Document:

Exhibit 4.6

                          REGISTRATION RIGHTS AGREEMENT

         This  Registration  Rights  Agreement  (this  "Agreement")  is made and
entered into as of August 31, 2005, among Intraop Medical Corporation,  a Nevada
corporation  (the  "Company"),  and the purchasers  signatory  hereto (each such
purchaser is 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:

                  "Advice" shall have the meaning set forth in Section 6(d).

                  "Effectiveness  Date"  means,  with  respect  to  the  initial
         Registration  Statement  required  to be  filed  hereunder,  the  120th
         calendar day following  the date hereof  (135th  calendar day following
         the  date  hereof  if the  Company  completes  a  Subsequent  Stonegate
         Placement on or before  September  30,  2005) and,  with respect to any
         additional  Registration  Statements which may be required  pursuant to
         Section  3(c),  the 120th  calendar day following the date on which the
         Company  first  knows,  or  reasonably  should  have  known,  that such
         additional  Registration  Statement  is required  hereunder;  provided,
         however,  in the event the Company is notified by the  Commission  that
         one of the above Registration  Statements will not be reviewed or is no
         longer subject to further review and comments,  the Effectiveness  Date
         as to such  Registration  Statement  shall  be the  fifth  Trading  Day
         following  the date on which the  Company is so  notified  if such date
         precedes the dates required above.

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

                  "Event" shall have the meaning set forth in Section 2(b).

                  "Event Date" shall have the meaning set forth in Section 2(b).

                  "Filing Date" means, with respect to the initial  Registration
         Statement required hereunder,  October 3, 2005 and, with respect to any
         additional  Registration  Statements which may be required  pursuant to
         Section  3(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 hereunder.

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

                  "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).

                  "Plan of  Distribution"  shall have the  meaning  set forth in
Section 2(a).

                  "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) all of the shares of Common
         Stock  issuable  upon  conversion in full of the  Debentures,  (ii) all
         shares issuable as interest on the Debentures  assuming all permissible
         interest payments are made in shares of Common Stock and the Debentures
         are held until maturity,  (iii) all Warrant Shares, (iv) any securities
         issued  or   issuable   upon  any  stock   split,   dividend  or  other
         distribution,  recapitalization  or similar  event with  respect to the
         foregoing,  (v) any additional  shares  issuable in connection with any
         anti-dilution  provisions  in the  Debentures  or the Warrants (in each
         case,  without giving effect to any limitations on conversion set forth
         in the Debenture or  limitations on exercise set forth in the Warrant),
         (vi) shares  issuable in lieu of cash  payments of  liquidated  damages
         pursuant  to Section  2(b) and (vii)  shares  issuable  to  Regenmacher
         pursuant  to  warrants   issued  to  it  pursuant  to  the  Regenmacher
         Transaction.

                  "Registration  Statement"  means the  registration  statements
         required  to  be  filed  hereunder  and  any  additional   registration
         statements  contemplated by Section 3(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.

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                   "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.

                  "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.

                  "Selling Shareholder Questionnaire" shall have the meaning set
forth in Section 3(a).

        2.        Shelf Registration

               (a) On or prior to each Filing Date,  the Company  shall  prepare
and file with the  Commission  a "Shelf"  Registration  Statement  covering  the
resale of 130% of the Registrable Securities on such Filing Date for an offering
to be  made  on a  continuous  basis  pursuant  to Rule  415.  The  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 (unless otherwise directed by the Holders) substantially the "Plan
of  Distribution"  attached  hereto  as Annex A.  Subject  to the  terms of this
Agreement,  the  Company  shall  use its best  efforts  to cause a  Registration
Statement  to be  declared  effective  under the  Securities  Act as promptly as
possible  after the filing  thereof,  but in any event  prior to the  applicable
Effectiveness  Date,  and shall use its best  efforts to keep such  Registration
Statement  continuously effective under the Securities Act until 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"). The Company shall telephonically request effectiveness
of a  Registration  Statement  as of 5:00 pm Eastern  Time on a Trading Day. The
Company shall immediately  notify the Holders via facsimile of the effectiveness
of  a  Registration   Statement  on  the  same  Trading  Day  that  the  Company
telephonically  confirms  effectiveness with the Commission,  which shall be the
date requested for effectiveness of a Registration Statement. The Company shall,
by 9:30 am Eastern Time on the Trading Day after the Effective  Date (as defined
in the Purchase Agreement),  file a Form 424(b)(5) with the Commission.  Failure
to so notify  the  Holder  within 1 Trading  Day of such  notification  shall be
deemed an Event under Section 2(b).

               (b) If: (i) a Registration  Statement is not filed on or prior to
its Filing Date (if the Company files a Registration Statement without affording
the  Holders  the  opportunity  to review and comment on the same as required by
Section  3(a),  the Company  shall not be deemed to have  satisfied  this clause
(i)),  or (ii) 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

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review,  or (iii) prior to its  Effectiveness  Date, the Company fails to file a
pre-effective amendment and otherwise respond in writing to comments made by the
Commission  in respect of such  Registration  Statement  within 10 calendar days
after the  receipt  of  comments  by or  notice  from the  Commission  that such
amendment  is  required  in order for a  Registration  Statement  to be declared
effective,  or (iv) a  Registration  Statement  filed  or  required  to be filed
hereunder is not declared effective by the Commission by its Effectiveness Date,
or (v) after the  Effectiveness  Date, a Registration  Statement  ceases for any
reason to remain  continuously  effective as to all  Registrable  Securities for
which it is  required to be  effective,  or the  Holders  are not  permitted  to
utilize the  Prospectus  therein to resell such  Registrable  Securities  for 10
consecutive  calendar  days but no more than an  aggregate  of 15 calendar  days
during any 12-month  period  (which need not be  consecutive  Trading Days) (any
such  failure or breach  being  referred to as an "Event",  and for  purposes of
clause (i) or (iv) the date on which  such  Event  occurs,  or for  purposes  of
clause (ii) the date on which such five Trading Day period is  exceeded,  or for
purposes of clause (iii) the date which such 10 calendar day period is exceeded,
or for  purposes  of clause  (v) the date on which  such 10 or 15  calendar  day
period, as applicable,  is exceeded being referred to as "Event Date"),  then in
addition to any other rights the Holders may have hereunder or under  applicable
law, on each such Event Date and on each monthly  anniversary of each such Event
Date (if the applicable  Event shall not have been cured by such date) until the
applicable  Event is cured,  the  Company  shall pay to each Holder an amount in
cash, as partial liquidated  damages and not as a penalty,  equal to 2.0% of the
aggregate  purchase price paid by such Holder pursuant to the Purchase Agreement
for any Registrable Securities then held by such Holder. If the Company fails to
pay any partial 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  partial
liquidated  damages are due until such amounts,  plus all such interest thereon,
are paid in full. The partial  liquidated  damages  pursuant to the terms hereof
shall  apply on a daily  pro-rata  basis for any portion of a month prior to the
cure of an Event.

        3. Registration Procedures.

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

               (a) Not less than five  Trading  Days prior to the filing of each
Registration  Statement or any related Prospectus or any amendment or supplement
thereto  (including  any  document  that would be  incorporated  or deemed to be
incorporated  therein by  reference),  the  Company  shall,  (i) furnish to each
Holder copies of all such documents proposed to be filed, which documents (other
than those  incorporated  or deemed to be  incorporated  by  reference)  will be
subject  to the  review  of such  Holders,  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 shall  reasonably  object in good faith,
provided  that,  the Company is notified of such  objection  in writing no later
than 5 Trading  Days after the  Holders  have been so  furnished  copies of such
documents.   Each   Holder   agrees  to  furnish  to  the  Company  a  completed
Questionnaire  in the form  attached  to this  Agreement  as Annex B (a "Selling
Shareholder  Questionnaire")  not less than two Trading Days prior to the Filing
Date or by the end of the fourth  Trading Day  following  the date on which such
Holder receives draft materials in accordance with this Section.

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               (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
(subject to the terms of this  Agreement),  and as so supplemented or amended to
be filed pursuant to Rule 424; (iii) respond as promptly as reasonably  possible
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 a  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  (subject to
the terms of this  Agreement)  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) If during the Effectiveness Period, the number of Registrable
Securities  at any time exceeds 90% of the number of shares of Common Stock then
registered in a Registration  Statement,  then the Company shall file as soon as
reasonably  practicable but in any case prior to the applicable  Filing Date, an
additional Registration Statement covering the resale by the Holders of not less
than 130% of the number of such Registrable Securities.

               (d)  Notify  the  Holders of  Registrable  Securities  to be sold
(which  notice  shall,   pursuant  to  clauses  (ii)  through  (vi)  hereof,  be
accompanied by an  instruction  to suspend the use of the  Prospectus  until the
requisite  changes have been made) as promptly as reasonably  possible  (and, in
the case of (i)(A) below,  not less than five 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  or any other
federal  or state  governmental  authority  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;

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(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;  (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
a 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  revisions  to  a  Registration  Statement,  Prospectus  or  other
documents so that, in the case of a 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;  and (vi) the  occurrence  or  existence  of any pending
corporate  development with respect to the Company that the Company believes may
be material and that, in the  determination of the Company,  makes it not in the
best interest of the Company to allow  continued  availability of a Registration
Statement or  Prospectus;  provided that any and all of such  information  shall
remain  confidential  to each Holder until such  information  otherwise  becomes
public,  unless  disclosure by a Holder is required by law;  provided,  further,
notwithstanding  each Holder's agreement to keep such information  confidential,
the Holders  make no  acknowledgement  that any such  information  is  material,
non-public information.

               (e) 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.

               (f)  Furnish  to  each  Holder,  without  charge,  at  least  one
conformed copy of each such Registration  Statement and each amendment  thereto,
including  financial  statements and schedules,  all documents  incorporated  or
deemed to be incorporated  therein by reference to the extent  requested by such
Person, 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.

               (g) Promptly  deliver to each  Holder,  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 in
connection with resales by the Holder of Registrable Securities.  Subject to the
terms  of  this  Agreement,  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, except after
the giving on any notice pursuant to Section 3(d).

               (h) If NASDR  Rule  2710  requires  any  broker-dealer  to make a
filing  prior to  executing a sale by a Holder,  the  Company  shall (i) make an
Issuer Filing with the NASDR, Inc. Corporate  Financing  Department  pursuant to
NASDR Rule  2710(b)(10)(A)(i),  (ii)  respond  within five  Trading  Days to any
comments received from NASDR in connection  therewith,  (iii) and pay the filing
fee required in connection therewith.

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               (i) Prior to any resale of  Registrable  Securities  by a Holder,
use its commercially reasonable efforts to register or qualify or cooperate with
the selling Holders in connection with the  registration  or  qualification  (or
exemption from the Registration or qualification) of such Registrable Securities
for the  resale  by the  Holder  under the  securities  or Blue Sky laws of such
jurisdictions  within the United  States as any Holder  reasonably  requests  in
writing,  to keep each  registration or qualification  (or exemption  therefrom)
effective  during the  Effectiveness  Period and to do any and all other acts or
things reasonably  necessary to enable the disposition in such  jurisdictions of
the Registrable  Securities  covered by each 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,  subject the Company to any
material tax in any such jurisdiction  where it is not then so subject or file a
general consent to service of process in any such jurisdiction.

               (j) If requested by the  Holders,  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.

               (k) Upon the occurrence of any event contemplated by this Section
3, as  promptly  as  reasonably  possible  under the  circumstances  taking into
account the Company's good faith  assessment of any adverse  consequences to the
Company and its stockholders of the premature  disclosure of such event, prepare
a  supplement  or  amendment,   including  a  post-effective   amendment,  to  a
Registration Statement or a supplement to the related Prospectus or any document
incorporated  or deemed to be  incorporated  therein by reference,  and file any
other required document so that, as thereafter delivered, neither a 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.  If the Company  notifies the Holders in accordance
with  clauses  (ii) through (vi) of Section 3(d) above to suspend the use of any
Prospectus  until the requisite  changes to such Prospectus have been made, then
the Holders shall suspend use of such Prospectus.  The Company will use its best
efforts to ensure that the use of the  Prospectus  may be resumed as promptly as
is  practicable.  The Company shall be entitled to exercise its right under this
Section  3(k) to  suspend  the  availability  of a  Registration  Statement  and
Prospectus,  subject to the payment of partial  liquidated  damages  pursuant to
Section 2(b),  for a period not to exceed 90 days (which need not be consecutive
days) in any 12 month period.

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

               (m) 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 required by the Commission, the person
thereof  that has voting and  dispositive  control  over the Shares.  During any
periods  that the  Company  is unable  to meet its  obligations  hereunder  with
respect to the  registration  of the Registrable  Securities  solely because any
Holder  fails to furnish  such  information  within  three  Trading  Days of the
Company's  request,  any liquidated damages that are accruing at such time as to
such  Holder  and its  Affiliates  only  shall be tolled  and any Event that may
otherwise  occur  solely  because of such delay  shall be  suspended  as to such
Holder and its  Affiliates  only,  until such  information  is  delivered to the
Company.

