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                                                                     EXHIBIT 4.6

                         SECURITIES PURCHASE AGREEMENT

      This Securities Purchase Agreement (this "Agreement") is made and entered
into as of April 5, 2002, among Hyseq, Inc., a Nevada corporation (the
"Company"), and the investors signatory hereto (each a "Purchaser" and
collectively the "Purchasers").

      WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"), and Rule 506 promulgated thereunder, the Company desires to
issue and sell to the Purchasers, and the Purchasers, severally and not jointly,
desire to purchase from the Company, certain securities of the Company, as more
fully described in this Agreement.

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

                                   ARTICLE I.
                                   DEFINITIONS

      1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms have the meanings indicated in this Article I:

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

            "Closing" means the closing of the purchase and sale of the
Securities pursuant to Section 2.1.

            "Closing Date" means the date of the Closing.

            "Commission" means the Securities and Exchange Commission.

            "Common Stock" means the common stock of the Company, par value
$.001 per share, or such securities into which such stock shall hereafter be
classified.

            "Common Stock Equivalents" means any rights, warrants, options,
convertible securities, exchangeable securities or other securities or debt of
any kind that may be at any time convertible into, exchangeable for or otherwise
give the holder thereof the right to receive shares of Common Stock.

            "Company Counsel" means Latham & Watkins.

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

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

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

            "Per Unit Purchase Price" means $4.20.

            "Purchaser Counsel" means Robinson Silverman Pearce Aronsohn &
Berman LLP, 1290 Avenue of the Americas, New York, New York 10104.

            "Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company and the
Purchasers, in the form of Exhibit B.

            "Required Effectiveness Date" means the date on which an Underlying
Shares Registration Statement is required to become effective pursuant to the
Registration Rights Agreement.

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

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

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

            "Selling Securityholder Notice and Questionnaire" means the
questionnaire in the form of Exhibit E.

            "Shares" means the shares of Common Stock, which are being purchased
by and issued to the Purchasers at the Closing pursuant to this Agreement.

            "Strategic Transaction" means a transaction or relationship in which
the Company issues shares of Common Stock or Common Stock Equivalents to a
Person which is, itself or through its subsidiaries, an operating company in a
business synergistic with the business of the Company and in which the Company
receives material benefits in addition to the investment of or lending of funds,
but shall not include a transaction in which the Company is issuing securities
primarily for the purpose of raising capital or to a Person whose primary
business is investing in securities.

            "Subsidiary" means any subsidiary of the Company that is required to
be listed in Schedule 3.1(a).

            "Trading Day" means (a) any day on which the Common Stock is traded
on its primary Trading Market, or (b) if the Common Stock is not then listed or
quoted on any national

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securities exchange, market or trading or quotation facility, then a day on
which trading occurs on The New York Stock Exchange (or any successor thereto).

            "Trading Market" means the Nasdaq National Market or any national
securities exchange, market or trading or quotation facility on which the Common
Stock is then listed or quoted.

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

            "Transfer Agent Instructions" means instructions to the Company's
transfer agent, in the form of Exhibit C.

            "Underlying Shares Registration Statement" means a registration
statement meeting the requirements set forth in the Registration Rights
Agreement and covering the resale of the Securities by the Purchasers or their
assignees.

            "Unit" means a Share and a Warrant to acquire Warrant Shares.

            "Warrant" means each Common Stock purchase warrant, in the form of
Exhibit A issued to a Purchaser at the Closing.

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

                                   ARTICLE II.
                                PURCHASE AND SALE

      2.1. Closing. Subject to the terms and conditions set forth in this
Agreement, at the Closing, the Company shall issue and sell to the Purchasers,
and the Purchasers shall, severally and not jointly, purchase from the Company,
the Shares and the Warrants for an aggregate purchase price set forth below each
of the Purchaser's name on the signature pages to this Agreement and at the Per
Unit Purchase Price. The Closing shall take place at the offices of Purchaser
Counsel immediately following satisfaction or waiver of the conditions set forth
in Article V of this Agreement or at such other location or time as the parties
may agree.

      2.2. Closing Deliveries.

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

                  (i) a stock certificate evidencing a number of Shares equal to
the quotient obtained by dividing (x) the purchase price indicated below such
Purchaser's name on the signature page to this Agreement by (y) the Per Unit
Purchase Price, registered in the name of such Purchaser;

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                  (ii) a Warrant, registered in the name of such Purchaser,
pursuant to which such Purchaser shall have the right to acquire on the terms
set forth therein a number of Warrant Shares equal to one quarter the number of
Shares issuable to such Purchaser in accordance with Section 2.2(a)(i);

                  (iii) the legal opinion of Company Counsel, in the form of
Exhibit D, addressed to the Purchasers;

                  (iv) a Registration Rights Agreement duly executed by the
Company; and

                  (v) Transfer Agent Instructions duly executed by the Company
and delivered to and countersigned by the Company's transfer agent.

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

                  (i) the purchase price indicated below such Purchaser's name
on the signature page of this Agreement, in United States dollars and in
immediately available funds, by wire transfer to an account designated in
writing by the Company for such purpose;

                  (ii) a Registration Rights Agreement duly executed by such
Purchaser; and

                  (iii) a Selling Securityholder Notice and Questionnaire.

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

      3.1 Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to the Purchasers as of the
date hereof:

            (a) Subsidiaries. The Company has no subsidiaries other than those
listed in Schedule 3.1(a). Except as disclosed in Schedule 3.1(a), the Company
owns all of the capital stock of each Subsidiary free and clear of any lien,
charge, security interest, encumbrance, right of first refusal or other
restriction (collectively, "Liens"), and all the issued and outstanding shares
of capital stock of each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights. If the Company has no
subsidiaries, then references in the Transaction Documents to the Subsidiaries
will be disregarded.

            (b) Organization and Qualification. Each of the Company and the
Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither the Company nor any Subsidiary is in violation
of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each

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jurisdiction in which the nature of the business conducted or property owned by
it makes such qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, could not, individually or in
the aggregate, reasonably be expected to (i) adversely affect the legality,
validity or enforceability of any Transaction Document, (ii) have or result in a
material adverse effect on the results of operations, assets, prospects,
business or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) adversely impair the Company's ability
to perform fully on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a "Material Adverse Effect").

            (c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary corporate action
on the part of the Company and no further corporate action is required by the
Company. Each of the Transaction Documents has been (or upon delivery will be)
duly executed by the Company and, when delivered in accordance with the terms
hereof, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.

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

            (e) Filings, Consents and Approvals. Except for the consent required
pursuant to Section 4.6 of that certain Securities Purchase Agreement, dated as
of August 28, 2001, among the Company and the purchasers party thereto (the
"August Transaction Consent"), neither the Company nor any Subsidiary is
required to obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in connection with
the execution, delivery and performance by the Company of the Transaction
Documents (including the obtaining of any approval of stockholders pursuant to
NASD Rule 4350(i)(1)(D)), other than (i) the filings required under Section 4.7,
(ii) the filing with the Commission of the Underlying

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Shares Registration Statement, (iii) the application(s) to each Trading Market
for the listing of the Securities for trading thereon in the time and manner
required thereby and (iv) filings under any state blue sky laws (collectively,
the "Required Approvals"),

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

            (g) Capitalization. The number of shares and type of all authorized,
issued and outstanding capital stock of the Company is set forth in Schedule
3.1(g). No securities of the Company are entitled to preemptive or similar
rights, and no Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as a result of the purchase
and sale of the Securities and except as disclosed in Schedule 3.1(g), there are
no outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
Except as disclosed in Schedule 3.1(g), the issue and sale of the Securities
will not obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Purchasers) and will not result in a
right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under such securities.

