Document:

EXHIBIT 10.18

                                  PRIVATE LABEL
                               PURCHASE AGREEMENT

         THIS AGREEMENT is entered into as of this 22nd day of September, 2003
by and between MedArt Corporation, having its principal place of business at
1479 Glencrest Drive, Suite A, San Elijo Hills, San Marcos, California 92078
("Seller"), and Vascular Solutions, Inc., having its principal place of business
at 6464 Sycamore Court, Minneapolis, Minnesota 55369 ("Buyer").

1.       Product Description. This Agreement governs all of the terms and
         conditions concerning the sale by Seller to the Buyer of a certain
         specially designed product based on Seller's MedArt 426 30 watt solid
         state laser console as modified and manufactured in accordance with
         Buyer's specifications set forth on Schedule 1 hereto (the
         "Specifications") to be sold and marketed by Buyer without limitation
         as to territory under Buyer's trademarks and trade names solely for use
         in endovascular therapy of vascular conditions (the "Product").

2.       Product Specifications.

         (a)      Original Specifications. The Product sold to Buyer hereunder
                  shall meet the Specifications and shall be manufactured in
                  accordance with all applicable Quality System Regulations
                  ("QSR") of the U.S. Food & Drug Administration (the "FDA") for
                  medical devices and Seller's quality system in accordance with
                  EN46001 or EN13485. Seller also shall certify compliance of
                  the Product with all applicable UL requirements at the time of
                  sale of the Product to the Buyer.

         (b)      Changes by Seller. If at any time during the term of this
                  Agreement Seller finds it necessary or desirable to change the
                  components or manufacturing procedures of the Product or
                  effect any other change relating to the Product which would
                  result in changes in the Specifications or could reasonably
                  require notification or approval of the FDA or any other
                  regulatory agency, Seller shall not effect any such change
                  with respect to the Product until notifying and receiving
                  prior written approval from Buyer for such change, which
                  approval shall not be unreasonably delayed or withheld.

** The appearance of a double asterisk denotes confidential information that has
been omitted from the exhibit and filed separately, accompanied by a
confidential treatment request, with the Securities and Exchange Commission
pursuant to Rule 24b-2 of the Securities Exchange Act of 1934.

Initials:
  Buyer ________
  Seller _______

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         (c)      Changes by Buyer. If at any time during the term of this
                  Agreement Buyer finds it necessary or desirable to change the
                  Specifications for the Product, Buyer shall promptly notify
                  Seller in writing of the nature of such changes to the
                  Specifications. Seller and Buyer shall promptly consult with
                  each other regarding such proposed changes in the
                  Specifications. If Seller agrees to modify the Specifications
                  in accordance with Buyer's request, or otherwise as mutually
                  agreed by Seller and Buyer, all future quantities of the
                  Product shall be manufactured in accordance with the revised
                  Specifications and in accordance with a timetable mutually
                  agreed upon by Buyer and Seller. Buyer shall be responsible
                  for all inventories of Products in Seller's possession, which
                  are rendered obsolete as a result of Buyer's requested changes
                  in the Specifications. If the change in the Specifications
                  results in an increase or decrease in the cost to manufacture
                  the Product, the price for the Product manufactured under the
                  revised Specifications and purchased under this Agreement
                  shall be increased or decreased accordingly.

3.       Regulatory Submissions and Approvals. At Buyer's sole cost and expense,
         Seller shall perform all additional testing, qualifications and
         validations of the Product that are reasonably required for Buyer's
         submission of its 510(k) clearance to the FDA. All existing testing,
         qualifications and validations in Seller's possession and based on the
         MedArt 426 platform will be made available at no charge to Buyer. The
         written protocols and reports of such testing shall be completed by
         Seller, with prior review by Buyer, and Seller and Buyer shall use
         their best efforts to complete such work according to the timeline
         listed on Schedule 2. Seller shall, at Seller's expense maintain the
         approval to apply the CE mark to the Product. In the event that device
         modifications requested by Buyer result in approval expenses, the cost
         of such review and approval shall be the responsibility of the buyer.
         Other than as stated in the previous sentence, Buyer shall have
         responsibility for filing and obtaining all required consents,
         licenses, authorizations and approvals for the use and sale of the
         Product in such countries, including the United States, in which Buyer
         determines to sell the Product. All such consents, licenses,
         authorizations and approvals of the Product obtained by Buyer shall be
         held in the name of Buyer or its designee. Subject to the terms of
         Section 14 below governing confidentiality, Buyer shall have access to
         all test reports, manufacturing records and other documents of Seller
         that may be useful in obtaining or maintaining a registration for the
         Product in the United States and outside the United States and to
         facilitate the commercialization of the Product. Seller shall, at
         Buyer's sole cost and expense, provide continued regulatory assistance
         and support for the receipt and maintenance of the 510(k) clearance and
         CE mark as reasonably requested by Buyer. Buyer shall have the right to
         reference the source of its Product as supplied by Seller in its
         regulatory filings, product descriptions, sales literature and other
         descriptions of the Product.

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         The CE Product to be distributed by Buyer will have a top foil that is
         marked with the Product name and logo and have colors decided by the
         buyer. A company name will not appear on the front of the product. When
         the Product is distributed in Europe, a CE label shall be attached to
         the back of the Product as well as a label indicating the Product is
         manufactured by Seller and distributed by Buyer. It will be the
         responsibility of Buyer to attach such labels to each laser unit being
         sold in Europe. Product sold in the United States by Buyer under
         Buyer's 510(k) Clearance will not have a CE label. The name "ASAH
         Medico A/S will not be on the type label of any unit sold outside the
         CE geographic region.

         When Product is distributed in Europe, a dedicated CE-version of the
         user instruction manual shall be included with the product. This
         version will specify Seller as Manufacturer and specify Buyer as
         distributor. The Seller will provide Buyer with the CE version of the
         operator's manual. The CE version will be in British English. No
         corrections are permitted to the CE version without prior agreement by
         Seller.

4.       Purchase Terms. During the Term of this Agreement, Seller agrees to
         sell and Buyer agrees to purchase, on the terms and conditions herein
         stated, the Product. Buyer shall purchase and use the Product solely
         for endovascular treatment of vascular conditions and shall resell the
         Product only for endovascular treatment of vascular conditions. During
         the Term of this Agreement, Seller and its affiliates shall sell the
         Product manufactured in accordance with the Specifications exclusively
         to Buyer and shall not, directly or indirectly, sell the Product to any
         customer, partner, distributor or other person or entity. Conversely,
         Buyer shall purchase its requirements for the Product, for the
         Application, solely from the Seller and not from any other person or
         entity.

5.       Private Label Requirements. All Products shall bear the logos,
         trademarks and trade dress of Buyer (collectively "Buyer's Marks").
         Buyer shall provide Seller all specifications and materials necessary
         to affix Buyer's Marks to the Products or otherwise to manufacture the
         Products in accordance with Buyer's Marks.

6.       Purchase Prices.

         (a)      Initial Prices. During the Term of this Agreement, Seller
                  agrees to sell the Product to the Buyer at the prices set
                  forth in Schedule 2. The period of time from the date of FDA
                  approval of Buyer's 510(k) for the Product through one year
                  from such date shall be referred to as the First Contract
                  Year. The subsequent one-year period shall be referred to as
                  the Second Contract Year, and the subsequent one-year period
                  shall be referred to as the Third Contract Year, if this
                  Agreement is still in effect at such times.

         (b)      Price Changes. The prices set forth in Schedule 2 for Products
                  ordered shall be increased or decreased for Product ordered in
                  the Second Contract Year and the Third Contract Year by the
                  amount that the actual costs of Seller's components for the
                  Product increase or decrease over Seller's

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                  actual costs for such components purchased in the First
                  Contract Year, provided that the price may not increase by
                  more than 20% over the Term of this Agreement, not to exceed
                  the year 2005. Increased prices shall apply to all Products
                  ordered after Seller provides Buyer with written notice of
                  such price increase.

         (c)      Invoices and Payment. Seller shall invoice Buyer on each
                  shipment of the Product for the Products together with prepaid
                  freight, insurance and other costs, and payment shall be made
                  in U.S. dollars in all cases net 30 days from the date of
                  shipment. If and for so long as any invoiced amounts are due
                  but not paid, they shall accrue a service charge of 1% per
                  month or the maximum rate allowed by law, whichever is lower,
                  and Seller shall have the right, in its discretion, to require
                  payment for additional shipments by cash in advance or by
                  letter of credit.

