Document:

Exhibit 10.20

                          SECURITIES PURCHASE AGREEMENT

         This SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of June
30, 2005 is made by and among PharmaFrontiers  Corp., a Texas corporation,  with
headquarters  located at 2408 Timberloch Place, Suite B-7, The Woodlands,  Texas
77380 (the  "Company"),  and the investors  named on the signature pages hereto,
together with their permitted transferees (the "Investors").

                                    RECITALS:

         A. The Company and the  Investors are  executing  and  delivering  this
Agreement in reliance upon the exemptions from securities  registration afforded
by Section 4(2) of the Securities Act and Rule 506 under Regulation D.

         B.  Each  of  the  Investors  holds  a  15%  Exchangeable   Convertible
Promissory  Note (the "Bridge  Notes"),  and the right to receive a warrant (the
"Bridge Warrants"), previously issued by the Company.

         C. Each of the Investors desires,  upon the terms and conditions stated
in this Agreement,  to purchase,  by  surrendering  their Bridge Note and Bridge
Warrant,  that number of shares  (the  "Common  Shares") of Common  Stock of the
Company  provided  for  herein  (the  "Common  Shares")  and the  warrants  (the
"Warrants") to acquire shares of Common Stock as described herein.

         D. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration  Rights Agreement
under which the Company has agreed to provide certain  registration rights under
the  Securities  Act,  the  rules and  regulations  promulgated  thereunder  and
applicable state securities laws.

         E. The capitalized terms used herein and not otherwise defined have the
meanings given them in Article IX hereof.

         F. In a separate private offering the Company has sold shares of Common
Stock and Warrants to cash investors and granted them registration rights.

         In  consideration  of the premises and the mutual  covenants  contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby  acknowledged,  the Company and the  Investors  hereby agree as
follows:

ARTICLE I
                        PURCHASE AND SALE OF COMMON STOCK

     1.1 PURCHASE AND SALE OF COMMON STOCK. At the Closing, subject to the terms
of this Agreement and the  satisfaction or waiver of the conditions set forth in
Articles VI and VII hereof,  the Company  will issue and sell to each  Investor,
and each  Investor  will (on a several and not a joint basis)  purchase from the
Company,  (a) that  number  of Common  Shares  equal to the  principal  plus the
interest of the Investor's  Bridge Note divided by $1.50 per share,  plus (b) an
additional  number of Common  Shares equal to the  principal  of the  Investor's
Bridge Note times twenty percent (20%).

                                       1
<PAGE>

     1.2 PAYMENT. At the Closing, subject to the terms of this Agreement and the
satisfaction  or  waiver of the  conditions  set  forth in  Articles  VI and VII
hereof,  each  Investor  will pay for the  Common  Shares by  delivering  to the
Company the Investor's Bridge Note;  Investor's  execution of this Agreement and
delivery of Investor's Bridge Note shall be deemed to also constitute Investor's
surrender of Investor's right to any Bridge Warrant.  Promptly after closing the
Company shall  deliver to each  Investor of (i) one or more stock  certificates,
free and  clear of all  restrictive  and  other  legends  (except  as  expressly
provided  herein),  representing the Common Shares so purchased by such Investor
and (ii) Warrants in an amount determined in accordance with Section 1.4 hereof,
and the Company  will  deliver  such stock  certificates  and  Warrants  against
delivery of the purchase price as described above. At Company's option,  Company
may accept the  surrender of Bridge Notes as payment for the  Securities in lieu
of cash.

     1.3 CLOSING DATE.  Subject to the  satisfaction or waiver of the conditions
set forth in  Articles VI and VII  hereof,  the Closing  will take place at 8:00
a.m.,  Central  Time,  on or prior to May 27, 2005 (or such  extended date up to
June 3, 2005 as determined by the Company or at another date or time agreed upon
by the parties to this  Agreement  (the  "Closing  Date");  provided that at any
time, the Company may close the sale with such Investors as have submitted their
Bridge Notes and then hold one or more subsequent Closings thereafter subject to
the foregoing  limitations on the Closing Date.  The Closing(s)  will be held at
the offices of Vinson & Elkins LLP in  Houston,  Texas or at such other place as
the Company may determine.

     1.4 WARRANTS.  In consideration of the purchase of the Common Shares by the
Investors,  at the Closing the Company will issue three different warrants:  the
"Series  A  Warrant,"  the  "Series  B  Warrant"  and  the  "Series  C  Warrant"
(collectively,  the  "Warrants")  to each  Investor.  The Series A Warrant shall
entitle the  Investor to purchase  1,250  shares of Common  Stock for each 1,000
shares of Common Stock  purchased by such  Investor  pursuant to Section  1.1(a)
above on the  Closing  Date at an  exercise  price of $2.00  per  share and will
expire on the  later of (i) eight  months  after the  Closing  Date or (ii) five
months after the  registration  statement for the re-sale of the warrant  shares
becomes  effective.  The Series B Warrant shall entitle the Investor to purchase
500 shares of Common Stock for each 1,000  shares of Common  Stock  purchased by
such  Investor  pursuant  to  Section  1.1(a)  above on the  Closing  Date at an
exercise  price of $2.90 per share and will expire on the later of (i) 16 months
after the Closing Date or (ii) 12 months after the  registration  statement  for
the re-sale of the warrant shares becomes effective.  The Series C Warrant shall
entitle the  Investor to purchase  1,000  shares of Common  Stock for each 1,000
shares of Common Stock  purchased by such  Investor  pursuant to Section  1.1(a)
above on the  Closing  Date at an  exercise  price of $4.00  per  share and will
expire five years from the Closing Date. The Series A Warrant,  Series B Warrant
and Series C Warrants will be substantially in the forms of Exhibits B, C and D,
respectively,  attached hereto.  For purposes of the Warrants,  the Closing Date
for all Warrants  shall be the first  Closing Date,  notwithstanding  the actual
Closing Date for a particular Investor was after the first Closing Date.

     1.5  CONTINGENT ON CASH  OFFERING.  This  Agreement is contingent  upon the
Company  closing the separate cash offering with gross  proceeds of between $2.5
million and $10.0 million.

                                       2
<PAGE>

                                   ARTICLE II
                   REPRESENTATIONS AND WARRANTIES OF INVESTORS

         Each  Investor  represents  and warrants to the Company,  severally and
solely with respect to itself and its purchase hereunder and not with respect to
any other Investor, that:

     2.1 INVESTMENT  PURPOSE.  The Investor is purchasing the Securities for its
own account and not with a present  view toward the public sale or  distribution
thereof, except pursuant to sales registered or exempted from registration under
the  Securities  Act;  provided,  however,  that by making  the  representations
herein,  such  Investor  does not  agree to hold any of the  Securities  for any
minimum  or other  specific  term and  reserves  the  right  to  dispose  of the
Securities  at any  time  in  accordance  with  or  pursuant  to a  registration
statement or an exemption from the  registration  requirements of the Securities
Act.

     2.2 ACCREDITED INVESTOR STATUS. The Investor is an "accredited investor" as
defined in Rule  501(a) of  Regulation  D. The  Investor  has  experience  as an
investor in securities representing an investment decision like that involved in
the  purchase of the  Securities  and  acknowledges  that it has the  knowledge,
sophistication and experience in financial and business matters as to be capable
of evaluating  the merits and risks of an investment in the  Securities  and has
the ability to bear the economic risks of an investment in the Securities.

     2.3 RELIANCE ON EXEMPTIONS.  The Investor  understands  that the Securities
are being offered and sold to it in reliance upon specific  exemptions  from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and  accuracy of, and the  Investor's
compliance with, the representations,  warranties,  agreements,  acknowledgments
and  understandings  of the Investor set forth herein in order to determine  the
availability  of such  exemptions and the eligibility of the Investor to acquire
the Securities.

     2.4 INFORMATION.  The Investor and its advisors,  if any, have reviewed the
SEC Documents and been  furnished  with all materials  relating to the business,
finances and operations of the Company,  and materials relating to the offer and
sale  of the  Securities,  that  have  been  requested  by the  Investor  or its
advisors,  if any. The Investor and its advisors, if any, have been afforded the
opportunity  to ask  questions of the Company.  Neither such  inquiries  nor any
other due diligence  investigation  conducted by Investor or any of its advisors
or representatives  modify,  amend or affect the Investor's right to rely on the
Company's  representations  and warranties  contained in Article III below.  The
Investor  acknowledges  and  understands  that its  investment in the Securities
involves a significant degree of risk,  including the risks reflected in the SEC
Documents,  and that the market price of the Common Stock has been and continues
to be volatile and that no  representation  is being made as to the future value
of the Common Stock.

     2.5  GOVERNMENTAL  REVIEW.  The Investor  understands that no United States
federal  or state  agency or any other  government  or  governmental  agency has
passed upon or made any  recommendation  or  endorsement of the Securities or an
investment therein.

     2.6 TRANSFER OR RESALE. The Investor understands that:

          (a) except as  provided  in the  Registration  Rights  Agreement,  the
     Securities  have  not  been  registered  under  the  Securities  Act or any
     applicable state securities laws and,  consequently,  the Investor may have
     to bear the risk of owning the Securities for an indefinite  period of time
     because the Securities may not be transferred  unless (i) the resale of the
     Securities is registered  pursuant to an effective  registration  statement
     under the Securities Act; (ii) the Investor has delivered to the Company an
     opinion of counsel (in form,  substance and scope customary for opinions of
     counsel in comparable transactions) to the effect that the Securities to be
     sold or  transferred  may be sold or  transferred  pursuant to an exemption
     from  such  registration;  (iii)  the  Securities  are sold or  transferred
     pursuant to Rule 144; or (iv) the  Securities are sold or transferred to an
     affiliate (as defined in Rule 144) of the Investor;

                                       3
<PAGE>

          (b) any sale of the  Securities  made in  reliance  on Rule 144 may be
     made only in accordance  with the terms of Rule 144 and, if Rule 144 is not
     applicable,  any resale of the Securities under  circumstances in which the
     seller (or the person through whom the sale is made) may be deemed to be an
     underwriter  (as that term is defined in the  Securities  Act) may  require
     compliance with another exemption under the Securities Act or the rules and
     regulations of the SEC thereunder;

          (c) except as set forth in the Registration Rights Agreement,  neither
     the Company nor any other  person is under any  obligation  to register the
     Securities  under the  Securities  Act or any state  securities  laws or to
     comply with the terms and conditions of any exemption thereunder; and

          (d) notwithstanding  anything in this Agreement or the Warrants to the
     contrary,  the Company  agrees to  reregister  any Common Shares or Warrant
     issued to an Investor  hereunder in the name of any partner or affiliate of
     such  Investor,  and any such partner shall be deemed to be an Investor for
     all  purposes of this  Agreement  and the  Registration  Rights  Agreement,
     provided that any such partner or affiliate agrees in writing to be subject
     to the terms of this Agreement and the Registration Rights Agreement to the
     same extent as of such  partner  were an original  Investor  hereunder  and
     thereunder.

     2.7 LEGENDS.  The Investor understands that until (a) the Common Shares and
the Warrants  may be sold by the Investor  under Rule 144(k) or (b) such time as
the resale of the  Securities  has been  registered  under the Securities Act as
contemplated by the Registration Rights Agreement, the certificates representing
the Securities  will bear a restrictive  legend in  substantially  the following
(and, subject to Article V, a stop transfer order may be placed against transfer
of the certificates for such Securities):

                  THE SECURITIES  REPRESENTED BY THIS  CERTIFICATE HAVE NOT BEEN
                  REGISTERED  UNDER THE SECURITIES  ACT OF 1933, AS AMENDED,  OR
                  THE  SECURITIES  LAWS  OF  ANY  STATE  OF  THE  UNITED  STATES
                  (COLLECTIVELY,  THE "ACTS"). THE SECURITIES MAY NOT BE OFFERED
                  OR SOLD IN THE  ABSENCE  OF THE  FOLLOWING:  (1) AN  EFFECTIVE
                  REGISTRATION  STATEMENT  FOR THE  SECURITIES  UNDER  THE  ACTS
                  COVERING THE TRANSACTION,  (2) THE COMPANY RECEIVES AN OPINION
                  OF COUNSEL  REASONABLY  SATISFACTORY  TO THE COMPANY THAT SUCH
                  REGISTRATION  IS NOT  REQUIRED  UNDER  THE  ACTS,  OR (3)  THE
                  COMPANY  OTHERWISE  SATISFIES ITSELF THAT  REGISTRATION IS NOT
                  REQUIRED UNDER THE ACTS.  NOTWITHSTANDING  THE FOREGOING,  THE
                  SECURITIES  MAY BE  PLEDGED  IN  CONNECTION  WITH A BONA  FIDE
                  MARGIN ACCOUNT OR OTHER LOAN OR FINANCING  ARRANGEMENT SECURED
                  BY THE SECURITIES.

                                       4
<PAGE>

         The legend set forth above will be removed and the Company will issue a
certificate without the legend to the holder of any certificate upon which it is
stamped, in accordance with the terms of Article V hereof.

     2.8 AUTHORIZATION;  ENFORCEMENT. This Agreement and the Registration Rights
Agreement  have been duly and validly  authorized,  executed  and  delivered  on
behalf of the Investor  and are valid and binding  agreements  of the  Investor,
enforceable  in  accordance  with  their  terms,  subject  to the  effect of any
applicable bankruptcy,  insolvency,  reorganization,  moratorium or similar laws
affecting  the rights of  creditors  generally  and the  application  of general
principles of equity.

     2.9  RESIDENCY.  The Investor is a resident of the  jurisdiction  set forth
immediately below such Investor's name on the signature pages hereto.

     2.10 NO INTENT TO EFFECT A CHANGE OF CONTROL.  The  Investor has no present
intent to change or influence  the control of the Company  within the meaning of
Rule 13d-1 of the Exchange Act.

     2.11 NO  HEDGING.  The  Investor  has not  established  any  hedge or other
position in the Common Stock that is outstanding  on the Closing Date,  which is
designed to or could  reasonably be expected to lead to or result in any sale of
the Common  Shares.  For  purposes  hereof,  a "hedge or other  position"  would
include  effecting any short sale or having in effect any short  position or any
purchase,  sale or grant of any put  option,  call  option  or  prepaid  forward
contract  with respect to the Common Stock of the Company or with respect to any
security  (other  than a  broad-based  market  basket or index)  that  includes,
relates to or derives any significant part of its value from the Common Stock.

                                  ARTICLE III
                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

         The Company,  and each of its Subsidiaries,  as applicable,  represents
and warrants to the Investors that:

     3.1  ORGANIZATION  AND  QUALIFICATION.  All  of  the  direct  and  indirect
Subsidiaries  of the Company are set forth on SCHEDULE  3.1.  The Company  owns,
directly or  indirectly,  all of the capital stock or other equity  interests of
each of its  Subsidiaries  free and clear of any  Liens,  and all the issued and
outstanding  shares of capital  stock of each of its  Subsidiaries  are  validly
issued and are fully paid,  non-assessable  and free of  preemptive  and similar
rights to subscribe for or purchase securities. The Company and its Subsidiaries
are duly  incorporated,  validly existing and in good standing under the laws of
the jurisdictions in which they are incorporated,  with full power and authority
(corporate and other) to own, lease, use and operate their  properties,  if any,
and to carry on their businesses as and where now owned,  leased, used, operated
and  conducted.  The Company is duly  qualified  to do  business  and is in good
standing in every  jurisdiction in which the nature of the business conducted by
it makes  such  qualification  necessary,  except  where  the  failure  to be so
qualified or in good standing would not have a Material Adverse Effect.

                                       5
<PAGE>

     3.2 AUTHORIZATION; ENFORCEMENT. (a) The Company has all requisite corporate
power and  authority  to enter into and to perform  its  obligations  under this
Agreement, the Registration Rights Agreement and the Warrants, to consummate the
transactions  contemplated  hereby and  thereby and to issue the  Securities  in
accordance  with the terms hereof and thereof;  (b) the execution,  delivery and
performance  of  this  Agreement,  the  Registration  Rights  Agreement  and the
Warrants  by  the  Company  and  the  consummation  by  it of  the  transactions
contemplated  hereby and thereby  (including  without limitation the issuance of
the Common  Shares,  the Warrants  and the Warrant  Shares and  reservation  for
issuance of the Warrant Shares) have been duly authorized by the Company's Board
of Directors and no further consent or authorization  of the Company,  its Board
or  Directors,  or  its  stockholders  is  required;  (c)  this  Agreement,  the
Registration  Rights  Agreement  and the Warrants have been duly executed by the
Company;  and (d) each of this Agreement,  the Registration Rights Agreement and
the Warrants  constitutes a legal,  valid and binding  obligation of the Company
enforceable  against the Company in accordance with its respective terms, except
as may be limited by any applicable bankruptcy,  insolvency,  reorganization, or
moratorium or similar laws  affecting the rights of creditors  generally and the
application of general principles of equity.

     3.3  CAPITALIZATION.  As of the date prior to the Closing Date hereof,  the
authorized  capital stock of the Company  consisted of (i) 50,000,000  shares of
Common Stock, par value $0.05 per share, of which 10,534,324  shares were issued
and  outstanding;  2,000,000  shares were reserved for issuance under the Option
Plan; and no shares were reserved for issuance  pursuant to any other securities
(except  as set  forth  under  this  Section  3.3 and in the  Private  Placement
Memorandum);  and (ii)  10,000,000  shares of preferred  stock, no par value per
share, of which no shares were issued and  outstanding.  All of such outstanding
shares of capital stock have been,  or upon  issuance will be, duly  authorized,
validly issued, fully paid and nonassessable.  No shares of capital stock of the
Company,  including  the Common  Shares and the Warrant  Shares,  are subject to
preemptive  rights or any other similar rights of the other  stockholders of the
Company or any liens or  encumbrances  imposed through the actions or failure to
act of the  Company.  Except  as set  forth in the SEC  Documents,  the  Private
Placement  Memorandum and the  transactions  contemplated  hereby,  there are no
outstanding  options,  warrants,  scrip,  rights to subscribe for, puts,  calls,
rights of first refusal, agreements, understandings, claims or other commitments
or rights of any  character  whatsoever  relating  to, or  securities  or rights
convertible  into,  exercisable  for, or exchangeable  for any shares of capital
stock of the  Company,  or  arrangements  by which the  Company is or may become
bound to issue additional shares of capital stock of the Company.

         Except as disclosed in the Private  Placement  Memorandum  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  Investors)  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. Except as
disclosed in the Private Placement Memorandum,  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.  Except as
disclosed  in the  Private  Placement  Memorandum,  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.  The Company's
Certificate of Incorporation and the Company's By-laws, each as in effect on the
date hereof,  filed as exhibits to the  Company's  SEC  Documents,  are true and
correct copies of each such document.

                                       6
<PAGE>

     3.4 ISSUANCE OF  SECURITIES.  The Common  Shares and the Warrants have been
duly  authorized  and,  upon  issuance  in  accordance  with  the  terms of this
Agreement, will be validly issued, fully paid and non-assessable,  free from all
taxes,  liens,  claims,  encumbrances  and charges  with respect to the issuance
thereof,  will not be subject to preemptive  rights or other  similar  rights of
stockholders  of the  Company,  and will not impose  personal  liability  on the
holders  thereof.  The Warrant Shares have been duly authorized and reserved for
issuance,  and,  upon  exercise  of the  Warrants in  accordance  with the terms
thereof,  will be validly issued,  fully paid and non-assessable,  and free from
all taxes,  liens,  claims and  encumbrances  and  charges  with  respect to the
issuance  thereof and will not be subject to preemptive  rights or other similar
rights of  stockholders  of the Company and will not impose  personal  liability
upon the holder thereof.

