Document:

Exhibit 10.10

                          SECURITIES PURCHASE AGREEMENT

         This Securities  Purchase  Agreement (this  "AGREEMENT") is dated as of
October 25, 2005 among Intraop Medical  Corporation,  a Nevada  corporation (the
"COMPANY"),  and each purchaser  identified on the signature pages hereto (each,
including  its  successors  and assigns,  a  "PURCHASER"  and  collectively  the
"PURCHASERS").

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

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

                                   ARTICLE I.
                                   DEFINITIONS

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

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

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

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

                  "CLOSING   DATE"  means  the  Trading  Day  when  all  of  the
         Transaction   Documents   have  been  executed  and  delivered  by  the
         applicable  parties  thereto,  and all conditions  precedent to (i) the
         Purchasers'  obligations  to pay the  Subscription  Amount and (ii) the
         Company's  obligations to deliver the Securities have been satisfied or
         waived.

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

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                   "COMMISSION" means the Securities and Exchange Commission.

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

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

                  "COMPANY COUNSEL" means Manatt, Phelps & Phillips, LLP.

                  "CONVERSION  PRICE"  shall have the  meaning  ascribed to such
         term in the Debentures.

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

                  "DISCLOSURE SCHEDULES" shall have the meaning ascribed to such
         term in Section 3.1.

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

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

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

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                  "EXEMPT  ISSUANCE"  means the issuance of (a) shares of Common
         Stock or options to  employees,  officers or  directors  of the Company
         pursuant to any stock or option plan duly  adopted by a majority of the
         non-employee  members  of the Board of  Directors  of the  Company or a
         majority  of the  members  of a  committee  of  non-employee  directors
         established  for such  purpose,  (b)  securities  upon the  exercise or
         exchange of or conversion of any  Securities  issued  hereunder  and/or
         securities  exercisable or exchangeable  for or convertible into shares
         of Common Stock issued and  outstanding on the date of this  Agreement,
         provided that such  securities  have not been amended since the date of
         this Agreement to increase the number of such securities or to decrease
         the exercise,  exchange or conversion price of any such securities, (c)
         securities  issued pursuant to acquisitions or strategic  transactions,
         provided any such  issuance  shall only be to a Person which is, itself
         or  through  its  subsidiaries,  an  operating  company  in a  business
         synergistic  with the  business of the Company and in which the Company
         receives benefits in addition to the investment of funds, but shall not
         include  a  transaction  in which the  Company  is  issuing  securities
         primarily  for the  purpose  of raising  capital or to an entity  whose
         primary business is investing in securities, (d) warrants or options to
         purchase   Common   Stock   issued   in   connection   with   otherwise
         non-convertible  or non-equity  linked debt  financing with a reputable
         commercial  lender provided that the exercise price of such warrants or
         options at all times is equal to or  greater  than the VWAP at the time
         of the consummation of such financing and the aggregate  exercise price
         of such  warrants  or options  does not exceed 10% of the net  proceeds
         raised by the Company in such  financing  transaction,  (e)  securities
         issued  in  connection   with  any  stock  split,   stock  dividend  or
         recapitalization  and (f)  securities  issued  upon  conversion  of any
         securities included in the definition of Exempt Issuance.

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

                  "INTELLECTUAL PROPERTY RIGHTS" shall have the meaning ascribed
         to such term in Section 3.1(o).

                  "LEGEND REMOVAL DATE" shall have the meaning  ascribed to such
         term in Section 4.1(c).

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

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

                   "MATERIAL  ADVERSE EFFECT" shall have the meaning assigned to
         such term in Section 3.1(b).

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

                  "MAXIMUM RATE" shall have the meaning ascribed to such term in
         Section 5.17.

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                  "PARTICIPATION  MAXIMUM"  shall have the  meaning  ascribed to
         such term in Section 4.13.

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

                  "PRE-NOTICE"  shall have the meaning  ascribed to such term in
         Section 4.13.

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

                  "PURCHASER PARTY" shall have the meaning ascribed to such term
         in Section 4.11.

                  "REGENMACHER TRANSACTION" means the sale of 10% senior secured
         debentures in an aggregate principal amount of $2,000,000 on August 31,
         2005.

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

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

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

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

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

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

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

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

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

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

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

                  "SUBSEQUENT FINANCING" shall have the meaning ascribed to such
         term in Section 4.13.

                  "SUBSEQUENT  FINANCING NOTICE" shall have the meaning ascribed
         to such term in Section 4.13.

                  "SUBSIDIARY"  means any subsidiary of the Company as set forth
         on SCHEDULE 3.1(A).

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

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

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

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

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

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

                   "WARRANT  SHARES"  means the shares of Common Stock  issuable
         upon exercise of the Warrants.

                                  ARTICLE II.
                                PURCHASE AND SALE

                  2.1 CLOSING; ADDITIONAL CLOSINGS. On the initial Closing Date,
         upon  the  terms  and  subject  to the  conditions  set  forth  herein,
         concurrent  with the  execution  and delivery of this  Agreement by the
         parties hereto,  the Company agrees to sell, and each Purchaser  agrees
         to  purchase  in  the  aggregate,  severally  and  not  jointly,  up to
         $5,500,000  principal  amount of the  Debentures.  Each Purchaser shall
         deliver  to  the  Company  via  wire  transfer  or  a  certified  check
         immediately  available funds equal to their Subscription Amount and the
         Company shall deliver to each Purchaser their respective  Debenture and
         Warrants as determined  pursuant to Section  2.2(a) and the other items
         set forth in Section 2.2 issuable at the Closing.  Upon satisfaction of
         the  conditions  set forth in Sections 2.2 and 2.3,  the Closing  shall
         occur at the offices of Company counsel,  or such other location as the
         parties  shall  mutually  agree.  The Company  may  conduct  additional
         Closings  with  purchasers  selected by the Company up to an additional
         $5,500,000  in  Debentures at any time on or prior to October 31, 2005.
         The terms and conditions of any subsequent Closing shall be governed by
         Sections 2.2 and 2.3 herein. Purchasers at any subsequent closing shall
         sign a  counterpart  signature  page to this  Agreement  and the  other
         documents  required  pursuant to Sections 2.2 and 2.3 herein and,  upon
         execution  of such  documents,  shall be deemed a  "Purchaser"  for all
         purposes under this Agreement.

