the face value of such Series C Preferred Shares plus accrued and unpaid
dividends and upon payment in full, the Purchasers shall surrender certificates
representing such redeemed Series C Preferred Shares for cancellation.

               Section 3.14 Transfer Agent Instructions. The Company shall issue
irrevocable instructions to its transfer agent, and any subsequent transfer
agent, to issue certificates,

<PAGE>
registered in the name of each Purchaser or its respective nominee(s), for the
Conversion Shares and the Warrant Shares in such amounts as specified from time
to time by each Purchaser to the Company upon conversion of the Series C
Preferred Shares or exercise of the Warrants in the form of Exhibit E attached
hereto (the "Irrevocable Transfer Agent Instructions"). Prior to registration of
the Conversion Shares and the Warrant Shares under the Securities Act, all such
certificates shall bear the restrictive legend specified in Section 5.1 of this
Agreement. The Company warrants that no instruction other than the Irrevocable
Transfer Agent Instructions referred to in this Section 3.15 will be given by
the Company to its transfer agent and that the Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Registration Rights Agreement. Nothing in
this Section 3.15 shall affect in any way each Purchaser's obligations and
agreements set forth in Section 5.1 to comply with all applicable prospectus
delivery requirements, if any, upon resale of the Shares. If a Purchaser
provides the Company with an opinion of counsel, in a generally acceptable form,
to the effect that a public sale, assignment or transfer of the Shares may be
made without registration under the Securities Act or the Purchaser provides the
Company with reasonable assurances that the Shares can be sold pursuant to Rule
144 without any restriction as to the number of securities acquired as of a
particular date that can then be immediately sold, the Company shall permit the
transfer, and, in the case of the Conversion Shares and the Warrant Shares,
promptly instruct its transfer agent to issue one or more certificates in such
name and in such denominations as specified by such Purchaser and without any
restrictive legend. The Company acknowledges that a breach by it of its
obligations under this Section 3.15 will cause irreparable harm to the
Purchasers by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 3.15 will be inadequate and agrees,
in the event of a breach or threatened breach by the Company of the provisions
of this Section 3.15, that the Purchasers shall be entitled, in addition to all
other available remedies, to an order and/or injunction restraining any breach
and requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.

                                   ARTICLE IV

                                   CONDITIONS

               Section 4.1 Conditions Precedent to the Obligation of the Company
to Close and to Sell the Series C Preferred Shares and Warrants. The obligation
hereunder of the Company to close and issue and sell the Series C Preferred
Shares and the Warrants to the Purchasers at the Closing Date is subject to the
satisfaction or waiver, at or before the Closing of the conditions set forth
below. These conditions are for the Company's sole benefit and may be waived by
the Company at any time in its sole discretion.

               (a) Accuracy of the Purchasers' Representations and Warranties.
The representations and warranties of each Purchaser shall be true and correct
in all material respects as of the date when made and as of the Closing Date as
though made at that time, except for representations and warranties that are
expressly made as of a particular date, which shall be true and correct in all
material respects as of such date.

<PAGE>
               (b) Performance by the Purchasers. Each Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Purchasers at or prior to the Closing Date.

               (c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.

               (d) Delivery of Purchase Price. The Purchase Price for the Series
C Preferred Shares and Warrants has been delivered to the Company at the Closing
Date.

               (e) Delivery of Transaction Documents. The Transaction Documents
have been duly executed and delivered by the Purchasers to the Company.

               Section 4.2 Conditions Precedent to the Obligation of the
Purchasers to Close and to Purchase the Series C Preferred Shares and Warrants.
The obligation hereunder of the Purchasers to purchase the Series C Preferred
Shares and Warrants and consummate the transactions contemplated by this
Agreement is subject to the satisfaction or waiver, at or before the Closing
Date, of each of the conditions set forth below. These conditions are for the
Purchasers' sole benefit and may be waived by the Purchasers at any time in
their sole discretion.

               (a) Accuracy of the Company's Representations and Warranties.
Each of the representations and warranties of the Company in this Agreement and
the Registration Rights Agreement shall be true and correct in all material
respects as of the Closing Date, except for representations and warranties that
speak as of a particular date, which shall be true and correct in all material
respects as of such date.

               (b) Performance by the Company. The Company shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing Date.