     3.5 OUTSTANDING  DEBT. The Company has no  Indebtedness  for Borrowed Money
(as hereinafter  defined) except for the Bridge Notes and as otherwise set forth
in the SEC  Documents.  The  Company  is not in  default  in the  payment of the
principal of or interest or premium on any such Indebtedness for Borrowed Money,
and  no  event  has  occurred  or is  continuing  under  the  provisions  of any
instrument,   document  or  agreement   evidencing   or  relating  to  any  such
Indebtedness  for  Borrowed  Money which with the lapse of time or the giving of
notice, or both, would constitute an event of default thereunder.

     3.6 NO CONFLICTS; NO VIOLATION.

          (a) The execution,  delivery and  performance of this  Agreement,  the
     Registration  Rights  Agreement  and the Warrants by the  Company,  and the
     consummation  by the Company of the  transactions  contemplated  hereby and
     thereby (including,  without limitation, the issuance of the Common Shares,
     the Warrants  and the Warrant  Shares and  reservation  for issuance of the
     Warrant  Shares)  do not and  will not (i)  conflict  with or  result  in a
     violation of any provision of the Certificate of  Incorporation or By-laws,
     (ii) violate or conflict  with,  or result in a breach of any provision of,
     or  constitute a default (or an event which with notice or lapse of time or
     both  could  become a  default)  under,  or give to  others  any  rights of
     termination, amendment (including without limitation, the triggering of any
     anti-dilution  provision),  acceleration or cancellation of, any agreement,
     indenture,  patent, patent license, or instrument to which the Company is a
     party, or (iii) result in a violation of any law, rule, regulation,  order,
     judgment or decree  (including U.S.  federal and state  securities laws and
     regulations and regulations of any  self-regulatory  organizations to which
     the Company or its securities are subject)  applicable to the Company or by
     which any property or asset of the Company is bound or affected (except for
     such   conflicts,    breaches,    defaults,    terminations,    amendments,
     accelerations,  cancellations and violations as would not,  individually or
     in the aggregate, have a Material Adverse Effect).

                                       7
<PAGE>

          (b)  The  Company  is  not  in   violation  of  its   Certificate   of
     Incorporation, By-laws or other organizational documents and the Company is
     not in default  (and no event has  occurred  which with  notice or lapse of
     time or both could put the Company in default)  under,  and the Company has
     not taken any  action or failed to take any  action  that (and no event has
     occurred  which,  without  notice or lapse of time or both)  would  give to
     others any rights of termination,  amendment,  acceleration or cancellation
     of, any agreement,  indenture or instrument to which the Company is a party
     or by which any  property  or assets of the  Company is bound or  affected,
     except  for  possible  defaults  as  would  not,  individually  or  in  the
     aggregate, have a Material Adverse Effect.

          (c) The Company is not  conducting,  and, so long as any Investor owns
     any of the Securities,  will not conduct,  its business in violation of any
     law,  ordinance or regulation of any  governmental  entity,  the failure to
     comply with which would,  individually or in the aggregate, have a Material
     Adverse Effect.

          (d)  Except as  specifically  contemplated  by this  Agreement  and as
     required under the Securities Act and any applicable  state securities laws
     or  any  listing  agreement  with  any  securities  exchange  or  automated
     quotation  system,  the  Company is not  required  to obtain  any  consent,
     authorization  or order of, or make any filing or  registration  with,  any
     court or governmental agency or any regulatory or self regulatory agency in
     order for it to execute,  deliver or perform any of its  obligations  under
     this Agreement,  the Warrants or the Registration Rights Agreement, in each
     case in accordance  with the terms hereof or thereof,  or to issue and sell
     the Common Shares and the Warrants in accordance  with the terms hereof and
     to issue the Warrant Shares upon exercise of the Warrants.

     3.7 SEC DOCUMENTS,  FINANCIAL  STATEMENTS.  Since June 1, 2004, the Company
has filed all reports, schedules, forms, statements and other documents required
to be filed by it with the SEC  pursuant to the  reporting  requirements  of the
Securities  Act and the  Exchange Act (all of the  foregoing  filed prior to the
date hereof and all  exhibits  included  therein and  financial  statements  and
schedules thereto and documents (other than exhibits)  incorporated by reference
therein,  being hereinafter  referred to herein as the "SEC  Documents").  As of
their respective dates, the SEC Documents complied in all material respects with
the  requirements of the Exchange Act or the Securities Act, as the case may be,
and the rules and  regulations of the SEC promulgated  thereunder  applicable to
the SEC Documents,  and none of the SEC  Documents,  at the time they were filed
with the SEC,  contained  any untrue  statement of a material fact or omitted to
state a material  fact  required to be stated  therein or  necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.  As of their respective dates, the financial statements of
the Company  included in the SEC  Documents  complied as to form in all material
respects with  applicable  accounting  requirements  and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in  accordance  with U.S.  generally  accepted  accounting  principles,
consistently  applied,  during  the  periods  involved  (except  (i)  as  may be
otherwise  indicated in such financial  statements or the notes thereto, or (ii)
in the case of unaudited interim statements,  to the extent they may not include
footnotes or may be condensed or summary  statements)  and fairly present in all
material respects the financial  position of the Company as of the dates thereof
and the  results of its  operations  and cash flows for the  periods  then ended
(subject,  in the  case  of  unaudited  statements,  to  normal  year-end  audit
adjustments).  Except  for the  Bridge  Notes and as set forth in the  financial
statements  included  in the SEC  Documents,  the  Company  has no  liabilities,
contingent or otherwise,  other than liabilities incurred in the ordinary course
of business  subsequent to December 31, 2004,  and  liabilities  of the type not
required under generally accepted accounting  principles to be reflected in such
financial statements.

                                       8
<PAGE>

     3.8 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the SEC Documents or
in the  Private  Placement  Memorandum,  since  the date of the  latest  audited
financial  statements  included within the SEC Documents,  (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.

     3.9 ABSENCE OF LITIGATION.  There is no action,  suit,  claim,  proceeding,
inquiry or  investigation  before or by any  court,  arbitrator,  public  board,
government or administrative agency, regulatory or self-regulatory  organization
or body  pending or, to the  knowledge  of the  Company,  threatened  against or
affecting  the Company or any of its officers or  directors  acting as such that
could,  individually or in the aggregate,  have a Material  Adverse Effect.  The
Company is not aware of any facts or  circumstances  which would  reasonably  be
expected to give rise to any such action or proceeding.  Neither the Company nor
any of its Subsidiaries, 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 SEC involving the Company or any current
or former  director or officer of the  Company.  The SEC has not issued any stop
order or other order suspending the effectiveness of any registration  statement
filed by the Company or any of its  Subsidiaries  under the  Exchange Act or the
Securities Act

     3.10 INTELLECTUAL PROPERTY RIGHTS.

          (a) To the Company's  knowledge,  Schedule 3.10  accurately sets forth
     all patents,  patent  applications,  patent rights,  inventions,  know-how,
     trade secrets, trademarks,  trademark applications,  service marks, service
     names,  trade names and  copyrights  necessary  to enable it to conduct its
     business as now operated (the "Intellectual  Property") that is material to
     Company's business  (collectively,  the "Company's IP"). The Company either
     owns or has a valid  license  to the  Company's  IP free  and  clear of any
     claim,  security interest,  lien, pledge,  option, charge or encumbrance of
     any kind whatsoever. The Company's rights in Company's IP are in full force
     and effect. Company's IP has not been used or enforced or failed to be used
     or enforced in a manner that would result in the abandonment,  cancellation
     or unenforceability of any of Company's rights in and to Company's IP.

                                       9
<PAGE>

          (b) Except as set forth in Schedule 3.10,  Company has not transferred
     any rights or interest  in, or granted any  exclusive  license with respect
     to, any of its Intellectual Property, to any third party.

          (c) All  Intellectual  Property of the Company and its Subsidiaries is
     currently  in  compliance  with all legal  requirements  (including  timely
     filings,  proofs and  payments  of fees) and is valid and  enforceable.  No
     Intellectual Property of the Company or its Subsidiaries which is necessary
     for the  conduct  of  Company's  and each of its  Subsidiaries'  respective
     businesses as currently  conducted or as currently proposed to be conducted
     has been or is now  involved in any  cancellation,  dispute or  litigation,
     and, to the Company's knowledge, no such action is threatened. No patent of
     the  Company  or  its  Subsidiaries  has  been  or is now  involved  in any
     interference, reissue, re-examination or opposition proceeding.

          (d) All of the licenses and sublicenses and consent,  royalty or other
     agreements  concerning  Intellectual  Property  which are necessary for the
     conduct  of  the  Company's  and  each  of  its  Subsidiaries'   respective
     businesses as currently conducted,  or, to the knowledge of the Company, as
     currently  proposed to be conducted to which the Company or any  Subsidiary
     is a party or by which any of their assets are bound (other than  generally
     commercially  available,  non-custom,  off-the-shelf  software  application
     programs  having  a  retail  acquisition  price of less  than  $10,000  per
     license)  (collectively,   "License  Agreements")  are  valid  and  binding
     obligations  of the Company or its  Subsidiaries  that are parties  thereto
     and, to the Company's knowledge, the other parties thereto,  enforceable in
     accordance with their terms,  except to the extent that enforcement thereof
     may be  limited  by  bankruptcy,  insolvency,  reorganization,  moratorium,
     fraudulent  conveyance or other similar laws  affecting the  enforcement of
     creditors' rights generally, and, to the Company's knowledge,  there exists
     no event or condition  which will result in a material  violation or breach
     of or  constitute  (with or without  due notice or lapse of time or both) a
     default by the Company or any of its  Subsidiaries  under any such  License
     Agreement.

          (e) To the Company's  knowledge,  the Company and its Subsidiaries own
     or have the valid  right to use all of the  Intellectual  Property  that is
     necessary for the conduct of the  Company's  and each of its  Subsidiaries'
     respective  businesses as currently conducted,  or, to the knowledge of the
     Company,  as  currently  proposed to be  conducted  and for the  ownership,
     maintenance and operation of the Company's and its Subsidiaries' properties
     and assets,  free and clear of all liens,  encumbrances,  adverse claims or
     obligations   to  license  all  such  owned   Intellectual   Property   and
     Confidential Information,  other than licenses entered into in the ordinary
     course of the Company's and its Subsidiaries'  businesses. To the Company's
     knowledge,  the Company and its  Subsidiaries  have a valid and enforceable
     right  to use  all  third  party  Intellectual  Property  and  Confidential
     Information  used  or  held  for use in the  respective  businesses  of the
     Company and its Subsidiaries.

                                       10
<PAGE>

          (f) To the Company's  knowledge,  the conduct of the Company's and its
     Subsidiaries'  businesses  as  currently  conducted  does not  infringe  or
     otherwise   impair  or  conflict  with   (collectively,   "Infringe")   any
     Intellectual  Property  rights  of any third  party or any  confidentiality
     obligation  owed to a third party,  and, to the  Company's  knowledge,  the
     Intellectual  Property and Confidential  Information of the Company and its
     Subsidiaries  which are  necessary for the conduct of Company's and each of
     its  Subsidiaries'  respective  businesses  as currently  conducted are not
     being Infringed by any third party. There is no litigation or order pending
     or outstanding or, to the Company's knowledge, threatened or imminent, that
     seeks to limit or challenge or that concerns the ownership,  use,  validity
     or enforceability of any Intellectual Property or Confidential  Information
     of the Company and its Subsidiaries and the Company's and its Subsidiaries'
     use of any  Intellectual  Property or Confidential  Information  owned by a
     third party, and, to the Company's  knowledge,  there is no valid basis for
     the same.

          (g) The  consummation of the transactions  contemplated  hereby and by
     the other  Transaction  Documents will not result in the alteration,  loss,
     impairment of or restriction  on the Company's or any of its  Subsidiaries'
     ownership or right to use any of the Intellectual  Property or Confidential
     Information which is necessary for the conduct of Company's and each of its
     Subsidiaries'  respective businesses as currently conducted or as currently
     proposed to be conducted.

          (h) The Company and its  Subsidiaries  have taken  reasonable steps to
     protect the Company's and its  Subsidiaries'  rights in their  Intellectual
     Property  and  Confidential  Information.  Each  employee,  consultant  and
     contractor  who  has  had  access  to  Confidential  Information  which  is
     necessary  for the  conduct  of  Company's  and  each of its  Subsidiaries'
     respective businesses as currently conducted or as currently proposed to be
     conducted has executed an agreement to maintain the confidentiality of such
     Confidential  Information and has executed appropriate  agreements that are
     substantially  consistent with the Company's standard forms thereof. Except
     under confidentiality obligations, there has been no material disclosure of
     any of the Company's or its Subsidiaries'  Confidential  Information to any
     third party.

     3.11  COMPLIANCE.  Neither the Company nor any of its  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.

                                       11
<PAGE>

     3.12 NO MATERIALLY  ADVERSE  CONTRACTS,  ETC. The Company is not subject to
any charter,  corporate or other legal  restriction,  or any  judgment,  decree,
order,  rule or  regulation  which in the  reasonable  judgment of the Company's
officers has or is expected in the future,  individually or in the aggregate, to
have a Material  Adverse  Effect.  The Company is not a party to any contract or
agreement which in the reasonable  judgment of the Company's  officers has or is
expected to have a Material Adverse Effect.

     3.13 TAX  STATUS.  The  Company  has made or filed all  federal,  state and
foreign income and all other tax returns,  reports and declarations  required by
any  jurisdiction to which it is subject (unless and only to the extent that the
Company  has set  aside on its  books  provisions  reasonably  adequate  for the
payment  of all unpaid  and  unreported  taxes) and has paid all taxes and other
governmental  assessments  and charges  that are  material  in amount,  shown or
determined to be due on such  returns,  reports and  declarations,  except those
being  contested  in good  faith,  and has set  aside  on its  books  provisions
reasonably  adequate for the payment of all taxes for periods  subsequent to the
periods  to which such  returns,  reports or  declarations  apply.  There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any  jurisdiction,  and the Company  knows of no basis for any such  claim.  The
Company  has not  executed a waiver with  respect to the statute of  limitations
relating to the assessment or collection of any foreign, federal, state or local
tax. None of the Company's tax returns is presently  being audited by any taxing
authority.

     3.14 CERTAIN  TRANSACTIONS.  Except as disclosed in the SEC Documents,  and
other than the grant of stock options, employment agreements or the ownership of
other securities and rights disclosed in filings under the Exchange Act, none of
the officers, directors, or employees of the Company is presently a party to any
transaction with the Company (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 employee  or, to the  knowledge  of the  Company,  any  corporation,
partnership,  trust or other entity in which any officer,  director, or employee
has a substantial interest or is an officer, director, trustee or partner.

     3.15  ENVIRONMENTAL  LAWS.  The  Company  (i)  is in  compliance  with  all
applicable foreign federal, state and local laws and regulations relating to the
protection  of human health and safety,  the  environment  or hazardous or toxic
substances or wastes,  pollutants or contaminants  ("Environmental  Laws"), (ii)
has  received all permits,  licenses or other  approvals  required of them under
applicable Environmental Laws to conduct its business and (iii) is in compliance
with all terms and conditions of any such permit,  license or approval where, in
each of the three  foregoing  clauses,  the  failure  to so comply  would  have,
individually or in the aggregate, a Material Adverse Effect.

     3.16 DISCLOSURE.  No information  relating to or concerning the Company set
forth in this  Agreement  or provided to the  Investors  pursuant to Section 2.4
hereof or otherwise  provided in connection with the  transactions  contemplated
hereby,  including  without  limitation any oral or written  statements  made or
given by the officers of the Company,  or any of the  Company's  agents,  to any
Investor,  or any  Investor's  agent,  taken as a whole,  contained  any  untrue
statement of a material fact nor omitted to state any material fact necessary in
order  to  make  the  statements  made  herein  or  therein,  in  light  of  the
circumstances  under  which  they  were  made,  not  misleading.   No  event  or
circumstance  has occurred or information  exists with respect to the Company or
its business,  properties,  operations  or financial  conditions,  which,  under
applicable  law, rule or regulation,  requires  immediate  public  disclosure or
announcement  by the  Company but which has not been so  publicly  announced  or
disclosed.  The Company  acknowledges  and agrees that no Investor  makes or has
made  any  representations  or  warranties  with  respect  to  the  transactions
contemplated hereby other than those specifically set forth in Article II hereof

                                       12
<PAGE>

     3.17  ACKNOWLEDGMENT  REGARDING  INVESTORS'  PURCHASE  OF  SECURITIES.  The
Company  acknowledges  and agrees  that each  Investor  is acting  solely in the
capacity of an arm's length  purchaser  with respect to this  Agreement  and the
transactions  contemplated  hereby.  The Company  further  acknowledges  that no
Investor 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  statement  made by any  Investor  or any of their
respective  representatives  or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation and is merely
incidental to such Investor's purchase of the Securities and has not been relied
on by the Company in any way. The Company  further  represents  to each Investor
that the Company's  decision to enter into this  Agreement has been based solely
on an independent evaluation by the Company and its representatives. 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  Warrant  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 Investor  and  regardless  of the
dilutive  effect  that  such  issuance  may have on the  ownership  of the other
stockholders of the Company.  Anything in this Agreement or elsewhere  herein to
the contrary  notwithstanding (except for Section 2.11 hereof), it is understood
and  agreed by the  Company  (i) that none of the  Investors  have been asked to
agree, nor has any Investor 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
Investor, 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 Investor, and counter
parties in  "derivative"  transactions  to which any such  Investor  is a party,
directly  or  indirectly,  presently  may have a "short"  position in the Common
Stock,  and (iv) that each Investor shall not be deemed to have any  affiliation
with  or  control  over  any  arm's  length  counter-party  in any  "derivative"
transaction.

     3.18 NO INTEGRATED  OFFERING.  Except as disclosed in the Private Placement
Memorandum,  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  in any  security  or  solicited  any  offers  to buy any  security  under
circumstances  that would require  registration  under the Securities Act of the
issuance of the Securities to the Investors.

                                       13
<PAGE>

     3.19 NO BROKERS.  The Company has taken no action  which would give rise to
any claim by any person for brokerage  commissions  or finder's fees relating to
this  Agreement or the  transactions  contemplated  hereby  other than  Sanders,
Morris, Harris, Inc.

     3.20 PERMITS;  COMPLIANCE.  The Company is in possession of all franchises,
grants,  authorizations,  licenses, permits, easements,  variances,  exemptions,
consents, certificates, approvals and orders necessary to own, lease and operate
its properties and to carry on its business as it is now being conducted, except
those  the  failure  of which  to  possess  would  not,  individually  or in the
aggregate, have a Material Adverse Effect (collectively, the "Company Permits"),
and there is no action  pending or, to the knowledge of the Company,  threatened
regarding  suspension or cancellation of any of the Company Permits. The Company
is not in  conflict  with,  or in default or  violation  of, any of the  Company
Permits,   except  for  any  such  conflicts,   defaults  or  violations  which,
individually  or in the  aggregate,  would not  reasonably be expected to have a
Material  Adverse  Effect.  Since October 31, 2004, the Company has not received
any notification with respect to possible  conflicts,  defaults or violations of
applicable laws, except for notices relating to possible conflicts,  defaults or
violations,  which  conflicts,  defaults or violations would not have a Material
Adverse  Effect.  None of the Company's  products have received the FDA approval
required to sell such products.

     3.21 TITLE TO PROPERTY.  The Company has good and  marketable  title in fee
simple  to all  real  property  and good and  marketable  title to all  personal
property owned by it which is material to the business of the Company.  Any real
property  and  facilities  held under  lease by the Company are held by it under
valid and  enforceable  leases with such exceptions as would not have a Material
Adverse Effect.

     3.22 INSURANCE.  The Company is insured by insurers of recognized financial
responsibility  against  such losses and risks and in such amounts as is prudent
and customary in the businesses in which the Company is engaged.  To the best of
Company's  knowledge,  such  insurance  contracts  and policies are accurate and
complete. The Company has no 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 at a cost that would not have a Material Adverse Effect.