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        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,  (B) in compliance with applicable  state securities or Blue
Sky laws  reasonably  agreed to by the  Company in writing  (including,  without
limitation, fees and disbursements of counsel for the Company in connection with
Blue  Sky  qualifications  or  exemptions  of  the  Registrable  Securities  and
determination  of the eligibility of the  Registrable  Securities for investment
under the laws of such jurisdictions as requested by the Holders) and (C) if not
previously paid by the Company in connection with an Issuer Filing, with respect
to any filing  that may be  required  to be made by any broker  through  which a
Holder intends to make sales of  Registrable  Securities  with NASD  Regulation,
Inc.  pursuant to the NASD Rule 2710, so long as the broker is receiving no more
than a  customary  brokerage  commission  in  connection  with such  sale,  (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, (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.  In no event shall the Company be
responsible  for any  broker or  similar  commissions  or,  except to the extent
provided for in the Transaction Documents,  any legal fees or other costs of the
Holders.

        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,  brokers (including brokers who
offer and sell  Registrable  Securities  as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment advisors
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 attorneys' fees) and expenses (collectively,  "Losses"),

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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 any form of  prospectus or in any amendment or supplement  thereto
or in any preliminary prospectus,  or arising out of or relating to any omission
or  alleged  omission  of a  material  fact  required  to be stated  therein  or
necessary to make the statements  therein (in the case of any Prospectus or form
of 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 (i) 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 such form of
Prospectus or in any amendment or supplement  thereto (it being  understood that
the Holder has approved  Annex A hereto for this purpose) or (ii) in the case of
an occurrence of an event of the type  specified in Section  3(d)(ii)-(vi),  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  arising from or in connection with the transactions
contemplated by this Agreement of which the Company is aware.

               (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,  to the extent  arising 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 or alleged  untrue  statement of a material fact contained
in any Registration Statement, any Prospectus,  or any form of prospectus, or in
any amendment or supplement thereto or in any preliminary prospectus, or arising
out of or  relating  to any  omission  or alleged  omission  of a material  fact
required to be stated  therein or necessary to make the  statements  therein not
misleading (i) 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 (ii) 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 such form of  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(d)(ii)-(vi),  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.

                                       9
<PAGE>

               (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  have the right to assume the  defense  thereof,
including the employment of counsel  reasonably  satisfactory to the Indemnified
Party 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 it
shall  be  finally  determined  by a  court  of  competent  jurisdiction  (which
determination  is not  subject to appeal or further  review)  that such  failure
shall have 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 reasonably  believe that a material 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 the reasonable fees and expenses of one
separate  counsel  shall  be at the  expense  of the  Indemnifying  Party).  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.

               Subject to the terms of this  Agreement,  all reasonable 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;  provided,  that the Indemnified Party shall
promptly  reimburse  the  Indemnifying  Party for that  portion of such fees and
expenses  applicable  to such  actions for which such  Indemnified  Party is not
entitled to indemnification hereunder, determined based upon the relative faults
of the parties.

                                       10
<PAGE>

               (d) Contribution.  If the  indemnification  under Section 5(a) or
5(b)  is  unavailable  to an  Indemnified  Party  or  insufficient  to  hold  an
Indemnified Party harmless for any Losses,  then each  Indemnifying  Party shall
contribute  to the amount  paid or payable by such  Indemnified  Party,  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 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 this Agreement,
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, except in the case of fraud by
such Holder.

               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 set forth on Schedule
6(b) attached 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 the  initial  Registration  Statement  other  than  the  Registrable
Securities.  No  Person  has any  right to  cause  the  Company  to  effect  the
registration  under the  Securities  Act of any  securities of the Company.  The
Company  shall  not file any other  registration  statements  until the  initial
Registration   Statement   required  hereunder  is  declared  effective  by  the
Commission,  provided that this Section 6(b) shall not prohibit the Company from
filing amendments to registration statements already filed.

                                       11
<PAGE>

          (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.

          (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(d),  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 will use its best efforts to ensure that the use of the  Prospectus  may
be resumed as promptly as it  practicable.  The Company agrees and  acknowledges
that any  periods  during  which  the  Holder is  required  to  discontinue  the
disposition  of the  Registrable  Securities  hereunder  shall be subject to the
provisions of Section 2(b).

          (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 the stock option or other employee
benefit  plans,  then the Company shall send to each Holder a written  notice of
such  determination  and, if within  fifteen days after the date 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; provided, however, that, the Company shall not
be required to register any Registrable Securities pursuant to this Section 6(e)
that are  eligible  for resale  pursuant  to Rule 144(k)  promulgated  under the
Securities  Act  or  that  are  the  subject  of a then  effective  Registration
Statement.

          (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  Holders  of at least 75% 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
Holders  and that does not  directly  or  indirectly  affect the rights of other
Holders may be given by Holders of all 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.

                                       12
<PAGE>

          (g) Notices. Any and all notices or other communications or deliveries
required or permitted to be provided  hereunder  shall be delivered as set forth
in the Purchase Agreement.

          (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
the Holders of at least 75% of the then-outstanding Registrable Securities. Each
Holder may assign  their  respective  rights  hereunder in the manner and to the
Persons as permitted under the Purchase Agreement.

          (i) No  Inconsistent  Agreements.  Neither  the Company nor any of its
subsidiaries has entered, as of the date hereof, nor shall the Company or any of
its  subsidiaries,  on or  after  the  date of this  Agreement,  enter  into any
agreement  with  respect  to its  securities,  that  would  have the  effect  of
impairing  the rights  granted to the  Holders in this  Agreement  or  otherwise
conflicts  with the  provisions  hereof.  Except as set forth on Schedule  6(i),
neither the Company nor any of its subsidiaries has previously  entered into any
agreement granting any registration rights with respect to any of its securities
to any Person that have not been satisfied in full.

          (j) 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.

          (k)  Governing  Law.  All  questions   concerning  the   construction,
validity,  enforcement and  interpretation of this Agreement shall be determined
with the provisions of the Purchase Agreement.

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

          (m) 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  commercially  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.

                                       13
<PAGE>

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

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

                              ********************

                                       14
<PAGE>

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

                                INTRAOP MEDICAL CORPORATION

                                By:  /s/  Donald A. Goer___________________
                                  Name: Donald A. Goer
                                  Title:   Chief Executive Officer and President

                       [SIGNATURE PAGE OF HOLDERS FOLLOWS]

                                       15
<PAGE>

                     [SIGNATURE PAGE OF HOLDERS TO IOPM RRA]

Name of Holder: Gamma Opportunity Capital Partners, LP Class C
Signature of Authorized Signatory of Holder: /s/ Jonathan P. Knight
Name of Authorized Signatory: Jonathan P. Knight
Title of Authorized Signatory: President/Director

                           [SIGNATURE PAGES CONTINUE]

                                       16
<PAGE>

                     [SIGNATURE PAGE OF HOLDERS TO IOPM RRA]

Name of Holder: Gamma Opportunity Capital Partners, LP Class A
Signature of Authorized Signatory of Holder: /s/ Jonathan P. Knight
Name of Authorized Signatory: Jonathan P. Knight
Title of Authorized Signatory: President/Director

                           [SIGNATURE PAGES CONTINUE]

                                       17
<PAGE>

                     [SIGNATURE PAGE OF HOLDERS TO IOPM RRA]

Name of Holder: Bushido Capital Master Fund, LP
Signature of Authorized Signatory of Holder: /s/ Christopher Kossman
Name of Authorized Signatory: Christopher Kossman
Title of Authorized Signatory: Managing Director

                           [SIGNATURE PAGES CONTINUE]

                                       18
<PAGE>

                     [SIGNATURE PAGE OF HOLDERS TO IOPM RRA]

Name of Holder: Samir Financial, L.L.C.
Signature of Authorized Signatory of Holder: /s/ Mohammed H. Mirza
Name of Authorized Signatory: Mohammed H. Mirza
Title of Authorized Signatory: Manager

                           [SIGNATURE PAGES CONTINUE]

                                       19
<PAGE>

                     [SIGNATURE PAGE OF HOLDERS TO IOPM RRA]

Name of Holder: Regenmacher Holdings, Ltd.
Signature of Authorized Signatory of Holder: /s/ Jonathan P. Knight
Name of Authorized Signatory: Jonathan P. Knight
Title of Authorized Signatory: President of Investment Manager

                           [SIGNATURE PAGES CONTINUE]

                                       20
<PAGE>

                    [SIGNATURE PAGE OF HOLDERS TO IOPM RRA]

Name of Holder: ABS SOS-Plus Partners, Ltd.
Signature of Authorized Signatory of Holder: /s/ Jonathan P. Knight
Name of Authorized Signatory: Jonathan P. Knight
Title of Authorized Signatory: President/Director

                                       21

<PAGE>

                              Plan of Distribution
                              --------------------

         Each Selling  Stockholder  (the "Selling  Stockholders")  of the common
stock ("Common Stock") of Intraop Medical Corporation, a Nevada corporation (the
"Company") 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 the
Trading Market or any other 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.  A  Selling  Stockholder  may  use  any  one or  more of the
following methods when selling shares:

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

          o    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;

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

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

          o    privately negotiated transactions;

          o    settlement of short sales  entered into after the effective  date
               of the registration statement of which this prospectus is a part;

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

          o    a combination of any such methods of sale;

          o    through the  writing or  settlement  of options or other  hedging
               transactions,  whether through an options  exchange or otherwise;
               or

          o    any other method permitted pursuant to applicable law.

         The Selling  Stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (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,  but, except as set forth in a supplement to this Prospectus, in the
case of an agency transaction not in excess of a customary brokerage  commission
in compliance with NASDR Rule 2440; and in the case of a principal transaction a
markup or markdown in compliance with NASDR IM-2440.

                                       22
<PAGE>

         In connection  with the sale of the Common Stock or interests  therein,
the Selling Stockholders may enter into hedging transactions with broker-dealers
or other financial institutions,  which may in turn engage in short sales of the
Common Stock in the course of hedging the  positions  they  assume.  The Selling
Stockholders  may also sell shares of the Common  Stock short and deliver  these
securities  to close out their  short  positions,  or loan or pledge  the Common
Stock to  broker-dealers  that in turn may sell these  securities.  The  Selling
Stockholders   may  also  enter   into   option  or  other   transactions   with
broker-dealers  or other  financial  institutions or the creation of one or more
derivative  securities which require the delivery to such broker-dealer or other
financial  institution of shares offered by this  prospectus,  which shares such
broker-dealer  or  other  financial  institution  may  resell  pursuant  to this
prospectus (as supplemented or amended to reflect such transaction).

         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. Each Selling  Stockholder has
informed  the  Company  that it does not have any written or oral  agreement  or
understanding,  directly or indirectly, with any person to distribute the Common
Stock. In no event shall any broker-dealer receive fees, commissions and markups
which, in the aggregate, would exceed eight percent (8%).

         The Company is required to pay certain  fees and  expenses  incurred by
the Company incident to the  registration of the shares.  The Company has agreed
to indemnify the Selling  Stockholders against certain losses,  claims,  damages
and liabilities, including liabilities under the Securities Act.

         Because Selling Stockholders may be deemed to be "underwriters"  within
the  meaning of the  Securities  Act,  they will be  subject  to the  prospectus
delivery requirements of the Securities Act. In addition, any securities covered
by this  prospectus  which  qualify  for sale  pursuant  to Rule 144  under  the
Securities  Act may be sold under Rule 144  rather  than under this  prospectus.
Each  Selling  Stockholder  has advised us that they have not  entered  into any
written or oral agreements,  understandings or arrangements with any underwriter
or  broker-dealer  regarding  the  sale  of  the  resale  shares.  There  is  no
underwriter or  coordinating  broker acting in connection with the proposed sale
of the resale shares by the Selling Stockholders.

         We agreed to keep this  prospectus  effective  until the earlier of (i)
the date on which the shares may be resold by the Selling  Stockholders  without
registration  and  without  regard to any volume  limitations  by reason of Rule
144(e) under the  Securities Act or any other rule of similar effect or (ii) all
of the shares have been sold  pursuant to the  prospectus  or Rule 144 under the
Securities  Act or any other rule of similar  effect.  The resale shares will be
sold only through  registered or licensed  brokers or dealers if required  under
applicable  state securities  laws. In addition,  in certain states,  the resale
shares may not be sold unless they have been registered or qualified for sale in
the applicable  state or an exemption  from the  registration  or  qualification
requirement is available and is complied with.

                                       23
<PAGE>

         Under  applicable  rules and  regulations  under the Exchange  Act, any
person engaged in the  distribution of the resale shares may not  simultaneously
engage in market  making  activities  with  respect to the Common  Stock for the
applicable  restricted  period,  as  defined  in  Regulation  M,  prior  to  the
commencement of the distribution.  In addition, the Selling Stockholders will be
subject  to  applicable  provisions  of the  Exchange  Act  and  the  rules  and
regulations  thereunder,  including  Regulation M, which may limit the timing of
purchases and sales of shares of the Common Stock by the Selling Stockholders or
any other  person.  We will  make  copies of this  prospectus  available  to the
Selling  Stockholders  and have  informed  them of the need to deliver a copy of
this prospectus to each purchaser at or prior to the time of the sale.

