Document:

CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE

      THIS CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE ("Agreement") with an
effective date of June ______, 2004 ("Effective Date") is made and entered into
by and between Cytomedix, Inc. ("Cytomedix" or "Company") and Mark E. Cline
(hereinafter referred to as "Employee"). This Agreement sets forth the terms
upon which the Company and the Employee have agreed to terminate Employee's
employment with the Company.

1. Termination of Employment:

      1.1 Employee hereby tenders his voluntary resignation as President of the
Company as of the Effective Date. The Company hereby accepts such resignation.

2. Resignation as Director:

      2.1 Employee hereby tenders his voluntary and irrevocable resignation as a
member of the Company's Board of Directors as of the Effective Date.

3. Consideration:

      3.1 Employee agrees that this Agreement contains compensation or benefits
to which the Employee is not otherwise entitled.

      3.2 Pursuant to the letter agreement between the Company and the Executive
dated March 25, 2004 ("Employment Agreement") and the Stock Option Grant Notice
issued in conjunction therewith, the Employee received options to purchase
175,000 shares of the Company's common stock at a price of $1.50 per share.
These options were to vest on November 15, 2004, unless the Company terminated
the Employee without cause prior to such date, in which case 1/12th of the
options vested on the 15th day of each month beginning on November 15, 2003, and
continuing until the date of termination. In consideration of this Agreement,
the Company agrees to the following:

      (a) Of the 175,000 options awarded to Employee on November 15, 2003,
25,000 shall expire immediately, the remaining 150,000 shall continue to vest as
per the original vesting schedule as provided in the Stock Option Grant Notice.
Accordingly, 12,500 options shall vest on the 15th day of each month beginning
on December 15, 2003. As of June 15, 2003, 87,500 options have vested. As of
November 15, 2004, all 150,000 options shall have vested.

      (b) Notwithstanding the language in the Stock Option Agreement between the
Company and the Employee, the options shall remain exercisable for a period of
five years from the date of original grant, so that all options awarded to
Employee shall expire on November 15, 2008.

      (c) The shares underlying the options awarded Employee shall be included
on any registration statement filed with the Securities and Exchange Commission
with respect to the shares of common stock underlying the Company's Long-Term
Incentive Plan.

      3.3 In consideration of this Agreement, the Employee shall continue to
receive his regular salary from the date of this Agreement until July 31, 2004.

      3.4 Premiums for the medical and dental programs that Employee is
currently enrolled in shall continue to be paid by the Company until July 31,
2004; provided, however, that Employee shall continue to pay the employee
portion of such premiums.

4.       Confidentiality:

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      4.1 Employee agrees that the nature, terms, conditions, and substance of
this Agreement shall be kept confidential by him, his attorneys, and spouse; and
shall not be disclosed at any time to any other person or entity at all without
the prior written consent of Company, except as necessary in the course of: (1)
preparing and filing appropriate tax returns or dealing with federal or state
taxing authorities; and (2) the performance of personal or business financial
planning. In addition, any term of this Agreement may be disclosed during any
lawsuit or other proceeding brought to enforce the terms of this Agreement or as
required by applicable law, legal subpoena or court order.

      4.2 Employee agrees that upon the receipt of a subpoena or other legal
request for information contained in or regarding the nature, terms, conditions,
or substance of this Agreement, Employee shall promptly notify Company in
writing of such request and shall give Company the opportunity to object to the
disclosure of such information before responding to any such request. Such
written notification shall be sent to Company via certified mail.

5. No Current Claims:

      5.1 Employee warrants and represents that he is not presently a named
plaintiff in any law suit, filed in any jurisdiction, against Company and that
he has not filed a charge with the EEOC or any other administrative agency
against Company. In the event that this warranty and representation is
incorrect, Company shall have the absolute right to terminate this Agreement,
and to demand and have immediately returned to Company all consideration paid by
it to Employee pursuant to this Agreement.

      5.2 Company is hereby indemnified and held harmless by Employee for any
breach of the warranty and representation contained in this Section 5, and to
recover from Employee all costs and expenses incurred as a result of Employee's
breach of the warranty and representation contained in this Section 5, and all
costs and expenses incurred in defending any now pending legal or administrative
proceeding, not referenced in this Section 5, in which Employee is a named
plaintiff, claimant or petitioner. Costs and expenses, for purposes of this
Section 5, shall include, but not be limited to, attorneys' fees and other legal
costs.

6. Covenant Not to Sue and Release:

      6.1 Except for the rights and obligations provided by or arising under
this Agreement, Employee hereby releases, acquits, withdraws, retracts and
forever discharges any and all claims, manner of actions, causes of action, in
law or in equity, suits, judgments, debts, liens, contracts, agreements,
promises, liabilities, demands, damages, losses, costs, expenses or disputes,
known or unknown, fixed or contingent, which he now has or may have hereafter,
directly or indirectly, personally or in a representative capacity, against
Company, and its predecessors, successors, administrators, attorneys,
fiduciaries, officers, directors, shareholders, representatives, agents,
employees, and all persons acting through or in connection with Company, by
reason of any act, omission, matter, cause or thing whatsoever, from the
beginning of time to, and including, the Effective Date. This General Release
includes, but is not limited to, all claims, manner of actions, causes of action
in law or in equity, suits, judgments, debts, liens, contracts, agreements,
promises, liabilities, demands, damages, losses, costs, expenses or disputes,
known or unknown, fixed or contingent, which arise under the Employment
Agreement; Title VII of the Civil Rights Act of 1964, as amended; The Age
Discrimination in Employment Act of 1967, as amended; The Americans with
Disabilities Act; The Rehabilitation Act of 1973, as amended; The Family and
Medical Leave Act, as amended; 42 U.S.C. ss.ss. 1981 through 1988, as amended;
the Arkansas Constitution or Arkansas statutory law, as amended; any federal,
state or local statute or ordinance, all as amended; common law claims of breach
of contract, intentional or negligent infliction of emotional distress,
negligent hiring, breach of the covenant of good faith and fair dealing,
promissory estoppel, negligence, wrongful termination or employment,
interference with prospective economic advantage, violation of civil rights and
all other claims of any type or nature including any claims for attorneys' fees.
The parties intend that this release shall discharge all claims against the
released parties to the extent permitted by law.

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      6.2 Employee represents and warrants that he has not heretofore assigned
or transferred, or purported to assign or transfer, to any person or entity, any
claim that is a subject of this Agreement or any portion thereof or interest
therein, and agrees to indemnify, defend, and hold Company harmless from any and
all claims based on or arising out of any such assignment or transfer, or
purported assignment or transfer, of any claims, or any portion thereof or
interest therein.

      6.3 Nothing in this Agreement is or should be construed as a release by
Employee of, or an agreement by Employee not to sue on, any charges, complaints,
claims, liabilities, obligations, promises, agreements, controversies, damages,
costs, losses, debts, or expenses arising out of any matter, cause, acts,
conduct, claims, or events which may occur after the Effective Date.

7. No Admission of Liability or Wrongdoing:

      7.1 Company and Employee agree and acknowledge that this Agreement is the
result of a compromise and shall never at any time for any purpose be construed
as an admission of any liability or wrongdoing on the part of any party. Company
specifically disclaims any liability to Employee or to any other person or
entity.

8.       Confidentiality of Trade Secrets; Covenant Not to Compete

      8.1 During the term of Employee's employment by Company, Employee has
acquired knowledge of confidential and proprietary information regarding, among
other things, Company's products and intellectual property, Company's present
and future operations, its current or potential customers, pricing strategies,
its compensation and incentive programs for employees and the methods used by
Company and its employees. Employee hereby agrees that he shall not directly or
indirectly use or disclose, any of the Company's Trade Secrets, as defined
hereinafter, that he may have acquired during the term of his employment. The
term "Trade Secret" as used in this Agreement shall mean information including,
but not limited to, technical or non-technical data, a formula, a pattern, a
compilation, a program, a device, a method, a technique, a drawing, a process,
financial data, financial plans, product plans, or a list of actual or potential
customers which:

      (a) derives economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by, other persons
who can obtain economic value from its disclosure or use; and

      (b) is the subject of reasonable efforts by the Company to maintain its
secrecy.

      8.2 Employee agrees and acknowledges that the confidentiality and
non-compete provisions contained in Exhibit A to the Employment Agreement shall
continue to apply to Employee as provided therein.

      8.3 Employee agrees and acknowledges that, if a violation of any covenant
contained in Section 8 and Exhibit A to the Employment Agreement occurs or is
threatened, such violation or threatened violation will cause irreparable injury
to Company, that the remedy at law for any such violation or threatened
violation will be inadequate and that Company shall be entitled to appropriate
equitable relief.

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9. Property:

      9.1 Employee agrees, warrants and represents that within seven days of
execution of this Agreement he will return all records, files, memoranda,
reports, price lists, customer lists, employee lists, employee files, drawings,
plans, sketches, documents, and the like (together with all copies thereof)
relating to the business of the Company, which Employee shall have used or
prepared or come in contact with in the course of, or as a result of, his
employment and agrees that he shall not hereafter cause removal of such
materials from the premises of the Company. Employee further agrees that upon
execution of this Agreement he will return all files, notes, documents and the
like related to his employment, including but not limited to any audio tapes of
conversation(s) with any current of former Company employee(s). Employee further
warrants and represents that within seven days of execution of this Agreement he
will return all office equipment and other items, all Company credit cards,
keys, parking cards, and all other property of every type and description
belonging to Company.

10. No Disparaging Statement:

      10.1 Company and Employee shall refrain from making any disparaging
statement about the other or about any of Company's personnel.

11.      Voluntary Agreement:

      11.1 Employee represents and agrees that he has had a full and adequate
opportunity to discuss and consider any claims against the Company. Further,
Employee represents and agrees that: (1) this Agreement is written in a manner
that he understands; (2) this Agreement and the promises made in this Agreement
by Employee are granted in exchange for the consideration which is granted to
Employee in this Agreement; (3) Employee has been advised to and has had an
opportunity to consult with an attorney prior to deciding whether to enter into
this Agreement; and (4) Employee has been given at least twenty-one days within
which to consider this Agreement.

      11.2 This Agreement is executed with the full knowledge and understanding
on the part of Employee that there may be more serious consequences, damages or
injuries, which are not now known, and that any payment or benefits conferred
herein to Employee in consideration of this Agreement are accepted as final.
Employee further agrees and represents that it is within his contemplation that
he may have claims against Company of which, at the time of the execution of
this Agreement, he has no knowledge or suspicion, but he agrees and represents
that this Agreement extends to all claims in any way based upon, connected with
or related to the matters released herein, whether or not known, claimed or
suspected by him.