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

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statements, to normal, immaterial, year-end audit adjustments. All material
agreements to which the Company or any Subsidiary is a party or to which the
property or assets of the Company or any Subsidiary are subject have been filed
as exhibits to the SEC Reports as required under the Exchange Act.

            (i) Material Changes. Except as disclosed in the SEC Reports, since
December 31, 2001, (i) there has been no event, occurrence or development that
has had or that could reasonably be expected to result in a Material Adverse
Effect, (ii) the Company has not incurred any liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B) liabilities
not required to be reflected in the Company's financial statements pursuant to
GAAP or required to be disclosed in filings made with the Commission, (iii) the
Company has not altered its method of accounting or the identity of its
auditors, (iv) the Company has not declared or made any dividend or distribution
of cash or other property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock, and (v) the
Company has not issued any equity securities to any officer, director or
Affiliate, except pursuant to existing Company stock option plans.

            (j) Litigation. Except as disclosed in the SEC Reports, since
December 31, 2001, there has been no action, suit, inquiry, notice of violation,
proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an "Action") which (i) adversely affects or challenges
the legality, validity or enforceability of any of the Transaction Documents or
the Securities or (ii) could, if there were an unfavorable decision,
individually or in the aggregate, have or result in a Material Adverse Effect.
Neither the Company nor any Subsidiary, nor any director or officer thereof, is
or has been the subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of breach of
fiduciary duty. There has not been, and to the knowledge of the Company, there
is not pending or contemplated, any investigation by the Commission involving
the Company or any current or former director or officer of the Company. The SEC
has not issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the Exchange
Act or the Securities Act.

            (k) Labor Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company.

            (l) Compliance. Neither the Company nor any Subsidiary (i) is in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, could reasonably be expected
to result in a default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in default under
or that it is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it or any of
its properties is bound (whether or not such default or violation has been
waived), (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is or has been in violation of any statute, rule or
regulation of any governmental authority, including without limitation all
foreign, federal, state and local laws relating to taxes, environmental
protection, occupational health and safety,

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product quality and safety and employment and labor matters, except in each case
as could not, individually or in the aggregate, reasonably be expected to have
or result in a Material Adverse Effect.

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

            (n) Title to Assets. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them that is
material to the business of the Company and the Subsidiaries and good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries. Any real property and
facilities held under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and, to the Company's knowledge, enforceable leases of
which the Company and the Subsidiaries are in compliance.

            (o) Patents and Trademarks. The Company and the Subsidiaries have,
or have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in connection with their
respective businesses as described in the SEC Reports and the failure of which
to so have could reasonably be expected to have a Material Adverse Effect
(collectively, the "Intellectual Property Rights"). Except as disclosed in the
SEC Reports, since December 31, 2001, neither the Company nor any Subsidiary has
received a written notice that the Intellectual Property Rights used by the
Company or any Subsidiary violates or infringes upon the rights of any Person.
To the knowledge of the Company and except as disclosed in the SEC Reports, all
such Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights.

            (p) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are reasonable and customary in the businesses in which
the Company and the Subsidiaries are engaged. Neither the Company nor any
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business without a significant increase in cost.

            (q) Transactions With Affiliates and Employees. Except as set forth
in SEC Reports or on Schedule 3.1(q), none of the officers or directors of the
Company and, to the knowledge of the Company, none of the employees of the
Company is presently a party to any transaction with the Company or any
Subsidiary (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the

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furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.

            (r) Internal Accounting Controls. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
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 action
is taken with respect to any differences.

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

            (t) Certain Fees. Except as specified in Schedule 3.1(t), no
brokerage or finder's fees or commissions are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement. The Company agrees that the Purchasers shall
have no obligation with respect to any fees or with respect to any claims made
by or on behalf of any Person for fees of the type contemplated by this Section
with respect to the transactions contemplated by this Agreement.

            (u) Private Placement. Assuming the accuracy of the Purchasers
representations, warranties and agreements set forth in Section 3.2(b)-(g), no
registration under the Securities Act is required for the offer and sale of
Common Stock by the Company to the Purchasers as contemplated hereby. Neither
the Company nor any of its Affiliates nor any person acting on the Company's
behalf has, directly or indirectly, at any time within the past six months, made
any offer or sale of any security or solicitation of any offer to buy any
security under circumstances that would eliminate the availability of the
exemption from registration under Regulation D under the Securities Act in
connection with the offer and sale of the Securities as contemplated hereby.

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            (v) Form S-3 Eligibility. The Company is eligible to register the
resale of its Common Stock by the Purchasers under Form S-3 promulgated under
the Securities Act.

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

            (x) Registration Rights. Except as described in Schedule 3.1(x), the
Company has not granted or agreed to grant to any Person any rights (including
"piggy-back" registration rights) to have any securities of the Company
registered with the Commission or any other governmental authority that have not
been satisfied.

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

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

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

            (a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The purchase by such Purchaser of the Securities
hereunder has been duly authorized by all necessary action on the part of such
Purchaser. Each of this Agreement

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and the Registration Rights Agreement has been duly executed by such Purchaser,
and when delivered by such Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms.

            (b) Investment Intent. Such Purchaser is acquiring the Securities as
principal for its own account for investment purposes only and not with a view
to or for distributing or reselling such Securities or any part thereof, without
prejudice, however, to such Purchaser's right, subject to the provisions of this
Agreement and the Registration Rights Agreement, at all times to sell or
otherwise dispose of all or any part of such Securities pursuant to an effective
registration statement under the Securities Act or under an exemption from such
registration and in compliance with applicable federal and state securities
laws. Nothing contained herein shall be deemed a representation or warranty by
such Purchaser to hold Securities for any period of time. Such Purchaser is
acquiring the Securities hereunder in the ordinary course of its business. Such
Purchaser does not have any agreement or understanding, directly or indirectly,
with any Person to distribute any of the Securities.

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

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

            (e) Access to Information. Such Purchaser acknowledges that it has
reviewed the Disclosure Materials and has been afforded (i) the opportunity to
ask such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Subsidiaries
and their respective financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information that
the Company possesses or can acquire without unreasonable effort or expense that
is necessary to make an informed investment decision with respect to the
investment. Neither such inquiries nor any other investigation conducted by or
on behalf of such Purchaser or its representatives or counsel shall modify,
amend or affect such Purchaser's right to rely on the truth, accuracy and
completeness of the Disclosure Materials and the Company's representations and
warranties contained in the Transaction Documents.

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

                                       11
<PAGE>

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

            (h) No Advice. Such Purchaser understands that nothing in this
Agreement or any other materials presented by the Company to such Purchaser in
connection with the purchase and sale of the Securities constitutes legal, tax
or investment advice. Such Purchaser has consulted such legal, tax and
investment advisors as it, in its sole discretion, has deemed necessary or
appropriate in connection with its purchase of Securities.

            (i) Selling Securityholder Questionnaire. Such Purchaser has
supplied all requested information in the signature pages hereto and the Selling
Securityholder Notice and Questionnaire and such information is true and correct
as of the date hereof and will be true and correct as of the Effective Date.