                                       24
<PAGE>

                                                                         Annex B

                           INTRAOP MEDICAL CORPORATION

                 Selling Securityholder Notice and Questionnaire

         The undersigned  beneficial owner of common stock, par value $0.001 per
share (the "Common Stock"), of Intraop Medical Corporation, a Nevada corporation
(the "Company"), (the "Registrable Securities") understands that the Company has
filed or  intends  to file with the  Securities  and  Exchange  Commission  (the
"Commission")   a  registration   statement  on  Form  S-3  (the   "Registration
Statement") for the registration and resale under Rule 415 of the Securities Act
of 1933, as amended (the "Securities  Act"), of the Registrable  Securities,  in
accordance  with the terms of the  Registration  Rights  Agreement,  dated as of
August ___, 2005 (the "Registration  Rights  Agreement"),  among the Company and
the Purchasers  named therein.  A copy of the  Registration  Rights Agreement is
available  from the Company  upon  request at the address set forth  below.  All
capitalized  terms not otherwise defined herein shall have the meanings ascribed
thereto in the Registration Rights Agreement.

         Certain  legal  consequences  arise  from  being  named  as  a  selling
securityholder  in  the  Registration  Statement  and  the  related  prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are advised
to consult their own securities law counsel  regarding the consequences of being
named  or not  being  named  as a  selling  securityholder  in the  Registration
Statement and the related prospectus.

                                     NOTICE

         The  undersigned  beneficial  owner (the "Selling  Securityholder")  of
Registrable Securities hereby elects to include the Registrable Securities owned
by it and listed below in Item 3 (unless otherwise  specified under such Item 3)
in the Registration Statement.

                                       25
<PAGE>

The  undersigned  hereby  provides the following  information to the Company and
represents and warrants that such information is accurate:

                                  QUESTIONNAIRE

1.      Name.

       (a)      Full Legal Name of Selling Securityholder

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

       (b)      Full Legal Name of  Registered  Holder (if not the same as (a)
                above) through which  Registrable  Securities Listed in Item 3
                below are held:

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

       (c)      Full Legal  Name of  Natural  Control  Person  (which  means a
                natural person who directly or indirectly alone or with others
                has power to vote or dispose of the securities  covered by the
                questionnaire):

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

2.      Address for Notices to Selling Securityholder:

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

Telephone:______________________________________________________________________
Fax:____________________________________________________________________________
Contact Person:_________________________________________________________________

3.      Beneficial Ownership of Registrable Securities:

         (a) Type and Principal  Amount of Registrable  Securities  beneficially
owned:

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

                                       26
<PAGE>

4. Broker-Dealer Status:

          (a)  Are you a broker-dealer?

                                            Yes [ ]      No [ ]

          (b)  If  "yes" to  Section  4(a),  did you  receive  your  Registrable
               Securities as compensation for investment banking services to the
               Company.

                                            Yes [ ]      No [ ]

        Note: If no, the  Commission's  staff has indicated that you should be
              identified as an underwriter in the Registration Statement.

         (c) Are you an affiliate of a broker-dealer?

                                            Yes [ ]      No [ ]

         (d)      If you are an  affiliate  of a  broker-dealer,  do you certify
                  that you bought the  Registrable  Securities  in the  ordinary
                  course of  business,  and at the time of the  purchase  of the
                  Registrable  Securities to be resold, you had no agreements or
                  understandings,  directly  or  indirectly,  with any person to
                  distribute the Registrable Securities?

                                            Yes [ ]      No [ ]

        Note:  If no, the  Commission's  staff has indicated that you should be
               identified as an underwriter in the Registration Statement.

5. Beneficial  Ownership of Other Securities of the Company Owned by the Selling
Securityholder.

         Except as set forth  below in this Item 5, the  undersigned  is not the
         beneficial or registered  owner of any  securities of the Company other
         than the Registrable Securities listed above in Item 3.

          (a)  Type and  Amount of Other  Securities  beneficially  owned by the
               Selling Securityholder:

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

                                       27
<PAGE>

6. Relationships with the Company:

         Except as set  forth  below,  neither  the  undersigned  nor any of its
         affiliates,  officers, directors or principal equity holders (owners of
         5% of more of the equity  securities of the  undersigned)  has held any
         position or office or has had any other material  relationship with the
         Company  (or its  predecessors  or  affiliates)  during  the past three
         years.

         State any exceptions here:

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

         The   undersigned   agrees  to  promptly  notify  the  Company  of  any
inaccuracies  or  changes  in the  information  provided  herein  that may occur
subsequent  to the date  hereof  at any time  while the  Registration  Statement
remains effective.

         By signing  below,  the  undersigned  consents to the disclosure of the
information  contained  herein  in its  answers  to  Items 1  through  6 and the
inclusion of such  information  in the  Registration  Statement  and the related
prospectus  and  any  amendments  or  supplements   thereto.   The   undersigned
understands  that  such  information  will  be  relied  upon by the  Company  in
connection with the preparation or amendment of the  Registration  Statement and
the related prospectus.

         IN WITNESS WHEREOF the undersigned, by authority duly given, has caused
this Notice and  Questionnaire  to be executed and delivered either in person or
by its duly authorized agent.

Dated:                                 Beneficial Owner:
       ------------------                               ------------------------

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

PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED  NOTICE AND  QUESTIONNAIRE,  AND
RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:

                                       27EXHIBIT 10.3

                          SECURITIES PURCHASE AGREEMENT

         This Securities  Purchase  Agreement (this  "Agreement") is dated as of
August 31, 2005 among Intraop Medical  Corporation,  a Nevada  corporation  (the
"Company"),  and each purchaser  identified on the signature pages hereto (each,
including  its  successors  and assigns,  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 each  Purchaser,  and each  Purchaser,  severally  and not
jointly, desires to purchase from the Company, 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 each Purchaser agree
as follows:

ARTICLE I.
                                   DEFINITIONS

         1.1  Definitions.  In addition to the terms  defined  elsewhere in this
Agreement:  (a) capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Debentures (as defined herein),  and (b) the
following terms have the meanings indicated in this Section 1.1:

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

                  "Affiliate"  means any Person  that,  directly  or  indirectly
         through one or more intermediaries,  controls or is controlled by or is
         under  common  control  with a  Person,  as such  terms are used in and
         construed  under Rule 144 under the  Securities  Act. 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  Trading  Day  when  all  of  the
         Transaction   Documents   have  been  executed  and  delivered  by  the
         applicable  parties  thereto,  and all conditions  precedent to (i) the
         Purchasers'  obligations  to pay the  Subscription  Amount and (ii) the
         Company's  obligations to deliver the Securities have been satisfied or
         waived.

                                       1
<PAGE>

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

                   "Commission" means the Securities and Exchange Commission.

                  "Common  Stock"  means the common  stock of the  Company,  par
         value $0.001 per share,  and any other class of  securities  into which
         such securities may hereafter have been reclassified or changed into.

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

                  "Company Counsel" means Manatt, Phelps & Phillips, LLP.

                  "Conversion  Price"  shall have the  meaning  ascribed to such
         term in the Debentures.

                  "Debentures" means, the 7% Convertible Debentures due, subject
         to the terms therein,  three years from their date of issuance,  issued
         by the Company to the Purchasers hereunder, in the form of Exhibit A.

                  "Disclosure Schedules" shall have the meaning ascribed to such
         term in Section 3.1.

                  "Effective Date" means the date that the initial  Registration
         Statement  filed by the  Company  pursuant to the  Registration  Rights
         Agreement is first declared effective by the Commission.

                  "Evaluation Date" shall have the meaning ascribed to such term
         in Section 3.1(r).

                  "Exchange Act" means the  Securities  Exchange Act of 1934, as
         amended, and the rules and regulations promulgated thereunder.

                                       2
<PAGE>

                  "Exempt  Issuance"  means the issuance of (a) shares of Common
         Stock or options to  employees,  officers or  directors  of the Company
         pursuant to any stock or option plan duly  adopted by a majority of the
         non-employee  members  of the Board of  Directors  of the  Company or a
         majority  of the  members  of a  committee  of  non-employee  directors
         established  for such  purpose,  (b)  securities  upon the  exercise or
         exchange of or conversion of any  Securities  issued  hereunder  and/or
         securities  exercisable or exchangeable  for or convertible into shares
         of Common Stock issued and  outstanding on the date of this  Agreement,
         provided that such  securities  have not been amended since the date of
         this Agreement to increase the number of such securities or to decrease
         the exercise,  exchange or conversion price of any such securities, (c)
         securities  issued pursuant to acquisitions or strategic  transactions,
         provided any such  issuance  shall only be 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 benefits in addition to the investment of funds, but shall not
         include  a  transaction  in which the  Company  is  issuing  securities
         primarily  for the  purpose  of raising  capital or to an entity  whose
         primary business is investing in securities, (d) warrants or options to
         purchase   Common   Stock   issued   in   connection   with   otherwise
         non-convertible  or non-equity  linked debt  financing with a reputable
         commercial  lender provided that the exercise price of such warrants or
         options at all times is equal to or  greater  than the VWAP at the time
         of the consummation of such financing and the aggregate  exercise price
         of such  warrants  or options  does not exceed 10% of the net  proceeds
         raised by the Company in such  financing  transaction,  (e)  securities
         issued pursuant to the Regenmacher  Transaction,  (f) securities issued
         in connection with any stock split, stock dividend or recapitalization,
         (g) up to an  amount  of  debentures  equal to the  difference  between
         $6,000,000  and the aggregate  Subscription  Amounts  hereunder,  to be
         placed by Stonegate Securities to Accredited Investors on substantially
         the same  terms and  conditions  hereunder,  except  that the number of
         "long-term"  warrants  issued in connection with such financing will be
         based on 30% of each  such  investors'  subscription  amount,  not 50%,
         which investors shall execute definitive agreements for the purchase of
         such  securities  on  or  before  September  30,  2005  (a  "Subsequent
         Stonegate  Placement") and (h) securities issued upon conversion of any
         securities included in the definition of Exempt Issuance.

                   "FW" means Feldman  Weinstein LLP with offices located at 420
         Lexington Avenue, Suite 2620, New York, New York 10170-0002.

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

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

                  "Legend Removal Date" shall have the meaning  ascribed to such
         term in Section 4.1(c).

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

                  "Long  Term  Warrant"  means  collectively  the  Common  Stock
         purchase warrants, in the form of Exhibit C delivered to the Purchasers
         at the Closing in accordance with Section 2.2(a) hereof, which Warrants
         shall be exercisable  immediately  and have a term of exercise equal to
         five years.

                                       3
<PAGE>

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

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

                  "Maximum Rate" shall have the meaning ascribed to such term in
         Section 5.17.

                  "Participation  Maximum"  shall have the  meaning  ascribed to
         such term in Section 4.13.

                  "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.

                  "Pre-Notice"  shall have the meaning  ascribed to such term in
         Section 4.13.

                  "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.

                  "Purchaser Party" shall have the meaning ascribed to such term
         in Section 4.11.

                  "Regenmacher" shall mean Regenmacher Ltd.

                  "Regenmacher  Debentures"  shall have the meaning  ascribed to
         such term in Section 2.3(b)(v).

                  "Regenmacher  Transaction"  shall have the meaning ascribed to
         such term in Section 2.3(b)(v).

                  "Registration  Rights Agreement" means the Registration Rights
         Agreement, dated the date hereof, among the Company and the Purchasers,
         in the form of Exhibit B attached hereto.

                  "Registration   Statement"  means  a  registration   statement
         meeting the requirements set forth in the Registration Rights Agreement
         and covering the resale of the  Underlying  Shares by each Purchaser as
         provided for in the Registration Rights Agreement.

                  "Required  Approvals"  shall have the meaning ascribed to such
         term in Section 3.1(e).

                                       4
<PAGE>

                  "Required   Minimum"  means,  as  of  any  date,  the  maximum
         aggregate  number of shares of Common Stock then issued or  potentially
         issuable in the future pursuant to the Transaction Documents, including
         any Underlying  Shares  issuable upon exercise or conversion in full of
         all Warrants and Debentures  (including  Underlying  Shares issuable as
         payment of interest),  ignoring any  conversion or exercise  limits set
         forth therein,  and assuming that the Conversion  Price is at all times
         on and after the date of determination 75% of the then Conversion Price
         on the Trading Day immediately prior to the date of determination.

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

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

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

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

                   "Short  Sales" shall  include all "short sales" as defined in
         Rule 200 of Regulation SHO under the Exchange Act.

                  "Short Term Warrant" means the Common Stock purchase warrants,
         in the form of Exhibit E delivered to the  Purchasers at the Closing in
         accordance  with  Section  2.2(a)  hereof,   which  Warrants  shall  be
         exercisable  on the date  hereof  and until the  earlier of the 6 month
         anniversary of the Effective  Date and the 13 month  anniversary of the
         date hereof.

                   "Subscription  Amount"  means,  as  to  each  Purchaser,  the
         aggregate  amount  to be paid for  Debentures  and  Warrants  purchased
         hereunder as specified  below such  Purchaser's  name on the  signature
         page of this Agreement and next to the heading  "Subscription  Amount",
         in United States Dollars and in immediately available funds.

                  "Subsequent Financing" shall have the meaning ascribed to such
         term in Section 4.13.