         2.2 DELIVERIES.

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

                           (i) this Agreement duly executed by the Company;

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

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

                           (iv) a Long Term  Warrant  registered  in the name of
                  such  Purchaser to purchase up to a number of shares of Common
                  Stock  equal to 50% of such  Purchaser's  Subscription  Amount
                  divided by the Conversion  Price, with an exercise price equal
                  to $0.40, subject to adjustment therein;

                           (v) a Short Term  Warrant  registered  in the name of
                  such  Purchaser to purchase up to a number of shares of Common
                  Stock  equal to 50% of such  Purchaser's  Subscription  Amount
                  divided by the  Conversion,  with an  exercise  price equal to
                  $0.40, subject to adjustment therein; and

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

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

                  (i) this Agreement duly executed by such Purchaser;

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

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

         2.3 CLOSING CONDITIONS.

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

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

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

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

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

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

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

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

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

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

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

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

                  (a) SUBSIDIARIES.  All of the direct and indirect subsidiaries
         of the  Company  are set forth on SCHEDULE  3.1(A).  The Company  owns,
         directly  or  indirectly,  all of the  capital  stock or  other  equity
         interests of each Subsidiary  free and clear of any Liens,  and all the
         issued and  outstanding  shares of capital stock of each Subsidiary are
         validly  issued  and  are  fully  paid,   non-assessable  and  free  of
         preemptive and similar rights to subscribe for or purchase  securities.
         If the Company has no subsidiaries,  then references in the Transaction
         Documents to the Subsidiaries will be disregarded.

                  (b)  ORGANIZATION AND  QUALIFICATION.  The Company and each of
         the Subsidiaries is an entity duly incorporated or otherwise organized,
         validly   existing  and  in  good  standing   under  the  laws  of  the
         jurisdiction of its incorporation or organization (as applicable), with
         the  requisite  power and authority to own and use its  properties  and
         assets and to carry on its business as currently conducted. Neither the
         Company nor any  Subsidiary  is in  violation  or default of any of the
         provisions of its respective  certificate or articles of incorporation,
         bylaws  or  other  organizational  or  charter  documents.  Each of the
         Company and the  Subsidiaries is duly qualified to conduct business and
         is in good  standing as a foreign  corporation  or other entity in each
         jurisdiction in which the nature of the business  conducted or property
         owned  by it makes  such  qualification  necessary,  except  where  the
         failure to be so  qualified  or in good  standing,  as the case may be,
         could not have or  reasonably  be  expected to result in (i) a material
         adverse  effect on the  legality,  validity  or  enforceability  of any
         Transaction Document,  (ii) a material adverse effect on the results of
         operations,  assets,  business,  prospects or condition  (financial  or
         otherwise) of the Company and the  Subsidiaries,  taken as a whole,  or
         (iii) a material adverse effect on the Company's  ability to perform in
         any  material  respect  on a timely  basis  its  obligations  under any
         Transaction  Document (any of (i), (ii) or (iii),  a "MATERIAL  ADVERSE
         EFFECT") and no Proceeding has been instituted in any such jurisdiction
         revoking, limiting or curtailing or seeking to revoke, limit or curtail
         such power and authority or qualification.

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

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

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                  (e)  FILINGS,  CONSENTS  AND  APPROVALS.  The  Company  is not
         required to obtain any consent, waiver, authorization or order of, give
         any notice to, or make any filing or  registration  with,  any court or
         other federal,  state, local or other  governmental  authority or other
         Person in connection  with the execution,  delivery and  performance by
         the  Company  of the  Transaction  Documents,  other  than (i)  filings
         required  pursuant to Section 4.6, (ii) the filing with the  Commission
         of the Registration  Statement,  (iii) the notice and/or application(s)
         to each  applicable  Trading  Market for the  issuance  and sale of the
         Debentures  and Warrants and the listing of the  Underlying  Shares for
         trading thereon in the time and manner required  thereby,  and (iv) the
         filing of Form D with the  Commission  and such filings as are required
         to be made under applicable state  securities laws  (collectively,  the
         "REQUIRED APPROVALS").

                  (f)  ISSUANCE  OF THE  SECURITIES.  The  Securities  are  duly
         authorized  and,  when  issued  and  paid  for in  accordance  with the
         applicable  Transaction  Documents,  will be duly and  validly  issued,
         fully paid and  nonassessable,  free and clear of all Liens  imposed by
         the Company  other than  restrictions  on transfer  provided for in the
         Transaction Documents. The Underlying Shares, when issued in accordance
         with the terms of the  Transaction  Documents,  will be validly issued,
         fully paid and  nonassessable,  free and clear of all Liens  imposed by
         the Company.  The Company has reserved from its duly authorized capital
         stock a number of shares of Common Stock for issuance of the Underlying
         Shares at least equal to the Required Minimum on the date hereof.

                  (g)  CAPITALIZATION.  The  capitalization of the Company is as
         set forth on  SCHEDULE  3.1(G).  The Company has not issued any capital
         stock since its most recently filed periodic  report under the Exchange
         Act,  other than  pursuant to the  exercise of employee  stock  options
         under the  Company's  stock  option  plans,  the  issuance of shares of
         Common  Stock to employees  pursuant to the  Company's  employee  stock
         purchase plan and pursuant to the conversion or exercise of outstanding
         Common  Stock  Equivalents.  No Person has any right of first  refusal,
         preemptive  right,  right of  participation,  or any  similar  right to
         participate  in  the  transactions   contemplated  by  the  Transaction
         Documents.  Except  as a  result  of  the  purchase  and  sale  of  the
         Securities,  there are no outstanding options,  warrants, script rights
         to  subscribe  to, calls or  commitments  of any  character  whatsoever
         relating to, or securities,  rights or obligations  convertible into or
         exercisable  or  exchangeable  for,  or giving  any Person any right to
         subscribe  for or acquire,  any shares of Common  Stock,  or contracts,
         commitments, understandings or arrangements by which the Company or any
         Subsidiary is or may become bound to issue additional  shares of Common
         Stock  or  Common  Stock  Equivalents.  The  issuance  and  sale of the
         Securities  will not  obligate  the  Company to issue  shares of Common
         Stock or other securities to any Person (other than the Purchasers) and
         will not  result in a right of any  holder  of  Company  securities  to
         adjust the  exercise,  conversion,  exchange  or reset price under such
         securities.  All of the  outstanding  shares  of  capital  stock of the
         Company are validly  issued,  fully paid and  nonassessable,  have been
         issued in compliance  with all federal and state  securities  laws, and
         none  of  such  outstanding  shares  was  issued  in  violation  of any
         preemptive  rights or  similar  rights  to  subscribe  for or  purchase
         securities.  No further  approval or  authorization of any stockholder,
         the Board of  Directors  of the Company or others is  required  for the
         issuance  and  sale  of  the  Securities.  There  are  no  stockholders
         agreements,  voting agreements or other similar agreements with respect
         to the  Company's  capital stock to which the Company is a party or, to
         the  knowledge  of the Company,  between or among any of the  Company's
         stockholders.

