Document:

Execution Version

                          SECURITIES PURCHASE AGREEMENT

         This Securities Purchase Agreement (this "Agreement") is dated as of
February 14, 2005 among QMed, Inc., a Delaware corporation (the "Company"), and
the purchasers identified on the signature pages hereto (each, a "Purchaser" and
collectively, the "Purchasers").

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

         NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser,
severally and not jointly, agree as follows:

                                   ARTICLE I
                                   DEFINITIONS

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

                  "Additional Investment Rights" means, collectively, the
         Additional Investment Rights issued and sold under this Agreement, in
         the form of Exhibit A.

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

                  "Business Day" means any day other than Saturday, Sunday or
         other day on which commercial banks in The City of New York are
         authorized or required by law to remain closed.

                  "Change of Control" means the occurrence of any of the
         following in one or a series of related transactions: (i) an
         acquisition after the date hereof by an individual or legal entity or
         "group" (as described in Rule 13d-5(b)(1) under the Exchange Act) of
         more than one-half of the voting rights or equity interests in the
         Company; (ii) a replacement of more than one-half of the members of the
         Company's board of directors that is not approved by those individuals
         who are members of the board of directors on the date hereof (or other
         directors previously approved by such individuals); (iii) a merger or
         consolidation of the Company or any significant Subsidiary or a sale of

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         more than one-half of the assets of the Company in one or a series of
         related transactions, unless following such transaction or series of
         transactions, the holders of the Company's securities prior to the
         first such transaction continue to hold at least two-thirds of the
         voting rights and equity interests in the surviving entity or acquirer
         of such assets; (iv) a recapitalization, reorganization or other
         transaction involving the Company or any significant Subsidiary that
         constitutes or results in a transfer of more than one-half of the
         voting rights or equity interests in the Company; (v) consummation of a
         "Rule 13e-3 transaction" as defined in Rule 13e-3 under the Exchange
         Act with respect to the Company, or (vi) the execution by the Company
         or its controlling shareholders of an agreement providing for or
         reasonably likely to result in any of the foregoing events.

                   "Closing" means the closing of the purchase and sale of the
         Shares and the Additional Investment Rights pursuant to Section 2.1.

                  "Closing Date" means the date of the Closing.

                  "Closing Price" 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 an Eligible Market or any other
         national securities exchange, the closing price per share of the Common
         Stock for such date (or the nearest preceding date) on the primary
         Eligible Market or exchange on which the Common Stock is then listed or
         quoted; (b) if prices for the Common Stock are then quoted on the OTC
         Bulletin Board, the closing bid price per share of the Common Stock for
         such date (or the nearest preceding date) so quoted; (c) if prices for
         the Common Stock are then reported in the "Pink Sheets" published by
         the National Quotation Bureau Incorporated (or a similar organization
         or agency succeeding to its functions of reporting prices), the most
         recent closing bid price per share of the Common Stock so reported; or
         (d) 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 Purchasers holding a majority of the Securities.

                  "Commission" means the Securities and Exchange Commission.

                  "Common Stock" means the common stock of the Company, par
         value $0.001 per share.

                  "Common Stock Equivalents" means, collectively, Options and
         Convertible Securities.

                  "Company Counsel" means St. John & Wayne LLC, counsel to the
         Company.

                  "Convertible Securities" means any stock or securities (other
         than Options) convertible into or exercisable or exchangeable for
         Common Stock.

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

                  "Eligible Market" means any of the New York Stock Exchange,
         the American Stock Exchange, the NASDAQ National Market or the NASDAQ
         SmallCap Market.

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

                  "Excluded Stock" means the issuance of Common Stock (A) upon
         exercise or conversion of any options or other securities described in
         Schedule 3.1(f) (provided that such exercise or conversion occurs in
         accordance with the terms thereof, without amendment or modification)
         or otherwise pursuant to any employee benefit plan described in
         Schedule 3.1(f) or hereafter adopted by the Company and approved by its
         shareholders or (B) in connection with any issuance of shares or grant
         of options to employees, officers, directors or consultants of the
         Company pursuant to a stock option plan or other incentive stock plan
         duly adopted by the Company's board of directors or in respect of the
         issuance of Common Stock upon exercise of any such options.

                  "Filing Date" means the 30th day following the Closing Date
         with respect to the initial Registration Statement required to be filed
         hereunder, and, with respect to any additional Registration Statements
         that may be required pursuant to Section 6.1(f), the 10th day following
         the date on which the Company first knows, or reasonably should have
         known, that such additional Registration Statement is required under
         such Section.

                  "Lien" means any lien, charge, claim, security interest,
         encumbrance, right of first refusal or other restriction.

                  "Losses" means any and all losses, claims, damages,
         liabilities, settlement costs and expenses, including, without
         limitation, costs of preparation and reasonable attorneys' fees.

                  "Options" means any rights, warrants or options to subscribe
         for or purchase Common Stock or Convertible Securities.

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

                  "Per Unit Purchase Price" means $11.25.

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

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

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                  "Purchaser Counsel" has the meaning set forth in Section
         6.2(a).

                  "Registrable Securities" means any Common Stock (including
         Underlying Shares) issued or issuable pursuant to the Transaction
         Documents, together with any securities issued or issuable upon any
         stock split, dividend or other distribution, recapitalization or
         similar event with respect to the foregoing.

                  "Registration Statement" means each registration statement
         required to be filed under Article VI, including (in each case) the
         Prospectus, amendments and supplements to such registration statement
         or Prospectus, including pre- and post-effective amendments, all
         exhibits thereto, and all material incorporated by reference or deemed
         to be incorporated by reference in such registration statement.

                  "Required Effectiveness Date" means (i) with respect to the
         initial Registration Statement required to be filed hereunder, the 90th
         day following the Closing Date, and (ii) with respect to any additional
         Registration Statements that may be required pursuant to Section
         6.1(f), the 30th day following the date on which the Company first
         knows, or reasonably should have known, that such additional
         Registration Statement is required under such Section.

                  "Rule 144," "Rule 415," and "Rule 424" means Rule 144, Rule
         415 and Rule 424, respectively, promulgated by the Commission pursuant
         to the Securities Act, as such Rules may be amended from time to time,
         or any similar rule or regulation hereafter adopted by the Commission
         having substantially the same effect as such Rule.

                  "Securities" means the Shares, Additional Investment Rights
         and the Underlying Shares.

                  "Shares" means the aggregate number of shares of Common Stock,
         which are being issued and sold to the Purchasers at the Closing and
         set forth on the signature pages hereof.

                  "Subsidiary" means any Person that is "significant subsidiary"
         of the Company as defined in Rule 1-02(x) of Regulation S-X under the
         Securities Act.

                  "Trading Day" means (a) any day on which the Common Stock is
         listed or quoted and traded on its primary Trading Market, or (b) if
         the Common Stock is not then listed or quoted and traded on any
         Eligible Market, then a day on which trading occurs on the NASDAQ
         SmallCap Market (or any successor thereto), or (c) if trading ceases to
         occur on the NASDAQ SmallCap Market (or any successor thereto), any
         Business Day.

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

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

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                  "Transfer Agent Instructions" means the Irrevocable Transfer
         Agent Instructions, in the form of Exhibit B, executed by the Company
         and delivered to and acknowledged in writing by the Company's transfer
         agent.

                  "Underlying Shares" means the shares of Common Stock issuable
         upon exercise of the Additional Investment Rights.

                  "Unit" means one Share and an Additional Investment Right to
         acquire 0.25 shares of Common Stock.

                                   ARTICLE II
                                PURCHASE AND SALE

         2.1 Closing. Subject to the terms and conditions set forth in this
Agreement, at the Closing the Company shall issue and sell to each Purchaser,
and each Purchaser shall, severally and not jointly, purchase from the Company,
such number of Units indicated below such Purchaser's name on the signature page
of this Agreement at the Per Unit Purchase Price. The Closing shall take place
at the offices of Proskauer Rose LLP immediately following the execution hereof,
or at such other location or time as the parties may agree.

         2.2 Closing Deliveries.

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

                           (i) one or more stock certificates, free and clear of
                  all restrictive and other legends (except as expressly
                  provided in Section 4.1(b) hereof), evidencing such number of
                  Shares equal to the number of Units indicated below such
                  Purchaser's name on the signature page of this Agreement,
                  registered in the name of such Purchaser;

                           (ii) an Additional Investment Right, registered in
                  the name of such Purchaser, pursuant to which such Purchaser
                  shall have the right to acquire such number of Underlying
                  Shares indicated below such Purchaser's name on the signature
                  page of this Agreement under the heading "Additional
                  Investment Right Shares"1, on the terms set forth therein;

                           (iii) a legal opinion of Company Counsel, in the form
                  of Exhibit C, executed by such counsel and delivered to the
                  Purchasers; and

                           (iv) duly executed Transfer Agent Instructions
                  acknowledged by the Company's transfer agent.

                  (b) At the Closing, each Purchaser shall deliver or cause to
         be delivered the following an amount equal to the Per Unit Purchase
         Price multiplied by the number of Units indicated below such

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         Purchaser's name on the signature page of this Agreement, in United
         States dollars and in immediately available funds, by wire transfer to
         an account designated in writing to such Purchaser by the Company for
         such purpose.

                                  ARTICLE III
                         REPRESENTATIONS AND WARRANTIES

         3.1 Representations and Warranties of the Company. The Company hereby
represents and warrants to each of the Purchasers as follows:

                  (a) Subsidiaries. The Company has no direct or indirect
         Subsidiaries other than those listed in Schedule 3.1(a). Except as
         disclosed in Schedule 3.1(a), the Company owns, directly or indirectly,
         all of the capital stock or comparable equity interests of each
         Subsidiary free and clear of any Lien and all the issued and
         outstanding shares of capital stock or comparable equity interest of
         each Subsidiary are validly issued and are fully paid, non-assessable
         and free of preemptive and similar rights.

                  (b) Organization and Qualification. Each of the Company and
         the Subsidiaries is an entity duly organized, validly existing and in
         good standing under the laws of the jurisdiction of its incorporation
         or organization (as applicable), with the requisite power and authority
         to own and use its properties and assets and to carry on its business
         as currently conducted. Neither the Company nor any Subsidiary is in
         violation of any of the provisions of its respective certificate or
         articles of incorporation, bylaws or other organizational or charter
         documents. Each of the Company and the Subsidiaries is duly qualified
         to do business and is in good standing as a foreign corporation or
         other entity in each jurisdiction in which the nature of the business
         conducted or property owned by it makes such qualification necessary,
         except where the failure to be so qualified or in good standing, as the
         case may be, could not, individually or in the aggregate, (i) adversely
         affect the legality, validity or enforceability of any Transaction
         Document, (ii) have or result in a material adverse effect on the
         results of operations, assets, prospects, business or condition
         (financial or otherwise) of the Company and the Subsidiaries, taken as
         a whole on a consolidated basis, or (iii) adversely impair the
         Company's ability to perform fully on a timely basis its obligations
         under any of the Transaction Documents (any of (i), (ii) or (iii), a
         "Material Adverse Effect").

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

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<PAGE>

                  (d) No Conflicts. The execution, delivery and performance of
         the Transaction Documents by the Company and the consummation by the
         Company of the transactions contemplated hereby and thereby do not and
         will not (i) conflict with or violate any provision of the Company's or
         any Subsidiary's certificate or articles of incorporation, bylaws or
         other organizational or charter documents, (ii) conflict with, or
         constitute a default (or an event that with notice or lapse of time or
         both would become a default) under, or give to others any rights of
         termination, amendment, acceleration or cancellation (with or without
         notice, lapse of time or both) of, any agreement, credit facility, debt
         or other instrument (evidencing a Company or Subsidiary debt or
         otherwise) or other understanding to which the Company or any
         Subsidiary is a party or by which any property or asset of the Company
         or any Subsidiary is bound or affected, or (iii) result in a violation
         of any law, rule, regulation, order, judgment, injunction, decree or
         other restriction of any court or governmental authority to which the
         Company or a Subsidiary is subject (including federal and state
         securities laws and regulations and the rules and regulations of any
         self-regulatory organization to which the Company or its securities are
         subject), or by which any property or asset of the Company or a
         Subsidiary is bound or affected.