                  "Subsequent  Financing Notice" shall have the meaning ascribed
         to such term in Section 4.13.

                  "Subsidiary"  means any subsidiary of the Company as set forth
         on Schedule 3.1(a).

                  "Trading  Day" means a day on which the Common Stock is traded
         on a Trading Market.

                                       5
<PAGE>

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

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

                  "Underlying  Shares"  means the shares of Common  Stock issued
         and issuable upon conversion of the Debentures and upon exercise of the
         Warrants  and  issued  and  issuable  in lieu of the  cash  payment  of
         interest  on  the  Debentures  in  accordance  with  the  terms  of the
         Debentures.

                  "VWAP" means,  for any date, the price determined by the first
         of the following clauses that applies:  (a) if the Common Stock is then
         listed or quoted on a Trading Market, the daily volume weighted average
         price of the Common Stock for such date (or the nearest preceding date)
         on the primary  Trading Market on which the Common Stock is then listed
         or quoted as reported by Bloomberg  Financial L.P.  (based on a Trading
         Day from  9:30  a.m.  EST to 4:02  p.m.  Eastern  Time)  using  the VAP
         function;  (b) if the Common  Stock is not then listed or quoted on the
         Trading  Market and if prices for the Common Stock are then reported in
         the  "Pink  Sheets"  published  by the Pink  Sheets,  LLC (or a similar
         organization  or  agency  succeeding  to  its  functions  of  reporting
         prices),  the most  recent bid price per share of the  Common  Stock so
         reported;  or (c) in all other cases,  the fair market value of a share
         of Common Stock as  determined  by a nationally  recognized-independent
         appraiser  selected in good faith by  Purchasers  holding a majority of
         the Stated Value of the principal amount of Debentures then outstanding
         and reasonably acceptable to the Company.

                  "Warrants"  means,  collectively,  the Short Term Warrants and
         the Long Term Warrants

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

                                  ARTICLE II.
                                PURCHASE AND SALE

         2.1  Closing.  On the Closing  Date,  upon the terms and subject to the
conditions set forth herein,  concurrent with the execution and delivery of this
Agreement by the parties hereto,  the Company agrees to sell, and each Purchaser
agrees to purchase in the aggregate, severally and not jointly, up to $6,000,000
principal amount of the Debentures, but no less than $3,000,000 principal amount
of Debentures.  Each Purchaser shall deliver to the Company via wire transfer or
a certified check immediately available funds equal to their Subscription Amount
(except that, with respect to Samir  Financial,  up to $500,000 of consideration
for Debentures may be paid, in lieu of cash  consideration,  by the cancellation
of an equal amount of

                                       6
<PAGE>

indebtedness  of the Company then held by Samir  Financial on a $1 for $1 basis)
and the Company shall deliver to each Purchaser their  respective  Debenture and
Warrants as determined  pursuant to Section 2.2(a) and the other items set forth
in Section 2.2 issuable at the Closing.  Upon satisfaction of the conditions set
forth in Sections 2.2 and 2.3, the Closing  shall occur at the offices of FW, or
such other location as the parties shall mutually agree.

      2.2  Deliveries.
               ----------

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

                  (i) this Agreement duly executed by the Company;

                  (ii) a  legal  opinion  of  Company  Counsel,  in the  form of
         Exhibit D attached hereto;

                  (iii)  a  Debenture  with a  principal  amount  equal  to such
         Purchaser's  Subscription  Amount,  registered  in  the  name  of  such
         Purchaser;

                  (iv) a Long  Term  Warrant  registered  in the  name  of  such
         Purchaser to purchase up to a number of shares of Common Stock equal to
         50% of such Purchaser's  Subscription  Amount divided by the Conversion
         Price,  with an exercise  price equal to $0.4 0, subject to  adjustment
         therein;

                  (v) a  Short  Term  Warrant  registered  in the  name  of such
         Purchaser to purchase up to a number of shares of Common Stock equal to
         such Purchaser's pro rata share (based on each Purchaser's Subscription
         Amount  and  an  aggregate   Subscription   Amount  of  $6,000,000)  of
         $3,000,000  divided by the  Conversion  Price,  with an exercise  price
         equal to $0.40, subject to adjustment therein; and

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

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

                  (i) this Agreement duly executed by such Purchaser;

                  (ii) such Purchaser's  Subscription Amount by wire transfer to
         the account as specified in writing by the Company; and

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

      2.3   Closing Conditions.

          a) The  obligations  of the Company  hereunder in connection  with the
      Closing are subject to the following conditions being met:

                                       7
<PAGE>

                  (i) the accuracy in all material respects when made and on the
         Closing Date of the  representations  and  warranties of the Purchasers
         contained herein;

                  (ii)  all   obligations,   covenants  and  agreements  of  the
         Purchasers  required to be  performed  at or prior to the Closing  Date
         shall have been performed; and

                  (iii) the delivery by the Purchasers of the items set forth in
         Section 2.2(b) of this Agreement.

         b) The respective obligations of the Purchasers hereunder in connection
with the Closing are subject to the following conditions being met:

                  (i) the accuracy in all material  respects on the Closing Date
         of the representations and warranties of the Company contained herein;

                  (ii) all obligations,  covenants and agreements of the Company
         required to be  performed  at or prior to the  Closing  Date shall have
         been performed;

                  (iii) the  delivery  by the  Company of the items set forth in
         Section 2.2(a) of this Agreement;

                  (iv) there  shall have been no  Material  Adverse  Effect with
         respect to the Company since the date hereof;

                  (v) the  individuals  and entities  listed on Schedule 6(b) of
         the  Registration  Rights Agreement shall have executed and delivered a
         lock-up agreement, in the form attached hereto as Exhibit F;

                  (vi)  the  sale  of  secured  nonconvertible   debentures  and
         warrants of the Company in the principal  amount of up to $2,000,000 to
         Regenmacher  pursuant to that certain Securities  Purchase Agreement of
         even date  herewith by and between  the Company and  Regenmacher  (such
         transaction,  the "Regenmacher  Transaction"  and such debentures,  the
         "Regenmacher Debentures") shall be consummated  simultaneously with the
         Closing;

                  (vii) the  holders of the  Company's  outstanding  convertible
         securities immediately prior to the date hereof shall have converted at
         least 87% or  $1,700,000  of such  outstanding  securities on terms and
         conditions satisfactory to the Purchasers;

                  (viii)  the  delivery  by  the  Company  of  evidence,  to  be
         effective  contemporaneous  with  the  Closing,  of  the  satisfaction,
         conversion  and/or payment of indebtedness  in the aggregate  amount of
         approximately  $3,856,500 owed to Siemens Medical,  Samir Financial and
         other individuals and entities set forth on Schedule 4.9, including the
         delivery  of payoff  letters,  copies  of  executed  UCC-3  termination
         statements, and/or conversion documents together with general releases,
         each in form and substance,  and on terms and conditions,  satisfactory
         to the Purchasers; and

                                       8
<PAGE>

                  (ix) from the date hereof to the Closing Date,  trading in the
         Common Stock shall not have been  suspended by the  Commission  (except
         for any  suspension  of trading of  limited  duration  agreed to by the
         Company,  which  suspension  shall be terminated prior to the Closing),
         and,  at any time prior to the  Closing  Date,  trading  in  securities
         generally as reported by  Bloomberg  Financial  Markets  shall not have
         been  suspended  or  limited,  or  minimum  prices  shall not have been
         established on securities whose trades are reported by such service, or
         on any  Trading  Market,  nor  shall a  banking  moratorium  have  been
         declared either by the United States or New York State  authorities nor
         shall  there have  occurred  any  material  outbreak or  escalation  of
         hostilities  or  other  national  or  international  calamity  of  such
         magnitude  in its effect  on, or any  material  adverse  change in, any
         financial  market which,  in each case, in the  reasonable  judgment of
         each Purchaser,  makes it  impracticable or inadvisable to purchase the
         Debentures at the Closing.

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

         3.1 Representations and Warranties of the Company.  Except as set forth
under the  corresponding  section of the disclosure  schedules  delivered to the
Purchasers  concurrently herewith (the "Disclosure  Schedules") which Disclosure
Schedules  shall  be  deemed  a  part  hereof,  the  Company  hereby  makes  the
representations and warranties set forth below to each Purchaser.

                  (a) Subsidiaries.  All of the direct and indirect subsidiaries
         of the  Company  are set forth on Schedule  3.1(a).  The Company  owns,
         directly  or  indirectly,  all of the  capital  stock or  other  equity
         interests of each Subsidiary  free and clear of any 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 to subscribe for or purchase  securities.
         If the Company has no subsidiaries,  then references in the Transaction
         Documents to the Subsidiaries will be disregarded.

                  (b)  Organization and  Qualification.  The Company and each of
         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  or default of any of the
         provisions of its respective  certificate or articles of incorporation,
         bylaws  or  other  organizational  or  charter  documents.  Each of the
         Company and the  Subsidiaries is duly qualified to conduct business and
         is in good  standing as a foreign  corporation  or other entity in each
         jurisdiction in which the nature of the business  conducted or property
         owned  by it makes  such  qualification  necessary,  except  where  the
         failure to be so  qualified  or in good  standing,  as the case may be,
         could

                                       9
<PAGE>

         not have or reasonably be expected to result in (i) a material  adverse
         effect on the legality,  validity or  enforceability of any Transaction
         Document,  (ii) a material adverse effect on the results of operations,
         assets,  business,  prospects or condition  (financial or otherwise) of
         the Company and the Subsidiaries, taken as a whole, or (iii) a material
         adverse  effect on the  Company's  ability to  perform in any  material
         respect  on a  timely  basis  its  obligations  under  any  Transaction
         Document (any of (i), (ii) or (iii), a "Material  Adverse  Effect") and
         no Proceeding has been  instituted in any such  jurisdiction  revoking,
         limiting  or  curtailing  or seeking to revoke,  limit or curtail  such
         power and authority or qualification.

                  (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  hereunder and  thereunder.  The
         execution  and  delivery of each of the  Transaction  Documents  by the
         Company and the  consummation  by it of the  transactions  contemplated
         thereby have been duly  authorized by all necessary  action on the part
         of the Company and no further  action is required by the  Company,  its
         board of directors or its  stockholders  in connection  therewith other
         than in  connection  with  the  Required  Approvals.  Each  Transaction
         Document has been (or upon  delivery  will have been) duly  executed by
         the Company and, when delivered in accordance with the terms hereof and
         thereof,  will  constitute  the valid  and  binding  obligation  of the
         Company  enforceable  against the Company in accordance  with its terms
         except   (i)  as   limited  by   applicable   bankruptcy,   insolvency,
         reorganization,  moratorium  and  other  laws  of  general  application
         affecting  enforcement  of  creditors'  rights  generally  and  (ii) as
         limited by laws relating to the  availability of specific  performance,
         injunctive relief or other equitable remedies.

                  (d) No Conflicts.  The execution,  delivery and performance of
         the  Transaction  Documents by the Company and the  consummation by the
         Company of the other  transactions  contemplated  hereby and thereby do
         not and will not:  (i)  conflict  with or violate any  provision of the
         Company's or any Subsidiary's certificate or articles of incorporation,
         bylaws or other  organizational or charter documents,  or (ii) conflict
         with, or constitute a default (or an event that with notice or lapse of
         time or both would become a default)  under,  result in the creation of
         any Lien upon any of the  properties  or assets of the  Company  or any
         Subsidiary,  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) subject to the Required Approvals,  conflict with
         or 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
         have or reasonably be expected to result in a Material Adverse Effect.

                                       10
<PAGE>

                  (e)  Filings,  Consents  and  Approvals.  The  Company  is not
         required to obtain any consent, waiver, authorization or order of, give
         any notice to, or make any filing or  registration  with,  any court or
         other federal,  state, local or other  governmental  authority or other
         Person in connection  with the execution,  delivery and  performance by
         the  Company  of the  Transaction  Documents,  other  than (i)  filings
         required  pursuant to Section 4.6, (ii) the filing with the  Commission
         of the Registration  Statement,  (iii) the notice and/or application(s)
         to each  applicable  Trading  Market for the  issuance  and sale of the
         Debentures  and Warrants and the listing of the  Underlying  Shares for
         trading thereon in the time and manner required  thereby,  and (iv) the
         filing of Form D with the  Commission  and such filings as are required
         to be made under applicable state  securities 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
         applicable  Transaction  Documents,  will be duly and  validly  issued,
         fully paid and  nonassessable,  free and clear of all Liens  imposed by
         the Company  other than  restrictions  on transfer  provided for in the
         Transaction Documents. The Underlying Shares, when issued in accordance
         with the terms of the  Transaction  Documents,  will be validly issued,
         fully paid and  nonassessable,  free and clear of all Liens  imposed by
         the Company.  The Company has reserved from its duly authorized capital
         stock a number of shares of Common Stock for issuance of the Underlying
         Shares at least equal to the Required Minimum on the date hereof.