         (d)      Taxes. The prices set forth in Schedule 2 do not include, and
                  Buyer shall be responsible for and pay, all taxes, including
                  sales, use and value added taxes, duties, assessments and
                  other governmental charges, however designated, imposed by any
                  governmental authority (other than Seller's net income taxes)
                  resulting from the sale of the Product to Buyer.

7.       Delivery, Shipping, Risk of Loss.

         (a)      Delivery. All purchases of Products by Buyer hereunder shall
                  be FOB the manufacturing facility in Hvidovre, Denmark of
                  Seller's affiliate, Asah Medico A/S. All Products will be
                  shipped directly to one of Buyer's facilities as specified by
                  Buyer. Seller will use best efforts to deliver the Product in
                  accordance with the delivery date specified in the accepted
                  purchase order. If Seller fails to deliver the Product within
                  30 days of the delivery date specified in the accepted
                  purchase order, Buyer may cancel without penalty all or any
                  portion of the purchase order.

         (b)      Shipping. All Products will be shipped by Seller freight
                  prepaid and Buyer will reimburse Seller for the actual costs
                  of such shipping. All shipments will be made through a common
                  carrier specified by Buyer, or, if Buyer does not specify a
                  carrier within fifteen (15) days before the scheduled shipment
                  date, by a carrier selected by Seller. At Buyer's discretion,
                  Seller will procure insurance on all shipments of Products
                  against damage to or loss of the Product. Such insurance so
                  provided by Seller will be billed to Buyer, and Buyer will
                  reimburse Seller for the actual costs of such insurance.
                  Unless otherwise specified by Buyer and agreed to by Seller,
                  packaging of shipments shall be in accordance with Seller's
                  customary practices. No partial shipments shall be made
                  without Buyer's written consent.

         (c)      Title and Risk of Loss. Seller shall retain title and bear the
                  risk of loss until such time as the Product has been delivered
                  to the carrier designated

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                  by Buyer or, if no such designation has occurred, Seller's
                  regular carrier at the FOB point. Seller will have no further
                  responsibility for the Products and all risk of damage to or
                  loss or delay of the Products will pass to Buyer upon the
                  delivery of the Products at the FOB point to the common
                  carrier specified by Buyer or, if none is so specified, to the
                  common carrier selected by Seller.

8.       Ordering Procedures.

         (a)      Purchase Orders. Sales of the Product will be made pursuant to
                  purchase orders issued by Buyer to Seller specifying (i)
                  quantities, (ii) order value (based on Schedule 2 hereof),
                  (iii) requested delivery dates and (iv) shipping instructions
                  and shipping address. All purchase orders are subject to
                  standard acceptance and confirmation in writing by Seller. All
                  purchase orders duly submitted in accordance with the terms of
                  this Agreement will be accepted by Seller. No accepted
                  purchase order may be modified or cancelled by Buyer without
                  the written consent of Seller. Buyer shall be entitled to use
                  its standard form of purchase order; provided, however, that
                  such purchase order shall not impose any terms not contained
                  in this Agreement or alter any of the terms contained in this
                  Agreement. In the event of any conflict between the terms of
                  any purchase order and the terms of this Agreement, the terms
                  of this Agreement shall control. For the First Contract Year,
                  Buyer shall issue a purchase order upon execution of this
                  Agreement to purchase the following number of units of the
                  Product according to the following schedule:

                  o        ** units to be delivered January 15, 2004

                  o        ** units to be delivered February 15, 2004

                  o        ** units to be delivered May 15, 2004

                  o        ** units to be delivered August 15, 2004

                  o        ** units to be delivered November 15, 2004;

                  provided, however, that if Buyer has not received its 510(k)
                  clearance for the Product by January 1, 2004, the initial
                  delivery of Products listed above will be delayed until
                  receipt by Buyer of the 510(k) clearance, with each subsequent
                  scheduled delivery in the First Contract Year delayed a
                  corresponding period of time but provided further that, in the
                  event Buyer has not received its 510(k) clearance by July 1,
                  2004, Seller shall have the option to terminate this Agreement
                  and Buyer shall be obligated to pay to Seller, by way of
                  liquidated damages and not as a penalty, $490,000.

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         (b)      Forecasts. Contemporaneously with the execution of this
                  Agreement, Buyer will submit to Seller a forecast of Buyer's
                  intended purchases of the Product during each quarter of the
                  First Contract Year. Buyer will provide Seller no later than
                  thirty (30) days prior to each succeeding quarter of each
                  Contract Year of this Agreement with an updated forecast of
                  quarterly purchases for a new twelve (12) month period. Such
                  rolling forecasts will be done in good faith for purposes of
                  facilitating Seller's manufacturing lead times, but they shall
                  not be considered binding purchase orders for purposes of this
                  Agreement.

         (c)      Amount and Delivery Dates. Buyer shall issue purchase orders
                  at times within its discretion throughout the Contract Year
                  (but not more frequently than twice a month) requesting
                  delivery no sooner than 60 days from the date of the receipt
                  of the purchase order by Seller. Each purchase order shall
                  provide for a minimum of five (5) units of the Product, but
                  Seller shall have no obligation hereunder to accept any
                  purchase order which, when taken together with all other
                  purchase orders for the relevant quarter, would exceed Buyer's
                  forecast for such quarter by more than ten (10) units of the
                  Product unless Seller expressly agrees to accept any such
                  orders.

         (d)      Minimum Purchases. Buyer agrees to purchase a minimum of
                  (i) ** units of the Product in the First Contract Year and
                  (ii) a minimum of ** units of the Product in each of the
                  Second and Third Contract Years, of which Buyer must purchase
                  at least ** units of the Product during each quarter of each
                  such Contract Year except in the quarter which corresponds
                  most closely to the third fiscal quarter of the calendar year
                  during which Buyer must purchase at least ** units of the
                  Product. In the event that Buyer fails to meet the minimum
                  purchase obligation for any Contract Year, Seller shall be
                  entitled to terminate this Agreement pursuant to Section 13 of
                  this Agreement unless Buyer cures such default prior to the
                  end of the relevant quarter or Contract Year by placing a firm
                  purchase order with Seller for the amount of the shortfall in
                  purchased Products.

9.       Complaints and Quality Control.

         (a)      Complaints. The Buyer will inform the Seller of any serious
                  adverse events or quality complaints resulting from a
                  defective Product within three (3) business days of being
                  informed thereof and will, where appropriate, provide Seller
                  with returned Product for evaluation. The Seller will perform
                  an analysis of any quality complaint or returned Product
                  promptly and will provide Buyer with a written report.
                  Defective or broken Products will be initially returned to
                  Buyer for analysis. Buyer may, at its discretion, forward any
                  defective or broken Products to Seller for repair or analysis.
                  Buyer will be responsible for all MDR reports of product in
                  the United States; however, Seller will be responsible for all
                  Vigilance reports within the EU. The cost of servicing or
                  repair of any

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                  Products under warranty shall be borne by Seller in accordance
                  with the terms of Section 11 below. The cost of servicing or
                  repair of any Products that are damaged or defective for any
                  other reason shall be paid by Buyer to Seller at Seller's then
                  current standard rates for such repair service as invoiced by
                  Seller to Buyer.

         (b)      Quality Standards. Buyer shall have access for purposes of
                  reviewing and auditing Seller's Quality Assurance Manual and
                  all quality systems employed by Seller in connection with the
                  manufacture and packaging of the Product. In addition, Seller
                  shall provide the documentation necessary to allow Buyer to
                  reference Seller's relevant regulatory file(s) in any
                  submissions with the FDA and any international regulatory
                  filings or approvals in connection with the approval of the
                  Product. Seller shall cooperate with Buyer's reasonable
                  requests for information in all FDA regulatory filings, audits
                  and approvals and Seller shall cooperate with Buyer to address
                  any GMP deficiencies noted during any FDA audit.

10.      Inspection and Acceptance. Upon receipt by Buyer of a shipment of
         Products, Buyer will have ten (10) working days to inspect the Products
         for conformity with the Specifications and the agreed quality control
         procedures and tests listed on Schedule 1 hereto. Buyer will promptly
         report to Seller any damage, discrepancy or quality control failure in
         or to a shipment of Products discovered by Buyer during the above ten
         (10) working day acceptance period and furnish written evidence or
         other appropriate documentation to Seller. If the substantiating
         evidence delivered by Buyer demonstrates that such damage,
         Specification discrepancy or quality control problem existed at the
         time of delivery of the Products at the FOB point, Seller will promptly
         deliver additional or substitute Products to Buyer in accordance with
         the terms of this Agreement. For purposes of this Agreement, Buyer
         shall be deemed to have accepted all Products shipped which have not
         been affirmatively rejected by Buyer within the ten (10) working day
         acceptance period set forth above.