      11.3 Company and Employee represent and acknowledge that in executing this
Agreement, they did not rely upon and have not relied upon any written or oral
representations or statements not expressly a part hereof that have been made by
any party to this Agreement, or by the agents, representatives, or attorneys of
any party with regard to the subject matter, basis, or effect of this Agreement.

12. Advised to Consult an Attorney:

      12.1 EMPLOYEE SHOULD CONSULT WITH AN ATTORNEY PRIOR TO SIGNING THIS
AGREEMENT.

13. Period for Review and Consideration:

      13.1 Employee acknowledges that he received a copy of this Agreement and
was given a period of twenty-one days in which to review, consider and accept
the Agreement.

14. Employee's Right to Revoke:

      14.1 Employee is advised that he may revoke this Agreement within seven
days of signing it. Revocation must be made by delivering written notice of the
revocation to Dr. Kshitij Mohan. If this Agreement is revoked by Employee in
this seven day period, the Agreement will not be effective and enforceable as it
relates to the Employees resignation as President of the Company.

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<PAGE>

15.      Reserved

16.      Entire Agreement:

      16.1 This Agreement sets forth the complete and exclusive statement of the
terms of the agreement between the parties hereto and fully supersedes any and
all prior agreements (oral or in writing) or understandings between the parties
hereto pertaining to the subject matter hereof.

17.      Successors:

      17.1 This Agreement shall be binding upon Employee and upon his heirs,
administrators, representatives, executors, and assigns. This Agreement shall
inure to the benefit of Company and its successors, and past, current and future
fiduciaries, officers, directors, shareholders, administrators, agents,
employees, and assigns.

18. Governing Law:

      18.1 This Agreement shall be construed in accordance with the laws of the
State of Arkansas.

19.      Modifications:

      19.1 This Agreement may be amended or modified only by a written
instrument, signed by Company and Employee, that expressly sets forth the
parties' intention to amend or modify this Agreement. No condition, term, or
provision of this Agreement may be waived by any party except in writing, signed
by the party or its authorized representative, that expressly sets forth the
party's intention to waive a condition, term or provision of this Agreement.

20.      Severability:

      20.1 Should any provision of this Agreement be declared or be determined
by any court to be illegal or invalid, the validity of the remaining parts,
terms, or provisions shall be deemed not to be affected.

21. Authority to Execute Agreement:

      21.1 Company represents and warrants that this instrument is a valid and
binding corporate action and that the person executing this instrument on behalf
of Company is duly authorized to do so on behalf of the Company.

EMPLOYEE                                             COMPANY

                                                     CYTOMEDIX, INC.

/s/ Mark E. Cline                                    /s/ Kshitij Mohan
-------------------------                            ---------------------------
Mark E. Cline                                        Kshitij Mohan
                                                     Chief Executive Officer

                                       5EXHIBIT 4.1

                             SUBSCRIPTION AGREEMENT

         THIS SUBSCRIPTION AGREEMENT (this "Agreement"), dated as of June 4,
2004, by and among Zynex Medical Holdings, Inc., a Nevada corporation (the
"Company"), and the subscribers identified on the signature page hereto (each a
"Subscriber" and collectively "Subscribers").

         WHEREAS, the Company and the Subscribers are executing and delivering
this Agreement in reliance upon an exemption from securities registration
afforded by the provisions of Section 4(2), Section 4(6) and/or Regulation D
("Regulation D") as promulgated by the United States Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"1933 Act").

         WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the
Subscribers, as provided herein, and the Subscribers shall purchase, in the
aggregate, $1,200,000 (the "Purchase Price") of the Company's common stock,
$.001 par value (the "Common Stock" or "Shares"), and share purchase warrants in
the forms attached hereto as EXHIBIT A, EXHIBIT B AND EXHIBIT C (collectively,
the "Warrants"), to purchase shares of Common Stock (the "Warrant Shares"). The
per Share Purchase Price shall be $1.75, subject to adjustment as described in
this Agreement. The Purchase Price shall be payable to the Company on the
Closing Date. The Common Stock, the Warrants and the Warrant Shares are
collectively referred to herein as the "Securities"; and

         WHEREAS, the aggregate proceeds of the sale of the Common Stock and the
Warrants contemplated hereby may be held in escrow pursuant to the terms of a
Funds Escrow Agreement which may be executed by the parties substantially in the
form attached hereto as EXHIBIT D (the "Escrow Agreement").

         NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement, the Company and the Subscribers hereby
agree as follows:

                  1. PURCHASE AND SALE OF SHARES AND WARRANTS. Subject to the
satisfaction (or waiver) of the conditions to Closing set forth in this
Agreement and the Escrow Agreement, each Subscriber shall purchase the Shares
and Warrants for the portion of the Purchase Price indicated on the signature
page hereto, and the Company shall sell such Shares and Warrants to the
Subscriber. The Purchase Price for the Shares and Warrants shall be paid in
cash. The entire Purchase Price shall be allocated to the Shares.

                  2. ESCROW ARRANGEMENTS; FORM OF PAYMENT. Upon execution hereof
by the parties and pursuant to the terms of the Escrow Agreement, each
Subscriber agrees to make the deliveries required of such Subscriber as set
forth in the Escrow Agreement and the Company agrees to make the deliveries
required of the Company as set forth in the Escrow Agreement.

                  3. WARRANTS.

                           (a) A WARRANTS. On the Closing Date the Company will
issue A Warrants to the Subscribers. One (1) A Warrant will be issued for each
two (2) Shares issued on the Closing Date. The per Warrant Share exercise price
to acquire a Warrant Share upon exercise of an A Warrant shall be $1.75. The A
Warrants shall be exercisable until the registration statement described in
Section 11.1(iv) of this Agreement has been effective for one hundred and fifty
(150) days.

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                           (b) B WARRANTS. On the Closing Date the Company will
issue B Warrants to the Subscribers. One (1) B Warrant will be issued for each
one (1) Share issued on the Closing Date. The per Warrant Share exercise price
to acquire a Warrant Share upon exercise of a B Warrant shall be $2.00. The B
Warrants shall be exercisable until five (5) years after the Closing Date. The B
Warrants will be subject to Call as described in EXHIBIT B hereto.

                           (c) C WARRANTS. On the Closing Date the Company will
issue C Warrants to the Subscribers. One (1) C Warrant will be issued for each
thirty (30) Shares issued on the Closing Date. The per Warrant Share exercise
price to acquire a Warrant Share upon exercise of a C Warrant shall be $0.01.
The C Warrants shall be exercisable until five (5) years after the Closing Date.
The C Warrants will not be subject to Call.

                  4. SUBSCRIBER'S REPRESENTATIONS AND WARRANTIES. Each
Subscriber hereby represents and warrants to and agrees with the Company only as
to such Subscriber that:

                           (a) INFORMATION ON COMPANY. The Subscriber has been
furnished with or has had access at the EDGAR Website of the Commission to the
Company's Form 10-KSB for the year ended September 30, 2003 as filed with the
Commission, together with all subsequently filed Forms 10-QSB, 8-K, and filings
made with the Commission available at the EDGAR website (hereinafter referred to
collectively as the "Reports"). In addition, the Subscriber has received in
writing from the Company such other information concerning its operations,
financial condition and other matters as the Subscriber has requested in writing
(such other information is collectively, the "Other Written Information"), and
considered all factors the Subscriber deems material in deciding on the
advisability of investing in the Securities.

                           (b) INFORMATION ON SUBSCRIBER. The Subscriber is, and
will be at the time of the conversion of the Common Stock and exercise of any of
the Warrants, an "accredited investor", as such term is defined in Regulation D
promulgated by the Commission under the 1933 Act, is experienced in investments
and business matters, has made investments of a speculative nature and has
purchased securities of United States publicly-owned companies in private
placements in the past and, with its representatives, has such knowledge and
experience in financial, tax and other business matters as to enable the
Subscriber to utilize the information made available by the Company to evaluate
the merits and risks of and to make an informed investment decision with respect
to the proposed purchase, which represents a speculative investment. The
Subscriber has the authority and is duly and legally qualified to purchase and
own the Securities. The Subscriber is able to bear the risk of such investment
for an indefinite period and to afford a complete loss thereof. The information
set forth on the signature page hereto regarding the Subscriber is accurate.

                           (c) PURCHASE OF COMMON STOCK AND WARRANTS. On the
closing date, the Subscriber will purchase the Common Stock and Warrants as
principal for its own account and not with a view to any distribution thereof.

                           (d) COMPLIANCE WITH SECURITIES ACT. The Subscriber
understands and agrees that the Securities have not been registered under the
1933 Act or any applicable state securities laws, by reason of their issuance in
a transaction that does not require registration under the 1933 Act (based in
part on the accuracy of the representations and warranties of Subscriber
contained herein), and that such Securities must be held indefinitely unless a
subsequent disposition is registered under the 1933 Act or any applicable state

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securities laws or is exempt from such registration. In any event, and subject
to compliance with applicable securities laws, the Subscriber may enter into
hedging transactions with third parties, which may in turn engage in short sales
of the Securities in the course of hedging the position they assume and the
Subscriber may also enter into short positions or other derivative transactions
relating to the Securities, or interests in the Securities, and deliver the
Securities, or interests in the Securities, to close out their short or other
positions or otherwise settle short sales or other transactions, or loan or
pledge the Securities, or interests in the Securities, to third parties that in
turn may dispose of these Securities.

                           (e) SHARES LEGEND. The Shares and the Warrant Shares
shall bear the following or similar legend:

                  "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
                  REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE
                  SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
                  HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
                  STATEMENT UNDER SUCH SECURITIES ACT OR ANY APPLICABLE STATE
                  SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY
                  SATISFACTORY TO ZYNEX MEDICAL HOLDINGS, INC. THAT SUCH
                  REGISTRATION IS NOT REQUIRED."

                           (f) WARRANTS LEGEND. The Warrants shall bear the
following

or similar legend:

                  "THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
                  THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
                  OF 1933, AS AMENDED. THIS WARRANT AND THE COMMON SHARES
                  ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
                  OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
                  EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
                  ACT OR ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF
                  COUNSEL REASONABLY SATISFACTORY TO ZYNEX MEDICAL HOLDINGS,
                  INC. THAT SUCH REGISTRATION IS NOT REQUIRED."

                           (g) COMMUNICATION OF OFFER. The offer to sell the
Securities was directly communicated to the Subscriber by the Company. At no
time was the Subscriber presented with or solicited by any leaflet, newspaper or
magazine article, radio or television advertisement, or any other form of
general advertising or solicited or invited to attend a promotional meeting
otherwise than in connection and concurrently with such communicated offer.