                  (e) Issuance of the Securities. The Securities (including the
         Underlying Shares) are duly authorized and, when issued and paid for in
         accordance with the Transaction Documents, will be duly and validly
         issued, fully paid and nonassessable, free and clear of all Liens and
         except as set forth on Schedule 3.1(e), shall not be subject to
         preemptive rights or similar rights of shareholders. The Company has
         reserved from its duly authorized capital stock the maximum number of
         shares of Common Stock issuable upon exercise of the Additional
         Investment Rights.

                  (f) Capitalization. The number of shares and type of all
         authorized, issued and outstanding capital stock, options and other
         securities of the Company (whether or not presently convertible into or
         exercisable or exchangeable for shares of capital stock of the Company)
         is set forth in Schedule 3.1(f). All outstanding shares of capital
         stock are duly authorized, validly issued, fully paid and nonassessable
         and have been issued in compliance with all applicable securities laws.
         Except as disclosed in Schedule 3.1(f), there are no outstanding
         options, warrants, script rights to subscribe to, calls or commitments
         of any character whatsoever relating to, or securities, rights or
         obligations convertible into or exercisable or exchangeable for, or
         giving any Person any right to subscribe for or acquire, any shares of
         Common Stock, or contracts, commitments, understandings or arrangements
         by which the Company or any Subsidiary is or may become bound to issue
         additional shares of Common Stock, or securities or rights convertible
         or exchangeable into shares of Common Stock. There are no anti-dilution
         or price adjustment provisions contained in any security issued by the
         Company (or in any agreement providing rights to security holders) and
         the issue and sale of the Securities (including the Underlying Shares)
         will not obligate the Company to issue shares of Common Stock or other
         securities to any Person (other than the Purchasers) and will not
         result in a right of any holder of Company securities to adjust the
         exercise, conversion, exchange or reset price under such securities. To
         the knowledge of the Company, except as specifically disclosed in
         Schedule 3.1(f), no Person or group of related Persons beneficially
         owns (as determined pursuant to Rule 13d-3 under the Exchange Act), or
         has the right to acquire, by agreement with or by obligation binding
         upon the Company, beneficial ownership of in excess of 5% of the
         outstanding Common Stock, ignoring for such purposes any limitation on
         the number of shares of Common Stock that may be owned at any single
         time.

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                  (g) SEC Reports; Financial Statements. The Company has filed
         all reports required to be filed by it under the Exchange Act,
         including pursuant to Section 13(a) or 15(d) thereof, for the two years
         preceding the date hereof (or such shorter period as the Company was
         required by law to file such material) (the foregoing materials
         (together with any materials filed by the Company under the Exchange
         Act, whether or not required) being collectively referred to herein as
         the "SEC Reports" and, together with this Agreement and the Schedules
         to this Agreement, the "Disclosure Materials") on a timely basis or has
         received a valid extension of such time of filing and has filed any
         such SEC Reports prior to the expiration of any such extension. The
         Company has delivered to each Purchaser true, correct and complete
         copies of all SEC Reports filed within the 10 days preceding the date
         hereof. As of their respective dates, the SEC Reports complied in all
         material respects with the requirements of the Securities Act and the
         Exchange Act and the rules and regulations of the Commission
         promulgated thereunder, and none of the SEC Reports, when filed,
         contained any untrue statement of a material fact or omitted to state a
         material fact required to be stated therein or necessary in order to
         make the statements therein, in the light of the circumstances under
         which they were made, not misleading. The financial statements of the
         Company included in the SEC Reports comply in all material respects
         with applicable accounting requirements and the rules and regulations
         of the Commission with respect thereto as in effect at the time of
         filing. Such financial statements have been prepared in accordance with
         United States generally accepted accounting principles applied on a
         consistent basis during the periods involved ("GAAP"), except as may be
         otherwise specified in such financial statements or the notes thereto,
         and fairly present in all material respects the financial position of
         the Company and its consolidated subsidiaries as of and for the dates
         thereof and the results of operations and cash flows for the periods
         then ended, subject, in the case of unaudited statements, to normal,
         immaterial, year-end audit adjustments. All material agreements to
         which the Company or any Subsidiary is a party or to which the property
         or assets of the Company or any Subsidiary are subject are included as
         part of or specifically identified in the SEC Reports.

                  (h) Material Changes. Since the date of the latest audited
         financial statements included within the SEC Reports, except as
         specifically disclosed in the SEC Reports or in Schedule 3.1(h), (i)
         there has been no event, occurrence or development that, individually
         or in the aggregate, has had or that could result in a Material Adverse
         Effect, (ii) the Company has not incurred any liabilities (contingent
         or otherwise) other than (A) trade payables and accrued expenses
         incurred in the ordinary course of business consistent with past
         practice and (B) liabilities not required to be reflected in the
         Company's financial statements pursuant to GAAP or required to be
         disclosed in filings made with the Commission, (iii) the Company has
         not altered its method of accounting or the identity of its auditors,
         except as disclosed in its SEC Reports, (iv) the Company has not
         declared or made any dividend or distribution of cash or other property
         to its shareholders 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-based plans.

                  (i) Absence of Litigation. There is no action, suit, claim,
         proceeding, inquiry or investigation before or by any court, public
         board, government agency, self-regulatory organization or body pending
         or, to the knowledge of the Company, initiated against or affecting the
         Company or any of its Subsidiaries that could, individually or in the
         aggregate, have a Material Adverse Effect.

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

                  (k) Title to Assets. Except as set forth on Schedule 3.1(k),
         the Company and the Subsidiaries have good and marketable title in fee
         simple to all real property owned by them that is material to the
         business of the Company and the Subsidiaries and good and marketable
         title in all personal property owned by them that is material to the
         business of the Company and the Subsidiaries, in each case free and
         clear of all Liens, except for Liens as do not materially affect the
         value of such property and do not materially interfere with the use
         made and proposed to be made of such property by the Company and the
         Subsidiaries. Any real property and facilities held under lease by the
         Company and the Subsidiaries are held by them under valid, subsisting
         and enforceable leases of which the Company and the Subsidiaries are in
         compliance.

                  (l) Certain Fees. Except for the fees described in Schedule
         3.1(l), all of which are payable to registered broker-dealers, no
         brokerage or finder's fees or commissions are or will be payable by the
         Company to any broker, financial advisor or consultant, finder,
         placement agent, investment banker, bank or other Person with respect
         to the transactions contemplated by this Agreement, and the Company has
         not taken any action that would cause any Purchaser to be liable for
         any such fees or commissions.

                  (m) Private Placement. Neither the Company nor any Person
         acting on the Company's behalf has sold or offered to sell or solicited
         any offer to buy the Securities by means of any form of general
         solicitation or advertising. Neither the Company nor any of its
         Affiliates nor any Person acting on the Company's behalf has, directly
         or indirectly, at any time within the past six months, made any offer
         or sale of any security or solicitation of any offer to buy any
         security under circumstances that would (i) eliminate the availability
         of the exemption from registration under Regulation D under the
         Securities Act in connection with the offer and sale of the Securities
         as contemplated hereby or (ii) cause the offering of the Securities
         pursuant to the Transaction Documents to be integrated with prior
         offerings by the Company for purposes of any applicable law, regulation
         or stockholder approval provisions, including, without limitation,
         under the rules and regulations of any Trading Market. The Company is
         not, and is not an Affiliate of, an "investment company" within the
         meaning of the Investment Company Act of 1940, as amended. The Company
         is not a United States real property holding corporation within the
         meaning of the Foreign Investment in Real Property Tax Act of 1980.

                  (n) Listing and Maintenance Requirements. The Company has not,
         in the two years preceding the date hereof, received notice (written or
         oral) from any Trading Market on which the Common Stock is or has been

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         listed or quoted to the effect that the Company is not in compliance
         with the listing or maintenance requirements of such Trading Market.
         The Company is, and has no reason to believe that it will not in the
         foreseeable future continue to be, in compliance with all such listing
         and maintenance requirements.

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

                  (p) Application of Takeover Protections. There is no control
         share acquisition, business combination, poison pill (including any
         distribution under a rights agreement) or other similar anti-takeover
         provision under the Company's charter documents or the laws of its
         state of incorporation that is or could become applicable to any of the
         Purchasers as a result of the Purchasers and the Company fulfilling
         their obligations or exercising their rights under the Transaction
         Documents, including, without limitation, as a result of the Company's
         issuance of the Securities and the Purchasers' ownership of the
         Securities.

                  (q) Disclosure. The Company confirms that neither it nor any
         other Person acting on its behalf has provided any of the Purchasers or
         their agents or counsel with any information that constitutes or might
         constitute material, nonpublic information. The Company understands and
         confirms that each of the Purchasers will rely on the foregoing
         representations in effecting transactions in securities of the Company.
         All disclosure materials provided to the Purchasers regarding the
         Company, its business and the transactions contemplated hereby,
         including the Schedules to this Agreement, furnished by or on behalf of
         the Company are true and correct and do not contain any untrue
         statement of a material fact or omit to state any material fact
         necessary in order to make the statements made therein, in the 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 any of its Subsidiaries or its or their business,
         properties, prospects, operations or financial conditions, which, under
         applicable law, rule or regulation, requires public disclosure or
         announcement by the Company but which has not been so publicly
         announced or disclosed. The Company acknowledges and agrees that (i) no
         Purchaser makes or has made any representations or warranties with
         respect to the transactions contemplated hereby other than those
         specifically set forth in Section 3.2 or (ii) any statement, commitment
         or promise to the Company or, to its knowledge, any of its
         representatives which is or was an inducement to the Company to enter
         into this Agreement or otherwise.

                  (r) Acknowledgment Regarding Purchasers' Purchase of
         Securities. The Company acknowledges and agrees that each of the
         Purchasers is acting solely in the capacity of an arm's length
         purchaser with respect to the Company and to this Agreement and the
         transactions contemplated hereby. The Company further acknowledges that
         no Purchaser is acting as a financial advisor or fiduciary of the
         Company (or in any similar capacity) with respect to this Agreement and
         the transactions contemplated hereby and any advice given by any
         Purchaser or any of their respective representatives or agents in
         connection with this Agreement and the transactions contemplated hereby
         is merely incidental to the Purchasers' purchase of the Securities. The

                                       10
<PAGE>

         Company further represents to each Purchaser that the Company's
         decision to enter into this Agreement has been based solely on the
         independent evaluation of the transactions contemplated hereby by the
         Company and its representatives.

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

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

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

                  (v) Transactions With Affiliates and Employees. Except as set
         forth in SEC Reports filed at least ten days prior to the date hereof,
         none of the officers or directors of the Company and, to the knowledge
         of the Company, none of the employees of the Company is presently a
         party to any transaction with the Company or any Subsidiary (other than
         for services as employees, officers and directors), including any
         contract, agreement or other arrangement providing for the furnishing
         of services to or by, providing for rental of real or personal property
         to or from, or otherwise requiring payments to or from any officer,
         director or such employee or, to the knowledge of the Company, any
         entity in which any officer, director, or any such employee has a
         substantial interest or is an officer, director, trustee or partner.