               (c) No Suspension, Etc. Trading in the Company's Common Stock
shall not have been suspended by the Commission (except for any suspension of
trading of limited duration agreed to by the Company, which suspension shall be
terminated prior to the Closing), and, at any time prior to the Closing Date,
trading in securities generally as reported by Bloomberg Financial Markets
("Bloomberg") shall not have been suspended or limited, or minimum prices shall
not have been established on securities whose trades are reported by Bloomberg,
or on the New York Stock Exchange, nor shall a banking moratorium have been
declared either by the United States or New York State authorities, nor shall
there have occurred any national or international calamity or crisis of such
magnitude in its effect on any financial market which, in each case, in the
reasonable judgment of the Purchasers, makes it impracticable or inadvisable to
purchase the Series C Preferred Shares.

               (d) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or

<PAGE>
governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement.

               (e) No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company or any Subsidiary, or any of the officers, directors or
affiliates of the Company or any Subsidiary seeking to restrain, prevent or
change the transactions contemplated by this Agreement, or seeking damages in
connection with such transactions.

               (f) Opinion of Counsel, Etc. The Purchasers shall have received
an opinion of counsel to the Company, dated the date of such Closing, in
substantially the form of Exhibit F hereto and such other certificates and
documents as the Purchasers or their counsel shall reasonably require incident
to the Closing.

               (g) Certificate of Designations. Prior to the Closing Date, the
Certificate of Designations in the form set forth on Exhibit C attached hereto
shall have been filed with the Secretary of State of Delaware.

               (h) Series C Preferred Shares and Warrants. The Company shall
have delivered to the Purchasers the originally executed certificates
representing the Series C Preferred Shares (in such denominations as each
Purchaser may request) and originally executed Warrants (in such denominations
as each Purchaser may request) being acquired by the Purchasers at the Closing.

               (i) Resolutions. The Board of Directors of the Company shall have
adopted resolutions consistent with Section 2.1(b) hereof in a form reasonably
acceptable to the Purchasers (the "Resolutions").

               (j) Reservation of Shares. As of the Closing Date, the Company
shall have reserved out of its authorized and unissued Common Stock, solely for
the purpose of effecting the conversion of the Series C Preferred Shares and the
exercise of the Warrants, a number of shares of Common Stock equal to at least
100% of the aggregate number of Conversion Shares issuable upon conversion of
the Series C Preferred Shares and the number of Warrant Shares issuable upon
exercise of the number of Warrants assuming all such Preferred Shares and
Warrants were fully convertible or exercisable on such date regardless of any
limitation on the timing or amount of such conversions or exercises.

               (k) Transfer Agent Instructions. The Irrevocable Transfer Agent
Instructions, in the form of Exhibit E attached hereto, shall have been
delivered to and acknowledged in writing by the Company's transfer agent.

               (l) Secretary's Certificate. The Company shall have delivered to
the Purchasers a secretary's certificate, dated as of the Closing Date, as to
(i) the Resolutions, (ii) the Certificate, (iii) the Bylaws, each as in effect
at the Closing, and (iv) the authority and incumbency of the officers of the
Company executing the Transaction Documents and any other documents required to
be executed or delivered in connection therewith.

<PAGE>
               (m) Officer's Certificate. On the Closing Date, the Company shall
have delivered to the Purchasers a certificate of an executive officer of the
Company, dated as of the Closing Date, confirming the accuracy of the Company's
representations, warranties and covenants as of each Closing Date and confirming
the compliance by the Company with the conditions precedent set forth in this
Section 4.2 as of the Closing Date.

               (n) Fees and Expenses. As of each Closing Date, all fees and
expenses required to be paid by the Company shall have been or authorized to be
paid by the Company as of the Closing Date.

               (o) Registration Rights Agreement. As of the Closing Date, the
parties shall have entered into the Registration Rights Agreement in the Form of
Exhibit D attached hereto.

               (p) Material Adverse Effect. No Material Adverse Effect shall
have occurred.

               (q) Robert W. Duggan Purchase. Subject only to the receipt of
stockholder approval described in Section 3.13 above, Robert W. Duggan, Chief
Executive Officer of the Company (or his affiliates or designees), shall have
agreed to purchase at least two million dollars ($2,000,000) Stated Value of
Series C Preferred Shares, one million dollars ($1,000,000) of which may be paid
by the cancellation of outstanding indebtedness of one million dollars
($1,000,000) that is currently due and payable from the Company to Mr. Duggan.