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

                                   ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

      4.1. Transfer Restrictions.

            (a) Securities may only be disposed of pursuant to an effective
registration statement under the Securities Act, to the Company or pursuant to
an available exemption from or in a transaction not subject to the registration
requirements of the Securities Act, and in compliance with any applicable state
securities laws. In connection with any transfer of Securities other than
pursuant to an effective registration statement or to the Company, except as
otherwise set forth herein, the Company may require the transferor thereof to
provide to the Company an opinion of counsel selected by the transferor, the
form and substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require registration of such
transferred Securities under the Securities Act. Notwithstanding the foregoing,
the Company hereby consents to and agrees to register on the books of the
Company and with any transfer agent for the securities of the Company, without
any such legal opinion, any transfer of Securities by a Purchaser to an
Affiliate of such Purchaser that is exempt from the registration requirements
under the Securities Act, provided that the transferee certifies to the Company
that it is an "accredited investor" as defined in Rule 501(a) under the
Securities Act and that it is acquiring the Securities solely for investment
purposes (subject to the qualifications hereof). Such certification may also
include any additional information as may be required under the Securities Act
and as may be reasonably requested by the Company, to enable the Company to
determine that such transfer is exempt from the registration requirements of the
Securities Act. As a condition of transfer, any such transferee shall agree in
writing to be bound

                                       12
<PAGE>

by the terms of this Agreement and shall have the rights of a Purchaser under
this Agreement and the Registration Rights Agreement.

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

      THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
      COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
      EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
      (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
      EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
      SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
      TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
      SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
      THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
      SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
      OTHER LOAN SECURED BY SUCH SECURITIES.

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

            (c) None of the Securities shall contain the legend set forth above
or any other legend (i) while a registration statement (including any Underlying
Shares Registration Statement ) is effective under the Securities Act to cover
the resale of such security, or (ii) if Rule 144(k) may be utilized by the
seller of such security or (iii) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the Staff of the Commission) The Company shall cause
its counsel to issue the legal opinion included in the Transfer Agent
Instructions to the Company's transfer agent on the Effective Date. If all or
any portion of a Warrant is exercised at a time when there is an effective
registration statement covering the resale of Warrant Shares, such Warrant
Shares shall be issued without legends. The Company agrees that following the
Effective Date (and pursuant to the last sentence of this paragraph) or at such
time as such legend is no longer

                                       13
<PAGE>

required under this Section 4.1(b), it will, no later than three Trading Days
following the delivery by a Purchaser to the Company or the Company's transfer
agent of a certificate representing Shares or Warrant Shares issued with a
restrictive legend, deliver or cause to be delivered to such Purchaser a
certificate representing such Securities that is free from all restrictive and
other legends. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions
on transfer set forth in this Section. Notwithstanding anything in this
Agreement to the contrary, the Company shall have no obligation to register any
transfer of the Securities on its books or with any transfer agent, and no such
transfer may be made, unless such transfer is in compliance with this Section
4.1 and the transferor has delivered to the Company a certificate containing
information reasonably requested by the Company to that effect.

            (d) If the Company fails to deliver or cause to be delivered to any
Purchaser a certificate representing any Securities by the third Trading Day
after the date on which delivery of such certificate is required by Section
4.1(b), the Company shall pay to such Purchaser, in cash, as liquidated damages
and not as a penalty (i) with respect to a sale of Securities by the Purchaser,
$5,000 for each day after such third Trading Day until such certificate is
delivered in accordance with Section 4.1(b) and (ii) other than with respect to
a sale of Securities by the Purchaser, $1,000 for each of the first 10 days
after such third Trading Day and $5,000 for each day thereafter until such
certificate is delivered in accordance with Section 4.1(b). Nothing herein shall
limit such Purchaser's right to pursue actual damages for the Company's failure
to deliver certificates representing any Securities as required by the
Transaction Documents, and such Purchaser shall have the right to pursue all
remedies available to it at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief.

      4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance
of the Securities will result in dilution of the outstanding shares of Common
Stock, which dilution may be substantial under certain market conditions. The
Company further acknowledges that its obligation to issue the Securities
pursuant to the Transaction Documents is unconditional and absolute, regardless
of the effect of any such dilution.

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

      4.4 Integration. The Company shall not, and shall use its best efforts to
ensure that no Affiliate of the Company shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would (i) eliminate

                                       14
<PAGE>

the availability of the exemption from registration under Regulation D under the
Securities Act in connection with the offer and sale of the Securities as
contemplated hereby or (ii) cause the offering of the Securities pursuant to
this Agreement to be integrated with prior offerings by the Company for purposes
of any applicable shareholder approval provisions including, without limitation,
under the rules and regulations of any Trading Market.

      4.5 Reservation and Listing of Securities. The Company shall maintain a
reserve from its duly authorized shares of Common Stock for issuance pursuant to
the Transaction Documents in such amount as may be required to fulfill its
obligations in full under the Transaction Documents. The Company shall (i) in
the time and manner required by each Trading Market, prepare and file with such
Trading Market an additional shares listing application covering the Shares and
the Warrant Shares, (ii) take all steps necessary to cause such shares to be
approved for listing on each Trading Market as soon as possible thereafter,
(iii) provide to the Purchasers evidence of such listing, and (iv) maintain the
listing of such shares on each such Trading Market or another eligible
securities market.

      4.6 Subsequent Placements.

            (a) Without the prior written consent of the Purchasers, prior to
the Effective Date, the Company will not offer or sell any of its Common Stock
or Common Stock Equivalents to any Person (other than the issuance of Common
Stock upon the exercise of options or warrants outstanding on the date hereof
and listed on Schedule 3.1(g)).

            (b) From the date hereof until the third month after the Effective
Date, the Company will not, directly or indirectly, offer, sell, grant any
option to purchase, or otherwise dispose of (or announce any offer, sale, grant
or any option to purchase or other disposition of) any of its equity or equity
equivalent securities, including without limitation any debt, preferred stock or
other instrument or security of it or its Subsidiaries' that is, at any time
during its life and under any circumstances, pursuant to its terms, convertible
into or exchangeable for Common Stock (any such offer, sale, grant, disposition
or announcement being referred to as a "Subsequent Placement"), unless (i) the
Company delivers to each of the Purchasers a written notice (the "Subsequent
Placement Notice") of its intention to effect such Subsequent Placement, which
Subsequent Placement Notice shall describe in reasonable detail the proposed
terms of such Subsequent Placement, the amount of proceeds intended to be raised
thereunder, the Person with whom such Subsequent Placement is proposed to be
effected, and attached to which shall be a term sheet or similar document
relating thereto and (ii) such Purchaser shall not have notified the Company by
6:30 p.m. (New York City time) on the fifth Trading Day after its receipt of the
Subsequent Placement Notice of its willingness to provide (or to cause its
designee to provide), subject to completion of mutually acceptable
documentation, financing to the Company on the same terms set forth in the
Subsequent Placement Notice. If any Purchaser shall fail to so notify the
Company of its willingness to participate in the Subsequent Placement, the
Company may effect such Subsequent Placement on the terms and to the Persons set
forth in the Subsequent Placement Notice and to those Purchasers that have
elected to participate in the Subsequent Placement; provided that the Company
must provide the Purchasers with a second Subsequent Placement Notice, and the
Purchasers will again have the right of first refusal set forth above in this
paragraph (b), if the Subsequent Placement subject to the initial Subsequent
Placement Notice is not consummated for any reason on the terms set forth in
such Subsequent Placement

                                       15
<PAGE>

Notice within 30 days after the date of the initial Subsequent Placement Notice.
If all Purchasers indicate a willingness to provide financing in excess of the
amount set forth in the Subsequent Placement Notice, then each Purchaser will be
entitled to provide financing pursuant to such Subsequent Placement Notice up to
an amount equal to such Purchaser's pro rata portion of the aggregate purchase
price paid for the Securities under this Agreement, but the Company shall not be
required to accept financing from the Purchasers in an amount in excess of the
amount set forth in the Subsequent Placement Notice.