                                       10
<PAGE>

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

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

                                       11
<PAGE>

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

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

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

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

                                       12
<PAGE>

                  (n) TITLE TO ASSETS.  The  Company and the  Subsidiaries  have
         good and  marketable  title in fee simple to all real property owned by
         them  that  is  material  to  the  business  of  the  Company  and  the
         Subsidiaries  and good and  marketable  title in all personal  property
         owned by them that is material  to the  business of the Company and the
         Subsidiaries,  in each  case free and clear of all  Liens,  except  for
         Liens as do not materially affect the value of such property and do not
         materially  interfere with the use made and proposed to be made of such
         property by the Company and the  Subsidiaries and Liens for the payment
         of  federal,  state or other  taxes,  the  payment  of which is neither
         delinquent  nor subject to penalties.  Any real property and facilities
         held under lease by the Company and the  Subsidiaries  are held by them
         under valid, subsisting and enforceable leases of which the Company and
         the Subsidiaries are in compliance.

                  (o) PATENTS AND TRADEMARKS.  The Company and the  Subsidiaries
         have,  or  have  rights  to  use,  all  patents,  patent  applications,
         trademarks,   trademark  applications,   service  marks,  trade  names,
         copyrights, licenses and other similar rights necessary or material for
         use in connection with their respective  businesses as described in the
         SEC  Reports  and which the  failure  to so have  could have a Material
         Adverse Effect  (collectively,  the  "INTELLECTUAL  PROPERTY  RIGHTS").
         Neither the Company nor any  Subsidiary  has received a written  notice
         that  the  Intellectual  Property  Rights  used by the  Company  or any
         Subsidiary  violates or infringes upon the rights of any Person. To the
         knowledge of the Company,  all such  Intellectual  Property  Rights are
         enforceable and there is no existing  infringement by another Person of
         any of the Intellectual Property Rights of others.

                  (p) INSURANCE. The Company and the Subsidiaries are insured by
         insurers of recognized financial responsibility against such losses and
         risks  and  in  such  amounts  as  are  prudent  and  customary  in the
         businesses  in which the  Company  and the  Subsidiaries  are  engaged,
         including,  but  not  limited  to,  directors  and  officers  insurance
         coverage at least equal to the aggregate  Subscription  Amount.  To the
         best knowledge of the Company,  such  insurance  contracts and policies
         are accurate and complete.  Neither the Company nor any  Subsidiary has
         any  reason to believe  that it will not be able to renew its  existing
         insurance  coverage  as and when  such  coverage  expires  or to obtain
         similar  coverage from similar insurers as may be necessary to continue
         its business without a significant increase in cost.

                  (q) TRANSACTIONS WITH AFFILIATES AND EMPLOYEES.  Except as set
         forth in the SEC  Reports,  none of the  officers or  directors  of the
         Company and, to the knowledge of the Company,  none of the employees of
         the Company is presently a party to any transaction with the Company or
         any  Subsidiary  (other than for  services as  employees,  officers and
         directors),  including  any  contract,  agreement or other  arrangement
         providing for the furnishing of services to or by, providing for rental
         of real  or  personal  property  to or  from,  or  otherwise  requiring
         payments to or from any officer,  director or such  employee or, to the
         knowledge of the Company, any entity in which any officer, director, or
         any  such  employee  has a  substantial  interest  or  is  an  officer,
         director,  trustee or partner,  in each case in excess of $60,000 other
         than  (i) for  payment  of  salary  or  consulting  fees  for  services
         rendered,  (ii)  reimbursement  for expenses  incurred on behalf of the
         Company and (iii) for other employee  benefits,  including stock option
         agreements under any stock option plan of the Company.

                                       13
<PAGE>

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

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

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

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

                                       14
<PAGE>

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

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

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

                  (y) DISCLOSURE.  The Company  confirms that neither it nor any
         other Person acting on its behalf has provided any of the Purchasers or
         their agents or counsel with any information  that constitutes or might
         constitute material, nonpublic information. The Company understands and
         confirms that the Purchasers will rely on the foregoing representations
         and covenants in effecting  transactions  in securities of the Company.
         All disclosure  provided to the Purchasers  regarding the Company,  its
         business  and  the  transactions  contemplated  hereby,  including  the
         Disclosure  Schedules to this  Agreement,  furnished by or on behalf of
         the Company with respect to the  representations  and  warranties  made
         herein are true and correct  with respect to such  representations  and
         warranties  and do not contain any untrue  statement of a material fact
         or omit to  state  any  material  fact  necessary  in order to make the
         statements made therein, in light of the circumstances under which they
         were made, not misleading.  The Company acknowledges and agrees that no
         Purchaser  makes or has made any  representations  or  warranties  with
         respect  to the  transactions  contemplated  hereby  other  than  those
         specifically set forth in Section 3.2 hereof.

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

                                       15
<PAGE>

                  (aa) SOLVENCY. Based on the financial condition of the Company
         as of the  Closing  Date  after  giving  effect to the  receipt  by the
         Company of the proceeds from the sale of the Securities hereunder,  (i)
         the Company's fair saleable value of its assets exceeds the amount that
         will be required to be paid on or in respect of the Company's  existing
         debts and other liabilities (including known contingent liabilities) as
         they mature;  (ii) the Company's assets do not constitute  unreasonably
         small  capital to carry on its business for the current  fiscal year as
         now  conducted  and as proposed to be conducted  including  its capital
         needs taking into account the particular  capital  requirements  of the
         business conducted by the Company,  and projected capital  requirements
         and capital  availability  thereof;  and (iii) the current cash flow of
         the Company, together with the proceeds the Company would receive, were
         it to  liquidate  all of its  assets,  after  taking  into  account all
         anticipated uses of the cash, would be sufficient to pay all amounts on
         or in respect of its debt when such  amounts  are  required to be paid.
         The Company  does not intend to incur  debts  beyond its ability to pay
         such debts as they mature  (taking  into account the timing and amounts
         of cash to be payable on or in respect of its debt). The Company has no
         knowledge of any facts or  circumstances  which lead it to believe that
         it will file for  reorganization or liquidation under the bankruptcy or
         reorganization  laws of any  jurisdiction  within  one  year  from  the
         Closing  Date.  The SEC Reports  set forth as of the dates  thereof all
         outstanding  secured and unsecured  Indebtedness  of the Company or any
         Subsidiary, or for which the Company or any Subsidiary has commitments.
         For the purposes of this Agreement,  "INDEBTEDNESS"  shall mean (a) any
         liabilities  for  borrowed  money or amounts  owed in excess of $50,000
         (other than trade accounts  payable  incurred in the ordinary course of
         business),  (b)  all  guaranties,  endorsements  and  other  contingent
         obligations in respect of  Indebtedness  of others,  whether or not the
         same are or should be reflected in the Company's  balance sheet (or the
         notes  thereto),   except   guaranties  by  endorsement  of  negotiable
         instruments  for deposit or collection or similar  transactions  in the
         ordinary  course of  business;  and (c) the present  value of any lease
         payments  in  excess  of  $50,000  due  under  leases  required  to  be
         capitalized  in  accordance  with GAAP.  Neither  the  Company  nor any
         Subsidiary is in default with respect to any Indebtedness.