11.      Warranties and Service.

         (a)      Warranties. Seller warrants that it has all rights to sell the
                  Products and that the Products, when sold to Buyer, will be
                  free and clear from all liens and encumbrances. Seller
                  warrants that the Products will meet the Specifications and
                  will be free from defects in material and workmanship at the
                  time of shipment from Seller's manufacturing facility. Such
                  warranty shall begin on the date of invoice of the Products by
                  Buyer and shall continue for one (1) year and three (3) months
                  thereafter. Seller further warrants that the manufacture of
                  the product will be in conformity with QSR's of the FDA for
                  medical devices and in compliance with ISO 9001 series
                  guidelines, and that no Product delivered under this Agreement
                  will be adulterated or misbranded within the meaning of the
                  United States Food, Drug and Cosmetic Act. No substitution of
                  Product may be made by Seller without the express written
                  consent of Buyer.

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                  Seller will, in its discretion, repair or replace or issue a
                  full refund with respect to any Product failing to meet the
                  above warranties; provided, that the defective Product is
                  returned to Seller at Seller's expense within the warranty
                  period. Seller will use commercially reasonable efforts to
                  complete any repairs and ship the Product back to Buyer within
                  eight (8) working days of Seller's receipt of the Product.
                  Seller will have no obligation to make any repairs,
                  replacements or refunds with respect to Products which are
                  rendered defective in whole or in party by accidents, the
                  fault or negligence of Buyer or its customers, as the result
                  of excessive wear and tear, or the failure of Buyer or its
                  customers to maintain or use the Products in accordance with
                  Seller's applicable operating and/or maintenance manuals. No
                  Product may be returned to Seller without a return
                  authorization approved by Seller. All replaced Products or
                  parts shall become the property of Seller and shall, at
                  Seller's instructions, be returned to Seller at Seller's
                  expense or destroyed.

         (b)      LIMITATION OF WARRANTIES, REMEDIES AND LIABILITY. THE
                  WARRANTIES SET FORTH IN THIS SECTION 11 ARE INTENDED SOLELY
                  FOR THE BENEFIT OF BUYER. ALL CLAIMS HEREUNDER SHALL BE MADE
                  BY BUYER AND MAY NOT BE MADE DIRECTLY ON SELLER BY BUYER'S
                  CUSTOMERS. THE WARRANTIES SET FORTH ABOVE ARE IN LIEU OF ALL
                  OTHER WARRANTIES, EXPRESS OR IMPLIED, WHICH ARE HEREBY
                  DISCLAIMED AND EXCLUDED BY SELLER, INCLUDING WITHOUT
                  LIMITATION ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
                  PARTICULAR PURPOSE OR USE AND ALL OBLIGATIONS OR LIABILITIES
                  ON THE PART OF THE SELLER FOR DAMAGES ARISING OUT OF OR IN
                  CONNECTION WITH THE USE, REPAIR OR PERFORMANCE OF THE
                  PRODUCTS. THE SOLE AND EXCLUSIVE REMEDIES FOR BREACH OF ANY
                  AND ALL WARRANTIES AND THE SOLE REMEDIES FOR THE SELLER'S
                  LIABILITY OF ANY KIND (INCLUDING LIABILITY FOR NEGLIGENCE)
                  WITH RESPECT TO THE PRODUCTS AND ITS PERFORMANCE UNDER THIS
                  AGREEMENT SHALL BE LIMITED TO THE REMEDIES PROVIDED IN SECTION
                  11(a) ABOVE. SELLER SHALL NOT BE RESPONSIBLE FOR ANY
                  INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING FROM ITS BREACH OF
                  SAID WARRANTY OR ITS PERFORMANCE OF THIS AGREEMENT.

         (c)      Service. With the delivery of the Product in the first
                  purchase order under this Agreement, Seller shall provide
                  Buyer with two (2) loaner units of the Product. Thereafter,
                  Seller shall provide Buyer with that number of loaner units of
                  the Product which at any given time during the Term of this
                  Agreement is equal to five percent (5%) of the number of
                  Products purchased, and no past due invoices by Buyer which
                  are still under warranty to meet the reasonable requirements
                  of Buyer to provide such

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                  units to its customers while units under warranty are repaired
                  or replaced as provided above. The loaner pool will be
                  adjusted (up or down) every six months to reflect the proper
                  number available to support the installed base. The loaner
                  pool can never exceed five percent (5%) of the delivered
                  units. If a situation occurs that demand a higher number, a
                  solution will be found between the Seller and Buyer, in order
                  to service the customer base as intended. Such loaner units
                  will at all times remain the property of Seller, and shall be
                  returned to Asah Medico's manufacturing facility in Hvidovre,
                  Denmark, freight and insurance prepaid, once each twelve (12)
                  months for maintenance. Seller shall continue to provide
                  service for a minimum of seven (7) years from the date of this
                  Agreement on the Products at Seller's customary rates for
                  service. Seller also shall provide an extended service
                  warranty option beyond the one (1) year warranty period at
                  Seller's then current service charges.

12.      Indemnification.

         (a)      Buyer's Indemnification. Buyer will assume full responsibility
                  with respect to the use of the Product, and it is mutually
                  agreed that Seller assumes no liabilities of any kind with
                  respect to the use by Buyer or any third party of the Product.
                  Buyer agrees to indemnify and hold harmless Seller, its
                  successors, assigns, directors, officers, agents and
                  employees, from and against any and all losses, damages or
                  expenses, including court costs and reasonable attorneys'
                  fees, resulting from or arising out of (i) the special design
                  features of the Product requested by Buyer and incorporated in
                  the Specifications, (ii) the marketing, sale or use of any
                  Product by Buyer or its customers, (iii) any modification or
                  alteration of the Products by Buyer or its customers or agents
                  without Seller's prior consent, or (iv) any acts of negligence
                  or misrepresentation by Buyer or its employees or agents,
                  unless such loss, damage or expense is the direct result of
                  the Product failing to meet the Specifications set forth
                  herein at the time of shipment from Seller's facility.

         (b)      Seller's Indemnification. Seller agrees, at its own expense,
                  to defend, indemnify and hold harmless Buyer, its successors,
                  assigns, directors, officers, agents and employees, from and
                  against any and all losses, damages or expenses, including
                  court costs and reasonable attorneys' fees, resulting from or
                  arising out of the failure of the Product to meet the
                  Specifications at the time of shipment to the Buyer.

         (c)      Indemnification Procedures. In the event that any demand or
                  claim is made or suit is commenced against an indemnified
                  party, the indemnified party shall give prompt written notice
                  to the indemnifying party and the indemnifying party shall
                  have the right to compromise such claim to the extent of its
                  own interest and shall undertake the defense of any such suit.
                  An indemnified party may engage its own counsel, at its own
                  expense, to monitor the defense of any such matter.

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13.      Term and Termination.

         (a)      Term. This Agreement shall commence on the date hereof and
                  shall terminate on the conclusion of the Third Contract Year
                  hereunder, unless sooner terminated in accordance with the
                  terms hereof or extended by the mutual agreement of the
                  parties (the "Term").

         (b)      Termination. Either party may terminate this Agreement
                  immediately and cancel any purchase orders hereunder if the
                  other party (i) assigns this Agreement or any of its rights
                  hereunder in violation of the terms of this Agreement and
                  without the prior written consent of the other party, (ii)
                  makes an assignment for the benefit of creditors, or a
                  receiver, trustee in bankruptcy or similar officer is
                  appointed to take charge of all or part of its property, (iii)
                  is adjudged a bankrupt, (iv) breaches any material term of
                  this Agreement and such breach has not been remedied within
                  thirty (30) days after written notice thereof has been given
                  to the breaching party, or (v) the other party's performance
                  of this Agreement has been prevented by an event of Force
                  Majeure for at least six (6) consecutive months pursuant to
                  Section 15(c) below. In addition, Seller may terminate this
                  Agreement immediately if the Buyer fails to purchase the
                  minimum quantities of Products pursuant to Section 8(d) hereof
                  in each relevant quarter or Contract Year unless Buyer cures
                  such default by issuing a firm purchase order to Seller for
                  the shortfall in purchased Products. Any such termination
                  shall not release Seller or Buyer from their obligations
                  arising under this Agreement prior to the effective date of
                  termination.