            (c) Prior to the expiration of the 30th Trading Day following the
Effective Date, the Company shall not, directly or indirectly, file a
registration statement (other than on Form S-8 or pursuant to the Registration
Rights Agreement) with the Commission with respect to any securities of the
Company. The 30 Trading Day period set forth in this Section 4.6(c) and the
three month period set forth in Section 4.6(b) shall be extended for (i) the
number of Trading Days during such periods in which trading in the Common Stock
is suspended by any Trading Market and (ii) the number of Trading Days after the
Effective Date during which (A) the Underlying Shares Registration Statement is
not effective or (B) the prospectus included in the Underlying Shares
Registration Statement may not be used by the holders thereof for the resale of
Registrable Securities thereunder.

            (d) The restrictions contained in paragraphs (a)-(b) of this Section
4.6 shall not apply to issuances of Common Stock and Common Stock Equivalents:
(i) to the Company's employees, officers or directors and the issuance of shares
of Common Stock to such employees, officers or directors upon exercise of
options granted, pursuant to an employee benefit plan or stock option plan
whether now existing or approved by the Company and its stockholders in the
future, (ii) to consultants as compensation for services rendered to the Company
not to exceed an aggregate value of $500,000, (iii) pursuant to one or more
Strategic Transactions, (iv) to Dr. George Rathmann for additional financing
provided to the Company by Dr George Rathmann, (v) under a bona fide
underwritten public offering (which shall not include equity lines of credit or
similar financing structures) which results in net proceeds in excess of US $40
million at a per share price (excluding underwriters commissions and discounts)
that is not at a discount to the then-prevailing market price of the Common
Stock and (vi) pursuant to the Rights Agreement, dated as of June 5, 1998, by
and between the Company and U.S. Stock Transfer Corporation, as the Rights
Agent.

      4.7 Securities Laws Disclosure; Publicity. The Company shall (i) on the
Closing Date, issue a press release acceptable to the Purchasers disclosing the
transactions contemplated hereby and (ii) make such other filings and notices in
the manner and time required by the Commission. Subject to the limitations
contained in Section 4.12, the Company shall, at least two Trading Days prior to
the filing or dissemination of any disclosure required by this paragraph,
provide a copy thereof to the Purchasers for their review. The Company and the
Purchasers shall consult with each other in issuing any press releases or
otherwise making public statements or filings and other communications with the
Commission or any regulatory agency or Trading Market with respect to the
transactions contemplated hereby, and neither party shall issue any such press
release or otherwise make any such public statement, filing or other
communication without the prior consent of the other, except if such disclosure
is required by law or Trading Market rules or regulations, in which case, in the
case of public statements made within 8 months after the Closing Date and press
releases, the disclosing party shall promptly

                                       16
<PAGE>

provide the other party with prior notice thereof. Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Purchaser, or
include the name of any Purchaser in any filing with the Commission or any
regulatory agency or Trading Market, without the prior written consent of such
Purchaser, except to the extent such disclosure (but not any disclosure as to
the controlling Persons thereof) is required by law or Trading Market rules or
regulations, in which case the Company shall provide the Purchasers with prior
notice of such disclosure.

      4.8 Use of Proceeds. The Company shall use the net proceeds from the sale
of the Securities hereunder for working capital purposes and not for the
satisfaction of any portion of the Company's debt (other than payment of trade
payables and accrued expenses in the ordinary course of the Company's business
and prior practices), to redeem any Company equity or equity-equivalent
securities or to settle any outstanding litigation.

      4.9 Indemnification of Purchaser. The Company will indemnify and hold the
Purchasers and their directors, officers, shareholders, partners, employees and
agents (each, a "Purchaser Party") harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys' fees and costs of investigation (collectively, "Losses") that any
such Purchaser Party may suffer or incur as a result of or relating to any
misrepresentation, breach or inaccuracy, or any allegation by a third party
that, if true, would constitute a breach or inaccuracy, of any of the
representations, warranties or covenants made by the Company in this Agreement
or any other Transaction Documents. The Company will reimburse such Purchaser
for its reasonable legal and other expenses (including the cost of any
investigation, preparation and travel in connection therewith) incurred in
connection therewith, as such expenses are incurred.

      4.10 Reimbursement. Subject to the provisions of Section 5(a)(1)and (2)
and 5(b)(1)and (2) of the Registration Rights Agreement and other than with
respect to gross negligence or wilful misconduct by a Purchaser, if any
Purchaser becomes involved in any capacity in any action, proceeding or
investigation by or against any Person who has a relationship with the Company
(including as a stockholder), solely as a result of such Purchaser's acquisition
of the Securities under this Agreement, the Company will reimburse such
Purchaser for its reasonable legal and other expenses (including the cost of any
investigation preparation and travel in connection therewith) incurred in
connection therewith, as such expenses are incurred. The reimbursement
obligations of the Company under this paragraph shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same terms
and conditions to any Affiliates of the Purchasers who are actually named in
such action, proceeding or investigation, and partners, directors, agents,
employees and controlling persons (if any), as the case may be, of the
Purchasers and any such Affiliate, and shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal representatives of the
Company, the Purchasers and any such Affiliate and any such Person. The Company
also agrees that neither the Purchasers nor any such Affiliates, partners,
directors, agents, employees or controlling persons shall have any liability to
the Company or any Person asserting claims on behalf of or in right of the
Company solely as a result of acquiring the Securities under this Agreement.

                                       17
<PAGE>

      4.11 Shareholders Rights Plan. No claim will be made or enforced by the
Company that any Purchaser is an "Acquiring Person" ( or similar triggering
person) under any shareholders rights plan or other Anti-Takeover Provision in
effect or hereafter adopted by the Company, or that any Purchaser could be
deemed to trigger the provisions of any such plan or arrangement, by virtue of
receiving Securities under the Transaction Documents or under any other
agreement between the Company and the Purchasers. The Company will take such
affirmative steps as may be required to render inapplicable to the Purchasers
all Anti-Takeover Provisions that may otherwise apply to the Purchasers as a
result of their acquisition of Securities hereunder.

      4.12 Material Non-Public Information. The Company covenants and agrees
that neither it nor any other Person acting on its behalf shall provide any of
the Purchasers or its agents or counsel with any information that constitutes
material non-public information, unless such Purchaser shall have prior thereto
agreed to execute a written agreement regarding the confidentiality and use of
such information.

                                   ARTICLE V.
                                   CONDITIONS

      5.1 Conditions Precedent to the Obligations of the Purchasers. The
obligation of each Purchaser to acquire Securities at the Closing is subject to
the satisfaction or waiver by such Purchaser, at or before the Closing, of each
of the following conditions:

            (a) Representations and Warranties. The representations and
warranties of the Company contained herein shall be true and correct in all
material respects as of the date when made and as of the Closing as though made
on and as of such date (except for representations and warranties that speak of
a specific date, which need only be true and correct as of such date).

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

            (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 that
prohibits the consummation of any of the transactions contemplated by the
Transaction Documents.

            (d) Adverse Changes. Since the date of execution of this Agreement,
no event or series of events shall have occurred that reasonably would be
expected to have or result in a Material Adverse Effect.

            (e) Delivery of Items. The Company shall have delivered to Purchaser
Counsel all items that it is required to deliver at the Closing under Section
2.2 (a).

            (f) Consents. The Company shall have received the August Transaction
Consent.

                                       18
<PAGE>

            (g) Compliance Certificate. The Company shall have delivered to or
as directed by the Purchasers, an Officer's Certificate, signed by its Chief
Executive Officer, dated as of the Closing Date, certifying that the Company has
satisfied the conditions set forth in Section 5.1(a)-(f).