               Section 4.3 Condition Precedent to the Obligation of St. Cloud
Capital to Close and to Purchase the Series C Preferred Shares and Warrants. The
obligation hereunder of St. Cloud Capital to purchase the Series C Preferred
Shares and Warrants and consummate the transactions contemplated by this
Agreement is subject to its receipt from the United States Small Business
Administration of $1,500,000, the proceeds of which shall be used to acquire and
pay for its portion of the Series C Preferred Shares and Warrants.

                                    ARTICLE V

                               CERTIFICATE LEGEND

               Section 5.1 Legend. Each certificate representing the Series C
Preferred Shares, the Conversion Shares, the Warrants and the Warrant Shares
shall be stamped or otherwise imprinted with a legend substantially in the
following form (in addition to any legend required by applicable state
securities or "blue sky" laws):

        THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE
        NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
        "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
        TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE
        SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR COMPUTER
        MOTION, INC. SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT
        REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
        PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

<PAGE>

        The Company agrees to reissue certificates representing any of the
Securities, without the legend set forth above if at such time, prior to making
any transfer of any such Securities, such holder thereof shall give written
notice to the Company describing the manner and terms of such transfer and
removal as the Company may reasonably request. Such proposed transfer will not
be effected until: (a) the Company has notified such holder that either (i) in
the opinion of Company counsel, the registration of the Series C Preferred
Shares, the Conversion Shares, Warrants or Warrant Shares under the Securities
Act is not required in connection with such proposed transfer; or (ii) a
registration statement under the Securities Act covering such proposed
disposition has been filed by the Company with the Commission and has become
effective under the Securities Act; and (b) the Company has notified such holder
that either: (i) in the opinion of Company counsel, the registration or
qualification under the securities or "blue sky" laws of any state is not
required in connection with such proposed disposition, or (ii) compliance with
applicable state securities or "blue sky" laws has been effected. The Company
will use its best efforts to respond to any such notice from a holder within
five (5) days. In the case of any proposed transfer under this Section 5, the
Company will use reasonable efforts to comply with any such applicable state
securities or "blue sky" laws, but shall in no event be required, in connection
therewith, to qualify to do business in any state where it is not then qualified
or to take any action that would subject it to tax or to the general service of
process in any state where it is not then subject. The restrictions on transfer
contained in Section 5.1 shall be in addition to, and not by way of limitation
of, any other restrictions on transfer contained in any other section of this
Agreement.

                                   ARTICLE VI

                                   TERMINATION

               Section 6.1 Termination by Mutual Consent. This Agreement may be
terminated at any time prior to the Closing Date by the mutual written consent
of the Company and the Purchasers.

               Section 6.2 Effect of Termination. In the event of termination by
the Company or the Purchasers, written notice thereof shall forthwith be given
to the other party and the transactions contemplated by this Agreement shall be
terminated without further action by either party. If this Agreement is
terminated as provided in Section 6.1 herein, this Agreement shall become void
and of no further force and effect, except for Sections 8.1 and 8.2, and Article
VII herein. Nothing in this Section 6.2 shall be deemed to release the Company
or any Purchaser from any liability for any breach under this Agreement, or to
impair the rights of the Company and such Purchaser to compel specific
performance by the other party of its obligations under this Agreement.
<PAGE>
                                   ARTICLE VII

                                 INDEMNIFICATION

               Section 7.1 General Indemnity. The Company agrees to indemnify
and hold harmless each Purchaser (and its respective directors, officers,
affiliates, agents, successors and assigns) from and against any and all losses,
liabilities, deficiencies, costs, damages and expenses (including, without
limitation, reasonable attorneys' fees, charges and disbursements) incurred by
each Purchaser as a result of any inaccuracy in or breach of the
representations, warranties or covenants made by the Company herein. The
Purchasers severally but not jointly agree to indemnify and hold harmless the
Company and its directors, officers, affiliates, agents, successors and assigns
from and against any and all losses, liabilities, deficiencies, costs, damages
and expenses (including, without limitation, reasonable attorneys' fees, charges
and disbursements) incurred by the Company as result of any inaccuracy in or
breach of the representations, warranties or covenants made by the Purchasers
herein.