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

                  (x) Solvency. Based on the financial condition of the Company
         as of the Closing Date, (i) the Company's fair saleable value of its
         assets exceeds the amount that will be required to be paid on or in
         respect of the Company's existing debts and other liabilities

                                       11
<PAGE>

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

                  (y) Internal Accounting Controls. The Company and the
         Subsidiaries maintain a system of internal accounting controls
         sufficient to provide reasonable assurance that (i) transactions are
         executed in accordance with management's general or specific
         authorizations, (ii) transactions are recorded as necessary to permit
         preparation of financial statements in conformity with generally
         accepted accounting principles and to maintain asset accountability,
         (iii) access to assets is permitted only in accordance with
         management's general or specific authorization, and (iv) the recorded
         accountability for assets is compared with the existing assets at
         reasonable intervals and appropriate action is taken with respect to
         any differences; however, the Company makes no representation as to
         whether the Company's auditors will find a material weakness in the
         Company's internal controls.

                  (z) Sarbanes-Oxley Act. The Company is in compliance with
         applicable requirements of the Sarbanes-Oxley Act of 2002 and
         applicable rules and regulations promulgated by the Commission
         thereunder in effect as of the date of this Agreement, except where
         such noncompliance could not be reasonably expected to have,
         individually or in the aggregate, a Material Adverse Effect; however,
         the Company makes no representation as to whether the Company's
         auditors will find a material weakness in the Company's internal
         controls.

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

                  (a) Organization; Authority. Such Purchaser is an entity duly
         organized, validly existing and in good standing under the laws of the
         jurisdiction of its organization with the requisite corporate or
         partnership power and authority to enter into and to consummate the
         transactions contemplated by the Transaction Documents and otherwise to
         carry out its obligations hereunder and thereunder. The purchase by
         such Purchaser of the Shares and Additional Investment Rights hereunder
         has been duly authorized by all necessary action on the part of such
         Purchaser. This Agreement has been duly executed and delivered by such
         Purchaser and constitutes the valid and binding obligation of such
         Purchaser, enforceable against it in accordance with its terms.

                  (b) Investment Intent. Such Purchaser is acquiring the
         Securities for investment purposes only and not with a view to or for
         distributing or reselling such Securities or any part thereof, without
         prejudice, however, to such Purchaser's right, subject to the

                                       12
<PAGE>

         provisions of this Agreement, at all times to sell or otherwise dispose
         of all or any part of such Securities pursuant to an effective
         registration statement under the Securities Act or under an exemption
         from such registration and in compliance with applicable federal and
         state securities laws. Nothing contained herein shall be deemed a
         representation or warranty by such Purchaser to hold Securities for any
         period of time.

                  (c) Purchaser Status. At the time such Purchaser was offered
         the Shares and the Additional Investment Rights, it was, and at the
         date hereof it is, an "accredited investor" as defined in Rule 501(a)
         under the Securities Act.

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

                                   ARTICLE IV
                         OTHER AGREEMENTS OF THE PARTIES

         4.1 Transfer Restrictions.

                  (a) Securities may only be disposed of pursuant to an
         effective registration statement under the Securities Act or pursuant
         to an available exemption from the registration requirements of the
         Securities Act, and in compliance with any applicable state securities
         laws. In connection with any transfer of Securities other than pursuant
         to an effective registration statement or to the Company or pursuant to
         Rule 144(k), except as otherwise set forth herein, the Company may
         require the transferor to provide to the Company an opinion of counsel
         selected by the transferor and reasonably satisfactory to the Company,
         the form and substance of which opinion shall be reasonably
         satisfactory to the Company, to the effect that such transfer does not
         require registration under the Securities Act. Notwithstanding the
         foregoing, the Company hereby consents to and agrees to register on the
         books of the Company and with its transfer agent, without any such
         legal opinion, any transfer of Securities by a Purchaser to an
         Affiliate of such Purchaser, provided that the transferee certifies to
         the Company that it is an "accredited investor" as defined in Rule
         501(a) under the Securities Act.

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

         [NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
         SECURITIES ARE EXERCISABLE] HAVE [NOT] BEEN REGISTERED WITH THE
         SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
         STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
         SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
         ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE

                                       13
<PAGE>

         REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
         AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
         REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH
         APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS. NOTWITHSTANDING THE
         FOREGOING, THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE
         OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
         MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH
         SECURITIES.

         Certificates evidencing Securities shall not be required to contain
         such legend or any other legend (i) while a Registration Statement
         covering the resale of such Securities is effective under the
         Securities Act, or (ii) following any sale of such Securities pursuant
         to Rule 144, or (iii) if such Securities are eligible for sale under
         Rule 144(k), or (iv) if such legend is not required under applicable
         requirements of the Securities Act (including judicial interpretations
         and pronouncements issued by the Staff of the Commission). The Company
         shall cause its counsel to issue the legal opinion included in the
         Transfer Agent Instructions to the Company's transfer agent on the
         Effective Date. Following the Effective Date or at such earlier time as
         a legend is no longer required for certain Securities, the Company will
         no later than three Trading Days following the delivery by a Purchaser
         to the Company or the Company's transfer agent of a legended
         certificate representing such Securities, deliver or cause to be
         delivered to such Purchaser a certificate representing such Securities
         that is free from all restrictive and other legends. The Company may
         not make any notation on its records or give instructions to any
         transfer agent of the Company that enlarge the restrictions on transfer
         set forth in this Section.

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

         4.2 Furnishing of Information. As long as any Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. Upon the request of any Purchaser, the Company shall deliver to
such Purchaser a written certification of a duly authorized officer as to

                                       14
<PAGE>

whether it has complied with the preceding sentence. As long as any Purchaser
owns Securities, if the Company is not required to file reports pursuant to such
laws, it will prepare and furnish to the Purchasers and make publicly available
in accordance with paragraph (c) of Rule 144 such information as is required for
the Purchasers to sell the Securities under Rule 144. The Company further
covenants that it will take such further action as any holder of Securities may
reasonably request to satisfy the provisions of Rule 144 applicable to the
issuer of securities relating to transactions for the sale of securities
pursuant to Rule 144.

         4.3 Integration. The Company shall not, and shall use its best efforts
to ensure that no Affiliate of the Company shall, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers.

         4.4 Reservation and Listing of Securities. The Company shall maintain a
reserve from its duly authorized shares of Common Stock for issuance pursuant to
the Transaction Documents in such amount as may be required to fulfill its
obligations in full under the Transaction Documents. In the event that at any
time the then authorized shares of Common Stock are insufficient for the Company
to satisfy its obligations in full under the Transaction Documents, the Company
shall promptly take such actions as may be required to increase the number of
authorized shares. The Company shall in the time and manner required by its
Trading Market, prepare and file with such Trading Market an additional shares
listing application covering the number of shares of Common Stock issuable under
the Transaction Documents and shall take all steps necessary to cause such
shares of Common Stock to be approved for listing on its Trading Market as soon
as possible.

         4.5 Subsequent Placements.

                  (a) From the date hereof until the earlier of (i) the ninety
         (90) day following the Closing Date or (ii) the Effective Date, the
         Company will not, directly or indirectly, offer, sell, grant any option
         to purchase, or otherwise dispose of (or announce any offer, sale,
         grant or any option to purchase or other disposition of) any of its or
         the Subsidiaries' equity or equity equivalent securities, including
         without limitation any debt, preferred stock or other instrument or
         security that is, at any time during its life and under any
         circumstances, convertible into or exchangeable or exercisable for
         Common Stock or Common Stock Equivalents (any such offer, sale, grant,
         disposition or announcement being referred to as a "Subsequent
         Placement") if as a result of such offer, sale, grant or other
         disposition, the Person entitled to acquire such equity or equity
         equivalent security may do so at an effective net price to the Company
         per share of Common Stock less than the Per Unit Purchase Price.

                  (b) From the date hereof until the one year anniversary of the
         Closing Date, the Company will not, directly or indirectly, effect any
         private offering of the Company's Securities ("PIPEs Securities") in
         which the Company is obligated to register the PIPEs Securities with
         the Commission within 180 days of the date the PIPEs Securities are
         first issued by the Company, unless the Company shall have first
         complied with this Section 4.5(b).

                           (i) The Company shall deliver to each Purchaser a
                  written notice (the "Offer") of any proposed or intended
                  issuance or sale or exchange of the securities being offered
                  (the "Offered Securities") in a Subsequent Placement, which
                  Offer shall (w) identify and describe the Offered Securities,
                  (x) describe the price and other terms upon which they are to

                                       15
<PAGE>

                  be issued, sold or exchanged, and the number or amount of the
                  Offered Securities to be issued, sold or exchanged, (y)
                  identify the Persons or entities to which or with which the
                  Offered Securities are to be offered, issued, sold or
                  exchanged and (z) offer to issue and sell to or exchange with
                  each Purchaser (A) a pro rata portion of 50% of the Offered
                  Securities based on such Purchaser's pro rata portion of the
                  aggregate purchase price paid by the Purchasers for all of the
                  Shares purchased hereunder (the "Basic Amount"), and (B) with
                  respect to each Purchaser that elects to purchase its Basic
                  Amount, any additional portion of the Offered Securities
                  attributable to the Basic Amounts of other Purchasers as such
                  Purchaser shall indicate it will purchase or acquire should
                  the other Purchasers subscribe for less than their Basic
                  Amounts (the "Undersubscription Amount").

                           (ii) To accept an Offer, in whole or in part, a
                  Purchaser must deliver a written notice to the Company prior
                  to the end of the five (5) Trading Day period of the Offer,
                  setting forth the portion of the Purchaser's Basic Amount that
                  such Purchaser elects to purchase and, if such Purchaser shall
                  elect to purchase all of its Basic Amount, the
                  Undersubscription Amount, if any, that such Purchaser elects
                  to purchase (in either case, the "Notice of Acceptance"). If
                  the Basic Amounts subscribed for by all Purchasers are less
                  than the total of all of the Basic Amounts, then each
                  Purchaser who has set forth an Undersubcription Amount in its
                  Notice of Acceptance shall be entitled to purchase, in
                  addition to the Basic Amounts subscribed for, the
                  Undersubscription Amount it has subscribed for; provided,
                  however, that if the Undersubscription Amounts subscribed for
                  exceed the difference between the total of all the Basic
                  Amounts and the Basic Amounts subscribed for (the "Available
                  Undersubscription Amount"), each Purchaser who has subscribed
                  for any Undersubscription Amount shall be entitled to purchase
                  on that portion of the Available Undersubscription Amount as
                  the Basic Amount of such Purchaser bears to the total Basic
                  Amounts of all Purchasers that have subscribed for
                  Undersubscription Amounts, subject to rounding by the Board of
                  Directors to the extent its deems reasonably necessary.

                           (iii) The Company shall have ten (10) Trading Days
                  from the expiration of the period set forth in Section
                  4.5(b)(ii) above to issue, sell or exchange all or any part of
                  such Offered Securities as to which a Notice of Acceptance has
                  not been given by the Purchasers (the "Refused Securities"),
                  but only to the offerees described in the Offer and only upon
                  terms and conditions (including, without limitation, unit
                  prices and interest rates) that are not more favorable to the
                  acquiring Person or Persons or less favorable to the Company
                  than those set forth in the Offer.