     3.23 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  maintains a system of internal  accounting
controls  sufficient,  in the judgment of the Company's  board of directors,  to
provide  reasonable  assurance that (a)  transactions are executed in accordance
with  management's  general or specific  authorizations,  (b)  transactions  are
recorded  as  necessary  to  permit  preparation  of  financial   statements  in
conformity with generally accepted  accounting  principles and to maintain asset
accountability,  (c)  access to  assets is  permitted  only in  accordance  with
management's general or specific authorization,  (d) the recorded accountability
for assets is compared  with the existing  assets at  reasonable  intervals  and
appropriate  action is taken with respect to any differences,  and (e) financial
reporting and the preparation of financial  statements for external  purposes in
accordance with U.S. generally accepted accounting principles are reliable.

                                       14
<PAGE>

     3.24  EMPLOYMENT  MATTERS.  The Company is in compliance  with all federal,
state,  local  and  foreign  laws  and  regulations  respecting  employment  and
employment  practices,  terms and  conditions of employment  and wages and hours
except  where  failure to be in  compliance  would not have a  Material  Adverse
Effect.  There are no pending  investigations  involving the Company by the U.S.
Department  of  Labor  or any  other  governmental  agency  responsible  for the
enforcement of such federal, state, local or foreign laws and regulations. There
is no unfair  labor  practice  charge or complaint  against the Company  pending
before the National Labor  Relations  Board or any strike,  picketing,  boycott,
dispute,  slowdown or stoppage pending or,  threatened  against or involving the
Company.  No  representation  question  exists  respecting  the employees of the
Company,  and no  collective  bargaining  agreement or  modification  thereof is
currently  being  negotiated  by  the  Company.   No  grievance  or  arbitration
proceeding  is  currently  pending  under any  expired  or  existing  collective
bargaining  agreements  of the  Company.  No  material  labor  dispute  with the
employees  of the  Company  exists  or,  to the  knowledge  of the  Company,  is
imminent.

     3.25 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.

     3.26  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.

     3.27 INVESTMENT COMPANY STATUS. The Company is not and upon consummation of
the  sale of the  Securities  will not be an  "investment  company,"  a  company
controlled  by  an  "investment  company"  or  an  "affiliated  person"  of,  or
"promoter" or "principal underwriter" for, an "investment company" as such terms
are defined in the Investment Company Act of 1940, as amended.

     3.28 NO GENERAL  SOLICITATION.  Neither  the  Company  nor any  distributor
participating on the Company's behalf in the  transactions  contemplated  hereby
(if any) nor any person  acting for the Company,  or any such  distributor,  has
conducted any "general  solicitation,"  as such term is defined in Regulation D,
with respect to any of the Securities being offered hereby.

     3.29  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  or other
similar anti-takeover provision under the laws of the state of its incorporation
which  is or  could  become  applicable  to the  Investors  as a  result  of the
transactions contemplated by this Agreement,  including, without limitation, the
Company's  issuance  of the  Securities  and  the  Investors'  ownership  of the
Securities.

                                       15
<PAGE>

                                   ARTICLE IV
                                    COVENANTS

     4.1 BEST  EFFORTS.  Each  party  will use its best  efforts to satisfy in a
timely  fashion each of the  conditions to be satisfied by it under  Articles VI
and VII of this Agreement.

     4.2 FORM D;  BLUE SKY  LAWS.  The  Company  will  file a Notice  of Sale of
Securities  on  Form D  with  respect  to  the  Securities,  as  required  under
Regulation  D, and will provide a copy thereof to each Investor  promptly  after
such filing.  The Company will, on or before the Closing Date,  take such action
as it reasonably  determines to be necessary to qualify the  Securities for sale
to the Investors  under this  Agreement  under  applicable  securities (or "blue
sky") laws of the states of the United  States (or to obtain an  exemption  from
such  qualification),  and will provide  evidence of any such action so taken to
the Investors on or prior to the date of the Closing. The Company will file with
the  SEC a  Current  Report  on  Form  8-K  disclosing  this  Agreement  and the
transactions  contemplated  hereby  within four  business days after the Closing
Date and will  make any  required  notice  filings  with  state  securities  law
authorities on a timely basis.

     4.3  REPORTING  STATUS.  The  Company's  Common Stock is  registered  under
Section 12 of the Exchange Act.  Throughout the Registration  Period (as defined
in the Registration Rights Agreement),  the Company will use its best efforts to
timely  file all  reports,  schedules,  forms,  statements  and other  documents
required to be filed by it with the SEC under the reporting  requirements of the
Exchange  Act,  and the  Company  will not  terminate  its  status  as an issuer
required to file reports  under the Exchange Act even if the Exchange Act or the
rules and regulations thereunder would permit such termination.

     4.4 USE OF PROCEEDS. The Company will use the proceeds from the sale of the
Securities to pay clinical trial expenses,  research and  development  expenses,
various  outstanding  liabilities,  working capital and overhead costs,  capital
expenditures to expand manufacturing, a license fee to the University of Chicago
as disclosed in the Private Placement Memorandum,  certain fees to the Placement
Agent as disclosed in the Private Placement Memorandum and for general corporate
purposes.

     4.5 FINANCIAL  STATEMENTS.  The financial statements of the Company will be
prepared  in  accordance  with  United  States  generally  accepted   accounting
principles,  consistently  applied,  and will  fairly  present  in all  material
respects the consolidated  financial  position of the Company and results of its
operations  and cash flows for the periods then ended  (subject,  in the case of
unaudited statements, to normal year-end audit adjustments).

     4.6 LISTING. On or before the day the registration statement for the resale
of the Common Shares and the sale of the Warrant Shares becomes  effective,  the
Company will secure the listing of the Common Shares and the Warrant Shares upon
each  national  securities  exchange or automated  quotation  system,  including
without  limitation the Nasdaq  (including the OTCBB), if any, upon which shares
of Common Stock are then listed  (subject to official  notice of  issuance).  So
long as any Investor owns any of the  Securities,  the Company will use its best
efforts  to obtain  and,  so long as any  Investor  owns any of the  Securities,
maintain  the listing and trading of its Common Stock on Nasdaq  (including  the
OTCBB),  the  American  Stock  Exchange or the New York Stock  Exchange and will
comply  in  all  respects  with  the  Company's  reporting,   filing  and  other
obligations under the bylaws or rules of the National  Association of Securities
Dealers, Inc. and such exchanges or automated quotation system, as applicable.

                                       16
<PAGE>

     4.7 SOLVENCY;  CORPORATE EXISTENCE;  COMPLIANCE WITH LAW. The Company (both
before  and  after  giving  effect  to the  transactions  contemplated  by  this
Agreement)  is solvent  (i.e.,  its assets have a fair market value in excess of
the amount  required to pay its probable  liabilities  on its existing  debts as
they become  absolute and matured) and currently the Company has no  information
that would lead it to reasonably  conclude that the Company would not have,  nor
does it intend to take any action that would impair its ability to pay its debts
from time to time  incurred in connection  therewith as such debts  mature.  The
Company will conduct its business in compliance with all applicable  laws, rules
and  regulations  of the  jurisdictions  in  which  it is  conducting  business,
including,   without  limitation,   all  applicable  local,  state  and  federal
environmental laws and regulations,  where the failure to comply with such would
have a Material Adverse Effect.

     4.8  INSURANCE.  The Company will  maintain  liability,  casualty and other
insurance  (subject to customary  deductions and  retentions)  with  responsible
insurance  companies  against  such  risk  of  the  types  and  in  the  amounts
customarily  maintained by companies of comparable size and in lines of business
of the Company.

     4.9 RESERVATION OF SHARES.  The Company will at all times have  authorized,
and  reserved  for the purpose of  issuance,  a  sufficient  number of shares of
Common  Stock to provide for the full  exercise of the Warrants and the issuance
of the Warrant Shares in connection  therewith (based upon the exercise price of
the  Warrants  in effect  from time to time).  The  Company  will not reduce the
number of shares of Common  Stock  reserved for  issuance  upon  exercise of the
Warrants, without the consent of all the Investors. If at any time the number of
shares of Common Stock authorized and reserved for issuance is below the Warrant
Shares issued and issuable upon exercise of the Warrants  (based on the exercise
price of the  Warrants  then in effect),  the  Company  will  promptly  take all
corporate  action  necessary  to authorize  and reserve a  sufficient  number of
shares, including, without limitation, calling a special meeting of stockholders
to authorize  additional  shares to meet the  Company's  obligations  under this
Section 4.11, in the case of an insufficient  number of authorized  shares,  and
using its best  efforts to obtain  stockholder  approval  of an increase in such
authorized number of shares.

     4.10 PLEDGE OF  SECURITIES.  The Company  acknowledges  and agrees that the
Securities  may be pledged by an Investor in connection  with a bona fide margin
agreement  or  other  loan  or  financing  arrangement  that is  secured  by the
Securities.  The pledge of Securities shall not be deemed to be a transfer, sale
or assignment of the Securities hereunder, and no Investor effecting a pledge of
Securities  shall be required to provide the Company with any notice  thereof or
otherwise make any delivery to the Company pursuant to this Agreement;  provided
that an Investor and its pledgee shall be required to comply with the provisions
of  Section  2.6 hereof in order to effect a sale,  transfer  or  assignment  of
Securities  to such  pledgee.  The Company  hereby agrees to execute and deliver
such  documentation  as a pledgee of the Securities  may  reasonably  request in
connection with a pledge of the Securities to such pledgee by an Investor.

                                       17
<PAGE>

     4.11 DISCLOSURE OF TRANSACTIONS AND OTHER MATERIAL INFORMATION. The Company
shall, by 8:30 p.m. Eastern time on the earlier of July 1, 2005 or the Effective
Date (the "Required  Disclosure Date"),  issue a press release and by 12:00 p.m.
Eastern  time on the  same  day,  issue a  Current  Report  on  Form  8-K,  each
reasonably  acceptable to a majority in interest of the Investors disclosing (i)
any  material  nonpublic  information  provided  to any  Investor,  and (ii) the
material terms of the transactions contemplated hereby, and, with respect to the
Current Report, shall attach the Transaction Documents thereto as exhibits.  The
Company shall not, and shall cause each  Subsidiary  and each of its  respective
officers, directors, employees and agents, not to, provide any Investor with any
material nonpublic  information regarding the Company or any Subsidiary from and
after the Closing Date without the express written consent of such Investor.  In
the event of a breach of the foregoing covenant by the Company,  any Subsidiary,
or its each of respective officers, directors, employees and agents, in addition
to any other  remedy  provided  herein  or in the  Transaction  Documents,  such
Investor  shall  have  the  right  to  demand  that  the  Company  make a public
disclosure,  and if the Company  fails to do so within two  business  days,  the
Investor may make a public  disclosure,  in the form of a press release,  public
advertisement or otherwise,  of such material nonpublic  information without the
prior  approval  by the  Company,  each  Subsidiary,  or each of its  respective
officers,  directors,  employees or agents.  In such event,  such Investor shall
provide  a copy of such  public  disclosure  to the  Company  at or prior to the
dissemination  of such  disclosure  to the public.  No  Investor  shall have any
liability  to the Company,  any  Subsidiary,  or any of its or their  respective
officers, directors,  employees,  stockholders or agents for any such disclosure
unless such Investor acts with negligence or willful misconduct.  Subject to the
foregoing,  neither the Company nor any Investor  shall issue any press releases
or any other public  statements  with respect to the  transactions  contemplated
hereby  naming the other party  without the prior  approval of the other  party;
which approval shall not be unreasonably withheld or delayed; provided, however,
that the Company shall be entitled,  without the prior approval of any Investor,
to make any press  release  or other  public  disclosure  with  respect  to such
transactions  (i) in a  Current  Report  on  Form  8-K in  compliance  with  the
requirements  of the  Exchange  Act,  and (ii) as may  otherwise  be required by
applicable law and  regulations,  including the applicable rules and regulations
of the Nasdaq  (provided  that in the case of clause (i) each Investor  shall be
provided a copy of any  proposed  press  release to be issued by the  Company at
least one day prior to its  release).  In addition to any other rights or claims
an  Investor  may  have,  if the  Company  fails to make the  public  disclosure
required by the first  sentence of this Section,  then (i) the Company shall (a)
pay each  Investor an  aggregate  amount  equal to (1) five  percent (5%) of the
total purchase price paid by the Investor for the Securities  hereunder for each
thirty  (30)  day  period  (or  portion  thereof)  elapsing  from  the  Required
Disclosure  Date until Company makes the required  disclosure in accordance with
this Section 4.11 (the  "Disclosure  Date"),  plus (2) (b) in the event that the
VWAP on the first Trading Day after the Disclosure Date is less than the VWAP on
the Required  Disclosure  Date, the amount of such difference  multiplied by the
number of Securities and (ii) without any further action required,  the Exercise
Price of the Series A Warrants shall be automatically reduced to equal $1.50 per
share and the Expiration Date of the Series A Warrants shall be extended one day
for each day elapsing  from the Required  Disclosure  Date until the  Disclosure
Date.  The  amounts  payable  as partial  liquidated  damages  pursuant  to this
paragraph shall be payable in lawful money of the United States beginning on the
fifth day  following the Required  Disclosure  Date and on the fifth day of each
successive month thereafter.  If the Company fails to pay any partial liquidated
damages  pursuant  to this  Section  in full  within  seven  days after the date
payable,  the Company will pay interest  thereon at a rate 9% per annum (or such
lesser  maximum  amount that is permitted to be paid by  applicable  law) to the
Investor,  accruing daily from the date such partial  liquidated damages are due
until such amounts, plus all such interest thereon, are paid in full.

                                       18
<PAGE>

     4.12 SALES BY INVESTORS.  Each Investor will sell any Securities sold by it
in compliance  with  applicable  prospectus  delivery  requirements,  if any, or
otherwise in compliance with the requirements for an exemption from registration
under the Securities Act and the rules and regulations  promulgated  thereunder.
No Investor will make any sale,  transfer or other disposition of the Securities
in violation of federal or state securities  laws.  Investor  acknowledges  that
Investor has been provided with material nonpublic information and agrees to not
publicly disclose such information  until it has been publicly  disclosed by the
Company.  Investor  further  acknowledges  that  Investor  may not  engage  in a
transaction  to  buy  or  sell  any  of  the  Company's  securities  until  such
information is publicly  disclosed by the Company pursuant to Section 4.11 above
or otherwise becomes public information.

     4.13  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 Investors.

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

                                   ARTICLE V
                 TRANSFER AGENT INSTRUCTIONS; REMOVAL OF LEGENDS

     5.1 ISSUANCE OF CERTIFICATES. The Company shall instruct its transfer agent
to issue  certificates,  registered in the name of each Investor or its nominee,
for Common Shares and Warrant  Shares in such amounts as specified  from time to
time by each  Investor to the Company  issuable upon exercise of the Warrants in
accordance  with their terms.  All costs and expenses  related to the removal of
the legends and the reissuance of any Securities  shall be borne by the Company.
So long as  required  by this  Article  V, all such  certificates  will bear the
restrictive  legend  described in Section 2.7, except as otherwise  specified in
this  Article  V.  Nothing  in  this  Section  5.1  will  affect  in any way the
Investors'  obligations  and agreement set forth in Section 2.7 hereof to comply
with all applicable prospectus delivery requirements, if any, upon resale of the
Common Shares and the Warrant Shares.

                                       19
<PAGE>

     5.2 UNRESTRICTED SECURITIES.

          (a) Subject to Section 4.12 hereof, certificates evidencing the Common
     Shares and  Warrant  Shares  shall not contain  any legend  (including  the
     legend set forth in Section 2.7 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
     Common  Shares or Warrant  Shares  pursuant  to Rule 144,  or (iii) if such
     Common Shares or Warrant 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).  If all or any portion of a Warrant
     is  converted  or  exercised  (as  applicable)  at a time when  there is an
     effective  registration  statement to cover the resale of the Common Shares
     or Warrant  Shares,  or if such Common Shares or Warrant 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 Common  Shares or Warrant  Shares,  as
     applicable,  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 5.2, it will,  no later than five Trading Days
     following  the  delivery by an  Investor  to the  Company or the  Company's
     transfer  agent of a  certificate  representing  Common  Shares or  Warrant
     Shares, as applicable, issued with a restrictive legend (such third Trading
     Day, the "LEGEND REMOVAL DATE"),  --------------------- deliver or cause to
     be delivered to such Investor 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 Investors
     by crediting the account of the Investor's prime broker with the Depository
     Trust Company System.

          (b) In addition  to such  Investor's  other  available  remedies,  the
     Company shall pay to an Investor,  in cash, as partial  liquidated  damages
     and not as a penalty,  for each $1,000 of Common Shares (or Warrant  Shares
     underlying a Warrant tendered for legend removal) (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 5.2(a), $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 Legend Removal Date until such certificate is delivered without a
     legend.  Nothing herein shall limit such Investor'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  Investor
     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,  without the necessity of showing economic loss
     and without any bond or other security being required.

          (c) Each Investor, severally and not jointly with the other Investors,
     agrees  that  the  removal  of the  restrictive  legend  from  certificates
     representing Securities as set forth in this Section 5.2 is predicated upon
     the Company's reliance that the Investor will sell any Securities  pursuant
     to either the  registration  requirements of the Securities Act,  including
     any applicable prospectus delivery requirements, or an exemption therefrom.

                                       20
<PAGE>

                                   ARTICLE VI
                 CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL

         The  obligation  of the Company to issue and sell the Common Shares and
Warrants to each Investor at the Closing is subject to the  satisfaction by such
Investor,  on or before the Closing Date,  of each of the following  conditions.
These  conditions  are for the  Company's  sole benefit and may be waived by the
Company at any time in its sole discretion:

     6.1 The Investor  will have executed  this  Agreement and the  Registration
Rights Agreement and will have delivered those agreements to the Company.

     6.2 The Investor  will have  delivered  the  purchase  price for the Common
Shares to the Company in accordance with this Agreement.

     6.3 The  representations  and  warranties  of the Investor must be true and
correct in all  material  respects as of the Closing Date as though made at that
time  (except for  representations  and  warranties  that speak as of a specific
date, which representations and warranties must be correct as of such date), and
the Investor will have performed and complied in all material  respects with the
covenants and conditions  required by this Agreement to be performed or complied
with by the Investor at or prior to the Closing.

     6.4 No litigation,  statute,  rule,  regulation,  executive order,  decree,
ruling or injunction will have been enacted, entered, promulgated or endorsed by
or in any court or  governmental  authority  of  competent  jurisdiction  or any
self-regulatory  organization  having  authority  over the matters  contemplated
hereby which prohibits the consummation of any of the transactions  contemplated
by this Agreement.

                                  ARTICLE VII
               CONDITIONS TO THE INVESTOR'S OBLIGATION TO PURCHASE

         The obligation of each Investor hereunder to purchase the Common Shares
from the Company at the Closing is subject to the satisfaction, on or before the
Closing Date, of each of the following conditions. These conditions are for each
Investor's  respective  benefit and may be waived by any Investor at any time in
its sole discretion:

     7.1 The Company will have  executed  this  Agreement  and the  Registration
Rights Agreement and each such Agreement will have been delivered the Investor.

     7.2  The  Company  will  have  delivered  to the  Investors  duly  executed
certificates  representing  the Common Shares and duly executed  Warrants in the
amounts and forms specified in Sections 1.1 and 1.4 hereof.

     7.3 The  representations  and  warranties  of the Company  must be true and
correct in all  material  respects as of the Closing as though made at that time
(except for  representations  and  warranties  that speak as of a specific date,
which  representations  and warranties must be true and correct as of such date)
and the Company must have  performed and complied in all material  respects with
the  covenants  and  conditions  required by this  Agreement  to be performed or
complied with by the Company at or prior to the Closing.  The Investor must have
received a certificate or certificates dated as of the Closing Date and executed
by the Chief  Executive  Officer or the Chief  Financial  Officer of the Company
certifying  as to the matters in  contained  in this  Section 7.3 and as to such
other matters as may be reasonably  requested by such Investor,  including,  but
not limited to, the Company's  Certificate of Incorporation,  By-laws,  Board of
Directors' resolutions relating to the transactions  contemplated hereby and the
incumbency and signatures of each of the officers of the Company who may execute
on behalf of the Company any document delivered at the Closing.