                           (h) AUTHORITY; ENFORCEABILITY. This Agreement and
other agreements delivered together with this Agreement or in connection
herewith have been duly authorized, executed and delivered by the Subscriber and
are valid and binding agreements enforceable in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity; and Subscriber
has full corporate power and authority necessary to enter into this Agreement
and such other agreements and to perform its obligations hereunder and under all
other agreements entered into by the Subscriber relating hereto.

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<PAGE>

                           (i) RESTRICTED SECURITIES. Subscriber understands
that the Securities have not been registered under the 1933 Act and such
Subscriber will not sell, offer to sell, assign, pledge, hypothecate or
otherwise transfer any of the Securities unless (i) pursuant to an effective
registration statement under the 1933 Act, (ii) such Subscriber provides the
Company with an opinion of counsel, in a form reasonably acceptable to the
Company, to the effect that a sale, assignment or transfer of the Securities may
be made without registration under the 1933 Act, or (iii) Subscriber provides
the Company with reasonable assurances (in the form of seller and broker
representation letters) that the Shares or the Warrant Shares, as the case may
be, can be sold pursuant to (A) Rule 144 promulgated under the 1933 Act, or (B)
Rule 144(k) promulgated under the 1933 Act, in each case following the
applicable holding period set forth therein. Notwithstanding anything to the
contrary contained in this Agreement, such Subscriber may transfer (without
restriction and without the need for an opinion of counsel) the Securities to
its Affiliates (as defined below) provided that each such Affiliate is an
"accredited investor" under Regulation D and such Affiliate agrees to be bound
by the terms and conditions of this Agreement.

                                    For the purposes of this Agreement, an
"Affiliate" of any specified Subscriber means any other person or entity
directly or indirectly controlling, controlled by or under direct or indirect
common control with such specified Subscriber. For purposes of this definition,
"control" means the power to direct the management and policies of such person
or firm, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.

                           (j) NO GOVERNMENTAL REVIEW. Each Subscriber
understands that no United States federal or state agency or any other
governmental or state agency has passed on or made recommendations or
endorsement of the Securities or the suitability of the investment in the
Securities nor have such authorities passed upon or endorsed the merits of the
offering of the Securities.

                           (k) CORRECTNESS OF REPRESENTATIONS. Each Subscriber
represents as to such Subscriber that the foregoing representations and
warranties are true and correct as of the date hereof and, unless a Subscriber
otherwise notifies the Company prior to the Closing Date (as hereinafter
defined), shall be true and correct as of the Closing Date.

                           (l) SURVIVAL. The foregoing representations and
warranties shall survive the Closing Date for a period of two years.

                  5. COMPANY REPRESENTATIONS AND WARRANTIES. The Company
represents and warrants to and agrees with each Subscriber that:

                           (a) DUE INCORPORATION. The Company and each of its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the respective jurisdictions of their incorporation
and have the requisite corporate power to own their properties and to carry on
their business as now being conducted. The Company and each of its subsidiaries
is duly qualified as a foreign corporation to do business and is in good
standing in each jurisdiction where the nature of the business conducted or
property owned by it makes such qualification necessary, other than those
jurisdictions in which the failure to so qualify would not have a material
adverse effect on the business, operations or financial condition of the
Company.

                           (b) OUTSTANDING STOCK. All issued and outstanding
shares of capital  stock of the Company and each of its  subsidiaries  have been
duly authorized and validly issued and are fully paid and nonassessable.

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<PAGE>

                           (c) AUTHORITY; ENFORCEABILITY. This Agreement, the
Common  Stock,  the  Warrants,  the Escrow  Agreement  and any other  agreements
delivered together with this Agreement or in connection  herewith  (collectively
"Transaction  Documents") have been duly  authorized,  executed and delivered by
the Company and are valid and binding agreements  enforceable in accordance with
their  terms,   subject  to   bankruptcy,   insolvency,   fraudulent   transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting  creditors'  rights generally and to general  principles of equity.
The Company has full corporate  power and authority  necessary to enter into and
deliver the Transaction Documents and to perform its obligations thereunder.

                           (d) ADDITIONAL ISSUANCES. There are no outstanding
agreements or preemptive or similar rights  affecting the Company's common stock
or equity  and no  outstanding  rights,  warrants  or  options  to  acquire,  or
instruments   convertible   into  or   exchangeable   for,  or   agreements   or
understandings  with  respect  to the sale or  issuance  of any shares of common
stock  or  equity  of  the  Company  or  other  equity  interest  in  any of the
subsidiaries of the Company except as described on SCHEDULE 5(D).

                           (e) CONSENTS. No consent, approval, authorization or
order  of  any  court,   governmental   agency  or  body  or  arbitrator  having
jurisdiction  over the Company,  or any of its  affiliates,  the American  Stock
Exchange, the National Association of Securities Dealers, Inc., Nasdaq, SmallCap
Market, the OTC Bulletin Board ("Bulletin Board") nor the Company's shareholders
is required for the  execution by the Company of the  Transaction  Documents and
compliance  and  performance  by  the  Company  of  its  obligations  under  the
Transaction Documents,  including,  without limitation, the issuance and sale of
the Securities.

                           (f) NO VIOLATION OR CONFLICT. Assuming the
representations  and  warranties  of the  Subscribers  in Section 4 are true and
correct,  neither the issuance and sale of the Securities nor the performance of
the Company's  obligations under this Agreement and all other agreements entered
into by the Company relating thereto by the Company will:

                                    (i) violate, conflict with, result in a
breach of, or  constitute a default (or an event which with the giving of notice
or the lapse of time or both would be reasonably likely to constitute a default)
under (A) the articles or certificate of incorporation, charter or bylaws of the
Company,  (B) to the Company's  knowledge,  any decree,  judgment,  order,  law,
treaty,  rule,  regulation  or  determination  applicable  to the Company of any
court,  governmental  agency or body, or arbitrator having jurisdiction over the
Company  or any of its  subsidiaries  or over the  properties  or  assets of the
Company or any of its affiliates,  (C) the terms of any bond, debenture, note or
any other  evidence of  indebtedness,  or any  agreement,  stock option or other
similar plan, indenture,  lease, mortgage,  deed of trust or other instrument to
which the Company or any of its affiliates or  subsidiaries is a party, by which
the Company or any of its affiliates or  subsidiaries  is bound, or to which any
of the  properties of the Company or any of its  affiliates or  subsidiaries  is
subject,  or (D)  the  terms  of  any  "lock-up"  or  similar  provision  of any
underwriting or similar agreement to which the Company, or any of its affiliates
or subsidiaries is a party except the violation, conflict, breach, or default of
which would not have a material adverse effect on the Company; or

                                    (ii) result in the creation or imposition of
any lien,  charge or encumbrance upon the Securities or any of the assets of the
Company, its subsidiaries or any of its affiliates; or

                                       5
<PAGE>

                                    (iii) result in the activation of any
anti-dilution  rights or a reset or repricing of any debt or security instrument
of any  other  creditor  or  equity  holder of the  Company,  nor  result in the
acceleration of the due date of any obligation of the Company; or

                                    (iv) result in the activation of any
piggy-back registration rights of any person or entity holding securities of the
Company or having the right to receive securities of the Company.

                           (g) THE SECURITIES. The Securities upon issuance:

                                    (i) are, or will be, free and clear of any
security interests, liens, claims or other encumbrances, subject to restrictions
upon transfer under the 1933 Act and any applicable state securities laws;

                                    (ii) have been, or will be, duly and validly
authorized  and on the date of issuance  of the Shares and upon  exercise of the
Warrants,  the Shares and Warrant Shares will be duly and validly issued,  fully
paid and nonassessable  (and if registered  pursuant to the 1933 Act, and resold
pursuant  to an  effective  registration  statement  will  be free  trading  and
unrestricted,  provided  that  each  Subscriber  complies  with  the  prospectus
delivery requirements of the 1933 Act);

                                    (iii) will not have been issued or sold in
violation  of any  preemptive  or other  similar  rights of the  holders  of any
securities of the Company; and

                                    (iv) will not subject the holders thereof to
personal liability by reason of being such holders.

                            (h) LITIGATION. There is no pending or, to the best
knowledge of the Company, threatened action, suit, proceeding or investigation
before any court, governmental agency or body, or arbitrator having jurisdiction
over the Company, or any of its affiliates that would affect the execution by
the Company or the performance by the Company of its obligations under the
Transaction Documents. Except as disclosed in the Reports, there is no pending
or, to the best knowledge of the Company, basis for or threatened action, suit,
proceeding or investigation before any court, governmental agency or body, or
arbitrator having jurisdiction over the Company, or any of its affiliates which
litigation if adversely determined would have a material adverse effect on the
Company.

                           (i) REPORTING COMPANY. The Company is a publicly-held
company subject to reporting obligations pursuant to Section 15d of the
Securities Exchange Act of 1934, as amended (the "1934 Act"). Pursuant to the
provisions of the 1934 Act, the Company has timely filed all reports and other
materials required to be filed thereunder with the Commission during the
preceding twelve months, for a company that would be subject to Section 12(g) of
the 1934 Act.

                           (j) NO MARKET MANIPULATION. The Company has not
taken, and will not take, directly or indirectly, any action designed to, or
that might reasonably be expected to, cause or result in stabilization or
manipulation of the price of the common stock of the Company to facilitate the
sale or resale of the Securities or affect the price at which the Securities may
be issued or resold.

                           (k) INFORMATION CONCERNING COMPANY. The Reports
contain all material information relating to the Company and its operations and
financial condition as of their respective dates which information is required
to be disclosed therein. Since the date of the financial statements included in
the Reports, and except as modified in the Other Written Information or in the
Schedules hereto, there has been no material adverse change in the Company's
business, financial condition or affairs not disclosed in the Reports. The

                                       6
<PAGE>

Reports do not contain any 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 not misleading in light of the circumstances when made.

                           (l) STOP TRANSFER. The Securities, when issued, will
be restricted securities. The Company will not issue any stop transfer order or
other order impeding the sale, resale or delivery of any of the Securities,
except as may be required by any applicable federal or state securities laws and
unless contemporaneous notice of such instruction is given to the Subscriber.

                           (m) DEFAULTS. The Company is not in violation of its
articles of incorporation or bylaws. The Company is (i) not in default under or
in violation of any other material agreement or instrument to which it is a
party or by which it or any of its properties are bound or affected, which
default or violation would have a material adverse effect on the Company, (ii)
not in default with respect to any order of any court, arbitrator or
governmental body or subject to or party to any order of any court or
governmental authority arising out of any action, suit or proceeding under any
statute or other law respecting antitrust, monopoly, restraint of trade, unfair
competition or similar matters, or (iii) to its knowledge not in violation of
any statute, rule or regulation of any governmental authority which violation
would have a material adverse effect on the Company.