      5.2 Conditions Precedent to the Obligations of the Company. The obligation
of the Company to sell Securities at the Closing is subject to the satisfaction
or waiver by the Company, at or before the Closing, of each of the following
conditions:

            (a) Representations and Warranties. The representations and
warranties of the Purchasers contained herein shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made on and as of such date.

            (b) Performance. The Purchasers shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Purchasers at or prior to the Closing.

            (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 that
prohibits the consummation of any of the transactions contemplated by the
Transaction Documents.

            (d) Consents. The Company shall have received the August Transaction
Consent.

                                   ARTICLE VI.
                                  MISCELLANEOUS

      6.1 Fees and Expenses. At the Closing, the Company shall reimburse Pine
Ridge Financial, Inc. for legal fees and expenses incurred by it in connection
with the preparation and negotiation of the Transaction Documents by paying to
it (or, at its election, by delivering directly to Purchaser Counsel) $35,000.
In lieu of the payments required by the immediately preceding sentence, Pine
Ridge Financial, Inc. may retain the amount of such payments instead of
delivering such amounts to the Company at the Closing. Except as expressly set
forth in the Transaction Documents to the contrary, each party shall pay the
fees and expenses of its advisers, counsel, accountants and other experts, if
any, and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all transfer agent fees, stamp taxes and other taxes and duties levied
in connection with the issuance of the Securities.

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

                                       19
<PAGE>

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

      If to the Company:      Hyseq, Inc.
                              670 Almanor Avenue
                              Sunnyvale, CA 94085
                              Phone No. : (408) 524-8100
                              Facsimile No.: (408) 524-8141
                              Attn: President

      With a copy to:         Latham & Watkins
                              135 Commonwealth Drive
                              Menlo Park, CA 94025
                              Facsimile No.: (650) 463-2600
                              Attn: Alan C. Mendelson

      If to a Purchaser:      To the address set forth under such Purchaser's
                              name on the signature pages hereof;

      With a copy to :        Robinson Silverman Pearce Aronsohn & Berman LLP
                              1290 Avenue of the Americas
                              New York, NY 10104
                              Attn: Eric L. Cohen, Esq.
                              Facsimile No.: 212-541-1432 and 212-541-4630

or such other address as may be designated in writing hereafter, in the same
manner, by such Person.

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

      6.5 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.

                                       20
<PAGE>

      6.6 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Except as set forth in
Section 4.1(a), the Purchasers may not assign this Agreement or any of the
rights or obligations hereunder without the consent of the Company.

      6.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person except as otherwise set forth in Section 4.9 hereof.

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

      6.9 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery and exercise of the
Securities, as applicable.

      6.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding

                                       21
<PAGE>

obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.

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

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

      6.13 Replacement of Stock Certificate. If any stock certificate
representing a number of shares of Common Stock issued to a Purchaser pursuant
to this Agreement is mutilated, lost, stolen or destroyed, the Company shall
issue or cause to be issued in exchange and substitution for and upon
cancellation hereof, or in lieu of and substitution for such stock certificate,
a New Stock Certificate, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and indemnity, if
requested, satisfactory to it. Applicants for a New Stock Certificate under such
circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges as the Company may prescribe.

      6.14 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose.

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                            SIGNATURE PAGES FOLLOWS]

                                       22
<PAGE>

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

                                             HYSEQ, INC.

                                             By:
                                                --------------------------------
                                             Name:  Peter S. Garcia
                                             Title: Senior Vice President and
                                                    Chief Financial Officer

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                      SIGNATURE PAGE FOR PURCHASERS FOLLOW]

                                       23
<PAGE>

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

                                             [PURCHASER]

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

                             Aggregate Purchase Price:

                             Number of Shares to be acquired:

                             Warrant Shares acquirable under Warrant:

                             Tax ID No:

                             Address for Notice:

                             With a copy to:

                             Robinson Silverman Pearce Aronsohn & Berman LLP
                             1290 Avenue of the Americas
                             New York, NY 10104
                             Facsimile No.: (212) 541-4630 and (212) 541-1432
                             Attn: Eric L. Cohen, Esq.

                                       24<PAGE>

                                                                     EXHIBIT 4.7

                         REGISTRATION RIGHTS AGREEMENT

            This Registration Rights Agreement (this "Agreement") is made and
entered into as of April 5, 2002, by and among Hyseq, Inc., a Nevada corporation
(the "Company"), and the investors signatory hereto (each a "Purchaser" and
collectively, the "Purchasers").

            This Agreement is made pursuant to the Securities Purchase
Agreement, dated as of the date hereof among the Company and the Purchasers (the
"Purchase Agreement").

            The Company and the Purchasers hereby agree as follows:

            1. Definitions. Capitalized terms used and not otherwise defined
herein that are defined in the Purchase Agreement shall have the meanings given
such terms in the Purchase Agreement. As used in this Agreement, the following
terms shall have the following meanings:

            "Effectiveness Date" means, with respect to the initial Registration
Statement required to be filed hereunder, the earlier of (a) (i) the 90th day
following the Closing Date or (ii) the 45th day following the date that the
Company receives its first response (written or oral) from the Commission as to
the Company's first request for confidential treatment with respect to any
exhibits filed pursuant to confidential treatment requests prior to the date the
Registration Statement is filed with the Commission (regardless of whether such
response of the Commission is a request for additional information), whichever
is later and (b) the fifth Trading Day following the date on which the Company
is notified by the Commission that such Registration Statement will not be
reviewed or is no longer subject to further review and comments, and, with
respect to any additional Registration Statements that may be required pursuant
to Section 2(c), the earlier of (a) (i) the 90th day following the date on which
the Company first knows, or reasonably should have known, that such additional
Registration Statement is required under such Section or (ii) the 45th day
following the date that the Company receives its first response (written or
oral) from the Commission as to the Company's first request for confidential
treatment with respect to any exhibits filed pursuant to confidential treatment
requests prior to the date such additional Registration Statements is filed with
the Commission (regardless of whether such response of the Commission is a
request for additional information), whichever is later and (b) the fifth
Trading Day following the date on which the Company is notified by the
Commission that such Registration Statement will not be reviewed or is no longer
subject to further review and comments.

            "Effectiveness Period" shall have the meaning set forth in Section
2(a).

            "Filing Date" means, with respect to the initial Registration
Statement required to be filed hereunder, the 30th day following the Closing
Date, and, with respect to any additional Registration Statements that may be
required pursuant to Section 2(c), the 30th day following the date on which the
Company first knows, or reasonably should have known that such additional
Registration Statement is required under such Section.

            "Holder" or "Holders" means the holder or holders, as the case may
be, from time to time of Registrable Securities.

<PAGE>

            "Indemnified Party" shall have the meaning set forth in Section
5(c).

            "Indemnifying Party" shall have the meaning set forth in Section
5(c).

            "Losses" shall have the meaning set forth in Section 5(a).

            "Materially Detrimental" means, in the good faith judgment of the
Board of Directors of the Company as set forth in a certificate signed by the
President, Chief Financial Officer or General Counsel of the Company, the filing
in question would be materially detrimental to the Company by reason of (i) any
proceeding before, or material event involving, the Food and Drug
Administration, or (ii) any proposal or plan of the Company or any of its
Subsidiaries to engage in any sale, acquisition, merger, consolidation,
reorganization, tender offer or similar transaction.

            "Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.

            "Prospectus" means the prospectus included in a Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by a Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.

            "Registrable Securities" means (i) the Shares and (ii) the Warrant
Shares, together with any securities issued or issuable upon any stock split,
dividend or other distribution, recapitalization or similar event with respect
to the foregoing.