                                       21
<PAGE>

     7.4 No litigation,  statute,  rule,  regulation,  executive order,  decree,
ruling or injunction will have been enacted, entered, promulgated or endorsed by
or in any court or  governmental  authority  of  competent  jurisdiction  or any
self-regulatory  organization  having  authority  over the matters  contemplated
hereby which prohibits the consummation of any of the transactions  contemplated
by this Agreement.

     7.5 Trading and  listing of the Common  Stock on the Nasdaq  OTCBB must not
have been suspended by the SEC or the Nasdaq, nor shall Nasdaq have notified the
Company of any  failure  of the  Company  to meet any of the  continued  listing
standards.

     7.6 The Investors  will have received an opinion of the Company's  counsel,
dated  as  of  the  Closing  Date,  in  form,  scope  and  substance  reasonably
satisfactory to the Investors.

                                  ARTICLE VIII
                                 INDEMNIFICATION

     8.1  INDEMNIFICATION  BY  COMPANY.  In  consideration  of  each  Investor's
execution and delivery of this  Agreement and its  acquisition of the Securities
hereunder,  and in addition to all of the Company's other obligations under this
Agreement, the Registration Rights Agreement, and the Warrants, the Company will
defend, protect, indemnify and hold harmless each Investor and each other holder
of the Securities and all of their stockholders, officers, directors, employees,
advisors  and direct or indirect  investors  and any of the  foregoing  person's
agents or other representatives (including,  without limitation,  those retained
in  connection   with  the   transactions   contemplated   by  this   Agreement)
(collectively,  the "Indemnitees") from and against any and all actions,  causes
of action,  suits,  claims,  losses,  costs,  penalties,  fees,  liabilities and
damages,  and expenses in connection  therewith  (regardless of whether any such
Indemnitee  is a party to the  action  for which  indemnification  hereunder  is
sought),  and including  reasonable  attorneys' fees and  disbursements  and the
costs of  collection  and  enforcement  of the terms of this  Agreement  and the
Transaction Documents (the "Indemnified  Liabilities"),  incurred or suffered by
an  Indemnitee  as a result of, or arising out of, or relating to (a) any breach
of any  representation  or warranty  made by the Company  herein or in any other
certificate,  instrument  or document  contemplated  hereby or thereby,  (b) any
breach of any covenant,  agreement or obligation of the Company contained herein
or in any other  certificate,  instrument  or  document  contemplated  hereby or
thereby,  or (c) any cause of action, suit or claim brought or made against such
Indemnitee  and  arising  out of or  resulting  from  the  execution,  delivery,
performance,  breach or enforcement of this Agreement,  the Registration  Rights
Agreement or the Warrants by the Company; provided,  however, that, with respect
to this  clause  (c),  the  Company  shall  not be  liable  to the  extent  such
Indemnified   Liabilities  are  finally  determined  by  a  court  of  competent
jurisdiction  to have  resulted  primarily  and  directly  from  the  Investors'
negligence or willful misconduct.  To the extent that the foregoing  undertaking
by the  Company is  unenforceable  for any  reason,  the  Company  will make the
maximum  contribution to the payment and satisfaction of each of the Indemnified
Liabilities that is permissible under applicable law.

                                       22
<PAGE>

                                   ARTICLE IX
                                   DEFINITIONS

     9.1 "Additional Shares" has the meaning set forth in Section 4.13.

     9.2 "Bridge  Loan  Shares"  means those  shares of Common  Stock  issued in
connection with the Bridge Notes.

     9.3 "Bridge Notes" has the meaning set forth in the recitals.

     9.4 "Bridge Warrants" has the meaning set forth in the recitals.

     9.5  "Closing"  means the  closing of the  purchase  and sale of the Common
Shares.

     9.6 "Closing Date" has the meaning set forth in Section 1.3.

     9.7 "Common Shares" has the meaning set forth in the recitals.

     9.8 "Common  Stock" means the common stock,  par value $0.05 per share,  of
the Company.

     9.9 "Company" means PharmaFrontiers Corp.

     9.10 "Company Permit" has the meaning set forth in Section 3.19.

     9.11  "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 SEC.

     9.12 "Environmental Laws" has the meaning set forth in Section 3.14.

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

     9.14  "Indebtedness for Borrowed Money" shall include only (i) indebtedness
of the Company and its Subsidiaries incurred as the result of a direct borrowing
of  money,   and  (ii)  guarantees  by  the  Company  and  its  Subsidiaries  of
indebtedness  of third  parties,  and shall not include  any other  indebtedness
including,  but not  limited to,  indebtedness  incurred  with  respect to trade
accounts, equipment leases, and intercompany loans.

     9.15 "Indemnified Liabilities" has the meaning set forth in Article VIII.

     9.16 "Indemnitees" has the meaning set forth in Article VIII.

                                       23
<PAGE>

     9.17 "Intellectual Property" has the meaning set forth in Section 3.10.

     9.18  "Investors"  means  the  investors  whose  names are set forth on the
signature pages of this Agreement, and their permitted transferees.

     9.19 "Material  Adverse Effect" means a material  adverse effect on (a) the
assets,  liabilities,  business,  properties,  operations,  financial condition,
prospects or results of operations of the Company and its Subsidiaries, taken as
a whole, or (b) the ability of the Company to perform its  obligations  pursuant
to the  transactions  contemplated  by this Agreement or under the agreements or
instruments to be entered into or filed in connection herewith.

     9.20 "Nasdaq" means the Nasdaq SmallCap Market.

     9.21 "Option  Plan" means the Company's  2004 Stock Option Plan,  including
all amendments thereto.

     9.22  "OTCBB"  means  the  OTC  Bulletin  Board  operated  by the  National
Association of Security Dealers, Inc.

     9.23 "Private Placement  Memorandum" means the Private Placement Memorandum
dated May 16,  2005  issued by the  Company  and to which this  Agreement  is an
Exhibit.

     9.24  "Registration   Rights  Agreement"  means  the  Registration   Rights
Agreement,  dated as of the date of this Agreement and among the parties to this
Agreement, in the form attached hereto as Exhibit C.

     9.25  "Regulation D" means Regulation D as promulgated by the SEC under the
Securities Act.

     9.26  "Rule  144"  and  "Rule  144(k)"  mean  Rule  144  and  Rule  144(k),
respectively, promulgated under the Securities Act, or any successor rule.

     9.27 "SEC" means the Securities and Exchange Commission.

     9.28 "SEC Documents" has the meaning set forth in Section 3.7.

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

     9.30 "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder, or any similar successor statute.

     9.31  "Subsidiaries"  means any entity in which the  Company,  directly  or
indirectly, owns capital stock or holds an equity or similar interest.

     9.32  "Trading  Day" means a day on which the OTC  Bulletin  Board,  Nasdaq
SmallCap Market, American Stock Exchange or such other securities market, in any
such case which at the time constitutes the principal  securities market for the
Common Stock, is open for general trading of securities.

                                       24
<PAGE>

     9.33 "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 OTC
Bulletin Board, the Nasdaq SmallCap Market, the American Stock Exchange, the New
York Stock Exchange or the Nasdaq National Market.

     9.34  "Transaction  Documents"  shall have the meaning set forth in Section
10.16.

     9.35 "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 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.  Eastern Time to 4:02 p.m. Eastern Time);
(b) if the Common Stock is not then listed or quoted on a Trading  Market and if
prices for the  Common  Stock are then  quoted on the OTC  Bulletin  Board,  the
volume weighted  average price of the Common Stock for such date (or the nearest
preceding date) on the OTC Bulletin  Board;  (c) if the Common Stock is not then
listed or quoted on the OTC  Bulletin  Board 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 an  independent  appraiser  selected  in  good  faith  by the  Investors  and
reasonably acceptable to the Company.

     9.36 "Warrant  Shares"  means the shares of Common Stock  issuable upon the
exercise (or otherwise) of the Warrants.

     9.37 "Warrants" means the Series A Warrants, Series B Warrants and Series C
Warrants to purchase  shares of Common Stock,  in the forms  attached  hereto as
Exhibits C, D and E, respectively.

                                   ARTICLE X
                    TERMINATION; GOVERNING LAW; MISCELLANEOUS

     10.1 TERMINATION.  This Agreement may be terminated by any Investor,  as to
such Investor's  obligations hereunder only and without any effect whatsoever on
the obligations  between the Company and the other Investors,  by written notice
to the other parties,  if the Closing has not been consummated on or before June
3, 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).

     10.2  GOVERNING LAW;  JURISDICTION.  This Agreement will be governed by and
interpreted in accordance  with the laws of the State of Texas without regard to
the  principles  of conflict of laws.  The parties  hereto  hereby submit to the
jurisdiction  of the United States federal and state courts located in the State
of  Texas  with  respect  to any  dispute  arising  under  this  Agreement,  the
agreements entered into in connection herewith or the transactions  contemplated
hereby or thereby.

     10.3 COUNTERPARTS;  SIGNATURES BY FACSIMILE. This Agreement may be executed
in two or more  counterparts,  all of  which  are  considered  one and the  same
agreement and will become effective when  counterparts  have been signed by each
party and delivered to the other  parties.  This  Agreement,  once executed by a
party, may be delivered to the other parties hereto by facsimile transmission of
a copy of this Agreement  bearing the signature of the party so delivering  this
Agreement.

                                       25
<PAGE>

     10.4  HEADINGS.  The  headings of this  Agreement  are for  convenience  of
reference  only,  are  not  part  of  this  Agreement  and  do  not  affect  its
interpretation.

     10.5  SEVERABILITY.  If any  provision  of this  Agreement  is  invalid  or
unenforceable  under any applicable  statute or rule of law, then such provision
will be deemed  modified in order to conform  with such  statute or rule of law.
Any provision hereof that may prove invalid or unenforceable  under any law will
not affect the validity or enforceability of any other provision hereof.

     10.6 PAYMENT SET ASIDE.  To the extent that the Company  makes a payment or
payments to any  Investor  pursuant to any  Transaction  Document or an Investor
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.

     10.7 ENTIRE AGREEMENT.  This Agreement,  the Registration  Rights Agreement
and the Warrants  (including all schedules and exhibits thereto)  constitute the
entire  agreement  among the parties  hereto with respect to the subject  matter
hereof  and  thereof.  There  are  no  restrictions,   promises,  warranties  or
undertakings,  other than those set forth or referred to herein or therein. This
Agreement  supersedes all prior agreements and understandings  among the parties
hereto with respect to the subject matter hereof.

     10.8 INVESTOR APPROVALS.  Except as otherwise specifically provided herein,
in each case in which approval of the Investors is required by the terms of this
Agreement,  such requirement shall be satisfied only upon receipt of the written
consent of each Investor.

     10.9  AMENDMENTS,  CHANGES,  WAIVERS,  ETC.  Neither this Agreement nor any
provision  hereof may be amended,  changed,  waived,  discharged  or  terminated
orally,  but only by a  statement  in writing  signed by  Investors  agreeing to
purchase,  or after the  Closing,  holding  not less  than 80% of the  shares of
Common  Stock  sold  hereunder;  notwithstanding  the  foregoing  the  following
provisions  may not be amended  except in a writing  signed by the party against
which  enforcement of the amendment is sought:  Article 1, Sections 4.10 through
4.16,  Article V, Article VII, Section 10.1, 10.8, 10.9, 10.13,  10.17 and 10.18
and any  provisions  herein that specify  liquidated  damages or penalties.  The
terms  of the  agreements  attached  as  Exhibits  hereto  may  only be  amended
according to the terms of such agreements.

                                       26
<PAGE>

     10.10  NOTICES.  Any notices  required or  permitted  to be given under the
terms of this  Agreement  must be sent by certified or  registered  mail (return
receipt requested) or delivered personally or by courier (including a recognized
overnight  delivery  service) or by facsimile  and will be  effective  five days
after being placed in the mail, if mailed by regular U.S. mail, or upon receipt,
if delivered  personally,  by courier (including a recognized overnight delivery
service) or by facsimile,  in each case addressed to a party.  The addresses for
such communications are:

If to the Company:         PharmaFrontiers Corp.
                           2408 Timberloch Place, Suite B-7
                           The Woodlands, Texas 77380
                           Attn: David McWilliams, President
                           Facsimile: (281) 272-1088

With a copy to:            Vinson & Elkins L.L.P.
                           1001 Fannin, Suite 2300
                           Houston, Texas 77002
                           Attn: Michael C. Blaney
                           Facsimile: (713) 615-5487

     If to an  Investor:  To  the  address  set  forth  immediately  below  such
Investor's name on the signature pages hereto`

         Each  party will  provide  written  notice to the other  parties of any
change in its address.

     10.11 SUCCESSORS AND ASSIGNS.  This Agreement is binding upon and inures to
the benefit of the parties and their  successors  and assigns.  The Company will
not assign this  Agreement or any rights or  obligations  hereunder  without the
prior  written  consent  of the  Investors,  and no  Investor  may  assign  this
Agreement  or any rights or  obligations  hereunder  without  the prior  written
consent of the Company.  Notwithstanding  the foregoing,  an Investor may assign
all or part of its rights and obligations  hereunder to any of its "affiliates,"
as that term is defined  under the  Securities  Act,  without the consent of the
Company so long as the affiliate is an accredited  investor  (within the meaning
of Regulation D under the  Securities  Act) and agrees in writing to be bound by
this Agreement.  This provision does not limit the Investor's  right to transfer
the  Securities  pursuant  to the  terms  of this  Agreement  or to  assign  the
Investor's rights hereunder to any such transferee pursuant to the terms of this
Agreement.

     10.12 THIRD PARTY BENEFICIARIES. This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns, and
is not for the benefit  of, nor may any  provision  hereof be  enforced  by, any
other person.

     10.13 SURVIVAL.  All representations and warranties  contained herein shall
survive the execution and delivery of this Agreement,  any  investigation at any
time made by the Investors or on their behalf,  and the sale and purchase of the
Common Shares and the Warrants and payment therefor. All statements contained in
any  certificate,  instrument or other writing  delivered by or on behalf of the
Company   pursuant  hereto  or  in  connection  with  or  contemplation  of  the
transactions  herein  contemplated  (other than legal opinions) shall constitute
representations and warranties by the Company hereunder.

                                       27
<PAGE>

     10.14  PUBLICITY.  The Company may make any press  release or SEC or Nasdaq
filings with respect to such  transactions as are required by applicable law and
regulations  (including  NASD  requirements)  without the prior  approval of the
Investors (although the Company will make reasonable efforts to consult with the
Investors in  connection  with any such press  release  prior to its release and
filing).

     10.15 FURTHER  ASSURANCES.  Each party will do and perform,  or cause to be
done and  performed,  all such  further  acts and things,  and will  execute and
deliver  all other  agreements,  certificates,  instruments  and  documents,  as
another  party  may  reasonably  request  in order to carry out the  intent  and
accomplish  the  purposes  of  this  Agreement  and  the   consummation  of  the
transactions contemplated hereby.

     10.16 NO STRICT CONSTRUCTION. The language used in this Agreement is 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.

     10.17 EQUITABLE RELIEF. The Company recognizes that, if it fails to perform
or discharge any of its obligations under this Agreement,  any remedy at law may
prove to be inadequate  relief to the Investors.  The Company  therefore  agrees
that the Investors are entitled to temporary and permanent  injunctive relief in
any such case without the necessity of proving actual damages.

     10.18  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.

     10.19  INDEPENDENT  NATURE  OF  INVESTORS'   OBLIGATIONS  AND  RIGHTS.  The
obligations  of each  Investor  under any of the  Warrant,  Registration  Rights
Agreement or this Agreement  (collectively,  the  "Transaction  Documents")  are
several  and not  joint  with the  obligations  of any  other  Investor,  and no
Investor shall be responsible in any way for the  performance of the obligations
of any other  Investor  under any  Transaction  Document.  The  decision of each
Investor to purchase  Common Shares  pursuant to the  Transaction  Documents has
been  made  by  each  Investor  independently  of any  other  Investor.  Nothing
contained  herein or in any  Transaction  Document,  and no action  taken by any
Investor  pursuant  thereto,  shall be deemed to  constitute  the Investors as a
partnership,  an  association,  a joint venture or any other kind of entity,  or
create a presumption that the Investors are in any way acting in concert or as a
group with respect to such obligations or the  transactions  contemplated by the
Transaction  Document.  Each Investor 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  Investor  to be joined as an  additional  party in any
proceeding for such purpose.  Each Investor  acknowledges that no other Investor
has acted as agent for the  Investor in  connection  with making its  investment
hereunder and that no other  Investor will be acting as agent of the Investor in
connection  with monitoring its investment in the Common Shares or enforcing its
rights under the Transaction  Documents.  Each Investor has been  represented by
its  own  separate  legal  counsel  in  their  review  and  negotiation  of  the
Transaction Documents. The Company has elected to provide all Investors with the
same terms and Transaction  Documents for the convenience of the Company and not
because it was required or requested to do so by the Investors.

                                       28
<PAGE>

         IN WITNESS  WHEREOF,  the  undersigned  Investors  and the Company have
caused this Agreement to be duly executed as of the date first above written.

                                    COMPANY:

                                    PHARMAFRONTIERS CORP.

                                    By:     /S/ DAVID B. MCWILLIAMS
                                        ------------------------------------
                                           David B. McWilliams, President

                       [SIGNATURES CONTINUED ON NEXT PAGE]

<PAGE>

                 INVESTOR:

                                  INVESTOR'S NAME:
                                                  ----------------------------

                                  By:      /S/
                                     -----------------------------------------
                                  Print Name:
                                             ---------------------------------
                                  Title:
                                        --------------------------------------

INVESTOR'S ADDRESS:

(any notice hereunder to this Investor shall include a copy to):

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

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

         --------------------------------------------
         Attn:
              ---------------------------------------

     [SIGNATURE PAGE TO PHARMAFRONTIERS CORP. SECURITIES PURCHASE AGREEMENT]

<PAGE>

                                  SCHEDULE 3.1
                                       TO
                          SECURITIES PURCHASE AGREEMENT

                                  SUBSIDIARIES

1.       Opexa Pharmaceuticals, Inc. a Delaware corporation

2.       Al Magnus, Inc., a Texas corporationExhibit 10.21

                          SECURITIES PURCHASE AGREEMENT

         This SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of July
15, 2005 is made by and among PharmaFrontiers  Corp., a Texas corporation,  with
headquarters  located at 2408 Timberloch Place, Suite B-7, The Woodlands,  Texas
77380 (the  "Company"),  and the investors  named on the signature pages hereto,
together with their permitted transferees (the "Investors").

                                    RECITALS:

         A. The Company and the  Investors are  executing  and  delivering  this
Agreement in reliance upon the exemptions from securities  registration afforded
by Section 4(2) of the Securities Act and Rule 506 under Regulation D.

         B. Each of the Investors desires,  upon the terms and conditions stated
in this  Agreement,  to purchase  that  number of shares of Common  Stock of the
Company  indicated on their signature page hereto (the "Common Shares") at $1.50
per share and to receive, in consideration for such purchase,  the warrants (the
"Warrants") to acquire shares of Common Stock as described herein.

         C. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration  Rights Agreement
under which the Company has agreed to provide certain  registration rights under
the  Securities  Act,  the  rules and  regulations  promulgated  thereunder  and
applicable state securities laws.