                           (n) NO INTEGRATED OFFERING. 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 the offer of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
the Bulletin Board. Nor will the Company or any of its affiliates or
subsidiaries take any action or steps that would cause the offer of the
Securities to be integrated with other offerings. The Company will not conduct
any offering other than the transactions contemplated hereby that will be
integrated with the offer or issuance of the Securities.

                           (o) NO GENERAL SOLICITATION. Neither the Company, nor
any of its affiliates, nor to its knowledge, any person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the 1933 Act) in connection with the
offer or sale of the Securities.

                           (p) LISTING. The Company's common stock is quoted on
the Bulletin Board. The Company has not received any oral or written notice that
its common stock is not eligible nor will become ineligible for quotation on the
Bulletin Board nor that its common stock does not meet all requirements for the
continuation of such quotation and the Company satisfies and as of the Closing
Date, the Company will satisfy all the requirements for the continued quotation
of its common stock on the Bulletin Board.

                           (q) NO UNDISCLOSED LIABILITIES. The Company has no
liabilities or obligations which are material, individually or in the aggregate,
which are not disclosed in the Reports and Other Written Information, other than
those incurred in the ordinary course of the Company's businesses since
September 30, 2003 and which, individually or in the aggregate, would reasonably
be expected to have a material adverse effect on the Company's financial
condition, other than as set forth in SCHEDULE 5(Q).

                           (r) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since
September 30, 2003, no event or circumstance has occurred or exists with respect
to the Company or its businesses, properties, operations or financial condition,
that, under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the Reports. (s) CAPITALIZATION. The

                                       7
<PAGE>

authorized and outstanding capital stock of the Company as of the date of this
Agreement and the Closing Date are set forth on SCHEDULE 5(S). Except as set
forth in the Reports and Other Written Information and SCHEDULE 5(D), there are
no options, warrants, or rights to subscribe to, securities, rights or
obligations convertible into or exchangeable for or giving any right to
subscribe for any shares of capital stock of the Company. All of the outstanding
shares of Common Stock of the Company have been duly and validly authorized and
issued and are fully paid and nonassessable. (t) DILUTION. The Company's
executive officers and directors understand the nature of the Securities being
sold hereby and recognize that the issuance of the Securities will have a
potential dilutive effect on the equity holdings of other holders of the
Company's equity or rights to receive equity of the Company. The board of
directors of the Company has concluded, in its good faith business judgment,
that the issuance of the Securities is in the best interests of the Company. The
Company specifically acknowledges that its obligation to issue the Securities is
binding upon the Company and enforceable regardless of the dilution such
issuance may have on the ownership interests of other shareholders of the
Company or parties entitled to receive equity of the Company. (u) 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 Company and the accountants and lawyers formerly or presently
employed by the Company, including but not limited to disputes or conflicts over
payment owed to such accountants and lawyers.

                           (v)      INVESTMENT COMPANY.  The Company is not,
and is not an Affiliate (as defined in Rule 405 under the 1933 Act) of, an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.

                           (w) CORRECTNESS OF REPRESENTATIONS. The Company
represents that the foregoing representations and warranties are true and
correct as of the date hereof in all material respects, and, unless the Company
otherwise notifies the Subscribers prior to the Closing Date, shall be true and
correct in all material respects as of the Closing Date.

                           (x) SURVIVAL. The foregoing representations and
warranties shall survive the Closing Date for a period of two years.

                  6. REGULATION D OFFERING. The offer and issuance of the
Securities to the Subscribers is being made pursuant to the exemption from the
registration provisions of the 1933 Act afforded by Section 4(2) or Section 4(6)
of the 1933 Act and/or Rule 506 of Regulation D promulgated thereunder. On the
Closing Date, the Company will provide an opinion reasonably acceptable to
Subscriber from the Company's legal counsel opining on the availability of an
exemption from registration under the 1933 Act as it relates to the offer and
issuance of the Securities and other matters reasonably requested by
Subscribers. A form of the legal opinion is annexed hereto as EXHIBIT E. The
Company will provide, at the Company's expense, such other legal opinions in the
future as are reasonably necessary for the resale of the Common Stock and
exercise of the Warrants and resale of the Warrant Shares.

                  7. LEGAL FEES. The Company shall pay to Grushko & Mittman,
P.C., a fee of $1,7500 ("Legal Fees") of which $7,500 has already been paid, as
reimbursement for services rendered to the Subscribers in connection with this
Agreement and the purchase and sale of the Shares and Warrants (the "Offering")

                                       8
<PAGE>

and acting as Escrow Agent for the Offering. The Legal Fees will be payable on
the Closing Date out of funds held pursuant to the Escrow Agreement.

                  8. BROKER.

                           (a) BROKER'S FEE. The Company on the one hand, and
each Subscriber (for himself only) on the other hand, agree to indemnify the
other against and hold the other harmless from any and all liabilities to any
persons claiming brokerage commissions or broker's fees other than J.P. Turner &
Company L.L.C. ("Broker") on account of services purported to have been rendered
on behalf of the indemnifying party in connection with this Agreement or the
transactions contemplated hereby and arising out of such party's actions. The
Company agrees that it will pay the Broker a cash broker's fee of ten percent
(10%) of the Purchase Price ("Broker's Fees") directly out of the funds held
pursuant to the Escrow Agreement. The Company represents that there are no other
parties entitled to receive fees, commissions, or similar payments in connection
with the Offering except the Broker. The Broker will also be paid by the Company
ten percent (10%) of the cash proceeds received by the Company from exercise of
the A Warrants and B Warrants ("Warrant Exercise Compensation"). The Warrant
Exercise Compensation must be paid by the Company to the Broker within five (5)
days after each receipt by the Company of Warrant Exercise cash proceeds.

                           (b) BROKER'S WARRANTS. On the Closing Date, the
Company will issue to the Broker Warrants identical to and carrying the same
rights as the C Warrants issuable to the Subscribers. A form of Broker's Warrant
is annexed hereto as EXHIBIT F. The Broker will receive two (2) Warrants for
each thirty (30) Shares issued to the Subscribers on the Closing Date and one
Broker's Warrant for each ten (10) A Warrants and ten (10) B Warrants exercised
by Subscribers . All the representations, covenants, warranties, undertakings,
remedies, liquidated damages, indemnification, and other rights including but
not limited to registration rights made or granted to or for the benefit of the
Subscribers are hereby also made by and granted to the Broker in respect of the
Broker's Warrants.

                  9. COVENANTS OF THE COMPANY. The Company covenants and agrees
with the Subscribers as follows:

                           (a) STOP ORDERS. The Company will advise the
Subscribers, promptly after it receives notice of issuance by the Commission,
any state securities commission or any other regulatory authority of any stop
order or of any order preventing or suspending any offering of any securities of
the Company, or of the suspension of the qualification of the Common Stock of
the Company for offering or sale in any jurisdiction, or the initiation of any
proceeding for any such purpose.

                           (b) LISTING. The Company shall promptly secure the
listing of the shares of Common Stock and the Warrant Shares upon each national
securities exchange, or automated quotation system upon which they are or become
eligible for listing (subject to official notice of issuance) and shall maintain
such listing so long as any Warrants are outstanding. The Company will maintain
the listing of its Common Stock on the American Stock Exchange, Nasdaq SmallCap
Market, Nasdaq National Market System, Bulletin Board, or New York Stock
Exchange (whichever of the foregoing is at the time the principal trading
exchange or market for the Common Stock (the "Principal Market")), and will
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Principal Market, as applicable.
The Company will provide the Subscribers copies of all notices it receives
notifying the Company of the threatened and actual delisting of the Common Stock
from any Principal Market. As of the date of this Agreement and the Closing
Date, the Bulletin Board is and will be the Principal Market.

                                       9
<PAGE>

                           (c) MARKET REGULATIONS. The Company shall notify the
Commission, the Principal Market and applicable state authorities, in accordance
with their requirements, of the transactions contemplated by this Agreement, and
shall take all other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Securities to the Subscribers and promptly provide copies
thereof to Subscriber.

                           (d)      REPORTING REQUIREMENTS.  From the date of
this Agreement and until the sooner of (i) two (2) years after the Closing Date,
or (ii) until all the Shares and Warrant Shares have been resold or transferred
by all the Subscribers pursuant to the Registration Statement or pursuant to
Rule 144, without regard to volume limitation, the Company will (x) comply in
all respects with its reporting and filing obligations under the 1934 Act, (y)
comply with all reporting requirements that are applicable to an issuer with a
class of shares registered pursuant to Section 12(b) or 12(g) of the 1934 Act,
as applicable, and (z) comply with all requirements related to any registration
statement filed pursuant to this Agreement. The Company will use its best
efforts not to take any action or file any document (whether or not permitted by
the 1933 Act or the 1934 Act or the rules thereunder) to terminate or suspend
such registration or to terminate or suspend its reporting and filing
obligations under said acts until two (2) years after the Closing Date. Until
the earlier of the resale of the Common Stock and the Warrant Shares by each
Subscriber or at least two (2) years after the Warrants have been exercised, the
Company will use its best efforts to continue the listing or quotation of the
Common Stock on the Principal Market or other market with the reasonable consent
of Subscribers holding a majority of the Shares and Warrant Shares, and will
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Principal Market. The Company
agrees to timely file a Form D with respect to the Securities if required under
Regulation D and to provide a copy thereof to each Subscriber promptly after
such filing.

                           (e) USE OF PROCEEDS. The Company undertakes to use
the proceeds of the Subscribers' funds for the purposes set forth on SCHEDULE
9(E) hereto. A deviation from the use of proceeds set forth on SCHEDULE 9(E) of
more than 10% per item or more than 20% in the aggregate shall be deemed a
material breach of the Company's obligations hereunder. Except as set forth on
SCHEDULE 9(E), the Purchase Price may not and will not be used for accrued and
unpaid officer and director salaries, payment of financing related debt,
redemption of outstanding redeemable notes or equity instruments of the Company
nor non-trade obligations outstanding on the Closing Date.

                           (f) RESERVATION. Prior to the Closing Date, the
Company undertakes to reserve, PRO RATA, on behalf of each Subscriber and holder
of a Warrant, from its authorized but unissued common stock, a number of common
shares equal to the amount of Warrant Shares issuable upon exercise of the
Warrants. Failure to have sufficient shares reserved pursuant to this Section
9(f) for three (3) consecutive business days or ten (10) days in the aggregate
shall be a material default of the Company's obligations under this Agreement.