                           (iv) In the event the Company shall propose to sell
                  less than all the Refused Securities (any such sale to be in
                  the manner and on the terms specified in Section 4.5(b)(iii)
                  above), then each Purchaser may, at its sole option and in its
                  sole discretion, reduce the number or amount of the Offered
                  Securities specified in its Notice of Acceptance to an amount
                  that shall be not less than the number or amount of the
                  Offered Securities that the Purchaser elected to purchase
                  pursuant to Section 4.5(b)(ii) above multiplied by a fraction,

                                       16
<PAGE>

                  (i) the numerator of which shall be the number or amount of
                  Offered Securities the Company actually proposes to issue,
                  sell or exchange (including Offered Securities to be issued or
                  sold to Purchasers pursuant to Section 4.5(b)(ii) above prior
                  to such reduction) and (ii) the denominator of which shall be
                  the original amount of the Offered Securities. In the event
                  that any Purchaser so elects to reduce the number or amount of
                  Offered Securities specified in its Notice of Acceptance, the
                  Company may not issue, sell or exchange more than the reduced
                  number or amount of the Offered Securities unless and until
                  such securities have again been offered to the Purchasers in
                  accordance with Section 4.5(b)(i) above.

                           (v) Upon the closing of the issuance, sale or
                  exchange of all or less than all of the Refused Securities,
                  the Purchasers shall acquire from the Company, and the Company
                  shall issue to the Purchasers, the number or amount of Offered
                  Securities specified in the Notices of Acceptance, as reduced
                  pursuant to Section 4.5(b)(iv) above if the Purchasers have so
                  elected, upon the terms and conditions specified in the Offer.
                  The purchase by the Purchasers of any Offered Securities is
                  subject in all cases to the preparation, execution and
                  delivery by the Company and the Purchasers of a purchase
                  agreement relating to such Offered Securities reasonably
                  satisfactory in form and substance to the Purchasers and their
                  respective counsel.

                           (vi) Any Offered Securities not acquired by the
                  Purchasers or other persons in accordance with Section
                  4.5(b)(iii) above may not be issued, sold or exchanged until
                  they are again offered to the Purchasers under the procedures
                  specified in this Agreement.

                  (c) The restrictions contained in paragraph (a) of this
         Section 4.5 shall not apply to Excluded Stock.

         4.6 Securities Laws Disclosure; Publicity. The Company shall, on or
before 8:30 a.m., New York City time on February 14, 2005, issue a press release
acceptable to the Purchasers disclosing all material terms of the transactions
contemplated hereby. Within one Trading Day following the Closing Date, the
Company shall file a Current Report on Form 8-K with the Commission (the "8-K
Filing") describing the terms of the transactions contemplated by the
Transaction Documents and including as exhibits to such Current Report on Form
8-K this Agreement, the form of the Additional Investment Rights, in the form
required by the Exchange Act. Thereafter, the Company shall timely file any
filings and notices required by the Commission or applicable law with respect to
the transactions contemplated hereby and provide copies thereof to the
Purchasers promptly after filing. Except with respect to the 8-K Filing and the
press release referenced above (a copy of which will be provided to the
Purchasers for their review as early as practicable prior to its filing), the
Company shall, at least one Trading Day prior to the filing or dissemination of
any disclosure required by this paragraph, provide a copy thereof to the
Purchasers for their review. The Company and the Purchasers shall consult with
each other in issuing any press releases or otherwise making public statements
or filings and other communications with the Commission or any regulatory agency
or Trading Market with respect to the transactions contemplated hereby, and
neither party shall issue any such press release or otherwise make any such
public statement, filing or other communication without the prior consent of the
other, except if such disclosure is required by law, in which case the

                                       17
<PAGE>

disclosing party shall promptly provide the other party with prior notice of
such public statement, filing or other communication. Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Purchaser, or
include the name of any Purchaser in any filing with the Commission or any
regulatory agency or Trading Market, without the prior written consent of such
Purchaser, except to the extent such disclosure is required by law or Trading
Market regulations, in which case the Company shall provide the Purchasers with
prior notice of such disclosure. The Company shall not, and shall cause each of
its Subsidiaries and its and each of their respective officers, directors,
employees and agents not to, provide any Purchaser with any material nonpublic
information regarding the Company or any of its Subsidiaries from and after the
filing of the 8-K Filing without the express written consent of such Purchaser.
In the event of a breach of the foregoing covenant by the Company, any of its
Subsidiaries, or any of its or their respective officers, directors, employees
and agents, in addition to any other remedy provided herein or in the
Transaction Documents, a Purchaser shall have the right to 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, its Subsidiaries, or any of its or their respective officers,
directors, employees or agents. No Purchaser shall have any liability to the
Company, its Subsidiaries, or any of its or their respective officers,
directors, employees, shareholders or agents for any such disclosure. Subject to
the foregoing, neither the Company nor any Purchaser shall issue any press
releases or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be entitled,
without the prior approval of any Purchaser, to make any press release or other
public disclosure with respect to such transactions (i) in substantial
conformity with the 8-K Filing and contemporaneously therewith and (ii) as is
required by applicable law and regulations (provided that in the case of clause
(i) each Purchaser shall be consulted by the Company in connection with any such
press release or other public disclosure prior to its release). Each press
release disseminated during the 12 months preceding the date of this Agreement
did not at the time of release contain any untrue statement of a material fact
or omit 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 are made, not misleading.

         4.7 Use of Proceeds. Except as set forth on Schedule 4.7, the Company
shall use the net proceeds from the sale of the Securities hereunder for working
capital purposes and not (i) for the satisfaction of any portion of the
Company's debt (other than payment of trade payables and accrued expenses in the
ordinary course of the Company's business and consistent with prior practices),
(ii) to redeem any Company equity or equity-equivalent securities, or (iii) to
settle any outstanding litigation.

         4.8 Reimbursement. If any Purchaser or any of its Affiliates or any
officer, director, partner, controlling Person, employee or agent of a Purchaser
or any of its Affiliates (a "Related Person") becomes involved in any capacity
in any Proceeding brought by or against any Person in connection with or as a
result of the transactions contemplated by the Transaction Documents, the
Company will indemnify and hold harmless such Purchaser or Related Person for
its reasonable legal and other expenses (including the costs of any
investigation, preparation and travel) and for any Losses incurred in connection
therewith, as such expenses or Losses are incurred, excluding only Losses that
result directly from such Purchaser's or Related Person's gross negligence or
willful misconduct. In addition, the Company shall indemnify and hold harmless
each Purchaser and Related Person from and against any and all Losses, as

                                       18
<PAGE>

incurred, arising out of or relating to any breach by the Company of any of the
representations, warranties or covenants made by the Company in this Agreement
or any other Transaction Document, or any allegation by a third party that, if
true, would constitute such a breach. The conduct of any Proceedings for which
indemnification is available under this paragraph shall be governed by Section
6.4(c) below. The indemnification obligations of the Company under this
paragraph shall be in addition to any liability that the Company may otherwise
have and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Purchasers and any such
Related Persons. If the Company breaches its obligations under any Transaction
Document, then, in addition to any other liabilities the Company may have under
any Transaction Document or applicable law, the Company shall pay or reimburse
the Purchasers on demand for all costs of collection and enforcement (including
reasonable attorneys fees and expenses). Without limiting the generality of the
foregoing, the Company specifically agrees to reimburse the Purchasers on demand
for all costs of enforcing the indemnification obligations in this paragraph.

                                   ARTICLE V
                                   CONDITIONS

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

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

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

                  (c) No Injunction. No statute, rule, regulation, executive
         order, decree, ruling or injunction shall have been enacted, entered,
         promulgated or endorsed by any court or governmental authority of
         competent jurisdiction that prohibits the consummation of any of the
         transactions contemplated by the Transaction Documents;

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

                  (e) No Suspensions of Trading in Common Stock; Listing.
         Trading in the Common Stock shall not have been suspended by the
         Commission or any Trading Market (except for any suspensions of trading
         of not more than three Trading Days (whether or not consecutive) solely
         to permit dissemination of material information regarding the Company)
         at any time since the date of execution of this Agreement, and the
         Common Stock shall have been at all times since such date listed for
         trading on an Eligible Market;

                                       19
<PAGE>

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

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

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

                                   ARTICLE VI
                               REGISTRATION RIGHTS

         6.1 Shelf Registration

                  (a) As promptly as possible, and in any event on or prior to
         the Filing Date, the Company shall prepare and file with the Commission
         a "Shelf" Registration Statement covering the resale of all Registrable
         Securities for an offering to be made on a continuous basis pursuant to
         Rule 415. The Registration Statement shall be on Form S-3 (except if
         the Company is not then eligible to register for resale the Registrable
         Securities on Form S-3, in which case such registration shall be on
         another appropriate form in accordance herewith as the Purchasers may
         consent) and shall contain (except if otherwise directed by the
         Purchasers) the "Plan of Distribution" attached hereto as Exhibit C.

                  (b) The Company shall use its best efforts to cause the
         Registration Statement to be declared effective by the Commission as
         promptly as possible after the filing thereof, but in any event prior
         to the Required Effectiveness Date, and shall use its best efforts to
         keep the Registration Statement continuously effective under the
         Securities Act until all Registrable Securities covered by such
         Registration Statement have been sold publicly or are no longer
         outstanding or when such Securities can be sold pursuant to paragraph
         (k) of Rule 144 (the "Effectiveness Period").

                  (c) The Company shall notify each Purchaser in writing
         promptly (and in any event within one Trading Day) after receiving
         notification from the Commission that the Registration Statement has
         been declared effective.

                  (d) If: (i) any Registration Statement is not filed on or
         prior to the Filing Date (if the Company files such Registration
         Statement without affording the Purchasers the opportunity to review
         and comment on the same as required by Section 6.2(a) hereof, the
         Company shall not be deemed to have satisfied this clause (i)), or (ii)
         the-Company fails to file with the Commission a request for
         acceleration in accordance with Rule 461 promulgated under the
         Securities Act, within five Trading Days after the date that the
         Company is notified (orally or in writing, whichever is earlier) by the
         Commission that a Registration Statement will not be "reviewed," or
         will not be subject to further review, or (iii) the Company fails to
         respond to any comments made by the Commission within 10 Trading Days
         after the receipt of such comments, or (iv) a Registration Statement

                                       20
<PAGE>

         filed hereunder is not declared effective by the Commission by the
         Required Effectiveness Date, or (v) after a Registration Statement is
         filed with and declared effective by the Commission, such Registration
         Statement ceases to be effective as to all Registrable Securities to
         which it is required to relate at any time prior to the expiration of
         the Effectiveness Period without being succeeded within 20 Trading Days
         by an amendment to such Registration Statement or by a subsequent
         Registration Statement filed with and declared effective by the
         Commission, or (vi) an amendment to a Registration Statement is not
         filed by the Company with the Commission within 20 Trading Days after
         the Commission's having notified the Company that such amendment is
         required in order for such Registration Statement to be declared
         effective, or (vii) the Common Stock is not listed or quoted, or is
         suspended from trading on an Eligible Market for a period of three
         Trading Days (which need not be consecutive Trading Days) (any such
         failure or breach being referred to as an "Event," and for purposes of
         clause (i) or (iv) the date on which such Event occurs, or for purposes
         of clause (ii) the date on which such five Trading Day period is
         exceeded, or for purposes of clauses (iii), (v) or (vi) the date which
         such ten Trading Day-period is exceeded, or for purposes of clause
         (vii) the date on which such three Trading Day period is exceeded,
         being referred to as "Event Date"), then: (x) on each such Event Date
         the Company shall pay to each Purchaser an amount in cash, as partial
         liquidated damages and not as a penalty, equal to 1% of the aggregate
         purchase price paid by such Purchaser pursuant to the Purchase
         Agreement; and (y) on each monthly anniversary of each such Event Date
         thereof (if the applicable Event shall not have been cured by such
         date) until the applicable Event is cured, the Company shall pay to
         each Purchaser an amount in cash, as partial liquidated damages and not
         as a penalty, equal to 1% of the aggregate purchase price paid by such
         Purchaser pursuant to the Purchase Agreement. Such payments shall be in
         partial compensation to the Purchasers and shall not constitute the
         Purchaser's exclusive remedy for such events. If the Company fails to
         pay any liquidated damages pursuant to this Section in full within
         seven days after the date payable, the Company will pay interest
         thereon at a rate of 18% per annum (or such lesser maximum amount that
         is permitted to be paid by applicable law) to the Purchaser, accruing
         daily from the date such liquidated damages are due until such amounts,
         plus all such interest thereon, are paid in full.