         D. The capitalized terms used herein and not otherwise defined have the
meanings given them in Article IX hereof.

         In  consideration  of the premises and the mutual  covenants  contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby  acknowledged,  the Company and the  Investors  hereby agree as
follows:

                                    ARTICLE I
                        PURCHASE AND SALE OF COMMON STOCK

     1.1 Purchase and Sale of Common Stock. At the Closing, subject to the terms
of this Agreement and the  satisfaction or waiver of the conditions set forth in
Articles VI and VII hereof,  the Company  will issue and sell to each  Investor,
and each  Investor  will (on a several and not a joint basis)  purchase from the
Company, such number of Common Shares set forth on the Investor's signature page
at a price of $1.50 per share.  The Company will add Investor's  name and number
of shares  purchased  to Exhibit A and amend  Exhibit A from time to time to add
new Investors.

     1.2 Payment. At the Closing, subject to the terms of this Agreement and the
satisfaction  or  waiver of the  conditions  set  forth in  Articles  VI and VII
hereof,  each Investor will pay the purchase  amount for the Common Shares as is
set forth on the Investor's  signature page. Each Investor will make the payment
by wire transfer of immediately available funds in accordance with the Company's
written wire  instructions;  promptly after closing the Company shall deliver to
each  Investor  of (i) one or more  stock  certificates,  free and  clear of all
restrictive   and  other  legends   (except  as  expressly   provided   herein),
representing  the Common  Shares so purchased by such Investor and (ii) Warrants
in an amount  determined in accordance with Section 1.4 hereof,  and the Company
will  deliver  such stock  certificates  and  Warrants  against  delivery of the
purchase price as described above. At Company's  option,  Company may accept the
surrender of Bridge Notes as payment for the Securities in lieu of cash.

                                        1
<PAGE>

     1.3 Closing Date.  Subject to the  satisfaction or waiver of the conditions
set forth in  Articles VI and VII  hereof,  the Closing  will take place at 8:00
p.m.,  Central  Time,  on or prior to July 15,  2005 (or such  extended  date as
determined  by the  Company  as  identified  by one day  prior  notice  from the
Company) (the "Closing Date");  provided that at any time, the Company may close
the sale with such  Investors as have executed this  Agreement and then hold one
or more subsequent Closings  thereafter subject to the foregoing  limitations on
the Closing Date. The Closing(s)  will be held at the offices of Vinson & Elkins
LLP in Houston, Texas, or at such other place as the parties agree.

     1.4 Warrants.  In consideration of the purchase of the Common Shares by the
Investors,  at the Closing the Company will issue three different warrants:  the
"Series  A  Warrant,"  the  "Series  B  Warrant"  and  the  "Series  C  Warrant"
(collectively,  the  "Warrants")  to each  Investor.  The Series A Warrant shall
entitle the  Investor to purchase  1,250  shares of Common  Stock for each 1,000
shares of Common  Stock  purchased  by such  Investor on the Closing  Date at an
exercise  price of $2.00 per share and will expire on the later of (i)  February
17, 2006 or (ii) five months after the registration statement for the re-sale of
the warrant  shares  becomes  effective.  The Series B Warrant shall entitle the
Investor to purchase  500 shares of Common Stock for each 1,000 shares of Common
Stock  purchased by such  Investor on the Closing  Date at an exercise  price of
$2.90 per share and will  expire on the later of (i) October 17, 2006 or (ii) 12
months after the  registration  statement for the re-sale of the warrant  shares
becomes  effective.  The Series C Warrant shall entitle the Investor to purchase
1,000 shares of Common Stock for each 1,000 shares of Common Stock  purchased by
such  Investor on the Closing  Date at an exercise  price of $4.00 per share and
will expire on June 17, 2010. The Series A Warrant,  Series B Warrant and Series
C  Warrants  will  be  substantially  in  the  forms  of  Exhibits  B,  C and D,
respectively, attached hereto.

                                   ARTICLE II
                   REPRESENTATIONS AND WARRANTIES OF INVESTORS

         Each  Investor  represents  and warrants to the Company,  severally and
solely with respect to itself and its purchase hereunder and not with respect to
any other Investor, that:

     2.1 Investment  Purpose.  The Investor is purchasing the Securities for its
own account and not with a present  view toward the public sale or  distribution
thereof, except pursuant to sales registered or exempted from registration under
the  Securities  Act;  provided,  however,  that by making  the  representations
herein,  such  Investor  does not  agree to hold any of the  Securities  for any
minimum  or other  specific  term and  reserves  the  right  to  dispose  of the
Securities  at any  time  in  accordance  with  or  pursuant  to a  registration
statement or an exemption from the  registration  requirements of the Securities
Act.

                                        2
<PAGE>

     2.2 Accredited Investor Status. The Investor is an "accredited investor" as
defined in Rule  501(a) of  Regulation  D. The  Investor  has  experience  as an
investor in securities representing an investment decision like that involved in
the  purchase of the  Securities  and  acknowledges  that it has the  knowledge,
sophistication and experience in financial and business matters as to be capable
of evaluating  the merits and risks of an investment in the  Securities  and has
the ability to bear the economic risks of an investment in the Securities.

     2.3 Reliance on Exemptions.  The Investor  understands  that the Securities
are being offered and sold to it in reliance upon specific  exemptions  from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and  accuracy of, and the  Investor's
compliance with, the representations,  warranties,  agreements,  acknowledgments
and  understandings  of the Investor set forth herein in order to determine  the
availability  of such  exemptions and the eligibility of the Investor to acquire
the Securities.

     2.4 Information.  The Investor and its advisors,  if any, have reviewed the
SEC Documents and been  furnished  with all materials  relating to the business,
finances and operations of the Company,  and materials relating to the offer and
sale  of the  Securities,  that  have  been  requested  by the  Investor  or its
advisors,  if any. The Investor and its advisors, if any, have been afforded the
opportunity  to ask  questions of the Company.  Neither such  inquiries  nor any
other due diligence  investigation  conducted by Investor or any of its advisors
or representatives  modify,  amend or affect the Investor's right to rely on the
Company's  representations  and warranties  contained in Article III below.  The
Investor  acknowledges  and  understands  that its  investment in the Securities
involves a significant degree of risk,  including the risks reflected in the SEC
Documents,  and that the market price of the Common Stock has been and continues
to be volatile and that no  representation  is being made as to the future value
of the Common Stock.

     2.5  Governmental  Review.  The Investor  understands that no United States
federal  or state  agency or any other  government  or  governmental  agency has
passed upon or made any  recommendation  or  endorsement of the Securities or an
investment therein.

     2.6 Transfer or Resale. The Investor understands that:

          (a) except as  provided  in the  Registration  Rights  Agreement,  the
     Securities  have  not  been  registered  under  the  Securities  Act or any
     applicable state securities laws and,  consequently,  the Investor may have
     to bear the risk of owning the Securities for an indefinite  period of time
     because the Securities may not be transferred  unless (i) the resale of the
     Securities is registered  pursuant to an effective  registration  statement
     under the Securities Act; (ii) the Investor has delivered to the Company an
     opinion of counsel (in form,  substance and scope customary for opinions of
     counsel in comparable transactions) to the effect that the Securities to be
     sold or  transferred  may be sold or  transferred  pursuant to an exemption
     from  such  registration;  (iii)  the  Securities  are sold or  transferred
     pursuant to Rule 144; or (iv) the  Securities are sold or transferred to an
     affiliate (as defined in Rule 144) of the Investor;

          (b) any sale of the  Securities  made in  reliance  on Rule 144 may be
     made only in accordance  with the terms of Rule 144 and, if Rule 144 is not
     applicable,  any resale of the Securities under  circumstances in which the
     seller (or the person through whom the sale is made) may be deemed to be an
     underwriter  (as that term is defined in the  Securities  Act) may  require
     compliance with another exemption under the Securities Act or the rules and
     regulations of the SEC thereunder;

                                       3
<PAGE>

          (c) except as set forth in the Registration Rights Agreement,  neither
     the Company nor any other  person is under any  obligation  to register the
     Securities  under the  Securities  Act or any state  securities  laws or to
     comply with the terms and conditions of any exemption thereunder; and

          (d) notwithstanding  anything in this Agreement or the Warrants to the
     contrary,  the Company  agrees to  reregister  any Common Shares or Warrant
     issued to an Investor  hereunder in the name of any partner or affiliate of
     such  Investor,  and any such partner shall be deemed to be an Investor for
     all  purposes of this  Agreement  and the  Registration  Rights  Agreement,
     provided that any such partner or affiliate agrees in writing to be subject
     to the terms of this Agreement and the Registration Rights Agreement to the
     same extent as of such  partner  were an original  Investor  hereunder  and
     thereunder.

     2.7 Legends.  The Investor understands that until (a) the Common Shares and
the Warrants  may be sold by the Investor  under Rule 144(k) or (b) such time as
the resale of the  Securities  has been  registered  under the Securities Act as
contemplated by the Registration Rights Agreement, the certificates representing
the Securities  will bear a restrictive  legend in  substantially  the following
(and, subject to Article V, a stop transfer order may be placed against transfer
of the certificates for such Securities):

                  THE SECURITIES  REPRESENTED BY THIS  CERTIFICATE HAVE NOT BEEN
                  REGISTERED  UNDER THE SECURITIES  ACT OF 1933, AS AMENDED,  OR
                  THE  SECURITIES  LAWS  OF  ANY  STATE  OF  THE  UNITED  STATES
                  (COLLECTIVELY,  THE "ACTS"). THE SECURITIES MAY NOT BE OFFERED
                  OR SOLD IN THE  ABSENCE  OF THE  FOLLOWING:  (1) AN  EFFECTIVE
                  REGISTRATION  STATEMENT  FOR THE  SECURITIES  UNDER  THE  ACTS
                  COVERING THE TRANSACTION,  (2) THE COMPANY RECEIVES AN OPINION
                  OF COUNSEL  REASONABLY  SATISFACTORY  TO THE COMPANY THAT SUCH
                  REGISTRATION  IS NOT  REQUIRED  UNDER  THE  ACTS,  OR (3)  THE
                  COMPANY  OTHERWISE  SATISFIES ITSELF THAT  REGISTRATION IS NOT
                  REQUIRED UNDER THE ACTS.  NOTWITHSTANDING  THE FOREGOING,  THE
                  SECURITIES  MAY BE  PLEDGED  IN  CONNECTION  WITH A BONA  FIDE
                  MARGIN ACCOUNT OR OTHER LOAN OR FINANCING  ARRANGEMENT SECURED
                  BY THE SECURITIES.

         The legend set forth above will be removed and the Company will issue a
certificate without the legend to the holder of any certificate upon which it is
stamped, in accordance with the terms of Article V hereof.

                                       4
<PAGE>

     2.8 Authorization;  Enforcement. This Agreement and the Registration Rights
Agreement  have been duly and validly  authorized,  executed  and  delivered  on
behalf of the Investor  and are valid and binding  agreements  of the  Investor,
enforceable  in  accordance  with  their  terms,  subject  to the  effect of any
applicable bankruptcy,  insolvency,  reorganization,  moratorium or similar laws
affecting  the rights of  creditors  generally  and the  application  of general
principles of equity.

     2.9  Residency.  The Investor is a resident of the  jurisdiction  set forth
immediately below such Investor's name on the signature pages hereto.

     2.10 No Intent to Effect a Change of Control.  The  Investor has no present
intent to change or influence  the control of the Company  within the meaning of
Rule 13d-1 of the Exchange Act.

     2.11 No  Hedging.  The  Investor  has not  established  any  hedge or other
position in the Common Stock that is outstanding  on the Closing Date,  which is
designed to or could  reasonably be expected to lead to or result in any sale of
the Common  Shares.  For  purposes  hereof,  a "hedge or other  position"  would
include  effecting any short sale or having in effect any short  position or any
purchase,  sale or grant of any put  option,  call  option  or  prepaid  forward
contract  with respect to the Common Stock of the Company or with respect to any
security  (other  than a  broad-based  market  basket or index)  that  includes,
relates to or derives any significant part of its value from the Common Stock.

                                  ARTICLE III
                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

         The Company,  and each of its Subsidiaries,  as applicable,  represents
and warrants to the Investors that:

     3.1  Organization  and  Qualification.  All  of  the  direct  and  indirect
Subsidiaries  of the Company are set forth on Schedule  3.1.  The Company  owns,
directly or  indirectly,  all of the capital stock or other equity  interests of
each of its  Subsidiaries  free and clear of any  Liens,  and all the issued and
outstanding  shares of capital  stock of each of its  Subsidiaries  are  validly
issued and are fully paid,  non-assessable  and free of  preemptive  and similar
rights to subscribe for or purchase securities. The Company and its Subsidiaries
are duly  incorporated,  validly existing and in good standing under the laws of
the jurisdictions in which they are incorporated,  with full power and authority
(corporate and other) to own, lease, use and operate their  properties,  if any,
and to carry on their businesses as and where now owned,  leased, used, operated
and  conducted.  The Company is duly  qualified  to do  business  and is in good
standing in every  jurisdiction in which the nature of the business conducted by
it makes  such  qualification  necessary,  except  where  the  failure  to be so
qualified or in good standing would not have a Material Adverse Effect.

     3.2 Authorization; Enforcement. (a) The Company has all requisite corporate
power and  authority  to enter into and to perform  its  obligations  under this
Agreement, the Registration Rights Agreement and the Warrants, to consummate the
transactions  contemplated  hereby and  thereby and to issue the  Securities  in
accordance  with the terms hereof and thereof;  (b) the execution,  delivery and
performance  of  this  Agreement,  the  Registration  Rights  Agreement  and the
Warrants  by  the  Company  and  the  consummation  by  it of  the  transactions
contemplated  hereby and thereby  (including  without limitation the issuance of
the Common  Shares,  the Warrants  and the Warrant  Shares and  reservation  for
issuance of the Warrant Shares) have been duly authorized by the Company's Board
of Directors and no further consent or authorization  of the Company,  its Board
or  Directors,  or  its  stockholders  is  required;  (c)  this  Agreement,  the
Registration  Rights  Agreement  and the Warrants have been duly executed by the
Company;  and (d) each of this Agreement,  the Registration Rights Agreement and
the Warrants  constitutes a legal,  valid and binding  obligation of the Company
enforceable  against the Company in accordance with its respective terms, except
as may be limited by any applicable bankruptcy,  insolvency,  reorganization, or
moratorium or similar laws  affecting the rights of creditors  generally and the
application of general principles of equity.

                                       5
<PAGE>

     3.3  Capitalization.  As of the date prior to the Closing Date hereof,  the
authorized  capital stock of the Company  consisted of (i) 50,000,000  shares of
Common Stock, par value $0.05 per share, of which 14,121,743  shares were issued
and  outstanding;  2,000,000  shares were reserved for issuance under the Option
Plan;  and 9,697,779  shares were reserved for issuance  pursuant to outstanding
warrants and 5,659,573 shares were reserved for issuance pursuant to outstanding
convertible  notes (provided that if all of the convertible notes and associated
warrants  are  exchanged  pursuant to the  exchange  offer as  described  in the
Private Placement Memorandum,  the Company will issue a total of 5,659,573shares
and reserve a total of 15,563,825  shares for issuance upon exercise of warrants
issued in the exchange offer); and (ii) 10,000,000 shares of preferred stock, no
par value per share, of which no shares were issued and outstanding. All of such
outstanding  shares of capital  stock have been,  or upon issuance will be, duly
authorized,  validly issued, fully paid and nonassessable.  No shares of capital
stock of the Company,  including the Common Shares and the Warrant  Shares,  are
subject  to  preemptive  rights  or  any  other  similar  rights  of  the  other
stockholders  of the Company or any liens or  encumbrances  imposed  through the
actions  or  failure  to act of the  Company.  Except  as set  forth  in the SEC
Documents and the  transactions  contemplated  hereby,  there are no outstanding
options,  warrants, scrip, rights to subscribe for, puts, calls, rights of first
refusal,  agreements,  understandings,  claims or other commitments or rights of
any character  whatsoever relating to, or securities or rights convertible into,
exercisable for, or exchangeable for any shares of capital stock of the Company,
or arrangements by which the Company is or may become bound to issue  additional
shares of capital stock of the Company.

         Except as disclosed in the Private  Placement  Memorandum  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  Investors)  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. Except as
disclosed in the Private Placement Memorandum,  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.  Except as
disclosed  in the  Private  Placement  Memorandum,  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.  The Company's
Certificate of Incorporation and the Company's By-laws, each as in effect on the
date hereof,  filed as exhibits to the  Company's  SEC  Documents,  are true and
correct copies of each such document.

                                       6
<PAGE>

     3.4 Issuance of  Securities.  The Common  Shares and the Warrants have been
duly  authorized  and,  upon  issuance  in  accordance  with  the  terms of this
Agreement, will be validly issued, fully paid and non-assessable,  free from all
taxes,  liens,  claims,  encumbrances  and charges  with respect to the issuance
thereof,  will not be subject to preemptive  rights or other  similar  rights of
stockholders  of the  Company,  and will not impose  personal  liability  on the
holders  thereof.  The Warrant Shares have been duly authorized and reserved for
issuance,  and,  upon  exercise  of the  Warrants in  accordance  with the terms
thereof,  will be validly issued,  fully paid and non-assessable,  and free from
all taxes,  liens,  claims and  encumbrances  and  charges  with  respect to the
issuance  thereof and will not be subject to preemptive  rights or other similar
rights of  stockholders  of the Company and will not impose  personal  liability
upon the holder thereof.

     3.5 Outstanding  Debt. The Company has no  Indebtedness  for Borrowed Money
(as hereinafter  defined) except for the Bridge Notes and as otherwise set forth
in the SEC  Documents.  The  Company  is not in  default  in the  payment of the
principal of or interest or premium on any such Indebtedness for Borrowed Money,
and  no  event  has  occurred  or is  continuing  under  the  provisions  of any
instrument,   document  or  agreement   evidencing   or  relating  to  any  such
Indebtedness  for  Borrowed  Money which with the lapse of time or the giving of
notice, or both, would constitute an event of default thereunder.

     3.6 No Conflicts; No Violation.

          (a) The execution,  delivery and  performance of this  Agreement,  the
     Registration  Rights  Agreement  and the Warrants by the  Company,  and the
     consummation  by the Company of the  transactions  contemplated  hereby and
     thereby (including,  without limitation, the issuance of the Common Shares,
     the Warrants  and the Warrant  Shares and  reservation  for issuance of the
     Warrant  Shares)  do not and  will not (i)  conflict  with or  result  in a
     violation of any provision of the Certificate of  Incorporation or By-laws,
     (ii) violate or conflict  with,  or result in a breach of any provision of,
     or  constitute a default (or an event which with notice or lapse of time or
     both  could  become a  default)  under,  or give to  others  any  rights of
     termination, amendment (including without limitation, the triggering of any
     anti-dilution  provision),  acceleration or cancellation of, any agreement,
     indenture,  patent, patent license, or instrument to which the Company is a
     party, or (iii) result in a violation of any law, rule, regulation,  order,
     judgment or decree  (including U.S.  federal and state  securities laws and
     regulations and regulations of any  self-regulatory  organizations to which
     the Company or its securities are subject)  applicable to the Company or by
     which any property or asset of the Company is bound or affected (except for
     such   conflicts,    breaches,    defaults,    terminations,    amendments,
     accelerations,  cancellations and violations as would not,  individually or
     in the aggregate, have a Material Adverse Effect).

                                       7
<PAGE>

          (b)  The  Company  is  not  in   violation  of  its   Certificate   of
     Incorporation, By-laws or other organizational documents and the Company is
     not in default  (and no event has  occurred  which with  notice or lapse of
     time or both could put the Company in default)  under,  and the Company has
     not taken any  action or failed to take any  action  that (and no event has
     occurred  which,  without  notice or lapse of time or both)  would  give to
     others any rights of termination,  amendment,  acceleration or cancellation
     of, any agreement,  indenture or instrument to which the Company is a party
     or by which any  property  or assets of the  Company is bound or  affected,
     except  for  possible  defaults  as  would  not,  individually  or  in  the
     aggregate, have a Material Adverse Effect.