               Section 7.2 Indemnification Procedure. Any party entitled to
indemnification under this Article VII (an "indemnified party") will give
written notice to the indemnifying party of any matters giving rise to a claim
for indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article VII except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought against an
indemnified party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of the indemnified party a conflict of interest between it
and the indemnifying party may exist with respect to such action, proceeding or
claim, to assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. In the event that the indemnifying party advises an
indemnified party that it will contest such a claim for indemnification
hereunder, or fails, within thirty (30) days of receipt of any indemnification
notice to notify, in writing, such person of its election to defend, settle or
compromise, at its sole cost and expense, any action, proceeding or claim (or
discontinues its defense at any time after it commences such defense), then the
indemnified party may, at its option, defend, settle or otherwise compromise or
pay such action or claim. In any event, unless and until the indemnifying party
elects in writing to assume and does so assume the defense of any such claim,
proceeding or action, the indemnified party's costs and expenses arising out of
the defense, settlement or compromise of any such action, claim or proceeding
shall be losses subject to indemnification hereunder. The indemnified party
shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party and
shall furnish to the indemnifying party all information reasonably available to
the indemnified party which relates to such action or claim. The indemnifying
party shall keep the indemnified party fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. If
the indemnifying party elects to defend any such action or claim, then the
indemnified party shall be entitled to participate in such defense with counsel
of its choice at its sole cost and expense. The indemnifying party shall not be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent. Notwithstanding anything in this Article VII to the
contrary, the indemnifying party shall not, without the indemnified party's
prior written consent, settle or compromise any claim or consent

<PAGE>
to entry of any judgment in respect thereof which imposes any future obligation
on the indemnified party or which does not include, as an unconditional term
thereof, the giving by the claimant or the plaintiff to the indemnified party of
a release from all liability in respect of such claim. The indemnification
required by this Article VII shall be made by periodic payments of the amount
thereof during the course of investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred, so long as the
indemnified party irrevocably agrees to refund such moneys if it is ultimately
determined by a court of competent jurisdiction that such party was not entitled
to indemnification. The indemnity agreements contained herein shall be in
addition to (a) any cause of action or similar rights of the indemnified party
against the indemnifying party or others, and (b) any liabilities the
indemnifying party may be subject to pursuant to the law.

                                  ARTICLE VIII

                                  MISCELLANEOUS

               Section 8.1 Fees and Expenses. Each party shall pay the fees and
expenses of its advisors, counsel, accountants and other experts, if any, and
all other expenses, incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement, provided,
however, that the Company shall pay such fees and expenses set forth on Schedule
2.1(p) hereto, including all reasonable attorneys' fees and expenses (exclusive
of disbursements and out-of-pocket expenses) incurred by the Purchasers in
connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Transaction Documents and the transactions contemplated
thereunder up to $50,000. In addition, the Company shall pay all reasonable fees
and expenses incurred by the Purchasers in connection with any amendments,
modifications or waivers of this Agreement or any of the other Transaction
Documents or incurred in connection with the enforcement of this Agreement and
any of the other Transaction Documents, including, without limitation, all
reasonable attorneys' fees, disbursements and expenses.

               Section 8.2 Specific Enforcement; Consent to Jurisdiction.

               (a) The Company and the Purchasers acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement or the other Transaction Documents were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement or the other Transaction
Documents and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.

               (b) The Company and each Purchaser (i) hereby irrevocably submit
to the exclusive jurisdiction of the United States District Court sitting in the
Southern District of New York and the courts of the State of New York located in
New York county for the purposes of any suit, action or proceeding arising out
of or relating to this Agreement or any of the other Transaction Documents or
the transactions contemplated hereby or thereby and (ii) hereby waive, and agree
not to assert in any such suit, action or proceeding, any claim that it is not

<PAGE>
personally subject to the jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. The Company and each Purchaser consent to
process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this Section 8.2 shall affect
or limit any right to serve process in any other manner permitted by law. The
Company and the Purchasers hereby agree that the prevailing party in any suit,
action or proceeding arising out of or relating to the Series C Preferred
Shares, this Agreement, the Registration Rights Agreement or the Warrants, shall
be entitled to reimbursement for reasonable legal fees from the non-prevailing
party.

               Section 8.3 Entire Agreement; Amendment. This Agreement and the
Transaction Documents contain the entire understanding and agreement of the
parties with respect to the matters covered hereby and, except as specifically
set forth herein or in the other Transaction Documents, neither the Company nor
any Purchaser make any representation, warranty, covenant or undertaking with
respect to such matters, and they supersede all prior understandings and
agreements with respect to said subject matter, all of which are merged herein.
No provision of this Agreement may be waived or amended other than by a written
instrument signed by the Company and the holders of at least ninety percent
(90%) of the then-outstanding Series C Preferred Shares (excluding the Series C
Preferred Shares beneficially owned by Robert W. Duggan), and no provision
hereof may be waived other than by a written instrument signed by the party
against whom enforcement of any such amendment or waiver is sought. No such
amendment shall be effective to the extent that it applies to less than all of
the holders of the Series C Preferred Shares then outstanding. No consideration
shall be offered or paid to any person to amend or consent to a waiver or
modification of any provision of any of the Transaction Documents unless the
same consideration is also offered to all of the parties to the Transaction
Documents or holders of Series C Preferred Shares, as the case may be.

