Document:

SECURITIES PURCHASE AGREEMENT

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

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

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

                                   ARTICLE I.
                                   DEFINITIONS

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

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

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

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

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

                  "Closing Price" means on any particular date (a) the last
         reported closing bid price per share of Common Stock on such date on
         the Trading Market (as reported by Bloomberg L.P. at 4:15 PM (New York

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

                   "Commission" means the Securities and Exchange Commission.

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

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

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

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

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

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

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

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

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

                  "Exempt Issuance" means the issuance of (a) shares of Common
         Stock or options to employees, officers or directors of the Company
         pursuant to any stock or option plan duly adopted by a majority of the

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

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

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

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

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

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

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

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

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

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                  "Participation Maximum" shall have the meaning ascribed to
such term in Section 4.14.

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

                  "Pre-Notice" shall have the meaning ascribed to such term in
Section 4.14.

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

                  "Purchaser Party" shall have the meaning ascribed to such term
in Section 4.12.

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

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

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

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

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

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

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

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

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

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

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

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

                  "Subsequent Financing" shall have the meaning ascribed to such
term in Section 4.14.

                  "Subsequent Financing Notice" shall have the meaning ascribed
to such term in Section 4.14.

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

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

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

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

                  "Transfer Agent Instructions" means the irrevocable transfer
         agent instructions executed by the Company, in the form of Exhibit F
         attached hereto.

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

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

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

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

                                  ARTICLE II.
                                PURCHASE AND SALE

     2.1 Closing;  Additional  Closings.  On the initial  Closing Date, upon the
terms and  subject  to the  conditions  set forth  herein,  concurrent  with the
execution  and  delivery of this  Agreement by the parties  hereto,  the Company
agrees  to  sell,  and each  Purchaser  agrees  to  purchase  in the  aggregate,
severally and not jointly, up to $5,500,000  principal amount of the Debentures.
Each  Purchaser  shall  deliver to the Company via wire  transfer or a certified
check  immediately  available funds equal to their  Subscription  Amount and the
Company shall deliver to each Purchaser their respective  Debenture and Warrants
as  determined  pursuant  to  Section  2.2(a)  and the other  items set forth in
Section 2.2 issuable at the Closing.  Upon  satisfaction  of the  conditions set
forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of Company
counsel, or such other location as the parties shall mutually agree. The Company
may conduct additional Closings with purchasers selected by the Company up to an
additional $5,500,000 in Debentures at any time on or prior to November 7, 2005.
The terms and conditions of any subsequent Closing shall be governed by Sections
2.2  and  2.3  herein.  Purchasers  at  any  subsequent  closing  shall  sign  a
counterpart  signature page to this Agreement and the other  documents  required
pursuant to Sections 2.2 and 2.3 herein and, upon  execution of such  documents,
shall be deemed a "Purchaser" for all purposes under this Agreement.

     2.2 Deliveries

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

               (i) this Agreement duly executed by the Company;

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

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

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

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

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

               (vii)  Transfer  Agent  Instructions,  in the form of  Exhibit  F
               attached hereto,  which instructions shall have been delivered to
               and acknowledged in writing by the Company's transfer agent.

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

               (i) this Agreement duly executed by such Purchaser;

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

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

     2.3 Closing Conditions.

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

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

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

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

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

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

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

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

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

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

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

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

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

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

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

          (d) No  Conflicts.  The  execution,  delivery and  performance  of the
          Transaction  Documents  by the  Company  and the  consummation  by the
          Company of the other transactions  contemplated  hereby and thereby do
          not and will not:  (i) conflict  with or violate any  provision of the
          Company's   or   any   Subsidiary's   certificate   or   articles   of
          incorporation, bylaws or other organizational or charter documents, or
          (ii)  conflict  with,  or  constitute a default (or an event that with
          notice or lapse of time or both would become a default) under,  result