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

                                       16

<PAGE>

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

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

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

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

                  (gg) NO DISAGREEMENTS WITH ACCOUNTANTS AND LAWYERS.  There are
         no  disagreements  of  any  kind  presently  existing,   or  reasonably
         anticipated  by the  Company  to arise,  between  the  accountants  and
         lawyers  formerly or presently  employed by the Company and the Company
         is  current  with  respect  to any  fees  owed to its  accountants  and
         lawyers.

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

                                       17
<PAGE>

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

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

         3.2  REPRESENTATIONS  AND WARRANTIES OF THE PURCHASERS.  Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:

                  (a) ORGANIZATION;  AUTHORITY. Such Purchaser is an entity duly
         organized,  validly existing and in good standing under the laws of the
         jurisdiction  of  its  organization  with  full  right,   corporate  or
         partnership  power and  authority to enter into and to  consummate  the
         transactions contemplated by the Transaction Documents and otherwise to
         carry out its  obligations  hereunder and  thereunder.  The  execution,
         delivery  and  performance  by  such  Purchaser  of  the   transactions
         contemplated  by  this  Agreement  have  been  duly  authorized  by all
         necessary  corporate or similar  action on the part of such  Purchaser.
         Each Transaction Document to which it is a party has been duly executed
         by such  Purchaser,  and when delivered by such Purchaser in accordance
         with the terms hereof,  will  constitute the valid and legally  binding
         obligation of such Purchaser, enforceable against it in accordance with
         its terms,  except (i) as limited by general  equitable  principles and
         applicable bankruptcy, insolvency, reorganization, moratorium and other
         laws of general application  affecting enforcement of creditors' rights
         generally,  (ii) as limited by laws  relating  to the  availability  of
         specific performance, injunctive relief or other equitable remedies and
         (iii) insofar as  indemnification  and  contribution  provisions may be
         limited by applicable law.

                                       18
<PAGE>

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

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

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

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

                                       19
<PAGE>

                  (f) SHORT SALES AND CONFIDENTIALITY  PRIOR TO THE DATE HEREOF.
         Other than the transaction  contemplated hereunder,  such Purchaser has
         not directly or  indirectly,  nor has any Person acting on behalf of or
         pursuant  to  any  understanding  with  such  Purchaser,  executed  any
         disposition,  including  Short Sales (but not  including  the  location
         and/or  reservation  of  borrowable  shares  of Common  Stock),  in the
         securities of the Company  during the period  commencing  from the time
         that such Purchaser first received a term sheet from the Company or any
         other  Person  setting  forth the  material  terms of the  transactions
         contemplated  hereunder  until  the date  hereof  ("DISCUSSION  TIME").
         Notwithstanding  the  foregoing,  in the case of a Purchaser  that is a
         multi-managed  investment  vehicle whereby separate  portfolio managers
         manage separate  portions of such Purchaser's  assets and the portfolio
         managers have no direct  knowledge of the investment  decisions made by
         the portfolio  managers  managing  other  portions of such  Purchaser's
         assets,  the  representation  set forth  above  shall  only  apply with
         respect to the portion of assets managed by the portfolio  manager that
         made the investment decision to purchase the Securities covered by this
         Agreement.  Other than to other Persons party to this  Agreement,  such
         Purchaser has maintained the confidentiality of all disclosures made to
         it in connection  with this  transaction  (including  the existence and
         terms of this transaction).

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

                                  ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

         4.1 TRANSFER RESTRICTIONS.

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

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

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

                                       20
<PAGE>

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

                  (c)  Certificates  evidencing the Underlying  Shares shall not
         contain any legend  (including  the legend set forth in Section  4.1(b)
         hereof): (i) while a registration statement (including the Registration
         Statement)  covering the resale of such security is effective under the
         Securities  Act, or (ii) following any sale of such  Underlying  Shares
         pursuant to Rule 144, or (iii) if such  Underlying  Shares are eligible
         for sale  under Rule  144(k),  or (iv) if such  legend is not  required
         under applicable requirements of the Securities Act (including judicial
         interpretations   and  pronouncements   issued  by  the  staff  of  the
         Commission).  The  Company  shall  cause its  counsel  to issue a legal
         opinion to the Company's  transfer  agent  promptly after the Effective
         Date if required by the Company's  transfer agent to effect the removal
         of the  legend  hereunder.  If all or any  portion  of a  Debenture  or
         Warrant is converted or exercised (as  applicable) at a time when there
         is an  effective  registration  statement  to cover  the  resale of the
         Underlying  Shares, or if such Underlying Shares may be sold under Rule
         144(k) or if such legend is not  otherwise  required  under  applicable
         requirements of the Securities Act (including judicial  interpretations
         thereof)  then  such  Underlying  Shares  shall be  issued  free of all
         legends.  The Company  agrees that  following the Effective  Date or at
         such time as such  legend  is no longer  required  under  this  Section
         4.1(c),  it will,  no later  than  three  Trading  Days  following  the
         delivery by a Purchaser to the Company or the Company's  transfer agent
         of a certificate representing Underlying Shares, as applicable,  issued
         with a restrictive  legend (such third Trading Day, the "LEGEND REMOVAL
         DATE"),   deliver  or  cause  to  be  delivered  to  such  Purchaser  a
         certificate  representing such shares that is free from all restrictive
         and other legends. The Company may not make any notation on its records
         or give  instructions to any transfer agent of the Company that enlarge
         the  restrictions  on transfer set forth in this Section.  Certificates
         for Securities subject to legend removal hereunder shall be transmitted
         by the transfer agent of the Company to the Purchasers by crediting the
         account of the  Purchaser's  prime  broker  with the  Depository  Trust
         Company System.
                                       21
<PAGE>

                  (d) In addition to such Purchaser's other available  remedies,
         the Company shall pay to a Purchaser,  in cash,  as partial  liquidated
         damages  and not as a penalty,  for each  $1,000 of  Underlying  Shares
         (based on the VWAP of the Common Stock on the date such  Securities are
         submitted to the Company's transfer agent) delivered for removal of the
         restrictive  legend and subject to Section 4.1(c),  $10 per Trading Day
         (increasing  to $20 per Trading Day 5 Trading  Days after such  damages
         have begun to accrue) for each Trading Day after the second Trading Day
         following the Legend  Removal Date until such  certificate is delivered
         without a legend.  Nothing herein shall limit such Purchaser's right to
         pursue actual damages for the Company's failure to deliver certificates
         representing  any Securities as required by the Transaction  Documents,
         and  such  Purchaser  shall  have  the  right to  pursue  all  remedies
         available to it at law or in equity including,  without  limitation,  a
         decree of specific performance and/or injunctive relief.

