Document:

<PAGE>

                                 EXHIBIT 10.26

                         Securities Purchase Agreement

     SECURITIES PURCHASE AGREEMENT, dated as of June 27, 2000 (this
"Agreement"), among BRITESMILE, INC., a corporation organized and existing under
the laws of Utah (the "Company"), and the purchasers identified in Exhibit A
                                                                   ---------
to this Agreement (each individually a "Purchaser," and collectively the
"Purchasers").

                                   Recitals

     A.   Subject to the terms and conditions set forth in this Agreement, the
Company desires to issue and sell to the Purchasers, and the Purchasers desire
to purchase an aggregate principal amount of Fifteen Million Eight Hundred
Thirty-three Thousand, Three Hundred Thirty-three Dollars ($15,833,333) of the
Company's 5% Convertible Subordinated Notes, due 2005 (the "Convertible Notes"),
which are convertible into shares of the Company's common stock, par value $.001
per share (the "Common Stock"). The Convertible Notes shall be in the form
attached to this Agreement as Exhibit B. Exhibit A sets forth the aggregate
                              ---------  ---------
principal amount of Convertible Notes to be purchased by each of the Purchasers.
No Purchaser shall be responsible for the obligations of any other Purchaser.

     B.   Simultaneously with their purchase of the Convertible Notes, the
Purchasers desire to purchase, and the Company desires to sell and issue,
warrants to purchase Common Stock (the "Warrants"). The number of shares of
Common Stock issuable upon the exercise of the Warrants issued to the Purchasers
shall be equal to the quotient of (A) the product of the aggregate principal
amount of Convertible Notes purchased by each Purchaser multiplied by 0.50,
divided by (B) the Conversion Price on the Issuance Date (as those terms are
defined in the Convertible Notes) and shall be substantially in the form
attached as Exhibit C. The exercise price of the Warrants shall be 140% of the
            ---------
Market Price (as that term is defined in the Warrants) of Common Stock as of the
Pricing Date (as that term is defined in the Warrants).

     C.   The Company and the Purchasers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "Securities Act").

     D.   Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as Exhibit D (the "Registration Rights
                                             ---------
Agreement") pursuant to which the Company has agreed to provide certain
registration rights under the Securities Act, and the rules and regulations
promulgated thereunder, and applicable state securities laws.

     IN CONSIDERATION of the mutual covenants and agreements set forth herein
and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
<PAGE>

                                   ARTICLE I

                    PURCHASE AND SALE OF CONVERTIBLE NOTES

     1.1  Purchase and Sale.  Subject to the terms and conditions set forth
          -----------------
herein, the Company shall issue and sell to each Purchaser and each Purchaser
severally agrees to purchase the principal amount of Convertible Notes, in
denominations of no lower than $100,000 and integral multiples of $50,000 in
excess thereof, set forth opposite such Purchaser's name on Exhibit A hereto at
                                                            ---------
the closing described below. No Purchaser shall be responsible for the
obligations of any other Purchaser.

     1.2  The Closing.
          -----------

          (a)  Time and Place.  The closing (the "Closing") of the purchase and
               --------------
sale of the Convertible Notes shall take place at the offices of Durham Jones &
Pinegar, P.C. ("DJP"), Broadway Centre, Suite 900, 111 East Broadway, Salt Lake
City, Utah 84111, at 9:00 a.m. local time, on June 30, 2000 or such later date
as the parties shall agree. The date of the Closing is referred to in this
Agreement as the "Closing Date."

          (b)  Deliveries. At the Closing, (i) the Company shall deliver to DJP,
               ----------
as escrow agent for the Company and the Purchasers (the "Escrow Agent") (1) the
Convertible Notes and the Warrants, each registered in the respective names of
the Purchasers, (2) the legal opinion of DJP substantially in the form attached
hereto as Exhibit E, and (3) all other documents, instruments and writings
          ---------
required to have been delivered at or prior to the Closing by the Company
pursuant to this Agreement; and (ii) the Purchasers shall deliver to the Escrow
Agent (1) a total of Fifteen Million Eight Hundred Thirty-three Thousand, Three
Hundred Thirty-three Dollars ($15,833,333) (the "Purchase Price"), in United
States dollars in immediately available funds by wire transfer to the account of
the Escrow Agent as designated in an Escrow Agreement, which shall be executed
by all the parties hereto and the Escrow Agent, and delivered to the Escrow
Agent on the date of this Agreement, and shall be in the form attached hereto as
Exhibit G, which Purchase Price shall be payable severally by each of the
---------
Purchasers in the amount specified opposite their names on Exhibit A hereto, and
                                                           ---------
(2) all documents, instruments, and writings required to have been delivered at
or prior to the Closing by the Purchasers pursuant to this Agreement.

                                  ARTICLE II

                        REPRESENTATIONS AND WARRANTIES

     2.1  Representations, Warranties and Agreements of the Company.  The
          ---------------------------------------------------------
Company hereby makes the following representations and warranties to the
Purchasers:

                                      -2-
<PAGE>

          (a)  Organization and Qualification.  The Company is a corporation,
               ------------------------------
duly organized, validly existing, and in good standing under the laws of the
State of Utah, with the requisite corporate power and authority to own and use
its properties and assets and to carry on its business as currently conducted.
The Company has no subsidiaries other than as set forth in Schedule 2.1(a)
                                                           ---------------
attached hereto (collectively, the "Subsidiaries"). Each of the Subsidiaries is
a corporation, duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, with the full corporate power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Each of the Company and the Subsidiaries is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, could not, individually or
in the aggregate, (x) adversely affect the legality, validity or enforceability
of this Agreement, the Convertible Notes, the Warrants and the Registration
Rights Agreement (collectively, the "Transaction Documents"), (y) have a
material adverse effect on the results of operations, assets, prospects, or
financial condition of the Company and the Subsidiaries, taken as a whole, or
(z) adversely impair the Company's ability to perform fully on a timely basis
its obligations under the Transaction Documents (collectively or individually,
any of clauses (x) through (z) being referred to in this Agreement as a
"Material Adverse Effect").

          (b)  Authorization; Enforcement.  The Company has the requisite
               --------------------------
corporate power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of the Transaction Documents
by the Company and the consummation by it of the transactions contemplated
hereby and thereby, including, without limitation, the issuance of the
Convertible Notes and the Warrants and the reservation for issuance and the
issuance of the Underlying Shares (as defined herein) issuable upon conversion
or exercise thereof, have been duly authorized by the Company's Board of
Directors and no further consent or authorization is required by the Company,
its Board of Directors or its shareholders (except to the extent that
shareholder approval may be required pursuant to the rules of the Nasdaq
National Market for the issuance of a number of Conversion Shares greater than
19.99% of the number of shares of Common Stock outstanding immediately prior to
the Closing Date).  The Transaction Documents have been duly executed and
delivered by the Company. Each of the Transaction Documents constitutes the
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective articles or certificate of incorporation, bylaws, or other
charter documents.

          (c)  Capitalization.  The authorized, issued, and outstanding
               --------------
capital stock of the Company is set forth in Schedule 2.1(c). All of such
                                             ---------------
outstanding shares have been, or upon

                                      -3-
<PAGE>

issuance will be, validly issued and are fully paid and nonassessable. No shares
of Common Stock are entitled to preemptive or similar rights, nor is any holder
of the Common Stock entitled to preemptive or similar rights arising out of any
agreement or understanding with the Company by virtue of any of the Transaction
Documents. Except as disclosed in Schedule 2.1(c), and except for the
                                  ---------------
Convertible Notes and Warrants, (A) no shares of the Company's capital stock are
subject to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company; (B) there are no outstanding
debt securities issued by the Company; (C) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries; (D) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to register the
sale of any of their securities under the Securities Act (except the
Registration Rights Agreement); (E) there are no outstanding securities or
instruments of the Company or any of its Subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries; (F) there are no securities or instruments containing anti-
dilution or similar provisions that will be triggered by the issuance of the
Securities as described in this Agreement; and (G) the Company does not have any
stock appreciation rights or "phantom stock" plans or agreements or any similar
plan or agreement. The Company has furnished to each Purchaser true and correct
copies of the Company's Articles of Incorporation, as amended and as in effect
on the date hereof (the "Articles of Incorporation"), and the Company's Bylaws,
as amended and as in effect on the date hereof (the "Bylaws"), and the terms of
all securities convertible into or exercisable or exchangeable for Common Stock
and the material rights of the holders thereof in respect thereto. Except as
specifically disclosed in the SEC Documents (as defined below) or Schedule
                                                                  --------
2.1(c),  no Person (as defined below) (i) to the knowledge of the Company,
------
beneficially owns (as determined pursuant to Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), or (ii) has
the right to acquire, by agreement with or by obligation binding upon the
Company, beneficial ownership of in excess of five percent (5%) of the Common
Stock. A "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.

          (d)  Issuance of Convertible Notes and Warrants.  The Convertible
               ------------------------------------------
Notes and the Warrants are duly authorized, and, when issued and paid for in
accordance with the terms of this Agreement, shall be validly issued, fully paid
and nonassessable, and free from all taxes, liens and charges with respect to
the issuance thereof.  The Company, as at the Closing Date, has and at all times
while the Convertible Notes and the Warrants are outstanding will maintain an

                                      -4-
<PAGE>

adequate reserve of duly authorized shares of Common Stock to enable it to
comply with its obligations on the conversion or exercise of the Convertible
Notes or the Warrants, as the case may be. The shares of Common Stock that would
be issuable upon conversion in full of the Convertible Notes and the full
exercise of the Warrants (the "Underlying Shares") have been duly authorized and
when issued in accordance with the terms of the Convertible Notes and of the
Warrants, as the case may be, will be validly issued, fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issuance thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock. At least 6,500,000 shares of Common Stock (subject to
adjustment pursuant to the Company's covenant set forth in Section 3.15 below)
have been duly authorized and reserved for issuance upon conversion of the
Convertible Notes and upon exercise of the Warrants. The issuance by the Company
of the Securities is exempt from registration under the Securities Act.

          (e)  No Conflicts.  The execution, delivery and performance of the
               ------------
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby on the Closing Date do not and will not (i)
conflict with or violate any provision of its Articles of Incorporation or
bylaws (each as amended through the date hereof), (ii) subject to obtaining the
consents referred to in Section 2.1(f), conflict with, or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its Subsidiaries is a party, or (iii) result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority to which the Company or any of its
Subsidiaries is subject (including Federal and state securities laws and
regulations), or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected, except in the case of each of clauses (ii)
and (iii), such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as could not, individually or in the aggregate,
have or result in a Material Adverse Effect.  The business of the Company and
its Subsidiaries is not being conducted in violation of any law, ordinance or
regulation of any governmental authority, except for violations which,
individually or in the aggregate, do not have a Material Adverse Effect.

          (f)  Consents and Approvals.  Except as specifically set forth in
               ----------------------
Schedule 2.1(f), neither the Company nor any Subsidiary is required to obtain
---------------
any consent, waiver, authorization or order of, 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) the filing by the Company of the registration statement contemplated by the
Registration Rights Agreement with the SEC, (ii) the application by the Company
for the listing of the Underlying Shares with The Nasdaq Stock Market (and with
any other national securities exchange or market on which the Common Stock is
then listed), (iii) the filing by the Company of a Form D with the SEC; (iv) the
filing by the Company of any notification required in connection with the
consummation of the transactions contemplated by the Transaction Documents as
required by any state securities laws,

                                      -5-
<PAGE>

and (v) in all other cases, where the failure to obtain such consent, waiver,
authorization or order, or to give or make such notice or filing, could not have
or result in, individually or in the aggregate, a Material Adverse Effect (the
consents, waivers, authorizations, orders, notices and filings referred to
clauses (i) through (iv) above and referred to in Schedule 2.1(f) being referred
                                                  ---------------
to in this Agreement as the "Required Approvals"). Except as disclosed in
Schedule 2.1(f), all consents, authorizations, orders, filings and registrations
---------------
which the Company is required to obtain pursuant to the preceding sentence have
been obtained or effected on or prior to the date hereof. The Company and its
Subsidiaries are unaware of any facts or circumstances that might give rise to
any of the foregoing. The Company is not in violation of the listing
requirements of the Nasdaq National Market, including, without limitation, the
requirements set forth in Rule 4310(c)(25)(G)(i) of The Nasdaq Stock Market's
Marketplace Rules, and has no actual knowledge, nor has it received any notice
from the Nasdaq National Market of any facts which would reasonably lead to
delisting or suspension of the Common Stock by the Nasdaq National Market in the
foreseeable future.

          (g)  Litigation; Proceedings.  Except as specifically disclosed in
               -----------------------
the Disclosure Materials (as hereinafter defined) or in Schedule 2.1(g), there
                                                        ---------------
is no action, suit, notice of violation, proceeding or investigation pending or,
to the best knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries or any of their respective properties before
or by any court, governmental or administrative agency or regulatory authority
(Federal, state, county, local or foreign) which (i) adversely affects or
challenges the legality, validity or enforceability of any of the Transaction
Documents or the Convertible Notes, Warrants, or Underlying Shares (collectively
the "Securities") or (ii) could not, individually or in the aggregate, have or
result in a Material Adverse Effect.

          (h)  No Default or Violation.  Neither the Company nor any
               -----------------------
Subsidiary (i) is in default under or 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, (ii) is in violation of any order
of any court, arbitrator or governmental body, or (iii) is in violation of any
statute, rule or regulation of any governmental authority, except as could not
individually or in the aggregate, have or result in, individually or in the
aggregate, Material Adverse Effect.

          (i)  Private Offering.  Neither the Company nor any Person acting on
               ----------------
its behalf has taken or will take any action which might subject the offering,
issuance or sale of the Securities to the registration requirements of Section 5
of the Securities Act.

          (j)  SEC Documents.  The Company has filed all reports required to
               -------------
be filed by it under the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the three years preceding the date hereof (or such shorter
period as the Company was required by law to file such material) (the foregoing
materials being collectively referred to herein as the "SEC Documents" and,
together with the exhibits and schedules to this Agreement and other documents
and information furnished to the Purchasers by or on behalf of the Company at
any time prior to the Closing, as the "Disclosure Materials") on a timely basis
or has timely filed any

                                      -6-
<PAGE>

notification required under Rule 12b-25 under the Exchange Act and has
thereafter filed any such reports within the time period stated in any such
notification under Rule 12b-25. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the SEC promulgated
thereunder, and none of the SEC Documents, 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 light of
the circumstances under which they were made, not misleading. All material
agreements to which the Company is a party or to which the property or assets of
the Company are subject have been filed as exhibits to the SEC Documents to the
extent required. The financial statements of the Company included in the SEC
Documents comply in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved, except as may be otherwise specified in such financial
statements or the notes thereto, and fairly present in all material respects the
financial position of the Company 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 year-end audit adjustments. Since the
date of the financial statements included in the Company's last filed Annual
Report on Form 10-KSB prior to the date of this Agreement, there has been no
event, occurrence or development that has had or that could have or result in a
Material Adverse Effect which has not been specifically disclosed in writing to
the Purchasers by the Company. The Company last filed audited financial
statements with the SEC on July 7, 1999, and has not received any comments from
the SEC in respect thereof. No other information provided by or on behalf of the
Company to the Purchasers which is not included in the SEC Documents contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they are or were made, not misleading. Neither the
Company nor any of its Subsidiaries nor any of their officers, directors,
employees or agents have provided the Purchasers with any material, nonpublic
information.

          (k)  Employee Relations.  Neither the Company nor any of its
               ------------------
Subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its Subsidiaries, is any such dispute threatened. None of the
Company's or its Subsidiaries' employees is a member of a union and neither the
Company nor any of its Subsidiaries is a party to a collective bargaining
agreement, and the Company and its Subsidiaries believe that their relations
with their employees are good. No executive officer (as defined in Rule 501(f)
of the Securities Act) has notified the Company that such officer intends to
leave the Company or otherwise terminate such officer's employment with the
Company and the Company does not expect to terminate any such officer during the
six months following the date hereof.

          (l)  Intellectual Property Rights.  Except as set forth in Schedule
               ----------------------------                          --------
2.1(l), the Company and its Subsidiaries own or possess adequate rights or
------
licenses to use all trademarks, trade names, service marks, service mark
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets and rights

                                      -7-
<PAGE>

necessary to conduct their respective businesses as now conducted. Except as set
forth on Schedule 2.1(l), none of the trademarks, trade names, service marks,
         ---------------
service mark registrations, service names, patents, patent rights, patent
applications, copyrights, inventions, licenses, approvals, government
authorizations, trade secrets or other intellectual property rights
(collectively, the "Intellectual Property") of the Company have expired or
terminated, or are expected to expire or terminate within two years from the
date of this Agreement, except where such expiration or termination would not
result, individually or in the aggregate, in a Material Adverse Effect. Except
as set forth in Schedule 2.1(l), the Company and its Subsidiaries do not have
                ---------------
any knowledge of any infringement by the Company or its Subsidiaries of the
Intellectual Property of others. Except as set forth on Schedule 2.1(l), no
                                                        ---------------
administrative or court action or proceeding has been made or brought against,
or to the Company's knowledge, has been threatened against, the Company or its
Subsidiaries regarding the infringement of the Intellectual Property of others.
The Company and its Subsidiaries have taken reasonable security measures to
protect the secrecy, confidentiality and value of their intellectual properties.
Except as set forth in Schedule 2.1(l), the Company and its Subsidiaries do not
                       ---------------
have any knowledge of any infringement by any third party of any of the
Company's or its Subsidiaries' Intellectual Property.