                  (g)  Capitalization.  The  capitalization of the Company is as
         set forth on  Schedule  3.1(g).  The Company has not issued any capital
         stock since its most recently filed periodic  report under the Exchange
         Act,  other than  pursuant to the  exercise of employee  stock  options
         under the  Company's  stock  option  plans,  the  issuance of shares of
         Common  Stock to employees  pursuant to the  Company's  employee  stock
         purchase plan and pursuant to the conversion or exercise of outstanding
         Common  Stock  Equivalents.  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,  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
         exercisable  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  Common  Stock  Equivalents.  The  issuance  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.  All of the  outstanding  shares  of  capital  stock of the
         Company are validly  issued,  fully paid and  nonassessable,  have been
         issued in compliance  with all federal and state  securities  laws, and
         none  of  such  outstanding  shares  was  issued  in  violation  of any
         preemptive  rights or  similar  rights  to  subscribe  for or  purchase
         securities.  No further  approval or  authorization of any stockholder,
         the Board of  Directors  of the Company or others is  required  for the
         issuance  and  sale  of  the  Securities.  There  are  no  stockholders
         agreements,  voting agreements or other similar agreements with respect
         to the  Company's  capital stock to which the Company is a party or, to
         the  knowledge  of the Company,  between or among any of the  Company's
         stockholders.

                                       11
<PAGE>

                  (h) SEC Reports;  Financial Statements.  The Company has filed
         all reports,  schedules, forms, statements and other documents required
         to be  filed by it  under  the  Securities  Act and 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,
         including the exhibits thereto and documents  incorporated by reference
         therein, being collectively referred to herein as the "SEC Reports") on
         a timely basis or has received a valid extension of such time of filing
         and has filed any such SEC Reports prior to the  expiration of any such
         extension.  As of their  respective  dates, the SEC Reports complied in
         all material  respects with the  requirements of the Securities Act and
         the  Exchange  Act and the  rules  and  regulations  of the  Commission
         promulgated  thereunder,  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 the 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
         United States generally  accepted  accounting  principles  applied on a
         consistent basis during the periods involved ("GAAP"), except as may be
         otherwise  specified in such financial  statements or the notes thereto
         and except  that  unaudited  financial  statements  may not contain all
         footnotes required by GAAP, and fairly present in all material respects
         the financial position of the Company and its consolidated subsidiaries
         as of and for the dates thereof and the results of operations  and cash
         flows for the periods  then ended,  subject,  in the case of  unaudited
         statements, to normal, immaterial, year-end audit adjustments.

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

                                       12
<PAGE>

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

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

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

                  (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

                                       13
<PAGE>

         materially  affect  the value of such  property  and do not  materially
         interfere with the use made and proposed to be made of such property by
         the Company and the  Subsidiaries and Liens for the payment of federal,
         state or other taxes,  the payment of which is neither  delinquent  nor
         subject to penalties. Any real property and facilities held under lease
         by the  Company  and the  Subsidiaries  are held by them  under  valid,
         subsisting  and  enforceable  leases  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 necessary or material for
         use in connection with their respective  businesses as described in the
         SEC  Reports  and which the  failure  to so have  could have a Material
         Adverse Effect  (collectively,  the  "Intellectual  Property  Rights").
         Neither the Company nor any  Subsidiary  has received a written  notice
         that  the  Intellectual  Property  Rights  used by the  Company  or any
         Subsidiary  violates or infringes upon the rights of any Person. To the
         knowledge of the Company,  all such  Intellectual  Property  Rights are
         enforceable and there is no existing  infringement by another Person of
         any of the Intellectual Property Rights of others.

                  (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  prudent  and  customary  in the
         businesses  in which the  Company  and the  Subsidiaries  are  engaged,
         including,  but  not  limited  to,  directors  and  officers  insurance
         coverage at least equal to the aggregate  Subscription  Amount.  To the
         best knowledge of the Company,  such  insurance  contracts and policies
         are accurate and complete.  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 the SEC  Reports,  none of the  officers or  directors  of the
         Company and, to the knowledge of the Company,  none of the employees of
         the Company is presently a party to any transaction with the Company or
         any  Subsidiary  (other than for  services as  employees,  officers and
         directors),  including  any  contract,  agreement or other  arrangement
         providing for the furnishing of services to or by, providing for rental
         of real  or  personal  property  to or  from,  or  otherwise  requiring
         payments to or from any officer,  director or such  employee or, to the
         knowledge of the Company, any entity in which any officer, director, or
         any  such  employee  has a  substantial  interest  or  is  an  officer,
         director,  trustee or partner,  in each case in excess of $60,000 other
         than  (i) for  payment  of  salary  or  consulting  fees  for  services
         rendered,  (ii)  reimbursement  for expenses  incurred on behalf of the
         Company and (iii) for other employee  benefits,  including stock option
         agreements under any stock option plan of the Company.

                                       14
<PAGE>

                  (r) Sarbanes-Oxley;  Internal Accounting Controls. The Company
         is in material compliance with all provisions of the Sarbanes-Oxley Act
         of 2002 which are  applicable to it as of the Closing Date. 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 GAAP and to
         maintain asset accountability, (iii) access to assets is permitted only
         in accordance with management's general or specific authorization,  and
         (iv) the  recorded  accountability  for  assets  is  compared  with the
         existing assets at reasonable intervals and appropriate action is taken
         with respect to any differences. The Company has established disclosure
         controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
         15d-15(e))  for the Company and designed such  disclosure  controls and
         procedures to ensure that material information relating to the Company,
         including its Subsidiaries, is made known to the certifying officers by
         others within those entities,  particularly  during the period in which
         the Company's most recently  filed  periodic  report under the Exchange
         Act, as the case may be, is being  prepared.  The Company's  certifying
         officers have evaluated the effectiveness of the Company's controls and
         procedures as of the date prior to the filing date of the most recently
         filed   periodic   report  under  the  Exchange  Act  (such  date,  the
         "Evaluation  Date").  The Company  presented in its most recently filed
         periodic   report  under  the  Exchange  Act  the  conclusions  of  the
         certifying  officers about the effectiveness of the disclosure controls
         and procedures  based on their  evaluations as of the Evaluation  Date.
         Since the Evaluation  Date,  there have been no significant  changes in
         the Company's internal controls (as such term is defined in Item 307(b)
         of  Regulation  S-K under the Exchange Act) or, to the knowledge of the
         Company, in other factors that could significantly affect the Company's
         internal controls.

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

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

                  (u)  Investment  Company.  The  Company is not,  and is not an
         Affiliate  of,  and  immediately  after  receipt  of  payment  for  the
         Securities,  will not be or be an Affiliate of, an "investment company"
         within the meaning of the  Investment  Company Act of 1940, as amended.
         The Company  shall conduct its business in a manner so that it will not
         become subject to the Investment Company Act.

(v)      Registration Rights.  Other than each of the Purchasers,  no Person has
         any right to cause the  Company  to effect the  registration  under the
         Securities Act of any securities of the Company.

                                       15
<PAGE>

                  (w) Listing and Maintenance Requirements. The Company's Common
         Stock is registered  pursuant to Section 12(g) of the Exchange Act, and
         the Company has taken no action  designed to, or which to its knowledge
         is likely to have the effect of,  terminating  the  registration of the
         Common Stock under the  Exchange  Act nor has the Company  received any
         notification  that the  Commission is  contemplating  terminating  such
         registration.  The Company has not, in the 12 months preceding the date
         hereof,  received  notice from any  Trading  Market on which the Common
         Stock is or has been listed or quoted to the effect that the Company is
         not in compliance with the listing or maintenance  requirements of such
         Trading  Market.  The Company is, and has no reason to believe  that it
         will not in the  foreseeable  future continue to be, in compliance with
         all such listing and maintenance requirements.

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

                  (y) Disclosure.  The Company  confirms that neither it nor any
         other Person acting on its behalf has provided any of the Purchasers or
         their agents or counsel with any information  that constitutes or might
         constitute material, nonpublic information. The Company understands and
         confirms that the Purchasers will rely on the foregoing representations
         and covenants in effecting  transactions  in securities of the Company.
         All disclosure  provided to the Purchasers  regarding the Company,  its
         business  and  the  transactions  contemplated  hereby,  including  the
         Disclosure  Schedules to this  Agreement,  furnished by or on behalf of
         the Company with respect to the  representations  and  warranties  made
         herein are true and correct  with respect to such  representations  and
         warranties  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.  The Company acknowledges and agrees that no
         Purchaser  makes or has made any  representations  or  warranties  with
         respect  to the  transactions  contemplated  hereby  other  than  those
         specifically set forth in Section 3.2 hereof.

(z)      No  Integrated  Offering.  Assuming  the  accuracy  of the  Purchasers'
         representations  and warranties  set forth in Section 3.2,  neither the
         Company,  nor any of its  affiliates,  nor any Person  acting on its or
         their behalf has,  directly or indirectly,  made any offers or sales of
         any  security  or  solicited  any  offers  to buy any  security,  under
         circumstances  that would cause this  offering of the  Securities to be
         integrated  with prior  offerings  by the Company  for  purposes of the
         Securities  Act  or any  applicable  shareholder  approval  provisions,
         including,  without limitation,  under the rules and regulations of any
         Trading Market on which any of the securities of the Company are listed
         or designated.

                                       16
<PAGE>

                  (aa) Solvency. Based on the financial condition of the Company
         as of the  Closing  Date  after  giving  effect to the  receipt  by the
         Company of the proceeds from the sale of the Securities hereunder,  (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). The Company has no
         knowledge of any facts or  circumstances  which lead it to believe that
         it will file for  reorganization or liquidation under the bankruptcy or
         reorganization  laws of any  jurisdiction  within  one  year  from  the
         Closing  Date.  The SEC Reports  set forth as of the dates  thereof all
         outstanding  secured and unsecured  Indebtedness  of the Company or any
         Subsidiary, or for which the Company or any Subsidiary has commitments.
         For the purposes of this Agreement,  "Indebtedness"  shall mean (a) any
         liabilities  for  borrowed  money or amounts  owed in excess of $50,000
         (other than trade accounts  payable  incurred in the ordinary course of
         business),  (b)  all  guaranties,  endorsements  and  other  contingent
         obligations in respect of  Indebtedness  of others,  whether or not the
         same are or should be reflected in the Company's  balance sheet (or the
         notes  thereto),   except   guaranties  by  endorsement  of  negotiable
         instruments  for deposit or collection or similar  transactions  in the
         ordinary  course of  business;  and (c) the present  value of any lease
         payments  in  excess  of  $50,000  due  under  leases  required  to  be
         capitalized  in  accordance  with GAAP.  Neither  the  Company  nor any
         Subsidiary is in default with respect to any Indebtedness.

                  (bb)  Tax  Status.   Except  for   matters   that  would  not,
         individually  or in the  aggregate,  have or  reasonably be expected to
         result in a Material  Adverse  Effect,  the Company and each Subsidiary
         has filed all necessary federal, state and foreign income and franchise
         tax returns and has paid or accrued all taxes shown as due thereon, and
         the  Company  has no  knowledge  of a tax  deficiency  which  has  been
         asserted or threatened against the Company or any Subsidiary.

                  (cc) No General  Solicitation.  Neither  the  Company  nor any
         person  acting on behalf of the  Company has offered or sold any of the
         Securities by any form of general  solicitation or general advertising.
         The Company has offered the  Securities for sale only to the Purchasers
         and certain other "accredited investors" within the meaning of Rule 501
         under the Securities Act.

                                       17
<PAGE>

                  (dd) Foreign Corrupt  Practices.  Neither the Company,  nor to
         the  knowledge  of the  Company,  any agent or other  person  acting on
         behalf of the Company,  has (i) directly or indirectly,  used any funds
         for unlawful  contributions,  gifts,  entertainment  or other  unlawful
         expenses related to foreign or domestic political  activity,  (ii) made
         any  unlawful  payment to foreign or domestic  government  officials or
         employees or to any foreign or domestic  political parties or campaigns
         from corporate  funds,  (iii) failed to disclose fully any contribution
         made by the  Company  (or made by any  person  acting on its  behalf of
         which the  Company  is aware)  which is in  violation  of law,  or (iv)
         violated in any material  respect any provision of the Foreign  Corrupt
         Practices Act of 1977, as amended.

                  (ee) Accountants.  The Company's  accountants are set forth on
         Schedule  3.1(ff) of the Disclosure  Schedule.  To the knowledge of the
         Company, such accountants, have expressed their opinion with respect to
         the financial  statements  included in the  Company's  Annual Report on
         Form 10-KSB for the year ended  December  31,  2004,  are a  registered
         public accounting firm as required by the Securities Act.

                  (ff)  Seniority.  As of the Closing Date, no  indebtedness  or
         other  equity of the  Company is senior to the  Debentures  in right of
         payment,  whether  with  respect to  interest  or upon  liquidation  or
         dissolution,  or otherwise, other than indebtedness secured by purchase
         money security  interests (which is senior only as to underlying assets
         covered thereby) and capital lease obligations (which is senior only as
         to the property covered thereby).

                  (gg) No Disagreements with Accountants and Lawyers.  There are
         no  disagreements  of  any  kind  presently  existing,   or  reasonably
         anticipated  by the  Company  to arise,  between  the  accountants  and
         lawyers  formerly or presently  employed by the Company and the Company
         is  current  with  respect  to any  fees  owed to its  accountants  and
         lawyers.