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

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

         4.2  ACKNOWLEDGMENT  OF  DILUTION.  The Company  acknowledges  that the
issuance of the Securities may result in dilution of the  outstanding  shares of
Common Stock, which dilution may be substantial under certain market conditions.
The Company  further  acknowledges  that its  obligations  under the Transaction
Documents,  including without  limitation its obligation to issue the Underlying
Shares pursuant to the Transaction Documents, are unconditional and absolute and
not  subject  to any  right  of  set  off,  counterclaim,  delay  or  reduction,
regardless  of the effect of any such dilution or any claim the Company may have
against any Purchaser and  regardless of the dilutive  effect that such issuance
may have on the ownership of the other stockholders of the Company.

                                       22
<PAGE>

         4.3  FURNISHING  OF   INFORMATION.   As  long  as  any  Purchaser  owns
Securities,  the  Company  covenants  to timely  file (or obtain  extensions  in
respect  thereof  and file  within the  applicable  grace  period)  all  reports
required  to be filed by the  Company  after  the date  hereof  pursuant  to the
Exchange Act. As long as any Purchaser  owns  Securities,  if the Company is not
required to file  reports  pursuant  to the  Exchange  Act, it will  prepare and
furnish to the  Purchasers and make publicly  available in accordance  with Rule
144(c) such information as is required for the Purchasers to sell the Securities
under Rule 144.  The Company  further  covenants  that it will take such further
action as any holder of Securities  may  reasonably  request,  all to the extent
required from time to time to enable such Person to sell such Securities without
registration  under the  Securities  Act within the limitation of the exemptions
provided by Rule 144.

         4.4 INTEGRATION.  The Company shall not sell, offer for sale or solicit
offers to buy or  otherwise  negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the  Securities  in a manner that would  require the  registration  under the
Securities  Act of the sale of the Securities to the Purchasers or that would be
integrated  with the offer or sale of the  Securities  for purposes of the rules
and regulations of any Trading Market.

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

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

                                       23
<PAGE>

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

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

         4.9 USE OF  PROCEEDS.  The  Company  shall be  required  to use the net
proceeds from the sale of the Securities hereunder  specifically as set forth on
SCHEDULE 4.9 HERETO.

         4.10  REIMBURSEMENT.  If any Purchaser becomes involved in any capacity
in any  Proceeding by or against any Person who is a stockholder  of the Company
(except as a result of sales, pledges,  margin sales and similar transactions by
such Purchaser to or with any current  stockholder),  solely as a result of such
Purchaser's acquisition of the Securities under this Agreement, the Company will
reimburse such Purchaser for its reasonable legal and other expenses  (including
the cost of any  investigation  preparation and travel in connection  therewith)
incurred  in  connection   therewith,   as  such  expenses  are  incurred.   The
reimbursement  obligations  of the  Company  under  this  paragraph  shall be in
addition to any  liability  which the Company may otherwise  have,  shall extend
upon the same terms and  conditions to any  Affiliates of the Purchasers who are
actually  named in such  action,  proceeding  or  investigation,  and  partners,
directors,  agents,  employees and controlling persons (if any), as the case may
be, of the  Purchasers  and any such  Affiliate,  and shall be binding  upon and
inure  to  the  benefit  of  any   successors,   assigns,   heirs  and  personal
representatives  of the Company,  the  Purchasers and any such Affiliate and any
such  Person.  Other than with respect to willful  misconduct  by a Purchaser in
connection with the acquisition of the Securities,  the Company also agrees that
neither the Purchasers nor any such  Affiliates,  partners,  directors,  agents,
employees or controlling  persons shall have any liability to the Company or any
Person  asserting  claims on behalf  of or in right of the  Company  solely as a
result of acquiring the Securities under this Agreement.

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

                                       24
<PAGE>

         4.12 RESERVATION AND LISTING OF SECURITIES.

                  (a) The  Company  shall  maintain  a  reserve  from  its  duly
         authorized  shares  of  Common  Stock  for  issuance  pursuant  to  the
         Transaction  Documents in such amount as may be required to fulfill its
         obligations in full under the Transaction Documents.

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

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

                                       25
<PAGE>

         4.13 PARTICIPATION IN FUTURE FINANCING.

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

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

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

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

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

                                       26
<PAGE>

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

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

         4.14 SUBSEQUENT EQUITY SALES.

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

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

                                       27
<PAGE>

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

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

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

                                   ARTICLE V.
                                  MISCELLANEOUS

         5.1 TERMINATION.  This Agreement may be terminated by any Purchaser, as
to such Purchaser's obligations hereunder only and without any effect whatsoever
on the  obligations  between the Company  and the other  Purchasers,  by written
notice to the other  parties,  if the  Closing  has not been  consummated  on or
before October 31, 2005; PROVIDED, HOWEVER, that no such termination will affect
the right of any party to sue for any breach by the other party (or parties).

                                       28
<PAGE>

         5.2 FEES AND EXPENSES. Except as expressly set forth in the Transaction
Documents  to the  contrary,  each party shall pay the fees and  expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party  incident  to the  negotiation,  preparation,  execution,
delivery and performance of this  Agreement.  The Company shall pay all transfer
agent fees, stamp taxes and other taxes and duties levied in connection with the
delivery of any Securities.

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

         5.4 NOTICES.  Any and all notices or other communications or deliveries
required or permitted to be provided  hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of  transmission,  if
such notice or  communication is delivered via facsimile at the facsimile number
set forth on the signature  pages  attached  hereto prior to 5:30 p.m. (New York
City  time)  on a  Trading  Day,  (b) the next  Trading  Day  after  the date of
transmission,  if such notice or communication is delivered via facsimile at the
facsimile  number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day,  (c) the 2nd Trading  Day  following  the date of mailing,  if sent by U.S.
nationally  recognized  overnight courier service, or (d) upon actual receipt by
the party to whom such  notice is  required  to be given.  The  address for such
notices and communications shall be as set forth on the signature pages attached
hereto.

         5.5 AMENDMENTS;  WAIVERS;  ADDITIONAL PURCHASERS.  No provision of this
Agreement may be waived or amended except in a written instrument signed, in the
case of an amendment, by the Company and Purchaser's holding at least 75% of the
then  outstanding  Securities or, in the case of a waiver,  by the party against
whom  enforcement  of any such waiver is sought.  No waiver of any default  with
respect to any provision,  condition or  requirement of this Agreement  shall be
deemed to be a  continuing  waiver in the  future or a waiver of any  subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise  any right  hereunder in
any manner impair the exercise of any such right. Notwithstanding the foregoing,
additional  purchasers  under the Purchase  Agreement may become parties to this
Agreement by executing a counterpart signature page hereto,  without any further
consent of the Purchasers and, upon execution of this Agreement, such additional
purchasers shall be deemed "Purchasers" for all purposes hereunder.

         5.6  HEADINGS.  The headings  herein are for  convenience  only, do not
constitute a part of this  Agreement  and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent,  and no
rules of strict construction will be applied against any party.