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

          (o)  Title. The Company and its Subsidiaries have good and marketable
               -----
title in fee simple to all real property owned by them and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in Schedule 2.1(o) or such
                                                         ---------------
as do not materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company and any of
its Subsidiaries. Any real property and facilities held under lease by the
Company and any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.

          (p)  Tax Status. The Company and each of its Subsidiaries has made or
               ----------
filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and

                                      -8-
<PAGE>

charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and for which the Company has set aside on its books provision reasonably
adequate for the payment of all taxes for periods subsequent to the periods to
which such returns, reports or declarations apply. There are no unpaid taxes in
any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any such
claim.

          (q)  Transactions With Affiliates. Except as set forth on Schedule
               ----------------------------                         --------
2.1(q) and in the Disclosure Materials and other than the grant of stock options
------
disclosed on Schedule 2.1(c), none of the officers, directors, or employees of
             ---------------
the Company is presently a party to any transaction with the Company or any of
its Subsidiaries (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.

          (r)  Foreign Corrupt Practices.  Neither the Company, nor any of its
               -------------------------
Subsidiaries, nor, to the Company's knowledge, any director, officer, agent,
employee or other person acting on behalf of the Company or any of its
Subsidiaries has, in the course of its actions for, or on behalf of, the
Company, used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political activity; made
any direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or made
any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.

          (s)  Investment Company.  The Company is not, and is not an
               ------------------
Affiliate, as that term is defined in Section 3.10, of an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.

          (t)  Certain Fees.  Except for fees payable to FleetBoston Robertson
               ------------
Stephens, Inc. as described in Section 5.1 of this Agreement, no fees or
commissions will be payable by the Company to any broker, financial advisor,
finder, investment banker, or bank with respect to the transactions contemplated
by this Agreement.

          (u)  Solicitation Materials.  The Company has not (i) distributed
               ----------------------
any offering materials in connection with the offering and sale of the
Securities other than the Disclosure Materials and any amendments and
supplements thereto or (ii) solicited any offer to buy or sell the Securities by
means of any form of general solicitation or advertising.

                                      -9-
<PAGE>

          (v)  Form S-3 Eligibility.  The Company is eligible to register
               --------------------
securities for resale with the SEC under Form S-3 promulgated under the
Securities Act.

          (w)  Listing and Maintenance Requirements Compliance.  Other than as
               -----------------------------------------------
specifically listed in the Disclosure Materials, the Company has not in the two
years preceding the date of this Agreement received written notice from any
stock exchange or market on which the Common Stock is or has been listed (or on
which it has been quoted) to the effect that the Company is not in compliance
with the listing or maintenance requirements of such exchange or market.

          (x)  Acknowledgment Regarding Purchaser's Purchase of Convertible
               ------------------------------------------------------------
Notes. 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 and thereby. The
Company further acknowledges that each Purchaser is not acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with respect to
the Transaction Documents and the transactions contemplated hereby and thereby,
and any advice given by any of the Purchasers or any of their respective
representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to such
Purchaser's purchase of the Securities. The Company further represents to each
Purchaser that the Company's decision to enter into the Transaction Documents
has been based solely on the independent evaluation by the Company and its
representatives.

          (y)  No Integrated Offering.  Neither the Company, nor any of its
               ----------------------
affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any securities or solicited any offers
to buy any securities, under circumstances that would require registration of
the issuance by the Company of any of the Securities under the Securities Act or
cause this offering of the Securities to be integrated with prior offerings by
the Company for purposes of the Securities Act or any applicable stockholder
approval provisions, including, without limitation, under the rules and
regulations of any exchange or automated quotation system on which any of the
securities of the Company are listed or designated, nor will the Company or any
of its Subsidiaries take any action or steps that would require registration of
the issuance by the Company of any of the Securities under the Securities Act or
cause the offering of the Securities to be integrated with other offerings.

          (z)  Insurance. The Company and each of its Subsidiaries are insured
               ---------
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such
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

                                      -10-
<PAGE>

as may be necessary to continue its business at a cost that would not have a
Material Adverse Effect, taken as a whole.

          (aa) Regulatory Permits.  Except for the absence of which would not
               ------------------
result, either individually or in the aggregate, in a Material Adverse Effect,
the Company and its Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct their respective businesses, and neither the
Company nor any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.

          (bb) Internal Accounting Controls.  The Company and each of its
               ----------------------------
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences, and
the Company has not received any indication contrary to clauses (i) through (iv)
above from its auditors or other advisors.

          (cc) No Materially Adverse Contracts, Etc.  Neither the Company nor
               ------------------------------------
any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future to have a
Material Adverse Effect.  Neither the Company nor any of its Subsidiaries is a
party to any contract or agreement which in the judgment of the Company's
officers has or is expected to have a Material Adverse Effect.

          (dd) Application of Takeover Protections. The Company and its board of
               -----------------------------------
directors have taken all necessary action in order to render inapplicable any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar and-takeover provision
under the Company's articles of incorporation or the laws of the state of its
incorporation which is or could become applicable to the Purchasers as a result
of the transactions contemplated by this Agreement, including, without
limitation, the Company's issuance of the Securities and the Purchasers'
ownership of the Securities.

          (ee) Rights Agreement. The Company has not adopted a shareholder
               ----------------
rights plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the Company and does not
intend to do so.

                                      -11-
<PAGE>

          (ff) No Other Agreements.  The Company has not, directly or
               -------------------
indirectly, made any agreements with any Purchasers relating to the terms or
conditions of the transactions contemplated by the Transaction Documents except
as set forth in the Transaction Documents.

          (gg) Absence of Certain Changes.  Except as disclosed in Schedule
               --------------------------                          --------
2.1(gg), since March 31, 2000, there has been no material adverse change and no
-------
material adverse development in the business, properties, assets, operations,
results of operations, financial conditions or prospects of the Company or its
Subsidiaries. The Company has not taken any steps, and does not currently expect
to take any steps, to seek protection pursuant to any bankruptcy law nor does
the Company or any of its Subsidiaries have any knowledge or reason to believe
that its creditors intend to initiate involuntary bankruptcy proceedings or any
actual knowledge of any fact which would reasonably lead a creditor to do so.
Except as disclosed in Schedule 2.1(gg), since April 1, 2000, the Company has
                       ----------------
not declared or paid any dividends, sold any assets, individually or in the
aggregate, in excess of $100,000 outside of the ordinary course of business or
had capital expenditures, individually or in the aggregate, in excess of
$100,000.

          (hh) Senior Indebtedness.  Except as set forth on Schedule 2.1(hh),
               -------------------                          ----------------
the Company has no Senior Indebtedness (as defined in the Convertible Notes).

     2.2  Representations and Warranties of the Purchasers.  Each Purchaser
          ------------------------------------------------
severally and not jointly, and only with respect to itself, makes the following
representations and warranties to the Company:

          (a)  Organization; Authority.  Such Purchaser, if an entity, is a
               -----------------------
corporation or other entity duly incorporated or organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
organization with the requisite corporate or other power and authority to enter
into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations thereunder. The purchase by
such Purchaser of the Convertible Notes and the Warrants hereunder has been duly
authorized by all necessary action on the part of such Purchaser. Each of this
Agreement and the Registration Rights Agreement has been duly executed and
delivered by such Purchaser and constitutes the valid and legally binding
obligation of such Purchaser, enforceable against such Purchaser, in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights generally and to general principles of equity.

          (b)  Investment Intent.  Such Purchaser is acquiring the Convertible
               -----------------
Notes and the Warrants, and upon conversion of the Convertible Notes or exercise
of the Warrants, will acquire the Underlying Shares, for its own account for
investment only and not with a view towards, or for resale in connection with,
the public sale or distribution thereof, except pursuant to sales registered or
exempted under the Securities Act; provided, however, that by making the
representations contained in this Section 2(b), such Purchaser does not agree to
hold any of the Securities for any minimum or other specific term and reserves
the right to dispose of the

                                      -12-
<PAGE>

Securities at any time in accordance with or to the extent allowed by this
Agreement, the Registration Rights Agreement, and the Securities Act.

          (c)  Accredited Status.  At the time such Purchaser was offered the
               -----------------
Convertible Notes and the Warrants, it was, and at the date hereof, it is, and
at the Closing Date and each of its conversion dates as to the Convertible Notes
or exercise dates as to the Warrants, it will be, an "accredited investor" as
defined in Rule 501(a) under the Securities Act.

          (d)  Experience of 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.

          (e)  Ability of Purchaser to Bear Risk of Investment.  Such
               -----------------------------------------------
Purchaser acknowledges that the Securities are speculative investments and may
involve a high degree of risk and 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.

          (f)  Access to Information.  Such Purchaser acknowledges receipt of
               ---------------------
the Disclosure Materials and further acknowledges that it has been afforded (i)
the opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms and
conditions of the offering of the Convertible Notes and the Warrants, and the
merits and risks of investing in the Convertible Notes and the Warrants; (ii)
access to information about the Company and the Company's financial condition,
results of operations, business, properties, management and prospects sufficient
to enable it to evaluate its investment; and (iii) the opportunity to obtain
such additional information which the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment and to verify the accuracy and
completeness of the information contained in the Disclosure Materials.

          (g)  Affiliate Status.  Except as previously disclosed to the Company,
               ----------------
on the date prior to this Agreement, such Purchaser was not an Affiliate of the
Company.

          (h)  Reliance.  Such Purchaser understands and acknowledges that (i)
               --------
the Convertible Notes and the Warrants are being offered and sold to such
Purchaser without registration under the Securities Act in a private placement
that is exempt from the registration provisions of the Securities Act and (ii)
the availability of such exemption, depends in part on, and the Company will
rely upon the accuracy and truthfulness of, the foregoing representations and
the Purchaser hereby consents to such reliance.

          (i)  Professional Advice. Such Purchaser has sought such accounting,
               -------------------
legal and tax advice as it has considered necessary to make an informed
investment decision with respect to its acquisition of the Securities.

                                      -13-
<PAGE>

          (j)  Transfer or Resale.  Such Purchaser understands that except as
               ------------------
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the Securities Act or any state securities
laws, and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered under the Securities Act and applicable state securities
laws, (B) such Purchaser shall have delivered to the Company an opinion of
counsel, in a generally acceptable form, to the effect that such Securities to
be sold, assigned or transferred may be sold, assigned or transferred pursuant
to an exemption from such registration, (C) such Purchaser provides the Company
with reasonable assurance that such Securities can be sold, assigned or
transferred pursuant to Rule 144 promulgated under the Securities Act (or a
successor rule thereto) ("Rule 144") or (D) transferred in accordance with Rule
144A under the Securities Act (or any successor rule thereto) ("Rule 144A") to a
qualified institutional buyer (as such term is defined in Rule 144A); (ii) any
sale of the Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the seller
(or the person through whom the sale is made) may be deemed to be an underwriter
(as that term is defined in the Securities Act) may require compliance with some
other exemption under the Securities Act or the rules and regulations of the SEC
thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such Securities under the Securities Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder. Notwithstanding the foregoing, the Securities may be pledged in
connection with a bona fide margin account or other loan secured by the
Securities.

          (k)  Legends. Such Purchaser understands that the certificates or
               -------
other instruments representing the Notes and the Warrants and, until such time
as the sale of the Underlying Shares has been registered under the Securities
Act as contemplated by the Registration Rights Agreement, the stock certificates
representing the Underlying Shares, except as set forth below, shall bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):

     THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
     REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
     APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED
     FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF AN
     EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
     SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
     LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
     REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
     SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO EITHER RULE 144A
     UNDER SAID ACT TO A QUALIFIED INSTITUTIONAL BUYER OR RULE 144 UNDER
     SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE

                                      -14-
<PAGE>

     PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
     SECURED BY THE SECURITIES.

The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if (i) such Securities are registered for sale under the Securities
Act, (ii) in connection with a sale transaction, such holder provides the
Company with an opinion of counsel, in a generally acceptable form to the
Company, to the effect that a public sale, assignment or transfer of such
Securities may be made without registration under the Securities Act, or (iii)
such holder provides the Company with reasonable assurances that the Securities
can be sold pursuant to Rule 144 without any restriction as to the number of
securities acquired as of a particular date that can then be immediately sold.
Such Purchaser acknowledges, covenants and agrees to sell the Securities
represented by a certificate(s) from which the legend has been removed, only
pursuant to (i) a registration statement effective under the Securities Act and
upon compliance with the prospectus delivery requirements of the Securities Act,
or (ii) advice of counsel that such sale is exempt from registration required by
Section 5 of the Securities Act.

                                  ARTICLE III

                        OTHER AGREEMENTS OF THE PARTIES

     3.1  Best Efforts. The Company shall use its best efforts to timely satisfy
          ------------
each of the conditions to be satisfied by it as provided in Article IV of this
Agreement.

     3.2  Form D and Blue Sky.  The Company agrees to file a Form D with respect
          -------------------
to the Securities as required under Regulation D under the Securities Act within
the time specified in Regulation D and to provide a copy thereof to each
Purchaser promptly after such filing. The Company shall, on or before the
Closing Date, take such action as the Company shall reasonably determine is
necessary to qualify the Securities for, or obtain exemption for the Securities
for, sale to the Purchasers at the Closing pursuant to this Agreement under
applicable state securities laws, and shall provide evidence of any such action
so taken to the Purchasers on or prior to the Closing Date. The Company shall
make all filings and reports relating to the offer and sale of the Securities
required under applicable state securities laws following the Closing Date.

     3.3  Reporting Status. Until the earlier of (i) the date which is one year
          ----------------
after the date on which the holders thereof may sell all of the Underlying
Shares without restriction pursuant to Rule 144(k) under the Securities Act (or
successor thereto) and (ii) the date on which (A) the holders thereof  shall
have sold all the Underlying Shares and (B) none of the Convertible Notes or the
Warrants is outstanding (the "Reporting Period"), the Company shall file all
reports required to be filed with the SEC pursuant to the Exchange Act, and the
Company shall not terminate its status as an issuer required to file reports
under the Exchange Act even if the Exchange Act or the rules and regulations
thereunder would otherwise permit such termination.

                                      -15-
<PAGE>

     3.4  Shareholder Information. The Company agrees to send to each Purchaser
          -----------------------
during the Reporting Period copies of any notices and other information made
available or given to the stockholders of the Company generally,
contemporaneously with the making available or giving thereof to the
stockholders. During the Reporting Period, the Company shall include each
Purchaser on the Company's distribution list for press releases and shall
provide each Purchaser with any such press releases in the same manner and at
the same time as others on such distribution list.

     3.5  Right of First Refusal.  Subject to the exceptions described below,
          ----------------------
during the period beginning on the date hereof and ending on, and including, the
date which is twelve (12) months after the Closing Date, neither the Company nor
its Subsidiaries shall negotiate or contract with any party for any equity
financing (including any debt financing with an equity component) or issue any
equity securities of the Company or any Subsidiary or securities convertible
into or exchangeable or exercisable for equity securities of the Company or any
Subsidiary (including debt securities with an equity component) in any form
("Future Offerings"), unless it shall have first delivered to each Purchaser, or
a designee appointed by such Purchaser, a written notice (the "Future Offering
Notice") describing the proposed Future Offering, including the size, material
terms and conditions thereof, and providing each Purchaser an option to purchase
up to its Aggregate Percentage (as defined below) of the securities to be issued
in such Future Offering, as of the date of delivery of the Future Offering
Notice, in the Future Offering on the same terms and conditions set forth in the
Future Offering Notice. The rights granted to the Purchasers in this Section 3.5
are collectively referred to as the "First Right of Refusal." For purposes of
this Section 3.5, "Aggregate Percentage" at any time with respect to any
Purchaser shall mean the percentage obtained by calculating the quotient of (i)
the aggregate principal amount of the Convertible Notes issued to such Purchaser
on the Closing Date by (ii) the aggregate principal amount of the Convertible
Notes issued to all of the Purchasers on the Closing Date. A Purchaser can
exercise its option to participate in a Future Offering by delivering written
notice of its election to participate to the Company within ten (10) Business
Days after receipt of a Future Offering Notice, which notice shall state the
quantity of securities being offered in the Future Offering that such Purchaser
will purchase, up to its Aggregate Percentage, and that number of securities it
is willing to purchase in excess of its Aggregate Percentage. In the event that
one or more Purchasers fail to elect to purchase up to each such Purchaser's
Aggregate Percentage of the Future Offering, then each Purchaser that has
indicated its willingness to purchase a number of securities in such Future
Offering in excess of its Aggregate Percentage shall be entitled to purchase up
to its pro rata portion of the securities in the Future Offering which one or
more of the other Purchasers have not elected to purchase. If the Purchasers
fail to elect to fully participate in the Future Offering within the periods
described in this Section 3.5, the Company shall have sixty (60) calendar days
thereafter to sell the securities of the Future Offering that the Purchasers did
not elect to purchase, upon terms and conditions no more favorable to the
purchasers thereof than specified in the Future Offering Notice.  If the Company
has not sold such securities of the Future Offering within such sixty (60) day
period, the Company shall not thereafter issue or sell such securities without
first offering

                                      -16-
<PAGE>

such securities to the Purchasers in the manner provided in this Section 3.5.
The First Right of Refusal shall not apply to (i) any loan from a commercial
bank which does not have an equity issuance feature or component, (ii) the
Company's issuances of securities (A) as consideration in a merger or
consolidation, or (B) in connection with any strategic partnership or joint
venture (the primary purpose of which is not to raise equity) with any entity
whose primary business is not investing in or advising other entities, (iii) the
issuance of Common Stock in a firm commitment, underwritten public offering,
(iv) the issuance of securities upon exercise or conversion of the Company's
options, warrants or other convertible securities outstanding as of the date
hereof provided the terms of such securities are not amended after the date
hereof, and (v) the grant of additional options or warrants, or the issuance of
additional securities, under any Company stock option plan, restricted stock
plan or stock purchase plan for the benefit of the Company's employees, officers
or directors for services provided to the Company. The Purchasers shall not be
required to participate in or exercise their right of first refusal with respect
to a particular Future Offering in order to preserve their First Right of
Refusal with respect to later Future Offerings.