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          in the  creation of any Lien upon any of the  properties  or assets of
          the  Company  or any  Subsidiary,  or give to  others  any  rights  of
          termination,  amendment, acceleration or cancellation (with or without
          notice,  lapse of time or both) of, any  agreement,  credit  facility,
          debt or other  instrument  (evidencing a Company or Subsidiary debt or
          otherwise)  or  other  understanding  to  which  the  Company  or  any
          Subsidiary is a party or by which any property or asset of the Company
          or any  Subsidiary  is bound or  affected,  or  (iii)  subject  to the
          Required Approvals, conflict with or result in a violation of any law,
          rule,  regulation,  order,  judgment,   injunction,  decree  or  other
          restriction  of any  court or  governmental  authority  to  which  the
          Company  or a  Subsidiary  is  subject  (including  federal  and state
          securities laws and regulations), or by which any property or asset of
          the Company or a Subsidiary  is bound or affected;  except in the case
          of  each  of  clauses  (ii)  and  (iii),  such as  could  not  have or
          reasonably be expected to result in a Material Adverse Effect.

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

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

          (g) Capitalization.  The capitalization of the Company is as set forth
          on Schedule 3.1(g). The Company has not issued any capital stock since
          its most recently filed periodic  report under the Exchange Act, other
          than  pursuant to the  exercise of employee  stock  options  under the
          Company's  stock option plans,  the issuance of shares of Common Stock
          to employees  pursuant to the Company's  employee  stock purchase plan
          and pursuant to the conversion or exercise of outstanding Common Stock
          Equivalents.  No  Person  has any right of first  refusal,  preemptive
          right, right of participation,  or any similar right to participate in
          the transactions contemplated by the Transaction Documents.  Except as
          a result  of the  purchase  and sale of the  Securities,  there are no
          outstanding options, warrants, script rights to subscribe to, calls or
          commitments  of any character  whatsoever  relating to, or securities,
          rights or obligations  convertible into or exercisable or exchangeable
          for, or giving any Person any right to subscribe  for or acquire,  any
          shares of Common Stock, or contracts,  commitments,  understandings or

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          arrangements  by which the Company or any  Subsidiary is or may become
          bound to issue  additional  shares  of Common  Stock or  Common  Stock
          Equivalents. The issuance and sale of the Securities will not obligate
          the Company to issue shares of Common Stock or other securities to any
          Person (other than the  Purchasers)  and will not result in a right of
          any holder of Company  securities to adjust the exercise,  conversion,
          exchange or reset price under such securities.  All of the outstanding
          shares of capital stock of the Company are validly issued,  fully paid
          and nonassessable, have been issued in compliance with all federal and
          state securities laws, and none of such outstanding  shares was issued
          in violation of any  preemptive  rights or similar rights to subscribe
          for or purchase  securities.  No further  approval or authorization of
          any  stockholder,  the Board of  Directors of the Company or others is
          required  for the issuance  and sale of the  Securities.  There are no
          stockholders agreements, voting agreements or other similar agreements
          with respect to the Company's  capital stock to which the Company is a
          party or, to the knowledge of the Company, between or among any of the
          Company's stockholders.

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

          (i) Material  Changes.  Since the date of the latest audited financial
          statements  included  within the SEC Reports,  except as  specifically
          disclosed in the SEC Reports, (i) there has been no event,  occurrence
          or  development  that has had or that could  reasonably be expected to

                                       11
<PAGE>

          result in a Material Adverse Effect, (ii) the Company has not incurred
          any  liabilities  (contingent  or  otherwise)  other  than  (A)  trade
          payables  and  accrued  expenses  incurred in the  ordinary  course of
          business  consistent  with  past  practice  and  (B)  liabilities  not
          required  to  be  reflected  in  the  Company's  financial  statements
          pursuant to GAAP or required to be  disclosed in filings made with the
          Commission,   (iii)  the   Company  has  not  altered  its  method  of
          accounting,  (iv) the Company has not declared or made any dividend or
          distribution  of  cash  or  other  property  to  its  stockholders  or
          purchased,  redeemed or made any  agreements to purchase or redeem any
          shares of its  capital  stock and (v) the  Company  has not issued any
          equity  securities  to any  officer,  director  or  Affiliate,  except
          pursuant to existing  Company stock option plans. The Company does not
          have  pending  before the  Commission  any  request  for  confidential
          treatment of information.