                           (g)      TAXES.  From the date of this Agreement and
until the sooner of (i) two (2) years after the Closing Date, or (ii) until all
the Shares and Warrant Shares have been resold or transferred by all the
Subscribers pursuant to the Registration Statement or pursuant to Rule 144,
without regard to volume limitations, the Company will promptly pay and
discharge, or cause to be paid and discharged, when due and payable, all lawful
taxes, assessments and governmental charges or levies imposed upon the income,
profits, property or business of the Company; provided, however, that any such
tax, assessment, charge or levy need not be paid if the validity thereof shall
currently be contested in good faith by appropriate proceedings and if the
Company shall have set aside on its books adequate reserves with respect
thereto, and provided, further, that the Company will pay all such taxes,
assessments, charges or levies forthwith upon the commencement of proceedings to
foreclose any lien which may have attached as security therefore.

                                       10
<PAGE>

                           (h)      INSURANCE.  From the date of this Agreement
and until the sooner of (i) two (2) years after the Closing Date, or (ii) until
all the Shares and Warrant Shares have been resold or transferred by all the
Subscribers pursuant to the Registration Statement or pursuant to Rule 144,
without regard to volume limitations, the Company will keep its assets which are
of an insurable character insured by financially sound and reputable insurers
against loss or damage by fire, explosion and other risks customarily insured
against by companies in the Company's line of business, in amounts sufficient to
prevent the Company from becoming a co-insurer and not in any event less than
one hundred percent (100%) of the insurable value of the property insured; and
the Company will maintain, with financially sound and reputable insurers,
insurance against other hazards and risks and liability to persons and property
to the extent and in the manner customary for companies in similar businesses
similarly situated and to the extent available on commercially reasonable terms.

                           (i)      BOOKS AND RECORDS.  From the date of this
Agreement and until the sooner of (i) two (2) years after the Closing Date, or
(ii) until all the Shares and Warrant Shares have been resold or transferred by
all the Subscribers pursuant to the Registration Statement or pursuant to Rule
144, without regard to volume limitations, the Company will keep true records
and books of account in which full, true and correct entries will be made of all
dealings or transactions in relation to its business and affairs in accordance
with generally accepted accounting principles applied on a consistent basis.

                           (j)      GOVERNMENTAL AUTHORITIES.   From the date
of this Agreement and until the sooner of (i) two (2) years after the Closing
Date, or (ii) until all the Shares and Warrant Shares have been resold or
transferred by all the Subscribers pursuant to the Registration Statement or
pursuant to Rule 144, without regard to volume limitations, the Company shall
duly observe and conform in all material respects to all valid requirements of
governmental authorities relating to the conduct of its business or to its
properties or assets.

                           (k)      INTELLECTUAL PROPERTY.  From the date of
this Agreement and until the sooner of (i) two (2) years after the Closing Date,
or (ii) until all the Shares and Warrant Shares have been resold or transferred
by all the Subscribers pursuant to the Registration Statement or pursuant to
Rule 144, without regard to volume limitations, the Company shall maintain in
full force and effect its corporate existence, rights and franchises and all
licenses and other rights to use intellectual property owned or possessed by it
and reasonably deemed to be necessary to the conduct of its business.

                           (l)      PROPERTIES. From the date of this Agreement
and until the sooner of (i) two (2) years after the Closing Date, or (ii) until
all the Shares and Warrant Shares have been resold or transferred by all the
Subscribers pursuant to the Registration Statement or pursuant to Rule 144,
without regard to volume limitation, the Company will keep its properties in
good repair, working order and condition, reasonable wear and tear excepted, and
from time to time make all necessary and proper repairs, renewals, replacements,
additions and improvements thereto; and the Company will at all times comply
with each provision of all leases to which it is a party or under which it
occupies property if the breach of such provision could reasonably be expected
to have a material adverse effect.

                           (m) CONFIDENTIALITY/PUBLIC ANNOUNCEMENT. From the
date of this Agreement and until the sooner of (i) two (2) years after the
Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
or transferred by all the Subscribers pursuant to the Registration Statement or
pursuant to Rule 144, without regard to volume limitations, the Company agrees
that except in connection with a Form 8-K or the Registration Statement, it will
not disclose publicly or privately the identity of the Subscribers unless
expressly agreed to in writing by a Subscriber or only to the extent required by
law and then only upon ten days prior notice to Subscriber. In any event and
subject to the foregoing, the Company undertakes to file a Form 8-K or make a
public announcement describing the Offering not later than the first trading day
following the Closing Date. In the Form 8-K or public announcement, the Company
will specifically disclose the amount of common stock outstanding immediately
after the Closing.

                                       11
<PAGE>

                           (n) FURTHER REGISTRATION STATEMENTS. Except for a
registration statement filed on behalf of the Subscribers pursuant to Section 11
of this Agreement which may include the securities identified on SCHEDULE 11.1
hereto, if any, the Company will not file any registration statements, including
but not limited to Form S-8, with the Commission or with state regulatory
authorities without the consent of the Subscriber until ninety (90) days after
the actual effective date of the registration statement described in Section
11.1(iv) of this Agreement ("Actual Effective Date") during which such
Registration Statement shall be current and available for use in connection with
the public resale of the Shares and Warrant Shares ("Exclusion Period").

                           (o) BLACKOUT. The Company undertakes and covenants
that until the first to occur of (i) the end of the Exclusion Period, or (ii)
until all the Shares and Warrant Shares have been resold pursuant to such
registration statement, the Company will not enter into any acquisition, merger,
exchange or sale or other transaction that could have the effect of delaying the
effectiveness of any pending registration statement or causing an already
effective registration statement to no longer be effective or current.

                           (p) NON-PUBLIC INFORMATION. The Company covenants and
agrees that neither it nor any other Person acting on its behalf will provide
any Subscriber or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior thereto such
Subscriber shall have agreed in writing to receive such information. The Company
understands and confirms that each Subscriber shall be relying on the foregoing
representations in effecting transactions in securities of the Company.

                           (q) LOCKUP. The Company will deliver to the
Subscribers on or before the Closing Date and enforce the provisions of
irrevocable Lockup Agreements in the forms annexed hereto as EXHIBIT G, with the
parties identified on SCHEDULE 9(q) hereto.

                  10.      COVENANTS OF THE COMPANY AND SUBSCRIBER REGARDING
INDEMNIFICATION.

                           (a) The Company agrees to indemnify, hold harmless,
reimburse and defend the Subscribers, the Subscribers' officers, directors,
agents, affiliates, control persons, and principal shareholders, against any
claim, cost, expense, liability, obligation, loss or damage (including
reasonable legal fees) of any nature, incurred by or imposed upon the Subscriber
or any such person which results, arises out of or is based upon (i) any
material misrepresentation by Company or breach of any warranty by Company in
this Agreement or in any Exhibits or Schedules attached hereto, or other
agreement delivered pursuant hereto; or (ii) after any applicable notice and/or
cure periods, any breach or default in performance by the Company of any
covenant or undertaking to be performed by the Company hereunder, or any other
agreement entered into by the Company and Subscriber relating hereto.

                           (b) Each Subscriber agrees to indemnify, hold
harmless, reimburse and defend the Company and each of the Company's officers,
directors, agents, affiliates, control persons against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees) of any
nature, incurred by or imposed upon the Company or any such person which
results, arises out of or is based upon (i) any material misrepresentation by
such Subscriber in this Agreement or in any Exhibits or Schedules attached
hereto, or other agreement delivered pursuant hereto; or (ii) after any
applicable notice and/or cure periods, any breach or default in performance by

                                       12
<PAGE>

such Subscriber of any covenant or undertaking to be performed by such
Subscriber hereunder, or any other agreement entered into by the Company and
Subscribers, relating hereto.

                           (c) In no event shall the liability of any Subscriber
or permitted successor hereunder or under any other agreement delivered in
connection herewith be greater in amount than the dollar amount of the net
proceeds actually received by such Subscriber upon the sale of Registrable
Securities (as defined herein).

                           (d)      The procedures set forth in Section 11.6
shall apply to the indemnifications set forth in Sections 10(a) and 10(b) above.

                  11.1. REGISTRATION RIGHTS. The Company hereby grants the
following registration rights to holders of the Securities.

                           (i)      On one occasion, for a period commencing
ninety-one (91) days after the Closing Date, but not later than two (2) years
after the Closing Date ("Request Date"), upon a written request therefor from
any record holder or holders of more than 50% of the Shares and Warrant Shares
actually issued upon exercise of the Warrants, the Company shall prepare and
file with the Commission a registration statement under the 1933 Act registering
the Shares and Warrant Shares including Warrant Shares issuable upon exercise of
the Broker's Warrants (collectively "Registrable Securities") which are the
subject of such request for unrestricted public resale by the holder thereof.
For purposes of Sections 11.1(i) and 11.1(ii), Registrable Securities shall not
include Securities which are registered for resale in an effective registration
statement or included for registration in a pending registration statement, or
which have been issued without further transfer restrictions after a sale or
transfer pursuant to Rule 144 under the 1933 Act. Upon the receipt of such
request, the Company shall promptly give written notice to all other record
holders of the Registrable Securities that such registration statement is to be
filed and shall include in such registration statement Registrable Securities
for which it has received written requests within ten (10) days after the
Company gives such written notice. Such other requesting record holders shall be
deemed to have exercised their demand registration right under this Section
11.1(i).

                           (ii)     If the Company at any time proposes to
register any of its securities under the 1933 Act for sale to the public,
whether for its own account or for the account of other security holders or
both, except with respect to registration statements on Forms S-4, S-8 or
another form not available for registering the Registrable Securities for sale
to the public, provided the Registrable Securities are not otherwise registered
for resale by the Subscribers or Holder pursuant to an effective registration
statement, each such time it will give at least fifteen (15) days' prior written
notice to the record holder of the Registrable Securities of its intention so to
do. Upon the written request of the holder, received by the Company within ten
(10) days after the giving of any such notice by the Company, to register any of
the Registrable Securities not previously registered, the Company will cause
such Registrable Securities as to which registration shall have been so
requested to be included with the securities to be covered by the registration
statement proposed to be filed by the Company, all to the extent required to
permit the sale or other disposition of the Registrable Securities so registered
by the holder of such Registrable Securities (the "Seller" or "Sellers"). In the
event that any registration pursuant to this Section 11.1(ii) shall be, in whole
or in part, an underwritten public offering of common stock of the Company, the
number of shares of Registrable Securities to be included in such an
underwriting may be reduced by the managing underwriter if and to the extent
that the Company and the underwriter shall reasonably be of the opinion that

                                       13
<PAGE>

such inclusion would adversely affect the marketing of the securities to be sold
by the Company therein; provided, however, that the Company shall notify the
Seller in writing of any such reduction. Notwithstanding the foregoing
provisions, or Section 11.4 hereof, the Company may withdraw or delay or suffer
a delay of any registration statement referred to in this Section 11.1(ii)
without thereby incurring any liability to the Seller.