     3.6  Listing. The Company shall promptly secure the listing of all of the
          -------
Registrable Securities (as defined in the Registration Rights Agreement) upon
each national securities exchange and automated quotation system (including the
Nasdaq National Market ("NNM")), if any, upon which shares of Common Stock are
then listed (subject to official notice of issuance) and shall maintain, so long
as any other shares of Common Stock shall be so listed, such listing of all
Registrable Securities from time to time issuable under the terms of the
Transaction Documents. During the Reporting Period, the Company shall maintain
the Common Stock's listing on either the NNM or the New York Stock Exchange
("NYSE"). Neither the Company nor any of its Subsidiaries shall take any action
which may result in the delisting or suspension of the Common Stock on the NNM
or NYSE (other than to switch listings from the NNM to NYSE). The Company shall
promptly, and in no event later than the following Business Day, offer to
provide to the Purchasers copies of any notices it receives from the NNM or NYSE
regarding the continued eligibility of the Common Stock for listing on such
automated quotation system or securities exchange, provided that such notices
shall not contain any material non-public information. The Company shall pay all
fees and expenses in connection with satisfying its obligations under this
Section 3.6.

     3.7  Expenses.  The Company shall pay after Closing an expense allowance of
          --------
up to Twenty-five Thousand Dollars ($25,000), to counsel for the Purchasers,
provided that the Purchasers shall promptly remit an invoice for such amount on
or before the thirtieth (30/th/) day following the Closing Date. The Purchasers
agree to engage a single firm as counsel to represent them jointly.

     3.8  Corporate Existence. So long as any Purchaser beneficially owns any
          -------------------
Convertible Notes or Warrants, the Company shall maintain its corporate
existence and shall not sell all or substantially all of the Company's assets,
except in the event of a merger or consolidation or sale of all or substantially
all of the Company's assets where the surviving or successor entity in such

                                      -17-
<PAGE>

transaction (A) assumes the Company's obligations under the Transaction
Documents and (B) is a publicly traded corporation whose common stock is listed
for trading on the NNM or NYSE.

     3.9   Trading Restrictions. Each Purchaser agrees that during the ten (10)
           --------------------
trading days immediately preceding the date of this Agreement, it shall not sell
any shares of Common Stock including by way of any "short sales" of the Common
Stock (as defined in Rule 3b-3 of the Exchange Act).

     3.10  Integration.  The Company shall not and shall use its best efforts
           -----------
to ensure that no Person controlling, controlled by or under common control with
the Company (an "Affiliate") shall sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in Section 2 of
the Securities Act) that would be integrated with the offer or sale of the
Convertible Notes, the Warrants, or the Underlying Shares in a manner that would
require the registration under the Securities Act of the issue or sale of the
Convertible Notes, the Warrants, or the Underlying Shares to the Purchasers.

     3.11  Subsequent Registrations.  Other than Underlying Shares and other
           ------------------------
"Registrable Securities" (as such term is defined in the Registration Rights
Agreement) to be registered in accordance with the Registration Rights Agreement
and except as set forth in Schedule 11 to the Registration Rights Agreement
                           -----------
(which securities may not be registered prior to the time the Registrable
Securities are registered), the Company shall not, for a period of not less than
ninety (90) trading days after the date that the Underlying Shares Registration
Statement relating is declared effective by the SEC, without the prior written
consent of the Purchasers, register for resale any securities of the Company.
Any days that Purchasers are unable (either because the Company has notified the
Purchasers that the Purchasers may not utilize such Underlying Shares
Registration Statement, or because any securities exchange or market has
suspended trading in the Common Stock or because any governmental authority has
suspended the use of such Underlying Shares Registration Statement) to sell
Underlying Shares under the Underlying Shares Registration Statement shall be
added to such ninety (90) trading day period for the purposes of this Section
3.11.

     3.12  Transfer Agent Instructions. The Company shall issue irrevocable
           ---------------------------
instructions to its transfer agent, and any subsequent transfer agent, to issue
certificates, registered in the name of each Purchaser or its nominee(s), for
the Underlying Shares in such amounts as specified from time to time by each
Purchaser to the Company upon conversion of the Convertible Notes or exercise of
the Warrants (in the form attached hereto as Exhibit F, the "Irrevocable
                                             ---------
Transfer Agent Instructions"). Prior to the effectiveness of registration of the
Underlying Shares under the Securities Act, all such certificates shall bear the
restrictive legend specified in Section 2.2(k) of this Agreement.  The Company
warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 3.12, and stop transfer instructions to
give effect to Section 2.2(j) hereof (in the case of the Underlying Shares,
prior to registration of the Underlying Shares under the Securities Act) will be
given by the Company to its transfer agent with respect to the Underlying Shares
and that the Underlying Shares shall otherwise be freely transferable on

                                      -18-
<PAGE>

the books and records of the Company as and to the extent provided in this
Agreement and the Registration Rights Agreement. Nothing in this Section 3.12
shall affect in any way each Purchaser's obligations under the Securities Act
and agreements set forth in Section 2.2(k) to comply with all applicable
prospectus delivery requirements, if any, upon resale of the Securities. If a
Purchaser provides the Company with an opinion of counsel, in a generally
acceptable form to the Company, to the effect that a public sale, assignment or
transfer of the Securities may be made without registration under the Securities
Act, the Company shall permit the transfer, and, in the case of the Underlying
Shares, promptly instruct its transfer agent to issue one or more certificates
in such name and in such denominations as specified by such Purchaser and
without any restrictive legends. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Purchasers.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 3.12 will be inadequate and agrees, in the event
of a breach or threatened breach by the Company of the provisions of this
Section 3.12, that the Purchasers shall be entitled, in addition to all other
available remedies, to an 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.

     3.13  Limitation on Senior Indebtedness.  Notwithstanding anything to the
           ---------------------------------
contrary herein or any of the instruments or documents executed in connection
with this Agreement, the Company covenants that it will not issue any Senior
Indebtedness, as that term is defined in the Convertible Notes, after the date
of this Agreement and while any of the Convertible Notes are outstanding,
without first obtaining the written consent of the Holders of at least three
fourths (3/4) of the aggregate principal amount of the Convertible Notes then
outstanding; provided, however, that the foregoing written consent limitation
will have no effect after such time as the Company has achieved positive cash
flow from operations of at least Three Million Dollars ($3,000,000) for any
fiscal quarter completed after the date of this Agreement, which determination
shall be made by reference to financial information filed as part of any
Quarterly Report on Form 10-QSB or Annual Report on Form 10-KSB of the Company
filed at any time while the Convertible Notes are outstanding, and further
provided that the Purchasers hereby agree and consent to the issuance by the
Company of up to Three Million Dollars ($3,000,000) of additional convertible
debt financing on terms no more favorable than the Convertible Notes, which
shall be in pari passu with the Convertible Notes, and which may be issued after
the date hereof to any party selected by the Company, including the directors,
officers or existing shareholders of the Company.

     3.14  Use of Proceeds.  The Company covenants to use all of the proceeds
           ---------------
from the placement of the Securities for working capital purposes and not for
the satisfaction of any portion of Company debt or to redeem or repurchase
Company equity or equity-equivalent securities. Pending application of the
proceeds of this placement in the manner permitted hereby the Company will
invest such proceeds in interest bearing accounts and/or short-term, investment
grade interest bearing securities.

                                      -19-
<PAGE>

     3.15  Reservation of Shares.  The Company shall take all action necessary
           ---------------------
to at all times have authorized, and reserved for the purpose of issuance, no
less than 200% of the number of shares of Common Stock needed to provide for the
issuance of the shares of Common Stock upon conversion of all outstanding
Convertible Notes (without regard to any limitations on conversions) and 100% of
the number of shares of Common Stock needed to provide for the issuance of the
shares of Common Stock upon exercise of all outstanding Warrants (without regard
to any limitations on exercises).

     3.16  Filing of Current Report on Form 8-K. On or before the second (2/nd/)
           ------------------------------------
Business Day following the Closing Date, the Company shall file a Current Report
on Form 8-K with the SEC describing the terms of the transactions contemplated
by the Transaction Documents and including as exhibits to such Current Report on
Form 8-K this Agreement, the form of the Convertible Notes, the Registration
Rights Agreement and the form of Warrants.

     3.17  Proxy Statement.  The Company shall provide each shareholder entitled
           ---------------
to vote at the next meeting of shareholders of the Company, which meeting shall
occur on or before August 31, 2000 (the "Shareholder Meeting Deadline"), a proxy
statement, which has been previously reviewed by the Purchasers and a counsel of
their choice, soliciting each such shareholder's affirmative vote at such annual
shareholder meeting for (i) approval of the Company's issuance of all of the
Securities as described in this Agreement in accordance with applicable law and
the rules and regulations of The Nasdaq Stock Market, Inc.; and (ii) approval
for the increase in the number of authorized shares of Common Stock to
100,000,000 (such affirmative approval in respect of both clauses (i) and (ii)
above being referred to herein collectively as the "Shareholder Approval"), and
the Company shall use its best efforts to solicit its shareholder's approval of
such issuance of the Securities and to cause the Board of Directors of the
Company to recommend to the shareholders that they approve such proposal. If the
Company fails to hold a meeting of its shareholders by the Shareholder Meeting
Deadline, then, as partial relief (which remedy shall not be exclusive of any
other remedies available at law or in equity), the Company shall pay to each
holder of Convertible Notes an amount in cash equal to the product of (i) the
Purchase Price multiplied by (ii) 0.015; multiplied by (iii) the quotient of (x)
the number of days after the Shareholder Meeting Deadline and prior to the date
that a meeting of the Company's shareholders seeking Shareholder Approval is
held, divided by (y) 30. The Company shall make the payments referred to in the
immediately preceding sentence within five (5) days of the earlier of (I) the
holding of the meeting of the Company's shareholders, the failure of which
resulted in the requirement to make such payments, and (II) the last day of each
30-day period beginning on the Shareholder Meeting Deadline. In the event the
Company fails to make, such payments in a timely manner, such payments shall
bear interest at the rate of 1.5% per month (pro rated for partial months) until
paid in full.

     3.18  Indemnification.  In consideration of each Purchaser's execution and
           ---------------
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless each
Purchaser and each other holder of the Securities and

                                      -20-
<PAGE>

all of their stockholders, officers, directors, partners, members, employees and
direct or indirect investors and any of the foregoing persons' agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(c) any cause of action, suit or claim brought or made against such Indemnitee
and arising out of or resulting from the execution, delivery, performance or
enforcement of the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (d) any transaction financed or to be
financed in whole or in part, directly or indirectly, with the proceeds of the
issuance of the Securities, or (e) the status of such Purchaser or holder of the
Securities as an investor in the Company. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law to the
settlement of claims and the Company's rights to assume the defense of claims.

     3.19  Transactions With Affiliates.  So long as (i) any Convertible Notes
           ----------------------------
or Warrants are outstanding or (ii) any Purchaser owns Underlying Shares with a
market value of at least $500,000, the Company shall not, and shall cause each
of its Subsidiaries not to, enter into, amend, modify or supplement, or permit
any Subsidiary to enter into, amend, modify or supplement, any agreement,
transaction, commitment or arrangement with any of its or any Subsidiary's
officers, directors, person who were officers or directors at any time during
the previous two years, shareholders who beneficially own 5% or more of the
Common Stock, or affiliates or with any individual related by blood, marriage or
adoption to any such individual or with any entity in which any such entity or
individual owns a 5% or more beneficial interest (each, a "Related Party"),
except for (a) customary employment arrangements and benefit programs on
reasonable terms, (b) any agreement, transaction, commitment or arrangement
which is approved by a majority of the disinterested directors of the Company or
(c) any agreement, transaction, commitment or arrangement on an arms-length
basis on terms no less favorable than terms which would have been obtainable
from a person other than such Related Party.  For purposes hereof, any director
who is also an officer of the Company or any Subsidiary of the Company shall not
be a disinterested director with respect to any such agreement, transaction,
commitment or arrangement.

                                  ARTICLE IV

                                      -21-
<PAGE>

                                 CONDITIONS

     4.1  Conditions Precedent to the Obligation of the Purchasers to Purchase
          --------------------------------------------------------------------
the Convertible Notes.  The obligation of each Purchaser hereunder to purchase
---------------------
the Convertible Notes and the Warrants from the Company at the Closing is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for each Purchaser's
sole benefit and may be waived by such Purchaser at any time in its sole
discretion by providing the Company with prior written notice thereof:

          (a) The Company shall have executed each of the Transaction Documents
and delivered the same to such Purchaser.

          (b) The Common Stock (i) shall be designated for quotation or listed
on the Nasdaq National Market and (ii) shall not have been suspended by the SEC
or the Nasdaq National Market from trading on the Nasdaq National Market nor
shall suspension by the SEC or the Nasdaq National Market have been threatened
either (A) in writing by the SEC or the Nasdaq National Market or (B) by falling
below the minimum listing maintenance requirements of the Nasdaq National
Market; and the Underlying Shares issuable upon conversion or exercise of the
Notes and the related Warrants, as the case may be, shall be listed upon the
Nasdaq National Market.

          (c) The representations and warranties of the Company shall be true
and correct , and the Company shall have performed, satisfied and complied with
the covenants, agreements and conditions required by the Transaction Documents
to be performed, satisfied or complied with by the Company at or prior to the
Closing Date. Such Purchaser shall have received a certificate, executed by the
Chief Executive Officer of the Company, dated as of the Closing Date, to the
foregoing effect and as to such other matters as may be reasonably requested by
such Purchaser.

          (d) The Board of Directors of the Company shall have adopted
resolutions consistent with Section 2.1(b) above and in a form reasonably
acceptable to such Purchaser (the "Resolutions").

          (e) As of the Closing Date, the Company shall have reserved out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
conversion of the Convertible Notes and the exercise of the Warrants, at least
6,500,000 shares of Common Stock.

          (f) The Irrevocable Transfer Agent Instructions in the form attached
hereto as Exhibit F shall have been delivered to and acknowledged in writing by
          ---------
the Company's transfer agent.

          (g) The Company shall have delivered to such Purchaser a certificate
evidencing the incorporation and good standing of the Company in such entity's
state of

                                      -22-
<PAGE>

incorporation or organization issued by the Secretary of State or comparable
officer of such state of incorporation or organization as of a date within ten
(10) days of the Closing Date, or such other date as shall be acceptable to the
Purchasers.

          (h) The Company shall have delivered to such Purchaser a certified
copy of the Articles of Incorporation as certified by the Utah Department of
Commerce, Division of Corporations and Commercial Code, as of a date within ten
(10) days of the Closing Date.

          (i) The Company shall have delivered to such Purchaser a secretary's
certificate, dated as of the Closing Date, certifying as to (A) the Resolutions,
(B) the Articles of Incorporation and (C) the Bylaws, each as in effect at the
Closing.

          (j) The Company shall have made all filings under all applicable
federal and state securities laws necessary to consummate the issuance of the
Securities pursuant to this Agreement in compliance with such laws.

          (k) The Company shall have a letter from the Company's transfer agent
certifying the number of shares of Common Stock outstanding as of a date within
five days of the Closing Date, copies of which shall be made available to
Purchasers so requesting.

          (l) The Company shall have delivered to the Purchasers such other
documents relating to the transactions contemplated by the Transaction Documents
as the Purchasers or their counsel may reasonably request.