               Section 8.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery by telecopy or facsimile at the
address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second
business day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications shall be:

If to the Company:           Computer Motion, Inc.
                             130-B Cremona Drive
                             Goleta, CA 93117
                             Attention:  Robert Duggan
                             Telecopier:  (805) 968-4920
                             Telephone:  (805) 685-3729 [x.113]
<PAGE>
with copies (which copies
shall not constitute notice
to the Company) to:          Stradling, Yocca, Carlson & Rauth
                             302 Olive Street
                             Santa Barbara, CA 93101
                             Attention: David E. Lafitte, Esq.
                             Telecopier: (805) 564-1044
                             Telephone: (805) 564-0065

If to any Purchaser:         At the address of such Purchaser
                             set forth on Exhibit A to this Agreement.

with copies to:              Christopher S. Auguste, Esq.
                             Jenkens & Gilchrist Parker Chapin LLP
                             The Chrysler Building
                             405 Lexington Ave.
                             New York, New York  10174
                             Telecopier: (212) 704-6288
                             Telephone: (212) 704-6000

        Any party hereto may from time to time change its address for notices by
giving at least ten (10) days written notice of such changed address to the
other party hereto.

               Section 8.5 Waivers. No waiver by either party of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.

               Section 8.6 Headings. The article, section and subsection
headings in this Agreement are for convenience only and shall not constitute a
part of this Agreement for any other purpose and shall not be deemed to limit or
affect any of the provisions hereof.

               Section 8.7 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
assigns. After the Closing, the assignment by a party to this Agreement of any
rights hereunder shall not affect the obligations of such party under this
Agreement. The Purchasers may assign the Series C Preferred Shares, the Warrants
and its rights under this Agreement and the other Transaction Documents and any
other rights hereto and thereto without the consent of the Company.

               Section 8.8 No Third Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.

               Section 8.9 Governing Law. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of New York,
without giving effect to

<PAGE>
the choice of law provisions. This Agreement shall not be interpreted or
construed with any presumption against the party causing this Agreement to be
drafted.

               Section 8.10 Survival. The representations and warranties of the
Company and the Purchasers contained in Sections 2.1(o) and 2.1(s) should
survive indefinitely and those contained in Article II, with the exception of
Sections 2.1(o) and 2.1(s), shall survive the execution and delivery hereof and
the Closing until the date three (3) years from the Closing Date, and the
agreements and covenants set forth in Articles I, III, V, VII and VIII of this
Agreement shall survive the execution and delivery hereof and the Closing
hereunder.

               Section 8.11 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and shall become effective when counterparts have been signed by
each party and delivered to the other parties hereto, it being understood that
all parties need not sign the same counterpart.

               Section 8.12 Publicity. The Company agrees that it will not
disclose, and will not include in any public announcement, the names of the
Purchasers without the consent of the Purchasers in accordance with Section 8.3,
which consent shall not be unreasonably withheld or delayed, or unless and until
such disclosure is required by law, rule or applicable regulation, and then only
to the extent of such requirement.

               Section 8.13 Severability. The provisions of this Agreement are
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.

               Section 8.14 Further Assurances. From and after the date of this
Agreement, upon the request of the Purchasers or the Company, the Company and
each Purchaser shall execute and deliver such instruments, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement, the Warrants
and the Registration Rights Agreement.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

<PAGE>
        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the date first above
written.

                                            COMPUTER MOTION, INC.

                                            By:
                                               ---------------------------------
                                               Name:
                                               Title:

                                            [NAME OF PURCHASER]

                                            By:
                                               ---------------------------------
                                               Name:
                                               Title:

<PAGE>
                                EXHIBIT A TO THE
             SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
                            FOR COMPUTER MOTION, INC.

                                LIST OF INVESTORS

<PAGE>
                               EXHIBIT B-1 TO THE
             SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
                            FOR COMPUTER MOTION, INC.

                           FORM OF SERIES C-1 WARRANT

<PAGE>
                               EXHIBIT B-2 TO THE
             SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
                            FOR COMPUTER MOTION, INC.