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

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

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

                                       12
<PAGE>

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

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

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

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

          (q) Transactions With Affiliates and Employees. Except as set forth in
          the SEC Reports, none of the officers or directors of the Company and,
          to the knowledge of the Company,  none of the employees of the Company
          is  presently  a party  to any  transaction  with the  Company  or any
          Subsidiary  (other  than  for  services  as  employees,  officers  and

                                       13
<PAGE>

          directors),  including  any contract,  agreement or other  arrangement
          providing  for the  furnishing  of  services to or by,  providing  for
          rental of real or personal property to or from, or otherwise requiring
          payments to or from any officer,  director or such employee or, to the
          knowledge of the Company,  any entity in which any officer,  director,
          or any such  employee  has a  substantial  interest  or is an officer,
          director,  trustee or partner, in each case in excess of $60,000 other
          than (i) for  payment  of  salary  or  consulting  fees  for  services
          rendered,  (ii)  reimbursement  for expenses incurred on behalf of the
          Company and (iii) for other employee benefits,  including stock option
          agreements under any stock option plan of the Company.

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

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

                                       14
<PAGE>

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

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

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

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

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

          (y)  Disclosure.  The Company  confirms  that neither it nor any other
          Person  acting on its behalf has  provided  any of the  Purchasers  or
          their agents or counsel with any information that constitutes or might
          constitute material,  nonpublic  information.  The Company understands
          and  confirms  that  the   Purchasers   will  rely  on  the  foregoing
          representations and covenants in effecting  transactions in securities
          of the Company.  All disclosure  provided to the Purchasers  regarding
          the Company,  its business and the transactions  contemplated  hereby,
          including the Disclosure Schedules to this Agreement,  furnished by or
          on behalf of the  Company  with  respect  to the  representations  and

                                       15
<PAGE>

          warranties  made  herein  are true and  correct  with  respect to such
          representations and warranties and do not contain any untrue statement
          of a material  fact or omit to state any  material  fact  necessary in
          order  to  make  the  statements   made  therein,   in  light  of  the
          circumstances under which they were made, not misleading.  The Company
          acknowledges  and  agrees  that no  Purchaser  makes  or has  made any
          representations   or  warranties  with  respect  to  the  transactions
          contemplated hereby other than those specifically set forth in Section
          3.2 hereof.

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

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

                                       16
<PAGE>

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

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

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

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

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

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

                                       17
<PAGE>

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

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

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

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

                                       18
<PAGE>

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

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

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

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

                                       19
<PAGE>

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

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

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

                                  ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

4.1      Transfer Restrictions.

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

                                       20
<PAGE>

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

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

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

          (c)  Certificates  evidencing the Underlying  Shares shall not contain
          any legend  (including the legend set forth in Section 4.1(b) hereof):
          (i)  while  a  registration   statement  (including  the  Registration
          Statement) covering the resale of such security is effective under the
          Securities Act, or (ii) following any sale of such  Underlying  Shares
          pursuant to Rule 144, or (iii) if such Underlying  Shares are eligible
          for sale under Rule  144(k),  or (iv) if such  legend is not  required
          under  applicable   requirements  of  the  Securities  Act  (including
          judicial interpretations and pronouncements issued by the staff of the
          Commission).  The  Company  shall  cause its  counsel to issue a legal
          opinion to the Company's  transfer  agent promptly after the Effective