          (m) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement or the
Registration Rights Agreement relating to the issuance or conversion of any
portion of the principal amount of the Convertible Notes or exercise of the
Warrants;

          (n) Since the date of the financial statements included in the
Company's last filed Quarterly Report on Form 10-QSB or Annual Report on Form
10-KSB, whichever is more recent, last filed prior to the date of this
Agreement, no event which has or can reasonably be expected to have a Material
Adverse Effect which has not specifically been disclosed in the Disclosure
Materials prior to the date of this Agreement shall have occurred, nor shall
there have occurred a material adverse change in the financial condition or
prospects of the Company, which is not disclosed in the Disclosure Materials;

          (o) The Company shall have delivered to each Purchaser an opinion of
outside legal counsel to the Company in substantially the form attached hereto
as Exhibit E and dated as of the Closing Date;
   ---------

                                      -23-
<PAGE>

          (p) All Required Approvals and consents shall have been obtained;

          (q) The Company shall have delivered to such Purchaser or its designee
the Convertible Notes and the Warrants being purchased at Closing, registered in
the name of such Purchaser, each in form satisfactory to the Purchasers; and

          (r) No event resulting in a Material Adverse Effect shall have
occurred between the date of this Agreement and the Closing Date.

                                   ARTICLE V

                                 MISCELLANEOUS

          5.1 Placement Fees and Expenses.  Except to the extent set forth in
              ---------------------------
Section 3.7, and except as otherwise may be provided in the Registration Rights
Agreement, each of the parties shall pay its own fees and expenses (including
the fees of any attorneys, accountants, appraisers or others engaged by such
party) in connection with this Agreement and the transactions contemplated
hereby, except that the Company shall pay on the Closing Date out of the
Purchase Price up to six percent (6%) of the total Purchase Price to FleetBoston
Robertson Stephens, Inc., as placement agent (the "Placement Agent") and shall
issue to the Placement Agent a warrant (the "Placement Agent Warrant") to
purchase up to that number of shares of Common Stock as shall be equal to ten
percent (10%) of the number of shares of Common Stock underlying the Warrants
issued to the Purchasers.  The Placement Agent Warrant, if any, shall have an
exercise period of five years from the Closing Date. Except for the number of
shares of Common Stock issuable upon its exercise, the Placement Agent Warrant
shall be identical to the Warrants and shall be in the form attached to this
Agreement as Exhibit C. The shares of  Common Stock issuable upon the exercise
             ---------
of the Placement Agent Warrant shall be included within the definition of
Registrable Securities under the Registration Rights Agreement, and the
Placement Agent shall be a party to the Registration Rights Agreement.  The
Company shall pay all stamp and other taxes and duties levied in connection with
the issuance of the Securities pursuant to this Agreement.

          5.2 Entire Agreement.  This Agreement, together with the exhibits
              ----------------
and schedules hereto, the Registration Rights Agreement, the Convertible Notes
and the Warrants 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.

          5.3 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 (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 4:30 p.m. (Pacific
time) on a Business Day, (ii) the Business Day after the date of transmission,
if

                                      -24-
<PAGE>

such notice or communication is delivered via facsimile at the facsimile
telephone number specified in the Purchase Agreement later than 4:30 p.m.
(Pacific time) on any date and earlier than 11:59 p.m. (Pacific time) on such
date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as follows:

     If to the Company:     BRITESMILE, INC.
                            490 North Wiget Lane
                            Walnut Creek, California 94598
                            Facsimile No.: (925) 941-6266
                            Attn: Paul A. Boyer, Chief Financial Officer

     With copies to:        DURHAM JONES & PINEGAR, P.C.
                            Broadway Centre, Suite 900
                            111 East Broadway
                            Salt Lake City, Utah 84111
                            Facsimile No.: (801) 415-3500
                            Attn:  Jeffrey M. Jones

If to a Purchaser, to it at the address and facsimile number set forth on
Exhibit A, with copies to such Purchaser's representatives as set forth on
---------
Exhibit A, or at such other address and/or facsimile number and/or to the
---------
attention of such other person as the recipient party has specified by written
notice given to each other party five days prior to the effectiveness of such
change.

          5.4  Amendments; Waivers. No provision of this Agreement may be
               -------------------
amended other than by an instrument in writing signed by the Company and the
holders of at least two-thirds (2/3) of the principal amount of the Convertible
Notes on the Closing Date, and no provision hereof may be waived other than by
an instrument in writing signed by the party against whom enforcement is sought.
No such amendment shall be effective to the extent that it applies to less than
all of the holders of the Convertible Notes or Warrants then outstanding. 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 also is offered to all of the parties to the
Transaction Documents or holders of Convertible Notes, as the case may be.

          5.5  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.

          5.6  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 shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the holders of at
least two-thirds (2/3) of the principal amount of the Convertible Notes then

                                      -25-
<PAGE>

outstanding.  A Purchaser may assign some or all of its rights hereunder without
the consent of the Company; provided, however, that any such assignment shall
not release such Purchaser from its obligations hereunder unless such
obligations are assumed by such assignee and the Company has consented to such
assignment and assumption, which consent shall not be unreasonably withheld.
Notwithstanding anything to the contrary contained in the Transaction Documents,
the Purchasers shall be entitled to pledge the Securities in connection with a
bona fide margin account or other loan secured by the Securities.

          5.7  No Third-Party Beneficiaries.  This Agreement is intended for
               ----------------------------
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.

          5.8  Governing Law.  All questions concerning the construction,
               -------------
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.  Each party hereby irrevocably
submits to the non-exclusive jurisdiction of the state and federal courts
sitting in New York City, Borough of Manhattan, State of New York, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, 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 brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such 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. Each party hereby irrevocably
waives any right it may have, and agrees not to request, a jury trial for the
adjudication of any dispute hereunder or in connection herewith or arising out
of this Agreement or any transaction contemplated hereby.

          5.9  Survival.  The agreements and covenants contained in Article IV
               --------                                             ----------
and this Article V shall survive the delivery and conversion of the Convertible
         ---------
Notes pursuant to this Agreement, and the representations and warranties of the
Company and the Purchasers contained in Article II shall survive until a date
                                        ----------
that is two years after the Closing Date. Each Purchaser shall be responsible
only for its own representations, warranties, agreements and covenants
hereunder.

          5.10  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.

                                      -26-
<PAGE>

          5.11  Publicity.  The Company, the Purchasers and the Placement
                ---------
Agent shall consult with each other in issuing any press releases or otherwise
making public statements with respect to the transactions contemplated hereby
and neither party shall issue any such press release or otherwise make any such
public statement without the prior written consent of the other, which consent
shall not be unreasonably withheld or delayed, except that no prior consent
shall be required if such disclosure is required by law, in which case the
disclosing party shall provide the other party with prior notice of such public
statement.  Notwithstanding the generality of the foregoing, the parties agree
that the Company will issue a press release at or immediately after the Closing,
the contents of which will be filed with the SEC as a current report of the
Company on Form 8-K, the form of which will be agreed to by the parties at or
before the Closing.

          5.12  Severability.  In case any one or more of the provisions of
                ------------
this Agreement shall 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 which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.

          5.13  No Strict Construction. The language used in this Agreement will
                ----------------------
be deemed to be the language chosen by the parties to express their mutual
intent, and no rule of construction will be applied against any party.

          5.14  Termination. In the event that the Closing shall not have
                -----------
occurred with respect to a Purchaser on or before five (5) Business Days from
the date hereof due to the Company's failure to satisfy the conditions set forth
in Article IV above (and such Purchaser's failure to waive such unsatisfied
condition(s)), such Purchaser shall have the option to terminate this Agreement
with respect to the Company at the close of business on such date without
liability of such Purchaser to the Company.

          5.15  Remedies. Each Purchaser and each holder of the Securities shall
                --------
have all rights and remedies set forth in the Transaction Documents and all
rights and remedies which such holders have been granted at any time under any
other agreement or contract and all of the rights which such holders have under
any law. Any person having any rights under any provision of this Agreement
shall be entitled to enforce such rights specifically (without posting a bond or
other security), to recover damages by reason of any breach of any provision of
this Agreement and to exercise all other rights granted by law.

          5.16  Payment Set Aside. To the extent that the Company makes a
                -----------------
payment or payments to any Purchaser hereunder or pursuant to the Registration
Rights Agreement, the Convertible Notes or the Warrants, or the Purchasers
enforce or exercise their rights hereunder or thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or

                                      -27-
<PAGE>

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

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                            SIGNATURE PAGES FOLLOW]

                                      -28-
<PAGE>

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

The Company:

BRITESMILE, INC.

By: /s/ Paul A. Boyer
    --------------------------
Name: Paul A. Boyer
      ------------------------
Title: Chief Financial Officer
       -----------------------

Purchasers:

LCO INVESTMENTS LIMITED

By: /s/ Michael C.M. Yong
    --------------------------
    Its: Director
         ---------------------

    /s/ Andrew McKelvey
------------------------------
ANDREW McKELVEY

PEQUOT PRIVATE EQUITY FUND II, L.P.

BY: PEQUOT CAPITAL MANAGEMENT, INC.
      ITS: INVESTMENT MANAGER

By: /s/ Kevin E. O'Brien
    --------------------------
     Kevin E. O'Brien, General Counsel
<PAGE>

PEQUOT PARTNERS FUND, L.P.

BY: PEQUOT CAPITAL MANAGEMENT, INC.
      ITS: INVESTMENT MANAGER

By: /s/ Kevin E. O'Brien
    --------------------------
    Kevin E. O'Brien, General Counsel

PEQUOT INTERNATIONAL FUND, INC.

BY: PEQUOT CAPITAL MANAGEMENT, INC.
      ITS: INVESTMENT ADVISOR

By: /s/ Kevin E. O'Brien
    ------------------------------------
     Kevin E. O'Brien, General Counsel

    /s/ John Reed
----------------------------------------
JOHN REED

    /s/ Gasper Lazzara, Jr., D.D.S.
----------------------------------------
GASPER LAZZARA, JR., D.D.S.
<PAGE>

CAPEX, L.P.

By  RBP, LLC
Its General Partner

By: /s/ Evan Zucker
    ------------------------------------
    Evan Zucker
    Managing Partner

PACIFIC MEZZANINE FUND

By  PACIFIC PRIVATE CAPITAL

By: /s/  Nathan W. Bell
    ------------------------------------
    Nathan  W. Bell, Managing Partner<PAGE>

                                 EXHIBIT 10.27

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A FORM REASONABLY SATISFACTORY TO
THE ISSUER, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO EITHER RULE 144A UNDER SAID ACT
TO A QUALIFIED INSTITUTIONAL BUYER OR RULE 144 UNDER SAID ACT. NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN SECURED BY THE SECURITIES.

No. _____________

                               BriteSmile, Inc.

                         CONVERTIBLE SUBORDINATED NOTE
                         -----------------------------

June 29, 2000                                                      $____________

     FOR VALUE RECEIVED, BRITESMILE, INC., a Utah corporation (the "Company"),
hereby promises to pay to the order of __________________ or registered assigns
("Holder") the principal amount of ___________________ Dollars
($________________), on the Maturity Date (as defined below) and to pay interest
("Interest") on the unpaid principal balance hereof at the rate of five percent
(5.0%) per annum from the date hereof  (the "Issuance Date") until the same
becomes due and payable, whether at maturity or upon acceleration or by
conversion or redemption in accordance with the terms hereof or otherwise.
Interest on this Note shall commence accruing on the Issuance Date and shall be
computed on the basis of a 365-day year and actual days elapsed and shall (A) be
payable in cash on the Interest Dates (as defined below) pursuant to Section
2(c)(ii) and (B) be included in the Additional Amount (as defined below) at the
time of optional or mandatory conversion or redemption of the principal to which
such interest relates in accordance with Section 1 hereof. Any amount of
interest on this Note which is not paid when due shall bear interest at the rate
of 18% per annum from the date thereof until the same is paid ("Default
Interest").

     1.   Payments of Principal and Interest. All payments of principal and
          ----------------------------------
interest on this Note (to the extent such principal is not converted into Common
Stock (as defined
<PAGE>

below) in accordance with the terms hereof) shall be made in lawful money of the
United States of America by wire transfer of immediately available funds to such
account as the Holder may from time to time designate by written notice in
accordance with the provisions of this Note. Whenever any amount due by the
terms of this Note is due on any day which is not a Business Day (as defined
below), the same shall instead be due on the next following day which is a
Business Day and, in the case of any interest payment date which is not the date
on which this Note is paid in full, the extension of the due date thereof shall
not be taken into account for purposes of determining the amount of interest due
on such date. For purposes of this Note, "Business Day" shall mean any day other
than a Saturday, Sunday or a day on which commercial banks in the city of New
York are authorized or required by law or executive order to remain closed. Each
capitalized term used herein, and not otherwise defined, shall have the meaning
ascribed thereto in the Securities Purchase Agreement, dated June 27, 2000,
pursuant to which this Note and the Other Notes (as defined below) were
originally issued (the "Securities Purchase Agreement"). This Note and the Other
Notes issued by the Company pursuant to the Securities Purchase Agreement are
collectively referred to in this Note as the "Notes."

     2.   Conversion of Notes. This Note shall be convertible into shares of the
          -------------------
Company's common stock, par value $0.001 per share (the "Common Stock"), on the
terms and conditions set forth in this Section 2.

          (a)  Certain Defined Terms. For purposes of this Note, the following
               ---------------------
terms shall have the following meanings:

               (i)   "Additional Amount" means, with respect to any principal
     amount of Notes, the sum of (A) accrued and unpaid Interest, if any, on
     such principal amount up through and including the date on which the
     Additional Amount is calculated, and (B) Default Interest, if any, on the
     interest referred to in the immediately preceding clause (A).

               (ii)  "Approved Stock Plan" means any employee benefit plan which
     has been approved by the Board of Directors of the Company, pursuant to
     which the Company's securities may be issued to any employee, officer or
     director for services provided to the Company.

               (iii) "Change of Control" means any of the following: (A) the
     consolidation, merger or other business combination of the Company with or
     into another Person (other than (I) a consolidation, merger or other
     business combination in which holders of the Company's voting power
     immediately prior to the transaction continue after the transaction to
     hold, directly or indirectly, the voting power of the surviving entity or
     entities necessary to elect a majority of the members of the board of
     directors (or their equivalent if other than a corporation) of such entity
     or entities, or (II) pursuant to a migratory merger effected solely for the
     purpose of changing the jurisdiction of incorporation of the Company), (B)
     the sale or transfer of all or substantially all of the Company's assets,
     or (C) a

                                      -2-
<PAGE>

     purchase, tender or exchange offer made to and accepted by the holders of
     more than the 50% of the outstanding shares of Common Stock.

               (iv)  "Closing Bid Price" means, for any security as of any date,
     the last closing bid price for such security on the Principal Market (as
     defined below) as reported by Bloomberg Financial Markets or its successor
     or, if not then in existence or reporting such securities prices, a
     comparable reporting service or publication ("Bloomberg"), or if the
     Principal Market begins to operate on an extended hours basis, and does not
     designate the closing bid price, then the last bid price at 4:00 p.m., New
     York City Time, as reported by Bloomberg, or if the foregoing do not apply,
     the last closing bid price of such security in the over- the-counter market
     on the electronic bulletin board for such security as reported by
     Bloomberg, or, if no closing bid price is reported for such security by
     Bloomberg, the last closing trade price of such security as reported by
     Bloomberg, or, if no last closing trade price is reported for such security
     by Bloomberg, the average of the bid prices of any market makers for such
     security as reported in the "pink sheets" by the National Quotation Bureau,
     Inc. If the Closing Bid Price cannot be calculated for such security on
     such date on any of the foregoing bases, the Closing Bid Price of such
     security on such date shall be the fair market value as mutually determined
     by the Company and the holders of the Notes. If the Company and the holders
     of the Notes are unable to agree upon the fair market value of the Common
     Stock, then such dispute shall be resolved pursuant to Section 2(d)(iii)
     below with the term "Closing Bid Price" being substituted for the term
     "Market Price." All such determinations to be appropriately adjusted for
     any stock dividend, stock split or other similar transaction during such
     period.

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

               (vi)  "Conversion Amount" means the sum of (A) the principal
     amount of this Note to be converted, redeemed or otherwise with respect to
     which this determination is being made and (B) the Additional Amount with
     respect to such principal amount.

               (vii) "Conversion Price" means (A) as of any Conversion Date (as
     defined below) or other date of determination during the period beginning
     on the Issuance Date (as defined below) and ending on and including the day
     immediately preceding the earlier of (I) the Put Option Payment Date and
     (II) the Maturity Date, 120% of the Market Price (as defined below) of the
     Common Stock on the Pricing Date, (B) as of any Conversion Date or other
     date of determination on or after the Put Option Payment Date, the lower of
     (I) the Put Option Conversion Price and (II) 120% of the Market Price of
     the Common Stock on the Pricing Date, and (C) as of any Conversion Date or
     other date of determination on or after the Maturity Date, the lower of (I)
     the Maturity Conversion Price (as defined below) and (II) 120% of the
     Market Price of the

                                      -3-
<PAGE>

     Common Stock on the Pricing Date. The Conversion Price as calculated under
     any of the foregoing clauses (A)(I), (A)(II), (B)(I), (B)(II), (C)(I), and
     (C)(II) shall be subject to adjustment or substitution as provided in this
     Note.