                           (iii) If, at the time any written request for
registration is received by the Company pursuant to
Section 11.1(i), the Company has determined to proceed with the actual
preparation and filing of a registration statement under the 1933 Act in
connection with the proposed offer and sale for cash of any of its securities
for the Company's own account and the Company actually does file such other
registration statement, such written request shall be deemed to have been given
pursuant to Section 11.1(ii) rather than Section 11.1(i), and the rights of the
holders of Registrable Securities covered by such written request shall be
governed by Section 11.1(ii).

                           (iv)     The Company shall file with the Commission
not later than thirty (30) days after the Closing Date (the "Filing Date"), and
cause to be declared effective within ninety (90) days after the Filing Date
(the "Effective Date"), a Form SB-2 registration statement (the "Registration
Statement") (or such other form that it is eligible to use) in order to register
the Registrable Securities for resale and distribution under the 1933 Act. The
Company will register not less than a number of shares of common stock in the
aforedescribed registration statement that is equal to all of the Shares and
Warrant Shares issuable pursuant to this Agreement. The Registrable Securities
shall be reserved and set aside exclusively for the benefit of each Subscriber
and Warrant holder, PRO RATA, and not issued, employed or reserved for anyone
other than each such Subscriber and Warrant holder. The Registration Statement
will immediately be amended or additional registration statements will be
immediately filed by the Company as necessary to register additional shares of
Common Stock to allow the public resale of all Common Stock included in and
issuable by virtue of the Registrable Securities. Without the written consent of
the Subscriber, no securities of the Company other than the Registrable
Securities will be included in the Registration Statement except as disclosed on
SCHEDULE 11.1, if any.

                  11.2. REGISTRATION PROCEDURES. If and whenever the Company is
required by the provisions of Section 11.1(i), 11.1(ii), or (iv) to effect the
registration of any Registrable Securities under the 1933 Act, the Company will,
as expeditiously as possible:

                           (a) subject to the timelines provided in this
Agreement, prepare and file with the Commission a registration statement
required by Section 11, with respect to such securities and use its best efforts
to cause such registration statement to become and remain effective for the
period of the distribution contemplated thereby (determined as herein provided),
and promptly provide to the holders of the Registrable Securities copies of all
filings and Commission letters of comment including a notification by confirmed
telecopier to Subscribers and Grushko & Mittman, P.C. within twenty-four (24)
hours of (i) notice that the Commission has no (further) comments on the
registration statement, and (ii) declaration of effectiveness of the
registration statement;

                           (b) prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective until such registration statement has been effective for a
period of two (2) years, and comply with the provisions of the 1933 Act with
respect to the disposition of all of the Registrable Securities covered by such
registration statement in accordance with the Sellers' intended method of
disposition set forth in such registration statement for such period;

                           (c) furnish to the Sellers, at the Company's expense,
such number of copies of the registration statement and the prospectus included
therein (including each preliminary prospectus) as such persons reasonably may
request in order to facilitate the public sale or their disposition of the
securities covered by such registration statement;

                                       14
<PAGE>

                           (d) use its best efforts to register or qualify the
Sellers' Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the Sellers shall request
in writing, provided, however, that the Company shall not for any such purpose
be required to qualify generally to transact business as a foreign corporation
in any jurisdiction where it is not so qualified or to consent to general
service of process in any such jurisdiction;

                           (e) if applicable, list the Registrable Securities
covered by such registration statement with any securities exchange on which the
Common Stock of the Company is then listed;

                           (f) immediately notify the Sellers when a prospectus
relating thereto is required to be delivered under the 1933 Act, of the
happening of any event of which the Company has knowledge as a result of which
the prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing; and

                           (g)      provided same would not be in violation of
the provision of Regulation FD under the 1934 Act, make available for inspection
by the Sellers, and any attorney, accountant or other agent retained by the
Seller or underwriter, all publicly available, non-confidential financial and
other records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors and employees to supply all publicly
available, non-confidential information reasonably requested by the seller,
attorney, accountant or agent in connection with such registration statement.

                  11.3. PROVISION OF DOCUMENTS. In connection with each
registration described in this Section 11, each Seller will furnish to the
Company in writing such information and representation letters with respect to
itself and the proposed distribution by it as reasonably shall be necessary in
order to assure compliance with federal and applicable state securities laws.

                  11.4. NON-REGISTRATION EVENTS. The Company and the Subscribers
agree that the Sellers will suffer damages if the Registration Statement is not
filed by the Filing Date and not declared effective by the Commission by the
Effective Date, and any registration statement required under Section 11.1(i) or
11.1(ii) is not filed within 60 days after written request and declared
effective by the Commission within 120 days after such request, and maintained
in the manner and within the time periods contemplated by Section 11 hereof, and
it would not be feasible to ascertain the extent of such damages with precision.
Accordingly, if (i) the Registration Statement is not filed on or before the
Filing Date or is not declared effective on or before the sooner of the
Effective Date, or within three (3) business days of receipt by the Company of a
written or oral communication from the Commission that the Registration
Statement will not be reviewed or that the Commission has no further comments,
(ii) if the registration statement described in Sections 11.1(i) or 11.1(ii) is
not filed within 60 days after such written request, or is not declared
effective within 120 days after such written request, or (iii) any registration
statement described in Sections 11.1(i), 11.1(ii) or 11.1(iv) is filed and
declared effective but shall thereafter cease to be effective (without being
succeeded within ten (10) business days by an effective replacement or amended
registration statement) for a period of time which shall exceed 30 days in the
aggregate per year (defined as a period of 365 days commencing on the date the
Registration Statement is declared effective) or more than 20 consecutive days
(each such event referred to in clauses (i), (ii) and (iii) of this Section 11.4
is referred to herein as a "Non-Registration Event"), then the Company shall
deliver to the holder of Registrable Securities, as Liquidated Damages, an
amount equal to one and one-half percent (1.5%) for each thirty (30) days or
part thereof for the first sixty (60) days and thereafter an amount equal to two
percent (2%) for each thirty (30) days or part thereof of the Purchase Price of

                                       15
<PAGE>

the Shares and Warrant Shares owned of record by such holder as of and during
the pendency of such Non-Registration Event which are subject to such
Non-Registration Event. The Company must pay the Liquidated Damages in cash
within ten (10) days after the end of each thirty (30) day period or shorter
part thereof for which Liquidated Damages are payable. In the event a
Registration Statement is filed by the Filing Date but is withdrawn prior to
being declared effective by the Commission, then such Registration Statement
will be deemed to have not been filed.

                  11.5. EXPENSES. All expenses incurred by the Company in
complying with Section 11, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, fees and expenses (including
reasonable counsel fees) incurred in connection with complying with state
securities or "blue sky" laws, fees of the National Association of Securities
Dealers, Inc., transfer taxes, fees of transfer agents and registrars, costs of
insurance and fee of one counsel for all Sellers (in an amount not to exceed
$5,000) are called "Registration Expenses." All underwriting discounts and
selling commissions applicable to the sale of Registrable Securities, including
any fees and disbursements of any additional counsel to the Seller, are called
"Selling Expenses." The Company will pay all Registration Expenses in connection
with the registration statement under Section 11. Selling Expenses in connection
with each registration statement under Section 11 shall be borne by the Seller
and may be apportioned among the Sellers in proportion to the number of shares
sold by the Seller relative to the number of shares sold under such registration
statement or as all Sellers thereunder may agree.

                  11.6. INDEMNIFICATION AND CONTRIBUTION.

                           (a)      In the event of a registration of any
Registrable Securities under the 1933 Act pursuant to Section 11, the Company
will, to the extent permitted by law, indemnify and hold harmless the Seller,
each officer of the Seller, each director of the Seller, each underwriter of
such Registrable Securities thereunder and each other person, if any, who
controls such Seller or underwriter within the meaning of the 1933 Act, against
any losses, claims, damages or liabilities, joint or several, to which the
Seller, or such underwriter or controlling person may become subject under the
1933 Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such Registrable Securities was registered
under the 1933 Act pursuant to Section 11, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances when made, and will subject
to the provisions of Section 11.6(c) reimburse the Seller, each such underwriter
and each such controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company shall
not be liable to the Seller to the extent that any such damages arise out of or
are based upon an untrue statement or omission made in any preliminary
prospectus if (i) the Seller failed to send or deliver a copy of the final
prospectus delivered by the Company to the Seller with or prior to the delivery
of written confirmation of the sale by the Seller to the person asserting the
claim from which such damages arise, (ii) the final prospectus would have
corrected such untrue statement or alleged untrue statement or such omission or
alleged omission, or (iii) to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with information
furnished by any such Seller, or any such controlling person in writing
specifically for use in such registration statement or prospectus.

                           (b)      In the event of a registration of any of
the Registrable Securities under the 1933 Act pursuant to Section 11, each
Seller severally but not jointly will, to the extent permitted by law, indemnify
and hold harmless the Company, and each person, if any, who controls the Company
within the meaning of the 1933 Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and each

                                       16
<PAGE>

person who controls any underwriter within the meaning of the 1933 Act, against
all losses, claims, damages or liabilities, joint or several, to which the
Company or such officer, director, underwriter or controlling person may become
subject under the 1933 Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in the registration statement under which such Registrable Securities were
registered under the 1933 Act pursuant to Section 11, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereof,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and each such
officer, director, underwriter and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided, however,
that the Seller will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
such Seller, as such, furnished in writing to the Company by such Seller
specifically for use in such registration statement or prospectus, and provided,
further, however, that the liability of the Seller hereunder shall be limited to
the net proceeds actually received by the Seller from the sale of Registrable
Securities covered by such registration statement.

                           (c) Promptly after receipt by an indemnified party
hereunder of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party hereunder, notify the indemnifying party in writing thereof, but the
omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to such indemnified party other than under this
Section 11.6(c) and shall only relieve it from any liability which it may have
to such indemnified party under this Section 11.6(c), except and only if and to
the extent the indemnifying party is prejudiced by such omission. In case any
such action shall be brought against any indemnified party and it shall notify
the indemnifying party of the commencement thereof, the indemnifying party shall
be entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel satisfactory to such indemnified
party, and, after notice from the indemnifying party to such indemnified party
of its election so to assume and undertake the defense thereof, the indemnifying
party shall not be liable to such indemnified party under this Section 11.6(c)
for any legal expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of investigation
and of liaison with counsel so selected, provided, however, that, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be reasonable defenses available to it which are different from
or additional to those available to the indemnifying party or if the interests
of the indemnified party reasonably may be deemed to conflict with the interests
of the indemnifying party, the indemnified parties, as a group, shall have the
right to select one separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with the reasonable
expenses and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the indemnifying party as incurred.