                                       21
<PAGE>

          Date if required by the Company's transfer agent to effect the removal
          of the  legend  hereunder.  If all or any  portion of a  Debenture  or
          Warrant is converted or exercised (as applicable) at a time when there
          is an  effective  registration  statement  to cover the  resale of the
          Underlying Shares, or if such Underlying Shares may be sold under Rule
          144(k) or if such legend is not otherwise  required  under  applicable
          requirements of the Securities Act (including judicial interpretations
          thereof)  then such  Underlying  Shares  shall be  issued  free of all
          legends.  The Company  agrees that  following the Effective Date or at
          such time as such  legend is no longer  required  under  this  Section
          4.1(c),  it will,  no later  than three  Trading  Days  following  the
          delivery by a Purchaser to the Company or the Company's transfer agent
          of a certificate representing Underlying Shares, as applicable, issued
          with a restrictive legend (such third Trading Day, the "Legend Removal
          Date"),  deliver  or  cause  to  be  delivered  to  such  Purchaser  a
          certificate representing such shares that is free from all restrictive
          and  other  legends.  The  Company  may not make any  notation  on its
          records or give instructions to any transfer agent of the Company that
          enlarge  the  restrictions  on  transfer  set  forth in this  Section.
          Certificates for Securities  subject to legend removal hereunder shall
          be  transmitted by the transfer agent of the Company to the Purchasers
          by  crediting  the account of the  Purchaser's  prime  broker with the
          Depository Trust Company System.

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

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

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

                                       22
<PAGE>

     4.2 Register; Transfer Agent Instructions.

          (a) Register.  The Company shall  maintain at its principal  executive
          offices  (or such  other  office or agency  of the  Company  as it may
          designate by notice to each holder of Securities),  a register for the
          Debentures and the Warrants in which the Company shall record the name
          and  address  of the  Person  in  whose  name the  Debentures  and the
          Warrants  have been  issued  (including  the name and  address of each
          transferee),  the principal  amount of Debentures held by such Person,
          the  number of  Conversion  Shares  issuable  upon  conversion  of the
          Debentures and the number of Warrant Shares  issuable upon exercise of
          the Warrants held by such Person.  The Company shall keep the register
          open and available at all times during  business  hours for inspection
          of any Buyer or its legal representatives.

          (b) Transfer Agent  Instructions.  The Company shall issue irrevocable
          instructions to its transfer agent, and any subsequent transfer agent,
          to issue  certificates  or  credit  shares to the  applicable  balance
          accounts at The Depository  Trust Company  ("DTC"),  registered in the
          name of each Buyer or its  respective  nominee(s),  for the Conversion
          Shares and the Warrant Shares issued upon conversion of the Debentures
          or exercise of the Warrants in such amounts as specified  from time to
          time by each Buyer to the Company upon conversion of the Debentures or
          exercise of the Warrants in the form of Exhibit F attached hereto (the
          "Transfer  Agent   Instructions").   The  Company   warrants  that  no
          instruction other than the Transfer Agent Instructions  referred to in
          this  Section  4.2(b)  will be given by the  Company  to its  transfer
          agent, and that the Securities shall otherwise be freely  transferable
          on the books and records of the Company as and to the extent  provided
          in this  Agreement  and the other  Transaction  Documents.  If a Buyer
          effects a sale, assignment or transfer of the Securities in accordance
          with  Section  4.1,  the Company  shall  permit the  transfer  and the
          Company  shall  promptly  instruct its transfer  agent to issue one or
          more certificates or credit shares to the applicable  balance accounts
          at DTC in such name and in such  denominations  as  specified  by such
          Buyer to effect such sale,  transfer or assignment.  In the event that
          such  sale,  assignment  or  transfer  involves  Conversion  Shares or
          Warrant Shares sold, assigned or transferred  pursuant to an effective
          registration  statement or pursuant to Rule 144,  the  transfer  agent
          shall issue such Securities to the Buyer,  assignee or transferee,  as
          the  case  may  be,  without  any  restrictive   legend.  The  Company
          acknowledges  that a breach by it of its  obligations  hereunder  will
          cause   irreparable  harm  to  a  Buyer.   Accordingly,   the  Company
          acknowledges  that the  remedy at law for a breach of its  obligations
          under this Section 4.2 will be inadequate and agrees,  in the event of
          a breach or threatened breach by the Company of the provisions of this
          Section 4.2 that a Buyer shall be  entitled,  in addition to all other
          available  remedies,  to an order and/or  injunction  restraining  any
          breach and  requiring  immediate  issuance and  transfer,  without the
          necessity  of  showing  economic  loss and  without  any bond or other
          security being required.

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

                                       23
<PAGE>

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

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

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

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

                                       24
<PAGE>

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

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

     4.10 Use of Proceeds. The Company shall be required to use the net proceeds
from the sale of the Securities hereunder  specifically as set forth on Schedule
4.10 hereto.