                  (e) The Company shall not, prior to the Effective Date of the
         Registration Statement, prepare and file with the Commission a
         registration statement relating to an offering for its own account or
         the account of others (other than on Form S-4 or Form S-8 (each as
         promulgated under the Securities Act) or as contemplated in the
         Transaction Documents) under the Securities Act of any of its equity
         securities.

                  (f) If the Company issues to the Purchasers any Common Stock
         pursuant to the Transaction Documents that is not included in the
         initial Registration Statement, then the Company shall file an
         additional Registration Statement covering such number of shares of
         Common Stock on or prior to the Filing Date and shall use it best
         efforts, but in no event later than the Required Filing Date, to cause
         such additional Registration Statement to become effective by the
         Commission.

         6.2 Registration Procedures. In connection with the Company's
registration obligations hereunder, the Company shall:

                                       21
<PAGE>

                  (a) Not less than three Trading Days prior to the filing of a
         Registration Statement or any related Prospectus or any amendment or
         supplement thereto (including any document that would be incorporated
         or deemed to be incorporated therein by reference), the Company shall
         (i) furnish to each Purchaser and any counsel designated by any
         Purchaser (each, a "Purchaser Counsel", and Iroquois Capital, L.P. has
         initially designated Proskauer Rose LLP "LP Counsel") copies of all
         such documents proposed to be filed, which documents (other than those
         incorporated or deemed to be incorporated by reference) will be subject
         to the review of each Purchaser and Purchaser Counsel, and (ii) cause
         its officers and directors, counsel and independent certified public
         accountants to respond to such inquiries as shall be necessary, in the
         reasonable opinion of respective counsel, to conduct a reasonable
         investigation within the meaning of the Securities Act. The Company
         shall not file a Registration Statement or any such Prospectus or any
         amendments or supplements thereto to which Purchasers holding a
         majority of the Registrable Securities shall reasonably object in
         writing.

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

                  (c) Notify the Purchasers of Registrable Securities to be sold
         and Purchaser Counsel as promptly as reasonably possible, and (if
         requested by any such Person) confirm such notice in writing no later
         than two Trading Day thereafter, of any of the following events: (i)
         the Commission notifies the Company whether there will be a "review" of
         any Registration Statement; (ii) the Commission comments in writing on
         any Registration Statement (in which case the Company shall deliver to
         each Purchaser a copy of such comments and of all written responses
         thereto); (iii) any Registration Statement or any post-effective
         amendment is declared effective; (iv) the Commission or any other
         Federal or state governmental authority requests any amendment or
         supplement to any Registration Statement or Prospectus or requests
         additional information related thereto; (v) the Commission issues any
         stop order suspending the effectiveness of any Registration Statement
         or initiates any Proceedings for that purpose; (vi) the Company
         receives notice of any suspension of the qualification or exemption
         from qualification of any Registrable Securities for sale in any
         jurisdiction, or the initiation or threat of any Proceeding for such
         purpose; or (vii) the financial statements included in any Registration
         Statement become ineligible for inclusion therein or any statement made
         in any Registration Statement or Prospectus or any document
         incorporated or deemed to be incorporated therein by reference is
         untrue in any material respect or any revision to a Registration

                                       22
<PAGE>

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

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

                  (e) Furnish to each Purchaser and Purchaser Counsel, without
         charge, at least one conformed copy of each Registration Statement and
         each amendment thereto, including financial statements and schedules,
         all documents incorporated or deemed to be incorporated therein by
         reference, and all exhibits to the extent requested by such Person
         (including those previously furnished or incorporated by reference)
         promptly after the filing of such documents with the Commission.

                  (f) Promptly deliver to each Purchaser and Purchaser Counsel,
         without charge, as many copies of the Prospectus or Prospectuses
         (including each form of prospectus) and each amendment or supplement
         thereto as such Persons may reasonably request. The Company hereby
         consents to the use of such Prospectus and each amendment or supplement
         thereto by each of the selling Purchasers in connection with the
         offering and sale of the Registrable Securities covered by such
         Prospectus and any amendment or supplement thereto.

                  (g) (i) In the time and manner required by each Trading
         Market, prepare and file with such Trading Market an additional shares
         listing application covering all of the Registrable Securities; (ii)
         take all steps necessary to cause such Registrable Securities to be
         approved for listing on each Trading Market as soon as possible
         thereafter; (iii) provide to the Purchasers evidence of such listing;
         and (iv) maintain the listing of such Registrable Securities on each
         such Trading Market or another Eligible Market.

                  (h) Prior to any public offering of Registrable Securities,
         use its best efforts to register or qualify or cooperate with the
         selling Purchasers and each applicable Purchaser Counsel in connection
         with the registration or qualification (or exemption from such
         registration or qualification) of such Registrable Securities for offer
         and sale under the securities or Blue Sky laws of such jurisdictions
         within the United States as any Purchaser requests in writing, to keep
         each such registration or qualification (or exemption therefrom)
         effective during the Effectiveness Period and to do any and all other
         acts or things necessary or advisable to enable the disposition in such
         jurisdictions of the Registrable Securities covered by a Registration
         Statement.

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

                                       23
<PAGE>

                  (j) Upon the occurrence of any event described in Section
         6.2(c)(vii), as promptly as reasonably possible, prepare a supplement
         or amendment, including a post-effective amendment, to the Registration
         Statement or a supplement to the related Prospectus or any document
         incorporated or deemed to be incorporated therein by reference, and
         file any other required document so that, as thereafter delivered,
         neither the Registration Statement nor such Prospectus will contain an
         untrue statement of a material fact or omit to state a material fact
         required to be stated therein or necessary to make the statements
         therein, in the light of the circumstances under which they were made,
         not misleading.

                  (k) Cooperate with any due diligence investigation undertaken
         by the Purchasers in connection with the sale of Registrable
         Securities, including, without limitation, by making available any
         documents and information; provided that the Company will not deliver
         or make available to any Purchaser material, nonpublic information
         unless such Purchaser specifically requests in advance to receive
         material, nonpublic information in writing.

                  (l) If Holders of a majority of the Registrable Securities
         being offered pursuant to a Registration Statement select underwriters
         for the offering, the Company shall enter into and perform its
         obligations under an underwriting agreement, in usual and customary
         form, including, without limitation, by providing customary legal
         opinions, comfort letters and indemnification and contribution
         obligations.

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

         6.3 Registration Expenses. The Company shall pay (or reimburse the
Purchasers for) all fees and expenses incident to the performance of or
compliance with this Agreement by the Company, including without limitation (a)
all registration and filing fees and expenses, including without limitation
those related to filings with the Commission, any Trading Market and in
connection with applicable state securities or Blue Sky laws, (b) printing
expenses (including without limitation expenses of printing certificates for
Registrable Securities and of printing prospectuses requested by the
Purchasers), (c) messenger, telephone and delivery expenses, (d) fees and
disbursements of counsel for the Company, (e) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement, and (f) all listing fees to be paid
by the Company to the Trading Market.

         6.4 Indemnification

                  (a) Indemnification by the Company. The Company shall,
         notwithstanding any termination of this Agreement, indemnify and hold
         harmless each Purchaser, the officers, directors, partners, members,
         agents, investment advisors and employees of each of them, each Person
         who controls any such Purchaser (within the meaning of Section 15 of
         the Securities Act or Section 20 of the Exchange Act) and the officers,
         directors, partners, members, agents and employees of each such
         controlling Person, to the fullest extent permitted by applicable law,
         from and against any and all Losses, as incurred, arising out of or
         relating to any untrue or alleged untrue statement of a material fact
         contained in the Registration Statement, any Prospectus or any form of
         prospectus or in any amendment or supplement thereto or in any
         preliminary prospectus, or arising out of or relating to any omission
         or alleged omission of a material fact required to be stated therein or
         necessary to make the statements therein (in the case of any Prospectus
         or form of prospectus or supplement thereto, in the light of the

                                       24
<PAGE>

         circumstances under which they were made) not misleading, except to the
         extent, but only to the extent, that (i) such untrue statements,
         alleged untrue statements, omissions or alleged omissions are based
         solely upon information regarding such Purchaser furnished in writing
         to the Company by such Purchaser expressly for use therein, or to the
         extent that such information relates to such Purchaser or such
         Purchaser's proposed method of distribution of Registrable Securities
         and was reviewed and expressly approved in writing by such Purchaser
         expressly for use in the Registration Statement, such Prospectus or
         such form of Prospectus or in any amendment or supplement thereto or
         (ii) in the case of an occurrence of an event of the type specified in
         Section 6.2(c)(v)-(vii), the use by such Purchaser of an outdated or
         defective Prospectus after the Company has notified such Purchaser in
         writing that the Prospectus is outdated or defective and prior to the
         receipt by such Purchaser of the Advice contemplated in Section 6.5.
         The Company shall notify the Purchasers promptly of the institution,
         threat or assertion of any Proceeding of which the Company is aware in
         connection with the transactions contemplated by this Agreement.

                  (b) Indemnification by Purchasers. Each Purchaser shall,
         severally and not jointly, indemnify and hold harmless the Company, its
         directors, officers, agents and employees, each Person who controls the
         Company (within the meaning of Section 15 of the Securities Act and
         Section 20 of the Exchange Act), and the directors, officers, agents or
         employees of such controlling Persons, to the fullest extent permitted
         by applicable law, from and against all Losses (as determined by a
         court of competent jurisdiction in a final judgment not subject to
         appeal or review) arising solely out of any untrue statement of a
         material fact contained in the Registration Statement, any Prospectus,
         or any form of prospectus, or in any amendment or supplement thereto,
         or arising solely out of any omission of a material fact required to be
         stated therein or necessary to make the statements therein (in the case
         of any Prospectus or form of prospectus or supplement thereto, in the
         light of the circumstances under which they were made) not misleading
         to the extent, but only to the extent, that such untrue statement or
         omission is contained in any information so furnished in writing by
         such Purchaser to the Company specifically for inclusion in such
         Registration Statement or such Prospectus or to the extent that (i)
         such untrue statements or omissions are based solely upon information
         regarding such Purchaser furnished in writing to the Company by such
         Purchaser expressly for use therein, or to the extent that such
         information relates to such Purchaser or such Purchaser's proposed
         method of distribution of Registrable Securities and was reviewed and
         expressly approved in writing by such Purchaser expressly for use in
         the Registration Statement, such Prospectus or such form of Prospectus
         or in any amendment or supplement thereto or (ii) in the case of an
         occurrence of an event of the type specified in Section
         6.2(c)(v)-(vii), the use by such Purchaser of an outdated or defective
         Prospectus after the Company has notified such Purchaser in writing
         that the Prospectus is outdated or defective and prior to the receipt
         by such Purchaser of the Advice contemplated in Section 6.5. In no
         event shall the liability of any selling Purchaser hereunder be greater
         in amount than the dollar amount of the net proceeds received by such
         Purchaser upon the sale of the Registrable Securities giving rise to
         such indemnification obligation.