                           (d) In order to provide for just and equitable
contribution in the event of joint liability under the 1933 Act in any case in
which either (i) a Seller, or any controlling person of a Seller, makes a claim
for indemnification pursuant to this Section 11.6 but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 11.6 provides for indemnification in
such case, or (ii) contribution under the 1933 Act may be required on the part
of the Seller or controlling person of the Seller in circumstances for which

                                       17
<PAGE>

indemnification is not provided under this Section 11.6; then, and in each such
case, the Company and the Seller will contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after contribution
from others) in such proportion so that the Seller is responsible only for the
portion represented by the percentage that the public offering price of its
securities offered by the registration statement bears to the public offering
price of all securities offered by such registration statement, provided,
however, that, in any such case, (y) the Seller will not be required to
contribute any amount in excess of the public offering price of all such
securities offered by it pursuant to such registration statement; and (z) no
person or entity guilty of fraudulent misrepresentation (within the meaning of
Section 10(f) of the 1933 Act) will be entitled to contribution from any person
or entity who was not guilty of such fraudulent misrepresentation.

                  11.7. DELIVERY OF UNLEGENDED SHARES.

                           (a) Within three (3) business days (such third (3rd)
business day, the "Unlegended Shares Delivery Date") after the business day on
which the Company has received (i) a notice that Registrable Securities have
been sold either pursuant to the Registration Statement or Rule 144 under the
1933 Act, (ii) a representation that the prospectus delivery requirements, or
the requirements of Rule 144, as applicable, have been satisfied, and (iii) the
original share certificates representing the shares of Common Stock that have
been sold, and (iv) in the case of sales under Rule 144, customary
representation letters of the Subscriber and/or Subscriber's broker regarding
compliance with the requirements of Rule 144, the Company at its expense, (y)
shall deliver, and shall cause legal counsel selected by the Company to deliver,
to its transfer agent (with copies to Subscriber) an appropriate instruction and
opinion of such counsel, directing the delivery of shares of Common Stock
without any legends including the legends set forth in Sections 4(e) and 4(f)
above, issuable pursuant to any effective and current Registration Statement
described in Section 11 of this Agreement or pursuant to Rule 144 under the 1933
Act (the "Unlegended Shares"); and (z) cause the transmission of the
certificates representing the Unlegended Shares together with a legended
certificate representing the balance of the unsold shares of Common Stock, if
any, to the Subscriber at the address specified in the notice of sale, via
express courier, by electronic transfer or otherwise on or before the Unlegended
Shares Delivery Date. Transfer fees shall be the responsibility of the Seller.

                           (b) In lieu of delivering physical certificates
representing the Unlegended Shares, if the Company's transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer program, upon request of a Subscriber, so long as the certificates
therefor do not bear a legend and the Subscriber is not obligated to return such
certificate for the placement of a legend thereon, the Company shall cause its
transfer agent to electronically transmit the Unlegended Shares by crediting the
account of Subscriber's prime Broker with DTC through its Deposit Withdrawal
Agent Commission system. Such delivery must be made on or before the Unlegended
Shares Delivery Date.

                           (c) The Company understands that a delay in the
delivery of the Unlegended Shares pursuant to Section 11 hereof beyond the
Unlegended Shares Delivery Date could result in economic loss to a Subscriber.
As compensation to a Subscriber for such loss, the Company agrees to pay late
payment fees (as liquidated damages and not as a penalty) to the Subscriber for
late delivery of Unlegended Shares in the amount of $100 per business day after
the Delivery Date for each $10,000 of purchase price of the Unlegended Shares
subject to the delivery default. If during any 360 day period, the Company fails
to deliver Unlegended Shares as required by this Section 11.7 for an aggregate
of thirty (30) days, then each Subscriber or assignee holding Securities subject
to such default may, at its option, require the Company to purchase all or any
portion of the Shares and Warrant Shares subject to such default at a price per
share equal to 130% of the Purchase Price of such Common Stock and Warrant
Shares. The Company shall pay any payments incurred under this Section in
immediately available funds upon demand.

                                       18
<PAGE>

                           (d) In addition to any other rights available to a
Subscriber, if the Company fails to deliver to a Subscriber Unlegended Shares as
required pursuant to this Agreement, within ten (10) calendar days after the
Unlegended Shares Delivery Date and the Subscriber purchases (in an open market
transaction or otherwise) shares of common stock to deliver in satisfaction of a
sale by such Subscriber of the shares of Common Stock which the Subscriber
anticipated receiving from the Company (a "Buy-In"), then the Company shall pay
in cash to the Subscriber (in addition to any remedies available to or elected
by the Subscriber) the amount by which (A) the Subscriber's total purchase price
(including brokerage commissions, if any) for the shares of common stock so
purchased exceeds (B) the aggregate purchase price of the shares of Common Stock
delivered to the Company for reissuance as Unlegended Shares, together with
interest thereon at a rate of 15% per annum, accruing until such amount and any
accrued interest thereon is paid in full (which amount shall be paid as
liquidated damages and not as a penalty). For example, if a Subscriber purchases
shares of Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to $10,000 of purchase price of shares of Common Stock
delivered to the Company for reissuance as Unlegended Shares, the Company shall
be required to pay the Subscriber $1,000, plus interest. The Subscriber shall
provide the Company written notice indicating the amounts payable to the
Subscriber in respect of the Buy-In.

                           (e) In the event a Subscriber shall request delivery
of Unlegended Shares as described in Section 11.7(e) and the Company is required
to deliver such Unlegended Shares pursuant to Section 11.7(e), the Company may
not refuse to deliver Unlegended Shares based on any claim that such Subscriber
or any one associated or affiliated with such Subscriber has been engaged in any
violation of law, or for any other reason, unless, an injunction or temporary
restraining order from a court, on notice, restraining and or enjoining delivery
of such Unlegended Shares or exercise of all or part of said Warrant shall have
been sought and obtained and the Company has posted a surety bond for the
benefit of such Subscriber in the amount of 130% of the amount of the aggregate
purchase price of the Common Stock and Warrant Shares which are subject to the
injunction or temporary restraining order, which bond shall remain in effect
until the completion of arbitration/litigation of the dispute and the proceeds
of which shall be payable to such Subscriber to the extent Subscriber obtains
judgment in Subscriber's favor.

                  12. (a) RIGHT OF FIRST REFUSAL. Commencing on the Actual
Effective Date and until the Registration Statement has been effective for one
hundred and fifty (150) days, the Subscribers shall be given not less than five
(5) business days prior written notice of any proposed sale by the Company of
its common stock or other securities or debt obligations, except in connection
with (i) employee stock options or compensation plans in connection with no more
than 200,000 shares of Common Stock, (ii) as full or partial consideration in
connection with any merger, consolidation or purchase of substantially all of
the securities or assets of any corporation or other entity, (iii) as has been
described in the Reports or Other Written Information filed with the Commission
or delivered to the Subscribers prior to the Closing Date, or (iv) the
Securities contemplated to be issued to the Subscribers and Broker pursuant to
this Agreement (collectively "Excepted Issuances"). The Subscribers who exercise
their rights pursuant to this Section 12(a) shall have the right during the five
(5) business days following receipt of the notice to purchase all of such
offered common stock, debt or other securities in accordance with the terms and
conditions set forth in the notice of sale in the same proportion to each other
as their purchase of Shares in the Offering. In the event such terms and
conditions are modified during the notice period, the Subscribers shall be given
prompt notice of such modification and shall have the right during the original
notice period or for a period of five (5) business days following the notice of
modification, whichever is longer, to exercise such right.

                                       19
<PAGE>

                           (b) OFFERING RESTRICTIONS. During the Exclusion
Period except in connection with the Excepted Issuances or the Offering, the
Company will not enter into any agreement to, nor issue any equity, convertible
debt or other securities convertible into common stock without the prior written
consent of the Subscribers, which consent may be withheld for any reason.

                           (c) FAVORED NATIONS PROVISION. Other than the
Excepted Issuances, if at any time until the Registration Statement has been
effective for one hundred and eighty (180) days, if the Company shall offer,
issue or agree to issue any common stock or securities convertible into or
exercisable for shares of common stock (or modify any of the foregoing which may
be outstanding at any time prior to the Closing Date) to any person or entity at
a price per share or conversion or exercise price per share which shall be less
than the Per Share Purchase Price, without the consent of each Subscriber
holding Shares, then the Company shall issue, for each such occasion, additional
shares of Common Stock to each Subscriber so that the average Per Share Purchase
Price of the shares of Common Stock issued to the Subscriber (of only the Common
Stock or Warrant Shares still owned by the Subscriber) is equal to such other
lower price per share. The delivery to the Subscriber of the additional shares
of Common Stock shall be not later than the closing date of the transaction
giving rise to the requirement to issue additional shares of Common Stock. The
Subscriber is granted the registration rights described in Section 11 hereof in
relation to such additional shares of Common Stock except that the Filing Date
and Effective Date vis-a-vis such additional common shares shall be,
respectively, the sixtieth (60th) and one hundred and twentieth (120th) date
after the closing date giving rise to the requirement to issue the additional
shares of Common Stock. For purposes of the issuance and adjustment described in
this paragraph, the issuance of any security of the Company carrying the right
to convert such security into shares of Common Stock or of any warrant, right or
option to purchase Common Stock shall result in the issuance of the additional
shares of Common Stock upon the issuance of such convertible security, warrant,
right or option and again upon any subsequent issuances of shares of Common
Stock upon exercise of such conversion or purchase rights if such issuance is at
a price lower than the then Per Share Purchase Price. The rights of the
Subscriber set forth in this Section 12 are in addition to any other rights the
Subscriber has pursuant to this Agreement and any other agreement referred to or
entered into in connection herewith.

                           (d)      MAXIMUM EXERCISE OF RIGHTS.   In the event
the exercise of the rights described in Sections 12(a) and 12(c) would result in
the issuance of an amount of common stock of the Company that would exceed the
maximum amount that may be issued to a Subscriber calculated in the manner
described in Section 10 of the Warrant, then the issuance of such additional
shares of common stock of the Company to such Subscriber will be deferred in
whole or in part until such time as such Subscriber is able to beneficially own
such common stock without exceeding the maximum amount set forth calculated in
the manner described in Section 10 of the Warrant. The determination of when
such common stock may be issued shall be made by each Subscriber as to only such
Subscriber.