               (viii)  "Excluded Securities" means up to 1,250,000 shares of
     Common Stock issued at a purchase price of not less than $4.00 per share in
     connection with any strategic partnership or joint venture (the primary
     purpose of which is not to raise equity capital) with any entity whose
     primary business is not investing or advising other entities.

               (ix)    "Maturity Conversion Price" means the product of (A) 95%
     multiplied by (B) the arithmetic average of the Weighted Average Price of
     the Common Stock on each trading day during the 30 consecutive trading days
     immediately preceding the Maturity Date.  All such determinations shall be
     appropriately adjusted for any stock dividend, stock split or other similar
     transaction during such period.

               (x)     "Maturity Date" means the date which is five (5) years
     after the Issuance Date of this Note.

               (xi)    "Market Price" means, as of any date of determination,
     with respect to any security, that price which shall be computed as the
     arithmetic average of the Closing Bid Prices for such security during the
     ten (10) consecutive trading days immediately preceding such date of
     determination. All such determinations shall be appropriately adjusted for
     any stock dividend, stock split or other similar transaction during such
     period.

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

               (xiii)  "Other Notes" means the convertible subordinated notes,
     other than this Note, issued by the Company pursuant to the Securities
     Purchase Agreement.

               (xiv)   "Person" means an individual, a limited liability
     company, a partnership, a joint venture, a corporation, a trust, an
     unincorporated organization, or a government or any department or agency
     thereof.

               (xv)    "Principal Market" means the Nasdaq National Market, or
     if the Common Stock is not traded on the Nasdaq National Market, then the
     principal securities exchange or trading market for the Common Stock.

               (xvi)   "Pricing Date" means June 28, 2000.

               (xvii)  "Put Option Conversion Price" means as of any Conversion
     Date or other date of determination after the Put Option Payment

                                      -4-
<PAGE>

     Date, the arithmetic average of the three (3) lowest Closing Bid Prices of
     the Common Stock during the thirty (30) consecutive trading days
     immediately preceding such Conversion Date or other date of determination.
     All such determinations shall be appropriately adjusted for any stock
     dividend, stock split or other similar transaction during such period.

               (xviii) "Registration Rights Agreement" means that certain
     Registration Rights Agreement between the Company and the initial holders
     of the Notes relating to the filing of a registration statement covering
     the resale of the shares of Common Stock issuable upon conversion of the
     Notes and exercise of the Warrants.

               (xix)   "Restricted Securities" means securities that are not
     eligible for resale pursuant to Rule 144(k) under the Securities Act (or
     any successor provision).

               (xx)    "Weighted Average Price" means, for any security as of
     any date, the dollar volume-weighted average price for such security on the
     Principal Market during the period beginning at 9:30 a.m., New York City
     time, and ending at 4:00 p.m., New York City time, as reported by Bloomberg
     through its "Volume at Price" functions or, if the foregoing does not
     apply, the dollar volume-weighted average price of such security in the
     over-the-counter market on the electronic bulletin board for such security
     as reported by Bloomberg, or, if no dollar volume-weighted average price is
     reported for such security by Bloomberg, the average of the highest closing
     bid price and the lowest closing ask price of any of the market makers for
     such security as reported in the "pink sheets" by the National Quotation
     Bureau, Inc. If the Weighted Average Price cannot be calculated for such
     security on such date on any of the foregoing bases, the Weighted Average
     Price of such security on such date shall be the fair market value as
     mutually determined by the Company and the holders of the Notes. If the
     Company and the holders of the Notes are unable to agree, upon the fair
     market value of the Common Stock, then such dispute shall be resolved
     pursuant to Section 2(d)(iii) below with the term "Weighted Average Price"
     being substituted for the term "Closing Bid Price."

          (b)  Holder's Conversion Right; Mandatory Redemption or Conversion.
               -------------------------------------------------------------
Subject to the provisions of Section 5, at any time or times on or after the
Issuance Date (as defined above), the holder of this Note shall be entitled to
convert any part of the outstanding and unpaid Conversion Amount of this Note
into fully paid and nonassessable shares of Common Stock in accordance with
Section 5, at the Conversion Rate (as defined below). If any Conversion Amount
of this Note remains outstanding on the Maturity Date, then, pursuant to Section
2(d)(vii), all of such Conversion Amount shall be converted at the Conversion
Rate as of such date in accordance with Section 2(d)(vii) or redeemed by the
Company in accordance with Section 2(d)(vii).  The Company shall not issue any
fraction of a share of Common Stock upon any conversion. All shares of Common
Stock (including fractions thereof) issuable upon conversion of

                                      -5-
<PAGE>

this Note by the holder shall be aggregated for purposes of determining whether
the conversion would result in the issuance of a fraction of a share of Common
Stock. If, after the aforementioned aggregation, the issuance would result in
the issuance of a fraction of a share of Common Stock, the Company shall round
such fraction of a share of Common Stock up or down to the nearest whole share.

          (c)  Conversion.
               ----------

               (i)  Conversion Rate. The number of shares of Common Stock
                    ---------------
     issuable upon conversion of a Conversion Amount of this Note pursuant to
     Section 2(b) shall be determined according to the following formula (the
     "Conversion Rate"):

                               Conversion Amount
                               -----------------
                               Conversion Price

               (ii) Cash Payment of Additional Amount. The Additional Amount
                    ---------------------------------
     shall be payable on the last day of each March and the last day of each
     September during the period beginning on the Issuance Date and ending on,
     and including, the Maturity Date (each an "Interest Date"). If an Interest
     Date is not a Business Day then the Additional Amount shall be due and
     payable on the Business Day immediately following the Interest Date. The
     Additional Amount shall be payable in cash.  Any accrued and unpaid
     Interest which is not paid within five (5) Business Days of such accrued
     and unpaid Interest's Interest Date shall bear Default Interest.

          (d)  Mechanics of Conversion. The conversion of this Note shall be
               -----------------------
conducted in the following manner:

               (i)  Holder's Delivery Requirements. To convert this Note into
                    ------------------------------
     shares of Common Stock on any date (the "Conversion Date"), the holder
     hereof shall (A) transmit by facsimile (or otherwise deliver), for receipt
     on or prior to 4:30 p.m., Pacific Time on such date, a copy of a fully
     executed notice of conversion in the form attached hereto as Exhibit A (the
                                                                  ---------
     "Conversion Notice") to the Company with a copy thereof to the Company's
     designated transfer agent (the "Transfer Agent") and (B) if required by
     Section 2(d)(viii), surrender to a common carrier for delivery to the
     Company as soon as practicable following such date the original Note being
     converted (or an indemnification undertaking with respect to such Note in
     the case of its loss, theft or destruction). A holder delivering a
     Conversion Notice by facsimile shall use its best efforts to send a copy of
     the Conversion Notice by overnight mail to the Company by depositing such
     copy of the Conversion Notice with a nationally recognized overnight
     delivery service on the Conversion Date; provided, however, that the
     failure of any holder to satisfy its obligations under this sentence shall
     not affect the Conversion Date or the obligations of the Company for any
     conversion of this Note.  The date of the Company's receipt of such copy of
     the Conversion Notice

                                      -6-
<PAGE>

     shall be deemed to occur on the Business Day immediately following the day
     such holder deposits the copy of the Conversion Notice with a nationally
     recognized overnight delivery service (the "Overnight Receipt Date").

               (ii)  Company's Response. Upon receipt by the Company of a
                     ------------------
     facsimile or other copy of a Conversion Notice, the Company (1) shall
     immediately send, via facsimile, a confirmation of receipt of such
     Conversion Notice to the Transfer Agent, which confirmation shall
     constitute an instruction to the Transfer Agent to process such Conversion
     Notice in accordance with the terms of this Note, and (2) on or before the
     second Business Day following the date of receipt by the Company of such
     Conversion Notice (the "Share Delivery Date"), (A) issue and deliver to the
     address as specified in the Conversion Notice, a certificate, registered in
     the name of the holder or its designee, for the number of shares of Common
     Stock to which the holder shall be entitled, or (B) provided the Transfer
     Agent is participating in the Depository Trust Company ("DTC") Fast
     Automated Securities Transfer Program, upon the request of the holder,
     credit such aggregate number of shares of Common Stock to which the holder
     shall be entitled to the holder's or its designee's balance account with
     DTC through its Deposit Withdrawal Agent Commission system. Subject to
     Section 2(d)(viii), if less than the Conversion Amount of this Note is
     submitted for conversion, then the Company shall, as soon as practicable
     and in no event later than five Business Days after receipt of the Note
     (the "Note Delivery Date") and at its own expense, issue and deliver to the
     holder a new Note for the outstanding principal amount not converted.

               (iii) Dispute Resolution. In the case of a dispute as to the
                     ------------------
     determination of the Market Price or the arithmetic calculation of the
     Conversion Rate, the Company shall instruct the Transfer Agent to issue to
     the holder the number of shares of Common Stock that is not disputed and
     shall transmit an explanation of the disputed determinations or arithmetic
     calculations to the holder via facsimile within one (1) Business Day of
     receipt of such holder's Conversion Notice or other date of determination.
     If such holder and the Company are unable to agree upon the determination
     of the Market Price or arithmetic calculation of the Conversion Rate within
     two (2) Business Days of such disputed determination or arithmetic
     calculation being transmitted to the holder, then the Company shall within
     one (1) Business Day submit via facsimile (A) the disputed determination of
     the Market Price to an independent, reputable investment bank selected by
     the Company and approved by the holders of at least two-thirds (2/3) of the
     aggregate Conversion Amounts of the Notes then outstanding or (B) the
     disputed arithmetic calculation of the Conversion Rate to the Company's
     independent, outside accountant. The Company shall cause the investment
     bank or the accountant, as the case may be, to perform the determinations
     or calculations and notify the Company and the holder of the results no
     later than forty-eight (48) hours from the time it receives the disputed
     determinations or calculations. Such investment bank's or accountant's
     determination or calculation, as the case may be, shall be binding upon all
     parties absent manifest error.

                                      -7-
<PAGE>

               (iv) Record Holder. The person or persons entitled to receive the
                    -------------
     shares of Common Stock issuable upon a conversion of this Note shall be
     treated for all purposes as the record holder or holders of such shares of
     Common Stock on the Conversion Date.

               (v)  Company's Failure to Timely Convert.
                    -----------------------------------

                    (A)  Cash Damages. If within three (3) Business Days after
                         ------------
          the Company's receipt of the facsimile copy of a Conversion Notice the
          Company shall fail to issue a certificate to the holder or credit the
          holder's balance account with DTC for the number of shares of Common
          Stock to which such holder is entitled upon such holder's conversion
          of this Note or, subject to Section 2(d)(viii), the Company shall fail
          to issue a new Note representing the principal amount to which such
          holder is entitled, if any, pursuant to Section 2(d)(ii), in addition
          to all other available remedies which such holder may pursue hereunder
          and under the Securities Purchase Agreement, the Company shall pay
          additional damages to such holder for each date after the Share
          Delivery Date such conversion is not timely effected and/or each date
          after the Note Delivery Date such new Note is not delivered in an
          amount equal to 0.5% of the product of (I) the sum of the number of
          shares of Common Stock not issued to the holder on or prior to the
          Share Delivery Date and to which such holder is entitled and, in the
          event the Company has failed to deliver a new Note to the holder on or
          prior to the Note Delivery Date, the number of shares of Common Stock
          issuable upon conversion of the Conversion Amount represented by the
          new Note, as of the Note Delivery Date and (II) the Closing Bid Price
          of the Common Stock on the Share Delivery Date, in the case of the
          failure to deliver Common Stock, or the Note Delivery Date, in the
          case of failure to deliver a new Note. If the Company fails to pay the
          additional damages set forth in this Section 2(d)(v) within five
          Business Days of the date incurred, then the holder entitled to such
          payments shall have the right at any time, so long as the Company
          continues to fail to make such payments, to require the Company, upon
          written notice, to immediately issue, in lieu of such cash damages,
          the number of shares of Common Stock equal to the quotient of (X) the
          aggregate amount of the damages payments described herein divided by
          (Y) the Conversion Price in effect on such Conversion Date as
          specified by the holder in the Conversion Notice.

                    (B)  Void Conversion Notice; Adjustment to Conversion Price.
                         ------------------------------------------------------
          If for any reason the holder has not received all of the shares of
          Common Stock prior to the ninth (9th) Business Day after the Overnight
          Receipt Date with respect to a conversion of this Note, then the
          holder, upon written notice to the Company, with a copy to the
          Transfer Agent, may void its Conversion Notice with respect to, and
          retain or have

                                      -8-
<PAGE>

          returned, as the case may be, any principal amount of this Note that
          has not been converted pursuant to such holder's Conversion Notice;
          provided that the voiding of a holder's Conversion Notice shall not
          --------
          affect the Company's obligations to make any payments which have
          accrued prior to the date of such notice pursuant to Section
          2(d)(v)(A) or otherwise. If for any reason the holder has not received
          all of the shares of Common Stock prior to the fourteenth (14th)
          Business Day after the Overnight Receipt Date with respect to a
          conversion of this Note, then the Conversion Price of the principal
          amount of this Note with respect to which the Company has not
          delivered shares of Common Stock on or prior to such fourteenth (14th)
          Business Day shall be adjusted to the lowest Closing Bid Price during
          the period beginning on the Conversion Date and ending on the date
          such holder voided the Conversion Notice, subject to further
          adjustment as provided in this Note. Notwithstanding the foregoing, no
          adjustment to the Conversion Price shall be made pursuant to this
          Section 2(d)(v)(B) that will increase the Conversion Price.

                     (C)  Redemption. If for any reason the holder has not
                          ----------
          received all of the shares of Common Stock prior to the ninth (9th)
          Business Day after the Overnight Receipt Date with respect to a
          conversion of this Note (a "Conversion Failure"), then the holder,
          upon written notice to the Company, may require that the Company
          redeem any or all of the Conversion Amount of this Note, including the
          Conversion Amount previously submitted for conversion and with respect
          to which the Company has not delivered shares of Common Stock, in
          accordance with Section 3.

               (vi)  Pro Rata Conversion. If the Company receives a Conversion
                     -------------------
     Notice from more than one holder of the Notes for the same Conversion Date
     and the Company can convert some, but not all, of the Notes submitted for
     conversion, the Company shall convert from each holder electing to have
     Notes converted at such time a pro rata amount of such holder's Conversion
     Amount submitted for conversion based on the Conversion Amount of the Notes
     submitted for conversion on such date by such holder relative to the
     Conversion Amount of all Notes submitted for conversion on such date.

               (vii) Mandatory Redemption or Conversion at Maturity at Company's
                     -----------------------------------------------------------
     Option.  If any Conversion Amount of any Notes remains outstanding on the
     ------
     Maturity Date, the Company shall have the option either (i) to convert all
     of the Conversion Amount of the Notes outstanding on the Maturity Date at
     the Conversion Rate as of such date without the holders of such Notes being
     required to give a Conversion Notice on such Maturity Date (a "Maturity
     Date Mandatory Conversion"), or (ii) redeem all of the Conversion Amount on
     the Maturity Date for an amount in cash (the "Maturity Date Redemption
     Price") equal to the Conversion Amount (a "Maturity Date Mandatory
     Redemption"). The Company shall be deemed to have elected a Maturity Date
     Mandatory Redemption unless it

                                      -9-
<PAGE>

     delivers written notice to each holder of Notes at least thirty-five (35)
     Business Days prior to the Maturity Date of its irrevocable election to
     effect a Maturity Date Mandatory Conversion. If the Company elects a
     Maturity Date Mandatory Redemption, then on the Maturity Date the Company
     shall pay to each holder of Notes outstanding on the Maturity Date, by wire
     transfer of immediately available funds, an amount equal to the Maturity
     Date Redemption Price. If the Company elects a Maturity Date Mandatory
     Redemption and fails to redeem all of the Conversion Amount of the Notes
     outstanding on the Maturity Date by payment of the Maturity Date Redemption
     Price, then in addition to any remedy such holder of Notes may have under
     this Note, the Securities Purchase Agreement and the Registration Rights
     Agreement, (X) the applicable Maturity Date Redemption Price payable in
     respect of such unredeemed Conversion Amount shall bear interest at the
     rate of 1.5% per month, prorated for partial months, until paid in full,
     and (Y) any holder of Notes shall have the option to require the Company to
     convert any or all of such holder's Conversion Amount that the Company
     elected to redeem under this Section 2(d)(vii) and for which the Maturity
     Date Redemption Price (together with any interest thereon ) which has not
     been paid into shares of Common Stock equal to the number which results
     from dividing the Maturity Date Redemption Price (together with any
     interest thereon) by the Conversion Price in effect on the Maturity Date.
     If the Company has elected a Maturity Date Mandatory Conversion or has
     failed to pay the Maturity Date Redemption Price in a timely manner as
     described above, then the Maturity Date shall be extended for any Notes for
     as long as (A) the conversion of such Notes would violate the provisions of
     Section 5, (B) a Triggering Event shall have occurred and be continuing, or
     (C) an event shall have occurred and be continuing which with the passage
     of time and the failure to cure would result in a Triggering Event.