                  (c) Conduct of Indemnification Proceedings. If any Proceeding
         shall be brought or asserted against any Person entitled to indemnity
         hereunder (an "Indemnified Party"), such Indemnified Party shall
         promptly notify the Person from whom indemnity is sought (the

                                       25
<PAGE>

         "Indemnifying Party") in writing, and the Indemnifying Party shall
         assume the defense thereof, including the employment of counsel
         reasonably satisfactory to the Indemnified Party and the payment of all
         fees and expenses incurred in connection with defense thereof;
         provided, that the failure of any Indemnified Party to give such notice
         shall not relieve the Indemnifying Party of its obligations or
         liabilities pursuant to this Agreement, except (and only) to the extent
         that it shall be finally determined by a court of competent
         jurisdiction (which determination is not subject to appeal or further
         review) that such failure shall have proximately and materially
         adversely prejudiced the Indemnifying Party.

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

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

                  (d) Contribution. If a claim for indemnification under Section
         6.4(a) or (b) is unavailable to an Indemnified Party (by reason of
         public policy or otherwise), then each Indemnifying Party, in lieu of
         indemnifying such Indemnified Party, shall contribute to the amount
         paid or payable by such Indemnified Party as a result of such Losses,
         in such proportion as is appropriate to reflect the relative fault of
         the Indemnifying Party and Indemnified Party in connection with the
         actions, statements or omissions that resulted in such Losses as well

                                       26
<PAGE>

         as any other relevant equitable considerations. The relative fault of
         such Indemnifying Party and Indemnified Party shall be determined by
         reference to, among other things, whether any action in question,
         including any untrue or alleged untrue statement of a material fact or
         omission or alleged omission of a material fact, has been taken or made
         by, or relates to information supplied by, such Indemnifying Party or
         Indemnified Party, and the parties' relative intent, knowledge, access
         to information and opportunity to correct or prevent such action,
         statement or omission. The amount paid or payable by a party as a
         result of any Losses shall be deemed to include, subject to the
         limitations set forth in Section 6.4(c), any reasonable attorneys' or
         other reasonable fees or expenses incurred by such party in connection
         with any Proceeding to the extent such party would have been
         indemnified for such fees or expenses if the indemnification provided
         for in this Section was available to such party in accordance with its
         terms.

                           The parties hereto agree that it would not be just
         and equitable if contribution pursuant to this Section 6.4(d) were
         determined by pro rata allocation or by any other method of allocation
         that does not take into account the equitable considerations referred
         to in the immediately preceding paragraph. Notwithstanding the
         provisions of this Section 6.4(d), no Purchaser shall be required to
         contribute, in the aggregate, any amount in excess of the amount by
         which the proceeds actually received by such Purchaser from the sale of
         the Registrable Securities subject to the Proceeding exceeds the amount
         of any damages that such Purchaser has otherwise been required to pay
         by reason of such untrue or alleged untrue statement or omission or
         alleged omission. No Person guilty of fraudulent misrepresentation
         (within the meaning of Section 11(f) of the Securities Act) shall be
         entitled to contribution from any Person who was not guilty of such
         fraudulent misrepresentation.

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

         6.5 Dispositions. Each Purchaser agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in
connection with sales of Registrable Securities pursuant to the Registration
Statement. Each Purchaser further agrees that, upon receipt of a notice from the
Company of the occurrence of any event of the kind described in Sections
6.2(c)(v), (vi) or (vii), such Purchaser will discontinue disposition of such
Registrable Securities under the Registration Statement until such Purchaser's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 6.2(j), or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement. The Company may provide
appropriate stop orders to enforce the provisions of this paragraph.

         6.6 No Piggyback on Registrations. Except as set forth on Schedule
3.1(o), neither the Company nor any of its security holders (other than the
Purchasers in such capacity pursuant hereto) may include securities of the
Company in the Registration Statement other than the Registrable Securities, and
the Company shall not after the date hereof enter into any agreement providing
any such right to any of its security holders.

         6.7 Piggy-Back Registrations. If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of the
Registrable Securities and the Company shall determine to prepare and file with
the Commission a registration statement relating to an offering for its own

                                       27
<PAGE>

account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Purchaser written notice of
such determination and if, within fifteen days after receipt of such notice, any
such Purchaser shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
Purchaser requests to be registered.

                                  ARTICLE VII
                                  MISCELLANEOUS

         7.1 Termination. This Agreement may be terminated by the Company or any
Purchaser, by written notice to the other parties, if the Closing has not been
consummated by the third Trading Day following the date of this Agreement;
provided that no such termination will affect the right of any party to sue for
any breach by the other party (or parties).

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

         7.3 Entire Agreement. The Transaction Documents, together with the
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules. At or
after the Closing, and without further consideration, the Company will execute
and deliver to the Purchasers such further documents as may be reasonably
requested in order to give practical effect to the intention of the parties
under the Transaction Documents. Notwithstanding anything to the contrary
herein, Securities may be assigned to any Person in connection with a bona fide
margin account or other loan or financing arrangement secured by such Company
Securities.

         7.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified in this Section 7.4 prior to 6:30 p.m. (New York City time) on a
Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section on a day that is not a Trading Day or later than 6:30
p.m. (New York City time) on any Trading Day, (c) the Trading Day following the
date of deposit with a nationally recognized overnight courier service, or (d)
upon actual receipt by the party to whom such notice is required to be given.
The addresses and facsimile numbers for such notices and communications are
those set forth on the signature pages hereof, or such other address or
facsimile number as may be designated in writing hereafter, in the same manner,
by any such Person.

                                       28
<PAGE>

         7.5 Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and each of the Purchasers or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Purchasers under Article VI and that does not directly or indirectly affect the
rights of other Purchasers may be given by Purchasers holding at least a
majority of the Registrable Securities to which such waiver or consent relates.

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

         7.7 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Any Purchaser may assign
its rights under this Agreement to any Person to whom such Purchaser assigns or
transfers any Securities, provided such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof that
apply to the "Purchasers." Notwithstanding anything to the contrary herein,
Securities may be assigned to any Person in connection with a bona fide margin
account or other loan or financing arrangement secured by such Securities.

         7.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except that each Related Person is an intended third party
beneficiary of Section 4.8 and each Indemnified Party is an intended third party
beneficiary of Section 6.4 and (in each case) may enforce the provisions of such
Sections directly against the parties with obligations thereunder.

         7.9 Governing Law; Venue; Waiver Of Jury Trial. ALL QUESTIONS
CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK. THE COMPANY AND PURCHASERS HEREBY IRREVOCABLY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN
THE CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE
BROUGHT BY THE COMPANY OR ANY PURCHASER HEREUNDER, IN CONNECTION HEREWITH OR
WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH
RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY
IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING

                                       29
<PAGE>

BROUGHT BY THE COMPANY OR ANY PURCHASER, ANY CLAIM THAT IT IS NOT PERSONALLY
SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR
PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF
PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR
PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR
OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN
EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL
CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING
CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS
IN ANY MANNER PERMITTED BY LAW. THE COMPANY AND PURCHASERS HEREBY WAIVE ALL
RIGHTS TO A TRIAL BY JURY.

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

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

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

         7.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.

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

                                       30
<PAGE>

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

         7.16 Payment Set Aside. To the extent that the Company makes a payment
or payments to any Purchaser hereunder or pursuant to the Additional Investment
Rights or any Purchaser enforces or exercises its rights hereunder or
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 by 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.

         7.17 Adjustments in Share Numbers and Prices. In the event of any stock
split, subdivision, dividend or distribution payable in shares of Common Stock
(or other securities or rights convertible into, or entitling the holder thereof
to receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof, each
reference in any Transaction Document to a number of shares or a price per share
shall be amended to appropriately account for such event.

         7.18 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. The decision of each Purchaser to
purchase Securities pursuant to this Agreement has been made by such Purchaser
independently of any other Purchaser and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company or of the Subsidiary which may have been
made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser or any of its agents or employees shall have any
liability to any other Purchaser (or any other Person) relating to or arising
from any such information, materials, statements or opinions. Nothing contained
herein or in any Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Document. The Company hereby confirms that it understands and agrees
that the Purchasers are not acting as a "group" as that term is used in Section
13(d) of the Exchange Act. Each Purchaser acknowledges that no other Purchaser
has acted as agent for such Purchaser in connection with making its investment

                                       31
<PAGE>

hereunder and that no other Purchaser will be acting as agent of such Purchaser
in connection with monitoring its investment hereunder. Each Purchaser shall be
entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose. Each
Purchaser represents that it has been represented by its own separate legal
counsel in its review and negotiations of this Agreement and the Transaction
Documents and each party represents and confirms that Proskauer Rose LLP
represents only Iroquois Capital, L.P. in connection with this Agreement and the
other Transaction Documents.

                           [Signature pages to follow]

                                       32
<PAGE>

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

                                    QMED, INC.

                                    By:     /s/ Michael W. Cox
                                            -------------------------------
                                    Name:   Michael W. Cox
                                    Title:  President & CEO

                                    Address for Notice:

                                    25 Christopher Way
                                    Eatontown, NJ 07724

                                    Facsimile No.:  732.544.5404
                                    Telephone No.: 732.544.5544
                                    Attn:

         With a copy to:            St. John & Wayne, L.L.C.
                                    Two Penn Plaza East
                                    Newark, NJ 07105
                                    Fax: (973) 491-3555
                                    Tel.: (973) 491-3600
                                    Attn: William P. Oberdorf, Esq.

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

<PAGE>

                                    Purchaser: IROQUOIS CAPITAL, L.P.

                                    By:     /s/ Joshua Silverman
                                    Name:   Joshua Silverman
                                    Title:  Partner

                                    Number of Units: 144,444

                                    Additional Investment Right Shares: 36,111

                                    Address for Notice:

                                    Iroquois Capital, L.P.
                                    641 Lexington Ave, 26th Floor
                                    New York, NY  10022
                                    Facsimile No.:  (212) 207-3452
                                    Telephone No.: (212) 974-3070
                                    Attn: Joshua Silverman

         With a copy to:            Proskauer Rose LLP
                                    1585 Broadway
                                    New York, New York 10036-8299
                                    Facsimile No.:  (212) 969-2900
                                    Telephone No.:  (212) 969-3000
                                    Attn:  Adam J. Kansler, Esq.

<PAGE>

                                    Purchaser: Smithfield Fiduciary LLC

                                    By:     /s/ Adam J. Chill
                                            ------------------------------
                                    Name:   Adam J. Chill
                                    Title:  Authorized Signatory

                                    Number of Units:  144,444

                                    Additional Investment Right Shares: 36,111

                                    Address for Notice:

                                    c/o Highbridge Capital Management, LLC
                                    9 West 57th Street, 27th Floor
                                    New York, New York 10019
                                    Facsimile No.:  (212) 751-0755
                                    Telephone No.:  (212) 287-4720
                                    Attn:  Ari J. Storch/Adam Chill

<PAGE>

                                    Purchaser: Omicron Master Trust

                                    By:     /s/ Bruce Bernstein
                                    Name:   Bruce Bernstein
                                    Title:  Managing Partner

                                    Number of Units:  168,889

                                    Additional Investment Right Shares: 42,222

                                    Address for Notice:

                                    650 Fifth Avenue, 24th Floor
                                    New York, NY 10019
                                    Facsimile No.:  (212) 803-5269
                                    Telephone No.:  (212) 803-5262
                                    Attn:  Bruce Bernstein/Brian Daly

<PAGE>

                                    Purchaser: Cranshire Capital, L.P.

                                    By:     /s/ Mitchell P. Kopin
                                            --------------------------------
                                    Name:   Mitchell P. Kopin
                                    Title:  President - Downsfield Capital
                                            The General Partner

                                    Number of Units:  177,778

                                    Additional Investment Right Shares: 44,444

                                    Address for Notice:

                                    Cranshire Capital, L.P.
                                    666 Dundee Road, Suite 1901
                                    Northbrook, IL 60062
                                    Facsimile: (847) 562-9031
                                    Attn: Mitchell Kopin

<PAGE>

Exhibits:

A        Form of Additional Investment Right
B        Transfer Agent Instructions
C        Opinion of Company Counsel
D        Plan of DistributionEXHIBIT A

NEITHER THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES OR BLUE SKY LAWS. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON
EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

                                   QMED, INC.