            "Registration Statement" means the initial registration statement
required to be filed hereunder and any additional registration statements
contemplated by Section 2(c), including (in each case) the Prospectus,
amendments and supplements to such registration statement or Prospectus,
including pre- and post-effective amendments, all exhibits thereto, and all
material incorporated by reference or deemed to be incorporated by reference in
such registration statement.

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

            "Rule 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.

                                      -2-
<PAGE>

            "Rule 424" means Rule 424 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.

            "Shares" means the shares of Common Stock issued to the Purchasers
pursuant to the Purchase Agreement.

            "Special Counsel" means Purchaser Counsel who will be reimbursed by
the Company pursuant to Section 4.

            "Warrants" means the Warrants issued under the Purchase Agreement.

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

            2. Registration.

                  (a) On or prior to each Filing Date, the Company shall prepare
and file with the Commission a Registration Statement covering the resale of all
Registrable Securities for an offering to be made on a continuous basis pursuant
to Rule 415. Each Registration Statement shall be on Form S-3 (except if the
Company is not then eligible to register for resale the Registrable Securities
on Form S-3, in which case such registration shall be on another appropriate
form in accordance herewith) and shall contain (except if otherwise directed by
the Holders) the "Plan of Distribution" attached hereto as Annex A. The Company
shall cause such Registration Statement to become effective and remain effective
as provided herein. The Company shall use its best efforts to cause each
Registration Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof, but in any event prior to its
Effectiveness Date, and shall use its best efforts to keep each Registration
Statement continuously effective under the Securities Act until the date which
is two years after the date that such Registration Statement is declared
effective by the Commission or such earlier date when all Registrable Securities
covered by such Registration Statement have been sold or may be sold without
volume restrictions pursuant to Rule 144(k) as determined by the counsel to the
Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company's transfer agent and the affected Holders (the
"Effectiveness Period").

                  (b) If: (a) a Registration Statement is not filed on or prior
to its Filing Date (if the Company files such Registration Statement without
affording the Holder the opportunity to review and comment on the same as
required by Section 3(a), the Company shall not be deemed to have satisfied
clause (a)), or (b) the Company fails to file with the Commission a request for
acceleration in accordance with Rule 461 promulgated under the Securities Act,
within five Trading Days of the date that the Company is notified (orally or in
writing, whichever is earlier) by the Commission that a Registration Statement
will not be "reviewed," or not subject to further review, or (c) the Company
fails to respond to any comments made by the Commission within ten Trading Days
after the receipt of such comments, or (d) a Registration Statement filed
hereunder is not declared effective by the Commission by its Effectiveness Date,
or (e) after a Registration Statement is filed with and declared effective by
the Commission, a

                                      -3-
<PAGE>

Registration Statement ceases to be effective as to all Registrable Securities
to which it is required to relate at any time prior to the expiration of the
Effectiveness Period without being succeeded within ten Trading Days or, if it
would be Materially Detrimental, twenty Trading Days, by an amendment to such
Registration Statement or by a subsequent registration statement which
Registration Statement shall be included within the definition of "Registration
Statement" filed with and declared effective by the Commission, (f) an amendment
to a Registration Statement is not filed by the Company with the Commission
within ten Trading Days or, if it would be Materially Detrimental, twenty
Trading Days, of the Commission's notifying the Company that such amendment is
required in order for a Registration Statement to be declared effective, (any
such failure or breach being referred to as an "Event," and for purposes of
clause (a) or (d) the date on which such Event occurs, or for purposes of clause
(b) the date on which such five Trading Day period is exceeded, or for purposes
of clauses (c), (e) or (f) the date which such ten Trading Day-period or twenty
Trading Day period, as the case may be, is exceeded, being referred to as "Event
Date"), then: (x) on each such Event Date the Company shall pay to each Holder
an amount in cash, as liquidated damages and not as a penalty, equal to 1% of
the aggregate purchase price paid by such Holder pursuant to the Purchase
Agreement; and (y) (if the applicable Event has not been cured by the first
month anniversary following the Event Date, then on such anniversary date) the
Company shall pay to each Holder an amount in cash, as liquidated damages and
not as a penalty, equal to 1% of the aggregate purchase price paid by such
Holder pursuant to the Purchase Agreement and on each monthly anniversary
thereafter until the applicable Event is cured, the Company shall pay to each
Holder an amount in cash, as liquidated damages and not as a penalty, equal to
2% of the aggregate purchase price paid by such Holder pursuant to the Purchase
Agreement provided, however, that all periods shall be tolled during delays
directly caused by the action or inaction of any Holder, and the Company shall
have no liability in respect of any such delay. If the Company fails to pay any
liquidated damages pursuant to this Section in full within seven days after the
date payable, the Company will pay interest thereon at a rate of 18% per annum
(or such lesser maximum amount that is permitted to be paid by applicable law)
to the Holder, accruing daily from the date such liquidated damages are due
until such amounts, plus all such interest thereon, are paid in full.

                  (c) File additional Registration Statements if the number of
Registrable Securities at any time exceeds 85% of the number of shares of Common
Stock then registered in a Registration Statement.

            3. Registration Procedures

            In connection with the Company's registration obligations hereunder,
the Company shall:

                  (a) Not less than (1) five Trading Days prior to the filing of
a Registration Statement or any related Prospectus, (2) three Trading Days prior
to the filing of any pre-effective or post-effective amendment to a Registration
Statement or (3) one Trading Day prior to the filing of any supplement to a
Registration Statement (other than a prospectus supplement the principal purpose
of which is to update the list of selling stockholders), the Company shall, (i)
furnish to the Holders and their Special Counsel copies of all such documents
proposed to be filed (including documents incorporated or deemed incorporated by
reference and

                                      -4-
<PAGE>

not available on the EDGAR system) which documents will be subject to the review
of such Holders and their Special Counsel, and (ii) cause its officers and
directors, counsel and independent certified public accountants to respond to
such inquiries as shall be necessary, in the reasonable opinion of respective
counsel to conduct a reasonable investigation within the meaning of the
Securities Act. The Company shall not file a Registration Statement or any such
Prospectus or any amendments or supplements thereto to which the Holders of a
majority of the Registrable Securities and their Special Counsel shall
reasonably object.

                  (b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to a Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep a
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the Commission
such additional Registration Statements in order to register for resale under
the Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424; (iii)
respond as promptly as reasonably possible, and in any event within ten Trading
Days, to any comments received from the Commission with respect to a
Registration Statement or any amendment thereto and, as promptly as reasonably
possible provide the Holders true and complete copies of all correspondence from
and to the Commission relating to such Registration Statement; and (iv) comply
in all material respects with the provisions of the Securities Act and the
Exchange Act with respect to the disposition of all Registrable Securities
covered by a Registration Statement during the applicable period in accordance
with the intended methods of disposition by the Holders thereof set forth in
such Registration Statement as so amended or in such Prospectus as so
supplemented.

                  (c) Notify the Holders of Registrable Securities to be sold
and their Special Counsel as promptly as reasonably possible (and, in the case
of (i)(A) below, not less than three Trading Days prior to such filing) and (if
requested by any such Person) confirm such notice in writing no later than one
Trading Day following the day (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment to a Registration Statement is proposed
to be filed; (B) when the Commission notifies the Company whether there will be
a "review" of such Registration Statement and whenever the Commission comments
in writing on such Registration Statement (the Company shall provide true and
complete copies thereof and all written responses thereto to each of the
Holders); and (C) with respect to a Registration Statement or any post-effective
amendment, when the same has become effective; (ii) of any request by the
Commission or any other Federal or state governmental authority for amendments
or supplements to a Registration Statement or Prospectus or for additional
information; (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of a Registration Statement covering any or all of
the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any Proceeding for such purpose; and (v) of the occurrence of any
event or passage of time that makes the financial statements included in a
Registration Statement ineligible for inclusion therein or any statement made in
such Registration Statement or Prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect or that
requires any post-effective amendment to such Registration Statement, or
Prospectus so that, in the case of a

                                      -5-
<PAGE>

Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.