               (viii) Book-Entry. Notwithstanding anything to the contrary set
                      ----------
     forth herein, upon conversion of any portion of this Note in accordance
     with the terms hereof, the holder thereof shall not be required to
     physically surrender this Note to the Company unless the full Conversion
     Amount represented by this Note is being converted. The holder and the
     Company shall maintain records showing the Conversion Amount so converted
     and the dates of such conversions or shall use such other method,
     reasonably satisfactory to the holder and the Company, so as not to require
     physical surrender of this Note upon each such conversion. In the event of
     any dispute or discrepancy, such records of the Company shall be
     controlling and determinative in the absence of manifest error.
     Notwithstanding the foregoing, if any portion of this Note is converted,
     and in reliance on this Section 2(d)(viii) the holder does not surrender
     this Note, the holder may not transfer this Note unless the holder first
     physically surrenders this Note to the Company, whereupon the Company will
     forthwith issue and deliver to the holder a new Note of like tenor,
     registered as the holder may request, representing in the aggregate the
     remaining Conversion Amount represented by this Note. The holder and any
     assignee, by acceptance of this Note or a new Note, acknowledge and agree
     that, by reason of the provisions of this paragraph, following conversion
     of

                                      -10-
<PAGE>

     any portion of this Note, the Conversion Amount (including the principal of
     this Note) represented by this Note may be less than the principal amount
     and the accrued interest set forth on the face hereof.

          (e)  Taxes. The Company shall pay any and all taxes that may be
               -----
payable with respect to the issuance and delivery of Common Stock upon the
conversion of Notes.

          (f)  Adjustments to Conversion Price. In addition to any other
               -------------------------------
adjustments provided herein, the Conversion Price will be subject to adjustment
from time to time as provided in this Section 2(f).

               (i)  Adjustment of Conversion Price upon Issuance of Common
                    ------------------------------------------------------
     Stock.  If and whenever on or after the date of issuance of the Notes, the
     -----
     Company issues or sells, or in accordance with this Section 2(f) is deemed
     to have issued or sold, any shares of Common Stock (including the issuance
     or sale of shares of Common Stock owned or held by or for the account of
     the Company, but excluding (A) shares of Common Stock deemed to have been
     issued by the Company in connection with an Approved Stock Plan, (B) shares
     of Common Stock issued upon conversion of the Notes or exercise of the
     Warrants, (C) shares of Common Stock issued upon the conversion or exercise
     of any options or warrants issued other than under an Approved Stock Plan
     outstanding as of the Issuance Date provided the terms of such securities
     are not amended after the Issuance Date, or (D) any Excluded Securities)
     for a consideration per share less than a price (the "Applicable Price")
     equal to the Conversion Price in effect immediately prior to such time,
     then immediately after such issue or sale, the Conversion Price then in
     effect shall be reduced to an amount equal to the per share consideration
     received by the Company upon such issue or sale.  For purposes of
     determining the adjusted Conversion Price under this Section 2(f)(i), the
     following shall be applicable:

                    (A)  Issuance of Options. If the Company in any manner
                         -------------------
     grants or sells any Options and the lowest price per share for which one
     share of Common Stock is issuable upon the exercise of any such Option or
     upon conversion, exchange or exercise of any Convertible Securities
     issuable upon exercise of such Option is less than the Applicable Price,
     then such share of Common Stock shall be deemed to be outstanding and to
     have been issued and sold by the Company at the time of the granting or
     sale of such Option for such price per share. For purposes of this Section
     2(f)(i)(A), the "lowest price per share for which one share of Common Stock
     is issuable upon the exercise of any such Option or upon conversion,
     exchange or exercise of any Convertible Securities issuable upon exercise
     of such Option" shall be equal to the sum of the lowest amounts of
     consideration (if any) received or receivable by the Company with respect
     to any one share of Common Stock upon granting or sale of the Option, upon
     exercise of the Option and upon conversion, exchange or exercise of any
     Convertible Security issuable upon exercise of such Option. No further

                                      -11-
<PAGE>

     adjustment of the Conversion Price shall be made upon the actual issuance
     of such Common Stock or of such Convertible Securities upon the exercise of
     such Options or upon the actual issuance of such Common Stock upon
     conversion, exchange or exercise of such Convertible Securities.

               (B)  Issuance of Convertible Securities. If the Company in any
                    ----------------------------------
     manner issues or sells any Convertible Securities and the lowest price per
     share for which one share of Common Stock is issuable upon such conversion,
     exchange or exercise thereof is less than the Applicable Price, then such
     share of Common Stock shall be deemed to be outstanding and to have been
     issued and sold by the Company at the time of the issuance of sale of such
     Convertible Securities for such price per share. For the purposes of this
     Section 2(f)(i)(B), the "lowest price per share for which one share of
     Common Stock is issuable upon such conversion, exchange or exercise" shall
     be equal to the sum of the lowest amounts of consideration (if any)
     received or receivable by the Company with respect to any one share of
     Common Stock upon the issuance or sale of the Convertible Security and upon
     the conversion, exchange or exercise of such Convertible Security.  No
     further adjustment of the Conversion Price shall be made upon the actual
     issuance of such Common Stock upon conversion, exchange or exercise of such
     Convertible Securities, and if any such issue or sale of such Convertible
     Securities is made upon exercise of any Options for which adjustment of the
     Conversion Price had been or are to be made pursuant to other provisions of
     this Section 2(f)(i), no further adjustment of the Conversion Price shall
     be made by reason of such issue or sale.

               (C)  Change in Option Price or Rate of Conversion. If the
                    --------------------------------------------
     purchase or exercise price provided for in any Options, the additional
     consideration, if any, payable upon the issue, conversion, exchange or
     exercise of any Convertible Securities, or the rate at which any
     Convertible Securities are convertible into or exchangeable or exercisable
     for Common Stock changes at any time, the Conversion Price in effect at the
     time of such change shall be adjusted to the Conversion Price which would
     have been in effect at such time had such Options or Convertible Securities
     provided for such changed purchase price, additional consideration or
     changed conversion rate, as the case may be, at the time initially granted,
     issued or sold. For purposes of this Section 2(f)(i)(C), if the terms of
     any Option or Convertible Security that was outstanding as of the date of
     issuance of the Notes are changed in the manner described in the
     immediately preceding sentence, then such Option or Convertible Security
     and the Common Stock deemed issuable upon exercise, conversion or exchange
     thereof shall be deemed to have been issued as of the date of such change.
     No adjustment shall be made if such adjustment would result in an increase
     of the Conversion Price then in effect.

               (D)  Calculation of Consideration Received. In case any Option is
                    -------------------------------------
     issued in connection with the issue or sale of other securities of the
     Company, together comprising one integrated transaction in which no
     specific

                                      -12-
<PAGE>

     consideration is allocated to such Options by the parties thereto, the
     Options will be deemed to have been issued for a consideration of $0.01. If
     any Common Stock, Options or Convertible Securities are issued or sold or
     deemed to have been issued or sold for cash, the consideration received
     therefor will be deemed to be the gross amount received by the Company
     therefor, less expenses in excess of five percent (5%) of the gross amount
     received. If any Common Stock, Options or Convertible Securities are issued
     or sold for a consideration other than cash, the amount of the
     consideration other than cash received by the Company will be the fair
     value of such consideration, except where such consideration consists of
     marketable securities, in which case the amount of consideration received
     by the Company will be the arithmetic average of the Closing Bid Prices of
     such securities during the ten (10) consecutive trading days ending on the
     date of receipt of such securities. If any Common Stock, Options or
     Convertible Securities are issued to the owners of the non-surviving entity
     in connection with any merger in which the Company is the surviving entity,
     the amount of consideration therefor will be deemed to be the fair value of
     such portion of the net assets and business of the non-surviving entity as
     is attributable to such Common Stock, Options or Convertible Securities, as
     the case may be. The fair value of any consideration other than cash or
     securities will be determined jointly by the Company and the holders of a
     majority of the principal amount of the Notes then outstanding. If such
     parties are unable to reach agreement within ten (10) days after the
     occurrence of an event requiring valuation (the "Valuation Event"), the
     fair value of such consideration will be determined within five (5)
     Business Days after the tenth (10th) day following the Valuation Event by
     an independent, reputable appraiser agreed to by the Company and the
     holders of a majority of the Conversion Amounts of the Notes. The
     determination of such appraiser shall be deemed binding upon all parties
     absent manifest error and the fees and expenses of such appraiser shall be
     bound by the Company.

                    (E)  Record Date. If the Company takes a record of the
                         -----------
     holders of Common Stock for the purpose of entitling them (1) to receive a
     dividend or other distribution payable in Common Stock, Options or
     Convertible Securities, or (2) to subscribe for or purchase Common Stock,
     Options or Convertible Securities, then such record date will be deemed to
     be the date of the issue or sale of the shares of Common Stock deemed to
     have been issued or sold upon the declaration of such dividend or the
     making of such other distribution or the date of the granting of such right
     of subscription or purchase, as the case may be.

               (ii) Adjustment of Conversion Price Upon Subdivision or
                    --------------------------------------------------
     Combination of Common Stock.  If the Company at any time subdivides (by any
     ----------------------------
     stock split, stock dividend, recapitalization or otherwise) one or more
     classes of its outstanding shares of Common Stock into a greater number of
     shares, the Conversion Price in effect immediately prior to such
     subdivision will be proportionately reduced. If the Company at any time
     combines (by combination, reverse stock split or otherwise) one or more
     classes of its outstanding shares of

                                      -13-
<PAGE>

     Common Stock into a smaller number of shares, the Conversion Price in
     effect immediately prior to such combination will be proportionately
     increased.

               (iii) Holder's Right of Alternative Conversion Price Following
                     --------------------------------------------------------
     Issuance of Convertible Securities. If the Company in any manner issues or
     ----------------------------------
     sells Convertible Securities or Options that are convertible into or
     exchangeable or exercisable for Common Stock at a price which varies or may
     vary with the market price of the Common Stock, including by way of one or
     more reset(s) to a fixed price (each of the formulations for such variable
     price being herein referred to as, a "Variable Price"), and such Variable
     Price is not calculated using the same formula used to calculate the
     Conversion Price in effect immediately prior to the time of such issue or
     sale, the Company shall provide written notice thereof via facsimile and
     overnight courier to each holder of the Notes (a "Variable Notice") on the
     date of issuance of such Convertible Securities or Options. If a holder of
     the Notes then outstanding provides written notice to the Company via
     facsimile and overnight courier (the "Variable Price Election Notice")
     within fifteen (15) Business Days of receiving a Variable Notice that such
     holder desires to replace the Conversion Price then in effect with the
     Variable Price described in such Variable Notice, then, from and after the
     date of the Company's receipt of the Variable Price Election Notice, the
     Conversion Price will automatically be replaced with the Variable Price for
     the Notes held by such holder.  In the event that a holder of Notes
     delivers a Conversion Notice after the Company's issuance of Convertible
     Securities with a Variable Price but before such holder's receipt of the
     Company's Variable Notice, then such holder shall have the option by
     written notice to the Company to rescind such Conversion Notice or to have
     the Conversion Price be equal to such Variable Price for the conversion
     effected by such Conversion Notice.

               (iv)  Adjustment of the Conversion Price Upon Major Corporate
                     -------------------------------------------------------
     Event Announcement.  In the event (A) the Company makes a public
     ------------------
     announcement that it intends to consolidate or merge with or into another
     Person or engage in a business combination involving the issuance or
     exchange of more than fifty percent (50%) of the Company's outstanding
     Common Stock, (B) the Company makes a public announcement that it intends
     to sell or transfer all or substantially all of the Company's assets, or
     (C) any Person (including the Company) publicly announces a purchase,
     tender or exchange offer for more than 50% of the Company's outstanding
     Common Stock (the transactions described in clauses (A), (B) and (C) above
     are hereinafter referred to as "Major Corporate Event" and the date of the
     announcement referred to in clause (A), (B) or (C) is hereinafter referred
     to as the "Announcement Date"), then the Conversion Price shall, effective
     upon the Announcement Date and continuing through and including the
     Adjusted Conversion Price Termination Date (as defined below), be equal to
     the Conversion Price which would have been applicable for a conversion by
     the holder on the Announcement Date.  From and after the Adjusted
     Conversion Price Termination Date, the Conversion Price shall be determined
     as set forth in Section 2.  For purposes hereof, "Adjusted Conversion Price

                                      -14-
<PAGE>

     Termination Date" shall mean, with respect to any proposed Major Corporate
     Event for which a public announcement as contemplated by this Section
     2(f)(iv) has been made, the date upon which the Company or other Person (in
     the case of clause (C) above) consummates or publicly announces the
     termination or abandonment of the proposed Major Corporate Event which was
     the subject of the previous public announcement.

               (v)   Nine Month Adjustment to Conversion Price.  In addition to
                     -----------------------------------------
     any other adjustment to the Conversion Price provided for in this Note, on
     that date which shall be the nine month anniversary of the Issuance Date
     (the "Adjustment Date"), the Conversion Price shall be subject to a one-
     time downward adjustment to One Hundred Two Percent (102%) of the Market
     Price on the Adjustment Date, provided that in no event shall the
     Conversion Price be subject to a downward adjustment under this Section
     2(f)(v) to less than Seventy-five percent (75%) of the Market Price on the
     Pricing Date.

               (vi)  Distribution of Assets.  If the Company shall declare or
                     ----------------------
     make any dividend or other distribution of its assets (or rights to acquire
     its assets) to holders of Common Stock, by way of return of capital or
     otherwise (including, without limitation, any distribution of cash, stock
     or other securities, property or options by way of a dividend, spin off,
     reclassification, corporate rearrangement or other similar transaction) (a
     "Distribution"), at any time after the issuance of this Note, then, in each
     such case the Conversion Price in effect immediately prior to the close of
     business on the record date fixed for the determination of holders of
     Common Stock entitled to receive the Distribution shall be reduced,
     effective as of the close of business on such record date, to a price
     determined by multiplying such Conversion Price by a fraction of which (A)
     the numerator shall be the Closing Bid Price of the Common Stock on the
     trading day immediately preceding such record date minus the value of the
     Distribution (as determined in good faith by the Company's Board of
     Directors) applicable to one share of Common Stock, and (B) the denominator
     shall be the Closing Bid Price of the Common Stock on the trading day
     immediately preceding such record date.  In the event that a Distribution
     will not result in a reduction to the Conversion Price pursuant to the
     foregoing sentence of this Section 2(f)(vi), the Conversion Price in effect
     immediately prior to the close of business on the record date fixed for the
     determination of holders of Common Stock entitled to receive the
     Distribution shall remain in effect.

               (vii) Other Events. If any event occurs of the type contemplated
                     ------------
     by the provisions of this Section 2(f) but not expressly provided for by
     such provisions (including, without limitation, the granting of stock
     appreciation rights, phantom stock rights or other rights with equity
     features), then the Company's Board of Directors will make an appropriate
     adjustment in the Conversion Price so as to protect the rights of the
     holders of the Notes; provided that no such adjustment will increase the
     Conversion Price as otherwise determined pursuant to this Section 2(f).

                                      -15-
<PAGE>

                    (vii) Notices.
                          --------

                          (A)  Immediately upon any adjustment of the Conversion
     Price, the Company will give written notice thereof to each holder of the
     Notes setting forth in reasonable detail, and certifying, the calculation
     of such adjustment.

                          (B)  The Company will give written notice to each
     holder of Notes at least ten (10) Business Days prior to the date on which
     the Company closes its books or takes a record (I) with respect to any
     dividend or distribution upon the Common Stock, (II) with respect to any
     pro rata subscription offer to holders of Common Stock or (III) for
     determining rights to vote with respect to any Organic Change (as defined
     in Section 4(a)), dissolution or liquidation, provided that such
     information shall be made known to the public prior to or in conjunction
     with such notice being provided to such holder.

                          (C)  The Company will also give written notice to each
     holder of Notes at least ten (10) Business Days prior to the date on which
     any Organic Change, dissolution or liquidation will take place, provided
     that such information shall be made known to the public prior to or in
     conjunction with such notice being provided to such holder.