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

     4.12  Indemnification  of  Purchasers.  Subject to the  provisions  of this
Section  4.12,  the Company will  indemnify  and hold the  Purchasers  and their
directors,  officers,  shareholders,  members,  partners,  employees  and agents
(each,  a  "Purchaser  Party")  harmless  from any and all losses,  liabilities,
obligations,  claims, contingencies,  damages, costs and expenses, including all

                                       25
<PAGE>

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

     4.13 Reservation and Listing of Securities.

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

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

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

                                       26
<PAGE>

4.14     Participation in Future Financing.

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

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

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

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

          (e) If by 5:30 p.m.  (New York City time) on the 5th Trading Day after
          all of the  Purchasers  have  received  the  Pre-Notice,  the  Company
          receives  responses to a Subsequent  Financing  Notice from Purchasers
          seeking  to   purchase   more  than  the   aggregate   amount  of  the
          Participation  Maximum,  each such  Purchaser  shall have the right to

                                       27
<PAGE>

          purchase the greater of (a) their Pro Rata Portion (as defined  below)
          of the  Participation  Maximum  and (b)  the  difference  between  the
          Participation Maximum and the aggregate amount of participation by all
          other  Purchasers.  "Pro  Rata  Portion"  is  the  ratio  of  (x)  the
          Subscription  Amount of Securities  purchased on the Closing Date by a
          Purchaser participating under this Section 4.14 and (y) the sum of the
          aggregate  Subscription Amounts of Securities purchased on the Closing
          Date by all Purchasers participating under this Section 4.14.

          (f) The Company must provide the Purchasers  with a second  Subsequent
          Financing  Notice,  and the  Purchasers  will  again have the right of
          participation  set forth above in this Section 4.14, if the Subsequent
          Financing  subject to the initial  Subsequent  Financing Notice is not
          consummated  for any reason on the terms set forth in such  Subsequent
          Financing  Notice within 60 Trading Days after the date of the initial
          Subsequent Financing Notice.

          (g) Notwithstanding  the foregoing,  this Section 4.14 shall not apply
          (i) in  respect of an Exempt  Issuance,  (ii) in respect of reverse or
          forward stock split,  stock dividend or stock  combinations or (iii) a
          bona fide firm commitment public  underwritten  offering of the Common
          Stock by a nationally recognized investment bank.

     4.15 Subsequent Equity Sales.

          (a) From the date  hereof  until 180 days  after the  Effective  Date,
          neither the Company nor any  Subsidiary  shall issue  shares of Common
          Stock or Common  Stock  Equivalents;  provided,  however,  the 180 day
          period set forth in this Section 4.15 shall be extended for the number
          of Trading  Days during such period in which (i) trading in the Common
          Stock is  suspended  by any  Trading  Market,  or (ii)  following  the
          Effective  Date,  the  Registration  Statement is not effective or the
          prospectus  included in the Registration  Statement may not be used by
          the Purchasers for the resale of the Underlying Shares.

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

                                       28
<PAGE>

          (c) Notwithstanding  the foregoing,  this Section 4.15 shall not apply
          in respect of (i) an Exempt  Issuance,  except that no  Variable  Rate
          Transaction  shall be an Exempt  Issuance or (ii) after the  Effective
          Date, a firm commitment  public offering of Common Stock  underwritten
          by a nationally recognized reputable investment bank.