14.      Confidentiality.

         (a)      Definition. In the course performing under this Agreement,
                  each party may obtain information from the other party that is
                  of a proprietary or confidential nature ("CONFIDENTIAL
                  Information"). Confidential Information may include, but is
                  not limited to, trade secrets, manufacturing specifications,
                  technical data and know-how, instructional and operating
                  manuals, financial information, marketing and sales data and
                  plans, and other information or documents. Confidential
                  Information must either be in writing and clearly marked as
                  confidential or, if disclosed orally or in intangible form,
                  received under circumstances which can be reasonably
                  understood to impose an obligation of confidentiality on the
                  receiving party.

         (b)      Disclosures of Confidential Information. Neither party shall
                  at any time, either during or after the Term of this
                  Agreement, use for its own purposes or publish, disclose, or
                  otherwise divulge any of the other party's Confidential
                  Information to any person without the prior written consent of
                  the other party. Each party shall protect the Confidential
                  Information of the other party through means at least as
                  stringent as those used to protect that party's own
                  Confidential Information. Neither party shall use the

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                  other party's Confidential Information except in the course of
                  performing its obligations under this Agreement. Upon
                  termination of this Agreement for any reason, each party shall
                  immediately return to the other party all of the other party's
                  Confidential Information in its possession, custody, or
                  control.

         (c)      Limitations on Scope of Confidential Information. The term
                  Confidential Information shall not apply or shall cease to
                  apply to information which (i) can be demonstrated by
                  reasonable documentary proof to be already known to the other
                  party, (ii) is or becomes publicly known through no wrongful
                  act of the receiving party, (iii) can be demonstrated by
                  reasonable documentary proof to have been independently
                  developed by the receiving party without benefit of the
                  disclosing party's Confidential Information, or (iv) is
                  received from a third party without similar restriction and
                  without breach of this Agreement.

         (d)      Injunctive Relief. The parties acknowledge and agree that any
                  breach of this Section 14 may cause irreparable harm to the
                  non-breaching party, and therefore such party shall be
                  entitled to injunctive relief in addition to all other legal
                  remedies.

         (e)      Prior Agreement. Upon execution of this Agreement, the
                  Confidentiality Letter Agreement executed by the parties as of
                  June 21, 2003 shall terminate and be superseded by the
                  provisions of this Section 14.

15.      Force Majeure.

         (a)      Definition. "FORCE MAJEURE" means any event or condition, not
                  existing or known on the date hereof, not reasonably
                  foreseeable as of such date, and not reasonably within the
                  control of either party, that prevents in whole or in material
                  part the performance by one of the parties of its obligations
                  under this Agreement or that renders the performance of such
                  obligations so difficult or costly as to make such performance
                  commercially unreasonable.

         (b)      Notice. Upon giving written notice to the other party, the
                  party whose performance is affected by an event of Force
                  Majeure shall be released without any liability on its part
                  from the performance of its obligations under this Agreement,
                  EXCEPT for the obligation to pay any amounts due and owing,
                  but only to the extent and only for the period that such
                  performance is so affected by the event of Force Majeure. Such
                  notice shall include a description of the nature of the event
                  of Force Majeure and its cause of possible consequences. The
                  party claiming Force Majeure shall promptly notify the other
                  party of the termination of such event.

         (c)      Termination. Should the period of Force Majeure continue for
                  more than six (6) consecutive months, either party may
                  terminate this Agreement

Initials:                              11
  Buyer ________
  Seller _______
<PAGE>

                  without liability to the other party, except for payments due,
                  upon giving written notice to the other party.

16.      Dispute Resolution.

         (a)      Negotiation. The parties agree to consult and negotiate in
                  good faith to try to resolve any dispute, controversy or claim
                  that arises out of or relates to this Agreement. The parties
                  agree that, except as provided in Section 16(b) below, neither
                  party will initiate formal dispute resolution under this
                  Agreement unless and until such party has provided written
                  notice of the potential claim to the other party and the
                  representatives of the parties shall have attempted to achieve
                  an amicable resolution of the claim; provided, however, that
                  in no event shall a party be required to delay initiation of
                  formal dispute resolution hereunder for more than a period of
                  thirty (30) days following such notice.

         (b)      Reservation for Litigation. Notwithstanding Section 16(a)
                  above and Section 16(c) below, each party expressly reserves
                  the right to seek emergency injunctive relief from a court of
                  competent jurisdiction if in such party's discretion the
                  circumstances warrant such relief. In addition, nothing in
                  this Section 16(b) shall preclude a party from seeking such
                  interim relief with respect to any disputes or claims arising
                  under this Agreement as may be available under the arbitration
                  rules as provided in Section 16(c) below. However, immediately
                  following the issuance of such injunctive relief, each party
                  shall consent to the stay of any judicial proceedings pending
                  arbitration of all underlying claims between the parties in
                  accordance with this Section 16.

         (c)      Arbitration. Subject to the rights of the parties under
                  Section 16(b) above, all disputes, claims or controversies
                  arising out of or in connection with this Agreement shall be
                  finally settled in accordance with the International
                  Arbitration Rules (the "Rules") of the International Centre
                  for Dispute Resolution of the American Arbitration Association
                  ("AAA"), as modified by Section 16(d) below. Such arbitration
                  shall be conducted before an arbitral tribunal consisting of
                  three (3) members appointed in accordance with the Rules. The
                  award of the tribunal shall be final and binding on the
                  parties, and judgment upon the award rendered by the
                  arbitrators may be entered in any court of competent
                  jurisdiction. The place of arbitration shall be New York, New
                  York, USA. At least one arbitrator shall have knowledge of or
                  experience in the medical device industry.

         (d)      Special Rules. Notwithstanding any provision to the contrary
                  in the Rules, the parties hereby stipulate that any
                  arbitration hereunder shall be subject to the following
                  special rules.

                  (i)      Each party shall have the right to request from the
                           arbitrators, and the arbitrators shall order upon
                           good cause shown, reasonable and

Initials:                              12
  Buyer ________
  Seller _______
<PAGE>

                           limited pre-hearing discovery, including (1) exchange
                           of witness lists, (2) depositions under oath of named
                           witnesses, (3) written interrogatories, and (4)
                           document requests;

                  (ii)     Upon conclusion of the pre-hearing discovery, the
                           arbitrators shall promptly hold a hearing upon the
                           evidence to be presented by the parties and shall
                           promptly render a written opinion and award;

                  (iii)    The arbitrators may not award or assess punitive
                           damages against either party; and

                  (iv)     All reasonable attorney's fees and costs incurred by
                           the prevailing party in any arbitration pursuant to
                           this Agreement, and the cost of such arbitration,
                           shall be paid by the losing party to the arbitration
                           within five (5) days after receipt of written demand
                           therefore from the prevailing party following the
                           rendition of the written decision of the arbitral
                           tribunal.

         (e)      Survival. The duty of the parties to arbitrate any dispute,
                  controversy or claim under this Section 17 shall survive the
                  termination of this Agreements for any reason.

17.      Entire Agreement; Amendment. This Agreement sets forth the entire and
         only agreement between Buyer and Seller concerning the subject matter
         hereof. No provision of this Agreement can be modified or amended
         except by an explicit written amendment signed by both Buyer and
         Seller.

18.      Assignment. Neither party will have the right to assign this Agreement,
         in whole or in part, to any third party without the prior written
         consent of a duly authorized officer of the other party.
         Notwithstanding the foregoing, either party may freely assign this
         Agreement (i) to any company controlling, controlled by or under common
         control with that party; provided, that such assignment shall not
         relieve the assigning party of any of its obligations and liabilities
         under this Agreement, or (ii) to any party succeeding to the entire
         business of the party to which this Agreement relates. This Agreement
         will be binding upon and inure to the benefit of the parties and their
         successors and assigns to which such consent, if necessary, is given.

19.      General.

         (a)      Waivers. No waiver of any right or remedy hereunder will be
                  effective unless based upon a writing signed by the party
                  against whom it is sought to be enforced.

         (b)      Notices. All notices required or permitted under this
                  Agreement must be made in writing and delivered in person, by
                  certified or registered mail, postage prepaid, or by a
                  recognized international courier for second day delivery,
                  addressed to the attention of the Chief Executive Officer of
                  the

Initials:                              13
  Buyer ________
  Seller _______
<PAGE>

                  Buyer or the Chief Executive Officer of the Seller at the
                  respective addresses of the parties first written above, or
                  such other address as may be given by one party to the other
                  by like notice.

         (c)      Relationship. The parties are independent contractors and
                  shall not be deemed to have formed any partnership, joint
                  venture or other relationship. Neither party shall make, or
                  represent to any other person that it has the power or
                  authority to make, any financial or other commitment on behalf
                  of the other party.