                  (d) Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of a
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.

                  (e) Furnish to each Holder and their Special Counsel, without
charge, (i) at least one conformed copy of each Registration Statement and each
amendment thereto, including financial statements and schedules, and (ii) all
documents incorporated or deemed to be incorporated therein by reference, and
all exhibits to the extent requested by such Person (including those previously
furnished or incorporated by reference) promptly after the filing of such
documents with the Commission; provided, that the Company shall have no
obligation to provide any document pursuant to this clause (ii) that is
available on the EDGAR system.

                  (f) Subject to the terms of Section 6(d), the Company shall
promptly deliver to each Holder and their Special Counsel, without charge, as
many copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request. The Company hereby consents to the use of such Prospectus
and each amendment or supplement thereto by each of the selling Holders in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus and any amendment or supplement thereto.

                  (g) Prior to any public offering of Registrable Securities,
use its best efforts to register or qualify or cooperate with the selling
Holders and their Special Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration Statement;
provided, that the Company shall not be required to qualify generally to do
business in any jurisdiction where it is not then so qualified or subject the
Company to any material tax in any such jurisdiction where it is not then so
subject.

                  (h) Cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be delivered to a transferee pursuant to a Registration Statement, which
certificates shall be free, to the extent permitted by the Purchase Agreement,
of all restrictive legends, and to enable such Registrable Securities to be in
such denominations and registered in such names as any such Holders may request.

                  (i) Upon the occurrence of any event contemplated by Section
3(c)(v), as promptly as reasonably possible, prepare a supplement or amendment,
including a post-effective amendment, to a Registration Statement or a
supplement to the related Prospectus

                                      -6-
<PAGE>

or any document incorporated or deemed to be incorporated therein by reference,
and file any other required document so that, as thereafter delivered, neither
such Registration Statement nor such Prospectus will contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.

                  (j) Comply with all applicable rules and regulations of the
Commission.

                  (k) The Company may require each selling Holder to furnish to
the Company a certified statement as to the number of shares of Common Stock
beneficially owned by such Holder and, if requested by the Commission, the
controlling person thereof.

            4. Registration Expenses. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not any Registrable Securities are sold pursuant to a
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the Trading Market on which the Common Stock is then
listed for trading, and (B) in compliance with applicable state securities or
Blue Sky laws), (ii) printing expenses (including, without limitation, expenses
of printing certificates for Registrable Securities and of printing prospectuses
if the printing of prospectuses is reasonably requested by the holders of a
majority of the Registrable Securities included in a Registration Statement),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company and $10,000 of the fees and disbursements of Special
Counsel for the Holders, (v) Securities Act liability insurance, if the Company
so desires such insurance, and (vi) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.

            5. Indemnification

                  (a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents and employees of each of them, each
Person who controls any such Holder (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) and the officers, directors,
agents and employees of each such controlling Person, to the fullest extent
permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, reasonable costs of
preparation and reasonable attorneys' fees) and expenses (collectively,
"Losses"), as incurred, arising out of or relating to any untrue or alleged
untrue statement of a material fact contained in a Registration Statement, any
Prospectus or in any amendment or supplement thereto arising out of or relating
to any omission or alleged omission of a material fact required to be stated
therein or necessary to make

                                      -7-
<PAGE>

the statements therein (in the case of any Prospectus or supplement thereto, in
light of the circumstances under which they were made) not misleading, except to
the extent, but only to the extent, that (1) such untrue statements or omissions
are based solely upon information regarding such Holder furnished in writing to
the Company by such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in a Registration Statement, such
Prospectus or in any amendment or supplement thereto (it being understood that
the Holder has approved Annex A hereto for this purpose) or (2) in the case of
an occurrence of an event of the type specified in Section 3(c)(ii)-(v), the use
by such Holder of an outdated or defective Prospectus after the Company has
notified such Holder in writing that the Prospectus is outdated or defective and
prior to the receipt by such Holder of the Advice contemplated in Section 6(d).
The Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.

                  (b) Indemnification by Holders. Each Holder shall, severally
and not jointly, indemnify and hold harmless the Company, its directors,
officers, agents and employees, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses, as
incurred, arising solely out of or based solely upon: (x) such Holder's failure
to comply with the prospectus delivery requirements of the Securities Act or (y)
any untrue statement of a material fact contained in any Registration Statement,
any Prospectus, or in any amendment or supplement thereto, or arising solely out
of or based solely upon any omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading to the
extent, but only to the extent, that such untrue statement or omission is
contained in any information so furnished in writing by such Holder to the
Company specifically for inclusion in such Registration Statement or such
Prospectus or to the extent that (1) such untrue statements or omissions are
based solely upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in a Registration Statement (it
being understood that the Holder has approved Annex A hereto for this purpose),
such Prospectus or in any amendment or supplement thereto or (2) in the case of
an occurrence of an event of the type specified in Section 3(c)(ii)-(v), the use
by such Holder of an outdated or defective Prospectus after the Company has
notified such Holder in writing that the Prospectus is outdated or defective and
prior to the receipt by such Holder of the Advice contemplated in Section 6(d).
In no event shall the liability of any selling Holder hereunder be greater in
amount than the dollar amount of the net proceeds received by such Holder upon
the sale of the Registrable Securities giving rise to such indemnification
obligation.

                  (c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party shall promptly notify the
Person from whom indemnity is sought (the "Indemnifying Party") in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party

                                      -8-
<PAGE>

and the payment of all fees and expenses incurred in connection with defense
thereof; provided, that the failure of any Indemnified Party to give such notice
shall not relieve the Indemnifying Party of its obligations or liabilities
pursuant to this Agreement, except (and only) to the extent that such failure
shall have proximately and materially adversely prejudiced the Indemnifying
Party.

            An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised in writing by counsel that a conflict of interest is
likely to exist if the same counsel were to represent such Indemnified Party and
the Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party); provided, that the Indemnifying Party shall not be
liable for the fees and expenses of more than one separate firm of attorneys at
any time for all indemnified parties. The Indemnifying Party shall not be liable
for any settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such Proceeding.

            All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten Trading
Days of written notice thereof to the Indemnifying Party (regardless of whether
it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnified Party shall reimburse
all such fees and expenses to the extent it is finally judicially determined
that such Indemnified Party is not entitled to indemnification hereunder).

                  (d) Contribution. If a claim for indemnification under Section
5(a) or 5(b) is unavailable to an Indemnified Party (by reason of public policy
or otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied

                                      -9-
<PAGE>

by, such Indemnifying Party or Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action, statement or omission. The amount paid or payable by a party as a
result of any Losses shall be deemed to include, subject to the limitations set
forth in Section 5(c), any reasonable attorneys' or other reasonable fees or
expenses incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms.

            The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), no Holder shall be required
to contribute, in the aggregate, any amount in excess of the amount by which the
proceeds actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission.

            The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.

            6. Miscellaneous

                  (a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.

                  (b) No Piggyback on Registrations. Except as and to the extent
specified in Schedule 6(b) hereto, neither the Company nor any of its security
holders (other than the Holders in such capacity pursuant hereto) may include
securities of the Company in a Registration Statement other than the Registrable
Securities, and the Company shall not after the date hereof enter into any
agreement providing any such right to any of its security holders. Except as and
to the extent specified in Schedule 6(b) hereto, the Company has not previously
entered into any agreement granting any registration rights with respect to any
of its securities to any Person which have not been fully satisfied.