                  (hh)   Acknowledgment   Regarding   Purchasers'   Purchase  of
         Securities.  The  Company  acknowledges  and  agrees  that  each of the
         Purchasers  is  acting  solely  in  the  capacity  of an  arm's  length
         purchaser   with  respect  to  the   Transaction   Documents   and  the
         transactions contemplated hereby. The Company further acknowledges that
         no  Purchaser  is acting as a  financial  advisor or  fiduciary  of the
         Company (or in any similar capacity) with respect to this Agreement and
         the  transactions  contemplated  hereby  and any  advice  given  by any
         Purchaser  or any of their  respective  representatives  or  agents  in
         connection with this Agreement and the transactions contemplated hereby
         is merely incidental to the Purchasers' purchase of the Securities. The
         Company  further  represents  to  each  Purchaser  that  the  Company's
         decision  to enter into this  Agreement  has been  based  solely on the
         independent  evaluation of the transactions  contemplated hereby by the
         Company and its representatives.

                                       18
<PAGE>

                  (ii) Acknowledgement  Regarding  Purchasers' Trading Activity.
         Anything  in  this  Agreement  or  elsewhere  herein  to  the  contrary
         notwithstanding  (except for Section 4.16 hereof), it is understood and
         agreed by the Company (i) that none of the  Purchasers  have been asked
         to agree,  nor has any Purchaser  agreed,  to desist from purchasing or
         selling, long and/or short,  securities of the Company, or "derivative"
         securities  based on  securities  issued by the  Company or to hold the
         Securities for any specified term; (ii) that past or future open market
         or other  transactions  by any Purchaser,  including  Short Sales,  and
         specifically including, without limitation, Short Sales or "derivative"
         transactions,  before or after the  closing  of this or future  private
         placement  transactions,  may negatively impact the market price of the
         Company's  publicly-traded  securities;  (iii) that any Purchaser,  and
         counter  parties  in  "derivative"   transactions  to  which  any  such
         Purchaser  is a party,  directly or  indirectly,  presently  may have a
         "short"  position  in the Common  Stock,  and (iv) that each  Purchaser
         shall not be deemed to have any  affiliation  with or control  over any
         arm's length counter-party in any "derivative" transaction. The Company
         further  understands and  acknowledges  that (a) one or more Purchasers
         may engage in hedging  activities  at various  times  during the period
         that the Securities are  outstanding,  including,  without  limitation,
         during the periods that the value of the Underlying Shares  deliverable
         with respect to Securities  are being  determined  and (b) such hedging
         activities   (if  any)  could   reduce   the  value  of  the   existing
         stockholders'  equity  interests  in the  Company at and after the time
         that  the  hedging   activities  are  being   conducted.   The  Company
         acknowledges  that  such  aforementioned   hedging  activities  do  not
         constitute a breach of any of the Transaction Documents.

                  (jj)  Manipulation  of Price.  The Company has not, and to its
         knowledge  no one acting on its behalf  has,  (i)  taken,  directly  or
         indirectly,   any  action  designed  to  cause  or  to  result  in  the
         stabilization  or  manipulation  of the  price of any  security  of the
         Company to facilitate the sale or resale of any of the Securities, (ii)
         sold,  bid for,  purchased,  or, paid any  compensation  for soliciting
         purchases  of,  any of the  Securities  (other  than for the  placement
         agent's placement of the Securities), or (iii) paid or agreed to pay to
         any person any  compensation  for  soliciting  another to purchase  any
         other securities of the Company.

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

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

                                       19
<PAGE>

         enforceable  against it in  accordance  with its  terms,  except (i) as
         limited by general  equitable  principles  and  applicable  bankruptcy,
         insolvency,  reorganization,  moratorium  and  other  laws  of  general
         application affecting enforcement of creditors' rights generally,  (ii)
         as  limited  by  laws   relating  to  the   availability   of  specific
         performance,  injunctive  relief or other equitable  remedies and (iii)
         insofar as indemnification  and contribution  provisions may be limited
         by applicable law.

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

                  (c) Purchaser  Status.  At the time such Purchaser was offered
         the Securities,  it was, and at the date hereof it is, and on each date
         on which it exercises  any Warrants or converts any  Debentures it will
         be either:  (i) an "accredited  investor" as defined in Rule 501(a)(1),
         (a)(2),  (a)(3),  (a)(7) or (a)(8) under the  Securities  Act or (ii) a
         "qualified  institutional  buyer" as defined in Rule 144A(a)  under the
         Securities  Act.  Such  Purchaser is not required to be registered as a
         broker-dealer under Section 15 of the Exchange Act.

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

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

                  (f) Short Sales and Confidentiality  Prior To The Date Hereof.
         Other than the transaction  contemplated hereunder,  such Purchaser has
         not directly or  indirectly,  nor has any Person acting on behalf of or
         pursuant  to  any  understanding  with  such  Purchaser,  executed  any
         disposition,  including  Short Sales (but not  including  the  location
         and/or

                                       20
<PAGE>

         reservation of borrowable shares of Common Stock), in the securities of
         the  Company  during  the  period  commencing  from the time  that such
         Purchaser  first  received a term  sheet from the  Company or any other
         Person   setting   forth  the  material   terms  of  the   transactions
         contemplated  hereunder  until  the date  hereof  ("Discussion  Time").
         Notwithstanding  the  foregoing,  in the case of a Purchaser  that is a
         multi-managed  investment  vehicle whereby separate  portfolio managers
         manage separate  portions of such Purchaser's  assets and the portfolio
         managers have no direct  knowledge of the investment  decisions made by
         the portfolio  managers  managing  other  portions of such  Purchaser's
         assets,  the  representation  set forth  above  shall  only  apply with
         respect to the portion of assets managed by the portfolio  manager that
         made the investment decision to purchase the Securities covered by this
         Agreement.  Other than to other Persons party to this  Agreement,  such
         Purchaser has maintained the confidentiality of all disclosures made to
         it in connection  with this  transaction  (including  the existence and
         terms of this transaction).

                  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) The Securities may only be disposed of in compliance  with
         state and federal  securities  laws. In connection with any transfer of
         Securities other than pursuant to an effective  registration  statement
         or Rule 144, to the  Company or to an  affiliate  of a Purchaser  or in
         connection with a pledge as contemplated in Section 4.1(b), the Company
         may require the transferor thereof to provide to the Company an opinion
         of counsel selected by the transferor and reasonably  acceptable to the
         Company,  the form and  substance of which  opinion shall be reasonably
         satisfactory to the Company,  to the effect that such transfer does not
         require   registration  of  such   transferred   Securities  under  the
         Securities Act. As a condition of transfer,  any such transferee  shall
         agree in writing to be bound by the terms of this  Agreement  and shall
         have  the  rights  of  a  Purchaser   under  this   Agreement  and  the
         Registration Rights Agreement.

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

         [NEITHER]  THESE  SECURITIES  [NOR  THE  SECURITIES  INTO  WHICH  THESE
         SECURITIES ARE [EXERCISABLE]  [CONVERTIBLE]]  HAVE BEEN REGISTERED WITH
         THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES  COMMISSION OF
         ANY STATE IN RELIANCE  UPON AN EXEMPTION  FROM  REGISTRATION  UNDER THE
         SECURITIES  ACT OF  1933,  AS  AMENDED  (THE  "SECURITIES  ACT"),  AND,
         ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
         REGISTRATION  STATEMENT  UNDER THE  SECURITIES  ACT OR  PURSUANT  TO AN
         AVAILABLE  EXEMPTION  FROM,  OR IN A  TRANSACTION  NOT  SUBJECT TO, THE
         REGISTRATION  REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
         APPLICABLE  STATE  SECURITIES  LAWS AS EVIDENCED BY A LEGAL  OPINION OF
         COUNSEL TO THE TRANSFEROR TO SUCH EFFECT,  THE SUBSTANCE OF WHICH SHALL
         BE  REASONABLY  ACCEPTABLE  TO THE COMPANY.  THESE  SECURITIES  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.

                                       21
<PAGE>

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

                  (c)  Certificates  evidencing the Underlying  Shares shall not
         contain any legend  (including  the legend set forth in Section  4.1(b)
         hereof): (i) while a registration statement (including the Registration
         Statement)  covering the resale of such security is effective under the
         Securities  Act, or (ii) following any sale of such  Underlying  Shares
         pursuant to Rule 144, or (iii) if such  Underlying  Shares are eligible
         for sale  under Rule  144(k),  or (iv) 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 a legal
         opinion to the Company's  transfer  agent  promptly after the Effective
         Date if required by the Company's  transfer agent to effect the removal
         of the  legend  hereunder.  If all or any  portion  of a  Debenture  or
         Warrant is converted or exercised (as  applicable) at a time when there
         is an  effective  registration  statement  to cover  the  resale of the
         Underlying  Shares, or if such Underlying Shares may be sold under Rule
         144(k) or if such legend is not  otherwise  required  under  applicable
         requirements of the Securities Act (including judicial  interpretations
         thereof)  then  such  Underlying  Shares  shall be  issued  free of all
         legends.  The Company  agrees that  following the Effective  Date or at
         such time as such  legend  is no longer  required  under  this  Section
         4.1(c),  it will,  no later  than  three  Trading  Days  following  the
         delivery by a Purchaser to the Company or the Company's  transfer agent
         of a certificate representing Underlying Shares, as applicable,  issued
         with a restrictive  legend (such third Trading Day, the "Legend Removal
         Date"),   deliver  or  cause  to  be  delivered  to  such  Purchaser  a
         certificate  representing such shares 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.  Certificates
         for Securities subject to legend removal hereunder shall be transmitted
         by the transfer agent of the Company to the Purchasers by crediting the
         account of the  Purchaser's  prime  broker  with the  Depository  Trust
         Company System.

                                       22
<PAGE>

                  (d) In addition to such Purchaser's other available  remedies,
         the Company shall pay to a Purchaser,  in cash,  as partial  liquidated
         damages  and not as a penalty,  for each  $1,000 of  Underlying  Shares
         (based on the VWAP of the Common Stock on the date such  Securities are
         submitted to the Company's transfer agent) delivered for removal of the
         restrictive  legend and subject to Section 4.1(c),  $10 per Trading Day
         (increasing  to $20 per Trading Day 5 Trading  Days after such  damages
         have begun to accrue) for each Trading Day after the second Trading Day
         following the Legend  Removal Date until such  certificate is delivered
         without a legend.  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.

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

                  (f) Until the one year  anniversary of the Effective Date, the
         Company  shall  not  undertake  a reverse  or  forward  stock  split or
         reclassification of the Common Stock.

         4.2  Acknowledgment  of  Dilution.  The Company  acknowledges  that the
issuance of the Securities may 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  obligations  under the Transaction
Documents,  including without  limitation its obligation to issue the Underlying
Shares pursuant to the Transaction Documents, are unconditional and absolute and
not  subject  to any  right  of  set  off,  counterclaim,  delay  or  reduction,
regardless  of the effect of any such dilution or any claim the Company may have
against any Purchaser and  regardless of the dilutive  effect that such issuance
may have on the ownership of the other stockholders of the Company.

         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. As long as any Purchaser  owns  Securities,  if the Company is not
required to file  reports  pursuant  to the  Exchange  Act, it will  prepare and
furnish to the  Purchasers and make publicly  available in accordance  with Rule
144(c) such information as is required for the Purchasers to sell the Securities
under Rule 144.

                                       23
<PAGE>

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 sell, offer for sale or solicit
offers to buy or  otherwise  negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the  Securities  in a manner that would  require the  registration  under the
Securities  Act of the sale of the Securities to the Purchasers or that would be
integrated  with the offer or sale of the  Securities  for purposes of the rules
and regulations of any Trading Market.

         4.5 Conversion and Exercise Procedures.  The form of Notice of Exercise
included in the  Warrants and the form of Notice of  Conversion  included in the
Debentures set forth the totality of the  procedures  required of the Purchasers
in order to exercise the Warrants or convert the Debentures. No additional legal
opinion or other information or instructions shall be required of the Purchasers
to exercise their Warrants or convert their Debentures.  The Company shall honor
exercises of the Warrants and  conversions  of the  Debentures and shall deliver
Underlying Shares in accordance with the terms,  conditions and time periods set
forth in the Transaction Documents.

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

                                       24
<PAGE>

         4.7  Shareholder  Rights Plan. No claim will be made or enforced by the
Company or, to the knowledge of the Company, any other Person that any Purchaser
is an "Acquiring  Person" under any  shareholder  rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the  provisions of any such plan or  arrangement,  by
virtue of  receiving  Securities  under the  Transaction  Documents or under any
other  agreement  between  the  Company and the  Purchasers.  The Company  shall
conduct  its  business  in a manner so that it will not  become  subject  to the
Investment Company Act.