     3.   Redemption at Option of Holder.
          ------------------------------

          (a)  Redemption Option Upon Triggering Event. In addition to all other
               ---------------------------------------
rights of the holder contained herein, after a Triggering Event (as defined
below), the holder shall have the right, at the holder's option, to require the
Company to redeem all or a portion of this Note at a price equal to (x) with
respect to a Triggering Event described in clauses (iii) or (vii) of Section
3(b) below, 125% of the Conversion Amount, and (y) with respect to a Triggering
Event described in clauses (i), (ii), (iv), (v) or (vi) of Section 3(b) below,
the greater of (i) 125% of the Conversion Amount and (ii) the product of (A) the
Conversion Rate for the Conversion Amount to be redeemed in effect at such time
as such holder delivers a Notice of Redemption at Option of Holder (as defined
below) and (B) the Closing Bid Price on the trading day immediately preceding
such Triggering Event on which the Principal Market is open for trading or if no
Closing Bid Price is reported by the Principal Market on such trading day, then
the most recently reported Closing Bid Price (the "Redemption Price").

          (b)  "Triggering Event". A "Triggering Event" shall be deemed to have
               ------------------
occurred at such time as any of the following events:

                    (i)   the failure of the Registration Statement to be
     declared effective by the SEC on or prior to the Effectiveness Deadline (as
     defined in the Registration Rights Agreement);

                                      -16-
<PAGE>

                    (ii)  while the Registration Statement is required to be
     maintained effective pursuant to the terms of the Registration Rights
     Agreement, the effectiveness of the Registration Statement lapses for any
     reason (including, without limitation, the issuance of a stop order) or is
     unavailable to the holder for sale of all of such Holder's Registrable
     Securities (as defined in the Registration Rights Agreement) in accordance
     with the terms of the Registration Rights Agreement, and such lapse or
     unavailability continues for a period of fifteen (15)  consecutive trading
     days or any thirty (30) trading days in a 365-day period (excluding days
     during an Allowable Grace Period);

                    (iii) the suspension from trading or failure of the Common
     Stock to be listed on the Nasdaq National Market or The New York Stock
     Exchange, Inc. or The American Stock Exchange, Inc. for a period of fifteen
     (15) consecutive trading days or for more than an aggregate of thirty (30)
     trading days in any 365-day period;

                    (iv)  the Company's or the Transfer Agent's notice to any
     holder of Notes, including by way of public announcement, at any time, of
     its intention not to comply with a request for conversion of any Notes into
     shares of Common Stock that is tendered in accordance with the provisions
     of the Notes;

                    (v)   a Conversion Failure (as defined in Section
     2(d)(v)(C));

                    (vi)  upon the Company's receipt of a Conversion Notice, the
     Company not being obligated to issue the shares of Common Stock issuable
     upon such conversion of Notes due to the provisions of Section 11; or

                    (vii) the Company breaches any representation, warranty,
     covenant or other term or condition of the Securities Purchase Agreement,
     the Registration Rights Agreement, the Warrants, this Note or any other
     agreement, document, certificate or other instrument delivered in
     connection with the transactions contemplated thereby and hereby, except to
     the extent that such breach would not have a Material Adverse Effect (as
     defined in Section 2.1(a) of the Securities Purchase Agreement) and except,
     in the case of a breach of a covenant which is curable, only if such breach
     continues for a period of at least twenty (20) days.

          (c)  Mechanics of Redemption at Option of Holder. Within one (1)
               -------------------------------------------
Business Day after the occurrence of a Triggering Event, the Company shall
deliver written notice thereof via facsimile and overnight courier (a "Notice of
Triggering Event") to each holder of Notes.  At any time after a holder becomes
aware of a Triggering Event, the holder may require the Company to redeem all of
such holder's Notes by delivering written notice thereof via facsimile and
overnight courier ("Notice of Redemption at Option of Holder") to the Company,
which Notice of Redemption at Option of Holder shall indicate (i) the Conversion
Amount of the Notes that the holder is electing to redeem and (ii) the
applicable Redemption Price, as calculated pursuant to Section 3(a) above.

                                      -17-
<PAGE>

          (d)  Payment of Redemption Price. Upon the Company's receipt of a
               ---------------------------
Notice(s) of Redemption at Option of Holder from any holder of Notes, the
Company shall deliver the applicable Redemption Price to the holder within five
(5) Business Days after the Company's receipt of a Notice of Redemption at
Option of Holder; provided that the holder's Notes shall have been delivered to
the Company. If more than one holder of Notes submits Notes for redemption and
the Company is unable to redeem all of the Notes submitted for redemption, the
Company shall (i) redeem a pro rata amount from each holder of Notes based on
the Conversion Amount represented by the Notes submitted for redemption by such
holder relative to the aggregate Conversion Amounts of all Notes for redemption
by all holders of Notes, and (ii) in addition to any remedy such holder of Notes
may have under the Notes and the Securities Purchase Agreement, pay to each
holder interest at the rate of 1.5% per month (prorated for partial months) in
respect of the unredeemed Conversion Amounts until paid in full.  Interest on
the Notes shall continue to accrue interest until the date the Company pays the
Redemption Price.

          (e)  Void Redemption. In the event that the Company does not pay the
               ---------------
Redemption Price within the time period set forth in Section 3(d), at any time
thereafter and until the Company pays such unpaid applicable Redemption Price in
full, the holder shall have the option (the "Void Optional Redemption Option")
to, in lieu of redemption, require the Company to promptly return to the holder
the Note that was submitted for redemption by such holder under this Section 3
and for which the applicable Redemption Price (together with any interest
thereon) has not been paid, by sending written notice thereof to the Company via
facsimile (the "Void Optional Redemption Notice").  Upon the Company's receipt
of such Void Optional Redemption Notice, (i) the Notice of Redemption at Option
of Holder shall be null and void with respect to that portion of the Note
subject to the Void Optional Redemption Notice, (ii) the Company shall
immediately return the Note subject to the Void Optional Redemption Notice, and
(iii) the Conversion Price of such portion of the Note shall be adjusted to the
lesser of (A) the Conversion Price as in effect on the date on which the Void
Optional Redemption Notice is delivered to the Company and (B) the lowest
Closing Bid Price during the period beginning on the date on which the Notice of
Redemption at Option of Holder is delivered to the Company and ending on the
date on which the Void Optional Redemption Notice is delivered to the Company.

          (f)  Disputes; Miscellaneous. In the event of a dispute as to the
               -----------------------
determination of the arithmetic calculation of the Redemption Price, such
dispute shall be resolved in the same manner described in Section 2(d)(iii)
above with the term "Redemption Price" being substituted for the term
"Conversion Rate."  The holder's delivery of a Void Optional Redemption Notice
and exercise of its rights following such notice shall not affect the Company's
obligations to make any payments which have accrued prior to the date of such
notice. In the event of a redemption pursuant to this Section 3 of less than all
of the Conversion Amount of this Note, the Company shall promptly cause to be
issued and delivered to the holder a new Note representing the remaining
Conversion Amount which has not been redeemed, if necessary.

                                      -18-
<PAGE>

     4.   Other Rights of Holders.
          -----------------------

          (a)  Reorganization, Reclassification, Consolidation, Merger or Sale.
               ---------------------------------------------------------------
Any recapitalization, reorganization, reclassification, consolidation, merger,
sale of all or substantially all of the Company's assets to another Person or
other transaction which is effected in such a way that holders of Common Stock
are entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock is referred
to herein as "Organic Change." Prior to the consummation of any (i) sale of all
or substantially all of the Company's assets to an acquiring Person or (ii)
other Organic Change following which the Company is not a surviving entity, the
Company will secure from the Person purchasing such assets or the successor
resulting from such Organic Change (in each case, the "Acquiring Entity") a
written agreement (in form and substance reasonably satisfactory to the holders
of the Notes representing at least two thirds (2/3) of the Conversion Amounts of
the Notes then outstanding) that the Acquiring Entity will assume the
obligations represented by this Note (including, without limitation, the right
to convert this Note into the securities or assets issued to the holders of the
Common Stock in connection with such Organic Change). Prior to the consummation
of any other Organic Change, the Company shall make appropriate provision (in
form and substance reasonably satisfactory to the holders of at least two thirds
(2/3) of the Conversion Amounts then outstanding) to insure that each of the
holders of the Notes will thereafter have the right to acquire and receive in
lieu of or in addition to (as the case may be) the shares of Common Stock
immediately theretofore acquirable and receivable upon the conversion of such
holder's Notes such shares of stock, securities or assets that would have been
issued or payable in such Organic Change with respect to or in exchange for the
number of shares of Common Stock which would have been acquirable and receivable
upon the conversion of such holder's Notes as of the date of such Organic Change
(without taking into account any limitations or restrictions on the
convertibility of the Notes).

          (b)  Optional Redemption Upon Change of Control. In addition to the
               ------------------------------------------
rights of the holders under Section 4(a), upon a Change of Control of the
Company, the holder of this Note shall have the right, at the holder's option,
to require the Company to redeem all or a portion of the Conversion Amount
represented by this Note for an amount equal to 125% of the then outstanding
Conversion Amount of this Note ("Change of Control Redemption Price").  No
sooner than fifteen (15) days nor later than ten (10) days prior to the
consummation of a Change of Control, but not prior to the public announcement of
such Change of Control, the Company shall deliver written notice thereof via
facsimile and overnight courier (a "Notice of Change of Control") to the
holders.  At any time during the period beginning after receipt of a Notice of
Change of Control (or, in the event a Notice of Change of Control is not
delivered at least ten (10) days prior to a Change of Control, at any time on or
after the date which is ten (10) days prior to a Change of Control) and ending
on the date of such Change of Control, the holders may require the Company to
redeem all or a portion of the Conversion Amount of this Note then outstanding
by delivering written notice thereof via facsimile and overnight courier (a
"Notice of Redemption Upon Change of Control") to the Company, which Notice of
Redemption Upon Change of Control shall indicate (i) the Conversion

                                      -19-
<PAGE>

Amount the holder is submitting for redemption, and (ii) the applicable Change
of Control Redemption Price, as calculated pursuant to this Section 4(b). Upon
the Company's receipt of a Notice(s) of Redemption Upon Change of Control from
any holders of Notes, the Company shall promptly, but in no event later than one
(1) Business Day following such receipt, notify the holder of this Note by
facsimile of the Company's receipt of such Notice(s) of Redemption Upon Change
of Control. The Company shall deliver the applicable Change of Control
Redemption Price simultaneous with the consummation of the Redemption Change of
Control; provided that, if required by Section 2(d)(viii), this Note shall have
been so delivered to the Company. Notwithstanding anything to the contrary in
this Note (including without limitation Section 9), payments provided for in
this Section 4(b) shall have priority to payments to the Company's stockholders
in connection with a Change of Control.

          (c)  Purchase Rights.  If at any time the Company grants, issues or
               ---------------
sells any Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the "Purchase Rights"), then the holders of Notes will be entitled
to acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which such holder could have acquired if such holder had held
the number of shares of Common Stock acquirable upon complete conversion of the
Notes (without taking into account any limitations or restrictions on the
convertibility of the Notes) immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.

          (d)  Forced Delisting. If a redemption voided pursuant to Section 3(e)
               ----------------
was caused by a Triggering Event involving the Company's inability to issue
Conversion Shares because of the Exchange Cap (as defined in Section 11), and if
so directed in one or more Void Optional Redemption Notices by the holders of at
least two-thirds (2/3) of the Conversion Amounts of the Notes then outstanding,
including Conversion Amounts of Notes submitted for redemption pursuant to
Section 3 with respect to which the applicable Redemption Price has not been
paid, the Company shall promptly as practicable delist the Common Stock from the
exchange or automated quotation system on which the Common Stock is traded and
have the Common Stock, at such holders' option, traded on the electronic
bulletin board or the "pink sheets."

          (e)  Optional Redemption By Holder After Third Anniversary.  At any
               -----------------------------------------------------
time from and after the third anniversary of the Issuance Date (the "Put Option
Date"), the holder of this Note shall have the right, but not the obligation, to
elect to cause the Company to redeem all or a portion of this Note (the "Put
Option").  The holder of this Note may exercise the Put Option by providing
written notice to the Company at any time on or after the thirtieth (30th)
Business Day immediately preceding the Put Option Date of its election to
exercise the Put Option.  Within thirty (30) Business Days after the holder's
exercise of the Put Option, but in no event prior to the Put Option Date (the
"Put Option Payment Date"), the Company shall pay the exercising holder, in
cash, an amount equal to the then outstanding Conversion Amount of the Note as
to which the Put Option

                                      -20-
<PAGE>

is being exercised (the "Put Option Payment"). If any holder exercises the Put
Option as to all or any portion of a Note, and the Company does not pay the Put
Option Payment in full on or before the Put Option Payment Date, (Y) the Put
Option Payment shall bear interest at the rate of 1.5% per month, prorated for
partial months, until paid in full, and (X) if the Put Option Payment is not
paid within five (5) business days after the Put Option Payment Date, the holder
who has exercised the Put Option but has not been paid the Put Option Payment
shall have the option to require the Company to convert the outstanding
Conversion Amount of the Notes held by such holder (including the Note subject
to the Put Option).

     5.   [RESERVED]

     6.   Redemption at the Company's Election. At any time or times after the
          ------------------------------------
second anniversary of the Issuance Date but before the Maturity Date, the
Company shall have the right, in its sole discretion, to require that some or
all of the then outstanding Conversion Amounts of the outstanding Notes be
redeemed ("Redemption at Company's Election") for cash consideration equal to
(i) in the event that the Company's Election Redemption Date (as defined below)
is prior to the date which is the third anniversary of the Issuance Date, 103%
of the principal amount to be redeemed, plus any Additional Amount with respect
to such principal amount, (ii) in the event that the Company's Election
Redemption Date is on or after the date which is the third anniversary of the
Issuance Date, 102% of the principal amount to be redeemed, plus any Additional
Amount with respect to such principal amount, and (iii) in the event that the
Company's Election Redemption Date is on or after the date which is the fourth
anniversary of the Issuance Date, but before the Maturity Date, 101% of the
principal amount to be redeemed, plus any Additional Amount with respect to such
principal amount (the "Company's Election Redemption Price"); provided that the
Conditions to Redemption at the Company's Election (as set forth below) are
satisfied as of the date of the Notice of Redemption at Company's Election (the
"Redemption at Company's Election Notice Date"). The Company may exercise its
right to Redemption at Company's Election only by providing each holder of Notes
written notice ("Notice of Redemption at Company's Election") at least thirty
(30) but no more than sixty (60) Business Days prior to the date of consummation
of such redemption ("Company's Election Redemption Date"), provided that the
holder of a Note who receives a Notice of Redemption at Company's Election may,
at any time before the Company's Election Redemption Date convert all or any
portion of such Note. If the Company elects to require redemption of some, but
not all, of the Conversion Amount of the Notes then outstanding, the Company
shall require redemption of the pro rata amount from each holder of such Notes
based on the principal amount of Notes purchased by such holder relative to the
aggregate principal amount of all Notes purchased pursuant to the Securities
Purchase Agreement (such amount with respect to the holder being referred to
herein as its "Pro Rata Redemption Amount"). The Notice of Redemption at
Company's Election shall indicate (x) the Conversion Amount of the Notes the
Company has elected to redeem from all holder of Notes, (y) the Company's
Election Redemption Date, and (z) each holder's Pro Rata Redemption Amount. If
the Company has exercised its right of Redemption at Company's Election and the
conditions of this Section 6, including the Conditions to Redemption at

                                      -21-
<PAGE>

Company's Election, have been satisfied, then each holder's Pro Rata Redemption
Amount which remains outstanding at the Company's Election Redemption Date shall
be redeemed as of the Company's Election Redemption Date by payment by the
Company to each holder of the Notes of the Company's Election Redemption Price.
If required by Section 2(d)(viii), all holders of the Notes shall thereupon and
within two Business Days after the Company's Election Redemption Date or such
earlier date as the Company and each holder of Notes mutually agree, surrender
all Notes being redeemed on such date to the Company. If the Company fails to
pay the full Company's Election Redemption Price with respect to this Note on
the Company's Election Redemption Date, then the Redemption at Company's
Election shall be null and void with respect to this Note and the holder shall
be entitled to all the rights of a holder of outstanding Notes. "Conditions to
Redemption at the Company's Election" means the following conditions: (i) during
the period beginning on the Issuance Date and ending on and including the
Redemption at Company's Election Notice Date, the Company shall have delivered
all shares of Common Stock issuable upon conversion of the Notes to the holders
of the Notes, and all shares of Common Stock issuable upon exercise of the
Warrants issued under the Securities Purchase Agreement, on a timely basis as
set forth in this Note and in the Warrants; (ii) on each day during the period
beginning thirty (30) days prior to the date of Notice of Redemption at
Company's Election and ending on and including the Company's Election Redemption
Date the Registration Statement shall be effective and available for the sale of
at least all of the Registrable Securities (as defined in the Registration
Rights Agreement); (iii) on each day during the period beginning thirty (30)
days prior to the date of Notice of Redemption at Company's Election and ending
on and including the Company's Election Redemption Date, the Common Stock is
designated for quotation on the Nasdaq National Market or listed on The New York
Stock Exchange, is not suspended from trading and neither delisting nor
suspension by such exchange or market shall have been threatened either (A) in
writing by such exchange or market or (B) by falling below the minimum listing
maintenance requirements of such exchange or market; (iv) during the period
beginning on the Issuance Date and ending on and including the Company's
Election Redemption Date, there shall not have occurred a Triggering Event or an
event that with the passage of time and without being cured would constitute a
Triggering Event; (v) during the period beginning on the Issuance Date and
ending on and including the Company's Election Redemption Date, there shall not
have occurred the consummation of a Change of Control or the public announcement
of a pending, proposed or intended Change of Control which has not been
terminated; (vi) on the earlier to occur of (A) the Shareholder Meeting Deadline
(as defined in the Securities Purchase Agreement) and (B) the date on which the
Company holds its first meeting of shareholders after the Issuance Date, the
Company shall have received the Shareholder Approval (as defined in the
Securities Purchase Agreement); and (vii) the Company otherwise has satisfied
its obligations in all material respects and is not in default in any material
respect under this Note, the Securities Purchase Agreement, the Warrants and the
Registration Rights Agreement. Notwithstanding the above, but subject to Section
5, the holder may convert any Conversion Amount (including Conversion Amounts
selected for redemption) into Common Stock pursuant to Section 2(b) on or prior
to the date immediately preceding the Company's Election Redemption Date. If the
Company fails to timely pay any Company's Election Redemption Price in
accordance with this Section

                                      -22-
<PAGE>

6, then the Company shall not be permitted to submit another Notice of
Redemption at Company's Election without the prior written consent of the
holders of the Notes representing at least two-thirds (2/3) of the Conversion
Amounts of the Notes then outstanding.