         5.7  SUCCESSORS AND ASSIGNS.  This Agreement  shall be binding upon and
inure to the benefit of the parties and their successors and permitted  assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior  written  consent of  Purchaser's  holding at least 75% of the
then outstanding  Securities.  Any Purchaser may assign any or all of its rights
under this Agreement to any Person to whom such  Purchaser  assigns or transfers
any  Securities,  provided such transferee  agrees in writing to be bound,  with
respect to the transferred  Securities,  by the provisions  hereof that apply to
the "Purchasers".

                                       29
<PAGE>

         5.8 NO  THIRD-PARTY  BENEFICIARIES.  This Agreement is intended for the
benefit of the parties  hereto and their  respective  successors  and  permitted
assigns and is not for the benefit of, nor may any provision  hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.11.

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

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

         5.11  EXECUTION.  This  Agreement  may  be  executed  in  two  or  more
counterparts,  all of which when taken  together shall be considered one and the
same agreement and shall become effective when  counterparts have been signed by
each party and  delivered  to the other  party,  it being  understood  that both
parties need not sign the same  counterpart.  In the event that any signature is
delivered by facsimile  transmission,  such  signature  shall create a valid and
binding  obligation of the party executing (or on whose behalf such signature is
executed)  with the same force and effect as if such  facsimile  signature  page
were an original thereof. 5.12 SEVERABILITY.  If any provision of this Agreement
is  held to be  invalid  or  unenforceable  in any  respect,  the  validity  and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affected or impaired thereby and the parties will attempt to agree
upon a valid and enforceable provision that is a reasonable substitute therefor,
and upon so  agreeing,  shall  incorporate  such  substitute  provision  in this
Agreement.

                                       30
<PAGE>

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

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

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

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

                                       31
<PAGE>

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

         5.18  INDEPENDENT  NATURE OF PURCHASERS'  OBLIGATIONS  AND RIGHTS.  The
obligations of each Purchaser under any Transaction Document are several and not
joint with the  obligations of any other  Purchaser,  and no Purchaser  shall be
responsible  in any way for the  performance  of the  obligations  of any  other
Purchaser under any Transaction  Document.  Nothing  contained  herein or in any
Transaction  Document,  and no action taken by any Purchaser  pursuant  thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint  venture  or any other kind of entity,  or create a  presumption  that the
Purchasers  are in any way acting in concert or as a group with  respect to such
obligations or the transactions  contemplated by the Transaction Documents. Each
Purchaser  shall be  entitled to  independently  protect and enforce its rights,
including without  limitation the rights arising out of this Agreement or out of
the other  Transaction  Documents,  and it shall not be necessary  for any other
Purchaser  to be  joined  as an  additional  party  in any  proceeding  for such
purpose.  Each Purchaser has been  represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents.

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

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

                            (SIGNATURE PAGES FOLLOW)

                                       32
<PAGE>

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

INTRAOP MEDICAL CORPORATION                             ADDRESS FOR NOTICE:
                                                        -------------------

By:  /S/ DONALD A. GOER                                 570 Del Rey Avenue
     -----------------------------------------------
     Name:  Donald A. Goer                              Sunnyvale, CA  94085
     Title:    Chief Executive Officer and President

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

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

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

                      SIGNATURE PAGE FOR PURCHASER FOLLOWS]

                                       33

<PAGE>

        [PURCHASER SIGNATURE PAGES TO IOPM SECURITIES PURCHASE AGREEMENT]

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

Name of Purchaser: Dolphin Offshore Partners
SIGNATURE OF AUTHORIZED SIGNATORY OF PURCHASER: /S/ PETER E. SALAS
                                                ------------------
Name of Authorized Signatory: Peter E. Salas
Title of Authorized Signatory: General Partner
Email Address of Purchaser:_______________________________________

Address for Notice of Purchaser:

c/o Dolphin Asset Management
129 East 17th Street
New York, N.Y.  10003

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

Subscription Amount:  $750,000
Warrant Shares:  1,875,000 (total)
EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]

                                       34
<PAGE>

                                                                         ANNEX A

                                CLOSING STATEMENT

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

DISBURSEMENT DATE:    October ___, 2005

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

                               GROSS PROCEEDS TO BE RECEIVED IN TRUST  $

II.  DISBURSEMENTS

                                                                       $
                                                                       $
                                                                       $
                                                                       $

TOTAL AMOUNT DISBURSED:                                                $

WIRE INSTRUCTIONS:

To: _____________________________________

To: _____________________________________

                                       35Exhibit 10.11

                               DISCLOSURE SCHEDULE

         This Disclosure Schedule, dated as of October 25, 2005 ( the
"Schedule"), is made and given pursuant to Article III and Article IV of the
SECURITIES PURCHASE AGREEMENT dated as of October 25, 2005 by and among Intraop
Medical Corporation and the purchasers named therein (the "Agreement"). Any
terms defined in the Agreement shall have the same meaning when used in this
Disclosure Schedule as when used in the Agreement unless the context otherwise
requires.

         Notwithstanding anything to the contrary contained in this Schedule or
in the Agreement, the information and disclosures contained in each section of
this Schedule (including any schedules attached to this Schedule) shall be
deemed to be disclosed and incorporated by reference in each of the sections of
this Schedule as though fully set forth in such other sections (whether or not
specific cross-references are made) where it is reasonably apparent on the face
of the disclosure (without regard to the contents of any document referred to in
such disclosure and the contents of which are not expressly described or facts
and circumstances not expressly described or implied in such disclosure) that it
is applicable to such other sections, and shall be deemed to qualify and limit
all representations, warranties and covenants of the Company contained in the
Agreement.

SECTION 3.1(A)(B)

The Company's subsidiaries are:

         1.       Intraop Medical Services, Inc., a Delaware corporation, a
                  wholly owned subsidiary. The company is in good standing in
                  Delaware, but is not in good standing in California due to
                  failure to pay California franchise taxes. The Company is the
                  sole stockholder.

         2.       IMS Louisville, LLC a Delaware limited liability corporation,
                  of which the Company is the sole member and manager. IMS
                  Louisville is inactive in Delaware, pending dissolution.

SECTION 3.1(G)

1. The capitalization of the Company consists of 100,000,000 shares of
authorized common stock, $0.001 par value, of which 20,126,135 shares are
outstanding. Included in the outstanding shares are 1,600,000 shares issued as
collateral for the 10% senior secured debentures issued on August 31, 2005 to
Regenmacher Holdings Ltd. and ABS SOS-Plus Partners Ltd., and 100,000 shares
issued to principals of The Investor Relations Group on August 26, 2005. No
other class of stock is authorized or outstanding.

<PAGE>

2. The Company has outstanding options exercisable 1,127,500 for shares of the
Company's common stock at prices ranging from $0.10 per share to $1.375 per
share.

3. The Company has outstanding warrants exercisable for 10,635,674 shares of the
Company's common stock at exercise prices ranging from $0.40 per share to $2.50
per share.

4. On August 31, 2005, the Company issued to certain investors 7% convertible
debentures in the aggregate principal amount of $2,500,000, convertible into
common stock at an initial conversion price of $0.40 per share.