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

         4.9 Use of Proceeds and Engagement of an Investor  Relations  Firm. The
Company  shall  be  required  to use  the  net  proceeds  from  the  sale of the
Securities hereunder specifically as set forth on Schedule 4.9 hereto, including
the repayment of all  outstanding  Indebtedness as of the date hereof other than
as specifically set forth on such schedule, and to redeem Common Stock or Common
Stock  Equivalents  and to  settle  outstanding  litigation,  but  not  for  the
redemption  of any other Common Stock or Common Stock  Equivalents  or to settle
any other outstanding litigation not set forth thereon.  Within 30 days from the
date  hereof,  the Company  shall  engage the  services of a reputable  investor
relations firm, which selection shall be subject to the reasonable approval of a
majority in interest of the  Purchasers,  and shall continue to use the services
of such firm (or another firm selected  through a similar  process) for a period
of at least two years,  unless  all of the  Debentures  are repaid or  converted
prior to two years from the Closing  Date. A  sufficient  amount of the Proceeds
raised hereunder shall be reserved for the payment of such firm.

         4.10  Reimbursement.  If any Purchaser becomes involved in any capacity
in any  Proceeding by or against any Person who is a stockholder  of the Company
(except as a result of sales, pledges,  margin sales and similar transactions by
such Purchaser to or with any current  stockholder),  solely as a result of such
Purchaser's acquisition of the Securities under this Agreement, the Company will
reimburse such Purchaser for its reasonable legal and other expenses  (including
the cost of any  investigation  preparation and travel in connection  therewith)
incurred  in  connection   therewith,   as  such  expenses  are  incurred.   The
reimbursement  obligations  of the  Company  under  this  paragraph  shall be in
addition to any  liability  which the Company may otherwise  have,  shall extend
upon the same terms and  conditions to any  Affiliates of the Purchasers who are
actually  named in such  action,  proceeding  or  investigation,  and  partners,
directors,  agents,  employees and controlling persons (if any), as the case may
be, of the  Purchasers  and any such  Affiliate,  and shall be binding  upon and
inure  to  the  benefit  of  any   successors,   assigns,   heirs  and  personal
representatives  of the Company,  the  Purchasers and any such Affiliate and any
such  Person.  Other than with respect to willful  misconduct  by a Purchaser in
connection with the acquisition of the Securities,  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.

                                       25
<PAGE>

         4.11  Indemnification of Purchasers.  Subject to the provisions of this
Section  4.11,  the Company will  indemnify  and hold the  Purchasers  and their
directors,  officers,  shareholders,  members,  partners,  employees  and agents
(each,  a  "Purchaser  Party")  harmless  from any and all losses,  liabilities,
obligations,  claims, contingencies,  damages, costs and expenses, including all
judgments,  amounts paid in settlements,  court costs and reasonable  attorneys'
fees and costs of  investigation  that any such  Purchaser  Party may  suffer or
incur  as  a  result  of  or   relating   to  (a)  any  breach  of  any  of  the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other  Transaction  Documents  or (b) any action  instituted
against  a  Purchaser,  or any of them or their  respective  Affiliates,  by any
stockholder  of the  Company who is not an  Affiliate  of such  Purchaser,  with
respect to any of the  transactions  contemplated by the  Transaction  Documents
(unless such action is based upon a breach of such Purchaser's  representations,
warranties or covenants  under the  Transaction  Documents or any  agreements or
understandings  such  Purchaser  may  have  with  any  such  stockholder  or any
violations by the Purchaser of state or federal  securities  laws or any conduct
by such Purchaser which constitutes fraud, gross negligence,  willful misconduct
or  malfeasance).  If any action shall be brought against any Purchaser Party in
respect  of which  indemnity  may be sought  pursuant  to this  Agreement,  such
Purchaser  Party shall promptly  notify the Company in writing,  and the Company
shall  have the right to assume  the  defense  thereof  with  counsel of its own
choosing. Any Purchaser Party shall have the right to employ separate counsel in
any  such  action  and  participate  in the  defense  thereof,  but the fees and
expenses of such counsel shall be at the expense of such Purchaser  Party except
to the extent that (i) the employment  thereof has been specifically  authorized
by the Company in writing, (ii) the Company has failed after a reasonable period
of time to assume  such  defense  and to employ  counsel or (iii) in such action
there is,  in the  reasonable  opinion  of such  separate  counsel,  a  material
conflict  on any  material  issue  between  the  position of the Company and the
position  of such  Purchaser  Party.  The  Company  will  not be  liable  to any
Purchaser Party under this Agreement (i) for any settlement by a Purchaser Party
effected  without  the  Company's  prior  written  consent,  which  shall not be
unreasonably  withheld or delayed; or (ii) to the extent, but only to the extent
that a loss, claim, damage or liability is attributable to any Purchaser Party's
breach of any of the representations,  warranties,  covenants or agreements made
by the Purchasers in this Agreement or in the other Transaction Documents.

         4.12 Reservation and Listing of Securities.

                  (a) 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.

                  (b) If, on any date,  the number of  authorized  but  unissued
         (and  otherwise  unreserved)  shares of  Common  Stock is less than the
         Required  Minimum  on such  date,  then the Board of  Directors  of the
         Company  shall  use  commercially   reasonable  efforts  to  amend  the
         Company's  certificate  or articles of  incorporation  to increase  the
         number of  authorized  but unissued  shares of Common Stock to at least
         the Required Minimum at such time, as soon as possible and in any event
         not later than the 75th day after such date.

                                       26
<PAGE>

                  (c) The  Company  shall,  if  applicable:  (i) in the time and
         manner  required  by the  Trading  Market,  prepare  and file with such
         Trading  Market an additional  shares  listing  application  covering a
         number of shares of Common Stock at least equal to the Required Minimum
         on the date of such application, (ii) take all steps necessary to cause
         such shares of Common  Stock to be approved  for listing on the Trading
         Market as soon as possible thereafter,  (iii) provide to the Purchasers
         evidence of such listing,  and (iv) maintain the listing of such Common
         Stock on any date at least equal to the  Required  Minimum on such date
         on such Trading Market or another Trading Market.

         4.13 Participation in Future Financing.

                  (a) From the date hereof until the date,  with respect to each
         Purchaser, that such Purchaser no longer owns any Debentures,  upon any
         financing by the Company or any of its  Subsidiaries of Common Stock or
         Common Stock  Equivalents  (a "Subsequent  Financing"),  each Purchaser
         shall  have  the  right  to  participate  in  up to an  amount  of  the
         Subsequent  Financing  equal to the  lesser  of 100% of the  Subsequent
         Financing  and the sum of the  aggregate  Subscription  Amounts  of all
         Purchasers on the Closing Date (the "Participation Maximum").

                  (b) At  least 5  Trading  Days  prior  to the  closing  of the
         Subsequent  Financing,  the Company shall  deliver to each  Purchaser a
         written  notice  of its  intention  to  effect a  Subsequent  Financing
         ("Pre-Notice"),  which  Pre-Notice shall ask such Purchaser if it wants
         to review the details of such  financing  (such  additional  notice,  a
         "Subsequent  Financing Notice").  Upon the request of a Purchaser,  and
         only upon a  request  by such  Purchaser,  for a  Subsequent  Financing
         Notice,  the Company  shall  promptly,  but no later than 1 Trading Day
         after  such  request,  deliver a  Subsequent  Financing  Notice to such
         Purchaser. The Subsequent Financing Notice shall describe in reasonable
         detail the proposed terms of such Subsequent  Financing,  the amount of
         proceeds  intended to be raised  thereunder,  the Person with whom such
         Subsequent Financing is proposed to be effected,  and attached to which
         shall be a term sheet or similar document relating thereto.

                  (c) Any Purchaser  desiring to participate in such  Subsequent
         Financing must provide  written notice to the Company by not later than
         5:30 p.m.  (New York City time) on the 5th Trading Day after all of the
         Purchasers  have received the Pre-Notice  that the Purchaser is willing
         to  participate  in  the  Subsequent  Financing,   the  amount  of  the
         Purchaser's participation, and that the Purchaser has such funds ready,
         willing,  and  available  for  investment on the terms set forth in the
         Subsequent  Financing  Notice. If the Company receives no notice from a
         Purchaser as of such 5th Trading Day, such Purchaser shall be deemed to
         have notified the Company that it does not elect to participate.

                  (d) If by 5:30 p.m.  (New York City  time) on the 5th  Trading
         Day  after  all  of  the  Purchasers   have  received  the  Pre-Notice,
         notifications by the Purchasers of their  willingness to participate in
         the Subsequent  Financing (or to cause their  designees to participate)
         is, in the  aggregate,  less than the  total  amount of the  Subsequent
         Financing,  then the Company may effect the  remaining  portion of such
         Subsequent  Financing  on the terms and to the Persons set forth in the
         Subsequent Financing Notice.

                                       27
<PAGE>

                  (e) If by 5:30 p.m.  (New York City  time) on the 5th  Trading
         Day after all of the  Purchasers  have  received  the  Pre-Notice,  the
         Company  receives  responses  to a  Subsequent  Financing  Notice  from
         Purchasers  seeking to purchase more than the  aggregate  amount of the
         Participation  Maximum,  each such  Purchaser  shall  have the right to
         purchase the greater of (a) their Pro Rata  Portion (as defined  below)
         of the  Participation  Maximum  and  (b)  the  difference  between  the
         Participation  Maximum and the aggregate amount of participation by all
         other  Purchasers.   "Pro  Rata  Portion"  is  the  ratio  of  (x)  the
         Subscription  Amount of  Securities  purchased on the Closing Date by a
         Purchaser  participating under this Section 4.13 and (y) the sum of the
         aggregate  Subscription  Amounts of Securities purchased on the Closing
         Date by all Purchasers participating under this Section 4.13.

                  (f) The  Company  must  provide the  Purchasers  with a second
         Subsequent  Financing  Notice,  and the Purchasers  will again have the
         right of  participation  set forth above in this Section  4.13,  if the
         Subsequent Financing subject to the initial Subsequent Financing Notice
         is not  consummated  for any  reason  on the  terms  set  forth in such
         Subsequent  Financing  Notice  within 60 Trading Days after the date of
         the initial Subsequent Financing Notice.

                  (g) Notwithstanding the foregoing, this Section 4.13 shall not
         apply (i) in respect of an Exempt Issuance,  (ii) in respect of reverse
         or forward stock split, stock dividend or stock combinations or (iii) a
         bona fide firm commitment  public  underwritten  offering of the Common
         Stock by a nationally recognized investment bank.

         4.14 Subsequent Equity Sales.

                  (a) From the date  hereof  until 180 days after the  Effective
         Date,  neither  the Company nor any  Subsidiary  shall issue  shares of
         Common Stock or Common Stock Equivalents;  provided,  however,  the 180
         day period set forth in this  Section  4.14 shall be  extended  for the
         number of Trading  Days  during such period in which (i) trading in the
         Common Stock is suspended by any Trading Market,  or (ii) following the
         Effective  Date,  the  Registration  Statement is not  effective or the
         prospectus  included in the  Registration  Statement may not be used by
         the Purchasers for the resale of the Underlying Shares.

                  (b) From the date hereof until such time as no Purchaser holds
         any of the  Securities,  the Company shall be prohibited from effecting
         or  entering  into an  agreement  to effect  any  Subsequent  Financing
         involving  a  "Variable  Rate  Transaction".  The term  "Variable  Rate
         Transaction"  shall mean a transaction  in which the Company  issues or
         sells  (i) any debt or equity  securities  that are  convertible  into,
         exchangeable  or  exercisable  for,  or  include  the right to  receive
         additional shares of Common Stock either (A) at a conversion,  exercise
         or exchange  rate or other price that is based upon and/or  varies with
         the trading  prices of or quotations  for the shares of Common Stock at
         any time after the initial issuance of such debt or equity  securities,
         or (B) with a conversion, exercise or exchange price that is subject to
         being reset at some future date after the initial issuance of such debt
         or equity  security or upon the  occurrence  of specified or contingent
         events directly or indirectly related to the business of the Company or
         the market  for the Common  Stock or (ii)  enters  into any  agreement,
         including,  but not limited  to, an equity line of credit,  whereby the
         Company may sell securities at a future determined price.

                                       28
<PAGE>

                  (c) Notwithstanding the foregoing, this Section 4.14 shall not
         apply in respect of (i) an Exempt  Issuance,  except  that no  Variable
         Rate  Transaction  shall  be an  Exempt  Issuance  or  (ii)  after  the
         Effective  Date,  a firm  commitment  public  offering of Common  Stock
         underwritten by a nationally recognized reputable investment bank.

         4.15 Equal Treatment of Purchasers.  No consideration  shall be offered
or paid to any  person to amend or consent  to a waiver or  modification  of any
provision of any of the Transaction  Documents unless the same  consideration is
also offered to all of the parties to the Transaction  Documents.  Further,  the
Company shall not make any payment of principal or interest on the Debentures in
amounts  which  are   disproportionate  to  the  respective   principal  amounts
outstanding  on  the  Debentures  at  any  applicable  time.  For  clarification
purposes,  this provision constitutes a separate right granted to each Purchaser
by the Company and negotiated separately by each Purchaser,  and is intended for
the  Company  to treat  the  Purchasers  as a class  and shall not in any way be
construed as the Purchasers  acting in concert or as a group with respect to the
purchase, disposition or voting of Securities or otherwise.