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

     4.17 Short Sales and Confidentiality  After The Date Hereof. Each Purchaser
severally and not jointly with the other  Purchasers  covenants  that neither it
nor any affiliates acting on its behalf or pursuant to any understanding with it
will  execute any Short Sales during the period  after the  Discussion  Time and
ending  on  the  earlier  of (a)  the  Effectiveness  Date  (as  defined  in the
Registration  Rights Agreement) and (b) the date that an Event of Default occurs
under the Debentures (the "Restriction Date"). Each Purchaser, severally and not
jointly  with the  other  Purchasers,  covenants  that  until  such  time as the
transactions  contemplated  by this  Agreement  are  publicly  disclosed  by the
Company  as  described  in  Section  4.7,  such  Purchaser  will  maintain,  the
confidentiality   of  all  disclosures  made  to  it  in  connection  with  this
transaction  (including  the  existence  and  terms of this  transaction).  Each
Purchaser understands and acknowledges, severally and not jointly with any other
Purchaser,  that the  Commission  currently  takes the position that coverage of
short  sales of  shares  of the  Common  Stock  "against  the box"  prior to the
Effective Date of the Registration  Statement with the Securities is a violation
of Section 5 of the  Securities  Act,  as set forth in Item 65,  Section 5 under
Section A, of the Manual of Publicly Available Telephone Interpretations,  dated
July 1997,  compiled by the Office of Chief  Counsel,  Division  of  Corporation
Finance.  Notwithstanding the foregoing,  no Purchaser makes any representation,
warranty  or  covenant  hereby  that it will not  engage  in Short  Sales in the
securities  of the  Company  after the  Restriction  Date.  Notwithstanding  the
foregoing, in the case of a Purchaser that is a multi-managed investment vehicle
whereby separate portfolio managers manage separate portions of such Purchaser's
assets and the  portfolio  managers have no direct  knowledge of the  investment
decisions  made  by the  portfolio  managers  managing  other  portions  of such
Purchaser's  assets,  the covenant set forth above shall only apply with respect
to the  portion  of  assets  managed  by the  portfolio  manager  that  made the
investment decision to purchase the Securities covered by this Agreement.

                                       29
<PAGE>

                                   ARTICLE V.
                                  MISCELLANEOUS

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

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

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

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

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

                                       30
<PAGE>

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

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

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

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

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

                                       31
<PAGE>

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

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

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

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

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

     5.16 Payment Set Aside.  To the extent that the Company  makes a payment or
payments to any Purchaser  pursuant to any  Transaction  Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such  enforcement  or exercise or any part thereof are  subsequently
invalidated,  declared to be fraudulent or  preferential,  set aside,  recovered

                                       32
<PAGE>

from, disgorged by or are required to be refunded,  repaid or otherwise restored
to the  Company,  a  trustee,  receiver  or  any  other  person  under  any  law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable  cause of action),  then to the extent of any such  restoration
the  obligation  or part thereof  originally  intended to be satisfied  shall be
revived and  continued  in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

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

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

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

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

                            (Signature Pages Follow)

                                       33
<PAGE>

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

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

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

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

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

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

                      SIGNATURE PAGE FOR PURCHASER FOLLOWS]

                                       34
<PAGE>

        [PURCHASER SIGNATURE PAGES TO IOPM SECURITIES PURCHASE AGREEMENT]

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

Name of Purchaser:   Dolphin Offshore Partners
Signature of Authorized Signatory of Purchaser: /s/ Peter E. Salas
                                                --------------------------------
Name of Authorized Signatory:   Peter E. Salas
Title of Authorized Signatory:  General Partner
Email Address of Purchaser:
                               -------------------------------------------------

Address for Notice of Purchaser:
                                c/o Dolphin Asset Management Corp.
                                129 East 17th Street
                                New York, NY  10003

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

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

                           [SIGNATURE PAGES CONTINUE]

                                       35
<PAGE>

        [PURCHASER SIGNATURE PAGES TO IOPM SECURITIES PURCHASE AGREEMENT]

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

Name of Purchaser:   Alpha Capital AG
Signature of Authorized Signatory of Purchaser:  /s/ Konrad Ackerman
                                                 -------------------------------
Name of Authorized Signatory:   Konrad Ackerman
Title of Authorized Signatory:  Director
Email Address of Purchaser:
                                ------------------------------------------------

Address for Notice of Purchaser:
                                 Pradafant 7
                                 9490 Farstentams
                                 Vhd 42 Lichtenstein

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

                          Alpha Capital/Co/LH Financial
                          160 Central Park South
                          Suite 2701
                          New York, NY 10019

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

                           [SIGNATURE PAGES CONTINUE]

                                       36
<PAGE>

        [PURCHASER SIGNATURE PAGES TO IOPM SECURITIES PURCHASE AGREEMENT]