5. The Company received notices from shareholders representing all 97,000 shares
of common stock who had previously voted against the Merger that they wished to
redeem their shares in accordance with certain dissenter's rights provisions.
The estimated redemption value is $121,250 of which $30,000 has been paid.

SECTION 3.1(I)(II)

On August 22, 2005 and August 26, 2005 and October 14, 2005, the Company became
obligated under notes in the principal amount of $237,500 from Donald A. Goer,
its CEO and Chairman. The notes are unsecured and bear interest at 9% per annum
and are to be repaid when the finances of the Company permit and have not been
disclosed in filings with the SEC. Original principal of $197,000 of these notes
remain outstanding.

SECTION 3.1(N)

1. All of the assets of the Company are subject to a lien and security interest
which secures the 10% senior secured debentures issued on August 31, 2005.

2. Pursuant to a Factoring Agreement dated February 24, 2005 ("Factoring
Agreement") in the principal amount of $1,060,000, the Company has pledged its
right, title and interest in its Mobetron S/N 13 and all contracts or proceeds
related to the unit, including its contemplated contract for sale of the unit to
the University of Heidleburg, to E.U. Capital Venture, Inc., a Nevada
corporation ("EU Venture").

3. In October 2004, the Company entered into an inventory repurchase agreement
with a EU Venture (the "First EU Repurchase Agreement"). Under the terms of the
agreement, EU Venture placed an order for Mobetron S/N 15 (the "Financed
Mobetron") with CDS Engineering LLC ("CDS") and gave a deposit to CDS of
$525,000 towards the purchase of that Mobetron. In January 2005, the Company
entered into an inventory repurchase agreement with EU Venture (the "Second EU
Repurchase Agreement"). Under the terms of the agreement, the EU Venture placed
an order for Mobetron S/N 14 (the "Second Financed Mobetron") with CDS and gave
a deposit to CDS of $540,000 towards the purchase of that Mobetron. In April
2005, the Company entered into an inventory repurchase agreement with EU Venture
(the "Third EU Repurchase Agreement"). Under the terms of the agreement, the EU
Venture placed an order for a Mobetron S/N 15 (the "Third Financed Mobetron")
with the Company and gave a deposit to the Company of $562,000 towards the
purchase of that Mobetron. The Financed Mobetron, the Second Financed Mobetron
and the Third Financed Mobetron are subject to a lien by EU Venture.
<PAGE>

4. On August 16, 2005, the Company entered in to an Inventory/Factoring
Agreement with E.U.C. Holding and EU Venture (the "EU Line"). The Company
anticipates that inventory and contracts currently financed under the Factoring
Agreement, the First EU Repurchase Agreement, the Second EU Repurchase Agreement
and the Third EU Repurchase Agreement will be refinanced under the EU Line and
be subject to liens under EU Line.

SECTION 3.1(P)

The Company's directors and officer's insurance coverage in the amount of
$3,000,000 is less than the anticipated Subscription Amount.

SECTION 3.1(Q)

The Company has entered into certain loan agreements with its officers and
directors as described in Section 3.1(i)(ii) above.

SECTION 3.1(R)

The Company is in material compliance with the disclosure controls and
procedures provisions of the Sarbanes-Oxley Act of 2002. The internal accounting
controls provisions of the Sarbanes-Oxley Act of 2002 are not yet applicable to
the Company and the Company may not be in material with all of such provisions.
However, the Company is working to insure that it is in compliance with such
provisions when they become applicable to the Company.

SECTION 3.1(S)

The Company has entered into Placement Agency Agreement dated May 17, 2005
("Agency Agreement") with Stonegate under which the consummation of the
transactions contemplated by the Transaction Documents are subject to certain
fees and other compensation being paid to Stonegate.

Specifically, Stonegate is entitled under the agreement to receive, at closing
of the contemplated transactions:(i) proceeds equal 7% of the Subscription
Amount (the "Fee Amount"), (ii) a number of warrants equal to the Fee Amount
divided by initial Conversion Price and which warrant shall be substantially
similar in the form of EXHIBIT 3.1(S) and (iii) reimbursement of reasonable
out-of-pocket expenses of Stonegate up to an aggregate maximum of $20,000.

<PAGE>

SECTION 3.1(V)

The Company has granted registration rights to the investors who purchased the
7% convertible debentures and the 10% senior secured debentures on August 31,
2005.

SECTION 3.1(Y)

The Company has disclosed to Dolphin Offshore Partners information that
constitutes or might constitute material, nonpublic information pursuant to
nondisclosure agreements executed by such Purchasers, including but not limited
to, detailed sales and manufacturing projections and forecasts, detailed
financial projections, lists of holders and their holdings of the Company's
stock, warrants, options, and debt and accounts payable, and agreements pursuant
to those holdings.

SECTION 3.1(AA)

Except as disclosed in Section 3.1(h) above, the SEC Reports set forth all
outstanding secured and unsecured Indebtedness of the Company or any Subsidiary,
or for which the Company or any Subsidiary has commitments.

SECTION 3.1(EE)

The Company's  certified  public  accountants at the time of the issuance of the
10-KSB for the year ended  December 31, 2004 were Madsen and  Associates  CPA's,
Inc. Subsequent to the Merger, the Company retained Stonefield Josephson,  Inc.,
as its  accountants.  Stonefield  Josephson,  Inc.  resigned  as  the  Company's
certified public accountants on September 12, 2005.

SECTION 3.1(FF)

The 10% senior secured debentures issued on August 31, 2005 to Regenmacher
Holdings and ABS SOS-Plus Partners Ltd. and certain inventory financing will be
senior to the Debentures upon liquidation or dissolution.

SECTION 3.1(GG)

As of June 30, 2005 the Company has outstanding invoice from DLA Piper Rudnick
Gray Cary US LLP ("Gray Cary") totaling approximately $446,781 for legal
services. The Company has asked Gray Cary to adjust its billings to the Company
due to certain disagreements over the invoiced amounts.

<PAGE>

SCHEDULE 4.9

A. The following Indebtedness will remain outstanding following the close:

         1.       The 7% convertible debentures issued on August 31, 2005.
         2.       The 10% senior secured debentures issued on August 31, 2005.
         3.       To the extent not  refinanced  under the EU Line:  outstanding
                  indebtedness  under  the  Factoring  Agreement,  the  First EU
                  Repurchase  Agreement,  the Second EU Repurchase Agreement and
                  the Third EU Repurchase  Agreement.
         4.       Indebtedness  under the EU Line. 5. Promissory  notes shown on
                  Exhibit 4.9(a), 4.9(c), and 4.9(d).

B. The Indebtedness shown on Exhibit 4.9(b) will be repaid  contemporaneous with
or immediately following the Closing.

C.  Indebtedness  on Exhibit 4.9(c) and 4.9(d) will be repaid from proceeds from
any subsequent Closing.

D. The remainder of any proceeds from the Closing may be used for any legitimate
corporate purpose including the satisfaction of outstanding trade payables.