          (c) The Company is not  conducting,  and, so long as any Investor owns
     any of the Securities,  will not conduct,  its business in violation of any
     law,  ordinance or regulation of any  governmental  entity,  the failure to
     comply with which would,  individually or in the aggregate, have a Material
     Adverse Effect.

          (d)  Except as  specifically  contemplated  by this  Agreement  and as
     required under the Securities Act and any applicable  state securities laws
     or  any  listing  agreement  with  any  securities  exchange  or  automated
     quotation  system,  the  Company is not  required  to obtain  any  consent,
     authorization  or order of, or make any filing or  registration  with,  any
     court or governmental agency or any regulatory or self regulatory agency in
     order for it to execute,  deliver or perform any of its  obligations  under
     this Agreement,  the Warrants or the Registration Rights Agreement, in each
     case in accordance  with the terms hereof or thereof,  or to issue and sell
     the Common Shares and the Warrants in accordance  with the terms hereof and
     to issue the Warrant Shares upon exercise of the Warrants.

     3.7 SEC Documents,  Financial  Statements.  Since June 1, 2004, the Company
has filed all reports, schedules, forms, statements and other documents required
to be filed by it with the SEC  pursuant to the  reporting  requirements  of the
Securities  Act and the  Exchange Act (all of the  foregoing  filed prior to the
date hereof and all  exhibits  included  therein and  financial  statements  and
schedules thereto and documents (other than exhibits)  incorporated by reference
therein,  being hereinafter  referred to herein as the "SEC  Documents").  As of
their respective dates, the SEC Documents complied in all material respects with
the  requirements of the Exchange Act or the Securities Act, as the case may be,
and the rules and  regulations of the SEC promulgated  thereunder  applicable to
the SEC Documents,  and none of the SEC  Documents,  at the time they were filed
with the SEC,  contained  any untrue  statement of a material fact or omitted to
state a material  fact  required to be stated  therein or  necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.  As of their respective dates, the financial statements of
the Company  included in the SEC  Documents  complied as to form in all material
respects with  applicable  accounting  requirements  and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in  accordance  with U.S.  generally  accepted  accounting  principles,
consistently  applied,  during  the  periods  involved  (except  (i)  as  may be
otherwise  indicated in such financial  statements or the notes thereto, or (ii)
in the case of unaudited interim statements,  to the extent they may not include
footnotes or may be condensed or summary  statements)  and fairly present in all
material respects the financial  position of the Company as of the dates thereof
and the  results of its  operations  and cash flows for the  periods  then ended
(subject,  in the  case  of  unaudited  statements,  to  normal  year-end  audit
adjustments).  Except  for the  Bridge  Notes and as set forth in the  financial
statements  included  in the SEC  Documents,  the  Company  has no  liabilities,
contingent or otherwise,  other than liabilities incurred in the ordinary course
of business  subsequent to December 31, 2004,  and  liabilities  of the type not
required under generally accepted accounting  principles to be reflected in such
financial statements.

                                       8
<PAGE>

     3.8 Absence of Certain Changes. Except as disclosed in the SEC Documents or
in the  Private  Placement  Memorandum,  since  the date of the  latest  audited
financial  statements  included within the SEC Documents,  (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.

     3.9 Absence of Litigation.  There is no action,  suit,  claim,  proceeding,
inquiry or  investigation  before or by any  court,  arbitrator,  public  board,
government or administrative agency, regulatory or self-regulatory  organization
or body  pending or, to the  knowledge  of the  Company,  threatened  against or
affecting  the Company or any of its officers or  directors  acting as such that
could,  individually or in the aggregate,  have a Material  Adverse Effect.  The
Company is not aware of any facts or  circumstances  which would  reasonably  be
expected to give rise to any such action or proceeding.  Neither the Company nor
any of its Subsidiaries, 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 SEC involving the Company or any current
or former  director or officer of the  Company.  The SEC has not issued any stop
order or other order suspending the effectiveness of any registration  statement
filed by the Company or any of its  Subsidiaries  under the  Exchange Act or the
Securities Act

     3.10 Intellectual Property Rights.

          (a) To the Company's  knowledge,  Schedule 3.10  accurately sets forth
     all patents,  patent  applications,  patent rights,  inventions,  know-how,
     trade secrets, trademarks,  trademark applications,  service marks, service
     names,  trade names and  copyrights  necessary  to enable it to conduct its
     business as now operated (the "Intellectual  Property") that is material to
     Company's business  (collectively,  the "Company's IP"). The Company either
     owns or has a valid  license  to the  Company's  IP free  and  clear of any
     claim,  security interest,  lien, pledge,  option, charge or encumbrance of
     any kind whatsoever. The Company's rights in Company's IP are in full force
     and effect. Company's IP has not been used or enforced or failed to be used
     or enforced in a manner that would result in the abandonment,  cancellation
     or unenforceability of any of Company's rights in and to Company's IP.

                                       9
<PAGE>

          (b) Except as set forth in Schedule 3.10,  Company has not transferred
     any rights or interest  in, or granted any  exclusive  license with respect
     to, any of its Intellectual Property, to any third party.

          (c) All  Intellectual  Property of the Company and its Subsidiaries is
     currently  in  compliance  with all legal  requirements  (including  timely
     filings,  proofs and  payments  of fees) and is valid and  enforceable.  No
     Intellectual Property of the Company or its Subsidiaries which is necessary
     for the  conduct  of  Company's  and each of its  Subsidiaries'  respective
     businesses as currently  conducted or as currently proposed to be conducted
     has been or is now  involved in any  cancellation,  dispute or  litigation,
     and, to the Company's knowledge, no such action is threatened. No patent of
     the  Company  or  its  Subsidiaries  has  been  or is now  involved  in any
     interference, reissue, re-examination or opposition proceeding.

          (d) All of the licenses and sublicenses and consent,  royalty or other
     agreements  concerning  Intellectual  Property  which are necessary for the
     conduct  of  the  Company's  and  each  of  its  Subsidiaries'   respective
     businesses as currently conducted,  or, to the knowledge of the Company, as
     currently  proposed to be conducted to which the Company or any  Subsidiary
     is a party or by which any of their assets are bound (other than  generally
     commercially  available,  non-custom,  off-the-shelf  software  application
     programs  having  a  retail  acquisition  price of less  than  $10,000  per
     license)  (collectively,   "License  Agreements")  are  valid  and  binding
     obligations  of the Company or its  Subsidiaries  that are parties  thereto
     and, to the Company's knowledge, the other parties thereto,  enforceable in
     accordance with their terms,  except to the extent that enforcement thereof
     may be  limited  by  bankruptcy,  insolvency,  reorganization,  moratorium,
     fraudulent  conveyance or other similar laws  affecting the  enforcement of
     creditors' rights generally, and, to the Company's knowledge,  there exists
     no event or condition  which will result in a material  violation or breach
     of or  constitute  (with or without  due notice or lapse of time or both) a
     default by the Company or any of its  Subsidiaries  under any such  License
     Agreement.

          (e) To the Company's  knowledge,  the Company and its Subsidiaries own
     or have the valid  right to use all of the  Intellectual  Property  that is
     necessary for the conduct of the  Company's  and each of its  Subsidiaries'
     respective  businesses as currently conducted,  or, to the knowledge of the
     Company,  as  currently  proposed to be  conducted  and for the  ownership,
     maintenance and operation of the Company's and its Subsidiaries' properties
     and assets,  free and clear of all liens,  encumbrances,  adverse claims or
     obligations   to  license  all  such  owned   Intellectual   Property   and
     Confidential Information,  other than licenses entered into in the ordinary
     course of the Company's and its Subsidiaries'  businesses. To the Company's
     knowledge,  the Company and its  Subsidiaries  have a valid and enforceable
     right  to use  all  third  party  Intellectual  Property  and  Confidential
     Information  used  or  held  for use in the  respective  businesses  of the
     Company and its Subsidiaries.

                                       10
<PAGE>

          (f) To the Company's  knowledge,  the conduct of the Company's and its
     Subsidiaries'  businesses  as  currently  conducted  does not  infringe  or
     otherwise   impair  or  conflict  with   (collectively,   "Infringe")   any
     Intellectual  Property  rights  of any third  party or any  confidentiality
     obligation  owed to a third party,  and, to the  Company's  knowledge,  the
     Intellectual  Property and Confidential  Information of the Company and its
     Subsidiaries  which are  necessary for the conduct of Company's and each of
     its  Subsidiaries'  respective  businesses  as currently  conducted are not
     being Infringed by any third party. There is no litigation or order pending
     or outstanding or, to the Company's knowledge, threatened or imminent, that
     seeks to limit or challenge or that concerns the ownership,  use,  validity
     or enforceability of any Intellectual Property or Confidential  Information
     of the Company and its Subsidiaries and the Company's and its Subsidiaries'
     use of any  Intellectual  Property or Confidential  Information  owned by a
     third party, and, to the Company's  knowledge,  there is no valid basis for
     the same.

          (g) The  consummation of the transactions  contemplated  hereby and by
     the other  Transaction  Documents will not result in the alteration,  loss,
     impairment of or restriction  on the Company's or any of its  Subsidiaries'
     ownership or right to use any of the Intellectual  Property or Confidential
     Information which is necessary for the conduct of Company's and each of its
     Subsidiaries'  respective businesses as currently conducted or as currently
     proposed to be conducted.

          (h) The Company and its  Subsidiaries  have taken  reasonable steps to
     protect the Company's and its  Subsidiaries'  rights in their  Intellectual
     Property  and  Confidential  Information.  Each  employee,  consultant  and
     contractor  who  has  had  access  to  Confidential  Information  which  is
     necessary  for the  conduct  of  Company's  and  each of its  Subsidiaries'
     respective businesses as currently conducted or as currently proposed to be
     conducted has executed an agreement to maintain the confidentiality of such
     Confidential  Information and has executed appropriate  agreements that are
     substantially  consistent with the Company's standard forms thereof. Except
     under confidentiality obligations, there has been no material disclosure of
     any of the Company's or its Subsidiaries'  Confidential  Information to any
     third party.

     3.11  Compliance.  Neither the Company nor any of its  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.

                                       11
<PAGE>

     3.12 No Materially  Adverse  Contracts,  Etc. The Company is not subject to
any charter,  corporate or other legal  restriction,  or any  judgment,  decree,
order,  rule or  regulation  which in the  reasonable  judgment of the Company's
officers has or is expected in the future,  individually or in the aggregate, to
have a Material  Adverse  Effect.  The Company is not a party to any contract or
agreement which in the reasonable  judgment of the Company's  officers has or is
expected to have a Material Adverse Effect.

     3.13 Tax  Status.  The  Company  has made or filed all  federal,  state and
foreign income and all other tax returns,  reports and declarations  required by
any  jurisdiction to which it is subject (unless and only to the extent that the
Company  has set  aside on its  books  provisions  reasonably  adequate  for the
payment  of all unpaid  and  unreported  taxes) and has paid all taxes and other
governmental  assessments  and charges  that are  material  in amount,  shown or
determined to be due on such  returns,  reports and  declarations,  except those
being  contested  in good  faith,  and has set  aside  on its  books  provisions
reasonably  adequate for the payment of all taxes for periods  subsequent to the
periods  to which such  returns,  reports or  declarations  apply.  There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any  jurisdiction,  and the Company  knows of no basis for any such  claim.  The
Company  has not  executed a waiver with  respect to the statute of  limitations
relating to the assessment or collection of any foreign, federal, state or local
tax. None of the Company's tax returns is presently  being audited by any taxing
authority.

     3.14 Certain  Transactions.  Except as disclosed in the SEC Documents,  and
other than the grant of stock options, employment agreements or the ownership of
other securities and rights disclosed in filings under the Exchange Act, none of
the officers, directors, or employees of the Company is presently a party to any
transaction with the Company (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 employee  or, to the  knowledge  of the  Company,  any  corporation,
partnership,  trust or other entity in which any officer,  director, or employee
has a substantial interest or is an officer, director, trustee or partner.

     3.15  Environmental  Laws.  The  Company  (i)  is in  compliance  with  all
applicable foreign federal, state and local laws and regulations relating to the
protection  of human health and safety,  the  environment  or hazardous or toxic
substances or wastes,  pollutants or contaminants  ("Environmental  Laws"), (ii)
has  received all permits,  licenses or other  approvals  required of them under
applicable Environmental Laws to conduct its business and (iii) is in compliance
with all terms and conditions of any such permit,  license or approval where, in
each of the three  foregoing  clauses,  the  failure  to so comply  would  have,
individually or in the aggregate, a Material Adverse Effect.

     3.16 Disclosure.  No information  relating to or concerning the Company set
forth in this  Agreement  or provided to the  Investors  pursuant to Section 2.4
hereof or otherwise  provided in connection with the  transactions  contemplated
hereby,  including  without  limitation any oral or written  statements  made or
given by the officers of the Company,  or any of the  Company's  agents,  to any
Investor,  or any  Investor's  agent,  taken as a whole,  contained  any  untrue
statement of a material fact nor omitted to state any material fact necessary in
order  to  make  the  statements  made  herein  or  therein,  in  light  of  the
circumstances  under  which  they  were  made,  not  misleading.   No  event  or
circumstance  has occurred or information  exists with respect to the Company or
its business,  properties,  operations  or financial  conditions,  which,  under
applicable  law, rule or regulation,  requires  immediate  public  disclosure or
announcement  by the  Company but which has not been so  publicly  announced  or
disclosed.  The Company  acknowledges  and agrees that no Investor  makes or has
made  any  representations  or  warranties  with  respect  to  the  transactions
contemplated hereby other than those specifically set forth in Article II hereof

                                       12
<PAGE>

     3.17  Acknowledgment  Regarding  Investors'  Purchase  of  Securities.  The
Company  acknowledges  and agrees  that each  Investor  is acting  solely in the
capacity of an arm's length  purchaser  with respect to this  Agreement  and the
transactions  contemplated  hereby.  The Company  further  acknowledges  that no
Investor 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  statement  made by any  Investor  or any of their
respective  representatives  or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation and is merely
incidental to such Investor's purchase of the Securities and has not been relied
on by the Company in any way. The Company  further  represents  to each Investor
that the Company's  decision to enter into this  Agreement has been based solely
on an independent evaluation by the Company and its representatives. 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  Warrant  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 Investor  and  regardless  of the
dilutive  effect  that  such  issuance  may have on the  ownership  of the other
stockholders of the Company.  Anything in this Agreement or elsewhere  herein to
the contrary  notwithstanding (except for Section 2.11 hereof), it is understood
and  agreed by the  Company  (i) that none of the  Investors  have been asked to
agree, nor has any Investor 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
Investor, 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 Investor, and counter
parties in  "derivative"  transactions  to which any such  Investor  is a party,
directly  or  indirectly,  presently  may have a "short"  position in the Common
Stock,  and (iv) that each Investor shall not be deemed to have any  affiliation
with  or  control  over  any  arm's  length  counter-party  in any  "derivative"
transaction.

     3.18 No Integrated Offering. Except for the rights of holders of the Bridge
Loan Shares,  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  in any  security  or  solicited  any  offers  to buy any  security  under
circumstances  that would require  registration  under the Securities Act of the
issuance of the Securities to the Investors.

     3.19 No Brokers.  The Company has taken no action  which would give rise to
any claim by any person for brokerage  commissions  or finder's fees relating to
this  Agreement or the  transactions  contemplated  hereby  other than  Sanders,
Morris, Harris, Inc.

                                       13
<PAGE>

     3.20 Permits;  Compliance.  The Company is in possession of all franchises,
grants,  authorizations,  licenses, permits, easements,  variances,  exemptions,
consents, certificates, approvals and orders necessary to own, lease and operate
its properties and to carry on its business as it is now being conducted, except
those  the  failure  of which  to  possess  would  not,  individually  or in the
aggregate, have a Material Adverse Effect (collectively, the "Company Permits"),
and there is no action  pending or, to the knowledge of the Company,  threatened
regarding  suspension or cancellation of any of the Company Permits. The Company
is not in  conflict  with,  or in default or  violation  of, any of the  Company
Permits,   except  for  any  such  conflicts,   defaults  or  violations  which,
individually  or in the  aggregate,  would not  reasonably be expected to have a
Material  Adverse  Effect.  Since October 31, 2004, the Company has not received
any notification with respect to possible  conflicts,  defaults or violations of
applicable laws, except for notices relating to possible conflicts,  defaults or
violations,  which  conflicts,  defaults or violations would not have a Material
Adverse  Effect.  None of the Company's  products have received the FDA approval
required to sell such products.

     3.21 Title to Property.  The Company has good and  marketable  title in fee
simple  to all  real  property  and good and  marketable  title to all  personal
property owned by it which is material to the business of the Company.  Any real
property  and  facilities  held under  lease by the Company are held by it under
valid and  enforceable  leases with such exceptions as would not have a Material
Adverse Effect.

     3.22 Insurance.  The Company is insured by insurers of recognized financial
responsibility  against  such losses and risks and in such amounts as is prudent
and customary in the businesses in which the Company is engaged.  To the best of
Company's  knowledge,  such  insurance  contracts  and policies are accurate and
complete. The Company has no 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 at a cost that would not have a Material Adverse Effect.

     3.23 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  maintains a system of internal  accounting
controls  sufficient,  in the judgment of the Company's  board of directors,  to
provide  reasonable  assurance that (a)  transactions are executed in accordance
with  management's  general or specific  authorizations,  (b)  transactions  are
recorded  as  necessary  to  permit  preparation  of  financial   statements  in
conformity with generally accepted  accounting  principles and to maintain asset
accountability,  (c)  access to  assets is  permitted  only in  accordance  with
management's general or specific authorization,  (d) the recorded accountability
for assets is compared  with the existing  assets at  reasonable  intervals  and
appropriate  action is taken with respect to any differences,  and (e) financial
reporting and the preparation of financial  statements for external  purposes in
accordance with U.S. generally accepted accounting principles are reliable.

     3.24  Employment  Matters.  The Company is in compliance  with all federal,
state,  local  and  foreign  laws  and  regulations  respecting  employment  and
employment  practices,  terms and  conditions of employment  and wages and hours
except  where  failure to be in  compliance  would not have a  Material  Adverse
Effect.  There are no pending  investigations  involving the Company by the U.S.
Department  of  Labor  or any  other  governmental  agency  responsible  for the
enforcement of such federal, state, local or foreign laws and regulations. There
is no unfair  labor  practice  charge or complaint  against the Company  pending
before the National Labor  Relations  Board or any strike,  picketing,  boycott,
dispute,  slowdown or stoppage pending or,  threatened  against or involving the
Company.  No  representation  question  exists  respecting  the employees of the
Company,  and no  collective  bargaining  agreement or  modification  thereof is
currently  being  negotiated  by  the  Company.   No  grievance  or  arbitration
proceeding  is  currently  pending  under any  expired  or  existing  collective
bargaining  agreements  of the  Company.  No  material  labor  dispute  with the
employees  of the  Company  exists  or,  to the  knowledge  of the  Company,  is
imminent.

                                       14
<PAGE>

     3.25 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.

     3.26  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.

     3.27 Investment Company Status. The Company is not and upon consummation of
the  sale of the  Securities  will not be an  "investment  company,"  a  company
controlled  by  an  "investment  company"  or  an  "affiliated  person"  of,  or
"promoter" or "principal underwriter" for, an "investment company" as such terms
are defined in the Investment Company Act of 1940, as amended.

     3.28 No General  Solicitation.  Neither  the  Company  nor any  distributor
participating on the Company's behalf in the  transactions  contemplated  hereby
(if any) nor any person  acting for the Company,  or any such  distributor,  has
conducted any "general  solicitation,"  as such term is defined in Regulation D,
with respect to any of the Securities being offered hereby.