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

Name of Purchaser:   Crestview Capital Master LLC
Signature of Authorized Signatory of Purchaser:  /s/ Stewart R. Flink
                                                 ----------------------
Name of Authorized Signatory:   Stewart R. Flink
Title of Authorized Signatory:  Managing Member
Email Address of Purchaser:
                                ------------------------------------------------

Address for Notice of Purchaser:
                                95 Revere Drive
                                Ste. A
                                Northbrook, IL 60062

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

Subscription Amount:  $1,250,000
Warrant Shares:   3,125,000
EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]

                                       37
<PAGE>

        [PURCHASER SIGNATURE PAGES TO IOPM SECURITIES PURCHASE AGREEMENT]

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

Name of Purchaser:   Magnetar Capital Master Fund, Ltd.
Signature of Authorized Signatory of Purchaser:   By:  Magnetar Financial LLC,
                                                  Its: Investment Manager,
                                                  By:  /s/ Paul Smith
                                                       -------------------------
Name of Authorized Signatory:   Paul Smith
Title of Authorized Signatory:  General Counsel
Email Address of Purchaser:
                                ------------------------------------------------

Address for Notice of Purchaser:

                                c/o Magnetar Financial LLC
                                1603 Orrington Avenue, 13th Floor
                                Evanston, IL 60201

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

Subscription Amount:  $2,000,000
Warrant Shares:   5,000,000 total
EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]

                                       38
<PAGE>

                                                                         Annex A

                                CLOSING STATEMENT

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

Disbursement Date:    [October/November] ___, 2005

I.   PURCHASE PRICE

                    Gross Proceeds to be Received in Trust              $

II.  DISBURSEMENTS

                                                                        $
                                                                        $
                                                                        $
                                                                        $

Total Amount Disbursed:                                                 $

WIRE INSTRUCTIONS:

To: _____________________________________

To: _____________________________________

                                       39DISCLOSURE SCHEDULE

         This Disclosure Schedule, dated as of November 4, 2005 ( the
"Schedule"), is made and given pursuant to Article III and Article IV of the
Securities Purchase Agreement dated as of October 25, 2005 by and among Intraop
Medical Corporation and the purchasers named therein (the "Agreement"). Any
terms defined in the Agreement shall have the same meaning when used in this
Disclosure Schedule as when used in the Agreement unless the context otherwise
requires.

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

Section 3.1(a)(b)

The Company's subsidiaries are:

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

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

Section 3.1(g)

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

<PAGE>

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

     3. The Company has outstanding  warrants  exercisable for 17,323,174 shares
of the Company's common stock at exercise prices ranging from $0.40 per share to
$2.50 per share.

     4. On August 31, 2005, October 26 and November __, 2005, the Company issued
to certain investors 7% convertible debentures in the aggregate principal amount
of $4,000,000,  convertible into common stock at an initial  conversion price of
$0.40 per share.

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

Section 3.1(i)(ii)

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

Section 3.1(n)

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

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

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

<PAGE>

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

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

Section 3.1(p)

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

Section 3.1(q)

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

Section 3.1(r)

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

Section 3.1(s)

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

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

<PAGE>

Section 3.1(v)

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

Section 3.1(y)

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

Section 3.1(aa)

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

Section 3.1(ee)

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

Section 3.1(ff)

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

Section 3.1(gg)

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

<PAGE>

Schedule 4.10

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

          1.   The 7% convertible  debentures issued on August 31, 2005, October
               26, 2005 and November __, 2005..

          2.   The 10% senior secured debentures issued on August 31, 2005.

          3.   To the  extent  not  refinanced  under  the EU Line:  outstanding
               indebtedness  under  the  Factoring   Agreement,   the  First  EU
               Repurchase Agreement,  the Second EU Repurchase Agreement and the
               Third EU Repurchase Agreement.

          4.   Indebtedness under the EU Line.

          5.   Promissory notes shown on Exhibit 4.9(a).

     B. The  Indebtedness  shown on Exhibit  4.10(b) and 4.10(c)  will be repaid
contemporaneous with or immediately following the Closing.