                           ADDITIONAL INVESTMENT RIGHT

Additional Investment Right No. [ ]                     Dated: February 14, 2005

         QMed, Inc., a Delaware corporation (the "Company"), hereby certifies
that, for value received, [Name of Holder] or its registered assigns (the
"Holder"), is entitled to purchase from the Company (a) up to a total of [ ]1
shares of common stock (the "Common Stock"), of the Company (each such share, an
"Additional Investment Right Share" and all such shares, the "Additional
Investment Right Shares") at an exercise price equal to $11.75 per share (as
adjusted from time to time as provided in Section 9, the "Exercise Price"), and
(b) only as part of and in connection with the purchase of the Additional
Investment Right Shares at any time and from time to time from and after the
date hereof and through and including the 30th calendar day following the
Effective Date, but not including the Effective Date (the "Expiration Date"),
and subject to the following terms and conditions. This Additional Investment
Right (this "Additional Investment Right") is one of a series of similar
Additional Investment Rights issued pursuant to that certain Securities Purchase
Agreement, dated as of the date hereof, by and among the Company and the
Purchasers identified therein (the "Purchase Agreement"). All such Additional
Investment Rights are referred to herein, collectively, as the "Additional
Investment Rights."

1. Definitions. In addition to the terms defined elsewhere in this Additional
Investment Right, capitalized terms that are not otherwise defined herein have
the meanings given to such terms in the Purchase Agreement.

2. Registration of Additional Investment Right. The Company shall register this
Additional Investment Right, upon records to be maintained by the Company for
that purpose (the "Additional Investment Right Register"), in the name of the
record Holder hereof from time to time. The Company may deem and treat the
registered Holder of this Additional Investment Right as the absolute owner
hereof for the purpose of any exercise hereof or any distribution to the Holder,
and for all other purposes, absent actual notice to the contrary.

3. Registration of Transfers. The Company shall register the assignment and
transfer of any portion of this Additional Investment Right in the Additional
Investment Right Register, upon surrender of this Additional Investment Right,
with the Form of Assignment attached hereto as Exhibit A duly completed and
signed, to the Transfer Agent or to the Company at its address specified herein.
Upon any such registration or transfer, a new Additional Investment Right to
purchase Common Stock, in substantially the form of this Additional Investment
Right (any such new Additional Investment Right, a "New Additional Investment
Right"), evidencing the portion of this Additional Investment Right so
transferred shall be issued to the transferee and a New Additional Investment
Right evidencing the remaining portion of this Additional Investment Right not
so transferred, if any, shall be issued to the transferring Holder. The
acceptance of the New Additional Investment Right by the transferee thereof
shall be deemed the acceptance by such transferee of all of the rights and
obligations of a holder of an Additional Investment Right.

4. Exercise and Duration of Additional Investment Right.

(a) This Additional Investment Right shall be exercisable by the registered
Holder at any time and from time to time on or after the date hereof to and
including the Expiration Date. At 6:30 P.M., New York City time on the
Expiration Date, the portion of this Additional Investment Right not exercised
prior thereto shall be and become void and of no value.

(b) The Holder may exercise this Additional Investment Right by delivering to
the Company (i) the original Additional Investment Right and an exercise notice,
in the form attached hereto as Exhibit B (the "Exercise Notice"), appropriately
completed and duly signed, and (ii) payment of the Exercise Price for the number
of Additional Investment Right Shares as to which this Additional Investment
Right is being exercised, and the date such items are delivered to the Company
(as determined in accordance with the notice provisions hereof) is an "Exercise
Date." Execution and delivery of the Exercise Notice shall have the same effect
as cancellation of the original Additional Investment Right and issuance of a
New Additional Investment Right evidencing the right to purchase the remaining
number of Additional Investment Right Shares.

5. Delivery of Additional Investment Right Shares.

(a) Upon exercise of this Additional Investment Right, the Company shall
promptly (but in no event later than three Trading Days after the Exercise Date)
issue or cause to be issued and cause to be delivered to or upon the written
order of the Holder and in such name or names as the Holder may designate, a
certificate for the Additional Investment Right Shares free of restrictive
legends unless a registration statement covering the resale of the Additional
Investment Right Shares and naming the Holder as a selling stockholder
thereunder is not then effective and the Additional Investment Right Shares are
not freely transferable without volume restrictions pursuant to Rule 144 under
the Securities Act. The Holder, or any Person so designated by the Holder to
receive Additional Investment Right Shares shall be deemed to have become holder
of record of such Additional Investment Right Shares as of the Exercise Date.
The Company shall, upon request of the Holder, use its best efforts to deliver
Additional Investment Right Shares hereunder electronically through the
Depository Trust Corporation or another established clearing corporation
performing similar functions.

(b) This Additional Investment Right is exercisable, either in its entirety or,
from time to time, for a portion of the number of Additional Investment Right
Shares. Upon surrender of this Additional Investment Right following one or more
partial exercises, the Company shall issue or cause to be issued, at its
expense, a New Additional Investment Right evidencing the right to purchase the
remaining number of Additional Investment Right Shares.

(c) In addition to any other rights available to a Holder, if the Company fails
to deliver to the Holder a certificate representing Additional Investment Right
Shares on the third Trading Day after the date on which delivery of such
certificate is required by this Additional Investment Right and if after such
third Trading Day the Holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Holder of the Additional Investment Right Shares that the Holder anticipated
receiving from the Company (a "Buy-In"), then the Company shall, within three
Trading Days after the Holder's request and in the Holder's discretion, either
(i) pay cash to the Holder in an amount equal to the Holder's total purchase
price (including brokerage commissions, if any) for the shares of Common Stock
so purchased (the "Buy-In Price"), at which point the Company's obligation to
deliver such certificate (and to issue such Common Stock) shall terminate, or
(ii) promptly honor its obligation to deliver to the Holder a certificate or
certificates representing such Common Stock and pay cash to the Holder in an
amount equal to the excess (if any) of the Buy-In Price over the product of (A)
such number of shares of Common Stock, times (B) the Closing Price on the date
of the event giving rise to the Company's obligation to deliver such
certificate.

(d) The Company's obligations to issue and deliver Additional Investment Right
Shares in accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the same, any
waiver or consent with respect to any provision hereof, the recovery of any
judgment against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder or any other Person of any obligation to the Company or any
violation or alleged violation of law by the Holder or any other Person, and
irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Holder in connection with the issuance of
Additional Investment Right Shares. Nothing herein shall limit a Holder's right
to pursue any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company's failure to timely deliver
certificates representing shares of Common Stock upon exercise of the Additional
Investment Right as required pursuant to the terms hereof.

6. Charges, Taxes and Expenses. Issuance and delivery of certificates for shares
of Common Stock upon exercise of this Additional Investment Right shall be made
without charge to the Holder for any issue or transfer tax, withholding tax,
transfer agent fee or other incidental tax or expense in respect of the issuance
of such certificates, all of which taxes and expenses shall be paid by the
Company; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any certificates for Additional Investment Right Shares or Additional
Investment Rights in a name other than that of the Holder or an Affiliate
thereof. The Holder shall be responsible for all other tax liability that may
arise as a result of holding or transferring this Additional Investment Right or
receiving Additional Investment Right Shares upon exercise hereof.

7. Replacement of Additional Investment Right. If this Additional Investment
Right is mutilated, lost, stolen or destroyed, the Company shall issue or cause
to be issued in exchange and substitution for and upon cancellation hereof, or
in lieu of and substitution for this Additional Investment Right, a New
Additional Investment Right, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity, if requested. Applicants for a New Additional Investment
Right under such circumstances shall also comply with such other reasonable
regulations and procedures and pay such other reasonable third-party costs as
the Company may prescribe.

8. Reservation of Additional Investment Right Shares. The Company covenants that
it will at all times reserve and keep available out of the aggregate of its
authorized but unissued and otherwise unreserved Common Stock, solely for the
purpose of enabling it to issue Additional Investment Right Shares upon exercise
of this Additional Investment Right as provided herein, the number of Additional
Investment Right Shares which are then issuable and deliverable upon the
exercise of this entire Additional Investment Right free from preemptive rights
or any other contingent purchase rights of persons other than the Holder (after
giving effect to the adjustments and restrictions of Section 9, if any). The
Company covenants that all Additional Investment Right Shares so issuable and
deliverable shall, upon issuance and the payment of the applicable Exercise
Price in accordance with the terms hereof be duly and validly authorized, issued
and fully paid and nonassessable. The Company will take all such action as may
be necessary to assure that such shares of Common Stock may be issued as
provided herein without violation of any applicable law or regulation, or of any
requirements of any securities exchange or automated quotation system upon which
the Common Stock may be listed.

9. Certain Adjustments. The Exercise Price and number of Additional Investment
Right Shares issuable upon exercise of this Additional Investment Right are
subject to adjustment from time to time as set forth in this Section 9.

(a) Stock Dividends and Splits. If the Company, at any time while this
Additional Investment Right is outstanding, (i) pays a stock dividend on its
Common Stock or otherwise makes a distribution on any class of capital stock
that is payable in shares of Common Stock, (ii) subdivides outstanding shares of
Common Stock into a larger number of shares, or (iii) combines outstanding
shares of Common Stock into a smaller number of shares, then in each such case
the Exercise Price shall be multiplied by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding immediately before
such event and of which the denominator shall be the number of shares of Common
Stock outstanding immediately after such event. Any adjustment made pursuant to
clause (i) of this paragraph shall become effective immediately after the record
date for the determination of stockholders entitled to receive such dividend or
distribution, and any adjustment pursuant to clauses (ii) or (iii) of this
paragraph shall become effective immediately after the effective date of such
subdivision or combination.

(b) Pro Rata Distributions. If the Company, at any time while this Additional
Investment Right is outstanding, distributes to holders of Common Stock (i)
evidences of its indebtedness, (ii) any security (other than a distribution of
Common Stock covered by the preceding paragraph), (iii) rights or warrants to
subscribe for or purchase any security, or (iv) any other asset (in each case,
"Distributed Property"), then in each such case the Exercise Price in effect
immediately prior to the record date fixed for determination of stockholders
entitled to receive such distribution shall be adjusted (effective on such
record date) to equal the product of such Exercise Price times a fraction of
which the denominator shall be the average of the Closing Prices for the five
Trading Days immediately prior to (but not including) such record date and of
which the numerator shall be such average less the then fair market value of the
Distributed Property distributed in respect of one outstanding share of Common
Stock, as determined by the Company's independent certified public accountants
that regularly examine the financial statements of the Company (an "Appraiser").
In such event, the Holder, after receipt of the determination by the Appraiser,
shall have the right to select an additional appraiser (which shall be a
nationally recognized accounting firm), in which case such fair market value
shall be deemed to equal the average of the values determined by each of the
Appraiser and such appraiser. As an alternative to the foregoing adjustment to
the Exercise Price, at the request of the Holder delivered before the 90th day
after such record date, the Company will deliver to such Holder, within five
Trading Days after such request (or, if later, on the effective date of such
distribution), the Distributed Property that such Holder would have been
entitled to receive in respect of the Additional Investment Right Shares for
which this Additional Investment Right could have been exercised immediately
prior to such record date. If such Distributed Property is not delivered to a
Holder pursuant to the preceding sentence, then upon expiration of or any
exercise of the Additional Investment Right that occurs after such record date,
such Holder shall remain entitled to receive, in addition to the Additional
Investment Right Shares otherwise issuable upon such exercise (if applicable),
such Distributed Property.