         (d)      Severability. If any provision of this Agreement is declared
                  invalid or unenforceable by a court of competent jurisdiction,
                  such provision will be severed from this Agreement and the
                  remaining provisions will be unaffected thereby. The parties
                  will promptly meet and negotiate a substitute provision
                  meeting as closely as possible the intent of the invalid or
                  unenforceable provision and, with reasonable precision,
                  avoiding the defects of the original provision.

         (e)      Governing Law. This Agreement has been entered into under the
                  laws of the State of New York, USA, without regard to its
                  principles of conflicts of law, and will be governed by and
                  construed in accordance with those laws as they apply to
                  contracts entered into and carried out solely within the State
                  of New York.

         (f)      Cumulative Remedies. Subject to the terms of this Agreement,
                  all rights accorded either of the parties hereunder shall be
                  cumulative with all other rights so granted as well as any
                  rights and remedies either of them may have at law or in
                  equity.

         (g)      Headings. The Section headings in this Agreement are for
                  convenience only and shall not affect the construction hereof.

         IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized representatives to execute this Agreement the day and year first
written above.

MEDART CORPORATION                           VASCULAR SOLUTIONS, INC.

By:  /s/ Jan Enemaerke                       By:  /s/ Howard Root
     -----------------------------------          ------------------------------

Its: President & Chief Operating Officer     Its: Chief Executive Officer
     -----------------------------------          ------------------------------

Initials:                              14
  Buyer ________
  Seller _______
<PAGE>

              SCHEDULE 1 - SPECIFICATIONS AND ACCEPTANCE STANDARDS

<TABLE>
<CAPTION>
<S>                                               <C>
------------------------------------------------- --------------------------------------------------------------------
Laser Wavelength                                  810 nm +/- 10 nm
------------------------------------------------- --------------------------------------------------------------------
Output Power                                      30 W max
------------------------------------------------- --------------------------------------------------------------------
Power Range                                       1-30 W
------------------------------------------------- --------------------------------------------------------------------
Power Increments                                  1W
------------------------------------------------- --------------------------------------------------------------------
Operating Modes                                   Continuous, Pulsed
------------------------------------------------- --------------------------------------------------------------------
Pulse Duration ON/OFF:                            Pulse mode:  10 - 1,000 milliseconds (msec)
------------------------------------------------- --------------------------------------------------------------------
                                                  CW:  No "time out" on continuous
------------------------------------------------- --------------------------------------------------------------------
Display Readout:                                  "Real Time" read out of both Time (Seconds) and Energy (Joules) on
                                                  screen while firing the laser.
------------------------------------------------- --------------------------------------------------------------------
Aiming Beam                                       Attenuable Red-5 mw max (at
                                                  source) 635 +/- 4nm.
                                                  Aiming beam will be on all the
                                                  time (both in Stand-By and
                                                  Ready modes).
------------------------------------------------- --------------------------------------------------------------------
Output                                            SMA-905 Type connector,
                                                  accepts:200 micron fibers up
                                                  to 5 W400, 600, and 1000
                                                  micron fibers up to 15 W. All
                                                  fibers to be .37 NA,
                                                  silica/silica multimode.
------------------------------------------------- --------------------------------------------------------------------
Size                                              20" x 12" x 6" overall dimensions (51cm x 30cm x 15cm)
------------------------------------------------- --------------------------------------------------------------------
Weight                                            28 lbs. or 13 kilos
------------------------------------------------- --------------------------------------------------------------------
Cooling                                           Air cooled
------------------------------------------------- --------------------------------------------------------------------
Power requirements                                110/220v suitable for U.S. and international AC input, as
                                                  specified in purchase order.  Power cord to be included for
                                                  country of use, as specified in purchase order
------------------------------------------------- --------------------------------------------------------------------
Laser Casing                                      Artwork to be applied by Seller at Buyer's specifications
------------------------------------------------- --------------------------------------------------------------------
Labeling                                          All labeling to be written under Buyer's name and artwork, to be
                                                  supplied by Buyer
------------------------------------------------- --------------------------------------------------------------------
Accessories                                       QSC -SMA converter, Foot pedal, operating manual
------------------------------------------------- --------------------------------------------------------------------
Packaging                                         Packaged in a shipping case including the foot pedal, power cord
                                                  and operating manual
------------------------------------------------- --------------------------------------------------------------------

                                           Inspection and Acceptance

------------------------------------------------- --------------------------------------------------------------------
Performance Feature:                              Acceptance Standards:
------------------------------------------------- --------------------------------------------------------------------
Run start-up and complete calibration             No failure and calibrated power transmission at +/- 20% of output
                                                  power at fiber output
------------------------------------------------- --------------------------------------------------------------------
Physical defects and damage                       No visible damage to the outer shell, screen or working components
------------------------------------------------- --------------------------------------------------------------------
</TABLE>

Initials:                              15
  Buyer ________
  Seller _______
<PAGE>

                        SCHEDULE 2 - SCHEDULE AND PRICING

         Seller and Buyer shall use their best efforts to meet the following
schedule for documentation, testing, report generation and regulatory filings
and approvals for the Product:

         Seller delivers to Buyer all existing documentation for the 510(k)
submission:

         -        510(k) for the 426 platform by September 24, 2003
         -        Operating manual by September 24, 2003
         -        Service manual by September 24, 2003
         -        IEC 60601 Series testing by September 24, 2003
         -        Software validation protocol by September 24, 2003
         -        Software modifications to be incorporated by September 24,
                  2003
         -        Statement of impact on software validation by September 24,
                  2003
         -        Standards compliance statement by September 24, 2003.

         Buyer provides Seller with all changes to the Specifications, labeling
and artwork by September 24, 2003

         Seller completes all software validations by January 1, 2004

         Seller obtains CE mark authorization for the Products by November 15,
2003

         Buyer files 510(k) submission by October 1, 2003

         The price for the Product during each of the three Contract Years shall
be as follows, with quantities being cumulative over the three Contract Year
period

                                     CONSOLE
               ------------------------- -------------------------
                        QUANTITY                  PRICE
                    First ** units                  **
                    Next ** units                    *
                    Next ** units                    *
                    Next ** units                    *
                      Thereafter                     *
               ------------------------- -------------------------

         * Prices for all units in excess of ** units shall not exceed the price
for the first ** units except as provided in Section 6(b) and may be reduced
based on Seller's budgetary forecast of the cost of materials and labor at the
relevant time.

Initials:                              16
  Buyer ________
  Seller _______Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

                This Securities Purchase Agreement (this "Agreement")
is dated as of October ___, 2003, among DDS Technologies USA, Inc., a Nevada
corporation (the "Company"), and the purchasers identified on the
signature pages hereto (each a "Purchaser" and collectively the "Purchasers").

                WHEREAS, subject to the terms and conditions set forth in
this Agreement and pursuant to Section 4(2) of the Securities Act (as defined
below), and Rule 506 promulgated thereunder, the Company desires to issue and
sell to the Purchasers, and the Purchasers, severally and not jointly, desire to
purchase from the Company in the aggregate, up to 2,500,000 shares of Common
Stock, and Warrants to purchase up to 1,250,000 shares of Common Stock, with the
right to increase the size of the offering without the consent of the
Purchasers.

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

ARTICLE I.

DEFINITIONS

                1.1 Definitions. In addition to the terms defined
elsewhere in this Agreement, for all purposes of this Agreement, the following
terms have the meanings indicated in this Section 1.1:

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

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

    "Business Day" means any day except Saturday,
    Sunday and any day which shall be a federal legal holiday or a day on which
    banking institutions in the State of New York are authorized or required by
    law or other governmental action to close.

    "Closing" means the closing of the purchase and
    sale of the Common Stock and the Warrants pursuant to Section 2.1(a) on
    October ___, 2003, or such other date as agreed to by the parties.

    "Closing Date" means the date of the Closing.

    "Closing Price" means on any particular date
    (a) the last reported closing bid price per share of Common Stock on such
    date on the Trading Market (as reported by Bloomberg L.P. at 4:15 PM (New
    York time) as the last reported closing bid price for regular session
    trading on such day), or (b) if there is no such price on such date, then
    the closing bid price on the Trading Market on the date nearest preceding
    such date (as reported by

    1

    
    
Bloomberg L.P. at 4:15 PM (New York time) as the closing
    bid price for regular session trading on such day), or (c)  if the
    Common Stock is not then listed or quoted on the Trading Market and if
    prices for the Common Stock are then reported in the "pink sheets" published
    by the National Quotation Bureau Incorporated (or a similar organization or
    agency succeeding to its functions of reporting prices), the most recent bid
    price per share of the Common Stock so reported, or (d) if the shares of
    Common Stock are not then publicly traded the fair market value of a share
    of Common Stock as determined by an appraiser selected in good faith by the
    Purchasers of a majority in interest of the Shares then outstanding.