                  13.      MISCELLANEOUS.

                           (a) NOTICES. All notices, demands, requests,
consents, approvals, and other communications required or permitted hereunder
shall be in writing and, unless otherwise specified herein, shall be (i)
personally served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable air courier
service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or
facsimile, addressed as set forth below or to such other address as such party
shall have specified most recently by written notice. Any notice or other
communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business

                                       20
<PAGE>

hours where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be: (i) if to the
Company, to: Zynex Medical Holdings, Inc., 8100 South Park Way, Suite A-9,
Littleton, CO 80120, Attn: Thomas Sandgaard, CEO, telecopier: (800) 495-6695,
with a copy by telecopier only to: Sichenzia, Ross, Friedman & Ference LLP, 1065
Avenue of the Americas, New York, NY 10018, Attn: Gregory Sichenzia, Esq.,
telecopier number: (212) 930-9725, (ii) if to the Subscribers, to: the one or
more addresses and telecopier numbers indicated on the signature pages hereto,
with an additional copy by telecopier only to: Grushko & Mittman, P.C., 551
Fifth Avenue, Suite 1601, New York, New York 10176, telecopier number: (212)
697-3575, and (iii) if to the Broker, to: J.P. Turner & Company, L.L.C., 17
Corporate Plaza, Suite 200, Newport Beach, CA 92660, Attn: Michael Rose,
telecopier: (949) 717-4839.

                           (b) CLOSING. The consummation of the transactions
contemplated herein shall take place at the offices of Grushko & Mittman, P.C.,
551 Fifth Avenue, Suite 1601, New York, New York 10176, upon the satisfaction of
all conditions to Closing set forth in this Agreement ("Closing Date").

                           (c) ENTIRE AGREEMENT; ASSIGNMENT. This Agreement and
other documents delivered in connection herewith represent the entire agreement
between the parties hereto with respect to the subject matter hereof and may be
amended only by a writing executed by both parties. Neither the Company nor the
Subscribers have relied on any representations not contained or referred to in
this Agreement and the documents delivered herewith. No right or obligation of
either party shall be assigned by that party without prior notice to and the
written consent of the other party.

                           (d) COUNTERPARTS/EXECUTION. This Agreement may be
executed in any number of counterparts and by the different signatories hereto
on separate counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute but one and the same
instrument. This Agreement may be executed by facsimile signature and delivered
by facsimile transmission.

                           (e) LAW GOVERNING THIS AGREEMENT. This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York without regard to principles of conflicts of laws. Any action brought
by either party against the other concerning the transactions contemplated by
this Agreement shall be brought only in the state courts of New York or in the
federal courts located in the state of New York. THE PARTIES AND THE INDIVIDUALS
EXECUTING THIS AGREEMENT AND OTHER AGREEMENTS REFERRED TO HEREIN OR DELIVERED IN
CONNECTION HEREWITH ON BEHALF OF THE COMPANY AGREE TO SUBMIT TO THE JURISDICTION
OF SUCH COURTS AND WAIVE TRIAL BY JURY. The prevailing party shall be entitled
to recover from the other party its reasonable attorney's fees and costs. In the
event that any provision of this Agreement or any other agreement delivered in
connection herewith is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision of any agreement.

                           (f) SPECIFIC ENFORCEMENT, CONSENT TO JURISDICTION.
The Company and Subscriber acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof, this being in addition
to any other remedy to which any of them may be entitled by law or equity.
Subject to Section 13(e) hereof, each of the Company, Subscriber and any
signator hereto in his personal capacity hereby waives, and agrees not to assert
in any such suit, action or proceeding, any claim that it is not personally

                                       21
<PAGE>

subject to the jurisdiction in New York of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. Nothing in this Section shall affect or limit
any right to serve process in any other manner permitted by law.

                           (g) INDEPENDENT NATURE OF SUBSCRIBERS. The Company
acknowledges that the obligations of each Subscriber under the Transaction
Documents are several and not joint with the obligations of any other
Subscriber, and no Subscriber shall be responsible in any way for the
performance of the obligations of any other Subscriber under the Transaction
Documents. The Company acknowledges that the decision of each Subscriber to
purchase Securities has been made by such Subscriber independently of any other
Subscriber and independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets, properties,
liabilities, results of operations, condition (financial or otherwise) or
prospects of the Company which may have been made or given by any other
Subscriber or by any agent or employee of any other Subscriber, and no
Subscriber or any of its agents or employees shall have any liability to any
Subscriber (or any other person) relating to or arising from any such
information, materials, statements or opinions. The Company acknowledges that
nothing contained in any Transaction Document, and no action taken by any
Subscriber pursuant hereto or thereto (including, but not limited to, the (i)
inclusion of a Subscriber in the SB-2 Registration Statement and (ii) review by,
and consent to, such Registration Statement by a Subscriber) shall be deemed to
constitute the Subscribers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Subscribers are in
any way acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. The Company acknowledges
that each Subscriber shall be entitled to independently protect and enforce its
rights, including without limitation, the rights arising out of the Transaction
Documents, and it shall not be necessary for any other Subscriber to be joined
as an additional party in any proceeding for such purpose. The Company
acknowledges that it has elected to provide all Subscribers with the same terms
and Transaction Documents for the convenience of the Company and not because
Company was required or requested to do so by the Subscribers. The Company
acknowledges that such procedure with respect to the Transaction Documents in no
way creates a presumption that the Subscribers are in any way acting in concert
or as a group with respect to the Transaction Documents or the transactions
contemplated thereby.

                           (h) EQUITABLE ADJUSTMENT. The Securities and the
purchase prices of Securities shall be equitably adjusted to offset the effect
of stock splits, stock dividends, and distributions of property or equity
interests of the Company to its shareholders.

                      [THIS SPACE INTENTIONALLY LEFT BLANK]

                                       22

<PAGE>

                    SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT

         Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.

                                   ZYNEX MEDICAL HOLDINGS, INC.
                                   a Nevada corporation

                                   By:  /S/ THOMAS SANDGAARD
                                        --------------------
                                            Name:  Thomas Sandgaard
                                            Title:  Chief Executive Officer

                                   Dated: June 4, 2004

<TABLE>
<CAPTION>
--------------------------------------- --------------------- ------------- -------------- --------------
SUBSCRIBER                              PURCHASE PRICE        SHARES        A WARRANTS     B WARRANTS
--------------------------------------- --------------------- ------------- -------------- --------------
<S>                                     <C>                   <C>           <C>            <C>
                                        $500,000.00           285,714       142,857        285,714

-------------------------------------
(Signature)
ALPHA CAPITAL AKTIENGESELLSCHAFT
Pradafant 7
9490 Furstentums
Vaduz, Lichtenstein
Fax: 011-42-32323196
--------------------------------------- --------------------- ------------- -------------- --------------
</TABLE>

<PAGE>

                    SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT

         Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.

                                   ZYNEX MEDICAL HOLDINGS, INC.
                                   a Nevada corporation

                                   By:  /S/ THOMAS SANDGAARD
                                        --------------------
                                            Name:  Thomas Sandgaard
                                            Title:  Chief Executive Officer

                                   Dated: June 4, 2004

<TABLE>
<CAPTION>

------------------------------------------------- --------------------- -------------------- ------------------- --------------
SUBSCRIBER                                        PURCHASE PRICE        SHARES               A WARRANTS          B WARRANTS
------------------------------------------------- --------------------- -------------------- ------------------- --------------
<S>                                               <C>                   <C>                  <C>                 <C>
                                                  $300,000.00           171,429              85,715              171,429

_________________________________
(Signature) STONESTREET LIMITED
PARTNERSHIP C/o Canaccord Capital Corporation
320 Bay Street, Suite 1300 Toronto,
Ontario M5H 4A6, Canada
Fax: (416) 956-8989
------------------------------------------------- --------------------- -------------------- ------------------- --------------
</TABLE>

<PAGE>
                    SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT

         Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.

                                   ZYNEX MEDICAL HOLDINGS, INC.
                                   a Nevada corporation

                                   By:  /S/ THOMAS SANDGAARD
                                        --------------------
                                            Name:  Thomas Sandgaard
                                            Title:  Chief Executive Officer

                                   Dated: June 4, 2004

<TABLE>
<CAPTION>

------------------------------------------------- --------------------- -------------------- ------------------- --------------
SUBSCRIBER                                        PURCHASE PRICE        SHARES               A WARRANTS          B WARRANTS
------------------------------------------------- --------------------- -------------------- ------------------- --------------
<S>                                               <C>                   <C>                  <C>                 <C>
                                                  $100,000.00           57,143               28,572              57,143

--------------------------------------------
(Signature)
WHALEHAVEN FUNDS LIMITED
3rd Floor, 14 Par-Laville Road Hamilton,
Bermuda HM08 Fax: (441) 292-1373

------------------------------------------------- --------------------- -------------------- ------------------- --------------
</TABLE>

<PAGE>

                    SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT

         Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.

                                   ZYNEX MEDICAL HOLDINGS, INC.
                                   a Nevada corporation

                                   By:  /S/ THOMAS SANDGAARD
                                        --------------------
                                            Name:  Thomas Sandgaard
                                            Title:  Chief Executive Officer

                                   Dated: June 4, 2004

<TABLE>
<CAPTION>

------------------------------------------------- --------------------- -------------------- ------------------- --------------
SUBSCRIBER                                        PURCHASE PRICE        SHARES               A WARRANTS          B WARRANTS
------------------------------------------------- --------------------- -------------------- ------------------- --------------
<S>                                               <C>                   <C>                  <C>                 <C>
                                                  $100,000.00           57,143               28,572              57,143

--------------------------------------------
(Signature)
GREENWICH GROWTH FUND LIMITED
3rd Floor, 14 Par-Laville Road
Hamilton, Bermuda HM08
Fax: (441) 292-1373
------------------------------------------------- --------------------- -------------------- ------------------- --------------
</TABLE>

<PAGE>

                    SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT

         Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.

                                   ZYNEX MEDICAL HOLDINGS, INC.
                                   a Nevada corporation

                                   By:  /S/ THOMAS SANDGAARD
                                        --------------------
                                            Name:  Thomas Sandgaard
                                            Title:  Chief Executive Officer

                                   Dated: June 4, 2004

<TABLE>
<CAPTION>

------------------------------------------------- --------------------- -------------------- ------------------- --------------
SUBSCRIBER                                        PURCHASE PRICE        SHARES               A WARRANTS          B WARRANTS
------------------------------------------------- --------------------- -------------------- ------------------- --------------
<S>                                               <C>                   <C>                  <C>                 <C>
                                                  $200,000.00           114,286              57,143              114,286

--------------------------------------------
(Signature)
ELLIS INTERNATIONAL LIMITED INC.
27 Old Gloncester Street
London, WEIN 3XX
United Kingdom
Fax: 011-020-7788-7803
------------------------------------------------- --------------------- -------------------- ------------------- --------------
</TABLE>

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