     3.29  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  or other
similar anti-takeover provision under the laws of the state of its incorporation
which  is or  could  become  applicable  to the  Investors  as a  result  of the
transactions contemplated by this Agreement,  including, without limitation, the
Company's  issuance  of the  Securities  and  the  Investors'  ownership  of the
Securities.

                                       15
<PAGE>

                                   ARTICLE IV
                                    COVENANTS

     4.1 Best  Efforts.  Each  party  will use its best  efforts to satisfy in a
timely  fashion each of the  conditions to be satisfied by it under  Articles VI
and VII of this Agreement.

     4.2 Form D;  Blue Sky  Laws.  The  Company  will  file a Notice  of Sale of
Securities  on  Form D  with  respect  to  the  Securities,  as  required  under
Regulation  D, and will provide a copy thereof to each Investor  promptly  after
such filing.  The Company will, on or before the Closing Date,  take such action
as it reasonably  determines to be necessary to qualify the  Securities for sale
to the Investors  under this  Agreement  under  applicable  securities (or "blue
sky") laws of the states of the United  States (or to obtain an  exemption  from
such  qualification),  and will provide  evidence of any such action so taken to
the Investors on or prior to the date of the Closing. The Company will file with
the  SEC a  Current  Report  on  Form  8-K  disclosing  this  Agreement  and the
transactions  contemplated  hereby  within four  business days after the Closing
Date and will  make any  required  notice  filings  with  state  securities  law
authorities on a timely basis.

     4.3  Reporting  Status.  The  Company's  Common Stock is  registered  under
Section 12 of the Exchange Act.  Throughout the Registration  Period (as defined
in the Registration Rights Agreement),  the Company will use its best efforts to
timely  file all  reports,  schedules,  forms,  statements  and other  documents
required to be filed by it with the SEC under the reporting  requirements of the
Exchange  Act,  and the  Company  will not  terminate  its  status  as an issuer
required to file reports  under the Exchange Act even if the Exchange Act or the
rules and regulations thereunder would permit such termination.

     4.4 Use of Proceeds. The Company will use the proceeds from the sale of the
Securities to pay clinical trial expenses,  research and  development  expenses,
various  outstanding  liabilities,  working capital and overhead costs,  capital
expenditures to expand manufacturing, a license fee to the University of Chicago
as disclosed in the Private Placement Memorandum,  certain fees to the Placement
Agent as disclosed in the Private Placement Memorandum and for general corporate
purposes.

     4.5 Financial  Statements.  The financial statements of the Company will be
prepared  in  accordance  with  United  States  generally  accepted   accounting
principles,  consistently  applied,  and will  fairly  present  in all  material
respects the consolidated  financial  position of the Company and results of its
operations  and cash flows for the periods then ended  (subject,  in the case of
unaudited statements, to normal year-end audit adjustments).

     4.6 Listing. On or before the day the registration statement for the resale
of the Common Shares and the sale of the Warrant Shares becomes  effective,  the
Company will secure the listing of the Common Shares and the Warrant Shares upon
each  national  securities  exchange or automated  quotation  system,  including
without  limitation the Nasdaq  (including the OTCBB), if any, upon which shares
of Common Stock are then listed  (subject to official  notice of  issuance).  So
long as any Investor owns any of the  Securities,  the Company will use its best
efforts  to obtain  and,  so long as any  Investor  owns any of the  Securities,
maintain  the listing and trading of its Common Stock on Nasdaq  (including  the
OTCBB),  the  American  Stock  Exchange or the New York Stock  Exchange and will
comply  in  all  respects  with  the  Company's  reporting,   filing  and  other
obligations under the bylaws or rules of the National  Association of Securities
Dealers, Inc. and such exchanges or automated quotation system, as applicable.

                                       16
<PAGE>

     4.7 Solvency;  Corporate Existence;  Compliance with Law. The Company (both
before  and  after  giving  effect  to the  transactions  contemplated  by  this
Agreement)  is solvent  (i.e.,  its assets have a fair market value in excess of
the amount  required to pay its probable  liabilities  on its existing  debts as
they become  absolute and matured) and currently the Company has no  information
that would lead it to reasonably  conclude that the Company would not have,  nor
does it intend to take any action that would impair its ability to pay its debts
from time to time  incurred in connection  therewith as such debts  mature.  The
Company will conduct its business in compliance with all applicable  laws, rules
and  regulations  of the  jurisdictions  in  which  it is  conducting  business,
including,   without  limitation,   all  applicable  local,  state  and  federal
environmental laws and regulations,  where the failure to comply with such would
have a Material Adverse Effect.

     4.8  Insurance.  The Company will  maintain  liability,  casualty and other
insurance  (subject to customary  deductions and  retentions)  with  responsible
insurance  companies  against  such  risk  of  the  types  and  in  the  amounts
customarily  maintained by companies of comparable size and in lines of business
of the Company.

     4.9 Reservation of Shares.  The Company will at all times have  authorized,
and  reserved  for the purpose of  issuance,  a  sufficient  number of shares of
Common  Stock to provide for the full  exercise of the Warrants and the issuance
of the Warrant Shares in connection  therewith (based upon the exercise price of
the  Warrants  in effect  from time to time).  The  Company  will not reduce the
number of shares of Common  Stock  reserved for  issuance  upon  exercise of the
Warrants, without the consent of all the Investors. If at any time the number of
shares of Common Stock authorized and reserved for issuance is below the Warrant
Shares issued and issuable upon exercise of the Warrants  (based on the exercise
price of the  Warrants  then in effect),  the  Company  will  promptly  take all
corporate  action  necessary  to authorize  and reserve a  sufficient  number of
shares, including, without limitation, calling a special meeting of stockholders
to authorize  additional  shares to meet the  Company's  obligations  under this
Section 4.11, in the case of an insufficient  number of authorized  shares,  and
using its best  efforts to obtain  stockholder  approval  of an increase in such
authorized number of shares.

     4.10 Pledge of  Securities.  The Company  acknowledges  and agrees that the
Securities  may be pledged by an Investor in connection  with a bona fide margin
agreement  or  other  loan  or  financing  arrangement  that is  secured  by the
Securities.  The pledge of Securities shall not be deemed to be a transfer, sale
or assignment of the Securities hereunder, and no Investor effecting a pledge of
Securities  shall be required to provide the Company with any notice  thereof or
otherwise make any delivery to the Company pursuant to this Agreement;  provided
that an Investor and its pledgee shall be required to comply with the provisions
of  Section  2.6 hereof in order to effect a sale,  transfer  or  assignment  of
Securities  to such  pledgee.  The Company  hereby agrees to execute and deliver
such  documentation  as a pledgee of the Securities  may  reasonably  request in
connection with a pledge of the Securities to such pledgee by an Investor.

                                       17
<PAGE>

     4.11 Disclosure of Transactions and Other Material Information. The Company
shall,  by 8:30  p.m.  Eastern  time on the  earlier  of  August  1, 2005 or the
Effective Date (the "Required  Disclosure  Date"),  issue a press release and by
12:00 p.m.  Eastern  time on the same day,  issue a Current  Report on Form 8-K,
each reasonably acceptable to a majority in interest of the Investors disclosing
(i) any material nonpublic  information  provided to any Investor,  and (ii) the
material terms of the transactions contemplated hereby, and, with respect to the
Current Report, shall attach the Transaction Documents thereto as exhibits.  The
Company shall not, and shall cause each  Subsidiary  and each of its  respective
officers, directors, employees and agents, not to, provide any Investor with any
material nonpublic  information regarding the Company or any Subsidiary from and
after the Closing Date without the express written consent of such Investor.  In
the event of a breach of the foregoing covenant by the Company,  any Subsidiary,
or its each of respective officers, directors, employees and agents, in addition
to any other  remedy  provided  herein  or in the  Transaction  Documents,  such
Investor  shall  have  the  right  to  demand  that  the  Company  make a public
disclosure,  and if the Company  fails to do so within two  business  days,  the
Investor may make a public  disclosure,  in the form of a press release,  public
advertisement or otherwise,  of such material nonpublic  information without the
prior  approval  by the  Company,  each  Subsidiary,  or each of its  respective
officers,  directors,  employees or agents.  In such event,  such Investor shall
provide  a copy of such  public  disclosure  to the  Company  at or prior to the
dissemination  of such  disclosure  to the public.  No  Investor  shall have any
liability  to the Company,  any  Subsidiary,  or any of its or their  respective
officers, directors,  employees,  stockholders or agents for any such disclosure
unless such Investor acts with negligence or willful misconduct.  Subject to the
foregoing,  neither the Company nor any Investor  shall issue any press releases
or any other public  statements  with respect to the  transactions  contemplated
hereby  naming the other party  without the prior  approval of the other  party;
which approval shall not be unreasonably withheld or delayed; provided, however,
that the Company shall be entitled,  without the prior approval of any Investor,
to make any press  release  or other  public  disclosure  with  respect  to such
transactions  (i) in a  Current  Report  on  Form  8-K in  compliance  with  the
requirements  of the  Exchange  Act,  and (ii) as may  otherwise  be required by
applicable law and  regulations,  including the applicable rules and regulations
of the Nasdaq  (provided  that in the case of clause (i) each Investor  shall be
provided a copy of any  proposed  press  release to be issued by the  Company at
least one day prior to its  release).  In addition to any other rights or claims
an  Investor  may  have,  if the  Company  fails to make the  public  disclosure
required by the first  sentence of this Section,  then (i) the Company shall (a)
pay each  Investor an  aggregate  amount  equal to (1) five  percent (5%) of the
total purchase price paid by the Investor for the Securities  hereunder for each
thirty  (30)  day  period  (or  portion  thereof)  elapsing  from  the  Required
Disclosure  Date until Company makes the required  disclosure in accordance with
this Section 4.11 (the  "Disclosure  Date"),  plus (2) (b) in the event that the
VWAP on the first Trading Day after the Disclosure Date is less than the VWAP on
the Required  Disclosure  Date, the amount of such difference  multiplied by the
number of Securities and (ii) without any further action required,  the Exercise
Price of the Series A Warrants shall be automatically reduced to equal $1.50 per
share and the Expiration Date of the Series A Warrants shall be extended one day
for each day elapsing  from the Required  Disclosure  Date until the  Disclosure
Date.  The  amounts  payable  as partial  liquidated  damages  pursuant  to this
paragraph shall be payable in lawful money of the United States beginning on the
fifth day  following the Required  Disclosure  Date and on the fifth day of each
successive month thereafter.  If the Company fails to pay any partial liquidated
damages  pursuant  to this  Section  in full  within  seven  days after the date
payable,  the Company will pay interest  thereon at a rate 9% per annum (or such
lesser  maximum  amount that is permitted to be paid by  applicable  law) to the
Investor,  accruing daily from the date such partial  liquidated damages are due
until such amounts, plus all such interest thereon, are paid in full.

                                       18
<PAGE>

     4.12 Sales by Investors.  Each Investor will sell any Securities sold by it
in compliance  with  applicable  prospectus  delivery  requirements,  if any, or
otherwise in compliance with the requirements for an exemption from registration
under the Securities Act and the rules and regulations  promulgated  thereunder.
No Investor will make any sale,  transfer or other disposition of the Securities
in violation of federal or state securities  laws.  Investor  acknowledges  that
Investor has been provided with material nonpublic information and agrees to not
publicly disclose such information  until it has been publicly  disclosed by the
Company.  Investor  further  acknowledges  that  Investor  may not  engage  in a
transaction  to  buy  or  sell  any  of  the  Company's  securities  until  such
information is publicly  disclosed by the Company pursuant to Section 4.11 above
or otherwise becomes public information.

     4.13  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 Investors.

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

     4.15 Prohibited Transactions.

          (a) From the date hereof until the  expiration of fifteen (15) Trading
     Days after a  registration  statement  filed  pursuant to the  Registration
     Rights  Agreement  has been  declared  effective,  the  Company  will  not,
     directly or  indirectly,  offer,  sell,  grant any option to  purchase,  or
     otherwise dispose of any of its equity securities or securities convertible
     into its equity securities. Notwithstanding the foregoing, the Company may,
     at any time,  (i) issue any  equity  securities  it is  obligated  to issue
     pursuant  to any  agreement  to which it is a party as of the date  hereof,
     including but not limited to all agreements  with the Investors,  placement
     agents,  consultants and licensors,  and any amendment  thereto  subsequent
     hereto,  provided any such amendment is approved by a majority of the Board
     of Directors,  (ii) issue options,  equity  securities or similar awards to
     employees,  consultants  and  directors of the Company  upon  approval of 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,  (iii) issue equity securities as a
     dividend or  distribution  with  respect to all of the  outstanding  Common
     Stock, (iv) issue equity  securities or securities  convertible into equity
     securities to any bank or equipment  lessor in connection  with a financing
     or equipment lease, or (v) issue Common Stock as a result of a reduction in
     the exercise  price of any of the Series A Warrants,  the Series B Warrants
     or Series C Warrants,  (vi) issue  Common Stock or options for Common Stock
     pursuant to the Amended and Restated  License  Agreement dated December 30,
     2004 with the  University  of Chicago,  including  any  amendments  thereto
     approved by a majority of the Board of Directors,  (vii) issue Common Stock
     pursuant to a "Strategic  Transaction"  approved by a majority of the Board
     of Directors. A "Strategic Transaction" shall mean (x) any transaction with
     an acquiror,  acquisition target company or merger partner,  or (y) a joint
     venture,  corporate alliance,  research agreement or licensing  transaction
     with  respect  to one or more  technologies,  assets,  compounds,  compound
     families,  and/or products or product  candidates,  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;  or (viii)  issue common stock and Warrants in a
     second  offering  (the  "Second  Offering")  on  terms  the  same as  those
     contained herein;  provided such Second Offering is for an aggregate amount
     no greater  than the  difference  of $10 million and the  aggregate  amount
     raised pursuant to this Agreement; and provided that the Second Offering is
     consummated within thirty days of the last Closing Date hereunder.

                                       19
<PAGE>

          (b) From the date hereof until the second  anniversary  of the Closing
     Date,  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.

     Notwithstanding anything contained herein or in the Registration Rights
Agreement to the contrary, either as part of the sale to Investors, or any time
subsequent to the Closing Date, Company may offer shares of Common Stock, at a
conversion price of $1.50 per share, and the Series A Warrants, Series B
Warrants and Series C Warrants plus up to 20,000 shares per $100,000 of Bridge
Note principle to holders of the Bridge Notes in exchange for the Bridge Notes
and the right to a warrant (the "Bridge Warrant") associated with the Bridge
Notes; provided the Company reserves the right to issue an additional number of
shares to the Bridge Warrant holders as approved by the Company's Board of
Directors in order to facilitate such an exchange. Such Warrants will be
exercisable for the same number of shares (i.e. warrant coverage) as if they had
been sold pursuant to this Agreement, with the same exercise prices and other
terms and shall be coterminous with the other Series A Warrants, Series B
Warrants and Series C Warrants, as the case may be. In such event, the Company
may offer the Bridge Note holders the same registration rights as provided in
the Registration Rights Agreement. Notwithstanding anything contained herein or
in the Registration Rights Agreement to the contrary, the Company may include in
the Registration Statement filed pursuant to the Registration Rights Agreement
the resale of: (i) all shares issued to the Bridge Note holders, both previously
and upon conversion or exchange of the Bridge Notes and Bridge Warrants, or upon
exercise of the Bridge Warrants or any Warrants issued to them, (ii) shares, and
shares issuable upon exercise of warrants, issued to the placement agents and
consultants in connection with the sale of the Notes and the sale of securities
pursuant to this Agreement; (iii) shares issued to Sanders Morris Harris
pursuant to the Company's engagement letter and Placement Agent Agreement; (iv)
shares issued to the University of Chicago pursuant to an Amended and Restated
License Agreement dated December 30, 2004; as may be amended; (v) up to
approximately 1,812,000 shares held by Mr. George Jarkesy and Brewer & Pritchard
PC and (vi) shares issued to purchasers in a Second Offering including shares
issuable to such purchasers upon exercise of Warrants issued in the Second
Offering.

                                       20
<PAGE>

                                   ARTICLE V
                 TRANSFER AGENT INSTRUCTIONS; REMOVAL OF LEGENDS

     5.1 Issuance of Certificates. The Company shall instruct its transfer agent
to issue  certificates,  registered in the name of each Investor or its nominee,
for Common Shares and Warrant  Shares in such amounts as specified  from time to
time by each  Investor to the Company  issuable upon exercise of the Warrants in
accordance  with their terms.  All costs and expenses  related to the removal of
the legends and the reissuance of any Securities  shall be borne by the Company.
So long as  required  by this  Article  V, all such  certificates  will bear the
restrictive  legend  described in Section 2.7, except as otherwise  specified in
this  Article  V.  Nothing  in  this  Section  5.1  will  affect  in any way the
Investors'  obligations  and agreement set forth in Section 2.7 hereof to comply
with all applicable prospectus delivery requirements, if any, upon resale of the
Common Shares and the Warrant Shares.

5.2      Unrestricted Securities.

          (a) Subject to Section 4.12 hereof, certificates evidencing the Common
     Shares and  Warrant  Shares  shall not contain  any legend  (including  the
     legend set forth in Section 2.7 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
     Common  Shares or Warrant  Shares  pursuant  to Rule 144,  or (iii) if such
     Common Shares or Warrant 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).  If all or any portion of a Warrant
     is  converted  or  exercised  (as  applicable)  at a time when  there is an
     effective  registration  statement to cover the resale of the Common Shares
     or Warrant  Shares,  or if such Common Shares or Warrant 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 Common  Shares or Warrant  Shares,  as
     applicable,  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 5.2, it will,  no later than five Trading Days
     following  the  delivery by an  Investor  to the  Company or the  Company's
     transfer  agent of a  certificate  representing  Common  Shares or  Warrant
     Shares, as applicable, issued with a restrictive legend (such third Trading
     Day, the "Legend Removal  Date"),  deliver or cause to be delivered to such
     Investor  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  Investors  by
     crediting the account of the  Investor's  prime broker with the  Depository
     Trust Company System.

                                       21
<PAGE>

          (b) In addition  to such  Investor's  other  available  remedies,  the
     Company shall pay to an Investor,  in cash, as partial  liquidated  damages
     and not as a penalty,  for each $1,000 of Common Shares (or Warrant  Shares
     underlying a Warrant tendered for legend removal) (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 5.2(a), $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 Legend Removal Date until such certificate is delivered without a
     legend.  Nothing herein shall limit such Investor'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  Investor
     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,  without the necessity of showing economic loss
     and without any bond or other security being required.

          (c) Each Investor, severally and not jointly with the other Investors,
     agrees  that  the  removal  of the  restrictive  legend  from  certificates
     representing Securities as set forth in this Section 5.2 is predicated upon
     the Company's reliance that the Investor will sell any Securities  pursuant
     to either the  registration  requirements of the Securities Act,  including
     any applicable prospectus delivery requirements, or an exemption therefrom.

                                   ARTICLE VI
                 CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL

         The  obligation  of the Company to issue and sell the Common Shares and
Warrants to each Investor at the Closing is subject to the  satisfaction by such
Investor,  on or before the Closing Date,  of each of the following  conditions.
These  conditions  are for the  Company's  sole benefit and may be waived by the
Company at any time in its sole discretion:

     6.1 The Investor  will have executed  this  Agreement and the  Registration
Rights Agreement and will have delivered those agreements to the Company.

     6.2 The Investor  will have  delivered  the  purchase  price for the Common
Shares to the Company in accordance with this Agreement.

     6.3 The  representations  and  warranties  of the Investor must be true and
correct in all  material  respects as of the Closing Date as though made at that
time  (except for  representations  and  warranties  that speak as of a specific
date, which representations and warranties must be correct as of such date), and
the Investor will have performed and complied in all material  respects with the
covenants and conditions  required by this Agreement to be performed or complied
with by the Investor at or prior to the Closing.