  

                    "Commission" means the Securities and Exchange
Commission.

"Common Stock" means the common stock of the
    Company, $0.0001 par value per share, and any securities into which such
    common stock may hereafter be reclassified.

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

    "Company Counsel" means Hodgson Russ LLP.

    "Disclosure Schedules" means the Disclosure
    Schedules attached as Annex I hereto.

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

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

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

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

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

    2

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

    "Per Share Purchase Price" equals $6.00, subject
    to adjustment for reverse and forward stock splits, stock dividends, stock
    combinations and other similar transactions of the Common Stock that occur
    after the date of this Agreement and before the Closing.

    "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.

    "Registration Statement" means a registration
    statement meeting the requirements set forth in the Registration Rights
    Agreement and covering the resale by the Purchasers of the Shares and the
    Warrant Shares.

    "Registration Rights Agreement" means the
    Registration Rights Agreement, dated as of the date of this Agreement, among
    the Company and each Purchaser, in the form of Exhibit A hereto.

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

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

  

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

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

    "Shares" means the shares of Common Stock issued
    or issuable to each Purchaser pursuant to this Agreement.

    "Subscription Amount" means, as to each Purchaser
    and the Closing, the amounts set forth below such Purchaser's signature
    block on the signature page hereto, in United States dollars and in
    immediately available funds.

    "Subsidiary" shall have the meaning ascribed to
    such term in Section 3.1(a).

    "Trading Day" means (i) a day on which the Common
    Stock is traded on a Trading Market, or (ii) if the Common Stock is not
    listed on a Trading Market, a day on which the Common Stock is traded on the
    over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if
    the Common Stock is not quoted on the OTC Bulletin Board, a day on which the
    Common Stock is quoted in the over-the-counter market as reported by the
    National Quotation Bureau Incorporated (or any similar organization or

    

    3

    
    
agency succeeding to its functions of reporting prices); provided, that in
    the event that the Common Stock is not listed or quoted as set forth in (i),
    (ii) and (iii) hereof, then Trading Day shall mean a Business Day.

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

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

    "Warrants" means the Common Stock Purchase
    Warrants, in the form of Exhibit B, issuable to the Purchasers at
    Closing, which warrants shall be exercisable immediately and have an
    exercise price equal to $8.00 and a term of exercise of 3 years.

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

  

ARTICLE II.

PURCHASE AND SALE

                2.1 Closing. At the Closing, the Purchasers shall
purchase, severally and not jointly, and the Company shall issue and sell, in
the aggregate, up to 2,500,000 shares of Common Stock, and Warrants to purchase
up to 1,250,000 shares of Common Stock on the Closing Date. The Company shall
have the right to increase the number of shares of Common Stock and Warrants
without the consent of any Purchaser. Each Purchaser shall purchase from the
Company, and the Company shall issue and sell to each Purchaser, a number of
Shares equal to such Purchaser's Subscription Amount divided by the Per Share
Purchase Price. The Warrants shall be issued, without additional consideration,
on the basis of one Warrant for each Share purchased. Upon satisfaction of the
conditions set forth in Section 2.2, the Closing shall occur at the Toronto
offices of Hodgson Russ LLP, or such other location as the parties shall
mutually agree.

                2.2 Closing Conditions.

(a) At the Closing the Company shall deliver or cause to
    be delivered to each Purchaser (except as otherwise provided below):

    (i) this Agreement duly executed by the Company;

        (ii) within 3 Trading Days of the Closing Date, a
        certificate evidencing a number of Shares equal to such Purchaser's
        Subscription Amount divided by the Per Share Purchase Price, registered
        in the name of such Purchaser;

        4

        
        
(iii) within 3 Trading Days of the Closing Date, a
        Warrant, registered in the name of such Purchaser, pursuant to which
        such Purchaser shall have the right to acquire up to the number of
        shares of Common Stock equal to 50% of the Shares to be issued to such
        Purchaser at such Closing; and

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

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

    (i) this Agreement duly executed by such Purchaser;

        (ii) such Purchaser's Subscription Amount as to such
        Closing by wire transfer to the account of the Company as provided to
        the Purchasers in writing prior to the Closing Date; and

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

      
    
    (c) All representations and warranties of each of the
    parties herein shall remain true and correct as of the Closing Date.

    (d) As of the Closing Date, there shall have been no
    Material Adverse Effect with respect to the Company since the date hereof.

    (e) From the date hereof to the Closing Date, trading in
    the Common Stock shall not have been suspended by the Commission (except for
    any suspension of trading of limited duration agreed to by the Company,
    which suspension shall be terminated prior to the Closing), and, at any time
    prior to the Closing Date, trading in securities generally as reported by
    Bloomberg Financial Markets shall not have been suspended or limited, or
    minimum prices shall not have been established on securities whose trades
    are reported by such service, or on any Trading Market, nor shall a banking
    moratorium have been declared either by the United States or New York State
    authorities.

  

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

                3.1 Representations and Warranties of the Company.
Except as set forth under the corresponding section of the Disclosure Schedules
delivered concurrently herewith, the Company hereby makes the following
representations and warranties as of the date hereof and as of the Closing Date
to each Purchaser:

(a) Subsidiaries. The Company has no direct or
    indirect subsidiaries. The Company owns, directly or indirectly, all of the
    capital stock of its Subsidiary free and clear of any lien, charge, security
    interest, encumbrance, right of first refusal or other 

    5

    
    
restriction
    (collectively, "Liens"), and all the issued and outstanding shares of
    capital stock of each Subsidiary are validly issued and are fully paid,
    non-assessable and free of preemptive and similar rights. 

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

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

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

    6

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

    (e) Filings, Consents and Approvals. The Company
    is not required to obtain any consent, waiver, authorization or order of,
    give any notice to, or make any filing or registration with, any court or
    other federal, state, local or other governmental authority or other Person
    in connection with the execution, delivery and performance by the Company of
    the Transaction Documents, other than (a) the filing with the Commission of
    the Registration Statement, the application(s) to each Trading Market for
    the listing of the Shares and Warrant Shares for trading thereon in the time
    and manner required thereby, and applicable Blue Sky filings, (b) such as
    have already been obtained or such exemptive filings as are required to be
    made under applicable securities laws, and (c) such other filings as may be
    required following the Closing Date under the Securities Act, the Exchange
    Act and corporate law.

    (f) Issuance of the Securities. The Securities are
    duly authorized and, when issued and paid for in accordance with the
    Transaction Documents, will be duly and validly issued, fully paid and
    nonassessable, free and clear of all Liens. The Company has reserved from
    its duly authorized capital stock the maximum number of shares of Common
    Stock issuable pursuant to this Agreement and the Warrants.

    (g) Capitalization. The capitalization of the
    Company is as described in the Company's most recent periodic report filed
    with the Commission. The Company has not issued any capital stock since such
    filing other than pursuant to the exercise of employee stock options under
    the Company's stock option plans and pursuant to the conversion or exercise
    of Common Stock Equivalents outstanding on the date hereof. No Person has
    any right of first refusal, preemptive right, right of participation, or any
    similar right to participate in the transactions contemplated by the
    Transaction Documents. Except as a result of the purchase and sale of the
    Securities and except for employee stock options under the Company's stock
    option plans, there are no outstanding options, warrants, script rights to
    subscribe to, calls or commitments of any character whatsoever relating to,
    or securities, rights or obligations convertible into or exchangeable for,
    or giving any Person any right to subscribe for or acquire, any shares of
    Common Stock, or contracts, 

    7

    
    
commitments, understandings or arrangements by which the
    Company or any Subsidiary is or may become bound to issue additional shares
    of Common Stock, or securities or rights convertible or exchangeable into
    shares of Common Stock. The issue and sale of the Securities will not
    obligate the Company to issue shares of Common Stock or other securities to
    any Person (other than the Purchasers) and will not result in a right of any
    holder of Company securities to adjust the exercise, conversion, exchange or
    reset price under such securities.

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

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

    8

    
    
dividend or distribution of cash or other property to its
    stockholders or purchased, redeemed or made any agreements to purchase or
    redeem any shares of its capital stock and (v) the Company has not issued
    any equity securities to any officer, director or Affiliate, except pursuant
    to existing Company stock option plans. The Company does not have pending
    before the Commission any request for confidential treatment of information.