                           FORM OF SERIES C-2 WARRANT

<PAGE>
                                EXHIBIT C TO THE
             SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
                            FOR COMPUTER MOTION, INC.

                       FORM OF CERTIFICATE OF DESIGNATION

<PAGE>
                                EXHIBIT D TO THE
             SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
                            FOR COMPUTER MOTION, INC.

                      FORM OF REGISTRATION RIGHTS AGREEMENT
<PAGE>
                                EXHIBIT E TO THE
           SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
                              COMPUTER MOTION, INC.

                 FORM OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS

                              COMPUTER MOTION, INC.

                                                         as of October __, 2002

[Name and address of Transfer Agent]
Attn:  _____________

LADIES AND GENTLEMEN:

        Reference is made to that certain Series C Convertible Preferred Stock
Purchase Agreement, dated as of October __, 2002, by and among Computer Motion,
Inc., a Delaware corporation (the "COMPANY"), and the purchasers named therein
(collectively, the "PURCHASERS") pursuant to which the Company is issuing to the
Purchasers shares of its Series C Convertible Preferred Stock, par value $.001
per share, (the "PREFERRED SHARES") and warrants (the "WARRANTS") to purchase
shares of the Company's common stock, par value $.001 per share (the "COMMON
STOCK") Warrants in connection with the sale and issuance of Preferred Shares
and Warrants to the Purchasers. This letter shall serve as our irrevocable
authorization and direction to you (provided that you are the transfer agent of
the Company at such time) to issue shares of Common Stock upon conversion of the
Preferred Shares (the "CONVERSION SHARES") and exercise of the Warrants (the
"WARRANT SHARES") to or upon the order of a Purchaser from time to time upon (i)
surrender to you of a properly completed and duly executed Conversion Notice or
Exercise Notice, as the case may be, in the form attached hereto as Exhibit I
and Exhibit II, respectively, (ii) in the case of the conversion of Preferred
Shares, a copy of the certificates (with the original certificates delivered to
the Company) representing Preferred Shares being converted or, in the case of
Warrants being exercised, a copy of the Warrants (with the original Warrants
delivered to the Company) being exercised (or, in each case, an indemnification
undertaking with respect to such share certificates or the warrants in the case
of their loss, theft or destruction), and (iii) delivery of a treasury order or
other appropriate order duly executed by a duly authorized officer of the
Company. So long as you have previously received (x) written confirmation from
counsel to the Company that a registration statement covering resales of the
Conversion Shares or Warrant Shares, as applicable, has been declared effective
by the Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 ACT"), and no subsequent notice by the Company or
its counsel of the suspension or termination of its effectiveness and (y) a copy
of such registration statement, and if the Purchaser represents in writing that
the Conversion Shares or the Warrant Shares, as the case may be, were sold
pursuant to the Registration Statement, then certificates representing the
Conversion Shares and the Warrant Shares, as the case may be, shall not bear any
legend restricting transfer of the Conversion Shares and the Warrant Shares, as
the case may be, thereby and should not be subject to any stop-transfer
restriction. Provided, however, that if you have not previously received (i)
written confirmation from counsel to the Company that a registration statement
covering resales of the Conversion Shares or Warrant Shares, as applicable, has
been declared effective by the SEC under the 1933 Act, and (ii) a copy of such
registration statement, then the certificates for the Conversion Shares and the
Warrant Shares shall bear the following legend:

<PAGE>
                     "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
              BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
              SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE
              SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER
              THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS, OR
              COMPUTER MOTION, INC. SHALL HAVE RECEIVED AN OPINION OF ITS
              COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES
              ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS
              IS NOT REQUIRED."

and, provided further, that the Company may from time to time notify you to
place stop-transfer restrictions on the certificates for the Conversion Shares
and the Warrant Shares in the event a registration statement covering the
Conversion Shares and the Warrant Shares is subject to amendment for events then
current.

        A form of written confirmation from counsel to the Company that a
registration statement covering resales of the Conversion Shares and the Warrant
Shares has been declared effective by the SEC under the 1933 Act is attached
hereto as Exhibit III.

        Please be advised that the Purchasers are relying upon this letter as an
inducement to enter into the Securities Purchase Agreement and, accordingly,
each Purchaser is a third party beneficiary to these instructions.

        Please execute this letter in the space indicated to acknowledge your
agreement to act in accordance with these instructions. Should you have any
questions concerning this matter, please contact me at ___________.