<PAGE>

<TABLE>
<CAPTION>

              EXHIBIT 4.9(A) -- REMAIN OUTSTANDING FOLLOWING CLOSE
                    INDIVIDUAL RELATED PARTY PROMISSORY NOTES

                                                                           INTEREST CALCULATION DATES
                                                                           CALC DATE      10/24/05
                                                                           LAST PAID      12/31/01
                                                              DEPOSIT      INT. OWED
NAME                           AMOUNT   INT. RATE  NOTE DATE  DATE         FROM          INT DUE       TOTAL OUT.
----------------------- -------------- ----------- ---------- ----------- ------------ ------------- ----------------
<S>                        <C>              <C>      <C>  <C>    <C>  <C>     <C>  <C>    <C>             <C>
Donald A. Goer             642,754.60       9.00%    9/30/04     9/30/04      9/30/04     64,098.51       706,853.11
Mary Louise Meurk          164,670.75       9.00%    9/30/04     9/30/04      9/30/04     16,421.74       181,092.49
Donald A. Goer              25,000.00       9.00%     6/9/05      6/9/05       6/9/05        853.00        25,853.00
Donald A. Goer              25,000.00       9.00%    7/22/05     7/22/05      7/22/05        583.68        25,583.68
Donald A. Goer              60,000.00       9.00%     8/1/05      8/1/05       8/1/05      1,246.11        61,246.11
----------------------- -------------- ----------- ---------- ----------- ------------ ------------- ----------------
Total                      917,425.35                                                     83,203.05     1,000,628.40
======================= ============== =========== ========== =========== ============ ============= ================
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                      EXHIBIT 4.9(B) -- REPAY FROM PROCEEDS
                    INDIVIDUAL RELATED PARTY PROMISSORY NOTES

                                                                             INTEREST CALCULATION DATES
                                                                              CALC DATE      10/24/05
                                                                              LAST PAID      12/31/01
                                                                   DEPOSIT    INT. OWED
NAME                           AMOUNT   INT. RATE   NOTE DATE      DATE       FROM        INT DUE     TOTAL OUT.
---------------------- --------------- ----------- ----------- ------------ ------------ ------------- --------------
<S>                         <C>             <C>       <C>  <C>     <C>  <C>     <C>  <C>     <C>           <C>
Donald A. Goer              70,000.00       9.00%     5/31/05      5/31/05      5/31/05      2,543.74      72,543.74
Donald A. Goer              30,000.00       9.00%     6/30/05      6/30/05      6/30/05        863.16      30,863.16
Donald A. Goer             120,000.00       9.00%     8/22/05      8/22/05      8/22/05      1,870.86     121,870.86
Donald A. Goer              27,500.00       9.00%     8/26/05      8/26/05      8/26/05        400.07      27,900.07
---------------------- --------------- ----------- ----------- ------------ ------------ ------------- --------------
Total                      247,500.00                                                        5,677.83     253,177.83
====================== =============== =========== =========== ============ ============ ============= ==============
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                  EXHIBIT 4.9(C) -- REPAY FROM SUBSEQUENT CLOSE
                     INDIVIDUAL THIRD PARTY PROMISSORY NOTES

                                                                             INTEREST CALCULATION DATES
                                                                             CALC DATE       10/24/05
                                                                             LAST PAID       12/31/01
                                                                   DEPOSIT   INT. OWED
NAME                         AMOUNT    INT. RATE    NOTE DATE      DATE      FROM         INT DUE   TOTAL OUT.
-------------------- --------------- ------------ ------------ ------------ ------------ -------------- ------------
<S>                       <C>              <C>        <C>  <C>     <C>  <C>    <C>   <C>     <C>          <C>
Jerome Vaeth              50,000.00        9.00%      9/30/95      9/30/95     12/31/01      20,282.76    70,282.76
-------------------- --------------- ------------ ------------ ------------ ------------ -------------- ------------
Total                     50,000.00                                                          20,282.76    70,282.76
==================== =============== ============ ============ ============ ============ ============== ============
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                                      EXHIBIT 4.9(D) -- REPAY FROM SUBSEQUENT CLOSE
                                        INDIVIDUAL RELATED PARTY PROMISSORY NOTES

                                                                               INTEREST CALCULATION DATES
                                                                               CALC DATE      10/24/05
                                                                               LAST PAID      12/31/01
                                                                    DEPOSIT    INT. OWED
NAME                           AMOUNT   INT. RATE    NOTE DATE      DATE       FROM       INT DUE   TOTAL OUT.
----------------------- -------------- ----------- ------------ ------------ ------------ ------------- ------------
<S>                         <C>             <C>        <C>  <C>     <C>  <C>     <C>  <C>       <C>       <C>
Mary Louise Meurk           10,000.00       9.00%      7/21/05      7/21/05      7/21/05        235.94    10,235.94
John Matheu                  5,000.00       9.00%      7/28/05      7/28/05      7/28/05        108.77     5,108.77
Ted Phillips                 5,000.00       9.00%       8/1/05       8/1/05       8/1/05        103.84     5,103.84
Donald A. Goer              50,000.00       9.00%     10/14/05     10/14/05     10/14/05        123.29    50,123.29
----------------------- -------------- ----------- ------------ ------------ ------------ ------------- ------------
Total                       70,000.00                                                           571.84    70,571.84
======================= ============== =========== ============ ============ ============ ============= ============
</TABLE>

<PAGE>

2/2

20143288.2
                 SCHEDULE 6(B) TO REGISTRATION RIGHTS AGREEMENT

         This Schedule 6(b), dated as of October 25, 2005 ( the "Schedule"), is
made and given pursuant to Article 6(b) of the REGISTRATION RIGHTS AGREEMENT
dated as of October 25, 2005 by and among Intraop Medical Corporation and the
purchasers named therein (the "Agreement"). Any terms defined in the Agreement
shall have the same meaning when used in this Disclosure Schedule as when used
in the Agreement unless the context otherwise requires.

         In addition to the Registrable Securities, the Company's Initial
Registration will include:

1. Shares issuable upon conversion of the 7% convertible debentures issued on
August 31, 2005.

2. All of the Company's outstanding common stock except 445,000 shares issued to
Summit Financial Partners, L.L.C or its employees or affiliates pursuant to the
close of the Company's merger on March 9, 2005.

3. Holders of outstanding warrants exercisable for 10,635,674 shares of the
Company's common stock.

4. Holders of outstanding options exercisable 1,127,500 for shares of the
Company's common stock.

5. Warrants for shares of the Company's common stock which may be granted in
relation to this close or a subsequent close to Stonegate Securities, Inc., a
Texas corporation ("Stonegate") as the holder of in relation to a Placement
Agreement between Stonegate and the Company dated May 17, 2005.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00092-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00092-of-00352.parquet"}]]