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

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

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

    (m) Regulatory Permits. The Company and the
    Subsidiaries possess all certificates, authorizations and permits issued by
    the appropriate federal, state, local or  

    9

    
    
foreign regulatory authorities
    necessary to conduct their respective businesses as described in the SEC
    Reports, except where the failure to possess such permits would not have or
    reasonably be expected to result in a Material Adverse Effect ("Material
    Permits"), and neither the Company nor any Subsidiary has received any
    notice of proceedings relating to the revocation or modification of any
    Material Permit.

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

    (o) Patents and Trademarks. To the knowledge of
    the Company and each Subsidiary, the Company and the Subsidiaries have, or
    have rights to use, all patents, patent applications, trademarks, trademark
    applications, service marks, trade names, copyrights, licenses and other
    similar rights that are necessary or material for use in connection with
    their respective businesses as described in the SEC Reports and which the
    failure to so have could have or reasonably be expected to result in a
    Material Adverse Effect (collectively, the "Intellectual Property Rights").
    Neither the Company nor any Subsidiary has received a written notice that
    the Intellectual Property Rights used by the Company or any Subsidiary
    violates or infringes the rights of any Person. To the knowledge of the
    Company, all such Intellectual Property Rights are enforceable.

    (p) Insurance. The Company and the Subsidiaries
    currently hold no insurance but will use the proceeds to this financing to
    put in place insurance by insurers of recognized financial responsibility
    against such losses and risks and in such amounts as are prudent and
    customary in the businesses (not less than $5 million) in which the Company
    and the Subsidiaries are engaged within 45 days of the Closing Date. Neither
    the Company nor any Subsidiary has any reason to believe that it will not be
    able to obtain such insurance or to renew its insurance coverage as and when
    such coverage expires or to obtain similar coverage from similar insurers as
    may be necessary to continue its business without a significant increase in
    cost. 

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

    10

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

    (r) Internal Accounting Controls. The Company and
    each of its subsidiaries maintains a system of internal accounting controls
    sufficient to provide reasonable assurance that (i) transactions are
    executed in accordance with management's general or specific authorizations,
    (ii) transactions are recorded as necessary to permit preparation of
    financial statements in conformity with GAAP and to maintain asset
    accountability, (iii) access to assets is permitted only in accordance with
    management's general or specific authorization, and (iv) the recorded
    accountability for assets is compared with the existing assets at reasonable
    intervals and appropriate action is taken with respect to any differences.
    The Company has established disclosure controls and procedures (as defined
    in Exchange Act Rules 13a-14 and 15d-14) for the Company and designed such
    disclosure controls and procedures to ensure that material information
    relating to the Company, including its subsidiaries, is made known to the
    certifying officers by others within those entities, particularly during the
    period in which the Company's Form 10-K or 10-Q, as the case may be, is
    being prepared.

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

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

    (u) Investment Company. The Company is not, and is
    not an Affiliate of, an "investment company" within the meaning of the
    Investment Company Act of 1940, as amended.

    11

    
    
(v) Listing and Maintenance Requirements. The
    Company has not, in the 12 months preceding the date hereof, received notice
    from any Trading Market on which the Common Stock is or has been listed or
    quoted to the effect that the Company is not in compliance with the listing
    or maintenance requirements of such Trading Market. The Company is, and has
    no reason to believe that it will not in the foreseeable future continue to
    be, in compliance with all such listing and maintenance requirements.

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

    (x) Disclosure. The Company confirms that, neither
    the Company nor any other Person acting on its behalf has provided any of
    the Purchasers or their agents or counsel with any information that
    constitutes or might constitute material, non-public information. The
    Company understands and confirms that the Purchasers will rely on the
    foregoing representations and covenants in effecting transactions in
    securities of the Company. All disclosure provided to the Purchasers
    regarding the Company, its business and the transactions contemplated
    hereby, including the Disclosure Schedules to this Agreement, furnished by
    or on behalf of the Company are true and correct and do not contain any
    untrue statement of a material fact or omit to state any material fact
    necessary in order to make the statements made therein, in light of the
    circumstances under which they were made, not misleading.

    (y) Solvency. Based on the financial condition of
    the Company as of the Closing Date, (i) the Company's fair saleable value of
    its assets exceeds the amount that will be required to be paid on or in
    respect of the Company's existing debts and other liabilities (including
    known contingent liabilities) as they mature; (ii) the Company's assets do
    not constitute unreasonably small capital to carry on its business for the
    current fiscal year as now conducted and as proposed to be conducted
    including its capital needs taking into account the particular capital
    requirements of the business conducted by the Company, and projected capital
    requirements and capital availability thereof, and including the anticipated
    proceeds of the sale of the Securities; and (iii) the current cash flow of
    the Company, together with the proceeds the Company would receive, were it
    to liquidate all of its assets, after taking into account all anticipated
    uses of the cash, would be sufficient to pay all amounts on or in respect of
    its debt when such amounts are required to be paid. The Company does not
    intend to incur debts beyond its ability to pay 

    12

    
    
such debts as they mature (taking into account the timing
    and amounts of cash to be payable on or in respect of its debt).

  

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

(a) Organization; Authority. Such Purchaser is an
    entity duly organized, validly existing and in good standing under the laws
    of the jurisdiction of its organization with full right, corporate or
    partnership power and authority to enter into and to consummate the
    transactions contemplated by the Transaction Documents and otherwise to
    carry out its obligations thereunder. The execution, delivery and
    performance by such Purchaser of the transactions contemplated by this
    Agreement has been duly authorized by all necessary corporate or similar
    action on the part of such Purchaser. Each Transaction Document to which it
    is a party has been duly executed by such Purchaser, and when delivered by
    such Purchaser in accordance with the terms hereof, will constitute the
    valid and legally binding obligation of such Purchaser, enforceable against
    it in accordance with its terms.

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

    (c) Purchaser Status. At the time such Purchaser
    was offered the Securities, it was, and at the date hereof it is an
    "accredited investor" as defined in Rule 501(a) under the Securities Act.
    Such Purchaser is not required to be registered as a broker-dealer under
    Section 15 of the Exchange Act. 

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

    13

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

    (f) Compliance with the Securities Laws. Such
    Purchaser agrees to comply with the requirements of Regulation M, if
    applicable, with respect to the sale of the Shares by the Purchaser. Such
    Purchaser hereby confirms its understanding that it may not cover short
    sales made prior to the Effective Date with Shares registered for resale on
    the Registration Statement. The Purchaser acknowledges that it does not
    intend to cover short positions made by it before the Effective Date with
    Shares held by it and registered on the Registration Statement.

  

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

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

                4.1 Transfer Restrictions. 

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

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

    THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE
        SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
        STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
        SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
        ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
        REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
        AVAILABLE EXEMPTION FROM, OR IN A 

        14

        
        
TRANSACTION NOT SUBJECT TO, THE REGISTRATION
        REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
        STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE
        TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
        ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION
        WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER
        LOAN WITH A FINANCIAL INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS
        DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT.

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

    (c) Certificates evidencing the Shares and Warrant Shares
    shall not contain any legend (including the legend set forth in Section
    4.1(b)), (i) while a registration statement (including the Registration
    Statement) covering the resale of such security is effective under the
    Securities Act, or (ii) following any sale of such Shares or Warrant Shares
    pursuant to Rule 144, or (iii) if such Shares or Warrant Shares are eligible
    for sale under Rule 144(k), or (iv) if such legend is not required under
    applicable regulation of the Securities Act (including judicial
    interpretations and pronouncements issued by the Staff of the Commission).
    The Company shall cause its counsel to issue a legal opinion to the
    Company's transfer agent promptly after the Effective Date if required by
    the Company's transfer agent to effect the removal of the legend hereunder.
    If all or any portion of a Warrant is exercised at a time when there is an
    effective registration statement to cover the resale of the Warrant Shares,
    such Warrant Shares shall be issued free of all legends. The Company agrees
    that following the Effective Date or at such time as such legend is no
    longer required under this Section 4.1(c), it will, no later than three
    Trading Days following the delivery by a Purchaser to the Company or the
    Company's transfer agent of a certificate representing Shares or Warrant
    Shares, as the case may be, issued with a restrictive legend, deliver or
    cause to be delivered to such Purchaser a certificate 

    15

    
    
representing such Securities that is free from all
    restrictive and other legends. The Company may not make any notation on its
    records or give instructions to any transfer agent of the Company that
    enlarge the restrictions on transfer set forth in this Section.