                                       Very truly yours,

                                       COMPUTER MOTION, INC.

                                       By:
                                          --------------------------------------
                                            Name:
                                                 -------------------------------
                                            Title:
                                                  ------------------------------

ACKNOWLEDGED AND AGREED:

[TRANSFER AGENT]

By:
      --------------------------
Name:
      --------------------------
Title:
      --------------------------
Date:
      ------------
<PAGE>
                                    EXHIBIT I

                              COMPUTER MOTION, INC.
                                CONVERSION NOTICE

Reference is made to the Certificate of Designation of the Relative Rights and
Preferences of the Series C Preferred Stock of Computer Motion, Inc. (the
"Certificate of Designation"). In accordance with and pursuant to the
Certificate of Designation, the undersigned hereby elects to convert the number
of shares of Series C Preferred Stock, par value $.001 per share (the "Preferred
Shares"), of Computer Motion, Inc., a Delaware corporation (the "Company"),
indicated below into shares of Common Stock, par value $.001 per share (the
"Common Stock"), of the Company, by tendering the stock certificate(s)
representing the share(s) of Preferred Shares specified below as of the date
specified below.

        Date of Conversion:
                            ----------------------------------------------------

        Number of Preferred Shares to be converted:
                                                   -------------

        Stock certificate no(s). of Preferred Shares to be converted:
                                                                     -----------

        The Common Stock have been sold pursuant to the Registration Statement
(as defined in the Registration Rights Agreement): YES       NO
                                                      -----    ------
Please confirm the following information:

        Conversion Price:
                                                       -------------------------
        Number of shares of Common Stock to be issued:
                                                       -------------------------

Please issue the Common Stock into which the Preferred Shares are being
converted and, if applicable, any check drawn on an account of the Company in
the following name and to the following address:

        Issue to:
                                                       -------------------------

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

        Facsimile Number:
                                                       -------------------------

        Authorization:
                                                       -------------------------

                                                   By:
                                                      --------------------------
                                                   Title:
                                                         -----------------------
        Dated:

                                 PRICES ATTACHED
<PAGE>
                                   EXHIBIT II
                              COMPUTER MOTION, INC.
                             FORM OF EXERCISE NOTICE

                                  EXERCISE FORM

                              COMPUTER MOTION, INC.

The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of Computer
Motion, Inc. covered by the within Warrant.

Dated:                              Signature
      -----------------                       ----------------------------------
                                    Address
                                            ------------------------------

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

                                   ASSIGNMENT

FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation.

Dated:                              Signature
      -----------------                       ----------------------------------
                                    Address
                                            ------------------------------

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

                               PARTIAL ASSIGNMENT

FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.

Dated:                              Signature
      -----------------                       ----------------------------------
                                    Address
                                            ------------------------------

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

                                 FOR USE BY THE ISSUER ONLY:

This Warrant No. W-_____ canceled (or transferred or exchanged) this _____ day
of ___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock in
the name of _______________.
<PAGE>
                                   EXHIBIT III

                         FORM OF NOTICE OF EFFECTIVENESS
                            OF REGISTRATION STATEMENT

[Name and address of Company's transfer agent]

               Re:    COMPUTER MOTION, INC.

Ladies and Gentlemen:

        We are counsel to Computer Motion, Inc., a Delaware corporation (the
"COMPANY"), and have represented the Company in connection with that certain
Debenture and Warrant Purchase Agreement (the "PURCHASE AGREEMENT"), dated as of
August __, 2002, by and among the Company and the purchasers named therein
(collectively, the "PURCHASERS") pursuant to which the Company issued to the
Purchasers Debentures (the "DEBENTURES") and warrants (the "WARRANTS") to
purchase shares of the Company's common stock, par value $.001 per share (the
"COMMON STOCK"). Pursuant to the Purchase Agreement, the Company has also
entered into a Registration Rights Agreement with the Purchasers (the
"REGISTRATION RIGHTS AGREEMENT"), dated as of August __, 2002, pursuant to which
the Company agreed, among other things, to register the Registrable Securities
(as defined in the Registration Rights Agreement), including the shares of
Common Stock issuable upon exercise of the Warrants, under the Securities Act of
1933, as amended (the "1933 ACT"). In connection with the Company's obligations
under the Registration Rights Agreement, on ________________, 2002, the Company
filed a Registration Statement on Form S-3 (File No. 333-________) (the
"REGISTRATION STATEMENT") with the Securities and Exchange Commission (the
"SEC") relating to the resale of the Registrable Securities which names the
Purchasers as selling stockholders thereunder.