     7.   Reservation of Shares. The Company shall, so long as any principal
          ---------------------
amount of the Note is outstanding, reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
conversion of the Notes, such number of shares of Common Stock as shall from
time to time be sufficient to effect the conversion of all of the Conversion
Amounts of the Notes then outstanding. The initial number of shares of Common
Stock reserved for conversions of the Notes and each increase in the number of
shares so reserved shall be allocated pro rata among the holders of the Notes
based on the principal amount of the Notes held by each holder at the time of
issuance of the Notes or increase in the number of reserved shares, as the case
may be. In the event a holder shall sell or otherwise transfer any of such
holder's Notes, each transferee shall be allocated a pro rata portion of the
number of reserved shares of Common Stock reserved for such transferor. Any
shares of Common Stock reserved and allocated to any holder which ceases to hold
any Notes shall be allocated to the remaining holders of the Notes, pro rata
based on the principal amount of the Notes then held by such holders.

     8.   Voting Rights. Holders of the Notes shall have no voting rights,
          -------------
except as required by law, and as expressly provided in this Note.

     9.   Subordination.  The payment of the principal and interest on this Note
          -------------
shall be subordinated and subject in right of payment to the prior payment in
full of all Senior Indebtedness of the Company, whether outstanding at the date
of this Note or thereafter incurred subject to Section 3.13 of the Securities
Purchase Agreement.  No provision of this Section 9 shall prevent the occurrence
of any default under this Note.

          (a)  Certain Definitions.  For purposes of this Note:
               -------------------

               (i)  "Senior Indebtedness" means, with respect to the Company,
          the principal of, interest payable on or in connection with, and all
          fees, costs, expenses and other amounts accrued or due on or in
          connection with, Indebtedness of the Company, whether outstanding on
          the date of this Note or thereafter created, incurred, assumed,
          guaranteed or in effect guaranteed by the Company (including all
          deferrals, renewals, extensions or refundings of, or amendments,
          modifications or supplements to, the foregoing), unless in the case of
          any particular Indebtedness the instrument creating or evidencing the
          same or the assumption or guarantee thereof expressly provides that
          such Indebtedness shall not be senior in right of payment to this Note
          or expressly provides that such Indebtedness is "PARI PASSU" or
          "junior" to this Note. Notwithstanding the foregoing, Senior
          Indebtedness shall not include any Indebtedness of the Company to any
          Subsidiary of the Company a majority of the voting stock of which is

                                      -23-
<PAGE>

          owned, directly or indirectly, by the Company; provided, however, that
          the term Senior Indebtedness shall include Indebtedness to a
          Subsidiary of the Company arising by reason of a guaranty by the
          Company of Indebtedness of such Subsidiary to a Person that is not a
          Subsidiary of the Company.

               (ii) "Indebtedness" means (a) all indebtedness, obligations and
          other liabilities of the Company in connection with commercial credit
          obtained from recognized financial institutions, (b) any indebtedness
          or other obligations secured by any mortgage, pledge, lien or other
          encumbrance existing on property which is owned or held by the
          Company, and (c) any and all deferrals, renewals, extensions,
          refinancings and refundings of, or amendments, modifications or
          supplements to, any indebtedness, obligation or liability of the kind
          described in clauses (a) and (b).

     10.  Restriction on Redemption and Dividends. Until all of the Conversion
          ---------------------------------------
Amount of this Note has been converted, redeemed or otherwise satisfied as
provided herein, the Company shall not, directly or indirectly, redeem, or
declare or pay any cash dividend or distribution on, its capital stock without
the prior express written consent of the holders of Notes representing at least
two thirds (2/3) of the Conversion Amounts of the Notes then outstanding, except
for payments on convertible securities of the Company (other than the Other
Notes) outstanding on the Issuance Date pursuant to the terms of such
convertible securities as in effect on the Issuance Date, if any.

     11.  Limitation on Number of Conversion Shares. The Company shall not be
          -----------------------------------------
obligated to issue any shares of Common Stock upon conversion of this Note if
the issuance of such shares of Common Stock would exceed that number of shares
of Common Stock which the Company may issue upon conversion of the Notes (the
"Exchange Cap") without breaching the Company's obligations under the rules or
regulations of the Principal Market, or the market or exchange where the Common
Stock is then traded, except that such limitation shall not apply in the event
that the Company (a) obtains the approval of its stockholders as required by the
applicable rules of the Principal Market, or the market or exchange where the
Common Stock is then traded, (or any successor rule or regulation) for issuances
of Common Stock in excess of such amount or (b) obtains a written opinion from
outside counsel to the Company that such approval is not required, which opinion
shall be reasonably satisfactory to the holders of a majority of the Conversion
Amount of the Notes then outstanding. Until such approval or written opinion is
obtained, no Purchaser (as that term is defined in the Securities Purchase
Agreement) shall be issued, upon conversion of the Notes, shares of Common Stock
in an amount greater than the product of (i) the Exchange Cap amount multiplied
by (ii) a fraction, the numerator of which is the principal amount of the Notes
issued to such Purchaser pursuant to the Securities Purchase Agreement and the
denominator of which is the aggregate principal amount of all Notes issued to
the Purchasers pursuant to the Securities Purchase Agreement (the "Cap
Allocation Amount"). If any Purchaser shall sell or otherwise transfer any of
such Purchaser's Notes, the transferee shall be allocated a pro rata portion of
such Purchaser's Cap Allocation Amount. If any holder of

                                      -24-
<PAGE>

Notes, shall convert all of such holder's Notes into a number of shares of
Common Stock which, in the aggregate, is less than such holder's Cap Allocation
Amount, then the difference between such holder's Cap Allocation Amount and the
number of shares of Common Stock actually issued to such holder shall be
allocated to the respective Cap Allocation Amounts of the remaining holders of
Notes on a pro rata basis in proportion to Conversion Amount of Notes then held
by each such holder.

     12.  Reissuance of Notes. Subject to Section 2(d)(viii) in the event of a
          -------------------
conversion or redemption pursuant to this Note of less than all of the
Conversion Amount represented by this Note, the Company shall promptly cause to
be issued and delivered to the holder, upon tender by the holder of this Note
converted or redeemed, a new note of like tenor representing the remaining
principal amount of this Note which has not been so converted or redeemed.

     13.  Defaults and Remedies.
          ---------------------

          (a)  Events of Default. An "Event of Default" is: (i) default for
               -----------------
thirty (30) days in payment of interest or Default Interest on this Note on or
after the Maturity Date; (ii) default in payment of the principal amount of this
Note when and as due; (iii) failure by the Company for thirty (30) days after
notice to it to comply with any other material provision of this Note; (iv) any
default under or acceleration prior to maturity of any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any indebtedness for money borrowed of at least $500,000 by the
Company or for money borrowed the repayment of at least $500,000 of which is
guaranteed by the Company, whether such indebtedness or guarantee now exists or
shall be created hereafter, (v) if the Company pursuant to or within the meaning
of any Bankruptcy Law; (A) commences a voluntary case; (B) consents to the entry
of an order for relief against it in an involuntary case; (C) consents to the
appointment of a Custodian of it or for all or substantially all of its
property; (D) makes a general assignment for the benefit of its creditors; or
(E) admits in writing that it is generally unable to pay its debts as the same
become due; or (vi) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that: (1) is for relief against the Company in an
involuntary case; (2) appoints a Custodian of the Company or for all or
substantially all of its property; or (3) orders the liquidation of the Company
or any subsidiary, and the order or decree remains unstayed and in effect for
sixty (60) days. The term "Bankruptcy Law" means Title 11, U.S. Code, or any
similar Federal or state or foreign law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.

          (b)  Remedies. If an Event of Default occurs and is continuing, the
               --------
holder of this Note may declare all of this Note, including any interest and
Default Interest and other amounts due, to be due and payable immediately,
except that in the case of an Event of Default arising from events described in
clauses (iv) and (v) of Section 13(a), this Note shall become due and payable
without further action or notice. Holder may not enforce the provisions of this
Section 13 except as provided in this Section 13. In addition to any remedy such
holder of the Notes may have under this Note and the Securities

                                      -25-
<PAGE>

Purchase Agreement, such unpaid amount shall bear interest at the rate of 1.5%
per month (prorated for partial months) until paid in full.

     14.  Vote to Change the Terms of the Note. This Note and any provision
          ------------------------------------
hereof may only be amended by an instrument in writing signed by the Company and
the holder of this Note. The term "Note" and all references thereto, as used
throughout this instrument, shall mean this instrument as originally executed,
or if later amended or supplemented, then as so amended or supplemented.

     15.  Rule 144A Information Requirement. Within the period prior to the
          ---------------------------------
expiration of the holding period applicable to sales hereof under Rule 144(k)
under the Securities Act (or any successor provision), the Company covenants and
agrees that it shall, during any period in which it is not subject to Section 13
or 15(d) under the Securities Exchange Act of 1934, as amended, make available
to the holder and the holder of any Common Stock issued upon exercise of this
Note which continues to be Restricted Securities in connection with any sale
thereof and any prospective purchaser of this Note from the Holder, the
information required pursuant to Rule 144A(d)(4) under the Securities Act upon
the request of the Holder and it will take such further action as the Holder may
reasonably request, all to the extent required from time to time to enable the
Holder to sell this Note without registration under the Securities Act within
the limitation of the exemption provided by Rule 144A, as Rue 144A may be
amended from time to time. Upon the request of the Holder, the Company will
deliver to the Holder a written statement as to whether it has complied with
such requirements.

     16.  Lost or Stolen Notes. Upon receipt by the Company of evidence
          --------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Note, and, in the case of loss, theft or destruction, of an indemnification
undertaking by the holder to the Company in a customary form and, in the case of
mutilation, upon surrender and cancellation of this Note, the Company shall
execute and deliver new notes of like tenor and date; provided, however, the
Company shall not be obligated to re-issue notes if the holder contemporaneously
requests the Company to convert such remaining principal amount into Common
Stock.

     17.  Payment of Collection, Enforcement and Other Costs. If: (i) this Note
          --------------------------------------------------
is placed in the hands of an attorney for collection or enforcement or is
collected or enforced through any legal proceeding; or (ii) an attorney is
retained to represent the holder of this Note in any bankruptcy, reorganization,
receivership of the Company or other proceedings affecting Company creditors'
rights and involving a claim under this Note, then the Company shall pay to the
holders all attorney's fees, costs and expenses incurred in connection
therewith, in addition to all other amounts due hereunder.

     18.  Cancellation. After all principal and accrued interest at any time
          ------------
owed on this Note has been paid in full, this Note shall automatically be deemed
canceled, shall be surrendered to the Company for cancellation and shall not be
reissued.

                                      -26-
<PAGE>

     19.  Note Exchangeable for Different Denominations. This Note is
          ---------------------------------------------
exchangeable, upon the surrender hereof by the holder at the principal office of
the Company, for a new Note or Notes (in principal amounts of at least $100,000)
containing the same terms and conditions and representing in the aggregate the
principal amount of this Note, and each such new Note will represent such
portion of such principal amount as is designated by the holder at the time of
such surrender. The date the Company initially issues this Note will be deemed
to be the "Issuance Date" hereof regardless of the number of times a new Note
shall be issued.

     20.  Waiver of Notice. To the extent permitted by law, the Company hereby
          ----------------
waives demand, notice, protest and all other demands and notices in connection
with the delivery, acceptance, performance, default or enforcement of this Note
and the Securities Purchase Agreement.

     21.  Governing Law. All questions concerning the construction, validity,
          -------------
enforcement and interpretation of this Note shall be governed by the internal
laws of the State of New York, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of New York or any other
jurisdictions) that would cause the application of the laws of any jurisdictions
other than the State of New York.  The Company hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts sitting in New York
City, Borough of Manhattan, State of New York, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, 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 brought in an inconvenient forum or that the venue of such suit,
action or proceeding is improper. The Company 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 to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. The Company hereby irrevocably waives any right it may
have, and agrees not to request, a jury trial for the adjudication of any
dispute hereunder or in connection herewith or arising out of this Agreement or
any transaction contemplated hereby.

     22.  Remedies, Characterizations, Other Obligations, Breaches and
          ------------------------------------------------------------
Injunctive Relief.  The remedies provided in this Note shall be cumulative and
-----------------
in addition to all other remedies available under this Note, at law or in equity
(including a decree of specific performance and/or other injunctive relief), no
remedy contained herein shall be deemed a waiver of compliance with the
provisions giving rise to such remedy and nothing herein shall limit the
holder's right to pursue actual damages for any failure by the Company to comply
with the terms of this Note.  Amounts set forth or provided for herein with
respect to payments, conversion and the like (and the computation thereof) shall
be the amounts to be received by the holder thereof and shall not, except as
expressly provided herein, be subject to any other obligation of the Company (or
the

                                      -27-
<PAGE>

performance thereof). The Company acknowledges that a material breach by it of
its obligations hereunder will cause irreparable harm to the holder and that the
remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such material breach or threatened material
breach, the holder of this Note shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.

     23.  Specific Shall Not Limit General; Construction. No specific provision
          ----------------------------------------------
contained in this Note shall limit or modify any more general provision
contained herein. This Note shall be deemed to be jointly drafted by the Company
and the Holder and shall not be construed against any person as the drafter
hereof.

     24.  Failure or Indulgence Not Waiver. No failure or delay on the part of
          --------------------------------
this Note in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.

     25.  Notices. Whenever notice is required to be given under this Note,
          -------
unless otherwise provided herein, such notice shall be given in accordance with
Section 5.3 of the Securities Purchase Agreement.

                 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                     [SIGNATURE PAGE FOLLOWS IMMEDIATELY]

                                      -28-
<PAGE>

IN WITNESS WHEREOF, the Company has caused this Note to be signed as of the 29th
day of June, 2000.

BRITESMILE, INC.

By:__________________________________
     Its:____________________________
<PAGE>

                                   EXHIBIT A

                               BRITESMILE, INC.
                               CONVERSION NOTICE

Reference is made to the 5% Convertible Subordinated Notes due 2005 (the
"Notes") issued by BriteSmile, Inc., a Utah corporation (the "Company").  In
accordance with and pursuant to the Notes, the undersigned hereby elects to
convert the Conversion Amount indicated below into shares of Common Stock, par
value $0.001 per share (the "Common Stock"), of the Company, as of the date
specified below.

     Date of Conversion:_______________________________________________________

     Conversion Amount to be converted:________________________________________

Please confirm the following information:

     Conversion Price:_________________________________________________________

     Number of shares of Common Stock to be issued:____________________________

     Is the Variable Price being relied on pursuant to Section 2(f)(iii) of the
Notes? (check one)  YES ____    No ____

Please issue the Common Stock into which the Conversion Amount is being
converted and, if applicable, any check drawn on an account of the Company in
the following name and to the following address:

     Issue to:_________________________________________________________________
          _____________________________________________________________________

     Facsimile Number:_________________________________________________________

     Authorization:____________________________________________________________
                              By:______________________________________________
                              Title:___________________________________________

     Dated:____________________________________________________________________

     Account Number (if electronic book entry transfer):_______________________

     Transaction Code Number (if electronic book entry transfer):______________
<PAGE>

                                ACKNOWLEDGMENT
                                --------------

     The Company hereby acknowledges this Conversion Notice and hereby directs
Continental Stock Transfer & Trust Co. (the "Transfer Agent") to issue the above
indicated number of shares of Common Stock in accordance with the Transfer Agent
Instructions dated June 29, 2000 from the Company and acknowledged and agreed to
by the Transfer Agent.

                              BRITESMILE, INC.

                              By:_________________________________
                              Name:_______________________________
                              Title:______________________________

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00023-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00023-of-00352.parquet"}]]