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

  

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

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

                4.4 Securities Laws Disclosure; Publicity. The Company
shall, by 8:30 a.m. Eastern time on the 2nd Business Day following
the date of this Agreement, issue a press release or file a Current Report on
Form 8-K, in each case reasonably acceptable to each Purchaser disclosing the
transactions contemplated hereby and make such other filings and notices in the
manner and time required by the Commission. The Company and each Purchaser shall
consult with each other in issuing any press releases with respect to the
transactions contemplated hereby, and neither the Company nor any Purchaser
shall issue any such press release or otherwise make any such public statement
without the prior consent of the Company, with respect to any press release of
any Purchaser, or without the prior consent of each Purchaser, with respect to
any press release of the Company, which consent shall not unreasonably be
withheld, except if such disclosure is required by law, in which case the
disclosing party shall promptly provide the other party with prior notice of
such public statement or communication. Notwithstanding the foregoing, the
Company shall not publicly disclose the name of any Purchaser, or include the
name of any

16

Purchaser in any filing with the Commission or any regulatory agency
or Trading Market, without the prior written consent of such Purchaser, except (i)
as required by federal securities law in connection with the registration
statement contemplated by the Registration Rights Agreement and (ii) to the
extent such disclosure is required by law or Trading Market regulations, in
which case the Company shall provide the Purchasers with prior notice of such
disclosure permitted under subclause (i) or (ii).

                4.5 Shareholders Rights Plan. No claim will be made or
enforced by the Company or any other Person that any Purchaser is an "Acquiring
Person" under any shareholders rights plan or similar plan or arrangement in
effect or hereafter adopted by the Company, or that any Purchaser could be
deemed to trigger the provisions of any such plan or arrangement, by virtue of
receiving Securities under the Transaction Documents or under any other
agreement between the Company and the Purchasers.

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

                4.7 Use of Proceeds. The Company shall use the net
proceeds from the sale of the Securities hereunder for (i) general working
capital purposes, (ii) to finance the manufacture of machinery which employs
disaggregation dry system technology for lease to customers, primarily located
in the United States, and (iii) not for the satisfaction of any portion of the
Company's debt (other than payment of trade payables in the ordinary course of
the Company's business and prior practices), to redeem any Company equity or
equity-equivalent securities or to settle any outstanding litigation, or to make
any payment to any director or officer, other than salary and reimbursement of
expenses in accordance with past practice.

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

17

any such Affiliates, partners, directors, agents, employees
or controlling persons shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the Company solely as a result of
acquiring the Securities under this Agreement.

                4.9 Indemnification of Purchasers. The Company will
indemnify and hold the Purchasers and their directors, officers, shareholders,
partners, employees and agents (each, a "Purchaser Party") harmless from
any and all losses, liabilities, obligations, claims, contingencies, damages,
costs and expenses, including all judgments, amounts paid in settlements, court
costs and reasonable attorneys' fees and costs of investigation that any such
Purchaser Party may suffer or incur as a result of or relating to: (a) any
misrepresentation, breach or inaccuracy, or any allegation by a third party
that, if true, would constitute a breach or inaccuracy, of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other Transaction Documents; or (b) any cause of action,
suit or claim brought or made against such Purchaser Party and arising solely
out of or solely resulting from the execution, delivery, performance or
enforcement of this Agreement or any of the other Transaction Documents and
without causation by any other activity, obligation, condition or liability
pertaining to such Purchaser. The Company will reimburse such Purchaser for its
reasonable legal and other expenses (including the cost of any investigation,
preparation and travel in connection therewith) incurred in connection
therewith, as such expenses are incurred.

                4.10 
Reservation of Common Stock. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Shares pursuant to this
Agreement and Warrant Shares pursuant to the Warrants. 

                4.11 
Listing of Common Stock. The Company hereby agrees to use commercially
reasonable efforts to maintain the listing of the Common Stock on the Trading
Market, and as soon as reasonably practicable following the Closing (but not
later than the earlier of the Effective Date and the first anniversary of the
Closing Date) to list the applicable Shares and Warrant Shares on the Trading
Market. The Company further agrees, if the Company applies to have the Common
Stock traded on any other Trading Market, it will include in such application
the Shares and Warrant Shares, and will take such other action as is necessary
or desirable in the opinion of the Purchasers to cause the Shares and Warrant
Shares to be listed on such other Trading Market as promptly as possible. The
Company will take all action reasonably necessary to continue the listing and
trading of its Common Stock on a Trading Market and will comply in all respects
with the Company's reporting, filing and other obligations under the bylaws or
rules of the Trading Market.

                4.12 Prohibition of Short Sales.
Prior to the Effective Date, each Purchaser shall not effect any "short sale" of
the Company's common stock. Each Purchaser acknowledges and agrees that, in the
event of an actual or threatened breach of any of the provisions of this
Agreement by such party, the harm to the others will be immediate, substantial
and irreparable and the monetary damages will be inadequate. Accordingly, each
Purchaser agrees that, in such 

18

event, the others will be entitled to equitable relief,
including an injunction and an order of specific performance, in addition to any
and all other remedies oat law or in equity.

ARTICLE V.

MISCELLANEOUS

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

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

                5.3 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
(a) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified on the signature pages attached
hereto prior to 6:30 p.m. (New York City time) on a Trading Day, (b) the next
Trading Day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number on the signature pages attached
hereto on a day that is not a Trading Day or later than 6:30 p.m. (New York City
time) on any Trading Day, (c) the Trading Day following the date of mailing, if
sent by U.S. nationally recognized overnight courier service, or (d) upon actual
receipt by the party to whom such notice is required to be given. The address
for such notices and communications shall be as set forth on the signature pages
attached hereto.

                5.4 Amendments; Waivers. No provision of this
Agreement may be waived or amended except in a written instrument signed, in the
case of an amendment, by the Company and each Purchaser or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought. No
waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of either party to
exercise any right hereunder in any manner impair the exercise of any such
right.

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

19

                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 may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of each Purchaser. Any
Purchaser may assign any or all of its rights under this Agreement to any
Person, provided such transferee agrees in writing to be bound, with respect to
the transferred Securities, by the provisions hereof that apply to the
"Purchasers".

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

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

                5.9 Survival. The representations, warranties,
agreements and covenants contained herein shall survive the Closing and delivery
of the Shares.

                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 

20

effective when counterparts have been signed by each party
and delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.

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

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

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

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

                5.15 Independent Nature of Purchasers' Obligations and
Rights. The obligations of each Purchaser under any Transaction Document are
several and not joint with the obligations of any other Purchaser, and no
Purchaser shall be responsible in any way for the performance of the 

21

obligations of any other Purchaser under any Transaction
Document. Nothing contained herein or in any Transaction Document, and no action
taken by any Purchaser pursuant thereto, shall be deemed to constitute the
Purchasers as a partnership, an association, a joint venture or any other kind
of entity, or create a presumption that the Purchasers are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Document. Each Purchaser shall be entitled to
independently protect and enforce its rights, including without limitation, the
rights arising out of this Agreement or out of the other Transaction Documents,
and it shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose. Each Purchaser has been
represented by its own separate legal counsel in their review and negotiation of
the Transaction Documents. The Company has elected to provide all Purchasers
with the same terms and Transaction Documents for the convenience of the Company
and not because it was required or requested to do so by the Purchasers.

(Signature Page Follows)

22

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

	

DDS TECHNOLOGIES USA, INC.

 

 

By:_____________________________________ 

     Name: 

     Title: 

    	Address for Notice:

    150 East Palmetto Park Road

    Suite 510 

    Boca Raton, Florida 33432

    Attn: Joe Fasciglione

    Tel: (561) 750-4450

    Fax:
	With copy to (which shall not constitute notice):
	 
	Attn: Joseph P. Galda

    Tel: 716-848-1454

    Fax: 716-849-0349
	
[SIGNATURE PAGE CONTINUES]

    

23

(PURCHASER'S SIGNATURE PAGE)

                [___________________________________]

                

                By:__________________________

                Name: 

                Title: 

              
            
          
        
      
    
  

                                                                                    Subscription Amount: $

    [___________________________________]

                

                By:__________________________

                Name: 

                Title: 

              
            
          
        
      
    
                                                                Subscription Amount: $

    [___________________________________]

                

                By:__________________________

                Name: 

                Title: 

              
            
          
        
      
    
                                                                Subscription Amount: $

    

    
  

    Address for all notices:

                
 

     

  

With a copy to:

Hodgson Russ LLP

One M&T Plaza, Suite 2000

Buffalo, NY 14203-2391

Tel: (716) 848-1454

Fax: (716) 849-0349

Attn: Joseph P. Galda

24

EXHIBIT A

REGISTRATION RIGHTS AGREEMENT

25

EXHIBIT B

COMMON STOCK PURCHASE WARRANT

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