         4.16  Short  Sales  and  Confidentiality  After The Date  Hereof.  Each
Purchaser  severally and not jointly with the other  Purchasers  covenants  that
neither  it  nor  any  affiliates  acting  on  its  behalf  or  pursuant  to any
understanding  with it will  execute any Short Sales during the period after the
Discussion  Time and  ending on the  earlier of (a) the  Effectiveness  Date (as
defined in the Registration  Rights Agreement) and (b) the date that an Event of
Default occurs under the Debentures (the  "Restriction  Date").  Each Purchaser,
severally and not jointly with the other  Purchasers,  covenants that until such
time as the transactions  contemplated by this Agreement are publicly  disclosed
by the Company as described in Section 4.6, such Purchaser  will  maintain,  the
confidentiality   of  all  disclosures  made  to  it  in  connection  with  this
transaction  (including  the  existence  and  terms of this  transaction).  Each
Purchaser understands and acknowledges, severally and not jointly with any other
Purchaser,  that the  Commission  currently  takes the position that coverage of
short  sales of  shares  of the  Common  Stock  "against  the box"  prior to the
Effective Date of the Registration  Statement with the Securities is a violation
of Section 5 of the  Securities  Act,  as set forth in Item 65,  Section 5 under
Section A, of the Manual of Publicly Available Telephone Interpretations,  dated
July 1997,  compiled by the Office of Chief  Counsel,  Division  of  Corporation
Finance.  Notwithstanding the foregoing,  no Purchaser makes any representation,
warranty  or  covenant  hereby  that it will not  engage  in Short  Sales in the
securities  of the  Company  after the  Restriction  Date.  Notwithstanding  the
foregoing, in the case of a Purchaser that is a multi-managed investment vehicle
whereby separate portfolio managers manage separate portions of such Purchaser's
assets and the  portfolio  managers have no direct  knowledge of the  investment
decisions  made  by the  portfolio  managers  managing  other  portions  of such
Purchaser's  assets,  the covenant set forth above shall only apply with respect
to the  portion  of  assets  managed  by the  portfolio  manager  that  made the
investment decision to purchase the Securities covered by this Agreement.

                                       29
<PAGE>

                                   ARTICLE V.
                                  MISCELLANEOUS

         5.1 Termination.  This Agreement may be terminated by any Purchaser, as
to such Purchaser's obligations hereunder only and without any effect whatsoever
on the  obligations  between the Company  and the other  Purchasers,  by written
notice to the other  parties,  if the  Closing  has not been  consummated  on or
before August ___, 2005; provided, however, that no such termination will affect
the right of any party to sue for any breach by the other party (or parties).

         5.2 Fees and  Expenses.  At the  Closing,  the  Company  has  agreed to
reimburse  Bushido Capital  Partners,  Ltd.  ("Bushido") up to $30,000,  for its
actual,  reasonable,  out-of-pocket  legal fees and expenses,  none of which has
been paid  prior to the  Closing  and up to $5,000  for  payment  to firms  that
conduct  investigative  services  and  background  checks on the Company and its
management.  The Company shall  deliver,  prior to the Closing,  a completed and
executed copy of the Closing  Statement,  attached  hereto as Annex A. 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 delivery of any Securities.

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

         5.4 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
set forth on the signature  pages  attached  hereto prior to 5:30 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 set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day,  (c) the 2nd Trading  Day  following  the date of mailing,  if sent by U.S.
nationally  recognized  overnight courier service, or (d) upon actual receipt by
the party to whom such  notice is  required  to be given.  The  address for such
notices and communications shall be as set forth on the signature pages attached
hereto.

         5.5 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  Purchaser's  holding at least 75% of the then  outstanding
Securities 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.

                                       30
<PAGE>

         5.6  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. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent,  and no
rules of strict construction will be applied against any party.

         5.7  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  Purchaser's  holding at least 75% of the
then outstanding  Securities.  Any Purchaser may assign any or all of its rights
under this Agreement to any Person to whom such  Purchaser  assigns or transfers
any  Securities,  provided such transferee  agrees in writing to be bound,  with
respect to the transferred  Securities,  by the provisions  hereof that apply to
the "Purchasers".

         5.8 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 4.11.

         5.9 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance  with the internal laws of the State of
New York,  without  regard to the  principles of conflicts of law thereof.  Each
party  agrees  that  all  legal  proceedings   concerning  the  interpretations,
enforcement and defense of the  transactions  contemplated by this Agreement and
any other Transaction  Documents  (whether brought against a party hereto or its
respective affiliates,  directors, officers, shareholders,  employees or agents)
shall be commenced  exclusively  in the state and federal  courts sitting in the
City of New  York.  Each  party  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 the  Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action  or  proceeding,  any  claim  that it is not  personally  subject  to the
jurisdiction of any such court, that such suit, action or proceeding is improper
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. The parties  hereby waive all
rights  to a trial  by jury.  If  either  party  shall  commence  an  action  or
proceeding to enforce any  provisions  of the  Transaction  Documents,  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.

                                       31
<PAGE>

         5.10 Survival.  The  representations  and warranties  contained  herein
shall survive the Closing and the delivery,  exercise  and/or  conversion of the
Securities, as applicable for the applicable statue of limitations.

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

         5.12  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.

         5.13 Rescission and Withdrawal Right.  Notwithstanding  anything to the
contrary  contained in (and  without  limiting  any similar  provisions  of) the
Transaction  Documents,  whenever  any  Purchaser  exercises a right,  election,
demand or option  under a  Transaction  Document and the Company does not timely
perform its related  obligations within the periods therein provided,  then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice,  demand or election in whole
or in part  without  prejudice  to its  future  actions  and  rights;  provided,
however,  in the case of a rescission of a conversion of a Debenture or exercise
of a Warrant,  the  Purchaser  shall be  required to return any shares of Common
Stock subject to any such rescinded conversion or exercise notice.

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

         5.15  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.

                                       32
<PAGE>

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

         5.17 Usury.  To the extent it may  lawfully  do so, the Company  hereby
agrees not to insist upon or plead or in any manner  whatsoever  claim, and will
resist any and all efforts to be compelled to take the benefit or advantage  of,
usury  laws  wherever  enacted,  now or at  any  time  hereafter  in  force,  in
connection  with any  claim,  action or  proceeding  that may be  brought by any
Purchaser  in  order to  enforce  any  right or  remedy  under  any  Transaction
Document.  Notwithstanding  any  provision  to  the  contrary  contained  in any
Transaction  Document,  it is  expressly  agreed  and  provided  that the  total
liability of the Company  under the  Transaction  Documents  for payments in the
nature of interest  shall not exceed the maximum  lawful rate  authorized  under
applicable law (the "Maximum Rate"), and, without limiting the foregoing,  in no
event  shall any rate of  interest or default  interest,  or both of them,  when
aggregated with any other sums in the nature of interest that the Company may be
obligated to pay under the Transaction Documents exceed such Maximum Rate. It is
agreed  that  if the  maximum  contract  rate  of  interest  allowed  by law and
applicable to the Transaction  Documents is increased or decreased by statute or
any official  governmental action subsequent to the date hereof, the new maximum
contract rate of interest  allowed by law will be the Maximum Rate applicable to
the  Transaction  Documents  from  the  effective  date  forward,   unless  such
application  is  precluded  by  applicable  law.  If  under  any   circumstances
whatsoever, interest in excess of the Maximum Rate is paid by the Company to any
Purchaser with respect to indebtedness  evidenced by the Transaction  Documents,
such excess shall be applied by such Purchaser to the unpaid  principal  balance
of any such  indebtedness or be refunded to the Company,  the manner of handling
such excess to be at such Purchaser's election.

         5.18  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 Documents. Each
Purchaser  shall be  entitled to  independently  protect and enforce its rights,
including without  limitation the rights arising out of this Agreement or out of
the other  Transaction  Documents,  and it shall not be necessary  for any other
Purchaser  to be  joined  as an  additional  party  in any  proceeding  for such
purpose.  Each Purchaser has been  represented by its own separate legal counsel
in their review and  negotiation of the  Transaction  Documents.  For reasons of
administrative  convenience only,  Purchasers and their respective  counsel have
chosen to communicate  with the Company through FW. FW does not represent all of
the  Purchasers  but only  Bushido.

                                       33
<PAGE>

The  Company  has  elected to  provide  all  Purchasers  with the same terms and
Transaction  Documents for the convenience of the Company and not because it was
required or requested to do so by the Purchasers.

         5.19 Liquidated Damages.  The Company's  obligations to pay any partial
liquidated  damages or other amounts owing under the Transaction  Documents is a
continuing  obligation of the Company and shall not  terminate  until all unpaid
partial liquidated damages and other amounts have been paid  notwithstanding the
fact that the instrument or security  pursuant to which such partial  liquidated
damages or other amounts are due and payable shall have been canceled.

         5.20  Construction.  The parties  agree that each of them and/or  their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved  against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.

                            (Signature Pages Follow)

                                       34
<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.

INTRAOP MEDICAL CORPORATION                            Address for Notice:
                                                       -------------------

By:  /s/ Donald A. Goer                                3170 De La Cruz Boulevard
     -------------------------
     Name:  Donald A. Goer                             Suite 108
     Title:                                            Santa Clara, CA  95054

With a copy to (which shall not constitute notice):

Manatt, Phelps & Phillips, LLP
1001 Page Mill Road, Bldg. 2
Palo Alto, CA  94304
Attention:  David M. Pike, Esq.

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                      SIGNATURE PAGE FOR PURCHASER FOLLOWS]

                                       35
<PAGE>

        [PURCHASER SIGNATURE PAGES TO IOPM SECURITIES PURCHASE AGREEMENT]

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

Name of Holder: Bushido Capital Master Fund, LP
Signature of Authorized Signatory of Holder: /s/ Christopher Kossman
Name of Authorized Signatory: Christopher Kossman
Title of Authorized Signatory: Managing Director
Email Address of Purchaser:________________________________________________

Address for Notice of Purchaser:

Address for Delivery of Securities for Purchaser (if not same as above):

Subscription Amount: $1,000,000
Warrant Shares: 2,500,000
EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]

                                       36
<PAGE>

        [PURCHASER SIGNATURE PAGES TO IOPM SECURITIES PURCHASE AGREEMENT]

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

Name of Holder: Gamma Opportunity Capital Partners, LP Class C
Signature of Authorized Signatory of Holder: /s/ Jonathan P. Knight
Name of Authorized Signatory: Jonathan P. Knight
Title of Authorized Signatory: President/Director
Email Address of Purchaser:________________________________________________

Address for Notice of Purchaser:

Address for Delivery of Securities for Purchaser (if not same as above):

Subscription Amount: $500,000
Warrant Shares: 1,250,000
EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]

                                       37
<PAGE>

        [PURCHASER SIGNATURE PAGES TO IOPM SECURITIES PURCHASE AGREEMENT]
         IN  WITNESS  WHEREOF,  the  undersigned  have  caused  this  Securities
Purchase   Agreement  to  be  duly  executed  by  their  respective   authorized
signatories as of the date first indicated above.

Name of Holder: Gamma Opportunity Capital Partners, LP Class A
Signature of Authorized Signatory of Holder: /s/ Jonathan P. Knight
Name of Authorized Signatory: Jonathan P. Knight
Title of Authorized Signatory: President/Director
Email Address of Purchaser:________________________________________________
Address for Notice of Purchaser:

Address for Delivery of Securities for Purchaser (if not same as above):

Subscription Amount: 500,000
Warrant Shares: 1,250,000
EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]
                           [SIGNATURE PAGES CONTINUE]

                                       38
<PAGE>

        [PURCHASER SIGNATURE PAGES TO IOPM SECURITIES PURCHASE AGREEMENT]
         IN  WITNESS  WHEREOF,  the  undersigned  have  caused  this  Securities
Purchase   Agreement  to  be  duly  executed  by  their  respective   authorized
signatories as of the date first indicated above.

Name of Holder: Samir Financial, L.L.C.
Signature of Authorized Signatory of Holder: /s/ Mohammed H. Mirza
Name of Authorized Signatory: Mohammed H. Mirza
Title of Authorized Signatory: Manager
Email Address of Purchaser:________________________________________________
Address for Notice of Purchaser:

Address for Delivery of Securities for Purchaser (if not same as above):

Subscription Amount: 500,000
Warrant Shares: 1,250,000
EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

                                       39

<PAGE>

                                                                         ANNEX A

                                CLOSING STATEMENT

Pursuant to the attached  Securities  Purchase  Agreement,  dated as of the date
hereto,  the  purchasers  shall  purchase up to  $6,000,000  of  Debentures  and
Warrants from Intraop Medical Corporation, a Nevada corporation (the "Company").
All funds will be wired into a trust account maintained by ____________, counsel
to the  Company.  All funds will be disbursed  in  accordance  with this Closing
Statement.

DISBURSEMENT DATE:    August ___, 2005

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

I.   PURCHASE PRICE
     --------------

                    GROSS PROCEEDS TO BE RECEIVED IN TRUST               $

II.  DISBURSEMENTS
     -------------

                    [Per the instructions of Bushido]                    $30,000
                                                                         $
                                                                         $
                                                                         $
                                                                         $

TOTAL AMOUNT DISBURSED:                                                  $

WIRE INSTRUCTIONS:

To: _____________________________________

To: _____________________________________

                                       40

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