(c) Fundamental Transactions. If, at any time while this Additional Investment
Right is outstanding, (i) the Company effects any merger or consolidation of the
Company with or into another Person, (ii) the Company effects any sale of all or
substantially all of its assets in one or a series of related transactions,
(iii) any tender offer or exchange offer (whether by the Company or another
Person) is completed pursuant to which holders of Common Stock are permitted to
tender or exchange their shares for other securities, cash or property, or (iv)
the Company effects any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is effectively converted into
or exchanged for other securities, cash or property (other than as a result of a
subdivision or combination of shares of Common Stock covered by Section 9(a)
above) (in any such case, a "Fundamental Transaction"), then the Holder shall
have the right thereafter to receive, upon exercise of this Additional
Investment Right, the same amount and kind of securities, cash or property as it
would have been entitled to receive upon the occurrence of such Fundamental
Transaction if it had been, immediately prior to such Fundamental Transaction,
the holder of the number of Additional Investment Right Shares then issuable
upon exercise in full of this Additional Investment Right (the "Alternate
Consideration"). The aggregate Exercise Price for this Additional Investment
Right will not be affected by any such Fundamental Transaction, but the Company
shall apportion such aggregate Exercise Price among the Alternate Consideration
in a reasonable manner reflecting the relative value of any different components
of the Alternate Consideration. If holders of Common Stock are given any choice
as to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any exercise of this Additional Investment Right
following such Fundamental Transaction. At the Holder's request, any successor
to the Company or surviving entity in such Fundamental Transaction shall issue
to the Holder a new warrant consistent with the foregoing provisions and
evidencing the Holder's right to purchase the Alternate Consideration for the
aggregate Exercise Price upon exercise thereof. The terms of any agreement
pursuant to which a Fundamental Transaction is effected shall include terms
requiring any such successor or surviving entity to comply with the provisions
of this paragraph (c) and insuring that the Additional Investment Right (or any
such replacement security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction. If any Fundamental
Transaction constitutes or results in a Change of Control, then at the request
of the Holder delivered before the 90th day after such Fundamental Transaction,
the Company (or any such successor or surviving entity) will purchase the
Additional Investment Right from the Holder for a purchase price, payable in
cash within five Trading Days after such request (or, if later, on the effective
date of the Fundamental Transaction), equal to the Black Scholes value of the
remaining unexercised portion of this Additional Investment Right on the date of
such request.

(d) Number of Additional Investment Right Shares. Simultaneously with any
adjustment to the Exercise Price pursuant to paragraphs (a) or (b) of this
Section, the number of Additional Investment Right Shares that may be purchased
upon exercise of this Additional Investment Right shall be increased or
decreased proportionately, so that after such adjustment the aggregate Exercise
Price payable hereunder for the increased or decreased number of Additional
Investment Right Shares shall be the same as the aggregate Exercise Price in
effect immediately prior to such adjustment.

(e) Calculations. All calculations under this Section 9 shall be made to the
nearest cent or the nearest 1/100th of a share, as applicable. The number of
shares of Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Company, and the disposition of any
such shares shall be considered an issue or sale of Common Stock.

(f) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to
this Section 9, the Company at its expense will promptly compute such adjustment
in accordance with the terms of this Additional Investment Right and prepare a
certificate setting forth such adjustment, including a statement of the adjusted
Exercise Price and adjusted number or type of Additional Investment Right Shares
or other securities issuable upon exercise of this Additional Investment Right
(as applicable), describing the transactions giving rise to such adjustments and
showing in detail the facts upon which such adjustment is based. Upon written
request, the Company will promptly deliver a copy of each such certificate to
the Holder and to the Company's Transfer Agent.

(g) Notice of Corporate Events. If the Company (i) declares a dividend or any
other distribution of cash, securities or other property in respect of its
Common Stock, including without limitation any granting of rights or warrants to
subscribe for or purchase any capital stock of the Company or any Subsidiary,
(ii) authorizes or approves, enters into any agreement contemplating or solicits
stockholder approval for any Fundamental Transaction or (iii) authorizes the
voluntary dissolution, liquidation or winding up of the affairs of the Company,
then the Company shall deliver to the Holder a notice describing the material
terms and conditions of such transaction, at least 20 calendar days prior to the
applicable record or effective date on which a Person would need to hold Common
Stock in order to participate in or vote with respect to such transaction, and
the Company will take all steps reasonably necessary in order to insure that the
Holder is given the practical opportunity to exercise this Additional Investment
Right prior to such time so as to participate in or vote with respect to such
transaction; provided, however, that the failure to deliver such notice or any
defect therein shall not affect the validity of the corporate action required to
be described in such notice.

10. Payment of Exercise Price. The Holder shall pay the Exercise Price in
immediately available funds.

11. Limitation on Exercise. Notwithstanding anything to the contrary contained
herein, the number of shares of Common Stock that may be acquired by the Holder
upon any exercise of this Additional Investment Right (or otherwise in respect
hereof) shall be limited to the extent necessary to insure that, following such
exercise (or other issuance), the total number of shares of Common Stock then
beneficially owned by such Holder and its Affiliates and any other Persons whose
beneficial ownership of Common Stock would be aggregated with the Holder's for
purposes of Section 13(d) of the Exchange Act, does not exceed 4.999% (the
"Maximum Percentage") of the total number of issued and outstanding shares of
Common Stock (including for such purpose the shares of Common Stock issuable
upon such exercise). For such purposes, beneficial ownership shall be determined
in accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. Each delivery of an Exercise Notice
hereunder will constitute a representation by the Holder that it has evaluated
the limitation set forth in this paragraph and determined that issuance of the
full number of Additional Investment Right Shares requested in such Exercise
Notice is permitted under this paragraph. By written notice to the Company, the
Holder may waive the provisions of this Section or increase or decrease the
Maximum Percentage to any other percentage specified in such notice, but (i) any
such waiver or increase will not be effective until the 61st day after such
notice is delivered to the Company, and (ii) any such waiver or increase or
decrease will apply only to the Holder and not to any other holder of Additional
Investment Rights.

12. Fractional Shares. The Company shall not be required to issue or cause to be
issued fractional Additional Investment Right Shares on the exercise of this
Additional Investment Right. If any fraction of a Additional Investment Right
Share would, except for the provisions of this Section 12, be issuable upon
exercise of this Additional Investment Right, the number of Additional
Investment Right Shares to be issued will be rounded up to the nearest whole
share or right to purchase the nearest whole share, as the case may be.

13. Notices. Any and all notices or other communications or deliveries hereunder
(including without limitation any Exercise Notice) shall be in writing and shall
be deemed given and effective on the earliest of (i) the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
number specified in this Section prior to 6:30 p.m. (New York City time) on a
Trading Day, (ii) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section on a day that is not a Trading Day or later than 6:30
p.m. (New York City time) on any Trading Day, (iii) the Trading Day following
the date of mailing, if sent by a nationally recognized overnight courier
service, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices or communications shall be as
set forth in the Purchase Agreement.

14. Additional Investment Right Agent. The Company shall serve as additional
investment right agent under this Additional Investment Right. Upon 30 days'
notice to the Holder, the Company may appoint a new additional investment right
agent. Any corporation into which the Company or any new additional investment
right agent may be merged or any corporation resulting from any consolidation to
which the Company or any new additional investment right agent shall be a party
or any corporation to which the Company or any new additional investment right
agent transfers substantially all of its corporate trust or shareholders
services business shall be a successor additional investment right agent under
this Additional Investment Right without any further act. Any such successor
additional investment right agent shall promptly cause notice of its succession
as additional investment right agent to be mailed (by first class mail, postage
prepaid) to the Holder at the Holder's last address as shown on the Additional
Investment Right Register.

15. Miscellaneous.

(a) Subject to the restrictions on transfer set forth on the first page hereof,
this Additional Investment Right may be assigned by the Holder. This Additional
Investment Right may not be assigned by the Company except to a successor in the
event of a Fundamental Transaction. This Additional Investment Right shall be
binding on and inure to the benefit of the parties hereto and their respective
successors and assigns. Subject to the preceding sentence, nothing in this
Additional Investment Right shall be construed to give to any Person other than
the Company and the Holder any legal or equitable right, remedy or cause of
action under this Additional Investment Right. This Additional Investment Right
may be amended only in writing signed by the Company and the Holder and their
successors and assigns.

(b) The Company will not, by amendment of its governing documents or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Additional Investment
Right, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder against impairment.
Without limiting the generality of the foregoing, the Company (i) will not
increase the par value of any Additional Investment Right Shares above the
amount payable therefor on such exercise, (ii) will take all such action as may
be reasonably necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Additional Investment Right Shares on
the exercise of this Additional Investment Right, respectively, and (iii) will
not close its shareholder books or records in any manner which interferes with
the timely exercise of this Additional Investment Right.

(C) GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS ADDITIONAL
INVESTMENT RIGHT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO
THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY
OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER
OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR
DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE
TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT
IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT
TO THE JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY
(WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES
TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD
AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW. THE COMPANY HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY.

(d) The headings herein are for convenience only, do not constitute a part of
this Additional Investment Right and shall not be deemed to limit or affect any
of the provisions hereof.

(e) In case any one or more of the provisions of this Additional Investment
Right shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Additional
Investment Right shall not in any way be affected or impaired thereby and the
parties will attempt in good faith to agree upon a valid and enforceable
provision which shall be a commercially reasonable substitute therefor, and upon
so agreeing, shall incorporate such substitute provision in this Additional
Investment Right.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
                             SIGNATURE PAGE FOLLOWS]

<PAGE>

         IN WITNESS WHEREOF, the Company has caused this Additional Investment
Right to be duly executed by its authorized officer as of the date first
indicated above.

                                            QMed, INC.

                                            By:
                                            Name:
                                            Title:

<PAGE>

                                    EXHIBIT A

                             FORM OF EXERCISE NOTICE

(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Additional Investment Right)

To:  QMed, Inc.

The undersigned is the Holder of Additional Investment Right No. _______ (the
"Additional Investment Right") issued by QMed, Inc., a Delaware corporation (the
"Company"). Capitalized terms used herein and not otherwise defined have the
respective meanings set forth in the Additional Investment Right.

1.       The Additional Investment Right is currently exercisable to purchase a
         total of ______________ Additional Investment Right Shares.

2.       The undersigned Holder hereby exercises its right to purchase
         _________________ Additional Investment Right Shares pursuant to the
         Additional Investment Right.

3.       The Holder intends that payment of the Exercise Price shall be made in
         immediately available funds, and shall pay the sum of $____________ to
         the Company in accordance with the terms of the Additional Investment
         Right.

4.       Pursuant to this exercise, the Company shall deliver to the holder
         _______________ Additional Investment Right Shares.

5.       Following this exercise, the Additional Investment Right shall be
         exercisable to purchase a total of ______________ Additional Investment
         Right Shares.

Dated:                      ,                Name of Holder:
       ---------------------  -------

                                             (Print)

                                       By:
                                      Name:
                                     Title:

                                    (Signature must conform in all respects to
                                    name of holder as specified on the face of
                                    the Additional Investment Right)

<PAGE>

                                    EXHIBIT B

                               FORM OF ASSIGNMENT

 [To be completed and signed only upon transfer of Additional Investment Right]

         FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Additional Investment Right to purchase ____________ shares of Common Stock and
appoints ________________ attorney to transfer said right on the books of QMed,
Inc. with full power of substitution in the premises.

Dated:                      ,
       ---------------------

                                    (Signature must conform in all respects to
                                    name of holder as specified on the face of
                                    the Additional Investment Right)

                                    Address of Transferee

In the presence of:

--------
1  25% of the total Shares purchased by the Purchaser.

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