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

<PAGE>

              Exhibit 4.10(a) -- Remain Outstanding Following Close
                    Individual Related Party Promissory Notes

<TABLE>
<CAPTION>

                                                                           Interest Calculation Dates
                                                                            Calc Date       11/7/05
                                                                            Last Paid      12/31/01

                                                              Deposit      Int. Owed
Name                           Amount   Int. Rate  Note Date        Date         From       Int Due       Total Out.
----------------------- -------------- ----------- ---------- ----------- ------------ ------------- ----------------
<S>                        <C>              <C>      <C>  <C>    <C>  <C>     <C>  <C>    <C>             <C>
Donald A. Goer             642,754.60       9.00%    9/30/04     9/30/04      9/30/04     66,769.55       709,524.15
Mary Louise Meurk          164,670.75       9.00%    9/30/04     9/30/04      9/30/04     17,106.05       181,776.80
Donald A. Goer              25,000.00       9.00%     6/9/05      6/9/05       6/9/05        939.30        25,939.30
Donald A. Goer              25,000.00       9.00%    7/22/05     7/22/05      7/22/05        669.98        25,669.98
Donald A. Goer              60,000.00       9.00%     8/1/05      8/1/05       8/1/05      1,460.01        61,460.01

----------------------- -------------- ----------- ---------- ----------- ------------ ------------- ----------------
Total                      917,425.35                                                     86,944.90     1,004,370.25
======================= ============== =========== ========== =========== ============ ============= ================

</TABLE>

<PAGE>

                     Exhibit 4.10(b) -- Repay from Proceeds
                    Individual Related Party Promissory Notes

<TABLE>
<CAPTION>

                                                                              Interest Calculation Dates
                                                                               Calc Date       11/7/05
                                                                               Last Paid      12/31/01

                                                                    Deposit   Int. Owed
Name                            Amount   Int. Rate   Note Date         Date         From       Int Due   Total Out.
----------------------- --------------- ----------- ----------- ------------ ------------ ------------- ------------
<S>                          <C>             <C>       <C>  <C>     <C>  <C>     <C>  <C>       <C>       <C>
Mary Louise Meurk            10,000.00       9.00%     7/21/05      7/21/05      7/21/05        270.46    10,270.46
John Matheu                   5,000.00       9.00%     7/28/05      7/28/05      7/28/05        126.60     5,126.60
Ted Phillips                  5,000.00       9.00%      8/1/05       8/1/05       8/1/05        121.67     5,121.67

----------------------- --------------- ----------- ----------- ------------ ------------ ------------- ------------
Total                        20,000.00                                                          518.73    20,518.73
======================= =============== =========== =========== ============ ============ ============= ============
</TABLE>

<PAGE>

                     Exhibit 4.10(c) -- Repay from Proceeds
                     Individual Third Party Promissory Notes
<TABLE>
<CAPTION>

                                                                             Interest Calculation Dates
                                                                              Calc Date        11/7/05
                                                                              Last Paid       12/31/01

                                                                   Deposit   Int. Owed
Name                         Amount    Int. Rate    Note Date         Date         From        Int Due   Total Out.
-------------------- --------------- ------------ ------------ ------------ ------------ -------------- ------------
<S>                       <C>              <C>        <C>  <C>     <C>  <C>    <C>   <C>     <C>          <C>
Jerome Vaeth              50,000.00        9.00%      9/30/95      9/30/95     12/31/01      20,605.25    70,605.25
-------------------- --------------- ------------ ------------ ------------ ------------ -------------- ------------
Total                     50,000.00                                                          20,605.25    70,605.25
==================== =============== ============ ============ ============ ============ ============== ============

</TABLE>

<PAGE>

                 SCHEDULE 6(b) to REGISTRATION RIGHTS AGREEMENT

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

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

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

     2. All of the  Company's  outstanding  common stock except  345,000  shares
issued  to Summit  Financial  Partners,  L.L.C or its  employees  or  affiliates
pursuant to the close of the Company's merger on March 9, 2005.

     3. Holders of outstanding warrants exercisable for 17,323,174 shares of the
Company's common stock.

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

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

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