                  (c) Compliance. Each Holder covenants and agrees that it will
comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
a Registration Statement.

                                      -10-
<PAGE>

                  (d) Discontinued Disposition. Each Holder agrees by its
acquisition of such Registrable Securities that, upon receipt of a notice from
the Company of the occurrence of any event of the kind described in Section
3(c), such Holder will forthwith discontinue disposition of such Registrable
Securities under a Registration Statement until such Holder's receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement or
until it is advised in writing (the "Advice") by the Company that the use of the
applicable Prospectus may be resumed, and, in either case, has received copies
of any additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement. The
Company may provide appropriate stop orders to enforce the provisions of this
paragraph.

                  (e) Piggy-Back Registrations. If at any time during the
Effectiveness Period there is not an effective Registration Statement covering
all of the Registrable Securities and the Company shall determine to prepare and
file with the Commission a registration statement relating to an offering for
its own account or the account of others under the Securities Act of any of its
equity securities, other than on Form S-4 or Form S-8 (each as promulgated under
the Securities Act) or their then equivalents relating to equity securities to
be issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Holder written notice of such
determination and, if within fifteen days after receipt of such notice, any such
Holder shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
holder requests to be registered, subject to customary underwriter cutbacks
applicable to all holders of registration rights.

                  (f) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of the then outstanding Registrable Securities. Notwithstanding
the foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of certain Holders
and that does not directly or indirectly affect the rights of other Holders may
be given by Holders of at least a majority of the Registrable Securities to
which such waiver or consent relates; provided, however, that the provisions of
this sentence may not be amended, modified, or supplemented except in accordance
with the provisions of the immediately preceding sentence.

                  (g) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section prior to 6:30 p.m. (New York City
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 number
specified in this Agreement later than 6:30 p.m. (New York City time) on any
date and earlier than 11:59 p.m. (New York City time) on such date, (iii) the
Trading Day following the date of mailing, if sent by nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom such
notice is required to be given. The address for such notices and communications
shall be as follows:

                                      -11-
<PAGE>

        If to the Company:          Hyseq, Inc.
                                    670 Almanor Avenue
                                    Sunnyvale, CA 94085
                                    Facsimile No.: (408) 524-8141
                                    Attn: President

        With a copy to:             Latham & Watkins
                                    135 Commonwealth Drive
                                    Menlo Park, CA 94025
                                    Facsimile No.: (650) 463-2600
                                    Attn: Alan C. Mendelson

        If to a Purchaser:   To the address set forth under such
                             Purchaser's name on the signature pages hereto.

        With a copy to:      Robinson Silverman Pearce Aronsohn & Berman LLP
                             1290 Avenue of the Americas
                             New York, NY  10104
                             Facsimile No.: (212) 541-4630 and (212) 541-1432
                             Attn: Eric L. Cohen, Esq.

        If to any other Person who is then the registered Holder:

                             To the address of such Holder as it appears in the
                             stock transfer books of the Company

            or such other address as may be designated in writing hereafter, in
the same manner, by such Person.

                  (h) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
each Holder. Each Holder may assign their respective rights hereunder in the
manner and to the Persons as permitted under the Purchase Agreement.

                  (i) Execution and Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed shall be deemed to
be an original and, all of which taken together shall constitute one and the
same Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.

                  (j) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all Proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement

                                      -12-
<PAGE>

(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced exclusively in
the state and federal courts sitting in the City of New York, Borough of
Manhattan. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
Borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of this Agreement), and
hereby irrevocably waives, and agrees not to assert in any Proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such Proceeding venue is improper. Each party hereto hereby irrevocably waives
personal service of process and consents to process being served in any such
Proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Each party hereto hereby irrevocably waives, to
the fullest extent permitted by applicable law, any and all right to trial by
jury in any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If either party shall commence a Proceeding to
enforce any provisions of this Agreement, then the prevailing party in such
Proceeding shall be reimbursed by the other party for its attorneys fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such Proceeding.

                  (k) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.

                  (l) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.

                  (m) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

                  (n) Independent Nature of Purchasers' Obligations and Rights.
The obligations of each Purchaser hereunder is several and not joint with the
obligations of any other Purchaser hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without

                                      -13-
<PAGE>

limitation the rights arising out of this Agreement, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose.

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                           SIGNATURE PAGES TO FOLLOW]

                                      -14-
<PAGE>

            IN WITNESS WHEREOF, the parties have executed this Registration
Rights Agreement as of the date first written above.

                                        HYSEQ, INC.

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

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                     SIGNATURE PAGES OF PURCHASER TO FOLLOW]

<PAGE>

            IN WITNESS WHEREOF, the parties have executed this Registration
Rights Agreement as of the date first written above.

                                        [PURCHASER]

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

                                        Address for Notice:
                                        [ ]

                                        With a copy to:

                                        Robinson Silverman Pearce Aronsohn &
                                        Berman LLP
                                        1290 Avenue of the Americas
                                        New York, NY 10104
                                        Facsimile No.: (212) 541-4630 and
                                                       (212) 541-1432
                                        Attn: Eric L. Cohen, Esq.

<PAGE>

                                                                         Annex A

                              Plan of Distribution

      The Selling Stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of Common Stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The Selling Stockholders may use any one or more of the
following methods when selling shares:

      -     ordinary brokerage transactions and transactions in which the
            broker-dealer solicits purchasers;

      -     block trades in which the broker-dealer will attempt to sell the
            shares as agent but may position and resell a portion of the block
            as principal to facilitate the transaction;

      -     purchases by a broker-dealer as principal and resale by the
            broker-dealer for its account;

      -     an exchange distribution in accordance with the rules of the
            applicable exchange;

      -     privately negotiated transactions;

      -     short sales

      -     broker-dealers may agree with the Selling Stockholders to sell a
            specified number of such shares at a stipulated price per share;

      -     a combination of any such methods of sale; and

      -     any other method permitted pursuant to applicable law.

      The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.

      Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.

      The selling stockholder may from time to time pledge or grant a security
interest in some or all of the Shares or common stock or Warrant owned by them
and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell the shares of common stock from
time to time under this prospectus, or under an amendment to this prospectus
under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933
amending the list of selling stockholders to include the pledgee, transferee or
other successors in interest as selling stockholders under this prospectus.

<PAGE>

      The selling stockholders also may transfer the shares of common stock in
other circumstances, in which case the transferees, pledgees or other successors
in interest will be the selling beneficial owners for purposes of this
prospectus.

      The Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. The Selling Stockholders have
informed the Company that it does not have any agreement or understanding,
directly or indirectly, with any person to distribute the Common Stock.

      The Company has advised the Selling Stockholders that they are required to
comply with Regulation M promulgated under the Securities and Exchange Act
during such time as they may be engaged in a distribution of the shares. With
some exceptions, Regulation M precludes any Selling Stockholders, any affiliated
purchasers and any broker-dealer or other person who participates in such
distribution from bidding for or purchasing, or attempting to induce any person
to bid for or purchase any security that is the subject of the distribution
until the entire distribution is complete. Regulation M also prohibits any bids
or purchases made in order to stabilize the price of a security in connection
with the distribution of that security. All of the foregoing may affect the
marketability of the common stock.

      The Company is required to pay all fees and expenses incident to the
registration of the shares, including $10,000 of fees and disbursements of
counsel to the Selling Stockholders. The Company has agreed to indemnify the
Selling Stockholders against certain losses, claims, damages and liabilities,
including liabilities under the Securities Act.

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