        In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and accordingly, the
Registrable Securities are available for resale under the 1933 Act pursuant to
the Registration Statement.

                                                   Very truly yours,

                                                   [COMPANY COUNSEL]

                                                   By:
                                                      --------------------------

cc:     [LIST NAME OF PURCHASERS]

<PAGE>
                                EXHIBIT F TO THE
             SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
                            FOR COMPUTER MOTION, INC.

                                 FORM OF OPINION

1. The Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and has the requisite corporate
power to own, lease and operate its properties and assets, and to carry on its
business as presently conducted. The Company is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which the failure to so qualify would have a Material Adverse Effect.

2. The Company has the requisite corporate power and authority to enter into and
perform its obligations under the Transaction Documents and to issue the Series
C Preferred Shares, the Conversion Shares, the Warrants and the Warrant Shares.
The execution, delivery and performance of each of the Transaction Documents by
the Company and the consummation by it of the transactions contemplated thereby
have been duly and validly authorized by all necessary corporate action and no
further consent or authorization of the Company or its Board of Directors is
required. Each of the Transaction Documents have been duly executed and
delivered, and the Series C Preferred Shares and the Warrants have been duly
executed, issued and delivered by the Company and each of the Transaction
Documents constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its respective terms. The
Series C Preferred Shares, the Conversion Shares and the Warrant Shares are not
subject to any preemptive rights under the Certificate of Incorporation or the
Bylaws.

3. The Series C Preferred Shares have been duly authorized and, when delivered
against payment in full as provided in the Purchase Agreement, will be validly
issued, fully paid and nonassessable. The Conversion Shares, have been duly
authorized and reserved for issuance, and, when delivered upon exercise as
provided in the Certificate of Designations, will be validly issued, fully paid
and nonassessable. The Warrant Shares, have been duly authorized and reserved
for issuance, and, when delivered upon exercise or against payment in full as
provided in the Warrants, will be validly issued, fully paid and nonassessable.

4. The execution, delivery and performance of and compliance with the terms of
the Transaction Documents and the issuance of the Series C Preferred Shares, the
Conversion Shares, the Warrants and the Warrant Shares do not (a) violate any
provision of the Certificate of Incorporation or Bylaws, (b) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Company is a party and which is known to us, (c) create
or impose a lien, charge or encumbrance on any property of the Company under any
agreement or any commitment known to us to which the Company is a party or by
which the Company is bound or by which any of its respective properties or
assets are bound, or (d) result in a violation of any Federal, state, local or
foreign statute, rule, regulation, order, judgment, injunction or decree
(including Federal and state

<PAGE>
securities laws and regulations) applicable to the Company or by which any
property or asset of the Company is bound or affected, except, in all cases
other than violations pursuant to clauses (a) and (d) above, for such conflicts,
default, terminations, amendments, acceleration, cancellations and violations as
would not, individually or in the aggregate, have a Material Adverse Effect.

5. No consent, approval or authorization of or designation, declaration or
filing with any governmental authority on the part of the Company is required
under Federal, state or local law, rule or regulation in connection with the
valid execution, delivery and performance of the Transaction Documents, or the
offer, sale or issuance of the Series C Preferred Shares, the Conversion Shares,
the Warrants or the Warrant Shares other than filings as may be required by
applicable Federal and state securities laws and regulations and the Nasdaq
rules and regulations.

6. To our knowledge, there is no action, suit, claim, investigation or
proceeding pending or threatened against the Company which questions the
validity of the Agreement or the transactions contemplated thereby or any action
taken or to be taken pursuant thereto. There is no action, suit, claim,
investigation or proceeding pending, or to our knowledge, threatened, against or
involving the Company or any of its properties or assets and which, if adversely
determined, is reasonably likely to result in a Material Adverse Effect. There
are no outstanding orders, judgments, injunctions, awards or decrees of any
court, arbitrator or governmental or regulatory body against the Company or any
officers or directors of the Company in their capacities as such.

7. The offer, issuance and sale of the Series C Preferred Shares and the
Warrants, the offer and issuance of the Conversion Shares pursuant to the
Agreement and the offer, issuance and sale of the Warrant Shares pursuant to the
Agreement and the Warrants, as applicable, are exempt from the registration
requirements of the Securities Act of 1933, as amended.

8. The Company is not, and as a result of and immediately upon Closing will not
be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.

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