     6.4 No litigation,  statute,  rule,  regulation,  executive order,  decree,
ruling or injunction will have been enacted, entered, promulgated or endorsed by
or in any court or  governmental  authority  of  competent  jurisdiction  or any
self-regulatory  organization  having  authority  over the matters  contemplated
hereby which prohibits the consummation of any of the transactions  contemplated
by this Agreement.

                                       22
<PAGE>

                                  ARTICLE VII
               CONDITIONS TO THE INVESTOR'S OBLIGATION TO PURCHASE

         The obligation of each Investor hereunder to purchase the Common Shares
from the Company at the Closing is subject to the satisfaction, on or before the
Closing Date, of each of the following conditions. These conditions are for each
Investor's  respective  benefit and may be waived by any Investor at any time in
its sole discretion:

     7.1 The Company will have  executed  this  Agreement  and the  Registration
Rights Agreement and each such Agreement will have been delivered the Investor.

     7.2  The  Company  will  have  delivered  to the  Investors  duly  executed
certificates  representing  the Common Shares and duly executed  Warrants in the
amounts and forms specified in Sections 1.1 and 1.4 hereof.

     7.3 The  representations  and  warranties  of the Company  must be true and
correct in all  material  respects as of the Closing as though made at that time
(except for  representations  and  warranties  that speak as of a specific date,
which  representations  and warranties must be true and correct as of such date)
and the Company must have  performed and complied in all material  respects with
the  covenants  and  conditions  required by this  Agreement  to be performed or
complied with by the Company at or prior to the Closing.  The Investor must have
received a certificate or certificates dated as of the Closing Date and executed
by the Chief  Executive  Officer or the Chief  Financial  Officer of the Company
certifying  as to the matters in  contained  in this  Section 7.3 and as to such
other matters as may be reasonably  requested by such Investor,  including,  but
not limited to, the Company's  Certificate of Incorporation,  By-laws,  Board of
Directors' resolutions relating to the transactions  contemplated hereby and the
incumbency and signatures of each of the officers of the Company who may execute
on behalf of the Company any document delivered at the Closing.

     7.4 No litigation,  statute,  rule,  regulation,  executive order,  decree,
ruling or injunction will have been enacted, entered, promulgated or endorsed by
or in any court or  governmental  authority  of  competent  jurisdiction  or any
self-regulatory  organization  having  authority  over the matters  contemplated
hereby which prohibits the consummation of any of the transactions  contemplated
by this Agreement.

     7.5 Trading and  listing of the Common  Stock on the Nasdaq  OTCBB must not
have been suspended by the SEC or the Nasdaq, nor shall Nasdaq have notified the
Company of any  failure  of the  Company  to meet any of the  continued  listing
standards.

     7.6 The Investors  will have received an opinion of the Company's  counsel,
dated  as  of  the  Closing  Date,  in  form,  scope  and  substance  reasonably
satisfactory to the Investors.

                                       23
<PAGE>

                                  ARTICLE VIII
                                 INDEMNIFICATION

     8.1  Indemnification  by  Company.  In  consideration  of  each  Investor's
execution and delivery of this  Agreement and its  acquisition of the Securities
hereunder,  and in addition to all of the Company's other obligations under this
Agreement, the Registration Rights Agreement, and the Warrants, the Company will
defend, protect, indemnify and hold harmless each Investor and each other holder
of the Securities and all of their stockholders, officers, directors, employees,
advisors  and direct or indirect  investors  and any of the  foregoing  person's
agents or other representatives (including,  without limitation,  those retained
in  connection   with  the   transactions   contemplated   by  this   Agreement)
(collectively,  the "Indemnitees") from and against any and all actions,  causes
of action,  suits,  claims,  losses,  costs,  penalties,  fees,  liabilities and
damages,  and expenses in connection  therewith  (regardless of whether any such
Indemnitee  is a party to the  action  for which  indemnification  hereunder  is
sought),  and including  reasonable  attorneys' fees and  disbursements  and the
costs of  collection  and  enforcement  of the terms of this  Agreement  and the
Transaction Documents (the "Indemnified  Liabilities"),  incurred or suffered by
an  Indemnitee  as a result of, or arising out of, or relating to (a) any breach
of any  representation  or warranty  made by the Company  herein or in any other
certificate,  instrument  or document  contemplated  hereby or thereby,  (b) any
breach of any covenant,  agreement or obligation of the Company contained herein
or in any other  certificate,  instrument  or  document  contemplated  hereby or
thereby,  or (c) any cause of action, suit or claim brought or made against such
Indemnitee  and  arising  out of or  resulting  from  the  execution,  delivery,
performance,  breach or enforcement of this Agreement,  the Registration  Rights
Agreement or the Warrants by the Company; provided,  however, that, with respect
to this  clause  (c),  the  Company  shall  not be  liable  to the  extent  such
Indemnified   Liabilities  are  finally  determined  by  a  court  of  competent
jurisdiction  to have  resulted  primarily  and  directly  from  the  Investors'
negligence or willful misconduct.  To the extent that the foregoing  undertaking
by the  Company is  unenforceable  for any  reason,  the  Company  will make the
maximum  contribution to the payment and satisfaction of each of the Indemnified
Liabilities that is permissible under applicable law.

                                   ARTICLE IX
                                   DEFINITIONS

     9.1 "Additional Shares" has the meaning set forth in Section 4.13.

     9.2 "Bridge  Loan  Shares"  means those  shares of Common  Stock  issued in
connection with the Bridge Notes.

     9.3 "Bridge Notes" means those promissory notes for an aggregate  principal
amount  of $6.1  million  issued  by the  Company  between  September  2004  and
February, 2005.

     9.4  "Closing"  means the  closing of the  purchase  and sale of the Common
Shares.

     9.5 "Closing Date" has the meaning set forth in Section 1.3.

     9.6 "Common Shares" has the meaning set forth in the recitals.

                                       24
<PAGE>

     9.7 "Common  Stock" means the common stock,  par value $0.05 per share,  of
the Company.

     9.8 "Company" means PharmaFrontiers Corp.

     9.9 "Company Permit" has the meaning set forth in Section 3.19.

     9.10  "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 SEC.

     9.11 "Environmental Laws" has the meaning set forth in Section 3.14.

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

     9.13  "Indebtedness for Borrowed Money" shall include only (i) indebtedness
of the Company and its Subsidiaries incurred as the result of a direct borrowing
of  money,   and  (ii)  guarantees  by  the  Company  and  its  Subsidiaries  of
indebtedness  of third  parties,  and shall not include  any other  indebtedness
including,  but not  limited to,  indebtedness  incurred  with  respect to trade
accounts, equipment leases, and intercompany loans.

     9.14 "Indemnified Liabilities" has the meaning set forth in Article VIII.

     9.15 "Indemnitees" has the meaning set forth in Article VIII.

     9.16 "Intellectual Property" has the meaning set forth in Section 3.10.

     9.17  "Investors"  means  the  investors  whose  names are set forth on the
signature pages of this Agreement, and their permitted transferees.

     9.18 "Material  Adverse Effect" means a material  adverse effect on (a) the
assets,  liabilities,  business,  properties,  operations,  financial condition,
prospects or results of operations of the Company and its Subsidiaries, taken as
a whole, or (b) the ability of the Company to perform its  obligations  pursuant
to the  transactions  contemplated  by this Agreement or under the agreements or
instruments to be entered into or filed in connection herewith.

     9.19 "Nasdaq" means the Nasdaq SmallCap Market.

     9.20 "Option  Plan" means the Company's  2004 Stock Option Plan,  including
all amendments thereto.

     9.21  "OTCBB"  means  the  OTC  Bulletin  Board  operated  by the  National
Association of Security Dealers, Inc.

     9.22 "Private Placement  Memorandum" means the Private Placement Memorandum
dated  March 1, 2005 issued by the  Company  and to which this  Agreement  is an
Exhibit.

                                       25
<PAGE>

     9.23  "Registration   Rights  Agreement"  means  the  Registration   Rights
Agreement,  dated as of the date of this Agreement and among the parties to this
Agreement, in the form attached hereto as Exhibit C.

     9.24  "Regulation D" means Regulation D as promulgated by the SEC under the
Securities Act.

     9.25  "Rule  144"  and  "Rule  144(k)"  mean  Rule  144  and  Rule  144(k),
respectively, promulgated under the Securities Act, or any successor rule.

     9.26 "SEC" means the Securities and Exchange Commission.

     9.27 "SEC Documents" has the meaning set forth in Section 3.7.

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

     9.29 "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder, or any similar successor statute.

     9.30  "Subsidiaries"  means any entity in which the  Company,  directly  or
indirectly, owns capital stock or holds an equity or similar interest.

     9.31  "Trading  Day" means a day on which the OTC  Bulletin  Board,  Nasdaq
SmallCap Market, American Stock Exchange or such other securities market, in any
such case which at the time constitutes the principal  securities market for the
Common Stock, is open for general trading of securities.

     9.32 "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 OTC
Bulletin Board, the Nasdaq SmallCap Market, the American Stock Exchange, the New
York Stock Exchange or the Nasdaq National Market.

     9.33  "Transaction  Documents"  shall have the meaning set forth in Section
10.16.

     9.34 "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 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.  Eastern Time to 4:02 p.m. Eastern Time);
(b) if the Common Stock is not then listed or quoted on a Trading  Market and if
prices for the  Common  Stock are then  quoted on the OTC  Bulletin  Board,  the
volume weighted  average price of the Common Stock for such date (or the nearest
preceding date) on the OTC Bulletin  Board;  (c) if the Common Stock is not then
listed or quoted on the OTC  Bulletin  Board 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 an  independent  appraiser  selected  in  good  faith  by the  Investors  and
reasonably acceptable to the Company.

                                       26
<PAGE>

     9.35 "Warrant  Shares"  means the shares of Common Stock  issuable upon the
exercise (or otherwise) of the Warrants.

     9.36 "Warrants" means the Series A Warrants, Series B Warrants and Series C
Warrants to purchase  shares of Common Stock,  in the forms  attached  hereto as
Exhibits C, D and E, respectively.

                                   ARTICLE X
                    TERMINATION; GOVERNING LAW; MISCELLANEOUS

     10.1 Termination.  This Agreement may be terminated by any Investor,  as to
such Investor's  obligations hereunder only and without any effect whatsoever on
the obligations  between the Company and the other Investors,  by written notice
to the other parties,  if the Closing has not been consummated on or before July
15, 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).

     10.2  Governing Law;  Jurisdiction.  This Agreement will be governed by and
interpreted in accordance  with the laws of the State of New York without regard
to the  principles of conflict of laws.  The parties hereto hereby submit to the
jurisdiction  of the United States federal and state courts located in the State
of New York with  respect  to any  dispute  arising  under this  Agreement,  the
agreements entered into in connection herewith or the transactions  contemplated
hereby or thereby.

     10.3 Counterparts;  Signatures by Facsimile. This Agreement may be executed
in two or more  counterparts,  all of  which  are  considered  one and the  same
agreement and will become effective when  counterparts  have been signed by each
party and delivered to the other  parties.  This  Agreement,  once executed by a
party, may be delivered to the other parties hereto by facsimile transmission of
a copy of this Agreement  bearing the signature of the party so delivering  this
Agreement.

     10.4  Headings.  The  headings of this  Agreement  are for  convenience  of
reference  only,  are  not  part  of  this  Agreement  and  do  not  affect  its
interpretation.

     10.5  Severability.  If any  provision  of this  Agreement  is  invalid  or
unenforceable  under any applicable  statute or rule of law, then such provision
will be deemed  modified in order to conform  with such  statute or rule of law.
Any provision hereof that may prove invalid or unenforceable  under any law will
not affect the validity or enforceability of any other provision hereof.

     10.6 Payment Set Aside.  To the extent that the Company  makes a payment or
payments to any  Investor  pursuant to any  Transaction  Document or an Investor
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.

                                       27
<PAGE>

     10.7 Entire Agreement.  This Agreement,  the Registration  Rights Agreement
and the Warrants  (including all schedules and exhibits thereto)  constitute the
entire  agreement  among the parties  hereto with respect to the subject  matter
hereof  and  thereof.  There  are  no  restrictions,   promises,  warranties  or
undertakings,  other than those set forth or referred to herein or therein. This
Agreement  supersedes all prior agreements and understandings  among the parties
hereto with respect to the subject matter hereof.

     10.8 Investor Approvals.  Except as otherwise specifically provided herein,
in each case in which approval of the Investors is required by the terms of this
Agreement,  such requirement shall be satisfied only upon receipt of the written
consent of each Investor.

     10.9  Amendments,  Changes,  Waivers,  etc.  Neither this Agreement nor any
provision  hereof may be amended,  changed,  waived,  discharged  or  terminated
orally,  but only by a  statement  in writing  signed by  Investors  agreeing to
purchase,  or after the  Closing,  holding  not less  than 80% of the  shares of
Common  Stock  sold  hereunder;  notwithstanding  the  foregoing  the  following
provisions  may not be amended  except in a writing  signed by the party against
which  enforcement of the amendment is sought:  Article 1, Sections 4.10 through
4.16,  Article V, Article VII, Section 10.1, 10.8, 10.9, 10.13,  10.17 and 10.18
and any  provisions  herein that specify  liquidated  damages or penalties.  The
terms  of the  agreements  attached  as  Exhibits  hereto  may  only be  amended
according to the terms of such agreements.

     10.10  Notices.  Any notices  required or  permitted  to be given under the
terms of this  Agreement  must be sent by certified or  registered  mail (return
receipt requested) or delivered personally or by courier (including a recognized
overnight  delivery  service) or by facsimile  and will be  effective  five days
after being placed in the mail, if mailed by regular U.S. mail, or upon receipt,
if delivered  personally,  by courier (including a recognized overnight delivery
service) or by facsimile,  in each case addressed to a party.  The addresses for
such communications are:

                  If to the Company:        PharmaFrontiers Corp.
                                            2408 Timberloch Place, Suite B-7
                                            The Woodlands, Texas 77380
                                            Attn: David McWilliams, President
                                            Facsimile: (281) 272-1088

                  With a copy to:           Vinson & Elkins L.L.P.
                                            1001 Fannin, Suite 2300
                                            Houston, Texas 77002
                                            Attn: Michael C. Blaney
                                            Facsimile: (713) 615-5487

     If to an  Investor:  To  the  address  set  forth  immediately  below  such
Investor's name on the signature pages hereto`

                                       28
<PAGE>

         Each  party will  provide  written  notice to the other  parties of any
change in its address.

     10.11 Successors and Assigns.  This Agreement is binding upon and inures to
the benefit of the parties and their  successors  and assigns.  The Company will
not assign this  Agreement or any rights or  obligations  hereunder  without the
prior  written  consent  of the  Investors,  and no  Investor  may  assign  this
Agreement  or any rights or  obligations  hereunder  without  the prior  written
consent of the Company.  Notwithstanding  the foregoing,  an Investor may assign
all or part of its rights and obligations  hereunder to any of its "affiliates,"
as that term is defined  under the  Securities  Act,  without the consent of the
Company so long as the affiliate is an accredited  investor  (within the meaning
of Regulation D under the  Securities  Act) and agrees in writing to be bound by
this Agreement.  This provision does not limit the Investor's  right to transfer
the  Securities  pursuant  to the  terms  of this  Agreement  or to  assign  the
Investor's rights hereunder to any such transferee pursuant to the terms of this
Agreement.

     10.12 Third Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns, and
is not for the benefit  of, nor may any  provision  hereof be  enforced  by, any
other person.

     10.13 Survival.  All representations and warranties  contained herein shall
survive the execution and delivery of this Agreement,  any  investigation at any
time made by the Investors or on their behalf,  and the sale and purchase of the
Common Shares and the Warrants and payment therefor. All statements contained in
any  certificate,  instrument or other writing  delivered by or on behalf of the
Company   pursuant  hereto  or  in  connection  with  or  contemplation  of  the
transactions  herein  contemplated  (other than legal opinions) shall constitute
representations and warranties by the Company hereunder.

     10.14  Publicity.  The Company may make any press  release or SEC or Nasdaq
filings with respect to such  transactions as are required by applicable law and
regulations  (including  NASD  requirements)  without the prior  approval of the
Investors (although the Company will make reasonable efforts to consult with the
Investors in  connection  with any such press  release  prior to its release and
filing).

     10.15 Further  Assurances.  Each party will do and perform,  or cause to be
done and  performed,  all such  further  acts and things,  and will  execute and
deliver  all other  agreements,  certificates,  instruments  and  documents,  as
another  party  may  reasonably  request  in order to carry out the  intent  and
accomplish  the  purposes  of  this  Agreement  and  the   consummation  of  the
transactions contemplated hereby.

     10.16 No Strict Construction. The language used in this Agreement is 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.

     10.17 Equitable Relief. The Company recognizes that, if it fails to perform
or discharge any of its obligations under this Agreement,  any remedy at law may
prove to be inadequate  relief to the Investors.  The Company  therefore  agrees
that the Investors are entitled to temporary and permanent  injunctive relief in
any such case without the necessity of proving actual damages.

                                       29
<PAGE>

     10.18  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.

     10.19  Independent  Nature  of  Investors'   Obligations  and  Rights.  The
obligations  of each  Investor  under any of the  Warrant,  Registration  Rights
Agreement or this Agreement  (collectively,  the  "Transaction  Documents")  are
several  and not  joint  with the  obligations  of any  other  Investor,  and no
Investor shall be responsible in any way for the  performance of the obligations
of any other  Investor  under any  Transaction  Document.  The  decision of each
Investor to purchase  Common Shares  pursuant to the  Transaction  Documents has
been  made  by  each  Investor  independently  of any  other  Investor.  Nothing
contained  herein or in any  Transaction  Document,  and no action  taken by any
Investor  pursuant  thereto,  shall be deemed to  constitute  the Investors as a
partnership,  an  association,  a joint venture or any other kind of entity,  or
create a presumption that the Investors are in any way acting in concert or as a
group with respect to such obligations or the  transactions  contemplated by the
Transaction  Document.  Each Investor 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  Investor  to be joined as an  additional  party in any
proceeding for such purpose.  Each Investor  acknowledges that no other Investor
has acted as agent for the  Investor in  connection  with making its  investment
hereunder and that no other  Investor will be acting as agent of the Investor in
connection  with monitoring its investment in the Common Shares or enforcing its
rights under the Transaction  Documents.  Each Investor has been  represented by
its  own  separate  legal  counsel  in  their  review  and  negotiation  of  the
Transaction Documents. The Company has elected to provide all Investors with the
same terms and Transaction  Documents for the convenience of the Company and not
because it was required or requested to do so by the Investors.

                                       30
<PAGE>

         IN WITNESS  WHEREOF,  the  undersigned  Investors  and the Company have
caused this Agreement to be duly executed as of the date first above written.

                                COMPANY:

                                PHARMAFRONTIERS CORP.

                                By:     /s/ David B. McWilliams
                                    -----------------------------------------
                                       David B. McWilliams, President

                       [Signatures continued on next page]

                                       31
<PAGE>

                                INVESTOR:

                                INVESTOR'S NAME:
                                                ----------------------------

                                By:      /s/
                                   -----------------------------------------
                                Print Name:
                                           ---------------------------------
                                Title:
                                      --------------------------------------

Number of Shares:
                 ---------------------------

Aggregate Purchase Amount:  $________________

INVESTOR'S ADDRESS:

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

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

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

(any notice hereunder to this Investor shall include a copy to):

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

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

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

         Attn:
              -----------------------------------

     [Signature Page to PharmaFrontiers Corp. Securities Purchase Agreement]

                                       32

<PAGE>

                                  SCHEDULE 3.1
                                       TO
                          SECURITIES PURCHASE AGREEMENT

                                  SUBSIDIARIES

1.       Opexa Pharmaceuticals, Inc. a Delaware corporation

2.       Al Magnus, Inc., a Texas corporation

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00087-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00087-of-00352.parquet"}]]